Clean Air Act
Key Stakeholders' Views on Revisions to the New Source Review Program Gao ID: GAO-04-274 February 2, 2004Environmental Protection Agency (EPA) revisions to the New Source Review (NSR) program to control industrial emissions have drawn attention from state and local agencies that implement the program, as well as industry and environmental and health groups. Under the revisions, companies may not have to install pollution controls when making some facility changes. GAO was asked to obtain the opinions of state air quality officials and other stakeholders on the impact of both the final and proposed revisions EPA issued in December 2002. GAO obtained survey responses from NSR program managers in 44 states and certain localities and contacted six environmental and health groups, and eight industry groups active in the NSR debate. Survey details are available in GAO-04-337SP.
A majority (29 of 44) of the state officials responding to GAO's survey expected the rule EPA finalized in December 2002 to provide industry with greater flexibility to make some facility changes without having to obtain NSR permits or, in some cases, install pollution controls. However, in their opinion, 27 officials expected the rule to increase emissions of harmful air pollutants, thereby hindering areas' efforts to meet air quality standards and potentially creating or exacerbating public health risks. This concern\ contrasts with EPA's assessment that the rule will decrease emissions and maintain the current level of environmental protection. Furthermore, 30 of the officials expected their agency's workload would increase as they adopt and implement the rule into their own programs. Almost all of the 44 officials would like EPA assistance with implementation. Similarly, 28 of the 42 officials responding expected the two NSR revisions as proposed in December 2002--intended to provide more certainty about when facility changes are considered routine maintenance, repair, and replacement activities and can be excluded from NSR requirements--to decrease the number of permits companies would have to obtain, thereby giving them the flexibility to make some changes without installing controls. However, 21 and 26 officials, respectively, thought that the two exclusions would increase emissions; only relatively few thought the exclusions would decrease emissions as EPA's analysis had predicted. About a third of the officials thought the exclusions would exacerbate air quality problems in areas that do not meet standards, but fewer officials thought the exclusions would cause problems in areas that currently meet standards. Finally, 27 thought that implementing the two exclusions would increase states' administrative burden. The other stakeholder groups GAO contacted agreed that the final rule and two exclusions would decrease the regulatory burden on companies that modify their facilities, but disagreed about the impact on emissions and air quality agencies' workload. The six environmental and public health officials expected that because companies would not have to obtain as many NSR permits or install as many controls when modifying facilities, emissions would rise and state and local agencies' workloads increase as agencies sought alternative ways to meet standards. In contrast, the eight industry officials expected the revisions to encourage companies to invest in energy-efficient projects they had avoided under the prior program, which the officials believed would lower fuel use and emissions. The officials also expected that fewer permits would lead to decreases in agencies' workloads. Determining the revisions' likely impacts is difficult because, as discussed in GAO's August 2003 report on EPA's analytical basis for the final rule (GAO-03-947), little data exist to confirm stakeholders' opinions. In that report, GAO recommended that EPA work with state and local agencies to obtain data to assess the rule's emissions impact and correct any adverse effects.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-274, Clean Air Act: Key Stakeholders' Views on Revisions to the New Source Review Program
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
February 2004:
Clean Air Act:
Key Stakeholders' Views on Revisions to the New Source Review Program:
GAO-04-274:
GAO Highlights:
Highlights of GAO-04-274, a report to congressional requesters
Why GAO Did This Study:
Environmental Protection Agency (EPA) revisions to the New Source
Review (NSR) program to control industrial emissions have drawn
attention from state and local agencies that implement the program, as
well as industry and environmental and health groups. Under the
revisions, companies may not have to install pollution controls when
making some facility changes. GAO was asked to obtain the opinions of
state air quality officials and other stakeholders on the impact of
both the final and proposed revisions EPA issued in December 2002. GAO
obtained survey responses from NSR program managers in 44 states and
certain localities and contacted six environmental and health groups,
and eight industry groups active in the NSR debate.
What GAO Found:
A majority (29 of 44) of the state officials responding to GAO‘s
survey expected the rule EPA finalized in December 2002 to provide
industry with greater flexibility to make some facility changes
without having to obtain NSR permits or, in some cases, install
pollution controls. However, in their opinion, 27 officials expected
the rule to increase emissions of harmful air pollutants, thereby
hindering areas‘ efforts to meet air quality standards and potentially
creating or exacerbating public health risks. This concern contrasts
with EPA‘s assessment that the rule will decrease emissions and
maintain the current level of environmental protection. Furthermore,
30 of the officials expected their agency‘s workload would increase as
they adopt and implement the rule into their own programs. Almost all
of the 44 officials would like EPA assistance with implementation.
Similarly, 28 of the 42 officials responding expected the two NSR
revisions as proposed in December 2002”intended to provide more
certainty about when facility changes are considered routine
maintenance, repair, and replacement activities and can be excluded
from NSR requirements”to decrease the number of permits companies
would have to obtain, thereby giving them the flexibility to make some
changes without installing controls. However, 21 and 26 officials,
respectively, thought that the two exclusions would increase
emissions; only relatively few thought the exclusions would decrease
emissions as EPA‘s analysis had predicted. About a third of the
officials thought the exclusions would exacerbate air quality problems
in areas that do not meet standards, but fewer officials thought the
exclusions would cause problems in areas that currently meet
standards. Finally, 27 thought that implementing the two exclusions
would increase states‘ administrative burden.
The other stakeholder groups GAO contacted agreed that the final rule
and two exclusions would decrease the regulatory burden on companies
that modify their facilities, but disagreed about the impact on
emissions and air quality agencies‘ workload. The six environmental
and public health officials expected that because companies would not
have to obtain as many NSR permits or install as many controls when
modifying facilities, emissions would rise and state and local
agencies‘ workloads increase as agencies sought alternative ways to
meet standards. In contrast, the eight industry officials expected the
revisions to encourage companies to invest in energy-efficient
projects they had avoided under the prior program, which the officials
believed would lower fuel use and emissions. The officials also
expected that fewer permits would lead to decreases in agencies‘
workloads.
Determining the revisions‘ likely impacts is difficult because, as
discussed in GAO‘s August 2003 report on EPA‘s analytical basis for
the final rule (GAO-03-947), little data exist to confirm
stakeholders‘ opinions. In that report, GAO recommended that EPA work
with state and local agencies to obtain data to assess the rule‘s
emissions impact and correct any adverse effects.
What GAO Recommends:
GAO recommends that EPA (1) help state air quality agencies implement
the revisions, (2) monitor the effects of the rule that excludes
routine equipment replacements from NSR, and (3) consider
stakeholders‘ concerns before excluding other activities from NSR. In
commenting on the report, EPA‘s Assistant Administrator for Air and
Radiation said that the agency has concerns about our methodology and
certain of our findings. GAO believes its approach and presentation
are appropriate. Moreover, EPA said that our recommendations make
sense, and that the agency already plans to take these actions.
www.gao.gov/cgi-bin/getrpt?GAO-04-274.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact John Stephenson at
(202) 512-3841 or stephensonj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
A Majority of the State Officials Expect the December 2002 Rule Will
Provide Industry with Greater Operating Flexibility but Also Increase
Emissions and Agencies' Workload:
At Least Half of the State Officials Expected the Proposed Revisions
Defining NSR Exclusions to Provide Industry Greater Flexibility but
Also Increase Emissions and the Administrative Workload for State
Agencies:
Other Stakeholders Expected the Proposed and Final NSR Revisions to
Benefit Industry but Disagreed on Their Effect on Emissions and Air
Quality Agencies' Workload:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Summary of Local Agency Officials' Responses:
Impacts on Industry:
Emissions Impacts:
Impacts on Local Agencies:
Impacts on Industry:
Emissions Impacts:
Impacts on Agencies:
Appendix II: Objectives, Scope, and Methodology:
Appendix III: Comments from the Environmental Protection Agency:
GAO Comments:
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: NSR Revisions Included in the December 2002 Final Rule:
Table 2: Anticipated Emissions Effects of the December 2002 Final Rule
Provisions (number of state officials' responses):
Table 3: Ways in Which Officials Expect Their States to Adopt the Final
Rule:
Table 4: States with Local Air Agencies:
Table 5: Survey Respondents Listed by EPA Region:
Abbreviations:
ALAPCO: Association of Local Air Pollution Control Officials:
DOE: Department of Energy:
EPA: Environmental Protection Agency:
NSR: New Source Review:
PSD: Prevention of Significant Deterioration:
STAPPA: State and Territorial Air Pollution Program Administrators:
United States General Accounting Office:
Washington, DC 20548:
February 2, 2004:
The Honorable James M. Jeffords:
Ranking Minority Member
Committee on Environment and Public Works:
United States Senate:
The Honorable Joseph I. Lieberman:
United States Senate:
The Environmental Protection Agency's (EPA) revisions to the Clean Air
Act's New Source Review (NSR) Program--one of the act's mechanisms for
maintaining air quality to protect public health--have provoked
controversy. These revisions are contained in rules that the agency
issued in December 2002 and October 2003, respectively. In general,
these rules provide companies with regulatory flexibilities to modify
their industrial facilities without triggering NSR requirements to
install potentially costly pollution controls, if certain conditions
are met. According to EPA, the December 2002 rule will provide
incentives for facilities to reduce emissions, remove barriers to
energy efficiency and pollution control projects, and offer facilities
greater regulatory flexibility, while the October 2003 rule will allow
companies to modernize facility operations in ways that will maintain
and improve safety, reliability, and efficiency. EPA also anticipates
that the rules will enhance the NSR program's environmental benefits.
Reactions to the rules have differed considerably. A number of industry
groups agree with EPA's position, and some states have filed legal
documents in court expressing support for the rules. Other states and
some localities, including a coalition of states and various localities
primarily located in the mid-Atlantic and northeast regions of the
country,[Footnote 1] as well as certain environmental groups, have
filed lawsuits challenging the legality of the two rules in court.
The NSR program--established in 1977--seeks to protect public health,
maintain compliance with air quality standards, and enhance air quality
in national parks and scenic areas. The NSR program applies to nearly
17,000 industrial facilities, including fossil-fueled power plants,
petroleum refineries, and facilities that manufacture automobiles,
chemicals, pharmaceuticals, and paper. The program requires companies,
when they are constructing facilities, to obtain NSR permits that limit
the amount of pollution that facilities may emit and to install
pollution controls when necessary. The program imposes similar
requirements when a company makes a physical or operational change to
an existing facility--such as adding new production equipment--if the
change would result in a significant net increase in
emissions.[Footnote 2] The Congress allowed existing facilities to
defer installation of pollution controls until a major modification was
made with the expectation that, over time, all facilities would install
such equipment, and this would lead to lower overall emissions.
Responsibility for implementing NSR, as well as other air quality
regulations, generally rests with state and local air quality agencies.
However, the stringency of the air quality regulations they set varies.
The Clean Air Act generally requires more stringent control measures
for industries located in areas that fail to meet at least one of the
air quality standards than for those located in areas that meet the
standards.
Because of the NSR program's complexity and the administrative burden
it imposes, EPA has long recognized a need to revise it. In 1992, EPA
began a reform process that resulted in proposed changes to the program
in 1996 and 1998. But the agency did not finalize the proposals as
rules during the previous administration. The current administration
acted on certain of the prior reform proposals by issuing a final rule
in December 2002.[Footnote 3] This rule contained five provisions--
including a new method for determining whether a facility change will
significantly increase net emissions--that reduced the likelihood that
certain of these changes would require an NSR permit or, in some cases,
the installation of pollution controls. In assessing the potential
costs and benefits of the rule to determine whether to pursue it, EPA
anticipated that this rule will provide incentives for facilities to
reduce emissions, remove barriers to investments in energy efficiency
and pollution control projects, and offer facilities greater regulatory
flexibility. In addition, at the time the agency issued the rule, it
released an analysis of the rule's anticipated environmental effects
that concluded the rule would lead to an overall environmental
benefit.[Footnote 4] EPA estimated it will cost state and local
agencies about $6.5 million annually to incorporate the rule into their
air pollution control plans. However, the agency expects that the rule
will ultimately decrease agencies' NSR costs after the first 3 years of
implementation.
Also in December 2002, EPA issued a proposed rule, with two provisions,
that would define certain activities as routine maintenance, repair, or
replacement and, therefore, exempt from NSR requirements.[Footnote 5]
In its assessment of the rule, the agency asserted that the two
provisions would provide greater certainty to industry about when
facility changes can be exempt from NSR and encourage facilities to
perform energy-efficiency projects that were being hindered by the
existing program's requirements for permits and costly controls. The
cost of installing controls varies but, in extreme cases, costs can
reach hundreds of millions of dollars, according to EPA.
One of the provisions that EPA proposed would exclude activities from
NSR requirements considered "routine equipment replacements"--
replacements of worn-out or broken machinery with identical parts or
those that perform the same function as the existing part. EPA proposed
several thresholds below which expenditures for such equipment
replacement could be considered routine and exempt from NSR
requirements and solicited public comment on them.[Footnote 6] After
reviewing the comments it received, EPA issued this exclusion as a
final rule in October 2003. EPA established 20 percent of the cost to
replace the entire process unit--for example, a steam-generating unit
in a power plant--as the cost threshold companies could use to replace
parts within that unit without being subject to NSR, and concluded that
the rule would have insignificant environmental effects.[Footnote 7]
EPA also estimated that the rule would impose one-time costs of $8.7
million on industry and $1.7 million on state and local agencies that
adopt the rule, while saving the electric utility industry hundreds of
millions of dollars.[Footnote 8]
The other provision that EPA proposed would create an "annual
maintenance allowance" exclusion that would enable companies to avoid
NSR if the cost of all routine maintenance and repair activities did
not exceed a certain percentage of the cost to replace the entire
facility. The agency has not determined whether it will finalize this
portion of the proposal or pursue other options to address routine
maintenance and repair activities.
You asked us to address a number of questions about the basis of the
revisions and their potential impacts. In two previous reports on the
revisions, we reviewed (1) EPA's assessment of the economic and
environmental impact resulting from the December 2002 final rule, and
(2) the potential impact of the NSR revisions on the enforcement
actions that EPA had filed against coal-fired power plants for
allegedly violating NSR requirements and on public access to
information on emissions. We presented our findings on these reviews in
reports issued on August 22, 2003, and October 21, 2003,
respectively.[Footnote 9] In the August report, we determined that data
limitations precluded EPA from performing a quantitative analysis of
the effects of the December 2002 final rule. In the October report, we
determined that the revisions could affect the ongoing cases and the
public's access to emissions information, although EPA program managers
did not agree that the rule would affect access to emissions
information.
You also asked us to obtain the views of a number of key stakeholders
about a broader range of the revisions' potential impacts. More
specifically, you asked us to obtain (1) state air quality agency
officials' views about the impacts of the December 2002 final NSR rule
on industry, emissions, and agencies' workloads; (2) state air quality
agency officials' views about the impacts of the two December 2002
proposed NSR exclusions on industry, emissions, and agencies workloads;
and (3) environmental, health, and industry organizations' views on the
impacts of all the NSR revisions. In addition, we determined selected
local air quality agencies' views on the revisions' potential effects.
To address the first two objectives, we administered a detailed survey
to the NSR program managers in 50 states and the District of Columbia
using the Internet. We surveyed program managers to ensure that we
obtained information from those most involved in the day-to-day
administration of the NSR program. In addition, we sent this survey to
71 local agencies, primarily those with their own authority to issue
NSR permits. To identify the NSR program manager for each state or
local agency, we worked with the 10 EPA regional offices and obtained
some information from the State and Territorial Air Pollution Program
Administrators (STAPPA) and the Association of Local Air Pollution
Control Officials (ALAPCO) Internet site. We pretested the survey with
selected state and local program managers to ensure the questions were
clear, understandable, accurate, and comprehensive. In addition, to
ensure that the questions were neutral and objective, we pretested the
survey with states that were supportive of the revisions, as well as
states that were not. We received complete responses from 44 state
program managers and 60 local agency officials (each state or local
agency could only provide one response). The managers in four states
said they declined to respond so as not to disclose information related
to their state's ongoing NSR-related litigation. We have provided a
copy of our survey and detailed tables showing the state and local
officials' responses to the questions in a separate report, Survey of
State and Local Air Quality Officials Opinions on the Impacts of the
Environmental Protection Agency's Revisions to the Clean Air Act's New
Source Review Program (GAO-04-337SP), available on the Internet at
http: //www.gao.gov/special.pubs/gao-04-337sp. We have also summarized
the main results of our survey of select local air quality agencies in
appendix I.
It is important to note that we asked the program mangers for their
opinions about the potential impacts, both positive and negative, of
the NSR revisions. Based on our prior work, we had established, and EPA
program managers told us, that very little data existed--either on the
impact of the NSR program before the revisions, or on the number of
facilities that might use any or all of the revisions--to try to assess
the revisions' impacts. In addition, at the time we asked the state and
local officials for their opinions about the exclusion of certain
activities as routine equipment replacement, EPA had not defined a
specific cost threshold for this exclusion as it did in the October
2003 rule. As a result, we wanted to confirm that the opinions the
officials stated about the exclusion in response to our survey were
still accurate. Therefore, we provided a summary of our survey results
regarding this provision to STAPPA/ALAPCO. Working with its members,
the association confirmed that states and localities continue to have
the same views about this exclusion as they did at the time of our
survey. Furthermore, we confirmed with the EPA NSR program manager that
he did not think the opinions of the state and local officials had
changed as a result of EPA finalizing the exclusion in its October 2003
rule.
To address the third objective, we identified key stakeholders involved
in NSR policy decisions at the national level--including
representatives of industry, environmental, and public health
interests--and sent them a more general list of questions via
electronic mail that solicited their responses about the revisions'
potential effects. For a more detailed discussion of our scope and
methodology, see appendix II.
Results in Brief:
A majority of the 44 state air quality officials responding to our
survey believes that the December 2002 final rule will provide industry
greater flexibility to modify facilities without having to install
pollution controls in some cases; a majority of the officials also
think, however, this flexibility will come at the cost of increases in
emissions and agencies' workloads. Regarding the impact of the rule on
industry, 29 of the 44 officials said that, in their professional
opinion, the rule allows companies to make more modifications without
having to obtain permits, which can trigger requirements for controls.
The permitting process and its requirements to install controls,
however, was one of the best features of the NSR program prior to the
revisions, according to 40 of the officials. Regarding the rule's
impact on emissions, 27 of the 44 officials believe the rule will
increase emissions; only 5 believe it will decrease them (the remaining
officials thought they would remain the same or were unsure). Many
officials expect that these potential emissions increases will affect
their state's ability to meet the national health-based air quality
standards: 13 officials said their state would have difficulty meeting
standards, and 14 said they would look to other pollution control
programs to try to offset the anticipated increases. Only 7 said their
state would not have difficulty meeting standards. (Nine said they
could not judge the rule's effects). Finally, 30 of the officials
predicted that implementing the rule, such as educating industry and
their own staff on its provisions, would increase their agency's
workload at a time when many state agencies' resources are constrained.
To implement the rule, almost all of the officials said they would like
EPA's assistance and we are recommending that EPA provide states with
this help.
Overall, the state officials had similar opinions about the impact of
the two provisions excluding some facility activities from NSR
requirements if they are considered routine maintenance, repair, or
replacement. Regarding the exclusions' impact on industry, 28 of the 42
officials responding to this question said that both provisions would
allow companies to make more facility changes without having to obtain
permits. On the other hand, 21 of the 42 officials thought the
exclusion for routine equipment replacement would increase emissions,
and 26 thought the proposed annual maintenance allowance exclusion
would have this impact. Relatively few officials thought the exclusions
would decrease emissions. In general, the officials were less concerned
about the impact of the exclusions on states' ability to address air
quality problems or meet standards than they were about the final
rule's impact. More specifically, about a third of the officials
thought the increased emissions under the exclusions would worsen air
quality problems in areas that already did not meet standards.
Moreover, only 5 officials thought the exclusion for routine equipment
replacement would cause problems in areas that currently meet
standards, and only 7 thought the proposed annual maintenance allowance
exclusion would do so. Regarding the impact on agency workloads, 27 of
the 44 officials responding thought that implementing the exclusions
would increase their administrative burden. Overall, 21 officials
opposed the exclusion for routine replacement of equipment; 32 opposed
the proposed annual maintenance allowance exclusion; and, relatively
few supported either provision (the remaining officials said they
neither supported nor opposed it, or they had no opinion).
The other stakeholders we contacted--representatives of key industry,
environmental, and public health interests who have been most active in
the NSR debate at the national level--also believed the revisions in
the final rule and the two proposed exclusions would decrease the
regulatory burden on industry. But the stakeholders differed in their
opinions about these revisions' impacts on emissions and agencies'
workloads. Representatives from the six environmental and public health
groups we contacted believed the revisions allow companies to make more
modifications without having to obtain an NSR permit or install
controls, and that emissions and public health risks would increase as
a result. These representatives also believed the changes would create
more work for state and local air quality agencies, such as their
having to find other ways to reduce emissions to meet air quality
standards. On the other hand, the eight industry representatives we
contacted expected the revisions to decrease emissions and health risks
because they believe, consistent with EPA's analysis, that companies
will be more likely to pursue energy efficiency projects they had
postponed because of the prior NSR requirements. With these projects,
facilities could operate more efficiently, burning less fuel and
creating fewer emissions, according to the representatives. As we noted
in our August 2003 report, however, other industry and environmental
officials believed that if facilities can operate more efficiently,
they will increase their production and, therefore, emissions overall.
Finally, the industry representatives we contacted believed that the
revisions would lighten air quality agencies' workloads. The NSR
program will be clearer and simpler to implement and enforce, and
agencies will have fewer permits to issue, according to some of these
representatives.
Determining the likely impact of the revisions, given the conflicting
opinions of state officials and stakeholders, is difficult primarily
because little data exist to substantiate opinions. For example, one of
the stakeholders we contacted cited an EPA analysis of the equipment
replacement rule as support for his position, and another cited a
Department of Energy (DOE) analysis. However, neither analysis was a
comprehensive assessment of the revisions' effects. Furthermore, as we
noted in our August 2003 report, the overall economic and environmental
effects of the December 2002 rule are uncertain because of data
limitations and difficulty determining how companies will respond to
the rule. Therefore, we recommended in that report that EPA work with
state and local air quality agencies to obtain the data needed to
monitor the rule's emissions impacts and address any adverse effects.
In this light, we are making additional recommendations in this report:
that EPA (1) identify available data, or ways to obtain it, to monitor
the emissions impact of the NSR exclusion for routine equipment
replacement (which EPA issued as a final rule in October 2003) and (2)
consider the state officials' and stakeholders' concerns about
emissions and workload impacts that we identified before issuing a
final rule on the proposed annual maintenance allowance.
In commenting on the report, EPA's Assistant Administrator for Air and
Radiation said that the agency has concerns about our methodology and
certain of our findings. Nevertheless, EPA said that our
recommendations, on their face, make sense and that the agency already
has plans to take these actions. Specifically, EPA asserted that GAO
(1) used the opinions expressed in the survey responses as fact, and to
draw conclusions and make recommendations about the NSR program, (2)
did not assure balance and objectivity, (3) used a skewed survey
sample, and (4) should have evaluated whether the survey results were
consistent with the facts cited in EPA's analyses of the revisions'
effects. GAO disagrees with each of these assertions. First, GAO
solicited opinions and carefully presented them as such because we
found, and EPA acknowledged, the emissions data available to analyze
the NSR revisions' impacts are so limited. We also found that the state
program managers' informed opinions raised substantial concerns about
the revisions' impacts. Our recommendations are intended to address
these legitimate concerns. Second, in designing our survey, we took
numerous steps to minimize bias, including asking respondents' about
both the positive and negative effects of the revisions, conducting
several pretests of the survey, and having a survey specialist
independent of its design review the survey to ensure that the
questions were not biased. Third, GAO surveyed the universe of state
program managers. These officials are on the front lines of program
implementation and are in the most informed position to weigh in on the
implementation impact questions we asked. Because of the large number
of other affected stakeholders, it was not feasible to survey the
universe. Instead, we surveyed 30 representative organizations, chosen
because they are involved in national NSR policy decisions and
represent diverse environmental, health, and industry perspectives.
Finally, we did not use the results of EPA's analyses as a benchmark to
evaluate the survey responses because our previous and current work has
identified numerous limitations with those analyses. EPA's written
comments and our detailed response are included as appendix III.
Background:
Under the Clean Air Act, EPA establishes health-based air quality
standards that the states must meet and regulates air pollutant
emissions from various sources. These include industrial facilities and
mobile sources, such as automobiles and other transportation. EPA has
issued air quality standards for six primary pollutants--carbon
monoxide, lead, nitrogen oxides, ozone,[Footnote 10] particulate
matter, and sulfur dioxide--that have been linked to a variety of
health problems. For example, ozone can inflame lung tissue and
increase susceptibility to bronchitis and pneumonia. In addition,
nitrogen oxides and sulfur dioxide contribute to the formation of fine
particles that have been linked to aggravated asthma, chronic
bronchitis, and premature death. In 2002, the most recent year for
which data were available, 146 million Americans lived in areas that
failed to meet at least one air quality standard, according to
EPA.[Footnote 11]
Subject to EPA's oversight, state and local air quality agencies
generally administer the NSR program and operate under one of two
arrangements. First, some agencies located in areas that meet air
quality standards have "delegation" agreements with EPA under which
they implement the NSR program contained in EPA's regulations. Under
the second arrangement, agencies design their own programs by
incorporating all of their air quality regulations, including federal
requirements, into overall air quality plans, known as state
implementation plans. They update these plans periodically and submit
them to EPA for approval.
In addition, the Clean Air Act requires those agencies that implement
their own air quality programs to ensure their requirements are at
least as stringent as EPA's regulations. State and local agencies may
also supplement the federal NSR program with additional requirements.
However, some jurisdictions have laws or policies that prevent agencies
from implementing more stringent regulations.
Throughout its history, the NSR program has been characterized by
complexity and controversy, involving disputes between EPA and industry
about, among other things, whether certain facility changes qualified
for the routine maintenance, repair, and replacement exclusion. In
recent years, EPA has taken enforcement action against companies in
several industries, including some electricity producers, forest
product manufacturers, and petroleum refineries, alleging
noncompliance with the program.
In addition to concerns about enforcement related issues, some industry
representatives have also raised concerns that the time required to
obtain a NSR permit and the cost of installing controls have prevented
facilities from making changes that enhance energy efficiency and
reduce air emissions, such as modifying a boiler so that it produces
the same amount of energy with less fuel. In May 2001, the Vice
President's National Energy Policy Development Group recommended, among
other things, that the Administrator of the EPA, in consultation with
the Secretary of Energy and other federal agencies, examine the impact
of the NSR program on investments in new utility and refinery
generation capacity, on energy efficiency, and on environmental
protection. In its June 2002 NSR Report to the President, EPA
concluded, among other things, that the program had not affected
investments in new power plants and refineries but had discouraged some
energy efficiency projects at existing facilities, including some that
would have reduced air emissions. This report also contained
recommendations for revising the program.
Subsequently, EPA issued a final rule on December 31, 2002, which
contained five provisions, identified in table 1, which exempt certain
facility changes from requirements to obtain NSR permits.[Footnote 12]
Table 1: NSR Revisions Included in the December 2002 Final Rule:
Provision: Revised method for calculating "baseline" emissions; Final
rule requirements: Changes the method for computing a piece of
equipment's baseline emissions from the most recent 24-month period--or
any other period more representative of normal operations--to any 24-
month period in the past 10 years adjusted for any new emissions limits
added since the baseline period. No changes were made to the baseline
period for electric utilities.
Provision: Revised test for calculating emissions changes; Final rule
requirements: Allows a facility to calculate expected emissions after a
facility change based on its projection of future operation, rather
than at full capacity. This provision extended to all other industries
the same type of methodology for calculating expected emissions that
EPA had granted to the utility sector in the early 1990s.
Provision: Clean unit; Final rule requirements: Excludes production
equipment with state-of-the-art pollution controls from NSR
requirements for up to 10 years after installation provided the unit
will still meet the physical or operational characteristics that formed
the basis for the clean unit designation.
Provision: Pollution control projects; Final rule requirements: Exempts
pollution prevention and control projects from NSR if they are on EPA's
list of "environmentally beneficial" projects or on a case-specific
basis if a nonlisted project is determined to be environmentally
beneficial. It also must be shown that the project will not cause or
contribute to a violation of federal air quality standards or adversely
impact air quality-related values (such as visibility) for a national
park.
Provision: Plantwide emissions limits; Final rule requirements: Allows
facilities to set a single emissions limit (per pollutant) for an
entire plant and then make changes within the facility without
triggering NSR, provided they do not exceed the limit.
Source: EPA.
[End of table]
These revisions have been the subject of congressional debate. For
example, in 2002, the Congress held hearings during which members of
the Congress, EPA officials, and a number of stakeholders--including
industry, states, and environmental groups--presented their positions
on the revisions. Also, legislation has been introduced in the Congress
that seeks to further regulate emissions from industrial
facilities.[Footnote 13]
In addition, a number of environmental and public health groups, as
well as a group of states primarily from the Mid-Atlantic and
Northeast, claimed that the December 2002 final rule violated the Clean
Air Act and asked EPA to reconsider several aspects of the rule. In
July 2003, EPA agreed to do so and then solicited public comment on the
areas under reconsideration. Based on this input, EPA announced at the
end of October 2003 that it would make several technical changes to the
rule. State and local agencies that operate under delegation agreements
were required to have implemented the December 2002 rule by March 2003
or return responsibility for implementing the rule to EPA, while those
operating under state implementation plans have until January 2006 to
revise their regulations accordingly.[Footnote 14]
As for the December 2002 proposed provisions--that would further
specify what facility changes are exempt from NSR requirements under
the routine maintenance, repair, or replacement exclusions--a coalition
of primarily Mid-Atlantic and Northeastern states and environmental and
public health groups challenged the legality of the equipment
replacement rule in court after it was finalized in October 2003. State
and local agencies that operate under delegation agreements were
required to implement this rule by December 26, 2003 or have EPA
implement it for them, while those operating under state implementation
plans have until October 2006 to revise their regulations accordingly.
However, on December 24, 2003, the U.S. Court of Appeals for the
District of Columbia Circuit stayed the equipment replacement rule
pending further review, preventing the rule from going into effect
while the court considers the legal challenges. EPA has not determined
what additional action, if any, it will take regarding establishing an
annual maintenance allowance below which facility changes would be
considered exempt from NSR requirements.
A Majority of the State Officials Expect the December 2002 Rule Will
Provide Industry with Greater Operating Flexibility but Also Increase
Emissions and Agencies' Workload:
A majority of the state officials expect that the December 2002 final
rule will provide industry with greater flexibility to make facility
changes without triggering NSR requirements for permits. However, a
majority of the officials also expect that the rule will lead to an
overall increase in emissions of harmful air pollutants and hinder
efforts to meet air quality standards, potentially creating or
exacerbating risk to public health. Most of the officials also expect
that the rule will increase their agencies' workload.
More than Half of the State Officials Expect Most of the Rule's
Provisions to Decrease the Number of NSR Permits Issued and Provide
Flexibility for Companies to Modify Their Facilities:
In pursuing the December 2002 final rule, EPA, among other things,
sought to offer facilities greater flexibility to improve and modernize
their operations. Similarly, the state air quality agency officials (29
of 44) said that in their professional opinion, obtaining fewer permits
and more flexibility to modify facilities are the rule's two primary
positive effects for industry. For example, more than half of the state
officials believe that four of the five provisions of the rule[Footnote
15]--including the revised test for determining whether a facility
modification significantly increases net emissions and is, therefore,
subject to NSR--will decrease the number of permits state air quality
agencies issue.
For perspective, the state officials reported that their agencies had
issued a total of 600 NSR permits during the 3 years prior to the final
rule to companies that were modifying existing facilities.[Footnote 16]
The officials expect the number of such permits issued to decrease
under the final rule because it expands the range of activities that
companies may pursue without a permit and, in some cases, controls.
Forty of the state officials identified the requirements to install
pollution controls as one of the best features of the NSR program prior
to the final rule. According to EPA, however, several provisions of the
rule require companies to make certain commitments, such as accepting
an overall limit on their emissions, in exchange for avoiding
permitting. Therefore, EPA believes the rule will encourage investments
that decrease emissions.
As we reported in our August 2003 report, EPA found that the December
2002 final rule would lead to overall benefits by encouraging energy
efficiency projects, reducing emissions and related health risks, and
providing economic benefits to companies affected by the program. For
example, EPA's analysis found that the rule would encourage companies
to implement energy efficiency projects that would reduce emissions,
such as upgrades to boilers used to generate power.[Footnote 17]
However, only 9 of the 44 officials we surveyed anticipated that the
rule would provide the impetus for companies to increase these
projects.
A Majority of the State Officials Expect the Rule to Increase Emissions
and Hinder Efforts to Meet Health-based Air Quality Standards:
A majority of the state officials expect emissions to increase as a
result of the final rule--in contrast to EPA's conclusion, in the
agency's analysis of the rule's environmental effects, that it will
reduce emissions from industrial facilities.[Footnote 18] More
specifically, 27 of the 44 officials we surveyed expect that overall,
the December 2002 rule will increase emissions; 8 officials believe
emissions will decrease or remain the same (the remaining 9 officials
could not judge the emissions impact). At least half of the officials
thought the rule would increase emissions of carbon monoxide, nitrogen
dioxide, ozone, particulate matter, or sulfur dioxide--all of which
have been linked to health problems and are controlled by a variety of
Clean Air Act programs.
When asked about the emissions impact of each specific provision in the
final rule, a majority of the state officials identified two of the
rule's provisions as most likely to cause emissions increases, as table
2 illustrates. These include the revised methods for determining (1) a
facility's historical or "baseline" emissions and (2) whether a change
will result in a significant net emissions increase.
Table 2: Anticipated Emissions Effects of the December 2002 Final Rule
Provisions (number of state officials' responses):
Final rule provision: Clean unit;
Increase emissions: 20;
Decrease emissions: 6;
No change in emissions: 12;
Unable to judge: 6;
Total: 44.
Final rule provision: Plantwide emissions limit;
Increase emissions: 24;
Decrease emissions: 10;
No change in emissions: 4;
Unable to judge: 6;
Total: 44.
Final rule provision: Pollution control project;
Increase emissions: 14;
Decrease emissions: 10;
No change in emissions: 12;
Unable to judge: 8;
Total: 44.
Final rule provision: Revised method for calculating "baseline"
emissions;
Increase emissions: 29;
Decrease emissions: 2;
No change in emissions: 5;
Unable to judge: 8;
Total: 44.
Final rule provision: Revised test for calculating emissions changes;
Increase emissions: 29;
Decrease emissions: 1;
No change in emissions: 5;
Unable to judge: 9;
Total: 44.
Final rule provision: Overall effects of rule;
Increase emissions: 27;
Decrease emissions: 5;
No change in emissions: 3;
Unable to judge: 9;
Total: 44.
Source: GAO analysis of survey responses.
[End of table]
For example, a majority of the officials believe the "baseline"
provision will increase emissions. This provision allows industrial
facilities to use any consecutive 24-month period in the previous
decade as a baseline.[Footnote 19] EPA changed this emissions
calculation method to, among other things, account for variations in
business cycles. The agency concluded that this provision would have
negligible emissions consequences because it would not alter the
baseline for most facilities, including coal-fired power plants (the
largest emitting group of facilities). In addition, companies must
adjust their baselines downward to reflect any other emissions
limitations that have become effective since the period of time they
selected for establishing their baseline, according to EPA.[Footnote
20] EPA program managers, therefore, maintain that emissions baselines
will not significantly increase as a result of this provision.
Nevertheless, some officials provided written responses to our survey
describing their concerns over this provision. Several such officials
asserted that it allows companies to select the 24-month period within
the previous 10 years in which their emissions were highest.
In addition, 24 officials thought that the provision for plantwide
emissions limits, whereby facilities accept a cap on their overall
emissions to avoid undergoing NSR, would nevertheless increase
emissions. For example, several officials said that the rule enables
facilities to establish their emissions cap based on their highest 2
years of emissions in the previous 10 years, thereby enabling them to
create a cap that exceeds their current emissions. On the other hand,
10 officials said this provision would decrease emissions, and several
asserted that it creates incentives for facilities to reduce or limit
their emissions. EPA program managers maintain that this provision will
decrease emissions.
In addition to these overall effects, 24 of the state officials
anticipate that the rule will particularly allow facilities built prior
to the establishment of the NSR program in 1977 to increase their
emissions. At the time, the Congress decided to allow existing
facilities to defer installation of pollution controls until a major
modification was made with the expectation that, over time, all
facilities would install such equipment, and this would lead to lower
overall emissions. However, as we concluded in our June 2002 report on
emissions from older power plants,[Footnote 21] taken as a whole, such
plants still emit more air pollution for each unit of electricity
generated than newer plants. For example, we found that for each
megawatt of electricity produced, the older facilities emitted about
100 percent more sulfur dioxide and 25 percent more nitrogen oxides
than newer facilities.
State officials that believe emissions increases will occur under the
rule gave various opinions as to how they would manage such increases.
For example, 7 officials said that the rule would not impede their
ability to meet or maintain air quality standards. Another 14 expect
they will offset the anticipated increases using other air quality
regulations, such as those used to control emissions from mobile
sources (automobiles and other transportation). However, 13 others
expect the rule to impede their ability to meet or maintain standards-
-despite these other regulations. (Nine said they could not judge the
rule's effects.) This could create challenges for agencies that expect
the rule to interfere with efforts to meet air quality standards, but
that said they were prohibited from adopting more stringent
regulations, such as the District of Columbia, Kentucky, New Jersey,
New Mexico, Oklahoma, Pennsylvania, and Wisconsin.[Footnote 22] On the
other hand, 28 state officials said that state law or policy does not
prohibit them from adopting more stringent rules than federal
requirements.
Most State Officials Believe the Rule Will Not Resolve Uncertainty
About When NSR Applies to a Modification:
A majority of the state officials' responses contrasted with EPA's
statement that the final rule would provide greater certainty than in
the past for companies and regulators when determining when NSR
requirements apply. Officials identified this uncertainty as one of the
program's main problems before the rule, and 30 officials identified
continued uncertainty as the rule's greatest negative impact on state
agencies and industry.
More specifically, one official explained that the rule is too vague to
be implemented with certainty or enforced. Another state official said
that the rule's new method for determining whether a facility
modification would significantly increase its emissions is by far the
most complicated process yet devised for making such determinations.
Furthermore, the official stated that a company trying to do the right
thing could easily be confused when attempting to determine its future
levels of emissions. This confusion could increase both the burden that
the rule imposes on state agencies to implement and enforce it and the
costs for companies that want to use its provisions.
In addition, 30 of the state officials said that the final rule did not
resolve any of the other significant problems with the program,
including difficulty in determining the stringency of pollution
controls that facilities should install when required to do so.
A Majority of State Officials Expect the Rule Will Increase Agencies'
Workloads and Would Like EPA's Assistance in Understanding and
Implementing the Rule:
The state officials' survey responses showed that many expect the final
rule to impose demands on their agencies, including increased
workloads. This comes at a time when many states face budget deficits.
Nevertheless, many of the state officials said their agencies plan to
adopt all or most of the rule's provisions as written (see table 3).
Table 3: Ways in Which Officials Expect Their States to Adopt the Final
Rule:
Adopt all or most provisions as written;
For areas that meet standards: 20;
For areas that do not meet standards: 17.
Seek review of rule in court;
For areas that meet standards: 8;
For areas that do not meet standards: 9.
Adopt or maintain more stringent regulations;
For areas that meet standards: 3;
For areas that do not meet standards: 2.
Other/do not know;
For areas that meet standards: 13;
For areas that do not meet standards: 8.
Total;
For areas that meet standards: 44;
For areas that do not meet standards: 36.
Source: GAO analysis of state survey responses.
Note: Some states have both areas that meet standards and areas that do
not meet them.
[End of table]
In revising state programs to incorporate the rule, 31 of the officials
said that it would take between one and four staff to adopt the rule's
provisions and obtain EPA's approval of their proposed implementation
plans. Seventeen of the 36 officials that were able to anticipate the
staff needed said that their agency had a plan for obtaining the
necessary staff time, but 15 others did not (4 said they did not know
if their agency had a plan).
In addition, 30 state officials expect that having to administer the
rule after it is adopted will increase their workload at least to some
extent--despite the fact that most expect a decrease in the number of
permits issued in the future. Another 6 expect a decrease in their
workload, and 1 expected no change. As noted above, most officials
expected continued uncertainty for state agencies as a negative impact
of the rule. One official explained that the state agency was spending
considerable time learning the regulations and training agency staff
and companies, while also developing record keeping, tracking, and
other administrative processes. Another official expected a dramatic
increase in the agency's administrative workload, including time spent
reviewing information associated with the rule's provisions for
plantwide limits, among other things. Similarly, another official
expected a high demand among companies for plantwide limits and that
developing them would be very resource intensive. However, another
official said that the workload would increase initially because of the
learning curve with the new program but then decrease over time. The
remaining 7 officials did not know or had not assessed the rule's
workload impact. EPA program managers maintain that, over time, the
rule will decrease the workload for agencies.
To better understand and implement the rule, all but one of the agency
officials said that they would benefit from some type of assistance
from EPA, including updated guidance or workshops.
At Least Half of the State Officials Expected the Proposed Revisions
Defining NSR Exclusions to Provide Industry Greater Flexibility but
Also Increase Emissions and the Administrative Workload for State
Agencies:
Similar to their opinions on the final rule, a majority (28 of 42) of
the state officials expected EPA's two NSR revisions--as proposed in
December 2002--to provide companies the flexibility to perform
maintenance and replacement activities without obtaining permits and
installing pollution controls. However, at least half of the officials
also expected that, as a result, emissions would increase, and a third
expected the exclusions would exacerbate existing air quality problems
and health risks in areas that already do not meet standards. A
majority also expected a greater administrative burden and uncertainty
for agencies in determining when a facility's activities can be
excluded.
A Majority of State Officials Expected the Two Exclusions to Provide
Industry the Flexibility to Undertake More Facility Modifications
without a NSR Permit and Pollution Controls:
Twenty-eight state officials expected the two exclusions would exempt
facility changes from requirements for permits and controls, decreasing
the number of permits they issue over the next 5 years. This would
provide industry with greater flexibility to perform routine
maintenance, repair, and replacement activities without incurring the
costs and delays of the NSR program. EPA previously determined which
activities were considered routine maintenance, repair, and
replacement, and thus excluded from NSR, on a case-by-case basis. In
December 2002, EPA proposed that, in addition to the case-by-case
determination, exclusions could also be determined according to a cost
threshold mechanism, below which activities could be exempted from NSR,
rather than an emissions threshold. Although, at the time of our
survey, the 20 percent cost threshold for replacing equipment had not
been established, one official said that this exclusion would exempt
most facility modifications from NSR.
The state officials identified fewer permits and increased flexibility
as the exclusions' most positive benefits for companies. In addition,
19 of the officials expected that the exclusions would have a positive
effect on companies' efforts to pursue energy efficiency projects.
These officials' opinions are, therefore, consistent with EPA's finding
that the exclusions would remove barriers to energy efficiency
investments.
About Half of the State Officials Opposed the Equipment Replacement
Exclusion and a Majority Opposed the Annual Maintenance Allowance:
Overall, 21 of the 44 officials said they opposed the equipment
replacement exclusion. Another 12 said they supported this provision,
and the others said they neither supported nor opposed it, or had no
opinion. One of the officials who expressed concerns about the proposal
said that implementing the equipment replacement exclusion would reduce
or eliminate incentives for companies to install well-controlled
equipment. Another official expressed the concern that the exclusion
did not include the necessary provisions to ensure that a company does
not replace an entire emissions unit over a period of just a few years
without installing controls.
In addition, 32 of the 44 officials said they opposed the annual
maintenance allowance exclusion. Another 3 officials said they
supported this provision, and the others said they neither supported
nor opposed it, or had no opinion. Specifically, some states were
concerned that the financial analysis to evaluate the cost data to
determine exclusions is too complex. One official asserted that the
annual maintenance allowance would enable companies to conduct projects
that are not routine, thereby extending the life of equipment that
should have been upgraded with more efficient equipment. According to
EPA, the agency received a mixture of positive and negative comments on
the annual maintenance allowance approach from key stakeholders,
including industry, state and local agencies, and environmental groups.
The agency has not determined whether it will finalize this portion of
the proposal or pursue other options to address routine maintenance
activities.
At Least Half of the State Officials Expected the Proposals Would
Increase Emissions, Potentially Worsening Air Quality:
At least half of the state officials believed that the exclusions would
result in increased emissions of harmful air pollutants. For example,
half expected that the equipment replacement exclusion would increase
emissions, and several believe the cost threshold mechanism will allow
older facilities to avoid installing pollution controls. Only 2
officials thought that this exclusion would decrease emissions, while
the others expected no change (7) or could not judge (12).
Similarly, 26 of 42 officials who responded said they expected the
proposed annual maintenance allowance exclusion would increase
emissions. For example, one official explained that because the
exclusion is based solely on the amount of money spent without regard
to emissions increases, facilities could make changes that increase
emissions and be exempt from NSR. Only 1 official expected this
exclusion would decrease emissions, while the others expected no change
(1) or could not judge (14).
Overall, 21 of the 44 state officials believed the two exclusions would
enable older facilities, built prior to 1977, to increase emissions.
Another 8 expected emissions to decrease or remain the same, and 15
were unable to judge. As discussed earlier, older power plants emit
more pounds of pollutants per unit of energy generated than newer
plants. One official said that older facilities would continue to be
modified without going through NSR and upgrading their pollution
controls. Another official said that enabling older power plants to
avoid installing pollution controls violated the intent of the Clean
Air Act.
While at least half of the officials expected the exclusions to
increase emissions, fewer expected them to exacerbate existing air
quality problems or create new ones. For example, of the 30 officials
located in states with areas that currently do not meet air quality
standards, about a third expect the equipment replacement exclusion to
interfere with areas' efforts to meet standards, while another third
did not expect it to interfere, and the final third could not judge. In
addition, 13 of these officials expected the annual maintenance
allowance exclusion to interfere, while 5 did not, and 12 could not
judge. In terms of creating new air quality problems in areas that
currently meet standards, only 5 of 44 officials expected the equipment
replacement exclusion to have this impact, while 20 did not, and 19
could not judge. Furthermore, only 7 of these officials expected the
annual maintenance allowance exclusion to have this impact, while 16
did not, and 21 could not judge.
The opinions of officials that expect emissions increases and adverse
air quality effects contrast with EPA's conclusion that the exclusions
would enhance the environmental protection and benefit derived from the
program. In addition, EPA's economic analysis of the exclusions found
that they would lead to health benefits and did not account for any
potential health-related costs.[Footnote 23] However, to the extent
that either exclusion would cause or exacerbate violations of health-
based air quality standards, EPA's analysis would have underestimated
the health effects and costs of the exclusions.
A Majority of the State Officials Expected the Exclusions Would Create
a Greater Administrative Workload:
A majority of the officials said that implementing the exclusions would
increase their administrative burden (27 of 44) and create uncertainty
for agencies in determining when a facility's activities can be
excluded (28 of 44). These opinions contrast with EPA's conclusion in
the analysis noted above that they would provide greater regulatory
certainty. Several officials expressed concerns about the complex
accounting procedures they would need to use to determine compliance
with the cost threshold mechanisms and whether modifications could be
excluded from NSR permitting. For example, one official said that the
accounting procedures were well beyond the expertise of the state
agency, and another official described how the agency would need to
hire certified public accountants to determine compliance with the
exclusions.
Other Stakeholders Expected the Proposed and Final NSR Revisions to
Benefit Industry but Disagreed on Their Effect on Emissions and Air
Quality Agencies' Workload:
According to key stakeholders we contacted, the proposed and final
revisions to the NSR program would benefit industry by decreasing the
regulatory burden on companies that modify their industrial facilities,
but these stakeholders disagreed on the revisions' impact on emissions
and other factors. Stakeholders representing environmental and public
health groups anticipated that the revisions would mean fewer
modifications will be subject to NSR's permit and control requirements,
but more work for regulators as they look for alternative ways to
control emissions. In contrast, stakeholders representing the industry
groups asserted that the proposed and final changes clarified the NSR
program, thereby making permitting easier, and encouraging investment
in energy efficient projects that lower fuel consumption and emissions.
As we concluded in our August 2003 report, the overall economic and
environmental effects of the December 2002 rule are uncertain because
of data limitations and difficulty determining how individual companies
will respond to the rule.
Environmental and Public Health Group Stakeholders Expected the
Proposed and Final Revisions to Decrease Industry's Regulatory Burden
but Increase Emissions and Air Quality Agencies' Workload:
According to the opinions of the six environmental and public health
group stakeholders we contacted, as well as an association representing
all of the state and local air quality agencies, the proposed and final
revisions would lessen the regulatory burden on companies because, as
discussed earlier, fewer modifications would trigger NSR. Under the
prior rules, to obtain a permit, a company would have to submit an
application and go through a public notice and comment period--a
process that could take 3 months to more than 1 year. The company would
also have to periodically report on their compliance with the permit.
Furthermore, in cases where the modification would significantly
increase emissions, the company would have to go through the time and
expense of installing emission controls. As a result of the NSR
revisions, however, environmental and public health stakeholders
anticipate that companies would forgo the emissions reductions that
would have been achieved by installing controls, thereby increasing
emissions and public health risks.
As with a majority of the state air quality officials responding to our
survey, nearly all of the environmental and public health group
stakeholders asserted that the proposed and final revisions would
create more work for state and local air quality agencies. Several of
them believe that, because the revisions would result in fewer permits,
they would also result in fewer recordkeeping and reporting
requirements for industry. This, in turn, would make it harder for the
agencies to track and monitor changes at facilities that could
influence emissions. For example, according to the association
representing these agencies, the revisions would make it difficult for
them because they would now have to identify other sources of emissions
information instead of relying on companies to report this information,
as companies were previously required to do under the NSR program. We
concluded in our October 2003 report that, overall, as a result of the
final rule, the public may have less assurance that they will have
notice of, and information about, company plans to modify facilities in
ways that affect emissions, as well as less opportunity to provide
input on these changes and verify they will not increase emissions.
Some of the environmental and public health stakeholders also pointed
out that the agencies will be forced to find programs other than the
federal NSR program to control emissions so that local air quality
meets the national standards. For example, areas not meeting at least
one of the standards must develop a state plan showing how they will
reduce emissions to comply with the standard.[Footnote 24] But with
fewer modifications and facilities subject to emission controls through
NSR, air quality agencies will have to look for other ways to reduce or
control emissions. However, according to some environmental and public
health groups, these alternative regulations and programs can be more
difficult to implement because, for example, they focus on smaller
sources of emissions compared with the sources subject to the federal
NSR program. Therefore, to achieve the same emissions savings as they
would have under NSR, the agencies will have to track emissions and
pursue reductions from a greater number of sources, requiring more
staff time and resources for permitting and enforcement.
Industry Stakeholders Asserted That the Proposed and Final Revisions
Clarify When NSR Applies to a Modification, Thereby Encouraging Energy
Efficiency Projects and Reducing Emissions and Air Quality Agencies'
Workload:
Most industry stakeholders we contacted felt the proposed and final
revisions would lessen, or at least not increase, their regulatory
burden, similar to the opinions of the environmental and public health
stakeholders. Fewer modifications would be subject to the requirements
to obtain a permit and install controls. Furthermore, several industry
stakeholders said their regulatory burden would decrease because the
revisions clarified when NSR actually applied. Several industry
stakeholders explained that before the revisions, companies were
uncertain as to whether some of their modifications triggered NSR. For
example, one stakeholder said that the existing routine maintenance
exclusion was arbitrary and unclear. As a result, to avoid enforcement
actions and penalties, companies would opt not to make the
modifications.
On the other hand, the industry stakeholders disagreed with the
environmental and public health stakeholders on a number of other
potential impacts. First, all of the industry stakeholders believed the
changes will encourage companies to invest in energy efficiency
projects they avoided in the past because of NSR requirements. For
example, as we discussed in our October 2003 report, under the prior
program, to determine if a modification would increase emissions enough
to trigger NSR, companies generally had to assume that facilities would
run at the maximum capacity or the highest capacity allowed by the
existing NSR permit after making the modification. A company had to
make this assumption even if the facility had not run at this level in
the past or was not expected to in the future. Industry stakeholders
argued that having to assume this potential increase in emissions
biased the test and overstated the true emissions impact of a project.
One industry representative gave the example of a proposed modification
that had the potential to save the company an estimated $300,000 per
year and reduce emissions, but that the company did not pursue because
the emissions test predicted it would have triggered costly NSR
controls.
In the December 2002 final rule, EPA revised the method of calculating
the expected emissions so a company can project the actual activity
level--as opposed to the maximum potential activity level--after the
facility change and estimate the resulting emissions accordingly.
Therefore, according to some of these stakeholders, such energy
efficiency projects most likely will not trigger NSR requirements under
the revised rule and will be less costly for companies to pursue. The
industry stakeholders believed that, with the increased energy
efficiency investments, facilities would use less fuel for the same
levels of production.
However, as we discussed in our August 2003 report, industrial
facilities' future production levels and air pollutant emissions may
fluctuate in response to changing economic conditions and other
factors. In that report, we also noted that the executive director of
one industry trade association stated that it would make economic sense
to increase production at more efficient facilities. The representative
"could not imagine a utility spending money on extra capacity and then
not utilizing it." As a result, some environmental groups that
disagreed with industry were concerned that, if facilities become more
efficient, they will actually cause a net increase in overall emissions
and health risks. On the other hand, according to an EPA program
manager, the agency expected that, if a company increased production at
its more efficient facilities, it could decrease production at its less
efficient facilities, more than offsetting any emissions impact.
However, the manager said that the agency had not analyzed the air
pollution impacts of shifts in production that facilities make after
implementing energy efficiency projects to support the agency's
viewpoint.
The industry stakeholders we contacted believed the increased projects
and lower emissions they anticipate will result more from the revisions
included in the December 2002 final rule rather than the October 2003
rule. This is because, according to some stakeholders, the latter rule
simply reinforces how companies had already been interpreting NSR in
the past to determine if a modification was a routine replacement of
equipment and, therefore, exempt from NSR requirements. However, the
October 2003 rule specifies a 20 percent cost threshold, below which a
company could make certain changes as routine replacement and exempt
from NSR.
Also, in contrast with the environmental and public health groups, some
of the industry stakeholders argued that even with the NSR exemptions,
companies will still have to monitor facility emissions and install
emission control technologies because of other clean air regulations.
For example, under the acid rain program, some utilities have had to
control their facilities' sulfur dioxide and nitrogen oxide emissions.
Under the air toxics program, some companies have had to install
controls to reduce facility emissions of hazardous air pollutants. In
addition, the stakeholders maintained that state and local air quality
agencies will still have to monitor any project that could increase
emissions to ensure compliance with these programs, and the agencies
may have their own requirements governing facility modifications. While
this is true, we noted in our October 2003 report that the scope of the
state and local program requirements varies widely.
Finally, most of the industry stakeholders, unlike the environmental
and health stakeholders, expected a decrease in the state and local air
quality agencies' workload as a result of the proposed and final
revisions. The stakeholders claim the revisions will streamline
agencies' monitoring, minimize the time they spend determining if
companies have properly complied with NSR, and ease the permitting
process.
While the stakeholders based their views primarily on professional
opinion, one cited a DOE analysis and another cited an EPA analysis as
support for their views. The DOE analysis included an estimate of
emissions if all coal-fired power plants installed pollution controls
while the EPA analysis focused on the possible emissions consequences
of the equipment replacement exclusion. Neither analysis
comprehensively assessed the impacts of the NSR revisions.
One environmental representative compared the emissions levels in the
DOE analysis with those in the EPA analysis to support the assertion
that the exclusions would represent a rollback from the current program
because the levels in the DOE analysis were lower than EPA's. However,
the DOE analysis is not useful as a benchmark for assessing the effects
of EPA's revisions because, under the NSR program, facilities only have
to install the best available controls when making major modifications.
In addition, this analysis was not specifically related to EPA's NSR
revisions.
An industry stakeholder cited the above-mentioned EPA analysis of the
equipment replacement rule to support the assertion that the exclusions
would decrease emissions. However, the EPA analysis was limited in
scope--it considered only power plants (the largest emitting category
of facilities) and only two pollutants, nitrogen oxides and sulfur
dioxide. Another related analysis performed by an EPA contractor
included six additional industries and was based on case studies.
Finally, as we concluded in our August 2003 report, the overall
economic and environmental effects of the December 2002 rule are
uncertain because of data limitations and difficulty determining how
industrial companies will respond to the rule.
Conclusions:
EPA's assessments of the December 2002 and October 2003 NSR revisions
concluded that the rules would provide industry with greater
flexibility to modify their facilities without having to obtain NSR
permits or, in some cases, install pollution controls, while enhancing
the program's environmental benefits. The survey responses indicate
that most state program managers agreed with EPA's conclusion that the
revisions would enhance flexibility for industry. However, a majority
of state program managers did not agree with EPA's conclusion that the
increased flexibility would lead to less pollution, raising questions
about the final and proposed revisions' environmental effects.
Specifically, most of the state officials believed that the December
2002 rule and the not-yet finalized annual maintenance allowance
exclusion would increase emissions, and half believed the equipment
replacement provision would have this effect. Furthermore, of those
that believe emissions increases will occur, a number of the officials
thought that these anticipated increases would cause violations of
health-based air quality standards or delay the attainment of the
standards in areas that already have poor air quality, potentially
creating or exacerbating health risks. Environmental groups agreed with
the state program managers who expressed concerns, but other state
officials and industry stakeholders maintained the revisions would have
positive environmental effects. Little data currently exist to resolve
these competing viewpoints. We therefore recommended in our August 2003
report that EPA determine what data are available to monitor the
December 2002 rule's effects and use the monitoring results to
determine what effects the rule has created. For the same reason, if
the equipment replacement rule eventually takes effect--pending the
resolution of legal challenges--it will be necessary to monitor its
implementation to determine its environmental and other effects. In
addition, more EPA assistance for states would help them implement the
new rules and lessen their administrative burden.
Recommendations for Executive Action:
To ensure that state and local air quality agencies are adequately
equipped to implement the new NSR rules, as required by EPA, and that
the rules do not have unintended effects on emissions and public
health, we recommend that the EPA Administrator (1) provide state and
local air quality agencies with assistance in implementing the December
2002 rule, (2) pending the court's decision on the equipment
replacement rule, work with state and local air quality agencies to
identify the data that the agency would need to monitor the effects of
this rule and use the monitoring results to identify necessary
changes,[Footnote 25] and (3) consider the state and stakeholder
concerns about emissions and workload impacts that we identified before
deciding whether to issue a final rule on the second proposed
exclusion, the annual maintenance allowance exclusion.
Agency Comments and Our Evaluation:
We provided EPA with a draft of this report for review. The Assistant
Administrator for Air and Radiation said that the agency has concerns
about our methodology and certain of our findings. Nevertheless, EPA
said that our recommendations, on their face, make sense, and that the
agency already has plans to take these actions.
Specifically, EPA asserted that GAO (1) in some instances, used the
opinions expressed in the survey responses--which EPA believes may not
have been grounded in a correct understanding of the revisions--as
fact, and to draw conclusions and make recommendations about the NSR
program, (2) did not carry out its work in a way that assured balance
and objectivity, (3) used a skewed survey sample, and (4) should have
evaluated whether the survey results were consistent with the facts
cited in EPA's analyses of the revisions' effects.
GAO disagrees with each of EPA's assertions. First, as we previously
reported and EPA acknowledged, there are limited data available to
assess the effects of the NSR revisions. Therefore, consistent with the
review's objectives, we solicited the opinions of key stakeholders on
the revisions' effects and clearly presented them as opinions in both
the title and body of the report. When, in this context of scarce data,
many state program managers responsible for program implementation
express concerns about the revisions' adverse effects, we believe it
would be prudent to take these concerns seriously. As such, GAO makes a
number of recommendations to (1) collect data on and monitor the
revisions' actual impacts, (2) consider stakeholders' opinions before
further revising the NSR program, and (3) provide state and local
agencies assistance in implementing the revisions. Taking this latter
action will help to address EPA's concerns that the respondents' may
not have fully understood the revisions.
Second, we developed the survey using standard survey research
principles and took steps to minimize question bias, including
conducting several pretests, asking respondents about both the positive
and negative effects of the revisions, and subjecting the survey to a
thorough review by a GAO survey specialist not involved in its
development. To ensure the independence of our efforts, we do not
routinely seek the subject agency's review of our survey instruments.
Nonetheless, we worked with NSR program managers within EPA to
understand how the revisions would work in practice as well as their
potential effects and used this information to design the survey
questions.
Third, GAO surveyed the universe of state program managers because we
believe they are in the most informed position to determine the
revisions' impacts on their programs and workloads. Furthermore, in the
survey's instructions we asked the managers, when answering the
questions, to coordinate with the officials within their agencies as
they deemed necessary and appropriate. As such, we relied on each state
agency's own procedures for completing and reviewing the survey
responses. In addition, we surveyed select stakeholders representing
environmental, health, and industry interests. Because of the large
number of other affected stakeholders, it was not feasible to survey
the universe. Instead, we surveyed 30 organizations representing
diverse perspectives and chose them because they were involved in
national NSR policy decisions. A number of these groups represent the
views of large numbers of industrial companies or have a national
membership base.
Finally, GAO believes EPA's assertion that we should have evaluated
whether the opinions of state officials responsible for program
implementation were consistent with "facts" cited in EPA's analyses is
disingenuous. As we point out in our previous and current work, these
"facts" are largely assertions based on EPA's limited analysis of the
revisions' effects. We therefore did not use the agency's analysis as a
benchmark to evaluate the survey responses. We further believe that the
state program managers provided plausible explanations for why their
views disagreed with those asserted by EPA.
Appendix III contains the text of EPA's letter along with our detailed
responses to the issues raised. EPA also provided a number of technical
comments, which we have incorporated as appropriate.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 10 days
from the report date. At that time, we will send copies of the report
to the EPA Administrator and other interested parties. We also will
make copies available to others upon request. In addition, the report
will be available at no charge on the GAO Web site at http: //
www.gao.gov.
If you have any questions about this report, please contact me at:
(202) 512-3841 or stephensonJ@gao.gov. Key contributors to this report
are listed in appendix IV.
John B. Stephenson:
Director, Natural Resources and Environment:
Signed by John B. Stephenson:
[End of section]
Appendix I: Summary of Local Agency Officials' Responses:
This summary provides an overview of survey responses completed by 45
local air quality agencies--those with independent authority to adopt
rules and write, review, or issue New Source Review (NSR) permits.
Seventeen of the 45 local air quality agencies are in California. The
remainder are scattered across the remaining 14 states that have local
air quality agencies. (See appendix II, table 3.) Detailed local survey
results are available at: http: //www.gao.gov/special.pub/gao-04-337sp.
Similar to the state officials, more than half of the local officials
expect that the December 2002 rule will provide industry with greater
flexibility to make facility changes, but also believe that the rule
will result in increased emissions. However, in contrast to the state
officials, fewer than half of the local officials anticipate their
workload to increase as a result of the rule.
For some questions, the number of officials that provided answers
varied.
Impacts on Industry:
In terms of positive effects, 28 of 45 local officials believe the rule
will result in greater flexibility for industry to make facility
changes, similar to state officials. Also, 24 of the local officials
believe that the rule will benefit industry by enabling companies to
avoid NSR permitting. In addition, 10 of the officials identified
greater opportunities for industry to pursue energy efficiency projects
as one of the positive effects of the rule. On the other hand, only 2
of the local officials believe the rule will positively affect industry
by providing companies with greater certainty as to when NSR applies to
a facility modification. Twenty of the officials believe that
regulatory uncertainty is one of the rule's primary negative effects.
Emissions Impacts:
As with the state officials, a majority (24 of 44) of local officials
expect the rule to increase emissions, while 10 expect no change and 9
were unable to judge. More than half of the officials believe the
revised methods for calculating a facility's historical "baseline"
emissions (25 of 44) and estimating emission changes from a
modification (23 of 44) will lead to increased emissions. Fewer than
half expect the remaining provisions to increase emissions. Twenty-two
of the officials anticipate that the rule will allow facilities built
prior to 1977--which did not have to install controls until they made a
modification that significantly increased emissions--to increase total
emissions because they can continue to postpone installing controls,
while 11 anticipate no change in emissions from such facilities. Only 6
officials do not believe the rule will affect their ability to meet or
continue to meet air quality standards. On the other hand, 16 expect
that they can use other clean air regulations to meet standards, and 11
believe that taking into consideration the impacts of the final rule,
these other regulations will not help them meet or continue to meet the
standards.
Impacts on Local Agencies:
Although a greater percentage of local officials (21-24 percent) than
state officials (6-7 percent) anticipate adopting or maintaining more
stringent regulations than EPA, fewer local officials (22 of 45) than
state officials (30 of 44) expect the rule to increase their workload.
In addition, 5 of 43 officials do not anticipate the need for
additional staff to adopt the final rule and obtain EPA approval in
contrast to state officials. All of the local officials said they would
like some type of assistance from EPA, such as implementation workbooks
and training courses.
Similar to state officials, at least half of the local officials
expected the two exclusions for routine maintenance, repair, and
replacement activities to provide industry greater flexibility to make
changes, but unlike state officials, fewer than half expected the
exclusions would increase emissions or their administrative burden.
Overall, 22 of 45 officials said that they opposed the equipment
replacement exclusion and 16 supported it, while 28 opposed the annual
maintenance allowance exclusion and 5 supported it.
Impacts on Industry:
More than half (24 of 45) of the local officials believed the
exclusions would provide industry with greater flexibility to make
facility changes, as did half of the state officials. Twenty-seven
believed that not having to obtain a NSR permit would be one of the
exclusions' most positive benefits for industry. Thirteen of 43 local
officials expected the exclusions to positively affect a company's
ability to pursue energy efficiency projects, while 16 expected no
change.
Emissions Impacts:
Eighteen of 45 officials expected the equipment replacement exclusion
to increase emissions, while 14 expect no change, and 10 were unable to
judge. Twenty-one of 45 officials expected the annual maintenance
allowance exclusion to increase emissions, while 8 expected no change,
and 15 were unable to judge. In addition, 21 of the 45 officials
anticipated that facilities built prior to 1977 would increase
emissions as a result of the exclusions, while 11 expected no change
and 10 were unable to judge. These figures are similar to the state
responses, however, compared with state officials, fewer local
officials expected the exclusions to result in significant enough
emissions changes to exacerbate air quality problems in areas that do
not meet standards or cause new problems in areas that currently meet
the standards.
Impacts on Agencies:
Unlike state officials, fewer than half (22 of 45) of the local
officials believed the exclusions would increase their administrative
burden.
[End of section]
Appendix II: Objectives, Scope, and Methodology:
The Ranking Minority Member of the Senate Environment and Public Works
Committee and Senator Lieberman asked us to obtain the views of a
number of key stakeholders about the revisions' potential impacts. More
specifically, they asked us to obtain (1) state air quality agency
officials' views about the impacts of the December 2002 final NSR rule
on industry, emissions, and agencies' workloads; (2) state air quality
agency officials' views about the impacts of the two December 2002
proposed NSR exclusions on industry, emissions, and agencies'
workloads; and (3) environmental, health, and industry organizations'
views on the impacts of all the NSR revisions. In addition, we
determined selected local air quality agencies' views on the revisions'
potential effects.
To address the first two objectives and gather information from local
agencies, we conducted an Internet-based survey of 50 state air quality
agencies, the District of Columbia, and the 71 local air quality
agencies that have responsibility for implementing the New Source
Review (NSR) regulations and could potentially issue NSR permits. To
ensure that we obtained information from those that were most involved
in the day-to-day administration of the NSR program and therefore in
the best position to judge the revisions' potential impacts, we worked
with the 10 EPA regional offices and obtained information from the
Internet Web site of the Association of State and Territorial Air
Pollution Program Administrators (STAPPA) and the Association of Local
Air Pollution Control Officials (ALAPCO) to identify the NSR program
manager for each agency. The 15 states with local air quality agencies
that issue NSR permits are listed in table 4 below.
Table 4: States with Local Air Agencies:
State: California; Number of local agencies: 35.
State: Ohio; Number of local agencies: 7.
State: Missouri, Tennessee; Number of local agencies: 4.
State: Arizona, Indiana, North Carolina; Number of local agencies: 3.
State: Alabama, Nebraska, Nevada, Pennsylvania; Number of local
agencies: 2.
State: Kansas, Kentucky, New Mexico, Oregon; Number of local agencies:
1.
Source: GAO.
[End of table]
California is the only state with local agencies covering the entire
state. For the other states, the local agencies are typically located
in larger metropolitan areas with air quality problems. In order to
present a national perspective of the issues faced by air quality
officials, we focused on the responses from states and highlighted
areas where local agencies had differing points of view.
The state and local air quality officials survey was developed between
December 2002 and April 2003. It includes questions to determine
respondents' views on the NSR program prior to the revisions, as well
as the anticipated effects the proposed and final revisions would
likely have on their programs.
Because we administered the survey to all of the state air quality
agencies and local agencies that have responsibility for implementing
the NSR regulations and could potentially issue NSR permits, our
results are not subject to sampling error. However, the practical
difficulties of conducting any survey may introduce other types of
errors, commonly referred to as nonsampling errors. For example,
differences in how a particular question is interpreted, the sources of
information available to respondents in answering a question, or the
types of people who do not respond can introduce unwanted variability
into the survey results. We included steps in the development of the
survey, the collection of data, and the editing and analysis of data
for the purpose of minimizing such nonsampling errors.
To reduce nonsampling error, we had cognizant officials from STAPPA and
ALAPCO review the survey to make sure that they could clearly
comprehend the questions and estimate the burden it would place on
them. We also pretested the survey with three states and one local
agency to ensure that (1) the questions were clear and unambiguous, (2)
terminology was used correctly, (3) the survey did not place an undue
burden on agency officials, and (4) the survey was comprehensive and
unbiased. In selecting the pretest sites, we sought to include agencies
in states that supported the rules as well as those that did not. We
also considered major subgroups such as states with and without local
permitting authorities and locations across a wide geographical area.
To determine what concerns, if any, those states involved in litigation
against the Environmental Protection Agency (EPA) regarding the NSR
reforms would have in completing the survey, we had an official from
the New York State Attorney General's Office (who is involved in the
litigation) review the survey. We asked the official to identify those
questions that states might refuse to answer because of litigation
concerns. In the end, four states involved in the litigation did not
respond to the survey. We made changes to the content and format of the
final questionnaire based on the pretests.
We conducted the survey using self-administered electronic
questionnaires posted to GAO's Web site on the Internet. We sent e-mail
notifications to alert the appropriate officials of the forthcoming
questionnaire. These were followed by another e-mail containing unique
passwords and usernames that enabled the officials to access and
complete the survey and notifying officials that the survey was
activated. The questionnaire was available on the Web until July 7,
2003. We received responses from 44 states and 60 local agencies (each
agency could only provide one response). In summarizing the survey
data, the District of Columbia was included in the state responses.
However, 15 of the local agencies that responded told us that they do
not have the authority to adopt their own NSR regulations, or they do
not write or issue NSR permits. Therefore, they were not eligible
respondents and did not provide responses to our more detailed
questions. Thus, 45 local agencies provided complete responses. The
overall response rate was 83 percent. We edited all completed surveys
for consistency and, if necessary, contacted respondents to clarify
responses. Table 5 below lists the states that responded, by EPA
region, as well as those that did not respond (listed in parentheses).
It is important to note that four states in EPA Region 1 declined to
respond so as not to disclose information about their ongoing NSR-
related litigation.
Table 5: Survey Respondents Listed by EPA Region:
EPA Region 1: EPA Region 2; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): New Jersey, New York.
EPA Region 1: EPA Region 3; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Delaware, District of Columbia,
Maryland, Pennsylvania, Virginia, West Virginia.
EPA Region 1: EPA Region 4; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Alabama, Georgia, Kentucky,
Mississippi, North Carolina, South Carolina, Tennessee (Florida).
EPA Region 1: EPA Region 5; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Illinois, Indiana, Michigan,
Minnesota, Ohio, Wisconsin.
EPA Region 1: EPA Region 6; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Arkansas, Louisiana, New
Mexico, Oklahoma, Texas.
EPA Region 1: EPA Region 7; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Iowa, Kansas, Missouri,
Nebraska.
EPA Region 1: EPA Region 8; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Colorado, Montana, North
Dakota, South Dakota, Utah, Wyoming.
EPA Region 1: EPA Region 9; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): California, Hawaii, Nevada
(Arizona).
EPA Region 1: EPA Region 10; Maine, Rhode Island (Connecticut,
Massachusetts, New Hampshire, Vermont): Alaska, Oregon, Washington
(Idaho).
Source: GAO analysis of survey responses.
Note: States that did not respond are listed in parentheses.
[End of table]
At the time we conducted our survey, we asked state and local officials
about the impacts of a proposed exclusion from NSR for equipment
replacement activities. Because EPA finalized this exclusion as a rule
after we completed our survey, we took steps to determine whether the
officials' views on the proposal were also true for the final rule. For
example, in December 2003, the national association representing state
and local air pollution control officials told us that, based on their
ongoing dialogue with state and local officials, the survey responses
on the proposed exclusion were consistent with state and local
officials' views on the final rule. In addition, an EPA manager for the
NSR program said that he does not anticipate that the officials who
responded to our survey would have changed their opinions on this
exclusion in the time since they responded to the survey, even though
it was not yet in final form at the time they commented.
To address the third objective, we identified key stakeholders involved
in national level NSR policy decisions and sent them a survey via e-
mail soliciting their responses to a number of questions about the
proposed and final NSR revisions' potential impacts on emissions,
industry investments, and air quality agencies' workloads. We
distributed the survey to 30 organizations representing diverse
industry and environmental interests. We used several criteria to
select stakeholders for comment. For example, because of the large
number of stakeholders involved in NSR issues at the national, state,
and local level, we focused exclusively on groups that have a national
perspective, including some law firms that represent several large
industries. The stakeholders we selected included the following:
* groups identified by knowledgeable EPA officials as key stakeholders;
* members of EPA's Permits/NSR/Toxics Subcommittee within its Clean Air
Act Advisory Council (CAAAC) that have a national scope (CAAAC is a
senior level policy committee consisting of approximately 60 senior
managers and experts representing state and local government,
environmental and public interest groups, academic institutions,
unions, trade associations, utilities, industry, and other experts);
* national level groups that have testified in Congress on NSR and
Clean Air Act issues over the last several years;
* national level groups that commented on EPA's NSR proposals; and:
* trade associations representing those industries identified by EPA as
those most affected by NSR.
We again took steps in the design, data collection, and analysis phases
of the survey to minimize nonsampling and data processing errors,
including pretesting of the survey questions, follow-up with those that
did not respond promptly, and independent verification of all survey
responses entered into an analysis database. We conducted two pretests
of the survey and made changes to the content and format of the final
questionnaire based on the pretests.
The survey was sent to the key stakeholders on July 2, 2003, and was
available until July 18, 2003. Of the 30 stakeholders contacted, the
following 14 responded to this survey:
* American Forest & Paper Association;
* American Lung Association;
* American Petroleum Institute;
* Clean Air Task Force;
* Clean Air Trust;
* Council of Industrial Boiler Owners;
* Edison Electric Institute;
* Energy and Innovation Center, Environmental Law Institute;
* Hogan & Hartson LLP;
* Morgan, Lewis & Bockius LLP;
* National Environmental Development Association's Clean Air Regulatory
Project;
* National Petrochemical & Refiners Association;
* National Resources Defense Council; and:
* STAPPA/ALAPCO.
We edited all completed surveys for consistency and, if necessary,
contacted respondents to clarify responses.
For all of these objectives, we worked with cognizant EPA officials,
including the agency's NSR program manager.
Detailed survey results are available at: http: //www.gao.gov/
special.pubs/gao-04-337sp.
We conducted our review from September 2002 through January 2004 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix III: Comments from the Environmental Protection Agency:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460:
JAN 23 2004:
OFFICE OF AIR AND RADIATION:
Mr. John B. Stephenson:
Director, Natural Resources and Environment
U.S. General Accounting Office:
441 G Street, NW
Washington, DC 20548:
Dear Mr. Stephenson:
Thank you for the opportunity to review a draft of the forthcoming
General Accounting Office (GAO) report entitled "Key Stakeholders'
Views on Revisions to the New Source Review Program" which you are
preparing at the request of Senators Jeffords and Lieberman. I have
some serious concerns about this draft report, which I would like to
describe.
The report is intended to be a summary of the views of State,
environmental, and industry stakeholders on the impact of the
Environmental Protection Agency's (EPA) final New Source Review (NSR)
rules, including both the December 2002 final rule ("NSR Reform Rule")
and the October 2003 final rule ("Equipment Replacement Provision
Rule"), as well as a proposed approach - the "maintenance allowance"
that EPA is still considering whether to finalize. The report uses
surveys to solicit the opinions of these stakeholders on a range of
complex issues related to the final and proposed rules, including the
environmental, economic, and workload impacts resulting from the rules.
While I do not object to the idea of surveying stakeholder opinion and
reporting the results, I am very concerned about the manner in which
GAO has carried out this task, as reflected in the draft report. I am
most concerned about the fact that GAO has, in some instances, used the
opinions expressed in the survey responses as if they were fact.
Specifically, the report uses the opinion survey to draw conclusions
and make recommendations about the NSR program without first attempting
to make some judgment as to whether the opinions are substantiated by
available information or even whether they are grounded in a correct
understanding of the rules' provisions. There is good reason to
question the basis for some of the opinions expressed; this undercuts
the conclusions GAO reaches and uses as the basis for its
recommendations.
I also want to express a particular concern that, even within the
narrow task of gathering and reporting opinion, GAO has carried this
out in a way that does not assure balance and objectivity. The survey
GAO used was not designed to elicit the most helpful information for
assessing the rules. This is compounded by the fact that the two
organizations GAO identified as having reviewed the survey are both
outspoken critics of the EPA rules, while EPA itself was not given a
chance to review the survey. In addition, the survey sample reflected a
skewed distribution among stakeholder groups; professional staff from
every State and local agency were surveyed, but only a handful of
environmental groups and industry trade associations were surveyed, no
other State officials (e.g., environmental commissioners) were
surveyed, and no individual industrial facility or company
environmental officials were included. Furthermore, the report gives
much more attention to the State responses, and focuses
disproportionately on discussing responses that express unfavorable
opinions of the rule.
I have discussed these and other concerns in more detail in an
attachment to this letter. However, I want to close by saying that I am
very concerned that, unless these issues are addressed, the report will
mistakenly be interpreted as presenting factual information that the
rule will have adverse impacts, instead of simply presenting survey
results in which some officials hold this opinion. Again, thank you for
the opportunity to comment.
Sincerely,
Jeffrey R. Holmstead:
Assistant Administrator:
Signed by Jeffrey R. Holmstead:
Attachment:
Additional EPA Comments on GAO Draft NSR Report Titled "Key
Stakeholders' Views on Revisions to the New Source Review Program":
-An opinion survey of the kind administered by GAO should not be used
to draw any conclusions or make any recommendations about the NSR
program. This is because an opinion survey is just that - opinion. The
draft report makes no effort to assess whether the opinions expressed
in the survey are based on data, analysis, or even on a reasonable
understanding of the rules' provisions. EPA cannot determine from the
report the basis for the stakeholders' survey responses, but based on
the Agency's own detailed assessment of the NSR rules, many of the
opinions expressed in the survey are unsupportable.[NOTE 1] While it
may be of interest to know that a particular stakeholder has a
particular opinion, GAO should evaluate whether the survey results are
consistent with the facts presented. There are good reasons to believe
many of them are not. Two such examples are included below. GAO must
acknowledge that such opinions are in conflict with available
information, lest these opinions be given unwarranted weight in drawing
conclusions or making recommendations about the NSR program.
Example 1: Several respondents expressed an opinion that the December
2002 rule would delay attainment of health standards in nonattainment
areas. This result is inconsistent with readily available facts. Even
if one has the opinion that emissions could increase from modifications
that would no longer require a permit under the revised rules - an
opinion EPA does not share - the portion of the emissions affected by
the December 2002 is small (whether in an attainment or a nonattainment
area), and any changes are dwarfed by the decreases that are coming and
will continue to come from rules designed to reduce emissions (e.g.,
acid rain program, NO[X] SIP call, maximum achievable control
technology (MACT) standards, mobile source rules). In addition, States
are required to have rules in place for ozone nonattainment areas that
reduce emissions inventories by 3 percent per year. In contrast, the
overall impact of the NSR rule changes is limited to emissions from
modifications to existing units (i.e., not new sources or new units at
existing sources). NSR benefits from these kinds of modifications are a
very small subset of the total benefits of the NSR program.
Furthermore, in nonattainment areas, these modified units are generally
already well controlled for the nonattainment pollutant, or would have
to be in order to qualify for many of the new rule's provisions. For
example, PAL sources must cap total emissions, Clean Units must apply
state-of-the-art controls to qualify, and pollution control projects
must be environmentally beneficial to be eligible for the NSR
exclusion. Any alleged marginal difference in controls at such sources
will not have any significant effect in counteracting the large
decreases we expect from State and federal air pollution control rules.
Example 2: Some States also responded that they believe the December
2002 rules will impose increased resource burden beyond the initial
period of rule adoption. This result cannot be reconciled with the
rule's provisions, and is also in conflict with EPA information showing
that the number of NSR permits (but not the environmental benefits of
the program) will decrease. Although the pollution control project
exclusion has associated State actions, these actions are a small
subset of what issuance of an NSR permit would require, and are thus by
definition less burdensome. A clean unit test is a one time action by
States, but it results in administrative savings that are realized the
first time a source uses it, and continues to result in savings
throughout the 10-year duration of the test. The changes to the
emissions test and baseline result in similarly obvious administrative
savings. And, while some States express concerns about the up-front
burden of establishing a PAL, permitting authorities with PAL
experience have reported that PALS have resulted in net financial
benefits or anticipate that this will be the case.[NOTE 2] This result
is virtually certain to hold for PALS under the NSR rule. Thus,
because each individual provision clearly results in an administrative
savings, it is not reasonable to conclude that an increase in burden
will result from the December 2002 NSR final rule.
* Unless validated, GAO should not use these opinions to draw
conclusions about the NSR program. This contrasts with GAO's more
reasoned approach in its August 2003 report, in which GAO independently
assessed EPA's analysis of the effects of the December 2002 rule. In
the most recent draft report, GAO does not evaluate the extent to which
opinions are corroborated by the underlying data and rationale.
Therefore, it should not assign equal weight to all opinions, and
should not make any judgment about the rule's environmental impact.
* GAO should not use the survey results as the basis for its
recommendations. GAO uses these results as a justification for its
recommendations that EPA: (1) help air quality agencies implement the
revisions, (2) monitor the effects of the Equipment Replacement
Provision, as we are doing with the NSR Reform Rule, and (3) consider
stakeholders concerns before taking any final action on the maintenance
allowance. The recommendations on their face make sense, and EPA
already had plans to take these actions in any case. However, the
survey results shed no light on whether these recommended actions are
more or less important, because the results are unconfirmed opinions,
some of which are based on incorrect information or assumptions. The
most appropriate course would be to de-link the survey results from the
recommendations, and present the results for what they are: a summary
of opinions.
* The survey itself is not particularly helpful in eliciting meaningful
information that could be used to corroborate the stakeholders' views
and resolve apparently conflicting information. A number of simple
factual questions could have been asked that would have assisted in
evaluating the opinions expressed. This is compounded by what appears
to be an uneven process for seeking input on the survey before it was
deployed. The two stakeholders identified in the survey
development process are two outspoken critics of the NSR regulations
who had publicly expressed vocal opposition to the final rules before
they were published. While other unnamed States also pre-tested the
survey, EPA was not offered a chance to, though the Agency's input
could have improved the survey and reduced the appearance of bias. In
addition, the survey sample reflected a skewed distribution among
stakeholder groups; professional staff from every State and local
agency were surveyed, but only a handful of environmental groups and
industry trade associations were surveyed, no other State officials
(e.g., environmental commissioners) were surveyed, and no individual
facility environmental officials were included. The industry and
environmental groups also got a less detailed survey.
* It is unclear whether the views of the survey respondents reflect the
organizations they represent. Although GAO correctly reports the survey
results as individual - not organizational - views, readers are likely
to conclude erroneously that the survey respondents' opinions on a
particular issue actually represent their entire organizations. For
example, it is entirely possible that an NSR program manager's view of
potential NAAQS impacts or necessary mitigation actions would be
different from the State's Air Director, or Environmental Commissioner.
In order to accurately reflect a State agency position, the survey
should have been sent to the State environmental commissioner.
* The report does not present a balanced characterization of the survey
results. It emphasizes the view that the NSR rules will have adverse
impacts. The conclusions GAO drew were heavily weighted toward the
opinions of State officials, and their results are discussed in much
greater detail. Furthermore, when the State results are reported, the
States who expect positive workload and environmental impacts get a
cursory mention, while those who expect negative effects get pages of
discussion itemizing each of the expected negative effects.
NOTES:
[1] EPA's own analysis (Supplemental Analysis of the Environmental
Impact of the 2002 Final NSR Improvement Rules, November 21, 2002) as
well as the October 2003 response to comments received on it
(Technical Support Document for the Prevention of Significant
Deterioration (PSD) and Nonattainment Area New Source Review (NSR):
Reconsideration, October 30, 2003) details the Agency's findings
regarding the emissions impacts of the final rule, and explains in
detail why we have reached conclusions that cast doubt on several
opinions expressed in the survey.
[2] This finding was first noted in EPA's 2002 report entitled,
Evaluation of Implementation Experience with Innovative Air Permits.
The following are GAO's comments on the letter from the Environmental
Protection Agency dated January 23, 2004.
GAO Comments:
1. GAO does not agree with EPA's assertions that we, in some instances,
used the opinions expressed in the survey results as facts. Consistent
with the review's objectives, this report carefully characterizes the
survey results as opinions. To this end, the report's title clearly
points out that we are presenting stakeholders' views. In addition,
based on our two earlier reports on the revisions, we determined that,
at best, limited data exist on the effects of the prior NSR program or
the potential effects of the revisions. In fact, as we found in our
August 2003 report on the analytical basis for EPA's December 2002
rule,[Footnote 26] EPA itself relied primarily on the professional
judgment of agency staff and comments received on earlier NSR reform
proposals, rather than a comprehensive quantitative analysis of the
rule's possible effects, in initially justifying the rule. That report
also described limitations with the agency's subsequent analysis of the
rule's environmental effects. Because of our earlier findings about
data limitations, we believe it useful and entirely appropriate to
supplement the available information with the informed opinions of
those most involved in the day-to-day administration of NSR programs.
GAO also disagrees with EPA's characterization that we improperly used
stakeholder opinions to draw conclusions and make recommendations about
the NSR revisions. While recognizing that the results were based on
opinion, it is important to point out that these were the opinions of
those on the front lines of program implementation. In this case, these
informed opinions raise important questions about the revisions'
effects. Because of these questions and, in light of the limited hard
analytical data on the revisions' effects, GAO recommends that EPA
collect data on the revisions' actual impacts. We made this
recommendation in our August 2003 report regarding the December 2002
rule and again in this report regarding the equipment replacement
exclusion. We further recommend that EPA consider these informed
opinions before further revising the NSR program. EPA also questioned
whether the respondents' opinions were grounded in a correct
understanding of the rules' provisions. We believe that our
recommendation that EPA provide state and local air quality agencies
with assistance in implementing the revisions will help to address this
concern. Despite its concerns, EPA said these three recommendations, on
their face, makes sense and that the agency plans to take these
actions.
2. GAO disagrees with EPA's assertion that the way we carried out our
work did not assure balance and objectivity. We developed the survey
using standard survey research principles. This included taking steps
to minimize question bias, asking respondents about both the positive
and negative effects of the revisions, providing respondents with a
range of answers to each question (including "no change" or "no
effect"), and assessing each question for bias and problematic wording
during an extensive pretesting and review process. We also sought to
eliminate bias and problematic wording by subjecting the survey to a
thorough review by a GAO survey specialist who was not involved in its
development. Regarding the external review of our survey, we point out
in the objectives, scope, and methodology section that we asked the
trade association that represents state and local air quality control
agencies (i.e., the officials we surveyed) to help ensure that their
members could clearly comprehend the questions and estimate the burden
it would place on them. We also asked a representative of the New York
Attorney General's Office to review the survey specifically to gauge
whether they thought those states involved in lawsuits with EPA over
the reforms would be concerned about completing the survey. Finally, to
ensure the independence of our efforts, we do not routinely seek the
subject agency's review of our survey instruments. Nonetheless, we held
discussions with staff in EPA's Office of Air Quality Planning and
Standards, Office of Enforcement, and regional offices to make sure we
understood the technical nature of the revisions when developing the
survey. In preparing our two prior NSR reports, we also worked closely
with EPA's managers of the NSR program to understand the agency's
assessment of how the revisions would work in practice, as well as the
potential effects. We used all of this information to design the survey
questions.
3. GAO disagrees with EPA's assertion that our survey sample was
skewed. GAO surveyed various stakeholders including state and local
officials, as well as industry and environmental groups, and this
report presents a range of views on the possible effects of the NSR
revisions. We describe our methodology for selecting these stakeholders
in the report's objectives, scope, and methodology section. More
specifically, with respect to our survey of state agency officials, we
point out that we did not survey a sample, but the universe of state
NSR program managers. We sent the survey to the manager of each state's
NSR program within the state environmental agency (instead of the
agency head) because these program managers are responsible for day-to-
day program implementation and hence are in the most informed position
to determine the revisions' impacts on their programs and workloads.
Furthermore, in the survey's instructions we asked the managers, when
answering the questions, to coordinate with the officials within their
agencies as they deemed necessary and appropriate. As such, we relied
on each state agency's own procedures for completing and reviewing the
survey responses. In several cases, in fact, the program managers told
us the reason they needed additional time to submit their responses to
us was because the responses were under review by others within their
agencies.
EPA also questioned why we surveyed every state and local agency but
only a handful of environmental groups and industry trade associations,
and no individual industry officials. GAO gathered more detailed
information from state and local agencies than from other stakeholders
because these agencies generally implement the regulations and we were
asked to obtain information on how this implementation would affect
agencies' programs and workload. Because of the large number of other
affected stakeholders, it was not feasible to survey the universe.
Instead, we surveyed key stakeholders that had been involved in
national NSR policy decisions, which included 30 organizations, in
order to obtain diverse industry and environmental perspectives. Of the
30 organizations we surveyed, 14 responded, and 8 of the respondents
represented industry. A number of the organizations that responded
represent large numbers of industrial companies, including the American
Forest & Paper Association and the American Petroleum Institute.
Likewise several of the environmental and health groups represent a
national membership base, including the American Lung Association and
the Natural Resources Defense Council.
GAO also disagrees with EPA's assertion that we focused
disproportionately on the state officials' unfavorable opinions of the
rule. In presenting the state survey results, we generally listed the
total number of officials responding to a question and information on
the distribution of their responses. We then provided more detailed
information about the majority's opinion for each question, consistent
with standard survey principles. In most cases, it turned out that the
majority of respondents to our questions held the view that the
revisions would have an adverse impact on emissions and their workload,
contrary to EPA's conclusions about the revisions' impacts. We were
very careful, however, to also discuss the number of respondents who
held the minority view on a particular topic.
4. EPA's letter suggests that GAO should have evaluated whether the
survey results were consistent with the "facts," asserts that many of
the survey responses are not, and cites its own analysis of the
revisions' emissions impacts as factual support for its position. EPA
also cites two examples of cases in which the agency believes
respondents' opinions conflict with fact. EPA's comment related to the
"facts" however, largely only represents references to its own
assertions.
First, as discussed previously we have identified limitations with
EPA's analysis of the revisions' impacts. As we stated in our August
2003 report, a senior EPA economist said that uncertainty about the
extent to which companies might elect to use the NSR alternatives in
the December 2002 rule limited the agency's ability to estimate the
rule's impacts. For these reasons, we did not use EPA's analysis as a
benchmark to evaluate the survey responses. Again, in this context, the
opinions of key stakeholders, especially those responsible for
implementing the regulations, provide an important perspective
appropriately considered by congressional decisionmakers.
Second, as to EPA's examples of opinions conflicting with facts, the
agency suggests that the opinions of those who expect the December 2002
rule to delay attainment of air quality standards are incorrect. In its
first example, EPA states that (1) even if emissions increased, the
increase would be small and dwarfed by decreases coming from other air
quality regulations, and (2) facilities affected by the revisions
either already have emissions controls or would have to have them to
qualify for many of the rule's exemptions, such as those for plantwide
emissions limits, clean units, and pollution control projects.
Regarding the first point, as we report, 7 officials agreed with EPA
and said that the rule would not impede their ability to meet or
maintain air quality standards. Another 14 expect they will offset the
anticipated increases using other air quality regulations. A minority
of the respondents (13) said that, despite these other regulations,
they would still have difficulty meeting or maintaining air quality
standards. Therefore, these 13 officials already took into account the
other air quality regulations EPA cites. Regarding the second point,
EPA did not mention the rule's key exemption--the revised method for
determining facilities past emissions--that does not require that
facilities have emissions controls, and was the provision cited most
often by the state officials as likely to lead to emissions increases.
While EPA maintains that this provision will not have a significant
environmental impact, agency managers for the NSR program acknowledged
that EPA's analysis justifying its position was not based on a
statistically valid sample of affected facilities. Ultimately, many
stakeholders disagreed with EPA's assertions.
Regarding the second example, GAO agrees that these opinions conflict
with EPA's information but also believes the state officials provided
plausible explanations for why they expect their burden to increase
even though they expect to issue fewer permits. As we point out in the
report, some of the officials said that they find the December 2002
rule confusing, complicated, and leading to more uncertainty about the
NSR program--all of which can contribute to agencies' workloads. While
EPA asserts that the rule will lead to an overall reduction in workload
for agencies based on its experience with six states that have used
flexible permitting systems, our survey results found that four of
these same states said the opposite--they expect the rule to increase
their workload (one had not assessed such impacts, and the other did
not know what the effect would be). Officials from the four states said
they would spend more time drafting laws, regulations, and guidance, as
well as processing permits, explaining the rule to industry, and
training staff. Furthermore, officials from the four states said that
they expected more work associated with the rule's revised method for
determining facilities' past emissions. Therefore, GAO disagrees with
EPA's assertion that the experience of these states shows that the rule
will reduce agencies' workloads or that the survey results are
contradictory.
[End of section]
Appendix IV: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
John B. Stephenson (202) 512-3841 Eileen R. Larence (202) 512-6510:
Staff Acknowledgments:
In addition to the individuals named above, Ulana Bihun, Michael Hix,
Jeffrey Larson, Lisa Turner, and Laura Yannayon made key contributions
to this report. Nancy Crothers, Bob DeRoy, Tim Guinane, Karen Keegan,
Judy Pagano, Minette Richardson, and Monica Wolford also made important
contributions.
FOOTNOTES
[1] The District of Columbia is included in this coalition.
[2] Such changes are called "major modifications" and the level of
emissions that will trigger the NSR requirements, known as the
threshold, varies by pollutant and the air quality status of the area
in which a facility is located.
[3] Prevention of Significant Deterioration (PSD) and Nonattainment New
Source Review (NSR): Baseline Emissions Determination, Actual-to-
Future Actual Methodology, Plantwide Applicability Limitations, Clean
Units, Pollution Control Projects, 67 Fed. Reg. 80186 (2002) (to be
codified at 40 C.F.R. pts, 51 and 52).
[4] See U.S. Environmental Protection Agency, Supplemental Analysis of
the Environmental Impact of the 2002 Final NSR Improvement Rules
(Washington, D.C.: Nov. 21, 2002).
[5] Prevention of Significant Deterioration (PSD) and Nonattainment New
Source Review: Routine Maintenance, Repair and Replacement, 67 Fed.
Reg. 80290 (2002).
[6] The cost of the replacement equipment had to be below a certain
percentage of the cost to replace the "process unit." A process unit
for power plants is defined as the portion of a plant that directly
contributes to electricity production (power plants can have more than
one such unit). The replacement equipment also had to meet certain
criteria, such as maintaining the basic design of the original unit.
[7] Prevention of Significant Deterioration (PSD) and Nonattainment New
Source Review (NSR): Equipment Replacement Provision of the Routine
Maintenance, Repair and Replacement Exclusion, 68 Fed. Reg. 61248 (Oct.
27, 2003) (to be codified at 40 C.F.R. pts, 51 and 52).
[8] EPA based this statement on an analysis which concluded that
revising the routine maintenance, repair, and replacement exemption
would lead to the increased availability of existing power plants,
thereby reducing the need for new plants. See U.S. Environmental
Protection Agency, Regulatory Impact Analysis for the Specification of
Categories of Activities as Routine Maintenance, Repair, and
Replacement for the New Source Review Program (Washington, D.C.: August
2003).
[9] See U.S. General Accounting Office, Clean Air Act: EPA Should Use
Available Data to Monitor the Effects of Its Revisions to the New
Source Review Program, GAO-03-947 (Washington, D.C.: Aug. 22, 2003) and
U.S. General Accounting Office, Clean Air Act: New Source Review
Revisions Could Affect Utility Enforcement Cases and Public Access to
Emissions Data, GAO-04-58 (Washington, D.C.: Oct. 21, 2003).
[10] Ozone forms when nitrogen oxides react with volatile organic
compounds in the presence of heat and sunlight.
[11] This information, provided by EPA, is used for background purposes
only. We did not, therefore, assess its reliability.
[12] The final rule's provisions were based on proposals considered by
the previous administration but never finalized. EPA solicited public
comment on those proposals in 1996 and again in 1998.
[13] Clear Skies Act of 2003 (S. 485 and H.R. 999); Clean Power Act of
2003 (S. 366); Clean Air Planning Act of 2003 (S. 843); Omnibus Mercury
Emission Reduction Act of 2003 (S. 484).
[14] Instead of meeting the March 2003 deadline, state and local
agencies could elect to have EPA take over the administration of
portions of their NSR programs affected by the revisions. Several
agencies have chosen this option.
[15] Less than half of the officials expect the provision exempting
pollution control projects to lead to fewer permits.
[16] According to EPA, this number may include some permits for new
units at existing facilities. The officials reported issuing 528
permits to companies that were constructing new facilities. EPA program
managers said the December 2002 rule did not affect new facilities and
new units at existing facilities.
[17] As we concluded in our August 2003 report, EPA relied primarily on
anecdotal information from industry in concluding that the NSR program,
prior to the final rule, discouraged some energy efficiency projects,
including some projects that would have reduced air emissions. Twenty-
three of the 44 state officials we surveyed said that the prior NSR
program discouraged companies' willingness to pursue energy efficiency
projects.
[18] See U.S. Environmental Protection Agency, Supplemental Analysis of
the Environmental Impact of the 2002 Final NSR Improvement Rules
(Washington, D.C.: Nov. 21, 2002).
[19] EPA historically used the 2 years immediately preceding the
proposed change to establish a facility's actual emissions. However, in
some cases, the agency allowed use of an earlier period.
[20] According to EPA, such requirements include those limiting
emissions of toxic air pollutants, nitrogen oxides, as well as
requirements in state implementation plans for attainment of the air
quality standard for ozone.
[21] See U.S. General Accounting Office, Air Pollution: Emissions from
Older Electricity Generating Units, GAO-02-709 (Washington, D.C.: June
2002).
[22] The following jurisdictions said that they are restricted from
adopting more stringent regulations than federal requirements: the
District of Columbia, Iowa, Mississippi, Missouri, Montana, New Jersey,
New Mexico, Kentucky, Ohio, North Dakota, Oklahoma, Pennsylvania, South
Dakota, Utah, Virginia, and Wisconsin.
[23] See U.S. Environmental Protection Agency, Regulatory Impact
Analysis for the Specification of Categories of Activities as Routine
Maintenance, Repair and Replacement for the New Source Review Program
(Washington, D.C.: August 2003).
[24] Otherwise, the areas may be subject to sanctions, such as the loss
of access to federal transportation funding.
[25] EPA should coordinate this effort with its response to a similar
recommendation in our August 2003 report (GAO-03-947).
[26] U.S. General Accounting Office, Clean Air Act: EPA Should Use
Available Data to Monitor the Effects of Its Revisions to the New
Source Review Program, GAO-03-947 (Washington, D.C.: Aug. 22, 2003).
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