New Source Review Update

1. New Source Review Update Western States Air Resources Council Business Meeting September 18, 2003

2. Lessons Learned “One of the lessons that we have learned through our ongoing efforts is that it would be difficult, if not impossible, to improve NSR in one large rulemaking. Instead, I believe it is best to make incremental changes…” January 19, 2001 memo from Robert Perciasepe, AA for OAR to NSR Stakeholders

3. NSR Report to the PresidentJune 2002 Included recommendations for reforms to NSR regulations • Final rule issued in FR on 12/31/02 for five elements proposed in 1996 • Final rule for RMRR signed on August 27, 2003 • Proposals to come on aggregation, de-bottlenecking, and allowable PALs

4. NSR Reform Provisions • Final Changes in August 2003: • Routine MaintenanceFinal Changes in December 2003: • Baseline Actual Emissions • Actual-to-Projected-Actual Applicability Test • Plantwide Applicability Limitations (PALs) • Clean Unit Test • Pollution Control Project (PCP) Exclusion • , Repair and Replacement (RMRR) • Equipment Replacement Provision • No action on allowance approach • Upcoming Proposals: • Debottlenecking Policy • Project Aggregation Policy • Allowables PALs

5. Key Implementation Consideration

6. Implementation by States • For delegated States, new rules became effective March 3, 2003 (60 days from publication in the Federal Register.) (10 States) • For SIP-approved States, rule changes due within 3 yearsfrom publication in the Federal Register to amend their SIPs or, alternatively, must demonstrate that that State program is at least as stringent as new rules. (40 States)

7. Reconsideration of December 31, 2003 Changes • One key goal was to improve legal defensibility of final changes • Open a select group of elements for public comment • Committed to Court to respond to requests for reconsideration by end of October

8. Other Litigation • Litigation on 1980 Rules • Reconsideration requests from certain utilities and on fugitive emissions related to modifications • Anticipate litigation, request for stay and request for reconsideration on final RMRR change • Decisions in Ohio Edison and Duke Power cases • NO2 increments litigation • Decisions on New York and Texas Title V Programs

9. Future Rulemaking • 1996 proposal • ODS substances • Innovative technology waiver • What does “demonstrated” mean? • When is a source free from having to consider new technologies in the permitting process? • Class I requirements • 1990 amendments

10. RMRR Equipment Replacement Provision • Excludes as RMRR any replacement of process components with identical or “functionally equivalent” components. • A “functionally equivalent” component is any component that serves the same purpose as the replaced component • Fixed Capital Cost of the activity cannot exceed some 20% of the cost to reconstruct a new process unit.

11. Equipment Replacement Provision • The activity is not routine if it changes the “basic design parameters” of the process unit • For utilities, BDP are: maximum hourly heat input and maximum hourly fuel consumption rate or maximum hourly electric output rate and maximum steam flow rate • For non-utilities, BDP are: maximum rate of fuel or heat input, maximum rate of material input, or maximum rate of product output • Proposed rule defines “process unit” and gives definitions for 3 types of industrial sources or facilities