NEW SOURCE REVIEW
“EPA Utility Enforcement
Initiative and NSR Reform”
American Public Power Association
Colorado Springs, CO
March 13, 2002
1
Leslie S. Ritts, Partner
Hogan & Hartson, L.L.P.
Leslie S. Ritts, Partner
(202)
Hogan637-6573
& Hartson L.L.P.
LSRitts@hhlaw.com
TOPICS I WILL COVER
•
•
•
•
•
What is the Utility Enforcement Initiative?
EPA’s Enforcement Targets
How EPA has Implemented its Initiative
A Quick Overview of NSR Basics
A Quick Overview of Clean Air Act Civil and
Criminal Enforcement Tools
• Settlements and Agreements in Principle to Date
• A Quick Overview of NSR Reforms
2
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
UTILITY ENFORCEMENT INITIATIVE
1997-Present
OBJECTIVE
• “Evaluate NSR/PSD/NSPS compliance and, if
appropriate, aggressively pursue significant NOx
emissions reductions”
From OECA Outline of Utility Enforcement Initiative (1997)
3
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
PURPOSE
• To obtain NOx, SO2, and CO emission reductions from
initial 25 targeted coal-fired electric generating
facilities faster than would be obtained by EPA’s
regulations governing the -– Acid Rain Program
– NOx SIP Call
– Ozone Transport Section 126 Petitions
– Regional Haze Program
4
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
UTILITY ENFORCEMENT TARGETS
The Original Eight Systems
• TVA
• Southern Companies
• American Electric Power
• Cinergy (Public Service Indiana)
• First Energy
• Illinois Power Company
• Southern Indiana Gas & Electric
• Tampa Electric Company
5
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
THE SECOND WAVE
OF TARGETS INCLUDED
•
•
•
•
•
Duke Power
Virginia Electric & Power Company
NJ PSE&G
20 or More Other Investor-Owned Utilities
and Rural Electric Cooperatives and Public Power
Companies
6
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
ENFORCEMENT ACTIONS
IMPLEMENTED BY -– U.S. EPA Regional Counsel (Regional “Leads”)
– U.S. Department of Justice
– U.S. EPA Headquarters Office of Enforcement Stationary Source Division (Bruce Buckheit,
Director)
7
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
TYPICAL STEPS IN CLEAN AIR ACT
NSR ENFORCEMENT ACTION
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•
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Section 114 Information Request;
Inspections;
Supplementary Section 114 Requests;
Notice of Violations / Administrative Orders;
Conference with EPA and DOJ Attorneys;
Settlement Negotiations (Settlements Then Lodged
with A Complaint in District Court); or
• Complaint in U.S. District Court;
• Judicially-Supervised Discovery and Trial
8
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
HUMAN EFFECTS OF NSR
ENFORCEMENT
• Delays in All Permitting
• Uncertainty
– Planned Routine Maintenance During Outages
– Unplanned Maintenance
– Big Projects and Financing
– Reliability and PUCs
• Community Relationships
• Employee and Management Upset
9
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
SECTION 114
INFORMATION REQUESTS
Who Are Subject?
• Persons Who Own Emissions Equipment
• Persons Who Manufacture Emissions Control or
Process Equipment (e.g., Turbine and Boiler
Manufacturers)
• “Any Other Persons” Whom “the Administrator
Believes May Have Information (e.g., Trade
Associations)”
• Anyone Else Subject to the Act (e.g., Turn-Key
Operators)
10
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
INSPECTIONS
The Rules
• Broad Legal Authority and Few Limitations
• Little or No Prior Agency Notification Required
• No Warrants
• Establishing System Procedures
– Responsible Manager (Alternate)
– Tours, Samples, Document Requests
11
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114
INFORMATION REQUESTS
• “For 20-year period (1978-1998), provide for each
unit for each year work order records (capital
improvement requests) for all capital projects
including but not limited to:
– Work order approvals with authorizing signatures
– Work order project completion reports
– Equipment specifications
– Cost/benefits analyses
– Alternative options analyses.”
12
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114 REQUESTS
• “For 20-year period (1978-1998), provide for each unit:
– Boiler cross-sectional diagrams
• Original
• Current
– Boiler design ratings (original/current)
• Steam flow rate
– Peak
– Sustained
• Maximum heat input capacity (based on what coal
content)
• Gross MW capacity
• Net MW capacity
13
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114 REQUESTS
• “For 20-year period (1978-1998) provide for each unit for
each year:
– Capacity factor
– Operating hours
– Coal consumption (ton/year)
– Total gross and net generation (MW-hr)
– Heat rate (BTU/KW-hr)
– Annual forced outage rate (principal causes) (MW-hr
lost generation)
– Annual planned outage rate
cont’d next page
14
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114 REQUESTS
– Derating/lost generation (MW-hr) due to:
• Boiler related components
• Turbine generator components
• Environmental control performance
• Other
– Scheduled/planned retirement dates
– Coal analysis (% sulfur, % ash, heat content)
– Capability test results (MW)
– Monthly peak hourly average generation (MW)”
cont’d next page
15
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114 REQUESTS
• GADs (generating availability data system) reports (1978present) listing all:
– Forced outages
– Scheduled outages
– Causes
– Duration of outages
16
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114 REQUESTS
• “For past 20-year period provide for each year:
– Utility system generation
– Utility system electric consumption
– Utility system electric demand
– Net electric sales
– Net electric purchases
• Life extension / life optimization studies, evaluations,
assessments, reports
• Total capital expenditures per unit for boilers over life of
the unit
cont’d next page
17
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXAMPLES OF EPA § 114 REQUESTS
•
•
•
•
•
•
•
Flue gas recirculation (FGR) changes/dates
Dates of low-NOx burner (LNB) retrofits
Balanced draft conversion dates
Dates of scrubber retrofits
Dates of ESP or baghouse retrofits
Pulverizer and cyclone replacement dates
Economizer, reheater and superheater replacement dates
18
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
WHAT IS EPA
LOOKING FOR?
An Overview of
New Source Review Basics
19
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
WHAT IS MAJOR SOURCE “NEW
SOURCE REVIEW (NSR)”?
• NSR is a preconstruction permitting program that
regulates “major source construction” and “the
modification” of “major stationary sources” of air
pollution (includes criteria pollutants and others).
• It applies to any new major source or any existing
major source, that “significantly increase” emissions
because of a “physical or operational change” to the
source.
• It also applies to minor sources that install major
emissions units.
20
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“NSR” vs. “PSD”
• NSR requirements vary depending on the attainment
status of the area.
– “Prevention of Significant Deterioration (PSD)” in
attainment areas
– “Nonattainment NSR” in nonattainment areas
• Sources in the Ozone Transport Region (New England
States) must comply with Nonattainment NSR
requirements regardless of the area’s attainment status.
21
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
REGULATED POLLUTANTS
• PSD and Nonattainment NSR are pollutant-specific. If an
area is nonattainment for one pollutant and attainment for
another, two different permits are required (or one meeting
the requirements of both programs).
• Nonattainment NSR applies to only the six criteria pollutants
(i.e., NOx, SO2, CO, O3, PM, Pb).
• PSD applies to the criteria pollutants and to all other
“regulated pollutants,” except Section 112 toxic pollutants
(e.g., ODS, H2S, TRS, etc.)
22
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR IMPLEMENTATION
• Most PSD/NSR programs are approved into States’
Implementation Plans (SIPs) based on criteria established
by EPA (40 CFR 51.165-166).
• There is a Federal PSD program (40 CFR 52.21) for
attainment areas; there is no Federal nonattainment NSR
program. If a state’s PSD rules are not approved, EPA
delegates implementation of the Federal PSD program to
those affected States.
• In certain limited instances, EPA also has authority to
administer the NSR program.
23
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR IMPLEMENTATION, cont’d
• There are approximately 200-250 major source permits
issued per year (compared to 20-50,000 minor source
permits).
• EPA’s position is that 80% of industry is not in
noncompliance with NSR/PSD (from OECA’s 1999
Enforcement Alert).
24
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
PSD REQUIREMENTS
(Section 165 of CAA)
• Conduct ambient air impact analysis to assure that new
emissions will not cause NAAQS or increment violation.
– Preconstruction monitoring
– Pollutant dispersion modeling
• Assure that there are no unacceptable impacts on Class I
areas (e.g., National Parks).
• Apply “Best Available Control Technology (BACT)” - The
BACT determination process allows for consideration of
environmental, energy, economic and other impacts.
25
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NONATTAINMENT NSR
(Section 173 of CAA)
• Offset Emission Increase.
• Apply Lowest Achievable Emission Rate (LAER) The LAER Determination Process Does Not Allow for
Consideration of Economic Impacts.
• Ensure State-Wide Compliance of All Owner’s
Sources.
• Analyze Alternative Sites and Processes.
26
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NA NSR OFFSET REQUIREMENTS
• Must obtain at least 1-to-1 offsets. Higher ratios apply
depending on severity of nonattainment problem.
• Must come from nearby nonattainment area that is of equal or
higher classification and that contributes to the area’s
nonattainment problem.
• Must be in effect and “federally enforceable” under the Act.
• Must not be used to meet any other requirement under the
Act.
27
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
WHAT IS A “MAJOR
(STATIONARY) SOURCE”
• Any buildings, structures, facilities or installations that
(1) belong to the same industrial grouping (2-digit SIC
code), (2) are located on contiguous or adjacent property,
(3) are under common control (i.e., same owner), and (4)
emit above the applicable emissions threshold.
• Includes support facilities even if the support facility is in a
different SIC code. A support facility conveys, stores, or
otherwise assists in the production processes of the source
(e.g., a coal prep plant).
• Factors considered include proximity, dependency, and
common control.
28
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
MAJOR SOURCE THRESHOLDS
• Prevention of Significant Deterioration (PSD)
– 100 tpy if on the NSPS source category list
– 250 tpy if unlisted source category
• Nonattainment NSR
– 50 tpy for most areas
– Lower thresholds apply in some areas with more
severe nonattainment problems (e.g., severe ozone
nonattainment has a 25 ton major source
threshold).
29
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
POTENTIAL-TO-EMIT (PTE)
• The maximum capacity (based on 8760 hours of
operation) of a source to emit a pollutant based on its
current physical and operational design, allowing for
reductions due to practically (or federally) enforceable
limitations.
• Practically enforceable means the source must be able
to show continual compliance with the limitation or
requirement. (Annual emission limitations,
e.g., 100 tpy, are not allowed.)
30
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
POTENTIAL-TO-EMIT (PTE), cont’d
• “Federally enforceable” means conditions that are
enforceable by EPA. The D.C. Circuit Court of
Appeals has voided this part of the PTE definition, but
it remains in most state programs.
31
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
MODIFICATIONS - “THE
EMISSIONS INCREASE” TEST
• NSR applies when the post-change emissions could exceed
the current actual emissions by a “significant” amount.
(Significant is defined for each pollutant.)
• The current actual emissions are based on the source’s
operations during the two-year period preceding the
change (or a more representative period, if appropriate).
• Post-change utility emissions are based on the unit’s
maximum PTE before 1992, and “future actuals” after
1992 in delegated programs or if state has revised its NSR
rules.
32
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
MODIFICATIONS - ACTUAL TO
POTENTIAL TEST
• After 1992, in certain states, predicted future actual
emissions are substituted for “PTE’s” under the
WEPCO Rule (40 CFR § 52.21(b)(33); 57 Fed. Reg.
32314, July 21, 1992).
– Many states did not adopt WEPCO Rule
– Confusion and ambiguity in applying WEPCO
Rule
– Post-change record-keeping?
33
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EXEMPT ACTIVITIES
• “Routine maintenance, repair, and replacement”
• Use of an alternative fuel under certain circumstances
• Increase in hours of operation or production rate except as
prohibited by a federally enforceable emission limit
• Change in ownership
• Certain alternative fuels
• Addition of a “pollution control project”
• Installation or operation of a clean-coal technology
• “Reactivation” of very clean coal-fired electric generating
unit.
34
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“RMRR”
DETROIT EDISON DETERMINATION, MAY 23, 2000
(Turbine Dense Pack Replacements)
Nature
• Whether major components of a facility are being modified
or replaced; specifically whether the units are of
considerable size, function or importance to the operation
of the facility, considering the type of industry involved
• Whether the change requires pre-approval of a state
commission, in the case of utilities
• Whether the source itself has characterized the change as
non-routine in any of its own documents
35
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“RMRR”
DETROIT EDISON DETERMINATION, MAY 23, 2000
(Turbine Dense Pack Replacements), cont’d
• Whether the change could be performed during full
functioning of the facility or while it was in full working
order
• Whether the materials, equipment and resources necessary
to carry out the planned activity are already on site
36
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“RMRR”
DETROIT EDISON DETERMINATION, MAY 23, 2000
(Turbine Dense Pack Replacements), cont’d
Extent
• Whether an emissions unit will be replaced
• Whether the change will take a significant time to perform
• Whether the collection of activities, taken as a whole,
constitutes a non-routine effort, notwithstanding that
individual elements could be routine
• Whether the change requires addition of parts to existing
equipment
37
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“RMRR”
DETROIT EDISON DETERMINATION, MAY 23, 2000
(Turbine Dense Pack Replacements), cont’d
Purpose
• Whether the purpose of the effort is to extend the useful life
of the unit; similarly, whether the source proposes to
replace a unit at the end of its useful life
• Whether the modification will keep the unit operating in its
present condition, or whether it will allow enhanced
operation (e.g., will it permit increased capacity, operating
rate, utilization, or fuel adaptability)
38
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“RMRR”
DETROIT EDISON DETERMINATION, MAY 23, 2000
(Turbine Dense Pack Replacements), cont’d
Frequency
• Whether the change is performed frequently in a typical
unit’s life
39
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“RMRR”
DETROIT EDISON DETERMINATION, MAY 23, 2000
(Turbine Dense Pack Replacements), cont’d
Cost
• Whether the change will be costly, both in absolute terms
and relative to the cost of replacing the unit
• Whether a significant amount of the cost of the change is
included in the source’s capital expenses, or whether the
change can be paid for out of the operating budget (i.e.,
whether the costs are reasonably reflective of the costs
originally projected during the source’s or unit’s design
phase as necessary to maintain the day-to-day operation of
the source
40
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR AVOIDANCE STRATEGIES
• Practically enforceable emission restrictions to limit
the source’s PTE to below major source levels
(synthetic minor) (NSR if relaxed - Section
52.21(r)(4) NSR “circumvention” policy.)
• “Net out” of review
• Establish plantwide applicability limit (PAL).
41
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NETTING OUT OF REVIEW
• If the emission increase from the source could exceed
the significance level, the source can avoid NSR if the
total of all its creditable increases and decreases in the
preceding 5 years (or other applicable
contemporaneous period) does not exceed the
significance levels.
• Emission decreases must be real, quantifiable,
permanent, and practically enforceable (or federally)
and they must not have been otherwise required.
42
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR PERMITTING PROCESS
• Source Selects BACT or LAER, Models Air Quality in
PSD Areas, Obtains Offsets in Nonattainment Areas
• Source Submits Application
• Completeness Determination by Permitting Authority (PA)
• Within one year, PA must issue a proposed permit for
public review
– Make the application, the proposed permit, and all
related materials available to the public for comment;
– Notify the public of the proposed permit in a local
newspaper
cont’d on next page
43
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR PERMITTING PROCESS
• PA must transmit a copy to the FLM, other States, and/or
tribes affected
– Make the application, the proposed permit, and all
related materials available to the public for comment;
– Notify the public of the proposed permit in a local
newspaper.
• After considering all public comments (written and oral)
the PA may issue the final construction permit
• The PSD/NSR Permit must be incorporated in the Title V
Operating Permit
44
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
Modifications to Existing Boilers
EPA Alleges Were Not Permitted!
45
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
MAJOR COMPONENTS
UNDER ENFORCEMENT SCRUTINY
•
•
•
•
•
•
•
•
•
•
•
•
• FG recirculation systems
• Air inlet ducts
• Turbine apertures (e.g.,
blades or buckets)
• Ductwork for gas from
boiler
• Duct dampers
• Air reheaters
• Boiler make-up H2O
systems
• Coal handling/coal yard
changes
Superheaters
Economizers
Reheaters
Air heaters
Boiler tubes
Cooling H2O tubes
Burners
Cyclones
Pulverizers
Ash pits
Coal grates
Ash hoppers (fly ash
handling systems
46
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
TARGETED CHANGES
AND REPAIRS
Boiler Components
• Water Tubing - Convection, Superheater, Reheater,
Economizer
• Fans
• Coal Pulverizers
Turbine Components
• Blades
47
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EPA’S ASSERTIONS -Violations of Clean Air Act NSR occurs if a non-exempt
NSR change results in:
• Recovery of lost utilization or capacity (e.g., “life
replacement projects”);
• Greater boiler efficiency and potential increase in
utilization;
• Increased peak capacity at the unit (e.g. repowering);
• A unit is restarted after “many?” years.
48
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
KEY PROBLEMS
FOR THE INDUSTRY
• All old coal-fired units require periodic replacement
of tubes
• Material improvements, changes in coal quality, and
experience may lead to “changes in design”
• Any repair or replacement will make the unit more
reliable and if it is available, one can expect it to be
used more. If it is used more, emissions will increase
unless capped.
49
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
KEY TO THE DEFENSE OF
PAST PROJECTS
• Understanding the history and drawing a distinction
between the scope and intent of the project and what
happened at Wisconsin Electric Power Company, as
analyzed by the Seventh Circuit Court of Appeals
(WEPCO v. Reilly, 893 F.2d 901 (7th Cir. 1990),
relative to “customary and routine maintenance in the
industry.”
• Preparing an analysis that the project did not “result
in” emissions increases.
50
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
KEY TO THE DEFENSE OF
CURRENT PROJECTS
• Defining the project and managing its paper trail
• Documenting an analysis that:
– Project is “routine maintenance, repair or
replacement (or one of the other NSR exemptions)”
– That the project will not result in an increase in
emissions
• Obtaining state and local agency support of
determinations, if possible
51
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
PARTICULAR SCRUTINY OF -• Replacement of major components with improved
design and materials
• Replacement of major components with same design
and materials
• Periodic preventive maintenance
• Repair of components when they fail completely
52
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
What Happens When EPA Finds
An NSR Violation?
A Review of Clean Air Act
Enforcement Tools
53
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
BASIC COMPLIANCE TOOLS
• Administrative Penalties (“Traffic Tickets”)
• Administrative Orders
• Civil Actions
– Injunctions to Halt Construction
– Injunctions to Retrofit Equipment
– Civil Penalties or Section 120 Compliance Orders
• Criminal Actions
• Section 303 Imminent Harm Orders
54
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
IN THE UTILITY ENFORCEMENT
INITIATIVE, THE U.S. DEPARTMENT OF
JUSTICE IS SEEKING FROM VARIOUS
UTILITY SYSTEMS:
• Civil Penalties
• Injunctive Relief
• Supplemental Environmental Projects (“SEPs”)
– But No Criminal Penalties
55
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
CLEAN AIR ACT CIVIL PENALTIES
• Section 113(b) - $25,000 per day, per violation
escalated to $27,500/day/violation
• $10 million/yr for a single violation
56
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
CRIMINAL PENALTIES
• Section 113(c) - Any person who “knowingly”
violates any requirement or prohibition ... shall upon
conviction be punished by a fine pursuant to Title 28
and/or by imprisonment not to exceed 5 years
– Also applies to material statements,
representations, certifications, or omits information
or fails to file or maintain any notice, application,
record, plan or other document ... whether with
respect to the requirements imposed by the
Administrator or by a state.
57
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
UNRESOLVED QUESTIONS
REGARDING CRIMINAL LIABILITY
• Public Health Laws Interpret Strict Liability - No “Mens
Rea (Intent to Violate)”
• Criminal Clean Air Act Cases - Falsification of Monitoring
Data
• Legislative History
– Requires “Notice” of Requirement
– Excuses Penalties for Good Faith Prompt SelfReporting
– Shifts Burden to Management
58
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
DOJ LETTER
TO NSR DEFENDANTS
November 15, 1999 Department of Justice Letter
• Shutdowns not necessary
• But no reassurances
• Ask us --
59
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
EPA NSR COMPLAINTS ALLEGE -• Failure to Obtain PSD/NSR Construction Permits
and/or State Operating Permits
• Failure to Install “BACT” or “LAER”
• In Nonattainment Areas, Failure to Obtain Offsets
• Failure to Comply with NSPS
• Other Federally-Enforceable State Violations (e.g.,
SIP Opacity Violations, Start-up/Shutdown/
Malfunction Reporting Violations)
60
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
INJUNCTIVE RELIEF
• “BACT” - Today’s “BACT,” not retrofit “BACT”/
“LAER”
• Enhanced Monitoring
• Air Quality Monitoring and Modeling
• Restrictions on Emissions Trading Relinquishment of
Banked Emissions Reductions
• SEPs to Mitigate Damages
61
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
BACT FOR UTILITIES
• Sulfur Dioxide (SO2) - scrubber or switch to gas
• Particulates - High efficiency electrostatic precipitator /
fabric filter bag
• Nitrogen Oxides (NOx) - Selective Catalytic Reduction
(SCR)
62
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
LEGAL DEFENSES INCLUDE -• Statute of Limitations (See Next Page)
• EPA’s Interpretations Counter to Legal Reading of CAA
– WEPCO Defenses
– Significant Increase Test
• Fair Notice Defense / Illegal Rulemaking
• Project Exempt from NSR (RMRR, etc.)
• No Actual Emissions Increases
• Emissions Increases not “the result of” the Project
• State Approved Project
63
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
LEGAL DEFENSES
TO NSR VIOLATIONS
• Statute of Limitations
– No Clean Air Act statute of limitations
– 28 USC § 2462
– 5 years of penalties (EPA v. Marine Shale, 81 F.3d
1329 (5th Cir. 1996)
– No statute of limitations for injunctive relief
• Campbell Soup N.D. Cal. 1987
• American Electric Power, So. Dist. Ohio 2001
• But see Mead v. EPA, W.D. Maryland 2001
64
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
LEGAL DEFENSES
TO NSR VIOLATIONS
Fair Notice Doctrine
• Company had “Notice”
• Company Could Determine the Content of the Notice
– General Electric Case (TSCA)
– Chrysler Case (NHTSA)
– Hoerchst Celanese (Clean Air Act)
65
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
ENFORCEMENT ONGOING
TVA
May 21, 2002 – Hearing
Scheduled in Federal
Eleventh Circuit Court of
Appeals on EPA
Administrative Record /
Decision Aug.-Oct. 2002
Illinois Power
Trial Scheduled July 2002,
Discovery Ongoing
AEP, So. Indiana Gas
& Electric, First
Energy, Southern
Companies
Discovery Ongoing,
Trial 2003-2004
66
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
DOJ NSR REPORT
67
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“New Source Review: An Analysis of the
Consistency of Enforcement Actions with the
Clean Air Act and Implementing Regulations”
(Jan. 15, 2002)
“The Department concludes that the EPA has a reasonable
basis for arguing that the enforcement actions are consistent
with both the Clean Air Act and the Administrative
Procedures Act.”
***
“Having concluded that the EPA has a reasonable basis for
bringing the enforcement actions, the Department of Justice
will continue to prosecute these lawsuits before the federal
judiciary.”
John Ashcroft, Attorney General
68
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
“New Source Review: An Analysis of the
Consistency of Enforcement Actions with the
Clean Air Act and Implementing Regulations”
(Jan. 15, 2002), cont’d
“The EPA to date has not issued a regulation that explains
which type of construction project it considers ‘routine
maintenance,’ and hence exempt from New Source Review.”
***
“Although the New Source Review Program has been in
effect since 1977, the EPA did not until recently file
enforcement actions alleging that certain facilities’
construction projects constitute ‘modifications.’”
John Ashcroft, Attorney General
69
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
WHAT HAS EPA
GOTTEN TO DATE?
Utility NSR Settlements and
“Agreements in Principle”
70
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
UTILITY SETTLEMENTS
1998
Tampa Electric Company signed consent
decree valued at $1 billion covering two
plants (10 units) for 10 years
2002
(not yet
lodged)
New Jersey Public Service Electric &
Gas signed consent decree valued at
$0.35 billion covering three plants (4 units)
Both received past and future NSR protections /
“covenants not to sue.”
71
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
UTILITY “AGREEMENTS IN
PRINCIPLE,” BUT SETTLEMENTS NOT
YET WORKED OUT
• Cinergy – tentatively agreed in 2001 to settlement
valued at $1.4 billion covering 10 plants (34 units).
• Virginia Power – tentatively agreed in 2001 to
settlement valued at $1.2 billion covering 8 plants (21
units).
• Others Thought to Be Negotiating, Although Status
Certainly “Unclear.”
72
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
COMPARISON OF EMISSION
REDUCTIONS IN SETTLEMENTS AND
AGREEMENTS
NOx Controls
• TECO - SCR or equivalent controls, average 0.15
lb/mmBtu across facility, or 3.5 ppm for repowered
units (no cap)
• PSE&G - SCR by 2004-2007 scheduled: individual
units to achieve 0.1 lb/mmBtu - 0.15 mmBtu (no
federal cap)
73
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
COMPARISON OF EMISSION
REDUCTIONS IN SETTLEMENTS AND
AGREEMENTS, cont’d
NOx Controls
• Cinergy - SCR or equivalent controls at nine units
equivalent to 0.1 lb/mmBtu beginning in 2004; SNCR
or low NOx burners on other units (system-wide cap
during ozone season)
• Virginia Power - SCR installations to reduce 55,000
tons by 2004-7 with additional reductions 2008-2012.
Systemwide cap of 30,250 Tpy by 1/2013 from 1998
baseline of 105,000
74
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
SULFUR DIOXIDE SCRUBBING
• TECO - 93-95% Scrubber efficiency by Sept. 2000
(no cap)
• PSE&G - Installation of scrubbers at 4 units 12/0612/12 with 0.15 lb/mmBtu average (30 day rolling)
• Cinergy - Scheduled installation of scrubbers over
2008-2013 and optimization other scrubbers
• Virginia Power - Scheduled two 95% control
scrubbers by 2002? Two others by 2010, 2012
Some will have caps but no details
75
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
PARTICULATE MATTER
• TECO - BACT Analysis/ESP optimization, 1 CEM by
2002
• PSE&G - Baghouse by 12/06 to achieve 0.015
lb/mmBtu at one facility; improve operation at other
facility to achieve 0.03 lb/mmBtu
• Cinergy - BACT review and upgrades based on
review, assess Hg Technologies
• Virginia Power - Optimization of Controls and CEMs?
76
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
OTHER SETTLEMENT TERMS
• Emissions Trading Restrictions, Retirement of Credits
• Civil Penalties $1.4mm (PSE&G) - $3.5mm (TECO) $8.5mm? (Cinergy)
• SEPs
– TECO - $5mm for NOx mitigation projects, $2mm for
state estuary programs
– PSE&G - $6mm for various projects including CO2
reduction
– Cinergy - $21.5mm commitment
– Virginia Power - $14mm commitment
77
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
WHAT IS NSR REFORM?
78
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR REFORM AND EFFECT ON
ENFORCEMENT
• Public Debate on Enforcement
• NSR “90 Day” (265 Day and Counting) Report with
NSR Recommendations
• NSR Reforms and Rulemaking
79
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR REFORM RULEMAKING
Summer 2002 - Final Rule
• Significant Increase Test with Causation
• 2-of-10-yr. Baseline
• 10-15 yr. “Plantwide Applicability Limits” (PALs)
• 10-15 yr.”Clean Unit Exemption for PSD/NSR
sources or 90% state-approved equivalent
• New FLM Procedures
80
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.
NSR REFORM RULEMAKING, cont’d
Summer 2002 - Proposed Rule
• Routine Maintenance, Repair and Replacement
• (5% of Capital Replacement - per project?
Aggregated project over two years? What is
baseline?)
• Narrative Description for projects exceeding 5%
(nature, purpose, cost, frequency)
• Final Rule??
81
Leslie S. Ritts, Partner
Hogan & Hartson L.L.P.