Air Pollution: Legal Perspectives on the Routine Maintenance Exception to New Source Review
CRS Report for Congress
Air Pollution: Legal Perspectives on the
“Routine Maintenance” Exception to New
Source Review
Robert Meltz
Legislative Attorney
American Law Division
Summary
A major Clean Air Act issue is the extent to which an existing power plant or
factory may be altered without effecting a “modification.” A “modification” of an
existing air pollution source is subject to the Act’s stringent air pollution control
requirements for new sources. The topic of this report is a widely used exemption to
“modification” allowing changes that constitute “routine maintenance, repair, and
replacement” without triggering such stringent requirements. The report surveys the
original legal landscape surrounding this exemption – in the contexts of determining
applicability of New Source Performance Standards, and New Source Review in
Prevention of Significant Deterioration and nonattainment areas. It then summarizes the
many significant developments during the current Bush Administration, both in the
Federal Register and in the courts. This report will be updated as events warrant.
In the three decades since its enactment, the Clean Air Act (CAA)1 has seen many
skirmishes over how its text should be interpreted. A current, and major, one involves the
extent to which a power plant or factory may alter its facilities or operations without
bringing about a “modification” of that emissions source. A “modification” turns an
existing emissions source into a “new source,” which has to meet more stringent air
pollution control requirements in the CAA than does an existing source. Legally speaking,
the issue is – What changes to an “existing stationary source” of air pollution are
significant enough to be a “modification” so as to trigger the CAA’s New Source
Performance Standards (NSPSs) and pre-construction “new source review” (NSR)?
Our topic in this report, however, is narrower. It is the widely used exemption to
what constitutes a modification for “routine maintenance, repair, and replacement”
(RMRR) at stationary sources. On the meaning of this vague phrase turns considerable
sums of money, since routine maintenance, repair, and replacement, by virtue of the
1 42 U.S.C. § 7401 et seq.
Congressional Research Service ˜ The Library of Congress
exemption, does not require the facility to install the state-of-the-art, often expensive,
pollution controls demanded by NSPSs and NSR.
This report surveys the original statutory, regulatory, and case law landscape on
RMRR, then describes more recent regulatory and judicial developments.
The Statute and Regulations; WEPCO
In enacting the CAA of 1970, Congress drew a sharp line between existing and new
stationary sources of air pollution. For many existing stationary sources, Congress
believed, retrofitting the latest air-pollution control technology would not be economically
or technologically feasible. But new sources, built as they are after adoption of a new
pollution standard, could feasibly install state-of-the-art controls, and given the CAA’s
goal of cleaning the air and avoiding new pollution problems, it was imperative they do
so.
So the CAA of 1970 adopted different approaches for existing and new stationary
sources. For existing sources of major air pollutants (but not hazardous emissions), states
were given wide discretion to set emission ceilings for individual sources. By contrast,
for new sources of air pollutants that “may reasonably be anticipated to endanger public
health or welfare,” EPA itself sets the standards – the earlier-mentioned NSPSs – rather
than give the states discretion.2 NSPSs are strict technology-based standards, set at the
emissions rate that can be achieved by use of the best adequately demonstrated
technology.3 The 1977 amendments went further. In areas where the air is either cleaner
than national ambient standards require (“Prevention of Significant Deterioration,” or
PSD, areas) or dirtier than national standards (“nonattainment areas”), proposed “major”
new sources must undergo NSR before they can be built.4 Both PSD-area NSR and
nonattainment-area NSR are complex, requiring among other things that the would-be
builder obtain a pre-construction permit containing emission limits based on “best
available control technology” (PSD areas) or “lowest achievable emission rate”
(nonattainment areas).
The RMRR issue arises because the CAA says that not only newly constructed
stationary sources, but also modifications of existing sources, are subject to NSPSs and
NSR. In the Act’s words, NSPSs apply to any “new source,” defined as --
any stationary source, the construction or modification of which is
commenced after the publication of regulations (or, if earlier,
2 CAA § 111(b)(1); 42 U.S.C. § 7411(b)(1).
3 CAA § 111(a)(1); 42 U.S.C. § 7411(a)(1).
4 CAA § 165, 42 U.S.C. § 7475 (PSD areas); CAA § 173, 42 U.S.C. § 7503 (nonattainment
areas). The NSPS program is focussed on technology requirements for new sources. The NSR
requirements focus on the location of the source and its potential effect on the environment of
that locality.
proposed regulations) prescribing a [NSPS] which will be applicable
to such source.5
The PSD and nonattainment-area portions of the Act, mandating NSR, are to similar
effect. NSR in such areas is triggered by proposals to build either “major” new sources
or modifications of existing sources.6 Enhancing the similarity, the Act says that the
meaning of “modification” for determining applicability of NSR is the same as for
applicability of NSPSs.7 Thus, the pivotal issue is – Precisely what changes to a
stationary source constitute a “modification”?
The CAA defines “modification” as --
any physical change in, or change in the method of operation of, a
stationary source which increases the amount of any air pollutant
emitted by such source or which results in the emission of any air
pollutant not previously emitted.8
To reiterate, this definition determines both which changes in a source are subject to
NSPSs, and which trigger NSR. Note that it does not cover just any “physical change ...
or change in the method of operation,” but only those that result in an increase in
emissions. The definition leaves many questions unanswered, as it does not define its
component phrases – “physical change,” “change in the method of operation,” and
“increases the amount of any air pollutant.” The meaning of each of these phrases has
been the subject of litigation.
Given that a mere modification triggers NSPSs and NSR, it is unsurprising that an
entire “reconstruction” of an existing facility does so as well. EPA defines a
“reconstruction” as --
replacement of components of an existing facility to such an extent that
(1) [t]he fixed capital cost of the new components exceeds 50 percent of
the fixed capital cost that would be required to construct a comparable
entirely new facility, and (2) [i]t is technologically and economically
feasible to meet the applicable [NSPSs].9
5 CAA § 111(a)(2); 42 U.S.C. § 7411(a)(2) (emphasis added). CAA section 111(a)(6) states that
any stationary source that is not a “new source” is an “existing source.” 42 U.S.C. § 7411(a)(6).
6 CAA § 169(2)(C), 41 U.S.C. § 7479(2)(C) (PSD areas); CAA § 172(c)(5), 42 U.S.C. §
7 CAA § 169(2)(C), 42 U.S.C. § 7479(2)(C) (PSD areas); CAA § 171(4), 42 U.S.C. § 7501(4)
(nonattainment areas).
8 CAA § 111(a)(4); 42 U.S.C. § 7411(a)(4).
9 40 C.F.R. § 60.15(b). “Reconstruction” is not mentioned in the CAA.
Observe that in contrast with modifications, a change in a facility can constitute a
reconstruction irrespective of whether it increases emissions.10
But let’s return to modifications. EPA’s definition of “modification” echoes the
Act’s definition,11 but also states six kinds of changes in a stationary source the Agency
does not consider to be modifications – based on its view that Congress could not have
intended that every change at a source, no matter how minor, would subject the source to
heightened pollution-control requirements. The most debated of these EPA-developed
exceptions is for RMRR – that is:
[m]aintenance, repair, and replacement, which the [EPA]
Administrator determines to be routine for a source category ....12
Until recently (see below), EPA regulations did not further specify the kinds of
activities included as RMRR. Rather, eligibility for the RMRR exemption was through
case-by-case analysis, “weighing the nature, extent, purpose, frequency, and cost of the
proposed work, as well as other relevant factors, to arrive at a common sense
determination.”13 This case-by-case approach of EPA was approved in the leading case
of Wisconsin Electric Power Co. v. Reilly (“WEPCO”).14 WEPCO had concluded that
“extensive renovation” of its generating units was needed and submitted a proposed “life
extension” program to the state. Among the renovations proposed were repair and
replacement of the turbine generators, boilers, mechanical and electrical auxiliaries, and
the common plant support facilities. EPA determined that WEPCO’s proposal triggered
both NSPS and PSD-area NSR, requiring a permit before construction could begin.
Relevant here, EPA dismissed WEPCO’s argument that the proposal was RMRR.
In WEPCO, the Seventh Circuit ruled that using EPA’s case-by-case approach, the
agency’s ruling that the proposal went beyond RMRR was proper. The extent of the work
on the plant, said the court, was substantial and unprecedented. Also, the purpose of the
project (“life extension”), its infrequency (only once or twice in the unit’s life), and its
high cost all pointed to non-routineness.
Recent Developments
In recent years, the RMRR exemption has assumed center stage. The curtain-raising
act was the filing of CAA enforcement actions by the Clinton Administration against
electric utilities across the Midwest and South (involving 36 power plants, several owned
10 This is made explicit by 40 C.F.R. § 60.15(a).
11 40 C.F.R. § 60.2. Notwithstanding that the NSR sections of the Act incorporate the NSPS
definition of “modification,” there are differences in how EPA defines the term in each context.
See 57 Fed. Reg. 32314, 32316 (July 21, 1992) (discussion of how emission increases are
calculated differently for the NSPS and NSR programs).
12 40 C.F.R. § 60.14(e)(1). See also 40 C.F.R. §§ 51.165(a)(1)(v)(C)(1), 52.01(d)(1),
13 See Wisconsin Elec. Power Co. v. Reilly, 893 F.2d 901, 910 (7th Cir. 1990) (quoting EPA
memorandum).
14 893 F.2d 901 (7th Cir. 1990).
by TVA), accusing them of making plant changes that exceeded “routine maintenance”
without installing the more stringent NSR controls. Following this, in May, 2001,
President Bush’s National Energy Policy Development Group issued a recommended
national energy policy, directing EPA to review the impact of NSR on investment in new
utility and refinery generation capacity, energy efficiency, and environmental protection.
This resulted in EPA’s June, 2002 report to the President on the impact of NSR, which
asserted the desirability of specifying certain categories of activities that categorically
qualify as “routine maintenance.” On December 31, 2002, EPA published final
regulations that affect how, for NSR purposes, sources are to calculate emission increases
resulting from a change, and that amend other features of its NSR rules.15 More relevant
here, EPA on the same day proposed a rule purporting to clarify the RMRR exception in
the manner recommended in its report – by specifying activity categories that will be
considered RMRR without regard to other considerations.16
EPA v. Whitman. While this RMRR proposal was pending, the Eleventh Circuit
rendered its long-awaited decision in EPA v. Whitman.17 Whitman arose when the EPA
determined that the TVA violated the CAA through various rehabilitation projects at its
coal-fired electric power plants that went beyond RMRR, but were undertaken without
permits. It embodied this determination in an administrative compliance order (ACO).
The ACO was affirmed by EPA’s Environmental Appeals Board, which also endorsed the
agency’s multi-factor test for RMRR applied in WEPCO.18 The Eleventh Circuit,
however, found that although the CAA empowers EPA to issue ACOs with the status of
law, the CAA was unconstitutional to the extent that severe civil and criminal penalties
can be imposed by a court for noncompliance with such an agency order, generally issued
without an adjudication. Rather, EPA must prove the CAA violation in district court.
Hence, the court held, TVA was free to violate the ACOs here without fear of penalty.
Note that this decision, important as it is to enforcement of the RMRR exception, did
not speak to the contours of the exception itself.
The October, 2003 final rule. The contours of RMRR were significantly reshaped,
however, when EPA in October, 2003 finalized its equipment-replacement rule proposal
of the previous December.19 The final rule declares a set of equipment replacement
activities that will be viewed as per se RMRR, in contrast to the old case-by-case
approach. According to the regulatory preamble, the new approach is “intended to
provide greater regulatory certainty without sacrificing the current level of environmental
protection ....” and addresses the criticism that the case-by-case approach “hamper[s]
activities important to assuring the safe, reliable, and efficient operation of existing
plants.” (The new rule represented final action on only part of the agency’s December,
2002 proposal. For the moment, EPA is not taking action on the proposed annual
maintenance, repair, and replacement “allowance.” The allowance was an annual
15 67 Fed. Reg. 80,186 (Dec. 31, 2002).
16 67 Fed. Reg. 80,290 (Dec. 31, 2002).
17 336 F.3d 1236 (11th Cir. 2003), petition for cert. filed (Feb. 13, 2004) (No. 03-1162).
18 CAA Docket No. 00-6 (Sept. 15, 2000).
19 68 Fed. Reg. 61248 (Oct. 27, 2003).
maintenance cost allowance established for each facility based on an industry-specific
percentage.)
The new rule specifies that the replacement of components of a process unit with
identical components or their functional equivalents constitutes RMRR, provided the
replacement cost (including related costs such as labor and equipment rentals) is less than
20% of the current replacement value of the process unit of which the component is a
part, the replacement does not change the unit’s basic design parameters, and the unit
continues to meet enforceable emission limitations and any operational limitations that
constrain emissions. The agency acknowledges that the new approach will allow
replacement of components under more circumstances than the former case-by-case
approach – the key trigger of the controversy over the new rules. The former approach
remains available as an “alternative and/or supplement,” but it is anticipated that the
higher thresholds of the new per se approach will make resort to the case-by-case
approach uncommon. Finally, the new rule imposes no recordkeeping requirements, on
the belief that records normally kept by a business, together with EPA’s broad CAA
authority to inspect facilities, will allow proper enforcement.
The new rule applies only to conduct after the rule’s effective date, and thus does not
constitute a defense to pending CAA enforcement actions based on failure to meet
RMRR.
State of New York v. Environmental Protection Agency. In multiple lawsuits filed
in the D.C. Circuit, fifteen states (mostly in the Northeast, plus California, Illinois, New
Mexico, Wisconsin, and the District of Columbia), plus several localities and
environmental groups, argue that the equipment-replacement RMRR rule goes beyond
EPA’s authority under the CAA. These suits have been consolidated under the name
State of New York v. Environmental Protection Agency.20 On December 24, 2003, the
court granted petitioners’ motion to stay the rule pending the court’s full review.
“Petitioners,” said the court, “have demonstrated the irreparable harm and likelihood of
success on the merits” required for the issuance of such a stay. Because stays pending
review are not often granted, one may assume that this judicial statement betokens an
uphill climb by EPA in defending the rule. With the new rule thus suspended (it was to
have taken effect on December 26, 2003), the old case-by-case approach continues to
apply.
The court on December 24 also declined to consolidate the above actions with
another group of consolidated cases that challenged the December, 2002 final rule. It did
agree, however, to designate the same panel for the equipment-replacement rule cases as
has been assigned for the December, 2002 final rule cases, due to the related nature of the
two groups of cases.
20 No. 03-1380.