C HAMBER OF C OMMERCE OF THE U NITED S TATES OF A MERICA. May 2, Re: Routine Maintenance, Repair, and Replacement Proposed Rule

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1 C HAMBER OF C OMMERCE OF THE U NITED S TATES OF A MERICA W ILLIAM L. KOVACS V ICE P RESIDENT E NVIRONMENT, TECHNOLOGY & R EGULATORY A FFAIRS 1615 H STREET, N.W. W ASHINGTON, D.C (202) U.S. Environmental Protection Agency EPA West (Air Docket) 1200 Pennsylvania Avenue, N.W. Room B108, Mail Code 6102T Washington, D.C Attention: Docket ID No. A Re: Routine Maintenance, Repair, and Replacement Proposed Rule Dear Sir or Madam: These comments are being filed on behalf of the U.S. Chamber of Commerce (U.S. Chamber), the world s largest business federation representing more than three million businesses of every size, sector, and region. The U.S. Chamber has long advocated reform of the New Source Review (NSR) program, which has been plagued with regulatory confusion and controversy since its inception in The controversy surrounding NSR involves determining the meaning of no more than five common words in the English language Routine Maintenance, Repair and Replacement (RMRR) at existing facilities. In this context, the Environmental Protection Agency (EPA), in its 1978 rulemaking, determined that when a facility undertakes a physical change in operation that would result in a significant net emissions increase of any pollutant subject to the Clean Air Act (CAA), it must obtain a permit for the modification, unless such change was the result of Routine Maintenance, Repair, and Replacement. The meaning of these five common words has been the subject of countless lawsuits and several regulatory proposals. Moreover, the EPA has released some 4,000 pages of guidance and several letter opinions to clarify the five words, only to generate yet more confusion and more litigation after each effort to provide clarity. Perhaps the only way to describe EPA s efforts is to paraphrase Benjamin Franklin: Here comes the orator (regulator) with his flood of words and his drop of reason.

2 Page 2 of 2 I. The Bush Administration Should be Commended for Establishing a Process to Add Reason to the Debate In May 2001, the President s National Energy Policy Development Group requested that the EPA investigate the impact of the Clean Air Act s New Source Review policies on investment in new power plant and refinery capacity, energy efficiency, and environmental protection. The EPA formed an interagency team with the Department of Energy, the Council on Environmental Quality, the Department of the Interior, the Office of Management and Budget, and the National Economic Council. It solicited input from hundreds of parties and received more than 130,000 written comments discussing the effect of NSR on the energy sector. On June 13, 2002, the EPA filed its New Source Review: Recommendations. The Agency made numerous findings and recommendations and discussed the adverse impacts on the production of energy. It also proposed that NSR could be achieved more efficiently and at a much lower cost through the implementation of a multiemissions national cap and trade program such as the President s proposed Clear Skies legislation. On December 31, 2002, the EPA proposed a regulation to clarify when facility operations are Routine Maintenance, Repair and Replacement. On February 27, 2003, Senator Inhofe introduced the President s Clear Skies legislative proposal, and Congressman Joe Burton, on that same day, introduced a companion bill in the House of Representatives. Both the EPA s proposed regulations to clarify RMRR, and Clear Skies attempt to bring reason to the debate. Although our comments focus solely on the EPA s proposed regulations to define RMRR, the adoption of which is necessary to provide immediate clarity, the Chamber submits that the Clear Skies legislative route appears to be the more lasting means to regulatory certainty for the regulated industry and for the protection of human health and the environment.

3 Page 3 of 3 II. The Proposed Rule Establishes a Common Sense Framework for Determining RMRR Defining RMRR should be a practical and common sense undertaking so that regulated entities can achieve regulatory certainty while protecting public health and the environment. The public has not been well served by twenty-five years of debate. Presently, the RMRR exclusion is considered on a case-by-case basis, and the standard for making such a determination has at one time or another been determined by regulation, letter opinion, guidance documents or regulation through litigation. As part of its present effort, the EPA has proposed two common sense methods of determining whether activities constitute RMRR and are therefore, excluded from NSR permitting requirements. Such excluded activities would be: (1) activities within an annual maintenance, repair, and replacement allowance for a facility and; (2) replacements that meet certain equipment replacement criteria, i.e. functionally equivalent equipment. The Chamber supports both of these proposals because they provide industry with specific rules under which to make a determination as to whether the activities constitute RMRR, or are a new net source of air emissions for which a permit for the modification is required. As to the annual maintenance allowance, the EPA solicited comments on whether the allowance should be for single or multiple years. The Chamber supports a multi-year allowance since facilities have multi-year budgeting cycles for maintenance and improvements. As to what equipment is functionally equivalent, the EPA needs to provide additional clarity to this proposal, especially in light of what new technology is considered functionally equivalent, so as to capture the benefit of more efficiency and greater environmental protection. As a result of the EPA setting forth these simple and clear standards, the regulated community will be better able to determine what RMRR is and thus reduce the level of confusion and controversy regarding how to comply with the regulation.

4 Page 4 of 4 III. Perspective on the Issue The EPA needs to implement its proposed regulations to clarify RMRR as soon as possible after reviewing what may be tens of thousands of additional comments. Prompt implementation brings what is needed most to this issue clarity and regulatory certainty. Critics of the EPA s efforts (i.e., certain state attorneys general and environmental groups) mislead the public by claiming that the EPA s proposed rule would somehow increase air pollution. However, nothing could be further from the truth. First and most important, no facility can exceed its CAA permit conditions and nothing in NSR/RMRR in any way changes that fact. Second, the NSR program and the impact of RMRR are by no means the primary tools for regulating air emissions. Rather, the CAA has a plethora of provisions that are operative and simultaneously provide public health air quality protections. Included in the CAA and thus applicable to all facilities that emit into the air are many comprehensive and complex regulations, including: the National Ambient Air Quality Standards (NAAQS), which regulates ozone and particulate matter; the enforceable State Implementation Plans (SIPs); the NO X SIP call; the acid rain program; regional haze, and numerous regulations governing the content of fuels. All of these clean air programs impose numerous emission limitations on the regulated community and, compliance with these regulations has successfully reduced overall emission levels over the last several decades. Within the context of the CAA, NSR is statutorily triggered only if a modification to an existing facility will result in a significant net increase in emissions. RMRR activities do not constitute major modifications, as they do not result in increases in the amount of an air pollutant emitted by the source, under its existing permit conditions. What is really at issue with NSR/RMRR is a policy difference, not what the law requires. Critics of NSR and RMRR argue that the old facilities emit too much pollution and that new facilities would emit less, and that it is implied in the CAA that old facilities are to be phased out of existence. The implication of this argument is that NSR is a kind of illegal process for allowing old facilities to continue operation and increase pollution levels. Such an argument by certain attorneys general and environmental groups is simply disingenuous.

5 Page 5 of 5 First, nowhere in the CAA does Congress require older facilities to be shut down and new facilities constructed. As codified and with regard to existing units, Congress concerned itself solely with preventing increased emissions, period. Contentions that there is to be a phase out of aging facilities are political statements, not codified congressional policy. Second, although these interest groups may argue for new, loweremission facilities, these same groups have opposed the construction of new facilities for decades. For example, the nation has not built a new oil refinery in twenty-five years. Moreover, nuclear plants, which are emission-free, have been subject to the same fate as refineries, and we have not constructed a new nuclear power unit in twenty-five years. By analogy, would the critics of NSR shut down an apartment building and move all its occupants out into the street just because the building is old, notwithstanding the fact that it meets the letter of the law in all other respects? Adoption of such an ill-conceived policy, which would shut down thousands of old buildings in the United States, would be reckless. Yet this is what certain attorneys general and environmental groups would have us do with old coalfired power plants. Facilities that perform routine maintenance, repair, or replacements that do not subsequently result in increased emissions above permitted emissions levels (i.e., those agreed upon in an existing binding facility permit) should similarly be allowed to continue to operate, age notwithstanding. Since Congress did not authorize age discrimination against old facilities that are in compliance with their permit requirements, RMRR that does not result in an exceedance of such permitted emissions levels must be allowed. IV. A Clear RMRR Exclusion is Good Public Policy It is essential and good public policy to allow older facilities (primarily coal-fired power plants) to continue operations where they meet existing permit requirements. Moreover, coal, as a fuel source is used to produce almost 50 % of the electricity in this nation.

6 Page 6 of 6 During the last decade many coal-fired power plants have been replaced by facilities that use natural gas. Ninety-eight percent of new electric power facilities now use natural gas to generate electricity. Future demand for electricity and other uses will increase the requirements for natural gas to 29 trillion cubic feet (TCF) by 2010 and 31 TCF by 2015, and this is without any concerted effort to close coal-fired power plants because they are old. Moreover, by 2015, more than 14 million new customers will be connected to natural gas supplies through 300,000 miles of new transmission pipelines and distribution mains. The need for natural gas is being influenced greatly by the fact that there are currently moratoria and regulatory restrictions on exploring for new natural gas reserves on both coasts of the United States (100% restricted), the Gulf of Mexico (56% restricted) and in the Rocky Mountains (40% restricted). Today the nation is producing less natural gas (18.9 TCF in 2000) than in 1973 when we produced 21.7 TCF. Today, more than 40% of all natural gas that is discovered, or 137 TCF, is on federal land that is either closed to exploration or under restrictive provisions. To now close old but reliable, and permit compliant coal-fired power plants would cause economic ruin in many sectors and regions of the nation by causing natural gas prices to spike at a time when supplies are restricted. The EPA s NSR/RMRR proposed rule brings balance, common sense and some regulatory certainty to the debate. The EPA cannot be a summer warrior on this issue. It must implement its NSR/RMRR proposal immediately. Such action is legally mandated, it is good public policy, and it will help to ensure energy security. V. Conclusion In recognition of the EPA s observations (New Source Review: Report to the President, June 2002) that there are deficiencies, inefficiencies, and confusions surrounding the present NSR program, the EPA proposal to define RMRR is rooted in solid common sense and it should be finalized as soon as possible.

7 Page 7 of 7 What is more likely however, is that whatever the EPA does to clarify the NSR/RMRR conflict, the conflict will be continued by certain state attorneys general and environmental groups who simply want to limit the energy and economic growth. This effort to close down old coal-fired power plants and then oppose the construction of new power generating facilities is not only devious politics, but it is economically reckless and harmful to national security. Groups opposed to the use of coal-fired power plants have differing views on how the economy of the nation should develop. That not withstanding however, they do not have license to unravel laws by unsupported, unauthorized regulatory means. With this in mind, the EPA should do the best that it can to bring clarity to the situation by finalizing the proposal. Congress meanwhile should carefully explore the Administration s Clear Skies initiative as a way forward to circumvent the NSR controversy and address air quality concerns with current pollutant emissions levels. The proposed Administration framework for Clear Skies provides clarity, as well as needed simplicity and common sense, and would replace NSR, in addition to other inefficient parts of the Clean Air Act. This legislative route for addressing outstanding concerns is far more preferable to yet another tedious round of endless discussions about and litigation over NSR/RMRR. The NSR/RMRR merry-go-round must stop. The EPA must issue its proposed rule to clearly define RMRR immediately so as to bring some clarity to the situation. Thank you for the opportunity to submit our comments on this most important issue. Sincerely, William L. Kovacs

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