NCPA - National Center for Policy Analysis

Reforms Recommended for Clean Air Act Permits

February 28, 2002

Newly built or reconstructed facilities -- including electric utilities, oil refineries, paper mills and steel mills -- are required to go through extensive permitting requirements and install top-technological pollution control equipment under 1977 Clean Air Act amendments.

However, existing facilities were grandfathered in, meaning they were not required to undergo New Source Reviews (NSR) by the Environmental Protection Agency (EPA) until they underwent "major modifications" -- defined as any change causing a "significant" increase in air emissions. Thus routine plant maintenance, repair and replacement did not fall under the NSR requirements.

However, there was confusion and complexity in determining when NSRs were required, and owners of existing plants avoided the costly process.

The Clinton Administration's EPA adopted a new and extreme interpretation of the law, imposing NSRs on modifications to existing plants even if the changes actually decrease emissions, improve energy efficiency or increase safety.

  • The new NSR interpretation would increase the number of permit reviews by the thousands, creating a permanent backlog.
  • Utilities could be forced to choose between avoiding modifications that improve operations -- risking blackouts and higher costs -- or closing a facility for up to three years while the permit is processed and the technology installed.
  • Moreover, oil supplies could be jeopardized since modifications to upgrade refineries also would be subject to exhaustive NSR rules, no oil refineries have been built since the 1970s, and many aging refineries have shut down.

Experts say changes to be proposed by the Bush administration should require facilities to meet an overall emissions cap after a fixed amount of time, rather than at the time a modification is made. Also, market incentives should be introduced, such as allowing facilities to trade emissions credits.

Source: Dana Joel Gattuso (Political Economy Research Center and Competitive Enterprise Institute), "Why the New Source Review Program Needs Reform: A Primer on NSR," Backgrounder No. 1518, February 21, 2002, Heritage Foundation, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.


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