[Senate Hearing 106-944]
[From the U.S. Government Publishing Office]
S. Hrg. 106-944
CLEAN AIR ACT: NEW SOURCE REVIEW REGULATORY PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
CLEAN AIR, WETLANDS, PRIVATE PROPERTY AND NUCLEAR SAFETY
OF THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
FEBRUARY 28, 2000--CINCINNATI, OHIO
__________
Printed for the use of the Committee on Environment and Public Works
U.S. GOVERNMENT PRINTING OFFICE
66-380 WASHINGTON : 2001
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington DC
20402
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred sixth congress, second session
BOB SMITH, New Hampshire, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma DANIEL PATRICK MOYNIHAN, New York
CRAIG THOMAS, Wyoming FRANK R. LAUTENBERG, New Jersey
CHRISTOPHER S. BOND, Missouri HARRY REID, Nevada
GEORGE V. VOINOVICH, Ohio BOB GRAHAM, Florida
MICHAEL D. CRAPO, Idaho JOSEPH I. LIEBERMAN, Connecticut
ROBERT F. BENNETT, Utah BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island
Dave Conover, Staff Director
Tom Sliter, Minority Staff Director
------
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear
Safety
JAMES M. INHOFE, North Carolina, Chairman
GEORGE V. VOINOVICH, Ohio BOB GRAHAM, Florida
ROBERT E. BENNETT, Utah JOSEPH I. LIEBERMAN, Connecticut
KAY BAILEY HUTCHISON, Texas BARBARA BOXER, California
(ii)
C O N T E N T S
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Page
FEBRUARY MARCH 28, 2000--CINCINNATI, OHIO
OPENING STATEMENTS
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 1
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 2
WITNESSES
Bynum, Joe, executive vice president, Fossil Power Group,
Tennessee Valley Authority..................................... 16
Prepared statement........................................... 82
Report, Routine Maintenance of Electric Generating Stations.. 17-42
Hawkins, David, Natural Resources Defense Council................ 51
Prepared statement........................................... 94
Report, Plant Life Extension................................. 58-63
Survey, Plant Life Extension Conference...................... 52-58
Moore, W. Henson, President and Chief Executive Officer, American
Forest and Paper Association................................... 48
Prepared statement........................................... 90
Statement, Forest Products Industry, Michael Draper.......... 50
Seitz, John S., Director, Office of Air Quality Planning and
Standards, Environmental Protection Agency..................... 9
Prepared statement........................................... 80
Slaughter, Bob, director, Public Policy National Petrochemical
and Refiners Association....................................... 46
Prepared statement........................................... 83
Strickland, Hon. Ted, U.S. Representative from the State of Ohio. 5
Prepared statement........................................... 78
Tyndall, Bill, vice president of environmental services, Cinergy
Corporation.................................................... 63
Prepared statement........................................... 100
CLEAN AIR ACT: NEW SOURCE REVIEW REGULATORY PROGRAM
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MONDAY, FEBRUARY 28, 2000
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Clean Air, Wetlands, Private Property,
and Nuclear Safety,
Cincinnati, Ohio.
The subcommittee met, pursuant to notice, at 2:30 p.m. at
the Hamilton County Administration Building, 138 East Court
Street, 6th Floor, Cincinnati, Ohio, Hon. James M. Inhofe
(chairman of the subcommittee) presiding.
Present: Senators Inhofe and Voinovich.
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. The meeting will come to order. I
apologize, but it seems like we had our news conference before
instead of after the meeting, which is fine with me.
Today's hearing is on the reform of the New Source Review
Regulatory Program. This is a highly complicated issue and
hopefully we can shed some light on it today. This hearing is
not about recent enforcement actions taken by the EPA against
the electric utilities, although those actions were filed using
the existing regulations.
For those people in the audience who are not familiar with
the way the EPA works, let me explain. The Air Program Office
writes the regulations and the Enforcement Office polices the
compliance of those regulations that have been written.
What I would like to do now is briefly layout where we are
today and invite some of the witnesses to comment. The New
Source Review Program dates back to the Clean Air Act of 1977.
The Act required sources built after 1977 to have state-of-the-
art emissions control devices. Congress did not believe this
was fair and equitable and financially feasible to require all
existing facilities to install new equipment.
Instead, Congress required existing large facilities to
undergo a New Source Review before they make major expansions
or modifications in order to prevent significant new air
emissions. These facilities have been referred to as
grandfathered facilities, meaning that they are originally
exempted from the new provision controls. Although, of course,
they have had to install other control devices over the years.
This program started a confusion and debate, which has
lasted for almost 25 years now. I am told that over the years
the EPA has issued more than 4,000 pages of guidance documents,
which sometimes contradict each other, in order to explain the
original 20-page, 1980 regulations.
In the late 1980's the Wisconsin Electric Power Company,
called WEPCO, challenged a determination by the EPA that they
had violated the NSR regulations. The lawsuit resulted in a new
regulation governing the NSR for utilities in 1992 called the
WEPCO rule. Then in 1994 the EPA issued a new proposed rule for
all industries and after 6 years in debate the EPA has
indicated that they may go final with their new rule later this
year.
In my opinion, the major question is: when do modifications
or changes to a facility or plant trigger the New Source Review
Program. This involves a number of issues, such as whether you
measure actual releases or just potential to release; whether
you look at the dollar amount of the modifications and compare
it with the value of the facility; or whether the modifications
are just routine maintenance which is also hard to define.
Considering the amount of debate over the last 25 years, the
number of guidance documents and regulations issued by the EPA,
and the number of lawsuits, I don't expect that we're going to
be able to answer all the questions that exist today.
I would like to publicly thank Bob Perciasepe, EPA's Clean
Air Director, for working these issues out. He couldn't be here
with us today. He sent a very capable person to represent him.
Senator Voinovich?
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
U.S. SENATOR FROM THE STATE OF OHIO
Senator Voinovich. Thank you, Mr. Chairman. First of all, I
would like to thank the county commissioners, John Dowling, Tom
Neyer, and Bob Bedinghaus, for allowing us to use this fine
facility here in Cincinnati; and I would like to welcome you
here, Mr. Chairman. The chairman and I have known each other
since his days when he was the Mayor of the City of Tulsa,
Oklahoma, and I was the Mayor of the City of Cleveland and
we've worked together in the Senate; and I consider him a true
champion of responsible environmental policy.
I don't know whether you know this or not, Mr. Chairman,
but this is the home of Ken Griffey, Jr., and he's coming home
to play and join his dad on the Reds team, and we're expecting
some great things from him.
Senator Inhofe. Sure, yes. Is that an invitation to come up
and----
Senator Voinovich. Come up for the I-71 World Series.
Cincinnati is our queen city and it has a wonderful public
partnership and a community that really cares about the
environment and public health.
I'd also like to welcome Congressman Ted Strickland. Ted is
testifying today, and Ted and I have worked together in a
bipartisan manner on a range of issues including the post
ambient air standards for a particulate ozone; proposed NAAQS
standards. Right now we're working on the Portsmouth gas
infusion plant to try and predict in the interest of the
workers, and I'm glad you're here today, Ted.
I'd also like to extend a warm welcome to Bill Tyndall,
Vice President of Environmental Services and Federal Affairs at
Cinergy Corporation in Cincinnati. Cinergy is a responsible
corporate citizen in the environmental arena and I am pleased
that Mr. Tyndall is here today and he's testified before our
committee before, Mr. Chairman.
As I said, Southwest Ohio cares a great deal about clean
air and the environment. I think it's appropriate that
Cincinnati was chosen as the location for this hearing today.
Just last month the U.S. EPA issued a proposed rule to
redesignate Cincinnati as in attainment of the 1-hour ozone
rule. I want to congratulate the greater Cincinnati community
for working on that through a variety of coordinated programs
to improve the quality of Ohio's air. And we're very hopeful
that Administrator Browner will quickly act to finalize the
rule following the close of the public comment period.
Incidentally, Mr. Chairman, when I first entered office in
1991 as Governor of the State of Ohio, most of Ohio's urban
areas were not attaining the 1-hour ozone standard. By the time
I left in 1998 all but Cincinnati were in attainment. So we're
very, very proud of the fact that we've achieved that standard.
And as you know, I have been very concerned about the new
proposed standards for ambient air particulate matter and part
of the reason is because we worked so doggoned hard to reach
the 1-hour ozone standard. And as many people in this room
know, I testified in your committee. The chairman helped us
with that, and finally had to go to court over those
regulations. A U.S. Appeals Court several weeks ago remanded
EPA's ozone and PM2.5 standards ruling that the EPA
did not justify its decision with sound scientific evidence. So
that we want a clean environment, but we want reasonable rules.
Now, we're here today to talk about the New Source Review
Program and the proposed changes to the program. I think the
chairman has done a good job explaining the history of it.
We have a clean air statute. While I have some concerns
about the law, it has done a great deal to clean up the
nation's air and has improved public health and the
environment. We need clear guidelines on how EPA will enforce
provisions of that law and we need clear rules for industry to
play by.
I think you are going to be having a series of hearings,
Mr. Chairman? Perhaps next year, we'll look at reauthorizing
the Clean Air Act?
Senator Inhofe. Yes. We have two more this year. We've
already had one. Then we'll start the process, and we set a
rather ambitious schedule for completing it.
Senator Voinovich. I think it's important to look into the
problems created by the New Source Review Program and look for
the solutions needed to clarify the rules, and I commend U.S.
EPA for taking on that task. Whether we're talking about the
electrical utility, pulp and paper, or refining industries, one
thing is clear: it is important for them to know the rules of
the game. It should be clear to them what kinds of repairs can
be made before triggering New Source Review, because repairs
need to be made in a timely manner to insure worker safety and
reliability of service, particularly electricity. So I urge the
EPA to take into consideration the unintended consequences that
are associated with this issue. We need to insure that this
rule will help maintain air quality standards, but we also need
to insure that needed maintenance repairs can be made so as not
to jeopardize worker safety or the reliability of needed
services.
I also want to raise concern about the length of time it
takes to receive a New Source Review permit, either to build a
new facility or to make changes in an existing facility. I've
been told that the standard timeframe is between one and 2
years. I also understand that even getting a determination on
whether a New Source Review permit is needed is also a timely
process. I'm not sure that most industries can withstand that
kind of timeframe without suffering serious consequences. A
plant operator needs to make a decision much earlier than that
to insure worker safety and, particularly, reliability of
service.
In addition, competitiveness is called into question. For
instance, if a computer chip manufacturer wants to build a new
plant it is likely that the technology will have changed during
the time it takes to get an NSR permit and build the facility.
I just think there needs to be some balance here.
So, again, I commend the agency for moving forward to
reform the program and I hope that it will keep those issues in
mind as it proceeds forward. I am pleased that the EPA has
worked with various stakeholders during the rulemaking process,
and I strongly encourage them to do the same with the electric
utilities. You learn more through communication, and that's
what I hope will be achieved today through this hearing and
will be achieved as the EPA continues the stakeholder
discussions.
Mr. Chairman, I ask that my statement be made a part of the
record.
Senator Inhofe. Without objection.
Thank you, Senator Voinovich. I sometimes find that people
in the local community are not as aware as they are in
Washington in certain areas of expertise as the people who
represent them. I was very pleased to have had one of the
toughest jobs in the world, that is to be the mayor of a major
city, when we were mayors together. And way back at that time
and up to the present, Senator Voinovich has been one of those
individuals who has been an expert in the field of clean air.
And as he mentioned, he actually came as Governor of Ohio and
testified before the committee that I chaired, the committee
that we're in right now.
I'm very happy to have Ted Strickland here, who I served
with in the House. And while you're coming up, Congressman
Strickland, let me just kind of give you an overview of what
we're going do today. We've got a lot of people here. We've got
four panels and then one panel has several on it. So with all
seven witnesses we're going to have to keep moving along.
I also mentioned that some of the Senators who are not here
today, their staff is here; and they're going to be taking
information back to their Senators in Washington but some of
them could not be here today.
Each witness will be allocated 5 minutes to give his
opening statement. They'll be lights. And I see Andrew Wheeler
brought his lights from Washington here. It's red and yellow
and green. I think we all know what that means. So with that we
will go ahead and begin.
And, Congressman Strickland, it's a pleasure having you
here with us today in your district.
STATEMENT OF HON. TED STRICKLAND, U.S. REPRESENTATIVE FROM THE
STATE OF OHIO
Representative Strickland. Thank you. Thank you, Mr.
Chairman. Thank you for your coming to Ohio. And Senator
Voinovich, I especially want to thank you for the fact that you
have shown leadership in supporting one of Ohio's great
resources, and that is the use of and continued use of coal.
That's certainly very important to my district.
I do represent the Sixth District. It's a 14-county,
sprawling district, from Warren County in the west to
Washington County in the east. This part of the State offers
beautiful natural forest land, some of the most pristine
farmland in Ohio, and many unique historic sites.
Briefly, I just would like to share this morning some
troubling statistics from my district and my concerns about
EPA's New Source Review Program. I think together this
information demonstrates the need for meaningful reform of the
NSR program so that we can strike a better balance between the
pace of desired environmental benefits and the increased
productivity anticipated through economic development
initiatives.
As Senator Voinovich knows, the Sixth Congressional
District is one of the poorest in Ohio and even the country. It
has the lowest per capita income and the highest poverty rate
of any district in Ohio. Unfortunately, southern Ohioans have
not experienced the full economic recovery that most of the
U.S. has enjoyed. The Sixth District includes Meigs and Vinton
Counties, which have among the highest unemployment rates of
any of Ohio's 88 counties, 11.1 percent and 13.8 percent,
respectively, compared to a statewide average of 4.3 percent.
These statistics clearly underscore the region's enthusiasm for
economic development opportunities and its fear of regulations
which may hamper job creation. Without a doubt, low cost energy
and high quality manufacturing labor are vital to the economic
prospects of the region.
A substantial number of the labor force, more than 25
percent, is employed in the manufacturing sector. And this
region provides a significant number of jobs in the utility,
mining, and refining sectors. Southern Ohio cannot withstand
the loss of these jobs and it certainly cannot afford to
overlook any opportunity for job creation. I have heard from
the International Brotherhood of Electrical Workers, who raised
specific issues about EPA's New Source Review proposed rule,
and it should come as no surprise that one such concern is job
loss. Under the current NSR program, decisions could be made to
shut down utilities rather than venture into the confusing NSR
permitting program to undertake what could be considered
routine maintenance activities. Obviously this would result in
layoffs.
As you know, the New Source Review was first introduced as
part of the 1977 Clean Air Amendment. The program was designed
to insure that newly constructed facilities and substantial
modifications of existing facilities do not result in the
violation of applicable air quality standards. The New Source
Review Program is acknowledged to be a very complicated program
and a potential bottleneck to many positive community
development projects, including brownfields redevelopment and
the manufacturing facility improvements and modernization.
For example, the specific requirements dictated by the New
Source Review Program depend on the location of the facility.
If a plant is cited in a part of the country that fails to meet
the national ambient air quality standards for a pollutant, one
set of requirements apply. If a plant is in a max attainment
area, another set of rules apply. As you can imagine, some
facilities may rest in a region that is considered in
attainment for some criteria pollutants but not others,
complicating the requirements even further.
Let me quickly describe some frustrations my constituents
and others have shared with me concerning this program. I've
learned that merely determining whether the program applies to
a project depends on complicated rules and guidelines which
have been subject to 20 years of EPA's interpretation. I've
also been told that EPA could require a preconstruction permit
under NSR for the replacement of worn equipment parts even
though the replacements are only modifications and not new
construction.
I know the EPA claims many successes under the NSR program,
and I applaud the reduction or prevention of pollutant
emissions. The environmental protections afforded under the NSR
program should not be minimized here today; however, the EPA's
most recent proposed changes to the NSR lead to considerable
controversy and the agency acknowledges the need to build a
more flexible program and streamline the permitting process. I
would suggest that a truly meaningful reform of the NSR program
can actually lead to even greater environmental benefits in the
future.
And in closing, let me say that this past fall I raised the
concern that the EPA should not short-change the discussion on
meaningful NSR reform. I am pleased to hear that a full review
of approaches to NSR reform is ongoing. Without sufficient
dialog among the interested parties, I have little confidence
that a workable solution can be reached.
Therefore, I would like to state very clearly that
congressional oversight of this process does not stop here in
Cincinnati. Indeed I think today's hearing demonstrates that
both senators and representatives will continue to monitor the
progress made to reform this program. With hard work and
cooperation I believe an equitable proposal can be crafted that
creates an efficient NSR rule without unnecessary pitfalls and
establishes a proper balance between environmental benefits and
economic progress.
Mr. Chairman, in closing let me thank you once again for
holding this hearing and Senator Voinovich for bringing it to
Ohio. Thank you very much.
Senator Inhofe. Thank you, Congressman Strickland. I hope
it's obvious to everyone that this is not a partisan thing. We
are all concerned. First of all, Democrats and Republicans
alike want clean air. Democrats and Republicans also want fair
treatment. During the course of our little news conference out
here I told them the major concern I had is the
unpredictability. People don't know, and that's what we're here
to find out today, if they know what they can properly plan for
in advance, how much time it's going to take to comply.
I guess you would agree, Congressman Strickland, that both
Democrats and Republicans feel that the dialog between the EPA
and the stakeholders should continue?
Representative Strickland. I think it's essential. And I
think, as I said near the close of my statement, that it's
incumbent upon those of us who are in the House and those of
you who are in the Senate to make sure that this process
proceeds in a manner that involves meaningful dialog and input
from all stakeholders.
Senator Inhofe. I'm sure this will be a surprise to you
when I say it, but we have witnesses today who are testifying
that the EPA has issued conflicting guidance on this program
over the last 20 years or so. I know my constituents are
concerned with that back in Oklahoma, and you have some that
are concerned with that here.
Representative Strickland. Well, they absolutely are, and
it's important for a Federal agency to proceed in a fair
manner. And I am troubled by some of the actions which seem to
reach back to apply rules or interpretation of rules
retroactively. That troubles me greatly. I see no fairness to
that, and I think it's our responsibility as elected officials
to make sure that what happens is done in a fair and a
justifiable manner, and that's why I'm here today.
Senator Inhofe. Because of the time constraints and the
number of witnesses, we had to restrict the opening statements.
You were talking about the frustrations of your constituents.
Did you get a chance to complete that thought?
Representative Strickland. Well, I did not but I'll submit
it for the record. So many of my constituents representing both
working folks, members of the work force, as well as the
management of some of these facilities, are terribly concerned
and justifiably so. And that's why I am so pleased that you're
holding this hearing.
Senator Inhofe. I think that's one of the issues here,
Representative Strickland, that we have. Both labor and
management are the big losers if we become noncompetitive. And
I know--I can't speak for Ohio, but I can in Oklahoma. We've
had some businesses actually have to leave and go across the
border. And, of course, we're a little closer to Mexico, and
we've lost a ton of jobs in Oklahoma as a result of this. And I
assume that you have some examples here in Ohio, also.
Representative Strickland. Well, I think there is great
fear, as Senator Voinovich said a little earlier, the concern
about the lack of predictability and not knowing what
interpretations are going to be made regarding which
regulations and how they are going to be applied. It seems to
be one of the most troublesome aspects of this situation.
Senator Inhofe. Senator Voinovich?
Senator Voinovich. I'm interested in reading the letter
from the--was it the president of the IBEW?
Representative Strickland. Yes.
Senator Voinovich. Are you aware of the fact of whether or
not that organization is participating at all in the
negotiations that are going on in terms of the rulemaking?
Representative Strickland. I am not aware as to whether or
not that particular organization is, but it's a good question.
I certainly will talk with him. It seems important to me,
Senator, that all stakeholders be given a voice in this process
and be listened to. And that's the only way I think we can come
to a consensus that is going to be widely embraced by all
parties.
Senator Voinovich. Well, I'm a big believer in quality
management. I think so often when we talk about these things
that we don't really bring in the people that are actually
doing the work and have the insight into what some of this
means. So often you get an engineer from some company that
says, well, this is the way it is, and the other person on the
other side says what he has to say. And if you had somebody
that was really doing the work at the table with them, they'd
have a much better understanding of what it's about. And I
would hope that representatives here from the EPA make sure
that some of those people are involved who are actually out
there getting the job done in terms of----
Representative Strickland. Absolutely. If I can just say as
a concluding statement here, my district is a unique district
but it is also a district not unlike other districts across the
country in terms of its economic needs and in terms of its past
history of having heavy manufacturing jobs and so on. And it is
really troubling to me that a district like mine, and districts
like mine across this country, could find themselves in an ever
more difficult set of economic circumstances at a time when
they really need to be able to make economic progress and to
attract industry and create jobs and so on.
And quite frankly, in perhaps a selfish way, that is the
primary motivation behind my speaking out on this issue, and I
think it's very important. It's important to my constituents
and to the industries which serve my constituents. Thank you
very much.
Senator Inhofe. Well, let me just--I think what Senator
Voinovich is suggesting is something that is a very good idea,
to bring them in, the labor force in. They have just as much to
be concerned with as anybody else. So I would like to ask you
specifically to encourage them to do that, maybe today, to make
some calls and get an involvement.
I would also like to say that Senator Voinovich mentioned
the ambient air proposed rules that we went through for about 2
years. And we held a field hearing out in Oklahoma. We had your
Lieutenant Governor and several people from Ohio out there, and
it seems like Oklahoma and Ohio have a lot of things in common
in terms of regulations. So it's nice to have you here to
testify. Thank you very much.
Representative Strickland. Thank you, Senator.
Senator Inhofe. Now, I'd like to ask our second panel, Mr.
John Seitz, Director of Office of Air Quality Planning and
Standards. Mr. Seitz is a regular here and we always are able
to get a lot of healthy compromises and communications, and I
appreciate very much your coming today.
Mr. Seitz. Thank you, Senator.
STATEMENT OF JOHN S. SEITZ, DIRECTOR, OFFICE OF AIR QUALITY
PLANNING AND STANDARDS, ENVIRONMENTAL PROTECTION AGENCY
Mr. Seitz. Good afternoon, Mr. Chairman and Senator
Voinovich. I thank you for the opportunity to be here today on
behalf of the administration to talk to you about the New
Source Review Program.
Enacted in Congress in 1977, the program's goal was to
minimize air pollution from large, newly built, and modified
industrial facilities. Recent figures suggest that over the
life of the program NSR has prevented move than 100 million
tons of pollution from getting into the air. The NSR program
insures that when companies upgrade their facilities in a way
that increases air pollution that they also take specific
measures to minimize those increases. Upgrading pollution
controls in the industrial infrastructure simultaneously make
good economic and environmental sense. It's a simple concept
that has been working in the NSR program for almost a quarter
century, protecting our nation's air resources and makeing a
critical part of the air quality program.
The NSR provisions of the Clean Air Act combine air quality
planning, air pollution technology requirements, and
stakeholder participation. The only time NSR applies is when a
facility makes a change that could significantly increase air
pollution. This means a facility can make any change it wants
so long as emissions could not increase. If a facility is
unsure whether a change will trigger NSR review, there are many
resources available to help them answer that question, most
notably the State and local agencies. States are key partners
in this program. Under the Act generally the States have the
primary responsibility for issuing permits and they can
customize their NSR program within the bounds of the EPA
regulations.
The NSR permit program for major sources has two different
components: one for areas where the air is dirty or unhealthy,
and the other for areas where the air is cleaner. In areas with
unhealthy air, NSR assures that the sources do not impede
progress toward cleaner air. In areas with clean air,
especially pristine areas like national parks and wilderness
areas, the program assures that emissions from new and modified
sources do not significantly degrade the air quality. The
program assures citizens that if any large industrial source
being built or modified in their neighborhood, then the
pollution aspects are addressed.
Permits for sources located in attainment areas are known
as prevention or significant deterioration--or PSD--permits.
Permits for sources located in areas not meeting the National
Ambient Air Quality Program are known as NSR permits. A major
difference in the two programs is that the control technology
requirement is more stringent in the nonattainment areas.
Let me give you a few statistics about the NSR program. Our
most recent data indicate that approximately 1 percent of large
facilities or roughly about 250 facilities of 20,000 industrial
facilities in this country are going through the NSR program
annually. Recent data also show that these permits have
prevented about a half a million tons per year of pollution
from entering the environment. It's remarkable that annually
less than 1 percent of these large sources are involved in the
program, yet so much pollution is averted. These emission
reductions are being achieved at the same time as the
unprecedented economic expansion. We believe the program is
achieving its goal.
In addition to the emission reductions, the NSR program has
sparked improvement in pollution control and pollution
prevention technology. This technology forcing aspect of the
program is an important reason why it has been so successful in
allowing for continued economic growth while insuring
environmental protection. It also helps the United States to be
a leader in the export of pollution control technology.
Despite the success of the NSR program, we have been
actively working with many different stakeholders on all sides
of the equation to help find ways to make the program work more
effectively. I described some of those in my written statement
which has been submitted for the record. We have worked very
hard to be inclusive and comprehensive in our analysis of the
stakeholder concerns. Since 1992 we have held hundreds of hours
of meetings actively seeking comments and recommendations from
various stakeholders. We formed the NSR Reform Subcommittee of
the Clean Air Act Advisory Committee, a group of experts from
industry, environmental groups, and State and local
governments, brought together for the purpose of making
recommendations for improving the NSR program. We listened to
the analysis and debate from a wide variety of often opposing
viewpoints. We issued a proposed rule in 1996, took comments,
and held a public hearing on that rule. Since then we have
continued to have meetings with stakeholders. As recently as
last week we held another meeting with an industrial group.
Our fundamental principle during this reform effort has
been to promote more certainty and flexibility in the
permitting process while maintaining at least the same level of
environmental protection. We are examining the idea of
promoting flexible plant-wide caps that would enable sources to
make changes at their plant without meeting NSR's program so as
long as the overall environmental cap is met. More examples are
included in my written statement.
We are also considering other options to provide
flexibility for a specific industry while protecting the
environment. For example, we recently held meetings with our
stakeholders to obtain views on the concept of a sector-based
approach for utilities. This would tailor the NSR regulations
in such a way as to address issues unique to the utilities
while still providing the overall environmental protection
envisioned by the NSR program.
We continue to discuss several issues with stakeholders and
have not reached final decisions on the reform rule. However,
we hope to complete the NSR rulemaking, as you indicated, later
this year.
Mr. Chairman, this concludes my statement. I appreciate the
opportunity to be here today and I would be happy to answer any
questions you have.
Senator Inhofe. Thank you, Mr. Seitz. Mr. Seitz, I get
conflicting reports as to the length of time it takes to apply
for and to receive a permit under the NSR program. I know you
keep records of these. Can you give us what your records show?
Mr. Seitz. Yes. I'd be pleased to give that to you for the
record, Senator.
Senator Inhofe. No, just for today's oral testimony, I'm
sure you've looked at this before.
Mr. Seitz. I was a little surprised by the comment of one
to 2 years. I acknowledge that there are some permits that take
over that period of time after completing the application, but
we believe that the majority of those are issued within the
timeframe of 12 months, as set forth in the statute. However,
industry has brought to the table in the reform effort--I think
the microchip, the computer chip was a good example you brought
out--that they need the ability to make changes quickly in the
permitting process. They need more certainty, more speed in the
permitting process. So we are currently looking at that and
hope some of the efforts in terms of PALS and the technology
clearinghouse can address some of that.
Senator Inhofe. I'd like to have kind of an average just
off the top of your head, 6 months, a year, 2 years?
Mr. Seitz. I'd say it's probably from 9 to 12 months at
this point in time.
Senator Inhofe. Nine to 12 months would be somewhat of an
average?
Mr. Seitz. Right.
Senator Inhofe. Now, who issues----
Mr. Seitz. That's from the complete application. Sometimes
there are problems getting a complete application. But once the
application is in the hands of the States, I'd say 9 to 12
months.
Senator Inhofe. First of all, who receives the permit
applications, the EPA or the States?
Mr. Seitz. The States.
Senator Inhofe. The States. And then who reviews them at
EPA?
Mr. Seitz. Well, it depends on the program, sir. If it is a
SIP-approved program such as in Oklahoma, the State is the
primary reviewer during the public comment period on the
permit. The EPA regional office provides comments on some
permits, but not necessarily all permits.
Senator Inhofe. In planning new regulations which will
result in the increase of permit applications, something that
hasn't been talked about very much is who is going to pay for
this? How much additional work load is going to be incurred in
terms of the EPA, in terms of the State? Have you done a study
of that, on work load, how we're going to accommodate that?
Mr. Seitz. No, sir, I have not. We have not completed a
study on that, yet. It's unclear to me at this point in time
that as a result of the final reform package that we will have
an increased number of permits that will actually go through
the system. It is hoped that with some of the innovations such
as plant-wide applicability limits, the process would actually,
narrow that some. When we do the final rulemaking, we will have
to put forward an analysis as to what the total cost and burden
would be, which we have not done as of yet.
Senator Inhofe. Prior to the rulemaking?
Mr. Seitz. Prior to the final rulemaking.
Senator Inhofe. Oh, OK, yes.
Mr. Seitz. Yes.
Senator Inhofe. The other witnesses, Henson and others,
I'll probably be asking you the same question, but I'd be
interested in knowing how this--at our news conference, and I
think Ted Strickland mentioned this too, what this does to our
competitiveness if we have these lengthy permit periods of
time, how do you think that would affect our competitiveness
compared to other countries?
Mr. Seitz. Again, planning is the cornerstone of this
program, as I said. The intent of the program when Congress put
it together is that as a plant expands and plans on increasing
its capacity, the environmental protection is protection
addressed as a critical component of that. So I would hope that
in the permit process the industrial sector would consider
environmental protection as essential to the permitting
application, and we need to preserve that aspect of the program
along with the reforms to expedite the permitting process.
Again, that is part of the effort of the reform process we have
underway.
Senator Inhofe. This is a concern to me because in Oklahoma
we have some specific examples that I talked about the last
time we had a hearing in Washington.
It's been suggested that the New Source Review reform
process is being steered in the direction of trying to get the
same emissions reductions from the same sources as the 8-hour
ozone and fine particulates and NAAQS set aside--they've been
set aside by the D.C. Circuit Court of Appeals. And the NOx SIP
call and Section 126, we're talking about three different
things which are pending before that same court. Now, you've
heard this and you've talked about this before. What is the
agency's response to that notion?
Mr. Seitz. I don't quite even understand how one could say
that the NSR program is supplementing the NOx SIP call under
section 110 of the Act. NSR is a source-specific facility,
case-by-case decision. As you know, the NOx SIP call was across
a given region based on a nitrogen budget for each State.
Some of the alternative approaches we are examining in NSR
reform voluntary approaches such as PAL or the sector-based
approach for utilities. They clearly are voluntary programs and
have nothing to do with the NOx SIP call.
Since it would be a voluntary offering, I don't know how it
could be something that supplements the NOx SIP call.
Senator Inhofe. Yes, I'm running out of time here. Just one
last question. In the January 3, 2000 issue of the well-known
trade journal Electric Utility Week, Administrator Browner is
quoted as saying in reference to a just announced final ruling
granting the Clean Air Act, Section 126, petitions filed by the
northeastern States asking for NOx emissions reductions from
midwestern and southeastern States, ``we're going to get there
one way or another.''
What do you think she meant by that?
Mr. Seitz. I think the Administrator's position is that we
are going to get the clean air. Every American is deserves
clean air, and she meant that we have to work together to
achieve that.
Senator Inhofe. Not to get to those standards that are
under court review one way or another?
Mr. Seitz. I didn't read it that way.
Senator Inhofe. OK, Senator Voinovich?
Senator Voinovich. When Administrator Browner appeared
before our committee last week on her budget, she talked about
overall reduction in the budget but an increase of 11 percent
in the administrative part of the budget.
Are you aware of any additional money that's going to be
made available for this procedure, the people that handle this
New Source Review?
Mr. Seitz. Senator, at this current time I am unaware of
that. I'm not aware of what the final pass-back numbers would
be.
Senator Voinovich. Well, I'm interested with talking about
the timing though. The real decision on this, the application
is submitted to the State agency and they go through it. But is
it in Washington that that decision is made or is it made in
the regional office in terms of this particular review?
Mr. Seitz. In terms of the review and who conducts the
review, that decision is in terms of the delegation. For
instance, Ohio and Oklahoma have different types of programs.
Maybe it would be helpful to describe them. The Oklahoma
program is administered by the State under a State-approved
regulatory program that was adopted in the Federal rulemaking.
The State of Oklahoma issues the NSR permits.
The State of Ohio's program is delegated program. The State
did not choose to get a federally approved program so,
therefore, the State is acting as an agent for EPA. In Ohio
when a permit is issued by the State it is actually a federally
issued permit, and Ohio acts as the agent for EPA. So the
regional office--it is in Chicago for Ohio--would be more
closely involved. An appeal of that permit goes straight to the
EPA.
It's my understanding the State of Ohio is working to
change that now. This process contrasts with the appeals in
Oklahoma, which go to the State.
So the decision on where the permit goes and how it is
reviewed depends on that State's structure. In Ohio, the
regional office is more involved. In Oklahoma, the permits
would be decided on a case-by-case decision. The funding of the
program is an overall budget decision that is made out of
Washington.
Senator Voinovich. I'm interested in that. As I say, I'm a
big fan of quality. And I know that as Governor of the State we
had a lot of agencies that did a lousy job of permitting, and
we made a real issue of that. We instituted quality management
in our State agencies. I recall underground storage tanks.
Ninety percent of the applications that used to be submitted
were rejected because the people didn't understand the form.
They spent a couple of months working on that issue, the people
that actually issued the permits. They spent time with their
customers, revised the application. Today there is only a 5
percent rejection. So that speeded up the process right off the
bat, because people didn't understand the process.
Maybe it's a governmental thing, but I really want to know
how you handle this. I want to kow what the manpower is and is
it----
Mr. Seitz. Well, in light of what you just said,
particularly in terms of total quality and what you might do in
the State of Ohio or Oklahoma, the internal timeframe is
governed by the State. EPA does not set that. The statute says
12 months. The period of time the State agency chooses to, say,
take phase one or phase two, is totally within their
discretion. So to the extent that some States have, as you
said, maybe in Ohio with the total quality aspect of it, have
implemented processing changes that make it more efficient,
that is totally within the State's capability right now. I
think through STAPPA/ALAPCO, which are the State and local air
associations, share those experiences.
So within that timeframe the only thing we govern is the 12
months.
Senator Voinovich. Well, I'd like you to get back to me on
that. I'd also like to know how much of EPA's new budget are
they putting into the program.
Mr. Seitz. I'd be glad to answer that for you.
Senator Voinovich. You're going to hear testimony today
that will surprise you. People have been doing things according
to the rules and all of a sudden they are finding out that they
are supposed to have violated a process. They should have been
able to get the permits reviewed and issued. Just what is the
attitude of the agency toward those kinds of claims?
Mr. Seitz. Well, most frequently, in the examples you've
given I was actually sort of surprised at some of it. And you
referenced some of it in your statement, Senator Inhofe. As
mentioned, these rules were put out in 1980. Routine
maintenance, or that issue of maintaining, was put in in 1988
and 1989, put out as guidance, and that was upheld in the
courts. And since that time we, EPA, has received very few
written requests for an interpretation of that definition. So I
am somewhat surprised that if it is so confusing and confounded
why we have heard so little? There are questions about the
other programs I administer; and Senator Inhofe has had the
opportunity to quiz me on some of them in the past. I get
hundreds of requests for interpretation, whether it is a MACT
program or Title I program.
So with respect to this issue, I receive relatively few
questions in that area. In contrast, I receive lots of requests
for information on modeling: how you do attribution, etc. On
the issue of what is and is not routine--very few. I think we
have to look closely at that as we go forward. I'm hearing that
today.
Senator Voinovich. There is a question about whether or not
when you're coming up with the final rules on this whether
you're going to be concerned about electricity reliability. One
of the things that is a big issue now with the proposed 85
percent on the NOx that the agency is requiring, is that many
of the utilities are complaining about the fact that if they
would go forward with that that they would have a real
reliability problem. And there also is some real concern about
ordinary maintenance of facilities that involve the well-being
of people who are working for those agencies. And in terms of
just providing reliable electricity for people that are--you
know, the benefits of the company. What comment do you have
about that?
Mr. Seitz. Senator, as mentioned last summer when this
first came up in connection with the SIP call, the
Administrator said at that point in time if anyone is concerned
about their ability to produce electricity because of either
brown outs or shortage contact us because we do not believe
this program will jeopardize the power supply of this country.
With respect to the issue of whether or not routine
maintenance can go on at a facility, as I said in my statement,
the test here is really simple. I know there's a lot of debate
around it, but the test here is really quite simple: Are there
going to be emission increases as a result of what you're
doing?
Senator Voinovich. May I ask one last question? I know I'm
out of time here.
Senator Inhofe. Sure.
Senator Voinovich. The issue of cost benefit in making a
decision, and based on the technology that's available, does
that ever get into the decisionmaking process?
Mr. Seitz. Specifically you're referring to the decision of
whether to apply back the Best Available Control Technology--
BACT. One of the factors in that decision is cost, like the age
of equipment. So, yes, cost benefit is looked at in making
decisions.
Senator Voinovich. Good.
Mr. Seitz. We take a look at the incremental costs, the
marginal costs, social impacts, cost of energy. Those are
specific criteria that are set forth in the statute.
Senator Inhofe. Let me ask you one followup question and
feel free to do the same thing.
Mr. Seitz, I understand that part of your proposed rule
would require facilities to look at what they actually emit
today and then compare that to what they potentially could emit
after equipment changes. And it seems to me this is kind of
apples and oranges, that any facility could potentially emit
more than they actually emit without making any equipment
changes. All they have to do is run at full speed or increase
the number of hours that they're emitting more pollutants.
Would it make more sense to compare the actual emissions before
an equipment change to the actual emissions after an equipment
change. It seems like you anticipate that everyone runs at full
capacity a hundred percent of the time.
Mr. Seitz. Well, again, Senator, I think you have to go
back to another provision in the Clean Air Act about the
contemporaneous period in which you determine what the actual
is. So when you make a change you assess the last 5 years of
emissions data. Then you project forward to see, based on the
proposed changes, what you could do in the way of production.
If, based on the proposed changes, you have the ability to
produce 100 products an hour, instead of 10 products an hour,
there could be more pollution. Granted you're not at that level
yet. A source has the ability to say, ``We never plan to emit.
We want to address the technology issue now and put the
technology on.'' They would have, through the State permitting
program, the ability to take on an enforceable cap to address
that.
But the basic concept is if there is a potential to
increase the emissions, then the impact on the environment has
to be addressed.
Senator Inhofe. But why couldn't you just compare the
present potential to future potential? Then at least you're
comparing the same things.
Mr. Seitz. Let's say that a facility in the last 5 years
has only produced 10 units. However, when the plant was built
30 years ago, it was designed to produce 100 units. Is it fair
to say that the design capability should meet an environmental
permit that is based on 30 units 20 years ago should be the
design criteria now, even though the standard has not been
achieved in 30 years? We think that that's not what the
statute----
Senator Inhofe. OK, I understand your answer. I disagree
with it, and I'm going to be asking some of the--Panel 3 and 4
the same question.
Do you have any further questions of Mr. Seitz?
Senator Voinovich. No, I haven't.
Senator Inhofe. Thank you very much, Mr. Seitz. I
appreciate your being here.
Audience speaker. Senator, would you indulge me for a
second, please?
Senator Inhofe. No, sir, we won't. I'm sorry. I don't want
to be rude, but we have to comply with our rules. This is the
way things get out of hand. We would run out of time, sir. I'd
ask you to please sit down.
I'd ask now Mr. Bynum to come forward. Most of the
witnesses today are either industry or government, and I think
Mr. Bynum is a hybrid. Which are you, Mr. Bynum?
Mr. Bynum. I'm a hybrid. You're absolutely right, Mr.
Chairman.
Senator Inhofe. By the way, I would like to have all of the
panels to understand that you're entire statement will be made
a part of the record, but for time sake we have to do this. And
that's why I always regret having to not deviate from the
published rules by not allowing people from the audience to
join in. When we're on time constraints, that takes away from
our invited witnesses.
Mr. Bynum?
Mr. Bynum. Thank you.
STATEMENT OF JOE BYNUM, EXECUTIVE VICE PRESIDENT, FOSSIL POWER
GROUP, TENNESSEE VALLEY AUTHORITY
Mr. Bynum. Mr. Chairman, thank you for the opportunity to
testify before the subcommittee today. In my testimony I am
providing the committee with the views that are solely those of
the Tennessee Valley Authority. I appreciate your interest in
the Environmental Protection Agency's proposed changes to the
New Source Review Program, which will have a lasting impact on
the operation of individual fossil plants and, in fact, the
reliability of our nation's electric system.
TVA has been operating various kinds of generating
technology for more than 65 years and has substantial expertise
in the maintenance of fossil plants. I am here today to
represent TVA's dual responsibilities as a power producer and
an environmental steward.
Although there has been some criticism of its complexity,
the TVA believes the NSR program has generally been a success.
The EPA has largely applied the program's requirements in a way
that does not impede routine maintenance or efficiency
improvements of the nation's electric generating resources. TVA
believes such improvements, long a part of routine maintenance,
are desirable to insure a reliable supply of electricity and
are in the public interest. As the person responsible for the
operation and maintenance of 59 coal units, I urge great
caution as EPA contemplates changes to the program.
Unfortunately, some of the ideas being discussed can discourage
such desirable improvements and have a detrimental impact on
the electric utility industry's ability to safely and
effectively operate our plants.
The current NSR regulations have long excluded routine
maintenance, repair, and replacement projects at existing
sources. Historically the EPA has employed a common sense
understanding of the term that encompasses those maintenance
activities that are customary in the industry but optimize
reliability, safety, availability, and efficiency. It would be
a serious mistake in its rulemaking for the EPA to change its
historic interpretation of the definition of routine
maintenance. The EPA should not make changes to the program
that discourage utilities from making improvements that
increase plant efficiency and improve reliability. The
utilities in the eastern interconnect have strained to meet
demand and keep the lights on the last two summers. Now more
than ever utility maintenance programs are key to meeting
demand and reliably serving the public.
TVA has recently released a technical report on routine
maintenance on the TVA system and in the utility industry. This
report demonstrates how important maintenance is for reliable
service. I would like to submit a copy of this report for the
record.
Senator Inhofe. Without objection.
[The referenced report follows:]
ROUTINE MAINTENANCE OF ELECTRIC GENERATING STATIONS
TENNESSEE VALLEY AUTHORITY
(GERRY L. GOLDEN MANAGER, PRODUCTION TECHNOLOGY FOSSIL POWER GROUP)
EXECUTIVE SUMMARY
The Tennessee Valley Authority (TVA) has more than 65 years of
experience in maintaining electricity-generating units with a wide
range of unit size and technologies.
This report examines TVA's maintenance philosophy and highlights
specific TVA and industry routine maintenance activities. TVA and
utility maintenance practices have as their goal unit reliability and
availability and safe working conditions. This report presents
maintenance case studies including:
Cyclone replacements (at least 300 replaced industrywide
[43 percent]).
Draft system replacements (at least 79 replacements of
forced-draft systems identified in a sample of 151 boilers [52
percent]).
Reheater replacements (231 in a sample of 190 generating
units [121 percent--some units had multiple replacements]).
Economizer replacements (98 replacement projects
identified in a sample of 202 generating units [49 percent]).
A large number of variables affect unit components' useful lives
and dictate varying maintenance responses. These responses range from
simply lubricating equipment to replacing components with improved
materials to lessen component degradation and downtime. TVA's analyses
indicate that component replacement does not occur at a certain age but
varies widely, both within the TVA system and elsewhere in the
industry.
The case studies presented herein are only illustrative of the
broad range of maintenance, repair, and replacement activities
necessary to ensure safe and reliable production of electric power from
coal-fired units. They do, however, provide insights into commonly
encountered failure mechanisms and the advancements in assessment and
repair techniques that have occurred over the last three decades.
Introduction
A steam electricity-generating unit is a complicated machine
consisting of thousands of separate parts and components that must be
operated together in an integrated fashion to produce electricity. Like
any complex mechanical system, an electricity-generating unit may
suffer impaired performance caused by defects in design or manufacture,
extreme operating conditions, or catastrophic failure. This impaired
performance affects the economic performance of a unit and employee
safety. In addition, it negatively impacts the ability to supply
adequate and reliable electric energy to the public. To complicate
matters, the unit's component parts are subject to different operating
conditions and deteriorate at different rates. To ensure reliable
integration and operation of all of these parts, an active maintenance
program is necessary.
The Tennessee Valley Authority (TVA) has more than 65 years of
experience in maintaining various kinds of power-generating
technologies. In the early 1930's, TVA began operating and maintaining
hydroelectric units. When the public's demand for electricity exceeded
the region's hydroelectric generation potential, TVA turned to coal-
fired steam generating units. Output from its hydroelectric and coal-
fired units was later supplemented by generation from nuclear units.
Whatever the choice of fuel or generating technology, maintenance has
been and continues to be the key to reliable operation of a unit
throughout its useful life.
In a 1972 report, two TVA power-system managers, T. H. Gladney and
H. S. Fox, described TVA's maintenance experiences to date and its
maintenance philosophy. Maintenance practices and techniques have
improved since then, with better analytical tools and more experience,
but the maintenance philosophy has remained unchanged for more than 25
years. TVA and other power-system operators try to attain and maintain
the highest practical availability and reliability of generating assets
while taking into account safety and economic and financial
considerations. Only through careful maintenance of generating assets
can the public's need for electric energy be reliably and safely met.
This report builds on the TVA maintenance activities documented in
the earlier Gladney and Fox work. First, information about TVA's power
system is provided. The report then discusses the life of a generating
unit, the utility obligation to serve, and overall maintenance concepts
in order to provide the fuller context in which maintenance decisions
are made. This is followed by several case studies of specific
maintenance projects and information about the frequency of similar
maintenance activities on the TVA system and elsewhere.
TVA's Electric Power System
TVA is an agency and instrumentality of the United States created
by the Tennessee Valley Authority Act of 1933. Congress has tasked TVA
with the development and conservation of the resources of the Tennessee
Valley region in order to foster the region's economic and social well-
being. One component of TVA's regional resource development program is
the generation, transmission, and sale of electric power. TVA's power
system now serves approximately 8 million people in parts of seven
States.
Generation sources currently operated by TVA include 11 coal-fired
power plants, 29 hydroelectric plants, 4 gas-turbine plants, 1 hydro
pumped-storage facility, and 3 nuclear plants. TVA's 11 coal-fired
power plants consist of 59 units, which are located in Alabama,
Kentucky, and Tennessee. These units represent approximately 60 percent
of the installed generating capacity on the TVA system.
TVA's oldest active coal-fired unit was placed into service in late
1951; the newest unit was placed into service in 1989. Four of the
units are supercritical units. The unit boilers are a diverse mix of
burner types and configurations: 26 are tangentially fired; 24 are
wall-fired; 2 are cell burners; 6 are cyclones; and 1 is atmospheric
fluidized-bed combustion. Unit sizes range from 125 MWs to 1,300 MWs
(nameplate capacities). These boiler types and sizes are typical for
more than 90 percent of the United States coal-fired boiler fleet. All
of the boilers originally burned medium- to high-sulfur eastern coals,
but a number of them currently burn coal blends consisting of low-
sulfur western and medium- or high-sulfur eastern coals. TVA's nominal
fossil fuel-fired capacity is now 19,917 MWs.
TVA is widely recognized as one of the leaders in the utility
industry. Throughout its history, TVA has championed the evolution of
electricity-generating technologies to improve efficiency and
reliability and to reduce costs. Since the 1960's many of the major
step increases in the size and economic performance of coal-fired
generating plants have been taken by TVA. These steps included the
construction and operation of:
Gallatin Unit 1--first 300 MW tangentially fired unit in
1956;
Widow's Creek Unit 7--first 500 MW tangentially fired
unit in 1961;
Colbert Unit 5--first 500 MW wall-fired unit in 1965;
Paradise Unit 1--first 700 MW unit in 1963;
Bull Run--first 900 MW unit in 1967;
Paradise Unit 3--first 1100 MW unit in 1970;
Cumberland Unit 1--first 1300 MW unit in 1973; and
Shawnee Unit 10--first utility-scale (160 MW) atmospheric
fluidized-bed combustion unit in 1989.
As Gladney and Fox stated, these units ``. . . represented the
largest units the turbogenerator and steam-generator manufacturers were
capable of designing and building; consequently, maintenance problems
associated with prototype units were faced during the entire period.''
In its 1955 Annual Report to the President and Congress, TVA
observed:
Because of the size of the TVA power system and its region-wide
integration, TVA has been able to take advantage of the economies of
``bigness'' and to stimulate advances in steam-plant technology.
Turbogenerators of unprecedented capacity and greater efficiency have
been purchased in multiple units of 2 to 12. As a result, the new TVA
steam plants have made excellent field laboratories for the
manufacturers, providing an opportunity for inspecting and testing a
whole series of machines under operating conditions. The later machines
in each series could be improved from the experience with earlier
installations.
Many of the maintenance practices developed by TVA on these
prototype units therefore became the practices that were adopted and
refined by others in the industry.
Today, many of TVA's generating units are among the top performers
in the country, ranking in the top decile in efficiency and
reliability.
The Integrated Steam Electric Generating Unit
A typical steam driven electricity-generating unit is a complex
assembly of off-the-shelf components and custom-engineered equipment.
Steam: Its Generation and Use (40th edition 1992) by Babcock and
Wilcox, and Combustion Fossil Power (4th edition 1991) by Combustion
Engineering Inc., describe in detail from the equipment vendors'
perspective the various kinds of boilers and their component parts.
The design, installation, and operation of boiler and
turbogenerator component parts must be fully integrated in order to
achieve the ultimate objective of generating electricity reliably,
safely, and at the least cost possible. This integration is, even for
the simplest, smallest units, a major undertaking. Thousands of
components and pieces of equipment that are designed and supplied by
different firms must ultimately be properly assembled, tested, and,
almost always, tuned and refined before a generating unit can be
initially connected to the grid. Furthermore, it is not unusual for
replacements of equipment and systems and refinements to operational
procedures to continue for months and years before a unit achieves its
efficiency and reliability objectives.
Maintaining integrated operation of all components is difficult
because of the large number of components and the varying stresses on
components. Failure of a component, or its failure to meet performance
specifications, results in the inability of a unit to perform
efficiently or to generate at design capability and may even prevent
the unit from generating at all. This is true for almost all
components. Failure of a critical electrical relay, sensing device, or
valve can interfere with a unit's ability to operate properly as much
as can failure of larger boiler or turbine components.
The components and equipment of a generating unit face a wide range
of operating environments and service conditions. These conditions
range from the heat- and humidity-controlled environment of a control
room to the extremely harsh environment inside a large furnace. Heat
transfer surfaces in a boiler must retain adequate structural integrity
to contain water/steam at pressures up to 4500 psi, the approximate
equivalent to an ocean depth of two miles.
Components must retain this structural integrity while being
exposed to furnace temperatures exceeding 3000F; to highly corrosive
gases; to deposition of corrosive solid materials; and to erosion
caused by high-velocity, abrasive solid materials. Solid particles and
water droplets traveling at supersonic velocities bombard steam turbine
blades. Dynamic forces from the formation and collapse of steam bubbles
can gouge chunks of metal from seating surfaces and rotating elements
of control valves and pump impellers. Insulation inside electrical
generators must maintain integrity while withstanding up to 24,000
volts.
Because of this wide variation in conditions of service, the
service lives of individual components differ considerably. This
affects the ability to maintain reliable integrated operation. Even the
various components of a system or assembly do not have the same
expected service life. For example, the rotating elements of a steam
turbine, under design conditions, will require repair or replacement
before the stationary components of the turbine. The superheater
section of a boiler, which operates in a substantially more hostile
service environment than the economizer section of the same boiler,
typically has a shorter life than the economizer--even though the
superheater is made of higher grade materials that can tolerate very
adverse conditions.
The power system may fail to meet its performance and reliability
expectations because of design and integration errors. Components often
fail to achieve their initially anticipated service lives. Poor quality
control, manufacturing errors, design errors, and imperfect information
regarding conditions of service can result in exposure to stresses
higher than anticipated by the design engineer. Unexpected trace
materials in the fuel supply can result in higher corrosion. Improper
operation due to human error or failure of control components may also
shorten component lives. For example, a single overheating event can
occur early in the life of a plant and shorten the useful life of an
entire section of heat transfer surfaces within a boiler (e.g., a
superheater or reheater). All of these circumstances eventually require
some form of maintenance response to ensure safe and reliable
operation.
Advances in industry standards, metallurgical developments, and
improvements in inspection procedures and performance-testing
techniques can also result in reduced life for components. Codes and
standards exist to minimize the threat of a major safety-related
failure. Industrial experience and increased knowledge of materials
behavior can result in changes to these codes and standards that
require removal of components from service earlier than anticipated by
the designer. For example, in 1965 and again in 1991, the American
Society of Mechanical Engineers reduced the allowable high-temperature
stress levels for 11/4 Cr. 1/2 Mo steel (chrome-molybdenum, also known
as T-11), which was commonly used in the waterwall, reheater, and
superheater sections of a boiler. This significantly affected the
assessment of remaining useful life for some of the boiler sections
fabricated from this material. Similarly, the development of improved
nondestructive examination techniques for boiler tubes and other
components allowed sophisticated assessments of the remaining useful
life of pressure parts to be conducted, which in turn allowed for
planned replacements of wearing parts to be undertaken before a forced
outage required emergency repairs.
Life of a Generating Unit
Given the variations in the design life of individual unit
components and systems, the life of a generating unit depends upon how
a unit is operated, how well it is maintained, and other external
factors. As a result, there is no preordained expected life of a
generating unit. For TVA and other generating utilities, there are in
fact two different concepts of expected life.
First, there is the project planning life or accounting life. When
a decision is made to put a new generating unit on line, a minimum
expected lifetime is defined for accounting or planning purposes. In
other words, for a project to be viable, it must be expected to perform
long enough to generate sufficient revenues to provide a minimum
targeted return on investment. In the case of for-profit entities, this
minimum expected life or ``accounting life'' also establishes the
depreciation schedule, an important parameter in the economic
evaluation of a new project because of tax considerations. TVA
periodically adjusts its depreciation schedules to reflect current
estimates of a plant's remaining useful life. It is not unusual,
however, for a generating plant to become fully depreciated yet remain
in service.
Second, generating units have a useful life, one that is based on a
dynamic assessment of unit-specific internal and external factors to
determine its continuing viability. Just as automobiles are not retired
once the car loan is paid, generating units are not retired from
service at the end of their accounting lives simply because they have
been fully depreciated. Rather, they are retired when they no longer
remain viable assets. This means that units are removed from service
when either:
The revenue they generate is inadequate to cover fixed plus
variable operating costs and to provide sufficient return on investment
in needed component restorations; or Technological advances provide the
opportunity for an investment in new facilities to generate greater
return on investment and lower cost of electricity than could be
achieved through continued operation of the existing facility.
Maintenance, repair, and replacement of unit components are
necessary to achieve reliable and safe operation of a generating unit
throughout this useful life. Since 1940, TVA has permanently shut down
24 steam-driven electrical power plants. TVA acquired 23 of these
plants from other power companies or from the government. One of the 24
plants shut down was the Watts Bar coal-fired plant, the first steam
plant designed and constructed by TVA. Many of the plants included in
the acquisition of entire utility systems had internal combustion
engines and were retired immediately upon their acquisition. Others
were coal-fired plants of varying size and description that were shut
down from 1941 to 1997 based on system needs and the relative economics
of the individual plants.
Review of this retirement history shows that retirements of coal-
fired units on the TVA system have been limited to small (<60 MW) units
that operated at low steam pressure and low temperature and had high
heat rates (low efficiency) compared to other existing TVA units. Those
units identified in Table 1 represent the largest and most efficient of
the coal units shut down by TVA.
Table 1
Thermal Conditions of Retired TVA Fossil Units
------------------------------------------------------------------------
Steam Estimated
Pressure Steam Temp Heat Rate
(PSI) (T) (Btu/kWh)
------------------------------------------------------------------------
Parksville....................... 250 575 21,000
Hales Bar........................ 365 725 18,000
Watts Bar........................ 865 900 11,400*
------------------------------------------------------------------------
*Design Value
As demand grew on the TVA electrical system, substantially larger,
more efficient generating units were added. The significantly lower
production cost of these new units resulted in the older units being
used less. This decrease in utilization led to the old unite' net
annual revenue going negative (often, even net generation would go
negative). Retirement of the old units typically followed soon
thereafter.
Table 2 was compiled based on information obtained from a review of
TVA's Annual Reports to the President and Congress in 1957-1959. Table
2 compares the average cost and capacity factor of the TVA-acquired
units that were in service and the average figures for the TVA coal
system overall. For example, in the late 1950's, the average cost of
electric power generated by TVA's old, acquired units was about 4.4 to
6.5 times the cost of electric power generated by TVA's new coal-fired
units. The acquired units were all retired in the early to mid-1960's.
(TVA retired the Parksville, Bowling Green, and Watauga units in 1960,
the Nashville plant in 1962, Hales Bar in 1963, Memphis in 1965, and
Wilson in 1966.)
Table 2
Financial Performance of JVA Coal Units 1957-1959
------------------------------------------------------------------------
1957 1958 1959
------------------------------------------------------------------------
TVA Coal System--Average Cost ($/ 2.773 2.898 2.793
MWh)............................
Effective Capacity Factor (%).... 90.110 77.960 82.200
TVA-Acquired Units.--Average Cost 17.918 12.640 17.200
($/MWh).........................
Effective Capacity Factor (%).... 4.440 4.740 3.130
------------------------------------------------------------------------
* Generating units acquired by TVA from other power companies or from
other government agencies from 1933 through 1950. Plants still active
in 1957-1959 included Wilson, Nashville, Hales Bar, Parksville,
Watauga, and Bowling Green.
This retirement sequence demonstrates that neither the accounting
age nor the actual age of units dictates when units are retired. TVA's
1960 Annual Report indicated that the Nashville, Memphis, and
Parksville units had reached the end of their accounting lives; that
is, they were fully depreciated. Yet, the 1960 retirements included the
Bowling Green and Watauga units but not the Nashville and Memphis
units. Table 3 provides a summary of the age of some of these acquired
facilities at the time of their retirements. Even in the 1950's and
1960's, unit age at date of retirement ranged from just less than 30 to
over 60 years, confirming that plant age was not the motivation behind
retirement.
Table 3
Age of TVA Coal-Fired Plants at Retirement
------------------------------------------------------------------------
Retirement Age at
Generating Unit Date Retirement
------------------------------------------------------------------------
Hopkinsville.................................. 1954 41
Parksville.................................... 1960 46
Bowling Green................................. 1960 28
Watauga....................................... 1960 38
Nashville..................................... 1962 61
Hales Bar..................................... 1964 40
Wilson........................................ 1966 50
------------------------------------------------------------------------
TVA's most recent plant to be shut down was the Watts Bar Steam
Plant. This four-unit, combination wet-bottom/dry-bottom boiler plant
was the first coal-fired plant actually built by TVA. The units began
operation in 1942-45. In only one decade, the unite' operation was
shifted from base-load to peaking mode following completion of the
Kingston units in 1954-55. The technology of coal-fired generating
stations had evolved considerably during this period because of
increases in operating temperature and pressure and the addition of
steam reheating to the thermodynamic steam cycle. As a result, the new
Kingston units were approximately 20 percent more efficient than the
Watts Bar units (design heat rates of 9,400 Btu/kWh compared to 11,400
Btu/kWh at Watts Bar) and produced electricity at costs substantially
lower than the Watts Bar units.
The generation from Watts Bar continued to decline as other
generating units were added to the TVA system until, as early as 1960,
the net generation of the plant was negative--it consumed more
electricity when it wasn't operating than it generated when it was
operating. The units were effectively retired at ages ranging from 15
to 18 years. However, Watts Bar's value as backup capacity exceeded the
cost to maintain it as a viable generating asset, so it continued to be
staffed and remained capable of operation. This changed in 1982 when an
analysis indicated that, for the number of hours of expected operation,
it would be more economical to generate the standby power from
combustion turbines than to maintain full staffing and absorb the total
fixed cost of the Watts Bar facility. As a result of this analysis, the
plant was shut down and put into mothballed condition. Subsequently, in
1997 Watts Bar was permanently shut down--55 years after going into
service.
Technological advances have continued to improve the efficiency and
reduce the variable operating costs of new generating units. However,
these more recent efficiency improvements have not approached the giant
strides that were made in the 1950's and 1960's. Additionally, the
economy-of-scale factor that allowed the fixed cost of the replacement
capacity to be relatively small prior to 1970 is no longer relevant
because there has been no increase in the size of generating units
since the early 1970's. In fact, almost all of the new generating units
added in the 1990's have capacities considerably smaller than those
built in the late 1960's and early 1970's. Simply stated, the more
recent limited improvements in unit operating efficiencies are not
sufficient economically to justify the replacement of existing units,
especially when the public's demand for electricity has continued to
increase.
1 Refer to the care study on reheater replacement on p. 28 of this
report for additional details.
Service Mandates
The TVA Act requires TVA to provide an ample supply of electric
power to aid in discharging its congressionally mandated responsibility
for the advancement of national defense and the physical, social, and
economic development of the TVA region. The TVA Act also requires TVA
to provide power at the lowest feasible rates, which in turn requires
that TVA generate power at the lowest feasible cost.
Maintaining generating units to ensure they are available to
generate when needed is a critical element of any program to ensure
reliability of supply. Maintenance activities are also necessary to
reduce costs. If generating are not reliable, more capacity must be
installed (or obtained from some other power supplier) to ensure that
total energy needs are met. Furthermore, if the lowest cost coal-fired
units are not fully available when needed, energy needs must be met
from generating units with higher production costs.
As a member of the North American Electric Reliability Council \2\
(NERC), TVA is also obligated to help preserve the reliability of the
national electricity transmission and distribution grid. NERC's
Operating Policy 1, Section C, defines the responses required of
participating utilities in order to maintain acceptable frequencies at
the transmission interfaces between entities. Upsets such as loss of a
major generating unit on another utility's system can require TVA to
activate its standby generation facilities or start idle ones. In
addition to having an obligation to respond reliably to such events,
TVA must minimize the number of events that are initiated on its
system. Reliable generation and the ability to control the times when
generating units operate or are shut down are crucial to fulfilling
this obligation.
---------------------------------------------------------------------------
\2\ NERC is a not-for-profit organization responsible for promoting
the reliability of the electric supply for North America. This mission
is accomplished by working with all segments of the electric industry
as well as customers. Electric utilities formed NERC in 1968 to
coordinate efforts to avoid blackouts such as the November 1965 event
that left 30 million prople without power in the northeast USA and
Ontario, Canada. NERC reviews the past for lessons learned and monitors
the present for member compliance with published policies, standards,
principles, and guides. NERC assesses the future reliability of the
bulk electric systems in North America. NERC's owners are ten regional
councils whose members come from all segments of the electric
industry--investor-owned Federal State/municipal and provincial
utilities electric cooperatives, independent power producers, power
marketers and electricity customers. TVA is a member of Southeastern
Electric Reliability Council (SERC). NERC governance is by a board of
trustees comprised of 47 electric industry executives. TVA has
representation on the board of trustees. Operating guides and policies
are developed and revised by committees comprised of members from the
ten councils. Guides and policies are approved at various levels and
ultimately by the board of trustees (Information from NERC's Web site
January 2000--http://www.nerc.com)
---------------------------------------------------------------------------
In addition, TVA must operate its generating units and transmission
assets in a manner that fully protects the health and well-being of its
employees. As a result, TVA strives to promptly correct conditions that
might lead to an unsafe or unhealthy working environment.
Other companies that own and operate electricity-generating
facilities for profit have also long been under a legal duty to
maintain and to operate their facilities in a manner that ensures a
safe, efficient, and reliable supply of electricity to their consumers.
This legal duty is described in the utilities' compacts with their
public service or public utilities commissions (PUCs). Activities aimed
at improving or maintaining the reliability and efficiency of
generating facilities are also subject to public scrutiny through
reports to State PUCs, to the Federal Energy Regulatory Commission
(FERC), and to the Energy Information Administration (EIA) within the
U.S. Department of Energy.
Theory of Maintenance
To fulfill their respective obligations to serve, TVA and the rest
of the electric utility industry have developed a very simple
maintenance philosophy--maintain the reliability of generating units in
a way that preserves the value of the asset and minimizes the cost of
electricity. For some maintenance activities, this simple statement is
equally simple to implement. However, for other activities, determining
the appropriate approach may involve more complicated engineering and
economic evaluations. Furthermore, the conclusions that are reached
today may not be valid at some future date because of changes in the
technology or economic circumstances.
Under this maintenance philosophy, routine maintenance of
components of a generating unit generally falls into three categories.
It can be proactive, reactive, or predictive.
Proactive Utilities routinely change lubricants, clean lubricants,
replace gaskets, repack pump seals, etc., based on fixed calendar
schedules or hours of service--regardless of the condition of the
equipment. Typically, major overhauls of equipment have also been
performed on a predetermined schedule based on manufacturers'
recommendations or utility experience. Improvements in monitoring and
diagnostic capabilities in recent years have enabled plant operators to
reduce the level of this proactive maintenance in favor of the more
cost-effective ``condition based'' or predictive maintenance.
Reactive Reactive maintenance is routinely performed when
components or systems fail or experience performance degradation. This
may entail replacement of components with identical parts, replacement
with components with improved design or materials, replacement followed
by changes in operating procedures, or replacement of an entire
assembly or system that includes the failed component. The actions
taken following a failure are determined by an economic evaluation that
includes consideration of the immediate needs of the generating system,
impact of the failure on unit operation, the frequency of the failure,
and the availability of alternative solutions designed to prevent
similar failures in the future.
When a failure results in loss of generating capability of a unit,
either partial or total, the economics normally dictate choosing a
maintenance solution that minimizes lost generation. This sometimes
results in an immediate response to restore unit capability followed by
a later action to avoid future failures. For example, consider the case
of a tube failure in the reheat section of a steam generator.
If the damage is isolated to a single tube, that area of the tube
is cut out and replaced, and the unit is returned to service. If there
is visible collateral damage or if it is clear from initial analysis
and review of operating history that other tubes in close proximity to
the failure have been exposed to similar conditions that would make
their early failure likely, a larger number of tubes may be replaced
before the unit is returned to service. In this case, reactive
maintenance is augmented by a proactive component replacement in order
to avoid future failures that would result in loss of generation or
create safety risks.
If it is determined that the root cause of a failure is a condition
that has exposed all or a large number of the reheater tubes to
increased risk of failure, the economic analysis may indicate that
replacement of the entire reheater is needed to maintain unit
reliability and safety and that replacement is the most cost-effective
approach to maintaining system reliability. Such a condition might
result from identification of a design or materials deficiency,
operational errors such as temperature or water-quality excursions, or
changes in the condition of service such as might result from
unexpected changes in fuel combustion characteristics due to variation
of properties within a coal seam. The economic analysis would indicate
that the loss of generation and wear and tear on the unit resulting
from anticipated failures and shutdowns justify the investment needed
to replace the reheater.
Reactive maintenance can also be initiated by discovery of
conditions that will lead to component failure if not corrected. If
evidence of damage is found during inspections, a similar economic
analysis is performed to determine the appropriate response. When the
condition is detected prior to failure, however, repair of the
component may also be a viable option. For example, discovery of
cavitation damage at the suction of a pump could lead to weld repair of
the pump impeller, replacement of the impeller, replacement of the
impeller with improved materials, reconfiguration of the suction
piping, or changes to the system upstream of the pump. The selected
course of action would depend upon the costs of the alternative
solutions and the benefits each solution would provide to system
reliability.
Predictive As technology has advanced, so have the maintenance
tools used by the electric utility industry. Advances in equipment-
monitoring capability and analytical techniques now achieve many of the
benefits of proactive maintenance while avoiding the costs of
inspecting and overhauling equipment that is operating well and poses
no current threat to unit reliability or employee safety. Predictive
capability also allows threatening conditions to be discovered and
mitigated prior to failure, thus avoiding the cost of lost generation,
wear and tear on equipment that occur during the shutdowns and startups
that accompany failures, and safety risks associated with a failure.
Examples of predictive or condition-based maintenance are
plentiful. Deterioration of a piece of rotating equipment can now be
discovered by spectral analysis long before vibration reaches levels
that would have been detectable with originally installed equipment.
Portable vibration-monitoring equipment allows this analysis technique
to be extended to components that have never previously been equipped
with any type of vibration-monitoring equipment. Evaluation of
metallurgical samples now enables the condition of tubing or other
structural members to be determined and the remaining service life of
the component to be predicted with increased precision. This allows the
replacement of components before failure while fully utilizing the life
of the component. Modern computational fluid dynamics capabilities
allow the prediction of corrosive conditions within boilers that may
result from installation of low-NOx burners. This enables localized
mitigation techniques such as protective cladding to be applied.
Timing of Maintenance Activities
The economic evaluation of maintenance activities at a generating
unit is dependent upon a total generating system optimization that
assigns a role and set of operating objectives to each individual unit.
Unit roles and objectives change because of independent factors that
include changes in fuel costs, overall economic conditions, and the
condition of other units in the operating system. As a unit's role
changes, the maintenance practice for that unit may also change.
For example, a unit operating as a ``swing'' or load-following unit
affords more opportunities to patch or replace failed components one at
a time without severely impacting systemwide reliability because system
load demand does not require that the unit be operated continuously.
(It should be noted that this swing mode of operation might, in fact,
create more opportunities for failure because of the thermal,
mechanical, and electrical cycling of equipment and systems.) However,
conditions on the operating system (such as loss of another generating
unit for an extended period of time) can quickly change the role of the
unit to base-load operation. Because a base-load unit is expected to
operate continuously, opportunities for failure-driven maintenance are
less frequent and certainly more costly. Proactive replacement of a
complete assembly of components that have failure potential, rather
than reactive replacement of individual components, may become
economically justified with the increase in production rate or hours of
operation.
Many of TVA's coal-fired units experienced a major change of roles
in the mid-1980's when TVA decided to shut down all operating nuclear
units for an extended period because of safety concerns. The
reliability of the coal-fired units during this period became critical
to meeting system demand and fulfilling TVA's mission and obligation to
serve.
Decisions to repair or replace and the scope of the repair or
replacement are not based only on assessments of the least-cost
approach to maintaining the requisite reliability of TVA's generating
and transmission system. The evaluations of options at a generating
unit must also include consideration of the condition of the rest of
the electrical system and the general economy as well as the safety of
TVA employees.
Technologically Superior Replacement It has been the common
practice within TVA and the utility industry for decades to replace
components and systems with state-of-the-art equipment that is often
more reliable or more efficient than the original, sometimes obsolete,
component. It is also typical for maintenance activities to include
improved maintenance and operational practices that respond to
conditions experienced during actual operation of the unit. The
following discussion lists specific examples of these practices on the
TVA system.
Replacements with improved design or materials
Boiler feedpump recirculation valves for supercritical
units underwent a complete evolution of materials and design and were
replaced numerous times on many units.
Cooling tower fill was replaced with fill systems that
had better structural and thermal properties and/or eliminated asbestos
materials.
Metallic expansion joints were replaced with more durable
fabric joints.
Insulation of generator stator bars was upgraded because
of continuing failures of the originally supplied design.
Steam turbine blade shape and materials of construction
have been improved with resultant increases in thermodynamic efficiency
and reliability.
Feedwater heaters have been completely retubed with new
materials that have improved the reliability of the heaters with
resultant increases in thermal efficiency of the generating units.
Analog control systems have been replaced with digital
systems that provide increased control flexibility and accuracy and
improved reliability.
Improved maintenance tools or operational practices:
Continuous-cleaning systems for condenser tubes have
increased efficiency through improved heat transfer capability and
increased reliability by eliminating the need for unit outages or
short-term load reductions to manually clean tubes.
Vibration-monitoring systems with expanded capability
have provided increased analytical capability and have increased the
number of pieces of rotating equipment that can be monitored. This has
resulted in improved reliability by making maintenance programs more
effective and avoiding forced outages. Continuous-emissions-monitoring
equipment has been added to improve combustion controls and overall
thermal efficiency. Continuous-cleaning and filtration systems have
been added to lubricating oil systems of turbine generators and other
large rotating equipment to improve bearing life and decrease bearing-
related forced outages.
More recently, artificial intelligence control systems
have been added to continuously optimize unit efficiency while
minimizing pollutant emissions.
TVA Historical Practices
The overall maintenance philosophy described above has been in
place at TVA for many years. This philosophy is reflected in a report
presented to the American Power Conference in 1972, ``TVA's Power Plant
Maintenance Program'' by T.H. Gladney and H.S. Fox. At the time of that
report, TVA's oldest coal-fired plant had been in service just over 20
years. Many of the units were less than 10 years old. The report
clearly stated TVA's approach to maintenance:
In an effort to maintain unit reliability, major replacement or
rehabilitation in areas where excessive tale failures occur is made
after an evaluation based on loss of generation, cost of repairs, and
damage to the and from frequent startups and shutdowns indicates it is
justified.
Examples of the types of routine maintenance activities and
projects that were identified in the report after less than 20 years of
operation include the following.
In one family of 14 similar turbines, 3 high-pressure
spindles had to be replaced because of creep-rupture cracking.
Another high-pressure spindle was replaced and two
intermediate-pressure spindles were on order following discovery of
unacceptable cracks in the rotor bore.
Steam chests were replaced on two 700 MW units after only
8 years of operation.
Four generators required complete stator rewinding with
upgraded insulation material, and 42 percent of the total generator
fleet required partial replacement of bars.
Although the projects had not yet been implemented, the
decision had been made to pressurize the penthouse on all pressurized
furnaces.
Most crotch tubes, reentrant throat tubes, wrapper tubes,
and face tubes had been replaced at least once on all cyclones of two
700 MW units, and it was thought that replacement of all cyclone tubes
would be required within 3 to 5 years. (See Paradise Unit 1 Cyclone
Replacement Case Study later in this report.)
Of 41 low-pressure heaters using admiralty tubing, 14 had
been retubed using better quality copper-nickel material and all others
were anticipated to require retubing in the near future.
Stainless steel tubes were removed, heat-treated, and
reinstalled in the superheater and reheater sections of 11 steam
generators.
The return bends in all reheater pendant elements of two
steam generators were redesigned and replaced.
These maintenance activities left the basic design of the steam/
heat cycle and the maximum heat input to the furnace unchanged. Within
these overall design constraints, however, all of these maintenance
activities were intended to improve the reliability or efficiency of
the generating units.
Case Studies
The same TVA maintenance philosophy has been consistently applied
since the Gladney-Fox report. Four case histories of maintenance
projects are presented below. Each case presents a discussion of the
component, its function, and its conditions of service; the relevant
operational history of the component; alternatives considered; and the
rationale behind the maintenance decision. This specific case is then
extended to analyze the history of replacements of the component on
both the entire TVA coal-fired system and a larger data set that
represents either the entire electric utility industry or a large
segment of the industry.
Cyclone Furnace Replacement
Cyclone Background
As related in Steam: Its Generation and Use, \3\ cyclone-fired
boilers were developed by Babcock and Wilcox (B&W) to burn coals with
low ash-melting (fusion) temperatures that are not well suited for
pulverized-coal (PC) combustion. The ash from these coals would enter
the superheater of a PC unit in a molten state and create severe
slagging and fouling problems. The ``cyclone'' design developed by B&W
addressed this problem by deliberately melting as much ash as possible
and draining it from the bottom of the furnace. This kept molten slag
out of the superheater and substantially reduced the total amount of
ash that was transported out of the boiler with the flue gas (fly ash).
The cyclone design also had these collateral benefits:
---------------------------------------------------------------------------
\3\ Babcock and Wilcox, Storm: Its Generation and Use, 40th
edition, 1992, pp 14-1-14-11
---------------------------------------------------------------------------
Eliminated the need for high-cost and high-maintenance
pulverizers.
Resulted in overall smaller furnaces (with the associated
reductions in powerhouse dimensions).
Required smaller particulate collection equipment due to
reduced fly ash loading.
Opened the market to a range of fuels that were not
usable with pulverized-coal firing.
The design objective was accomplished by creating a zone where
combustion takes place outside the main furnace. The hot flue gas and
molten slag then discharges into the main furnace, with the gas being
cooled and discharged from the top of the furnace while the molten slag
is kept at elevated temperatures and is drained through the main
furnace bottom. This allows very high temperatures to be maintained in
the combustion zone while the majority of the evaporative heat transfer
occurs in the main furnace.
These combustion zones or ``cyclones'' are horizontally oriented,
cylindrical barrels that attach to the sides of the main furnace.
Cyclones range from 6 feet to 10 feet in diameter. As few as 1 or as
many as 23 of these cyclones are attached to the main furnace of
different units. The term ``cyclone furnace'' is used to describe both
the individual cyclones and the total furnace assembly of a cyclone-
fired unit. The cyclones are a water-cooled, tangent tube construction,
but a thick layer of refractory lining is used to protect the tubing
material while allowing the sustained high temperatures (greater than
3000F) needed to consistently melt the ash. BOW describes the operation
of cyclones as follows:
Crushed coal and some air . . . enter the front of the Cyclone
through specially designed burners in thefrontwall of the Cyclone. In
the main Cyclone barrel a swirling motion is created by the tangential
addition of the secondary air in the upper Cyclone barrel wall. A
unique combustion pattern and circulating gas-flow structure result. .
. . The products of combustion eventually leave the Cyclone furnace
through the re-entrant throat. A molten slag layer develops and coats
the inside surface of the Cyclone barrel. The slag drains to the bottom
of the Cyclone and is discharged through the slag tap. \4\
---------------------------------------------------------------------------
\4\ Babcock and Wilcox, Steam: Its Generation and Use, 40th
edition, 1992, p. 141.
While cyclones achieved their design objectives, they also
presented some difficult problems. The introduction of crushed coal and
air at high velocities resulted in erosion problems, particularly in
areas of the cyclone that do not form a protective slag layer. The hot,
molten slag environment also introduced high risk for corrosion damage
to the water-cooled tubes. Generally, the refractory material would
protect the tubing. However, in areas where refractory eroded, cracked,
or otherwise was removed from the tubing, the tubing's exterior
surfaces would be subjected to the corrosive matter (such as iron
sulfide) and rapidly lose metal thickness and strength. As a result,
cyclones were plagued by tube failures that resulted in forced outages
and decreased reliability. In the face of these cyclone failures, B&W
developed rehabilitative repair and replacement strategies, such as
welding flat steel stock onto tube surfaces in areas of high erosion
potential and using a high-density pin-studding pattern to better hold
refractory in place.
Paradise Unit 1 Case Study
Unit 1 of the Paradise Fossil Plant (located on the Green River in
Muhlenberg County, Kentucky) is a 700 MW (nominal) cyclone-fired unit
that was put into service in 1963. It has 14 ten-foot diameter
cyclones--7 on each of the front and rear walls. Its boiler produces
steam at 2450 psi'', 1003F. Within its first year of commercial
operation, the unit began experiencing failures of cyclone tubes. These
failures increased in frequency such that by the time of the Gladney
and Fox report in 1972, most of the crotch tubes, reentrant throat
tubes, wrapper tubes, and face tubes had been replaced at least once.
It was projected at that time that replacement of all cyclone tubes
would be mandatory within 3 to 5 years, but this anticipated wholesale
replacement was delayed by a manpower-intensive program of frequent,
proactive, tube replacements. This piecemeal replacement of the tubes
continued through 1982; however, during this period the cyclones
continued to exhibit failures that resulted in decreasing reliability,
wear and tear on equipment, and labor and materials charges. The
increase in unit forced outages from 1962 is shown in Figure 1. (The
peak forced-outage rate experienced in 1979 was the result of a single
turbine casing failure that resulted in a forced outage of
approximately 1350 hours and contributed 20.5 percent to the 42.5
percent forced-outage rate for the year. Without this single event, the
forced-outage rate for 1979 would have been about 22 percent--
consistent with the trend at the time but still unacceptably high.)
The contributions to forced outages for calendar year 1982 are
analyzed in Table 4 below. These data show that cyclone failures were
the principal cause of the unit's degraded performance.
Table 4
Paradise 1--1982 Forced Outage Rate (FOR) Analysis
----------------------------------------------------------------------------------------------------------------
Estimated
Forced Differential
Description No. of Outage MWH Loss Contr. To Power
Events Hours Unit FOR Replacement
Cost
----------------------------------------------------------------------------------------------------------------
Cyclone Tube Leaks...................................... 10 882 516118 15.50 4,077,000
Waterwalls.............................................. 2 158 98052 2.95 775,000
Condenser Shell......................................... 1 158 10839 0.33 86,000
Wet Coal................................................ 2 11 6881 0.21 54,000
Main Turbine Control Valve.............................. 2 5 2903 0.09 23,000
Main Turbine Shop Valve................................. 1 2 1002 0.03 8,000
Boiler Feedpump Turbine................................. 1 1 744 0.02 6,000
Total............................................... 19 1026 636539 19.12 5,029,000
----------------------------------------------------------------------------------------------------------------
In addition to decreasing reliability and increasing costs, cyclone
repairs were becoming increasingly manpower-intensive. Although there
were only ten forced-outage events attributed to cyclones during
calendar year 1982, there were 213 tube leaks (and 168 leaks in 1981).
Each of these leaks required maintenance attention.
As discussed above, when equipment experiences repeated failures
that adversely impact performance, it is TVA's practice to undertake a
structured analysis of various alternatives to correct the problem. The
maintenance decision involves a choice between:
Repair or replacement of individual components (reactive
maintenance);
Replacement of other components that have also
experienced conditions that could affect future performance (proactive
maintenance); and
Incorporation of improved materials or design elements
that might help address the causes of equipment degradation in the
future.
TVA evaluated three primary options to address this unacceptable
situation.
1. Do nothing--Make no proactive tube replacements. Take only those
measures necessary to return the unit to service after cyclone tube
failures.
2. Status quo--Continue with the past program of proactive
replacement of damaged or high-risk tubes.
3. Replacement--Replace all cyclones in a single scheduled outage,
incorporating advances in materials and design developed by BOW based
on lessons learned in service.
TVA knew that there were similar cyclone problems at other
utilities and that other utilities had replaced cyclones as part of
their maintenance programs. The TVA analysis considered the results
that had been achieved or projected by other utilities with similar
large boilers. The results achieved by these utilities are shown in
Table 5 below.
Table 5
Results of Prior Cyclone Replacements
------------------------------------------------------------------------
Unit 1 Unit 2 Unit 3
------------------------------------------------------------------------
Availability Before.............. 60% 59% 50%
1Availability After.............. 82% 78% 75%*
FOR** Before..................... 24.5% 29% 35%
FOR After........................ 6.58% 13% 12%*
------------------------------------------------------------------------
* Projected results--projects were being implemented at time of economic
evaluation.
** FOR--Forced Outage Rate.
Based on TVA's experience to that time, complete inspection and
evaluation of the condition of the cyclones, and the results of similar
replacement projects performed by others, TVA projected the future
performance of the unit for all three options as shown in Figure 2.
Using these projections for future performance, the expected cost
of the three options, and projected differential costs for replacement
power, the economic analyses Droduced the results shown in Table 6.
1Table 6
Paradise 1 Cyclone Options Economic Evaluation
------------------------------------------------------------------------
Low-Load High-Load
Forecast* Forecast*
------------------------------------------------------------------------
Present Worth Savings ($ million):
Alternative 2 vs. Alternative 1............... -2.70 5.90
Alternative 3 vs. Alternative 1............... 15.90 45.30
Benefit/Cost Ratio:
Alternative 2 vs. Alternative 1............... 0.75 1.58
Alternative 3 vs. Alternative 1............... 2.11 5.12
------------------------------------------------------------------------
* TVA typically projects a range for future energy demands on its
system: low-, medium-, and high-load forecasts. This table shows the
range of cost estimates based on the low- and high-load forecasts at
that time.
As Table 6 shows, Alternative 3 (full replacement during a
scheduled outage) was the best alternative, maximizing both the savings
and the benefit/cost ratio for both the low- and high-load forecasts.
TVA chose Alternative 3 and implemented the project in 1984.
Experience on the TVA System
TVA operates six cyclone-fired units, three each at the Allen and
Paradise Fossil Plants. In total, the Allen units have 21 seven-foot
diameter cyclones and the Paradise units have 51 ten-foot diameter
cyclones. All the cyclones have experienced the erosion and corrosion
problems discussed above and, like Paradise Unit 1, all the originally
supplied cyclones have been replaced. Figure 3 depicts the replacement
history for these cyclones since 1978. The major tubing replacements
refer to replacement of reentrant throat tubes at the Allen Fossil
Plant. (Note that the replacements during the proactive, partial tube
replacement effort are not included in Figure 3. That effort, which was
performed at all TVA cyclones, is discussed above in the case study for
Paradise Unit 1.)
Other Industry Experience \5\
---------------------------------------------------------------------------
\5\ Throughout this report, TVA experience is also included in the
analysis of industry experience.
---------------------------------------------------------------------------
The TVA experience with operating and maintaining cyclones is not
unique. Virtually all cyclone owners have encountered the same problems
with varying degrees of severity. There are 96 electricity-generating
stations in the United States, (totaling 26,152 MW of capacity) powered
by cyclone-fired furnaces. These units contain 701 individual cyclones.
At these units, 300 cyclones (representing 13,981 MW of capacity) have
been replaced since 1979. Industrywide data on partial replacements
were not available for this report. Figures 4 and 5 show the number of
cyclones replaced and the associated capacity as a function of cyclone
age. The median age of the replaced cyclones was 21 years, while the
mean age of those cyclones was 23.1 years.
Of these 300 replacement cyclones, only 13 cyclones (representing a
total capacity of 569 MW) were replaced with identical cyclones. All
other replacements included some improvement based on the B&W
rehabilitative repair and replacement strategies (discussed in the
background above) or similar measures.
It is apparent from the TVA case study and the analysis of
industrywide maintenance history and practices that full replacement of
cyclones has occurred frequently throughout the industry. It is also
apparent that cyclones have been replaced on units of varying ages,
confirming that many variables affect the actual condition and
performance of boiler components. Full replacement of cyclones to
correct problems created by corrosion and erosion of materials has
occurred frequently and routinely throughout the utility industry.
Balanced-Draft Conversion
Balanced-Draft Background
In the 1950's, boiler designers began to employ a new design
concept for large utility boilers--pressurized furnace operation. Prior
to this design, the furnaces of all utility pulverized-coal-fired
boilers had operated under a slight vacuum (negative pressure). The
majority of these negative-pressure furnaces operated in a ``balanced
draft'' mode. That is, they were equipped with a forced-draft fan that
supplied the combustion air to the furnace and an induced-draft fan
that mechanically drew the combustion gasses out of the furnace and
expelled them through the chimney. Some smaller units were equipped
with only an induced-draft fan, while some had no fans at all, using
the draft effect of the chimney to draw air into the boiler and
evacuate the combustion products.
There were several recognized incentives to move to pressurized
firing. Operation with a negative-pressure furnace introduces some
inefficiency caused by the unavoidable in-leakage of air not needed for
combustion. This extra air requires additional motive power from the
induced-draft fans and increases thermal losses because the total mass
of hot gas lost from the system through the chimneys is increased.
Keeping the furnace, the convective sections of the boiler, and the
duct to the chimney under positive pressure eliminates this
inefficiency. In addition, elimination of the induced-draft fan lowers
the initial cost of the draft system and subsequent operation and
maintenance costs.
The early installations with this forced-draft system design were
initially successful and were soon followed by construction of other
small, pressurized firing units. Pressurized firing was increasingly
used in the industry by the mid to late 1950's and was widely accepted
by the mid-1960's. (Of 284 boilers sold from 1955 to 1965 by Babcock
and Wilcox and Combustion Engineering, the two largest boiler suppliers
in the United States, 127 were pressurized. Of 185 sold from 1966 to
1975, 76 were pressurized.)
Although the pressurized furnaces were gaining in popularity during
this period, certain shortcomings in the concept began to be
manifested. Leakage of air into the furnace was replaced by leakage of
combustion products out of the furnace. These combustion products,
laden with fly ash and high concentrations of SO2 and other
corrosive gasses, caused several unacceptable conditions that called
for a maintenance response:
Infiltration of corrosive gasses and fly ash into the
penthouses above the furnaces resulted in accelerated corrosion and
structural failures.
The employee work environment deteriorated because of
exposure to high concentrations of combustion byproducts.
Corrosion of components in the powerhouse near the
boilers increased.
Rotating machinery was exposed to increased levels of
damaging particulate matter.
Component performance was degraded because accessibility
to the components was reduced, impeding performance of maintenance.
As a result, no pressurized Babcock and Wilcox units and only two
pressurized Combustion Engineering units were sold after 1975 (none
after 1977), and many utilities began to replace their forced-draft
systems with balanced-draft systems to address equipment degradation
and related health and safety problems. Some of the replacements were
undertaken for economic reasons based on loss of reliability caused by
component failure and inability to perform required maintenance.
However, the primary reason for many of the replacements, including
those on the TVA system, was improvement of the operating environment
for plant personnel-- employee health and safety.
The trend back to balanced-draft systems was accelerated by the
addition of control equipment to meet air-quality regulatory
requirements. The new control equipment added resistance (pressure
drop) to the flow of the flue gas. Often, this added resistance could
not be overcome by the existing draft system. Thus, when a utility
considered the addition of control equipment, one of the options
considered to enhance the draft system to accommodate the added
pressure drop was replacement with a balanced-draft system. This was
often the preferred option because it both accommodated the added
pressure drop and resolved other operational, maintenance, and safety
concerns, as discussed above. A TVA survey of 79 balanced-draft
conversions indicates that 68 were done either out of concerns for
employee health and safety or in conjunction with the addition of
pollution-control equipment.
Cumberland Unit 1 Case Study
Unit 1 of the Cumberland Fossil Plant (located on the Cumberland
River in Stewart County, Tennessee) is a 1300 MW (nominal) opposed-
wall, pulverized-coal-fired unit that was put into service in 1973. It
produces steam at 3650 psi'', 10030F. The unit was not yet in service
at the time Gladney and Fox reported in 1972 that the decision had been
made to pressurize the penthouse on all pressurized units. This
decision was made in an effort to mitigate the severe maintenance and
safety problems that had been encountered on the six other TVA units
that had been operating with pressurized furnaces.
Very early in the life of the Cumberland unit, it was apparent that
state-of-the-art efforts to reduce gas leakage were inadequate. (These
efforts included the redesign of tubing penetrations, sootblower
penetration seals, expansion joints, and other design details aimed at
reducing the tearing of ductwork and other pressure boundaries during
boiler startups and shutdowns.) The environment inside the powerhouse
when the unit was operating was intolerable--especially at upper
elevations near the boiler bay. It was determined that the
SO2 concentrations inside the powerhouse exceeded the levels
allowed for safe industrial occupancy.
Cumberland also was unable to consistently attain the reliability
that is normally expected of a new generating unit. While this was due
to a number of reasons, TVA determined that the hostile environment
caused by the leakage from the pressurized furnace was a major
contributor to the unit's poor initial performance, which is depicted
in Figure 6.
Accordingly, TVA decided to replace the pressurized firing system
with a balanced-draft system in conjunction with its decision to add
new, high-efficiency electrostatic precipitators to the unit for
particulate control. In this instance, a rigorous economic evaluation
justifying the decision was not made; providing a safer work
environment for employees was deemed a major priority. The
authorization document for the conversion states:
. . . (G)as leakage from the boilers has resulted in sulfur dioxide
and fly ash problems in the plant. Sulfur dioxide concentrations exceed
the recognized national standard established to limit employee exposure
and also prohibit adequate equipment maintenance and increase unit
deratings. Also, the entrained fly ash infiltrates plant equipment,
resulting in premature failures and further deratings. The addition of
induced-draft fans and conversion to balanced-draft firing will
eliminate these problems.
. . . The addition of induced-draft fans and conversion to
balanced-draft firing will bring the two Cumberland units into
compliance with TVA Code VIII HAZARD CONTROL and consistent with the
Occupational Safety and Health Act of 1970. The cost of converting
these units to balanced-draft is estimated to be $41 million; this cost
will be partially offset by the potential saving of reduced deratings
and unit trips and by reduced plant maintenance. \6\
---------------------------------------------------------------------------
\6\ Tennesssee Valley Authority Project Authorization, Serial No.
3384, September 29, 1978.
---------------------------------------------------------------------------
The project was approved in 1978 and implemented in 1981.
Experience on the TVA System
Eleven of TVA's 59 operating units, totaling over 7,100 MW, were
initially constructed and operated with pressurized furnaces. This
included all units that went into service between 1962 and 1973. Today
only one of these units, the 900 MW Bull Run unit, remains in
pressurized operation.
Bull Run is unique among the TVA pressurized units in that it has
historically burned coal with a much lower sulfur concentration. (The
lower sulfur content reduces the corrosiveness and SO2
concentration of gasses that may leak into the powerhouse.) Bull Run
has experienced many of the adverse conditions associated with
pressurized firing. However, the twin-furnace, membrane-wall
construction of the unit combined with its continuous operation as a
base-load unit burning low-sulfur coal has allowed plant staff to
maintain a safe working environment while balancing the impact of
reduced reliability and other economic penalties associated with
pressurized units. The penthouse at Bull Run was pressurized in 1972.
Similar to the Cumberland project, other forced-draft system
replacement projects on the TVA system were performed in conjunction
with addition of environmental control equipment. Table 7 summarizes
the history of TVA balanced-draft conversions.
Table 7
Draft System Replacements of JVA Coal-Fired Units
----------------------------------------------------------------------------------------------------------------
Date of
Size, Date of Draft Concurrent
Unit MW Initial System Environmental
Operation Replacement Control
----------------------------------------------------------------------------------------------------------------
Allen 1......................................................... 330 1959 1991 None
Allen 2......................................................... 330 1959 1993 None
Allen 3......................................................... 330 1959 1993 None
Colbert 5....................................................... 500 1965 1981 None
Cumberland 1.................................................... 1300 1973 1981 ESP
Cumberland 2.................................................... 1300 1973 1982 ESP
Paradise 1...................................................... 700 1963 1983 FGD
Paradise 2...................................................... 700 1963 1983 FGD
Paradise 3...................................................... 1150 1970 1983 ESP*
Widow's Creek 8................................................. 500 1965 1977 FGD
----------------------------------------------------------------------------------------------------------------
* Paradise 3 replacement of forced draft system was delayed one outage cycle by delays in delivery of induced
draft fans.
Other Industry Experience
There are no readily accessible data that identify industrywide
pressurized furnaces and those where a forced-draft system was replaced
with a balanced-draft system. However, TVA was able to obtain data from
a large sample of U.S. utilities that own a significant number of coal-
fired generators. This data set includes 19 utilities that operate
166,000 MW of fossil generation. These utilities collectively own 151
boilers that were purchased and initially operated with pressurized
furnaces. Within a 15-year period beginning in 1972, utilities replaced
forced-draft systems with balanced-draft systems on 73 of these units.
(Six other units were converted between 1991 and 1995 for a total of 79
conversions representing 52 percent of the sample population.) Draft
system replacement did not alter these unite' treat input capacity or
steam flow but in most instances reduced the net electrical output
because of increased auxiliary electrical loads for the induced-draft
fans. The ages of the units at the time of the conversions are shown in
Figure 7.
These data show that replacement of forced-draft systems with
balanced-draft systems in order to address equipment degradation,
maintenance problems, health and safety concerns, and pollution control
requirements has occurred frequently in the utility industry. The data
show that these draft system replacements occurred regardless of the
age of the unit, with age at conversion ranging from 4 to 36 years. On
the TVA system, conversions to balanced-draft were justified primarily
because of the need to improve working environments for employees.
Improvement in unit reliability was an important collateral benefit.
Balanced-draft conversions have occurred frequently and routinely in
the utility industry.
Reheater Replacement
Reheater Background
Modern coal-fired power plants operate on cycles based on the
regenerative Rankine cycle. In this cycle the boiler feedwater is
converted to superheated steam in the boiler and used to drive a
turbine-generator for electrical energy production. The steam is then
condensed to liquid water to allow it to be pumped back to the boiler.
The water is then heated using heat exchangers and returned to the
boiler again as the boiler feedwater (thus being a regenerative cycle).
In efforts to increase the plant thermal efficiencies (that is, reduce
the amount of coal required to be burned for a specified output of
electric power), the cycle was first improved to use superheated steam
and then further improved with the addition of the reheat circuit. This
latter addition, referred to as the reheat cycle, includes removing
energy from the superheated steam in a high-pressure turbine and then
returning the steam to the reheat section of the steam generator for
additional heat energy. The steam is then again returned to the
turbine-generator for further energy removal. For large installations,
reheat makes possible a thermal efficiency improvement of approximately
5 percent and substantially reduces the heat rejected to the condenser
cooling water. \7\
---------------------------------------------------------------------------
\7\ Combustion Engineering Inc. Combustion Fossil Power, 4th
edition, 1991, pp. 1-8.
---------------------------------------------------------------------------
Most of the TVA coal-fired plants built since 1951 (all since 1954)
use the reheat cycle. The portion of the steam generator that transfers
the heat to the steam is referred to as the ``reheater'' or the
``reheat superheater.'' This system is, in general terms, a simple
single-phase heat exchanger with steam flowing on the inside and the
flue gas passing on the outside, generally in a cross-flow
configuration. \8\ The major components are:
---------------------------------------------------------------------------
\8\ Babcock and Wilcox, Steam: Its Generation and Use, 40th
edition, 1992, pp. 1-8
Inlet header (which distributes steam returning to the
boiler from the high-pressure turbine exhaust to the individual tubes)
Heat exchange tubes or elements (horizontal, pendant,
platen, terminal, or crossover depending on individual design)
Outlet header (which collects heated steam from the
individual tubes for passage to the intermediate-pressure turbine)
Because of the high operating temperatures, appropriate
construction materials are critical to a successful reheater design.
Accordingly, steel alloys were used in parts of the reheater
construction because of their superior high-temperature properties and
resistance to oxidation. But, as in all components of these steam
generators, portions not operating at high temperatures were
constructed of lower alloy steels (also referred to as higher carbon
steels) that were lower in cost. The design of the reheater components,
as other boiler components, was an attempt to optimize between the
initial cost of materials of construction and the need for higher-cost
steel alloys for reliable operation.
As a result, carbon and low-alloy steels were used for portions of
the reheater subject to lower temperature ranges, such as the reheater
inlet tubes (where the lower temperature steam from the high-pressure
turbine exhaust enters the reheater). Intermediate chrome-molybdenum
(Cr-Mo) steels were used for portions subject to higher temperatures,
such as toward the reheater outlet (where the steam achieves its
maximum temperature). Unfortunately, this use of differing materials
added an unforeseen failure mechanism to these components--the
difficulties of welding dissimilar metals together.
In early reheater designs, the materials selected were not always
adequate to address the full range of the conditions that would be
experienced, such as varying temperatures during operational upsets,
varying physical and thermal stresses, water chemistry conditions, and
changes in coal and ash physical and chemical properties. Accordingly,
the useful life of these reheaters varied significantly among the many
units in the industry because of the differences in operating
environments.
In addition to construction materials, the physical design of the
reheaters was critical to the actual performance of the components in
service. Again, an optimization was required to balance the desired
high heat transfer from the gas to steam and the need to avoid
undesirably high metal temperatures. Another major factor was the
optimization of available tube surface while maintaining adequate tube
spacing to avoid high gas velocities and the resulting excessive
erosion of the tube material.
Combined with these design considerations were the coal-ash
properties that must be factored into the design in order to avoid
fouling and, again, excessive erosion. To manage the fouling
conditions, sootblowers were added in some applications. As with the
welding of dissimilar metals, installation of sootblowers to reheaters
adds a potential failure mechanism to reheater components, namely,
erosion caused by sootblower impingement.
Design features similar to those described above are extremely
important in determining the life of reheater components. Equally
important however is the actual operating environment to which the
reheater is subjected. This can probably be best illustrated by
examining the most common tube-failure mechanisms experienced in
reheaters and the corresponding potential root causes as identified in
the Electric Power Research Institute's Boiler Tube Failures: Theory
and Practice. \9\ See Table 8 which follows.
---------------------------------------------------------------------------
\9\ Electric Popover Research Institute, Boiler Tube Failures
Theory and Practice, TR-J05261.
Table 8
Failure Mechanisms in Reheaters (RH)
----------------------------------------------------------------------------------------------------------------
Failure Mechanism Possible Root Causes
----------------------------------------------------------------------------------------------------------------
Short-Term Overheating in RH Tubing......... Tube blockage induced (especially exfoliated oxide
blockage)
Maintenance induced (improper chemical cleaning or
repairs)
Operation induced (improper startup or shutdown, or
overtiring with top heater out of service)
Long-Term Overheating/Creep................. Influences of initial design and/or material choice
Buildup of internal oxide scale
Overheating due to restricted flow caused by chemical or
other deposits, scale, debris, etc.
Operating conditions or changes in operation
Blockage or laning of boiler gas passages
Increases in stress due to wall thinning
RH Fireside Corrosion (Sootblower or Ash)... Influence of overheating of tubes (poor initial design,
internal oxide growth during operation, high temperature laning,
tube misalignment, operational problems when coal is changed, and
rapid startups causing reheater to reach temperature before full
steam flow)
Change to coal with unusually corrosive ash
Incomplete or delayed combustion
Dissimilar Metal Weld Failures (Failures Excessive tube stresses such as caused by improper
occur where ferritic and austenitic steels initial design or improper tube supports
are welded together). Excessive local tube temperatures
Change in unit operation (increased unit cycling, change
of fuel, redesign of adjacent heat duties)
Initial fabrication defects
Stress Corrosion Cracking................... Influence of environment (mainly contamination from
carryover of chlorides from chemical cleaning of waterwalls,
boiler water carryover, caustic from attemperator spray,
condenser cooling water leaks, or ingress of fireside
contaminants or flue gas during primary leaks)
Influence of excessive stresses (especially at supports)
Need to change material to a stabilized grade of
stainless steel
----------------------------------------------------------------------------------------------------------------
These failure mechanisms can occur concurrently or individually.
Depending upon the failure mechanisms, different maintenance responses
may be required. These range from repair or replacement of individual
tubes or tube sections, to redesign and replacement of the reheater, to
the installation of equipment that will address the root cause of the
maintenance problem (such as sootblowers).
Cumberland Units 1 and 2 Reheater Replacement Case Study
In addition to the Cumberland Unit 1 features described earlier,
Cumberland Units 1 and 2 each had 233,200 square feet of reheater
surface installed as part of the original construction. During
operation of the plant, high wear rates caused by fly ash or sootblower
impingement resulted in numerous erosion shields being added and
subsequently replaced. Cracks were routinely identified during
inspections and were ground out and repaired. Individual tubes were cut
out and replaced because of thinning from high-temperature oxidation
and coal ash corrosion, mechanical damage, sootblower erosion, or
overheating damage. Misaligned tube elements were realigned and
numerous support lugs replaced. Still, the reheater condition continued
to degrade and require increasing maintenance attention.
In the 1986-1988 period, deterioration of the inlet pendant lower
loops led to their being cut out and replaced with SA213-T22 material,
a higher chromium content steel that is more resistant to loss of
strength with long-term exposure to high temperature. However, the T22
material is susceptible to out-of-service pitting. As a result, these
loops were replaced again in 1996.
In 1996, TVA conducted a comprehensive review of the failure
experiences in the Cumberland reheaters. The review showed that during
the period of fiscal years 1992-1996, 11 leaks had occurred in the Unit
2 reheater pendant tubes. A root cause analysis was performed on the 11
leaks, and several failure mechanisms were identified (including
corrosion fatigue, stress corrosion cracking, weld defects, high-
temperature oxidation/coal ash corrosion, dissimilar metal welds, and
sootblower erosion) with several root causes. Inspections and
nondestructive testing indicated that further failures were developing.
It was projected that the failure rate would increase and further
jeopardize the availability of the unit, potentially causing two forced
outages per year by the year 2000.
TVA concluded that, because of the damage that already existed and
the overall condition of the existing reheat pendant tubes, the most
economical solution was the complete replacement of the 147 inlet and
outlet elements. The following items were also recommended:
Changes in the design of the structural attachments that
were welded to the tubes. These attachments were limiting thermal
expansions, thereby creating high local stresses that were leading to
corrosion fatigue failures. The supports were redesigned and materials
changed to reduce or eliminate this mechanism.
Improvement in the unit's boiler water chemistry program.
Condenser tubes were replaced to stop leakage of contaminants from the
untreated condenser cooling water into the feedwater system. Also, the
feedwater chemistry treatment process was changed to reduce or
eliminate water chemistry contributions to the conditions that led to
reheater internal tube corrosion.
Improvement in the welding quality assurance program.
Failures had been occurring in field welds and header socket welds. A
new welding quality assurance program was implemented to avoid repeats
of these failures.
The cost of the element replacement project was estimated to be
$8.4 million, with a projected benefit of $2.9 million per year. Thus
the project would pay for itself in 3 years. The recommendations were
implemented and the reheater was replaced in 1999.
Experience on the TVA System
Of TVA's currently operating 59 units, 49 use the reheat cycle. In
all these units, partial or complete replacement of the components of
the reheaters exposed to the flue gas stream has been required in order
to keep the units in reliable operation.
Some plants have had different life experiences of the inlet versus
the outlet reheater pendants. For example, TVA had to replace the
outlet pendant elements at Gallatin Fossil Plant Units 1 and 2 within 8
to 15 years, while the inlet pendant elements operated for more than 35
years without replacement. Figure 8 below provides a summary of the
reheater modification/replacement projects performed on the TVA system.
At least one significant portion of the reheater pendant elements in
every TVA reheat cycle unit has had to be replaced within 20 to 40
years of initial operation.
Other Industry Experience
To assess industry practice in the maintenance of reheaters, TVA
analyzed data from other utilities with predominately coal-fired
generation. These data represent the maintenance histories of 219
generating units totaling more than 80,000 MW of electrical generation.
Of these 219 units, 190 are equipped with reheaters. The results of
this analysis are given in Figure 9.
Of the 190 reheaters included in the sample, there have been 231
reheater replacement projects, with some reheaters having been replaced
more than once. As with the cyclone and the draft system replacement
data, these data show no strong correlation between reheater
replacement projects and reheater age. Ages at replacement ranged from
5 to 44 years, with a mean age of 25.1 years and a median age of 25 for
this data set. This leads to the conclusion that factors other than age
determine the need for reheater replacement.
Economizer Component Replacement
Economizer Background
Another enhancement to improve the efficiency of the base Rankine
thermal cycle was the addition of a heat exchanger in the flue gas
stream exiting the steam generator. This heat exchanger, called an
economizer, is typically a simple single-phase, tubular heat exchanger
with boiler feedwater flowing on the inside and flue gas passing on the
outside of the tubes. Thermal energy in the flue gas is transferred
across the heat exchange surface into the feedwater, increasing its
temperature before it enters the unit's steam drum or the furnace
surfaces, depending upon the boiler design.
The economizer provides another useful function by reducing the
magnitude of thermal shock caused by feedwater temperature fluctuations
at the inlet to either the boiler drum or the waterwalls. Thermal
shock, the rapid change in metal temperature due to changes in the
fluid temperature, produces stress increases in thick walled boiler
components. Large numbers of these stress cycles will ultimately lead
to failure of the component.
The economizer is usually the last heating surface in the flue gas
stream before the gas stream exits the steam generator and passes
through the combustion air preheater. The overall efficiency of a
boiler is improved more by using the thermal energy in the flue gas to
heat feedwaterthan by using it to preheat the combustion air. Sizing an
economizer, that is, determining the amount of heat transfer surface to
be provided, is an economic optimization among three principal
parameters: the cost of the economizer surface, the cost of the air
preheater, and the thermal efficiency of the boiler.
The major components of the economizer, in general terms, are the
inlet header, the heat exchange tubes or elements, and the outlet
header. Since these components are exposed to considerably lower
temperatures and a less hostile environment than other boiler
components (reheaters and superheaters, for example) they are typically
constructed from low-carbon steel to reduce cost. However, because this
steel is subject to corrosion in the presence of even extremely low
concentrations of oxygen, it is necessary to provide boiler water that
is practically 100 percent oxygen-free. \11\ This tubing is also
susceptible to fly ash erosion and erosion/corrosion.
---------------------------------------------------------------------------
\11\ Combustion Engineering Inc., Combustion Fossil Power, 4th
edition 1991, pp 5-10.
---------------------------------------------------------------------------
Thus, as with the reheater, both the physical design and
fabrication details of the economizer and the operating conditions it
encounters are important factors that determine its useful life. Their
importance is again clearly illustrated by the summary of the most
common tube-failure mechanisms experienced in economizers and the
corresponding potential root causes taken from the Electric Power
Research Institute's Boiler Tube Failures: Theory and Practice. \12\
---------------------------------------------------------------------------
\12\ Electric Power Research Institute, Boiler-Tube Failures:
Theory and Practice, TR-105261 Volume 2: Water-Tooched Tubes, 1996.
Table 9
Failure Mechanisms in Economizers
------------------------------------------------------------------------
Failure Mechanism Possible Root Causes
------------------------------------------------------------------------
Corrosion Fatigue........... Influences of excessive stresses/
strains (especially restraint stresses at
attachments)
Influence of environmental
factors (poor boiler water chemistry,
overly aggressive or improper chemical
cleaning, and/or improper boiler shutdown
and/or lay-up procedures)
Influence of historical unit
operation (operating procedures that have
caused high stresses)
Fly ash or Sootblower Excessive local velocities
Erosion. (geometry of design, distortion or
misalignment of tubing rows, misalignment
or loss of gas flow guides and baffles,
operating above the continuous design
rating, and/or operating above design
excess air flow)
Increased particle loading (fuel
considerations and/or soot-blower
operation or maintenance)
Improper sootblower operation
(control of frequency, temperatures,
pressures, and travel; mechanical
malfunctions, etc.)
Thermal fatigue of Operating conditions that
economizer inlet header produce large through-wall thermal
tubes. gradients in the header
Header design and construction
Erosion/corrosion in Very low O2 levels and high
economizer inlet headers. levels of oxygen scavenger
Low-temperature creep High stresses (high residual
cracking. stresses from the cold forming process,
enhanced membrane stresses caused by tube
ovality, and/or high service stresses)
Fatigue in tubes............ Excessive strains caused by
constraint of thermal expansion
Excessive mechanical stresses
(poor design or manufacturing)
Vibration induced by flue gas
Poor welding
Pitting in tubes............ Influence of improper shutdown
practice (presence of stagnant oxygenated
water)
Sagging economizer tubes
preventing tube draining after shutdown
(presence of stagnant oxygenated water)
Acid dew point corrosion.... Operation of economizer below
the acid dew point (SO2 oxidizes to SO3
and combines with moisture to form
sulfuric acid)
------------------------------------------------------------------------
Paradise Unit 3 Economizer Replacement Case Study
Unit 3 of the Paradise Fossil Plant (located on the Green River in
Muhlenberg County, Kentucky) is a 1,100 MW (nominal) cyclone-fired unit
that were put into service in 1970. It produces steam at 3650 psi'',
10030F.
The unit has 281,580 square feet of economizer surface, which was
installed as part of the original B&W design and installation. During
the first 20 years of unit operation, the reliability of the economizer
began to decrease as a result of many of the failure mechanisms
addressed in the background discussion. A 1992 review of the generating
unit's performance reliability found that tube failures in the
economizer was one of the leading causes of forced outages.
A root-cause analysis investigation found numerous failure
mechanisms and root causes contributing to these leaks. The predominant
failure mechanisms were identified as fly ash erosion, corrosion
fatigue, pitting in tubes, and thermal fatigue of economizer inlet
header tubes. The root causes were determined to be the following:
Poor original design of the economizer (including the
baffles).
Inadequate boiler water treatment and boiler water
chemistry control.
Startup procedures that were allowing slugs of cold water
to enter the economizer inlet header.
Cycling stresses due to forced outages on the unit from
other causes.
Measures were implemented to eliminate these root causes or reduce
their future impacts. However, past operations had already
significantly damaged the economizer elements and inlet header. It was
projected that without replacement of most of its components the
economizer would increasingly contribute to unit unreliability. It was
determined that component failures would, in fact, increase the
economizer contribution to unit downtime by approximately 10 percent
per year. This equated to a differential cost of replacement power to
TVA of $19,543,000 plus the cost of repairs for the fiscal years 1995-
1999 period. The total cost to replace the economizer was estimated to
be $9,153,000. It was replaced in 1994.
Experience on the TVA System
Of TVA's currently operating 59 units, 44 are equipped with
economizers. TVA has replaced all or a significant portion of the
economizer elements/tubes on 11 units and has replaced the inlet
headers on 3 units. Because of the relatively less severe service
conditions of economizers, they have generally experienced longer
useful lives than other boiler components discussed above. The TVA
history of economizer component replacement projects is provided in
Figure 10 below.
Other Industry Experience
The age analysis of economizer replacement projects for the same
industry sample used in the reheater analysis above is presented in
Figure 11. Of the 219 units in the sample, 202 are equipped with
economizers.
As might be expected, because of the generally less severe service
conditions, there have been fewer economizer replacement projects than
reheater replacement projects: 98 economizer projects versus 231
reheater projects. However, the average and median ages of the affected
economizer at the time of the replacement project are less than the
average and median ages of the reheater replacements by 2.3 and 3
years, respectively. The age distribution of the economizer
replacements is similar to the reheater age distribution. There is no
strong correlation between economizer age and economizer replacement.
It is apparent that factors other than age create the situations that
lead to economizer replacement.
Conclusions
The Tennessee Valley Authority has, in its more than 65 years of
operating electricity-generating plants, established a philosophy of
maintenance that has as its objective the safe, reliable, low-cost
supply of electricity to the residents of the Tennessee Valley. This
maintenance philosophy has been in place and implemented consistently
since long before 1972, as is evidenced by the 1972 Gladney-Fox report
referenced previously.
At the core of TVA's philosophy is a thorough evaluation of factors
that contribute to loss of reliability and consideration of
alternatives to mitigate the loss. The selection of the appropriate
alternative is most often based on economic considerations. The
selection is also heavily influenced by other factors that are
important to TVA, such as employee health and safety. It is common for
the selected alternative to be replacement of equipment or components--
often with functionally identical equipment or components that reflect
improvements in technology and lessons learned from actual service. The
many factors that influence equipment or component replacement include
design or fabrication errors, unanticipated operating conditions,
operational errors, and technology advancements.
Analysis of selected TVA projects that involved replacement of
components and systems at TVA generating units does not reveal any
strong correlation between the need for replacement and age of the
equipment or component. TVA is no different from other electric
utilities in its maintenance practices. Others in the industry
routinely perform the projects performed by TVA. Furthermore, analysis
of data from a large sampling of other utility projects clearly
indicates that this routine maintenance behavior--component and
equipment replacement--is driven by factors other than unit or
component age.
Biographical Notes
Jerry L. Golden is the Senior Manager of Production Technology in
the Tennessee Valley Authority's Fossil Power Group. At various times
he has served as TVA's Head Mechanical Engineer, Fossil Steam
Generation and Equipment; Manager, Advanced Production and
Environmental Technology; Manager, Clean Air Program and Generation
Technology; Manager, Fossil Engineering; and (Acting) Vice President,
Governmental Relations.
Mr. Golden served on the U.S. Environmental Protection Agency's
Acid Rain Advisory Committee and chaired the Base Programs Analysis and
Policies Work Group of EPA's Clean Air Act Advisory Committee. He
currently serves as utility chair of the EPRI advisory committee
dealing with post-combustion NOx control and is an advisor on the EPRI
boiler performance and SO2 committees. He also serves on the
board of directors of the UtiliTree Carbon Company, an entity formed to
implement carbon reduction and sequestration activities for utilities
participating in the Climate Challenge Program of the U.S. Department
of Energy.
Mr. Bynum. Mr. Chairman, TVA finds itself in the position
of agreeing with what appears to be the EPA's broader goals in
these NSR changes improving the nation's air quality. However,
we remain concerned that the agency may be tempted to shoehorn
this admirable goal into a program that's primarily designed to
address the permitting and control of new sources. Literally,
the New Source Review Program is about who turns the wrench,
when, and where. It is not intrinsically designed to handle
broad shifts in air quality policy.
In the Summer of 1998 TVA announced a voluntary
installation of selective catalytic reduction controls to
control of nitrogen oxide emissions at ten of our larger coal
plants. TVA has undertaken this effort because we believe it is
necessary if air quality improvements are to continue in the
Tennessee Valley region. We have committed to this effort
although it will cost more than $500 million on top of the more
than $2.5 billion that TVA has already spent to reduce
emissions from it coal-firing plants.
I note this voluntary effort for two reasons. First, I
think it demonstrates our commitment to environmental
stewardship. Second, it represents an emission control effort
based on a comprehensive analysis of our entire system to
achieve improved air quality throughout the Tennessee Valley
and adjacent areas. TVA carefully considered the air quality
challenges facing our region and we're placing SCR controls
where they will do the most good. When considering how air
quality should be improved, an approached similar to TVA's
system-wide plan for nitrogen oxide reductions can be a
template. Although, the utility industry has just finished
substantially reducing its NOx emission, the TVA thinks more
can and should be done. What is needed is a program that allows
utilities to reduce emissions on the system-wide or industry-
wide basis over time while still allowing units to be
maintained as they have been historically. Unfortunately, the
attempts to achieve this goal through the New Source Review
Program likely will fall flat. The underlying program is ill-
equipped to answer these far reaching policy considerations.
TVA stands ready to work with this subcommittee and EPA to
continue the improvements in air quality and to develop the
requirements for a successful program.
Mr. Chairman, the subcommittee's interest in the proposed
changes to the New Source Review Program is well timed. We are
in an important juncture in trying to find a way to continue
improvements in air quality without sacrificing the maintenance
of individual facilities or the reliability of the overall
collective system. Thank you.
Senator Inhofe. Thank you, Mr. Bynum. As the only Federal
agency who must live under the NSR regulations, your testimony
is very important to us. You have both the credibility, if you
want to call it that, of a Federal agency and the real-world
experience of a private sector or a regulated industry.
Mr. Bynum. Yes, sir.
Senator Inhofe. On the average how long does it take to
apply for and receive a permit under the NSR program?
Mr. Bynum. I think the 12 months that have been mentioned
is probably a realistic average for permits.
Senator Inhofe. So you agree with Mr. Seitz in that?
Mr. Bynum. I do. I think that's about average. I think the
difficulty with the timeframe, however, is if you look at some
of the activities that we're concerned about being contemplated
is you don't always have a 12-month lead time to know when
you're going to have to do some of those activities. For
instance, just 2 days ago we removed a rotor from one of our
fossil plants that was, in fact, running just fine a week ago.
Now we're contemplating doing work on that rotor and replacing
that rotor and we can have that done in a relatively short
period of time. And we would be severely restrained if we had
to go through a 12-month permitting process to do that type of
a replacement. So it's not only the timing. I wish I had a year
to know every replacement, every major piece of maintenance
that I had to do. I wished I had a year's advance to know what
I was going to have to do.
Senator Inhofe. As a Federal agency, do you think you were
treated the same as other facilities?
Mr. Bynum. Yes, I do.
Senator Inhofe. Could you explain what effect the NSR
program has on your reliability and also the effect on your
rate payers?
Mr. Bynum. Well, clearly, you know, we have to be able to
maintain the reliability of our fossil plants. You know, we had
understood and hope will continue the new source review, you
know, should not be aimed at not allowing us to do those
projects that improve efficiency, improve reliability of the
system. We absolutely have to maintain that reliability. This
past year we broke our previously all-time record system usage
16 times in a 30-day period. So the demand is continually
growing, which means the reliability of our fossil plants
continually has to increase.
So in the case you were talking about with Mr. Seitz, the
number of hours those units are going to run is expected to
increase. It has to increase because of the increase in demand
that we have on our system. So it's extremely important.
From our standpoint, we don't have stockholders. The rate
payers in our communities pay for all of the modifications, pay
for all of the--if a unit is not available, we have to go out
on the market----
Senator Inhofe. You never hear from them, of course?
Mr. Bynum. Of course. We have quite a vocal rate paying
community, I can assure you.
Senator Inhofe. Senator Voinovich?
Senator Voinovich. Earlier today I was talking to someone
and trying to get an understanding of what we're talking about
here. And there is some understanding that when the Clean Air
Act went into effect that we grandfathered in the pollution
that was already being generated at the time, and that nothing
has been done since that time to modify the facilities over
that period.
I'd like you to comment about even though some of the old
facilities have been grandfathered, are they still spewing out
the same emissions that were there when they were originally
grandfathered? I would like you to comment on that.
Mr. Bynum. Absolutely not. In fact, that is a common
misperception. As was discussed before, there are national
ambient air quality standards, and we have to meet those
national ambient air quality standards and those are met with
modifications and met by the existing power plants that we have
that have been so-called grandfathered.
The Clean Air Act of 1990 which, through the acid rain
portion, required additional reductions. Those were done with
these fossil plants. Literally every plant in our system has
had to do some type of change as far as scrubbers--all the way
from scrubbers on some units down to fuel switches. But they
all have been required to change some mode of operation in
order to meet the new--not only the national air ambient
quality standards but the acid rain legislation that was placed
on top of that. So these facilities have not been exempt from
that. In fact, these are the facilities that we have made the
adjustments to that have been able to meet those requirements.
We've reduced our SO2 by--or will have reduced it by
80 percent. By 2005 we will have reduced our NOx by 70 to 75
percent in the same timeframe on these units.
Senator Voinovich. I appreciate your clarifying that,
because there is that perception among some of the public that
this is the way it is. I know in our State utilities have spent
an enormous amount of money reducing the emissions going into
the air. As a matter of fact, when I looked the last time at
some statistics, that we had spent more in Ohio on dealing with
that problem than many of the utilities in the States that were
complaining about the loading of ozone going into their
respective States.
One of the things that I'm concerned about, the WEPCO
decision came in and basically said if you make a major
modification you've got to get the permit. But they also said
that miner modifications were not subject.
Do you think that the rules that are being written today
are aimed at changing the WEPCO decision through regulation and
applying a new standard?
Mr. Bynum. I have a concern that they are. And, again, if
you look at the--you know, the exclusion is for routine
maintenance. And what's routine maintenance and the types of
things that I'm talking about, boiler tube repairs,
replacements, certain boiler sections, reheater replacements,
major turbine work. I mentioned the turbine rotor, other
turbine type work. This work has been routinely done in our
industry for years, before the WEPCO ruling. In fact, I have
a--I indicated the one paper that we had on routine
maintenance. I have another which was, in fact, written in 1972
that describes the typical maintenance that's required to
maintain the reliability and availability of fossil power
plants. Those things have not changed. They are the same things
that were good basic maintenance practices to improve the
reliability and efficiency of plants in 1972 are the same
things that we're talking about today, that we are concerned
could be put in a rule that would prohibit us from doing this
or that would require repermitting and then the putting on of
controls subsequent to that. So that is our concern.
Senator Voinovich. One other comment, Representative
Strickland mentioned the statement of J.J. Berry, the
International President of the International Brotherhood of
Electrical Workers. And he raised some questions about safety
and the welfare of utility workers. Would you like to comment
on that?
Mr. Bynum. Well, I share this concern. Anything that would
tend to threaten the reliability of pieces of equipment in a
fossil plant where you might have a failure of a piece of
equipment could certainly be not only an issue of reliability
but safety for our employees. We're talking about conditions--
4,000 pounds of pressure in some of these boiler tubes, that's
a two-and-a-half mile depth in the sea, 3,000 degree
Fahrenheit, 24,000 volts in our generators. So we're in, you
know, a relatively hostile environment. And anything that
degrades the reliability of equipment in that environment, you
know, certainly would be an issue with public health and the
safety of our employees.
We have done projects in the past. For instance, we did a
balance draft conversion on a number of our units, and that was
largely driven by the atmosphere that was created in the upper
sections of our power plants. And now, you know, we would be
afraid that those types of projects through some new rule would
be prohibited or at least require you to go back through the
permitting process. And we think that would be very detrimental
to us being able to conscientiously go forth with our
responsibilities for employee health and safety.
Senator Voinovich. Thank you.
Senator Inhofe. Thank you, Mr. Bynum.
I'd now ask that our fourth panel come to the witness
table. Panel 4 includes Mr. Bob Slaughter, Director of Public
Policy for the National Petrochemical and Refiners Association;
Mr. W. Henson Moore, an old friend of mine from the House of
Representatives days and now the President and Chief Executive
Officer of the American Forest and Paper Association; Mr. David
Hawkins, of the Natural Resources Defense Council; and Mr. Bill
Tyndall, who's been back with us several times before and used
to be with one of my closest friends in the House John Dingle,
now Vice President of Environmental Services of Cinergy
Corporation.
With that said, we'll start in the order that the panelists
appear on the agenda.
Mr. Slaughter?
STATEMENT OF BOB SLAUGHTER, DIRECTOR, PUBLIC POLICY NATIONAL
PETROCHEMICAL AND REFINERS ASSOCIATION
Mr. Slaughter. Good afternoon, Mr. Chairman, and Senator
Voinovich. My name is Bob Slaughter. I am general counsel and
director of public policy for the NPRA, the National
Petrochemical and Refiners Association. I am here today to
present joint testimony on behalf of both NPRA and the American
Petroleum Institute. Together those associations represents
essentially all petrochemical and petroleum refiners for whom
NSR reform is a very critical issue.
My message today is a simple one. New Source Review reform
is needed to allow refiners to continue their record of
achieving significant environmental progress. And almost as we
speak the EPA is in the process of issuing far reaching new
environmental regulations which necessitate further changes in
refinery facilities and operations.
The current EPA interpretation of NSR threatens to
frustrate our efforts at compliance with these new initiatives.
Even worse, certain EPA activities indicate that some agency
officials may even be seeking to second guess past actions
which were taken in good faith and in reliance upon NSR
interpretations, which we believe to be both firmly established
and long settled. This amounts to changing an existing
regulation without public notice and comment or congressional
review.
Clearly NSR reform is needed to remove the cloud of
uncertainty over the current and future operations of refiners
and other key industries. We hope that this hearing will help
lead to effective NSR reform.
Refineries have an impressive record of emission reduction.
As shown on the first chart, EPA figures demonstrate that we
have reduced our emissions by 74 percent between 1980 and 1996.
Refining capacity declined only 16 percent during the same
period. Since then we have made further progress both in
reducing emissions from refineries and in cutting emissions
from our products, such as through the reformulated gasoline
program.
We are being asked to do much more. The second chart is
what we call our regulatory blizzard chart. It lists recent
anticipated environmental initiatives, 13 of them, with which
the refining industry must comply in the immediate and near
future. We will spend billions of dollars to meet these
requirements. Most, if not all, will require changes in
facilities or procedures. For example, the final Tier II
gasoline sulfur rule will require roughly $8 billion of
industry investment in a short timeframe to accomplish what EPA
estimates is the environmental equivalent of removing 164
million cars from the road.
The upcoming diesel sulfur regulation will cost roughly an
additional $4 billion and must be implemented over nearly the
same time period as gasoline sulfur reduction. Current NSR
interpretation will impede our efforts to comply with these new
environmental requirements. Although intended to limit emission
increases, New Source Review now applies to actions which do
not increase or which may even reduce emissions. Traditional
tests to determine NSR application are now structured to
require NSR in most instances.
Former exceptions to NSR application have been narrowly
construed or recast so that they provide little or no relief.
At best current NSR policy is hopelessly confusing. At worst it
can be paralyzing. When triggered, NSR is an onerous and time
consuming process. Despite the fact that it is effectively
impossible to determine when an NSR permit is required,
refiners must somehow decide whether an anticipated action
triggers NSR permitting and controls. If it does, they must
obtain the required permit before beginning any construction,
install appropriate emissions control technology, and perhaps
meet other requirements as well. On average it takes 18 months
to 2 years to get an NSR permit.
State NSR decisions may also not reflect the EPA's latest
positions. The EPA has delegated the program to most States but
is now investigating State permitting decisions affecting
refineries over the last 20 years. These decisions were not
questioned during 20 years of State and EPA inspections.
Refineries are in a quandary because State decisions may not be
supported by EPA, while EPA's own guidance is difficult to find
and often contradictory or confusing when located.
Some EPA officials, however, do seem to realize these
problems. Talks have recently taken place between EPA and
representatives of several affected industries to discuss the
need for NSR reform. API and NPRA have been participants. We
are encouraged by the discussion that has occurred and hope
that more talks will be scheduled. The EPA has also
participated in one industry workshop regarding ways to
expedite permitting relative to the gasoline sulfur rule. A
joint workshop will be held next month. We appreciate EPA's
commitment to these efforts but believe that underlying NSR
reform is needed to provide us and other affected industries
with greater certainty. We need an NSR process that is simple,
efficient and transparent.
Our thanks to you, Mr. Chairman, and you, Senator
Voinovich, for your interest in this important issue. I look
forward to answering your questions.
Senator Inhofe. Thank you, Mr. Slaughter.
Henson?
STATEMENT OF W. HENSON MOORE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AMERICAN FOREST AND PAPER ASSOCIATION
Mr. Moore. Mr. Chairman and Senator Voinovich, thank you
both for having this hearing. I'm Henson Moore, the President
of the American Forest and Paper Association. We think the NSR
program ought to meet a few basic principles. They ought to be
consistent. They ought to follow congressional intent. It ought
not be changed retroactively, that they should benefit the
environment, and the program regulators, the program office,
not the enforcers, ought to set new changes in policies and
ought to be open to public scrutiny. Based on these principles
today's NSR program is broken. We're not the only ones that
think that. The EPA itself thinks it's broken. The States do.
Republicans and Democrats in Congress do.
And we have a statement we would like to include in the
record, Mr. Chairman, from unions in our industry representing
a quarter of a million of our workers who also feel this
program is broken.
Basically it's broken because when it requires a permit,
something that takes--in the case of our industry we're seeing
somewhere between a year and a year-and-a-half to get one of
these permits for a physical change, we think this is something
that ought to be looked at very carefully. Congress never
intended NSR to impose new controls on equipment simply because
of routine maintenance. The idea was if you're doing something
that's going to increase emissions, you ought to go get a
permit. We agree to that. The problem is not congressional
intent. It's the way it's being implemented. Furthermore, it's
confusing.
Mr. Chairman, you've got a few pages in the United States
Code that deal with this. These citations deal with New Source
Review. Here are 4,000 pages of conflicting guidelines,
regulations, and rules put out by EPA and various offices of
EPA to interpret these few pages. That's the problem. The
program is so complicated. It's so conflicting. It's so
difficult to deal with. Nobody in the EPA knows how it works,
and certainly the people trying to conform to it don't know how
it works.
Let me give you an example of routine maintenance. In 1980
EPA provided an exclusion from NSR review for routine
maintenance. We operated fine under that for 8 years. Then EPA
came out and said, well, we're going to change that. We're
going to weigh a variety of factors to arrive at a common sense
finding of what was routine maintenance. We operated with that.
Then last year, the enforcement office now, the people who
actually fine you and hold you in violation of the rules,
substantially narrowed this exclusion and without any public
input stated it was meant to cover, I quote, ``frequent,
traditional, and comparatively inexpensive repairs to maintain
existing equipment.'' That's a 180-degree change. Now you are
liable retroactively for fines and penalties back to 1980 when
you were told it was OK and there is no amount of permitting
time for this kind of routine matter that is acceptable. Even
if you got it down to 6 months, as Mr. Seitz said, or 3 months,
you still can't run a business based on this kind of a hold-up,
waiting to see if you can get something routinely done without
risking fines on a per diem basis. So the first problem is
you've got to reform NSR to make it work. This is not workable.
Nobody thinks it is. It needs to be changed.
But you've also got another problem. The problem is the
unfair and egregious enforcement of these retroactive rules,
interpreting and changing rules and applying them retroactively
and applying fines. For example, 10 years ago we had a mill
that replaced an old power boiler with a new one that had
potential lower emissions. The State, after getting comments
from EPA, said this is OK and gave us the approval to go ahead
and proceed. Now EPA says the boiler increases mill operating
capacity and potential emissions and, therefore, alleges the
mill failed to comply with NSR requirements and is now asking
for fines going back 10 years when, in fact, it was cleared by
the State. There have been no increase in emissions. And
actually, at the time it was thought it would have potential
lower emissions. There are other examples.
Now we're not quarreling with implementation of the law,
where somebody, as Mr. Seitz says, where you've got a change of
a stationary source that increases emissions. If that's the
case, you ought to go throught NSR; and if you didn't do that
and get a permit you are liable, and it's OK to go back no
matter how long you have to go back to enforce that kind of a
situation. Now we're talking about potential, phantom emission
increases. We're talking about not actual changes at all or
actual changes in the emissions from these plants. Therefore,
we feel like EPA ought to suspend these enforcement actions--
against anybody that has not actually increased emissions until
such time as they finish the reforms in the regulations
themselves. This is a program that is broken and needs to be
fixed. And unfortunately, they are continuing to break the
rules retroactively through the enforcement procedures to make
it even more egregious and make it worse.
Senator Inhofe. Thank you, Mr. Moore. Are you going to
submit that document you held up?
Mr. Moore. This one, but not this one. If you want them,
you're welcome to them.
Senator Inhofe. That reminds me a little bit of in the
1980's a State of Union message that I heard when they brought
the tax code out. No, I'm talking about the document on the
workers that were affected----
Mr. Moore. Yes, that's this one.
Senator Inhofe. Thank you very much.
[The referenced document follows:]
Statement of Michael Draper, Chairman, Forest Products Industry
National Labor Management Committee
On behalf of the Forest Products Industry National Labor Management
Committee (LMC), I would like to submit the following statement for the
record.
The LMC is a coalition of labor unions and forest products
associations formed 10 years ago to pursue the conunon goals of the
working men and women of our industry. Collectively, the LMC represents
over 2 million workers nationwide, include 250,000 forest products
workers. Our members are employed in hundreds of wood, pulp and paper
manufacturing cities throughout the nation, producing the products used
by consumers in households, offices and schools across the globe.
I began my career as a member of the United Brotherhood of
Carpenters and Joiners of America (UBCIA) in a sawmill in California.
Today, I am the Regional Vice President for the UBCJA and represent
workers across the Western United States. The forest products
industry--both the wood and paper sectors--has been devastated over the
last decade due to a decline in timber harvests and restrictions on
manufacturing facilities. I have personally seen entire towns destroyed
as local mills shut their doors because they were no longer able to
compete, sending thousands of workers to the unemployment line.
Throughout my proud career, I have had the oppose to work with
thousands of individuals, including community leaders, county
officials, working families, environmental groups, local and State
legislators, as well as leaders in Washington, DC--all in pursuit of a
common goal to provide the best public policy solutions for forest
products workers and rural communities.
The forest products industry and its workers depend upon the
environment for our livelihooods, and working together, our Coalition
is proud of our strong record of environmental stewardship and we
recognize our responsibilities to ensure a cleaner environment for all
Americans. We have come a long way over the last decade, and
increasingly our industry continues to embrace new standards in
environmental stewardship, including the American Forest and Paper
Association's Sustainable Forestry Initiative (SFI)'sm, The SFIsm is an
innovative approach to securing the proper guidelines and principles to
providing sound scientific practices to protect our air, water and
land.
On behalf of the working men and women in pulp and paper
manufacturing facilities throughout the nation, I am submitting this
statement today out of concern for the Environmental Protection
Agency's New Source Review (NSR) program. We support the Agency's goal
of providing a cleaner and safer environment for all Americans, yet are
concerned that the NSR program is not working and the complexities of
the guidelines are dwarfing its ultimate mission.
The Environmental Protection Agency is currently reviewing what the
Agency admits is a ``broken'' New Source Review (NSR) program. First
established under the 1917 Clean Air Act Amendments, the NSR program is
considered to be the Act's single-most complicated regulatory program.
As a result, our industry has struggled to understand and comply with
the regulations, which stem from more than 4,000 pages of interpretive
guidance.
Oftentimes, decisions orally approved by the Agency are overturned
several years later based on changes in interpretive guidance that did
not exist at the time the original compliance decision was made. In a
1996 proposal to reform the Cleen Air Act, the Agency explained that it
had specifically recognized that routine maintenance, repair and
replacement did not trigger the modification rule. Now, the NSR program
is being interpreted to cover virtually anything the pulp and paper
industry is doing to expand, improve operations and make equipment
changes to meet environmental requirements, even when these changes
reduce emissions and improve efficiency.
Today, the guidelines of the NSR program are confusing and
oftentimes inconsistent and contradictory, which is ultimately
hampering our ability to successfully compete in the global market. The
complexities are impeding innovation, inhibiting the use of new
technologies or forestalling attempts to enhance environmental
performance and energy efficiency. Our manufacturing facilities are
shelving these plans, stifling new opportunities for growth and
development.
Yet even more troublesome is the fact the the Agency is moving
ahead with a new enforcement initiative before the NSR program is
fixed. Manufacturing facilities are facing penalties reaching $25,000
per day starting when the actual construction or modifications began,
in some cases going back nearly 20 years! Our industry estimates that
the initiative could cost as much $10 to $50 million per mill, a price
tag that would halt production and force many of our plants to shut
their doors. The end result: high-skill, living wage jobs will be sent
overseas.
The demand for our products is high and we must all work to keep
these jobs on American soil. Natural resources are an integral part of
our work; the environment is our Trade--from the products we produce,
to the air we breathe and the water we drink. It is critical that we
work toward the best policy solutions to balance the environmental,
social and economic needs of our society. We are all committed to a
common mission, so let's work together to sustain a healthy environment
for future generations.
Today, we ask our leaders in Congress to work with the
Environmental Protection Agency and all shareholders to create and
quickly implement a reformed NSR program--a new program that will not
stifle innovation and cost American jobs--a new program that will be
fair, consistent and allow smallholders to comply in the spirit of law,
providing a cleaner and safer environment for our children and
grandchildren.
Senator Inhofe. Mr. Hawkins?
STATEMENT OF DAVID HAWKINS, NATURAL RESOURCES DEFENSE COUNCIL
Mr. Hawkins. Thank you, Senator. Well, looking at this
stack, no one can argue that the program has been bad for the
paper industry.
Senator, thank you. Most of today's witnesses have focused
on the problems that the Clean Air Act presents for polluting
sources. I'd like to comment on the problems that are presented
for our members and your constituents, particularly the elderly
and children, whose health is at risk from today's pollution
burden.
Just last week Ohio environmental groups published a report
on the continuing problem of smog in the Ohio River Valley that
documented the large number of adverse health effects,
including over 83,000 asthma attacks that were directly
attributable to elevated smog, over a thousand emergency room
visits, over 600 hospital admissions. Now it's important to
understand how much of a smog problem is due to old,
grandfathered pollution sources, ones that should have been
cleaned up under the Clean Air Act but have not been.
For example, fossil electric power plants are major
contributors to smog and soot problems. What's astonishing is
how much those older plants dominate the inventory for that
sector. Over 80 percent of the total U.S. emissions from fossil
electric generating plants for sulfur and nitrogen emissions
come from power plants built more than 20 years ago. Now
contrast that to the motor vehicle program. In the motor
vehicle program 20 year old cars contribute to less than 7
percent of NOx emissions. If we had the problem with motor
vehicles that today's power plants represent in terms of old
sources, we would all be choking to death quite literally.
Why is this? Well, because contrary to the expectation of
Congress old plants have been kept running. They have been kept
running rather than being replaced by cleaner sources. Many of
these actions were due to loopholes in the law. But too many
instances the strategies of keeping plants running have been
carried out without complying with NSR requirements.
The courts are going to decide based on the facts in
particular cases, so I'm not going to get into the facts in
particular cases. But let me comment on a couple of broad
arguments that were repeated here today. The first is, ``It's
all just routine maintenance.'' And the second is, ``EPA has
changed the rules.''
On the first point, the claim that everything is just
routine maintenance is a rewriting of history. I have here two
large volumes of proceedings of electric industry conferences
held in the mid 1980's. All of the documents in these two
volumes relate to programs to extend the life of existing coal-
fired power plants by another 20 to 30 years past the design
life of those facilities. And just to quote from the
proceedings themselves, at the beginning of this 1984 document
it says: ``Typically the fossil fuel power plant is designed
for a 30-year life. But as new fossil plants become
increasingly difficult to finance, efforts are being made to
extend the life of aging fossil plants to 50 or 60 years of
reliable service.''
In this 1984 conference 27 out of the 33 utility companies
that were surveyed said they had begun or were planning life
extension programs. And I would like to submit that survey for
the record, if I might.
Senator Inhofe. Without objection.
[The referenced survey follows:]
Proceedings: Fossil Plant Life Extension Conference and Workshop
Washington, DC, June 12-15, 1984
Workshop Director J. R. Scheibel
Prepared for Electric Power Research Institute
SYNOPSIS OF QUESTIONNAIRE RESULTS FOR EPRI PLANT LIFE EXTENSION
WORKSHOP JUNE 12-15, 1984
Plant life extension will play an increasingly important role in
meeting U.S. generating requirements. This fact was made apparent in
the utility responses to questionnaires concluding the June 12-15
workshop held in Washington, D.C. Approximately 94 percent of 33
responding utilities expect plant life extension to play a significant
role in meeting their system demand in the future. Of the utilities
expecting plant life extension to play a significant role in meeting
their system demand, 40 percent have already implemented such a
program, 10 percent expect to implement a plant life extension program
within 5 years, and the remaining 50 percent plan to implement a plant
life extension program within 20 years.
Six principal considerations stand out for establishing a power
plant as a candidate for life extension. They are, in order of
importance:
Plant age.
System load demand and future expectation.
Physical plant condition.
Operating Efficiency.
Availability.
Maintenance costs.
Other considerations identified by the responding utilities as
considerations for establishing a plant as a candidate for life
extension include: 1) plant replacement cost, 2) proximity to load, 3)
operating costs, 4) fuel availability, 5) operating history, 6)
politics, 7) new pollution control equipment, and 8) safety.
The responding utilities indicated that plant life extension
studies are generally carried out in house. This is primarily dependent
on having adequate in-house engineering staff and expertise to support
the study or studies. Where the magnitude of the effort exceeds the
utilities technical resources, assistance from OEMs and A/Es is
obtained.
The utilities identified four units that have already had their
life extended, or are scheduled for completion in 1984. One additional
unit is scheduled for completion in 1986. Life extension studies have
been completed for another 43 units, most of which have begun plant
modifications and are in various states of completion, though no
specific completion dates are identified. An additional 134 units have
been identified as candidates for study or presently being evaluated
for life extension.
Noted units range in size from 40 MW to 900 MW with coal being the
predominant fuel Present age of the subject units ranges from 10 years
to 49 years with the greatest concentration of units in the 20- to 35-
year bracket. Desired total service life, including the extended life
period, is from 50 to 60 years. Of the 139 units identified thus far
for plant life extension, the predominant operating mode intended is
for cycling and/or baseload service. Approximately 52 percent of the
units will operate in cycling service while 43 percent of the units
will be base loaded. The remaining 5 percent will operate in peaking
service or load following mode. One unit is scheduled for mothballing.
In addition to the units noted above, 15 additional units are
slated for conversion from their design condition fuel. Nine are to be
converted from oil or gas firing to coal, and six units will be
converted to either atmospheric fluidized bed combustion (AFBC) or
integrated gasification combined cycle plants. Fourteen of the 15 units
are 80 MW and under in size, while one unit is 250 MW. Unit ages range
from 28 to 40 years, with an average age around 32 years.
The utilities identified three principal areas for uncertainty when
evaluating plants for life extension. In order of importance, these
uncertainties are:
Estimating remaining life.
Evaluation of boiler and turbine.
Evaluation of headers, drums, and piping.
Other uncertainties identified include: 1) verification of life
extension and uprating, 2) material properties, 3) evaluation of
electrical components, 4) generation planning and costs, including
maintenance cost to support target availability, 5) evaluations
requiring historical OEM data, 6) environmental considerations, and 7)
probability of major failures.
The utilities see a very significant role for diagnostic monitoring
equipment including: vibration, stress, and condition analyzers during
the extended life period.
The utilities noted that they would like future workshops planned
on plant life extension. Primary areas of interest, listed in order of
preference, include:
Concentration on utilities' findings.
Update on ongoing projects.
Methodologies.
Equipment evaluation and diagnostics.
Remaining life estimation.
Program planning.
Metallurgy and electrical components.
Generic problems.
High pressure piping.
Instrumentation and controls.
In order of preference, the utilities desire EPRI to undertake
development programs in the following areas to assist in their carrying
out or implementing life extension activities:
Boiler life extension--Drums and headers
--Superheaters and reheaters
--Waterwalls
--Controls
--Structural members
--Burners
--Fans
--Pulverizers and feeders
--Valves and piping
--Ductwork
--Fabric expansion joints.
Balance of plant evaluation
--Piping
--Controls.
--Feedwater heaters
--Condensers
--Pumps
--Valves
--Motors
--Transformers
--Switchgear
--Cable, wiring
--Precipitators
--Cooling towers
--Deaerators.
Turbine life evaluation
--Shafts
--Generators
--Blades Discs
--Controls
--Bearings.
Generation planning studies.
Mr. Hawkins. The conference participants were clear that
these life extension efforts involved much more than routine
maintenance, and I'd like to quote from a paper delivered by
Duke Power. Duke Power said: ``As in the case with most U.S.
utilities, Duke Power has experienced a major change in
operating philosophy in the past several years. This
necessitated us developing a different approach than routine
plant maintenance, which would have been responsive to the new
schedule constraints. Plant maintenance program previously
employed did an excellent job in minimizing cost outlays versus
keeping this plant in service until the end of its design life.
This program simply can't be applied to the present
situation.''
At another industry conference 2 years later TVA described
how it had begun its fossil and hydro unit evaluation and
modernization program in 1984 with the primary goal: ``to
extend plant life 20 or more years beyond its design life of 35
to 40 years.''
Cincinnati Gas and Electric presented a detailed paper
describing its life extension project at the Beckjord Unit 3,
which involved 49 capital improvement projects which the paper
distinguished from normal maintenance. And I'd like to submit
that for the record.
Senator Inhofe. Without objection, it will be entered into
the record.
[The referenced report follows:]
Life Extension and Assessment of Fossil Power Plants
CONFERENCE PROCEEDINGS
(Editors, Barry Dooley and Ramaswamy Viswanathan)
ABSTRACT
A great many utilities across the country have included Life
Extension as an integral part of their generation expansion plans. Life
Extension has temporarily replaced new construction. Most of these
utilities have adopted a ``phased'' approach to Life Extension of
candidate units. The Cincinnati Gas 6 Electric Company's W. C. Beckiord
Station-Unit 3 is the first generating unit in the country to complete
a ``full'' instead of ``phased'' life extension program. During a 13-
week outage which ended in January, 1986, all life extensive
modifications recommended as a result of extensive studies were
implemented. A total of forty-nine replacement and/or modification
projects were performed to add approximately 25 years to the unit's
life at a total cost of less than $100/kW. The planning, coordination
and project management utilized to inspect and evaluate the condition
of the unit, procure materials, equipment, and contractors and complete
the installation and startup are discussed in detail.
BACKGROUND
LL C. Beckjord Station is located on the Ohio River near New
Richmond, Ohio, approximately 17 miles upstream from Cincinnati, Ohio.
Unit 3 has a rated capacity of 128 MW and was placed into service in
1954. The unit consists of B&L front fired single reheat pulverized
coal boiler and a General Electric tandem compound two flow turbine.
Steam conditions are 1800 psig/1000 deg. F/1000 deg. F.
The unit was conservatively designed, well-built, and has been
well- maintained. Its heat rates and availability have been favorable.
An analysis of CO&E's generation expansion plan identified Unit 3 as
the prime candidate for life extension.
STUDIES
For 30 years, the plant operators, maintenance and other support
personnel have worked with the unit. They know it well; they know its
limitations and its strong points. They have a good idea of what
equipment is or is not suitable for another twenty-five years. This
knowledge is a valuable source of information. In our studies, it was
used to build the foundation for our detailed investigations. It
allowed us to focus our resources on specific areas.
Our preliminary studies had estimated a cost of $89/kW to extend
the life of Unit 3.
One of the most questionable areas in the determination of
remaining life is turbine-generators, especially rotors and shells. We
realized that this equipment is highly engineered and that much of the
information required to properly evaluate this equipment is proprietary
by the manufacturer, General . Electric. In the case of Unit 3, General
Electric had been involved in every turbine overhaul since the initial
startup. For these reasons, GE was contracted to perform a life
extension evaluation of the turbine-generator equipment. This study was
initiated in September 1983, and completed in February, 1984.
The GE study of the turbine-generator supported our original
estimate. Management approval was obtained in June, 1984, to proceed
with life extension. A 13 week outage was scheduled for the fall of
1985.
A team was assembled to investigate the remaining areas of the
unit. Organization of the study team is shown in Figure 1. The Boiler
Plant study was conducted by our in-house engineering personnel with
assistance in the evaluation of high temperature components from
Babcock & Wilcox. Electrical equipment and structures were also
evaluated by in-house personnel. Bechtel Associates was contracted to
perform the life extension evaluations of balance of plant equipment.
Bechtel was responsible for basically all other equipment not supplied
by either the original boiler or turbine contractor??
These studies were formally kicked off in July, 1984, and were
completed in February, 1985, as scheduled. This demanding schedule was
complicated by the need to conduct the inspection during a 2-week
period. This required special considerations and careful planning. The
inspection work was carefully staged and scheduled so that the unit
could be returned to service within 24 hours notice if required for
load.
SCOPE OF WORK
As a result of the study, 49 capital improvement projects were
identified for the life extension outage. CG&E defines capital projects
in accordance with Federal Energy Regulatory Commission guidelines. A
list of these refurbishment projects is provided in Table I.
A MAJOR PROJECT WITP A MINOR SCHEDULE
At the time of our inspections, the outage to implement the
recommendations of those inspe * ions was less than 1 year away. Action
had to be taken to expedite procurement of long lead time items. Our
requirements for obtaining competitive pricing could not be compromised
and, before we could proceed with any purchase, our evaluation and cost
justification for the replacement or modification had to be approved.
It was obvious, that in order to maintain our commitment to the
outage schedule, we must utilize some of the project controls normally
reserved for major, new construction projects.
WCB-3--LIFE EXTENSION CAPITAL WORK
Turbine Related
Bucket Replacement (5 rows)
Steam Seal Conversion
HP Inner Shell Replacement
Static Exciter
Stop Valve Bypass Valve Installation
Generator Field Rewind
Generator Stator Rewind
Starting & Loading Thermocouples
Misc. Control Improvements
Condenser Retubing
Fine Mesh Screens.
Boiler Related
Bunker Replacement
ID Fan Drive Replacement
Demineralizer Replacement
Combustion Controls
Service Water Piping Replacement
Water Sampling Room
Annunciator Replacement
Boiler Skin Casing
Insulation Replacement
Ignitor Replacement
Feeder Motor Replacement
Secondary Air Dampers
Primary Air Fan Replacement
Sootblowers Replacement
Secondary Superheater
High Temp. Headers (3)
Primary Reheater
Secondary Reheater
Uninterruptible Power Supply
Misc. Control and Panel Equipment.
Total Project cost approximately $13,000,000, including all
engineering, overheads, and allowance for funds.
Table I
We had recently acquired the PREMIS critical path method scheduling
program. In the past, on major projects, our scheduling work had always
been handled by outside consultants. As soon as we were able to
identify a potential replacement or modification for the outage, action
was taken to input the schedule into the PREMIS program. Our primary
concerns at this point were to:
1. Order and receive all materials and equipment prior to the first
day of the outage, and
2. Complete all engineering and drafting in-time to allow for
obtaining competitive bids, and
3. Award installation contracts in time to allow contractors to
prepare detailed installation schedules.
On this project, our plans were to complete all engineering in-
house for capital projects. Many of our engineering personnel were
unfamiliar with the PREMIS program. To expedite the input of
information, standard forms were prepared that listed the normal steps
in the engineering-procurement-drafting process in our company. The
engineer simply had to fill in the estimated time to complete each step
in the process and/or fix the date when the step had to be complete.
These forms greatly simplified the schedule formation process.
Once the PREMIS schedules were input, the critical paths were
identified and we were able to concentrate our efforts on those items
in trouble.
CONTRACTORS
It has been our experience that the fewer contractors on the
jobsite, the easier it is to control the project. Limiting the
contractors also limits the ``finger-pointing'' and simplifies
coordination. For this project, installation contractors were chosen
for the following work packages:
Turbine-Generator
Boiler
Electrical
Piping
Condenser
Asbestos Removal
Insulation.
Besides the capital work involved in the life extension project,
there was a large amount of maintenance work identified by the plant
that had to be included in the work packages. This required a close
working relationship between engineering and plant personnel related to
the outage.
The turbine-generator installation contract was awarded to General
Electric. Much of this work, especially service shop work, was awarded
on a firm price basis. Late in the outage, problems were found with the
stator windings in the generator. National Electric Coil was contracted
to manufacture and install the new stator windings without impacting
the outage schedule.
Competitive bids were obtained for the boiler work. Babcock &
Wilcox was successful. This scope of work was by far the most extensive
of the project. B&W was also successful supplier of all of the boiler
material being installed in this work package. This offered a great
advantage since we were able to negotiate a single source
responsibility from B&W for both materials and installation.
This project involved the removal of asbestos bearing insulation
from the entire boiler, (over 15,000 sq. ft.). Both the removal and the
replacement were performed on firm price, competitive bid contracts. R.
E. Kramig Co. of Cincinnati, Ohio performed the removal. Powerhouse
Equipment of Akron, Ohio performed the replacement.
All electrical work was assembled into a package and awarded to a
local Contractor' Watson-Flagg. Likewise, all piping work (except for
boiler related) was assembled in a package and awarded by competitive
bid to a local piping contractor, Mechanicals, Inc.
The condenser retubing and installation of ID fan drives (both in
secluded areas of the plant) were bid separately and awarded to a local
contractor, Enerfab.
Each of the installation contractors were required to provide
detailed Schedules within several weeks of award. These bar charts were
required to include each step of the installation process and men per
shift per day for each of these steps. This data became the basis for
the project outage schedule.
Prior to award of the installation contracts on this project, our
management negotiated an agreement with the National Maintenance Policy
Committee for craft labor of signatory unions to work at 90 percent of
full scale wages. This resulted in a considerable savings in
installation cost for this project.
THE OUTAGE TEAM
As with any major project, a field engineering staff is necessary
to service construction and administer the contractors. When our last
new unit was completed, our normal field construction staff was
reassigned. A new team with special characteristics had to be assembled
for this project. These special characteristics for the Outage Team
were:
1. A clear understanding of existing plant operations and good
working relationships with plant personnel.
2. A familiarization with the modifications and equipment to be
installed. The outage length did not allow time for someone to be
trained.
3. The tenacity necessary to effectively manage contractor
personnel.
4. A willingness to devote long hours to the project.
Fulfilling these objectives required a mix of engineering and plant
personnel. Our General Engineering and Electric Production Departments
each contributed individuals to the Outage Team. Temporary
reassignments were made. The Outage Coordinator was brought in from
another generating plant, thereby allowing for his undivided attention
to the project. The organization is shown in Figure 2. The Outage
Coordinator was directly responsible for the outage work. His team of
Field Engineers were the single source contacts for the contractors. It
was the responsibility of the Life Extension Project Leader to procure
equipment and contractors. It was the Outage Coordinator's
responsibility to see that the contracts are carried out.
The Outage Team was located in a room off the Turbine Room
fittingly called ``Outage Central''. An outage board 35 foot long by 8
feet high (see Figure 3) displayed all schedules for boiler and balance
of plant equipment installations. A smaller board on the opposite wall
displayed turbine work. These boards were the focal point of daily
contractor meetings. Each morning at 8:30 a.m. all contractor
representatives grouped to discuss progress from the proceeding day and
activities to take place that day. If activities scheduled for the
previous day were not completed as scheduled, they were moved back and
their impact on other operations and the overall schedule could be
assessed immediately. These meetings could be intimidating and were an
effective tool. The discussion of daily activity by each contractor was
very effective in minimizing lack of coordination problems. The
contractors were also responsible for reporting their manpower levels
at these meetings.
THE OUTAGE
The outage was scheduled for October 25, 1985 thru January 25,
1986. The first 15 days of the outage were used exclusively for
asbestos insulation removal. The entire boiler area from ash hopper to
penthouse was enclosed with plastic sheeting and placed under a
negative pressure. The insulation removal contractor worked three 8-
hour shifts per day for these 15 days and completed all work as
scheduled. Eighty large dumpsters of material was removed. During this
work, we maintained field engineers at the site around the clock to
ensure the work remained on schedule and was completed in accordance
with applicable safety regulations.
During these 15 days, the Boiler Room of the unit was closed off to
all other personnel.' As a result; other contractors, such as the
boiler and piping contractors, could not begin work until November 11,
1985.
The outage went well. Jobs initially considered crucial and close
to impossible, such as the boiler skin casing, went very well. All
contractors, with the exception of the turbine contractor, were
originally scheduled for one or two 8-hour shifts. The turbine work was
done on two 10-hour shifts. It was only during the last week of the
outage that limited overtime became necessary.
Three occurrences took place during the outage which had great
potential for upsetting the schedule. Each occurrence was dealt with
accordingly and adjustments made to compensate. As a result, the
scheduled completion date remained unaffected. These occurrences are
described below.
1. As mentioned earlier, the stator rewind was found to be in need
of rewinding. Coils were manufactured, installed and tested within 8
weeks of award.
2. The main steam and hot reheat lines were found to be severely
exfoliated. Within 10 days of a decision to acid clean this piping, the
cleaning system connections were fabricated and installed, the cleaning
completed, and the temporary connections were removed. Total cost of
this work was slightly over $100,000. The turbine and boiler
contractors were slightly delayed, however, a weekend of overtime
brought them back on schedule.
3. Difficulties in electrical testing and delays in release for
testing. Adjustments were made in testing responsibilities, work hours
and overtime to compensate.
The Outage was completed on schedule. On January 25, 1986, at
9:37AM the generator relay was closed. On January 27, 1986, a cold
spell hit the Cincinnati area and the unit was used to produce over 100
MW's (75 percent of full load) to meet the system demands.
Generator vibration at the first critical was unacceptable. After
several balance attempts, the rewound field was removed and balanced at
low speed on Site. Mid plane balance was required to reduce vibration.
This field removal, balance, and replacement work took 1 week after the
unit was finally removed from service.
COMPANY LABOR EFFORT
CG&E labor efforts were monitored throughout the entire project
from study thru the full implementation of life extension
recommendations. All but one Of the jobs in this project were
engineered by in-house engineering personnel. All field engineering,
drafting, and electrical testing was completed by our company
personnel. A summary of the hours is shown in Table II below:
Table II
Summary of Company Labor WCB-3 Life Extension
------------------------------------------------------------------------
Description Manhours
------------------------------------------------------------------------
Engineering (study only)..... 5,900
Engineering of Modifications 13,800
(incl. field eng'rg.).
Drafting..................... 8,200
Scheduling................... 1,100
Electrical Testing........... 8,400
Plant Support................ 1,600
Total.................... 39,000
------------------------------------------------------------------------
Figure 4 compares monthly manpower requirements to major events in the
schedule.
CONCLUSION
Our work is complete on Unit 3. All modifications required for life
extension have been implemented. We can walk away from the unit with
reasonable assurance of its operating reliably thru the extended life
period.
The outage was a great success. It was completed on time and within
budget, and at a cost of less than $100/kW. We've learned from our
experience and are implementing changes now for our next outage on WCB-
2 in October, 1986. This will be another full implementation of life
extension recommendations.
The PRENIS program will be used to schedule not only the
engineering and procurement, but the actual outage work itself. Through
careful planning for completion of each item prior to contractor
bidding, we hope to greatly reduce our electrical testing and
contractor overtime.
Work scopes are being detailed far in advance of the outage to
minimize extra work. We are capitalizing on our experience to reduce
our engineering and drafting efforts. Major scope changes such as the
rewind of the generator stator and acid cleaning of the main steam and
hot reheat line are being planned. Our field engineering personnel will
be better supported with assistance to provide better cost control and
cost reporting.
ACKNOWLEDGEMENTS
Presentation of this paper is not complete without acknowledgement
to the hundreds of individuals who made this life extension project a
success. Everyone involved; the engineers, draftsmen, craft labor,
technicians, clerks and typists played an important role in the final
outcome. Special recognition is given to the Outage Team, whose
unselfish dedication to the project made the pieces all come together.
REFERENCES
Pulskamp, B.E., ``Life Extension of W. C. Beckord Station--Units 1,
2 & 3'', Electric Power Research Institute Fossil Plant Life Extension
Workshop, June, 1984
Mr. Hawkins. How about the point that the EPA has changed
the rules? Well, my time is up and I don't want to bend the
rules. So if we get into that in the question and answer I
would be happy to respond.
Senator Inhofe. You'll have that opportunity, Mr. Hawkins,
thank you.
Mr. Tyndall?
STATEMENT OF BILL TYNDALL, VICE PRESIDENT OF ENVIRONMENTAL
SERVICES, CINERGY CORPORATION
Mr. Tyndall. Good afternoon, Senators. Thank you for
inviting me here today to testify before you on the EPA's
proposed changes to the Clean Air Act's New Source Review
Program. My name is Bill Tyndall. I am Vice President of
Environmental Services for Cinergy Services, a service company
for Cinergy Corporation, which is the utility that serves the
Cincinnati area and home to this committee room, or temporary
committee room.
Cinergy serves about 1.4 million electric customers and
478,000 gas customers in Indiana, Ohio and Kentucky. Let me
talk very quickly about why the issue of New Source Review is
so critical to Cinergy and to other companies trying to provide
electrical service to our customers.
Steadily increasing customer demand for electricity and a
strong and increasing economy have provided a test to our
nation's electric supply in many areas of the country,
particularly in the Midwest. The EPA's proposed changes to the
New Source Review rule must be carefully screened to make sure
that they do not undercut our ability to continue to supply
power reliably and safely. And let me emphasize there is no
margin for error here, as most observers recognize that the
Midwest faces narrow reserve margins this summer and for the
next few years.
As you are aware, electricity generating units are operated
under extreme conditions of temperature, pressure and wear that
makes such failures particularly likely. As an automobile or
other highly integrated pieces of equipment, these various
parts wear at different rates with the results that parts, both
large and small, must be replaced on a periodic basis in order
to keep the unit running properly. If the parts are not
replaced, the failure to make such repairs results in rapid and
declining reliability, unit availability, and really increases
in--or decreases in the safe operation of the plant.
And I brought with me one sort of show-and-tell item. This
is tubing from our Zimmer power plant. There are 30 to 50 miles
of tubing in a boiler. This shows a rupture from the pressure
blowing out the tubing. It is this kind of repairs that you
constantly have to be making. And when you see this or where
you see this starting to happen, you actually go in and will
repair whole areas. And, you know, to response to some of the
things that Mr. Hawkins brought up, the question of whether
there was over-extensive repair and replacement in the past
will be something that obviously EPA has chosen to resolve in
court cases. And, you know, it's not at this point probably in
the committee's ability to look at that issue or to influence
it, and we'll be happy to defend ourselves in court.
But going forward, we need to have a system that allows
this kind of project to go forward and make the units available
because we simply can't risk having them not on line and having
to wait a year or longer to get them on line because of having
a food fight with EPA over whether a certain repair is covered
or not under the New Source Review rules.
Also, just to comment on the grandfathering issue, as has
already been talked about by other witnesses, these existing
power plants are subject to a host of Clean Air Act
requirements. And really, as I've testified before in front of
this committee and, you know, mimicking what's up there from
the refiners, there's a whole other addition of requirements
coming at coal-fired power. Cinergy at this point has spent
about $650 million on putting on controls in the 1990's and we
expect to spend $400 million more over the next few years
making NOx reductions, partly in which will address some of the
issues that David described in terms of health effects in the
Ohio Valley.
But all of that is taking place in response to programs in
Title I of the Clean Air Act, programs that are designed to
reduce emissions and improve ambient air quality. To try and
turn the New Source Review Rule into the place where the
reductions take place is to put too much of a burden on this
program. To put it succinctly, it is not going to work that
every time in the 30 to 50 miles there is a blow-out of a tube,
it is not going to work to have that be the moment when plants
have to be shut down for a year when difficult decisions about
whether you put upwards of $250 million or more of controls on
a plant versus repowering it versus closing it down are made.
The system at this moment in time is not going to survive. The
companies and the system at this moment in time are not going
to survive a world where that's the basis on which we put our
control.
There's an alternative, which is to deal with these issues
directly. I think the chairman of this committee has put
forward a proposal to get all the sites together to talk about
the challenges facing coal-fired power, to get all the
stakeholders, the States, the environmentalists, into a room
and see if there isn't a way of developing a path forward that
gets the reductions, that also provides certainty for the
industry.
My CEO, Mr. Rogers, has been working with EEI on an
internal task force, and hoping to work with the committee to
try and do the same thing. And we think that's where the
environmental issues should be resolved so that we can--in
terms of New Source Review it should just be a program that
puts controls on new sources. It shouldn't be providing mockup
for all these other air quality issues.
Senator Inhofe. All right, thank you, Mr. Tyndall.
Mr. Hawkins, you were going to make some comments about
changing rules. I want to give you an opportunity to do that. I
have instructed Mr. Wheeler to extinguish the traffic light so
we can go ahead and give ample time to each of the four of you.
So why don't you go ahead and share what you were going to
share with us concerning the change in the rules.
Mr. Hawkins. Thank you, Mr. Chairman. Very briefly, the New
Source Review Program as has been described involves the EPA
writing regulations which appear in the Federal Register. And
then from that point on it is largely a self-policing system
where the applicants are responsible for determining whether
their facilities and changes at their facilities may require a
permit. And they are entitled to and invited to consult with
the local permitting authority or with EPA.
In the early 1980's when the industry began to discuss
these life extension programs that I've been talking about,
industry members discussed the fact that regulatory agencies
might say these projects would be subject to New Source Review.
What did the industry do? Instead of going to EPA and asking
for clarification, they said, let's characterize these things
as ``upgrades'' and ``maintenance;'' let's characterize them as
``reliability related,'' downplay the life extension, and above
all deal with it at the local level. Do not elevate it to a
national level. In other words, they made a deliberate decision
to try to fly under the radar screen with respect to this very
important issue.
EPA has always been ready to respond to applicability
requests, and a large part of this stack of documents are EPA's
responses to inquiries from other industries. Other industries
have asked EPA for applicability determinations. But the
utility industry by and large chose not to do so. Why? Because
we think they didn't like the answer they would get.
So then what happened? Well, in 1988 the State of Wisconsin
did, in fact, elevate it to a national level. It wrote a letter
to EPA that said, ``We've got a project in front of us
involving Wisconsin Electric Power. We'd like to know whether
you think it triggers New Source Review.'' The agency looked at
that and said, ``Yes, it does.'' What did the company do? It
hired the law firm that represents all the investor-owned
utilities, virtually all of them, and took EPA to court and
sued EPA saying, ``What you said is unlawful.'' In 1990 the
Seventh Circuit upheld EPA's interpretation of routine
maintenance. The industry had claimed that all the WEPCO work
was routine maintenance. They brought in lots of data similar
to the information that TVA has shared about practices in the
industry. The court said EPA is right. The court said if the
industry's arguments were to be accepted, an indefinite
loophole would be created in the Clean Air Act contrary to
Congress' intentions.
While that case was pending, EPA began an investigation of
utility practices, a broad investigation. What happened in that
investigation? The same industry lawyers that brought the WEPCO
case went to OMB and they got OMB to kill the investigation 2
weeks after the WEPCO case came out. So that stopped EPA in its
tracks for awhile. Then the industry went to Congress and tried
to get an amendment in the 1991 and 1992 sessions, which was
the Energy Policy Coordination Act before Senator Bennett
Johnson's committee.
Congress did not enact the loopholes that the industry
sought, so they went back to EPA and they tried to get the EPA
to write in broadened exemptions for routine maintenance. The
industry knew exactly what the game was here and they were
trying to get a very expanded definition of this loophole,
because they knew what they had been doing didn't fit within
the regulations as they were written.
EPA did give an expanded loophole for some things in 1992,
but it didn't do it with respect to routine maintenance. Then a
few years passed, EPA again began another investigation in
1997. Again, the industry went back to OMB trying to get that
investigation killed, but this time OMB refused to kill it and
that has resulted in where we are today. And that's why I say
the rules have not been changed.
Senator Inhofe. Do any of the other panel members have a
brief response to what Mr. Hawkins has just stated?
Mr. Tyndall. Just to respond to several things. There have
been--I mean, there was guidance put into the 1992 rulemaking
on the WEPCO rule, of the so-called WEPCO rule, that talked
about what routine repair and maintenance is. And there it said
that it was an activity that was undertaken by others in the
industry. So there have been some marks given by EPA, and
obviously companies are making decisions and they are trying to
shoot for the targets that EPA has provided.
You know, I don't want to--I know David has a view of how
this has rolled out. But I think the best example of how the
reality of trying to get EPA clarification on this, what it
really looks like, is a company last spring asked for a
clarification as to whether when they changed the turbine
blade, or the turbine blades, whether that would trigger New
Source Review. And they are still waiting for a response. The
only thing----
Senator Inhofe. How long ago was that?
Mr. Tyndall. That was almost a year ago. And the only thing
they have gotten from EPA was what's called a 114 request,
which is essentially a request of information regarding all the
projects they've done in the past. Essentially what they've
done is, when they requested a clarification as to whether one
of their projects would trigger New Source Review it only
triggered a Federal investigation. So in that world, you know,
the companies are not going to be writing EPA a lot of letters
seeking clarification of what they can and cannot do.
You know, again, what has happened in the past, you know,
whether companies have gone over some line and whether the line
was apparent or not, is right now, you know, the subject of
litigation. I'm not really in a position to comment on it. But
I will tell you and, you know, echo something that Mr. Bynum
says. In terms of the people out there having to make decisions
about what they can and cannot do at a plant, and especially in
an emergency situation where a unit goes down in the summer
because of one component or another failing, and when you have
very little time to get it back on line when it's needed right
at that time because we don't have excess power in this area,
there is not a line out there that anyone understands.
Senator Inhofe. OK, let me ask you, when you were talking
about the blade in the turbine, that was not a turbine change,
that was a blade in an existing turbine?
Mr. Tyndall. You know, Senator, I'm not sure whether it was
all or part of a turbine.
Senator Inhofe. I think that would be helpful for us to
know. I'd like the examples. Maybe some of you have other
examples, in which case for the record you could submit them.
Because there's no way that we can interpret and determine this
without having specific examples that are obvious to those of
us who are not in the business.
Let me ask each of you to respond to Mr. Seitz's
approximation of about six to 9 months in terms of the--I know
this will differ from industry to industry. But as far as those
industries that are represented today, and of course Mr.
Hawkins having been with the EPA, you might want to respond to
this, too. But I'd like to ask you your assessment of an
average timeframe in which these permits--the application and
the receipt of the permit. Let's start with you, Mr. Slaughter.
Mr. Slaughter. Yes, Mr. Chairman. Our experience has been
on the order of 18 months to 2 years. And I know you are
familiar with this, but this particular question has been of so
much concern with regard to the Tier II gasoline sulfur rings
and the fact that the permit process, the time it takes, may
inhibit our ability to comply in the given time that EPA took
special notice of the problem in its recently finalized rules.
So our experience has been 18 to 24 months. We have every
indication that EPA is concerned with the time.
Senator Inhofe. And you probably have records on this?
Mr. Slaughter. Yes.
Senator Inhofe. If you could supply those, would you do
that?
Mr. Slaughter. Yes.
Senator Inhofe. Mr. Moore?
Mr. Moore. The information we have from our companies is
typically--the words used are typically 18 months.
Senator Inhofe. All right, sir. Mr. Tyndall?
Mr. Tyndall. We have one plant which was permitted in the
late 1980's, early 1990's, and we're double checking but the
recollection of one of the engineers who was involved in the
project was that that was a two to 3-year permitting process
for a new unit.
Senator Inhofe. That's one example and one permit you're
talking about?
Mr. Tyndall. Right. I mean I--having both worked on the
program at EPA, monitored it in Congress, and sort of attended
a lot of these New Source Review meetings, my overall
impression for the industry and for the industry in general is
one to 2 years and even longer in situations where issues
involving--any kind of issue can slow it down considerably.
Senator Inhofe. Mr. Hawkins, any response to that or do you
generally agree?
Mr. Hawkins. Just a quick comment, Mr. Chairman, which is
that most changes of facilities never see the Federal NSR
permit process. Most changes of facilities either net out of
review or are processed through the State, minor new source
review. And it's only a very small fraction of all the
permitting actions that are carried on by State and local
agencies that are actually subject to a major Federal new
source review.
Senator Inhofe. That's interesting. Do you think it might
be that Mr. Seitz is taking those, including those in the
averaging to come up with his time that he's----
Mr. Hawkins. No. There are in the audience from the local
agencies that may want to say something about it, but there are
thousands of changes that are looked at by local and State
permitting control authorities.
Senator Inhofe. OK, then a very similar question for each
of you to respond to would be, addressing this reliability
issue and its effect on foreign competition, competitiveness.
Would anyone like to respond to that?
Mr. Hawkins. I would like to respond to the electric supply
reliability issue. I would submit that this argument about the
impairment of the ability to respond to emergencies or worker
safety is a classic red herring. Nobody has ever interpreted
the rules to apply to the emergency replacement of the pieces
of equipment in the electric utility sector, and I'm not aware
of it happening in other sectors. None of the cases that have
been brought, if you look at the complaints and notices of
violation, involve these kinds of things. The agency has never
indicated that it regards to these kinds of actions as not
entitled to the exceptions.
As I was saying in my testimony, what we're talking about
here are organized activities that were planned over a lengthy
period by the companies themselves, going up to corporate
management level for approval in the capital budgets. These are
not emergencies. These are substitutes for new capacity.
Senator Inhofe. Mr. Slaughter, you had mentioned 18 to 24
months. And I would ask you specifically if it takes your
industry 18 to 24 months for permits before they can make
equipment changes for new products, what does that do to your
competitiveness? Do you have any thoughts about that?
Mr. Slaughter. Well, we have had a lot of problems, Mr.
Chairman. Because as you know, we've not had a new refinery
sited in the United States since the early to mid-1970's. This
essentially means that we have had to basically take place--
take care of delivering product to consumers and taking care of
any increase in demand through changes at the existing
facilities, through maintenance, repair, replacement, some
additional capacity. Now with the tremendous burdens of the
Tier II requirements upon us, and also others to come, as you
know we are going to be forced probably to go in and look for
permits in an unprecedented fashion over the next few years. So
we are not going to be able to make our compliance dates,
particularly on Tier II, unless we have some relief on the
permit process. And EPA has been trying to address that, at
least in part.
Senator Inhofe. All right, sir.
Senator Voinovich?
Senator Voinovich. I was interested in Mr. Hawkins'
testimony. I would think that from what I heard from Mr. Bynum,
who is with Tennessee Valley Authority, that he is concerned
that some of the things that you are talking about under the
new rules would be included. That's the concern there. That's
the kind of thing you're trying to share with the agency in
terms of coming up with the rules to make sure that those kinds
of things, indeed, are not included in that situation.
Mr. Slaughter, it's very interesting. I'd like you to tell
everybody here at this hearing, you now have Tier II sulfur
requirements and it's going to cost the industry this $8
billion, I think it was?
Mr. Slaughter. Yes, sir.
Senator Voinovich. Approximately how much will that add to
the cost of a gallon of gasoline in this country?
Mr. Slaughter. Well, there are different estimates. The
industry's estimate is four to five cents per gallon. The EPA
estimate was about one-and-a-half to one-point-nine cents. We
are much more comfortable with our estimate. It is a total of
$8 billion. And then as you know, the agency is also about to
propose a rule on diesel sulfur which will cost about half as
much on diesel. And as you know, Washington and other areas
have been getting their share of complaints about diesel prices
as of late.
Senator Voinovich. I think at the time the biggest
complaint I'm getting at my offices here in Ohio is that people
are complaining about the high cost of gasoline. There's lots
of reasons for that, but the fact of the matter is it's
interesting that because of policies you haven't built a new
refinery in this country in God knows how long. And the reason
for it is it's not--why don't you tell us the reason why.
Mr. Slaughter. Well, it's not possible to site a refinery
because there are a multiplicity of regulations that would
apply to it and areas generally have problems with it. We are
pretty much resigned to the probability that another refinery
will not be sited in the United States. We're going to be
permanently reliant upon the sites that we have now. And I
might just add, as you pointed out, we have a stewardship
responsibility which we're reminded of from time to time to
deliver gasoline and diesel to the public. So we've got to keep
the plant in order and up to date.
Senator Voinovich. One of the things that the public ought
to pay attention to is the lack of energy or oil policy that we
have in this country. We are right now at the mercy of the OPEC
nations. If we got ourselves--our capacity to deliver gasoline
is down to--we're more reliant today on overseas oil, I think
at 65 percent. In 1973 it was about 35 or 40. And we're
requiring you now to do some other things.
The interesting thing is I think what you're talking about
is some of the things that you're going to have to do to the
current facilities that you have, you're concerned that that
will then trigger this New Source Review, which would then make
it more difficult for you to do the job that we are asking, or
EPA is asking you to do, and that is to get rid of the sulfur
from your gasoline.
Mr. Slaughter. That's right.
Senator Voinovich. The public has got to start putting some
of this stuff together, about how it all works. And the point
is you want to--you know, we haven't built--I'd like--why
haven't the utilities explained why--why don't you build brand
new utility plants? How come you haven't--you've tried to
extend the life of those plants?
Mr. Tyndall. Well, I think that's a very good point,
because--I don't know. I mean, I've looked at the legislative
history of the Clean Air Act amendment in 1970 and some of the
claims that there was a specific date. There wasn't a specific
date that was really used as when these plants would stop
operating. But obviously what occurred was there wasn't the
ability to add a whole bunch of new plants, so there was needed
capacity continuation into the 1990's from the existing plants.
Again, there was--I don't think it was a secret that there were
projects undertaken to restore deteriorating capacity.
You know, it's certainly one of--you know, a line that EPA
is now claiming it can discern that it certainly wasn't
informing people of in the past as to what exactly could be
done and couldn't be done. They have never provided a list of
projects, they've never said a money amount that couldn't be
done. They've never said if you capitalize something it can't
be done. So none of the--there's never been any discussion
about exactly what can and can't be done until they bring
enforcement actions and cite companies. First Energy was cited
for something that occurred in 1979.
So the ability to site these plants is--and to site any
plants. Cinergy is trying to build a state-of-the-art gas-fired
unit in a small town in Indiana, the kind of project that I
think NRDC would want to see us doing, and we're having a very
difficult time siting it because of issues involving land use,
local air quality issues. And so in that world where it's so
difficult to bring new things on line, you are going to
continue to see pressure where there is very little margin for
error, you are going to see continued pressure to keep these
plants running. If any of our major units have to go down for
whatever reason in the summer, it puts a serious strain on the
entire Ohio-Indiana--and really the whole Midwest region. And,
you know, we're going to do whatever we can to avoid that.
Senator Voinovich. Well, your company I think did Zimmer.
It was going to be a nuclear power, and they just that down and
they spent----
Mr. Tyndall. Right, which is the last plant we brought on.
Senator Voinovich. That last plant. And I think part of the
problem--I mean, another reason I would think logically that
you're trying to extend the life is you have rate payers,
people that have got to pay the rates. As the Governor of this
State in terms of the rates that our residents pay, in terms of
the competitiveness of our industries, we have parts of the
State where people complain their rates are so high they're not
competitive. We're concerned about, you know, competitiveness.
All this has to be tied in. It's a reasonable, rational way of
trying to develop rules and regulations.
The other thing, Mr. Chairman, is the whole issue of fossil
fuel. There are a lot of people in this country today that
believe that there are some folks that just want to eliminate
fossil fuel plants period, get rid of them. But you get rid of
fossil fuel and nobody wants nuclear.
If you don't mind, Mr. Chairman, we had a big hearing in
Cleveland a month ago with some folks that were very concerned
that they're going to run this nuclear waste through the City
of Cleveland, out to Yucca Mountain. Well, I'll be dead before
Yucca Mountain ever becomes a storage facility for nuclear
waste. And someone was saying, well, what's the deal? We want
to kill nuclear waste. Well, where are we going to get our
power? Solar.
We need to bring some rationality to all of this. And I
think the environmental groups and the industry ought to get
together at a table, and I'm hope that maybe in this room, like
you suggested, Mr. Chairman, get everybody together and talk
about this and where are we going? What is our national policy
in regard to, say, the oil industry? Where are we going? Are we
going to be completely relying on everyone else?
Henson, your industry--you know, 18 months to 2 years. I
think one of the other things is, you're all from different
regions. That's the other thing. Is there a variation in the
regions in terms of issuing the permits?
Mr. Slaughter, I'm sure you have several regions.
Mr. Slaughter. Lots of them.
Senator Voinovich. Would you comment on that?
Mr. Slaughter. There is some variation, but the average is
what I've given you. A lot of our permitting activity takes
place in Region VI, which is Texas and Louisiana, but that's
the national average.
Senator Voinovich. Mr. Hawkins?
Mr. Hawkins. Senator, may I? If I can comment briefly on
the question of the ability for new coal plants to get a permit
and the life extension issue.
Again, the facts won't bear out the claim that new coal
plants couldn't get permits under the NSR and PSD rules. East
Bend, the Trimble County Plant, the Rockport Plant, these are
all plants within a hundred miles or so of here along the Ohio
River that all got permitted with state-of-the-art controls
under the PSD regulations.
As far as life extension, we don't object to extending the
life of these facilities, provided that they modernize their
pollution controls when they do. Our objection is that the
companies were not up front about what they wanted to do and
failed to negotiate out what the requirements would be for
cleaning up their power plants when they decided to extend the
life of these old units, rather than building new capacity.
So we're not objecting at all to finding ways to save money
for the rate payer. I'm a rate payer, too; and my bill is as
high as anybody else's and I'd like it to be lower. But you can
clean these plants up economically and improve air quality and
improve public health. And if that's part of your life
extension program, then you're not going to have any arguments
from us.
Senator Voinovich. So the issue is not the length of the
old plants, just tearing them down and rebuilding them, your
point is that if you're going to be going forward with it that
you ought to try to have the most modern technology available
to you when you----
Mr. Hawkins. If you want to run them longer, clean them up.
I mean, the irony is that we're embarking on new regulation and
a competitive playing field. And the fact is that the
grandfather status of these extended life power plants is
introducing a competitive distortion against new merchant gas-
fired power plants that want to come on to the market and
they're having trouble getting financing because they have to
compete head to head against plants with a built-in pollution
subsidy because of their grandfather status.
Senator Voinovich. But you will admit that they have done,
as one of the other witnesses said, they have reduced the
pollution from these coal-fired plants.
Mr. Hawkins. Some industries have done better than others.
As I said in my prepared testimony, 20-year-old power plants
are responsible for 88 percent of the power plant sulfur oxide
pollution, and 84 percent with the nitrogen oxide power plant
pollution. They're hanging on there with the bulk of the
pollution in those 20-year and older power plants. That's not
impressive performance in my view.
Mr. Tyndall. But, I mean, Senator, there is a very
legitimate issue about talking about what is the best way of--
if further reductions are to be made what is the best way. I
think the question where Mr. Hawkins and I may disagree is
whether you use a program that essentially says, you know, when
you blow--you know, as he would have it, and it's been
described as a hair trigger. When you blow a tube in the 30 to
50 miles that are in a power plant, that's a second that you
swoop in and shut down the plant. You put on state-of-the-art
controls. That isn't going to work. That's not reality.
And Cinergy has been working constructively with lots of
environmental groups, with other companies, to try and find a
way of resolving these issues in a manner that makes sense for
the environment, that makes sense for industry. And, you know,
I mentioned before, Senator--Chairman Smith's initiative. I
know there's some discussions going on between companies and
environmental groups, in other words, trying to find a
solution. I don't think the solution is to have a hair trigger
on New Source Review so that if you have the misfortune of
having any unit, any portion of your unit, have a problem, that
that's the moment you're going to swoop and have to face the 2
years, make the investment. That's not a rational way of
resolving these issues.
You know, the life extension issue, again, it's in the
courts. I don't think there was--some of these quote, unquote,
life extension projects, I don't think there was a lot of
hiding the ball. You know, I think I know of an example where
there were T-shirts and mugs and it was on annual reports. So I
don't think that the court is going to find some conspiracy to
violate the law. But, again, that's all in the courts.
Senator Voinovich. That's in the courts. I think the thing
is to look at the whole picture, the spectrum, and figure out
where Mr. Hawkins would come out in terms of, hey, this is
something that really ought to have required. And you know, I'm
sure there are instances of that out there. And I think that if
there are, then we should say that there are, OK; and then
they're going to be brought under the net. But there is a
rational, common sense way of handling this that doesn't put
the industry in a place of not being able to protect workers or
reliability and some of these other things.
The last question I'm going to ask is, and maybe I'm taking
it away from the chairman here was, but he talked about my
briefing for this issue of the actual and the potential, that
today if you're going to do something you're looking at what it
is actually today and then what it's going to be actually
tomorrow, although the potential may be there for the new thing
to increase emissions. I guess that's what it's about. But if
you look at the actual experience, common sense would say that
you're not, even though someone says you've got the potential
of going up, that in all practicality that's not going to be
the case. I don't know if we're just talking about words here.
Is this a real issue?
Mr. Slaughter. Senator, if I could jump in for a minute,
it's a very real issue. All the major industries like ours that
are regulated build in a compliance margin to our operations.
In other words, we don't go all the way out to our permitted
levels of emissions. So the problem is that that means that
there's a built in problem with NSR, because they look at your
actual emissions to your potential emissions, and your
potential emissions include the compliance margin. So that is
being done almost automatically to trigger NSR.
So one of the things I mentioned is that the net has been
cast very widely to bring everybody into the ambit of NSR
review, and the actual--the potential emissions test is one of
the major reasons why.
Mr. Moore. Senator, we also feel that this is a major
problem and it's recent. Here again, since 1998, EPA is going
back and changing something that had been a practice for
largely 20 years of measuring actual to actual. Now the idea is
you have to look at potentially the problem, that'll
potentially increase. We take the position, our interpretation
of the law, would be for our numbers that if you are operating
at a certain level and if you make some kind of a change to
your equipment under the regulations before 1998, or the
guidelines, you didn't have to go through the permitting
process, because you weren't changing any of the actuals.
If you did increase your actual emissions, even within your
permit level, if under the regulations it meets the term
``significant,'' then you should go get a permit. But what
we're talking about here is no realization of an increase at
all and then you go through this process. This is new. This is
conflicting the system. This is causing States not to know what
to do. It's causing the industry not to know what to do. And
for what purpose? If there is no increase in emissions, why do
you have to go through this? The law says clearly an increase
in emissions. Nowhere does it talk about a possibility. And if
a possibility is achieved, then you've got to go back, because
the law says, you change your operations and increase your
emissions, you've got to go back and go through the review
process.
So the law is pretty clear. But what we're getting into
here is something different, something new, something, as Mr.
Hawkins has said in all honesty, you're trying to get at not
permitting an increase. You're trying to get into forced
decreases. And I think Mr. Tyndall said that was not the intent
of the statute. Congress didn't intend that. There are other
ways you get at that, other laws that you get at that.
Senator Voinovich. Mr. Hawkins?
Mr. Hawkins. First, it's not new. This was the subject of a
1979 lawsuit by the Chemical Manufacturers Association and I
believe the forest products industry was part of that lawsuit.
A settlement was entered in 1981 where the agency said it would
propose alternatives to the potential to actual test. In 1989
the agency completed public comment and issued a rule saying it
was going to retain this actual to potential test.
Now, that's all the legalisms, but let's talk about the
common sense aspect because I think it's a more powerful
argument. The common sense point is the statute says no
emissions increase. EPA has always taken the position that if a
company is willing to live with its forecast of what the actual
emissions in the future will be, then it can get a permit. The
difficulty has been that the companies want to come in and say
there's not going to be any emission increase and then the
agency says put it in writing, and they say, ``Oh, no, I don't
want to do that.'' They don't want to be bound by their
assertions that there isn't going to be an emission increase.
If they are willing to take an enforceable commitment that
there will not be an emission increase, they can get their
permit without the potential test at all.
Mr. Tyndall. But to just add to the complexity, that sounds
great until you realize that if you have a plant--you know, you
had a low demand the year before, you only have 80 percent or
in our industry you only use it about 80 percent of the time.
What Mr. Hawkins is suggesting is in order to repair your tube
you go in, and assuming EPA will respond to you and not launch
a Federal investigation and allow you the level of emissions
you had in the past, that essentially they'll let you freeze
yourself at that 80 percent capacity. Therefore, you have
essentially frozen that plant's output from that time forward
at that level regardless of what future demand may be and
regardless of whether any increase in the future was related or
not related to you repairing this tube. And that--I mean, this
gets into the complexities of this program and the sort of
arguments that swirled around it for the last 20 years. That's
why we really need to find something that's much simpler, like
addressing the environmental issues in a different manner and
then saying because of--we have a NOx cap over all emissions in
Ohio, which we may have very shortly, or whatever reason, we're
protecting the environment and we're satisfied we're protecting
the environment, then we don't need to worry about whether any
individual plant--we don't have to worry as much about whether
any individual plant is going to increase emissions and we can
do something by just essentially stating you're not changing
the emissions rate, something very simple. The engineers
understand it. If you're change doesn't increase the emissions
rate, you can go ahead and make them. It's a very simple
approach. It's one that can be made to work with a number of
safeguards, some of which are already in place, and it's the
kind of thing that I think if EPA were willing to really sit
down and talk to Mr. Hawkins but also talk to industry and look
at this issue, it might be something that could be resolved
instead of them going forward--I think partly because their
enforcement office is making them, going forward and just
making, you know, as I said, the hair trigger approach to this
program.
Senator Inhofe. Well, I appreciate your following up on
that because I was going to do that.
Mr. Hawkins, in your testimony and in previous briefings
you emphasized the fact that industry changes the names of
maintenance work depending on their audience. I think one of
the examples you used is to switch from the term ``life
extension'' to ``reliability of projects.'' You seem to equate
that to an admission, I guess, of guilt. Having been in the
business world, I know that you use different terms depending
upon your audience. If a manager wants funding for a project,
he uses a term that he knows the accountants will approve.
Now I understand that the environmental organizations do
this, too. In a recent news article, and I was reading this,
it's Inside EPA. They are talking about changing the name of
the Environmental Defense Fund to Environmental Defense,
because this has a greater appeal in their fund raising efforts
out there. The article also says that your own organization was
searching for a new communications director and an employee
said that the NRDC was hoping to become ``the Bloomingdale's of
the environmental movement.'' Does the NRDC hire or work with
consultants to figure out the best words to use to raise the
most money?
Mr. Hawkins. I haven't heard that one. I think we would be
better off if we were the Wal-Mart of the moment. Actually,
we've been fairly stodgy as these things go. We haven't done
focus groups or taken polls on our name. And I think proof of
the pudding is our name--Natural Resources Defense Council. I
have joked that we should have a tag line: ``We're the group
you've never heard of.''
We've pretty much resisted the idea of trying to come up
with, you know, turning ourselves into Exxon or American Brands
or something that nobody knows what it stands for.
Senator Inhofe. Do you have any questions, Senator
Voinovich?
Senator Voinovich. No, I haven't.
Senator Inhofe. Do any of the members of this committee
have something they're just dying to say that they haven't had
the opportunity to say? Mr. Moore?
Mr. Moore. Yes, sir. I've got a lot of respect for Mr.
Hawkins and his organization and worked with them while I was
in government and I wish we could work with them more closely
now. I can't let this routine maintenance thing go by. We have
a different view of this. We aren't involved in a lot of things
that he's been talking about involving the power companies,
maybe things are different there.
All we know is in 1980 the rule was clear, you know, what
was maintenance. And, yes, we didn't have a lot of needs for
the Federal permitting process. It was fairly clear. Now we're
having a new enforcement decision in 1999 saying what routine
maintenance is, and that's where the impact is. Anything you
do, these words mean anything. They cover frequent,
conditional, comparative, inexpensive repairs to maintain
existing equipment. Look at the position that puts a middle
manager in and then look at the position that puts the State
regulator in when he calls them on the phone and says, I'm
getting ready to do something that's routine. It's maintaining
existing equipment. It's not going to increase anything. Do I
have to get the permit? What does he say back? He says I don't
know. He says, you know, I gave you a permit 10 years ago and
now retroactive they are coming back and saying they didn't do
it right because it had a potential of increasing emissions.
Basically the rules have changed. The rules have gotten to
where now they are even more unenforceable or more
unfollowable, if that's a word, than they ever were before. And
so, yes, you're not going to see--I mean, I don't know, by one
measure you could see a great deal more of the permits being
requested because of being forced to because now you are
getting into things that up until 1999 everybody thought were
not included.
Well, what's going to happen is you're just going to freeze
the process. Nobody is going to do anything. In the mills you
are not going to do anything, adding anything to improve the
processing or even improve the environment. Sometimes you do
both at the same time on the grounds that we don't want to go
through this. It's a marginal project. We're not going to go
through all this red tape and wait 18 months or maybe longer if
this thing is getting more complex and more permits being
required. And the States are saying we don't know what to tell
you. As a matter of fact, the States are asking EPA to go back
to a simpler, reformed rule and get away from some of the stuff
they're proposing here, particularly in the routine maintenance
area.
So I don't think we ought to let this area go by with some
of us saying that we think that routine maintenance is a way to
keep doing something or get away from something or whatever,
that's not the case at all. Routine maintenance in our industry
is meant to be just that. We are supposed to be doing something
to keep a mill working, keep it running. If it increases
emissions, we're supposed to get a permit and they were
supposed to put some kind of equipment on to take that back
down to below the emission levels. And that's not how this
thing is working out there. This is something that's headed in
the wrong direction. In other words, in how it is being
enforced and by what it's doing to those of us who are trying
to follow these rules and regulations. And we ought not let
that go by as some kind of a no real change or no real
difference in procedures. That's just not true from the point
of view of us trying to live under these things.
Senator Inhofe. Mr. Hawkins, do you want to respond?
Mr. Hawkins. Actually, I'd like to make my final comment be
one of agreement with something that Bill Tyndall and Joe Bynum
said. Both of them pointed out the benefits of looking at a
comprehensive approach to reducing emission from existing
sources and preferably focusing on multiple pollutants. I think
that has a great deal of merit. We are engaged in discussions,
formal and informal, with a variety of players in the electric
sector and we're committed to exploring that and seeing whether
we can come to agreement.
Senator Inhofe. Thank you very much. Mr. Tyndall? All
right, any final----
Mr. Slaughter. I just might add one point, Mr. Chairman,
which is, you know, it's been suggested that maybe there are
people who haven't been doing much. I know you're aware of the
Natural Petroleum Council's study that shows that basically
over this last decade the refining industry spent more on
basically environmental controls than the entire book value of
the industry. So there is a major commitment there. I probably
should also add as mentioned in my oral statement that we hope
these talks with EPA on NSR go forward and the program office
and Mr. Perciasepe, whom you mentioned, has generally been
helpful in this regard. Unfortunately, that hasn't been the
uniform position across the agency. We're hopeful that this
hearing will help move things in a more positive direction.
Senator Inhofe. I appreciate that.
Senator Voinovich. Mr. Chairman, I just want to point out
one thing to verify that. As Governor I really worked hard with
communities to get us some ambient--to get into attainment. And
there was one industry, BP, had a big refinery up in the Toledo
area, and they put on an enormous amount of money into cleaning
up that facility. And as a result of what they did, they
brought the Toledo area into attainment. So there's a lot of
good that's being done out there by industry, and I guess the
thing is that we want to all keep working to continue to
improve the quality of our air but we want to do it in a way
that makes sense and doesn't require you to spend money on
things you ought not to spend money on, at the same time
realize that we want to get better.
Senator Inhofe. Thank you very much. Well, I thank all of
our panelists. We're quitting exactly on schedule. But I
appreciate you've come a long ways. We've come a long way to
have this hearing. I appreciate your attendance here very much,
and we are adjourned.
[Whereupon, at 4:45 p.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
STATEMENT OF HON. TED STRICKLAND,
U.S. REPRESENTATIVE FROM THE STATE OF OHIO
Introduction
Good morning, Mr. Chairman. Thank you for your kind welcome and for
allowing me to offer testimony at today's hearing. I especially would
like to thank Senator Voinovich and take this Opportunity to express
the appreciation of southern Ohio for his leadership in defending the
use of coal--one of Ohio's most valuable natural resources.
My name is Ted Strickland. It is my privilege to represent the
people of the 6 Congressional District of Ohio in the U.S. House of
Representatives. Ohio's 6th Congressional District spans all or part of
14 counties across the southern part of Ohio, from Warren County in the
west to Washington County in the east. This part of the State also
offers a beautiful national forest, some of the most pristine farmland
in Ohio and many unique historic sites.
I appear here today because I am very concerned that new approaches
to Federal environmental policies may result in an excessive and
disproportionate hardship on already distressed parts of the country,
like southern Ohio. The New Source Review (NSR) program directly
affects southern Ohio and its neighboring States where some of my
constituents travel to work. This region is home to coal-fired power
plants, coal mines, manufacturing plants, a petroleum refinery and a
large paper mill. After visiting this part of the country, it becomes
readily apparent why we must strive for a healthy environment and why
we must do so in a manner that allows for a healthy economy.
I support strong environmental protections which improve the
nation's ability to be a good steward of our natural resources, and I
am proud of the fact that the 6th Congressional District has attained
compliance with all of the National Ambient Air Quality Standards for
all of the criteria pollutants regulated under the Clean Air Act.
However, I believe equally strongly that we have a responsibility to
develop a reasonable balance between the specific goal of air quality
improvement and other important public policy objectives. Like Vice
President Al Gore, I firmly believe that both a good environment and a
good economy can coexist while we continue to use one of our most
abundant energy resources--coal. In fact, I would share that Ohio
University, right here in southern Ohio, offers promising research on
the development of a practical biologically based process to reduce
emissions from fossil generation units. This type of research provides
some assurance that in the long run our fuel supply will remain
diversified, reliable and efficient. The technological possibilities
are within reach, but only if research and regulation compliment each
other.
Briefly, I will share with you some troubling statistics from my
district and my concerns about the EPA's New Source Review (NSR)
program. I think together this information demonstrates the need for
meaningful reform of the NSR program so that we strike a better balance
between the pace of desired environmental benefits and the increased
productivity anticipated through economic development initiatives.
New Source Review Creates Problems For Economic Development
As Senator Voinovich knows, the 6th Congressional District of Ohio
is one of the poorest in the State and the country. It has the lowest
per capita income ($ 10,349) and the highest poverty rate (20.1
percent) of any Congressional District in Ohio. Unfortunately, Southern
Ohioans have not experienced the economic recovery that most of the
U.S. has enjoyed in 1990's. The 6th District includes Meigs and Vinton
Counties, which have among the highest unemployment rates of any of
Ohio's 88 counties (11.1 percent and 13.8 percent, respectively,
compared to the statewide average of 4.3 percent). These statistics
clearly underscore the region's enthusiasm for economic development
opportunities and its fear of regulations which may hamper job
creation. Without a doubt, low cost energy and high quality
manufacturing labor are vital to the economic prospects of the region.
A substantial number of the labor force--more than 25 percent--is
employed in the manufacturing sector. And, this region provides a
significant number of jobs in the utility, mining, and refinery
sectors. Southern Ohio cannot withstand the loss of these jobs, and it
certainly cannot afford to overlook any opportunity for job creation.
I have heard from the International Brotherhood of Electrical
Workers (IBEW) who raise specific issues about the EPA's New Source
Review proposed rule, and it should come as no surprise that one such
concern is job loss. Under the current NSR program, decisions could be
made to shut down utilities rather than venture into the confusing NSR
permitting program to undertake what could be considered ``routine
maintenance'' activities. Obviously, this would result in layoffs. At
this time, I would like to ask to include for the record, the statement
of John J. Barry, International President of the IBEW.
Clean Air Act New Source Review ``Reform'' Rulemaking Concerns
As you know, New Source Review was first introduced as part of the
1977 Clean Air Act Amendments. The program is designed to ensure that
newly constructed facilities and substantial modifications of existing
facilities do not result in violation of applicable air quality
standards. The New Source Review program is widely acknowledged to be
very complicated and to be a potential bottleneck to many positive
community development projects including, brownfields redevelopment and
to manufacturing facility improvements and modernizations.
For example, the specific requirements dictated by the New Source
Review Program depend on the location of the facility. If a plant is
sited in a part of the country that fails to meet the National Ambient
Air Quality Standard (NAAQS) for a pollutant, one set of requirements
apply. If the plant is in a NAAQS attainment area, another set of rules
apply. As you can imagine, some facilities may rest in a region that is
considered in attainment for some criteria pollutants, but not others,
complicating the requirements even further.
Let me describe some general frustrations my constituents and
others have shared with me concerning the New Source Review program. I
have learned that merely determining whether the program ``applies'' to
a project depends on complicated rules and guidelines which have been
subject to 20 years' of EPA interpretation. I have also heard that EPA
could require a preconstruction permit under NSR for the replacement of
worn equipment parts even though the replacements are only
modifications and not new construction. In fact, these types of
modifications are aimed at pollution reduction and efficiency
increases--two worthy goals. On top of that, I understand that
preconstruction permitting can take a year or longer. I do not
understand why industry, whose business practices benefit the economy
and comply with the Clean Air Act standards should suffer from the
inconsistent and unintended application of the NSR program. It seems
quite clear to me the program is broken and it is time to fix it.
With the Objective of creating a more efficient NSR program, EPA
announced back in 1991 that it would ``simplify and reform'' the
original New Source Review rules. To the agency's credit, it
understands that the NSR program demands a thorough review and it has
engaged stakeholders to work on a comprehensive reform package. I would
hope that this effort results in a program that encourages
modifications and maintenance at our facilities so that they remain
reliable, competitive and safe.
Conclusion
I know the EPA claims many successes under the NSR program and I
applaud the reduction or prevention of pollutant emissions. The
environmental protections afforded under the NSR program should not be
minimized here today. However, the EPA's most recent proposed changes
to the NSR led to considerable controversy and the agency acknowledges
the need to build in more flexibility in the program and streamline the
permitting process. I would suggest that a truly meaningful reform of
the NSR program could actually lead to even greater environmental
benefits in the future. If the NSR program remains in its current
broken state, I suspect certain facility maintenance functions may be
delayed, thereby stifling progress on the air quality front.
This past fall, I raised the concern that the EPA should not
shortchange the discussion on meaningful NSR reform. I am pleased to
hear that a full review of approaches to NSR reform is ongoing. Without
sufficient dialog among the interested parties, I have little
confidence that a workable solution can be reached. Therefore, I would
like to state very clearly that congressional oversight of this process
does not stop here in Cincinnati. Instead, I think today's hearing
demonstrates that both Senators and Representatives will continue to
monitor the progress made to reform the New Source Review Program. With
hard work and cooperation, I believe an equitable proposal can be
crafted that creates an efficient NSR rule that avoids unnecessary
pitfalls and establishes a proper balance between environmental
benefits and economic progress.
I commend the chairman, Senator Voinovich, and the subcommittee for
their attention and oversight with respect to this important issue.
Thank you again for the opportunity to testify here today.
__________
STATEMENT OF JOHN SEITZ, DIRECTOR, OFFICE OF AIR QUALITY PLANNING AND
STANDARDS, OFFICE OF AIR AND RADIATION, ENVIRONMENTAL PROTECTION AGENCY
Good afternoon Mr. Chairman and members of the subcommittee. Thank
you for the opportunity to talk with you about the New Source Review
program under the Clean Air Act. The New Source Review (or ``NSR'')
program was enacted by Congress in 1977. It's goal is to minimize air
pollution from large new and modified stationary sources. Recent
figures suggest that over the life of the program, NSR has prevented
more than a hundred million tons of air pollution. When companies
upgrade facilities, either by building a new plant or making major
modifications to an existing plant, they are required to install the
best available pollution control equipment. In areas with unhealthy
air, NSR assures that these sources do not impede progress toward
cleaner air. In areas with clean air, especially pristine areas like
national parks, the program assures that emissions from new and
modified sources do not significantly degrade air quality. The program
also assures citizens that any large new or modified industrial source
in their neighborhoods will be as clean as practical.
Upgrading pollution controls and the industrial infrastructure
simultaneously makes economic and environmental sense. In general, it
is more cost-effective for sources to install pollution control
equipment such as scrubbers, electrostatic precipitators, or selective
catalytic converters at the same time that they make major capital
improvements. Because the NSR program relies on this principle, it
minimizes emissions from new sources while maximizing opportunities for
additional industrial and economic growth. It's a simple concept that
has been working in the NSR program for almost a quarter-century,
protecting our nation's air resources, and making up a critical
component of our total air quality program.
Background
The NSR provisions of the Clean Air Act combine air quality
planning, air pollution technology requirements, and stakeholder
participation. NSR is a preconstruction permitting program. If new
construction or making a major modification will increase emissions by
an amount large enough to trigger NSR requirements, then the source
must obtain a permit before it can begin construction. States are key
partners in the program. Under the Act, States have the primary
responsibility for issuing permits, and they can customize their NSR
programs within the limits of EPA regulations. EPA's role is to approve
State programs, to review, comment on, and take any other necessary
actions on draft permits, and to assure consistency with EPA's rules,
the State's implementation plan, and the Clean Air Act. (EPA also
issues permits where there is no approved NSR program, such as on some
Tribal lands). Citizens also play a role in the permitting decision,
and must be afforded an opportunity to comment on each construction
permit before it is issued.
The NSR permit program for major sources has two different
components--one for areas where the air is dirty or unhealthy, and the
other for areas where the air is cleaner. Under the Clean Air Act,
geographic areas (e.g., counties or metropolitan statistical areas) are
designated as ``attainment'' or ``nonattainment'' with the health-based
National Ambient Air Quality Standards (NEARS)--the air quality
standards which are set to protect human health. Permits for sources
located in attainment (or unclassifiable) areas are called Prevention
of Significant Deterioration (PSD) permits and those for sources
located in nonattainment areas are called nonattainment NSR permits.
A major difference in the two programs is that the control
technology requirement is more stringent in nonattainment areas and is
called the Lowest Achievable Emission Rate (LAER). On the other hand,
in attainment areas, a source must apply Best Available Control
Technology (BACT) and the statute allows consideration of cost in
weighing BACT options.
Also, in keeping with the goal of progress toward attaining the
national air quality standards, sources in nonattainment areas must
always provide or purchase ``offsets''--decreases in emissions which
compensate for the increases from the new source or modification. In
attainment areas, PSD sources typically do not need to obtain offsets.
However, PSD does require an air quality modeling analysis of the
impact of the construction project, and if the analysis finds that the
project contributes to ambient air pollution that exceeds allowable
levels, this impact must be mitigated. Sometimes these mitigation
measures can include offsets in PSD areas. In addition to ensuring
compliance with the NAAQS, States track and control emissions of air
pollution by calculating the maximum increase in concentration allowed
to occur above an established background level--that change in
concentration is known as a PSD increment.
Another key requirement is the provision in the PSD program to
protect pristine areas like national parks or wilderness areas
(referred to as Class I areas). If a source constructs or modifies in a
way that could affect a Class I area, the law affords a Federal land
manager (for example, a National Park Service superintendent) an
opportunity to review the permit and the air quality analysis to assure
that relevant factors associated with the protection of national parks
and wilderness areas are taken into consideration, and, if necessary,
that harmful effects are mitigated.
(The Clean Air Act also requires States to regulate construction
for smaller changes, and at sources that are not big enough to be
classified as ``major.'' This program is known as minor NSR. However,
minor NSR is not part of the NSR Reform rule and is not the focus of
today's remarks)
Current Status of the NSR Program
Let me give you a few statistics about the NSR program to put
things in perspective. Preliminary estimates based on our most recent
data indicate that approximately 250 facilities apply for a PSD or
nonattainment NSR permit annually. That's out of the approximately
20,000 sources that would be classified as ``major'' under the Act, and
the far larger number of additional stationary sources of air pollution
in the United States that are not large enough to be called major. The
nonattainment NSR and PSD programs are designed to focus on changes to
facilities that have a major impact on air quality. And the NSR program
is resulting in cleaner air. Recent data show that, each year, NSR
permits at PSD sources have prevented about half a million tons per
year of new emissions compared to what would be emitted if there were
no Federal or State permitting. Clearly, in the absence of NSR,
Americans would be breathing less healthy air. Even in areas with clean
air, there would likely have been significant declines in air quality
in some places, as well as harmful impacts in national parks. As these
reductions have been occurring, the United States is in the midst of a
record-breaking economic expansion. Thus, the program is accomplishing
its intended purpose.
In addition to the emissions reductions, the NSR program has
sparked improvements and innovations in pollution control technology.
Whenever demand for good control technology exists, vendors compete to
supply better control technology at lower cost. This competition
reduces the cost of controls as the control technology improves. This
technology-forcing aspect of the program is an important reason why it
has been so successful in allowing for continued economic growth while
ensuring environmental protection. It also ensures that the U.S. will
remain a leading exporter of pollution control technology.
NSR Reform
Despite the successes of the NSR program, some of those with a
stake in the program--EPA, regulated industry, State and local
governments, environmental groups, Federal land managers, and others--
have engaged in a long-running dialog about how to make the program
work more efficiently and effectively. The issues raised fall into five
general categories. First, some argue that the process for determining
exactly whether a permit is necessary for changes they are making to
existing sources could be easier. Second, despite the statutory
requirement that PSD permits be issued within 12 months of a complete
permit application, some believe that the process for obtaining a
permit can take too long, delaying construction. Third, some are
concerned that the decisions made in the NSR process, such as the
selection of a control technology, have been arbitrary, making it
difficult to plan ahead. Fourth, stakeholders such as citizens and
Federal land managers want to be more involved in the decisionmaking
process. In addition, some believe that the program needs to cover more
sources and is not sufficiently rigorous, while others feel that the
existing program is already too rigorous and too broad in scope.
For the past several years, the EPA has been undertaking a thorough
multi-stakeholder process to understand and address the concerns
associated with NSR in an effort to make the program work better. The
NSR program protects the public from air pollution from large sources--
from every type of industry. EPA has been diligent about being
inclusive and comprehensive in our analysis of industry concerns. Since
1992, we have held hundreds of hours of meetings actively seeking
comments and recommendations from various stakeholders. We formed the
NSR Reform Subcommittee of the Clean Air Act Advisory Committee, a
group of experts from industry, environmental groups, and State and
local government brought together for the purpose of making
recommendations on improving NSR. We listened to analysis and debate
from a wide variety of often conflicting points of view. We issued a
proposed rule in 1996, took written comments, and held a public
hearing. Since then, we continue to meet with stakeholders, and, as
recently as this month, have had multiple meetings with outside groups
representing industry.
Our fundamental principle during this reform effort has been to
promote more certainty and flexibility in the permitting process while
maintaining at least the same level of environmental protection as the
current program. A few examples of the approaches we have proposed
include: (1) promotion of flexible plantwide caps that would enable
sources to make changes at their plants without triggering NSR
applicability so long as the overall cap is not exceeded; (2) a more
clearly defined and faster process for making control technology
decisions; (3) deregulation of source modifications that have already
recently installed good controls; (4) increased incentives for new or
modified sources to incorporate pollution prevention or innovative
control technology; and (5) opportunities for more meaningful
participation in the permitting process for the public and Federal land
managers through increased availability of information and earlier
involvement.
We are also considering other ways to better achieve the same goals
as the current program. For example, we recently held a meeting of NSR
stakeholders to obtain views on the concept of a sector-based approach
to NSR at utilities. This approach would tailor NSR regulations
specifically to the utility sector in an effort to address issues
unique to utilities, while still providing the overall environmental
protection of the NSR program. As noted, we continue to discuss several
issues with stakeholders, and have not reached final decisions on the
Reform package. However, we hope to complete an NSR Reform rulemaking
later this year.
Mr. Chairman, this concludes my prepared statement. I appreciate
the opportunity to be here today. I would be happy to answer any
questions that you may have.
__________
STATEMENT OF JOE BYNUM, EXECUTIVE VICE PRESIDENT, FOSSIL POWER GROUP
TENNESSEE VALLEY AUTHORITY
Mr. Chairman, thank you for the opportunity to testify before the
subcommittee today. In my testimony today, I am providing the committee
with the views that are solely those of the Tennessee Valley Authority.
I appreciate your interest in the Environmental Protection Agency's
proposed changes to the New Source Review (NSR) program. Depending upon
how EPA changes this program, there could be a lasting impact on the
operation of individual fossil plants and, in fact, the reliability of
our nation's electric system.
The Tennessee Valley Authority is a Federal agency and corporation
charged with fostering the economic and social well being of the
residents of the Tennessee Valley. This includes managing the Tennessee
River system, with responsibilities for flood control, navigation and
stewardship of land and water resources. As part of this mandate, TVA
operates the nation's largest integrated public power system, providing
electricity to eight million residents in a seven-State region.
In total, we have over 28,000 megawatts of generating capacity.
Coal-fired generation comprises about 60 percent of this capacity, with
59 units at 11 plants in three southeastern States. This places us
among the largest coal-using utilities in the country. TVA has been
operating various kinds of generating technologies for more than 65
years and has substantial expertise in the maintenance of fossil
plants. I am here today to represent TVA's dual responsibilities as a
power producer and an environmental steward.
Although there has been some criticism of its complexity, TVA
believes the NSR program has generally been a success. EPA has largely
applied the program's requirements in a way that does not impede
routine maintenance of the nation's electric-utility generating
resources. Moreover, in the past the program has not been applied in a
way to discourage improvements in unit efficiency and reliability. TVA
believes such improvements--long a part of routine maintenance--are
desirable to ensure a reliable supply of electricity and are in the
public interest.
As the person responsible for the operation and maintenance of 59
coal units, I urge great caution as EPA contemplates changes to the
program that could preclude improvements in efficiency and reliability.
Unfortunately, some of the ideas being presented to EPA by others as
part of the rulemaking process could discourage such desirable
improvements and have a detrimental impact on the electric-utility
industry's ability to safely and effectively operate our plants.
EPA's stated goal in its proposed regulation is to ``reduce the
costs and regulatory burdens for applicants'' to the program. However,
I would counter that, rather than achieving this admirable goal, these
potential changes to the proposed rule will actually impede the NSR
process. In fact, several aspects of the proposal are not only unsound
on policy grounds, but appear counter to the intent of the Clean Air
Act.
The current NSR regulations have long excluded routine maintenance,
repair, and replacement projects at existing sources. Industries of all
kinds, including the electric utility industry, have relied upon this
exclusion to maintain production capabilities and capacity.
Historically, EPA has employed a common-sense understanding of the term
that encompassed those maintenance activities that are customary in the
industry to optimize reliability, safety, availability and efficiency.
It would be a serious mistake in this rulemaking for EPA to change
its historic interpretation of the definition of routine maintenance.
EPA should not make changes to the program that discourage utilities
from making improvements that increase plant efficiency and improve
reliability.
Utilities in the Eastern Interconnect have been straining to meet
demand and keep the lights on the last two summers. Now more than ever,
utility maintenance programs are key to meeting demand and reliably
serving the public. TVA has recently released a technical report on
routine maintenance on the TVA system and in the utility industry. This
report demonstrates how important maintenance is to reliable service. I
would like to submit a copy of this report for the record.
Mr. Chairman, TVA finds itself in the position of agreeing with
what appears to be EPA's broader goals in these NSR changes--improving
the nation's air quality. However, we remain concerned that the agency
may be tempted to shoehorn this admirable goal into a program that is
primarily designed to address the permitting and control of new
sources. Literally, the new source review program is about who turns a
wrench, when and where. It is not intrinsically designed to handle
broad shifts in air quality policy. Instead, this rule should use a
straightforward approach that does not block the maintenance practices
that have allowed this nation's industrial capacity to support the
booming economy.
In the summer of 1998, TVA announced the voluntary installation of
selective catalytic reduction controls to control nitrogen oxide
emissions at 10 of our larger coal units. TVA is undertaking this
effort because we believe it is necessary if air quality improvements
are to continue in the Tennessee Valley region. We are committed to
this effort although it will cost more than $500 million on top of the
more than $2.5 billion that TVA has already spent to reduce emissions
from its coal-fired plants. By 2005, TVA will have reduced its system
sulfur dioxide emissions by SO percent. Moreover, by the same period,
we aim to reduce our ozone season its nitrogen oxide emissions by 70-75
percent, driven in large part by our voluntary efforts.
I note this voluntary effort for two reasons. First, I think it
demonstrates our commitment to environmental stewardship. Second, it
represents an emissions control effort based on a comprehensive
analysis of our entire system to achieve efficient air quality
throughout the Tennessee Valley and adjacent areas. TVA carefully
considered the air quality challenges facing our region, and we are
placing SCR controls where they will do the most good.
When considering how the NSR program should be improved, an
approach similar to TVA's system-wide plan for nitrogen oxide
reductions can be a template. Although the utility industry has just
finished substantially reducing its NOx emissions, TVA thinks more can
and should be done. What is needed is a program that allows utilities
to reduce emissions on a system-wide or industry-wide basis over time
while still allowing units to be maintained as they have been
historically. TVA stands ready to work with this subcommittee and EPA
to build on the improvements already well under way.
Finally, in general, there should be greater emphasis on multi-
pollutant planning, taking a look at how to improve air quality
generally rather than just one pollutant at a time. Utilities need
greater certainty as they plan for emissions control. Most importantly,
air quality improvement efforts must have adequate mechanisms to ensure
the most cost-effective air quality improvements. Unfortunately, the
attempts to achieve these goals through the New Source Review program
will likely fall flat. The underlying program is ill-equipped to answer
these far-reaching policy considerations.
Mr. Chairman, the subcommittee's interest in the proposed changes
to the New Source Review program is well timed. We are at an important
juncture, trying to find a way to continue improvements in air quality
without sacrificing the maintenance of individual facilities or the
reliability of the overall electric system.
__________
STATEMENT OF BOB SLAUGHTER, GENERAL COUNSEL AND DIRECTOR OF PUBLIC
POLICY, AMERICAN PETROLEUM INSTITUTE, ON BEHALF OF THE NATIONAL
PETROCHEMICAL AND REFINERS ASSOCIATION
I. INTRODUCTION
Good morning. My name is Bob Slaughter. I am General Counsel and
Director of Public Policy for the National Petrochemical & Refiners
Association (NPRA). I am very pleased to be here this morning to
address the need for reform of the ``New Source Review/Prevention of
Significant Deterioration'' (``NSR'') program under the Clean Air Act
on behalf of both NPRA and the American Petroleum Institute (``API'').
NPRA's membership includes virtually all U.S. refiners, as well as
petrochemical manufacturers using processes similar to refineries. Our
members own and/or operate almost 98 percent of U.S. refining capacity.
NPRA includes not only the larger companies, but also many small and
independent companies. API is a trade association that represents more
than 400 member companies involved in all aspects of the petroleum
industry including refining, exploration and production,
transportation, and marketing industries. The NSR program significantly
affects NPRA and API member companies.
II. OVERVIEW
The refining industry has dramatically reduced its direct and
indirect emissions since Clean Air Act regulation began in the 1970's.
Between 1980 and 1996, according to EPA's own figures, the refining
industry decreased its criteria pollutant air emissions by 74 percent.
Congress and EPA have required us to attain additional dramatic
emissions reductions in the next few years.
We will meet these obligations. However, both our ability to meet
them and our ability to efficiently make and deliver the products we
refine to consumers is currently threatened by the likely prospect that
EPA will claim that almost any operational change we make triggers
``new source review'' (``NSR'') under the Clean Air Act.
Congress enacted the NSR program in the 1970's to ensure that
sources that significantly increase their emissions must install
technology to control that increase. You may well ask how an industry
with the continuing record of dramatic emissions reductions which I
have mentioned could be so affected by a program intended to control
emissions increases.
The answer lies in the manner in which EPA now administers this
program. EPA applies NSR to many changes that will never cause
emissions increases, even to changes that will reduce emissions.
Moreover, EPA's practice of defining critical elements of the program
by guidance rather than through rulemaking--or not defining them at
all--has created a situation where it is effectively impossible for
even the most diligent refiner to determine when NSR applies and when
it does not.
This state of affairs has created an urgent need for NSR reform.
The policy consideration is this: EPA's reinterpretation of NSR
threatens our ability to make the plant changes necessary to comply
with important environmental requirements for stationary sources and
fuel reformulation.
I would now like to address these points in more detail.
III. HOW THE NEW SOURCE REVIEW PROGRAM THREATENS FUTURE ENVIRONMENTAL
PROGRESS
The refining industry now faces extensive new Clean Air Act
regulations that will take effect in the near future. These include
requirements both for control of refinery emissions, and for the
reformulation of gasoline to remove sulfur and selected ``air tonics''.
It seems certain in addition that EPA will require the reformulation of
diesel fuel, and likely that Congress or EPA will consider requiring
the phase-down or elimination of MTBE from gasoline.
Attached is a chart titled, ``Cumulative Regulatory Impacts on
Refineries: 2000-2010'' reflecting these requirements in more detail.
Implementing these upcoming programs is very important to EPA's
environmental agenda. The refining industry's environmental progress to
date is very impressive. Between 1980 and 1996, according to EPA's own
figures, the refining industry decreased its criteria pollutant air
emissions by 74 percent, while refining capacity decreased by only 16
percent (see attached chart titled ``U.S. Refinery Emissions
Reductions''). These figures underestimate our current emissions
reductions, since they do not include the impact of many regulations
issued under the 1990 amendments to the Clear Air Act. Nor do they
reflect the significant emissions reductions that have been obtained
through the use of reformulated gasoline produced by our industry. EPA
expects emission reductions achieved by future fuel reformulation and
stationary source emission requirements to be even greater. EPA
estimates that just one of the upcoming product reformulation
regulations, the Tier IV gasoline sulfur reduction requirements, will
produce emission benefits equivalent to removing 164 million cars from
the road.
EPA has recognized that refiners face tremendous logistical
challenges in meeting the ambitious goals and deadlines of these
important new regulations. To implement the regulations, refiners must
make many infrastructure and process changes. For each change, refiners
must determine whether NSR permitting and controls are required, and
then obtain required permits before commencing any construction.
Because it is now effectively impossible to determine when an NSR
permit is required, and extremely time-consuming to obtain a permit,
the current state of the NSR program directly threatens the industry's
ability to meet Congress' deadlines for this suite of new regulations.
In order to meet Congress' ambitious goals and deadlines for
upcoming Clean Air Act regulations, it is essential that refiners have
a flexible and efficient permitting process. The current NSR program
prohibits this and must be substantially reformed. Moreover, as
discussed below, EPA's new interpretation of NSR applicability
threatens continued environmental progress, as it penalizes refiners
for making changes that decrease emissions.
IV. THE PROBLEM WITH EPA'S CURRENT APPROACH TO NSR APPLICABILITY
NSR is one of the most complicated regulatory programs ever
created. EPA has recognized this and initiated the reform process to
simplify and rectify the program. In this hearing, however, I want to
focus on certain aspects of the program. EPA's current approach to NSR
applicability makes it extremely difficult for refiners to determine
when NSR permitting and controls are required and leaves refineries in
enforcement jeopardy unless they consider NSR for any and all
operational changes. As a result, the program is an untenable burden on
State permitting authorities and refineries and threatens their ability
to implement Congress' future environmental goals in a timely manner.
A. Background
Under the Clean Air Act and EPA's regulations, NSR is triggered by
any ``physical change or change in the method of operation'' of a
source that increases its emissions by a significant amount. \1\ If a
physical/operational change does not itself significantly increase
source emissions, or if the source ``nets out'' the change by
offsetting emissions reductions in other places, then, under the law,
NSR does not apply.
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\1\ Clean Air Act Sec. 111(a)(4); 40 CFR 52.21(b)(2).
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If a change does cause a significant emissions increase, NSR
requires the source to get a permit before beginning construction of
the change, install emissions control technology on the change, and
perhaps meet other requirements as well. It takes 18 months to 2 years
on average to get an NSR permit.
EPA officials have recently made public statements that many
changes at refineries over the past 20 years required NSR permits but
that none were obtained. Since NSR is only triggered by an emissions
increase, and given that the refining industry since 1980 has
experienced dramatic emissions reductions, any such EPA claim of
widespread NSR noncompliance would appear inconsistent with the basic
intent of the Clean Air Act.
EPA has not disclosed information to support its claims of
widespread refinery NSR noncompliance, and so we cannot comment on them
specifically. However, EPA has reinterpreted its NSR rules in recent
years so as to enable the Agency to allege that virtually any change a
source might make requires NSR permitting and controls, even if
emissions have not increased. In creating NSR, Congress intended that
facilities that significantly increase emissions, by adding new
equipment or making major changes, must install the latest pollution
control equipment. NSR was never intended to impose new controls on
older facilities simply because of their age and need for routine
maintenance.
B. The Elements of EPA's Current Approach to NSR Applicability
1. The ``Actual-to-Potential'' Test
EPA uses the ``actual-to-potential'' test to determine whether a
source has significantly increased its emissions. As explained below,
the ``actual-to-potential'' test is bad public policy because it
provides an incentive for sources to maximize their emissions, and
punishes them for minimizing their emissions. The ``actual-to-
potential'' test is also inconsistent with Congress' intent for the NSR
program, because it requires a source to add controls when its
emissions do not increase significantly or even when they decrease.
Congress intended NSR to apply only when a source significantly
increases its emissions. The ``actual-to-potential'' test is a result
of EPA interpretation and should be altered or abandoned through the
reform process.
In determining whether a ``physical/operational change'' at a
source caused a significant emissions increase, EPA does not compare
actual emissions before the change with actual emissions after the
change. Instead, EPA compares actual emissions before the change with
potential emissions--that is, the maximum amount the source could
emit--after the change. According to EPA, NSR is triggered whenever the
difference between ``past actual'' emissions and ``future potential''
emissions is ``significant''.
This ``actual-to-potential'' approach always overstates the
emissions increase caused by a physical/operational change. There will
always be a difference between ``past actual'' emissions and ``future
potential'' emissions at any source that complies with its emissions
limits. Sources must maintain a buffer between actual emissions and
potential (permitted) emissions to avoid inadvertently exceeding the
permitted limit. A source that cares about its environmental
performance will go further and try to minimize its emissions at all
times, and EPA should encourage this. However, EPA's ``actual-to-
potential'' test punishes sources for doing so.
The ``actual-to-potential'' test penalizes efforts to maintain a
compliance margin or minimize emissions and uses them to trigger NSR
for changes that do not really increase emissions, or even decrease
emissions. As a source lowers its actual emissions, the difference
between those actual emissions and potential emissions gets greater.
EPA counts that difference as an emissions increase that triggers NSR
whenever that source makes a physical/operational change. Thus a source
is rewarded for maximizing emissions and deterred from minimizing
emissions. Additionally, under this approach, a process unit at a
source can trigger NSR repeatedly even when its emissions do not
increase at all or even decrease. \2\
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\2\ EPA policy forbids sources that engage in ``emissions trading''
from counting their compliance margin as an ``emissions credit'' when
it would be advantageous to the source to do so. See Draft Economic
Incentive Program Guidance (September 1999) at 81, 106-107. But EPA NSR
policy counts that same compliance margin toward non-compliance with
NSR and uses it to trigger permit requirements.
---------------------------------------------------------------------------
Although the ``actual-to-potential'' test is inconsistent with the
intent of the statute, EPA requires that sources use this method and
only this method to determine whether an emissions ``increase'' has
occurred. EPA has found it to be a convenient way to require controls
on more sources, whether or not their emissions have increased
significantly.
What is a ``Physical Change or Change in the Method of
Operation''?
As we have shown, the ``actual-to-potential'' test creates phantom
emission increases. As a result, almost any change labeled a ``physical
change or change in the method of operation'' of a source will trigger
NSR even if in reality it will not increase emissions at all, or even
decreases emissions.
The question then become, what is a ``physical change or change in
the method of operation''. EPA's application of the term is a moving
target. Small repairs and improvements are needed constantly at complex
sources like refineries. Under EPA's current approach, it is impossible
to determine when such a repair or improvement will be counted as an
NSR-triggering ``physical/operational change'', and when it will not.
We know that EPA is increasingly aggressive in its claims that such
repairs and improvements trigger NSR. However, that change in position
has never been subject to public notice and comment, as the
Administrative Procedure Act requires. Some of its elements have not
even been issued as guidance. In some cases, we do not even know what
they are.
Let me offer two illustrations of these points, picked from many
possible candidates.
A's rules provide that ``routine maintenance repair and
replacement'' does not trigger NSR. EPA has never defined these terms,
either in rulemaking or guidance. However, recently, EPA has begun to
claim in enforcement actions and informal conversations that this
exclusion never applies to changes that increase the efficiency of a
unit, improve its reliability, or reduce its costs. Under that
approach, repairing or maintaining a 1990 unit with year 2000
components that improve its performance could trigger NSR. Such an
approach is both economically and environmentally counterproductive. It
destroys the ``total quality improvement'' programs that businesses
must adopt in today's competitive markets--and that the Administration
has endorsed because of their environmental benefits.
EPA has always recognized that NSR is triggered when a
single ``physical change or change in the method of operation'' causes
an emissions increase. EPA has also always cautioned that if a source
artificially splits a single project into two projects in order to
avoid NSR, it will still treat that project as one. We agree. But EPA
now claims that all changes at a plant should be aggregated together
whenever they serve the ``basic purpose'' of the facility. Since
changes that did not serve that ``basic purpose'' would not be made,
this is a formula for aggregating all changes that a plant makes into
one change. Once those changes have been aggregated, the ``actual-to-
potential'' test makes it virtually certain NSR requirements will be
triggered.
V. THE CONSEQUENCES OF EPA'S CURRENT APPROACH TO NSR
EPA's current approach to NSR applicability results in significant
compliance uncertainty, overburdens State and refinery resources, and
hinders future environmental progress.
1. Compliance Uncertainty
Under EPA's current approach, it has become nearly impossible for
any refinery to determine which of its activities might trigger NSR and
which will not; EPA's requirements are extremely unclear and a
constantly moving target.
Refiners cannot rely on the current written guidance to determine
when NSR is required because the existing guidance is unclear and often
contradictory. It consists of over 4,000 pages of guidance documents,
many of which are in draft form and contradict each other, and various
EPA memoranda. Many of EPA's new positions on NSR applicability
contradict the older guidance, and are not even in writing. Refiners
often do not know EPA's latest position until it is incorporated into
an enforcement action or initiative.
Refiners should be able to rely on State permitting authority
decisions to determine when NSR is applicable, but it now appears they
cannot. In most States, EPA has delegated the implementation of the NSR
program to State permitting authorities. The State permitting
authorities make permitting decisions for refineries, and regularly
inspect refineries to ensure that State decisions are properly
implemented. EPA also reviews and approves the States' programs, and
periodically inspects the refineries themselves. However, compliance
with State decisions does not necessarily accord with EPA's latest
positions. In fact, EPA is currently conducting a widespread
investigation of refineries regarding NSR permitting compliance as far
back as 1980. In effect, EPA has called into question State NSR
permitting decisions over the last 20 years. These decisions were not
questioned during 20 years of State and EPA inspections.
2. Overburdening State Resources
Moreover, under EPA's current approach, hundreds of projects a year
at a refinery might trigger NSR. No State has the resources to answer
thousands of NSR permitting questions annually from all its major
stationary sources, or to review its NSR permitting decisions over the
past 20 years. Certainly, States have much better and more
environmentally productive ways to invest their resources (e.g.,
expediting permitting for gasoline sulfur reduction requirements as EPA
has agreed to do). State permitting may also be slowed down because
States will proceed more cautiously for fear that they may be second-
guessed by EPA. This may create permitting bottlenecks at the very time
States need to proceed expeditiously to implement important upcoming
regulations.
3. Overburdening Refineries
The end point of EPA's current position is universal NSR. However,
no industrial economy could function if every change to a factory
required a permit before construction could begin. This will be
particularly burdensome for refineries given the operational changes
necessary to comply with the blizzard of new fuel reformulation and
stationary source regulations. EPA recognized that Congress did not
intend universal NSR in its 1996 proposal for NSR reform, however EPA's
new approach is achieving just that:
``. . . section 111(a)(4) of the Act could--read literally--
encompass the most mundane activities at an industrial facility (even
the repair or replacement of a single leaky pipe, or an insignificant
change in the way that pipe is utilized). However, the EPA has
recognized that Congress did not intend to make every activity at a
source subject to major new source requirements under parts C and D. As
a result, the EPA has adopted several exclusions from the 'physical or
operational change' component of the definition. For instance, the EPA
has specifically recognized that routine maintenance, repair and
replacement. . . [is not by itself] considered a physical or
operational change in the method of operation within the definition of
major modification.'' 61 Fed. Reg. 38250, 38253 (July 23, 1996).
4. Hindering Future Environmental Progress
As discussed in section III, EPA's current approach to NSR
threatens the Agency's future environmental agenda by posing
significant logistical challenges for implementing important upcoming
regulations.
Additionally, the unnecessary costs of EPA's current approach to
NSR will compete with resources needed to implement these regulations.
Our resources are limited and the costs of these upcoming regulatory
initiatives are high. Just one of these regulations, the Tier II/
gasoline sulfur reduction requirements, is expected to nearly double
the refining industry's environmental expenditures to approximately $8
billion annually. Expected requirements to reformulate diesel fuel
could increase these costs by half again.
We simply do not see the logic for applying EPA regulatory
reinterpretation to activities that do not increase emissions, or
actually reduce emissions.
VI. REFINING INDUSTRY GOALS FOR NSR REFORM
The refining industry is encouraged by our current round of
discussions with EPA on NSR reform and hope that this joint effort will
continue and produce real reform. The discussions so far have been
candid and useful, but we still do not know clearly what to expect from
them.
We believe that any real reform must address both substantive and
procedural issues. Real reform should ensure that NSR applies only if
emissions actually increase significantly. The current system of
perpetual exposure to NSR cannot be defended.
Real reform must alter or abandon the ``actual-to-potential'' test
so that changes that do not increase emissions do not automatically
trigger NSR. Real reform must also change EPA's current approaches to
``routine maintenance, repair and replacement'' and ``aggregation'',
which work together with the ``actual-to-potential'' test to create
exposure to NSR for virtually any change a plant makes. Perpetual NSR
is unworkable, contrary to Congressional intent, and bad environmental
policy.
Finally, real reform will address the need to expedite rather than
hinder efforts to comply with federally mandated environmental
programs.
These changes should be subject to full public review and comment.
VII. EPA'S ENFORCEMENT INITIATIVE WILL UNDERMINE NSR REFORM
I would like to conclude with a word about enforcement.
Over the past 2 years, EPA has been conducting a massive
investigation of the refining industry, and several other industries,
for purported ``widespread'' noncompliance of the NSR program.
Violations of NSR do occur, and the government should pursue them
whenever they do. However, the refining industry believes EPA's
allegations of widespread noncompliance are based on new and
controversial reinterpretations of the NSR requirements that amount to
rulemaking without notice and comment. By making fundamental changes to
the NSR program through enforcement actions, EPA threatens to undermine
the NSR reform process and an clarification of the program that reform
can provide.
The reinterpretations that EPA wants to retroactively enforce would
allow EPA to claim that virtually any source is subject to NSR. As
previously discussed, this approach would be impossible to comply with,
overburden State and industry resources, and undermine the
implementation of future environmental regulations.
By questioning State permitting decisions and policy over the past
20 years, EPA will only further slow down the permitting process and
divert State resources toward reviewing past decisions. This is
inappropriate at a time when it is critical that State permitting
authorities and refiners work together to expedite the permitting
processes for important upcoming environmental regulations, such as the
Tier II/ gasoline sulfur reductions requirements.
The decision criteria for many NSR issues are so opaque, and have
changed so many times that, in our view, it is neither fair, nor just,
nor sound public policy to make them the excuse for an aggressive
enforcement program. The opportunity for public comment and
congressional review of EPA's proposed reinterpretation of NSR is
necessary to respect the due process rights of those who have to
comply. If EPA wants to revise the NSR program, it should do so through
the reform process.
__________
STATEMENT OF W. HENSON MOORE, AMERICAN FOREST & PAPER ASSOCIATION
Good afternoon. I am Henson Moore, President and CEO of the
American Forest & Paper Association Thank you for inviting me to
present the views of America's leading forest and paper companies on
EPA's New Source Review Program, or NSR. This hearing exemplifies your
concern to see that our environmental laws work.
AF&PA believes that the NSR program should meet a few basic
principles. First, the rules should be consistent, in sync with
congressional intent, and not change in midstream. Second, policies
should benefit the environment. And finally, program regulators, not
enforcers--should set regulatory policies in a process that is open to
public scrutiny.
Based on these principles, our industry judges today's NSR program
as fundamentally ``broken.'' It needs immediate reform.
Everyone agrees it's broken EPA, the States, industry, Republicans
and Democrats in Congress and notably labor unions. In fact, the Forest
Products Industry National Labor Management Committee, a coalition of
labor unions and industry organizations which represent over 1 million
workers, issued a statement today raising similar concerns with EPA's
reform and enforcement efforts. I would like to submit it into the
hearing record.
Making matters worse, EPA is playing ``good cop, bad cop'' with
targeted industries, sending out conflicting signals on how it intends
to pursue NSR. While the air program continues an on-going process
started in 1991 to clarify, simplify, and fix NSR, the office of
enforcement is aggressively issuing notices of violation on pulp and
paper facilities. Other major industries are, or may soon be, facing
similar assaults. By doing this, the enforcement office is
reinterpreting established NSR policies that industry has long used to
comply with the law and doing so without notice, comment, or any public
procedure and applying these new interpretations retroactively asking
for fines in the process. In addition, EPA's judgments frequently
second-guess State permitting agencies earlier decisions leading to
EPA's erroneous conclusion that 80 percent of industry is in non-
compliance. This is as unfounded as the underlying guidance is
confusing.
In some cases, plants are deferring routine maintenance, delaying
conversion to cleaner fuels or making other environmental improvements,
and shelving plans to move forward with production innovations all to
avoid the uncertainties and burdens imposed by the current NSR review
process. If this continues, two things will happen: our industry will
lose its competitive edge in a global marketplace and the environment
will suffer.
Our Industry and Its Commitment
Let me tell you a little about the forest and paper industry. With
more than 1.5 million workers and an annual payroll of $41 billion,
we're a major contributor to the nation's overall economic health.
Importantly, every AF&PA company subscribes as a condition of
membership to a set of eight environmental, health, and safety
principles designed to make environmental performance an essential part
of every aspect of their operations. As we have increased employment
and production as an industry, we've also made important environmental
strides:
We cut our sulfur dioxide emissions by 63 percent between
1980 and 1995.
We reduced the amount of chlorine used in bleaching by 89
percent from 1988 to 1994.
We decreased surface water discharges by 47 percent
between 1988 and 1996.
We've reduced the total energy we consume to make a ton
of paper by 21 percent.
Our industry are recycling leaders, recovering nearly
half of all the paper and paperboard Americans use each year.
We have a similarly rigorous commitment to the management of
forestlands, called the Sustainable Forestry Initiative SM (SFIsm)
program. Participants in this innovative program abide by a set of
strict principles and objectives. A panel of 18 nationally recognized
experts including leading environmentalists, academics, and foresters,
as well as representatives of the U.S. Forest Service and EPA oversees
our performance and critiques it as part of our annual SFIsm progress
report. We are especially proud that in 1999, Renew America and the
President's Council on Sustainable Development recognized SFIsm with
the National Award for Sustainability.
In addition to our commitment to innovation, we're also committed
to cooperation. In meeting our environmental responsibilities, we work
closely with regulators, environmentalists, and leaders in the
communities that host our facilities, and others.
A good example is the way we worked in concert with EPA to develop
the so-called pulp and paper ``Cluster Rule,'' the first-of-its-kind
multi-media regulation governing air and water quality in our industry.
In fact, we were the only industry to voluntarily accept EPA's
invitation to develop the ``cluster'' concept. Although it requires us
to invest an estimated $2.8 billion in environmental upgrades, we're
satisfied that the final rule fairly balances environmental
improvements and benefits with our industry's capital planning
expectations.
And, of course, we've been heavily involved in EPA's effort to
reform the New Source Review program from the very beginning, putting
constructive ideas on the table, working with other industries and
stakeholders, and being responsive to EPA's requests. Incidentally, our
experiences with Assistant Administrator Bob Perciasepe and his staff
have always been positive and productive. We are ready to work
diligently toward a reasonable NSR program.
Why NSR Is Broken
In broad terms, NSR requires a company to get a permit before it
begins construction of any new ``major source'' with the ``potential to
emit'' more than 100 to 250 tons a year of any regulated pollutant
under the Clean Air Act. It also requires before construction begins a
permit for a physical change to an existing ``major source,'' or any
change in its ``method of operation,'' that will cause an increase in
actual source emissions of any regulated pollutant exceeding specified
levels. Typically, it takes over a year and a half to get a permit,
even for very small plant changes, requiring extensive air quality
analysis and a commitment to install expensive state-of-the-art control
technology.
In creating NSR, Congress told plant operators who would increase
emissions by adding new equipment or making major changes to existing
facilities to install the latest pollution control equipment. But
Congress never intended NSR to impose new controls on older already
permitted equipment simply because of their age and need for routine
maintenance. So the problem with NSR is not congressional intent.
NSR was designed to hold the line against emissions increases, not
to aggressively pursue broad emission reductions. Other sections of the
Clean Air Act already have that mandated purpose. The statutory term
``prevention of significant deterioration'' (PSD) makes that purpose
clear.
The problem with NSR has always been with the way EPA has
implemented it not congressional intent. The rules are too complex. The
informal guidance, memoranda and letters EPA has issued over the last
23 years more than 4,000 pages of interpretations and reinterpretations
is inconsistent. It is no surprise that so much confusion abounds when
most of these interpretive changes occurred at EPA behind closed doors
without the benefit of public notice and comment. In particular, in
recent years, EPA has sought to change interpretations that industry,
the States, and EPA itself have followed for years.
The definition of ``routine maintenance'' is a good example of
EPA's flip-flopping policies.
In 1980, EPA provided an exclusion from NSR review for ``routine
maintenance'' without defining the term.
In 1988, an EPA memorandum indicated the agency would weigh a
variety of factors ``to arrive at a common-sense finding'' as to what
was routine maintenance. This admittedly ambiguous interpretation left
much latitude in State and EPA's case-by-case reviews.
Then, in 1999 the enforcement office substantially narrowed the
exclusion, without public input, stating it ``was meant to cover
frequent, traditional, and comparatively inexpensive repairs to
maintain existing equipment.''
EPA is changing the rules 180 degrees contrary to congressional
intent, and is applying those changes retroactively, using a process
that lacks public involvement. For example, if a plant manager replaces
worn-out bricks on the inside of a furnace, doesn't that sound like
routine maintenance even if the replacements are costly and occur on an
irregular basis. Real NSR reform needs to go back to a ``common sense''
definition of routine maintenance. So the first problem is to reform
NSR to make it workable.
EPA has long known of the problem. As far back as 1991, it
announced it would ``simplify and reform'' the ``old'' 1980 NSR program
to reduce confusion over its applicability and to streamline NSR
review. Several years later, the Clinton Administration cited NSR as a
candidate for reform in its National Performance Review of Regulations.
At a September 1996 hearing, an EPA spokesman acknowledged: ``A lot of
uncertainty exists in the old regulations as they have evolved since
about 1980.''
Major efforts by the EPA air office in 1996 and 1998 to rewrite the
NSR rules did not yield successful reform, but clearly indicated EPA's
desire to fix the broken program. However, the job is not completed and
confusion still exists. Recently, two senior EPA staff members heavily
involved in the NSR reform discussions publicly debated the ``correct''
interpretation of its ``actual to potential'' NSR policy. If EPA
officials can't figure it out and agree on a single meaning, how are
States and industry supposed to?
Some people familiar with NSR, again including some within EPA,
have gone so far as to suggest the program is working at cross-purposes
with the Clean Air Act. During a 1993 NSR Simplification Workshop, for
example, Ed Lillis, the Chief of EPA's Permits Program Branch,
admitted: ``the rules seem to work against the purpose of why they were
established.''
The agency's current method for estimating emissions from a planned
plant change is another good example of how NSR policy defies logic.
EPA has recently changed its interpretations to require the facility to
compare its pre-change actual emissions to its post-change potential
emissions. This ``apples to oranges'' accounting scheme forces every
facility to count imaginary emissions from unused capacity as an
increase in emissions resulting from the modification, thus triggering
NSR even when the change will cause no real increase in actual
emissions, and, in many cases, will reduce actual emissions. For
example, an effort to reduce emissions and comply with the ``Cluster
Rule'' could land a facility in the 18-month NSR permit review process
and end up requiring even more controls. Where's the common sense in
this? To quote a letter from Pennsylvania's Department of Environmental
Protection to Robert Perciasepe, ``How can we expect industry to do
everything they can to minimize emissions when we will be penalizing
them for these actual reductions when they come in for New Source
Review?''
Or consider the outcome of this real-world scenario.
In 1 year, a typical pulp and paper site may make 40,000 changes in
equipment, procedures, and operations. Based on the latest round of EPA
guidance and interpretations, the environmental manager at this typical
site screens them all and comes up with 400 (or roughly 1 percent) that
may be considered ``changes'' under the new guidance. Of these, the
manager decides about 25 projects that would make the plant run better
and cleaner might require permitting. In the past, the State regulatory
agency would have considered most of those projects inconsequential,
but now they are reluctant to take a position for fear they may be
second-guessed by EPA's enforcement office. Because of this
uncertainty, and the fact that the State lacks the resources to process
that number of projects in the first place, all 25 efficiency and
reliability improvements are stopped cold.
Does any of this sound like something that's good for the
environment or good for business?
Misdirected Enforcement
What's even more egregious than having to deal with a confusing
myriad of guidance and interpretations is being held accountable for a
constantly changing standard. We cannot sit here today and talk
reasonably about NSR reform without talking about the aggressive NSR
enforcement initiative launched last year. Just as we couldn't have a
reasonable discussion about reforming the IRS while an army of IRS
auditors were launching an all-out attack on taxpayers based on the old
rules.
Unfortunately, that's what's happening under the NSR program. The
enforcement actions rely on new interpretations of past EPA policy and
seek large retroactive fines which can exceed $20 million per facility.
The enforcement office is taking the program in the exact opposite
direction of where the NSR reform effort needs to go. Hundreds or
thousands of minor changes at facilities would be pulled into the
review system, swamping the State review process and further delaying
permitting decisions all with little or no environmental benefit. This
is very counterproductive. I think all Americans can agree, it is
unfair to change the rules in the middle of the game and penalize
people for their retroactive application.
This abrogation of the basic principles previously outlined is
leading to enforcement actions like these where EPA is overturning past
determinations that NSR review was unnecessary because there was no
significant expected increase in emissions.
Ten years ago, a mill replaced an old power boiler with a new one
that had lower potential emissions. The State, after soliciting
comments from EPA, approved the mill's permit application for the new
boiler without requiring an NSR review. Now, EPA says the new boiler
increases mill operating capacity and potential emissions and alleges
the mill failed to comply with the NSR requirements. But the law states
that only actual increases in emissions require NSR review.
A pulp and paper facility installed a boiler with a Prevention of
Significant Deterioration (PSD) permit many years ago. Some years
later, part of the boiler was replaced with a slightly different design
that did not increase the capacity but improved the efficiency, reduced
overall downtime, and decreased emissions. Now, years later, EPA's
enforcement office, using new interpretations of what triggers NSR
review, determined that this project was a modification that required a
NSR permit and issued a notice of violation. Again, only actual
emission increases require NSR review.
A facility obtains a permit from a State agency, using best
emissions estimates available at the time those from EPA's emissions
factors data base. Data developed years later shows the original
estimate was low. EPA holds that the source should have obtained a
permit based on the new data. The agency also orders it to undergo a
Best Available Control Technology (BACT) analysis using today's measure
of best available technology. As a result, the earlier State decision
is reversed. The source must install expensive controls that were not
originally available and EPA imposes a large fine. This type of
ratcheting of control requirements is unfair and not required by the
law.
What is EPA trying to accomplish by going after actions that are
within the law and in some cases even reduce emissions?
As we cite these real-world examples to illustrate how EPA would
overstep its authority, we need to make one thing clear. We are not
here today to talk about the details of individual enforcement actions.
We do not want to impede any legitimate enforcement discussions between
EPA and our member companies. The record of the American Forest & Paper
Association in recent years makes it quite clear that we have little
patience for those who fail to meet their environmental
responsibilities. Real violations of clear environmental regulations
should be enforced. Period.
Rather, we are here today to raise legitimate concerns over EPA's
overall enforcement policy. We question the logic behind the timing of
what appears to be a well-orchestrated enforcement campaign at the same
time that the rules underlying the enforcement actions are in flux. EPA
incorrectly claims that 80-90 percent of our industry is not in
compliance, 80 to 90 percent! This claim comes from bizarre
interpretations of NSR. For example, one EPA enforcement official
recently stated, ``If capital investments at major facilities have been
made for the purpose of meeting market demand, diversifying product
lines, increasing production efficiency, or reducing operating costs
there is a high probability of PSD violations.'' [Betsy Wise, EPA
Region 10 Enforcement Official at January 2000 meeting of the Joint
Legislative Environmental Common Sense Committee in Idaho.] In other
words, if a company has pursued its routine business goals, then it
seems likely to have violated the PSD standards. Yes, under this
convoluted logic, 100 percent of the industry is guilty guilty of
providing products to meet the changing demands of the American public
while doing its best to meet the intent and spirit of the Clean Air
Act!
We are here today to raise concerns over a broken environmental
regulation that allows one EPA office to retroactively reinterpret
regulations established two decades ago. A clear NSR regulation must be
developed to eliminate arbitrary enforcement that is being imposed on
companies going about their normal business in full compliance with the
adopted NSR rules.
To draw a sports analogy, it's like the National Basketball
Association eliminating the 3-point shot and then going back to
overturn any victories that were won based on 3-point shooting. Or, if
we're talking about the IRS and taxes again, it's like the IRS
eliminating the mortgage-interest deduction for millions of American
taxpayers today and then demanding their past taxes with huge penalties
for having used the deduction in prior years.
So the second problem is this out-of-control enforcement binge. EPA
should suspend those enforcement actions that rely on new
interpretations of older policies and do not involve emissions above
permitted limits until the NSR reforms are successfully completed.
Enforcement actions where emission increases exceeded permitted limits
and clearly violated the law should proceed.
Summary and Conclusions
You know the axiom all too well. It's not the role of the judicial
branch to legislate. Likewise, it should not be the role of the EPA's
enforcement office to regulate. Compounding this issue is the matter of
timing. Not only should the enforcement office not be regulating and
changing the rules of the game and applying them retroactively, they
shouldn't be doing so as part of an aggressive campaign while the air
office is rewriting the rules.
We fully appreciate the challenge before the air office. Making
sense out of these complex rules is no easy task. And we applaud the
``open door policy'' that the air office has shown us in working on the
reform effort. We ask, however, that EPA's reform effort follow the
basic principles I have identified: establish consistent rules and only
apply them prospectively, give the job to the air office, not the
enforcement office, and base them on the law.
We're prepared to hold up our end of the bargain by working
tirelessly with EPA to make NSR reform a reality. All we ask is that
EPA all of EPA hold up its end of the bargain as well.
Thank you.
__________
STATEMENT OF DAVID G. HAWKINS, DIRECTOR, AIR AND ENERGY PROGRAMS,
NATURAL RESOURCES DEFENSE COUNCIL
Mr. Chairman, members of the subcommittee, thank you for your
invitation to testify on behalf of NRDC, the Natural Resources Defense
Council, regarding the New Source Review (NSR) regulatory program of
the Clean Air Act. NRDC is a nonprofit citizen organization dedicated
to environmental protection, with more than 400,000 members nationwide.
Since 1970, NRDC has followed closely the implementation of the Clean
Air Act and has sought to promote actions under the law that carry out
Congress' policy decisions to protect public health and the environment
from harm caused by air pollution.
In this testimony I would like to touch on three topics: the role
of new source requirements in the nation's air quality management
program; features of the current regulatory program that need
improvement; and some of the general claims surrounding efforts to
enforce the Act's NSR programs against various electric utility
companies.
I. The Clean Air Act's Dual-Track Air Quality Strategy
In 1970 Congress adopted a dual-track program to protect and
enhance our nation's air quality. The first program calls on States to
adopt comprehensive pollution control programs under State law to
achieve air quality objectives set forth in National Ambient Air
Quality Standards (NAAQS) adopted by EPA. This ambient program is an
example of the ``assimilative capacity'' approach to environmental
management based on the belief that the environment can assimilate a
certain amount of dirt or toxins released from human activities without
causing identifiable harm. This approach starts by identifying exposure
levels of pollution that current research indicates may be tolerable
for humans and ecosystems and then seeks to reduce emissions from
pollution sources enough to meet the maximum tolerable exposure
targets.
The 1970 Act's ambient management program strengthened previous
efforts enacted by Congress in the 1960's and relied on States to set
control rules for pollution sources at levels just tough enough to
bring total pollution down to the level of the national ambient
standards. Implicit in this approach is that an area's air quality
determines the amount of clean-up required of sources. Even if there
are readily available means of reducing a source's pollution, a State
is not required to adopt such measures if not needed to meet the NAAQS.
But Congress did not rely exclusively on the assimilative approach
to air quality protection in the 1970 Act. Congress adopted another
strategy designed to minimize air pollution by requiring sources to
meet emission performance standards based on modern ``best practices''
in pollution abatement. The performance standard approach does not set
required levels of control based on the air quality conditions of
particular areas. Rather, the required emission reductions are
determined by assessing how much polluting processes can be cleaned up,
taking account of technical and economic constraints.
Congress expected that future ambient goals would likely be more
ambitious than 1970's defined goals and wanted an independent program
that would be effective in reducing total emissions over time.
Congress' intent in the performance standard program was to use the
force of new purchases and investments to incorporate advances in
pollution prevention and control as a complementary strategy to the
ambient management program.
Congress applied the performance standard approach to both
stationary and mobile sources but with some important distinctions. In
the mobile source area (cars, trucks, buses), only entirely new
vehicles were subject to federally established modern performance
standards. Congress was presented with analyses demonstrating that with
traditional rates of ``fleet turnover,'' most of the benefits of
tighter new car standards would be experienced in less than 10 years.
In requiring performance standards for stationary sources, Congress
adopted more sweeping provisions. The Act requires that both new and
modified stationary sources must meet modern performance standards. As
I will discuss later, Congress in 1970 also adopted a very expansive
definition of ``modification.''
The 1970 Act's principal tool for improved pollution control for
new and modified sources was the New Source Performance Standard
(NSPS), a national, categorical requirement based on very good, but not
the best, pollution minimizing practices. In 1977, when the Act was
amended, Congress adopted the new source review (NSR) and prevention of
significant deterioration (PSD) programs to strengthen efforts to
minimize emissions and air quality impacts from new and modified
sources. In the 1977 Amendments Congress expanded both the scope of the
rigor of the requirements for improved performance from new and
modified sources. Coverage would no longer be limited to the categories
for which EPA had adopted NSPS requirements; rather all new and
modified sources above certain pollution tonnage thresholds would be
required to minimize their emissions. Second, the level of the
performance requirement would not be tied to often out-of-date NSPS;
rather case-by-case determinations of current best performance would be
required. Third, covered sources locating in clean areas as well as
dirty areas would have to pass ambient impact tests to prevent a
worsening of air quality. In 1990, Congress again increased its
emphasis on pollution prevention from new and modified sources,
reducing the size thresholds for coverage in badly polluted areas.
In sum, Congress has repeatedly endorsed the concept of modern
performance standards for new and modified pollution sources, adopting,
in successive amendments, strengthened requirements intended to make
the NSR programs more effective in reducing pollution.
However, these programs have for 20 years been the subject of
criticism from industry representatives and from many academic
economists. The economists' argument runs, ``why should new sources be
regulated more strictly than existing sources? After all, air quality
is determined by how much pollution is released and where it is
released. The air certainly cannot tell the difference between a pound
of pollution from a plant built in 1965 and that from a plant built in
1995.''
Critics of the Act's new source requirements argue that instead of
regulating new and old sources differently, we should simply establish
our desired air quality objectives and allow them to be met by the most
efficient means. Under this approach, agencies first would do research
to identify the adverse effects of air pollution on health and welfare;
next, agencies would convert this research into environmental
standards; then, the agencies would design pollution control programs
to achieve the environmental standards; finally, agencies and pollution
sources would implement the pollution control programs and the air
would become cleaner.
This critique and prescription has a certain superficial appeal. As
I have mentioned, the ambient management program has been a central
program of the Clean Air Act since 1970 and it should continue. The
question is whether it is prudent to rely on the ambient standards
approach as the only strategy for improving and protecting air quality.
In my view that would be a mistake.
The 1970 and later Clean Air Acts reflect a judgment by Congress
that the ambient standards approach should be the major pollution
control strategy but that it should be complemented by other
independently functioning programs such as the NSR and Mobile Source
Emission Standards programs. I think that this judgment was a wise one.
The history of air pollution control efforts both before and after the
1970 Act reveals that the ambient standards approach, while
conceptually sound, has its weak spots, which when exploited by well-
organized opposition, can prevent the program from solving air quality
problems in a timely fashion.
First, the Government's capacity to acquire unambiguous information
about natural processes is very limited. The research is complex,
expensive, and time consuming. Due to perennial shortages of money,
talent, and time, most of the studies undertaken in the past and those
being conducted now are less than perfect. As a result, their
conclusions are easy to pick apart and dismiss as not dispositive.
Moreover, the health effects we are concerned about are increasingly
related to chronic exposures to low levels of combinations of
pollutants. We have never conducted an adequate study to characterize
the effects from these kinds of exposures and none is even planned.
The uncertainties in what we know about air pollution effects in
turn lead to controversy and delay in establishing environmental
standards. All of us, including this committee, have experienced this
controversy in the continuing disputes about EPA's revised ozone and
particulate standards.
The next step in the process--control program design--can also be
affected. Different interests argue at length about how emissions in a
particular location relate to air quality in that location or
elsewhere. This can and has led to uncertainty, controversy and delay
in designing pollution reduction programs to meet environmental
standards. The continuing fights over efforts to address transported
air pollution are an example of this problem.
Another weak spot in the ambient standards abatement program is
that it often requires large changes in established patterns of
behavior. When an air pollution control agency adopts a regulation that
applies to an existing source it is trying to get firms to spend their
money, time, and thought in ways they have not planned. Not
surprisingly, these firms often resist, which leads to uncertainty,
controversy and delay in the final step of the ambient standards
approach, the actual implementation of pollution reduction measures in
the real world.
This resistance to change often feeds back to the first step in the
ambient standards process, setting the standards themselves. Pressure
is mounted to weaken existing standards and to oppose the setting of
new ones. Again, the unified fight of industrial polluters against the
revision of the ozone and particulate standards highlights this
problem.
These weaknesses do not call for abandoning the ambient standards
approach. But they do suggest the wisdom of complementing that approach
with programs that are strong where the ambient approach is weak. The
Act's NSR programs meet that need. Implemented properly, these programs
can assure that as new well-controlled sources replace old ones, we
will make progress in reducing emissions as our economy grows. By
controlling the major pollutants, the new source programs also serve as
a hedge against unidentified risks associated with those pollutants. By
dealing with engineering facts rather than biological facts, the new
source programs usually involve more manageable factual controversies.
We are relatively good at measuring the dollar costs of meeting
performance standards and calculating the emission reductions such
standards can provide. Finally, by focusing on new and modified
sources, the new source programs can lessen the social and political
costs of reducing pollution. Because they operate at the time firms are
making new investments, these programs allow firms to plan pollution
prevention and control into their plant operations.
All of this does not argue that the new source programs should
replace the ambient program, only that they should complement that
program. For the new source programs have weaknesses in areas where the
ambient program performs better. The new source programs focus on the
highly technical details of engineering and thus are too insulated from
effective public participation. Controlling pollution only from new
sources often is not the cheapest way to achieve a unit of emissions
reduction. In my view, the premium we pay to accomplish reductions
where the ambient program has failed to deliver them is a prudent
investment, but controls on new and modified sources should not be our
only program. Finally, new source programs, because they are technology
based, do not guarantee a desirable level of environmental quality. We
will degrade our air quality unless we improve pollution reducing
methods and processes at least as fast as we grow. The new source
programs do not create adequate incentives for such improvements and
thus must be complemented by the ambient standards and PSD programs
which do recognize that clean air is a scarce resource.
In sum, the Clean Air Act's dual track approach to air quality
management employs the principle of diversification to reduce risks. In
an uncertain world, a prudent investor will forego putting all his
money into the one stock with the apparent highest yield. Instead he
will spread his risk by selecting a range of investments some which
offer high risk and high yield and others which offer less risk and
less yield. Similarly, the Act resembles a stable ecosystem which has a
diversity of species. Such systems are much less likely to fail in the
face of adversity than systems that have no diversity.
II. How Should EPA's NSR Programs be ``Reformed'?
NRDC has participated over the last decade in stakeholder
discussions convened by EPA to consider ways to improve the Act's NSR
programs. A major reason these talks have made little progress is the
lack of agreement on the purposes of these programs. There are two
major purposes: to assure that new investments do not degrade air
quality and to assure that when new investments are made, emissions are
minimized by requiring sources to meet performance standards that
reflect modern emission prevention capabilities.
While a great deal of attention has been paid to the complexity of
the NSR permitting process, the larger environmental failure of the NSR
program is that the program has not brought down emissions as Congress
intended. Citizens, pollution control agencies, and Members of Congress
are increasingly aware of the fact that grandfathered air pollution
sources are more and more the central impediment to clean air progress.
Contrary to the intent of Congress, investments in new production have
not resulted in existing grandfathered sources being replaced by
facilities that must meet modern performance standards. As a result,
grandfathered sources dominate the pollution inventory throughout the
United States.
The degree to which old stationary sources determine our nation's
burden of air pollution is striking, especially when compared to the
impact of old cars on pollution loads. For example, fossil electric
powerplants built more than 20 years ago are responsible for 84 percent
of total US nitrogen oxides (NOx) pollution from that sector and 88
percent of sulfur dioxide (SOx). In contrast, 20-year-old cars
contribute less than 7 percent of U.S. car NOx pollution and 3 percent
of that sector's VOC (volatile organic compounds) pollution.
It is obvious that the Title II new mobile source program has done
quite a good job of preventing old cars from dominating today's
pollution problems but the Title I new stationary source program has
performed miserably on this score.
There are some obvious reasons for the NSR program's poor pollution
reduction performance. First, the rules themselves contain too many
loopholes that allow sources to avoid NSR even though they continue to
make significant investments year after year. Second, as recent
enforcement actions have alleged, there are many instances of firms
escaping the requirements of the rules by misclassifying projects in an
unlawful manner.
Reform of the NSR program should address its failure to produce
pollution reduction from old grandfathered sources as a priority issue
as well as explore ways to simplify the NSR process. A genuine reform
of the program should aim to make two basic changes: the program should
apply to more industrial projects than it now does and the review
process should be streamlined to enable decisions to be made quickly
while protecting the public's right to participate. Instead, the
``reform'' proposals EPA has published over the last decade have
concentrated almost entirely on changes that would expand the loopholes
of the current rules so that even fewer grandfathered sources would be
required to clean up as they upgraded their capital equipment.
The combination of categorical exemptions and exclusions, weak
rules for calculating emission increases, and broad provisions for
``netting out'' of review allow far too many sources to avoid the NSR
program indefinitely. When illegal evasions of the rules are added to
the many exemption opportunities in the rules, we get the results we
see most sources never encounter the Federal NSR program and their
pollution remains with us.
NRDC has filed lengthy comments with EPA on these issues over the
years and I will not burden the subcommittee with a recitation of the
details here. I would like to mention one area that of ``netting.''
Netting is the jargon for a transaction that allows new projects at
existing sources to escape NSR. In essence it allows the source
operator to count ``reductions'' from grandfathered pieces of polluting
equipment at the site in calculating whether a new project will result
in an emission increase that would require new source review. By
allowing sources to avoid the modern performance requirements of NSR,
netting preserves the status quo, perpetuating excessively high levels
of pollution originally emitted by poorly controlled grandfathered
pollution sources.
Netting rewards sources that have managed to manipulate the current
system to preserve high levels of emissions. Current netting policy
allows those high emission levels to function as an asset that can be
deployed to avoid NSR/PSD review. Thus, netting operates at cross
purposes with sound air quality objectives. It creates incentives to
keep emissions at unnecessarily high levels and perpetuates an
inefficient allocation of emission ``shares'' by providing the greatest
rewards to the most polluting sources. Netting frustrates one of the
primary objectives of the NSR/PSD program, which is to link
requirements for modern emission performance standards to investments,
so that emissions are reduced as the economy expands. Instead, netting
allows existing emission levels to be perpetuated indefinitely.
While the netting rules are complex, the fundamental problem with
the approach is easy to understand. Netting allows a grandfathered
pollution source to ``bequeath'' its excessive pollution privileges to
its descendant, the new piece of equipment. Under netting, the new
piece of equipment is not required to meet modern performance
standards; it can emit at much higher levels by relying on the
pollution entitlements transferred from old, grandfathered pieces of
equipment. In this way, excessive amounts of pollution can live on long
after the original sources have disappeared. Netting resembles the
former hereditary peerage system in England, where membership in the
House of Lords and other privileges were handed down from generation to
generation. England recently acknowledged this system has no proper
place in a modern democracy. We too need to eliminate the pollution
peerage that is embedded in EPA's netting rules.
For nonattainment NSR, the Supreme Court in Chevron made it clear
that EPA has the authority to eliminate the availability of netting
altogether. One perverse effect of netting in nonattainment NSR is that
new equipment is installed without meeting ``lowest achievable emission
rate'' (LAER) performance standards. This in turn means that a greater
level of emission reduction is required to offset the new equipment's
emissions than if the new equipment had met LAER standards. These
additional emission reductions must come from a finite pool of existing
emission sources whose total pollution load must be further reduced for
the area to attain the ambient standards. Thus, the effect of NSR
netting is to allow existing source owners to unilaterally dedicate the
cheapest and easiest emission reductions in a nonattainment area to
compensate for poorly controlled new units, leaving State and local
control agencies with the more difficult task of developing an
attainment plan from the more expensive, politically controversial
remaining emission reduction opportunities.
EPA's original defense of its 1981 change to allow netting under
the nonattainment NSR program was that areas choosing such an approach
would be required to develop timely attainment plans in any event so
that there would be no environmental harm. It is now the year 2000 and
EPA can no longer deny that the theory it presented to the Supreme
Court in the early 1980's has no basis in reality. In fact, areas have
not succeeded in developing timely and adequate attainment plans. State
and local agencies have protested repeatedly to EPA that they cannot
identify sufficient, politically feasible emission reductions to
demonstrate timely attainment. EPA has responded with policies that
have permitted lengthy delays in the submission of adequate plans.
Given that the premise for EPA's initial adoption of NSR netting in
1981 has not been achieved, it is time for nonattainment netting to be
abolished.
To restrict netting in the PSD NSR program, EPA should reform its
definition of contemporaneous so that only activities which are part of
the project for which the netting claim is made can qualify. Second,
EPA should reduce the netting credits available for shutting down or
limiting operations at existing units to reflect the obvious fact that
the new emission-increasing projects will have greater longevity than
the older existing units that are generating the netting credits. For
example, consider a source that proposes to build a 100-ton-per-year
new unit with a 35-year useful life and to net out the increase with
the shutdown of a 100-ton source that has only 5 years of life
remaining. The stream of emission reductions from the shutdown source
ends after 5 years but the emission increases from the new source
continue for an additional 30 years. There clearly is an enormous
increase in the cumulative emissions from the facility over the life of
the new project that is not captured if netting credits are given for
the shutdown unit based only on a comparison 1 year's emissions.
III. Enforcement of NSR Requirements
The ``new source review'' enforcement actions filed against major
electric utilities are an effort to end a flagrant abuse of the Clean
Air Act ``grandfather clause'' provisions relating to existing
pollution sources. As mentioned above, Congress in the 1970 Clean Air
Act did include a grandfather clause that exempted existing stationary
pollution sources from the duty to meet modern emission performance
standards. However, Congress did not intend to extend a permanent,
blanket exemption to existing sources. Thus, Congress provided that
when an existing source was ``modified'' it would become subject to new
source requirements. Moreover, Congress defined ``modification''
extremely broadly, including in the term ``any physical change or
change in method of operation'' that increases emissions. Congress
adopted an expansive definition of the term to prevent sources from
evading new performance standards with piecemeal changes.
EPA regulations narrow the Act's modification definition somewhat
by including an exemption for ``routine maintenance, repair, and
replacement.'' It is this exemption the defendant companies claim
shield their plants from NSR. However, the challenged projects cannot
be called routine, as a matter of law, logic, good policy, or history.
Public information documents an industry capital investment strategy,
starting in the 1980's, to upgrade existing plants to run longer and
harder rather than letting them retire and be replaced by new capacity.
For instance, one of the challenged projects involved removing existing
700 horsepower fans (the ``lungs'' of a powerplant) and replacing them
with new 900 horsepower fans. If this is routine replacement, then so
is taking the original 350 horsepower engine out of your car and
``replacing'' it with a 450 horsepower engine.
In essence, the industry decided to sell more electricity by
building new capacity into their existing machines rather than building
entirely new units. This practice has both kept pollution at
unreasonably high levels and has functioned as a barrier to entry into
the market keeping many new clean, efficient units from being built.
While the industry is now labeling these projects as ``routine
maintenance,'' utility equipment vendors as well as utility witnesses
in public utility commission rate cases have described these projects
as going beyond maintenance and providing capacity that otherwise would
have to be created by building new units. Indeed, in a recent filing
with the Department of Energy, American Electric Power Co. explicitly
referred to some of the challenged projects as not including ``routine
maintenance'' activities.
Industry's claim today is that any rebuild project, regardless of
scope is ``routine'' as long as the rebuilt plant's maximum production
capacity is no greater than the plant's original maximum design
capacity. This may remind you of the fabled ``one-hundred-year-old''
axe: it's only had two new heads and four new handles over its life.
The industry's interpretation would read the ``modification''
provision out of the Act, creating a permanent grandfather exemption
for all the capacity that existed prior to 1970. And when the industry
litigated their interpretation over a decade ago, they lost. The
utility industry in the 1980's challenged a Reagan-era EPA ruling that
rebuilding a deteriorated plant to ``restore'' original capacity could
not fit within the routine maintenance exemption. In 1990, the 7th
Circuit rejected industry claims that original design capacity should
define the boundary for the ``routine'' exemption. Wisconsin Electric
Power Co. v. Reilly, 893 F.2d 901. In WEPCO, the court flatly rejected
industry's interpretation as one that would confer indefinite immunity
from new source standards, contrary to Congress' intent.
When the WEPCO court upheld EPA, the industry prevailed on the
Office of Management and Budget (OMB) to kill a broader examination of
industry practices initiated by EPA. Industry also lobbied Congress
following the court ruling to amend the law to create broad new
exemptions for utility modification projects. When they did not get new
statutory exemptions, industry lobbied the Bush Administration for
regulatory exemptions. In 1992, the Bush Administration amended the NSR
rules to give the utility industry a more generous formula for
calculating whether an emission increase had occurred. But the rule did
not change the definition of routine maintenance. After the 1992 rule
had been in place for a few years, EPA again launched an investigation
to determine why so few NSR applications had been filed. The industry
again sought intervention by OMB, using the Paperwork Reduction Act as
a pretext. While this effort delayed EPA's investigation for a time,
this time OMB ultimately rejected the industry's Paperwork Act claims.
The industry complains that EPA has not published a detailed
reference book listing exactly which projects are ``routine
maintenance'' and which are not. But EPA has explained in numerous
communications with utilities and other industries, that determining
the correct classification of many projects is a highly fact-specific
undertaking. For that reason, These letters are similar to the opinion
letters that the IRS uses to answer fact-dependent tax questions.
The utility industry implies that EPA has not given them fair
notice of their NSR obligations. The opposite is true. It has been
EPA's practice for 30 years to issue ``applicability determination''
letters to resolve questions about whether a specific project would
trigger NSR. Industry officials have known from the beginning of their
rebuild programs that these types of projects could trigger NSR but
they did not seek determinations from EPA for any of the challenged
projects.
Minutes of a 1984 industry discussion shed some light on the
industry's thinking. The minutes report a consensus that companies
should----
identify their projects as ``upgraded maintenance
programs;''
``downplay the life extension aspects of these projects
(and extended retirement dates) by referring to them as plant
restoration (reliability/availability improvement) projects;''
deal with the air regulatory issues ``at the State and
local level and not elevate [them] to the status of a national
environmental issue.'' (ie, don't ask EPA because you won't like the
answer) EPRI, Proceedings: Fossil Plant Life Extension Conference and
Workshop (1984) at 27-4.
As a final argument to inspire fear in the public, the industry has
claimed that they now cannot make needed repairs for fear of triggering
additional enforcement actions. There is no merit to this claim. EPA's
NSR rules for utilities provide generous ``baseline'' emission formulas
(the maximum polluting hour in the past 5 years and the average of the
two maximum polluting years of the previous 5 years). A company that
commits to not exceed these generous limits can carry out any
maintenance or other project it wishes, routine or otherwise, without
triggering NSR. Companies who refuse to commit to limit their pollution
increases can seek applicability determinations from EPA.
In short we believe EPA and the other plaintiffs are doing the
right thing by enforcing the NSR law as Congress intended. The results
of that enforcement should be to achieve a major reduction in pollution
from these plants and to improve all industries' attention to their NSR
obligations when they modify their facilities.
Thank you for this opportunity to testify. I am happy to answer any
questions you may have.
__________
STATEMENT OF WILLIAM F. TYNDALL, VICE PRESIDENT, ENVIRONMENTAL
SERVICES, AND VICE PRESIDENT FOR FEDERAL AFFAIRS, CINERGY SERVICES,
INC.
Introduction
Good afternoon. Thank you for inviting me here today to testify
before you on EPA's proposed changes to the Clean Air Act's new source
review (``NSR'') requirements.
My name is Bill Tyndall. Since August 1998, I have been Vice
President of Environmental Services for Cinergy Services, Inc., and I
recently was named Vice President of Federal Affairs as well. Cinergy
Services is the service company for Cinergy Corp., one of the nation's
leading diversified energy companies. Its operating companies, The
Cincinnati Gas & Electric Company and PSI Energy, Inc., serve more than
1.4 million electric customers and 478,000 gas customers in Indiana,
Ohio, and Kentucky. Cinergy is active in U.S. power and natural gas
markets and maintains a 24-hour-a-day, 7-day-a-week trading operation.
The company's international business unit, Cinergy Global Resources,
has assets in power generation, transmission, and distribution projects
in the Czech Republic, Spain, the United Kingdom, Zambia, Estonia, and
the United States. Cinergy's 1999 revenues were $5.9 billion, and its
total assets are $9.6 billion. Cinergy's core energy system comprises
approximately 11,000 megawatts at 14 baseload stations and seven
peaking stations. Its natural gas distribution system is connected to
six interstate pipelines.
Before joining Cinergy, I served as minority counsel to the House
Commerce Committee and advised committee Democrats on air quality
issues. Before that, I spent 5 years at EPA, serving first in EPA's
Office of General Counsel, where I worked on new source review and
other stationary source issues, and later as a senior policy advisor in
EPA's Office of Air and Radiation, the office responsible for
administering the NSR program.
Today I am here on behalf of Cinergy, a company with nearly three
decades of experience under EPA's regulatory treatment of NSR. Thus, I
am speaking as someone who has spent nearly 10 years working with EPA's
new source review program from a variety of perspectives. My testimony
also is on behalf of the Edison Electric Institute, an association of
investor-owner electric utilities such as Cinergy. I will be addressing
what I believe to be the serious ramifications of EPA's attempt to
reform the Clean Air Act's new source review program.
A series of summer heat waves and steadily rising consumer demand
have forced many utilities to the limits of their generating capacity.
With the industry's equipment pushed to the breaking point for extended
periods, the Nation as a whole faces a risk of electricity shortfalls
that is higher than ever before. As these trends continue, the need to
keep electric utilities running, and running reliably, is at its apex.
The availability of power in America depends on the ability of
utilities to continue maintaining their facilities in the manner needed
to ensure safe, efficient, and reliable generation on demand. To
exacerbate the situation, electric utilities, rural cooperatives,
municipal electric systems, and independent power producers are all
facing significant obstacles in siting and building needed additional
peaking capacity.
In the midst of these potential electricity shortfalls, EPA now
proposes changes to the Act's NSR program that could require existing
facilities to undergo an expensive and time-consuming permitting
process before they undertake any activities intended to maintain
safety, availability, and reliability. A close examination of EPA's
proposal shows not only that it is contrary to Congress' focus on new
sources of pollution, but that it is inconsistent with how the rule has
been written and applied for nearly three decades. Moreover, EPA's plan
to promulgate an unworkable rule that discourages or delays needed
maintenance projects is at odds with maintaining the reliability of the
nation's power supply.
Background
Electric utilities occupy a unique position in the industrial
world. We arguably are the ultimate example of ``just-in-time
delivery'' of a product to our customers. Because it is not feasible to
store significant amounts of power, we must generate electricity at the
very instant that our customers consume it. This requires constant and
careful maintenance of our generating units, which are comprised of
thousands of individual components working together as an integrated
system. In this interdependent environment, the failure of a single
component is sufficient in many cases to cause an entire generating
unit to be shut down and require repair.
Furthermore, utilities are operated under extreme conditions of
temperature, pressure, and wear that make such failures particularly
likely. As in an automobile, or any other highly integrated piece of
equipment, these various parts wear at different rates, with the result
that parts both large and small must be replaced on a periodic basis in
order to keep the unit running properly. In contrast, the failure to
make such repairs results in rapid and predictably declining
reliability and unit availability. At present, Cinergy operates over 60
individual generating units in our three-State system, and the
maintenance required to keep these facilities operating smoothly has
been, and remains, a daunting task.
Note that a failure to maintain generating units properly results
not only in decreased performance, but also can cause unsafe conditions
for our employees, as well as our customers. The early history of steam
generation was plagued by equipment failures, with many injuries to
plant employees. Since that time, the American Society of Mechanical
Engineers (ASME) and other industry authorities have developed detailed
codes that guide utility maintenance and repair activities to ensure
that generating units may be operated safely and reliably for decades.
In addition, various State agencies and insurance underwriters regulate
boiler operation, maintenance, and repair practices to ensure utilities
maintain their equipment properly.
These generating facilities are subject to a host of Clean Air Act
provisions that constrain emissions to levels that protect the public
health and welfare. For electric utilities, this includes, but is not
limited to, (1) compliance with SIP-based limitations designed to
achieve or maintain the national ambient air quality standards
(``NAAQS''); (2) restrictions on NOx and SO2 emissions under
the Act's Title IV acid rain program, including a more stringent phase
two of that program which commenced on January 1, 2000; (3)
restrictions on ozone, SO2, and particulate matter under
Title I of the Act; and (4) EPA's Title V operating permit program. In
this manner, Congress has ensured that all industrial facilities both
old and new are subject to extensive and costly pollution control
requirements. In addition, State environmental programs impose
additional emission limitations that apply to our plants.
In 1970, and again in 1977, Congress enacted significant amendments
to the Clean Air Act targeted at new sources of pollution.
Specifically, Congress amended the Act to provide that companies that
construct new facilities, or make ``major modifications'' to existing
facilities that result in significantly increased emissions, must apply
an extra layer of pollution control to these units. As EPA has
recognized, Congress targeted new construction and the extensive
alteration of existing units because it understood that it is more
feasible technically, and less disruptive economically, for companies
to install new control technology at the time these events occur than
it is to retrofit existing units.
Under the terms of the NSR program, new and ``modified'' units must
satisfy ``new source performance standards,'' and install controls that
represent ``best available control technology'' or ``lowest achievable
emission rate'' requirements. Such units also must undergo review for
their impact on ambient air quality either under the ``prevention of
significant deterioration'' program (for areas where air quality is
cleaner than the NAAQS require) or under the nonattainment program (for
areas where one or more NAAQS is not being achieved). Thus, a ``major
modification'' to an old plant can create a ``new'' source for
regulatory purposes and trigger the congressional mandate for the plant
to undergo a permitting process that takes 18 months or longer to
complete and results in millions of dollars in control equipment costs.
While Congress may have considered this a reasonable process for a
``major modification,'' it is clear that such a process and cost cannot
be imposed on routine maintenance and repair activities if the U.S. is
to maintain a safe, reliable, and reasonable supply of electric
generation to homes and businesses.
EPA's Historical Treatment of the Modification Rule
Given this history, the question of whether a source has undergone
a ``major modification'' for purposes of NSR is a crucial one for older
generating units. Historically, EPA has interpreted the modification
rule in a manner consistent with Congress' focus on new sources of
pollution and its concern about the costs of retrofits. For example,
EPA guidance recognizes that Congress ``did not intend to make every
activity at a source subject to new source requirements'' via the
modification rule, and that EPA ``in no way intends to discourage
physical or operational changes that increase efficiency or reliability
or lower operational costs, or improve other operational
characteristics of the unit.'' 57 Fed. Reg. 32,327. Similarly, EPA has
expressed concern with requirements that would ``unduly hamper the
ability of any company to take advantage of favorable market
conditions.'' 45 Fed. Reg. at 52,704. For these reasons, EPA has always
excluded ``routine maintenance, repair and replacement,'' as well as
increases in production rate or hours of operation within a facility's
capacity, from the definition of a modification.
EPA's actual application of the modification rule to utilities also
has been consistent with both congressional intent and the agency's
regulatory pronouncements. Specifically, EPA has allowed utilities to
make those repairs that are customarily undertaken in the industry to
maintain the availability and reliability of electric generating
facilities, and to thereby maximize the useful lives of these units,
without any suggestion that such repairs were non-routine modifications
subject to NSR. Importantly, EPA adopted this approach while armed with
an extensive agency awareness of utility maintenance practices from
onsite inspections, reports filed with State and Federal regulatory
agencies, and countless industry articles.
There is one case where EPA has found that repair and replacement
activity crossed the line between those routine projects that keep a
facility operating, and a non-routine expansion of the facility subject
to NSR. In a 1989 administrative decision, EPA ruled that a plant-wide
reconstruction project at Wisconsin Electric's (``WEPCo'') Port
Washington facility was a non-routine change because it involved a
``massive'' and ``unprecedented'' replacement of major components, some
of which had never been replaced before by WEPCo or other utilities. By
pursuing the WEPCo project as a non-routine modification, after years
of allowing less ambitious repair and replacement projects that
extended unit life, EPA confirmed that the majority of utility
maintenance projects to extend life qualified as routine maintenance
and did not trigger the modification rule. EPA later confirmed this to
Congress, leading GAO to report later in 1990 that:
According to EPA policy officials, WEPCo's life extension project
is not typical of the majority of utilities' life extension projects,
and concerns that the agency will apply the ruling it applied to
WEPCo's project are unfounded. (emphasis supplied)
In keeping with its statements to Congress, EPA has continued to
allow utilities to undertake repair and replacement projects as needed
to maximize unit life in the 10 years following the WEPCo decision,
without any finding that such projects triggered NSR.
EPA's Proposal to Revoke the WEPCo Rule
However, in Federal Register notices issued in July 1996 and 1998,
EPA has proposed a major revision to the NSR modification rule. I refer
you to 61 Fed. Reg. 38,250 and 63 Fed. Reg. 39,857. In these notices,
EPA essentially proposes to revoke parts of a 1992 rule EPA issued to
formalize its WEPCo decision (the so-called ``WEPCo Rule''). EPA would
replace this WEPCo Rule with a new interpretation of the modification
standard under which nearly all activities intended to maintain or
restore the reliability or efficiency of a generating unit would
trigger NSR.
EPA's original modification rule is fairly straightforward, and
defines a ``modification'' as a: (1) physical or operational change (2)
that results in (3) a significant net emissions increase. The rules
then provide examples of activities that do not constitute a physical
or operational change, including routine repair, replacement and
maintenance, pollution control projects, fuel switches, and so on. See
40 C.F.R. Sec. 52.21(b)(2), Sec. 60.14. As I mentioned earlier, this
rule historically has resulted in a regulatory program where utilities
are allowed indeed encouraged--to maintain and operate their plants as
they were designed to operate.
EPA now seeks to change how each of these criteria is applied to
determine whether a modification has occurred. First and most important
is EPA's new approach to what constitutes a ``physical or operational
change.'' As described above, EPA has always excluded traditional
utility maintenance activities, whether performed singly or grouped
together, from the definition of a physical or operational change under
the exclusion for ``routine maintenance, repair and replacement.''
EPA now proposes an interpretation of the ``routine maintenance,
repair and replacement'' exclusion under which all activities that
restore deteriorated capacity and availability must be treated as
``non-routine'' repairs. This would mean that all utility maintenance
projects would be ``non-routine,'' since even the simplest utility
maintenance project is intended to restore lost availability and
reliability. This again is in direct conflict with the history
discussed earlier. It also is logically inconsistent with the language
of EPA's exclusion for ``routine maintenance, repair and replacement.''
If all repairs are non-routine, there can be no such exclusion. EPA
would, in effect, read this exclusion out of the NSR regulations.
Another major change is EPA's elimination of the causation
requirement of the modification rule, and its removal of the so-called
``demand growth'' exclusion, which excludes increases in production
rate and hours of operation. EPA created this latter provision based on
its understanding that Congress did not in any way intend for the
modification rule to punish utilities for responding to changes in
demand growth within the design capabilities of their facilities. Thus,
under the rule as written, a physical or operational change cannot be
considered a ``modification'' unless the change ``results in'' a
significant increase in emissions. In other words, the mere fact that
there is an increase in net annual emissions after a particular change
does not necessarily trigger NSR. If the increase was caused not by the
change but by something else for example, by an increase in production
rate or hours of operation, occurring in response to an increase in
product demand or some similar market force--a ``modification'' has not
occurred. In this regard, EPA stated in the preamble to the 1992 WEPCo
Rule that it ``declines to create a presumption that every emissions
increase that follows a change in efficiency is inextricably linked to
the efficiency change.'' 57 Fed. Reg. at 32,327.
EPA now proposes a regulatory regime under which any non-routine
(or otherwise non-excluded) change that is followed by a significant
increase in annual utilization of the facility would be presumed to be
a modification, even if that change does not affect a facility's
overall capacity to burn fuel (and hence its emission rate). According
to EPA, the Agency's ``experience'':
. . . . leads to the conclusion that sources generally make non-
routine physical or operational changes which are substantial enough
that they might trigger NSR in order to increase reliability, lower
operating costs, or improve operational characteristics of the unit and
do so in order that they may improve their market position. A proximate
cause for making such changes may be to respond to increased demand, or
to more efficiently compete for share of a market that has flat, or
even decreasing, demand. \1\
---------------------------------------------------------------------------
\1\ 63 Fed Reg. 39,860.
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``For these reasons,'' the Agency continues, ``EPA now seriously
questions whether market demand should ever be viewed as a significant
factor in answering the relevant regulatory question of whether an
emissions increase results from a physical or operational change at an
existing source.'' Indeed, according to EPA, ``in a market economy, all
changes in utilization and, hence, emissions might be characterized as
a response to market demand.'' Id. In this manner, EPA's proposal
appears to require that any change that is followed by a significant
increase in annual utilization is a ``modification'' and, therefore,
subject to NSR.
EPA's final change is to redefine how an emissions increase is
calculated. EPA claims that ``[u]nder current regulations,'' non-
routine activity at a unit must be ``deemed to be of such significance
that 'normal operations' are deemed not to have begun'' at the
facility. In other words, EPA would treat a company that undertakes a
non-routine change at a unit as if the unit had never been operated
before and had no emissions history. This change is significant because
the NSR rules provide that, for a unit that has not begun ``normal
operations,'' post-change emissions must be calculated based on the
assumption that the unit will be operated at full tilt, 24 hours a day,
365 days a year after the change. Under this test, any change will show
an increase in emissions, even if the change would not truly result in
any new pollution.
But the Seventh Circuit specifically rejected this view of the
emissions increase test in its review of EPA's WEPCo determination. See
Wisconsin Elec. Power Co. v. Reilly, 893 F.2d at 917-18. Moreover, EPA
rejected this interpretation in its 1992 WEPCo Rule, explaining that
the Agency is required to compare actual emissions before and after a
change, unless the unit is brand new or has been entirely rebuilt by
spending 50 percent of the cost of a new facility. See 57 Fed. Reg. at
32,317, 32,323.
When one considers these changes together all repairs are non-
routine, all non-routine repairs are deemed to result in an emissions
increase, regardless of whether they actually did so it becomes clear
that EPA plans to subject the entire electric utility industry to a new
level of controls not contemplated by the original NSR program.
Summary
If EPA's goal is to obtain new source levels of emission reduction
from existing sources even though those sources have already reduced
emissions to address the public health and welfare requirements of the
Clean Air Act then let's address this directly as a policy issue. The
new source review program was never meant to require such sweeping
reductions from existing utilities, and is uniquely ill-suited as a
vehicle for obtaining them. In particular, EPA's interpretation of NSR
would require all utilities to delay repair, and possibly shut down
their facilities, for 18 months or more every time there is a minor
equipment failure in order to go through the NSR process. There simply
isn't enough capacity in the Nation to allow for so many units to
remain inactive for such extended periods, nor would consumers
appreciate the jump in rates that would accompany such a change.
EPA's proposed revision to NSR is problematic for other reasons as
well. EPA's proposed NSR approach would force utilities to guess on
when to install new pollution controls according to the unpredictable
failure of minor pieces of equipment, rather than choosing a time that
minimizes outages and technical difficulties the very problem Congress
sought to avoid in creating NSR. Utilities faced with the prospect of
undergoing NSR every time they replace broken turbine blades or boiler
tubing would be discouraged from making such changes for as long as
possible, with serious ramifications for the reliability of the
nation's power supply and for the safe operation of the units.
Degradation in reliability is counter to the expectations of State
public utility commissions, which can and have financially penalized
companies for substandard performance. Finally, for many utilities,
EPA's NSR proposal also would mean foregoing the adoption of new
technologies that could increase the efficiency of generating units by
reducing the amount of coal needed to produce power. By discouraging
such opportunities, EPA would be losing a chance to obtain significant
reductions in pollutants not currently regulated under the Act, in
particular, greenhouse gases.
In sum, the utility industry already faces many challenges to its
ability to provide safe, reliable, and affordable power to the American
public. EPA's proposed changes to the NSR modification rule should not
be among them. The ongoing rulemaking process needs to be conducted in
a manner that will truly reform the NSR program, rather than the
piecemeal approach currently being taken by the Agency. It is now time
for EPA to abandon such impractical approaches to NSR in favor of
straightforward negotiations with industry, and for Congress to address
the important policy issues raised in the current debate. Regardless,
EPA's proposed NSR rule should not proceed on its current track.
I thank you for the opportunity to present these comments, and
would be happy to respond to any questions.