By Robynn Andracsek, P.E., Burns & McDonnell

The Clean Air Act and its subsequent amendments have been landmark pieces of legislation that have resulted in substantial improvements in our national air quality. Unfortunately, like any legislation, it has many poorly written sections, undefined terms and counterintuitive requirements. In fact, upon reading the Act, if it doesn’t make sense, then you probably understand it correctly. Consider one of its unintended lessons: pollute as much as possible during the two years before any new construction activities.

Let me explain.

Power plants that modify their operations may be subject to a number of different air pollution regulations. Major modifications will trigger Prevention of Significant Deterioration (PSD) permitting, provided the modification causes a significant increase in emissions. A major modification means any physical change in, or change to, a major stationary source’s method of operation, which would result in a significant emissions increase or significant net increase of a regulated pollutant. Exceptions include routine maintenance, repair and replacement.

The Environmental Protection Agency specifies a two-step test in determining whether a modification triggers PSD. The first step is to determine if the modification is either a physical or an operational change. If yes, the second step is to determine whether emissions will rise above the PSD significant emission rate thresholds as a result of the change.

Step one involves determining if the modification is “routine” (a word whose meaning is critical, not defined and an entirely separate idiosyncrasy of the Clean Air Act, to be discussed in a future column). Step two involves “netting” emissions at a facility.

Emissions netting refers to the process of considering certain past and future emissions changes at an existing major source to determine if a “net emissions increase” of a pollutant will result from either a proposed physical change or a change in operation. “Rules” must be followed when performing a netting activity. First, netting must take place at the same facility; that means emissions reductions cannot be traded between stationary sources. Second, when any emissions decrease is claimed, all source-wide “creditable and contemporaneous” emissions increases and decreases of the pollutant subject to netting must be included in deciding whether PSD is applicable. This formula may be useful in understanding the concept:

Net Emissions Change = (Future potential emissions increases associated with the proposed modification) MINUS (Source-wide creditable contemporaneous actual emissions decreases) PLUS (Source-wide creditable contemporaneous potential emissions increases).

If the net emissions change is less than the “significant emission rate” (as shown in Table 1) detailed in the PSD regulations, then the modification has “netted out” for that pollutant. This means the pollutant is not subject to PSD review. As such, a best available control technology (BACT) analysis and modeling is not required for the pollutant, in most cases.

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Under the New Source Review regulations, in determining if a physical change will result in a significant emissions increase, electric power producers may use an “actual-to-representative-actual annual emissions” test for emissions from the electric utility steam generating unit. Here, a calculation of baseline emissions and a projection of future “actual” emissions after the change is provided, rather than future “potential” emissions.

The exact type of permit required will depend on the net change in emissions and may differ from state to state. A PSD major modification represents a net increase equal to or greater than the amounts shown in Table 1.

An Implicit Incentive to Pollute

Inherent in the netting calculations is past actual emissions. If a facility has recently operated at less than 100 percent capacity (reflecting time off for scheduled outages, seasonal fluxes in demand and so on) then the recent actual emissions are automatically less than the potential emissions had the plant operated 8,760 hours a year. So without making a single physical change to a boiler, a plant could have a “net” emissions increase. Logic suggests that the greater the volume of emissions used to calculate “past actuals,” the more likely the netting equation will turn out to be less than the significant emission rates.

The U.S. Supreme Court recently ruled on this issue in the Environmental Defense vs. Duke Energy case (No. 05-848, argued November 1, 2006 and decided April 2, 2007). This case dealt in part with netting calculations and considered whether an emissions increase is measured in pounds per hour (Duke’s position) or tons per year (Environmental Defense’s position). In other words, does the short-term emission rate have to increase in order to have a significant emissions increase? Or, are annual emissions (including the influence from capacity changes) the decisive attribute?

Duke Energy lost, but more importantly, the Supreme Court punted on the larger issue. Has the EPA been inconsistent? Is the EPA retroactively targeting 20 years of accepted practice? Is the EPA changing the regulations through interpretation instead of rulemaking?

If and until the EPA or the courts resolve this inconsistency in netting procedures, the prudent operator should schedule his or her facility’s modifications accordingly. In order to follow the letter of the law, but definitely not the spirit, you could emit as much as possible in the two years preceding a planned construction activity. Only then can you take full advantage of “netting” as regulated under the Clean Air Act and as interpreted by the courts.