Clean Air Act:
Key Stakeholders’ Views on Revisions to the New Source Review Program

United States General Accounting Office (GAO) Report to Congressional Requesters 

GAO-04-274 2feb04

Selected sections of the complete report are included in this file on Mindfully.org.
Please refer to the complete document at www.gao.gov

What GAO Found

A majority (29 of 44) of the state officials responding to GAO’s survey expected the rule EPA finalized in December 2002 to provide industry with greater flexibility to make some facility changes without having to obtain NSR permits or, in some cases, install pollution controls. However, in their opinion, 27 officials expected the rule to increase emissions of harmful air pollutants, thereby hindering areas’ efforts to meet air quality standards and potentially creating or exacerbating public health risks. This concern contrasts with EPA’s assessment that the rule will decrease emissions and maintain the current level of environmental protection. Furthermore, 30 of the officials expected their agency’s workload would increase as they adopt and implement the rule into their own programs. Almost all of the 44 officials would like EPA assistance with implementation.

Similarly, 28 of the 42 officials responding expected the two NSR revisions as proposed in December 2002—intended to provide more certainty about when facility changes are considered routine maintenance, repair, and replacement activities and can be excluded from NSR requirements—to decrease the number of permits companies would have to obtain, thereby giving them the flexibility to make some changes without installing controls. However, 21 and 26 officials, respectively, thought that the two exclusions would increase emissions; only relatively few thought the exclusions would decrease emissions as EPA’s analysis had predicted. About a third of the officials thought the exclusions would exacerbate air quality problems in areas that do not meet standards, but fewer officials thought the exclusions would cause problems in areas that currently meet standards. Finally, 27 thought that implementing the two exclusions would increase states’ administrative burden.

The other stakeholder groups GAO contacted agreed that the final rule and two exclusions would decrease the regulatory burden on companies that modify their facilities, but disagreed about the impact on emissions and air quality agencies’ workload. The six environmental and public health officials expected that because companies would not have to obtain as many NSR permits or install as many controls when modifying facilities, emissions would rise and state and local agencies’ workloads increase as agencies sought alternative ways to meet standards. In contrast, the eight industry officials expected the revisions to encourage companies to invest in energy-efficient projects they had avoided under the prior program, which the officials believed would lower fuel use and emissions. The officials also expected that fewer permits would lead to decreases in agencies’ workloads.

Determining the revisions’ likely impacts is difficult because, as discussed in GAO’s August 2003 report on EPA’s analytical basis for the final rule (GAO-03-947), little data exist to confirm stakeholders’ opinions. In that report, GAO recommended that EPA work with state and local agencies to obtain data to assess the rule’s emissions impact and correct any adverse effects.

February 2, 2004
The Honorable James M. Jeffords
Ranking Minority Member
Committee on Environment and Public Works United States Senate

The Honorable Joseph I. Lieberman
United States Senate

The Environmental Protection Agency’s (EPA) revisions to the Clean Air Act’s New Source Review (NSR) Program—one of the act’s mechanisms for maintaining air quality to protect public health—have provoked controversy. These revisions are contained in rules that the agency issued in December 2002 and October 2003, respectively. In general, these rules provide companies with regulatory flexibilities to modify their industrial facilities without triggering NSR requirements to install potentially costly pollution controls, if certain conditions are met. According to EPA, the December 2002 rule will provide incentives for facilities to reduce emissions, remove barriers to energy efficiency and pollution control projects, and offer facilities greater regulatory flexibility, while the October 2003 rule will allow companies to modernize facility operations in ways that will maintain and improve safety, reliability, and efficiency. EPA also anticipates that the rules will enhance the NSR program’s environmental benefits.

Reactions to the rules have differed considerably. A number of industry groups agree with EPA’s position, and some states have filed legal documents in court expressing support for the rules. Other states and some localities, including a coalition of states and various localities primarily located in the mid-Atlantic and northeast regions of the country,¹ as well as certain environmental groups, have filed lawsuits challenging the legality of the two rules in court.

The NSR program—established in 1977—seeks to protect public health, maintain compliance with air quality standards, and enhance air quality in national parks and scenic areas. The NSR program applies to nearly 17,000 industrial facilities, including fossil-fueled power plants, petroleum refineries, and facilities that manufacture automobiles, chemicals, pharmaceuticals, and paper. The program requires companies, when they are constructing facilities, to obtain NSR permits that limit the amount of pollution that facilities may emit and to install pollution controls when necessary. The program imposes similar requirements when a company makes a physical or operational change to an existing facility—such as adding new production equipment—if the change would result in a significant net increase in emissions.² The Congress allowed existing facilities to defer installation of pollution controls until a major modification was made with the expectation that, over time, all facilities would install such equipment, and this would lead to lower overall emissions.

Responsibility for implementing NSR, as well as other air quality regulations, generally rests with state and local air quality agencies. However, the stringency of the air quality regulations they set varies. The Clean Air Act generally requires more stringent control measures for industries located in areas that fail to meet at least one of the air quality standards than for those located in areas that meet the standards.

Because of the NSR program’s complexity and the administrative burden it imposes, EPA has long recognized a need to revise it. In 1992, EPA began a reform process that resulted in proposed changes to the program in 1996 and 1998. But the agency did not finalize the proposals as rules during the previous administration. The current administration acted on certain of the prior reform proposals by issuing a final rule in December 2002.³ This rule contained five provisions—including a new method for determining whether a facility change will significantly increase net emissions—that reduced the likelihood that certain of these changes would require an NSR permit or, in some cases, the installation of pollution controls. In assessing the potential costs and benefits of the rule to determine whether to pursue it, EPA anticipated that this rule will provide incentives for facilities to reduce emissions, remove barriers to investments in energy efficiency and pollution control projects, and offer facilities greater regulatory flexibility. In addition, at the time the agency issued the rule, it released an analysis of the rule’s anticipated environmental effects that concluded the rule would lead to an overall environmental benefit.⁴ EPA estimated it will cost state and local agencies about $6.5 million annually to incorporate the rule into their air pollution control plans. However, the agency expects that the rule will ultimately decrease agencies’ NSR costs after the first 3 years of implementation.

Also in December 2002, EPA issued a proposed rule, with two provisions, that would define certain activities as routine maintenance, repair, or replacement and, therefore, exempt from NSR requirements.⁵ In its assessment of the rule, the agency asserted that the two provisions would provide greater certainty to industry about when facility changes can be exempt from NSR and encourage facilities to perform energy-efficiency projects that were being hindered by the existing program’s requirements for permits and costly controls. The cost of installing controls varies but, in extreme cases, costs can reach hundreds of millions of dollars, according to EPA.

One of the provisions that EPA proposed would exclude activities from NSR requirements considered "routine equipment replacements"— replacements of worn-out or broken machinery with identical parts or those that perform the same function as the existing part. EPA proposed several thresholds below which expenditures for such equipment replacement could be considered routine and exempt from NSR requirements and solicited public comment on them.⁶ After reviewing the comments it received, EPA issued this exclusion as a final rule in October 2003. EPA established 20 percent of the cost to replace the entire process unit—for example, a steam-generating unit in a power plant—as the cost threshold companies could use to replace parts within that unit without being subject to NSR, and concluded that the rule would have insignificant environmental effects.⁷ EPA also estimated that the rule would impose one-time costs of $8.7 million on industry and $1.7 million on state and local agencies that adopt the rule, while saving the electric utility industry hundreds of millions of dollars.⁸

The other provision that EPA proposed would create an "annual maintenance allowance" exclusion that would enable companies to avoid NSR if the cost of all routine maintenance and repair activities did not exceed a certain percentage of the cost to replace the entire facility. The agency has not determined whether it will finalize this portion of the proposal or pursue other options to address routine maintenance and repair activities.

You asked us to address a number of questions about the basis of the revisions and their potential impacts. In two previous reports on the revisions, we reviewed (1) EPA’s assessment of the economic and environmental impact resulting from the December 2002 final rule, and (2) the potential impact of the NSR revisions on the enforcement actions that EPA had filed against coal-fired power plants for allegedly violating NSR requirements and on public access to information on emissions. We presented our findings on these reviews in reports issued on August 22, 2003, and October 21, 2003, respectively.⁹ In the August report, we determined that data limitations precluded EPA from performing a quantitative analysis of the effects of the December 2002 final rule. In the October report, we determined that the revisions could affect the ongoing cases and the public’s access to emissions information, although EPA program managers did not agree that the rule would affect access to emissions information.

You also asked us to obtain the views of a number of key stakeholders about a broader range of the revisions’ potential impacts. More specifically, you asked us to obtain (1) state air quality agency officials’ views about the impacts of the December 2002 final NSR rule on industry, emissions, and agencies’ workloads; (2) state air quality agency officials’ views about the impacts of the two December 2002 proposed NSR exclusions on industry, emissions, and agencies workloads; and (3) environmental, health, and industry organizations’ views on the impacts of all the NSR revisions. In addition, we determined selected local air quality agencies’ views on the revisions’ potential effects.

To address the first two objectives, we administered a detailed survey to the NSR program managers in 50 states and the District of Columbia using the Internet. We surveyed program managers to ensure that we obtained information from those most involved in the day-to-day administration of the NSR program. In addition, we sent this survey to 71 local agencies, primarily those with their own authority to issue NSR permits. To identify the NSR program manager for each state or local agency, we worked with the 10 EPA regional offices and obtained some information from the State and Territorial Air Pollution Program Administrators (STAPPA) and the Association of Local Air Pollution Control Officials (ALAPCO) Internet site. We pretested the survey with selected state and local program managers to ensure the questions were clear, understandable, accurate, and comprehensive. In addition, to ensure that the questions were neutral and objective, we pretested the survey with states that were supportive of the revisions, as well as states that were not. We received complete responses from 44 state program managers and 60 local agency officials (each state or local agency could only provide one response). The managers in four states said they declined to respond so as not to disclose information related to their state’s ongoing NSR-related litigation. We have provided a copy of our survey and detailed tables showing the state and local officials’ responses to the questions in a separate report, Survey of State and Local Air Quality Officials Opinions on the Impacts of the Environmental Protection Agency’s Revisions to the Clean Air Act’s New Source Review Program (GAO-04-337SP), available on the Internet at http://www.gao.gov/special.pubs/gao-04-337sp. We have also summarized the main results of our survey of select local air quality agencies in appendix I.

It is important to note that we asked the program mangers for their opinions about the potential impacts, both positive and negative, of the NSR revisions. Based on our prior work, we had established, and EPA program managers told us, that very little data existed—either on the impact of the NSR program before the revisions, or on the number of facilities that might use any or all of the revisions—to try to assess the revisions’ impacts. In addition, at the time we asked the state and local officials for their opinions about the exclusion of certain activities as routine equipment replacement, EPA had not defined a specific cost threshold for this exclusion as it did in the October 2003 rule. As a result, we wanted to confirm that the opinions the officials stated about the exclusion in response to our survey were still accurate. Therefore, we provided a summary of our survey results regarding this provision to STAPPA/ALAPCO. Working with its members, the association confirmed that states and localities continue to have the same views about this exclusion as they did at the time of our survey. Furthermore, we confirmed with the EPA NSR program manager that he did not think the opinions of the state and local officials had changed as a result of EPA finalizing the exclusion in its October 2003 rule.

To address the third objective, we identified key stakeholders involved in NSR policy decisions at the national level—including representatives of industry, environmental, and public health interests—and sent them a more general list of questions via electronic mail that solicited their responses about the revisions’ potential effects. For a more detailed discussion of our scope and methodology, see appendix II.

Notes

1  The District of Columbia is included in this coalition.

2  Such changes are called "major modifications" and the level of emissions that will trigger the NSR requirements, known as the threshold, varies by pollutant and the air quality status of the area in which a facility is located.

3  Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Baseline Emissions Determination, Actual-to-Future Actual Methodology, Plantwide Applicability Limitations, Clean Units, Pollution Control Projects, 67 Fed. Reg. 80186 (2002) (to be codified at 40 C.F.R. pts, 51 and 52).

4  See U.S. Environmental Protection Agency, Supplemental Analysis of the Environmental Impact of the 2002 Final NSR Improvement Rules (Washington, D.C.: Nov. 21, 2002).

5  Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review: Routine Maintenance, Repair and Replacement, 67 Fed. Reg. 80290 (2002).

6  The cost of the replacement equipment had to be below a certain percentage of the cost to replace the "process unit." A process unit for power plants is defined as the portion of a plant that directly contributes to electricity production (power plants can have more than one such unit). The replacement equipment also had to meet certain criteria, such as maintaining the basic design of the original unit.

7  Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Equipment Replacement Provision of the Routine Maintenance, Repair and Replacement Exclusion, 68 Fed. Reg. 61248 (Oct. 27, 2003) (to be codified at 40 C.F.R. pts, 51 and 52).

8  EPA based this statement on an analysis which concluded that revising the routine maintenance, repair, and replacement exemption would lead to the increased availability of existing power plants, thereby reducing the need for new plants. See U.S. Environmental Protection Agency, Regulatory Impact Analysis for the Specification of Categories of Activities as Routine Maintenance, Repair, and Replacement for the New Source Review Program (Washington, D.C.: August 2003).

9  See U.S. General Accounting Office, Clean Air Act: EPA Should Use Available Data to Monitor the Effects of Its Revisions to the New Source Review Program, GAO-03-947 (Washington, D.C.: Aug. 22, 2003) and U.S. General Accounting Office, Clean Air Act: New Source Review Revisions Could Affect Utility Enforcement Cases and Public Access to Emissions Data, GAO-04-58 (Washington, D.C.: Oct. 21, 2003).

A majority of the 44 state air quality officials responding to our survey believes that the December 2002 final rule will provide industry greater flexibility to modify facilities without having to install pollution controls in some cases; a majority of the officials also think, however, this flexibility will come at the cost of increases in emissions and agencies’ workloads. Regarding the impact of the rule on industry, 29 of the 44 officials said that, in their professional opinion, the rule allows companies to make more modifications without having to obtain permits, which can trigger requirements for controls. The permitting process and its requirements to install controls, however, was one of the best features of the NSR program prior to the revisions, according to 40 of the officials. Regarding the rule’s impact on emissions, 27 of the 44 officials believe the rule will increase emissions; only 5 believe it will decrease them (the remaining officials thought they would remain the same or were unsure). Many officials expect that these potential emissions increases will affect their state’s ability to meet the national health-based air quality standards: 13 officials said their state would have difficulty meeting standards, and 14 said they would look to other pollution control programs to try to offset the anticipated increases. Only 7 said their state would not have difficulty meeting standards. (Nine said they could not judge the rule’s effects). Finally, 30 of the officials predicted that implementing the rule, such as educating industry and their own staff on its provisions, would increase their agency’s workload at a time when many state agencies’ resources are constrained. To implement the rule, almost all of the officials said they would like EPA’s assistance and we are recommending that EPA provide states with this help.

Overall, the state officials had similar opinions about the impact of the two provisions excluding some facility activities from NSR requirements if they are considered routine maintenance, repair, or replacement. Regarding the exclusions’ impact on industry, 28 of the 42 officials responding to this question said that both provisions would allow companies to make more facility changes without having to obtain permits. On the other hand, 21 of the 42 officials thought the exclusion for routine equipment replacement would increase emissions, and 26 thought the proposed annual maintenance allowance exclusion would have this impact. Relatively few officials thought the exclusions would decrease emissions. In general, the officials were less concerned about the impact of the exclusions on states’ ability to address air quality problems or meet standards than they were about the final rule’s impact. More specifically, about a third of the officials thought the increased emissions under the exclusions would worsen air quality problems in areas that already did not meet standards. Moreover, only 5 officials thought the exclusion for routine equipment replacement would cause problems in areas that currently meet standards, and only 7 thought the proposed annual maintenance allowance exclusion would do so. Regarding the impact on agency workloads, 27 of the 44 officials responding thought that implementing the exclusions would increase their administrative burden. Overall, 21 officials opposed the exclusion for routine replacement of equipment; 32 opposed the proposed annual maintenance allowance exclusion; and, relatively few supported either provision (the remaining officials said they neither supported nor opposed it, or they had no opinion)

The other stakeholders we contacted—representatives of key industry, environmental, and public health interests who have been most active in the NSR debate at the national level—also believed the revisions in the final rule and the two proposed exclusions would decrease the regulatory burden on industry. But the stakeholders differed in their opinions about these revisions’ impacts on emissions and agencies’ workloads. Representatives from the six environmental and public health groups we contacted believed the revisions allow companies to make more modifications without having to obtain an NSR permit or install controls, and that emissions and public health risks would increase as a result. These representatives also believed the changes would create more work for state and local air quality agencies, such as their having to find other ways to reduce emissions to meet air quality standards. On the other hand, the eight industry representatives we contacted expected the revisions to decrease emissions and health risks because they believe, consistent with EPA’s analysis, that companies will be more likely to pursue energy efficiency projects they had postponed because of the prior NSR requirements. With these projects, facilities could operate more efficiently, burning less fuel and creating fewer emissions, according to the representatives. As we noted in our August 2003 report, however, other industry and environmental officials believed that if facilities can operate more efficiently, they will increase their production and, therefore, emissions overall. Finally, the industry representatives we contacted believed that the revisions would lighten air quality agencies’ workloads. The NSR program will be clearer and simpler to implement and enforce, and agencies will have fewer permits to issue, according to some of these representatives.

Determining the likely impact of the revisions, given the conflicting opinions of state officials and stakeholders, is difficult primarily because little data exist to substantiate opinions. For example, one of the stakeholders we contacted cited an EPA analysis of the equipment replacement rule as support for his position, and another cited a Department of Energy (DOE) analysis. However, neither analysis was a comprehensive assessment of the revisions’ effects. Furthermore, as we noted in our August 2003 report, the overall economic and environmental effects of the December 2002 rule are uncertain because of data limitations and difficulty determining how companies will respond to the rule. Therefore, we recommended in that report that EPA work with state and local air quality agencies to obtain the data needed to monitor the rule’s emissions impacts and address any adverse effects. In this light, we are making additional recommendations in this report: that EPA (1) identify available data, or ways to obtain it, to monitor the emissions impact of the NSR exclusion for routine equipment replacement (which EPA issued as a final rule in October 2003) and (2) consider the state officials’ and stakeholders’ concerns about emissions and workload impacts that we identified before issuing a final rule on the proposed annual maintenance allowance.

In commenting on the report, EPA’s Assistant Administrator for Air and Radiation said that the agency has concerns about our methodology and certain of our findings. Nevertheless, EPA said that our recommendations, on their face, make sense and that the agency already has plans to take these actions. Specifically, EPA asserted that GAO (1) used the opinions expressed in the survey responses as fact, and to draw conclusions and make recommendations about the NSR program, (2) did not assure balance and objectivity, (3) used a skewed survey sample, and (4) should have evaluated whether the survey results were consistent with the facts cited in EPA’s analyses of the revisions’ effects. GAO disagrees with each of these assertions. First, GAO solicited opinions and carefully presented them as such because we found, and EPA acknowledged, the emissions data available to analyze the NSR revisions’ impacts are so limited. We also found that the state program managers’ informed opinions raised substantial concerns about the revisions’ impacts. Our recommendations are intended to address these legitimate concerns. Second, in designing our survey, we took numerous steps to minimize bias, including asking respondents’ about both the positive and negative effects of the revisions, conducting several pretests of the survey, and having a survey specialist independent of its design review the survey to ensure that the questions were not biased. Third, GAO surveyed the universe of state program managers. These officials are on the front lines of program implementation and are in the most informed position to weigh in on the implementation impact questions we asked. Because of the large number of other affected stakeholders, it was not feasible to survey the universe. Instead, we surveyed 30 representative organizations, chosen because they are involved in national NSR policy decisions and represent diverse environmental, health, and industry perspectives. Finally, we did not use the results of EPA’s analyses as a benchmark to evaluate the survey responses because our previous and current work has identified numerous limitations with those analyses. EPA’s written comments and our detailed response are included as appendix III.

A Majority of the State Officials Expect the Rule to Increase Emissions and Hinder Efforts to Meet Health-based Air Quality Standards

A majority of the state officials expect emissions to increase as a result of the final rule—in contrast to EPA’s conclusion, in the agency’s analysis of the rule’s environmental effects, that it will reduce emissions from industrial facilities.18 More specifically, 27 of the 44 officials we surveyed expect that overall, the December 2002 rule will increase emissions; 8 officials believe emissions will decrease or remain the same (the remaining 9 officials could not judge the emissions impact). At least half of the officials thought the rule would increase emissions of carbon monoxide, nitrogen dioxide, ozone, particulate matter, or sulfur dioxide— all of which have been linked to health problems and are controlled by a variety of Clean Air Act programs.

When asked about the emissions impact of each specific provision in the final rule, a majority of the state officials identified two of the rule’s provisions as most likely to cause emissions increases, as table 2 illustrates. These include the revised methods for determining (1) a facility’s historical or “baseline” emissions and (2) whether a change will result in a significant net emissions increase.

Table 2: Anticipated Emissions Effects of the December 2002 Final Rule Provisions (number of state officials’ responses)

Final rule provision	Increase 	Decrease	No change 	Unable 
			emissions	emissions	in emissions	to judge 	Total
Clean unit 		20 		6 		12 		6 		44

Plantwide emissions 	24 		10 		4 		6 		44
  limit 
Pollution control 	14 		10 		12 		8 		44
  project 
Revised method for  	29 		2 		5 		8 		44
 calculating 
 “baseline” emissions
Revised test for 	29 		1 		5 		9 		44
 calculating emissions 
 changes 
Overall effects 	27 		5 		3 		9 		44
 of rule 

Source: GAO analysis of survey responses.

For example, a majority of the officials believe the “baseline” provision will increase emissions. This provision allows industrial facilities to use any consecutive 24-month period in the previous decade as a baseline.19 EPA changed this emissions calculation method to, among other things, account for variations in business cycles. The agency concluded that this provision would have negligible emissions consequences because it would not alter the baseline for most facilities, including coal-fired power plants (the largest emitting group of facilities). In addition, companies must adjust their baselines downward to reflect any other emissions limitations that have become effective since the period of time they selected for establishing their baseline, according to EPA.20 EPA program managers, therefore, maintain that emissions baselines will not significantly increase as a result of this provision.

Nevertheless, some officials provided written responses to our survey describing their concerns over this provision. Several such officials asserted that it allows companies to select the 24-month period within the previous 10 years in which their emissions were highest.

In addition, 24 officials thought that the provision for plant-wide emissions limits, whereby facilities accept a cap on their overall emissions to avoid undergoing NSR, would nevertheless increase emissions. For example, several officials said that the rule enables facilities to establish their emissions cap based on their highest 2 years of emissions in the previous 10 years, thereby enabling them to create a cap that exceeds their current emissions. On the other hand, 10 officials said this provision would decrease emissions, and several asserted that it creates incentives for facilities to reduce or limit their emissions. EPA program managers maintain that this provision will decrease emissions.

In addition to these overall effects, 24 of the state officials anticipate that the rule will particularly allow facilities built prior to the establishment of the NSR program in 1977 to increase their emissions. At the time, the Congress decided to allow existing facilities to defer installation of pollution controls until a major modification was made with the expectation that, over time, all facilities would install such equipment, and this would lead to lower overall emissions. However, as we concluded in our June 2002 report on emissions from older power plants,21 taken as a whole, such plants still emit more air pollution for each unit of electricity generated than newer plants. For example, we found that for each megawatt of electricity produced, the older facilities emitted about 100 percent more sulfur dioxide and 25 percent more nitrogen oxides than newer facilities. State officials that believe emissions increases will occur under the rule gave various opinions as to how they would manage such increases. For example, 7 officials said that the rule would not impede their ability to meet or maintain air quality standards. Another 14 expect they will offset the anticipated increases using other air quality regulations, such as those used to control emissions from mobile sources (automobiles and other transportation). However, 13 others expect the rule to impede their ability to meet or maintain standards—despite these other regulations. (Nine said they could not judge the rule’s effects.) This could create challenges for agencies that expect the rule to interfere with efforts to meet air quality standards, but that said they were prohibited from adopting more stringent regulations, such as the District of Columbia, Kentucky, New Jersey, New Mexico, Oklahoma, Pennsylvania, and Wisconsin.22 On the other hand, 28 state officials said that state law or policy does not prohibit them from adopting more stringent rules than federal requirements.

Notes

18 See U.S. Environmental Protection Agency, Supplemental Analysis of the Environmental Impact of the 2002 Final NSR Improvement Rules (Washington, D.C.: Nov. 21, 2002).

19 EPA historically used the 2 years immediately preceding the proposed change to establish a facility’s actual emissions. However, in some cases, the agency allowed use of an earlier period.

20 According to EPA, such requirements include those limiting emissions of toxic air pollutants, nitrogen oxides, as well as requirements in state implementation plans for attainment of the air quality standard for ozone.

21 See U.S. General Accounting Office, Air Pollution: Emissions from Older Electricity Generating Units, GAO-02-709 (Washington, D.C.: June 2002).

22 The following jurisdictions said that they are restricted from adopting more stringent regulations than federal requirements: the District of Columbia, Iowa, Mississippi, Missouri, Montana, New Jersey, New Mexico, Kentucky, Ohio, North Dakota, Oklahoma, Pennsylvania, South Dakota, Utah, Virginia, and Wisconsin.

Conclusions

EPA’s assessments of the December 2002 and October 2003 NSR revisions concluded that the rules would provide industry with greater flexibility to modify their facilities without having to obtain NSR permits or, in some cases, install pollution controls, while enhancing the program’s environmental benefits. The survey responses indicate that most state program managers agreed with EPA’s conclusion that the revisions would enhance flexibility for industry. However, a majority of state program managers did not agree with EPA’s conclusion that the increased flexibility would lead to less pollution, raising questions about the final and proposed revisions’ environmental effects. Specifically, most of the state officials believed that the December 2002 rule and the not-yet finalized annual maintenance allowance exclusion would increase emissions, and half believed the equipment replacement provision would have this effect. Furthermore, of those that believe emissions increases will occur, a number of the officials thought that these anticipated increases would cause violations of health-based air quality standards or delay the attainment of the standards in areas that already have poor air quality, potentially creating or exacerbating health risks. Environmental groups agreed with the state program managers who expressed concerns, but other state officials and industry stakeholders maintained the revisions would have positive environmental effects. Little data currently exist to resolve these competing viewpoints. We therefore recommended in our August 2003 report that EPA determine what data are available to monitor the December 2002 rule’s effects and use the monitoring results to determine what effects the rule has created. For the same reason, if the equipment replacement rule eventually takes effect—pending the resolution of legal challenges—it will be necessary to monitor its implementation to determine its environmental and other effects. In addition, more EPA assistance for states would help them implement the new rules and lessen their administrative burden.

Recommendations for Executive Action

To ensure that state and local air quality agencies are adequately equipped to implement the new NSR rules, as required by EPA, and that the rules do not have unintended effects on emissions and public health, we recommend that the EPA Administrator (1) provide state and local air quality agencies with assistance in implementing the December 2002 rule, (2) pending the court’s decision on the equipment replacement rule, work with state and local air quality agencies to identify the data that the agency would need to monitor the effects of this rule and use the monitoring results to identify necessary changes,25 and (3) consider the state and stakeholder concerns about emissions and workload impacts that we identified before deciding whether to issue a final rule on the second proposed exclusion, the annual maintenance allowance exclusion.

***********

25EPA should coordinate this effort with its response to a similar recommendation in our August 2003 report (GAO-03-947).

Agency Comments and Our Evaluation

We provided EPA with a draft of this report for review. The Assistant Administrator for Air and Radiation said that the agency has concerns about our methodology and certain of our findings. Nevertheless, EPA said that our recommendations, on their face, make sense, and that the agency already has plans to take these actions.

Specifically, EPA asserted that GAO (1) in some instances, used the opinions expressed in the survey responses—which EPA believes may not have been grounded in a correct understanding of the revisions—as fact, and to draw conclusions and make recommendations about the NSR program, (2) did not carry out its work in a way that assured balance and objectivity, (3) used a skewed survey sample, and (4) should have evaluated whether the survey results were consistent with the facts cited in EPA’s analyses of the revisions’ effects.

GAO disagrees with each of EPA’s assertions. First, as we previously reported and EPA acknowledged, there are limited data available to assess the effects of the NSR revisions. Therefore, consistent with the review’s objectives, we solicited the opinions of key stakeholders on the revisions’ effects and clearly presented them as opinions in both the title and body of the report. When, in this context of scarce data, many state program managers responsible for program implementation express concerns about the revisions’ adverse effects, we believe it would be prudent to take these concerns seriously. As such, GAO makes a number of recommendations to (1) collect data on and monitor the revisions’ actual impacts, (2) consider stakeholders’ opinions before further revising the NSR program, and (3) provide state and local agencies assistance in implementing the revisions. Taking this latter action will help to address EPA’s concerns that the respondents’ may not have fully understood the revisions.

Second, we developed the survey using standard survey research principles and took steps to minimize question bias, including conducting several pretests, asking respondents about both the positive and negative effects of the revisions, and subjecting the survey to a thorough review by a GAO survey specialist not involved in its development. To ensure the independence of our efforts, we do not routinely seek the subject agency’s review of our survey instruments. Nonetheless, we worked with NSR program managers within EPA to understand how the revisions would work in practice as well as their potential effects and used this information to design the survey questions.

Third, GAO surveyed the universe of state program managers because we believe they are in the most informed position to determine the revisions’ impacts on their programs and workloads. Furthermore, in the survey’s instructions we asked the managers, when answering the questions, to coordinate with the officials within their agencies as they deemed necessary and appropriate. As such, we relied on each state agency’s own procedures for completing and reviewing the survey responses. In addition, we surveyed select stakeholders representing environmental, health, and industry interests. Because of the large number of other affected stakeholders, it was not feasible to survey the universe. Instead, we surveyed 30 organizations representing diverse perspectives and chose them because they were involved in national NSR policy decisions. A number of these groups represent the views of large numbers of industrial companies or have a national membership base.

Finally, GAO believes EPA’s assertion that we should have evaluated whether the opinions of state officials responsible for program implementation were consistent with “facts” cited in EPA’s analyses is disingenuous. As we point out in our previous and current work, these “facts” are largely assertions based on EPA’s limited analysis of the revisions’ effects. We therefore did not use the agency’s analysis as a benchmark to evaluate the survey responses. We further believe that the state program managers provided plausible explanations for why their views disagreed with those asserted by EPA.

Appendix III contains the text of EPA’s letter along with our detailed responses to the issues raised. EPA also provided a number of technical comments, which we have incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 10 days from the report date. At that time, we will send copies of the report to the EPA Administrator and other interested parties. We also will make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov.

If you have any questions about this report, please contact me at (202) 512-3841 or stephensonJ@gao.gov. Key contributors to this report are listed in appendix IV.

John B. Stephenson
Director, Natural Resources and Environment

Please see the complete document at the GAO website: