1721 Federal Regulations

The Clean Air Act (1963) imposes a complex regulatory structure on air pollution sources (Leonard, 1997). From a historical perspective, the regulatory environment for a major emission source has been largely dependent on two factors: where the facility is located (that is, whether in an area meeting clean air standards or not) and the facility age (new or old source). At the federal level, the CAA and its various amendments (1965, 1967, 1970, 1977, and 1990) provide the critical statute for restrictions on electric generation technologies. Title I establishes national ambient air quality standards (NAAQS) that prescribe the maximum permissible concentration of pollutants allowed in ambient air (Environmental Protection Agency, 1996). Specifically, the act requires the United States Environmental Protection Agency (EPA) to establish standards for six criteria pollutants: CO, NOx, SO2, PM, ozone, and lead. Regions of the country where air pollution levels persistently exceed these standards are called non-attainment areas.

In general, the responsibility for reducing air pollution levels has been assigned to the states. Each state is required to promulgate a state implementation plan (SIP) providing for the implementation, maintenance, and enforcement measures necessary to attain the ambient air standards by the deadlines prescribed by the CAA. The EPA has the responsibility of reviewing each state's SIP, and is authorized to direct a state to revise its SIP if necessary. Two elements that an SIP must contain are federal new source performance standards (NSPS) and new source review (NSR) rules. The NSPS specify maximum pollutant emission rates for various processes, including combustion equipment. The EPA has promulgated new source performance standards for SO2, NOx, and PM. NSPS are based on the level of control that can be achieved by the best demonstrated technology. NSR rules govern the permitting of new emissions sources and are triggered if a new source emits or has the potential to emit at an annual rate specified by the NSPS. NSR rules distinguish between attainment and nonattainment areas with less stringent prevention of significant deterioration (PSD) rules applying to attainment areas. The trigger for NSR PSD rules is 250 tons/year for any regulated pollutant. Nonattainment areas are differentiated in classes based on severity of ambient pollutant concentrations: marginal, moderate, serious, extreme, and severe (Table 1.11).

TABLE 1.11

New Source Review Thresholds for Nonattainment Areas

Pollutant

Area Designation

Threshold (tpy)a

Ozone precursors (NOx, VOC)

Inhalable particulate matter (PM10) and PM10 precursors (NOx, SO2, VOC) Carbon Monoxide Nitrogen Oxides Sulfur Dioxide

Marginal, moderate

Serious

Severe

Extreme

Moderate

Serious

Any nonattainment area

100 50 25 10 100 70 100

a Short tons per year.

Source: Leonard, R.L., Air Quality Permitting, CRC Lewis Publishers, Boca Raton, FL, 1997 (with permission).

In nonattainment areas, in order to construct and operate a new power plant or DG (or to make major modifications to an existing plant), the owner needs to obtain a permit from the state environmental agency if NSR levels are exceeded. The NSR process requires the owner to analyze alternative locations, sizes, production processes, and control techniques, and to demonstrate that the plant benefits outweigh its environmental and social costs. Facilities are also required to have control technology that meets the standard for the lowest achievable emission rate (LAER). The control technology required to meet the LAER is established by each state on a case-by-case basis for each emission source as it is permitted.

Furthermore, the owner of the plant is required to purchase offsets for each criteria pollutant that is in nonattainment. The EPA requires that emission offsets provide a positive air quality benefit to the area. Owners are, therefore, required to obtain more than one offset for each unit of pollutant emitted. The offset ratio depends upon the extent to which the region is in nonattainment. This offset requirement has promoted the establishment and trading of emission reduction credits for NOx and VOCs among industries in 12 states.

The process for reviewing new facilities is slightly different in attainment areas. Owners are also required to obtain permits to construct and operate new plants (or make major modifications to existing plants) to ensure that new pollution sources do not make the region slip into nonattainment. These PSD permits require a review of the air quality impacts of the proposed facility. New plants are required to install best available control technology (BACT) for all pollutants regulated under the CAA. The control technology required to meet BACT standards is established by each state on a case-by-case basis for each emission source.

Historically, less stringent controls apply to existing electric utility facilities in attainment areas due to grandfathering statutes. This provides clear advantages when competing with new sources that require specific emission controls as specified by NSPS (Biewald et al., 1998). This situation may be changing, as a host of new regulatory initiatives could result in more stringent controls for existing facilities, especially coal-fired facilities. These controls could have a significant influence on the cost of power from coal-fired facilities, making them less attractive in a competitive marketplace.

1.7.2.1.2 National Environmental Policy Act

The National Environmental Policy Act (1969) requires the federal government to consider, at all stages of decision making, any federal action that could significantly affect the quality of the human environment. The NEPA framework includes a requirement for preparation of an environmental impact statement (EIS) if the project is deemed significant based on an initial environmental assessment (EA). If a federal government agency requires the preparation of an EIS, it could influence the decision to install a DG facility.

1.7.2.1.3 Other Federal Regulations

While air contaminant regulations are expected to be the dominant regulatory hurdle for distributed generation technologies, a DG project could be impacted by a suite of other federal laws. These include the Clean Water Act

(1987), Resource, Conservation and Recovery Act (1976), Occupational Safety and Health Act (1970), Toxic Substances Control Act (1976), Endangered Species Act (1973), Coastal Zone Management Act (1972), and Historic Sites Act.

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