EPA proposed several alternative cost thresholds for  routine maintenance and repair below which modifications could be  considered exempt and solicited comments on the thresholds. In addition, during a  September 3, 2002, hearing before the Subcommittee on Public Health,  Senate Committee on Health Education, Labor, and Pensions, former EPA  Administrator Carol Browner testified that, among other things, she was  concerned that the revisions would “eliminate the very features of the  current law that provide transparency to the public—monitoring, record  keeping, and reporting.”

	Because EPA’s Assessments Showed That Some NSR Revisions Could Affect the Enforcement Cases, the Agency Made Changes before Issuing the Final and Proposed Rules

EPA enforcement officials assessed the potential impact of the NSR  revisions (before issuing them as final and proposed rules in December  2002) on the enforcement cases against coal-fired utilities and determined  that some of the revisions could have an impact. In part as a result  of the assessments, for the revisions that were included in the final rule,  EPA adjusted the content and wording of the language before issuing the  rule so that they were not expected to affect the cases. Furthermore,  some EPA enforcement officials and key stakeholders believe that the  announcement of the August 2003 final rule, in which EPA set a specific  cost threshold for routine replacement activities, could also delay  settlement of some of the cases and could affect judges’ decisions in the  cases about what remedies to apply to companies that are found to be in  violation of the old NSR rule. Therefore,  since this provision in the rule was not a significant change for the utility  industry, the EPA staff did not expect this provision to affect the cases. In general, EPA enforcement officials were  concerned that if the agency specifically proposed a definition of routine  maintenance that was different from the way the agency had applied the  exclusion in the past, defendants could delay the cases by arguing that  some of the facility changes under dispute in the lawsuits might be able to  qualify for an exemption from NSR. EPA Enforcement Staff and Key Stakeholders Believe the Possibility of Revising the Routine Maintenance Exclusion Delayed Settlement of Some Cases, and the August 2003 Rule May Have Additional Negative Effects

According to former and current EPA senior enforcement officials, despite  the agency’s efforts to minimize the impact of the final and proposed rules  on the enforcement cases, they believe the possibility that EPA could  revise the routine maintenance exclusion in ways that could improve the  companies’ legal positions in the cases had a detrimental effect on the  willingness of some companies to settle. For example, a company can  now determine on its own if there is a “reasonable possibility” that a  change could trigger NSR, but the rule is unclear about how companies  will make this determination and how the public can access information  about it. On the other hand, according to some state and local air quality agencies  and environmental groups, because a company can pursue a facility  change without an NSR permit under a PAL, as long as total facility  emissions do not increase, the public may have fewer opportunities to  provide input on a company’s decision to modify a facility, assess the  emissions created (including hazardous air pollutants that may not be  identified for monitoring under the PAL), and consider ways to control  them. These changes may still trigger state or local  requirements to obtain a permit and its associated public participation  rules, depending on the state or locality, but, as we have stated, the scope  of these requirements varies widely. The rule may also affect  judges’ decisions regarding whether the companies have to install  pollution controls, jeopardizing the expected emissions reductions. Recommendations for  To better ensure the ability of federal, state, local, and public entities to  Executive Action  monitor facility emissions and NSR compliance, we recommend that the  EPA Administrator better define what constitutes a “reasonable possibility” that emissions  after a facility change will trigger NSR requirements, require that companies maintain documentation on all “reasonable  possibility” determinations, and determine, with state and local air quality agencies, how to ensure public  access to company’s on-site information on facility changes and emissions. Appendix I: Objectives, Scope, and Methodology

Our objectives were to determine (1) whether EPA and DOJ assessed the  potential impact that issuing the final and proposed rules in December  2002 would have on enforcement cases pending against coal-fired utilities  and what the assessments indicated, and (2) what effect, if any, the final  rule might have on public access to information on facility changes and  the resulting emissions.
Why GAO Did This Study

Recent Environmental Protection Agency (EPA) revisions to the New Source Review (NSR) program--a key component of the federal government's plan to limit harmful industrial emissions--have been under scrutiny by the Congress, environmental groups, state and local air quality agencies, the courts, and several industry groups. The revisions more explicitly define when companies can modify their facilities without needing to obtain an NSR permit or install costly pollution controls, as NSR requires. GAO was asked to determine (1) whether EPA and the Department of Justice (DOJ) assessed the potential impact of the revisions on the ongoing enforcement cases against coal-fired utilities and, if so, what the assessments indicated; and (2) what effect, if any, the revisions might have on public access to information about facility changes and their resulting emissions.

What GAO Found

EPA staff assessed the potential impact of the NSR revisions on the utility enforcement cases and, according to current and former EPA enforcement officials, determined that some of the revisions could affect the cases. EPA staff discussed the potential effects of the revisions with DOJ. In part as a result of the assessments, EPA changed some of the revisions before issuing them as final and proposed rules in December 2002. Specifically, EPA changed the content and wording of some of the provisions included in the final rule and determined that the rule would not affect the cases. However, EPA enforcement officials were very concerned that the proposed rule--addressing when a company could consider a facility change "routine maintenance, repair, or replacement" and exempt from NSR--could have a negative impact on the cases. The concern was that proposing one specific definition for this exclusion that differed from the way the agency had applied it in the past could affect the cases' outcome. Consequently, EPA instead proposed several alternative definitions--different cost thresholds below which a company could make a change that is exempt--for public comment. Nevertheless, some of the enforcement officials and stakeholders believe that industry's knowledge that EPA could be defining the exclusion in terms more favorable to industry delayed some settlements while the rule was being developed, jeopardizing expected emissions reductions. Subsequently, in August 2003, despite seven ongoing cases, EPA announced a final rule specifying a 20 percent cost threshold below which a company could make certain changes and consider them routine replacement and exempt from NSR. EPA and DOJ maintain that the rule will not affect the cases because it applies only to future changes. But some EPA enforcement officials and stakeholders are concerned that even if judges find companies to be in violation of the old rule, judges could be persuaded, when setting remedies, to not require the installation of pollution controls--limiting emissions benefits--because under the 20 percent threshold, most of the facility changes in dispute would now be exempt. Certain provisions in the December 2002 final rule could limit assurance of the public's access to data about--and input on--decisions to modify facilities in ways that affect emissions. This would make it more difficult for the public to monitor local emissions, health risks, and NSR compliance. Under the rule, fewer facility changes may trigger NSR and thus the need for permits and related requirements to notify the public about changes and to solicit comments--unless state and local air quality agencies have their own permit and public outreach rules. However, the scope of these state and local rules varies widely. Also under the rule, companies will now determine whether there is a "reasonable possibility" a facility change will increase emissions enough to trigger NSR--in effect policing themselves. But EPA has not defined "reasonable possibility," required that companies keep data on all of their reasonable possibility determinations, or specified how the public can access the data companies do keep on site.