October 14, 1988 Final Determinations Regarding the Applicability of the Act's NSPS and PSD Requirements to the Proposed Life Extension Project at the Port Washington Steam Electric Generating Station 4.38

4.38

Mr. John W. Boston
Vice President
Wisconsin Electric Power Company
Post Office Box 2046
Milwaukee, Wisconsin 52301

Dear Mr. Boston:

As you requested in our meeting on September 15, 1988, I have made final determinations regarding the applicability of the Clean Air Act's New Source Performance Standards (NSPS) and Prevention of Significant Deterioration (PSD) requirements to the proposed life extension project at the Port Washington steam electric generating station, which is owned and operated by Wisconsin Electric Power Company (WEPCO). For the reasons discussed below, I have determined that, as proposed, the renovations at Port Washington are subject to both PSD and NSPS requirements. However, EPA remains willing to work with you regarding methods of compliance. As we have discussed, one alternative would be to reconfigure the project such that no emissions increases would occur. My staff is ready to meet with you to discuss these matters at any time.

I. BACKGROUND

On September 12, 1988, David Kee, Director, Air and Radiation Division, EPA Region V, wrote you regarding PSD and NSPS coverage of the Port Washington renovations. Enclosed with that letter was a memorandum dated September 9, 1988 from Don R. Clay, Acting Assistant Administrator, addressing the background of the Port Washington project, and analyzing at some length the relevant interpretative issues. For purposes of brevity, I will not repeat that material here, but rather incorporate it by reference.

The September documents concluded that the life extension project, as proposed, likely would be subject to PSD and NSPS requirements. However, EPA also stated that final applicability determinations could not be provided at that time in the absence of certain factual information. In our subsequent meeting you requested that EPA furnish final determinations, and agreed to provide the necessary additional information. You also asked EPA to reconsider certain of the conclusions in Don Clay's memorandum. These matters are discussed below.

II. FINAL DETERMINATIONS

Your staff has responded to our requests for additional information, and I want to thank you for WEPCO's continued cooperation in doing so. Based on this, and the other information in EPA's files, I now make the following final determinations:

(1) The life extension project, as proposed, will render WEPCO's Port Washington plant subject to the PSD requirements of Part C of the Clean Air Act as a major modification within the meaning of the Act and the EPA regulations at 40 C.F.R. Section 52.21.

(2) The proposed life extension project will render each of the five steam generating units at the Port Washington plant subject to the NSPS requirements of section 111 of the Clean Air Act as a modification within the meaning of the Act and the EPA regulations at 40 CFR Part 60.

In reconsidering the memorandum and letter of September 9 and 12, I have taken a careful look at the issues you raised in our meeting: whether the renovations are routine; whether EPA has treated similar projects in a different fashion; and whether there would be an emissions increase due to a physical or operational change. However, I find no reason to depart from the reasoning of the September documents. Accordingly, I conclude that WEPCO's life extension project, if carried out as proposed, will involve a substantial and non-routine renewal of the Port Washington facilities that will significantly increase both hourly maximum and annual emissions of air pollutants.

Specifically, regarding the nature of the proposed work at Port Washington, I find that these renovations constitute physical changes for PSD purposes within the meaning of 40 C.F.R. Section 52.21(b)(2)(i), and physical and operational changes for NSPS exclusions for routine maintenance, repair, and replacement, nor the exclusions for increases in production rate or hours of operation. (See 40 C.F.R. Sections 52.21(b)(2)(iii) and 60.14(e)).

Regarding the emissions changes from the life extension project, based upon the emissions data and certain factual assertions submitted by WEPCO, I find that the Port Washington renovations will result in a significant net increase in emissions of several pollutants for PSD purposes within the meaning of 40 C.F.R. Section 52.21(b)(2)(i), (b)(3), and (b)(21). I find further that the renovations will result in an increase in the emission rate of several pollutants at each of units 1-5 for NSPS purposes within the meaning of 40 C.F.R. Section 60.14(a) and (b).

Enclosures A and B detail the emissions changes underlying these findings for PSD and NSPS purposes. As indicated above, EPA's calculations and determinations are based on data supplied by WEPCO. We will use the data in Enclosures A and B in the event you would like to work with us to establish an acceptable arrangement for satisfying PSD and NSPS requirements through the addition or enhancement of pollution control equipment, physical capacity restrictions, or, in the case of PSD, federally enforceable limitations on potential emissions.

III. DISCUSSION

As you requested, I have reconsidered the question of whether the physical and operational changes at Port Washington are routine, whether applying PSD and NSPS here would be inequitable in light of EPA's past treatment of renovation projects, and whether the renovations will result in emissions increases. These matters are addressed below, as is EPA's reasoning with respect to the baselines for calculating the PSD and NSPS emissions increases reflected in Enclosures A and B.

Regarding the question of routineness, the renovations involve the replace of steam drums, air heaters, and other major components that are integral to the continued operation of the source. The work will not simply maintain the facilities in their current state, but rather will significantly enhance their present efficiency and capacity, and substantially extend their useful economic life. In addition, the work called for here is rarely, if ever, performed. Moreover, this work is costly, both in relative and absolute terms. Based on these and other factors, I reaffirm Don Clay's findings on the non-routine character of the Port Washington changes. The September 9 memorandum contains a complete discussion of EPA's reasoning on this issue.

On the related equity question, I find no inconsistency here with EPA's prior determinations regarding routine and non-routine changes. I note initially that PSD and NSPS applicability determinations are made on a case- by-case basis. Thus, it was very difficult to analogize to other projects, which almost inevitably present significant factual differences. Nevertheless, my staff has reviewed the additional material you submitted on September 19, and September 27, 1988 regarding certain other renovation projects, and has informally surveyed EPA Regional Offices and state agencies.

I have concluded that none of the four steam drum replacements identified in your September 19 submission are sufficiently similar to the Port Washington project to support determinations of nonapplicability in this matter. The Carolina

Power and Light case involved a faulty steam drum replaced prior to the initial start-up of a new unit, and would not have increased emissions for PSD or NSPS purposes. The Great Western Sugar example did not involve a utility boiler, and was too small to be affected by NSPS. The Ashland Oil facility was not at a utility, involved a waste heat boiler that was not fossil-fuel fired, and hence, was not an emissions unit subject to PSD or NSPS. The Algoma Steel Co. facility was not a utility boiler, and not located in the United States.

In addition, the informal survey conducted by the Office of Air and Radiation disclosed no closely analogous cases that were ever reviewed by EPA headquarters for purposes of PSD or NSPS. In particular, EPA found no examples of steam drum replacement at aged electric generating facilities. Moreover, EPA could find no examples in which the Agency had analyzed and issued an applicability determination for a "life extension project" for any category of major source. Regarding the four utility projects identified in your September 27 submission, I note that they do not involve steam drum replacement. In addition, permit applications were not submitted to the state agencies for the Duke Power and Texas Utilities projects you cite. Consequently, they were not reviewed by any air pollution control agency. The Cincinnati Gas and Electric project was reviewed by the state, but not EPA. The state determined, and EPA Region II concurred, that the Hydraco Enterprises project was not subject to PSD based on a net decrease in emissions of all pollutants. Our informal survey and review of the projects you identified reveal that major construction activities undertaken by utilities that may be subject to Clean Air Act requirements have not been brought to the attention of EPA. The Agency is considering what steps may be necessary to address this situation.

EPA has discovered only two state agency determinations addressing life extension questions in a manner possibly inconsistent with EPA's analysis of the Port Washington project. These instances, which apparently were not brought to EPA's attention prior to the states' determination, do no create an inequity that would justify a different conclusion by EPA in this case.

As to the question of emissions increases at Port Washington, I believe that EPA has properly interpreted the PSD and NSPS regulations as applying to increases in emissions due to increases in hours of operation or production rate, where, as here, such operational or production increases are closely related to physical or operational changes. A contrary interpretation would allow even massive emissions increases stemming from significant new capital investment -- as distinguished from routine fluctuations in the business cycle --

to escape scrutiny under the Clean Air Act simply because the new investment did not involve an inherently more polluting production process. I do not believe that Congress intended such a result.

I would like to point out that the figures on emission increases in Enclosures A and B reflect my conclusions regarding the proper points in time from which to calculate emissions changes. For PSD, I have determined under 40 C.F.R. Section 52.21 (b) (21) (ii) that the two-year period of 1983 and 1984 -- prior to the source curtailments due to discovery of cracks in the rear steam drums -- are more representative of normal source operations than the most recent two-year period. This conclusion is appropriate in light of WEPCO's historical operations.

As to NSPS, there is no "representative emissions" concept under that program. Rather, under the circumstances presented by this case, the baseline emission rates for units 1 - 5 are determined by hourly maximum capacity just prior to the renovations. At this time, EPA is relying on the actual operating data you submitted to determine current maximum capacity. Although EPA is certainly open to further discussion on this point, the information contained in your September 27 and October 11, 1988 submissions is inadequate to support WEPCO's assertions that higher-than-actual capacities could be achieved on an economically sustainable basis. For example, you indicate that operation at higher levels at units 1-4 "could increase equipment deterioration thus causing further damage." Regarding Unit 5, you state that " safety concerns" dictated the decision to shut down that unit. Based on this information, we are unable to rely on WEPCO's statements as to maximum "achievable" capacity in determining the emissions changes at each of these units. Thus, for example, in the case of Unit 5, the current capacity must be regarded as zero.

IV. CONCLUSION

In adopting the PSD and NSPS programs, Congress intended to address the type of long-term capital investments in pollution-emitting facilities at issue in the Port Washington life extension project. Thus, as proposed, these renovations would be subject to the requirements of both programs. However, as indicated above, my staff remains ready to work closely with WEPCO to discuss specific pollution control equipment and permitting measures that would minimize the cost to WEPCO of complying with the requirements of the Clean Air Act. I have asked Don Clay to work with you in seeking a final resolution of the compliance issues by December 1.

Again, thank you for your cooperation in this matter.

Enclosures

cc: Senator Robert W. Kasten, Jr.
Representative F. James Sensenbrenner, Jr.
Don Clay, EPA (ANR-445)
David Kee, Air & Radiation Div., Region V

NOTE: PSD applicability for the other PSD regulated pollutants listed at 40 CFR Section 52.21 (b)(23)(i) and (ii) has not been determined at this time.

1) Average emissions for two-year period defined by calendar years 1983 and 1984.

2) As calculated by WEPCO based on 1992 coal type, actual emissions after ESP, and an annual capacity utilization factor of 90%.

3) An EPA estimate of potential emissions, based on existing federally enforceable limits (i.e., applicable SIP), may be higher. The indicated PSD applicability determination would, however, not change.

NOTES:

(a) With less add-on control than NSPS requirement, emissions (lb/hr) would not increase and NSPS would not apply.

(b) Because of planned ESP upgrade, PM emissions (lb/MM Btu) after renovation are expected to be less than NSPS requirement. However, NSPS would require CEMS for opacity.

(c) Because arch-fired boilers are used at Port Washington, current NOx emissions (lb/MM Btu) are expected to be less than NSPS requirements. However, NSPS would require a CEMS for NOx.