Comments of Eliot Spitzer, Attorney General of the State of New York, on the U.S. Environmental Protection Agency's 90-Day Review of the Clean Air Act New Source Review Program

July 2001

I am pleased to present these comments in response to the review by the U.S. Environmental Protection Agency (EPA) of the Clean Air Act New Source Review (NSR) program as ordered by President Bush's May 2001 National Energy Policy Report. I have already testified before the Senate on the benefits and realities of the NSR program and incorporate that testimony here. (See Exhibit A.)

The Report ordered EPA to review the NSR program and also ordered the U.S. Department of Justice (DOJ) to review, in particular, the ongoing NSR enforcement cases. As New York is deeply involved in enforcement of the NSR program with respect to coal-fired power plants both in New York and in upwind states, these comments address both the program as a whole and the enforcement cases.

SUMMARY OF COMMENTS

I strongly urge EPA and DOJ to re-affirm the wisdom of the U.S. Congress and at least three former U.S. Presidents and continue the implementation and enforcement of the NSR program. To relax or weaken enforcement of the NSR regulations would be a major environmental and public health mistake. The public health and environmental threats that the NSR program addresses - respiratory diseases such as asthma, premature mortality from particulate pollution, smog, acid rain, and the degradation of coastal waters - are very real to millions of Americans. The nitrogen oxide (NOx) and sulfur dioxide (SO2) pollution from coal-fired power plants (not to mention the impacts from mercury and carbon dioxide emissions) cost Americans thousands of lives and billions of dollars each year.

The NSR program is a fair, effective and efficient way to reduce this pollution and these impacts. Congress, in originally establishing the program, recognized that the most cost-efficient time to install new controls was when a power plant was being built or modified. Congress also recognized the wisdom in allowing old plants to avoid the cost of pollution controls because such plants would soon reach the end of their useful lives. New and modified plants, Congress declared, should be as clean as technically feasible. The NSR cases do no more than enforce this simple and clear directive of Congress. Law enforcement must not be compromised at this critical time.

The arguments made by various coal companies in their efforts to eviscerate the NSR program are completely lacking in merit. As I have discussed in earlier testimony before the U.S. Senate, the NSR enforcement actions do not rely on a new interpretation of the law, but rather on regulations from the 1970s and EPA guidance memoranda from the late 1980s. In fact, the most recent NSR rules were issued by EPA almost 10 years ago, in 1992, during the first Bush Administration. The NSR program only requires pollution controls to be installed if there will be a significant net pollution increase from a project, so efficiency upgrades alone are not at all inhibited. Arguments that the NSR program prevents projects that could increase electricity without increasing pollution are simply untrue.

Industry also argues that the replacement of major power plant components such as reheaters, superheaters, and pulverizers, constitutes "routine maintenance" and thus is exempt from the NSR requirements. This argument, however, is contradicted by industry's own documents, showing that these replacements took months to undertake, costs millions of dollars, required thousands of hours to complete, were conducted pursuant to "life extension" programs, and had never been undertaken before on the units at issue. In order to give the word "modification" any meaning, as Congress obviously intended when it enacted the Clean Air Act, EPA must maintain its current course and require the plants that have undertaken these major upgrades to install the pollution control technology required under the NSR regulations.

It is important to note that the complaining power plants have always had available to them, but have failed to use, an agency procedure under which they could ask EPA for a "non-applicability determination." Under this procedure EPA would have informed these power plants whether the replacements they intended to undertake constituted modifications that triggered the NSR provisions. Having failed to utilize this procedure, however, these plants undertook the risk that their activities once found out would be deemed illegal; they cannot now be heard to claim that EPA is somehow being unfair.

Requiring these plants to install proper pollution controls is not only required under the law, it makes good economic sense as well. While the owners of coal-fired plants may make slightly less profit on the plants after installing pollution controls if they are deregulated, the plants will still be economical for them - without charging the public significantly more for their electricity. On the other hand, if the plants are not deregulated, as most are now, the utilities will be able to earn increased profits on the new investments in pollution control, while the public will pay rates for power approved by state public utility commissions. NSR relies on market mechanisms to achieve its policy objectives. By requiring the old plants to install pollution controls, the NSR program both levels the playing field for new power plants, and eliminates an unfair subsidy of many billions of dollars a year for old dirty power plants. The market cannot work with incentives of that size for dirty power.

Recent reports strongly re-affirm the benefits of the NSR program. In December 2000, the Energy Information Administration (EIA) issued a report, Analysis of Strategies for Reducing Multiple Emissions from Power Plants: Sulfur Dioxide, Nitrogen Oxides, and Carbon Dioxide (EIA Analysis) (relevant pages are attached as Exhibit B). [i] This report analyzed the emission reductions and electricity price implications of, among other things, the NSR enforcement cases. The EIA Analysis found that the NSR enforcement effort, especially if broadened to address all coal-fired plants, would decrease NOx and SO2 emissions by 60 to 80 percent. Moreover, the EIA Analysis concluded that such pollution reductions would have little to no impact on consumer electricity prices. In other words, effective law enforcement can clean the air and not hurt the rate-paying public.

Indeed, the opposite is the case: cleaning the air actually saves literally billions of dollars in health care and quality of life costs. Another recent study prepared by Abt Associates (Abt), applying standard modeling techniques, analyzed the human health implications of both power plant pollution and its reduction. This report found that coal-fired power plant emissions cause each year over 30,000 premature deaths, 20,000 hospitalizations, 600,000 asthma attacks and five million lost work days. Reductions in power plant emissions of approximately the same magnitude as would be achieved by the NSR cases would reduce these impacts by two-thirds. The report also calculated a dollar value for the reduction of mortality and disease using standard valuation methods and determined it to be over $100 billion per year.

In addition to these public health benefits, the NSR cases can achieve the very significant reductions in acid rain that we need to bring Adirondack and other Northeast lakes and ponds back to life. There is almost universal agreement that reductions in sulfur dioxide far greater than those under the 1990 Clean Air Act amendments are now needed. The NSR program can quickly and fairly achieve these reductions, as noted by the EIA itself. And with this reduction in acid rain, would come other environmental benefits such as reduced coastal water degradation and soil chemistry alteration. Moreover, even without a new program to address mercury emissions, the NSR cases could reduce mercury emissions very significantly, thus reducing the major source of the mercury that finds its way into the environment, into fish, and into humans.

Let there be no mistake: these NSR cases and the NSR program overall are not about some arcane law; they are about providing enormous benefits to the public health, environment, and the consumer. They reduce pollution; they do so in an economically fair and efficient way; they do not hurt the rate-payer; they help the taxpayer; and they dramatically improve life for millions of Americans. EPA and DOJ must re-affirm the NSR program; you must not reject or diminish it in any way.

It is possible that by ignoring the NSR program we may be able to obtain marginally more electricity in the near-term. But we can always find some short-term reason to sacrifice the environment. To do so, however, would be to jettison our long-term effort toward a healthy environment and a clean electricity supply for a short-term capacity boost. To do so would be to nullify much of the pollution control efforts made to date under Congress's Clean Air Act plan. To do so would be to render meaningless the enormous effort put in by the states to address this pollution and implement this program. And to do so would be to put the profits of a few energy companies over the health and well-being of millions of Americans and the environment. We must not abandon the Clean Air Act mid-stream.

In sum, I recommend that EPA and DOJ continue the enforcement and implementation of the NSR program. EPA and DOJ must continue working with the downwind states to finalize settlements in cases in which we have agreements-in-principle and continue to aggressively litigate those cases against companies refusing to reduce their pollution as Congress has required. By working together we can achieve great things for this country - clean air, better health, a safer environment, and a stronger electricity system. Separately, the northeastern states may be able to achieve some of those goals, but that is no reason for EPA and DOJ to abdicate their responsibilities. The federal government has a responsibility to all to provide a clean and healthy environment; it has a responsibility to continue aggressive prosecution of the NSR enforcement cases.