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Coal state lawmakers try to shield more power projects from New Source Review

As the Trump administration mulls a new rule to reduce utility sector carbon emissions, a trio of coal-state lawmakers has introduced a set of bills to exempt pollution control installations and other projects from triggering tougher Clean Air Act requirements for power plants.

Republican U.S. Reps. Morgan Griffith of Virginia and David McKinley and Evan Jenkins of West Virginia introduced two bills in late June that would amend Section 111 of the Clean Air Act, with respect to which projects are considered modifications of a power plant or other industrial facility that must go through the New Source Review, or NSR, permitting process. Currently, the NSR program can require facilities that add pollution controls or make other nonroutine modifications to match the emissions rates of some of the lowest-emitting plants in the country or buy offsets from other nearby facilities to help satisfy National Ambient Air Quality Standards, or NAAQS.

Critics of the NSR program say it impedes construction and expansion of power plants, particularly as the U.S. Environmental Protection Agency has toughened NAAQS for criteria pollutants such as ozone. The Trump administration could try to ease NSR obligations as part of a broader push to reduce the number and severity of federal regulations, but some lawmakers in Congress want to make changes at the statutory level.

To that end, Griffith, McKinley and Jenkins cosponsored House Bill 3127, which would exclude energy efficiency, pollution control and reliability projects from the definition of "modification" under Section 111 of the Clean Air Act. The lawmakers also sponsored H.R. 3128, which would change the "emissions increase test" for the NSR program so that new source requirements would be triggered based on a plant's hourly rate rather than annual emissions.

Griffith said the bills will allow power generators and manufacturers to upgrade their facilities without having to undergo the "burdensome" NSR process.

"We should not penalize companies upgrading existing facilities while improving efficiency, trying to reduce pollutants, or strengthening grid reliability," he said. "This will remove a roadblock that has discouraged companies from upgrading their facilities for these purposes."

The National Mining Association, or NMA, which represents U.S. coal producers, praised the legislation. "NMA welcomes this effort to correct structural deficiencies in the law that slow and possibly block projects that are designed to improve efficiency and productivity of industrial sources, including power plants," the group's Senior Vice President Bruce Watzman said.

The Edison Electric Institute, which represents investor-owned utilities and met with lawmakers on the bills during the second quarter of 2017, said July 28 that it still was reviewing the legislation.

Environmental groups worry the bills would allow electric generators to skirt tougher emissions standards that could result from an NSR review. They also questioned whether the proposals would have enough support to avoid a filibuster in the U.S. Senate, where Republicans hold a narrow 52-seat majority.

"This is a clear attempt to let the coal industry off the hook and pollute our air and water at the expense of public health," Sierra Club Associate Legislative Director Matthew Gravatt said. "I wouldn't expect Congress to sign off on proposals like these."

Potential roadblocks

Although coal-fired generators generally would welcome a higher NSR threshold, the bills could leave many plant upgrades subject to the program's requirements. H.R. 3127 defines efficiency projects as those that result in a lower maximum hourly carbon emissions rate and do not increase the maximum hourly emissions rate for any criteria pollutants beyond either the facility-wide or unit-specific permitted emissions rate.

A lobbyist with one large electric utility, who asked not to be identified, said many projects that improve combustion efficiency, including turbine upgrades, may not be measurable through an emissions test. In addition, environmental groups could view the efficiency project definition as "an attempt to re-write the historic emissions tests and allow massive increases."

He also said H.R. 3127's exemption for pollution control projects is similar to a prior exclusion that the U.S. Court of Appeals for the District of Columbia Circuit rejected for potentially allowing unlimited collateral emissions increases for some pollutants as long as emissions fell for another. The utility source further questioned the EPA's ability to factor reliability upgrades into its environmental reviews.

"Reliability projects add a lot of concepts that EPA and state environmental agencies have no familiarity with, and are not in a position to form judgments about," he said.

H.R. 3128 may have more of an impact on which projects trigger NSR. That bill would define a project modification requiring NSR permitting as any upgrade that increases the maximum achievable emissions rate compared with the original facility design or raises a source's maximum hourly emissions rate beyond what was achieved there in the 10 years before the modification.

That definition "would exempt many projects and might be manageable on a prospective basis more easily than some of the suggestions in House Bill 3127," the utility lobbyist said.

Both bills were referred to the House Energy and Commerce Committee, which has yet to schedule a hearing or markup for the proposals. Congress will be preoccupied in the coming months with the debt ceiling, tax reform, spending bills and other legislation, which could make consideration of H.R. 3127 and H.R. 3128 difficult.

But even without Congress, the EPA could seek to change the NSR program to exempt more projects. Megan Berge, a partner with Baker Botts LLP's environmental practice, said the George W. Bush administration made new NSR rules, some of which were overturned in court. Although certain of the program's requirements are statutory and need congressional approval to change, "a lot of things are left to agency discretion," she said.

The future of the NSR program could be particularly crucial if the EPA moves ahead on regulating carbon emissions from power plants. The Trump administration is preparing to throw out the Obama administration's carbon-cutting Clean Power Plan but is expected to craft a successor rule that will require existing plants to become more efficient, potentially triggering new source review.