3
Emission Sources Subject to New Source Review and Technology Options

INTRODUCTION

The purpose of this chapter is to address the following key questions:

  • What source categories account for a substantial portion of permitting activity pertaining to modifications under New Source Review (NSR)?

  • Are modifications an important part of all NSR permitting?

  • What is the current status of state permitting programs and availability of permit data?

  • What is the correct status of state permitting programs and availability of permit data?

  • What are the most common kinds of repairs and replacements in selected industries?

  • What are the typical technology options or considerations regarding those source categories?

The answers to those questions provide insight into the emissions, energy use, and other implications of technological choices regarding preventive measures, repairs, and replacements. In this chapter, we use language that implies the colloquial meanings, as opposed to the “legal” terminology of maintenance and modification as these terms are used in NSR permitting. It is common in many industries to refer to repair and replacement activities as maintenance (in a nonlegal sense) and for maintenance costs to be considered a routine part of the annual operating cost of a facility. To avoid



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New Source Review for Stationary Sources of Air Pollution 3 Emission Sources Subject to New Source Review and Technology Options INTRODUCTION The purpose of this chapter is to address the following key questions: What source categories account for a substantial portion of permitting activity pertaining to modifications under New Source Review (NSR)? Are modifications an important part of all NSR permitting? What is the current status of state permitting programs and availability of permit data? What is the correct status of state permitting programs and availability of permit data? What are the most common kinds of repairs and replacements in selected industries? What are the typical technology options or considerations regarding those source categories? The answers to those questions provide insight into the emissions, energy use, and other implications of technological choices regarding preventive measures, repairs, and replacements. In this chapter, we use language that implies the colloquial meanings, as opposed to the “legal” terminology of maintenance and modification as these terms are used in NSR permitting. It is common in many industries to refer to repair and replacement activities as maintenance (in a nonlegal sense) and for maintenance costs to be considered a routine part of the annual operating cost of a facility. To avoid

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New Source Review for Stationary Sources of Air Pollution confusion with legal terminology, in this chapter we use the terms repair and replacement instead of maintenance and modification. The main focus here in terms of pollutants is on selected criteria pollutants, especially sulfur dioxide (SO2) and oxides of nitrogen (NOx) but also including carbon monoxide (CO), particulate matter (PM) with an aerodynamic diameter smaller than about 10 µm (PM10), and PM with an aerodynamic diameter smaller than about 2.5 µm (PM2.5). Volatile organic compounds (VOCs), which are ozone precursors, are also included. With respect to identifying technology options, the focus here is on the current status of emission-source technologies and current options for repair and replacement. However, because technology changes, explicit consideration is given to the process of technology change and the implications for technology change in the future. Furthermore, we consider both pollution control and pollution prevention. Typically, pollution control refers to “end-of-pipe” techniques for removing pollutants from an exhaust gas after they have been formed in an upstream process. For example, in a coal-fired power plant, NOx, SO2, and PM are formed during combustion. Postcombustion control technologies—such as selective catalytic reduction, flue-gas desulfurization, and electrostatic precipitation, respectively—can be used to reduce or capture those pollutants. In contrast, pollution prevention is aimed at reducing or eliminating sources of pollution, typically through feedstock substitutions or process alterations. For example, in the case of a coal-fired power plant, methods that control and stage mixing of fuel and air more carefully can prevent the formation of a portion of NOx that otherwise would have been created, and evaporative VOC emissions can be prevented by substituting water-based solvents for VOC-based solvents in a manufacturing facility. In addition, cost is always a consideration in evaluating and choosing options for repair and replacement. Therefore, cost implications of alternatives for repair and replacement are summarized. OVERVIEW OF NEW SOURCE REVIEW PERMITS The purpose of this section is to identify and evaluate the frequency of NSR permitting activity with respect to industrial categories for the purpose of determining which emission sources represent the highest priority for assessment. However, a substantial challenge is that there is not a readily available database that summarizes NSR permitting activity. For example, an Environmental Protection Agency (EPA) database1 (EPA 2004d) containing case-specific information on best available control technology (BACT) and lowest achievable emission rate (LAER) does not readily distinguish 1 The database is referred to as the RACT-BACT-LAER clearinghouse. RACT means reasonably available control technology.

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New Source Review for Stationary Sources of Air Pollution between permits for new sources and permits for modifications. In principle, such data could be obtained individually from each state, but the availability of such data varies among states. An overview of permitting activity was gleaned from information provided by EPA during preparation of the committee’s interim report (NRC 2005), supplemented with information obtained in the intervening period. We provide here a summary based on the interim report followed by a summary of the additional information. In its interim report, the committee obtained data provided by EPA as the basis of a summary of permitting activity. That information is included in Appendix D. The data provided by EPA are unpublished, were not subjected to review, and have not been distributed outside EPA. The data were based on information collected internally by EPA from its regional offices that were obtained from state and local permitting authorities. They were summarized by EPA for the committee in terms of the NSR permitted emissions (in tons) by two-digit Standard Industrial Classification (SIC) code and by number of permits. Permits were categorized as “greenfield,”2 new at existing sources, and modifications. The main focus here is on modifications. The data do not include information on facilities that made modifications but did not obtain permits via the NSR program. Although the information presented in the table is sorted by pollutant, it is possible for a modification to involve more than one pollutant. For NOx, the largest share of modification permits—in both number of permits (46%) and NSR permitted emissions (35%)—was for SIC type 49 (electric, gas, and sanitary services).3 SIC type 49 includes electricity-generating plants of all types, and most of the permits and permitted emissions were for SIC code 4911, electric services. SIC types 32 (stone, clay, and glass products) and 26 (paper and allied products) also had a large share of the reported NSR permitted emissions for modifications (27% and 10%, respectively) but substantially fewer than for SIC type 49. For SIC type 32, the most important source category was SIC code 3241, hydraulic cement. Pulp mills (SIC code 2611) were the most commonly permitted source for modifications under SIC type 26. NOx emission sources at these types of facilities are typically industrial or electricity-generating-plant furnaces but can include a variety of other combustion-based sources, such as heaters, kilns, and ovens. For SO2, the key emission-source category in number of modification 2 A greenfield emission source refers to a source that is part of a newly constructed facility at a site where no facility had previously existed. 3 This group includes establishments primarily engaged in the generation, transmission, and/ or distribution of electricity or gas or steam. It also includes irrigation systems and sanitary systems involved in the collection and disposal of garbage, sewage, and other wastes.

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New Source Review for Stationary Sources of Air Pollution permits (31%) and NSR permitted emissions for modifications (27%) was SIC type 49 (electric, gas, and sanitary services), for which SIC code 4911 (electric services) was the most important subcategory. Other source categories with large totals for NSR-permitted emissions for modifications included SIC types 28 (chemicals and allied products, particularly industrial inorganic chemicals and phosphatic fertilizers) (24%), 32 (stone, clay, and products, particularly hydraulic cement) (22%), and 26 (paper and allied products, particularly pulp, paper, and paperboard mills) (14%). SO2 emissions typically are associated either with combustion of sulfur-bearing fuels or with processing of sulfur-bearing feedstocks or ores (such as crude oil and metal ores). For CO, the largest number of permits for modifications was issued to SIC types 49 (which includes electric, gas, and sanitary services) and 33 (which includes primary metal industries). With respect to NSR permitted emissions for modifications, the largest categories (in descending order) were SIC types 26 (paper and allied products, primarily paperboard mills), 32 (stone, clay, and glass products, primarily hydraulic cement and concrete block and brick), 33 (primary metal industries), 20 (food and kindred products, primarily cane sugar), and 49 (electric, gas, and sanitary services, primarily electricity-generating facilities). For PM, the highest frequency of NSR permits for modifications was for SIC types 49 (electric, gas, and sanitary services) and 33 (primary metal industries). Although both those types also contributed to the NSR permitted emissions for modifications, these emissions are widely distributed among six categories, including SIC types 28 (chemical and allied products, primarily carbon black, phosphatic fertilizers, and industrial organic chemicals), 26 (paper and allied products, primarily paperboard mills, pulp mills, and coated and laminated paper), and 20 (food and kindred products, primarily cane sugar). For VOCs, the highest frequency of permits for modifications was for SIC types 49 (electric, gas, and sanitary services), 33 (primary metal industries), and 24 (lumber and wood products). The largest share of NSR permitted emissions for modifications was for SIC types 26 (paper and allied products, with a large contribution from coated and laminated paper), 20 (food and kindred products, with a large contribution from soybean oil mills), and 24 (lumber and wood products). The summary above is subject to several key limitations. Complete permit data were not available for every permit issued. The survey was for a specific period (1997-1999); more-recent data were not available. Some sources accept limits on their emissions by state permits when modifications are made and so are not included in the EPA database. There is some uncertainty in estimated NSR permitted emissions because emission rates are often reported on a short-term basis and had to be converted to an

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New Source Review for Stationary Sources of Air Pollution estimate of annual emissions. Actual emissions are typically less than what is allowable. During the survey period, there was a noticeable increase in the number of new natural-gas-fired turbines permitted, which would affect totals for greenfield sites and new facilities at existing locations. However, that probably does not substantially affect the frequency of permits issued for modifications. The data do not include situations in which NSR permits for major modifications were not issued, such as for facilities that considered but decided against making a modification or facilities that made modifications but did not get an NSR permit for a major modification, whether because of noncompliance or because the source agreed to reduce emissions and obtained a state permit. Despite the limitations of the data, they are among the most comprehensive available. The summary of permitting activity from the interim report is updated here on the basis of data from EPA that include the period 1997-2002. These data are similar to those provided in summary form by EPA for the interim report, with the same caveats and limitations except that the update includes additional years (2000-2002) and the committee had access to the underlying data and so could generate its own summary tables. The information presented also includes Census data on the number of facilities in each state and EPA data on the number of emitting facilities and their total emission amounts. The information is summarized here with respect to the following two objectives: (1) determine the overall permitting activity when comparing electricity-generating and other sectors, and (2) for the SIC codes of sectors other than electricity generating that have the most permitting activity, identify the states with the largest share of this activity occurring. Table 3-1 compares NSR permitting activity by pollutant, selected states, and manufacturing vs electricity-generating sectors; and Table 3-2 compares permitting activity by pollutant, selected states, and selected manufacturing industries. Although the general conclusions are the same, the updated summary enables more specific insights regarding permitting activity on a state level and regarding the relative importance of electricity generation versus manufacturing sectors. On the basis of Table 3-1, in general, the emissions associated with permits for modifications are about 1.5-2.3% of the total emissions for a given pollutant for the manufacturing sector (including facilities not granted a permit in that period). For the electricity-generating sector, the emissions associated with permits for modifications are 0.1-1.1% of total emissions except for CO, for which they are 3.6% of total emissions. Overall, therefore, the amount of emissions associated with permits for modifications are about 1-2% of total emissions for most pollutants and types of industrial facilities. In general, 33.1-41.2% of all NSR permits issued in the manufactur-

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New Source Review for Stationary Sources of Air Pollution TABLE 3-1 NSR Permit Activity Pollutant, 1997-2002, Manufacturing versus Electricity Generationa Manufacturing Sector Number of Permits Permitted Emissions (tpy) Census Emissions State Tot Grn New Mod Grn New Mod Plants Plants tpy Carbon monoxide AL 24 2 12 7 385 6,729 5,353 5,444 386 190,106 WI 13 2 6 5 240 1,831 2,875 9,936 907 56,427 AR 12 1 5 6 3,694 3,054 12,206 3,316 96 93,876 LA 11 0 7 5 - 8,360 3,315 3,545 198 592,306 NC 10 0 4 5 - 14,067 4,470 11,306 886 63,506 FL 9 1 4 2 490 2,894 15,697 15,992 234 48,569 IL 8 0 4 4 - 5,701 515 17,953 1,644 114,147 TX 6 0 4 2 - 1,059 6,422 21,808 466 386,465 OH 5 0 2 5 - 7 5,589 17,974 342 701,527 TN 5 0 2 2 - 2,271 338 7,407 211 91,929 IN 5 1 3 1 135 1,180 272 9,303 341 237,363 Total 148 10 71 59 5,813 72,785 73,750 363,753 12,949 4,351,945 Nitrogen oxides AL 25 3 13 6 287 5,206 2,258 5,444 382 66,693 LA 18 1 11 5 186 3,442 2,504 3,545 214 146,447 FL 16 1 7 5 394 3,428 622 15,992 270 44,255 AR 10 1 3 4 406 86,700 2,936 3,316 102 31,170 IL 10 0 5 4 - 5,875 1,486 17,953 2041 102,435 WI 10 2 6 2 1,842 916 360 9,936 951 43,953 NC 8 1 3 3 767 1,127 4,175 11,306 912 43,718 TX 6 0 4 2 - 2,093 8,329 21,808 470 280,741 PA 6 0 2 1 - 4,889 916 17,128 476 110,514 TN 6 0 3 3 - 4,013 487 7,407 232 60,711 IN 6 1 3 2 75 1,022 2,102 9,303 358 43,912 OH 6 0 3 5 - 138 1,637 17,974 345 69,263 MN 6 0 3 1 - 1,194 106 8,091 278 20,808 CA 5 0 0 2 - - 1,577 49,418 1,804 73,855 Total 181 13 85 60 6,463 133,659 36,343 363,753 14,515 1,803,675 Particulate matter (PM10) AL 27 2 12 11 86 913 1,605 5,444 535 35,287 FL 26 2 12 10 24 1,401 2,561 15,992 351 13,846 WI 19 2 11 8 126 466 243 9,936 812 9,748 LA 18 1 9 7 14 1,223 447 3,545 202 30,334 NC 12 1 4 4 177 474 877 11,306 1,222 19,405 IL 9 0 4 4 - 736 132 17,953 2,615 45,727 AR 8 1 4 3 247 568 477 3,316 101 13,485 KY 8 0 4 2 - 172 734 4,218 511 10,773 OH 7 0 4 5 - 30 3,375 17,974 516 34,887 TN 7 0 3 3 - 658 169 7,407 164 2

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New Source Review for Stationary Sources of Air Pollution Electricity-Generating Sector Number of Permits Permitted Emissions (tpy) Emissions (tpy) Tot Grn New Mod Grn New Mod 31 10 12 1 7,970 14,664 4,545 12,005 18 0 9 3 - 3,729 444 7,856 16 6 3 0 5,687 1,705 - 12,413 19 4 3 3 3,151 674 1,780 35,071 13 5 2 2 2,285 625 235 13,848 61 29 11 8 8,119 2,636 5,563 23,297 36 4 3 0 5,688 9,153 - 16,536 62 5 2 0 3,850 887 - 101,286 12 0 3 0 - 2,563 - 15,868 3 1 2 0 1,284 433 - 10,935 17 8 1 0 5,444 221 - 16,930 557 166 104 39 119,977 63,637 24,090 677,206 33 15 11 1 5,349 5,236 892 235,480 18 4 1 3 1,962 559 929 178,812 66 29 12 13 22,507 3,214 20,826 310,279 16 6 3 0 4,431 1,418 - 65,935 37 4 2 0 1,666 4,379 - 330,587 19 0 13 4 - 5,231 886 120,543 13 5 2 0 5,389 2,040 - 274,309 62 5 2 0 4,149 346 - 502,201 27 3 3 0 650 142 - 275,072 3 1 2 0 2,032 643 - 311,678 17 9 1 0 4,287 132 - 402,124 13 0 3 0 - 3,462 - 557,700 4 1 2 0 782 737 - 127,232 14 8 0 1 1,498 - 247 34,541 572 180 108 46 120,370 45,036 31,234 7,193,141 28 14 11 1 2,407 2,237 259 9,080 55 30 9 7 2,706 672 1,125 11,419 14 0 8 2 - 1,250 164 5,968 10 5 4 2 1,230 252 352 3,850 11 6 4 2 882 281 87 14,357 10 6 3 0 1,700 1,389 - 12,090 8 5 3 0 1,966 676 - 1,930 8 4 2 0 2,017 511 - 19,393 3 0 3 0 - 458 - 16,562 1 1 1 0 214 54 - 33,764

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New Source Review for Stationary Sources of Air Pollution Manufacturing Sector Number of Permits Permitted Emissions (tpy) Census Emissions State Tot Grn New Mod Grn New Mod Plants Plants tpy Particulate matter (PM10) continued VA 7 0 3 4 - 161 90 5,986 854 13,514 IN 6 0 4 2 - 472 253 9,303 456 14,689 MS 6 2 1 3 111 13 116 3,008 103 7,712 TX 5 0 3 2 - 219 1,497 21,808 419 34,010 IA 5 0 1 3 - 197 628 3,749 32 7,379 SC 5 3 3 0 282 86 - 4,450 172 8,137 GA 5 0 2 2 - 55 236 9,083 145 29,335 CA 5 0 0 2 - - 222 49,418 1,520 15,891 Total 207 14 99 80 1,067 11,656 13,936 363,753 15,397 606,681 Sulfur dioxide FL 20 1 7 11 37 3,161 21,247 15,992 237 7,3497 AL 14 0 7 6 - 2,137 3,319 5,444 327 84,797 IL 8 0 3 4 - 16,392 2,747 17,953 1,130 240,356 WI 8 2 4 2 82 685 104 9,936 637 80,598 LA 7 0 5 2 - 10,763 1,995 3,545 132 151,246 NC 7 1 2 3 244 5,661 5,837 11,306 755 72,180 AR 7 1 2 3 791 232 10,401 3,316 86 54,095 OH 6 0 2 5 - 1,590 2,719 17,974 334 330,991 IN 6 1 3 2 39 384 2,400 9,303 330 125,434 TX 5 0 3 2 - 93 12,600 21,808 369 233,257 IA 5 0 1 3 - 5,913 2,132 3,749 30 67,285 TN 5 0 2 3 - 902 585 7,407 107 122,658 VA 5 0 2 2 - 612 117 5,986 664 97,063 Total 131 8 58 54 1,206 53,725 68,349 363,753 9,776 2,914,441 Volatile organic compounds WI 36 2 23 10 93 2,934 743 9,936 1,233 56,490 AL 27 3 8 10 2,023 1,308 1,843 5,444 566 88,546 LA 13 1 8 5 12 2,702 3,188 3,545 235 90,490 AR 12 0 7 3 - 1,696 837 3,316 117 33,988 FL 12 1 5 3 16 420 1,990 15,992 507 18,622 NC 11 0 7 3 - 2,372 1,148 11,306 1,156 78,718 GA 11 0 3 5 - 448 1,316 9,083 227 32,111 IL 10 0 4 7 - 6,645 2,443 17,953 1,741 136,081 SC 10 3 5 0 844 1,504 - 4,450 187 46,631 KY 9 1 2 4 107 609 4,116 4,218 559 57,951 MI 8 0 5 2 - 2,935 103 1,6045 765 71,594 MS 8 1 4 3 678 501 1,148 3,008 188 39,079 OH 8 0 2 5 - 3 2,251 17,974 820 77,781 TX 8 0 5 3 - 405 1,451 21,808 568 192,080 VA 8 0 3 4 - 991 301 5,986 822 55,460

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New Source Review for Stationary Sources of Air Pollution Electricity-Generating Sector Number of Permits Permitted Emissions (tpy) Emissions (tpy) Tot Grn New Mod Grn New Mod 17 8 5 1 1,547 417 115 4,825 8 7 1 0 1,436 22 - 13,307 11 8 3 0 1,497 848 - 1,964 5 3 2 0 702 139 - 23,372 3 1 2 0 213 93 - 3,020 2 2 0 0 266 - - 7,208 10 8 2 1 1,296 353 438 8,519 4 3 1 0 452 38 - 3,283 303 156 85 34 30,119 11,358 3,822 35,1410 53 27 11 7 5,991 616 20457 698,288 15 8 5 1 945 9,365 324 568,542 7 4 2 0 383 5,632 - 833,311 14 0 9 2 - 1,588 148 238,313 3 1 1 1 215 3 21 131,565 9 4 3 0 1,125 576 - 478,640 7 3 2 0 198 137 - 85,554 3 0 2 0 - 10,503 - 1,491,039 7 7 0 0 771 - - 986,065 5 3 2 0 312 122 - 684,100 1 0 1 0 - 0 - 173,424 2 1 1 0 428 95 - 546,745 14 7 5 1 657 357 14 215,026 244 126 68 22 43,919 37,075 25,334 13,421,975 16 0 10 3 - 344 185 942 22 11 7 1 1,983 853 598 2,991 7 3 3 1 94 97 97 14,964 8 5 3 0 733 857 - 1,390 51 27 8 5 1,224 211 313 4,279 11 5 3 2 177 73 23 3,504 9 4 3 0 303 114 - 1,236 7 4 3 0 792 252 - 6,198 2 2 0 0 607 - - 524 5 4 1 0 1,245 24 - 1,541 15 6 7 3 873 454 65 3,819 10 7 3 0 731 797 - 3,355 2 0 1 0 - 39 - 2,089 6 3 2 0 441 55 - 22,749 15 8 5 1 956 98 83 1,519

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New Source Review for Stationary Sources of Air Pollution Manufacturing Sector Number of Permits Permitted Emissions (tpy) Census Emissions State Tot Grn New Mod Grn New Mod Plants Plants tpy IN 7 0 5 2 - 696 382 9,303 658 41,206 MN 7 0 4 1 - 622 53 8,091 295 34,344 TN 7 0 2 3 - 126 479 7,407 392 108,326 IA 5 0 2 2 - 310 929 3,749 32 10,901 Total 230 12 112 77 3,773 30,483 25,255 363,753 19,625 1,714,148 aNSR permit data are unofficial from EPA—preliminary, unpublished, not subjected to review, or not distributed outside EPA; this may not be a complete list of all NSR permits obtained in 1997-2002. NOTE: Table lists only states with five or more NSR permits in manufacturing plants, but totals are for all states. ing sector and 9.0-25.6% in the electricity-generating sector were issued for modifications, depending on the pollutant. Thus, in both sectors, the number of permits issued for modifications is less than the number issued for either new facilities at existing locations or new and greenfield facilities combined. Typically, only a few states contribute substantially to the national total emissions associated with permits for modifications for a given pollutant and sector. For example, for NOx, five states (Florida, Arkansas, Texas, Ohio, and Alabama) contribute 61.4% of the total emissions associated with such permits in the manufacturing sector, whereas a different set of five states (Alabama, Illinois, Wisconsin, Florida, and Ohio) contribute 47.8% of the total permitted emissions associated with modifications in the electricity-generating sector. For SO2, only three states (Florida, Texas, and Arkansas) contribute 64.7% to emissions associated with modification permits in the manufacturing sector, and Florida alone contributes 80.7% to the total emissions for modification permits in the electricity-generating sector. In general, in the manufacturing sector, the top five states shown in Table 3-1 contribute 55.4-78.1% of the national emissions associated with permits for modifications. Similarly, the top five states contribute 47.8-82.8% of the emissions associated with modification permits in the electricity-generating sector. Therefore, in general, a substantial portion of the total emissions associated with permits for modifications can be attributed to a relatively small number of states.

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New Source Review for Stationary Sources of Air Pollution Electricity-Generating Sector Number of Permits Permitted Emissions (tpy) Emissions (tpy) Tot Grn New Mod Grn New Mod 7 7 0 0 573 - - 2,712 4 1 1 0 42 20 - 2,788 2 1 1 0 99 58 - 7,393 1 1 0 0 59 - - 613 279 133 79 29 17,087 5,187 1,667 160,666 ABBREVIATIONS: Census plants = number of establishments in manufacturing industries in state, taken from 1997 Economic Census; emissions = 1997 EPA point-source emission data (unpublished, not 1996 National Emissions Inventory [NEI] data), includes number of plants with any emissions of this pollutant and total emissions; Grn = Greenfield; Mod = modification; New = new unit at existing plant; Tot = total; tpy = tons per year. Alabama, Arkansas, Florida, Ohio, North Carolina, and Texas have substantial permitting activity in the manufacturing sector for modifications for three or more of the five pollutants listed in Table 3-1. Alabama, Florida, Louisiana, and Wisconsin have substantial permitting activity for modifications in the electricity-generating sector for three or more pollutants. Table 3-2 provides examples of the distribution of NSR permits among selected industries and states for five pollutants in the manufacturing sector. For example, for NOx, the paper and allied products industry contributed about 21.7% to the emissions associated with permits for modifications, and the largest share of the activity for this industry was in North Carolina. For SO2, the chemical and allied products industry and the paper and allied products industry combined for 57.5% of the total emissions associated with permits for modifications in the manufacturing sector. Most of that activity was in Florida, Arkansas, and North Carolina. For PM10, the two industries combined account for about half the total emissions associated with permits for modifications in the manufacturing sectors, with only a handful of states (e.g., Alabama, North Carolina, Kentucky, and Florida) contributing substantial shares. The primary metal industries and the paper and chemical industries had substantial permitting activity for CO, including permits for modifications totaling 1,000 tons/year or more in six states. VOC emissions tend to be dispersed among many industries. The paper and allied products industry contributed 28.3% of the total emissions associated with permits for modifications; a large share of the industry total was in

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New Source Review for Stationary Sources of Air Pollution quality of the pulp, and depending on the final product, bleach the pulp. The brownstock washers are used to separate the digestion liquids from the pulp material. The diluted black liquor that leaves the brownstock washers is collected for processing and recovery. Washed pulp (brownstock) is also passed through screens to remove excessively large (partially undigested) or small pieces of the pulp. A proper pulp size is needed to ensure the strength and quality of the final product. Some Kraft mills also use a bleaching process to convert the brown pulp to a white (bleached) pulp. That bleaching process involves the use of chemicals such as chlorine dioxide, hydrogen peroxide, and ozone to remove residual lignin from the pulp and results in a brightening or bleaching of the digested raw material. Pulp is introduced into a bleaching tower, bleached, and then washed to remove excess bleaching liquid. Papermaking The washed (and perhaps bleached) pulp is processed into a final product through a series of processes that vary based on the final product desired. The processes may involve blending hard and soft woods but always include discharge of a pulp slurry onto a forming fabric, dewatering, and drying. Blending of softwoods and hardwoods changes the ultimate strength and characteristics (such as softness) of the final product. Different wood types are processed in the digesters separately to ensure that proper digestion times and recovery techniques are used. (For example, softwoods contain high concentrations of terpenes; after the digestion process, gases emanating from the digester and blow tanks used for softwood processing may be condensed and recovered to form turpentine.) To achieve the desired final-product characteristics, softwood pulp and hardwood pulp may be blended. Not all papermaking processes employ a blending technique. Once the appropriate pulp characteristics are achieved, the pulp is sprayed onto large pressing and drying rollers where the paper product is formed, as indicated previously. The paper products that are formed and dried are ultimately converted to customer-usable products such as boxes, bags, tissue, etc. Chemical Recovery A critical component of a Kraft mill is the chemical recovery process. The black liquor generated in the digester is captured in the blow tanks and washer sections of a typical mill and then concentrated in evaporators and burned in a recovery boiler to recover Na2S. The molten smelt that is generated reacts further with lime to ultimately recover NaOH. The recovered Na2S and NaOH form the basis of the white liquor that is fed into the digesters as wood chips are processed.

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New Source Review for Stationary Sources of Air Pollution Typical Emissions and Control Equipment The primary emissions from a Kraft mill are VOCs, SO2, NOx, CO, total reduced sulfur (TRS), and PM. The emission rates of the pollutants depends on the wood products used (softwood versus hardwood) and on the final product of the mill (Davis 2000; Someshwar 2003). The National Council for Air and Stream Improvement and EPA have conducted studies to determine the typical emissions from specific mill processes (Someshwar 2003; NCASI 2004). Table 3-6 provides data on the types of compounds emanating from the major sections of a typical Kraft mill and the typical air-pollution-control devices that are used to reduce emissions (Davis 2000; Springer 2000; Someshwar 2003; NCASI 2004; Witkowski and Wyles 2004). The composition of emissions from the power boilers depends on the type of fuel used. Typical fuels and the percentage of mills using the specified fuel in steam-generating power boilers are as follows: natural gas, about 33%; wood, about 33%; coal, about 26%; and oil and miscellaneous fuels, about 8% (NCASI 2004). Although the use of waste bark may be an efficient use of resources, the combustion of bark typically generates excessively high levels of CO compared with the combustion of other fuels in a typical steam-generating power boiler (NCASI 2004). However, the use of TABLE 3-6 Typical Air-Pollutant Compositions and Emission-Control Equipment Used in Each Subprocess in Kraft Mills Subprocess Pollutants Typical Emission Controla Digester VOCs, sulfur compounds Combustion Blow tanks VOCs, sulfur compounds Combustion Brownstock washing VOCs, sulfur compounds Combustion Bleaching Halogenated compounds (particularly chlorine dioxide and chloroform), CO, methanol Scrubber Chemical-recovery boilers PM, NOx, sulfur compounds, CO, VOCs ESP, SNCR Smelt-dissolving tanks PM, sulfur compounds, VOCs, ammonia Scrubbers Slaker and causticizing tanks PM Scrubbers Lime kiln PM, sulfur compounds, NOx, CO, VOCs Scrubbers or ESP Drying VOCs, sulfur compounds Combustion aThe control equipment listed in not necessarily for the control of all the pollutants that are listed for each subprocess. For example, an ESP will control only PM emissions. SOURCE: Adapted from Witkowski and Wyles 2004.

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New Source Review for Stationary Sources of Air Pollution waste bark as a fuel may also be beneficial to air quality, because NOx and SO2 concentrations are reduced. Mill Repair and Replacement Activities Numerous repair and replacement activities are periodically undertaken to ensure safe and optimal mill performance. For existing Kraft mills, these types of activities have the potential to trigger NSR, and any effort to assess the effect of operational changes in the NSR program on Kraft mills depends on the nature of the activities. Table E-3 in Appendix E lists repair and replacement and other activities peculiar to Kraft mills that are periodically undertaken. The quality and variety of the fuel types used in the pulp and paper industry may result in repair or replacement activities for facility components that are different from those in industrial sectors that rely on one fuel type. Time Frames for Industrial Production and Process Change The previous sections have highlighted some key industries and the process technologies that are used to create products. This section briefly addresses the notion that there is a temporal aspect of industrial production. The temporal aspect has several specific considerations. One is that a given product mix must be produced to meet demand, typically involving a characteristic load profile. Another is that the product mix may change to meet market needs. The ability to store an output allows for scheduling the operation of the plant so as not to be closely coupled to the demand cycle. This, in turn, may have implications for steady-state operations, which is an important consideration for control of emissions. For electric-power generation, electricity is produced at the same time that it is consumed. It is impractical to store electricity for later use, so the total power-generation level must change as the demand for electricity changes. Some power plants, particularly the larger coal-fired and nuclear plants, are often run in a “baseload” mode, which means roughly constant output. Other plants, which typically have higher marginal fuel costs, such as natural-gas-fired systems, may operate in “intermediate” or “peaking” modes. An intermediate-load plant may ramp up and down once a day to capture substantial increases in the daytime electricity demand over overnight demand. A peaking plant may operate for only a few hours per day to accommodate specific periods of highest electricity demand. The overall average capacity factor of a baseload plant can be about 80%, versus 50% or less for an intermediate-load plant and perhaps only 15% for a peaking-load plant. In petroleum refining, where it is possible to store the product (in tanks),

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New Source Review for Stationary Sources of Air Pollution it is more economical to size the plants and operate them to achieve roughly steady-state production at high-use factors. Thus, in contrast with electric-power generation, refineries typically operate at roughly constant load factors. However, the product mix changes over the course of the year. For example, gasoline formulations typically change to a less volatile mix in the summer to reduce evaporative emissions of photochemically active ozone precursors. The specifics of the operations at the refineries may change over the course of a year because of changes in product mix. Similarly, in other industries, such as automotive and pharmaceutical, there may be periodic “retooling” or transitioning to other products or product mixes. Those changes potentially can require modifications to existing facilities or other changes that might affect energy use or efficiency. TECHNOLOGICAL CHANGE The stringency and form of environmental regulation can influence the nature and speed of technological change for pollution-control equipment and have important implications for the cost and performance characteristics of that equipment. Technological advances can lead to lower costs of installing pollution-control devices, lower costs of operating the devices, improved emission-reduction performance, or some combination of those. Understanding the relationship between regulation and technological change is important for accurate assessment of the costs and, in some cases, the benefits of environmental regulation, including the changes in NSR rules being considered in this report. Regulatory stringency and applicability have a direct relationship to the size of the potential market for a particular control technology and the incentive of a developer to improve it. Greater certainty about future regulatory requirements also provides for a more accurate assessment of the potential market for a particular technology and may increase incentives for improving it. The potential for being designated NSPS, BACT, or LAER, in theory, could provide an incentive for technology developers to devise a better technology for reducing or even preventing emissions, but there are few empirical studies of the effects of regulations on new-technology development. NESCAUM (2000) provides some information regarding the adoption of technologies for control of NOx and SO2 emissions along with regulatory context. The form of environmental regulations—whether technology standards, emission-rate standards, or cap-and-trade programs—will also affect incentives for different forms of innovation. In particular, emission cap-and-trade regulations impose an opportunity cost in the form of the price of an emission allowance on every ton of pollutant emitted and thereby potentially create a stronger incentive to improve emission-control efficiencies of particular technologies than would exist with either tech-

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New Source Review for Stationary Sources of Air Pollution nology standards or emission-rate standards (Keohane 2002). Emission cap-and-trade programs also lower costs by reducing the need for control-equipment redundancy to meet a national or regional emissions target. If a facility is required to control emissions whenever the facility is running, redundant pollution controls would be necessary. However, with a cap-and-trade program, the facility operator can continue to operate even when the pollution-control equipment is not operating and cover the additional emissions by purchasing or retiring more allowances. To illustrate the relationship between environmental regulation and the development of emission-control technologies, we consider two examples of such technologies: FGD technology used to reduce emissions of SO2 and SCR technology used to reduce NOx emissions from fossil-fuel-fired boilers used to generate electricity. Both FGD and SCR are technology options that are included in the modeling analysis of the electricity sector as reported in Chapter 6. Flue-Gas Desulfurization FGD technology is of particular interest because it must be installed for compliance with NSPS for SO2-emission reduction at new pulverized-coal electricity-generating units. The recent settlements of EPA NSR enforcement cases against several electricity-generating facilities (see Chapter 2) included agreements to install FGD scrubbers at one or more coal-fired units. FGD units were also an important part of electricity-generating-facility compliance strategies with the SO2 cap-and-trade provisions of Title IV of the 1990 CAA amendments. Sixteen electricity-generating facilities installed retrofit FGD units in at least one of their existing coal-fired generators to comply with Phase I of Title IV (Swift 2001). About eight scrubbers were installed after stricter caps were put into place under Phase II of the program, which took effect in 2000 (Burtraw and Palmer 2004). Studies of the effect of NSPS and Title IV on innovation in scrubber technology suggest that both forms of regulation helped to spur technological advances, but of different types. Taylor et al. (2003) found that patents relevant to SO2-control technology grew dramatically in the early 1970s and remained high through the middle 1990s relative to earlier periods. Popp (2003) found that SO2-removal patent counts peaked in the early 1980s at substantially above post-1990 levels. He suggested that that pattern indicates that stricter NSPS rules issued in the late 1970s contributed to increased patenting in the early 1980s. The later decline in patenting activity could be due to a combination of factors, including lower-than-expected SO2-allowance prices, the drop in construction of new coal-fired generators, the maturity of the FGD technology, and a declining propensity to patent in general.

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New Source Review for Stationary Sources of Air Pollution Several authors find that the move toward a more flexible cap-and-trade approach to SO2 regulation contributed to innovation. Burtraw (1996, 2000) found that the flexibility associated with permit trading allowed generators to make changes in institutional behavior that helped to lower costs and, by creating a form of competition with scrubbing, helped to provide incentives to reduce scrubbing costs. Popp (2003) found that although capital and operating costs of scrubbers declined during the period since first implementation of NSPS, the move to cap-and-trade regulation for SO2 in the late 1990s was accompanied by an improvement in the SO2-removal efficiency of FGD units. That improvement is seen as a direct result of the stronger incentive to continually reduce emissions associated with a need to hold SO2 allowances to cover all emissions. Keohane (2002) also found that FGD equipment costs did not decline during Phase I of Title IV but that the operating efficiency of scrubbers did increase and brought about large declines in operating costs per ton of SO2 removed. Recent vintages of FGD units reduce potential stack emissions of SO2 by 95% or more, whereas the median emission reduction before the revised NSPS for SO2 in the late 1970s was closer to 80% (Popp 2003; Taylor et al. 2003). Today’s systems are also much more reliable than were the FGD systems installed in the 1980s, and the increased reliability contributes to higher total SO2 removal (Taylor et al. 2003). Improvements in reliability and in the removal efficiency of FGDs are linked to some extent. As noted by de Nevers (2000), the electricity-generating industry endured problems associated with the early adoption of systems, such as limestone scrubbers, in the 1970s and early 1980s. Examples of problems encountered included higher-than-anticipated corrosion of metals; deposits of solids, and scaling and plugging in the FGD system itself; entrainment of slurry droplets and downstream deposition of solids; underuse of reagent; and problems with the separation of water from the waste products. Solutions to those problems have included better control of pH in the slurry, better control of the composition of the slurry to avoid scaling and plugging problems, improved design of such key components as entrainment separators, and increased slurry holding times and oxidation. Learning by doing also has helped to bring down the costs of operating FGD units. Taylor (2001) showed that the operating costs of FGD units have fallen by 17% for every doubling of installed capacity. Capital costs of a wet limestone scrubber designed to reduce emissions of 3.5% sulfur coal by 90% at a 500-MW unit have fallen by roughly 50% over 20 years, and the bulk of the decline occurred before the beginning of the cap-and-trade program (Taylor et al. 2003, Figure 6).

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New Source Review for Stationary Sources of Air Pollution Selective Catalytic Reduction SCR technology is of interest because it is an effective means of reducing NOx emissions from boilers at electricity-generating facilities; it has the potential to reduce emissions by 70-90%. SCR generally is assumed to be necessary to meet NSPS requirements for NOx reductions at new pulverized-coal facilities. It is also the technology typically selected to control NOx in settlements of NSR-enforcement cases brought against large electricity producers by EPA in recent years. SCR is one of many ways to control NOx emissions, and it is a relatively capital-intensive and expensive method compared with other approaches (Swift 2001) that have proved sufficient to achieve compliance with recent NOx regulations. Before the 1990 CAA amendments, many existing coal-fired generators faced no restrictions on emissions of NOx. Title IV of the 1990 CAA amendments imposed an annual average emission-rate cap on NOx emissions for coal-fired generators in the United States. The emission-rate limit was based on the use of low-NOx burners, and the standard varied by boiler type (Swift 2001). Most units complied with the regulation by installing low-NOx burners, although flexibility provisions in the law, such as emission-rate averaging across units at a plant, encouraged firms to reduce emissions through other means, such as changing air-fuel mixtures and adjusting boiler temperatures to reduce NOx emissions, before investing in control technology (Swift 2001). The linking of the standards to the degree of reduction achievable with low-NOx burner technology provided limited incentive for U.S. coal-fired generators to adopt the more expensive SCR technology. However, in several states, such as California, SCR was applied starting in the 1980s on gas-turbine combined-cycle facilities. Demand for SCR to reduce NOx emissions was expected to grow somewhat when the Ozone Transport Commission (OTC) program for capping summertime NOx emissions from electricity generators in nine northeastern states took effect in 1999. The cap began in Phase II of the OTC program, which ran from 1999 through 2002, mandating a 55% reduction below 1990 levels in summertime NOx emissions from affected sources. Despite the large reductions sought, most of the regulated units were able to achieve a large fraction of the required reductions in NOx emissions through operational changes, so the role for SCR was much smaller than expected (Swift 2001). Beginning in summer 2003, the cap was tightened to roughly 70% below the 1990 level (Burtraw and Evans 2004). The geographically more expansive multistate NOx caps under EPA’s NOx SIP call, which covers 19 states and the District of Columbia and took effect in summer 2004, greatly increased installations of SCR technology. Coal-fired power plants in a number of states also have retrofitted combustion and postcombustion NOx controls (for example, low-NOx burners and SCR) in response to SIP

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New Source Review for Stationary Sources of Air Pollution requirements for attaining National Ambient Air Quality Standards. For example, the first retrofit of SCR to a coal-fired power plant occurred in 1995 (NESCAUM 2000). The United States was a relatively late adopter of SCR. In Japan, it was used as early as the late 1970s but at much lower removal rates than are common today, typically at a rate of 60%. The lower removal rates meant that there was less of an issue with ammonia slip, because use of ammonia is more complete under these conditions. Ammonia slip refers to unreacted ammonia that leaves the SCR system and is vented to the atmosphere with the stack gases. German coal-fired boilers adopted SCR in the late 1980s and early 1990s in combination with environmental regulations. During the 1980s, improvements in catalyst formulation, as well as injection grids and control systems enabled achievement of 80-90% removal efficiencies with less ammonia slip for a wider variety of flue-gas compositions. One barrier to adoption of SCR in the United States during the 1980s, in addition to high costs and relatively low regulatory stringency, was the perception that SCR could not be used in U.S. coal plants because the alkali content of U.S. coal was higher than that of coal used in Japan (or Germany) and that the difference could be a potential cause of catalyst plugging or poisoning. However, experience has shown that, with appropriate catalyst formulation, different coal chemistry is not a problem. Other potential problems with the application of SCR, such as ammonium salt deposition on downstream equipment, are apparently reduced or eliminated by controlling ammonia slip and by selecting appropriate materials and surfaces for such equipment (for example, an air preheater). Current work by Taylor (2004) finds that SCR emission-removal efficiencies have improved dramatically coincidentally with the spread of regulations requiring or spurring their use—from Japan in the late 1970s to early 1980s to Germany in the late 1980s to early 1990s and then to the United States more recently. Increased SCR use in the United States has come about only recently, largely in response to the regional summertime NOx-emission cap-and-trade programs in the northeastern states and to NSR requirements. Currently, removal efficiencies of 90% and higher are feasible, and typically 90% removal is guaranteed by vendors (Culligan and Krolewski 2001). Operating costs of SCR units have also declined by 50% in 10 years (Taylor 2004). New Source Review Modifications and Incentives for Technological Change Several economic researchers have asked whether NSR regulations inhibit technological change. Anecdotal evidence and a small amount of empirical evidence, discussed in Chapter 5, suggest that differentiated regula-

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New Source Review for Stationary Sources of Air Pollution tion of new sources slows capital turnover and that differentiated regulation of modified sources reduces investment in modifications and upgrades at existing plants. To the extent that the technological modifications would have promoted new technologies, the evidence of reduced investment at existing plants could be consistent with dampened diffusion of new technology and reduced technological change more broadly. However, no empirical studies have explored the relationship directly (Jaffe et al. 2003). Not addressed here is the issue of the implications of tighter controls on new sources versus keeping older sources on line longer. The dearth of literature on NSR and technological change and the lack of direct evidence make it difficult to offer much in the way of informed judgment about how the recent NSR rule changes are likely to affect innovation. To the extent that regulation reduces the applicability of BACT and LAER to existing sources, it could reduce demand for pollution-control retrofits and thereby reduce innovation by technology developers. However, if the fact that NSR applies only when major modifications actually take place limited investment activity in the first place, then this effect is likely to be small. Most of the NSR revisions—such as changes in methods of estimating emission effects and baseline emissions, and plantwide applicability limitations—limit the possibility that a particular investment or expenditure at an existing facility will trigger NSR. Those favoring the NSR rule changes have asserted that concerns over triggering NSR reduced investments at existing plants and reduced markets for new technologies (see Box 3-1). They also have asserted that limiting its applicability could increase the adoption of new technologies, which in turn could spur technological innovation. Whether that hypothesized effect would occur remains an open question. SUMMARY The key conclusions of this chapter are as follows: Permits for modifications involve only 1-2% of total emissions for most pollutants in either the manufacturing or electricity-generating sector (including facilities that did not receive an NSR permit in the period 1997-2002). However, NSR permitting activity pertaining to modifications was substantial when considering only those facilities that received an NSR permit during the period considered. On the basis of preliminary data, which are subject to various limitations, permits for modifications account for 25-48% of the reported total amount of permitted emissions, depending on the pollutant, among all facilities that are reported to have received an NSR permit.

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New Source Review for Stationary Sources of Air Pollution BOX 3-1 Example of an Emerging Technology: IGCC Integrated gasification combined cycle (IGCC) is an example of an emerging technology. The IGCC features the gasification, rather than combustion, of fuels. For example, coal (or a wide variety of other fuels, including waste fuels) is partially combusted by using an oxidant (typically 95% pure oxygen from a dedicated air-separation plant), and steam or water is added. The partial combustion of the fuel supplies thermal energy for endothermic gasification reactions that lead to the formation of a synthesis gas (“syngas”) containing CO, hydrogen, and other substances. The bulk of noncombustible material in the fuel is removed via the bottom of the gasifier as a vitrified “slag” that typically is less leachable than the bottom ash of a conventional furnace. The syngas goes through gas cooling, scrubbing, and acid-gas separation to remove particles, H2S, and carbonyl sulfide (COS). The sulfur is recovered in elemental, solid form and can be used as a byproduct. The syngas can be used as a fuel in a gas-turbine combined cycle to generate power. Alternatively, it can be used as a feedstock for the production of chemicals, such as hydrogen, ammonia, and methanol. Gasification can be the cornerstone of a “polygeneration” system or “coal refinery” that creates a mix of multiple products. For power-generation applications, NOx emission can be prevented or minimized via saturation of the syngas with moisture or injection of nitrogen from the air-separation plant. However, postcombustion SCR can be used for additional NOx control if needed. IGCC systems are generally more efficient than combustion-based systems, use less water, have lower air-pollutant emissions, and have greater fuel flexibility. Even if advanced supercritical combustion-based plants attain comparable efficiency, IGCC plants could still offer advantages of greater fuel flexibility, coproduction of multiple products, and the potential for less-expensive carbon sequestration. Although IGCC technology has been shown to be technically feasible in several large-scale demonstration plants, it has not yet been cost-competitive in the United States. However, American Electric Power has recently announced its intentions to construct the first commercial IGCC plant in the United States some time in the next 5-6 years. NSR permits for modifications have been issued for a wide variety of emission-source categories but primarily, following whether measured by number of permits or by amounts of permitted emissions, in electricity-generating facilities; stone, clay, and glass products; paper and allied products; chemicals and allied products; and food and kindred products.

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New Source Review for Stationary Sources of Air Pollution Although the industries are diverse, their emission processes are often similar. For example, many industries use common unit operations, such as industrial furnaces to generate steam for process use, whereas others use combustion sources, such as tunnel or rotary kilns. There is substantial variation among states regarding the implementation status of the NSR revisions and the existence of a minor-construction permitting program that might cover modifications that are not covered under NSR. There is limited experience with NSR revisions where the programs have been implemented. Furthermore, there appears to be reluctance by some states and firms to conduct permitting, given the current uncertainty about litigation over the revisions. There is a lack of systematic and consistent reporting of NSR permits by states. However, some states appear to be adopting a common framework for electronic management of permits. A review of common repair and replacement practices for selected types of process facilities showed that such activities can vary considerably in frequency and cost.7 Likewise, for a given emission source, such as a boiler at an electricity-generating plant, the wide array of pollution-prevention and -control options can vary in effectiveness and cost. Emission sources, pollution-prevention techniques, and pollution-control technology are expected to change, and regulations like those considered here can be part of the motivating factors for such change. However, the effects of regulations can vary greatly, depending on the specifics of programs. 7 The committee takes no position on whether these repair and replacement activities are “routine” within the meaning of EPA’s prerevision or revised NSR regulations.