Here’s how the federal government rewards an energy company for upgrading its power plants to lower costs for families and businesses and improving the environment: slap them with a nearly a million dollar fine, force them to close power plant units and lay off employees and make them millions of dollars in environmental mitigation projects.
If that sounds backwards to you, well it is.
In a lawsuit that lasted 15 years, Duke Energy and the Environmental Protection agency (EPA) reached a settlement where Duke “will pay a civil penalty of $975,000, shut down a coal-fired power plant and invest $4.4 million on environmental mitigation projects.”
The EPA and Department of Justice brought the suit against Duke Energy in 2000 arguing that the company failed to comply with the Clean Air Act when the company modified 13 coal-fired units in North Carolina.
At issue is the New Source Review (NSR), one of the 1977 Clean Air Act amendments. Power plants must meet certain air quality standards, and companies must follow Prevention of Significant Deterioration (PSD) rules to demonstrate that the construction and operation of new projects and major modifications will not increase emissions above a specified threshold.
Therefore, if a company wants to make plant modifications that improves the power plant’s efficiency, it will trigger New Source Review and the EPA will regulate the plant to meet the most recent emissions standards.
However, what constitutes a significant modification is subjective under the rules. The amendment excludes routine maintenance, repair, and replacement, but what falls under the definition of significant modification remains murky, despite multiple administrative attempts to clarify the meaning. The lack of clarification also forces companies into years, if not decades, of litigation over NSR violations. Such is the most recent case with Duke Energy.
Companies could be allocating resources to invest in new equipment and provide jobs that benefit energy consumers, but instead have to waste resources fighting ridiculously long and unnecessary lawsuits. Even though companies argue in court they complied with the law, the result will be a settlement where the federal government hands down millions of dollars in fines, and forces the closure of power plants, killing jobs in the process.
New Source Review is a cost to both the economy and the environment. Plant upgrades can improve efficiency and reduce operational costs, thereby lowering electricity costs for families and businesses, increasing reliability, and providing environmental benefits.
Nevertheless, because those upgrades trigger a New Source Review, the policy discourages new investment and keeps power plants operating less efficiently than they otherwise would.
Although increasing the efficiency of a plant will likely cause it to run longer and consequently cause the plant’s emissions to rise, NSR does not account for the emission reduction that would occur if a less efficient plant reduced its hours of operation to compensate for increases in operation of a more efficient plant.
That is why Congress should repeal New Source Review.
New Source Review is a bureaucratic mess that prevents plants from operating at optimal efficiency. Power plants are already clean because companies equip them with sophisticated, state-of-the-art pollution prevention technology to ensure safe operations no matter how long the power plant runs.
Repealing NSR would not be a free pass for companies to pollute but instead allow them to improve plant efficiency, reduce emissions and also increase power generation to meet U.S. energy needs.
