EPA: Nitrogen Oxides Emission Reduction Program

Published by the Government Accountability Office on 1997-01-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Office of the General Counsel


      January 3, 1997

      The Honorable John H. Chafee
      The Honorable Max Baucus
      Ranking Minority Member
      Committee on Environment and Public Works
      United States Senate

      The Honorable Thomas J. Bliley, Jr.
      The Honorable John D. Dingell
      Ranking Minority Member
      Committee on Commerce
      House of Representatives

      Subject:   Environmental Protection Agency: Nitrogen Oxides Emission Reduction

      Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on
      a major rule promulgated by Environmental Protection Agency (EPA), entitled
      "Nitrogen Oxides Emission Reduction Program" (RIN: 2060-AF48). We received the
      rule on December 13, 1996. It was published in the Federal Register as a final rule
      on December 19, 1996. 61 Fed. Reg. 67111.

      The final rule promulgates standards for the second phase of the Nitrogen Oxides
      Reduction Program under Title IV of the Clean Air Act by establishing nitrogen
      oxides emission limitations for certain coal-fired electric utility units and revising
      nitrogen oxides emission limitations for others as specified in section 407(b)(2) of
      the Act.

      The rule is effective on the date of publication, December 19, 1996, which is less
      than the 60-day delay in the effective date of a major rule required by the Small
      Business Regulatory Enforcement Fairness Act of 1996. 5 U.S.C. § 801. Upon
      contacting officials at EPA, we have been advised that the use of an immediate

effective date was an oversight. EPA will publish a corrected notice in the Federal
Register which will contain an effective date with the required 60-day delay.

Enclosed is our assessment of the EPA's compliance with the procedural steps
required by sections 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule.
Our review indicates, with the exception noted above, that the EPA complied with
the applicable requirements.

If you have any questions about this report, please contact James Vickers, Senior
Attorney, at (202) 512-8210. The official responsible for GAO evaluation work
relating to the Environmental Protection Agency is Peter Guerrero, Director,
Environmental Protection Issues. Mr. Guerrero can be reached at (202) 512-6111.

Robert P. Murphy
General Counsel


cc: Thomas E. Kelly, Director
    Office of Regulatory Management and Information
    Environmental Protection Agency

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       ANALYSIS UNDER 5 U.S.C. §§ 801(a)(1)(B)(i)-(iv) OF A MAJOR RULE
                                 ISSUED BY
                              (RIN: 2060-AF48)
(i) Cost-benefit analysis

The Regulatory Impact Analysis which was performed in connection with this final
rule discusses the five options which EPA considered and the costs and benefits
associated with each option. EPA selected option 4 which revises the Group 1
boiler limits and establishes limits for all Group 2 boilers except cyclones with a
capacity of 155 MWe or less, wet bottoms with a capacity of 65 MWe or less,
stockers and FBC boilers. The total expenditures from the implementation of
option 4 is estimated at $204 million per year starting in the year 2000 resulting in
an nitrogen oxide reduction of 890,000 tons per year with a cost effectiveness of
$229 per ton.

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605,
607 and 609

EPA has determined that the final rule will not have a significant economic impact
on a substantial number of small entities. Under the Small Business
Administration's size threshold for small electric service companies of 4 million
megawatt hours per year, there are 700 small utilities of which only 64 are subject
to the final rule. Only 15 of these utilities are expected to incur compliance costs.
While the financial impact of compliance will be greater for these firms than for
large or medium utilities, the impact is not significant as measured by the change
in return on equity or return on assets.

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform
Act of 1995, 2 U.S.C. §§ 1532-1535

EPA determined that this rule contains a federal mandate that will result in
expenditures of $100 million or more for state, local, and tribal governments, or the
private sector. In compliance with section 202 of the Unfunded Mandates Reform
Act, EPA prepared a written statement, including a cost benefit analysis, assessing
the impact of the rule, which it published in the preamble to the final rule.

EPA points out that while there are no federal funds to assist State, local, and tribal
governments in meeting these costs, title V of the Clean Air Act authorizes these
entities to collect permitting fees from utilities to cover all costs of developing and

issuing title V operating permits, including Acid Rain provisions. Utilities may
recover costs incurred in complying with the rule by passing them on to ratepayers.

Consistent with the intergovernmental provisions of sections 203 and 204 of the Act,
EPA involved state, local and business representatives in the public hearing and the
submission of comments in developing the rule. In addition, EPA solicited
comments from the 25 state and municipality-owned utilities, as well as their
elected officials, after providing them a summary of the proposed rule and its
estimated impact.

Section 205 of the Act requires agencies to identify and consider a reasonable
number of regulatory alternatives and to adopt the least costly, most cost-effective
or least burdensome alternative that achieves the objectives of the rule. In the
preamble to the final rule, EPA discusses five options it considered and its reasons
why the approach used in the final rule was considered the most cost-effective,
least burdensome alternative that is consistent with the objectives of the rule.

(iv) Other relevant information or requirements under Acts and Executive orders

Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.

Instead of the notice and comment procedures in the Administrative Procedure Act,
the EPA promulgated this rule using the procedures, which have similar notice and
comment requirements, contained in section 307(d) of the Clean Air Act, as
amended. (42 U.S.C. § 7607(d)). The use of these procedures regarding rules
pertaining to the promulgation or revision of regulations under subchapter IV-A of
the Act relating to the control of acid deposition is mandated by section
307(d)(1)(F) of the Act. (42 U.S.C. § 7607(d)(1)(F)).

EPA published a Notice of Proposed Rulemaking on January 19, 1996 (61 Fed. Reg.
1442), and conducted a public hearing on February 8, 1996 on the proposed rule.
The comment period, which was originally to expire on March 4, 1996, was
extended to March 19, 1996.

EPA received approximately 100 comments regarding the proposed rule and the
preamble to the final rule discusses the comments received and any action taken as
a result of the comments.

Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520

Over the next 3 years, the final rule does not impose any new information collection
requirements subject to the Paperwork Reduction Act not already required by
current regulations. Prior to the year 2000, EPA will submit to the Office of
Management and Budget an Information Collection Request renewal which will

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include any additional burden hours imposed by the final rule for Group 2 boilers

Statutory authorization for the rule

EPA has cited section 407(b)(2) of the Clean Air Act (42 U.S.C. § 7651f(b)(2)), as
amended, as authority for the issuance of the final rule.

Executive Order No. 12866

The final rule was reviewed by the Office of Management and Budget under the
Executive Order as a "significant regulatory action." The Office of Information and
Regulatory Affairs of OMB approved the final rule as complying with the
requirements of the Order based on the information supplied by EPA, including a
planned regulatory action document describing the reason for the rule and an
assessment of the costs and budgetary impact of the rule.

In its submission, EPA did not identify any other statute or executive order
imposing procedural requirements relevant to the final rule.

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