## Facts

- Wisconsin Electric Power Company (WEPCO) operated an aging coal-fired power plant in Port Washington, Wisconsin, with five steam-generating units.
- WEPCO proposed a major “life-extension” renovation to keep the units operating until approximately 2010.
- The project required taking units out of service to replace or rebuild major components, including steam drums, air heaters, and other boiler and auxiliary parts.
- Wisconsin regulators sought EPA guidance on whether the project triggered Clean Air Act requirements.
- EPA issued two final determinations concluding the project would trigger New Source Performance Standards (NSPS) and the Prevention of Significant Deterioration (PSD) program.
- For NSPS, EPA determined the project was a non-exempt “physical change” (not “routine maintenance, repair, and replacement”) and would increase emissions based on a baseline comparison that relied heavily on 1987 data for certain units.
- For PSD, EPA treated the project as a “major modification” by estimating post-project emissions using a “potential to emit” approach that assumed near-continuous operation.
- WEPCO petitioned for judicial review of both final EPA determinations.

## Issues

1. Whether WEPCO’s life-extension project was a non-exempt “physical change” constituting a “modification” under the NSPS provisions of the Clean Air Act.
2. Whether EPA’s NSPS emissions-increase analysis, including its baseline selection, was consistent with the statute and regulations requiring a representative pre-change baseline.
3. Whether EPA lawfully applied PSD by using a “potential to emit” calculation premised on continuous operation to find a significant emissions increase.

## Decision

- The court affirmed EPA’s determination that the project was a “physical change” and not “routine maintenance, repair, and replacement,” and therefore a “modification” triggering NSPS.
- The court largely upheld EPA’s NSPS emissions-increase framework but remanded in part for further explanation to ensure the baseline used was “representative” and adequately justified.
- The court vacated EPA’s PSD determination and remanded because EPA did not adequately justify, under existing regulatory authority, its “potential to emit” methodology based on assumed continuous operation.
- Disposition: affirmed in part, vacated in part, and remanded to the EPA.

## Legal Principles

- Under the Clean Air Act, a “modification” includes any physical change to a stationary source that increases the amount of any air pollutant emitted (or causes the emission of a new pollutant).
- The “routine maintenance, repair, and replacement” exclusion is limited; extensive, infrequent, and costly overhauls aimed at extending a unit’s life and replacing major components may fall outside the exclusion.
- EPA may apply a multi-factor inquiry to distinguish routine work from non-routine work, including the nature, extent, purpose, frequency, cost of the work, and industry practice.
- NSPS emissions-increase determinations must compare post-change emissions to a pre-change baseline that reflects representative operating conditions; an agency must explain and justify baseline choices.
- PSD applicability determinations must be supported by a reasoned methodology grounded in regulatory text and prior agency practice; use of “potential to emit” assumptions (such as continuous operation) requires adequate justification.

## Conclusion

The Seventh Circuit sustained EPA’s NSPS determination that WEPCO’s life-extension overhaul constituted a non-routine physical change triggering NSPS, required further explanation of aspects of EPA’s NSPS baseline analysis, and vacated EPA’s PSD finding because EPA had not sufficiently justified its potential-to-emit approach for post-project emissions.


Wis. Elec. Power Co. v. Reilly, 893 F.2d 901 (7th Cir. 1990)