BigB, the smaller wire works just fine for fault clearing the same as smaller wire works for fault clearing on larger circuits. Remember that the fault will be cleared before the current will destroy the grounding conductor or table 250.122 would not be valid.
Depending upon where you are working, you may or may not be "grandfathered". You need to check with your local laws and ordinances. In Indiana, you are permitted to continue to wire an addition with the Code that was in force when the home was built.
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Charlie Eldridge, Indianapolis,
Utility Power Guy
