Jan. 21 (Bloomberg) -- Electric utilities are on the verge of winning long-sought changes in air-pollution regulations from President George W. Bush, and they aren't very happy about it.

Two years after introducing his so-called ``Clear Skies'' legislation, only to see it languish in Congress, Bush is preparing to issue executive orders to implement many of the changes by March, Jim Connaughton, chairman of the White House Council on Environmental Quality, said in an interview.

The problem: Using the president's executive authority will open the changes to just the sort of legal challenges the utility industry would like to avoid, while failing to provide all that it says it needs.

The rules ``would potentially be too cumbersome,'' said Pat Hemlepp, director of corporate communications for Columbus, Ohio- based American Electric Power Co., the largest U.S. generator of electricity.

Without a legislative solution, Connaughton said, ``you're left with conflict and lawyers and technical people and then litigation every step of the way over the course of the next decade.'' If the rules are enacted as proposed, they would probably face lawsuits from several environmental groups, including the Natural Resources Defense Council and the Clear Air Task Force, both based in Washington.

The new rules would reduce sulfur dioxide and nitrogen oxide and regulate mercury emissions from power plants for the first time. They would also permit states to establish a ``cap and trade'' system that would allow companies that violate standards to buy credits from those that have cut pollution.

Falling Short

Those rules fall short of what both the Bush administration and utility companies want. The sulfur dioxide and nitrogen oxide regulation, which is known as the Clear Air Interstate Rule because it aims to stop pollution from crossing state lines, would only apply to 29 eastern states. And the mercury rule would allow a trading system as just one option on a menu of programs; the companies and the administration want a national system.

``For a company like us that works in many states, it would become more difficult for us to potentially recover the costs of the different environmental equipment we'd have to put on, varying from state to state,'' Hemlepp said. American Electric Power operates 26 coal-fired power plants in nine states.

Most important, the rules lack the stalled legislation's curb on lawsuits, said Quin Shea, director of environmental programs at the Edison Electric Institute, the Washington-based group that lobbies for the publicly held utilities that produce 75 percent of U.S. electricity, including American Electric Power, Charlotte, North Carolina-based Duke Energy Corp. and Atlanta-based Southern Co.

Time and Money

The legislation ``saves time, saves money, hundreds of millions over the course of the next 15 years, money spent by the federal, state and local government in litigation and enforcement, as well as money spent by industry,'' Shea said.

Opponents of Clear Skies say litigation is one of the chief enforcement tools under existing law. During President Bill Clinton's administration, for example, the Environmental Protection Administration sued 51 power plants owned by nine utilities for failure to secure repair and maintenance permits.

In August 2003, the Bush administration attempted to ease the Clean Air Act's requirements for ``routine repair and maintenance'' of the 20,000 facilities monitored by the EPA. The U.S. Court of Appeals for the District of Columbia suspended the rules after 14 states filed suit, arguing the changes amounted to a loophole for polluters.

Public Health

Clear Skies would eliminate such checks and balances, said Angela Ledford, director of Clear the Air, a Washington-based group. ``The only reason to move forward legislatively is that legislation provides regulatory relief to industry at the expense of public health,'' she said.

Bush and the utilities haven't yet abandoned all hopes of passing the legislation. Senator James Inhofe, an Oklahoma Republican who is chairman of the Senate Committee on Environment and Public Works, has scheduled two hearings on the bill over the next month and said he hopes to see it sent to the Senate for a full vote by the end of February.

``Because legislation is the first and best option, we want to take our strongest effort in giving that the opportunity it deserves,'' Connaughton said. ``The regulations are the second-best way to get there.''

Chafee's Stance

At the moment, however, the bill doesn't even have the Republican support to get it out of committee. Senator Lincoln Chafee, a Rhode Island Republican, won't vote for the bill unless it includes restrictions on carbon dioxide emissions as a way to combat global warming, said his press secretary, Stephen Hourahan.

Inhofe, in a telephone interview, was adamant that carbon dioxide not be included. Global warming is ``the second-largest hoax every played on the American people, after the separation of church and state,'' Inhofe said. ``Carbon dioxide certainly will not be part of Clear Skies. It is not a pollutant. Clear Skies deals only with pollutants.''

Without Chafee's support for the bill, the panel is split 9-9 on the measure. And even if the bill could reach the Senate floor, Republicans, with their 55 votes, don't have sufficient support to overcome a Democratic filibuster -- a parliamentary maneuver that can block action and requires 60 votes to overcome.

Little Chance

The result is that the bill has little chance of becoming law, said Vermont Senator Jim Jeffords, an independent who votes with the Democrats and is a member of Inhofe's panel. The bill ``is weaker and slower than public health and environmental protection require, and it does not have enough support to pass the Senate,'' Jeffords said in an e-mailed response to questions.

Some environmentalists believe the administration's renewed efforts to push the Clear Skies legislation may be a tactic to avoid taking any action at all. ``There's a chance that EPA may never issue the interstate rule,'' Frank O'Donnell, director of Clean Air Watch, a Washington-based environmental group, said in an e-mail. Proposing the rules may have been a ``cynical ploy all along, something for EPA Administrator Michael Leavitt to talk about during a presidential campaign, and something to be discarded once the elections were over.''

Connaughton denied the charge. ``I can absolutely disabuse you of the notion that we are delaying,'' he said. ``I spend 50 percent of my time working on Clear Skies or the rules these days. The president has made this a priority.''

To contact the reporter on this story: Jay Newton-Small in Washington at jnewtonsmall@bloomberg.net.

Last Updated: January 21, 2005 00:15 EST