EPA Said to Give Power Companies Options to Delay Pollution Rule

The Environmental Protection Agency would let power plants apply for more time to comply with new pollution standards under a rule sent to the White House for review, according to people familiar with the process.

The EPA stopped short of granting an across-the-board delay in implementing the rules, as sought by companies such as American Electric Power Co. (AEP) and Southern Co. (SO), according to the people, who spoke on condition of anonymity while the proposal is under review by the White House Office of Management and Budget. Instead, it’s designed to offer guarantees that the EPA rule won’t endanger electric reliability by forcing companies to shut plants that burn coal.

The EPA “will reinforce that an additional year is available,” Christine Tezak, a senior policy analyst at Robert W. Baird & Co. in McLean, Virginia, said in an interview. “But people will still have to ask for it.”

The rule, estimated by the EPA to cost $11 billion in 2015, is one of the most expensive proposed by President Barack Obama’s administration. It is set to be issued next month and take effect in 2015.

The EPA says cutting emissions of mercury, arsenic and other hazardous materials at coal-fired plants would save lives and create 9,000 more jobs than would be lost, as companies invest billions of dollars to install pollution-scrubbing systems or build cleaner natural-gas plants.

The White House budget office is reviewing the EPA’s proposal, and staff members are meeting with utilities, power producers, union leaders and environmentalists to discuss the regulation and the schedule for compliance.

AEP, Southern

AEP of Columbus, Ohio, and Atlanta-based Southern, the two largest U.S. producers of electricity from coal, say that they will have to shutter needed power plants if the EPA pushes ahead with making the rule effective in 2015.

In a meeting with White House officials set for today, lobbyists for companies such as Southern and St. Louis-based Arch Coal Inc. (ACI) will make the case that the regulation should be put off for a year so the agency can deal with the more than 900,000 comments submitted and work with the Federal Energy Regulatory Commission on the risks to the delivery of electricity, according to Scott Segal, a lobbyist at Bracewell & Giuliani LLP in Washington. Absent that, the EPA should delay the deadline for complying beyond 2015, Segal said.

“We need sufficient time for implementation to get this right,” Segal said in an interview.

The EPA has said it can grant power producers an extra year to comply if they try and fail to meet the three-year deadline set out in the Clean Air Act, or if state or regional officials say a particular plant is necessary for emergency purposes.

National Security

The law also allows for delays beyond a year that can be granted by the president for national-security purposes, and the EPA will say those plants will be able to run in times of peak demand under particular circumstances.

The EPA’s proposal could still be changed, or rejected, by the budget office. An EPA proposal to cap ozone pollution nationwide was scrapped by Obama in September.

AEP has said that if the EPA rule goes forward it will mean the closing of parts or all of 11 power plants, eliminating as many as 600 jobs. The company has said it will need to spend as much as $8 billion to upgrade plants.

“Three years is absolutely inadequate -- at least six years are needed to comply,” Anthony Topazi, chief operating officer of Southern, said in written testimony for a hearing on the issue at FERC tomorrow. “We cannot err on the side of putting the reliability of the system at risk.”

The Obama administration may face other risks if it bows to the pressures of AEP and Southern, said John Walke, clean-air director for the New York-based Natural Resources Defense Council, said in an interview. If the administration accepts the “fanciful” argument and grants a further delay beyond the three years stipulated by law, environmentalists will fight that in court, he said.

Walke joined environmentalists at a White House meeting yesterday, pressing officials to advance the rule. Unlike the ozone rule, “they see this as a political asset,” Walke said.

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net;

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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