July 6 (Bloomberg) -- The Obama administration proposed cutting air pollution from power plants owned by companies such as Duke Energy Corp., American Electric Power Co. and Southern Co. in 31 states from Massachusetts to Texas.
The rules aimed at curbing smog and acid rain, to take effect in 2012, revamp those issued by the Bush administration five years ago for pollution crossing state lines, the Environmental Protection Agency said today. A federal court rejected the prior regulations in 2008, saying the EPA sought to create an unlawful emissions-trading program.
The rules would result in more than $120 billion in annual health benefits in 2014 while adding $2.8 billion in yearly costs for utilities, according to the agency. The proposal, known as transport rules, would limit trading of pollution rights while slashing sulfur dioxide, which produces acid rain, and nitrogen oxide, the cause of smog, the EPA said.
“EPA’s new proposal would require dramatic reductions in power-sector emissions, on top of major reductions to date, on a very short timeline,” Dan Riedinger, a spokesman for the Edison Electric Institute, a Washington-based trade group representing utility companies including AEP, Duke and Southern, said in a statement. The standard “leaves the power sector exposed to a great deal of regulatory uncertainty.”
Asthma, Heart Attacks
The proposed regulations would cut sulfur dioxide by 71 percent by 2014 from 2005 levels and nitrogen oxide by 52 percent over the same period, according to the EPA. Emissions from power plants have been linked to illnesses such as asthma and heart attacks, according to the EPA.
The rules would protect the public from the health dangers tied to air pollution better than those issued under former President George W. Bush, and the requirements would achieve “greater reductions more quickly,” Gina McCarthy, the EPA’s assistant administrator, said on a conference call today with reporters.
The regulations are more stringent than Bush’s would have been for sulfur dioxide and begin earlier than the 2014 start year that had been expected, Kevin Book, managing director at ClearView Energy Partners LLC, a Washington-based policy analysis firm, said in an interview.
Under Bush’s rules, the cap on sulfur dioxide would have been about 4.66 million tons, while the proposed regulations would permit about 3.4 million tons a year, Book said.
“This is another example of the Obama administration trying to be very aggressive in satisfying their environmental constituency,” Jeff Holmstead, a former assistant administrator at the EPA and now a partner at Bracewell & Giuliani LLP in Washington, said in an interview. “The industry will be surprised just how tight the sulfur dioxide caps are.”
The rules will probably trigger the closing of the “smallest and dirtiest coal plants” when coupled with new limits expected from the EPA for mercury emissions from coal-fired generators, K. Whitney Stanco, a Washington-based analyst with Concept Capital, said in a research note to clients today before the regulations were announced.
The agency doesn’t know whether the regulations would result in shutting plants, McCarthy of the EPA said.
“Millions of people continue to breathe unhealthy air,” McCarthy said on the call. “Yesterday most of the East Coast had pretty lousy ozone days” as temperatures soared, McCarthy said, referring to ground-level ozone formed when chemicals from burning fossil fuels combine with sunlight.
‘Single Best Thing’
“It’s the single best thing the Obama administration has done to deal with air pollution,” Frank O’Donnell, president of the Washington-based environmental group Clean Air Watch, said in an interview.
Duke Energy spokesman Tom Williams said the Charlotte, North Carolina-based company would release a statement during the EPA’s 60-day public comment period for the rules. Duke, the third-largest operator of U.S. coal-burning power plants, had sued to overturn a part of the Bush administration’s rule that based emissions-trading allowances on 20-year-old data.
Melissa McHenry, a spokeswoman for Columbus, Ohio-based AEP, said the company is reviewing the EPA’s statement. AEP is the biggest U.S. producer of coal-fueled electricity.
Valerie Hendrickson, a spokeswoman for Atlanta-based Southern Co., the second-biggest U.S. utility owner, didn’t return calls seeking comment.
Today’s proposal initially caused the sulfur-dioxide emissions market to trade lower, in part because the rules appear to eliminate the ability to use surplus sulfur-dioxide trading permits, Paul Tesoriero, director of environmental trading at Evolution Markets LLC in White Plains, New York, said in an interview.
There’s also “uncertainty” about how polluters would be able to use their extra nitrogen-oxide allowances, he said.
The EPA is proposing that emissions be reduced through a limited cap-and-trade system among the states and Washington, D.C., letting companies that exceed their pollution limits buy credits from those that pollute less.
The EPA also proposed two alternative approaches, one that would permit emissions trading only within a state and another that would enable a company to trade pollution rights among its own power plants.
A federal appeals court struck down the Bush administration’s regulations two years ago, saying it overstepped its authority in creating the Clean Air Interstate Rule, which was intended to reduce allowable emissions of sulfur dioxide and nitrogen oxide in 28 U.S. states.
To contact the reporter on this story: Kim Chipman in Washington at KChipman@bloomberg.net
To contact the editor responsible for this story: Larry Liebert at email@example.com