EPA Said to Give Companies Option to Delay Pollution Caps

Nov. 29 (Bloomberg) -- The U.S. Environmental Protection Agency proposed letting individual power plants apply for more time to meet new pollution standards, in another concession to industry demands to ease regulation, according to people familiar with the process.

The EPA stopped short of an industrywide delay of at least a year sought by utilities led by American Electric Power Co. and Southern Co., according to the people, who spoke on condition of anonymity while the White House Office of Management and Budget reviews the proposal.

The agency “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 so-called air toxics rule is the costliest of 33 EPA regulations under review by OMB’s Office of Information and Regulatory Affairs. Republican lawmakers such as Representative Ed Whitfield of Kentucky criticize EPA rules as overreaching that hinders job creation. The Republican-led House has passed bills that would block EPA regulations such as planned standards for industrial boilers.

The proposed rule, estimated by the EPA to cost $11 billion a year, is set to be issued next month and take effect in 2015. The EPA’s proposal could still be changed, or rejected, by the White House. An EPA proposal to cap ozone pollution nationwide was scrapped by President Barack Obama in September.

Faced with complaints by companies and lawmakers, the EPA has exempted the burning of biomass from incinerator rules, eased off sulfur-dioxide caps for Texas power plants and pledged not to establish controls on farm dust.

Emission Limits

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.

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

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

‘Isolated Instances’

“In developing our rules, we are careful to look closely at reliability issues,” Betsaida Alcantara, a spokeswoman for the EPA, said today in an e-mail. “If there are isolated instances where reliability may be a concern, the Clean Air Act has the flexibility to deal with those cases.”

A separate EPA measure on power-plant emissions of sulfur dioxide and nitrogen oxide that cross state lines is set to take effect in 2012, and is separate from the air toxics rule now under review.

In a meeting with White House officials set for today, lobbyists for companies such as Southern and St. Louis-based Arch Coal Inc. will urge that the rule be put off for a year so the agency can deal with more than 900,000 comments 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 beyond the target date, Segal said.

Reliability Report

“Compliance deadlines will challenge the electric industry’s planning horizons, processes and schedules,” the North American Electric Reliability Corp. said in a report released yesterday.

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.

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.

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.

‘Absolutely Inadequate’

“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.

Industry is divided over the regulation. Exelon Corp., the largest U.S. power producer, and Public Service Enterprise Group Inc. support the EPA’s rules and don’t want any further delays.

“By providing regulatory certainty, the rules will be the driving force to modernize and improve the efficiency of our aging electric system,” Kathleen Barron, vice president of Chicago-based Exelon, said in testimony submitted to FERC.

To contact the reporter 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