EPA’s Changes to Air-Toxics Rule Fail to Sway U.S. Critics

Utility companies criticizing a proposed new U.S. cap on power-plant pollutants say they aren’t swayed by the Obama administration’s decision to grant two of their requests for more flexibility in complying.

Representatives for the largest coal-fired power producers, Southern Co. and American Electric Power Co., said the administration is underestimating the costs of the plan, which was released by the Environmental Protection Agency in Washington yesterday.

“We are disappointed,” Melissa McHenry, a spokeswoman for American Electric, based in Columbus, Ohio, said in an e-mail yesterday. “Our main concern remains the amount of time available to achieve compliance.”

The EPA’s mercury and air toxics rule would cost companies $9.6 billion a year for installing pollution-control devices or closing coal plants and substituting another fuel source, such as natural gas. Most of the 1,100 U.S. coal-fired units already comply, the EPA said. The rule caused a split within the industry.

Exelon Corp. of Chicago and Public Service Enterprise Group Inc., of Newark, New Jersey, support the rule because they say they’ve already cut emissions and their competitors should have to as well.

“This is a rule that is way long overdue,” Eric Svenson, PSEG’s vice president of environment, health and safety, said in an interview. “We know from PSEG’s own experience that installing hardware and controls is doable.”

Save Lives

The EPA says the standard will save lives and create as much as $90 billion in annual benefits. It will also boost employment as power producers install scrubbing systems, Lisa Jackson, the agency’s administrator, said at an event in Washington. Babcock & Wilcox Co. and Alstom SA are companies that make such equipment.

The standard will lead to a cut of 4.7 gigawatts of U.S. coal-fired generation capacity by 2015, or less than one-half of 1 percent, according to the EPA. FBR Capital Markets & Co. in New York estimated the drop might more than 10 times that much.

Changes announced yesterday include easing mandatory controls for particulate matter, scuttling pollution caps when plants are starting up or shutting down, and giving companies greater leeway to average mercury emissions across units. Altering the rule will save utilities about $1 billion annually, the EPA said in a fact sheet.

Push to Overturn

“These are the kinds of flexibilities that a number of people in the industry have been arguing for,” Paul Allen, senior vice president of Constellation Energy Group Inc., said in an interview.

The EPA’s rule still faces hurdles.

U.S. Senator James Inhofe, an Oklahoma Republican, pledged to push for legislation that would overturn the rule, and said he asked the EPA’s inspector general to investigate the way the agency developed the regulation.

“I am determined to apply the brakes to President Obama’s runaway regulatory agenda before it wrecks our economy,” he said in a statement yesterday.

American Electric, based in Columbus, Ohio, said in June that proposed EPA rules would force it to close parts or all of 11 power plants, eliminating 600 jobs. Southern said in August that the rules may cost it as much as $18 billion.

The International Brotherhood of Electrical Workers and other unions sided with American Electric in urging a delay in the rules.

‘Some Improvements’

In a meeting with Jackson in September, executives from American Electric made the case for adjusting the particulate standard, saying the company’s cost would be $700 million for little or no health benefit, according to notes filed online by EPA officials. Southern asked for the waiving of pollution controls during startup and shutdown.

The companies each got their way. “There seem to be some improvements in the rule,” McHenry said, referring to the particulate-matter adjustment. Stephanie Kirijan, a spokeswoman for Southern, said the company is still reviewing the measure.

The lobbying didn’t succeed in persuading the administration to extend the three-year compliance deadline across the board.

Instead, the rule was accompanied by a presidential memorandum directing the EPA to use its legal authority to give power companies more time when necessary. The EPA said in its statement that it wants to make “broadly available” a fourth year, and will offer more time to deal with local reliability issues.

Compliance Deadline

“They didn’t address the time frame for compliance,” Scott Segal, a lobbyist in Washington with Bracewell & Giuliani LLP representing companies such as Southern, said in an interview. Overall, “this is largely the same as the proposal.”

For environmental and health groups, that’s something to cheer.

Mercury harms the nervous systems of fetuses and young children, according to the EPA. Clamping down on additional pollutants covered by the standard will reduce asthma, cancer, heart disease and early death.

“There was no last-minute mischief,” John Walke, clean-air director for the New York-based Natural Resources Defense Council, said in an interview. The “11th-hour lobbying frenzy just failed.”

Southern rose 1 percent to $45.86 in New York trading yesterday. American Electric rose 2.3 percent to $40.85. The EPA rules were in line with investor expectations, Andrew Smith, a New York-based analyst for J.P. Morgan Securities LLC, said in a note to investors.

Regulated utilities such as Southern should be able to pass the costs of new investments to customers, John Kohli, portfolio manager for the Franklin Resources Inc. utilities fund, said in an interview Dec. 20.

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