Dec. 11 (Bloomberg) -- As lawyers argued in the U.S. Supreme Court over forcing power companies to install pollution scrubbers on power plants, the facility at the center of the case was busy doing something else: installing scrubbers.
When it was run by a unit of Edison International in 2011, the Homer City Generating Station in Pennsylvania led the charge to get the Environmental Protection Agency’s so-called transport rule tossed out, a case that ended up at the high court yesterday.
Since the case was filed, Edison transfered control of the plant back to its majority owner, General Electric Co., which said it would spend $700 million to $750 million comply with the transport rule and related EPA regulations.
“The scrubbers we’re installing will make Homer City one of the nation’s cleanest coal-fired power plants,” said Andrew Katell, a spokesman for GE.
Attorneys general from 14 states, led by Texas, are challenging the transport rule alongside Edison, Energy Future Holdings Corp.’s Luminant, Entergy Corp., Peabody Energy Corp., Southern Co. and the United Mine Workers of America. They say the EPA improperly focused on the cost of emission reductions, rather than basing its rule solely on the amount of pollutants created in each state.
“What this means is that states here which are making only a very slight contribution to air-quality problems in downwind states are nonetheless required to make very substantial reductions,” said Peter Keisler, a lawyer representing the companies and miners, told the justices.
That argument drew resistance from several justices, including Sonia Sotomayor, who said it would be “crazy” for the agency not to consider cost. Justice Elena Kagan said the agency was focusing on “states that have lots of cheap and dirty emissions.”
To be sure, the issues before the Supreme Court go well beyond the plant even if GE does bring it up to compliance. The government’s lawyer said the case could affect how future rules are crafted governing pollution that crosses state lines.
“This court’s decision would affect the way in which both the states and EPA went about the business of determining how good-neighbor obligations should be carried out” in the future, Malcolm Stewart, the deputy solicitor general, told the justices.
Edison is still pushing back against the EPA, because of the precedent set by the way the agency crafted this rule, said Claudia O’Brien, a lawyer at Latham & Watkins LLP who represents the company.
“The principles involved are very important,” she said in an interview.
When the case was filed in 2011, Edison warned that keeping the law in place would cost it $85 million in 2012 to buy pollution credits. It said the plant, the biggest source of sulfur dioxide emissions in the U.S. the year before, couldn’t clean up the soot and smog created by burning coal fast enough to meet the EPA deadline.
When the U.S. Court of Appeals for the D.C. Circuit struck down the law, it gave the company a reprieve.
“The further out they can push it, the better,” said Rob Barnett, an analyst at Bloomberg Government. “Delay is always a good thing when you are on the industry side.”
GE’s decision to clean up the facility may be good for business too, according to a report from Standard & Poor’s. The credit-rating company said in a report Sept. 25 that installing scrubbers were key to the viability of the plant.
The pollution-control system being installed now will help the plant meet separate EPA regulation due to kick in by 2015 limiting mercury and air toxic particles from coal plants.
The 1,884 megawatt plant, in western Pennsylvania, is one of the nation’s biggest emitters of sulfur dioxide. In 2009, two of its units emitted approximately 96,000 tons of it, among the highest in the nation, according to a separate government complaint filed against the company. In 2010, the plant emitted 109,000 tons, the most of any plant in the country, according to the Sierra Club.
With the scrubbers in place, those emissions will be cut by 95 percent, according to GE.
Activists for the Sierra Club, which is fighting coal plants nationwide in part with a $50 million donation from New York Mayor Mike Bloomberg, the founder and majority owner of Bloomberg LP, wonder whether GE’s investments make sense, given the cheap price of renewable and natural-gas generated electricity.
“We’re still scratching our heads about how they justified it economically,” Tom Schuster, the local representative for the Sierra Club’s Beyond Coal campaign, said in an interview.
GE says that the plant’s size, location and facilities make it a good bet for investment.
“We have done our own internal valuations and engaged a third-party advisor, and believe that we will earn both a return of, and return on, our investment,” Katell said.
The Supreme Court cases are Environmental Protection Agency v. EME Homer City Generation, 12-1182, and American Lung Association v. EME Homer City, 12-1183.
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