Power Drain

The U.S. Energy Crisis Utilities, Environmentalists, and States Will Discuss Revisions to Clean Air Act

John J Fialka / Wall Street Journal 4sep01

WASHINGTON -- State officials, utility executives and leaders of the nation's environmental groups will hold two days of closed talks this month, negotiations that could pave the way for a significant revision of the Clean Air Act.

The unusual talks, sponsored by the Senate Environment and Public Works Committee, will mark a step toward new legislation designed to cut deeply into industrial air emissions and, at the same time, give utilities the "regulatory certainty" they say they need to build a new generation of power plants.

The so-called stakeholder talks, starting next week, are designed to explore areas of agreement among the three groups. Staff members from some committees of Congress and federal agencies will observe the talks to get a taste for the complex politics and economics involved. Power plants produce about a third of the nation's air pollution.

"This is a multitrillion-dollar issue," said Joel Bluestein, spokesman for a group of five utilities pushing for the revision. "How you sort all this out in a politically charged atmosphere will be very difficult. But it should be a lot of fun." The utilities include Enron Corp. and El Paso Energy Corp., of Houston, Calpine Corp., of San Jose, Calif., Trigen Energy Corp., of White Plains, N.Y., and NiSource Inc., of Merrillville, Ind.

The "fun" will be closely watched by the Bush administration, which is writing a bill that aims to reduce levels of nitrogen oxides, sulfur dioxide and mercury. Democrats hope to add a fourth pollutant -- carbon dioxide, or CO2. Scientists believe man-made CO2, currently unregulated, is the largest cause of global warming.

Adding CO2, "however, likely would produce a sharp political backlash, because there is no cost-effective way to remove it from the stacks of coal-fired power plants, which produce 52% of the nation's electricity. Requiring steep cuts in mercury, which could be expensive, also could cause utilities to switch from coal. Mercury is released into the air in the process of burning coal.

"That will be a bright red flag for a lot of legislators, a lot of our states and a lot of our companies," said Quin Shae, the chief environmental expert for the Edison Electric Institute, which represents the nation's closely held utilities. Still, he added, the value of the talks "could be very high," because they could affect all EEI members.

Under the Clean Air Act, pollutants are covered by 19 different programs, some of which overlap and some that have yet to phase in. A multipollutant approach would create one reduction target for a specified pollutant, leaving it up to companies how to meet that target by a specified date.

In exchange for accepting deeper cuts for emissions, plant owners want a "period of certainty" during which they would be assured there would be no new regulations that would require substantially altering their power plants.

This approach also could initiate a nationwide regime of emissions trading. If a company reduced its emissions of a pollutant below targeted levels, it would get emissions credits that could be sold to other companies, which may need the credits to help reach their own targets. It would give plant owners more flexibility than they have under current law, which gives state regulators the authority to choose what state-of-the art pollution-abatement equipment a given plant must use.

The idea for the talks comes from Sen. Robert C. Smith, a New Hampshire Republican who used a similar session last year to broker a law to restore the Everglades. Sen. James M. Jeffords, the Vermont independent who is chairman of the committee, said in a statement that the approach will produce an "aggressive, four-pollutant bill" that he hopes the committee will pass by late October.

State regulators are split on the merits of emissions trading, because it tends to reduce some of their powers. They also are split by geography. Because weather patterns move polluted air from west to east, northern East Coast states say they can't meet federal air-quality standards without tougher curbs on Midwest states, where there tend to be more coal-fired power plants.