POWER PLANTS Bush administration finalizes new pollution regulations

The mandate allows plants to trade pollution credits with other plants.
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WASHINGTON -- The Bush administration finalized Thursday a regulation for the eastern United States that would cut power plant pollutants that cause smog, acid rain and soot by about two-thirds over the next decade.
The rule -- which will cost about $3.6 billion a year to implement but is expected to save $85 billion in annual health benefits -- "will result in the biggest health benefit of any EPA rule in more than a decade," said Jeffrey Holmstead, the Environmental Protection Agency's assistant administrator.
The EPA predicts that the rule will prevent 17,000 heart and respiratory deaths caused by pollution from coal-fired power plants. It's aimed at reducing nitrogen oxide, which causes smog, and sulfur dioxide, which causes acid rain and soot.
The new rule is part of a two-prong effort to fulfill President Bush's pledge to clean up pollution from power plants that were built before the nation's air pollution laws were enacted. A more controversial rule to reduce mercury -- one criticized by environmental activists as being too slow and weak -- will be finalized next week.
Differing from past regulations
Because Thursday's regulation is designed to reduce pollution that travels across state lines, it applies only to 28 Eastern and Midwestern states and the District of Columbia.
Unlike most past regulatory efforts, this rule doesn't tell power plants how to reduce pollution. Instead, it puts caps on emissions and lets the utilities decide how to get below those limits.
One cap would reduce allowable nitrogen oxides emissions by 53 percent in 2009 and would cut permitted sulfur dioxide pollution by 62 percent in 2010. A more stringent cap for both would then take effect in 2015: 61 percent below current levels for nitrogen oxide and 73 percent below current levels for sulfur dioxide.
The key to the rule is that utilities are given a free-market tool that allows them to trade the right-to-pollute among power plants much like pork belly futures on the Chicago Mercantile Exchange -- a method that helped cut acid rain in the 1990s. A utility that can't reduce its emissions can buy the right-to-pollute from a utility that exceeded cleanup requirements.
The concept, when first used with acid rain in 1990, turned environmental offices in utilities into valued money-makers, said Fred Krupp, the president of Environmental Defense, a moderate environmental group that worked with the EPA on the latest rule.
This is how the new system works: The EPA will allocate "allotments" for the right to pollute by state based on how much power each produces. The states will then divvy those up among power plants, but the number of allotments will be less than what's allowed for current pollution, so utilities will have to clean up or buy another utility's allotments. Right now, an allotment equivalent to a ton of sulfur dioxide pollution sells for about $650, but could easily hit $1,000, Holmstead said.
Newer power plants will likely clean up faster than others because it's cheaper for them to clean up and sell excess allotments to older power plants.
Heidi Griesmer, an Ohio EPA spokeswoman, said the agency does not yet have a plan for the state, which has 23 coal-fired power plants. Ohio is required to reduce emissions of sulfur dioxide by 968,000 tons or 82 percent, and emissions of nitrogen oxides by 272,000 tons, or 77 percent, by 2015.
Although Maryland faces a larger percent reduction on both kinds of emissions, no state is required to reduce as much in terms of amounts.
Many affected power companies said Thursday they have already been seeking air pollution improvements.
Regional effects
Cincinnati-based Cinergy Corp., anticipating the more stringent clean-air regulations, said in September that it began work on an eight-year plan to upgrade its coal-fired electricity generating plants.
The projected cost is $2 billion through expected completion in 2012. All of the cost ultimately gets passed on to consumers, assuming that state utility regulators give approval, Cinergy spokeswoman Kathy Meinke said.
Cinergy operates nine coal-fired plants in Ohio, Kentucky and Indiana, along with a small hydroelectric plant at Markland Dam on the Ohio River in southern Indiana.
Columbus, Ohio-based American Electric Power already had begun installing equipment on coal-burning plants in three states, said John McManus, vice president for environmental services. AEP expects to spend $3.5 billion on scrubbers and other equipment at 18 plants in Ohio, Kentucky and West Virginia.