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EPA's New NOx Rule a BigPlus for Gas Demand

EPA's New NOx Rule a BigPlus for Gas Demand

The Environmental Protection Agency's final plan for reducing smog-causing emissions of nitrogen oxides (NOx) in 22 eastern states and the District of Columbia should create an additional 1 Tcf of gas demand by 2003, said Bruce Craig of the Natural Gas Supply Association.

The increase should occur predominately during the off-season (spring, summer, fall), which should provide a greater year-round demand balance and better utilization of the pipeline grid, said Craig. The most noticeable increases in demand probably will occur in the Midwest because of the dominance of coal-fired generation there and the abundance of gas pipeline capacity. Some heavily coal-dependent electric generators will turn to co-firing gas and coal. Others will be building new more efficient gas-fired generation at a rapid pace because of the tightness in the Midwest power market today.

"This is a big win for natural gas," said Craig. "The NGSA is 100% behind EPA on this rule." The new State Implementation Plan (SIP Call) mandates a reduction of 1.1 million tons of NOx annually, or 28%, by 2007. States clean air plans come due in September 1999 and needed controls must be in place by 2003.

The EPA rule, which is based in part on recommendations from 37 states, is the first attempt to protect public health in downwind states from smog that crosses their borders from other states. The plan includes a model "cap and trade" program that encourages development of a market-based emissions trading program. The trading program would allow each state to establish a cap on NOx emissions. Within the cap, power plants and other sources that reduce emissions in greater amounts than required can sell the excess as credits. Other facilities -- that cannot reduce emissions as quickly or as cost effectively -- can use the credits to meet their clean air requirements.

It does not mandate which sources of NOx emissions should be reduced, but provides governors with flexibility to achieve the reductions from sources that make the most sense. But EPA estimates reductions from power plants are the cheapest way the achieve the desired results.

If there's one thing that's certain, its that EPA will be sued. Every EPA rule is appealed and this one will be no different. Electric utilities, particularly those in the Midwest who face much tougher emissions restrictions than what they've faced in the past, were extremely displeased with the final rule. The Midwest Ozone Group, an ad hoc coalition of 30 electric utilities and coal companies from 11 states, and the West Virginia Chamber of Commerce issued a Notice of Intent to sue EPA. Among the states that were targeted for the "most drastic reductions" are West Virginia, Ohio, Indiana, Missouri, Kentucky, Illinois, Michigan and North Carolina. "Ironically, these are the states that have the cleanest air and the best record of performance in achieving the nation's air quality goals,'' said David M. Flannery, legal counsel for the Midwest Ozone Group.

American Electric Power noted 13 of the 22 states opposed the EPA plan and came up with a better one. Wisconsin Electric (WE) officials said EPA's schedule for curbing releases of nitrogen oxide emissions will severely limit power plant availability throughout the Midwest during a critical time. WE estimates its total compliance cost is $250 to $500 million ($30-$50 million per year).

Rocco Canonica

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