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
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
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
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