In what one gas industry official close to the case called a”major victory,” the District of Columbia Circuit Court of Appealsupheld the Environmental Protection Agency’s program for reducingnitrogen oxide (NOx) emissions for 19 eastern and midwestern statesplus the District of Columbia last week. Barring any furtherappeals, the NOx SIP Call rule will be added to the Clean Air Act,requiring the states included in it to reduce their NOx emissionsby a total of 1.2 million tons, or 28% of current levels, annually.

The rule almost certainly will have a major impact on gas demandas generators scramble to meet its requirements by relying more oncleaner gas-fired generation rather than dirty coal and oil-firedunits. The regulation is fuel neutral. Regardless of what fuel isused to generate electricity in these states, they all have to meetthe same standard of emissions.

“Natural gas benefits because for the first time in the historyof the Clean Air Act, natural gas is taking its rightful place in afuel-neutral energy portfolio,” said Rhone Resch, the NGSA’sDirector of Utility Regulations and Environmental Affairs. Whenoriginally issued, the NGSA was one of the regulation’s biggestproponents. The organization said at the time that the plan wouldcreate an additional demand of 1 Tcf of gas by 2003.

“This regulation was a major part of the EPA’s strategy toreduce smog,” said Resch. The NGSA was one of the intervenors inthe case on behalf of the EPA. “It was originally issued at thefederal level in the fall of 1998, but there had been many delaysduring the appeals process. The fact that the court ruled in favorof the bill so strongly I think surprised many people.” He addedthat the only major loss to the rule was that three states were cutfrom the original 22-state plan.

Opposing the new regulations were a coalition of organizations,comprised mostly of coal utilities and headed by the state ofMichigan, Resch said. Overall, there were 31 petitioners and 65intervenors that agreed with Michigan and filed statements with thecourt against the regulation. On the other side, 22 intervenorsfiled statements in support of the EPA.

The new rule does not mandate which sources of NOx emissionsshould be reduced, but provides governors with flexibility toachieve the reductions from sources that make the most sense. ButEPA estimates reductions from power plants are the cheapest way theachieve the desired results.

Because of delays (Resch said the regulation suffered “several”setbacks during the appeals process), the timeline of the programhas to be reworked. Resch said the supporters of the regulationexpect to see the states start filing their plans in the nearfuture and expect to see emission reductions begin in 2004. Theoriginal plan required the states to have their plans filed in thefall of 1999.

“The bottom line is that 19 states and Washington D.C. will nowhave to develop state implementation plans to reduce NOx emissionsaccording to a budget established by the EPA,” Resch concluded.

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