The Environmental Protection Agency’s final plan for reducingsmog-causing emissions of nitrogen oxides (NOx) in 22 easternstates and the District of Columbia should create an additional 1Tcf of gas demand by 2003, said Bruce Craig of the Natural GasSupply Association.

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

“This is a big win for natural gas,” said Craig. “The NGSA is100% behind EPA on this rule.” The new State Implementation Plan(SIP Call) mandates a reduction of 1.1 million tons of NOxannually, or 28%, by 2007. States clean air plans come due inSeptember 1999 and needed controls must be in place by 2003.

The EPA rule, which is based in part on recommendations from 37states, is the first attempt to protect public health in downwindstates from smog that crosses their borders from other states. Theplan includes a model “cap and trade” program that encouragesdevelopment of a market-based emissions trading program. Thetrading program would allow each state to establish a cap on NOxemissions. Within the cap, power plants and other sources thatreduce emissions in greater amounts than required can sell theexcess as credits. Other facilities — that cannot reduce emissionsas quickly or as cost effectively — can use the credits to meettheir clean air requirements.

It does not mandate which sources of NOx emissions should bereduced, but provides governors with flexibility to achieve thereductions from sources that make the most sense. But EPA estimatesreductions from power plants are the cheapest way the achieve thedesired 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 muchtougher emissions restrictions than what they’ve faced in the past,were extremely displeased with the final rule. The Midwest OzoneGroup, an ad hoc coalition of 30 electric utilities and coalcompanies from 11 states, and the West Virginia Chamber of Commerceissued a Notice of Intent to sue EPA. Among the states that weretargeted 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 andthe best record of performance in achieving the nation’s airquality goals,” said David M. Flannery, legal counsel for theMidwest Ozone Group.

American Electric Power noted 13 of the 22 states opposed theEPA plan and came up with a better one. Wisconsin Electric (WE)officials said EPA’s schedule for curbing releases of nitrogenoxide emissions will severely limit power plant availabilitythroughout the Midwest during a critical time. WE estimates itstotal compliance cost is $250 to $500 million ($30-$50 million peryear).

Rocco Canonica

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