For nearly 21 months, a government task force steadily moved toward recommending rules that within three years would force every coal-fired power plant in the country to reduce emissions of mercury, which can cause neurological and developmental damage to humans.
The Environmental Protection Agency-sponsored working group had a well-regarded mix of utility industry representatives, state air quality officials and environmentalists. Without settling on specific emission reductions, the panel agreed that all 1,100 of the nation's coal- and oil-fired power plants must use the "maximum achievable control technology" (MACT) to reduce mercury and other hazardous pollutants.
Mercury from U.S. coal- and oil-fired power plants can cause neurological and developmental damage in humans.
(Amy Sancetta -- AP)
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But in April, the EPA abruptly dismantled the panel. John A. Paul, its co-chairman, said members were given no clue why their work was halted -- that is, until late last month, when the Bush administration revealed it was taking an entirely different approach, using a more flexible portion of the Clean Air Act.
The new approach would still cost the industry billions of dollars to meet long-term goals. But it was far cheaper and less onerous than the MACT approach that most experts had assumed the EPA was developing to meet a court-imposed deadline of Dec. 15.
The administration's alternative plan would technically downgrade the danger of mercury pollution; grant utility companies 10 more years to develop and install new anti-pollution equipment; and launch a cap-and-trade system that would allow utilities to buy emissions "credits" from lesser-polluting companies to meet an overall industry target, or cap, without having to install new scrubbers or anti-pollution equipment on every plant.
The proposed rule mirrored President Bush's "Clear Skies" legislation, which was stalled in Congress, and would regulate mercury pollution along with two less toxic air pollutants, sulfur dioxide and nitrogen oxide. Mike Leavitt, the new EPA administrator, said the approach would provide "the largest air pollution reductions of any kind not specifically mandated by the Congress." But some task force members were shocked and angered.
"It is as though the working group never existed," said Paul, supervisor of Ohio's Regional Air Pollution Control Agency. "Just when we think we have a process in action to control mercury from every power plant, they walk away from it."
"It was a huge decision that demonstrated that [the EPA's] desire wasn't to regulate mercury in the way that Congress and a federal advisory committee and other stakeholders had anticipated," added panel member S. William Becker, executive director of a bipartisan association of state air quality officials.
EPA and White House officials say their approach is actually "greener" than the one prescribed by Congress and considered by the working group. In the long run, they say, it will encourage development of mercury-removal technologies beyond existing techniques envisioned under MACT; offer utilities economic incentives to continuously reduce mercury emissions; and cover emissions from plants to be built, although new facilities are likely to use clean-burning natural gas, not coal.
But critics accuse the White House and its allies in the utility industry of subverting a process involving one of the most toxic chemicals known, which once airborne can pollute rivers, lakes and oceans and penetrate the food chain. John Stanton of the National Environmental Trust, a member of the working group, said the administration's decision marks "really a fundamental shift in the recognition of the threat posed by mercury to the very most susceptible," including the fetuses of pregnant women who eat mercury-tainted fish.
Stanton and other environmentalists charge that by shifting the regulations from the rigorous Section 112 of the Clean Air Act, crafted by Congress to deal with the most hazardous pollutants, to the more permissive Section 111, the administration will excuse the utility industry from controlling more than 60 other toxins associated with the burning of coal and allow power plants to continue polluting for another decade. "This is a case of politics polluting science," Stanton said.
Some critics blamed White House political adviser Karl Rove, Office of Management and Budget regulatory experts or Vice President Cheney's office for dictating the new policy. In fact, the regulatory turnabout was engineered by Jeffrey R. Holmstead, the EPA's senior air quality official and a former industry lawyer, who is little known outside a circle of government regulators and utility industry executives.
Holmstead had been a scholar with a libertarian group that advocated market solutions to environmental problems and a partner at the Washington law firm Latham & Watkins, which has represented electric power companies and other industries before Congress. He was associate counsel to President George H.W. Bush, with primary focus on environmental issues.
Neither Leavitt nor Christine Todd Whitman, when she was EPA administrator, played a significant role in developing the mercury rule backed by Holmstead, although Leavitt became a strong advocate of the overall cap-and-trade approach during last-minute high-level meetings, said a Leavitt aide.
"I was the one who started talking about [the approach] about a year ago," Holmstead confirmed in a recent interview. "I can assure you that no one on the industry side ever spoke about it."
Holmstead said he first considered using Section 111 to regulate mercury, instead of the more restrictive Section 112, shortly after he joined the EPA, as part of deliberations over the administration's "Clear Skies" legislation. The proposed legislation uses market mechanisms to encourage development of new technology to meet mandatory industry-wide emissions caps.
"It appeared we could get much greater pollution reduction from the power sector if we could do cap-and-trade for all three pollutants," Holmstead said.
Under the administration's approach, utilities would have until 2018 to cut those emissions by 70 percent. By comparison, the EPA working group considered various approaches that would cut mercury pollution by 35 percent to 93 percent within three to four years.
Rove said in an interview that although he attended several interagency meetings on mercury, "I was not a principal mover" in the decision-making. A senior White House adviser said: "If you had to pick one person, it was Jeff Holmstead in EPA's air office who played the key role in development of the cap-and-trade approach to regulation of mercury emissions."
The Clinton administration considered a similar approach in 2000 but abandoned it after EPA officials found it was not legally supportable, said then-EPA director Carol Browner. "The career people at OMB basically proposed what industry wanted," Browner said. But agency lawyers said the approach "had some legal vulnerabilities."
Over the summer, some EPA staffers cautioned Holmstead that treating mercury as a lesser pollutant and allowing for trading might not hold up in court, an EPA official said.
"Sure, there's concerns about legal problems with this approach, but that doesn't mean you shouldn't try it or that it doesn't have value," said Philip S. Angell, an adviser to Leavitt. Ann Berwick, associate director of the Clean Energy Group, an association of utilities advocating more environmentally sound policies, said her members are concerned that the administration plan is "a little dicey from a legal standpoint" and may not offer much regulatory certainty.
As a legal hedge, the administration last month simultaneously proposed a second mercury regulation that would provide a 29 percent reduction in emissions and require all plants to install pollution controls. The EPA had to offer that proposal to comply with a legal requirement, and Leavitt and other officials made it clear it was not their first choice.
In December 2000, the EPA concluded that mercury emissions from power plants were a hazardous pollutant that should be controlled under Section 112, which mandated swift adoption of the "maximum available technology." The EPA agreed to propose the MACT rule by Dec. 15, 2003, and finalize the rule a year later to settle a court case.
The EPA created the Utility MACT Working Group in August 2002, around the time Holmstead joined the agency. The group included six representatives of state and local air quality agencies, eight environmentalists and 15 industry representatives. Although it was clear from the start that it would be impossible to develop a consensus view among the competing interests, Paul and other members said there was general agreement that there would have to be some type of a MACT standard, affecting every U.S. plant, to comply with the law.
Interviews with leading industry lawyers and representatives indicated that although utility executives backed a flexible cap-and-trade system for mercury, most assumed the EPA would eventually adopt some type of MACT standard. Industry officials offered their views during at least five White House meetings between May 21 and Nov. 4.
"People in the industry never expected EPA to go in that direction of a mercury trading program," said an industry lawyer. "It's something they liked, but [executives] thought the MACT standard was on the table, and they were resigned to that."
Ohio-based Cinergy and the Clean Energy Group went so far as to ask the EPA for computer analyses to help assess the economic impact of the task force's MACT proposals. On April 1, Sally Shaver, an official of the EPA's Office of Air Quality Planning and Standards in North Carolina, told Paul and others that a decision on the computer runs had been indefinitely postponed.
That was the last time Paul heard from the EPA.
