Utility Futility at the EPA

Last November, the Environmental Protection Agency announced a wave of lawsuits against 17 electric power plants in the Midwest and South. The agency claims these coal-burning facilities have been flouting the Clean Air Act for decades, thereby creating a swath of ozone smog that stretches all the way to the Northeast. Several Northeastern states have joined in by filing petitions and lawsuits of their own, arguing that these unwanted pollution intrusions are preventing them from meeting Clean Air Act standards. On March 1st, just days after Tampa Electric Company became the first of these utilities to settle rather than engage in a protracted legal battle, EPA announced that it is going after 12 more.


The cost of EPA’s aggressive implementation of the Clean Air Act could easily stretch into the billions. It’s almost enough to make you feel sorry for your electric company.


The targets of EPA’s lawsuits claim they are victims of an ex post facto rewrite of the way the Clean Air Act works, and they have a strong point. Under the Act, utilities must go through a lengthy permitting process before building a new facility or substantially modifying an existing one. Routine maintenance, on the other hand, does not trigger such tough requirements. In these lawsuits, EPA is essentially reinterpreting the law, arguing that dozens of facility changes plant managers thought were routine maintenance actually count as major modifications. Almost all of these actions were known to EPA when they were performed, yet no objections were raised at the time. Paul Bailey, vice president of environmental issues for the Edison Electric Institute, calls this “a case, at bottom, of revisionist history.”


If the power plants lose, they will be subject to fines of up to $25,000 per day for violations that had gone on for many years, in addition to the high costs of bringing facilities into compliance with EPA’s newly defined requirements. One can see why these companies are worried even about the small chance of EPA prevailing in federal court.


As with many environmental “solutions,” these costly measures are chasing a greatly overstated problem. Ambient ozone levels are already declining, 16 percent from 1988 to 1997 alone, according to EPA figures. This positive trend is very likely to continue, even without the agency’s latest crackdown. Further, the extent of interstate smog migration along prevailing winds eastward and northward is also exaggerated. A 1997 study by the Ozone Transport Assessment Group, an organization comprising EPA and environmental officials of 37 states, concluded that ozone transport beyond 150 miles is minor, undercutting much of the rationale behind EPA’s agenda. “Transported ozone is a far less significant contributor in the Northeast than local sources,” says Dr. Kay Jones, former senior advisor on air quality to the President’s Council on Environmental Quality during the Ford and Carter administrations.


Declaring long range ozone transport a serious problem in the Northeast and targeting utilities in the Midwest and South may not be sound environmental policy, but it is brilliant environmental politics. EPA has essentially agreed to cut Northeastern states some slack regarding in-state air emissions by placing the burden elsewhere, and in so doing has solidified bipartisan support for the agency among politicians from that region. Playing regional divide and conquer has diffused the nascent nationwide opposition to costly federal environmental measures, which nearly derailed EPA’s controversial ozone and particulate matter rules in 1997. EPA’s game of pitting one region against others has another self-serving purpose–it seemingly demonstrates the need to deal with pollution at a level higher than the states, and cements the agency’s role as the nation’s environmental referee.


Tampa Electric agreed to a $3.5 million civil fine and plant renovations that could cost $1 billion. Though the other utilities stand by the legality of their actions and have vowed to fight, the costs and years-long delays and uncertainties created by litigation may force them to the settlement table as well. In the end, the price tag could reach tens of billions of dollars.


But don’t feel too sorry for your electric company. After all, most of these costs will be passed on to you.


Ben Lieberman ([email protected]) is a CEI policy analyst.