Energy & Environment

Balking on Air

by | January 2000

It's taken a decade, but St. Louis is moving at last to submit to the Clean Air Act of 1990. Local gas stations began selling reformulated fuels last summer to clean up the smoggy air. And this spring, motorists there will start taking their cars in for tougher emissions inspections that the Missouri General Assembly finally--if reluctantly--authorized.

But environmental regulators across the Mississippi River in Illinois say that's not enough. They want Missouri industries to spend hundreds of millions of dollars on additional air pollution controls, primarily to help Chicago clean up its own air 300 miles to the northeast. When the wind blows that way on hot summer days, there's no question that the St. Louis area's smokestack emissions contribute to the smog that hovers over Chicago. Nevertheless, utilities and businesses in the Show Me State say they shouldn't have to bear an inequitable economic burden to remedy the situation in Chicago. Meanwhile, Illinois' frustration over the matter mounted in early December, when the U.S. Environmental Protection Agency declared the state's smog clean-up plan for Chicago, along with those for eight other cities, to be inadequate.

This skirmishing is only part of a much larger air pollution battle that has been shaping up over the past year involving EPA and the states in the eastern half of the country. Two years ago, a coalition composed of three dozen state environmental commissioners negotiated an agreement about how to address cross-boundary ozone transport. But the multi-state accord has unraveled since then, and the result has been a contentious and litigious fight over how much upwind states should do to help downwind states solve their air quality problems.

Last spring, for example, the deadline loomed for 22 states to submit detailed plans to comply with the ambitious goal that EPA wants to set for curbing smog-producing nitrogen oxide. But some Midwestern state regulators, industry groups and utilities that operate coal-burning power plants mounted legal challenges to federal clean air authority that have tied EPA's hands and left pollution-control efforts in limbo.

Then, in the fall, the New York and Connecticut attorneys general declared that they were taking 17 coal-burning electric generating stations in five Midwestern states to court, contending that their smokestack emissions are damaging the East Coast's environment. "Air pollution does not respect state boundaries," says New York Attorney General Elliot Spitzer. "We are under siege by air-borne pollution originating far beyond our borders." Shortly thereafter, EPA and the U.S. Department of Justice announced a similar action against utilities in 10 states.

Michigan Environmental Quality Director Russell Harding, along with other Midwestern regulators, views the lawsuits as grandstanding by Northeastern political leaders. "This stuff plays pretty well politically when you're blaming somebody else," he says. Whatever the motivations, Ohio environmental director Christopher Jones predicts that "what we are setting up now is a regional civil war."

Ground-level ozone remains the most intractable air-quality problem for major cities east of the Rocky Mountains. Smog forms when nitrogen oxide and volatile organic compounds emitted by utilities, factories, automobiles and commonly used solvents react chemically in the air above population centers to create ozone that can irritate people's lungs and send the most vulnerable to the hospital.

Twenty years ago, EPA set the Clean Air Act limit on ground-level ozone at 0.12 parts per million, measured over a one-hour period. But hot-weather smog in many metropolitan areas still spikes high enough to besmirch the air and threaten human health. So in 1997, EPA Administrator Carol M. Browner tightened the standard to 0.08 ppm, measured over eight-hour periods to more accurately account for cumulative exposure.

Trying to comply with the law, state and local governments have taken politically painful steps to require cleaner-burning cars and industrial smokestacks. Those efforts, however, haven't been sufficient to meet the less rigorous standard--much less the tougher one. Now, federal and state regulators have concluded that nitrogen oxide emissions that winds carry across the eastern third of the continent make it impossible for Chicago, Atlanta and many other cities to ever get into compliance.

Acknowledging the problem, 12 states and the District of Columbia have been working together to manage smog along the heavily populated urban corridor from Northern Virginia to Maine. Through the region's Ozone Transport Commission, last year they began phasing in NOx budget caps designed to cut emissions to less than half of 1990 levels by 2003. To the west and south, though, coal-fired power plants and industrial boilers in the Ohio and Tennessee valleys and Midwestern prairies are still sending pollutants swirling across the Appalachian Mountains toward the Atlantic Seaboard.

New York, Pennsylvania and other Eastern states have demanded that the federal government help them out by forcing industrial heartland states to curtail smog-forming NOx. "New Hampshire's been doing its job, but we still will have violations because we have transported pollution," says Robert W. Varney, New Hampshire's environmental commissioner. He adds that without help from the Midwest, meeting the standard "will force downwind states to make up for the pollution that upwind states send them" through draconian restrictions on industry and motor traffic.

"The fact of the matter is that pollution within the Northeastern states is not entirely the fault of the Midwest," Ohio's Jones responds. Like Missouri, Ohio has taken the politically difficult step of requiring more rigorous auto emission checks, "but that's not the case in a lot of the Northeastern states," he adds.

In 1995, state environmental commissioners tried to settle these issues themselves, launching unprecedented region-wide negotiations that included EPA, industry and regulatory agencies from all 37 states east of the Rockies. The Ozone Transport Assessment Group spent two years compiling computer models confirming that NOx emissions can drift hundreds of miles away, crossing state lines, to compound air quality problems. But apportioning the blame--and deciding how much emissions must be cut--turned out to be a daunting exercise.

Nebraska's environmental chief walked out midway through the OTAG debates, and Texas and neighboring states made detailed arguments that transport models showed no compelling case that their industries should be subjected to tough NOx-control measures. With each state possessing one vote, environmental commissioners wound up cutting political deals (reminiscent of the regional horse-trading that typically occurs in the U.S. Senate) to forge majority support for ozone-control recommendations.

OTAG wound up excluding all but one of the states west of the Mississippi from the recommendations. Because Illinois needed NOx cuts from St. Louis to help Chicago out, then-Illinois EPA director Mary A. Gade, who was also chairman of OTAG, insisted that Missouri be kept subject to the recommendations, even though Iowa and Arkansas, its immediate neighbors, got off the hook.

In their 1997 report, OTAG negotiators laid out state-by-state NOx budgets that would force major sources in 22 states to spend an estimated $1.7 billion to cut emissions at power plants, factories and other major facilities. OTAG's data suggest that smog-forming chemicals disperse the longer the distances they travel, so commissioners recommended progressive NOx-reduction levels, ranging between 65 and 85 percent, that would ease emission limits for more distant sources that have less impact on polluted areas. To hold the costs to a minimum, they endorsed an emissions-trading system that would allow industries to sell credits for cutbacks that exceed required levels to others not in compliance.

Not all the states were satisfied. Alabama, Kentucky, Michigan, Virginia and West Virginia dissented from OTAG's final package, and 11 Eastern states quickly filed Clean Air Act petitions demanding that EPA force Midwestern utilities to start controlling ozone transport. EPA sided with the East, ignoring the OTAG proposal for graduated NOx- control levels and ordering a one-size-fits-all standard requiring 85 percent reductions, accompanied by an emissions-trading system. EPA's proposal would force facilities to install expensive equipment to achieve the NOx-reduction goal.

Ameren Corp., the major electric utility serving St. Louis and southern Illinois, projects that controlling transported ozone will cost its power plants between $250 million and $350 million by 2002 to install sophisticated NOx-control units, plus another $15 million a year to run them during five smog-prone summer months. Missouri officials concede that the St. Louis area contributes to Chicago's smog, but they're not convinced that EPA's all-out emission-control strategy is justified. "The costs for St. Louis are clear and certain, but the benefits for Chicago are much more speculative," contends Frank H. Hackmann, a St. Louis attorney who represents the city's Regional Commerce & Growth Association. For Missouri, the potential costs look even more burdensome since its next-door neighbors won't be subject to the same requirements.

What's more, the state can't count on help from Texas and other upwind states to deal with its own ozone problems. EPA has promised Missouri, however, that it will keep monitoring transport across the Great Plains to determine whether NOx controls should be extended to Texas and other states that talked their way out of the OTAG compromise. Another concern is that the economic consequences could be magnified as states deregulate the electric power industry, freeing utilities to build new coal-fired facilities outside the OTAG- delineated boundaries.

In the midst of OTAG's fragile deliberations, EPA further confused the political situation by simultaneously tightening the ozone standard, making compliance all the more difficult. Along with major Midwestern industries, Michigan, Ohio and other upwind states filed suit, arguing that the regulations were too expensive and lacked a solid scientific basis. A U.S. Appeals Court ruled in their favor last May--even going so far as to state that EPA's rule-making processes amounted to "unconstitutional delegations of legislative power." Although the agency is appealing this decision, for now it has been effectively blocked from enforcing the new standard or following up on its NOx- control proposal.

In negotiations last summer, governors of the six upwind states offered to curb emissions by 65 percent, a level that their pollution- control advisers say would take care of transport problems without prescribing the most expensive NOx controls and leaves room for expanding the region's electric power grid. Northeastern states are holding out for more, but Michigan is moving on its own to implement the 65 percent reduction. "We're more than taking care of any culpability we have to the Northeast," maintains Harding.

So far, Illinois, Missouri, Wisconsin and several other upwind states haven't jumped on the legal bandwagon. Illinois, for one, is caught in the middle, since it exports NOx across Lake Michigan but also gets it from St. Louis and other neighbors. State regulators have drafted a rule ordering 70 industrial facilities in central and southern Illinois to proceed with the 85 percent emissions cut that EPA proposes. Bharat Mathur, Illinois' air-quality chief, says that's economically feasible if all the OTAG states spread the costs around through a region-wide cap and trading program.

With that plan on hold while EPA appeals last year's court decisions, Illinois has begun negotiating with neighboring states on a Midwest- only program. Midwestern regulators are moving toward cutting NOx by 65 percent, a level that Mathur says would get Chicago into compliance with the old ozone standard. All deals would be off, however, if EPA's ozone-control strategy is upheld in court. Mathur says the Midwest would have to go to 85 percent "or even more stringent" NOx reductions for Chicago to meet the tighter standard that EPA has proposed.

In filing their own lawsuits, New York Attorney General Spitzer and Connecticut Attorney General Richard Blumenthal made it clear they don't trust Midwestern states to take care of the Northeast's problem. They argue that utilities in Indiana, Kentucky, Ohio, Virginia and West Virginia violated the Clean Air Act when they modified 17 coal- burning power plants' capacity without upgrading NOx and sulfur dioxide controls. "We're seeking to enforce the rights we have under the Clean Air Act to protect New Yorkers," Spitzer says. "We want an 85 percent cut at a minimum."

Spitzer says New York's attorneys decided it would be more effective to sue polluting power companies directly instead of taking EPA or Midwest state regulators to court for failing to do their jobs. "Do we have gripes with agencies that have failed to act? Sure, but this is more direct," he says.

EPA and the U.S. Justice Department followed up with federal lawsuits against seven private utilities and the Tennessee Valley Authority, targeting 24 coal-fired plants from southern Illinois to Tampa, Florida. The federal and state lawsuits contend that utilities illegally modified the plants to expand generating capacity, triggering the law's requirement that new emission sources be equipped with state-of-the-art pollution controls. Midwestern regulators note that EPA didn't object when states approved the changes.

Spitzer says New York resorted to the legal route "at least partly because efforts on other playing fields to address the problem are going nowhere." Midwest governors and regulators consulted with their states' congressional delegations last year, and Northeast officials feared that Congress would overrule EPA's ozone-control recommendations. State attorneys are willing to settle with utilities if they adopt acceptable pollution controls, but Spitzer says he won't defer to Congress or EPA and the states to settle ozone-transport issues. Other Northeast states are likely to go to court as well, and "the rhetoric has really been turned up by the litigation," observes Jones, a former Ohio assistant attorney general. "It's tying the Gordian knot tighter."

If positions keep hardening, the regional disputes could well wind up before the U.S. Supreme Court; although Harding thinks Congress will eventually have to step into the fray to clarify EPA's ozone-control authority. Of course, EPA and the states set up OTAG partly to keep Congress from meddling with the Clean Air Act, and regulators don't relish relying on senators and representatives to sort out the technical and economic issues that ozone transport poses.

"We're talking about a complex regulatory program, and the only way to solve this is a comprehensive resolution" negotiated by the states, says Jones. The OTAG experiment in creative federalism could yet bear fruit, but for now the legal tangles make it "very hard for any governor to move forward aggressively" to deal with smog problems, laments former OTAG Chairman Gade. "The momentum we had was important," she adds. "I don't think anything healthy is going to come out of this."


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