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State Dropout Rate High For Bush Mercury Plan

May 29, 2006 - Page 1456

By Rebecca Adams, CQ Staff
CQ WEEKLY - IN FOCUS

As a top environmental official in the Clinton administration, Kathleen A. McGinty regularly antagonized officials in Western states by imposing tough federal standards on grazing, logging and other commercial activities on public lands. She ignited a furor over states' rights in 1996, when, as chairwoman of the Council on Environmental Quality, she pushed the administration to unilaterally designate 1.7 million acres of Utah canyon lands off-limits to development.

These days, the 43-year-old chemist-turned-lawyer, who has been a protégé of Al Gore since he was a senator from Tennessee, is experiencing a bit of role reversal. As Pennsylvania's secretary of environmental protection, McGinty is at the vanguard of an intensifying effort by states to scuttle a Bush administration plan to regulate mercury emissions from power plants. By trying to impose tougher regulations than the administration, some states are hoping to gain the upper hand in an intensifying battle with federal authorities over who is best suited to impose clean air rules - a fight that has significant economic implications for utilities.

The dispute most immediately centers on mercury, a toxic heavy metal found in the coal burned by power plants. The EPA estimates that 48 tons of mercury is released into the atmosphere annually, some of which later settles in waterways, is ingested by fish, and can harm people and animals who eat them. The federal government warns pregnant women to limit their consumption of large fish such as swordfish, because high levels of the byproduct methylmercury may affect the developing brain and nervous system of a fetus.

The administration last year proposed reducing mercury emissions, in two stages, 69 percent by 2018 and allowing power plants that don't comply to buy pollution "credits" from plants that have met the milestones.

The success of such a "cap-and-trade" system depends on the participation of most states to ensure that the largest possible number of plants are involved in buying or selling credits. However, the Bush plan allowed states to opt out and develop their own mercury standards - an option the White House wagered few governors would exercise.

That calculation now appears to be backfiring. Twenty-one states - some with Republican governors, including New York, Maryland, Minnesota and Connecticut - have served notice to the administration that they will produce their own plans. Pennsylvania, which has a Democratic governor and the second-highest level of mercury emissions in the country, after Texas, is among the most aggressive dissenters, proposing to cut mercury levels by 90 percent by 2015. The state also wants to prohibit the trading of pollution credits among its 36 coal-fired power plants because officials say they believe it would leave pockets of mercury contamination near the dirtiest plants.

"It's unfortunate but true that there's not the leadership on these types of issues that there should be," McGinty said in an interview. "The administration is beholden more to the narrow interests of a select lobby of power plants than the interests of the nation's well-being as a whole."

Lobbying Battle

Some believe that McGinty and officials in her state are moving, in part, to protect Pennsylvania's coal industry. The Bush plan encourages utilities to switch from the bituminous coal mined in the East to the sub-bituminous and lignite coal mined primarily in the West.

Regardless of the states' motivations, the administration is trying to head off political embarrassment by lobbying state officials to embrace its plan. The EPA last month dispatched Robert J. Wayland, an analyst with its Office of Air Quality Planning and Standards, to Harrisburg to promote the Bush plan to a state Senate committee on the same day McGinty testified in favor of the state proposal. The legislature does not have to confer its blessing on the state plan but can sink it if members deem it too expensive or onerous.

Wayland and other EPA officials have noted that all state plans still must meet the federal agency's approval by, among other things, imposing equivalent or tougher standards than the Bush plan. Should a state plan not pass muster, the EPA could instead impose the Bush plan. Many state officials suspect that the agency will implement the federal policy without giving them ample time to revise plans that are rejected.

"That doesn't seem to be a signal of cooperation," Bill Becker, executive director of a professional association for those who run state and local air quality programs, said of the EPA's position. "It's more like, 'I gotcha.' "

Jason Burnett, policy adviser to the assistant administrator of the EPA's Office of Air and Radiation, said all states would get a fair hearing. However, he said states that want to opt out of the federal system should be careful in making and explaining their decisions. "I don't want to trivialize the complexity involved in making important decisions like this," he said. "There are a lot of important factors we considered in developing our national plan, and I'd hope that states also take this very seriously."

Closely watching the debate are electric utilities, which fear they might have to comply with a patchwork of regulations. The power companies predict that if enough states opt out of

the administration plan and devise their own rules, utilities will have to invest millions of dollars outfitting plants with scrubbers and other pollution-control equipment, along with switching coal suppliers - costs that ultimately will be passed on to their customers.

"The great fear is that too many states going off in the direction of inflexibility" and opting out of the federal program "could undermine or destroy the federal program," said Scott Segal, director of the Electric Reliability Coordinating Council, a coalition of utilities.

EPA officials say the fears of a failed cap-and-trade market may be overblown because significant trading is done within states.

But Fred McGuire, vice president of environmental safety and health at Reliant Energy, a utility with plants in Pennsylvania, says the Bush plan cannot succeed without a robust market for trading pollution credits. A dearth of state participation would "make it more difficult to estimate and accurately forecast pricing," he added.

Utility executives and EPA officials are mindful that clean air regulations have long pitted state against state - and coalitions of states against the federal government - making it difficult to establish one-size-fits-all standards.

A cap-and-trade system different from the one proposed for mercury was authorized when the Clean Air Act was last updated in 1990 and has achieved some success in controlling emissions of sulfur dioxide and nitrogen oxides from some older plants.

The current tensions between states and the federal government build on earlier disputes. In 2002, nine states - New York, Connecticut, Maine, Maryland, Massachusetts, New Hampshire,

New Jersey, Rhode Island and Vermont - sued the administration in federal court for instituting regulatory changes that they contended weaken the Clean Air Act. The states object to shifting interpretations of a clean air program known as New Source Review that dictates whether operators of coal-fired power plants must add pollution controls when upgrading facilities. The Supreme Court will hear the case in its next term.

The states' challenges to the Bush mercury rule have drawn the notice of longtime regulators, who say it marks the most widespread backlash to date against a new Bush administration environmental rule. "This is an unprecedented response by state and local governments to a deficient federal rule," said Becker of the utility officials' group.

In Michigan, Democratic Gov. Jennifer M. Granholm last month ordered environmental officials to develop a state rule requiring utilities to reduce emissions by 90 percent by 2015. Georgia is considering cuts of 90 percent between 2012 and 2015. In Minnesota, GOP Gov. Tim Pawlenty is asking the state's Legislature to pass a law mandating a 90 percent reduction by 2014. And New York Republican Gov. George E. Pataki proposed a similar standard on May 25.

Pressure to Act

Administration officials felt compelled to tackle the issue in 2004, prodded by lobbying from evangelical Christians concerned about mercury's impact on fetuses. The EPA finalized its federal policy in March 2005, after the administration was unable to move similar, broader legislation through Congress.

The criticism is that the administration's plan is weak and takes too long to implement. McGinty says her years in the federal government taught her to move without reservation.

But some observers think Pennsylvania's efforts may prove to be more the exception than the rule and that many states will end up embracing plans that closely resemble the administration's. Some of the 21 dissenting states would allow power plants to trade some pollution credits, reflecting the belief that a free enterprise system could lower the companies' costs of complying with tougher laws.

"Frankly, there's such misgivings about the way Katie McGinty is running the environmental program in Pennsylvania that I'm not sure whether we really should regard the state as a bellwether," said the utility coalition's Segal. "The approaches she has taken have not always addressed concerns on all sides of the issue. I think some additional focus on supply and reliability concerns would improve the end product of the state's regulation."

McGinty is unmoved, saying states are best equipped to take a tough approach.

"There are many strong and extremely capable professionals at EPA," she said, before offering an opinion that some may have lobbed at her during her White House tenure. "I just think that on some of these major issues . . . they are being poorly led in a way that's hurtful to the economy."

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