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Mercury Rising

How will the EPA's rulemaking affect U.S. energy markets?
Fortnightly Magazine - January 2004

to act now to understand the risks associated with the various options being considered.

Background

Current regulation of air emissions from power plants is based on the Clean Air Act (CAA). Generating units in states that are in the NO X State Implementation Plan (SIP) Call region must comply with NO X regulations during the ozone season (May through September). The CAA also established national, year-round regulation for SO 2 emissions. Both programs as currently implemented are cap-and-trade programs that allow for trading of emissions between generators.

More recently, global concerns over climate change and greenhouse gases, as well as local concerns regarding the health hazards of mercury, have created a push for a new "multi-pollutant" regulatory package that would modify the current CAA. President Bush's Clear Skies Act is the current frontrunner. Clear Skies would establish a national cap for mercury, reduce the SO 2 cap initially by approximately 50 percent relative to the current law's 2010 target, and establish two regional (East and West), year-round caps for NO X. Clear Skies would allow for trading of allowances for all three pollutants under a similar cap-and-trade regime as currently exists for SO 2 and NO X.

Yet, due to increasing concerns over carbon emissions and details of the proposed mercury regulations, more and more legislators are starting to think that Clear Skies may not be stringent enough. These legislators have promoted other multi-pollutant legislative packages, some of which contain CO 2 regulations in addition to regulations covering the other three pollutants. As some push for more stringent controls that include carbon restrictions, others are working to loosen the standards proposed by Clear Skies. The recently released Chairman's mark put forth by Senate Environment and Public Works Chairman James Inhofe, R-Okla., and Clear Air Subcommittee Chairman George Voinovich, R-Ohio, raises the proposed cap for mercury and changes restrictions on new units.

Given this debate and the ongoing dispute of the energy bill in general, some experts believe it is unlikely that Clear Skies or any other multi-pollutant bill will pass this year. If this prediction turns out to be true, then 2005 would be the earliest Congress would pass a multi-pollutant package.

Mercury MACT

A 1998 congressional study found evidence that mercury was a hazardous air pollutant (HAP) that should be studied further by the EPA. In April of the same year, a suit filed by the Natural Resources Defense Council (and others) to force the EPA to regulate utility mercury emissions was settled. Under terms of the settlement, the EPA is required to propose regulation that controls mercury by Dec. 15, 2003. Final standards must be issued a year later, with implementation of the regulation set for 2007.

In 2000, the EPA officially classified mercury as a HAP and said it would begin the regulatory process for developing a mercury standard under Section 112 of the CAA. Under Section 112, HAPs must be regulated through implementation of MACT. Until this month, the EPA was expected to follow these regulatory guidelines and propose a MACT standard to control mercury. EPA's