Court delays EPA rule on coal plants

HOUSTON Fri Dec 30, 2011 8:22pm EST

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HOUSTON (Reuters) - A U.S. federal appeals court on Friday issued a last-minute order to delay the January 1 implementation of stricter federal limits on pollution from coal-fired plants, providing a temporary win for utilities worried about the cost of implementation.

In a blow to environmental groups, the U.S. Court of Appeals for the D.C. Circuit granted a request to stay the Environmental Protection Agency's Cross-State Air Pollution Rule, pending further court review.

The EPA finalized the rule in July, setting much stricter limits on sulfur dioxide and nitrogen oxide emissions from power plants in 27 states to protect the health of residents in states downwind from the emissions.

"The EPA firmly believes that when the court does weigh the merits of the rule it will ultimately be upheld," the agency said in a statement after the court's decision.

Power generators said the January 1 implementation date was too soon to allow the design and installation of pollution control equipment to meet the rule, forcing a number of units to shut or to run only part of the time.

Texas challenged the EPA rule because the state was included in the final version without having an opportunity to provide input on its impact in Texas. State regulators who met later with EPA officials said the agency used faulty assumptions about the state's power grid.

The court's stay decision "is a prudent one that now gives the court time to review the regulation and its burdensome effects on Texas," state Attorney General Greg Abbott said in a statement on Friday.

The state's largest power producer, Dallas-based Luminant, said the court stay "recognizes the irreparable harm it would cause to our company and others," according to a statement.

Luminant had planned to suspend operations at two coal-fired units in North Texas January 1.

Now, Luminant plans to continue operating the two Monticello units while "closely evaluating business and operational decisions given that this stay does not invalidate the rule, but delays a decision on its implementation until a final court ruling is issued," the company said in a release.

The Cross-State rule is among several EPA initiatives which have divided the power industry between companies, such as Exelon and NextEra that produce power from less polluting sources like nuclear and natural gas, and others, like American Electric Power Co and Southern Co that rely on coal to generate electricity.

"The underlying rule was the subject of hasty process, poor technical support, unequal application, and substantial threat to jobs, power bills and reliability," said Scott Segal, director of the Electric Reliability Coordinating Council.

"Stays are granted when there is a strong chance of success on the merits and when parties can be injured without preliminary relief," Segal said on Friday.

Proponents of stricter rules say the industry can adapt and they maintain that the costs of implementing the rules will be offset by savings from reduced healthcare expenses.

"The pollution reductions at stake are some of the single most important clean air protections for children, families and communities across the eastern half of the United States," said Vickie Patton, general counsel for Environmental Defense Fund.

The EPA estimated that the Cross State rule will save up to 34,000 lives, prevent 15,000 heart attacks and prevent 400,000 asthma attacks each year, providing $120 billion to $280 billion in annual health benefits for the nation.

Other states challenging the Cross State rule were Louisiana, Kansas, Nebraska, Alabama, Florida, Oklahoma, South Carolina, Virginia, Georgia, Indiana, Michigan, Mississippi, Ohio and Wisconsin.

(Writing by Patrick Temple-West; Reporting by Eileen O'Grady in Houston and Timothy Gardner in Washington; Editing by Russell Blinch and Bob Burgdorfer)

(Corrects name of court in paragraph 2; error occurred in previous versions of story)

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