Oil and Gas

EPA must rewrite utility mercury rule: U.S. court

WASHINGTON (Reuters) - In a victory for environmentalists and a setback for big U.S. coal-burning utilities, a federal court ruled on Friday that the Environmental Protection Agency must fundamentally rework its mercury rules for utilities.

Southern Company's Plant Bowen in Cartersville, Georgia is seen in this aerial photograph in Cartersville in this file photo taken September 4, 2007. A U.S. court on Friday ruled that the Environmental Protection Agency must reconsider a controversial decision to allow coal-fired power plants to swap rights to emit toxic mercury. REUTERS/Chris Baltimore

The U.S. Court of Appeals for the District of Columbia ruled that the EPA violated the Clean Air Act in 2005 when it exempted coal plants from the strictest emission controls for mercury and other toxic substances like arsenic, lead and nickel.

The EPA’s “Clean Air Mercury Rule” would have created a “cap-and-trade” program to allow utilities to swap rights to emit mercury to comply with overall limits that would reduce nationwide emissions by 70 percent by 2018.

Some 14 states, including New York and California, sued the EPA over the rules, along with environmental and public health groups.

The court ruling means that big coal-burning utilities like Atlanta-based Southern Co and American Electric Power of Columbus, Ohio, will have to install expensive mercury-reduction equipment at more of their power plants rather than rely on a fleet-wide trading program.

The ruling adds to the U.S. backlash against building coal-fired power plants, which are also a major source of heat-trapping carbon dioxide emissions.

Wall Street banks including Citigroup Inc, JP Morgan Chase & Co and Morgan Stanley this week issued standards that weigh carbon dioxide and mercury emissions when determining whether to lend money for new power plants.

“This adds to the momentum against building new coal-fired power plants,” said John Walke, attorney with the Natural Resources Defense Council, which participated in the lawsuit. “This immediately changes the landscape and adds to the argument against new pulverized coal plants.”

It could be years before the EPA can enact new rules on mercury. In the meantime, regulating mercury emissions will likely be left to states, which in many cases have set their own strict limits on utilities.

The nation’s 1,100 coal-burning units emit about 48 tons of mercury each year, the largest unregulated U.S. source. The EPA rule vacated by the court would have set the cap at 38 tons per year by 2010 and 15 tons per year in 2018.

Mercury contaminates water and fish and has been linked to neurological disorders in young children.

The court found that the EPA’s justification for the program “deploys the logic of the Queen of Hearts,” and said the agency must propose new rules for new and existing power plants.

Environmental groups applauded the ruling.

“The EPA recklessly ignored the law and the science,” said Vickie Patton, an attorney for Environmental Defense. “Now, each coal plant in America must clean up its own toxic mercury pollution.”

The Edison Electric Institute, which lobbies on behalf of most investor-owned utilities, called the court ruling a “major setback,” which will delay federal rule-making efforts for years.

Separate federal rules already require utilities to cut mercury emissions, so “air quality will continue to improve” in the meantime, said Dan Riedinger, a spokesman for the group.

Utilities had said the cap-and-trade system gives them flexibility to reduce emissions without spurring a switch to natural gas, which is cleaner but more expensive than coal.

Reporting by Chris Baltimore, editing by Matthew Lewis