Nov 12 - McClatchy-Tribune Business News Formerly Knight Ridder/Tribune Business News - Randy Lee Loftis The Dallas Morning News

Texas law says that if a power company obeys the rules, it will get its permit.

But what if the rules are no good?

That question is erupting into a big Texas political battle over permits for proposed new coal-burning power plants.

In the next few months, lawsuits, administrative fights and demands for reform before the Legislature will challenge the way Texas regulates air pollution.

The biggest issue is whether Texas' environmental rules are up to the task of protecting public health -- the overriding goal of the Texas Clean Air Act and its counterpart, the federal Clean Air Act. Critics say the rules don't even meet the legal minimums.

"We think all the words in the law actually mean something," said Jim Marston, head of the Texas office of Environmental Defense, a national group that is suing the Texas Commission on Environmental Quality in Travis County District Court over the commission's rules for coal plant permits.

Environmentalists could file another, similar lawsuit in federal court this month. While judges consider those suits, however, permits for 16 new plants are moving forward.

This month, a state administrative law judge will start a race to schedule and conduct hearings and issue recommendations for a half-dozen of them in just six months, the maximum allowed under Gov. Rick Perry's fast-track order for coal plant permits. Before the order, a single plant's hearing process could have taken a year.

Meanwhile, Texas officials are crafting a new anti-smog plan for urban North Texas that must account for pollution from all sources inside and outside the metro area. Planners must do this without knowing how many new coal plants will be allowed.

At the same time, environmentalists intend to urge the Texas Legislature to strengthen the state's environmental laws and rules when its regular session convenes.

A coalition of 21 cities and counties, led by Dallas Mayor Laura Miller and Houston Mayor Bill White, is already challenging the coal plants' permits. The group plans to tell legislators that the state's regulations favor power companies and other polluting industries -- a result, they say, of a too-close relationship between regulators and those they regulate.

Nationwide debate

Companies seeking state permits to build new coal-burning plants across East Texas maintain that they get anything but an easygoing, backslapping reception in state regulators' offices. Instead, they describe the process of getting a permit as often contentious and sometimes painful.

"When we go to Austin, we feel like we go in with a big target on our backs," said Mike McCall, head of the wholesale unit of TXU. The Dallas-based power company wants to build 11 of the 16 new coal plants proposed in Texas.

Texas isn't alone in debating how the new boom in coal plants, fed by coal's lower price and growing power demands, should fit into federal and state procedures meant to keep people's lungs healthy. Regulators in Illinois, Ohio, Kentucky, and other states have also squared off with public interest groups over what clean-air laws require.

Power companies nationwide have applied for permits or already received them for about 150 new plants that would burn coal, the cheapest but dirtiest fuel for making electricity. But Texas' plans for coal are the biggest, followed by Illinois and Ohio.

For the most part, state rules dictate permit details, since Congress, when it rewrote the Clean Air Act in 1990, made enforcing air quality chiefly a state job.

But federal laws and guidelines play a big role in shaping state rules. In general, states can set rules that are stricter than federal rules, but they can't soften them.

Environmental groups and other critics of the coal boom say the Texas Commission on Environmental Quality has done exactly that in three ways: by not requiring power companies to consider the lowest-polluting technology for their coal plants; by not making them assess each new plant's impact on Dallas-Fort Worth's air quality; and by not measuring the new plants' cumulative impact.

Courts will have to decide what the law really requires. For Ms. Miller, until legislators force changes at the commission -- headed by three appointees of Mr. Perry -- Texas won't protect people from dangerous air pollution. "If we could change the process at the TCEQ, that could be changed," she added.

The commission declined to comment.

Any affected area

All of the proposed coal plants are outside the metropolitan Dallas-Fort Worth area, so they aren't in the federally designated "nonattainment area" -- the area that hasn't met the federal health standard for ozone, or smog.

For that reason, Texas isn't requiring the power companies to study how their emissions might drift into urban North Texas and affect local smog, even though a distant source's ability to affect a city's air quality is well established.

Environmentalists say Texas' failure to require studies of the potential effect on Dallas-Fort Worth is a clear violation of the Clean Air Act. The federal law requires studies of the potential impact of a major pollution source "in any area which may be affected."

Texas officials say they'll address the new plants' effect on North Texas through their new smog-fighting plan, due next month.

The plan will seek pollution cuts both from industries and vehicles inside the metro area and from industries beyond Dallas-Fort Worth, officials familiar with the proposal said. But it's not known whether it will require reductions at power plants outside the metro area.

It's also unclear how the state can write a smog plan without knowing the cumulative impact of the new coal plants. Texas treats each proposed plant as if it were alone, instead of as part of a fleet of big new pollution sources that together might affect North Texas smog.

Ms. Miller called that "a gigantic omission" by state officials. Lawyers for environmental groups said the omission violated federal requirements for assessing a new source's impact, as well as a provision of Texas law requiring the state to deal with cumulative impacts from pollution sources concentrated in an area.

It also raised concerns at the EPA, said Richard Greene, the agency's regional administrator, but for practical instead of legal reasons. EPA officials suggested to the state environmental commission that it compute the plants' cumulative impact early on, since the commission will have to do it anyway in the new smog plan, Mr. Greene said.

Mr. McCall of TXU said it wouldn't be fair for the state to deny one plant's permit because of the cumulative effect of other plants. "If they comply with the law," he said, "the state ought to give them the permit."

Behind closed doors

Late last year, a controversial move by the federal Environmental Protection Agency gave power companies a huge advantage in state permit fights across the country, including in Texas.

The EPA's decision concerned a requirement in the federal Clean Air Act that new pollution sources must use the "best available control technology" to limit emissions. When an electric industry consultant asked the EPA if that meant companies had to consider using the cleanest coal technology -- integrated gasification combined cycle, or IGCC -- for their new plants, the EPA said no.

Just two days later, the Texas Commission on Environmental Quality embraced that guidance, ruling that Texas power companies could ignore the cleaner technology and go with cheaper but higher-polluting coal plants.

Environmental groups sued the EPA over its guidance, successfully arguing that the agency made the ruling behind closed doors and with no public input. In federal court last month, the EPA canceled the guidance and promised to revisit the issue in public. But it still maintains it has no power to make states consider IGCC for new coal plants.

Lawyers for environmental groups said the dispute showed federal regulators had lost interest in pushing for innovations, despite the federal Clean Air Act's instructions to keep forcing pollution levels down whenever possible.

"The EPA's really operating on some very old information," said Ann Weeks, attorney for the Boston-based Clean Air Task Force, one of the groups that sued over the guidance.

IGCC converts coal to a gas before burning it. An EPA report in July said gasification offers lower emissions on nearly every front and makes it possible to capture carbon dioxide, the chief man-made culprit in global warming, before it reaches the atmosphere.

A dozen states now require power companies to consider IGCC for their new plants. Texas still says companies don't have to study the cleaner technology.

Companies in Texas are now seeking permits for 16 conventional coal plants and one that would burn petroleum coke, a coal-like refinery waste, without having to consider IGCC.

Houston-based Tondu Corp. has voluntarily adopted IGCC for a proposed power plant on the Corpus Christi ship channel.

TXU's most recent permit applications, filed April 20, cite the now-invalid EPA guidance as justification for not considering the gasification technology. Mr. McCall, the TXU executive, said the pollution controls that the company chose for its proposed new plants match IGCC on some emissions.

A comparison of TXU's plans and a dozen gasification plants being permitted across the country shows that the cleanest IGCC plants would beat TXU on all eight regulated air pollutants. In three cases -- nitrogen oxides, mercury and volatile organic compounds -- TXU's emissions would be lower than at least one of the new gasification plants.

TXU has promised to reduce its overall emissions by 20 percent even as it adds new plants and doubles its coal use. That would require an overall 70 percent cut in emissions from its existing coal plants, essentially meeting new federal emissions rules years early. TXU has not specified how it will accomplish those reductions.

Mr. McCall acknowledged that none of TXU's proposed plants, which would operate for decades, would have the carbon-capturing ability that current IGCC plants can have, although TXU says future retrofits might be possible. TXU is also investing in research on controlling future carbon dioxide emissions.

Environmental groups contend that Texas' failure to press power companies to embrace IGCC -- which alone among existing coal technologies can handle future caps on greenhouse gases -- is a violation of the Clean Air Act and an abandonment of clean-air progress.

"The issue is really about decision rights, about who gets to decide -- the plant's developer alone, or the developer and the public together," said John Thompson, director of the Clean Air Task Force's coal transition project, which encourages cleaner technologies. "We need radically cleaner technology on the coal side."

Tight, crowded schedule

The timetables for the legal challenges, permit decisions and the smog plan are about to collide.

No hearings are set so far for the Environmental Defense lawsuit against the state environmental commission, filedin Travis County District Court. A state response is pending.

Another lawsuit is possible soon in U.S. District Court. Environmentalists gave TXU a 60-day notice on Sept. 29 that they would sue the power company over one of its proposed plants under the citizen-enforcement provision of the federal Clean Air Act. Dallas oilman and developer Albert Huddleston is bankrolling that lawsuit, saying he is deeply concerned over the plants' possible effects on North Texas air.

The 60-day notice expires.

That same day, a state administrative law judge will convene a preliminary hearing on TXU's permit requests. Testimony isn't likely until late January, with the judge's recommendation for or against the permits due by April 23. The state environmental commission will then decide whether to issue the permits.

Mr. Perry said his October 2005 fast-track order for new coal power plants was simply meant to cut red tape. Environmentalists called it a giveaway to power companies, among his biggest campaign donors.

Meanwhile, the state's new smog plan for urban North Texas is due out for public comment in December. By June, the state must submit the final plan to the EPA.

That will be one month into next summer's ozone season.

E-mail rloftis@dallasnews.com