US power companies assail SO2 allowance restrictions in court

Washington (Platts)--5Mar2007

The US government violated its Clean Air Act by requiring, in a March
2005 rule, that power companies eventually submit more than one SO2 allowance
for each ton of emissions, a coalition of electricity providers told a federal
court Monday.

The companies--led by Duke Energy, AES and FPL Group--articulated their
concerns with the Environmental Protection Agency's Clean Air Interstate Rule
in a brief they filed with the US Court of Appeals in Washington. Other
plaintiffs in the case, brought in May 2005, include Minnesota Power and
Maryland-based Constellation Energy.

Of particular concern to the generators is a CAIR provision that will
increasingly lower the compliance value of SO2 allowances. Starting in 2010,
companies will have to submit two allowances for each ton of emissions. That
number rises to 2.86 allowances for each ton of SO2 starting in 2015.

"Congress expressly prescribed that each allowance shall be 'an
authorization to emit, during or after a specified calendar year, one ton'" of
SO2, the plaintiffs said in their brief.

With this authorization and clear procedures on allowance trading,
"Congress [in effect] created a fixed 'currency' and a nationwide scope for
the allowance transfer system," they said.

Furthermore, Congress in the 1990 Clean Air Act amendments that created
emissions trading, required EPA to allocate 8.9 million allowances to certain
power plants, the plaintiffs said.

--Martin Coyne, martin_coyne@platts.com