Washington (Platts)--12Mar2008

The Bush administration on Wednesday is set to finalize a major
air-quality rule that could have major financial implications for coal-fired
power plants, oil refineries and other industries.

The regulation will update the US air-quality standard for ground-level
ozone, one of the primary components of smog.

Stephen Johnson, administrator of the US Environmental Protection Agency,
is scheduled to announce the new standard in a conference call at 1 pm EDT
Wednesday. Johnson is under court order to sign the standard by midnight
Wednesday, because of a lawsuit that environmental groups filed accusing EPA
of stalling on the standard.

The US Clean Air Act requires EPA to periodically review the ozone
standard to ensure that it is as stringent as it needs to be to protect public
health, regardless of pollution-related costs that would have to be borne by
electric utilities and other industries.

Ozone has been linked to asthma, heart attacks and other serious medical
conditions, and it is responsible for thousands of illnesses and premature
deaths each year, according to EPA and public health organizations.

Tightening the ozone standard could heap hundreds of millions of dollars
of new regulatory costs on coal-fired power plants, which contribute to the
formation of smog through nitrogen oxide emissions. The proposal also could
lead to new and expensive pollution-control requirements for the
transportation sector, which is the largest single source of smog.

The current ozone standard, which EPA set during the Clinton
administration in 1997, sets an upper bound of 0.08 parts/million. Last year,
EPA proposed to tighten the standard to a more stringent 0.07 to 0.075 ppm,
but EPA said it also would consider setting the standard at an even more
rigorous 0.06 ppm, as well as leaving the current 0.08 standard in place.

Environmental and public health groups have urged EPA to set a very
strict standard, on the order of 0.06 ppm, but electric utilities, oil
companies and other industries have urged EPA leave the current standard in
place, saying there is no scientific justification for tightening it further.

John Kinsman, director of air quality programs at the Edison Electric
Institute, a trade group of large utilities, has said the costs of tightening
the standard could run in the "tens of billions of dollars."

After EPA publishes the new standard in the Federal Register,
stakeholders that are not happy with it will have 60 days to sue the agency
over the measure. Assuming the standard is not struck down through a lawsuit,
states would have to start submitting their plans in 2013 to meet the
standard.

A legal battle erupted when EPA last tightened the ozone standards during
the Clinton administration. A host of industry groups sued EPA over the move,
saying the agency had no scientific basis for tightening the standard.

The case went all the way to the Supreme Court, which rejected the
challenge and ruled that EPA could tighten the standard regardless of the
economic costs of doing so.
--Brian Hansen, brian_hansen@platts.com