Acid Rain Threatens Forests In More Ways Than Previously Thought

Ban On Pollution Credit Swaps Voided

Ruling deals a blow to state's efforts to reduce acid rain in Adirondacks

by Dina Cappiello, April 10, 2002

A state law that penalized New York power plants for trading pollution credits to 14 other states was voided by a federal judge on Tuesday, removing a key part of the state's strategy to reduce acid rain in the Adirondacks.

U.S. District Court Judge David N. Hurd in Utica ruled that the 2000 Air Pollution Mitigation Law was unconstitutional and conflicted with the federal Clean Air Act by restructuring the nationwide trading system whereby tons of sulfur dioxide emissions, or credits, are swapped freely between states.

New York's law placed a 100 percent penalty on utilities that traded credits of the acid rain-forming gas to Midwestern and Southern states, which are responsible for roughly 70 percent of the pollution that falls as acid rain over New York.

In his decision, Hurd sided with the Clean Air Markets Group, a consortium of electricity generators and emissions traders, including NRG Energy Inc., a company that owns five power plants in the state. The parties claimed that the restrictions on trading by New York utilities decreased the market value of credits from the state.

The group filed the suit against the state in November 2000, six months after Gov. George Pataki signed the law. The judge's ruling makes the law null and void and bars the state from enforcing it.

"This clears the way for in-state power plants to sell their pollution credits to any power plant who cares to buy them,'' said Marc Violette, a spokesman for Attorney General Eliot Spitzer, who represented the governor in the litigation. "There is a multi-pronged effort that we are engaged in to stop the flow of out-of-state pollution into New York state. This law was one of the prongs.''

For the Adirondacks, a region where federal reductions in air pollution have yet to result in improvements in lakes and soils, the decision is an unwelcome blow, especially with the Bush administration considering unraveling another part of the state's acid rain arsenal, the lawsuits New York has waged against Midwestern plants that have upgraded their facilities without coming into compliance with the Clean Air Act.

Tuesday's decision could also limit the effectiveness of a 50 percent reduction in sulfur dioxide required by in-state power plants announced by the governor in February because the cuts were based in part on the partial ban on trading pollution credits.

A Pataki spokeswoman said that the administration would be reviewing its legal options.

"Obviously we are very disappointed with the decision. It has been part of the governor's acid rain strategy,'' said spokeswoman Jennifer Farina.

The emissions-credit system was designed to offer utilities flexibility in complying with federal air pollution regulations. It sets a cap on the number of tons of sulfur dioxide that can be released into the environment by the nation's power plants but allows the utilities to trade the credits among them.

A plant that emits less than it is allotted can hold onto or sell unused pollution credits to other plants. Plants buying credits can then use them to exceed the limits on pollution set by the government.

New York has been one of the biggest exporters of sulfur dioxide credits, something that state legislators predicted when they pressured Congress in the early 1990s to make trading regulations more regional.

A 2000 General Accounting Office report that analyzed the emissions trading system nationwide between 1993 and 1998 found that New York utilities traded more than 200,000 of the 866,000 tons of sulfur dioxide they were allotted under the federal acid rain program.

But nearly 10 percent of what was traded -- or 70,000 tons -- was sold to upwind states whose power plant emissions generate acid rain over New York.

The Air Pollution Mitigation Law was seen as a way to renew pressure on the federal government. The law attempted to steer the sale of credits from New York utilities away from New Jersey, Pennsylvania, Maryland, Delaware, Virginia, North Carolina, Tennessee, West Virginia, Ohio, Michigan, Illinois, Kentucky, Indiana and Wisconsin.

"The root of our enthusiasm for the law was to send a message to Washington that the 1990 Clean Air Act amendments, while a good start, were insufficient to stop acid rain,'' said John Sheehan, a spokesman for the Adirondack Council. "New York was essentially prepared to interfere with the program if the federal government wasn't going to protect us.''

The companies that brought the suit argued that the solution to New York's acid rain problem should be left up to Congress.

Judge Hurd went further in his decision, by challenging the law's effectiveness at the intent of rerouting the pollution.

He pointed out that out-of-state plants polluted less in 2000 than they were allotted and that the law does not prohibit trading between New York utilities, which are responsible for between 13 and 38 percent of the pollution generating acid rain within the state.

Thirdly, Hurd stated that most of the credits -- equal to a ton of sulfur dioxide, and sold for roughly $150 each -- imported by upwind states are from states other than New York.

"I don't think the judge left much room for the state to enforce the law,'' said Norman Fichthorn, the attorney for the Clean Air Markets Group. "As a result of this decision, the law has no legal effect anymore.''


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