SO2 market very active; Sierra Club sues EPA over NOx reductions

Washington (Platts Coal Trader)--20Jan2004

While the Vintage NOx markets were silent during the week of Jan 12, the SO2 market showed increasing activity throughout the week.

The SO2 market saw lots of activity during the week. According to one Platts Coal Trader source, several factors may have contributed to the increased activity. PIRA Energy Group, an international energy consulting firm, recently suggested that $250/ton would be a good price for SO2 allowances. The source believes that may have sparked interest in the market. The trader also thinks that utilities may have entered the market because companies are beginning to think about having to comply with the EPA's Interstate Quality Rule, which seeks to cut SO2 40% and NOx 65% from today's level.

The Georgia Sierra Club filed suit in US District Court in Atlanta to force the EPA to issue a nitrogen oxide reduction rule in Georgia. The environmental group said that the EPA had "unreasonably delayed" a SIP (state implementation plan) for Georgia, which allowed the state to fall behind in compliance with NOx reduction targets compared with 19 other states in the eastern US.

The rule had been held back because of litigation over whether the state should be included in a 1997 EPA order covering 22 states. A federal appeals court ruled in March 2000 that the northern two-thirds of the state should be covered by the rule. EPA officials in Washington said they expected to issue the rule for Georgia in the coming “two to three months,” requiring the NOx reductions to be carried out by 2007, thus making the Sierra Club suit unnecessary.

The Georgia Division of EPA already had issued NOx reduction rules for the Atlanta metro area in 2001 and, based on that, Georgia Power has implemented an $800-mil project to cut back NOx emissions from several coal-burning plants in the region. Utility officials said they expect the reductions already carried out under the SIP to cover much of the requirements under the eventual EPA plan.

But according to Sierra Club attorney Curtis Cox, the EPA plan will be geared to prevent transport of ozone from Georgia into neighboring states to the east and may not necessarily match the state plan, which is focused on improving air quality in Atlanta. Cox said North Carolina officials have recently complained about EPA's slowness in forcing Georgia to cut emissions.