TXU Fighting Big Cuts in Emissions: Power, Coal Firms Invoke Perry’s Name in Opposing Stricter Limits on Plants

By Randy Lee Loftis, The Dallas Morning News

Apr. 25–TXU’s public promise to cut air pollution by 20 percent while doubling its coal use comes as the Dallas-based utility has been working quietly to kill a possible move to require much deeper cuts.

Other Texas power and coal-mining companies also have tried to derail any strict new state limit on power plants, telling state regulators a coal crackdown would go against the wishes of coal’s top Texas ally: Gov. Rick Perry.

As Texas shifts from cleaner-burning natural gas to cheaper coal for new plants, the environmental debate has concerned how new coal emissions would affect urban North Texas’ long, frustrating effort to clean up the air.

TXU’s announcement last week of 11 new coal plants, eight more than previously announced, will fuel the debate. TXU said that even with new plants, it would cut its overall current pollution levels by 20 percent. Details haven’t emerged, but TXU called it the nation’s biggest voluntary reduction.

New plants’ emissions, however, are only part of Dallas-Fort Worth’s smog problem. New studies done for the Texas Commission on Environmental Quality and North Texas regional planners found that existing plants’ emissions might have to drop by 50 percent to 70 percent to help the region meet federal health rules.

That estimate included TXU’s three earlier announced new plants, but not the eight more unveiled last Thursday. No official study is available for how TXU’s revised plan might change things, but that’s one of the factors state planners must consider in the new North Texas clean-air plan they’re writing.

However, environmentalists believe they already have what they need to demand drastic cuts. Of five ideas for cutting East Texas pollution that consultants presented to regional planners this month, deeply reducing power plant emissions was the most effective by far in fighting Dallas-Fort Worth’s smog.

Environmental commission staff members presented nearly identical findings last November to industry and environmental experts. That meeting triggered a coordinated campaign by Texas power and coal companies to kill any prospect of new limits.

In letters sent within days of each other and with frequently identical language, they told the environmental commission that their emissions had little or no effect on Dallas-Fort Worth’s smog and that the cuts would be too difficult and far too expensive.

The companies also injected power politics into the argument. They said Mr. Perry, who has made boosting electricity supplies a key policy, had forbidden new limits on power plant pollution.

Any such move would be “antithetical to the governor’s directive,” a lobbyist for one industry group wrote to the TCEQ last December. An executive of TXU Power wrote that the company believed stringent new limits “would jeopardize the TCEQ’s ability to comply with Governor Perry’s Executive Order RP-49.”

That Oct. 27 order mandates faster permit decisions on new plants. It is silent on emissions.

But that didn’t keep companies from using it to head off tougher rules on nitrogen oxides, or Nox.

“As recognized by Ex. Order RP49, the Commission is directed to protect and foster the use of Texas’ natural resources to generate electrical power,” wrote two executives of Texas Westmoreland Coal Co., owner of the state’s second-largest lignite mine, which supplies a power plant near Jewett, in east-central Texas.

“In short, Texas Westmoreland Coal Co.’s Jewett Mining Operations present the exact situation contemplated by the Governor’s Executive Order,” their Dec. 7 letter said. The company said it “warns TCEQ that any contemplation of the additional Nox limitations on East Texas EGUs [electric generating units] would directly implicate the Jewett Mine and the Limestone Electric Generating Station, thus trigger[ing] Executive Order RP49.”

The companies made sure Mr. Perry’s aides knew they were using his name to attack the pollution cuts, sending his office copies of their letters.

They also sent copies to Mr. Perry’s fellow Republicans, Lt. Gov. David Dewhurst and House Speaker Tom Craddick; dozens of legislators; and the six Perry appointees who run the environmental and public utility commissions.

Perry spokeswoman RachaelNovier said nothing in the governor’s order gives coal a pass on new pollution limits, despite what the companies claimed.

“The executive order doesn’t address standards, just expediting the permitting process, which is just good government,” Ms. Novier said. “We’re confident that the TCEQ will draft a plan that will achieve clean air and doesn’t disrupt the state’s energy supply.”

But Tom “Smitty” Smith, Texas director of the nonprofit group Public Citizen, said that when Mr. Perry praised TXU’s announcement on Thursday, it was a message to regulators not to demand more than TXU’s 20 percent.

“This 20 percent reduction is hardly even a down payment on the debt they owe the people whose lungs they’ve scarred in the D-FW area,” Mr. Smith said. “The political fix appears to be in.”

‘A goal of the governor’

Some of the letters’ authors said they had made their point.

Joel Trouart, a Texas Westmoreland Coal vice president, noted that five months after state planners outlined the idea of deep emissions cuts, “I think they are fairly far from having a proposal.”

Meanwhile, she said, coal is Texas policy: “This is a goal of the governor.”

Michael J. Nasi, a lawyer and lobbyist for the coal trade group Gulf Coast Lignite Coalition, said the TCEQ is trying to dovetail its clean-air duties with Mr. Perry’s backing of the Texas coal industry.

“Right now the agency is looking hard at making sure those goals are aligned,” he said. “The spirit and overall policy is to maximize the use of Texas resources.”

TCEQ chairman Kathleen Hartnett White made some of the same points in an April 7 speech to the North Texas Clean Air Steering Committee, a regional planning group.

She argued for getting every possible reduction from local sources, especially cars, before looking for cuts from farther away. Coal plants already have made deep cuts, she said, adding that new ones would be expensive — key themes of the industry letters.

Ms. White said her agency had reached no conclusion on possible new limits and was feeling no political pressure.

“I’ve never had a discussion with the governor’s office on that,” she said.

A TCEQ engineer also denied that political pressure had influenced planning for Dallas-Fort Worth. The agency is studying coal cuts across East Texas, including scaled-back options that might affect fewer power plants, said Susana Hildebrand, a technical adviser to the agency’s chief engineer.

“We’re aware of their concerns,” Ms. Hildebrand said, referring to the companies. “But that hasn’t changed [the fact] that we need to evaluate what will get D-FW into attainment.”

The commission staff is drafting a proposed new clean-air plan for North Texas, with a preliminary vote by the three commissioners, all Perry appointees, in early summer. The agency hopes to submit a plan to the U.S. Environmental Protection Agency by late this year.

The EPA will decide whether the plan is likely to let North Texas meet the next federal clean-air deadline of 2010.

The state’s schedule is months faster than federal requirements. That’s to keep a promise for quicker action made in a legal settlement with the Blue Skies Alliance, a North Texas clean-air group.

A political weapon

The high stakes for Texas’ power industry can be measured in lobbying dollars. Companies that produce coal or gas or generate fossil-fuel power say they’ll spend as much as $11.5 million lobbying the state government in 2006, a review of state reports by The Dallas Morning News shows.

Last year, the 15 biggest spenders in Texas’ power industry spent as much as $17 million on Texas lobbying, according to Texans for Public Justice, an Austin-based political watchdog. Regular-session years for the Legislature draw more spending.

Overall, energy and natural resources companies, including oil and water, are the biggest lobbying spenders of any Texas industry, Texans for Public Justice says.

Electricity also powers political campaigns. Since 2000, state reports show, TXU’s political action committees have given $1.3 million to Texas state candidates, parties or causes. Recipients include Mr. Dewhurst, $147,500; Mr. Perry, $71,000; and Mr. Craddick, $36,000.

Mr. Perry also got $128,015 from Erle Nye, who retired as TXU’s chairman last year.

How an order from Mr. Perry that addressed only the timing of power plant permits became instead a political weapon against tighter pollution rules is a new chapter in the political, economic and environmental fight over urban North Texas’ smoggy air.

For decades, the region has violated the federal health standard for ozone, a corrosive and lung-scarring chemical cooked up when summer heat bakes pollution from vehicles, power plants and other sources.

Even during cooler months, the pollution that forms ozone is still there. Nitrogen dioxide, a key ozone ingredient that comes from burning fossil fuel, is what gives the North Texas horizon its characteristic dirty brown haze.

Planners say emissions must drop by about 42 percent in order to crank the region’s ozone level down to the legal limit by the 2010 deadline.

So far, they’ve identified only enough cuts to get ozone down to a predicted 91 parts per billion. That shortfall has them looking for cuts even hundreds of miles away.

Smog-causing pollution can drift across entire continents, and engineers say winds from the southeast or east bring two-thirds as much ozone as the law allows. Half of that imported ozone comes from natural sources and half from pollution.

Coal produces some of that, state planners say. It is the dirtiest of Texas’ electricity fuels but produces 39 percent of the state’s power and is abundant from near Texarkana to far south of San Antonio. Lignite is a dirty-burning coal, but eight of TXU’s 11 new plants will burn cleaner, higher-energy Wyoming coal.)

With more coal-friendly state and federal administrations, and with natural gas prices rising, Texas companies such as TXU started planning new coal-burning plants. Permits, however, can take a year or more because of technical reviews and public or environmental objections. That can cost companies millions of dollars.

Mr. Perry addressed that concern with his Oct. 27 executive order. It gives the state six months to rule on a new plant’s permit request.

The governor’s order came two weeks after he struck a deal with TXU, which was seeking higher rates to cover steeper natural gas prices after hurricanes Katrina and Rita. TXU agreed to postpone part of its fuel-cost adjustments until after April 1.

It also agreed to extend a low-income family, 10 percent discount through August and to give $2.5 million for electricity consumer education.

Mr. Perry’s office and TXU say the order on permits wasn’t a tradeoff for softer rate hikes in advance of elections.

There’s no direct mention of any new TXU plant in an Oct. 13 letter laying out the rate agreement from Jim Burke, head of TXU’s retail arm, to Perry chief of staff Deirdre Delisi. Mr. Burke thanked the governor’s office, however, for agreeing on the importance of “ongoing efforts to ensure adequate development of new generation resources in the state.”

Fixing D-FW’s smog

As the governor was agreeing to speed up new plants’ permits, the TCEQ staff was eyeing that same industry for smog cuts.

On Nov. 18, three weeks after the executive order, TCEQ planners outlined the possibility of extending to all of East Texas the strict limits that apply in the Houston area. Planners said doing that might yield about one-sixth of the needed cuts in North Texas ozone levels.

At the meeting and in letters to the TCEQ two weeks later, company representatives said no lignite plant could make deep cuts. Even if it could, they argued, the cuts would be hugely expensive, driving some companies out of business and raising electric rates.

Clifford Miercort, who retired last month as president and chief executive officer of Dallas-based North American Coal Corp., said utilities predicted a disaster. “They made it very clear to me that they would probably have to shut down units,” he said.

Nearly every power company agreed. In an 11-page letter, TXU Power environmental chief Shawn Glacken wrote that the cuts would cripple efforts to provide reliable, affordable electricity, therefore violating Mr. Perry’s order. “It may have a chilling effect on electric reliability,” TXU spokeswoman Kimberly Morgan said.

Affordable power was also on the mind of Ms. White, the TCEQ chairman, when she asked North Texas clean-air planners to remember that the cost of cleaner coal “is one that will be distributed” to consumers every time they open an electric bill.

“Or,” countered Public Citizen’s Mr. Smith, “every time they go to the doctor.”

E-mail rloftis@dallasnews.com

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Copyright (c) 2006, The Dallas Morning News

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