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By BILL KEMP

Tough acid rain provisions of new Clean Air Act

Ending a decade-long logjam engineered by his predecessor, Ronald Reagan, President George Bush has led the charge for sweeping federal legislation on acid rain. There is general agreement among lawmakers, environmentalists and business interests that acid rain legislation will become law by the end of the year. But what may be good news for the lakes of New York, Maine and Canada may spell trouble for Illinois. Because of Illinois' high-sulfur coal industry and the reliance on this so-called "dirty" coal to generate much of the state's electricity, Bush's acid rain proposals are expected to translate into lost jobs, lost revenue and higher electric bills in Illinois.

Bush declared on the 1988 campaign trail, "I am an environmentalist," and he has made revision of the 1970 Clean Air Act, last revised a dozen years ago, the cornerstone of his administration's environmental agenda. Acid rain is just one target of an extensive revamping of the Clean Air Act. Also included in the administration's literal rewrite are a multifaceted plan to address urban air pollution and further reductions in harmful automobile emissions. But the acid rain part of the Bush plan for a new Clean Air Act has sent a chilling message to Illinois' coal and utility industries and to many Illinois politicians. Bush's acid rain proposal will cost the nation billions of dollars, but only a handful of states, Illinois among them, is likely to bear the brunt of the cleanup costs. And it appears that Congress will approve the acid rain package with or without the support of Gov. James R. Thompson, the state's congressional delegation, Illinois' coal miners or the state's electric customers.

The centerpiece of the Bush proposal is a call to reduce emissions of sulfur dioxide (S02) and nitric oxide (NOx), two airborne pollutants that scientific research has linked to acidification of lakes and streams. Bush seeks to reduce annual national emission of S02 by 10 million tons and NOx by 2 million tons from current levels by the year 2001. (Bush's reduction in tonnage and target dates are not set in stone, but there is consensus that the administration's framework will survive the legislative grinder of Congress.) The S02 reductions are expected roughly to halve the nation's current output by 2001. But NOx emissions may be the same as current levels since reductions in the Midwest would be offset by increases in NOx emissions in the high growth areas of the South and West.

The controversy in Bush's plan centers not on the amount of reduced emissions but rather on how the reductions will be achieved. Bush's plan makes states that use high-sulfur coal to power utility plants, like Illinois, pick up the greatest portion of the billion dollar plus tab to reduce emissions. Unlike previous measures in Congress to stop acid rain, Bush's does not spread the cost among all states. Instead, his plan targets the source of emissions. That includes targeting utilities and not industries. In the western states, petroleum refineries and smelting plants are the greatest sources of S02 emissions, but under the Bush plan these industries would be unaffected. The Bush administration argues that utilities are the single greatest source of S02 and NOx nationwide an estimated 65 to 70 percent and that reductions can be made more cheaply by the utilities than heavy industry.

The pace Bush has set to meet the reduction deadlines is fast even by pro-environmental standards. Bush mandates a reduction of 5 million tons of S02 by 1996 and an additional 5 million tons five years later. Bush also places a cap on most S02 emitters by the year 2001:1.2 pounds of S02 per one million British thermal units of heat generated. The cap will mean that utilities using central and southern Illinois high-sulfur coal will be required to make a 500 percent reduction in their sulfur output by the end of the next decade. This cap will affect even those Illinois utilities that are not "major" polluters.

Both Illinois' abundance of and reliance on high-sulfur coal will saddle the state with a large share of the burden to reduce S02 and NOx emissions. Illinois ranks fourth among states in tonnage of NOx and S02 emissions. An estimated 80 percent of these emissions are coming from utility plants. In addition, Illinois coal is also used by many out-of-state utility companies that are among the nation's highest emitters. Illinois, Missouri, Indiana and Georgia utility companies bought more than 46 million tons of Illinois coal in 1987, almost 75 percent of the state's mined coal.

Gov. Thompson criticizes the Bush proposal: "We had high hopes the administration proposal would contain at least some

January 1990/Illinois Issues/21


elements that would help avoid economic devastation for southern Illinois. Unfortunately, the package does not do it." Richard King, executive director of the Illinois Commerce Commission, says Bush's plan will have a "significant, depressing effect on the state's economy."

Targeted for substantial reductions of S02 emissions during the first round are 107 utility plants east of the Mississippi River, the Bush administration's so-called "hit list" of the largest and dirtiest plants. On that list are 26 utility plants that account for 55 percent of all Illinois coal sales, according to the Illinois Department of Energy and Natural Resources. Illinois plants on the list include Central Illinois Public Service Company's Coffeen plant in Montgomery County, Grand Tower in Jackson County and Meredosia in Morgan County. Illinois Power also has three plants on the hit list: the huge Baldwin plant in Randolph County. Hennepin in Putnam County and the Vermilion plant near Danville. The Kincaid plant in Christian County is Commonwealth Edison's only plant on the special list. Each of these plants currently uses high-sulfur Illinois coal.

. . . it predicts that the state would lose 19,000 coal mining and related jobs

The utilities must decide by 1996 either to stop purchasing high-sulfur coal or to retrofit their plants with expensive S02 reduction equipment called "scrubbers." If they ship in low-sulfur coal by rail from Montana and Wyoming, the utilities will pay from 10 to 20 percent more than the current cost of Illinois coal. The unreliability of railroad shipping rates is the greatest barrier to opening markets for low-sulfur coal, according to John Mead, director of the Coal Research Center at Southern Illinois University - Carbondale. But the second option scrubbing technology is an equally expensive proposition. It is the only feasible method currently available to remove sulfur from the coal-burning process. Called a "big, big ticket item" by the Coal Research Center, scrubbing may increase electric rates by 10 to 15 percent for some Illinois utility customers. Scrubber retrofit costs at Illinois Power's Baldwin station, the largest coal-fired plant in the state, are estimated at more than $524 million, according to the Department of Energy and Natural Resources.

Illinois utilities are bracing for Bush's acid rain bill. If it is approved, Central Illinois Public Service Company (CIPS), a utility serving large parts of central and southern Illinois, including Macomb, Taylorville and Carbondale, has made the decision to switch to low-sulfur coal from the western states. CIPS is currently the third largest buyer of Illinois coal, and its decision would translate to the Illinois coal industry as an annual lost market for four million tons of coal and lost revenue of more than $140 million. St. Louis-based Union Electric Company and Decatur-based Illinois Power, the No. 1 and 2 buyers of Illinois coal, respectively, will face a similiar decision: western coal or expensive scrubbers. Other utilities like municipally owned Springfield City Water, Light and Power, which has one scrubber in place, remain committed to high-sulfur Illinois coal and thus must meet Bush's emission reductions with available technology.

The large and somewhat abstract capital costs for scrubber installation and the decline in tonnage of mined Illinois coal will trickle through to affect most utility rates in Illinois and the economy, especially downstate in southern Illinois. CIPS spokesperson Jim Goff estimates that the company will be forced to raise its rates from 10 to 14 percent over the next decade if Bush's proposals become law. The SIU Coal Research Center estimates similar rate increases of 10 to 15 percent. The Department of Energy and Natural Resources estimates that compliance with the S02 goals of the acid rain package will cost Illinois utilities an estimated $300 million annually over the next decade. The department estimates that the Illinois coal industry's, output will drop from the current 61 million tons mined in 1987 to 29 million tons annually over the same period. Also, it predicts that the state would lose 19,000 coal mining and related jobs. SIU Coal Research Center economist David Arey says that while the effect of acid rain legislation will not be as great in Chicago, the 34 southern-most counties of Illinois face a "pretty grim" decade. In some southern counties, such as Perry and Williamson, "King Coal" rules, accounting for more than 25 percent of the employment and 35 percent of the income.

Arey stresses that the key to the mining economy, and the reason why acid rain laws would hit the region hard, is not so much the loss of jobs, but rather a reduction in coal production. During the 1980s, the mining work force was reduced by nearly one-third, but because of improved mechanization, production remained steady. The pending acid rain measures would cut coal mining production an estimated 50 percent, meaning a loss in coal revenue of more than $1 billion and an additional loss of $500 million to $1 billion to the state's economy. Arey's point is that although the Illinois coal industry can remain relative stable in light of significant work force reductions, a large cut in coal production might be the death knell of the coal industry in Illinois. A large reduction in coal production means related industries, such as heavy machinery, equipment and gasoline, would also slump.

Because those most punished in the acid rain equation will be the companies and people who rely on the high-sulfur coal of central and southern Illinois, the Illinois Coal Association has led the battle against the legislation. The association opposes providing utility companies a choice between purchasing scrubbing equipment and drawing on the abundant low-sulfur coal reserves in Montana and Wyoming. Taylor Pensoneau, the association's vice president, would like to see Congress require current high-sulfur coal users to install scrubbers, rather than allowing utility companies like CIPS to ship in low-sulfur coal. "Fuel switching is unacceptable," Pensoneau says, adding that if enough utility companies look westward, the Illinois coal industry could be brought to its knees.

With their backs against the wall, Illinois lawmakers are fighting tooth and nail to ease the economic pain for the state. Illinois

22/January 1990/Illinois Issues


politicians opposed acid rain legislation during the Reagan years but now realize passage of a bill is inevitable. Says SIU Coal Research Center's Arey, "There's universal agreement that the days of stonewalling acid rain legislation are over." In the waning days of the 1989 Congress, the Senate Environment and Public Works Committee passed by a 15-1 vote an acid rain bill that the Illinois Coal Association terms "unacceptable." The Senate version is nothing but bad news for Illinois coal and utility interests, and a staunch supporter of stiff acid rain measures. Majority Leader George J. Mitchell (D-Maine), has promised to call a floor vote within hours of reconvening on January 23. Negotiations continue in the House on individual provisions in Bush's Clean Air Act revisions, but the outline will remain intact, according to environmentalists and lawmakers. "The talk on the Hill is that the Clean Air Act will be like babies and school lunch programs; nobody is going to vote against it," says David Almy, press secretary to U.S. Rep. Edward R. Madigan (R-15. Lincoln). Madigan is fighting an uphill battle to attach pro-Midwest measures to the Bush plan, but Almy fears, "The political muscle is there to screw a small number of [midwestern] congressional districts in order to allegedly clean the environment."

Madigan and Illinois Congressman Terry Bruce (D-19, Olney), the state's two most ardent backers of Illinois coal, support the idea of "cost sharing" to address the regional inequalities in paying for the acid rain measures. Cost sharing can be achieved through a proposed national electricity surcharge or by a tax on all electric utility producers using fossil fuel.

Madigan is fighting an uphill battle to attach pro-Midwest measures to the Bush plan

A national tax would provide funding for Illinois utilities to offset the cost of scrubbers and other clean coal technologies. Madigan argues that states like Texas, which produces almost as much S02 as Illinois, will be left unscathed by costly federal mandates. But Bush remains adamant, against any so-called cost-sharing initiatives, which the administration's "read my lips" stance sees as nothing more than a tax. It is unlikely that midwestem lawmakers can muster support outside the high-sulfur coal states for cost sharing when it translates into the politically sensitive measure of a new tax.

With support from Gov. Thompson, the Illinois congressional delegation is also calling for:

increased federal funding for innovative clean coal research in the hopes of maintaining high-sulfur coal markets;

a "credit" plan that would allow utilities that made prior reductions in S02 and NOx emissions during the 1980s to use those reductions to meet future requirements; and

a system of "bubbling," whereby a utility company could maintain a dirty plant if other plants in its control would pick up the reduction slack left by the high emitter.

The Illinois delegation would also like to see an extension or outright delay of Bush's two-tiered reduction plan and an exemption on high-NOx emitters called cyclone boilers, which are found almost exclusively in the Midwest.

Madigan's call for fair treatment has won him supporters on the influential House Energy and Commerce Committee, the panel that will decide the fate of Bush's acid rain package in the House. The committee membership is divided between pro-business House members led by Democrat John Dingell, a Michigan congressman committed to protecting the automobile industry, and the environmental faction led by California Democrat Henry Waxman. Madigan's spokesperson says both Madigan and Bruce, along with a half-dozen other midwestem lawmakers, will provide the swing votes assuring passage to whichever side treats the region with softer hands.

Bush's acid rain plan has also come under attack in Illinois because the high-sulfur coal industry and its customers say it will unintentionally derail major advancements in clean coal technology. Pensoneau of the Illinois Coal Association argues that because utility companies will scramble to comply with Bush's plan by installing bulky and expensive scrubbers, more promising S02 and NOx reduction methods will be left on the laboratory shelf. "Who's going to care about projects that were on the verge of breakthrough?" asks SIU Coal Research Center's Arey, after scrubbers are installed to meet Bush's reduction limits. The federal government and a number of states, most notably Illinois, have poured almost $1 billion into clean coal technology research during the decade.

Arey also argues that Bush should wait for the results of a federal acid rain study due this year. Scientists continue to debate the one-to-one relationship between S02 and NOx emissions and the acidification of lakes thousands of miles away. The eagerly awaited, definitive acid rain study has been 10 years in the making and features a final price tag of more than $500 million. Early indications are that the congressionally mandated study, called the National Acid Precipitation Assessment Program, will argue that the acid rain problem is stabilizing in the United States because of reductions made in S02 emissions since 1970. Illinois lawmakers are arguing that Congress should adopt a wait-and-see attitude before passing legislation on acid rain, but the call for patience is falling on deaf ears.

Since Bush made formal in the summer his proposal to revamp the Clean Air Act, a tough acid rain bill has become a juggernaut. Madigan's press secretary David Almy sums up Illinois' problem in opposing acid rain measures: "Everybody thinks we have the low moral ground. We're seen as the bad guys, the guys with black hats," he says. The Illinois Coal Association's Pensoneau asks, "Why can't we have both clean air and a healthy coal economy?" Likewise, if the Bush bill becomes law, many Illinois electric customers will no doubt be asking, "Why can't we have both clean air and lower rates?" For years, of course, others have asked, "Why can't we have clean air when it's our neighbors upwind who pollute? "

Bill Kemp is a staff writer for the Illinois Times in Springfield.

January 1990/Illinois Issues/23


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