White House set to suspend pollution rules for California

By Christopher Parkes in Los Angeles and Nancy Dunne in Washington Published: February 9 2001 19:38GMT | Last Updated: February 10 2001 00:50GMT

The White House looked set on Friday to approve a plea from California for the suspension of federal pollution rules.

A suspension would allow the state, which is suffering from severe electricity shortages, to run its power stations at full blast without the risk of penalties.

The request from California governor Gray Davis was passed to an energy task force headed by Vice President Dick Cheney, and assent was expected early next week.

It marked a renewed attempt by Mr Davis to enlist federal support while the state develops a plan for a permanent solution to its months-old energy crisis.

An appeal for measures that would tend to worsen the already heavy pollution that blights much of the state underscored the urgency of the governor's drive to head off the threat of blackouts extending into the summer, when power consumption peaks.

So far, the White House has tended to blame California's woes on the state's failed deregulation project and stringent environmental standards. It has resisted calls for federal intervention, except to hint weeks ago that federal clean-air regulations could be eased.

Boosting both power production and generation capacity has been accorded top priority in the state as negotiations continue on structural changes that could lead to the state taking over the distribution grid in return for cash aid to near-bankrupt utilities.

More short-term relief came this week as the state concluded its first long-term power purchasing contracts to be paid for by a $10bn state bond issue - the mainstay of restructuring efforts so far.

Also, a court ordered electricity generators not to cut off supplies to the state. The interim order, resisted by suppliers that feared they would not be paid, will last at least until February 16, the date of the next hearing.

On Thursday Mr Davis used emergency powers to order the accelerated approval of planning consents for new generating stations, and called for the immediate installation of microturbines and other specialist peak-supply equipment to provide as much as 5,000 megawatts by July.

Mr Davis offered cash incentives to encourage construction and called for a total of 20,000 megawatts - 1MW is enough for 1,000 domestic consumers - to be installed by mid-2004.

Further signs that some in Washington believe California should be left to sort out the mess alone emerged on Capitol Hill on Friday, when measures deployed by the previous administration came under attack.

Senator Phil Gramm, chairman of the Senate banking committee, said the provisions of the Defense Production Act, which gave authority to the energy secretary, to force suppliers to sell power to California's ailing utilities, would either be killed or substantially rewritten.

"It was the intent of Congress that those powers be used for emergencies that had clear national security implications," he said. "I don't ever intend to see the act extended again without a rewriting."

Eric Fygi, a senior energy department official, said that unless the department acted, natural gas supplies could have been cut from several military installations located in the region.

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-- Martin Thompson (mthom1927@aol.com), February 10, 2001

Answers

Calif. Pollution Laws Blamed in Crisis Bush, GOP Say Strict Air Quality Regulations Contribute to State's Energy Woes California Gov. Gray Davis tours the new Calpine 545 megawatt gas- fired power plant under construction near Yuba City, Calif., Thursday. (AP)

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• Set It Free! • Some Power Trip

E-Mail This Article Printer-Friendly Version Subscribe to The Post By William Booth Washington Post Staff Writer Saturday, February 10, 2001; Page A04

LOS ANGELES -- The Bush administration and some Republican lawmakers have suggested that California's anti-pollution laws are one cause for the state's electricity crisis and are pointing to the dearth of power in the West to argue that environmental concerns should be tempered with the need to generate more energy.

In California, however, there is wide disagreement with the premise that somehow strict environmental and air quality regulations have either stopped producers from generating electricity or kept companies from building new power plants in the state.

In recent weeks, President Bush has suggested that California's strict air quality regulations are holding back power production.

"If there's any environmental regulations," Bush said on CNN, "preventing California from having a hundred precent max output at their plants -- as I understand there may be -- then we need to relax those standards."

State officials counter that California's older, dirtier power plants are running overtime to churn out electricity, even at the cost of bad air.

"We have the worst air quality in the nation, but we don't think we've in any way impeded production of power during this shortage," said Sam Atwood of the South Coast Air Quality Management District, which oversees air pollution controls in the Los Angeles basin.

Interviews with officials at five large power producers in the state revealed that instead of plants idled by pollution regulations, the plants were being run overtime, and there was general agreement that the state regulators were allowing older plants that pollute the air more to keep generating in exchange for commitments to install pollution control devices in the near future.

In the weeks after California's energy crunch was made real by the first rolling blackouts, a number of Republican governors and lawmakers have charged that California seems only too willing to suck power from other states but is overly protective of its own air and water.

"In my opinion, the environmental groups, the extreme groups, have prevented us from energy exploration all over the country," said Rep. Randy "Duke" Cunningham (R-Calif). "They have stopped California from building new power plants."

Sen. Larry E. Craig (R-Idaho) said that while the energy crisis in California was caused by a combination of factors, "dominant in it all is a general attitude that transmission lines were unsightly and generation plants were environmentally unsound and that somehow they would get by without being producers of energy."

California's regulators strongly disagree. "The charge that we oppose the construction of new power plants or the operation of existing plants is false," said Claudia Chandler of the California Energy Commission, the state agency that approves new generating plants.

Bob Danziger, the chairman emeritus of Sunlaw Energy Corp., which operates two power plants in the Los Angeles basin and is planning to build a major facility, said his fellow energy producers are using the current crisis to call for looser environmental regulations.

"It's a way for the producers to roll pollution controls back," Danziger said. "You still have people in this industry who don't want to spend a dime on pollution controls and they're making fortunes."

Gov. Gray Davis (D) on Thursday signed several emergency executive orders that call upon state regulators to streamline the permitting process for new power plants and to offer cash "bonuses" to power plant builders who can bring their facilities online by this summer.

Davis also sent a letter to Bush asking him to direct federal regulatory agencies to streamline their review of permits to build and operate power plants.

However, today, White House spokesman Ari Fleischer characterized the Davis letter as "asking the president to waive federal environmental regulations permitting California therefore to produce more energy."

But upon hearing Fleischer's comments, Davis's staff countered that the California governor had not asked for environmental regulations to be loosened. "We didn't ask for anything of the sort," said Steve Maviglio, a Davis spokesman.

One central fact in the current California energy crisis is not in dispute: Demand for electricity is outstripping supply.

In the past 10 years, not a single major new power plant was built in the state (nor have any been erected in the Pacific Northwest). In the Los Angeles basin, there has not been a large plant constructed in decades.

Power suppliers and regulators agree that new plants were not constructed during the early 1990s because there was an abundance of electricity. Then came partial deregulation in 1996 and several years of market uncertainity, discouraging new investment.

Since 1998, the California Energy Commission has approved nine major new power plants and is considering 14 others. As the new plants come online between this year and 2003, the state should again have plentiful power supplies.

Critics of California's energy policies say that the state still is responsible for the lag in power because the process to approve new plant construction is needlessly time-consuming.

"It's probably the strictest in the nation," said Dan Riedinger of Edison Electric Institute, an industry research group based in the District.

Officials at the California Energy Commission, which approves new plants, say their agency is a "one-stop shop" that can process an application for a new plant in a year.

But Tom Williams of Duke Energy, which operates five power plants in the state, counters that it takes about a year and $1 million just to gather the 2,500 pages of data needed to apply for a new plant.

The energy commission, Williams explains, does not start the clock for its "year" until the application is considered "data adequate," and "you're never data adequate."

Recently, Duke submitted its completed application for demolishing old generators at one of its sites and replacing them with modern turbines and pollution controls in August 1999. The plant was approved in October 2000.

"The application took 15 months, but the whole process took 22 months," said Williams, who figured the same process would take 10 months in Texas.

The California Energy Commission, while having the ultimate say on the approval of new plants, also has instituted a formal process to allow "interveners" to protest the scale, appearance, emissions and locations of plants. These interveners can be environmentalists, competing power companies or other industries. One proposed 600- megawatt plant, the Metcalf Energy Center in San Jose, is being fought by its neighbor, the computer hardware giant Cisco.

"This idea that California's environmental laws have somehow contributed to the current crisis is an urban myth," said Ralph Cavanagh, an energy expert at the Natural Resources Defense Council in San Francisco. "The last thing most environmentalists want is to stop the building of a new modern natural gas-powered plant to replace ones that are 40 or 50 years old and a thousand times dirtier."

California faces unique challenges because of its poor air quality -- the worst air in the nation hovers over the Los Angeles basin, although Houston's air rapidly is becoming as dirty.

Bush administration officials have suggested that California is suffering through its crisis because power plants might not be operating at full tilt because of air pollution regulations.

But in this case, the state has clearly loosened the rules.

In the South Coast Air Quality Management District, which oversees air pollution cleanup in the Los Angeles area, officials have relaxed rules in exchange for promises to install pollution control devices at the plants.

Over the last seven years in the Los Angeles area, the 15 major power plants were required to reduce their noxious emissions year by year or to purchase "pollution credits" from one another. This market- based and flexible policy was instituted at the request of the power producers.

Almost every power plant in Los Angeles delayed installing the new air-scrubbers, and so the prices for these pollution credits skyrocketed in the last year. When the cost of credits became so high that some plants opted to shut down, the air quality management district suspended the program and allowed the power generators to keep cranking out the electrons.

"The bottom line is that we have enough flexibility within the regulatory structure to allow the power plants to run overtime," said Barry Wallerstein, executive officer of the air quality district.

© 2001 The Washington Post Company

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-- Martin Thompson (mthom1927@aol.com), February 10, 2001.