2005 act gas natural price reduction

The price of cleaner air: New ozone plan likely to be hardest on power producers - Industry Report

The new plan to reduce ozone in the Baton Rouge area to federally acceptable levels targets nitrogen oxides as the culprit.

Nitrogen oxides are sometimes referred to as NOx.

Among industry, power generators tend to emit more of the stuff than anybody else. Thus, they'll be hit hardest by the proposed ozone rules, which are pending approval by the U.S. Environmental Protection Agency.

But power plants, refineries and chemical plants will all be spending tens of millions of dollars to bring themselves into compliance. Some facilities could be required to cut nitrogen oxide emissions by as much as 60 percent. Most plants plans are in early stages, so don't expect a lot of retrofitting construction right away. The deadline for compliance is May 2005--if the plan goes through.

Kevin LeBlanc, manager of investor relations with The Shaw Group which does industrial construction, said companies like his generally won't see much work in retrofitting for nitrogen oxide requirements until plants are forced to by the deadline.

From a business perspective, companies only stand to lose more money by making pollution control investments before they absolutely have to, he said.

"The bottom line is they're not going to be making any extra money by retrofitting, so they wait till the last minute," LeBlanc said. "The bottom' line is it's the bottom line."

Knocking out NOx

Louisiana Generating LLC has two power plants in Pointe Coupee Parish, one of four parishes added to the latest ozone plan. The others are East and West Feliciana and St. Helena parishes.

Gary Ellender is Louisiana Generating's director of environmental affairs. Lie said it's not yet clear how much it will cost to bring the company's plants, Big Cajun 1 and Big Cajun 2, into compliance, though it'll probably run into tens of millions of dollars.

Big Cajun 1 is a natural gas-fired plant with four separate generating units, while Big Cajun 2 is a coal-burning plant with three generators. The new rules would force each plant to cut 35 percent to 40 percent of its nitrogen oxide emissions Ellender said.

The first unit scheduled for low-nitrogen oxide conversion will be the No. 3 generator at Big Cajun 2. It'll be taken off line this March to begin retrofitting of a low-nitrogen oxide burner and combustion-modification equipment.

Two generators at Big Cajun 1 have already been retrofitted with low-nitrogen oxide equipment and won't need further changes, Ellender said, though the other two generators will require extensive modification.

He noted that his company provided input to the state Department of Environmental Quality during the entire plan development process. Agency officials were "extremely helpful and cooperative" in considering Louisiana Generating's desire to keep its rates low while at the same time coming up with substantial pollution cuts, Ellender said.

"There were other alternatives that--depending on the level of reduction--could have been many times more expensive," he added, "which would have ultimately resulted in higher rates to the residents of the state."

Entergy has two power plants within the original five-parish non-attainment area. Spokesman Bill Benedetto said the ozone plan requires reductions of 50 percent to 60 percent at those facilities, both of which are powered by natural gas.

But it's still up in the air as to which of numerous technologies and operating solutions will be used to comply with the new rules, he said.

The usual suspects

"As part of the evaluation process, testing and preliminary engineering has begun and we are evaluating proposals for emission controls,"' Benedetto said.

Power plants aren't the only facilities facing tighter controls under the new plan, however. The ExxonMobil refinery in Baton Rouge will have to reduce its nitrogen oxide emissions by approximately 30 percent if the plan is approved.

Walt Eldridge, with the refinery's environmental group, said options include retrofitting super- or ultra-low nitrogen oxide burners in some furnaces used in the refining process. A number of furnaces were already fitted with low-nitrogen oxide burners during the early 1990s to comply with Louisiana's first state implementation plan, which targeted both nitrogen oxides and volatile organic compounds.

Eldridge cited substantial progress in reducing pollutants targeted by the U.S. Clean Air Act, noting that in 2000 the refinery emitted only 8,640 tons of volatile organic compounds, nitrogen oxides, sulfur dioxides and carbon monitrogen oxideide, compared to 51,831 tons in 1987.

A program to continue the low-nitrogen oxide conversions through the 1990s was suspended when DEQ obtained an EPA waiver for nitrogen oxide emissions, Eldridge said. Improvements in low-nitrogen oxide technology, meanwhile, mean the previously converted furnaces may be converted again, he added.

No conversion work has been done yet, though the company is involved in "scoping studies," which examine the range of options and projected cost and results of converting specific burners. More detailed studies will follow. The refinery has 60 furnaces, Eldridge said.

"It won't be pocket change. We're talking about tens of millions of dollars."

Eldridge said there's "absolutely no doubt" ExxonMobil will comply with the new plan if it's approved.

At the same time, the refinery is seeking DEQ approval to increase emissions of nitrogen oxides and volatile organic compounds in order to produce lower-sulfur gasoline for 2004 model year automobiles, which will hit the streets in 2003. The cleaner gasoline would have 1 percent of the sulfur content gasoline had in 1980, Eldridge said.

If granted a permit by DEQ, the refinery would generate 227 tons more per year of nitrogen oxides than it's now permitted. But reduced emissions from cars burning the cleaner gasoline will mean a decrease of 1,386 tons of nitrogen oxides per year in the five-parish non-attainment area around Baton Rouge--this according to the EPA, Eldridge said.