Subject: Section 126 Lawsuit Decision
From: [email-masked]
To: [email-masked], [email-masked], [email-masked], [email-masked], [email-masked]
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Date: Mon, 27 Aug 2001 12:46:38 -0700 (PDT)

The Federal Appeals Court issued a ruling today on the EPA Section 126 Rule.  We need to get more legal analysis of the order, but it 
states:

"It is Ordered that EPA's Section 126 Rule is remanded as to all cogenerators, but vacated only as to those cogenerators classified as electric generating units ("EGUs") under the rule that supply equal to or less than one third of their potential capacity or equal to or less than 25 MW to the grid for sale per year."   This part of the order appears to "vacate" or completely throw out the 126 rule for cogeneration units less than 25 MW or selling less than 1/3 of their capacity to the grid.   For all other cogenerators, the court remands the rule for all other cogenerators to EPA for re-working, consistent with some of the court's earlier objections.

"It is Further ordered that as of May 15, 2001, the date of this court's decision, the three-year compliance period for emissions limitations applicable to EGUs under the Section 126 Rule is tolled, pending EPA's resolution of the remand of EGU growth factors ordered by this court."  This more significant part of the order "tolls" -- or puts on hold -- compliance with the 126 Rule for all EGUs until EPA resolves EGU growth factor issues that the court identified in its May 15, 2001 ruling.  The practical effect of this part of the order will be to delay implementation of the Section 126 Rule until May 2004, when the EPA NOx SIP Call is scheduled to go into effect.   The EPA will not be able to re-issue its rules in a time frame that would require compliance before May 2004. 

The NOx SIP Call would have supplanted the Section 126 Rule in May 2004 anyway -- what this ruling does is take away some of the uncertainty that existed for the May to September 2003 period (original effective date of the Section 126).  The initial impact that could result is that prices for 2003 OTR allowances could be lower, now that less of the generating sector in fewer states will be facing summer 2003 compliance. 

Again, I will forward any more detailed legal analysis as I receive it, but this is the latest news...

Please call if you have any questions.

Jeff Keeler
Director, Environmental Strategies
Enron Corp
(203) 245-0828 office
(203) 464-1541 cell