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Coal Warriors 

When Southern Co. needed help in the political struggle over Atlanta's air, the utility company knew it had friends -- especially Sen. John Breaux.

A corporate-funded bash in L.A. for a Louisiana senator could hardly seem to blame for another coughing fit in smoggy Atlanta. But that's the way critics look at the events of Aug. 15, 2000.

That night, during the Democratic National Convention, Southern Co. and the trade group Edison Electric Institute were among the sponsors of the "Mardi Gras Goes Hollywood" party for Sen. John Breaux on the Paramount Studios back lot. The faux-Carnival festivities included three floats flown in for the occasion from New Orleans. Breaux wore a bright orange jumpsuit and passed out beads to 2,000 or so partygoers who ate gumbo and partied to the tunes of Big Bad Voodoo Daddy.

Seven months later, in a March 23 letter to Vice President Dick Cheney, Breaux raised questions about the New Source Review program, which requires industrial facilities like Southern Co. to install better pollution controls when modifying their plants.

The policies of the Environmental Protection Agency (EPA) "interfere with our nation's ability to meet our energy and fuel supply needs," Breaux and Sen. James Inhofe, R-Okla., wrote. They urged the vice president to "suspend EPA's activities until such time as there has been a thorough review of both the policy and its implications."

Breaux did not respond directly to inquiries about corporate donors or about his relationship with Southern Co. Through a statement faxed by his office, he reiterated his position on overall energy policy. "Both camps [environmentalists and consumers concerned about energy prices] have valid concerns and I think we can meet the concerns of both sides," he said. "I believe the federal government should work with industry to address our nation's energy shortage in an environmentally safe manner."

For their part, Southern Co. executives say it's absurd to assume that the company's $4 million in lobbying expenses or campaign donations give them the power to skew the nation's energy and environmental policies -- or make a potentially multibillion-dollar Justice Department lawsuit against the company disappear.

"I'm pleased that there are people out there who think we have as much influence as they seem to think we do," says Chris M. Hobson, vice president of environmental affairs for Georgia Power, a Southern Co. subsidiary. "They think we have more influence than we think we do."

To fully understand why Southern Co. would court Breaux -- as well as enjoy a sizable influence with lawmakers in general -- one must look back to 1970. That was the year Southern Co. became a prime beneficiary of a clause in the Clean Air Act that exempted certain coal-fired power plants from adding modern pollution controls. The loophole said power plants that were already built or were in the process of being built wouldn't have to install expensive new emission controls as long as the plants themselves weren't modified in a major way.

"The whole electric industry was pushing for [the exemption]," says John Walke, a former attorney at the U.S. Environmental Protection Agency (EPA) and current director of the air division at the Natural Resources Defense Council. "Power companies were claiming they would retire their oldest and dirtiest power plants, and it wasn't cost effective for Congress to require them to retrofit plants with pollution control equipment."

Because of this exemption, 10 coal-burning Southern Co. plants were grandfathered in the '70s; all are still in operation today. One wasn't completed until 1975. This plant -- Bowen -- was in 1999 the ninth dirtiest power plant in the country for sulfur dioxide, according to statistics compiled by the U.S. Public Interest Research Group (PIRG) from EPA databases.

Another Georgia plant, Plant Scherer, was completed in 1989, 19 years after the Clean Air Act passed. It too was exempted from using modern pollution controls. Scherer was the country's No. 1 source of the greenhouse gas carbon dioxide in the country in 1999, and the 13th largest source of nitrogen oxide, which contributes to ozone smog.

Overall, in 1999, Southern Co. was the leading producer of carbon dioxide, sulfur dioxide and nitrogen oxide in the nation.

Atlanta's notorious air-pollution woes are in large part due to the city's heavy driving habit -- the source of more than half the chemicals that go into the region's ozone smog. But Georgia Environmental Protection Division computer models say Southern Co. alone is the source for more than another third of these chemicals. For this reason, environmental groups have made the Atlanta-based utility a national poster child for cleaner power plants.

PIRG says Southern could reduce its sulfur dioxide output by 892,000 tons, and its nitrogen oxide emissions by 242,000 tons, if 10 of its plants were retrofitted with better pollution technology.

Meanwhile, on Nov. 3, 1999, the Justice Department and EPA filed lawsuits against eight utility holding companies that operate 32 older, coal-burning power plants. Among those was a suit filed in the U.S. District Court of Northern Georgia in Atlanta against the Southern Co. According to the lawsuits, Southern Co. and the other companies spent hundreds of millions of dollars to improve productivity at the plants, but never upgraded their pollution controls.

The Justice Department suit cites 10 Southern Co. plants -- five in Alabama, one in Florida, one in Mississippi and three in Georgia -- as "significant contributors to some of the most severe environmental problems facing the nation today." A court order forcing Southern Co. to upgrade its plants would "produce an immediate and dramatic improvement in the quality of air breathed by millions of Americans downwind of these plants ... and allow the environment to restore itself following years, and in some cases, decades, of illegal emissions," the lawsuit says.

Southern Co.'s Hobson says the company has no hidden agenda to avoid upgrading pollution controls.

"If there is one thing I want you to take away from this, it is that the Southern Co. is not some nameless, faceless corporation," Hobson says. "We don't sit around in these buildings and figure out what is the best way that we can circumvent the regulatory process." He notes that the company has spent "hundreds of millions of dollars" on pollution controls and, since 1990, has burned cleaner coal during the summer months.

According to information the company filed with the U.S. Securities and Exchange Commission, Southern Co. spent about $400 million on pollution control upgrades between 1990 and 2000. The company, Hobson says, will always be in a precarious position, balancing between local utility regulators demanding lower rates, stockholders, and what he calls the "environmental master."

Says Hobson: "The lawsuit, in my opinion, is an act of frustration by the EPA because they were unable, through whatever process they go through, unable to achieve the environmental goals that they thought they ought to meet. If I were EPA I would ... just admit that everything in the last 20 years was confusion at best."

Over the years, Southern Co. has paid top dollar to get this type of message across. In 1999, Southern Co. and its subsidiaries spent $4.3 million on 14 in-house lobbyists and 11 outside lobbying firms to pound D.C.'s marble hallways -- almost double what second-place DTE Energy spent on lobbying.

In 1996 and 1997, the company joined in a multi-million dollar advertising and lobbying campaign to prevent EPA from issuing new standards for ozone and particulate matter. In 1999, a trade organization chaired by a Southern Co. executive filed a lawsuit, still ongoing, challenging an EPA rule restricting particulate matter pollution.

Last year, Southern Co.'s lawyers argued before the U.S. Supreme Court that standards for healthy air set by the EPA should be based on industry costs, instead of medical studies. In February, the Supreme Court unanimously rejected that argument.

In terms of market value, Southern Co. is a $20 billion company; last year alone it took in $11.6 billion in revenues. But it is not immune to its challengers. In SEC documents, Southern Co.'s managers admit that the Justice Department suit could affect operations, cash flow and the financial condition of the entire company -- if settlement costs aren't passed on to ratepayers.

And in the last seven months, the Justice Department announced settlements with three other power companies involved in the lawsuits, each for more than $1 billion. The one with Ohio-based Cinergy Corp. was the largest air pollution settlement in history, a whopping $1.4 billion for fines and the cleanup of four plants.

The lawsuit against Southern Co. seeks the cleanup of 10 power plants. Once the three companies upgrade their plants as the Justice Department settlement requires, they'll reduce pollution emissions by more than 750,000 tons each year between them.

When the latest Justice Department settlement was announced on May 11, Attorney General John Ashcroft -- not usually considered a friend to environmentalists -- said he was ready to go after the remaining defendants. Coal-plant lawsuits are considered no-brainer enforcement actions upon which an administration can shore up an environmental image.

"Enforcing environmental law is a top a priority for the Department of Justice," Ashcroft said, "and I look forward to protecting our natural resources and helping ensure that companies are in compliance with law."

At the time Ashcroft made that statement, however, Southern Co. lobbyists were working on a settlement of their own sort.

Southern Co.'s cause is not hurt by the fact that in the 1999-2000 election cycle, the company, its subsidiaries, their employees and their political action committee gave more money -- $1.4 million -- to federal political campaigns than did any other electric utility, according to the Center for Responsive Politics, a nonprofit group that tracks campaign contributions.

Among the biggest beneficiaries was the Republican National Committee, which received $222,000. The Democrats got a paltry $55,000. But one of Southern Co.'s favorite individual recipients was a Democrat: John Breaux. His campaign received $12,500 during the 1999-2000 election cycle, according to the Center for Responsive Politics.

Breaux wasn't the only politician whose campaign coffers benefited from Southern Co. PIRG reports that the company spent $172,000 to grease nine senators and 28 representatives who sit on committees that develop energy or environmental policies. In addition to its staff lobbyists, the company has hired some of the most influential insiders on Capitol Hill -- from both parties. Southern spent $360,000 for the services of Kathleen McGinty, former chairwoman of the White House Council on Environmental Quality and an adviser to Al Gore. It paid $220,000 to former national GOP Chairman Haley Barbour, who was just tapped by Sen. Trent Lott as the lead fundraiser to help the Republicans regain control of the Senate in 2002.

Barbour confirmed in the June 4, 2001 issue of Newsweek that he was "involved" in trying to free Southern from the Justice Department lawsuit.

As it turned out, the Bush/Cheney energy policy, which Bush unveiled May 17, gave Southern Co. just about everything it wanted. It directs Attorney General Ashcroft to review the lawsuits pending against power companies and report back to the president; it also orders EPA Administrator Christine Todd Whitman to reconsider the New Source Review program, which regulates older, coal-burning power plants.

Last week, EPA announced it was scaling back initiatives to reduce emissions from old coal-burning plants. And some people suspect that the White House already has its mind made up to kill the New Source Review program.

"Asking the Justice Department to review [the lawsuits against power companies] is a total joke," Walke says. "The people at Justice have been reviewing their case for years. Everyone in Washington recognizes this as just a thinly veiled recommendation to balk on these lawsuits."

On June 12, Whitman spelled out her views to representatives from the National Association of Manufacturers: "Well, New Source Review is one of those things where the idea is very good, [but] it's been in the implementation where we've gotten into problems. ... We started to focus on the minutiae instead of the big goal."

Just four days after the energy plan was released, Barbour and Cheney were breaking bread again. This time it was at the vice president's mansion at a dinner on May 28, the night before a Presidential Gala fundraiser. Barring any surprises, it appears that the Justice Department suit against Southern Co., and the other companies accused of increasing emissions without upgrading pollution controls, will get nowhere.

But the story doesn't end with the lawsuits and the New Source Review program. In January, EPA proposed new guidelines to reduce sulfur dioxide emissions that cause what is called "regional haze," a cloud of pollution that threatens mountain forests. The new standards are called Best Available Retrofit Technology (BART) emission controls. They would require Southern to spend millions of dollars to upgrade its plants emission controls.

All indications are that Southern will marshal its resources -- and its powerful friends -- to fight those new rules as well. States the company in its most recent annual report to the SEC: "Litigation of the BART rules is probable in the near future."

click to enlarge Among Southern Co.'s biggest beneficiaries was the Republican National Committee, which received $222,000. The Democrats got a paltry $55,000. But one of Southern Co.'s favorite individual recipients was a Democrat: Sen. John Breaux. - DAVID BLUMENFELD
  • David Blumenfeld
  • Among Southern Co.'s biggest beneficiaries was the Republican National Committee, which received $222,000. The Democrats got a paltry $55,000. But one of Southern Co.'s favorite individual recipients was a Democrat: Sen. John Breaux.


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