Coal regs a goldmine

Proposed clean air rules recently released by President Obama’s Environmental Protection Agency that aim to cut mercury emissions from coal-fired power plants, while likely to benefit workers in key swing states, will also produce other, unexpected winners — private-equity heavyweights Henry Kravis and David Bonderman.

The two, whose firms have invested in an energy company that runs coal power plants, will see more than $1 billion in savings because the EPA’s proposed rules go easy on the type of coal used in their plants.

The huge savings by Texas utility Energy Future Holdings, owned by Kravis’ KKR and Bonderman’s TPG Capital, is tied to the EPA proposal which exempts lignite coal-fired plants, like those run by EFH from having to spend money to reduce pollution levels at the plants.

The EPA in setting mercury standards is putting lignite coal in a different category than other coal.

EFH will save $1 billion by not needing to meet tougher standards applied to other coal-fired plants, sources said.

“A lobbyist probably convinced the EPA that the lights would go out in Texas if they did not provide the exemption,” the owner of a large coal-burning utility said, and if EFH’s plants shut down then Texas electricity prices would rise in an election year. EFH declined comment.

Three of the nation’s five top mercury-emitting coal plants in 2009 used lignite, and EFH owns two of them, according to the Environmental Defense Fund.

The EPA is now recommending court-ordered standards to comply with the Clean Air Act that call for a 91 percent reduction for mercury and acid gasses, and 55 percent for sulfur dioxide.

The problem with enforcing regulations on lignite burning plants, which are mostly in Texas, is lignite coal is largely dirt and almost impossible to make cleaner.

The utility owner said, though, that he believed the EPA could have arrived at a different solution.

It could instead have given lignite users more time to comply, so an owner could build natural gas plants and replace the lignite-burning ones before the deadline.

State attorneys general could return to court if they feel final recommendations — when they become law in November — to not comply with the Clean Air Act.

The EPA proposal gives other coal-fired power plants up to four years to meet the new standards. Many of the older plants that could benefit — at least until they fall short of compliance in four years — are in political swing states including Michigan, Ohio and Pennsylvania. [email protected]