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In EPA Battle, Old King Coal is Far From Merry

Probably the most sensitive issue is Texas, where the largest utility, Energy Future Holdings, is already struggling under the burden of the debt it took on in its $45 billion leveraged buyout in 2007.

Concern over the threat of blackouts in the state is already high this summer, because of the strain created by high temperatures -- which lead to heavier use of air-conditioning -- and unexpected plant shutdowns.

The issue has been given an extra political edge by the emergence of Rick Perry, the Texas governor, as possible Republican presidential candidate.

Perry has already struck out at EPA regulations for killing jobs and characterized the rules as "destructive federal over-reach".

EFH has also protested furiously, saying: "The severe and disproportionate impact on Texas is unjustified and the timeline unreasonable and will harm Texas jobs, prices, and power supply."

EFH and other companies have asked the EPA to delay implementation of the Cross-State Air Pollution Rule and are now waiting for a reply.

If the EPA refuses, it is likely that some companies and states will take legal action.

Brannin McBee, of Bentek Energy, a consultancy, says he expects the EPA will give the industry more time, perhaps by phasing in its new restrictions over a number of years.

There is simply not enough capacity in the U.S. to fit all the desulfurization equipment and build the new gas-fired plants and pipelines that will be needed within the EPA's timetable.

However, he adds, the EPA seems determined to press ahead with its strategy.

"The general consensus in the industry is that the new rules will have to be delayed somehow," he says.

"But we do believe the new limits will come in some way or another."
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