WASHINGTON, D.C., Feb. 3, 1998 -- In testimony today to the U.S. Environmental Protection Agency (EPA), American Electric Power (NYSE: AEP) summed the agency´s actions connected with its proposed call for nitrogen oxide (NOx) state implementation plans (SIPs) in two words: bad faith.

In November 1997, EPA issued SIP calls requiring 22 states to impose uniform NOx emission reductions of 85 percent by utilities and other large sources in a region spanning the Northeast, Midwest and South. The calls were issued despite modeling results by the 37-state Ozone Transport Assessment Group (OTAG). Endorsed by EPA, OTAG was convened to study the formation and transport of ozone in the eastern United States. OTAG´s findings indicated that NOx emissions from the Midwest and Southern states have limited impact on air quality problems in the Northeast. NOx is a precursor to the formation of ozone.

Mark Gray, manager of environmental services for AEP, told those gathered that EPA disregarded OTAG´s recommendation that a range of emission reduction levels, from 55 percent to 85 percent, be implemented. EPA instead proposed an 85 percent reduction level in an onerous "one size fits all" approach.

"EPA has not only abandoned the concept of differentiated control levels for utility sources," Gray said, "but it has compounded its act of bad faith by proposing the most stringent end of the range for the whole 22-state region covered by the proposal."

Gray also said that EPA broke faith with OTAG participants on the science that guided their process. "Once the ozone modeling made clear that long-range transport was not a significant contributor to nonattainment in various regions, the need for the development of sub-regional control strategies became obvious," Gray said.

Notwithstanding the need to conduct sub-regional modeling, which would require at least another year to complete, EPA "unilaterally proposed an extreme control program without regard to regional needs."

To further his point, Gray pointed out how EPA has accelerated its timetable for implementation. EPA originally targeted 2004 as the appropriate implementation date, in tune with OTAG recommendations. However, after eight Northeast states filed Section 126 petitions in August 1997, EPA changed the date to September 2002, in line with the petitions.

The petitions contended that pollutants from the Midwest were preventing the Northeast states from achieving mandated air quality standards, and asked EPA to impose harsh new controls on Midwest utilities and other industries.

"We are left to wonder whether EPA is, in effect, granting the Northeast states´ petitions with the SIP call proposal without the due process required for such petitions," Gray said. "Bad faith at a minimum, illegal at worst."

Gray also questioned the potential success of a nitrogen oxides trading program under EPA´s proposal. Referring to the industry´s experience with the sulfur dioxide program, Gray cautioned that such a program "should (have) a range of control options...to help stimulate market activity. Most importantly, there must be something to trade.

"The EPA proposal, in addition to ignoring regional air quality needs, is at such a stringent level that the limits of...technology will be pushed. ...[T]he economic savings that may occur due to trading will be minuscule compared to the total cost of the control program."

Gray noted that AEP is participating in the new Alliance for a Constructive Air Policy, which is prepared to work closely with individual states "to achieve significant emission reductions in the near term and design control strategies that actually attain the new ozone standard in the longer term.

"We believe that (ACAP´s) alternative to EPA´s proposal will be far more successful in bringing the public clean air [and] at a much lower cost," Gray concluded.

AEP, a global energy company, is one of the United States´ largest investor-owned utilities, providing energy to 2.9 million customers in Ohio, Indiana, Michigan, West Virginia, Virginia, Tennessee and Kentucky. AEP has holdings in the United States, the United Kingdom and China. Wholly owned subsidiaries provide power engineering, consulting and management services around the world. The company is based in Columbus, Ohio.