The Obama administration is engaged in an unusual internal spat as
the White House and Environmental Protection Agency tussle over how to
handle millions of tons of waste from coal-fired power plants.

Utility and environmental groups are watching the coal-ash dispute
as an indicator of the administration’s pliability on the regulatory
front.

The White House has already backed several new environmental
initiatives that have drawn sharp reactions from industry, particularly
EPA findings last month that designated carbon dioxide as a dangerous
pollutant.

But environmental groups are pointing to a flurry of industry
meetings on the coal-ash issue as evidence that utilities and other
companies are using a foothold within the White House to fight back
against potentially far-reaching new rules.

The office of President Barack Obama’s regulatory czar, Cass
Sunstein, has held nearly 20 meetings with industry groups since
October to discuss the potential impact of proposed EPA rules to treat
coal ash and other coal byproducts as hazardous waste, according to
White House records. Mr. Sunstein directs the Office of Information and
Regulatory Affairs within the White House Office of Management and
Budget.

Watchdog groups say it is unusual for the OMB to insert itself so
prominently, and so early, into the process. In this case, the EPA has
yet to publish its proposed new regulations for coal ash, a step that
would then open the door to public comment and hearings.

“Industry is trying to influence the process in a back-door
fashion,” said Lisa Evans, a senior attorney for Earthjustice, an
environmental organization.

Utility companies argue that a federal hazardous-waste ruling would
impose huge logistical challenges and add potentially billions of
dollars in new costs. Other industries warn that an adverse EPA ruling
could jeopardize the use of coal ash in such construction materials as
cement mix and wallboard.

As the power industry has sought to cut air pollution from power
plants, it has resulted in more pollutants remaining in the material
left behind after coal is burned. It contains such toxins as arsenic,
lead, chromium and selenium, which present health and environmental
risks if released into ground water. The exact characteristics depend
on the type of coal burned and methods used to capture soot and smoke.

EPA Administrator Lisa Jackson submitted her proposed rules on coal
waste to the OMB for review in September, promising to issue her
decision on the matter by the end of the year.

But last month, in the wake of the OMB meetings, the EPA said it was
delaying its decision “due to the complexity of the analysis” required.
All proposed rules are normally run by OMB for review.

Administration officials declined to elaborate on the discussions,
but defended the ongoing review. “This has been a very regular, very
normal deliberative process on a very complex rule,” said OMB spokesman
Thomas Gavin.

Each year, the waste left over from burning coal generates 125 to
130 million tons of ash and sludge — enough to fill a million
railcars. Currently, about 40% of that waste finds it way into new
products and 60% is stored in ponds or pits, mostly on utility property.

There is no single, federal standard requiring that pits be lined to
prevent the leeching of pollutants into ground water or streams, nor is
there a common standard for pit or pond structures and monitoring.

“Most states have fairly good enforcement, but EPA is looking at
doing something more,” said Tony Earley, president of the Edison
Electric Institute and also chief executive of DTE Energy. “We’re
worried about added costs.”

The coal-ash issue burst into the news at the end of 2008, when a
dike broke open at a pond near a power plant operated by the Tennessee
Valley Authority, sending 5.4-million cubic yards of polluted water
sweeping across 300 acres.

OMB’s prominent involvement in the coal-ash issue has surprised some
observers, who point out that the regulatory affairs office within OMB
has largely stood aside as other huge regulatory matters, such as the
EPA carbon-dioxide ruling, have moved forward. The office of regulatory
affairs within OMB was established in the 1970s to review all
administration rules and regulations before they go into force.

Coal-burning utilities largely oppose the move by the EPA to
establish a national rule under the 1976 Resource Conservation and
Recovery Act.

“We think the issue of pond failures has to do with the structure of
the ponds and not the material itself,” said Bryan Hannegan, vice
president of the environmental sector for the Electric Power Research
Institute, a power-industry research organization based in Palo Alto,
Calif.

The organization has told OMB that utilities could lose $5 billion
to $10 billion of revenue each year if they no longer could sell coal
combustion byproducts to industry. Furthermore, the organization says
added storage costs could be a burden on power plants, especially those
operating in deregulated markets, where they must compete against other
forms of generation.

“We think 250 to 350 coal units could be shut down, in an extreme
scenario, and drive up the cost of electricity,” said Mr. Hannegan.

Environmentalists say such estimates are a scare tactic by the
industry intended to intimidate the administration and EPA into
softening the proposed rule.