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December 15, 1993

ALLIANCE FOR CLEAN COAL, a Virginia not-for-profit corporation, Plaintiff,
ELLEN C. CRAIG, TERRENCE L. BARNICH, WILLIAM M. DICKSON, RUTH K. KRETSCHMER, KARL A. McDERMOTT, LYNN M. SHISHIDO-TOPEL and DAVID S. WILLIAMS, in their official capacities as, respectively, Chairman and Commissioners of the Illinois Commerce Commission, Defendants.


The opinion of the court was delivered by: SUZANNE B. CONLON


 1. The Coal Industry

 Coal is produced in over half the states and is sold in a highly competitive interstate market. In 1992, 998 tons of coal were produced in 27 states. Most of that coal was used by electric utilities, which burned 783 tons (78 percent of the total market). Coal is the principal fuel source for electricity generators, accounting for 56 percent of all electricity generated in 1992. Coal is also burned by other large industrial facilities. See Alliance Ex. 10.

 All coal is not alike. Coal mined in the states west of the Rocky Mountains ("western states") generally has a lower sulfur content than coal mined east of the Rockies ("eastern states"). Most coal mined in Illinois has a relatively high sulfur content. When coal is burned, sulfur dioxide is emitted in direct proportion to its sulfur content. In light of increasing air pollution problems, reducing sulfur dioxide emissions has become a national priority. One way for coal-burning facilities to reduce sulfur dioxide emissions is simply to burn lower-sulfur coal. See generally Bruce A. Ackerman & William T. Hassler, Clean Coal/Dirty Air (1981).

 2. The Clean Air Act

 In 1970, Congress responded to the problem of atmospheric emissions by amending the Clean Air Act ("the 1970 clean air act"). The 1970 clean air act authorized the Environmental Protection Agency ("EPA") to set new source performance standards to regulate various emissions, including sulfur dioxide. See 42 U.S.C § 7411 (1970) (amended 1977). In promulgating emissions standards for new sources, the EPA approved two methods for controlling sulfur dioxide emissions: (1) the use of low sulfur coal; and (2) the use of pollution control devices ("scrubbers") to reduce emissions before they could reach the atmosphere.

 In 1977, Congress amended the clean air act ("the 1977 clean air act") by requiring new or modified sources to use the "best technological system . . . adequately demonstrated" to reduce sulfur dioxide emissions. 42 U.S.C. § 7411(a)(1) (1977) (amended 1990). Under the 1977 clean air act, the EPA set standards requiring percentage decreases of sulfur dioxide emissions. See Sierra Club v. Costle, 211 U.S. App. D.C. 336, 657 F.2d 298 (D.C. Cir. 1981) (upholding EPA's promulgation of percentage reduction standards under the 1977 clean air act). Whereas under the 1970 clean air act, coal-burning electric plants could choose the best (i.e., the cheapest) means of compliance, under the 1977 clean air act, new facilities effectively were required to build scrubbers regardless of the sulfur content of the coal they burned and regardless of cost.

 In 1990, Congress once again amended the clean air act, adding an acid rain reduction program which mandates drastic reductions in industrial sulfur dioxide emissions. See 42 U.S.C. §§ 7651-7661f ("the 1990 clean air act"). Under phase I of the 1990 clean air act, the 110 largest coal-burning facilities in 21 states must meet an intermediate sulfur dioxide emissions limit by 1995. See 42 U.S.C. § 7651c. Under phase II of the 1990 clean air act, all facilities will be required to meet more stringent emissions limitations, starting in 2000. See 42 U.S.C. § 7651d. Under the 1990 clean air act, coal-burning electric plants again will be free to comply with sulfur dioxide emissions standards in the cheapest way possible. The principle methods for complying with the phase II limitations will be installing new scrubbers, using lower sulfur coal, switching to another fuel source, or buying or offsetting emissions. *fn2"

 3. The Public Utilities Act And The Coal Act

 The Illinois Public Utilities Act ("the utilities act"), empowers the commission to regulate the Illinois public utility industry. See 220 ILCS 5/2-101. In regulating public utilities, the commission must maintain the objectives of "adequate, efficient, reliable, environmentally safe and least-cost public utility services. . . ." 220 ILCS 5/1-102; see also 220 ILCS 5/8-402 (imposing similar duty on public utilities themselves).

 In 1991, the Illinois General Assembly passed the coal act to amend the utilities act by adding a new section concerning Illinois' implementation of and compliance with the 1990 clean air act. See 220 ILCS 5/8-402.1. Under the coal act, public utilities must devise clean air act compliance plans and present the plans to the commission for approval. Id. at (c). In devising and approving clean air act compliance plans, public utilities and the commission are required to:

take into account the need for utilities to comply in a manner which minimizes to the extent consistent with the other goals and objectives of this Section the impact of compliance rates for service, the need to use coal mined in Illinois in an environmentally responsible manner in the production of electricity, and the need to preserve as a valuable state resource the mining of coal in Illinois.

 220 ILCS 5/8-402.1(a)(i). In addition, the coal act declares that the construction of scrubbers:

at existing large generating units burning Illinois coal as a fuel source can be an environmentally responsible and cost effective means of compliance when the impact on personal income in this State of changing the fuel used at such generating units ...

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