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When New York Governor George Pataki signed a controversial environmental bill in May that penalizes the sale of federal pollution allowance credits to states blamed for New York’s acid rain problem, everyone involved, including the governor, expected a legal battle. That prophesy came true Wednesday when a lawsuit was filed in U.S. District Court for the Northern District. An organization called the Clean Air Markets Group (CAMG), an alliance of electricity-generating companies, pollution credit brokers, mining firms and trade associations, on Wednesday claimed that the bill violates both the Supremacy and Commerce Clauses of the U.S. Constitution. It was neither accident nor coincidence that the lawsuit was filed on the 10th anniversary of the Clean Air Act amendments at issue, according to a lawyer for CAMG. “We thought it was an appropriate day,” said Paul A. Feigenbaum of Couch White, local counsel in Albany. Norman W. Fichthorn and Allison D. Wood, of Hunton & Williams in Washington, D.C., are lead counsel. At issue is a federal law that since 1990 has allowed companies that reduce their sulfur dioxide emissions below U.S. requirements to sell their unused pollution allowance credits to firms that find it cheaper to buy the credits than modernize plants. The problem alleged by environmentalists in New York is that since New York State has more stringent pollution standards, companies were racking up excess credits and selling them to coal-burning plants in Southern and Midwestern states. Then, environmentalists claimed, the pollution would drift right back to New York in the form of acid rain. Officials acknowledged that they could not actually ban the sale of pollution credits. But lawmakers did come up with a bill they hoped would address the problem without intruding on federal law or violating the Constitution. The bill, sponsored by state Senators Carl L. Marcellino, R-Oyster Bay, and Ronald B. Stafford, R-Plattsburgh, and Assemblyman Richard L. Brodsky, D-Westchester, does not directly prohibit the sale of pollution allowances. Rather, it imposes fines equal to the value of the transaction making the allowances worthless if the credits are sold to firms in any of 14 states: New Jersey, Pennsylvania, Ohio, Michigan, Illinois, Kentucky, Indiana, Wisconsin, Virginia, West Virginia, North Carolina, Tennessee, Maryland or Delaware. On May 24, Governor Pataki signed S.4917-C, which seeks to “insure that utilities make prudent revenue decisions regarding their participation” in the pollution credit program, and predicted it would be fought in court. On Wednesday Clean Air Markets Group v. Pataki, 00-CV-1738, was filed in the Northern District, where it is pending before U.S. District Judge David N. Hurd and U.S. Magistrate Judge Ralph W. Smith Jr. CAMG contends the law violates the Supremacy Clause because Congress, by passing Title IV of the Clean Air Act, undertook the task of regulating the sale of emission allowances. The organization also claims that the New York law violates the Constitution’s Commerce Clause by effectively regulating the interstate commerce of pollution credits. Opponents of the bill insist that it is not only unconstitutional, but counter-productive. They argue that New York, by interfering with a pollutant’s ability to turn a profit on extra emission allowances, largely removes any incentive a firm would have to voluntarily employ higher air-quality standards than those mandated by law. Michael McKeon, spokesman for the governor, said the Pataki Administration is confident that S.4917-C is constitutional. Although supporters of the bill had hoped it would influence Congress to reduce the cap on sulfur dioxide emissions, McKeon said the governor is committed to combating acid rain, even if he has to rely on state statutes to do so.

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