Here is an abridged version of the most recent monthly update to FGD World Markets

Reductions will be achieved by installing the best available control technologies (BACT) including scrubbers to remove at least 93 percent of the SO₂ at Pleasant Prairie and Oak Creek. Pleasant Prairie 1 is a --------------------------------

This follows a consent decree by Domion just a week earlier. Dominion Virginia Power Co. has agreed to spend $1.2 billion to reduce pollution at eight of its plants in Virginia and West Virginia and to pay a -------------------

Within the last few months Duke Power agreed with the State of North Carolina to install scrubbers. Carolina Power and Light agreed to install 11 scrubbers. Southern Company announced that they would solicit bids and install scrubbers on one unit at Bowen and one at Gorgas. Previously, TVA had announced an ambitious scrubber program and placed ------------------------------

Another dispute regarding regional haze clash involves federal EPA, North Dakota, and power plants. A decision by EPA is due shortly. The issue is not about the installation of scrubbers but “when”. The plants that might have to be scrubbed would be -----------------

Lots of FGD systems will be required over the next five years in New York as a result of regulations passed by state legislators. SO₂ emission allowances will be halved from that presently -------------------------

What do these decisions mean in terms of the rest of the coal-fired plants in the U.S.? The conclusion is that 70 percent of the coal-fired plants in the U.S. will have scrubbers within the next 7 to 12 years. This differs from the Clear Skies schedule which anticipates 50,000 MW of additional scrubbers by 2010 and -------------------

Why do we opt for the higher number? The answer is reflected in the Wisconsin Energy settlement. This utility is one of the downstream dominos in the EPA domino strategy. The game plan was to successfully litigate cases against the first few utilities and then expect the other utilities to settle voluntarily. This is what WE Energies did. They agreed to pay a fine as well -----------------------------------

With the consent decrees so far the agreement results in 70 percent of the units installing BACT which includes scrubbers. There may be some surprises as the First Energy and TVA decisions are rendered. But the momentum is certainly substantial and unlikely to be slowed. Even if Clear Skies ------------------------------------

Another factor is just the reality of the fact that ultimately the states have to meet the ambient particulate standards. SO₂ is considered to be a major contributor to ambient fine particulate (sulfates). Unscrubbed plants emit large quantities of SO₂. When ----------------

The Steag 1500 MW plant is slated for 2008 start up in Farmington, New Mexico. City Public Service in San Antonio is tentatively planning a -----------------------

Peabody now has transmission and water withdrawal permits for its Prairie State Energy plant in Illinois. Since the Illinois Coal Revival Initiative became law in June 2002, dozens of development prospects have surfaced. Peabody Energy made the first move announcing that it would build a 1,500 MW state-of-the-art coal plant about 50 miles southeast of St. Louis in southwestern Washington County. Midwest Generation, a division of Mission Energy, followed up in November by filing for an air quality permit to build 1,000 MW of new coal-fired generating at its Collins Station near Morris in north central Illinois. A $1 billion, 660 MW plant is slated for Elwood IL. Indeck-Elwood LLC --------------------------------

A Minnesota House committee passed legislation to endorse Excelsior Energy’s Mesaba Energy project. If completed, the complex would be comprised of a 2,000 MW coal gasification facility and 1,000 MW of wind generation. These 3,000 MW of power would---------------------------------.

In Kentucky the 540 MW Kentucky Pioneer project has run into a zoning dispute that could slow down its start up. The Kentucky Mountain 520 MW project is in the -----------

The city of Oak Creek has reached a tentative environmental and economic agreement with Milwaukee utility WE Energies on the utility's plan to add 1,800 MW of new coal generation to its Oak Creek power plant, city officials said Tuesday. Under the agreement, WE Energies will invest $20 million in redeveloping brownfield or contaminated sites in the area. The utility will also pay $2.5 million a year to the city, independent of shared revenue payments, as compensation for construction impact mitigation. Under its “Power the Future” plan, WE Energies plans to ------------------------

Barring any unforeseen problems, construction is scheduled to begin in September on the new MidAmerican Energy coal-fired generating plant in Council Bluffs, Iowa. ----------

New Coal-Fired Boilers in U.S. (MW)

Start-Up	Original	New
Year

2002		600
2003	320	300
2004	-------------------

With the combination of retrofit scrubber installations and new coal-fired plants the annual scrubber system market in the U.S. will be ----------------------------------------

This FGD World Markets: Update is now a regular monthly feature of the report and a way to determine what has changed in the most recent month. For more information on this report click on http://www.mcilvainecompany.com/air.html#NO27 .

Last month was a significant one for the NO_x Control industry. Here are --------------------

There has been uncertainty as to whether NSR rule changes would impact the effort to litigate violations of the grandfather clause at existing coal-fired plants. The uncertainty has been eliminated with settlements announced for Dominion and Wisconsin Energies. Dominion agreed to terms essentially the same as tentatively announced in 2000. Dominion and Domino share more than the first five letters. The EPA strategy has been to create a domino effect -----------------------------------------------------------------------------

Last week Wisconsin Energies volunteered. The company settled by agreeing to a fine, 3 SCR installations not ---------------------------------------------------------------------------------

Lawsuits involving First Energy, TVA, and Illinois Power are proceeding. Cinergy has tentatively settled. Tampa Electric and PSE&G settled previously. The basic principle is that any plant, which has extended the life of its generators, should have filed for new source review. The penalty for not doing so is to fit two-thirds of its capacity with BACT, and to ------------------------------------------------------------------------------------------

This formula is applicable to any plant built before 1977. Since very few plants have been built since 1977, the formula applies to nearly 240,000 MW of -------------------------

The current high price of natural gas is more than a temporary problem. Natural gas production in the U.S. will continue to decline. New wells, twice as deep with half the gas as wells being depleted, will raise the extraction costs. Already the ---------------------

A number of SCR projects are materializing due to EU regulators in France, Spain,--------

Here is an abridged version of the most recent monthly update to FGD World Markets:

FGD World Markets Update May 2003

10,000 MW/yr. scrubber retrofit market.

If anyone doubted that the flood of scrubber orders was on its way then the recent settlement of NSR by a utility, which was not even sued yet, is the argument stopper. WE Energies, EPA, and DOJ announced a $600 million agreement to atone for the sins of life extension without new source review.