The DC Circuit Court of Appeals has extended the date for states and sources 
to comply with the EPA's NOx SIP Call regulation to May 2004, from the 
original May 2003 date.

Background

Back in May 1999, a federal Court stayed the NOx SIP submittal deadline for 
States, pending the final outcome of the NOx SIP litigation.   After the DC 
Circuit Court decided the case in March 2000, EPA asked the court to lift the 
stay on the NOx SIP submittal for States and give the states the same amount 
of time they would have had to submit their SIPs, had the stay not been 
imposed in the first place.   Industry sources opposed lifting the stay, and 
also asked the court to move the complaince deadline back a year, due to the 
delays caused by the litigation.

The Court lifted the stay on June 22, 2000, but was silent on the issue of 
the compliance deadline.  States are now required to develop their "State 
Implementation Plans" (SIPs) by October 31, 2000.  

Yesterday, the Court decided that sources should have until May 2004 to 
comply, giving sources an extra year to prepare for the new regulatory regime.

Remaining Questions

With the previous 2003 compliance deadline, the NOx SIP Call regulations were 
on the same time schedule as the Section 126 petitions, which were approved 
by EPA (though a separate regulatory process -- a nearly-identical fallback 
to the NOx SIP call) for many of the same sources and states as the NOx SIP 
Call.   The Section 126 Rule is going to be litigated starting this coming 
November, but the Court has not yet issued a stay of those regulation, nor 
has it delayed the compliance deadline to 2003.   Unless the Court places a 
stay on the 126 Rule and delays the compliance deadline to 2004, sources 
could still be required to make substantial NOx reductions starting in May 
2003.   We expect the Courts to resolve this issue sometime before the 126 
litigation commences in early November.

Enron Activities

SIPs are being developed by the states, with a deadline of October 31, so 
Environmental Strategies will be spending the next few months working to 
ensure that the rules that are crafted in the states provide the most 
favorable treatment possible for our assets while providing a competitive 
advantage to our traders.   While the delay could benefit some Enron assets 
that need to comply with the regulations, it could also benefit our 
competitors, who have another year to defer environmental compliance 
decisions that would likely increase their costs and create other 
disadvantages for them.

We will keep you posted with any developments as they occur.

Jeff Keeler  (202) 466-9157
Mary Schoen (713) 345-7422