CLIMATE:

As Senate bill languishes, lobbyists press EPA on carbon regs

Skeptical about the prospects of climate legislation in the Senate, energy companies and environmental groups have shifted their lobbying efforts toward U.S. EPA.

Energy businesses want to stop EPA from proceeding with its plan to regulate greenhouse gas emissions under the Clean Air Act, a move expected to come in March. If the agency does decide to impose restrictions, industry wants them delayed until 2012 or later. Meanwhile, environmentalists are urging the agency to move as quickly as possible to regulate major emission sources.

Both sides hope they can have an impact, but lobbying EPA is different from lobbying Congress.

Companies that make campaign contributions to lawmakers cannot do the same with EPA employees. Some key arguments made to lawmakers, such as how legislation would affect certain states, workers or consumer groups, are far less likely to influence EPA. And the agency is limited in how much it can factor in cost as it decides on regulations.

"It's a different ball game entirely," said David Bookbinder, Sierra Club's chief climate counsel. "When you're dealing with Congress, it's a political institution where political considerations loom large in any decision."

"EPA is clear, it is setting its own policy objectives," Bookbinder said. "We have no influence on that."

EPA in March is expected to roll out the first-ever federal standards affecting greenhouse gas emissions from automobile tailpipes. This follows the agency's move in December declaring greenhouse gases a danger to public health. The tailpipe standards would automatically trigger requirements that stationary sources -- such as power plants -- install "best available control technology," or BACT, according to EPA. The agency has proposed a separate rule to shield smaller facilities from those requirements, the "tailoring rule," which is also expected to be in place by March.

A large segment of the energy business, in conversations with EPA workers and in comments filed on EPA's notice of its proposed tailoring rule, is arguing that regulating greenhouse gases under the Clean Air Act will create havoc.

Federal regulations will conflict with state rules, industry advocates said, with many states forced to target carbon emissions from smaller sources that would be affected by the federal rule. As well, there is concern that EPA might try to govern what kinds of power plants can be built, favoring cleaner fuel sources like natural gas over coal.

Companies have realized that EPA is serious about regulation, and not merely making what many thought six months ago was a political threat to push Congress to act on climate, analysts said.

"There was a widespread expectation going into 2009 that this would be the year of domestic climate legislation," said Sam Thernstrom, who worked at President George W. Bush's White House Council on Environmental Quality and is now a fellow at the American Enterprise Institute. "2009 didn't turn out that way."

"EPA is going to move forward," Thernstrom said. "Industry has woken up to that fact. Potentially regulated industries that stand to lose a lot of money here need to pay attention to the regulatory process right now."

Many of those industries are lobbying lawmakers and asking them to rein in EPA. They are expressing support for a proposed amendment from Sen. Lisa Murkowski (R-Alaska) aimed at blocking U.S. EPA's efforts to regulate greenhouse gases.

"It's merely a prudent way to say, 'Let's look before we leap,'" said Luke Popovich, spokesman for the National Mining Association, an industry trade group. "It strikes us as a reasonable approach to take."

Behind the scenes, energy companies and trade groups are talking to lawmakers about how EPA's plan could adversely affect utilities, coal companies, and the oil and gas industry.

"They're lobbying EPA, they're lobbying Congress, and they're hoping either Congress will act or EPA will act," said Jeff Holmstead, former EPA air chief during the Bush administration and now an industry lawyer. "If you get every member of Congress to lobby EPA, they may be forced to deal with it even if they might not otherwise be persuaded to deal with it on their own."

Holmstead, who has lobbied for Duke Energy Corp., Edison Electric Institute, Southern Co. and Arch Coal Inc., worked with Murkowski's staff on the wording of an EPA amendment she offered last fall, the Washington Post reported this week.

Environmental groups, meanwhile, are waging a counter-push. A coalition of 37 environmental, public health and liberal advocacy groups in a letter sent to senators last week urged opposition to Murkowski's amendment (E&ENews PM, Jan. 11).

"A vote for Senator Murkowski's amendment is a step backward for public health," the letter said. "It puts our communities at risk, undermines the new clean energy economy and inappropriately injects Congress into scientific decisions."

Those companies and groups talking to EPA are likely to hear the agency say that it is limited in what it can do, said Lee Lane, fellow with the American Enterprise Institute think tank. While Congress can pass new laws, he said, EPA is far more limited in authority.

"What they will be saying, I'm confident, is 'Our hands are bound by law here,'" Lane said. "They are simply obligated by the statute that Congress has enacted that governs EPA behavior."

EPA did not respond to several requests to answer questions about how interested parties are approaching the agency on climate issues, beyond the official comments those businesses and groups have made on the EPA's proposed "tailoring" rule.

Influencing Congress

Although EPA is a regulatory agency, politics still factor into its decisions, analysts said. And that is what many in industry are hoping as they talk to lawmakers about EPA.

"In some ways, you lobby EPA by lobbying the Congress," said Lane with AEI. "In some ways, you can lobby it by appealing to other parts of the executive branch."

"A lot of what I would be doing if I were lobbying for industry would be making sure my congressman knew the consequences for his constituency" of EPA regulations, Lane added. "That might be more important or as important as making the same case to EPA."

Popovich with the National Mining Association declined to detail how the trade group is pressing its case on EPA with Congress but said that "one could draw that conclusion" that EPA is "more likely to listen to Congress."

"Some people would make the assumption that certain members of Congress could make a more compelling case than the mining industry," Popovich added.

Career EPA employees advise on new regulations, but the final decisions are made by political appointees, said Thernstrom with AEI.

"It would be naive to think they're not taking their orders from the White House," Thernstrom said. "It would be naive to think the White House doesn't have its eye on the political ball and the election cycle at all times."

The vote on Murkowski's amendment could occur as soon as next week when the Senate votes on raising the debt ceiling. Even if supporters fail to muster the needed votes for passage, the vote alone could have an impact on EPA, Holmstead said.

"If EPA sees and the political leadership sees that there is enough momentum on the Clean Air Act to do something, that can have an impact," Holmstead said, adding that "the whole debate may educate enough people in the administration that they say, 'Hey, this is a problem for us.'"

Industry cautious

The issue of approaching EPA on climate policy is a sensitive one for energy companies, with many of their representatives in interviews preferring to simply restate their opposition to EPA's use of the Clean Air Act to regulate greenhouse gas emissions.

"We've long said that we prefer a legislative approach," said Valerie Holpp, spokeswoman for Southern Co., one of the largest investor-owned utility companies. "We don't believe the Clean Air Act was designed to address greenhouse gas emissions."

Duke Energy also prefers legislation, spokesman Tom Williams said.

"At this point, our focus is on Congress and not the EPA," Williams said.

American Coalition for Clean Coal Electricity, a lobbying group for the coal and railroad industry, confirmed that it has had meetings with EPA but did not want to talk about what it was pushing for at those sessions.

National Mining Association has focused on both Congress and EPA, Popovich said.

"We try to inform regulators. We try to inform members of Congress," Popovich said. "We've been very aggressive in doing that."

In its comments on EPA's proposed tailoring rule, the mining association told the agency that it failed to look closely enough at cost.

"We didn't think that a proper economic assessment was done" on the cost-benefit ratio, Popovich said. "There ought to be mechanisms in place in any control regime that can moderate the cost."

Popovich rejected the notion that EPA is limited by a strict reading of the Clean Air Act, given that the agency has proposed its tailoring rule to exempt smaller sources from new regulations on greenhouse gas emissions.

"Doesn't that signal their creativity?" Popovich said, adding, "EPA doesn't view itself to be in a straitjacket."

If EPA acts before Congress, it needs to find a way to do so with the lowest costs, said Steve Corneli, senior vice president of market and climate policy for NRG Energy Inc., which generates power largely from coal, oil and natural gas but also has two wind farms in west Texas.

That could include phasing in regulations to prevent a slew of power plant shutdowns, he said. Another option could be allowing power plants to generate energy with a small amount of biomass as a way of reducing greenhouse gas emissions.

NRG is a member of several industry groups that are talking with EPA about what could work best, Corneli said. At the same time, the company is talking with lawmakers, pushing for a legislative solution. EPA is likely to have a hard time issuing regulations that don't trigger lawsuits, he said.

"It's likely to be very difficult," Corneli said. "On the one hand, they have to make sure that they're doing everything the Clean Air Act requires. On the other hand, they have to be careful not to undermine the reliability of power plants."

Politics of climate

Environmentalists, meanwhile, argue that industry simply is in a state of denial in lobbying that EPA should not regulate under the Clean Air Act.

"I don't think they're really through the grieving process yet," Sierra Club's Bookbinder said. "This train has left the station. They just don't understand that the regulations are coming."

While the Supreme Court in its 2007 Massachusetts v. EPA ruling said the agency must regulate greenhouse gases as a pollutant, it did not set any time frame for doing so, industry lawyer Holmstead said. Both in conversations with EPA and in comments on the agency's proposed tailoring rule, industry is underscoring that point, he said.

"The one argument industry is making is 'Don't rush into this,'" Holmstead said. "There's no reason to do this. There's absolutely no benefit to moving forward with this."

Interested companies and groups can go in and talk to political appointees at EPA and can bring technical experts to explain why EPA's approach is flawed, Holmstead said. But breaking through is difficult, he said.

"This EPA, they believe they have a mandate to implement the agenda of most of the environmental community," Holmstead said.

"Climate is much more political," Holmstead added. "No one is really sure how it's going to work out. Certainly we are making those kinds of contacts on a number of issues."

Bookbinder disagreed, saying that "unlike with the Bush administration, which simply did what these companies told them to, now the process is far more open. This administration is far more interested in obeying and following the law, rather than finding ways around it."

In many cases, interested parties can influence a federal agency through the rulemaking process, said Ted Gayer, senior fellow at the Brookings Institution think tank and a senior economist at the White House's Council of Economic Advisers from 2003 to 2004. Sometimes the agency in its proposed rule will in effect ask for help, saying it is asking for input on the best way to resolve an issue. If the comments are 10 to 1 in favor of an approach, he said, that might sway an agency.

Climate policy, however, is very different from most other issues, Gayer said, because so many people are interested and have such different views.

"The only way I think you have a significant effect on EPA," Gayer said, "is through the courts."

Reporter Robin Bravender contributed.

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