CLIMATE:

EPA agrees to limit emissions from power plants, refineries

Threatened with lawsuits from environmental groups, the Obama administration has agreed to issue another round of greenhouse gas limits for both power plants and refineries -- this time through a provision of the Clean Air Act that allows U.S. EPA to require pollution controls at both new and existing facilities.

The agreement suggests the administration plans to press forward with its efforts to address climate change, despite the failure of the cap-and-trade bill in the Senate this year and the expectation of a backlash in Congress once regulation-averse Republicans seize control of the House next month.

Under today's deal with several states and environmental groups, EPA plans to issue a "modest" set of performance standards for two sectors that produce about 40 percent of U.S. greenhouse gas emissions, air chief Gina McCarthy told reporters this morning.

The rules for power plants would need to be proposed by July 26, 2011, and finalized by May 26, 2012. Proposed standards for refineries would need to be released by Dec. 10, 2011, with a final rule due on Nov. 10, 2012.

Because putting the rules in place will demand significant resources, EPA Administrator Lisa Jackson has decided to focus on the largest sources of greenhouse gas emissions first, McCarthy said. The agency will still meet its Clean Air Act obligations for other industries, she said, leaving open the possibility that performance standards could be issued later for other sectors, such as cement kilns.

"In refineries and power plants, we have large amounts of emissions, we have significant opportunities for cost-effective reductions, and we have relatively few sources to have to regulate," McCarthy said. "So it was her decision that in 2011 this would be the focus of EPA's attention."

The performance standards are also expected to get substantial attention from Congress next year. Despite being announced the day before Christmas Eve, the deal got a noisy and divided reception inside the Beltway, where leading critics of the Obama administration's approach to climate change predicted that the new regulations will play right into their hands.

The plan to issue performance standards was praised by environmentalists, who wanted to put a price on planet-warming gases and feel the rules are the best option left after the failure of the cap-and-trade bill in Congress. But Republicans and industry groups described today's agreement as another step toward a "backdoor" cap-and-trade program, vowing to stop the regulations from taking effect.

Fred Upton (R-Mich.), the incoming chairman of the House Energy and Commerce Committee, said in a statement today that the push to establish greenhouse gas pollution standards under the Clean Air Act is "a crescendo" in EPA's ongoing assault on energy producers. Upton said the effort doesn't help protect American jobs or fortify the country's energy security.

"We should be working to bring more power online, not shutting plants down," Upton said. "We will not allow the administration to regulate what they have been unable to legislate -- this Christmas surprise is nothing short of a backdoor attempt to implement their failed job-killing cap-and-trade scheme."

Alaska Sen. Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, sponsored a resolution this year to stop EPA from regulating greenhouse gases under the Clean Air Act. It failed on the Senate floor, but with an upcoming shift in the balance of power and a new batch of costly rules on the way, those types of measures could get more support, Murkowski spokesman Robert Dillon said.

"The administration used the threat of EPA regulations as a cudgel to force Congress to pass cap and trade. It was a strategy that failed," he said in an interview. "You've opened Pandora's box now. You've let the agency loose with these new regulations when they're interpreting the law."

The New Source Performance Standards (NSPS) would go beyond the Obama administration's first set of greenhouse gas regulations, which are aimed at emissions from cars, light trucks and the largest new industrial facilities. Those rules, which are focused on energy efficiency and apply only to new vehicles and facilities, are set to take effect on Jan. 2.

But the new rules, despite their misleading name, allow EPA to limit emissions from existing power plants and refineries, expanding the scope of the climate program beyond the handful of large plants that are expected to be built or renovated over the next few years. The agency has the discretion to set an efficiency standard for the two industries, perhaps requiring plants to release no more than a certain amount of greenhouse gases for every megawatt of electricity that is generated or gallon of fuel that is refined.

Experts say the potential reductions are modest but significant as the Obama administration tries to cut U.S. greenhouse gas emissions by 17 percent from 2005 levels by 2020. According to a recent study by Resources for the Future, a nonpartisan think tank, the utility sector could cut its emissions by 5 to 10 percent with efficiency standards and rules that require biomass to be burned along with coal.

The options for setting performance standards under the Clean Air Act are more flexible than the rules for construction permits that will be required starting Jan. 2, McCarthy said.

Some experts have suggested the standards could allow businesses to buy, sell or swap the right to release carbon dioxide and other planet-warming gases, but EPA does not plan to limit total emissions, McCarthy said today. She said the agency has no target in mind for the overall emissions reductions that it could achieve.

"The NSPS process is a tool of the Clean Air Act that we've used 75 times before," McCarthy said. "This is not about a cap-and-trade program, it's nothing unusual to greenhouse gases, and it's not in any way trying to get into the area where Congress will be establishing law at some point in the future -- we hope."

Eye on the economy

Supporters of the rules hope that limiting emissions at power plants and refineries will hasten a shift from fossil fuels -- such as coal, which provides more than 40 percent of U.S. electricity -- to cleaner sources of energy such as wind or solar. They say EPA has been legally obligated to take these steps for years, and that the technology to meet the upcoming rules is already affordable.

"EPA is doing precisely what is needed to protect our health and welfare and provide businesses certainty at a time when some would prefer to roll back the clock," said David Doniger, policy director of the Natural Resources Defense Council's Climate Center.

But while the agreement was praised by environmentalists, who are worried that unchecked industrial emissions are causing dangerous changes to the Earth's climate, it was criticized by industry groups, which argued that the new regulations will impose chilling costs on American businesses while doing little or nothing to help the environment.

Some trade groups representing utilities, energy-intensive businesses and the oil industry are challenging the legality of EPA's new rules in court while pushing for Congress to overrule EPA's regulations.

Today, those groups took the occasion to challenge President Obama. Just last week, he spent several hours with a group of business leaders at the White House and promised to take a "balanced approach" to regulation to help the economy rebound from the worst slowdown since the Great Depression.

Today's agreement is the opposite of what President Obama was seeking when he pledged to put economic recovery first, said Charles Drevna, president of the National Petrochemical and Refiners Association, in a statement.

"EPA's proposals would carry tremendous costs but no benefits for the American people -- all pain and no gain," Drevna said. "Regulations can't create technology that doesn't exist or change the laws of physics and economics, so the only way to comply with EPA's proposals would be to inflict massive increases in energy costs and massive increases in unemployment on families across our nation."

Jackson and other top EPA officials have argued that these types of environmental rules haven't stifled the economy in the past, but businesses have lingering worries that greenhouse gases are different. Unlike the nitrogen oxides (NOx) and sulfur dioxide (SO2) that cause acid rain, skeptics say, carbon dioxide is ubiquitous and impossible to curb on a global scale without cooperation from other countries.

Performance standards have been used for decades to make plants install the newest air pollution controls and run their equipment in ways that reduce emissions, they say, but there's no such thing as a scrubber for carbon dioxide. As things stand right now, there's no practical way to keep large amounts of carbon dioxide out of the atmosphere without trapping it underground.

But while carbon capture could someday become the norm for power plants and refineries, EPA has admitted that it isn't a viable technology. Projects are under way around the world, but the process is still expensive and relatively untested, the agency said in a November document that provided guidance on its previous round of regulations for high-emitting facilities.

Facilities will only need to use existing technology to reduce emissions in a cost-effective way, McCarthy said today.

Of all the programs in the Clean Air Act, she said, the performance standards are "one of the most flexible and common-sense approaches that we can take to reduce pollution in sectors where we have determined that pollution reductions are necessary to guarantee public health protection as well as protection of welfare."

Hill battles ahead

Though industry lobbyists are confident that the Republican-controlled House will pass legislation next session to block or delay the regulations, those types of measures still face an uphill battle in the Senate.

But Republican committee chairmen with jurisdiction over EPA rules will have the opportunity to probe the new rules at hearings and summon Jackson, among other top officials, for an explanation. They could also try to tighten EPA's purse strings or pass legislation to block the new rules, though a veto from Obama would be nearly impossible to overcome, experts say.

These lawmakers, many of whom previously challenged the scientific argument for climate change and tried to rebrand cap and trade as a "cap and tax" scheme, said the performance standards would slam American consumers by hiking electric bills and raising the cost of gasoline. They are preparing for a bruising fight with the Obama administration at a time of nearly unprecedented debate over environmental regulations in general and, more specifically, any proposal that would force action on climate change.

One House member who has already showed his willingness to tangle with EPA is Rep. Darrell Issa (R-Calif.), the incoming chairman of the House Oversight and Government Reform Committee.

Issa spokesman Kurt Bardella said today the congressman is disappointed by the decision to move forward with new regulations, in part because he believes they will hurt an already fragile economy. But he also dislikes the Obama administration's tactics.

"There are serious questions about EPA's decision to move forward with these job-killing regulations that will usurp power from states -- violating the principles of federalism that are the backbone of the Clean Air Act," Bardella said.

Long legal road

Environmentalists have spent years suing EPA to make the agency issue limits on greenhouse gas emissions, but they have only made headway during the tenure of President Obama, who has described climate change as a major threat to humanity and has vowed to tackle the issue.

The performance standards for power plants and other sectors were sent back to EPA after the Supreme Court's 2007 ruling in Massachusetts v. EPA, which held that greenhouse gases can be controlled as a pollutant under the Clean Air Act if EPA decides that they are a threat to human health and welfare.

Environmentalists wanted the agency to make that scientific decision, and once it did -- in December 2009 -- they redoubled their push for federal limits on the amount of greenhouse gases that large industrial sources are allowed to emit.

Until today, there were frequent signs that the agency would start issuing the performance standards, but nothing definitive.

In its draft budget for the current fiscal year, the White House requested $7.5 million to consider and possibly develop the performance standards for key industry sectors. The request said the White House was trying to limit greenhouse gas emissions "through means that are flexible and manageable for business," prompting swirling speculation about an administration-sanctioned cap-and-trade program.

The first major opportunity for such a program came in August, when EPA issued performance standards for the cement industry -- the nation's third-largest source of greenhouse gas emissions, after power plants and refineries.

EPA passed on the issue, saying it couldn't require emissions cuts because it didn't have adequate information to set a standard. The agency hadn't included greenhouse gas limits in a 2008 proposal that was issued before the agency concluded greenhouse gases are a threat.

"This is not the end of the matter," EPA wrote in its final rule. "To the contrary, based on our current knowledge we believe that it may be appropriate for the agency to set a standard of performance."

Environmentalists challenged that decision in court last month, claiming EPA is obligated to limit greenhouse gases now that the agency has acknowledged that the emissions threaten the public.

Experts say today's decision by EPA could have wide-reaching implications, potentially influencing a landmark global warming case that is waiting to be heard by the Supreme Court next year.

The case, American Electric Power v. Connecticut, stems from a lawsuit by states and environmental groups that claimed members of the public are being hurt by the greenhouse gas emissions from coal-fired utilities. In a brief supporting the Tennessee Valley Authority, a federally owned utility that was named as a defendant, the Obama administration argued that those types of "public nuisance" claims were pre-empted by EPA's plan to begin regulating greenhouse gases on Jan. 2.

But those rules only apply to existing sources, the states and environmental groups shot back in a recent filing. They agreed that they would have no choice but to drop their lawsuit if EPA were actually regulating existing power plants -- and the performance standards that the agency agreed to issue today would do just that.

Reporter John McArdle contributed.

Click here to read the power plant agreement.

Click here to read the refinery agreement.

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