CLIMATE:

As Hill debate flounders, EPA plows ahead on emission rules

The Obama administration is finalizing rules to control industrial greenhouse gas emissions amid growing skepticism about the prospects of Congress passing a comprehensive climate change bill this year.

U.S. EPA is nearly finished with rules that answer the Supreme Court's 2007 opinion on global warming, as well as a nationwide standard to control greenhouse gas emissions from automobiles.

The regulatory push comes as Senate Democrats struggle to find the votes to pass a global warming bill. Committee chairmen have delayed the introduction of their cap-and-trade proposal until later this month, but it is unclear if they will get traction as Congress wades deeper into a battle over overhauling the nation's health care system.

"I think health care is sort of the Big Kahuna here," Sen. Tom Harkin (D-Iowa), the former chairman of the Agriculture Committee, said this week. "We've got to get that done first."

Senate Democratic leaders are also doubting that they can meet their goal of having President Obama sign a global warming law before a major U.N. climate summit in Copenhagen this December. "We may not go there with a final law," Harkin conceded.

Lisa Jackson, the EPA administrator, insisted again last week that the Obama team would still prefer cap-and-trade legislation over implementing her agency's climate regulations, which are certain to be the target of lawsuits.

"I firmly believe ... and the president has said all along that new legislation is the best way to deal with climate change pollution," she said on National Public Radio's "Diane Rehm Show."

In the meantime, Jackson said her agency would not sit on its hands. "EPA can do some important things to start to mitigate greenhouse gas emissions in our country," she said. "We would do it under existing authority, that means the Clean Air Act."

Environmentalists also would prefer that Congress pass a climate bill. Even so, they welcome the agency's momentum toward the climate regulations.

"There's no question that in order to achieve the level of reductions that science demands and to do it in the most cost-effective way, the nation needs comprehensive, well-designed climate and energy legislation," said Vickie Patton, a senior attorney at the Environmental Defense Fund. "But we also can't afford to stand still."

Patton added, "EPA's actions are kind of the pillars of smart public policy that can both ensure that greenhouse gas measures are rooted in good data and begin making progress today while Congress debates."

David Doniger, policy director of the Natural Resources Defense Council's climate center, counted four reasons for EPA to start moving on the climate rules: respect for global warming science, the Supreme Court's more than 2-year-old decision that said the Clean Air Act can be used to regulate greenhouse gases, the international ramifications from U.S. leadership, and as a driver for Congress.

By starting with rules that cover automobiles and large, stationary industrial sources, Doniger said EPA could clamp down on about two-thirds of the nation's carbon dioxide emissions.

"We insist that the existing law be carried out," Doniger said. "You can take a big bite out of the U.S. global warming pollution under the existing law."

Industry leaders would also prefer the certainty of a climate law over Clean Air Act regulations.

Still, Jeff Holmstead, the former EPA air chief under President George W. Bush, said the House-passed climate bill is viewed by many industry groups as too expensive, prompting some to accept the uncertainty of regulations.

"At this point, and maybe things will change, I think most people in the industry are still working and hoping that they can get reasonable climate legislation," Holmstead said. "But I think most folks are anticipating that we are going to have at least a period of time when we're going to have to deal with CO2 under the Clean Air Act."

Setting the stage

EPA has set the stage for a regime to ratchet down greenhouse gas emissions.

In April, the agency released a proposed finding that greenhouse gases endanger public health and welfare -- the "endangerment finding" -- that would establish greenhouse gases as pollutants under the Clean Air Act and pave the way for future regulations.

EPA officials say they are still combing through some 300,000 public comments gathered this summer on the proposal. Jackson has not said when she will sign the final document, though there is speculation it will happen at the end of this month as Senate committee leaders unveil details of their cap-and-trade bill.

Historically, EPA has waited to release endangerment findings on other air pollutants at the same time as it released final regulations. But Holmstead predicted an earlier release -- without any rules -- so as to have a greater influence on a sluggish Capitol Hill debate.

"They're hoping to get some political mileage out of that," Holmstead said.

Some EPA rules are already in the pipeline -- with White House review under way and public release expected in the coming months.

Last month, for example, EPA sent a final rule to the Office of Management and Budget that establishes a mandatory registry to keep track of greenhouse gas emissions. The regulations, required under a 2007 spending bill signed by President George W. Bush, are viewed as a major step toward informing future climate policy decisions.

EPA expects to finalize the rule next month (Greenwire, Aug. 19).

Also last month, EPA and the Transportation Department sent draft rules to the White House that would boost automobile and light-truck efficiency standards for model years 2012 to 2016, and would impose the first-ever federal tailpipe standards for greenhouse gases (E&ENews PM, Aug. 26).

It is unclear when the joint rulemaking will be formally proposed. But sources tracking the issue expect the agencies to complete their work by March 31, 2010, in order to meet the statutory requirement that corporate average fuel efficiency (CAFE) standards be completed 18 months before the next model year begins in October.

The Obama administration is also trying to write regulations that answer industry and Republican critics who say EPA rules will be too expensive, with direct effects on a range of small emission sources -- including schools, churches and family-run businesses.

EPA last week submitted a rule to the White House designed to limit any strict permitting requirements to the largest industrial sources of more than 25,000 tons of carbon dioxide per year.

The Clean Air Act now requires EPA to regulate all new or modified facilities that emit more than 250 tons of pollution per year, a threshold that is seen as an appropriate level for conventional pollutants. But that level is widely seen as problematic for carbon dioxide emissions, which are produced in much greater quantities.

Details on the EPA exemption proposal have not yet been made public, though Jackson last week was not shy about her intentions (Greenwire, Sept. 1).

"Certainly, we would look to avoid [regulating small sources]," she said on NPR. "I've said in testimony that I believe there are ways to regulate greenhouse gases that don't bring in smaller sources, that don't start from the bottom."

Experts predict that the EPA threshold rule will be issued either prior to or along with the joint tailpipe standards from EPA and DOT's National Highway Traffic Safety Administration. That is because the auto regulations are also seen as a trigger for further EPA greenhouse gas rules.

Prepare for lawsuits

Lawsuits challenging the EPA climate regulations are also a sure thing.

"I think it's safe to say that anything EPA touches involving climate change at this point will be challenged by somebody," said Roger Martella, EPA's general counsel under President George W. Bush.

Holmstead, now an industry attorney at Bracewell & Giuliani, said he expects three separate challenges to pending EPA regulations: one to the endangerment finding, one to the greenhouse gas tailoring rule, and one to the Clean Air Act portion of the car and truck standards.

The timing of any lawsuits depends on when EPA decides to roll out its rules, given Clean Air Act provisions requiring court challenges to be filed within 60 days. "So it will depend entirely on whether EPA decides to roll them out together or separately," Holmstead said.

Industry groups are widely expected to challenge the actual endangerment finding -- though there is already sharp disagreement over whether that decision would be subject to judicial review. Any group that has filed negative comments on the proposal -- from the U.S. Chamber of Commerce to private citizens -- is seen as a potential litigant.

But NRDC's Doniger said he envisions EPA facing its first big legal test on climate change once it finishes the regulations.

Of all the legal challenges that the agency could face, Holmstead predicted the one most likely to succeed is a lawsuit against the tailoring rule that would exempt smaller sources from permitting requirements.

"EPA is trying to do something that makes sense here, but it flies in the face of what the statute says," he said.

Holmstead and other observers have questioned whether EPA has the legal authority to raise the threshold from 250 tons annually to 25,000 tons.

Marlo Lewis, a senior fellow at the Competitive Enterprise Institute, called the proposal "blatantly illegal," arguing that the agency cannot exempt smaller sources from the permitting requirements without clearly violating the law. "This is just simply a case of the agency trying to make the law," he said.

And while many larger environmental groups have said that they do not intend to challenge the threshold rule, smaller groups or conservative organizations seeking to prove a point may challenge EPA's authority, sources say.

The Center for Biological Diversity is often named as an environmental group interested in pushing EPA to regulate smaller emission sources. But Kassie Siegel, director of the group's Climate Law Institute, denied that claim. "We're not going to sue over small sources," she insisted.

Whoever sues will force the courts to enter new territory and draw heightened attention, because these will be EPA's first-ever climate rules, Martella said.

"There's a lot riding on the initial precedent that's going to be created here," he said.

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