CONGRESS:

Senate draft of climate legislation makes unofficial debut

Many environmentalists cheered. Some industry groups jeered.

Others tried to decipher new provisions ranging from strengthened U.S. EPA authority to altered carbon offset language.

Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) are not releasing the official version of their major climate legislation in the Senate until today, but advocates on the right and left already are making their thoughts known about a preliminary 801-page draft of the bill leaked to E&E yesterday.

Green groups praised the draft's toughened emission cuts for 2020, which were hiked to 20 percent below 2005 levels from a 17 percent number contained in a House version of the legislation. Many considered the move necessary, considering that the recession already has dropped C02 output significantly, making the original target easier.

"This is clearly an improvement over the House bill in modest and significant ways," said Dan Lashof, director of the Climate Center at the Natural Resources Defense Council.

Yet some groups that made a loud ruckus during House negotiations are determined to push back strongly against the Boxer-Kerry plan.

"It just seems totally out of touch with reality," said Glenn English, CEO of the National Rural Electric Cooperative Association, which represents hundreds of coal-dependent utilities. He took particular issue with the new 20 percent cut, which he said many of his members would have difficulty meeting without spiking electricity rates.

A more muscular EPA

The preliminary draft of the Senate climate bill gives EPA a wider berth to set limits on greenhouse gas emissions, even in the event that a federal cap-and-trade plan takes effect.

The House-passed climate bill sponsored by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) put firm boundaries on EPA's authority, pre-empting the agency from regulating greenhouse gases under many existing sections of the Clean Air Act, an action that for the most part environmentalists and industry agreed was necessary to avoid triggering unnecessarily burdensome requirements.

The preliminary Senate version removes these restrictions on EPA. "The difference with this version is that there really is no affirmative pre-emption," said Roger Martella, EPA's general counsel under the George W. Bush administration and currently a partner at Sidley Austin.

Environmentalists claimed the change as a major victory, specifically because the bill would allow EPA to set emissions standards when issuing permits for existing power plants under the agency's New Source Review program.

Without the change to the draft legislation, "we believe that this would have allowed us to fall into the same trap that the Clean Air Act has fallen into in the past -- assuming that utilities won't build out existing plants," said David Hamilton, the Sierra Club's director of global warming and energy programs.

And like the Waxman-Markey bill, the Senate draft allows EPA to set greenhouse gas emissions performance standards for new coal-fired power plants, as well as major emissions sources that do not fall under a national carbon cap.

Republicans upset about possibility of cap-lowering by EPA

But the absence of restrictions on EPA could also potentially subject more emissions sources to the dual specter of a market cap-and-trade plan and regulatory requirements, said Martella. "This dual approach effectively allows EPA to lower the ceiling set for emissions below the cap if it chooses to do so," he said.

This is one prospect that Republicans are already attacking.

"What we've heard from the majority side is they want a market-based federal national program, but it seems we're going to have that national program ... on top of EPA regulation, which is totally unworkable," said Mike Catanzaro, deputy staff director for the Environment and Public Works Committee Republicans, at a press briefing yesterday.

He said that the pre-emption issue is likely to be "front and center" in any Senate floor debate over climate legislation, although he called the prospect of that debate occurring over the next several months "unlikely."

In the absence of climate legislation, EPA is already pursuing emissions standards for major industrial sources as it works toward finalizing its "endangerment finding" that will trigger those Clean Air Act requirements. Administrator Lisa Jackson, however, has pledged that the regulations would not encompass thousands of small emitters whose output is higher than the threshold written in the law, which was tailored to pollutants far less prevalent than CO2. Opponents of EPA regulation believe lawsuits will force EPA to regulate these small emitters anyway.

Hamilton of the Sierra Club said that the environmental community would likely be open to seeing changes to the draft Senate bill that would more prescriptively preserve certain EPA authorities. "There are a variety of ways that you could do this to make sure that you don't get a huge build-out of existing plants. We're happy to talk about what those might be," he said.

The new draft also makes a small change that would allow states to maintain their own cap-and-trade plans through 2017 in the event that a national cap-and-trade system is substantially delayed.

Justice Department gets offset fraud sleuths

This would not have been allowed under the House-passed bill. "This is a good catch," said Bill Becker, executive director of the National Association of Clean Air Agencies.

He explained what would have happened under the House-passed bill. "If the federal program is delayed, and then you also on top of that take away the state's cap-and-trade program or the region's cap-and-trade program, then you would be left with nothing," he said.

On an unrelated matter, the bill adds another government agency into the carbon offset mix: the Justice Department. In what one lobbyist called a "criminalization of offsets," the draft establishes a "carbon offsets integrity unit" under the assistant attorney general for the Environment and Natural Resources Division to conduct investigations and enforce laws related to offsets.

Previously, the main potential players in the space were EPA and the Agriculture Department, which was given jurisdiction over agricultural projects in a late deal worked out on the House side to bring in votes from farm states. But the deal has been a source of controversy, with some environmentalists expressing concern that the Waxman-Markey plan for carbon credits would not ensure that offsets actually block greenhouse gases from reaching the air.

Offsets refer to things such as methane-capture systems at landfills that businesses can use to meet emission obligations outside their mandatory caps. The Boxer-Kerry plan so far leaves the total amount of offsets available in the system at 2 billion metric tons annually, with the amount split between domestic and international initiatives.

Reporter Robin Bravender contributed.

Want to read more stories like this?

E&E is the leading source for comprehensive, daily coverage of environmental and energy politics and policy.

Click here to start a free trial to E&E -- the best way to track policy and markets.