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Re-Election Greenlights Host of EPA Rules, Solidifies Regulation of Greenhouse Gases

Thursday, November 8, 2012

President Obama's re-election gives the green light to a host of air pollution and other pending environmental rules and will ensure that one of the president's few tools for curbing U.S. greenhouse gas emissions--Environmental Protection Agency regulations--will live on.

The president's Nov. 6 win essentially clears the way for EPA's initial efforts to reduce greenhouse gas emissions from new coal- and other fossil fuel-fired power plants under the Clean Air Act's new source performance standards, which are expected to be finalized in 2013.

Also likely to move forward are air pollution rules to strengthen national ambient air quality standards for particulate matter and regulations cutting air toxics emitted by boilers, both awaiting final action. Those are likely to be followed by a revision of the ozone rule in 2014 and action on yet-to-be-proposed Tier 3 requirements governing sulfur content in gasoline.

Curbing greenhouse gas emissions from power plants, cars, and light trucks has been a top environmental initiative for Obama, and with his re-election secure he is likely to continue to rely on EPA's existing regulatory authority to address climate change (see related story).

Climate change was virtually ignored during the campaign by both Obama and Republican challenger Mitt Romney, but Obama spoke directly to the issue in his victory speech. “We want our children to live in an America that isn't burdened by debt, that isn't weakened by inequality, that isn't threatened by the destructive power of a warming planet,” the president said in his remarks after Romney's concession.

No Climate Bill Likely

With Republicans maintaining control of the House, there is little to no chance that Obama can resurrect a broad climate change bill like the 2010 failed Senate bill.

Still, some energy and environmental analysts say there will be renewed discussion of a carbon tax when the president and Congress begin debating the need for new revenue sources to avoid a “fiscal cliff” when tax hikes and automatic spending cuts go into effect in January. Taxing the carbon content of fossil fuels could conservatively raise $90 billion or more a year, according to some estimates.

Scott Segal, an energy industry representative who directs the Electric Reliability Coordinating Council, said Obama's slight mention of the issue is not quite “a new climate policy for the country,” but that the looming negotiations between Congress and the president needed to avert a fiscal cliff means a carbon tax will be part of the debate in the coming months.

“There has been significant discussion of alternatives” to a cap-and-trade bill, Segal said, “and I would suggest with reports out that $90 billion a year could be derived at $20 per ton of carbon, we would well anticipate a significant discussion of the issue.”

Alternatives to Cap-and-Trade Program

“There will come a time when significant sources of revenue have to be on the table,” he said.

The divided Congress Obama has faced over the last two-years remains essentially unchanged, with Republicans retaining control of the House.

“There is virtually no chance of a cap-and-trade revival at a federal level,” said Robert Shapiro, a senior Commerce Department official in the Clinton administration who chairs the globalization initiative for NDN, a Democratic think tank. “I think there is a possibility, though it's not probable, that a carbon-based tax could play some role in overall tax reform.”

Final Power Plant Rules Expected Soon

EPA proposed in April to limit new coal-fired plants to a total of 1,000 pounds of carbon dioxide per megawatt-hour. New combined cycle natural gas plants would likely comply with those limits without having to install new pollution controls. Slated to be finalized in 2013, the rules would represent the first attempt in the United States to regulate power plant greenhouse gases under the Clean Air Act's Section 111, which sets new source performance standards for emissions.

Obama's victory also makes it far more likely that a deal his administration cut with auto manufacturers, environmental groups, and others to double the fuel economy of cars and light trucks to 54.5 miles per gallon by 2025 will move ahead. The joint EPA-Transportation Department rules also are designed to cut greenhouse gases emitted by light vehicles. Romney had called for scrapping those rules due to concerns they would raise vehicle costs and hurt auto manufacturers.

EPA's power plant rules, along with a possible regulation of coal ash as hazardous waste, all face a brighter future under four more years of an Obama administration, although there may be a move in the Senate to limit EPA's authority on coal ash (see related story).

Also a concern for power plants is EPA's development of a proposed rule to prevent fish from being killed in cooling water intake structures at those plants, although the rule is only the draft stage. That rule is part of a long list of regulatory actions pending in EPA and other agencies (see related story).

Impact of Rules Downplayed

Many electric utilities and the coal mining industry argue the EPA rules targeting power plants are part of a broader “war on coal” being waged by the Obama administration, but environmental groups note that Romney ran as an unabashed friend to the industry--and still lost in coal-friendly states such as Ohio.

“The biggest terror facing coal today is not regulations,” Michael Gerrard, director of the Center for Climate Change Law at Columbia Law School, said. “It's cheap [natural] gas,” which has led to fuel-switching for electricity generators.

There are also a host of rules in their infancy that have strong support from environmental groups but have less specific timelines for development at EPA.

These rules, which include EPA Tier 3 vehicle and gasoline standards, would have been easy for a Romney administration to delay or withdraw. Others range from EPA plans to limit greenhouse gas emissions from existing coal-fired power plants and a new ozone rule. President Obama personally withdrew stricter ozone limits due to economic concerns in September 2011, but he pledged action on ozone in 2014.

Oil Industry Awaits Particulate Matter Rule

Howard Feldman, the American Petroleum Institute's director of regulatory and scientific affairs, noted that EPA is scheduled to publish its final rule for particulate matter in mid-December to meet a court deadline.

Down the road, EPA also is expected to regulate greenhouse gas emissions for petroleum refineries because the agency pledged to do so under a court settlement, Feldman said. But agency officials “seem to indicate that's not coming anytime soon, so one can only infer that means sometime after the election,” he said.

“We call all of these regulations … a regulatory tsunami now facing refineries,” Feldman said, adding that the industry expects further regulation will lead refineries to close or to be put up for sale. “You drive up costs too high in the U.S., then you are facing potential closures,” he said.

Clean Car, Gasoline Standards Highlighted

Of all of the EPA air pollution rules currently under development, EPA's Tier 3 vehicle and gasoline standards is considered by some to be among the top regulatory initiatives at the agency because it could significantly cut both nitrogen oxide emissions, which contribute to ozone, and sulfur.

S. William Becker, executive director of the National Association of Clean Air Agencies, called the Tier 3 standards “the single most important rule on the air pollution front” now under way at EPA. The rule would update Tier 2 standards that required cleaner cars and lowered the sulfur content in gasoline and could cut nitrogen oxides emissions virtually overnight by 240,000 tons, Becker said.

That reduction, he said, is more than would be achieved through either the Cross-State Air Pollution Rule, which was finalized by EPA in 2011 but vacated by an appeals court in August, or that rule's predecessor, the Bush administration's Clean Air Interstate Rule.

House Republicans tried to delay the Tier 3 standards under a bill (H.R. 4480) that cleared the chamber in June, but the measure stalled in the Senate.

Energy industry representative Frank Maisano said that historically, presidents entering their second and final term must decide between whether they will push for a range of smaller advances on environment and energy or push for broader changes.

“For Obama, the question is, will he shoot for bigger ticket items, rather than playing small ball by moving forward on something like coal ash” regulation, said Maisano, an energy specialist with the Bracewell & Giuliani law firm. “Or will he play a bigger game, say, by trying to take down more existing power plants” by pushing greenhouse gas limits for existing coal-fired power plants?

The EPA power plant greenhouse gas rules now close to being finalized only address new fossil fuel-powered plants.

Keystone Pipeline Approval Inevitable?

For the oil and gas industry, Obama's win likely slows approval of Keystone XL's Canada-to-Texas oil pipeline, although many analysts predict he ultimately will approve it. Romney had made the project a key issue and pledged to approve a cross-border permit on “day one” of his presidency, but approval will be trickier for Obama because environmental groups are a key part of his political base.

The Obama administration's official timetable calls for the president to make a decision on the pipeline sometime in the first quarter of 2013, and many analysts expect him ultimately to relent on a project that has strong support from the oil and gas industry and which would likely lead to new jobs in the sector.

Obama initially denied the permit in January 2012 after being forced by Congress to speed up his decision on the project, a decision that many attributed to the upcoming election.

“On this one, I think Obama has been relatively pragmatic, when he delayed the decision on Keystone they were pretty transparent that they were kicking it past the election,” said Brigham McCown, who served as an acting administrator of the Pipeline and Hazardous Materials Safety Administration under President Bush.

“But since he won't stand for election again, his supporters will also be clamoring for him to make progress. He is going to have to deliver some things for his core supporters” essentially to compensate for approving the pipeline, said McCown, now managing director United Transportation Advisors LLC.

Chamber, Other Business Groups Worry

Industry groups worry that an Obama victory will only encourage an administration that has been pushing a fairly ambitious environmental regulatory agenda. Bill Kovacs, of the U.S. Chamber of Commerce, said the group is particularly concerned with two of the air pollution rules--the national ambient air quality standards for particulate matter and the delayed ozone standards.

EPA was directed under a court order to finalize the particulate matter rule in December, so that rule could be in place even before Obama begins his second term, according to Kovacs, the chamber's senior vice president for environment, technology, and regulatory affairs.

The chamber argues that both regulations are the result of a judicial strategy derided by industry as “sue and settle,” in which environmental groups use the courts to force agencies to expedite delayed regulations.

'Zero-Sum' Game

“The importance of these two [rules] is that they are both too stringent, with many areas of the country out of attainment,” Kovacs said. In areas out of attainment, “you wouldn't be able to bring in new companies or expand without a one-to-one reduction” in emissions elsewhere, he said. “It's a zero-sum game.”

A second Obama term also is likely to mean more attention and perhaps further regulation of natural gas drilling practices that rely on hydraulic fracturing, Kovacs said. He noted that EPA has already included fracking in its national enforcement initiatives through fiscal 2013, under which the agency has focused inspections of natural gas extraction and production activities that it say “may cause or contribute to significant harm to public health and/or the environment.”

EPA conducted 570 such inspections in fiscal year 2012, up from 362 in fiscal 2011, according to agency data.

Other key rules for the chamber include EPA's development of a rule governing cooling water intake structures at power plants and its potential regulation of coal ash as hazardous waste, Kovacs said.

Clean Water Act Guidance Being Readied?

An Obama victory also sets the stage for broadening the application of the Clean Water Act to “intermittent” streams that can go dry during the year or geographically isolated wetlands.

In the wake of two U.S. Supreme Court decisions, EPA and the U.S. Army Corps of Engineers have been developing guidance to clarify whether relatively small waterways deserve protection under the Clean Water Act. Applying the act more broadly could mean additional permit requirements before landowners or developers dredge and fill such waterways.

That guidance would have been an easy target for a Romney administration--industry and environmental groups saw it as particularly vulnerable to being withdrawn and reworked had Romney won--but Obama's re-election likely means it will now be finalized in the months ahead.

Steve Fleischli, senior water attorney for the Natural Resources Defense Council, told BNA that he expects the guidance, which has been under review by the White House Office of Management and Budget since May, to be finalized quickly, perhaps before the end of the year.

Key Administration Posts

The head of the Environmental Protection Agency, Lisa Jackson, has not signaled whether she intends to stay into a second Obama term, although sources in and outside the agency say she has considered leaving after the president's first term. Among the pluses for Obama if Jackson stays on: he will not have to send a new appointee before the Senate Environment and Public Works Committee, where Republicans are a vocal minority in challenging the agency for what they see as overzealous environmental regulation under Obama.

Becker of the National Association of Clean Air Agencies said he expects some turnover at EPA even with an Obama victory. “These jobs eat you up,” Becker said. But some industry representatives say talk of Jackson's departure is overblown. Segal, the energy industry representative, said Obama's re-election may embolden Jackson to say on.

At the Energy Department, Secretary Steven Chu has also been tight-lipped about his future, although sources in and out of the department have hinted he may be considering leaving.

There is some precedent for top officials to remain for two full terms in a Democratic administration. Both EPA Administrator Carol Browner and Interior Secretary Bruce Babbit served both terms of the Clinton presidency.

EPA officials said the agency would not comment officially on Jackson's plans, nor those of her top assistant administrators, including air chief Gina McCarthy, enforcement head Cynthia Giles, and Mathy Stanislaus, who heads the solid waste and emergency response office.

By Dean Scott
 


Contributing to this report were Anthony Adragna, Patrick Ambrosio, Andrew Childers, Jessica Coomes, Lynn Garner, Alan Kovski, Ari Natter, Pat Rizzuto, Amena H. Saiyid, Andrea Vittorio, and Pat Ware
 

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