EPA Bid For Carbon Clarity Fails To Satisfy Business

(Bloomberg News) The Environmental Protection Agency's effort to give states a leading role in curbing pollution tied to global warming failed to satisfy the agency's critics in business and the U.S. Congress.

The agency said yesterday that states can determine what pollution-cutting technologies power plants and oil refineries should use when the first national carbon-dioxide emission rules take effect next year. Environmental activists praised EPA's flexibility. Opponents said the rules were too vague and would damage the economy.

"The energy and manufacturing sectors will essentially be in a construction moratorium that could materially hamper economic recovery," said Scott Segal, a Washington lawyer at Bracewell & Giuliani LLP who lobbies for utilities such as Southern Co. and Duke Energy Corp. that burn coal to make power.

President Barack Obama's EPA is proceeding with rules to regulate carbon-dioxide pollution, a greenhouse gas blamed for climate change, after Congress failed to pass legislation. EPA Administrator Lisa Jackson has said she will pursue modest steps that will help reduce emissions over time. Critics said yesterday's guidance for states and companies confused more than it clarified.

"They may have muddied the waters even more," said Bernard Weinstein, an economist and associate director of the Maguire Energy Institute at Southern Methodist University in Dallas. "My concern is the energy and manufacturing sectors won't know what to do."

The EPA said complaints that the rules will halt the building of power plants are "simply wrong."

"There will be no moratorium, and there will be no delay in industrial facilities obtaining permits," Brendan Gilfillan, an agency spokesman, said today in an e-mailed statement.

The EPA's carbon regulations under the Clean Air Act are set to begin Jan. 2 and will apply when companies propose to build or modify industrial sources of pollution, such as power plants. The EPA's document provided guidance for state and local authorities in selecting the best-available technology and isn't a rulemaking, the agency said.

The rules will be implemented by states through a permitting process when companies seek permission to build or upgrade operations.

States will be able to determine on a case-by-case basis the "best available control technology" that companies should use to limit carbon-dioxide pollution that contributes to climate change, EPA Assistant Administrator Gina McCarthy said yesterday.

The agency is taking "common-sense" actions, according to McCarthy. "We're confident that this will be a smooth transition," she said.

The EPA isn't dictating a specific fuel or pollution-cutting technology, giving states leeway to decide how to proceed. The agency said increasing energy efficiency probably will emerge as the most cost-effective solution.

An approach emphasizing energy-efficiency was backed by the U.S. Chamber of Commerce, the biggest U.S. lobbying group. The chamber, which opposes carbon regulations and has sued to block the EPA, is still reviewing the guidelines and doesn't have a comment, Bryan Goettel, a spokesman for the Washington-based organization, said yesterday.

The EPA said it's unlikely for now that companies will have to install costly technologies aimed at capturing and storing carbon emissions.

The guidelines also say that emissions from producing ethanol or other fuels made from plants will be treated differently than greenhouse gases from oil refineries or coal- burning power stations. The agency said it will issue further guidance in January on how to assess the environmental and economic benefits of such biomass fuels.

"Certain biomass feedstocks may be considered carbon- neutral," the agency said. The EPA may "partially or wholly" exclude emissions from bioenergy and other biogenic sources in the analysis of best available control technologies.

McCarthy rejected comments from companies that the limits on carbon pollution will hurt businesses and halt new construction.

"The Clean Air Act for 40 years has found a way to issue permits in a way that allows the economy to grow," she said on a conference call yesterday with reporters. "We aren't going to stop that with the greenhouse-gas" process.

"EPA is showing that dealing with greenhouse-gas emissions is not the bogeyman portrayed by opponents of clean-air controls," said Frank O'Donnell, president of the Washington- based environmental group Clean Air Watch.

Lawmakers including Senator Jay Rockefeller, a West Virginia Democrat, and states such as Texas have sought to delay or block the EPA's carbon rules as a cost the economy can't bear.

Rockefeller reaffirmed yesterday his call for the Senate to pass legislation he wrote that would delay the EPA carbon regulations for two years. He said the agency's case-by-case approach will make it harder for companies to build or expand their operations.

"Such an unstable regulatory environment prevents companies from making long-range investment decisions," Rockefeller said in an e-mailed statement.

Howard Feldman, director of regulatory and scientific affairs for the Washington-based American Petroleum Institute, which represents oil and gas companies, also said the rules will hurt business.

"The EPA is railroading job-killing regulations onto states, localities and America's businesses during a time of uncertain economic recovery," Feldman said in a statement.

The EPA is moving to regulate carbon emissions after legislation putting a cap on carbon pollution stalled this year in the Senate. A "cap-and-trade" measure passed the House in June 2009. Obama pledged to regulate carbon using the EPA should Congress fail to act.

"The Obama administration must now carry out its threat to regulate," Kevin Book, managing director of ClearView Energy Partners LLC in Washington, said in a research note.

The administration may be rushing to complete rules before Republicans take control of the House next year, a move likely to spur hearings questioning the scientific basis for new regulations, Book said.