(Dow Jones) The Obama administration's suggested greenhouse-gas rules could make innocent bystanders of wind and solar projects.

A draft rule proposed by the Environmental Protection Agency late last year targeted emissions, such as carbon dioxide, that contribute to global warming. As currently written, the rule may delay the construction of natural gas-fired plants that are needed as a back-up to renewable energy sources.

As hopes for comprehensive climate-change legislation fade, the administration wants to regulate such emissions using the Clean Air Act, a move that puts at odds two complementary elements of Obama's energy policy: emissions reduction and renewable energy. Concerns in California, which is aiming to cut emissions by 30% from 1990 levels by 2020, may be a harbinger for a national problem.

Because renewable power is sometimes intermittent--the wind doesn't always blow and the sun doesn't always shine--new natural-gas facilities are vital to preserve the system's reliability.

The California Energy Commission warned the EPA late last year that unless the federal agency made major modifications to its proposed rule, the state's renewable energy projects could face massive delays. In particular, the commission said, the EPA needs to dramatically raise the emission control limits to exponentially higher levels for the initial stages and exempt some facilities from the new mandate. Otherwise, they would likely face a very tough time getting permits.

While the commission said it supports the EPA's legal authority and the proposal in principle, "the negative impact on power plant projects delayed by [Environmental Appeals Board] review is almost inestimable," commission head Melissa Jones wrote in a December letter to the EPA.

Because they emit greenhouse gases, natural-gas power plants will be required to obtain permits that cover those emissions.

Since then, the EPA's administrator has said the agency will modify and delay their proposed rules for around a year. California now says its projects can now move forward smoothly ahead of the new deadline.

"EPA is committed to working with those states to ensure they continue their successful efforts," EPA spokeswoman Adora Andy said in an email. She said there is no reason to believe that permitting requirements would block construction of any natural gas-fired power plants that the commission says is necessary for renewable energy back-up. "Clean Air Act permitting cannot result in a requirement to install any pollution controls that are not commercially available and feasible," she said.

But industry experts say the problem isn't about installing pollution controls, but rather the permitting process itself. The issue, they say, will still apply across the country as other states--and the federal government--try to boost renewable energy production.

"The addition of new wind or solar will certainly require the permitting of new natural gas plants, there's no way around that, and the problems that the commission identified are going to continue to be there," said Jeff Holmstead, a former senior EPA official and now a partner with law firm Bracewell and Guiliani.

The EPA has begun drafting new rules that will govern greenhouse gases under the Clean Air Act, forcing emitters to apply for operation, construction and facility-modification permits. To prevent up to 6 million new facilities such as bakeries, schools and churches from being subjected to regulation immediately, the EPA proposed to raise in the early years the emission levels to 1,000 times the standard set by law.

But regulators across the country warn that that level is still too low and have asked the EPA to delay--if not halt altogether--the new regulations to at least 2011.

After the surge of protest from state regulators, unions and lawmakers both Republican and Democrat, EPA Administrator Lisa Jackson said last week she would delay implementing the new rule by around a year. She also said her agency plans to raise "substantially" the emissions limit in the initial stage, but declined to say how much.

Galen Lemei, an advisor to California Energy Commission Chairman Karen Douglas, said in an email that Jackson's proposed modifications alleviated the commission's concerns. Lemei said the EPA's new time line would either allow California to get all of its permitting for natural gas power plants finalized by the middle of 2011, or the EPA wouldn't require applications already in the pipeline to be affected. The EPA declined to clarify.

EPA's Jackson said she plans to temporarily exempt some plants until the second half of next year. But that may not be long enough for many natural gas plants either planned or those that will eventually be needed to expand renewable energy production in the U.S.

An indication of the fear of potential harm from the proposed rule, other states with stringent renewable energy programs, such as Texas, have asked the EPA to cancel its rule-making altogether.

 

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