EPA-Texas Feud Escalates Over New Carbon Regulations

December 27, 2010, 8:42 AM EST

By Kim Chipman
Bloomburg Business Week

(Updates with Sierra Club comment in ninth paragraph.)

Dec. 23, 2010 (Bloomberg) -- The U.S. Environmental Protection Agency said it will take control of carbon-emission rules in Texas after Governor Rick Perry rejected new federal regulations intended to combat climate change.

The EPA will decide directly on greenhouse-gas permits for companies seeking to build or upgrade power plants and oil refineries in Texas, the agency said today in a statement. The EPA’s nationwide carbon rules, imposed under the Clean Air Act, take effect Jan. 2.

Texas is the only state that has refused to implement the new rules. President Barack Obama is pressing ahead with the regulations after Congress failed to pass legislation capping carbon emissions. Perry, a Republican, calls the rules overreaching by the federal government that will cripple his state’s economy.

“The EPA’s misguided plan paints a huge target on the backs of Texas agriculture and energy producers by implementing unnecessary, burdensome mandates on our state’s energy sector, threatening hundreds of thousands of Texas jobs and imposing increased living costs on Texas families,” Katherine Cesinger, a Perry spokeswoman, said in an e-mailed statement.

The American Petroleum Institute in Washington, the largest U.S. lobbying group for the oil and gas industry, called the EPA’s plan improper.

‘Coercing’ States

“In unprecedented fashion, EPA is now coercing some states to relinquish their authority and is directly usurping state regulatory authority in Texas,” Howard Feldman, API’s director of regulatory and scientific affairs, said in a statement.

The EPA’s rules are set to start 13 months after the agency declared carbon-dioxide emissions a danger to public health and welfare. The EPA’s “endangerment finding” followed a Supreme Court ruling in 2007 that the agency has the authority to regulate carbon emissions under the Clean Air Act.

Neil Carman, who studies air pollution for the Sierra Club, an environmental advocacy group in Austin, said the new rules won’t be costly to implement, comparing them to measures aimed at reducing acid rain in the 1980s. Businesses that opposed the rules at the time ultimately benefited from them, he said.

“There have always been these scare stories -- ‘the sky is falling,’” he said. “The sky isn’t going to fall.”

EPA Assistant Administrator Gina McCarthy said today that the the agency isn’t taking over Texas’s permitting program. She said its handling of carbon regulations was meant to supplement the existing permit process.

“All we are trying to do is ensure that Texas businesses that are applying for a Clean Air Act permit can get one and have somebody to apply to,” she told reporters on a conference call today.

Seven States

Most states are prepared to grant the permits starting Jan. 2, according to the EPA. Seven have agreed to have the agency issue permits while they revise their programs to accommodate the new rules.

Texas emits about 11 percent of U.S. greenhouse-gas emissions, more than any other state, according to Texas EPA spokesman David Gray. If Texas were a country it would be the world’s eighth-largest polluter, he said.

Texas, home to about a fourth of U.S. oil refining capacity, has more coal-fired electrical capacity than any state in the U.S., according to the San Francisco-based Sierra Club.

Talks Continue

The EPA remains in talks with Texas and views federal control of greenhouse-gas permits in the state as a temporary arrangement, McCarthy said.

“We are more than willing and in fact anxious about how quickly we can work with them to have them take over,” she said.

Business groups such as the U.S. Chamber of Commerce and Republicans and some Democrats in Congress are pushing to halt the EPA’s authority over greenhouse gases.

The agency announced today a plan to propose a second wave of greenhouse-gas regulations. The move was part of a lawsuit settlement with environmental groups and states, such as New York and California, that pushed the Obama administration to go further to limit heat-trapping emissions.

“Power plants and oil refineries are among the top three emitters of carbon dioxide in the country,” California’s Governor-elect Jerry Brown said in a statement. “While California has been aggressive in regulating such emissions, until recently, the federal government has not.”

The EPA will propose new standards for utilities by July and for oil refineries by December, McCarthy said today. Those rules will be made final for power plants by May 2012 and for refineries by November 2012, she said.

Attracting Investment

EPA Administrator Lisa Jackson today sought to respond to concern that the rules will burden business with excessive new costs and hurt the economy.

“These standards will help American companies attract private investment to the clean energy upgrades that make our companies more competitive and create good jobs here at home,” Jackson said in the statement.

The EPA officials said today it’s too early to know what the new rules, known as “new source performance standards” for pollutants under the Clean Air Act, will entail.

--With assistance from Mike Lee in Dallas and Simon Lomax in Washington. Editors: Larry Liebert, Stephen West