"Tailoring" Of The Environmental Protection Agency's Greenhouse Gas Agenda

One of the key points of the Obama Administration's environmental agenda involves an aggressive greenhouse gas (GHG) regulatory program, which starts with mandatory GHG emission reporting for large sources of CO2 and other greenhouse gasses and will continue with regulatory programs to limit and control GHG emissions from certain large sources. With a broader-based GHG program to materially ratchet down GHG emissions from the U.S., the administration has charted a definitive GHG course.

While the U.S. Environmental Protection Agency (EPA) is moving forward on implementing a number of initiatives related to GHG and CO2 regulation, the House Energy and Commerce Committee appears to have a much different agenda. Intent on stopping the EPA in its tracks, the House is moving forward with H.R. 910, the Energy Tax Prevention Act of 2011. This bill would repeal many of the material regulatory actions the EPA has taken to regulate GHG emissions, including mandatory reporting of GHG emissions, and would limit any future regulation by the Agency to address climate change. Certain limited exceptions to the bill include the Renewable Fuel Standard, the GHG Emission Standards and Corporate Average Fuel Economy Standards for light-, medium- and heavy-duty vehicles, and federal research, development and demonstration programs addressing climate change.

Proponents of the House bill appear to be focused on preventing additional regulation of the largest sources of GHGs, namely fossil fuel-fired power plants and petroleum refineries, which are regulated under the EPA's GHG Tailoring Rule. It seems likely, however, that the House agenda is much broader. The EPA's Tailoring Rule already exempts small businesses, such as restaurants and small commercial facilities, regulating only those large industrial emitters that are likely already permitted under the Clean Air Act and that collectively emit nearly 70 percent of GHGs from stationary sources. If enacted, the bill could be a blow to the competitiveness of renewable energy sources such as wind and solar, limiting growth in those industries, and could be a catalyst for increased extraction of domestic oil and gas resources. Indeed, the House has taken advantage of a perfect storm, as rising gas prices and instability of foreign governments have stoked public support for increased reliance on domestic fuel sources.

It is unclear, however, whether this bill will make it past the House. The Democratic-controlled Senate is unlikely to pass the bill as is, although House Republicans have included the aforementioned limited exceptions, perhaps in the hope of attracting crossover support from moderate Democrats. Given the Obama Administration's recent proposal for a national clean energy standard and a stated national goal of producing 80 percent of U.S. electricity from clean energy sources by 2035, H.R. 910, if passed without material amendment by the Senate, would face a likely veto by President Obama.

If House Republicans are unsuccessful "tailoring" the EPA's GHG regulatory program, then they will likely continue ongoing efforts to defund the EPA's regulation of GHGs. Given the House's role in the budget process, and the need to reach budget consensus, this approach may be more effective. The House version of the spending bill for the rest of 2011 takes this defunding approach; the Senate failed to address this issue in its recent version of the bill. With the current legislative climate in Washington focused on significant spending cuts, the Obama Administration could be forced to compromise with GHG regulatory opponents to prevent a government shutdown or keep other programs funded. In addition, certain industry organizations and congressional Republicans have sued the EPA, challenging the Tailoring Rule. Therefore, the EPA is facing strong challenges on several fronts to develop and maintain effective regulatory authority over GHG emissions.

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