States Want Delay on Emission Rules

By STEPHEN POWER and IAN TALLEY
A growing number of state regulators are urging the Obama administration to slow the rollout of proposed federal rules curbing industrial greenhouse-gas emissions, saying the administration's approach could overwhelm them with paperwork, delay construction projects and undercut their own efforts to fight climate change.

The concerns echo some criticisms that business groups -- including the American Petroleum Institute and the National Association of Manufacturers -- have voiced about the potential consequence of new regulations, though the states generally don't challenge the legality of the proposed regulations, as some business groups have. Indeed, many state regulators continue to say they support the Environmental Protection Agency's effort to regulate greenhouse gases. Their concerns, they say, have more to do with how quickly such rules should be phased in, and how to pay for an expansion in regulatory oversight at a time when their budgets are in the red.
Regulators from around the U.S., including Kansas, Pennsylvania, Florida and California, are calling on the EPA to go slowly with its new rules, and in some cases warning that they lack funding to regulate some of the new emissions sources that would be covered.
The states' warnings vary in urgency, with some saying the EPA's proposal can be easily tweaked and others urging the agency to reconsider the proposal, predicting dire consequences. South Carolina regulators, in a letter to EPA dated Dec. 23, said the proposal will cause chaos and warned that many construction projects -- and jobs -- are at risk.
In a Dec. 24 letter to the EPA, the California Energy Commission, which oversees energy policy in the state, said the EPA's proposal "will likely retard, rather than facilitate," reductions in greenhouse-gas emissions from its electricity sector.
Because California, which has been a leader among states in pursuing its own emissions efforts, plans to require electric utilities to use more renewable power than they do currently, the state needs new natural-gas-fired power plants to provide back-up power when the wind doesn't blow or the sun doesn't shine. Most of those new plants aren't subject to the EPA permit process but will require permits under the EPA's proposal, the state says.
"We are gravely concerned that EPA's current proposal will likely create a huge administrative burden," said Melissa Jones, the commission's executive director. While most states stop short of predicting job losses, California says the proposed rules would cause "gridlock" on the construction of power plants.
Kansas's Department of Health and Environment has warned that the EPA proposal will affect some animal-feeding operations as well as some municipal solid-waste landfills, and Florida's Department of Environmental Protection has called the proposed permitting approach unmanageable.
The EPA declined to comment about the criticisms raised by state regulators. "We are still reviewing the comments. No decisions have been made about the final rule," an EPA spokeswoman said.
The Obama administration has said it would prefer that Congress pass legislation that would use a so-called cap-and-trade system to curb greenhouse-gas emissions. Under a cap-and-trade system, the government would require companies to hold permits in order to emit greenhouse gases. Over time, the government would issue fewer permits, bringing emissions down while allowing companies to buy and sell permits among themselves. But prospects for that legislation passing the Senate -- at least in its current form -- are dim, leaving EPA regulation as the administration's main tool.
In order to acquire a permit, facilities would be required to demonstrate to state or local regulators that they are using the best practices and technologies to minimize greenhouse-gas emissions. The decision on what constitutes those practices would, in most cases, be left to states, which are expected to rely heavily on guidance from the EPA. The EPA is expected to publish such guidance in the coming months.
Officials in other states say they worry the EPA won't give them enough time to revise their own state rules, which generally set much lower emissions thresholds for regulating air pollutants. If the EPA doesn't give them enough time, state officials say, tens of thousands of new air-quality permits would need to be issued over the next 18 months or so, a scenario that state officials say could delay the process for many new facilities.
Citing budget shortfalls, some state agencies are suggesting the EPA propose new fees on businesses that could generate revenue that states could use to hire more employees to process permits. But the proposals would likely encounter opposition as many businesses are still struggling to recover from the recession.
"This issue [of permits] is an extraordinarily hot topic among the states," said William Becker, executive director of the National Association of Clean Air Agencies. Mr. Becker said that during a recent conference call organized by his group and involving more than 100 state and local air-quality agencies, "most, if not all, said EPA is seriously underestimating the number of sources" that would be subject to regulation under its proposal.
Mr. Becker emphasized that most of his group's members support EPA regulation of greenhouse gases and that most of the problems they have identified are surmountable. His group has suggested that the EPA wait until at least 2011 to trigger permitting requirements for major stationary sources of greenhouse gases.
A central issue is an EPA proposal slated to take effect as early as the spring to require facilities emitting at least 25,000 tons of greenhouse gases a year to obtain construction and operating permits. The EPA relies on states and local agencies to administer air-quality permits, and has said its proposed emissions threshold is high enough that it will effectively exempt small businesses, such as farms and restaurants.
In comments filed with the EPA last month, the Office of Advocacy at the U.S. Small Business Administration said the EPA's proposed rules "are likely to have a significant economic impact on a large number of small entities."
Business groups, meanwhile, have questioned the EPA's legal authority to pick and choose which facilities to regulate, citing federal statutes that set much lower emissions thresholds for requiring permits.
Referring to the federal law that defines the EPA's duties for protecting and improving air quality, Carl Pope, executive director of the environmental group Sierra Club, said, "The fact that the Clean Air Act permitting authority is not a particularly good way for dealing with my backyard barbecue...does not mean that we should not have a Clean Air Act permit on...major fossil-fuel power stations."
Write to Stephen Power at stephen.power@wsj.com and Ian Talley at ian.talley@dowjones.com