By Valerie Volcovici
WASHINGTON, June 23 (Reuters) - Before President BarackObama unveils a plan to lower carbon emissions from thousands ofexisting U.S. power plants, stakeholders on all sides of theissue have attempted to make their mark on the regulations.
Electric utilities, environmental groups, large electricityconsumers, and states have been working furiously behind thescenes for months to have a say in new rules that will be laidout by the Environmental Protection Agency.
Obama, in a video released by the White House on Saturday,confirmed that he will deliver a major speech on climate changeon Tuesday. "I'll lay out my vision for where I believe we needto go - a national plan to reduce carbon pollution," Obama said.
Administration officials have said the White House will usethe Clean Air Act to tackle power plants, which account fornearly 40 percent of greenhouse gas emissions.
This comes as no surprise to the companies and states thatwill have to either comply with or carry out the regulations.For the past few months, they have been working behind thescenes to influence the EPA before it begins what could be amonths- or years-long rule-making process.
"The traditional industry response to EPA rule-making is -the EPA puts something out and then we respond to it," saidEmily Fisher, a director of legal affairs for energy andenvironment at electric industry lobby group Edison ElectricInstitute (EEI). "This is different in that we feel obligated tobe more engaged early on."
Fisher said the EPA will be in a "gray area" when it takesits first steps to regulate existing sources because the agencywill need to use a rarely used and broadly worded section of theClean Air Act, known as 111(d).
Under that statute the EPA would set federal emissionsguidelines and decide upon the best systems or technologies forreducing emissions. Each state would then be left to setperformance standards for its power plants and to determine howthe plants will meet those standards.
Because there is little legal precedent for the rule, theagency will rely on a range of external sources for input, saidDina Kruger, a former director of the EPA climate changedivision and now a regulatory consultant.
EARLY START
Environmental group the Natural Resources Defense Council(NRDC) has developed the most detailed proposal so far.
In December it unveiled a plan in which the EPA would setstate-specific emissions rates that would give the states mostreliant on coal-generated energy more time to comply.
Dan Lashof, NRDC's climate and clean air program director,said the group wrote the plan to "rehabilitate the reputation ofthe Clean Air Act," which critics say will raise electricityprices, "and show there is a flexible way to regulate carbon."
Under the plan, a state that currently gets more electricityfrom coal-fired power plants than cleaner-burning natural gas orrenewable energy would set an emissions rate target in 2020 thatis higher than for a state that is less coal-dependent. Stateswould then develop their own plans to meet the target.
The NRDC said its plan would cut carbon pollution 26 percentunder 2005 levels by 2020 and cost $4 billion, which it said wasa fraction of the cost of health and environmental damages fromnot acting on climate change.
But this approach may be vulnerable to legal challenges,said Robert Wyman, a lawyer at Latham and Watkins in Los Angeleswho heads up a coalition of major companies that are also tryingto influence the EPA rule-making.
The EPA "lacks the legal authority to differentiate amongstates in setting the eventual performance standards forspecific fuel and technology subcategories," Wyman said.
The National Climate Coalition, which includes companiessuch as Boeing , Shell and utilities NRG andMidwest Generation, has developed a framework for the EPA thatWyman feels would stand up to potential legal challenges.
Under their approach, the EPA would set separate emissionperformance standards for coal- and gas-fired power plants.
"The EPA would develop the basic building blocks forcoordinated state action while leaving to the states the choiceof approach," according to a summary of their plan.
The NCC approach would let utilities calculate averageemissions across their range of facilities, which in turn wouldenable states to use market-based mechanisms, such as trading ofemissions permits.
EARLY ACTORS
Several states and certain utilities that have already takensteps to lower carbon levels at their plants will lobby the EPAto get credit for emissions already reduced under states' carbonreduction or clean energy programs.
Xcel Energy, which operates in states with renewable energymandates including Colorado and Minnesota, estimates that itsgreenhouse gas reductions by 2020 will be three to four timesgreater than if it kept its fleet of coal plants and tried tomaximize their efficiency under future EPA regulations.
States such as California and the nine northeastern statesin the Regional Greenhouse Gas Initiative, which havemarket-based cap-and-trade systems in place, have also said theywill seek equivalency.
The EEI also warned in a white paper on existing power plantrules in 2012 that while the EPA should give companies "flexibleapproaches" to meet the standard, "some are concerned thatflexibility may open the door to more stringent standards."