Rulemaking chops seen as edge for 2 inside candidates to replace Jackson

Source: Jason Plautz and Jean Chemnick, E&E reporters • Posted: Wednesday, February 13, 2013

With U.S. EPA Administrator Lisa Jackson leaving the agency today, two of her lieutenants are being discussed in Washington, D.C., as leading candidates to succeed her.

Deputy Administrator Bob Perciasepe and EPA air chief Gina McCarthy — both with extensive experience at EPA and as state regulators — have the regulatory chops that environmentalists prize and also have reputations for giving industry a seat at the table for rulemakings.

With major regulations in the offing — notably, greenhouse gas standards for new and existing power plants — industry representatives say an ability to work with business is badly needed.

“I hope the president doesn’t pick someone who will be overwhelmed with scoring political points instead of constructive work,” said Scott Segal of Bracewell & Giuliani’s Policy Resolution Group. “Frankly, the environmental and the energy arena is polarized enough without that.”

A seasoned politician, former Washington Gov. Christine Gregoire (D) has been mentioned as a possible Jackson successor and so has California Air Resources Board Chairwoman Mary Nichols, who was EPA air chief under President Clinton until 1997.

But most agency watchers are giving the edge to McCarthy and Perciasepe because of their experience on rulemaking in President Obama’s first term and relationships with the electric utility industry.

Perciasepe, who now serves as acting administrator, was EPA’s top water official and later the top air official under Clinton. He has been chief operating officer at the National Audubon Society and served as Maryland’s environment secretary.

McCarthy oversaw the office responsible for the agency’s highest-profile rulemakings in Obama’s first term, including for carbon dioxide, sulfur in gasoline and first-time federal efforts to regulate hydraulic fracturing. She came to EPA after serving as a top state regulator in Connecticut and Massachusetts.

McCarthy’s gender might also make her an attractive choice for Obama, who has been criticized for nominating white males to his second-term Cabinet. He did nominate a woman, Recreational Equipment Inc. CEO Sally Jewell, to lead the Interior Department last week (Greenwire, Feb. 6).

A utility source said Perciasepe is seen by industry as “somebody that you could talk to,” even though he might toe the administration line on regulation. “He’s seen as somebody who’s not an ideologue,” the source said, “and who has talked to industry in the past and who would be accessible.”

McCarthy, meanwhile, is personally identified with the air rules, which makes her popular with people who support the regulations and controversial with their opponents. She was quoted in a 2009 Greenwire profile saying she was not one to shrink from an argument (Greenwire, Nov. 13, 2009).

“I don’t know if it’s my Irish blood, but … I love disagreements,” McCarthy said. “I love the democratic process. If I’m in a room where everybody agrees, I start to nod off.”

Bill Becker, executive director of the National Association of Clean Air Agencies, said McCarthy’s sense of humor has been an asset when explaining the agency’s perspective, especially during her frequent visits to House offices at the behest of the GOP majority.

“She is able to take a difficult situation that is unsettling and, through her humor and social skills, make people feel better,” Becker said.

Rigorous and fair’

But McCarthy’s experience at the helm of environmental departments in Massachusetts and Connecticut, states that are invested heavily in non-coal electric generation, is unlikely to persuade coal-fired utilities that she would give a sympathetic ear to their concerns, the utility source said.

As as state regulator, McCarthy helped lay groundwork for the multi-state Regional Greenhouse Gas Initiative (RGGI). Industry has panned the first-in-the-nation carbon dioxide cap-and-trade program as a stealth tax, and Senate Republicans would likely raise the topic of McCarthy’s involvement with it at her confirmation hearing.

Yet McCarthy has been praised for working with industry throughout her career.

Gloria Bergquist, spokesman for the Alliance of Automobile Manufacturers, said McCarthy was receptive to her group in setting higher fuel economy standards through model year 2025.

“Gina McCarthy has been a pragmatic policymaker who strives for aspirational goals, while at the same time realizing how real-world realities, like consumer demand, affect those goals,” Bergquist said.

“She has been a supporter of a rigorous midterm review of fuel economy standards, and that has been an important priority to the auto industry. McCarthy has also been an advocate for a single national program to avoid a piecemeal approach to policy that would ultimately take money out of consumers’ pockets.”

The midterm review for the 2017-2025 standards was a big prize for automakers, which said the time frame for implementing the standards was too far away and they needed a chance to consider sales, cost and technology. Some environmentalists are concerned that the review could create a loophole for car companies to weaken the standards, but they have vowed to make sure all parties are involved in the review.

And Frank O’Donnell of Clean Air Watch pointed to McCarthy’s work on rules governing diesel backup generators as a sign that she can sometimes be too conciliatory to industry. Faced with a lawsuit from the demand-response company EnerNOC Inc. following the agency’s rulemaking limiting air emissions from reciprocating internal combustion engines, McCarthy and her staff tried to strike a deal to keep the company happy. They eventually settled on terms that would allow backup generators to use diesel engines for 150 hours per year, dropping to 100 hours per year in 2017.

But public health and environmental groups took issue with a separate part of the deal, which allowed generators to run for up to 50 hours per year during high demand or “peak shaving” periods until August 2017, which was eventually struck from the final rule released last month.

“Anybody coming in is going to have to have some of that ability to bridge the gap between stakeholders who have diametrically opposed views. That’s never an easy lift,” O’Donnell said.

An EnerNOC spokesman said those involved with the talks described McCarthy and her team as “rigorous and fair.”

Congressional Republicans have long attacked Jackson’s EPA as being aggressive, overreaching and job-killing for its series of regulations. But other observers say that EPA never took the adversarial posture toward industry conjured in Republican rhetoric.

In fact, some environmentalists say that the agency may have even been too conciliatory to industry on some rules with Perciasepe’s and McCarthy’s fingerprints.

They say Jackson delayed and rewrote toxics rules for industrial boilers and cement kilns in order to address industry complaints that they were too onerous. This was part of a larger pattern of being mindful to industry concerns, they say.

“I can’t think of a rule that has come out over the past several years in the air office — and the little I know about the other media programs — that hasn’t reflected significant input from the business community,” said Becker of the National Association of Clean Air Agencies.

Becker noted that McCarthy, Perciasepe, Nichols and Gregoire all have experience at state regulatory agencies, which he said are sensitive to the needs of industry. State administrators must take a practical approach to regulation, he said, because state economies depend upon it.

“When I talk with colleagues in the business community, they are treated very fairly and respectfully by both,” he said of McCarthy and Perciasepe. “It is not surprising that they’ve taken that skill from the state level to the federal level and that they’ve reached out and sought input from the business community.”

‘Unfortunate pattern of ignoring the law’

James Pew, an attorney for Earthjustice who worked on the litigation that accompanied the boiler and cement maximum available control technology [MACT] rules, said EPA sometimes violated the law and ignored court rulings in order to pacify industry stakeholders.

Obama’s EPA was tasked with writing both rules, which had been postponed indefinitely under the George W. Bush administration. The agency released a Boiler MACT rule in June 2010 that Pew said was stringent enough to meet Clean Air Act criteria. But he said EPA took an apologetic tone in statements accompanying the proposal and asked for more time to reconsider it.

This fueled congressional and industry calls for the agency to rewrite the standard, including legislative efforts that failed (E&ENews PM, March 8, 2012).

The agency’s stance helped pave the way for a rule that was less protective of public health, Pew said.

“In my view, that was just a transparent attempt to kick the ball down the road,” Pew said. “There were no real defects in the rule; EPA just didn’t want to issue unpopular rules.”

EPA also took legal steps to undermine its own boiler rule, Pew said, when the agency asked the courts to extend a judicial deadline to allow it to be rewritten, and then asked for a stay on implementation. The court rejected both attempts.

“It sort of spiraled into this unfortunate pattern of ignoring the law, running afoul of the court and undermining its own rules because it would rather accommodate industry than comply with the Clean Air Act,” he said.

EPA sabotaged its cement kiln rule for much the same reason, he said. After the initial rule weathered a legal challenge by the industry, the Obama administration voluntarily swapped it for a less stringent standard on the pretext that industry might win on appeal.

These actions by EPA happened between 2010 and 2012, when the White House was struggling to protect Democratic seats in Congress and to ensure the president’s re-election. Pew said he hoped the political winds had changed enough that EPA would not feel compelled to pursue a similar policy of capitulation in the future.

EPA’s decisions on boiler and cement kilns — and the White House’s choice in 2011 to kill an ozone rule — were all made on Jackson’s watch, Pew noted. And Jackson is generally regarded as a very pro-environment, pro-public health administrator. This indicates that White House policy might trump an administrator’s inclinations, no matter who that administrator is, he said.

Segal of Bracewell & Giuliani said that with a “perfect regulatory storm on the horizon,” whoever is picked would need to strike a careful balance, more than Jackson portrayed publicly.

“This future administrator is going to have to develop regulations that are smart and not costly. Sometimes it seems that for green groups, a good result is what costs the most money and cripples the most industry,” Segal said. “That’s just not going to work anymore.”