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How Industry Won the Battle of Pollution Control at E.P.A.

March 6, 2004
 By CHRISTOPHER DREW and RICHARD A. OPPEL Jr.





Just six weeks into the Bush administration, Haley Barbour,
a former Republican party chairman who was a lobbyist for
electric power companies, sent a memorandum to Vice
President Dick Cheney laying down a challenge.

"The question is whether environmental policy still
prevails over energy policy with Bush-Cheney, as it did
with Clinton-Gore," Mr. Barbour wrote, and called for
measures to show that environmental concerns would no
longer "trump good energy policy."

Mr. Barbour's memo was an opening shot in a two-year fight
inside the Bush administration for dominance between
environmental protection and energy production on clean air
policy. One camp included officials, like Mr. Cheney, who
came from the energy industry. In another were enforcers of
environmental policy, led by Christie Whitman, a former
Republican governor of New Jersey.

The battle engaged some of the nation's largest power
companies, which were also among the largest donors to
President Bush and other Republicans. They were represented
by Mr. Barbour and another influential lobbyist, Marc
Racicot, who also would later become chairman of the
Republican National Committee.

In an administration that puts a premium on keeping its
internal disputes private, this struggle went on well out
of the public's view. But interviews and documents trace
the decisions in which the Bush administration changed the
nation's approach to environmental controls, ultimately
shifting the balance to the side of energy policy. Senior
officials at the Environmental Protection Agency, including
Mrs. Whitman, became isolated, former aides said, and
several resigned.

Thirty years after the first Earth Day, the incoming
administration was still confronting power-plant
smokestacks spewing fumes. The policy questions were
arcane, involving strategies to control polluting
particles. At stake, though, were environmental risks to
human health and the nation's ability to produce cheap
energy, as well as decisions about how the most polluting
industries would be monitored for decades to come.

For operators of some coal-fired plants, the stakes were
more tangible. Dozens of plants were facing lawsuits over
air pollution brought by the Clinton administration and
several northeastern states - including New Jersey under
Mrs. Whitman before she became head of the E.P.A. The
industry, fearing billions of dollars in new costs, set
about to undo the suits.

One of the most important decisions was Mr. Bush's reversal
of a campaign promise to regulate emissions of carbon
dioxide, a gas that many scientists say contributes to
global warming. The administration also has proposed looser
standards for emissions of mercury - a highly toxic
pollutant - than President Bill Clinton had sought. The
most protracted fight concerned the administration's
decision to issue new rules that substantially reduced the
requirements for utilities to build pollution controls when
modernizing their plants. The final policy shift may
ultimately help the coal-plant operators shed the lawsuits.


The struggle within the administration, in skirmishes
between Cabinet officers and vollies of memorandums, showed
how the White House has transformed domestic policy through
regulatory revision, rather than more contentious
congressional debate.

Administration officials say the changes were needed to
raise energy production and lift the burden of cumbersome
and costly regulations on industry. They said that the
approach will continue the trend of declining emissions and
reduce some of the most harmful pollutants by about half in
the next decade - cuts as deep if not deeper than the old
measures would bring.

"It's not about whether air quality will get better," said
James L. Connaughton, chairman of the White House Council
on Environmental Quality. "It will, and it must. The
question is what path you take to get there."

Critics on Capitol Hill and environmental groups say the
policies will slow the cleaning of the air and undercut
Congress's authority, while catering to companies that are
big contributors to Mr. Bush's campaigns.

"Rather than work with Congress to move us forward on
environmental issues, the Bush administration is working
with the special interests to undermine them," said Senator
James M. Jeffords, the Vermont independent who is the
ranking minority member of the Senate environment
committee.

But both sides agree on one outcome of the struggle: The
nation's approach to air pollution control shifted
drastically.

An Early Challenge

As President Bush took office, he said he wanted to swiftly
address energy shortages that had caused blackouts in
California. Coming from the Texas energy industry, he was
convinced that Clinton administration environmental
policies were restraining energy production. And utilities
geared up to press the new administration for big changes
on a handful of issues that were crucial to them.

Their biggest worry was Mr. Bush's campaign pledge to carry
through on a Clinton administration effort to impose
controls on power plant emissions of carbon dioxide.

The coal-fired power companies, which are among the
nation's largest sources of carbon dioxide, were alarmed
when Mrs. Whitman in her first days at the agency said Mr.
Bush would carry out his promise. Not long after, Mr.
Barbour sent his memorandum to Vice President Cheney, who
was heading a task force Mr. Bush had ordered to conduct a
broad review of energy policy.

Mr. Cheney had been chief executive at Halliburton, an
oil-and-gas-services company. Energy corporations had been
among the strongest supporters of Mr. Bush's presidential
campaign: There were more executives from energy than from
any other industry group among Mr. Bush's most elite
fund-raisers, called "Pioneers," who each generated more
than $100,000 in donations.

The industry's outcry over carbon dioxide reached Mr. Bush.
In March 2001, he reversed himself, saying there would be
no carbon dioxide controls. "I was responding to
realities," Mr. Bush said at the time, "and the reality is
our nation has a real problem when it comes to energy."

After that victory, the utilities moved to press their
advantage, turning to Mr. Cheney for help on another issue:
a set of rules requiring them to add new pollution controls
when they upgraded or expanded their plants. The power
companies strongly objected to the rules, which were known
as "new source review," calling them arbitrary, expensive
and outmoded.

A small group of coal-fired utilities was especially
unhappy. In 1999, the Clinton administration had sued nine
companies, saying they had expanded 51 older plants without
adding the required controls. Among those facing suits were
the Southern Company, based in Atlanta; the Duke Energy
Corporation, based in Charlotte, N.C.; and the FirstEnergy
Corporation, based in Akron, Ohio. Southern, one of Mr.
Barbour's biggest clients, was facing potential liabilities
of hundreds of millions of dollars.

The rules had not previously been vigorously enforced, and
the companies contested the suits, saying the Clinton
administration had focused on them unfairly and made it too
costly to improve their plants.

Mrs. Whitman made it clear she was willing to revise the
rules and settle the lawsuits. But, former aides at the
E.P.A. said, she favored old-fashioned political
horse-trading: She would ease up on the old rules, but only
after going to Congress with broad legislation to establish
tough new controls on three important pollutants - sulfur
dioxide, nitrogen oxide and mercury.

Mrs. Whitman's orders were to "find ways to deal with" the
rules "without giving away the farm to industry
unilaterally," said Jeremy Symons, a former agency official
who works with the National Wildlife Federation, an
advocacy group.

Industry lobbyists had a different strategy. C. Boyden
Gray, who was White House counsel during the first Bush
administration and represented some utilities, said the
companies viewed the pollution lawsuits as "a gun to the
head." They feared, he said, that if their bid to change
the rules got caught up in a bigger battle in Congress,
"they might not get anything."

The industry's main lobbying group, the Edison Electric
Institute, already had meetings with White House and Energy
Department officials about relaxing the pollution rules.
The group's president, Thomas R. Kuhn, had been a Yale
classmate of President Bush, and was also a Pioneer.

Yet for some companies named in the lawsuits, the institute
was not forceful enough. "We needed a strategy and an
organization to take a more aggressive approach," said Todd
Terrell, a spokesman for Southern. So, at Mr. Barbour's
urging, a handful of coal-burning utilities formed their
own lobbying group.

At the time, Mr. Barbour was probably Washington's most
successful lobbyist. As Republican National Committee
chairman from 1993 to 1997, he had helped the party gain
control of Congress and had long been one of its most
prodigious fund-raisers. His corporate clients included
many of the party's largest donors. That added to his
entree with Republican officials.

The splinter group, organized by Mr. Barbour in the spring
of 2001, was called the Electric Reliability Coordinating
Council. Scott Segal, its executive director, said it
sought a "more consistent" effort to rewrite the pollution
rules. Several government officials and lobbyists said the
group's underlying goal was bolder: to persuade the
administration to repudiate the old rules and thus torpedo
the lawsuits based on them.

According to the Center for Responsive Politics, the six
utility companies now in the council and their employees
made more than $10 million in political donations over the
last five years, nearly three-fourths of that going to
Republicans. Southern and its employees account for nearly
$4 million of the total, with 72 percent of their donations
going to Republicans.

Mr. Barbour had a meeting with Mr. Cheney on May 3, 2001,
just two weeks before the task force was set to unveil its
energy plan, Mr. Segal said. Mr. Barbour was accompanied by
Mr. Racicot, a friend of President Bush who would become
the Republican chairman in January 2002 and is now chairman
of Mr. Bush's campaign.

Mr. Segal said that Mr. Barbour and Mr. Racicot "did not
dwell" on the lawsuits, but suggested that the
administration should abandon the standards that the
Clinton administration had applied in bringing them.

Mrs. Whitman's aides said Mr. Cheney's office did not
inform her of that meeting. But the next day Mrs. Whitman,
knowing the debate was reaching a climax, sent a blunt
memorandum to Mr. Cheney.

"We will pay a terrible political price if we undercut or
walk away from" the lawsuits, she wrote.

She said it would be "hard to refute the charge that we are
deciding not to enforce the Clean Air Act."

She warned Mr. Cheney that a "broad attack" in his final
report on the pollution rules would wipe out her leverage
over the industry and "permanently destroy our chance to
achieve any needed legislative reforms we may seek in the
future."

As the task force neared its end, Southern and other
utilities in Mr. Barbour's group were busy on another
front. On May 15, 2001, they gave $100,000 to the
Republican party.

A Shift in Lobbying Efforts

Mrs. Whitman's arguments succeeded in forestalling any
recommendation in the Cheney task force report, issued on
May 17, to rewrite the rules or cripple the lawsuits.
Instead, the task force called only for the E.P.A. to
review the rules with the Energy Department, whose focus is
to promote energy supply, and for the Justice Department to
review whether the suits were valid.

In January 2002, though, Mr. Barbour and his group learned
that they would get no help from the Justice Department.
Its lawyers found nothing amiss with the pollution
lawsuits, concluding that they were supported by "a
reasonable basis in law and fact."

That setback did not slow the lobbying. Soon its locus
shifted, as the Energy Department, led by Spencer Abraham,
became increasingly involved, setting off a fight that
reverberated inside the E.P.A. as officials there said they
felt outmaneuvered.

Mr. Barbour and Mr. Racicot joined a parade of industry
lobbyists seeking out Energy officials. Between July 2001
and November 2001, Francis S. Blake, then the deputy energy
secretary, held seven meetings with industry groups about
the pollution rules, attended by more than 60 executives
and lobbyists, records show. During that time he met with
only one lobbyist from an environmental group.

In early 2002, Energy and E.P.A. officials got down to
considering new rules. Environmental officials in charge of
enforcement grew alarmed at the proposals emanating from
Mr. Abraham's department, which often echoed the industry's
demands.

In one memorandum, E.P.A. officials attacked an Energy
Department draft as "highly biased and loaded with
emotionally charged code words" that would ultimately
"vitiate" the pollution-control program.

At one point, her aides said, Mrs. Whitman set up what she
thought would be a private meeting with Mr. Cheney to
discuss E.P.A. concerns. When she arrived at his office,
though, she was disappointed to find that Mr. Abraham was
already there to present counterarguments.

Soon an exodus began from the E.P.A.'s enforcement branch.
Eric V. Schaeffer, who joined the agency during the first
Bush administration and was head of the Office of
Regulatory Enforcement, sent a resignation letter to Mrs.
Whitman that February. "We seem about to snatch defeat from
the jaws of victory," he wrote, adding that the White House
"seems determined to weaken the rules we are trying to
enforce."

Mr. Schaeffer and his boss, Sylvia K. Lowrance, then the
agency's top career enforcement official, both said in
interviews they repeatedly warned Mrs. Whitman that the
rule changes would jeopardize the enforcement lawsuits.
Their view, shared by many industry lawyers, was that
judges were often reluctant to penalize companies for
failing to comply with rules that had been subsequently
relaxed. Mrs. Lowrance later took early retirement.

A different view was held by some E.P.A. policy officials,
including Jeffrey R. Holmstead, a former aide to Mr. Gray
in the first Bush White House, who was now in charge of
writing air-pollution regulations. Mr. Holmstead had long
criticized the old rules as unmanageable and
counter-productive, and he believed revising them would
have no impact on the lawsuits in court.

But Mr. Holmstead was uneasy with the lobbyists'
participation. "This would have been so much simpler if
they hadn't gotten Barbour involved, because that just
created this new political intrigue," he said.

In June 2002, Mr. Holmstead had a chance to see how closely
the White House was watching. At a party for the 50th
birthday of Mr. Abraham, Mr. Holmstead ran into Andrew
Card, the White House chief of staff.

Mr. Card "wanted to know how come we were having so much
trouble" finishing up the rule revisions, Mr. Holmstead
recalled.

Shortly after, on June 13, Mrs. Whitman sent a proposal to
the White House. It contained many of the changes that the
Energy Department had championed, and was the foundation of
the final rule revisions published in October 2003.

Mrs. Whitman has never discussed the decision-making
process or broken ranks in public with President Bush. But
the new rules showed that the White House had thrown its
weight behind energy priorities, both environment and
energy officials said.

The rules said utilities would not have to add new
pollution-control devices if upgrades and construction
projects did not cost more than 20 percent of the plant's
value - a loophole all sides said was huge.

Departures From E.P.A.

Mrs. Whitman resigned last May,
saying she hoped to spend more time with her family.
Several former aides said she was frustrated that she did
not have more support within the administration. She
declined through a spokesman to be interviewed.

In a statement, Mrs. Whitman said she had supported
streamlining the pollution rules because many groups agreed
that they "had grown cumbersome, unreliable and
unpredictable." She said that Mr. Bush "expects the members
of his cabinet to advocate forcefully on behalf of his or
her agency" before making major decisions.

Mr. Cheney, Mr. Abraham, Mr. Racicot and Mr. Barbour - now
the governor of Mississippi - declined to comment.

Late last year, top E.P.A. officials announced a new
pollution enforcement policy that seemed likely to
critically weaken the pending lawsuits. By year's end three
more of the agency's top enforcement officials resigned.
"The rug was pulled out from under us," one of them, Rich
Biondi, said.

The new rules evoked fierce opposition, though, as fourteen
states sued to block the change. In December, a federal
appeals court stayed their use, pending further arguments.
E.P.A. officials said they put the new enforcement policy
on hold until the court challenge is resolved.

The administration's goal now is to expand the use of a
more flexible "cap and trade" regulatory system created in
the early 1990's that worked with notable success to combat
acid rain. It lets utilities buy and sell credits that give
them a pollution allowance. The number of credits available
nationwide shrinks over time, creating a cap to ensure that
pollution levels decline. Late last year, administration
officials announced plans to move to the new cap-and-trade
system by revising regulations, rather than pressing for a
new pollution bill, as Mrs. Whitman had envisioned.

Under the administration's plan, nationwide sulfur dioxide
emissions from power plants would fall to 5.3 million tons
by 2015, and nitrogen oxide emissions to 2.2 million tons,
according to E.P.A. estimates. Those would be reductions of
51 and 55 percent, respectively, over levels in 2001.

A recent administration move to control diesel emissions
has drawn praise from environmentalists. But in December,
officials set off a new controversy by proposing a
cap-and-trade approach for another pollutant: emissions
from coal-fired power plants of mercury, which can cause
neurological damage to humans. Instead of starting to
curtail the emissions by 2007, as was widely expected, the
proposal would give utilities until 2018 to make
significant cuts.

Many environmentalists and some former E.P.A. officials
said that while the proposed pollution cuts are
substantial, they give industry more time to make
reductions than existing law. The critics contend that it
was foolish to weaken the pollution lawsuits without
extracting anything in return.

"They are packaging this as a pollution cut, but in fact it
is a pollution delay imposed on a program that the Clean
Air Act requires to go faster," said Dave Hawkins, a lawyer
for the Natural Resources Defense Council in Washington.

What is clear is that the energy industry is satisfied with
the way the Bush administration has gone. "Cost-effective,
and effective, are reasonable ways to describe the Bush
administration's clean-air policy," said Mr. Segal of the
electricity lobbying group. "The administration has a lot
to be proud of on its air policy."

Jennifer 8. Lee contributed reporting from Washington for
this article.

http://www.nytimes.com/2004/03/06/politics/06LOBB.html?ex=1079581625&ei=1&en=8696c8c3db9ed3be


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