By Valerie Volcovici and Lawrence Hurley
WASHINGTON (Reuters) - When Gina McCarthy steps into her new role as administrator of the Environmental Protection Agency she will face an army of lawyers trying to sway the agency as it writes rules on power-plant emissions that will form the centerpiece of the Obama administration's climate-action plan.
At least some of those lawyers are likely to lead legal challenges against the rules once they are issued.
McCarthy, confirmed by the U.S. Senate on Thursday, and the EPA will use a rarely used section of the Clean Air Act to carry out the boldest aspect of the plan President Barack Obama announced in June - slashing carbon pollution from the country's biggest source of greenhouse gas emissions, its thousands of existing power plants.
A source at a utility lobbying group said that while some companies may be inclined to wait and then sue the EPA after it finalizes the rules, the better tactic would be to engage in the rulemaking process but prepare for litigation just in case.
"If you are being prudent you are better off working with the EPA," the source said, noting that the courts have tended to side with the agency in recent high-profile cases.
The U.S. Supreme Court ruled in 2007 that greenhouse gases are a harmful pollutant, which gave the EPA the authority to use the act to regulate the climate-warming emissions.
But there is little precedent for using the Clean Air Act to regulate greenhouse gases from existing sources, creating an opening for lawyers to offer their own interpretations on behalf of electricity sector clients or environmental groups.
Bill Bumpers, a partner and Clean Air Act specialist at Baker Botts' Washington climate-change practice, is gearing up to help clients both inform the EPA's rulemaking process and anticipate lawsuits years down the line.
His clients range from companies that have already adopted early action strategies to curb their emissions - some of which he has designed himself - to those that rely heavily on coal and will be harder hit by future rules.
TALKING THE TECH TALK
Lobbying a federal agency is often different from seeking to influence Congress. What works on Capitol Hill, especially emotive arguments about the impact a regulation might have on jobs, does not work well inside the EPA, said Raymond Ludwiszewski, a former EPA general counsel under Bill Clinton and the first administration of George W. Bush who is now a partner at Gibson, Dunn & Crutcher.
"If you are trying to influence the agency, you are stronger with technical arguments," Ludwiszewski said.
As a result, many law firms have technical experts on staff and will sometimes commission studies that can be cited during the rulemaking process.
The threat of litigation has already influenced the EPA to make a technical adjustment to its proposed regulation on carbon emissions from new power plants, sources familiar with the process have said. Instead of one emissions standard that would apply to both coal- and gas-fired plants, it will set a separate less stringent standard for coal plants to enable at least some efficient facilities to be built.
Obama last month set a deadline of September 20 for the agency to complete that rule, which was originally required to be finalized by April 13.
The proposed rule initially required any new power plant to emit no more than 1,000 lbs of carbon dioxide per megawatt hour, effectively ruling out new plants powered by coal without the as-yet uncommercialized carbon capture and storage technology.
A legal coalition of utilities known as the Utility Air Regulatory Group (UARG), represented by the climate-law practice of Hunton and Williams, has already sued the agency, arguing that there should be separate standards for gas and coal-fired plants. Although the case was thrown out by the court because the rule has not been approved, the suit gave the EPA an early view of the utilities' legal strategy, probably prompting the agency to adjust it to thwart future challenges.
At Sidley Austin, another major law firm, clients can call upon agency veterans such as Roger Martella, a former general counsel at EPA under George W. Bush, and star litigators like Peter Keisler, who has argued a number of high-profile environmental and energy cases in recent years.
"The prime message we try to get out to our clients, if a company believes the rule is going to impact them, is to not wait until the rule is final to develop a legal strategy," Martella said.
Sophisticated industry players involved in rulemaking adopt a series of approaches. They can have private meetings with officials, participate in public meetings, file written comments and exert pressure outside of EPA - on Capitol Hill or at the White House, for example.
In fact, to file a legal challenge to a regulation, a party has to have raised the issue in the rulemaking process by filing a formal statement.
After a proposed rule is published in the Federal Register, parties that oppose it will generally warn the EPA that they will sue if the rule is not changed prior to approval. Firms differ on how heavily litigators are involved in the rulemaking process.
Scott Fulton, a partner at Beveridge and Diamond who served as general counsel to the EPA until January, said the agency is well aware of the potential legal challenges to its upcoming emissions plan, and is certain to "make the rule as flexible as possible" by deferring most authority to the states.
He said the agency will set up a public engagement process that is much more open than in the past and will probably schedule public listening sessions and other direct meetings.
Whatever the legal merits of EPA's regulations, the agency will first have to seek approval from the White House, which signs off on proposed rules before they are issued.
That judgment, said Sean Donahue, a lawyer who represents the Environmental Defense Fund, will be based in large part on "what is politically possible."
(Reporting by Valerie Volcovici and Lawrence Hurley; Editing by Ros Krasny and Prudence Crowther)
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