Via Politico:

By Erica Martinson

Supporters of President Barack Obama’s climate regulations are getting worried EPA may have few tools to use if states decide to follow conservatives’ advice and refuse to cooperate with the agency on climate change regulations.

Questions abound about how the agency would impose its own climate plans on behalf of states or make sure the states that do submit plans actually stick to them.

Also up in the air: whether the agency has the right to hit the violators with penalties that could even include the loss of federal highway dollars — one of the main fiscal weapons Washington has used to get states to toe the line on everything from motorcycle helmet laws to underage drinking.

But the agency is declining to say whether highway dollars would actually be at risk. And conservatives like Senate Majority Leader Mitch McConnell call their “just say no” strategy the surest way for states to create momentum to block or undo Obama’s climate initiative — a strategy that mirrors the GOP’s state-by-state efforts to undermine Obamacare’s health care exchanges.

The growing squeeze comes as EPA is months away from finishing rules that would require states to cut the carbon dioxide output of their power plants. As with the Obamacare exchanges, any state that fails to submit an adequate plan for cutting pollution will have to live with a federal anti-pollution plan crafted by EPA. And EPA’s requirements would probably be much more expensive and onerous than any plan a state would create for itself, many analysts say, even if the feds don’t impose additional penalties.

Refusing to write your own plan “just means somebody else is driving your car,” said Susan Tierney, senior adviser at Analysis Group who supports EPA’s rulemaking. States can probably produce a “much more compelling and lower-cost option,” she added.

One key issue is the difference between what EPA could enforce on its own through a federal plan versus what the states could do themselves. States that are game have various options, including increasing their reliance on lower-pollution sources like natural gas, ramping up renewable energy and pushing energy-efficiency programs that reduce consumers’ power demand. Such programs have been the route taken by East Coast states participating in the Regional Greenhouse Gas Initiative with little drama.

But EPA can’t control the state legislatures, transmission organizations, utility commissions and other entities that would make those measures possible. That means a federally created anti-pollution plan would probably focus directly on requiring greenhouse gas cuts from individual power plants, which would probably be much more expensive.

And that could hurt EPA’s ability to roll out the climate policy, according to agency supporters like William Becker, the executive director of the National Association of Clean Air Agencies, the trade association for state and local air regulators.

The “naysayers,” he said, who are “painting such a bleak picture and trying to constrain the flexibilities that EPA is offering to the states are going to have just a chilling effect on the ability of agencies to implement this program in the way that the public expects states to do.”

Others go even further, arguing that EPA has a mandatory duty under the Clean Air Act to hold back millions of dollars in highway funds and to impose strict limits on industrial construction permits in states that refuse to comply.

A July white paper by lawyers from the D.C. firm Wilkinson Barker Knauer also argues that states could lose highway money or face onerous construction restrictions if they don’t comply.

Don’t fall for those scare tactics, say EPA’s adversaries, who argue it’s far riskier for states to play along with the agency. Instead, they say, refusing to submit plans would save states time and money, increase opponents’ leverage in Congress and leave time for court challenges that could eliminate the climate regulations altogether.

“Think twice before submitting a state plan — which could lock you in to federal enforcement and expose you to lawsuits,” McConnell said in an op-ed last week that stoked the debate. “Refusing to go along at this time with such an extreme proposed regulation would give the courts time to figure out if it is even legal, and it would give Congress more time to fight back.”

The New York Times editorial board denounced McConnell’s efforts as “reckless” Monday. “Mr. McConnell’s call to governors to sit on their hands is a travesty of responsible leadership,” the board wrote. It added that “governors who follow his advice may not get the result they want, since, under time-honored environmental law, noncompliant states could face imposition of a blanket federal alternative that is not tailored to local conditions.”

But Hal Quinn, CEO of the National Mining Association, argued that the Clean Air Act allows states to decide whether to submit a compliance plan.

“Suggestions that Leader McConnell’s op-ed is asking states to do something illegal is wrong,” he said. And besides, Quinn said, submitting a state compliance plan is “building a Trojan Horse for EPA to come in … if you stumble or fall in meeting those targets.”

McConnell’s argument has its roots in an argument made in a Federalist Society paperpublished in November, which asked: “What if states just said no?”

“The notion that EPA could impose sanctions if States fail to submit the plan EPA demands can be dismissed quickly: EPA does not have that authority,” said the paper, written by three attorneys from the firm Troutman Sanders.

Serious players strongly disagree about whether EPA could impose either mandatory or voluntary sanctions under the section of the Clean Air Act it’s using to write the power plant rules. And the agency itself isn’t doing much to clear up the question.

EPA Administrator Gina McCarthy gave only an indirect answer last week after Senate Environment and Public Works Chairman Jim Inhofe asked her how the agency would handle states that drag their feet. “Would the EPA consider withholding federal highway funding?” the Oklahoma Republican asked. “Or would you say no?”

“This is not a traditional [State Implementation Plan] under the National Ambient Air Quality Standards,” McCarthy responded. “There’s other processes for us to work with states. Clearly our hope is that states will provide the necessary plans. If not, there will be a federal system in place to allow us to move forward.”

EPA is writing its climate regulations under the Clean Air Act’s Section 111, which requires the agency to establish a procedure for reviewing compliance plans that’s “similar” to the procedure outlined by Section 110, which governs some other pollution rules. But it’s not clear whether the agency’s full enforcement authority applies.

The proposed rule does not directly address the issue, though it says the 111(d) state implementation plans will be different from the air quality standard plans “in several respects, reflecting the significant differences between CAA sections 110 and 111.”

The debate is part of a host of uncertainties about the exact impact of EPA’s upcoming regulations, which will provide the states with carbon-reduction goals but allow them a wide berth of flexibility in how to get there. But the intersection of politics and policy has proved to be a rough road.

One state that’s indicative of that conflict is McConnell’s own home state of Kentucky, where the administration of Democratic Gov. Steve Beshear has been working closely with EPA on crafting a plan to comply with the climate rule.

While the state’s Energy and Environment Cabinet “appreciates Sen. McConnell’s comments and concerns,” it doesn’t agree, said spokesman Dick Brown.

“The overwhelming majority of our stakeholders are telling us to make preparations to submit a plan,” Brown said. “Failing to follow through with creation of that plan means Kentucky would most likely have to abide by a Federal Implementation Plan that would cause harm to Kentucky’s economic future and burden the next administration with challenges not of its making.”

In the end, the question of mandatory penalties is likely to be hashed out front of federal appellate judges.

Meanwhile, McCarthy said her agency will stay on track.

“My only comment would be that EPA has been working with the states well before we put pen to paper on this rule,” she said after last week’s hearing. “That will not stop. And we continue to have tremendous dialogue with the states — including the state of Kentucky.”

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