By Valerie Volcovici
WASHINGTON, Feb 27 (Reuters) - U.S. limits on greenhouse gas emissions face a challenge in federal court this week from more than 100 industry groups and several U.S. states, the latest high-profile effort to halt or overturn the Environmental Protection Agency's rules.
Three federal judges will hear arguments on Tuesday and Wednesday at the D.C. Court of Appeals from groups seeking to overturn the regulations and also convince the judges that the science used by the EPA is wrong.
The EPA's raft of recent clean air rules has divided the power industry between companies that have moved toward cleaner energy, including Exelon and NextEra and those who generate most of their power from coal, including Southern Co and American Electric Power.
Environmental groups and activists concerned about global warming support the EPA regulations because the U.S. Congress has not enacted legislation to cap emissions.
The petitioners, who combined a dozen separate similar lawsuits under the name the Coalition for Responsible Regulation, will target four EPA rules:
* The "endangerment finding" - the scientific finding made by the EPA in Dec. 2009 that found that greenhouse gases endanger public health, enabling the agency to regulate them under the Clean Air Act.
* The "tailpipe rule" - the May 2010 rule, which set greenhouse gas emission and fuel economy standards for new light-duty vehicles.
* The "timing rule" - the April 2010 rule that will require generators and industrial plants to apply for permits to cover greenhouse gas emissions once the rules for vehicles kick in.
* The "tailoring rule" issued in June 2010, which set a timeline to start requiring those industrial and utility sources to apply for permits according to the scale of their emissions.
On Friday, the EPA proposed that only the largest polluters would be required to hold carbon permits. The move was aimed at reducing burdens on states and local government permitting agencies.
SUPREME COURT RULING IN FOCUS
The Supreme Court ruled in 2007 ruling that the EPA had the authority to regulate greenhouses gases using the Clean Air Act if it determined carbon dioxide emissions endanger public health.
Challengers to the EPA climate program range from governments of states and municipalities where employment and tax revenue depend on industries that emit greenhouse gasses, to business lobby groups such as the U.S. Chamber of Commerce. These groups argue that the 1970 Clean Air Act was never intended for regulating greenhouse gasses.
Although most experts expect the judges to support the EPA's "endangerment finding," the other proposed regulations may be more vulnerable under the legal spotlight.
David Doniger, policy director for the climate and air program of the Natural Resources Defense Council, said opponents have a "ghost of a chance" to challenge the stringent process used by the EPA to reach its endangerment decision.
"This kind of attack which will go nowhere in the court," he said, adding that the decision was the product of a "multi-layered pyramid of peer-reviewed scientific research and assessment."
Jeff Holmstead, a partner at law firm Bracewell & Guiliani who represents utilities and other energy industry clients, conceded that the challengers face an "uphill" battle with the endangerment finding because the judges - David Tatel, David Sentelle and Judith Rogers - have all sided with the EPA in earlier cases that challenged its regulatory authority over greenhouse gases.
But Holmstead, a former assistant administrator of the EPA, said the challengers may have a stronger case against some of the EPA's other greenhouse gas regulations.
"In terms of where the EPA is most vulnerable, it is probably the tailoring rule," he said.
The EPA created the tailoring rule to reinterpret a section of the Clean Air Act that requires any facility whose emissions exceed 250 tons per year of any pollutant to apply for a permit from a state agency and show it is using the cleanest available technology.
Unlike other pollutants for which 250 tons of emissions would represent a large amount, carbon is emitted in much higher quantities, meaning even facilities such as schools or churches would be forced to apply for permitting.
Critics of the EPA have argued that the agency's attempt to "tailor" the Clean Air Act is illegal because it rewrites the existing law.
"The tailoring rule is the weakest of the EPA's rules because it violates explicit language in the Clean Air Act," said Howard Feldman, director of regulatory and scientific affairs at the American Petroleum Institute, a petitioner in next week's court hearings.
He said the EPA's altering of the Clean Air Act language proves that the law was never designed to regulate carbon emissions.
"We think the EPA has clearly overstepped Congressional intent," he said.
PRESSURING CONGRESS
Bracewell & Giuliani's Holmstead said if the judges decide to overturn the tailoring rule, it could renew pressure on lawmakers to address power plant emissions.
"I think a lot of people expect that the court will likely overturn the tailoring rule and that is likely to happen in mid-summer," said Holmstead, who had previously served as an assistant administrator of the EPA.
"If the tailoring rule is struck down, there will be pressure to do something immediately," he said, adding that there will be pressure from both sides to come up with "sensible" legislation.
But Rob Brenner, a senior fellow at Duke University who recently retired from the EPA last year,said he expects the judges to uphold all the EPA rules when they issue their decision this summer.
"I think in the end what will happen here is that it is going to be apparent how far off base the critics are," Brenner said.
He noted that the EPA is scheduled to release greenhouse gas regulations for new power plants this spring, and added that he expects those rules will draw similar legal challenges.
But Brenner said the EPA has made a concerted attempt to write the regulations in a way that is not onerous to industry.
"When people see the proposal, these arguments that the new (power plant) standards will be the death knell for coal or any other kinds of arguments are not going to hold up," he said. (Reporting by Valerie Volcovici; Editing by David Gregorio)