U.S. carbon rules could slam door on new coal plants
* Proposed rules on new plants expected this month
* Could push carbon capture, other ways to cut emissions
By Timothy Gardner and Valerie Volcovici
WASHINGTON, Feb 13 (Reuters) - The Obama administration is expected soon to unveil long-delayed rules limiting carbon emissions from new coal-fired power stations, possibly helping to slam the door shut well into the future on building plants that run on the fuel.
The Environmental Protection Agency has dragged its feet on proposing the new standards on carbon emissions that would hit new coal plants or facilities undergoing expansion.
The short-term impact of the rules, the first to limit U.S. carbon emissions from new power stations, is expected to be symbolic -- the rules will not tackle existing plants, which would have been far more disruptive to the industry.
But in the long run it could set the stage for rules that take on such cuts.
"The proposed rule is certainly expected to send the message that coal is dead," said Christine Tezak, an energy policy analyst at wealth management company Robert W. Baird & Co.
Republicans sharply oppose a raft of clean-air initiatives from the EPA and are keen to take the argument on the campaign trail for this year's presidential election that the initiatives kill jobs and saddle businesses with onerous costs.
The longer the administration delays, the less likely the rules will be finalized before November's vote and the greater the chances they could be overturned if President Barack Obama loses.
But EPA chief Lisa Jackson, whose mantra is smart rules can protect the environment, human health and the economy, says the carbon plan will be out early this year.
The delay on the carbon rules is simply to work out the kinks so they are not too costly on power companies, said administration sources, who asked not to be identified.
U.S. states and environmentalists who have sued the EPA in the past to speed up the carbon rules also expect to see the proposal soon. "It's our expectation that the rules for greenhouse gas emissions from new power plants will be issued this month," said Mike Myers, a New York state government lawyer involved in talks with the EPA.
BETTER SAFE THAN SORRY
After delaying the carbon rules in June and again in September last year, the EPA finally submitted them in November to the White House's Office of Management and Budget, where they were being reviewed before going back to the agency.
The OMB has already held the rules for 90 days, which is normally the length of time the White House would review proposals such as these.
The environmental groups that sued the EPA on the carbon plan would consider going back to court if the White House continued to delay the rules, according to sources in the organizations.
A ruling favorable to the environmental groups could result in the courts laying down a hard date for the release of the rules.
Obama delayed a major smog rule last fall, leading some environmental groups outside the talks on the carbon regulations to worry a precedent had been set for axing clean-air initiatives.
Still, officials from states and environmental groups in the talks said the administration would move forward. The agency has created a public database of the country's top emitters and is requiring the biggest emitters to hold permits for releasing greenhouse gases.
"The administration is working on getting it right," said Jeff Tittel, head of the New Jersey chapter of the Sierra Club, one of the groups that have sued the EPA over carbon. "It's better to be safe than sorry, because they don't want to rush a rule that can't be implemented."
WHAT IF GAS RUSH SLOWS?
The outlook for new coal plants has been darkened by the EPA's host of clean-air rules and as electricity companies dash to build plants to burn much cheaper natural gas.
The EPA rules have pushed utilities to close more than 30 coal-fired plants, and companies have announced plans to shut at least 130 more through 2020. No new coal-fired plants were started in 2011, but more may be needed in the future if the economy recovers and natural gas prices rebound.
The carbon rules could require new coal-fired power plants to capture a portion, up to 60 percent, of their carbon emissions and bury them permanently underground, or take other measures to reduce emissions.
The EPA's overall clean-air efforts have divided the power industry between companies that have moved toward cleaner energy, including Exelon and NextEra, and those that generate most of the power from coal, including Southern Co and American Electric Power.
Southern, which owns the three largest carbon-polluting power plants in the country, would not comment on the carbon rules, but has said EPA air rules taken together will force it to shut 40 percent of its coal-fired generation.
Melissa McHenry, a spokeswoman for American Electric Power, said the United States needed to worry about the long-term implications of the carbon rules.
"Near-term it's not an issue, but what are the implications of the rules longer-term if the shale gas business doesn't pan out the way people expect it to?," she said. "It's a concern for long-term reliability" of the electric grid. (Editing by Russell Blinch and Dale Hudson)
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