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Magazine / NEED TO KNOW: ENERGY

Rick Perry’s Air War

The Texas governor may be scoring political points for taking on EPA over pollution rules, but he could be putting his state’s energy companies at risk.

Up in the air: Pollution rules in Texas.(Scott Olson/Getty Images)

photo of Coral Davenport
September 8, 2011

It’s become a staple for Republicans on the 2012 campaign trail to slam the Environmental Protection Agency as a job-killing government regulator. But Rick Perry was bashing EPA—on the stump and in practice—long before it was cool.

As governor of Texas, Perry has engaged in an outright war against EPA for years. Of course, tangling with federal environmental regulators isn’t unusual in the Lone Star State, where the economy deeply depends on the oil industry. Three of the world’s five biggest oil companies are headquartered in Houston, and Texas consumes more fossil fuels and spews more pollution than any other state.

But by any measure, Perry took the fight to new extremes, escalating long-simmering regulatory tension into a symbolic state-federal showdown. He repeatedly issued high-profile rebukes to EPA, refusing to comply with regulations and daring the agency to crack down with punitive measures that he knew could blow up politically in the middle of the 2012 presidential campaign. He channeled Texas regulators’ difficulties with EPA into his own swaggering narrative of a state oppressed by the federal government; he occasionally even threatened secession. Perry’s moves pumped up his national profile, but, critics argue, they hurt not only his state’s air quality but also the pocketbooks of the oil and gas corporations that are the lifeblood of its economy.

 

As far back as 2006—when former Texas Gov. George W. Bush, hardly known as an environmental enforcer, was in the White House—EPA repeatedly warned Perry that Texas’s unique system of regulating industrial air pollution violated the 40-year-old Clean Air Act.

Federal law requires big polluters such as oil refiners to control emissions of dangerous contaminants in each unit of a polluting plant to receive an operating permit. Texas has a “flexible permit” process that issues permits to facilities that simply measure emissions levels for plants as a whole, allowing plant operators to put controls on some—but not all—polluting units.

Last year, after many warnings, EPA gave Texas a deadline of June 30 to submit a plan for a revised permitting process that complies with federal law or to surrender its pollution-licensing authority to Washington. Instead of working with Texas companies to satisfy the federal law, Perry’s Commission on Environmental Quality refused to meet the deadline. When EPA regulators were forced to step in and take over the permitting program, Perry grabbed headlines by charging that EPA was “willing to kill Texas jobs and derail one of the strongest industries in the country.”

Perry has made it clear that Texas has no intention of complying with climate-change rules.

Perry gained a political pop, but some industry officials in Texas grumbled about the practical results. Instead of getting pollution permits from a single state agency, they now must go through a new layer of regulation, applying separately for some permits from EPA, a process that experts say adds time and cost and can slow construction schedules.

The “flexible-permit” battle set the stage for the politically charged Texas-versus-EPA showdown over global warming. Earlier this year, EPA rolled out new regulations to control the carbon pollution that causes global warming. The agency was legally required to do so under a 2007 Supreme Court ruling that carbon pollution endangers human health and is legally subject to regulation under the Clean Air Act. Not surprisingly, the controversial climate-change rules—which require factories, power plants, and oil refineries to use the best available technology to reduce carbon pollution—spurred a wave of pushback: 17 states and dozens of industry groups are suing the agency in a series of legal actions expected to drag on for years.

But most states took a standard precautionary measure: At the same time they are suing EPA, they are also working with the agency to find ways to comply with the rules. Then, if the states lose the lawsuits, they will already be on their way to meeting the new standards. States that do not comply with the rules—or need extra time to do so—will be subject to federal intervention, but those that opt for what experts call a “friendly FIP,” or federal implementation program, will dodge punitive measures and get help from EPA until they cut their pollution to permissible levels.

Texas alone opted for the unfriendly approach. It’s the only state that did not issue a plan for compliance—and Perry has made it clear that Texas has no intention of complying. The move was a blatant slap to the Obama administration—and once again gave Perry the national spotlight. Defying the climate rules offered him the perfect opportunity to loudly decry the science of global warming—which in his book Fed Up! he calls a “contrived phony mess that is falling apart under its own weight”—and to slam EPA as a “rogue agency” with an “activist mind-set” that has “targeted Texas.” Such rhetoric is viral catnip to the tea party voters who could help catapult Perry to the 2012 presidential nomination.

Unfortunately, the Texas oil and gas industry, which has bone-deep ties to the Republican establishment and is far and away Perry’s biggest financial contributor, was once again left holding the bag. Industry officials declined to speak on the record about the practical effects of Perry’s battle with EPA, but a number of contractors who had consulted with companies as they struggled to deal with the fallout of the governor’s political fight said that although the industry certainly opposes stronger pollution regulation, the regulatory uncertainty created by Perry’s moves has made its situation worse.

Polluters in other states that are suing the EPA at least know that no matter what the outcome of the lawsuits, the agency won’t punish them later; in Texas, there is no such certainty—and without it, some companies have scaled back their decisions to build, consultants familiar with the industry’s thinking say.

“It threw Texas economics into a state of flux,” according to an energy and environmental consultant who has worked with major companies in the state but spoke on condition of anonymity because of confidentiality agreements.

“The practical reality is that when you have a standoff like this, you still have to be authorized, you still have to get the permits,” the consultant said. “While that’s all being worked out in the courts, industry has no choice but to do it or risk being shut down.… You have to act as though whoever’s got the most-stringent regulations—in this case, the EPA—is going to win. Because of this, there were plants that chose not to expand. It was a standoff, but a company risks being shut down by the more stringent standard. Nobody in my circle—the major oil and gas companies—was going to take that chance.”

Mathew Tejada, executive director of Air Alliance Houston, a nonprofit group dedicated to reducing pollution in the infamously smoggy city, put it more bluntly: “To make a political point about his opinion on global climate change, Governor Perry has actually made it harder for Texas industry.”

Perry’s campaign did not respond to a request for comment.

Republican strategists say, however, that although Perry’s move may have inconvenienced some in Texas industry, it could still pay off politically, especially with tea party voters. “It absolutely robbed business of certainty, yes,” said Michael McKenna, a GOP strategist and an expert on energy policy and politics. “Business guys get really nervous when they get caught in the switches on this kind of thing.”

But McKenna pointed out the growing divide between two groups that were once inseparable—industry and the new breed of tea party Republicans—and said that Perry appears poised to keep the backing of Big Business while firing up tea party voters.

“Rick Perry’s jihad against EPA is driven by what’s good for Texas voters and consumers,” McKenna said, “not necessarily what’s good for industry.”

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