EPA Chief Forges Working Relationships with Industry

U.S. energy companies don't see eye to eye with the Obama administration's Environmental Protection Agency. But for the first time in years, they have begun to fashion something resembling a working relationship.

On issues such as measuring the impact of hydraulic fracturing and clamping down on emissions from power plants, the EPA's new chief, Gina McCarthy, has navigated the inherently fraught relationship between regulators and industry without becoming the political lightning rod her predecessor was.

It isn't Ms. McCarthy's policies that make the difference—executives dislike them—but her style, in particular a willingness to make concessions that render regulations relatively more palatable, the executives say.

"We can argue like cats and dogs but we understand where we're both coming from," said Charles Drevna, president of the trade groupAmerican Fuel and Petrochemical Manufacturers, who is almost always at odds with Ms. McCarthy's policy agenda. "She's somebody you would love to go out and have a beer with."

The coming months will test Ms. McCarthy's ability to remain out of the political cross hairs. The EPA is set to issue new regulations for power plants in June, a move expected to draw legal challenges. Meantime, President Barack Obama is faced with a decision on whether to allow the construction of the Keystone XL oil pipeline, which is strongly opposed by environmentalists.

The EPA, long a target of Republican critics, is also the tip of the spear in Mr. Obama's quest to shape policy in his second term by going around Congress, in this case to enact regulations relating to climate change.

Ross Eisenberg, vice president of energy and resources policy at the National Association of Manufacturers, credits Ms. McCarthy with a change in tone, but his praise goes only so far. He said the EPA "really did engage constructively" when it came to regulating mercury emissions from power plants. But with greenhouse gasses, "To date, frankly, they're not."

Several utility companies complained in 2012 that they couldn't comply with a three- year deadline to meet new standards for discharge of mercury and some other toxins. They suggested an alternative to how the EPA was seeking to limit emissions, and argued it was unnecessary for plants to monitor acid gases if they already monitored for sulfur dioxide, which performs the same function.

Ms. McCarthy held a series of discussions and identified a pathway for the EPA to extend the time limit for compliance for up to five years. She made the industry's requested change to the emissions limit, which is estimated to cut the cost of compliance by up to $700 million. The EPA also set alternative standards for sulfur dioxide so a plant with a sulfur-dioxide monitor could avoid the cost of monitoring acid gases.

Under Ms. McCarthy's predecessor, Lisa Jackson, the EPA faced consistent criticism. Mitt Romney, Mr. Obama's Republican challenger in the 2012 election—and Ms. McCarthy's former boss—called for Ms. Jackson to be fired over rising gas prices. Not long afterwards, Ms. McCarthy's own confirmation took three months to conclude.

People who have worked with both EPA chiefs say there was tension over policy issues and management style. Ms. Jackson was a favorite among environmental groups. Ms. McCarthy, who worked for Mr. Romney when he was governor of Massachusetts and was an assistant administrator under Ms. Jackson, gives industry leaders the impression she stands up to that key Democratic constituency.

"I don't think Gina says anything different to me than she would to the head of an environmental group," said Dave McCurdy, president of the American Gas Association. "And she'll push back" against both environmental and industry groups.

David Goldston, director of government affairs at the Natural Resources Defense Council, said Ms. McCarthy is a straight-shooter. "You don't feel like there's a lot of massaging statements in meetings to obfuscate or try to leave different impressions with different people," he said. He said she has been "strong and effective" at the EPA even if his environmental group would have liked the agency to go further on some regulations.

Ms. Jackson didn't respond to a request for an interview.

Ms. McCarthy sidestepped questions of where she disagreed with her predecessor and said she has "no beef with her."

She said she thinks part of her appeal to traditional EPA adversaries is that she doesn't consider herself an "advocate" for any particular outcome. "The difference with me is I'm willing to moderate that so that I can take everybody else with me. I don't go for the perfect or the most; I go for the practical."

Arriving at her Pennsylvania Avenue office at 7:15 a.m., a cup of black coffee in hand and a security detail in tow, Ms. McCarthy is one of the few cabinet members with a presidential blueprint to guide her duties. Mr. Obama's Climate Action Plan, which he unveiled last summer, gives Ms. McCarthy the autonomy to operate without fear of getting on the wrong side of the White House, she said.

To accomplish her goals she employs a gritty pragmatism some people who have worked with her say can come off as overly tough. Just 5 feet 2 inches tall, her sense of humor employs a liberal use of four-letter words while her Boston accent is so thick she can be difficult for non-Bostonians to understand.

She has been surprised by the government's ethics bureaucracy and its gift guidelines, remarking how officials chased her down for a dinky North Pole pin someone gave her at an event ("I threw the f—ing thing away," she told them), and for a jar of moose meat that "could gag a maggot" she accepted from a little girl during a hearing in Alaska.

She has a blunter take on the EPA's critics on Capitol Hill than on the companies she regulates, saying that because of lawmakers' political concerns they are "not thinking about the issues the same way."

Sen. James Inhofe (R., Okla.), a longtime and outspoken EPA critic, said he has been won over by Ms. McCarthy's work.

Mr. Inhofe hosted two meetings last year in his office at the Capitol between Ms. McCarthy and executives of Devon Energy Corp. DVN +0.95% They told Ms. McCarthy the EPA was overestimating the level of greenhouse-gas emissions from hydraulically fracked wells in an annual report to the United Nations.

The accounting matters to industry executives because part of the U.N. climate-change effort involves coordinating with governments to write national plans to address the emissions.

The executives presented alternative methods for the calculations. They became the basis for Ms. McCarthy's proposed change in 2014 in how the EPA will measure such emissions.

"She sat down and made modifications to the rule, and that was very helpful," Mr. Inhofe said. "You don't get that if you have a relationship of hostility."

Posted on March 9, 2014 in Energy Efficiency, Legislative and Raw Materials.