NEW YORK (Dow Jones)

The U.S. Environmental Protection Agency may delegate to states the tough decisions on judging the best technologies to cut greenhouse-gas emissions, adding a new uncertainty for industries likely to face regulations aimed at fighting climate change.

Energy companies are closely watching the debate on technology as the EPA takes initial steps toward requiring power plants, refineries, chemical plants and other sources to hold permits to emit carbon dioxide and gases starting next year. Many environmentalists are pressing for the EPA to draft a rigorous set of specific guidelines for the "Best Available Control Technology," or BACT, for emitting sources.

The EPA is expected to issue BACT guidance to states by the end of the year, a critical part of the permitting process for new plants and facilities planning to make major modifications. But finding any consensus on what technologies best control CO2 emissions has been difficult, particularly over the issue of power-plant fuels.

For example, many environmental groups want power firms to replace coal-fired power-plant projects with natural gas-fueled plants or require a company to fit its station with expensive carbon-storage facilities. And some groups have been fighting to prevent refiners from modifying their facilities to refine crude from emissions-heavy oil sands. Others have pushed to allow for the flexibility to use market-based programs such as spending money to encourage lower electricity demand, which indirectly cuts emissions.

The EPA's approach "may not necessarily be--and I emphasis the word may--may not necessarily be to take a position," said EPA Senior Counsel Joe Goffman at the Northeast Climate Policy Forum here Tuesday. Instead, the agency may "counsel the states that do a lot of permitting as how to think about these issues."

Not taking a definitive position would allow the agency to navigate a delicate political solution. States such as California that may want a more stringent application can draft tough rules around technologies, while others such as Texas can put in place guidelines more attuned to industry concerns. Although federally regulated--and open to EPA review--air permits for power plants and other large industrial facilities are processed by state officials.

If the EPA doesn't take a position, it could be viewed as a minor win for industries seeking to avoid the most stringent and expensive emission-cutting solutions. However, it would also create further complications for emitting sectors.

Not taking a position would be "a complete punt to the states," said Jeff Holmstead, a former senior EPA official and now a partner with law firm Bracewell and Guiliani. "For a time, there's going to be a lot of uncertainty...you never know what a state or a judge is going to do," he said.

States, which traditionally have been heavily involved in the regulation process for other pollutants, have already voiced concerns about the cost of implementing permits for greenhouse gases, which unlike other pollutants have a global rather than simply a regional impact. They also have been waiting for EPA input on some of the thorniest issues, such as how to factor in efficiency when deciding on a power plant permit or how to take into account fuel types--from wind to coal--when determining the best technological approaches, said J. Jared Snyder, an assistant commissioner for the New York State Department of Environmental Conservation on the sidelines of Tuesday's forum.

"States want to see guidance as to how to deal with greenhouse gases. It is not something they've done before. [States are] in a very different place when regulating greenhouse gases," Snyder said.

Some states may want the EPA to determine the guidelines to help create parity around the country. Without such equity, migration of manufacturing and other energy and emissions-intensive industries may accelerate out of high-cost states to those with lower costs.

"In New York and California, you may be facing very strict limits compared to those in Kansas or Alabama," said William Bumpers, a partner at the law firm Baker Botts LLP.

He added the regional disparity may equalize over time as technologies are used on a wide scale and other states are required to adopt them.

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