U.S. Environmental Protection Agency Administrator Lisa Jackson, speaks during a news conference in Rio de Janeiro June 20, 2012.

NEW YORK | Fri Dec 28, 2012 4:28pm EST

NEW YORK (Reuters) - The past four years of U.S. environmental regulation was marked by a crackdown on emissions that angered coal miners and power companies. Over the next four, the new head of the Environmental Protection Agency will have to decide whether to take on an even larger industry: Big Oil.

Following Lisa Jackson's resignation on Wednesday, her successor will inherit the tricky task of regulating a drilling boom that has revolutionized the energy industry but raised fears over the possible contamination of water supplies.

The controversial technique at the center of the boom, hydraulic fracturing, involves injecting millions of gallons of water laced with chemicals deep into shale rocks to extract oil and gas. It has become a flashpoint issue, putting the EPA -- charged with safeguarding the nation's water -- in the middle of a fight between environmentalists and the energy industry.

Both sides now eagerly await a major EPA research project into fracking's effects on water supplies due in 2014, as well as final rules on issues including the disposal of wastewater and the use of 'diesel' chemicals in the process.

It is unclear who will take the role, but the incoming chief may have a "huge impact" on the oil and gas industry, says Robert McNally, a White House energy adviser during the George W. Bush administration who now heads the Rapidan Group, a consulting firm.

On the one hand, energy industry and big manufacturers are warning the EPA not to impede a drilling boom that offers the promise of decades' worth of cheap energy. Meanwhile, environmentalists are pressing President Barack Obama to ensure the drilling bonanza is not endangering water resources.

"This administration clearly needs contributors to economic growth for its economic legacy as much as it needs to add to its environmental legacy," said Bruce Bullock of the Maguire Energy Institute at Southern Methodist University in Dallas.

"This appointment could be key in seeing which of those two legacies is more important."

There are many contenders for the role, but no clear front-runner as yet. Obama may seek an insider to avoid a difficult confirmation process, with possible candidates including Bob Perciasepe, the EPA deputy administrator and interim chief, and Gina McCarthy, who runs the air quality division.

Obama is unlikely to win Congressional approval for a heavy-handed regulator, and there is no suggestion of a stringent crackdown.

Even Jackson, who suffered withering criticism from big industry and Republicans for her efforts to curb pollution and limit greenhouse gas emissions, has cautiously condoned the practice as safe, while acknowledging the need for greater study and, in some cases, oversight.

"(Fracking technology) is perfectly capable of being clean," Jackson said in February. "It requires smart regulation, smart rules of the road."

Jackson's successor may now be charged with refining those rules, and both energy companies and fracking critics are anxious about the outcome.

Industry body Independent Petroleum Association of America said the EPA has "hindered development" of oil and gas for four years, and looks forward to a new chief who will promote energy drilling "hand in hand" with environmental regulation.

Executive director of the Sierra Club environmental group Michael Brune says the EPA has "unfinished business" in addressing things such as the release of methane emissions during fracking.

APPETITE TO REGULATE

Some analysts say Obama will not risk the economic stimulus of cheaper, domestic energy by pushing for tougher regulations. The oil sector is one of the few bright spots in the U.S. economy; natural gas prices are near their lowest in a decade, a boon for manufacturers, and U.S. oil output is the highest in 18 years.

"Even before (Jackson's resignation) there didn't seem to be much of an appetite in the White House to regulate shale drilling on a federal level in the next couple of years," says Nitzan Goldberger, U.S. energy policy analyst with Eurasia Group.

But big drillers such as ExxonMobil and Chesapeake who have plowed billions of dollars into shale fields are watching carefully for any sign of new rules or oversight.

Mark P. Fitzsimmons, a former lawyer in the Department of Justice's environmental division, and now a partner at Steptoe & Johnson LLP in Wash DC, says there is "a risk of overregulation." Some drilling activity has already slowed sharply this year due to the slump in natural gas prices.

"Regulatory overlays that add to the cost of production will further slow down development" but won't stop it, he said.

While fracking technology has been around for decades, it has only gained widespread use across dozens of states in recent years. The EPA, like many groups, has struggled to keep up with the expansion, according to Government Accountability Office reports released earlier this year.

After years in which states were mostly responsible for regulating onshore drilling, the new EPA administrator will be pressed to take a more central role.

A year ago, in the first U.S. government report of its kind, the EPA drew a potential link between water contamination in rural Pavillion, Wyoming and fracking, based on samples of ground water from the area. That study has been contested, and subsequent research has been inconclusive.

A firmer word on the impact may not emerge until 2014, when the EPA is expected to release the first exhaustive in-depth government study on the long-term effects of fracking on drinking water, commissioned by Congress over two years.

While climate change issues and air pollution may remain larger agency priorities, fracking is moving up the agenda.

"I don't think they would be capable of ignoring something that Matt Damon makes a movie about," said Fitzsimmons.

Damon and John Krasinski star in "Promised Land," a new film that opened on Friday exploring the social impact of fracking. It received mixed reviews from critics, but is being closely watched by an energy industry that fears it could further antagonize public opinion over domestic drilling.

A Gallup poll this year showed drinking water contamination is the leading environmental concern among Americans.

DIESEL, WASTEWATER AND FLARING

The debate rages over a diverse range of issues.

While fracking was exempted from the Federal Clean Water Act in 2005, operations that used diesel fuel, which contains a number of toxic chemical compounds, were not exempted.

However, what exactly constitutes "diesel" has been a bone of contention among oil firms and environmental groups.

"The question is how to define "diesel" - broadly or narrowly," says consultant McNally.

"It's a big issue especially for Bakken producers," he said, referring to the region of North Dakota where crude oil output has more than tripled in two years.

The EPA published a draft definition in May, which met with criticism from the industry and some legislators, but it will fall to the new administrator to set a final definition.

Under Jackson, the EPA also said it would begin to regulate the millions of gallons a day of wastewater that is withdrawn from wells after the fracking process, probably in 2014. This is usually trucked offsite and sometimes re-injected elsewhere, although increasingly it is being reprocessed for further use.

And eventually, the EPA could face pressure to backtrack on previous initiatives. In April, the agency relented to pressure from the industry, giving drillers until January 2015 to end the practice of "flaring" excess natural gas from wells that were not connected to pipelines. It had initially proposed that firms cease almost immediately.

For Jackson's successor, a central question is whether the EPA takes a broader role in the industry, or, as Jackson hinted a year ago, allows state officials to call most the shots when it comes to drilling:

"It's not to say that there isn't a federal role, but you can't start to talk about a federal role without acknowledging the very strong state role."

(Additional reporting by Selam Gebrekidan and Valerie Volcovici; Editing by Joseph Radford and Andrew Hay)

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U.S. Environmental Protection Agency Administrator Lisa Jackson, speaks during a news conference in Rio de Janeiro June 20, 2012.

WASHINGTON | Thu Dec 27, 2012 6:54pm EST

WASHINGTON (Reuters) - U.S. Environmental Protection Agency chief Lisa Jackson, who spearheaded the Obama administration's crackdown on carbon emissions, said on Thursday she will step down after almost four years of battles with Republican lawmakers and industry over proposed regulations.

Under her leadership, the agency declared for the first time that carbon dioxide was a danger to human health and could be regulated under the Clean Air Act, leading the EPA to develop a new regulatory regime to limit carbon emissions.

Industry groups and Republican lawmakers opposed Jackson's efforts to fight climate change, hauling her in for numerous hearings in Congress, and she faced some pushback from within the administration too.

She won praise from many environmental groups, while others complained her EPA was too timid. It was unclear what direction the administration will take on climate change during President Barack Obama's second term.

Obama thanked Jackson for her service, praising her work on mercury pollution limits, fighting climate change and helping set new fuel economy standards for vehicles.

"Under her leadership, the EPA has taken sensible and important steps to protect the air we breathe and the water we drink," Obama said in a statement.

Jackson, the first black administrator of the 17,000-strong EPA, said in a statement she was "confident the (EPA) ship is sailing in the right direction."

Jackson, 50, is expected to leave her cabinet position after Obama's State of the Union address in early 2013. Leading the list of potential replacements are Bob Perciasepe, deputy EPA administrator, who will take over the agency on an interim basis; and Kathleen McGinty, a former head of Pennsylvania's Department of Environmental Protection and a protégé of former U.S. Vice President Al Gore.

Also said to be in the mix are Gina McCarthy, the EPA's assistant administrator for the Office of Air and Radiation; and Mary Nichols, chair of the California Air Resources Board.

Jackson's departure was not a surprise. Analysts had not expected her to stay for Obama's second term.

The administration is expected to face a tough fight to get any potential nominee confirmed by the Senate -- especially any candidate seen as being in the mold of Jackson.

"Secretary Jackson played the environmental ‘bad cop' to President Obama's more moderate ‘good cop,' but the result of their tag-team effort has been a huge expansion of the EPA's power. That's the exact opposite of what is needed," said S. T. Karnick, research director at the Heartland Institute, a Chicago group that is skeptical of man-made climate change.

Jackson is the first major energy policy official to step aside since Obama's re-election last month. Some have speculated that Energy Secretary Steven Chu, a Nobel prize-winning physicist who has also clashed with industry, will also depart, as may Interior Secretary Ken Salazar.

BRUISING ENCOUNTERS

Republican lawmakers accused Jackson's EPA of massive government overreach that choked economic growth, and passed numerous bills aimed at undoing the regulations. Obama did not sign their bills into law, but the White House did begin to pull back or delay rules in the face of the relentless onslaught.

Some speculated Jackson would step down in 2011, when Obama decided to delay rules to restrict emissions of smog-forming chemicals from power plants.

"From an energy and consumer perspective, it has to be said that the Jackson EPA presided over some of the most expensive and controversial rules in agency history," said Scott Segal, director of the Electric Reliability Coordinating Council, which lobbied against many of the EPA's proposed regulations.

States and governors fought Jackson's rules in the courts, scoring a win in August when a U.S. appeals court overturned the EPA's Cross-State Air Pollution Rule, aimed at reducing harmful emissions from coal-burning power plants.

On Thursday, many environmentalists and public health advocates hailed Jackson, saying she leaves a legacy of cleaner air.

"Administrator Jackson has been one of the most effective leaders in the history of the Environmental Protection Agency," Larry Schweiger, president of the National Wildlife Federation.

Jackson is a chemical engineer by training, and reports in recent weeks suggested she might be under consideration for the post of president of Princeton University. She is also a one-time chief of staff of New Jersey Governor John Corzine, and other media reports say she may be mulling a run for governor of that state.

Despite contentious dealings with Congress, Jackson maintained a cordial relationship with one of her biggest critics, Senator Jim Inhofe. She even kept a photo of the Oklahoma Republican and his grandchildren in her office.

"Lisa Jackson and I disagreed on many issues and regulations while she headed the EPA, however, I have always appreciated her receptivity to my concerns, her accessibility and her honesty," said Inhofe, who has called climate change a hoax, chided the Obama administration for a "far left green agenda" and vigorously opposed carbon regulations.

Inhofe said Jackson's departure offers the White House the chance to appoint someone "who appreciates the needs of our economy."

UNFINISHED AGENDA INCLUDES FRACKING

A self-described pragmatist, Jackson passionately fought to limit air pollution. She often described her two sons' struggles with asthma when discussing the importance of clean air.

Jackson also rejected her critics' complaints that stronger environmental rules were incompatible with a robust economy.

When broad climate change legislation sputtered in Congress in 2010, the EPA became the White House's main vehicle for addressing carbon emissions.

Since then, the agency has finalized rules outlining restrictions on carbon emissions for new power plants, effectively prohibiting the construction of new coal-fired plants without carbon-capture and storage technology.

Natural Resources Defense Council President Frances Beinecke said Jackson's successor "will inherit an unfinished agenda that begins with the issuance of new health protections against carbon pollution from existing power plants - the largest remaining driver of climate change that needs to be controlled."

The EPA also will help decide whether the federal government will regulate hydraulic fracturing, or fracking. The drilling technique has sparked a boom in U.S. energy production but opponents have linked it to water pollution and other problems.

Most regulation of fracking has fallen to the states, but the EPA has said it plans to propose standards on wastewater from gas wells by 2014 and is considering rules that would require more disclosure about the chemicals used in fracking.

U.S. oil and gas production has reached record levels in recent years. Even so, drillers have complained that EPA has taken too heavy a hand in regulating energy production and warn that onerous rules could crimp oil and gas output.

"In the past four years, EPA has hindered development of our nation's oil and natural gas resources by making it difficult for America's independent producers to overcome the enormous regulatory obstacles to operate," said Julia Bell, spokeswoman for the Independent Petroleum Association of America.

(Additional reporting by Valerie Volcovici and Roberta Rampton; Editing by Ros Krasny, Will Dunham, Mohammad Zargham and David Gregorio)

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1 of 5. Farmer Gail Wright is pictured next to a water pump which he says he is likely to shut down because the Ogallala Aquifer no longer provides adequate water near Sublette, Kansas, November 26, 2012. Residents of the Great Plains over the last year or so have experienced storms reminiscent of the 1930s Dust Bowl. Experts say the new storms have been brought on by a combination of historic drought, a dwindling Ogallala Aquifer underground water supply, climate change and government farm programs. Picture taken November 26.

LIBERAL, Kansas | Sun Dec 30, 2012 9:16am EST

LIBERAL, Kansas (Reuters) - Real estate agent Mark Faulkner recalls a day in early November when he was putting up a sign near Ulysses, Kansas, in 60-miles-per-hour winds that blew up blinding dust clouds.

"There were places you could not see, it was blowing so hard," Faulkner said.

Residents of the Great Plains over the last year or so have experienced storms reminiscent of the 1930s Dust Bowl. Experts say the new storms have been brought on by a combination of historic drought, a dwindling Ogallala Aquifer underground water supply, climate change and government farm programs.

Nearly 62 percent of the United States was gripped by drought, as of December 25, and "exceptional" drought enveloped parts of Kansas, Colorado, Oklahoma, Texas, and New Mexico, according to the U.S. Drought Monitor.

There is no relief in sight for the Great Plains at least through the winter, according to Drought Monitor forecasts, which could portend more dust clouds.

A wave of dust storms during the 1930s crippled agriculture over a vast area of the Great Plains and led to an exodus of people, many to California, dramatized in John Steinbeck's novel "The Grapes of Wrath."

While few people believe it could get that bad again, the new storms have some experts worried that similar conditions - if not the catastrophic environmental disaster of the 1930s - are returning to parts of Texas, Oklahoma, New Mexico, Kansas and Colorado.

"I hope we don't talk ourselves into complacency with easy assumptions that a Dust Bowl could never happen again," said Craig Cox, agriculture director for the Environmental Working Group, a national conservation group that supports converting more tilled soil to grassland. "Instead, we should do what it takes to make sure it doesn't happen again."

Satellite images on December 19 showed a dust storm stretching over an area of 150 miles from extreme southwestern Oklahoma across the Panhandle of Texas around Lubbock to extreme eastern New Mexico, said Jody James, National Weather Service meteorologist in Lubbock. Visibility was reduced to half a mile in places, stoked by high winds, he said. At least one person was killed and more than a dozen injured in car crashes.

"I definitely think these dust storms will become more common until we get more measurable precipitation," James said.

'DIRTY 30S'

The Great Plains is a flat, semi-arid, area with few trees, where vast herds of buffalo once thrived on native grasses. Settlers plowed up most of the grassland in the late 19th and early 20th centuries to create the wheat-growing breadbasket of the United States, encouraged by high commodity prices and free "homestead" land from the government.

The era known as the "Dirty 30s" - chronicled by Ken Burns in a Public Broadcasting Service documentary that aired in November - was when a 1930s drought gripped the Great Plains and winds carried away exposed soil in massive dust clouds.

Bill Fitzgerald, 87, a farmer near Sublette, Kansas, remembers "Black Sunday" on April 14, 1935, when a clear, sunny day in southwest Kansas turned black as night by mid afternoon because of a massive cloud of dust that swept from Nebraska to the Texas panhandle.

"My older brother and I were in my dad's 1927 or '28 Chevy truck a mile north and a mile west of the house and we saw it rolling in," Fitzgerald said. "It was about 10 p.m. when it cleared enough for us to go home."

Farming practices have vastly improved since the 1930s. Farmers now leave plant remnants on the top of the soil and less soil is exposed, to preserve moisture and prevent erosion.

Irrigation beginning in the 1940s from the Ogallala aquifer, a huge network of water under the Great Plains, also made land less vulnerable to dust storms.

DRYING UP

But the Ogallala aquifer is drying up after years of drawing out more water than was replenished.

Many farmers have had to drill deeper wells to find water. Others are giving up on irrigation altogether, which means they can no longer grow crops of high-yielding and lucrative corn. They will instead grow wheat, cotton or grain sorghum on dry land, which depends completely on natural precipitation in an area that typically gets 20 inches of rain a year or less.

Near Sublette, Kansas, farmer Gail Wright said he would probably give up irrigating two square miles of his land and would plant wheat and grain sorghum instead of corn because of the diminishing aquifer. Drilling deeper wells would cost $120,000 each, Wright said.

"When we drilled those wells in the 1960s and 70s, we were doing 1,500 or 1,600 gallons per minute," said Wright. "Now, they are down to anywhere from 400 to 600 gallons per minute. We probably pumped out 200 feet of water."

Another farmer in Sublette, 79-year-old Lawrence Withers, whose family farms land his grandfather settled in 1887, is resigned to a future without irrigation.

"We have pumped 170 feet off the aquifer, that's gone. There's just a little tick of water at the bottom," he said.

The Ogallala supplies water to 176,000 square miles (456,000 square km) of land in parts of eight states from the Texas panhandle to southern South Dakota. That amounts to about 27 percent of all irrigated land in the nation, according to the U.S. Geological Survey.

The volume of water in the aquifer stood at about 2.9 billion acre feet in 2009, a decline of about 9 percent since 1950, according to the Geological Survey. About two-and-a-half times as much water was drawn out in the 14 years ended 2009 as during the prior 15-year period, data shows.

The water may run out in 25 years or less in parts of Texas, Oklahoma and southwest Kansas, although in other areas it has 50 to 200 years left, according to the Geological Survey.

Rationing has been imposed on irrigation in the region but it may be too little too late.

"It's a situation where across the Plains the demand far exceeds the annual recharge," said Mark Rude, executive director of the Southwest Kansas Groundwater Management District.

RECORD DROUGHT

The worst drought in decades has exacerbated the situation. The semi-arid area around Lubbock, which typically gets about 19 inches of rain a year, received less than 6 inches in 2011, the lowest ever recorded. This year was better but still far below normal at 12.5 inches, meteorologist James said.

Climate change is also having an impact on the region, said atmospheric scientist Katharine Hayhoe, co-director of the Climate Science Center at Texas Tech University in Lubbock.

"It is definitely hotter in the summer and drier in the summer because of climate change," she said.

The average annual temperature in Lubbock has increased by one full degree over the last decade, according to National Weather Service data, and the average amount of rainfall has fallen during summer months by about .50 inch over the decade.

Some say government policies are making things worse.

Federal government subsidized crop insurance pays farmers whether they produce a crop or not, encouraging farmers to plant even in a drought year.

Another subsidized U.S. government program that pays farmers to take sensitive marginal land out of crop production and put it into grassland is gradually shrinking.

In a possible case of history repeating itself, high commodity prices are encouraging farmers to break up the land and plant crops when the 10-year conservation contracts with the government expire, said environmentalist Cox. This is similar to what happened in the 1920s when vast areas of grassland were plowed up.

The government also has imposed restrictions on how much land can go into conservation reserves to save money at a time of massive U.S. budget deficits, he said.

The amount of land in conservation reserves has declined by more than 2.3 million acres over the last five years in five states of the Great Plains - Texas, Oklahoma, Kansas, Colorado and New Mexico, according to U.S. Agriculture Department data.

If most of that land is plowed up for crops it could lead to more dust storms in the future.

"I think you are probably going to see increased erosion if that happens," said Richard Zartman, Chairman of the Plant and Soil Science Department at Texas Tech, adding that it was unlikely to get as bad as the Dust Bowl days.

(Additional reporting by Greg McCune and Christine Stebbins; Editing by Claudia Parsons)

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Japan's new Prime Minister Shinzo Abe attends a news conference at his official residence in Tokyo December 26, 2012.

TOKYO | Thu Dec 27, 2012 10:37pm EST

TOKYO (Reuters) - Japan's new government said on Friday it hoped to stick to a three year deadline to decide whether to restart all nuclear reactors after safety checks, despite the country's newly formed nuclear regulator saying the deadline was impossible to meet.

Economy Minister Toshimitsu Motegi, who is also responsible for energy policy, said reactors would be restarted as units received the all-clear from the atomic regulator.

"We will rely on the NRA (Nuclear Regulation Authority) to judge safety from an expert point of view and will not restart ones as long as safety is not confirmed," Motegi told a news conference.

NRA Chairman Shunichi Tanaka said in an interview in the Asahi newspaper on Friday that completing safety checks within the three-year timeframe set by new Prime Minister Shinzo Abe will be impossible to meet.

All but two of Japan's 50 reactors remain switched off after an earthquake and tsunami caused meltdowns and explosions at the Fukushima Daiichi station in northeastern Japan in March 2011.

Atomic energy supplied about 30 percent of Japan's needs before Fukushima, but since the disaster support for nuclear power has plummeted.

Abe's government, which was installed on Wednesday after a landslide election victory, has said it will take 10 years to decide on the best energy mix for Japan.

"We have not decided on the policy of going zero-nuclear by the 2030s," Motegi said, referring to the previous government's policy.

An order from former Prime Minister Yoshihiko Noda to restart the two reactors now operating in western Japan prompted the biggest demonstrations in the country in decades and contributed to his election defeat this month.

The NRA, which still needs to draft new rules on safety, has signaled it will take a tougher stance on nuclear stations situated over possible seismic fault lines and prevent risky plants from restarting.

If a review of a faultline under the operating reactors at the Ohi station shows it is active, the NRA will request a halt for the units, operated by Kansai Electric Power Co, Tanaka said in the interview.

A panel of NRA experts this week confirmed its assessment that there are active faults under the Higashi Dori nuclear plant in northern Japan, which is owned by Tohoku Electric Power Co. The assessment means the NRA is unlikely allow the plant to restart.

(Reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Michael Perry)

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U.S. Environmental Protection Agency Administrator Lisa Jackson testifies at a hearing of the House Subcommittee on Oversight and Investigations on Capitol Hill in Washington, September 22, 2011.

WASHINGTON | Sun Dec 30, 2012 5:11am EST

WASHINGTON (Reuters) - Regardless of who takes the reins, the U.S. Environmental Protection Agency will likely face continued legal battles in President Barack Obama's second term as it tries to finalize pollution rules for power plants, analysts said.

EPA Administrator Lisa Jackson, who spearheaded the Obama administration's regulation of carbon emissions, said on Thursday she will step down after almost four years.

Her tenure was marked by opposition from industry groups and Republican lawmakers to the EPA's first-ever crackdown on carbon emissions, as well as other anti-pollution measures.

Analysts said whoever succeeds Jackson will probably face a spate of lawsuits to challenge rules that the EPA will finalize governing power plants, industrial sources and oil and gas production.

"This is shaping up to be four years of litigation," said Christopher Guith, vice president for policy at the U.S. Chamber of Commerce's Energy Institute.

Given the partisan divide, Guith said, legislators would struggle to draft laws that could serve as alternatives to the EPA's pending suite of carbon and air regulation.

"As we look to an even more divided Congress, the action will be in the federal courts," he said.

The U.S. Court of Appeals for the District of Columbia circuit, which hears most challenges to federal environmental rules, is likely to be busy as industry groups and states bring their cases against the EPA's rules after they are finalized.

The court sided with the agency in most of the recent challenges, most notably upholding its decision to use the Clean Air Act to regulate carbon dioxide emissions.

David Doniger, policy director of the National Resources Defense Council's Climate and Clean Air Program, said this could bolster the EPA as it tackles rules that may be more controversial than those rolled out under Jackson.

"The agency has a very good batting record on the clean air side. Carbon and climate (regulations) have come through completely unscathed," he said.

CARETAKER ADMINISTRATOR?

After the EPA was a political lightning rod during the first Obama administration, the president is likely to seek out a safe, possibly internal choice as Jackson's successor, or to avoid the confirmation process altogether.

"There are just so many arrows pointed at this agency," said Susan Tierney, managing principal and energy and environment specialist at Boston-based Analysis Group

Bob Perciasepe, deputy EPA administrator, will take over on an interim basis and could continue in that role indefinitely.

He previously worked at the EPA during the Clinton administration, specializing in water and air quality. Before rejoining the agency, Perciasepe was a top official at the National Audubon Society, a major conservation group.

Tierney said she expects the EPA to stay the course on its current agenda, especially as the agency faces some court-ordered deadlines to finalize rules, such as for coal ash, industrial waste from coal-fired plants and ozone standards.

PRIORITY ON CLIMATE CHANGE?

Some environmentalists have criticized Obama for being too timid on climate issues during his first term. But in his acceptance speech on election night in November the president gave a nod to climate change, raising hopes for more activism.

The White House may lean on the EPA to tackle one of the largest sources of U.S. greenhouse gas emissions, the current fleet of power plants, said Jeremy Symons, senior vice president at the National Wildlife Federation.

"The president has made clear that climate change is one of his top three priorities for the second term, so that means EPA needs to do its job," Symons said.

This, he said, means the agency needs to finalize the rules for new power plants and the standards for limiting carbon emissions from existing power plants.

The NRDC's Doniger said once the EPA meets an April 2013 legal deadline to finalize the greenhouse gas rules for new power plants, it will then have to address standards for existing plants.

The EPA has to start promptly in the beginning of the second term, said Doniger, because the rulemaking process is "a multistep process that will take time."

The controversial task will almost certainly trigger lawsuits because the rules will target a large number of domestic power plants and could jeopardize electric reliability.

"It's high stakes litigation when you are talking about bringing 40 percent of generation under regulations. That's disastrous," the Chamber's Guith said.

Guith said that while the EPA does have the authority to regulate carbon dioxide using the Clean Air Act, its rules are too difficult for industry - forcing the litigation.

"This EPA has been so aggressive in pushing the envelope by way of the compliance timeline that it has made itself more vulnerable to lawsuits," he said.

The EPA may also face legal challenges from environmental groups and certain states. The NRDC, the Environmental Defense Fund and the Sierra Club joined a group of nine states led by New York that threatened to sue the EPA last year to propose air pollution standards for oil and gas drilling.

They said that the drilling, transportation and distribution resulted in a significant release of methane, a potent greenhouse gas that is not regulated by federal rules.

Doniger said the group is trying to negotiate a timeline with the EPA to set a rule but could sue the agency if it doesn't agree a schedule by February.

(Additional reporting by Ayesha Rascoe; Editing by Gary Hill)

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New housing construction is seen in Darnestown, Maryland, October 23, 2012.

NEW YORK | Wed Dec 26, 2012 9:50am EST

NEW YORK (Reuters) - Single-family home prices rose in October for nine months in a row, reinforcing the view the domestic real estate market is improving and should bolster the economy in 2013, a closely watched survey showed on Wednesday.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.7 percent in October on a seasonally adjusted basis, stronger than the 0.5 percent rise forecast by economists polled by Reuters.

"Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength," David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement.

While record low mortgage rates and modest job growth should keep the housing recovery on track, analysts cautioned home prices face downward pressure from a likely pickup in the sales of foreclosed and distressed properties and reduced buying investors and speculators.

Prices in the 20 cities rose 4.3 percent year over year, beating expectations for a rise of 4.0 percent.

Las Vegas posted the biggest monthly rise on a seasonally adjusted basis at 2.4 percent, followed by a 1.7 percent increase in San Diego, the latest Case-Shiller data showed.

"Higher year-over-year price gains plus strong performances in the Southwest and California, regions that suffered during the housing bust, confirm that housing is now contributing to the economy," Blitzer said.

Housing contributed 10 percent to the overall U.S. economic growth in the third quarter, while the sector represented less than 3 percent of gross domestic product, he said.

Last week, the government said U.S. GDP expanded at a stronger-than-expected 3.1 percent annualized pace in the third quarter.

Excluding seasonal factors, however, home prices in 12 of the 20 cities fell in October from September as home values tend to decline in fall and winter, Blitzer said.

Chicago experienced the largest non-seasonally adjusted decline at 1.5 percent, followed by a 1.4 percent fall in Boston.

(Reporting by Richard Leong; Editing by Chizu Nomiyama)

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