A Sirius Satellite Radio unit is shown installed in a private vehicle in Washington February 20, 2007.

NEW YORK | Thu Jan 10, 2013 5:41pm EST

NEW YORK (Reuters) - Sirius XM Radio Inc's grip on drivers is under an increasing threat as the availability of Internet connections in more cars is helping Pandora Media Inc counter some of its rival's big selling points.

In a sign of how important drivers are to the two companies, each of their top executives made the trek to Las Vegas this week to court automakers at the annual Consumer Electronics Show.

Sirius XM, which has its satellite radios in 70 percent of new vehicles, generates the vast majority of its revenue through subscriptions and derives only a fraction from advertising dollars. Streaming service Pandora is just the opposite, collecting most of its revenue from advertising and operating only a nascent subscription business.

Right now, Sirius XM is the much bigger company, with almost 24 million subscribers and more than $3 billion in annual revenue. In the third quarter, it generated average revenue of $12.14 per subscriber.

Pandora, by contrast has 60 million users, about 1 million of whom are paid subscribers, and is on track to generate $424 million in revenue this year.

But the migration of music audiences to mobile devices threatens to upend a market that Sirius current dominates. The key to both companies' futures rests on winning the battle for the listener on the go, particularly people traveling by car.

With its presence in new vehicles, Sirius XM has a first-mover advantage over Pandora. But Pandora is making a huge push to get into the car, a move that dovetails with ubiquitous wireless access that makes it easier to listen to its service.

"Internet-enabled radio in the car has already begun," Pandora Chief Executive Officer Joe Kennedy said in an interview. "It will grow as a snowball, initially small but growing exponentially."

Sirius XM declined to make its executives available for interviews.

Of Pandora's 60 million total listeners, 77 percent have tuned in with a mobile device. The problem is, the revenue per 1,000 listener hours on mobile was only $26.96 in the third quarter, up from $23.60 a year earlier, but still less than half of the $56.40 the company generated from other listeners.

"They do have to continue their mobile monetization," said Cowen and Co analyst John Blackledge, who has a "neutral" rating on the stock.

Kennedy called the third quarter a "key milestone" since the mobile revenue increase outpaced mobile usage growth.

At Sirius XM, executives have said its customers are increasingly listening to its service on mobile devices, but it has never broken out figures on that usage. It costs Sirius XM car subscribers an extra $3.50 a month to stream the service over the Internet on devices.

"They don't really promote it, and it's not really a cornerstone of the product," Gabelli & Co analyst Brett Harriss said.

Sirius XM Chief Financial Officer David Frear said at an investor conference on Wednesday that the strategy was "to capture you in the car and then allow you to extend to other platforms."

DASH FOR THE DASHBOARD

While Sirius XM touts the ability of its satellites to deliver a strong signal and high audio quality, the importance of those attributes is likely to fade because of the widespread availability of faster and better Internet connections in cars.

"From the consumer standpoint, the reception advantages of satellite radio will be marginalized or go away over time," said a former Sirius XM executive familiar with the business models of the company and its competitors.

Indeed, Liberty Media Corp, which ranks as Sirius XM's largest shareholder and is close to gaining operating control of the company, has criticized its former longtime CEO, Mel Karmazin, for not adapting to changing technologies fast enough.

Critics say Sirius XM has relied too heavily on its position in the auto market and perceived programming advantage. About 50 million cars in the United States come equipped with the satellite radios, with just under half of their owners actually subscribing to the service.

For its part, Pandora is available in just 75 vehicle models, although it also has deals with automakers like General Motors Co, Ford Motor Co, BMW and most recently Chrysler Group LLC that allow drivers to plug in their Pandora-enabled mobile devices and use the car's dashboard to control the service.

More than 1 million people have used Pandora's dashboard integration, Pandora said.

Sirius XM also believes it has an edge with its programming from the likes of shock jock Howard Stern, talk show host Oprah Winfrey and major sports leagues. Access to this type of content, Sirius contends, justifies the subscription cost of at least $14.49 per month.

In the first three quarters of the year, Sirius XM's programming and content costs were $205.2 million, while it paid $409.4 million in revenue sharing and royalties, the company has reported. This represents roughly 25 percent of its revenue in the period.

On the other hand, Pandora spends roughly 55 percent its revenue on acquiring music.

"Having music is an important thing, but having the diversity of the content, the music, the news, the talk and the entertainment content is really what sets us apart," Sirius XM CFO Frear said at a December 3 investor conference.

But as Internet access becomes more readily available in cars, people will be able to listen to podcasts and other content.

"The value of commercial-free music on Sirius could decrease," said Gabelli analyst Harriss. "There is no doubt competition from Pandora will increase in the next two or three years."

RIHANNA VS. PANDORA

Still, Sirius XM has an unlikely ally in its battle with streaming music services: the U.S. government.

As it stands, Pandora and other streaming music services pay a much bigger percentage of revenue to license songs than Sirius XM does. Plus, the more popular these services become, the more they have to shell out for music royalties.

Based on rules that U.S. lawmakers set under the Digital Millennium Copyright Act, Pandora pays more than 50 percent of its revenue to an agency called SoundExchange to license songs on a per-performance basis.

Sirius XM pays 8 percent of its revenue for song licensing, and that will increase to just 11 percent by 2017 under a new deal struck with regulators. Traditional radio pays nothing at all to SoundExchange, although it pays composers to air their music.

Pandora and its brethren are pushing for changes in how royalties for online radio are collected and are backing the Internet Radio Fairness Act, a bill that would change regulation of royalties.

But they are up against big stars like Billy Joel, Rihanna and Missy Elliott, who are opposed to the bill because they believe their royalties would be cut drastically.

"Music is a poisonous area of investment because the royalty structures are so out of whack, it's impossible to be profitable," said David Packman, a veteran of the music industry and partner in venture capital firm Venrock.

"We think innovation is seriously depressed in this sector because of the licensing challenges."

(Editing by Peter Lauria and Lisa Von Ahn)

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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 | Mon Dec 31, 2012 10:34am 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 Natural 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)

(This story was corrected to fix the name of environmental group to Natural Resources Defense Council from National Resources Defense Council in the tenth paragraph)

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Italy's outgoing Prime Minister Mario Monti looks on during a news conference in Rome December 28, 2012. Monti said on Friday that he would lead a coalition of centrist parties who support his European and reform-minded agenda in the parliamentary election in just two months time.

ROME | Sun Dec 30, 2012 10:46am EST

ROME (Reuters) - Mario Monti declared "mission accomplished" when he resigned as Italy's prime minister, having seen off the debt crisis that loomed as he took office just over a year ago but 2013 will test whether he has laid the foundations for lasting economic change.

Elections on February 24-25 will give Italian voters their first chance to decide whether they want to stick to the broad course he has set or turn to a growing chorus of politicians who have attacked his austerity medicine.

Monti's decision to enter the race himself has put his reform agenda at the heart of the campaign and will have effects far outside Italy, the euro zone's third-largest economy, which took the single currency to the brink of collapse last year.

Former European Commissioner Monti, favored by the markets, the business establishment and even the Catholic church, has insisted that the election must be about creating agreement on policy rather than on any individual.

In that sense, the true test of his success may be not whether he wins a second term but whether he has succeeded in convincing the other parties and the country as a whole to stay with the liberalizing agenda he has laid out.

That remains uncertain, despite the plaudits he earned abroad for his handling of the crisis, as ordinary Italians have seen their living standards fall and unemployment rise relentlessly.

The centre-left Democratic Party (PD), the favorites to win the election, have supported Monti in parliament and say they will maintain the broad course he has set, while putting more emphasis on growth and helping workers and the poor.

But some on the left of the party and among its trade union allies say inequality has risen under Monti.

On the right, Silvio Berlusconi accuses Monti of taking orders from German Chancellor Angela Merkel and penalizing middle class Italians for the benefit of German banks. He has called for sweeping tax cuts to stimulate growth.

The runaway success of the anti-establishment comic Beppe Grillo and his 5-Star Movement, which wants to hold a referendum to decide whether to leave the euro, has also underlined the widespread mood of disillusion now deeply anchored in Italy.

"I don't have any confidence in my country, absolutely not," said Rosaria Resciniti, one of thousands of young people lining up to enter a competition for a job as primary school teacher in Rome.

"It is a country for old people. We should all leave and leave the country to the pensioners," she said.

UNEMPLOYMENT EMERGENCY

Monti himself acknowledged the disaffection on Friday when he confirmed that he would be joining the election campaign as head of a centrist alliance committed to continuing his reforms.

"Fortunately, it seems that the financial emergency is over, but there is another emergency which is just as serious or even more so, which is the unemployment emergency, especially as regards youth unemployment and the lack of growth," he said.

Helped by the promise of European Central Bank support, the main gauge of investor confidence, the spread between yields on Italian 10 year government bonds and safer German Bunds has narrowed from the crisis levels of more than 550 basis points hit when Monti took office to about 320 points.

But the broader indicators of economic health have got worse, a fact constantly pointed out by critics such as Berlusconi and Grillo, who say the tax hikes and spending cuts imposed to calm the markets have dragged Italy into a recessionary spiral.

The economy has contracted for five consecutive quarters and is estimated to have shrunk by 2.4 percent in 2012. Public debt has topped the symbolic 2 trillion euro level, corruption and waste are still rampant, and youth unemployment is over 36 percent.

Italy has had the euro zone's most sluggish economy for more than a decade, and whether any of the leaders fighting the election can turn that around quickly is doubtful, as one of the possible ministers in a centre-left government acknowledged.

"This crisis will last throughout the whole of the next parliament at least," deputy PD leader Enrico Letta told Reuters last month.

The task will be greatly complicated if market sentiment turns against Italy as it did in 2011, when tensions in the Berlusconi government raised doubts about its commitment to budget discipline.

Monti, seen outside Italy at least as a guarantor of stability, has said he was "not a man sent by Providence", but whether he himself will be involved in the next government has been one of the main questions hanging over the race.

His sober, professorial style came as a welcome relief to international investors and European partners unnerved by the turmoil and scandal surrounding Berlusconi as bond markets crashed in the summer of 2011.

But if opinion polls are confirmed on election day, it is difficult to see how he could become prime minister without resorting to the kind of backroom deals that characterized the shaky coalitions of the postwar period, when governments often survived no more than months or even weeks.

The most recent opinion poll gave centre-left PD leader Pier Luigi Bersani support of 36 percent, with Monti on 23.3 percent, ahead of both Berlusconi's People of Freedom (PDL) and Grillo's 5-Star Movement.

Monti's involvement in the election has ruled him out as a candidate for president of the Republic, a post that would have given him significant behind-the-scenes influence.

That leaves the possibility of becoming finance minister in a Bersani government, though there has been little sign of enthusiasm either from his side or from the PD, which has maintained a respectful tone towards Monti but now clearly sees him as a political adversary.

GROWTH AGENDA

Beyond the issue of personalities, the deep-rooted problems afflicting the Italian economy will be a formidable challenge to any new government.

"The situation in Italy is not easy, there are too many centres of power where everybody blocks everything. Our infrastructure isn't working and we've got corruption all over," said Renzo Rosso, head of the group behind Diesel jeans, one of the Italian companies that has managed to find a way past the obstacles in its home market to create a global success.

All the main parties in the race have called for more emphasis on creating growth, which along with its towering public debt has long been Italy's Achilles heel.

Monti's own 25-page agenda lays out a range of answers, such as taxing consumption and large fortunes more than companies and workers, and opening up markets to more competition and breaking down the suffocating power of special interest groups.

Turning such ideas into practice and convincing the public to go along with them is another matter.

Reflecting on her time in office, Elsa Fornero, an academic expert recruited into Monti's technocrat government whose labor reform plans were largely stymied by resistance from both unions and employers, said she had learned the difference the hard way.

"In this period of almost a year now, I have been able to measure the distance between being a professor and being a minister," she told foreign reporters last month.

"It's something completely different. I have been more used to formulating rational solutions, but the rationality of a solution is not enough because society is more differentiated and doesn't just live on rationality."

(Additional reporting by Hanna Rantala, Cristiano Corvino and Antonella Ciancio; Editing by Will Waterman)

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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 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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LISBON | Sun Oct 14, 2012 7:02pm EDT

LISBON (Reuters) - Portugal's center-right government presents its 2013 budget on Monday, which will outline the harshest measures yet under Lisbon's 78-billion-euro bailout and is likely to mark the end of the country's so far reluctant acceptance of austerity.

The budget will face immediate opposition from angry Portuguese, who plan to march on parliament to demand the resignation of the government and an end to austerity, which has sent Portugal into its worst recession since the 1970s.

The 2013 budget is set to introduce sharp income tax hikes, which could amount to up to two or three months' wages for middle income workers, to ensure the country meets its budget goals under the bailout. Finance Minister Vitor Gaspar has described the planned tax increases as "enormous."

Economists fear that the tough measures, which will also include pension cuts, a financial transaction tax and higher property taxes, could push Portugal into a recessive spiral like Greece, further undermining Europe's German-inspired austerity drive for the euro's highly-indebted countries.

The austerity moves in the 2013 budget came after the government announced last month a rise in social security contributions, which it subsequently dropped after mass protests erupted. The opposition to the alternative tax measures is set to be equally strong.

Even Portugal's conservative president, Anibal Cavaco Silva, criticized the budget measure. "In the current circumstances, it is not correct to demand of a country being subjected to a budget adjustment process that it meets the targets at any cost," Cavaco Silva wrote on his Facebook page.

Before September, Portugal had shown a relatively high level of political consensus and support for cutting costs and the bailout it sought in 2011. But that support has been eroded, with the main opposition Socialists now pledging to vote against the budget when it is put to parliament at the end of the month.

Protests have now become frequent, though still peaceful. A general strike is planned for November 14.

LAST MINUTE DEBATE

The ruling center-right Social Democrats hold a comfortable majority in parliament together with their smaller allies, the rightist CDS. But the CDS has a long history of opposing higher taxes and analysts say the party's complete support of the government can no longer be taken for granted, especially if the economy deteriorates further.

Local media reported that the government was still locked in an internal debate at the weekend on the possibility of finding more areas for spending cuts in order to ease the tax hikes. The budget is expected to be detailed on Monday afternoon.

The economy is expected to contract at least 3 percent this year and the government expects a contraction of just 1 percent in 2013 -- a forecast widely doubted by economists. Unemployment is already at record highs above 15 percent and the government expects it to rise to 16.4 percent next year.

The 2013 draft budget may include new economic forecasts for next year.

This year's budget performance was undermined by tax revenues falling short of expectations as the recession deepened and unemployment rose beyond government forecasts.

(Reporting By Axel Bugge; Editing by Rosalind Russell)

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