President Obama’s controversial decision last week to suspend new anti-smog standards offered hints — but not the full road map — of how the White House will navigate politically explosive battles with congressional Republicans over which industry regulations to sacrifice and which ones to fight for this fall.

The Friday decision, which angered many environmental activists and won praise from business groups, represented the most high-profile case in a debate that carries deep implications for Obama’s reelection campaign as he tries to spur job creation, woo business donors and fire up his voting base. It came as the president prepares for a major address Thursday night to lay out a new employment strategy.

Most notable in the smog decision was that Obama made it himself — undercutting his own Environmental Protection Agency leadership and siding with industry officials who warned that stricter ozone standards risked further damage to a fragile economy.

And yet, as the administration signals that it will stand by other rules opposed by industry groups, advocates on both sides are left wondering what broader strategy may be guiding the White House as it reviews existing and proposed regulations.

“I do not have a sense of the administration’s philosophy here or where or how they determine to draw a line between economic impacts versus outside organizational pressures,” said R. Bruce Josten, the top lobbyist for the U.S. Chamber of Commerce, which represents the nation’s businesses.

The Chamber heaped praise on the White House for its ozone decision. But Josten, who said he is in frequent contact with White House Chief of Staff William Daley and other top officials, said the administration “still has a heavy hand” with hundreds of regulations in the pipeline, from those affecting the environment to labor and capital markets.

Activists on the left, too, are curious. “Does Obama have an environmental bottom line?” asked Bill Snape, senior counsel for the Center for Biological Diversity, in an e-mail. “I cannot discern it.”

Shift in warfare

The ozone decision signaled a new phase in Washington warfare. For their first two years, Obama and his team pushed through ambitious legislative initiatives such as the economic stimulus, the health-care overhaul and a rewrite of the financial regulatory system.

Now, newly empowered congressional Republicans are driving an agenda of smaller government, deficit reduction and regulatory rollbacks that GOP lawmakers say will help spur job growth.

And Obama, his presidency on the line amid fading hopes of a near-term economic recovery, is eager to show that he, too, recognizes the need to curb government overreach. At the same time, he needs to reassure anxious advocates on the left, many of whom have complained since last month’s debt-ceiling deal that the president has become too easily cowed by Republican arguments.

It is a delicate balancing act for a president still searching for the right formula to spark the economy to life at the same time that he hopes to win back crucial independent voters.

A late August poll by Pew found that just about a third of Americans approved of Obama’s handling of the economy, while six in 10 disapproved.

Obama in January launched a broad regulatory review, but skeptical GOP lawmakers are pressing ahead this month — seeking to overturn 10 federal rules spanning health care, workplace safety and the environment. Officials say the review, recently completed across 26 agencies, resulted in plans that could save businesses more than $10 billion over the next five years.

Moreover, Obama, in a letter last week to House Speaker John A. Boehner (R-Ohio), sought to show flexibility on a number of potential new rules being suggested by his agencies. Those ideas, he wrote, “are merely proposed, and before finalizing any of them, we will take account of public comments and concerns and give careful consideration to cost-saving possibilities and alternatives.”

One early indication of the president’s new focus on regulation came in January, when the Occupational Safety and Health Administration withdrew a proposed rule that would have required employers to record repetitive-motion injuries.

The ozone standard was one of several controversial air-quality measures under consideration, including new limits on mercury and air toxins.

Industry and advocacy groups — many of them caught off guard by the ozone ruling — are struggling to assess its larger meaning.

Cass Sunstein, head of the Office of Information and Regulatory Affairs, said in an interview Saturday that the White House’s approach involved a “careful analysis of costs and benefits, trying to make sure the benefits justify the costs.”

“We’re committed to protecting public health and welfare, but in a way that’s attuned to the economic situation,” he said.

But Sunstein said observers should not draw larger conclusions based on the ozone action, which was Obama’s personal decision. The president’s arguments, Sunstein added, “are very distinctive to the discussion of ozone.”

In some ways, the ozone regulation was easier to jettison than others, because it will come up for review again in 2013 and other air-quality rules could achieve some of the same outcomes. Key industries had made powerful economic arguments against it, warning the White House that they might not open new facilities out of concern that the standards would block their operating permits.

Natural-gas companies, for example, argued to the administration that the rule might hamper their ability to take advantage of newly accessible natural-gas reserves.

Cal Dooley, president and chief executive of the American Chemical Council, said his members made it clear that they were “really poised to make billions of dollars in investments in the United States.”

Stephen Brown, vice president and counsel for Tesoro Cos., said people would be wrong to assume that the administration will abandon several of the other controversial air-quality regulations the EPA is planning to finalize this year.

“They are not backing down from using the Clean Air Act to regulate across the board,” Brown said. “This was probably the weakest one to fight on, politically. They opted not to; that’s all it is.”

In private meetings and public statements, White House officials emphasized Friday that they would still push to enact measures such as the mercury and air toxins rule and touted these regulations as part of the administration’s environmental commitment.

But Daniel J. Weiss, who directs climate strategy for the liberal research group Center for American Progress, said administration officials were naive if they thought that Republicans would be satisfied with one regulatory concession on air pollution.

“It’s hard to understand why they made this decision, which will only embolden their enemies and alienate their allies,” Weiss said, adding that since House Republicans have identified mercury as one of the six EPA rules they plan to roll back this fall, “they’re going to have to fight even harder to protect it because their opponents just won on one of their six items.”


For weeks, the Obama administration had struggled with how to split the difference on the smog rule, which had both enormous economic and public-health implications. At a closed meeting with environmentalists in mid-July, Daley wondered aloud why the two sides couldn’t reach the sort of agreement the White House recently brokered on fuel efficiency for cars and light trucks. Advocates noted that it was easier to negotiate with a single industry, especially one that had been bailed out by the federal government and faced the possibility of strict regulations on the state level.

While both industry and activists will be scrutinizing Obama’s upcoming jobs speech for further clues to his regulatory strategy, the unease among his supporters is palpable. Nearly 250 climate activists were arrested Saturday at the White House protesting the proposed Keystone XL pipeline that would connect Canada’s oil sands to the Gulf Coast.

Courtney Hight, who ran Obama’s 2008 youth vote operation in Florida and coordinates youth activists as co-director of the Energy Action Coalition, said Friday’s news made her nervous about other decisions facing the president.

“We want to see him stand up and fight,” said Hight, who was arrested at the White House on Thursday.