Cap-and-trade legislation continues to wind its way through the House and as you know faces an uncertain fate in the Senate. Failing passage some time later this year the EPA is standing by to do via regulatory fiat what isn’t done by legislation. That might be a nightmare.

The WSJ has a brief story about the recent hearings on the President’s nominee to be the EPA’s Director of Air and Radiation, Regina McCarthy. During hearings on her nomination she was asked about the potential for significant litigation against a broad sector of the economy aiming to enforce potential regulation of greenhouse gases.

 The EPA has stated that it would likely only regulate around 13,000 of the largest emitters once new rules are finalized. EPA Administrator, Lisa Jackson, said earlier this year that, “It is a myth … EPA will regulate cows, Dunkin Donuts, Pizza Huts, your lawnmower and baby bottles.” 

Legal experts have asserted that based on the Clean Air statutes, the regulations could be applicable to many more entities. Ms. McCarthy admitted during the hearings that in fact legal suits could be brought against smaller companies. She however has a solution for the problem. Here is how she plans to handle it:

“I will request that I be informed if any such notice is filed with regards to a small source, and I will follow-up with the potential litigants.”

And when some of the more radical elements of the green movement are confronted with her “follow-up” is it likely that they are going to make nice and drop their lawsuits? Well, probably not. Here is what one environmentalist had to say:

Kassie Siegel, director of the Center for Biological Diversity’s Climate Law Institute, says her group is prepared to sue for regulation of smaller emitters if the EPA stops at simply large emitters.

This is the stick that the Obama Administration now possesses. As much as Ms. McCarthy’s statement might seem naive, it might also be taken as a warning to the Senate that they risk the nightmare scenario if they don’t produce a bill. And just in case you think they’re afraid to use their sticks, notice what they did to the Chrysler creditors. They know how to play hardball.