After initially appearing to retreat in the face of the midterm onslaught, Barack Obama and EPA Administrator Lisa Jackson have decided to pursue an end-run strategy to impose regulation on energy producers regarding greenhouse-gas emissions.  The move sets up a confrontation between the White House and Congress, which has already signaled a willingness to play hardball with Obama on regulatory innovation:

The Obama administration is expected to roll out a major greenhouse gas policy for power plants and refineries as soon as Wednesday, signaling it won’t back off its push to fight climate change in the face of mounting opposition on Capitol Hill.

The Environmental Protection Agency has agreed to a schedule for setting greenhouse gas emission limits, known as “performance standards,” for the nation’s two biggest carbon-emitting industries, POLITICO has learned.

Under the schedule agreed to by EPA, states and environmental groups, the agency will issue a draft greenhouse gas performance standard for power plants by July 2011 and a final rule by May 2012. The agreement – which comes after states and environmentalists challenged the George W. Bush administration’s failure to set the standards – requires EPA to issue a draft limit for refineries by Dec. 2011 and a final rule by Nov. 2012.

The White House Office of Management and Budget has signed off on the schedule, according to a litigant in the legal fight.

Earlier, it appeared that the White House had backed away from the regulatory approach, at least for the next year or so.  This change comes at an unusual moment when Obama had started to win some bipartisan cooperation from Congress on his other priorities, notably START and DADT.  Whatever momentum and trust Obama built with that and the tax deal will rapidly dissipate if the EPA starts operating outside authority granted or desired by Congress.

The incoming Congress has many tools to block or slow the regulatory growth, one of which Harry Reid handed to Republicans this week.  The GOP will have the ability to shape funding for the EPA for the final six months of this fiscal year.  Congress can either mandate that no funds be spent from EPA’s budget for the purpose of creating or enforcing greenhouse-gas emissions, or they can defund the agency entirely after March 4th.  The latter will almost certainly set up a government-shutdown confrontation, but the former probably wouldn’t, especially since a few red-state Senators would likely join the Republicans in reining in Jackson.  Jay Rockefeller already proposed a two-year moratorium on EPA regulatory expansion to prevent just this scenario.

Alternately, Congress could undo the regulatory changes by using the Congressional Review Act.  That law gives Congress the power to undo regulations by executive branch agencies, and more importantly, bypasses the filibuster in the Senate.  However, that would require Barack Obama’s signature, which means that the GOP would have to garner two-thirds of each chamber to override a veto — not terribly likely.  That would still be a worthwhile exercise, especially with a presidential election approaching, as a way to frame Obama as an out-of-control regulator.  The House could also drag Jackson to the Hill as often as they want to demand explanations under oath, and to make the process as uncomfortable as possible for the White House.

If Obama wants to play hardball, Republicans have lots of options.  They just need to play hardball as well.  We’ll see if this inspires them to do so.