Obama Issues Memoranda to Increase Fuel Efficiency, Possibly Let States Decide Emissions Rules

President Obama continued his reversal of Bush-era policies, issuing two memoranda on Monday that promote his clean-energy policy while having a far-reaching impact on the ailing U.S. auto industry.

The first memorandum ordered the Transportation Department to work out rules for automakers to improve fuel economy. It calls for the department to notify automakers by March 2009 to increase their fuel efficiency for 2011 model year cars and trucks.

Obama said the fix will help the auto industry produce a viable product.

"We must help them thrive by building the cars of tomorrow," he said in an announcement before a live audience in the East Room of the White House.

Obama said that Washington must help states on tougher fuel standards, not work against them, and yet year after year, special interests have overshadowed common sense and rhetoric has supplanted the hard work needed to yield results.

"America will not be held hostage to dwindling resources," he said. "The days of Washington dragging its heels are over. My administration will not deny facts. We will be guided by them. ... We cannot afford to pass the buck."

The second memorandum ordered the Environmental Protection Agency to reconsider California's request for a waiver from the Clean Air Act -- a move that would allow California, the nation's most populous state, to set tougher tailpipe emission standards than apply nationally.

"Each step begins to move us in a new direction while giving us the tools that we need to change," Obama said. 

He also encouraged Congress to pass the economic Recovery and Reinvestment Act, whose provisions he said will save $2 billion a year by making federal buildings more fuel efficient, among other items.  

Obama said America's dependence on oil is one of the most serious threats the nation faces -- it bankrolls dictators, stifles innovation and sets back the ability to compete. He added that "these urgent dangers to our national security are compounded by the long-term threat of climate change.

"These are the facts and they are well known to the American people," he said.

The memoranda mark further reversals by Obama of policies set down by his predecessor, George W. Bush. Last week Obama used his executive power to reverse Bush's policies on interrogation of suspected terrorists, the Guantanamo Bay detention center and funding for international groups that perform abortions or provide abortion information

The latest rule on California aims to reverse a 2007 decision by the Bush Environmental Protection Agency that touched off a storm of investigations and lawsuits from Democrats and environmental groups who contended the denial was based on political instead of scientific reasons.

California's proposed restrictions would force automakers to cut greenhouse gas emissions by 30 percent in new cars and light trucks by 2016. U.S. automakers have opposed the waiver, claiming it would create two different emission standards and therefore complicate methods of manufacturing vehicles with different environmental standards.

Senior administrations officials told FOX News that Obama will not order the EPA to back California's waiver -- though they say that is the certain outcome. The state's governor, Arnold Schwarzenegger, wrote to the president last week requesting that the waiver be granted.

Thirteen other states -- Arizona, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont and Washington -- have already signaled they will follow California's lead in reducing tailpipe pollution. Approval of California's waiver would affect roughly half of all cars and light trucks sold nationwide. 

As for fuel economy, existing law requires that by 2020, new cars and trucks meet a standard of 35 miles per gallon, a 40 percent increase over the status quo. The Bush administration did not set regulations in support of that law. Obama gave the EPA until 2010 to come up with a rule that can be put into effect by time the new line of cars for 2011 come out in fall 2010.

Rep. Edward J. Markey, D-Mass., who chairs key energy and global warming panels in the House and is a chief author of the new fuel economy standards being considered, said before Obama spoke that the president is keeping his pledge to fight global warming and rebuild the economy.

"This is an energy triple play that will cut global warming pollution, increase innovation, and reduce our dependence on foreign oil. It shows what a visionary president is capable of doing, and the faith he has in the economic revival that America's automotive and energy industries can produce," he said in a written statement.

But Sen. George Voinovich was not so optimistic, saying the U.S. auto industry can't handle additional restrictions on its product when Chrysler and General Motors just borrowed $17 billion from the federal government to stay afloat.

"I am fearful that today's action will begin the process of setting the American auto industry back even further," Voinovich said. "The federal government should not be piling on an industry already hurting in a time like this."

FOX News' Major Garrett and The Associated Press contributed to this report.