UPDATE 2-Obama settles on EPA, Energy Department nominees -source
* EPA pick to face tough questioning in Senate
* Energy choice puts another scientist in top spot
* Team to carry out renewed Obama fight against climate change (Adds quote from former EPA official)
WASHINGTON, Feb 20 (Reuters) - President Barack Obama intends to nominate air quality expert Gina McCarthy to lead the U.S. Environmental Protection Agency and nuclear physicist Ernest Moniz to head the Department of Energy as early as this week, according to a source familiar with the process.
McCarthy would likely become the face of Obama's latest push to fight climate change. Currently the assistant administrator for the EPA Office of Air and Radiation, she would replace Lisa Jackson, who stepped down as EPA chief this month.
Moniz, a former undersecretary of energy during the Clinton administration, is director of the Massachusetts Institute of Technology's Energy Initiative, a research group that gets funding from industry heavyweights including BP, Chevron , and Saudi Aramco for academic work on projects aimed at reducing greenhouse gases.
Moniz would replace Steven Chu, a Nobel Prize-winning physicist, who is stepping down.
The source said announcements of the two nominations were possible this week but were more likely to come later.
McCarthy has the respect of environmental groups and a reputation for working well with utilities and state regulators, which bear the brunt of implementing EPA rules.
But she will face tough questions from Republican lawmakers who believe the EPA has gone too far in its rules, which they argue have hurt the economy.
Obama has taken up climate change as one of his main second-term challenges, warning during his State of the Union speech to Congress that his administration would consider taking executive actions to fight the problem if lawmakers fail to revive a market-based system to regulate carbon emissions.
The EPA would likely be the agency to implement such executive actions.
"Gina is a true-blue environmentalist, but she is at least willing to make changes when people have legitimate concerns," said Jeffrey Holmstead, a former EPA official who held McCarthy's current job in President George W. Bush's administration and is now a lobbyist for energy interests.
He said he expected the Senate to confirm McCarthy because she had shown a willingness to work with industry.
A Boston native, McCarthy came to Washington after serving as the top environmental regulator in Massachusetts and Connecticut under Democratic and Republican governors.
Former Massachusetts Governor Michael Dukakis, a Democrat, appointed her chairwoman of a council to oversee a review of a proposed hazardous waste incinerator in the Boston area in 1990.
She later served as an environmental policy adviser to then-Massachusetts Governor Mitt Romney and launched the state's first Climate Protection Action Plan. Romney was Obama's Republican opponent in the 2012 presidential election.
In 2004, McCarthy was appointed to head Connecticut's Department of Environmental Protection under then-Governor Jodi Rell, also a Republican, and helped lead the state into a carbon cap-and-trade system for Northeastern states, known as the Regional Greenhouse Gas Initiative.
SCIENTIST AT THE HELM
By choosing Moniz, Obama would put another scientist at the head of the Department of Energy, despite a sometimes rocky tenure for Chu.
At MIT, Moniz led intensive studies about the future of coal, nuclear energy and natural gas, and he helped attract funding and research momentum to energy projects on campus.
People familiar with Moniz's work said, if chosen, he would bring his own energy and pragmatism to the job.
"He has a kind of boundless enthusiasm that's infectious," said George Shultz, a former secretary of state in the Reagan administration who is head of an advisory committee for the MIT Energy Initiative.
"He knows a lot about the subject in all its dimensions," Shultz said.
Some green groups are skeptical about Moniz because of his support for natural gas and have started petitions against his potential nomination.
They are wary of hydraulic fracturing, or "fracking," a method used by gas drillers to blast sand, water and chemicals into layers of shale to unleash natural gas trapped deep beneath the ground.
Moniz earned kudos for a pragmatic approach toward using research to find ways to reduce carbon pollution from fossil fuels and transition to cleaner forms of energy.
"It's clearly part of his DNA," said Phil Sharp, a former congressman who now leads the research group Resources for the Future and has worked with Moniz on panels.
"Those in the advocacy community who are really deep in the substance find they can work with him," Sharp said. (Additional reporting by Valerie Volcovici and Timothy Gardner; Editing by Alistair Bell and Eric Beech)