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S. HRG. 109–867

S. 131, ‘‘THE CLEAR SKIES ACT OF 2005’’

HEARING

BEFORE THE

COMMITTEE ON

ENVIRONMENT AND PUBLIC WORKS

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

FEBRUARY 2, 2005

Printed for the use of the Committee on Environment and Public Works

(

Available via the World Wide Web: http://www.access.gpo.gov/congress.senate
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JAMES M. INHOFE, Oklahoma, Chairman

JOHN W. WARNER, Virginia

CHRISTOPHER S. BOND, Missouri

GEORGE V. VOINOVICH, Ohio

LINCOLN CHAFEE, Rhode Island

LISA MURKOWSKI, Alaska

JOHN THUNE, South Dakota

JIM DEMINT, South Carolina

JOHNNY ISAKSON, Georgia

DAVID VITTER, Louisiana

JAMES M. JEFFORDS, Vermont

MAX BAUCUS, Montana

JOSEPH I. LIEBERMAN, Connecticut

BARBARA BOXER, California

THOMAS R. CARPER, Delaware

HILLARY RODHAM CLINTON, New York

FRANK R. LAUTENBERG, New Jersey

BARACK OBAMA, Illinois

ANDREW WHEELER, Majority Staff Director

KEN CONNOLLY, Minority Staff Director

(II)
(III)

CONTENTS

Page

FEBRUARY 2, 2005

OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana, prepared statement ...................................................................................................................... 79

Bond, Hon. Christopher S., U.S. Senator from the State of Missouri ................. 26

Boxer, Hon. Barbara, U.S. Senator from the State of California, prepared

statement .............................................................................................................. 80

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware ................... 8

Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island .................. 29

Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New York ........ 29

DeMint, Hon. Jim, U.S. Senator from the State of South Carolina .................... 39

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma .................... 1

Isakson, Hon. Johnny, U.S. Senator from the State of Georgia .......................... 7

Jeffords, Hon. James M., U.S. Senator from the State of Vermont .................... 4

Lautenberg, Hon. Frank R., U.S. Senator from the State of New Jersey ........... 20

Lieberman, Hon. Joseph I., U.S. Senator from the State of Connecticut ........... 24

Murkowski, Hon. Lisa, U.S. Senator from the State of Alaska ........................... 21

Obama, Hon. Barack, U.S. Senator from the State of Illinois ............................. 28

Vitter, Hon. David, U.S. Senator from the State of Louisiana ............................ 19

Voinovich, Hon. George V., U.S. Senator from the State of Ohio ........................ 31

WITNESSES

Breehey, Abraham, legislative representative, Government Affairs Department, International Brotherhood of Boilermakers ............................................ 72

Prepared statement .......................................................................................... 260

Responses to additional questions from:

Senator Voinovich ..................................................................................... 262

Senator Lautenberg ................................................................................... 262

Connaughton, James L., chairman, Council on Environmental Quality ............ 40

Prepared statement .......................................................................................... 81

Responses to additional questions from:

Senator Baucus .......................................................................................... 87

Senator Inhofe ........................................................................................... 82

Senator Jeffords ......................................................................................... 91

Senator Lautenberg ................................................................................... 86

Senator Murkowski ................................................................................... 97

Senator Obama .......................................................................................... 90

Senator Vitter ............................................................................................ 99

Senator Voinovich ..................................................................................... 87

Houseal, Brian, executive director, Adirondack Council ...................................... 68

Prepared statement .......................................................................................... 100

Responses to additional questions from:

Senator Inhofe ........................................................................................... 102

Senator Jeffords ......................................................................................... 103

Senator Lautenberg ................................................................................... 103

Walke, John, Clean Air director, Natural Resources Defense Council ............... 70

Prepared statement .......................................................................................... 105

Responses to additional questions from:

Senator Inhofe ........................................................................................... 148

Senator Jeffords ......................................................................................... 158

Senator Lautenberg ................................................................................... 160
Page

IV

ADDITIONAL MATERIAL

Article, Associated Press, Warmer world shrinking glaciers, January 31,

2005........................................................................................................................ 66–67

Charts:

Delivering Extensive Health Benefits and Widespread Attainment ............ 36

EPA Projections of Coal-Fired Power Plants that will not have applied

modern NOx and SOx controls under Clear Skies by 2020 ...................... 270

Industrial Price of Natural Gas ...................................................................... 35

Timeline for the Ozone NAAQS ...................................................................... 37

Fact sheets, state-level snapshots of the number of facilities that could be

eligible for opt-in MACT provisions, Earthjustice.......................................... 168–211

Letters:

Hubbard, James W., delegate, Maryland General Assembly and chair,

National Conference of State Legislatures’ Environment and Natural

Resources Committee .................................................................................... 10–17

Marshall, David, senior counsel, Clean Air Task Force............................. 212–253

Religious leaders in opposition to S. 131 ........................................................ 44

Tubbesing, Carl, deputy executive director, National Conference of State

Legislatures ................................................................................................... 18

Presentation, Quin Shea, senior director for Environmental Activities, Edison

Electric Institute .................................................................................................. 254

Statements:

Cook, John, vice president and managing director, Eastern U.S. Conservation Region, The Nature Conservancy ............................................... 263

Edison Electric Institute .................................................................................. 60

Holmstead, Jeffrey, Assistant Administrator, Environmental Protection

Agency, July 8, 2003 ..................................................................................... 287

Large Public Power Council ............................................................................. 267

McSlarrow, Hon. Kyle E., Deputy Secretary, Department of Energy, May

8, 2003 ............................................................................................................ 281

Whitman, Hon. Christine Todd, Administrator, Environmental Protection

Agency, April 8, 2003 .................................................................................... 274
(1)

S. 131, ‘‘THE CLEAR SKIES ACT OF 2005’’

WEDNESDAY, FEBRUARY 2, 2005

U.S. SENATE, COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, Washington, DC.

The committee met, pursuant to notice, at 9:15 a.m. in room 406,

Senate Dirksen Building, Hon. James M. Inhofe (chairman of the

committee) presiding.

Present: Senators Inhofe, Bond, Voinovich, Chafee, Murkowski,

Thune, DeMint, Isakson, Vitter, Jeffords, Lieberman, Carper, Clinton, Lautenberg, and Obama.

OPENING STATEMENT OF HON. JAMES M. INHOFE,

U.S. SENATOR FROM THE STATE OF OKLAHOMA

Senator INHOFE. The committee will come to order. We have a

policy of starting on time, and we will do that. I see our witness

is here on time, as he always is. Thank you.

The committee has had more than 20 hearings examining issues

related to motor pollutant legislation. Today’s hearing is the final

hearing I plan to hold as chairman of this committee on this issue.

I intend to mark up this bill 2 weeks from today. We have talked

to our committee members. I think we have had enough meetings

on this. We had eight of these when I was chairman of the Clean

Air Subcommittee, and there is not much more to talk about.

The Clear Skies legislation is the largest reduction in utility

emissions ever called for in the history of this Country or by any

President, a 70 percent reduction by 2018 in SO2, NOX, and mercury. Although the air is much cleaner today than it used to be,

with major pollutants being cut in half even as the population and

economic activity increased substantially, when it comes to reducing utility emissions, the Clean Air Act is outdated and must be

reformed.

Every attempt to set a standard by regulation has resulted in

endless litigation. The NOx SIP Call took over 7 years. The

NAAQS process took over 10 years when you consider the 1997

proposal was required by the court order. The residual risk program is in worse shape, and the agency’s efforts to date to deal

with the residual risk have been criticized by the National Academy of Sciences. Regardless of what you think about the NSR program, it has resulted in almost no emissions reductions, and its use

in the courtroom will only delay the reductions. The only virtually

litigation-free program to reduce utility emissions has been the

Acid Rain Program.
2

The success of the Acid Rain Program is the reason President

Bush proposed the Clean Skies Initiative, and the reason Senator

Voinovich and myself support it. This program has been practically

litigation-free, whether it was in the implementing of regulations

or the enforcement. It has been almost completely violation free.

The Clear Skies legislation, S. 131, will cleanup the air by reducing utility emissions faster, cheaper, and more efficiently than the

Clean Air Act. Anyone who doubts this either does not understand

the legislation or has not paid attention to the endless litigation

over the past 15 years. We will hear testimony today from a variety

of witnesses in addition to the Administration witness. We will

hear from: A well-respected environmental official who is dedicated

to solving the Acid Rain problem in New York and New England,

the area of the Country where its effects are the most devastating;

an analyst for the labor union who is concerned that the alternatives to Clear Skies will cost jobs; and a lawyer for the national

group which has brought numerous lawsuits under the current law.

Why is it that only the lawyer supports the endless litigation that

is in the current act? I think we understand that.

What we are trying to accomplish with this act is to expand the

Acid Rain Program in order to achieve the emissions reductions

without the endless lawsuits. Maybe that is why so many large environmental organizations, who employ more lawyers than scientists, oppose this bill.

They have thrown a number of unsubstantiated claims at this

bill. They say this bill infringes on the States’ rights. It does not,

it reaffirms them. They claim it rolls back emission reductions the

current act will achieve. It does not. It will make new reductions

possible. They say the law requires, and we can achieve, a 90 percent reduction in mercury by 2008. It does not, and we cannot

given the lack of technology. It just couldn’t happen. Most ludicrous

of all, they say it will engender lawsuits despite the fact that this

bill is based on the litigation-free Acid Rain Program precisely to

end litigation and ensure clean air progress.

Last week, the Energy Information Administration released a report examining the economic impacts of mercury regulation. It

found that the proposal favored by the national environmental

groups, such as the NRDC, to regulate mercury by 90 percent by

2008 would lead to a 26 percent increase in natural gas prices and

a 22 percent increase in electricity prices by 2010 if technologies

cannot achieve the mandate. EPA says they will not. The result:

wholesale exports of American manufacturing jobs overseas, and

we have already seen this started.

Given the environmental benefits and predictability of this bill,

I would question those who say that we are standing on ideology

not to include carbon mandates. Who is standing on ideology? Carbon mandates cannot pass the Senate. We know that, we have had

it up several times. To insist that that be a part of this bill would

merely put us in a position where we would not be able to have

a three pollutant bill.

Finally, I am reminded in this debate of the debate that took

place in this committee a few years ago about moving brownfields

without Superfund liability reform. Everyone agreed we needed

brownfields reform. Most of the Republicans on the committee
3

wanted liability reform. We were cautioned by the other side that

if we were to link both of them together and not let the perfect be

the enemy of the good, we all listened and we, the Republicans,

said, all right, fine, we won’t do that, we will go ahead and do the

brownfields without doing the liability reform.

So, I think we have the same situation today, just the tables are

turned, and I think that we need to consider this; we need to pass

it, we need to get it to the floor, get it to conference, and start

cleaning up the air.

[The prepared statement of Senator Inhofe follows:]

STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM

THE STATE OF OKLAHOMA

This Committee has had more than 20 hearing examining issues related to multipollutant legislation. Today’s hearing is the final hearing I plan to hold as Chairman of this Committee on the issue. I intend to mark up this bill 2 weeks from

today because it is past time for Congress to act.

The Clear Skies legislation, is the largest reduction in utility emissions ever called

for by an American President, 70 percent reductions is NOX, SO2, and mercury by

2018, with major reductions taking place in the first phase over the next 5 years.

Although the air is much cleaner today than it used to be, with major pollutants

being cut by half even as the population and economic activity increased substantially, when it comes to reducing utility emissions the Clean Air Act is outdated and

must be reformed.

Every attempt to set a standard by regulation has resulted in endless litigation.

The NOX SIP Call took over 7 years. The NAAQS Process took over 10 years when

you consider the 1997 proposal was required by court order. The residual risk program is in worse shape, and the agency’s efforts to date to deal with residual risk

have been criticized by the National Academy of Sciences. And regardless of what

you think of the NSR program, it has resulted in almost no emissions reductions,

and its use in the courtroom will only delay reductions. The only virtually litigationfree program to reduce utility emissions has been the acid rain program.

The success of the acid rain program is the reason President Bush proposed the

Clean Skies Initiative, and the reason Senator Voinovich and myself support it. This

program has been practically litigation-free, whether it was in the implementing of

regulations or the enforcement. And it has been almost completely violation free.

The Clear Skies legislation, S. 131, will clean up the air by reducing utility emissions faster, cheaper, and more efficiently than the Clean Air Act. Anyone who

doubts this either does not understand the legislation or has not paid attention to

the endless litigation over the last fifteen years.

We will hear testimony today from a variety of witnesses in addition to the Administration witness. We will hear from: a well-respected environmental official that

is dedicated to solving the Acid Rain problem in New York and New England, the

area of the country where its effects are most devastating; an analyst for a labor

union who is concerned that the alternatives to Clear Skies will cost jobs; and a lawyer for a national group which has brought numerous lawsuits under the current

act. Why is it that only the lawyer supports the endless litigation that is the current

act?

What we are trying to accomplish with this Act, is to expand the Acid Rain program in order to achieve the emissions reductions without the endless lawsuits.

Maybe that is why so many large environmental organizations, who employ more

lawyers than scientists, oppose this bill.

They have thrown a number of unsubstantiated claims at this bill. They say this

bill infringes on state’s rights. It does not, it reaffirms them. They claim it rolls back

emission reductions the current act will achieve. It does not. It will make new reductions possible. They say the law requires, and we can achieve, a 90 percent reduction in mercury by 2008. It does not and we cannot given the lack of technology.

And, most ludicrous of all, they say it will engender lawsuits despite the fact that

this bill is based on the litigation-free Acid Rain program precisely to end litigation

and ensure clean air progress.

Last week, the Energy Information Administration released a report examining

the economic impacts of mercury regulation. It found that the proposal favored by

national environmental groups such as the NRDC to regulate mercury by 90 percent

by 2008 would lead to a 26 percent increase in natural gas prices and a 22 percent

increase in electricity prices by 2010 if technologies cannot achieve the mandate.
4

And EPA says they will not. The result: wholesale exports of American manufacturing jobs overseas.

Given the environmental benefits and predictability of this bill, I would question

those who say we are standing on ideology not to include carbon mandates. Who

is standing on ideology? Carbon mandates cannot pass the Senate. That is the simple truth of the matter. Those who would sacrifice the tangible benefits in cleaner

air and improved health achieved in a ‘‘3–P’’ bill simply to make a political statement are the ones clinging to the worst parts of the Clean Air Act, the litigation,

not the emissions reductions of the acid rain program.

Thank you.

Senator INHOFE. Senator Jeffords.

OPENING STATEMENT OF HON. JAMES M. JEFFORDS,

U.S. SENATOR FROM THE STATE OF VERMONT

Senator JEFFORDS. Thank you, Mr. Chairman, for holding this

important hearing.

A decade and a half ago I worked with many of the current members of the committee in crafting the Clean Air Amendment of

1990. We and some of the legends of this committee and this institution—John Chafee, Pat Moynihan, George Mitchell, and others—

banded together to write a law that has resulted in great health

and environmental benefits. Today, in great contrast, we will debate the merits of S. 131.

I am not putting it mildly when I state that S. 131 eviscerates

the Clean Air Act. S. 131, as introduced, represents the biggest

rollback of the Act ever presented to this committee. I believe most

laws can be improved. Once again, I repeat my willingness to negotiate and to compromise to make improvements in the existing

Clean Air Act to increase guaranteed public health and environmental benefits, but S. 131 is not a net improvement.

The Clean Air Act is working, despite the continuing efforts of

the Bush administration to undermine it and to protect industry at

the expense of public health. I understand that power plant owners

want a new law to escape vigorous enforcement of the Clean Air

Act, particularly New Source Review. The power plant companies

want further delay of legal deadlines to achieve the health-based

standards of poor ozone and fine particulate matter. Utilities want

to be shielded from reducing toxic air pollutants like mercury and

other heavy metals, and from achieving modern emission standards, and most fuel plants want to put off dealing with the global

warming forever, but now is not the time to fulfill the polluters’

wish list.

Since 1990, more than 70 million tons of pollution have been re- duced, and the law is still working, accruing more than $110 million in net benefits every year. Amazingly, those reductions occurred while GDP rose considerably and electricity prices increased

by less than 1 percent per kilowatt hour, an incredible success.

S. 131 radically slows that progress and reverses course. S. 131

rewrites major portions of the Clean Air Act to delay attainment

of the health-based standards, leaving millions of Americans to

breathe dirty air longer. The bill never achieves the emissions reductions claimed by the proponents. The caps are not really caps

and the bill is rife with loopholes for polluters and litigation.

This bill takes the efficient market-based system set up in 1990

and dismantles it. The States’ ability to rely on Federal action to

prevent interstate transport of air pollution is crippled by S. 131.
5

The current Act’s drive for continual improvement of pollution control technology, and for new and modified sources would be stifled.

S. 131 actually increases greenhouse gas emissions by 13 percent

or more in 2020.

S. 150, the Clean Power Act, my bipartisan bill with 18 co-sponsors, achieves greater pollution reduction faster, and with greater

benefits for society, as does Senator Carper’s.

Unfortunately, S. 131 and the Administration’s proposed interstate rule is much less about obtaining the maximum benefits than

it is about providing maximum protection to the utility industry

from the requirements of the present Clean Air Act.

S. 131 is really quite a sweetheart deal: All of the permits or allowances to pollute are handed over to industry sources for free.

Yes, for free. Under S. 131, the public, who really owns the rights

to the air, would see higher medical and insurance costs due to the

pollution that lingers longer than the law allows.

Let me leave you with some sobering thoughts. Everyday power

plant pollution contributes or causes 68 Americans to die prematurely, 1,000 to have non-fatal heart attacks, and thousands of

adults and children to have asthma attacks so severe that they will

go to the hospital, and 6.6 million tons of carbon dioxide will add

to the already serious dangerous interference with the earth’s climate system.

Today, we spend about $1 billion or more of taxpayers’ money on

homeland security to protect against a certainly dangerous, but uncertain threat. How much will we spend to save lives and protect

the quality of lives hurt by pollution? The Clean Air Act sets out

air quality and the emissions performance standards aimed at constantly reducing the known threat of certain damage from dangerous manmade emissions.

Our energy sector must do more to meet those standards. They

and the Federal Government must invest more seriously and rapidly in cleaner, more efficient technologies to protect health and the

environment. S. 131 does nothing to meet those challenges, and allows more pollution than current law.

[The prepared statement of Senator Jeffords follows:]

STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM

THE STATE OF VERMONT

A decade and a half ago I worked with many of the current members of this Committee in crafting the Clean Air Act Amendments of 1990.

We and some of the legends of this Committee and this institution, John Chafee,

Pat Moynihan, George Mitchell and others banded together to write a law that has

resulted in great health and environmental benefits.

Today, in great contrast, we will debate the merits of S. 131. I am not putting

it mildly when I state that S. 131 eviscerates the Clean Air Act. S. 131, as introduced, represents the biggest rollback of the Act ever presented to this Committee.

I believe most laws can be improved. Once again, I repeat my willingness to negotiate and to compromise to make improvements in the existing Clean Air Act to increase guaranteed public health and environmental benefits. But, S. 131 is not a

net improvement.

The Clean Air Act is working, despite the continued efforts of the Bush Administration to undermine it and to protect industry at the expense of the public health.

I understand that power plant owners want a new law to escape vigorous enforcement of the Clean Air Act, particularly New Source Review. The power plant companies want further delay of legal deadlines to achieve the health-based standards for

ozone and fine particulate matter.
6

Utilities want to be shielded from reducing toxic air pollutants, like mercury and

other heavy metals, and from achieving modern emission standards. And most fossil

fuel plants want to put off dealing with global warming forever.

But now is not the time to fulfill the polluters wish list. Since 1990, more than

70 million tons of pollution have been reduced and the law is still working, accruing

more than $110 billion in net benefits every year.

Amazingly, those reductions occurred while GDP rose considerably and electricity

prices increased by less than one cent per kilowatt-hour. An incredible success.

S. 131 radically slows that progress and reverses course. S. 131 rewrites major

portions of the Clean Air Act to delay attainment of the health-based standards—

leaving millions of Americans to breath dirty air longer.

The bill never achieves the emissions reductions claimed by the proponents. The

caps are not really caps and the bill is rife with loopholes for polluters and litigation.

This bill takes the efficient market-based system set up in 1990 and dismantles

it. The states’ ability to rely on Federal action to prevent interstate transport of air

pollution is crippled by S. 131.

The current Act’s drive for continual improvement of pollution control technology

from new and modified sources would be stifled. S. 131 actually increases greenhouse gas emissions by 13 percent or more in 2020.

S. 150, the Clean Power Act, my tri-partisan bill with 18 cosponsors, achieves

greater pollution reduction, faster and with greater benefits for society. As does Senator Carper’s.

Unfortunately, the S. 131 and the Administration’s proposed interstate rule is

much less about obtaining the maximum benefits than it is about providing maximum protection to the utility industry from the requirements of the current Clean

Air Act. S. 131 is really quite a sweetheart deal. All of the permits or allowances

to pollute are handed out to industry sources for free.

Under S. 131, the public, who really own the rights to the air, would see higher

medical and insurance costs due to pollution that lingers longer than the law allows.

Let me leave you with some sobering thoughts. Everyday, on average, power plant

pollution will contribute to or cause 68 Americans to die prematurely, 1000 to have

a non-fatal heart attack, and thousands of adults and children to have asthma attacks so severe they will go the hospital. And 6.6 million tons of carbon dioxide will

add to the already serious risk of dangerous interference with the earth’s climate

system.

Today, we will spend about $1 billion or more of taxpayer’s money on homeland

security to protect against a certainly dangerous but uncertain threat. How much

will we spend to save lives and protect the quality of lives hurt by pollution?

The Clean Air Act sets out air quality and emissions performance standards

aimed at constantly reducing the known threat of certain damage from dangerous

manmade emissions.

Our energy sector must do more to meet those standards. They and the Federal

Government must invest more seriously and rapidly in cleaner, more efficient technologies to protect health and the environment. S. 131 does nothing to meet these

challenges and allows more pollution than current law. It won’t make a better tomorrow.

Thank you.

Senator INHOFE. Thank you, Senator Jeffords.

We are going to adhere to the 5 minute rule on opening statements, because we have a long hearing here. So if you all would

cooperate I would appreciate it. Don’t feel compelled to spend a full

5 minutes if you don’t want to.

Senator Isakson, I believe.

Senator ISAKSON. Thank you very much.

Senator INHOFE. By the way, after we are completed with our

opening statements, we will conclude opening statements and not

go back to them if others come in.

Yes, Senator Isakson.

Senator ISAKSON. Thank you very much, Mr. Chairman. I ask

unanimous consent my entire statement be submitted for the

record.
7

Senator INHOFE. All statements will be made a part of the

record.

OPENING STATEMENT OF HON. JOHNNY ISAKSON,

U.S. SENATOR FROM THE STATE OF GEORGIA

Senator ISAKSON. I am delighted to be here, although this is my

second participation as a member of this committee. I understand

this is the 24th hearing the committee has held since 1998 on this

issue, and I commend the Chairman for his dedication to bring the

issue to the floor for us to have a full debate.

It is a critical issue. In the State of Georgia it is a very critical

issue. In my State, 28 of 159 counties, including Walker and

Catoosa Counties in the mountains, through the metropolitan Atlanta area, down the Chattahoochee River to Muskogee County and

the greater Columbus area, are non-attainment for particulate

matter; and 22 of those 150 counties in the same area are non-attainment for ozone. The fact is about 60 percent of Georgia’s population lives in non-attainment areas. I think the goals of Clear

Skies and the goals of this bill are appropriate and will be good for

Georgians.

I am especially interested in the benefits for Georgia regarding

the transition areas. Under Clear Skies, areas that are projected to

meet ozone and fine particulate standards by 2015 as a result of

Clear Skies would have a legal deadline to do so. These areas

would be designated transitional, rather than non-attainment, and

would not have to adopt local measures, except as necessary, to

quality for transitional status. Clear Skies will allow many of Georgia’s counties to be designated transitional and ultimately in attainment. I believe that, with some minor change protecting States

from the threat of lawsuit as a result of these designations, this

provision will dramatically benefit not just Georgia, but the Nation.

Clear Skies will help to solve the clean air crisis by responsibly

synchronizing the Nation’s environmental, energy, and economic

policies. By reducing emissions to historic lows and helping to ensure continued access to reliable low-cost electricity, we are implementing a formula that is critical to job creation and to Georgia

and to America’s global competitiveness, and to the quality of life

of the citizens of the State that I represent.

I yield back.

[The prepared statement of Senator Isakson follows:]

STATEMENT OF HON. JOHNNY ISAKSON, U.S. SENATOR FROM THE STATE OF GEORGIA

Thank you, Chairman Inhofe, for holding this hearing. I hope that this hearing,

the 24th hearing on this issue by my count since 1998, will underscore the need

for Clear Skies. I know that I certainly am hopeful that we can report this legislation out of Committee, and to the floor for a vote where the entire Senate can debate

the merits of the bill.

In my state of Georgia 28 of 159 Counties, including Walker and Catoosa Counties

in the mountains, through Metro Atlanta, and down to Muscogee County and the

Metro Columbus area, are in non-attainment for particulate matter. 22 of 159 counties over the same geographic area are in non-attainment for ozone. In fact, about

60 percent of Georgia’s population lives in a non-attainment area. We have impaired

waters from high mercury levels and, in a state where we celebrate the outdoors,

over half of Georgia’s lakes and rivers have mercury-based fish consumption

advisories. Coal fired power plants are a large source of these mercury levels. In

light of the troubled history of Clean Air Act regulations and the delays that have

prevented their full and timely implementation, Clear Skies is the best solution for
8

reducing toxic power plant emissions by meaningful levels, and for making sure

those reductions actually become reality.

As I mentioned in last week’s subcommittee hearing, I am especially interested

in the benefits for Georgia in the section regarding ‘‘Transitional Areas’’. Under

Clear Skies, areas that are projected to meet the ozone and fine particles standards

by 2015 as a result of Clear Skies would have legal deadline of 2015 for meeting

these standards (i.e., will have an attainment date of 2015). These areas would be

designated ‘‘transitional’’ areas, instead of ‘‘non-attainment’’ or ‘‘attainment,’’ and

would not have to adopt local measures except as necessary to qualify for transitional status). They would have reduced air quality planning obligations and would

not have to administer more complex programs. Clear Skies will allow many of

Georgia’s counties to be designated ‘‘transitional’’, and ultimately in attainment. I

believe that, with some minor changes protecting states from the threat of lawsuit

as a result of these designations, this provision will dramatically benefit not just

Georgia but the nation.

America has made much progress since 1970 and the passage of the Clean Air

Act, however we still face major air quality challenges in many parts of the country.

Clear Skies is the most important step we can take to address these challenges.

Clear Skies will help solve the current clean air crisis by responsibly synchronizing

the nation’s environmental, energy, and economic policies. By reducing emissions to

historic lows and helping to ensure continued access to reliable, low-cost electricity,

we are implementing a formula that is critical to job creation and to Georgia and

America’s global competitiveness.

Congress needs to act now so that we may begin achieving emissions reductions

and their related health benefits sooner rather then later. I look forward to working

with you Mr. Chairman to pass Clear Skies, and improve our nation’s air quality.

Thank you.

Senator INHOFE. Thank you, Senator Isakson.

Senator CARPER.

OPENING STATEMENT OF HON. THOMAS R. CARPER,

U.S. SENATOR FROM THE STATE OF DELAWARE

Senator CARPER. Thank you, Mr. Chairman, and thanks for holding this hearing.

Mr. Connaughton, welcome. I look forward to getting to know

you better and having a chance to talk about some of these issues

with you further, beyond our meeting today.

Mr. Chairman, I have two unanimous consent requests, if I

could. One, on my way to Washington earlier this week, I was looking through our local paper, the News Journal, and I came across

an Associated Press story written by Charles Hanley. It may have

appeared in your papers at home. But the headline is, ‘‘Warmer

World, Shrinking Glaciers;’’ the sub-headline: ‘‘From Alaska to

Patagonia, Climate Change is Taking a Toll.’’

Some of you have heard me say this: I am a Johnny-come-lately

on global warming, but I have become convinced over time that

something is going on in our world. And to the extent that we

begin taking some corrective actions now, not just us in this Country, but nations all over the world, we will be happy that we did,

rather than taking some far more Draconian steps later on.

Senator Jeffords has alluded to this. I have been here for 4 years,

but the history of this committee, this is a committee that works

well across the aisle, Democrats and Republicans. To the extent we

get anything done, whether it is brownfields or the earlier Clean

Air Act, it is because we work together. If we don’t do that in this

case as well, we are not going to get much done. In fact, we will

end up with the kind of gridlock that has characterized too much

of what goes on in Washington in recent years.
9

Later today I am going to be involved in a meeting with Republican and Democratic Senators on class action reform. Tomorrow

there will be a markup in the Judiciary Committee on class action

reform. It is a product of literally years of bipartisan effort to hammer out a compromise to bring to the Senate floor, I hope next

week, legislation that will provide for, I think, a more level playing

field in our legal climate in this Country.

That is a contentious issue and, frankly, so are the issues that

are before us today. The only way we have gotten to the point

where we are in class action is we decided that the Republicans are

not going to do this on their own, or Democrats either. It is going

to be a genuine effort to reach across the aisle to work within the

committees of jurisdiction and, frankly, to work outside those committees of jurisdiction; for the Administration to play a constructive

role and to get us to a point where we are about to take up that

legislation and, I think, pass it with a large bipartisan majority.

That example and an earlier example that I cited last week, with

the passage of 9/11 legislation, we had Senators Collins and

Lieberman really providing what I call the gold standard for Democrats and Republicans working together and working through

tough issues. We did that in those instances and, frankly, we need

to do it here. I was privileged to spend an hour or so with my dear

friend, Senator Voinovich, yesterday in his office to talk through

some of these issues to see where we can begin to find common

ground, and we are going to make every effort to do that.

Mr. Chairman, I would just urge you to reach out to folks on our

side in the same way that George and I have reached out to one

another. It may be too late to do that, I hope not, and I would urge

you to do that. I would urge my friend, Senator Jeffords, if that

hand is extended, that we take it and see how we can move forward.

The issues here are difficult: Should we include carbon? Should

we address the issue of global warming or not? I think you have

a proposal from Senator Jeffords which is the Kyoto standard and

you have a proposal from the Administration that says we are not

going to do anything at all. There has to be something in between

those two polar positions. There is. I think it is the legislation that

Senator Chafee and Senator Gregg and Senator Alexander introduced in the last Congress and will probably reintroduce shortly.

But there has to be a middle ground. There has to be a middle

ground between a position that says we are not going to change

New Source Review at all and we are going to get rid of it entirely.

There has to be some middle ground there where we cannot necessarily get rid of it, but we can improve it.

I would ask unanimous consent for the record to submit this letter that we got today. It is from a legislator in Maryland who is

the chairman of the National Conference of State Legislators Environmental and Natural Resources Committee, and it is basically a

letter calling on us to not hamstring the States in their efforts to

clean up their own air, and asking that we not doctor New Source

Review. It doesn’t say we shouldn’t change it at all, but asks that

we not doctor it.

Senator INHOFE. Without objection, it will be a part of the record.
10

[The referenced document follows:]
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Senator CARPER. The last thing I want to say is this. My time

is almost up. I am just going to stop right here.

Again, I urge a bipartisan effort. I will be happy to engage with

the Chairman and others, Democrats and Republicans, on this committee. But if we don’t do that, we are not going to get much done.

Senator INHOFE. Thank you very much, Senator Carper.

Senator Vitter.

OPENING STATEMENT OF HON. DAVID VITTER, U.S. SENATOR

FROM THE STATE OF LOUISIANA

Senator VITTER. Thank you, Mr. Chairman. I want to thank you

and Senator Jeffords for holding the hearings.

Thanks to all of the witnesses for their upcoming testimony.

I am very interested in this issue. It certainly affects Louisiana

and communities across Louisiana, as it does communities across

the Country, so I look forward to being very involved, proactive and

constructive, on this issue. In terms of passing new legislation, I

am eager to pass legislation more flexible and which actually allows us to make improvements in air quality in a more efficient

and cost effective manner. Unfortunately, under existing law, I

think you have a lot of examples contrary to that, including in

places like Louisiana. I will give you an example for instance,

which is a big case in Louisiana.

In Baton Rouge, as we move from a 1-hour ozone standard to a

more stringent 8-hour ozone standard, Baton Rouge’s classification

could go from severe to marginal. Yet, under existing law, even as

that happens, Baton Rouge would be held to the existing severe restrictions under the old 1-hour standard. That seems to be inconsistent and almost nonsensical. The other thing it produces is litigation, which is ongoing and which just adds cost and delay into

the whole notion of moving forward and actually producing cleaner

air.

So I think from that example and other similar examples across

the country, there is a huge amount of room for improvement for

increased flexibility, for increased opportunity, for efficiency and

cost effectiveness in cleaning up the air and meeting much more

stringent standards. I look forward to working toward that goal.

I have a formal opening statement which I will submit to the

Record. I will apologize ahead of time, I will have to leave soon to

perform my freshman duties of presiding on the Senate floor, but

that is no statement contrary to my great interest in this issue.

[The prepared statement of Senator Vitter follows:]

STATEMENT OF HON. DAVID VITTER, U.S. SENATOR FROM THE STATE OF LOUISIANA

Thank you, Mr. Chairman for scheduling today’s hearing on the Clear Skies Act

of 2005. I also want to thank our witnesses for coming today to testify about this

legislation, which is based on one of the more successful programs established by

the Clean Air Act.

We have made major strides in the fight for cleaner air since Congress first

passed the Clean Air Act in 1970. But we continue to face air quality challenges

in different parts of the United States, and Americans still suffer adverse impacts

from air pollution. An important next step would be for Congress to enact sensible

legislation that will achieve additional health benefits and reductions in air pollution without triggering endless lawsuits.

In cities across the nation, our current approach to regulating air quality has generated ambiguities that have triggered such lawsuits. In Baton Rouge, Louisiana,
20

for example, a lawsuit has been filed over Federal environmental officials’ approach

to regulating ozone levels there.

Until 2004, the Environmental Protection Agency applied a so-called ‘‘one hour’’

ozone implementation standard to the city of Baton Rouge. In 2004, however, the

EPA replaced its ‘‘one hour’’ standard with a new, more stringent and protective

‘‘eight-hour’’ ozone implementation standard. Baton Rouge, which was classified as

a ‘‘severe’’ non-attainment area under the EPA’s old ozone implementation standard,

is now considered a ‘‘marginal’’ area under the agency’s new standard.

To re-classify Baton Rouge as ‘‘marginal’’ under EPA’s more stringent standard

and yet continue to insist that the city meet the requirements for areas that are

designated as ‘‘severe’’ seems to me to be inconsistent—especially when Baton Rouge

has not even implemented any of the ‘‘severe’’ requirements. But my constituents

in Baton Rouge tell me that this is exactly what the government is requiring of

them under the EPA rule implementing the 8-hour standard. Not surprisingly, this

situation has resulted in the filing of a lawsuit.

I look forward to hearing from our witnesses on this and other important issues.

Once again, thank you, Mr. Chairman for your efforts to organize this hearing.

Senator INHOFE. Thank you, Senator Vitter.

I think by agreement, Senator Obama, that Senator Lautenberg

will go next. Is that correct?

OPENING STATEMENT OF HON. FRANK LAUTENBERG,

U.S. SENATOR FROM THE STATE OF NEW JERSEY

Senator LAUTENBERG. Thank you, Mr. Chairman. I thank my colleague for deferring. I have a hearing on the soon to be, Secretary

of Homeland Defense, so I appreciate it.

The Clean Air Act has been called the most effective environmental law ever written, so I am not sure that it needs fixing. It

may need extending, but I don’t think it needs the kind of fixing

that we are looking at presently. We heard last Wednesday, despite

double and triple digit growth in our GDP, energy consumption and

population, that clean air programs have succeeded in reducing pollution by 51 percent. We have made significant progress over the

years, but we still haven’t finished the job.

Last year, Americans in over 450 counties had to breathe

unhealthy air that failed to meet the Environmental Protection

Agency’s health standards for ozone. I have seen the tragic effects

of air pollution first-hand. Asthma took my sister’s life, and I have

watched my 10-year-old grandson, who also has asthma, struggle

at times just to breathe. As a father and grandfather, I don’t want

other members of my family poisoned by the air they breathe, and

I don’t want anybody else’s family to have to breathe that air. That

is why I have looked at this new Clear Skies bill and have become

more concerned as I examine it.

According to EPA, under the bill before us, about 200 of the dirtiest power plants wouldn’t have to cut their emissions at all. In

New Jersey, one-third of the ozone and over one-third of the mercury emissions come from other States. But under this bill, we

couldn’t do anything about that upwind pollution, except hold our

breath. Moreover, this bill doesn’t require power plants to reduce

any of their emissions of 66 deadly toxic pollutants.

Mr. Chairman, I appreciate the hard work that you and Senator

Voinovich have put into developing the Clear Skies bill, but on reflection, I think that we are better off sticking with the Clean Air

Act and do a better job of enforcing its provisions, and I thank you,

Mr. Chairman.

[The prepared statement of Senator Lautenberg follows:]
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STATEMENT OF HON. FRANK LAUTENBERG, U.S. SENATOR FROM THE STATE OF

NEW JERSEY

The Clean Air Act has been called the ‘‘most effective environmental law’’ ever

written. So I’m not sure that the Clean Air Act needs to be ‘‘fixed.’’ As we heard

last Wednesday, despite double- and triple-digit growth in our GDP, energy consumption and population, Clean Air Act programs have succeeded in reducing pollution by 51 percent.

So we have made significant progress over the years, but we haven’t finished the

job by any stretch. Last year, Americans in over 450 counties had to breathe

unhealthy air that failed to meet the Environmental Protection Agency’s health

standards for ozone.

I’ve seen the tragic effects air pollution can have first-hand. Asthma took my sister’s life, and I’ve watched my 10-year old grandson, who also has asthma, struggle

just to breathe. As a father and grandfather, I don’t want my family to be poisoned

by the air they breathe. That’s why, the more I’ve looked at this new ‘‘Clear Skies’’

bill, the more concerned I’ve become.

According to EPA, under the bill before us, about 200 of the dirtiest power plants

wouldn’t have to cut their emissions at all. In New Jersey, one-third of the ozone

and over one-third of the mercury emissions come from other States. But under this

bill, we couldn’t do anything about that upwind pollution except hold our breath.

About 10 percent of New Jersey’s school kids have asthma, and about 150,000 of

them are hospitalized each year, yet the analysis shows that ‘‘Clear Skies’’ would

let industry off the hook for meeting vital health standards for three major pollutants until 2025 or even later. Any possible public health reason for such a bill completely escapes me. Moreover, this bill doesn’t require power plants to reduce any

of their emissions of 66 deadly toxic pollutants.

Mr. Chairman, I appreciate the hard work that you and Senator Voinovich have

put into developing the ‘‘Clear Skies’’ bill. But, on reflection, I think we’re better

off sticking with the Clean Air Act and do a better job of enforcing its provisions.

Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator Lautenberg.

Senator Murkowski.

OPENING STATEMENT OF HON. LISA MURKOWSKI,

U.S. SENATOR FROM THE STATE OF ALASKA

Senator MURKOWSKI. Thank you, Mr. Chairman. I appreciate the

opportunity this morning.

Welcome to Mr. Connaughton and those other witnesses that we

will hear this morning.

This is a very important hearing, I think, to all of us. I think it

is clear, as you listen to the discussion already, there is not agreement as to what it is that we do next, but I think it is important

to take the step, I believe, with the legislation that we have before

us, in recognizing that we must begin somewhere.

The Clean Air Act, as Senator Lautenberg has mentioned, together with the amendments that were passed in 1990, has been

remarkably successful in improving the Nation’s air quality, and

one of the most significant chapters in the clean air success story

has been the reduction of emissions that contribute to acid rain

through the cap and trade policies, which free the industry from

the most onerous restraints of a command and control regime.

I am pleased to note that the legislation before us does recognize

the success of the Acid Rain Program and carries on that good

work by taking the next steps toward further reduction in two key

acid rain precursor chemicals, specifically the NOx and the SOx. It

will also add a new and equally strict ceiling for mercury and, in

the process, will achieve significant additional reductions in fine

particulates and ozone.
22

At the same time, it will provide a measure of certainty for the

companies that it affects. It will neither cause massive power cost

increases or open the door to excessive delays. If the goal is to reduce pollution, this is the most practical step that can be taken.

Of course, one thing that we do not have in Clear Skies is regulation of carbon dioxide as a pollutant.

Now, many people, many scientists believe very fervently that

human-produced CO2 may cause or aggravate global climate warming, and many point to warming in my State of Alaska or situations up in the Arctic as evidence. But despite what we may see

up North, the science on manmade CO2 as an agent of climate

change, including in the Arctic, is anything but undisputed, is anything but conclusive.

Now, we have had rising temperatures. We are seeing changes

in the Arctic. That much we know. But the question is what is

causing the changes. We have seen periods of higher temperatures

and higher CO2 which have occurred multiple times in the past,

raising questions about whether today’s experience is truly unique

or whether it is part of a cycle.

Temperatures in the Arctic also seem to respond to a several-decade-long cycle which may be tied to an ocean phenomenon called

the Pacific Decadal Oscillation. In other words, the warming that

we may be seeing in the Arctic may be driven by regular predictable changes in the ocean, instead of by CO2 stimulated increases

in the air temperature. But all of this together just kind of leads

us to the place where we are—is there conclusive evidence, is there

demonstrable evidence that says that CO2 is an agent of climate

change?

We do know that if we add CO2 regulation to this bill it will seriously delay action on NOx, SOx, mercury, ozone, and particulates,

and that it would impose extraordinary costs by forcing a rapid,

large shift toward natural gas. As you know, I have been pushing

to get more of Alaska’s natural gas to market here in the lower 48

States, but I believe it is better to let gas usage and gas supply

grow in unison, rather than cause hardship through steps that create large, unplanned increases in energy costs.

Balancing the need for improved air quality, while avoiding unrealistic demands that would damage our economy and social fabric,

is not an easy task. This is a good start this morning, and I appreciate the work, Mr. Chairman, that you and so many others have

made on this issue. Thank you.

[The prepared statement of Senator Murkowski follows:]

STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM THE STATE OF ALASKA

Thank you, Mr. Chairman. I too would like to welcome and thank our witnesses

for taking time to explore the ramifications of this important legislation. I hope we

can all agree on the importance of moving forward with this key part of the President’s agenda.

The Clean Air Act, together with amendments passed in 1990, has been remarkably successful in improving the nation’s air quality. The 2004 EPA annual report

notes that since 1970, air pollution overall has been reduced almost 50 percent

while economic growth in the U.S. has increased by 160 percent. This is one of the

great success stories of the century.

One of the most significant chapters in the Clean Air success story has been the

reduction of emissions that contribute to acid rain through ‘‘cap and trade’’ policies

that set solid upper limits, but allowed trading in allowances for certain pollutants,
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freeing industry from the most onerous restraints of a command and control regime

and allowing it to develop more workable methods of reducing pollution.

I’m pleased to note that this bill does recognize the success of the acid rain program and carries on that good work by taking the next steps toward further reductions in two key Acid Rain precursor chemicals emitted by many large electricity

generation facilities, especially those using coal. These chemicals are nitrogen oxides

(NOX) and sulphur dioxide (SO2). It will also add a new and equally strict ceiling

for mercury (Hg), an emission which may have a variety of adverse health effects,

especially on pregnant women and infants. In the process, it will achieve significant

additional reductions in fine particulates and ozone.

At the same time, it will provide a measure of certainty for the companies it affects. Unlike some proposals, and unlike the purely administrative approach which

can be stymied by repeated litigation, it will neither cause massive power-cost increases or open the door to excessive delays. If the goal is to reduce pollution, this

is the most practical step that can be taken.

Clear Skies is consistent with the recommendations of the National Research

Council, which encouraged air quality efforts that are ‘‘less bureaucratic,’’ with

‘‘more emphasis on results than process.’’ That is precisely what we have in Clear

Skies.

One thing we do not have in Clear Skies is regulation of carbon dioxide (CO2) as

a pollutant. As someone said the other day, it is the proverbial ‘‘elephant in the

room.’’

CO2 is recognized as a ‘‘greenhouse gas.’’ Many people, including many scientists,

believe fervently that human-produced CO2 may cause—or aggravate—global climate warming. Many point to Arctic areas including much of my State of Alaska

and say that physical changes are occurring that prove the case. That being the

case, they say, we should treat CO2 as a pollutant and bring it under the same system we are using for chemicals on which the scientific evidence is undisputed.

However, the science on man-made CO2 as an agent of climate change including

in the Arctic—is anything but undisputed.

CO2 accounts for .04 percent of the atmosphere. Less than 5 percent of that is

attributed to human emissions. The concern is that the earth’s ability to scrub CO2

from the air through the growth of plants and other natural methods of sequestering carbon may be exceeded by the addition of human emissions to natural

sources. Much of the debate over CO2 goes back to the so-called ‘‘hockey stick’’—a temperature graph developed for the U.N.’s Intergovernmental Panel on Climate Change,

which appeared to show relatively stable temperatures for hundreds of years, then

a temperature spike during the 20th Century presumably due to increased CO2

emissions from internal combustion engines, electrical generation plants, and so on.

However, recent published papers indicate it has serious problems, including adjustments that made past temperatures seem cooler than they were, reliance on overly

narrow data sets, and worst, mathematical faults in the basic formula, which may

be so flawed that it would have produced the same ‘‘hockey stick’’ even if one used

it to graph random numbers instead of temperature estimates.

Other research shows that in the Arctic, periods of higher temperatures and higher CO2 have occurred multiple times in the past, raising questions about whether

today’s experience is truly unique or just part of a natural cycle.

Temperatures in my part of the Arctic also seem to respond to a several-decade

long cycle, which may be tied to an ocean phenomenon called the Pacific Decadal

Oscillation. In other words, warming Arctic temperatures and effects such as

changes in the ice pack and permafrost structures may be driven by regular, predictable changes in the ocean, instead of by CO2-stimulated increases in air temperatures.

All these questions about CO2 as an agent of climate change are still unresolved.

Because of that, it is less than wise to rely on claims that there is a scientific ‘‘consensus’’ in which all the questions are answered and all the skeptics hushed.

It does appear clear, however, that adding CO2 regulation to this bill would seriously delay action on NOx, SO2, mercury, ozone and particulates, and that it would

impose extraordinary costs by forcing a rapid, large shift toward natural gas. While

I would very much like to see Alaska’s abundant natural gas being utilized in the

Lower 48 States, and intend to do everything I can to make that happen, I believe

it is better to let gas usage and gas supply grow in unison, rather than cause hardship through steps that create large, unplanned increases in energy costs.

Finally, Mr. Chairman, I want to congratulate both you and Senator Voinovich,

the chair of the Clean Air Subcommittee, your very able staffs, and those in the Administration who helped develop the option before us today. Balancing the need for

improved air quality while avoiding unrealistic demands that would damage our
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economy and social fabric is not an easy task. I believe this is a good start and look

forward to a stimulating and informed discussion by our witnesses.

Senator INHOFE. Thank you, Senator Murkowski.

Senator Obama.

Senator OBAMA. My understanding is that my distinguished senior colleague from Connecticut has to chair a committee, so I will

defer to him.

Senator INHOFE. Senator Lieberman.

OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,

U.S. SENATOR FROM THE STATE OF CONNECTICUT

Senator LIEBERMAN. Thanks, Mr. Chairman.

Thanks, Senator OBAMA. You are building up a lot of credits with

the rest of us this morning.

Thanks, Mr. Chairman, for convening this hearing. I know that

we all agree on the need for clean and unambiguous clean air legislation to protect the quality of the air we breathe. It obviously

makes sense because it protects the health of our people, it makes

sense because it gives business a clear set of rules to live by, and

it makes sense because, if we do this in a way that allows us to

achieve the greatest gains at the lowest possible cost, it will help

our businesses compete in the global marketplace.

Unfortunately, in too many ways, my conclusion is that the Clear

Skies Act does not make sense and does not achieve the goals that

we wanted to achieve. It damages the existing tools of the Clean

Air Act that have worked very successfully and effectively to protect individual States; it drops requirements that EPA update its

standards on a regular basis; it ends requirements that best pollution control technology be employed in new facilities; it permits

some industries to opt in to Clear Skies provisions that may well

be weaker than current Clean Air Act protections; it enacts SO2

and NOx provisions that are not strong enough; it does virtually

nothing to reduce mercury pollution for more than a decade. Of

course, as we all know, it does not deal with carbon dioxide emission and, therefore, the problem that to me is real, which is the

warming of the globe.

All this has an effect on my constituents in Connecticut, both individuals who suffer from air-induced diseases, such as asthma,

and from businesses that are affected by the inadequacy of what

exists now and what is being proposed in this legislation.

I know that some have said that we should be realistic and that

the choice here in this session is between the Clear Skies Act or

nothing. I regret to say that if that is the choice, I would recommend that we do nothing. But there are better choices, and we

can achieve them together. Naturally, I believe that the Clean

Power Act, which Senator Jeffords and Senator Collins and I and

many others have co-sponsored, is a better choice, but I understand

that some parts of that are not acceptable to others.

I hope we can find a way to do more than emit a lot of sound

and fury that leads to nothing ultimately done in response to a

very real and dangerous problem, which is the pollution from various sources of our air. Bottom line, I am convinced we can do better than the Clear Skies Act, and I know that we must in the
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public’s interest, and I hope together that we can find a way to do

that.

Senator Obama, thank you very much.

Mr. Chairman, thank you. I look forward to working with you to

find some common ground on an urgent problem.

[The prepared statement of Senator Lieberman follows:]

STATEMENT OF HON. JOSEPH I. LIEBERMAN, U.S. SENATOR FROM

THE STATE OF CONNECTICUT

Thank you Mr. Chairman, for convening this hearing to discuss multi-pollutant

legislation, which is so important to the health and well-being of the American people.

I know we all agree there is certainly a need for clear and unambiguous Clean

Air legislation to protect the quality of the air we breathe. It makes sense because

it protects the health of our citizens. It makes sense because it gives business a

clear set of rules to live by. And it makes sense to do this in a manner that achieves

the greatest gains at the lowest possible cost, to help our businesses compete in the

global marketplace.

Unfortunately, in too many ways S. 131, the so-called ‘‘Clear Skies’’ legislation,

doesn’t make sense.

It damages the tools of the Clean Air Act that have worked so effectively to protect individual states. It drops the requirements that EPA update its standards on

a regular basis. It ends requirements that best pollution control technology be employed in new facilities. It permits some industries to ‘‘opt-in’’ to Clear Skies provisions that may be weaker than current Clean Air Act protections.

It enacts SO2 and NOx provisions that are too weak. It does virtually nothing to

reduce mercury pollution for more than a decade. And Clear Skies does nothing to

address carbon dioxide emissions and global warming, wasting an opportunity to

deal with all pollutants at once—and give industry the certainty they need now to

tackle pollutants in a clear and cost-effective manner.

The Administration has been telling us that Clear Skies gives states the ‘‘tools

they need’’ to combat air pollution. They say that it protects states rights by permitting them to set stricter standards within their own borders. But what they don’t

mention is that what Clear Skies takes away are the useful tools that states already

have under current law to fight pollution that comes from outside their borders,

from another state upwind.

In Connecticut, we often suffer from ozone smog caused by NOx emissions. Asthmatic children and adults in our state have attacks triggered by ozone and by the

fine particles formed from SO2. Parents who have children come to them in the middle of the night and say three simple words—‘‘I can’t breathe’’—know just how

frightening asthma can be. We can reduce the number of times this happens to children throughout our nation by implementing rigorous and fair pollution standards

that can be met with today’s technology at an affordable cost. To think that we

won’t because of Clear Skies should be reason enough to go back to the drawing

board and get it right.

The health effects of air pollution go beyond asthma. Each year, nationwide, these

particles are also responsible for some 15,000 premature deaths. These are preventable deaths. Does Clear Skies help reduce this number? Probably. What they won’t

tell you is that protections provided by the Clean Air Act—our current law—do a

better job of reducing this number farther and faster.

Throughout the country, many of our fish are tainted by high levels of mercury,

which in the northeast is caused mostly by mercury emitted by U.S.-based power

plants. There should be no debate that mercury, SO2, and NOx must be reduced decisively and quickly.

What about carbon dioxide? The legislation before us does nothing, absolutely

nothing, to begin to address CO2 emissions. Why? Many in industry have told us

that it would be far more cost effective to factor CO2 requirements into their planning at the same time that they are making changes to control for SO2, NOx, and

mercury.

CO2 concentrations have been rising due to emissions from power plants, cars and

other manmade sources. We have now reached the point where further study without action is both dangerous and costly. There is scientific consensus that global

warming is a real and potentially disastrous phenomenon. The rest of the developed

world is already taking steps, opening up market opportunities through development of new technologies and new trading markets while the U.S. stands behind
26

and does nothing. Our businesses that compete in an international marketplace are

facing carbon regulation overseas as we speak.

Shame on us if 100 or 200 years from now our grandchildren and great-grandchildren are living on a planet that has been irreparably damaged by global warming, and they ask, ‘‘How could those who came before us, who saw this coming, have

let this happen?’’

Clear Skies falls far short of what is needed, what is achievable, what is cost-effective, and what makes good common sense. Some say be realistic. The choice is

between the Administration’s Clear Skies or nothing. If that is the choice, I choose

nothing. But there are better choices, including the Clean Power Act that Senator

Jeffords, Senator Collins and I and many others have introduced. Or there may be

some, third alternative. The fact is we can do better than Clear Skies and we must.

Senator INHOFE. Thank you, Senator Lieberman.

Senator Bond.

OPENING STATEMENT OF HON. CHRISTOPHER S. BOND,

U.S. SENATOR FROM THE STATE OF MISSOURI

Senator BOND. Thank you, Mr. Chairman, for holding this hearing.

Last week, one of our colleagues defined the Clear Skies debate

as jobs versus the environment, and I know that both of them are

very important. Jobs and job creation played a major role in the

Presidential election. I would say it played a role in my election,

too, because I was able to save 5,000 Missouri manufacturing jobs

and 20,000 jobs across the Midwest and Southeast.

Jobs are vital to our families. Without a job, families can’t survive; heating bills are not paid, food is not put on the table. Without a job, medical insurance is not affordable, medical bills are not

paid. A community without jobs cannot afford enough police, cannot afford fire stations and libraries. A community without jobs is

a community without a future.

I would say also, without jobs and economic growth, the environment suffers. The environment suffers mightily. I visited East Germany, Poland, and Czechoslovakia before the wall came down, and

I saw the economic stagnation under the communist system and

the absolutely appalling pollution, the rivers running brown and

smelling worse from chemical companies, the haze from power

plants that was unregulated. It was appalling. I have seen the

same thing in other areas of the world that are not developed. So

we have to have economic development along with environmental

improvement.

But environmental debates don’t have to be solely about jobs

versus the environment. I would say that the Missouri example I

cited is an example where we protected jobs, the environment, and

public safety, to boot. Now, my colleague on this committee from

California won’t like the example, but I understand where she

comes from, literally. Two years ago we stopped a State regulation

that would have killed 5,000 jobs in Missouri and 20,000 jobs elsewhere in the Country. That proposal would have cut emissions in

lawnmowers, weed whackers, chainsaws by requiring the use of

catalytic converters.

Now, such a change would have put manufacturing companies in

Missouri and Kentucky and Alabama out of business. Manufacturers would have closed their plants, laid off workers, most likely

moved the jobs to China. Fire chiefs and consumer safety advocates

were also deathly afraid of the proposal, these catalytic converters,
27

operating at 1100 degrees only inches from hands or legs. A

chainsaw scares me bad enough with a blade, not to worry about

being fused into my leg. But firefighters feared a new round of forest and brush fires from operating these superheated engines.

A long story short, we produced a win-win solution. California

was allowed to keep its State rule, but we limited the ability to

move the rule to other States. We protected the environment by requiring EPA to conduct a new round of national pollution cuts from

small engines, and we will have pollution reduction from small engines across the Nation. Consumer safety is protected because the

California rule and the EPA rule will be reviewed under the safety

requirements of the Clean Air Act.

I think we have a similar opportunity for a win-win with Clear

Skies, which offers a balanced approach: it will protect jobs and the

environment. It will be the largest ever pollution cut from electric

power plants, reducing acid rain causing SO2 by 70 percent. Clear

Skies will reduce smog causing NOx by 70 percent and, for the first

time ever, mercury emissions will be reduced by 70 percent.

Clear Skies is not without cost: It will impose a $50 billion mandate on power companies to install new pollution control technologies. But it will prevent costly litigation from delaying environmental improvements and running up costs in the courtroom rather than in cutting pollution. Clear Skies omits a carbon mandate

that would drive jobs out of this Country. If you were worried

about air pollution and environmental pollution, just drive those

jobs to China and India.

Of course, they aren’t covered by Kyoto; they will continue to

grow in their pollution. The more jobs they steal, the more pollution will blow across to Alaska. If there is manmade CO2 and environmental changes, Alaska can look to its neighbors south and

west. That is where the pollution will come from. But that isn’t

going to pass, because it would rob our families of jobs, threaten

to drive up the heating bills of elderly people, who would have to

choose between heating and eating; it would force farmers, putting

tremendous burden on them and on other producers.

But I think Clear Skies protects family budgets from steep electric increases, protects jobs, protects manufacturing by attaining

clean air standards in almost every local area through power plant

regulation alone, and protects transportation by attaining clean air

standards in almost every local area through power plant regulation alone. It keeps coal flowing, it avoids a hyper-dependence on

extremely expensive and short supply natural gas. It will protect

our environment, our workers, and our families, and I urge my colleagues to support the Clear Skies bill.

Senator INHOFE. Thank you, Senator Bond.

Senator Obama, do you want to continue to yield to your colleagues?

Senator OBAMA. If Senator Clinton needed to, I would yield to

her happily. But I think she is going to be here for a second.

Senator INHOFE. Fine. You are recognized.
28

OPENING STATEMENT OF HON. BARACK OBAMA,

U.S. SENATOR FROM THE STATE OF ILLINOIS

Senator OBAMA. Thank you, Mr. Chairman, other members of the

committee.

I had the occasion of listening to some of the testimony during

the subcommittee, and I think that Senator Bond is right to point

out that there are economic costs to environmental regulation. I

represent a State that depends heavily on the coal industry, particularly in southern Illinois. We have a large chemical industry

that has been hurt by high natural gas prices. I think that there

is no doubt that when we think about the environment, we have

to balance costs and benefits.

There also is a cost when our environment is degraded. As some

of you may be aware, my daughter is one of the 230,000 children

in Illinois with asthma. Chicago is the second hardest-hit city in

the Country from power plant pollution. Every single river and

lake in Illinois has an advisory for fish consumption due to the risk

of mercury consumption. As I mentioned in the subcommittee,

when you have had a daughter who comes into your bedroom in

the middle of the night and says she can’t breathe, then you are

mindful of the fact that even if there are some costs that go along

with controlling pollution, those costs may well be worth it.

Now, I recognize that many members of this committee have

been frustrated because this issue has been debated for several

years. There are no perfect answers to this issue. But there are a

few things I think we should all be clear about. The option, at least

as I understand it, is not between the Clear Skies Act and doing

nothing at all. The question is, is the Clear Skies Act an improvement over the status quo, which is the Clean Air Act? It strikes me

that one of the first tasks of our committee should be to take the

physicians’ axiom to heart, first do no harm.

So, when I am weighing the benefits of Clear Skies, I am not

weighing it against no environmental regulation whatsoever, I am

weighing it against what would happen if we simply maintain the

status quo. It seems to me, at least, that I have not heard any dispute that although Clear Skies would significantly reduce emissions compared to doing nothing whatsoever, that, in fact, it also

represents a diminishing level of protection compared to what exists currently. I think that is something that we probably should

acknowledge.

The second point that has been raised several times is the issue

of attainment, and Chicago is an area that is having difficulty

achieving attainment. I am happy to discuss whether or not the

mechanisms that we have set up for local communities to attainment are too onerous or too strict or there is too much command

and control. While there is some flexibility in terms of how to do

this, simply saying that since these communities are having trouble

reaching attainment, we shouldn’t even try, strikes me as a self defeating attitude. At the very least we should acknowledge that if

we are lowering the standards, then there is going to be more air

pollution in these communities than there otherwise would be.

A final point I guess I would make is with respect to the issue

of litigation, which has come up frequently. I think one of the

things that I heard during the subcommittee was the complaint
29

that the existing rules were consistently tied up in litigation and,

as a consequence, we weren’t getting sufficient environmental protection, period.

This reminds me a little bit of the kid who murders his parents

and then complains about being an orphan. I mean, if companies

are initiating litigation because they don’t want to be regulated at

all, and then they come and complain about the fact that there is

too much litigation, that doesn’t seem to me a good reason for this

committee to make changes on existing law.

I know my time is up, Mr. Chairman, but I guess I would suggest that if we are going to have a debate about this issue, then

it should be an honest debate. The fact that there is litigation out

there is not, in and of itself, a justification for changing the law.

If we are going to change the law, it should be because we are

going to strike a better balance between the environment and economic issues than we are currently doing.

Senator INHOFE. Thank you, Senator Obama.

Senator CHAFEE.

OPENING STATEMENT OF HON. LINCOLN CHAFEE,

U.S. SENATOR FROM THE STATE OF RHODE ISLAND

Senator CHAFEE. Thank you, Mr. Chairman, for holding this

hearing. As you can tell by many of the opening statements, there

is a lot of difference of opinion here, particularly between the

Chairman and the ranking member. We are going to hear from Mr.

Connaughton the benefits of the legislation before us, and then we

will hear in the next panel from John Walke, who will testify the

bill is far dirtier than simply implementing the Clean Air Act; that

the bill is far dirtier than competing legislative proposals; that the

bill is far more costly than competing legislative proposals; that

global warming is urgent and real; and that delay increases both

the danger and the cost.

At the same time, our constituents are saying to us all we want

is clean air; we send you to Washington to look after our health.

From industry, at the many hearings we have had, all they are

saying is give us some certainty. So I think the path that might

be best taken is with Senator Carper and somewhere in the middle

of some of the differences here so we can give both our constituents

their healthy air and industry some certainty.

So thank you, Mr. Chairman, for holding this hearing.

Senator INHOFE. Thank you, Senator Chafee.

Senator Clinton.

OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON,

U.S. SENATOR FROM THE STATE OF NEW YORK

Senator CLINTON. Thank you, Mr. Chairman. I think the last two

statements really sum up my feelings. On the one hand, do no

harm. There is significant evidence based on the analysis of this

legislation that from many perspectives it would do harm.

But, second, that there ought to be an opportunity for some kind

of bipartisan effort that recognizes the costs and also the benefits

of perhaps improving on the Clean Air Act.

We have held numerous hearings in this committee on this issue,

and one thing that has been established beyond any doubt is that
30

the human health and environmental consequences of power plant

emissions are real and substantial. I think we should just start

with that, as opposed to dismissing it or diminishing it. A recent

study estimates that current soot and smog from power plant emissions cause more than 24,000 premature deaths, 38,200 non-fatal

heart attacks, hundreds of thousands of asthma attacks, and millions of days of lost work each year. That goes right to the heart

of our economic productivity.

Now, in New York these effects are felt throughout our State,

and we have perhaps borne the brunt of a lot of the environmental

damage over the last decades. One of the other witnesses on the

next panel will be the executive director of the Adirondack Council,

Brian Houseal, and Dr. Houseal will represent a group that is perhaps one of the most effective advocates for clean air in our Country, and they are here to testify against this legislation, despite

their longstanding belief that we could and should do better when

it comes to NOx and SOx and mercury.

Mercury pollution is an incredible problem throughout New York

and the Country, and we have a lot of work that we could do together, and I am very proud that in New York our Republican Governor, our Democratic attorney general, and our leading utilities

came together and reached an agreement about how to cut emissions from coal-fired plants in New York State. It seems to me that

is the kind of model that we should be looking to follow here in the

Senate.

But Clear Skies does nothing to address the climate change effects of power plant emissions of carbon dioxide; it does not meet

the test on any of the pollutants we are concerned about; it includes a weak mercury cap that requires no mercury-specific pollution controls to be added until 2018. In addition, the bill allows unlimited mercury trading, something that I don’t think should be

permitted. Why should we be in the business of permitting the

trading of poison? It ignores the significant evidence of local mercury deposition around power plants.

Clear Skies effectively eliminates Clean Air Act tools such as

New Source Review and section 126, tools that States such as New

York have relied on to reduce pollution in a bipartisan fashion.

Clear Skies weakens pollution control technology standards that

apply to new power plants and other industrial sources, reduces

protections for national parks. What do we get in return for these

changes to the Clean Air Act? Well, we get promised reductions in

NOx and SOx that are too small and too slow to enable States and

localities to meet the ozone and fine particulate matter standards

by the current deadlines. Realizing that caps would be inadequate

to reach the ozone standards by the current Clean Air Act deadlines, this legislation simply delays these deadlines by up to 11

years.

So there is just so much in this that sends us backwards. As a

Senator from New York, the question for me is simple: Why would

I support a bill that delays achievement of clean air goals in my

State, while eliminating significant tools that my State has used in

the past?

I also want to point out that the cost estimates are very difficult

to actually get a handle on, but it is important to recognize that
31

when the Clean Air Act Acid Rain Program was debated in 1990,

there were lots of rather high estimates. The Edison Electric Institute estimated compliance with SOx caps would cost utilities $7.4

billion by 2010; the EPA’s estimate was $4.6 billion. In fact, the actual cost was considerably less, between $1.1 and $1.5 billion.

So I think that we can do better. I don’t believe this legislation

puts us on the right path. I think that if there is an opportunity

for legitimate compromise, I want to be part of that. But, if not,

I certainly, on behalf of my State, cannot support legislation that

turns the clock back instead of forward.

Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator Clinton.

We have two more. Senator Voinovich.

OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,

U.S. SENATOR FROM THE STATE OF OHIO

Senator VOINOVICH. Thank you, Mr. Chairman, for holding this

hearing. I am pleased to be here today for our second meeting this

year and our 24th hearing since 1998 on multi-emissions issues.

Today, we are here to discuss the Clear Skies Act, and I am sure

that Mr. Connaughton will do a good job of outlining the fact that

this will reduce power emissions by 70 percent. The beauty of Clear

Skies is that the reduction levels and timelines are placed in statute and cannot be delayed. The bill expands the Acid Rain Program, our Nation’s most successful clean air initiative, which has

had virtually no litigation, 100 percent compliance, and reduced

sulfur dioxide emissions by 38 percent below 1990 levels at less

than the projected costs.

As I discussed at our last hearing, it is important we put multiemission legislation in context. We live in a global marketplace. Let

us not fool ourselves, environmental and energy policies have a direct impact on our ability to keep and maintain jobs in this Country. Just ask the thousands of Ohioans who are in manufacturing

who are no longer working. We simply cannot continue to rely on

natural gas for power generation. Our clean air policies have

played a major role in the fact that nearly 88 percent of the new

power plants built since 1992 have been natural gas fired. We have

a chart here that shows how natural gas costs have increased dramatically during the last several years. [See chart on page 35.]

The chemical industry, which is very big in the State of Ohio, at

one time was an exporter of products. Today, we have a 9.6 billion

deficit. That means that we have gone from a Country that exports

chemical products to now that has changed and now we are importing those products.

Annual funding for the Lehigh Program, a program for low-income families, has increased 73 percent since 1999 because of higher heating prices.

This legislation is also needed now because 509 counties were recently designated as non-attainment for the new National Ambient

Air Quality Standards for ozone and particulate matter. This is a

very serious problem in terms of job growth and capital investment.

Chart 2 will show that under Clear Skies and EPA’s new diesel

fuel and engine regulations to reduce sulfur, 90 percent of the
32

counties would come into attainment without any local effort. So

we have the counties that are not in attainment. With Clear Skies

and the new diesel, you see from that chart that most of them are

going to come into compliance because of Clear Skies and the new

diesel requirements. These designations are based on stricter

standards, not dirtier air. [See chart on page 36.]

I think a lot of people are under the impression that the air is

dirtier today. It is much cleaner than it was. Since 1970, while our

Nation and economy have grown substantially, emissions of the six

main pollutants have decreased by 50 percent. We need Clear Skies

to continue at a higher rate this Country’s commitment to cleaning

up the environment and protecting public health. You can just see

our economy has grown, number of miles traveled, more people in

this Country, and even during that period we have reduced the six

worse toxins by over 50 percent.

The Clean Air Act’s highly litigated and cumbersome provisions

make it unclear what or when reductions will be achieved. Critics

of Clear Skies point to the section 126 petition, NAAQS, and New

Source Review program as affected, but history tells a different

story. For example, chart 4. This chart shows the timeline for when

EPA began considering a new standard for ozone and when State

implementation plans are due. Folks, it took 15 years, 15 years to

get the new ozone standards that are now for ozone and particulate

matter. [See chart on page 37.]

The New Source Review program is far worse. I will quickly run

through some of it. Twenty pages of regulations in 1980 defining

NCRs turned into 4,000 pages of guidance documents. A 1990 lawsuit and court decision resulted in EPA rulemaking. In 1992 working groups were formed to reform New Source Review, with contradictory proposed changes in 1996 and 1998. EPA filed enforcement actions in 1999, of which several are still being litigated and

different courts have reached different opinions in two of these

cases.

On top of this, critics have taken out of context two sections of

a 208 National Academy of Science interim report to claim that

New Source Review, if unchanged, will result in more reductions

than Clear Skies. This is absolutely ridiculous. Clear Skies cap all

power pollution immediately, while NSR is applied on a case-bycase basis under a standard that now has two different and litigated interpretations.

With all this lengthy litigation, no one really can tell us when

the NSR program is going to really take effect. It won’t be until

2007 before you have oral arguments on two different cases on

NSR. One says that the rule is OK, it complies with the law; the

other one says it doesn’t comply with the law. So that is what we

get from NSR: More lawyers, more litigation.

Until we get passed this rhetoric of the false charges that Clear

Skies is less than existing law, we are going to go nowhere. Time

is of the essence. If we continue the way we are, folks, we are going

to have a stalemate of losses, uncertainty for jobs and our competitive position in the global marketplace, and, more importantly,

more importantly, for those of us who are concerned about the environment, uncertainty for our environment and for public health

in this Country.
33

[The prepared statement of Senator Voinovich follows:]

STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR FROM

THE STATE OF OHIO

Good morning. I am pleased to be here today for our second meeting this year

and our 24th hearing since 1998 on multi-emissions issues.

Today we are here to discuss the Clear Skies Act, which would be the most aggressive clean air proposal ever enacted a 70 percent reduction of power plant emissions. In just 3 years, nitrogen oxides would be capped at a reduction level of 59

percent and in 5 years, at a 59 percent reduction level for sulfur dioxide and 29 percent for mercury. As former EPA Administrator Leavitt stated before my Subcommittee on April 1 of last year, the sulfur dioxide and nitrogen oxides reductions

‘‘will result in some $50 billion’’ investment by power plants.

The beauty of Clear Skies is that the reduction levels and timelines are placed

in statute and cannot be delayed. The bill expands the Acid Rain Program our nation’s most successful clean air initiative, which has had virtually no litigation, 100

percent compliance, and reduced sulfur dioxide emissions by 38 percent below 1990

levels at less than the projected cost.

As I discussed at our hearing last week, it is important that we put multi-emissions legislation in context. We live in a global marketplace. Let us not fool ourselves environmental and energy policies have a direct impact on our ability to keep

and maintain jobs in this country.

We simply cannot continue to rely on natural gas for power generation. Our clean

air policies have played a major role in the fact that nearly 88 percent of the new

power plants built since 1992 have been natural gas fired. [CHART 1] As a result

of this increased demand, natural gas prices have doubled their historical price and

we now have the highest prices in the developed world. As the second largest consumer of natural gas (quote): ‘‘The chemical industry’s eight-decade run as a major

exporter (ended in 2003) with a $19 billion trade surplus in 1997 becoming a $9.6

billion deficit’’ (March 17, 2004 Washington Post article).

Tom Mullen from Cleveland Catholic Charities testified in 2002 that we must also

consider the devastating impact of increased electricity and home heating costs on

the poor and elderly. Annual funding for the LIHEAP program to help low income

families with their home heating bills has increased by 73 percent since 1999 due

to higher prices.

Clear Skies will keep jobs in America and energy prices stable, by allowing us to

keep using coal our most abundant and cheapest energy source. This legislation is

needed now because 509 counties were recently designated as in nonattainment for

the new National Ambient Air Quality Standards for ozone and particulate matter.

As Cincinnati Chamber of Commerce President Michael Fisher stated in testimony

on April 1, 2004, ‘‘job growth and capital investment are hindered by the nonattainment designation.’’ [CHART 2] Under Clear Skies and EPA’s new diesel fuel and

engine regulations to reduce sulfur, 90 percent of the counties would come into attainment without any local effort.

These designations are based on stricter standards, not dirtier air. [CHART 3]

Since 1970, while our nation and economy have grown substantially, emissions of

the six main pollutants have decreased by 51 percent. We need Clear Skies to continue at a higher rate this country’s commitment to cleaning up the environment

and protecting public health.

We all want cleaner air the important question is how we achieve it. Instead of

having this debate, false claims are being made that existing programs are better

than Clear Skies. Conrad Schneider from Clean Air Task Force testified last week

that: (quote) ‘‘. . . existing provisions of the Clean Air Act could potentially require

future emission reductions beyond . . . ’’ Clear Skies.

Could potentially require’? This is exactly the point. We need to stop talking about

the ideal world and focus on the real world. The Clean Air Act’s highly litigated and

cumbersome provisions make it unclear what or when reductions will be achieved.

Critics of Clear Skies point to the Section 126 petitions, NAAQS, and New Source

Review programs as effective, but history tells us a different story:

• In 1997, eight Northeastern states petitioned EPA to force Midwestern states

to reduce nitrogen oxides. After four Federal court decisions and EPA retooling, this

culminated in the NOx SIP call, which went into effect not in May 1998 but in May

2004 7 years after the process began.

• [CHART 4] This chart shows the timeline for when EPA began considering a

new standard for ozone and when State Implementation Plans are due. It took 15

years!
34

• The New Source Review program is far worse. I will quickly run through some

of it:

• 20-pages of regulations in 1980 defining NSR has turned into 4,000 pages

of guidance documents;

• A 1990 lawsuit and court decision resulted in an EPA rulemaking in 1992;

• Working groups were formed in the 1990’s to reform NSR with contradictory proposed changes in 1996 and 1998;

• EPA filed enforcement actions in 1999 of which several are still being litigated and different courts have reached different opinions in two of the cases.

• In 2003, EPA issued two rules to reform the program, both of which have

spurred lawsuits. Oral arguments on one of these rules are not expected to

occur until at least 2006.

• On top of all this, critics have taken out of context two sentences of a 208

page National Academy of Sciences interim report to claim that the NSR program if unchanged will result in more reductions than Clear Skies. This is ridiculous. Clear Skies caps all power plant pollution immediately while NSR is applied on a case-by-case basis under a standard that now has two different—and

litigated—interpretations. With all this lengthy litigation, no one can really tell

us what the NSR program will get us—except more lawyers!

Until we get past this rhetoric and the false charges that Clear Skies does less

than existing law, we are going to go nowhere. In my opinion, these arguments are

just a facade for the real motive of holding up this legislation for the political issue

of capping carbon dioxide emissions which cannot pass the Senate and definitely not

the House. This will leave us in this stalemate of lawsuits and uncertainty for businesses and more importantly uncertainty for our environment and public health.

Time is of the essence. It is either now or never. I met with several of my colleagues on the other side and plan to keep working with them and every member

on this Committee to get something done to reduce sulfur dioxide, nitrogen oxides,

and mercury emissions substantially.

I look forward to hearing from the witnesses. Thank you.
35
36
37
38
39

Senator INHOFE. Thank you, Senator Voinovich.

Senator DeMint.

OPENING STATEMENT OF HON. JIM DEMINT, U.S. SENATOR

FROM THE STATE OF SOUTH CAROLINA

Senator DEMINT. Thank you, Mr. Chairman. I want to thank you

and Senator Voinovich for your leadership on this issue.

I am convinced that the Clear Skies Act will continue to improve

air quality without making it prohibitively expensive to do business

in the United States. The Commerce Department is already estimating that it is 22 percent more expensive to do business in this

Country than our leading trading partners, and our good intentions

when it comes to regulations are clearly hurting people. We must

agree on this committee how to balance the quality of air, the quality of our life, with the quality of our jobs.

I don’t think anyone on this side is pretending that this bill will

solve all the environmental problems that we have, or address all

the concerns related to global climate change. But I think if we

really look at the legislation, we can agree that this is a big step

forward. We do now have a quagmire of antiquated regulations

that are open to subjective and arbitrary interpretation. This is not

just something we are coming up with here. The power companies

and industries that have to deal with this are telling us that the

regulations are clearly doing as much, if not more, to promote lawsuits than they are doing to really help us cleanup our air.

I believe the Clear Skies Act does replace piecemeal regulations

with a single set of requirements for our three major air pollutants

and guarantees that specific emission caps are achieved by deadlines that have been enacted into law. We must translate our good

intentions into good regulatory system, and I do believe that the

Clear Skies Act is a major step toward not only cleaning up our air,

but clearing out our courtrooms and helping to protect the jobs. I

encourage all of my colleagues to take a look at the legislation

itself, the deadlines, and see that this is a big step forward.

Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator.

Senator Jeffords, did you want to make a statement for another

member?

Senator JEFFORDS. Senator Baucus contacted me earlier this

morning and wanted me to mention that he had hoped to be here,

but business in the Finance Committee—and if you have seen the

load that he has, you will understand that—has kept him otherwise occupied.

Senator INHOFE. All right. That is fine.

All right, Mr. Connaughton, you have survived that. We will recognize you for a 5-minute opening statement. Can you hold it to

that?

Mr. CONNAUGHTON. I am going to do my best, Mr. Chairman.

Senator INHOFE. All right.
40

STATEMENT OF JAMES L. CONNAUGHTON, CHAIRMAN,

COUNCIL ON ENVIRONMENTAL QUALITY

Mr. CONNAUGHTON. Good morning, Senator Jeffords, members of

the committee. I think it is fitting that we are here on Groundhog

Day. Those of you who know the Bill Murray movie know that we

went around and around and around and around, but it did have

a happy ending. It had a happy ending with a lot more information, a lot of accommodation, a lot of understanding of each side’s

views, and I am hopeful that that is where we are going to come

out 24-plus hearings later on this issue that we were actually debating since, really, Senator Moynihan led the charge back in the

mid–1990s on this idea of a multi-pollution strategy.

I am here before you today to strongly urge the passage of this

initiative. The time is now, and if it is not now, the States won’t

get the assistance they need.

President Bush is dedicated to providing our families and our

children with a healthier, more economically vibrant and secure future. Now, important to achieving that future is bringing proven

innovative tools to the task, and Clear Skies legislation is just such

a tool. It means healthier citizens—and that is paramount—stronger communities—and I will talk about that in a minute—more affordable, reliable, and secure energy; and improved wildlife habitat

across America.

First, Clear Skies will significantly expand the Clear Air Act’s

most innovative and successful program. We are working within

the Clear Air Act here—we are not changing it—in order to cut

power plant pollution of sulfur dioxide, nitrogen oxides, and, for the

first time, mercury by an unprecedented 70 percent in two phases.

These cuts in pollution will provide substantial health benefits;

they will prolong the lives of thousands of Americans annually; and

they will improve the conditions of life for hundreds of thousands

of people with asthma, other respiratory illnesses, and heart disease.

Now, I am the son of a pediatrician who worked with inner-city

Baltimore populations, and my father is also a chronic asthmatic

who, through my entire lifetime, every month I would take him to

the emergency room. I have a deep personal reason for being involved in this policy discussion.

Clear Skies will produce these health benefits, though, with

greater certainty by imposing a mandatory, permanent multi-pollutant cap on emissions for more than 1300 power plants nationwide. That will reduce pollution by as much as 9 million tons annually at full implementation. Utilities will achieve this by spending

more than $52 billion, the single most costly Clear Air Act program

in the history of the Clean Air Act, to install, operate, and maintain new, primarily clean coal pollution abatement technology on

both old plants and all the new ones. Clear Skies will require only

a few dozen government officials to operate it, and will assure compliance through a system that is both easy to monitor and extremely easy to enforce.

Accordingly, the Clear Skies cap and trade approach will give our

States the most powerful tool that we can provide to them for

meeting our new tough health-based air quality standards for fine

particles and for ozone. At the end of last year, EPA completed the
41

process of informing over 500 counties—and these are major manufacturing counties—that they either do not meet or that they contribute to another county not meeting these standards.

That relatively straightforward act has now triggered a very

complex process that will lead later this year to a frenzy of intrastate negotiation and conflict, interstate negotiation and conflict,

Federal-State negotiation and conflict, with State and citizen petitions, with lawsuits, and heightened uncertainty in energy markets, producing an avoidable and negative impact on local investment, jobs, and consumer energy bills. Now, that is not a pretty

picture. We can get there that way; we did it in the 1990s. But we

have a better way.

As a former Governor, the President personally experienced and

understands the complexities of developing and implementing State

plans to meet air quality standards. That is why he wants a common sense solution. Clear Skies, in conjunction with the cuts we

just did on diesel pollution across the entire fleet of diesel engines,

is going to provide that solution.

Most counties, as Senator Voinovich indicated, are going to be

able to meet these standards without having to do anything more

at the local level. For the relative few that remain, for the first

time in the history of the Clean Air Act, they will have less work

to do. They will have an easier burden at the local level to design

the strategies that they need to meet these standards.

This simple approach could save our governments and our communities and the private sector, including environmental groups,

literally tens of millions of dollars in negotiating costs alone. Now,

that alone is something to be happy about.

But more importantly, Clear Skies is about keeping communities

together. The up-front assurance of meeting air standards will give

communities the certainty they need not just to keep the manufacturing jobs they have got, but to actually attract new ones back

into the places where generations of their families currently live,

where they currently live, where they currently play together, and

where they currently pray together. This is about keeping communities in our manufacturing centers. The absence of such certainty

is what is driving an exodus of jobs out of these communities. They

go either to greenfields locations in the United States or, more importantly, they go overseas. We can do better.

We have talked about the affordability issues. I won’t go into

that further. But I also want to end with let us not forget the huge

wildlife habitat benefits of this policy. These are guaranteed emission reductions of sulfur dioxide, nitrogen oxide, and mercury. That

is great for our lakes, it is great for our streams, it is great for the

Adirondacks.

I just urge this committee to take the moment. Let us live the

promise of Groundhog Day, that movie, and let us find that common ground, because it exists. We can find a path forward.

Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Mr. Connaughton.

I noticed that you have charts here. Do you have a presentation

that you are going to be making that would be beneficial to this

hearing?
42

Mr. CONNAUGHTON. Well, my chart here is similar to the one

Senator Voinovich just put up. I have a second chart, if we get into

Q&A, on sort of the relative proportion.

Senator INHOFE. Oh, OK. Well, what I am going to do is I am

going to give you some of my time. But I think first Senator Obama

asked the question what will happen if we just maintain the status

quo. Do you want to answer that question?

Mr. CONNAUGHTON. Yes, I do.

Actually, Senator Obama, I am a Chicago boy of 5 years and did

a lot of work in my prior capacity doing environmental management work downstate. I have been in a lot of your manufacturing

facilities.

What the status quo means, especially for manufacturing communities, is it means they do not have the reliance that they are

going to depend on for affordable and secure energy. We are already experiencing, especially in the manufacturing States, this

volatility in natural gas prices that Senator Voinovich has pointed

to. That is a direct result of the increase in the use of natural gas

to generate energy. They are big hogs of natural gas.

That creates a competition in a constrained market for natural

gas that is much better as a feedstock, especially in chemical

plants. Like auto parts manufacturers use natural gas as a direct

energy source. That is the highest best use for natural gas in manufacturing. By the way, natural gas is the best thing to use, from

an efficiency perspective, in people’s homes. But every time you

push natural gas into electricity generation, you are driving up the

costs for these other—and, by the way, farmers, farmers in particular, they like low natural gas prices because that goes right into

fertilizer.

What the status quo is about, because we have just seen it in the

last 4 or 5 years, is about shifting from coal fire generation to natural gas fire generation. What Clear Skies does is it creates the future for clean coal generation, and not just by putting massive controls on up to 86 percent of existing coal fire generation, but also

by making sure that new coal fire generation is the next technology. Now, that is a great tradeoff.

So you get a lot of clean coal and then you get a lot more stability in natural gas. That goes back to my community point. Then

if you are in Decatur, Illinois and you are the mayor, you can actually invite manufacturers back in. I have reliable energy, I have

clean air; the amenities of my community are what you would want

them to be; you have efficiency by doing business here.

That is really what is at stake in this whole discussion, and,

again, I look forward to more questions on this point. This question

is about meeting clean air standards. We all agree the standards

are there, they are solid. We have deadlines. The States have to

do it. This is a question of the method by which we get to meeting

those air quality standards.

Senator INHOFE. Very good.

Now, Mr. Connaughton, now would be the time if you want to

make any kind of reference to your charts and have someone assist

you in doing that.

Mr. CONNAUGHTON. Let me quickly have the first one go up.
43

I just want to note this is for illustrative purposes. These are the

350-plus monitored counties that have to meet the new air quality

standards. That is manufacturing America.

Below is a chart that shows you with Clear Skies and the new

diesel cuts. Based on EPA modeling, we expect the vast majority

of those to meet the standard without having to do additional local

controls. Now, those that are left, and there will be some left, they

still have to take local action and they still have to meet the standards on time, it is just their burden will be easier. So we are not

talking about putting off the date that they have to act, we are just

talking about making their burden easier.

And then the second one, if you would. This will actually be the

first time in the history of the Clean Air Act that the utilities are

going to end up doing more than their share of pollution cuts. Historically, for the last 35 years under the Clean Air Act, when the

States have had the lead in cutting pollution, they always go to the

utilities last, for all the obvious reasons. Under this scenario, utilities are currently responsible for nearly 69 percent of sulfur dioxide. Well, their share is going to get diminished to 44 percent.

What that means is more flexibility for our manufacturers as they

want to bring in new high tech facilities. That is what that means.

Now, the same is true—we did the diesel cuts, and the diesel

cuts are a massive reduction from the transportation sector for the

first time. You all know how hard it is to control transportation at

the local level.

With these two programs we are getting the two hardest sectors

to control to do more than their share for the first time. That is

what we are talking about. So as we look at other legislative proposals, it is really a question of do you want to even go further in

doing that. That is what the debate is about. And then we have to

figure out the balance, the balance and how that affects these other

strategies.

Senator INHOFE. That is very good. Thank you, Mr.

Connaughton.

You will recall, I guess it was last year that we had the Catholic

Charities man, Tom Mullins, I believe it was, from Ohio came in

to talk about the devastating ability that the Jeffords bill—he was

referring to your bill at that time, Senator Jeffords—would have on

the impact to the elderly and the low-income families, and he described how over half of those residents in Ohio over the age of 65

have annual incomes under 15,000, and these people have a hard

time just paying for bare necessities.

A recent book called, ‘‘Heat Wave, A Social Autopsy of Disaster

in Chicago,’’ chronicled the problems of elderly, low-income Chicago

residents in predominantly minority neighborhoods during the heat

wave of 1995. Actually, over 700 people died at that time. These

are the same types of people that Mr. Mullins was referring to as

having problems paying their electricity bills and would be the first

harmed by the legislation.

Have you taken all this into consideration? It is something nobody seems to ever want to talk about, but the economic impact

that this would have on people.

Mr. CONNAUGHTON. I think the best way to look at this in its

most logical and politically understandable terms is what probable
44

explains why we haven’t done as much on power plants in the last

35 years is because the costs of these pollution controls get passed

through directly to the consumers that you mentioned, especially

the folks on low and fixed incomes.

So especially in our big urban areas the mayors understandably

have to make that tradeoff: Do I go after manufacturing sources?

Do I go after other sources rather than go after my utilities to get

these cuts. I believe, and certainly with my personal talks with a

lot of mayors and county officials, that is what drives the fact that

the localities haven’t acted as much as they could.

Now, we are in a great situation where, if we pursue the 70 percent approach that gets us all the transport issues resolved, the solution is going to be controls on coal. So our projections show that

we will continue to see electricity prices stay stable and continue

to decline. That is great for people who have—was it Senator

Voinovich? No, Senator Bond—to make a choice between heating

and eating. And that is very real for a lot of people.

So we can, through this approach, minimize the impact on the

pass-through to our consumers, and we can maximize the cost-effectiveness of getting the pollution reductions. I think that is what

we should all be after here.

Senator INHOFE. Thank you very much.

Senator Jeffords.

Senator JEFFORDS. Mr. Chairman, before I start my questions, I

ask consent that a letter from several religious groups opposing

this bill be made a part of the record.

Senator INHOFE. Without objection, so ordered.

[The referenced document follows:]

TESTIMONY OF RELIGIOUS LEADERS IN OPPOSITION TO S. 131—

THE CLEAR SKIES ACT OF 2005

As representatives of Christian denominations, we are called to express our grave

moral concerns with the proposed changes to the Clean Air Act. After careful review

of S. 131, the Clear Skies Act of 2005, we believe the legislation delays the critical

action necessary to clean up our nation’s air and fails altogether to address the real

and present threat of global warming. We urge this committee to adopt amendments

that would strengthen standards, speed up implementation, and control emissions

of carbon dioxide.

We believe clean air is a basic right and necessity for all life. Our faith teaches

that human beings are stewards of God’s creation. Unfortunately, we have too often

abandoned this sacred responsibility at the altar of human consumption, arrogance

and greed, leaving a legacy of pollution that threatens the health of communities

and the very future of our planet. Today, we call on our elected leaders to reverse

this legacy and enact bold legislation to reduce dramatically the emissions from

power plants—the single largest stationary source of air pollution in the United

States.

We believe the costs associated with delay and inaction are unacceptable. The

tragic toll of premature deaths, asthma attacks, lost days of school and work, polluted waterways and rising global temperatures is the result of an energy policy

that is neither just nor moral. The heaviest toll is paid by the most vulnerable in

our society including the poor, the elderly, children and pregnant women. Our faith

calls us to speak out on their behalf and oppose legislation that would delay efforts

to alleviate their suffering.

We have embarked on a campaign within the religious community to educate and

mobilize people of faith on the issue of air pollution. In the last year, we have encouraged our 100,000 congregations across the country to reflect on God’s sacred gift

of air by providing them with theological statements, worship materials, study

guides and prayers. In addition, many of our denominations have adopted policy

principles on power plant pollution and remain committed to supporting legislation

that fulfills our biblically mandated responsibilities of stewardship and justice.
45

In the Bible, the epistle James teaches us that faith without works is dead. It

is not enough to simply proclaim respect and love for God’s created world, we must

live out that faith through our actions. Today, we call on our elected leaders to join

us in defending God’s creation by enacting strict emissions controls that will clean

the air sooner rather than later and address the impending climate crisis.

We appreciate the opportunity to share our concerns and we look forward to working with the committee to enact meaningful legislation this year.

Sincerely,

REV. BRENDA GIRTON-MITCHELL,

Associate General Secretary for Justice and Advocacy,

National Council of the Churches of Christ in the USA

REV. ELENORA GIDDINGS IVORY,

Director, Presbyterian Church (U.S.A.) Washington Office

MAUREEN SHEA, DIRECTOR,

The Episcopal Church Office of Government Relations

REV. RON STIEF,

Minister and Team Leader, Washington Office,

United Church of Christ Justice and Witness Ministries

KAREN S. VAGLEY,

Director—Washington Office, Evangelical

Lutheran Church in America (ELCA)

JIM WINKLER,

General Secretary, General Board of Church and Society,

The United Methodist Church.

Senator JEFFORDS. Mr. Connaughton, does the President endorse

S. 131?

Mr. CONNAUGHTON. We don’t take an Administration position

until the bills are well evolved and on their way to a vote on the

floor, Senator. But we think a lot of very good work has been done

by the committee. I think it has incorporated a lot of input from

outside groups, mayors, environmental groups, as well as the industry. So, we see very significant progress having been made to

sharpen up the elements of this and, in fact, to address a number

of the concerns that I have heard from this side of the dais.

Senator JEFFORDS. Could you give us an idea of what changes

would be necessary for the President to endorse it?

Mr. CONNAUGHTON. We are still in the negotiation process, Senator, so I don’t want to make specific points at this time. Our central concern has been that we attain a 70 percent cap in two

phases, and that is in the bill; and the dates of the two phases are

consistent with what we are after. Our central concern is this is

designed in a way that we don’t create an opt-in situation that will

dilute the cap.

That has been important to us and some good work has been

done there. We want this designed in a way where, if this is producing the result that a current clean air program would otherwise

produce, or do better, that that program would be replaced, but

then it also retains the essential programs as it applies to the utilities—and this is something we cared about—it also retains the essential components.

For example, the 126 process is kept, but is put in abeyance because we are effectively granting it up front in this first round, but

we still have it come back again. That was important to us. It is

also important to us to be sure that the bill clarifies that the States

retain their full authority to act at the local level to get this remaining increment of pollution reductions that they will need. We
46

did not want to impede their authority to do so. I think the bill has

cleaned that up as well.

So when you ask me, in broad measure, this bill, especially as

it has evolved over the last couple of months, is now hitting the

core points that we are most interested and concerned about.

Senator JEFFORDS. That means, as I understand it, that you are

not endorsing it at this time.

Mr. CONNAUGHTON. Again, we do not take an endorsement of a

bill until it is on the floor, but we are very pleased with the

progress that has been made under the leadership of Senator

Inhofe and Senator Voinovich.

Senator JEFFORDS. Once upon a time in my office you told me

that a three-pollutant bill would encourage power companies to invest in less carbon, more energy efficient generation. That is an

odd and counterintuitive position, since there would be no carbon

pricing or regulatory driver. But if you were accurate, then why

does Clear Skies increase greenhouse gas emissions from the power

sector by 13 percent, or 425 million tons in 2020?

Mr. CONNAUGHTON. I do not recall that particular quote, but, if

you will, I will talk about the carbon implications of Clear Skies.

If you put a carbon cap into the utility sector process right now,

the rational economic choice for those utility CEOs is to fuel switch

to natural gas or to get out of natural gas. That is the rational economic choice. That is because the capital costs of getting the reductions that you would need are a lot cheaper. The up-front capital

costs are a lot cheaper through natural gas or through getting

other sources, like nuclear, for example.

Coal, we don’t have a technology today by which you can capture

carbon from coal; it doesn’t exist. In fact, the way you know that

it is off in the future is the only thing we have going right now is

a 2 billion plus investment of Federal taxpayer dollars that the

Bush administration is moving forward with to try to find that opportunity for capturing carbon from coal. So that is the other issue,

you can’t meet a carbon cap by complying through coal.

If, however, we sequence this process and we do a three-pollutant

strategy that is based on growing our reliance on clean coal, we can

bring forward in the second phase the kind of technology that holds

the promise of carbon capture. One of the most notable examples

is the integrated gasification combined cycle process. That process,

just by starting it up to cut air pollution, has a net efficiency—it

is a huge net efficiency. I forget exactly the range, but I think it

is 10 to 25 percent. So that alone is a carbon offset in terms of coal

fire generation. But it also holds the greater promise, because it is

a much smaller engineered unit, it holds the greater promise of

cost effectively removing carbon.

Now, to get from here to there you have to have a pathway for

a lot of investment in clean coal; otherwise, it will still be stuck in

government laboratories, because there is no open market. So the

way I see the issue, it is a matter of sequencing. If we can get $52

billion primarily oriented toward bringing online the next generation of clean coal, then we can spend that $2 billion in Federal subsidized research and put it on those units and do our best to find

the most cost-effective ways to reduce coal. That is a much more

powerful and more sustainable long-term strategy for dealing with
47

carbon, and it is going to get us to our shared objective. And on

this one we do have a shared objective: can we find a path of reducing carbon from coal that makes sense.

Senator JEFFORDS. You stated that the U.S. Conference of Mayors endorsed the cap levels in S. 131. However, the mayors’ position is still that until any new programs have been proven over

time to be as protective as current Clean Air Act programs, they

encourage EPA and the Congress to keep these programs in place,

with multi-pollutant legislation as an addition to current clean air

law. Why would you imply that they have endorsed this bill to gut

the Clean Air Act?

Mr. CONNAUGHTON. Actually, I don’t imply that, Senator. My testimony indicated that the mayors specifically endorsed a 70 percent

cut in the three pollutants by 2020. They have then come forward

and raised some of the same questions I am hearing about changes

in other Clean Air Act programs. Now, I have heard many different

concepts of what people are getting at with respect to that, and I

think a lot of that has been raised with Senator Inhofe and Senator

Voinovich. What I am seeing is adjustment of the bill to accommodate those concerns, because we share them. We want to be sure

that the States do retain their authorities, the State-based authorities that are given to them under the Clean Air Act to do more.

We also want to be sure we have a 126 process that does not go

away. In fact, the NSR process, we have refined the NSR process,

but that does not go away either, because we do want to be sure,

if new plants come online, that they do go through a review process. In fact, what I have seen in the legislation—and we are negotiating the details of it right now—is the legislation will update the

New Source performance standards for coal fire generation for the

first time in a long time, which has been something that didn’t

happen under the prior Administration and we hadn’t gotten to it

yet. This legislation will do that.

So I think the conversation, Senator, is moving in exactly the direction it should be moving to find that there is balance of tweaks

to get the benefits of the Federal top-down mandate, but still reserve the flexibility the States need to implement their local programs.

Senator INHOFE. Thank you, Senator Jeffords.

Senator Isakson.

Senator ISAKSON. Thank you, Mr. Chairman.

Good morning. I apologize for having to be at another meeting

during your testimony, but I have been reading it very quickly.

Could you put the chart back up for just a second?

Mr. CONNAUGHTON. Sure. The map?

Senator ISAKSON. The map, I am sorry. I want to make sure I

understand. At the top of those current 350-plus counties, the bottom, the reduction in the number of counties mean those that are

no longer shown have gone into the transition category, is that correct?

Mr. CONNAUGHTON. It means these counties meet the new standard. Now, some of them, I think a small subset of them—I think

the transition discussion is about a small subset that, for example,

if they have a 2013 date that they are supposed to meet the standard, that our models show that they will meet it in 2014 by reduc-
48

ing transported air pollution regionally. I think the transition process has tried to get at the point that some places—in fact, I think

Georgia has one of them—they need the transported reductions to

meet attainment. You couldn’t do something locally to meet the

standard.

I think that is what they are trying to accommodate. But that

is a small subset. Most of the counties that you see are counties

that meet the attainment standards on time through the first

phase cap, the 2010 cap; and then there is a much smaller set that

have to work through meeting the standard with Clear Skies plus

some local measures on time; and then this small category of counties that we are talking about in the context of this transitional

strategy.

But I want to underscore, from what I understand, the transition

provisions will only apply to areas that can demonstrate that they

cannot do local controls reasonably to meet the standard, that the

transported pollution is what their solution is. That seems to me

to be equitable. It is an equitable way—by the way, it is a much

better process than what happens under the current structure, because under the current structure there is three, four, five different

ways that EPA can and does grant extensions of time.

But as you know, in Georgia, when they grant that extension of

time, they exact an even steeper price. I think those are the equities that are being discussed and, again, I think they are to a rational policy outcome that can be achieved and get us to these air

quality standards.

Senator ISAKSON. You are correct, one of those areas is in Georgia, and I appreciate your mentioning that.

In the earlier opening statements a statement was made with regard to Clear Skies either exempting or putting off or somehow

lowering the requirements on some 200 power plants versus what

would be true under the Clean Air Act. In your statement, you said

that it would impose mandatory, permanent multi-pollutant caps

on emissions for more than 1300 power plants nationwide, reducing

pollution by as much as 9 million tons annually at full implementation. Based on everything I have heard and what I have seen, I

concur with that statement. I am wondering is there, in going to

the Clear Skies bill, any exemption or any lessening of standards

on specific plants that you know of?

Mr. CONNAUGHTON. I am not aware of any. We have a number

of plants as a result of Federal action or State action that have controls. The entire generation sector that this bill applies to is 1300,

and it would place a permanent cap on all of them.

Senator ISAKSON. Collectively.

Mr. CONNAUGHTON. Collectively. Now, to get there, this approach

will actually create an incentive for the biggest power plants, with

the biggest emissions, to reduce first. The current approach actually creates the opposite incentive. Because it is so expensive and

you don’t get any credit for doing it, usually you get to those ones

last. So, one, it flips that around, so you will see the biggest one—

and EPA’s modeling bears this out; you can check out their Web

site. We expect the biggest ones finally to go first.

Now, it is the case with the trading system that the biggest ones

go first and they over-control, they go beyond what they are al-
49

lowed, because there is a smaller unit for whom it would be much

more expensive, potentially technically infeasible to control. What

happens is that smaller unit has to pay a price. If they can’t put

the control on, they have to pay this other unit for the privilege of

controlling much further below what they are allowed. That is why

the trading system works; it cuts the overall costs, but delivers the

same or better performance.

We know that is proven because that is what the Acid Rain

Trading Program did, which is again—I have to be careful when

you say current law versus this approach. This approach is an expansion of current law. The other is a different set of components

under current law. We are talking about whether we move more

of our effort to the better tool or keep our effort in the less effective

tool.

Senator ISAKSON. Thank you, Mr. Chairman.

Senator INHOFE. Thank you, Senator Isakson.

Senator Carper.

Senator CARPER. Thanks, Mr. Chairman.

Mr. Connaughton, again, welcome. We are delighted that you are

here, and thank you for your testimony. Senator Jeffords mentioned earlier that you had visited with him and met with him and

presumably with his staff. Have you done that before today with

any of the rest of us on our side of the aisle?

Mr. CONNAUGHTON. I have not. This issue has been primarily led

by EPA, but Mike Leavitt has gone over to HHS, so I am filling

in the role that he would otherwise have played. I am aware that

Mike Leavitt, and before that Governor Whitman, had had many

conversations with folks on your side of the aisle. As you know,

Senator, I look forward to that. I have put in a request to meet

with you and I look forward to a longer conversation with you, I

think, next week.

I am filling in that role now, and I do look forward to that, and

it is important. This is not a partisan issue. In fact, this is really

a regional issue. You have the great advantage of being in Delaware and you meet the standards already, so you actually sit in a

great site of objectivity. But what we are really trying to work with

is the heartland, the manufacturing heartland, as they are really

balancing their coal issues, their natural gas issues, and figuring

out how to meet those air quality standards.

Senator CARPER. Thank you. I mentioned earlier while driving

around Delaware, I think it was Monday, and reading the paper—

we only have one statewide newspaper—I read the article that I alluded to earlier, an Associated Press story,‘‘Warmer World, Shrinking Glaciers—From Alaska to Patagonia, Climate Change Is Taking a Toll.’’

You heard me say earlier today I am a Johnny-come-lately on

global warming; I, frankly, didn’t give much credence to it for a

number of years. I have changed my mind, given what I believe is

a growing body of evidence that something is happening here, and

we need to take steps sooner rather than later, because if we take

them sooner, they can be more measured; if we take them later,

they may have to be more Draconian.

Just to ask your own personal opinion, do you share my concern

that something is going on with respect to the climate in the world
50

that we are living in? All this stuff about glaciers going away. I

have some seen with my own eyes. Is this fiction? What do you

make of it yourself?

Mr. CONNAUGHTON. I do share the concern, as does the President, that this is an issue that we must take very seriously. The

National Academy has given us enough advice to warrant that seriousness and the seriousness of the investment that we are making

as a Nation and internationally on this effort. There is still a lot

of items that the National Academy outlined to us to understand

further on the science. I think Senator Murkowski averred to that.

I would also put it in this context: The question is to what extent

is man part of this warming? The warming is happening, so we

still, as policymakers, have to address that in any event. So we

have a combination of understanding the fossil fuel contribution to

this issue or not, as well as understanding to the extent we are experiencing these changes, much like what occurred back in the

early part of this century. We had some pretty dramatic climate

changes in this Country that we had to manage out West. We have

to carry the collective set of policy measures forward.

Now, if I may, we are moving forward seriously, and we are actually building on the work that the Clinton administration started

in getting the research budgets up to where they needed to be, as

well as we have dramatically gone beyond in terms of the technology budgets, as well as the mitigation strategies that we are employing. I would be happy to talk about those now or when we meet

next week.

Senator CARPER. Well, let me stay with the issue of carbon. In

an earlier exchange you had with one of my colleagues, you talked

a little bit about coal gasification. The technology has been around

for a long time. We don’t have a whole lot of coal gasification plants

that have been built. Common sense would seem to suggest, at

least to me, that a country that has as much coal in the ground—

we have more coal than Saudi Arabia has oil, and yet we are not

using it. We have had the technology for years to be able to use

the coal in a way that is environmentally safe and friendly, we reduce CO2 emissions and enable us to reduce our dependence on foreign oil. What do we need to do as a Nation in order to take advantage of that natural resource and the technology that has been here

for some time?

Mr. CONNAUGHTON. First, I agree with all the points you just

made. So let us talk about a common strategy.

Senator CARPER. My wife rarely does that. It is nice to know that

someone does.

Mr. CONNAUGHTON. We have this great opportunity finally in

America to deal with the coal issue by making it clean. That is

what this is all about. Can we get more coal and rely on it and

make it clean? Gasification technology, as you have said, is proven

on a small scale in the petrochemical industry, but we are talking

about taking it from there and ramping it up to 750 megawatt,

1,000 megawatt generation.

Now, the scale of that engineering and the performance of that

engineering is something that we have invested a lot of money in

terms of we, the Federal taxpayer. There are two great plants, one
51

in Florida, the Teka Plant. I don’t know if you have been there yet.

There is another one in Indiana that is producing hydrogen.

But they are extremely expensive. The cost, just to give you an

example, for a 750 megawatt sized power plant, a natural gas plant

is $406 million to build it. Pulverized coal is $862 million to build

it. Nuclear is $900 million. This is the current technology of nuclear. Integrated gasification is $1.05 billion; it is more expensive

than a nuclear plant. And then the only thing more expensive than

that is a next generation nuclear plant. So when you are talking

about how do you get a utility in either a regulated market or, even

harder, in a non-regulated market to make a capital investment

that is the second most expensive one, we have to come up with

a combination of strategies to do that. This is before you figure out

the added technologies you might need to capture and store carbon.

This is a cost before you get to the carbon equation. That is why I am suggesting to you that if we can create this $52

billion private market that is oriented toward coal, that is going to

create a very different dynamic for the venture capitalists and the

technology innovators of the world to prove up on a big scale this—

by the way, there are some other ones too, but gasification is the

leading one right now—to prove up on a big scale the availability

of this just for the purposes of cutting pollution, harmful air pollution.

And then, when you have several of these built, which we

think—EIA suggested we might see 10 to 15 percent of new builds

in gasification with the three pollutant approach—we can do that

research to capture carbon off of it. That is a lot better than what

would otherwise be a 15-year government demonstration project.

We can actually apply it to commercially usable, reliable investment. That is what we are trying to get at, but it is a very complicated financing picture, and I am happy to talk to you about it

further.

Senator CARPER. Thank you.

Senator INHOFE. Thank you, Senator Carper.

Senator CARPER. Mr. Chairman, I want to yield back the balance

of my time.

Senator INHOFE. You did, 2 minutes ago. I hasten to say it is not

your fault.

Senator CARPER. Thank you for your generosity there.

Senator INHOFE. All right, let us see. I think it is Senator Murkowski.

Senator MURKOWSKI. Thank you.

Mr. Connaughton, you had the opportunity to come and visit us

in Alaska a couple years ago, so I know you have had a chance to

come and see the clean skies and breathe the clean air and appreciate what we have to offer up there. We are in a very unique situation, almost a laboratory in the sense that we don’t put out a lot

of pollutants; and we like it that way.

But where we are geographically, and with the winds and the

ocean currents and all that happens in the Arctic, we are subjected

to levels of pollution that come across from other countries. We

have been talking here about how we can deal with it State to

State, but Alaska’s problem is more State to country. How do we

deal with that?
52

Mr. CONNAUGHTON. Thank you for the question, and I will start

with that it is Alaska that is the benchmark for clean air when we

set our standards for the rest of the Country. There is an area in

Alaska that is the perfectly clean area of America.

Senator MURKOWSKI. Which one is that?

Mr. CONNAUGHTON. I will let you know.

Senator MURKOWSKI. I need to know which town to brag on.

Mr. CONNAUGHTON. It is near Denali.

The transported air pollution problem, the Asian brown cloud,

the way we address that is by us being able to advance new, more

affordable clean coal technologies, because it is a given that Asia

is going to continue to grow their economy on coal. You can’t have

a serious discussion about combating air pollution and the Asian

brown cloud, and you can’t have a serious discussion about climate

change and the effects of carbon unless you tackle the issue of how

we help Asia get on a technology path that is much more consistent

with ours, and at a speed that is faster than the one we have

worked our way through since Pittsburgh in the early 1990s.

So it is our belief that if we can get ourselves on a pollution reduction path based on these new advance clean coal technologies

that are also more efficient in their delivery of energy, and we can

get the price down, we can work much more effectively with our

counterparts in Asia, who are less concerned about carbon right

now and much more concerned about choking smog and the health

effects of that, we can get them to begin to design strategies where

it is worth their investment to use good clean coal technology. And

that will reduce sulfur, it will reduce nitrogen coming across, it will

reduce mercury, and, importantly, it will put them on the same

path of, again, creating an investment structure by which we hope,

and it looks pretty promising, that we can capture carbon, as well,

and put it to good use, rather than vent it to the atmosphere.

We are talking about decadal time scales, but the question is are

we doing it in 25 years or are we, on the current path, doing it in

60 or 70 years. And we would prefer to speed that up.

Senator MURKOWSKI. Let me ask you about the conversation a

little bit around this table, but certainly in scientific journals. Alaska is being pointed to as the kind of poster child, if you will, for

the effects of climate change, the effects of global warming. We are

seeing treelines migrating southward; we are seeing erosion the

likes of which we haven’t seen in decades; we are seeing warmer

temperatures. As a skier, we are really annoyed that the rain has

come instead of the snow. But we are actually seeing some

changes.

We don’t dispute, up North, that there is climate change taking

place right now. In my opening I made mention to the fact that we

don’t know whether it is a natural cycle or how much man contributes to the change in temperature that we are seeing. Some are citing to Alaska as proof positive that CO2 pollutants are causing the

climate change that we are seeing. What is your response to that?

Mr. CONNAUGHTON. My response on the science side—I am not

a scientist—is to revert back to the National Academy report of

2001 that really has guided our efforts in designing a climate

change research strategy that can help us better answer the very

questions that you have raised. The United States currently now
53

invests more in advancing the science of climate change than the

rest of the nations of the world combined, and importantly, what

the NAS did for us, which was extremely valuable, is they zeroed

in on the specific areas where we should be increasing our effort.

One of them is global observation. And we are actually investing

a lot more into the observational issues up in your part of the

world, because that is a critical region to give us an indicator of

what is happening. And then they have given us five or six other

research items around which we have formed a 10-year plan that

the National Academy fully endorsed. They said this is exactly

what we need. In fact, other countries are not teeing off of our research strategy.

So we have to take what we know. We have calibrated our policies with what we know in terms of the range of reasonable actions

we can take, both here and with developing country partners, even,

that we are doing more of, and then we have to feed more information into it. But it will be much more observation-based and

ground-based than it had been in the past. We need to evolve past

our projections and into real data base models, and that is where

we are going.

Senator MURKOWSKI. We want to work on that collaborative research, though.

Thank you.

Senator INHOFE. Thank you.

Senator Clinton.

Senator CLINTON. Thank you, Mr. Chairman.

Mr. Chairman, I want to publicly thank Mr. Connaughton for his

cooperative and collaborative efforts. He and I have worked together on a matter of great concern to New York, and I am delighted to see him here.

I also appreciate the fact that the Administration has not yet endorsed this bill, because I think there are a number of issues that

need to be addressed. And let me just briefly refer to several of

them and then ask for your response.

First, as I tried to follow the questioning with Senator Isakson,

I think that the bottom line with respect to utilities was that you

said to Senator Isakson not all plants would install controls, but

that the big ones would. Yet I have a list from the EPA which

projects that there would be 198 power plants, with an average age

of 48 years and an average generating capacity of 280 megawatts,

who will not have installed modern pollution control for NOx or

SOx before 2020.

Now, that obviously means that 70-year-old power plants with

56,000 megawatts of generating capacity will still be operating

with 1950s pollution control in 2020. And I would ask that the Administration consider seriously whether we want to allow 70-yearold plants to operate without controls. And, as I say, this is an EPA

projection of coal fire power plants that will not have applied modern NOx and SOx controls under Clear Skies by 2020. I would be

happy to provide that to you. I am sure that you can find that for

yourself.

Mr. CONNAUGHTON. Would you like me to speak to that issue?

Senator CLINTON. Let me just finish real quickly, because there

is another major concern that I have.
54

As I understand the President’s Clear Skies initiative, it started

out as a new way to reduce power plant emissions of SOx, NOx,

and mercury. Although I might not have agreed with the route that

the Administration was taking, it seemed to be a clear statement

of purpose.

Yet, S. 131 allows other major industries to opt in to the power

plants allowance program and thereby escape major requirements

of the Clean Air Act, reducing hazardous air pollution. And we

need to know, does the Bush administration now support repeal of

existing regulations that reduce cancer-causing and other hazardous pollutants beginning in 2007? The regulations that this

would apply to under section 407(j)(1)(b), which permits the opting

out provision, would include formaldehyde, acetaldehyde, hydrogen

chloride, benzine, other chemicals that have been traditionally regulated.

Again, this seems to be in stark contrast with what the President’s initial description of Clear Skies was. And has the EPA provided the Administration with any estimate of how many facilities

would qualify for these exemptions and the potential health impact

that would flow from those exemptions?

Mr. CONNAUGHTON. Let me take the first question. The design of

the cap and trade is such that we will, when all is said and done,

I think, capture and control up to 86 percent of the generation.

There will be plants left, but, as I indicated, those plants will have

paid the price of not putting on control by paying someone else to

control even further than they are allowed. That is the way the cap

and trade system works. That is what makes it effective.

To the extent there are a few remaining plants out of this 1300,

we would expect them to be the smaller ones, not the bigger ones.

But I will have EPA do some technical follow-up with you there.

And, Senator, if they are in a region where either they are transported pollution or actually in an area that is out of attainment

with the standard, the State will still remain free, today, as I understand it under the bill, as a matter of their local strategy, to directly regulate that plant if it is actually impacting their ability to

meet the air quality standard.

Senator CLINTON. But, Mr. Connaughton, that means, though,

that in New York, for example, we would have to rely on a State

in, say, the Ohio Valley to regulate that utility, even though it is

clear that there is transported pollution from that unregulated, out

of compliance, in light of the larger mission of the bill.

Mr. CONNAUGHTON. You raise a very important point, Senator,

however, the cuts are big enough in the first phase that we believe

will address nearly all of the transported pollution issue. If not, we

have a second phase that will deal with it further. And during that

second phase period the State of New York will be able to petition

EPA, under the 126 petition——

Senator CLINTON. But, no, we lose the option of 126 and NSR.

Mr. CONNAUGHTON. No, the way they have designed the bill,

Senator, is in the first round it goes away, but largely because, the

way I look at it, is we have granted it up front. We expect in the

next 4 years that most of the major transport States will petition

EPA. We expect that. What Clear Skies does is it says you don’t

need to petition us, we agree, you win; we are going to, up front,
55

grant you the transport reductions that you otherwise would seek

to get through this 4 year process.

Now, after you get through that process, then there is a re-up.

We will come back in the second round, after we see what in fact

occurs and can get the data we need. So if New York—and this is

a legitimate issue that you are raising. So if New York sees in the

second round that they still have a transport issue from across the

border, they will be able to come back to EPA and petition them

for assistance.

Senator CLINTON. I would just respectfully request that you look

at the actual language of this bill, because the changes to the 126

test seem very difficult to meet, if not impossible, and it would be

very helpful to have a dialog about that, because certainly reading

this makes it less than the obvious presumption that you have just

described.

Senator INHOFE. Senator Clinton, your time has expired, but you

asked two questions. Would you like to have him respond to the

second question?

Senator CLINTON. Yes, Mr. Chairman.

Senator INHOFE. We will give him some of our time, then.

Mr. CONNAUGHTON. Uncharacteristically, Senator, it popped out

of my head.

Senator CLINTON. Well, it is with respect to the opt-out provisions.

Mr. CONNAUGHTON. I am sorry.

Senator CLINTON. That non-power plant sources of pollution and

hazardous chemicals can basically opt in to the new regulatory

structure, thereby, in my view, avoiding the regulations that are already in existence.

Mr. CONNAUGHTON. First, I need to begin with we would strongly

support the opt-in concept as long as it doesn’t dilute the caps. So

the goal of this is if we can even more effectively get the pollution

reductions under the cap by having other sources opt in, that is

great; otherwise, they still have to be subject to current requirements.

With respect to the specific technical issue you have raised, that

is not one that I have delved into, but is one that I would be very

pleased to look at. We want an opt-in, we want SOx, NOx, mercury. If it has some unintended consequences with respect to these

other programs, that is something we should be examining, and I

am confident that we can have that in the conversation.

Senator CLINTON. Thank you very much.

Thank you, Mr. Chairman.

Senator INHOFE. Thank you. Thank you, Mr. Connaughton.

Let us see, I think Senator Chafee.

Senator CHAFEE. Thank you, Mr. Chairman.

Thank you again, Mr. Connaughton, for your time and your passion on this issue. The Clear Skies legislation allows for a cap and

trade system for mercury, but does not place a cap on per facility

emissions. How would this legislation prevent mercury hot spots

from occurring in communities near power plants?

Mr. CONNAUGHTON. A couple areas to go through there. This was

a significant concern that was raised first with respect to the Acid

Rain Trading Program, that there might be hot spots. And locally
56

heavy concentrations of SO2 and NOx are an immediate health

issue because they are immediately ingested. So it was a real concern then.

Very soon after the early implementation of the Acid Rain Program, it was well established that it reduced hot spots, it reduced

the number of areas that had locally heavy concentrations of SO2. EPA modeling suggests that we would see the same result with respect to mercury, because a chunk of it is a regional issue, and that

is what we are going after with Clear Skies, it is addressing the

regional disbursal that could buildup locally someplace else.

So to the extent there remains locally heavy concentrations, we

would expect, as a general matter, that those locally heavy concentrations would be much lower than they are today. I mean,

today there are big hot spots, and in the future we would expect

them to be significantly softened.

The final piece, which is very important to us, is to the extent

there is a locally heavy concentration that provides some residual

risk, we would want to be sure that the States retain the authority,

just as they would for SO2 and NOx, to address that locally remaining risk directly, as need be. So we have tried to layer this to

address that concern because it is a shared one.

I would note that we are hopeful that—mercury is new; we have

never regulated it before from power plants. So we are hopeful that

the cuts are massive enough here that, with the study work that

will occur at the Federal and State level, that we will find that we

have largely addressed the power plant contribution to that kind

of an issue. But we will be steadfast in doing that work to be sure

that we aren’t getting the outcome that you described.

Senator CHAFEE. Thank you. A lot has been made about the

President’s pledge in his campaign of 2000, as Governor Bush, to

regulate carbon dioxide. Were you part of the discussion to change

that position? Certainly, the President has a reputation for taking

a position and sticking to it through all of the flack. Were you part

of that discussion to reverse course on that?

Mr. CONNAUGHTON. I was not. I had the great privilege of being

unanimously confirmed by the Senate in June 2001, and walked in

the first day of the job and was informed that I would have the

clean air policy, the climate change policy, and the energy project

policy all at once. So I was brand new to that whole set of discussions, and I took the political lay of the land as I got it and worked

very hard to maximize the constructive outcomes as a result of

that.

Senator CHAFEE. Can you shed any light on some of the internal

discussions that might have gone one?

Mr. CONNAUGHTON. I think the President, as I recall, wrote a letter to Senator Hagel where he clearly articulated the basic rationale. I think, in sum, it was the concern about the huge economic

dislocation in the face of an energy crisis that was driving up especially natural gas prices. It was particularly foreshadowing or particularly insightful when you look at Senator Voinovich’s chart that

he just put up today.

I don’t think anybody thought even then, when gas prices were spiking up to $4, that we would find ourselves at $6.5 or $7 natural

gas. So the importance of a well-constructed carbon policy is even
57

more paramount today than it was then, and that is why, again,

I think we have go after the strategy of finding a way to create the

transition to cleaner coal technology and find the ways to cut carbon from coal. And as I indicated, Senator, you don’t do that with

a carbon cap today. Carbon cap today still makes it more economically rational to build a cheaper natural gas plant than go for the

more expensive coal plant.

Senator CHAFEE. The Vice President received a fair amount of

criticism for the energy task force and who was part of it, and I

believe it is still in the court system, who was part of that energy

task force, were environmentalists there. You entreated us at the

end of your statement to find common ground, and you said that

environmental organizations, some of them were supportive of this

legislation. Which ones are supportive, and were they part of putting together this bill?

Mr. CONNAUGHTON. A couple things. In terms of the bill that we

constructed, we had a lot of input from groups, and EPA has a

whole calendar; it was largely produced and created by EPA, so we

can share with you the docket of outreach that they have had on

this whole policy. One of our most regular interlocutors from the

environmental community has been the Adirondack Council, who is

here today, so I think I will let them speak for themselves in terms

of their views on this. We have had a very constructive and productive set of conversations with them because they were the champions of this approach to begin with, and really saw it through and

really produced the great result that we are getting from Acid Rain

Trading Program.

I would further note, just in conclusion, we have had so much

interface on the Clean Air interstate rule, which is sort of the regulatory side of this same issue, with all the environmental groups

as well. So we have had endless discussions docketed on the public

record with everybody, and I don’t want to leave out the mayors

and county officials. They are as critical to this discussion as the

non-governmental officials have been. And the unions, the unions,

for that matter, they have been through a lot as well.

Senator INHOFE. Thank you very much.

Senator Voinovich.

Senator VOINOVICH. I would like to put this into a big picture

context. I come from a State that is in bad shape economically because of loss of manufacturing jobs. Would you agree that our energy costs are globally the highest that we have got in terms of nations that compete with us?

Mr. CONNAUGHTON. They are among the highest, and currently

they are among the more volatile, which makes it hard for businesses to do big capital planning.

Senator VOINOVICH. And what we are striving to do here, and I

attribute that to the fact that—this is, what, the 7th year that I

have been involved with this; before I was a Governor involved in

it—that we really haven’t harmonized our energy and our environmental and our economic needs to put it on a kind of way of looking at cleaning up the environment, dealing with public health, and

also dealing with the economic needs, energy needs that we have

in our Country.
58

And there are some who argue that we need more draconian cuts

in emissions for NOx, SOx, mercury, and some want carbon involved. The issue is, the one that you made, is at what place does

that force our utilities to go to natural gas. And I would argue that

if we don’t come up with some kind of compromise here, that we

are going to continue to see the loss of jobs overseas. And particularly when you deal with the issue of carbon, everyone says carbon

has got to be capped, that if that is the straw that breaks the camel’s back, then we continue to have these high energy costs and our

businesses go to China or India or some other place.

Those that are concerned about global warming have got to understand that they are going to countries that don’t have the environmental regulation that we have here in the United States of

America. And I think the global competition has accelerated dramatically in the last several years, which makes this issue so much

more important today then ever before.

I would like your comments on that.

Mr. CONNAUGHTON. A State like Ohio needs the air pollution reductions, and we have set the standard. So we know the mark that

we want to hit; it has already been set and everybody agrees with

it, bipartisan, across all spectrums. There are lawsuits on it. It took

4 years and your long list to get there, but now everyone accepts

it.

So what we need is the strategy to hit it right, and that is why

70 percent cut in these two phases addresses the transported air

pollution issue. That is the one that is the hardest for the States

to deal with. It does it. It just so happens that by picking those

marks, you can do it in a way where most of your future is built

on clean coal rather than switching to natural gas. That helps with

the natural gas dynamic you discussed.

I spent a lot of time in your State, Senator, in fact, once with

you, and you have a lot of energy-intensive manufacturing and you

have a lot of manufacturing that depends on natural gas as a feedstock. We saw, with last year’s price spikes in natural gas, a lot

of that production go overseas.

Now, it is one thing for an existing plant to just move it overseas

to another plant and shut down temporarily. What is worse, and

this is what we are experiencing especially in the big heavy-duty

States like Ohio or down in the Gulf, in Louisiana, is when they

shut down the plant and they move the whole operation overseas.

Those jobs are gone for three generations, and they don’t come back

again.

And then we have this odd situation where we are buying the

product and shipping it back here, which makes no sense from an

efficiency perspective. So we have to calibrate how much we get

from the power plants as part of this issue of meeting air quality

standards against the concern about driving especially, again, the

energy-intensive manufacturing elsewhere.

And I do share the concern that you raised about any policy that

merely moves our air pollution and greenhouse gases someplace

else, because I care about the global issue here, and we don’t solve

the problem if we are moving greenhouse gases somewhere else,

because then they accumulate back in the atmosphere. So we have
59

just shifted it rather than—and we shouldn’t claim credit for it

here.

Senator VOINOVICH. One last question. Some of my colleagues

keep saying that you don’t support the bill. Can you clarify this?

For example, the Administration supported the No Child Left Behind in committee. Did you support Healthy Forest when it was in

committee?

Mr. CONNAUGHTON. The Administration does not take a position

on bills when they are in committee. We take positions on bills

when they are on the floor. However, I also made very clear that

the Administration likes this bill; we want to see it get out of committee. We think it is making the accommodations that are moving

toward meeting all of our concerns, and you have made a lot, which

we really thank you for. And we understand you are incorporating

a lot of the concerns from folks from the outside. That is exactly

what the legislative process is about.

We are strong proponents that this bill move as quickly as possible. And let me underscore that. If we don’t get this legislation

this year, the States will not have this very powerful tool, and we

will go down the path of litigation and conflict that we experienced

in the 1990s. We can get there, but getting there is ugly.

This is a lot cleaner. Getting there is like going down a lumbering—18-wheeler truck on the highway in the middle of rush

hour. That is what the standard path is. This is like getting into

a sleek roadster that is hydrogen powered. We just get to that destination a lot more cleanly.

Senator INHOFE. Thank you very much, Senator.

We have been joined by Senator Thune.

Senator Thune, as you know, we have a rule that we can’t have

opening statements after the first round is concluded, but you are

recognized now for 5 minutes to ask questions of Mr. Connaughton,

unless you would rather use that for an opening statement.

Senator THUNE. Well, Mr. Chairman, I would simply say thank

you for your leadership on this issue. This is a priority for this

committee and something that is of great interest to, I think, everybody in this Country. Those of us out in the upper Midwest also

care a lot about finding ways and technologies that will make energy more affordable and more usable, and to take advantage of

the great resources that we have in our part of the world to meet

the energy needs of this Country, and that we base those solutions

upon science; that we use science-based approaches to these issues.

I very much look forward to being a part of this process as it moves

forward.

I don’t have, at the moment, any questions for our witness, but

appreciate the testimony and am anxious to see the legislation

move and the many other priorities that we have before this committee. I think it says a lot that you have chosen to move this legislation quickly.

Senator INHOFE. We commented several times before you were

here that this is the 24th such hearing that we have had, and this

is it.

Thank you, Mr. Connaughton. You are an excellent witness and

we appreciate your being straightforward, and we will dismiss you

at this time.
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Mr. CONNAUGHTON. Thank you for your steadfast leadership, Mr.

Chairman.

Senator INHOFE. Thank you.

While the other panel is being seated, we have a number of requested UCs. One is to be made a part of the record, and I ask

unanimous consent that the Edison Electric Institute statement,

the American Highway Users, USA Next—that is a grassroots network representing 1.5 million seniors—and a letter from the attorney general of North Dakota supporting Clear Skies. Without objection, so ordered.

[The referenced documents are not available at time of print.]

STATEMENT OF THE EDISON ELECTRIC INSTITUTE

The Edison Electric Institute (EEI) appreciates the opportunity to submit this

statement for the hearing record. EEI has testified before this committee on several

occasions in recent years regarding its commitment to passage of comprehensive

multi-emission legislation, and that commitment remains strong.

EEI is the association of U.S. shareholder-owned electric companies, international

affiliates and industry associates worldwide. Our U.S. members serve more than 90

percent of the ultimate customers in the shareholder-owned segment of the industry, and nearly 70 percent of all electric utility customers in the nation. They generate almost 70 percent of the electricity generated by U.S. electric companies.

In summary, it is EEI’s view that sensible multi-emission legislation along the

lines of the Clear Skies Act will ensure significant additional improvements in air

quality nationwide. The electric power industry will be required to reduce emissions

of sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury by 70 percent from 2002

levels, with substantial cuts required by 2010.

Immediately upon passage of legislation, many companies will be spurred on by

the emissions trading program that rewards early reductions and the need to meet

the strict SO2 and NOx emission cuts in Phase 1, which account for three-quarters

of Clear Skies’ emission reduction requirements, and they will move quickly to design and install emissions control equipment. This is contrary to misleading claims

by some stakeholders that Clear Skies’ benefits will not accrue until full implementation of Phase 2 in 2018. In fact, legislation will produce earlier, verifiable reductions of SO2 and NOx than the combination of the Environmental Protection Agency’s (EPA) proposed Clean Air Interstate Rule (CAIR)—which will apply to only 29

states and likely take many years to move beyond litigation and state-specific implementation decisions—and reasonably predictable regulations in the future.

Regulation under the Clean Air Act (CAA or Act) is fraught with uncertainty and

delay. Power companies are subject to roughly a dozen major air quality programs,

often with overlapping or conflicting requirements. In addition, EPA regulations

typically are subject to litigation, adding additional uncertainty and delaying air

quality improvements. Because of anticipated litigation, and because it will take

several years for states and EPA to complete decisionmaking on implementation,

the precise requirements of EPA’s CAIR and mercury proposals may not be known

for a long time.

In contrast, sensible multi-emission legislation will harmonize CAA provisions,

immediately establish mandatory emissions requirements, and break the cycle of

perpetual litigation, allowing power companies to start implementing new requirements sooner than under continued piecemeal regulation.

THE PROGRESS WE HAVE MADE

The electric power industry has reduced its air emissions significantly in recent

years, even as demand for electricity has increased. Attached is a chart highlighting

SO2 and NOx reductions since 1980.

Electric generators have cut SO2 by 40 percent, with significant reductions over

past 10 years due primarily to implementation of the Act’s Acid Rain Program

(through flue gas desulfurization, or scrubbers, and switching to low-sulfur coal). Reductions will grow to almost 50 percent. The annual cost of the program exceeds

one billion dollars.

Electric generators also have reduced NOx emissions by about 40 percent since

1980, with significant reductions over the past 10 years attributable to installation

of low NOx burners and/or overfire air to meet the Act’s Acid Rain Program requirements, and selective catalytic reduction (SCR) in the eastern U.S. for ‘‘NOx SIP
61

Call’’ and other programs in the Northeast to address ozone. When completed, our

industry will have committed approximately $10 billion to install SCR and will expend hundreds of millions in annual operation costs. As a result, we will reduce

NOx by 80–90 percent throughout most of the eastern U.S. during the 2005 summer

ozone season. In addition, controls to reduce SO2, NOx and particulate matter currently are reducing mercury emissions by about 40 percent.

We have done all of this despite a steady climb in electricity demand, and without

sacrificing the reliability and affordability of the electricity that we produce. For example, between 1980–2003 electricity from coal-fueled generation increased 67 percent.

According to EPA, air quality has dramatically improved as a result of these and

other industry successes. For example, national average SO2 ambient concentrations

have been cut approximately 54 percent from 1983–2002 (U.S. EPA, Latest Findings

on National Air Quality: 2002 Status and Trends Report). Since 1976, the average

national ambient NO2 concentration has fallen 41 percent (Pacific Research Institute’s Index of Leading Environmental Indicators, April 2004). While monitoring for

fine particles began only recently, average PM2.5 levels were reduced 10 percent

from 1999 to 2003 (U.S. EPA, The Particle Pollution Report, December 2004). And,

a recent EPA report finds that ozone levels in 2003 were at their lowest level nationwide since 1980. (U.S. EPA, The Ozone Report—Measuring Progress Through

2003, April 2004).

Today, we are poised to make dramatic additional reductions through new rules

or multi-emission legislation consistent with the scope and framework of Clear

Skies. Sensible multi-emission legislation will ensure significant additional improvements in air quality nationwide by requiring the electric power industry to reduce

emissions of SO2, NOx and mercury by 70 percent from 2002 levels, with substantial

cuts required by the Phase I deadline of 2010. With such additional reductions, we

will have cut by almost 90 percent the emissions of SO2, NOx and mercury per ton

of coal used or kW-hour of electricity generated.

THE CURRENT CLEAN AIR ACT

Coal-fueled electric generators face CAA emission control requirements that are

duplicative, contradictory, costly and complex—which creates enormous uncertainty

for future investment. The net result of the current regulatory system is a planning

nightmare that makes it virtually impossible for electric generators to clearly understand what requirements will be in place for their plants at any point in the future.

In addition, there are long construction cycles and large capital expenditures that

prohibit us from accurately assessing which plants should be retrofitted with controls, which plants should be switched to different coals or to natural gas, which

plants should be retired, and when any of this should take place. The result is a

system that threatens the reliability and affordability of our nation’s electric supply.

This regulatory morass also puts more pressure on the natural gas supply and

delivery systems that already are yielding gas prices of great concern to the nation’s

industrial, commercial and residential gas, as well as electric customers.

Ironically, the present system also does not advantage those seeking further emission reductions from coal-fueled power plants. The piecemeal approach inherent in

the CAA necessarily involves many sequential scientific and technical decisions by

EPA and the States. Often, these decisions are challenged by environmental groups

and their allies, but may not necessarily be resolved in their favor. Regardless of

the substantive outcome of individual rulemakings, prolonged regulatory development inevitably is followed by litigation involving environmental, industry and other

stakeholders, causing decisionmaking delays of five or more years for each major

rule. This regulatory soup eventually may deliver cleaner air, but the accompanying

chaos makes the timing of that environmental progress speculative. Unfortunately,

the unpredictability of these rulemakings leads to the far more certain consequences

of significantly higher electricity prices and further delays in environmental benefits.

BENEFITS OF MULTI-EMISSION LEGISLATION

In contrast to the current piecemeal approach to regulation inherent in the existing Act, a well-designed multi-emission approach is the best roadmap for further reducing power plant emissions. Such legislation would address SO2, NOx and mercury, and benefit the environment, states and electric generator customers, employees and shareholders by:

• Providing certainty for the environment through low caps and emissions monitoring.
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• Reducing litigation and locking in major emission reductions today, so that control strategies can begin immediately—resulting in cleaner air sooner. • Substantially reducing the number of ozone and particulate matter non-attainment areas. • Providing certainty for power companies due to a clear and simplified Clean Air

Act, including coordinating reductions so that utilities are able to develop and use

innovative multi-pollutant control technology. • Addressing transported emissions and minimizing interstate conflicts. • Allowing flexibility through emissions trading. • Minimizing costs for consumers and cost impacts on shareholders. • Maintaining coal as a generation fuel and avoiding major new pressures on natural gas supplies. • Not disrupting reliable power generation. • Avoiding a patchwork quilt of programs in different states and confusion and

competitive issues for regulated sources. • Providing the time necessary to attract capital for the multi-billion dollar investments needed to meet new requirements. • Saving jobs at existing coal-fueled power plants and in the mining and rail industries, and creating jobs to construct massive pollution control projects.

Multi-emission legislation that is directionally consistent with the Clear Skies Act

has also garnered tremendous support from a diverse group of stakeholders, including the U.S. Conference of Mayors, National Association of Counties, National Conference of Black Mayors, the Alliance for Rural America, several state departments

of environmental protection, the National Association of Manufacturers, the U.S.

Chamber of Commerce, and a wide range of individual industries.

LEGISLATION IS SUPERIOR TO REGULATION

EPA’s CAIR and mercury proposals would reduce SO2 and NOx by about 70 percent from 2002 levels for 29 states, and would reduce mercury by 30 percent

(through MACT) or 70 percent (through cap-and-trade). The CAIR proposal also

would contribute significantly toward attainment of the new air quality standards

for 8–hour ozone and PM2.5. EEI estimates that the combination of the two proposed

rules would yield the largest industry investment in emission reductions in CAA

history, i.e., $20–$28 billion (NPV 2004–2020, 1999$).

Among EEI’s recommendations to EPA are that the new regulations should integrate and streamline existing programs to the maximum extent possible, provide

flexibility through unlimited emissions trading, and provide adequate time for implementation. Regarding mercury specifically, sufficient time is needed to implement any program because mercury control technologies are not yet ‘‘commercially

available.’’ While there continues to be impressive research progress, there also exists minimal operational experience and limited vendor guarantees.

However, there are many reasons why sensible multi-emission legislation would

be superior to EPA’s proposed regulations, and for a wide range of stakeholders.

Compared to the conventional regulatory process, legislation would:

• Yield faster and greater air quality benefits.

• Require the largest single capital investment in air pollution controls in the nation’s history.

• Reduce the uncertainty, delays and costs of litigation.

• Provide greater flexibility and cost-effectiveness due to trading, which also

would attract other industry participants.

• Provide business planning certainty for power companies since targets and

timeframes would be locked in and clearly defined.

• Provide consistency and predictability for states that share responsibility for implementing the CAA, and help reduce interstate conflicts.

• Promote continued use of the nation’s abundant and low-cost coal resources and

alleviate pressure on the U.S. natural gas supply.

CLEAR SKIES

The Clear Skies Act will require the most ambitious emission reductions ever

from power plants. As noted above, it will deliver additional dramatic reductions of

power plant emissions in the most cost-effective manner and provide greater business certainty. The emission reductions will be predictable and verifiable due to continuous emissions monitoring and large penalties for non-compliance.

Clear Skies will preserve air quality protections. While it will replace some individual Clean Air Act programs with specific, aggressive caps on emissions of SO2,

NOx and mercury, it will leave the Act’s other key provisions in place. For example,

legislation will maintain the National Ambient Air Quality Standards for SO2,
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ozone, particulate matter and other substances. These health-based standards comprise the cornerstone of CAA provisions that protect and improve local air quality.

In fact, multi-emission legislation will bring the vast majority of non-attainment

areas into compliance with new air quality standards. It also will preserve stringent, technology-based standards for new sources of electric generation; retain special requirements for sources located near national parks and wilderness areas; and

maintain the rights of state and local governments to adopt more stringent controls

on power plants within their borders.

While Clear Skies precludes affected sources from regulating mercury using maximum available control technology standards (instead instituting tight emission caps

for the entire industry), it preserves EPA’s authority to regulate hazardous air pollutants. Clear Skies allows mercury trading, which will protect human health while

also saving electricity customers billions of dollars. For the following reasons, it also

will not produce mercury ‘‘hot spots’’:

• Power generation sources now make up about 10 percent of total man-made and

natural sources in an area comprising the U.S. and bordering parts of Mexico and

Canada. In fact, a 50 percent emission reduction would yield much less than a 5-

percent reduction in deposition since a significant portion of U.S. deposition is released by foreign, particularly Asian, sources.

• Basic economics dictate that the largest sources will be controlled first.

• A significant percentage of power plant mercury emissions are elemental mercury, which tends not to deposit nearby and may remain in the atmosphere for

months or years before it is deposited to the Earth.

• Notwithstanding predictions to the contrary, no ‘‘hot spots’’ occurred due to SO2

trading under the Acid Rain Program—the only relevant precedent.

• Modeling by the Energy Information Administration and Brookhaven National

Laboratory predict no mercury ‘‘hot spots’’ due to emissions trading.

A deliberate approach to meeting emission reduction goals is essential for continued reliable electric generation and cost-effectiveness. Retrofits of additional SCR

systems for NOx, scrubbers for SO2, and activated carbon and fabric filters for mercury will be needed on over 100 GW of power plants, which is the equivalent of 250

medium sized generation units. Each such installation will require capital expenditures of $60 million to more than $200 million.

A deliberate approach also will provide sufficient time to go beyond mercury ‘‘cobenefit’’ reductions due to installation of SO2 and NOx controls. Reliable, cost-effective control technologies designed specifically for capturing mercury have not yet

been fully developed or tested. It is critical that these technologies are ‘‘commercially available’’ and guaranteed by their vendors.

Clear Skies represents one of the largest construction projects this nation will see,

bigger even than the now famous ‘‘Big Dig’’ ($15 billion over 14 years). Equipment

installations must be spread over time to ensure reliability and stable prices that

will not occur if too many large units are off-line for retrofits at once. A smooth

timeline also will provide a steady construction program over the next 15 years. As

we found with the NOx SIP Call rule, if controls are pushed within too narrow a

time window, aside from increased pressure to switch to natural gas there will be

labor and materials shortages and bottlenecks, which will greatly (and unnecessarily) increase costs.

EEI supports the phased approach in Clear Skies. In passing the Clean Air Act

Amendments of 1990, Congress afforded the industry a decade to comply with 50

percent reductions of SO2 and NOx emissions. At the time, Congress understood

that defined emission targets set over a reasonable timeframe would result in real

environmental improvements. Fast forwarding to the present, 70 percent emission

reductions for three different pollutants will be more costly, resource intensive and

time consuming. Providing two phases of reductions is consistent with the precedent

established in 1990.

OTHER MULTI-EMISSION PROPOSALS

EEI does not support other existing multi-emission legislative proposals. For example, the Clean Air Planning Act would require earlier emission reductions for

SO2, NOx and mercury than Clear Skies, and includes significant carbon dioxide

(CO2) emission reduction requirements. The issue of timing is crucial and these

deadlines would be very difficult to meet without sacrificing cost-effectiveness and

reliability of electric generation. The bill also would undermine emissions trading

by imposing unit-by-unit limits in 2020 for SO2 and NOx for plants on which construction commenced before August 17, 1971, and establishing unit-by-unit limitations for mercury. The Clean Air Planning Act is modeled to cost $15–30 billion

more ($1999, NPV 2004–2020) than Clear Skies. Finally, the Clean Air Planning Act
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could reduce electric generator coal use by about 25 percent and increase natural

gas use about 25 percent (in year 2020) while Clear Skies would impact fuel use

minimally.

A second legislative proposal, the Clean Power Act, would cause even greater economic hardship for the industry and the nation. All of the bill’s requirements—including very stringent CO2 limitations—would be placed on top of the existing Clean

Air Act, thereby exacerbating the complexity of the Act. More importantly, the bill

would dramatically impact electricity prices, natural gas prices and coal consumption. Finally, the ‘‘Outdated Power Plants’’ provision almost immediately would cancel out the bill’s cap-and-trade program.

COAL AND NATURAL GAS

Low-cost, reliable electricity results, in part, from our ability to utilize a variety

of readily available energy resources—coal, nuclear energy, natural gas, hydropower, and new renewable energy resources, such as wind, biomass and solar. Fuel

diversity is key to affordable and reliable electricity. A diverse fuel mix helps protect

consumers and national security from contingencies such as fuel shortages or disruptions, price fluctuations and changes in regulatory practices. A diverse fuel mix

takes advantage of regional differences in fuel availability that have evolved over

many decades.

While coal fuels slightly more than 50 percent of the generation produced in the

U.S., it fuels upwards of 80 percent of the electrical generation in many specific

states. These coal-fueled plants help to keep the price of electricity down for consumers and businesses, an extremely important issue in states whose economies are

already financially strapped.

Due in part to the complexity and uncertainty of existing clean air regulation,

over 90 percent of new power plants built over the past decade have relied on natural gas to produce electricity. Limits on U.S. natural gas supply have contributed

to high natural gas prices. As a result, the U.S. industrial sector, which relies heavily on natural gas, has seen an erosion of U.S.-based manufacturing jobs. The regulatory certainty provided by multi-emission legislation will promote continued use

of the nation’s abundant and low-cost coal resources and alleviate pressure on the

natural gas supply.

CONCLUSION

Sensible multi-emission legislation can reduce power plant emissions and improve

air quality faster, with greater environmental certainty, and more cost-effectively

than continued regulation under current law. EEI supports the Committee’s efforts

to craft multi-emission legislation that meets environmental goals and provides

states and industry with a workable roadmap.

With the economy in the early stages of recovery at the national and state levels,

Federal clean air policy must not force increases in the use of natural gas for electric generation. Environmental goals can and must be met, but fuel switching and

consumer price increases must be kept to a minimum. That is why EEI supports

multi-emission legislation along the lines of Clear Skies. It delivers clean air with

certainty, while protecting workers, consumers and industry. A sensible multi-emission bill addressing SO2, NOx and mercury benefits the environment, states, and

electric generators and their customers.

The time to act is now. EEI respectfully requests members of this Committee to

take advantage of this unique opportunity to create a new chapter of air quality

progress for the American people. EEI pledges its full support, and looks forward

to continuing to work with the Committee, the Administration and other stakeholders to help make multi-emission legislation a reality.

Senator INHOFE. Senator Carper had two UCs. One was an article that was in, I believe, yesterday’s paper, the Associated Press

article having to do with glaciers.

Well, we have lost our Senator from Alaska here, but it is kind

of interesting, and I want to have this appear in the record responding to his comments or brought after his article is in.

There have been 160,000—this is kind of fascinating—160,000

glaciers right now. Of the 160,000, only 42 glaciers have been studied for 10 years or more.

The glacier with the longest mass balance record of all is located

in Northern Sweden, it has a 50 year record. For the first 15 years
65

of that it was shrinking, but for the last 35 years it has actually

been getting bigger. And I think this is what science is showing us

now, that in areas glaciers are receding, in other areas they are actually building.

So I would ask unanimous consent this be made part of the

record right after the AP article. Without objection, so ordered.

[The referenced document follows:]
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Senator INHOFE. Well, we have a very distinguished panel.

We have—thank you for your patience, I might add.

Brian, is it called Houseal?

Mr. HOUSEAL. Houseal.

Senator INHOFE. Houseal. I am sorry. My staff is wrong for the

first time this year. The executive director of Adirondack Council;

John Walke, the Clean Air Director, Natural Resources Defense

Council; and Abraham Breehey, legislative representative, Government Affairs, International Brotherhood of Boilermakers.

We will go ahead and start with your opening statements. We

will start with you, Mr. Houseal.

STATEMENT OF BRIAN HOUSEAL, EXECUTIVE DIRECTOR,

ADIRONDACK COUNCIL

Mr. HOUSEAL. Good morning. Thank you, Mr. Chairman and

committee members, for the opportunity to testify today. I am

Brian Houseal, the executive director of the Adirondack Council.

The Adirondack Council is a privately funded, not-for-profit organization, with 18,000 members dedicated to ensuring the ecological

integrity and wild character of the Adirondack Park, a 6-millionacre mix of public and private land, equal in size to the State of

Vermont.

Adirondack Park has suffered some of the greatest damage in the

Country from acid rain due to its geography and geology. Prevailing winds bring power plant emissions from outside New York,

where they are deposited as rain, snow, and fog. The acid deposition then leaches nutrients from the soil, affecting tree growth and

often killing our spruce, fir, and sugar maples.

Acid rain has reduced the pH of many of our lakes to the same

level as vinegar. Approximately one-quarter of the park’s 2800

lakes and ponds are biologically dead; they don’t sustain their native plant and animal life. The Adirondacks are not alone. Acid

deposition affects every State along the Appalachian Mountain

chain and the eastern seaboard.

Although the 1990 Clean Air Act amendments began to lessen

the impacts of acid rain, the problem has not been solved. Early

data have shown a slight improvement in the acid neutralizing capacity of a handful of our lakes. This evidence, along with reports

from government agencies and nonprofit research organizations, indicate that the 1990 amendments targeted the right pollutants to

combat acid rain but did not sufficiently reduce the pollution levels.

Today we are here to make three requests of your committee.

First, action to stop acid rain must be taken this year. Second, any

legislation must be as good as or better than as the Environmental

Protection Agency’s Clean Air interstate rule. Third, no individual

State’s current enforcement mechanism should be eroded.

Action is long overdue to help the forests, water, and wildlife of

places like the Adirondacks to recover. Studies have also shown

that approximately 25,000 U.S. citizens die annually because of

power plant pollution. We need progress this year.

In the late 1990s, New York Senator Moynihan proposed legislation with significant emissions reductions that was considered neither politically nor economically feasible. However, we now know

that this level of reductions is possible on both counts. The Moy-
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nihan bill became the floor that other proposals would have to exceed. Numerous members of this committee have introduced legislation that goes beyond what Senator Moynihan first suggested.

Today we have a new floor, in the form of EPA’s Clean Air Interstate Rule. CAIR represents reductions of 65 percent of nitrogen

emissions and 70 percent of sulfur emissions, and is scheduled to

be finalized in March. Any legislation that is passed must

buildupon the floor established by CAIR.

Lower emission caps and earlier compliance dates would obviously serve to speed up the environment’s recovery. Lowering the

cap on sulfur dioxide would also have a significant co-benefit by reducing mercury emissions. We would like to see deeper cuts in caps

on mercury; however, we do not agree with the proposed trading

regime due to the demonstrated neurotoxicity of mercury in both

animal and human populations.

This bill does not include reductions in carbon dioxide, one of the

major ingredients of global climate change. While we are very concerned about the serious environmental impacts that are already

underway, we do not think that this incremental legislative step of

ending acid rain should be delayed while carbon is further debated.

We support New York Governor’s Pataki’s 12–State greenhouse

gas initiative, and we are very hopeful that the U.S. Senate will

act soon upon the McCain-Lieberman bill. It was very interesting

today to hear Senator Clinton portray our position as opposed to

acid rain legislation and Mr. Connaughton say that we are for acid

rain legislation. The energy industry holds one extreme; the environmentalists have another extreme. We have staked out the radical middle, sir.

We urge the committee members to carefully consider if it is necessary to make other changes to the existing Clean Air Act that

could have a negative impact on the very successful and effective

Acid Rain Program started by the EPA Clean Market Division 15

years ago. We would also encourage you to consider strengthening

provisions and continue funding that expand the mandates for rigorous chemical monitoring at the smokestacks and expand it to ecological monitoring on the ground.

Enforcement tools currently used by the States to clean up their

air should not be diminished in any way. These tools are crucial

to a successful cap and trade program. A prime example came last

month, when New York Governor Pataki and Attorney General

Spitzer announced an agreement with some of New York’s largest

and dirtiest coal-fired power plants to settle potential violations of

New Source Review requirements. This action will result in the

largest reductions in air pollution ever attained in New York.

In closing, the Adirondack Council first testified before this committee about acid rain in October 1999, on the same day Governor

Pataki announced that he would enact the toughest acid rain regulations in the Country. After court challenges, those rules went into

effect in 2004 with year-round nitrogen controls and further sulfur

reductions. New York has taken exhaustive measures to clean up

its own plants. We are now asking the rest of the Country to do

the same.

Thank you for the opportunity to testify.

Senator INHOFE. Thank you, Mr. Houseal.
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Mr. Walke.

STATEMENT OF JOHN WALKE, CLEAN AIR DIRECTOR,

NATURAL RESOURCES DEFENSE COUNCIL

Mr. WALKE. Mr. Chairman and members of this committee, I appreciate this opportunity to appear before you.

In April 2001, the utility industry’s top air pollution lobbyist addressed a coal industry group telling them, in a speech later published on the Internet and attached to my written testimony, that

EPA was planning to require air pollution reductions from coalburning power plants. But the lobbyist assured his colleagues that

he and his friends in the White House had a plan. The Administration would introduce legislation creating a weaker, slower program,

one that would allow coal plants to emit more pollution for much

longer.

The lobbyist promised that the weaker, slower cleanup requirements would be something that we could all live with and that

someone else can’t undo. He noted the Administration’s voluntary

global warming policies and said, ‘‘The President needs a fig leaf.’’

The so-called Clear Skies bill before this committee is the legacy

of the plan that the power lobbyists proudly described in 2001.

S. 131 would harm public health and worsen global warming, and

should not become law. To put it simply, the bill before you chooses

polluters over the public. Current law requires delivery of clean air

by 2009 for smog and 2010 for soot pollution. The Administration’s

bill allows those deadlines to be pushed back to 2022, and it undermines the tools available to States and EPA to achieve even that

lax deadline. Enforcing today’s Clean Air Act will achieve cleaner

air sooner.

The bill’s backers claims lawsuits create uncertainty in carrying

out current law. In evaluating this claim, it is worth remembering

that polluters bring most of those lawsuits. The shortest way to

prevent lawsuits, of course, is to eliminate laws. But that is not an

effective way to regulate those who elevate their own profits above

the public health. Enforcing the Clean Air Act promises more effective cleanup than certainty of moving backwards with this legislation.

Without conceding our fundamental concerns with expressing

human deaths and adverse health effects in monetary terms, it is

also important to note that as of 2020 the public health costs of the

Administration’s bill will exceed those of EPA’s earlier stronger

proposals by $61 billion per year. Moreover, EPA’s proposal would

only cost industry $3.5 billion more per year in implementation expenses. In other words, the Administration is promoting a bill that

as of 2020 costs the public $15 in health damage for every one dollar saved by industry. Where is this Administration’s claimed commitment to cost benefit analysis when the benefits to the public

vastly outweigh the cost to industry?

Let me address four other secrets in the bill that are worth noting. The biggest lie behind this bill is the claim that it will cut

power plant pollution 70 percent by 2018. It will not. EPA and the

Energy Department have told us plainly that this legislation will

not achieve actual pollution reductions of 70 percent until sometime after 2025. Chairman Connaughton’s testimony this morning
71

did not disagree with that. Enforcing today’s Clean Air Act will

cleanup power plant pollution more than a decade sooner than S.

131, enabling 159 million additional Americans to breathe healthy

air by the end of this decade. Second, the bill exempts more than

half of the Nation’s coal-fired power plant units from toxic mercury

control. Mercury is a potent neurotoxin now present at unhealthy

levels in the blood of nearly 5 million American women of childbearing age. The Country’s 1100 coal-fired power plants are the

largest source of that mercury. Yet the bill’s cap and trade program

to control mercury emissions simply exempts 582 of those plants.

As a result, the claimed 70 percent reductions in power plant mercury emissions are entirely fictional. Half of the plants must reduce

their mercury pollution, but the remainder need not make any reductions at all.

Further, due to other gimmicks that I detail in my written testimony, even the plants subject to some controls will not achieve 70

percent reductions. And whatever those reductions end up being,

they will occur after 2025, not by 2018, as promised. Enforcing today’s law would deliver far deeper mercury cuts at every power

plant in the Country and would achieve those necessary cuts by

2008.

Third, the Administration’s bill exempts as many as 69,000 dirty

non-utility units from regulations already adopted by EPA to control air toxics other than mercury, including arsenic, lead, and carcinogens like formaldehyde. You heard me correctly. Although advertised as a power plant bill, this legislation actually confers unprecedented favors on oil refineries, chemical facilities, and other

industrial categories.

By ostensibly agreeing to reduce smog-causing emissions by 30

percent by 2010 and 50 percent by 2018, an agreement with no

teeth due to clever loopholes in the bill, polluters can gain exemptions from air toxic regulations already on the books. Those exemptions could increase air toxic emissions by as many as 74,000 tons

per year compared to enforcing existing standards.

Fourth, the bill introduces fatal loopholes into the Acid Rain

Trading Program, stripping away safeguards and accountability

measures that are integral to its effectiveness, enforceability, and

reliability. Power plants are the largest source of global warming

pollution in the United States, responsible for 40 percent of U.S.

carbon dioxide emissions. Yet the Administration’s bill allows those

emissions to grow unchecked.

In the 2 years since the bill’s introduction, it has become increasingly obvious that the failure to address CO2 emissions is out of

sync with scientific and economic reality. While there are pockets

of denial left in the business and political worlds, even leaders in

the electric power industry recognize the obvious. Listen to American Electric Power: ‘‘Enough is known about the science and environmental impact of climate change for us to take actions to address its consequences. Delay only increases the danger we face,

and at the same increases the cost of addressing that danger later.’’

We can do three things to limit CO2 emissions from the electric

sector. First, produce and use electricity more efficiency; second,

dramatically increase our reliance on renewable energy resources;

third, pursue methods to capture and permanently store CO2 from
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the fossil energy sources we continue to use. Deployment of all

three of these technologies will be stimulated by the market’s signal from a limit on power sector CO2 emissions. All three will languish if Congress ignores CO2 in a power plant bill.

The Administration’s policy of ignoring CO2 limits will lock our

children and grandchildren into two truly bad choices: Either dangerously high CO2 levels or crash reductions later. This Congress

must do better. Thank you.

Senator INHOFE. Thank you, Mr. Walke.

Mr. Breehey.

STATEMENT OF ABRAHAM BREEHEY, LEGISLATIVE REPRESENTATIVE, GOVERNMENT AFFAIRS DEPARTMENT,

INTERNATIONAL BROTHERHOOD OF BOILERMAKERS

Mr. BREEHEY. Mr. Chairman, Mr. Jeffords, thank you for the opportunity to present our views on this important bill. My name is

Abraham Breehey. I am the legislative representative for the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers, and Helpers.

The Boilermakers are the principal union responsible for the installation, maintenance, and repair of industrial boilers, as well as

the installation of the pollution control equipment utilized to

achieve the emission reductions that are the goals of this legislation. Our members have a dual concern: First and foremost, to

have safe, productive workplaces; and, second, to ensure the sensible implementation of clean air standards that foster a market for

our labor while protecting the environment.

The Boilermakers have a significant interest in ensuring the latest control technology is used to meet Federal multi-pollutant emission standards. As an EPA analysis of the engineering factors affecting the installation of pollution control technology notes, the

labor requirements needed to retrofit scrubbers to remove SO2 for

a 500 megawatt utility include about 150,000 boilermaker

manhours.

Similarly, a retrofit of SCR NOx control technology of 500

megawatts requires as much as 350,000 manhours of construction

labor, with about half that amount available for boilermakers.

However, the vast majority of our manhours are generated providing maintenance and upgrades to existing coal-fired electric utilities. Too often under the status quo this work is being put off or

abandoned.

This legislation requires $52 billion in investment to meet air

quality standards, a significant portion of which will be paid in

wages to Boilermakers and other union craftsmen. We believe it

provides a clear path forward for new plant construction, sets

standards that are both technologically feasible and no doubt within the current labor capacity.

We believe this legislation achieves a significant balance in that

it provides a protective approach on clean air that maintains the

competitiveness of our industrial facilities, keeping Boilermakers

and other union members’ work from being outsourced. By ensuring a continued role of coal in our energy mix and providing greater

regulatory certainty, this legislation will promote stable energy
73

prices that are necessary for the economic growth that creates good

paying manufacturing and industry jobs.

I know we all agree that America’s workers are the most productive in the world. However, we are forced to succeed under competitive disadvantages. Regulatory policies that delay efficiency improvements or might lead to fuel switching from coal to natural gas

would only exacerbate our problems keeping good paying jobs here

at home.

The Boilermakers Union promotes the expansion of the Acid

Rain Program cap and trade system for SO2 to NOx and mercury

as suggested under this legislation because it sets predictable deadlines that are achievable with current technology.

Workplace safety is a cornerstone of the Boilermakers National

Joint Apprenticeship Program. Our members work together with

our employers to limit workplace injury and promote efficient operations. Too often important work is delayed due to the uncertainty

of the regulatory and permitting process. Power generating facilities operate most efficiently when they undertake repair and replacement projects on a regular basis.

The varying interpretations of the requirements of New Source

Review often forces facilities to delay maintenance while they await

EPA approval. Further, the threat of litigation too often acts as a

deterrence to capital investments that create work and maintain

safe facilities for our members. S. 131 will also prevent the litigation and delay associated with the U.S. EPA rulemaking proceedings. The bill’s approach to mercury emissions will avoid the

need for a controversial EPA mercury rule, while ensuring the use

of cost-effective emissions trading as a means to achieve significant

emission reductions.

We specifically support the use of a co-benefits approach for the

first phase of mercury control to enable more accurate measurements of the control capabilities of existing technology and allow

time for advanced mercury specific control to mature in time to

meet the final 2018 cap. Further, the caps, timetables, and incentives of the Clear Skies Act will result in high emissions reduction

goals through the application of technology, as opposed to fuel

switching.

Sections 455 and 475 provide for early action reduction credits to

encourage NOx and mercury reductions, respectively, through the

application of technology. Certainly the Boilermakers will realize

significant benefits from these provisions, but the implications of

widespread fuel switching to costly natural gas would be devastating across the manufacturing sector. An important benefit of

this legislation is that it fosters reliable, affordable energy generated from coal.

In conclusion, our union believes that among the greatest challenges that the Senate is faced with this year is maintaining the

competitiveness of American manufacturing in the global marketplace. Since its peak in 1998, the United States has lost 3 million

manufacturing jobs. There is a palpable anxiety among working

families across the Country.

Our union is committed to providing the highly skilled labor

needed to power the American economy, and we believe that the

legislation proposed by Senators Inhofe and Voinovich sets our fa-
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cilities on a path forward toward an affordable, stable, and domestically produced energy supply. I know our members look forward

to continuing our role in this important debate.

Again, thank you for this opportunity.

Senator INHOFE. Thank you, Mr. Breehey, for an excellent statement.

Mr. Houseal, you were here when Senator Clinton said that you

do not support this bill. Could you clarify that for the record? Do

you support the bill as it is being passed out of committee?

Mr. HOUSEAL. Sir, as my testimony indicated, I think there could

be some positive changes to the legislation, and to go on record, we

have said that we would support any legislation that would stop

acid rain.

Senator INHOFE. OK. Very good.

Mr. Walke, there are so many things in your statement that totally contradict everything that Mr. Connaughton said, so I am

going to ask unanimous consent that the record be held open so he

can respond to some of your comments, and I am sure you would

have no qualms with that.

Mr. WALKE. No, sir.

Senator INHOFE. Mr. Walke, do you really believe that there is

technology in place that would allow lignite-fired power plants to

have a 90 percent reduction by 2008?

Mr. WALKE. Senator Inhofe, there was an excellent presentation

yesterday that I believe your staff and others here attended by the

Institute of Clean Air Companies that demonstrated tremendous

advances in mercury pollution control technology for all types of

coal, lignite, bituminous, sub-bituminous, and the rest. And the

Clean Air Act, if enforced today by EPA, would give a compliance

window for that technology to be installed by 2008, with the law

providing the opportunity for an extension of 2009 if technology

were not available.

So what the vendors have said and what State air regulators

have said is that the availability of activated carbon injection technology with scrubbers and other types of technology by the time

the compliance deadlines will arrive under EPA’s rulemaking authority will achieve far, far greater reductions than the 29 percent

cuts that this bill would allow to occur for an additional 13 years.

As to any particular control level, EPA has yet to tell us what

that will be. My organization has advocated for a 90 percent level,

and I have entered into the record through my testimony comments

that we provided to EPA to address those technologies.

Senator INHOFE. And, once again, what percentage of reduction

would that be by 2008, the hearing that you had yesterday, or the

briefing, what did they come up with?

Mr. WALKE. The presentation yesterday, to my knowledge, did

not address your specific question by the specific date of 2008, so

I don’t know that that question was answered yesterday.

Senator INHOFE. OK. They are just saying that there is technology out there, but it doesn’t say—the question I had for you was

do you believe that a 90 percent reduction could—I have been

handed a note by someone who attended that. They said that the

vendors only promised 50 percent strict limits and 70 percent if
75

flexible implementation, and that is what this bill does. But it is

50 percent reduction according to a staffer who was there.

Mr. WALKE. The vendor is referring to authority under the current Clean Air Act to extend the deadline by an additional year,

or even an additional 2 years with Presidential involvement, which

I think is what they said would kick that up to a 70 percent. But,

again, I don’t believe that that precise question was answered, and

I will have to look in our comments that were filed with EPA to

see if it was answered there.

Senator INHOFE. That is fair enough.

Mr. Breehey, do you support the Clear Skies bill as it is written

right now to be passed out of committee?

Mr. BREEHEY. Yes, Mr. Chairman.

Senator INHOFE. All right.

I have a very distinguished group here for the national prayer

breakfast from Uganda, and I am going to have to run out and say

hello to them, so I am going to ask Senator Voinovich if you would

preside for just a moment.

Senator Jeffords.

Senator JEFFORDS. Thank you, Mr. Chairman.

I would like to ask each of you if you would like to take a minute

or two to respond to anything that you have heard from the Senators or the first witnesses here.

Mr. HOUSEAL. I am sorry, Senator, I didn’t get the question.

Senator JEFFORDS. If you have something that you would like to

relate to us relative to the first witnesses, we would be happy to

hear you.

Mr. HOUSEAL. To further reflect on my answer to Senator Inhofe,

the members of this committee have introduced several bills over

the years that would address the issue of acid rain, and we have

endorsed one bill which is actually in the House introduced by our

New York Republican delegation, Sweeney McHugh, House Bill

227, and would certainly urge this committee to come to a compromise on the proposed bill and work with the House as well to

get something through.

Senator JEFFORDS. Mr. Walke.

Mr. WALKE. Senator Jeffords, I would like to address a statement

that Chairman Connaughton made earlier in the panel, where he

indicated that, to his knowledge, there were not exemptions from

regulations that would be bestowed upon the affected units covered

under this bill. As I detailed in my testimony, we have 582 of the

1100 power plants nationwide that would need not adopt any mercury controls.

And because of the quite clever way the bill is structured, in fact,

some untold number of other power plants could escape smog and

soot controls as well under the cap because of the opt-in provisions

that Senator Clinton was referring to. The truth is that EPA

doesn’t know how many power plants would be exempt or well controlled under this, because they haven’t even analyzed this bill

with the really devastating effect of the opt-in provisions.

So I would encourage this committee to call upon EPA to fully

analyze all provisions of the bill that is before this committee and

to describe the impacts of those as compared to enforcing current

law, which we believe will protect the public better.
76

Senator JEFFORDS. Thank you.

Mr. BREEHEY. Senator, as Mr. Connaughton discussed at length,

one of our primary concerns is the impact of any clean air legislation on fuel switching to natural gas that will drive up manufacturing costs and increase the outsourcing of U.S. jobs. So we support the Administration’s perspective on that particular issue and

believe that the bill that Mr. Inhofe has put forward will go a long

way to addressing it.

Senator JEFFORDS. Mr. Walke, why do you think that until now

no real effort has been made to mark up Clear Skies or move it

through Congress, since it was first introduced at the request of

the President July of 2002?

Mr. WALKE. Well, my view is that it was the responsible opposition of this Congress that prevented the bill from being taken up

seriously in the past 2 years, and that realizing that EPA moved

forward with regulations under its current authority under the

Clean Air Act that would actually protect the public sooner and to

a greater degree.

I think that case is made even tenfold today, where we have a

bill before us that is dramatically weaker and worse than the bill

that was even introduced in the year 2001. So I am hopeful that

with EPA facing deadlines to act in March, 2 months from now,

that we will actually have rules that are issued that will protect

the public and that Congress will move on to other business and

not go forward with this bill.

Senator JEFFORDS. Mr. Walke, also, according to the most information that is available today, power plants are the source of significant non-attainment in many parts of the Country. They are

also the most cost-effective control options that States and local

governments will rely upon to achieve attainment. What do you believe are the most cost-effective control options that will allow attainment to be reached on schedule?

Mr. WALKE. Senator, plainly, deeper reductions from the power

plant sector are more cost-effective than the other cleanup measures that States would have to resort to in order to clean up their

air. EPA has found in the past that cost-effective reductions from

power plants are $2,000 a ton, and if we were to adopt that same

metric today, we would be cleaning up power plant emissions by 90

percent within the next 5 years, not by 70 percent over the course

of the next two decades.

The truth is that the Administration low-balled the requirements

that they were willing to impose upon the power sector, which resulted in a scandalously low cost-effectiveness dollar figure of $700

a ton. The DC area has submitted controls that would require

three to five to $7,000 of tons of reductions from other industry sectors, and we can do better and more cost-effectively with power

plants.

Senator JEFFORDS. Thank you, Mr. Chairman.

Senator VOINOVICH [assuming Chair]. Mr. Houseal, as you know,

some of my colleagues and witnesses claim that Clear Skies is a

rollback of existing Clean Air Act provisions. I would just like you

to comment on that.

Mr. HOUSEAL. We agree with the cuts as presented in the Clear

Skies bill that are in front of you today, and in terms of a rollback,
77

I would agree with Mr. Walke’s comment that we have a floor

available for us right now, which is the Clean Air Interstate Rule,

and a deadline of March, so that if this bill is above that floor, I

think we have a positive step forward here.

Senator VOINOVICH. And your position is the one that you have

maintained for several years. I will never forget your organization

being criticized by the Clean Air Trust. You got the villain of the

month award because you said let us do something about three Ps

or three Es, and let us discuss carbon at some other time, but let

us get on with it so we can do something about our problem.

Mr. HOUSEAL. That is correct. If Congress had moved in 1995,

when the first EPA study came out indicating further reductions

were necessary in NOx and SOx, and if it had happened that year,

I think the discussion today would be much different about a multipollutant bill. It is indeed unfortunate when we recognize that at

the time of the Kyoto protocols the Senate voted it down 95 to 0.

That was bipartisan. And more recently there has been slightly

more progress with the McCain-Lieberman bill. But obviously the

political will is not yet with us to have a bill.

Senator VOINOVICH. You want us to move on.

Mr. HOUSEAL. Let us move on and get acid rain cured and have

the debate about CO2. Senator VOINOVICH. Mr. Walke, as I stated in my opening statement, I hoped that we could move passed many claims against the

bill and have a construction discussion about the legislation. Instead you have levied many attacks against this legislation that I

disagree with, and I am glad the Chairman is going to leave the

record open so we can get at that. But one of the things that bothers me about your testimony is this issue of sinister motives by

those of us that are involved in this bill.

You just said the clever way the bill was constructed.

I want you to know that I was the chief environmentalist in the

House of Representatives in Ohio. I want you to know that I was

the father of the Ohio Environmental Protection Agency. I want

you to know that when I was Governor of Ohio, we moved forward

and we got every county to achieve the ambient air standards.

I care about the people of Ohio. I care about the fact that I don’t

believe that we have been moving rapidly enough to do something

about our environmental needs and our public health needs, and I

am very concerned about the fact, because we haven’t harmonized

our energy and environmental and economic needs, that many

Ohioans today have been hurt economically. So I just want you to

understand that.

First, you claim that more can be done under the existing Clean

Air Act. I won’t go into this again, but as I laid out in my opening

statement, the current Act NSR Section 126 have not worked well

in terms of meeting its deadlines. And I am glad that Mr.

Connaughton clarified what we are doing in that area, and we

would be glad to work on that area.

Second, you cite an EPA staff proposal that is much stronger

than Clear Skies. There is a long history on the Straw proposal.

I would just quote from a recent article in the issue of Washington

Monthly entitled, ‘‘Partly Sunny, Why Enviros Can’t Admit that

Bush’s Clear Skies Initiative Isn’t Half Bad.’’ One EPA career offi-
78

cial said, ‘‘We created the business as usual scenario of what would

happen under the Clean Air Act out of whole cloth. To be honest,

we wanted to scare the hell out of the industry. Early on, said EPA

staffer John Bachman, we became convinced that we couldn’t do

the Straw proposal.’’

Third, you state, ‘‘It is absurd to think that starting afresh with

a new, untested legal framework would reduce future litigation

delays.’’ As you cite Mr. Schneider’s testimony from last week, that

two dozen rules are required to implement Clear Skies, so there

are going to be extensive litigation. I hate to argue with you on this

point, since your organization seems to be an expert on litigation,

but I disagree.

The rulemakings required are those that are required under the

Acid Rain Program, and they were not litigated. Clear Skies contains provisions to assure the reductions. There is a prohibition

against legal challenges of the annual allowance allocations and a

default allowance procedure in case of any problems. And, most importantly, the emission caps and compliance deadlines to Clear

Skies are set in statute and cannot be disputed, delayed, or legally

challenged.

Fourth, you claim that the Jeffords–Carper bill gets faster reductions without more cost. This doesn’t make sense. If you look at the

2004 analysis of all three bills by the Energy Information Administration, those two bills cause more unemployment, higher natural

gas and electricity prices, and lower coal use than Clear Skies.

Fifth, you attack the transitional provision in the bill. This provision follows the National Academy of Sciences recommendation

that ‘‘the implementation of air quality regulations should be less

bureaucratic, with more emphasis on results and the process.’’

Mr. Breehey, you made reference to that in terms of your people.

It is stop, start, and you have no certainty there.

I have run out of my time, but let me quote from Administrator

Browner’s testimony October 1, 1997, before a joint committee

hearing of the House Committee on Commerce. She said, ‘‘Our next

implementation in this effort, NAAQS, is a regional strategy, it is

designed to target major utilities for pollution reductions through

a market-based cap and trade program. Once this plan is given a

chance to work, we believe that the vast majority of cities that

based on current data would not meet a more protective health

standard would be able to go through this strategy without any additional new local pollution controls or measures. The States will

receive a transitional classification. This classification will enable

them to avoid undue local planning requirements and the restrictions on economic growth.’’

Now, that is not from Christy Todd-Whitman or Mike Leavitt; it

is from Carol Browner, October 7, 1997.

Senator INHOFE [resuming Chair]. Thank you very much, Senator Voinovich.

And I thank the panel. I thank you for your patience. The first

panel went a little bit longer than it was supposed to. We appreciate your service very much.

We are adjourned.

[Whereupon, at 11:52 a.m., the committee was adjourned.]

[Additional statements submitted for the record follow:]
79

STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE STATE OF MONTANA

Mr. Chairman, Ranking Member Jeffords, thank you for holding this hearing

today on S. 131, the Clear Skies bill. This issue is very important, to the country

and to my state of Montana.

I believe we have an opportunity to craft a bi-partisan bill in this Committee. But,

this is not a simple task. It will require difficult negotiations and a lot of hard work.

We have to listen to each other, rather than talking past each other. We’ve held

a lot of hearings, but we’ve had very little discussion about what was said at those

hearings.

I don’t think there’s a lot of disagreement over the basic principles in this debate.

Cleaner air and a healthier environment; greater certainty for business; more efficient regulation; reduced costs of compliance. That’s our goal, to take what we’ve

learned from the implementation of the Clean Air Act Amendments of 1990, and

craft a better program that reduces pollution and enhances our global competitiveness. The question, of course, is how do we achieve this? Certainly, there is a significant difference of opinion among members of this Committee as to what is the best

approach.

But, a difference of opinion doesn’t mean a good compromise is out of our reach.

It certainly doesn’t mean that we shouldn’t even try to find common ground. That’s

what we’re here for in this Committee. That’s what I want to see.

In order to do this, though, we need to build some trust. There needs to been an

understanding that this isn’t a take it or leave it situation, that the legitimate concerns of members of this Committee about this legislation will not be ignored or dismissed, but considered and, where possible, addressed.

Will we all be able to agree on what is the best way forward? Probably not. But,

I think we can do better than an even split, or a bare majority. We should be shooting for as strong a bi-partisan vote as possible that will help this bill survive on

the floor. We have to do that if we’re serious about actually accomplishing something this year. We still need 60 votes to pass anything in this body.

Personally, I have a few simple criteria for any multi-pollutant bill: First, it must

represent a clear and positive step forward on clean air as compared to the status

quo. I understand that we’re facing very different challenges now than we did in

1990, even if we just consider the significant changes that have occurred within the

utility industry during that time. New challenges call for a new approach, such as

a sound multi-pollutant bill, but we have to make sure that we maintain and improve upon the Clean Air Act’s success at reducing air pollution nationwide.

Second, legislation must not harm, and if possible, must promote, the development of Montana coal. Montana sits on the largest coal reserves in the nation.

These coal reserves represent an enormous economic potential for my state, in royalties, revenue and jobs. Unfortunately, we just haven’t been able to develop the markets for our low-sulfur coal that our friends and neighbors in Wyoming have. I

would like to see if there’s a way we can fix that problem. Additionally, there are

a lot of proposals out there right now to develop new power plants in Montana that

burn Montana coal. Of course, not all of them will be built. But I want to be sure

that any legislation treats new plants fairly and provides sufficient incentives for

them to be built. New plants are cleaner and more efficient than older plants, particularly those plants that are 40 and 50 years old. Efficient and clean should be

rewarded, not penalized, particularly if we want to continue to advance clean coal

technologies to ensure that coal has a robust future.

Third, the legislation must substantively address carbon dioxide. I think we can

put together a strong package that passes the laugh test and pushes the technology

envelope without penalizing coal or harming our economy. I think such a package

would win the support of a majority of Senators on this Committee and on the floor.

Right now, it’s too soon for me to confirm whether Clear Skies satisfies the first

two criteria; I know that it does not satisfy the third. However, I’m confident that

we can find a compromise if, again, we work hard and talk to each other. And, if

we have the time to work something out. A rush to mark-up, without laying any

foundation for a bi-partisan compromise to take to the floor, is not a strategy for

success. This is frustrating because I want a good bill. It’s the right thing to do and

I think we can get it done.

I would like to associate myself with the earlier comments of Senator Carper,

where he noted that there is a great deal of room for negotiation on this bill, in

terms of caps and timelines, regulatory relief and CO2. I have a great deal of regard

for both Senator Voinovich and Senator Carper, the Chairman and Ranking Member of the Clean Air Subcommittee. They are both former Governors, they know how

to get things done. They have both indicated their willingness to start a dialog and
80

find a compromise. I fully support their efforts and will do everything I can to help

ensure they succeed.

Mr. Chairman, let’s set this Committee up to succeed. I think we’re close on so

many issues but the process needs time work itself out. Let’s give it that time to

see what can be done. It will be time well spent and I think it will only help this

bill’s prospects going forward.

Thank you, Mr. Chairman.

STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM

THE STATE OF CALIFORNIA

Mr. Chairman, I appreciate having a hearing before this Committee on the challenges of cleaning up the air. It is, however, unfortunate that you have chosen to

focus this hearing on legislation that would actually increase pollution.

Significant progress has been made since the Clean Air Act was enacted in 1970—

U.S. emissions of smog forming pollutants have decreased more than 50 percent

while economic growth has increased well over 150 percent. However, there is there

is still much to be done to clean up our air.

Dangerous levels of pollution are causing thousands of premature deaths, hundreds of thousands of asthma attacks, neurological disorders, and other illnesses

each year, especially in our children, our most vulnerable population.

According to the EPA, hospital admissions for asthma alone increased approximately 30 percent between 1980 and 1999. Further, one in six women of child bearing years has dangerous levels of mercury—a potent neurotoxin that threatens the

health of developing fetuses, children, and other vulnerable populations in her system.

These are the issues that we should be addressing today—how to reduce pollution

and its public health and environmental effects.

If the administration and this committee’s leadership were serious about addressing pollution, this committee would not be discussing S. 131, a wholesale roll back

of the Clean Air Act. We would be discussing Senator Jeffords’ bipartisan Clean

Power Act, S. 150, which takes on the challenge of protecting public heath by aggressively reducing power plant emissions while keeping the Clean Air Act in tact.

Although Senator Inhofe presents his bill as addressing power plant pollution—

that is not the purpose of this bill. Make no mistake, the purpose of S. 131 is to

undermine and unravel the Clean Air Act, undoing three decades of progress in

cleaning up our air, under the guise of a power plant bill.

Contained in S. 131 is virtually every roll back that industry has fought for since

the passage of the Clean Air Act. S. 131:

• Delays implementation of public health air quality standards 5–17 years;

• Repeals air toxic regulations for power plants and more than 73,000 other facilities, including emissions of cancer-causing pollutants such as formaldehyde, benzene, arsenic, toluene and lead;

• Makes it harder for states to clean the air by removing states’ tools, such as

the requirements that old, industrial facilities, including power plants, install modern pollution controls when they make significant changes that result in an increase

in air pollution or that they offset pollution increases; and

• Ignores emissions of carbon dioxide, the main cause of global warming.

Each year of delay in cleaning up our air takes an unnecessary toll on our public

health, welfare and the environment. The solution is not to defer deadlines and

weaken regulations, but, rather, to accelerate industry compliance with the current

Clean Air Act.

Proposals such as S. 131 that fall short of protecting public health or that seek

to use the power plant debate to unravel the current Clean Air Act should be soundly rejected because they do not address the fundamental issue—the threat to the

health of our communities from air pollution.

Remember, S. 131 is not really about power plants, S. 131 is about dismantling

the Clean Air Act. It is an industry wish list that not only fails to adequately address power plant pollution, but which would result in at least 21 million tons of

additional pollution placing public health and the environment at risk.

We cannot, and will not, let the Clean Air Act be unraveled to appease a powerful

lobby. We can and should have an open, honest bipartisan discussion about the

threat that air pollution poses to public health and the environment and the steps

that we can take to clean the air. I look forward to that discussion.
81

1Further detail about these benefits can be found in the materials accompanying this testimony and on the EPA and White House Web sites (www.epa.gov/clearskies and http://

www.whitehouse.gov/ceq/clearskies.html).

STATEMENT OF JAMES L. CONNAUGHTON, CHAIRMAN, U.S. COUNCIL ON

ENVIRONMENTAL QUALITY

Mr. Chairman, Senator Jeffords and members of the Committee. I appreciate the

opportunity to appear before you today to strongly urge passage of the President’s

Clear Skies Initiative. President Bush is dedicated to providing our families and

children with a healthier, more economically vibrant and secure future. Important

to achieving that future is bringing proven, innovative tools to the task. Clear Skies

legislation is just such a tool, and means healthier citizens, stronger communities,

more affordable, reliable and secure energy, and more vibrant wildlife habitat across

America.

Clear Skies will significantly expand the Clean Air Act’s most innovative and successful program in order to cut power plant pollution of sulfur dioxide, nitrogen oxides and, for the first time, mercury by an unprecedented 70 percent in two phases.

These cuts in pollution will provide substantial health benefits, prolonging the lives

of thousands of Americans annually, and improving the conditions of life for hundreds of thousands of people with asthma, other respiratory illnesses, and heart disease.1 As the son of a pediatrician who is also a chronic asthmatic, my passion for

this policy is deeply personal.

Clear Skies will produce these health benefits with greater certainty by imposing

a mandatory, permanent, multi-pollutant cap on emissions from more than 1300

power plants nationwide, reducing pollution by as much as 9 million tons annually

at full implementation. Utilities will achieve this by spending more than 52 billion

dollars to install, operate and maintain new, primarily clean coal pollution abatement technology on both old and new power plants. Clear Skies will require only

a few dozen government officials to operate and will assure compliance through a

system that is easy to monitor and easy to enforce.

Accordingly, the Clear Skies cap and trade approach will give our states the most

powerful, efficient and proven tool available for meeting our new, tough, healthbased air quality standards for fine particles and ozone. At the end of last year, EPA

completed the process of informing over 500 counties that they either do not meet

or that they contribute to another county not meeting the new standards. That relatively straightforward act has now triggered a very complex process that will lead

later this year to a frenzy of intrastate negotiation and conflict, interstate negotiation and conflict, Federal-state negotiation and conflict, state and citizen petitions,

lawsuits, and heightened uncertainty in energy markets, producing an avoidable

and negative impact on local investment, jobs and consumer energy bills. Not a pretty picture.

As a former Governor, the President personally experienced and understands the

complexities of developing and implementing state plans to meet air quality standards. That is why he places a premium on practical, common sense solutions. Clear

Skies, in conjunction with the Bush Administration’s new rules cutting diesel engine

pollution by more than 90 percent, provides that solution. Most counties will be able

to meet the new standards without having to take any new local measures beyond

the Clear Skies power plant reductions. For the relative few that remain, their burden will be substantially lighter and their likely challenges local ones. This simple

approach could save governments and the private sector tens of millions of dollars

in negotiations, litigating and otherwise inevitable delay in meeting air quality

standards.

Clear Skies will also help keep communities together. Up front assurance of meeting air standards will give communities the certainty they need to keep and attract

manufacturing jobs in the places where generations of their families currently live,

work, play, and pray. The absence of such certainty could exacerbate the breakup

of communities experiencing the exodus of industrial jobs to either ‘‘greenfields’’ locations in the United States or, even more consequentially, overseas.

Clear Skies will also make communities stronger economically by helping to keep

energy affordable, reliable, and domestically secure for their businesses and homes

particularly important to those least able to afford their energy needs. The marketbased trading approach will substantially cut the overall cost of compliance that is

passed on to consumers and shareholders. In addition, the specific cap levels in

Clear Skies—endorsed by organizations such as the U.S. Conference of Mayors and

National Association of Counties—are calibrated to encourage utilities to put controls on coal rather than switch to natural gas in order to comply. That minimizes
82

the overall impact on energy prices. Forcing fuel switching to natural gas, by contrast, maximizes it.

Finally, Clear Skies will help our ecosystems and wildlife thrive. It will eliminate

chronic acidity in the Adirondacks and virtually eliminate it in other Northeastern

lakes. It will improve long-term conditions in streams, rivers, lakes and bays. It will

vastly improve visibility in many of our parks and other scenic locations.

Mr. Chairman, for these reasons, a broad array of state, regional and local officials, as well as unions and non-governmental organizations, have endorsed the approach to meeting air quality that Clear Skies delivers. We look forward to the Congress delivering Clear Skies.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR INHOFE

Question 1. In the testimony submitted by Mr. John Walke, Natural Resource Defense Council, he states that a 2001 EPA document, entitled ‘‘Comprehensive Approach to Clean Power: Straw proposal and Supporting analysis for Interagency Discussion,’’ shows that 115 counties will still be in non-attainment in 2010 and that

66 counties will be in non-attainment by 2020. These estimates, however, appear

to conflict with estimates included in EPA’s 2003 analysis of the Clear Skies Act

of 2003 ‘‘Section B: Human Health and Environmental Benefits.’’ In that analysis,

EPA concludes that only 45 counties (27 counties for the 8-hour ozone standard and

18 for the PM2.5 standard) will remain in non-attainment out of a total of 419 counties deemed to be in non-attainment based on 1999 to 2001 data. This represents

close to a 90 percent reduction in the number of non-attainment areas. Please explain to the Committee which set of estimates provides the most accurate prediction

of nonattainment counties likely to remain based on existing information?

Response. In general, EPA’s most recent modeling estimates are based on more

up-to-date air quality and emissions data and improved modeling systems. The estimates in EPA’s 2003 analysis are EPA’s best estimates of how many counties will

attain the standards or continue to monitor non-attainment in 2020 under the provisions of the Clear Skies Act of 2003.

Question 2. Of the 45 counties that will remain in non-attainment, please list the

counties and provide information on when the Agency expects that these counties

will reach attainment based on the Agency’s current models. For each county, please

include information on the deadline assigned to the county in the recently promulgated implementation rules for the 8-hour and the PM2.5 standards. How many of

these counties does EPA believe. will not attain the standard by their assigned

deadline based on the Agency’s current models?

Response. The Clean Air Act requirement that states meet the National Ambient

Air Quality Standards (NAAQS) is unchanged in Clear Skies legislation. By providing national and regional reductions in pollution, Clear Skies would assist local

areas in reaching attainment. However, EPA cannot predict when some counties

will actually reach attainment, because EPA’s modeling does not take into account

the local-level controls that could be adopted by areas to help them reach attainment. Clear Skies modeling may predict that a county will monitor non-attainment

in 2020 with existing control programs and the Clear Skies Act of 2003 power sector

reductions; however, the county must attain the air quality standards through imposition of local or State-level controls.

There are 38 counties in all that EPA projects will not meet the standards in 2020

without adoption of state or local control measures: 27 counties projected to monitor

non-attainment for 8-hour ozone and 18 counties projected to monitor in non-attainment for PM2.5 (see table below). Seven of these counties are projected to monitor

nonattainment for both pollutants. The attainment deadlines for these 38 counties

depend on several factors.

All PM2.5 non-attainment areas are required to attain the standards ‘‘as expeditiously as practicable’’ and no later than 5 years from the effective date of designation, i.e., April 2010. The Administrator may grant an area an extension from 1 to

5 years (i.e., up to April 2015) based on the severity of the air quality problem and

the availability of emissions reduction options.

The attainment deadlines for the 8-hour ozone non-attainment areas depend on

whether they are subject to Subpart 1 or Subpart 2 of the Clean Air Act. All 27

of these counties are subject to Subpart 2 of the Clean Air Act. Subpart 2 ozone

non-attainment areas are classified according to the severity of their pollution problem. They must attain as expeditiously as practicable but no later than the maximum deadlines listed in the ozone implementation rule. These deadlines are the
83

following number of years after the effective date of designation (which was 6/15/

04 for each of the 27 areas):

Marginal - 3 years after designations, or 2007

Moderate - 6 years after designations, or 2010

Serious - 9 years after designations, or 2013

Severe - 15 or 17 years after designations, or 2019 or 2021

Extreme - 20 years after designations, or 2024

For each of the 27 Subpart 2 counties which are projected to monitor nonattainment for ozone in 2020 based on Clear Skies and existing control programs alone,

the maximum statutory attainment date is listed in the table below. To meet these

attainment deadlines, States will have to impose additional controls. The Administrator may grant up to two one-year extensions of the attainment deadlines for any

PM2.5 or 8-hour ozone non-attainment area that has experienced only a minimal

number of exceedances in its attainment year and for which the State has met all

the requirements in its State implementation plan for the relevant area. In addition,

if the State believes the area cannot attain by the maximum attainment date, the

State may request that the area be reclassified to a higher classification, which

would give it a later attainment date.

STATE COUNTY

PM2.5: Counties projected to monitor

non-attainment in

2020 w/Clear Skies

+ existing programs

THUS must take local

action

Ozone: Counties projected to monitor

non-attainment w/

Clear Skies + existing programs THUS

must take local action

Both: Counties projected to monitor

non-attainment in

2020 w/Clear Skies

+ existing programs

THUS must take local

action

Maximum statutory

attainment date for

ozone Subpart 2

counties

AL Jefferson Co ................... 1 .............................. .............................. ..............................

CA Fresno Co ....................... 1 1 1 2013

CA Kem Co .......................... 1 1 1 2013

CA Merced Co ...................... 1 .............................. .............................. ..............................

CA Stanislaus Co ................ 1 .............................. .............................. ..............................

CA Tulare Co ....................... 1 .............................. .............................. ..............................

CA Los Angeles Co .............. 1 1 1 2021

CA San Bernardino Co ........ 1 1 1 2021

CA Orange Co ...................... 1 1 1 2021

CA Riverside Co .................. 1 1 1 2021

CA San Diego Co ................. 1 .............................. .............................. ..............................

GA De Kalb Co .................... 1 .............................. .............................. ..............................

GA Fulton Co ....................... 1 .............................. .............................. ..............................

IL Cook Co ......................... 1 .............................. .............................. ..............................

MI Macomb Co .................... .............................. 1 .............................. 2010

MI Wayne Co ....................... 1 1 1 2010

OH Cuyahoga Co ................. 1 .............................. .............................. ..............................

OH Jefferson Co ................... 1 .............................. .............................. ..............................

PA Allegheny Co .................. 1 .............................. .............................. ..............................

CA Ventura Co ..................... .............................. 1 .............................. 2010

CT Fairfield Co .................... .............................. 1 .............................. 2010

CT Middlesex Co ................. .............................. 1 .............................. 2010

CT New Haven Co ............... .............................. 1 .............................. 2010

NJ Hudson Co ..................... .............................. 1 .............................. 2010

NJ Hunterdon Co ................. .............................. 1 .............................. 2010

NJ Middlesex Co ................. .............................. 1 .............................. 2010

NY Bronx Co ........................ .............................. 1 .............................. 2010

NY Richmond Co ................. .............................. 1 .............................. 2010

NY Westchester Co .............. .............................. 1 .............................. 2010

NJ Camden Co .................... .............................. 1 .............................. 2010

NJ Gloucester Co ................ .............................. 1 .............................. 2010

NJ Mercer Co ...................... .............................. 1 .............................. 2010

NJ Ocean Co ....................... .............................. 1 .............................. 2010

PA Bucks Co ....................... .............................. 1 .............................. 2010

PA Montgomery Co .............. .............................. 1 .............................. 2010

TX Galveston Co ................. .............................. 1 .............................. 2010

TX Harris Co ....................... .............................. 1 .............................. 2010

WI Kenosha Co .................... .............................. 1 .............................. 2010
84

1 Analysis of S. 1844, the Clear Skies Act of 2003; S. 843, the Clean Air Planning Act of 2003;

and S. 366, the Clean Power Act of 2003, May 2004, Energy Information Administration, Office

of Integrated Analysis and Forecasting, U.S. Department of Energy. 2The reference case in the EIA May 2004 analysis is based on the reference case in the Annual Energy Outlook 20041, and it incorporates final regulatory action under existing laws.

However, consistent with standard EIA practice requiring policy neutrality in baseline projections, it does not include pending or proposed actions at the time of the analysis, such as standards for mercury emissions from power plants or actions that might be taken to comply with

the revised National Ambient Air Quality Standards for ozone and fine particulates.

Question 3. S. 150, the Clean Power Act requires a 90 percent reduction in mercury emissions by 2010 with no emission trading. If units are not allowed to trade

emissions, what would happen to individual units that cannot reduce emissions by

90 percent? How many coal-fired units are at risk of not being able to reliably meet

a 90 percent reduction requirement by 2010?

Response. Mercury specific control technologies are not expected to provide 90%

control on all key combinations of coal type and control technology in this timeframe. Power companies and technology vendors, with substantial support from the

Department of Energy (DOE), are working to develop and commercialize technologies that are specifically designed to control mercury emissions from coal-fired

power plants. One of the most promising technologies is Activated Carbon Injection

(ACI). However, except for testing purposes, no coal burning power plant is using

ACI or any other technology designed to control mercury emissions. A limited number of full-scale ACI evaluations have been conducted for short periods of time on

units representing a fraction of the boiler population. DOE is now implementing a

second phase of field testing, focusing on longer-term, full-scale field-testing on a

wide range of coal and device configurations. These longer-term tests will provide

information important to subsequent commercial demonstration projects. Once ACI

is commercially available, additional time will be necessary to enable this technology to be deployed widely in the power sector.

Thus, there could be a significant number of units that would be unable to comply

with a 90 percent reduction by 2010 and would likely shut down. The Energy Information Administration (EIA) analysis shows that the early timing and stringency

of the emissions limits in the Clean Power Act combined with the birthday provision

in the bill leads to the largest resource cost and electricity price impacts among the

three bills they modeled in May 2004 (S.1844, S.843 and S.366)1. The stringent

emission caps, particularly the CO2 cap, cause a large decline in coal generation.

New coal capacity additions through 2025 would amount to only 3 gigawatts under

the Jeffords bill, and nearly 125 gigawatts of existing coal plants would be retired.

Relative to the reference case2, coal generation would be 35.3 and 54.7 percent lower

in 2010 and 2025, respectively, under the Jeffords bill. Coal production tracks this

decline. Relative to the reference case, coal production declines by 623.4 million tons

(45.4 percent) in 2020 and 771.6 million tons (50.4 percent) lower in 2025.

Question 4. Does EPA believe there is sufficient data, including full-scale test results of sufficient duration, to say with confidence that there are now commercially

available technologies for lignite or sub-bituminous coal plants that can reliably

achieve a 90 percent reduction in mercury emissions? Is EPA aware of any vendors

that have guaranteed a 90 percent reduction in mercury emissions from either lignite or sub-bituminous powered coal plants? If there are guarantees available, how

substantial are the penalties for failure to achieve the performance requirement?

What would happen to the utility versus the vendor if the performance level was

not achieved under legislative proposals, such as the Clean Power Act of 2005?

Response. Power companies and technology vendors, with substantial support

from the DOE, are specifically working to develop and commercialize technologies

that are designed to control mercury emissions from coal-fired power plants. One

of the most promising technologies is Activated Carbon Injection (ACI). However, except for testing purposes, no coal burning power plant is using ACI or any other

technology designed to control mercury emissions because the technology has not

been fully demonstrated. A limited number of full-scale ACI evaluations have been

conducted for short periods of time on units representing a small fraction of the boiler population. DOE is now implementing a second phase of field testing, focusing

on longer-term, full-scale field-testing on a wide range of coal and device configurations. These longer-term tests will provide information important to subsequent

commercial demonstration projects. Once ACI is commercially available, additional

time will be necessary to enable this technology to be deployed widely in the power

sector.

In terms of guarantees, assumption of risk is a contractual arrangement between

the seller (vendor) and purchaser (utility). The level of risk a vendor will be willing
85

to assume is unknown as this is a matter that would be subject to negotiation between the contracting parties, however, failure of the utility to comply with Clear

Skies requirements would subject the company to serious penalties.

Question 5. If legislation does not pass and if litigation delays the implementation

of the CAIR rule, how much more costly will it be for states and locals areas to attain the 8-hour ozone and PM2.5 standards? How likely will it be that more areas

will fail to meet their attainment deadlines? Will these areas be forced to bumpup to higher categories in order to avoid sanctions? What would happen to areas

that are unable within the next three years to submit an implementation plan that

can demonstrate attainment by the required deadline?

Response. We do not know how much more costly it would be for states and local

areas to attain the 8-hour ozone and PM2.5 standards if litigation delays the implementation of CAIR and legislation does not pass nor can we predict how likely it

would be that areas would fail to meet their attainment dates or whether ozone nonattainment areas would be forced to bump up to a higher classification in the event

of litigation delaying implementation of CAIR. Our experience with passage of the

Acid Rain Program and the NOx SIP Call illustrate our preference for legislation

instead of rulemakings. Litigation did not delay the Acid Rain Trading Program at

all, while litigation did delay the NOx SIP Call over a year in most states and even

longer in other states.

If EPA determines that a state fails to submit within three years of designation

an implementation plan that demonstrates attainment by the required deadline, or

if EPA disapproves a submitted plan, then two sanction clocks would start. Eighteen

months after the clock is started, if the State has not submitted the plan where EPA

found it had failed to do so, or if EPA has not approved a plan where it has disapproved the submission, sources in the area subject to the nonattainment new

source review requirements would be subject to an increased offset requirement. If

the deficiency has still not been corrected, six months later, the area would be subject to limitations on federal highway funding. In addition, EPA is required to promulgate a Federal Implementation Plan (FIP) no later than 24 months after it has

found the state failed to submit the plan or it has disapproved the plan and that

obligation remains until EPA has approved the required plan. EPA may grant extension(s) of the attainment deadline for Subpart I ozone nonattainment areas and

all PM2.5 nonattainment areas (which are also covered under Subpart 1 of the Clean

Air Act) for up to 5 years beyond the original 5-year attainment deadline if in its

attainment demonstration, the state justifies such an extension based on the severity of the pollution in the area and the availability and feasibility of control measures.

Question 6. In your testimony, you state that mandatory caps on CO2 emissions

will not produce a favorable economic climate for investing in new clean coal technologies, such as IGCC, which are more efficient (less CO2 producing) and which

hold the potential of allowing for future sequestration of CO2 emissions. You also

state, however, that these technologies are significantly more expensive to build

when compared to traditional fossil fuel or nuclear powered electricity. What is the

Administration currently doing to encourage the adoption of technologies, such as

IGCC? How important is regulatory certainty to encouraging the construction of

IGCC and other comparable next generation clean coal technologies?

Response. Under Clear Skies, the power sector will spend more than $52 billion

to install, operate, and maintain pollution abatement technology on both old and

new power plants. The cap-and-trade system encourages investment in innovative

pollution control technologies as we have seen under the Acid Rain Trading Program.

This investment future is enhanced by DOE’s Office of Fossil Energy research

and, through programs such as FutureGen, development of future gasification concepts that offer significant improvements in efficiency, fuel flexibility, and economics. Tomorrow’s IGCC plants could conceivably process a wide variety of low-cost

fuels, handling not only coal but also biomass, municipal and other solid wastes, or

perhaps combinations of these feed stocks. DOE is currently investigating new gasifier configurations that can adapt to variances in fuel composition, heating values,

ash content, and other factors. DOE is also working with its private sector partners

to develop a new, potentially low-cost configuration for a future gasifier-based advanced circulating fluidized-bed technology. Finally, DOE is looking to develop

lower-cost ways to produce the oxygen used in the gasification process, including use

new innovations in ceramic membranes to separate oxygen from the air at elevated

temperatures.

In addition, significant improvements in overall project economics can be obtained

through actions to make the siting and permitting of IGCC plants more predictable
86

and efficient. Pursuant to Executive Order 13212, the Task Force on Energy Project

Streamlining has begun a review of existing Federal permitting processes to identify

potential opportunities to make such processes more efficient, and is consulting with

States and interested private parties in an effort to reduce the barriers to deployment for IGCC and comparable clean coal technologies.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR LAUTENBERG

Question 1. Eight million New Jerseyans live where ozone health standards are

being violated, yet one-third of our ozone comes from upwind. Why does this bill

take away my state’s ability to reduce out-of-state pollution that threatens our

health?

Response. Changes to the Clean Air Act interstate transport provisions are designed to ensure that transported pollution is controlled from the power sector and

preserve the flexibility and cost-effectiveness of the trading program. Clear Skies reductions are greater or equal to the reductions over the next decade that could be

requested of downwind states that submitted petitions today. This is why the President’s Clear Skies legislation would not subject affected units to additional reductions as a result of section 126 petitions until 2012.

The cap and trade approach to reducing emissions from the power generating sector is the most efficient and effective route to reduce transported air pollution from

this sector. The Acid Rain Trading Program’s outstanding success demonstrates the

benefits of this approach. Clear Skies provides the power generation sector with certainty about upcoming regulations and promises the public a mandatory program

to reduce air pollution.

Question 2. About 10 percent of New Jersey’s school kids have asthma, and about

150,000 of them are hospitalized each year. Why does ‘‘Clear Skies’’ let industry off

the hook for meeting the health standards until 2025 or even later? Does the president believe that we should aim to still protect the health of our children?

Response. The Clean Air Act air quality goals, the National Ambient Air Quality

Standards (NAAQS), are unchanged under the Clear Skies proposal. New Jersey is

required to put in place a State Implementation Plan that will bring New Jersey

into attainment with the new NAAQS for ozone and fine particulate matter on time.

Clear Skies, by mandating enforceable emission caps for power plants, will help

New Jersey attain these air quality standards.

Clear Skies will provide significant air quality benefits to Northeastern states.

Interstate ozone transport would be significantly reduced under these cap levels.

The proposal recognizes the unique circumstances of various regions of the country

while retaining the economic benefits of national emission allowance markets. The

SO2 and NOx reductions required under Clear Skies in those states having or contributing to ozone nonattainment will address the problem of ozone and particulate

matter nonattainment and transport on or ahead of schedule.

Question 3. I’m sure you’ve taken your family to one of our national parks, where

most of us expect to enjoy fresh air and beautiful vistas, yet shockingly the air in

many of our National Parks is hazy and doesn’t meet the ozone health standard (Including Yosemite, the Great Smoky Mountains, and Shenandoah). Why does Clean

Skies remove the Clean Air Act’s special protections for national parks?

Response. Due to Clear Skies and the suite of diesel rules, major parks in the east

are expected to come into attainment for smog by 2015, to see substantial improvements in visibility, and reductions in acid rain. The Department of Interior and the

National Park Service have been working collaboratively with EPA, States, Tribes,

and stakeholders for many years to develop comprehensive pollution control strategies that will benefit the national parks.

Clear Skies will modify certain Clean Air Act programs and retain important environmental backstops. Given the substantial and cost effective improvements in regional pollution which the President’s Clear Skies Act could achieve, it is appropriate to consider ways to streamline the regulatory process for sources affected by

the caps, while still providing appropriate protection for class I areas such as national parks. Accordingly, the President’s Clear Skies legislation simplifies new

source review because the Clear Skies mandatory caps and 70% reduction make

such programs largely redundant. At the same time, the legislation maintains the

requirement that new or modified sources be assessed as to whether they would affect any air quality related values, including visibility, in class I areas. Because the

major visibility impacts of well controlled single sources occurs relatively near the

source, the requirement is limited to facilities located within 50 km of the area.
87

RESPONSE OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTION FROM

SENATOR VOINOVICH

Question 1. Some critics of Clear Skies claim that it is less stringent than existing

law, and they advocate simply for the Clean Air Interstate Rule and Clean Air Mercury Rule. Is existing law better for the environment and are the rules better than

Clear Skies legislation?

Response. Clear Skies is not less stringent than existing law. Clear Skies does not

change the new, more stringent health-based air quality standards that the federal

government set and the states must now meet. What Clear Skies provides is an effective tool to help the states get there with certainty. Clear Skies will significantly

expand the Clean Air Act’s most innovative and successful program in order to cut

power plant pollution of sulfur dioxide, nitrogen oxides and, for the first time, mercury by 70 percent in two phases. These cuts in pollution will provide substantial

health benefits, prolonging the lives of thousands of Americans annually, and improving the conditions of life for hundreds of thousands of people with asthma, other

respiratory illnesses, and heart disease.

Clear Skies will produce these health benefits with greater certainty than the

Clean Air rules because Clear Skies imposes a mandatory, permanent, multi-pollutant cap on emissions from more than 1,300 power plants nationwide, reducing pollution by as much as 9 million tons annually at full implementation.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR BAUCUS

Question 1a. Will Clear Skies provide adequate incentives for the construction of

new, cleaner coal-fired power plants? If yes, why and how? How many new coal

plants are projected to come on-line under Clear Skies versus the status quo?

Response. Analyses by the Energy Information Agency (EIA) and the Environmental Protection Agency (EPA) show that Clear Skies helps maintain coal as an

important fuel source. EIA and EPA both predict increases in coal production. EIA

analysis shows, under the Clear Skies bill modeled in May 2004, that new coal capacity additions through 2025 amount to 92 gigawatts under Clear Skies compared

to 108 gigawatts in the reference case. EIA projections show an increase under

Clear Skies of new, cleaner, more efficient Integrated Gasification and Combined

Cycle (IGCC) additions to nearly 26 gigawatts compared to the reference case projection of only 14 gigawatts of IGCC capacity additions by 2025. Both EIA and EPA

projections show that power generators are expected to rely primarily on the addition of emissions control equipment to comply with the emission caps—little fuel

switching from coal to natural gas is projected. In fact, EPA modeling projects that

coal-fired generation will increase 9% by 2020 compared to 2003 levels. When EPA

modeled Clear Skies with EIA assumptions for natural gas prices and electricity

growth, coal-fired generation was projected to increase by roughly 54% compared to

2003 levels. The EPA 2003 analysis of Clear Skies shows that approximately 5.2

gigawatts of coal-fired capacity comprised mostly of small units under 100

megawatts will no longer be economic to maintain. Using EIA assumptions for natural gas prices and electricity growth leads to about 0.4 gigawatts of coal-fired capacity that is no longer economic to maintain. EIA and EPA also project a small

effect on national electricity prices under Clear Skies.

To compare, EIA’s May 2004 analysis shows that fewer new coal plants will be

constructed under the Carper bill than under the Inhofe Clear Skies bill and the

reference case. New coal capacity additions through 2025 range from 21 gigawatts

to 35 gigawatts under the Carper bill analysis. Under the Jeffords bill, new coal

plant additions are much lower while retirements are higher compared to the reference case. New coal capacity additions through 2025 amount to only 3 gigawatts

under the Jeffords bill, and nearly 125 gigawatts of existing coal plants are retired.

Question 1b. Could and/or should Clear Skies be improved to provide greater incentives for new coal-fired plants, and do more to encourage the retirement of older,

less efficient facilities with no pollution controls? Can the Administration recommend any proposals along these lines?

Response. Clear Skies is designed to cut emissions from the power sector thus assisting the states in meeting new stringent air quality standards for ozone and particulate matter while ensuring a diverse energy future for the U.S., including coal

use.

Flexibility of compliance choices for the power sector, maintenance of fuel diversity, and the cost savings passed on to consumers through low electricity prices are

the benefits of the approach taken in Clear Skies, particularly when compared with
88

the other proposals that support more stringent targets, shorter compliance periods,

or command and control regulatory approaches. Low electricity prices are maintained under Clear Skies. EPA and EIA analysis shows that the power sector will

rely heavily on emission control technologies under Clear Skies to meet the caps;

EPA’s analysis of the Clear Skies Act of 2003 projected that 80 percent of coal-fired

capacity would have either SO2 or NOx controls by 2020. Emissions trading will provide flexibility to the sector to keep their resource costs low. Coal is maintained as

an important fuel source, thereby avoiding excessive pressure on natural gas prices;

EPA and EIA both predict coal generation will grow under Clear Skies and natural

gas consumption under Clear Skies tracks the reference case.

In addition, President Bush pledged during the 2000 campaign to invest $2 billion

over 10 years to fund research into clean coal technologies and is on track to exceed

that goal by more than 50%. The 2006 Budget provides $286 million, an increase

of $13 million over 2005 enacted levels, for the President’s Coal Research Initiative

to improve the environmental performance of coal power plants by reducing emissions and improving efficiency. This includes:

• $68 million for the Clean Coal Power Initiative, of which $18 million is allocated

to continue development of FutureGen, the coal-fueled, near-zero—emissions electricity and hydrogen generation project announced by the President in February

2003;

• A commitment to FutureGen beyond 2006, by proposing a $257 million advance

appropriation for 2007 to provide the Federal share of FutureGen for several years;

and

• $218 million for research and development of other clean-coal technologies, such

as Integrated Gasification Combined Cycle systems, carbon sequestration, and nextgeneration turbines.

Question 1c. How will Clear Skies promote the deployment of advanced clean coal

technologies, like IGCC, that currently face barriers to commercialization? Please be

specific.

Response. Under Clear Skies, the power sector will spend more than $52 billion

to install, operate, and maintain pollution abatement technology on both old and

new power plants. The cap-and-trade system encourages investment in innovative

pollution control technologies as we have seen under the Acid Rain Trading Program.

This investment future is enhanced by DOE’s Office of Fossil Energy research and

development of future gasification concepts that offer significant improvements in

efficiency, fuel flexibility, and economics. Tomorrow’s IGCC plants could conceivably

process a wide variety of low-cost fuels, handling not only coal but also biomass, municipal and other solid wastes, or perhaps combinations of these feed stocks. DOE

is currently investigating new gasifier configurations that can adapt to variances in

fuel composition, heating values, ash content, and other factors. DOE is also working with its private sector partners to develop a new, potentially low-cost configuration for a future gasifier-based advanced circulating fluidized-bed technology. Finally, DOE is looking to develop lower-cost ways to produce the oxygen used in the

gasification process, including use new innovations in ceramic membranes to separate oxygen from the air at elevated temperatures.

In addition, significant improvements in overall project economics can be obtained

through actions to make the siting and permitting of IGCC plants more predictable

and efficient. Pursuant to Executive Order 13212, the Task Force on Energy Project

Streamlining has begun a review of existing Federal permitting processes to identify

potential opportunities to make such processes more efficient, and is consulting with

States and interested private parties in an effort to reduce the barriers to deployment for IGCC and comparable clean coal technologies.

Question 2. How many facilities nation-wide that currently have not installed any

pollution control equipment will install some form of pollution control equipment

under Clear Skies? Where are the majority of these facilities located?

Response. EPA’s analysis of the Clear Skies Act of 2003 projects that an additional 270 units that currently do not have any advanced pollution controls to reduce emissions of SO2 and NOx will install controls to meet the emission reduction

requirements of Clear Skies. Currently, roughly 55 percent of coal-fired capacity

does not have advanced pollution controls for either SO2 or NOx removal (i.e., a

scrubber or SCR). EPA’s analysis of the Clear Skies Act of 2003 projected that 80

percent of coal-fired capacity would have either SO2 or NOx controls by 2020. The

additional pollution controls projected to be installed for Clear Skies are geographically dispersed throughout the country. Clear Skies results in emission reductions

where they are needed most and where they will have a high impact on attainment
89

of air quality standards; in the highest emitting regions of the country such as the

Mid-West, the Mid-Atlantic, and the South.

Question 3a. Specifically, how will Clear Skies impact Montana coal production

compared to the status quo? This includes Montana coal shipped out-of-state, as

well as Montana coal consumed in-state for power production. Please explain your

answer. If Clear Skies maintains current production levels, or decreases production,

please explain how that outcome might be changed.

Response. Although we have not performed similar analysis for S.131, EPA’s 2003

analysis of the Clear Skies Act of 2003 projected that that coal production in Montana will increase from today’s production levels.

Question 3b. How will S. 131 impact air quality in Montana?

Response. Although we have not performed similar analysis for S. 131, EPA modeling of the President’s 2003 Clear Skies Act projected that all counties in Montana

would meet the 8-hour ozone and fine particle standards by 2020. Lincoln County

would be brought into attainment with the fine particle standards by 2020 under

existing programs. In addition, Clear Skies would reduce fine particle concentrations

throughout the state and would prevent degradation of visibility in Montana’s

parks, ensure nitrogen deposition does not increase, and reduce mercury deposition.

Question 4. I understand that EPA staff has verified an analysis performed by

Westmoreland Resources, Inc. (WRI) that shows that market pressure created by

implementation of Title IV of the Clean Act (CAA) will force the closure of the

Absaloka Mine, owned by the Crow Tribe and operated by WRI. The market advantage that the Crow coal has had is that it is 300 miles closer by rail to customers

in the Midwest than other producers of western low-sulfur coal. As successive

phases of the Clean Air Act have been implemented, the Crow have lost customers

to the point where now it has one customer who purchases 90% of the mine’s production. This customer operates a scrubbed plant which emits SO2 below its permitted levels and is among the lowest emitting coal plants in the country. Losing

this customer would close the mine.

Please confirm this verification.

Response. EPA agrees that the rising price of Title IV allowances is predicted to

encourage the owners of the unit that the Crow Tribe is supplying to switch to a

lower sulfur coal. Representatives of the Crow Tribe have explained to EPA that

they are investigating other customers, including a new nearby coal plant and the

possibility of building a plant on the reservation. EPA has not done any analysis

of these scenarios or their impact on the Crow Tribe’s mine.

Question 5. I also understand that EPA staff agreed with the WRI analysis showing that granting the Crow Tribe and WRI relief will have negligible impacts on the

SO2 emissions of the primary surviving customer of the Absaloka mine. This customer operates a scrubbed plant in the Midwest that emits SO2 below its permitted

levels. This customer will coal source switch for economic purposes only—no tangible environmental gain will be had for closing the Crow Nation’s main source of

income. This relief will not increase emissions; switching coal will decrease emissions in a negligible amount.

Please confirm this verification.

Response. According to the information provided by the Crow Tribe, the switch

to lower sulfur coal would result in about a 50% reduction in emissions (11,000

tons). EPA has not analyzed the environmental benefits of that reduction. However,

this switch to low sulfur coal would not produce a net nationwide increase in emissions, since the customer would presumably free-up allowances for sale on the market. The impact of specific relief to the tribe on emissions at the customer’s plant

and the cap-and-trade program in general would depend on the nature of the relief

being provided.

Question 6. What has been the cumulative net cost (total cost minus the value

of allowances distributed to them) of compliance incurred by electric generating unit

owners under Title IV of the Clean Air Act Amendments of 1990?

Response. The costs of Title IV are not typically estimated in this manner. Several

outside experts have provided estimates of the cost of Title IV, and their estimates

of the annualized costs of Title IV are in the range of $1 billion to $3 billion for

2010 when the program is to be fully implemented. OMB’s 2003 Report to Congress

on the Costs and of Federal Regulation reports EPA estimates that annual cost of

Title IV’s SO2 reductions ranged between $1.1 billion and $1.9 billion (2001$); EPA

estimates of the NOx program’s annual costs added $0.4 billion.

Question 7. How will S.131 impact visibility in National Parks and other Public

Lands, and on air quality in existing Class I areas? What is the scientific basis for
90

setting a 51 kilometer distance from Class I areas beyond which advanced pollution

control requirements would not be required for new or modified sources? How does

this distance comport with the requirements?

Response. Although EPA has not analyzed how S. 131 would impact visibility in

National Parks and other public lands or air quality in existing Class I areas, EPA’s

analysis of the effects of the President’s Clear Skies legislation on visibility in these

areas and found that the Clear Skies Act of 2003 would benefit the ecosystems and

air quality in national parks across the country, especially in the eastern states.

The 2003 analysis projected benefits due to improvements in visibility in National

Parks and Wilderness areas in many Class I areas in the Southeast (including

Shenandoah and Great Smoky Mountain National Parks), the Southwest, and California. The reductions in acid rain, eutrophication, mercury deposition and regional

haze from Clear Skies would also improve these resources. By addressing air pollution from a regional perspective, the transport of air pollution into national parks

and wilderness areas would be reduced. We expect that S. 131 would have similar

types of benefits to National Parks and Class I areas.

Clear Skies would require all new facilities governed by Clear Skies to have, at

a minimum, the level of modern pollution controls as specified in section 481 (National Emission Standards for Affected Units). Subsequent review by the Federal

Land Manager of facilities within the 50 km of a National Park or other Class I

area would ensure a review of potential impacts of new sources to avoid significant

local effects.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR OBAMA

Question 1. Section 407(j)(1)(A): Please provide an estimate of the number of

sources in Illinois that could potentially opt-in under this provision and specifically

which hazardous air pollutants these sources may be withdrawing from regulation

under Section 112 of the Clean Air Act. Please also provide an estimate of the

amount of these pollutants that could be emitted under this provision and compare

it with current emissions as currently regulated.

Response. We cannot provide this data at the State level, because EPA only estimates emissions from source categories at the national level.

Question 2. What safeguards could be added to Clear Skies to ensure the trading

process does not create mercury hot spots?

Response. The Agency believes that a cap and trade system, coupled with States’

ability to control sources further, will effectively address any local risks from power

plants.

EPA analysis suggests that large coal-fired utility units—those that tend to have

relatively high emissions of the type of mercury that can deposit locally—have

greater local-scale deposition footprints than medium-sized and smaller coal-fired

utility units. The trading of allowances is likely to involve large utility units controlling their emissions more than required and selling allowances to smaller units,

rather than the reverse scenario. This prediction arises from the basic economics of

capital investment in the utility industry. Under a trading system where the firm’s

access to capital is limited, where the up-front capital costs of control equipment are

significant, and where emission-removal effectiveness (measured in percentage of removal) is largely unrelated to plant size, it makes more economic sense for the utility company to allocate pollution-prevention capital to its larger facilities than to the

smaller plants. Any economies of scale of pollution control investment will result in

investment at the larger plants.

Second, the types of mercury that are deposited locally are controlled by the same

equipment that controls criteria air pollutants (fine particles, SO2, and NOx). As

utilities invest in equipment to comply with the Clear Skies SO2 and NOx requirements, the Agency expects a ‘‘co-benefit’’ in mercury controls as particulate controls,

scrubbers, and SCR systems are installed on an increasing percentage of coal-fired

utility units. The type of mercury that is most difficult to control is the elemental

form of mercury that is most likely to be transported long distances from utility

units. Effective control of this type of mercury may require significant investment

in mercury-specific control technologies that are now only in the development stage.

Considering the economies of mercury trading, utility units that have significant

emissions of the elemental mercury may become buyers of allowances from plants

that can cost-effectively control mercury. Consequently, the economics of the trading

system are likely to favor controls of mercury that are likely to be deposited locally,

thereby reducing any local hot spots. In addition, Clear Skies does not change Clean

Air Act authority that allows States to adopt more stringent performance standards.
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Question 3. How will Clear Skies help states meet Clean Water Act requirements

for impaired water bodies?

Response. EPA analysis of the environmental impacts of the Administration’s

Clear Skies Act of 2003 projected that the required reductions in emissions of SO2, NOx, and mercury would result in significant reductions in acid deposition and deposition of nitrogen and mercury. All three types of deposition are responsible for or

contribute to water quality impairments. EPA’s 2003 modeling of Clear Skies shows

that implementation of Clear Skies would virtually eliminate chronic acidification

in Adirondack lakes and improve other areas of the Northeast and Southeast.

Question 4. Under Clear Skies Illinois may have difficulty demonstrating attainment for the new 8-hour ozone and PM2.5 standards. Please provide an analysis of

other source categories that that can help Illinois meet these deadlines at a cost

comparable to power plant reductions?

Response. EPA’s analysis shows that reductions from power plants are currently

the most cost-effective measures that can be taken to demonstrate attainment for

the new 8-hour ozone and PM2.5 standards. EPA does not have comprehensive costeffectiveness information for ozone precursors (NOx and VOC), direct PM2.5, and

PM2.5 precursors (SO2, NOx, VOC). Also, the cost-effectiveness of measures will vary

from state to state depending on measures already in place. Moreover, it is difficult

to rank measures by cost effectiveness ($/ton) when comparing direct PM2.5 sources

with sources whose emissions form PM2.5 only after reactions occur in the atmosphere. However, the local reduction measures listed below may help Illinois meet

their deadlines.

For the proposed CAIR rule, EPA conducted an analysis of available local measures (see pp 46 to 56 of http://www.epa.gov/air/interstateairquality/tsd0162.pdf). The

following measures, taken from this study, are examples of options states have the

power to adopt as part of Implementation Plans under current law and under S.

131:

Examples of direct PM measures:

1. Programs to require or encourage retrofit controls for on-road, off-road, and

stationary source diesel engines.

2. Programs to curtail use of woodstoves on high-PM days and to encourage replacement of older high-emitting woodstoves with cleaner-burning woodstoves.

3. Emissions limitations (for example RACT for major sources) for industrial

sources of PM2.5.

4. Regulations to ban open burning of refuse, and programs to improve enforcement of bans which are already in place.

Examples of SO2 reduction measures for categories other than electric power generation:

5. Emissions limitations for coal-fired industrial boilers.

6. Greater emission reductions for petroleum refineries.

7. Emission limitations for sulfuric acid plants not currently meeting NSPS

standards.

Examples of NOx reduction measures for categories other than electric power generation:

8. Emission limitations reflecting low NOx burners for industrial boilers.

9. Requirements for emission reductions from cement kilns.

10. RACT measures for major sources of NOx.

Examples of VOC control measures:

11. Adopt more stringent limits for architectural and industrial maintenance

coatings.

12. Requirements to prevent emissions from underground storage tanks at gasoline service stations.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR JEFFORDS

Question 1. Please provide by February 16, 2005, for the Committee’s business

meeting at which Clear Skies is expected to be marked up, an Administration analysis of the substantive changes to current laws, regulations and programs made by

S. 131, if it were enacted, including the potential impact on state authorities.

Response. S. 131 would not affect a state’s ability to regulate sources within its

borders. The EPA does not have an analysis of all the other substantive changes

to current laws, regulations and programs made by S. 131.

Question 2. Please provide a list of the ten most cost-effective control options that

states have the power and authority to adopt, under current law and under S. 131,
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as part of a State Implementation Plan to attain the ozone and PM2.5 NAAQS by

the deadlines specified in the Clean Air Act.

Response. The EPA does not have comprehensive cost-effectiveness information

for ozone precursors (NOx and VOC), direct PM2.5, and direct PM2.5 precursors (SO2,

NOx, VOC). Also, the cost-effectiveness of measures will vary from state to state depending on measures already in place. Moreover, it is difficult to rank measures by

cost effectiveness ($/ton) when comparing direct PM2.5 sources with sources whose

emissions form PM2.5 only after reactions occur in the atmosphere.

For the proposed CAIR rule, EPA conducted an analysis of available local measures (see pp 46 to 56 of http://www.epa.gov/air/interstateairquality/tsd0 162.pdf).

The following measures, taken from this study, are examples of options states have

the power to adopt as part of implementation plans under current law and under

S. 131:

Examples of direct PM measures:

1. Programs to require or encourage retrofit controls for on-road, off-road, and

stationary source diesel engines.

2. Programs to curtail use of woodstoves on high-PM days and to encourage replacement of older high-emitting woodstoves with cleaner-burning woodstoves.

3. Emissions limitations (for example RACT for major sources) for industrial

sources of PM2.5.

Examples of SO2 reduction measures for categories other than electric power generation:

4. Emissions limitations for coal-fired industrial boilers.

5. Greater emission reductions for petroleum refineries.

6. Emission limitations for sulfuric acid plants not currently meeting NSPS

standards.

Examples of NOx reduction measures for categories other than electric power generation:

7. Emission limitations reflecting low-NOx burners for industrial boilers.

8. Requirements for emission reductions from cement kilns.

9. RACT measures for major sources of NOx.

Examples of VOC control measures:

10. Adopt more stringent limits for architectural and industrial maintenance

coatings.

11. Requirements to prevent emissions from underground storage tanks at gasoline service stations.

Question 3. Please compare the difference in lives saved or premature deaths

avoided and the number of people living in nonattainment areas as would occur between implementation of the Clean Air Interstate Rule as proposed and S. 131 as

introduced for the following years: 2010, 2015, and 2020.

The Clean Air Act requirement that states meet the National Ambient Air Quality

Standards (NAAQS) is unchanged in Clear Skies legislation. By providing national

and regional reductions in pollution, Clear Skies would assist local areas in reaching

attainment of the air quality standards. Cap and trade systems have also been

shown to encourage early reductions in emissions. Such reductions could assist

areas with near-term attainment dates. EPA modeling of the President’s Clear Skies

legislation in 2003 shows dramatic attainment under the reductions. Of over 350

monitored counties which had violations, the 2003 analysis indicated that all but

38 counties would be in attainment by 2020 solely with operation of the Clear Skies

Act of 2003 and state and federal Clean Air Act programs already in existence. In

addition, of the counties that monitored nonattainment with the PM2.5 standard in

the 2003 analysis, about 70% were expected to come into attainment by 2010.

Should areas not come into attainment with these reductions from the power sector,

they will still have to take additional local steps. Depending on the area, the Clear

Skies reductions may make the burden on the need for additional local controls

lighter.

Question 4. If S. 131 were to be enacted as introduced, please describe the responsibility that a designated ‘‘transitional area’’ would have to ensure that its pollution

did not cause or contribute to nonattainment in downwind areas, prior to and after

such designation?

Response. For transitional non-attainment areas, S. 131 does not change area specific requirements with respect to the need to address transport. Under S. 131, all

areas-attainment, non-attainment, and transitional—would fall under the national

and regional caps that are intended to reduce power sector SO2 and NOx contributions to transport affecting PM2.5 and ozone nonattainment. S. 131 would not eliminate the fundamental requirements that sections 110 and 126 impose on States re-
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garding the need to address emissions from sources other than affected units under

S. 131 that contribute significantly to nonattainment in downwind states.

Question 5. According to EPA, the Clean Power Act, S. 150, when compared to

the predecessor of S. 131, would prevent 13,000 fewer lives from ending prematurely

in 2010, and 18,000 in 2015. Is that still accurate? How does S. 131 compare to

S. 1844 or S. 2815 in avoiding premature mortality?

Response. The Environmental Protection Agency (EPA) has not yet analyzed S.

131 with respect to the impact on statistical life. EPA has committed to provide this

information under S. 131, S. 150, S. 485, S. 843 and the Manager’s Amendment for

2010 and 2015.

However, as you know, the Clean Air Act requires that states meet Federal air

quality standards designed to protect human health. States must meet the new national, health-based air quality standards for ozone and PM2.5 standards by requiring reductions from many types of sources. Clear Skies legislation and other multipollutant bills provide a Federal program to cut emissions from the power generation sector. The reductions from the power sector are substantial and cost-effective,

so in many states, the reductions are large enough to meet the air quality standards. Some areas may need to take additional local actions. Depending on the area,

the Clear Skies reductions may make the burden lighter on the need for additional

local controls.

Question 6. Why does the Administration’s Clear Skies proposal result in an increase in greenhouse gas emissions from the power sector by 13% or by 425 million

tons in 2020 from today’s levels, according to EPA projections?

Response. Greenhouse gas emissions will increase from the power sector over the

next 15 years regardless of whether Clear Skies is enacted or not, as a result of

an expected 1.5–2.0% per year growth in electricity demand to support a growing

economy. Based on previous analysis of the Clear Skies Act of 2003, EPA believes

most of this electricity demand will meet with new natural gas and coal-fired generation plants, as fossil fuels are expected to remain the cheapest sources of electricity for the country. This expected increase in fossil-fired generation, and not

Clear Skies, is responsible for the projected increase in greenhouse gases in 2020.

The President’s Clear Skies proposal does not specifically address greenhouse gas

emissions from the power sector, but it will encourage cleaner, more efficient electric

generation technologies that produce fewer air pollutants and greenhouse gases

than technologies in use today. This approach is consistent with the President’s

overall aim to reduce the greenhouse gas intensity of the U.S. economy by 18% by

2012 compared to 2002, as the first step in a global, long-term effort to slow the

growth of our greenhouse gas emissions and, as science justifies, to stop and then

reverse the growth of emissions. The Bush Administration is carrying out a broad

range of innovative domestic and international policies and programs to achieve this

goal, and work in partnership with other developed and developing nations on a

common approach to addressing global climate change.

Question 7. A reasonable estimate of achieving attainment for the PM-2.5 standard

in all areas by the statutory deadline of 2010 is avoiding 25,000 premature deaths,

4,000 to 7,000 thousand heart attacks, and hundreds of thousands of asthma attacks each year. Could you provide the Committee with an estimate of the total annual health costs, including Medicare and Medicaid, associated with delaying attainment of the national air quality standards in all currently designated nonattainment areas by a year, and a separate estimate of the impact of the specific delays

in attainment such as provided for in the designation of ‘‘transitional areas’’ in

S. 131?

Response. We do not have an analysis that would allow us to provide the requested estimates.

Question 8. The Energy Information Administration analysis (May 2004) from last

year says that Clear Skies (S. 1844) never achieves a 70% reduction in emissions.

Do you agree with this analysis? If not, please describe the errors in that analysis

that need correction.

Response. In the Energy Information Agency (EIA) May 2004 analysis of S. 1844,

emissions of nitrogen oxides (NOx) are projected to fall to 1.79 million tons by 2025,

meeting the target called for in the bill. Projected emissions of sulfur dioxide (SO2)

and mercury (Hg) did not meet the bill’s emission cap targets by 2025. For SO2 this

occurs in the analysis because power companies reduce emissions early by banking

18.81 million tons before the first phase of the program. Early reductions are one

of the most significant environmental benefits of a cap and trade program that allows banking. The power sector would then use the banked allowances during the

Clear Skies compliance period. The bank balance is projected to fall to 12.33 million
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tons in 2017 and further to 5.11 million tons in 2025. In 2025, SO2 emissions are

projected to be 3.62 million tons, 0.62 million tons above the 3.0 million ton cap that

began in 2018. EIA predicts that if the usage of banked allowances were to continue

at the rate seen between 2020 and 2025, the 5.11 million tons of banked allowances

remaining in 2025 would be exhausted in 2030 or 2031. It is highly likely that the

3.0 million ton cap would be reached soon after 2030–31. This gradual decline of

SO2 emissions is consistent with the implementation of the Acid Rain program. For

Hg, the 15-ton cap called for in 2018 and beyond was not achieved because power

generators are expected to reduce their mercury emissions prior to 2010 to take advantage of the early credit program. Between 2004 and 2009, a total of 42 tons of

early reductions occurs because of the early credit program. Also, the $2,875.50 per

ounce ($35,000 per pound) allowance price safety valve is triggered. Hg emissions

in 2025 are projected to be 29 tons, 14 tons above the cap. If advancements in mercury control technologies lower the costs of control, as expected, for most plants and

coals below the safety valve, then further reductions would occur.

Emissions banking results in early reductions as companies over-control their

emissions early in the program and bank allowances for future use. Banked allowances can be used at any time so they provide flexibility for companies to respond

to growth and changing marketplace conditions over time and, although banking

can result in emissions above the cap level in the later years of the compliance period, because the cap is permanent banking does not result in an increase in cumulative emissions. This is an important trade-off for early reductions.

Question 9. As the Chairman of the Council on Environmental Quality, you have

the primary responsibility of ensuring the implementation of the National Environmental Policy Act or NEPA. That Act requires all Federal agencies to include in

every recommendation or report on proposals for legislation and other major Federal

actions a detailed statement for the public by the responsible official on alternatives

to the proposed action. What alternatives did the Federal government present to the

public when it sent up Clear Skies for Congress’ consideration in July 2002 and

again in February 2003?

The President’s Clear Skies legislation was not subject to NEPA. NEPA requires

Federal agencies to prepare an environmental impact statement on ‘‘every recommendation or report on proposals for legislation or other major Federal actions

significantly affecting the quality of the human environment . . . .’’ 42 U.S.C.

§ 4332(2)(C). The President is not a Federal agency. (See 40 C.F.R. § 1508.12 ‘‘Federal agency’ means all agencies of the Federal Government. It does not mean the

Congress, the Judiciary, or the President . . . .’’) In this particular case, Congress

exempted federal agencies drafting legislation for the President from NEPA under

Section 7(c)(1) of the Energy Supply and Environmental Coordination Act of 1973,

15 U.S.C. § 793(c)(1). (‘‘No action taken under the Clean Air Act [42 U.S.C.A. § 7401

et seq.] shall be deemed a major Federal action significantly affecting the quality

of the human environment within the meaning of the National Environmental Policy Act of 1969.’’) Moreover, the Constitution vests exclusively in the President the

authority to submit for the consideration of Congress such measures as he deems

necessary and expedient, and in aid of that function, the President may direct that

his subordinates in the executive branch provide him advice and assistance.

Notwithstanding NEPA requirements, the Administration has provided for the

public and for Congress’ consideration extensive modeling by EPA and EIA on the

President’s Clear Skies bill and other multi-pollutant alternatives such as Senator

Carper’s bill and your bill. Administrator Johnson has also committed to provide

further analysis of S. 131, S. 150, S. 485, S. 843 and the Manager’s Amendment per

his letter to Chairman Inhofe on May 26, 2005. Further, EPA proposed two

rulemakings, the Clean Air Interstate Rule and the Clean Air Mercury Rule, which

are similar to Clear Skies. These rulemakings included an extensive and detailed

technical analysis and lengthy public comment periods.

EPA and EIA Analyses of Clear Skies and Multi-pollutant Legislation

• EIA December 2000 ‘‘Analysis of Strategies for Reducing Multiple Emissions

from Power Plants: Sulfur Dioxide, Nitrogen Oxides, and Carbon Dioxide’’

http://www.eia.doe.gov/oiaf/servicerpt/powerplants/pdf/sroiaf(2000)05.pdf

• EIA July 2001 (Congressman McIntosh request) ‘‘Analysis of Strategies for Reducing Multiple Emissions from Electric Power Plants: Sulfur Dioxide, Nitrogen Oxides, Carbon Dioxide, and Mercury and a Renewable Portfolio Standard’’

www.eia.doe.gov/oiaf/servicerpt/epp/pdf/sroiaf(2001)03.pdf

• EIA Sept 2001 (Smith/Voinovich/Brownback request) ‘‘Reducing Emissions of

Sulfur Dioxide, Nitrogen Oxides, and Mercury from Electrical Power Plants’’

http://www.eia.doe.gov/oiaf/servicerpt/mepp/index.html
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• EPA economic analysis of various multi-pollutant scenarios requested by Smith/

Voinovich/Brownback June 8, 2001 ‘‘Analysis of Multi-Emissions Proposals for the

U.S. Electricity Sector’’

http://www.epa.gov/air/meproposalsanalysis.pdf

• EPA economic analysis of various multi-pollutant scenarios requested by Jeffords/Lieberman October 31, 2001 ‘‘Economic Analysis of a Multi-Emissions Strategy’’

http://www.epa.gov/air/jeffordslieberm.pdf

• EIA economic analysis of the Jeffords bill October 2001‘‘Analysis of Strategies

for Reducing Multiple Emissions from Power Plants: Sulfur Dioxide, Nitrogen Oxides, and Carbon Dioxide’’

http://www.eia.doe.gov/oiaf/servicerpt/powerplants/index.html

• EPA comprehensive modeling to support Clear Skies announcement Feb 2002

‘‘2002 Technical Support Package for Clear Skies; Section G: Summary of the Models used for the Analysis’’

http://www.epa.gov/air/clearskies/tech—sectiong.pdf

• EIA/EPA modeling of the Clear Skies mercury provisions Spring-Fall 2003 Testimony before Senate EPW committee (S. Hrg. 108–359) July 29, 2003

http://www.access.gpo.gov/congress/senate/senate09sh108.html

• EPA Clear Skies updated comprehensive analysis July 11th 2003 ‘‘The Clear

Skies Act Technical Support Package’’

http://www.epa.gov/air/clearskies/03technical—packagetofc.pdf

• EIA economic analysis of Carper and Jeffords bills September 2003 ‘‘Analysis

of S. 485, the Clear Skies Act of 2003, and S. 843, the Clean Air Planning Act of

2003’’

http://www.eia.doe.gov/env/utility.html

• EIA economic analysis of Inhofe-Voinovich Clear Skies 2003, Carper and Jeffords bills May 2004 ‘‘Analysis of S. 1844, the Clear Skies Act of 2003; S.843 the

Clean Air Planning Act of 2003; and S.336, the Clean Power Act of 2003’’

http://www.eia.doe.gov/oiaf/servicerpt/csa/executive—summary.html

Question 10. My tri-partisan bill, the Clean Power Act of 2005, which has 18 cosponsors, achieves more net benefits in 2010 and 2020 than S. 131, as does Senator

Carper’s. Does the Administration support maximizing net benefits?

Response. EPA’s 2003 analysis shows that all three multi-pollutant bills—Clear

Skies legislation, the Clean Power Act (CPA), and the Clean Air Planning Act

(CAPA) would bring a significant number of areas into attainment with the fine particle (PM2.5) standard when compared with continued implementation of existing

Clean Air Act programs. In 2010, Clear Skies is projected to bring 42 additional

counties into attainment; the Clean Air Planning Act would bring 48 additional

counties into attainment; and the Clean Power Act would bring 53 additional counties into attainment. EPA’s analysis of nitrogen oxide (NOx) emissions and ozone

shows that there would be no incremental ozone attainment benefits from the Jeffords bill and the Carper bill over those projected for Clear Skies in 2010 or 2020.

However, as you know, this does not mean that the three bills would result in

different levels of air quality: the Clean Air Act requires that states meet Federal

air quality standards. States must meet the new national, health-based air quality

standards for ozone and PM2.5 standards by requiring reductions from many types

of sources. Clear Skies legislation and other multi-pollutant bills provide a Federal

program to cut emissions from the power generation sector. The reductions from the

power sector are substantial and cost-effective, so in many states, the reductions are

large enough to meet the air quality standards. Some areas may need to take additional local actions. Depending on the area, the Clear Skies reductions may make

the burden on the need for additional local controls lighter.

The different approaches in the Jeffords bill and the Carper bill would, however,

cost Americans significantly more than Clear Skies. The Carper bill program costs

are 53% higher in 2010 ($6.6 billion) and 57% higher in 2020 ($9.9 billion) than

Clear Skies. On a net present value basis, for the period 2005 to 2030, the cumulative cost of Senator Carper’s bill is projected to be $82.7 billion—57% more than

the net present value of the cumulative cost of the Clear Skies legislation for the

same period ($52.5 billion). The projected cost differences are even greater for the

Jeffords’ bill. Relative to Clear Skies, CPA’s program costs are projected to be almost 300% higher in 2010 ($16.5 billion). In addition, pursuing sharp reductions in

CO2 from the electricity generating. sector alone would cause a dramatic shift from

coal to natural gas. The Jeffords bill is projected to increase electricity prices 39%

in 2010 and 50% in 2015, whereas Clear Skies is projected to have only a small impact on electricity prices.
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The compliance dates and control levels of CPA and CAPA will also increase the

cost to American consumers. In constructing the Clear Skies Act, we were conscious

of not extending beyond the limits of available labor and other construction resources even though Clear Skies requires very substantial increases in installation

of advanced pollution controls. CPA and CAPA require even more control technology

installations in a very short time frame, which could hinder electricity reliability.

Question 11. Under S. 131, what is likely to be the maximum number of major

sources that could obtain an exemption from the air toxics requirements of the current Clean Air Act to use maximum available control technology? Considering those

facilities, what is the approximate number of tons of HAPs currently emitted by

those facilities and how much more would their annual emissions under S. 131 be

than under current applicable maximum achievable control technology requirements

of section 112 of the Clean Air Act for those same sources?

Response. EPA has not analyzed S. 131 with respect to the number or type of facilities that might take advantage of opting into the trading program. EPA does not

have a database nor does it have a modeling tool that could predict which facilities

would voluntarily opt-in.

Question 12. Serious criticism has been leveled against the Administration for failing to follow an open and transparent process as required by EPA guidance and Executive Orders in the development and setting of the mercury reduction goal in

Clear Skies and in the proposed mercury rule. Did you at any time instruct or otherwise encourage any CEQ or any EPA employees or appointees to disregard EPA

guidance on rulemakings, or the directives in any of the Executive Orders, including

no. 12866 on regulatory review and no. 13045 on children’s health?

Response. The EPA finalized a rule to control mercury emissions from the power

sector on March 15 and we have followed guidelines for a proper rulemaking. Criticism of the rulemaking was addressed by Assistant Administrator Jeff Holmstead

in his response letter to the EPA Office of Inspector General. It can be viewed at

http://www.epa.gov/oig,/reports/2005/20050203–2005–P–00003.pdf

Question 13. You indicated that the cost to utilities to comply with the Clear Skies

legislation would be approximately $52 billion. What is expected to be the cumulative value of the allowances allocated to utilities in the same time period that they

spend this $52 billion? What is expected to be the cumulative value of allowances

to non-utilities participating in the program compared to their costs of compliance?

Response. It is important to understand that the estimated cost of compliance

with Clear Skies 2003 only includes the capital, operations and maintenance, and

fuel use costs. We do not assume any costs associated with the use of allowances.

This is because most of the value of the allowances is given to power companies.

This cost does not have a significant impact in the early years of the program because the 2003 legislation included an auction that was phased in. The power companies are then required to surrender allowances as part of compliance; thus on net,

allowances do not represent either a cost or an expense. This could be different for

individual power companies.

Question 14. Please describe the effect, if any, that enactment of S. 131 would

have on ongoing legal actions related to EPA regulations, programs, enforcement,

or guidance, including New Source Review, New Source Performance Standards,

and Hazardous Air Pollutants.

Response. We have not analyzed the effect of enactment of S. 131 on ongoing legal

actions.

Question 15. What is the cumulative total of the President’s budget requests, including FY06, for the FutureGen program and how much has been appropriated for

this program to date?

Response. FutureGen is a Presidential initiative to build the world’s first integrated sequestration and hydrogen production research power plant. The $1 billion

dollar project is intended to create the world’s first zero-emissions fossil fuel plant.

When operational, the prototype will be the cleanest fossil fuel fired power plant in

the world. The FY 2004 budget included $9 million to initiate FutureGen, and the

FY 2005 budget included another $18 million for FutureGen consistent with the

funding profile contained in the Department of Energy’s March 2004 Report to Congress. The President’s FY 2006 Budget requests another $18 million to continue

FutureGen, as well as ensures that the $257 million in unexpended funds available

from prior years’ clean coal projects are available to fund future clean coal activities,

beginning with FutureGen. The total Federal contribution to FutureGen is expected

to be $500 million in direct funding for FutureGen, and another $120 million from

DOE’s carbon sequestration programs.
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Question 16. An Associated Press report from December cited you and Secretary

Leavitt as saying that President Bush had made a decision to finalize the Clean Air

Interstate Rule by mid-March 2005, unless Congress passes the Administration’s

proposed Clear Skies Act by then. Did the President tell you or anyone else in the

White House that he had made a decision to issue the Clean Air Interstate Rule

by March unless Congress enacts Clear Skies by such date? Is it still the Administration’s intention to promulgate the final rule by that date?

Response. The EPA finalized the Clean Air Interstate Rule and the Clean Air

Mercury Rule by March 15, 2005.

Question 17. Has the Agency or the Administration analyzed setting more stringent caps than those in S. 131 that were as cost-effective or had greater net benefits? For instance, moving the SO2 emissions cap to 3 or 2 million tons in 2012 instead of 2018. If so, please provide these analyses.

Response. Extensive modeling has been done on the President’s Clear Skies bill,

Senator Carper’s bill and Senator Jeffords bills since 2001 by EPA and EIA and all

of these analyses are publicly available:

• EIA economic assessments of various multi-pollutant scenarios, December 2000

and July 2001 (Congressman McIntosh request), September 2001 (Smith/Voinovich/

Brownback request)

• EPA economic analysis of various multi-pollutant scenarios (Smith/Voinovich/

Brownback request), 2001

• EPA economic analysis of various multi-pollutant scenarios (Jeffords/Lieberman

request), 2001

• EIA economic analysis of the Jeffords bill, October 2001

• EPA comprehensive modeling to support Clear Skies, February 2002

• EPA costibenefits assessment of the Jeffords bill, June 2002

• EPA Clear Skies updated comprehensive analysis, July 2003

• EIA economic analysis of Carper and Jeffords bills, September 2003

• EPA cost/benefit assessment of Carper and Jeffords bills, October 2003

• EIA economic analysis of Inhofe-Voinovich Clear Skies 2003, Carper and Jeffords bills May 2004

Question 18. S. 131 eliminates the National Acid Precipitation Assessment Program and that program’s reporting requirement. As you may know, section 103(j)

of the Clean Air Act requires the Administration to submit a report to Congress

every two years showing acid deposition trends and every four years recommending

the reduction in deposition rates that must be achieved in order to prevent adverse

ecological effects. The last report was in 1998. Please provide by March 1, 2005, the

status of these reports and any working drafts of the four-year report that are available.

Response. The NAPAP Report is currently undergoing interagency review.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR MURKOWSKI

Question 1. Mr. Connaughton, we in Alaska are lucky to have avoided many of

the air pollution problems evident in more populous states. In fact, it has been suggested that much of the pollution that can be found in our state is transported from

overseas. To what degree is pollution from other countries an issue and what can

we do about it?

Response. It is well established that the growing economies of East Asia are a

large and growing source of pollution, and that these pollutants can be transported

over large distances in the atmosphere. The Bush Administration is partnering with

these nations, such as China and India, to develop and deploy cleaner, more efficient energy technologies that will provide more energy with fewer emissions that

can be transported across the Pacific to North America.

Question 2. There has been a lot of discussion in the media about whether humancaused CO2 is aggravating global warming. We are seeing events in Alaska that

may be temperature-related, such as changes in ice cover in the Arctic Ocean,

changes in the flora and fauna of different areas, insect infestations, and erosion,

among others. Other than the general category of ‘‘global warming,’’ what other

credible explanations exist for these events?

Response. The IPCC notes that ‘‘even without changes in external forcing, the climate may vary naturally, because, in a system of components with very different

response times and non-linear interactions, the components are never in equilibrium

and are constantly varying.’’ An example of such internal climate variation is the
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El Nin ̃ o and La Nina-Southern Oscillation (ENSO), resulting from the interaction

between atmosphere and ocean in the tropical Pacific.

Of importance to Alaska is the Pacific Decadal Oscillation (PDO), which is a natural oscillation of sea surface temperature in the North Pacific with a 20–30 year

cycle. It has been linked to major changes in the productivity of northeast Pacific

marine ecosystems, prevailing atmospheric winds and the average ‘‘storm track’’ location which affects erosion patterns, and the temperature of water entering the

Arctic Ocean through the Bering Strait which affects the extent and thickness of

Arctic sea ice. These natural cycles are being intensely studied through the Climate

Change Science Program, and improved understanding of these cycles will yield improved climate forecasts on seasonal-to-decadal time scales.

A sense of the natural variability of Arctic temperature can be obtained through

an examination of the following diagram, which is based on data from the Global

Historical Climatology Network, and is available from GISS.

This figure shows that today’s temperatures were comparable to those in the late

1930s. The highest annual temperature for the area between 64° N and 90° N occurred in 1938, while the 2000–2004 had the highest 5-year period.

Question 3. Are you familiar with the papers that have raised questions about the

‘‘hockey stick’’ graph used by the IPCC? In your view, what effect do these questions

have on the overall issue of the relationship between anthropogenic CO2 and climate

change?

Response. These questions are the focus of one of the ‘‘synthesis and assessment

reports’’ that will be published as part of the Climate Change Science Program. The

ongoing debate of reconstructing climate over the past 1000–2000 years underscores

the need to invest in new knowledge on natural climate variability, including developing and deploying comprehensive and sustained global observations of the climate

system through programs such as the U.S.-led Global Earth Observation System of

Systems (GEOSS) international partnership.

Question 4. I recently had a conversation in which a colleague suggested that we

should act to reduce CO2 and commented that ‘‘other countries’’ are already doing

it. Russia and the EU were specifically mentioned. Are other countries around the

world actually taking the same level of action on CO2 that is recommended by U.S.

proponents of Kyoto? Is the estimated effect on their economies the same as it would

be on ours?

Response. While the EU as a whole had 2002 emissions that were 2.5% below

their 1990 levels, some individual EU members, such as Spain, Portugal, and Ireland had emissions increase at a faster rate that the U.S. over that same period

of time. Many of the emissions reductions counted by the EU in their aggregate
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total come from improvements of efficiency within high-emitting industries in Germany, and from a switch (for other policy reasons) from coal to natural gas within

the U.K. In the case of Russia, a significant decline in economic activity since 1990

has resulted in significant emissions reductions.

Question 5. It has been suggested that stronger controls—as suggested in other

proposed bills—would harm the economy by causing a larger and more rapid shift

to alternative fuels such as natural gas. But I represent a state with abundant natural gas that we would like to market. Why would an immediate, largescale shift

to natural gas NOT be in our best interest?

Response. As documented in recent studies from the National Petroleum Council

and the American Gas Foundation, we currently do not have enough natural gas

supply within the Lower 48 and Alaska to meet our current needs. This has led to

consistent upward price pressure on natural gas, augmented only by a modest increase in domestic production and in imports of LNG. These increased natural gas

prices have already affected industries that rely on natural gas as a feedstock, such

as chemicals, pharmaceuticals, and plastics. Even with access to the abundant natural gas supplies in Alaska and no change in emissions controls, we would be facing

significantly higher future prices for natural gas.

Unlike competing proposals that would result in shifts of capital investments from

coal to natural gas, the Clear Skies legislation is designed to ensure that electricity

generators are able to obtain financing and perform installation of the necessary

pollution control equipment cost effectively. Clear Skies will ensure that our economy continues to grow and create new jobs, while other proposals would result in

exports of jobs and revenue overseas to where natural gas is cheaper. More stable

domestic markets for natural gas are in the long term interests of the nation and

the state of Alaska.

RESPONSES OF JAMES L. CONNAUGHTON TO ADDITIONAL QUESTIONS FROM

SENATOR VITTER

Question 1. Is there a basis in the CAA to require that an area implement requirements that would not be applicable under the 8-hour classification and are not

part of an approved SIP? Isn’t it true that anti-backsliding under the CAA involves

holding in place the requirements found in a SIP or Applicable Implementation Plan

and applying the requirements of the 8-hour standard?

Response. The Clean Air Act does not expressly address the interplay between obligations that applied for a standard and the new obligations that arise when that

standard has been revised. In the preamble to the proposed and final rule to implement the 8-hour ozone standard, EPA explained that in designing a transition from

the 1-hour ozone standard to the 8-hour standard, we looked to various CAA provisions concerning anti-backsliding to ascertain Congressional intent. These provisions

included section 110(1), section 193, subpart 2 of part D of Title I together with the

classification process under section 181, and section 172(e). See the April 30, 2004

(69 FR 23951 at 23972) and the June 2, 2003 proposal (68 FR 32819) for a detailed

discussion of the rationale. EPA concluded that Congress intended 1-hour ozone

nonattainment areas to remain obligated to adopt and implement those control obligations mandated by Congress for the area’s 1-hour classification. Thus, under our

anti-backsliding regulation, areas must continue to implement control obligations

that applied for purposes of the 1-hour standard and to adopt any control obligations that applied but that the area had not yet adopted. States may modify or remove control obligations in the SIP that were not mandated by Congress so long

as the State demonstrates that removal or modification will not interfere with attainment or maintenance of the 8-hour ozone standard or interfere with any other

applicable requirement.

Question 2. If the City of Baton Rouge continues to be classified as severe under

the 1-hour standard, major sources of VOCs in the nonattainment area would be

subject to the imposition of penalty fees if the area fails to attain the standard by

the attainment date. Have the major sources in any other city in the United States

ever been required to pay fees under this standard?

Response. The CAA Section 185 fees provision applies to ozone nonattainment

areas classified as severe or extreme when such an area fails to attain the standard

by its attainment date. Since severe and extreme areas have attainment dates of

November 15, 2005 or later, no such area has yet failed to attain the 1-hour standard by its 1-hour attainment date. The Phase I Rule to implement the 8-hour ozone

NAAQS (69 FR 23951) provides that once the 1-hour standard is revoked in June

2005, EPA will no longer make findings of whether areas attain the 1-hour standard

and also provides that the section 185 fee provisions will no longer apply for pur-
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poses of failing to attain the 1-hour standard. On June 29, 2004, EPA received a

Petition for Reconsideration that requested that the Agency reconsider, among other

issues, the section 185 fee issue because EPA had not proposed that these provisions

would no longer apply once the 1-hour standard is revoked. EPA granted the petition and issued a proposal seeking comment on the portion of the Phase I Rule that

addressed the continued applicability of the section 185 fees (February 3, 2005; 70

FR 5593). This proposal reiterated EPA’s belief that once the 1-hour standard is revoked, the section 185 fee provisions of the CAA should no longer apply for failure

to attain the 1-hour standard because there will be no ‘‘applicable’’ 1-hour attainment date. EPA plans to take final action on this issue by mid-May 2005.

Question 3. On January 25, 2005, I requested that CEQ furnish my office with

a detailed analysis of how S. 131, ‘‘the Clear Skies Act of 2005’’ would impact the

State of Louisiana (and Baton Rouge in particular) as compared to existing law.

When can we expect to receive that information?

Response. The EPA has not analyzed the impact of S. 131 on states; however,

EPA has provided detailed analysis of state-by-state effects of the Administration’s

Clear Skies legislation. The Louisiana analysis can be found at http://www.epa.gov/

air/clearskies/state/la.html.

STATEMENT OF BRIAN HOUSEAL, EXECUTIVE DIRECTOR, ADIRONDACK COUNCIL

Good morning. Thank you, Mr. Chairman and Committee members, for the opportunity to testify before you today. I am Brian Houseal, the Executive Director of the

Adirondack Council.

The Adirondack Council is a privately funded, not-for-profit organization dedicated to ensuring the ecological integrity and wild character of the Adirondack Park.

This year, the Adirondack Council and our 18,000 members are celebrating our 30th

anniversary of protecting the Adirondack Park. We have been fighting to stop acid

rain for 25 of those 30 years.

New York’s 6-million acre Adirondack Park is the largest park of any kind in the

lower 48 states. It is nearly three times the size of Yellowstone National Park and

roughly the size of Vermont. It contains the largest assemblage of old growth forest

east of the Mississippi River. The Park contains over 1,500 miles of rivers and

30,000 miles of streams and brooks. It also has 46 mountain peaks of over 4,000

feet tall. The nearly three million acres of public land has been protected by our

state constitution as ‘‘Forever Wild’’ for over 100 years, with one million acres being

classified as Wilderness.

The Adirondack Park has suffered some of the greatest damage from acid rain

due to its geology and geography. Prevailing winds bring power plant emissions

from outside New York into the Adirondacks where it is deposited in many forms

including acid rain, acid snow and acid fog. The acid deposition then leaches nutrients out of the soil affecting the growth of vegetation. On many mountaintops, 80

percent of the lush red spruce and balsam fir forests have turned brown and died

as the soil has been poisoned. Sugar maples and the maple syrup industry are also

profoundly affected by acid rain.

Acid rain has reduced the pH of some of our lakes to the same level as vinegar.

Approximately one quarter of the Park’s 2,800 lakes and ponds are biologically dead,

meaning they can no longer sustain their native plant and animal life. Those lakes

and additional waterways are further impacted seasonally by ‘‘spring shock,’’ a phenomenon that occurs when the winter snowpack melts and sends a high level of nitrogen into the water.

Haze obscures the view for hikers who climb to the tops of the state’s highest

peaks. Whiteface Mountain, a place where the air should be clean, crisp, and

healthy, is out of compliance for national air quality standards. Without Federal action, our Park will not recover and our ecosystems will continue to be unhealthy

and unproductive.

Acid rain affects all parts of the state, not just the Adirondack Park. A recent

study found that many locations where historic marble, limestone and sandstone

buildings are being eaten away by acid rain are in New York State. Albany, Buffalo,

New York City, Rochester, and Syracuse all made the list of the top 20 areas (‘‘The

Effect of Acid Rain/Budget Cuts on Helping Our Community Treasures.’’ DOC Communications, July 31, 2003). Our cities and our heritage can no longer withstand

the effects of this pollution.

In addition, grape growers from Long Island to the Finger Lakes note that their

harvests are diminished in vitality each year as the nutrients needed to grow vines

and fruit are depleted from the soil by polluted rain and snow. The Long Island Pine

Barren, the Catskill Park, the Taconic Mountain Ridge near Massachusetts and the
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Hudson Highlands are all suffering extensive environmental damage from decades

of acid rain.

The damage that sulfur and nitrogen pollution causes is far from a regional issue.

It is an issue of national, even international importance. Excess nitrogen in waters

and in soils—‘‘nitrogen saturation’’—can be found in the Northeast and in West Virginia’s Allegheny Mountains, Tennessee’s Great Smoky Mountains, Colorado’s Front

Range of the Rockies and even as far west as the San Bernardino and San Gabriel

Mountains of California. Studies conducted in the Shenendoah National Park show

that fish species richness, population density, condition, age distribution, size and

survival rate were all reduced in streams no longer able to neutralize acidity.

Estuaries along the entire east coast suffer from airborne inputs of nitrogen that

can make up nearly 40 percent of the total nitrogen loaded into their systems. In

estuary systems such as Long Island Sound, Narragansett Bay, Chesapeake Bay

and Tampa Bay in Florida, nitrogen-based pollution is overloading the water with

nutrients. This causes ‘‘eutrophication’’—an overabundance of algae. When algae

dies and decays, it depletes the water of precious oxygen needed by all aquatic animals. This condition is known as hypoxia. These blooms are associated with fin fish

kills, shellfish kills and human illness.

Acid rain is also falling on the District of Columbia. Acid rain is eating away at

the marble of the Capitol building and many of the great monuments on the mall.

The Lincoln memorial corrodes more every year. So it is with buildings and monuments throughout the Capitol. The monuments to the fallen on the great battle sites

of the Civil War, Gettysburg and Vicksburg, lose their inscriptions and carved features from the acid bath they endure each rainy day. The Statute of Liberty simply

slowly melts away, day by day. This is why the fight to stop acid rain has been

joined by many of the nation’s prestigious organizations dedicated to historic preservation.

Although the 1990 Clean Air Act Amendments have begun to lessen the impacts

of acid rain, the problem has clearly not been solved. Some early data has shown

a slight improvement in the acid neutralizing capacity (ANC) of a handful of our

lakes. This evidence, along with a litany of reports from government agencies and

non-governmental organizations indicates that the 1990 amendments targeted the

right pollutants to combat acid rain, but did not reduce the pollution levels sufficiently.

Today, we are here to make three requests as you consider new legislation in

order to help solve the acid rain problem. First, action to stop acid rain must be

taken this year. Second, it must be as good as or better than the Environmental

Protection Agency’s Clean Air Interstate Rule (CAIR). Finally, no individual state’s

current enforcement mechanisms should be eroded.

The Adirondack Council has been actively calling for further reductions in the

emissions that cause acid rain for almost a decade since the EPA first reported in

1995 that further reductions beyond the 1990 Clean Air Act Amendments would be

necessary. In 1997, we encouraged then-New York Senators Moynihan and D’Amato

to introduce legislation that would stop the damage and start the recovery process.

That roughly translated into an additional 50 percent reduction in sulfur emissions

below the phase 2 levels and a 70 percent cut in nitrogen from 1990 levels, including

a year-round cap-and-trade program. This bill was later sponsored by New York’s

entire Congressional delegation and reintroduced several times through 2002 when

it was sponsored by our current New York Senators Clinton and Schumer.

The Council has testified before this committee twice before on the problem of

acid rain since the Moynihan bill was first introduced. It has now been 10 years

since EPA’s 1995 report detailing the need for additional cuts to help places like

the Adirondacks recover. Something must be done this year to stop acid rain. Studies have shown that approximately 25,000 U.S. citizens die annually because of

power plant pollution. In essence, the lack of action by Congress since the first time

that the Adirondack Council testified here over 5 years ago has resulted in roughly

133,000 lives being needlessly cut short. We need progress this year—you cannot

come home empty-handed yet again. Action is long overdue. While I am honored to

testify before you and this committee, I would be even more honored if the problem

was solved this year and I did not have to return again to testify.

In the late 1990s the Moynihan proposal was considered neither politically nor

economically feasible. However, we now know that this level of reductions is possible

on both counts. For several years now, the Moynihan bill, once considered a radical

notion, has become the ‘‘floor’’ that other proposals would have to exceed. Numerous

members of this committee have introduced or soon will introduce legislation, all of

which go beyond what Senator Moynihan first suggested.

Today, we have a new ‘‘floor’’ in the form of the Clean Air Interstate Rule (CAIR).

CAIR represents a reduction of 65 percent of nitrogen emissions and 70 percent of
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sulfur emissions respectively from current levels in 29 eastern states plus the District of Columbia. This rule, proposed by the Environmental Protection Agency in

December 2003, is scheduled to be finalized in March. Any legislation that is passed

must buildupon the floor established by CAIR. In order to achieve this, Clear Skies

would have to be amended to move the compliance dates up from 2018 to 2015. We

believe this is possible as it would follow the model of the 10-year phase-in of the

Clean Air Act Amendments of 1990. Even lower emissions caps and compliance

dates would serve to speed up the recovery process of our lakes, streams and mountains. Lowering the cap on sulfur dioxide further would also produce a significant

co-benefit in terms of reducing mercury emissions.

We would like to see deeper cuts for mercury, and do not agree with the proposed

trading scheme due to the demonstrated neurotoxicity of mercury in both human

and wildlife populations.

This bill does not include reductions in carbon dioxide one of the major ingredients of global climate change. While we are very concerned about the serious environmental impacts that are already underway, we do not think that progress on

ending acid rain should be delayed while carbon is further debated. We support

Governor Pataki’s twelve-state Regional Greenhouse Gas Initiative (RGGI), and the

McCain-Lieberman bill, which we are hopeful the Senate will act on soon.

While we support CAIR, we would like to see legislation to ensure more legal certainty in the cap levels and timelines. We have witnessed numerous regulations tied

up in the court system for many years. Another benefit of legislation is that reports

to Congress on the progress of the program, along with funding necessary to expand

the chemical and ecological monitoring of sensitive ecosystems like the Adirondacks,

can be mandated. We would encourage you to consider strengthening these provisions of the legislation as it is marked up in the near future.

We would also urge the committee members to carefully consider whether or not

it is necessary to make other changes to the existing Clean Air Act. While we understand the need for regulatory certainty for industry compliance, changing programs

such as regional haze, Section 126 petitions, and rigorous monitoring from continuous emissions monitoring systems (CEMS) should be closely examined. Including

new requirements such as early reduction credits (ERC’s), opt-ins and safety valve

provisions could also have a negative impact on the effectiveness of the successful

acid rain program started by EPA and the Clean Air Markets Division fifteen years

ago.

Enforcement tools currently used by the states to clean up their air should not

be diminished in any way. A prime example of the usefulness of these enforcement

tools came last month from New York’s Governor George Pataki and Attorney General Eliot Spitzer, two men who have done a great deal to protect the Adirondack

Park from acid rain. They announced an agreement with the current and former

owners of some of New York’s largest and dirtiest coal-fired power plants to settle

potential violations of the Clean Air Act’s New Source Review (NSR) requirements.

These settlements will result in the largest reductions in air pollution ever attained

through a settlement in New York.

Last week, our Governor and Governor Schwarzenegger of California sent you a

letter stating, in part, ‘‘These states, like ours, will need all the tools available

under the Act to craft effective strategies to meet the standards,’’ [referring to 8-

hour ozone and particulate matter (PM2.5) standards.] We wholeheartedly agree

with their position, which was also echoed by Massachusetts Governor Mitt Romney.

The Adirondack Council first testified before this committee on the need to address acid rain in October 1999. On that same day, Governor Pataki announced that

he would enact the toughest acid rain regulations in the country. After several court

challenges, those rules went into effect on October first of 2004 with year-round nitrogen controls, and a month ago, further sulfur reductions. New York’s regulations

mirror the Moynihan legislation. New York has now taken exhaustive measures to

clean up its own plants. We are now asking the rest of the country to do the same.

Thank you again for allowing me to testify here today.

RESPONSE OF BRIAN L. HOUSEAL TO ADDITIONAL QUESTION FROM SENATOR INHOFE

Question. Do you believe that if the CAIR rule is delayed from litigation that it

will achieve SO2 reductions equal to Clear Skies?

Response. If CAIR is the subject of litigation, we hope that it will be implemented

without a stay, in order to start the reductions as scheduled while the specific issues

related to the litigation are resolved. Previous court decisions related to EPA Clean

Air Act regulations have proceeded in this manner.
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As the CAIR rule is only a regional program and Clear Skies is national, the approximately 70 percent reductions in both for sulfur and nitrogen are similar in nature. The overall emissions reductions in Clear Skies may be greater over time, insofar as it covers the entire country.

In order to ensure the eastern states see the benefits of the proposed reductions,

east and west regions could be established for sulfur similar to the nitrogen program in Clear Skies.

However, early reduction credits and opt-ins may have the unintended consequence of eroding the goal of 70 percent reductions in the Clear Skies bill.

RESPONSE OF BRIAN L. HOUSEAL TO ADDITIONAL QUESTION

FROM SENATOR JEFFORDS

Question. Do you support S. 131 as introduced?

Response. We support the intent of the legislation to reduce the pollution that

causes acid rain and we also support the mechanism by which this is achieved, the

successful cap-and-trade program. As S. 131 will be the vehicle for clean air legislation in the Senate this year, we respectfully request that the bill be improved before

it is passed by the committee. These improvements include: making the reductions

of sulfur dioxide and nitrogen oxides deeper and sooner; increasing the ratio of

avoided emissions necessary for power plants to receive an allowance through the

early reduction credit (ERC) program; and, determining if it is necessary to make

any changes to new source review (NSR), Section 126 petitions, and continuous

emissions monitoring systems (CEMS) requirements. We also urge you to also make

deeper cuts for mercury but do not support the trading of mercury as it is a

neurotoxin and has localized effects on both human and wildlife populations.

RESPONSES OF BRIAN L. HOUSEAL TO ADDITIONAL QUESTIONS

FROM SENATOR LAUTENBERG

Question 1. The Acid Rain Program’s cap and trade approach has been very successful. Would this bill’s cap and trade system be as protective of public health as

that program?

Response. This bill uses the successful Acid Rain Program cap and trade system

administered by the EPA’s Clean Air Markets Division over the past 15 years for

sulfur dioxide and replicates it for nitrogen oxides. Public health will be improved

by mandating deep cuts in these emissions as soon as possible. The faster and deeper the cuts, the better the results will be for public health and the environment.

Question 2. As someone who came out of the corporate world, I can appreciate the

importance of making sound investments in new technologies. Is the cap and trade

system in Clear Skies as cost-effective at reducing pollution as other approaches?

Response. Yes, the 1990 Clean Air Act amendments provided clear results. EPA’s

acid rain program has nearly 100 percent compliance and costs for industry to comply were a fraction of the original estimates. In addition, the program is run by only

a handful of EPA staff.

The reductions mandated by the amendments were easily obtained by the industry ahead of schedule. In fact, that is why new legislation is necessary. Industry

over-complied with the requirements and now have a ‘‘bank’’ of excess allowances

to use. Further cuts are necessary to provide the health and ecological benefits anticipated in 1990.

New source review (NSR) can be an effective tool in terms of reducing power plant

emission at individual plants. However, this is a long process and produces uncertain outcomes. Cap-and-trade is more certain and provides reductions for an entire

airshed, which can help the Adirondacks recover from acid rain. Both cap-and-trade

and NSR should be available as resources to clean up the air.

Question 3. Clear Skies proposes giving many industries a free pass when it

comes to reducing hazardous air pollutants—some of them known to cause cancer.

What impacts do you foresee from this dramatic retreat from Clean Air Act protections?

Response. The Adirondack Council claims no expertise in this area. It is our opinion that current Clean Air Act standards should not be weakened and the trading

of mercury should not be allowed.

Question 4. My entire home State of New Jersey was recently declared ‘‘out of attainment’’ for nitrogen oxides, which help form ozone and damage lungs—especially

of kids. Do you believe this bill will improve New Jersey’s air quality?
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Response. Insofar as this bill includes year-round controls on nitrogen oxides, New

Jersey’s air quality should improve. A 70 percent reduction in both sulfur and nitrogen should help New Jersey meet its attainment goals. We do not believe that any

one proposal is a ‘‘silver bullet,’’ but think that cap-and-trade programs will limit

interstate pollution, allowing individual states to take further actions on their own

to meet the necessary requirements.
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1 NRDC: About Us,http://www.nrdc.org/about/default.asp. 2 About EPA, http://www.epa.gov/epahome/aboutepa.htm#mission.

RESPONSES BY JOHN WALKE TO ADDITIONAL QUESTIONS FROM SENATOR INHOFE

Question 1. Please disclose a listing of the number and caption of all cases filed

by the Natural Resources Defense Council as plaintiff or as one of other plaintiffs

against the U.S. Environmental Protection Agency seeking any action or relief

under any section of the Air Pollution Prevention and Control Act, (‘‘Clean Air Act,’’

42 U.S.C. s. 7401 et seq.) since January 1, 1985.

Question 2. Please disclose a listing of the number and caption of all cases against

the U.S. Environmental Protection Agency wherein the Natural Resources Defense

Council is a named party since January 1, 1985.

Response. The Natural Resources Defense Council’s (‘‘NRDC’’) mission is ‘‘to safeguard the Earth: its people, its plants and animals and the natural systems on

which all life depends,’’ ‘‘to restore the integrity of the elements that sustain life,’’

and ‘‘to defend endangered natural places.’’ 1 Toward those ends, we pursue litigation challenging Environmental Protection Agency (‘‘EPA’’) rulemakings and other

agency activities when the agency violates environmental or public health statutes

or otherwise fails to perform its mission of ‘‘protect[ing] human health and the environment.’’ 2

The first table below identifies cases since 1985 in which NRDC has challenged

an EPA rulemaking or other action. The table does not include attorneys fees cases

(of which there have only been a few) nor cases in which NRDC intervened in support of the agency. (For our methodology in compiling this table, please see footnote

3.)

Following this table of NRDC cases is a comparable table of cases since 1985 in

which industry has challenged an EPA action. In virtually every such case, industry

has sought not to assist EPA in performing its mission of protecting public health

and the environment but instead to thwart and delay the agency’s efforts. Due to

time constraints, the list is significantly underinclusive, not least because it excludes (1) district court cases that were never appealed, and (2) the many cases—

including a significant number of NRDC’s case—in which an industry party did not

file the original complaint but did subsequently intervene against the agency. Despite that shortcoming, the list’s relative length (339 industry-filed cases, versus 92

cases in which NRDC has opposed the agency) is quite telling. (For our methodology

in compiling the table of industry cases, please see footnote 4.)
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Question 3. Please disclose a listing of the number of consent agreements involving the U.S. Environmental Protection Agency to which the Natural Resources Defense Council has been a party since January 1, 1985 including a listing of all parties involved and the terms of each agreement.

Response. Consistent with NRDC’s mission, described above, the organization occasionally enters into consent decrees with EPA. These judicially enforceable agreements limit litigation delays and assist EPA in protecting public health and the environment in a timely and mutually acceptable manner.

NRDC does not have a data base identifying all of the consent decrees to which

the organization has been a party. The Department of Justice does, however, publish notices of EPA consent decrees in the Federal Register. In addition, when EPA

initiates a rulemaking pursuant to a consent decree, it identifies the decree in the

rulemaking notice published in the Federal Register. Together, those two categories

of notices should identify the terms of, and parties to, each consent decree between

EPA and NRDC since the beginning of 1985. For the convenience of the Committee,

we have searched Westlaw’s Federal Register data base for all post-January 1, 1985

notices containing the terms ‘‘Natural Resources Defense Council,’’ ‘‘Environmental

Protection Agency,’’ and ‘‘consent decree.’’ Due to time constraints, we have not further winnowed this list. It is therefore significantly overinclusive, as it includes all

decrees that mention EPA and NRDC, whether or not the agency and the organization were parties to the decree.

November 24, 2004 69 FR 68444–01 ....... February 26, 1997 62 FR 8726–01

September 8, 2004 69 FR 54476–01 ........ February 21, 1997 62 FR 8012–01

September 2, 2004 69 FR 53705–01 ........ January 8, 1997 62 FR 1150–01

August 23, 2004 69 FR 51892–01 ............ December 16, 1996 61 FR 66086–01

July 9, 2004 69 FR 41576–01 ................... December 9, 1996 61 FR 64876–03

June 2, 2004 69 FR 31104–01 .................. November 6, 1996 61 FR 57518–01

May 14, 2004 69 FR 26942–01 ................ October 7, 1996 61 FR 52582–01

April 26, 2004 69 FR 22472–01 ............... August 29, 1996 61 FR 45778–01

December 31, 2003 68 FR 75515–01 ....... August 28, 1996 61 FR 44619–01

November 7, 2003 68 FR 63085–02 ......... August 28, 1996 61 FR 44396–01

August 6, 2003 68 FR 46684–01 .............. August 12, 1996 61 FR 41786–01

May 13, 2003 68 FR 25686–01 ................ June 20, 1996 61 FR 31736–01

April 25, 2003 68 FR 21002–01 ............... March 1, 1996 61 FR 8174–01

February 12, 2003 68 FR 7176–01 .......... February 7, 1996 61 FR 4600–01

December 27, 2002 67 FR 79020–02 ....... December 19, 1995 60 FR 65438–01

December 9, 2002 EPA 67 FR 74232–01 December 19, 1995 60 FR 65387–01

November 29, 2002 67 FR 71165–01 ....... November 28, 1995 60 FR 59658–01

November 20, 2002 67 FR 70070–03 ....... August 3, 1995 60 FR 39804–01

October 17, 2002 67 FR 64216–01 ........... June 29, 1995 60 FR 33926–01

September 12, 2002 67 FR 57872–01 ...... May 30, 1995 60 FR 28210–01

August 27, 2002 67 FR 55012–01 ............ May 2, 1995 60 FR 21592–01

June 24, 2002 67 FR 42644–01 ................ February 27, 1995 60 FR 10654–01

June 18, 2002 67 FR 41417–01 ................ February 17, 1995 60 FR 9428–01

March 26, 2002 67 FR 13826–01 ............. February 9, 1995 60 FR 7824–01

February 25, 2002 67 FR 8582–01 .......... January 27, 1995 60 FR 5464–01

February 4, 2002 67 FR 5170–01 ............ January 27, 1995 60 FR 5389–01

February 4, 2002 67 FR 5152–01 ............ January 24, 1995 60 FR 4712–01

January 23, 2002 67 FR 3370–01 ............ September 22, 1994 59 FR 48664–01

December 18, 2001 66 FR 65256–01 ....... September 20, 1994 59 FR 48228–01

December 11, 2001 66 FR 63921–01 ....... September 20, 1994 59 FR 48198–01

December 3, 2001 66 FR 61268–01 ......... September 19, 1994 59 FR 47982–01

November 14, 2001 66 FR 57160–01 ....... August 26, 1994 59 FR 44234–01

October 26, 2001 66 FR 54143–01 ........... April 22, 1994 59 FR 19402–01

September 7, 2001 66 FR 46754–01 ........ April 14, 1994 59 FR 17850–01

July 20, 2001 66 FR 37955–01 ................. December 17, 1993 58 FR 66078–01

July 12, 2001 66 FR 36542–01 ................. October 29, 1993 58 FR 58168–01

July 11, 2001 66 FR 36370–01 ................. October 27, 1993 58 FR 57898–01

June 8, 2001 66 FR 30902–01 .................. September 28, 1993 58 FR 50638–01

May 15, 2001 66 FR 26914–01 ................ June 21, 1993 58 FR 33813–03

February 26, 2001 66 FR 11638–01 ........ April 16, 1993 58 FR 20802–01

January 22, 2001 66 FR 6850–01 ............ April 7, 1993 58 FR 18011–01
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January 12, 2001 66 FR 2960–01 ............ March 4, 1993 58 FR 12454–01

January 3, 2001 66 FR 666–01 ................ December 4, 1992 57 FR 57534–01

January 3, 2001 66 FR 634–01 ................ September 24, 1992 57 FR 44210–03

January 3, 2001 66 FR 586–01 ................ September 8, 1992 57 FR 41000–01

January 3, 2001 66 FR 424–01 ................ August 18, 1992 57 FR 37194–01

December 27, 2000 65 FR 81964–01 ....... July 21, 1992 57 FR 32250–01

December 22, 2000 65 FR 81242–01 ....... May 7, 1992 57 FR 19748–01

November 30, 2000 65 FR 73453–01 ....... April 10, 1992 57 FR 12560–01

September 14, 2000 65 FR 55522–02 ...... March 19, 1991 56 FR 11513–01

August 31, 2000 65 FR 53008–02 ............ February 11, 1991 56 FR 5488–01

July 13, 2000 65 FR 43586–01 ................. January 30, 1991 56 FR 3526–01

July 12, 2000 65 FR 43002–01 ................. August 8, 1990 55 FR 32268–01

June 16, 2000 65 FR 37783–01 ................ March 27, 1990 55 FR 11183–01

May 1, 2000 65 FR 25325–01 .................. March 8, 1990 55 FR 8666–01

April 11, 2000 65 FR 19440–01 ............... January 2, 1990 55 FR 80–01

February 24, 2000 65 FR 9322–01 .......... December 20, 1989 54 FR 52251–01

January 27, 2000 65 FR 4360–01 ............ December 20, 1989 54 FR 52209–01

January 19, 2000 65 FR 3008–01 ............ June 2, 1989 54 FR 23868–01

December 21, 1999 64 FR 71453–01 ....... March 29, 1989 54 FR 12926–01

November 22, 1999 64 FR 64023–01 ....... October 17, 1988 53 FR 40562–01

August 23, 1999 64 FR 46012–01 ............ May 24, 1988 53 FR 18764–01

August 18, 1999 64 FR 45072–01 ............ April 26, 1988 53 FR 14926–01

June 7, 1999 64 FR 30276–02 .................. November 24, 1987 52 FR 45044–01

May 25, 1999 64 FR 28249–01 ................ November 5, 1987 52 FR 42522–01

March 30, 1999 64 FR 15158–01 ............. June 22, 1987 52 FR 23477–02

February 3, 1999 64 FR 5488–01 ............ December 4, 1986 51 FR 43814–01

January 13, 1999 64 FR 2280–01 ............ October 9, 1986 51 FR 36368–01

November 9, 1998 63 FR 61340–01 ......... September 30, 1986 51 FR 34904–01

October 21, 1998 63 FR 56292–01 ........... August 22, 1986 51 FR 30166–01

September 21, 1998 63 FR 50388–01 ...... August 4, 1986 51 FR 27956–01

September 4, 1998 63 FR 47285–01 ........ June 12, 1986 51 FR 21454–01

April 15, 1998 63 FR 18504–01 ............... June 4, 1986 51 FR 20426–01

April 3, 1998 63 FR 16500–01 ................. January 17, 1986 51 FR 2492–01

February 6, 1998 63 FR 6426–01 ............ November 14, 1985 50 FR 47142–01

February 6, 1998 63 FR 6392–01 ............ October 30, 1985 50 FR 45212–01

January 9, 1998 63 FR 1536–01 .............. October 4, 1985 50 FR 40672–01

January 7, 1998 63 FR 846–01 ................ September 20, 1985 50 FR 38276–01

December 17, 1997 62 FR 66182–01 ....... August 23, 1985 50 FR 34242–01

October 29, 1997 62 FR 58141–02 ........... May 9, 1985 50 FR 19664–01

October 20, 1997 62 FR 54453–02 ........... February 7, 1985 50 FR 5237–01

RESPONSES BY JOHN WALKE TO ADDITIONAL QUESTIONS FROM SENATOR JEFFORDS

Question 1. What affect will the allocation system in S. 131 have on the development and enhancement of new and existing utility investments in cleaner and more

efficient electricity generation?

Response. The allocation system in S. 131 will have a negative impact on the development and enhancement of new and existing utility investments in cleaner and

more efficient electricity generation, primarily due to the structuring of the allowance baselines provisions and the allocation of allowances for new sources. The legislation represents not only a transfer of wealth to the power sector and away from

the public, in terms of higher health costs and other social costs. But even within

the power sector, the legislation imposes relatively more of the burden of cleaner

air policies on the most efficient, the newest and the lowest emitting sources.

Along similar lines, the legislation misses an excellent opportunity to encourage

more renewable sources of energy, since it does not appear to provide any allocation

for renewable power.

Given time constraints in responding to the Committee’s questions, I will be

pleased to provide you with additional information in response to this question if

you wish.

Question 2. What are the problems that S. 131 creates with respect to the integrity of the existing cap and trade system?
159

Response. As detailed in my written testimony, S. 131 departs in a negative fashion from the basic role played by the acid rain cap-and-trade program in the 1990

Amendments. Moreover, the bill does damage even to that role by eliminating or

undermining the integrity and key accountability measures of the acid rain trading

program, while introducing loopholes and destabilizing elements that Title IV does

not contain. Indeed, S. 131 strips away safeguards and accountability measures that

are integral to the effectiveness, enforceability and reliability of a national cap-andtrade program. The overall result is that the proponents of the bill cannot claim the

successes of the acid rain program as a justification for their bill. To the contrary,

the history and success of the acid rain trading program necessitate opposition to

S. 131.

First, S. 131 repeals or weakens an array of statutory safeguards protecting local

and downwind communities from harmful smog and soot pollution (such as new

source review (‘‘NSR’’), the section 126 interstate air pollution program, new source

performance standards (NSPS), and best available retrofit technology (BART), as

well as toxic air pollution (Maximum Achievable Control Technology (MACT) standards). When Congress adopted the Clean Air Act amendments in 1990, it either

added, retained, or strengthened each of these safeguards. The safeguards have

helped to protect communities against local pollution increases that have occurred

even as the acid rain program’s national SO2 cap has been met and its NOx provisions have been implemented.

Second, S. 131 abandons critical features of the acid rain trading program that

have been integral to the integrity, accountability, and therefore success of that program. Inadequate monitoring requirements in S. 131 render its trading programs

for SO2, NOx and mercury unverifiable and untrustworthy.

The opt-in and ‘‘early reduction’’ provisions in the bill damage the integrity of the

trading program and effectively authorize emissions above the caps. In particular,

voluntary participation and self-selection associated with the opt-in provisions will

ensure gaming and worsen emissions performance. Moreover, inflated pollution

baselines for opt-in units produce bogus allowances that do not reflect actual emissions reductions—again, effectively raising the caps above the levels claimed by the

Administration.

In addition, the bill allows unlimited ‘‘shutdown’’ credits, creating bogus allowances that do not reflect actual emissions reductions. This is because the bill’s limitation on shutdown credits is substantially weaker than the corresponding provision

in the current acid rain program. These shutdown credit provisions, when combined

with the inflated baseline provisions, allow for older sources to run hard for 3 years,

opt in, then later shut down and create an enormous stream of added allowable

emissions that can be transferred to any other unit in the cap programs—again, effectively raising the caps above touted levels.

Finally, the bill allows mercury ‘‘early reduction’’ credits to be generated by optin units without limit, and even above the cap levels—effectively increasing the

mercury caps. As detailed in my written testimony, Section 475 of the legislation

allows the generation of early reduction credits for mercury emissions:

• Above cap levels, effectively raising the phase I and phase II mercury caps;

• Without any limitation on total mercury early reduction credits, rendering indeterminate the actual reductions achieved from the power sector or under the bill;

• Already required by state laws or regulations, obviating the benefits of those

state mercury reductions, allowing windfall sales of mercury allowances from reductions already required by state law, and permitting other affected units to maintain

high mercury levels or even increase those levels from allowance purchases; and

• From incidental mercury reductions occurring anyway as a result of SO2 or NOx

reductions, allowing discredited ‘‘anyway tons’’ to undermine the integrity of allowances and, again, raise the mercury cap levels.

The effect of all this is that S. 131 re-introduces a host of loopholes, accounting

gimmicks, free-rider problems and accountability defects that rightfully caused trading approaches to be held in low regard until the acid rain program corrected these

deficiencies in the 1990 Clean Air Act amendments. This bill strips the acid rain

trading program model of the very integrity that has justified public confidence in

the program, and ensures that S. 131 would not be as protective of public health

as the acid rain program.

Question 3. What, if any, comments would you care to make in response to the

points made by the Chairman of the Council on Environmental Quality in his testimony?

Response. As a general matter, neither the Council on Environmental Quality,

Environmental Protection Agency, nor any other administration entity has provided

analysis or data to the Congress, or the American people, to support the claim that
160

S. 131 would protect Americans in a stronger and timelier fashion than enforcement

of the current Clean Air Act. Nor have the sponsors of the legislation or other Members of Congress provided that information. Finally, none of the witnesses appearing

before the Committee or Subcommittee in favor of S. 131 has provided that support

either.

NRDC’s written testimony provides a detailed and comprehensive analysis of the

many flaws in S. 131, flaws that would make the bill less protective of public health

and America’s lands and waterway, by weakening and delaying the Clean Air Act’s

protections. The administration has declined thus far to provide a comparable public

analysis for the benefit of the American people, despite the EPA’s role as guardian

of the Clean Air Act and enforcer of its public health protections.

Regrettably, the frustrating reality is that the administration has not provided

analysis about the negative impacts of S. 131 on existing Clean Air Act safeguards;

the failure of the bill to deliver healthy air to tens of millions of Americans by current statutory deadlines, within the next 5 years; the multitude of new harmful exemptions and other weaknesses added even since the introduction of the already lax

Clear Skies bill (S. 485) in 2003; and the bill’s introduction of loopholes and infirmities that damage the integrity of the acid rain trading program model. Accordingly, there is little administration analysis to which one could respond.

With that caveat noted, I will address one central point made by Chairman

Connaughton during his oral testimony. It is not correct that S. 131 will reduce

emissions of sulfur oxides, nitrogen oxides and mercury by 70 percent in two phases.

As detailed in my written testimony, S. 131 contains a host of provisions that ensure that the three caps tied to 70 percent emissions reductions will not be met,

if industry simply acts in ways that the bill allows. This is primarily due to the optin provisions and early reduction provisions in the legislation. But it is also true

because of provisions such as the exemption from the mercury cap for affected units

emitting less than 50 pounds of mercury annually. As discussed in my written and

oral testimony, this exemption ensures that the bill would not reduce power plant

mercury pollution 70 percent from today’s levels of approximately 48 tons nationwide.

RESPONSES BY JOHN WALKE TO ADDITIONAL QUESTIONS FROM SENATOR LAUTENBERG

Question 1. The Acid Rain program’s cap and trade approach has been very successful. Would this bill’s cap and trade system be as protective of public health as

that program?

Response. No. As detailed in my written testimony, S. 131 departs in a negative

fashion from the basic role played by the acid rain cap-and-trade program in the

1990 Amendments. Moreover, the bill does damage even to that role by eliminating

or undermining the integrity and key accountability measures of the acid rain trading program, while introducing loopholes and destabilizing elements that Title IV

does not contain. Indeed, S. 131 strips away safeguards and accountability measures

that are integral to the effectiveness, enforceability and reliability of a national capand-trade program. The overall result is that the proponents of the bill cannot claim

the successes of the acid rain program as a justification for their bill. To the contrary, the history and success of the acid rain trading program necessitate opposition to S. 131.

First, S. 131 repeals or weakens an array of statutory safeguards protecting local

and downwind communities from harmful smog and soot pollution (such as new

source review (‘‘NSR’’), the section 126 interstate air pollution program, new source

performance standards (NSPS), and best available retrofit technology (BART), as

well as toxic air pollution (Maximum Achievable Control Technology (MACT) standards). When Congress adopted the Clean Air Act amendments in 1990, it either

added, retained, or strengthened each of these safeguards. The safeguards have

helped to protect communities against local pollution increases that have occurred

even as the acid rain program’s national SO2 cap has been met and its NOx provisions have been implemented.

Second, S. 131 abandons critical features of the acid rain trading program that

have been integral to the integrity, accountability, and therefore success of that program. Inadequate monitoring requirements in S. 131 render its trading programs

for SO2, NOx and mercury unverifiable and untrustworthy.

The opt-in and ‘‘early reduction’’ provisions in the bill damage the integrity of the

trading program and effectively authorize emissions above the caps. In particular,

voluntary participation and self-selection associated with the opt-in provisions will

ensure gaming and worsen emissions performance. Moreover, inflated pollution

baselines for opt-in units produce bogus allowances that do not reflect actual emis-
161

sions reductions—again, effectively raising the caps above the levels claimed by the

Administration.

In addition, the bill allows unlimited ‘‘shutdown’’ credits, creating bogus allowances that do not reflect actual emissions reductions. This is because the bill’s limitation on shutdown credits is substantially weaker than the corresponding provision

in the current acid rain program. These shutdown credit provisions, when combined

with the inflated baseline provisions, allow for older sources to run hard for 3 years,

opt in, then later shut down and create an enormous stream of added allowable

emissions that can be transferred to any other unit in the cap programs—again, effectively raising the caps above touted levels.

Finally, the bill allows mercury ‘‘early reduction’’ credits to be generated by optin units without limit, and even above the cap levels—effectively increasing the

mercury caps. As detailed in my written testimony, Section 475 of the legislation

allows the generation of early reduction credits for mercury emissions:

• Above cap levels, effectively raising the phase I and phase II mercury caps;

• Without any limitation on total mercury early reduction credits, rendering indeterminate the actual reductions achieved from the power sector or under the bill;

• Already required by state laws or regulations, obviating the benefits of those

state mercury reductions, allowing windfall sales of mercury allowances from reductions already required by state law, and permitting other affected units to maintain

high mercury levels or even increase those levels from allowance purchases; and

• From incidental mercury reductions occurring anyway as a result of SO2 or NOx

reductions, allowing discredited ‘‘anyway tons’’ to undermine the integrity of allowances and, again, raise the mercury cap levels.

The effect of all this is that S. 131 re-introduces a host of loopholes, accounting

gimmicks, free-rider problems and accountability defects that rightfully caused trading approaches to be held in low regard until the acid rain program corrected these

deficiencies in the 1990 Clean Air Act amendments. This bill strips the acid rain

trading program model of the very integrity that has justified public confidence in

the program, and ensures that S. 131 would not be as protective of public health

as the acid rain program.

Question 2. As someone who came out of the corporate world, I can appreciate the

importance of making sound investments in technologies. Is the cap and trade system in Clear Skies as cost-effective at reducing pollution as other approaches?

Response. No. The pollution cap levels and schedules in the Clear Skies legislation are not as cost-effective at reducing pollution as other approaches for two fundamental reasons—the weak control levels and extended control schedules. Moreover, the legislation is less cost-effective than other approaches, including the current Clean Air Act, using two different measures of cost-effectiveness.

First, the bill stops well short of requiring feasible pollution control measures for

power plants, allowing utilities to pollute well in excess of feasible control levels and

well in excess of levels necessary to achieve timely public health standards. This is

a consequence of the legislation’s weak caps, i.e., the pollution levels at which the

bill allows the electric utility sector to continue to pollute for the next two decades

and beyond. This is discussed at greater length below.

Second, in addition to refusing to impose feasible control measures on power

plants, the legislation adopts unjustifiably extended timelines for requiring pollution

cuts from power plants. This means that SO2 and NOx emissions reductions would

be too little, too late to provide meaningful assistance to states required to meet

public health standards for 8-hour ozone and PM2.5 by 2009 and 2010, respectively.

States would be forced to require more expensive, less feasible reductions from other

industries and sources, and some would find it very difficult to meet deadlines to

provide healthy air for their citizens.

In effect, by taking more cost-effective pollution reductions from power plants off

the table—by granting them more drawn out compliance deadlines and weaker pollution reduction obligations—the legislation saddles states, localities, other industries, the transportation sector and, ultimately, the public with less cost-effective options for meeting essential public health objectives.

This outcome concerns the first measure of cost-effectiveness that the legislation

fails—the measure of relative feasibility. By foregoing more cost-effective and feasible pollution reductions from power plants, the consequence is to impose less costeffective, less feasible control obligations about other sources of air pollution.

To better understand the question of cost-effective emissions reductions from

power plants, and to compare those to less cost-effective emissions reductions from

other industries and sources to which states and localities would be forced to resort,

I am attaching to these responses comments filed by a coalition of public health organizations on EPA’s Proposed Rule to Reduce Interstate Transport of Fine Particu-
162

1 Clean Air Task Force et al., ‘‘Comments on Proposed Rule to Reduce Interstate Transport

of Fine Particulate Matter and Ozone (Interstate Air Quality Rule), 69 Fed. Reg. 4566 (January

30, 2004),’’ (‘‘IAQR Comments’’), April 2, 2004. 2 NOx SIP Call ,63 Fed. Reg. at 57399–402.

3 63 Fed. Reg. at 57399.

4 63 Fed. Reg. at 57400.

5See IAQR Comments at 11–12.

6 In fact, EPA states: ‘‘These reductions are among the lowest cost EPA has ever observed in

NOx control actions . . .’’ 69 Fed. Reg. at 4614. Such reductions clearly come nowhere near to

representing the ‘‘greatest feasible emission reduction’’ as required by controlling Clean Air Act

precedent and policy. 7 NOx SIP Call, 63 Fed. Reg. at 57399: ‘‘[T]he required emission levels . . . were determined

based on the application of NOx controls that achieve the greatest feasible emissions reductions

while still falling within a cost-per-ton-reduced range that EPA considers to be highly cost-effective.’’ 8 Unless otherwise noted, all cost figures are in 1999$.

9Section V of the IAQR Comments contains a Clean Air Task Force analysis of the costs and

benefits of a similar alternate control scenario.

late Matter and Ozone (Interstate Air Quality Rule), 69 Fed. Reg. 4566 (January

30, 2004).1

As explained in those comments, in its 1998 NOx SIP Call rulemaking, EPA determined an appropriate level for reductions of regional NOx emissions by examining the cost-effectiveness of feasible control measures.2 EPA determined that

‘‘highly cost-effective’’ controls were those with a cost-effectiveness (measured in

terms of average cost per ton of pollutant removed) equivalent to or slightly greater

than that of controls that had already been implemented or planned, while achieving the greatest feasible emissions reductions.

Specifically, EPA determined in the NOx SIP Call that ‘‘highly cost-effective’’ controls were those that ‘‘achieve the greatest feasible emissions reduction but still cost

no more than $2,000 per ton of ozone season NOx emissions removed (in 1990 dollars), on average.’’ 3 EPA determined the $2,000/ton average cost figure based on

‘‘NOx emissions controls that are available and of comparable cost to other recently

undertaken or planned NOx measures.’’4

The proposed Interstate Air Quality Rule’s (now called Clean Air Interstate Rule)

establishes eastern regional caps for SO2 and NOx that approximate Clear Skies’

eastern regional caps for these pollutants. And the proposed CAIR caps result in

SO2 control levels costing between $700 and $800 per ton on average, and NOx con- trol levels costing between &700 and $800 per ton on average.5 Accordingly, there

is reason to believe that the average control costs by utilities for SO2 and NOx reductions under Clear Skies would be comparable.

But control levels for NOx and SO2 with average costs in the range of $700–$800

clearly do not achieve the ‘‘greatest feasible emissions reductions.’’ These cost figures are substantially less than what EPA determined to be highly cost effective 7

years ago; substantially less than the average cost effectiveness of other NOx control

measures examined by the agency 7 years ago (63 Fed. Reg. at 57400, Table 1); substantially less than the average cost of other control measures identified by EPA in

its CAIR proposal (69 Fed. Reg. at 4613–4615); and even more substantially less

than numerous other measures that public health groups identified and that states

have either adopted or are proposing to adopt.6

If the Clear Skies legislation were based upon the ‘‘highly cost-effective’’ criteria

in EPA’s NOx SIP Call rulemaking—an approach ratified by the United States

Court of Appeals for the D.C. Circuit—that approach would lead to a determination

that ‘‘highly cost-effective’’ controls are those that achieve the ‘‘greatest feasible

emission reductions’’ 7 but cost on average up to $2,000 per ton of SO2 removed and

up to $2,500 per ton of NOx removed.8 This would yield regional annual control caps

for power plants of 1.84 million tons for SO2 and 1.04 million tons for NOx, well

within these limits for highly cost-effective controls. Based on the relative percentage of national 2002 power plant NOx and SO2 emissions that were within the

IAQR, the recommended regional caps are equivalent to a 2.0 million ton national

SO2 cap, and a 1.25 million ton national NOx cap—well below the lax SO2 and NOx

pollution caps reflected in S. 131.9

In effect, the Clear Skies bill short changes emissions reductions from power

plants that should be considered the greatest feasible emissions reductions, based

upon s refusal to require greater but eminently feasible SO2 and NOx reductions

to better protect public health.

The other side of the feasibility coin in the zero sum calculation of air pollution

controls is the question of the cost-effectiveness of other state and local control

measures—beyond power plant controls. The failure of the Clear Skies legislation

to require the greatest feasible emissions reductions that are highly cost effective
163

10Texas Natural Resource Conservation Commission. Texas Emission Reduction Plan

(TERP)—Incentives Grants for Reducing Emissions. Projects Selected for Funding to Date: http:/

/www.tnrcc.state.tx.us/oprd/sips/grants.html. 11Metropolitan Washington Council of Governments. http://www.mwcog.org/uploads/committee-documents/z1ZZXg20040217144350.pdf. 12 69 Fed. Reg. at 4596–99; EPA’s Technical Support Document for the IAQR Air Quality Modeling Analyses (January 2004) (‘‘AQMTSD’’) at 46–56, App. I–L. 13 Id. 14 In EPA’s study of local measures in the IAQR, it listed several local SO2 reduction measures, but did not provide costs for any of them.

would force state and local jurisdictions to resort to control measures with average

costs far in excess of the $700–800 average cost per ton of SO2 and NOx reductions.

The following representative sample of control measure costs demonstrates the degree to which S. 131 would saddle state and local air pollution control agencies with

far greater cost impositions on local businesses, while still failing to ensure that attainment of public health standards would be achieved as expeditiously as practicable:

TEXAS EMISSION REDUCTION PLAN (TERP)—INCENTIVES GRANTS

FOR REDUCING EMISSIONS10

•The Texas Council of Environmental Quality’s Emissions Reduction Inventive

Grants Program provides grants to eligible projects in nonattainment areas and affected counties. The grants offset the incremental costs associated with reducing

emissions of NOx from high-emitting internal combustion sources. • Cost-effectiveness of a project, other than a demonstration project, may cost up to $13,000 per ton of NOx emissions reduced in the eligible counties for which the

project is propose. Infrastructure activities are excluded from the $13,000 per ton

cost-effectiveness limit.

Projected Project Cost Per Ton NOx Reduction

Grants Projects FY 2002–2003 .................................................................... Majority of projects $6,000 to $12,118.

Eligible Application Recommended for Funding FY 2004—1st Round ....... Majority of projects $11,000 to $12,998.

WASHINGTON DC METRO AREA—MWCOG11

ANALYSIS OF POTENTIAL REASONABLY AVAILABLE CONTROL MEASURES (‘‘RACM’’): AREA, NON-ROAD, AND MOBILE SOURCES

• The cost to an affected area of any alternative emissions reduction program to

offset internal combustion stationary sources significantly exceeds the cost to the

stationary source of the equivalent emissions reduction. The potential emissions reduction of RACM projects may not exceed that of high-emitting stationary sources.

• Projects Determined to be ‘‘Economically Feasible’’ or ‘‘Possible’’ by MWCOG:

Source Category Measure Cost ($/ton NOx)

Area Sources:

L1 ............................................... Control Locomotive Idling ...................................................................... $1,250

G6 ............................................... Preference for low-emissions lawn & garden equipment ..................... 7,238

S4 ............................................... Reduce idling by airport GSE ................................................................ 3,155

Mobile Sources:

B6 ............................................... Bicycle Racks in DC .............................................................................. 9,017

E3 ............................................... Telecommuting Centers ......................................................................... 7,279

E10 ............................................. Government Actions (ozone action day similar to snow day) ............... 5,030

F3 ............................................... Permit Right Turn on Red ..................................................................... 1,245

O4 ............................................... Employer Outreach (Private Sector) ....................................................... 3,542

O6 ............................................... Mass Marketing Campaign .................................................................... 2,393

T1 ............................................... Transit Prioritization .............................................................................. 8,480

Finally, EPA has reviewed potential applications of local controls of PM precursor

emissions to determine the extent to which such controls could solve the ozone and

PM2.5 nonattainment problems.12 As part of that analysis, EPA listed a variety of

control measures, and in some cases, their costs, that it believed would be appropriate to model for their air quality impact.13 In the 290 county study, EPA listed

a variety of local NOx control measures with costs ranging from $150/ton to $10,000/

ton NOx removed.14 The emission-weighted average cost per ton of the measures for

which costs are listed is about $2,545/ton, consistent with the position that regional
164

15 U.S. EPA, ‘‘Comprehensive Approach to Clean Power: Straw Proposal and Supporting Analysis for Interagency Discussion’’ (Aug. 3, 2001), available at http://www.catf.us/publications/

other/EPAStrawProposal.pdf. 16 Id. 17S. 131, § 407(j)(1)(A). 18 Id. 19See http://www.epa.gov/ttn/atw/rice/ricefactsheetfnl.pdf; /boiler/bolersfactsheetfnl.pdf;

/plypart/plywoodfactfinal.pdf; turbine/turbinefs.pdf.

NOx controls with average costs below $2,500 per ton be considered highly cost effective.

A second measure of cost-effectiveness that the legislation also fails is one concerning net social benefits. As explained at pages 13–14 of my February 2, 2005

written testimony, without conceding the fundamental concern with expressing

human deaths and adverse health effects in monetary terms, as of 2020, the public

health costs of the Administration’s bill exceed those of EPA’s original proposal by

$61 billion per year.15 Moreover, the EPA proposal’s public health savings come at

the relatively small annual price of $3.5 billion in implementation expenses.16 In

other words, the Administration is promoting a bill that—as of 2020—costs the public $15 for every $1 saved by industry. Plainly, much more protective pollution caps

would still provide net social benefits and would be more cost-effective for society

than the lax and delayed pollution reduction levels in S. 131.

Question 3. Clear Skies proposes giving many industries a free pass when it

comes to reducing hazardous air pollutants—some of them known to cause cancer.

What impacts do you foresee from this drastic retreat from Clean Air Act protections?

Response. The Clear Skies legislation marks the first time in the 35-year history

of the Clean Air Act that a bill in Congress has sought to allow industrial polluters

to escape air toxics regulations already adopted by the Environmental Protection

Agency, here Maximum Achievable Control Technology (MACT) standards. Worse,

the legislation does so without substituting any mandatory regulation for the air

toxics pollution (except mercury) that the bill allows to escape regulation. Finally,

for the first time in the Act’s history, a Congressional bill would allow weak reductions in criteria air pollutants (SO2 or NOx) to serve as the basis for emitting higher

levels of uncontrolled hazardous air pollution, including probable carcinogens.

And S. 131 does so for not just one industrial source category, but four:

• Industrial, Commercial, and Institutional Boilers and Process Heaters (69 Fed.

Reg. 55217);

• Plywood and Composite Wood Products (69 Fed. Reg. 45943);

• Reciprocating Internal Combustion Engines (69 Fed. Reg. 33473); and

• Stationary Combustion Turbines (69 Fed. Reg. 10511).17

From these four industrial source categories, the Administration’s bill exempts as

many as 69,000 industrial units from the Clean Air Act’s mandate of deep emissions

reductions by 2008.18 The result is to override the removal of as many as 74,000

tons-per-year of toxic and even carcinogenic chemicals from the air we breathe.19

The following information is taken from EPA fact sheets issued with the promulgation of these four rules. These fact sheets provide EPA estimates of the number

of current and future industrial units covered by the rules, as well as the nature

and amount of hazardous air pollution (HAP) regulated. Critically, these fact sheets

also provide estimates of the health benefits that EPA assigned to these

rulemakings. Depending upon the extent of participation by industrial units that

avail themselves of the air toxics regulatory relief in S. 131, virtually all of these

health benefits could be lost, and virtually all of the toxic air pollution emitted by

these tens of thousands of industrial units could escape regulation.

INDUSTRIAL, COMMERCIAL, AND INSTITUTIONAL BOILERS AND PROCESS HEATERS

EPA estimates that 58,000 existing boilers and process heaters, and 800 new boilers and process heaters built each year over the next 5 years will be subject to this

final rule.

This rule reduces emissions of a number of toxic air pollutants, including hydrogen chloride, manganese, lead, arsenic and mercury, by more than 58,000 tons annually in the fifth year after promulgation.

This rule also reduces emissions of sulfur dioxide and particulate matter in conjunction with the toxic air pollutant reductions. This rule may result in 2,270 fewer

premature deaths, 5,100 fewer cases of chronic bronchitis, reduced hospital admissions for pneumonia, asthma and cardiovascular problems. It may also result in
165

20See, e.g., ‘‘EPA Relied on Industry for Plywood Plant Pollution Rule,’’ Alan C. Miller & Tom

Hamburger, L.A. Times (May 21, 2004).

150,000 fewer respiratory incidences in children, lost work days, and restricted activity days for people with respiratory problems.

http://www.epa.gov/ttn/atw/boiler/boilersfactsheetfnl.pdf

PLYWOOD AND COMPOSITE WOOD PRODUCTS

EPA estimates that about 220 plywood and composite wood products facilities are

major sources of air toxics.

The rule will reduce air toxics from the manufacturing of Plywood and Composite

Wood Products (PCWP) by between 6,600 and 11,000 tons per year, or a 35 to 58

percent decrease from 1997 levels. The final rule will also reduce volatile organic

compound emissions by between 14,000 and 27,000 tons per year, or a 28 to 52 percent decrease from 1997 levels.

http://www.epa.gov/ttn/atw/plypart/plywoodfactfinal.pdf

RECIPROCATING INTERNAL COMBUSTION ENGINES

EPA estimates that approximately 8,120 new stationary RICE will be built at

major sources of air toxic emissions by the end of the 5th year after this rule takes

effect. In addition, about 1,800 existing stationary RICE located at major sources

may potentially be subject to the rule.

The final rule will reduce emissions of a number of toxic air pollutants such as

formaldehyde, acrolein, methanol, and acetaldehyde by 5,6000 tons in the fifth year

after promulgation. These pollutants, also known as air toxics, are known or suspected to cause adverse health and environmental effects. Formaldehyde and acetaldehyde are probable human carcinogens.

http://www.epa.gov/ttn/atw/rice/ricefactsheetfnl.pdf

STATIONARY COMBUSTION TURBINES

EPA estimates that 9 new stationary combustion turbines will be built each year

over the next 5 years and will be subject to the final rule.

The final rule will provide improvements in protecting human health and the environment by reducing air toxic emissions 98 tons per year in the 5th year after the

rule is final. The air toxics reduced are listed below:

Pollutant Emission Reductions Percent Reduction (in 5th yr after promulgation)

(after controls are installed)

Formaldehyde 67 tons, 90 percent

Toluene 17 tons, 90 percent

Acetaldehyde 11 tons, 90 percent

Benzene 3 tons, 90 percent

http://www.epa.gov/ttn/atw/turbine/turbinefs.pdf

One additional observation bears mention. Of the four MACT source categories

above that are eligible for regulatory relief in S. 131, at least three involved

rulemakings where industry lobbyists were urging EPA and the Office of Management and Budget to adopt unlawful ‘‘risk-based exemptions’’ from MACT standards.20 Industry was successful in persuading the Bush administration to adopt

these harmful and illegal exemptions in the final MACT standards for Industrial,

Commercial, and Institutional Boilers and Process Heaters, and Plywood and Composite Wood Products. The result of these exemptions is that thousands of tons of

hazardous air pollution (HAP) would escape into the air we breathe, uncontrolled,

when the Clean Air Act requires these pollutants to be minimized with advanced

pollution control technology. EPA declined to adopt the same risk-based exemptions

for the final Reciprocating Internal Combustion Engines MACT standard.

Because these exemptions are plainly contrary to the language, structure, purposes and legislative history of the technology-based MACT program adopted by

Congress in the 1990 Clean Air Act Amendments, NRDC and Earthjustice are currently challenging the two final rules that contain these exemptions in the U.S.

Court of Appeals for the D.C. Circuit.

Accordingly, S. 131 represents a blatant attempt to override those lawsuits before

the judicial branch has the opportunity to review the lawfulness of EPA’s actions.

Worse, S. 131 would not simply override legal challenges by the public to illegal

EPA rule exemptions; the legislation would allow tens of thousands of industrial

polluters to escape HAP regulation altogether, going well beyond EPA’s unjustified
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21 ‘‘The Clear Skies Act Technical Support Package’’ is available at http://www.epa.gov/air/

clearskies/03technicalpackagetofc.pdf. 22For the purposes of estimating the number of potentially eligible facilities, Earthjustice only

considered major sources. Enforcement and Compliance History online available at http://

www.epa.gov/echo/

and unlawful exemptions. All without any risk determination, without any substitute HAP regulation for non-mercury HAPs, without any logical linkage to the

putative power plant control purposes of S. 131—ultimately, without any announced

justification in the Congressional record for this legislation.

Finally, it bears noting in conclusion that neither the bill’s proponents or administration officials have provided data or analytic support—at least publicly—to explain

or justify the impacts of these exemptions from already adopted protections against

hazardous air pollution. The technical supporting documents for the legislation,

which include the only assessment of health and environmental effects by the administration that we are aware of, were published in July of 2003, 4 months before

the regulatory relief from HAP protections for opt-in units first appear in Clear

Skies legislation (S. 1844) and 7 months before the appearance of the current

iteration of this provision in S. 131.21

Accordingly, the best information available concerning the public health and environmental impacts of the opt-in MACT exemptions comes, first, from a facial reading of the vast regulatory relief that the bill would authorize; and second, from

EPA’s own estimation of the total amount of HAPs controlled by these four rules,

as well as the tremendous health benefits that these rules will deliver when fully

implemented. On the basis of that information, the impacts from this drastic retreat

from Clean Air Act protections could be devastating.

The environmental and public health organization Earthjustice has produced a series a of fact sheets that use publicly available EPA information to produce statelevel snapshots of the number of facilities that could be eligible for this opt-in provision. I am attaching these fact sheets to my responses.

Using the listings of potentially regulated industries found in the final MACT

rules noted above, and EPA’s Enforcement and Compliance History Online (ECHO),

Earthjustice determined that as many as 12,814 facilities nationwide could be eligible for the opt-in provisions’ regulatory relief, should it become law. At the state

level, the organization found that as many as the following numbers of facilities in

these states could be eligible for the bill’s regulatory relief: 777 facilities in California, 83 facilities in Connecticut, 511 facilities in Illinois, 438 facilities in Louisiana, 53 facilities in Montana, 220 facilities in New Jersey, 347 facilities in New

York, 35 facilities in Rhode Island, 1,021 facilities in Texas, and 16 facilities in

Vermont. S. 131’s regulatory relief would permit uncontrolled air toxic emissions

(other than mercury) from affected units at those facilities.22

Earthjustice also used EPA’s Toxic Release Inventory (TRI) data from 2002 to assess the quantity of toxic emissions reported by potentially regulated industries

from the four relevant industrial source categories. Since the TRI data base contains

emissions data at the facility level and not the unit level, this information does not

purport to estimate the potential effect of the opt-in provision on the basis of unit

participation. The data does demonstrate, however, that the potentially regulated

industries that could escape air toxics regulation should S. 131 become law, are

major contributors to toxic air pollution in this country. 2002 TRI data show that

nationwide, potentially regulated industries under the four source categories affected by S. 131’s opt-in provision reported more than 1.2 billion pounds of point

source toxic air emissions. These are the very industries that should be doing more

to control their toxic emissions—as EPA founded in adopting rules to cover their

toxics pollution—and not less, as S. 131 would allow.

Question 4. My entire home State of New Jersey was recently declared ‘‘out of attainment’’ for nitrogen oxides, which help form ozone and damage lungs—especially

of kids. Do you believe this bill will improve New Jersey’s air quality?

Response. This bill will not improve New Jersey’s air quality compared to the

timelier, better air quality improvements that New Jersey would experience from

EPA and the states simply enforcing the Clean Air Act that we have today. This

legislation delays the timelines and dilutes the rigor of pollution control measures

that otherwise would apply to SO2 and NOx pollution from dirty coal-fired power

plants located upwind of New Jersey, pollution that causes and contributes to New

Jersey’s ozone nonattainment problems.

In other words, this legislation is worse for New Jersey and the country than the

current Clean Air Act. Enforcing the current Clean Air Act will better protect Americans, and do so more quickly and cost-effectively, than going backwards with the

Clear Skies legislation.
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My February 2nd written testimony details the numerous and varied ways in

which S. 131 weaken and delays more protective air pollution control measures currently afforded—and mandated—by the current Clean Air Act. These protections

run the gamut from better protections against local smog and soot pollution contributing to nonattainment; protections against transported air pollution from upwind

source, an especially critical concern for New Jersey; stronger protections against

acid rain; more rigorous and timely protections against mercury poisoning and other

hazardous air pollution; and better safeguards for visibility and ecosystem health

in national parks and wilderness areas.
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PRESENTATION BY QUIN SHEA, SENIOR DIRECTOR FOR ENVIRONMENTAL ACTIVITIES, EDISON ELECTRIC INSTITUTE

Mr. SHEA. What I want to share with you are some insights based on the work

that I do every day and in the last couple months particularly so at the White

House with key staff there that are working on the energy policy development task

force, that are working on some of these EPA regulatory programs, and give you

some thoughts as to what is going on behind the scenes to supplement maybe what

you’re reading in the newspapers. I think you’ll find it interesting.

Obviously, electricity and economic growth, linked. Almost, you know, right across

the board for the last 30 years. We know that. It’s a matter of fact of life. Electric

drives the economic engine in the U.S. And demand of anything is going up. Jan

mentioned that DOE—and these are rather conservative forecasts in my opinion—

is estimating that we’re going to need about 393,000 megawatts over the next 20

years. And that’s right, if you think about it, based on what we’re using today, approximately 850,000 megawatts for total generation, close to 700,000 just in the utility sector. We’re looking at between a 50 and a 60 percent increase in the amount

of generation that we’re going to need over the next 20 years.

Ladies and gentlemen, that is a lot of juice. And we do not have the ability right

now in my industry to produce that. And there are a lot of impediments. California

is perhaps the best example, but it’s not the only one. I’m actually quite afraid when

I’m listening to a number of our CEOs talk, that they know for a fact and there’s

nothing that they or the administration can do about it, that we’re looking at extensive blackouts this summer in California and perhaps other parts of the country.

It’s very disheartening. And it is going to happen. And the underlying cause is the

fact that we do not have sufficient capacity and generation in this country, we do

not have sufficient infrastructure to allow for the transmission of power. And we

need to have it.

Now, as to fuel choice, obviously, my numbers will burn anything, up to and including dirty socks if it’s economic and they can do it. It doesn’t matter if it’s nuclear, or if it’s hydro, or if it’s coal or if it’s gas. I can tell you emphatically, not

just being an old coal guy myself, that we want to burn more coal. We desperately

want to burn more coal. We’ve got over 30 plants that were announced in the last

year. Some of those I think are at risk for some of the issues that I’m going to get

into.

Coal is cost effective. Working with the Vice President, we’re hoping that the market share goes up, we want it to go up as the fuel of choice. There simply isn’t the

gas out there to provide base-load generating capacity. Not a week goes by where

I don’t get a call from some of the industrials, the chlorine industry, the copper industry, saying they cannot compete, they cannot buy the electricity, because we’re

buying it all in the electricity industry or in the utility industry. And that’s true.

Now, you’ve already seen a number of iterations of this, the pie chart on fuel mix.

Some call it sort of energy balance, and I call it fuel diversity. That’s sort of the

term of art that’s used within the administration, fuel diversity. Again, I will reiterate what other people said. That is a good thing. The fact that you’ve got these

different types of fuels, particularly in different parts of the country, is incredibly

important. And it actually helps coal’s case.

Another handout that was over there was a one-page map of the United States

depicting sort of the fuel choice by area of the country. That’s very important. You

obviously have the parts of the country where coal is the predominant source. Others like in the northwest where it’s hydro. Take a good look at that. The underlying

point there is you can’t screw around with the generation mix in certain parts of

the country, because it would be disastrous.

Here’s what you already know. It’s out there. Coal is our friend. We know how

to get it. We can do it cheaply. We can bring it to market. Abundant, affordable,

reliable, increasingly clean. You’ll hear me say that a couple times. You’ll hear the

administration use those terms quite a bit.

Bottom point here actually applies to many of you in the room. We can bring it

to market very effectively through our partners in the rail industry. Increasingly

clean. This is a little tough to see, but again you have in your handout—again, as

Jan and other speakers have mentioned, emissions are coming down. They’re coming way down.

What actually is not on this particular chart, we can also show that particulate

matter emissions are coming way down. And now that we’re moving into an area

where we’re looking at potential air toxics regulations for coal-fired generation, it’s

interesting to note that just through the application of existing controls on our facilities, whether it’s scrubbers for SO2, low NOx burners or selective catalytic reduction

for NOx, or precipitators for PM, we’re getting about 40 percent of the mercury
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that’s emitted from coal generation right now without doing anything else. Forty

percent. The same for some of the other metals that are in the coal content. That

actually is a piece of good news with respect to the pending mercury controls that

we’re looking at in the next few years.

Now, the general outlook. I’ve got a lot of environmental concerns and I’m going

to touch on a couple of the big ones in a second. These are a big, big deal. For those

of you that work on sort of the negative side of the equation within your companies,

not out there generating product and making sales, but trying to keep as much as

possible of that from going away. Like in the environmental area, we work on—it’s

not a very glorious side, but we’re trying to help. We’ve got some serious, serious

problems. And they haven’t gone away, even with the change in administration.

Very important point. All right.

Here, in my opinion, are sort of the main points that are coming through, when

we have discussions with Andrew Lundquist, who heads the Vice President’s energy

policy task force at the staff level. Larry Lindsay, who’s one of the President’s principal economic advisors, Mitch Daniels, who heads the office of management and

budget. These are the terms or the phrases that come out over and over and over

again. When the energy policy task force report is issued in mid-May, you’re going

to see a lot of this in there.

Diversity of fuels, new technology options, appropriate incentives for electricity

generation. A lot of interesting things in there. Up and including possible tax relief.

Develop and commercialize clean coal technologies and provide funding for coal

R&D. I can give you an example of Senator Byrd’s bill, the national electricity and

environmental technology act, or F–60. These things are going to be in there, guaranteed.

Now, you’re also going to see a lot of words devoted to environmental policy. Now,

the President’s getting some opposition. Certainly among his staff and certainly

within our party; the Republican party, about how much environmental stuff should

be in this. He has argued, as have a number of his close advisors, that the two are

inexorably intertwined. You cannot move forward on a national energy policy without taking into account where we are on environmental policy. It’s very clear from

his letter to the U.S. Senate on March 13th which is the horse and which is the

cart. Energy policy is going to drive the two in his administration, but he is going

to include some addressing of environmental policies.

Now, here are the points that you’re going to see. Rely on sound science and

verifiable health benefits. I love this one. Everyone knows what we went through

over the last 5 or 6 years on the national ambient air quality standards. We had

EPA coming out and saying 100,000 children are at risk, or the elderly, for premature mortality. They’re going to die in the streets from the fine particulate matter that’s being emitted from coal-fired generation. Well, guess what? Six months

later that number had become 75,000, then it was 65,000, then it was 50,000, then

it was 35,000, then it was 20,000, and now it’s 15,000.

Folks, these are just numbers. These are just numbers. They’re scary numbers.

They’re used provocatively by those, particularly in the public health and environmental communities. They scare people. They’ve scared my grandmother. She’s 97

and said, what is going on? I said, Gram, this is wrong. Plus, it’s a premature mortality. If you die a day early, you’re a statistic. She said, oh, OK. She didn’t really

understand, but she sort of got it that I was taking care of it and it wasn’t a problem.

Beware of these numbers. Verifiable health benefits. It’s very important. Consider

fuel costs. There’s the link to energy policy. The environmental section is going to

have a strong linkage to energy policy. Practical compliance deadlines. If we’re going

to set hard targets for reductions of different things, give us a reasonable amount

of time to do it. Don’t stick us with a deadline that’s impractical or is effectively

technology forcing or will cause fuel switching, because we can’t meet it in an appropriate amount of time. That will not happen over the next few years.

Reasonable certainty for investments. Do not tell me to do something today where

I have to and plug in this widget or bolt on this piece of equipment and 2 years

later it’s effectively a stranded environmental requirements with a couple of new

ones. Don’t do that to me. Give me some certitude for investments along with those

reasonable compliance schedules.

Give states appropriate flexibility. This is a big one. You’ve got a Governor, you’ve

got a lot of folks in the administration with state background. My opinion over the

last 8 years we’ve seen a serious erosion in the so-called Federal-state partnership.

A lot of these rules and regulations, whether they’re health or environment, the big

ones that you have to deal with every day are supposed to be implemented by the

states. Sometimes without any money, and we call that an unfunded mandate. But

in any event, there’s supposed to be a balancing of power there. That hasn’t oc-
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curred. There has been a steady erosion. We’ve got Big Brother basically telling the

states what to do on most of these environmental issues. That’s got to change. And

it will change.

Now, specific policies initiatives. Here are the big daddies, in my opinion. These

are the issues, maybe there’s 20 or 30, crossing the water area, the solid waste area,

the air area and, of course, climate change that we all work on on any given day.

These are the big ones. These are the coal killers. These are the ones that we need

relief on and I’m actually fairly optimistic about.

New source review. You can’t help but have heard about this one, because basically we’ve had a reinterpretation of this entire program that EPA administers that

does not allow our plants to conduct routine maintenance and repair. Now yeah,

they’re going to run the risk of violating the law and looking at penalties and possibly jail time for CEOs because they’re not going to cutoff the power to the elderly

citizens in Chicago in the middle of July or August. That’s not going to happen. But

this particular rule is the largest impediment to making changes, basic changes at

plants. It’s an impediment to environmental progress. It’s an impediment to safety,

worker safety. And ironically, the fact that it doesn’t allow us to make efficiency improvements at our plants, ironically, it also doesn’t allow us to do projects that could

be a CO2 beneficial.

I will point outside that this change started occurring in 1996, and then in earnest in 1998 when EPA tried to do away with the so-called wet pro rule, which allows us some safety on new source review. I was at EPA for 4 years. I worked in

the enforcement program. I was the chief of staff to the then-assistant administrator

Jim Straff, who then went to California. I was very zealous at my job. We both had

cots at our office. You can call that insane. We worked very hard. We used every

enforcement tool in the tool kit available to us. So did our colleagues at Justice.

Nowhere, nowhere in the deepest recesses of our gray matter did it ever occur to

us that we could so warp the new source review program to do what was done in

roughly 1998. This is going to change in the next few months. I guarantee it.

Mercury. All right. Also on a substantive matter, we’ve talked about Kyoto a lot.

That’s been out there. It’s the big boogie man in the last few years. Kyoto is dead.

Kyoto is absolutely dead. It’s not going to happen. We’re taking steps right now to

reverse every piece of paper that EPA has put together where they could call CO2

a pollutant under the Clean Air Act. That’s going to be nailed down in the next few

months.

Internationally, the U.S. is not going to work on Kyoto. It is dead. For those of

you, not you specifically, but for those who want to continue to beat that dead horse,

let me tell you right now, there will be no equine resurrection here. Now, having

said that, mercury, in my opinion, is very Kyoto-like in its potential impacts. Mercury to me is the issue that scares me the most of the ones that are out there right

now.

EPA had a regulatory determination in December of last year, another 11th hour

initiative, where they basically determined, as they were supposed to, whether there

would or would not be a mercury rulemaking over the next few years. And there

will be. Could have been two paragraphs long. Instead, EPA went ahead of the

multi-year process that will result in a program, basically prescribed the regulatory

approach that we’re going to have to comply with several years down the road. They

did that now, before we’ve gone through rulemaking, public review and comment,

before EPA builds a technical record. They did it now.

Coincidentally, by virtue of having selected that particular approach, maximum

achievable control technology, they also triggered another part of Title 3 of the

Clean Air Act that means that any new or reconstructed coal-fired unit must go

through what is called case-by-case MACT review for mercury, and possibly other

air toxics.

The punch line of that, the 4 to 5 sometimes 6 years that you normally count on

for permitting, procuring materials and then constructing a new coal-fired unit,

start at adding a year, maybe 18 months, maybe more. Of those 30 new coal-fired

plants that were announced, a lot of them will never be built because my CEOs will

figure out that it’s not cost effective. They’ll look for a way to do something else even

though they don’t want to. And it’s because of mercury. Mercury is the killer.

Harmonize conflicting compliance deadlines for implementation of the NOx rules.

Not that big of a deal out west, you say. It’s mostly a battle of the states, Midwest

versus the Northeast. It all comes down to, well, we’re going to do the NOx reductions, but what timeframe? And we’re going to fix this one in the next few months,

as well, we’re going to get the more reasonable timeframe. Why should it be a big

deal for you? I’ll tell you why. Because the logical next step for NOx related programs nationally will be to take what is roughly now the Mississippi River border

where these new controls are applying east, those are going to move west. That’s
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going to happen. There is going to be a truing up of national NOx reduction programs probably within the next couple of years on this President’s watch.

Provide states with greater flexibility on regional haze. I think most everyone in

this room is probably an expert on this issue. Terry Ross and others have worked

on this very, very hard. It will be with us for a while. You know that a regional

haze program, which is intended alleviate basically secondary impacts, visibility,

can actually be more onerous than the particulate matter national ambient air quality standard. Finally, support programs for voluntary reductions of greenhouse gas

emissions and technology solutions. Another very important footnote. Listen to this

very carefully. Now, in the March 13th letter to the Senate, the President made it

very clear that he didn’t support Kyoto, and if you read between the lines, we’re

going to be unraveling everything that Kyoto was based on. That’s going to happen.

But the President did two other things once we sort of came off of our cloud of

euphoria. He committed to some kind of CO2 program, a voluntary program. Think

about that. Some day we’re going to have to figure out what that means. He also

talked about a multi-pollutant strategy for further SO2 and. NOx reductions beyond

what are required right now, as well mercury. He made that commitment.

In two successive cabinet meetings following the issuance of that letter, he told

his cabinet, you will do this. He’s not backing away from that. We’re going to have

those reductions. We’re going to have a voluntary program.

This is not going to thrill some of you when I say that the utility industry right

now is putting together a very comprehensive near-term-reduction CO2 voluntary

program. CEOs are working on this right now. I was actually showing a draft to

a couple folks here like Greg Schaefer, just to see if I could survive the swing test,

which is the right across to the nose.

And what I’ll say here is since the mid 1990s, EEI and the utilities have already

had a voluntary program in place that has resulted in over 170 million metric tons

of carbon being retired. We do it with DOE, not EPA. It’s not regulatory, it’s voluntary. There’s going to be a next generation of this. We’re working very closely

right now with folks at the White House in putting this program together.

Let me put it to you in political terms. The President needs a fig leaf. He’s dismantling Kyoto, but he’s out there on a limb. He’s told his staff, you will come up

with something. They’re going to do it. Wouldn’t you like to be involved in what they

put together? We certainly have made the cut that way.

This gives you another look at some of the things that are coming up, both

definites and maybes. In summary, again, fuel diversity. Fuel diversity is the key

here which allows us to push a very pro-coal agenda. Coal is affordable, reliable,

adequate and increasingly clean.

I’m going to switch gears here. I’ve talked about the President’s commitment to

the so-called multi-pollutant approach. It’s going to happen. Terry Ross asked the

question of Senator Enzi, Are we talking about legislation coming out of Senate Environment Public Works courtesy of Senator Smith from New Hampshire? Maybe,

maybe not. I would suggest that certainly within this Congress these next 2 years

and possibly within over the next 4 years, the chances of getting comprehensive,

multi-emission legislation through are probably fairly low. It’s not there. It’s not

there.

Having said that, the President is prepared to do this administratively. Now, it

won’t be as robust a program because you won’t, in effect, be amending the Clean

Air Act and all of the other statutes that we’re subject to right now, but it will be

the next generation of regulatory programs. And the goal here will be to gain a foothold, an irreversible foothold on the next generation of reasonable cost effective SO2

and NOx reduction, plus air toxics that we can all live with and that someone else

can’t undo.

I’ve laid out here, basically, the issue. You’ve already seen the list. I’ll show it

to you one more time. We’ve got a lot of things going on right now, whether it’s the

Clean Air Act of 1970, the amendments in 1977 or the 1990 amendments. The guys

that do the permits for your companies will tell you, it’s is a pain in the ass. You’ve

got requirements coming over 30 years that are like on top of one another, they’re

duplicative, some of them lead to a forced result of a different technology or process

that just doesn’t make sense. But it’s an artifact of how we do business.

What if someone were to tell you that you had 15 or 20 years, here is the NOx

reduction target we want you to hit in that timeframe, here’s the SO2 reduction we

want you to hit, and the here’s the toxics reduction that we want you to hit. And

those reductions are fairly reasonable, but it’s one, one number, one timeframe, with

lots of bennies built in. I will tell you that’s very interesting to me, and I tend to

be a big disbeliever of this, and still have sort of mixed views.

Goals, provide regulatory certainty and stability. We want that. Continue improving air quality. We want that. Increase compliance, flexibility and reduce costs
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through market-based approaches. Sounds interesting, tell me more. Maintain coalfired generation as part of the electricity supply mix. And I’m not talking about

maintaining it at 10, 20, 25 percent. I mean where it is or better. And it’s possible.

Benefits, talked about that. Single set of reduction requirements, Clean Air Act,

lower cost of emission reductions, facilitates building of new plants. Part of the problem that we have right now, this lack of certainty that I keep talking about in terms

of what’s happening with the environmental controls, not being able to rely anymore

on the U.S. Court of Appeals for the District of Columbia or even the Supreme

Court to help us out in what are some of the most ridiculous rules on their face

to ever occur. We can’t rely on that. We need to have some certainty. This is possibly a way to get at that.

Now, the elements, and these, I will tell you, again, working with our CEOs behind closed doors, some of them hate this idea because they’d rather take their

chances under a business-as-usual approach, saying, well, we’ll get Bush or Atilla

the Hun as president for the next five terms, right? Well, maybe not. What happens

if we don’t? So we’ve got some guys way out there and some guys who have embraced this. All of them are continuing to work on this.

Types of emission, reduction levels, deadlines, safe harbor. That’s the big deal. If

you do these things, you’re into this program, you get that safe harbor, you’re not

going to get nickeled and dimed every 2 years for additional reductions of different

types of pollutants. New source review. We get that fixed. That is non-negotiable.

Non-negotiable. It’s got to go away.

Here’s the list put another way. Comprehensive approach, single SO2 reduction

requirement. Over on the right-hand side are some of the items, past and present

and potential, that are out there that could affect SO2 reduction requirements. Same

thing for NOx. On mercury, same thing here. We’ve got very—EPA, if nothing else,

is very clever. And I’m a product, obviously, of that sort of way of thinking and they

taught me well. And I know how they work and they’re smart guys.

What they figured out is that as you have sort of an impediment to maybe doing

what you want to do through the front door, through the Clean Air Act, there’s plenty of other ways to get at you. They’re starting to look at hitting us with mercury

controls through the water program. Through the water program. Very interesting.

Internationally, the EPA ramped up its discussions with Canada. The northeastern states, any Federal EPA working with Canada, to see what they could do—

they did this with NOx, as well—but to see what they could do to have Canada

bring pressure on the U.S. Government to maybe speed up its mercury rule or to

have Canada develop a mercury MACT at like 9 percent removal in the next couple

years, again, to put pressure on. Very, very clever. And finally we have Henry Waxman and others on the hill putting out a bill a day with these just like crazy, not

well-thought-out plans. But they’ve got them in play, they get press, they get people

scared, and they get a reaction. I put CO2 in here as a place holder. CO2 is not going

to be part of a mandatory anything.

Having said that, it is possible, important point, I will predict that when the

President sort of finishes off his multi-pollutant approach or his ideas for an administrative program, he will package the voluntary CO2 program with whatever is

mandatory, giving you the so-called four pollutant approach that everyone says he

backed off on in terms of his campaign pledge. It’s packaging, not substance, but

it’s a very important point inside the beltway.

NSR, safe harbor, flexibility. All the elements are there.

I want to talk to you about some numbers we ran. Again, putting myself at the

top of the list of doubting Thomases, we have been spending hundreds of thousands

of dollars over the last few months at EEI and some of our companies engaging

some top notch economic consultants, people with no ax to grind in this debate, to

start running scenarios for us; different combinations of reductions of SO2 and NOx,

mercury, and seeing what that gets us. Different timeframes for having to do that.

And then comparing that to several scenarios of what EPA would logically be expected to do in that same timeframe between now and 2020, including some very

conservative ones. We used a lot of EIA’s natural gas projections or we had other

ones, perhaps even more conservative or more robust. We used those as well.

Now, jump to the punch line. And this is what catches a CEO’s attention or your

shareholders. Net present value. I can also give you the numbers on sort of an annual basis between now and 2020. Scenario one is roughly 35 percent SO2 and NOx

reductions beyond baseline, beyond what’s required now, with no additional mercury

requirement. We just go with co-benefits, roughly what we’re getting from existing

controls. Scenario two, we ramped that up a little bit, where I think we’re looking

at 50/50 and co-benefits. Scenario three, I think, it’s 60, 60 and 60 percent for mercury, which I think is pretty realistic based on what the health evidence shows up.

And finally the EPA future. These are extraordinary deltas here.
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Now, we’ve got to continue to refine these numbers. I’m going to spend the latter

part of this week going over, talking to Jack Gerard. Well, maybe not. Our prayers

are with Jack, hopefully he’s better. But certainly with his staff and with some of

the mining companies to let them go through this and see what they think. Because

they have the most at risk. I already told you we don’t. The mine industry and rail

industry have more at risk. It’s important that our partners understand what we’re

doing and see if they agree on these numbers.

Finally, initial findings. Scenarios one, two and three, less expensive than the

EPA future. Ninety percent mercury reduction. That’s the number that EPA, the career staff, are looking at right now. They’re even looking at 95 percent reduction.

They’re not equating this at all to public health benefit, they’re just focusing on a

number—Henry Waxman uses numbers as well—as a hard target. That number is

Kyoto. That number is Kyoto.

EPA future, reduces coal use, increases gas. Uses more than scenarios one, two

and three. We know that. The cost of reducing carbon can vary widely depending

on the permit allocation scheme. It’s interesting we’re finding through some of the

scenarios we’re running, we can get some carbon co-benefits. Plus when you tack

on the voluntary program, we think we can do a pretty good job of having a robust

CO2 element to this program that does not hurt coal.

There you have it. Basically, sort of some thoughts of mine on energy policy, a

little bit on environmental policy at the 20,000 foot level, and something to think

about in terms of what is being debated right now inside the beltway as an alternative to business as usual at EPA. Thank you very much.

Mr. LINTON. I’m just going to ask if Jan has any comments on Shea’s presentation

at this point? Or we’ll hold for the questions, any other questions, I guess, from the

audience until all four presenters present.

Mr. LAITOS. What do you think the chances are within the next 2 or 3 years there

will be a reauthorization of the Clean Air Act, Clean Water Act or CERCLA?

Mr. SHEA. I think the chances are very low. I’ll tell you, maybe a little better on

Clean Water Act. I think CERCLA, in my opinion, is sort of like coal. It’s a fossil.

I think CERCLA in its present format is an artifact of a time when there was a

good idea but bad implementation. I see that possibly being dismantled.

Clean Water Act, I take back what I said, I do see opportunity for Clean Water

Act reauthorization over the next 4 years. I don’t see it for air. I’ll tell you why.

Very simply that while we now know where we might make surgical fixes to make

the Act run better, these are even things that we—Henry Waxman and I might

agree that there’s problems with the permitting process in the Clean Air Act that

weren’t envisioned in 1990 that need to be fixed. The problem is if you want to open

the Act up to technical changes or to those streamline fixes, much less a broader

reauthorization, people start piling on everything.

Now to the extent that the President is pushing in concert with Senator Smith

or others a so-called multi-pollutant bill, that might be a de facto substitute for

Clean Air Act reauthorization. But Clean Air Act reauthorization amendments of

2004, right now I don’t see it. There’s no impetus there, there’s no political will and

there’s too much risk.

Mr. LAITOS. One more question. Do you think, based on your experience with

what’s going on in the energy policy center in Washington, D.C. within the White

House or within the executive branch, do you see any interest as there was in the

1970s, the late 1970s, in terms of providing incentives, initiatives or grants for coal

gasification or coal liquification efforts?

Mr. SHEA. There is some. And that’s a fair point. Because I stayed away from a

couple points in my presentation that started talking about clean coal technology

or future R&D.

The Department of Energy is going to make out fairly well over the next few

years. It’s no longer going to be the red-headed stepchild cabinet office that it has

been in the last 8 years. It’s going to be reinvigorated. The fossil office and the policy office are going to be the key conduits to implementing a very important piece

of the energy policy task force that’s going to be issued, again, in mid-May. That’s

going to be long-term R&D.

Jan was talking about coal gasification. That is going to continue. Obviously, it’s

very speculative. We’re looking really at 10 years plus out. But that’s OK. Yes, it

is clearly in the mix right now. They are looking at it in addition to other basic

clean coal technologies, and even carbon capture and sequestration technologies.

I can’t tell you how much of an emphasis proportion or percentage wise there will

be, but I do know that there will be staff in fairly significant sums appropriated

for that.

Mr. LINTON. Thank you.
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STATEMENT OF ABRAHAM BREEHEY, LEGISLATIVE REPRESENTATIVE, GOVERNMENT

AFFAIRS DEPARTMENT, INTERNATIONAL BROTHERHOOD OF BOILEMAKERS

Chairman Inhofe, Senator Jeffords, and Members of the Committee, good morning. I am Abraham Breehey, Legislative Representative for the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers. On

behalf of our International President Newton Jones and our approximately 75,000

members across the country, thank you for the opportunity to present our views on

S. 131.

The Boilermakers are the principal union responsible for the installation, maintenance, and repair of industrial boilers, as well as the installation of the pollution

control equipment utilized to achieve the emissions reductions that are the goals of

this legislation. As a result, our members have a dual concern: first and foremost,

to have safe and productive workplaces for boiler operations; and second, to ensure

the sensible implementation of clean air standards that foster the market for our

services while protecting the environment.

Boilermakers have been active participants in the policymaking process. Representatives from our locals across the country have testified at EPA field hearings,

and our Government Affairs Office has submitted testimony for the record and letters on Clean Air topics going back for some years. The discussion of Clear Skies

is one in which all participants share the same goal: sensible protection of air quality. There are good natured disagreements about the best approach to achieve that

goal, but that should not keep us from proceeding with dedication.

Indeed, the Boilermakers have a significant interest in ensuring the latest control

technology is used to meet Federal multi-pollutant emissions standards and we have

much to gain through its deployment. As an EPA analysis of the engineering factors

affecting the installation of pollution control technology notes, the labor requirements needed to retrofit flue gas desulphurization systems generally referred to as

scrubbers to remove SO2 for a 500 MWe utility include approximately 150,000 boilermaker man-hours. Similarly, a retrofit of SCR NOx control technology of 500 MWe

requires as much as 350,000 man-hours of construction labor, with 40–50 percent

of that amount available for boilermakers. However, the vast majority of our manhours are generated providing maintenance, renovations, and upgrades to existing

coal-fired electric utilities. Too often, under the status-quo this work is being put

off, delayed, or abandoned.

The legislation before the Committee today would provide great benefits to our

union, as well a number of other AFL–CIO affiliates in the energy and construction

sectors. It requires $52 billion in investment to meet air quality standards, a significant portion of which will be paid in wages to Boilermakers and other union craftsman. We believe it provides a clear path forward for new plant construction, sets

standards that are both technologically feasible and no doubt within the current

labor capacity. We encourage the committee to support the Inhofe-Voinovich bill.

Some would prefer to maintain existing Clean Air Act authorities to wring additional emissions reductions out of existing facilities. This ‘‘command and control’’ approach relies on litigation-heavy, case-by-case analysis, such as the New Source Review (NSR) program. While NSR can produce successes in some cases, it is too often

cumbersome and slow as it applies to existing sources. We support the provisions

of the Clear Skies bill for addressing these issues.

The Boilermakers are aware of the balancing act that must be undertaken in developing environmental policy. However, we believe this legislation achieves a significant balance in that it provides a protective approach on clean air that maintains the competitiveness of our industrial facilities, keeping Boilermakers and

other union member’s work from being outsourced. By ensuring a continued role for

coal in our energy-mix and providing greater regulatory certainty, this legislation

will promote stable energy prices that are necessary for the economic growth that

creates good paying manufacturing and industrial jobs.

I know we all agree that America’s workers are the most productive in the world.

However, they are forced to succeed under tremendous competitive disadvantages

resulting from several factors, including unfair tax and trade policies, foreign subsidies, and health care costs not assumed by overseas producers. In addition, American manufacturers spend relatively more on pollution control than foreign competitors. Regulatory policies that delay efficiency improvements or that might lead to

fuel-switching from coal to natural gas would only exacerbate our problems keeping

good paying manufacturing jobs here at home.

The Boilermakers Union supports the expansion of the Acid Rain Program ‘‘cap

and trade’’ system for SOx to NO2 and mercury as suggested under this legislation

because it sets predictable deadlines that are achievable with current technology.

Also, rather than proceeding case-by-case, they apply to all regulated facilities si-
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multaneously. Under current law, our work often comes in fits and starts. This legislation will encourage a more steady work load for our members.

Our union is committed to ensuring the safety of the facilities where our members

and thousands of others work. It is a major and ongoing concern. Workplace safety

is a cornerstone of the Boilermaker’s National Joint Apprenticeship Program, and

our members work together with our employers to limit workplace injury and promote efficient operations. Reasonable and consistent rules are needed to encourage

repair and maintenance of power plants, and protect worker safety. Too often, important work is delayed due to the uncertainty of the regulatory and permitting

process. Power-generating facilities operate most efficiently when they undertake repair and replacement projects on a regular basis. The varying interpretations of the

requirements of NSR often forces facilities to delay maintenance work for 12 to 36

months while they await EPA approval.

Further, the threat of litigation too often acts as a deterrent to capital investments that create work and maintain safe facilities for our members. Boilers operate

under high temperatures and pressures with superheater tubes exposed to flue

gases at temperatures as high as 2,000 degrees and pressure around 3,000 lbs./

square inch and must be maintained in order to be safe for workers. While NSR

can present obstacles to maintenance and repair, Clear Skies does not.

The good news about Clear Skies is that the program sets expectations that can

be met with feasible technological applications. Our members training and expertise

at installing pollution control technology is unmatched. However, applications that

have not been tested across all fuel types and under actual operating conditions and

for which there are no guarantees should not be the basis of clean air policy.

S. 131 also will prevent the litigation and delay associated with U.S. EPA rulemaking proceedings. The bill’s approach to mercury emissions will avoid the need

for a controversial EPA mercury rule, while ensuring the use of cost-effective emissions trading as the means to achieve a significant reduction of emissions. We specifically support the use of a ‘‘co-benefits’’ approach for the first phase of a mercury

control program to enable more accurate measurements of the mercury control capabilities of existing technologies, and to allow time for advanced mercury-specific control technologies to mature in time to meet the final 2018 mercury cap.

Further, the caps, timetables, and incentives of the Clear Skies Act will result in

high emissions reductions goals through the application of clean air technology, as

opposed to fuel-switching. Sections 455 and 475 provide for early action reduction

credits to encourage NOx and mercury reductions, respectively, through the application of technology, as opposed to fuel-switching. Certainly, the Boilermakers and the

members of the United Mine Workers of America will realize significant benefits

from the provisions, but the implications of widespread fuel-switching to costly natural gas would be devastating across the manufacturing sector. An important benefit of this legislation is that it will foster reliable and affordable electricity generated from coal. More than one-half of our nation’s electrical output is generated

by coal. Reducing the use coal in our energy supply mix would inevitably result in

increased demand in natural gas, a fundamental change in energy policy that raises

important concerns about natural gas availability and cost.

The current regulatory framework has resulted in most new power generation facilities being gas-fired. With demand for natural gas spiking, and prices increasingly

volatile, continuing down this path will have a devastating impact on American

workers, as firms look to move operations overseas for cheaper natural gas prices.

Under S. 131, any new coal plants will be included under the emissions cap and

the clear path forward with regard to emission reductions requirements allows our

employers improved investment planning, which contributes to reliable and affordable electricity generated from coal.

Our union also recognizes the needs of states and localities to comply with U.S.

EPA’s new 8-hour ozone and fine particulate standards. The deadlines for compliance with these standards are approaching, and states are beginning to prepare

State Implementation Plans. Computer modeling by U.S. EPA demonstrates that

the reductions proposed by S. 131 would allow many states and localities to meet

the new ozone and PM2.5 standards in a timely manner. Some areas, however, may

not be able to demonstrate attainment with the new standards. For this reason,

some states advocate adjustment of the bill’s final compliance deadlines for sulfur

and nitrogen oxides. While we support the timetables established under S. 131, we

note that reasonable adjustments of these final deadlines would not, in our judgment, raise issues about the availability of skilled labor to install and operate emission controls.

In conclusion, our union believes that among the greatest challenges this distinguished body is faced with is maintaining the competitiveness of American manufacturing in the global marketplace. Since its peak in 1998, the United States has lost
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more than 3 million manufacturing jobs. There is a palpable anxiety among working-families across the country. The International Brotherhood of Boilermakers is

committed to providing the highly skilled labor necessary to power the American

economy. We believe the legislation proposed by Senators Inhofe and Voinovich, S.

131 sets our electric-generating facilities on a path forward toward an affordable,

stable, domestically produced energy supply. I know our members look forward to

continuing our role in this important debate.

RESPONSES BY ABRAHAM BREEHEY TO ADDITIONAL QUESTIONS

FROM SENATOR VOINOVICH

Question 1. You state in your testimony that steady employment is needed instead

of peaks and falls and that Clear Skies provides for this for at least 15 years. However, some claim that Clear skies does no more than existing law—meaning your

should have this environment already. What effect has regulatory uncertainty had

on workers?

Response. Due to the nature of the work our members perform, our man-hour

rates are often cyclical—with peak seasons coming in the spring and fall. However,

the permitting and regulatory process of New Source Review often prevents accurate

planning and often delays anticipated work. The lack of clarity and case-by-case

evaluation of what constitutes routine maintenance, repair, or replacement has

forced industry to delay work for Boilermakers for as long as year. This creates difficulties in planning the deployment of our workforce, much of which often travels

significant distances when the need arises.

Question 2. Last week, Basin Electric CEO Ron Harper provided a specific example of how the New Source Review program has prevented an improvement at one

of their units that would reduce energy use and emissions. You also talk about the

NSR program as a roadblock for plants to put on pollution control technology—and

as a roadblock to worker safety improvements. Do you have any examples of how

NSR has prevented such improvements? Please provide additional thoughts on why

NSR needs to be reformed.

Response. Regretfully, it is difficult to identify a specific project simply because

this is not a matter our employers are anxious to share with us. Our concerns are

verified by anecdotal evidence, such as that provided by Mr. Harper, and we do not

believe the case he points to is unique. Further, one opinion expressed in the debate

over New Source Review is that only work performed by regular plant maintenance

personnel should be considered ‘‘routine,’’ and that any work performed by outside

contractors should be considered ‘‘non-routine.’’ Our members are often called upon

to supplement and complement the regular plant work force during planned outages. If the industry attempts to reduce its reliance on services from our members,

their standard of living will be directly and adversely impacted.

RESPONSES BY ABRAHAM BREEHEY TO ADDITIONAL QUESTIONS

FROM SENATOR LAUTENBERG

Question 1. The Acid Rain program’s cap and trade approach has been very successful. Would this bill’s cap and trade system be as protective of public health as

that program?

Response. While my experience relates mainly to the impact of the multi-pollutant

cap and trade systems on our workforce, as opposed to the public health benefits,

it is my understanding the expansion of the Acid Rain programs cap and trade approach will bring public health benefits. Since the Acid Rain program began, EPA

has reported the largest emitting sources actually reduced emissions the fastest.

The more a facility can reduce the more tradable credits it can generate. This is

bound to have significant public health benefits.

Question 2. As someone who came out of the corporate world, I can appreciate the

importance of making sound investments sound investments in new technologies. Is

the cap and trade system in Clear Skies as cost effective at reducing pollution as

other approaches?

Response. The incentives created through a cap and trade system will be applied

on a national basis with clear and specific compliance deadlines. Contrasted with

the resource-intensive and uncertain litigation that results from the new source review program, cap and trade is a cost effective approach. Creating a market for

emissions through the creation of tradable credits ensures that those who can most

efficiently reduce emissions will do so.
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Question 3. Clear Skies proposes giving many industries a free pass when it

comes to reducing hazardous air pollutants—some of them known to cause cancer.

What impacts do you foresee from this drastic retreat from Clean Air Act protections?

Response. We have a number of Boilermaker locals with members who work at

facilities eligible for the ‘‘opt-in’’ provisions of S. 131. The ability of these employers

to participate the market based trading system will provide financial incentives for

additional emission reductions where they can most cost-effectively be achieved.

It is far from a ‘‘free pass.’’ In order to receive relief from the maximum achievable

control technology standard (MACT) for boilers about which the question is asking,

the facility must first ‘‘opt in’’ to the stringent requirements of the Clear Skies Act.

To do so means to put a cap in place that would require the same types of control

technologies or process improvements that the MACT standard likely would require.

In addition, the boiler MACT has a risk-based alternative; meaning that existing

law will not cover each and every hazardous air pollutant, as some opponents of S.

131 imply. Ironically, while the NRDC witness at the hearing argued against granting relief from boiler MACT, the same organization has sued to stop the boiler rule

from even going into effect.

Question 4. My entire home State of New Jersey was recently declared ‘‘out of attainment’’ for nitrogen oxides, which help form ozone and damage lungs—especially

of kids. Do you believe this bill will improve New Jersey’s air quality?

Response. The 70 percent reductions in NOx and SO2 called for under S. 131 will

indeed improve New Jersey’s air quality. Further, states are free to go beyond the

minimum Federal standards with their own programs, just as New Jersey has done.

STATEMENT OF JOHN COOK, VICE PRESIDENT AND MANAGING DIRECTOR, EASTERN

U.S. CONSERVATION REGION, THE NATURE CONSERVANCY

Mr. Chairman and members of the Subcommittee, thank you for the opportunity

to provide written testimony for the Committee on the effects of air pollution on ecosystem health. The Nature Conservancy applauds your interest in this matter and

your efforts to find solutions to improve air quality in the United States. The Conservancy has a growing interest in solving the critical, globally significant problem

that acid rain and other air-borne pollutants pose to biological diversity and the ecosystem processes on which it depends. I am pleased to present the Conservancy’s

views on this important topic.

The Nature Conservancy is dedicated to preserving the plants, animals and natural communities that represent the diversity of life on Earth by protecting the

lands and waters they need to survive. The Conservancy has more than one million

individual members and programs in all 50 states and in 27 nations. To date, we

have been responsible for conserving more than 14.5 million acres in the United

States, and more than 83.5 million acres internationally. The Conservancy itself

owns more than 1,340 preserves in the United States—the largest private system

of nature sanctuaries in the world. Our conservation work is grounded in sound

science, strong partnerships with other landowners, and tangible results at local

places.

In the eastern United States we are working to conserve such spectacular and irreplaceable natural treasures as the Adirondacks, the Chesapeake Bay, the Northern Forest, and the Appalachian Mountains. These places are within driving distance of many millions of citizens, who benefit from the wilderness, drinking water,

wildlife, timber land, fisheries, natural areas, and recreational opportunities that

they provide. Atmospheric deposition threatens the health and long-term sustainability of every one of these places.

BACKGROUND

The atmospheric deposition of acidifying pollutants, in particular nitrogen and

sulfur (also known as acid rain), and toxic airborne pollutants—especially mercury

and ozone, are among the most pervasive and severe threats to The Nature Conservancy’s conservation goals in the eastern United States. Although the Clean Air Act

and other regulations and programs have achieved notable success in controlling

these emissions, and will continue to do so as the law is phased-in, the level of pollution allowed under the Clean Air Act remains too high and will continue to harm

plants and animals. For over a century we have been aware of the damage caused

by that acid rain. Acid rain results in decreased forest health, as it can reduce tree

growth and increase susceptibility to diseases, pests or even damage from cold

weather. Acid rain also has toxic effects in the aquatic world. Increased acidity in
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water has been fatal to fish and other aquatic species, particularly in landscapes

like the Adirondacks that contain soils that are poorly suited for absorbing the increased acidity.

Recently there has been increasing concern over the multiple impacts that excess

nitrogen is having on our environment. In 2003, the journal BioScience publishes

a special section detailing the magnitude and severity of the problem throughout the

continental United States. Of particular concern is that as nitrogen moves through

ecosystems it causes multiple effects on the ecosystem, referred to as the ‘‘nitrogen

cascade’’ (Galloway et al. 2003). For example, Aber et al. (2003) concluded that nitrogen deposition has altered the nitrogen status of northeastern forests. Not only

does it have negative impacts on forest health, this deposition ultimately contributes

to excess nutrient loading of estuaries as it ‘‘cascades’’ from upland deposition

through forest soils and water to its eventual release into coastal estuarine systems

(Driscoll et al. 2003). According to a National Oceanic and Atmospheric Administration study in 1999, 61 percent of the 23 estuaries examined in the Northeast were

classified as moderately to severely degraded by nutrient over-enrichment. Such enrichment has been shown to lead to multiple environmental problems for estuarine

ecosystems. Ecological problems associated with nitrogen deposition have also been

identified in the west (e.g., Fenn et al., 2003a,b). When combined with sulfur, nitrogen has contributed to the acidification of soils and surface waters as mentioned

above, as well as increasing the availability of potentially toxic aluminum, and the

long-term loss of some critical available nutrients in the soil. Consequently, nitrogen

deposition, whether by itself, or in combination with sulfur, is having profound effects on ecosystems in this region and others.

Mercury is a neurotoxin that accumulates in the food chain and is particularly

damaging to higher-level consumers, such as loons. In humans, high mercury levels

may result in neurological damage, including altered behavioral patterns known as

the ‘‘mad hatter’’ disease. Human health concerns due to high mercury levels in

many Adirondack lacks continue to result in fishing restrictions. Lower down in the

food web, the flathead minnow has been documented to suffer reduced reproductive

success with higher mercury contamination (Hammerschmidt et al., 2002). In larger

fish that prey on minnows (e.g., walleye), similar impacts to reproduction have been

documented (Lastif et al., 2001). Similarly, recent information on another top-level

fish predator—the Common loon—indicates that changes in loon behavior and decreased reproductive success contribute to declining loon populations as a consequence of high mercury concentrations.

Finally, ground level-ozone, is formed when nitrogen oxides and volatile organic

compounds combine in the presence of high temperatures and sunlight. Although

technically not transported by atmospheric deposition, it is an important secondary

pollutant inextricably linked to this issue. Ozone directly harms plants, causing lesions on leaves and altered cellular function. This has lead to altered composition

and structure in early successional species (Barbo et al. 1998), and concern for a

number of plant species in federally protected areas (NPS 2003). A great concern

is that the effects of ground-level ozone ultimately alter the ability of plants to perform one of the most basic and essential of all ecological processes—photosynthesis.

The net effect is a decrease in vitality and increased susceptibility to diseases and

severe weather events, both environmental conditions that appear to be on the increase.

ADIRONDACKS

The Adirondacks probably exhibit the most severe ecological impacts from acidic

deposition of any region in North America (Driscoll et al., 2003a, b). This large forested area with over 2770 lakes, covering six-million acres in northern NY, has

served as the ‘‘canary in a coal mine’’ for acid rain in the United States due to the

highly sensitive soils and significant deposition rates. Studies of 1,469 Adirondack

lakes show that nearly half (41 percent) are acidic (i.e., pH below 5.5), with the acidic condition in the vast majority of these impacted lakes (81 percent) directly attributable to atmospheric deposition. In addition to the chronic acidification described

above, spring acidity peaks occur on a large percentage of Adirondack streams and

lakes. The peaks are caused by the spring runoff of highly acidic water that has

accumulated in the snow pack during the winter. The spring acidity peaks can result in spikes of acidification that are lethal to fish and change invertebrate communities—completely altering aquatic species composition and structure even in some

highly protected, remote locations.

Research shows that there has been a cumulative effect of atmospheric deposition

on watersheds. Calcium—an essential element for healthy forests—has been depleted from the soil. In many acidified watersheds the calcium levels are at or below
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the thresholds known to cause dieback and reproductive failure of sugar maple and

red spruce trees. Another effect of acidified watersheds is the mobilization of aluminum out of the soil and into the water, where it is toxic—and in many cases lethal—to fish, plants and other organisms.

Mercury, another pollutant of atmospheric deposition, is also impacting the Adirondacks. At least 30 lakes—including remote wilderness lakes—have fish species

considered unsafe for women and children to eat because of elevated mercury levels

(13 were added to this list in the summer of 2004). Recent studies from the Adirondack Cooperative Loon Program show that 17 percent of the loons sampled have

blood mercury levels that are high enough to alter behavior, resulting in the decreased reproductive success of loon populations.

CENTRAL APPALACHIAN MOUNTAINS

The Central Appalachian Mountain region is exposed to acidic deposition levels

that are among the highest in the United States. The National Acid Precipitation

Assessment Program (NAPAP) identified this area and the Adirondacks as the two

regions of the country most affected by acidic deposition (Baker et al. 1991). Unfortunately, the places in the Central Appalachian region most susceptible to these pollutants also contain the highest levels of biodiversity and sometimes are already

under protected status. Susceptibility to acidic deposition in this region is determined by bedrock type, and the region’s ridges are commonly associated with basepoor bedrock types that provide little acid-neutralizing capacity. Most of these ridges

and streams are associated with public lands, including national forests, designated

Wilderness areas, and the Shenandoah National Park. Stream surveys and longterm monitoring stations have shown that at least one-third of the landscape associated with the mountain ridges have been harmed by acidic deposition, as indicated

by high concentrations of sulfur and acidity in streams and loss of aquatic biota.

Modeling conducted for the Southern Appalachian Mountain Initiative, a multistate, multi-stakeholder assessment, indicated that prospective reductions of acidprecursor emissions will be insufficient to prevent further acidification of sensitive

streams and soils associated with forested mountain watersheds in this region (Sullivan et al. 2002). Trend analysis indicates that streams in this region have yet to

show signs of recovery, and has the highest likelihood of further acidification in the

eastern and northern United States (Stoddard et al. 2003).

CHESAPEAKE BAY

The Chesapeake Bay is the largest estuary in the contiguous United States, and

is extremely susceptible to atmospherically deposited pollutants (EPA 2004). While

not especially vulnerable to acidification, atmospherically deposited nitrogen plays

a significant role in the nutrient cycling of the Chesapeake Bay—as in other estuaries (NOAA 2004). Current estimates of the percent contribution of atmospherically

deposited nitrogen to the Chesapeake Bay are 20–32 percent—although such estimates are known to vary considerably due to small sample sizes, complexities of

seasonal variation, and other factors (Sheeder et al. 2002).

While nitrogen is a naturally occurring nutrient in the Chesapeake Bay, excessive

additions of nitrogen have aided in the degradation of important habitat in what

remains the most productive estuary in the world. Such nutrification results in algal

blooms that reduce water clarity, diminishing the capacity for sunlight to penetrate

to the Bay floor. Submerged aquatic vegetation (SAV) is unable to persist in these

low-light conditions, resulting in loss of sediment holding functions and creating a

positive feedback loop for increasingly turbid water. Additionally, algae-decomposing

bacteria consume dissolved oxygen, leading to zones of anoxia (oxygen-poor regions)

that are unable to support estuarine biota. The Chesapeake Bay Program recognizes

that addressing atmospheric sources of nitrogen is a key strategy to Bay restoration.

RECOMMENDATIONS

The National Research Council of the National Academies of Science published

‘‘Air Quality Management in the United States’’ in January 2004. It called for a

more thorough consideration of the impacts to ecosystem health in the design of air

pollution control strategies. Specifically, the report’s recommendation for improved

air quality was to:

Enhance protection of ecosystems and other aspects of public welfare. Many of

the programs and actions undertaken in response to the Clean Air act have focused almost entirely on the protection of human health. Further efforts are

needed to protect ecosystems and other aspects of public welfare.

Specifically:
266

Although mandated by the CAA, the protection of ecosystems affected by air

pollution has not received appropriate attention in the implementation of the

act. A research and monitoring program is needed that can quantify the effects

of air pollution on the structure and functions of ecosystems. That information

can be used to establish realistic and protective goals, standards, and implementation strategies for ecosystem protection.

The Nature Conservancy agrees with this and other recommendations in the report. The Conservancy would like to work with the Committee, with private industry and other interested parties to improve our understanding of the ecosystem level

effects of atmospheric deposition and to incorporate ecosystem health concerns in

setting appropriate standards in clean air policy and in the development of multiemissions legislation.

CONCLUSION

The Nature Conservancy is continuing its efforts to study the effects of atmospheric deposition on globally significant ecosystems. We look forward to working

with the Committee staff and others in the public and private sector on the issue

of atmospheric deposition Thank you for the opportunity to provide testimony on

this important matter.

SELECTED SUPPORTING LITERATURE

Aber, J.D., C. L. Goodale, S. V. Ollinger, M.L. Smith, A. H. Magill, M. E. Martin,

R. A. Hallett, and J. L. Stoddard. 2003. Is Nitrogen Deposition Altering the Nitrogen Status of Northeastern Forests? BioScience 53: 375–389.

Baker, L.A., A.T. Herlihy, P.R. Kaufmann, and J.M. Eilers. 1991a. Acidic lakes and

streams in the United States: the role of acidic deposition. Science 252: 1151.

Barbo, D.N., A.H. Chappelka, G.L. Somers, M.S. Miller-Goodman, and K. Stolte.

1998. Diversity of an early successional plant community as influenced by ozone.

New. Phytol. 138:653–662.

Driscoll, C.T. G.B. Lawrence, A. J. Bulger, T. J. Butler, C.S. Cronan, C. Eagar, K.F.

Lambert, G.E. Likens, J.L. Stoddard, K.C. Weathers. 2001a. Acid Rain Revisited:

advances in scientific understanding since the passage of the 1970 and 1990 Clean

Air Act Amendments. Hubbard Brook Research Foundation. Science Links’’ Publication. Vol 1, no. 1.

Driscoll, C.T. G.B. Lawrence, A. J. Bulger, T. J. Butler, C.S. Cronan, C. Eagar, K.F.

Lambert, G.E. Likens, J.L. Stoddard, K.C. Weathers. 2001b. Acidic Deposition in

the Northeastern United States: Sources and Inputs, Ecosystem Effects, and Management Strategies. BioScience 51:180–198.

Driscoll, C.T., D. Whitall, J. Aber, E. Boyer, M. Castro, C. Cronan, C.L. Goodale,

P. Groffman, C.Hopkinson, K. Lambert, G. Lawrence, and S. Ollinger. 2003a. Nitrogen Pollution: From the Sources to the Sea. Hubbard Brook Research Foundation. Science Links’’ Publication. Vol 1, no. 2.

Driscoll, C.T., D. Whitall, J. Aber, E. Boyer, M. Castro, C. Cronan, C.L. Goodale,

P. Groffman, C.Hopkinson, K. Lambert, G. Lawrence, and S. Ollinger. 2003b. Nitrogen Pollution in the Northeastern United States: Sources, Effects, and Management Options. BioScience 53:357–374.

[ED] Environmental Defense. 2004.

[EPA] Environmental Protection Agency. 2004. Air Quality and Planning Standards.

(www.epa.gov/oar/oaqps/gr8water/xbrochure/chesapea.html)

Fenn, M.E., R. Haueuber, G. S. Tonnesen, J.S. Baron, S. Grossman-Clarke, D. Hope,

D. A. Jaffe, S. Copeland, L. Geiser, H.M. Rueth, and J.O. Sickman. 2003a. Nitrogen Emissions, Deposition, and Monitoring in the Western United States. BioScience 53:391–403.

Fenn, M.E., J.S. Baron, E.B. Allen, M.M. Rueth, K.R. Nydick, L. Geiser, W.D. Bowman, J.O. Sickman, T. Meixner, D.W. Johnson, and P. Neitlich. 2003b. Ecological

effects of Nitrogen Deposition in the Western United States. BioScience 53:404–

420.

Galloway, J.N, J.D. Aber, J. W. erisman, S.P. Seitzinger, R.W. Howarth, E. B. Cowling, and B. J. Cosby. 2003. The Nitrogen Cascade. BioScience 53: 341–356.

Hammerschmidt, C.R., M.B. Sandheinrich, J.G. Wiener, and R.G. Rada. 2002. Effects of dietary methylmercury on reproduction of fathead minnows. Environmental Science and Technology 36:877–883.

Lastif, M.A., R.A. Bodaly, T.A. Johnson, R.J.P. Fudge. 2001. Effects of environmental and maternally derived methylmercury on the embryonid and larval

stages of walleye (Stizostedion vitreum). Environmental Pollution 111:139–148.

[NEG/ECP] New England Governors and Eastern Canadian Premiers Forest Mapping Group 2003. Assessment of Forest Sensitivity to Nitrogen and Sulfur Deposi-
267

tion in New England and Eastern Canada. (www.ecosystems-research.com/fmi/VTNF-Forest-Sensitivity-Report.pdf)

[NOAA] National Oceanic and Atmospheric Administration. 2004. Atmospheric Deposition. (www.noaa.chesapeakebay.net/air/air.html)

[NPS] National Park Service. 2003. Ozone Sensitive Plant Species on National Park

Service and U.S. Fish and Wildlife Service Lands. NPS D1522. Natural Resource

Report NPS/NRARD/NRR–2003/01. Air Resources Division. Denver, CO. 21 pp.

(www.nature.nps.gov/ard/pubs/index.htm)

[NRC] National Research Council. 2004. Air Quality Management in the United

States. Report by the Committee on Air Quality Management in the United

States, Board on Environmental Studies and Toxicology, board on Atmospheric

Sciences and Climate, Division on Earth and Life Studies. The National Academy

Press: Washington, D.C.

Sheeder, Scott A. J.A. Lynch, and J. Grimm. 2002. Modeling Atmospheric Nitrogen

Deposition and Transport in the Chesapeake Bay Watershed. Journal of Environmental Quality 31:1194—206.

Stoddard, J.L., J.S. Kahl, F.A. Deviney, D.R. DeWalle, C.T. Driscoll, A.T. Herlihy,

J.H. Kellogg, P.S. Murdoch, J.R. Webb, and K.E. Webster, 2003. Response of Surface Water Chemistry to the Clean Air Act Amendments of 1990. EPA/620/R–03/

001, U.S. Environmental Protection Agency, Washington, DC.

Sullivan, T.J., B.J. Cosby, R.K. Munson, J.R. Webb, K.U. Snyder, A.T. Herlihy, A.J.

Bulger, E.H. Gilbert, and D. Moore. 2002. Assessment of the Effects of Acidic Deposition on Aquatic Resources in the Southern Appalachian Mountains. Final report to the Southern Appalachian Mountains Initiative, Asheville, NC.

STATEMENT OF LARGE PUBLIC POWER COUNCIL

The Large Public Power Council (LPPC) appreciates the opportunity to submit the

following written statement in support of Clear Skies Act of 2005 (S. 131). LPPC

has been a long-time supporter of passing comprehensive multi-pollutant control

legislation for the power sector. We were the first industry group to endorse the Administration’s original Clear Skies proposal with our letter to President Bush in

September 2002 and our support remains strong. LPPC believes the time to act is

now. The passage of the 2005 version of the Clear Skies Act will achieve not only

a 70 percent reduction in power plant emissions, but also can improve air quality

faster, with greater environmental certainty, and more cost effectively than continued regulation under current law.

LPPC is an association of 24 of the largest public power systems in the United

States. LPPC members directly or indirectly provide reliable, affordably priced electricity to most of the 40 million customers served by public power. We own and operate over 44,000 megawatts of generation and approximately 26,000 circuit miles

of transmission lines. LPPC member utilities and public power agencies are located

in states and territories representing every region of the country. In addition, member utilities own and operate a diverse portfolio of fossil, nuclear, hydropower, and

other renewable energy sources that reflect the national energy mix.

All LPPC members are committed to environmental excellence and among the 24

LPPC member utilities we have some supporting more environmentally stringent

provisions and others suggesting a narrower scope. LPPC looks forward to helping

to shape revisions to the Clean Air Act.

Stringent Emissions Reductions. If enacted into law, Clear Skies would be the

most ambitious pollution control program ever established to reduce power plant

emissions. The administration’s proposal would cut SO2 emissions by 73 percent

(from 11.2 to 3 million tons), NOx emissions by 67 percent (from 5.1 to 1.7 million

tons) and mercury emissions by 69 percent (from 48 to 15 tons) from 2000 levels.

Clear Skies’ reductions would build upon the reductions in SO2 and NOx that the

power sector has achieved to comply with the acid rain and NOx SIP-call programs

(43 percent reduction in SO2 and 45 percent reduction in NOx from 1990 levels).

What is especially impressive about the Clear Skies reduction targets is the longterm improvement in environmental performance achieved by the power industry.

After full implementation of Clear Skies, fossil-fired power plants will achieve 76

percent reduction in NOx and 83 percent reduction in SO2 from 1980 levels. Moreover, the power industry will achieve these reductions while fossil-fueled electricity

production will have more than double during the same period (1980 to 2020). This

means that, on average, for every unit of electricity generated from fossil fuels, the

emissions after implementation of Clear Skies will be less than one tenth of the

emissions for generating the same unit of electricity in 1980. (See Figure 1.)
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1 Note that the above projections are not entirely due to Clear Skies, but also benefit from

emission reductions from other Clean Air Act programs such as the off-road diesel rule.

Environmental Certainty. The Clear Skies Act provides absolute environmental

certainty. If enacted into law, the emissions reductions are locked in today by statute. Specifically, Clear Skies establishes emissions caps guaranteeing that power

plants will not exceed the total allotted levels for each air pollutant. Moreover, Clear

Skies contains specific compliance dates when those emissions caps begin to apply

and when the power plant reductions must be achieved.

The Clear Skies reductions are rock solid. Since the emissions caps and compliance deadlines are set by statute, they cannot be disputed, delayed or otherwise legally challenged in court. Similarly, Clear Skies contains other provisions to assure

full and timely achievement of the mandated emissions reductions. One such provision is an absolute statutory prohibition against any legal challenge of the annual

allowance allocations—which is a key component of the emissions trading program.

Specifically, Clear Skies expressly bars anyone from legally challenging in court

EPA’s calculation of allowance allocations and the determination of any values used

in such calculations. Another provision is the use of default allowance reconciliation

procedures, which apply if EPA fails to promulgate the core rules for allocating,

tracking, and trading allowances by the time that the reduction obligations take effect. These default procedures establish a fallback statutory framework for ensuring

full implementation and compliance with the Clear Skies reduction requirements

even if EPA has not yet promulgated sufficient implementing regulations.

Key Tool for Achieving Clean Air Goals. The targets and time schedules set forth

in the bill for reducing NOx, SO2, and mercury are ambitious, but appear appropriate to achieve the health and environmental goals established under the Clean

Air Act. This is confirmed by the enormous air quality improvements that will result

from implementation of the Clear Skies control program. The facts of Clear Skies

tell a very positive story.

The best way to measure the air quality benefits resulting from Clear Skies is

to evaluate its contribution to attaining the new ambient air quality standards for

fine particles and ozone. These air quality standards are ‘‘the Clean Air Act bedrock

measure of public health protection.’’ Measured by this yardstick, Clear Skies does

extraordinary well.1 Specifically, the Clear Skies reductions, in combination with existing control programs, are projected to reduce dramatically the number of areas

currently not meeting the new air quality standards for fine particles and ozone.

EPA modeling indicates:

• Eastern state fine particle non-attainment counties are projected to decline from

114 currently, to 27 in 2010, to 8 in 2020 (93 percent reduction).

• Eastern state 8-hour ozone non-attainment counties are projected to decline

from 268 currently, to 44 in 2010, to 20 in 2020 (92 percent reduction).
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Areas that are still non-attainment in 2020 are also much closer to attainment.

In areas where EPA projects to be in nonattainment notwithstanding implementation of the Clear Skies program, Clear Skies still plays a crucial role in attaining

the air quality standards. The air quality improvements (particularly, reductions in

regional air pollution transport) achieved by Clear Skies will better position States

in developing effective local air pollution control strategies for attaining the air

quality standards as expeditiously as possible. Clear Skies was never intended to

be the nation’s sole control strategy for attaining the new standards—particularly

since it addresses only one sector and source of emissions out of many in the economy.

New Paradigm for Cleaner Air. The Clear Skies legislation establishes a new paradigm for bringing cleaner air, sooner, at a lower cost. This new paradigm is essential to assure that the stringent emission reductions required under Clear Skies levels are technically and economically feasible, as well as consistent with objectives

to ensure adequate supplies of reasonably priced power. One essential element of

this new paradigm is the use of emissions trading systems for achieving the reductions at the lowest possible cost to industry and the communities we serve. To this

end, careful attention must be given to the methodology for distributing NOx, SO2,

and mercury allowances to electric generating units. LPPC supports the Clear Skies

methodology for allocating allowances to only those units subject to the multi-pollutant reduction requirements. We strongly oppose other legislative proposals to distribute allowances through any type of allowance auction system. Although different

allowance allocation methodologies may be appropriate for different pollutants,

whatever methodology adopted must result in an equitable allocation of the control

obligations to those generating facilities.

Another key component of a new air regulatory paradigm is a coordinated emission reduction strategy. Under existing law, the electric power sector currently faces

emissions control requirements that are duplicative, contradictory, costly and overly

complex. Such a regulatory scheme poses significant planning problems and makes

it very difficult to formulate an efficient strategy for meeting future air regulatory

control requirements, many of which require long construction cycles and large capital expenditures. The failure to improve planning certainty not only creates great

investment risks, but could threaten the reliability and affordability of our nation’s

electric supply.

LPPC is ready to work with the Senate Environment and Public Works Committee and other Members of Congress in developing a new regulatory paradigm

that achieves superior environmental results in a more efficient and cost-effective

manner. Key elements of this new paradigm include reform of new source review,

elimination of redundant air regulatory requirements, and a period of regulatory

certainty going forward for the power generation sector.

In conclusion, LPPC appreciates the Committee’s leadership on this important environmental initiative and stands ready to establish a new paradigm for bringing

cleaner air, sooner, at a lower cost. The time to pass multi-pollutant control legislation is now. Passage of such legislation will ensure clean air for our nation and do

so while protecting the economic well being of our communities and providing an

adequate supply of reliable and affordable energy.
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STATEMENT OF HON. CHRISTINE TODD WHITMAN, ADMINISTRATOR, U.S.

EVIRONMENTAL PROTECTION AGENCY, APRIL 8, 2003

I. INTRODUCTION

Thank you, Mr. Chairman and Members of the Committee for the opportunity to

speak with you today about the Clear Skies Act of 2003. Based on one of the most

successful programs created by the Clean Air Act, Clear Skies is a proposal to substantially reduce emissions of the three most harmful pollutants from power generation—and to do so in a way that is much faster and more efficient than under current law. As President Bush said in the State of the Union Address, Clear Skies

will advance our goal of ‘‘promot[ing] energy independence for our country, while

dramatically improving our environment.’’ The Administration is committed to

working with this Subcommittee and Congress to pass legislation this year. The

widespread support for multi-pollutant legislation to reduce power plant emissions

is a strong indicator that the time for action on this critical issue is now. Failure

to enact Clear Skies this year will delay important public health and environmental

benefits.

This country should be very proud of the progress we have already made in cleaning up our air. Since the Clean Air Act was first enacted in 1970, we have reduced

emissions of the six primary air pollutants by 25 percent. During the same time period, the economy has grown significantly—the Gross Domestic Product increased

160 percent; vehicle miles traveled increased 150 percent; energy consumption increased 40 percent; and the U.S. population increased 35 percent.

Although we have made much progress since 1970, we still face major air quality

challenges in many parts of the country. Clear Skies is the most important next step

we can take to address these challenges and achieve healthy air and a clean environment for all Americans. Clear Skies would make great strides toward solving our

remaining air quality problems in a way that also advances national energy security

and promotes economic growth. It would reduce power plant emissions of SO2, NOx

and mercury by approximately 70 percent from today’s levels and do it faster, with

more certainty, and at less cost to American consumers than would current law.

Last year’s EPA estimates project that, over the next decade, all the programs of

the existing Clean Air Act would reduce power plant emissions of SO2 and NOx by

approximately 23 million tons. Over the same time period, Clear Skies would reduce

emissions of these same pollutants by 58 million tons—a reduction of 35 million

tons of pollution that will not be achieved under current law1.

When fully implemented, Clear Skies would prolong thousands of lives each year,

providing billions of dollars in economic benefits, save millions of dollars in health

care costs, and increase by millions the number of people living in areas that meet

our new, more stringent health-based national air quality standards. Clear Skies

would also virtually eliminate chronic acidity in northeastern lakes, reduce nitrogen

loading in coastal waters, and help restore visibility in our national parks.

The Clean Air Act has been, and continues to be, a vehicle for great progress in

improving the health and welfare of the American people. The Clear Skies Act substantially expands one of the most successful Clean Air Act programs—the Acid

Rain Program—and reduces the need to rely on complex and less efficient programs.

The result would be significant nationwide human health and environmental benefits; certainty for industry, states and citizens; energy security; and continuing low

costs to consumers.

II. CLEAR SKIES PROVIDES SIGNIFICANT BENEFITS

The heart of Clear Skies is a proven cap-and-trade approach to emissions reductions. Mandatory caps restrict total emissions and decline over time. Clear Skies

would continue the existing national cap-and-trade program for SO2, but dramatically reduce the cap from 9 million to 3 million tons. Clear Skies would also use

a national cap-and-trade program for mercury that would reduce emissions from the

current level of about 48 tons to a cap of 15 tons, and would employ two regional

cap-and-trade programs for NOx to reduce emissions from current levels of 5 million

tons to 1.7 million tons. The specific caps and their timing are set forth in Table

1.

Table 1. Clear Skies Emission Reductions Timetable

Although national in scope, Clear Skies recognizes and adjusts for important regional differences in both the nature of air pollution and the relative importance of

emissions from power generation. The eastern half of the country needs reductions

in NOx emissions to help meet the ozone and fine particle standards, which generally are not an issue in the western half of the county (with the exception of Cali-
275

fornia, which does not have significant emissions from existing coal-fired power

plants). The western half of the country needs NOx reductions primarily to reduce

the regional haze that mars scenic vistas in our national parks and wilderness

areas, and the nitrogen deposition that harms fragile forests. Recognizing these regional differences, Clear Skies would establish two trading zones for NOx emissions

and prohibit trading between the zones to ensure that the critical health-driven

goals in the East are achieved.

Clear Skies also recognizes the special visibility protection measures that have

been developed by states participating in the Western Regional Air Partnership

(WRAP). Clear Skies would essentially codify the WRAP’s separate SO2 backstop

cap-and-trade program, which would come into effect only if the WRAP states did

not meet their 2018 SO2 emissions targets.

Finally, Clear Skies requires tough, technology-based new source standards on all

new power generation projects and maintains special protections for national parks

and wilderness areas when sources locate within 50 km of ‘‘Class I’’ national parks

and wilderness areas.

Significant Public Health and Environmental Benefits

The public health and environmental benefits of Clear Skies present compelling

reasons for its immediate passage. EPA projects that, by 2010, reductions in fine

particle and ozone levels under Clear Skies would result in billions of dollars in

health and visibility benefits nationwide each year, including as many as 6,400 prolonged lives. Using an alternative methodology, 3,800 lives would be prolonged by

2010. Under EPA’s base methodology for calculating benefits, Americans would experience significant benefits each year by 2020, including:

• 12,000 fewer premature deaths (7,000 under an alternative analysis),

• 11,900 fewer visits to hospitals and emergency rooms for cardiovascular and

respiratory symptoms,

• 370,000 fewer days with asthma attacks, and

• 2 million fewer lost work days.

Using the alternative methodology, by 2020 Americans would experience 7,000

fewer premature deaths each year.

Methodologies do not exist to quantify or monetize all the benefits of Clear Skies.

Still, it is clear that the benefits far exceed the costs. EPA estimates that the health

benefits we can quantify under Clear Skies are worth $93 billion annually by

2020—substantially greater than the annual costs of approximately $6.5 billion. An

alternative approach projects annual health benefits of $11 billion, still significantly

outweighing the costs. The Agency estimates an additional $3 billion in benefits

from improving visibility at select National Parks and Wilderness Areas. These estimates do not include the many additional benefits that cannot currently be monetized but are likely to be significant, such as human health benefits from reduced

risk of mercury emissions, and ecological benefits from improvements in the health

of our forests, lakes, and coastal waters.

Clear Skies would achieve most of these benefits by dramatically reducing fine

particle pollution caused by SO2 and NOx emissions, which is a year-round problem.

Of the many air pollutants regulated by EPA, fine particle pollution is perhaps the

greatest threat to public health. Hundreds of studies in the peer reviewed literature

have found that these microscopic particles can reach the deepest regions of the

lungs. Exposure to fine particles is associated with premature death, as well as

asthma attacks, chronic bronchitis, decreased lung function, and respiratory disease.

Exposure is also associated with aggravation of heart and lung disease, leading to

increased hospitalizations, emergency room and doctor visits, and use of medication.

By reducing NOx emissions, Clear Skies also would reduce ozone pollution in the

eastern part of the country and help keep ozone levels low in the western portion

of the country. Ozone (smog) is a significant health concern, particularly for children

and people with asthma and other respiratory diseases who are active outdoors in

the summertime. Ozone can exacerbate respiratory symptoms, such as coughing and

pain when breathing deeply, as well as transient reductions in lung function and

inflammation of the lung. Ozone has also been associated with increased hospitalizations and emergency room visits for respiratory causes. Repeated exposure

over time may permanently damage lung tissue.

Current estimates indicate that more than 350 counties fail to meet the healthbased fine particle and ozone standards. As a result, 45 percent of all Americans

live in counties where monitored air was unhealthy at times because of high levels

of fine particles and ozone.2 Clear Skies, in combination with existing control programs, would dramatically reduce that number, as shown in Figure 1. In areas

where attainment is not projected, Clear Skies would assist those areas in addressing the air quality problems. Even counties currently measuring attainment would
276

benefit from the reductions under Clear Skies. Throughout the West, Clear Skies

would hold emissions from power plants in check, preserving clean air in highgrowth areas and preventing degradation of the environment, even as population

and electricity demand increase.

[See Attached Figure 1, Widespread Attainment with Fine Particle and Ozone

Standards]

Clear Skies would also reduce mercury emissions from power plants. EPA is required to regulate mercury because EPA determined that mercury emissions from

power plants pose an otherwise unaddressed significant risk to health and the environment, and because control options to reduce this risk are available. Mercury, a

potent toxin, can cause permanent damage to the brain and nervous system, particularly in developing fetuses when ingested in sufficient quantities. People are exposed to mercury mainly through eating fish contaminated with methylmercury.

Mercury is released into the environment from many sources. Mercury emissions

are a complex atmospheric pollutant transported over local, regional, national, and

global geographic scales. EPA estimates that 60 percent of the mercury falling on

the U.S. is coming from current man-made sources. Power generation remains the

largest man-made source of mercury emissions in the United States. In 1999, coalfired power plants emitted 48 tons of mercury (approximately 37 percent of manmade total). These sources also contribute 1 percent of mercury to the global pool.

Mercury that ends up in fish may originate as emissions to the air. Mercury emissions are later converted into methylmercury by bacteria. Methylmercury accumulates through the food chain: fish that eat other fish can accumulate high levels of

methylmercury. EPA has determined that children born to women who may have

been exposed to high levels may be at some increased risk of potential adverse

health effects. Prenatal exposure to such levels of methylmercury may cause developmental delays and cognitive impairment in children. Clear Skies will require a

69 percent reduction of mercury emissions from power plants.

In addition to substantial human health benefits, Clear Skies would also deliver

numerous environmental benefits. For example, under Clear Skies, we project that

10 million fewer pounds of nitrogen would enter the Chesapeake Bay annually by

2020, reducing potential for water quality problems such as algae blooms and fish

kills. In fact, the Chesapeake Bay States, including NY, VA, MD, PA, DE, WV and

DC, recently agreed to incorporate the nitrogen reductions that would result from

Clear Skies legislation as part of their overall plan to reduce nutrient loadings to

the Bay. Clear Skies would also accelerate the recovery process of acidic lakes, virtually eliminating chronic acidity in many Northeastern lakes. For decades fish in

the Adirondacks have been decimated by acid rain, making many lakes completely

incapable of supporting populations of fish such as trout and smallmouth bass. The

Acid Rain Program has allowed some of these lakes and the surrounding forests to

begin to recover; Clear Skies would achieve additional needed reductions. Clear

Skies would also help other ecosystems suffering from the effects of acid deposition

by preventing further deterioration of Southeastern streams. Finally, Clear Skies

would improve visibility across the country, particularly in our treasured national

parks and wilderness areas.

Clear Skies is designed to ensure that these public health and environmental benefits are achieved and maintained. By relying on mandatory caps, Clear Skies would

ensure that total power plant emissions of SO2, NOx and mercury would not increase over time. This is a distinct advantage over traditional command-and-control

regulatory methods that establish source-specific emission rates but which allow

total emissions to increase over time. Like the Acid Rain Program, Clear Skies

would have much higher levels of accountability and transparency than most other

regulatory programs. Sources would be required to continuously monitor and report

all emissions, ensuring accurate and complete emissions data. If power plants emit

more than allowed, financial penalties are automatically levied—without the need

for an enforcement action. More importantly, every ton emitted over the allowed

amount would have to be offset in the following year, ensuring no net environmental

harm. This high level of environmental assurance is rare in existing programs;

Clear Skies would make it a hallmark of the next generation of environmental protection.

Reasonable Costs and Energy Security for Consumers and Industry

The President directed us to design Clear Skies to meet both our environmental

and our energy goals. Under Clear Skies, electricity prices are expected to remain

at or below current levels over the next decade. Our extensive economic modeling

of the power industry looked at a broad array of factors to gauge the effects of Clear

Skies on the energy industry—and they all show that cleaner air and energy security can go hand-in-hand.
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Clear Skies would maintain energy diversity. With Clear Skies, coal production

for power generation would be able to grow by almost 10 percent from 2000 to 2020

while air emissions are significantly reduced. EPA’s extensive economic modeling for

Clear Skies demonstrates that the proposal’s emission reductions would be achieved

primarily through retrofitting controls on existing plants. Clear Skies’s timeframe

and certainty enable the power sector to meet aggressive emission reduction targets

without fuel switching. This is important not only to power generators and their

consumers who want to continue to rely on our most abundant, reliable, affordable

and domestically secure source of energy, but also to other consumers and industries

whose livelihoods could be hurt by a rise in natural gas prices. Our analysis shows

that Clear Skies would not cause a significant increase in natural gas prices.

Under Clear Skies by 2010, about three-fourths of U.S. coal-fired generation is

projected to come from units with billions of dollars of investment in advanced SO2

and/or NOx control equipment (such as scrubbers and Selective Catalytic Reduction,

which also substantially reduce mercury emissions). In 2020, the percentage is projected to rise to 85 percent. Cost effective strategies and technologies for the control

of sulfur dioxide and nitrogen oxides emissions exist now, and—thanks in good part

to the Clear Skies market-based system—improved methods for these pollutants,

and for mercury, are expected to become increasingly cost-efficient over the next

several years. In fact, the Institute of Clean Air Companies forecasts that the U.S.

markets for most technology sectors will remain fairly strong, adding momentum to

the air pollution control technology industry. We expect that the Clear Skies Act

will provide great benefits to American jobs in the engineering and construction industries.

One of the key reasons Clear Skies would be cost-effective is its reliance on capand-trade programs. Like the Acid Rain Program upon which it is based, Clear

Skies would give industry flexibility in how to achieve the needed emission reductions, which allows industry to make the most cost-effective reductions and pass

those savings on to consumers. Power plants would be allowed to choose the pollution reduction strategy that best meets their needs (e.g., installing pollution control

equipment, switching to lower sulfur coals, buying excess allowances from plants

that have reduced their emissions beyond required levels). Like the Acid Rain program, Clear Skies includes banking provisions, enabling companies to save unused

allowances for future use. Banking creates a tangible, quantifiable, economic incentive to decrease emissions beyond allowable levels, which EPA projects will result

in significant early benefits due to over-compliance in the initial years, particularly

for SO2. It also leads to gradual emissions reductions over time, and therefore a less

disruptive transition to tighter emission controls needed to address lingering problems. Based on past experience under the Acid Rain Program, by placing a monetary value on avoided emissions, Clear Skies would stimulate technological innovation, including efficiency improvements in control technology, and encourage early

reductions.

Assistance to State and Local Governments

Under the current Clean Air Act, state and local governments face the daunting

task of meeting the new fine particle and ozone standards. Clear Skies would substantially reduce that burden. By making enormous strides toward attainment of

the fine particle and ozone standards, Clear Skies would assist state and local governments in meeting their obligation under the Clean Air Act to bring areas into

attainment with these health-based standards, and provide Americans with cleaner

air.

Clear Skies’ assistance to states goes beyond ensuring that power plants will reduce their emissions. Clear Skies relies on a common-sense principle—if a local air

quality problem will be solved in a reasonable timeframe by the required regional

reductions in power plant emissions, we should not require local areas to adopt local

measures. Under Clear Skies, areas that are projected to meet the ozone and fine

particles standards by 2015 as a result of Clear Skies would have a legal deadline

of 2015 for meeting these standards (i.e., will have an attainment date of 2015).

These areas would be designated ‘‘transitional’’ areas, instead of ‘‘nonattainment’’ or

‘‘attainment,’’ and would not have to adopt local measures (except as necessary to

qualify for transitional status). They would have reduced air quality planning obligations and would not have to administer more complex programs, such as transportation conformity, nonattainment New Source Review, or locally based progress or

technology requirements in most circumstances.
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III. IMPROVING THE CLEAN AIR ACT WITH CLEAR SKIES

Clear Skies would improve the Clean Air Act in a number of ways. It would build

on the proven portions of the Clean Air Act—like the national ambient air quality

standards and the Acid Rain Program—and reduce reliance on complex, less efficient requirements like New Source Review for existing sources. The mandatory

emissions caps at the heart of Clear Skies guarantee that reductions will be

achieved and maintained over time. In contrast, uncertainties with respect to regulatory development, litigation, and implementation time make it difficult to estimate

how quickly and effectively current regulations would be implemented under the

current Clean Air Act. The level of SO2 and NOx reductions we expect over the next

decade with Clear Skies legislation could not be achieved under the existing Act.

After that, we know that Clear Skies would achieve significant reductions, while

both the timing and level of reductions under the current Clean Air Act are unclear.

Early Reductions

One of the major reasons we need Clear Skies now is that adoption of Clear Skies

would provide greater protection over the next decade than the traditional regulatory path. The Clear Skies Act will result in significant over-compliance in the

early years, particularly for SO2, because sources are allowed to bank excess emissions reductions. For reasons described below, our analyses indicate that the cumulative SO2 and NOx emissions reductions achieved by Clear Skies over the next decade would not be achieved in the same timeframe under the current Clean Air Act.

Last year’s EPA estimates project that power plants would emit 35 million fewer

tons of NOx and SO2 over the next decade under Clear Skies than they would under

the current Clean Air Act—this more than doubles the reductions otherwise expected and would ensure significantly larger human health and environmental benefits. Our analysis suggests that the amount of pollution controls that the industry

will have to install under Clear Skies over the next decade will stretch the limits

of available labor and other construction resources, but can in fact be accomplished

while maintaining energy reliability and continuing the downward trend in electricity prices.

Legislation Now Is Better than Regulation Followed by Years of Litigation

Even if Clear Skies is not passed by Congress, power plants will be required to

reduce their emissions of SO2, NOx and mercury. There is no more cost effective

way than Clear Skies to meet the requirements of the current Clean Air Act or to

achieve our public health and environmental goals. We know that, absent new legislation, EPA and the states will need to take a number of regulatory actions, although it is unclear now when the requirements will come into effect or what their

control levels will be.

Clear Skies has several benefits over the regulatory scheme that will otherwise

confront power generators. Clear Skies is designed to go into effect immediately

upon enactment. Power plants would immediately understand their obligations to

reduce pollution and would be rewarded for early action. As a result, public health

and environmental benefits would begin immediately. Given Clear Skies’ design, it

is unlikely that litigation could delay the program (particularly since Congress

would decide the two most controversial issues—the magnitude and timing of reductions). In contrast, under the current Clean Air Act, power plants would not know

what their obligations would be until after EPA and states started and completed

numerous rulemakings.

Past experience suggests that litigation delays on the regulatory path are likely.

Our experience with two cap-and-trade programs—the legislatively created Acid

Rain Trading Program and the administratively created NOx SIP Call—illustrates

the benefits of achieving our public health and environmental goals with legislation

rather than relying solely on existing regulatory authority.

Though we project a great deal of benefits will arise from implementation of the

NOx SIP call, the journey has been difficult and is not yet over. The NOx SIP call

was designed to reduce ozone-forming emissions by one million tons across the eastern United States. The rulemaking was based on consultations begun in 1995

among states, industry, EPA, and nongovernmental organizations. A Federal rule

was finalized in 1998. As a result of litigation, one state was dropped and the 2003

compliance deadline was moved back for most states. Most states are required to

comply in 2004, although two states will have until 2005 or later. Meanwhile,

sources in these states continue to contribute to Eastern smog problems. Although

the courts have largely upheld the NOx SIP Call, the litigation is not completely

over. Industry and state challenges to the rules have made planning for pollution

control installations difficult, raised costs to industry and consumers, and delayed

health and environmental benefits.
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In contrast, reductions from the Acid Rain Program began soon after it passed

(even before EPA finalized implementing regulations). There were few legal challenges to the small number of rules EPA had to issue—and none of the challenges

delayed implementation of the program. The results of the program have been dramatic—and unprecedented. Compliance has been nearly 100 percent. Reductions in

power plant SO2 emissions were larger and earlier than required, providing earlier

human health and environmental benefits. Now, in the ninth year of the program,

we know that the greatest SO2 emissions reductions were achieved in the highest

SO2–emitting states; acid deposition dramatically decreased over large areas of the

eastern United States in the areas where they were most critically needed; trading

did not cause geographic shifting of emissions or increases in localized pollution (hot

spots); and the human health and environmental benefits were delivered broadly.

The compliance flexibility and allowance trading has reduced compliance costs by

75 percent from initial EPA estimates.

[See 2001 Acid Rain Program Progress Report submitted for the record.]

It is clear from this example that existing regulatory tools often take considerable

time to achieve significant results, and can be subject to additional years of litigation before significant emissions reductions are achieved. Under this scenario, there

are few incentives to reduce emissions until rules are final and litigation is complete, posing potentially significant delays in achieving human health and environmental benefits.

The Clean Air Act contains several provisions under which EPA will be required

to impose further emission controls on power plants in order to allow states to meet

the new national ambient air quality standards (NAAQS) for PM2.5 and ozone. For

example, Section 126 of the Clean Air Act provides a petition process that states

can use to force EPA to issue regulations to reduce emissions of SO2 and NOx from

upwind sources, including power plants. A number of states have indicated that

they intend to submit Section 126 petitions in the near future. However, compared

to Clear Skies, this approach will almost certainly involve years of litigation and uncertainty about reduction targets and timetables.

Additional reductions are required from power plants through the regional haze

rule’s BART (Best Available Retrofit Technology) requirements and forthcoming

mercury MACT (maximum achievable control technology) requirements. EPA is required to propose by the end of 2003 a MACT standard for utility mercury emissions

that must be met, plant-by-plant, by every coal-fired utility with unit capacity above

25 megawatts. EPA is required to finalize this rule by the end of 2004. The Act generally gives sources 3 years within which to comply with MACT standards. This

compliance obligation could be delayed by a court if EPA’s rule is challenged.

Because these regulations will be the product of separate Federal, state and judicial processes, comparable health and environmental protection is likely to cost more

under the current Clean Air Act than under Clear Skies. EPA estimates that a comprehensive, integrated approach relying on cap-and-trade programs could reduce

costs by one fourth as compared to the regulatory approach achieving comparable

emission reductions. These cost savings would be passed on to the public through

lower electricity prices and greater profitability to investors and owners of electric

generation.

New Source Review

Some have suggested that Clear Skies is an attempt to undermine the Clean Air

Act. This is simply not true. To achieve the next generation of environmental

progress, we must build on the successful provisions in laws that have served us

well—and learn from those provisions that have not served us well, or have had

only limited success. New Source Review (NSR) is an example of a program that

EPA and stakeholders have long recognized is not working well.

There is a misconception that the principle goal of the NSR program is to reduce

emissions from power plants. This is simply incorrect. Reducing emissions from

power plants is the principle goal of Clear Skies. The NSR program is triggered only

when facilities emitting large amounts of air pollution are built, and when modifications at these facilities result in significant increases in air pollution. The NSR program is not designed to result in nationwide reductions of air pollution from power

plants. When it comes to reducing harmful air emissions from power plants, Clear

Skies would accomplish more than NSR.

Clear Skies would significantly modify the NSR program for power plants, but

contain some important backstops. We expect that existing power plants would not

have to go through NSR for modifications. New sources would no longer have to go

through the entire NSR process, but some aspects of the process would still apply.

Although we believe that with a tight cap on emissions, new sources will always

install good controls, we did not want to run the risk that a new source would be
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uncontrolled. Therefore, as a backstop, Clear Skies would require all new power

plants to meet New Source Performance Standards that are set in the statute.

In addition, new power generators locating within 50 km of a Class I area (e.g.,

national parks or wilderness areas) would still be subject to the current NSR requirements for the protection of those areas. Finally, new power plants will also

have to meet the current NSR requirements that they will not cause or contribute

to a violation of the national ambient air quality standards.

IV. WINDOW OF OPPORTUNITY

Because of the lessons learned over the last decade, there is increasing support

for legislation such as Clear Skies that would significantly reduce and cap power

plant emissions and create a market-based system to minimize control costs. From

environmental groups to coal companies, there is increasing broad-based support

demonstrating that multipollutant legislation is a preferable path to cleaner air.

Such an approach would address an array of air pollution concerns associated with

power generation—including fine particles, smog, mercury deposition, acid rain, nitrogen deposition, and visibility impairment—at lower cost and with more certainty

than currently allowed by the Clean Air Act.

The Acid Rain Program is widely accepted as one of the most effective air pollution programs ever adopted and has consequently attracted worldwide attention and

emulation. The Program’s track record has encouraged Congress to consider broader

applications of cap-and-trade programs to address multiple air pollutants. The common elements of the proposals considered by Congress are mandatory caps on emissions of multiple pollutants from the power generation sector, implemented through

allowance trading programs modeled after the Acid Rain Program.

There is no better time for Congress to be considering multipollutant legislation.

President Bush has indicated that Clear Skies is his top environmental priority. The

number of proposals being considered by Congress also indicates a consensus behind

the basic idea of a multipollutant cap-and-trade approach. The Large Public Power

Council, Edison Electric Institute, Adirondack Council, and numerous individual

utilities have all expressed support for the scope and framework of Clear Skies. If

legislation passes quickly, we will begin achieving emissions reductions and related

health benefits now. Congress needs to act now so that we do not lose a decade’s

worth of health and environmental benefits from reducing fine PM pollution, smog,

acid deposition, nitrogen deposition, and regional haze. Further, as EPA continues

to implement additional forthcoming regulations under the existing framework of

the Act, the likelihood of our ability to pursue an integrated program diminishes—

and with it diminish the numerous advantages that I have delineated today of an

approach like Clear Skies.

Legislation is also needed now to help states with their air quality planning and

provide incentives for industry innovation, which, in turn, would lower costs and

emissions. Such incentives are particularly compelling this year as we approach the

task of reducing mercury emissions from the power industry. If designed correctly,

legislation could provide the incentive that spurs technological innovation. When

stringent yet flexible mechanisms exist, substantial technological improvements and

steady reductions in control costs can be expected to follow.

Congress obviously has much to consider as it weighs Clear Skies and other

multipollutant proposals this year. We anticipate and welcome a rigorous and

healthy debate on these issues.

NOTES

1 Except where otherwise noted, the projected emission levels, costs and benefits

in this testimony are all based on analyses of the Clear Skies Act of 2002 conducted

in 2002. EPA is currently analyzing the Clear Skies Act of 2003 using updated modeling assumptions and other updated information. We expect that the new analyses

will be very similar to the 2002 analyses, but specific projections will likely change

somewhat. 2These numbers are based on the most current monitoring data available to EPA.

It is more current than the data that was available at the time that EPA conducted

its analyses last year of the Clear Skies Act of 2002. The newer data confirms that

we have serious air quality problems in many counties, but it shows improvement—

fewer counties violating the ozone and fine particle standards. As a result, compared

to last year’s analyses, the new analyses may show less residual non-attainment

(counties out of attainment in 2010 and 2020).
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STATEMENT OF HON. KYLE E. MCSLARROW, DEPUTY SECRETARY, U.S. DEPARTMENT

OF ENERGY, MAY 8, 2003

Mr. Chairman, I am pleased to appear before you today to discuss the Administration’s National Energy Policy and to discuss why we think Clear Skies is a critical

component of the President’s strategy to confront our energy and environmental

challenges.

Though it is often overlooked, the President’s National Energy Policy directed the

Administrator of the Environmental Protection Agency to work with Congress to

propose legislation that would establish a flexible, market-based program to significantly reduce and cap emissions of sulfur dioxide, nitrogen oxide, and mercury from

electric power generators. The President’s National Energy Policy concluded that, as

our energy needs grow, additional innovations would be necessary to continue improving our environmental conditions. The success of the Clean Air Act Acid Rain

program in promoting innovation and emission reductions is well known—especially

by Members of this committee—and served as the template for the Clear Skies legislation now before this Committee.

We are pleased that the Senate is now considering a comprehensive energy bill

reported out of the Senate Energy committee, and commend Chairman Domenici

and the members of his committee for acting so swiftly. And, we commend you, Mr.

Chairman, and this committee for moving aggressively to consider the Clear Skies

legislation.

INTRODUCTION AND OUTLOOK

Over the past century, we have witnessed the power of energy to drive global economic development. In the 1970s, we learned firsthand how energy shortages and

resulting high prices can compromise economic growth and the quality of life to

which Americans have grown accustomed. Clearly, the availability of reliable, affordable energy is critical to sustained economic growth.

We have a series of long-term energy challenges that require action now. These

challenges are present along the entire energy continuum, affecting crude oil, refinery products, natural gas, electricity generation and transmission, the environment,

and economic growth.

The Nation’s Power Industry

To understand the need for Clear Skies, it is important to understand the current

make-up of the Nation’s electric power industry. The U.S. power-generating sector

remains the envy of the world. On any given day, approximately 5,000 generating

plants can make available up to 900,000 megawatts of electricity for virtually every

home and business in the country. Fossil fuels supply about 70 percent of the Nation’s requirements for electricity generation. Coal, alone, accounts for more than 50

percent of the electricity Americans consume. Primarily because of the power sector’s use of abundant supplies of American coal and natural gas, consumers in the

United States benefit from some of the lowest cost electricity of any free market

economy.

U.S. Electricity Generation by Fuel

America’s economic progress and global competitiveness have benefited greatly

from this low cost electricity. Electricity is an essential part of America’s modern

economy. While the Nation has made dramatic progress in ‘‘decoupling’’ overall energy consumption from economic growth, increased economic activity remains closely

linked to the availability of affordable electric power—and is likely to remain so well

into the future.

The Nation’s demand for electricity is projected to grow significantly over the next

22 years. Between now and 2025, the United States will likely have to add between

446,000 and 656,000 megawatts of new generating capacity to meet growing demand. This is equivalent to adding the entire power generation sectors of Germany

and Japan, combined, to the U.S. power grid. Concurrent with this dramatic—and

capital intensive—expansion of the Nation’s power fleet, power generators will also

be called upon to make new investments in pollution control technologies to meet

tightening environmental standards. Over the past 25 years, America’s electricity

utility industry has invested billions of dollars in advanced technologies to improve

the quality of our air. Each year, a substantial portion of normal plant operations

costs—again amounting to several billions of dollars a year—are associated with operating installed technologies that reduce air emissions.

The investment has returned dividends. By installing new technologies to capture

tiny particles of fly ash, the power industry has significantly improved air quality

by dramatically reducing particulate matter. The power industry has also installed
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sulfur dioxide controls on more than 90,000 megawatts of capacity as part of a successful effort that has cut SO2 emissions substantially since 1970. Most of the nation’s coal-fired plants have also installed nitrogen oxide controls that have helped

make initial NOx reductions. In short, advanced technology—given the time to mature and be deployed—can be effective.

Technological improvements have permitted the Nation’s power sector to continue

generating relatively low cost power and, at the same time, use the energy resources

America has in most abundance. America’s use of coal, for example, has actually tripled since 1970 even as our air has become cleaner. Advanced technology also offers

a pathway toward the prospects of achieving even greater reductions in air pollutants in the future.

At this point, let me review long-term energy trends—with a focus on natural gas

and coal—which should help illustrate our challenges. My comments here are based

on analyses prepared by the Department of Energy’s independent analytical arm,

the Energy Information Administration, in its Annual Energy Outlook 2003 (AEO

2003). All statistics are based on EIA’s reference case scenario for the year 2025,

which assumes current laws and regulations, including the Eastern U.S. ozone SIP

call, but not future regulations, such as those to implement the new Clean Air Act

ozone and particulate matter standards or the mercury MACT standard. The reference case also assumes continued improvement in energy consuming and producing technologies, consistent with historic trends.

Natural Gas Trends

The natural gas share of electricity generation is projected to increase from 17

percent in 2001 to 30 percent in 2025. By 2025, total natural gas consumption is

expected to increase to almost 35 trillion cubic feet, which will amount to 26 percent

of U.S. delivered energy consumption. Industrial consumption—the largest natural

gas-consuming sector—is expected to increase by 3.4 trillion cubic feet over the forecast, driven primarily by economic growth. Combined consumption in the residential

and commercial sectors is projected to increase by 2.6 trillion cubic feet between

2001 and 2025, driven by increasing population and healthy economic growth, and

accompanied by gradually rising prices in real terms. Natural gas remains the overwhelming choice for home heating throughout the forecast period. Natural gas consumption in the generation sector doubles by 2025 due to lower capital costs, higher

efficiencies, lower construction lead times, and lower emissions.

In the short term, domestic natural gas prices are expected to remain high in

2003 and are at risk for significant volatility through at least the next 12 to 18

months. EIA estimates that the current natural gas storage level is the lowest on

record for this point in the annual cycle. As long as temperatures remain at or

below normal this summer, natural gas storage levels should rise sharply over the

coming months. But if this summer is hotter than normal, natural gas prices would

jump as cooling demand would compete with the need to build storage inventories.

A large rebound in the economy, poor results from the ongoing increase in natural

gas drilling, or a continued tight oil market might also spur volatility.

On that note, drilling for natural gas expected to increase substantially, but a

fourth U.S. LNG terminal is expected to open this year at Cove Point, Maryland,

and a Kern River Pipeline extension from the Rockies to the West Coast opened earlier this month—greatly increasing the capacity to move gas from a key producing

area. In 2004, declining oil prices should ease natural gas prices, and strong natural

gas drilling should increase productive capacity through the end of the year.

Domestic gas production is expected to increase more slowly than consumption

over the long-term forecast, rising from 19.4 trillion cubic feet in 2001 to 26.8 trillion cubic feet in 2025. The national average wellhead price is projected to reach

$3.90 per thousand cubic feet, in 2001 dollars, by 2025.

Increased U.S. natural gas production through 2025 is projected to come primarily

from unconventional sources and from Alaska. Unconventional gas production increases by 4.1 trillion cubic feet over the forecast period—more than any other

source, largely because of expanded tight sandstone gas production in the Rocky

Mountain region. Annual production from unconventional sources is expected to account for 36 percent of production in 2025, compared to 28 percent today. An Alaska

natural gas pipeline is projected to begin flowing gas to the lower 48 States in 2021,

reaching 4.5 billion cubic feet per day in 2023, with further expansion beginning in

2025. In 2025, total Alaskan gas production is projected to be 2.6 trillion cubic feet.

Conventional onshore non-associated production is projected to increase by 1.2

trillion cubic feet over the forecast, driven by technological improvements and rising

natural gas prices. However, its share of total production declines from 34 percent

in 2001 to 29 percent by 2025. Non-associated offshore production adds 560 billion

cubic feet, with increased drilling activity in deep waters; however, its share of total
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U.S. production declines from 22 percent in 2001 to 18 percent by 2025. Associated

dissolved production declines by 800 billion cubic feet, consistent with a projected

decline in crude oil production. Lower 48 associated-dissolved natural gas is projected to account for 8 percent of U.S. natural gas production in 2025, compared

with 15 percent in 2001.

A key question facing producers and policymakers today is whether natural gas

resources in the mature onshore lower 48 States have been exploited to a point at

which lower discoveries per well eliminate the possibility of increasing—or even

maintaining—current production levels at reasonable cost. Depletion has been

counterbalanced historically by improvements in technology that have allowed gas

resources to be discovered more efficiently and developed less expensively, have extended the economic life of existing fields, and have allowed natural gas to be produced from resources that previously were too costly to develop. In EIA’s projection,

technological progress for both conventional and unconventional recovery is expected

to continue to enhance exploration and reduce costs. However, there is a significant

debate within the industry itself as to whether this will occur.

The difference between U.S. natural gas production and consumption is net imports. Net imports of natural gas, primarily from Canada, are projected to increase

from 3.6 trillion cubic feet in 2001 to 7.8 trillion cubic feet in 2025. Net imports contributed 16 percent to total natural gas supply in 2001, compared to an expected

22 percent in 2025. Almost half of the increase in U.S. imports is expected to come

from liquefied natural gas (LNG). By 2025, EIA expects expansion at the four existing terminals and construction of three new LNG terminals.

Growth in pipeline imports from Canada partly depends on the completion of the

MacKenzie Delta pipeline, which is expected to be completed in 2016 and expanded

in 2023. Net imports from Canada are projected to provide 15 percent of total U.S.

supply in 2025, about the same as in 2001. Mexico is projected to go from a net

importer of U.S. natural gas to a net exporter in 2020, as an LNG facility begins

operating in Baja California, Mexico, in 2019, predominantly serving the California

market. By 2025, the United States is expected to import about 350 billion cubic

feet of natural gas from Mexico per year.

Coal Trends

The share of electricity generated from coal is projected to decline from 52 percent

in 2001 to 47 percent in 2025 as a more competitive electricity industry invests in

less capital-intensive and more efficient natural gas generation technologies. Nonetheless, coal remains the primary fuel for electricity generation through 2025, and

EIA projects that 74 gigawatts of new coal-fired generating capacity will be constructed between 2001 and 2025.

EIA’s analysis here does not incorporate a projection of several Clean Air Act programs that could have a significant impact on the use of coal such as the mercury

MACT. Although this rule has not been proposed, based on requirements of the

Clean Air Act it is designed to require the control of mercury on a source by source

basis by the end of 2007, which could be very costly and cause an even greater decline in the share of electricity generated by coal.

EIA projects growing domestic consumption over the forecast horizon, and projects

a simultaneous reduction in real coal prices to generators by approximately 12 percent by 2025. Average annual coal consumption is projected to increase by 1.3 percent per year between 2001 and 2025. As domestic coal demand grows, U.S. coal

production is projected to increase at an average rate of 1.0 percent per year.

The decline in prices is driven by the expectation of continued improvements in

labor productivity, and the continued market expansion of western coal, which has

a lower minemouth price than eastern coals. As western production makes further

inroads into markets traditionally supplied by eastern coal, the average heat content of the coals produced and consumed will drop as well, reflecting the lower thermal content per ton of western than eastern coals.

PRESIDENT BUSH’S NATIONAL ENERGY POLICY

We long ago ceased to fully provide for our petroleum needs domestically, and

though most of our current natural gas demand can be met with North American

production, the trend here is also toward a greater share for imported natural gas.

And coal, our most abundant energy resource, is actually projected to reduce its percentage share of electricity generation.

We are often at the mercy of events and decisions over which we have often limited—and sometimes no—control. When winters and summers are mild; when all refineries or pipelines are online; when supply from abroad is abundant and reliable;

when prices are reasonable, we do not feel this dependency. However, when almost

any one of these factors breaks down, markets react instantly, and we face the high-
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er prices and volatility that have become by now an almost certain cyclical phenomenon.

These trends are a concern.

President Bush recognized that to prevent these problems from becoming a permanent, recurring feature of American life, we needed a long-term plan for energy

security that would promote reliable, affordable and environmentally sound energy

for the future.

President Bush’s National Energy Policy, released in May, 2001, reflected a few,

fundamental principles. First, we need to maintain a diversity of fuels from a multiplicity of sources. Second, we should seek opportunities for increased investment,

trade, exploration and development, which are increasing every year, far beyond the

traditional markets of the last 50 years. And third, we should focus on research and

development on initiatives that seek long-term solutions to our energy challenges,

as we have done with energy efficiency, renewables, hydrogen, fusion, and nuclear

energy, as well as the recently announced zero-emission FutureGen coal project.

While these initiatives hold enormous promise for the future, we recognize the

need for immediate actions to address the nation’s growing energy demand. Clear

Skies figures prominently on this list. I’d like to mention just a few of the actions

currently underway, particularly those focused on ensuring adequate supplies of

natural gas and electricity.

To increase and diversify domestic supplies of natural gas, the Administration,

among other actions, has streamlined the process by which permits are granted for

important energy projects, such as pipelines and refineries, and accelerated the leasing of non-restricted Federal lands where environmentally appropriate.

The Administration is encouraging new gas well investment by allowing for access

to high quality resources and growth in pipeline delivery capability. We recognize

that recoverable resources tend to be more difficult to develop and produce because

the U.S. is a mature producing area. This increases ultimate supply costs, which

requires ever increasing prices to be economically viable. A number of locations,

such as portions of the Rocky Mountain area and the eastern Gulf of Mexico, are

currently unavailable to exploration and development even though they are expected

to contain substantial volumes of recoverable natural gas.

Interstate pipelines have been expanding delivery capacity, but additional expansions are needed to satisfy expected market growth. In 2002, 54 interstate pipeline

projects were completed, adding about 12.8 billion cubic feet of capacity per day

throughout the U.S., and proposals for expansions in 2003 through 2005 have been

announced for a number of pipelines. The gas pipeline network has grown extensively over the past decade to meet the increasing demand for gas and to accommodate diversified gas sources. Regulatory lags in obtaining authorization for expansions of pipeline capacity are being addressed by initiatives at the Federal Energy

Regulatory Commission (FERC) aimed at streamlining this approval process.

The Administration also strongly supports the construction of a commercially viable Alaska natural gas pipeline as a critical part of our energy security portfolio.

The National Energy Policy also highlighted the growing need for attention to the

nation’s electricity markets and infrastructure. The Administration’s overarching

goal is to ensure that Americans have abundant, affordable, clean and secure electricity supplies, and we strongly believe that Clear Skies is a key component of

meeting this goal, as is a comprehensive energy bill that includes a sound electricity

title to modernize our Nation’s antiquated wholesale electricity laws.

The Administration believes that there really is only one viable policy choice: we

must complete the transition to effective competition in wholesale power markets.

Well-functioning markets will, we believe, lead to lower costs for consumers and

businesses. But there is more than simply the benefit of lower prices. A well-functioning market brings its own rewards. As confidence is gained that the system is

reliable and capable of coping with high-demand for electricity, there will increasingly be less need for restrictive and prescriptive regulation. And that is the point

when much-needed investment is likely to be attracted—investment in new technologies, and in improved generation and transmission facilities that produce additional energy and environmental benefits.

When the opposite is true—when uncertainty reigns, when reliability is questioned, when prices seem detached from market forces—investment vanishes.

The present uncertainty in the wholesale electricity market is not simply affected

by policy choices that center on transmission assets and market designs. The uncertainty extends to the generation of electricity itself. That is why it is important to

provide greater regulatory certainty about the kinds of investment choices that the

generating industry will have to make over the next two decades.

We believe that the President’s Clear Skies proposal does just that.
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S. 485 CLEAR SKIES ACT OF 2003

In 2000, 39 percent of the total energy consumed in the U.S. was for power generation. Since 1975, total U.S. energy use has grown by about 1.1 percent per year,

while GDP and electricity consumption have grown by nearly 3 percent per year.

We project future electricity growth to be somewhat less, below 2 percent per year,

but it is clear that electricity is either the fuel of choice or fuel of necessity for many

applications.

Our electric power is among the lowest in cost of any free market society. Low

cost electricity is part of America’s competitive edge in international markets. Cheap

power translates to prosperity and available resources to overcome problems in

many areas unrelated to energy but essential to our quality of life. A major reason

that electricity in the U.S. is relatively inexpensive is that roughly one-half of our

generation comes from coal.

S. 485, the Clear Skies Act of 2003, is a multi-pollutant, market-based cap and

trade program that will reduce power plant emissions of sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury by approximately 70 percent from today’s levels—and

do it faster, with more certainty, and at less cost to American consumers than would

current law.

Flexibility of compliance choices, maintenance of fuel diversity, and the cost savings passed on to consumers through lower electricity prices are among the benefits

of the approach taken in Clear Skies, particularly when compared with other proposals that support more stringent targets, shorter compliance periods, or command

and control regulatory approaches. The cap-and-trade system of emission reductions

used in S. 485 should translate into reduced impacts on fuel markets—in particular,

coal and gas—than equivalent emission reductions achieved through other approaches.

The Clear Skies Act substantially expands one of the most successful Clean Air

Act programs—the Acid Rain Program—and reduces the need to rely on complex

and less efficient programs. Power plants would be allowed to choose the pollution

reduction strategy that best meets their needs (e.g., installing pollution control

equipment, switching to lower sulfur or mercury coals, buying excess allowances

from plants that have reduced their emissions beyond required levels). And like the

Acid Rain program, Clear Skies includes banking provisions, enabling companies to

save unused allowances for future use. The result would be significant nationwide

human health and environmental benefits; certainty for industry, states and citizens; energy security; and continuing low costs to consumers.

S. 485 establishes a coordinated timeline for control of major emissions that provides adequate time to attract investment funds and avoids premature retirement

of working capital. The patchwork of existing and soon-to-be-implemented regulations under the Clean Air Act, coupled with the delays bred by continuous litigation

over them, has created enormous uncertainty for utilities, co-ops, and municipal

generators. This uncertainty has curtailed investments in technology that would reduce emissions at existing plants and prevented numerous new facilities from coming online. Clear Skies provides industry with the time needed to attract capital

necessary to reduce emissions without jeopardizing energy security.

ENERGY IMPACTS OF CLEAR SKIES

It is difficult to quantify what the cost or energy impacts will be if multipollutant

legislation is not enacted. The EIA ‘‘baseline’’ includes all future legislation and regulations that have been specified, but does not include regulations that have not yet

been promulgated. We know that in the absence of S. 485, mercury regulations will

be promulgated by December 2004. But we do not know what those regulations will

require; that knowledge will come only after a lengthy rulemaking process. We can

anticipate that additional reductions in SO2 and NOx will be required to attain ambient air quality standards for fine particulate matter. But we do not know what

those regulations will be. We can anticipate additional regulations to reduce regional haze, but again, we do not know what those regulations will require.

What we should be concerned with is this: uncertainty, delay, and litigation are

not likely to produce greater environmental benefits; they instead are likely to lead

to more costly solutions, and they risk affecting the energy fuel mix in ways that

are unwarranted and unforeseen.

Although we have not contrasted Clear Skies to this unknown regulatory future,

we have compared it to a future predicated on current control programs. Under

Clear Skies, natural gas consumption, which is projected to increase from 23 to 35

trillion cubic feet of gas in our baseline projection to 2025, increases to 36 trillion

cubic feet per year in 2025. However, we do not project that a significant change

in natural gas supply is needed due to the implementation of Clear Skies. Wellhead
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natural gas prices follow the baseline pattern, after decreasing from the unusually

high prices that occurred in 2001.

Clear Skies helps maintain coal as an important fuel source, thereby avoiding excessive pressure on natural gas prices. In our baseline projection, coal consumption

would increase about 38 percent through 2025. Under S. 485, we project approximately a 26 percent increase.

EIA projects that electricity prices will be lower throughout the projection period

than in 2001, for both the baseline scenario and under S. 485. The effect of the

emission reductions is roughly a 0.3 cent per kilowatt-hour price increase above the

baseline in 2025.

One of the concerns we have is in the ever-increasing reliance on natural gas for

generation of electricity. As I have noted previously, this is primarily a function of

efficiency and costs, but because our marginal supply of natural gas will increasingly come from imported LNG we should be concerned that we not place too much

stress on natural gas supply by forcing a level of fuel switching from coal to gas

that leads to higher volatility and higher prices. Natural gas supply as a low-cost

and reliable source of electricity is not automatic—one has only to witness the winters of 2000–2001, and 2002–2003 to see the point.

In both the near and long term, the price of a commodity like natural gas is determined by the interaction of supply and demand. However, the determinants of supply and demand in the near term can be quite different than the factors that determine prices in the long term. In the near term, factors such as weather related increases in demand, storage levels, productive capacity at the wellhead, and disruptions in supply lines can be paramount because of the difficulty of quickly increasing

the number of producing wells. Long-term market conditions, however, depend more

on such factors as:

• The ability of markets to respond to price increases with adequate investments

in new wells;

• Continuing availability of alternative fuels for generation;

• A viable market for imported gas;

• The continued development of new technologies; and

• Emissions reductions required under future regulation

The difference in what affects natural gas prices in the near term versus long

term has important policy implications. We have to recognize that in the short run

it is hard to do much about natural gas supply. From the time natural gas prices

spike, the industry rule of thumb is that it takes 6–18 months for production to increase. And, unlike oil, there is currently no large international spot market in liquefied natural gas to moderate gas supply scarcity.

The elasticity of natural gas demand plays a significant role in price volatility.

Because many users cannot switch to alternative fuels quickly, demand tends to be

more inelastic in the short run. Inelastic demand means that small changes in demand lead to significantly higher prices than under less inelastic demand. Demand

becomes less elastic as electric generators or industrial users lose their ability to

switch to another fuel or as any user loses the ability to reduce consumption in response to higher prices.

It is, therefore, critically important that we maintain a balanced diversity of fuels

to provide low-cost and abundant electricity. And the key to this is that we not assume that all policy objectives can simply be achieved with unlimited reliance on

natural gas.

THE ROLE OF RESEARCH

One of DOE’s fundamental missions is the advancement of energy-related technology. I would be remiss if I did not emphasize again that the projections I have

presented today assume only a continuation of historic trends in technology evolution. We have the ability to change those trends through dramatic technology improvements. We intend to do exactly that.

The President has launched a suite of relevant technology initiatives:

FreedomCAR and the Hydrogen Fuel Initiative (the hydrogen/fuel cell vehicle and

infrastructure program), FutureGen (a program to develop a zero-emission coalbased power plant, coproducing low-cost hydrogen and sequestering CO2), and fusion

electric power plants. Success in these areas will dramatically change the energy,

economic, and environmental future of the Nation.

The future role of coal in our energy mix may also be highly sensitive to the success we have in our program to improve Integrated Gasification Combined Cycle

(IGCC) technology, an inherently clean way to produce power from coal. This technology has already been demonstrated at commercial scale, but additional support

is being provided by DOE to enhance its efficiency, reduce technological risk, and
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drive down capital costs. In addition, as I mentioned earlier, we are also pursuing

R&D targeted specifically on one of the tougher challenges in Clear Skies—mercury

control.

CONCLUSION

In conclusion, we believe that Clears Skies, which provides a range of benefits—

improved health, cleaner air, and economic efficiency—is the best approach to address our dual energy and environmental challenges. Clear Skies avoids the more

serious economic consequences of other approaches to cleaner air and provides market-based flexibility to the energy sector. Clear Skies, combined with our many

other efforts to develop new, reliable, and secure sources of energy, will deliver significant environmental protection. It will help us to achieve our national goal of

abundant, affordable, and clean sources of energy by maintaining fuel diversity and

by providing greater regulatory certainty.

STATEMENT OF JEFFREY HOLMSTEAD, ASSISTANT ADMINISTRATOR, U.S.

ENVIRONMENTAL PROTECTION AGENCY, JULY 8, 2003

I. INTRODUCTION

Thank you, Mr. Chairman and Members of the Committee for the opportunity to

speak with you today about the Clear Skies Act of 2003. Based on one of the most

successful programs created by the Clean Air Act, Clear Skies is a proposal to substantially reduce emissions of the three most harmful pollutants from power generation—and to do so in a way that is much faster and more efficient than under current law.

As President Bush said in the State of the Union Address, Clear Skies will advance our goal of ‘‘promot[ing] energy independence for our country, while dramatically improving our environment.’’ The Administration is committed to working with

this Subcommittee and Congress to pass legislation this year. The widespread support for multi-pollutant legislation to reduce power plant emissions is a strong indicator that the time for action on this critical issue is now. Failure to enact Clear

Skies this year will delay important public health and environmental benefits.

This country should be very proud of the progress we have already made in cleaning up our air. According to the Environmental Protection Agency’s (EPA) first Draft

Report on the Environment, since the Clean Air Act was first enacted in 1970, total

national emissions of the six most common air pollutants have been reduced 25 percent. Remarkably, this improvement in national air quality has occurred even while,

during the same 30-year period, the U.S. Gross Domestic Product increased 161 percent, energy consumption increased 42 percent, and vehicle miles traveled increased

149 percent.

Although we have made much progress since 1970, we still face major air quality

challenges in many parts of the country. Clear Skies is the most important next step

we can take to address these challenges and achieve healthy air and a clean environment for all Americans. Clear Skies would make great strides toward solving our

remaining air quality problems in a way that also advances national energy security

and promotes economic growth. It would reduce power plant emissions of sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury by approximately 70 percent from

today’s levels and do it faster, with more certainty, and at less cost to American consumers than would current law. With Clear Skies, power plants would emit far less

over the next decade than they would under the current Clean Air Act. Because of

the innovative cap-and-trade approach used in Clear Skies, power plants would

have an incentive to start reducing emissions as soon as Clear Skies is passed, resulting in emissions reductions more quickly than required.

EPA recently updated our analyses of Clear Skies using the most recent air quality data, population census information, and modeling techniques. This modeling

represents the most sophisticated, comprehensive, detailed national modeling EPA

has ever produced. These analyses reaffirm that Clear Skies would greatly reduce

air pollution from power plants while ensuring a reliable, affordable supply of electricity.

When fully implemented, Clear Skies would deliver tens of billions of dollars in

annual health benefits, prolong thousands of lives and prevent millions of illnesses

each year, provide billions of dollars of economic benefits, and save millions of dollars in health care costs. The added benefit of Clear Skies would virtually assure

attainment of the new ozone and particulate matter standards for much of this

country, providing air that meets the new, more protective health-based national air

quality standards to millions of people. Achieving the national standards has been
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a problem that has plagued our nation’s communities for decades. Clear Skies would

also virtually eliminate chronic acidity in northeastern lakes, reduce nitrogen loading in coastal waters, and help restore visibility in our national parks and wilderness areas. The Clean Air Act has been, and continues to be, a vehicle for great progress in

improving the health and welfare of the American people. The Clear Skies Act substantially expands one of the most successful Clean Air Act programs—the Acid

Rain Program—and reduces the need to rely on complex and less efficient programs.

The result would be significant nationwide human health and environmental benefits; certainty for industry, states and citizens; energy security; and continuing low

costs to consumers.

II. CLEAR SKIES PROVIDES SIGNIFICANT BENEFITS

The heart of Clear Skies is a proven cap-and-trade approach to emissions reductions. Mandatory caps restrict total emissions and decline over time. When fully implemented, Clear Skies would result in a 70 percent reduction in emissions of SO2, NOx and mercury from today’s levels. Clear Skies would continue the existing national cap-and-trade program for SO2, but dramatically reduce the cap from 9 million to 3 million tons. Clear Skies would also use a national cap-and-trade program

for mercury that would reduce emissions from the current level of about 48 tons to

a cap of 15 tons, and would employ two regional cap-and-trade programs for NOx

to reduce emissions from current levels of 5 million tons to 1.7 million tons.

Although national in scope, Clear Skies recognizes and adjusts for important regional differences in both the nature of air pollution and the relative importance of

emissions from power generation. The eastern half of the country needs reductions

in NOx emissions to help meet the ozone and fine particle standards, which generally are not a regional issue in the western half of the county (with the exception

of California, which does not have significant emissions from existing coal-fired

power plants). The western half of the country needs NOx reductions primarily to

reduce the regional haze that mars scenic vistas in our national parks and wilderness areas, and the nitrogen deposition that harms fragile forests. Recognizing these

regional differences, Clear Skies would establish two trading zones for NOx emissions and prohibit trading between the zones to ensure that the critical health-driven goals in the East are achieved.

Clear Skies also recognizes the special visibility protection measures that have

been developed by states participating in the Western Regional Air Partnership

(WRAP). Clear Skies would essentially codify the WRAP’s separate SO2 backstop

cap-and-trade program, which would come into effect only if the WRAP states did

not meet their 2018 SO2 emissions targets.

Finally, Clear Skies requires tough, technology-based new source standards on all

new power generation projects and maintains special protections for national parks

and wilderness areas when sources locate within 50 km of ‘‘Class I’’ national parks

and wilderness areas.

Significant Public Health and Environmental Benefits

The public health and environmental benefits of Clear Skies present compelling

reasons for its immediate passage. EPA’s new analysis projects that, by 2010, reductions in fine particle and ozone levels under Clear Skies would result in billions of

dollars in health and visibility benefits nationwide each year, including prolonging

as many as 7,900 lives annually. Using an alternative methodology, Clear Skies

would prolong 4,700 lives annually by 2010. EPA’s base methodology for calculating

benefits shows that Americans would experience significant health benefits each

year by 2020, including:

• 14,100 fewer premature deaths;

• 8,800 fewer cases of chronic bronchitis;

• 23,000 fewer non-fatal heart attacks;

• 30,000 fewer visits to hospitals and emergency rooms for cardiovascular and

respiratory symptoms, including asthma attacks; and

• 12.5 million fewer days with respiratory illnesses and symptoms.

Using an alternative methodology, by 2020 Americans would experience 8,400

fewer premature deaths each year.

We have not developed methodologies for quantifying or monetizing all the expected benefits of Clear Skies. Still, under all of our analytical approaches, it is

clear that the benefits far exceed the costs. EPA estimates that the monetized value

of the health benefits we can quantify under Clear Skies would be $110 billion annually by 2020—substantially greater than the projected annual costs of approximately $6.3 billion. An alternative approach projects annual health benefits of $21

billion, still significantly outweighing the costs. The Agency estimates an additional
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$3 billion in benefits from improving visibility at select national parks and wilderness areas. These estimates do not include the many additional benefits that cannot

currently be monetized but are likely to be significant, such as human health benefits from reduced risk of mercury emissions, and ecological benefits from improvements in the health of our forests, lakes, and coastal waters.

Clear Skies would achieve most of these benefits by dramatically reducing fine

particle pollution caused by SO2 and NOx emissions, which is a year-round problem.

Of the many air pollutants regulated by EPA, fine particle pollution is perhaps the

greatest threat to public health. Hundreds of studies in the peer-reviewed literature

have found that these microscopic particles can reach the deepest regions of the

lungs. Exposure to fine particles is associated with premature death, as well as

asthma attacks, chronic bronchitis, decreased lung function, and respiratory disease.

Exposure is also associated with aggravation of heart and lung disease, leading to

increased hospitalizations, emergency room and doctor visits, and use of medication.

By reducing NOx emissions, Clear Skies also would reduce ozone pollution in the

eastern part of the country and help keep ozone levels low in the western portion

of the country. Ozone (smog) is a significant health concern, particularly for children

and people with asthma and other respiratory diseases who are active outdoors in

the summertime. Ozone can exacerbate respiratory symptoms, such as coughing and

pain when breathing deeply, as well as transient reductions in lung function and

inflammation of the lung. Ozone has also been associated with increased hospitalizations and emergency room visits for respiratory causes. Repeated exposure

over time may permanently damage lung tissue.

Clear Skies would help move us from a situation where nearly every major urban

area is projected to be out of attainment with the ozone and fine particle standards,

to a scenario where only a few major cities would continue to have nonattainment

problems. Based on current data (1999–2001 data), 129 counties nationwide (114

counties in the East) currently exceed the fine particle standard and 290 counties

nationwide (268 counties in the East) currently exceed the new ozone standard. As

a result, 45 percent of all Americans live in counties where monitored air was

unhealthy at times because of high levels of fine particles and ozone. Clear Skies

would dramatically reduce that number. By 2020, the combination of Clear Skies,

EPA’s proposed rule to decrease emissions from nonroad diesel engines, and other

existing state and Federal control programs, such as pollution controls for cars and

trucks, would bring all but 18 counties nationwide (including only 8 counties in the

East) into attainment with the fine particle standards and all but 27 counties nationwide (including only 20 counties in the East) into attainment with the ozone

standards. Even in the few areas that would not attain the standards, Clear Skies

would significantly improve air quality. This would make it easier for state and local

areas to achieve the new ozone and fine particle standards. Throughout the West,

Clear Skies would hold emissions from power plants in check, preserving clean air

in high-growth areas and preventing degradation of the environment, even as population and electricity demand increase.

[See Attached Figures 1 and 2, Attainment with Fine Particle and Ozone Standards]

Clear Skies would also reduce mercury emissions from power plants. EPA is required to regulate mercury because EPA determined that mercury emissions from

power plants pose an otherwise unaddressed significant risk to health and the environment, and because control options to reduce this risk are available. Mercury, a

potent toxin, can cause permanent damage to the brain and nervous system, particularly in developing fetuses when ingested in sufficient quantities. People are exposed to mercury mainly through eating fish contaminated with methylmercury.

Mercury is released into the environment from many sources. Mercury emissions

are a complex atmospheric pollutant transported over local, regional, national, and

global geographic scales. EPA estimates that 60 percent of the mercury falling on

the U.S. is coming from current man-made sources. Power generation remains the

largest man-made source of mercury emissions in the United States. In 1999, coalfired power plants emitted 48 tons of mercury (approximately 37 percent of manmade total). These sources also contribute 1 percent of mercury to the global pool.

Mercury that ends up in fish may originate as emissions to the air. Mercury emissions are later converted into methylmercury by bacteria. Methylmercury accumulates through the food chain: fish that eat other fish can accumulate high levels of

methylmercury. EPA has determined that children born to women who may have

been exposed to high levels may be at some increased risk of potential adverse

health effects. Prenatal exposure to such levels of methylmercury may cause developmental delays and cognitive impairment in children. Clear Skies will require a

69 percent reduction of mercury emissions from power plants.
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In addition to substantial human health benefits, Clear Skies would also deliver

numerous environmental benefits. Nitrogen loads to the Chesapeake Bay and other

nitrogen sensitive estuaries would be reduced, reducing potential for water quality

problems such as algae blooms and fish kills. In fact, the Chesapeake Bay States,

including NY, VA, MD, PA, DE, WV and DC, recently agreed to incorporate the nitrogen reductions that would result from Clear Skies legislation as part of their

overall plan to reduce nutrient loadings to the Bay. Clear Skies would also accelerate the recovery process of acidic lakes, eliminating chronic acidity in all but 1

percent of Northeastern lakes by 2030. For decades fish in the Adirondacks have

been decimated by acid rain, making many lakes completely incapable of supporting

populations of fish such as trout and smallmouth bass. The Acid Rain Program has

allowed some of these lakes and the surrounding forests to begin to recover; Clear

Skies would eliminate chronic acidity in Adirondack region lakes by 2030. Clear

Skies would also help other ecosystems suffering from the effects of acid deposition

by preventing further deterioration of Southeastern streams. Finally, Clear Skies

would improve visibility across the country, particularly in our treasured national

parks and wilderness areas, resulting in improvements of approximately two to

seven miles in visual range in many areas. For example, in the Southeast, Clear

Skies would improve the visual range by two to four miles.

Clear Skies is designed to ensure that these public health and environmental benefits are achieved and maintained. By relying on mandatory caps, Clear Skies would

ensure that total power plant emissions of SO2, NOx and mercury would not increase over time. This is a distinct advantage over traditional command-and-control

regulatory methods that establish source-specific emission rates but which allow

total emissions to increase over time. Like the Acid Rain Program, Clear Skies

would have much higher levels of accountability and transparency than most other

regulatory programs. Sources would be required to continuously monitor and report

all emissions, ensuring accurate and complete emissions data. If power plants emit

more than allowed, financial penalties are automatically levied—without the need

for an enforcement action. More importantly, every ton emitted over the allowed

amount would have to be offset in the following year, ensuring no net environmental

harm. This high level of environmental assurance is rare in existing programs;

Clear Skies would make it a hallmark of the next generation of environmental protection.

Reasonable Costs and Energy Security for Consumers and Industry

The President directed us to design Clear Skies to meet both our environmental

and our energy goals. Under Clear Skies, electricity prices are not expected to be

significantly impacted. Our extensive economic modeling of the power industry

looked at a broad array of factors to gauge the effects of Clear Skies on the energy

industry—and they all show that cleaner air and energy security can go hand-inhand.

Clear Skies would maintain energy diversity. With Clear Skies, coal production

for power generation would be able to grow by 10 percent from 2000 to 2020 while

air emissions are significantly reduced. EPA’s extensive economic modeling for Clear

Skies demonstrates that the proposal’s emission reductions would be achieved primarily through retrofitting controls on existing plants. Clear Skies’s timeframe and

certainty enable the power sector to meet aggressive emission reduction targets

without fuel switching. This is important not only to power generators and their

consumers who want to continue to rely on our most abundant, reliable, affordable

and domestically secure source of energy, but also to other consumers and industries

whose livelihoods could be hurt by a rise in natural gas prices. Our analysis shows

that Clear Skies would have little effect on natural gas prices.

Under Clear Skies by 2010, more than two-thirds of U.S. coal-fired generation is

projected to come from units with billions of dollars of investment in advanced SO2

and/or NOx control equipment (such as scrubbers and Selective Catalytic Reduction,

which also substantially reduce mercury emissions). In 2020, the percentage is projected to rise to over 80 percent. Cost effective strategies and technologies for the

control of sulfur dioxide and nitrogen oxides emissions exist now, and—thanks in

good part to the Clear Skies market-based system—improved methods for these pollutants, and for mercury, are expected to become increasingly cost-efficient over the

next several years. In fact, the Institute of Clean Air Companies forecasts that the

U.S. markets for most technology sectors will remain fairly strong, adding momentum to the air pollution control technology industry. We expect that the Clear Skies

Act will provide great benefits to American jobs in the engineering and construction

industries.

One of the key reasons Clear Skies would be cost-effective is its reliance on capand-trade programs. Like the Acid Rain Program upon which it is based, Clear
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Skies would give industry flexibility in how to achieve the needed emission reductions, which allows industry to make the most cost-effective reductions and pass

those savings on to consumers. Power plants would be allowed to choose the pollution reduction strategy that best meets their needs (e.g., installing pollution control

equipment, switching to lower sulfur coals, buying excess allowances from plants

that have reduced their emissions beyond required levels). Like the Acid Rain program, Clear Skies includes banking provisions, enabling companies to save unused

allowances for future use. Banking creates a tangible, quantifiable, economic incentive to decrease emissions beyond allowable levels, which EPA projects will result

in significant early benefits due to over-compliance in the initial years, particularly

for SO2. It also leads to gradual emissions reductions over time, and therefore a less

disruptive transition to tighter emission controls needed to address lingering problems. Based on past experience under the Acid Rain Program, by placing a monetary value on avoided emissions, Clear Skies would stimulate technological innovation, including efficiency improvements in control technology, and encourage early

reductions.

EPA’s models, however, do not predict this technological innovation. The updated

analyses show that mercury control costs would be higher than were estimated last

year. We are still in the early stages of understanding how different technologies

will affect mercury emissions from power plants because mercury is not currently

regulated in the power sector. There is an ongoing dynamic research process sponsored by EPA, the Department of Energy (DOE), the Electric Power Research Institute (EPRI), and vendors specifically aimed at furthering our understanding of mercury control, with new data being made available on a continuous basis.

Over the last year, both EPA and DOE’s Energy Information Agency (EIA) used

updated information to reassess what mercury emissions levels would be in 2010

after installation of NOx and SO2 controls necessary to meet the Clear Skies’ SO2

and NOx caps (NOx and SO2 control equipment also reduce some mercury emissions—i.e., ‘‘cobenefit’’ reductions). Due to differences in assumptions and models,

the Administration estimates that these mercury emissions would range from 34 to

46 tons. EIA’s and EPA’s updated analyses estimate the incremental cost now of

complying with the 2010 cap to be $650 to $750 million per year.

A key feature of understanding this cost is the Clear Skies’ safety valve provision

that sets a maximum cost of $35,000 per pound of mercury emissions. The safety

valve is designed to minimize unanticipated market volatility and provide more

market information that industry can rely on for compliance decisions. The updated

modeling projects that the safety valve provision would be triggered if technology

does not improve in the future (the modeling does not include any assumptions

about how technology will improve). If the safety valve is triggered, EPA will borrow

allowances from the following year’s auction to make more allowances available at

the safety valve price. The future year cap is reduced by the borrowed amount, and

the emissions reductions are ultimately achieved.

EPA believes that, as technology develops, the cost of mercury controls will decrease. If it does not, the new analyses project greater mercury emissions in 2020

than did the 2002 analyses due to the triggering of the safety valve.

Assistance to State and Local Governments

Under the current Clean Air Act, state and local governments face the daunting

task of meeting the new fine particle and ozone standards. Clear Skies would substantially reduce that burden. By making enormous strides toward attainment of

the fine particle and ozone standards, Clear Skies would assist state and local governments in meeting their obligation under the Clean Air Act to bring areas into

attainment with these health-based standards, and provide Americans with cleaner

air.

As noted previously, the combination of Clear Skies, EPA’s proposed rule to decrease emissions from nonroad diesel engines, and other existing state and Federal

control programs—such as pollution controls for cars and trucks—would, by 2020,

bring all but 18 counties nationwide (including only 8 counties in the East) into attainment with the fine particle standards and all but 27 counties nationwide (including only 20 counties in the East) into attainment with the ozone standards.

Even in the few areas that would not attain the standards, Clear Skies would significantly improve air quality. This would make it easier for state and local areas

to reach the ozone and fine particle standards.

Clear Skies’ assistance to states goes beyond ensuring that power plants will reduce their emissions. Clear Skies relies on a common-sense principle—if a local air

quality problem will be solved in a reasonable timeframe by the required regional

reductions in power plant emissions, we should not require local areas to adopt local

measures. Under Clear Skies, areas that are projected to meet the ozone and fine
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particles standards by 2015 as a result of Clear Skies would have a legal deadline

of 2015 for meeting these standards (i.e., will have an attainment date of 2015).

These areas would be designated ‘‘transitional’’ areas, instead of ‘‘nonattainment’’ or

‘‘attainment,’’ and would not have to adopt local measures (except as necessary to

qualify for transitional status). They would have reduced air quality planning obligations and would not have to administer more complex programs, such as transportation conformity, nonattainment New Source Review, or locally based progress or

technology requirements in most circumstances.

III. IMPROVING THE CLEAN AIR ACT WITH CLEAR SKIES

Clear Skies would improve the Clean Air Act in a number of ways. It would build

on the proven portions of the Clean Air Act—like the national ambient air quality

standards and the Acid Rain Program—and reduce reliance on complex, less efficient requirements like New Source Review for existing sources. The mandatory

emissions caps at the heart of Clear Skies guarantee that reductions will be

achieved and maintained over time. In contrast, uncertainties with respect to regulatory development, litigation, and implementation time make it difficult to estimate

how quickly and effectively current regulations would be implemented under the

current Clean Air Act. The level of SO2 and NOx reductions we expect by 2010 with

Clear Skies legislation would not be achieved under the existing Act. After that, we

know that Clear Skies would achieve significant reductions, while both the timing

and level of reductions under the current Clean Air Act are unclear.

Early Reductions

One of the major reasons we need Clear Skies now is that adoption of Clear Skies

would provide greater protection over the next decade than the traditional regulatory path. The Clear Skies Act will result in significant over-compliance in the

early years, particularly for SO2, because sources are allowed to bank excess emissions reductions. Because of the incentives provided by the cap-and-trade approach

used in Clear Skies, power plants would start reducing emissions almost as soon

as Clear Skies is passed. Without Clear Skies, EPA and the states will have to go

through regulatory processes to put the necessary emission control programs in

place. These regulatory processes take years and are subject to litigation—and

power plants would have no incentive to reduce emissions before the outcome of

those regulatory processes were known.

As a result, emission reductions under Clear Skies would start years earlier than

under the current regulatory approach. Clear Skies’ emissions reductions would cost

less since EPA does not have statutory authority under the current Clean Air Act

to design an integrated program that is as cost-effective as Clear Skies. Every year

that emissions reductions are delayed, we delay the health and environmental benefits that would be achieved if Clear Skies were to become law.

Our analysis suggests that the amount of pollution controls that the industry will

have to install under Clear Skies over the next decade will stretch the limits of

available labor and other construction resources, but can in fact be accomplished

while maintaining energy reliability and continuing competitive electricity prices.

Legislation Now Is Better than Regulation Followed by Years of Litigation

Even if Clear Skies is not passed by Congress, power plants will be required to

reduce their emissions of SO2, NOx and mercury. There is no more cost-effective

way than Clear Skies to meet the requirements of the current Clean Air Act or to

achieve our public health and environmental goals. We know that, absent new legislation, EPA and the states will need to take a number of regulatory actions, although it is unclear now when the requirements will come into effect or what their

control levels will be.

Clear Skies has several benefits over the regulatory scheme that will otherwise

confront power generators. Clear Skies provides regulatory certainty and lays out

the timeframes necessary for managers to design a cost effective strategy tailored

to both their current budgets and future plans. Clear Skies is designed to go into

effect immediately upon enactment. Power plants would immediately understand

their obligations to reduce pollution and would be rewarded for early action. As a

result, public health and environmental benefits would begin immediately and result in emissions reductions more quickly than required. Given Clear Skies’ design,

it is unlikely that litigation could delay the program (particularly since Congress

would decide the two most controversial issues—the magnitude and timing of reductions). In contrast, under the current Clean Air Act, power plants would not know

what their obligations would be until after EPA and states started and completed

numerous rulemakings.
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Past experience suggests that litigation delays on the regulatory path are likely.

Our experience with two cap-and-trade programs—the legislatively created Acid

Rain Trading Program and the administratively created NOx SIP Call—illustrates

the benefits of achieving our public health and environmental goals with legislation

rather than relying solely on existing regulatory authority.

Though we project a great deal of benefits will arise from implementation of the

NOx SIP call, the journey down the regulatory path has been difficult and is not

yet over. The NOx SIP call was designed to reduce ozone-forming emissions by one

million tons across the eastern United States. The rulemaking was based on consultations begun in 1995 among states, industry, EPA, and nongovernmental organizations. A Federal rule was finalized in 1998. As a result of litigation, one state

was dropped and the 2003 compliance deadline was moved back for most states.

Most states are required to comply in 2004, although two states will have until 2005

or later. Meanwhile, sources in these states continue to contribute to Eastern smog

problems. Although the courts have largely upheld the NOx SIP Call, the litigation

is not completely over. Industry and state challenges to the rules have made planning for pollution control installations difficult, raised costs to industry and consumers, and delayed health and environmental benefits.

In contrast, reductions from the Acid Rain Program began soon after it passed

(even before EPA finalized implementing regulations). There were few legal challenges to the small number of rules EPA had to issue—and none of the challenges

delayed implementation of the program. The results of the program have been dramatic—and unprecedented. Compliance has been nearly 100 percent. Reductions in

power plant SO2 emissions were larger and earlier than required, providing earlier

human health and environmental benefits. Now, in the ninth year of the program,

we know that the greatest SO2 emissions reductions were achieved in the highest

SO2–emitting states; acid deposition dramatically decreased over large areas of the

eastern United States in the areas where they were most critically needed; trading

did not cause geographic shifting of emissions or increases in localized pollution (hot

spots); and the human health and environmental benefits were delivered broadly.

The compliance flexibility and allowance trading has reduced compliance costs by

75 percent from initial EPA estimates.

[See 2001 Acid Rain Program Progress Report submitted for the record.]

It is clear from this example that existing regulatory tools often take considerable

time to achieve significant results, and can be subject to additional years of litigation before significant emissions reductions are achieved. Under this scenario, there

are few incentives to reduce emissions until rules are final and litigation is complete, posing potentially significant delays in achieving human health and environmental benefits.

The Clean Air Act contains several provisions under which EPA will be required

to impose further emission controls on power plants in order to enable states to

meet the new national ambient air quality standards (NAAQS) for PM2.5 and ozone.

For example, Section 126 of the Clean Air Act provides a petition process that states

can use to force EPA to issue regulations to reduce emissions of SO2 and NOx from

upwind sources, including power plants. A number of states have indicated that

they intend to submit Section 126 petitions in the near future. However, compared

to Clear Skies, this approach will almost certainly involve years of litigation and uncertainty about reduction targets and timetables.

Additional reductions are required from power plants through the regional haze

rule’s BART (Best Available Retrofit Technology) requirements and forthcoming

mercury MACT (maximum achievable control technology) requirements. EPA is required to propose by the end of 2003 a MACT standard for utility mercury emissions

that must be met, plant-by-plant, by every coal-fired utility with unit capacity above

25 megawatts. EPA is required to finalize this rule by the end of 2004. The Act generally gives sources 3 years within which to comply with MACT standards. This

compliance obligation could be delayed by a court if EPA’s rule is challenged.

Because these regulations will be the product of separate Federal, state and judicial processes, comparable health and environmental protection is likely to cost more

under the current Clean Air Act than under Clear Skies. EPA estimates that a comprehensive, integrated approach relying on cap-and-trade programs could reduce

costs by one-fourth as compared to the regulatory approach achieving comparable

emission reductions. These cost savings would be passed on to the public through

lower electricity prices and greater profitability to investors and owners of electric

generation.
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New Source Review

Some have suggested that Clear Skies is an attempt to undermine the Clean Air

Act. This is simply not true. To achieve the next generation of environmental

progress, we must build on the successful provisions in laws that have served us

well—and learn from those provisions that have not served us well, or have had

only limited success. New Source Review (NSR) is an example of a program that

EPA and stakeholders have long recognized is not working well.

There is a misconception that the principal goal of the NSR program is to reduce

emissions from power plants. This is simply incorrect. Reducing emissions from

power plants is the principal goal of Clear Skies. The NSR program is triggered only

when facilities emitting large amounts of air pollution are built, and when modifications at these facilities result in significant increases in air pollution. The NSR program is not designed to result in nationwide reductions of air pollution from power

plants. When it comes to reducing harmful air emissions from power plants, Clear

Skies would accomplish more than NSR. Figure 3 illustrates how the coordinated

reductions that result from Clear Skies would improve air quality in the air shed

that affects the Great Smoky Mountains National Park. In our estimate, such significant regional improvements could not be obtained in this timeframe under the

NSR framework.

Clear Skies would significantly modify the NSR program for power plants, but

contain some important backstops. We expect that existing power plants would not

have to go through NSR for modifications. New sources would no longer have to go

through the entire NSR process, but some aspects of the process would still apply.

Although we believe that with a tight cap on emissions, new sources will always

install good controls, we did not want to run the risk that a new source would be

uncontrolled. Therefore, as a backstop, Clear Skies would require all new power

plants to meet New Source Performance Standards (NSPS) that are set in the statute at levels significantly more stringent than current NSPS levels.

In addition, new power generators locating within 50 km of a Class I area (e.g.,

national parks or wilderness areas) would still be subject to the current NSR requirements for the protection of those areas. Finally, new power plants will also

have to meet the current NSR requirements that they will not cause or contribute

to a violation of the national ambient air quality standards.

IV. WINDOW OF OPPORTUNITY

Because of the lessons learned over the last decade, there is increasing support

for legislation such as Clear Skies that would significantly reduce and cap power

plant emissions and create a market-based system to minimize control costs. From

environmental groups to coal companies, there is increasing broad-based support

demonstrating that multipollutant legislation is a preferable path to cleaner air.

Such an approach would address an array of air pollution concerns associated with

power generation—including fine particles, smog, mercury deposition, acid rain, nitrogen deposition, and visibility impairment—at lower cost and with more certainty

than currently allowed by the Clean Air Act.

There is no better time for Congress to be considering multipollutant legislation.

President Bush has indicated that Clear Skies is his top environmental priority. The

number of proposals being considered by Congress also indicates a consensus behind

the basic idea of a multipollutant cap-and-trade approach. Organizations including

the National Governors Association, U.S. Conference of Mayors, National Association of Counties, Large Public Power Council, Edison Electric Institute, Adirondack

Council, and numerous individual utilities have all expressed support for the scope

and framework of Clear Skies. If legislation passes quickly, we will begin achieving

emissions reductions and related health benefits now, not years from now. Congress

needs to act now so that we do not lose a decade’s worth of health and environmental benefits from reducing fine PM pollution, smog, acid deposition, nitrogen

deposition, and regional haze. Further, as EPA continues to implement additional

forthcoming regulations under the existing framework of the Act, the likelihood of

our ability to pursue an integrated program diminishes—and with it diminish the

numerous advantages that I have delineated today of an approach like Clear Skies.

Legislation is also needed now to help states with their air quality planning and

provide incentives for industry innovation, which, in turn, would lower costs and

emissions. Such incentives are particularly compelling this year as we approach the

task of reducing mercury emissions from the power industry. If designed correctly,

legislation could provide the incentive that spurs technological innovation. When

stringent yet flexible mechanisms exist, substantial technological improvements and

steady reductions in control costs can be expected to follow.
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I hope this Congress will concur that there is no better time to pass this important legislation. Every day that passes represents a lost opportunity to reduce emissions and reap human health and environmental benefits. The ‘‘regulatory window’’

is open now, allowing Congress to pass Clear Skies, based on a proven program, before EPA and the states must embark on a more complex and expensive traditional

regulatory process. Clear Skies provides a balanced approach that our nation needs

for meeting clean air goals, while safeguarding our economy and promoting energy

security. In short, Clear Skies is a clear win for the American people.

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