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OVERSIGHT: ENVIRONMENTAL PROTECTION 

AGENCY’S CLEAN AIR REGULATIONS—ONE YEAR 

AFTER THE CAIR AND CAMR FEDERAL COURT 

DECISIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CLEAN AIR 

AND NUCLEAR SAFETY 

OF THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JULY 9, 2009 

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

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys 
(II) 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

BARBARA BOXER, California, Chairman 

MAX BAUCUS, Montana 

THOMAS R. CARPER, Delaware 

FRANK R. LAUTENBERG, New Jersey 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

AMY KLOBUCHAR, Minnesota 

SHELDON WHITEHOUSE, Rhode Island 

TOM UDALL, New Mexico 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

ARLEN SPECTER, Pennsylvania 

JAMES M. INHOFE, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

DAVID VITTER, Louisiana 

JOHN BARRASSO, Wyoming 

MIKE CRAPO, Idaho 

CHRISTOPHER S. BOND, Missouri 

LAMAR ALEXANDER, Tennessee 

BETTINA POIRIER, Staff Director 

RUTH VAN MARK, Minority Staff Director 

SUBCOMMITTEE ON CLEAN AIR AND NUCLEAR SAFETY

THOMAS R. CARPER, Delaware, Chairman 

MAX BAUCUS, Montana 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

JEFF MERKLEY, Oregon 

BARBARA BOXER, California (ex officio) 

DAVID VITTER, Louisiana 

GEORGE V. VOINOVICH, Ohio 

CHRISTOPHER S. BOND, Missouri 

JAMES M. INHOFE, Oklahoma (ex officio) 
(III) 

C O N T E N T S 

Page 

JULY 9, 2009 

OPENING STATEMENTS 

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware ................... 1 

Voinovich, Hon. George V., U.S. Senator from the State of Ohio ........................ 3 

Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee ................... 66 

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

statement .............................................................................................................. 169 

WITNESSES 

McCarthy, Regina, Assistant Administrator, Office of Air and Radiation, U.S. 

Environmental Protection Agency ...................................................................... 5 

Prepared statement .......................................................................................... 8 

Responses to additional questions from: 

Senator Inhofe ........................................................................................... 18 

Senator Vitter ............................................................................................ 19 

Stephenson, John B., Director, Natural Resources and Environment, U.S. 

Government Accountability Office ...................................................................... 25 

Prepared statement .......................................................................................... 27 

Corneli, Steve, Senior Vice President, Market and Climate Policy, NRG Energy, Inc. ............................................................................................................... 73 

Prepared statement .......................................................................................... 75 

LaBauve, Randall R., Vice President, Environmental Services, Florida Power 

and Light Company ............................................................................................. 79 

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

Responses to additional questions from Senator Vitter ................................ 84 

Hart, Gary R., Market Analyst, ICAP Energy ...................................................... 87 

Prepared statement .......................................................................................... 89 

Scott, Douglas P., Director, Illinois Environmental Protection Agency .............. 93 

Prepared statement .......................................................................................... 95 

Korleski, Chris, Director, Ohio Environmental Protection Agency ..................... 118 

Prepared statement .......................................................................................... 121 

Response to an additional question from Senator Inhofe ............................. 124 

Schneider, Conrad G., Advocacy Director, Clean Air Task Force ........................ 125 

Prepared statement .......................................................................................... 128 

ADDITIONAL MATERIAL 

Letter from Entergy to Senator Carper, July 9, 2009 .......................................... 171 

(1) 

OVERSIGHT: ENVIRONMENTAL PROTECTION 

AGENCY’S CLEAN AIR REGULATIONS—ONE 

YEAR AFTER THE CAIR AND CAMR FEDERAL COURT DECISIONS 

THURSDAY, JULY 9, 2009 

U.S. SENATE, 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, 

SUBCOMMITTEE ON CLEAN AIR AND NUCLEAR SAFETY, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10 a.m. in room 

406, Dirksen Senate Office Building, Hon. Thomas R. Carper 

(chairman of the subcommittee) presiding. 

Present: Senators Carper, Alexander, Vitter, and Voinovich. 

OPENING STATEMENT OF HON. THOMAS R. CARPER, 

U.S. SENATOR FROM THE STATE OF DELAWARE 

Senator CARPER. The hearing will come to order. 

I want to welcome you one and all to this room this morning. We 

will be joined by a number of our colleagues throughout the morning. I expect we will have a vote, maybe a vote around 11 or 11:30. 

I appreciate the presence of our guests and especially those of 

our witnesses, and we thank you not only for your attendance, but 

for your preparation for this hearing. I look forward to hearing 

your statements, your comments, and then to your responses to the 

questions that we might raise. 

Senator Voinovich, good morning. You are welcome. 

Today’s oversight hearing, as you know, is focused on Environmental Protection Agency’s clean air regulations in light of 1 year 

passing since the CAIR and the CAMR court decisions. Senators 

will have 5 minutes for their opening statements, and then I will 

recognize each of our panels of witnesses. 

Ms. McCarthy, you are our first panel in its entirety, along with 

Mr. Stephenson. Welcome to both of you. 

Each witness will have 5 minutes or so to offer his or her statement to our committee. And following your panelist statements, we 

will have two rounds of questions. 

Today’s hearing will continue the attention that the Environment 

and Public Works Committee is giving all this month to the issue 

of cleaning up our Nation’s air and moving toward a clean energy 

economy. Today, we are shifting the focus from greenhouse gases 

to some of the other major pollutants emitted by our Nation’s fossil 

fuel power plants: sulfur dioxide, nitrogen oxide and mercury. 

These pollutants are silent killers, causing serious health problems 
2 

such as asthma, chronic bronchitis, cancer, children born with 

brain defects, and even death itself. 

More than 24,000 Americans die each year from sulfur dioxide 

emissions alone. Unfortunately, many of our fellow Americans are 

exposed to these pollutants every day. Six out of 10 Americans, 

more than 186 million people in all, live in areas where air pollution levels endanger their lives. And these pollutants know no 

State boundaries. Pollution in one State easily moves to another, 

making it very difficult to reduce these pollutants through State 

regulation alone. 

Fortunately, we have the technology to make the reductions necessary to protect our health and grow our economy at the same 

time. Now, we have to find the right incentives for utilities to make 

the right investments and implement this new technology. 

Since coming to the Senate 8 years ago, I have tried to provide 

these industry incentives through multi-pollutant legislation, but 

every year I have been told that the technology doesn’t exist or it 

is too complicated, or maybe we should just let the EPA handle it. 

So we have been here before. And despite claims that action would 

cripple our economy or the technology did not exist, Congress 

amended the Clean Air Act in 1990 and implemented the first capand-trade program for sulfur dioxide power plant emissions, known 

as the Acid Rain Program. We did so at the urging, I believe, of 

former President George Herbert Walker Bush. 

Since then, it has been one of the most successful environmental 

programs in our Nation’s history. Not only have we had 100 percent utility compliance, we also obtained greater emission reductions at a faster rate than we expected, at a quarter of the cost. 

Let me just say that again. Not only did we get 100 percent utility 

compliance, we did so achieving greater emission reductions at a 

faster rate than we expected at about one-quarter of the cost. 

Still, 19 years later, Congress has not made any significant 

changes to the Clean Air Act, and the EPA has had difficulties 

tightening and broadening power plant emission reductions. Recent 

EPA attempts to regulate sulfur dioxide, nitrogen oxide and mercury emissions have been thrown out of courts, and each decision 

has limited the agency’s policy choices of how to reduce these pollutants. 

I have faith that the EPA can write new and stronger rules to 

regulate these pollutants, and I look forward to hearing how Ms. 

McCarthy and her colleagues expect to do that. But I am afraid 

that such regulations will be mired in the courts for years to come. 

Delays result in business uncertainty, more air pollution, and 

more costly reductions in the future. This is why I believe, as does 

my friend and colleague, our friend and colleague from Tennessee, 

Senator Lamar Alexander, that we can no longer wait for clean air. 

Together, we are working on legislation, we call it a 3P bill for 

three pollutants, that would reduce emissions of sulfur dioxide, nitrogen oxide, and mercury. 

We want legislation that does not allow backsliding on pollution 

reduction and that provides business and environmental certainty. 

And we will extend the Acid Rain Program to include stronger sulfur dioxide reductions and a national nitrogen oxide cap-and-trade 

program. 
3 

We agree that cap-and-trade should not be used for toxins. So we 

are putting a plant by plant cap on mercury emissions. We hope 

to introduce legislation in the next several weeks, and we respectfully seek your input this morning on this effective, efficient and 

doable plan for clean air. 

I sincerely hope that today’s hearing will serve as a reminder 

that we cannot forget the other Ps, those other Ps, SOx, NOx and 

mercury as we work on our climate itself. 

And with that, I would like to welcome and to introduce to one 

and all the Ranking Member of our Subcommittee, Senator David 

Vitter from Louisiana. 

David. 

Senator VITTER. Thank you very much, Mr. Chairman, and 

thank you for calling and leading this hearing. 

I am really eager to hear as much of the testimony as possible, 

and ask a few questions, so I will submit my opening statement for 

the record in that spirit. 

Thank you all for being here. 

[The prepared statement of Senator Vitter was not received at 

time of print.] 

Senator CARPER. Thanks very much. Thanks very much for joining us. 

Senator Voinovich, a man who’s thought a little bit about these 

issues, I know from personal experience. 

OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, 

U.S. SENATOR FROM THE STATE OF OHIO 

Senator VOINOVICH. Well, I missed being your Ranking Member, 

but I am, as you know, over on another committee, and I am so 

pleased Senator Vitter has taken my place as Ranking Member of 

this committee. But I must say that I am very interested in what 

this committee does. 

Senator CARPER. And we are delighted that you are. 

Senator VOINOVICH. Thanks for holding the hearing. I want to 

thank the witnesses for being here today, and I look forward to 

their testimony. 

Today’s panel does include Chris Korleski, Director of the Ohio 

Environmental Protection Agency, and I am glad that Chris is 

here. He has done an outstanding job in Ohio. Unfortunately, I 

may not be able to hear the testimony of the second set of witnesses because I have the Homeland Security appropriations bill on 

the floor. 

Last year, the U.S. Court of Appeals for the D.C. Circuit vacated 

the clean air interstate CAIR and the clean air mercury rule, 

CAMR. The decisions undercut years of work and unraveled the 

Bush administration’s attempt to implement a comprehensive air 

quality strategy to meet the combined goals of bringing much of the 

country into attainment with the ozone and fine particulate matter 

national ambient air standards, NAAQS; achieving reductions in 

mercury emissions from coal-fired power plants; addressing regional haze impacts from power plants; and responding to State petitions to control upward sources of ozone and fine particulate matter under section 126 of the Clean Air Act. 
4 

Generally, the CAIR implemented a cap-and-trade program to 

provide significant reductions in sulfur dioxide, NOx, and emissions 

from fossil fuel-powered utilities across 28 eastern States and the 

District of Columbia. And CAMR sought to usher in phased reductions in mercury emissions in a manner that was consistent with 

the development of technologies. 

CAIR and CAMR were an attempt to avoid piecemeal implementation of multiple emissions control obligations and to attain air 

quality standards in a cost-effective manner. Among other things, 

coordinating the compliance obligations of all three pollutants, SOx, 

NOx, and mercury, promoted efficiency enabling many companies 

to meet a substantial portion of mercury emission reduction obligations through the co-benefits achieved by installing pollution controls for NOx and SOx. 

Indeed, CAIR and CAMR, combined with clean air viability, were 

viewed as one of the most effective set of environmental regulations 

in history. In 2005, EPA estimated the cost-benefit ratio of these 

three rules to be greater than 20 to 1, with most of the benefits 

coming from the CAIR rule. And while there were differences of 

opinion on how CAIR should be implemented, and there is a difference as the Chairman of the committee just mentioned that he 

wants to raise the percentages, the fact is that the rule was generally supported by much of the regulated community, affected 

States, environmental groups. Indeed, the Natural Resources Defense Council intervened on EPA’s behalf in support of the rule. 

There was a coming together there. 

Now, the rules have been vacated. There is no comprehensive 

and cost-effective policy to address NAAQS compliance, untangle 

the complicated web of overlapping and redundant regulations affecting power plants, and to bring about public health benefits we 

had hoped to achieve. 

The situation is precisely what I feared, and is why Senator 

Inhofe and I worked so hard to move Clear Skies through this Congress, the last Congress. As most of you recall, Clear Skies was 

more or less the legislative equivalent of CAIR and CAMR, and 

while Clear Skies did not go far enough, as I said, for some, passing the legislation would have at least locked into law emissions reduction requirements. 

Now, we are uncertain and we have a chaotic situation, and I believe it is incumbent on us to fix it. As you will hear today from 

several witnesses, without additional legislative authority, a comprehensive, uniform region-wide trading program cannot be developed. That is why Senator Inhofe and I intend to reintroduce a bill 

from last Congress that allows EPA to move forward with replacement of CAIR that ensures trading will be an essential element of 

that plan and that certainty can be restored to the emissions markets. 

In regard to mercury, we are faced with a question of what is the 

appropriate level of control for mercury emissions. When we debated mercury controls previously, reasonable people disagreed as 

to what technology could deliver. Thank goodness that since that 

time, we have seen some improvement in technology dealing with 

mercury, and I am sure the witnesses may mention that. 
5 

I understand that good progress has been made in advancing 

those technologies they mentioned. However, it is less clear that a 

90 percent control requirement can be met on a consistent and reliable basis for all plants. We might have to look at the kind of coal 

that is being burned at those plants if we are going to set requirements for it. 

So overall, I am anxious to hear from the witnesses and to see 

if we can’t bring some certainty back to the table and let folks 

know where they stand so that we can move forward and eliminate, as I say, the chaos that is out there today. I just wish that 

we had been able to do that last year. We would have been farther 

ahead in terms of reducing NOx, SOx and mercury. 

Thank you, Mr. Chairman. 

Senator CARPER. Thank you, Senator Voinovich. 

I agree with a good deal that Senator Voinovich has said. I especially agree with his comment. I wrote it down. It is incumbent on 

us to fix this, and indeed it is. And I am very hopeful that we will. 

Again, welcome to our first panel of our two guests. On my left, 

your right, Regina McCarthy. And we welcome you as the EPA Administrator for Air and Radiation. You have been in your post now 

I think for about a month, and probably it seems like about a year, 

but we are delighted that you have been confirmed and you are before us today as the Air Administrator. 

And alongside of her we have no stranger to this committee, 

John Stephenson. Mr. Stephenson is the Director of Natural Resources and Environmental team for the Government Accountability Office and has come before our committee a number of 

times. We welcome you back again today. 

Each of you will have roughly 5 minutes to complete your opening statement. The full content of your written statements will be 

included in the record. 

And before I forget it, I am just going to ask unanimous consent 

that a modified statement from Steve Corneli be submitted to the 

committee. And I would ask unanimous consent at this time. Without objection, that will be the case. 

[The referenced document was not received at time of print.] 

Senator CARPER. And with that, let me just recognize Ms. 

McCarthy and ask you to proceed. Again, your full statement will 

be made a part of the record. Thank you. 

STATEMENT OF REGINA McCARTHY, ASSISTANT ADMINISTRATOR, OFFICE OF AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY 

Ms. MCCARTHY. Chairman Carper, Ranking Member Vitter, Senator Voinovich, I really want to appreciate and thank you for inviting me here today to testify on the work that we are going to do 

together to mitigate the impacts of emissions from power plants. 

During my confirmation process about a year ago, no actually it 

was just about a month ago, I appreciated the opportunity to discuss our shared concerns about public health and environmental effects of air pollution from power plants. I agree with statements already made by Senator Carper and others that power plant emissions of NOx, SOx, mercury and other pollutants are significant 
6 

concerns, and I am grateful for the Senator’s leadership on this important issue, and I look forward to working on this together. 

As I stated at my confirmation hearing back in April, I care 

deeply about these issues, and I take my responsibility to protect 

our health and our environment very seriously. For over a generation, we have been hoping and expecting to significantly reduce 

emissions from power plants that cause impacts like premature 

deaths, childhood asthma and acid rain. 

We have made great progress since 1970, but we have a long way 

to go. And now we also face the daunting challenge that is posed 

to us by climate change. We now have both a great responsibility 

as well as an interesting and equally large opportunity to re-shape 

and coordinate our approach to reducing air pollution from power 

plants. 

Administrator Jackson has made it clear to me that we need to 

move forward both smartly and aggressively on the regulatory side 

to meet our mission as science and the law demands, and in ways 

that make sense, that offer flexibility without sacrificing human 

health or environmental protection, and that are also cost-effective. 

‘‘Aggressively’’ means we listen to the scientists and we protect 

public health and the environment as much as we can and as soon 

as we can, and I know you share these goals as well. 

Recently, I took the first step in implementing this approach by 

issuing a notice of EPA’s intent to collect information about toxic 

air emissions that are being generated and emitted from power 

plants. This data collection is necessary for us to set smart and aggressive maximum achievable control technology standards for utilities. Until we analyze this data, I cannot tell you how the MACT 

standard will come out. But what I can tell you is that there are 

some coal-fired power plant boilers that have already reduced their 

mercury emissions by 90 percent or more. But I will leave that further discussion to my good colleague from GAO who will provide 

you information from his study. 

And I can tell you that the MACT program requires that controls 

will be installed in existing sources within 3 years after the final 

rule has been issued, with the possibility of an extension of another 

year for specific sources only under limited circumstances. 

At the same time as we are working on the MACT standard, we 

are also working to address the problem of interstate transport of 

SOx and NOx emissions and the resulting fine particulate in ozone 

pollution across the Eastern U.S. We are developing a new approach, one that fits within the framework of the 2008 court decision that remanded the Clean Air Interstate Rule, so that we can 

reduce regional interstate transport of these long distance pollutants, while guaranteeing that each downwind non-attainment area 

is getting the reductions it is entitled to under the law. We told the 

court that we would take 2 years. 

We are moving aggressively to meet that commitment in hopes 

of proposing a rule in early 2010, with finalization in early the following year. It is an aggressive schedule, but we know it is important. We understand the need for certainty. 

There are other rules EPA is working on as well to affect power 

plants, and we are using also our non-regulatory tools to reduce 
7 

emissions by reducing energy demand through conservation, energy 

efficiency, and the development of renewable resources. 

The future of our power industry wouldn’t also be complete if I 

didn’t talk about the need for reducing greenhouse gas emissions. 

And as Administrator Jackson has indicated, the best way to do 

that is through comprehensive energy legislation, and we are looking forward to working with you on that as well. 

But to sum up, we are working hard to understand the regulatory challenges before us, to coordinate those challenges, to work 

with industry, with environmental constituents and other groups to 

make sure that we do move forward aggressively and smartly on 

our regulatory obligations in ways that provide certainty so that investments can be made once again in this area, and we can successfully meet our environmental and public health challenges 

moving forward. 

In closing, I want to thank Senator Carper and other members 

of the committee for beginning another chapter in this discussion. 

We look forward to working with you and providing you the technical assistance you need to move forward. 

Thank you very much. 

[The prepared statement of Ms. McCarthy follows:] 
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Senator CARPER. Thank you very much, Ms. McCarthy. 

And now let me call on Mr. Stephenson. Welcome. 

STATEMENT OF JOHN B. STEPHENSON, DIRECTOR, NATURAL 

RESOURCES AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. STEPHENSON. Thank you, Mr. Chairman, Senators Vitter, 

Voinovich, and Alexander. 

I am pleased to be here today to discuss our preliminary findings 

on the effectiveness and cost of mercury control technologies as 

well as key issues EPA faces in developing a regulation for mercury 

emissions from coal-fired power plants. 

Mercury, as you know, is a toxic element that poses human 

health risk, including neurological disorders in children that impair 

their cognitive abilities. Coal-fired power plants represent the largest unregulated industrial source of mercury emissions in the 

United States. 

Nearly 10 years ago, EPA determined that it was appropriate 

and necessary to regulate mercury emissions from coal-fired power 

plants under section 112 of the Clean Air Act. Subsequently, as you 

have heard, in 2005 EPA chose to promulgate a cap-and-trade program, rather than establish a maximum achievable control or 

MACT standard to control mercury emissions. However, the capand-trade program was vacated by the D.C. Circuit Court of Appeals in February 2008 before EPA could implement it. 

EPA must now develop a MACT standard to regulate mercury 

emissions from coal-fired plants which will require most existing 

boilers to reduce mercury emissions to at least the average level 

achieved by the best performing 12 percent of the boilers. 

While developing MACT standards for hazardous air pollutants 

can take up to 3 years, EPA has until July 27 of this year to settle 

or respond to a lawsuit filed by several environmental groups that 

require EPA to promulgate final mercury emissions standards for 

coal-fired plants by a date no later than December 2010. 

In 2005, we reported that mercury emissions reduction technology showed promise but that data on long-term performance in 

a production facility were limited. My testimony today is based on 

ongoing work for this subcommittee, so our findings are preliminary, but our analysis to date shows that the most promising technology, sorbent injection, has matured sufficiently for us to report 

that at least a 90 percent reduction in mercury emissions appears 

achievable and affordable at most power plants. 

This assessment is based on the widespread success of sorbent 

injection systems at types of boiler configurations and use at more 

than three-fourths of the U.S. coal-fired boilers. Specifically, the 

substantial mercury reductions have been demonstrated at all 25 

boilers at 14 plants currently using these systems to comply with 

State requirements, and at 50 DOE and industry full scale tests at 

operating power plants as well. 

In addition, our preliminary analysis shows that the cost of sorbent control technology for mercury currently being used by power 

plants is far less than the cost of control technologies for other pollutants such as wet scrubbers for sulfur dioxide or selective catalytic reduction for nitrogen oxide. 
26 

The cost of mercury controls varied depending upon what other 

pollution control devices were installed at the plant but generally 

averaged about $3.6 million or 12/100ths of a cent per kilowatt 

hour. If fully passed on to customers, this represents a potential increase in the average residential customer’s monthly bill of only 97 

cents, but the actual increase will depend on market conditions and 

the regulatory framework. 

For example, on rate-regulated company has reported that it will 

be requesting a consumer rate increase of only 6 cents to 10 cents 

per month to install mercury controls, costing about $4.5 million. 

Moving forward, EPA faces key regulatory issues that will have 

implications on the effectiveness of the mercury emission standards: First, how it will calculate emissions reductions from the best 

performers on which the MACT standard will be based; second, 

whether it can or should establish varying standards for the three 

coal types, bituminous, sub-bituminous, and lignite; and third, how 

EPA’s standard will take into account varying operating conditions. 

In addition, EPA must decide on whether it will use an input 

standard, the mercury content of the coal being burned; an output 

standard, emissions from the stack; or some combination. 

Finally, the vacating of the Clean Air Mercury Rule by courts 

has delayed the collection of data on mercury emissions and resolution of some technical issues with monitoring systems. We are 

pleased to note that just last week, EPA announced its intention 

to conduct an information collection request from power plants, 

which is the first step to establishing a utility MACT. 

Whether power plans will install sorbent inspection systems for 

mercury alone or pursue multi-pollutant control strategies for sulfur dioxide and nitrogen oxide as well will likely be driven by the 

broader regulatory context in the legislation you have heard, in 

which they will operate in the future. 

Mr. Chairman, that concludes the summary of my statement. 

Our final report on mercury control technology will be issued to 

you in October, and I will be happy to answer questions. 

[The prepared statement of Mr. Stephenson follows:] 
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Senator CARPER. Well, thank you for that preview, and actually 

for a very encouraging preview. We appreciate the work that GAO 

does on a lot of fronts, and we are especially grateful for your help 

in this particular instance. 

Ms. McCarthy, if I remember correctly, the Clean Air Interstate 

Rule was implemented to help States with I think the 1997 particulate matter and ozone standards. Is my memory correct? 

Ms. MCCARTHY. Yes, it is, Senator. 

Senator CARPER. So we are about 12 years into this without regulations that are fully established. Is that correct? 

Ms. MCCARTHY. That is correct. 

Senator CARPER. All right. 

When do you think that you or EPA will promulgate a replacement for the Clean Air Interstate Rule? 

Ms. MCCARTHY. When the CAIR rule was remanded back to 

EPA, the indication from EPA was that we would do our best within 2 years to have a replacement rule. We are already engaged in 

that discussion with outside communities and we are heavily involved in the technical work that needs to be done to re-shape a 

CAIR rule so that it will pass the test of time. 

Our indication now is that we are looking for a rule to come out 

in early 2010 as a proposal, with a final in early 2011. That is an 

expedited schedule for us, but we are fully intending to meet that 

schedule. 

Senator CARPER. All right. So roughly 2 years into this Administration. 

Ms. MCCARTHY. That is correct. 

Senator CARPER. OK. And I think I know the answer to this 

question, but could this rule be litigated and create some further 

delays? 

Ms. MCCARTHY. It could be litigated, but the work that we are 

undergoing now is with the intent that we let science and the law 

drive this decision and that we craft a rule that is informed by the 

court actions that have been taken, and that is going to be able to 

withstand legal challenge. 

Senator CARPER. All right. 

Could you talk with us a bit further about the maximum achievable control technology process for those that may not be as familiar here? 

Ms. MCCARTHY. Yes, I can. The maximum achievable control 

technology process is a process where we will take a rule like 

CAMR that has been found to not be acceptable to the courts and 

legal, and we will expand that for the utilities to look at all of the 

hazardous air pollutants. 

What that means is we first go out with an information request 

that looks at gathering the emissions data from across the country 

in terms of what utilities are generating in terms of hazardous air 

pollutants. And then we will set specific standards for meeting 

those emission requirements on the basis of some of the top performing utilities. 

So it is a standard where you must achieve good individual controls at your facilities based on what we believe to be some of the 

best technologies that are available. And as I think the GAO report 

is indicating, there is quite an opportunity here to achieve signifi-
62 

cant reductions, not just in mercury hazardous air pollutants, but 

also in additional air pollutants that will drive specific reductions 

at individual plants. 

Senator CARPER. The process you just outlined for us, it sounds 

like it could take a while, even without lawsuits. Is that a fair 

statement? 

Ms. MCCARTHY. It is a fair statement that it is now in litigation, 

and we are working with the litigants concerning what type of time 

line we can actually commit to at EPA in terms of the development 

of that final rule. 

Senator CARPER. Has the maximum achievable control technology process ever been litigated when regulating other source 

categories? 

Ms. MCCARTHY. Yes. 

Senator CARPER. OK. Could you just briefly explain for us 

banked allowances? Just take a minute on that. Just talk to us 

about banked allowances please. 

Ms. MCCARTHY. Senator, if I may, I assume that your discussion 

is talking specifically about how it relates to this challenge with 

the utilities. And what I will say is that there is an opportunity as 

part of a trading scheme to bank allowances. And as we all know, 

trading allows reductions in NOx and SO2 in ways that drive investments so that we are getting the lowest possible, least possible 

cost associated with those reductions. 

As part of that trading process, there is an ability to bank allowances. In the Acid Rain Program, there are now significant allowances that have been banked. And now that we are beginning the 

NOx process that we began on January 1 of this year under the 

first phase of the CAIR rule, there have also been reductions in 

SO2 allowances in anticipation of CAIR happening. 

So those allowances can actually be used instead of individual reductions in the trading scheme. And the challenge that we face 

right now with this particular issue relative to CAIR, is that there 

have been significant—the good news is there have been significant 

reductions in terms of pollution, in terms of SO2 emissions. But as 

a result of that, there are a number of banked allowances that are 

sitting there that could be used instead of individual emission reductions, which is the goal that we are all looking to achieve. 

Senator CARPER. All right. Thanks. 

I have a question, and I will yield to Senator Vitter. 

If the D.C. Court’s decision keeps EPA from extending the Acid 

Rain Program, could all the banked allowances from the Acid Rain 

Program be worth relatively little, giving little incentive for utilities to hold on to them? And would this create, really could lead 

to an increase, rather than a decrease in air pollution? 

Ms. MCCARTHY. Mr. Chairman, I think you are recognizing an 

issue that is of concern to both you and to EPA. We have been 

monitoring the markets and looking at what is happening among 

the utilities. And what we are seeing is that emissions are continuing to go down, but that is also a reflection of the economy. So 

you raise a concern to both of us. 

Senator CARPER. All right. Thank you. 

We have been joined by Senator Alexander. 
63 

Senator Alexander, when we come to you on the questioning, I 

am going to offer you the opportunity to make an opening statement as well, if you would like. 

Senator Vitter. 

Senator VITTER. Thanks, Mr. Chairman. 

And thanks to our witnesses for all your work. 

Ms. McCarthy, you talked about the agency’s time line for formally proposing the rule. I appreciate that. Will it continue to be 

a market-based approach? And how will it integrate the use of existing title IV Acid Rain Program allowances? 

Ms. MCCARTHY. Senator, what I will tell you is that in looking 

at doing the work we need to do before the proposed rule is released, we are looking closely at what the court actually said. And 

we do believe there remain opportunities for trading within CAIR 

and the CAIR replacement rule. 

The challenge for us will be that we need to address the central 

issue that was raised by the courts, which is we need to understand the significant contributions that are being made by upwind 

States to downwind States, and we need to make sure that any 

proposal that we put on the table addresses that fundamental 

issue. 

So we still believe that there are opportunities for trading. We 

are also looking at hybrid approaches, which look at the establishment of individual performance standards at facilities with a trading regime. So we understand the benefits of trading in this and 

we are looking to design a hybrid proposal, or look at trading in 

a way that will pass muster based on the court’s decision. 

Relative to the SO2 banked allowances, we have to continue to 

monitor that. The court made it clear to us that we can’t control 

the acid rain SO2 allowances through a replacement of CAIR. 

Senator VITTER. OK. Since the court’s vacating the rule last year, 

has the EPA updated its modeling to determine which States 

should be included in a replacement rule? And if so, could you tell 

us if the EPA modeling indicates any changes to the subset of 

States that you expect to be subject to a replacement rule? 

Ms. MCCARTHY. As far as I know, Senator, we are continuing 

that investigation, and as soon as I can answer your question more 

specifically, I am happy to. 

Senator VITTER. OK. Compared to the rule time line, do you have 

any general notion of when we would at least know that sort of 

basic fact in terms of if the subset of States is going to be changed 

or affected? 

Ms. MCCARTHY. I guess the answer is I don’t know the answer 

to your question, Senator, but I can take a look at it and see if we 

can get you that information in advance. 

Senator VITTER. OK. Thank you. 

Is the agency working directly with stakeholders in the emission 

markets outside of the formal comment and notice process? 

Ms. MCCARTHY. We have been doing significant outreach to the 

States, as well as to the power plant industry and others, looking 

at what we need to do for a CAIR replacement rule that once again 

provides stability and surety in terms of how investments will be 

made. We will continue to do that through the course of our tech-
64 

nical investigations and through the course of the development of 

this rulemaking procedure. 

Senator VITTER. OK. How do you all choose the stakeholders to 

include in discussions? And how do you sort of publicize that in the 

spirit of the President’s executive order calling for complete transparency? 

Ms. MCCARTHY. So far, we have had open discussions at various 

forums. We are happy to go and attend meetings. We will be using 

the formal rulemaking process and comments from everybody will 

be considered. But at this point, we are attending meetings. We are 

talking about it openly. We are looking for opportunities and advice. But we will be entering into the formal rulemaking procedure, 

and when we do that we will go through the comment process. 

Senator VITTER. Have you also proactively invited stakeholders 

in to discussions you have hosted? 

Ms. MCCARTHY. I am sorry. We have set up working meetings. 

I do not believe that those, the attendance at those meetings have 

been handcrafted or hand-picked. We have offered to have workshops. We have publicly spoken about those and invited attendees, 

and they have been pretty well attended. 

Senator VITTER. OK. And how is that publicized? And how is the 

list of attendees publicized? Is that on your Web site anywhere? 

Ms. MCCARTHY. My understanding is that it has been on the 

Web site. But Senator, I am happy to provide you information in 

terms of what workshops we have already done and how we have 

advertised that. And if you have suggestions for how we could do 

greater outreach, I am certainly open to those. 

Senator VITTER. Great. 

And quickly for Mr. Stephenson, I think in your GAO study you 

discuss sorbent injections and some other technologies used to decrease mercury emissions. Are some of these successful at removing 

more than mercury, including SOx and NOx? And so can they lead 

to reductions in those other categories from the same platform? 

Mr. STEPHENSON. Sorbent injection is primarily aimed at mercury. However, you can get co-benefits from emission reduction 

technologies from sulfur dioxide and nitrogen oxide. The reverse is 

true. Some of the plants, some of the boilers we looked at were 

achieving 90 percent mercury reduction with no additional emission technology. 

Senator VITTER. OK. 

Thank you, Mr. Chairman. 

Senator CARPER. Just a point of clarification in response to your 

answer to Senator Vitter’s last question. He was asking when we 

deploy the mercury emission control, do we get a co-benefit in reduction in SOx and NOx? My interpretation of what you said is, no, 

we don’t. But if we are putting in place technologies to reduce SOx

and NOx, there is a co-benefit with mercury. Is that what you are 

saying? 

Mr. STEPHENSON. Yes. 

Senator CARPER. OK. Thanks. 

OK. Senator Voinovich. 

Senator VOINOVICH. Yes. Again, thank you for being here. 

Ms. McCarthy, in a recently proposed rule pertaining to maximum achievable control technology standards for hospital, medical 
65 

and infectious waste incinerators, EPA came up with a new method 

for setting MACT standards. We understand that this was determined without consideration of cost or feasibility, and that the EPA 

concedes that the new standards are so stringent that no facility 

will be able to comply. 

Is it your view that the proposed revised standards are consistent with the legal requirement that are based on what is actually achieved in practice? Two, do you think Congress intended in 

enacting the Clean Air Act to have EPA set technology-based 

standards without regard to costs or feasibility? And three, will you 

commit to undertaking a common sense review of this regulation 

with a view of improving air quality in a manner that is consistent 

with past precedent for setting such standards? 

I posed this question to you in writing during your confirmation. 

You promised to get back to me. To date, we have received no response. I note the EPA is under a court order, a deadline of September 15 to finalize the rule. The industry has told me that implementation of the proposed rule would result in the closure of many 

existing facilities, including those in my State of Ohio. 

I therefore ask that you move this issue to the top of your agenda 

and with a response to my specific question as soon as possible. I 

know that the industry has requested a meeting with you so they 

could talk to you about this, and I would very much appreciate if 

you would give them that meeting. 

Ms. MCCARTHY. Senator, thank you for raising this issue. I 

apologize if I did not provide you a timely and complete response, 

and I will certainly do that. I am happy to meet with industry on 

this issue and to take a closer look at it. 

Now, as it relates to the issues before us, you know, clearly on 

the utility MACT standard, we know that we need to move forward 

aggressively on that standard, but we also know we need to look 

at the emissions that are currently being generated to understand 

what is achievable, and to move forward as quickly as possible, but 

with an understanding of what can be achieved and what is doable. 

And I will bring that same level of judgment in discussion when 

I have that meeting with the industry representatives on the other 

MACT standard, and we can talk it through. 

Senator VOINOVICH. Well, I am real concerned about it because 

they feel that they are going to have to close some of the facilities 

based on the proposed rule that you are talking about. So I would 

like to have you spend some time with them and appreciate the 

fact that you will meet with them. 

The other thing is the whole idea behind cap-and-trade is that 

they send a price signal to encourage emission reductions. And ever 

since the court’s unexpected decision in the CAIR case, SO2 allowance prices have been very low. In fact, you talked about them. 

They are putting them on a shelf. 

So most power plants from an economic perspective would be better off buying allowances and now even operating their scrubbers. 

And you know, the issue I have is why can’t we fix this problem 

right now by codifying the Clean Air Interstate Rule? And by the 

way, if we did do that, codify it, that would not prevent Senator 

Carper and others from increasing the percentage of reduction 
66 

that, you know, that they would like to see, assuming Congress 

wants to do it. 

Ms. MCCARTHY. Senator, this committee and Congress has every 

right to move forward to resolve this situation as you see fit. I 

guess my challenge is that in my world, which is the world of regulation, we also need to move forward. And we need to see how we 

align these decisions and how we provide that level of certainty 

that you are looking for as quickly as possible. 

Now, I do believe that we have a lot of opportunity to move forward, by moving forward on the utility MACT standard which will 

provide some certainty in terms of what we are looking for for reductions of hazardous air pollutants, and then looking at moving 

forward with CAIR as well. 

Now, the timing on this is as aggressive as we can get in terms 

of a replacement rule for CAIR. We are hoping to have a final rule 

in place by early 2011. But those are the tools that I have to work 

with, and we will certainly work together and hopefully in concert 

with one another to identify the best path forward. 

Senator VOINOVICH. Well, I will be interested in hearing from 

some of the other witnesses about where does that put them right 

now in terms of what their SIP plans are and what they are telling 

people. Because right now, it is just kind of, they are in limbo. 

And I have to tell you that when we put that in effect and they 

thought it was going to stick, they really moved. They did a terrific 

job. There is a great deal that was accomplished during that period 

of time, and then whoops, the court made their decision and then 

everything kind of just stopped. 

And so the earlier we can get on this, I think the better it is for 

everyone, including reducing the emissions. 

Ms. MCCARTHY. And I think you will hear from some of my State 

colleagues that they are interested in resolving these issues as 

well, and I think as we all are. 

Senator VOINOVICH. Thank you. 

Senator CARPER. All right. Thanks, Senator Voinovich. 

Senator Alexander, if you would like to make an opening statement, you are welcome to do so before your questions. 

OPENING STATEMENT OF HON. LAMAR ALEXANDER, 

U.S. SENATOR FROM THE STATE OF TENNESSEE 

Senator ALEXANDER. Thanks. 

Senator CARPER. I am delighted you are here. Thank you for 

your great interest and leadership. 

Senator ALEXANDER. Thank you, Tom. 

I first want to congratulate Senator Carper for his consistent 

leadership on the issues of how we properly regulate sulfur, nitrogen and mercury. He and I have worked together ever since I have 

been a Senator on 3P legislation. I will only speak for myself in 

what I have to say, but I think we see eye to eye on much of this. 

And I am glad that he is calling attention to this. 

Here is my statement. I hope, and I would echo what Senator 

Voinovich said, and I will ask a couple of questions. But I would 

hope, Ms. McCarthy, that we can move as rapidly as we can to reinstate the CAIR rule. I gather you do, too. And it is very important for all of the reasons that are suggested. 
67 

I have also introduced legislation on limiting carbon for dealing 

with global warming, but we really don’t know what to do with carbon yet. We do know what to do with sulfur, nitrogen and mercury. 

And we know that for the foreseeable future, we are going to have 

to burn coal. 

And my general view of it is that we ought to regulate sulfur, 

nitrogen and mercury and get on with it as rapidly as we can, and 

chalk it up as a cost of doing business for burning coal, and know 

that it is going to be a part of our energy life for the next 10 or 

20 years or so until we find some other alternative way of powering 

a country that produces 25 percent of the gross domestic product 

in the world and uses 25 percent of the electricity. 

So I think you have strong bipartisan support and interest from 

the Congress in a reasonable, effective CAIR rule. And I will be 

asking you in a minute if there is anything else that you think we 

can do that will make it easier for you to achieve that goal. 

One reason I have worked with Senator Carper on these three 

pollutants is because I don’t want sulfur, nitrogen and mercury to 

get lost in all of the talk about carbon. I mean, all of them are important, but Tennessee is 10th highest among States for sulfur 

emissions; 12th for nitrogen. We have 800,000 people with chronic 

lung disease, according to the American Lung Association. 

The Great Smoky Mountains National Park, which is 2 miles 

from my house, is the most polluted and most visited national park 

in America. The conservative Republicans who live around there 

are for clean air because they breathe the air, and they know tourists come there to see the Smokys, not to see smog. So we are all 

in favor of good, strong national standards for sulfur, nitrogen and 

mercury in our part of the world. 

And in fact, we know that we can’t continue to recruit auto suppliers and auto plants to Tennessee unless there are strong national air pollution standards because by ourselves we can’t clean 

up the air enough because so much of it blows in from other parts 

of the country. 

So I am one Senator who believes that we obviously have scrubbers and SCRs and a way to deal with mercury at a 90 percent 

level, and we should just get on with it. And I am sure there are 

reasonable questions that can be debated back and forth, but that 

is my general view. And I hope that you will make that a top priority. 

And I guess my main view is, while we are figuring out what to 

do with carbon and how to do it, I see no need whatsoever to delay 

for a minute what we already know how to do about sulfur, nitrogen and mercury. That is my view. 

Now, may I switch to questions, Mr. Chairman? 

Is there anything that we here can do to make it easier for you 

to enact a CAIR rule more quickly? 

Ms. MCCARTHY. Senator, first let me thank you for your leadership on this issue as well. I know we have spoken about this individually, and I share your concern that we move as quickly as possible. This is a less complicated issue than many we deal with, and 

as you heard from Mr. Stephenson, the technology is there for 

many of these issues. And we know we need to move this forward. 
68 

And so you have my pledge that this is a priority, not just for 

EPA and the Administrator, but for me personally. 

Senator ALEXANDER. But is there anything we can do to make it 

more rapid than early 2011? 

Ms. MCCARTHY. That is a good question. In terms of a regulatory 

process, we think we are moving as expeditiously as we can 

through the regulatory process, and as open as we can in terms of 

our outreach on this issue so that when we actually move toward 

regulation that it will stand the test of time. That is going to be 

our challenge. 

I would just encourage you to continue the dialog. I encourage, 

through Senator Carper, EPA will be there to provide you technical 

support in modeling resources so that you can take a look at this 

issue and continue to engage all of us in focusing our attention on 

this. 

Senator ALEXANDER. If we move ahead, Senator Carper has 

talked about moving ahead with legislation on three pollutants, 

and I am very much inclined to join him in that, as I have before. 

Will that make it harder or easier for you to do a rule? Or does 

it matter? 

Ms. MCCARTHY. To me, Senator, it doesn’t matter as long as we 

understand that our resources will be going to both efforts, and as 

long as you understand that my charge from the Administrator is 

to move as far and as fast as we can to get the reductions that we 

need for public health and the environment. 

Senator ALEXANDER. So you believe that you have sufficient authority now to reinstate a regional CAIR rule by early 2011. Is that 

correct? 

Ms. MCCARTHY. I believe that we do. And it is not just the CAIR 

rule, Senator, it is also the utility MACT standard because I think 

that what you and I are both trying to do is to set a pathway forward that utilities can understand and begin to target their investments wisely. 

Senator ALEXANDER. Right. 

Ms. MCCARTHY. While we are not seeing utilities not running 

their scrubbers and taking their SO2 allowances and using those 

instead, it could happen. You know, we are doing everything we 

can to move forward quickly and to work with States where they 

do have some authority to mitigate that and to prevent that from 

happening. But we need to run far and we need to run fast together. 

Senator ALEXANDER. I suspect it would be helpful to utility executives to know that you are not the only one interested in reinstating the CAIR rule as they are sitting in their board rooms making their decisions about whether to invest in an expensive scrubber or equipment for mercury, that there is substantial support in 

Congress to do that even if you can’t. 

Ms. MCCARTHY. And my sense is that the utilities will be participating in your process to look at legislation, and I have already met 

with a number of the major utilities to talk to them about our efforts to coordinate our regulatory process, how quickly we want to 

get that done and our interest in providing them that path to certainty that they are looking for. 
69 

Senator ALEXANDER. Would you be kind enough to supply me 

with some estimate of what percent of the coal plants in the country have scrubbers; what percent have SCRs? 

Ms. MCCARTHY. I would be happy to provide you that information. 

Senator ALEXANDER. And then I have one other question, something you said attracted my interest. I don’t want to get off on climate change very much. But you said that the best way to deal 

with climate change is comprehensive energy legislation. When 

dealing with fuel, do you think that cap-and-trade is more effective 

at reducing carbon than a low carbon fuel standard? 

Ms. MCCARTHY. Oh, I am sorry. Someone was saying something. 

Senator, we can take a look at that. I know that there were 

changes in the Waxman-Markey bill and that there will be other 

conversations here on the Senate side. 

Senator ALEXANDER. No, but my question is, there are two different ways to deal with fuel, which is 30 percent of carbon: capand-trade or a low carbon fuel standard. Which one do you think 

is more effective? 

Ms. MCCARTHY. I think both of them have opportunities for effectiveness. I will tell you that when I was in Connecticut, we joined 

with other New England States in looking at the development of 

a low carbon fuel standard. There is tremendous opportunity. 

Senator ALEXANDER. Yes, but, well do you really think a cap-andtrade is an effective way to deal with fuel? 

Ms. MCCARTHY. I believe that you could do it both ways. 

Senator ALEXANDER. Well, I would like to urge you to examine 

that, because we have had testimony before this committee that 

cap-and-trade—by Oak Ridge scientists—that cap-and-trade was a 

very inefficient way to deal with fuel because it raises the price, 

that is for sure, but it doesn’t reduce the carbon because it only 

raises the price by 10 or 20 cents, and that is not enough to change 

behavior. That is 10 or 20 cents that adds to the cost of people driving. It is 10 or 20 cents that might be going into the Highway 

Trust Fund. 

And why would we impose a complex cap-and-trade system on 

fuel, which is 30 percent of carbon, when we could use a low carbon 

fuel standard, is my point. And then, of course, if I had more time, 

I would go over into the smokestacks part and say instead of a big 

complex cap-and-trade, why don’t we just build nuclear power 

plants, and as we open them, close some of the dirtiest coal plants. 

I think we have gotten into the situation of taking a good idea, 

renewable energy, and expanding it until it doesn’t work. I didn’t 

mean to get off very much on climate change today, but I would 

like you to ask you to look at the effectiveness of a low carbon fuel 

standard opposed to cap-and-trade for dealing with carbon from 

fuel. 

Ms. MCCARTHY. Senator, I know this is a discussion that we will 

be having and I will make sure that I am educated by testimony 

that has been given to you in the past, and we will have a good 

discussion as a bill is moved through the Senate. 

Senator ALEXANDER. Thank you for your time. 

And Senator Carper, thank you for inviting me to join you today. 
70 

Senator CARPER. Delighted you are here. Delighted to work with 

you on these issues. 

Let me go back to something I think you said to one of my colleagues earlier. And I think you were talking about the authority 

to allow for trading under a revised CAIR rule. And I think you 

said that EPA had the authority to do that. Were you talking about 

interstate trading or intrastate trading? 

Ms. MCCARTHY. Senator, I was trying to make the distinction 

that in the court case, what the court said was that EPA hadn’t 

effectively identified and dealt with the significant contributions 

from one State that would contribute significantly to non-attainment or the maintenance of attainment in another State. It didn’t 

specifically say that you could not do trading. 

And so we are looking at that court decision specifically because 

we believe that our task now is to do what the court told us to do, 

to understand better the relationship between one State and another in terms of interstate transport. And we believe that we can 

look at trading regimes that are either intrastate, that are closer, 

more regional, that are maybe tighter that can meet the standards, 

the test that the court has given us, or that are combined with performance standards. 

So we don’t believe that trading is off the table by any means. 

We are trying to meet the challenge that the court provided us 

without giving up the flexibility and the cost-effectiveness that 

trading can provide for NOx and SO2. 

Senator CARPER. All right. Fair enough. Thank you. 

Let me talk to you just a little bit more about the Acid Rain Program if we could. Do you believe that the Acid Rain Program was 

a success? And if so, what do you think are a couple of major reasons why it was successful? 

Ms. MCCARTHY. Unequivocally, yes, I do believe it was a tremendous success. I think part of its success obviously is in the reductions it has achieved, and the fact that it has achieved those reductions in a cost-effective way, at a cost that was substantially lower 

than industry predicted. And I think that it was the basis for us 

to look at the development of a CAIR rule in the past Administration, and it is an opportunity for us to understand the value that 

trading brings to the table now, and to try to keep those advantages, while we recognize that trading is not necessarily appropriate for other pollutants like toxic air pollutants. 

Senator CARPER. All right. I want to ask another question. I 

think I know the answer to this question. We sort of talked at it 

or around it already. But I would just like to ask for the record, 

and that is do you believe that legislation with targets and timetables for mercury, for nitrogen oxide, for sulfur dioxide, could give 

certainty for environmental reductions and business decisions? 

Ms. MCCARTHY. I think that legislation certainly can provide certainty, but I also would indicate to you that I think regulations 

done well and done in a coordinated way can work as well. 

Senator CARPER. Good. Thanks. 

And for Mr. Stephenson, with what GAO has found so far, if EPA 

used mercury technology currently deployed today, what kind of 

percentages would they likely set for a mercury-only MACT? 
71 

Mr. STEPHENSON. What our finding is so far is that the actual 

demonstrations on operating plants and the DOE test combined 

represent over 75 percent of the power plant configurations and 

technologies that are out there now. We are saying that at least 90 

percent is probably achievable. 

Senator CARPER. All right. Thank you. 

Could you clarify how many States already have fossil fuel plant 

mercury emission mandates? And do most States take an at-thestack approach? 

Mr. STEPHENSON. I am not sure about the latter part. There is 

about 20 or so States that have mercury-specific legislation ongoing. There are four States, including yours, that they are actually 

implemented so far. I am not sure how many use a stack approach 

versus a—— 

Senator CARPER. In the States, do you have any idea what the 

average reduction requirements are? 

Mr. STEPHENSON. Excuse me? 

Senator CARPER. In the States that have them, do you have any 

idea what the average reduction requirements are? 

Mr. STEPHENSON. I have a table in front of me. The top percentage is a 90 percent reduction. Some call for 80 percent reductions. 

Some call for 40 percent of the largest four utilities. There is a variation across the board. 

Senator CARPER. All right. Thank you. 

How much is GAO finding mercury technology costs when compared to other clean air technologies such as scrubbers? I think you 

spoke to this earlier, but I want you to go back to it. 

Mr. STEPHENSON. Yes, it is very inexpensive. The average cost of the plants that are actually using sorbent injection now is only $3.4 

million. That sounds like a lot, but converted to kilowatts per hour, 

it is less than 12/100ths of 1 cent. And likely the increase in a resident’s monthly bill would be certainly less than $1 and probably 10 

cents a month. 

Senator CARPER. Per month? 

Mr. STEPHENSON. Yes. 

Senator CARPER. All right. 

And finally, have you found facilities that could get much greater 

mercury reductions but are not doing so because they are not mandated by either the Federal or the State government to do that? 

Mr. STEPHENSON. Absolutely. I mean, that is the reason for a 

need for a MACT standard. There are many who are not. The ones 

that are in compliance now and already demonstrating this capability are because there is a State law. A Federal law that would 

affect all 491 plants would achieve the same kind of results, in our 

opinion, that those States have achieved. 

Senator CARPER. So let me see if I understand this. We have 

each year, Ms. McCarthy I am told, 600,000 babies born whose 

moms have high levels of mercury. We know that we can reduce 

emissions by roughly 90 percent at these coal-fired power plants, 

at a cost of maybe not much more than $1 a year for consumers. 

I have no idea what the cost-benefit analysis of that would be, but 

it has got to be off the charts. What do you think? 

Ms. MCCARTHY. I will tell you, Senator, just to confirm your suspicions, almost half of the mercury emissions in the U.S. are from 
72 

these power plants. So it is a significant public health, as well as 

an environmental issue. 

Senator CARPER. Senator Vitter. 

Senator VITTER. No. 

Senator CARPER. OK. 

Our thanks to both of you. Some of my colleagues who could not 

be here will want to submit some questions for the record. We appreciate your presence today. We appreciate your preparation for 

today’s hearing, and for your responses today. And we would appreciate your prompt responses to any other questions that we submit 

to you. You are both doing great work. You make a good team, and 

we appreciate that teamwork and your presence today. Thanks so 

much. 

As our second panel approaches the witness table, I am just 

going to go ahead and begin their introductions, if I could. 

On this panel, first we have Steve Corneli. Mr. Corneli is NRG 

Energy’s Senior Vice President of Market and Climate Policy. We 

are delighted that you are here. Welcome. Nice to see you again. 

Next we have Mr. Randall R. LaBauve. I understand you are the 

Vice President, Environmental Services, for the Florida Power and 

Light Company. Mr. LaBauve. 

Our third witness, and I am just going to stick with the order 

in which our witnesses are sitting before us, Mr. Hart, Mr. Gary 

Hart. You look different than your pictures. 

[Laughter.] 

Senator CARPER. But you still look good, and we are happy you 

could be with us today. Mr. Hart is the Market Analyst for ICAP 

Energy. Is it ICAP? Is it OK to call it ICAP? Prior to ICAP Energy, 

he spent 28 years with Southern Company as their Manager of 

Emissions Trading. 

Next, Mr. Chris—is it Korleski? Oh, I am sorry. You fellows are 

sitting in different order than my notes have been prepared, but 

that is OK. I will get it right. 

Next, Doug Scott. Mr. Scott is Director of Illinois Environmental 

Protection Agency. In addition to being its Director, he served 2 

years as Chair of the Air Committee for Environmental Council of 

the States. Great to see you. 

Now, Chris Korleski. And Mr. Korleski is Director of Ohio Environmental Protection Agency. And he was before our subcommittee 

I think around this time last year discussing this same issue. Very 

nice to see you again. Thank you for joining us today. 

And finally, Conrad Schneider. Mr. Schneider is the Advocacy Director for the Clean Air Task Force, and has been, again, before 

our committee in the past discussing clean air issues. And we are 

delighted that you have been willing to come back. Sometimes people refuse to come back a second time, but you are nice to do that. 

I am going to ask you to hold your statements to about 5 minutes, and if go much over that, I will have to rein you in, but hopefully I won’t have to do that. But we are delighted that you are 

here. We look forward to a very good discussion. Thank you. 

Mr. Corneli. 
73 

STATEMENT OF STEVE CORNELI, SENIOR VICE PRESIDENT, 

MARKET AND CLIMATE POLICY, NRG ENERGY, INC. 

Mr. CORNELI. Thank you, Chairman Carper and members of the 

subcommittee. I am happy to testify today on behalf of NRG Energy about ways to reduce the emissions of sulfur dioxide, nitrogen 

oxides, and mercury. 

NRG owns about 23,000 megawatts of power plants, including 

fossil, wind and nuclear resources, and we are actively developing 

new nuclear, new wind, and new solar resources as we speak. 

We are also a member of the United States Climate Action Partnership. We are strong supporters of cap-and-trade legislation for 

climate change. And we look forward to working with all of you in 

addressing that issue in the weeks and months to come. 

We also take other missions very seriously, and we spent over $400 million in the last 5 years reducing our emissions of SO2, NOx

and mercury. We have a total of about $1.3 billion of planned 

spending on those emissions in the next 5 years or so. 

At the start, I would like to say that we really liked CAIR. And 

we are supporters of that approach. But given the court’s remand 

to CAIR, while we hope the rulemaking process can proceed, we 

really think an economically responsible and an environmentally 

effective rule would be advantaged by legislation that would give 

specific authorities to the EPA. 

I would like to talk today about four principles that, in our view, 

could guide such legislation. First, we think, as you pointed out, 

Senator Carper, cap-and-trade and the Acid Rain Program have 

been an unqualified success, a stunning success, and the Nation 

owes it to its citizens, its businesses, and its economy to build on 

that success in addressing these other emissions, with the exception of mercury. 

According to EPA, as you noted, the emission reductions have 

been over 40 percent at well less than half of the projected cost, 

and we should build on that. So to do that, we think Congress 

should clearly authorize EPA to use cap-and-trade to address regional and national emissions transport problems under section 

110(A)(2)(d) of the Clean Air Act; should expressly authorize EPA 

to create a regional NOx program similar to that established under 

CAIR; and should modify title IV to authorize the use of acid rain 

program allowances to reduce the transport of SO2 emissions that 

contribute to fine particle non-attainment problems and help keep 

people from seeing the Smoky Mountains when they visit Senator 

Alexander’s beautiful State. 

This will help provide the legal continuity that the business community needs to actually invest the billions of dollars that we plan 

on spending to address these emissions. But we also need to assure 

the economic continuity of the program. 

So our second principle is to make sure we do that by reducing 

the emission caps in a timely manner, consistent with the expected 

deployments of technology, to keep the prices at a stable level and 

avoid precipitous price crashes and volatility that otherwise can, as 

you pointed out, make these investments essentially worthless. 

A third principle, in our view the cap-and-trade program should 

continue to use the reasonable free allocation of allowances, at 

least in a partial way, to avoid punitive burdens on companies and 
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on their customers that must invest these billions of dollars to 

achieve the needed reductions. 

Our analysis suggests that a full auction of SO2 and NOx allowances could easily cost large fossil fuel companies $100 million or 

so per year. In our view, there is absolutely no reason for such punitive cost burdens when reasonable allocations such as under the 

current approaches will lead to the same environmental results, 

while keeping the cost of compliance much lower for the affected 

companies and many of their customers. 

In addition, we think banked SO2 allowances should be useful for 

compliance, with a discount, as in the CAIR program. 

Finally, we think the implementation of SO2 and NOx cap-andtrade systems should anticipate and coordinate with the emerging 

climate change bill, and especially the technology deployment and 

emission reductions that we think are likely to result from the 

automotive sector, the transport sector, and the power sector as 

those sectors adopt low carbon technologies. 

Post-combustion, carbon capture and sequestration, more nuclear, electric cars, higher efficiencies, all of those will tend to reduce the 3Ps from other sources, as well as from the power sector. 

We have to invest billions on that stuff, too, so we think an approach that facilitates and encourages the private investment and 

does so in a coordinated way is what you should all shoot for, and 

we look forward to working with you on that. 

And I would be happy to answer any questions you have. 

[The prepared statement of Mr. Corneli follows:] 
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Senator CARPER. You bet. We look forward to working with you 

as well. 

Mr. LaBauve. Welcome. Please proceed. 

STATEMENT OF RANDALL R. LaBAUVE, VICE PRESIDENT, ENVIRONMENTAL SERVICES, FLORIDA POWER AND LIGHT 

COMPANY 

Mr. LABAUVE. Mr. Chairman, Members of the Subcommittee, 

thank you for the opportunity to testify today. My name is Randall 

LaBauve, and I am Vice President, Environmental Services for 

Florida Power and Light Company. 

Senator CARPER. Sir, is your microphone on? Just double check. 

Mr. LABAUVE. Now it is. 

Senator CARPER. Good. What was your name? No, go ahead. 

[Laughter.] 

Mr. LABAUVE. FPL Group is a leading clean energy company 

with approximately 39,000 megawatts of generating capacity and 

more than 15,000 employees in 27 States and Canada. FPL Group’s 

principal subsidiaries are NextEra Energy Resources, the largest 

generator of renewable energy from wind and sun in North America, and Florida Power and Light Company, which serves 4.5 million customer accounts in Florida and is one of the largest regulated electric utilities in the country. 

Today, the electric energy sector is at an environmental crossroads. While some companies like FPL Group have transitioned to 

the no and low emissions generation technologies of the future, 

other companies are stalled in an untenable past. As such, the environmental decisions that the Congress and the agencies make 

will dictate billions of dollars’ worth of future decisions. But perhaps more importantly, these decisions also stand to reward and/ 

or punish companies for the actions they may or may not have 

taken. 

When CAIR was promulgated, its legality was challenged by numerous companies, including FPL Group, in various States. The 

D.C. Circuit Court decided in July, 2008 that CAIR was fundamentally flawed, and EPA was directed to rewrite the rule. The court 

found many flaws in the rule including three which we believe are 

significant to future EPA regulations. 

First, the court found that the proposed emissions trading program would not necessarily bring all areas into attainment as required by section 110 of the Clean Air Act. Second, the court ruled 

that EPA had no authority to terminate or limit sulfur dioxide 

emission allowances under title IV of the Clean Air Act. Finally, 

upholding FPL Group’s challenge, the court ruled that EPA had 

unlawfully acted beyond the bounds of its statutory authority by 

utilizing fuel adjustment factors to reallocate NOx allowances from 

cleaner generation to those utilizing coal-fired generation. 

Unfortunately, the issues the court identified will not be easily 

remedied by EPA. Without significant revisions to the Clean Air 

Act, the EPA likely cannot rewrite CAIR to include the currently 

proposed program measures. This may leave EPA little choice but 

to develop a draconian command and control rule that would be extremely costly and would certainly lead to further litigation. 
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Therefore, it is now incumbent on the Congress to act and to provide EPA clear legislative direction to develop effective and equitable rules. Since the court’s ruling, there have been several calls 

for a quick fix to codify the existing CAIR proposal. However, such 

an overly simplistic rushed effort to avoid the court’s decision simply isn’t practicable. 

Codifying CAIR will not address the growing complexity of rules 

that are staged to affect electric generating facilities, and will not 

provide a comprehensive solution to all the confusing and overlapping regulations that will result in additional litigation, create economic uncertainty, and affect future electric generating reliability. 

In other words, inaction isn’t a choice. 

But instead of a rushed and incomplete half measure, Congress 

should take on the task and enact a comprehensive national policy 

that addresses the various emission reduction programs currently 

being developed by EPA. We need Congress to develop a comprehensive 3P bill that provides protective and reasonably attainable reductions of SO2 and NOx emissions, incorporates the regulation of mercury and other hazardous air pollutants; and corrects 

the flaws in CAIR. 

Without legislation, EPA’s current patchwork of Clean Air Act 

and court decision-driven rule development will continue to be a 

stifling burden to reducing emissions and achieving industry compliance. 

The legislation should establish an efficiency-based cap-and-trade 

program to distribute emission allowances without inequitable fuel 

adjustment factors, initially utilizing free allocations of a percentage of the allowances, and then transitioning to a 100 percent auction of allowances. 

The legislation should also include direction and authority for 

EPA to utilize a market-based trading program that will reduce the 

downwind impact of emissions to non-attainment areas and include 

assurances that attainment standards will be met. 

FPL Group believes that only Congress can effectively address 

the confusing and incomplete patchwork of onerous air emission 

regulations that are stifling the decision processes for upgrading, 

maintaining, repowering, and building new power plants. 

As such, we commend the Chairman for taking on this issue and 

stand ready to work with this subcommittee to pass a comprehensive three-pollutant bill that will provide the necessary certainty to 

reduce pollution and advance our Nation’s energy policy. 

Thank you. 

[The prepared statement of Mr. LaBauve follows:] 
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Senator CARPER. Mr. LaBauve, thank you very much for that 

statement and for being here today. 

Mr. Hart. Gary R. Hart. Welcome. 

STATEMENT OF GARY R. HART, MARKET ANALYST, 

ICAP ENERGY 

Mr. HART. Good morning, Chairman Carper and to the distinguished members of the committee. 

I appreciate the opportunity to appear before you and discuss the 

implications and impacts of the recent court decision on the emissions trading markets. 

My name is Gary R. Hart. I represent ICAP Brokerage as a Market Analyst. Prior to my affiliation with ICAP, I spent 28 years 

with the Southern Company and retired as their Manager of Emissions Trading in late 2006. In that capacity, I managed a systemwide bank of emission allowance holdings valued at over $4 billion. 

I helped found the trade association known as the Environmental 

Markets Association and was part of a delegation to Beijing to instruct the Chinese government and academia on how to implement 

a cap-and-trade program. I speak frequently on this, and have been 

quoted in things such as Wall Street Journal and Fortune and was 

recently quoted in the Washington Post on the Waxman-Markey 

bill. 

I have been really fortunate to watch cap-and-trade grow from a 

theory or concept included in the 1990 amendments to the Clean 

Air Act, into a fully functioning policy tool providing real environmental benefits to our citizens. Even groups such as the Environmental Defense Fund published a pamphlet in September 2000 entitled, From Obstacle to Opportunity—How Acid Rain Emissions 

Trading Is Delivering Cleaner Air. 

In my opinion, as compared to command and control, marketbased solutions such as cap-and-trade offers the following positive 

advantages. It allows for compliance options or flexibility. It creates 

incentives to over-comply and sell those excess allowances back 

into the market. It establishes market prices to include in the unit 

dispatch equation, thus forcing cleaner units to run first and at 

greater capacity factors. And it really forces the economic allocation 

of capital dollars. 

In March, 2005, EPA promulgated the CAIR and CAMR rules 

and from the regulated entity perspective, thousands of man hours 

were expended in developing long-term compliance strategies. Complex computer models were used to balance the cost of installing 

technology against the cost of relying upon the allowance markets 

to reach a least cost compliance strategy. 

In many cases, it was determined that the needed technologies 

could not be installed in time, and hence decisions were made to 

purchase emission allowances for future compliance purposes. With 

the court ruling vacating the CAIR rule, we now find ourselves in 

a market where there is massive uncertainty as to the future viability of SO2 and NOx markets, and this is coupled with massive 

holdings of emission allowances that were purchased in anticipation of a two for one surrender beginning in 2010 for SO2 compliance. 
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In theory, SO2 and NOx allowance market equilibrium prices 

should represent the next incremental cost to install control equipment, i.e. scrubbers or SCRs, on a unit and are expressed typically 

in dollar per ton removal costs. Currently, this 20-year levelized 

cost for an SO2 scrubber is estimated to be between $750 to $900 

per ton, yet due to these other factors, again the SO2 market is 

now trading well below $100. The same equilibrium cost for annual 

NOx has been estimated to be in excess of $2,000 per ton to put 

on an SCR, and yet right now NOx allowances are trading at ap- proximately $1,100. 

Wait and see seems to be the prevailing attitude in these markets. This is further reinforced by an article in the April 1 issue 

of Air Daily where Sam Napolitano, the Director of the Clean Air 

Markets Division at EPA, was quoted as follows: ‘‘While no inferences should be made from last week’s letter, I am urging buyer 

beware. Probably the trading allowances in the next 2 years is on 

good ground, but after that, it’s not so good.’’ 

The results of the annual 2009 EPA auction pointed to a real 

lack of confidence in these markets, again due to the court decisions. The 2009 vintage SO2 allowances sold at an average price of only $69.74, which was like the second all time low price, and future 7-year vintage allowances sold for only $6.65. 

I refer to July 11, 2008, in my presentations as really ‘‘Black Friday’’ in the emissions market. Again, SO2 prices fell from $314 on the morning of July 11 to close at $115, and annual NOx prices fell from $4,800 down to $1,100 by the close of the day. 

Cap-and-trade programs established by Congress and the EPA to 

deal with SO2 and NOx emissions have truly been an environmental success story, as you can see from my attached chart. Unfortunately, it appears the EPA has been painted into a corner and 

can only respond to the court with some type of command and control regime. There was a great deal of effort put forth in late 2008 

to attempt to give the CAIR rule legislative authority. I would encourage the members of the committee to again consider such a focused technical legal fix to CAIR to restore much-needed confidence 

in these markets. 

I wish to thank the distinguished members of the committee for 

holding this hearing and allowing me to share my views on this 

most important matter with you. 

Thank you. 

[The prepared statement of Mr. Hart follows:] 
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Senator CARPER. Thank you, Mr. Hart. Thank you very, very 

much. 

Mr. Scott, please proceed. Welcome. 

STATEMENT OF DOUGLAS P. SCOTT, DIRECTOR, ILLINOIS 

ENVIRONMENTAL PROTECTION AGENCY 

Mr. SCOTT. Thank you very much, Chairman Carper, Senator 

Voinovich, Senator Alexander. I appreciate the opportunity to be 

here with you today. 

I have been the Director of the Illinois EPA for 4 years, and during that time period we have entered into extensive regulatory negotiations and rulemaking on just the subject we are talking about 

today, at the State level to address sulfur dioxide, nitrogen oxides 

and mercury, specifically addressing those emissions from coalfired power plants in our State. 

We get about 40 percent of our electricity from coal-fired power 

plants, and they represent the largest source of man-made emissions of mercury and sulfur dioxide, and one of the largest sources 

of nitrogen oxide in our State. We are home to 21 large coal-fired 

power plants that operate electric generating units. 

We have made exceptional progress in the last few years in reducing the emissions that contribute to ozone and particulate matter air pollution as well as the toxic mercury emissions that deposit 

into and contaminate Illinois’ waters and fish. 

In particular, we reached landmark multi-pollutant standard 

agreements with the three largest coal-fired power plants in our 

system. They represent about 88 percent of the 17,000 megawatts 

of coal-fired electric generating capacity and account for hundreds 

of thousands of tons of air emissions each year. 

We have what we call multi-pollutant and combined pollutant 

standards, MPS and CPS, that we entered into agreements with 

these companies, and they will improve Illinois and regional air 

quality dramatically by reducing the three pollutants we have been 

talking about today. 

The agreed-to standards represent the largest reductions in air 

emissions ever agreed to by individual companies in Illinois under 

any context, whether through an enforcement action or through 

regulation. The combination of the Illinois mercury rule, CAIR, and 

the MPS and CPS will have enormous positive impacts on reducing 

mercury, SOx and NOx emissions far beyond the levels that were 

required under the Federal CAMR and CAIR alone, and I have additional details of those figures in my written testimony. 

Whereas the Federal CAMR focuses solely on mercury emissions 

and CAIR concentrates on SO2 and NOx, Illinois has taken a combined approach that exceeds the goals in the context of a single 

regulatory framework accommodating engineering and construction 

issues and outage schedules, which are very, very important, as 

well as financing issues which have become even more important 

recently. 

When the United States District Court of Appeals vacated 

CAMR, our Illinois mercury rule was already in effect, and therefore the vacator had minimal impact on our Illinois rule, as you 

heard from the gentleman in the previous panel. It did cause us 

to do some revisions to our particular rule with respect to moni-
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toring provisions we had relied on CAMR for, but otherwise our 

rule is intact. 

We were relying on CAIR phase one as part of our 8-hour ozone 

and annual PM2.5 attainment plans in annual fine particulate matter non-attainment areas. We have improved to a very significant 

degree even without these expected reductions. As a result, all but 

one monitor is in attainment for these standards, which we are 

very glad of. 

Despite the improvement in air quality, we would have much 

more significant problems in demonstrating attainment in our 

State implementation plan, as was discussed earlier, if CAIR phase 

one or something that looks very much like it, were not reinstated. 

As was suggested during the first panel, there is concern that 

power plants may delay or cancel some controls that were being installed to comply with CAIR phase one due to the loss of value in 

the SO2 and NOx allowances. And as you have heard, the market 

value of these allowances is very uncertain. 

We think that the vacator of CAMR and CAIR emphasizes the 

high risk associated with moving forward without legislation and 

moving forward only with Federal regulations subject to widespread opposition and controversy. Regulations will almost certainly be challenged in courts, potentially resulting in further delay 

of a vital strategy for the States to achieve attainment of Federal 

air quality standards. 

Section 126 petitions will surely also be filed by States who believe their neighbors in upwind States could do more to address 

non-attainment, even if the complaining States’ air quality issues 

are largely as a result of emissions from its own sources. And Mr. 

Korleski and I have been working with our colleagues in other Midwestern and in the Northeastern States on an approach, but it is 

a very difficult one to try to work on together. 

As a result of our knowledge and experience gained through our 

efforts in Illinois, we support a comprehensive national strategy for 

reducing emissions of multiple pollutants from electric generating 

units. A comprehensive integrated approach benefits both regulators and the regulated community, in our opinion. 

Multi-pollutant approaches should, where practicable, address all 

significant emissions from electric generating units and supplement, not replace, the existing Clean Air Act programs such as 

New Source Review and MACT standards and Regional Haze. And 

we agree with you, Senator Carper, that trading makes a lot of 

sense with respect to nitrogen oxide and sulfur dioxide, but not 

with the neurotoxin mercury. We agree with that approach very 

much. 

We look forward to working with you, and again commend you 

and the other Senators who have—I have testified in front of you 

before and I really appreciate the continued interest that you have 

and the sentiment that you raised, Senator Alexander, that this 

not get lost in the other very, very important legislation that is 

coming through the Senate right now. 

Thank you for having me here today. 

[The prepared statement of Mr. Scott follows:] 
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Senator CARPER. Thank you, Mr. Scott. We are going to do our 

best to make sure it does not get lost. And thank you for the good 

work you are doing in Illinois. 

Mr. SCOTT. Thank you. 

Senator CARPER. Mr. Korleski, from the Buckeye State, Ohio. 

STATEMENT OF CHRIS KORLESKI, DIRECTOR, OHIO 

ENVIRONMENTAL PROTECTION AGENCY 

Mr. KORLESKI. Good morning. My name is Chris Korleski, and I 

am the Director of the Ohio Environmental Protection Agency. 

Chairman Carper, thank you so much for having me here, Ranking Member Vitter, who has had to leave, my own Senator 

Voinovich—it is always a pleasure to be here and be working with 

you on a project—and Senator Alexander, it is nice to work with 

you as well. I thank you all for the opportunity to meet with you 

again to come and discuss the CAIR issue. 

As we all know, the Clean Air Act requires States to develop approvable State implementation plans, SIPs, which set forth the 

emission reduction measures that States will implement in order to 

achieve attainment with the air standards. Stated simply, the initial CAIR rule served, and thankfully continues to serve, as an integral component of Ohio’s SIP to achieve necessary reductions in 

both NOx and sulfur dioxide from power plants. 

Now, based on U.S. EPA’s projected emission reductions for Ohio, 

the initial CAIR rule was anticipated to reduce NOx from power 

plants in Ohio from about 355,000 tons a year in 2003 to 93,000 

tons a year by 2009, and 83,000 tons per year by 2015. Similarly 

large decreases for SO2 emissions were projected. 

It is critical to remind ourselves that a State’s obligation to timely achieve the standards for ozone and PM2.5 remain firmly in place 

despite whatever might happen with CAIR. For example, Ohio was 

required to achieve compliance with the old ozone standard, meaning 84 parts per billion, in marginal non-attainment areas by June 

2009, and in moderate non-attainment areas by June 2010. 

I am happy to tell you that Ohio has attained the old ozone 

standard in all but one of our non-attainment areas. However, our 

delight over this significant progress must be short-lived because 

new, more stringent standards for ozone, that is 75 parts per billion, are now in place. Indeed, under the new more stringent ozone 

standard, we expect some of our urban areas to be designated nonattainment in 2010, including some areas that only just recently 

achieved timely compliance with the old standard. 

All of this means that Ohio needs the reductions achieved by 

CAIR to not only maintain compliance with the old standards, but 

to help us achieve the new standards as well. 

Now, I should emphasize that a number of power plants in Ohio 

have installed NOx controls and SO2 scrubbers on their largest 

newer units in anticipation of the 2009 compliance deadline under 

the first phase of CAIR. However, we know that this first phase of 

controls will not be sufficient for Ohio to meet the revised ozone 

and PM2.5 standards. But while we know that some form of enhanced CAIR is unquestionably needed to help States like Ohio 

meet their attainment targets, we don’t know what the final 

version of CAIR will look like. 
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I can tell you, as Director Scott has indicated, that several Midwestern States, including Ohio, have been having discussions with 

the Northeastern States in an attempt to try and develop joint recommendations to U.S. EPA for a CAIR replacement rule. Although 

these discussions have not concluded, I believe there is recognition 

by Midwestern and Northeastern States that additional controls on 

power plants beyond the initial version of CAIR will be necessary 

to achieve the revised air quality standards for ozone and PM2.5. The issue of contention is likely to be the degree to which power 

plant emissions can reasonably be expected to be lowered. 

Further, Ohio believes firmly that when revising CAIR, U.S. EPA 

must recognize that power plant emissions are not the main contributor to ozone non-attainment in urban areas. Rather, it is primarily the impact of transportation-related emissions that continues to hamper Midwestern and Northeastern States from 

achieving the ozone standard. 

Additionally, U.S. EPA must carefully consider what level of impact from one State on another’s non-attainment should be deemed 

unacceptable; 1 percent of the problem; 4 percent of the problem; 

as well as the issue of the proper remedy to be applied when the 

threshold is exceeded. 

Even more importantly, Ohio continues to believe that U.S. EPA 

must when replacing CAIR squarely address the issue of emission 

trading. However, given the language of the court’s decision, it appears that without additional legislative authority, a comprehensive uniform region-wide trading program cannot be developed. 

And to put it very simply, we know such a program works. As 

other people have pointed out, the Acid Rain Program is an excellent example where trading has produced significant additional 

emission reductions for SO2. As non-attainment with air quality standards threatens both 

public health and economic development, I would be concerned by 

a revised CAIR that does not include a regional trading plan. In 

our view, since there is recognition that a level of control beyond 

CAIR is needed, it becomes imperative that a trading program be 

enacted. 

In short, while we don’t believe that there will ultimately be any 

large uncontrolled power plants in Ohio, we also believe that the 

smaller plants, those that are the least effective or least cost-effective to control, will best be able to obtain emission reductions 

through the application of a trading program. 

As noted above, it will be difficult, to say the least, for U.S. EPA 

to include a regional trading plan, given the court’s July, 2008 decision and the language of the Act. Therefore, let me again respectfully suggest the solution. 

As we know, the heart of the court’s concern with the initial 

version of CAIR derived from the court’s interpretation of a single 

section of the Clean Air Act. In interpreting that section, the court 

concluded that trading was not appropriate. 

I again respectfully suggest to this subcommittee that Congress 

address the loss of the significant flexibility embedded in the initial 

version of CAIR by a surgical laser-like amendment to section 110. 

Such an amendment would allow U.S. EPA to successfully promulgate a revised CAIR such that certain and significant emission re-
120 

ductions would be achieved, while at the same time, the flexibility 

needed in order to obtain significant reductions would be preserved. 

Indeed, Ohio will again take the liberty of respectfully proposing 

a new section 110(a)(2)(E), set forth below, which I will not read, 

which would provide the authority for a regional trading approach 

to serve as a starting point for consideration and discussion. 

In conclusion, Ohio respectfully requests that Congress provide 

clear authority to U.S. EPA to promulgate a CAIR rule which incorporates regional emission trading. The previous multi-State rule 

promulgations by U.S. EPA have included trading, resulted in significant emission reductions, and most importantly, were successful 

in improving air quality. 

I thank you very much. 

[The prepared statement of Mr. Korleski follows:] 
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Senator CARPER. Thank you, Mr. Korleski, very much. 

Mr. Schneider. All ready for this presentation? Got some visual 

aids here? That is good. 

STATEMENT OF CONRAD G. SCHNEIDER, ADVOCACY 

DIRECTOR, CLEAN AIR TASK FORCE 

Mr. SCHNEIDER. Thank you, Senators. Senator Carper, Senator 

Alexander, and I am sorry that Senator Voinovich had to leave. 

Thank you for the opportunity to address you today. 

Mr. Chairman, I want to thank you personally for the leadership 

and commitment that you have shown, the persistence that you 

have shown on this issue. I recognize Senator Voinovich, who also 

has persevered through this, and Senator Alexander. 

The three of you who were here just moments ago I think of as 

the A-Team in terms of if this problem is going to get solved, it is 

going to be the three of you that take the leadership role. 

Senator CARPER. We have been called a lot of things. That is actually one of the nicer things, Lamar. We have the L.A. team and 

the T.A. team. 

[Laughter.] 

Mr. SCHNEIDER. I represent the Clean Air Task Force, which is 

a national nonprofit environmental advocacy organization. And our 

mission, in fact our founding mission, was to clean up power 

plants. Today’s hearing revisits the status of emission controls 1 

year after the D.C. Circuit struck down the Clean Air Interstate 

and Clean Air Mercury Rules. And I want to commend EPA for its 

statement here that it intends to follow the requirements of the 

Clean Air Act and issue stringent power plant regulations to replace those rules. 

There is no question that EPA should do that, including regulations on carbon dioxide consistent with its statutory duty as expressed by the Supreme Court in Massachusetts v. EPA. But we 

know that just as the Bush CAIR and CAMR rules were challenged 

and struck down, any new rules may founder on the shoals of court 

challenges and delays. And so to guarantee the certainty that public health and the environment demand and that industry craves, 

we believe that Congress should act now to solve this problem. 

In preparing for my testimony today, I really had a sense of de ́ja`

vu all over again. I know that this date marks about the 1-year anniversary of the court cases, but it also is about the eighth anniversary of my first testimony before this committee on this very issue. 

And at that time in support of multi-pollutant legislation, I testified that power plants are the biggest contributor to the single 

largest environmental health risk that we face. They cause over 

30,000 preventable premature deaths each year due to inhalation 

from particulate matter that that pollution creates. 

In addition, that pollution causes tens of thousands of respiratory 

and cardiovascular emergency room visits and hospital admissions; 

contributes to unhealthy levels of ozone smog that triggers many 

more asthma attacks; damages forests, lakes, bays and crops due 

to acid rain; contaminates our wildlife with mercury; and shrouds 

our national parks in a veil of haze—I would put up Great 

Smoky—a veil of haze unnecessarily; and of course last, contributes 
126 

significantly to climate change. My written testimony documents 

these effects in detail. 

After 8 years from my first testimony here, we are back where 

we started, with nothing except the continued death, disease and 

damage caused by these plants. In that time, according to EPA’s 

own analysis, approximately 240,000 Americans have died unnecessarily due to this pollution. Let me say that again. In the 8 years 

since I testified here, 30, 60, 90, 120, 150, 180, 210, 240,000 Americans have died unnecessarily due to this pollution. And when we 

realize that today technology exists, as it did then, that can reduce 

this pollution by 90 percent or more, we have to conclude that we 

all share a measure of responsibility. 

It is high time for all power plants in this country to be well controlled or shut down to make way for cleaner energy sources. 

Consistent with the emission controls technology that are available today, we believe the appropriate level of emission reduction 

would include a SOx, a sulfur dioxide cap of 2 million tons per year; 

a nitrogen oxide emissions cap of no more than 1.6 million tons per 

year, but subject to the point that the gentlemen from the States 

made, which is to bring their States into attainment, and I know 

that there are studies ongoing right now to pinpoint that number 

more specifically. 

With respect to mercury, we strongly support allowing EPA to 

finish its rulemaking on MACT for all coal-and oil-fired power 

plant hazardous air pollutants, but we would support that Congress backstop that process by requiring a 95 percent plant by 

plant mercury emission reduction at all currently existing coal-fired 

plant if that rule is not in place by 2012. These caps should supplement—not replace—existing Clean Air Act authorities. 

We would oppose the so-called technical fix which would merely 

give EPA the authority to allow emissions trading in the CAIR replacement rule, without at the same time setting specific limits. 

The reductions in CAIR were too little too late, and I would note 

that it sounds like the old war between the States, between the 

Northeast, Midwest and Southeast, is largely over. Today, States 

in each of those regions agree that we need more than CAIR to 

meet attainment. 

Senator Carper, your bill, the Clean Air Power Act, last year 

EPA did an analysis of the bill vintage 2005 that said its benefits 

would be $160 billion a year in 2020, and only at the cost of $9.5 

billion at the same year. That means the benefits of your bill would 

be roughly 15 to 1. 

We are also aware that this debate takes place in the context of 

climate and energy legislation that the full committee is taking up 

right now and the full Senate is scheduled to take up later this 

year. And we commend the House of Representatives for its action 

in passing a climate bill, and we support an economy-wide cap-andtrade approach, and will work to strengthen it as it moves forward 

here. 

But we also know that addressing the climate bill, or passing the 

climate bill, will not remedy the SOx, NOx and mercury emissions; 

only flue gas desulferization scrubbers, only selective catalytic reduction, only activated carbon injection for mercury and other 

measures can do this. 
127 

And if under a climate bill existing coal plants are to be retrofitted to control their CO2 emissions, we are being told that they 

must virtually eliminate their sulfur, nitrogen and mercury emissions to allow those post-combustion CO2 controls to function properly. So we support this as part of a climate bill or separately, because it needs to happen. 

And I would just note one other thing, and here is an idea. One 

of the chief criticisms of the Waxman-Markey bill is that it gives 

away carbon dioxide allowances to the power sector for free. And 

although that issue is a bit more complicated than the one I just 

stated, Clean Air Task Force believes that any giveaway of carbon 

allowances should be conditioned on plants meeting the best available technology and the maximum available control technology for 

hazardous air pollutants. 

Indeed, adding that provision to the Waxman-Markey climate bill 

would only add a small increment to its cost, while multiplying 

many times its calculable benefits. But regardless of whether it is 

accomplished through a climate bill or through separate legislation, 

Congress must commit to finishing this job. It is not too much to 

ask to save 30,000 lives a year, clear our national parks, restore 

the health of our forest ecosystems, cut ozone smog, and virtually 

eliminate the power sector’s contribution to the mercury contamination in fish. 

We submit the costs of the bill is a small price to pay and many 

years overdue. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Schneider follows:] 
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Senator CARPER. Thank you very, very much for that statement. 

We have a vote underway. I have a few minutes to get to the 

floor to vote. I will be right back. So this hearing is not adjourned, 

but in recess until I get back. I will be back shortly. 

Thank you very much. 

[Recess.] 

Senator CARPER. Thank you for your patience. We are voting on 

one of our appropriations bills, trying to get those moving along, 

but I think we will have time to finish. No more votes before we 

finish, so I thank you for that. 

This is a question I would ask of the entire panel, and that is, 

it sounds like all of you support some sort of legislative action to 

address sulfur dioxide and nitrogen oxide emissions. Is that correct? Every head has nodded yes. OK. 

Some of you support only a technical fix. And let me just ask for 

those of you who feel that way, why wouldn’t you want more certainty with targets and timetables if you think technical fix is better? Why not more certainty with targets and timetables? And 

maybe you don’t share this concern, but wouldn’t the litigation continue without providing as much direction as possible? 

Anyone, please. 

Mr. Korleski. 

Mr. KORLESKI. Senator, if I may, I am one who does support, I 

think I used the phrase surgical and laser-like fix. 

Senator CARPER. I remember you saying that. 

Mr. KORLESKI. I know some of the other panelists disagree and 

would seek a more comprehensive approach. Very frankly, my view 

is that, and I think we have seen this over the last number of 

years, the more comprehensive, the larger it is, the more complex 

it is, it will require agreement by a larger number of parties, many 

of whom I think at the end of the day will not come to agreement. 

And my fear is, just to put it in the most candid terms, it would 

be gridlock to try to get there. 

So my recommendation has been, again I think sitting at this 

panel I think I heard, as you did, everyone say trading, make trading OK. Some people said, OK, that is a small part of it. Someone 

like me said that is a big part of it. I didn’t hear anybody say it 

was a bad idea. That is something that everyone could agree upon 

and therefore something that could hopefully and presumably be 

accomplished, I don’t even want to say presumably, hopefully be accomplished in legislation. 

Once you get beyond that, I think all bets are off. 

Senator CARPER. OK. All right. Thanks. 

For panel members who may have a different view, just without 

being argumentative, but just a different view on this point. 

Mr. LaBauve. 

Mr. LABAUVE. Thank you, Senator. 

From our view, Senator, I think we do all support the need for 

legislation and the need to support additional trading. From our 

perspective, however, I think you can see what was in the rule and 

what the court said of the rule, and I think it will not provide the 

type of certainty, the type of comprehensive solution that we all 

need on this particular type of issue. 
162 

Even as we look at going forward, if we were to get at technical 

fix, there is no guarantee, as the court found, that all the areas 

that are currently non-attainment under the old standard would 

necessarily be brought back into attainment under that standard, 

since there have been new standards passed, as well as additional 

elements that EPA has to look at under the hazardous air pollutant requirements and the MACT requirements. 

We would like to see a more comprehensive fix to the whole solution to give us the type of certainty so that we can move forward 

with our planning. 

Senator CARPER. OK. 

Mr. Corneli. 

Mr. CORNELI. Yes, and we tend to agree with FPL on that point. 

But with respect to the target—— 

Senator CARPER. You tend to agree with whom? 

Mr. CORNELI. With what FPL just said. 

Senator CARPER. OK. 

Mr. CORNELI. Part of the target or part of the objective of legislation should be to remove as much of the litigation risk as possible. 

And you know, the difference between the Michigan decision and 

the one a year ago shows that stuff can pop up that you weren’t 

aware of yet. So we think there are, as I mentioned in my testimony, several areas of legal fixes that are needed. 

In addition, we would support the target and timetable of the introduction of a reducing cap over time. And I think if that is discussed broadly enough, very few people would oppose it because 

from the environmental side, you get more environmental benefits. 

From the business side, you get better economic certainty that 

there will be a continued price signal to support the validity of the 

investments we are making and the ability to recover them, especially with a reasonable approach to allocations, which help assure 

there is a positive incentive to make those investments, because 

you can then monetize some of the emission allowances you have 

allocated. 

And I think on that point, while several of us talked about different aspects of that, from what I have heard here and from what 

I have seen in related debates in the climate change area, I think 

there is room for consensus for building agreement around how to 

have a reasonable and moderate allocation approach as well. 

Senator CARPER. Good. Thank you. All right. 

Mr. Schneider, I have a question. My next question is for you, 

if you really want to respond to this. 

Mr. SCHNEIDER. Please, Senator. 

Senator CARPER. OK. Next question, if we look at the court’s decision on the CAIR case, let me just ask, do you believe that EPA 

can rewrite rule on their own that continues the Acid Rain Program for sulfur dioxide? And do you think they could write a rule 

that allows for interstate cap-and-trade for sulfur dioxide and nitrogen oxide? 

Mr. SCHNEIDER. Senator, I think it would be very difficult. And 

I think it would be vulnerable to court challenge. I was heartened 

to hear Assistant Administrator McCarthy today say that she 

thinks she can create a hybrid approach, and I would be very inter-
163 

ested in listening to what her OGC lawyers say about that. That 

was a heartening thing to hear. 

Our reading of the case is it is going to be very difficult to thread 

that needle. And you know, that is very different. The litigation 

posture, that is very different compared to the settled precedent in 

the MACT area, where we think there is a pretty clear road path 

for EPA to move forward. And we have differentiated that in our 

testimony to sort of say maybe that could go forward and maybe 

Congress helpfully could set a backstop in case that is not in place. 

But on the CAIR side, frankly it is a mine field. 

Senator CARPER. All right. Just a follow up; if the Acid Rain Program cannot be extended, what happens to the banked allowances 

from previous years? 

Mr. SCHNEIDER. Well, I mean, the conditionalism on that is that 

the market collapses. And one fear is that you see people dumping 

allowances, which basically means that it is cheaper for them to 

emit and not run scrubbers. Right? So that would be a concern. 

The fact of the matter is there are some limits on that with respect to people’s individual Federal and State permits and other 

State requirements. So I can’t here tell you that, you know, we are 

going to from 1 day to the next see this spike in emissions as a 

result of that. But certainly, it is not a helpful thing. What we are 

trying to do is get an emissions trajectory that goes down to protect 

public health and the environment. So that would not be a good 

outcome. 

That is another reason is makes sense, and this sort of goes back 

to your previous question that the other gentleman addressed, why 

it makes sense to move beyond just a technical fix or surgical fix 

and to set specific emission rate limits and so forth on these pollutants so there is certainty and especially not the litigation risk that 

would be faced otherwise, and the risk of what you are hinting at 

in your question. 

Senator CARPER. All right. Thanks. 

Let me ask my next question, this is really for the broad panel, 

but especially for Mr. Scott, if I could. 

In the past, I have introduced legislation with others that has 

regulated mercury, including Senator Alexander, who has been a 

champion on this, but we introduced legislation that regulated mercury at the stack, calling for 90 percent reductions. 

According to the GAO study, which we have heard from earlier 

this morning, it looks like most plants are easily able to get to 90 

percent reductions. Let me just ask somebody who has dealt with 

this issue for some time, do you think that 90 percent is realistic? 

Is it too high? Is it too low? 

Mr. SCOTT. We think it is very realistic, Senator. It is interesting. When we were negotiating these agreements early on, we 

started with a strong mercury rule that called for 90 percent, and 

that is actually what led to all of the discussions about a multi-pollutant solution. And we were told at that time by most of the companies that they didn’t think that it was achievable. But our findings from the testing and the actual installations that have been 

done would indicate that it is quite doable, and that it is a realistic 

number. 
164 

So we think that that 90 percent figure is not only realistic, but 

it is showing up in the testing that has been done, and even at less 

sorbent injection in an activated carbon injection system than even 

we had anticipated being necessary to accomplish that 90 percent. 

So we have been very encouraged by the results that we have seen. 

Senator CARPER. OK. 

Anybody else want to be heard on this issue? 

Mr. Corneli and then Mr. Schneider. 

Mr. CORNELI. Yes, we have cooperated with the GAO on some of 

their work. We have done sorbent injection control initially ourselves and have plans to do it on our entire fleet of coal plants. And 

we think it works. We agree basically with the GAO perspective. 

We think it works. We think it is economical, and at least on our 

plants and coal types. And we think it is something that can definitely be done under the MACT approach and should be done 

under the MACT approach. 

I would say that at a somewhat more technical level, we think 

that other hazardous air pollutants that come out of power plants 

could interfere with the efficient cap-and-trade and removal technologies for SO2 and NOx. So we think that in addition to a MACT 

approach for mercury, power plants should be removed from section 112 with respect to other HAPs to avoid that kind of interference between MACT for other things that are not quite such serious pollutants. 

Senator CARPER. OK. Thank you. 

Mr. Schneider, last word on this issue. 

Mr. SCHNEIDER. Sure. I do want to respond to that very point because I know that has been a subject of some discussions. And we 

would vigorously oppose the idea of removing the other hazardous 

air pollutants from section 112. In their own right, dioxins, furans, 

acid gases, and heavy metals, they are serious environmental 

threats, and they should go through the MACT process. And I 

think we will have a better outcome both in environment and in 

terms of ultimate control on these plants if they are subject to that. 

So we would oppose that. Thanks. 

Senator CARPER. All right. Thank you. 

Mr. Corneli, can you talk with us little bit about what NRG is 

doing to mitigate mercury at your coal plants? You talked a little 

bit about this, but if you don’t mind. You folks have a big plant 

down in southeastern Sussex County in Delaware. But what kind 

of reductions are you seeing in your plants? Again, you talked 

about this a little bit, but could you talk about the benefit of certainty for pollution controls, not just what the country needs, but 

also for your company? 

Mr. CORNELI. Well, two things. First, on the sorbent injection for 

mercury, the 90 percent reduction levels seem to be attainable. We 

have begun to use that at our plant in Delaware and are seeing 

good results. I don’t have the latest details of the actual results 

there, but I would be glad to get those to you. 

Senator CARPER. All right. Thank you. 

Mr. CORNELI. In terms of the—— 

Senator CARPER. You have a number of plants there, a couple of 

smaller ones and larger units, too. 
165 

Mr. CORNELI. Yes, in New York as well, and also installed sorbent injection. The question of certainty I think is particularly important for us because we are a merchant power plant. We don’t 

have rate base. We don’t have regulated rates that allow us to turn 

around and recover our costs from retail customers. That tends to 

be good news for customers because they don’t have to accept the 

costs that a regulated utility would just pass through, but it makes 

cost recovery challenging for us. 

So one of the things that we need in certainty really is to know 

what the rules are. And the second thing goes back to the allocation provisions, is that we need to have a reasonable way of being 

sure that we can recovery our costs through the cap-and-trade system or mitigate our costs by selling allowances when we make the 

emission reductions. And that relates both to the existing bank 

from reductions we have made in the past that we would like to 

be able to use that for compliance, although we do think that there 

needs to be this two for one or 2.85 for one discount in the future. 

And it also goes to features of what you can do or what the EPA 

can do in making a new rule and a new law. And that is to continue that same sort of incentive, positive incentive that if you 

make emission reductions, if you invest billions of dollars in emission reductions, you will have some way to recover that or a portion of those costs by actually selling allowances that you got for 

free, without creating windfalls or without creating too much of a 

good thing. 

And the last piece of certainty for us really relates to the thing 

you have already talked about, Senator, and with your colleagues, 

is litigation risk. If you do invest billions of dollars or hundreds of 

millions of dollars in pollution control equipment and you are relying on selling allowances at a market price to recoup some of that 

expense, and a court case comes along and vacates or remands the 

rule, as other witnesses have said, that can lead the market to collapse. 

And all of a sudden the way you thought you were going to make 

back money for your investors in terms of paying for those hundreds of millions of dollars investment evaporates. And that is 

something that we think is critically urgent to avoid, to having a 

market-oriented powerful incentive for the private sector to really 

jump on board, not only with the controls, but actually with the 

legislation itself. 

So we think those features will be very, very helpful in moving 

this forward politically, legally and commercially. 

Senator CARPER. Good. 

I am sitting here today remembering a hearing that goes back 

maybe 5 or 6 years ago, and the hearing focused on mercury emissions and if we could find a way to cost-effectively reduce those 

emissions by 80 percent over a reasonable period of time. A number 

of people sat at this table and said, no way; that is just not, we 

are not going to do that anytime soon. I am just struck by how far 

we have come, and really struck by how cost-effective this can be. 

Could someone just take a minute and explain to me how does 

sorbent injection work? Can somebody just explain it to me, very 

briefly? Anyone want to take a shot at that, so even a Senator 

might understand it? 
166 

Mr. CORNELI. Well, I will have to explain it extremely simply because that is the extent of my understanding, Senator. But basically, a sorbent is something that chemically attracts or bonds with 

certain other chemicals. And activated carbon, for example, is a 

sorbent that will attract and bond with things. That is why people 

filter whiskey through charcoal. It is a good sorbent. 

And the activated carbon injection blows ground up carbon that 

has been treated to make it especially sorbent into the exhaust 

stream of a coal plant before it gets filtered out through part of the 

filtration system that captures fly ash and particulates and other 

things. And in that process, the vaporized mercury that is in the 

exhaust stream gets bonded onto the little carbon particles and filtered out. You know, that is the extent of my knowledge about it. 

Senator CARPER. Well, good. Thank you. I think I understood 

that. 

Another question, if I could, and maybe we will just direct this 

one to Mr. Scott. 

In your testimony, I think you mentioned that Illinois has implemented multi-pollutant regulations for your power plants, including regulations for mercury. Have you seen a dramatic increase in 

your customers’ electric bills? Have you seen any increase in your 

customers’ electric bills as a result? And do you believe that the 

multi-pollutant approach costs more money, or does it actually save 

money in the end? 

Mr. SCOTT. I think it would actually save money in the end, 

under the assumption that all of these different pollutants are 

going to be regulated at some point. The reason I say that is because we were able to sit down with the companies individually, 

which is obviously something that would be very difficult to do on 

a Federal level, but for us, we were able to do it, to actually sit 

down and go plant by plant and make sure that we were accommodating the companies in terms of things like outages and when 

they had to install equipment so that they were doing it at the 

most cost-effective time for them, rather than us coming along with 

multiple regulations and slapping them on at different times, them 

having to comply with them all, which may include moving equipment that you have installed once and reinstalling it a second time. 

So I believe doing this comprehensively is actually more cost-effective for the companies. The larger expense in all of this is not 

the mercury, it is the equipment that deals with NOx and SOx. It 

is things like scrubbers, which are, you know, the very expensive 

equipment that is there. The mercury injection alone, we are talking about in the millions of dollars to install, and when you spread 

that out over the number of kilowatt hours that are there, you are 

talking about a really, really small expense as compared to the billions that we are talking about, we think that the controls that are 

on for NOx and SOx are somewhere in the neighborhood of, for 

these three companies, somewhere in the neighborhood of $5 billion. 

So obviously, even as you spread that out, that becomes something that does get seen in the rates, as opposed to the mercury, 

which is a very, very small cost. But it is difficult to say how much 

of this is, Illinois is at an interesting juncture with re-regulating 

the utility companies. That period ended about 3 years ago, and we 
167 

have gone through a lot of new regulations now, so it is difficult 

to attribute any particular cost to any particular stream. But just 

from doing some analyses of how much it cost, you know, we can 

come to the conclusion obviously it is going to cost something to do 

that. But again, we think it is more cost-effective than doing these 

regulations piecemeal. 

Senator CARPER. OK. Thank you. 

And if I could, for Mr. LaBauve, a question. Your company has 

I think had difficulties with the allocation scheme for CAIR. Is that 

true? 

Mr. LABAUVE. Yes, that is correct, Senator. 

Senator CARPER. Why is that? 

Mr. LABAUVE. Under the proposed rule that came out from EPA 

originally, they allocated allowances to units across the country in 

the initial allocation. And when the final rule was actually developed, they applied what was called a fuel adjustment factor. And 

under that fuel adjustment factor, they made an adjustment to the 

allocation such that if you generate electricity from oil or from gas, 

you got only 60 percent or 40 percent of the previously allocated 

allowances that you formerly were going to get. And so that remainder that you didn’t get was actually shifted and moved over 

to those who generated electricity from coal. 

It basically, in EPA’s words, was their effort to try to adjust on 

an equity basis, shift some of the allowance value over to those coal 

units because they felt like they were going to have a larger percentage of reduction responsibilities in the long run. 

We think, one, that was not consistent with the Clean Air Act 

under section 110, which was supported by the court because they 

recognized that 110 has no element of equity adjustment in it. It 

is really just a matter of getting the areas into attainment as required by the Act. 

And second, the court said in terms of doing an equity adjustment, this was not within your authority, EPA, to do so. From our 

vantage point, we have always felt like from our perspective as a 

company, we have invested in clean generation. Our customers 

have paid for that clean generation. And the allowance values, 

whatever that may be that we were going to get, was going to be 

their way of getting some value of allowances to compensate them 

for the technology that they had installed in those units. 

We didn’t feel like it was appropriate for those allowances to be 

shifted over to the coal generators. 

Senator CARPER. All right. Thank you. 

A follow up maybe, if I could, for Mr. Corneli, and maybe for you 

again, Mr. LaBauve. Let me go over to Mr. Corneli first. 

In the Waxman-Markey climate legislation, I think the allocation 

for the cap-and-trade program for greenhouse gases combines an 

auction with free allowances. That is correct, isn’t it? 

Mr. CORNELI. Yes. 

Senator CARPER. OK. The free allocations are split between historical emissions and electrical output to the local electric distributors. Is that correct? OK. 

Mr. CORNELI. The allocations for the regulated distribution company is split that way, although there is additional just for certain 

fuel emitters, fuel-based emitters. 
168 

Senator CARPER. OK. And here is where I am leading. What are 

your thoughts about this particular allocation process? And could 

we do something similar for other pollutants? And what about auctioning the allowances? 

Mr. CORNELI. Well, that is a really good set of questions, and I 

will try to be precise and quick. First, I think one of the reasons 

that the Waxman-Markey bill has the allocation system for the 

power sector it does, which I would describe as one bucket for regulated distribution companies, which is every electric company that 

owns a meter on somebody’s house and pushes electricity through 

it, whether it is a co-op, municipal utility, a restructured distribution company in a State like yours, or a vertically integrated utility 

in the South or the West. 

Every LDC gets some allocations, and specifically has to pass the 

value of that through to their customers. That is the first bucket. 

The second bucket is coal-based merchant power plants get some 

allowances, not 100 percent, but some to reflect the fact that they 

will typically not be able to pass through all of their costs into 

higher power prices, unlike gas or oil-fired power plants. 

And so I think the reason for that system is partly to recognize 

the significant concerns that Randy just expressed, that customers 

of companies that have invested in cleaner assets deserve some recognition for that based on an output kind of allocation, and customers who are subject to high compliance costs because they are 

served by heavier emitters deserve some protection from that. 

So the LDC allocation addresses both those issues through a mix. 

The emitter allocation, which goes just to the folks who cannot pass 

through costs and just to an estimate of how much they cannot 

pass through, is designed to buffer the impact on compliance costs 

for companies like ours so we can invest these billions of dollars 

in new technology without creating any windfalls for us. 

And I think the same basic concepts, maybe applied quite differently in the case of NOx and SO2, could certainly be applied. The 

equity issues that are important to low emitting fleets could be recognized through a partial output-based allocation. The cost recovery issues that are important to heavily fossil fleets could be addressed through an allocation that is adjusted for their expected 

compliance costs. And this package would avoid windfalls, would 

stimulate investment, and would address equity concerns. 

So we are confident that that same basic approach could be used, 

you know, with recognition that the States are involved with the 

NOx allocation; that this is a different piece. But we think something like that makes sense, and we could get beyond sort of the 

old input versus output fight and look at the results—equity investment, fairness that really matter—and try to figure out a way to 

solve those issues. 

Mr. LABAUVE. Senator, I would concur with most of what Steve 

said. We support overall the Waxman-Markey bill and we support 

the allocation formulas that were included in the bill. I would say 

that early on in the debate, we were one of those companies that 

were advocating for 100 percent auction of allowances. We thought 

it was the appropriate methodology to follow. 

However, in the context of trying to get to a bill and trying to 

get something passed, we were working through USCAP. We were 
169 

working through EEI. And eventually worked our way with other 

companies to come up with a compromise that would as quickly as 

possible maybe start with a free allocation of allowances that would 

then eventually transition to an auction. And in that initial free allocation, as Steve noted, there was this balance between those allowances that would be allocated based upon sales and those allowances that would be based upon emissions. 

At the end of the day, while we could all differ as to the details, 

at the end of the day we do support overall the Waxman-Markey 

approach. And I do think it is a precedent that could be used in 

the context of discussing a three-pollutant bill and how to handle 

the allocation allowances. 

Senator CARPER. OK. Thank you. 

I think I am going to wrap it up here. Does anybody have something really burning that you feel like you need to get out on the 

floor? One last comment? I would yield to you. 

Mr. LABAUVE. Senator, I would just like to say from the perspective of FPL Group we have been working with you for years on the 

three-pollutant bill issue. We appreciate your leadership on this. 

We are excited about the opportunity to work with you in the future as we move forward to try to give EPA the clear certainty that 

they need to move forward with their rule. 

Senator CARPER. Thank you. And I appreciate very much your 

participation, and really what you said there at the end is that we 

have had this battle on input versus output, and whether to have 

auctions or not to have auctions. At the end of the day, I think we 

are going to get something done, and it is because of really the participation of everybody at this table and a lot of other folks as well, 

and the willingness to work hard, to use good science, but to also 

use good common sense, and to enable us to do some good things 

hopefully at a reasonable price for the folks who live in this country and on this planet. 

It has been a very good hearing, and I appreciate your willingness to stay as long as you have, and we look forward to continuing 

to work with you going forward. 

The hearing record I think will be left open for how long? Three 

years. No, just kidding. 

[Laughter.] 

Senator CARPER. A while. A while, not too long. And if you do 

receive any other follow up questions from my colleagues, I would 

just ask that you respond to those promptly. 

And again, we appreciate very much your being with us today. 

Thank you all so much. 

And with that, this hearing is adjourned. 

[Whereupon, at 12:30 p.m. the subcommittee was adjourned.] 

[An additional statement submitted for the record follows:] 

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

I want to thank Subcommittee Chairman Carper and Ranking Member Vitter for 

calling this timely hearing to discuss the aftermath of the D.C. Circuit’s decision to 

overturn EPA’s Clean Air Interstate Rule and Clean Air Mercury rule. I welcome 

this opportunity to discuss the impacts of these cases and the tools needed to 

achieve greater reductions in criteria pollutants. 

Of course, I welcomed the opportunity 4 years ago when this committee debated, 

and ultimately failed to pass, the Clear Skies bill, which would have locked in a 
170 

70 percent reduction in emissions of mercury, nitrogen oxides, and sulfur dioxide for 

the next two decades. Instead, the last Administration was forced to get those reductions through regulation. I argued then that the regulatory path was uncertain and 

prone to litigation. Here’s what I actually said, and what I predicted, 4 years ago: 

‘‘CAIR is significantly more vulnerable to court challenges than Clear Skies would 

have been and will undoubtedly be held up, not unlike the Clinton administration’s 

1997 air quality standards. This latest round of litigation demonstrates the need for 

a strong national Clear Skies law more than ever.’’ 

So here we are in 2009, without the substantial health benefits of Clear Skies and 

with no CAIR and CAMR rules because of litigation. We are left with an EPA that 

some believe lacks legal authority to permit region-wide emissions trading. We are 

left with uncertainty for States developing State Implementation Plans, or SIPs, 

that relied on CAIR to comply with national ambient air quality standards. We are 

left with uncertainty on, among other things, mercury reductions, conformity, new 

source review, and its effects on reductions for the Regional Haze Rule, which may 

impact my State of Oklahoma. In the final analysis, all we have are court decisions, 

which lawyers can certainly argue about for a substantial fee—but they don’t clean 

the air. 

Let’s put it bluntly: we have a colossal mess on our hands, created in large part 

by litigation. Ironically enough, the outcome of the CAIR litigation was something 

no one wanted—not environmentalists, not the States, and not industry. Now we 

face an uncertain regulatory future, and more important, we could lose the health 

and environmental benefits that CAIR would have achieved. I would note that EPA 

estimates such benefits to be 25 times greater than their costs. 

For all involved, it’s quite clear that the status quo is unacceptable. So what can 

we do to change it? Obviously, I would prefer a comprehensive legislative solution, 

such as that proposed in the Clear Skies bill, but that’s not politically feasible now 

or in the near future. So I believe in the short run, it’s imperative that we provide 

EPA with authority to implement CAIR, or at least something very much like CAIR. 

Why is such a course imperative? As you will hear today from several witnesses, 

without additional legislative authority, it’s unclear whether, under section 110 of 

the Clean Air Act, EPA can implement a comprehensive, region-wide trading program. I would note that the alternatives to trading under the Clean Air Act are 

unpalatable. 

So to make things crystal clear, I intend to join my colleague Senator Voinovich, 

who has taken the lead in drafting legislation that would provide EPA with narrowly tailored authority to implement CAIR, or its replacement. This legislation will 

help remedy significant price erosion in the SO2 and NOx markets, and provide incentives for plants to install pollution control equipment. Many companies have delayed such projects because of uncertainty over the future value of SO2 and NOx

allowances. 

A comprehensive legislative plan is needed, but that will take time. So in the 

meantime, let’s lock in market certainty and clean air benefits for the next decade. 

As was true 4 years ago, Congress needs to act, or else uncertainty, confusion, and 

litigation will rule the day. 

[Additional material submitted for the record follows:] 
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