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REGULATORY REFORM SERIES, PART 8: PRIVATE– 

SECTOR VIEWS OF THE REGULATORY CLIMATE 

ONE YEAR AFTER EXECUTIVE ORDER 13563 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FEBRUARY 16, 2012 

Serial No. 112–118 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

KATHY CASTOR, Florida 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

DONNA M. CHRISTENSEN, Virgin Islands 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 1 

Prepared statement ................................................................................................. 4 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 7 

Hon. John Sullivan, a Representative in Congress from the State of Oklahoma, opening statement .................................................................................... 8 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 9 

Prepared statement ................................................................................................. 10 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 12 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 12 

WITNESSES

Andrew F. Puzder, Chief Executive Officer, CKE Restaurants, Inc. .................. 15 

Prepared statement .......................................................................................... 18 

Barbara Walz, Senior Vice President for Policy and Environmental, Tri-State 

Generation and Transmission Association, Inc. ................................................ 50 

Prepared statement .......................................................................................... 52 

Answers to submitted questions ...................................................................... 137 

Kimber L. Shoop, Senior Counsel, Oklahoma Gas and Electric Company ......... 59 

Prepared statement .......................................................................................... 61 

Robert A. Luoto, President, Cross and Crown, Inc. .............................................. 78 

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

Mark A. Mitchell, Co-Chair, Environmental Health Task Force, National 

Medical Association .............................................................................................. 88 

Prepared statement .......................................................................................... 90 

Howard Williams, Vice President and General Manager, Construction Specialties, Inc. ................................................................................................................ 92 

Prepared statement .......................................................................................... 94 

SUBMITTED MATERIAL

Letter, dated November 2, 2011, from John Hickenlooper, Governor of the 

State of Colorado, to Lisa P. Jackson, Administrator, Environmental Protection Agency, submitted by Mr. Gardner ............................................................. 116 

Letter, dated December 16, 2011, from Hon. Mark Udall and Hon. Michael 

F. Bennet, Senators from the State of Colorado, and Colorado Congressional 

Delegation to Lisa P. Jackson, Administrator, Environmental Protection 

Agency, submitted by Mr. Gardner .................................................................... 117 

Letter, dated October 31, 2011, from Frank McNulty, Speaker of the House, 

Colorado General Assembly, to James B. Martin, Regional Administrator, 

Environmental Protection Agency, Region 8, submitted by Mr. Gardner ....... 119 

(1) 

REGULATORY REFORM SERIES, PART 8: PRIVATE–SECTOR VIEWS OF THE REGULATORY 

CLIMATE ONE YEAR AFTER EXECUTIVE 

ORDER 13563 

THURSDAY, FEBRUARY 16, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:06 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Cliff Stearns 

(chairman of the subcommittee) presiding. 

Members present: Representatives Stearns, Terry, Sullivan, Burgess, Blackburn, Bilbray, Gingrey, Scalise, Gardner, Griffith, 

DeGette, Green, and Waxman (ex officio). 

Staff present: Allison Busbee, Legislative Clerk; Mary Neumayr, 

Senior Energy Counsel; Alan Slobodin, Deputy Chief Counsel, 

Oversight; Sam Spector, Counsel, Oversight; Peter Spencer, Professional Staff Member, Oversight; Alvin Banks, Democratic Investigator; Tiffany Benjamin, Democratic Investigative Counsel; and 

Brian Cohen, Democratic Investigations Staff Director and Senior 

Policy Advisor. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Good morning, everybody. The Subcommittee on 

Oversight and Investigations is in session. 

My colleagues, we convene the eighth in a series of subcommittee 

hearings since last January to address the administration’s approach to regulatory reform. Today, we will receive testimony from 

several private sector witnesses. No one understands better than 

they do how the regulatory climate at present impacts their dayto-day operations and future business planning, including opportunities for economic growth and job creation. In fact, according to a 

Gallup Poll released yesterday, nearly half of the United States’ 

small business owners who aren’t hiring point to potential 

healthcare costs and government regulations as the reason why. 

FactCheck.org, a project of the Annenberg Public Policy Center 

of the University of Pennsylvania, citing numbers provided to Congress in 2011 by the Office of Information and Regulatory Affairs, 

reports that the estimated cost of Federal regulations under President Obama from the time he took office to the end of the 2010 fiscal year, not including regulations issued by the independent reguVerDate Aug 31 2005 14:58 Jan 02, 2013 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\112-11~4\112-11~1 WAYNE
2 

latory agencies, was somewhere between $8 billion and $16.5 billion. During the same initial stretch under President Bush, the estimated cost of new regulations was between $1.3 billion and $3.4 

billion. All figures have been adjusted for inflation. 

President Obama’s Executive Order 13563, issued just over 1 

year ago, affirmed among other things that agencies must adopt 

only those regulatory actions whose benefits justify their costs and 

are tailored to impose the least burden on society. It also called on 

agencies to review significant regulations already in place. As the 

President observed in a January 18, 2011, op-ed in the Wall Street 

Journal, ‘‘sometimes, those rules have gotten out of balance, placing unreasonable burdens on business—burdens that have stifled 

innovation and have had a chilling effect on growth and on jobs.’’ 

Yet, while some very outdated rules might be eventually cut back 

or simply eliminated, the Obama administration is doing very little 

to counter the ongoing regulatory juggernaut of the Environmental 

Protection Agency or address the thousands of pages of bureaucratic burdens released so far to implement a massive takeover of 

healthcare and the controversial financial reform bill. 

From industrial giants to small business start-ups, our Nation’s 

job creators are still sitting on trillions of dollars in capital, in part 

because they are concerned with the number and burden of regulations that are being issued or proposed by the Obama administration, all of which are adding uncertainty to the oppressive regulatory environment. 

For example, the Federal Deposit Insurance Corporation, in its 

annual summary of deposits as of June 30, 2011, confirmed that 

across the country, deposits shot up 7 percent, or $8.25 trillion, 

from 2010 to 2011, outpacing the 2 percent growth that occurred 

between 2009 and 2010. However, my colleagues, it is more than 

excessive and unclear regulation that the private sector must cope 

with; it is also the perception that Federal regulators have an 

unhealthy suspicion towards the business community and/or are 

clueless as to the real-world impact of their rules. 

We have before us today several representatives of American 

businesses from across the country and they reflect a wide range 

of industries. They will confirm that, 1 year later, we still have a 

long way to go. They will comment on how the current regulatory 

climate is affecting their day-to-day operations, including plans for 

expansion, investment, and hiring. 

These witnesses include Andrew Puzder, CEO of CKE Restaurants, Incorporated, which through its subsidiaries, franchisees, 

and licensees operates several popular fast-food chains, including 

Carl’s Jr. and Hardees. With more than 3,200 restaurant locations, 

CKE has created 70,000 jobs, 21,000 directly and 49,000 with 

franchisees. CKE, like many others today, faces the costly burden 

imposed by compliance with a litany of Obamacare-related rules, as 

well as other regulations which simply threaten to disrupt its role 

as an engine of economic growth. 

We will also hear from Kimber Shoop, a senior environmental attorney with the Oklahoma Gas and Electric Company; Bob Luoto, 

President of Cross and Crown, Incorporated, a logging business he 

founded, working primarily in northwestern Oregon; Barbara Walz, 

Senior Vice President for Policy and Environmental with Tri-State 

3 

Generation and Transmission Association, a wholesale electric 

power supplier to Colorado, Nebraska, New Mexico, and Wyoming. 

These witnesses will convey the message that even now, over 1 

year after the President launched his regulatory reform initiative 

with great fanfare, their experience with the Federal regulatory 

state has continued largely unchanged, with little if any sign of relief. I hope that today’s hearing and our hearing series cumulatively will move us one step closer to producing that much-needed 

relief for American job creators. 

[The prepared statement of Mr. Stearns follows:] 

4 


76395.001

Opening Statement of the Honorable Cliff Stearns 

Chairman, Subcommittee on Oversight and Investigations 

"Regulatory Reform Series #8 - Private Sector Views of the Regulatory 

Climate One Year After Executive Order 13563" 

February t 6, 2012 

(As Prepared for Delivery) 

We convene the eighth in a series of subcommittee hearings since last 

January to address the administration's approach to regulatory reform. 

Today, we will receive testimony from scvcral private sector witnesses. No 

one understands better than they do how the regulatory climatc at present impacts 

their day-to-day operations and future business planning, including opportunities 

for economic growth and job creation. 

In fact, according to a GALLUP poll released yesterday, nearly half of U.S. 

small-business owncrs who aren't hiring point to potential healthcare costs and 

government regulations as reasons. 

FactCheck.org, a project of the Annenberg Public Policy Center of the 

University of Pennsylvania, citing numbers provided to Congress in 2011 by the 

Office ofInformation and RegulatOlY Affairs (OIRA), reports that the estimated 

cost of federal rcgulations under Obama from the time he took office to the end of 

the 2010 fiscal year, not including regulations issued by the independent regulatory 

agencies, was somewhere between $8 billion and $16.5 billion. During the same 

initial stretch under President Bush, the estimated cost of new regulations was 

between $1.3 billion and $3.4 billion. (All figures adjusted for inflation). 

President Obama's Executive Order 13563, issued just over one year ago, 

affirmed, among other things that agencies must adopt only those regulatOlY 

actions whose benefits justify its costs and are tailored to impose the least burden 

on society. It also called on agencies to review significant regulations already in 

place. As the President observed in a January 18,2011 op-ed in the Wall Street 

Journal, "sometimes, those rules have gotten out of balance, placing unreasonable 

burdens on business - burdens that have stifled innovation and have had a chilling 

effect on growth and jobs." 

Yet, while some very outdated rules might be eventually cut back or 

eliminated, the Obama Administration is doing velY little to counter the ongoing 

regulatory juggernaut of the Environmental Protection Agency or address the 

Page I of3 
5 


76395.002

thousands of pages of bureaucratic burdens released so far to implement a massive 

takeover of health care and the controversial financial reform bill. 

From industrial giants to small business start-ups, our nation's job creators 

are still sitting on trillions of dollars in capital, in part because they are concerned 

with the number and burden ofregulations issued or proposed by the Obama 

administration, all of which are adding uncertainty to the oppressive regulatory 

environment. 

For example, the Federal Deposit Insurance Corporation, in its annual 

summary of deposits as of June 30, 2011, confirmed that across the country, 

deposits shot up 7 percent, to $8.25 trillion from 2010 to 2011, outpacing the 2 

percent deposit growth that occurred between 2009 and 2010. 

However, it is more than excessive and unclear regulation that the private 

sector must cope with. It is also the perception that federal regulators have an 

unhealthy suspicion toward the business community and/or are clueless to the real 

world impacts of their rules. 

We have before us today several reprcsentatives of American businesses, 

from across the country and reflecting a wide range of industries. They will 

confirm that, one year later, we still have a long way to go. They will comment on 

how the cun·ent regulatory climate is affecting their day-to-day operations, 

including plans for expansion, investment, and hiring. 

These witnesses include Andrew Puzder, CEO of CKE Restaurants, Inc., 

which through its subsidiaries, franchisees and licensees operates several popular 

fast food chains, including Carl's Jr. and Hardcc's. With more than 3,200 

restaurant locations, CKE has creatcd 70,000 jobs 21,000 directly and 49,000 

with franchisees. CKE, like many others, today faces the costly burden imposed 

by compliance with a litany of Obamacare-related rules, as well as other 

regulations, which threaten to disrupt its role as an engine of economic growth. 

We will also hear from Kimber Shoop, a Senior Environmental Attorney 

with the Oklahoma Gas and Electric Company; Bob Luoto, President of Cross and 

Crown Inc., a logging business he founded, working primarily in northwestern 

Oregon; and Barbara Walz, Senior Vice President for Policy and Environmental 

with Tri-State Generation and Transmission Association, Inc., a wholesale electric 

power supplier to Colorado, Nebraska, Ncw Mexico and Wyoming. 

Page 2 of3 
6 


76395.003

These witnesses will convey the message that even now, over one year after 

the President launched his regulatory reform initiative with great fanfare, their 

experience with the federal regulatory state has continued largely unchanged, with 

little if any sign of relief. I hope that today's hearing, and our hearing series 

cumulatively, will move us one step closer to producing that much-needed relief 

for America's job creators. 

Page 3 of3 
7 

Mr. STEARNS. And with that, I yield to the ranking member. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you very much, Mr. Chairman. You forgot 

to mention the other two witnesses. I am sure that was just an 

oversight on your part. Dr. Mitchell and Mr. Williams, we are 

happy to have you also, as well as the rest of the witnesses. 

Mr. Chairman, this is now the eighth hearing that we have had 

in this Congress on the issue of regulatory reform. I have got the 

message. The Republican majority supports regulatory reform and 

we have had hours and hours of hearings on this subject, but yet 

I haven’t really seen anything clear come out of it except for we all 

support regulatory reform where appropriate. Everybody in this 

room and the administration believes we should ensure that regulations are simple, clear, reasonable, and not overly burdensome on 

the industries that they oversee. I am sure every single person on 

this panel today agrees with us on that. 

If the goal of the ongoing series of hearings on President 

Obama’s regulatory reform to ensure that that was the case, that 

regulations be simple, clear, and reasonable, I would be in complete 

support of these continued hearings. However, having now sat 

through seven of these hearings, it is clear to me we are not really 

making any progress; we are just spinning our wheels. And what 

we are doing is bringing in panel after panel of witnesses to lodge 

a litany of different personal complaints about regulations that 

might affect them. 

Now, this subcommittee, which is one of the great subcommittees 

in the U.S. House of Representatives in my opinion—I have been 

on it for 15 years—we yield a lot of authority and responsibility. 

We have the ability to examine any issue within the purview of the 

mighty Energy and Commerce Committee. In the last Congress, we 

looked at crib safety, sought to understand the Deep Water Horizon 

oil spill, we tried to determine what led to the unintended acceleration in Toyotas. We did this in a bipartisan way, thoughtfully, by 

identifying real issues, by conducting research, even having field 

hearings where appropriate, talking to relevant parties, and looking at all sides of the issue. 

In this Congress, Mr. Chairman, as you will attest, I have many 

ideas about ongoing investigations in addition to regulatory reform 

that we could undertake. Avian flu, what is going on with the research? What are we doing as a Nation to protect and to defend 

against some kind of a pandemic flu or other infection? What is the 

fallout from the Fukushima Daiichi disaster in Japan and how does 

that impact the U.S. nuclear industry? A follow-up on the Deep 

Water Horizon, what is going on now with drilling in the Gulf and 

is there more of it going on and in an environmentally sound way? 

How is implementation of the Affordable Care Act coming and 

what can we do statutorily to make sure that it is a success for 

Americans? And I could go on and on and on. 

There are many things this subcommittee could be doing. Eight 

hearings to talk about the same thing without any progress seems 

8 

to me to be kind of a waste of time. And I say that with all due 

respect because I also believe that regulations should be tailored. 

Now, I would say if we really were going to do oversight on regulatory reform and the impact of regulations on businesses, we could 

have invited a member of the Coalition of Small Business Organizations that just released a study on how small businesses feel 

about regulations. This month, the American Sustainable Business 

Council, the Main Street Alliance, and the Small Business Majority 

released the results of a survey of 500 small business owners. Their 

survey showed that the issues small business owners care most 

about is weak customer demand, not overregulation. They also 

found that 86 percent of small business owners believed that some 

regulation is necessary in the modern economy. Seventy-eight percent supported holding health insurance companies accountable so 

they can’t raise rates unfairly. This is a huge issue for small business and big business alike. 

Seventy-nine percent of the small businesses thought it was important to have clean air and water. Sixty-one percent supported 

establishing standards to move the country towards energy efficiency and clean energy. This survey shows what matters to American businesses and it isn’t repealing the Clean Air Act or denying 

healthcare to workers. Business owners care more about getting 

people into their shops and buying their products, not doing away 

with regulations that ensure the safety and security of their families and their employees. 

Regulations, when promulgated in the right way, have real benefits. They can save lives and keep communities safe. They can ensure that small businesses aren’t unfairly pushed out of markets. 

Regulations should be narrowly tailored and reasonable, but we 

can’t pretend that they don’t provide real and important benefits 

to the American people. 

I think we can and should do better. I hope we will have factfinding hearings on important topics. And I will yield back before 

I start coughing more. 

Mr. STEARNS. I thank the gentlelady. 

I recognize Mr. Sullivan for 2 minutes. 

OPENING STATEMENT OF HON. JOHN SULLIVAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OKLAHOMA 

Mr. SULLIVAN. Thank you, Chairman Stearns. Thank you for 

holding this important hearing to discuss private sector views of 

President Obama’s Regulatory Initiative issued last year through 

Executive Order 13563. It is important that we hear from the private sector to assess whether President Obama’s executive order is 

working to ease the day-to-day regulatory burdens on American 

companies and to evaluate if his Regulatory Initiative is creating 

jobs. Given the fact that his administration has taken no action to 

repeal any expensive regulations this year, I don’t think they are 

off to a good start. 

I would like to take a moment to welcome our witnesses today 

and make special mention of Mr. Kimber Shoop, the senior environmental attorney who is with us on behalf of Oklahoma Gas and 

Electric Company, a medium- to small-sized award-winning utility 

9 

in my State. I am pleased Mr. Shoop will speak of the challenges 

faced by OG&E as they try to navigate the regulatory train wreck 

of regulations coming from the Environmental Protection Agency 

these days. OG&E is in the regulatory crosshairs of several multibillion-dollar EPA regulations, including Utility MACT, which happens to be the most expensive rule ever imposed on the utilities 

sector, the Cross-State Air Pollution rule, and compliance with the 

Regional Haze Rule. 

The Regional Haze Rule is of particular note as Oklahoma officials presented a plan to EPA for regional haze they believe is right 

for our State, and now the EPA is bringing the heavy hand of the 

Federal Government to the Oklahoma ratepayers anyway by largely rejecting our State’s implementation plan in favor of imposing its 

own Federal implementation plan. This is yet another example of 

EPA’s overreaching on the States with burdensome regulations 

without analyzing its impact on electric reliability or cost. It is important to note that these regulatory actions by EPA do not happen 

in a vacuum; they impact everything from a company’s ability to 

invest and make capital improvements to the rates, families, and 

small businesses paid for electricity services. 

As we continue to press for real regulatory reforms, I am confident that this hearing will help us continue making the case that 

the Obama administration needs to move faster to reduce the regulatory burdens of American companies. 

And I yield back. 

Mr. STEARNS. The gentleman yields back. 

The gentleman from Texas, Dr. Burgess, is recognized for 1 

minute. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman. And I, too, appreciate 

the hearing today. I will just state in comment to the opening 

statement by the ranking member, I, too, wish we had had a follow-up hearing on the unintended acceleration of Toyota vehicles 

because I think as we found out during that hearing and that process and getting documents from the National Highway Traffic Safety Administration that the problem was not electronic unintended 

acceleration, and that actually could have been put to rest by this 

committee. So it is a shame that was never undertaken. 

But I do appreciate the witnesses being here with us today. The 

chairman referenced the Gallup Poll and I think it is significant 

that over half of the hiring that is not happening is occurring because of the Patient Protection Affordable Care Act. I know that is 

something we will continue to explore in this committee and I look 

forward to that. 

So thank you, Mr. Chairman, and I will yield back to you. 

[The prepared statement of Mr. Burgess follows:] 

10 


76395.004

Mr. Chainnan, thank you for this hearing on regulatory 

refonn. I know my constituents appreciate it. 

I would like to start by reading to you the following 

statement regarding the regulatory burden in our country. 

Secretary of Treasury Timothy Geithner has said, "I'm 

sympathetic to the argument you want to be careful to get the 

rules better and smarter, but I don't think there's good 

evidence in support of the proposition that it's regulatory 

burden or uncertainty that's causing the economy to grow 

more slowly than any of us would like." 

That's a pretty interesting statement from someone I believe 

doesn't have a lot of private sector experience. It's also 

poignant considering a Gallop Poll was released yesterday 

that states of the employers who aren't hiring, 46 percent are 

worried about new government regulations. That's right; half 

of the employers who aren't hiring are doing so because of 

government regulations. 

This isn't just a statistic either because I have employers from 

back in Texas where real jobs are created, come into my 

office everyday and say that regulations are holding back 

their hiring. And it's not just from one department either; 

they come from every agency: EPA, Department of Energy, 

Labor, FDIC, SEC, obviously HHS, and the list goes on ... 

And then you have the President arguing for the need to 

streamline regulations, but his administration officials say 

regulations don't slow hiring. It doesn't add up. What's 

worse than having an administration that imposes job 

strangling regulations is one that does so and then pretends it 

doesn't! 
11 


76395.005

After talking to our witnesses here who are the real job 

creators, not the government, I hope we can develop a greater 

understanding of what is we should be doing, or not doing, to 

help create jobs. 

Thank you Mr. Chairman and I yield back. 
12 

Mr. STEARNS. The gentleman yields back. 

And the gentlelady from Tennessee, Ms. Blackburn, is recognized 

for 1 minute. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you. Welcome to our witnesses. 

We have referenced Administrator Sunstein and the actions on 

Executive Order 13563 and in that, when he came to us, he testified that the President’s executive order ‘‘would identify rules that 

have been outmoded, ineffective, insufficient, or excessively burdensome,’’ and the President wrote in the Wall Street Journal, ‘‘today, 

I am directing Federal agencies to do more to account for and reduce the burdens regulations may place on small businesses.’’ Well, 

unfortunately, what has seemed to come to pass is the testimony 

and the writing have not given what we have seen take place in 

the marketplace with the increase of regulations, 4,000 new regulations last year, nearly 80,000 new pages in the Federal Register. 

The Gallup Poll has been mentioned. We know that regulation is 

stifling businesses. 

We are looking forward to hearing from you and getting firsthand information of specific examples that this is prohibiting you 

from pursuing jobs growth and innovation in this country. 

I yield back. 

Mr. STEARNS. The gentlelady yields back. 

We have an additional 30 seconds. Anyone wish—if not, then we 

recognize Mr. Waxman for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Mr. Chairman, this is our eighth hearing today on 

regulatory reform, and if today’s hearing is anything like the first 

seven, we are not going to hear much about ensuring that regulations are carefully tailored to meet their need. 

This hearing is titled ‘‘Regulatory Reform Series 8—Private Sector Views of the Regulatory Climate One Year After the Executive 

Order’’ and what you have are four people who are going to tell us 

that they are unhappy, but do they represent the whole private 

sector? Are we going to hear a balanced view of how these regulations are operating? We, at the request of the Democrats, have two 

witnesses at the table who are going to give a different point of 

view, and the chairman wasn’t even willing to acknowledge them 

and welcome them to this hearing. I am very pleased they are here 

and I appreciate the chairman giving us some witnesses to give another point of view. 

But the point that I am trying to make is this is not a fact-finding hearing to understand whether we need changes in the regulatory system; this is a hearing to hear anecdotes from four people 

from four different industries about their complaints. And I don’t 

want to diminish or minimize the genuineness of what they have 

to say, but this is not a balance. 

13 

For example, we are going to hear from fellow Californian, Mr. 

Andrew Puzder, who runs Carl’s Jr. and Hardee’s restaurant 

chains, and he is here to tell us that he doesn’t like the inflexible 

and costly regulations stemming from the Affordable Care Act, although he glosses over the flexibility that allowed his company to 

receive a waiver from important medical loss ratio regulations. He 

is also going to criticize the new menu labeling laws. I am interested in his criticism, but that law was supported by the National 

Restaurant Association. They are in the private sector as well and 

they strongly supported these regulations. They called it a win for 

both restaurant owners and guests. 

We also have Kimber Shoop of the Oklahoma Gas and Electric 

Company. His company received important benefits from the Affordable Care Act, collecting almost $700,000 to help continue providing affordable healthcare coverage to their early retirees. But 

that is not why he is here; he is here to complain about regulations 

that he finds troublesome. Well, what we have is a handpicked 

group of four people to give a certain perspective on regulations. 

And this perspective is the Republican perspective that we have 

been hearing over and over and over again. I could call it a rush 

to judgment, but it is not even that. It is a statement of a political 

point of view. This hearing, as the others we have held on the subject, have been focused on politics over policy, more focused on attacking the President than working with us and him in a bipartisan way to solve America’s problems. 

I don’t have high hopes for this hearing, although I am pleased 

that the witnesses are here and pleased that we have two additional witnesses to give some bit of another point of view. We can’t 

make decisions by anecdote. We have got to have data. We have 

got to have debate. We have got to hear different points of view as 

we are urged to make decisions. 

But I have high hopes for one of our witnesses to clear up an important matter from a previous committee hearing. Three years 

ago, the Energy and Environment Subcommittee held a hearing on 

climate change, and at that hearing, Dr. Patrick Michaels from the 

Cato Institute testified that widely accepted scientific data has 

overestimated global warming and that regulation enacted in response to that data could have a ‘‘very counterproductive effect.’’ 

He was the only scientist to testify that climate change didn’t warrant congressional action. After that hearing, we discovered information that appeared to indicate that Dr. Michaels had made misrepresentations to the committee concealing some of his financial 

support from big energy business. Representative Welch asked him 

about it at that time what his financial relationships were with certain energy companies for the record. He never directly answered 

the question. 

Today, Barbara Walz, the representative of Tri-State, will be testifying. We sent a letter to her in advance of this hearing because 

public documents indicate that Tri-State funded Dr. Michaels’ work 

to discount the seriousness of climate change. I am sure that is in 

the interest of the company but that might well indicate that he 

had some kind of reason to come up with the conclusions he wanted. I think we need to, in this committee, understand this matter 

further. He appeared before our committee, presented himself as 

14 

an academic researcher discounting his ties to polluting industries. 

I think clarifying this will be very helpful. 

And that is about the only thing I hope that we may be from the 

positive point of view out of this hearing other than a lot of genuine, heartfelt complaints. 

Thank you, Mr. Chairman. 

Mr. STEARNS. And I thank the distinguished ranking member of 

the full committee. 

I now will welcome our witnesses, and I will start to my right. 

Mr. Williams, we are delighted to have you here. Howard Williams 

is the vice president and general manager of Construction Specialties, Incorporated. We also have Mark A. Mitchell, who is a doctor 

and co-chair of the Environmental Health Task Force, the National 

Medical Association. You are welcome. And Mr. Luoto is president 

of Cross and Crown, Incorporated. We have Mr. Shoop. Mr. Sullivan, I think, introduced him but I will mention again that he is 

a senior environmental attorney, Oklahoma Gas and Electric Company. And we have Barbara Walz, and the distinguished ranking 

member will introduce her, as well as Mr. Gardner. 

Ms. DEGETTE. Well, I am delighted, Mr. Chairman, that Ms. 

Walz is here today. I have worked with her and her company for 

many years on a lot of issues and we might disagree today, but we 

are good friends and it is delightful to see her. And I will yield to 

Mr. Gardner, who actually her company is in his district. 

Mr. GARDNER. Well, I thank the ranking member for yielding 

and welcome Ms. Walz as well to the committee. Thank you very 

much for your time and to all the witnesses for being here today. 

If you fly into Denver from the East Coast, you fly over my district, 

which is 32,000 square miles on the eastern plains of Colorado. It 

is a very large district, and you have got 44 not-for-profit systems 

that are located in your district. And many of them are in my congressional district, and I thank you for the work that you do to 

make rural Colorado work. 

Mr. STEARNS. And our last witness is Andy Puzder, CEO of CKE 

Restaurants. Mr. Waxman is not here. Having been a franchisee of 

motels and watched all the regulations come down from the company to me, I had to spend all the money to implement it as a 

franchisee, so my perspective was different than perhaps the Restaurant Association. I had three or four restaurants, I had five or 

six motels, so I found this crushing regulation just put in perspective having been a franchisee. 

But with that, Mr. Puzder, we are going to allow you to start 

your opening statement. I am sorry. We have to swear you in. 

As you know, the testimony you are about to give is subject to 

Title XVIII, Section 1001 of the United States Code. When holding 

an investigation hearing, this committee has the practice of taking 

testimony under oath. Do any of you have any objection to testifying under oath? No? The chair then advises you that under the 

rules of the House and the rules of the committee, you are entitled 

to be advised by counsel. Do you desire to be advised by counsel 

during your testimony today? In that case, would you please rise 

and raise your right hand? I will swear you in. 

[Witnesses sworn.] 

15 

Mr. STEARNS. Now, you may give your 5-minute opening, Mr. 

Puzder. 

TESTIMONIES OF ANDREW F. PUZDER, CEO, CKE RESTAURANTS, INC.; BARBARA WALZ, SENIOR VICE PRESIDENT 

FOR POLICY AND ENVIRONMENTAL, TRI–STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.; KIMBER L. 

SHOOP, SENIOR COUNSEL, OKLAHOMA GAS AND ELECTRIC 

COMPANY; ROBERT A. LUOTO, PRESIDENT, CROSS AND 

CROWN, INC.; MARK A. MITCHELL, M.D., CO–CHAIR, ENVIRONMENTAL HEALTH TASK FORCE, NATIONAL MEDICAL ASSOCIATION; AND HOWARD WILLIAMS, VICE PRESIDENT AND 

GENERAL MANAGER, CONSTRUCTION SPECIALTIES, INC. 

TESTIMONY OF ANDY PUZDER 

Mr. PUZDER. Thank you, Chairman Stearns, Ranking Member 

DeGette, and members of the subcommittee. The Virgin Islands 

representative isn’t here, so I can safely say that we have restaurants in every one of your districts, and it is a pleasure to be 

here today. I want to thank you for inviting me to testify before 

you on our Nation’s regulatory climate. I would also point out that 

we do have representatives of the National Restaurant Association 

and the National Council of Chain Restaurants here today to hear 

the testimony. So while I do speak for myself and not on behalf of 

those organizations, they are present. 

We own 3,250 restaurants in 42 States and 25 foreign countries 

under the Carl’s Jr. and Hardee’s brand names. With our 

franchisees, as the chairman mentioned, we employ about 70,000 

people. Our company creates jobs and helps generate economic 

prosperity by building new restaurants. Each new restaurant we 

construct creates 25 jobs in the restaurant itself. We invest over $1 

million in the community where we construct those restaurants. 

But our job creation goes way beyond the restaurants. Last year, 

we spent $1.25 billion for job-creating capital projects, media and 

advertising, supplier products and services, creating jobs in concentric circles emanating from our restaurants throughout our Nation’s economy. When our ability to build new restaurants is impeded, we create few jobs. 

Our company and its franchisees, all of whom are small business 

owners, are facing ever-increasing regulatory burdens that make it 

more difficult to open and operate profitable businesses. I am very 

concerned that in coming years we will be unable to create as many 

jobs as we would like due to increased expenses caused by various 

regulatory statutes and the associated regulations, particularly by 

laws such as the Patient Protection and Affordable Care Act. 

An entrepreneur started our company in 1941 near where Con- gressman Waxman grew up, in South Central L.A. with $315 he 

used to purchase a hot dog cart. Even then, he faced a couple of 

regulatory challenges. Today, however, to assist in opening and operating our restaurants, we have an internal 11-page list of 57 different categories of regulations with which we must comply to open 

and operate a simple quick-service restaurant. This list alone can 

discourage job-creating restaurant development. The rapidity with 

which legislators and bureaucrats are increasing the number of 

16 

regulations with which we must comply adds to the various challenges our company and our franchisees face. 

It is my hope to give you an understanding of some of the challenges we and our small business franchisees face every day. Two 

provisions of the PPACA serve to make the point. I will start with 

the menu-labeling provision that requires disclosure of the caloric 

content of our products on our menu boards. As a company, we 

support nutritional disclosure. As I described in my written testimony, for years we have had comprehensive, effective, and economical nutritional disclosure in our restaurants. The information 

is also easily accessible online at our Web site. If our company and 

franchise restaurants are forced to replace our menu board panels, 

we estimate it will cost approximately $1.5 million. To put this in 

context, that is 33 percent of the $4.5 million we invested last year 

on job-creating new restaurant construction. 

On an industry-wide basis, the FDA’s regulatory analysis estimated that the initial mean cost of complying with the menu labeling regulations for chain restaurants would be $315.1 million with 

an estimated ongoing cost of $44.2 million. Yet, as noted in my 

written testimony, independent research done to date demonstrates 

that caloric menu labeling has no impact on consumer eating habits. In other words, this may be a regulation that achieves little or 

nothing but will impose large, unnecessary costs, reducing both job 

creation and growth. Nutrition disclosure is important but it can 

be accomplished effectively and economically. The current law simply fails in each of these respects. 

In my written testimony, I suggest a compromise that would 

more efficiently and economically achieve the menu labeling law’s 

objectives. I have a number of letters with me from Members of the 

House and the Senate, Republicans and Democrats, including Representative Gardner, who is with us today, and Senator Feinstein 

from my home State, expressing concern with the impact of the 

menu labeling law on the restaurant industry. 

I hope we can reach some accommodation on this law that will 

effectively and economically accomplish the law’s objectives without 

imposing unnecessary costs and burdens. It can be done and we are 

willing to put in the time and effort to do so. 

Now, to debate the ACA’s mandatory medical coverage provisions, I am not an expert on healthcare law other than to know 

how it impacts our company. I also know there are people who believe universal health insurance coverage is beneficial and I am not 

here to debate that. However, there is a sacrifice that must be 

made to gain benefits. The question is whether the costs are worth 

the benefits. The PPACA and associated regulatory framework will 

eliminate job creation and opportunity. The best estimate of our 

healthcare consultants, Mercer Health and Benefits, LLC, is that 

the PPACA will increase our healthcare costs by approximately $18 

million per year should it be implemented as we currently understand the regulations. That is a 150 percent increase from the $12 

million we spent on healthcare last year and approximately four 

times the 4.5 million we spent on job creating new restaurants. 

At this point, we do not intend to drop coverage for our employees, but the money to comply with the PPACA has to come from 

somewhere. We use our revenues to pay our bills and expenses, to 

17 

pay down our debt, and we reinvest what is left in our business. 

This is how we grow and create jobs. There is no corporate pot of 

gold we can go to to cover increased healthcare costs. New unit construction could cease if we have to allocate the monies for that construction to the PPACA, and building new restaurants is how we 

create jobs. We would also have to reduce our capital spending, and 

capital spending not only creates jobs but is important to maintaining and growing our business. We would need to reduce the number of our full-time employees, increase the number of our parttime employees. We would need to automate positions where we 

could and reduce compensation for the positions we retain. 

Mr. STEARNS. I need you to sum up. You are a little over. 

Mr. PUZDER. Well, I would sum up by saying what the business 

community wants is not laissez-faire government. I understand 

completely that we need regulations to accomplish things that the 

private sector would not accomplish on its own, and I know that 

people consider the PPACA a very important piece of legislation 

and that nationalized health insurance is something that people 

want to pursue. What I am here to tell you today is, one, on the 

menu labeling, we can do it better and accomplish your objectives 

more efficiently than they are being accomplished now. If this is 

the path that we go down, it will eliminate job creation. It will reduce job creation and we will have to reduce it at our company. 

[The prepared statement of Mr. Puzder follows:] 

18 


76395.006

Written Testimony of Andrew F. Puzder, 

CEO ofCKE Restaurants Inc., 

On the PPAC's Impact on Job Creation and Economic Growth 

Before the House Energy and Commerce Committee's 

Subcommittee on Oversight (lnd Investigations 

!:. 

Introduction 

I want to thank Chairman Stearns and the other Committee members for 

giving me the opportunity to discuss the regulatory issues impacting CKE 

Restaurants, Inc. and American businesses in general. An open dialogue between 

legislators, regulators and the business community on these issues is essential to 

ensure our nation's economic success. No institution, individual or group of 

individuals is solely responsible for rebuilding our economy. Rather, it is our 

collective responsibility. I am committed to working with you to figure out ways to 

create a more business friendly and prosperous economic climate while addressing 

the important social policy issues facing our nation. 

Today's labyrinth of State and Federal regulations controls every aspect of 

economic activity; suffocates America's entrepreneurial spirit, and creates 

uncertainty stifling growth and prosperity. Perhaps this is what led President 

Obama to sign Executive Order 13563 in January of 2011. As you all know, this 

executive order calls for improving regulation and regulatory review. In signing 

this Executive Order, President Obama clearly recognized that overregulation is a 

problem. The Executive Order's impact is less clear. Executive Order No. 13563 

is avai lab I e at: '-'-'-''''''-'-'-'--'-'-'-!..!.b~''''-''-'-'-'~'-''''-='''-'--'-'-~-'-'--''-'--=-~'''-''-'''-''-'-!.-''-',-,,-==:!,!,' 

The topic of overregulation, of course, is not a new one. The Office of 

Advocacy of the US Small Business Administration stated in its 2010 Report that 

"[aJ comprehensive list of regulatory influences that affect one's daily existence is 

indeed extensive and overwhelming to track or sum up." It noted that "[t]he cost 

of government regulation gets stirred into the indistinct mixture of countless 

economic forces that determine prices, costs, designs, locations, profits, losses, 

wages, dividends, and so forth." It concluded that "the cost offederal regulation in 

the United States increased to more than $1.75 trillion in 2008" or "14 percent of 

US national income." In other words, the cost of federal regulations alone exceeds 

our annual budget deficit. 
19 


76395.007

While this is an astounding sum, the SBA Report notably deals solely with 

the costs of Federal regulations in place as of 2008 and fails to include Federal 

regulations or laws passed since 2008 such as the Dodd Frank Act or the Patient 

Protection and Affordable Care Act ("PPACA"). In addition, the Report fails to 

cover the costs of state regulations. Rather, it notes that "[r]egulatory agencies in 

the 50 American states have promulgated hundreds of thousands of regulations that 

are superimposed on federal regulations." SBA Report available at: 

https://docs.google.com/vi ewer?url=http://\vww .sba. gov I advo/research/rs3 71 tot. pd 

f. 

To make matters worse, State and Federal governments continue to add new 

regulations to the books at a dizzying pace. A recent Investor's Business Daily 

article states that "[t]he number of pages in the Federal Register - where all new 

rules must be published and which serves as proxy of regulatory activity -

jumped 18% in 2010." According to this article, "[t]he Federal Register notes that 

more than 4200 regulations are in the pipeline. That doesn't eount impending clean 

air rules fi'om the EPA. new derivative rules, or the FCC's net neutrality rule. Nor 

does that include recently announced fuel economy mandates or eventual 

ObamaCare and Dodd-Frank regulations." John Merline, Regulation Business, 

Jobs Booming Under Obama, Investor's Business Daily, (August 15, 2011), 

http://news.investors.com! Article/581555/20 11 0815190 I /Regulatory-AgeneiesStaffing-Up.htm. 

On top of these new regulations, the old regulations never seem to go away. 

As such, the regulatory burden grows over time with very little thought given to 

whether some old rule that may either be obsolete or not cost effective should be 

removed from the books before imposing new burdens. President Obama's 

Executive Order on improving regulations has a section that calls on agencies 

" ... to promote retrospective analysis of rules that may be outmoded, ineffective, 

insufficient, or excessively burdensome, and to modify, streamline, expand, or 

repeal them in accordance with what has been learned." Executive Order No. 

13563, Section 6 (January 18,2011), http://www.gpo.govlfdsys/pkg/FR-2011-01-

21/pdf/20 ll-1385.pdL 

The restaurant industry provides an excellent example of an industry 

dealing with overregulation. Our Company consists of a large business (CKE 

which owns about 30% of our restaurants) and many small businesses (our 

franchisees which own about 70% of our restaurants). As such, we are sensitive to 

the needs of both large companies and small businesses. To assist in opening and 

operating our restaurants, we have an internal 11 page list of the 57 different 

2 
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76395.008

categories of regulations with which we must comply in opening and operating a 

simple quick service restaurant. This list alone can discourage job creating 

restaurant development. The rapidity with which legislators and bureaucrats are 

increasing the number of regulations with which we must comply adds to the 

various challenges our Company and our franchisees face. 

I want to make something clear at the outset. I believe that our country 

needs government regulations to advance a number of social goals which the 

unfettered market will not accomplish on its own. My frustration is twofold. 

First, many regulations are written in a way that imposes substantial costs 

that are unnecessary to achieve the regulation's goal. The menu labeling 

legislation, passed as part of the PPACA and which r discuss below, falls into this 

category. I can understand why Congress wants consumers to have nutritional 

information about the foods they consume. But why must that information be 

included on the menu boards of fast food restaurants at a cost of millions of dollars 

the industry could otherwise spend on building new restaurants and when 

restaurants could more effectively post such information separately far more 

economically and effectively? This is particularly true since virtually all of the 

research done to date has shown that posting caloric information fails to change 

consumers' food choices. What is the purpose of imposing costs on small 

businesses like restaurant franchisees when it returns nothing in terms of more 

effective consumer information? 

Second, our system lacks any meaningful mechanism for tracking the cost of 

regulations as a whole and balancing that against the need for businesses to use 

their profits to expand, grow and thereby create jobs and prosperity. Regulations 

are a kind of tax. Just as taxes are necessary to raise the revenue government 

needs, so regulation is necessary to accomplish important goals the market will not 

accomplish on its own. But economic growth is also important both to individuals 

and government. Nonetheless, while most government officials recognize that 

raising taxes has a dampening effect on economic growth, there seems to be no 

similar acknowledgement with respect to the impact of regulatory costs. 

We are daily confronted with a maze of Federal regulations ranging from the 

EPA's Clean Air Act regulations and universal waste disposal regulations and 

OSHA's various workplace regulations to laws and regulations as esoteric as the 

Employee Polygraph Protection Act and the Genetic Information NonDiscrimination Act. 

3 
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76395.009

Certainly, when viewed independently of their collective impact, there is 

usually a well-intentioned reason for each of these laws and each regulation the 

bureaucrats create to implement them. The danger lies in their overreaching, 

overlapping and often inconsistent nature, their continued existence despite 

changed circumstances that render them irrelevant, and the inability of government 

to simplify or rationalize compliance. These policies are creating structural 

impediments to opening and operating American businesses that all too often cause 

those in business to give up in frustration, reducing economic growth and 

dampening the entrepreneurial spirit so essential to our prosperity. 

That is why I have been so vocal on this issue. I believe that, whatever a 

legislator's position on a proposed new regulatory statue, he or she should 

recognize that the regulation comes with a cost. Regulated businesses must spend 

money both to determine what the new law requires and then to comply with it. 

Recognizing this reality does not mean that Congress should decline to pass 

regulatory statutes. Rather, it means only that Congress should, on a bipartisan 

basis, be much more open to structuring such laws so as to maximize the benefits 

while minimizing any unnecessary burden. This is what businesspeople are really 

looking for: Not laissez faire government, but government that recognizes the 

contributions of business to economic growth and is sensitive to the difficulties 

which new regulations can create unless they are they are carefully tailored to meet 

both the legitimate needs of business and the social goal the regulations seek to 

accomplish. 

I will focus on the PPACA's impact as this Subcommittee's jurisdiction 

covers the PP ACA. The purpose of my testimony is (i) to describe our company 

and how we create jobs, (ii) to describe our long standing commitment to 

meaningful nutritional disclosure, (iii) to discuss the PPACA's proposed menu 

labeling requirements' ineffectiveness, burdens and unnecessary expense and (iv) 

to discuss the severe economic burdens the PPACA's mandatory health insurance 

provisions impose on American businesses and our company in particular. 

As matters currently stand, the PP ACA is creating significant concern in the 

American business community with respect to the increased costs and regulatory 

burdens it will undoubtedly impose. These costs and burdens are increasing the 

risks of new business ventures and discouraging investment. When entrepreneurs 

and businesses are unable to forecast with reasonable certainty that a venture will 

return a profit they will not invest, they will not grow and they will not create jobs. 

The predictable result is an uncertain and jobless recovery. 

4 
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76395.010

We respectfully request that Congress review the PPACA's provisions to 

determine which can be administered in a way that reduces costs for the businesses 

they impact. We further request that Congress review the PPACA's provisions to 

determine which provisions fail to accomplish anything productive and eliminate 

such provisions. If done effectively, this review would encourage job creation and 

prosperity as well as better government. As we all work to pull our nation out of 

the current economic malaise, why hurt American businesses if it gives you 

nothing in return? 

ll. 

Company Description and Job Creation Impact 

CKE Restaurants, Inc. is a quick service restaurant company that owns or 

franchises over 3,250 restaurants in 42 states and 25 foreign countries. We are 

headquartered in Carpinteria, California with regional headquarters in Anaheim 

California and st. Louis, Missouri. Carl N. Karcher, an Ohio native with an 8th 

grade education, and his wife Margaret, a California native, started our Company 

in 1941 with a hot dog cart in South Central Los Angeles. 

We employ about 21,000 people in the United States. Our domestic 

franchisees employ approximately an additional 49,000 people. As such, we 

account for about 70,000 jobs in the United States. 

We provide significant employment opportunities for minorities. 

Domestically, 64% of our Company employees are minorities. We also provide 

significant employment opportunities for women. Domestically, 63% of our 

employees are women. We are proud of the Company's diversity. 

Our Company owns and operates 892 of our 3,243 restaurants. Our 

franchisees own and operate the remaining 2,351 restaurants of which 1,928 are in 

the United States. Our Company-owned restaurants average over $1.2 million in 

sales per year. Each restaurant employs about 25 people and has one General 

Manager. Our General Managers are 57% minorities and 66% women. They are 

39 years old on average. However, their ages range from 18 to 71. Several of our 

Executive Vice Presidents and Senior Vice Presidents started as restaurant 

employees and learned the business as restaurant General Managers. 

On average, a General Manager runs a $1.2 million business with 25 

employees and significant contact with the public. He or she is in charge of a 

million-dollar-plus facility, a profit and loss statement and the success or failure of 

5 
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76395.011

a business. Our Company-owned restaurant General Managers earn an average 

salary of about $45,000 and can earn a salary of well over $50,000, plus a 

substantial performance-based bonus and benefits, including health insurance. For 

General Managers and above, the Company covers a portion of the cost (60%) of 

our employees' medical insurance and offers a number of alternative plans with 4 

coverage options, ranging from employee to family coverage. Below the General 

Manager position, the Company otTers an employee funded low cost limited 

medical benefits plan with 3 coverage options, ranging from employee to family 

coverage. 

Our franchisees, who are generally small business owners and entrepreneurs 

themselves, often started out as General Managers in our restaurants or our 

competitors' restaurants. We have 227 franchisees nationwide. These franchisees 

exemplify the entrepreneurial spirit on which we built our Company and they 

instill that spirit in their over 49,000 employees and managers. 

While we directly account for about 70,000 jobs in the United States, our 

Company's impact on the Nation's employment rate goes well beyond the number 

of people we directly employ. The hundreds of millions of dollars we spend on 

capital projects, services and supplies throughout the United States create 

thousands of jobs and generate broader economic growth. 

For example, in the past six years and despite our Nation's economic 

problems, our Company and franchisees have built over 300 new restaurants in the 

United States. Every time we build a restaurant, we make a substantial investment 

in the community where that restaurant is located (well over $1 million). We use 

local contractors on the project and we create, on average, 25 new jobs including a 

new General Manager position. When we add about 8 new restaurants, we add a 

District Manager. 

We also spend millions of dollars domestically each year all of which 

enhances our Nation's economic strength. Last year alone, our Company spent 

approximately $60 million on capital expenditures nationwide. Over the past five 

years, our Company spent $588 million on capital expenditures. These 

expenditures represent investments in our business and include new unit 

construction, remodels, property improvements, and infrastructure improvements. 

All of these expenditures create jobs and economic growth. Our franchisees' 

capital expenditures significantly increase these numbers. 

6 
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76395.012

In addition to our capital expenditures, last year we spent $30 million on 

restaurant repairs and maintenance. This would include amounts we pay to small 

businesses for projects such as landscaping, air conditioning repair, window 

cleaning, and asphalt and parking lot repairs. Our franchisees' repairs and 

maintenance expense again significantly increases these numbers. 

We also spend millions of dollars on media advertising to television stations, 

radio stations, newspapers and other media outlets nationally. Last year alone, we 

spent $175 million. All of these expenditures create jobs and growth. 

We support our nation's agricultural community with purchases of 

domestically produced or packed food and paper products. Last year, our food and 

paper expense was approximately $1 billion. 

We also support numerous charitable organizations throughout the country. 

For example, this year we raised over $1 million for military families and veterans 

through our Stars for Troops program. We donated these monies to Homes for our 

Troops and USA Cares. Over the past 6 years, our Carl's Jr. and Hardee's, 

Company and Franchise restaurants raised over $4.1 million through our Pink Star 

program. We donated these monies to the National Breast Cancer Foundation for 

regional grants to hospitals in Los Angeles and St. Louis. In California, Carl's Jr. 

has pledged $1 million to Cottage Hospital in Santa Barbara. In North Carolina, 

Hardee's donated $1 million to build the Children's Oncology Center at Duke 

Hospital. In St. Louis, Hardee's donated $250,000 to the Rankin Jordan Pediatric 

Rehabilitation Center. 

In addition to these examples, our Company and our franchisees support a 

host of other worthy causes through corporate and individual contributions and our 

restaurants routinely raise monies or contribute to the support of their 

communities' schools, civic organizations and sports teams. 

In summary, our Company and franchisees employ about 70,000 people 

nationwide, provide meaningful management positions and experiences for a broad 

range of people, and expend hundreds of millions of dollars for job creating capital 

projects, media and to our suppliers. We also pay millions of dollars in taxes and 

support deserving charitable organizations. 

7 
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76395.013

Ill. 

We Have an Historical Commitment to Health Conscious Consumers amI 

Meaningful Disclosure of Nutritioltal In (ormation 

We accomplish the foregoing while providing a variety of low cost, high 

quality food items at convenient locations for all segments of the economy, from 

the very .poor to the well to do. These products include Black Angus Beef 

Hamburgers, Turkey Burgers, whole muscle skinless Chicken Breast Sandwiches, 

Hand Breaded Chicken Tenders and Chicken Sandwiches, Salads, hand scooped 

Milk Shakes and Malts, and a number of breakfast items, among others. We are 

dedicated to offering our customers premium quality products and service at a 

level unparalleled in the quick service segment. 

We sell big, juicy delicious hamburgers and French fries, as well as a variety 

of other products. We are not shy about our menu items. They are all high quality 

products that provide important nutrients to our customers -- and they taste great. 

8 
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76395.014

People can eat at our restaurants every day, and maintain a diet of which any 

physician would thoroughly approve, with no more knowledge or prudence than 

they would need to eat well at home. Moreover, they can afford to do so. We are 

very proud that, even in these difficult economic times, our restaurants offer 

families the opportunity to enjoy a pleasant experience eating out at a restaurant 

with a friendly atmosphere and well trained staff. Many of our customers are 

lower income parents who can afford to take their children to breakfast, lunch or 

dinner at our restaurants with a menu the whole family can enjoy who simply 

would be unable to pay two or three times as much at a higher end restaurant. 

It is our job to offer great tasting, high quality, healthy products that our 

customers want to eat and we take great pride in doing so. For example, in 2011, 

we worked with editors of Men's Health magazine and the Eat This, Not That line 

of books to create a line of Turkey Burgers at Carl's Jr. and Hardee's. Just last 

week Health.com did a piece on "The Best and Worst Burgers" and our Turkey 

Burger was singled out as "Best Turkey Burger." Amanda MacMillan, The Best 

and Worst Burgers (Health.com, 2/6112), 

http://www.heaiti1.com/hcaith/galiery/O .. 20504336.00.html. CKE also earned the Turkey 

on the Menu (TOM) Award in the fast food category from the National Turkey 

Federation for introducing a variety of charbroiled turkey burgers and offering 

healthier options to consumers. 

Put simply, we believe it is our corporate responsibility to provide 

consumers full nutritional information about our products. We have absolutely no 

objection to disclosing nutritional information to our customers and we have done 

so for years and prior to any government compulsion. We believe there should be 

free choice and individual responsibility with respect to decisions regarding what 

people choose to eat. We believe the products we sell are healthful and, if 

consumers want different menu items, or more choices of products that have fewer 

calories, we are happy to serve them. 

9 
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76395.015

A. 

We post tlte caloric and fat content of our products ill our restaurants and have 

dOlle so (or a number ofvears 

A poster such as the one below hangs at eye level in every Carl's Jr. and 

Hardee's restaurant. Although difficult to read in the photo below, the actual 

poster in the restaurants is framed, 20 inches tall by 16 inches wide and very 

legible. It simply cannot be missed by any of our customers interested in the 

information. For each (){ our products it discloses serving size, calories. calories 

from fat. total fat. saturated fat. natural trans fat. artificial trans fat. cholesterol, 

sodium, total carbohydrates. dietary fibers. sugars and protein. We have had the 

modern versions of these posters in our Carl's Jr. restaurants since 2003 and in our 

Hardee's restaurants since 2005. Our best recollection is that we originally put 

nutritional disclosure posters in our Carl's Jr. restaurants in the mid-1990s. At 

Carl's Jr. we also make this information available in pamphlet form at the 

restaurants as you can see to the right of the posters in the photos below. We have 

done so for many years and before any government entities compelled us to do so. 

We simply believe such information should be available for consumers who wish 

to see it. 

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For additional information visit 

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B. 

On our web site, consumers call check the fat ami caloric cOlltent of our 

products amI call even create a meal and check the total nutritional information 

{or that meal with our Nutritional Calculator 

Most of the examples below are from the Carl's Jr. web site 

http://www.carlsjr.com/menu. Hardee's has its own web site with the same 

features. http://www.hardees.com/. 

This is an example of how our Nutrition Calculator works from our Carl's 

Jr. web site. [n this example, the consumer selected a Six Dollar Burger low carb 

style with an order of small fries and a Coke Zero. The nutritional information for 

the meal appears in the red line entitled "Totals." 

CONTACT us. 

DELICIOUS FOOD, TASTY FACTS. 

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C. 

We offer low fat, low calorie, low carbohydrate, vegetarian 

and gluten sensitive products alld our web site has an Alternative Options Menu 

offering a number oOtems (or our cOllsumers. 

http://www.carlsjr.com/svstem/pdf menus/:] /original/CJ AlternativeOptionsMen 

u.pdf? 1294692189. 

Order or modify many of our existing menu ifems to fit your diet needs. 

We believe our Alternative Options Menu is unique, particularly with 

respect to our Vegetarian and Gluten Sensitive options. 

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D. 

Our traditional menu also offers a number o(low fat and low calorie products 

and has done so (or many years. 

We have a line of whole-muscle, skinless chicken breast products which we 

char-broil and serve on honey wheat buns. Our Bar-B-Q Chicken Sandwich, for 

example, has 7 grams of fat. When consumers view our products on our web site, 

they have the option of getting full nutritional information by clicking on the 

"Nutritional information" option as in the pictures below. 

Customers can order any of our products on a honey wheat bun or low carb 

style as we use whole-leaf lettuce which can serve as the bun. This is the 

information for a Hardee's Thickburger low carb style. 

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We also have a variety of salads which customers can order with low-fat or 

non-fat dressings. We have had salads in our restaurants since at least the 1970s. 

Last year, we added a line of Turkey Burgers to our menu each of which are 

less than 500 calories. In addition, consumers can order any of our burgers with a 

Turkey Burger patty. 

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We also have a number of healthful low fat, low calorie beverages including 

1 % fat milk, orange juice, Vitamin Water Zero, Dasani bottled water, and Coke 

Zero, among others. 

fn summary, we have numerous delicious products for health conscious 

consumers and you can easily determine the nutritional information for any of our 

products in the restaurant or on our web sites. You can eat low fat or low calorie 

items in our restaurants and we are happy to sell these products. We accomplished 

all of the forgoing effectively, economically and without government compulsion 

and without adding confusion to our menu boards. 

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IV. 

The Impact of The Patient Protection and Affordable Care Act 

And Its Proposed Regulations 011 Our Abilitv to Avoid Layoffs, Create Jobs and 

Continue to Generate Economic Growth 

As noted above, we reinvest the great majority of our cash flow in our 

business and in the economies of the states where we do business. We do so by 

creating meaningful employment and management level opportunities for a diverse 

group of people, while reinvesting the vast majority of our cash flow in building 

new restaurants, remodeling existing restaurants, keeping our existing facilities in 

good condition, and purchasing various commodities and services. 

We accomplish all of this by running each restaurant as a profitable business 

and keeping our overall general and administrative expenses in check. Our 

business is relatively simple. We generate cash flow through our restaurants, pay 

our bills and then reinvest in our business. At the restaurant level, we simply take 

our revenues (essentially our sales) and reduce them by our food, labor and 

occupancy expenses. What remains is our restaurant level profit. All of our 

economic success - all of our ability to stimulate growth and jobs - stems from our 

restaurant level profit. Over the past few years, our industry and our Company 

have managed to grow despite being forced to deal with significant challenges, 

including declining consumer demand due to a weak economy, rapidly increasing 

commodity prices and increasing energy costs. 

We are also facing the negative impact of certain legislation and proposed 

regulations. This is true for our Company, our industry and our nation's retail 

industries in general. While generally well intentioned and having worthy 

objectives, such legislation and regulation rarely attempts to balance the costs and 

benefits thereof, and have the potential to add to our costs at a time when we are 

already facing very significant economic obstacles. We respectfully note that, 

unless properly structured with input from all sides, even when legislation or 

regulation intends to achieve something positive such as menu labeling or 

universal health care there is always a tradeoff that may hurt the very people the 

proposal is intended to benefit. 

We know the object of these proposals is not to impair our ability to reinvest 

in our business or to cause layoffs. Nonetheless, such legislation and regulation 

could leave us and our franchisees with no choice but to materially reduce our full 

time workforce and our capital spending which in turn, increases unemployment 

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and reduces economic growth. We hope that we can work with you to minimize 

the unintended negative effects of any such legislation and regulation. 

In particular, the PP ACA presents all American businesses with huge 

regulatory and economic hurdles that inhibit economic growth. My testimony will 

focus on the menu labeling portion of the PPACA (section 4205). It will then 

discuss the negative impact the PPACA's mandatory health insurance provisions 

will have on our Company's ability to grow and create jobs. 

A. 

Menu Labeling 

Before discussing specific issues with respect to the PPACA's approach to 

menu labeling, it is important to re-emphasize that, as a company, we support 

nutritional disclosure. We believe our actions (as described above) before any 

requirements were in place clearly demonstrate that. However, we strongly oppose 

legislative measures which generate significant costs without any benefit and 

which particularly disadvantage one part of the restaurant industry. We should 

disclose nutritional information in a cost efIective manner that is equitable and 

avoids giving a competitive advantage to any restaurant sector or interest group. It 

is in these respects that the PPACA's burdensome and expensive menu labeling 

provisions fail. 

I. Menu Labeling Provisions Have Had and Will Have No Impact on 

Reducing Obesity. First, while preventing obesity was the rational for enacting the 

PPACA's menu labeling provisions, the research to date has all but universally 

disclosed that placing caloric content on menus fails to impact people's eating 

habits and has no impact on reducing obesity. Below we list a number of studies 

and articles discussing the impact of menu labeling on eating habits. 

Calorie counts don't change most people's dining-out habits, experts say, 

Washington Post, 7/6/1 L http://www.washingtonpost.com/localicalorie-countsdont-change-most-peoples-dining-out-habits-expertssay/20 11/06/30/glQAhAgO I H story.htmL 

Menu labels don't influence students' food choices, Reuters, 7/1/11, 

http://www.reuters.com/article/20 11 10710 I/us-menu-IahelsidUSTRE7605G020 II 070 I; 

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Posting point-of-purchase nutrition information in university canteens does 

not in!1uence meal choice and nutrient intake, The American Journal 

Nlltrition, 6115/1 L http://www.ajcn.org/content/early/20 11106/15/ajcn.111.0 13417; 

Menu labeling law doesn't register a blip at Taco Time, Los Angeles Times, 

1/14/11, 

http://articles.latimes.com/20 Il1jan/14/news/la-heb-menu-Iabeling-20 11 0 114; 

Calorie Disclosures Fail to Weight Whole Enchilada, Wall Street Journal. 

7/8/09. http://onlinc.wsj.comiarticie/SBI24700756153408321.hllnl; 

Calorie Postings Don't Change Habits, Study Finds, New York Times, 10/6/09. 

http://www.l1vtil11cs.comI2009/10/06/nvregion/06caJories.html?scp= I &sq=mcnll%20Iabelling&s 

t=c~; 

Study: NYC calorie postings don't change orders, New York Post, 10/6/09, 

http://wwW.llypost.com/p/llcws/iocal/study nyc caloric postings don change ON8ltUiGVwDv 

IkCa20FvSN 

Fast food doesn't make you fat, Portfolio Magazine, 6/3/08, 

http://www.portfolio.com/vicws/blogs/odd-1111I11bcrs/2008/06/03/fast-food-docsl1t-l11ake-yollfat'?addCol11l11cnt=truc; 

Too Much Information? Why menu labeling laws are bound to jail, Reason 

Magazine, 6/25/08 http://reason.com/archives/200S/06/25/too-much-information; 

Are Restaurants Really Supersizing America? UC Berkley/Northwestern 

University Study, 12/30/07, http://are.berkelcy.edu/Papers/andersonOS.pdf. 

Exercise Info, Not Calorie Counts, Helps Teens Drop Sodas, National Public 

Radio, Dec. 16, 2011 hltp:liwww.npr.orgiblogs/thesalt/201 111211 61 I 43790349!excrcisc-infonot-caloric-counts-hclps-tecns-drop-sodas?ft= I &f~ 1 00 I. 

As stated in the July 6, 20 II Washington Post article cited above: "Evidence 

is mounting that calorie labels promoted by some nutritionists and the restaurant 

industry to help stem the obesity crisis - do not steer most people to lower-calorie 

foods. Eating habits rarely change, according to several studies. Perversely, some 

diners see the labels yet consume more calories than usual. People who use the 

labels often don't need to. (Meaning: They are thin.)." 

http://www.washingtonpost.com/locallcalorie-counts-dont-change-most-peoplesdining-out-habits-experts-say/20 11l06/30/g1QAhAgO I H story.html 

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Anecdotally, where we have already been required to add calorie disclosures 

to our menu boards, we have observed that such disclosure has, at best, a minimal 

impact on sales. More often, ironically, consumers appear to believefastfood has 

more calories than is actually the case and. as a result, may consume higher 

calorie items once they see the actual caloric content. 

Again, providing nutritional information for consumers is a good idea. As 

noted above, it is something we are currently doing and have done for many years 

more effectively than the PPACA requires. However, in addition to being 

ineffective if not counter-productive, the PPACA's menu labeling provisions are 

economically burdensome and inequitable, discouraging both growth and job 

creation. 

2. The Relevant Provision. The menu labeling provisions are located in 

Section 4205 of the PPACA which amends Section 403(q) (5) (a) of the Federal 

Food, Drug and Cosmetic Act (21 USC 343(q) (5) (A). The relevant provision 

requires that restaurants with menu boards "disclose in a clear and conspicuous 

manner:" 

Tn a nutrient content disclosure statement adjacent to the name of the 

standard menu item, so as to be clearly associated with the standard menu 

item, on the menu board, including a drive-through menu board, the 

number of calories contained in the standard menu item, as usually 

prepared and offered for sale ... 

21 USC 343 (q) (5) (H) (II) (aa). 

3. Economic Impact. This prOVIsIon will be very difficult and 

expensive to implement as we will have to place the information on our menu 

boards which means cluttering them even more than they are cluttered now and 

going through the expense of replacing all of our existing menu board s (assuming 

we are unable to find a more cost effective FDA approved alternative). We 

estimate that the cost to replace interior and drive-thm menu board panels at 

domestic Carl's Jr. and Hardee's restaurants would be $1.5 million ($1,473,560). 

This will be $1.5 million to accomplish something we are already doing less 

expensively and more effectively than the PPACA requires. Notably, as discussed 

below, the FDA estimates the costs at about $1,100 per restaurant and the Small 

Business Administration's ("SBA") Office of Advocacy reports that the National 

Council of Chain Restaurants (NCCR") estimated the cost at about $1,333 per 

restaurant. Using the FDA's number, the cost for our Company and franchised 

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Carl's Jr. and Hardee's restaurants would be about $2.1 million. Using the SBA's/ 

NCCR's estimate, our costs would be about $2.6 million. 

http://www .sba.gov! content/letter-dated-062820 1l-department-health-and-humanservices-tood-and-drug-administration. 

To put this expense in perspective, last year, our company spent $4.5 million 

on job creating new restaurant development, building five new company owned 

restaurant (this does not include monies the franchisees spent to build franchised 

restaurants). Company and franchise restaurant development is how we create new 

jobs. Using our estimate of anticipated menu board replacement costs (which is 

lower than the FDA's or the SBA's estimates), $1.5 million is 33% of the $4.5 

million our Company spent to build new Company owned restaurants for all oflast 

year. The amount we and our franchisees would be forced to spend on new menu 

boards would support the opening of 1 to 1 Y2 new restaurants and the creation of 

about 40 jobs in the restaurants and many more jobs outside of the restaurant. 

We would obviously prefer to spend these monies building new restaurants 

and creating jobs rather than providing information we already provide more 

effectively, more comprehensively and more economically than the PPACA 

requires. As opposed to just disclosil/g caloric cOl/tent, for each of our products, 

our nutritiollal illformation posters already disclose serving size, calories, 

calories from fat, total fat, saturated fat, natural trans fat, artificial trans fat, 

cholesterol, sodium, total carbohydrates, dietary fibers, sugars and protein. Our 

nutritional information posters are clearly marked and contain the facts about 

nutritional content so that customers can walk right up to them and read the 

information clearly. We firmly believe this is a far more effective communication 

of the information than lodging it on an already cluttered menu board that has to be 

read from five to ten feet away. 

We are not alone in facing these increased costs. On June 28, 2011, the 

SBA's Office of Advocacy filed comments with the FDA suggesting that the 

FDA's underestimated the costs in the proposed rules for chain restaurant and 

vending machine nutritional labeling and that alternatives exist that would 

minimize the rules' impact. 

department -health-and-human-services-fClOd-and-drug-admin istration. The SBA' s 

comments noted that "The FDA's regulatory analysis estimated that the initial 

mean estimated cost of complying with the proposed [menu labeling] rule [for 

chain restaurants] would be $315.1 million, with an estimated mean ongoing cost 

of $44.2 million." !d. Obviously, the costs for our industry will be very 

significant. 

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Yet, even the FDA's $315 million cost estimate may be low. As stated in a 

recent article on this subject in the American City Business Journals: 

The Food and Drug Administration may have underestimated the cost of 

complying with proposed food and calorie labeling rules for chain 

restaurants and vending machines. 

That's according to the Small Business Administration's Office of 

Advocacy, which urged the FDA to reassess its cost estimates and consider 

less-expensive alternatives. 

The proposed rules, which were called for in the health care reform law, 

require chain restaurants and operators of 20 or more vending machines to 

disclose nutritional information about their food items. The FDA estimates 

the rules will apply to 278,600 restaurants and 10,800 vending machine 

operators. 

The rule will cost each restaurant around $1,100, according to the FDA, 

mainly for testing foods, preparing new menus and training employees. 

Industry groups, however, told the Office of Advocacy that their surveys of 

restaurants indicate the costs would be higher. 

Calorie labeling rule could cost every restaurant $1,100, American City 

Business Journals, July 8, 2011, http://wwlv.hizjournals.com/portland/printedition/20 11/07 /08lcalorie-laheling-rule-could-cost- J 100. html? page=all. 

a. Interior Menu Boards. The walls that currently contain our menu boards 

are generally partial walls as we provide a clear view into our kitchens so the 

public can observe our food preparation process. Just above the line of sight into 

our kitchens is generally where we place the menu boards. This enhances our food 

safety and our customers comfort level as they can observe the food being prepared 

and the cleanliness of the restaurant. One solution to adding caloric information to 

our menu boards would be to make the menu boards larger which would, of 

course, obscure the view into the kitchen. We would lose the benefits of 

consumers being able to view the food preparation process. 

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Of course, a simple, equally effective and more economical solution would 

have been to make the relevant information available prominently on a wall 

adjacent to the menu board. This would have allowed us to make the required 

disclosure in an effective manner without the added expense of replacing all of our 

menu board panels or needlessly cluttering them and rendering them confusing. 

b. Drive-Thru Menu Board Labeling. Our drive thru menu boards are not 

amenable to menu labeling. They are simply too small and are designed for 

customer convenience and speed (which are generally the two reasons customers 

are in the drive thru to begin with). We are generally unable to make them larger 

as they are already as large as local zoning authorities allow us to make them. If 

we were allowed to make them larger, they would already be larger. 

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Last year, Senator Roy Blunt (R-Mo) sent a letter to the Department 

of Health and Human Services, Food and Dmg Administration ("FDA") raising 

concerns about the drive-thm menu board labeling issue, as part of the FDA's 

public comment request for its draft Section 4205 menu labeling regulations. The 

FDA responded stating that it was considering whether the use of "stanchions 

(such as free standing boards, generally placed next to the drive through menu 

boards) would enable customers to use calorie information when they are making 

selections from a drive though menu board .... " While this would certainly be 

helpful, it is difficult to see why having something adjacent to the drive-thm menu 

board is acceptable but having something adjacent to the interior menu board is 

unacceptable. We are unable to estimate the added cost of the FDA's stanchions 

approach as we currently have no idea what the stanchions would look like or 

where we would place them. As is very typical of sweeping Federal regulation, no 

consideration is given to how such regulation conflicts with the requirements of 

literally hundreds of local jurisdictions that impose other constraints to meet other 

legitimate objectives. 

So what it comes down to is this: The federal government has passed a law 

requiring us to build new signs, or buy new menu boards, and to put on those signs 

and menu boards information which we already provide even though it is unlikely 

to change eating habits, at a cost of over a million dollars that we will divert from 

and be unable to spend on expanding our business and creating jobs. 

4. Chains with 20 or More Restaurants. The menu labeling law only 

applies to chains with 20 or more restaurants. 21 USC 343 (q) (5) (H) (i). In other 

words, if you own less than 20 restaurants, you are exempt from the law's menu 

labeling requirements. The purpose of this provision is to protect small businesses 

from the law's expense and negative business impact. This exemption shows that 

the authors of the legislation well knew that it would have a negative impact. 

Apart from that, it is narve to make this distinction. First, it is simply inequitable 

to create a different unit cost structure for businesses above an arbitrary size 

threshold. Second, it is inconsistently applied, as this exemption is inapplicable to 

franchisees of chains that have more than 20 restaurants even if the individual 

franchisee owns less than 20 restaurants. In other words, small business operators 

who are independent get an advantage over chain restaurant franchisees even if the 

fJ-anchisee owns one restaurant. Our franchisees are also small business operators, 

and we submit that to the extent small business operators are deserving of special 

protection, all such operators similarly deserve protection. 

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Someone could argue that franchisees have the advantage of affiliating with 

larger chains, but franchisees pay 4% of their revenues for this privilege. As such, 

they are already at a competitive disadvantage from a profit perspective, but they 

have made a business decision that the trade off was worthwhile. When making 

this decision, our franchisees did not contemplate an additional economic 

disadvantage such as the menu labeling law now creates. Whether one of our 

franchisees' restaurants is across the street from a "Joe's Burgers" or a 

"McDonald's" makes very little difference: A competitor is a competitor. 

The International Franchise Association ("IF A") submitted comments to the 

FDA expressing these concerns on behalf of the chain restaurant industry. As the 

IFA stated: 

While the statute provides an exemption of the law's requirements for 

independent restaurants that have less than 20 locations, a small business 

owner that is a part of a franchise system will have to comply with the new 

regulations. The IF A is particularly concerned that the Proposed Rule and its 

requirements will create a competitive disadvantage between a single-unit 

franchise restaurant owner and local independent competitors. 

"These new requirements will dramatically increase costs for some small 

businesses that are in competition with similar independent restaurants that 

are not subject to the requirements of the new law," said Thorman [IFA 

Senior Vice President of Government Relations & Public Policy]. "We are 

asking the FDA to ensure these rules are implemented in a way that 

accommodates small business owners and provides consumers with 

important calorie information that is clear and concise." 

FDA Should Consider Economic Burden of Menu Labeling on Franchise 

Restaurant Owners, 

htlp:llwww.franchisc.org/Franchise-Ncws-Detail.aspx?id=54323. See also, 

Calorie labeling rule could cost every restaurant $1,100, American City 

Business Journals. July 8, 2011, http://wll.w.hizjournals.com/portland/printedition/20 f 1/07 /08lcalorie-labeling-rlile-could-cost-11 OO,html?page='all. 

5. COIlc/usion. While the PP ACA's menu labeling provisions may have 

been well intentioned, they were poorly thought out, will be both burdensome and 

expensive to implement and give an inequitable advantage to individuals who own 

less than 20 restaurants unless they are franchisees. We are already providing 

more nutritional information than the PPACA requires. We believe it is good 

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policy and good business to inform our customers in this way, even though 

experience has shown that such information does not change eating habits. The 

PPACA's menu labeling provisions are a perfect example of legislation that 

accomplishes very little while imposing costs that kill jobs and economic growth. 

Apart from the actual burden of this legislation, it has contributed to the sense -

which is quite common among our franchisees - that their own government has no 

idea how businesses operate and no sensitivity whatsoever to the challenges they 

and their consumers are confronting in these difficult times. 

As I have already stated, there is an increasing body of evidence that 

disclosure of caloric information as required by the new law has no impact on 

consumer buying decisions. This evidence would support repealing the law or 

postponing its implementation until there is greater certainty that it will have a 

beneficial effect. But we understand that many legislators who are committed to 

the idea of more consumer disclosure may be reluctant to take that step. For those 

legislators, a compromise is possible: Simply pass a "technical correction" to the 

law which makes clear that restaurants can post the required nutritional 

information on a wall inside the restaurant and adjacent to the menu board and that, 

if the restaurant provides complete nutritional information on its website, it is 

unnecessary to provide it in the drive thru lanes. This compromise would 

minimize the impact on franchisees, reduce the competitive disadvantage built into 

the law as currently written, and still require restaurant companies that- unlike 

Hardees and Carl's Jr. - currently fail to provide nutritional information to provide 

it. 

Just as important, it would show restaurant owners around the country and 

business owners in general that Congress recognizes their contributions to job 

creation and economic growth. In the long run, this serves the interests of those in 

this body who are more open to business regulation because it will show that it 

really is possible to pass regulations in a way that minimizes the burdens on those 

who create jobs and opportunity in our country. 

B. 

Emplol'er Mandates and Health Care Coverage 

I. Tlte Overall Impact on Employers and Job Creation. As noted 

above, our Company creates jobs by building new restaurants and working with 

our franchisees so they build new restaurants. Our restaurants create jobs both 

inside the store and also by spending hundreds of millions of dollars locally for 

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job-creating capital projects, media and advertising, and supplier products and 

services. 

Last year, as a company, we spent $11.8 million on health care coverage for 

our employees (the total cost including employee contributions was $21 million) 

and $4.5 million building new restaurants. We have been working closely with 

Mercer Health and Benefits, LLC, our health care consultants, to identify the 

PPACA's potential financial impact on our company. Mercer estimates that when 

the PPACA is fully implemented we will have an additional $18 million per year 

of costs with the PPACA's regulations as they are today. This will put our total 

health care costs at $29.8 million, a 150% increase from what we spent last year. 

That money will have to come from somewhere. The most likely place to start is 

new restaurant construction. The $18 million increase ill our health care 

coverage costs would completely cOllsume the $4.5 million we spent Oil new 

restaurallt construction last year, leaving nothing for growth and job creation. 

Another option to make up the gap between what we currently spend on 

health care and what we would spend under the PP ACA would be to reduce our 

labor force. It is important to note that the PP ACA explicitly makes labor more 

expensive. It is completely predictable that businesses such as ours will search for 

ways to take jobs out of our existing restaurants to reduce that expense. This is a 

basic law of economics that legislators would be well served to consider when 

crafting this kind of legislation. We would undoubtedly increase the number of 

part time employees; decrease the number of full time employees and attempt to 

automate positions (such as replacing cashier positions with ordering kiosks). 

These are not actions we want to take. They are actions the PPACA will all but 

compel us to take. 

Finally, we could make up the gap between our current health care costs and 

the increased costs under the PP ACA by reducing our capital spending on projects 

such as remodels and infrastructure. Eliminating these capital expenditures would 

be extremely difficult as they are essential to the continuing viability of our 

business. But under the PP ACA, we would have little choice other than to reduce 

them, eliminating construction jobs and endangering the long term prospects of our 

business. 

Our franchisees spent more on restaurant development last year as they built 

41 new restaurants domestically. They spent more on health care coverage as they 

own 70% of our domestic restaurants and account for about 49,000 employees 

(about two and a halftimes as many employees as our Company). As health care 

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costs increase, our Company will have to further reduce new unit constructioll 

and job creation. 

When I encourage franchisees to build new restaurants, I often hear about 

the uncertainties they face in deciding whether to make the investment. They 

speak of uncertainty with respect to future tax rates, energy, labor and commodity 

costs among other things. However, they prominently mention their certainty that 

under the PP ACA their health care costs are going to significantly increase. In 

fact, they express concern that they will be unable to keep their current restaurants 

open, let alone open new ones. 

Ours is obviously not the only industry facing the daunting prospect of 

massive health care cost increases under the PP ACA. The impact of this concern 

on American businesses is impeding growth and job creation. Businesses that are 

unable to forecast a profit from a new venture because of increased expense, or 

uncertainty about expense, will not invest. As noted in a recent analysis by the 

Heritage Foundation's James Sherk: 

Private-sector job creation initially recovered from the recession at a normal 

rate, leading to predictions last year of a "Recovery Summer." Since April 

2010, however, net private-sector job creation has stalled. Within two 

months of the passage of Obamacare, the job market stopped improving. 

This suggests that businesses are not exaggerating when they tell pollsters 

that the new health care law is holding back hiring. The law significantly 

raises business costs and creates considerable uncertainty about the future. 

* * * 

The fact that improvements in the job market ground to a halt after Congress 

passed Obamacare does not prove that the health care law caused itcorrelation cannot prove causation. However, the fact does lend strong 

weight to the voices of businesses who say that the law is preventing hiring. 

James Sherk, RecovefY Stalled Ajter Obamacare Passed (Heritage Foundation 

7/19/11) http://www.heritage.org/Research/Reports/20 1 I107/Economic-RecoveryStalled-Afler-Obamacare-Passed. 

In fact, some businesses that are marginally profitable may close when that 

profit margin disappears as a result of PP ACA's costs. When private sector 

businesses fail Of fail to invest, the economy slows and job creation either 

stagnates or vanishes. In our case, an $18 million increase in health care costs will 

significantly reduce our new unit growth and the associated job creation. 

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2. Specific Cost Drivers 

Underlying these overall costs are PPACA's myriad provIsIOns aimed at 

employer-sponsored health plans. These provisions will significantly impact the 

way we determine eligibility for and enroll employees in our health plans, the way 

we set our premium contributions, the design of our benefit plans, and how we 

deliver coverage and insure our employees. Administration and coverage of our 

benefits will change substantially between now and 2014. We are already 

expending significant time, etfort and resources just to figure out how to comply. 

a. During 2012 al1d 2013 reportil1g requirements come il1to effect, 

including W2 reporting of gross healthcare costs and Summary of Benefits and 

Coverage (SBCs). The law will reduce the contributions employees can make 

to their Flexible Spending Accounts, and the law will impose an additional 

0.9% Medicare tax for "high income" households (we do not expect that 

employers will have to collect or report this tax). 

b. Ollr biggest challel1ges come il1 2014: 

i. Communication to Employees about the Health Insurance 

Exchanges in all states in which we currently operate, and numerous 

other nuances about available state assistance. Unfortunately, the 

states are not uniformly creating exchanges, and we, our franchisees 

and other employers will have to keep track of myriad state 

approaches so as to comply with disclosure and other requirements. 

We have no idea when or even if the states in which we operate will 

have exchanges, how they will operate, or how employers will have to 

interact with them. 

There are additional compliance challenges in light of HHS' 

December 2011 bulletin on "essential health benetits" (EHB), which 

gave states considerable leeway to set their own benchmarks rather 

than defining one, nationally uniform package. 

It's unclear whether HHS will give multi-state employers like CKE 

any flexibility or a uniform standard for purposes of complying with 

the law's prohibition of annual and lifetime dollar caps for EHBs. 

ii. Automatic Enrollment of all eligible employees. 

29 
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76395.035

iii. The impact of the increased premium costs for all of the new 

eligible and enrolled employees. Other concerns in this regard are 

increasing costs of additional mandates, including "free" preventive 

care - which actually will result in higher premium costs, as well as 

costly new participant appeal and review rights that further burden 

employers. 

c. Selected Unknowns. There are many aspects of the PPACA's 

requirements where the government has yet to issue further guidance. Until 

the government does so, in a timely and reliable manner, we are unable to 

plan effectively. 

i. Auto Enrollment - FAQs released on February 9, 2012 indicate 

that this provision will not take place until after 2014. It is imperative 

that employers are given adequate time to comply with any 

regulations that are ultimately issued. These uncertainties hamper the 

employer's ability to plan strategically and effectively assess costs. 

ii. Disclosures - there are roughly 16 new disclosures or notice 

requirements but the government has yet to issue full guidance on 

most items. The government is writing new guidelines with details 

down to the font size, style and length of the required documents. 

Despite reasoned and valid concerns from employers, regulators just 

recently refused to give employers additional time to prepare a new 

disclosure essentially giving them at most six months to craft 

"summaries of benefits and coverage" that will likely confuse 

employees without giving them any new meaningful information. 

Regulators could have acknowledged, but chose to ignore, that 

employees eligible for employer-sponsored coverage already have 

access to meaningful and appropriate information, and that employers 

are already subject to significant disclosure obligations. 

Ill. Full Time vs. Part Time The current known is that anyone 

over 30 hours will be considered Full Time and eligible for benefits. 

Recent announcements suggest that employers will have some rules of 

convenience for newly hired employees - giving employers with parttime or fluctuating workforces rules that are a bit more workable, but 

that still impose administrative burdens and potentially costly 

penalties on employers. Moreover, for full-time employees, employer 

30 
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76395.036

plans will have to meet still unknown minimum requirements for 

"value" and "affordability"- stymieing attempts to plan strategically. 

With further guidance we can better understand the full time 

equivalent rules and how we are to treat part-time employees. This 

is important so that we avoid penalties for not providing certain 

coverage, and so that we know who has to be automatically enrolled 

in one of our plans. 

iv. Our part time employees currently have a Limited Medical Plan 

(sometimes referred to as a Mini-Med plan). The expectation is that 

in 2014 that option will become unavailable due to PPACA's 

provisions that prohibit annual benefit limits. Currently we are able to 

provide this benefit plan as we have filed for and obtained a waiver 

with HHS to allow us to provide this benefit through January 1, 2014. 

The waiver only allows us to avoid PPACA's annual dollar limit 

provisions - we must comply with all other applicable provisions. 

V. 

Conclusion 

The foregoing is intended to provide a summary of the issues the PP ACA 

has created and that we are currently working through. We anticipate that the 

PP ACA 's costs will be very substantial and its regulatory requirements 

burdensome. We strongly urge you to reconsider the menu labeling portion of the 

PPACA. We hope that at some point Members of Congress will set aside politics, 

and entrenched opinions, and carefully consider whether the benefit of PP ACA as 

a whole is outweighed by the cost. 

I want to conclude my testimony on a personal note. Like many people in 

this country, I come from a working class background. Through hard work and 

good fortune I was able to improve my position in life, and I am now able to 

provide opportunities to my children that r did not have. I fully recognize the 

important role government plays both in helping those who are unable to help 

themselves, and in providing a legal framework that enables the free market system 

to operate efficiently and with due regard for important goals like environmental 

quality and consumer health. 

I want government to continue playing that role. But Congress must 

understand that laws have a real impact on real people who are working in real 

31 
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76395.037

businesses. We have to keep those businesses profitable and successful or we lose 

our jobs and endanger our future. That is not an easy task in the best of times. 

There has been one occasions in the last twenty years when CKE was close to 

bankruptcy. If our company were in that position now, it is entirely possible that 

the PP ACA alone would force us over the edge. 

I am personally at a stage in life where such an outcome would not 

substantially affect me or my family. But the vast majority of our employees are 

not in that position. There are millions of people like them in our country whose 

jobs depend on Congress being sensitive to the realities of small business in a way 

that is lacking in the PP ACA. 

The situation is so dire that some of our franchisees have lost confidence in 

our economy and want to sell their businesses. These small business owners are 

concerned about the economic viability of their businesses in the current regulatory 

climate. They are concerned that their government does not understand the 

difficulties they face and is unsympathetic to their plight. Rather than acting to 

assist them, the government seems to continually increase the number and 

complexity of the regulations governing their businesses thereby restricting their 

ability to grow and prosper. 

Although we are working hard as a company with our elected 

representatives on both sides of the aisle to improve the business and regulatory 

climate, it is difficult to tell our franchisees that things are going to get better 

anytime soon. I understand that for many Members of Congress the PPACA was 

an important piece of legislation that advanced social policy goals they have 

pursued for many years. I encourage those Members to at least consider the 

compromise I have suggested with regard to the menu labeling portion of the bill. 

In the context of the overall bill, the burden imposed by the menu labeling section 

is small. But relief in that area would show that the Congress does recognize and 

place real value on the contributions of small business owners in our industry. 

That recognition would be far more meaningful than the actual relief which the 

compromise would provide, because it would create greater confidence within the 

business community that Congress cares about jobs and will in the future carefully 

balance its social agenda with our nation's economic needs. 

32 
50 

Mr. STEARNS. I thank you. 

Ms. Walz, you are recognized for 5 minutes. 

TESTIMONY OF BARBARA WALZ 

Ms. WALZ. Thank you. Chairman Stearns, Ranking Member 

DeGette, and members of the subcommittee, my name is Barbara 

Walz and I am the senior vice president for Policy and Environmental at Tri-State Generation and Transmission Association. I appreciate the opportunity to testify before you here today on TriState’s views of the regulatory climate. 

Tri-State is a not-for-profit consumer-owned electric cooperative 

based in Westminster, Colorado. Our mission is to provide reliable, 

cost-based wholesale electricity to our 44 not-for-profit member systems that serve 1.5 million rural consumers in Wyoming, Nebraska, New Mexico, and Colorado. Tri-State generates or purchases power from hydropower, solar, wind, coal, and natural gas. 

In 2010, we integrated 50 megawatts of wind and 30 megawatts of 

solar into our generation mix. At that time, the solar facility we 

built was the largest photovoltaic system in the world. The bulk of 

our power needs to come from coal-based power plants in Wyoming, 

Colorado, Arizona, and New Mexico. These plants have become an 

important part of the communities in which they reside. For example, the Craig Power Plant in Western Colorado and the coalmines 

from which the company gets its coal employs 750 employees and 

provides $73 million in wages and benefits. 

Tri-State’s generating facilities all have state-of-the-art emission 

controls and yet, even with these advanced emission controls, we 

are struggling with regulatory uncertainty and regulatory stringency from EPA regulations. Regional Haze, the Utility MACT 

rule, and Coal Ash are three of the examples of new regulations we 

are facing. Under the Regional Haze Program, States are provided 

the authority to make decisions about how much visibility improvement is reasonable and the controls needed to improve visibility. 

In Colorado, the Air Quality Control Commission unanimously 

adopted the State Implementation Plan, or SIP. This SIP is unique. 

It has unanimous support from the State, from environmental 

groups, and from industry. This SIP has subsequently been supported by the Democratic governor, the Republican speaker of the 

State House, as well as Senators Mark Udall, Bennet, Ranking 

Member DeGette, Congressman Gardner, and the rest of the Colorado House Delegation. Yet even with this bipartisan and crossspectrum support, there is significant uncertainty as to whether 

EPA will approve Colorado’s SIP. EPA has not been approving surrounding States’ SIPs and instead, they have issued FIPs, or Federal Implementation Plans, that are more stringent. So we are uncertain, as of today, what our Regional Haze costs will be. 

Another issue of regulatory uncertainty that we face is EPA’s 

pending decision on coal ash. Tri-State manages coal ash in a dry 

form in accordance with stringent State laws. Under the Clinton 

administration, EPA made a regulatory determination that Coal 

Ash is not a hazardous waste, and yet EPA has recently recanted 

this determination and has proposed designating coal ash as hazardous. The comment period for this rulemaking closed in 2010 but 

EPA said they won’t make a final decision until 2013. During this 

51 

reversal of decision by EPA, 28 States, including Colorado, have 

sent letters to EPA stating that programs that they have established under State law are sufficient to protect public health and 

the environment. 

A second concern that Tri-State has is the manner in which EPA 

is stringently interpreting its rulemakings. The Utility MACT is an 

example of this stringent approach. Under this rule, EPA was supposed to develop a standard based on the performance of existing 

units, but what they did was cherry-pick the lowest emissions of 

pollutants from a variety of sources from across the country and 

the standard does not represent the performance of a single unit 

in the United States. Some have referred to this facility as 

‘‘Franken-MACT.’’ For new coal units, the emission limits in the 

MACT Rule are so stringent that technology vendors have told 

EPA that they cannot design equipment to meet these stringent 

standards. This rule essentially prohibits building new coal plants 

in the United States and coal is our lowest-cost source of energy 

that Tri-State provides. 

As a not-for-profit cooperative, any costs associated with complying with EPA regulations is passed onto the end users of electricity in the form of higher electricity bills. Tri-State provides electricity to rural farms, ranches, and businesses and our service territory includes some of the poorest counties in the country. These 

folks cannot afford these ever-increasing costs. 

Tri-State urges the committee to exercise continued oversight 

over EPA’s regulatory activities to help us meet our mission of providing affordable and reliable electricity. 

I would like to thank Ranking Member DeGette and Congressman Gardner for their recent support on both Regional Haze and 

Coal Ash issues. Thank you. 

[The prepared statement of Ms. Walz follows:] 

52 


76395.038

Ms. Barbara Walz 

Senior Vice President for Policy and Environmental 

Tri-State Generation and Transmission, Inc. Westminster, Colorado 

Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

"Regulatory Reform Series #8 - Private-Sector Views afthe Regulatory Climate One Year 

After Executive Order 13563. " 

16 February 2012 

Thank you Mr. Chairman. Chairman Stearns and Ranking Member DeGette. my name 

is Barbara Walz and I am Tri-State Generation and Transmission Association's Senior Vice 

President for Policy and Environmental. I appreciate having the opportunity to testify before you 

today on Tri-State's views of the regulatory climate in the U.S. and its elTect on our ability to 

provide affordable and reliable electricity to our consumers. 

Tri-State is a not-for-profit member-owned wholesale generation and transmission 

electric cooperative based in Colorado. Our mission is to maintain high environmental standards, 

while providing reliable, cost-based wholesale electricity to our 44 not-for-protlt member 

systems (electric cooperatives and public power districts) that serve 1.5 million predominantly 

rural consumers over 200,000 square miles of territory in Colorado, Nebraska, New Mexico and 

Wyoming. To meet our membership'S electricity needs. Tri-State generates or purchases power 

produced by coal. and natural gas. as well as from renewables -- including hydropower. solar and 

wind. 

Tri-State supports and is committed to good environmental stewardship. but has observed 

the U.S. Environmental Protection Agency (EPA) propose and finalize an unprecedented number 

of regulations and significant guidance documents that will greatly affect Tri-State's ability to 

provide affordable electricity to our member systems .. As a not-For-profit cooperative. the cost 

to comply with these rules and other requirements are rolled directly into our consumers' rates. 
53 


76395.039

As a cooperative, Tri-State does not make any protit ti'om the implementation of these rules. 

The costs we absorb from these regulations are ultimately passed onto our member systems' 

consumers, who are the families and individuals at the end of the electric lines. 

Regulatory Uucertaiuty 

EPA's regulatory actions are substantially undermining the ability of States to make 

effective decisions to adopt and implement environmental programs in a manner that addresses 

the needs and interests of individual states. Many of our states' Clean Air, Clean Water and 

Solid and Hazardous Waste Programs are adopted li'om EPA and implemented by the individual 

states. EPA's actions oflate have made it difficult for states. and the business and industry that 

operate in those states, to know that the programs adopted by the state will survive review by this 

EPA. 

Regional I Jazc is a program under which EPA is taking actions that exceed or 

unnecessarily stretch its legal authority and undermine the ability of states and their constituent 

business and industry to manage and implement regulatory programs. Under this program, states 

are required to conduct an analysis of the major emitting facilities in their states considering 

several factors. States are expressly provided the authority under the EPA rule to make decisions 

about how much visibility improvement is reasonable at this time and what, if any, additional 

controls would improve visibility. However, in many states across the country, EPA is 

disapproving state-adopted plans. EPA is issuing plans that impose significantly more onerous 

emission controls at suhstantially greater costs. Tri-State believes that more expensive controls 

will likely provide very little, if any, additional visibility improvement. The state of Colorado's 

Air Quality Control Commission unanimously adopted a regional haze state implementation plan 

21 
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76395.040

(SIP) in December 20 I 0 that was supported by all of the parties to the rulemaking hearing. This 

plan was subsequently supported in letters by the Colorado Congressional delegation -- including 

Representatives Gardner and DeGette --, the Democratic Governor of Colorado as well as the 

Republican Speaker of the Colorado House. The EPA has signed a consent decree with the Wild 

Earth Guardians requiring it to make a decision regarding Colorado's SIP by this March. In 

surrounding western states EPA has disapproved or proposed to disapprove the plans of North 

Dakota, Wyoming, New Mexico, Oklahoma, Nevada and Arizona. The decisions of EPA come 

with significant economic impacts to business and industry as well as the states. 

The coal ash rule is another good example of the uncertainty that EPA is creating for our 

industry. Over 10 years ago, EPA conducted a study and made a regulatory determination. as 

was required by law, that coal ash was not a hazardous waste. Now EPA has changed its mind 

and is not sure. EPA has made two proposals to regulate coal ash; one as hazardous waste and 

one as a solid waste. This decision will have significant cost impacts to our industry. EPA 

closed the public comment period in 20 I 0, but may not finalize the rulemaking proposal until 

2013. 

Tri-State believes that classifying coal ash as a hazardous waste is unnecessary because 

the testing data do not support the need for this type of classification. If EPA proceeds with this 

designation, it is estimated that it will require about 10 times more hazardous waste landfill space 

than what is currently permitted. The permitting of these facilities takes years to accomplish and 

the ongoing operations and maintenance are very costly. Under the rulemaking for coal ash. 28 

states - including Colorado's Department of Public Health and Environment and New Mexico's 

Public Regulation Commission -- sent letters to EPA stating that the programs they have utilized 

31 
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76395.041

to manage coal ash as a solid waste, are sufficient to protect the public health and environment 

and meet the requirements of the law, 

As the Regional Haze and Coal Ash rules illustrate, the regulatory actions of EPA are 

creating great uncertainty in our industry, In many cases we spend a significant amount of 

resources to analyze and calculate how to proceed and determine the best course of action is 

legal challenge. 

The Interior West contains vast quantities of high quality, low emitting coal that can be 

used responsibly to generate cost effective energy for a growing region of the country. Tri-State, 

in conjunction with Sunflower Electric, has a permit to build a new coal-fired unit at an existing 

coal-tired power station in Kansas, but the new source emissions limits finalized by EPA in the 

Utility MACT are likely to make it impossible to complete, It is anticipated that this facility 

would cost over a billion dollars to construct. Prospective lenders will not provide financing 

without some guarantee that the facility will be able to comply with the new requirements, 

Prospective contractors or vendors have not been able to provide any type of guarantee that the 

equipment they can huild will meet the new requirements. 

Regulatory Stringency 

The Utility MACT rule has the dubious distinction of being an example ofa rulemaking 

that creates uncCltainty for the electric utility industry, while at the same time illustrating the 

how EPA stringently interprets some of its rulemakings. EPA is making the most stringent 

regulatory interpretations that seem possible, using questionable arguments that will likely be 

subjected to legal challenge and create considerable ongoing uncertainty. In doing so, EPA has 

created the most expensive regulatory program in history with industry costs totaling in the 

41 
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76395.042

billions annually. As I previously noted. because Tri-State is a not-for-profit electric 

cooperative. these costs will be passed on to our consumers directly in their monthly utility bills 

and indirectly in the goods and services that they purchase. 

Examples of these costs can be seen in the final rule for the electric Utility MACT rule 

or, as some call it, the Mercury and Air Toxics Standards Rule. In this rule, EPA cherry picked 

the lowest emissions of pollutants from a variety of sources across tile country to conjure up a 

description of facility emissions that do not represent any single facility in operation. This 

hypothetical facility has been deemed the "Franken MACT." 

The Utility MACT rule will require the application of emission controls at hundreds of 

facilities across the country. These controls can cost tens to hundreds of millions of dollars and 

can take years to install. EPA simply believes that when the electric utility industry floods the 

market with a demand for tllis type of service, contractors wi II staff up and meet the demand. 

However, these controls are not mass produced or "off-tile-sheil" technology. Each control unit 

is built specifically for the facility at which it will be used. The Utility MACT rule will require 

existing coal plants to have emission controls installed and operating in three years. This time 

frame may not seem difficult when you consider a single facility, but when considering the entire 

electric utility industry there will be hundreds of facilities across the country that will 

simultaneously require the installation of emission controls. It is unrealistic to think industry can 

design, permit, finance. construct, tcst and deploy this technology in this condensed timeframe. 

EPA has stated that 69 facilities can comply with all the requirements of the Utility MACT. 

Unfortunately, that leaves over a thousand facilities needing to install these very specialized 

controls in this short period of time. The EPA's recent requirement for determining compliance 

with the new national air quality standard for sulfur dioxide is another example of a stringent 

5 I f' 
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76395.043

regulatory interpretation. This regulation does not allow us to show that we comply by using 

actual monitored data. Instead, EPA requires us to usc modeled (or estimated) data based on a set 

of very stringent assumptions that may not accurately depict air quality conditions "011 the 

ground" at a given location. 

The emission standards that EPA is estahlishing for new coal fired sources is another 

example of a stringent regulatory interpretation. The emission standards EPA is seeking to 

establish are simply not achievable in the real world on a continuous basis as EPA requires. Use 

of the most advanced facility designs and emission control technologies that are currently 

commercially available will not position new units for continuous compliance. EPA has targeted 

setting the emission limits at the lowest levels that have ever been seen and, in some cases, lower 

than current instruments are able to measure. These limits may be achieved under the best 

operating conditions over a short period of time by facilities that do not epitomize the spectrum 

of the industrial operations in place today. In the Utility MACT, EPA used a relatively small 

facility in Hawaii that burns waste tires and coal from Indonesia to set the emission limits for 

new sources in the United States. There are signilicant questions about EPA's calculations and 

how much this facility is indicative of the U.S. coal-based generation. EPA estimate the benelits 

of the Utility MACT rule is $6 million annually. Unfortunately, the cost of compliance is 

estimated to be $9 billion annually. 

In addition. it is Tri-State's unclerstanding that EPA is currently considering proposing a 

New Source Performance Standards (NSf'S), in the near future, for greenhouse gases at an 

emission rate about one-half that ora coal-fired power plant. It is difficult for the electric sector 

to understand how EPA can attempt to establish such a requirement when EPA has stated that 

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76395.044

this technology is not commercially available. Tri-State believes that this will shut down coal 

operations in the U.S. 

EPA is operating under unrealistic expectations about the capability of our industry to 

design, finance, penn it, construct, test and deploy new technology -- in very short timeframesin order to comply with the rules that it is proposing and finalizing. EPA seems to have adopted 

an "ilyou mandate it they (the vendors) will build it" perspective to these rules and that the 

industry will be able to do what EPA wants in a very limited time frame. 

Conclusion 

Tri-State provides electricity to many rural areas of Colorado, Nebraska, New Mexico 

and Wyoming, some of which are in the most economically depressed counties of the country. 

The economic impact that EPA creates with the programs they adopt and the manner in which 

they manage those programs have real adverse economic impacts on the public. The electric 

utility industry provides well-paying and meaningful jobs in communities across the country. 

We also have a significant indirect beneficial economic impact on the communities in which we 

operate and do business. Tri-State is not opposed to necessary regulatory requirements to 

protect public health, welfare and the environment that can be implemented in fair and 

reasonable timeframcs. but we have a valid concern with the approach that EPA has taken in the 

rcccnt past to implement the laws Congress bas enacted. Tri-State urges the committee to 

exercise continued oversight over the EPA's regulatory process in order to help us to continue to 

provide affordable and reliable electricity to our member systems and their member-owners. 

Thank you for inviting me to testify here today. I'd be happy to take any questions. 

71 
59 

Mr. STEARNS. I thank the gentlelady. 

Mr. Shoop, for 5 minutes we recognize you. 

TESTIMONY OF KIMBER SHOOP 

Mr. SHOOP. My name is Kimber Shoop. I am senior counsel at 

Oklahoma Gas and Electric Company. We appreciate the opportunity to come before you today to provide our view of the regulatory climate in the aftermath of President Obama’s Executive 

Order 13563. 

OG&E serves approximately 790,000 customers in 268 communities in Oklahoma and Western Arkansas. While we are the largest electric utility in Oklahoma, OG&E is considered a medium- to 

small-sized investor-owned utility and lacks the resources possessed by many of the much larger utilities in the industry. Nonetheless, OG&E’s commitment to customers and its innovative 

thinking has been duly recognized by significant industry observers. In 2011, OG&E was named best in class for customer satisfaction by JD Power and Associates, and I am also very proud to report that OG&E was named 2011 utility of the year in North 

America by Electric Light and Power Magazine. 

OG&E has set a goal of reaching the year 2020 without adding 

any new fossil fuel generation by focusing on energy efficiency, demand response, smart grid, renewable wind power, and building 

new transmission. The recent suite of EPA rules under the Clean 

Air Act constitutes a serious challenge to OG&E’s efforts because 

they effectively force OG&E to make immediate or very near-term 

high-stakes choices regarding its generation fleet. 

With regard to meeting SO2 emission limits alone, OG&E will be 

forced to choose whether to install scrubber technology on its coal 

plants, which could cost over a billion dollars, or discontinue coal 

generation from units that still have much life in them and move 

closer to a primarily all natural gas fleet. Each of these options 

alone is extremely expensive for OG&E and ultimately our customers. We determined that either option would lead to the largest 

rate increase in our company’s history. 

Other EPA rules are further complicating the decision by creating new emission limits for NOx, acid gases, particulate matter, 

and mercury. The President’s executive order should have a welcome, therapeutic impact in improving our ability to meet in a 

more reasonable, cost-effective manner legitimate environmental 

objectives that Oklahomans and Americans in general generally desire. But OG&E does not see EPA successfully balancing the executive order’s laudable objectives of protecting public health and safety and environmental quality on the one hand with promotion of 

economic growth, innovation, competitiveness and job creation. 

OG&E does not see EPA sufficiently improving its processes by 

using the best available science or by truly being interested in allowing for meaningful public participation in an open exchange of 

ideas as called for in the executive order. OG&E most certainly 

does not see EPA’s regulatory approach as promoting predictability 

and reducing uncertainty, and OG&E does not find that EPA has 

taken into sufficient consideration comparative benefits and costs 

of its regulations. 

60 

For example, OG&E worked with various State interests in the 

DEQ and Oklahoma to craft a State compliance plan for the EPA’s 

Regional Haze Rule. This flexible Oklahoma solution provided 

optionality to OG&E, minimized the impact on customers in the 

State economy, and retained increased natural gas use as an alternative. Most importantly, this solution met the visibility improvement goals of the Regional Haze Rule. Unfortunately, the EPA rejected this reasonable approach and stuck to its rigid position with 

regards to scrubbers or conversion to gas within 5 years. 

OG&E does not view the EPA’s rejection of Oklahoma’s regional 

haze SIP as being consistent with the executive order’s stated goal 

of achieving environmental results on a more cost-effective or creative basis. The overlay of regional haze mandates with potentially 

different technology demands and unsynchronized compliance 

schedules for such items as U–MACT, CSAPR, and the soon-to-beseen greenhouse gas regulations magnify our unpredictability problem significantly. 

The strict and unpredictable timetables could also affect the reliability of service for OG&E and the other members of our regional 

grid. A mandate to invest over a billion dollars would make it difficult for OG&E to continue focusing on things like wind energy, 

energy efficiency, demand-side management, and will make it more 

difficult to invest in the base-level commitments for maintaining 

and operating our business. If we can achieve the same desired environmental results at a lower cost, which we think is the President’s laudable intention underlying the executive order, we believe 

we have an obligation to do so. 

For us to make intelligent capital investment decisions, we need 

to treat all of the new EPA rules holistically to create a coordinated, rational plan for selecting compliance strategies from the 

range of options in a way that makes sense to our State economies, 

our ratepayers, and the environment. We would hope that the result of the hearing today would be for the subcommittee to work 

together on a bipartisan basis to see the objectives of President 

Obama’s executive order become elemental drivers of all that EPA 

does. 

Thank you. 

[The prepared statement of Mr. Shoop follows:] 

61 


76395.045

OGE Energy Corp. PO 80.321 

Oklahoma City. Oklahoma 13101·0321 

405-553·3000 

www.oge.com 

06/£' 

Summary of Key Points from Statement of Kimber L. Shoop 

Senior Counsel 

Oklahoma Oas and Electric Company 

Hearing before the House Energy & Commerce Subcommittee on Oversight and Investigations 

February 16,2012 

OO&E very much supports and applauds the goals of President's Executive Order 13563. However, OO&E 

believes that the EPA is not meeting the goals set out by the President. EPA should increase its focus on promotion of 

economic growth, innovation, competitiveness, job creation, use of best available science, allowing meaningful public 

participation, enhanced capital investment predictability, and comparative cost-benefit aoalysis in its rulemaking 

process. This would materially improve the effectiveness, credibility and perceiVed legitimacy of the agency's efforts 

to protect the public health, safety and environmental quality. 

Executive Order 13563 comes at a critical time in our industry. Utilities are under historically unprecedented 

pressure to meet competing demands to invest capital to accomplish ao ever-widening range of puhlic policy 

objectives, including inter alia, greater energy efficiency and demand side management programs, increased use of 

reoewables, increased transmission aod cyber security. All these entail billions of dollars in new capital investment and 

are in addition to the cost of the range of EPA's new Clean Air regulations which individually and collectively 

themselves represent billion dollar investments. All these investments materially impact electric rates, customers, and 

the economic climate of a utility'. service area. Mid-sized and small utilities like OO&E do not have the same capital 

resources that much larger utilities have in order to accommodate all these investment demands and the attendant 

collateral requirements of personnel and other resources that go with those investments. Today's financial market 

environment makes financing these investments difficult and expensive and lends another level of uncertainty and risk 

to our ability to make capital investments. 

We do not see the EPA incorporating the Executive Order sufficiently in its development of its new Clean 

Air Act regulations as they would impact Oklahoma. In particular, we find EPA's approach to such regulations as 

adding to the significant uncertainty surrounding utility capital investment. We believe that there is significant room 

for improvement in the regulatory climate in terms of EPA's cost-benefit analysis, use of best available science, 

establishment of reasonable and cost·effective compliance timelines, consideration of electric service reliability and 

other critical electric market realities. We would welcome a more meaningful opportunity for dialogue with EPA on 

these issues. 

We urge the EPA to do more to reflect the aspirations of Executive Order 13563 in its rule makings affecting 

utilities and to permit greater flexibility for utilities in meeting established environmental objectives in a manner that 

makes greater sense for customers, jobs and the economic welfare of the markets utilities serve. 
62 


76395.046

OGE Energy Corp. PO 80x 321 

Oklahoma City, Oklahoma 7310H321 

405·553-3000 

W\NW,oge.com 

Statement of Kimber L. Shoop 

Senior Counsel 

Oklahoma Gas and Electric Company 

OG/E' 

Hearing Before the House Energy and Commerce Subcommittee on Oversight and 

Investigations 

February 16, 2012 

Re: Private Sector Views of the Regulatory Climate One Year After 

Executive Order 13563 

My name is Kimber L, Shoop. I am the Senior Counsel for Oklahoma Gas and 

Electric Company, an electric utility headquartered in Oklahoma City. Commonly called 

OG&E, we serve approximately 790,000 customers in 268 communities in Oklahoma 

and western Arkansas. Our fossil-fuel generation capacity mix is approximately 52% 

natural gas-fired, 38% coal-fired, and we currently have wind power capacity of 780 

megawatts or roughly 10% of our total generating capacity. 

My company and I appreciate the opportunity to come before you today to 

provide an overview of how we assess the regnlatory climate relating to our efforts to 

meet newly promulgated and pending EPA rules, including the EPA action to implement 

the Regional Haze rule in Oklahoma, the Cross State Air Pollution Rule and the 

Hazardous Air Pollution rule or Utility MACT. My statement will try to provide you 

with some insight into the challenges OG&E faces in light of these rules. However, 

before I begin talking about the EPA rules and their challenges to OG&E, I believe it is 

appropriate to provide some background about OG&E 

I. Who is OG&E? 

As you know, all utilities are not alike. They vary in many important ways: in 

terms of size, weather demands, financial resources, generation mix, renewable 
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resources, and of course their state regulatory and political environment in which they 

operate. While the largest electric utility in Oklahoma, OG&E is considered a medium to 

small sized investor owned utility and lacks the resources possessed by many of the much 

larger utilities that have appeared before this Subcommittee. It may be helpful to the 

Subcommittee to first have a sense of OG&E's individual persona as a utility and our 

particular experience and perspective in providing low cost, reliable and environmentally 

responsible electric service to our customers. 

As a state-regulated utility, OG&E bears the responsibility of its "obligation to 

serve" all electricity customers in its service area and we take this obligation seriously. 

This obligation to serve carries with it the requirement to provide reliable electric power 

at the lowest reasonable cost to our customers. But beyond that, OG&E strongly believes 

that it is incumbent on us as a good corporate citizen to produce reliable and low cost 

power for our customers in an environmentally responsible manner. 

A perfect example of our commitment to customers is our "2020 Goal." In 2007, 

OO&E's CEO, Pete Delaney, committed us to a goal of reaching thc year 2020 without 

adding any new fossil-fuel generation. This was a significant challenge because OG&E 

was and is experiencing steady growth in customer demand. OG&E's 2020 Goal 

represented a radical departure from the electric industry business model that served 

customers well since at least the 1930s. Simply stated, building power plants to serve 

current and anticipated load growth made certain sense in meeting demands for electricity 

- especially when fuel was cheaper and there were more plentiful construction resources 

and relatively inexpensive solutions to meet environmental requirements. Today, utilities 

cannot simply build power plants to meet growing demand. OG&E's leadership 

recognized in 2007 that continuation of the old approach to simply build additional 

generation capacity is not in the best interest of our customers, our shareowners and the 

local economies that we serve. 

First and foremost, the 2020 Goal is premised on continued commitment to 

investment in the day to day business of providing safe and reliable electric service, 

improving our operational efficiencies and engaging our customers. The 2020 Goal 

focuses on: increased energy efficiency programs; increased demand response through 

new and expanded programs that are enabled by new smart meter technology; adding 

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renewable wind energy; and building new transmission to bolster reliability and to 

support wind power. Over time. we've recognized that achieving the goal can be 

enhanced by a number of other initiatives, including consideration of the retirement or 

replacement of existing generation, not renewing our wholesale contracts as appropriate, 

and smart grid deployment. 

OG&E's commitment to customers and its innovative thinking is paying off and 

has been duly recognized by significant industry observers. In 2011, OG&E was named 

best in class by J.D. Power and Associates for customer satisfaction. Also, I am very 

proud to report that OG&E was named by Electric Light and Power magazine as the 2011 

Utility of the Year in North America. 

A. OG&E and Wind Power: 

I can report firsthand to you that the interest in enviroumentally friendly energy 

and energy conservation-oriented consumer behavior certainly exists in Oklahoma. In 

the western part of our state, wind farms seem to be popping up everywhere. Oklahoma 

has gone from virtually no wind power just a few years ago to currently being ranked 8th 

nationally in existing installed wind power generation capacity. By the end of 2011, 

OG&E had increased its wind generation to 780 MW, which represents approximately 

10% of our generation portfolio. This wind energy replaces and complements fossil fuel 

generation and will result in more than $1 billion in estimated customer savings over the 

life of those facilities. OG&E has also constructed new transmission lines between 

westem and central Oklahoma to allow renewable power being developed in sparsely 

populated westem Oklahoma to reach our customers and others in more heavily 

populated parts of our service areas in Oklahoma and Arkansas. And I might emphasize 

that all of these achievements in developing renewable generation are occurring without 

any state or federal mandates. 

B. OG&E and Demand Side Management and Efficiency: 

In addition to wind power, we are renewing our interest and focus on demand side 

management (UDSM") programs aimed at reducing energy use. OG&E has been 

focusing on energy efficiency and demand response to achieve reductions in both demand 

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and our customers' overall energy costs. OG&E has undertaken efforts to expand its 

traditional demand response programs and has received approval to expand its energy 

efficiency programs in both the Oklahoma and Arkansas jurisdictions. With additional 

customer education, better technology such as smart meters, and other programs, we 

believe that there are growing opportunities for even greater energy savings. 

In 2010, OG&E began implementing its Smart Grid program, and today is viewed 

as a national leader in deployment of this technology. Smart Grid is critical to the 

success of the DSM effort and a reduction in future customer costs associated with the 

avoidance of additional generation capacity. In 2007, OG&E began evaluating intelligent 

digital meters and advanced metering infrastructure. After a successful demonstration of 

Smart Grid technology in northwest Oklahoma City during 2008, OG&E decided to 

expand Smart Grid by deploying the technology in the Norman, Oklahoma service area. 

The results of that pilot program convinced us of the merits of expanding our Smart Grid 

project system-wide. On July 1, 2010, the Oklahoma Corporation Commission issued an 

order approving the Company's plan to move forward with deployment of Smart Grid in 

Oklahoma.l This past spring, the Arkansas Public Service Commission authorized 

OG&E to implement Smart Grid in Arkansas. As of the end of January 2012, I am 

pleased to report that OG&E has over 545,000 smart meters installed or just over 68% of 

the system-wide deployment of smart meters. With the installation of the smart meter 

technology, the Company is now able to propose additional tariff options, along with an 

enhanced suite of on-line customer tools, to further empower customers to manage their 

electric bills. The early results from our Smart Grid project have been very encouraging. 

Based on two consumer behavior studies, residential customers are now shifting as much 

as 1.9 kW of demand (per participant) from the peak near 5:00 PM to off system peak 

during the summer. These same customers saved around $200 on average for the year. 

OG&E's goal is to reduce its capacity needs by approximately 500 MW by 2020 

through its DSM and energy efficiency programs. 

OG&E's system-wide Smart Grid program was financed on a cost share basis with OG&E and its 

customers paying for 64.5% and the balance defrayed through a $130 million federal grant from DOE, 

which was made subject to the finalization of all administrative and contractna1 requirements, including 

completion of deployment by December, 2012. OG&E was the only investor-owned electric utility in 

Oklahoma and Arkansas that received a DOE grant. 

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C. OG&E and Fuel: 

OG&E's electricity rates are well below the national average. OG&E's low 

electricity rates are largely attributable to the favorable cost implications of having a 

diverse generation portfolio. As stated above, OG&E's current generation capacity mix 

is approximately 52% natural gas-fired, 38% coal-fired, 10% wind power. This diverse 

fuel mix allows OG&E to maintain electricity rates well below the national average 

because it shields customers from being too vulnerable to the price of anyone partiCUlar 

fuel. For example, natural gas prices have recently dropped to very low levels. 

However, there was a time in the recent past when natural gas prices were extremely high 

and subject to high volatility. OG&E's generation mix helped our customers through that 

volatile period and ensured that rates remained stable. 

Coal is both abundant domestically and historically cheaper than natural gas. 

Over the past five years, OG&E's average delivered price of coal has been $1.54 

($/MMBtu), while the average delivered price of natural gas has been $5.51 ($lMMBtu). 

In the past few months, OG&E's delivered price of natural gas has dropped, reaching 

approximately $3.82 ($IMMBtu) in January 2012, and is still above the historic price of 

coal. Having a diverse fuel mix has allowed customers to benefit from this differential in 

fuel costs. While approximately 38 percent of our generation capacity is from coal-fired 

generating units, those coal units produce 60 percent of the energy, with natural gas 

largely used for the balance of base load generation and for peaking demand. We use low 

sulfur Powder River Basin coal which has kept both our emissions and our electricity 

rates to our customers low, which in tum has contributed very significantly to 

Oklahoma's economic viability and competitiveness. As a major gas producing state, 

Oklahoma's economy, and I might add, OG&E's sister company, Enogex, benefit from 

higher prices for natural gas. However, if natural gas prices rise, the price advantage of 

coal for use in generating electricity grows. At the same time, continued use of coal 

brings with it significant challenges with regard to compliance with pending EPA rules. 

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II. Specific Challenges from Pending EPA Rules 

As discussed above, OG&E has an obligation to serve and provides reliable 

electric power at the lowest reasonable cost to our customers in an environmentally 

responsible manner. OG&E's efforts to increase wind farm development and an 

increased emphasis on demand side management and energy efficiency programs are 

examples of OG&E's commitment to reducing reliance on fossil fuel generation and 

reducing costs to customers. However, the recent suite of EPA rules constitutes a 

challenge to OG&E's efforts because they effectively force OG&E to make immediate 

or, at the least, very near term choices regarding its generation fleet. 

With regard to meeting S02 emission limits, OG&E will be forced to choose 

whether to (i) install costly scrubber technology on its coal plants (all of which are still 

only halfWay through their useful lives) or (ii) discontinue coal generation from units that 

still have much life in them and move closer to a primarily all natural gas fleet. I 

emphasize that this is not a set of choices in which one alternative is costly and the other 

is not. Each of these options alone is extremely expensive for OG&E and ultimately our 

customers. On top of these requirements for S02, other EPA rules are further 

complicating the decision by creating new emission limits for NOx, acid gases, 

particulate matter, and mercury. 

To put the cost quandary into perspective, OG&E hired leading industry 

consultants to provide cost estimates of installing scrubbers on four of OG&E's five coal 

units. The estimated capital cost is over $1 billion with an increase to annual O&M of 

between $70 and 150 million. This would translate into the largest rate increase in the 

history of the company. In July 2011, OG&E looked at the customer impact ofa scenario 

where dry scrubbers, low NOx burners and Activated Carbon Injection are all installed on 

OG&E's five coal units. The analysis showed that residential customers could see a 23 

percent increase on the average customer's monthly bill (i.e., an increase from $100 to 

$123 in the monthly bill). Also, the average monthly bill for a large industrial customer 

could increase by as much as $50,000 (which represents a 26 percent increase from the 

current average monthly bill). 

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If OG&E replaced its five coal units with natural gas generation, OG&E would 

face the capital costs of retiring, converting or replacing the coal units' baseload capacity 

and the related fuel costs stenuning from more natural gas being purchased and burned. 

In July 2011, OG&E also looked at the customer impact of a scenario where OG&E 

replaced its five coal units with natural gas generation. Using our January 2011 forecast 

of natural gas prices, OG&E estimated that such a switch to natural gas would be even 

more expensive for customers than installation of five scrubbers and would lead to 

greater vulnerability to the price volatility of natural gas. The analysis showed that 

residential customers could see a 37 percent increase on the average customer's monthly 

bill (i.e., an increase from $100 to $137 in the monthly bill). Also, the average monthly 

bill for a large industrial customer could increase by as much as $100,000 per month 

(which represents a 56 percent increase from the average monthly bill). 

As you can readily see, either of these options involves serious rate shock for 

customers and would commence an adverse ripple effect on our Oklahoma economy. In 

our view, it is incumbent on us to work with the Oklahoma Department of Environmental 

Quality (HDEQ") and the EPA to develop a more common sense solution that avoids such 

rate shock for customers, while achieving the objectives of the major EPA rules. 

A. Regional Haze Rule 

On July 6, 2005, the EPA issued its final Regional Haze Rule. This Rule requires 

that states submit state implementation plans ("SIPs") to address regional haze visibility 

impairment in 156 federally-protected parks and wildemess areas. Among other things, 

the EPA regulations require states over approximately a 50 year period to eliminate manmade impacts on visibility in federally protected parks and wildemess areas around the 

United States. 

The Regional Haze Rule includes a requirement that certain large stationary 

sources install Best Available Retrofit Technology ("BART") to control regulated 

emissions such as S02 and NOx. Sources that may be required to install BART are those 

sources; (i) that were put in place between August 7, 1962 and August 7, ]977; (ii) that 

have the potential to emit 250 tons or more of a visibility-impairing air pollutant; and (iii) 

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whose operations fall within one or more of twenty-six listed categories, including 

electric power generation. OG&E has several generating units that are "BART-eligible" 

under the regional haze regulations, including four coal-fired units and three gas-fired 

units. 

In January 2010, OG&E and the DEQ entered into a regional haze agreement to 

address the requirement of BART at OG&E's Sooner, Muskogee and Seminole 

Generating Stations and finalized the Oklahoma SIP. The state's solution was to require 

OG&E to continue to bum low sulfur coal because the installation of scrubbers was not 

cost effective for controlling S02 emissions. In the Oklahoma SIP, the DEQ recognized 

that the cost for dry scrubbers is too high and the benefit too low. If EPA disagreed with 

that BART determination, the State SIP's solution would give OG&E the option to either 

(i) achieve S02 emission reductions consistent with the installation of 4 scrubbers by 

2018; or (ii) achieve S02 emission reductions consistent with 2 scrubbers and 2 complete 

conversions to natural gas by 2026. This flexible Oklahoma solution provided 

optionality to OG&E, minimized the impact on customers and the state economy, and 

retained increased natural gas use as an alternative. Most importantly, this solution met 

the visibility improvement goals of the Regional Haze rule. 

In December 2011, EPA disapproved the portions of Oklahoma's regional haze 

SIP that address BART for S02 and issued a Federal Implementation Plan ("FIP") that 

directs OG&E to meet S02 emission limits within 5 years by either installing scrubbers 

on four coal units or switching that generation capacity to natural gas. 

The portion of the Oklahoma SIP approved by the EPA involves installation of 

low NOx burners on four OG&E eoal-fired units and three OG&E gas-fired units to 

control the NOx emissions. OG&E is in the process of moving forward with such 

installations, but we do so recognizing a considerable element of uncertainty since it 

remains to be seen whether the permitting process for such retrofits or other coming rules 

could implicate even greater controls. Also, the timing for the installation of the low 

NOx burners is five years under Regional Haze, while other rules may require an 

acceleration on the timeline. 

OG&E is studying the feasibility and cost-effectiveness of other potential ways to 

achieve the mandated S02 emission reductions under the Regional Haze FIP, including 

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installation of Dry Sorbent Injection ("DSI") on its coal units. Since this is relatively new 

teclmology and is not currently being used on a widespread basis on larger units, a 

substantial amount of testing will be required. Based on current infonnation, OG&E 

believes that DSI may be significantly less expensive to install and operate than 

scrubbers. OG&E continues to evaluate this DSI teclmology, but significant operational 

questions remain unanswered. It could be that OSI leads to additional controls that 

eliminate any cost savings, but it is not clear at this point. OG&E needs additional time 

to evaluate whether a lower cost altemative such as OSI would be effective, but the 

compliance deadlines from EPA and the lead-time needed to procure, penoit and 

construct scrubbers significantly hampers our ability to consider altemative solutions that 

may prove to be reasonable. 

OG&E is preparing to appeal this final decision on the S02 emission limits by 

EPA, but in the meantime, OG&E must face the prospect of complying with this very 

expensive rule. 

B. Maximum Achievable Control TechnologylHAPS (MACT) 

On December 16, 2011, the EPA signed the Maximum Achievable Control 

Teclmology (~CT) regulations governing emissions of certain hazardous air pollutants 

from electric generating units. The final rule includes numerical standards for particulate 

matter (as a surrogate for toxic metals), hydrogen chloride and mercury emissions from 

coal-fired boilers. Compliance is required within three years after the effective date of 

the rule with a possibility of a one year extension. The effective date of the rule has not 

been established, but it is expected to be during the second quarter of 2012. The final 

rule could be appealed after it is published. OG&E cannot predict the outcome of any 

such appeals and is evaluating the regulations and what emission controls would be 

necessary to meet the standards and the associated costs, which could be significant. 

OG&E believes that both scrubbers and OSI could be viable teclmologies for 

meeting the hydrogen chloride limits contained in the rule. However, as stated above, 

additional testing is required for OSI and the three-year clock (with possible one 

additional year extension of the compliance deadline) essentially limits OG&E's ability 

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to understand the DSI technology before making a decision on whether or not to commit 

to that technology for compliance. Also, the cost of DSI varies widely depending on 

whether DSI leads to other emission level increases that would require additional and 

expensive control technology. In addition to DSI to meet the MACT requirements, 

OG&E believes that Activated Carbon Injection (UACr') is necessary to meet the 

mercury limits contained in the rule. ACI would cost approximately $20 million to 

install on our five coal-fired units, plus significant annual O&M costs. However,OG&E 

would not want to invest those millions on its coal units if other regulations such as those 

identified elsewhere in my testimony are going to push the Company toward retirement 

or conversion of those units in the near future. 

C. Cross State Air Pollution Rule 

On July 7, 2011, the EPA finalized its Cross-State Air Pollution Rule to replace 

the fonner Clean Air Interstate Rule that was remanded by a Federal court as a result of 

legal challenges. The final rule requires 27 states to reduce power plant emissions that 

contribute to ozone and particulate matter pollution in other states. On December 27, 

2011, the EPA published a supplemental rule which makes six additional states, including 

Oklahoma, subject to the Cross-State Air Pollution Rule for NOx emissions during the 

ozone-season from May 1 through September 30. Under the rule, OG&E would be 

required to reduce ozone-season NOx emissions from its electrical generating units 

within the state beginning in 2012. The Cross-State Air Pollution Rule is currently being 

challenged in court by numerous states (including Oklahoma) and power generators. On 

December 30, 2011, the U.S. Court of Appeals issued a stay of the rule and requested 

proposals for accelerated briefing to allow the merits of the case to be heard by April 

2012. Just recently, EPA has stated that the supplemental rule applicable to Oklahoma is 

included in the stay of the main CSAPR rule. 

OG&E is looking at a possible appeal of the supplemental rule and specifically, 

Oklahoma's inclusion in such rule. For example, the basis for OG&E's inclusion in the 

supplemental rule is based on air emission modeling that shows Oklahoma sources 

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impacting a single county in Michigan; a county that actually is currently in attainment 

with the ambient air quality standards. 

OG&E cannot predict the outcome of such challenges and is evaluating what 

emission controls would be necessary to meet the proposed standards, its ability to 

comply with the standards in the timeframe proposed by the EPA and the associated 

costs, which could be significant. 

If the rules stand, OG&E believes that compliance would be enormously difficult 

within the timelines proposed by EPA. Compliance would likely require accelerating the 

installation oflow NOx burners and uneconomic dispatch of our generating units during 

peak periods coupled with reliance on large volumes of purchased power or purchased 

allowances (assuming that allowances are available for purchase). 

D. Other Regulatory Issues 

In addition, OG&E is studying the impacts on the company and our customers of 

various other pending EPA regulations, including changes to the National Ambient Air 

Quality Standards and potential Greenhouse Gas regulations. Moreover, there a number 

of non-air emission regulations that complicate the decisions discussed above. 

For example, with respect to cooling water intake structures, Section 316(b) of the 

Federal Clean Water Act requires that their location, design, construction and capacity 

reflect the ''best available technology" for minimizing their adverse environmental impact 

via the impingement and entrainment of aquatic organisms. In March 2011, the EPA 

proposed rules to implement Section 316(b) and, on August 18, 2011, OG&E filed 

comments with the EPA on the proposed rules. OG&E anticipates that the proposed 

rules will be finalized in mid-2012. In the interim, the state of Oklahoma requires OG&E 

to implement best management practices related to the operation and maintenance of its 

existing cooling water intake structures as a condition of renewing its discharge permits. 

Once the EPA promulgates the final rules, OG&E may incur additional capital and/or 

operating costs to comply with them. The costs of complying with the final water intake 

standards are not currently determinable, but could be significant. When these rules are 

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finalized, OG&E will again have to choose whether to invest new capital in existing units 

whose lives and continued use could be significantly affected by other rules. 

Another example of a proposed EPA rule is the proposed rule entitled "Hazardous 

Waste Management System: Identification and Listing of Special Wastes; Disposal of 

Coal Combustion Residuals ["CCRs"] From Electric Utilities." The Agency is seeking to 

establish federal regulations designed specifically for the management ofCCRs generated 

by the electric power sector (i.e., electric utilities and independent power producers) that 

utilize coal to generate electricity. The two primary regulatory options on which the 

Agency seeks comment include (i) the regulation of CCRs destined for disposal in 

landfills or surface impoundments as a listed "special waste" under the hazardous waste 

regulations of Subtitle C of the Resource Conservation and Recovery Act ("RCRAn) and 

(ii) the regulation of CCRs destined for disposal in landfills or surface impoundments as a 

non-hazardous solid waste under Subtitle D of RCRA. The Agency is also seeking 

comment regarding a number of variants under each option, including the Subtitle D 

"Prime" option which is identical to the Subtitle D option except that it provides for 

existing CCR surface impoundments to operate for the remainder of their useful lives 

without having to retrofit with composite liners and leachate collection systems. On 

November 19, 2010, OG&E submitted comments on the proposed rule. OG&E is 

currently evaluating how this proposed rule, if finalized, would impact OG&E's existing 

and future units. 

m. OG&E's Assessment of the regulatory cUmate In the aftermath of 

Executive Order 13563 

When OG&E first looked at the President's Executive Order 13563 over a year 

ago on January 18, 20 II, we were encouraged that the direction being given to EPA and 

the other federal agencies would have a welcome, therapeutic impact in improving our 

ability to meet the legitimate environmental objectives that Oklahomans and Americans 

in general desire. But, when we observe the regulatory landscape that we are facing in 

2012 in terms of the gamut of EPA's rulemakings, OG&E does not sec EPA successfully 

balancing the Executive Order's laudable objectives of protecting public health and 

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safety and environmental quality on the one hand with promotion of economic growth, 

innovation, competitiveness and job creation. OG&E does not see EPA improving its 

processes by using the best available science or by truly being interested in allowing for 

meaningful public participation and an open exchange of ideas as called for in the 

Executive Order. OG&E most certainly does not see EPA's regulatory approach as 

promoting predictability and reducing uncertainty - if anything the compliance timelines 

for multiple rules, final and pending, that I have mentioned have acted to significantly 

increase unpredictability and uncertainty for utility investment. And OG&E does not 

find that EPA has taken into sufficient account the comparative benefits and cost of its 

regulations from either a quantitative or qualitative perspective. 

For example, OG&E does not view the EPA's rejection of Oklahoma's regional 

haze SIP as being consistent with the Executive Order and achieving the stated 

environmental results on a more cost-effective or creative basis. Also, EPA's decision to 

include Oklahoma in CSAPR based upon controversial modeling assumptions that show 

an impact on a lone county in upstate Michigan does not strike us as use of best science. 

We cannot conclude that EPA is promoting economic efficiency, predictability of 

investment and competition by insisting on an unrealistic time line for compliance with 

UMACT. As embodied in the Executive Order, we expect the values of costeffectiveness, good science, fair evaluation of alternatives and the like to be essential 

elements of how EPA conducts its critical mission. 

It is imperative that the subcommittee understand that we are not wrestling with 

compliance with EPA's regulations in a vacuum. To the contrary, utilities such as OG&E 

are dealing every single day with the demands for all-time high investments in new 

transmission and distribution, renewable generation, efficiency and demand side 

improvements. These things all produce capital demands on utilities and their ratepayers 

at unprecedented levels and in a capital market which remains very challenging. In our 

case, OG&E's current capitalization is $5.5 billion and its annual operating revenue is 

$3.9 billion. Add to that an additional $1 billion (or more) in scrubbers that EPA would 

require us to install just to comply with the regional haze FIP, and you can readily see the 

consequences. Such scrubber investment would be the largest single capital investment 

in OG&E's history, increase our existing capital commitments by 30 percent, and lead to 

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dramatic increases in customer rates. A mandate to invest over $1 billion would make it 

difficult for OG&E to continue focusing on things like wind energy development, and 

energy efficiency and demand side management and will make it more difficult to invest 

in the base level commitments for maintaining and operating its business. 

A switch to natural gas is similarly expensive because of stranded costs, pipeline 

construction costs, fuel cost fluctuations, and other capital costs for new or retrofitted 

gas-fired units. From a customer's perspective, the cost of those capital investments and 

a likely higher fuel cost would together increase the price customers pay for electricity in 

the years to come. 

OG&E's competitive electric rates are a critical contributor to Oklahoma's 

economic welfare and competitiveness. Jobs in Oklahoma depend on our ability to 

provide the energy and energy infrastructure to power the state's economy. We cannot 

afford to be cavalier with our customers' money, or with the impact such rate increases 

would have on our state's economy, jobs and competitive viability. Ifwe can achieve the 

same desired environmental results at a lower cost - which we think was President 

Obama's laudable intention underlying Executive Order 13563 - we believe we have an 

obligation to do so. That is the nature of our current regional haze dispute with the EPA. 

OG&E and all the other interests in the state working with our state agencies came up 

with a SIP that improved visibility, but did not necessarily entail the expense of 

scrubbers. 

The timetables for implementing the various rules are also creating uncertainty 

because the rules are not synchronized and harmonized. We can do most anything EPA 

rules require in a more economically rational manner if we are given enough time to do 

so. But, the overlay of Regional Haze mandates with potentially different technology 

demands and related compliance schedules for such items as UMACf, CSAPR, and the 

soon to be seen greenhouse gas regulations magnify our unpredictability problem 

significantly. For an industry that makes strategic plans covering 10 to 20 year periods, a 

three to four year timetable to make these very important decisions on retrofitting or 

conversion seems very strict. 

The strict and unpredictable timetables also could affect the reliability of service. 

Because almost every utility in the various regions is impacted by some or all of these 

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rules, there needs to be coordination to avoid major regional reliability problems. Not 

only does maintaining reliability take great care and coordination among many interested 

parties, it is likely to require time to plan for coordinated construction of emission control 

technology and the installation of needed transmission system upgrades. These 

considerations alone could jeopardize utilities' ability to meet EPA's compliance 

deadlines, not to mention creating significant costs that will be passed on to utility 

customers. 

We want and need - and frankly our customers deserve - to be able to see how all 

these regulatory obligations will come together in a single regulatory matrix. We need to 

see all the new rules and evaluate how they relate to one another holistically. This will 

allow us to create a coordinated, rational plan for selecting compliance strategies from the 

range of options in a way that makes sense to our state economies, our ratepayers, and the 

environment. Once we determine what can work and at what cost, we need time to move 

those decisions through our state public service commissions, which have a rightful and 

primary role to play in all of this. We also need to coordinate with our Regional 

Transmission Organizations and the North American Electric Reliability Corporation 

(''NERC'') to ensure limited reliability concerns. 

EPA seems to underestimate the significant role that state public service 

commissions play in our industry, particularly in those states, like Oklahoma, with 

vertically integrated utilities. Our Oklahoma Corporation Commission and the Arkansas 

Public Service Commission playa legitimately primary role in reviewing all our capital 

investments for prudency and for rate impacts. And nothing we do as a utility - literally 

nothing - is done without extremely careful consideration for what our capital 

investments may mean for our rates and for the economic impact of those rates on our 

customers and our state economies. The point is that the uncertainty that EPA's 

rulernakings generate only prove more frustrating for us when we know we must be able 

to justify our compliance decisions, the rate impacts, and the prudency of our actions. 

IV. Conclusion 

OG&E wants to thank this subcommittee for allowing us to present our views and 

provide our perspective. We would hope that the result of the hearing today would be for 

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the Subcommittee to work together on a bi-partisan basis to see the objectives of 

President Obama's Executive Order 13563 become elemental drivers of all that EPA 

does. We are pleased to provide any further infonnation that the subcommittee may think 

is useful. 

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Mr. STEARNS. I thank the gentleman. 

Mr. Luoto, welcome, for 5 minutes. 

TESTIMONY OF ROBERT A. LUOTO 

Mr. LUOTO. Chairman Stearns, distinguished members of the 

Subcommittee on Oversight and Investigations, my name is Bob 

Luoto, and I am a third-generation lifelong professional logger. My 

wife Betsy, son Kirk, and I own and operate Cross and Crown, 

which is based out of Carlton, Oregon. During my almost 38 years 

as a professional logger, I have proudly served as a president and 

board member of both the Associated Oregon Loggers and the 

American Loggers Council. The Associated Oregon Loggers has 

named me Logger of the Year and my wife Betsy was named 

Woman of the Year for community and philanthropic leadership. 

Currently, I serve as board chairman for the Sustainable Forestry 

Initiative. 

I consider myself very blessed to have the opportunity to share 

with you personal thoughts on the enormous, increasing uncertainty created by our regulatory system. Despite the stated intent 

of Executive Order 13563, it is contributing to the collapse of the 

professional logging community in the United States. 

Our Nation’s forest wealth supports, among other things, an industry critical to both our national economy, as well as hundreds 

of rural communities like the one I call home in Western Oregon. 

The forestry sector in the United States is the world’s largest, supporting almost 1.1 million full-time jobs and generating over $108 

billion to our national economy annually. 

I am so proud of my family’s history and business to contribute 

to the world’s greatest forestry country. Currently, we employ 40 

men and women and have an annual payroll of almost $1.5 million, 

which includes comprehensive health benefits, retirement 401K, 

and vacation pay. We have two trained foresters on staff and all 

our employees have been trained in Best Management Practices by 

the Oregon Professional Loggers Master Logger Program, which 

was created to satisfy the strict environmental standards set by the 

Sustainable Forestry Initiative. 

However, as we look closer at the forestry sector, we see that the 

most critical component, the men and women who actually harvest 

and transport the wood to be used by the woods products industry 

may soon be lost forever. From 2001 to 2011, the United States logging workforce has declined from 73,500 to 48,400, a loss of almost 

25,000 or 35 percent. Further, the logging workforce has lost jobs 

each and every year between 2001 and 2011. 

My home State of Oregon has suffered greatly as well. From 

2001 to 2010 we have also lost 33 percent of our logging jobs. Our 

company has had to lay off 10 people at the beginning of 2008 and 

only recently have we been able to hire some back. However, we 

have been having trouble hiring young men and women, even those 

from families of professional loggers because they are choosing not 

to enter or reenter our profession in light of the legitimate concern 

for the future of the industry. We see clear proof of this in recent 

significant aging of the logging workforce. In 2001, for instance, the 

average workforce was 40 years and a half; in 2010, it is 46 years 

old. 

79 

When we think of all the causes of the collapse of the professional loggers in the United States, the one that I feel tremendously, the volatility that is created by the regulatory system, is 

one of the most significant. You need to look no further than the 

tremendous uncertainty created for professional loggers from the 

recent 9th Circuit Court of Appeals decision that invalidated the 

EPA’s Silvicultural Rule. This rule, which has been in effect for almost as long as I have been a logger, excludes silvicultural activities such as construction of logging roads from certain permitting 

requirements under the Clean Water Act. The EPA adopted this 

exclusion because professional loggers like me are trained to use 

best management practices and otherwise comply with State regulations and the Clean Water Act and prevent water pollution. 

Since the construction of logging roads is essential to most 

loggers’ businesses, many are concerned about what form and cost 

this completely new permitting requirement will be, as well as how 

this may otherwise affect us and allow other people to try to interfere with our businesses. If we can’t build roads, our logging operations will come to a halt and eliminate not only our company and 

jobs but the companies that rely on us for our business. 

As I read Executive Order 13563, I feel the EPA has been ordered to quickly resolve the uncertainty created by the invalidation 

of the Silvicultural Rule. So Executive Order 13563 states, ‘‘some 

sectors and industries face a significant number of regulatory requirements, some of which may be redundant and consistent or 

overlapping.’’ In light of this instruction, the EPA should be working with Congress today to pass the Silvicultural Regulatory Consistency Act, H.R. 2541, and amend the Clean Water Act to explicitly permit the long-standing Silvicultural Rule. 

And I would like to thank Representative Sue Myrick and Mike 

Ross, esteemed members of this subcommittee, for their sponsorship of this Act. Make no mistake, the invalidation of the Silvicultural Rule is only one of the many sources of regulatory uncertainty facing our professional loggers. Further sources of regulatory 

uncertainty could be how the EPA will treat bioenergy from woody 

biomass for the purpose of greenhouse gas emissions. In addition, 

there is no end in sight to the litigation of our national forests in 

our State, which has had a huge impact on my home State of Oregon. Oregon is made up over 55 percent National Forest land and 

we cannot reasonably even use these to help our lives in our communities. Many Oregon counties are now facing enormous budget 

shortfalls, increased poverty, and related social problems, and this 

has taken a toll not only on the professional loggers and the forestry sector but on our most important resource, our children. 

In conclusion, I would like to make it very clear that I agree with 

the core principles of 13563, but in order for this regulatory system 

to meet all of these goals, the system must emphasize long-term 

certainty. That is very crucial to this whole thing. 

On behalf of my wife Betsy, my son Kirk, my daughter Marisa, 

my daughter-in-law Jenna, son-in-law Jesse, and my grandchildren 

Liam, Finn, Landon, and Lydia, I would like to thank you for hearing—I got them all in there—— 

Mr. STEARNS. I think you did. 

80 

Mr. LUOTO [continuing]. Bit of a mouthful—I will take questions 

later on. Thank you. 

[The prepared statement of Mr. Luoto follows:] 

81 


76395.081

Summary of Testimony of Robert A. Luoto 

Before the Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

Hearing on "Regulatory Reform Series #8 - Private Sector Views of the 

Regulatory Climate One Year after Executive Order 13563" 

February 16,2012 

• The enormous and increasing uncertainty created by our regulatory system is 

contributing to the collapse of professional logging in the United States. 

• The United States is the world's fourth most forested country and has the world's 

largest forestry sector - it supports almost 1.1 million full-time jobs and adds 

$108 billion to our economy annually. 

• The most critical component of the forestry sector - our professional loggers who 

harvest and transport the wood needed by the sector - is also the most at risk. 

• From 2001 through 2011, the professional logging workforce in the United States 

has declined from 73,500 to 48,400 - a loss of25, I 00 jobs or 35 percent. 

• From 200 I through 2010, the median age of the professional logger increased 

from 40.5 to 46 years of age. 

• Key sources of regulatory uncertainty that harm professional loggers include the 

invalidation of the "Silvicultural Rule:' the treatment of forest bioenergy for 

greenhouse gas regulations, and the prevalence of lawsuits to prevent harvesting 

timber from Federal lands. 
82 


76395.082

Testimony of Robert A. Luoto 

Before the Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

Hearing on "Regulatory Reform Series #8 - Private Sector Views of the 

Regulatory Climate One Year after Executive Order 13563" 

February 16,2012 

Chairman Stearns and distinguished Members of the Subcommittee on Oversight 

and Invcstigations, my name is Bob Luoto, and I am a third-generation and lifelong 

professional logger. My wife, Betsy, son, Kirk, and I own and operate Cross and Crown, 

Inc., a commercial logging business based out of Carlton, Oregon. During my almost 38 

years as a professional logger, I have proudly served as a President and Board Member 

for both the Associated Oregon Loggers and the American Loggers Council. The 

Associated Oregon Loggers has named me Logger of the Year and also named Betsy 

Woman of the Year for her community and philanthropic leadership. Currently, I serve 

as the Board Chairman for the Sustainable Forestry Initiative. In all of our roles, Betsy, 

Kirk, and I have tirelessly advocated on behalf of professional loggers and their 

communities. and I consider myself very blessed to have the opportunity to share with 

you my personal thoughts on how the enormous and increasing uncertainty created by 

our regulatory system - despite the stated intent of Executive Order 13563 - is 

contributing to the collapse of professional logging in the United States. 

In order for us to appreciate the impact of the regulatory system upon our 

professional loggers, we must first appreciate our forests and what they provide us. 

According to the United Nations Food and Agriculture Organization and its'2011 report 

2 
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76395.083

entitled, State of the World's Forests, the United States is the world's fourth most 

forested country with over 304 million hectares or 750 million acres of forest area. 

Further, over the last decade, our forests have grown by more than 380,000 heetares or 

938,000 acres. 

Our Nation's forest wealth supports, among other things, an industry critical to 

both our national economy, as well as hundreds of rural forestry communities like the one 

I call home in western Oregon. According to the United Nations Food and Agriculture 

Organization, the forestry sector in the United States is the world's largest, supporting 

almost 1.1 million full-time jobs and generating more than $108 billion dollars for our 

economy annually. 

I am so proud that my family's history and business eontribute to the world's 

greatest forestry country. Currently, we employ 40 men and women and have an annual 

payroll of almost one and a half million dollars, which includes a comprehensive health 

insurance package, in addition to 40 I-K retirement plans, and vacation pay. We have two 

trained foresters on staft~ and all our employees have been trained in Best Management 

Practices by the Oregon Professional Loggers Master Logger Program, which was 

created to satisfy the strict environmental standards set by the Sustainable Forestry 

Initiative. We also have nine log trucks and other support trucks that have over a million 

miles travelled without an accident or serious violation. 

However, as we look eloser at the forestry sector, we see that its most critical 

component - the men and women who actually harvest and transport the wood to be used 

by the wood produets industry - may soon be lost forever. According the Bureau of 

3 
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76395.084

Labor Statistics Current Employment Statistics Survey, from 200 I through 20 II the 

United States logging workforce declined from 73,500 to 48,400 - a loss of almost 

25, I 00 jobs or 35 percent. Further, the logging workforce has lost jobs each and every 

year from 200 I through 20 I I. 

My home state of Oregon has suffered greatly as well. According to the Bureau of 

Labor Statistics and Department of Labor Quarterly Census olEmployment and Wages, 

from 200 I through 20 I 0 the Oregon logging workforce declined from 7,528 to 5,030 - a 

loss of almost 2,498 jobs or 33 percent. Our company had to layoff 1 ° people at the 

beginning of2008, and only recently have we been able to hire some back. However, we 

are having trouble hiring young men and women - even those from the families of 

professional loggers - because they are choosing not to enter or reenter the logging 

workforce in light of their legitimate concerns about the future of forestry. We see clear 

proof of this in the recent significant aging of the logging workforce. According to the 

Bureau of Labor Statistics and Bureau of the Census Current Population Survey, in 200 I, 

the median age of professional loggers in the United States was 40.5 years of age. By 

20 10, the median age had increased to 46 years of age. This increase of 5.5 years was 

more than double the increase seen over that same period for all industries combined. 

When I think of all of the causes for the collapse of professional loggers in the 

United States, I feel that the tremendous volatility and uncertainty created by our 

regulatory system is one of the most significant. You need look no further than the 

tremendous uncertainty created for our professional loggers from the recent decision by 

the Ninth Circuit Court of Appeals in NEDC v. Brown, which invalidated the United 

States Environmental Protection Agency's (EPA) "Silvicultural Rule." This rule4 
85 


76395.085

which has been in effect for almost as long as I have been a professional logger -

excluded silviculture activities such as the construction of logging roads from certain 

permitting requirements under the Clean Water Act. The EPA adopted this exclusion 

because professional loggers, like me, are trained to use Best Management Practices and 

otherwise comply with many state regulation and guidelines to protect against water 

pollution. Since the construction of logging roads is essential to most professional 

loggers' businesses, many are concerned about the form and cost of these completely new 

permitting requirements, as well as how they may otherwise be used by others to interfere 

with their logging operations. Logging roads are the lifeblood of our operation. They 

provide access into the forest so that we can harvest the timber and get it to the mills. If 

we can't build roads, our logging operations will come to a halt and eliminate our 

company, its jobs, and the many other companies that rely upon us for their business. 

As I read Executive Order 13563, I feel that the EPA has been ordered to quickly 

resolve the uncertainty created by the invalidation of its Silvicultural Rule. For example, 

Executive Order 13563 states, "Some sectors and industries face a significant number of 

regulatory requirements, some of which may be redundant, inconsistent, or overlapping. 

... Where relevant, feasible, and consistent with regulatory o~jectives, and to the extent 

permitted by law, each agency shall identify and consider regulatory approaches that 

reduce burdens and maintain flexibility and freedom of choice for the public." In light of 

this instruction, EPA should already be working with Congress to amend the Clean Water 

Act to make its own Silvicultural Rule explicitly permitted within the statute since Best 

Management Practices and state regulations and guidelines are already in place. While 

Congress recently delayed imposition of the new permitting requirements for this fiscal 

5 
86 


76395.086

year, to my knowledge the EPA has not asked Congress to resolve this issue once and for 

all. While appreciated, the one-year delay does not removc thc tcrrible unccrtainty we 

face, and I would respectfully ask that Congress schedule hearings immediately involving 

the EPA and other forestry stakeholders to pass the Silviculture Regulatory Consistency 

Act (HR 2541). I would like to thank Representatives Sue Myrick and Mike Ross, 

esteemed Members of this Subcommittee, for their sponsorship of this Act. 

Make no mistake, the invalidation of the Silvicultural Rule is only one of many 

sources of regulatory uncertainty facing our professional loggers. Further sources of 

regulatory uncertainty include how the EPA will choose to treat bioenergy from woody 

biomass for the purpose of greenhouse gas emissions regulations. Despite the promise 

that woody biomass holds for rural forestry eommunities that need more jobs, clean 

energy, and improved forest management, what professional logger or investor in his or 

her right mind would invest in new employees, facilities, or equipment to harvest and use 

woody biomass for energy without knowing how the EPA will ehoose to treat it after it 

completes its study in three years? 

In addition, there is no end in sight for the uncertainty created by countless 

lawsuits that prevent the harvesting of timber from Federal lands. We are now managing 

our Federal lands by crisis and allowing infestations and fire to ravage our forests and 

destroy homes and communities, rather than having the most capable and professional 

loggers in the world sustainably manage the forests, create jobs, and pay taxes. The 

impact of this on my home State has been severe - Oregon is made up of over 55 percent 

National Forest land that cannot be used reasonably to improve the lives of those in our 

local communities, and many of Oregon's counties are now facing enormous budget 

6 
87 


76395.087

shortfalls, increasing poverty rates, and related social problems. This type ofland 

management by over-regulation and litigation is therefore taking its toll on not only 

professional loggers and the forestry sector, but on all of our most important resource 

our children. 

In conclusion, I would like to make very clear that I agree with the core principle 

set forth in Executive Order 13563 - "Our regulatory system must protect public health, 

welfare, safety, and our environment while promoting economic growth, innovation, 

competitiveness, and job creation." In order of our regulatory system to meet all of these 

goals, the system must emphasize long-term certainty for those affected by it. The 

regulatory system today creates uncertainty through numerous and ever-changing 

regulations, and those limited few who know how to use and access this regulatory 

system take advantage of the uncertainty as an additional means to restrict behavior - of 

professional loggers as well as others testifying today. 

On behalf of my wife Betsy, son Kirk, daughter Marisa, daughter in-law Jenna, 

son in-law Jesse, and grandchildren Liam, Finn, Landon, and Lydia, I would like to thank 

you sincerely for allowing me to share my concerns about the future of professional 

logging in the United States. I am happy to answer any questions that you have. 

7 
88 

Mr. STEARNS. I think you forgot your dog. 

Mr. LUOTO. I did. Yes. But I will get it in there later. 

Mr. STEARNS. Dr. Mitchell, we want to recognize you and welcome you for your 5 minutes. 

TESTIMONY OF MARK A. MITCHELL 

Mr. MITCHELL. Thank you. Good morning, Chairman Stearns 

and Ranking Member DeGette and members of the subcommittee. 

My name is Dr. Mark Mitchell and I am a public health physician 

and I focus on environmental health, and I am also co-chair of the 

Environmental Health Task Force of the National Medical Association, which is representing over 40,000 African American physicians and their patients. I am here to testify about the need for 

strong regulation to protect the public health and the health of 

workers, as well as to maintain public confidence in the safety of 

business and the abilities of government to protect the U.S. residents. 

I was previously the director of the Hartford, Connecticut, Health 

Department, and in that capacity, it became apparent to me that 

although the public health was generally improving, there were 

certain diseases and conditions that were increasing in frequency. 

Those conditions are things such as asthma, cancer, learning disability, obesity, and diabetes. I also noticed that the conditions are 

more likely to be caused by environmental factors and could lead 

to a larger part of the American population suffering major disabilities and premature death if these trends continue. This is even 

more important in African American, Latino, and low-income communities where there are greater hazardous environmental exposures, as well as greater health disparities. These environmental 

risk factors can only be reduced through local, State, national and 

international environmental regulations. 

Although environmental regulation is so important, the only 

group that I was hearing from when I was health director about 

environmental regulation was the regulated community complaining about too much regulation when it was apparent to me 

that the regulations support business by protecting their credibility 

and that there is not enough regulation to protect environmental 

health. I want to make sure that when people walk into a restaurant that they feel safe eating in that restaurant, that they 

don’t expect that they are going to get sick from eating in that restaurant, for example. 

When I talked to people in my community, they assumed that 

government would automatically have their interest in mind and 

would act in the best interest of the public to protect them. I could 

see that this was not always the case. This realization persuaded 

me to focus my career on environmental health and environmental 

justice issues as an advocate for the public. When I talk to other 

physicians both within and outside the National Medical Association about environmental health, they are often very concerned. 

They usually recognize the significant morbidity and mortality that 

they are seeing in their patients due to hazardous environmental 

exposures. And as they learned more about the environment and 

about environmental regulations, they become even more concerned 

for the health of their patients. 

89 

I was previously on a U.S. Food and Drug Administration advisory panel on blood and blood products, and there I was surprised 

at the number of foreign companies that wanted their products approved by the FDA, even though they were not looking to sell those 

products in the United States. This is because of the FDA’s reputation for protecting health. I was told that they could use their FDA 

approval as a guarantee to potential customers that their products 

are safe and effective. This is why regulation can be good for business and good for the public. 

I am also aware about products such as DES, or 

diethylstilbestrol, that were not approved by the FDA and that 

went on to cause major disability in other countries where it was 

approved. Generations of Americans were protected by the FDA’s 

prevention of this drug from coming to market and causing this 

disability. Yes, it is true that regulations need to be updated from 

time to time to keep up with changing needs, including changing 

products, technologies, and lifestyles. Ineffective regulations need 

to be dropped, effective regulations need to be modified, and new 

regulations need to be developed to meet the new situation. 

Changes in regulations take time, often longer than 1 year. 

Many businesses see the benefits of regulation and do not see 

regulation as overly intrusive on business. I work to get health protection regulations, such as chemical policy reform, developed on a 

State and national level. When I speak to businesses large and 

small about regulation, they are more often concerned about regulatory certainty and predictability than about the burden of meeting regulations. 

The question that we were asked to answer as part of this panel 

was about what businesses have seen in the past year with regard 

to the regulatory change, and regulations actually take—there is a 

slow and deliberative process to dismantling regulations, which is 

the same process as creating regulations, so I would not expect to 

see much of a change within a 1-year period. 

In conclusion, physicians are becoming more and more concerned 

about the effect of environmental exposure on health. The National 

Medical Association believes that our country needs to have strong 

health protective regulations on the local, State, and Federal levels. 

Strong regulations can keep the workforce healthy and productive, 

as well as keep healthcare costs lower. This is good for business, 

good for the workers, and good for America. 

Thank you for the opportunity to speak, Mr. Chairman, and I am 

available to answer questions after the panel is finished. 

[The prepared statement of Mr. Mitchell follows:] 

90 


76395.088

Testimony by Mark A. Mitchell M.D., MPH 

on 

Private Sector Views on the Regulatory Climate One Year After 

Executive Order 13563 

before the 

Subcommittee on Government Oversight and Investigations 

House Committee on Energy and Commerce 

February 16,2012 

Good Morning Chairman Stearns and members of the Subcommittee. My name is Dr. 

Mark Mitchell. I am a public health physician focusing on environmental health and I am 

Co-chair of the Environmental Health Task Force for the National Medical Association, 

representing over 40,000 African American Physicians and their patients. I am here to 

testify about the need for strong regulation to protect the public health and the health of 

workers as well as to maintain public confidence in the safety of business and the abilities 

of government to protect U.S. residents. 

I was previously the Director of Health for the City of Hartford. CT. In that capacity, it 

became apparent to me that although the public health was generally improving. there 

were certain diseases and conditions that were increasing in frequency-such as asthma, 

cancer, learning disabilities, obesity, and diabetes. I also noticed that these conditions are 

more likely to be caused by environmental factors and could lead to a large part of the 

American population suffering major disabilities and premature death if these trends 

continue. This is even more important in African American, Latino, and low-income 

communities where there are greater hazardous environmental exposures and health 

disparities. These environmental risk factors can only be reduced through local, national 

and international environmental regulations. 

Although environmental regulation is so important. the only group I was hearing from 

about environmental regulation was the regulated community complaining about too 

much regulation. when it was apparent to me that the regulations support business by 

protecting their credibility and that there is not enough regulation to protect 

environmental health. When I talked to people in my community. they assumed that 

government would automatically have their interest in mind and would act in the best 

interest of the public to protect them. I could see that this was not always the case. This 

realization persuaded me to focus my career on environmental health and environmental 

justice issues as an advocate for the public. 

When I talk to other physicians both within and outside the National Medical Association 

about environmental health, they are often very concerned. They usually recognize the 

significant morbidity and mortality that they are seeing in their patients due to hazardous 

environmental exposures. As they learn more about the current state of environmental 

health and environmental regulation, they become even more concerned. 
91 


76395.089

I was previously on a U.S. Food and Drug Administration advisory panel. I was 

surprised at the number of foreign companies that wanted their products approved by the 

FDA, even though they were not looking to sell those products in the U.S. This is 

because of FDA's reputation for protecting health. I was told that they could use the 

FDA approval as a guarantee to potential customers that their products are safe and 

effective. This is why regulation is good for business and good for the public. 

I am also aware about products, like thalidomide, that were not approved by FDA and 

went on to cause major disabilities in other countries where it was approved for use. 

Generations of Americans were protected by FDA's prevention of this drug from coming 

to market in the U.S. 

Yes, it is true that regulations need to be updated from time-lo-time to keep up with 

changing needs including changing products, technologies, and lifestyles. Ineffective 

regulations need to be dropped, effective regulations need to be modified and new 

regulations need to bc developed to meet new situations. Changes in regulations take 

time, often longer than one year. 

Many businesses see the benefits of regulation and do not see regulation as overly 

intrusive on business. I work (0 get health protective regulations, such as chemical policy 

reform, developed on a state and national level. When I speak to businesses large and 

small about regulation, they are more concerned about regulatory certainty and 

predictability than about the burden of meeting regulations. 

Conclusion 

In summary, physicians are becoming more and more concerned about the effect of 

environmental exposures on health. The National Medical Association believes that our 

country needs to have strong health protective regulations on the local, state and federal 

levels. Strong regulations can keep the workforce healthy and productive as well as keep 

healthcare costs lower. This is good for business, good for the workers, and good for 

America. 

Thank you for this opportunity to speak, Mr. Chairman. I am available to answer any 

questions that the committee may have. 

2 
92 

Mr. STEARNS. I thank you, Dr. Mitchell. 

Mr. Williams, you are recognized for 5 minutes. 

TESTIMONY OF HOWARD WILLIAMS 

Mr. WILLIAMS. Thank you, Chairman Stearns and Representative 

DeGette, especially thank you to the minority for courageously inviting an unrepentant conservative Republican to testify. 

Economic uncertainty is not the primary deterrent to growth and 

development in today’s business. I will repeat two comments that 

Representative DeGette made this morning in her opening remarks 

from the Sustainable Business Council. Weak demand is business 

owners’ biggest problem. Small business owners see regulations as 

a necessary part of a modern economy so long as they are fair and 

reasonable. 

I manage a division of an American-owned small multinational corporation. The division that I manage is $110 million per year, 

450 people, and we make and develop architectural building products. And clearly, these last 3 years have been the most difficult 

years and the most uncertain years from an economic standpoint. 

And while we are not oblivious to regulation, regulation has not for 

a moment stalled or stopped our capital expenditures, our market 

and new product developments. After a flat year in 2009, 2010 as 

well as 2011 rebounded with double-digit year-over-year growth. 

And in the construction sector, that growth was not mirrored by 

any other segment within the construction sector. 

Our rate of annual growth is promising and we in a thriving and 

free market economy recognize it is that thriving free market economy that self-regulates demand, supply, and price, but it does not 

uniformly or equitably self-regulate health, safety, and the environment. Entrepreneurs are free to invest, to win or lose their investments, but in the areas of health, safety, and the environment, do 

we have the right to invest what is not solely ours to risk? We debate who will pay for the healthcare, and again, we are not oblivious as a business to where that intersection is rapidly looming. 

But failing to address substantiated causation, we continue to 

amass an environmental and health debt that will be as burdensome to the future as our current economic debt is to the present. 

These are debts that only business can pay because only business 

generates capital. 

Increasingly, the causes of cancer, diseases such as autism, Parkinson’s, and other illnesses are being linked to chemicals of concern and yet we struggle to reform decades-old regulation. In the 

absence of TSCA reform, business costs are rising, not because of 

Federal regulation, but for lack of it. States are enacting their own 

chemical regulations, businesses are requiring environmental declarations revealing chemical makeup of products and materials, 

and businesses are individually investing in meeting consumer and 

business-to-business needs. A Federally harmonized chemical regulation will set and control the health and safety aspects while making business information available. 

Reduced economic regulation removes uncertainty and encourages the free market to invest and grow. With freedom comes the 

responsibility to conduct business in ways that create and sustain 

a durable economy. It is in business’ self-interest to do that. HowVerDate Aug 31 2005 14:58 Jan 02, 2013 Jkt 037690 PO 00000 Frm 00096 Fmt 6633 Sfmt 6633 F:\112-11~4\112-11~1 WAYNE
93 

ever, in the areas of health, safety, and the natural environment, 

the invisible hand of the free market does not naturally yield to the 

good of the whole. 

We conservatives will readily hold up Atlas Shrugged and we 

will point at Washington and say overreaching, overreaching, overreaching, but ultimately, the storyline in that book is as much 

about business and creating or condemning adverse, self-serving 

business interests as it is the overreach in the government. 

We have invested in the research and the capital equipment necessary to remove chemicals of concern from our products. Much of 

our recent growth is directly attributable to that work, to those investments, and to that research. Such investment would almost 

argue against regulation but differentiation by regulation is not an 

acceptable business practice. We have no right to gain at the risk 

of the health, safety, and environment of either the present or the 

future. A strong America is strong economically, physically, and 

militarily. Regulations are not generally associated in that context, 

but in the areas of health, safety, and the natural environment, 

two of the three will stand or fall and responsible regulation helps 

to ensure that they stand. 

Thank you. 

[The prepared statement of Mr. Williams follows:] 

94 


76395.071

Howard Williams' Testimony 

Regulatory Reform Series #8 - Private-Sector Views of the Regulatory Climate One Year After 

Executive Order 13563; Subcommittee on Oversight and Investigations. 

Economic uncertainty, not regulation, is the primary deterrent to business growth and 

development. 

A recent survey by the American Sustainable Business Council reveals 

• Weak demand is small business owner's biggest problem. 

• Small business owners see regulations as a necessary part of a modern economy 

and believe they can live with them if they are fair and reasonable. 

I manage an $110,000,000 division of an American owned, small multinational business 

specializing in the development and manufacture of architectural building products. 

Although the past 3 years have been some of the most uncertain times, we have continued 

with the investment strategies that have produced sustained growth for 64 years. 

Our investment decisions are made on the basis of market research and financial analysis. 

Regulation did not give us cause to question our recent investments; economic uncertainty was 

our greatest concern. 

After a flat year in 2009, our growth curve resumed and posted double digit, year-over-year 

increases in 2010 and 2011. 

Our rate of growth exceeds the annual growth of the market sector in which we operate. 

A thriving free market economy self-regulates demand, supply and price, but it does not 

uniformly, or equitably, regulate health, safety and environmental responsibility. 
95 


76395.072

Entrepreneurs are free to invest, to win or lose their investments. But in the areas of health, 

safety and the environment do we have the right to invest what is not solely ours to risk? 

We debate who will pay the healthcare bill, but spend too little time on causation. 

By failing to address substantiated causation we continue to amass a health and environmental 

debt that will be as burdensome to future generations as our national debt. 

Debts that only business can pay because only business generates capital. 

Increasingly, the cause of cancer and diseases such as Autism, Parkinson's and other illnesses 

are being linked to chemicals of concern, and yet we struggle to reform decades old legislation. 

In the absence of TSCA Reform, business costs are rising not because of federal regulation, but 

for lack of it. States are enacting their own chemical regulations. Businesses are requiring 

environmental declarations revealing the chemical make-up of products and materials. 

Businesses are individually investing in the answers to increasing consumer and Business-toBusiness demands. 

Federal harmonized chemical regulation will set and control the health and safety aspects while 

making information accessible to all businesses. 

Reduced economic regulation removes uncertainty and encourages the free market to invest 

and grow. With freedom comes the responsibility to conduct business in ways that create and 

sustain a durable and enduring economy. 

It is in business's self-interest to do so. 

However, in the areas of health, safety, and the natural environment, the invisible hand of a 

free market does not naturally yield to the good of the whole. 
96 


76395.073

Some readily hold a copy of Atlas Shrugged in one hand and point to an overreaching 

government with the other, but ignore that the storyline is equally condemning of self-serving 

business interests. 

We have invested in the research and capital equipment that has allowed us to remove 

chemicals of concern from our major product line and to begin that work in other products. 

Much of our recent growth is directly attributable to this work and we currently enjoy the high 

ground of an uneven playing field because of our investments. 

Such investment would seem to argue against regulation. 

Differentiation by regulation is not an acceptable business practice. 

We have no right to gain at the risk of the health, safety and environment of either the present 

or the future. 

A strong America is strong economically, physically and militarily. Regulation is not always 

associated with that context, but in the areas of health, safety and the natural environment two 

of the three ultimately stand or fail. Regulation helps ensure they stand. 
97 

Mr. STEARNS. I thank you. And I will start with my first questions. 

Mr. Williams, you actually believe that economic uncertainty is 

totally divorced from regulatory uncertainty? Yes or no? 

Mr. WILLIAMS. No. 

Mr. STEARNS. OK. Because, you know, if you are a business and 

you are operating a Hardee’s and you hear there is a huge amount 

of regulation, the first thing you do as an owner, operator, or 

franchisee, you say hold it, I don’t want to invest anymore capital 

until I understand what the regulatory environment is. And you 

sort of indicated in your opening statement that economic uncertainty is not tied to regulatory uncertainty. And so that is just my 

observation. 

Let me go to Mr. Luoto. You have made a very passionate opening statement. I was just struck by the fact that you said that 

there was a 33 percent decline in your business and obviously you 

are one of the persons who said when the President did his op-ed 

and he talked about his Executive Order 13563, you would say 

there was a genuine problem out there. 

Mr. LUOTO. Yes, it is obvious in what has happened to our industry. We have had litigation on National Forest, we have had litigation now on our Clean Water Act and the EPA has by the 9th Circuit. So that has really given us a huge uncertainty. 

Mr. STEARNS. Certainly, that impact from EPA, doesn’t that create an economic uncertainty in your mind? 

Mr. LUOTO. Yes. 

Mr. STEARNS. Yes. Ms. Walz, do you feel that the impressions 

you got based upon this Executive Order 13563 that the President 

issued, did he truly understand the impacts of the regulatory climate on the private sector, including small businesses? 

Ms. WALZ. I am not certain if he understood at that time of writing it, I guess, but I would say I that I have not seen any 

progress—— 

Mr. STEARNS. Right. 

Ms. WALZ [continuing]. That it has actually accelerated. We are 

seeing more regulation at a faster pace. 

Mr. STEARNS. Mr. Luoto, do you get the impression on these regulations in your businesses that these regulations—do you feel that 

they are evaluated in terms of an economic impact or are they just 

not solution-oriented but sort of almost adversarial? What is your 

feeling? 

Mr. LUOTO. You know, they are not solution-orientated really because, you know, litigation just stops everything. So there is no solution other than courts and litigation. So when we end up with 

that, we have no certainty. And to me, you know, we have got to 

have more certainty in our industry. That is why we are losing our 

people, we are losing jobs, and in Oregon especially with the National Forest, that has been a bone of contention for, you know, 25, 

30 years that we have been going back and forth on. 

Mr. STEARNS. So bottom line, this regulatory climate you have 

talked about has made it very difficult to preserve existing jobs? 

Mr. LUOTO. It has. It is—— 

Mr. STEARNS. Yes. And Ms. Walz, my question to you is since 

this last executive order, do you perceive a net improvement in the 

98 

general regulatory climate facing your business or your industry 

more broadly? 

Ms. WALZ. I do not see a net improvement. Regulations are coming out faster and more furiously. 

Mr. STEARNS. OK. Mr. Puzder, a question for you. Do you think 

the Federal or State regulators generally think about ways in 

which they can render old or non-cost-effective rules less burdensome? Does that ever occur on their mind? Removing them from 

books before they come out with new regulations? That is, do they 

go backwards and look at what is on the books already before they 

ask for new ones? 

Mr. PUZDER. We certainly haven’t seen any evidence of that. As 

I said, we had that 11-page, single-spaced, 57 categories of regulatory issues we have to comply with when we build or operate a 

fast food restaurant. And that list doesn’t get shorter; it just seems 

to get longer. 

Mr. STEARNS. You make it clear that you are not an opponent of 

Federal regulations. In fact, you write that ‘‘I believe that our country needs government regulations to advance a number of social 

goals which the unfettered market will not accomplish on its own.’’ 

What is it, then, in your view that causes certain regulations to go 

bad? 

Mr. PUZDER. I think what happens is when your job is to create 

regulations to enforce a statute that Congress has enacted, people 

do so with great vigor. And I would say the vigor over the past few 

years has been phenomenal. We are seeing very, very aggressive 

regulation where I wish we just had a little more communication 

with the business community. And you can’t always communicate 

with the associations that represent the businesses because, for example, the National Restaurant Association in our case represents 

a number of different kinds of restaurants from Morton’s 

Steakhouse to Taco Bell to Carl’s Jr. and Hardee’s, and the concerns of each of those segments is different. So if you don’t talk to 

people actually from the businesses—and I realize that there is 

maybe some resistance to people coming in here and complaining, 

which is why I tried not to complain. I mean, but there are issues 

and we think we can actually contribute to more sensible, efficient 

regulations and a regulatory structure that will accomplish the 

goals Congress wants to accomplish without damaging the business. You know, don’t treat us as the enemy. We want to help and 

we are here to help. 

Mr. STEARNS. We had a hearing on Obamacare and the waivers 

that occur and McDonald’s got a waiver, Waffle House got a waiver. Did Hardee’s apply for a waiver? 

Mr. PUZDER. We got a waiver with respect to what are called 

Mini-Med plans. These are the same things that McDonald’s and 

these other—and really everybody had to get those because if retailers didn’t get those, then part-time employees or low-level fulltime employees would have had no insurance coverage. 

Mr. STEARNS. I guess specifically your restaurants, how many 

employees of the CKE restaurants currently receive Obamacare 

waivers on the law annual limits requirement? 

Mr. PUZDER. Well, all of the employees—we have 21,000 company employees. All of the restaurant-level employees who do not 

99 

have a company-covered plan would be covered by that waiver. 

They would have the Mini-Med plan—— 

Mr. STEARNS. And if they didn’t have that waiver—— 

Mr. PUZDER. —and that number is 1,100 currently enrolled in 

those plans. 

Mr. STEARNS. And what would happen if you didn’t have that 

waiver? What would happen? 

Mr. PUZDER. Well, the insurance would go away. The insurance 

companies wouldn’t issue those policies. They have annual caps so 

there—— 

Mr. STEARNS. So wouldn’t the law, Obamacare, raise the cost of 

healthcare for you? 

Mr. PUZDER. It will raise it by 150 percent is the best estimate. 

Mr. STEARNS. So when the waivers run out, you are going to face 

a serious problem? 

Mr. PUZDER. We are going to have to figure out a way to deal 

with a 150 percent increase and a very substantial cost. 

Mr. STEARNS. I thank you. My time has expired. 

Ms. DEGETTE. Well, let me ask you a question, Mr. Puzder. Before the Affordable Healthcare Act was enacted by Congress, did 

you offer health insurance to your employees? 

Mr. PUZDER. We offer health insurance to all of our employees. 

At the lower level it is employee-paid. It is the Mini-Med plans—— 

Ms. DEGETTE. Right, so—— 

Mr. PUZDER [continuing]. Which are, I know, $38 a month. 

Ms. DEGETTE. Yes, those are like the part-time employees and 

people like that. 

Mr. PUZDER. Part-time and we cover 60 percent—— 

Ms. DEGETTE. I am sorry. I only have 5 minutes. So for your 

lower-paid employees, what is the average amount that they make 

every year? 

Mr. PUZDER. I do not know what the average amount of our 

lower-level—— 

Ms. DEGETTE. Well, what is the hourly rate? Do you have any 

idea? 

Mr. PUZDER. I can tell you how many get the minimum wage. It 

is a small percentage—— 

Ms. DEGETTE. OK, but they are the lower-paid employees. Do 

you have any idea how much those insurance policies were costing 

for those people? 

Mr. PUZDER. Well, most of them don’t get those policies. 

Ms. DEGETTE. Right. So how did they pay—— 

Mr. PUZDER. They go to the emergency room. 

Ms. DEGETTE. Yes, they go to the emergency room. And there 

were 37 million Americans like that. So all of us were paying for 

those 37 million Americans, including your employees, to go the 

emergency room. That is why we passed the bill. 

Mr. PUZDER. That is right. 

Ms. DEGETTE. And I want to say that I really admire what your 

company has done with the nutrition information. I was looking at 

that and I think that is—because you did that voluntarily, right? 

Mr. PUZDER. Yes. 

Ms. DEGETTE. And there is these new regulations that are pending right now which would require any fast food business over a 

100 

certain number of employees to post something similar to what you 

guys have been doing for years, right? 

Mr. PUZDER. No. 

Ms. DEGETTE. OK. What is it then? 

Mr. PUZDER. You know what the menu board is when you walk 

in a fast food restaurant? 

Ms. DEGETTE. Right, yes. 

Mr. PUZDER. They are requiring that you put the caloric—we 

have to redo all the menu boards—— 

Ms. DEGETTE. Right. 

Mr. PUZDER [continuing]. To put the—— 

Ms. DEGETTE. No, no, I understand that but—— 

Mr. PUZDER. None of this other stuff is required. 

Ms. DEGETTE. Right. What I am saying is they are requiring 

other people to post the caloric information like you have been 

doing voluntarily in your own way for years. 

Mr. PUZDER. Yes. 

Ms. DEGETTE. That is only part of what you have been doing. I 

understand. 

Mr. PUZDER. Right. 

Ms. DEGETTE. So did you know that the National Restaurant Association actually supports that regulation? Because before there 

was a patchwork of 50 State regulations that people had to comply 

with, yes or no? 

Mr. PUZDER. I guess—— 

Ms. DEGETTE. Yes or no? Did you know the National Restaurant 

Association supports that? 

Mr. PUZDER. Yes. 

Ms. DEGETTE. OK. I happen to think—and I would be happy to 

work with you—if there is a business like yours that is actually 

doing this plus more, they should be able to get a waiver from that 

regulation. But there is something to be said for not making people 

comply with a patchwork of 50 State regulations. 

Mr. PUZDER. No, that is absolutely right. 

Ms. DEGETTE. Good, thank you. 

Mr. PUZDER. And actually doing this is much cheaper than what 

the law requires so—— 

Ms. DEGETTE. Right. 

Mr. PUZDER [continuing]. Restaurants should be—— 

Ms. DEGETTE. Right, but I think if you are doing a good job, you 

should be able to get a waiver and I comply with that. 

Now, Ms. Walz, I want to ask you because you and I have actually talked about these issues before. With respect to these environmental regulations—the Regional Haze, the Utility MACT, the 

Coal Ash, all that—your main problem is you want to know what 

are the rules and how are you going to comply with them? And the 

uncertainty is a big part of what your problem is right now, isn’t 

it? 

Ms. WALZ. That is correct. 

Ms. DEGETTE. I mean you have applied for the state SIP. We all 

support it. You haven’t heard. That gives uncertainty, your business, right? 

Ms. WALZ. Yes. 

101 

Ms. DEGETTE. And Mr. Shoop, that is part of your problem, too, 

uncertainty in regulation, right? And Mr. Luoto, you, too? You don’t 

know what the regulations are going to be and that gives you uncertainty in making your business plan, right? 

Mr. LUOTO. Yes. 

Ms. DEGETTE. And Mr. Williams, when you do your business 

plan, you factor in the cost of those regulations to doing business, 

right? 

Mr. WILLIAMS. Yes. 

Ms. DEGETTE. OK. So I want to ask you, Mr. Shoop, you don’t 

think that we should get rid of the environmental laws, do you? 

Mr. SHOOP. Oh, absolutely not. 

Ms. DEGETTE. No. And you don’t think so, Ms. Walz, do you? 

Ms. WALZ. No, I don’t think so. 

Ms. DEGETTE. I mean the Clean Air Act, for example, that provides a good public benefit, right? And—yes, Ms. Walz, I am sorry. 

Ms. WALZ. Yes, it does provide public—— 

Ms. DEGETTE. And Tri-State has been complying with the Clean 

Air Act for decades. 

Ms. WALZ. Correct. 

Ms. DEGETTE. So what you need to have is regulations that 

make sense and that are certain and that are not overly burdensome, right? 

Ms. WALZ. Correct. 

Ms. DEGETTE. And you feel the same way, right, Mr. Shoop? 

Mr. SHOOP. Yes. 

Ms. DEGETTE. And Mr. Luoto, I assume you feel the same way, 

too? You don’t think we should get rid of the Clean Water Act? 

Mr. LUOTO. No. 

Ms. DEGETTE. OK, good. So, see, we can find some agreement, 

Mr. Chairman. I just want to point one thing out in my remaining 

19 seconds—two things. Number one, the President’s executive 

order, which was roughly 1 year ago, supplemented and reaffirmed 

the principles of regulatory review established under Executive 

Order 12866. ‘‘Agencies have to propose or adopt regulations only 

when benefits justify costs, impose the least burden on society considering the cost of cumulative regulations, maximize net benefits, 

and select inter-regulatory approach, specify performance objectives, and identify and assess available alternatives to direct regulation.’’ Now, you don’t disagree with that, do you, Mr. Puzder? 

Mr. PUZDER. Not at all. 

Ms. DEGETTE. And Ms. Walz? Yes or no? Do you disagree with 

those goals? 

Ms. WALZ. No. 

Ms. DEGETTE. Mr. Shoop? 

Mr. SHOOP. No. 

Ms. DEGETTE. Mr. Luoto? 

Mr. LUOTO. Agreed goals. 

Ms. DEGETTE. Dr. Mitchell? 

Dr. MITCHELL. Yes, I agree. 

Ms. DEGETTE. And Mr. Williams? 

Mr. WILLIAMS. I agree. 

Ms. DEGETTE. OK. Just one last thing, Mr. Chairman. I just 

want to point out for the record that there were fewer regulations 

102 

issued by executive agencies for the first 3 years of this administration than from the first 3 years of the previous administration. And 

if there are regulations that are giving uncertainty or that are not 

tailored for their specific purpose, we all want to work together to 

fix those regulations. The wholesale elimination of the Clean Air 

Act or the Safe Drinking Water Act or environmental regulations 

or food safety, that is not the way to go about this. 

And once again, for the eighth time, I hold out my hand to say 

let us work together on this because overly burdensome regulations 

are not in anybody’s best interest. 

Mr. STEARNS. I thank the gentlelady and we recognize Mr. Terry. 

Mr. TERRY. Thank you. And Ms. Walz, has Tri-State complied 

with the Clean Water Act and the Clean Air Act? 

Ms. WALZ. Yes. 

Mr. TERRY. All right. So what we are talking about here in regulations are new proposed regulations, not whether or not you have 

complied with the last? 

Ms. WALZ. That is true. 

Mr. TERRY. And in your testimony you mentioned a couple. You 

mentioned Utili-MACT and Fly Ash. Those directly affect your ability to produce energy, correct? 

Ms. WALZ. Correct. 

Mr. TERRY. All right. Are there other like Boiler MACT that also 

impact your business? 

Ms. WALZ. Yes, there is a long list of regulations, yes. 

Mr. TERRY. So the issue is despite that there are some overall 

number that is similar to the number of regulations issued from 

one administration to the other, your industry is dealing with multiple ones at one time, correct? 

Ms. WALZ. Yes. 

Mr. TERRY. And what happens to the additional costs that are incurred to comply with the new rules? 

Ms. WALZ. Those are passed directly on to the end users of electricity because we are a not-for-profit entity. 

Mr. TERRY. So those costs are passed on. 

Ms. WALZ. Right. 

Mr. TERRY. Have you at least looked at Utili-MACT? At least 

with our utilities in Nebraska, they have to deal with CSAPR, Boiler MACT, Fly Ash, and Utili-MACT. The one that they think will 

be the most costly is Utili-MACT. Have you been able to determine 

what the cost per plant to comply with Utili-MACT? 

Ms. WALZ. It varies from plant to plant. I would say—— 

Mr. TERRY. Sure. 

Ms. WALZ [continuing]. The most expensive rule we are facing 

right now is Regional Haze. 

Mr. TERRY. OK. 

Ms. WALZ. However, there is a pancaking of these rules and you 

really look at MACT costs, add on what Regional Haze costs, add 

on what the new water effluent standards cost, add on what the 

Coal Ash costs, add on what the Boiler Rule costs, and this is an 

increasing cost over time. Quite honestly, it forces you to look at 

what point will you shut that facility down. 

Mr. TERRY. Is that something that you are actually thinking 

about, that you may have to shut down a facility? 

103 

Ms. WALZ. We are looking at the economics of each of these rules 

and they have a potential, yes, to shut down existing plants. 

Mr. TERRY. When combined. 

Ms. WALZ. Correct. 

Mr. TERRY. Getting back to Utili-MACT alone, have you been 

able to, you know, take any plant and say it is going to cost X millions of dollars to comply? Omaha Public Power has already said 

for their coal fire plant that really is only 10 years old, that they 

are going to have spend over 400 million. Have you done something 

similar? 

Ms. WALZ. We have looked at the cost to our existing plants. We 

are already very highly controlled at Tri-State, at all of our facilities, so it is not as significant. The main issue we have is the fact 

that we have an air permit to build a new plant in Kansas and this 

rule will stop that. We cannot get a technology company to say 

that, yes, we can design and build to those new standards. So essentially it will stop—— 

Mr. TERRY. So a technology isn’t even available to build to the 

new standards? 

Ms. WALZ. It is not available. 

Mr. TERRY. OK. Well, that is certainty, isn’t it? You are certain 

that you can’t comply; therefore, you don’t build it. 

Ms. WALZ. Yes. 

Mr. TERRY. OK. Well, good. Then we have accomplished that. 

One last question. And do you feel—and I think we all feel that 

we want clean water, we want clean air. Is there a cost-benefit 

analysis that you feel comfortable that the investments to comply 

or decision to shut down will actually increase public health in 

your area? Have you gotten records from the Colorado Department 

of Health that will show that there has been x number of cases of 

elevated mercury in people in an area of one of your coal fire 

plants, for example? 

Ms. WALZ. The cost-benefit analysis that we have seen is actually 

the most recent one, and the rule that was finalized today is the 

Utility MACT Rule. And that cost-benefit analysis, really it is a 

mercury rule. It is a hazardous air pollutant rule and the benefits 

that EPA estimates for mercury reduction is about $6 million. 

However, they go on to calculate and include economic benefit for 

reduction of particulate matter and estimate that I believe the 

number is 90—— 

Mr. TERRY. OK. I would love to come back and do this but I have 

got to ask Dr. Mitchell. 

Did you treat patients? 

Mr. MITCHELL. Yes, I have. 

Mr. TERRY. Do you take a history from them? 

Mr. MITCHELL. Yes, when I—— 

Mr. TERRY. When you obtain a history, do you call them a complainer? 

Mr. MITCHELL. No, we were asking them—— 

Mr. TERRY. Oh, well, then why do you call these four people a 

complainer because they set out some issues that affect their business just like a patient would to you? 

My time is done. 

104 

Ms. DEGETTE. Wait a minute. Let him answer the question. I ask 

unanimous consent to let Dr. Mitchell answer the question. 

Mr. TERRY. He answered the question. I asked him if he takes 

a history and whether he calls them a complainer. He said no. 

Ms. DEGETTE. You asked, why did he complain about the other 

four witnesses? Let him answer the question. 

Mr. STEARNS. I think in all fairness, Dr. Mitchell, do you want 

to take 15 seconds just to—— 

Mr. MITCHELL. Yes. 

Mr. STEARNS. Go ahead. 

Mr. MITCHELL. Thank you. 

I did not say that the other businesses are complainers and obviously there needs to be a balance—— 

Mr. STEARNS. OK. 

Mr. MITCHELL [continuing]. And they have issues and—— 

Mr. TERRY. All right, now, may I? 

Mr. STEARNS. OK, 15 seconds. 

Mr. TERRY. OK, thank you. 

But you did state in your opening statement that when you were 

in a position to hear people talk about regulations that they were 

just complaining. Now, I would from that statement—— 

Mr. STEARNS. Dr. Mitchell, he really has the time so I mean you 

have had your chance to—— 

Mr. TERRY. Just to state that your opening statement, you said 

people who—— 

Mr. STEARNS. I think—— 

Mr. TERRY [continuing]. Question regulations you viewed as just 

complaining and so—— 

Mr. STEARNS. OK, we are going to conclude this. We can go back 

and forth here for an hour. 

And we are going to let Mr. Waxman move on. He will—— 

Mr. WAXMAN. I ask unanimous consent not that we give more 

time to the gentleman from Nebraska but give time to our witnesses, 30 seconds to say what he wants to say. 

Mr. STEARNS. Does anybody object to the unanimous consent? Go 

ahead, 30 seconds. 

Mr. MITCHELL. What I was saying in my opening remarks is that 

the only people I was hearing from about regulations was the regulated community, that the public thought that the government was 

going to protect them and that they didn’t need to communicate 

with government about regulations. 

Mr. STEARNS. Thank you, Dr. Mitchell. 

We recognize Mr. Waxman, 5 minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Three years ago, Dr. Patrick Michaels testified before the Energy 

and Environment Subcommittee that widely accepted scientific 

data has overestimated global warming and that regulation enacted in response to that data could have a very counterproductive 

effect. In the CV he provided the committee, he provided what appeared to be a comprehensive list of all of his financial support, 

over $10,000. After the hearing, we learned that Dr. Michaels had 

omitted information about his advocacy group called New Hope, 

which apparently attempts to rebut the prevailing consensus on climate change science. Further, Dr. Michaels did not disclose finanVerDate Aug 31 2005 14:58 Jan 02, 2013 Jkt 037690 PO 00000 Frm 00108 Fmt 6633 Sfmt 6633 F:\112-11~4\112-11~1 WAYNE
105 

cial support he received for New Hope from energy sector supporters, including Tri-State Generation and Transmission. When 

Representative Welch, then a member of this committee, asked Dr. 

Michaels to clarify the record, he failed to give a clear answer. It 

is important that we learn about his discrepancy and find out if Dr. 

Michaels was misrepresenting himself as an unbiased researcher if 

in fact he was receiving significant support from energy companies 

and polluting industries for advocacy work. 

On Tuesday, I sent a letter to Ms. Walz asking her to come prepared to answer questions about any past or current arrangements 

Tri-State has or had with Dr. Michaels, New Hope, and any other 

affiliated organization. Ms. Walz, according to an affidavit Dr. Michaels filed in Federal court, Tri-State provided Dr. Michaels’ advocacy group $50,000 in 2006 to work on climate science issues. That 

is correct, isn’t it? 

Ms. WALZ. Congressman Waxman, I received your request late 

Monday in the day. I was in a meeting but needed to leave the office quick, but what I did is actually Googled Dr. Michaels because 

I had never heard of him and I wasn’t quite sure what the relevance to my testimony was here today. 

Mr. WAXMAN. Well, my question is about your company. I want 

to know whether Tri-State funded Dr. Michaels, his advocacy firm, 

or affiliated organizations before or after 2006 to work on climate 

science issues. Can you detail this funding history for the committee? 

Ms. WALZ. Based on the timing of your request, I have not had 

time to research this and bring forward information. 

Mr. WAXMAN. Will you get us that information for the record? 

Ms. WALZ. We are looking at your request and we will bring a 

response to you as appropriate. 

Mr. WAXMAN. Dr. Michaels’ affidavit also states that Tri-State 

‘‘requested that its support of $50,000 be held confidential.’’ Do you 

know why Tri-State requested that its funding effort be held confidential? 

Ms. WALZ. I had no personal knowledge of Dr. Michaels or any 

work he had done with Tri-State. 

Mr. WAXMAN. Tri-State is an electric cooperative. It is not an organization that typically funds climate change science research. Is 

it—— 

Mr. GARDNER. Will the gentleman yield? 

Mr. WAXMAN. No. I want to pursue my questions. 

Mr. GARDNER. Will the gentleman yield? I would like to know 

why—— 

Mr. WAXMAN. No, the gentleman’s time—I am asking my questions. 

Mr. STEARNS. The gentleman has the time. I would caution the 

gentleman that—— 

Mr. WAXMAN. Mr. Chairman, point of order. My time is running 

out and I don’t want to be cautioned and I don’t want to be interrupted. Ms. Walz—— 

Mr. STEARNS. Well, you have the time. 

Mr. GARDNER. I will remember that the next time you ask somebody to yield. 

106 

Mr. WAXMAN. I ask unanimous consent I be given additional 

minutes so I can—— 

Mr. STEARNS. No, you go ahead. We will give you an extra—— 

Mr. WAXMAN. Does the gentleman object? Are you the one that 

asked me to yield? 

Mr. STEARNS. The gentleman has the time. Use your time as 

your time is running. 

Mr. WAXMAN. Now, Tri-State is an electric cooperative. It is not 

an organization that typically funds climate change science research, is it? 

Ms. WALZ. Tri-State funds—— 

Mr. WAXMAN. Yes or no? 

Ms. WALZ [continuing]. R&D for carbon management and carbon 

policies. 

Mr. WAXMAN. Are there other climate scientists—well, these are 

things I want you to get to us. Are there other climate scientists 

that Tri-State funds? Can you provide information about any such 

activities for the committee? Ms. Walz, $50,000 is a lot of your 

members’ money. What could Tri-State hope to get in return? I 

want answers to that. I think it is pertinent to the integrity of the 

testimony we get before the Congress. 

Your members might be surprised to learn that their money was 

used to fund an advocacy firm to downplay the significance of climate change. When witnesses come before the committee, they 

should speak honestly and not mislead the Congress about their intentions or supporters. Ms. Walz, your information will help us to 

determine whether that was accurate or not. 

This is not the only incidents of this committee receiving questionable testimony. TransCanada recently testified that the steel to 

be used in the Keystone XL pipeline would be manufactured at an 

American steel mill. It turns out that is not the case. Given the information, it is imperative this committee ensure that it is receiving accurate testimony. I think that should be of interest to members on both sides of the aisle. A good place to start would be to 

further examine Dr. Michaels’ conduct and determine if he provided false or misleading information to the committee. 

And I would like to yield to whoever was asking me to yield. 

Mr. STEARNS. Mr. Gardner, do you want to take a little opportunity here? 

Mr. GARDNER. I believe the gentleman’s time has expired. 

Mr. STEARNS. The gentleman’s time has expired. We recognize 

Mr. Sullivan for 5 minutes. 

Mr. SULLIVAN. Thank you, Mr. Chairman. 

I have a question for Mr. Shoop. In your testimony you indicated 

that OG&E’s current capitalization is 5.5 billion and its annual operating revenue is 3.9 billion and that to purchase the scrubbers 

that EPA’s Regional Haze Federal Implementation Plan would require would cost an additional 1 billion or more. Do I understand 

your testimony correctly in saying that you don’t want to commit 

to that 1 billion or more for scrubbers because other cheaper alternatives to attain the Regional Haze objectives exist and because 

you want to first know whether or not other EPA regulations such 

as Utility MACT are either going to compel the investments in 

scrubbers or other alternatives? And if so, do I understand that you 

107 

are really saying that for a utility your size, it is imperative to be 

able to determine a comprehensive strategy for complying with all 

EPA regulations in order to invest efficiently and not wastefully? 

Do you think that EPA’s decision to issue a Federal Implementation Plan to Oklahoma for Regional Haze is reflective of the executive order’s directive to adopt the most cost-effective approach to 

attainment of environmental objectives? 

Mr. SHOOP. Well, thank you. And, you know, a billion dollars for 

OG&E is a lot of money and that is just the capital end of things. 

There is also annual O&M which is going to be north of $100 million every year to go along with those scrubbers. So it is a lot of 

dollars and we would like time to investigate alternatives. We are 

looking and studying dry sorbent injection technology, which is 

largely untested. There are a lot of things that we need to check, 

we need to run tests, and it could be that that is a much cheaper 

alternative than the scrubbers, but we need time to test it and the 

clock is running on not only Regional Haze but also these other 

rules as well. 

So I think that the EPA, if they were to combine some of these 

rules instead of keeping them in silos and allow us to address them 

holistically, I think we can achieve compliance probably in a much 

more cost-effective way. 

Mr. SULLIVAN. Also in your testimony you mention that the EPA 

decided to include Oklahoma in the Cross-State Air Pollution Rule. 

Based on computer modeling that suggested that the Oklahoma 

utilities emissions were threatening to place a county in Michigan 

in noncompliance with ambient air standards, prior to this revelation by EPA, did the Agency ever make such a claim of Oklahoma’s 

emission impact with any Michigan county? 

Mr. SHOOP. You know, originally, Oklahoma was studied and it 

was determined that Oklahoma was impacting Texas. And then in 

the final rule that came out with CSAPR, Oklahoma was omitted 

from that final rule and they came out with a supplemental rule 

and changed their mind and said that Oklahoma was now impacting a county in Michigan, which currently is in attainment by the 

way. So we have got serious concerns about that model and we 

have got serious concerns about the science behind it. It is just illogical to us that we could be impacting that lone county and nothing in between. So we really have some serious concerns. We filed 

comments with the EPA on those modeling assumptions and we 

hope that we get some more answers. 

Mr. SULLIVAN. It would be funny if it weren’t so serious, wouldn’t 

it? 

Mr. SHOOP. Yes. 

Mr. SULLIVAN. Thank you. 

Mr. STEARNS. The gentleman yields back the balance of his time. 

And Dr. Burgess is recognized for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. Puzder, I really appreciate the interactions you had with Ms. 

DeGette about the board being required in the restaurants. My 

pizza restaurant in Lewisville, Texas, a Domino’s, is generally just 

walk-in business or carryout or delivery and they are going to be 

required to put one of these big boards up. As you mentioned, there 

is some expense involved. All of the information is available online. 

108 

I can get the information should I so choose. I generally don’t but 

to have it up on the board in the restaurant when, in fact, most 

of it is carryout business or delivery really makes no sense. So people should go online and check the individual nutritional information, though I promise you I have never done it myself. 

Dr. Mitchell, I appreciate you being here, appreciate what your 

organization has meant over the years. Mr. Chairman, if I could 

correct my colleague, when we take a history, the first paragraph 

is the HPI, history of present illness, correct? 

Mr. MITCHELL. That is correct. 

Mr. BURGESS. And the line preceding that is CC or chief complaint. That is we elicit a complaint from a patient and then we 

try to help them unlike lawyers who just never try to help anybody. 

OK, that being aside—— 

Mr. MITCHELL. I will not comment on that. 

Mr. BURGESS. You know, we had Mr. Waxman talk about the 

Truth-in-Testimony and he made a pretty genuine plea for that. So 

let me just ask you on the second page of your testimony you talk 

about diethylstilbestrol. 

Mr. MITCHELL. Yes. 

Mr. BURGESS. I am not sure, though, that what you have got in 

your testimony is entirely accurate because diethylstilbestrol was 

approved by the Food and Drug Administration in 1947 for the 

treatment of habitual miscarriage. I am an ob-gyn physician by 

training. I trained in the 1970s so of course we were the recipients 

of the problems visited upon the children of women who had taken 

diethylstilbestrol, and in fact in the 1970s, the Food and Drug Administration rescinded its approval for treatment of preterm labor. 

I think it was 1971. Diethylstilbestrol, interestingly, persisted in 

medical practice. In fact, in the early ’70s up until about 1975 or 

1977 was widely used as post-coital contraceptives. Now, no one of 

this committee remembers that. We are all familiar with Plan B 

and the attempts to make that go over-the-counter in the market, 

and people ask me how can you oppose this because this is something that is helpful for patients and helpful for women? 

But I do remember the days when diethylstilbestrol was routinely prescribed for that and in fact harmed pregnancies that then 

continued after the regimen of post-coital contraception was given. 

And in fact I don’t know that it ever worked that effectively. So I 

would like at some point for you—I give you the opportunity to correct your testimony. I think it is thalidomide to which you refer but 

diethylstilbestrol in fact was approved by the Food and Drug Administration actually for several indications over the 50 years of its 

existence and may even still be available today for prostate cancer. 

I am not entirely certain about that because that was not my field 

of practice. 

Now, you also deal with environmental issues as affecting particularly the constituency that you represent, the National Medical 

Association minority populations, low-income populations. I share 

some of your concerns but I got to tell you the Environmental Protection Agency, right now the number one problem that your asthmatic patients have today is because of the Environmental Protection Agency, and that is the prevention of the sale of an over-thecounter rescue inhaler. Primatene was the common name for that. 

109 

But because of the EPA restrictions on the propellant used in 

Primatene, no one can get it as of January 1. In fact I spent New 

Year’s Eve driving around my district not listening to constituents 

but actually trying to buy the last remaining copies of Primatene 

that were available on the shelves because it would not be available. Now, Primatene is pretty low cost. In fact I learned a lot that 

night. You can get a package of two for $32 at most Wal-Marts— 

or you could. I also have a prescription inhaler that has the different propellant that is now allowed but it is about three or four 

times the cost of that Primatene inhaler. 

So your low-income patients who are asthmatics who might have 

difficulty obtaining their medications for whatever reason actually 

relied upon the use of over-the-counter Primatene. And of course 

some of us who are occasional asthmatics who will wake up at two 

o’clock in the morning, oh, my gosh, I got a problem. You know, I 

am doctor. I can write my own prescription so it is not a problem 

for me, but a lot of your patients or a lot of your constituents then 

are required to either suffer through that night trying to use the 

accessory muscles of breathing and being pretty miserable or if 

they are really in trouble they go the emergency room and it costs 

someone $800 to $1,500. 

I really appreciate Mr. Puzder’s comments about, you know, 

things aren’t free. And I hear the President talk about we are going 

to have free contraception and free screening exams. Someone is 

going to pay for those. But I just wondered if you had a comment 

about the unavailability of the over-the-counter asthma medications and again the fault of that being the EPA. And I really want 

to solicit your help with Administrator Jackson and Gina McCarthy, the Assistant Administrator who has come to this committee 

who seemed at a loss as to how to deal with this. 

Mr. MITCHELL. Yes. I think that Primatene was pulled for a couple of reasons. That was one of them, because of propellant; the 

other is because of concern I think by the physicians particularly 

around cardiac problems with Primatene; and a third reason is 

that they felt that patients with asthma should be getting medical 

attention rather than using over-the-counter—— 

Mr. BURGESS. Dr. Mitchell, if I may, you are a doctor. I mean 

does everyone always follow your advice to the letter? They never 

did for me. I would like to know your secret. 

Mr. MITCHELL. I wish it were true that they did. I understand 

what you are saying and your point is good but the issue is that 

they shouldn’t even have to do that. We know that ozone increases 

the amount of asthma attacks. We know that particulates increase 

the amount of asthma attacks—— 

Mr. BURGESS. I know my time has expired. I have been an asthmatic since the 1950s and I submit to you the environmental situation was different in those days. I still had the disease. 

So Mr. Chairman, with that, let me yield back to the committee. 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. Bilbray from California is recognized for 5 minutes. 

Mr. BILBRAY. Thank you, Mr. Chairman. Mr. Chairman, let me 

apologize to the committee because, you know, this sort of just 

brings me back to the good old days of the ’80s and I was sitting 

as a regulator for a county of 3 million and we had the fetal alcohol 

110 

syndrome issue, and the whole discussion at that time was that it 

was a major threat to the unborn and that we needed to address 

it. And the proposal came forward that we should require every 

restaurant to have on its menus the warning, every restaurant on 

its table posted, every bar on every table down to the point of requiring that every chair in a stadium where alcohol was sold had 

to have on the back of it a warning about fetal alcohol syndrome. 

And the perception was—and Doctor, I will bring this up—was that 

if we did not implement these rules, we were going to damn generations to this terrible problem and that if we really cared we 

have to do this. I was just in my 30s at that time and sitting as 

a county supervisor, and frankly, I said look, guys, in a bar there 

is only one place anybody reads anything and that is the back of 

the restroom door. And everybody laughed. How many years later, 

where do we put our warnings for fetal alcohol syndrome? Does 

that mean that we don’t care about the issue that we didn’t post 

it everywhere, anywhere that was originally proposed? 

And the reason why I bring this up, Mr. Chairman, just because 

you care isn’t enough. When we do regulations, we have got to not 

only care but we have got to be smart the way we apply it. 

Wouldn’t you agree with that, Dr. Mitchell? 

Mr. MITCHELL. Yes, I would. 

Mr. BILBRAY. OK. Well, let me give you an example. We keep 

talking about stationary sources here and coming from California 

don’t you agree that one of the dirty little secrets is that mobile 

sources are a major contributor to ozone and air pollution and 

greenhouse gas problems? 

Mr. MITCHELL. Ozone, yes, transportation and mobile sources are 

in addition to the stationary sources. 

Mr. BILBRAY. OK. All the time, Mr. Chairman, that we hear 

about—is there anybody here from a non-attainment area? OK. 

Now, you know, Doctor, that if you allow one industry to pollute 

under a non-attainment area, that means somebody else has to reduce it to stay within the air bubble of the attainment area. I keep 

hearing all this talk of what businesses and small businesses have 

to do, but at the same time I am seeing that, this committee who 

claims and a lot of people who claim to care about these air pollution issues ignore studies come out of Florida and Kansas that 

show that 22 percent of the emissions coming out of mobile sources 

can be tracked to inappropriate traffic control, not by the private 

sector that creates the jobs but by the public sector that puts up 

stop signs because yield signs don’t work, don’t want to use roundabouts, don’t want to synchronize traffic signals. 

Now, Doctor, don’t you think that it is rather a little hypocritical 

of us to say we care about jobs and we care about the environment 

but we focus almost exclusively on the private sector but never look 

at the public sector’s responsibility to do more than just mandate 

on the private sector? Don’t you think that maybe we ought to 

spend as much time worrying about what is government doing 

wrong—and I will be blunt with you—mandating things like MTB 

and ethanol and some of these other issues, doing the things we 

have done wrong, don’t you think it is time that maybe if we really 

care about the environment and public health, government will do 

111 

us—a physician would say heal thyself before you start pointing 

fingers? And I would yield to you to respond to that. 

Mr. MITCHELL. Yes, I mean I think that it is important that we 

look at all the policy and particularly obviously you as a Congress 

have a lot of responsibility for that. It is clear that you don’t reduce 

some pollution from mobile sources by widening the roads or those 

types of things, that you have got to invest in transit. That seems 

to be—— 

Mr. BILBRAY. Whoa, let me interrupt. First of all, I am sorry. I 

have done enough environmental assessments to know that the noproject options do have environmental repercussions, that not widening a road does have environmental—so Doctor, when you say 

that, I ran a transit system, too, and I understand the benefit 

there. But I think that too often you have just moved over a line 

that does not reflect the reality of science. And again let me just 

say there is a flip side, too, and I will say this to you. The Clean 

Water Act was brought up by the ranking member and we have got 

the Scripps Institution of Oceanography and the National Academy 

of Science saying that for the Federal Government to mandate the 

secondary mandate in the San Diego region would be adverse to 

the environment, not help the environment. And it has taken decades for people to understand that. Do you understand that sometimes environmental laws actually create problems rather than 

solve them? Would you agree with that, Doctor? 

Mr. MITCHELL. That does occur sometimes, yes. 

Mr. BILBRAY. Because they are not appropriately administered. I 

guess everything down the line here is there is an assumption that 

common sense and practical application like putting a warning on 

the back of a bathroom door rather than requiring it on the back 

of every seat in the stadium is the kind of thing the American people expect us to do and rightfully should do. And all I can say is 

if we want the right to mandate stuff on these people, we not only 

have a legal I think we have a moral obligation to make sure those 

regulations are based in common sense, not just good intention. 

And I yield back, Mr. Chairman. 

Mr. BURGESS [presiding]. I thank the gentleman. 

The gentleman from Texas, Mr. Green, is recognized for 5 minutes. 

Mr. GREEN. Mr. Chairman, I don’t know how to follow putting 

signs on the back of the bathroom door, but I think I agree with 

my colleague because sometimes regulations do have a benefit. And 

I know for lots of businesses regulations cost too much and they 

put pressure on earnings and discourage investment and innovation. And when my colleague from California asked about a nonattainment area, I represent East Harris County and we have 5 refineries and 20-plus chemical plants literally in my own district 

plus other ones in a neighboring area. We have refineries, chemical 

plants, and lots of industry support personnel for that industry and 

for the oil and gas industry. Regulations are critical for our workers for their safety, health in our communities who I represent the 

fence line folks, too. And it is true that I don’t always agree with 

the regulations of this administration, but I have had problems 

with past administrations, too, whether they were Republican or 

Democrat, on their regulations. 

112 

And I know with talking with the constituents that the public 

cares a great deal about benefits that come from good regulations 

and I will give you an example. The Clean Air Act, in the Houston 

Ship Channel, when I was in college in the ’60s you could actually 

light the water in the Houston Ship Channel. And nowadays, our 

plants for the last 15 years is on their intake of water has been 

actually getting live fish and crabs. We still don’t want to eat those 

crabs and fish but they are alive and in 1960 they weren’t. And so 

there are benefits. 

Now, there is a reason when there are some regulations whether 

Clean Water or Clean Air, and sometimes we have a problem. And 

I know I have disagreements on probably a dozen issues with the 

EPA during this recently in the last year and a half or 2 years, but 

sometimes they are good issues. 

Mr. Shoop, you and I have worked and shared a great concern 

over clean air regulations and I have to admit Texas is kind of like 

Oklahoma. We don’t have to have an interpreter to talk to each 

other. My only complaint is Oklahoma takes too many of our football players. But we have worked together on a resolution and I 

value that effort that we have done. And that has typically been 

on a bipartisan basis on our committee. And I know how important 

it is to balance regulations with health and safety and our economic interest because we would not have those 5 refineries and 

those 20-plus chemical plants providing our job and our tax base 

without some reasonableness to the oversight and the regulations. 

And I know we are looking at the benefits of regulation and also 

what the President did and I appreciate your testimony on Executive Order 13563, but one of the benefits I know of your particular 

company and it has benefitted a lot of my companies is the Affordable Care Act. I know the Affordable Care Act provided assistance 

to Oklahoma Gas and Electric like it did some of my companies 

with retiree benefits. So that would be an example—I know this 

may be sacrilege in this committee because we tried to repeal it, 

we tried to do everything else with it, but were there benefits that 

Oklahoma Gas and Electric received from the Affordable Care Act 

Early Retirement Reinsurance Program? 

Mr. SHOOP. I am actually not aware of that benefit, but if we received it, I am sure it was appreciated. But I have no knowledge 

of that. 

Mr. GREEN. OK. Well, you might check because I understand you 

received about $700,000 for the program and believe me, that helps 

some of my, you know, constituents in our district. 

Mr. Williams and Dr. Mitchell, do you have anything to add to 

some of the benefits important on regulations on individuals and 

companies? 

Mr. MITCHELL. Yes. I mean obviously companies rely on having 

a healthy workforce. If the workforce is not healthy, then it is going 

to be very, very costly to the companies both in healthcare costs as 

well as training for new employees. And so I think that is it really 

important for business to maintain a healthy workforce. 

Mr. GREEN. Mr. Williams, anything to add? 

Mr. WILLIAMS. Yes, I would reiterate that we have grown our 

business, we have hired people, we have invested capital because 

good business sense, market research says that that is a good thing 

113 

to do. We know regulation costs money. We know that there is 

pending regulation that may be threatening but that does not stop 

the opportunity for growth and investment. The broad uncertainty 

of our economy and of our debt is the largest inhibitor and the key 

point that gives us cause for concern when we step back and ask 

ourselves the questions associated with return on investment. Ultimately, it is the business case that allows us to move forward and 

it is that business case that has allowed us to continue to grow. 

Mr. GREEN. Well, Mr. Chairman, I know I am out of time. There 

is a reason for the regulation. I have, like I said, an area that is 

a heavy industrial. I love to hunt and fish; I just don’t want to have 

to do it to support my family. I would rather have my folks working 

at those plants. Thank you. 

Mr. STEARNS. The gentleman’s time has expired. 

Recognize Dr. Gingrey from Georgia for 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, I thank you. 

I want to address my first remarks to Mr. Williams. Mr. Williams, I have before me your written testimony but I thought I 

heard you say—you correct me if I am wrong—you are unabashed 

conservative Republican—— 

Mr. WILLIAMS. Unrepentant. 

Mr. GINGREY. Unrepentant conservative Republican? 

Mr. WILLIAMS. Yes, I am. 

Mr. GINGREY. Does that mean you still consider yourself a conservative Republican? 

Mr. WILLIAMS. Absolutely. 

Mr. GINGREY. Thank you. I thought that is what I heard you say. 

A little surprised that the minority staff would have your name in 

their rolodex to call you as a minority witness. Can you explain 

that to us? 

Mr. WILLIAMS. I had the opportunity to testify—we had the opportunity to talk at a prior hearing regarding TSCA reform and my 

understanding is that it was on the basis of that discussion—— 

Mr. GINGREY. They liked what you had to say at that particular 

time? 

Mr. WILLIAMS. Apparently so. 

Mr. GINGREY. Apparently so. Yes. Now, in your written testimony—I am looking, Mr. Williams, on the second page, back of the 

first page I guess—and you say, ‘‘increasingly, the cause of cancer 

and diseases such as autism, Parkinson’s, and other illnesses are 

being linked to chemicals of concern and yet we struggle to reform 

decades-old legislation.’’ In regard to autism, can I ask you this? 

Are you thinking of or referring to this controversial issue about 

mercury and the preservatives of childhood vaccines? Is that what 

you are thinking? 

Mr. WILLIAMS. I am not an expert in that area. We have done 

a fair amount of research to try to understand the market demand 

for materials made with safer chemicals, and in that research, 

reading publications by Safer Chemicals and Healthy Families, by 

the Autism Association that is a part of Safer Chemicals and 

Healthy Families. It is from that. 

Mr. GINGREY. Yes. So in regard to that, about struggling to reform legislation, do you have any legislation particularly in mind 

in regard to that entity? Autism and mercury and the preservaVerDate Aug 31 2005 14:58 Jan 02, 2013 Jkt 037690 PO 00000 Frm 00117 Fmt 6633 Sfmt 6633 F:\112-11~4\112-11~1 WAYNE
114 

tives, which is my understanding of course it has been removed, 

but what kind of legislation did you have in mind in regard to 

that? 

Mr. WILLIAMS. Regarding the TSCA reform legislation. 

Mr. GINGREY. Well, I was specifically referring to—— 

Mr. WILLIAMS. Autism? 

Mr. GINGREY. Autism, yes. 

Mr. WILLIAMS. I have none particularly in mind. 

Mr. GINGREY. OK. Well, thank you, Mr. Williams. Let me—— 

Mr. MITCHELL. Can you give me a chance to answer that question? 

Mr. GINGREY. Dr. Mitchell, I am coming right to you. 

Mr. MITCHELL. OK. 

Mr. GINGREY. And you can answer that in addition to my other 

questions, but I would like for you to answer my other questions 

first. I am reading your testimony and in regard to the issue of 

diethylstilbestrol, DES—and hold on just a second; let me ask the 

question and then you can respond—and here is what you say: ‘‘I 

am also aware about products like diethylstilbestrol, or DES, that 

were not approved by the FDA and went on to cause major disabilities in other countries where it was approved for use.’’ Now, that 

is your statement. And you go on to say that ‘‘generations of Americans were protected by FDA’s prevention of this drug from coming 

to market in the United States.’’ Doctor, are you aware of the 

fact—obviously, you are not aware of the fact that the FDA first 

approved DES in this country in 1941. 

Mr. MITCHELL. There was an error in my testimony. 

Mr. GINGREY. There obviously is an error in your testimony and, 

look, we all are subject to making errors and I think the chairman, 

Dr. Burgess, has given you the opportunity to revise and extend 

your testimony, but you know, the thing that really bothers me 

about all this is the first paragraph on the second page of your testimony—and you say, ‘‘I was previously on a U.S. Food and Drug 

Administration advisory panel.’’ You were an advisory expert for 

the FDA and you didn’t even know that they had approved DES 

for use in this country in 1941. 

Mr. MITCHELL. I mean thalidomide. 

Mr. GINGREY. Well, obviously and I can understand. I appreciate 

your answer but it is a little bit disturbing, Mr. Chairman, when 

witnesses are called before this committee as so-called ‘‘experts’’ 

whether for the majority or the minority and, you know, something 

like that, a mistake like that makes me feel that the whole testimony from Dr. Mitchell is worthless. And, you know, if the other 

side wants to talk about that and ask Dr. Mitchell to explain in 

more detail, they will have an opportunity to do that. 

And I yield back. 

Mr. BURGESS. The gentleman’s time has expired. Recognize the 

gentleman from Colorado for 5 minutes for purpose of questions. 

Mr. GARDNER. I thank the chairman for the time and I thank the 

witnesses for testifying today. And I would just, Mr. Chairman, ask 

that perhaps we can get some clarification from Mr. Waxman that 

Ms. Walz’s testimony wasn’t anything but truthful. I think it may 

have come across as he was impugning the witness here and I don’t 

115 

believe that that was what he was trying to do but I would just 

like to perhaps get that clarification from Mr. Waxman. 

And along those same lines of questions, I have served on this 

committee for about a year now, a little over a year now and have 

been to many, many hearings where the issue one thing, the issue 

is jobs, as is the case here the issue is regulations, as the issue is 

here and my colleague will go a different direction than the purpose of the hearing. In fact it is not the first time that a red herring has been used by my colleague. In fact so many have been 

used that perhaps they ought to be an endangered species. 

But I would like to talk a little bit, Ms. Walz, about some of your 

testimony and specifically the Regional Haze issue. In your testimony you note that Colorado’s Regional Haze SIP has cross-spectrum support and bipartisan support. Can you explain this collaborative approach? 

Ms. WALZ. Yes. When we went through the state hearing to put 

the rule in place, the environmental community was represented 

and a number of environmental organizations as well as utilities 

and the State, and we came up with a negotiated agreement that 

all parties agreed to and said this is the best way to go; this is good 

for Colorado; this is reasonable progress. 

Mr. GARDNER. And thank you. And I would like to submit for the 

record letters from Governor Hickenlooper and Senator Udall, Senator Bennet, as well as the Colorado Congressional Delegation, the 

Speaker of the House in support of Colorado’s SIP for the record, 

if I could, Mr. Chairman. 

Mr. BURGESS. So ordered. 

[The information follows:] 

116 


76395.074

OFFICE OF THE GOVERNOR 

136 State Capito! 

Denver, Colorado 80203 

Phone (303) 866.:2471 

Fax (3031 866·2003 

November 02,20]] 

The Honorable Lisa P. Jackson 

Office of the Administrator 

Environmental Protection Agency 

Room 3000, Ariel Rios Building 

1200 Pennsylvania Ave. NW 

Washington, DC. 20004 

Dear Administrator Jackson: 

STATE OF COLOMDO 

john w. Hickenlooper 

Governor 

Earlier this year the State of Colorado suhmitted to EPA an air quality plan to the Environmental 

Protection Agency on behalf of the State of Colorado. That plan, entitled "Colorado Visibility 

and Regional Haze State Implementation Plan for Twelve Mandatory Class I Federal Areas in 

Colorado" ("Regional Haze SIP"), is currently pending before EPA. I am writing to encourage 

EPA to approve the Regional Haze SIP and promote a cleaner environment and better economy 

for the state of Colorado. 

The Regional Haze SIP is the culmination of years of effort by the State of Colorado. It has been 

subject to review by the Colorado Department of Public Health and Environment, the Colorado 

Public Utilities Commission and the General Assembly. CDPHE prepared the Regional Haze SIP 

only after assuring that it had a strong technical foundation and only after receiving voluminous 

input from industry, the environmental community and other stakeholders, including EPA itself. 

Consistent with the Clean Air Act, the Regional Haze SIP represents a robust, carefully balanced 

solution to the problem of visibility impairment. Under the SIP, emissions from coal-fired 

electric generating units and other industrial sources will decline dramatically. These 

unprecedented emission reductions will enhance the vistas in our treasured natural parks and 

wilderness areas and will result in healthier air for all Coloradans. Moreover, the Regional SIP 

achieves these emission reductions at reasonable cost, protecting our state's economy while 

enhancing our environment It provides certainty and flexibility to our state's industries while 

cleaning up the air. 

For these reasons, I urge your approval the Colorado Regional Haze SIP. 
117 


76395.075

<!rongrcss of flit l~nHca stutcs 

m:us~inghlli. !I([ 211515 

The Honorable Lisa P. Jackson 

Office of the Administrator 

Environmental Protection Agency 

Room 3000, Ariel Rios Building 

1200 Pennsylvania Ave. NW 

Washington, DC. 20004 

near Administrator Jackson: 

December 16, 20 II 

Earlier this year, Colorado Governor John Hickenlooper submitted a State Implementation Plan (SIP) to 

EPA to reduce regional haze pollution in existing Class I areas in Colorado. The SIP has been reviewed 

and endorsed by the state's electric utilities, conservation organizations, the bipartisan state legislature, 

the governor, the Colorado Air Quality Control Commission, and the Colorado Public Utilities 

Commission. We ask that you give strong consideration to approving the plan as a whole so Colorado 

can eontinue its record of environmental and economic progress. 

The SIP submitted earlier this year is designed to significantly reduce harmful emissions of sulfur 

dioxide, nitrogen oxide and other pollutants in Class I areas in Colorado under the requirements of the 

Clean Air Act's Regional Haze program. Having been subject to state-administered environmental and 

economic assessments, the plan will address visibility concerns in treasured national park and wilderness 

areas that are at the heart of Colorado's tourism and recreation industries, as well as quality oflife. 

In working to achieve these important goals, Colorado followed an exemplary and inclusive stakeholder 

approach that has earned Colorado's proposal broad support within the state. The Colorado Air Quality 

Control Commission conducted several public hearings to collect input from both public and private 

sector partners. The hearings included participation from relevant state government agencies, regional 

utilities, and organi7.ations focused on resource protection. The Colorado Public Utilities Commission 

reviewed and approved many of the emissions reductions included in the SIP. The SIP also received 

broad, bipartisan support in both houses of the state legislature, something that speaks to its balanced and 

thoughtful approach to reducing harmful pollution. 

Colorado's proposed SIP is an aggressive and achievable plan for pollution reduction. We urge you to 

give it full and prompt consideration for approval so that the people of Colorado can realize its benefits as 

soon as possible. 

Thank you for your attention to this matter, and please do not hesitate to contact our offices with any 

questions. 

M~'Y' Mark Udall 

U.S. Senator 

Pi'iIN7ED ON RECYCLED PAP:;" 

Michael F. Bennet 

U.S. Senator 
118 


76395.076

Diana DeGette 

U.S. Representative 

r 

U.S. Representative 

~~ Scott Tipton 

U.s. Representative 

;ft:i-l« -,,-

Doug Lamborn 

U. S. Representative 

£t;h e,(p;_a. --..... Mike Coffman 

U.S. Representative 

~~'N~ ~~Lentative 
119 


76395.077

$tute-!1cprescntati\'c 

FRANK k1cNULTY 

P,O, Box 630573 

Highlands Ranch, CO 80163 

Capitol: 303·S66~2346 

Dis\rict 30}-683~8873 

October 31, 2011 

James B, Martin 

Regional Administrator 

COLORADO 

HOUSE OF REPRESENTATIVES 

STATE CAPITOL 

DENVER 

80203 

U,S. Environmental Protection Agency, Region 8 

1595 Wynkoop Street 

Denver, CO 80202 

RE: EPA Approval of Colol'ado Regional Haze State Implementation Plan 

Dear Adminislrnwr Martin: 

SPEAKER OF TIlE HOUSE 

Yicc-Chuimum: 

Executive CommiUce of 

Lcgisl~livc Council 

Legislative Council Committee 

1 write to ,'equest yow' prompt and full approval of Colorado's Regionall'laze State Implementation Plan 

(SIP), 

The Colorado General Assembly in 2011 passed House Bill 1291 that 1 sponsored to approve the SIP 

revision that was unanimously adopted by the Colorado Air Quality Control Commission to address the 

requirements ofthe federal Regionall'laze Rule. The SIP is a notable achievement in that it collected the 

support from all parties involved in the Air Quality Control Commission's rulemaking hearing; agency, 

industly and environmental groups were united in their supp0l1, The State of Colorado fulfilled its 

responsibility to respond to the federal Regional Haze Rule by analyzing and selecting the emission 

controls that fully add"ess the requirements of the Regional Haze Rule and provide the best stale-specific 

solutions for Colorado in a reasonable and balanced fashion, Colorado industry, which is now subject to 

these requirements to reduce air emissions at a cost in excess of$l billion, is poised to begin 

implementing these requirements, but waits for EPA approval or Colorado's SIP before it can proceed 

with ce'tainty, 

Following the federal requirements, Colorado's SIP makes prudent determinations of Best Available 

Retrofit Technology (BART) and "Better-than-BART" alternatives to assure greater emissions reduetions 

than would otherwise be achieved through meeting the minimum requirements of the federal program. 

The SIP also creates appropriate requirements to enSlll'e that progress is made toward achieving 

"Reasonable Progress' Goals" for protecting visibility in a dozen scenic areas across Colorado. 

Implementation of these many measures to improve visibility is linked to the date on which EPA 

approves the SIP, An earlier approval will help to redllce uncertainty in federal regulatory actions and 

lead more quickly to emission reductions and visibility protection benefits. 
120 


76395.078

James B. iVlal1in 

October 31,201! 

Page 2 

In April 20 II, the Colorado Department of Public Health and Environment sent to EPA the Colorado 

Visibilil)' {(nd Regional Haze State Implementation Plan/or Ihe n"el"e Manda/Oly Class 1 Federal Areas 

in Colorado. While a consent decree requires that EPA propose action by March 8,2012 and take final 

action by September 12, 2012, on behalf of the citizens of Colorado, including the parties involved in the 

collaborative creation of the SIP, I strongly urge you to promptly and lully approve the Colorado 

Regional I-laze State Implementation Plan. 
121 

Mr. GARDNER. And would you please explain to me Tri-State, 

what did you agree to do in your SIP? 

Ms. WALZ. We agreed to put on control technologies at the Craig 

Station, to install a selective catalytic reduction on one of the units, 

and then to lower our emissions on the other two. Its implementation, it is a $330 million investment in controls. 

Mr. GARDNER. And that investment as you said was, you know, 

you are a not-for-profit operation, so that investment will be in 

turn paid for by your members? 

Ms. WALZ. Correct. That is true. 

Mr. GARDNER. And in your testimony you had stated several different things including EPA requirements that may require—so 

talking about the cost of various regulations and the EPA has estimated that the benefits of the Utility MACT rule is 6 million annually and you had stated that unfortunately the cost of compliance 

is estimated to be $9 billion annually. Do you know roughly how 

much of that will be the cost that Tri-State will bear? 

Ms. WALZ. On the Utility MACT side, we are in the process of 

analyzing cost to existing units. We don’t have those estimates 

completed, but again the major impact to us is on building the new 

coal unit that we have an air permit for. It will stop construction 

of that. 

Mr. GARDNER. And again, that is a plant that will not go forward, correct, at this point? 

Ms. WALZ. Correct. Yes, we don’t have vendors that will give us 

guarantees that they can meet the new standard, and without that, 

you don’t have agencies that will give you financing to build. And 

then you risk building and not being able to comply from day one. 

Mr. GARDNER. And what would happen if you had to install three 

SCRs which remove nitrogen oxide at the Tri-State Craig facility? 

Ms. WALZ. If we are required to install three SCRs, which is a 

real concern that we have because that is what EPA’s action is taking in other States, it would be about $1 billion. 

Mr. GARDNER. And $1 billion would be borne by your 44 member 

cooperatives? 

Ms. WALZ. Yes, it would. 

Mr. GARDNER. Thank you. 

And then, Mr. Puzder, a couple of questions for you on restaurants. What kind of nutritional disclosures does the company 

currently provide you mentioned in your testimony? 

Mr. PUZDER. Yes, we disclose on large posters in the restaurants. 

I have got the list here—serving size, calories, calories from fat, 

total fat, saturated fat, natural trans fat, artificial trans fat, cholesterol, sodium, total carbohydrates, dietary fiber, sugars, and proteins. And—— 

Mr. GARDNER. And I—— 

Mr. PUZDER [continuing]. It is in a poster that is framed and this 

large in the restaurant. 

Mr. GARDNER. And that is displayed in the restaurant. And as 

your testimony and previous questions answered, does the government require you to disclose this information? 

Mr. PUZDER. No, we do it in every restaurant we have in the 

United States. We are not required to do it. We did it when I was 

122 

Carl Karcher’s lawyer back in the early ’90s. I mean it is just a tradition of the company. 

Mr. GARDNER. And you are offering healthy menu selections as 

well? 

Mr. PUZDER. We have turkey burgers, we have the skinless, allmuscle chicken sandwiches, we have salads, we have honey whole 

wheat buns. We have a lot of health products. 

Mr. GARDNER. And the government didn’t mandate you to do 

that? 

Mr. PUZDER. No, we have got them and I am very happy if people 

buy them. 

Mr. GARDNER. And then you talked a little bit about healthcare 

and the fact that healthcare cost estimates vary so widely. How are 

you able to even budget for new restaurant construction? 

Mr. PUZDER. Well, you really can’t. It is one of the reasons construction has gone down in the past couple of years. As a matter 

of fact, our franchisees are building less restaurants. This will be 

the first year in the history of the company which goes back to 

1941 that our franchisees outside the United States will build more 

restaurants than our franchisees in the United States. We will do 

about 41 restaurants last year inside the United States and about 

72 outside the United States. So it has become a very, very big 

problem. It is the one thing that franchisees always mention when 

I encourage them to build new restaurants, which I do regularly. 

Mr. GARDNER. I see my time has expired. Thank you. 

Mr. BURGESS. The gentleman’s time has expired. And I hope that 

the exportation of chicken fried steak will add favorably to the balance of trade. 

Recognize the gentleman from Virginia, 5 minutes for questions. 

Mr. GRIFFITH. Ms. Walz, let me ask you a few questions if I 

might. Do you know what the regulations—you are a monopoly 

company so all the price increases get passed through—I think you 

said earlier—to the consumer, is that correct? 

Ms. WALZ. I guess I wouldn’t describe us as a monopoly company. 

Mr. GRIFFITH. OK. 

Ms. WALZ. We are a rural electric cooperative and provide energy. Our members actually own us. We are a wholesale energy 

provider and they own us and we, by multiyear contract, give them 

energy. 

Mr. GRIFFITH. OK. And all these regulations that we are looking 

at that are going to affect your industry that you answered questions about earlier, the various types of regulations, do you have 

any idea what that cost increase is going to be? 

Ms. WALZ. I don’t. We have, again, a lot of uncertainty in looking 

at are we going to have three SCRs or are we going to have one 

SCR? Is the Coal Ash Rule going to get finalized in 2013? So again 

it is that pancake effect of each of these rules and the added cost 

that they each have. 

Mr. GRIFFITH. If I told you that one of the providers in my area, 

AEP, American Electric Power, had indicated that their increased 

cost on some of these regulations were going to be about 10 to 15 

percent increase, would that seem to you to be a reasonable number given that they are heavily dependent at this point on coal? 

123 

Ms. WALZ. Yes, I think that, you know, not knowing what their 

current controls are and where they have to go, the number doesn’t 

surprise me. 

Mr. GRIFFITH. Do you think that your number would be somewhere in line with theirs or are you all better positioned than AEP? 

Ms. WALZ. We are working on those numbers so I don’t have a 

percent increase. 

Mr. GRIFFITH. I have a rural district as well with small cities in 

it. We have median household income of about $36,000 per year, 

household income not individual. My constituents are very concerned not only about our loss of coal jobs because of what has been 

happening with regulations in that industry also affecting your industry, but also we are concerned that we have got a lot of folks 

on fixed incomes and a lot of folks who just don’t make the kind 

of money that sometimes Washington bureaucrats make and think 

that everybody can afford those kinds of increases. Would you state 

that the area that you serve is more like the Washington crowd or 

more like my district? 

Ms. WALZ. The area we serve is much like your district, yes. 

Mr. GRIFFITH. And so if my constituents are concerned about a 

10 to 15 percent increase in their electric rate, then you believe 

that perhaps your folks that you serve would also be very concerned about significant power increases? 

Ms. WALZ. Yes, they are very concerned. 

Mr. GRIFFITH. And do you just do homes or do you also do businesses in that rural area? 

Ms. WALZ. We do rural businesses as well. 

Mr. GRIFFITH. And I believe that they use a lot of electricity, too? 

Ms. WALZ. They do and it is actually growing in States like Wyoming where we have oil and gas development. 

Mr. GRIFFITH. And if their electric rates go up, do you know how 

that affects their competitiveness in the world market? 

Ms. WALZ. It makes it more difficult for them to compete in a 

world market when you don’t have similar costs and regulations in 

other countries. 

Mr. GRIFFITH. And so it would be fair to say, would it not, that 

it actually puts American manufacturers at a disadvantage when 

the regulations make their energy costs more than they might need 

to be otherwise? 

Ms. WALZ. I would agree. American businesses are at a disadvantage because of these increasing costs. 

Mr. GRIFFITH. And AEP has also told me that because of reasonable regulations that we had put on some in the past that they 

have already cleaned up about 80 percent of their emissions. Would 

that be similar for your company or have you all done even better? 

Ms. WALZ. I would say we started off better. I mean we are a 

fairly young company so as we built our plants we put the most 

advanced technology controls on them at the time. We don’t have 

a plant that is uncontrolled. They have been controlled since day 

one. 

Mr. GRIFFITH. OK. And so a large part of the problem, although 

we can always do better, but a large part of the problem has been 

resolved since we weren’t able to catch fish out of the river that the 

124 

previous gentleman stated. Wouldn’t that be accurate, that a large 

part of the problem has been resolved with emissions? 

Ms. WALZ. Nationwide? 

Mr. GRIFFITH. Nationwide, yes, ma’am. 

Ms. WALZ. I would say the standards that are in place have been 

believed to be protective and proven to be protective of human 

health and the environment. They are just going the next notch 

further without valid science in many cases. 

Mr. GRIFFITH. Well, here is the concern we have. To get to that 80 percent in our area costs about $6 billion. To get to this additional 12 percent represented by some of the new regs is going to 

cost 6 to 8 billion. And wouldn’t we be better off as a Nation to 

have a balanced approach where we look for innovative ways to do 

this but also look at ways that we don’t chase businesses out of the 

country and don’t impact the working poor and those living on 

fixed incomes who have retired and living on Social Security? 

Would you agree with that? 

Ms. WALZ. I agree with that. 

Mr. GRIFFITH. I thank you. 

My time is up. I yield back. 

Mr. STEARNS. Time is expired. 

Mr. Scalise is recognized for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate you holding 

this hearing. I know one of our colleagues on the Democratic side 

called it a waste of time to have this hearing. Frankly, I think we 

need to have more of these hearings and, you know, I think it is 

important when you get small business owners to take some of 

their time away, which is hard for you all to do because you are 

running small businesses, to come up here to Congress and share 

with us the concerns that you have and the things that are happening here that prevent you from creating jobs. I think that is one 

of the most valuable things we can do here so I would strongly disagree with the statement that it is a waste of time to do this because I know I go throughout my district meeting with small businesses of all types and walks of life; I hear the common theme from 

them it seems like every day is it is the policies and the regulations 

and the laws coming out of Washington that are their biggest impediment to creating jobs. 

And so we ought to be not only having hearings but also passing 

legislation as we have in the House passed over 30 bills to remove 

some of these regulations that you have been sharing with us. And 

you know, I think we are going to be getting other ideas from some 

of the things you are talking about as well as more of the rules 

that continue to come out unfortunately that show us things that 

we need to do to continue to try to allow for job creation out there 

and stop some of the radical stuff that is coming out of Washington. 

So I appreciate you first for taking the time out of your schedules 

to come in here and share these stories with us because I know I 

read—the Small Business Administration had done a really important report with the impact of regulatory costs on small firms, and 

they released this in September 2011. 

Mr. STEARNS. Mr. Scalise, just if you would yield for one second. 

Your point is exactly right. I ran a business; I barely had time to 

125 

come to something like this. The fact that these folks would take 

time from their business to come here to do this is remarkable and 

it is a tribute to them that they want to do it. I mean, if your businesses collapsed 30 percent, you really don’t have the time like Mr. 

Luoto is coming here. So I think that is an excellent point. Thank 

you. 

Mr. SCALISE. No, I appreciate that, Mr. Chairman, because it 

really is a sacrifice. But again, it gives us the real on-the-ground 

knowledge to know. You know, we read these rules and laws and 

we fight a lot of them up here and some people think it is just, you 

know, because one party wants to fight another party. We are 

fighting for the livelihoods of our small businesses back home. And 

so it is valuable for us for you to share these stories because it reiterates to us how important it is that we continue to try to do this. 

But in the SBA report, they actually highlighted and went and 

kind of surveyed and came up with true costs, the true cost of regulations on our small businesses. And they broke it down per family 

and the estimate by the Small Business Administration is that the 

regulations and the rules coming out of Washington cost the average American family $15,586. That is a dramatic cost of all of these 

regulations, and as many of you describe, don’t even really improve 

people’s health. I know, Mr. Puzder, you talked about these regulations coming out of FDA. They make you put these things on your 

board that don’t have anything to do with improving health and 

you are doing it on your own anyway. 

And, you know, I want to follow up with you because I have 

talked to a small business owner who actually owns franchises like 

you discussed and he said he owns a couple of McDonald’s franchises. And, you know, unlike what some people think, these are 

small businesses; this isn’t a large national corporation. The person 

who owns a few franchises is running those small businesses separately than the major corporation and they are providing 

healthcare to their employees. He said for the first time in his business experience—over 40 years he has been in business—first time 

he has ever had to lay anybody off was just last year and it was 

because of the President’s healthcare law, that the cost of complying just with that law—and there are a whole slew of others— 

but just the cost of complying with the President’s healthcare law, 

for the first time ever in 40 years of running a small business 

forced him to lay people off. And you have talked about some of 

that, too. If you can expand on how your experience and how many 

different franchisees do you have? How many people own those 

small businesses that run—— 

Mr. PUZDER. We have about 200 franchise entities between Carl’s 

Jr. and Hardee’s. Some of the restaurants make very good money; 

some of them in the middle; some of them are marginally profitable. The marginally profitable restaurants will close. The 

healthcare costs will drive them over the edge. We are going to 

have to reduce hiring, we are going to have to take full-time employees and make them part-time employees, we are going to have 

to automate positions. You know, I like personal service and these 

kiosks that they have where—the kids are much better at it than 

I am—they can go in and order on the computer screen like an 

ATM. You know, right now they are kind of cost prohibitive but the 

126 

reality is that this medical insurance law becomes effective, they 

may become less cost prohibitive. We may have to put those in the 

store. So we are going to have to make a lot of adjustments to try 

and—— 

Mr. SCALISE. Do you have any idea how many jobs that would 

cost just in your experience? 

Mr. PUZDER. You know, we have not tried to quantify it. The 

problem is that the law is very complicated. The regulatory framework is currently very uncertain. So even Mercer Health and Benefits, one of the largest healthcare consultants in the world and we 

have used them for a number of years, they have a very difficult 

time giving us any kind of rational estimate of what the cost increase is going to be. And the first estimate I got was between 8 

million increase and 32 million and I think I finally got them to 

settle in on a rational number of about 18. But it is very hard to 

tell where this is going to go so I really can’t give you a number 

right now. 

Mr. SCALISE. And literally could lead to their closing. 

Well, again, I thank all of you for your time and coming here and 

sharing your stories with us. It is really important and it shows us 

what we need to keep fighting to do. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. STEARNS. The gentleman yields back and we are going to do 

a second round here. And I appreciate the witnesses being patient 

with us as we start the second round. 

I am going to show a video here which is Jim Cramer on MSNBC 

yesterday. It is just about a minute, so if I could have the video 

and perhaps just maybe drop the lights a little bit. Can everybody 

see that OK? Yes, OK. We can see it. Just can we make sure we 

hear it? 

Ms. DEGETTE. It is our former colleague. 

Mr. STEARNS. We need sound here. 

Ms. DEGETTE. You know, it didn’t work the last time we tried 

to do it. 

Mr. STEARNS. Has this been tried before? Did it work? I am always amazed at how these things don’t work because it is so easy 

to get them to work. It is not like it is difficult. We will give it another 15 seconds here and then we will just go on. No, I think we 

are OK. We will give you another chance. Well, I think the video 

if we had run it would actually show Mr. Cramer going through the 

litany of the problems with Obamacare, the cost it would incur. 

And I will start with my questions here and go to Mr. Puzder. 

You had mentioned earlier that you had brought Mercer in and 

some of their conclusions based upon the funds that are needed to 

pay that additional cost and the effects on labor and so forth, what 

do you hear from your franchisees with regard to the rising 

healthcare costs attributed to the Affordable Healthcare Act and 

the impact of the expansion on their businesses, the people that are 

trying to make the bottom line? 

Mr. PUZDER. I have had franchisees come and tell me 1) that 

they are afraid to grow, they are afraid to build restaurants. And 

it is PPACA, it is the problems that ethanol is creating with respect to food costs, it is NLRB. There are a lot of things that have 

them nervous, but a major concern is always the Patient Protection 

127 

and Affordable Care Act. And some of them are now trying to get 

out of the business because they would just like to get their cash 

and move on and not continue to grow. 

Mr. STEARNS. So in addition to not growing they are even scared 

to invest additional capital right now because of the uncertainty of 

what it would mean to them? 

Mr. PUZDER. Absolutely. 

Mr. STEARNS. Is that fair to say? And it would be fair to say in 

the long run these rising health costs are going to impact CKE. 

Does this mean you will have less full-time and more part-time? I 

mean when I ran a restaurant, if something like this happened to 

me I would say oh, gosh, I will try and go where I can pay in situations, so at least I am not forced to the regulations. 

Mr. PUZDER. Well, it is really axiomatic in business that if a cost 

goes up, you try and decrease your use—— 

Mr. STEARNS. Right. 

Mr. PUZDER [continuing]. And in this case it would be labor. And 

what a lot of people are talking about is if you have three 40-houra-week employees that work 120 hours, if you have four 30-houra-week employees, they work 120 hours. So there is a lot of talk 

about reducing labor forces and this isn’t just CKE; this is in retail, 

restaurants and retail generally about reducing the full-time workforce to a part-time workforce. Then you avoid the coverage. The 

problem is that you lose productivity so that if everybody goes and 

takes their full-time employees who have loyalty to the company 

and know how to do the job, are more consistent workers, if we lost 

productivity in our workforce, then we lost productivity as a Nation. So there are offsetting costs and benefits on both sides but it 

is a very difficult problem. We are working very diligently to try 

and solve it. 

Mr. STEARNS. When you do a projection on this, did Mercer come 

up with a timeline, a projection of cost 2012, 2014 on—’12, ’13, ’14? 

Mr. PUZDER. Our big concern is 2014, which is when—— 

Mr. STEARNS. 2014. 

Mr. PUZDER [continuing]. Things become implemented. They 

have not given us a projection. Actually, it is hard for them to give 

us a projection for 2014 because—— 

Mr. STEARNS. No one knows. 

Mr. PUZDER [continuing]. I mean we just don’t know. I mean this 

is why I am constantly hammering on them to come up with more 

specific guidance and it is very hard to get. Businesses invest when 

they believe they can make a profit. You usually look at a 5-year 

plan, you would like a 20 percent return of your money so that in 

5 years you get your money back. If you don’t know what your 

healthcare costs are, you don’t know what your energy costs are, 

you don’t know what your labor costs are, you don’t know where 

your taxes are going, it is very hard to come up with a rational 

business plan and build and grow. And so Democrat, Republican, 

liberal, conservative, House, Senate, I don’t care. This is a real 

problem in America. Businesses don’t know whether or not they 

can make a profit and therefore they are not growing. 

Mr. STEARNS. You know, I think you mentioned this earlier but 

did Mercer actually say that you would have to cut your labor 

force? Did they go that far? 

128 

Mr. PUZDER. Well, one of the options is to reduce full-time labor. 

Mr. STEARNS. Full-time. So that was a strong recommendation 

from Mercer to cut full-time labor. 

Mr. PUZDER. That is one of the alternatives that they are analyzing. Again, you know, they gave me an example of a company 

that went to part-time labor, got a $5 million in benefits cost but 

lost $30 million in productivity. 

Mr. STEARNS. Yes. 

Mr. PUZDER. I can’t say they have strongly recommended it. It 

is one of the elements and it is a balance that we are currently 

working on. 

Mr. STEARNS. On the whole, your testimony states that the 

Obamacare is going to apply to all these franchisees and yet a lot 

of these people are not—you have Mercer but a franchisee 

doesn’t—do they have benefit of the Mercer study or do they have 

to do their own? 

Mr. PUZDER. No, they will have to analyze their own costs because obviously, you know, we have got 21,000 employees and 

about 900 restaurants. The next largest franchisee has about 300 

and most of them have one or two. So the way the law impacts restaurants is very, very different. 

Mr. STEARNS. So each of these franchisees has to do what you 

are doing with your major consultant. Do you have any recommendations for them as a result of the Mercer consultant to 

you? 

Mr. PUZDER. You mean recommendations as to what they should 

do to cover their healthcare costs? 

Mr. STEARNS. Right. 

Mr. PUZDER. At the moment I don’t because I don’t even have a 

recommendation for what we should do. You know, it is just very 

difficult to figure out at the current time. 

Mr. STEARNS. On that note, I will end my questions and recognize the ranking member. 

Ms. DEGETTE. Thank you, Mr. Chairman. 

I want to clear a couple things up for the record to start out with. 

The first thing I want to clear up is with Ms. Walz because I consulted with Mr. Waxman’s staff here and I just want the record to 

be really clear. It was not Mr. Waxman’s intention to in any way 

disparage you personally. He was trying to explore the relationship 

between this consultant and Tri-State. And I just wanted to clarify 

that because one of my colleagues had made that insinuation. 

And Dr. Mitchell, I wanted to ask you with the exception of the 

one typo which you are going to correct in your testimony, you are 

under oath. You realize that. This committee takes all of its testimony under oath, correct? 

Mr. MITCHELL. Yes, I understand. 

Ms. DEGETTE. And that mistake in your testimony, that was just 

simply a mistake; it wasn’t intentional, correct? 

Mr. MITCHELL. That is correct. I didn’t have very much notice 

and that—— 

Ms. DEGETTE. Sure. And is the rest of your testimony to the best 

of your knowledge and ability correct? 

Mr. MITCHELL. Yes, it is. 

129 

Ms. DEGETTE. Thank you. Now, Dr. Mitchell, I want to ask you 

a question about nutritional labeling, particularly at these fast food 

restaurants. I know that you are the head of the National Medical 

Association, which is African American physicians I believe, is that 

right? 

Mr. MITCHELL. No, I co-chair the Environmental Health Task 

Force—— 

Ms. DEGETTE. You co-chair the Environmental—so I know because I am the co-chair of the Congressional Diabetes Caucus, 

which is a bipartisan group. Most members of this committee belong to it. Childhood obesity is one of the most leading concerns in 

general, but in particular, among communities of color. Has your 

medical association found that to be correct? 

Mr. MITCHELL. Yes, it is one of the priority issues that the medical association is looking at. 

Ms. DEGETTE. Trying to prevent childhood obesity, correct? 

Mr. MITCHELL. Absolutely. 

Ms. DEGETTE. And is one of the issues in preventing childhood 

obesity the issue of nutritional labeling of food so parents can know 

what the appropriate nutritional composition is and the calories 

and fat and so on? 

Mr. MITCHELL. Absolutely. 

Ms. DEGETTE. And so maybe your association hasn’t taken a position on this, but in terms of you yourself, do you think it is a good 

idea if a parent goes to a fast food restaurant with their child, that 

they are able to have that kind of nutritional information available 

to them in a way they can understand it and make an informed 

choice? 

Mr. MITCHELL. Yes. 

Ms. DEGETTE. OK. 

Mr. MITCHELL. Yes, that is important. 

Ms. DEGETTE. Now, Mr. Puzder, I assume that is also important 

to Carl’s because that is why you folks have been posting this nutritional information for a long time. Is that right? 

Mr. PUZDER. I would even add that if you go online on our Web 

site you can actually make a meal for your children—— 

Ms. DEGETTE. Right. 

Mr. PUZDER [continuing]. And it will tell you all of the caloric information. 

Ms. DEGETTE. Right. Now—— 

Mr. PUZDER. So we are very aggressive in this area. 

Ms. DEGETTE. Right. And you know, I appreciate that. I was telling the chairman the first time they had these labeling requirements in New York—New York was one of the first States that did 

it—I went into an establishment with my daughter and we were 

horrified some of the things we thought were really healthy were 

not really healthy and other things were better for us. I am sure 

you hear that from consumers every day. 

Mr. PUZDER. You know, the big surprise in New York was that 

bagels had the same amount of calories as donuts. 

Ms. DEGETTE. Right. Exactly. Salads can have more calories 

than sandwiches. And so unfortunately, though, not every fast food 

business has taken that kind of forward action that you have, isn’t 

that right, Mr. Puzder? 

130 

Mr. PUZDER. That is absolutely correct. 

Ms. DEGETTE. So I guess what I am kind of getting at is there 

are good reasons for regulations that would require nutritional information to be provided to consumers, right? 

Mr. PUZDER. And not only do I agree with that but I propose in 

here that we just change the regulations so it is more efficient and 

more—— 

Ms. DEGETTE. Right. 

Mr. PUZDER [continuing]. Economical, not that we get rid of it. 

Ms. DEGETTE. And I totally agree with you. As I said in my first 

round of questioning, so it is not that we should eliminate those requirements; it is so that we should make them reasonable for everybody, right? 

Mr. PUZDER. We can make them cost-effective—— 

Ms. DEGETTE. Right. 

Mr. PUZDER [continuing]. And more consumer-effective. 

Ms. DEGETTE. Exactly. So, you know, like I say, it is not like the 

Republicans think we should have sensible regulations and the 

Democrats think we should just over-regulate everything; it is finding that sweet spot so to speak. 

Mr. PUZDER. And as I said, I have letters here—— 

Ms. DEGETTE. Yes. 

Mr. PUZDER [continuing]. We have met with—they are Democrats, they are Republicans, they are Senators—— 

Ms. DEGETTE. Right. 

Mr. PUZDER [continuing]. They are Members of this House—— 

Ms. DEGETTE. Right. And, you know, I feel the same way with 

Ms. Walz with Tri-State power is we have worked together as a 

delegation trying to figure out how these regulations work, isn’t 

that correct, Ms. Walz? Now, Mr. Puzder, you are not an expert on 

the regulatory process other than how it affects your business, 

right? 

Mr. PUZDER. Correct. 

Ms. DEGETTE. And so you can’t come in and say, Congress, you 

did make some suggestions but you can’t give us the overall what 

the healthcare regulations should look like or anything like that? 

Mr. PUZDER. I can’t and are there even people who can? I mean 

it is pretty complicated. 

Ms. DEGETTE. Well, I mean you have to look at each regulation—— 

Mr. PUZDER. That is exactly right. 

Ms. DEGETTE [continuing]. And see how—I mean you can’t paint 

everything with a big brush and say this is good or bad, right? 

Mr. PUZDER. Which is why I was a little concerned with the comments at the beginning about associations and we are going to try 

and—you know, you do need to hear from us I think. 

Ms. DEGETTE. Right, but ultimately we have to make the decisions. 

And the rest of you, Ms. Walz, Mr. Luoto, Mr. Shoop, you know 

about your industries but you can’t come in and tell us how to 

make these regulations perfect for everyone, can you, Ms. Walz? 

Ms. WALZ. I can’t tell you how to make them perfect but we have 

had a lot of suggestions and involvement and comments over making recommendations how to improve them. 

131 

Ms. DEGETTE. And we appreciate that so much. What about you, 

Mr. Shoop? 

Mr. SHOOP. No, I don’t think we can tell you how to make them 

perfect, but we definitely have some ideas on how to do that. 

Ms. DEGETTE. On the ones that affect you? 

Mr. SHOOP. Correct. 

Ms. DEGETTE. And Mr. Luoto, same with you, right? 

Mr. LUOTO. Well, you know, regulations are to benefit everybody, 

and I think that is one of the things that we need to do as business 

and working with you is to be able to get them so they work together. 

Ms. DEGETTE. Amen. I think you are right. 

Thank you very much, Mr. Chairman. 

And thanks again to, you know, to the entire panel for being here 

with us today. 

Mr. STEARNS. And let me just do an editorial comment to the 

ranking lady. I appreciate her reaching out and to try in a bipartisan manner to talk about these issues, and I think that is why 

I enjoy working with her. And, Ms. Walz, I think she aptly pointed 

out that Mr. Waxman, in his opening statement, was bullying in 

a direction that—normally you just ask questions about what is relevant, and in this case he didn’t. But I respect what she just said 

in which she did not mean any harm. In fact, the committee tries 

to respect the witnesses. But what I would say to her in all candor 

is that, when we have had these eight hearings, we have not heard 

from the administration that economic impact is the number one 

thing they are concerned about. It goes into lots of different things 

and so that is why economic impact particularly for a business is 

important. So with that—— 

Ms. DEGETTE. Well, if the gentleman would yield—— 

Mr. STEARNS. Sure, I will yield. 

Ms. DEGETTE [continuing]. Mr. Williams can talk about economic 

impact and what—— 

Mr. STEARNS. OK. 

Ms. DEGETTE [continuing]. Regulations mean to businesses if you 

would like to have him talk about that. 

Mr. STEARNS. No, we will move on to our next question. 

Mr. Burgess. 

Mr. BURGESS. I appreciate the chairman for yielding. 

Mr. Puzder, I just had a couple of follow-up questions because 

your testimony was so compelling as this hearing started out and 

your testimony about the increased cost that your business is going 

to be experiencing as a result of the Affordable Care Act. I thought 

it might interest you to know that I spent the evening before we 

voted on the Affordable Care Act in the Rules Committee and I had 

a number of amendments that I tried to get made in order. One 

I remember best was an amendment to change the title and to remove the word Affordable, and you have simply proved the point 

for me here today that that would have been an appropriate 

amendment for the Rules Committee to consider and undoubtedly 

it would have sailed through the House of Representatives had it 

been allowed to be voted on. 

But here is the deal. I mean all of us who were here remember 

the summer of 2009. We went home to our districts in August; we 

132 

did our normal little sleepy summer town halls and our attendance 

went from a couple dozen people to a couple thousand. And people 

were significantly upset on both sides but upset about what they 

were seeing coming out of the then-Democratic-controlled House of 

Representatives. And I will tell you the thing that I heard over and 

over again, the themes that came through loud and clear to me 

during those summer town halls was, number one, don’t disrupt 

the entire system. If you are going to fix some things that need fixing, then fix them, but don’t change everything for arguably 60 to 

65 percent of the population that is satisfied with how their medical care is administered. 

And then the other thing we heard was if you are going to do 

anything at all, would you please help us with costs? Because we 

are concerned legitimately about the increasing costs of health insurance and medical care. So my summation is we failed on both 

fronts. 

Now, you are not from inside this Beltway bubble; you are from 

outside. Am I correct in that assumption that we failed on both 

charges? 

Mr. PUZDER. It would seem at this point that the law does not 

accomplish those goals. I would have to agree with that. 

Mr. BURGESS. Well, I don’t know now what we are up to on the 

total number of waivers, but it would just seem to me that a law 

that has required northward of 1,500 waivers in order to be successful is by definition not a successful piece of legislation. 

Mr. PUZDER. Absent those waivers, a lot of people would not have 

health insurance. 

Mr. BURGESS. That is correct. Now, on the cost side, the efforts 

at cost containment, you know, really were nonexistent. I mean if 

you really wanted to put people in charge of the cost of 

healthcare—I mean I have a health savings account; I have had 

one for 20 years—the reason I reference the cheaper inhalers is because I am so tight I don’t like to pay for those expensive inhalers 

because I pay for everything out-of-pocket when it comes to my prescriptions because I have such a high deductible. When I got to the 

pharmacist and they say paper or plastic, they are referring to folding money or a credit card. 

So it is important you keep people involved in the cost of their 

care. One of the big problems we have in healthcare in America 

right now is that no one knows what their care actually costs and 

most people don’t care because we have anesthetized them over the 

years with either third party insurance or, in the case of Medicare 

and Medicaid and SCHIP, government-run insurance. 

But the ranking member suggested that it was the cost of the 

uninsured going to the emergency rooms that were a cost driver. 

Number one, we haven’t fixed that problem so if that is a cost driver—if anything, we have made it worse. But on the other hand, is 

that really the cost driver and is it the cross-subsidization that 

your private insurance has to provide the Federal Government because the Federal Government with Medicare and Medicaid does 

not pay the cost of rendering the service? Is that the cost driver 

rather than the people showing up to the emergency rooms? 

Mr. PUZDER. You know, there are a lot of alternative options 

with respect to fixing the healthcare system and to stop the dyVerDate Aug 31 2005 14:58 Jan 02, 2013 Jkt 037690 PO 00000 Frm 00136 Fmt 6633 Sfmt 6633 F:\112-11~4\112-11~1 WAYNE
133 

namic cost increases that were taking place before the PPACA and 

since. I think I said in my original remarks I am not a healthcare 

law expert. All I can tell you is that the way that it has been done, 

this way, will have a devastating impact on the ability of the private sector to create jobs because it allocates those costs which are 

now spread. They are too high but they are spread across the broad 

base of taxpayers. When you allocate all those costs to the private 

sector, the businesses that you are looking to to create jobs, you inhibit if you do not eliminate our ability to create jobs, to at least 

reduce it because benefits—and I know a lot of people think the 

PPACA has benefits; I am not here to argue about that—but benefits have costs and the cost of this bill will be the ability of the private sector to create jobs. 

Mr. BURGESS. I so appreciate you saying that. I get so frustrated 

when I hear the administration say that this is going to be free and 

that is going to be free. You and I know when anything has 

healthcare stamped on its side, it is never free. Someone is paying 

the price somewhere. 

I thank the chairman for their recognition. I will yield back my 

time. 

Mr. STEARNS. I thank the gentleman. 

Mr. Gardner from Colorado is recognized for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman. And I also want to 

thank Ranking Member DeGette for clarifying for me the statements made by Mr. Waxman. 

I just wanted to read a little bit of an article from a December 

article in the Denver Post. It was December 30, 2011, and the title 

of it is ‘‘Economic Certainty Being Sought by Small Businesses in 

Colorado.’’ And it was a survey of the Colorado/Wyoming members 

of the National Federation of Independent Businesses, 7,500 members, and their number one concern is economic certainty. And here 

is the quote from the leader of the NFIB in Colorado/Wyoming is 

‘‘their message is leave us alone. We know best. If you want to create jobs, create economic certainty.’’ We also heard during one of 

the opening statements a member of this committee who has said 

that this hearing is perhaps nothing more than an airing of pet 

peeves, that this is pet peeves, an issue that affects just these people and they are airing their grievances. 

And so I guess I would start with that and I would start with 

Mr. Puzder. Do the issues that you address today, are these just 

your concern alone only affecting the businesses that you deal 

with? 

Mr. PUZDER. No, the issues that I raise would either affect the 

entire quick service restaurant industry or retail I would say in 

general if not manufacturing as well in some instances. 

Mr. GARDNER. And that is not just a couple hundred people; that 

is not just a couple thousand people. How many people would that 

affect? 

Mr. PUZDER. We are the fifth largest, I believe, chain in the country and we have 70,000 employees. So you can take it from there. 

Mr. GARDNER. Ms. Walz, the same with you. I mean are these 

issues that we talked about today, are they only affecting Tri-State 

or are they affecting others around the country? 

134 

Ms. WALZ. They are affecting all utilities across the entire country. 

Mr. GARDNER. And you mentioned you had 750 people that 

worked between the coal operation in Craig and the power plant 

in Craig. Those operations would be affected as well, as would similar operations around the country? 

Ms. WALZ. That is correct. 

Mr. GARDNER. Mr. Shoop, the same question for you. 

Mr. SHOOP. You know, when we incur a billion dollars of cost, 

those costs are going to go to our customers. We have 790,000 customers that are going to see an increase. In my written statement 

I estimated that it would lead to a 23 percent increase for those 

residential customers, and then on top of that, increases for industrial and small business customers. And when we have, like last 

summer, 50 days of over 100 degree weather, it is going to raise 

people’s bills significantly. 

Mr. GARDNER. Mr. Luoto? 

Mr. LUOTO. Yes, the exclusion of the Silvicultural Rule for 

loggers in the United States—there are 48,000 loggers right now 

currently—it was almost 70,000. It has shrunk down. Obviously it 

is having a huge effect and the uncertainty that we are facing is 

going to make it even worse. You know, we have got to buy equipment; we face uncertainty in that. So obviously it is having a huge 

effect on what our industry is doing and it will have a huge effect 

on America as it comes back to getting the housing industry going 

and everything else because the wood will not be available. 

Mr. GARDNER. And I think the four businesses here that have 

talked about that I mean really highlight the concern that I have 

throughout this country and the effect and impact that regulatory 

uncertainty, regulations have. You know, looking at a report—this 

report is dated December 16 of 2011 from the Small Business Administration—the cost of Federal regulations, $1.75 trillion; the 

cost of regulatory burdens from new rules proposed or enacted for 

2011, over $90 billion; major regulations proposed or enacted in 

2011 as defined in the Executive Order 12866, 750; the number of 

rules repealed in 2011, one, and it was a spilled milk rule that the 

President spoke about at the State of the Union address. 

Mr. Puzder, in your experience have you seen a regulation or 

rule repealed? 

Mr. PUZDER. Like I said, we have that 11-page document with 57 

categories and it just gets longer; it doesn’t get shorter. 

Mr. GARDNER. Ms. Walz? 

Ms. WALZ. We have seen no reductions, just significant increase 

in the number of rules. 

Mr. GARDNER. Mr. Shoop? 

Mr. SHOOP. I do not recall any. 

Mr. GARDNER. Mr. Luoto? 

Mr. LUOTO. I don’t see any. I think it is getting bigger. 

Mr. GARDNER. And so I think that is the challenge we face. And 

as the members of Colorado small businesses and Colorado and 

Wyoming, 7,500 people have said economic certainty is the issue 

that they are concerned about and the costs that that will incur to 

them. 

135 

Ms. Walz, in our remaining time just a couple of questions for 

you. We talked about the Sunflower plant. It is the regulatory environment that is currently preventing that plant from going forward, correct? 

Ms. WALZ. I think the Utility MACT Rule, yes, we referred to the 

fact that the standards are well below what vendors can design 

to—— 

Mr. GARDNER. What they can actually design technologically 

available. 

Ms. WALZ. Correct, yes. 

Mr. GARDNER. Does that threaten the Colorado economy? Does 

that threaten the businesses that cooperatives work with? 

Ms. WALZ. It threatens our ability to provide reliable and affordable energy to our entire service territory and Colorado’s economy, 

yes. 

Mr. GARDNER. And then going back to the SIP issue, if the EPA 

does not approve the Regional Haze State Implementation Plan 

that we have worked with bipartisan support in Colorado, will that 

potentially hurt jobs in Colorado and the Colorado economy? 

Ms. WALZ. It will. Essentially, each time we have a new rule that 

is layered on top of all the others, the existence of the coal industry 

and our coal plants is threatened with each one. 

Mr. GARDNER. Thank you. I yield back. 

Mr. STEARNS. The gentleman yields back. 

I am going to have the last word as the chairman here and I just 

want to establish once and for all FactCheck.org—it is a project of 

the Annenberg Public Policy Center of the University of Pennsylvania—citing numbers provided to Congress in 2011 by the Office 

of Information and Regulatory Affairs, reports that the estimated 

cost of Federal regulation under Obama from the time he took office to the end of the 2010 fiscal year, not including regulations 

issued by the independent regulatory agencies, was somewhere between $8 billion and $16.5 billion. During the same initial stretch 

under President Bush, the estimated cost of new regulation was between $1.3 billion and $3.4 billion. All figures are adjusted for inflation. 

Now, I have one slide to conclude. Just this year—we are talking 

about regulations for 2012—from this we can see that since the 

President’s executive order, economically significant rules repealed 

this year are none. We have costs of regulation going up, nothing 

has been repealed, and hours of annual paperwork is increasing. So 

the conclusion, at least from the standpoint of this chairman is, 

regulations are going up, nothing is being repealed. And I thank 

our witnesses today. I thank all of them for coming. I think that 

is—— 

Ms. DEGETTE. Mr. Chairman, I am sorry to interrupt but where 

did you get the information in that slide? 

Mr. STEARNS. We would be glad to furnish you. I think it came 

from the Senate Republican Policy Committee. 

Ms. DEGETTE. OK. Well, I reserve—— 

Mr. STEARNS. Well, you certainly can put in the record—— 

Ms. DEGETTE [continuing]. Whether it should be put in the 

record. 

136 

Mr. STEARNS. Well, I think we will offer you to offer anything 

you want to change but that is it. And this committee is adjourned. 

Let me just say in conclusion I would like to thank all the witnesses but also if any member wants to put into the record, they 

have 10 business days, including you, Ms. DeGette, to submit questions for the record. And I ask the witnesses to agree to respond 

promptly to the questions. Thank you. 

[Whereupon, at 12:45 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

137 


76395.079

TRI-STATE GENERATION AND TRANSMISSION INC. 

HEADQUARTERS: P.O. BOX 33695 DENVER, '-V'LV"AiCJV 303·452·6111 

The Honorable Cliff Stearns 

Chairman 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

Washington, DC 20515 

Dear Mr. Chainnan: 

Ylarch 21. 2012 

Pursnant to your letter of March g, 2012, forthwith are answers to questions submitted for the 

record by the Ranking Ylemher of the Energy and Commerce Committee, Mr. Waxman. 

Is it accurate that Tri-State provided Hr. Michaels' firm, NHES, with S50,000 in 2006? 

Yes, 

Dr. Michaels describes the funding he received from Tri-S!ate as "support." Please explain 

what uuderstanding Tri-State had with Dr. Michaels in providing this funding. Were any 

goods or services contracted for ill exchange for this support? If not, please explain why 

this funding was provided. Please explain how the members of Tri-State benefitted from 

this slIl'port. 

In 2006, Tri·Sta!c made a one·time donation of$50,000 to New Hope Environmental 

Services (NHES). Tri-State's Board of Directors approved the disbursement. 

The Tri-State Board of Directors voted in 2006 to contribute to NHES to assist the 

organization's research and development efforts in exploring the causes and impacts of 

climate change. We believe it is in the best interests ofTri·State's member systems to 

have a complete understanding of the issue, so that as an industry and a nation, we can 

make the most informed decisions without harming our economy and our way of life. 

Dr. Michaels' affidavit also stated that Tri-Statc Generation and Transmission Association 

"had requested that its support of $50,000 to New Hope be held confidential. After this 

support was inadvertently made public by another New Hope client, Tri-Statc informed 

(Dr. Micbaels) that it would no longer support New Hope because of adverse publicity," Is 

it accurate that Tri-State requested tbat its funding of New Hope he held confidential'! If 

so, please explain why? 

We understand that Dr. Michaels' affidavit med in the United States District COUlt for 

the District of Vermont indicates that Tri·Stat. requested the one time donation of 

$50,000 remain confidential. We have no documentation to refute or confirm this 

asseltiol1. 

Has Tri-State funded Dr. Michaels, bis firm, NIlES, or other affiliated organizations in 

years other than 2006? lfso, please provide a list ortlte years in which funding was 

provided, the amollnt of tbe funding and the goods or services, if any, provided to TI'i-State 

in exchange for tbe funding. 

CRAIG STATION 

PO. !lOX 1307 

CRAIG, CO 81626·1307 

970·i124·4411 

FSCALANTE STATION 

P.O. cox 577 

PREwrnNM 87045 

50oHl76-2271 

NUCLA STATION 

P.O. BQX ('9t1 

NUCLA, co 814'4·0698 

970-864-731u 
138 

Æ 


76395.080

The Honorable Cliff Steoms 

March 21, 2012 

Page 2 

Our review indicates that Tri-State has not directly funded Dr. Michaels or NHES except 

for the 2006 donation. 

During the February 16,2012, hearing, you testified that Tri-State funds "R&D for carbon 

management and carbon policies." Please explain Tri-State's policies and approach in 

funding these R&D activities. Please also provide a list of the R&D projects that Tri-State 

is currently funding and Tri-State's annnal budget for these R&D activities. Did Dr. 

Michaels' firm, NHES, provide Tri-State with R&D -on carbon management and carbon 

policies? If so, plcase provide details Oil his R&D work: 

Tri-State has an annual budget of $3 million for research and development. We fund 

R&D that includes Carbon Capture and Sequestration Demonstration Projects and the 

Department of Energy-funded Colorado Plateau Carbon Dioxide Sequestration site 

characterization. 

The Tri-State Board of Directors voted in 2006 to contribute to NHES to assist the 

organization's research and development efforts in exploring the causes and impacts of 

climate change, We believe it is in the best interests ofTri-State's member systems to 

have a complete understanding of tile issue, so that as an industlY and a nation, we can 

make the most infonned decisions without hanning Ollr economy and ollr way of life. 

Does Tri-State fund the work of any other climate scientists or firms or institutions that 

pnblish on climate science? If so, please itlentify the scientists, firms, or institutions, the 

years in which they were funded, the purpose for which they were funded and the amount 

in each year for which they were fnnded. 

Since 1993, Tri-State has been a pat1icipating member in the Electric Power Research 

Institute (the world's foremost utility R&D consortium) and the Cooperative Research 

Network (a national collaborative effort focusing on the special rescarch needs of electric 

cooperative systems). Tri-State's investments. added to that of other utilities around the 

world, help ftmd the advancement ofteehnology and science that will improve the 

reliability and efficiency of electric systems for utilities, as well as homes and businesses. 

AN EQUAL OPPORTUNiry! AFFIRMATIVE ACTION EMPLOYER