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74–723PDF 2012

EPA’S IMPACT ON JOBS AND 

ENERGY AFFORDABILITY: UNDERSTANDING 

THE REAL COSTS AND BENEFITS OF 

ENVIRONMENTAL REGULATIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND 

ENVIRONMENT 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

WEDNESDAY, JUNE 6, 2012 

Serial No. 112–88 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUZANNE BONAMICI, Oregon 

VACANCY 

VACANCY 

VACANCY 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

HON. ANDY HARRIS, Maryland, Chair 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

PAUL C. BROUN, Georgia 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

RALPH M. HALL, Texas 

BRAD MILLER, North Carolina 

LYNN C. WOOLSEY, California 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

ZOE LOFGREN, California 

JERRY MCNERNEY, California 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Wednesday, June 6, 2012 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Andy Harris, Chairman, Subcommittee on Energy and Environment, Committee on Science, Space, and Technology, U.S. 

House of Representatives .................................................................................... 10 

Written Statement ............................................................................................ 11 

Statement by Representative Brad Miller, Ranking Minority Member, Subcommittee on Energy and Environment, Committee on Science, Space, and 

Technology, U.S. House of Representatives ....................................................... 12 

Written Statement ............................................................................................ 14 

Witnesses: 

Dr. Michael Honeycutt, Chief Toxicologist, Texas Commission on Environmental Quality 

Oral Statement ................................................................................................. 16 

Written Statement ............................................................................................ 19 

Mr. Eugene Trisko, Attorney at Law, on Behalf of the American Coalition 

for Clean Coal Electricity 

Oral Statement ................................................................................................. 53 

Written Statement ............................................................................................ 55 

Mr. Tom Wolf, Executive Director, Energy Council, Illinois Chamber of Commerce 

Oral Statement ................................................................................................. 75 

Written Statement ............................................................................................ 77 

Mr. David Hudgins, Director of Member and External Relations, Old Dominion Electric Cooperative 

Oral Statement ................................................................................................. 81 

Written Statement ............................................................................................ 83 

Mr. Richard Trzupek, Principal Consultant, Trinity Consultants 

Oral Statement ................................................................................................. 88 

Written Statement ............................................................................................ 90 

Discussion 98 

Appendix 1: Answers to Post-Hearing Questions 

Dr. Michael Honeycutt, Chief Toxicologist, Texas Commission on Environmental Quality ..................................................................................................... 110 

Mr. Eugene Trisko, Attorney at Law, on Behalf of the American Coalition 

for Clean Coal Electricity .................................................................................... 119 

Mr. Tom Wolf, Executive Director, Energy Council, Illinois Chamber of Commerce ..................................................................................................................... 126 

Mr. David Hudgins, Director of Member and External Relations, Old Dominion Electric Cooperative ....................................................................................... 128 

Mr. Richard Trzupek, Principal Consultant, Trinity Consultants ...................... 133 
Page

IV 

Appendix 2: Additional Material for the Record 

An Economic Impact Analysis of EPA’s Mercury and Air Toxics Standards 

Rule ....................................................................................................................... 136
(1) 

EPA’S IMPACT ON JOBS 

AND ENERGY AFFORDABILITY: 

UNDERSTANDING THE REAL COSTS 

AND BENEFITS OF ENVIRONMENTAL 

REGULATIONS 

WEDNESDAY, JUNE 6, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND ENVIRONMENT, COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, Washington, DC. 

The Subcommittee met, pursuant to call, at 2:15 p.m., in Room 

2318 of the Rayburn House Office Building, Hon. Andy Harris 

[Chairman of the Subcommittee] presiding. 
2 

RALPH M, HALL, TEXAS 

CHA!RMAN 

U.S. HOUSE OF REPRESENTATIVES 

EDD!E BERNICE JOHNSON, TEXAS 

RANKING MEM8ER 

COMMITIEE ON SCIENCE, SPACE, AND TECHNOLOGY 

2321 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6301 

1202) 225-6371 

www.science.house.1.I0V 

Subcommittee on Energy & Environment 

EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs 

and Benefits of Environmental Regulations 

Wednesday, June 6, 2012 

2:00 p.m. - 4:00 p.m. 

2318 Rayburn House Office Buildiug 

The Honorable Cass Suustein, Administrator, Office ofInformation and Regulatory 

Affairs, Office of Management and Budget (invited) 

Dr. Michael Honeycutt, Chief Toxicologist, Texas Commission on Environmental Quality 

Mr. Eugene Trisko, Attorney at Law, On behalf of the American Coalition for Clean Coal 

Electricity 

Mr. Tom Wolf, Executive Director, Energy Council, Illinois Chamber of Commerce 

Mr. David Hndgins, Director of Member and External Relations, Old Dominion Electric 

Cooperative 

Mr. Richard Trzupek, Principal Consultant, Trinity Consultants 
3 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

SUBCOMMITTEE ON ENERGY & ENVIRONMENT 

HEARING CHARTER 

EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs 

and Benefits of Environmental Regulations 

PURPOSE 

Wednesday, Jurie 6, 2012 

2:00 p.m. - 4:00 p.m. 

2318 Rayburn House Office Building 

On Wednesday, June 6, 2012, at 2:00 p.m. in Room 2318 of the Rayburn House Office Building, 

the Subcommittee on Energy and the Environment of the Committee on Science, Space, and 

Technology will hold a hearing titled, EPA's Impact on Jobs and Energy Affordability: 

Understanding the Real Costs and Benefits of Environmental Regulations. The purpose of this 

hearing is to examine the process used by the Office of Information and Regulatory Affairs 

(OIRA) and the Environmental Protection Agency (EPA) in evaluating the costs and benefits of 

federal environmental regulations, including the recently announced Carbon Pollution Standard 

for New Power Plants. l 

WITNESS LIST 

• The Honorable Cass Sunstein, Administrator, Office ofInformation and Regulatory 

Affairs, Office of Management and Budget (invited) 

• Dr. Michael Honeycutt, Chief Toxicologist, Texas Commission on Environmental Quality 

• Mr. Eugene Trisko, Attorney at Law, On behalf of the American Coalition for Clean Coal 

Electricity 

• Mr. Tom Wolf, Executive Director, Energy Council, Illinois Chamber of Commerce 

• Mr. David Hudgins, Director of Member and External Relations, Old Dominion Electric 

Cooperative 

• Mr. Richard Trzupek, Principal Consultant, Trinity Consultants 

Background 

The Office of Information and Regulatory Affairs (OIRA), established in the 1980 Paperwork 

Reduction Act and located within the Office of Management and Budget (OMB), is responsible 

for reviewing draft regulations and ensuring agency compliance with requirements in several 

Executive Orders pertaining to the regulatory process.2 It is OIRA's responsibility to oversee and 

coordinate the Administration's regulatory policies and ensure that agency reports, guidelines, 

I 77 Federal Register 22392. 

2 http;//www.whitehouse.gov/omb/inforeg administrator. 
4 

rules, testimony, and proposed legislation are consistent with Administration policy.3 In this 

capacity, OMB-OlRA commonly issues memoranda and guidance to agencies regarding the 

implementation of regulatory policies, actions, and goals. In accordance with these requirements, 

EPA and other agencies release Regulatory Impact Analyses (RIAs) that examine the costs and 

benefits of individual, major regulations. 

Overall Regulatory Burdens 

President Obama's issuance of Executive Order (EO) 13563 on "Improving Regulation and 

Regulatory Review" takes a number of steps aimed at improving the cost-effectiveness of 

regulatory actions. Despite the principles affirmed in this EO, the number of major regulations 

and their price tag has grown substantially. A March 2012 analysis by the Heritage Foundation 

found significantly higher regulatory burdens compared to the historical pace, with 106 new 

major federal regulations with more than $46 billion in costs having been adopted during the 

Obama Administration.4 In the same time period, federal regulatory agencies have seen their 

combined budgets grow 16 percent, and regulatory employment rise 13 percent. 5 

Role of EPA Clean Air Act Regulations 

EPA regulations are playing a greater role in the overall federal regulatory enterprise as 

measured in rulemaking and overall costs and benefits. According to OIRA's Regulatory 

Review Dashboard, (see Figure I) EPA has nearly twice as many regulatory actions currently 

being reviewed than any other part of the federal government. 

Figure I. OIRA's Regulatory Review Dashboard6 

AGENCIES WITH THE HOST REGULATORY ACTIONS CURRENTLY UNDER 

REVIEW 

Agency 

Total Pending Actions: 155 

3 The White House, Office of Management and Budget, "Office of Management and Budget: Open Government," 

http://www.whitehouse.gov/omb/open. 

4 James Gattuso and Diane Katz, "Red Tape Rising: Obama-Era Regulation at the Three-Year Mark," March 13, 

2012, http://www .heritage.org/researchireports/20 12/03/red.tape-rising-obama·era-regu lation-at-the-three-yearmark. . 

5 John Merline, "Regulation Business, Jobs Booming Under Obama," Investor's Business Daily, August 15, 20 II. 

6 http://www.reginfo.gov/public/. 

2 
5 

In its Draft 2012 Report to Congress on the Benefits and Costs of Federal Regulations and 

Unfunded Mandates on State, Local, and Tribal Entities,? OIRA notes the prominence of EPA 

Clean Air Act rules in the overall regulatory apparatus, disclosing that EPA rules represent 60 to 

81 percent of the agency-estimated monetized benefits and 44 to 54 percent of the monetized 

costs of all federal regulations. 

The report further emphasizes that 97 to 98 percent of EPA's claimed benefits come from air 

quality rules, and that "the large estimated benefits of EPA rules are mostly attributable to the 

reduction in public exposure to a single air pollutant: fine particulate matter."g While footnoting 

six major areas of uncertainty about EPA's assumptions about particulate matter (PM) and 

premature mortality and stating that "further scientific work is important in this domain" and 

"[m]ore research remains to be done on several key questions," OlRA continues to accept EPA's 

particulate matter-related benefits claims to justify the costs of air quality regulations on PM as 

well as other pollutants. The reliance on PM can also be seen in EPA's March 2011 report, 

Benefits and Costs of the Clean Air Actfrom 1990 to 2020, which focused almost exclusively on 

ambient PM reductions in claiming that the overall benefits of the Clean Air Act ($2 trillion) 

outweighed overall costs ($65 billion) by a factor of 30 to 1.9 In the regulatory analysis 

accom~anying the Agency's December 2011 Mercury and Air Toxics Standards for power 

plants, 0 PM co-benefits represented over 99 percent of the overall benefits, rather than the air 

toxics being regulated (see'Figure 2),u 

Recent environmental regulatory analysis has also increasingly relied on the use of private (as 

opposed to social) benefits, which allege private financial gain attributable to regulatory actions. 

For example, in the RIA accompanying the final New Source Performance Standards for the oil 

and natural gas sector in April of2012,12 the Agency claimed that requiring companies to capture 

methane from drilling operations would lead to "revenue from additional natural gas recovery" 

that "exceeds the costs" of compliance. Calling this practice "highly suspect," The Economist in 

February of this year described the increasing influence of private benefits and PM co-benefits 

for new federal rules: 

7 http://www.whitehouse.gov/sites/defaultlfiles/omb/oira/draft 2012 cost benefit reporl.pdf. 

'Ibid. 

9 http://www.epa.gov/air/sectSI2/prospective2.html. 

\0 77 Federal Register 9304. 

II Testimony of Anne Smith, October 4, 2011, 

http://science.house.gov/sites/republicans.science.house.gov/files/documents/hearings/ 1 00411 smith O.pdf. 

12 www.epa.gov/airquality/oilandgas/pdfs/20120417finalrule.pdf. 

3 
6 

Figure 2. The Role of PM Co-Benefits and Private Bt)nefits 13 

I Moving the goalposts Soorce of monetary benefits of ot!' .... "eClUl()mkaU~l 

$i9:nifl(;~nt'" federal Wl0S, */¢Qftotal 

.. Private benefits of energy effidency 

liliiii (o,ool1efits vi .... dIKed fino partkl •• _ All other beneHts 

2007 08 09 10 

In late March, EPA announced its proposed Carbon Pollution Standard for New Power Plants, 

despite concerns that tlie regulation could effectively prevent the construction of new coal-fired 

power plants, 14 While Executive Order 13563 requires that agencies "propose or adopt a 

regulation only upon a reasoned determination that its benefits justifY its costs," EPA stated that 

the rule "will result in negligible C02 emission changes, energy impacts, quantified benefits, 

costs, and economic impacts by 2020.,,15 

Executive Order 13563 

President Obama issued EO 13563, "Improving Regulation and Regulatory Review," on January 

18,2011.16 EO 13563 outlined several imperatives for the federal government's regulatory 

system while reiterating the principles, structures, and definitions governing regulatory review 

established in Executive Orders issued in previous Administrations. The Obama Executive Order 

stipulates that the regulatory system must protect public health, welfare, safety, and the 

environment while promoting economic growth, innovation, and competitiveness. It requires the 

system to be "based on the best available science," allow for public participation, promote 

predictability, and reduce uncertainty. It must also identifY and use the most innovative and least 

burdensome tools, take into account benefits and costs, and ensure regulations are accessible, 

consistent, and easy to understand. Furthermore, the system must measure and seek to improve 

the results of regulatory requirements. 

EO 13563 reaffirms many of the requirements and principles established in the Clinton 

Administration's Executive Order 12866; specifically that the benefits of regulatory actions must 

13 The Economist, "The Rule of More: Rule-making is being made to look more beneficial under Barack Obama," 

February 18,2012, http://www.economist.com/nodel2I547772/print. 

14 Robert Bryce, "Is There Still a Case for Coal?" Manhattan Institute Issues 2012, No. 13, May 2012, 

http://www.manhattan.institute.orglhtml/irI3.htm. 

15 http://epa.gov/carbonpollutionstandard/pdfs/20 120327proposaIRIA.pdf. 

16 Executive Order 13563, "Improving Regulation and Regulatory Review," Issued by President Barack Obama, 

January 18,2011, http://www.gpo.gov/fdsys!pkgIFR-2011-01-2I1pdf/2011-1385.pdf. 

4 
7 

justify costs; regulations must be tailored to impose the least burden on society and take into 

account the costs of cumulative regulations; selection of the regulatory approaches that maximize 

net benefits; specification of performance objectives; and the identification and assessment of 

available alternatives to direct regulation. However, President Obama's Order also permits 

agencies to "consider (and discuss qualitatively) values that are difficult or impossible to 

quantify, including equity, human dignity, fairness, and distributive impacts." 

President Obama's Order also includes specific requirements for agencies regarding public 

participation, integration and innovation, flexible approaches, the use of science, and 

retrospective analyses of existing rules. The Order asks agencies to coordinate, simplify, and 

harmonize their regulatory efforts to avoid overlap or redundancies, and identify approaches that 

reduce burdens and maintain flexibility and freedom of choice for the public. Agencies are also 

urged to come up with a method to conduct retrospective analyses of existing regulations in 

order to identify any ineffective or excessively burdensome regulations and later streamline, 

modify, expand, or repeal those identified. Additionally, each agency must "ensure the 

objectivity of any scientific and technological information and processes used to support the 

agencies regulatory action." 

Cumulative Effects of Regulation 

In response to Executive Order 13563 and recommendations on strengthening regulatory review 

by the White House Jobs Council,17 OIRA Administrator·Cass Sunstein distributed an OMB 

Memorandum on March 20, 2012 with the subject "Cumulative Effects ofRegulations.,,18 The 

letter identified key recommendations from the executive order, and outlined a list of steps that 

agencies should consider in order to incorporate consideration of cumulative effects, reduce 

"redundant, overlapping, and inconsistent requirements" and "identify opportunities to 

harmonize and streamline multiple rules." Furthermore, the memorandum directed agencies, 

where appropriate and feasible, to consider "cumulative effects and opportunities for regulatory 

harmonization" and "carefully assess the appropriate content and timing of rules in light of those 

effects and opportunities" in the rule analysis process. 

The steps outlined in the guidance stipulated ways for agencies to implement and incorporate 

recommendations, considerations, and principles outlined in the executive order. Issues 

addressed by the steps included public comment and early engagement of stakeholders in the 

rulemaking process; specific consideration of cumulative effects vis-a.-vis small businesses and 

start-ups; identification of opportunities to increase net benefits while decreasing costs; 

consideration of the relationship between proposed and existing regulations; identification of 

opportunities to eliminate inconsistency and redundancy; coordination of timing, content, and 

requirements of mUltiple rulemakings for a particular sector or industry; and incorporating 

consideration ofthe interactive and cumulative effects of mUltiple regulations affecting specific 

sectors as part of agencies retrospective analysis of existing rules. 

Previous Guidance to Agency 

Executive Order 12866 

17 http://www.jobs-council.com/recommendations/summary-of.road-map.lo.renewal-report!. 

18 http://www.whitehouse.gov/sites/defaultlfiles/omb/assels/inforeg/cumulative-effects-guidance.pdf. 

5 
8 

In September of 1993, President Clinton issued Executive Order 12866, "Regulatory Planning 

and Review.,,19 The order established a regulatory planning and review process whereby the 

OMB generally, and OIRA specifically, was assigned responsibility for review of the agency 

rulemaking process; furthermore, the Order designated OIRA as "the repository of expertise 

regarding regulatory issues, including methodologies and procedures that affect more than one 

agency ... " Pursuant to this characterization, the Order proceeded to assign substantial 

responsibility to 0 IRA both with regards to the regulatory process in general and the 

implementation of the Order specifically. 

The stated intention of the order was to "reform and make more efficient the regulatory process" 

and it established a regulatory philosophy and principles for agencies to incorporate or abide by 

in order to achieve this end. Per the identified principles, agencies would be required, among 

other things, to assess the costs and the benefits of intended regulations, and propose or adopt a 

regulation "only upon a reasoned determination that the benefits of an intended regulation justify 

its costs."zo The order also established the organization of the regulatory planning and review 

process, and assigned OMB and OIRA responsibility for ensuring that agencies incorporated the 

principles in the rulemaking process. 

OMB Circular A-4 

Circular A-4, issued by the Office of Management and Budget to the heads of executive agencies 

and establishments on September 17,2003, provides guidance to Federal agencies on the 

development of regulatory analysis and regulatory accounting statements as required by 

Executive Order 12866 and the Regulatory Right-to Know ACt.21 This circular served as a 

replacement for OMB's 1996 "Best Practices" document and the subsequent guidance issued in 

2000. Circular A-4 defines "good regulatory analysis" and also helps standardize the manner in 

which the benefits and costs of Federal regulatory action are measured and reported. It also 

incorporated and elaborated on the regulatory philosophy and principles outlined in Clinton's 

order. 

Per the circular, regulatory analyses should contain a statement of the need for the proposed 

action, which would include an identification of the problems to be addressed and specific 

authority to do so. An examination of alternative approaches based on several factors and 

variables must also be undertaken, followed by an evaluation of benefits and costs, both 

qualitative and quantitative, of the proposed action and identified alternatives. The circular 

provides instructions for agencies on how to perform a cost-benefit analysis, identifyfng key 

components and characteristics, such as establishment of a scope and baseline, evaluation of 

alternatives, and the transparency and reproducibility of results. Furthermore, the circular 

identifies opportunity cost as a key measure in estimating costs and benefits; OMB identifies 

"willingness-to-pay," or what individuals are willing to forgo to enjoy a particular benefit, as the 

most appropriate metric, although "willingness-to-accept," an individual's willingness to accept 

19 httll:llwww.whitehouse.gov/sites/defaultlfiles/omb/inforegleoI2866.pdf. 

20 This is a departure from a prior executive order, issued by President Reagan in 1981, which stipulated, 

"Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the 

potential costs to society ... the alternative involving the least net cost to society shall be chosen ... ". 

Executive Order 12291, "Federal Regulation" issued by President Ronald Reagan. February 17, 1981. Accessible at: 

http://www.archives.gov/federal-register/codificationlexecutive-order/I2291.html 

21 The White House, Office of Management and Budget, "Circular A-4," September 17, 2003, 

http://www.whitehouse.gov/omb/circulars a004 a-4/. 

6 
9 

compensation, is also included as a possible measure in some circumstances. The circular directs 

agencies to take into account ancillary benefits and countervailing risks in addition to simply 

examining direct benefits and costs. 

OMB Final Information Ouality Bulletin for Peer Review 

The general authority granted to OMB allows the office to oversee the quality of agency 

information, analyses, and regulatory action. Thus, as part of a larger effort to improve the 

quality of scientific information upon which policy decisions are based, OMB issued its "Final 

Information Quality Bulletin for Peer Review" in December of 2004.22 This bulletin, applicable 

to all departments and agencies, established "government-wide guidance aimed at enhancing the 

practice of peer review of government science documents" in order to increase the quality and 

credibility of scientific information generated by the federal government. 

The guidance addressed several questions fundamental to the peer review process such as what 

information is subject to peer review, the selection of appropriate reviewers, opportunities for 

public participation in the process, and additionally defined a planning process that would allow 

for dialogue between the agency, the public, and the scientific community. It also established 

definitions and government wide standards concerning when peer review is required and what 

type of peer review should be considered in various circumstances. 

EPA's Guidelines for Preparing Economic Analvses 

In order to meet the requirements of Executive Order 12866 and OMB Circular A-4, the 

Environmental Protection Agency undertook internal efforts to develop a framework for 

economic analyses that would both "inform the policy making process and satisfy OMB's 

requirement for regulatory review." This process resulted in the agency's publication of 

Guidelinesfor Preparing Economic Analyses,23 which established a scientific framework for 

performing economic analyses of environmental regulations and policies. 

The document provides guidance for conducting cost-benefit and economic impact analyses, 

how to perform distributional analyses, and a review and explanation of discounting procedures 

to be used in evaluating environmental regulatory actions. The guideline also attempts to ensure 

that issues inherent in assessing benefits and costs, such as uncertainty, timing, and valuation, are 

treated in a consistent manner in economic analysis throughout the Agency and across all 

program offices. 

22 http://www.whitehouse.gov/sites/defaultlfiles/omb/memorandalfy200SlmOS-03.pdf. 

23 US Environmental Protection Agency, Office of the Administrator "Guidelines for Preparing Economic 

Analyses," December 2010. Accessible at: bttp:/lyosemite.epa.gov/ee/epaleerm.nsflvwANIEE-OS68-

51.pdl7$fiIe1EE-0568-51.pdf 

7 
10 

Chairman HARRIS. The Subcommittee on Energy and Environment will come to order. 

Good afternoon. I am going to first apologize for a late start but 

we just got off the Floor with our first series of votes today, and 

I want to thank you all for your patience. 

Welcome to today’s hearing entitled ‘‘EPA’s Impact on Jobs and 

Energy Affordability: Understanding the Real Costs and Benefits of 

Environmental Regulations.’’ In front of you are packets containing 

the written testimony, biographies, and truth-in-testimony disclosure for today’s panel of witnesses. 

I now recognize myself for five minutes for an opening statement. 

I want to welcome everyone to this afternoon’s hearing on EPA’s 

Impact on Jobs and Energy Affordability and to thank our witnesses for lending this Subcommittee their time and expertise. 

At the outset, I want to note that, unfortunately, due to a personal conflict, we should congratulate Cass Sunstein on the birth 

of a child. Administrator Sunstein from the White House Office of 

Information and Regulatory Affairs will not be testifying today. I 

certainly understand this explanation, although it was not communicated to the Subcommittee until late last week. I am concerned 

and somewhat disappointed in the lack of transparency and responsiveness demonstrated by the Office of Information and Regulatory 

Affairs when trying to organize this hearing.Staff reached out to 

identify a mutually agreeable hearing date over two months ago, 

and beginning on April 24, I sent formal invitations expressing 

flexibility regarding the Office’s appearance that remain unanswered. 

I would be greatly disappointed if Administrator Sunstein refused to testify at some point before this Subcommittee, especially 

in light of the fact that his predecessors have testified before the 

Science Committee and its Subcommittee nearly a dozen times. An 

unwillingness to discuss recent regulatory developments would be 

especially disconcerting, given that Mr. Sunstein is responsible for 

overseeing the Open Government Initiative for the President’s selfproclaimed ‘‘most transparent Administration in history.’’ 

Further, his office is charged with enforcing the Executive Order 

requiring that the regulatory system be ‘‘based on the best available science’’ as well as OMB standards on information quality, 

peer review, and data access. These are all issues directly relevant 

to the Subcommittee’s jurisdiction and work, and I expect the Administrator to communicate to the Subcommittee by the end of this 

week when it would be convenient for him to testify in the coming 

months. 

While OIRA is not represented to discuss this process of integrating scientific and economics assessments into regulatory decision making, there are numerous Executive Orders and OMB and 

Agency guidelines for thorough regulatory analysis. Unfortunately, 

many of these guidelines have been willfully ignored in order to 

pursue an unprecedented regulatory agenda that is at odds with 

the President’s rhetoric about an ‘‘all-of-the-above’’ energy policy. 

Our witnesses today will describe a pattern of scientific and economic practices at EPA and OIRA that inflates health-based regulatory benefits; overlooks actual economic, energy affordability, and 

jobs impacts; and fails to reflect uncertainty in communicating 
11 

risks. All too often, major EPA regulations have been underpinned 

by secret science, hidden data, and black box models. As demonstrated in the hydraulic fracturing cases in Pavillion, Wyoming, 

Parker County, Texas, and Dimock, Pennsylvania, the Agency often 

appears more concerned with crucifying press releases and enforcement actions than meaningful peer review or scientific analysis. 

Additionally, EPA has failed to account for the health impacts of 

the higher energy prices and joblessness that these regulations 

guarantee. More and more of these regulations are almost exclusively justified on the basis of incidental ‘‘co-benefits’’ from particulate matter reductions—raising the specter of double-counting—and 

private benefits on the assumption that all regulated entities are 

acting irrationally and against their economic self-interest and 

the—and that EPA knows what is best for their bottom line. 

The absurdity of these estimates is demonstrated in OIRA’s 2012 

Draft Report to Congress, which indicates that, based on benefits 

estimates generated by EPA, the Agency’s air quality regulations 

represent almost 80 percent of the benefits for all federal rules. Despite President Obama’s Executive Order requiring that regulatory 

benefits justify costs, EPA recently announced its Carbon Pollution 

Standard for New Power Plants and claimed that the rule ‘‘will result in negligible CO2 emission changes, energy impacts, quantified 

benefits, costs, and economic impacts.’’ As a matter of principle, 

regulatory benefits should justify their costs, and EPA’s pursuit of 

this coal-killing regulation, despite its own admission that the rule 

has negligible benefits is mind boggling. As several of our witnesses will testify, this statement strains credulity, and the proposal is a de facto ban on new, clean, coal-generated electricity in 

this country, as well as directly at odds with the President’s ‘‘allof-the-above’’ energy rhetoric. 

I want to thank the witnesses for appearing before the Subcommittee today, and I look forward to a constructive discussion. 

I yield back the balance of my time, and I recognize the Ranking 

Member, Mr. Miller, for five minutes for an opening statement. 

[The prepared statement of Mr. Harris follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE CHAIRMAN ANDY HARRIS

I want to welcome everyone to this afternoon’s hearing on EPA’s Impact on Jobs 

and Energy Affordability, and thank our witnesses for lending this Subcommittee 

their time and expertise. 

At the outset, I want to note that, unfortunately, due to a personal conflict, Administrator Cass Sunstein from the White House Office of Information and Regulatory Affairs, or OIRA, will not be testifying today. I certainly understand this explanation, although it was not communicated to the Subcommittee until late last 

week. I am concerned and somewhat disappointed in the lack of transparency and 

responsiveness demonstrated by OIRA when trying to organize this hearing. Staff 

reached out to identify a mutually agreeable hearing date over two months ago, and 

beginning on April 24 I sent formal invitations expressing flexibility regarding 

OIRA’s appearance that remain unanswered. 

I would be greatly disappointed if Administrator Sunstein refused to testify before 

this Subcommittee, especially in light of the fact that his predecessors have testified 

before the Science Committee and its Subcommittees nearly a dozen times. An unwillingness to discuss recent regulatory developments would be especially disconcerting, given that Mr. Sunstein is responsible for overseeing the Open Government Initiative for the President’s self-proclaimed ‘‘most transparent Administration 

in history.’’ Further, his office is charged with enforcing the Executive Order requiring that the regulatory system be ‘‘based on the best available science’’ as well as 
12 

OMB standards on information quality, peer review, and data access. These are all 

issues directly relevant to the Subcommittee’s jurisdiction and work, and I expect 

the Administrator to communicate to the Subcommittee by the end of this week 

when it would be convenient to testify in the coming months. 

While OIRA is not represented to discuss this process of integrating scientific and 

economics assessments into regulatory decision making, there are numerous Executive Orders and OMB and Agency guidelines for thorough regulatory analysis. Unfortunately, many of these guidelines have been willfully ignored in order to pursue 

an unprecedented regulatory agenda that is at odds with the President’s rhetoric 

about an ‘‘all-of-the-above’’ energy policy. 

Our witnesses today will describe a pattern of scientific and economic practices 

at EPA and OIRA that inflates health-based regulatory benefits, overlooks actual 

economic, energy affordability, and jobs impacts, and fails to reflect uncertainty in 

communicating risks. All too often, major EPA regulations have been underpinned 

by secret science, hidden data, and black box models. As demonstrated in the hydraulic fracturing cases in Pavillion, Wyoming, Parker County, Texas, and Dimock, 

Pennsylvania, the Agency often appears more concerned with crucifying press releases and enforcement actions than meaningful peer review or scientific analysis. 

Additionally, EPA has failed to account for the health impacts of the higher energy prices and joblessness that these regulations guarantee. More and more of 

these regulations are almost exclusively justified on the basis of incidental ‘‘co-benefits’’ from particulate matter reductions (raising the specter of double counting) and 

private benefits on the assumption that all regulated entities are acting irrationally 

and against their economic self-interest (and that EPA knows what is best for their 

bottom line). 

The absurdity of these estimates is demonstrated in OIRA’s 2012 Draft Report to 

Congress, which indicates that, based upon benefits estimates generated by EPA, 

the Agency’s air quality regulations represent almost 80 percent of the benefits for 

all federal rules. Despite President Obama’s Executive Order requiring that regulatory benefits justify costs, EPA recently announced its Carbon Pollution Standard 

for New Power Plants and claimed that the rule ‘‘will result in negligible CO2 emission changes, energy impacts, quantified benefits, costs, and economic impacts.’’ As 

a matter of principle, regulatory benefits should justify their costs, and EPA’s pursuit of this coal-killing regulation, despite its own admission that the rule has negligible benefits, is mind boggling. As several of our witnesses will testify, this statement strains credulity, and the proposal is a de facto ban on new, cleaner coal-generated electricity in this country as well as directly at odds with the President’s ‘‘allof-the-above’’ energy rhetoric. 

I want to thank the witnesses for appearing before the Subcommittee today and 

I look forward to a constructive discussion. 

I yield back my time. 

Mr. MILLER. Thank you, Chairman Harris. 

I also want to begin by congratulating OIRA Administrator Cass 

Sunstein on the birth of a daughter last week. The human gestation period is somewhat predictable, and I suspect that Mr. 

Sunstein has known for some time that his wife would give birth 

about when she did. And that explains some of his reluctance to 

agree to a date to testify from among the options that the majority 

offered him. It is hard for me to imagine that he may not have 

mentioned that as the reason until last week, but it is hard for me 

to imagine he was keeping his wife’s pregnancy secret. Pregnancy, 

particularly in the later stages, tends to be a fairly transparent 

event. 

But today’s hearing is one he probably would not mind missing. 

This Committee certainly should inquire into the cost-benefit analysis of environmental regulations. I have been concerned about economic cost-benefit analysis for a long time. Placing a dollar value 

on human life in deciding the economic benefit of environmental 

regulations raises serious questions, both practical and moral. 

Should we really value the lives of older Americans less than 

younger Americans, as at least one of our witnesses today apparently favors? And in a letter to Administrator Sunstein last fall, 
13 

Chairman Harris asked, ‘‘in spite of the fact that most mortality 

associated with particulate matter happens in the population over 

65 years of age, EPA puts the same value on mortality for all ages. 

In your view, is this practice appropriate?’’ 

The Bush Administration briefly considered a senior death discount to justify weakening environmental regulations by valuing 

the lives of Americans older than 70 at 37 percent less than the 

values of the lives of other Americans. Their analysis reduced the 

economic benefit of one air pollution regulation from $77 billion to 

$8 billion. The Bush Administration recognized that they were 

swimming in deep waters, however, and dropped the idea of a senior death discount in economic cost-benefit analysis. That seems 

like the right decision to me. 

But we know that as a practical matter if we forbid anything 

that could result in someone’s death, then all economic activity will 

grind to a halt. But putting a dollar value on lives and valuing the 

lives of some more than others raises profound moral questions. I 

admit that deep philosophical discussions make me feel like I am 

back in college. I am in a dorm room late at night; three or four 

of us have had a few beers. We are sure that we are considering 

issues that have gone largely unexamined by previous generations 

and that our insights are wise beyond our years, but it is certainly 

better to talk about these questions out loud and let the American 

people in on the discussion. They might not agree that old folks’ 

lives should be discounted. In fact, they might decide that Congress 

is really just more interested in pleasing special interests than in 

protecting the health of our mothers and fathers. And any supposed philosophical justification or economic justification for what 

Congress is doing is phony. 

If that was what this hearing was about or even a discussion of 

economic cost-benefit analysis that was a notch or two less abstract 

or philosophical, the majority would have invited EPA to provide 

a witness to explain how it would do cost-benefit analysis. So EPA, 

it does cost-benefit analysis of environmental regulations, not 

OIRA. Instead, this hearing is one more forum for big, specific industries to air their grievances about the EPA. We have heard 

again and again over the last year and a half that the EPA is filled 

with authoritarian zealots bent on destroying jobs, raising energy 

costs, and otherwise making us all eat granola, wear sandals, and 

ride bicycles. We have heard repeatedly that the EPA knows little 

of scientific methods and even less of economic analysis often from 

witnesses with few apparent credentials as scientists or economists. 

Given the disjointed nature of the list of particular grievances 

with the EPA aired today, the minority decided not to call a witness to today’s hearing. If this Committee holds a hearing in the 

future for a serious, focused discussion of cost-benefit analysis, the 

communities affected by environmental exposures, and the practical and moral judgments that are behind the value of statistical 

life, we will certainly invite a witness. 

For today, I am submitting for the record letters and reports by 

groups and experts with the experience and knowledge to contribute to a thoughtful discussion of cost-benefit analysis. 
14 

I yield back. And Mr. Chairman, I believe that you have been 

provided already—or your staff has been provided already a list of 

the letters—the documents that we submit for the record. 

[The prepared statement of Mr. Miller follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE RANKING MEMBER BRAD MILLER

Thank you, Chairman Harris. 

I want to begin by congratulating OIRA Administrator Cass Sunstein on the birth 

of a daughter last week. The human gestation period is somewhat predictable, and 

I suspect that Mr. Sunstein has known for some time that his wife would give birth 

about when she did, and that explains some of his reluctance to agree to a date to 

testify from among the options that the majority offered. 

But today’s hearing is one he probably doesn’t mind missing. 

This Committee certainly should inquire into the cost-benefit analysis of environmental regulations. I’ve been concerned about economic cost-benefit analysis for a 

long time. Placing a dollar value on human life in deciding the economic benefit of 

environmental regulations raises serious questions, both practical and moral. 

Should we really value the lives of older Americans less than younger Americans, 

as at least one of our witnesses apparently favors? And in a letter to Administrator 

Sunstein last fall, Chairman Harris asked,‘‘In spite of the fact that most mortality 

associated with [particulate matter] happens in the population over 65 years of age, 

EPA puts the same value on mortality for all ages. In you view, is this practice appropriate?’’ 

The Bush Administration briefly considered a ‘‘senior death discount’’ to justify 

weakening environmental regulation. By valuing the lives of Americans older than 

70 at 37 percent less than the lives of other Americans, their analysis reduced the 

economic benefit of one air pollution regulation from $77 billion to $8 billion. 

The Bush Administration recognized that and dropped the idea of a ‘‘senior death 

discount’’ in economic cost-benefit analysis. That still seems like the right decision 

to me. 

We know that as a practical matter, if we forbid anything that might result in 

someone’s death, then all economic activity would grind to a halt. But putting a dollar value on lives, and valuing some lives more than others, raises profound moral 

questions. 

I admit that deep philosophic discussions make me feel like I’m back in college, 

I’m in a dorm room late at night, three or four of us have had a few beers, and 

we’re sure that we’re considering issues that have gone largely unexamined by previous generations and that our insights are wise beyond our years. 

But it’s certainly better to talk about these questions out loud and let the American people in on the discussion. They might not agree that old folks’ lives should 

be discounted. In fact, they might decide that Congress is really just more interested 

in pleasing special interests than in protecting the health of our mothers and fathers, and any supposed philosophical justification for what Congress is doing is 

phony. 

That’s what the title of this hearing suggested we would discuss today. 

If that was what this hearing was about, or even a discussion of economic costbenefit analysis that was a notch or two less abstract or philosophical, the majority 

would have invited the EPA to provide a witness to explain how they do cost-benefit 

analysis. Instead, this hearing is one more forum for specific big industries to air 

their grievances about the EPA. We’ve heard again and again that the EPA is filled 

with authoritarian zealots bent on destroying jobs, raising energy costs, and otherwise making us all eat granola, grow beards, and ride bicycles. We’ve heard repeatedly that the EPA really knows little of scientific methods and even less of economic 

analysis, often from witnesses with few apparent credentials as scientists or economists. 

Given the disjointed nature of the list of grievances with the EPA aired today, 

the minority decided not to call a witness. If this Subcommittee holds a future hearing for a serious, focused discussion of cost-benefit analysis, the communities affected by environmental exposures, and the practical and moral questions that are 

behind the Value of Statistical Life, we will certainly invite a witness. For today, 

I am submitting for the record letters and reports by groups and experts with the 

experience and knowledge to contribute to a thoughtful discusssion of cost-benefit 

analysis. 

I yield back. 
15 

Chairman HARRIS. Yes. The Chair appreciates the request, but 

I have to reserve the right to object to inclusion of the items in the 

record at this time as our staff simply has not had the time to adequately review the contents of the documents for relevance and appropriateness. As you know, we received—or may not know—we received most of the materials at 11:30 last night. And, you know, 

Congress, we like to think is a 24/7 body, but 11:30 last night is 

a little late. We received additional materials at 10 o’clock this 

morning. You know that we have been in session since then, and 

they total 18 documents and 140 pages. And, you know, we read 

fast, but we don’t read that fast. 

So it is quite possible that most, if not all, of these items will not 

present a problem but we simply need additional time for review. 

The Chair would remind and encourage all Members wishing to 

submit extensive materials into the record to share those as far in 

advance as possible to allow for reasonable review times so that we 

can, you know, get them in the record under unanimous consent, 

but I am afraid that won’t be possible at this time. 

Mr. MILLER. And, Mr. Chairman, given that, first of all, I would 

like to have a chance to discuss these issues if you determine on 

any basis that these should not be part of the record. I do not recall 

any time that the minority has submitted documents for the record 

and had that request denied, but I would reserve the right to object 

to any documents that the majority wishes to enter into the record. 

Chairman HARRIS. Sure. And if we send something over at 11:30 

last night, I think you—it would be totally, totally appropriate for 

you to—especially 140 pages at 11:30 at night, it would be totally 

appropriate for that to be a fact. 

Let me just—since you mentioned a letter that I had written to 

Mr. Sunstein, I look forward to discussing the issues about statistical lives, maybe with Administrator Sunstein, maybe with Ezekiel 

Emanuel also, because the whole purpose of the letter was that, in 

fact, Mr. Sunstein has said that we should use statistical life here 

and has repeatedly called for conducting regulatory analysis. I actually asked, is it appropriate in an EPA study? So I agree with 

you that that is something we should discuss in a very open forum. 

Now, if there are Members who wish to submit additional opening statements, your statements will be added to the record at this 

point. 

At this time, I would like to introduce three of our witnesses, and 

I will yield to Mrs. Biggert to introduce Mr. Wolf and Mr. Trzupek. 

The first witness is Dr. Michael Honeycutt, the Chief Toxicologist 

with the Texas Commission on Environmental Quality. Welcome 

back. He has been employed by the TCEQ since 1996 and has managed a division of 14 toxicologists since 2003. His responsibilities 

include overseeing health effects, reviews of air permit applications, overseeing the review of the results of ambient air monitoring projects, and overseeing the reviews of human health risk 

assessments for hazardous waste sites. 

Our next witness is Mr. Eugene Trisko, Attorney-at-Law, who is 

testifying on behalf of the American Coalition for Clean Coal Electricity. For 10 years, Mr. Trisko served as an expert witness on 

water utility cost of capital before the Public Utility Commissions 

of Maryland, Virginia, and West Virginia. In 2000 and again in 
16 

2007, Mr. Trisko was appointed by the U.S. Department of State 

to represent U.S. industry and labor in bilateral negotiations with 

Canada on air pollution control. 

Our fourth witness today will be Mr. David Hudgins, the Director of Member and External Relations at the Old Dominion Electric 

Cooperative. Old Dominion is a generation and transmission cooperative that supplies the electricity needs of 12-member electric distribution cooperatives that serve over 500,000 customers in Virginia, Delaware, and Maryland, and I might add, the 1st Congressional District of Maryland as well. In his position, Mr. Hudgins 

works with these member cooperatives and local, regional, and 

state governmental agencies to identify and attract businesses to 

locate in the predominantly rural areas served by these cooperatives. 

I now yield to Mrs. Biggert to introduce our third witness, Mr. 

Tom Wolf; and our fifth and final witness, Mr. Richard Trzupek. 

Mrs. BIGGERT. Thank you, Mr. Chairman. It is my pleasure to be 

here this afternoon to introduce both of these witnesses from my 

home State of Illinois. 

Mr. Wolf is the Executive Director of the Illinois Chamber of 

Commerce’s Energy Council, where he advocates for the development of across-the-board energy sources. Prior to joining the Chamber, Mr. Wolf spent more than 20 years as a Public Affairs Executive and holds a bachelor’s degree from the University of Wisconsin 

in Madison. 

Mr. Trzupek has worked in the environmental industry for three 

decades, starting as a stat tester and now acting as an Environmental Consultant to many businesses. He is the author of Air 

Quality Permitting and Compliance Manual and Regulators Gone 

Wild. I haven’t read that one yet—but how the EPA is ruining 

America’s industry—and holds a bachelor’s degree from Loyola 

University in Chicago. 

So I thank both of you for joining us and providing your insights 

into these troubling EPA regulations. I look forward to hearing 

your testimony. 

Yield back, Mr. Chairman. 

Chairman HARRIS. Thank you very much, Mrs. Biggert. 

As our witnesses should know, spoken testimony is limited to 

five minutes, each after which the Members of the Committee will 

have five minutes each to ask questions. 

I now recognize Dr. Michael Honeycutt to present his testimony. 

STATEMENT OF DR. MICHAEL HONEYCUTT, 

CHIEF TOXICOLOGIST, 

TEXAS COMMISSION ON ENVIRONMENTAL QUALITY 

Mr. HONEYCUTT. Good afternoon, Mr. Chairman and Members of 

the Committee. I am Dr. Michael Honeycutt, Director of the Toxicology Division at the TCEQ. I have submitted more detailed written comments on the science behind EPA’s cost-benefit analysis, 

but I will touch on a couple of highlights right now. 

The EPA’s cost-benefit analysis is detailed in the Regulatory Impact Analysis for each significant rule. A number of Executive Orders address the requirement for and the goals of cost-benefit anal-
17 

ysis. Under the Reagan Administration, the benefits for a proposed 

rule had to outweigh the cost for that rule. However, the Clinton 

Administration in this—the language was changed substantially 

such that the benefits must simply justify the cost. That position 

is maintained in the current administration, along with consideration for additional factors such as equity, fairness, promotion of 

economic growth, and job creation. 

The vast majority of the benefits that EPA calculates come from 

the so-called ‘‘co-benefits’’ of reducing fine particulate matter, or 

PM, even on the rules that do not directly target PM. Those estimated benefits rely heavily on two key assumptions: number one, 

that PM causes mortality; and that, number two, that there is no 

safe level of exposure to PM. The most recent analysis of the costs 

and benefits of the Clean Air Act concludes that for every $1 society spends complying with these regulations, $30 in benefits is obtained. However, more objective assessments of the human health 

benefits from cleaner air do not necessarily support the conclusion 

that the benefits outweigh costs. 

Keeping that in mind, I want to briefly talk about the ecological 

epidemiology studies that EPA is using as the primary basis for the 

PM benefits. These studies are exploratory studies designed to look 

for correlations. They are supposed to be followed up by more rigorous epidemiology and clinical studies to determine whether the 

correlations are real. These studies are not supposed to be used 

quantitatively, and they are certainly not rigorous enough to set 

environmental policy. The assumption is that breathing PM made 

individuals die sooner than they would have otherwise. 

This type of study is notorious for unresolved issues. Were the 

individuals actually outside? Did they take their medications that 

day? Do they have other risk factors with a stronger influence on 

life expectancy like smoking, cholesterol levels or obesity? There 

are a whole host of common-sense questions that go unanswered in 

these studies. Simply put, these studies cannot tell us if PM caused 

these deaths or even if these people died prematurely, much less 

tell us what PM might have caused their death. 

Since 2009, the EPA has assumed that there is a linear relationship between PM exposure and mortality. And you can see on the 

overhead here, data from a typical study showing that the relationship between mortality risk and PM levels is not obvious. That is 

not a straight line. I am sorry. In fact, one would be hard pressed 

to detect a linear association. Nevertheless, statisticians can run 

data through elegant models to try to find statistically significant 

correlations, but the output of those models is only as good as the 

input and, as any scientist will tell you, statistical correlation alone 

does not imply causation. 

EPA also assumes that any exposure to PM, no matter how low, 

directly causes premature death. This method extrapolates risk far 

below the NAAQS, extending to background levels. This approach 

is not entirely accurate, nor is it conclusively supported by the 

data. In fact, ecological epidemiology studies are not designed to 

detect thresholds. Furthermore, this assumption does not take into 

account the fact that the body can handle small doses of PM, and 

indeed, this concept is the cornerstone of toxicology. 
18 

When the scientific data addressing the association between PM 

and premature death is examined in detail, it becomes obvious that 

these statistical associations may have very little biological significance. The increased chance of dying that is reportedly due to PM 

exposure is extremely small. This chance is communicated by what 

is known as relative risk, with a relative risk of 1.0 being not significant. Scientific as well as legal guidance indicates that relative 

risks below 2.0 should not be considered to support this relationship. The relative risks for PM and premature death reported to 

date are considerably lower than 2.0. 

For the two studies EPA uses, one relative risk is 1.06 and the 

other is 1.16. Some of the studies show no relationship, and in fact, 

some studies suggest that PM can make you live longer. 

These issues illustrate EPA’s modus operandi. The concept of 

‘‘weight of evidence’’ is misused to discount contradictory data. 

They use worst-case assumptions, fail to put risks into proper perspective, and fail to disclose how uncertain the data are. Our agency believes that regulations are an integral and necessary tool to 

protect public health and our natural resources. Likewise, our expectation is that those regulations be based on sound science and 

justifiable and that they realize true benefits. 

Thank you for this opportunity. 

[The prepared statement of Mr. Honeycutt follows:] 
19 

Testimony of Dr. Michael Honeycutt, TCEQ 

One Page Summary of Main Points 

BackgroundjPurposeofRIAs 

EPA uses the reduction of PM2 .

S in its Regulatory Impact Analyses (RIA) for rulemaking under 

the Clean Air Act to show that the benefits of the regulations justify the costs. 

1. Under the Reagan administration, the benefits of proposed rules were required to 

outweigh the costs. However, recent executive orders under the Clinton and Obama 

administrations require the benefits of regulatory action to justify the costs. 

2. EPA uses the reductions of PM2.

S in its Regulatory Impact Analyses (RIA) for 

rulemaking under the Clean Air Act. 

a. Reductions of PM2.

S are used even when regulations are not related to PM2.S 

exposure because these reductions are expected to occur coincidentally due to 

the use of control technologies required by the proposed rule. 

Changes in PM2 .

5 methodology 

Changes in the methodology used to measure the benefits from reducing PM •. s are not based 

on sound science and have resulted in an increase in deaths attributed to PM •. s, despite 

improved air quality, resulting in inflated benefits. 

3. EPA recently changed the methodology used to measure the benefits from reducing 

PM2 .

S. These changes include: 

a. A "no threshold model" inaccurately assumes incremental benefits in lower 

levels of PM2.S• down to background levels. 

b. Risks are incorrectly attributed to very low levels of ambient PM2.

S. 

c. A causal relationship between PM2 .

S and mortality is assumed by only using 

data that supports the conclusion that PM2 .

5 exposure causes premature 

mortality. EPA ignored well-conducted studies that contradict their findings. 

The studies EPA used to say a causal relationship exists cannot be used for this 

purpose. 

d. Inappropriate use of a Value of Statistical Life (VSL) creates an inaccurate 

projection oflives "saved." 

4. EPA's changes to the PM2•

S methodology resulted in an increase in deaths attributed to 

PM2.

S, despite improved air quality. 

a. This methodology together with the inappropriate use ofVSL has resulted in 

inflated benefits of reducing PM2.5 and creates the illusion of Clean Air Act 

benefits that vastly outweigh the costs of rule implementation. 

Inflated benefit! cost ratio 

EPA claims that the benefits of reducing PM2.

S outweigh the costs by 30 to 1. However, 

alternative assessments of the human health benefits from cleaner air do not necessarily 

support the conclusion that benefits outweigh costs. 

5. Using flawed methodology, EPA claims that the benefits outweigh ilie costs by 36 to 1. 

a. By correcting Q.!l)x the inaccurate use ofVSL, it can be determined that the 

benefit:cost ratio is 5:1. Objective analysis indicates that the benefit:cost ratio is 

actually 0.3:1. 

6. This trend amounts to censoring the information being communicated to the risk 

manager. 

a. The same statistical "lives" are counted in multiple rules, resulting in a double 

counting of benefits. 

b. Costs are unique to each rule. 
20 

Good morning, Mr. Chainnan and members of the committee. I am Dr. Michael Honeycutt, 

director ofthe Toxicology Division at the Texas Commission on Environmental Quality. I have 

submitted more detailed written comments on the science behind the EPA's cost benefit 

analyses, but I'll touch on a couple of highlights now. 

The EPA's cost benefit analysis is detailed in the Regulatory Impact Analysis (RIA) for each 

significant rule!. A number of Executive Orders address the requirement for and goals of cost 

benefit analysis. Under the Reagan administration2 the benefits for a proposed rule had to 

outweigh the costs for that rule. However, with the Clinton administration3 this language was 

changed substantially such that the benefits must simply justifY the costs. That position is 

maintained in the current administration 4 along with consideration for additional factors such as 

equity, fairness, promotion of economic growth, and job creation. 

The vast majority of the benefits that EPA calculates5 come from the so-called "co-benefits" of 

reducing fine particulate matter6

, or PM, even on rules that do not directly target PM. Those 

estimated benefits rely heavily on two key assumptions: I) that PM causes mortality and 2) that 

there is no safe level of exposure to PM. The most recent analysis 7 of the costs and benefits of 

the Clean Air Act concludes that for every $1 society spends complying with these regulations, 

$30 in benefits is obtained. However, more objective assessments of the human health benefits 

from cleaner air do not necessarily support the conclusion that benefits outweigh costs8

• 

Keeping that in mind, I want to briefly talk about the ecological epidemiology studies that EPA 

is using as the primary basis for the PM benefits. These studies are exploratory studies designed 

to look for correlations. They are supposed to be followed up by more rigorous epidemiology 

and clinical studies to detennine whether the correlations are real. These studies are not supposed 

to be used quantitatively and they certainly are not rigorous enough to set environmental policy. 

The assumption is that breathing PM made individuals die earlier than they would have 

otherwise. This type of study is notorious for unresolved issues: Were the individuals actually 

outside in the days prior to their death? Did they take their medications that day? Do they have 

other risk factors with stronger influence on life expectancy (like smoking, cholesterol, or 

weight)? There are a whole host of common sense questions that go unanswered in these studies. 

Simply put, these studies cannot tell us if PM caused these deaths or even if these people died 

prematurely, much less tell us what level of PM might have caused their death. 

Since 2009, the EPA has assumed that there is linear relationship between PM exposure and 

mortality. You can see here (figure 1) data from a typical study showing that the relationship 

1 OMB Circular A-4: A regulatory action is economically significant ifit is anticipated(l) to "(h]ave an annual 

effect on the economy of$100 million or more" or (2) to "adversely affect in a material way the economy, a sector 

ofth. economy, productivity, competition,jobs, the environment, public health Or safety, or State, local, or tribal 

governments or comrnunHies." . 

2 EO 12291, 1981 

3 EO 12866, 1993 

4 EO 13563,2011 

5 EPA, March 2011. "The Benefits and Costs of the Clean Air Act from 1990 to 2020" 

• PM,., 

'EPA, March 2011. "The Benefits and Costs of the Clean Air Act from 1990 to 2020" 

8 Tony Cox. 2012. Reassessing the human health benefits from cleaner air. Risk Analysis. 32(5):816-29. 
21 

between mortality risk and PM levels is not obvious. In fact, one would be hard pressed to detect 

a linear association. Nevertheless, statisticians can run data through elegant models to try to find 

statistically significant correlations, but the output of those models is only as good as the input 

and, as any scientist will tell you, statistical correlation alone does not imply causation. 

EPA also assumes that any exposure to PM, no matter how low, directly causes premature death. 

This method extrapolates risk far below the NAAQS, extending to background levels. This "nothreshold" agproach is not entirely accurate, nor is it conclusively supported by the 

data9,1O,1l,12, 3,14.15,16,17. In fact, ecological epidemiology studies are not designed to detect 

thresholds. Furthermore, this assumption doesn't take into account the fact that the body can 

handle small doses of PM. Indeed, this concept is the cornerstone of toxicology. 

When the scientific data addressing the association between PM and premature death is 

examined in detail, it becomes obvious that these statistical associations may have very little 

biological significance. The increased chance of dying that is reportedly due to PM exposure is 

extremely small. This chance is communicated as relative risk, with a relative risk of 1.0 being 

non-significant. Scientific as well as legal guidance indicates that relative risks below 2.0 should 

not be considered to support a hypothesized relationship l8. The relative risks for PM and 

premature death reported to date are considerably lower than 2.0. For the two studies most often 

cited by the EPA, the relative risks are 1.06 (pope et al. 200219) and 1.16 (Laden et al. 20062

1

, Many of these studies do not show a statistical relationship between PM and premature death I. 

9 McDonnell WF, N Nishino-Ishikawa; FF Petersen, LH Chen, DE Abbey. 2002. Relationships of mortality with the 

fine and coarse fractions of long-tenn ambient PM 10 concentrations in nonsmokers. Journal of Exposure Analysis 

and Environmental Epidemiology. 10(5):427-36. . 

10 Koop GM and LA Tole. 2004. An investigation of thresholds in air pollution-mortality effects. Environmental 

Modeling and Software. 21(12):1662-1673. 

11 Enstrom IE. 2005. Fine particle air pollution and total mortality amOlig elderly Californians, 1973-2002. 

Inhalation Toxicology. 17{I4):803-16. 

I' Lipfert FW, JD Baty, JP Miller, RE Wyzga. 2006. PM,s constituents and related air quality variables as 

r,redictors of survival in a cohort of U.S. military veterans. Inhalation Toxicology. 18:643-657. 

3 Franklin M, A Zeka; J Schwartz. 2007. Association between PM,., and all-cause and specific-cause mortality in 

27 U.S. communities. Journal of Exposure Science and Environmental Epidemiology. 17(3):279-87. see lag 0 data 

14 Zeger SL, F Dominici, A McDermott, JM Samet. 2008. Mortality in the Medicare population and chronic 

exposure to fine particulate air pollution in urban centers (2000-2005). Environmental Health Perspectives. 

116(12):1614-9. see dataJor Western US. 

IS Krewski D, M Jerrett, RT Burnett, R Ma, E Hughes, Y Shi, MC Turner, CA Pope 3,d, G Thurston, EE Calle, MJ 

ThUD, B Beckerman, P DeLuca; N Finkelstein, K Ito, DK Moore, KB Newbold, T Ramsay, Z Ross, H Shin, B 

Tempalski. 2009. Extended follow-up and spatial analysis of the American Cancer Society study linking particulate 

air pollution and mortality. Research Report from the Health Effects Institute. 140:5-114. see 1972-2000 data 

16 Klemm RJ, EL Thomas, RE Wyzga. 2011. The impact of frequency and duration of air quality monitoring: 

Atlanta, GA, data modeling of air pollution and mortality. 61:1281-1291. 

l7Tony Cox. 2011. Honnesis for fine particulate matter (PM,.». Dose-Response. Pre-Press Article. 

18 Federal Judicial Center Reference Manual on Scientific Evidence Second Edition (2000) p384 & frt.l40. 

19 Pope CA Ill, RT Burnett, MJ Thun, EE Calle, D Krewski, K Ito, and GD Thurston. 2002. Lung cancer, 

cardiopulmonary mortality, and long-term exposure to fine particulate air pollution. Journal of the American 

Medical Association. 287:1132-1141. 

20 Laden F, J Schwartz, FE Speizer and DW Dockery. 2006. Reduction in fine particulate air pollution and mortality. 

American Journal of Respiratory and Critical Care medicine. 173:667-672. 

21 See references 9-17 above. 
22 

Some studies even suggest PM makes you live longer22,23. EPA could have chosen a number of 

studies just as well conducted as the Pope and Laden studies and would have determined there is 

no health benefit from further regulating PM. 

These issues illustrate EPA's modus operandi. The concept of "weight of evidence" is misused 

to discount contradictory data. They use worst-case, often unrealistic assumptions, fail to put 

risks into proper perspective, and fail to disclose how uncertain the data and therefore the 

conclusions are. They extrapolate their risk assumptions to generate numbers of lives "saved" 

which unnecessarily alarms the public, and backs policy makers into a comer so that questioning 

the basis for EPA actions creates the illusion that you don't care about public health. Indeed 

these regulations can have negative unintended consequences. Our agency believes regulations to 

be an integral and necessary tool to protect public health and our natural resources. Likewise, 

our expectation is that those regulations be based on sound science, be justifiable, and that they 

realize true benefits. 

Thank you for the opportunity to give this testimony. 

NAAQS 

N Figure 1. Reported <> correlation between 

<> mortality risk and 

average annual PM2.5 

~ in Eftim et al. 2008. 

.:.: <> Adjusted mortality II) 

ii: relative risk estimates 

>- <> for Medicare ;t: 

iii <Xl <> enrollees are plotted 1:: against average PM2.5 0 

::!: for the 110 American 

Cancer Society Study 

to counties. 0 

5 ro ~ w ~ 

Average Annual PMZ.5 

Eftimet al. Epidemiology. 2008 Mar;19(2):209·16. 

22 See Franklin ef a/. 2007 data for Birmingham, Cincinnati, Dallas, Houston, Las Vegas, Los Angeles, and 

Riverside. 

23 Tony Cox. 2011. Honnesis for fine particulate matter (PM2.,). Dose-Response. Pre~Press Article. 
II 

"n,Bi·gU'fi'i.iti'V',?N,·'·itMJi:

EPA's Benefit Cost Analysis 

Susana Hildebrand, P.E., Chief Engineer 

Michael Honeycutt, Ph.D. 

Stephanie Shirley, Ph.D. 

CAAA Benefic Cost Analysis 0 TCEQ Chief Engineer's Office Q May 17, 2012 {;, Page 1 
.. Texas Commission on Environmental Qua

Mission Statement: 

The Texas Commission on Environmental Quality strives to protect our 

state's human and natural resources consistent with sustainable 

economic development. Our goal is clean air, clean water, and the safe 

management of waste. 

The TCEQ regularly weighs matters that affect the environment and 

economy. Our goal is sensible regulation that addresses real 

environmental risks, while being based on sound science and 

compliance with state and federal statutes. In every case where Texas 

disagrees with EPA's action, it is because EPA's action is not consistent 

with these principles. 

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office 0 May 17, 2012 0 Page 2 
,. Background 

• March 2011 - EPA published "Benefits and Costs of the 

Clean Air Act from 1990 to 2020 (Second Prospective 

Study)" 

- Benefits ($2T) outweigh costs ($65B) by 30 to 1 

• TCEQ staff examined this analysis, focusing on: 

• The studies used 

• The assumptions made 

• The methods employed 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office • May 17, 2012 0 Page 3 
" • Regulatory Impact Analyses 

• President requires RIAs (Regulatory Impact Analyses) fro

all agencies proposing significant regulations 

• RIA should help determine if the benefits of an action are 

likely and justify the costs or discover which of various 

possible alternatives would be the most cost-effective 

- (OMB circular A4, 09/2003) 

• RIAs are NOT subject to peer or public review 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office 0 May 17, 2012 0 Page 4 
i Key legislation - Executive Order

• E012291 - Reagan, 1981 

- "Regulatory action shall not be undertaken unless the 

potential benefits to society for the regulation outweigh the 

potential costs to society ... the alternative involving the least net cost to society shall be chosenff 

• E012866 - Clinton, 1993 

- Key change: benefits must justify the costs 

• E013563 - Obama, 2011 

- Benefits must justify the costs 

- New: equity, human dignity, fairness and distributive 

impacts are required to be considered 

- "Our regulatory system must protect public health, welfare, 

safety, and our environment while promoting economic 

growth, innovation, competitiveness, and job creationff 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office 0 May 17, 2012 0 Page 5 
• 

• 

i Use of PM

2 .S in RIAs 

EPA uses estimates of 

benefits from reducing PM 25 in its RIAs for rule'makings under the Clean Air Act 

• This is called "co-benefits" 

because a PM25 reduction is expected from efforts to reduce other air pollutants 

towards using PM2.5 

as primary source of benefits in most RIAs 

since 1997 

• Even when regulation is 

not intended to protect public health from 

exposures to ambient 

PM2.5 

T3bt.!. o:lDap'H otRtli::lAH oa PUwRwtM iD. RL\s &iac. 1997 forM:ajor 

R\\Iemamp ualkl' tile 

wuh no q'lWltifitd 'bcefito Jt:dl;ue not m this able. Wharf: I'mie 'Ofbeufit md/ot co:;r 

:u. prcn-ided.. VI b.utd onupptf bwud'llfboth 'the Oeufih aJ:oQ eost t.:otmwc. 

uml.J the. dizeOlmt u.: 1MCl iA:all 

Year 

RlAa for Rules NOT Based on Leoal Authority 

to Reoulate Ambient PM 

1991 I O;oM !olAAQS (.11 uii ... 3hr) 

Section 

19991 RtIiOiiilH:w:Rule 

f§9!fl Finll Sertwu 126 htitiOn"Rl:11e" 

10041 

tndu:;trU1 Boiltr.; &; 

Clear. Air Mm:ury Rule 

Cla;mAirVi.z&'bilit)' 

Sbtlonary :b:wm.W. CombunioXl. 

iClo7lca=ololHAP ErommobUe 

20081 OmeNUQS (.o8shi;;;:-075 Shr) 

2CiOSTiM4l(1'bTNAAQS 

10091 

loimlilbt-Dity GHG &: c..ua,' 

.wfOTSO.:!N'AAQslt=hr. 75 ppb) 

Comm't 

SoliiWi::ie-Imi-UAit. NSPS-& 

10111 CcmtrolofGHGftomM.aium& HN\)'-Outy 

:!oTfT O.:iOie-Lc.omidm.tlca:NAA"QS 

ZOTITti'illity BWer MACf NESHAP 

10ul 

PMuCoBonefitslAre 

>50%01 

T<)U,I 

, 

PMl.ICoBenefit,Are 

Only 

Benefits 

Qu:otntfflod 

:> 99.9'10 

">9904 

CAAA Benefit Cost Analysis· 0 TCEQ Chief Engineer's Office • May 17, 2012 0 Page 6 

2

Ch

Meth

From S

t
• Key Changes in PM2•s Methodology 

• The Benefits and Costs of the Clean Air Act from 

1990 to 2020 (March 2011) 

1. A no-threshold model for PM2.5 that calculates 

incremental benefits down to the lowest modeled air 

quality levels 

2. Risks attributed to very low (background) levels of 

ambient PM2.5 

3. Assumption of causal relationship between PM2.5 and 

mortality 

4. A Value of Statistical Life (VSL) 

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office. May 17, 2012. Page 7 
• 

• 1. No Threshold Model 

A no-threshold model 

for PM 2.5 that calculates 

incremental benefits 

down to the lowest 

modeled air quality 

levels 

.:.: 

0: '" a; 

t 

0 

::;: 

'" 

<> '"

"" <> 

Annual 

NAAQS 

level 

I ! 

30' 

0010-

<> Q Q '> $, 0° <> ! -0) 0 0 0 0 

: ;(,<>0 <" oJ:o:o<>o 

0<)0 00 0 

'Q)OQ (19 Q 00 0; 00 Q 

;. 

! 

<) oj 

I 

Statistically 

concentration-

functio

10 15 20 25 

Average Annual PM2.5 Eftim et aJ. 2008 

Ad

CAAA Benefit Cost Analysis G TCEQ Chief Engineer's Office 0 May 17, 2012. Page 10 
• 

i 1. No Threshold Model 

A no-threshold model 

for PM 2.5 that calculates 

incremental benefits 

down to the lowest 

modeled air quality 

levels 

"'" en 

iE 

o "' :;:: '" 

'" <:> 

Annual 

NMQS 

level 

Q j Statistically 

concentration-

functio

w w a 

Average Annual PM2.5 Eftim et al. 2008 

below lowest measured levels 

CAAA Benefit Cost Analvsis 0 TCEQ Chief Engineer's Office 0 May 17, 2012" Page 11 

Ad
• 1. No Threshold Model 

• A model 

for PM2.5 that calculates 

incremental benefits 

down to the lowest 

modeled air quality 

levels 

1. Question: what is the shape 

of the curve in the low-dose 

range? 

2. Question: is there significant 

risk associated with ambient 

PM2.s levels? 

-'" ,!Q 

0:: 

o '" :2 0 

"' o 

Annual 

NAAQS 

level 

0: <;0 

Statistically 

concentration-

functio

10 15 20 2S 

Average Annual PMz,5 Eftim et aL 2008 

below lowest measured levels 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office • May 17, 2012. Page 12 

Ad
II Clinical Exposure Studies Conducted by 

116/2010 9:34 U:lIi "..58 

>M'" 10;52 12:ll 441.49 NpdlnlcaleIlUUrequ!r!ncfQlIow>upob$eNed "91"''' OMCQ23 U'" 150.&3 Nod"IIIlQlltff'l'eUrtqUlrincfoliow"'<lpobw-.otd 

3/23/2010 Nod!nl ... .... pcllo...-v'" 

4/13/lCllO OMCU;tS NQdlnlr;aleflect"equlllil,fullaw.upoh«:l'fflI 

<4120/20.10 0""" 13;1') "." 

<m_ U:1l0 U:OO ,,,.,. Nlldinlc.leffetu.reqtllrtna:fCJ!l<Jw'1lPob!<liNtd 

January 2010 - June 2011 4(28/2010 Nodln!e.ldftcu'tq\Jlrln&fo!Iow.o.,pobltMld S/4/1(Jl0 'M"" 32O,1S Sf""" ""W 

S{11/11J10 No dlmca!efftcU.reqo.,lrinilgjl<.nlMlpolm!M\d 

6{8/1PJtJ ",.u follow-llpQbnlYll<l 

41 Volunteers G/1Sjl()10 OMCG31 13:2!l .... " W}lOlO 0",,,,, " .. 121.36 

1113/2010 1(1;49 

7/l5/ZOlIJ XCU24 1.;1,11.1 

I/lO/lOUJ 41.1.98 

Dose:35 - 750 ug/m3 S/ll/101O ",., Nodlnlc1lldfectste>:<""""roll __ $,125/2010 9f.l120t0 

9/21/10l!l 174.61 

la/6/zalO 

Results: to tlleho»pihl lO!1lZ0U'i teiemmy. ZOUCtle Report. Enl'lfl)l'l lleal\hPll'nllIKt6ol:lQ.

1 individual: elevated heart rate 1lJ1B/20l0 UJUlOIO XCt;2l1 '''' 

1 individual: irregular heart beat* l/Ii/1Oll "'''' u.C5 l/Un011 "'''' 

39 individuals: no clinical effects 1/31/2011 X«234 !l(J.9$ 2j31l1lU J((U36 57.!l1 

lI_d lillY $'flIlfIUIII\I. '11m; WM ptOYlIII!d willi lIE \1Ie £Kli 1m! hDlW 

2110/lD11 66.l6 raferredloMD. 2/2412011 "m. 12,$7 1Ol.S1 

3/l3/WU XCnS9 U:SZ " .. tfoe/II\lalIeffed:!"eqult1ns follow-lIpo/);elVed 

4/14/2011 

4/18/2011 loIc>dinlealeffed;$lequlrmsl'ollf>W.1lj>4IuelW!d 4fJSflOll NOdlolealeffedl'equlrh1llfdlow.upaMI!Ne.j 

5/2/ltlll 

Sfj6/2nll "',.., N\fdlnbld!tWm\uft1naf/llIOW-<19 ooJetW:d, 

• Case Report: Supraventrtcular Arrhythmia after S/2Jf,l:nll ""'AS 266.92 6/2/1£)11 """ in.sa .... pobst:f'.ed Exposure to Concentrated Ambient Air Pollution Sf.I/1011 Nod!!'llgldfedliretj\lllio,foH-""P4bsm<i!d 

Particles. Ghio et al. EHP. Feb. 2012. 120:275-277 • Note, <:tlnltiol Effem Is defined requiring follow",!, <It roknil to 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office • May 17, 2012 0 Page 13 
II 2. Risk Attributed to Ambient PM2.

=99% of the estimated mortality is due to concentrations less 

than the level deemed protective of public health 

!v0"4 

:90% 

.c 

:: $1)% 

.., 

i 10% 

... 

." 

OJ 

." 

'0 

,. 

.! 

50% 

.. 

J!! 

c 

" l>. 

:; 

E 

" V 

10% 

7 75 10 12 13 20 

Sa •• llne annual mean PM", level <lAg!m') 

Orthe total PM .... elated deaths avoided: 

n%occuramongpopulatlonexpo.edto PM levels at or above che LMLofche Pope etal, study. 

I 1% occur among population exposed to PM levels acor aboveche ,,':' ell. study. 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office 0 May 17, 2012 e Page 14 
.. Extrapolation of Mortality Estimate

Figul'e C-2. Distlibution of PM2.5 Mortality Risk in 2005 

Percentage of total deaths due to PM2.S 

0.85%",2.6% 

2.3% to 3.9% 

4%<o5.!% 

5.2% to 6.1% 

6.1% to '1% Counties at or above the: median risk in 200S 

From EPA - Regulatory Impact Analysis of the Propose

T oxics Rule: Final Report - March 2011 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office 0 May 17, 2012 0 Page 17 
" • 4. Value of Statistical Life Definition A Value of Statistical Life (VSL) = value of risk reduction 

A "statistical life" has traditionally referred to the aggregation of sma

risk reductions across many individuals until that aggregate reflects a 

total of one statistical life 

The VSL has been a shorthand way of referring to the monetary valu

or tradeoff between income and mortality risk reduction, i.e. the 

willingness to pay for small risk reductions across large numbers of 

people 

It has led to confusion because it has been interpreted as referring to 

the loss of identified lives 

If risk was reduced 

by 1 in 1,000,000 

savings of 200 statistical lives = value of risk reduct

for 1 year 1(11 

in a population of 200 million savings of 200 actual lives 

CAAA Benefit Cost AnalYSis c TCEQ Chief Engineer's Office • May 17, 2012 e Page 18 
i Deriving Value of Statistical Life Willingness to Pay - Road Hazard Studies 

• Example: 

- Cars with seatbelts cost $300 

more than cars without seatbelts 

- Buying a car with that option 

reduces the probability of death 

by 1 in 100,000 

Probability of death by 1 in 10

- If people are willing to pay for this option, we can 

infer that the person is placing a valuation on his/her 

life of at least $300 x 100,000 = 30,000,000 ($30 

million) 

P ........ 

f ......... 

·::;$3(J'.m

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office • May 17, 2012. Page 19 
" • Deriving Value of Statistical Life Income vs. Risk - Occupational Studies 

• Example: 

- A job carries a higher risk of 

injury, but pays $ 500 more per year 

- The more dangerous job carries 

an increased risk of injury by 

1 in 10,000 

- If people are willing to pay for this option, we can 

infer that the individuals are placing a valuation on 

their lives of at least $500 x 10,000 = 5,000,000 ($5 

million) 

$ 

·'5

r •... ·.f/ .•• 

I·· ....• ;.' .;<x18

I . ......; .• 

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office e May 17, 2012. Page 20 
11 Interpreting VSL in the Media 

"When these new [EGU MACT] standards are finalized, they will assist in preventing 11,00

attacks, 17,000 premature deaths, 120,000 cases of childhood asthma symptoms 

approximately 11,000 fewer cases of acute bronchitis among children each year. Hospital vi

be reduced and nearly 850,000 fewer days of work will be missed due to illness." 

- Lisa Jackson, EPA Administrator, 2011 

[ This was interpreted as: 

"EPA's proposed mercury and air toxics standards ... are projected to save as many as 1

American lives ... 

- John D. Walke, Natural Resources Defense Council, 2011 

"These new standards mark a huge step forward in clean air protections and will be responsi

saving thousands of lives each year." 

- Albert A. Rizzo, MD, National Volunteer Chair of the American Lung Association 

"The new EPA mercury standards will save countless lives and improve the quality of lif

millions." 

- New York Mayor Michael Bloomberg 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office 0 May 17, 2012 0 Page 21 
• 

" • Appropriate Use of Value of Statistical L

EPA V5L:$8,900,OOO 

VIe Btntftli fWd Costs "fllle aUII All' Actfro

TADLE 5-8. LIFE YEARS GAINEP ANO LIFE EXPECTANCY GAIN ESTIMATES FROM THE 

POPULATION SIMULATION MODEL 

AGE COHORT 

LIFE·YEARS GAlHED IN I CUMULATIVE UF! Y£ARS 

SpECIFIC YEARS GAINED THROUGH TARGET I LIFE EXPECT

(ANNUAL) YEAR (YE

START AGE I END AGE 1 2020 2040 2020 21'''' 2010 I 2

Lives Saved vs. Life-Years Added 

Deaths "prevented or avoided" 

Gains in life expectancy 

40 49 60,000 71,000 910,000 2,300,000 0.63 

4-'.'1 .... 17,_000 •. OOO .... 

I .. 

Utility 

o • ......, _________ 1..-_ 

Time 

Figure: Determining OueImy..Adjusted Survlvai-Length of tile (lime) is plotted 

agaitlat quality 01 Nfo (utilh.y). The area underthe 

...-., ___ d In qualit, .... ju>1ed (OALVs). 

From Weeks 1995 

, 100+ 200,000 490,000 ),100,000 0 

3,800,0001 22.000,000 80,000,000 

Column ent.rles tooot utoroundlnR. UtI!!! expectancy mutts areincrtmentll

conditional Ufe- at the start ap of 

The median age of people who gain e

months of life from cleaner air is clos

80 years 

Adjustment of VSL for quality of life: 

EPA VSL of $8,900,000 appropri

for healthy young adult (::::25) 

6: 1 ratio for 25 vs. 80 year old 

CAAA Benefit Cost Analysis c TCEQ Chief Engineer'S Office • May 17, 2012. Page 22 
W Clean Air Act - Benefits and Costs 

reduced number of deaths in 2020 * value per statistical life saved 

= 230,000 fewer deaths * $8,900,000 per life saved 

::= $2 trillion 

Benefit/Cost = $2 triUion/$0.065 trillion*::= 30 

life-years gained in 2020 * value per statistical life-year gained 

=1,900,000 life-years gained * $150,000Ilife-year gained 

::= $0.3 trillion 

Benefit/Cost = $0.3 trillion/$0.065 trillion* ::= 5 

Adjusted estimate of benefit: 

$19 billion 

Benefit/Cost = $0.019 trillion/$0.065 trillion* ::= 0.3 

CAAA Benefit Cost Analysis e TCEQ Chief Engineer's Office • 17, 2012 0 Page 23 
11 Mercury & Air Toxics Standard 

Mercury $ 0.004-0.006 $ 1-2 

Acid Gasses $0 $ 32-87 

Non-Ha Metals $0 $ 1-2 

Total :S$ 0.006 $ 33-90 

• MATS is estimated to prevent 0.00209 IQ point loss per child (starting 

immediately) 

• Each child will gain 0.0956 school days over their lifetime 

• 0.00209 IQ pOints x 244,468 children = 511 IQ pOints per year 

• Assuming a net monetary loss per decrease in one IQ point of between 

rv$8,000 and rv$12,000 (in terms of foregone future earnings) 

• Benefit = $4.2M to $6.2M 

Table adapted from testimony by Anne E. Smith 212010 to Subcommittee on Energy and Power 

CAAA Benefit Cost Analysis • TCEQ Chief Engineer's Office • May 17, 2012. Page 24 
II Oil 8r. Gas NSPS and NESHAPS 

Benefits 

Costs 

Non-monetized 

benefits 

NA 

- $15 

11,000 tons of HAPS 

190,000 tons of VOC 

1.0 million tons of methane 

Health effects of HAP exposure 

Health effects of PM2 .5 and ozone exposure 

Visibility. impairment 

Vegetation effects 

Climate effects 

NA 

$3.5 

670 tons of HAP 

1,200 tons of VOC 

420 tons of methane 

Health effects of HAP exposure 

Health effects of PM2 .S and ozone expo

Visibility impairment 

Vegetation effects 

Climate effects 

" .. . quantification of those benefits cannot be accomplished for this rule. This is not to imply 

there are no benefits of the rules; rather, it is a reflection of the difficulties in modeling the direct a

indirect impacts of the reductions in emissions for this industrial sector with the data currently avail

April 2012 RIA 

CAAA Benefit Cost Analysis· TCEQ Chief Engineer's Office • May 17, 2012' Page 25 
II PM Co-Benefits in RIAs 

Cost 6,400 10,600 9,329 17 4 26,35

• Double counting benefits: same statistical lives 

counted in multiple rules 

• Different costs: unique to each rule 

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office • May 17, 2012. Page 26 
n 

II Contact Information 

Susana M. Hildebrand, P.E. 

Chief Engineer 

susana. hildebrand@tceq.texas.gov 

(512) 239-4696 

Michael Honeycutt, Ph. D. 

Division Director, Toxicology 

michael. honeycutt@tceq.texas.gov 

(512) 239-1793 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office e iVJay 17, 2012. Page 27 
n 

• Health Effects of Poverty and Unemployme

• Poverty and unemployment have been recognized as risk factors 

morbidity and mortality since the 1800's (Virchow, 1848) 

• As of March 2012, there are 4,850 publications on this topic 

Unemployment and All-Cause 

Mortality 

Meta-analyses stratified by gender and age' 

Gender Mean Age HR(95% ell 

Less than 40 1.73b (1.41, 2.11) 

Women 40 to 49.9 1.34b (1.15,1.56) 

50 to 65 

Less than 40 

Men 40 to 49.9 

50 to 65 1.17c (1.00,1.36) 

RoelfsEltilISoc Sci MEld 2011; 

Relation of real GOP per capita to age-adjuste

rates, US 1900-2000 (natural logarithms

8.0000 I . : 

. 

i!I 8 7.6 .,. + + +. + .. ".; ....... . • i ...... ....... ',:'-i.... . .... . I. .._')v,,,, Ii "" :::._': 

7.8000 

6.8000 

adi. R2do.954 

6.8000 I , i , 

6.0000 8.5000 9.0000 9.5000 10.0000 

rea I GOP per capita 

(logarithmic 1990 "international" Geary-Khamisdollaraper ca

Brenner M Hint. J. Epidemiol. 2005;34:1214-12

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office c lVlay 17, 2012 Page 28 
I) With CAAA vs. Without CAAA 

Tile Bellejlrs (l1/d Com a/rile Cleoll • .J.ir ro 2020 

FIGURE 1·1. CLEAN AIR ACT SECTION 612 SCENARIOS: CONCEPTUAL SCHEMATICI 

J 

1970 

r Flr.it PrlJ.SpecINe .A. __ -.. 

,r--- '\ 

B c 

WlthoCAAA 

-Freezes pollution controls a

levels 

-Assumes no additional state 

regulation after 1990 

-Assumes no improvemen

technology or efficiency 

-"There is no way to validat

counterfactual, without-CA

scenario estimates" 

1990 2000 2010 2020 Time 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office • Mav 17, 2012 c Page 29 
• Oil & Gas NESHAPS 

Climate Benefits Using 'G\VP' Appl'oach 

Total Benefits based on 100 real' GWP adjustmenr 

(millions 2008S) 

sec Yalue for 2015 emission reductions (Sllon 

COl in 2008 dollars) 1 

$6 (mean 5% discolillt rate) $25 (mean 3% discolillt Glle) $40 (mean 2.5% discOlIIltr3te) 

$76 (95111 percentile at 3% discount fate) 

:\lethane Embsion Reductions 3 (M:\lT eOt'e) 

Final NSPS 

$100 

$440 

$700 

S1,300 

17.0 

April1B. 2012 Press Conference 

Finall'IISHAP 

Amendments 

$0.05 

$0.20 $0.32 $0.60 

0.008 

"Today's rules would yield significant reductions in methane, a potent greenhouse gas. EPA's 

Regulatory Impact Analysis for the rule estimates the value of the climate co-benefits that 

would result from this reduction at $440 million annually by 2015." 

-Gina McCarthy 

[ Reported monetized benefit: $0 

Note: benefits calculated at 3%, but costs at 7% 

CAAA Benefit Cost Analysis G TCEQ Chief Engineer's Office G May 17, 2012 0 Page 30 
.. 

Costs of the Clean Air Act and Amendmen

PM Co- PM Co- Benefits Are • Cross State Ai 

Year RIAs for Rules Not Targeting Ambient PM 2.5 Benefltsare Only Benefits Cost ($ Bllllon)* >50% of Total Quantified Pollution Rule 

1997 Ozone NAAQS (.121hr=>.08 8hr) , 9.60 

1997 Pulp&Paper NESHAP 6.48 - EPA estimate

1998 Ox SIP call & Section 126 Petitions 1.66 cost:$800 m

1999 Regional Haze Rule , 1.74 

1999 Final Section 126 Petition Rule , 1.15 annually 2004 tationary Ree! rocating Internal Combustion En in NESHAP , 0.25 

2004 Industria! Boilers & Process Heaters NESHAP x x 0.86 - Independen

2005 Clean Air Mercury Rule x 0.90 2005 lean Air Visibility Rule/BART Guidelines , 1.50 analysis: $1

2006 tationarv Compression I nition Interna! Combustion En ine N$P$ 0.06 billion by 20

2007 Control of HAP from mobile sources , x 0.36 200S zone NAAQS (.08 8hr =>.075 8hrl x S.ZO" • Boiler MACT 200S (Pb) NAAQ5 x 3,20 2009 New Marine Comoress'n-! n En ines >30 l er C¥linder , 1.90 

- EPA estimat

2010 eciprocating Internal Combustion Engines NESHAP· Comp.lgnlt. , x 0.37 

2010 EPA/NHTSAJoint Ught-Duty GHG & CAFES 15,60 cost:$2.6 bi

2010 02 NAAOS (l-hr, 75 ppb) x >99,9% 1.50 

2010 Existing Stationary Compression Ignition Engines NESHAP x x 0,25 annually 

2011 Industrial, Comm, and institutional Boilers NESHAP , x 0.49 2011 Indus'l, Comm'I, and Institutional Boilers & Process Heaters NESHAP , x 2_90 

- Independen

2011 amm'l & Indus'J Solid Waste Incin. Units N$PS & Emission G'lines , x 0.28 analysis:$142011 ontrol of GHG from Medium & Heall'{-Duty Vehicles 2,QO& 2011 Ozone Reconsideration NAAOS , B.20R' billion 2011 Utility Boiler MACf NESHAP (Final Rule's RIA) x 9_60 

2011 Mercurv Cell Chlor Alkali Plant Mercury Emissions NESHAP x 0,00 2011 ewage Sludge Incineration Units NSPS & Emission Guidelines , x 0.02 

2011 Ferroa!loys Production NESHAP Ammendments , x 0.004 Partial Total

Total: 60.67 + MATS-9.3 

• ($2006) CAAA Benefit Cost Analysis TCEQ Chief Engineer's Office 0 May 17, 2012. Page 31 
II Business Impact 

DIe and ((un Df nu' C1NUJ .... i,· 

FIGURE 8?b. PERCENT CHANGE IN INDUSTRY OUTPUT IN 202.0: LABOR FORCE-ADJU

Pen::o;entagt' Change with Clean Air Act 

-10.11% -8.0% ..e.O% -4.0'!'" -2.G% 0.0% 2.0% 

- Coal 

TABLE 8-8. OIJde Oil 

SUMMARY OF ANNUAL MACROECONOMIC IMPACTS; LABOR FORCE-ADJUSTED CASE' 

-

.. :: "" .... Gas 

VARIABLE MODELRUH 2010 2015 2020 . 

GOP With Clean Air Act ($ billion) $15.027 $17,338 $20,202 

-

. _.". " 

Without Clean Air Act ($ billion) $15,059 $17,350 $20,197 

Chanae ($ billion) -$32 -$12 $5 

% chanee -0.21% -0.07% 0.02% 

Consumption .Wit.h.ctea"Air Act ($ billion) $10.969 $12,699 $14,881 

I!!!!\!IJ 

I!!!!!!! 

Without Clean Air Act ($ billion) $10.972 $12,696 $14,876 

Chanee (S billion) -$3 $3 S5 

% change -0.03% 0.02% 0.03% II 

Htck.tan EV Chanee (S billion) S11 $22 S29 

(annual) % chanee 0.08% 0.13% 0.15% 

Hote" 

1. Result. are exprel,ed tn year 2006 dolla ... r 

I 

P c: 

CAAA Benefit Cost Analysis 0 TCEQ Chief Engineer's Office. t-liay 17, 2012· Page 32 

-PMining (other) .... 

C<ms1NClion 

Food Teld_&App. 

..... ""'" 

Pulp & Paper 

Printing 

OtemJc31s 

Plas.lm&Ru1:I 

"" .. c.m.nt 

OthtrMinera1s 

tDn&""" 

Ah.mirwm 

OthNPritn.¥y 

F.lbricated Mel 

CornputerEqui 

Eleotrcnc Equ 

1hI\spcft3tiOn 

Ml$oeIbneoIa 

WhctU31e& F 

Tr.JnSport3tioo 

FIIUnCe&R2.'l 

Su!lines.sSeN 

Educmion 

HealthSeNce 

OthefSEtI/ioes 

'""

....

-ur

,

'

,-
• Adjusted Benefits Estimate 

Tony Cox, 2011: 

($1.8 trillion initial estimate) 

x (1/6 reduction factor for VSL if age or VSLY is considered) 

x (0.5 probability that a true association exists) 

x (0.5 probability that a true association is causal, given that one exists) 

x (0.5 probability that ambient concentrations are above any thresholds or nadir

in the C-R function, given that a true causal C-R relation exists) 

x (0.5 expected reduction factor in C-R coefficient by 2020 due to improved 

medication and prevention of disease-related mortalities) 

... ... ,,);1' ;;: 

CAAA Benefit Cost Analysis. TCEQ Chief Engineer's Office 0 May 17, 2012 0 Page 33 
52 

Chairman HARRIS. Thank you very much. 

I now recognize Mr. Eugene Trisko for five minutes to present 

his testimony. 

STATEMENT OF MR. EUGENE TRISKO, 

ATTORNEY AT LAW, ON BEHALF OF THE 

AMERICAN COALITION FOR CLEAN COAL ELECTRICITY 

Mr. TRISKO. Thank you, Mr. Chairman, Ranking Member Miller. 

I am Eugene Trisko. I am here on behalf of the American Coalition for Clean Coal Electricity. And I have conducted, for the better 

part of the last decade, an annual study as a consultant to ACCCE 

entitled, ‘‘Energy Cost Impacts on American Families.’’ This study 

really started soon after the Kyoto Protocol when a question arose, 

what are American families spending on energy? Because there 

were a variety of estimates at that time when the Kyoto Protocol 

was being considered in the United States, a number of studies 

that suggested impacts on the order of $500 or $1,000 per household or more. 

So we wanted to try to get a handle on a baseline—what are 

Americans spending now for energy? So having done this study 

pretty much on an annual basis since 2000, we have created, if you 

will, a baseline that has allowed us to track changes in energy 

costs. The report analyzes consumer energy costs since the year 

2001 for all U.S. households and examines the pattern of energy 

expenditures among four income levels and for senior and minority 

families. It relies on historical energy consumption survey data and 

current energy price forecasts from the Department of Energy’s Energy Information Administration. By way of a footnote, EIA is just 

now beginning to release the results of its 2009 survey of residential energy consumption and it has not yet gotten to the point 

where it is releasing consumption or expenditure data. When we 

get that information, we will update the study accordingly. But 

based upon the preliminary results from the 2009 survey, it appears that the consumption data, if anything, may be somewhat 

higher than they were in the previous study in 2005. 

Slightly more than one half of U.S. households have average 

pretax annual incomes below $50,000. Mr. Chairman, this country 

is divided precisely in half at an annual household income pretax 

of $50,000. Our median family income today is $49,455. And that 

has not changed in principle in the 10 years in which I have been 

conducting this study, with no adjustment for inflation. In 2001, 

families with gross annual incomes below $50,000 spent an average 

of 12 percent of their average after-tax income of $21,800 on residential and transportation energy—gasoline. In 2012, these households are projected to spend 21 percent of their average after-tax 

income of $22,390 on energy. 

Family incomes have not kept pace with the rising cost of energy. 

The U.S. Census Bureau reports that since 2000, real inflation-adjusted median household income has declined by six percent and is 

seven percent below the median household income peak of $53,000 

that occurred in the year 1999. Higher gasoline prices account for 

nearly 4/5ths of the increased cost of energy for consumers since 

2001. In nominal dollars, average U.S. household expenditures for 
53 

gasoline will grow by 136 percent from 2001 to 2012, based on EIA 

gasoline price projections for 2012. 

Electricity has maintained relatively lower annual average price 

increases compared to residential natural gas and gasoline. Electricity prices have increased by 51 percent in nominal dollars since 

1990, well below the 72 percent rate of inflation in the consumer 

price index. The nominal prices of residential natural gas and gasoline have nearly doubled and tripled, respectively, over this period. 

Virtually all of the residential electricity price increases over the 

past two decades have occurred since 2000. These increases are due 

in part to additional capital, operating, and maintenance costs associated with meeting clean air and other environmental standards. 

Lower-income families, including millions of fixed-income seniors, 

are more vulnerable to energy costs than higher-income families, 

because energy represents a larger portion of their household budgets. Energy is consuming 1/5th or more of the household incomes 

of lower- and middle-income families, reducing the amount of income that can be spent on food, housing, health care, and other necessities. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Trisko follows:] 
54 

Statement of Eugene M. Trisko 

Before the Committee on Science, Space and Technology 

Subcommittee on Energy and Environment 

June 6,2012 

Good afternoon, Chairman Harris, Ranking Member Miller, and members of 

the Subcommittee, 

I am here today to summarize the findings of a study of the impacts of rising 

energy costs on American families. I have conducted this study periodically 

since 2000 for the American Coalition for Clean Coal Electricity and its 

predecessor organizations. The latest version, "Energy Cost Impacts on 

American Families, 2001-2012," is attached to my testimony. 

The report analyzes consumer energy cost increases since 2001 for all u.S. 

households and examines the pattern of energy expenditures among four 

income levels and for senior and minority families. It relies on historical 

energy consumption survey data and current energy price forecasts from the 

U.S. Department of Energy's Energy Information Administration (EIA). 

Energy costs are summarized in nominal dollars by household income 

category for U.S. households in 2001,2005, and 2012, using data from EIA 

and the U.S. Bureau of the Census. Energy price projections for 2012 are 

based on the DOEIEIA Short-Term Energy Outlook released in January 

2012. At that time, EIA projected an average gasoline price of $3.54 per 

gallon in 2012. 
55 

Energy expenditures as a percentage of nominal after-tax income are 

estimated after the effects of federal and state income taxes and federal 

social insurance payments. The 2012 projections in this report are based on 

U.S. Bureau of the Census household income data for 2010 (the most recent 

available) and projected energy prices for 2012. 

Key findings of this report are: 

In 2010, the median household income of U.S. families was $49,445. 

Slightly more than one-half of U.S. households have average pre-tax 

annual incomes below $50,000. In 2001, families with gross annual 

incomes below $50,000 spent an average of 12% oftheir average 

after-tax income of$21,834 on residential and transportation energy. 

In 2012, these households are projected to spend 21% of their average 

after-tax income of $22,390 on energy. 

Family incomes have not kept pace with the rising costs of energy. 

Since 2007, the U.S. Census Bureau reports that real (inflationadjusted) median household income has declined by 6% (from 

$52,823) and is 7% below the median household income peak 

($53,252) that occurred in 1999. 

Poverty rates have increased to historic highs along with the declining 

long-term trend in family incomes. The number of people in poverty 

in 2010 was the largest number in the 52 years since the Census 

Bureau began to publish poverty statistics. 
56 

Higher gasoline prices account for nearly four-fifths of the increased 

cost of energy for consumers since 2001. In nominal dollars, average 

u.s. household expenditures for gasoline will grow by 136% from 

2001 to 2012, based on EIA gasoline price projections for 2012. In 

comparison, residential energy costs for heating, cooling, and other 

household energy services will increase on average by 43%, from 

$1,493 in 2001 to a projected $2,131 per household in 2012. 

Among consumer energy goods and services, electricity has 

maintained relatively lower annual average price increases compared 

to residential natural gas and gasoline. Electricity prices have 

increased by 51 % in nominal dollars since 1990, well below the 72% 

rate of inflation in the Consumer Price Index. The nominal prices of 

residential natural gas and gasoline have nearly doubled and tripled, 

respectively, over this period. 

Virtually all of the residential electricity price increases over the past 

two decades have occurred since 2000. These increases are due in part 

to additional capital, operating and maintenance costs associated with 

meeting clean air and other environmental standards. 

Lower-income families are more vulnerable to energy costs than 

higher-income families because energy represents a larger portion of 

their household budgets. Energy is consuming one-fifth or more of the 

household incomes of lower- and middle-income families, reducing 

the amount of income that can be spent on food, housing, health care, 

and other necessities. 
57 

Fixed-income seniors are a growing proportion of the U.S. population, 

and are among the most vulnerable to energy cost increases due to 

their relatively low average incomes. In 2010; the median gross 

income of25.4 million households with a principal householder aged 

65 or older was $31,408, 36% below the national median household 

income. 

These summary findings are discussed in more detail in the principal report. 

I am happy to answer any questions that the Subcommittee may have. 

Thank you. 
58 

Energy Cost Impacts on American Families, 

2001-2012 

78% 

<$10K $10-<30K 

.2001 

.2005 

$30-<50K 

5% 7% 9% 

2=$50K 

Energy Costs as Percentage of Annual Household After-Tax Income 

February 2012 

www.americaspower.org 
59 

Summary of Findings 

This report analyzes consumer energy cost increases since 2001 for all u.s. households 

and examines the pattern of energy expenditures among four income levels and for 

senior and minority families in 2012. It relies on historical energy consumption survey 

data and current energy price forecasts from the U.S. Department of Energy's Energy 

Information Administration (EIA).I Energy costs are summarized in nominal (thencurrent) dollars by household income category for u.s. households in 2001,2005, and 

2012, using data from EIA and the u.s. Bureau ofthe Census.2 Energy price projections 

for 2012 are based on the DOEIEIA Short-Term Energy Outlook released in January 

2012. 

Energy expenditures as a percentage of nominal after-tax income are estimated after the 

effects offederal and state income taxes and federal social insurance payments. The 

2012 projections in this report are based on u.s. Bureau of the Census household 

income data for 2010 (the most recent available) and projected energy prices for 2012. 

Key findings of this report are: 

In 2010, the median household income of U.S. families was $49,445. Slightly 

more than one-half of U.S. households have average pre-tax annual incomes 

below $50,000. In 2001, families with gross annual incomes below $50,000 spent 

an average of 12% of their average after~tax income of$21,834 on residential and 

transportation energy. By 2005, energy costs rose to 16% of their average aftertax income of$22,682. In 2012, these households are projected to spend 21 % of 

their average after-tax income of $22,390 on energy. 

Family incomes have not kept pace with the rising costs of energy. Since 2007, 

the U.S. Census Bureau reports that real (inflation-adjusted) median household 

income has declined by 6% (from $52,823) and is 7% below the median 

household income peak ($53,252) that occurred in 1999. 

Poverty rates have increased to historic highs along with the declining long-term 

trend in family incomes. The number of people in poverty in 2010 was the largest 

number in the 52 years since the Census Bureau began to publish poverty 

statistics. Poverty is more prevalent among some minority groups. Some 27% of 

Blacks and 26% of Hispanics lived in poverty in 2010, compared with 15% for 

the overall population. 

2 
60 

Higher gasoline prices account for nearly four-fifths of the increased cost of 

energy for consumers since 2001. In nominal dollars, average U.S. household 

expenditures for gasoline will grow by 136% from 2001 to 2012, based on EIA 

gasoline price projections for 2012. In comparison, residential energy costs for 

heating, cooling, and other household energy services will increase on average by 

43%, from $1,493 in 2001 to a projected $2,131 per household in 2012. 

Electricity is the bargain among all consumer energy produCts. Among consumer 

energy goods and services, electricity has maintained relatively lower annual 

average price increases compared to residential natural gas and gasoline. 

Electricity prices have increased by 51 % in nominal dollars since 1990, well 

below the 72% rate of inflation in the Consumer Price Index. The nominal prices 

of residential natural gas and gasoline have nearly doubled and tripled, 

respectively, over this period. 

Virtually all ofthe residential electricity price increases over the past two decades 

have occurred since 2000. These increases are due in part to additional capital, 

operating and maintenance costs associated with meeting clean air and other 

environmental standards. 

Lower-income families are more vulnerable to energy costs than higher-income 

families because energy represents a larger portion of their household budgets. 

Energy is consuming one-fifth or more of the household incomes oflower- and 

middle-income families, reducing the amount of income that can be spent on 

food, housing, health care, and other necessities. 

In 2010, 62% of Hispanic households and 68% of Black households had average 

annual incomes below $50,000, compared with 46% of white households and 

39% of Asian households. Due to these income inequalities, the burdens of 

energy price increases are imposed disproportionately on Black and Hispanic 

households. 

Fixed-income seniors are a growing proportion of the U.S. population, and are 

among the most vulnerable to energy cost increases due to their relatively low 

average incomes. In 2010, the median gross income of 25.4 million households 

with a principal householder aged 65 or older was $31,408, 36% below the 

national median household income. 

3 
61 

Energy Costs for U.S. Families, 2001-2012 

Energy costs for residential utilities and gasoline continue to strain low- and middleincome family budgets. As Table 1 illustrates, the average American family with an 

after-tax income of$53,229 will spend an estimated $6,088 on energy in 2012, or 11% 

of the family budget. The 60 million households earning less than $50,000-

representing 50.4% of U.S. households-will devote an estimated 21% of their after-tax 

incomes to energy, compared with 9% for households with annual incomes above 

$50,000. For the 28 million lower-income families with incomes between $10,000 and 

$30,000, energy expenditures will consume 24% of average after-tax incomes, 

compared with 14% in 2001. 

The summary income and energy expenditure data in Table 1 are based on u.s. Bureau 

of the Census pre-tax household income data for 2010 (the most recent available) and 

energy prices for 2012 projected by DOE/EIA. The Congressional Budget Office has 

calculated effective total federal tax rates, including individual income taxes and 

payments for Social Security and other social welfare programs.3 State income taxes are 

estimated from current state income tax rates. 

Table 1. Estimated Household Energy Expenditures as a Percentage of Income, 

2012 

Pre-tax income <$IOK $1O-<$30K $30-<$50K <$50K ~$50K Average 

Est. average after-tax $4,764 $18,106 $33,541 $22,390 $84,263 $53,229 

income 

Percentage of 7.8% 23.6% 19.0% 50.4% 49.6% 100.0% 

households 

Residential energy $1,596 $1,773 $2,044 $1,848 $2,554 $2,13l 

Transportation fuel $2,106 $2,621 $3,705 $2,951 $4,953 $3,957 

Total energy $3,702 $4,394 $5,749 $4,799 $7,507 $6,088 

Energy pct. of after-tax 77.7% 24.3% 17.1% 21.4% 8.9% 11.4% 

income 

Source: Appendix Table 1. 

Many lower-income families qualify for federal or state energy assistance. However, 

these programs are hard-pressed to keep up with the increase in household energy costs. 

In FY2011, funding for the federal Low Income Home Energy Assistance Program 

(LIHEAP) was cut from $5.1 billion to $4.7 billion.4 Based on DOEIEIA's 2005 

Residential Energy Consumption Survey (2009), the $4.7 billion funding level for 

LIHEAP would offset less than 2% oftotal U.S. residential energy bills. 

4 
62 

The portion of household incomes devoted to energy has increased substantially since 

2001 (see Chart 1). In 2001,62 million families with gross annual incomes less than 

$50,000 (2001$) spent an average of 12% of their after-tax income on residential and 

transportation energy. In 2012, energy will account for an average of 21 % ofthe aftertax income ofthe 60 million American families in this income category. Energy cost 

burdens are greatest on the poorest families, those earning less than $10,000. Their 

average energy bills increased from 36% of estimated after-tax income in 2001 to 78% 

in 2012. These estimates do not account for any governmental energy assistance that 

these families may receive, and thus do not reflect actual personal energy consumption 

expenditures. 

Chart 1 

Energy Costs as Percentage of Nominal After-Tax Income, 

2001, 2005, and Projected 2012 

78% 

<$10K $10-<30K 

Source: Appendix Table l. 

2001 

1112005 

$30-<50K 

5% 7% 9% 

:::$50K 

Relative Energy Price Increases 

Among key consumer energy products, electricity has increased at the lowest rate 

measured in nominal dollars over the past two decades. Chart 2 provides an index of 

consumer energy prices in nominal dollars since 1990. Prices for residential natural gas 

and gasoline have nearly doubled and tripled, respectively, while residential electricity 

prices increased by 51 %, well below the 72% rate of inflation based on the Consumer 

Price Index between 1990 and 2011.5 

5 
63 

Chart 2 

Price Trends of Consumer Energy Products in Nominal Dollars, 1990-2012 

(Index 1990 = 1.0) 

3.5·,-·--------------------······-·--

3.0 ;..... ...... -.-----------------.-......... --..... ........,-

2.5 + ....----------------------.... "F--'ic--4--

0.5 f----------.----------------

0.0 

1990 1995 2000 

- Electricity - Nat'l Gas 

2005 

Gasoline 

2010 

Sources: U.S. DOEIEIA, Annual Energy Review 2010 and Short-Tenn Energy Outlook 

(January 2012). 

Unlike other consumer energy products, electricity has maintained a relatively low rate 

of price increase below the overall rate of inflation. However, as Chart 2 indicates, 

virtually all of the residential electricity price increases over the past two decades have 

occurred since 2000. These increases are due in part to additional capital, operating and 

maintenance costs associated with meeting clean air and other environmental standards.6 

Current and prospective EPA rules for the utility sector are expected to result in 

additional electricity price increases in many areas ofthe country. For example, U.S. 

EPA estimates the annual costs of compliance with one recent Clean Air Act regulation 

- the utility Mercury and Air Toxics Standards rule - at $9.6 billion ($2007) in 2016.7 

The projected annual cost of this rule is 45% greater than EPA's $6.6 billion ($2006) 

estimate of the costs of compliance with all utility Clean Air Act requirements in 2010.8 

Electric Utility Fuel Cost Trends 

The relatively modest long-term rate of price increase for residential electricity reflects, 

in part, the electric utility industry'S historic reliance on low-cost coal for roughly onehalf of its energy supplies. As shown in Chart 3, coal prices delivered to electric utilities 

over the past decade have remained low and stable relative to competing fuels such as 

6 
64 

natural gas and petroleum.9 

EIA forecasts that domestic coal will cost $2.40 per million British Thermal Units 

(MMBTU) delivered to power plants in 2012.10 EIA projects the cost of natural gas 

delivered to utility plants in 2012 at $4.23IMMBTU.1I In its most recent long-term 

projections, EIA forecasts that natural gas wellhead prices will remain below $5 per 

thousand cubic feet (mct) in 2010$ through 2023, assuming continued success in the 

development of shale gas reserves. 12 EIA estimates that natural gas wellhead prices will 

reach $6.52 (in 2010$) per mcf(or $6.721MMBTU) in 2035.13 Minemouth coal prices 

are projected to increase from $1.76 per MMBTU in 2010 to $2.51 per MMBTU in 

2035 (2010$).14 

$20.00 

$18.00 

$16.00 

$14.00 

$12.00 

$10.00 

$8.00 

$6,00 

$4.00 

$2.00 

$0.00 

Chart 3 

Electric Utility Fuel Costs, 1998-2012 

(Nominal $ per Million BTU) 

r- -Coal I 

'- - Nat'l Gas I ~ "-,, Oil /\ I' 

/ \ I 

1/\ V 

/,-~/ \ .--. /::: / \.....----

~ ~,~ 

~'--'----" , , ~---.--r---"~'~.-, 

1998 2000 2002 2004 2006 2008 2010 

Sources: U.S. DOEIEIA, Electric Power Annual (2010) and Short-Term Energy Outlook 

(January 2012). 

Consumer Energy Cost Estimates 

The distribution of U.S. households by income categories provides the basis for 

estimating the effects of energy prices on consumer budgets in 2012. EIA's 2001 and 

2005 Surveys of Residential Energy Consumptionl5 are the principal sources for 

estimating energy expenditures for residential heating, cooling, electricity, and other 

household energy services. For this report, the EIA 2005 survey is updated with Census 

Bureau 2010 population data and EIA's January 2012 forecast of2012 residential 

7 
65 

energy prices. 

EIA's 2001 Survey of Household Vehicles Energy Use 16 provides information for 

estimating transportation energy costs by household income category based on gallons 

of gasoline used per household. These transportation data are updated using Census 

Bureau 2010 population data and EIA's January 2012 national average retail gasoline 

price estimate for 2012 of$3.54 per gallon. 

It is assumed that household gasoline usage in 2012 will be 6.3% below the levels of the 

2001 survey, reflecting a decline in household vehicle-miles traveled. The Department 

of Transportation's 2009 National Highway Transportation Survey (NHTS) reports that 

average vehicle miles traveled per household declined from 21,187 miles in 2001 to 

19,850 miles in 2009. 17 No adjustment is made for improved mileage performance 

because fleet average fuel efficiency has been flat at approximately 25 MPG since 

1990.18 The 2009 NHTS does not provide data on transportation expenses by income 

category, but its aggregate estimate of household gasoline expenditures for 2009 is 

consistent with the findings of this report. 19 

Residential and Transportation Energy Expenses 

The principal residential energy expenses are for electricity and natural gas for heating, 

cooling, lighting, and appliances. Some homes also use propane fuel and other heating 

sources, such as home heating oil, kerosene, and wood. 

Gasoline accounts for the largest single increase in consumer energy costs over the past 

decade. EIA's Short-Term Energy Outlook projects 2012 average retail gasoline costs 

at $3.54 per gallon, more than double the $1.47 per gallon price in 2001. In 2012, the 

average U.S. family will spend an estimated $3,957 on gasoline, compared with $1,680 

in 2001 - an average increase of $2,277 per household. 

The increase in gasoline prices follows a decade-long trend of increased market shares 

of pickup trucks and sport utility vehicles (SUV s), and an increase in the average 

number of vehicles owned per household.20 Despite the success of the "Cash for 

Clunkers" program, many families continue to own low-efficiency vehicles with low 

trade-in values. 

The impacts of residential and transportation energy costs on low- and middle-income 

families are summarized in Table 2 and in Appendix Table 1. Residential energy costs 

have increased on average by 43% since 2001, from $1,493 to $2,131 per household. 

Consumer costs for gasoline grew by 136% during this period, accounting for 79% of 

the overall $2,870 increase in total household energy costs since 2001. 

8 
66 

Table 2. Estimated After-Tax Income and Energy Costs by Income Category, 

2001, 2005, and Projected 2012 

(In nominal dollars) 

Pre-tax annual income: <$IOK $1 0-<$3 OK $30-<$50K <$50K ?:$50K Totals 

Est. aV2. after-tax income 

2001 $5,532 $17,520 $32,380 $21,834 $76,054 $47,396 

2005 $5,249 $18,198 $33,716 $22,682 $81,066 $49,924 

2012 $4,764 $18,106 $33,541 $22,390 $84,263 $53,229 

Residential enerln' $ 

2001 $1,039 $1,260 $1,456 $1,299 $1,836 $1,493 

2005 $1,351 $1498 $1,733 $1,565 $2,173 $1,850 

2012 $1,596 $1,773 $2,044 $1,848 $2,554 $2,131 

Transport enerln' $ 

2001 $934 $1,160 $1,638 $1,306 $2,195 $1,680 

2005 $1,513 $1,878 $2,652 $2,119 $3,554 $2,790 

2012 $2,106 $2,621 $3,705 $2,951 $4,953 $3,957 

Total enefin' $ 

2001 $1,973 $2,420 $3,094 $2,605 $4,031 $3,218 

2005 $2,863 $3,375 $4,385 $3,684 $5,725 $4,640 

2012 $3,702 $4,394 $5,749 $4,799 $7,507 $6,088 

Source: Appendix Table 1. 

Household Energy Cost Impacts 

Energy costs are straining low~ and middle-income family budgets. Heating, cooling, 

and transportation are necessities of life, and the rapid increase in consumer energy costs 

is impacting low- and middle-income family budget choices among energy and other 

necessary goods and services, such as health care, housing, and nutrition. 

As energy costs have risen over the past decade, the real, inflation-adjusted incomes of 

American families have been declining. The u.s. Census Bureau reports in its latest 

assessment of income and poverty that: 

Real median household income was $49,445 in 2010, a 2.3 percent decline 

from 2009. Since 2007, median household income has declined 6.4 percent 

(from $52,823) and is 7.1 percent below the median household income 

peak ($53,252) that occurred in 1999.21 

9 
67 

Poverty rates have increased along with the decline in real family incomes over the past 

decade, reaching historic highs in 2010; 

The official poverty rate in 20 I 0 was 15.1 percent-up from 14.3 percent 

in 2009. This was the third consecutive annual increase in the poverty rate. 

Since 2007, the poverty rate has increased by 2.6 percentage points, from 

12.5 percent to 15.1 percent. ... In 2010, 46.2 million people were in 

poverty, up from 43.6 million in 2009-the fourth consecutive annual 

increase in the number of people in poverty .... The number of people in 

poverty in 2010 is the largest number in the 52 years for which poverty 

estimates have been published.22 

For low- and middle-income families, energy costs are now consuming a portion of aftertax household income comparable to that traditionally spent on major categories such as 

housing, food, and health care. The Bureau of Labor Statistics' 2010 Consumer 

Expenditure Survey reports that 121 million "consumer units" in the U.S. with an average 

pre-tax income of$62,481 in 2010 spent an average of$16,557 (27%) on housing, 

$6,129 (10%) for food, and $3,157 (5%) on healthcare?3 

Energy Cost Impacts on Minorities 

EIA's residential energy consumption surveys do not provide energy consumption 

expenditures by income group combined with minority status. However, as illustrated in 

Chart 4, the unequal distribution of household incomes is a principal factor leading to 

disproportionate energy cost impacts on many minority families. More than 60% of 

Black and Hispanic families had pre-tax household incomes below $50,000 in 2010, 

compared with 39% for Asian families and 46% for white households. 

Chart 4 

Percentage of Households with Pre-Tax Incomes below $50,000, 2010 

68% 

60% 

40% 11m Pet <$SOK 

20% 

0% 

Asian White Hispanic Black 

Source: U.S. Bureau of the Census, Current Population Survey Annual Social and Economic 

Supplement (2011). 

10 
68 

Real, inflation-adjusted per capita incomes have declined due to the recession, with 

larger impacts on Black and Hispanic families than on Asian or white households. The 

U.S. Census Bureau reports that these recent declines in the real income of American 

families are part of a long-term declining trend that has particularly impacted Black and 

Hispanic households: 

Since 2007, real median household income has declined for all race and 

Hispanic-origin groups. Non-Hispanic-White household income declined 

by 5.4 percent, Black household income by 10.1 percent, Asian household 

income by 7.5 percent, and Hispanic household income by 7.2 percent. 

Real median household income has not yet recovered to pre-200 1 recession 

all-time highs. Household income in 2010 was 7.1 percent lower for all 

races combined (from $53,252 in 1999),5.5 percent lower for nonHispanic Whites (from $57,781 in 1999),14.6 percent lower for Blacks 

(from $37,562 in 2000),8.9 percent lower for Asians (from $70,595 in 

2000), and 10.1 percent lower for Hispanics (from $41,994 in 2000). Black 

. households experienced the largest household income percentage decline 

among the race and Hispanic origin groupS.24 

Poverty rates have increased in tandem with the declines in real incomes for Black and 

Hispanic households. The Census Bureau reports that: 

For Blacks, the poverty rate increased to 27.4 percent in 2010, up from 25.8 

percent in 2009, while the number in poverty increased to 10.7 million 

from 9.9 million. For Asians, the 2010 poverty rate and the number in 

poverty ... were not statistically different from 2009. However, the poverty 

rate increased for Hispanics to 26.6 percent in 2010 from 25.3 in 2009, and 

the number of Hispanics in poverty increased to 13.2 million from 12.4 

million.25 

Table 3 summarizes 2010 household incomes for Asian, Black, Hispanic, and white 

families in different gross annual income brackets. In 2010, the average incomes of 

Hispanic and Black families were 30% and 39% lower, respectively, than the average 

income of white households. Asian households, on the other hand, enjoyed average 

annual incomes of $84,828 in 2010 compared with the U.S. average income of $67,530. 

Based on these income inequality data, disproportionate numbers of Black and Hispanic 

families are more vulnerable to energy price increases than Asian or white families. 

11 
69 

Pre-tax annual income 

Table 3. Distribution oru.s. Households by 

Pre-tax Income, 2010 

<$ 10K $1O-<$30K $30-<$50K <$50K 

Percentage of households 

Asian 7% 17% 14% 38% 

Black 16% 31% 21% 68% 

Hispanic 10% 30% 22% 62% 

White 6% 21% 19% 46% 

U.S. average 8% 23% 19% 50% 

Avg. pre-tax income 

Asian $3,057 $19,841 $39,445 $23,923 

Black $4,968 $19,014 $38,862 $21,646 

Hisp~nic $4,964 $19,718 $38,764 $24,123 

White $5,005 $19,763 $39,315 $25,778 

U.S. average $4,906 $19,638 $39,183 $24,752 

2:$50K Totals 

62% 100% 

32% 100% 

38% 100% 

54% 100% 

50% 100% 

Averal!:e 

$122,997 $84,828 

$93,539 $44,802 

$95,848 $51,554 

$113,991 $73,439 

$111,018 $67,530 

Source: U.S. Bureau of the Census, Current Population Reports - 2010 Annual Social and 

Economic Supplement (2011). 

Impacts on Senior Citizens 

More than 28% of U.S. households receive Social Security benefits. The average basic 

Social Security income ofthese 32.6 million households was $16,236 in 2010.26 Some 

61 % of households receiving Social Security benefits also received other retirement 

income averaging $22,006,z7 

The U.S. Census Bureau reports that the median income of25.4 million households with 

a principal householder aged 65 or older was $31,408 in 2010, 36% below the national 

household median income of $49,445.28 

Lower-income senior households that depend mainly on fixed incomes are among those 

most vulnerable to energy price increases. Food, health care, and other necessities 

compete with energy costs for a share of the household budget. The $31,408 median 

income of senior U.S. households means that half of these households depend on 

incomes below this level. 

Conclusion 

On average, energy costs have nearly doubled as a fraction of annual family budgets 

since 2001. The unequal distribution of incomes in the United States imposes 

disproportionate energy cost burdens on minority and senior households. The average 

after-tax incomes oflow- and middle-income U.S. families have not grown since 2001. 

Meanwhile, inflation has eroded 27% of the value of American families' incomes.29 

12 
70 

The prices of petroleum-based fuels, particularly gasoline and home heating oil, have 

increased significantly in the past decade. The rapid escalation of consumer energy 

prices, along with stagnant income growth, magnifies the impact of energy costs on all 

American families. 

Acknowledgment - This report was prepared for ACCCE by Eugene M. Trisko, who has conducted 

these analyses annually since 2000. Mr. Trisko is an attorney and energy economist who represents 

labor and industry clients. He previously served as at an attorney in the Bureau of Consumer Protection 

of the U.S. Federal Trade Commission and as an expert witness on utility cost of capital. 

Notes 

1 Data on residential energy consumption patterns by income are derived from U.S. Department of 

Energy, Energy Information Administration, "Survey of Residential Energy Consumption," (2001 and 

2005 surveys)," available at http://www.eia.doe.gov/emeu/recs/contents.html. Data for 2005 energy 

consumption by household income are updated to estimated 2012 values based on consumer residential 

energy cost projections for 2012 in EIA's "Short-Term Energy Outlook" (January 2012). 

2 Household income by gross income category are calculated from the 2010 distribution of household 

income in U.S. Bureau of the Census, Current Population Survey, "Annual Social and Economic 

Supplement" (2011). . 

3 Congressional Budget Office (CBO), "Effective Federal Tax Rates Under Current Law, 2001 to 

2014" (August 2004), and "Effective Federal Tax Rates 1979-2006" (April 2009). Effective federal tax 

rates for the income categories in this paper were interpolated from CBO' s tax rates by income quintile 

based on the distribution of 200 1, 2005 and 2010 household incomes. State income tax rates are 

estimated from tax rates summarized in Federation of Tax Administrators, 

http://www.taxadmin.orglftalrate/ind_inc.html. 

4 See, http://www.neada.orglappropriations/index.html. 

5 U.S. Bureau of Labor Statistics, CPI Inflation Calculator, available at http://data.bls.gov/cgibinlcpicalc.pl 

6 See, U.S. EPA, "The Benefits and Costs of the Clean Air Act from 1990 to 2020" (2011) at Table 3-2 

(electric utility direct annual compliance costs increased from an estimated $1.4 billion ($2006) in 

2000 to $6.6 billion ($2006) in 2010.) Since 2000, the utility sector has complied with the federal acid 

rain program enacted in the 1990 Clean Air Act Amendments, EPA's 1998 Ozone Transport Rule 

reducing nitrogen oxide emissions in 19 eastern states, Phase I of EPA's 2005 Clean Air Interstate Rule 

requiring further reductions of sulfur dioxide and nitrogen oxide emissions in the eastern U.S., and a 

variety of other federal and state air and water quality standards. 

7 U.S. EPA, "Regulatory Impact Analysis for the Final Mercury and Air Toxics Standards," (December 

2011) at ES-14. 

8 U.S. EPA, "The Benefits and Costs of the Clean Air Act," supra. 

9 U.S. DOEIEIA, "Electric Power Annual 2010," (historical tables, 2011) and "Short-Term Energy 

Outlook," (January 2012). 

10 U.S. DOEIEIA, "Short-Term Energy Outlook" (January 2012), Table 2. 

11 Id. 

12 U.S. DOEIEIA, "Annual Energy Outlook 2012 Early Release," (January 2012) at 5. One thousand 

cubic feet of natural gas is equivalent to approximately 1.04 million BTUs. 

13 
71 

13 Id. 

14 Id. 

15 U.S. DOEJElA, "Residential Energy Consumption Survey, 2005," (2009), viewable at 

http://www.eia.doe.gov/emeulrecs/contents.html. 

16 U.S. DOEJElA, "Household Vehicles Energy Use: Latest Data & Trends" (November 2005), 

available at http://www.eia.doe/gov/emeu/rtecs/nhts_surveyI2001l. 

17 U.S. Department of Transportation, 2009 National Household Travel Survey (2011), Table 6. 

18 U.S. Department of Transportation, "NHTS Brief' (April200S), Exhibit 3 

19 U.S. DOT, NHTS, supra, at Table 34 (average household gasoline expenditures increased from 

$1,275 in 2001 to $3,30S in 2009.) The average price of gasoline in 2009 was $2.40/gal\on, one-third 

less than the $3.54/gallon price that ElA projects for 2012. Adjusted by the change in average gasoline 

prices, the 2009 NHTS data imply average 2012 household gasoline expenditures of $4,366, compared 

with the $3,957 estimate in this report. 

20 U.S. Department of Transportation, 2001 National Household Travel Survey, "Summary of Travel 

Trends" (December 2004). 

21 U.S. Census Bureau, "Income, Poverty, and Health Insurance Coverage in the United States: 2010" 

(2011), at 5. 

22 Id., at 14. 

23 See, Bureau of Labor Statistics, Economic News Release, September 27,2011, available at: 

http://www.bls.gov/news.release/cesan.nrO.htm. See also, Economic Policy Institute, "Basic Family 

Budgets: Working Families' Incomes Often Fail to Meet Living Expenses Around the U.S.," Briefing 

Paper (2005), available at: http://www.epi.org/pub1icationlbp165/ 

24 U.S. Census Bureau, "Income, Poverty, and Health Insurance Coverage in the United States: 2010" 

(2011), at S. 

25 ld., at 17. 

26 U.S. Census Bureau, "American Community Survey - 2010 American Community Survey I-Year 

Estimates," (2012). 

27/d. 

28 U.S. Census Bureau, "Income, Poverty, and Health Insurance Coverage in the United States: 2010" 

(2011), Table I. 

29 U.S. Bureau of Labor Statistics, CPI Inflation Calculator, available at http://data.bls.gov/cgibinlcpicalc.pl 

14 
72 

APPENDIX TABLE 1 - 2001. 2005 AND PROJECTED 2012 HOUSEHOLD INCOME AND ENERGY EXPENses 

2001 HOUSEHOLD ENERGY EXPENSES BY INCOME CATEGORY· ALL U.S. HOUSEHOLDS 

SUBTOTALS 

<$10K $10K-<$30K $30K-<l=$50K >i=$50K TOTALS $10K-<$SOK <$50K >I=$SOK 

Households (Mil.) 9.8 28.9 23.6 47.0 109.3 52.5 62.3 47.0 

Pet of tota! households 9.0% 26.4% 21.6% 43.0% 100.0% 48.0% 57.0% 43.0% 

Avg pre-tax income $5,733 $19,707 $39,201 $107,649 $60,488 $28,470 $24,893 $107,649 

Effec. fed tax rate % 2.0% 8.5% 13.4% 23.1% 17.3% 10.7% 9.3% 23.1% 

Est. state tax rate%: 1.5% 2.6% 4.0% 6.3% 4.4% 3.2% 3.0% 6.3% 

Est. after-tax income $5,532 $17,520 $32,380 $76,054 $47,396 $24,504 $21,834 $76,054 

Residential energy $ $1,039 $1,260 $1,456 $1,836 $1,493 $1,348 $1,299 $1,836 

Residential electric $ $628 $772 $922 $1,172 $938 $839 $806 $1,172 

Other resid. energy $ $411 $488 $534 $664 $555 $509 $493 $654 

Transport energy $ $934 $1,160 $1,638 $2,195 $1,680 $1,375 $1,306 $2,195 

Total energy $ $1,973 $2,420 $3,094 $4,031 $3,218 $2,723 $2,605 $4,031 

Energy % of after-tax inc. 35.7% 13.8% 9.6% 5.3% 6.8% 11.1% 11.9% 5.3% 

Resid. % of after-tax Inc. 18.8% 7.2% 4.5% 2.4% 3.2% 5.5% 6.0% 2.4% 

Trans, % of after-tax inc. 16.9% 6.6% 5.1% 2.9% 3.S% 5.6% 6.0% 2,9% 

2005 HOUSEHOLD ENERGY EXPENSES BY INCOME CATEGORY· AlL U,S. HOUSEHOLDS 

<$10K $10K-<$30K $30K-</=$50K >l=$50K TOTALS $10K-<$50K <$50K >/=$SOK 

Households (Mil,) 9.4 28.1 23.4 53.5 114.4 51.5 60.9 53.5 

Pet of total households 8.2% 24,6% 20.5% 46.8% 100.0% 45.0% 53.2% 46.8% 

Avg pre-tax income $5,400 $19,695 $39,388 $106,947 $63,344 $28,643 $25,055 $106,947 

Effec. fed tax rate % 1.8% 5.0% 10,4% 17.9% 16.7% 7.5% 6.6% 17.9% 

Est. state tax rate% 1.0% 2.6% 4.0% 6.3% 4.5% 3.2% 2.9% 6.3% 

Est. after-tax income $5,249 $18,198 $33,716 $81,066 $49,924 $25,581 $22,682 $81,066 

Resident!al energy $ $1,351 $1,498 $1,733 $2,173 $1,850 $1,604 $1,565 $2,173 

Residential electric $ $765 $914 $1,098 $1,361 $1,150 $998 $965 $1,361 

Other resid. energy $ $566 $583 $635 $812 $699 $607 $600 $812 

Transport energy $ $1,513 $1,878 $2,652 $3,554 $2,790 $2,230 $2,119 $3,554 

Total energy $ $2,863 $3,375 $4.385 $5,728 $4,640 $3,834 $3,684 $5,728 

Energy % of after-tax inc. 54,5% 18.5% 13.0% 7.1% 9.3% 15.0% 16.2% 7.1% 

ResJd. % of after-tax inc. 25.7% 8.2% 5.1% 2.7% 3.7% 6.3% 6.9% 2.7% 

Trans. % of after-tax inc, 28.8% 10.3% 7.9% 4.4% 5.6% 8.7% 9.3% 4.4% 

PROJECTED 2012 HOUSEHOLD ENERGY EXPENSES BY INCOME CATEGORY· ALL U,S, HOUSEHOLDS 

<$10K $10K-<$30K $30K·<I=$50K >/=$50K TOTALS $10K-<$50K <$50K >/=$50K 

Households (MiL) 9.2 28.0 22.6 58.9 118.7 50.6 59.8 58.9 

Pct of total households 7.8% 23.6% 19.0% 49.6% 100.0% 42.6% 50.4% 49.6% 

Avg pre-tax income $4,906 $19,638 $39,163 $111,018 $67,530 $28,370 $24,751 $111,018 

Effec. fed tax rate % 1.9% 5.2% 10.4% 17.8% 16.6% 7.5% 6.7% 17.8% 

Est. state tax rate% 1.0% 2.6% 4.0% 6.3% 4.6% 3.2% 2.9% 6.3% 

Est after~tax income $4,764 $18,106 $33,541 $84,263 $53,229 $25,320 $22,390 $84,263 

Residential energy $ $1,596 $1,773 $2.044 $2,554 $2,131 $1,894 $1,648 $2,554 

Residential electric $ $930 $1,083 $1,302 $1,613 $1.330 $1,181 $1,142 $1,613 

Other reslcL energy $ $666 $690 $743 $941 $800 $713 $706 $941 

Transport energy $ $2,106 $2,621 $3,705 $4,953 $3,957 $3,105 $2.951 $4.953 

Total energy $ $3,702 $4,394 $5,749 $7,507 $6,068 $4,999 $4,799 $7,507 

Energy % of after·tsx inc. 77.7% 24.3% 17.1% 6.9% 11.4% 19.?t'A> 21.4% 8.9% 

Resid. % of after-tax inc. 33.5% 9.S% 6.1% 3.0% 4.0% 7.5% 8.3% 3.0% 

Trans, % of after-tax inc. 44.2% 14.5% 11.0% 5.9% 7.4% 12.3% 13.2% 5,9% 

Sources: Population and income data trom U.S. Bureau of the Census, Current Population SUlVey Supp. (2001, 2005, 2011 eds.) Residential energy costs 

are based on U.S. DOE Residential Energy Consumption SUlVey (2001,2005 eds.) 2012 projections based on changes in 2005-2012 residential 

energy prices from U.S. DOEJEIA Annual Energy Review 2005 and Short-Term Energy Outlook (January 2012). Transportation energy expenditures are 

estimated from U.S. DOE/EIA, Household Vehicle Energy Use: Latest and Trends (Nov 2005) and DOElEIA Short~Term Energy Outlook (January 2012). 

Gasoline use per household in 2012 is reduced by 6.3% from 20011evels based on data in US DOT 2009 National Highway Transportation Survey. 

Average effective federal tax rates are estimated from Congressional Budget Office, Effective Federal Tax Rates Under Current Law, 2001-2014 

(August 2004), and Effective Federa! Tax Rates, 1979-2006 (April 2009). State tax rates estimated from w.NW.taxadmin.orglftalratelindjnc.htm!. 
73 

Summary of Statement of Eugene M. Trisko 

Before the Subcommittee on Energy and Environment 

June 6, 2012 

This testimony summarizes the findings of a study entitled "Energy Cost Impacts on 

American Families, 2001-2012." I have conducted this study periodically since 2000 for 

the American Coalition for Clean Coal Electricity and its predecessor organizations. 

The report analyzes consumer energy costs since 2001 for all u.s. households and 

examines the pattem of energy expenditures among four income levels and for senior and 

minority families. It relies on historical energy consumption survey data and current 

energy price forecasts from the DOE Energy Infonnation Administration (EIA). 

Slightly more than one-half of U.S. households have average pre-tax annual incomes 

below $50,000. In 2001, families with gross annual incomes below $50,000 spent an 

average of 12% oftheir average after-tax income of $21 ,834 on residential and 

transportation energy. In 2012, these households are projected to spend 21% of their 

average after-tax income of $22,390 on energy. 

Family incomes have not kept pace with the rising costs of energy. The U.S. Census 

Bureau reports that since 2007, real (inflation-adjusted) median household income has 

declined by 6% (from $52,823) and is 7% below the median household income peak 

($53,252) that occurred in 1999. 

Higher gasoline prices account for nearly four-fifths of the increased cost of energy for 

consumers since 2001. In nominal dollars, average U.S. household expenditures for 

gasoline will grow by 136% from 2001 to 2012, based on EIA gasoline price projections 

for 2012. 

Electricity has maintained relatively lower annual average price increases compared to 

residential natural gas and gasoline. Electricity prices have increased by 51% in nominal 

dollars since 1990, well below the 72% rate of inflation in the Consumer Price Index. The 

nominal prices of residential natural gas and gasoline have nearly doubled and tripled, 

respectively, over this period. 

Virtually all ofthe residential electricity price increases over the past two decades have 

occurred since 2000. These increases are due in part to additional capital, operating and 

maintenance costs associated with meeting clean air and other environmental standards. 

Lower-income families, including millions of fixed-income senior citizens, are more 

vulnerable to energy costs than higher-income families because energy represents a larger 

portion of their household budgets. In 2010, the median gross income of25.4 million 

households with a principal householder aged 65 or older was $31,408, 36% below the 

national median household income. Energy is consuming one-fifth or more of the 

household incomes of lower- and middle-income families, reducing the amount of 

income that can be spent on food, housing, health care, and other necessities. 
74 

Chairman HARRIS. Thank you very much. 

I now recognize Mr. Wolf to present his testimony. 

STATEMENT OF MR. TOM WOLF, 

EXECUTIVE DIRECTOR, ENERGY COUNCIL, 

ILLINOIS CHAMBER OF COMMERCE 

Mr. WOLF. Thank you, Mr. Chairman. 

My name is Tom Wolf. I am the Executive Director of the Energy 

Council at the Illinois Chamber of Commerce. The Council is made 

up of companies that generate, transmit, transport energy or supply the energy marketplace. Thank you for the opportunity to give 

a little bigger-picture perspective on some of the regulations being 

proposed on future greenhouse gas emission sources. 

When it comes to the energy regulatory oversight, businesses are 

looking for a few general themes. Some of them include predictability, what can and should they plan for; a sweet spot where interests—including environmental interests—are protected and commerce can flourish; benchmarks that are based on science and engineering, not wishful thinking; and diversity, allowing everyone a 

shot at success so we don’t rely too much on one form of energy. 

We believe the new rulemaking on greenhouse gas emissions for 

new sources proposed by the U.S. EPA falls short of these goals. 

Here are a couple of reasons why. 

The proposed rulemaking sets a limit which most natural gas 

generators can accommodate with today’s technology but that coal 

generation cannot. It seems a bit strange that this magic limit 

saves the planet and just so happens to allow natural gas but not 

coal generation. We understand there is a provision in the U.S. 

EPA regulations for coal companies to average the greenhouse gas 

emissions over 30 years, theoretically allowing them to build a new 

plant, retrofit it with sequestration technology when it becomes 

available—if and when it becomes available and move forward— 

that path for new coal could move forward. But that path seems 

to run through the installation of carbon capture and sequestration, a technology that is still under development and too expensive 

for use today. We hope that changes but it is unclear that it will. 

Given that, what company will be able to get financing for a new 

plant that is built on the hope that a new technology will be available and affordable at some point in the future? We don’t believe 

investors would or could take that risk. Let’s take a moment to remember how much cleaner coal generation has become in the past 

three decades. The Prairie State generation plant in Marissa, Illinois, outside St. Louis on the Illinois side of the Mississippi River 

produces 50 percent less regulated emissions and 15 percent less 

greenhouse gas emissions using the best available control technology, a great step forward. 

However, we believe if these proposed regulations take hold, the 

leap coal producers are asked to make in greenhouse gas emissions 

will be a roadblock to innovation, not an incentive. The leap being 

asked for could result in companies abandoning coal research and 

moving to other forms of energy, leaving us more vulnerable with 

fewer supply choices. 
75 

We believe if these regulations are enacted, the cleaner coal technologies will be invented somewhere else, or they won’t be invented 

at all because other countries that rely on coal are making little 

to no effort to minimize greenhouse gas emissions. We are a leader 

in cleaner coal technologies today and could be going forward. 

I hesitate to try and quantify the exact costs of the proposed 

rulemaking that I am going through. If I have learned one thing 

in my four years in this position, it is that the future is really hard 

to predict. Who could have predicted the natural gas—the new natural gas finds that we found in our country that could turn us into 

a natural gas exporter versus an importing one we thought we 

would be? Who could have predicted that crude oil from North Dakota, which was 7,500 barrels per day in 2006, is now over 500,000 

barrels a day? Who could have predicted that wind turbines would 

be 30 percent more efficient than they were three years ago or 

solar equipment costs would plummet the way they have? 

But unless there is a leap in coal generation technology that is 

unforeseen at this time, we believe the rules proposed by the U.S. 

EPA and new sources will effectively shut down the future of new 

coal generation and the jobs, economic development, and opportunity that would come with it. 

In closing, I want to talk about the Prairie State. I took a tour 

of Prairie State, talked the lead environmental engineer there and 

asked him what he felt about working at that plant and how he 

felt about working on the environmental controls. And he said, I 

am a kid in a candy store. I reap potential environmental controls 

in this plant and I am so proud of working here. We need to make 

regulations that inspire him to roll up his sleeves and find the next 

innovation that makes coal even cleaner instead of rulemaking that 

I believe makes him want to throw up his hands and go, are you 

kidding me? We can’t do it. 

So we suggest taking a long, deep breath, take a hard look at 

these new regulations and change them to allow new coal plants 

to be built, incentivized in a way that creates a market for the 

technological advances that will make coal cleaner and cleaner and 

a viable option for United States and global electricity users. 

Thank you for this opportunity, Mr. Chairman. 

[The prepared statement of Mr. Wolf follows:] 
76 

r:;i!;\ ..,! 

ILLINOIS CHAMBER 

OF COMMERCE 

Testimony of Tom Wolf, Executive Director Energy Council 

Illinois Chamber of Commerce 

EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs 

and Benefits of Environmental Regulations 

House Subcommittee on Energy and the Environment 

June 6,2012 

My name is Tom Wolf and I'm the executive director of the Energy Council at the Illinois 

Chamber of Commerce. The council is made up of companies that generate, transmit and 

transport energy, or supply the energy marketplace. We have voices from worlds of crude oil, 

coal, wind, solar, nuclear, waste-to-energy, natural gas, utility and transmission and engineering 

interests. The Council's goal is to make Illinois a better place for energy of aU kinds because 

that creates economic opportunities of all kinds. 

What we're looking for in regulations 

When it comes to energy regulatory oversight, businesses are looking for a few general themes: 

• Predictability - what can and should they plan for? 

• A sweet spot where interests - including environmental interests -- are protected and 

commerce can flourish 

• Benchmarks that are based on science and engineering, not wishful thinking 

• Diversity - allowing everyone a shot at success so we don't rely too much on one form 

of energy 

1 
77 

Why we believe the proposed rulemaking falls short 

We believe the new rulemaking on green house gas regulations for new energy sources 

proposed by the US EPA falls short of these goals. Here are some reasons why: 

The proposed rule making sets a limit which most natural gas generators £1ill accommodate with 

today's technology - but that coal generation cannot. It seems a bit strange that this magic limit 

saves the planet and just so happens to allow natural gas generation but not coal generation. 

I know everyone, including the Chamber, is excited about the new natural gas finds across the 

country, but it was a few short years ago that we were talking about importing natural gas. 

Things change in way we cannot predict - so why preclude a solution that includes new coal 

generation? 

We understand there is a provision in the EPA regulations for coal companies to average their 

GHG emissions over 30 years, theoretically allowing them to build a new plant and retrofit it with 

sequestration technology when (and if) it becomes available and economical. 

The Administration claims that there is a 'path forward' for coal in this rule. However, the path 

seems to run through installation of carbon capture and storage - a technology that is still under 

development and too expensive for use today. 

Given that, what company will be able to get financing for a new plant that is built on the hope 

that new technology will be available and affordable at some point in the future? We don't 

believe investors would or could take that risk. 

From our perspective these regulations are advocating for natural gas generation and creating a 

regulatory wet blanket on future coal production -- in essence, picking winners and losers when 

we need nothing but winners. 

Let's take a moment to comment on how much cleaner coal production has gotten in the past 

three or four decades. The Prairie State generation plant that's just about to become fully 

operational in southwestern Illinois produces 50% less regulated emissions and 15% less GHG 

emissions using best available control technology - a great step forward. 

However, we believe if these proposed regulations come into place, the leap coal producers are 

asked to make in GHG emissions will be a roadblock to new innovation, not an incentive. The 

leap being asked for could result in companies abandoning coal research and moving to other 

forms of energy -leaving us more vulnerable with fewer supply choices. 

We agree with the Administration when it talks about the importance of inventing new alternative 

energy technologies here in America. But we believe if these regulations are enacted, the 

cleaner coal technologies will be invented somewhere else, or they won't be invented at all 

2 
78 

because other countries that rely on coal are making little to no efforts to minimize GHG 

emissions. We are a leader in cleaner coal technologies and could be going fOlWard. But 

asking for this leap of faith could squash our ability to lead the world. 

Finally, the Chamber has a concern that is imperative under the concept of predictability. 

Whatever regulations that come out of this process, they should not serve as a precursor to 

regulating GHG from existing plants or provide a legal trap door for regulating existing plants 

when they are modified with new pollution controls to comply with other regulations. The 

USEPA has clearly said that they would not treat modified sources as new and that they had no 

plans or timetable for proposing regulations for existing sources. 

We ask that you stay true to that commitment as there will be voices pushing you to backtrack 

on that promise. 

What does this mean for Illinois business and consumers? 

I hesitate to try and quantify the exact costs and benefits if this proposed rulemaking is adopted 

as is. If I've leamed one thing in my four years in this position is the future is really hard to 

predict. Who could have predicted the natural gas finds that might turn us into a natural gas 

exporting country instead of an importing one. Who could have predicted that crude oil 

production in North Dakota would jump from 7,500 barrels per day in 2006 to more than 

700,000 barrels a day today. Who could have predicted that wind turbines would be up to 30% 

more efficient than four years ago, or that solar equipment costs would plummet. 

However, unless there is a leap in coal generation technology that is unforeseen at this time, 

new coal generation will be precluded from being part of the solution when it comes to energy 

generation. Remember, coal provides almost half of the power in our state today. These rules 

effectively shut down the future of new coal generation and the jobs, economic development 

and opportunity that would come with it. 

This does have economic ramifications as we believe we are better off with a diversified 

portfolio of generation options. Relying on fewer instead of more options puts us in danger of 

paying more for electricity, which affects the economy as a whole. 

3 
79 

Conclusion 

In closing the Chamber believes all of the above should mean all of the above - We believe 

diversity in our energy portfolio is an important. It seems these regulations push coal aside 

instead of forward. Therefore we're going to have to rely on everything but coal in our future 

baseload generation since it's hard to imagine anyone willing to invest in a power source that 

will be out of compliance before the first kilowatt is generated. We have 25% of the world's coal 

reserves. Isn't it worth trying a bit harder to make it part of the future energy mix? 

Since the rest of the world is going to continue using coal, shouldn't rulemaking provide 

reasonable challenges that drive innovation that can be exported globally and make a. dent in 

the C02 emissions this proposal is trying to achieve? 

We're afraid these new regulations will thwart, not push, innovation and discourage rather than 

encourage a diverse portfolio of generation recourses. 

We hope the government would create an environment where all sources of power have the 

chance to become more efficient and cleaner. We believe coal should be an important part of 

that future and, if regulations allow the industry to continually improve its production methods, it 

can provide opportunities for continued advancements and economic opportunity at home and 

abroad. 

We suggest taking a long, deep breath, and take a hard look at these new regulations and 

change them to allow new coal plants 10 be built, incenlivized in a way that creates a market for 

the technological advances that will make coal cleaner and cleaner - and a viable option for a 

U.S. and global electricity users. 

Thank you. 

4 
80 

Chairman HARRIS. Thank you very much. 

I now recognize Mr. David Hudgins for five minutes to present 

his testimony. 

STATEMENT OF MR. DAVID HUDGINS, 

DIRECTOR OF MEMBER AND EXTERNAL RELATIONS, 

OLD DOMINION ELECTRIC COOPERATIVE 

Mr. HUDGINS. Thank you, Mr. Chairman, Members of the Committee. 

Good afternoon. My name is David Hudgins. I am the Director 

of Member and External Relations at Old Dominion Electric Cooperative. ODEC is a generation and transmission cooperative 

headquartered in Glen Allen, Virginia, which is outside of Richmond. We provide electric power to 11 member-distribution cooperatives in Virginia, Maryland, and Delaware. Among our portfolio of fossil fuel generation, we have a 50 percent ownership in 

an 850 megawatt coal-fired plant in Halifax County, Virginia, and 

two simple cycle combustion turbines in Virginia and 50 percent of 

another one in Maryland. 

As an owner of existing fossil fuel generation, and more importantly, as we continue our interest and efforts to develop a coalfired base facility, Cypress Creek Power Station, ODEC’s decisions 

on future generation will be directly and negatively impacted by 

the adoption of the New Source Performance Standards for carbon 

dioxide, and I very much appreciate the opportunity to speak today 

on the EPA proposal or, as I learned over the weekend, the Employment Prevention Agency—i.e., this plant will employ 3,000 construction workers for four years, 225 permanent jobs at the end of 

the construction, and that is not including the ripple effect of hundreds of millions of dollars that are going to ripple through the 

economy. So it has a material impact on the entire region about the 

rules. 

But today, I am here to state officially that ODEC has significant 

concerns related to the proposal. This rule, the NSPS, is at its core 

flawed. EPA fails to provide stated benefits for this rule. The proposed rule’s standard is set without regard to fuel type, with only 

certain natural gas-fired units capable of meeting the proposed 

limit without control equipment. Given that there is currently no 

commercially available, demonstrated technology capable of removing the required CO2, namely carbon capture and storage from 

large coal power plants, this standard mandates fuel choice in lieu 

of technologies. The NSPS was never intended to be used to ‘‘redefine’’ a source or dictate use of one fuel over another. NSPS must 

be technologically driven and not enacted to drive an overall national mitigation goal. 

Additionally, the EPA, in their efforts to justify this standard, relied on two major assumptions. First, EPA believes that implementation of a currently unachievable CO2 standard for coal will drive 

commercial development of the emerging carbon capture technology 

to ensure future compliance. Second, the proposed rule presumes 

supply of natural gas will be both affordable and readily available 

to fuel the significant increase of base load generation in the com-
81 

ing decades. ODEC believes both of these assumptions are erroneous. 

With regard to carbon capture technology, EPA states in the release of the proposed standard, ‘‘today’s proposal does not interfere 

with construction of new coal-fired capacity.’’ EPA is justifying the 

standard by providing a 30-year averaging and assuming that fullscale carbon capture technology would be commercially viable within 10 years given current and projected government testing and 

demonstration. This averaging requirement alone will preclude any 

new coal plants from being built. No company will take the risk to 

invest billions of dollars into a power plant in the hopes that carbon capture technology will be developed. Additionally, financial 

lending institutions will not lend money to construct a plant without a viable technology to demonstrate compliance. This is a $5 billion investment on behalf of the cooperatives to provide 1,500 

megawatts. 

There are some demonstration projects involving enhanced oil recovery; however, this Administration’s Interagency Task Force on 

Carbon Capture noted, ‘‘only when the financial, economic, technological, legal, and institutional barriers are addressed will carbon 

capture be a viable mitigation option.’’ Finding suitable storage 

areas, developing pipeline infrastructure, and developing largescale capture technology, in addition to the legal and liability 

issues, are significant—if not insurmountable—hurdles to overcome. 

ODEC has been and continues to be a member of the Southeast 

Regional Carbon Sequestration Partnership. We recognize the need 

for these partnerships to facilitate exploration and expansion of 

this Nation’s technological capabilities. As a Virginia cooperative, 

coal has been an abundant, consistent, and economical source of 

fuel for development of base load electric generation for many decades. While all of us have seen recent prices of natural gas at alltime lows, EPA’s assumption that prices will remain low is extremely short-sighted. 

Historically, the U.S. Government has consistently failed to accurately predict future natural gas prices, and world market implications on natural gas pricing are disturbing. Electrical affordability 

from natural gas generation is significantly driven by the fuel 

price. EPA’s proposed standard will effectively eliminate ODEC’s 

choice for affordable base load electric power. 

ODEC recognizes that solutions to this country’s power needs in 

the future will take resources and innovation. However, this proposed mandate will not drive those solutions. Because of the significant impact it will have on the electric generation industry as 

a whole, and more importantly, on ODEC’s ability to construct new 

base load generation that will be affordable for all of our members—owners, ODEC urges the Committee to fully and objectively 

examine the source material and this proposed rule. Also, we urge 

the Committee to encourage the EPA to withdraw this proposed 

rule. 

This concludes my testimony and thank you again for the opportunity to speak on this fundamental issue of powering the United 

States economy into the future. Thank you. 

[The prepared statement of Mr. Hudgins follows:] 
82 

Comments of 

Old Dominion Electric Cooperative 

New Source Performance Standards for C02 

Presented to 

United States House of Representatives 

the Subcommittee on Energy and Environment of 

the House Committee on Science, Space, and 

Technology 

Presented by 

C. David Hudgins 

June 6,2012 

Old Dominion Electric Cooperative 

420lDominion Boulevard. Glen Allen, Virginia 23060 

Tel: 804-747-0592. Fax: 804-747-3742 

www.odec.com 
83 

ODEC TESTIMONY 

Good morning. My name is David Hudgins. I am the Director of Member 

& External Relations at Old Dominion Electric Cooperative (ODEC). ODEC is a 

generation and transmission cooperative, headquartered in Glen Allen, Virginia 

providing electric power to its 11 member-distribution electric cooperatives in 

Virginia, Maryland, and Delaware. Among our portfolio of fossil fuel generation 

assets, ODEC has a fifty percent ownership interest in the 850 MW coal-fired 

Clover Power Station, which is located in Halifax County, Virginia. 

Additionally, ODEC owns and operates two simple cycle combustion turbine 

facilities (each 510 MW gas and oil-fired generation) in Virginia and owns fifty 

percent of another in Maryland. 

As an owner of existing fossil fuel generation, and more importantly as we 

continue our interest and efforts to develop a coal-fired base load facility, Cypress 

Creek Power Station, ODEC's decisions on future generation will be directly and 

negatively impacted by the adoption of the New Source Performance Standards 

(NSPS) for carbon dioxide (C02), and I very much appreciate the opportunity to 

speak today on the EPA's proposal. 

I am here today to state that ODEC has significant concerns related to the 

proposal. The proposed NSPS is at its core flawed. EPA fails to provide a stated 
84 

benefit for this rule. The proposed rule's standard is set without regard to fuel 

type, with only certain natural gas-fired units capable of meeting the proposed limit 

without control equipment. Given that there is currently no commercially 

available, demonstrated technology capable of removing the required CO2, namely 

carbon capture & storage (CCS), from large coal-fired power plants, this standard 

mandates fuel choice in lieu of technologies. The NSPS was never intended to be 

used to "redefine" a source or dictate use of one fuel over another. NSPS must be 

technologically driven and not enacted to drive an overall national mitigation goal. 

Additionally, the EPA, in their efforts to justifY this standard, relied on two 

major assumptions. First, EPA believes that implementation of a currently 

unachievable CO2 standard for coal will drive commercial development of the 

emerging CCS technology to ensure future compliance. Second, the proposed rule 

presumes supply of natural gas will be both affordable and readily available to fuel 

the significant increase of base load generation in the coming decades. ODEC 

believes both of these assumptions are erroneous. 

With regard to CCS technology, EPA states in the release of the proposed 

standard, "today's proposal does not interfere with construction of new coal-fired 

capacity". EPA is justifYing the standard by providing a 30 year averaging period 

and assuming that full scale CCS technology would be commercially viable within 

10 years given current and projected government testing and demonstration 
85 

projects and funding. This averaging requirement alone will preclude any new 

coal plants from being built. No company will take the risk to invest billions of 

dollars into a power plant in the hopes that CCS technology will be developed. 

Additionally, financial lending institutions will not lend money to construct a plant 

without a viable technology to demonstrate compliance. 

There are some demonstration projects involving enhanced oil recovery 

(EOR); however, this administration's Interagency Task Force on Carbon Capture 

noted; "only when the financial, economic, technological, legal, and institutional 

barriers are addressed will CCS be a viable mitigation option." Finding suitable 

storage areas, developing pipeline infrastructure and developing large scale capture 

technology, in addition to the legal/liability issues, are significant, if not 

insurmountable, hurdles to overcome. ODEC has been and continues to be a 

member of the Southeast Regional Carbon Sequestration Partnership (SECARB). 

ODEC recognizes the need for these partnerships to facilitate exploration and 

expansion of this nation's technological capabilities. 

As a Virginia cooperative, coal has been an abundant, consistent, and 

economical source of fuel for development of base load electric generation for 

many decades. While all of us have seen recent prices of natural gas at all-time 

lows, EPA's assumption that prices will remain low is extremely short-sighted. 

Historically, the U.S. Government has consistently failed to accurately predict 
86 

future natural gas prices, and world market implications on natural gas pricing are 

disturbing. Electricity affordability from natural gas generation is significantly 

driven by the fuel's price. EPA's proposed standard will effectively eliminate 

ODEC's choice for affordable baseload electric power. 

ODEC recognizes that solutions to this country's power needs in the future 

will take resources and innovation. However, this proposed mandate will not drive 

those solutions. Because of the significant impact this will have on the electric 

generation industry as a whole, and more importantly, on ODEC's ability to 

construct new base load generation that will be affordable for all of our member 

owners, ODEC urges the committee to fully and objectively examine the source 

material and this proposed rule. Also we urge the committee to encourage the EPA 

to withdraw this proposed rule. 

This concludes my testimony and thank you again for this opportunity to 

speak on this fundamental issue of powering the United States economy into the 

future. 

##### 
87 

Chairman HARRIS. Thank you very much. 

I now recognize our final witness, Mr. Richard Trzupek, for five 

minutes to present his testimony. 

STATEMENT OF MR. RICHARD TRZUPEK, 

PRINCIPAL CONSULTANT, 

TRINITY CONSULTANTS 

Mr. TRZUPEK. Thank you, Mr. Chairman and Ranking Member 

Miller, for the opportunity to testify here today. 

I am Rich Trzupek, a chemist and environmental consultant currently employed as Principal Consultant with Trinity Consultants, 

Inc. I work in the trenches, as it were, for the small and midsized 

companies that do not have their own environmental staff. 

You have my written testimony, so I would like to use this time 

to highlight a few points. 

First, the perception in the regulative community that the EPA 

is overly aggressive and overly intrusive is real and in my opinion 

justified. When former Region 6 Administrator Dr. Al 

Armendariz—sorry about that—Armendariz made his famous crucifixion speech, it came as no surprise to those who work on the 

industrial side. From an industrial point of view, he honestly expressed—albeit in far-too-colorful language—the way that most 

high-ranking EPA officials view enforcement actions. My experience has been that, at the federal level, intimidation is often as important as compliance. 

Second, many parts of the regulatory structure and the federal 

permit systems are needlessly cumbersome and complex. Some say 

they do what they can to provide help in streamlining—TCEQ is 

a great example—but there is little they can do about the parts of 

their programs which are subject to U.S. EPA oversight and approval. The complexity the regulatory structure creates more and 

more opportunities for noncompliance, which has nothing to do 

with exceeding emission limits, but rather strictly about paperwork 

and procedures. 

The combination of aggressive enforcement, regulatory complexity, and a clunky federal permit system does lead to adverse 

economic consequences. I have seen many cases in my career where 

the decision not to build a facility in the United States or the decision not to expand an existing facility was heavily influenced by 

the regulatory environment. This is not to say that environmental 

regulations were the only factor in these decisions but they were 

important factors. 

Third, I believe it is time for Congress to review the way the U.S. 

EPA is allowed to continually redefine its mission, particularly 

with respect to the Clean Air Act. Under the Clean Air Act, the 

U.S. EPA is allowed to continually redefine what constitutes clean 

air by issuing a new ambient air quality standards. By continually 

moving the goalposts farther and farther as the air has gotten remarkably cleaner and cleaner, the Agency thus justifies continuing 

with less and less actual environmental or human health returns. 

The United States now has some of the cleanest air in the world, 

and I would respectfully suggest that it is time we acknowledge 

that fact and that the Clean Air Act reflects that fact. 
88 

Fourth, the economic justifications that the U.S. EPA uses when 

promulgating new regulations are, in my opinion, seriously flawed. 

In my opinion, U.S. EPA both grossly overestimates the economic 

benefits of regulations and ignores many economic, societal, and 

health consequences on the other side of the ledger. In a way, I 

think it is unfortunate that we call the metric value a statistical 

life because it tends to imply maybe I can plop down $9 million and 

buy a person. What it really is is the net economic productivity of 

the average person, how much money he makes, how much he impacts the economy. When you say it is a value of a life it is going 

to be insulting no matter the number. I personally think I am 

worth more than $9 million over the course of my life. And there 

is no way that metric should be used or should be called what it 

is as though it was a real value of a life. It is a value of what a 

person does and earns in his life. 

You will note that all of the above comments are not related to 

the U.S. EPA under this or any other administration. These comments would have applied four years ago, eight years ago, 12 years 

ago, et cetera. The only real difference over time is that we can 

apply the word ‘‘more’’ each and every year. Regulations get more 

complex, the EPA gets more aggressive, economic justifications are 

more unbelievable, et cetera. 

There is one thing that is unique to the EPA under the current 

Administration and that is what I refer to as the regulatory tsunami aimed squarely at the use of coal and power industrial sectors. Through a combination of greenhouse gas limitations—which 

previous witnesses have talked about—new permitting requirements, new ambient air quality standards, and new hazardous air 

pollution rules, the Agency has made it virtually impossible to 

build the new, modern coal-fired generation in the United States 

that would replace our aging fleet. 

The EPA has thus effectively decided that more and more of the 

base load power generation capacity the American depends on will 

be natural gas-fired. In the long term, I strongly suspect this will 

lead to substantial increases in the cost of electricity and in more 

wildly fluctuating power prices. 

Thank you again for the opportunity to testify, and please feel 

free to call on me again in the future if I can be of assistance to 

the Committee. 

[The prepared statement of Mr. Trzupek follows:] 
89 

Introduction 

Committee on Science, Space, & Technology 

Energy & Environment Subcommittee 

United States House of Representatives 

"Cost and Benefits of Environmental Regulations" 

Testimony of Ric bard Trzupek 

Principal Consultant 

Trinity Consultants, Inc. 

Wednesday, June 6tb, 2012 

WRITTEN 

Thank you Chairman Harris, Ranking Member Miller and other members of the Subcommittee 

for the opportunity to testify on this important topic. I am Richard Trzupek, a chemist and 

environmental consultant, currently employed as a Principal Consultant with Trinity Consultants, 

Inc. I have been employed in the environmental industry for thirty years, initially as a stack tester 

(measuring air pollution emitted by industrial processes) and then as a consultant to industry. 

The vast majority of my clients are now, and always have been, small to mid-sized companies 

that do not have full-time environmental professionals on staff. 

We have made enormous progress in cleaning up the environment in America since the passage 

of the Clean Air and Clean Water Acts over forty years ago. Everyone involved in that effort -

from businesses to environmental groups to everyday Americans - should be proud of what we 

have accomplished together. Obviously, the Environmental Protection Agency has played a key 

role in that effort as well. However, as our air and water and soil continue to get cleaner year 

after year - as the EPA's data clearly shows -the Agency's mission has, in my view, 

increasingly morphed from protecting human health and the environment to finding ways to 

justify its existence. 

I am not one of those who believes that the EPA should be eliminated. Instead, I believe that the 

EPA's mission should be redefined to reflect the fact that the environment in America in 2012 is 

nothing like what the environment was in 1970. As the law stands today, the EPA has the ability 

to continually redefine its mission in many areas and it does so regularly, no matter the 

administration is in charge at the time. By continually moving the goalposts further and further 

back, and offering increasingly dubious economic justifications for doing so, the Agency creates 

the illusion that ever more heavy-handed regulation are necessary and worth the cost. 

Working "in the trenches" with the men and women who struggle to comply with this evergrowing, ever more complex body of environmental regulations, I have seen the price that we all 

pay not for environmental protection, but rather for environmental puritanism. We pay a price 

in terms of jobs lost, in terms of reduced productivity and in terms of opportunities not realized. 

Page 1 
90 

Costs and Benefits - EPA Claims 

The EPA routinely claims enormous monetary benefits when promulgating a new regulation. 

Typically, these benefits consist of two key components: "premature deaths avoided" and 

increased worker productivity due to less lost sick days. "Premature deaths avoided" is the 

largest component of the calculation, so I will focus on that. 

In calculating the worth of premature deaths avoided, the EPA relies upon the "Value ofa 

Statistical Life" (VSL). It currently uses a VSL of about $9 million, which is, to my knowledge, 

the highest VSL used by any government agency. The Agency applies this value to each 

premature death avoided claimed, whether the theoretical death avoided involves extending an 

octogenarian's life by two weeks or a newborn's by seventy five years. The EPA, to my 

knowledge, has never said how much the average theoretical life is theoretically extended by the 

issuance of a new regulation. They simply claim the full value ofthe "statistical life" for each 

"premature death avoided". 

For example, the EPA recently claimed the recently promulgated Boiler MACT rule would result 

in $22 billion to $54 billion in economic benefits in 2014. This number is almost entirely driven 

by the premature deaths avoided metric, which the Agency claims is 2,500 to 6,500 premature 

deaths avoided per year. 

Even more dubiously, EPA Director Lisa Jackson has claimed the Clean Air regulations are an 

investment that returns forty dollars in revenue for each. dollar spent on regulating sources of air 

pollution. This figure comes from an EPA study in which the Agency made the following 

assertions: 

The direct benefits of the Clean Air Actjrom 1970 to 1990 include reduced incidence of a 

number of adverse human health effects, improvements in Visibility, and avoided damage to 

agricultural crops. Based on the assumptions employed, the estimated economic value of these 

benefits rangesjrom $5.6 to $49.4 trillion, in 1990 dollars, with a mean, or central tendency 

estimate, of$22.2 trillion. 

And, further on in the same document: 

The direct costs of implementing the Clean Air Act jrom 1970 to 1990, including annual 

compliance expenditures in the private sector and program implementation costs in the public 

sector, totaled $523 billion in 1990 dollars. 

$22.2 trillion divided $523 billion is 42.4, which is where Director Jackson comes up with the 40 

to 1 return on investment argument. Consider, however, that between 1970 and 1990, the 

aggregate total GDP ofthe United States was $63 trillion. According to EPA logic, the Clean Air 

Act alone was responsible for 35% of that economic activity ($22.2 trillion), and perhaps as 

much as 78% of it ($49.4 trillion)! It is a ludicrous claim. 

Page 2 
91 

In considering the cost side of the cost-benefit analysis, the Agency typically considers only the 

capital cost of control equipment, operating and maintenance costs associated with the 

equipment and the man-hour costs of compliance activities. The Agency does not consider other 

economic, societal and health costs associated with each regulation and with the body of 

regulatory activity as a whole. Examples of these costs include: 

• Job loss 

• Heath effects associated with job loss and reduced income 

• Opportunity costs associated with facilities not built in the US because of the regulatory 

burden 

• Costs passed on to the consumer and the effects that has on quality of life and health 

• Facilities that move to other countries in whole or in part because the regulatory 

environment 

Compliance Issues 

The most common lament among my clients goes something as follows: "I want to comply. I'm 

trying to comply. I just can't figure out what I'm supposed to do." Indeed, helping them figure it 

out is the reason they hire someone like me. Compliance with air quality regulations is not 

simply a matter of ensuring that emissions from a particular facility do not exceed applicable 

EPA standards. That part of compliance is relatively easy to understand in most cases. 

But, compliance also involves records and reports and notifications and inspections and tests and 

permits and other bureaucratic minutia. Compliance involves EPA inspectors and EPA permit 

writers and EPA attorneys. As complex as environmental regulations have gotten, a great many 

"violations" these days have nothing to do with pollution, but rather are about paperwork. Yet, in 

terms of enforcement, it does not matter if the violation involves pollution or paperwork. If a 

company fails to file some obscure notification, or if an over-zealous, inexperienced inspector 

doesn't like the way a particular record is being kept, the company is still subject to penalties of 

up to $25,000 per day until the error is corrected, as provided for in the Clean Air Act. 

The Agency does not typically collect $25,000 per day per violation of the Clean Air Act. But it 

frequently wields that legal authority as a cudgel to force a company to accept a lesser - but still 

substantial - penalty demand. This is particularly the case when small or mid-sized businesses 

are involved. Few have the will or the resources to fight a penalty demand of a hundred thousand 

dollars for a paperwork violation, for example. It's not worth it to hire a lawyer to go to battle 

with the EPA, especially when the Agency holds the $25,000 per day, per violation threat over 

their heads. 

Compliance with environmental regulations today is every bit as complex as compliance with tax 

code is for many Americans. It is an increasingly stressful burden on many businesses, in terms 

Page 3 
92 

of both the time spent on trying to stay in compliance with an ever-growing body of regulations 

and in terms ofthe way that overly-aggressive regulators can suppress the entrepreneurial spirit. 

Let me give you an example of the latter phenomena. "Renewable Energy" is all the rage today 

and everyone is looking for new sources of renewable fuels. One source of renewable fuels is 

one of the oldest fuel sources on earth: human waste, in the form of sewage sludge. Dried 

sewage sludge is very similar to lignite (a form of coal) in terms of both fuel value and air 

pollutant characteristics. Since it's not a fossil fuel, the combustion of sewage sludge does not 

add any additional carbon to the eco-system. So, rather than landfill it, land-apply it, or 

incinerate it (the three most popular disposal options today), why not recover the energy 

contained in sewage sludge? In some cases the EPA agrees, having recently approved of the use 

of dried sewage sludge as a supplementary fuel in coal-fired boilers. 

One of my clients, Uzelac Industries, manufactures some of the driers that are used to dry 

sewage sludge for use as a supplementary fuel. Uzelac is a small, entrepreneurial metal 

fabrication ship located just outside of Milwaukee in Greendale, Wisconsin. The owner, Michael 

Uzelac, had an inspiration: rather than bum natural gas (a fossil fuel) to dry the sludge, why not 

use some of the dried sludge itself to d(l the job? 

Unfortunately, EPA decided that burning dried sludge to operate the drier would be 

"incineration" and thus subject to an entirely different - and much more intrusive - set ofrules 

than a coal boiler using the sludge as supplemental fuel would be subject to. Why? Because, 

according to the Agency, if you bum the sludge at the same site where it was produced, it's a 

waste and then burning it is incineration. If you bum the sludge somewhere else, it's a fuel and 

then burning it is not incineration. When this decision was related to us, my flip response was 

"so, if! load the dried sludge on a truck and drive it around the block, does it become a fuel?" 

These kinds of tortuous, illogical regulatory analyses are a hallmark ofthe EPA today. The 

Department of Energy, the current administration and the American people may want innovation 

and new technologies, but the EPA hates dealing with them and the current regulatory structure 

is terribly unsuited to doing so. 

The Permit System 

The permit system has two parts: tbe state (or other local, independent district) level and the 

federal level. In most cases, there are two types of permits that must be obtained: a construction 

permit, which is required before a new plant or process can be built, and an operating permit, 

which is required for continuing operation of the plant or process. Construction permit programs 

carry with them the most significant economic impacts, so I will focus on those programs here. 

In general, the states are responsible for permitting smaller sources, while the states and the feds 

both get involved in permitting larger sources. At the state level, performance varies. Some states 

are very business friendly and work hard to push reasonable permits through quickly. Texas is an 

Page 4 
93 

excellent example of such a state. The TCEQ has an enviable reputation for working with 

industry, without compromising environmental protection. Other states are much more difficult 

to work with. Permits in some states take far too long to obtain and, when issued, are often 

Jittered with needlessly intrusive conditions that do nothing to protect the environment. 

At the federal level, the permit program is much more complex. Major sources must go through 

the EPA's Prevention of Significant Deterioration (PSD) permit program. The PSD permitting 

process is fraught with peril and, as currently constituted, frequently results in the cancellation of 

projects that would otherwise modernize American infrastructure and further advance the 

remarkable environmental progress we have made. 

The PSD program started with a good idea: as large sources of air pollution are replaced in the 

natural capital equipment life-cycle, let's make sure that the project includes state of the art 

controls. It makes sense to require a facility to install a $ I 0 million control device as part of a 

$500 million capital project to build a brand new plant that's going to be around for forty years. 

It doesn't make sense to require a facility that's on its last legs to make the same investment. 

Thus, as fleets turned over, the air in the natural scheme of things, emissions would continue to 

drop. 

That's what PSD was supposed to be. Perversely, it's had exactly the opposite effect in some big 

industries. Take our coal fleet, for example. Director Jackson is on-record chiding utility 

operators for running inefficient boilers that are forty years old or lJlore. The implication being 

that nobody tried to replace those old inefficient boilers with newer, more efficient boilers. That 

is simply not true. 

The Sierra Club has a portion of its website dedicated to its "Beyond Coal" program. In it, the 

organization proudly records the tens of thousands of megawatts of new, more efficient coalfired boiler construction projects it has helped to kill. Those are the boilers that should have 

replaced the older boilers in the fleet and they would have, had organizations like the Sierra Club 

not prevented them from being built. And, the PSD program is the weapon that organization\s 

like the Sierra Club and NRDC use to kill projects they don't like. They flood agencies with 

public comments that, under PSD, the agencies are bound to read and respond to. They file 

appeals, both in the judicial system and with the Environmental Appeals Board. In the latter case, 

just filing an appeal- whether it has merit or not - automatically stays the permit. 

PSD is thus used to throw obstacle after obstacle in the way of new projects. The goal is to so 

frustrate a developer that he or she will eventually abandon the project. Since capital has a shelflife, opposition groups like the Sierra Club are often remarkably successful utilizing this strategy. 

Ultimately, the combination ofPSD and well-healed, aggressive opposition groups are the reason 

that we haven't built a new oil refinery in the United States since 1975, and that we instead rely 

on an aging refineries instead. It's also the reason that we have so many old coal-boilers 

chugging along. This kind of activity doesn't do the environment any good and it's hardly sound 

PageS 
94 

economic policy. We need to find a way to go back and make PSD do what it was intended to 

do. 

Recent Regulatory Developments 

In the course of the last four years, the EPA has effectively banned the construction of any new, 

modem coal fired power plants in the United States. This has been accomplished not by the 

passage of a single regulation, but by the passage of multiple regulations that clearly target coalfired power in what I have corne to think of as a regulatory tsunami. Some of the key regulations 

promulgated include: 

• A New, Short Term Ambient Air Standardfor Nitrogen Dioxide This standard was put in 

place in addition to the existing annual Nitrogen Dioxide standard. The short tenn 

standard is so stringent that it is virtually impossible for a new coal fired power plant not 

to violate ·it. And, since new power plants are required to perfonn computer dispersion 

modeling to show that emissions won't exceed ambient air quality standards anywhere, 

under any conceivable weather conditions, this standard effectively prevents the 

construction of new, modem, efficient coal-fired generation to replace our aging fleet of 

coal boilers. 

• A New, Short Term Standardfor Sulfur Dioxide Again, the standard is so low that it is 

virtually impossible for new coal-fired generation not to violate it, even with state of the 

art controls. 

• Greenhouse Gas Permitting Large new sources of greenhouse gases must go through the 

EPA's major source, PSD construction pennit program. As part ofPSD permitting, 

sources must show that the controls used to reduce target air pollutants meet the 

definition of Best Available Control Technology (BACT). The EPA has made it clear, 

through guidance documents, that a coal-fired power plant will not pass the "BACT test" 

unless it uses Carbon Capture and Sequestration (CSS) to control greenhouse gas 

emissions. Since CSS technology is neither feasible nor affordable in large scale, this 

program also prevents the construction of new, modem, efficient coal-fired generation to 

replace our aging fleet. 

• Greenhouse Gas New Source Performance Standards The EPA recently published a 

New Source Performance Standard (NSPS) for Greenhouse Gas emissions from Electric 

Generating Units (EGU). No coal-fired power plant can meet that standard without the 

use of CSS, which - as noted above - is neither technically feasible nor affordable in 

large scale. Combined cycle, natural gas-fired power plants are capable of meeting the 

standard. 

Page 6 
95 

• Utility MACT & Boiler MACTMaximum Achievable Control Technology (MACT) 

standards are supposed to be about minimizing emissions of Hazardous Air Pollutants 

(or "HAPs", as opposed to the more common Criteria Air Pollutants). What the EPA has 

done in establishing MACT standards for large EGUs (Utility MACT) and industrial 

boilers (Boiler MACT) goes far beyond this goal. The standards themselves are 

incredibly stringent and that alone will hasten the retirement of many coal-fin:d assets in 

the United States. As troubling are provisions in the rules that will involve the EPA 

much more closely than ever in operation of the EGU's and boilers that remain. There 

are requirements to conduct periodic tune-ups and energy efficiency audits within the 

rules. Now, there is nothing wrong with tuning up boilers and conducing energy 

efficiency audits. Indeed, most companies do so on their own, because there is a 

monetary incentive to minimize energy use. But, involving the EPA in the process is 

foolish, overly intrusive and will be counter-productive in many cases. Inexperienced, 

over-zealous EPA officials at the federal and state levels often make foolish and counterproductive decisions about the pollution control systems that are within their purview 

today. A rule that gives them the opportunity to interfere at the operational level as 

these rules clearly do - is a recipe for disaster. 

It should also be noted that EPA officials are using threat of enforcement action to force smaller 

coal-fired boilers, such as municipal boilers or those operated by co-ops, to shut down or convert 

their boilers to fire another fuel (typically natural gas or biomass). Given the relatively small size 

of these units and the entities that operate them, and given EPA's spectacular, multi-million 

dollar successes in going after larger utility boilers, few - if any - operators of these smaller 

boilers would dare to fight the Agency. 

All of these regulatory actions, and many more, mean that the coal fleet in the United States will 

continue to shrink and no new coal-fired plants will be built to replace retired units. Construction 

of new natural gas fired generation is the only possible way to replace that base-load capacity 

without endangering the reliability of the grid. (Nuclear plants, even if permitted, cannot be built 

quickly enough; wind power is nowhere near reliable enough to provide base-load capacity; and 

solar plants are also terribly unreliable and the size of even the largest solar plants are pitifully 

small compared to the size of the coal-fired plants that will be retired). 

At the moment, natural gas is plentiful and relatively cheap. Thus, repowering will likely be 

relatively painless in the short term. However, natural gas prices are historically much more 

volatile than coal prices. The natural gas industry which is doing a tremendous job in my 

opinion - will find and create new markets for their product. Prices will eventually rise again and 

this will have a much more significant effect on the cost of electricity than is currently the case. 

We are thus in the midst of the monumental shift in the way that America generates its electric 

power. Dreams of supposedly "free" wind and solar power make for good talking points and 

heart-warming commercials, but there is little substance to found in those dreams from a science 

Page 7 
96 

and engineering point of view. According to Department of Energy Data, both solar plants and 

wind farms generate less than 20% of the power they are designed to produce. One cannot run an 

electric grid by relying on sources that we can't count on over 80% of the time. 

As a practical matter, the only sources of power that are both abundant enough and reliable 

enough to provide the base-load generation that is critical to maintaining a healthy grid are coal, 

nuclear and natural gas. Through a series of regulatory initiatives, the EPA has effectively 

decided that natural gas will be the fuel of choice in the years to come. Not Congress. Not the 

free market. That decision has been made by the Agency alone. I cannot say whether Congresses 

past intended to grant the EPA the authority to make such a decision when the original Clean Air 

Act and the Clean Air Act Amendments of 1990 were passed, but it is clear that this EPA 

believes it has that authority. If the EPA is going to decide energy policy to this extent, I would 

hope - as a private citizen - that someone takes a closer look at their decision-making process. 

Conclusion 

In conclusion, as I have stated in my testimony, the EPA continues to have a greater and greater 

effect on industry, energy production and economic activity in general, with increasingly smaller 

environmental returns. It's been twenty two years since Congress has taken a fresh look at the 

Clean Air Act. It's time to do so again. 

Thank you again for the opportunity to testify before the committee. 

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97 

Chairman HARRIS. Thank you very much. 

I thank the witnesses for being available for questioning today, 

reminding Members that Committee rules limit questioning to five 

minutes. 

The Chair at this point will open the round of questioning and 

I recognize myself for five minutes. 

Mr. Trzupek, let me just follow up on that regulatory tsunami. 

I am sure you are aware, as everyone in the public is, you know, 

we have this 2,700-page Affordable Care Act bill and a whole bunch 

of rules and regulations have to come from it. Are you aware that 

there are twice as many regulations from the EPA as there are 

from Health and Human Services before OIRA right now, despite 

the fact that HHS has to implement a 2,700-page health bill that 

involves 17 percent of the U.S. economy, twice as many? Would 

that surprise you? 

Mr. TRZUPEK. That frightens me. 

Chairman HARRIS. It wouldn’t surprise. I didn’t think it would. 

With regards to this statistical life, that is kind of related to the 

quality adjusted life, which is, if I recall, Ezekiel Emanuel, the advisor to the President, is the one that introduced that concept in 

regards to how to ration medical care as we go to look to decrease 

the costs of Medicare in the future. Am I correct? I mean it is the 

same concept that in fact older lives somehow don’t get the same 

amount of resources as younger lives? 

Mr. TRZUPEK. Yeah, that is correct. 

Chairman HARRIS. Right, that was Ezekiel Emanuel’s—the whole 

point of his pretty famous paper. 

Now, Dr. Honeycutt, let me ask you some questions. I am going 

to ask you—can we show the slides here? Because I am going to 

show this—these are some of your slides here that you didn’t 

present, but they are in the written testimony. Now, the first one 

suggests—because, you know, in science you like to think we kind 

of, you know, seek the truth. Apparently, the truth before pre-2009 

appeared to be that maybe four percent of all deaths was due to 

PM2, but the truth somehow changed post-2009 and all of a sudden 

four times as many deaths. One of those sciences is wrong, right? 

I mean we have to assume that no cataclysmic event occurred in 

2009 except maybe the beginning of a new administration that 

would have quadrupled the number of deaths attributable to PM2, 

is that—that is kind of correct? 

Dr. HONEYCUTT. Yes. 

Chairman HARRIS. Right? Okay. Now, let’s go to the next slide, 

which I think is one that you showed. When I took my master’s degree at the School of Public Health, the first thing they taught us 

in the statistics course is before you do any statistics you actually 

look at the data. Now, I look at this data and if you took that line 

that is vertical which really is nothing, that is just, you know, that 

.15, and you looked at that data and I asked someone to draw the 

best line—to imagine that a line describes this data or even a curve 

describes this data, one would look at it and go, well, you really 

can’t because with those outliers there on the right you could say, 

well, I could draw a line going downward with those outliers on the 

left. Well, maybe it is straight across. 
98 

So the first validation of any statistical analysis is look at it and 

say should you subject this statistical analysis? I got to you tell 

you, I look at this, I say I am not sure I would. Let’s go to the next 

slide. 

And that is true, right? Is that—that is the way you are supposed to deal with statistics? 

Dr. HONEYCUTT. You are absolutely correct. 

Chairman HARRIS. This is the assumption of causality. Now, this 

is the most worrisome because what you are suggesting—and I 

wish, you know, Cass Sunstein were here and God bless him on the 

birth of a daughter. I have two daughters. You know, he is going 

to have his hands full and three other—three boys. He is going to 

have his hands full for a while. But the research was an association. 

Dr. HONEYCUTT. Absolutely. 

Chairman HARRIS. Which they teach you in epidemiology should 

never be attributed to causality until you do actual studies that 

prove causality, is that correct? 

Dr. HONEYCUTT. Yes, sir. 

Chairman HARRIS. Okay. Now, this is the assumption of causality, and even if you assume causality, this is where you say most 

of the studies—because that line above the number one assumes 

that there is no effect—most of those studies fall on that line and 

only one study if I look at it doesn’t have an estimate—a range of 

estimate—of accuracy of estimate that actually doesn’t touch the 

line one. 

Dr. HONEYCUTT. Yes, sir. It is very—— 

Chairman HARRIS. So the assumption looking at that data would 

be there is actually no evidence that there is an increase in relative 

risk. 

Dr. HONEYCUTT. There is very little. 

Chairman HARRIS. In fact, the studies you showed indicate there 

is a 1.06. I imagine that study actually included 1 as part of the 

range. 

Dr. HONEYCUTT. Actually, it didn’t. It was very close to 1. 

Chairman HARRIS. Well, you said there were two studies, 1.06 

and 1.16, but I don’t see two that don’t touch the line of 1, maybe 

1.16 that did it. That is what I thought. 

Next slide. 

This one is very interesting, because it assumes that if you want 

to live a longer life in Dallas and in Houston, you better start 

breathing some PM2—— 

Dr. HONEYCUTT. Yes, sir. 

Chairman HARRIS [continuing]. Is that right? 

Dr. HONEYCUTT. Yes, sir. 

Chairman HARRIS. Because using the same association and the 

same causality information to say that actually your risk is decreased in Dallas and Houston and Birmingham and I know Las 

Vegas crosses the 1. And actually, there are only very few cities 

where there is even a slight increase. You know, maybe in Phoenix 

and Milwaukee it might not be hazardous, but that could outweigh 

Dallas and Houston. 

As far as you know, does the EPA—did they change the requirements for Dallas and Houston based on this scientific data? 
99 

Dr. HONEYCUTT. No, sir. We have the same requirements everyone else does. 

Chairman HARRIS. You do? Even though the evidence is that in 

Texas it appears to be protective? 

Dr. HONEYCUTT. Yes, sir. 

Chairman HARRIS. Okay. That is kind of what I thought. Anyway, thank you very much. We will get a second round, be sure to 

get some more in. And I now recognize the Ranking Member, Mr. 

Miller, for five minutes. 

Mr. MILLER. Thank you, Mr. Chairman. 

That set of questions make it all the more remarkable that no 

one from EPA was invited to appear at this hearing because these 

analyses are done by EPA; they are not done by OIRA. It certainly 

would have been useful to have had someone here from EPA to ask 

some of those very particular questions that the Chairman was just 

asking. 

The reason that I set out verbatim in my opening statement the 

Chairman’s question to Cass Sunstein last fall is I did not want to 

summarize the position he was taking since it was, as they say in 

‘‘Jeopardy,’’ in the form of a question. But let me put this innocent—although it pretty clearly is implicit in the question—for purposes of this question, if your position is that EPA should value life 

not by life but by years, and that if an environmental exposure 

lessens life by a percentage and therefore it is more years for 

younger people, then if that is your analysis, then you are saying, 

yes, younger people’s lives should count for more than older people’s lives. 

Given that assumption, Mr. Honeycutt, could you answer this 

question? In spite of the fact of that most mortality associated with 

particulate matter happens in the population over 65 years of age, 

EPA puts the same value on the mortality for all ages. In your 

view, is this practice appropriate? 

Dr. HONEYCUTT. No, sir. 

Mr. MILLER. That is not appropriate? 

Dr. HONEYCUTT. No, sir. 

Mr. MILLER. Okay. You do believe that younger lives should 

count for more than older lives? There should be a senior discount? 

Dr. HONEYCUTT. Actually, the lives should be the same. It is the 

life years that needs to be different because actually the rules impact—— 

Mr. MILLER. Right. 

Dr. HONEYCUTT [continuing]. People mainly 80 and over. 

Mr. MILLER. So you were—— 

Dr. HONEYCUTT. So it adds months to their lives. So a 25-yearold, if he lives past 25 years old—if this were infant mortality, you 

would be correct. You would use a whole life. But we are talking 

adding lives to people who are over 80 or adding years—months to 

the lives of people who are over 80. 

Mr. MILLER. Okay. So you are, again, the gist out of the analysis 

that you get there is that the life of a younger person should count 

for more than a life of an older person? 

Dr. HONEYCUTT. Well, they should count equally because a 25- 

year-old—his value of a statistical life—it should be the same no 
100 

matter what. But an 80-year-old who dies four months sooner than 

they would have, they have only lost that four months. 

Mr. MILLER. All right. Thank you, Dr. Honeycutt. 

Dr. Honeycutt, there is a pretty clearly established legal concept 

that there can be many causes, but if they act in concert they are 

all—that each one is a cause. Do you dispute that in any way? I 

mean, if someone is obese and a smoker and is exposed to particulate matter or any other kind of environmental exposure and that 

combination had not existed they would have survived, then each 

one of those is a cause. 

Dr. HONEYCUTT. Each one can contribute. The question is how 

much do they contribute? And I think the answer is those other 

factors contribute a lot more than PM does if PM does at all. 

Mr. MILLER. Okay. I understand the whole idea of double counting is that the—that two different rules may accomplish the same 

purpose and if you count it the same for both, you are double 

counting. But it is certainly possible to have discrete benefits from 

two different rules, and it is possible to have a cumulative effect 

from two different rules. Your slides suggest that there has been 

double counting but there is absolutely no—you cite no authority 

for that at all. What is your authority for the EPA double counting 

the benefits of air pollution controls, for instance? 

Dr. HONEYCUTT. Well, I mean it is taken directly from EPA analysis because when you reduce—if a rule reduces PM by a 

microgram per cubic meter and another one does, it is reducing the 

same microgram per cubic meter. 

Mr. MILLER. Why is it not 2 micrograms per cubic meter? 

Dr. HONEYCUTT. Because it looks at what—— 

Mr. MILLER. How do you know it is the same microgram? 

Dr. HONEYCUTT. Because you are measuring—if you are measuring at a monitor—see, these aren’t looking at sources; they are 

looking at monitors in the environment, monitors at a city. So if 

it is reduced at a monitor somewhere, it doesn’t really matter 

where it came from. It is reduced at the monitor. That is the different between an ambient standard and a point force standard. 

Mr. MILLER. Right. But you have offered no authority. Is there 

any authority—is there any published paper that shows that they 

are actually double counting rather than there being discrete benefit or cumulative benefit? 

Dr. HONEYCUTT. I am not sure about a published paper on that, 

but you can actually just look at EPA’s data and pull that information out. It is there. I would be happy to show you that. 

Dr. MILLER. Okay. Well, even better would be to have an EPA 

witness come and have that person ask those questions. 

My time has almost expired and I will yield back the last 15 seconds. 

Chairman HARRIS. Thank you. I think you are actually 15 in the 

red, but we will give you—remember, we are going to have another 

five minutes. And gosh, I kind of wish that the minority had invited the EPA. I would love to hear their explanation. 

Mrs. Biggert is recognized, the gentlelady from Illinois, for five 

minutes. 

Mrs. BIGGERT. And thank you, Mr. Chairman. 
101 

Mr. Wolf, you recently testified at a public hearing in Chicago on 

EPA’s proposed carbon pollution standard. Do you think that based 

upon recent EPA behavior, the Agency is likely to incorporate and 

respond to your concerns in the final standards? 

Mr. WOLF. I hate to predict the future of what government agencies do. I certainly hope that they will take a look at this. The industry—you know, I represent a lot of different voices in the industry in Illinois—wind, solar, coal, nuclear, crude oil, utilities—it is 

not like they are against every regulation in the book. They would 

like regulations that they believe allow a sweet spot for that environmental protection and a successful business model. And I am 

hoping the U.S. EPA looks at this specific one and has a path for 

coal that really is a path for coal and not a roadblock. 

Mrs. BIGGERT. Okay. Then, do you think that the recent EPA 

regulatory activity is consistent with the all-of-the-above energy 

policy? 

Mr. WOLF. I think this proposal is not consistent with that. I 

think this proposal does preclude coal—new coal generation from 

happening. The coal producers and actually some of the other producers of energy I have talked to about these regulations, people 

aren’t even in the coal business, some of the wind people I talk to 

look at this and say, yeah, they are not going to be able to build 

with this. It is just too much of a leap. Where they say 

incentivization for maybe permitting incentivizations, a renewed 

permit is X percent cleaner for greenhouse gas gives that incentive 

as an idea to get better and better and cleaner and cleaner over 

time. If you just say here is this big bar you have to reach and they 

can’t reach it, they aren’t even going to try to get there. 

Mrs. BIGGERT. I know that in Illinois there was sequestration 

that was talked about for a long time in southern Illinois which 

has not happened, but it seems like there has been some breakthrough on the greenhouse gases for coal. I thought that they really had—in some of the plants had been able to remove that from 

there. 

Mr. WOLF. Well, on the sequestration side there is actually a 

pilot project going on in Decatur right now—— 

Mrs. BIGGERT. Yeah. 

Mr. WOLF [continuing]. Where they are sequestering a million 

metric tons over three years and we are hopeful that pilot project 

will prove successful both technologically and environmentally and 

economically. But again we are not sure. 

Mrs. BIGGERT. So it is moving forward? 

Mr. WOLF. It is moving forward but there are a lot of ‘‘ifs’’ in that 

scenario and to say—to put out regulation that says every if is 

going to work out; therefore, let’s do it this way is grasping. And 

then, you know, there is—I think the coal industry has shown over 

the past three decades that it can get better. And that is in their 

hands and saying we are done. This is it. This is the best we can 

do. Consistently, they are showing they can get cleaner and cleaner 

in their energy and production and we should give them that 

chance to continue that. 

Mrs. BIGGERT. Okay. Then, Mr. Trzupek, what are the cumulative effects of these various EPA rules on the bottom line for 

small businesses? 
102 

Mr. TRZUPEK. For small businesses they have a very marked effect on the bottom line. In the small entrepreneurial businesses 

that I deal with, the person who is trying to manage the EPA program is usually the driving force in that business; he is the entrepreneur. And the more time he has to spend doing things that really don’t have environmental benefit, they are just about paperwork 

and procedures, the less time he is being productive, the less time 

he has to devote to growing his business. 

Mrs. BIGGERT. And do you think that the EPA’s carbon pollution 

standard that will effectively ban coal generation will impact the 

manufacturers and small businesses? 

Mr. TRZUPEK. I think in the long term because coal has been for 

years the great stabilizer in energy prices and natural gas, as I 

think Mr. Hudgins pointed out, historically fluctuates a lot and if 

you don’t have certainty on energy prices, that is definitely going 

to affect my clientele. 

Mrs. BIGGERT. Okay. 

And Mr. Trisko, what impact will the recently proposed and finalized rules on the power sector have on coalmining and 

coalminers? 

Mr. TRISKO. The—thank you, Mr. Wolf. 

Mrs. BIGGERT. Mr. Trisko, yeah. 

Mr. TRISKO. Yes. Thank you. The most recent economic impact 

analysis of the impact of the EPA Mercury and Air Toxics Standards Rule sponsored by ACCCE is prepared by National Economic 

Research Associates. I could briefly summarize those job results because your hearing is focused in part on the impact of these rules 

on jobs. Now, this is not broken down for coalmining jobs. 

Coalmining jobs obviously are kind of first in line. They are the 

first to be lost in this process followed by losses in the utility sector, the railroad sector, and so forth. There are, of course, some offsetting job gains in construction—construction of pollution controls 

and the like. 

The NERA study of the MATS rule—and this is prepared, dated 

March 21, 2012, so it was prepared after the final rule was promulgated and it is focused only on the MATS rule and compares that 

rule relative to two baselines; first, a CAIR baseline, the Clean Air 

Interstate Rule, which is in effect today pending the court’s stay of 

CSAPR; and then second, a baseline of the CSAPR rule assuming 

that that is implemented at some point. And in sum, the estimate 

of the net job impacts for the two rules are a net loss of 215,000 

permanent full-time equivalent jobs for the MATS rule plus CSAPR 

relative to a CAIR baseline. So it is a net loss, 215,000 permanent 

jobs. 

Mrs. BIGGERT. Okay. 

Mr. TRISKO. When you compare the MATS rule relative to the 

CSAPR transport rule, the estimate is for a net loss of 180,000 permanent full-time jobs. ACCCE would like permission to submit this 

study for the record following the conclusion of this hearing because all of the assumptions underlying the findings I have just 

summarized are contained therein. 

Mrs. BIGGERT. Mr. Chairman, I would ask that the study be submitted for the record. 

Chairman HARRIS. Without objection, so ordered. 
103 

[The information may be found in Appendix 2.] 

Chairman HARRIS. Thank you. The gentlelady yields back her 

time. 

We have enough time for a second round of questioning if—and 

I will begin a second round of five minutes of questions. 

If we can show one of the—show the slides. You can put them 

up—and this slide right here. I finally found that other box that 

didn’t intersect with zero because it is so close to the line of 1 you 

can’t see it. The two studies with the lines are the Laden study 

from 2006, the Pope study from 2002 which actually forms the 

basis of $1.8 trillion of the $2 trillion benefit claimed by EPA, the 

economic benefit. Now, my reading of that slide shows that both 

those overlap the relative risk of 1. Is that true? 

Dr. HONEYCUTT. Well, sir, there—— 

Chairman HARRIS. Or are they just really, really darn close? 

Dr. HONEYCUTT. They are very close. 

Chairman HARRIS. Okay. And just to put it into perspective, is 

it true that smoking increases—the relative risk of smoking is 

about 2.8 times? 

Dr. HONEYCUTT. Yes, sir. 

Chairman HARRIS. So you are looking at maybe two, three percent increase versus a 280 percent increase—180 percent increase—— 

Dr. HONEYCUTT. Yes, sir. 

Chairman HARRIS [continuing]. In those? Okay. And that is 1.8 

trillion of the 2 trillion. That is how really you get to 30 to 1—— 

Dr. HONEYCUTT. Sure. 

Chairman HARRIS. Do you know if meta-analysis has been conducted on those to actually increase the power of it to see if when 

you put all of those studies together they intersect—they overlap 

1? 

Dr. HONEYCUTT. Yes, sir. A meta-analysis has been done. The 

problem is one of those studies has over a million people in it. 

Chairman HARRIS. I got you. So it weighs—you are right. It overweighs in the meta-analysis. I understand that. 

Look, I am sorry that the EPA isn’t here to testify, but to be honest with you, we have been waiting since September. We were 

promised by—personally, Gina McCarthy promised me to send that 

data that justifies that from those two studies and the data. And 

Mr. Holden appeared and Mr. Smith asked him—he promised he 

would send it. We have been waiting for, you know, seven or eight 

months. I understand the EPA is busy writing regulations and 

doing other things but they should have some time to respond to 

Congress when we ask those kind of questions. 

Now, Mr. Hudgins, Cypress Creek Power Station, that base facility you are talking about that would be—would help provide electricity into my district for Choptank Electric. You know, you stated 

that your decisions on the base load facility it will be ‘‘directly and 

negatively impacted by the new carbon pollution standard for 

power plants despite the Agency’s claim that there is zero cost associated with the rule.’’ We are going to have Lisa Jackson—if she 

appears—testifying in this room at the end of the month and she 

has claimed that this rule won’t kill coal due to flexibilities included and the ability to incorporate carbon capture and sequestra-
104 

tion in 10 years. My assumption from your testimony is that you 

are not—you don’t really agree that that is necessarily true. Obviously, you probably would have gone ahead and built the facility. 

Mr. HUDGINS. Mr. Chairman, at the end of the day, this whole 

process of billions of dollars is driven by the financial institutions 

that we deal with, Wall Street. And one thing that bankers do not 

want is uncertainty. 

Chairman HARRIS. Right. I should say it is actually the financiers who really don’t trust that that is a stable, financially 

sound decision to—— 

Mr. HUDGINS. Take a $5 billion risk—— 

Chairman HARRIS. Right, on the fact that, for instance, carbon— 

and we know because we have had testimony in front of this Committee that carbon capture and sequestration, the demonstration 

projects actually aren’t—haven’t been done. They are just not scalable. They are really not financially feasible and yet we still hear 

that that is true. 

The prediction of energy costs—because I guess Lisa Jackson 

bases that on a—you know, a $250 million BTU cost of natural gas 

but the EIA estimate—and, you know, you have to trust the EIA 

at some point—are you aware of what their estimate was for this 

year’s cost of natural gas two years ago? 

Mr. HUDGINS. I am not. 

Chairman HARRIS. It is 4.50. It is actually 2.50. The government 

is only off by a factor of 80 percent in that estimate. Do you have 

any reason to believe that the government will be able to predict 

or that Ms. Jackson is able to predict the cost of natural gas? And 

is that, in fact, part of the basis for the decision to say that, you 

know, coal really might be—the price stability of coal might be the 

most dependable way to go if these rules weren’t in place? 

Mr. HUDGINS. Mr. Chairman, sometimes we go to use common 

sense and every time you have a—— 

Chairman HARRIS. This is Washington, DC. I beg to differ. 

Mr. HUDGINS. I understand, but at the end of the day, it is about 

monopoly and if we are forced as a utility into the gas market as 

to be the sole supplier of gas—I mean of electricity from gas, then 

what is going to happen to a price in any monopoly? And we can 

point to our history when the monopoly occurs, prices rise. 

Chairman HARRIS. Sure. 

Mr. HUDGINS. And what we were fearful of three, four years ago, 

gas was at almost $14 MCF. 

Chairman HARRIS. You are absolutely right, and we have a long 

history of the stability of coal prices. 

Mr. Trisko, can you add to that? 

Mr. TRISKO. Yes, Dr. Harris. Given your penchant for statistical 

analysis, I think you would be interested to find that the EIA’s 

analysis of the NYMEX future natural gas contract that appears on 

the short-term energy outlook Web page for DOE contains a tab 

called probability analysis. And if you click that tab on probability, 

you will find the 95 percent confidence intervals for the NYMEX 

December 2013 natural gas contract. It gives the reference case 

projection and then the 95 percent confidence intervals around that 

projection. Now, that is a contract price that is 18 months hence 

and EIA’s 95 percent confidence interval is between a range of 
105 

slightly less than $2 per million BTU and slightly less than $8 per 

million BTU. 

Chairman HARRIS. Only a four-fold range. 

Mr. TRISKO. Yeah. 

Chairman HARRIS. Easy to predict I guess. Listen, thank you 

very much and I defer—I recognize the Ranking Member, Mr. Miller, for a second round of questions. 

Mr. MILLER. Thank you, Mr. Chairman. Among the 17 documents that I earlier asked to be included in the record and do not 

yet have a ruling on, almost all of them are letters from groups 

that have an opinion, have a point of view on this topic. I have 

never known an organization that has a point of view on a topic 

that is before a Congressional Committee being denied the right to 

have their views included in the record. 

Some clippings, articles, and various publications, and only a 

couple of at all detailed technical kinds of documents, one of which 

is Summary of Expert Opinions on the Existence of a Threshold 

and the Concentration Response Function for PM-related Mortality, 

technical support document. This is published by the EPA, was 

compiled by the EPA. It includes several participants, some of 

which I have heard of like the American Heart Association, some 

of which I have not heard of but the list of authors of their papers 

is long, and their credentials appear impressive and in every case 

they have an equally long and equally impressive list of peer reviewers. It is pretty stunning to me to think that the majority staff 

does not know about this, did not know about this document well 

before last night in preparing for this hearing because this seems 

to be a pretty basic document. 

Dr. Honeycutt, are you familiar with this document? 

Dr. HONEYCUTT. I am familiar with most of the statements in it. 

Mr. MILLER. Well, are you familiar with the list of scientists who 

participated in one way or another either as authors or as—well, 

some list authors and peer reviews; some list experts, but those— 

this list of scientists who participated in preparation of this document? 

Dr. HONEYCUTT. Yes, sir. 

Mr. MILLER. You are familiar with that list? Okay. Well, you 

have criticized the EPA, including in your testimony today, as 

being secretive, not telling you what their analysis is. This seems 

pretty open. 

Dr. HONEYCUTT. Well, actually, the data underlying their analysis is not available. 

Mr. MILLER. Was that data provided to this list of—it looks like 

probably a couple hundred scientists? 

Dr. HONEYCUTT. No, it wasn’t. That data is held by a couple of 

universities and only the university professors have access to the 

data. 

Mr. MILLER. I am sorry. The data is not provided to peer reviewers? 

Dr. HONEYCUTT. That is correct. Only the analysis of the data is. 

Mr. MILLER. The people who—the scientists who agree to be peer 

reviewers are not seeing the data upon which they are—— 

Dr. HONEYCUTT. You are absolutely correct. 
106 

Mr. MILLER. I am not correct. I am not saying it. I am asking 

you. 

Dr. HONEYCUTT. Your statement is correct. 

Mr. MILLER. Okay. But that is what you are saying. All right. 

And so you disagree with the statement by the EPA that studies 

demonstrated an association between premature mortality and fine 

particulate pollution at the lowest levels measured in the relevant 

studies levels that are significantly below the NAAQS for fine particles. These studies have not observed a level at which premature 

mortality effects do not occur. You say that is not supported by 

data or by scientific analysis? 

Dr. HONEYCUTT. Oh, no, sir. That is absolutely true. But there 

are other studies that don’t show that association and there are 

other studies that show that PM is—if you can interpret it this 

way—healthful. And I think that is the problem. EPA doesn’t 

present that data. They only present the positive data. They don’t 

present the negative data. 

Mr. MILLER. Okay. One of the advantages of having peer reviewers is presumably that they know the literature of the field. Do you 

believe this—what appears to me in my lay opinion to be an impressive set of experts—do you think they do not know the data in 

this area or the analysis, the literature in this area? 

Dr. HONEYCUTT. Well, actually a number of those people, that is 

their data, so I would expect them to advocate the use of their own 

data over another researcher’s data. But—— 

Mr. MILLER. But the other studies that you refer to—— 

Dr. HONEYCUTT. Um-hum. 

Mr. MILLER [continuing]. And I—you are saying that what they 

are referring to is just some studies and then there are contradictory studies. So when they say that the studies demonstrate an association between premature mortality and fine particulate—fine 

particle pollution at the lowest levels measured in the relevant 

studies that what they are saying is our studies, but there are 

other studies that contradict that? 

Dr. HONEYCUTT. That is true. 

Mr. MILLER. And that these couple hundred scientists did not 

know about those studies or did they know about those studies? 

Dr. HONEYCUTT. They may have. I am not sure what they did or 

didn’t know, but those studies are older studies. Those studies—the 

exposures occurred during the ’80s and ’90s. A lot of the newer 

data shows different effects or doesn’t show the effect. 

Mr. MILLER. Okay. My time is expired. 

Chairman HARRIS. Thank you very much. 

And seeing no other Members here, I want to thank the witnesses for their valuable testimony, the Members for their questions. The Members of the Committee may have additional questions for you and we will ask you to respond to those in writing 

if we do. The record will remain open for two weeks for additional 

comments from Members. 

Again, I want to thank you very much for your patience in a late 

start to the hearing because of our voting schedule. The witnesses 

are excused. Thank you all for coming. 

The hearing is now adjourned. 

[Whereupon, at 3:27 p.m., the Subcommittee was adjourned.] 
107 

ANSWERS TO POST-HEARING QUESTIONS
108 

ANSWERS TO POST-HEARING QUESTIONS
109 

U.S. House of Representatives 

Committee on Science, Space, and Technology 

Subcommittee on Energy and Environment 

Questions for the Record - Responses by Dr. Michael Honeycutt 

July 6, 2012 

Hearing Title: EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs and 

Benefits of Environmental Regulations 

1. According to OIRA's Draft Report to Congress on the Benefits and Costs of Federal 

RegUlations and Unfunded Mandates on State, Local, and Tribal Entities, the benefits 

from EPA air quality regulations that affect particulate matter represent almost 80 

percent of all benefits from all regulations across the entire federal government. Do you 

find that claim to be credible? 

I do not find this claim to be credible. This conclusion is based on the monetization of mortality 

risks attributed to PM2.5 (fine particulate matter). The true (if any) relationship between PM2.5 and 

premature mortality is obscured by: 

(1) the choice of studies that support the proposed relationship between PM25 and mortality 

(and exclusion of contradictory data). EPA relied on two studies that showed a statisticallysignificant association between PM2.5 and premature mortality. If they had used any of the 

several equally well- or better-conducted studies that did not show a statistically significant 

association between PM2.5 and premature mortalityl, then the monetized benefits would have 

been $0. 

I Krewski el al.2000. Reanalysis of the Harvard Six Cities Study and the American Cancer Society Study of Particulate Air 

Pollution and Mortality, Part 11: Sensitivity Analysis. Health Effects Institute. PI29-293. See models that include S02 

McDonnell el al. 2002. Relationships of Mortality with the Fine and Coarse Fractions ofLong-Term Ambient PM 10 

Concentrations in Nonsmokers. Journal of Exposure Analysis and Environmental Epidemiology. lO(5):427~36. 

Koop and Tole. 2004. An Investigation of Thresholds in Air Pollution-Mortality Effects, Environmental Modeling and Software. 

21(12):1662-1673. 

Chen et at. 2005.The association between fatal coronary heart disease and ambient particulate air pollution: Are females at greater 

risk? Environmental Health Perspectives. 113(12): 1723-1729. See data for males 

Enstrom. 2005. Fine Particle Air Pollution and Total Mortality Among Elderly Californians, 1973-2002. Inhalation Toxicology. 

17(14):803-16. 

Lipfert el al. 2006. PM" Constituents and Related Air Quality Variables as Predictors of Survival in a Cohort of U.S. Military 

Veterans. Inhalation Toxicology. 18:643-657. 

Franklin ef al.. 2007. Association Between PM" and All-Cause and Specific-Cause Mortality in 27 U.S. Communities. lournal of 

Exposure Science and Environmental Epidemiology. 17(3):279-87. see lag 0 data. 

Zeger el al.200S, Mortality in the Medicare Population and Chronic Exposure to Fine Particulate Air Pollution in Urban Centers 

(2000-2005). Environmental Health Perspectives. 116(12):1614-9. see data for Western U.S. 

Krewski ef a1.2009. Extended Follow-Up and Spatial Analysis of the American Cancer Society Study Linking Particulate Air 

Pollution and Mortality. Research Report from the Health Effects Institute. 140:5-114. see 1972-2000 data. 

Klemm ef al.2011. The Impact of Frequency and Duration of Air Quality Monitoring: Atlanta, GA, Data Modeling of Air Pollution 

and Mortality. 61:1281-1291. 

Tony Cox. 2011. Hormesis for Fine Particulate Matter (pM, ,). Dose-Response. Pre-Press Article. 
110 

(2) the assumption of a no-threshold model which attributes risk to background levels of 

PM2S• This practice inflates the benefits because it calculates risk from PM2.5 levels that are 

naturally-occurring and too small to be controlled by regulations. 

(3) the application of a Weibull distribution to possible concentration-response functions 

leading to the exclusion of data that does not support the assumption of a cause-and-effect 

relationship between PM2.5 and premature mortality. Again, this artificially inflates the benefits 

because it predicts premature mortality (and therefore monetized benefits) in parts of the 

country where the actual data shows premature mortality due to PM2.5 exposure doesn't occur. 

Based on the uncertainties regarding the limitations of observational epidemiology studies as well 

as the methodological issues noted above, the benefits estimated by EPA for rulemakings under 

the Clean Air Act are overstated. 

2. The Subcommittee received a letter from the American Lung Association that stated 

that, in the case of the recently-finalized Mercury and Air Toxic Standards, "For every 

dollar spent to reduce air toxics pollution, Americans receive $3-9 in health benefits." Do 

you agree with this characterization? 

Not at all. This statement by the American Lung Association is taken from the Regulatory Impact 

Analysis for the Mercury and Air Toxic Standards (MATS) rule, which relies almost exclusively 

upon PM2.sco-benefits (see response to question 1 above). The EPA's economic analysis 

misrepresented the actual benefits of the rule. Benefits should be based on direct health benefits 

associated with reductions of the HAPs rather than including co-benefits associated with emission 

reductions of non-HAP pollutants. More than 90% of the represented health benefits are based on 

particulate matter reductions and not the HAPs that are the focus of the rule. Particulate matter is 

not a HAP and is regulated under other EPA air quality programs. If EPA confined its analysis 

only to the specific HAPs that pose a hazard to public health, any health benefits would be 

insubstantial compared to cost ofthe regulation. 

EPA was not able to quantify health benefits for reductions of actual HAPS regulated by the 

MATS rule except for mercury. EPA's quantified health benefits of$4 to $6 million reflecting 

mercury reductions are questionable, because that amount is based on the assumed economic value 

of a total of 511 intelligence quotient (IQ) points. EPA multiplied the average loss of 0.00209 IQ 

points per prenatally exposed child by 244,268 children assumed to be exposed to mercury via 

their mothers' consumption of freshwater fish2. This is akin to requiring 10 vehicles to reduce 

their speed by five mph per vehicle and then saying the resulting total decrease in speed is 50 mph. 

An IQ reduction of 0.00209 points cannot be measured. Also, EPA assumed no lag time in the 

response of methyl mercury levels in fish due to MATS, and if a lag was (correctly) assumed 

monetized benefits would be significantly lower. 

2 Please refer to additional testimony given 10/4/2011 before the Subcommittee on Energy and Environment - "Quality Science for 

Quality Air": http://science.house.gov/sitesirepublicans.sdence.house.gov!files/documents 

Iheariogs/l 00411 Jloneycutt. pdf 

2 
111 

3. What did you mean when you said that there is legal guidance for establishing causal 

relations and that relative risks less than 2.0 should not be considered? How does this 

affect EPA's association between particulate matter and mortality? 

There is scientific as well as legal precedence indicating that relative risks below 2.0 should not be 

considered to support a hypothesized relationship (Federal Judicial Center Reference Manual on 

Scientific Evidence Second Edition (2000) and NCIIIARC/WH03,4). This is because relative risks 

less than 2.0 can often be explained by confounding variables, i.e. factors that were not 

considered, but that are responsible for the observed effect. For example, cholesterol levels were 

not measured in the Pope et al. 2002 study but might explain the observed cardiovascular disease 

mortality rates. The relative risks for PM2.s and premature death reported to date are considerably 

lower than 2.0. For the two studies most often cited by the EPA, the relative risks are 1.06 (Pope et 

al. 20025

) and 1.16 (Laden et at. 20066

), and therefore may actually be due to confounding 

variables. In fact, a recent report indicates that confounding likely plays a significant role in the 

statistical findings of positive PM2s-mortality associations.7 

4. Aren't all of the assumptions within EPA's regulatory analysis and decision making 

designed to be health-protective? Isn't that a good thing? 

In recent years, the EPA has approached policy decisions with an overabundance of caution, 

leading to excessively conservative regulations not fully supported by the best available science. 

The application of this precautionary principle, without regard to the extent of population exposure 

or risk, conflicts with best practices of science-based risk assessment. In defense of this approach, 

some have argued that EPA always overestimates risks in order to provide adequate protection. 

While this mayor may not be sound regulatory policy, systematic over-estimation of benefits 

renders the cost-benefit process useless. Worst-case estimation of risks (and the benefits of 

avoiding those risks) without any indication that they represent very unlikely or even impossible 

scenarios, is highly misleading to the public and to elected representatives evaluating proposed 

policies and regulations. 

Contrary to what its advocates claim, this principle does not provide a prudent guide to developing 

public health measures. Harvard law professor Cass Sunstein, who currently serves as 

administrator of the Office ofInforrnation and Regulatory Affairs has said, "The precautionary 

principle, for all its rhetorical appeal, is deeply incoherent. It is of course true that we should take 

3 http://benchmarks.cancer.gov/2002/07/epidemiology-in-a-nutshelV "Relative risks or odds ratios less than 2.00 are viewed with 

caution." 

4 WHO/IARC Breslow and Day (1980). Statistical methods in cancer research. Vol. I. The analysis of case control studies. IARC 

Sci. Pub!. No. 32, Lyon, p. 36. "Relative risks ofless than 2.0 may readily reflect some unperceived bias or confounding factor, 

those over 5.0 are unlikely to do so." 

, Pope CA III, RT Burnett, MJ Thun, EE Calle, D Krewski, K Ito, and GD Thurston. 2002. Lung Cancer, Cardiopulmonary 

Mortality, and Long-term Exposure to Fine Particulate Air Pollution. lournal ofthe American Medical Association. 287:1132-

!I41. 

6 Laden F, 1 Schwartz, FE Speizer and DW Dockery. 2006. Reduction in Fine Particulate Air Pollution and Mortality. American 

Journal of Respiratory and Critical Care medicine. 173:667-672. 

7 Greven et 01. 2011. An Approach to the Estimation of Chronic Air Pollution Effects Using Spatia-Temporal Information. Journal 

of the American Statistical Association. 106(494):396-406. 

3 
112 

precautions against some speculative dangers. But there are always risks on both sides of a 

decision; inaction can bring danger, but so can action. Precautions, in other words, themselves 

create risks-and hence the principle bans what it simultaneously requires. ,,8 

The result of utilizing the precautionary principle is highly uncertain estimation of the benefits of 

Clean Air Act rules. This is because regulating pollutants without proof they are indeed harmful ill 

relevant doses negates the accurate quantification of what harm has been prevented. Further, 

especially in times of resource scarcity, focusing attention and regulation on unnecessary risks can 

result in inadequate attention or resources to address real health effect risks or problems. 

5. Why shouldn't EPA claim regulatory benefits association with incidental particulate 

matter reductions from non-PM rules? 

In 2011, President Barack Obama issued Executive Order 13563, which states that agencies 

should strive to reduce regulatory requirements that are "redundant, inconsistent, or 

overla[!J!ing. " 

Including PM2.5 co-benefits in multiple non-PM 2.5 rules is redundant. Section 109 of the Clean 

Air Act requires that each NAAQS be set at a level that protects public health with "an adequate 

margin of safety" (i.e. no additional public health improvements would be gained by tightening 

the standard any further). If those concentrations are safe, then it is not appropriate to calculate cobenefits for PM2.5 below this level to justifY nOn-PM2.5 regulations. More broadly, co-benefits 

from any pollutant that is regulated as a criteria pollutant with a NAAQS that conforms to the 

requirements of CAA should not be included in the Regulatory Impact Analysis (RlA) of any 

other pollutant. Including PM2.5 co-benefits in other RlAs not only results in double-counting of 

benefits, but also prevents identification of ways to reduce regulatory burdens while still meeting 

air quality objectives. 

Baseline calculations for proposed rules are inconsistent with best practices. EPA has argued that 

it does not double-count the PM2.

5 benefits because it includes all existing regulations in the 

baseline of emissions for each of its RlAs for another rule; however, this is not the case for the 

following reasons: (1) multiple RlAs are prepared simultaneously; this creates a constant potential 

for double-counting; (2) review of recent RlAs released by EPA indicates that all applicable CAArelated rules are not, in fact, included in the baseline calculations for these standards (e.g. see RlAs 

for ozone, S02, and N02 NAAQS); and (3) the baseline calculations are based on monitored levels 

ofPM2.5, and it is impossible to distinguish the effect of each rule on ambient levels of PM2.5' 

Furthermore, each rule seeks to lower the same observed levels of ambient PM2.5, resulting in 

double counting of estimated benefits across multiple rules. 

The consequences of these overlapping rules include lack of transparency and miscommunication 

with the public and policy makers. PMz.5 co-benefits are reported as part of the total benefits in the 

executive summary of an RIA and also in public announcements about the proposed rule. This 

8 Cass R. Sunstein, "Throwing Precaution to the Wind: Why the 'Safe' Choice Can Be Dangerous," Boston Globe, July 13,2008. 

For a more extensive critique. see Cass R. Sunstein, The Laws of Fear: Beyond the Precautionary Principle (Cambridge: 

Cambridge University Press, 2005). 

4 
113 

creates confusion for audiences who often fail to realize that these total benefits are mostly due to 

reductions in PM2.5. Furthermore, PM2.s-reiated benefits would be more effectively and 

appropriately obtained through revision to the PM2.5 NAAQS than through non-PM2.5 rules. 

Moreover, reliance on PM2.5 co-benefits undercuts the practical value of RIAs and allows EPA to 

avoid improvements to its methods for characterizing and quantifying health and welfare benefits 

for other pollutants. 

6. The Texas Commission on Environmental Quality is the 2nd largest environmental 

agency in the world. From your experience at TCEQ, are there ways that EPA could 

improve its cost-benefit analysis and stakeholder outreach process? 

Generally speaking, risk assessments that serve to inform cost benefit analysis should include the 

following steps: 

• Consider all available appropriate and relevant studies, not just studies that present 

positive results. 

• Report comprehensive weight-of-evidence based analyses, including positive and 

negative data. 

• Perform extensive sensitivity analyses to determine how confounding affects the 

analysis. 

• Select health endpoints based on toxicological grounds rather than on post-hoc 

statistical grounds. 

• Focus on studies with exposure data collected for individuals instead of groups (i.e. the 

studies by Pope et al. 9 and Laden et al. 10 do not determine personal exposure to PM - it 

was assumed to be equal for all individuals within a metropolitan area). 

• Use Cox proportional hazards models as the exposure-response models. 

• Do not use splines in statistical models, especially smoothing splines, as they have the 

effect of making the data fit the model instead of choosing an appropriate model to fit 

the data. 

• Consider including thresholds and nonlinear relationships in the exposure-response 

models. 

• Estimate risks using best estimates of individual exposure rather than extreme 

characterizations of population exposures. 

• Estimate risks for the general population in addition to the "most sensitive" 

subpopulation. 

• Clearly state the assumptions made and their qualitative and quantitative consequences. 

Further, the EPA should demonstrate a peer-review process that reflects transparency and 

commitment to representing all data, not just data that supports its policy goals. The non-profit 

organization, Toxicological Excellence for Risk Assessment (TERA) provides a superb 

9 Pope CA III, RT Burnett, MJ Thun, EE Calle, D Krewski, K Ito, and GD Thurston. 2002. Lung Cancer, Cardiopulmonary 

Mortality, and Long-term Exposure to Fine Particulate Air Pollution. Journal ofthe American Medical Association. 287: 1132-

1141. 

10 Laden F, J Schwartz, FE Speizer and DW Dockery. 2006. Reduction in Fine Particulate Air Pollution and Mortality. American 

Journal of Respiratory and Critical Care medicine. 173 :667-672. 

5 
114 

description of peer review: A peer review is an in-depth assessment of the assumptions, 

calculations, alternate interpretations, methodology, and conclusions of the document under 

review ... peer reviewers and consultants should be selectedfor both independence and 

scientific/technical expertise ... [andJinclude a range of perspectives on each panel, including 

diverse professional affiliations (e.g., academic, consulting, environmental, government, and 

industry). The evaluation of real or perceived bias or conflict of interest is an important 

consideration and for both peer review and consultation panels and every effort is made to avoid 

conflicts of interest and biases that would prevent a panel member from giving an independent 

opinion on the subject ... an objective evaluation by independent experts with a variety of different 

viewpoints and perspectives is critical to the credibility of any peer consultation or peer review. II 

TCEQ agrees with this description and strives to implement these principles. In fact, when the 

TCEQ revises its Guidelines for Risk Assessment, a peer review is conducted by a disinterested 

third party. No person on the peer review panel works for or receives funds from TCEQ. It is a 

conflict of interest for such individuals to participate in the peer review process, although 

stakeholders are welcomed to participate in the public comment process. Following the public 

comment period, each and every comment is addressed and changes are made to the document 

(when justified) as a result of this process. When TCEQ disagrees with a comment, justification is 

provided in the response to comment document, which is made publically available along with the 

modified Guidelines document. The EPA should utilize an equally transparent process, free as 

possible of conflict of interest. 

To this end, the following recommendations for improvement are suggested: 

o EPA risk assessments should include all of the steps listed above with results clearly 

communicated in resulting policy assessments, regulatory impact analyses, and final 

rulemakings. Emphasis should be placed on the limitations of the available scientific 

literature in order to provide policy makers with accurate information. This is particularly 

important to avoid the appearance that proposed rules are based on policy objectives, and 

merely "backed up" by applicable scientific evidence. 

o Members of the Science Advisory Board and Clean Air Science Advisory Committee 

should not include the authors of studies utilized in that specific assessment, nor should 

they be current recipients of EPA funding, as this represents a significant conflict of 

interest (see figures I and 2). If such individuals are to be consulted, equal weight should 

be given to scientists representing local and state governments as well as industry experts. 

o Prior to developing a rule, EPA should solicit stakeholder input during the development 

phase. TCEQ has found that engagement of affected regulated entities can help avoid the 

need for drastic changes from proposal to final adoption of a rule. 

o When soliciting public comment, EPA should respond to each comment in a substantial 

manner and revise technical and policy documents accordingly. A response to comments 

document which lists each comment (acknowledging that there may be multiple comments 

with very similar objectives that can reasonably be combined for this purpose) along with 

the agency responses should be provided with every rule. 

o Place the risks associated with ambient air pollution into the context of other risks people 

face. This is a crucial function of public health officials, who have an obligation to present 

scientific data in an unbiased manner and avoid inaccurate or inflannnatory language. 

11 http://www.tera.org/PeerlDescription.html 

6 
115 

7. You stated near the end of your testimony that these regulations could have negative 

unintended consequences. Could you explain what you mean by that? 

When regulations are routinely based on extrapolated, highly uncertain risk analysis, stakeholders 

must distinguish between real risk and these often alarmist conclusions. The result is that other 

necessary tasks are postponed. Indeed, University of Texas law professor Frank Cross observes, 

"The truly fatal flaw of the precautionary principle, ignored by almost all the commentators, is the 

unsupported presumption that an action aimed at public health protection cannot possibly have 

negative effects on public health. ,,12 

In the experience ofTCEQ, time and resources spent analyzing and responding to unnecessary 

regulations based of perceived (rather than real) risks detracts from other, far more urgent needs of 

our citizens. Activities such as the development of safe screening levels are often delayed while 

staff respond to policy issues that have significant consequences for the State. 

The solution for an adverse health effect associated with an environmental risk factor can itself 

become a risk factor for other health effects13. Public health officials must be aware of such 

potential consequences when advising citizens. Take, for example the following quote from EPA 

Administrator Lisa Jackson: "We are actually at the point in many areas of this country where on 

a hot summer day, the best advice you can give is don't go outside. Don't breathe the air. It may 

kill you. ,,14 Not only is this hyperbole unscientific, inaccurate, and inflanunatory, but this type of 

statement gives the public the impression that staying indoors and avoiding physical activity is 

preferable. In fact, indoor air quality is clearly worse than outdoor air quality (Burke et al. 2001 

and references thereinl5) and this type of advice can lead to unintended negative consequences. 

For example, suggesting that citizens avoid outdoor exercise in order to prevent exacerbation of 

asthma symptoms can result in unintended negative consequences such as contributing to obesity. 

The Policy Assessment (PA)16 docnment serves to "bridge the gap" between relevant scientific 

information and assessments and the judgments required of the EPA administrator in determining 

whether and how to revise the NAAQS. In reviewing the PA that supports the newly proposed PM 

NAAQS, the following comment from CASAC member Dr. Robert Phalen came to our attention: 

"I am struck by the limitations placed on the Staffinframing the P.A., and concerned that readers 

may believe that several potentially adverse secondary health consequences have been evaluated 

along with the direct health effects, when they have not. Thus, I recommend adding an explicit 

informative statement to the P.A., or the cover letter, such as: 'Due to statute, case-law, and 

policy decisions, it should be noted that this Policy Assessment addresses only the direct adverse 

health effects of PM mass fractions. Thus, secondary public health effects, such as (1) the 

potential health effects of compliance actions on jobs, and the availability of goods and 

services;(2) the potential health effects at locations that have positive (rather than negative) 

health associations with PM mass; and (3) the potential health effects of changes in PM mass on 

other air contaminants (e.g. UFP counts, and airborne acidity), are not considered. In short, the 

12 Frank B. Cross. "Paradoxical Perils of the Precautionary Principle," Washington and Lee Law Review 53. no. 3 (1996): 860. 

lJ Steve Packham, Phd, DAB.T. presentation titled: "Utah's Recess Guidance: Based on Air Quality." March 7, 2011. 

14 On HBO's "Real Time with Bill Maher," October 7,2011. 

" Burke et al. 2001. A population exposure model for particulate matter: case study results for PM2.5 in Philadelphia, PA. Journal 

of Exposure Analysis and Environmental Epidemiology II :470-489. 

16 http://mvw.epa.gov/ttnlnaaqslstandards/pmldata/20110419pmpafinal.pdf 

7 
116 

range of potential unintended secondary adverse consequences have not been evaluated in this 

document. Thus the recommendations herein may, or may not, improve overall public health. '" It 

is disturbing that such salient and reasonable advice from a member of the CASAC panel has been 

disregarded by EPA in the Policy Assessment presented to the Administrator. 

Looking at the issue in the most practical way, if an unnecessary regulation raises the cost of 

electricity such that a low-income elderly person feels they can't afford to use air conditioning 

during periods of intense heat they are more likely to suffer heat stroke. 

8. I understand the EPA recently conducted some experiments where they exposed people 

to high levels of PM. What are the implications ofthese experiments? 

A case study published in February 201217 describes exposure ofa volunteer to Concentrated Air 

Particles (CAPs). This individual had a personal and family history of heart disease as well as 

numerous other medical issues. During the exposure, the volunteer experienced an irregular heart 

beat and was transported to the hospital. A Freedom of Information Act request initiated by Steve 

Milloy located data spanning 2010 and 2011 for 40 additional individuals exposed to CAPsl8. Of 

these, 39 experienced no clinical effects and 1 experienced an elevated heart rate. 

Significant concerns are raised by this information: (1) If the EPA believes PM2.5 is lethal, is it 

ethical and/or legal to expose human volunteers to such high levels ofPM2.5? Indeed, 

Administrator Jackson testified to Congressl9 that, "[Airborne] particulate matter causes 

premature death. It doesn't make you sick. It's directly causal to dying sooner than you should." (2) 

The alternative interpretation is that these results invalidate the EPA's assertion that PMz.5 causes 

premature mortality. In fact, EPA has not been able to articulate a mechanism whereby PM2.5 

causes mortalitlo. Moreover, Green and Armstrong conclude, "it remains the case that no form of 

ambient PM-other than viruses, bacteria, and biochemical antigens-has been shown, 

experimentally or clinically, to cause disease or death at concentrations remotely close to u.s. 

ambient levels ... hundreds of researchers, in the u.s. and elsewhere, have for years been 

experimenting with various forms of pollution-derived PM, and none has found clear evidence of 

significant disease or death at relevant airborne concentrations. ,,21 

17 Ghio ef at. 2012. Supraventricular Arrhythmia after Exposure to Concentrated Ambient Air Pollution Particles. Environmental 

Health Perspectives. 120:275-277. 

18 http://junkscience.coml2012/04/18/epa-human-experiments-debunk-notion-of-killer-air-pollution-agency-hides.exculpatoryresults! 

19 September 22, 2011. House Energy and Commerce Committee Meeting on Air Regulations. 

"U.S. EPA. Integrated Science Assessment for Particulate Matter (Final Report). U.S. Environmental Protection Agency, 

Washington, DC, EP A/6001R-08JI39F. 2009. From Chapter 5, Possible PathwayslModes of Action: "Additional studies will be 

required to clarify the biological mechanisms underlying the health effects of PM." 

21 Laura Green and Sarah Armstrong, "Particulate matter in ambient air and mortality: toxicologic perspectives," Regulatory 

Toxicology and Pharmacology 38 (2003) 326-335. 

8 
117 

FIGURES 

Figure 1. Chartered Clean Air Science Advisory Committee 

(CASAC) 

il!i EPA Funded 

Non-EPA Funded 

Academic Industry Non-Profit State Government 

figure 2. Particulate Matter Review Panel ofthe CASAC 

jjijEPAFunded 

Non-EPA Funded 

Industry Non-Profit State Government 

9 
118 

Honorable Andy Harris, MD 

Chairman 

Eugene M. Trisko 

Attorney at Law* 

P.O. Box 596 

Berkeley Springs, WV 2541 I 

(304) 258-1977 

(301) 639-5238 (Cell) 

emtrisko@earthlink.net 

Subcommittee on Energy & Environment 

Committee on Science, Space, and Technology 

2321 Rayburn House Office Building 

Washington, DC 20515-6301 

Bye-mail transmission 

* Admitted in DC 

July 9, 2012 

Re: Responses to Committee Questions, Hearings on EPA's Impact on Jobs and Energy 

Affordability: Understanding the Real Costs and Benefits of Environmental Regulations, 

June 6, 2012 

Dear Chairman Harris: 

Thank you for your letter of June 25, 2012, concerning the above hearing. I greatly 

appreciated the opportunity to testify before the Subcommittee to present the findings of the 

study that I conducted on behalf of the American Coalition for Clean Coal Electricity 

(ACCCE), "Energy Cost Impacts on American Families, 2001-2012." 

I previously supplied Subcommittee staff with a corrected version of my portion of the 

hearing transcript. 

Attached are responses to the questions that you forwarded on June 25th in connection with 

my testimony and prefiled statement. These responses reflect my own views, and do not 

necessarily represent the views of ACCCE or its member organizations. 

Thank you again for this opportunity, and please do not hesitate to contact me if you have 

further questions. 

Sincerely, • Dlgitany SIgned by EUge~e M, Trisko Eugene M. Tnsko ~~';';;~y~~~O.MTnSkO,c=US,ou= 

Reason: I am the author of this document 

Date: 2012.07,08 20:53:29 -04'00' 

Eugene M. Trisko 

Attachment (Committee Questions and Responses) 
119 

Committee Questions and Responses 

1. In your testimony, you state that "lower income families are more 

vulnerable to energy costs than high-income families because energy 

represents a larger portion of their household budgets." In the event 

electricity prices were to rise, can you elaborate on how this might 

disproportionately impact lower income families, the choices and tradeoffs 

that might have to be made, and the overall impact this could have on the 

health and welfare of lower income families in this country? 

Response: The demand for electricity is relatively inelastic over the shortterm, meaning that demand is not very sensitive to increased prices. 

Increased electricity prices due to compliance with environmental 

regulations or other policies would pose additional hardships on lower- and 

fixed-income families by creating additional financial pressure on their 

budgets for other necessities such as food, health care, child care, housing, 

etc. A detailed study, beyond the scope of my testimony, would be needed 

to assess how these tradeoffs are being managed by lower- and fixed-income 

families. 

As documented in the study attached to my testimony, energy expenditures 

for the 50% of U.S. households with annual gross incomes less than $50,000 

have nearly doubled over the past decade, from an estimated average of 12% 

of after-tax income in 2001 to an estimated average of22% in 2012. These 

increased energy expenditures inevitably force difficult budget choices 

among other necessities. Meanwhile, real incomes have not increased to 

offset this additional cost burden on lower- and fixed-income families. As 

indicated in my testimony, the u.s. Census Bureau reports that since 2007 

real (inflation-adjusted) median household income has declined by 6% (from 

$52,823) and is 7% below the median household income peak ($53,252) that 

occurred in 1999. 

2. Your report found that residential price increases since 2000 have been 

associated with capital, operating and maintenance costs incurred due to 

environmental regulations. Given the current trend of environmental 

regulations in the last few years, will there be other even greater increases in 

electricity prices associated with meeting these new standards? How will 
120 

this affect the percentage of the average American's post-tax income spent 

on energy? 

Response: The electricity price data included in my testimony show a clear 

trend toward higher electricity prices since 2000 - nearly a 50% increase in 

nominal dollar terms during a period in which inflation as measured by the 

CPI increased by 31 % (2000 to 2011). A portion of this increase can be 

attributed to the costs of compliance with new environmental regulations 

such as Phase IT of the Title IV acid rain program, the NOx SIP Call, the 

Clean Air Interstate Rule, and other environmental regulations. 

There is evidence that even larger electricity price increases likely will result 

from new EPA regulations that have not yet been fully implemented, 

including the Mercury and Air Toxics Standards Rule (MATS) and the 

Cross-State Air Pollution Rule (CSAPR). In its Report to Congress on the 

Costs and Benefits of the Clean Air Act (2011), EPA indicates that the 

annual cost of compliance in 2010 with all existing utility clean air rules was 

$6.6 billion ($2006). In comparison, EPA's Final Regulatory Impact 

Analysis of the MATS rule projects the annual costs of compliance with this 

rule at $9.6 billion ($2007) in 2016. EPA estimates the annual costs of the 

CSAPR rule at an additional $0.8 billion ($2007) in 2014 (78 FR 48208, 

48215, August 8,2011, at Table IlI-4.) The two rules together thus will add 

$10.4 billion annually to the nation's electric bill. 

The prospective impacts on electricity prices of the costs of compliance with 

the MATS and CSAPR rules - assuming that they were implemented in the 

absence of Congressional, judicial or administrative actions - will be systemspecific, with the largest impacts anticipated in eastern states that rely upon 

coal for a substantial share of electric generation, and that will need to 

retrofit or upgrade substantial numbers of pollution control devices (e.g., 

West Virginia, Ohio, Kentucky, Indiana, Illinois, Missouri, etc.) 

Determining how these increased costs will be passed along to consumers, 

and their impacts on consumer electric prices and costs, will depend in large 

measure upon how state regulatory authorities address cost recovery issues 

among residential, commercial and industrial customer classes. Informal 

reports from state public utility commission officials in coal-dependent 

states indicate that electric rate increases on the order of 15% to 30% may be 

needed to provide cost recovery for the investments in pollution controls 

required by the MATS rule. This is an issue that the Committee and 
121 

Subcommittee may wish to explore in future hearings, with invited PUC 

witnesses from states expected to bear large portions ofthe compliance 

burden. 

3. Your report states that while prices for residential electricity have only 

increased 51 % since 1990, the price of residential natural gas has nearly 

doubled during this same time frame. What implications does this have for a 

potential future whereby natural gas generating units serve as this country's 

source of baseload electricity? 

Response: Two recent EPA regulations - the final MATS rule with its 

unachievable emission limits for new coal-based generating plants (and in 

particular for mercury emissions), and the proposed NSPS rule for 

Greenhouse Gas Emissions - make it extremely difficult, if not impossible, 

to permit, finance and construct any new baseload coal capacity beyond a 

handful of plants already in the construction phase. The nation is being 

forced, in effect, to accept natural gas combined-cycle capacity as the 

predominant source of new baseload capacity for the indefinite future. This 

prospect is fundamentally inconsistent with the "all of the above" energy 

policy advocated by the President, and risks undue reliance on natural gas 

with its long-term history of price volatility. 

As mentioned during the Q&A portion of my testimony, the Committee may 

wish to review the Department of Energy's price uncertainty analysis of 

future NYMEX natural gas contract prices. The most recent analysis from 

the EIA Short-Term Energy Outlook for June 2012 shows the 95% 

confidence intervals for the December 2013 natural gas contract. 

EIA's price uncertainty chart, which appears below, indicates a range of 

prices in December 2013 from $1.95 per MMBTU to $7.39 per MMBTU. 

Utility investments in new generating capacity involve plants with 50 to 60 

year lifetimes. The nation with the world's largest coal reserves should 

develop energy policies that maximize - not constrain - future generation 

options in light offuel price uncertainties such as these. No other nation has 

committed to undemonstrated CCS technology as a condition precedent for 

the construction of new coal generation capacity. 
122 

Henry Hub Natural Gas Price 

dollars per million btu 

8 

-Historical spot price 

7 --STEO forecast price ";liI,,$..I!Y./!JJ 

-NYMEXfuluresprice .All'. 

6 _<11_ gOS% i\iVMi::X futures upper confidence interval fI¥ .... Ifi' 

K r 5 - 000,"0:*-095% NYMEX futures lower confidence interval 00;# 

4 opi 

3 ~ 

2 

1fI>' 

/ 

Ji1 

o I , , , , , I , , , I , , , , , I , , , , , I , , , , , I , " ,I 

Jan 2011 Jul2011 Jan 2012 Jul2012 Jan 2013 Jul2013 

Note: Confidence interval derived fron options market informationforthe 5 trading days ending June 7, 20120 

Intervals 10t calculaled formonlhswith sparse trading in near-the-money options eontractso 

Source: Short-Term Energy Out ook, June 2012 

4. The EPA, in its regulatory analysis for the Carbon Pollution Standard, 

asserts that "the level of avoided negative health and environmental effects 

expected would imply net social benefits from this proposed rule." Given 

your testimony that higher energy costs decrease the amount of discretionary 

income family may spend on other necessities, including healthcare and 

food, would you agree with the Agency's assessment? 

Response: No. The Carbon Pollution Standard would impose carbon capture 

and storage requirements - a technology that has not been commercially 

demonstrated in this country" on new coal plants. This effectively would 

render coal uneconomic as a choice for future new electric generation 

facilities, largely regardless of the future price of natural gas. Electricity 

consumers should be concerned that the future price of electricity will be 

increasingly linked to volatile natural gas prices. Low- and fixed-income 

households will become more vulnerable to energy price increases as a 

result. This is another issue that deserves consideration in a follow-up 

hearing with state PUC officials, as recommended above. 
123 

5. According to OIRA's Draft Report to Congress on the Benefits and Costs 

of Federal Regulations and Unfunded Mandates on State, Local, and Tribal 

Entities, the benefits from EPA air quality regulations that affect particulate 

matter represent almost 80 percent of all benefits from all regulations across 

the entire federal government. Do you find that claim to be credible? 

Response: OIRA's assessment appears to be consistent with the testimony 

that Dr. Honeycutt offered at hearing, and I defer to his expertise. More than 

99% of the health benefits that EPA has claimed for the MATS rule are 

related to "co-benefits" from the reduction ofPM2.5 and other pollutants 

already regulated by multiple provisions of the Clean Air Act. Healthrelated benefits from mercury reductions are de minimis, with a net present 

value of $500,000 to $6.0 million according to EPA's Final RIA for the 

MATS rule. The RIA also shows that MATS would reduce mercury 

deposition on average by 1 percent in the continental United States. 

6. Do you think that recent EPA regulatory activity is consistent with an "all 

of the above" energy policy? 

Response: See response to Question 3, above. 

7. The recently-proposed Carbon Pollution Standard for Power Plants only 

applies to new sources, but some have indicated that the agreement that EPA 

signed with environmentalist groups will guarantee that they expand it to the 

existing facilities. How confident are you that EPA will only regulate new 

coal-fired power plants? 

Response: As a result of court decisions, EPA has considerable flexibility in 

the manner in which it chooses to apply greenhouse gas regulations to 

various sectors of the economy. Many share the concern that EPA may next 

move to apply GHG standards to existing sources, particularly major sources 

undergoing modification, thereby arresting progress in maintenance and 

modernization of the existing coal fleet. 

In recent years, a pattern of "regulation by consent decree" has evolved, 

effectively giving a large degree of control over EPA's regulatory agenda to 

the courts and to certain interest groups. A larger Congressional role both in 

oversight and in statutory direction is needed to ensure that generic 

legislation like the Clean Air Act is applied appropriately, and is updated to 
124 

reflect changing scientific, environmental, economic, and social 

considerations. 

8. In the EPA's regulatory impact assessment for the NSPS for EOUs, the 

"EPA does not anticipate this rule will have any impacts on the price of 

electricity, employment or labor markets, or the US economy." Would you 

agree with that statement? 

Response: For the reasons expressed here and above, I respectfully disagree 

with EPA's assertions about the potential macroeconomic impacts of the 

OHO NSPS rule. More detailed sensitivity analyses of the relative prices of 

coal and natural gas are needed to provide an adequate basis for judging the 

economic risks and potential costs of the rule, including adverse labor 

market impacts from unque reliance on natural gas as the principal form of 

new baseload generation. 

Studies such as NERA's March 2012 assessment of the MATS rule prepared 

for ACCCE (previously supplied for the hearing record pursuant to 

unanimous consent) show that large net employment dislocations can result 

from regulations that EPA analyses suggest would create jobs. EPA needs 

to update and ro enhance its modeling capability for the prediction of 

employment dislocations, using readily-available models that account for 

state and regional electricity price increases and their impacts on 

.employment, output and household income. 
125 

ILLINOIS • CHAMBER OF COMM:ERCE 

July 23, 2012 

The Honorable Andy Harris, M.D. 

Chairman 

Subcommittee on Energy & Environment 

2321 Raybum House Office Building 

WashingtOI!I, DC 20515-6301 

Dear Chainnan Harris: 

CHWAGO OFFICE 

300 it Wacker Drive 

SUitlt1600 

Chic'go.ll60606 

...." 31l983.7100 

~" 312.983.7101 

www.ilchamber.org 

Thank you :lor the opportunity to testify at the Energy & Environment subcommittee 

hearing entitled EPA's Impact on Johs and Energy A/fordahiJity: Understanding the 

Real Costs and Benefits of Environmental Regulations on June 6, 2012. Here are the 

answers to your follow-up questions: 

Q. What are the cumulative effects of these various EPA rules on the botiom lines of 

small businesses? Do you think EPA's carbon pollution standard, which wiN effectively 

ban coal generation, will impact manufacturers and small businesses? 

A. The bottom line issue here is the availability and cost of electricity. For many 

small businesses and manufacturers, electricity is the second highest cost on ':heir 

spreadsheets (after personnel). Therefore, the impact of the cumulative effect of the EPA 

mles will depend on how they end up affecting the cost and availability of el,?ctricity 

throughout the cmllltry. As you can imagine there are many differing opinions within the 

industry about how - and if - these rules will translate into cost increases andlor supply . 

concems. It is hard to predict because of the volatility of the market, the cunent increase 

in natural gas production, the current reliance on nuclear power and the rising (but still 

small) use of alternative energies. 

Ifthe EPA's rules come into effect and they do end up reducing our reliance on 

coal electricity gel'\eration (vvhich we believe they will), they will have an effect on small 

businesses if other fonns of electricity generation can't fill the gap Oack of supply) or if 

those other forms of generation end up being more expensive than coal (incr,~ased costs 

to consum,~rs). Even though we are excited about the prospects of natural g,,s production 

in the United States, it is a bit premature to assume that production will cont'11Ue at 

current levels and consumer prices will stay at historic lows. 

We~ believe the coal industry needs a predictable regulatory enviromrlt~nt from the 

Federal Government so it can determine which plants make sense to invest ill and which 

ones don't - and provide incentive for coal companies to fmd better, cleaner ways to 

produce electricity from coal as they've been doing for the past forty years. 

Q. In your testimony, you mention that it will be diffiCUlt for companies to obtain 

financing for new coal plants given the uncertain status of Carbon Capture and 

Sequestration (CCS) now and questionable prospects for its viability in the future. Aside 

from the difficulty in securingfinancing based on the hope that the new technology will 

be available and affordable at some point in the future, do you feel that this uncertainty 
126 

, 

ILLINOIS CHAMBER OFCOMME.RCE 

will result in. additional difficulties in obtaining the necessary construction and operating 

permits. 

A. Not to quibble or parse, but I didn't say that CCS has questionable prospects, just 

unknown prospects. No one knows whether the process can overcome the technological, 

regulatory and legal hurdles and then cross the finish line by working successfully on a 

commercial scale. Given this uncertainty, the EPA's regulations are designed to mal<e it 

next to impossible to get fmancing on a very risky bet that the coal industry CHn 

overcome the hurdles of CCS overnight. Making "bets" on our largest domestic 

resource, which provides such a huge chunk of our electricity, seems to us to he bad 

policy. We believe the Carbon Rules pmmulgated by the USEPA put new coal 

generation on the back burner, ifnot on a deathbed. 

To answer the question in a simpler way, if you can't get the financing to build a 

plant, you certainly can't get a construction or operations permit. Even if you C.all find 

the financing, construction and operation permits might be difficult as you'd have to 

prove you can meet the stringent USEP A regulations on carbon; and right now no one 

can. 

Q. In addition to the proposed Carbon Pollution Standard for New Power Plants, 

are there other EPA proposed or financial regulations that could negatively impact 

Energy Council members? 

A. My members generate, transmit and transport all kinds of energy - wind, coal, 

solar, natural gas, crude oil, nuclear, waste-to-energy, biofuels and more. Ewry EPA 

rule affects them in some way, shape or form·- sometimes positively, sometimes 

negatively. But my members gave me the green light to testify on the Carbon Rules 

because it seemed like they were written to make life for one form of generation - coal --

very diffictllt. Many of my members believe that regulations should not be V\~itten to 

pick winne:rs or losers, but to provide realistic road maps to enable companie:; to meet 

new environmental standards in a competitive marketplace. We are blessed with everincreasing diverse choices when it comes to electricity generation. Why should we 

promulgate rules that will result in the demise of one of them and overdependence on the 

rest? Give them a chance to compete and advance more efficient, lower emiflsion 

technoiogil'S, That kind of regulation creates a better planet in the long term and a better 

energy market for all Americans. 

I hope these answers provide some insight and are deemed helpful to the ongoing 

process, 

:::;;;. {i)J Tom Wolf ~{ Executive Director, Energy Council 
127 

July 06, 2012 

ViaE-mail 

Chairman Andy Harris 

Subcommittee on Energy & Environment 

US House of Representatives 

Committee on Science, Space, and Technology 

2321 Rayburn House Office Building 

Washington, DC 20515-6301 

Attn: Taylor Jordan taylor.jordan@mail.house.gov 

.. c 

"'~ Your To)uchstone Energy" &nner ~4' 

Re: Response to Questions for the Record - ODEC Testimony from June 6, 2012 Hearing 

Dear Chairman Harris: 

In response to your letter dated June 25. 2012, Old Dominion Electric Cooperative (ODEC) 

offers the following answers to the Questions for the Record posed in conjunction with my 

testimony given at the June 6 hearing entitled "EPA's Impact on Jobs and Energy Affordability: 

Understanding the Real Cost and Benefits of Environmental Regulations". We very much 

appreciate the time given to speak before the subcommittee and also the opportunity to address 

follow-up questions for which we will provide our cooperative's perspective on very critical 

issues facing our country and our company. 

1. Do you think that recent EPA regulatory activity is consistent with an "all of the 

above" energy policy? 

NQ, the underlying assumption that natural gas and renewables will be the technology of 

choice speaks very strongly to this issue. While EPA has proposed what they feel is a 

reasonable solution to allow coal to continue to be used, the practicality of the situation 

will be that companies will not be willing or able to take the risk on the viability of carbon 

capture and storage (CCS) technology. New coal plants will not be built and the existing 

fleet will be slowly phased out. There are few options available for base load power, and 

the loss of a significant and abundant energy resource like coal runs counter to this 

country's needs to ensure a diverse energy mix. Maintaining use of all our resources will 

provide competition among base load fuels in the market place resulting in true price 

stability and move us in the direction of energy independence. 

While we would all like to find more and better ways to generate electricity without any 

environmental impact, the fact of the matter is new technology, while moving forward, 
128 

Chairman Andy Harris 

July 6,2012 

Page 2 

has not, and will not realistically be able to progress at an accelerated rate to make up 

potential large shortfalls in our generation capabilities. EPA's justification that these 

mandates will encourage alternative technology and spur development of commercially 

viable CCS is extremely shortsighted. What has been and will be successful for this 

country are technologies developed, vetted, and brought to market by pioneers, 

researchers and visionaries working in collaboration with the government and the private 

sector. This formula has successfully worked for decades and not government mandates 

and oppressive regulations. ODEC believes that we must continue to move forward to 

better the environment, but based upon sound science, efficient technology, and in a 

manner that is economically responsible and environmentally balanced. Always keeping 

in the fore front these decisions directly affect all of our electric bills and the United 

States competitive position in the world. We must never lose sight that affordable and 

abundant electricity is the fundamental foundation for every sector of our economy, 

without exception. 

1. In the EPA's analysis for the proposed Carbon Pollution Standard for Power 

Plants, the agency assumes that "generation technologies other than coal (including 

natural gas and renewable sources) are likely to be the technology of choice for new 

generating capacity." In your opinion, is this assessment correct? 

NQ, this is a very large assumption based upon a small window of current data. While 

none of us possess a crystal ball to know what will happen in the future, the EPA should 

not be engaging in this type of supposition regarding the future of the energy market. 

While there is available information from a variety of reliable sources regarding the 

quantities of natural gas that are significantly higher than once estimated, there are still 

the questions of development of more and better extraction technology, and additional 

storage and infrastructure, as well as potential environmental impacts on water, which 

must be addressed to take full advantage of these resources. From a national 

perspective, the assumption that there will be adequate natural gas supply throughout 

the country is erroneous. This proposed rule fails to consider or acc04nt for lack of fuel 

availability in many geographic areas, and this failure is a fatal flaw. 

While natural gas prices are at record lows currently, no one should forget that between 

1999 and 2005, US natural gas prices quadrupled and there were significant spikes as 

recent as 2008. Furthermore, natural gas companies are pursuing developing liquid 

natural gas (LNG) facilities to transport natural gas from the US to other parts of the 

world. EPA has not considered the economic impact of LNG export on the US market 

and how it would affect this rule. 

Additionally, renewable technology has made progress; however, many of these sources 

are still heavily subsidized, intermittent and not truly economically viable. Moreover, 

different areas of the country have very different potential to take advantage of 

renewable technology. To assume technologies other than coal can and will be the 

choice in many regions of the country is extremely troubling. 

2 
129 

Chairman Andy Harris 

July 6,2012 

Page 3 

EPA has stated that the proposed Rule is based upon a "common sense approach". 

However, ODEC considers this proposal to be contrary to common sense and, in fact, 

the intent of the requirements of the Clean Air Act (CAA). Common sense would 

normally dictate that we as a country should be able to utilize a diverse mix of resources 

in the most efficient manner that is technically feasible at the time. While ODEC agrees 

that there should be forward thinking regarding technology, no one, including EPA, 

should be making forward assumptions that can and will have significant unintended 

consequences. In Section 1 of Executive Order 13563, addressing the general 

principles of regulation, it states "It [our regulatory system] must promote predictability 

and reduce uncertainty." Further Section 4, in discussing flexible approaches, the order 

states that agencies "consider regulatory approaches that reduce burdens and maintain 

flexibility and freedom of choice for the public." The regulation of technology in the 

proposed rule has not embodied these principles. Electricity affordability from natural 

gas generation is significantly driven by the fuel's price. The proposed standard will 

effectively eliminate competition in the market place and ODEC's choice for affordable 

electric power. The electric industry will become a price taker of gas monopolies. 

2. According to OIRA's Draft Report to Congress on the Benefits and Costs of Federal 

Regulations and Unfunded Mandates on State, Local, and Tribal Entities, the 

benefits from EPA air quality regulations that affect particulate matter represent 

almost 80 percent of all benefits from all regulations across the entire federal 

government. Do you find that claim to be credible? 

Based upon a review of the Draft Report dated March 2012, that percentage on its face 

appears to be correct. ODEC has not done a specific calculation. However, ODEC, as 

well as other utilities, has continued to comment that the assumptions and 

methodologies used to calculate the overall health benefits from the EPA regulations 

have a high degree of uncertainty and in many cases, the benefits are significantly 

biased high. The underlying assumptions used to calculate the benefits of these rules 

are not necessarily indicative of the real benefits. In many cases, both past and present, 

the benefits calculated, which are primarily health-related, are based upon a direct 

assumption that a certain amount of emissions will equate to a certain increase in 

atmospheric concentration which relates to a specific number of health impacts 

(morbidity, hospitalizations, treatment, lost work time, etc.). All of the assumptions made 

the air quality & statistical models used, the specific research data chosen - all have 

inherent inaccuracies. In an issue brief entitled "PM2.5 Reductions and Impact on 

Premature Death: An EPRI Perspective" (February 2009), the Electric Power Research 

Institute (EPRI) discussed the inherent inaccuracies in estimating avoided deaths and 

health impacts due to changes in air quality. In their conclusions, EPRI considers that 

studies' "estimates of impact vary substantially" and "Estimates of changes in 

atmospheric pollutants and their resultant impact on mortality should reflect this reality 

and recognize these estimates remain burdened with considerable uncertainty." 

3 
130 

Chairman Andy Harris 

July 6,2012 

Page 4 

As you well know, within the OIRA report, they state in the introductory paragraphs that 

"It is important to emphasize that the figures here have significant limitations" and In 

addition, and significantly, prospective estimates may contain erroneous assumptions 

producing inaccurate predictions; retrospective analysis, recently required by Executive 

Order 13563, can be an important way of increasing accuracy." Therefore, while the 

benefits in the OIRA draft report are a correct compilation of the EPA regulatory 

contribution, the actual benefits associated with the various regulatory actions are 

debatable. 

3. What is the potential for utilizing carbon capture and sequestration for the Cypress 

Creek Power Station to meet EPA's proposed rules? 

First and foremost, if the proposed New Source Performance Standards (NSPS) for 

greenhouse gas emissions is finalized with the current requirements, Cypress Creek will 

not be constructed. The future compliance obligations and the associated liability would 

not allow for financing of the project. With that said, ODEC has always tried to leave 

open avenues for utilization of technology in the future whenever it may become 

commercially available. Speaking from purely a technological standpoint, to implement 

CCS at Cypress Creek, there are numerous hurdles that would have to be overcome: 

1. The capture technology would have to progress to the point of being able to 

adequately capture the exhaust volumes from a large plant without a heavy 

parasitic load burden to run what amounts to essentially a chemical plant. 

2. Because the proposed sites are not in close proximity to an area even being 

considered for research as a storage repository, the transportation 

infrastructure would have to be fully permitted, designed and deployed i.e. 

barge, rail or pipeline. All of this requires multiple public hearings with multiple 

government agencies, an expensive and time consuming process. Also there 

is no guarantee at the end of the process we will have the necessary permits 

and then multiple legal suits will be filed by environmental organizations. 

3. Long-term storage locations would have to be carefully studied and fully 

explored before a final repository could be selected. 

4. The legal liability questions have to be answered. Who is responsible for the 

long term storage of millions of gallons of carbon dioxide for the next 50 or 

100 plus years from now? What happens when a seismic event occurs and 

releases an odorless, colorless and tasteless gas that is deadly to all life? 

Only when all the compounding issues of capture, transport, monitoring, storage, liability 

and cost are resolved can CCS be effectively and completely addressed. The current 

technological issues with capture alone are daunting. However, couple those with the 

technological, environmental, cost and legal issues associated with transport and 

storage of CO2, ODEC does not believe these fundamental issues can be resolved 

within 10 years, if at all. 

4 
131 

Chairman Andy Harris 

July 6,2012 

Page 5 

ODEC has been and continues to be a member of the Southeast Regional Carbon 

Sequestration Partnership (SECARB). ODEC recognizes the need for these 

partnerships to facilitate exploration and expansion of this nation's technological 

capabilities with CCS. However, ODEC cannot and will not rush to judgment on this 

issue as to its viability, affordability and applicability in the real world 

A rule of this unprecedented magnitude will surely have significant unintended consequences 

which will have widespread negative impact on the stability of our nation's electrical 

infrastructure and our economy. Because of the significant impact this will have on the electric 

generation industry as a whole, and more importantly, on ODEC's ability to construct new base 

load generation that will be affordable for all of our member owners, ODEC urges the 

Subcommittee to request the EPA to withdraw this rule. It's simply not workable. 

Again, ODEC appreciates the opportunity to provide additional information. If you have further 

questions or require any additional clarifications, feel free to contact me. 

Sincerely, 

David Hudgins 

Director, Member & External Relations 

cc (via e-mail): 

Lisa Johnson 

Ken Alexander 

David Smith 

5 
132 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND 'tECHNOLOGY 

SUBCOMMITTEE ON ENERGY & ENVIRONMENT 

Questions for the Record 

The Honorable Andy Harris 

EPA's Impact on Jobs and Energy Affordability: Understanding the Real Costs 

and Benefits of Environmental Regulations 

Mr. Richard Trzupek 

1. Dr. Honeycutt .described how EPA regulations rely on a series of assumptions about 

current air quality causing tens or hundreds of thousands of deaths. Can you describe the 

state of air quality in the United States and progress that has been made over the last 

several decades? Do you think current ambient concentrations are as harmful as EPA 

claims? 

2. According to OIRA's Draft Report to Congress on the Benefits and Costs of Federal 

Regrdations and Unfunded Mandates on State, Local, and Tribal Entities, the benefits 

from EPA air quality regulations that affect particUlate matter represent almost 80 percent 

of al1.benefits from all regulations across the entire federal govermnent. Do you find that 

claim to be credible? 

3. OIRA has recommended in their Report to Congress that federal agencies shOuld conduct 

a jobs analysis for major rules. In reading recent EPA rules, do you have any indication 

that the Agency is looking seriously at employment impacts? 

4. Do you think that recent.EP A regulatory activity is consistent with an ''all of the above" 

energy policy? 

5. EPA relies on particulate matter co-benefits to justify many of its regulations on the 

power sector. In your view, .is EPA focusing on the most important sources of PM and 

other pollutants? 

6. I understand that EPA recently conducted some experiments where they exposed people 

to high levels ofPM .. What are the implications of these experiments? 
(133) 

Appendix 2 

ADDITIONAL MATERIAL FOR THE RECORD
134 

AN ECONOMIC IMPACT ANALYSIS OF EPA’S MERCURY AND AIR TOXICS STANDARDS

RULE
135 

Contents 

INTRODUCTION ........................................................................................................................... 1 

NERA's NewERA MODEL. .......................................................................................... ; .................. 1 

MATCHING EPA's ANNUAL COST OF $10 BILLION IN 2015 .............................................. .1 

CAPITAL COST REQUIREMENTS ARE ATTRIBUTABLE TO BOTH RETROFITS 

AND REPLACEMENT CAPACITy .................................................................................. 2 

Retrofits ..................................................................................................................................... .3 

. Retirements ............................................................................................................................... .4 

Total Capital Spending by 2015 ............................................................................................... .4 

NON-CAPITAL COSTS ................................................................................................................ .4 

OVERALL MACROECONOMIC IMPACTS ASSOCIATED WITH THE COSTS OF THE 

MATS RULE ....................................................................................................................... 5 

CONCLUSION .............................................................................................................................. ,.6 

APPENDIX A - Additional Details on the NewERA Model ........................................................... 7 

NERA Economic Consulting 
136 

INTRODUCTION 

On December 16,2011, EPA released its final Mercury and Air Toxics Standards (MATS) Rule, 

accompanied by a Regulatory Impact Analysis (RIA) that reported the incremental cost to the 

U.S. electricity sector would be $9.6 billion per year in 2015. This is a large cost to the U.S. 

economy and; therefore, the Rule merits close examination. NERA has the capability to analyze 

the electric sector impacts and associated macroeconomic impacts of emissions policies. In this 

paper, we analyze the economic impacts of the MATS Rule. Our analysis is designed to 

generally match the EPA assumptions in its own analysis, and to offer a broader range of insights 

about the impacts of that Rule than EPA provided in its RIA. This paper briefly summarizes the 

approach in our MATS analysis, compares our results to those that EPA has reported, and 

provides some further results that are available from our own analysis. A particular addition that 

this paper offers is insight into the overall economy-wide impacts of the Rule that can be 

expected to result from the costs that the U.S. electric sector is projected to bear under the MATS 

Rule - EPA did not provide such an economy-wide assessment in its RIA. 

NERA's NewERA MODEL 

NERA's analysis was performed using NERA's NewERA model.l The NewERA model is an 

economy-wide economic model that includes a detailed representation ofthe electric sector. It 

has been designed to assess, on an integrated basis, system costs to the power sector to meet any 

specified policy scenario as well as the overall macroeconomic impacts of that policy scenario. 

For the power sector, NewERA uses a unit-level representation of the power generation system 

tliat considers the actions each generator takes to new policies such as MATS by providing 

compliance options such as retrofitting, retiring, fuel switching and re-dispatching. The outputs 

ofthe model include a variety of electric sector-specific results such as number of retrofits (and 

types), number of retirements, number and types of new capacity additions, fuel usage, and total 

sector costs. In addition, because the NewERA model includes all sectors of the economy we can 

also evaluate changes in fuel markets (most importantly, natural gas markets) and 

macroeconomic indicators such as GDP, consumption and employment measures. Additional 

information about the NewERA model is included in Appendix A. 

MATCHING EPA's ANNUAL COST OF $10 BILLION IN 2015 

The initial focus of the analysis was to see how closely our own projected electric sector impacts 

might match the analysis that EPA performed. Note that EPA only considered the impacts of the 

policy on the electric sector; they did liot consider the broader economic effects ofthe Rule on 

the economy that arise because of the impacts of the Rule on prices and resources throughout the 

economy . EPA forecast the impacts of the ,MATS Rule using the IPM model. EPA analyzed 

two policy scenarios: 1) a Baseline, which included the Cross-State Air Pollution Rule (CSAPR) 

that has since been stayed by the court,2 and 2) MATS, which layers the requirements of the 

I For additional technical details on the NowERA model see http://www.nera.coml677607.htm. 

2 On December 30, 2011, the United States Court of Appeals for the D.C. Circuit issued a ruling to stay CSAPR 

pending judicial review. 

NERA Economic Consulting 
137 

INTRODUCTION 

On December 16,2011, EPA released its final Mercury and Air Toxics Standards (MATS) Rule, 

accompanied by a Regulatory Impact Analysis (RIA) that reported the incremental cost to the 

U.S. electricity sector would be $9.6 billion per year in 2015. This is a large cost to the U.S. 

economy and; therefore, the Rule merits close examination. NERA has the capability to analyze 

the electric sector impacts and associated macroeconomic impacts of emissions policies. In this 

paper, we analyze the economic impacts of the MATS Rule. Our analysis is designed to 

generally match the EPA assumptions in its own analysis, and to offer a broader range of insights 

about the impacts of that Rule than EPA provided in its RIA. This paper briefly summarizes the 

approach in our MATS analysis, compares our results to those that EPA has reported, and 

provides some further results that are available from our own analysis. A particular addition that 

this paper offers is insight into the overall economy-wide impacts of the Rule that can be 

expected to result from the costs that the U.S. electric sector is projected to bear under the MATS 

Rule - EPA did not provide such an economy-wide assessment in its RIA. 

NERA's NewERA MODEL 

NERA's analysis was performed using NERA's NewERA model.l The NewERA model is an 

economy-wide economic model that includes a detailed representation ofthe electric sector. It 

has been designed to assess, on an integrated basis, system costs to the power sector to meet any 

specified policy scenario as well as the overall macroeconomic impacts of that policy scenario. 

For the power sector, NewERA uses a unit-level representation of the power generation system 

tliat considers the actions each generator takes to new policies such as MATS by providing 

compliance options such as retrofitting, retiring, fuel switching and re-dispatching. The outputs 

ofthe model include a variety of electric sector-specific results such as number of retrofits (and 

types), number of retirements, number and types of new capacity additions, fuel usage, and total 

sector costs. In addition, because the NewERA model includes all sectors of the economy we can 

also evaluate changes in fuel markets (most importantly, natural gas markets) and 

macroeconomic indicators such as GDP, consumption and employment measures. Additional 

information about the NewERA model is included in Appendix A. 

MATCHING EPA's ANNUAL COST OF $10 BILLION IN 2015 

The initial focus of the analysis was to see how closely our own projected electric sector impacts 

might match the analysis that EPA performed. Note that EPA only considered the impacts of the 

policy on the electric sector; they did liot consider the broader economic effects ofthe Rule on 

the economy that arise because of the impacts of the Rule on prices and resources throughout the 

economy . EPA forecast the impacts of the ,MATS Rule using the IPM model. EPA analyzed 

two policy scenarios: 1) a Baseline, which included the Cross-State Air Pollution Rule (CSAPR) 

that has since been stayed by the court,2 and 2) MATS, which layers the requirements of the 

I For additional technical details on the NowERA model see http://www.nera.coml677607.htm. 

2 On December 30, 2011, the United States Court of Appeals for the D.C. Circuit issued a ruling to stay CSAPR 

pending judicial review. 

NERA Economic Consulting 
138 

MATS Rule on top of the Baseline; the impacts of the Rule (MATS) are calculated 

these two scenarios. The IPM model incremental compliance costs to electric 

sector in 2015 would be $9.4 billion EPA added another $0.2 billion to that cost to 

monitl)rinlg and administrative costs, accoants for EPA's total cost 

as $9.6 billion. did not include the extra $0.2 billion, so our cost results, 

stated as the aanual cost 2015, should to IPM's estimate of $9.4 billion 

Since the N.wERA model 

of$9.4 billion in 2007$ to 

results in it is useful to convert the !PM cost estimate 

NERA 

value in 2010$; $9.7 billion. 

scenarios in the N.wERA model ~ a Baseline with 

on top ofCSAPR. We also used EPA's 

nrr,i,.r·.t"tl the incremental 

more years, and also 

which is the result 

1 compares our cost results to those 5 

Figure 1: Comparisoll of Allnoalized Illcremwtlli Compliauee Costs for MATS, Relative to CSAPR 

CAPITAL COST REQUIREMENTS ARE ATTRIBUTABLE TO BOTH 

RETROFITS AND REPLACEMENT CAPACITY 

electric sector must not 'with the MATS Rule, but will 

with CSAPR, which has been U.S. Court 

invest\l1ents that will need to be made ro with 

also work towards with MATS, it useful to also 

the MATS Rule relative ro a Baseline that Clean Air Interstate 

Rule (CAIR), which specifies the current S02 and NOx limits that generators must meet. 

evaluating !l. scenario that did not include CSAPR in the Baseline and 

the actual CAIR is assumed to 

Thus, we are to make of a 

tl1at includes the and CSAPR with one that includes but does 

not include either the MATS Rule or CSAPR, The results are 

based on this unless otherwise stated. 

Regulatory Impact Analysis for the Final Mercury llIld Air Toxics Standards, December 2011, p. 3-13. 

2 

NEAA Economic Coosullll\ll 
139 

There are some important details about costs that EPA did not report, but that we can report from 

our own analysis based on the NewERA model. One of these is the level of total capital that 

electric companies will need to raise within the implementation period. EPA only reports the 

annual capital payments that companies incur over time to "pay back" the upfront spending. 

Annualized costs have relevance because they may affect electricity rates. However, the level of 

spending that mllst occur upfront is of relevance for other reasons. For example, it indicates how 

leveraged companies may have to become, which can afJ:ect their borrowing costs and their stock 

valuate. 

The capital costs are associated with both pollution control retrofits and new capacity to replace 

capacity retired as a result oftbe Rule. Reporting only the annualized costs masks the significant 

increase in capital that would be required in order to ~'Omply with the MATS Rule. We thus tum 

to the key drivers of capital spending prior to 2015. 

Retrofits 

EPA's analysis shows that in 2015 the MATS Rule (incremental to CSAPR being fully 

implemented first) will entail 60 OW Qfscrubber retrofits (wet scrubbers, dry scrubbers and dry 

sorbent injection combined), 63 OW of scrubber upgrades, 99 OW of activated carbon injection 

(ACI) and at least 102 OW of fabric filters.6 In contrast, our analysis shows an incremental 64 

OW of scrubbers, 70 OW of ACI and 124 OW of fabric filters (the scrubber retrofit numbers are 

70 OW if compared relative to CAIR). The details on the retrofits are in Figure 2. 

Figure 1: Summary oUlllS Retrofit Additions 

Total 

SCClllll'io WFGD 1)FGD 1)SI Scrub SCR ACl fT 

Base (CSAPR) 55 6 9 70 0 0 0 

Delta .3 19 44 60 0 99 102 

CArR 18 0 0 18 15 7 4: 

CSAPRJMATS 19 47 22 88 16 78 128 

Delta/fom CAlR 1 47 22 70 2 70 124 

Note: Deltas may not add up due to rounding. 

Regulatory Impact Analysis for the Final Mercuty and Air Toxies Standards, p. 3·15. 

3 

NEAA Economic Consulting 
140 

Retirements 

The other component of the capital sPending relates to new capacity to replace coal-fired 

generators that economically retire due to the compliance requirements of the MATS Rule. EPA 

projects that the MATS Rule will result in an incremental 5 GW of coal-fired capacity retiring by 

2015 relative to CSAPR. Our analysis of the MATS Rulehas an incremental 19 GW of coalfired capacity retiring as a result of the MATS Rule relative to CSAPR. We project 23 GW of 

retirements relative the Baseline without CSAPR. We note, however, that the Baseline without 

CSAPR has 15 GW of retirements in it, so that the total capacity retired through 2015, once both 

CSAPR and MATS are applied, is 38 GW. (It is about the same even if only the MATS Rule is 

imposed on top of the CAIR-only Baseline.) Almost all of the incremental retirements are in 

states east of the Mississippi River. 

Some of the retired capacity is replaced by new natural gas-fired combined cycle units. This has 

to occur in some locations in order to maintain reserve margins.7 However, when reserve 

margins do not force replacement capacity, a significant part of the generation that comes from 

those retired units in the Baseline is replaced by greater generation from existing natural gas 

combined cycle units in the same region. Nationally, by 2015 there is an incremental build of 1 

GW of natural gas combined cycle units and an incremental build of 1.5 GW of combustion 

turbines driven by the MATS and CSAPR Rules combined. (It is about the same even if only the 

MATS-Rule is imposed on top oftheCAIR-only Baseline.) 

Total Capital Spending by 2015 

Thus, there are capital costs incurred due to retrofits and replacement capacity. Between 2012 

and 2015, the model projects that this capital requirement would be $84 billion to comply with 

both MATS and CSAPR. This represents a 30% increase over the capital requirements in a 

Baseline with either CAIR or CSAPR. Such an increase might create financing challenges for 

individual operating companies and the sector as a whole, which could lead to credit downgrades 

and possibly higher costs of borrowing. We have not attempted to include these potential costs 

in our estimates (nor has EPA included them in theirs). 

NON-CAPITAL COSTS 

The capital spending is the most significant feature of the costs. In addition, there are increased 

costs of generation that are due to: the greater use of natural gas to displace the coal-fired plants 

that retire specifically as a result of the MATS Rule, operating costs of the retrofits, and the 

reductions in unit efficiencies resulting from the retrofits themselves.s To some extent, these 

added operating costs are offset by reduced costs of maintaining the coal plants that are retired. 

The net effect of these operating costs, plus the annualized capital payments for the $84 billion in 

investment, is reflected in the total costs that were reported in Figure 1. 

7 Each region in the model has a reserve margin. If the available capacity relative to the region's peak demand 

falls below the required reserve level then capacity must be added to the system. 

S The retrofits often require additional power from the facility to operate, resulting in a net reduction in the 

efficiency of the plant. 

NERA Economic Consulting 

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141 

OVERALL MACROECONOMIC IMPACTS ASSOCIATED WITH THE 

COSTS OF THE MATS RULE 

The consequences of the MATS Rule are not just limited to the electric sector. The electric 

sector has to invest significant capital to comply with the MATS Rule. This capital and other 

added spending for compliance will induce lower industrial output (because the cost of power, 

natural gas, and other commodities will increase) and hence drive down income for workers. 

Although the investments also will create jobs installing the retrofits and building new power 

plants, the net effect of complying with the MATS Rule will be an increase in the costs of 

electricity and natural gas, and will produce a drag on the economy as a whole. EPA did not 

evaluate the MATS Rule using a macroeconomic model so they could not produce a net impact 

on jobs; instead they cited an c,;,timated 46,000 short-term jobs and 8,000 long-term utility jobs 

created.9 

Because the N.wERA model integrates electric sector costs with the rest of the economy, our 

analysis also directly estimates the impacts on wages and net employment as a result of the 

MATS Rule~ Our estimate of the net impact (inclusive of job gains associated with installing 

retrofits and building new power plants) of the MATS Rule in 2015 is a loss in income 

equivalent to 180,000 full-time jobs (215,000 full-time jobs if compared relative to CAIR). 

Figure 3 shows that while the largest job losses are in 2015, there are continuing job losses over 

time as the economy shrinks due to higher energy costs. 

Figure 3: Change In Full-Time Joh Equivalents 

CSAPRIMA TS (relative to CAIR) -215 -15 -75 -85 

The costs ofthe MATS Rule are also reflected in several other common economic measures. 

For example, the present value ofGDP losses from 2012 through 2035 would be between $84 

and $112 billion dollars ($84 billion is relative to CSAPR, $112 billion is relative to CAIR). 

Figure 4 shows the annual GDP losses and the present value loss through 2035. Not 

surprisingly, the largest loss is in 2015 when the MATS Rule is assumed to be fully 

implemented. 

• Regulatory Impact Analysis for the Final Mercury and Air Toxies Standards, p. 6·1. 

NERA Economic Consuftlng 

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142 

Figllre 4: Challge ill Gross Domestic Product 

CSAPRfMATS 

(relative to CAIR) -$3 -$25 $1 -$4 -$7 -$7 -$7 -$7 

Similar to GOP, the MATS Rule also leads to losses income for 

conswners. The value losses from would be between 

$35 and $71. dollars ($35 billion is relative to CSAPR, $71. is relative to CAIR). 

Figure 5 shows the annual losses and the present value loss through 2035. For 

consumption, the largest losses are 2012 as investment has to ramp to meet the 2015 

coroo!iam:e deadline, which requires a diversion of funds from investment. 

Figure 5: Change iu Cousumptlnu (billions, 20U,S 

CONCLUSION 

with IPM find that 

further than EPA's analysis in a few different 

of (:0l11lPlying with the MATS Rule relative to a Baseline 

that the electric sector 

and 

NEAA Ecooomic Consulting 

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143 

Æ 

APPENDIX A - Additional Details on the NewERA Model 

NERA developed the NewERA model to forecast the impact of policy, regulatory, and economic 

factors on the energy sectors and the economy. When evaluating policies that have significant 

impacts on the entire economy, one needs to use a model that captures the effects as they ripple 

through all sectors of the economy and the associated feedback effects. The NewERA model 

combines a macroeconomic model with all sectors of the economy (except for the e1ectric.sector) 

with a detailed electric sector model. This combination allows for a complete understanding of 

the economic impacts of different policies on all sectors of the economy. 

The macroeconomic model incorporates all production sectors and final demand of the economy. 

Policy consequences are transmitted throughout the economy as sectors respond until the 

economy reaches equilibrium. The production and consumption functions employed in the model 

enable gradual substitution of inputs in response to relative price changes, thus avoiding all-ornothing solutions. 

The main benefit of the integrated framework is that the electric sector can be modeled in great 

detail yet through integration the model captures the interactions and feedbacks between all 

sectors of the economy. Electric technologies can be well represented according to engineering 

specifications. The integrated modeling approach also provides consistent price responses since 

all sectors of the economy are modeled. In addition, under this framework we are able to model 

electricity demand response. 

There are great uncertainties about how the U.S. natural gas market will evolve, and the NewERA 

model is designed explicitly to address the key factors affecting future natural gas supply and 

prices. One of the major uncertainties is the availability of shale gas in the United States. To 

account for this uncertainty and the subsequent effect it could have on the domestic and 

international markets, the NewERA model includes resource supply curves for U.S. natural gas. 

The model also accounts for foreign imports and U.S. exports of natural gas, by using a supply 

(demand) curve for U.S. imports (exports) that represents how the global LNG market price 

would react to changes in U.S. imports or exports. 

The electric. sector model is a detailed model of the electric and coal sectors .. Each of the more 

than 17,000 electric generating units in the United States is represented in the model. The model 

minimizes costs while meeting all specified constraints, such as demand, peak demand, 

emissions limits and transmission limits. The model determines investments to undertake and 

unit dispatch. Because the NewERA model is an integrated model of the entire U.S. economy, 

electricity demand can respond to changes in prices and supplies. 

The steam coal sector is represented within the NewERA model by a series of coal supply curves 

and a coal transportation matrix. The NewERA model represents the domestic and international 

crude oil and refined petroleum markets. . 

The NewERA model outputs include demand and supply of all goods and services, prices of all 

commodities, and terms of trade effects (including changes in imports and exports). The model 

outputs also include gross regional product, consumption, investment, disposable income, and 

changes in 'job equivalents" based on labor wage income. 

NERA Economic Consulting 

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