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[Senate Hearing 106-975]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 106-975

      CLEAN AIR ACT: INCENTIVE-BASED UTILITY EMISSIONS REDUCTIONS

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
        CLEAN AIR, WETLANDS, PRIVATE PROPERTY AND NUCLEAR SAFETY

                                 OF THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 17, 2000

                               __________

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

                    U.S. GOVERNMENT PRINTING OFFICE
68-421 cc                   WASHINGTON : 2001
_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington DC 
                                 20402

               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

               one hundred sixth congress, second session
                   BOB SMITH, New Hampshire, Chairman
JOHN W. WARNER, Virginia             MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma            DANIEL PATRICK MOYNIHAN, New York
CRAIG THOMAS, Wyoming                FRANK R. LAUTENBERG, New Jersey
CHRISTOPHER S. BOND, Missouri        HARRY REID, Nevada
GEORGE V. VOINOVICH, Ohio            BOB GRAHAM, Florida
MICHAEL D. CRAPO, Idaho              JOSEPH I. LIEBERMAN, Connecticut
ROBERT F. BENNETT, Utah              BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas          RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island
                      Dave Conover, Staff Director
                  Tom Sliter, Minority Staff Director
                                 ------                                

  Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear 
                                 Safety

               JAMES M. INHOFE, North Carolina, Chairman

GEORGE V. VOINOVICH, Ohio            BOB GRAHAM, Florida
ROBERT E. BENNETT, Utah              JOSEPH I. LIEBERMAN, Connecticut
KAY BAILEY HUTCHISON, Texas          BARBARA BOXER, California

                                  (ii)

                            C O N T E N T S

                              ----------                              
                                                                   Page

                              MAY 17, 2000
                           OPENING STATEMENTS

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................    14
Lieberman, Hon. Joseph I., U.S. Senator from the State of 
  Connecticut....................................................     4
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire.... 2, 41
    Letter, Clean Air Act, STAPPO/ALAPCO.........................    43
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 8, 45

                               WITNESSES

Brunetti, Wayne, chairman and CEO, New Century Energies, Denver, 
  Colorado.......................................................    27
    Prepared statement...........................................   115
Cassidy, Frank, president, PSEG Power, LLC, Newark, New Jersey...    23
    Prepared statement...........................................    93
Cohen, Armond, executive director, Clean Air Task Force, Boston, 
  Massachusetts..................................................    25
    Prepared statement...........................................    94
    Supplemental statement.......................................   114
McCrary, Charles, president, Southern Company Generation, 
  Birmingham, Alabama............................................    21
    Prepared statement...........................................    89
Rogers, James E., president, Cinergy Corporation, Cincinnati, 
  Ohio...........................................................    17
    Prepared statement...........................................    84
Wood, David G., Assistant Director, Resources, Community and 
  Economic Development Division, General Accounting Office.......     5
    Prepared statement...........................................    45
    Report, Air Pollution: Status of Implementation and Issues of 
      the Clean Air Act Amendments of 1990, General Accounting 
      Office..................................................... 52-82

                          ADDITIONAL MATERIAL

Agreement, Voluntary Reductions Agreement, Colorado Air Pollution 
  Control Group and Public Service Company of Colorado...........   117
    Letters:
    Clean Air Act, STAPPO/ALAPCO.................................    43
    Response to GAO report, Robert Persiascepe, Assistant 
      Administrator for Air and Radiation, Environmental 
      Protection Agency..........................................    82
Report, Air Pollution: Status of Implementation and Issues of the 
  Clean Air Act Amendments of 1990, General Accounting Office.... 52-82

                                 (iii)

  

 
      CLEAN AIR ACT: INCENTIVE-BASED UTILITY EMISSIONS REDUCTIONS

                              ----------                              

                        WEDNESDAY, MAY 17, 2000

                                   U.S. Senate,    
               Committee on Environment and Public Works,  
  Subcommittee on Clean Air, Wetlands, Private Property    
                                        and Nuclear Safety,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:30 a.m. in 
room 406, Senate Dirksen Building, Hon. James M. Inhofe 
(chairman of the subcommittee) presiding.
    Present: Senators Inhofe, Voinovich, Bennett, Chafee, 
Lieberman, Lautenberg, and Smith [ex officio].

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. The hearing will come to order.
    Today is the second hearing on the Clean Air Act 
reauthorization held by this subcommittee. The first hearing 
was last October on general reauthorization issues.
    Today's hearing will address the multiple EPA regulations 
addressing the same pollutants as well as a look at the current 
implementation of the air program by the EPA.
    We will have a third reauthorization hearing later this 
summer where we will be talking about the effects of this on 
various political subdivision States and local governments.
    We will begin today's hearing with testimony from the 
General Accounting Office. They have conducted two 
investigations concerning the air act and will be reporting on 
their findings.
    The first report provides a snapshot of the status of the 
Clean Air Act implementation. The second report addresses the 
multiple regulatory requirements addressing the same 
pollutants. Specifically, the report looks at three industries: 
the refining industry, the utility industry, and the chemical 
industry.
    I requested this report over a year ago because of my 
concern that the Clean Air Act imposes multiple and sometimes 
conflicting requirements addressing the same pollutants.
    The results are very interesting, for example, there are 
seven different air programs controlling nitrogen oxides from 
utilities alone. Refiners are regulated under five different 
titles of the act. Chemical companies are regulated under seven 
different programs.
    I am glad that earlier this year Chairman Smith took an 
interest in this issue and how it relates to the utilities. I 
look forward to continuing my work with him on this issue over 
the next year.
    The second panel will focus this issue, the multiple 
regulatory environment on the utility industry. This panel will 
look at the incentive-based utility emissions reduction 
approach.
    The idea is to provide regulator certainty for the utility 
industry regarding a set of agreed-upon pollutants. Industry 
and the public would then know what reductions are going to be 
made and the timing for the reductions.
    I will be working with Senator Smith on this approach this 
year with the goal of having a bill by the end of the year.
    I will also be introducing a number of smaller bills this 
year just for discussion purposes alone, to bring them out so 
we can talk about the problems that exist, but not actually 
have anything that we will be offering, saving proposed 
legislation for the next Congress.
    For the purpose of the Utility Emissions Reduction Plan, I 
have a number of concerns and questions which I hope we can 
address today and in the coming months.
    First, I believe it must be a voluntary program.
    Second, I have grave concerns regarding CO2. I 
do not support giving EPA the authority to regulate 
CO2, even in a voluntary program.
    Three, how would companies who have already made large 
reductions be treated or would they be punished for the 
initiatives that they have already taken.
    Four, how will utilities in areas of the country who have 
not had to make reductions in the past, particularly the west, 
be treated should reductions be based on a set of numbers or 
just reduction percentages.
    Here is a quick example of how utility costs impact not 
only our national economy, but also our State and regional 
economies.
    Last week I met with the president of a steel mill in 
Oklahoma, right outside of Tulsa, who explained to me that 
every summer they close production down for several weeks when 
the utility prices spike during the high summer demand.
    Last year they closed for a month because their utility 
costs reached $150 per ton and with the steel selling at $225 a 
ton, obviously this just wouldn't work.
    A final note on utility deregulation. I am adamantly 
opposed to including environmental provisions in the dereg 
bill. Those provisions must be considered by this committee in 
conjunction with the Clean Air Act reauthorization, not as a 
separate measure.
    With these ideas in mind, we will turn now to the chairman 
of the parent committee, Senator Smith.

             OPENING STATEMENT OF HON. BOB SMITH, 
          U.S. SENATOR FROM THE STATE OF NEW HAMPSHIRE

    Senator Smith. Thank you very much, Senator Inhofe. Thank 
you for your leadership on this issue in holding the hearing 
this morning and having the witnesses here. As you know, we 
have begun a dialog among all of the stakeholders on how to 
improve the Clean Air Act and how to address these utility 
emissions problems. We are hopeful that we can draft a bill to 
provide certainty, flexibility, and achieve real environment 
improvements in our air.
    This comprehensive, multi-pollutant approach will include 
emissions trading, I hope, and significant permit relief, 
drawing on the phenomenal success of the Acid Rain Program 
which I didn't think would work, but it did.
    In the past, others have raised the prospect of using a 
comprehensive approach to increase flexibility and improve the 
environmental performance of power generation. But 
unfortunately, the Clean Air Act does not allow for that kind 
of flexibility in terms of compliance.
    So the current regime established under the Clean Air Act 
is too complex and does not produce the expected remission 
reductions.
    Regulators, environmental organizations and the industry 
seem to agree there must be a better way. We have some 
differences on how, but we do agree there must be a better way, 
and that is a start.
    There are a dozen regulations for NOx, each with its own 
deadlines and requirements. This cannot possibly be the most 
effective way to deal with NOx emissions.
    Second, the New Source Review program has been especially 
confusing. Senator Inhofe said the EPA has issued more than 
4,000 pages of guidance documents to explain the original 20 
pages of the 1980 regulations and the recent NSR enforcement 
options could easily lead to five to 10 years of litigation, 
only to result in control measures that may be redundant or 
contradictory with controls mandated by regulation.
    I have said before, publicly, that it is not good policy, 
environmental or otherwise, to create policy through the courts 
and litigation. The policy should be created here, not in the 
courts.
    We need to move away from the unit-by-unit, top down 
approach to more market-based solutions and get the job done.
    Three or four quick points: On certainty, we need to be 
clear about what emissions reductions are expected and the 
time-frame for those reductions. If we could get agreement on 
that, we could get the job done.
    The comprehensive approach, if not all pollutants are 
addressed we do lose some certainty. Future regulations could 
render meaningless our efforts to allow business planners, not 
bureaucrats, to create efficient, long-term pollution control 
strategies.
    Flexibility. Provide flexibility through permanent relief 
and the use of emissions trading as we did in the Acid Rain 
Program.
    Two quick issues on legislation: I think diversification is 
important. Coal will remain part of our energy mix. Our dialog 
should focus on our desired environmental outcomes rather than 
the fuel source It should be voluntary. This program should be 
voluntary.
    I know there is concern that exists with the voluntary 
approach, but let me at least make my meaning clear. 
Legislation should create an alternative to the current system.
    We need to get out of this box. I have said to everyone who 
sat down to discuss this, ``If you are in the box, don't sit 
down because you have your mind made up. But if you want to get 
out of the box and try to come up with a solution, then we can 
sit down and talk about it.'' And we have.
    Utilities will be able to choose between the current law 
and our new program. But compliance with either eventually will 
probably have to be mandatory.
    My goal is to device a system that is effective and 
efficient so that utility companies hopefully will be lining up 
to support and participate.
    I think we can do it. I look forward to the testimony of 
the witnesses. I thank you, Mr. Chairman, for your leadership 
on this issue.
    Senator Inhofe. Thank you, Senator Smith.
    Mr. Lieberman?

        OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN, 
           U.S. SENATOR FROM THE STATE OF CONNECTICUT

    Senator Lieberman. Thank you so much, Mr. Chairman, for 
holding this hearing on this topic which is so critical to our 
future energy availability and also for our air quality.
    I thank Senator Smith, chairman of the overall committee, 
for the leadership role that he is assuming in this important 
debate. I appreciate it very much and I look forward to working 
with both of you on this.
    Mr. Chairman, as we all know, there is a national movement 
going on now toward deregulation in the electricity industry. A 
significant number of States have already begun to deregulate 
utilities including my home State of Connecticut which passed 
legislation in 1998 that begins the process of our own safety 
regulation.
    This time of transition, I think, is also a very important 
time to take stock of where we are as a country with the 
provision of power and also, how we are dealing with the 
pollution that results from that provision of power.
    The fact is on the latter that too many of our utilities 
remain major sources of pollution. Twenty-four percent of 
industrial NOx emissions and 66 percent of industrial 
SO2 emissions come from utilities. Thirty-two 
percent of mercury and 40 percent of CO2 come from 
the power sector as well.
    In addition to this, almost 80 percent of the emissions 
that I have just described come from coal-fired power plants 
that were installed prior to 1977. These pollutants contribute 
to serious environmental problems, including smog, acid rain 
and climate change.
    Of course, equally serious, public health problems such as 
respiratory illness and, in a different sense, contamination of 
fish and other wildlife.
    In the face of these threats, many utilities have now come 
to realize that we need to enact legislation to address these 
problems and regulate these pollutants.
    I am heartened by industry's evolving commitment to such 
reductions. The question now before all of us is how to most 
effectively and efficiently now craft legislation that does 
just that.
    That is why I am particularly grateful for Senator Smith's 
leadership role here as chairman of the overall committee.
    My own approach to these problems is reflected in the Clean 
Energy Act of 1999 that Senator Jeffords and I introduced. It 
seems to me that legislation in this area should put forth 
concrete caps for all four pollutants: NOx, SO2, 
mercury, and CO2.
    For reductions over the short term, our legislation happens 
to specify the date of 2005. I also believe strongly that we 
need to enact reduction levels that are adequate to protect 
human health and the environment.
    Our bill would also close a loophole in the Clean Air Act 
that exempts older power plants from rigorous environmental 
standards.
    To ensure fairness in an era of increasing competitiveness, 
we must strengthen pollution control so that older, dirtier 
power plants don't gain an unfair share of the markets while 
polluting at higher rates than cleaner, newer, more efficient 
utilities.
    The good news here is, not uncharacteristically in our age, 
coming from the technology sector and the technologies that are 
available today.
    Pollution reductions such as those we are discussing are 
very much within our reach as a result of technological 
advancements.
    Sulfur emissions can be cured by lower sulfur coal use and 
flue gas desulfurization or scrubbers. Nitrogen oxides can be 
reduced by using selective catalytic and non-catalytic 
reduction and by using natural gas instead of coal.
    A reduction in mercury can be effected through the use of 
add-on controls and again, natural gas. CO2 can also 
be curbed with the use of natural gas. Again, these are all 
promising technologies.
    With their implementation and the continued leadership of 
the industry, I believe we can make the needed progress, and it 
is in the interest of our nation's economy and our people's 
health.
    I look forward to the discussion today and hope we can 
continue to move together toward an agreement on the best way 
to craft the most effective legislation possible.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Lieberman.
    We will be joined by at least three other Senators who are 
going to be here, Senator Lautenberg, Senator Voinovich and 
Senator Bennett.
    All the rest of the panel does have staff here and they 
will be submitting questions for the record.
    We are going to go ahead and start with the first panel 
which is GAO. We are going to be following the 5-minute rule. 
Those of you with kids or grandkids know what red, yellow, 
green, stop and go means.
    So we will try to keep our opening statements at 5 minutes. 
But you can submit your entire statement and it will be there 
for the record.
    Mr. Wood, why don't you begin?

  STATEMENT OF DAVID G. WOOD, ASSISTANT DIRECTOR, RESOURCES, 
COMMUNITY AND ECONOMIC DEVELOPMENT DIVISION, GENERAL ACCOUNTING 
                             OFFICE

    Mr. Wood. Thank you, Mr. Chairman.
    As your remarks have indicated, there probably are few laws 
that are as complex and have such enormous scope as the Clean 
Air Act. Simply put, its provisions affect the air that all 
Americans breath.
    The Congress last amended the statute in 1990. Since that 
time we have issued a number of reports and testimonies 
concerning the hundreds of actions that the law requires of 
EPA.
    The report you are releasing today, while finding that EPA 
has met the majority of those requirements, in some ways 
reaffirms issues that we have identified over the past decade.
    For example, in 1991 we questioned whether EPA's strategy 
and resource commitments would enable it to meet requirements 
for developing emission standards for hazardous air pollutants 
in accordance with the law's tight timetables.
    In today's report we found that EPA was late in meeting 102 
of the 120 such requirements with deadlines that have already 
passed.
    Senator Inhofe. Mr. Wood, would you move a little closer to 
the microphone?
    Mr. Wood. Certainly. In today's report we found that EPA 
was late in meeting 102 or the 120 such requirements with 
deadlines that have already passed and will likely be late in 
meeting some of the remaining requirements.
    In 1993, we reported that EPA regulations governing 
operating permit programs for major sources of air pollution 
had been delayed by 8 months, and questioned whether EPA or the 
States were devoting adequate resources to this effort.
    In today's report we found that most of the estimated 
19,000 sources subject to this provision have applied for 
permits, but States have issued only about 7,000 permits. A 
contributing factor is resource shortages at the State level.
    In 1997, we testified that the innovative allowance trading 
program established by the Acid Rain provisions could reduce 
electric utilities' compliance costs by over $3 billion 
annually compared with conventional regulatory approaches and 
could result in even less emissions of sulfur dioxide than 
originally anticipated.
    In today's report, most stakeholders agree that the acid 
rain provisions have been among the most successful of the 
Clean Air Act.
    During the same decade, EPA has explored alternatives to 
traditional forms of regulation. EPA has faced pressures to 
find alternatives due to the sheer cost and complexity of 
implementing the act.
    As noted in my written statement, the large industrial 
complexes operated by the petrochemical and refinery, chemical 
manufacturing and electric utility industries are prime 
examples of sources that are regulated under multiple Clean Air 
Act programs.
    We have reported on a number of EPA's efforts. For example, 
in 1997 we reported that EPA's efforts to reinvent 
environmental regulation faced a number of challenges, 
including a lack of consensus among agency employees as well as 
among external stakeholders such as State regulators, industry 
and environmental groups.
    And in 1999 we reported that EPA's efforts to develop 
effective partnerships with State regulators, while providing 
some benefits, had yet to achieve their potential for improving 
environmental regulation.
    Today's report summarizes discussions with a number of 
stakeholders highlighting issues that in their views have 
either helped or hindered effective implementation of the Clean 
Air Act.
    These discussions made a few things clear. First, it is 
indeed challenging to get consensus. As our report says, 
stakeholders expressed a wide variety of views.
    Second, one of the main sources of contention is the 
appropriate degree of flexibility that should be allowed to 
States and regulated sources in meeting environmental 
requirements.
    Third, one of the factors that is generally cited as 
helpful was the specificity of certain provisions of the Act. 
At first blush, the latter two observations may seem 
contradictory. But that is not necessarily the case.
    At the risk of over-simplifying, the general message seemed 
to be that specific ends or goals are helpful, but at the same 
time, flexible means can help in attaining those goals as long 
as air quality is protected. Thus, one of the challenges facing 
the Congress considering reauthorization of the Clean Air Act 
is determining the appropriate balance between traditional and 
more flexible regulatory approaches.
    We look forward to assisting this committee as it pursues 
these and other issues in the coming months.
    Mr. Chairman, that concludes my prepared remarks. I will be 
glad to respond to any questions that you or others may have.
    Senator Inhofe. Thank you, Mr. Wood.
    According to your testimony, the EPA and Congress have 
tried several different programs or initiatives to provide 
flexibility from clean air requirements over the past few 
years.
    The EPA tried the clean air power initiative. They also 
tried several reinvention types of initiatives like the common 
sense initiatives, Project XL. Congress tried to provide 
flexibility in 1990 by creating the Title V Permit Program and 
they ended up with just as many volumes, except it is all in 
the one volume that we had before.
    A lot of these programs hadn't worked in the past. What is 
your thinking about why the things that we have tried haven't 
worked?
    Mr. Wood. I am sure there is probably a detailed story 
behind each of those initiatives that I won't go into. I think 
in looking over the work that we have done evaluating EPA's 
initiative, particularly the Common Sense Initiative, and its 
efforts at reinvention, there are a few common themes.
    One is an inability to get consensus among all the 
stakeholders as to exactly what needs to be done, what the 
goals should be.
    Our report in 1997 sort of comprehensively looking at EPA's 
efforts to ``reinvent'' regulations cited a number of things 
including what I would characterize as internal cultural 
constraints. EPA is structured in a way that is very media-
specific and they consist of silos, if you will, such that the 
air people are only concerned about air. The water people focus 
mainly on water, that sort of thing.
    Senator Inhofe. Is that more than just the barriers in the 
Clean Air Act?
    Mr. Wood. In the law? Yes. These are things that transcend 
the law, in fact transcend all of the environmental laws, 
although interestingly, the laws themselves are probably one of 
the causes.
    The National Academy of Public Administration, as you may 
know, issued a couple of reports on EPA in the mid-1990's, and 
the statutory framework was one of the things that they thought 
most needed to be changed.
    Senator Inhofe. If it is cultural, it is within the EPA. I 
mean you have a turf battle going on there. Is there some way, 
as we look at reauthorization, that we could change this to 
overcome this?
    Have you looked at the problems and what can be done 
legislatively?
    Mr. Wood. I don't have any specific legislative solution or 
provisions to recommend. If you look at what the National 
Academy did, they basically said there needs to be integration 
across media. In other words, rather than having just a new 
Clean Air Act, maybe there needs to be more organic 
legislation.
    Senator Inhofe. In looking at the implementation status of 
the Clean Air Act, I can't help but notice that the 1990 
amendments placed 361 statutory deadlines for specific actions.
    Has that created any problems for prioritizing work by the 
EPA?
    Mr. Wood. This was one of the factors that EPA officials 
cited to us when we asked about why they had been late in 
meeting some of these statutory deadlines. They cited a number 
of things. One was the sheer workload. One was the complexity 
of issues that were not completely foreseen in 1990. Another 
was various lawsuits that have come up that have in essence 
diverted resources so that the whole job was made even more 
difficult.
    Senator Inhofe. The lawsuits coming up and then consent 
decrees?
    Mr. Wood. Those have an effect. It made what was already 
complex even more so.
    Senator Inhofe. We have been joined by Senators Bennett and 
Voinovich. Did you have any opening comments to make?
    Senator Bennett. No, Mr. Chairman.
    Senator Inhofe. Senator Voinovich, do you?

        OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, 
              U.S. SENATOR FROM THE STATE OF OHIO

    Senator Voinovich. Yes, I do, with your permission, Mr. 
Chairman.
    First of all, I want to commend you for continuing the 
hearings on the clean air reauthorization and I particularly 
commend you and Chairman Smith for holding today's hearing in 
an effort to try and create a multi-pollutant incentive-based 
emission reduction bill.
    I believe such an approach will allow utilities to make 
their necessary emission reductions in an efficient, cost-
effective manner, provide the best benefits to public health 
and the environment and assure electricity reliability.
    I would also like to extend a warm welcome to my friend, 
Jim Rogers, Vice Chairman and CEO of Cinergy in Cincinnati. 
Cinergy is a responsible corporate citizen in the environmental 
arena. I appreciate Cinergy's contributions to Ohio's economy 
and for its civic and philanthropic leadership in southwest 
Ohio. I am glad that you are here today.
    Ohio has realized significant improvements in air quality 
in recent years. I am not going to go into all the details, but 
the fact of the matter is that there have been significant 
improvements in our State and part of it is because we have got 
the cooperation of the private sector.
    Today our State has attained the current ambient air 
standards for ozone and particulate matter, but for one area of 
Cincinnati they qualify, but we haven't got the EPA yet to give 
them the attainment.
    Likewise, NOx emissions have decreased. EPA projected by 
the end of this year power plant emissions will be 4.6 million 
tons, a 2.1 million ton reduction since the Clean Air Act was 
implemented.
    Is that enough? No. But the point is that the nation's air 
is the cleanest it has been in some 20 years. These emission 
reductions have occurred during the most substantial economic 
growth that we have experienced in our country.
    So often we ignore the progress that we have made. However, 
we have come to the point now where there will be a significant 
cost for further reductions. For example, it is estimated that 
the NOx SIP call will cost Ohio utilities alone $1.5 billion in 
initial capital improvements, plus annual operation and 
maintenance costs.
    We need to make sure that the further steps we take to 
reduce utility emissions are based on sound science, are based 
on analysis, cost and benefits, and reasonable alternatives 
that provide flexibility for implementation in a cost-effective 
manner.
    However, one of the things that strikes me about the Clean 
Air Act is the number of requirements that are geared toward 
reducing the same pollutants.
    Bill Tyndall, President of Environmental Services for 
Cinergy testified last Fall before this subcommittee on the 
successes and concerns regarding the Clean Air Act. He 
identified numerous requirements that the utility industry 
faces to reduce NOx emissions such as NOx SIP call, 126 
petitions, the pending 8-hour zone, the PM2.5 NASC 
Standards, New Source Review and regional haze, just to name a 
few.
    He outlined an equal number of requirements to reduce 
sulfur emissions. It seems there ought to be a way for these 
companies to come up with a strategy to address future 
regulations up front, rather than going about these reductions 
in a piecemeal approach of installing one type of control 
technology 1 year and a different type several years down the 
road.
    I want to make it clear that I am not saying that emission 
reductions are bad. While I have some concerns with how the 
Clean Air Act is being implemented, it is a law to protect and 
promote public health and clean air.
    That law needs to be followed. But what is needed is some 
clear guidelines and assurances that the Federal Government 
won't change the rules down the road, and that is what we have 
over and over again.
    Too often, I think, some of what has been going on, Mr. 
Chairman, is in the political arena. Some groups comes along 
and off we go. There is a lot of arbitrariness here. It seems 
to me we ought to know, these are the rules. Here is what you 
have to do. You meet the standards and you can pretty well put 
that in the bank.
    I don't know what your shareholders think, but if I am a 
utility shareholder and I don't know what the future looks 
like, I don't think that is good for your bottom line or for 
your stock either.
    So we need to take a broad look at emission reductions and 
then provide flexibility for the industry to meet these goals. 
It is important for industry and the States to know the rules 
of the game.
    This will allow for better planning and implementation of 
the Clean Air Act requirements and allow those requirements to 
be implemented in an efficient, cost-effective way to provide 
the best benefit to the public health and environment.
    I see an incentive-based approach as a positive way to 
ensure that air quality standards are met, but in a more 
efficient and cost-effective way, Mr. Chairman.
    I think that one of the greatest things that we could do 
for this country would be to sit down with business and the 
environmental groups and come up with a 10-year plan and say, 
here is what it looks like, here is what we need to do, and 
then go for it.
    Thank you.
    Senator Inhofe. I appreciate, Senator Voinovich, the 
expertise that you have brought in. I think most people in this 
room realize that when you were Governor of Ohio, as the 
chairman of, was it the Air Committee--one of the committees of 
the National Governors' Conference. So we appreciate that.
    I announced before you came in that our next hearing will 
address the effect of these on various political subdivisions, 
State and local governments. I know that will be of interest to 
you.
    My time is up, Mr. Wood. I would like to ask you, if you 
had not done this, the idea of the consent decrees is something 
that has been bothering me throughout as almost a behavioral 
pattern of the EPA. Many times these lawsuits are encouraged, 
in my opinion, by the EPA. I would like to have you list these 
various actions and the effect that you believe that they have 
had whether they are resolved by consent decree or not. If you 
haven't done that, do you think that will be worthwhile?
    Mr. Wood. We will be glad to respond to a question if you 
would like to submit it afterwards. We have not done that.
    Senator Inhofe. All right. Thank you, Mr. Wood.
    [The information referred to follows:]

    According to officials in EPA's Office of General Counsel 
and Office of Air Quality Planning and Standards, EPA does not 
systematically track or maintain records of lawsuits 
challenging the Agency's plans for complying with Clean Air Act 
requirements. Agency officials stated that, while lawsuits have 
been filed for most of the rules and regulations issued 
pursuant to the Clean Air Act, the court-ordered deadlines 
generally have been consistent with the Agency's planned 
timeframes for promulgating such rules and regulations. The 
officials estimated that several hundred staff-hours would be 
required to (1) identify and (2) estimate the potential effect 
on the promulgation schedules of rules and regulations that 
have been the subject of lawsuits.

    Senator Inhofe. Senator Smith?
    Senator Smith. Thank you, Mr. Chairman.
    Mr. Wood, when Senator Voinovich finished his remarks, he 
concluded by saying that we would need to try to come to an 
acceptable level.
    I know the contaminants themselves are not your specific 
area, but how would you suggest to us as a committee that we 
set about reaching what would be an acceptable level so we can 
work with the trading and so forth that we have to do within 
the utilities and plants to achieve that. What methodology 
would you suggest we use?
    Mr. Wood. I don't have a specific methodology to suggest. I 
would say, based on our work, there is a strong sense that 
clear goals need to be articulated.
    Certainly, that was behind the success of Titles IV and VI, 
the Acid Rain and Stratospheric Ozone, where the statute itself 
had a clear goal and there was apparent consensus among all the 
stakeholders that that was what was needed.
    However, it is important to understand that in trying to 
transfer that approach to other pollutants, it won't always 
work because the characteristics of the pollutants aren't the 
same.
    We have done some work looking at generic alternatives, for 
example, cap and trade systems, because that is the very 
successful approach that was taken with acid rain.
    But in that case, the pollutants had characteristics that 
lent themselves to that approach. They were nationally ambient. 
They were well-characterized. It was known how they traveled in 
the atmosphere and how far. They were in a sense fungible--a 
reduction anywhere was helpful everywhere.
    That is simply not the case with all pollutants. Some are 
much more localized around their source. If a meaningful 
trading area can't be articulated, then a more flexible 
approach simply might not work, even if there was an agreed 
upon goal.
    Senator Smith. Mr. Chairman, I don't have any further 
questions, but I do want to compliment the witness for his 
testimony. Your written testimony is very comprehensive in 
terms of the excessive regulations and in so many cases the 
industry doesn't know what to comply with.
    You do offer some suggestions in there on how to deal with 
these requirements. It will be very helpful, I think, in terms 
of what we have to do to come up with legislation.
    We appreciate it.
    Senator Inhofe. Thank you.
    Senator Lieberman?
    Senator Lieberman. Thank you, Mr. Chairman.
    Mr. Wood, thanks for your very comprehensive report. In it 
you note that EPA has missed several legislative deadlines. Of 
course, we are disappointed that that has occurred.
    When we passed the Clean Air Act Amendments of 1990 
Congress did design the law to maximize accountability, to make 
sure that the citizens could hold EPA accountable for enacting 
the rules, and in fact that EPA could hold States accountable 
for doing their part.
    It seems to me that the process is working, especially 
since EPA has issued these rules, although unfortunately, with 
a delay.
    I want to know if you believe that it is fair to count all 
the requirements as if they have the same environmental 
importance.
    Mr. Wood. No. As a matter of fact, I think our written 
report and testimony as well make clear that they don't all 
have the same effect.
    Senator Lieberman. I appreciate that. To what extent would 
you say the delay, if you can make this judgment, is 
accountable to internal EPA bureaucracy and to what extent is 
it the result of litigation, for instance?
    Mr. Wood. I really don't have any figures. I wouldn't want 
to speculate. Certainly the litigation was one of several 
factors that EPA has cited as reasons behind the delays.
    Senator Lieberman. In other words the litigants were 
challenging one or another regulation and therefore it took 
time.
    I was interested in the part of your testimony that 
mentions the experience EPA had working with the chemical 
industry to address multiple requirements through the 
development of the Consolidated Air Rules. Based on your 
experience looking at those Consolidated Air Rules, how many 
companies do you think will take advantage of a new 
consolidated rule as opposed to sticking with the existing 
regulatory scheme?
    Mr. Wood. It isn't really clear at this time how many will 
do that. It will depend. Each company has to make a judgment. 
For some it will mean meeting more stringent requirements. We 
actually asked this of EPA, if they had an estimate and at this 
time they do not.
    Senator Lieberman. Do you have a sense of how long EPA 
worked with stakeholders to resolve issues related to that 
particular regulation?
    Mr. Wood. It was in the range of 3 to 4 years.
    Senator Lieberman. Is that a model, if you will, or does 
the complexity in creating that rule illustrate how long multi-
pollutant regulations involving stakeholders from complex 
facilities might take to develop as we think about multi-
pollutant systems here.
    Mr. Wood. I think any change in the status quo is going to 
take some time, whether it will all be that complicated, I am 
not sure.
    Senator Lieberman. This is a tough question and if you want 
to offer a first response now and think about and submit later 
testimony in writing I would be happy to receive it.
    The question is whether in your experience with the 
Consolidated Air Rules with the chemical industry, based on 
that, you would have any specific guidance to us as we go 
forward now considering multi-pollutant action regarding 
utilities.
    Mr. Wood. I guess the best guidance I would offer is that 
the stakeholders need to take a systematic approach--to first 
agree on what the goals are. That in itself is a very 
contentious subject.
    After that comes some sort of means for attaining the goal. 
That opens up its own series of contentious subjects. But, I 
guess I would recommend a sort of standardized systematic 
approach in each situation.
    Senator Lieberman. That in some ways is maybe an obvious 
but an important statement that you made about the agreement on 
goals.
    There was reference earlier to the Clean Air Power 
Initiative discussions in which EPA has been working with the 
industry discussing how to integrate future requirements.
    I know that some of the utility stakeholders have said that 
it would be premature to discuss strategies for achieving 
reductions that EPA has not already proposed or certainly not 
finalized.
    Based on that exchange and your own knowledge of this 
sector--we will hear, of course, from people from the industry 
in the next panel, but how would you evaluate the willingness 
of the industry to commit to reducing multiple air pollutants 
through an integrated approach?
    Mr. Wood. I don't know if I could generalize across the 
entire industry. What EPA told us--and also we met with 
representatives of the utility industry--was that there was an 
inability to come to an agreement on the goals.
    What EPA specifically told us was that there is not always 
agreement among the stakeholders themselves. In other words, 
utilities don't necessarily speak with a united voice on all 
issues.
    Senator Lieberman. I know that Senator Smith has initiated 
this process, but the first hurdle may be the highest hurdle, 
but a critical one and that is to see if we can have some base 
line agreement on what our goals are in this process.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Lieberman.
    Senator Voinovich?
    Senator Voinovich. I would just like to compliment you on 
your testimony. I would bring up something I have raised before 
and you make it clear that EPA has reduced grant funding to 
State and local governments to help them implement the Clean 
Air Act Amendments by 25 percent over the last several years to 
$120 million annually.
    That is a lot of money which is needed by State and local 
governments to fulfill their responsibilities. At the same 
time, in the 2001 budget of the EPA they are asking for $85 
million for a new initiative, the Clean Air Partnership Fund, 
instead of building on previous programs and giving it the 
priority.
    It seems to me in terms of their priorities they ought to 
reorder them, particularly during this last year of the 
administration and try to finish up and do what they already 
have on the books instead of going on into new areas that quite 
frankly, they may not be around to implement.
    Senator Inhofe. Thank you, Senator Voinovich,
    Senator Bennett?
    Senator Bennett. Mr. Wood, I am not sure whether before I 
got here everybody got a chance to see the chart that is in 
Figure 1? Is it put up somewhere or do you have it?
    Mr. Wood. We don't have it outside the report.
    Senator Bennett. I call attention to that because I think 
it is the missing fact in this whole debate. If you listen to 
the rhetoric about the Clean Air Act and particularly the 
rhetoric that occurs on the Floor, you would believe that 
Americans are choking in pollution and that it is getting 
considerably worse.
    If you read a book that has been in the news somewhat, you 
would believe that the absolution of the internal combustion 
engine is the most significant, indeed the only hope of the 
future.
    Here you have told us the truth, which is that from 1970 to 
1997 vehicle miles traveled in the United States have increased 
127 percent. The U.S. gross domestic product has increased 114 
percent and the U.S. population has increased 31 percent.
    All of these cars and all of this economic activity and all 
of these people churning out all of these pollutants in that 
period have seen aggregate emissions decrease by 31 percent.
    Mr. Wood. That is correct.
    Senator Bennett. We seem to be unable to take ``yes'' for 
an answer. The congress, the politicians seem to be unable to 
recognize that things are working.
    Instead, we tell ourselves that if we continue to have 
lawnmowers or, where I come from, snow-blowing machines, we are 
going to destroy the atmosphere all around us and we are one 
step away from disaster.
    If we don't abolish the internal combustion engine we will 
all die the day after tomorrow. If we don't agree to the Kyoto 
Accords, somehow civilization is going to come to a close.
    The evidence you have here makes it very clear that we as a 
society are doing pretty well in getting pollutants under 
control.
    My question to you is, this line that you show in the chart 
coming continually down ends in 1997. Do you have any sense 
that in the 3 years from 1997 to 2000 it has continued to come 
down? Has it bottomed out or is it going up?
    Mr. Wood. I believe it has continued down. The latest 
trends report that EPA has produced, I think, goes to 1998, and 
it shows a continued downward trend. I would note that that is 
the aggregate emissions of, I believe, the six ``criteria'' or 
major pollutants.
    Four of them definitely have gone down. Two have pretty 
much stayed the same. They have not declined very much. That is 
nitrous oxides and ground level ozone.
    So in the aggregate, yes, they have gone down, but not each 
and every one has gone down by the same degree.
    Senator Bennett. Well, I am not suggesting by any means 
that we don't still have some more to do. But I think in all of 
this conversation about how disastrous America's air and water 
may be, we should keep this chart in front of us.
    I thank you for making it Figure No. 1, and I hope 
everybody will recognize that the cleanest air is in the United 
States.
    I have a constituent who travels the world for a living, is 
in a whole variety of interesting and exotic places, and he has 
said to me the dirtiest air he has ever experience in his 
entire life is in Kathmandu. That sounds very exotic, to go 
live in Kathmandu.
    But this is a poor society that does not have the resources 
to put into an effort to clean up the air, compared to the 
United States which is a rich society and which has made the 
investment and which is producing the results.
    I think all of us, as we have hearings on the Clean Air Act 
and clean air discussion must recognize that we are, in fact, 
doing pretty well, and we are not on the verge of poisoning the 
entire planet because of the productivity of the American 
economy.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Bennett.
    Senator Lautenberg, I don't know whether you had an opening 
statement or whether you would just like to question the 
witness here.

        OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, 
           U.S. SENATOR FROM THE STATE OF NEW JERSEY

    Senator Lautenberg. I have both, but in fairness, having 
come so late, Mr. Chairman, I will ask unanimous consent that 
my full opening statement be included in the record.
    Senator Inhofe. Without objection.
    [The prepared statement of Senator Lautenberg follows:]
 Statement of Hon. Frank R. Lautenberg, U.S. Senator from the State of 
                               New Jersey
    Mr. Chairman, thank you for holding a hearing on this important 
topic.
    Mr. Chairman, reliable power underpins a healthy economy, but it 
can also be a major source of environmental pollution. Power plants are 
the largest industrial source of nitrogen oxides, sulfur dioxide, 
mercury, and carbon dioxide. These pollutants cause a wide range of 
severe public health and environmental problems, including global 
climate change, premature mortality, developmental and neurological 
damage, increased asthma, and loss of aquatic and forest ecosystems.
    We do have programs for controlling the air emissions of power 
plants, but the programs are fragmented and incomplete. They are, at 
the same time, less protective of public health and more costly than 
necessary. I believe public health, the environment, and industry could 
all benefit from a prudent reform of these air pollution programs. I 
applaud Chairman Smith for his leadership in such reform. I would urge 
him to use, as his primary measure of success, the extent to which his 
reforms demonstrably improve public health and the environment.
    I must, in particular, salute Chairman Smith for including carbon 
dioxide among the pollutants addressed in his reform efforts. Global 
climate change is probably the most daunting environmental challenge 
facing us today, and carbon dioxide, of course, is the principal 
greenhouse gas. Senator Smith's efforts are among the boldest we've 
seen undertaken to meet the global warming challenge.
    Finally, I am proud today to introduce to the subcommittee Mr. 
Frank Cassidy, President and Chief Operating Officer of PSE&G Power 
LLC. PSE&G Power is the power generation affiliate of Public Service 
Electric and Gas Company, New Jersey's largest electric and gas utility 
companies and one of the largest combined utilities in the nation. I'm 
pleased to note that Mr. Cassidy is a native son of New Jersey. He 
holds an electrical engineering degree from New Jersey Institute of 
Technology and an MBA from Rutgers University.
    Mr. Cassidy has more than 30 years of experience with PSE&G and its 
affiliated companies. Prior to being named president of PSE&G Power, he 
served as President of PSE&G Energy Technologies, which is a retail 
energy marketer. He also served PSE&G as Senior Vice President for 
Fossil Generation and Vice President for Transmission. He knows how to 
make power, move it, and sell it. I consider PSE&G one of the 
environmental leaders of the industry, and I'm proud to have the 
company represented here today by Mr. Cassidy.
    Mr. Chairman, and members of the subcommittee, I look forward to 
his testimony and the testimony of the other witnesses.
    Senator Lautenberg. I would ask to have a chance when the 
second panel comes around to say a few words there. But I will 
try to be brief in each case.
    I do have a couple of questions, Mr. Chairman.
    In January of this year I was at the South Pole. The ice 
melt is really worrisome. The water is pouring down those 
glaciers and they are shrinking at an incredible pace.
    Now that is not a figment of my imagination. Nobody is 
choking down there. But they packed fresh air into little test 
tubes so people could see what it was like. To suggest that 
everything is A-OK is just missing the boat.
    I am sorry my colleague from Utah didn't have a chance to 
go along there. I think he would have seen some interesting 
things.
    The highest skin cancer per capita in the world right now 
is Australia. When kids go to the beach there, they wear hats. 
They wear full bathing suits. It is demanded by regulation or 
what have you, because parents don't want their kids to get 
skin cancer.
    They are not willing to say ``a hole in the ozone, forget 
it.'' There is evidence all over us. The fact that things have 
come down, and I know in your report here, ``Although a change 
in the economy and other factors affect the emission trends 
according to the EPA, the emissions of air pollutants would be 
much higher without the Clean Air Act.''
    Is that your statement or is that----
    Mr. Wood. That is EPA's statement.
    Senator Lautenberg. Do you believe that?
    Mr. Wood. While we don't have any empirical evidence, I 
think just about all stakeholders agree that the Act has had an 
effect on making the air cleaner.
    Senator Lautenberg. So do you have in any place here the 
number of asthmatic sufferers in the country or respiratory 
disease sufferers?
    Mr. Wood. No, we don't.
    Senator Lautenberg. So while we may not have had pollution 
grow as rapidly as the economy or car miles or some other 
factors, there is enormous attention paid to respiratory 
disease.
    Unfortunately, my sister died from an asthma attack when 
she was at a school board meeting. There are lots and lots of 
people around this country who don't breath easier because of 
the strain on their system.
    So no, everybody isn't choking to death from pollution, but 
there is a significant awareness among families, lots and lots 
of children, I don't have the statistics, but I read that 
material fairly rigorously about new products coming out.
    There is one announced today. I saw it on TV this morning 
about a new asthma product that may reduce the consequences of 
asthma.
    I cross my fingers and pray that it does because I have a 
grandson who is affected by it. It is a very unpleasant 
condition. My daughter says he is wheezing and they have to run 
to the hospital and so forth.
    So while we are not perfect by a long shot, we have an 
awfully big obligation. If all of the Senators could visit the 
South Pole, it is an arduous trip, but it is a very worthwhile 
trip. Because here you see this pristine ice planet being 
attacked without the noise of explosions or car motors or 
things of that nature, just whittling away.
    Seventy percent of the earth's fresh water is stored in the 
South Pole, the ice pack. Seventy percent. As that declines and 
gets mixed with the saline water, saline-affected water, we run 
serious risks.
    So I don't think people are crying wolf. I agree that the 
progress we have made is really remarkable. There are countries 
all across this globe, we have all been through when we travel. 
We see how polluted these places are. But that doesn't excuse 
us in any way from doing our share.
    I was at the Air Summit in 1992 with several Senators and 
now Vice President Gore. I asked the Interior Minister from one 
of the Latin American countries why they couldn't stop burning 
the Amazon.
    He said to me, ``One farmer burning an acre of the Amazon 
can sustain his family for a lifetime. One of your chemical 
workers in a week does more damage to the environment than that 
single farmer. If you want our farmers to stop burning those 
forests, then the United States should pay for it. It is pretty 
simple. Pay for it.''
    So it is our environment, our global environment. We have 
problems that should only induce us to work harder to 
accomplish the solutions.
    Thank you, Mr. Chairman, for indulging me these questions.
    Senator Inhofe. Thank you, Senator Lautenberg.
    If there are no further questions we will go ahead and have 
the next panel come up. Thank you for giving us your time, Mr. 
Wood.
    Mr. Wood. Thank you.
    Senator Inhofe. Now I ask that our second panel come to the 
witness table. The panel includes Mr. James Rogers, Vice 
Chairman, President, and CEO of Cinergy Corporation. Mr. 
Rogers, I want to tell you we appreciate very much your having 
Bill Tyndall here. He has testified several times and has been 
a great help to us.
    Mr. Charles McCrary, President of the Southern Company 
Generation; Mr. Frank Cassidy, President and COO of PSEG Power; 
Mr. Armond Cohen, Executive Director of the Clean Air Task 
Force; and Mr. Wayne Brunetti, chairman and CEO, New Century 
Energies.
    I believe, Senator Lautenberg, you would like to introduce 
your constituent from New Jersey.
    Senator Lautenberg. Mr. Frank Cassidy is the President and 
Chief Operating Office of our largest power supplier, one of 
the largest in the country. He has a lot of experience.
    Besides having the honor of being a native son of New 
Jersey, he has had many accomplishments, an engineering degree 
from the New Jersey Institute of Technology, a prestigious 
school of science and technology.
    He has been with PSEG for more than 30 years. I think it is 
quite unusual that someone working for a giant utility like 
PSEG is willing to come here and encourage us to be wary of our 
pollution and to try and do things to reduce it.
    I welcome you here, Mr. Cassidy. I look forward to hearing 
your testimony. Thank you very much.
    Senator Inhofe. Thank you, Senator Lautenberg.
    Before we start with the witnesses, I would recognize 
Senator Smith.
    Senator Smith. Thank you, Mr. Chairman. One group that is 
not represented here today is the State and local air 
officials. We do have a letter from the association that 
represents them.
    I would ask unanimous consent that it be placed in the 
record immediately after the testimony from this panel.
    Senator Inhofe. Without objection, it is so ordered.
    I would comment that the next subcommittee meeting we have 
late in the summer, they will be a part of that one.
    We will start with Mr. Rogers.

STATEMENT OF JAMES E. ROGERS, VICE CHAIRMAN, PRESIDENT AND CEO, 
             CINERGY CORPORATION, CINCINNATI, OHIO

    Senator Inhofe. We will start with Mr. Rogers.
    I would like to have you all adhere to the 5-minute rule, 
since there are five of you here, if you don't mind.
    Your entire statements will be made a part of the record. 
Mr. Rogers.
    Mr. Rogers. Thank you very much. I am President and CEO of 
Cinergy Corporation in Cincinnati. We are a diversified energy 
company with most of its U.S. operations located in Ohio, 
Indiana, and Kentucky.
    We own or operate over 16,500 megawatts of generation 
around the world. In the Midwest we have over 12,000 megawatts. 
We burn about 28 to 30 million tons of coal a year which makes 
us one of the largest consumers of coal in the country and 
almost 98 percent plus of our electricity is generated by 
burning coal.
    There is no power producer in this country more dependent 
on coal to produce electricity than our company. Consequently, 
we are pleased that both this subcommittee and the full 
committee are exploring the possibility of pursuing a 
comprehensive, multi-pollutant emission reduction program for 
coal-fired generation in this country.
    So let me start out by thanking both subcommittee Chairman 
Inhofe and full committee Chairman Smith for their leadership 
and interest in a comprehensive multi-pollutant approach, as 
well as their staff's hard work in terms of pushing us to where 
we are today and doing all the behind-the-scenes work to get us 
to where we are.
    I am going to make a couple of quick points. The first 
point I want to make is that we need a comprehensive approach 
and we need it as soon as it can get done.
    Whether you are an old economy company or a new economy 
company, the reality is we are living in dog years, not human 
years. As you all know, there are seven dog years to every 
human year. As we move forward we need to move on that kind of 
pace.
    I would urge you, as you contemplate moving forward with 
this, that you live in dog years as we have to in the business 
world.
    The other point I would make is, if you take a look at the 
regulatory system that we have today, while EPA's current 
regulatory system for the power sector, while it generates a 
multitude of regulations and requirements, it is failing.
    It is certainly failing to provide a coherent environment 
to conduct the business of generating and delivering 
electricity reliably and cheaply.
    But it is also failing to make the progress the Nation 
needs and deserves toward clean air goals. I am convinced that 
Congress must therefore replace the existing piecemeal 
regulatory approach with a simple program based on a single set 
of emission reduction targets for industry.
    To give the committee some idea of the avalanche of Federal 
regulations that my company faces, I have attached two 
exhibits. Here EEI prepared this for us.
    I appreciated Senator Voinovich's comments with respect to 
the earlier hearing this year. If you really understood this 
you would see how difficult it is to rationally plan to provide 
electricity in the future and to meet these sometimes 
conflicting requirements.
    Please don't ask me to explain each of those. They are very 
complex and beyond my capability. But I want to give you one 
real life example.
    In the decades of the 1990's our company spent $640 million 
in reducing emissions from our facilities. In the next 3 years 
we are going to spend $700 million to comply with the NOx SIP 
call.
    But here is an important reality. We spend that money not 
knowing what the future holds. We spend that money on plants 
that are 25 and 30 years old, not knowing whether there will be 
future SO2s, whether there will be future mercury, 
whether there will be further CO2 requirements.
    But think about how constrained our position is. For 
instance, we have several choices. We can spend the money and 
wait, or, if we knew about future regulations that would change 
the economics, we may retire the plant. Or, what we may do if 
we knew the economics of future regulations, we may retire it 
and burn natural gas and not coal.
    But the point of the matter is, we cannot make that kind of 
decision today because we do not know what the future 
regulations will be for our company.
    With Federal legislation we can provide certain planning 
horizons, long lead times, market mechanisms and reduced 
compliance costs for our consumers while locking in progress on 
key environmental issues.
    Now, let me make a point, given the concern of this country 
today about reliability, and this is to me a very important 
point: We will be better able to maintain the reliability of 
our system and our service to our customers, who depend on 
electricity with E-commerce and the Internet more than ever 
before in the history of this country, we can do a better job 
of maintaining reliability if we have certainty with respect 
our environmental requirements over the next 10 or 15 years.
    In my judgment, this is a win for our consumers, it is a 
win for the environment. It is a win for the industry. To me it 
explains why there is growing interest in a comprehensive 
approach.
    In my testimony I go into great detail about what 
comprehensive legislation should look like and how we ought to 
do that.
    But I would like to conclude with a challenge. I want to 
underscore that we realize that this comprehensive approach to 
looking at power plant emissions reductions will be a bit hard 
for some companies to swallow. But it won't be any more 
difficult than it will be for our company.
    It is now time to take this concept to the next level. We 
urge the committee to avoid polarizing rhetoric, and it is so 
easy to do in this area, to work across Party lines, as I know 
you will, and to work with all stakeholders to make this a 
reality.
    It will not be an easy task, but I believe it is a 
challenge that you must undertake. The future reliability of 
the nation's energy supply depends on it, and so does the 
breathing public.
    Mr. Chairman, we stand ready to roll up our sleeves and get 
to work on this task. We are prepared to work in dog years.
    Senator Inhofe. Thank you, Mr. Rogers.
    Without objection, we will instruct the staff to have your 
chart as a part of the record here.
    [The information referred to follows:]
    
    
    Senator Inhofe. Mr. McCrary?

   STATEMENT OF CHARLES McCRARY, PRESIDENT, SOUTHERN COMPANY 
                GENERATION, BIRMINGHAM, ALABAMA

    Mr. McCrary. Mr. Chairman and members of the subcommittee, 
it is a pleasure for me to be here today. I appreciate the 
opportunity.
    My name is Charles McCrary and I am President of Southern 
Company Generation. Southern Company is the largest generator 
for electricity in the United States. We operate some 30,000 
megawatts of fossil fuel generation. Seventy percent of that 
generation is fueled by coal. As you well know, coal is the 
most abundant domestic supply of energy for generating 
electricity, supplying 55 percent of the nation's electricity.
    There are currently 25 Federal programs to regulate air 
emissions from electric generating plants. The programs have 
resulted in significant reductions in emissions from plants 
over the last decade.
    These reductions have occurred at the same time that the 
generation of electricity has increased, as well as the use of 
coal.
    In the Southern Company alone, while our generation has 
increased 49 percent, between 1990 and 2010 our emissions of 
sulfur dioxide as well as nitrogen oxide, have decreased by 42 
percent during that same time period. That is a good record of 
performance, but there are still over a dozen proposed or 
pending actions that could require more reductions.
    In spite of these challenges that these issues bring, I 
don't think that they are the result of any fundamental 
problems with the Clean Air Act.
    I think Congress did a good job with the Clean Air Act. We 
think the foundation of the act is sound. Most of the problems 
associated with the regulatory agenda for electric power 
generation, we believe, stem from EPA's failure to follow 
proper procedures and to appropriately apply scientific 
information. This view has been upheld by courts in key cases.
    You have requested our view on incentives for electric 
utilities to reduce emissions further. We certainly think 
incentives for voluntary action and market-based systems are 
always better than a command and control regulatory program.
    There are several examples of incentive programs and I 
would like to discuss a couple of them today. One is the 
comprehensive approach where many of the pending proposed 
actions like I mentioned earlier can be combined into one 
program of emission reductions.
    The positives for this approach include potential cost 
savings as compared to a pollutant by pollutant program and 
perhaps more efficiency. Some have also seen this approach as 
giving some regulatory certainty, which is good.
    I do not know that this is a good approach or a bad 
approach. What I do know is that there are certain cautions 
that we must associate with a comprehensive approach.
    We must assure that the approach codifies requirements that 
are justified on scientific and economic grounds. We must be 
sure we understand the meaning of certainty, particularly in 
light of practical abilities associated with health, standards 
and citizen suits.
    Another type of incentive might be the adoption of 
financial mechanisms such as investment tax credits, production 
tax credits, and accelerated depreciation.
    Last, let me mention the need to enhance programs to 
facilitate the development and installation of advanced 
technologies.
    At the Southern Company, we believe that development and 
commercialization of advanced technology is the key to 
improving environmental performance of electric generation.
    We have been leaders in the Department of Energy's clean 
coal demonstration program and currently operate the Department 
of Energy's Power System Development Facility in Wilsonville, 
Alabama.
    No matter which of the various alternatives are considered 
for improving the means of achieving clean air, we think 
certain principles should apply. One, any program for control 
should be based on sound, peer reviewed science as well as an 
accurate assessment of the advantages that the environment will 
experience.
    Two, targets and timetables for emission controls should 
reflect environmental needs and priorities and not necessarily 
rely on a ``one size fits all'' program.
    Three, the air quality control program should consistently 
utilize unencumbered market-based trading systems. The sulfur 
dioxide control program under the Acid Rain Title of the 1990 
amendments has been very successful.
    Mr. Chairman and members of the subcommittee, I do 
appreciate you letting me express my views. There are many 
challenges ahead of us and the Southern Company is committed to 
playing a constructive role during your deliberations on 
reauthorization.
    I would be glad to answer any questions that you or the 
subcommittee might have.
    Senator Inhofe. Mr. Cassidy?

STATEMENT OF FRANK CASSIDY, PRESIDENT, PSEG POWER, LLC, NEWARK, 
                           NEW JERSEY

    Mr. Cassidy. Mr. Chairman and members of the subcommittee, 
Senators, I am pleased and honored to appear before you this 
morning to represent my company, PSEG, and our coalition, the 
Clean Energy Group. On behalf of both, I thank you for taking 
the time to join the dialog among interested representatives of 
government, our industry, and the environmental community.
    Our industry is in the process of fundamental change. The 
Clean Energy Group supports and embraces the transformation of 
the electric power industry into a competitive market place.
    We share a common concern, however, that the economic 
benefits of fair and robust competitive energy marketplace and 
the social and public health benefits of improved air quality 
will not be achieved unless the relationship between national 
energy policy and environmental policy is recognized and 
rationalized.
    For this reason, the Clean Energy Group respectfully 
disagrees with the chairman. We believe very strongly that 
restructuring of the electric industry must be coordinated with 
appropriate environmental standards.
    While the Clean Energy Group has supported EPA's regulatory 
initiatives to reduce emission of pollutants traditionally 
associated with our industry, nitrogen oxide and sulfur 
dioxide, we also share concerns that compliance delays and 
litigation spurred by these initiatives during a period of such 
unprecedented structural change in the industry has contributed 
to a climate of business uncertainty that is becoming 
increasingly more difficult to manage.
    The strong probability that environmental policymakers will 
in the near future begin to regulate mercury emissions and that 
requirements to reduce carbon dioxide emissions are also on the 
horizon increases concerns that a pollutant-by-pollutant 
regulatory strategy will result in a continued cycle of 
political agitation, litigation and delay.
    The Clean Energy Group believes there is a common sense 
policy solution, an integrated air quality strategy to control 
and reduce emissions of nitrogen oxide, sulfur dioxide, mercury 
and carbon dioxide. Our proposal calls for mandatory nationwide 
caps of these emissions, established dates certain for 
producing the necessary emissions reductions, and 
implementation through emissions banking and trading, credit 
for early reductions and streamlining of the EPA's New Source 
Review process to provide industry with clear and unambiguous 
compliance guidelines.
    We agree with Senator Smith that such guidelines are 
necessary. This approach will allow and encourage companies to 
plan and coordinate emissions control strategies on a 
comprehensive, multi-pollutant basis and reduce the potential 
for stranded investment in pollution control technologies.
    It will provide a high degree of certainty for compliance 
with EPA's New Source Review requirement. It will deliver 
timely and necessary emissions reductions to help attain 
national clean air objectives.
    It will foster a fair competitive energy market and it will 
encourage investment in new electric generation capacity that 
will reduce emissions and enhance electric system reliability.
    I would like to summarize briefly the emissions caps and 
compliance schedules included in the Clean Energy Group 
proposal. Details are included in a draft legislative proposal 
attached to my written testimony.
    For nitrogen oxide, a two-phase program that would cap 
emissions at 4.2 million tons by 2003, a target consistent with 
the EPA NOx SIP Call Rule for 19 Eastern States.
    And a further 50 percent reduction to 2.1 million tons by 
2008. A 4.5 million ton cap on sulfur dioxide emissions by 2008 
which represents a 50 percent reduction below Phase 2 
requirements of the Acid Rain Program.
    This goal is consistent with meeting proposed national air 
quality standards for fine particulates.
    We anticipate EPA is likely to begin mercury regulation 
later this year. We are calling for a two-phase program which 
would require a 50 percent reduction and a 26-ton emissions cap 
by 2008 and, if necessary, further reductions to cut emissions 
70 to 90 percent below current levels by 2012.
    For carbon dioxide we are proposing an initial control 
strategy that would stabilize emissions at 1990 levels 
resulting in a 1.9 billion ton emissions cap also by 2008.
    Further reductions in the 2012 timeframe would be 
implemented in accord with national Climate Change policy as it 
evolves.
    Mr. Chairman and members of the subcommittee, the Clean 
Energy Group believes that an integrated, coordinated approach 
will provide the direction and regulatory certainty that will 
facilitate business planning, make investments decisions more 
rational, and ultimately deliver to our nation necessary 
improvements in air quality at costs that are reasonable and 
fairly allocated.
    Again, I am honored by the opportunity to make this 
statement. I will be happy to respond to your questions.
    Senator Inhofe. Thank you.
    Mr. Cohen?

 STATEMENT OF ARMOND COHEN, EXECUTIVE DIRECTOR, CLEAN AIR TASK 
                  FORCE, BOSTON, MASSACHUSETTS

    Mr. Cohen. Thank you very much, Mr. Chairman. Thank you for 
the opportunity to speak this morning.
    I am speaking not just of behalf of the Clean Air Task 
Force, but on behalf of the national campaign called ``Clear 
the Air,'' the National Resources Defense Council, the Izaak 
Walton League of America and nine citizens groups representing 
hundreds of thousands of people throughout the United States, 
in this case particularly concentrated in the Midwest and 
Southern part of the United States.
    I have submitted an extensive written statement and a 
couple of exhibits extracted from that statement. What I would 
like to do in my 5 minutes is just highlight a few key points, 
maybe respond to some of the things that have been said this 
morning. First, I do want to acknowledge that Senator Bennett 
said that there have been some substantial air quality 
improvements around the nation. That used to be celebrated and 
acknowledged.
    I will point out that in the power sector where those 
reductions have occurred, for example, in nitrogen oxides and 
sulfur dioxides, they have come as a result of regulation by 
the Congress, often bitterly opposed by industry, but 
ultimately put through.
    In the case of mercury and other toxic pollutants and 
CO2, there are projected substantial increases from 
the power sector over the next 10 to 15 years if no policy is 
put in place to address those measures. So I think the glass is 
certainly half full.
    We have a long way to go. Just taking the example of 
SO2, these are exhibits that appear as attachments 
to my testimony. As an example of one pollutant, we have one 
pollutant still driving some very significant problems 
throughout the United States.
    As you can see in the upper left there is a plot of 
basically the power plant SO2 concentrations. Each 
of those dots represents a power plant and its relative sulfur 
dioxide emissions.
    In the lower left what you see is a map of the ultra-fine 
soot, deadly soot particles, so-called PM-2.5 and the 
distribution, as you get to the red colors you see more dense 
concentrations.
    Interestingly, a lot of the heat in this debate has been 
about the Midwest or the Southeast allegedly polluting the 
Northeast. As you can see, at least with respect to sulfur, the 
bulk of the impacts from PM-2.5, which are at least half driven 
by power plant sulfur emissions, are concentrated in the 
heartland in the South.
    Likewise, as you turn to the lower right you see a 
continued persistent problem with acid deposition, again 
concentrated not just in the Northeast where a lot of the 
traditional publicity has been, but throughout the Southeast 
where forests, rivers, lakes, streams are in danger of 
acidification and need significant further sulfur reductions 
for recovery.
    In the upper right you see the visual impact in the 
Shenandoah National Park of sulfate from power plants, at least 
in part. About half of the haze-driven problems in the eastern 
parks come from power plant sulfate.
    On the left you see what it looks like on a pretty good day 
when the sulfate isn't drifting in from power plants. That 
represents maybe 10 percent of the days we get in the 
Shenandoah.
    The 10 percent worse days on the right, those are days when 
power plant sulfate is driving reductions in visibility of up 
to 80 percent from natural background levels.
    These are serious problems. Yes, progress has been made, 
but these are not acceptable situations. Just as one example, 
PM-2.5, just to go to Senator Smith's home State, we reference 
a study that was released 2 weeks ago by the Harvard School of 
Public Health.
    Just two coal-fired power plants in Massachusetts, and the 
Harvard School of Public Health study estimates that those two 
power plants alone result in about 160 premature deaths 
annually in Massachusetts and in New Hampshire, I am sure 
predominately due to the deposition, sulfur deposition and PM-
2.5.
    So we do have significant challenges ahead of us. The power 
sector does contribute a significant share of these problems. 
We are not saying that there hasn't been progress, but I think 
as the other panelists have agreed, there needs to be more.
    As far as policy directions, I think the first thing we 
have to do is look to where the States are going. New York, 
Massachusetts, Texas, Connecticut have all taken steps or have 
moved toward significant steps to control power plan air 
pollution.
    Governor Pataki supported a 50 percent cut in sulfur and 
NOx, for example and is seriously considering mercury and 
CO2 as part of the package.
    The States are sending you a signal that the status quo is 
not good enough. The air is not clean enough. Governor Bush 
signed into law during the last legislative session in Texas a 
bill that would cut some power plants emissions significantly. 
I think that indicates where public opinion is going.
    I have also attached several news articles from Ohio, other 
Southern and Midwestern States. You will see a lot of opinion 
leaders, editorial boards beginning to say, ``The current Clean 
Air Act is not stringent enough with respect to power plant 
emissions.
    I am heartened to see that utilities are joining in that 
chorus and I applaud Jim Rogers, Frank Cassidy's company and 
others who have asserted leadership to move us to a better 
place.
    I would like to think that we have defined the playing 
field now and now it is just a matter of timetables and 
numbers, some of which are our proposals which we have up there 
on a placard and we can discuss in detail.
    The last point, Mr. Chairman, is voluntary versus 
mandatory. I just urge you to consider that breathing is not a 
choice. We don't have a choice of whether to get up every 
morning and breath. I don't think that it is appropriate and my 
organization doesn't think it is appropriate to have a 
voluntary compliance with regulations that make it safe to 
breath.
    The history of voluntary programs in air pollution control 
has been very mixed. Our concern is that if we go down the 
voluntary track it will be 5 years, 10 years before we figure 
out it hasn't worked as it traditionally has not.
    I am prepared to cite examples. Then we will have to get on 
with the mandatory regime and we have lost 10 years of 
progress.
    Thank you very much and I look forward to your questions.
    Senator Inhofe. Thank you, Mr. Cohen.
    Mr. Brunetti?

  STATEMENT OF WAYNE BRUNETTI, CHAIRMAN AND CEO, NEW CENTURY 
                   ENERGIES, DENVER, COLORADO

    Mr. Brunetti. Thank you, Mr. Chairman, for having this 
hearing this morning to talk about----
    Senator Inhofe. We acknowledge, Mr. Brunetti, that you 
folks supply our panhandle out in Oklahoma.
    Mr. Brunetti. We do.
    Senator Inhofe. We appreciate the fine job you do out 
there.
    Mr. Brunetti. Thank you for that acknowledgement.
    Mr. Chairman, New Century Energies is a public utility 
holding company that serves 1.6 million customers in Colorado, 
Texas, Wyoming, New Mexico, Kansas, and as the Chairman pointed 
out, the panhandle of Oklahoma. We will soon be in the process 
of merging with Northern States Power Company that is based in 
Minneapolis, Minnesota, to become Xcel Energy which will serve 
3.1 million customers in 12 States and will have a generating 
capacity of about 22,000 megawatts, a rather large company, the 
eighth largest in the country.
    As I am sure you know, much of the electricity in the West 
is generated by coal-fired plants using low-sulfur content 
Western coal.
    For example, 74 percent of the electricity generated by our 
company comes from coal-fired facilities. The use of Western 
coal, even in uncontrolled plants, typically results in 
SO2 emissions lower than two-thirds of the country's 
coal-fired power plants.
    Air quality concerns in the west are somewhat different 
from many areas in the nation. Most of the country's national 
parks, wilderness areas and Class I areas are in this region. 
Our citizens are naturally concerned about impacts on those 
areas.
    Another factor adding to the regional challenge is growth. 
As many of you know, the metropolitan Denver area is among the 
fastest growing areas in the country and our company struggles 
to meet the power supply demands of this growth. As in other 
parts of the country, the West has grappled with the Clean Air 
Act rigidity and the EPA's inflexibility. In recent years we 
have been opposed by the EPA under the Clean Air Act that has 
made it very difficult to meet our requirements.
    We have some examples of that. Before I conclude my 
testimony, I would like to share one with you today. Earlier 
this year our subsidiary public service company in Colorado 
attempted to obtain a prevention of significant deterioration 
permit for a new gas-fired generating plant at the Fort St. 
Vrain plant site.
    Rather than install EPA's preferred nitrogen-oxygen control 
equipment, we proposed as part of the application to make great 
NOx reductions at a much lower cost at other power plants in 
our system.
    This approach received the approval and support of the 
State of Colorado and the environmental community in Colorado. 
EPA, however, rejected it as an affront to the integrity of the 
Clean Air Act.
    Our dealings at the State level stand in dramatic contrast 
to the problems with EPA. I think you will find our recent 
experience interesting.
    NCE is committed to being responsive to our customers' 
needs. A few years ago we did conduct a survey of our customers 
which indicated 62 percent of our customers were willing to pay 
a little more for cleaner air. We realized our best opportunity 
to address this concern was in Denver. Public Service Company 
operates three coal-fired plants in the metro area. In 1997, 
after much study of different alternatives, we proposed a 
voluntary emissions reduction program to reduce sulfur dioxide 
emissions from these plants by 70 percent and NOx by 40 
percent. We took this proposal to a wide range of interested 
parties including the environmental community, business, labor 
unions, coal suppliers and the local air quality planning 
agency and certain appropriate State agencies.
    The result of our collective efforts was Senate Bill 142 
which was passed by the General Assembly in 1998. Senate Bill 
142 encourages the Colorado Air Pollution Control Division to 
enter into flexible, voluntary emission reduction agreements 
with stationary sources.
    This is based upon three principles. It grants regulatory 
assurance, for instance we have a 15-year assurance that what 
we are doing will stay in place.
    Second, it provides flexibility that we could not receive 
under traditional command and control programs.
    For example, in Senate Bill 142, Public Service Company of 
Colorado reached an agreement that granted substantial 
flexibility in the form of annual emission averages, flexible 
tonnage caps and trading emissions between different plans.
    Third, it ensured regulatory companies can recover its 
costs. The resulting agreement between Colorado and our company 
is a win-win proposition unlike traditional command and control 
approaches taken by the EPA.
    I do not believe that under the Clean Air Act we could have 
reached such an agreement with the EPA. As compared with our 
Denver Emission Reduction Program, EPA's regulation of air 
quality appears to be broken, as I gave you an example in the 
Fort St. Vrain.
    The committee is to be commended for exploring this new 
approach of regulating air quality. I believe that there are 
four important concepts that have to be there to make it 
successful: flexibility, regulatory assurance, cost recovery 
and State control.
    Thank you for the opportunity, Mr. Chairman.
    Senator Inhofe. If my calculations are right, in order to 
adjourn when we are supposed to we will have to confine our 
questions of each panel member to 6 minutes and that will keep 
us on schedule.
    Let me first of all pose the same question to all five of 
you here. There has been a lot of talk about the Clean Air Act 
and of course, NOx and SO2 are pollutants. Do you 
think CO2 is a pollutant?
    We will start with you, Mr. Rogers. These are yes or no 
questions.
    Mr. Rogers. I do not think it is a pollutant under the EPA 
definition.
    Senator Inhofe. Mr. McCrary?
    Mr. McCrary. No, sir, not under the Clean Air Act. It is, 
though, a greenhouse gas.
    Senator Inhofe. Mr. Cassidy?
    Mr. Cassidy. Senator, I don't have an opinion of a legal 
definition under the Clean Air Act. I would say that if a more 
broad definition of a pollutant is used, the science and the 
direction of public policy seems to be saying to me that if a 
pollutant is a resource in the wrong place then it could be 
defined as a pollutant.
    Mr. Cohen. Mr. Chairman, the Clean Air Task Force, like Mr. 
Cassidy's company, doesn't have a legal position on that. I 
think some of our member groups may, so I am not going to step 
into those waters.
    Senator Inhofe. Mr. Brunetti?
    Mr. Brunetti. Mr. Chairman, not under the Act, we don't 
believe it is a pollutant.
    Senator Inhofe. On the first panel, Mr. Wood said the Clean 
Air Act was one of the problems with the failure of the clean 
air power initiative because it didn't provide the flexibility 
needed.
    Do each of you agree, and do you think the Clean Air Act 
needs to be amended to provide the flexibility that we are 
discussing today?
    Mr. Rogers?
    Mr. Rogers. I do. I will say, if you look at the amendments 
of the Clean Air Act of 1990, one of the great breakthroughs in 
that legislation is that it provided for emission allowance 
trading.
    That is translated into agreement with tougher targets, but 
it also is translated in lower false compliance. That is a 
wonderful example of setting a target but allowing companies 
the freedom to select the best way to meet the target.
    Senator Inhofe. Thank you.
    Mr. McCrary. Mr. Chairman, I believe that the Clean Air Act 
is fundamentally sound. Once again, I think that one of the 
problems with the Clean Air Act is the way it is implemented. 
If it is based on sound science, I think the Clean Air Act does 
provide some flexibility, particularly with the advent of 
emissions trading.
    Senator Inhofe. Mr. Cassidy?
    Mr. Cassidy. Both from a flexibility and a business 
certainty point of view, we do believe that the Clean Air Act 
should be amended to make provisions for the kind of proposal 
that I discussed.
    Senator Inhofe. Mr. Cohen?
    Mr. Cohen. Mr. Chairman, the groups I represent support 
flexibility and market-based mechanisms subject to the caveat 
that I have put on the board, that we are going to need to work 
through some discussion.
    As Exhibit 7 in my testimony shows, for some pollutants or 
ultimate pollutants such as PM-2.5, it is clear that there are 
very significant local impacts in urban areas of some of these 
plants where you have a lot of population concentrations.
    There are a couple of bills out there with recommendations 
as to how to limit trading for those circumstances where local 
impacts are especially significant.
    But subject to that caveat, I think we support flexibility 
Title IV, Acid Rain type approach for nitrogen, sulfur, 
certainly CO2, and I think mercury may be another 
case where we have hot spot issues that will need to be looked 
at as we refine legislation.
    But in general the concept and approach is one we support.
    Senator Inhofe. Thank you, Mr. Cohen.
    Mr. Brunetti?
    Mr. Brunetti. Mr. Chairman, as I pointed out with our 
Senate Bill 142 in the State of Colorado where flexibility is 
key, we believe that the Act can be enhanced to improve the 
flexibility of getting the end result.
    Senator Inhofe. Thank you. I know this will be difficult. 
But I would like to ask each one of you what you think is the 
No. 1 issue that will be the most difficult to solve as we try 
and move forward toward a legislation solution toward the 
emission bill, just one.
    Mr. Rogers, be No. 1.
    Mr. Rogers. I love this leadoff. I would rather do cleanup.
    Senator Inhofe. All right, let's start with Mr. Brunetti.
    [Laughter.]
    Mr. Brunetti. I will get even with Mr. Rogers after the 
meeting here.
    [Laughter.]
    Mr. Brunetti. One of the key items is regulatory assurance, 
long-run playing. I think that from running a large utility, 
what I like to see is the rise in 15 years without changing. 
And I think that is going to be difficult to achieve.
    Senator Inhofe. Mr. Cohen?
    Mr. Cohen. Your question reminds me of something you pose 
to a witness. I was supporting once in a deposition where the 
questioner began, ``What is the weakest part of your 
testimony?''
    So again, venturing in, I would say that I think that there 
is a broad consensus that on the sulfur, nitrogen oxide and 
toxic pollutant mercury agenda there is probably more 
convergence at this point on numbers than there probably is on 
the CO2 issue.
    My guess is that will be a little harder to tackle and we 
will have to be quite clever about how we do it.
    Senator Inhofe. All right. We are almost out of time here.
    Mr. Cassidy?
    Mr. Cassidy. I think what is striking is the remarkable 
degree of unanimity among everybody who spoke, the committee, 
and ourselves at the policy level. An approach of this type is 
something that we should implement.
    I thought Senator Voinovich was eloquent in saying that we 
would be doing the country a great service if we came to grips 
with these issues.
    I think the toughest part is going to be in deciding on the 
details, timeframes, amounts, and which pollutant. That is the 
case where input should come from all stakeholders and should 
be decided by yourselves.
    Senator Inhofe. Thank you, Mr. Cassidy.
    Mr. McCrary?
    Mr. McCrary. I think one of the big problems is going to be 
defining what certainty is and the practical reality of how you 
achieve certainty through a long timetable.
    Senator Inhofe. And last, Mr. Rogers.
    Mr. Rogers. I love it. The devil is in the detail and the 
most difficult detail to work through is going to be 
CO2, both in terms of levels and timing.
    Senator Inhofe. Thank you very much.
    Senator Smith.
    Senator Smith. Thank you very much, Mr. Chairman.
    Mr. Cohen, I know you can't speak for everyone, but would 
your group be willing to accept any statutory change that would 
allow forbearance, for want of a better work, on a plant-by-
plant basis to achieve the overall reductions if those 
reductions were less than what we would project otherwise?
    Mr. Cohen. I don't think we could commit to that in that 
case in every plant. I am not trying to be evasive, but we have 
begun to look more closely in the last year or two with some of 
these local plant impacts and the issues that may be associated 
with large dirty plants and plants near big urban centers.
    Those may pose a special problem. So I think that has to be 
a process of discussion. A couple of the current bills out 
there capture that by having a general trading provision 
subject to some further analysis of local plants.
    So I am not in a position today to make a blanket statement 
that as long as the national caps are OK there is no need to 
look at plant-specific impacts.
    Senator Smith. The reason we are asking, obviously, is that 
in an attempt to put together such a comprehensive bill, we 
would need to try to have as much agreement as possible with 
all the stakeholders. So if you have further thoughts on that 
that you could provide to us, we would appreciate it.
    What about on the issue of coal. Some of your critics would 
say that your goal is to eliminate all coal use. Is there a 
role that you can envision for coal in the nation's energy 
supply?
    Mr. Cohen. There certainly is. I think it would be 
certainly quite unrealistic to think that coal, even if that 
were our objective to phase it out, which it is not, it would 
be quite unrealistic to think that we can do that in anything 
like the next couple of decades.
    The target emission rates that we put out there for 
proposal, we believe can be met for the foreseeable future 
having less of a share in the total energy mix, but still a 
very significant share.
    Senator Smith. Mr. McCrary, can you voluntarily accept 
stricter emission limits and limits on unregulated pollutants 
in order to achieve flexibility under the NSR permit program 
and some certainty?
    Mr. McCrary. Yes, sir, I think I could, as long as those 
pollutants were based on scientific research.
    Senator Smith. Mr. Rogers, what do you think will the areas 
of greatest concern? This is almost like the question that 
Senator Inhofe asked. What would be of greatest concern to your 
colleagues in trying to put together a comprehensive bill that 
deals with all the stakeholders?
    Each utility is different in its own way in terms of what 
upgrades that they have done and what they haven't done. What 
worries you the most about us trying to put together a bill 
that would be acceptable to all of you?
    Mr. Rogers. I think we could work very effectively toward 
meeting an agreement on NOx and SOx, and I think even with 
respect to how to deal with mercury. I think we can do that.
    Again, I think CO2 is an area where you are 
going to have the greatest difficulty in terms of reaching some 
agreement in terms of the level and the target date.
    I also think the issue of how do you assure certainty, 
which was really Wayne's point, that is going to be a very 
difficult thing because it is almost impossible to bind future 
Congresses with respect to changes that will be made.
    My judgment is that we will be able to work out way through 
that and achieve a comprehensive approach that works for 
everybody, regardless of the position that they started this 
debate with.
    Senator Smith. Well, as you can tell from the hearing that 
Senator Inhofe is holding, we are in the information-gathering 
mode.
    Let me just say to all of you and anyone else who has any 
suggestions or thoughts or ideas that would help us, we welcome 
those and the door is open. We would certainly appreciate it 
from any stakeholder or potential stakeholder here, whatever 
thoughts you have as we try to put together a bill.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Smith.
    Senator Lautenberg?
    Senator Lautenberg. This has been an interesting, and I 
think informed panel. The contrast in views is relatively 
narrow. I don't mean to discuss the sharp differences, but one 
of the things that kind of surprises me, if I may say, and that 
is the definition of what is CO2, as not a 
pollutant.
    I noticed that several of you were careful to say that it 
is not defined under current rules. Does it pose a concern 
altogether because it is not a pollutant under the traditional 
definition?
    Mr. Rogers?
    Mr. Rogers. I think the way I would respond to your 
question is to make a point. We are all very careful in terms 
of the way we responded to that question earlier.
    Here is the point: If it is perceived as a pollutant under 
the Clean Air Act, can they give EPA the authority to do 
whatever they want with it regardless of the science?
    So the reality is, from a practical standpoint, many of us 
believe that the appropriate place to deal with the 
CO2 issue is before Congress where all points of 
view will be carefully considered.
    So from my view, a technical view, I do not view it as a 
pollutant for purposes of giving the EPA the authority to do 
whatever they want whenever they want in any manner they want.
    Senator Lautenberg. So it is not that it is not a material 
to be really concerned about. I appreciate your candor. We are 
kind of walking on eggs here.
    Let me ask Mr. Cassidy a question. If you are concerned 
about mercury emissions, I think it is fair to say that that is 
a major threat. Do you think it is possible to reduce mercury 
emissions from power plants by 90 percent, if I heard the 
commentary right?
    Mr. Cassidy. Senator, there are technologies that are being 
tested now that we think are very promising. One very important 
benefit of implementing this comprehensive approach is that 
more plants will be built testing those technologies.
    I do think that if 90 percent emission reductions are 
necessary that we will have the technology to do so.
    Senator Lautenberg. Should we therefore allow trading or 
prohibit the trading of mercury emissions? We allow trading of 
nitrogen oxide. Would that help in our quest to get it to a 90 
percent reduction level?
    Mr. Cassidy. I think it would. Let me just clarify the 
differences between the emissions that we are talking about. I 
think it is very well accepted at this point that sulfur 
dioxide, nitrogen oxides, and carbon dioxide are regional, 
national and global problems that lend themselves to a trading 
regime with national caps.
    Mercury is a little more complicated. There is a vaporous 
form of mercury that does travel long distances and could be 
subject to this same kind of mechanism.
    To the extent that there are local issues that Mr. Cohen 
referred to, I think they should be taken care of at the local 
level.
    Mr. Cohen. Senator Lautenberg, if I could just add for a 
moment to my comment earlier, the evidence we have is that 
something like 20 percent of the mercury outfall from the 
stacks land within a close range of the power plants.
    This is often a problem because plants are often located 
near water bodies that are also places where people fish, and 
particularly low-income people rely on this for a lot of their 
diet.
    So we think there are some significant equity issues and 
local contamination issues posed by a completely unconstrained 
mercury trading system that would allow, say, a continued level 
of mercury emissions in existing plants in some places.
    But I don't have a pat answer on how you reconcile that 
right now.
    Senator Lautenberg. The question was asked earlier about 
coal and how necessary it was to continue using it and so 
forth. I think, Mr. Cohen, you were very clear. You said that 
even if you want to, you could not dispose of it.
    The demand for electricity all over our country is 
burgeoning. I mean, the growth in the economy has produced that 
kind of reaction. I think it is important that we fulfill that 
demand Another question is, if we didn't have coal as our 
primary, and I am not suggesting that we rid ourselves of that 
resource, is there anything that you have seen thus far as an 
appropriate alternative long range that could be less 
threatening to the environment if a decision was made along the 
way to reduce or eliminate as much use of coal as we have? Mr. 
Rogers. Senator, I would quickly say that the statistics, to 
try and make the point clear, 55 percent of the electricity in 
this country is generated using coal. In the Midwest over 82 
percent of the electricity is generated by burning coal. 
Senator Lautenberg. What about the 45 percent remainder in the 
national production? You say 55 percent use coal?
    Mr. Rogers. Fifty-five percent nationally. Eighty-two 
percent in the Midwest. So in the Midwest we are more dependent 
on coal than the average for the country. But my view is there 
may be a couple, but no significant coal-fired based load 
plants being built today.
    Nearly all generation is gas-fired. Now, having come out of 
the gas industry, there is a limit on our ability to use gas. I 
remember back 10 years ago when it was a 16 TCF market. It is 
almost a 30 TCF market.
    There are limits in terms of how much gas will be available 
and what impact that will have on the price of natural gas over 
a longer period of time.
    It is promising and they have really improved the 
efficiency of those turbines, but the reality is that there are 
limits even there in terms of moving totally to natural gas.
    The other thing is that there are a lot of new technologies 
being tested, particularly fuel cells. But many of the fuel 
cells use gas or use hydrogen. So while there are fuel cells 
being tested, and our company alone is testing two different 
fuel cells a day. We are testing a micro-turbine technology.
    The reality is that those technologies have not become 
commercial, nor will the pricing of electricity from those 
machines match the prices we have today.
    But my point here I think is very important. If we have 
comprehensive legislation and we, as a major operator of coal 
facilities, know that, we can then do our analysis in a way and 
with specific targets 5 years out, 10 years out.
    My belief is the belief in technology. Our country will put 
more money into these new technologies. We will commercialize 
new ways to produce electricity and through the 
commercialization the prices will come down.
    There will be replacement sources for electricity that we 
are using today that we are burning coal to deliver.
    So one of the most significant things about this 
legislation is that it will stimulate significant investment in 
technologies.
    I believe our country has the ability to solve that 
problem.
    Senator Lautenberg. May I use the in-house technique here 
and ask you, each one of you, a yes or no answer? That is----
    Senator Inhofe. Senator Lautenberg, you have already gone 2 
minutes over your time.
    If it is a yes or no question, that would be fine.
    Senator Lautenberg. Do any of you see nuclear returning to 
our country as a source, a new nuclear facility coming back as 
a source of production?
    Mr. Rogers. No, not in the near term.
    Mr. Cohen. Not in my lifetime.
    Mr. McCrary. Not in the near future.
    Mr. Cassidy. Not in the near future.
    Mr. Brunetti. Not in my lifetime.
    Senator Lautenberg. Thank you very much.
    Senator Inhofe. Thank you.
    Senator Voinovich?
    Senator Voinovich. One of the things that has not come out 
in all of this discussion is the issue of all of this in terms 
of the people who consume energy in this country and the impact 
that some of these initiatives have on the reliability of 
energy and electricity in this country and also the costs 
connected with some of these initiatives in terms of our 
competitiveness in the world marketplace.
    It seems to me that one of the things that ought to be done 
is that ought to be captured and that should also be on the 
table if you are talking about balancing things.
    Too often we just have the environmental on the one side 
and we don't give consideration here, and some would argue that 
all we talk about is the reliability and economics and forget 
the environment.
    It is interesting that all of you agree that a 
comprehensive approach would make sense.
    The question I have is, do you think it is possible that 
those of you that are involved in this could sit down and set 
up some type of task force that would involve a representative 
group of people from business, industry and environment groups 
to come up with some overall comprehensive plan that you would 
at least lay on the table for us to give consideration to or at 
least come in with an agreement on three-quarters of this and 
say, the other 25 percent we don't agree on and you will have 
to reconcile that on your own. Is that possible?
    Mr. Brunetti. Senator, I will start with that. Absolutely, 
I think it is possible. The constituency we brought together in 
Colorado was quite diverse, as I pointed out, to get Senate 
Bill 142 passed. It included the full environmental community, 
State agencies, labor, and coal industry. We came to agreement.
    It was not an easy process. It was a very difficult 
process. Now, whether you could ever get a larger group, multi-
State with different interests to get to that point Probably 
not 100 percent, but I certainly think on some fundamentals 
that you could get agreement on some underlying principles.
    I think you saw some of that today.
    Senator Voinovich. Mr. Cohen?
    Mr. Cohen. I think it is possible and I think it is worth a 
try. You may be aware that there are discussions going on right 
now bilaterally and what not and a lot of discussion in the 
industry.
    I think that that has great promise. The devil certainly is 
in the details, but I think it is worth a shot if we want to 
get something done in an expeditious timeframe.
    Senator Voinovich. Mr. Cassidy?
    Mr. Cassidy. I agree with the previous speakers. I would 
say to the extent that Congress could provide a forcing 
function it might get it done in dog years rather than in 
regular years.
    Senator Voinovich. I am sorry. What did you say?
    Mr. Cassidy. To the extent that Congress could provide a 
forcing function to keep progress moving forward, I think that 
would be helpful.
    Senator Voinovich. Mr. McCrary?
    Mr. McCrary. Senator, all things are possible but nothing 
is real easy. I think certainly we can all agree on principle. 
I think the difficulty is going to come in the details.
    Senator Voinovich. Mr. Rogers?
    Mr. Rogers. Senator, I am the chairman of the environmental 
committee for EEI and within our industry we have been working 
over the last year to build a consensus around the notion of 
pursuing comprehensive legislation.
    I can say as an industry, and it doesn't include everybody, 
but by and large our industry is prepared to move forward on 
comprehensive legislation.
    The key is to be able to sit down with a set of different 
stakeholders because your point is one of the most important 
points.
    The cost of this is critical to the success of our 
companies; not our companies, but to the companies in this 
country in the future who are competing in a global economy.
    The piecemeal approach, in our judgment, translates into 
higher prices for consumers. Comprehensive will translate into 
lower prices.
    I think everybody at this table recognizes that, both the 
environmental groups as well as industry. That is why I have 
great hope that if we can sit down and work through the process 
and have these informal conversations that we can get there.
    But I do believe, as Frank suggested, that at the end of 
the day you all have to drive. You have to whip and drive this 
and it will be your drive that will get us across the goal 
line.
    Senator Voinovich. This is my second year. I have watched 
and you get polls on either side of the aisle and what happens 
is you end up getting nothing done and spending hours and 
hours.
    It seems to me that what you are all talking about here is 
really important to the future of our nation in terms of its 
competitiveness and also in terms of our environment.
    If you could try to put something together and really work 
at it, you know, we want to do something that is good. That 
means like anything else, there are compromises that have to be 
made.
    But it seems to me that compromising in consideration of 
having an overall term plan is well worth it in terms of, I 
think, the bottom line to your companies reliability and also, 
I think also, quite frankly, to the environment with people 
just pulling in different directions and not a whole lot 
getting done. So I would encourage you to do that.
    Mr. Brunetti, I am interested to know how did you do what 
you did in Colorado? I am out of time, but in terms of the 
regional--which region are you in, by the way, in terms of the 
EPA?
    Mr. Brunetti. Region 8.
    Senator Voinovich. How did you do what you were able to do 
without them messing it up?
    Mr. Brunetti. Actually they were involved in discussions. 
This all started with a customer survey. We try to drive our 
company from the customer's point of view. As I mentioned, 62 
percent of our customers said they were willing to pay a little 
bit more for cleaner air.
    So we said, OK, we want to run the business from that 
standpoint. How do we go about it? What do we do and how do we 
go about it?
    We solicited information from the environmental community 
and the State health department. We started crafting a plan to 
present to the Colorado legislature. It was coalition building.
    As has been mentioned, the devil is always in the details 
and the details sometimes got messy. But we did, at the end, 
resolve them and come up with a uniform approach which 
everybody agreed to.
    EPA was in those discussions and they did not mess this one 
up--yet.
    Senator Voinovich. Mr. Cohen, do you know what they did out 
there?
    Mr. Cohen. I am familiar with the general arrangements. The 
direction was right. I have some quarrel with the details, but 
I think the general approach of multi-pollutant approaches, 
broad-scale coverage and even incentives is something we are 
willing to consider as part of the bargain.
    I could submit in writing some of the critiques, things we 
would like not to see replicated at the Federal level from that 
particular arrangement, but I think those were more details 
than conceptual.
    Senator Voinovich. Thank you.
    Senator Inhofe. Thank you, Senator Voinovich.
    Let me just make an observation. From the last question 
that Senator Lautenberg asked and the quick replies we had from 
everyone, as you know the NRC is under the jurisdiction of this 
committee. They have completed the first re-licensing of a 
nuclear plant at Calvert Cliffs in just 2 years as opposed to 
some 10 years that people were speculating about. I thought I 
would throw that out and get it in the record.
    Senator Bennett.
    Senator Bennett. Thank you, Mr. Chairman. I will followup a 
little on the same comment. Most of my questions have been 
asked so I won't go through them. But Senator Lautenberg's 
question and the comments about what do we do if we don't go to 
coal does raise the overall question of where are we going to 
get the power in the future.
    European countries have gone increasingly nuclear. We, 
indeed, are the only western, highly developed country, 
whatever, that does not go in that direction. Coal is the 
dominant source.
    Mr. Cohen, you seem like a reasonable fellow. I am 
delighted to have you here.
    Mr. Cohen. My colleagues are getting very nervous.
    Senator Bennett. When you get that kind of a phrase from a 
politician like me, you are in trouble. Out where we come from 
we have a little bit of difficulty getting the environmental 
community to recognize that we need power.
    There is a controversy brewing now on the Columbia River 
with the demand from the environmental community that we take 
down all of the dams and thereby give up the hydroelectric 
power.
    In my State there is a strong effort getting mounted, 
fortunately it doesn't seem to be getting anywhere, but given 
the long view a lot of people have, it might get somewhere to 
take down the Glen Canyon Dam and drain Lake Powell.
    The question that I ask is: Where are you going to go to 
replace that power? I think you would all agree that 
hydroelectric power is pretty clean power. There is not a lot 
of pollution that comes out of hydroelectric power.
    Now, one of the ironies, and I am old enough now to 
remember this, when the debate occurred here in Congress as to 
whether or not the Glen Canyon Dam should be built in the first 
place, the Sierra Club came in and opposed it on the grounds 
that we would never as a nation need that much power and that 
certainly America's energy needs would never be so great. We 
would have surplus power, we would never ever need it.
    Then, some of the witnesses said, ``If by some chance we 
are wrong and we will at some unforeseen point need the power 
out of the Glen Canyon Dam, we wouldn't need the dam because 
look at all the low-sulfur coal at Kaparowitz that could be 
burned to provide the power.''
    We just had the President a few years ago use the 
Antiquities Act to prevent the mining of low-sulfur coal at 
Kaparowitz on environmental grounds.
    If we can't mine low-sulfur coal, if we can't use 
hydroelectric power, if we can't have nuclear power--you know, 
what are we going to do as the power needs of this country 
continue to go up.
    Mr. Cohen, I would just hope you would put in a kind work, 
if you will, for hydroelectric power among your friends 
because----
    Mr. Cohen. The tasks are growing by the minute.
    Senator Bennett. Because they don't seem to like the idea 
of any kind of power.
    Mr. Cohen. Senator, I respectfully disagree with that 
characterization that we are unconcerned about reliability or 
the ability to maintain adequate supplies.
    Senator Bennett. I am not saying you are. As I said, you 
strike me as a reasonable fellow.
    Mr. Cohen. Warned, warned.
    Senator Bennett. It is who you hang out with.
    Mr. Cohen. More generally, I think that all of us could 
look at all of each other's statements over a period of 20 
years and point out the contradictions and the twists and 
turns.
    I think the best approach is sort of a non-ideological one. 
I think that is what we are proposing, to look at the emission 
targets that are being proposed. Let's do some analysis.
    Some of my colleagues are doing analysis of the kinds of 
targets that were proposed. Let's see if we can get there in a 
reasonable timeframe at a reasonable cost with the fuel 
supplies we have.
    I think the obvious answer here, if you are here for the 
short term, is going to be some expansion in the use of natural 
gas. We believe on our first look that the supplies are 
adequate at a reasonable cost to meet these targets in these 
kinds of timeframes, decade-type timeframes.
    With respect to coal, I will say that there are some 
promising technologies on the horizon, to gasify coal, for 
example. Mr. McCrary's company is experimenting with some of 
that. They have had some recent successes that may well make 
that a much more environmentally viable fuel for the future as 
it is now a very economically viable fuel.
    I also agree with Jim Rogers that over the 10, 15, or 20 
year period we probably will drive a lot of things, new 
technologies, decentralized technologies that we can't foresee 
right now.
    But none of the groups that I am representing today 
certainly have an anti-coal position, an anti-hydro position on 
principle.
    I think what we are saying is, here are the targets we 
think are necessary to protect human health and the 
environment. We will have to push on some of the numbers but I 
don't think there is really a credible body of opinion that 
says we can't get there with some of the conventional sources 
that we have at our disposal today.
    Senator Bennett. Thank you. You confirm that you are a 
reasonable fellow.
    I have nothing further, Mr. Chairman, except that 
throughout all of this debate, let's deal with the science, not 
the superstition. Let's look at alternatives. I am willing to 
look at wind and solar and other things as alternatives, too. I 
don't want to be as narrow as I am suggesting that some other 
people are.
    But let's recognize that bottom line, somebody has to burn 
something or turn something or we are not going to have any 
lights. Thank you.
    Senator Inhofe. Thank you, Senator Bennett.
    We are at the time that we were supposed to conclude this 
meeting. But I know Senator Chafee and probably Senator 
Lieberman would like to make comments or ask questions. Try to 
restrict it to 5 minutes, if you could.
    Senator Chafee. I am just here to listen. I think that the 
further we do push the envelope on clean air the more it will 
profit our country. The Third World countries are certainly 
struggling with standards far below us. I just think the 
technology we develop in pushing the envelope that we can 
eventually export.
    A friend who was in Beijing said they couldn't see the 
street from the 32nd flood or his hotel because of the power 
plants in the region.
    This is something we can export, so let's just keep pushing 
the envelope.
    Senator Inhofe. Thank you, Senator Chafee.
    Senator Lieberman?
    Senator Lieberman. Thank you, Mr. Chairman, for your 
courtesy. Mr. Chairman, I apologize to you and the witnesses. I 
had a meeting of the Armed Services Committee that I had to 
attend.
    I appreciate the opportunity to question briefly. I have 
looked at the testimony that was submitted. I appreciate it 
very much.
    I understand that there is some concern about what might be 
called a cascading regulatory effect that might preempt the 
implementation of the kind of comprehensive approach we are 
talking about, a regulatory effect from within EPA.
    I wonder if you could give me any of your industry's sense 
of a time line necessary for developing and adopting the kind 
of multi-pollutant approach that we are talking about here in 
order to avoid that so-called cascading regulatory effect?
    Mr. Cassidy, since I happen to have met you yesterday, I am 
going to pick on you.
    Mr. Cassidy. I think what you are referring to, Senator, is 
that as time marches on additional requirements under existing 
legislation come into play. As I mentioned, we expect the 
process by which mercury will be regulated to start later in 
the year.
    I am not sure I can give you a specific timeline, but it 
certainly argues that we get through this process very quickly 
if we are going to realize the benefits of it.
    Senator Lieberman. Mr. Rogers?
    Mr. Rogers. Senator, from my perspective, in my opening 
statement I talked about living in dog years and not human 
years. It is very important that in business we live in dog 
years, whether you are an old or new economy company.
    My hope would be, and I am a pragmatist on this, my hope 
would be that a lot of the heavy lifting could get done over 
the next three to 4 months, I think the probability of getting 
comprehensive legislation this year is very slim, given my 
sense of the political dynamics of an election year.
    But I think the reality is that the hard work can get done 
and we can be in a position in January or February--there will 
be a lot of other very important issues on the plate then--but 
I think if we have done our hard work now we will be ready to 
go then.
    I think that ought to be a goal that we have. There is a 
sense of urgency about getting this done. It is easy to debate 
it, but it is important to make a decision.
    Senator Lieberman. That is a helpful response. We should 
realize it and attempt to realize that goal.
    Let me ask a broader question, and I would welcome a 
response from anyone on the panel. I notice one argument 
against the voluntary approach and for a mandatory one is that 
the voluntary approach potentially penalizes companies that opt 
in by allowing their non-participating competitors a market 
edge.
    Companies that have invested in state-of-the-art controls, 
as I said before, it seems to me, should not face a competitive 
disadvantage against counterparts as States undergo utility 
restructuring.
    A similar concern is that companies may chose to opt in 
only their cleanest plants, which is to say those closest to 
compliance, while leaving the dirtier units in the traditional 
regulatory framework.
    I would be interested in hearing views on that issue from 
all of you or any of you, but particularly from what might be 
called both sides of the debate.
    Mr. Cohen. Senator, I think you missed my earlier 
statement, but the organizations I represent are opposed to a 
voluntary approach period, mainly for that reason. The historic 
track record of these programs is non-impressive in terms of 
enlistment, precisely because folks are being asked to step up 
to the plate and disadvantage themselves.
    So it is hard to answer your refinement on that question 
because the initial threshold is that we don't support a 
voluntary approach.
    Senator Lieberman. I was familiar with your testimony. I 
did see it. How about somebody on the other side to make the 
case for the voluntary procedure?
    Mr. Brunetti?
    Mr. Brunetti. The best description, Senator, about the 
approach we did in Colorado, because it is concerned as we 
restructure the industry that if you have a voluntary approach, 
do something ahead, that at the time you put you plants at some 
competitive disadvantage.
    The approach that was taken in Colorado is that the State 
legislature allowed those costs to go on the wires so no matter 
what happens to the industry, it does not put the power plants 
themselves at a competitive disadvantage.
    So we have addressed it that way.
    Second of all, dealing with this, you know, you are going 
to opt in your best plants and keep the--the approach we took 
there is that reductions applied for a group of plants in a 
region where there was an air shed area and no plant got 
deteriorated.
    In other words, every plant improved somewhat, some more 
than others, but no plant had any deterioration at all. We did 
not opt in all the plants. So that is the approach we took. 
Whether it would work on a broader scale, I cannot say.
    Senator Lieberman. Would anyone else on the panel want to 
comment?
    Mr. Cassidy. I would just say I have a couple of problems 
with the voluntary approach. The way I tend to think of that is 
that you can choose to stick with what we have today or you can 
opt for the new path.
    Now, the people who chose to stick with what we have today, 
we still have all the problems that we have been talking about 
all along today; litigation, uncertainty and the like.
    Second, if a company can choose which path to go on, they 
will chose the least costly path, perhaps the path that doesn't 
get us to the environmental position that we seek and as Mr. 
Cohen mentioned earlier, we may end up 10 years from today 
finding that we have not gotten where we need to get.
    I think a mandatory approach that sets national tonnage 
caps is more appropriate and more like to work.
    Mr. Rogers. Senator, I would add to that this sort of 
refinement. I believe the targets have to be specific. They 
have to be mandatory and they have to be over time. There is a 
relationship between the target levels and the timing. I think 
that is a very important sort of calculus that needs to be 
understood.
    My view of voluntary is around how you comply with the 
targets. That is to me the voluntary nature of this. Where we 
are given the flexibility to use technologies, retire plants, 
change the technology at the plant, convert to gas. I mean 
there are a lot of ways to skin the cat.
    So my view is that the voluntary part of this is in the 
``how.'' The mandatory part of this is in the targets and the 
dates.
    Senator Lieberman. Thank you all for very thoughtful 
responses.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Lieberman.
    The time has come to conclude this. I want to thank all of 
you for coming.
    Mr. Rogers, I am particularly aware of the sacrifice you 
made to be here and I appreciate it very much.
    I have another committee meeting, so I have to leave.
    We are adjourned.
    [Whereupon, at 11:38 a.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [Additional statements submitted for the record follow:]
  Statement of Senator Bob Smith, U.S. Senator from the State of New 
                               Hampshire
    Good Morning. I would like to thank Senator Inhofe for his 
leadership in holding this hearing on a multi-pollutant approach to 
reducing utility emissions and all of the witnesses for appearing 
before us here today.
    In January I announced my intention to start a dialog among all 
stakeholders on how to improve the manner in which the Clean Air Act 
addresses utility emissions. I plan to draft a proposal that will 
provide both the certainty and the flexibility necessary to achieve 
real environmental improvements in a timely manner. This system should 
include clear limits on emissions of nitrogen, sulfur, carbon and 
mercury, as well as emissions-trading programs and significant permit 
relief. We can improve the Clean Air Act if we draw lessons from the 
phenomenal success of the Acid Rain Program, in achieving its pollution 
goal with the least transaction cost.
    I do not claim credit for this idea. The utility sector, 
environmental community, and numerous State and Federal Government 
officials have, from time to time, raised the prospect of using a 
comprehensive approach to increase flexibility and improve the 
environmental performance of power generation. But the Clean Air Act 
does not allow for such flexible terms of compliance. The current 
regime established under the Clean Air Act is too complex and has not 
produced the expected emission reductions. State regulators, 
environmental organizations and much of the utility industry seem to 
agree that there must be a better way to regulate emissions.
    Let me cite just two examples:
    1. There are a dozen regulations for NOx, each with its own 
deadlines and requirements. This cannot possibly be the most effective 
way to deal with NOx emissions.
    2. The New Source Review, or NSR, program has been especially 
confusing. Senator Inhofe noted at his field hearing in Cincinnati that 
EPA has issued more than 4000 pages of guidance documents to explain 
the original 20 pages of its 1980 regulations. EPA has been working for 
several years now on a rule revision, but to no avail. EPA's recent NSR 
enforcement actions could easily lead to 5 or 10 years of litigation 
only to result in control measures that may be redundant of or 
contradictory with controls mandated by regulation. I know we can find 
a more efficient system.
    We need to move away from a unit by unit, top-down approach to more 
market-based solutions. We must provide certainty, use a comprehensive 
approach, and provide flexibility.
    On Certainty.--We need to be clear about what emissions reductions 
are expected and the timeframe for these reductions. This will allow 
for efficient implementation by utilities and will provide air quality 
planners and others a common baseline when considering the need for 
emission limits from other sources.
    A Comprehensive Approach.--If not ALL pollutants are addressed, we 
lose certainty. Without addressing all pollutants now, future 
regulations could render meaningless our efforts to allow business to 
create efficient, long-term pollution control strategies.
    Flexibility.--We should provide flexibility in compliance through 
the use of emissions trading and other market-incentives. Title IV of 
the Clean Air Act the Acid Rain Program proved that flexibility can 
drive down the cost of compliance. Also, we have had 100 percent 
compliance with that program with many reductions made ahead of 
schedule. The actual costs of compliance are less than half the lowest 
estimate originally given. No other Federal, environmental program can 
claim this remarkable accomplishment.
    Broad relief from the NSR and permit programs is also a necessary 
component of any legislation. If a utility hits its emission targets, 
individual changes at any one plant would no longer be critical to 
Federal environmental policy.
    I would like to address two additional issues regarding this 
legislation.
    Coal.--Coal is and will remain an important part of our future 
energy mix. Our dialog should focus on our desired environmental 
outcomes rather than attempting to dictate the use of a particular fuel 
source.
    Voluntary participation.--I believe this program should be 
voluntary. I know that some concern exists with a voluntary approach, 
but let me at least make my meaning clear. This legislation should be 
an alternative to the current system. The utilities would be granted a 
period after enactment of the legislation to choose between the current 
law or our new program. Once that decision was made, however, 
compliance would be mandatory.
    My goal is to devise a system so effective and so efficient that 
the utility companies will be lining up to participate. I think we can 
do it, and I look forward to the testimony of today's witnesses.
                                 ATTACHM
                                 ENT___
                                 
                                                      May 16, 2000.

Senator Bob Smith, Chairman,
Senate Committee on Environment and Public Works,
Senate Office Building,
Washington, DC 20510-6175.

Dear Senators Smith and Baucus: We are writing to you on behalf of the 
State and Territorial Air Pollution Program Administrators (STAPPA) and 
the Association of Local Air Pollution Control Officials (ALAPCO), the 
national associations of State and local air pollution control agencies 
in the 54 States and territories and over 150 major metropolitan areas 
across the United States. We wish to thank you for the opportunity to 
participate in your process for developing a comprehensive and 
integrated strategy aimed at regulating air pollution from the power 
generation industry. We endorse this process and applaud you for your 
leadership in proceeding with this approach, and offer our assistance 
as you further refine this concept and develop legislation.
    Since the adoption of the Clean Air Act in 1970, Federal, State and 
local governments have made significant progress in reducing air 
pollution in our country. Notwithstanding this effort, our nation 
continues to have substantial and unacceptable air pollution problems. 
According to EPA's National Air Quality and Emissions Trends Report, 
1998 (published in March 2000), there are approximately 105 million 
people in this country who reside in areas that exceed at least one of 
the Federal health-based air quality standards. Additionally, the 
report indicates that, as of December 1998, over 2,506 water bodies in 
this country are under fish consumption advisories (for certain fish), 
resulting, in part, from toxic emissions into the air that deposit into 
these lakes, streams and ponds.
    According to recent information, electric utilities still represent 
one of the most significant sources of these and other pollutants. For 
example, EPA's National Air Quality and Emissions Trends Report, 1998, 
indicated that the electric industry is responsible for 67 percent of 
sulfur dioxide emissions, which contribute to acid rain and fine 
particulates (PM2.5), and 25 percent of nitrogen oxide emissions, not 
only a principal cause of ground-level ozone, but a contributor to the 
formation of fine particles, as well. Moreover, according to EPA's 
Study of Hazardous Air Pollutant Emissions from Electric Utility 
Generating Units-Final Report to Congress, (1998), electric utility 
steam generating units emit 67 hazardous air pollutants, including 
mercury, arsenic, nickel and dioxin. In fact, electric generators are 
one of the largest sources of mercury in this country, responsible for 
more than one-third of anthropogenic mercury emissions. Finally, EPA 
estimates that 37 percent of the carbon dioxide emissions in the United 
States are released by power plants (EPA's Inventory of U.S. Greenhouse 
Gas Emissions and Sinks 1990-1997, 1999).
    In light of these significant problems, STAPPA and ALAPCO believe 
that measures to further reduce emissions from the power generating 
industry are essential. Furthermore, a comprehensive and integrated 
approach for regulating the industry could offer substantial assistance 
in ameliorating many of these problems. Our associations offer these 
preliminary comments on this concept, which you may want to consider as 
you develop legislation.
    First, and perhaps most importantly, a comprehensive and integrated 
power generation proposal could lead to far greater environmental gains 
than the existing Clean Air Act. In particular, it could provide an 
excellent opportunity to regulate multiple pollutants in an integrated 
and holistic manner, including nitrogen oxides, sulfur dioxides, 
mercury and carbon dioxide. Moreover, it could enhance opportunities 
for pollution prevention and sustainability, as well as promote more 
expeditious compliance.
    Second, an integrated approach could offer enormous advantages to 
the regulated community. Today, the power generation industry is 
subject to almost a dozen separate and disparate programs to reduce air 
pollution. Many of these regulate different pollutants and impose 
dissimilar compliance deadlines. These include, among others, New 
Source Review requirements, interstate transport regulations (i.e., the 
requirement for State Implementation Plans for nitrogen oxides, or the 
``NOx SIP Call''), control requirements for meeting National Ambient 
Air Quality Standards (i.e., particulate matter, ozone and sulfur 
dioxide), acid rain control requirements, regional haze protection, 
controls for mercury and other hazardous air pollutants, environmental 
requirements associated with electricity restructuring and States' 
carbon dioxide requirements.
    These different programs targeting the power generation industry, 
along with their varying requirements and deadlines, have led to 
considerable uncertainty and cost inefficiencies for the regulated 
community. A comprehensive proposal, like the one you are developing, 
could provide far greater certainty for the regulated community by 
granting relief from additional requirements for a specified period of 
time. In addition, it could promote enormous cost efficiencies in 
developing and implementing control measures for these pollutants.
    Third, a comprehensive and integrated approach could also increase 
efficiency and certainty for State and local air quality regulators. 
The efficiencies would extend not only to devising strategies for 
addressing air pollution control problems from power generators but 
also to reviewing and revising operating permits.
    STAPPA and ALAPCO have investigated the benefits of integrating 
multiple pollutant control strategies for various industrial sectors, 
including the power generation industry. In a report we published in 
October 1999, Reducing Greenhouse Gases and Air Pollution: A Menu of 
Harmonized Options, we identified hundreds of regulatory measures and 
policy options that could be implemented at the Federal, State and 
local levels. We then selected four areas--New Hampshire; Atlanta, 
Georgia; Louisville, Kentucky; and Ventura, California--and, with the 
assistance of the air agencies, modeled technologically feasible and 
cost-effective strategies that could lead to multiple pollution control 
benefits in those areas. This modeling illustrated that measures to 
achieve substantial emissions reductions for a variety of pollutants 
are available to all areas through the selection of optimal control 
strategies designed to meet the needs of their specific circumstances. 
We have shared copies of this report with your staff and would be happy 
to provide further information on the study if you desire.
    Recognition of the wisdom of an integrated approach is increasing 
among environmental regulators, utility regulators and State energy 
officials alike. Recently, for example, STAPPA and ALAPCO participated 
in a process that is consistent with the intent of your legislation. In 
March 2000, STAPPA and ALAPCO met with leaders of the national 
associations representing State energy commissioners, State utility 
regulatory commissioners and State environmental commissioners. The 
purpose of the gathering was to discuss opportunities and barriers to 
pursuing multiple pollutant strategies that would help meet 
environmental requirements and be energy efficient and reliable. Many 
of the States represented at the meeting pledged to continue 
discussions within their communities, not only with their governmental 
counterparts, but also with other important stakeholders. This process 
is ongoing and another, much larger meeting of these groups is planned 
for September 2000 to continue and expand these discussions.
    While we are in favor of a comprehensive and integrated approach to 
reducing emissions from power generation, we do believe there are 
several areas in which we need to exercise caution. For example, 
although we support flexibility in the regulations to reduce costs for 
the regulated industry (e.g., emissions trading), we must ensure that 
there will not be localized adverse environmental impacts. In addition, 
we strongly believe that interpollutant trading of certain toxic 
substances, such as mercury, should not be included as part of a 
trading program. We believe it is possible to craft a program, however, 
that provides flexibility without compromising these important 
principles.
    We look forward to continuing our participation in developing your 
legislative proposal. We believe that legislation containing an 
integrated, comprehensive strategy, if structured properly, could lead 
to increased environmental protection at an accelerated rate, result in 
substantial cost efficiencies and increased certainty for both the 
regulated community and the regulators and reduce litigation. Clearly, 
many of the details of such a proposal will be controversial and will 
need to be negotiated, including the stringency of emission limits or 
performance standards, the deadlines and schedules and whether the 
program is mandatory or voluntary. However, we are confident that, 
working together, we can devise a beneficial and worthwhile legislative 
proposal.
    Thank you for this opportunity to provide you with our views on 
this important subject. Please do not hesitate to contact either of us 
or Bill Becker, STAPPA/ALAPCO's Executive Director, if you have any 
questions or require additional information.
            Sincerely,
                                         Ronald C. Methier,
                                               President of STAPPA.

                                        Marcia T. Willhite,
                                               President of ALAPCO.
                               __________
 Statement of Hon. George V. Voinovich, U.S. Senator from the State of 
                                  Ohio
    Mr. Chairman, I want to commend you for continuing hearings on 
Clean Air Act reauthorization. In particular, I commend you and 
Chairman Smith for holding today's hearing in an effort to try to 
create a multi-pollutant, incentive-based emission reduction bill. I 
believe such an approach will allow utilities to make their necessary 
emission reductions in an efficient and cost-effective manner, provide 
the best benefits to public health and the environment, and ensure 
electricity reliability.
    I would also like to extend a warm welcome to Jim Rogers, Vice 
Chairman, President and CEO of Cinergy Corporation in Cincinnati. 
Cinergy is a responsible corporate citizen in the environmental arena. 
I appreciate Cinergy's contributions to Ohio's economy and for its 
civic and philanthropic leadership in Southwest Ohio. I am pleased that 
Mr. Rogers could join us today.
    Ohio has realized significant improvements in air quality in recent 
years. Overall the ozone level in Ohio has gone down by 25 percent and 
in many urban areas, it has gone down by 50 percent in the past 20 
years.
    In addition, when I first entered office as Governor in 1991, most 
of Ohio's urban areas were not attaining the 1-hour ozone NAAQS 
standard. By the time I left office in 1998, all cities had attained 
the standard, except one. However, Cincinnati is now meeting the 
standard and is awaiting action by the EPA to be redesignated as in 
attainment.
    We've seen similar results across the nation. For instance, sulfur 
dioxide emissions from utilities peaked in 1975 at 18.3 million tons, 
but these were reduced to 13.1 million tons by 1997.
    Likewise, NOx emissions have decreased. EPA projected that by the 
end of this year, power plant NOx emissions will be 4.6 million tons a 
2.1 million ton reduction since the Clean Air Act was implemented.
    Is that enough? No, but the point is that the nation's air is the 
cleanest it has been in 20 years. And these emission reductions have 
occurred during substantial economic growth. So often we ignore the 
progress we have made.
    However, we have come to the point now where there will be 
significant costs for further reductions. For example, it is estimated 
that the NOx SIP call will cost Ohio utilities alone $1.5 billion in 
initial capital investments plus annual operation and maintenance 
costs. We need to make sure that the further steps that we take to 
reduce utility emissions are based on sound science, are based on an 
analysis of costs and benefits and reasonable alternatives, and provide 
flexibility for implementation in a cost-effective manner.
    However, one of the things that strikes me about the Clean Air Act 
is the number of requirements that are geared toward reducing the same 
pollutants. Bill Tyndall, Vice President of Environmental Services and 
Federal Affairs at Cinergy Corporation, testified last fall before this 
subcommittee on the successes and concerns regarding the Clean Air Act. 
He identified numerous requirements that the utility industry faces to 
reduce NOx emissions such as the NOx SIP call, the 126 petitions, the 
pending 8-hour ozone and PM2.5 NAAQS standards, New Source Review and 
Regional Haze just to name a few. He outlined an equal number of 
requirements to reduce sulfur emissions.
    It seems there ought to be a way for these companies to come up 
with a strategy to address future regulations upfront rather than going 
about these reductions in a piecemeal approach of installing one type 
of control technology 1 year and a different type several years down 
the road.
    I want to make it clear that I'm not saying that making emission 
reductions are bad. While I have some concerns with how the Clean Air 
Act is being implemented, it is the law to protect and promote public 
health and clean air. And that law needs to be followed. But what is 
needed are some clear guidelines and some assurances that the Federal 
Government won't change the rules down the road.
    We need to take a broad look at emission reductions and then 
provide flexibility for the industry to meet those goals. It is 
important for industry and the states to know the rules of the game.
    This will allow for better planning and implementation of Clean Air 
Act requirements and allow those requirements to be implemented in an 
efficient and cost-effective way to provide the best benefit to public 
health and the environment.
    I see an incentive-based approach as a positive way to ensure that 
air quality standards are met, but in a more efficient and cost-
effective way.
    Thank you, Mr. Chairman. I look forward to today's testimony.
                               __________
     Statement of David G. Wood, Associate Director, Environmental 
   Protection Issues, Resources, Community, and Economic Development 
           Division, United States General Accounting Office
    Mr. Chairman and members of the subcommittee: I am pleased to be 
here today to discuss issues concerning the implementation of the Clean 
Air Act, a comprehensive Federal law that regulates air emissions from 
stationary and mobile sources. The act was last reauthorized and 
amended by the Congress in 1990. Those amendments--particularly the 
first six titles of the law--require the Environmental Protection 
Agency (EPA) to take a number of actions such as issuing new 
regulations and guidance documents, undertaking research studies, and 
preparing reports for the Congress. The amendments established 
statutory deadlines for many of these actions.
    As you requested, my testimony today will focus on EPA's 
implementation of the Clean Air Act Amendments and on sources regulated 
by multiple provisions of the act. Specifically, I will discuss (1) the 
status of EPA's implementation of requirements established by the 1990 
amendments; (2) the views from stakeholders--State governments, local 
programs, industries that are regulated under the act, and 
environmental advocacy groups--on the issues that have either helped or 
hindered the implementation of the 1990 amendments; (3) examples of 
emission sources subject to regulation under more than one Clean Air 
Act program; and (4) the status of EPA's efforts to facilitate 
compliance for such sources. This testimony is based on our April 
report and ongoing work for this subcommittee that relates to emission 
sources affected by multiple provisions of the act. We will issue a 
report on the latter work this month.
    In summary, we found the following:
    As of February 2000, EPA had completed the majority of the 538 
required actions it identified under the 1990 amendments' first six 
titles. However, not all the requirements were met within the statutory 
deadlines: EPA missed the statutory deadlines for 198 of the 247 
requirements with deadlines by February 2000, and will likely miss 62 
of the 108 future statutory requirements with deadlines (primarily 
requirements to establish new standards for certain hazardous air 
pollutants). EPA officials attributed the agency's inability to meet 
its statutory deadlines to (1) its increased emphasis on obtaining 
stakeholders' review and involvement during the development of 
regulations, which added to the time needed to issue regulations, and 
(2) technical, policy, or legal issues that were not fully anticipated 
in 1990.
    Stakeholders provided a variety of views on the issues that have 
helped or hindered the implementation of the six titles. A number of 
stakeholders expressed the view that flexibility in the amendments has 
helped their implementation; for example, the trading system for sulfur 
dioxide emissions, under which utilities that reduce their emissions 
below required levels may sell their allowances to other utilities to 
help them meet their requirements. This allows electric utilities to 
achieve required sulfur dioxide emissions reductions at a lower cost. 
Also, stakeholders cited the specificity of goals and requirements as 
helpful; for example, the title dealing with stratospheric ozone 
depletion listed the affected chemicals and the dates for their 
eventual phase-out. Stakeholders cited inadequate resources at the 
State and local levels to effectively implement and enforce the 
amendments as a factor that has hindered implementation.
    The large industrial complexes operated by the petrochemical and 
refinery, chemical manufacturing, and electric power industries are 
prime examples of sources regulated under multiple Clean Air Act 
programs. For example, the emissions of nitrogen oxides from electric 
power plants are controlled under six programs, including those for 
controlling acid rain, ground-level ozone, and fine particles and 
programs for improving visibility. In addition, petrochemical 
refineries are regulated under five different titles of the 1990 
amendments, and individual chemical plants may be regulated by as many 
as seven different statutorily authorized programs. Additional State 
and local requirements may also apply to the same industrial emissions 
sources.
    EPA has embarked on a number of initiatives to reduce the 
regulatory workload and facilitate compliance for such facilities. 
These include two industry-specific efforts and other generic 
approaches, such as establishing total plant-wide emissions limits, to 
introduce more flexibility in the overall regulatory rulemaking and 
permitting processes. EPA's two industry-specific efforts are the 
Consolidated Air Regulation and the Clean Air Power Initiative. The 
Consolidated Air Regulation is intended to incorporate all Federal air 
regulations that affect the synthetic organic chemical manufacturing 
industry into a single set of regulations. This proposed regulation, 
currently pending approval by the Office of Management and Budget, 
would reduce the regulatory burden and enhance enforceability by having 
one set of emissions controls and monitoring, record keeping, and 
reporting requirements. The Clean Air Power Initiative is an effort to 
develop new regulatory approaches for controlling nitrogen oxide and 
sulfur dioxide from electric power plants. According to EPA and 
industry officials, efforts on this initiative have been suspended 
because of disagreement within the industry as well as within EPA over 
the appropriate level for proposed sulfur dioxide and nitrogen oxide 
reductions.
Background
    The Clean Air Act, enacted in 1963 and substantially overhauled in 
1970, is a comprehensive Federal law that regulates air emissions from 
stationary and mobile sources. This law authorizes EPA to, among other 
things, establish National Ambient Air Quality Standards to protect 
public health and welfare. In large part, the 1990 amendments to the 
Clean Air Act were intended to meet unaddressed or insufficiently 
addressed problems. The major provisions of the amendments are 
contained in the first six titles.
      Title I of the 1990 amendments establishes a more 
comprehensive approach for States to implement, maintain, and enforce 
the National Ambient Air Quality Standards.
      Title II contains provisions for controlling air 
pollution from motor vehicles, engines, and their fuel.
      Title III establishes new requirements to reduce the 
emissions of hazardous air pollutants (often called ``air toxics'') 
that are known or suspected of causing cancer or other serious health 
effects.
      Title IV establishes the acid deposition control program 
to reduce the adverse effects of acid rain by reducing annual emissions 
of pollutants, which are precursors of acid rain.
      Title V establishes a national permit program to ensure 
compliance with all applicable requirements of the act and to enhance 
EPA's and the States' ability to enforce the act. Title V requires the 
States to establish permit programs.
      Title VI establishes provisions to protect the 
stratospheric ozone layer.
    Each of these titles requires EPA to, among other things, 
promulgate regulations, publish final guidance for State air pollution 
control programs, and issue various research reports to the Congress. 
Most of the requirements involve promulgating regulations to implement 
the act. Once the regulations are promulgated, it is generally up to 
State and local air pollution control agencies to enforce their 
provisions, with oversight from EPA.
    Status of EPA's Implementation of the Clean Air Act Amendments of 
1990
    While EPA has completed the majority of the actions required by the 
1990 amendments, it has not done so in accordance with all statutory 
deadlines. EPA missed the statutory deadlines for 198 of the 247 
requirements with deadlines by February 2000. Furthermore, according to 
EPA officials, it is unlikely that the agency will meet the deadline 
for 62 of the 108 remaining statutory requirements (primarily 
requirements to establish new standards for certain hazardous air 
pollutants). Specifically, the officials do not believe they will meet 
the November 15, 2000, deadline for establishing standards for 
hazardous air pollutants.
    EPA officials cited several factors explaining why the agency has 
missed deadlines including: (1) its increased emphasis on obtaining 
stakeholders' review and involvement during regulatory development, 
which added to the time needed to issue regulations; (2) the setting of 
priorities to manage the work load resulting from the 1990 amendments, 
which created a tremendous number of new responsibilities for EPA; (3) 
complications associated with the startup and effective implementation 
of new programs (e.g., operating permits and air toxics), which posed 
technical, policy, or legal issues that were not fully anticipated in 
1990; (4) competing demands caused by the work load associated with 
EPA's response to lawsuits challenging some of its rules; and (5) the 
emergence of new scientific information and other factors that led to 
major Clean Air Act activities that did not arise from the 1990 
amendments, such as the effort to reduce the regional transport of 
ozone pollution throughout the East.
    It is important to recognize that in terms of their ultimate impact 
on the environment, all requirements are not equal. For example, a 
requirement that EPA issue a rule on monitoring a limited number of 
stationary sources in a single industry has neither the complexity nor 
the impact of a provision that requires dozens of States to submit 
implementation plans to attain a major national ambient air quality 
standard. The latter is inherently more difficult to accomplish and 
often requires States and local agencies to pass legislation and issue, 
adopt, and implement rules. Certain programs are implemented largely by 
States and require extensive, continuing interaction between EPA and 
the nation's Governors, State legislators, county officials, State and 
local regulators, and others on numerous complex requirements while 
others are implemented solely by EPA.
    Views of Key Stakeholders on Major Issues Affecting Implementation 
of the Clean Air Act Amendments of 1990
    The stakeholders we interviewed from environmental groups, 
industrial groups, and State and local governments stated that the 
Clean Air Act Amendments of 1990 have had positive effects on the 
environment by reducing pollutant emissions. However, the stakeholders 
had differing views on the issues that either helped or hindered the 
effective implementation of specific provisions.
Extent of Flexibility in Meeting Requirements
    One of the overarching issues affecting implementation cited by 
stakeholders is the tension between allowing States and sources of 
pollution the flexibility to develop their own approaches for achieving 
air quality improvements and using a more prescriptive ``command and 
control'' approach. For example, the title IV acid rain program, as 
designed by the Congress and implemented by EPA, attempted to strike a 
balance between traditional command and control principles--which 
specify where and how emissions reductions must be achieved--and the 
flexibility of market-based measures for reducing air pollution. 
Specifically, this program uses a market-based approach to allow 
electric utilities to trade sulfur dioxide allowances with other 
utilities. Utilities that reduce their emissions below the required 
level can sell their extra allowances to other utilities to help them 
meet their requirements. Stakeholders from environmental and industrial 
groups and State and local governments told us that the flexibility 
provided by the acid rain program's sulfur dioxide emissions allowance-
trading system enabled the required emissions reductions to be achieved 
at a lower cost than that estimated at the time the amendments were 
passed. Other stakeholders pointed out that because the legislation 
specified the reduction goals and identified the power plants that were 
required to achieve these reductions, the program was administratively 
more efficient to implement.
    According to some stakeholders, adopting more market-based 
approaches like the acid rain program is a particularly effective way 
of achieving greater flexibility. In their view, this program has shown 
that an aggregate ``cap'' on emissions, which permits individual 
sources to trade allowances, can lead to lower-cost emissions 
reductions than those under the traditional command and control 
approach used in other programs. EPA officials agreed that the ``cap 
and trade'' approach can reduce emissions at a lower cost (and, in some 
cases, reduced pollution levels as well) than those under a traditional 
command and control approach. However, they pointed out that to work 
effectively, cap and trade programs traditionally require a well-known 
population of sources with extremely well-characterized emissions and 
control costs. According to EPA, in some circumstances, other forms of 
economic incentive programs and approaches (e.g., open market trading 
and emission fee programs) can be added to the existing regulatory 
structure and can provide incentives for reductions from other source 
categories when accountability is adequate. For this reason, EPA has 
issued rules and guidance that allow States and other stakeholders to 
consider a variety of economic incentive approaches to both reduce 
costs and gain improved environmental quality.
Specificity of Requirements
    Several stakeholders identified the specificity in the amendments 
or in implementing regulations as an important factor affecting 
implementation. For example, according to a State and local government 
organization, specifying the amount of sulfur dioxide emissions 
reductions to be achieved and the specific power plants where the 
reductions were to come from made it easier to achieve the required 
reductions in sulfur dioxide emissions. The stratospheric ozone 
provisions of title VI--which specify the affected chemicals and the 
timeframes for their eventual phaseout--were also cited by stakeholders 
as an example of successful implementation.
Adequacy of Funding
    The States, State organizations, and environmental groups that we 
interviewed all commented that State and local governments need 
additional funding to more effectively implement the requirements of 
the amendments. According to a director of an organization that 
represents all State and local governments, there is currently a $140 
million annual shortfall in funds for implementation of the Clean Air 
Act at the State and local government levels.
    EPA awards grants to the States and local government agencies to 
help them implement the amendments. However, the agency has reduced 
this funding over the last several years by 25 percent, to $120 million 
annually. According to a State and local government organization, EPA 
justified the decrease by considering the funding available to States 
and local air pollution control agencies through permit fees (which are 
assessed on regulated sources for permits required by the Clean Air 
Act). However, according to a stakeholder representing an environmental 
group, there is a scarcity of funds from permits because States have 
been under pressure to keep the fees low. EPA officials stated that 
they work jointly with States and local agencies to establish 
priorities on the basis of available funding and, through work plan 
negotiations for grants, have been successful in directing grant funds 
toward agreed-upon priorities.
Examples of Sources Subject to Multiple Clean Air Act Regulatory 
        Programs
    Because the act is structured to address different aspects of the 
nation's air pollution problems, some sources are regulated by more 
than one statutory program. For example, industrial emissions sources 
such as petroleum refineries, chemical manufacturing facilities, and 
electric power plants are sometimes regulated under multiple provisions 
of the act and numerous associated Federal air regulations.
Petrochemical and Refinery Industry
    Petrochemical and refinery facilities are regulated under all of 
the first five titles of the 1990 amendments and a multitude of EPA 
regulations designed to implement the legislative provisions. In 
addition to the large number of existing air regulations, the industry 
is faced with planning and implementing measures to comply with a host 
of new requirements beginning in 2000.
    According to industry officials, efforts to comply with one program 
by controlling emissions of a pollutant from a single facility may have 
the unintended effect of increasing emissions of other pollutants from 
elsewhere in the same facility. For example, title II requires the 
petroleum industry to reduce sulfur levels in gasoline to help produce 
cleaner fuels for motor vehicles. Producing these cleaner fuels, 
however, requires changes in the refining process that may increase the 
emissions of other pollutants including such hazardous air pollutants 
as benzene, formaldehyde, and mercury from emission points within the 
refineries.
    EPA officials told us that while they do not expect this to occur 
at all refineries, it could occur at some. According to the officials, 
this case illustrates how separate requirements can serve different, 
but equally important purposes. The low-sulfur gasoline requirements 
will work nationwide to help ensure that air quality improves 
significantly in areas where mobile sources are a primary source of 
pollution. On the other hand, permitting requirements for statutory 
sources ensure that an individual facility's emission increases do not 
contribute to a local air quality problem.
Chemical Manufacturing Industry
    Within chemical manufacturing facilities, individual emission 
sources such as storage tanks may be subject to four or five different 
regulatory programs. At any given facility, all or part of the 
following--in addition to obtaining title V operating permits--may 
apply: (1) meeting standards for new source construction permitting, 
(2) reducing the emissions of hazardous air pollutants, (3) meeting new 
source performance standards, and (4) complying with visibility 
protection requirements.
    According to industry officials, the act's regulatory process is an 
especially complex system and it is not always clear which emission 
reduction requirements are applicable to a specific source. For 
example, the emissions of pollutants known as volatile organic 
compounds (VOC's) are subject to regulation under title I of the 1990 
amendments, but some are also considered to be hazardous air 
pollutants, which are regulated under title III. Thus, the same 
facility may be subject to meeting regulatory requirements associated 
with each title. According to industry officials, in some cases, EPA 
has recognized the title III requirement (under which the source must 
meet emissions levels associated with maximum achievable control 
technology standards) as the most stringent, and so the VOC emissions 
control requirements are considered to be satisfied through 
demonstrated compliance with the technology standards. According to an 
industry official, however, EPA has, in some situations, required that 
facilities report or demonstrate compliance with both emissions 
reduction requirements.
Electric Power Industry
    Electric-power-generating facilities may be subject to more than a 
dozen Federal air regulations and initiatives that have different 
objectives, timeframes, and compliance requirements. For example, the 
emissions of nitrogen oxides from power plants are subject to 
regulation under several title I programs, including (1) the national 
ambient air quality standards program, (2) the new source review 
program for minimizing air pollution from large new stationary sources; 
and (3) the visibility improvement program. Nitrogen oxides emissions 
are also controlled under the title IV acid deposition program, which 
is targeted at specific electric utility plants. According to industry 
officials, some of the regulations affecting the same air pollutants 
and emissions sources can make it difficult for the industry to 
accurately determine the applicability of each of the requirements and 
to develop effective emissions control strategies.
EPA Efforts to Address Sources Affected by Multiple Clean Air Act 
        Requirements
    Recognizing that individual facilities are regulated under multiple 
programs, EPA has undertaken initiatives to reduce the regulatory 
workload and facilitate compliance for such facilities. These include 
two industry-specific efforts--the Consolidated Air Regulations and the 
Clean Air Power Initiative--and several generic approaches to introduce 
more flexibility and stakeholder involvement in the rulemaking and 
permitting processes.
Consolidated Air Regulations
    One of the administration's initiatives aimed at reinventing 
environmental regulations was to consolidate Federal air regulations, 
so that all Federal air requirements for an industry would be 
incorporated into a single set of regulations. EPA used the regulations 
applicable to the synthetic organic chemicals manufacturing industry 
for its pilot study of the feasibility of consolidating and 
streamlining existing Federal air quality regulations. The synthetic 
organic chemical manufacturing industry was selected for the pilot 
because of the large number of air regulations that apply to the 
industry's facilities and the similarity in many of the requirements in 
the existing regulations. The resulting single set of regulations, 
which incorporates all of the applicable requirements for 16 different 
air regulations that affect the industry, is referred to as the 
Consolidated Air Regulations. Participation in the consolidated 
regulations by facilities will be voluntary; facilities may choose to 
continue being regulated under the 16 separate regulations or the 
consolidated regulations. EPA's objectives are to (1) reduce the 
regulatory burden, (2) facilitate implementation and compliance, and 
(3) ensure the continued environmental protection and enforceability of 
the regulations. Proposed by EPA in October 1998, the consolidated 
regulations are currently being reviewed by the Office of Management 
and Budget.
    The Consolidated Air Regulations are intended to maintain the 
current levels of health and environmental protection benefits 
currently afforded by the 16 existing regulations and also to ensure 
the same degree of emission controls as the existing regulations do or 
a greater degree than they do. However, the level of human health and 
environmental protection may be greater in some instances because the 
regulations will require some facilities (that choose the consolidated 
regulations) to meet more stringent emissions reductions or 
requirements.
    Because of the reduced burden afforded by the Consolidated Air 
Regulations, some sources are expected to elect to comply with the 
consolidated regulations despite the more stringent requirements. 
However, according to EPA officials, it is unclear at this time how 
many of the synthetic organic chemical manufacturing facilities will 
elect to participate because the consolidated regulations requirements 
may require some to achieve larger emissions reductions than they are 
currently required to meet under the older air regulations. EPA 
officials acknowledge that progress has been slower than expected 
because of difficulties in getting the chemical industry to agree on 
specific environmental protection requirements in the consolidated 
regulations and their reluctance to accept the more stringent emission 
reductions.
Clean Air Power Initiative
    The concerns about the electric power generating industry's costs 
to control multiple pollutants under several provisions of the Act 
added by the 1990 amendments prompted EPA to initiate the Clean Air 
Power Initiative (CAPI). In consultation with electric power industry 
representatives, EPA developed an integrated regulatory strategy for 
sulfur dioxide and nitrogen oxides emitted from power plants. The 
purpose of this collaborative effort was to seek new approaches to 
pollution control that would improve public health and the environment 
but simultaneously cost less and reduce the number and complexity of 
current and expected requirements. EPA began the CAPI in 1995 by 
meeting with interested stakeholders to discuss more cost-effective 
alternatives to pollution control and developing a model that could 
analyze the costs and emissions implications of different reduction 
scenarios for sulfur dioxide and nitrogen oxides.
    However, the lack of complete support within the electric power 
industry ended the initial effort in late 1996 without agreement, 
according to EPA officials. Some stakeholders believed that the 
controls suggested under the CAPI were not desirable or cost-effective, 
according to an EPA official, because they had not yet been required 
through rulemaking. According to officials at Edison Electric 
Institute, the initiative ended because (1) there was substantial 
disagreement over the science underlying EPA's proposed new controls 
for sulfur dioxide and nitrogen oxides; (2) EPA could not provide any 
regulatory certainty should a program be mutually agreed to; and (3) 
certainty could result only from amending the act, which neither 
stakeholder wanted to pursue.
    In late 1998 and throughout 1999, EPA staff participated in the 
Edison Electric Institute Air Quality Integration Dialogue at which EPA 
and industry staff explored an integrated approach for controlling 
pollution from the electric power industry. The dialog had broad 
industry participation as well as EPA staff participation. The White 
House Climate Change Task Force also attended these meetings. The 
Dialogue was intended to promote a free exchange of ideas and analysis 
at a staff level concerning new or potentially upcoming regulatory 
actions to address air emissions of sulfur dioxide, nitrogen oxides, 
carbon dioxide, and mercury.
    EPA continues to believe that over the next several years, it will 
probably be necessary for the power industry to achieve large 
reductions of sulfur dioxide and nitrogen oxides. According to agency 
officials, there continues to be considerable interest in developing an 
integrated approach to address cost-effective strategies for 
implementing multiple air regulations. EPA has had a number of followup 
discussions and expects to continue interactions with industry 
representatives on this topic.
Other Initiatives to Address Multiple Regulation Issues
    In addition to the Consolidated Air Regulations and the Clean Air 
Power Initiative, EPA has developed other regulatory approaches to 
provide industry with more flexibility to achieve the necessary 
reductions in air pollution, while still providing accountability for 
the results. For example, EPA allows facilities to average the 
emissions from all emissions points and to use trading programs in 
order to provide more flexibility in how and where an industrial 
facility chooses to reduce its air emissions. In some cases, EPA has 
set plant wide limits that control total emissions that are allowed to 
be released from an individual plant. These efforts provide latitude to 
industries in choosing how and where to reduce emissions.
    EPA has also worked with individual industries to eliminate 
duplicating or overlapping regulatory requirements. For example, EPA 
worked with industry organizations, such as aerospace and shipbuilding 
and coating operations, to set limits for VOCs and toxic air pollutants 
and with the pharmaceutical industry to give it more flexibility in 
complying with new source performance standards for storage tanks.
    Furthermore, EPA and various stakeholders began, in 1993, to 
identify opportunities for developing ``cleaner, cheaper, smarter'' 
environmental protection strategies that were tailored toward 
environmental protection and would consider the unique circumstances of 
different industries. EPA, along with States, environmental and public 
interest groups, and the environmental justice community worked with 
six industries--petroleum refining, printing, iron and steel, computer 
and electronics, metal finishing, and auto manufacturing--to find 
better ways to manage environmental responsibilities. With the 
completion of the Common Sense Initiative--one of EPA's efforts to 
``reinvent'' environmental regulation--EPA is applying the lessons 
learned to other sections of the act.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to respond to any questions you may have.
Contact and Acknowledgements
    For further information regarding this testimony, please contact 
David G. Wood at (202) 512-6111. Individuals making key contributions 
to this testimony included William McGee, Harry Everett, Odell Pace, 
and Karen Keegan.
                                 ______
                                 
         [Report of the General Accounting Office, April 2000]
Air Pollution: Status of Implementation and Issues of the Clean Air Act 
                           Amendments of 1990
            (Letter Report, April 17, 2000, GAO/RCED-00-72)
                                 ______
                                 
                                                     April 17, 2000

The Honorable James M. Inhofe, Chairman,
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear 
        Safety,
Committee on Environment and Public Works,
U.S. Senate.

Dear Mr. Chairman: The Clean Air Act, \1\ last reauthorized and amended 
by the Congress in 1990, provides for a number of related programs 
designed to protect health and control air pollution. The Clean Air Act 
Amendments of 1990 established new programs and made major changes in 
the ways that air pollution is controlled. The amendments require the 
Environmental Protection Agency (EPA) to take a number of actions--such 
as issuing new regulations and guidance documents, undertaking research 
studies, and preparing reports to the Congress--and specify a deadline 
for many of them. The majority of these requirements are found in the 
amendments' first six titles; EPA has identified 538 such requirements, 
361 of which have a statutory deadline. Additionally, the amendments 
specify deadlines for states and local air pollution control agencies--
who play a pivotal role in implementing the Act--to respond to the 
rules promulgated by EPA.
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    \1\42 U.S.C. 7401-7626. Unless otherwise stated, in this report, 
``the Act'' refers to the Clean Air Act as amended in 1990. 
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    With reauthorization of the Clean Air Act impending, you asked us 
to provide information on the implementation of the first six titles of 
the 1990 Clean Air Act amendments. \2\ Specifically, you asked us to 
(1) provide information on the status of EPA's implementation of the 
requirements established by the 1990 amendments and (2) obtain views 
from state governments, local programs, industries that are regulated 
under the Act, and environmental advocacy groups (collectively referred 
to as stakeholders) on the issues that have either helped or hindered 
the implementation of the 1990 amendments. \3\
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    \2\ This report does not address the implementation of requirements 
established prior to the 1990 amendments.
    \3\ A list of specific stakeholders contacted for this report is in 
Appendix VII.
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Results in Brief
    As of February 2000, EPA had identified 538 requirements under the 
1990 amendments' first six titles, of which 409 have been met. Of the 
requirements that have been met, 162 had no statutory deadlines, and 
the remaining 247 had statutory deadlines before the end of February 
2000. EPA missed the statutory deadline for 198 of these 247 
requirements with a deadline. Of the 129 requirements that the agency 
has not met, 6 had a statutory due date prior to February 2000, 108 
have a statutory due date after February 2000, and 15 do not have a 
statutory due date. EPA will likely miss 62 of the 108 future statutory 
requirements, which are related to establishing new standards for 
hazardous air pollutants. EPA officials attributed the agency's missing 
of statutory deadlines to several reasons, including (1) an increased 
emphasis on stakeholders' review and involvement during the development 
of regulations, which added to the time needed to issue regulations; 
(2) the setting of priorities to manage the workload resulting from the 
1990 amendments, which created a tremendous number of new 
responsibilities for EPA; and (3) complications associated with the 
startup and effective implementation of new programs, including 
technical, policy, or legal issues that were not fully anticipated in 
1990.
    Stakeholders provided a variety of views on the issues that have 
helped or hindered the implementation of the six titles. The following 
were the most commonly cited issues:
      The degree of flexibility allowed for states and 
regulated pollution sources to determine how they will achieve required 
air quality improvements. A number of stakeholders expressed the view 
that flexibility in the Act has helped implementation. For example, 
according to stakeholders, the emissions allowance-trading system--
under which utilities that reduce their emissions below required levels 
can sell their allowances to other utilities to help them meet their 
requirements--established by the title dealing with acid rain is a good 
example of flexibility. This allows electric utilities to achieve 
required sulfur dioxide emissions reductions at a lower-than-expected 
cost. One of the challenges facing the Congress in considering the 
reauthorization of the Clean Air Act is determining the appropriate 
balance between traditional command and control approaches and more 
flexible approaches that allow states and local air pollution control 
agencies and other stakeholders to implement the most cost-effective 
strategies, while meeting national air quality goals.
      The extent to which goals and requirements are clearly 
specified in the statute or regulations. For example, stakeholders 
cited the specificity in the Act's title dealing with stratospheric 
ozone depletion, which listed the affected chemicals and the dates for 
their eventual phase-out, as contributing to the successful 
implementation of that title.
      The adequacy of resources at the state and local level to 
effectively implement and enforce the statute. Stakeholders cited 
inadequate resources as an example of where the implementation of the 
1990 amendments has been hindered.
Background
    The Clean Air Act, enacted in 1963 and substantially overhauled in 
1970, is a comprehensive Federal law that regulates air emissions from 
stationary and mobile sources. This law authorizes EPA to, among other 
things, establish National Ambient Air Quality Standards (NAAQS) to 
protect public health and welfare. The goal of the 1970 amendments was 
to set and achieve the standards in every state by 1975. The setting of 
pollutant standards was coupled with directing the states to develop 
state implementation plans applicable to appropriate sources in the 
state. The Congress amended the statute again in 1977 primarily to set 
new goals or dates for attaining the standards, since many areas of the 
country had failed to meet the deadlines.
    In large part, the 1990 amendments to the Clean Air Act were 
intended to meet unaddressed or insufficiently addressed problems. The 
major provisions of the amendments are contained in the first six 
titles. Each of these titles requires EPA to, among other things, 
promulgate regulations, publish final guidance for state air pollution 
control programs, and issue various research reports to the Congress. 
Most of the requirements involve promulgating regulations to implement 
the Act. Once the regulations are promulgated, it is generally up to 
state and local air pollution control agencies to enforce their 
provisions, with oversight from EPA.
      Title I of the 1990 amendments establishes a more 
comprehensive approach for states to implement, maintain, and enforce 
the NAAQS.
      Title II contains provisions for controlling air 
pollution from motor vehicles, engines, and their fuel.
      Title III establishes new requirements to reduce the 
emissions of hazardous air pollutants (often called ``air toxics'').
      Title IV establishes the acid deposition control program 
to reduce the adverse effects of acid rain by reducing the annual 
emissions of pollutants that are precursors of acid rain. \4\
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    \4\ Acid deposition is caused mainly by coal that is burned in 
large electrical utility plants in the Midwest. When the coal is 
burned, large amounts of sulfur dioxide are released. It is then 
carried by winds toward the East Coast of the United States and Canada, 
where the acids become part of rain, snow, or fog in the area, or 
remain in gas or particle form and settle onto land as dry deposition. 
Falling to earth, acid rain can damage plant and animal life as well as 
lakes and streams.
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      Title V establishes a national permit program to ensure 
compliance with all applicable requirements of the Act and to enhance 
EPA's and the states' ability to enforce the Act. Title V requires the 
states to establish permit programs.
      Title VI establishes provisions to protect the 
stratospheric ozone layer.
    Although the Clean Air Act is a Federal law covering the entire 
country, the states are responsible for carrying out much of the 
statute. Under the law, EPA sets limits on how much of certain 
pollutants can be in the air anywhere in the United States. This 
ensures that all Americans have the same basic environmental 
protections. The 1990 amendments set deadlines for EPA, states, local 
governments, and businesses to reduce air pollution. These deadlines 
were designed to be more realistic than the deadlines in previous 
versions of the law.
    According to EPA, by many measures, the quality of the nation's air 
has improved in recent years. Great strides have been made in combating 
urban air pollution, toxic air pollution, depletion of the 
stratospheric ozone layer, and acid rain. Specifically, ground-level 
ozone, particulate matter, and carbon monoxide emissions have been 
reduced; the emissions of toxic air pollution are expected to decrease 
by 1.5 million tons a year; production of the most harmful ozone 
depleting chemicals has ceased; sulfur dioxide emissions have been cut 
by more then 5 million tons from the 1980 level; and motor vehicles and 
fuels are far cleaner than in 1990 as a result of revised emissions 
standards. As shown in figure 1, while the United States enjoyed major 
increases in population, gross domestic product, and vehicle miles 
traveled, the aggregate emissions of the six criteria pollutants 
decreased by 31 percent from 1970 through 1997. \5\
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    \5\ The six criteria pollutants are ozone, carbon monoxide, 
particulate matter, sulfur dioxide, nitrogen oxide, and lead. Thea are 
called criteria pollutants because the Agency set permissable levels 
for them on the basis of ``criteria'' or information on the effects on 
public health or welfare that may be expected from the presence of such 
pollutants.

    Although changes in the economy and other factors affect emissions 
trends, according to EPA, the emissions of air pollutants would be much 
higher without the Clean Air Act. EPA's Assistant Administrator for Air 
and Radiation has stated that the implementation of the Clean Air Act 
Amendments of 1990 has substantially cut air pollution over the past 9 
years. \6\ The stakeholders we interviewed--including environmental 
groups, industrial groups, and state and local governments--also agreed 
that the 1990 amendments have had a positive effect on the environment.
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    \6\ Testimony of the Assistant Administrator, Office of Air and 
Radiation, Environmental Protection Agency, before the U.S. Senate, 
Committee on Environment and Public Works, Subcommittee on Clean Air, 
Wetlands, Private Property, and Nuclear Safety (Oct. 14, 1999).
---------------------------------------------------------------------------
    However, according to EPA's Assistant Administrator, the Nation 
still has a long way to go to reach the agency's goal of clean air 
nationwide. For example, as shown in figure 2, in 1997, approximately 
107 million people lived in counties with air pollutant concentrations 
that exceeded national ambient air quality standards.

 STATUS OF EPA'S IMPLEMENTATION OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    As of February 2000, EPA had completed the majority of the actions 
required by the 1990 amendments. As shown in figure 3, the bulk of the 
future requirements relate to establishing new standards for hazardous 
air pollutants under title III, which will be completed in 2002, 
according to EPA officials' estimates. However, not all the 
requirements were met within the statutory deadline, and EPA officials 
indicated that additional requirements may be met after the specified 
statutory deadline, particularly those for the hazardous air 
pollutants. The status of implementing each of the amendments' six 
major titles is detailed in appendixes I through VI.

    Note: There are six unmet requirements (one in title I, three in 
title III, and two in title IV) that had a statutory due date prior to 
February 2000. These six requirements are not included in figure 3.
    It is important to recognize that in terms of their ultimate impact 
on the environment, all requirements are not equal. For example, a 
requirement that EPA issue a rule on monitoring a limited number of 
stationary sources in a single industry has neither the complexity nor 
the impact of a provision that requires dozens of states to submit 
implementation plans to attain a major national ambient air quality 
standard. The latter is inherently more difficult to accomplish and 
often requires states and local agencies to pass legislation and issue, 
adopt, and implement rules. Certain programs are implemented largely by 
states and require extensive, continuing interaction between EPA and 
the nation's Governors, state legislators, county officials, state and 
local regulators, and others on numerous complex requirements. Other 
programs are implemented by EPA.
    Overall, as of February 2000, EPA had fulfilled 409 of the 538 
requirements that it identified to implement the amendments' first six 
titles. Of the 409 requirements that have been met, 247 had a statutory 
due date and 162 did not. The majority of actions required for five of 
the six titles have been completed. For example, EPA has completed 126 
of 141 requirements implementing the NAAQS under title I.
    The 129 remaining requirements include promulgating regulations for 
states and local air pollution control agencies to enforce, as well as 
other requirements described in the amendments. Of the 129 requirements 
that are unmet, 6 had a statutory due date prior to February 2000, 108 
have a statutory due date after February 2000, and 15 do not have a 
statutory deadline. About one-half of these unmet requirements are for 
establishing standards for hazardous air pollutants: EPA is to 
promulgate 62 Maximum Achievable Control Technology (MACT) standards 
due by the statutory deadline of November 15, 2000. \7\
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    \7\ These technology-based standards require the maximum degree of 
reduction in emissions that EPA determines achievable for new and 
existing sources, taking into consideration the cost of achieving such 
reduction, health and environmental impacts, and energy requirements.
---------------------------------------------------------------------------
    EPA missed the deadline for 198 of the 247 statutory requirements 
with a deadline through February 2000. \8\ According to EPA officials, 
it is unlikely that the agency will meet the deadline for 62 of the 108 
remaining statutory requirements. Specifically, the officials do not 
believe they will meet the November 15, 2000, deadline for establishing 
standards for hazardous air pollutants.
---------------------------------------------------------------------------
    \8\ EPA has historically been tardy in meeting statutory deadlines. 
We previously recommended that EPA implement a rulemaking tracking 
system to aid the agency in meeting statutory deadlines, but EPA has 
not taken action on this recommendation. See Clean Air Rulemaking: 
Tracking System Would Help Measure Progress of Streamlining Initiatives 
(GAO/RCED-95-70 , Mar. 2, 1995).
---------------------------------------------------------------------------
    EPA officials cited several factors explaining why the agency has 
missed deadlines, including the following: (1) increased emphasis on 
stakeholders' review and involvement during regulatory development, 
which added to the time needed to issue regulations; (2) the setting of 
priorities to manage the workload resulting from the 1990 amendments, 
which created a tremendous number of new responsibilities for EPA; (3) 
complications associated with the startup and effective implementation 
of new programs (e.g., operating permits and air toxics), which posed 
technical, policy, or legal issues that were not fully anticipated in 
1990; (4) competing demands caused by the workload associated with 
EPA's response to lawsuits challenging some of its rules; and (5) the 
emergence of new scientific information and other factors that led to 
major Clean Air Act activities that did not arise from the 1990 
amendments, such as the effort to reduce regional transport of ozone 
pollution throughout the East.
    EPA officials stated that they do not believe they will meet the 
November 15, 2000, deadline for all of the remaining 62 MACT standards. 
(The agency took over 9 years to promulgate 92 existing MACT standards. 
According to EPA, these 92 MACT standards included some of the largest 
and most contentious categories.) The 1990 amendments require that if 
EPA fails to finalize the regulations within 18 months after the 
statutory deadline date, states must develop their own standards. 
According to EPA officials, this would be very expensive and 
cumbersome. However, the officials estimate that they can promulgate 
the required standards within 18 months after the deadline, noting that 
while the agency has missed previous MACT deadlines, it has virtually 
always issued the standards within 18 months of the deadline. According 
to EPA, in no case has any state had to develop its own case-by-case 
MACT determinations.
 VIEWS OF KEY STAKEHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
                  THE CLEAN AIR ACT AMENDMENTS OF 1990
    The stakeholders we interviewed from environmental groups, 
industrial groups, and state and local governments stated that the 
Clean Air Act Amendments of 1990 have had positive effects on the 
environment by reducing pollutant emissions. However, the stakeholders 
had differing views on the issues that either helped or hindered the 
effective implementation of the specific provisions. Key stakeholders' 
views on the major issues affecting the implementation of each of the 
amendments' first six titles is detailed in appendixes I through VI.
    The stakeholders we interviewed from environmental groups, 
industrial groups, and state and local governments identified three 
areas that affected the implementation of the specific provisions of 
the amendments: (1) the extent to which flexibility is allowed in 
meeting the requirements, (2) the specificity of requirements, and (3) 
the adequacy of funding at the state and local levels.
Extent of Flexibility in Meeting Requirements
    One of the overarching issues affecting implementation cited by 
stakeholders is the tension between allowing states and sources of 
pollution the flexibility to develop their own approaches for achieving 
air quality improvements and using a more prescriptive ``command and 
control'' approach. For example, the title IV acid rain program, as 
designed by the Congress and implemented by EPA, attempted to strike a 
balance between traditional command and control principles--which 
specify where and how emissions reductions must be achieved--and the 
flexibility of market-based measures for reducing air pollution. 
Stakeholders from environmental and industrial groups and state and 
local governments told us that the flexibility provided by the acid 
rain program's sulfur dioxide emissions allowance-trading system 
enabled the required emissions reductions to be achieved at a lower 
cost than that estimated at the time the amendments were passed. \9\ 
Other stakeholders pointed out that because the legislation specified 
the reduction goals and identified the power plants that were required 
to achieve these reductions, the program was administratively more 
efficient to implement.
---------------------------------------------------------------------------
    \9\ Title IV of the amendments uses a market-based approach to 
allow electric utilities to trade SO2 allowances with other 
utilities. Utilities that reduce their emissions below the required 
level can sell their extra allowances to other utilities to help them 
meet their requirements.
---------------------------------------------------------------------------
    According to some stakeholders, adopting more market-based 
approaches like the acid rain program is a particularly effective way 
of achieving greater flexibility. In their view, this program has shown 
that an aggregate ``cap'' on emissions, which permits individual 
sources to trade allowances, can lead to lower-cost emissions 
reductions than those under the traditional command and control 
approach used by EPA in other programs. EPA officials agreed that the 
``cap and trade'' approach can lead to lower-cost emissions reductions 
(and, in some cases, reduced pollution levels as well) than those under 
a traditional command and control approach. However, they pointed out 
that to work effectively, cap and trade programs traditionally require 
a well-known population of sources with extremely well characterized 
emissions and control costs. According to EPA, other forms of economic 
incentive programs and approaches (e.g., open market trading and 
emission fee programs), in some circumstances, can be added to the 
existing regulatory structure and can provide incentives for reductions 
from other source categories when accountability is adequate. For this 
reason, EPA has issued rules and guidance that allow states and other 
stakeholders to consider a variety of economic incentive approaches to 
both reduce costs and gain improved environmental quality.
    Concerned that future emissions reductions may be more expensive 
and difficult to accomplish, a state and local government organization 
official and other stakeholders cited a need for EPA and the states to 
provide flexibility in achieving further emissions reductions. 
According to one state official, allowing the states more creativity 
and flexibility is a way to get a better ``bang for the buck'' in 
emission reductions. He added that EPA should provide oversight but 
give the states the flexibility and incentive to meet the requirements 
themselves. We have reported several times in recent years on EPA's 
evolving efforts to provide states with more flexibility and to 
``reinvent'' environmental regulation, under the Clean Air Act and 
other statutes, by incorporating more flexible approaches and a greater 
focus on environmental results. \10\
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    \10\ See Environmental Protection: Challenges Facing EPA's Efforts 
to Reinvent Environmental Regulation (GAO/RCED-97-155 , July 2, 1997), 
Environmental Protection: EPA's and States' Efforts to Focus State 
Enforcement Programs on Results (GAO/RCED-98-113 , May 27, 1998), and 
Environmental Protection: Collaborative EPA-State Effort Needed to 
Improve New Performance Partnership System (GAO/RCED-99-171 , June 21, 
1999).
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    An industrial stakeholder observed that the Clean Air Act 
Amendments of 1990 allow EPA to use innovations such as trading 
mechanisms that would provide needed flexibility but that EPA had not 
used these innovations except in the acid rain program. However, EPA 
officials cited several examples that, in their view, illustrate the 
use of more flexible approaches.
      The Ozone Transport and Assessment Group--a national work 
group consisting of representatives of EPA, the Environmental Council 
of the States, and various industry and environmental groups--
identified flexible and cost-effective strategies to address the long-
range transport of ozone. These strategies, including emissions trading 
programs, were incorporated in the agency's 1998 rule requiring 22 
states and the District of Columbia to revise their state 
implementation plans to mitigate the transport of ozone through a 
reduction in nitrogen oxides. The rule allows states flexibility to 
choose the best mix of controls to meet statewide emissions budgets. 
\11\ EPA also published as guidance for states a ``model rule'' for 
achieving these emissions reductions through a cap-and-trade program.
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    \11\ 63 Fed. Reg. 57, 356 (1998). This rule has been the subject of 
litigation. On March 3, 2000, a Federal appeals court rejected most 
challenges to the rule, upholding EPA's authority to promulgate it. 
Michigan v. EPA, No. 98-1497 (D.C. Cir. Mar. 3, 2000).
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      On the basis of the experience with the acid rain trading 
program, the Ozone Transport Commission developed a nitrogen oxides 
trading program for states in the Northeast, with EPA's assistance.
      In developing measures to be included in state 
implementation plans to improve visibility, EPA gave states the option 
of applying the best available retrofit technology on a source-by-
source basis or developing an emissions trading program. EPA also cited 
the regional planning bodies that have been formed to address 
visibility impairment and regional haze issues as another example of 
flexibility.
      EPA's recent rule to reduce emissions from cars and 
light-duty trucks allows averaging, banking, and trading to provide 
additional flexibility to both vehicle manufacturers and gasoline 
refiners.
    According to one stakeholder, the state implementation plan 
process--under which each state develops a plan for implementing, 
maintaining, and enforcing air quality standards--needs to be better 
coordinated and more flexible in order to address situations in which 
pollution from one state contributes to the air pollution problems in 
another.
    EPA officials also noted that the agency worked with states and 
regions to design guidance on economic initiative programs that can be 
adopted to provide for the cost-effective implementation of the 
national ambient air quality standards. EPA believes that this guidance 
provides states with a great deal of flexibility in developing their 
implementation plans for achieving the air quality standards.
Specificity of Requirements
    Several stakeholders identified the specificity in the Act or in 
implementing regulations as an important factor affecting 
implementation. According to an environmental group stakeholder, 
statutory provisions that specified the expected quantity of emissions 
reductions and identified the categories of sources that were expected 
to achieve the reductions have been more successfully implemented. For 
example, according to a state and local government organization, 
specifying the amount of sulfur dioxide emissions reductions to be 
achieved and the specific power plants where the reductions were to 
come from made it easier to achieve the required reductions in sulfur 
dioxide emissions. The stratospheric ozone provisions of title VI--
which specify the affected chemicals and the timeframes for the 
eventual phase-out of their use--were also cited by stakeholders as an 
example of successful implementation.
Adequacy of Funding
    The states, state organizations, and environmental groups that we 
interviewed all commented that state and local governments need 
additional funding to more effectively implement the requirements of 
the Act. According to a director of an organization that represents all 
state and local governments, there is currently a $140 million annual 
shortfall in funds at the state and local government levels.
    EPA awards grants to the states and local government agencies to 
help them implement the Clean Air Act. The agency has reduced this 
funding over the last several years by 25 percent to $120 million 
annually. According to a state and local government organization, EPA 
justified the decrease by considering the funding available to states 
and local air pollution control agencies through permit fees (which are 
assessed on regulated sources for permits required by the Clean Air 
Act). However, according to a stakeholder representing an environmental 
group, there is a scarcity of funds from permits because states have 
been under pressure to keep the fees low. EPA officials stated that 
they work jointly with states and local agencies to establish 
priorities on the basis of available funding and, through work plan 
negotiations for grants, have been successful in directing grant funds 
toward agreed-upon priorities.
    One state government stakeholder commented that much of the burden 
of implementing the Clean Air Act has now shifted from EPA to the 
states. For example, EPA provides grant funds for the purchase of 
equipment, but states are expected to provide a matching share of the 
money needed to operate it. Such a problem may surface in the case of 
the new monitors for particulate matter. EPA paid for the monitors, 
and, as we reported in 1999, is funding their operation and 
maintenance. \12\ However, future funding for operation and maintenance 
was uncertain. According to EPA, the Clean Air Act recognizes that the 
states are principally responsible for its implementation, and through 
the appropriations of grant funds, the Federal Government participates 
in aiding the states in meeting their obligations.
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    \12\ See Air Pollution: EPA's Actions to Resolve Concerns With the 
Fine Particulate Monitoring Program (GAO/RCED-99-215 , Aug. 12, 1999).
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                              OBSERVATIONS
    The Clean Air Act is a large and complex statute. The nature of the 
pollutants covered by specific titles varies greatly in terms of, among 
other things, the distances they travel once airborne and how they 
interact with other pollutants in different climates and weather 
conditions. Moreover, the numbers of sources vary greatly depending 
upon the pollutant. One of the challenges facing the Congress in 
considering the Clean Air Act's reauthorization is determining the 
appropriate balance between traditional command and control approaches 
and more flexible approaches that allow state and local air pollution 
control agencies and other stakeholders to implement the most cost-
effective strategies, while meeting national air quality goals. In this 
regard, the acid rain provisions in title IV could offer a worthwhile 
model for some other air quality problems by setting national emissions 
reduction goals and, at the same time, encouraging market-based 
approaches to achieve the national goals.
                            AGENCY COMMENTS
    We provided EPA with a draft of this report for review and comment. 
The agency stated that presenting a broad account of the status of its 
implementation of the Clean Air Act in a single report was difficult 
and offered several suggestions for framing the implementation status 
in a broader contextual perspective. We agree with the general thrust 
of these comments and have made changes to the report where 
appropriate.
    Specifically, EPA emphasized that an assessment of the Act should 
focus on results such as emissions reductions, air quality 
improvements, and the increased protection of public health and the 
environment and emphasized that these improvements can be achieved 
through cost-effective methods that allowed for economic growth. We 
added information in the report on emissions reductions, national air 
quality improvements, and the increased protection of public health and 
the environment. The agency also pointed out that the report focuses on 
the 1990 amendments' implementation without discussing related 
activities resulting from requirements established in prior clean air 
statutes, such as the requirement for periodic review and, if 
appropriate, revision to the national ambient air quality standards. 
Our objective was to review only the status of requirements added by 
the 1990 amendments. We made it clear that the report does not provide 
information on other requirements. EPA also stated that given the Act's 
ambitious agenda and the reality of finite resources, the agency gave 
priority to implementing requirements that offered the greatest impact, 
which resulted in missed statutory deadlines for other requirements. We 
added this statement to the discussion of why EPA has missed deadlines. 
Last, we made changes to include EPA's views that the agency endeavored 
to implement the 1990 amendments in a flexible manner that best 
achieves air pollution reductions and that while the market-based cap 
and trade program has been highly effective in reducing sulfur dioxide 
emissions, it may not be the best tool for every environmental problem. 
The agency provided technical comments that updated and clarified 
information in the report; we incorporated these comments where 
appropriate. Appendix VIII contains the full text of the agency's 
written comments.
                         SCOPE AND METHODOLOGY
    To obtain information on the status of EPA's implementation of the 
Clean Air Act Amendments of 1990, we held discussions with the EPA 
officials who manage EPA's work load under the amendments' first six 
titles. As agreed with your staff, we did not review the status of 
implementing the 1990 amendments' remaining titles. We also did not 
address the status of implementing the requirements established prior 
to the Clean Air Act Amendments of 1990. We also obtained and reviewed 
EPA documentation entitled Implementation Strategy for the Clean Air 
Act Amendments of 1990. This document is updated periodically, provides 
an overview of the regulatory framework envisioned by the Clean Air Act 
Amendments of 1990, and provides information on what EPA has 
accomplished and what is left to be accomplished. We analyzed this 
documentation, including the most recent update in March 1999, and 
prepared a table of the requirements under each title, the requirements 
met by and after the established deadlines, and the unmet requirements. 
In order to ensure an accurate-as-possible count of the requirements, 
we asked EPA to review our table of requirements, and EPA suggested 
changes, which we have incorporated. For the requirements that were 
late in being met, we obtained agency officials' reasons for the delay. 
This analysis provides the extent to which EPA has met its requirements 
under the Clean Air Act Amendments of 1990 but does not show the extent 
to which the states and industry have actually implemented the 
requirements promulgated by EPA. We recognize that a tabulation of the 
requirements is only the first step in determining the status of 
implementation because of the relative complexities of the different 
provisions in the Act. For example, certain titles require extensive, 
continuing interaction among EPA and state and local regulators, while 
others do not.
    To obtain the views of key stakeholders on the major issues 
affecting the implementation of the Clean Air Act Amendments of 1990, 
we interviewed and received information from organizations that were 
interested and affected parties, including environmental groups, 
manufacturing associations, and state and local government agencies. 
(See app. VII for a listing of the organizations selected.) We 
coordinated our selection of organizations with EPA to ensure the 
representation of a good cross section of the key stakeholders involved 
with the implementation and oversight of the Clean Air Act Amendments 
of 1990. We asked representatives from these associations for their 
views on the implementation of the Clean Air Act Amendments of 1990, 
including factors that could either help or hinder effective 
implementation. We also obtained documentation of the National 
Governors Association's comments on the implementation of the Clean Air 
Act Amendments of 1990. We did not independently verify the information 
provided by the stakeholders. For each issue presented by the 
stakeholders, we asked for examples to support the points they were 
making. In some cases, examples were provided. We also asked EPA 
officials with responsibility for implementing the Act to review and 
comment on the issues raised by the stakeholders.
    We performed our work from May 1999 through February 2000 in 
accordance with generally accepted government auditing standards.
    As arranged with your office, unless you announce its contents 
earlier, we plan no further distribution of this report until 30 days 
from the date of this letter. At that time, we will send copies of this 
report to the Honorable Carol M. Browner, Administrator, Environmental 
Protection Agency, and other interested parties. We will make copies 
available to others on request.
    If you have any questions about this report, please contact me at 
(202) 512-6111 or William F. McGee at (919) 899-3781. Key contributors 
to this report were Gregory P. Carroll; Hamilton C. Greene, Jr.; Karen 
Keegan; and Everett O. Pace.
            Sincerely yours,
                         David G. Wood, Associate Director,
                                   Environmental Protection Issues,
                                         General Accounting Office.
                                 ______
                                 
                               Appendix I
            TITLE I--NATIONAL AMBIENT AIR QUALITY STANDARDS
    The Clean Air Act authorizes the Environmental Protection Agency 
(EPA) to set national standards to protect human health and welfare 
from emissions that pollute ambient air. As a first step in this 
process, EPA is required to list harmful pollutants that are discharged 
in relatively large quantities by a variety of sources across broad 
regions of the country. The Act requires EPA to determine National 
Ambient Air Quality Standards (NAAQS) for these so-called ``criteria 
pollutants.'' \13\ NAAQS are currently in place for six air pollutants: 
ozone, carbon monoxide, sulfur dioxide (SO2), nitrogen 
dioxide, lead, and particulate matter. EPA has been regulating these 
criteria pollutants since the 1970 Clean Air Act amendments were 
enacted. However, title I of the 1990 amendments established a more 
comprehensive approach for states to implement, maintain, and enforce 
the NAAQS to further help reduce criteria pollutants.
---------------------------------------------------------------------------
    \13\ These pollutants are called criteria pollutants because the 
agency sets permissible levels for them on the basis of ``criteria'' or 
information on the effects on public health or welfare that may be 
expected from the presence of such pollutants.
---------------------------------------------------------------------------
                         STATUS OF REQUIREMENTS
    To accomplish the objectives of title I of the Clean Air Act 
Amendments of 1990, EPA identified 141 requirements. These requirements 
included promulgating new regulations, such as enhanced monitoring for 
ozone, nitrogen dioxide, and volatile organic compounds; publishing 
final guidance for state plans to implement the NAAQS; and issuing 
reports to the Congress on volatile organic compounds emissions from 
the use of consumer and commercial products. The status of these 
requirements is shown in table 1.

                                 Table 1
    Status of Requirements Designed for National Ambient Air Quality
                                Standards
------------------------------------------------------------------------
    Require Requirements with statutory deadlines            Number
------------------------------------------------------------------------
Met on time..........................................  16
Met late.............................................  48
Unmet--deadlines prior to February 2000..............  1
Deadlines after February 2000........................  14
    SUBTOTAL.........................................  79
    Requirements without statutory deadlines\1\......  62
    Total............................................  141
------------------------------------------------------------------------
\1\EPA has met all 62 requirements.

    EPA's most recent data show that it has taken the required action 
to meet 64 of the 79 title I requirements established with a specific 
statutory deadline in the legislation. However, in 48 instances, the 
agency completed the required action after the statutory deadline had 
passed. According to EPA, it missed deadlines in the 1990 amendments 
owing in part to competing demands placed on the agency and other 
stakeholders by Clean Air Act issues not arising from the 1990 
amendments. For example, in the development of new air quality 
standards for ozone and particulate matter, an extensive scientific 
consultation process occurred. The emergence of new scientific 
information documenting the importance of regional ozone transport led 
to EPA's extending the deadlines for state submittal of ozone plans for 
many areas, and engaged states and EPA in a 2-year process to conduct 
modeling studies and to study potential solutions. That process led to 
EPA's nitrogen oxides State Implementation Plan call, which was another 
major effort. In addition, many of the title I requirements were 
delayed because of litigation. EPA has recently been delayed in 
implementing recent revisions to the NAAQS for ozone and particulate 
matter and in implementing its plan to mitigate the interstate 
transport of ozone because of two recent court rulings in May 1999. As 
a result, several requirements planned for completion in 1999 and 2000 
have been put on hold.
    According to EPA officials, the ongoing litigation on particulate 
matter and ozone is the largest obstacle preventing EPA from 
successfully completing the requirements of title I of the 1990 
amendments. EPA has implemented the bulk of title I requirements.
 VIEWS OF KEY STAKEHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
            TITLE I OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    The stakeholders we spoke with from environmental and industrial 
groups and state and local governments recognize the benefits of title 
I and acknowledge that cleaner air has resulted from it. As shown in 
table 2, the concentration of criteria pollutants affecting national 
air quality has decreased significantly from 1978 to 1997.

                                 Table 2
     Long-Term Percent Changes in National Air Quality Concentration
                         Numbers in Percentages
------------------------------------------------------------------------
                                                          Air quality
                                                         concentration
                      Pollutant                         percent change,
                                                            1978-97
------------------------------------------------------------------------
Carbon monoxide......................................  -60
Lead.................................................  -97
Nitrogen dioxide.....................................  -25
Ozone................................................  -30
Particular matter....................................  Data not
                                                        available
Sulfur dioxide.......................................  -55
------------------------------------------------------------------------
Source: EPA's National Air Quality and Emissions Trends Report (1997).

    However, stakeholders, including environmental groups and states, 
expressed concern with the process of implementing title I and gave 
several suggestions on how to improve the requirements or change the 
legislation. In particular, stakeholders support making improvements--
such as better coordination between states and EPA and more 
flexibility--to the State Implementation Plan (SIP) process, which is 
required by all states to implement, maintain, and enforce the NAAQS. 
In addition, stakeholders expressed their concern with the 
inconsistency in the way that states implement NAAQS, which is 
generally allowed by the Act, and suggested that the Act provide for 
better coordination between EPA and the states to address these 
inconsistencies on a regional basis. Last, other stakeholders expressed 
their concerns with specific provisions in title I of the Act that 
exempt older facilities from the emissions standards that apply to 
newer facilities.
State Implementation Plans Process
    Several stakeholders, including the environmental and state groups 
we spoke with, support making changes to the SIP process required by 
all states when they implement the NAAQS. According to one stakeholder 
we met with, the SIP process needs to be coordinated better, more 
flexible, and based on performance. The stakeholder added that more 
flexibility was needed in the SIP process so that coordination between 
state and local entities and EPA can be more effective, especially when 
pollution from one state contributes to the air pollution problems in 
another. According to EPA officials, under section 126 of the Clean Air 
Act, any state may petition EPA to set emissions limits for specific 
sources of pollution in other states that significantly contribute to 
its air quality problem. Petitions were filed by eight states in 1997 
and three additional states and the District of Columbia in 1999. In 
December 1999, EPA granted final approval of four of the eight 
petitions filed in 1997. By granting these four petitions, EPA found 
that certain large electric utilities and large industrial boilers and 
turbines violated a Clean Air Act prohibition against significantly 
contributing to air pollution in other states.
    According to an independent research organization we met with, a 
late SIP puts a state transportation agency in a bind because EPA can 
automatically withhold Federal funds. As a result, state planners must 
plan for two scenarios--one with Federal funds and one without them. 
Using two scenarios results in additional planning time. According to 
EPA officials, the 1990 amendments to the Clean Air Act direct EPA to 
apply certain sanctions to areas that fail to comply with the Act's 
requirements. These officials stated that one of these sanctions--the 
withholding of Federal highway funds--takes effect only after a state 
or nonattainment area is 2 years late in submitting the required SIP 
revision. Before such sanctions are invoked, the Governor's office and 
other government officials are made aware of the pending action and 
also are advised of what must occur to remove the sanction.
    According to the independent research organization we met with, a 
change to the current SIP process is supported. Under the change, 
credit will be given not only for planned programs, but also for going 
back and validating information through actual performance. For 
example, states are currently receiving SIP credits for instituting 
inspection and maintenance programs, but the credits are based solely 
on EPA's model--not on validating actual emissions testing. According 
to EPA officials, EPA does not discourage a state or area from 
validating its reduction credits. EPA reviews state validations by 
assessing the rate at which a state is reducing its total emissions.
Regional Solutions for Ozone
    Several stakeholders expressed their concern with the inconsistency 
in states' approaches for implementing NAAQS, which are generally 
allowed by the Clean Air Act, and suggested that the Act provide for 
better coordination between EPA and the states to address these 
inconsistencies on a regional basis. One stakeholder stated that the 
differences in states' approaches for implementing NAAQS need to be 
addressed, particularly in regions with ozone problems because ozone is 
a regional problem--not just a state problem. The stakeholder 
recommended that EPA be granted more authority to impose regional 
solutions to solve the interstate transport of ozone pollution. 
According to this stakeholder, one solution would be for the SIP 
process to be run on a regional basis. Another stakeholder suggested 
that in the area of ozone transport, there is a need for better 
coordination between states because none of them has the authority to 
require the others to take any particular action.
    According to EPA, the agency has taken significant steps toward 
reducing ground-level ozone in the eastern half of the United States. 
Through a 2-year effort with the Ozone Transport Assessment Group, EPA 
worked in partnership with the 37 easternmost states and the District 
of Columbia, industry representatives, and environmental groups to 
address the regional transport of ozone. According to EPA, the process 
resulted in a comprehensive analysis of technical information related 
to ozone transport, including modeling and monitoring data. The Ozone 
Transport Assessment Group recommended flexible and cost-effective 
strategies for reducing the long-range transport of ozone and ozone 
precursors, including the development of trading and market-based 
incentives.
    The solution to the ozone problem, however, has not been realized. 
In September 1998, EPA promulgated the nitrogen oxide State 
Implementation Plan call, a final rule requiring 22 states and the 
District of Columbia to mitigate the interstate transport of ozone 
through reductions in nitrogen oxides. \14\ The final rule required the 
affected states to submit their State Implementation Plan revisions by 
September 1999, but on May 25, 1999, the U.S. Court of Appeals for the 
D.C. Circuit indefinitely stayed the deadline for submission of the 
required plans. \15\ According to EPA, this court ruling delayed 
actions that would result in the reduction of actual nitrogen oxide 
emissions. On March 3, 2000, however, the Federal appeals court 
rejected most challenges to the rule, upholding EPA's authority to 
promulgate it. \16\ The court ruled, however, that EPA had improperly 
included 3 of the 22 states in the State Implementation Plan call.
---------------------------------------------------------------------------
    \14\ 63 Fed. Reg. 57, 356 (1998).
    \15\ Michigan v. EPA, No. 98-1497 (D.C. Cir. May 25, 1999).
    \16\ Michigan v. EPA, No. 98-1497 (D.C. Cir. Mar. 3, 2000).
---------------------------------------------------------------------------
    In another ruling, the U.S. Court of Appeals, D.C. Circuit, 
remanded EPA's rules revising NAAQS for particulate matter and ozone. 
\17\ EPA is seeking a review of the Court of Appeals decision in the 
Supreme Court.
---------------------------------------------------------------------------
    \17\ American Trucking Ass'ns. v. U.S. EPA, No. 175 F. 3d 1027, on 
rehearing 195 F. 3d 4 (D.C. Cir. 1999).
---------------------------------------------------------------------------
Grandfather Clause for Old Power Plants
    According to one environmental stakeholder, the most ineffective 
provision of the Clean Air Act is the grandfather language in section 
111 (b)(6), which exempts coal-fired power plants existing at the time 
the Act was amended in 1977 from the emissions standards that apply to 
newer facilities unless changes are made requiring permit 
modifications. According to this stakeholder, when this exemption--
which covers most coal-fired power plants in the United States--was 
adopted, it was expected that these plants would be retired after 
approximately 30 years of operations and that the entire fleet of power 
plants would be replaced with lower-emitting, more-efficient 
facilities. According to this stakeholder, in practice, this provision 
has created an incentive for the owners of these older, dirtier power 
plants to continue to operate them long after their expected retirement 
dates and has slowed the development of cleaner replacement capability.
    This stakeholder added that the grandfather provision in title I 
imposes significant costs on society in terms of human health effects 
(e.g., medical costs for respiratory ailments and premature deaths) and 
environmental impacts (e.g., forest productivity losses, contaminated 
water bodies, and reduced visibility). According to this stakeholder, 
as the electric industry is deregulated, it is also increasingly clear 
that this provision has anticompetitive effects--making it difficult or 
impossible for new power plants to enter markets dominated by 
grandfathered plants, and consequently, limiting electric consumers' 
choice in the market. Any change in this provision would require a 
change in legislation.
    In November 1999, the Department of Justice and EPA took 
enforcement actions against 32 coal-fired power plants, charging the 
companies with illegally releasing massive amounts of air pollutants 
for years. Because of the Clean Air Act grandfather provision, utility 
companies were not required to retrofit those existing plants with new 
air pollution equipment unless the utilities undertook major 
modifications of those plants. The government asserts that the 
utilities made major modifications to their plants in order to extend 
their life and to avoid the costs of building new plants, without 
installing new pollution control equipment, which resulted in tons of 
illegal emissions of pollutants. According to the EPA Administrator, 
the companies that owned the power plants had illegally retooled old, 
pollution-spewing coal plants without notifying regulators, without 
getting the necessary permits, and without installing new equipment to 
reduce emissions and meet pollution standards that apply to new plants. 
Most of these enforcement actions are still pending.
                                 ______
                                 
                              Appendix II
                    TITLES I AND II--MOBILE SOURCES
    Provisions for controlling air pollution from motor vehicles, 
engines, and their fuels are contained in both title I and title II of 
the Clean Air Act Amendments of 1990. \18\ Mobile sources include cars, 
trucks, buses, trains, aircraft, motorcycles, construction and farm 
equipment, boats and marine vessels, and lawn and garden equipment. The 
Clean Air Act Amendments of 1990 provides for emissions reductions from 
transportation sources by emphasizing the following:
---------------------------------------------------------------------------
    \18\ In this report, we have included the discussion of major 
issues affecting the implementation of mobile sources programs from 
both title I and title II in this appendix. EPA's Office of 
Transportation and Air Quality and state and local air pollution 
control agencies operate their mobile source programs as one program.
---------------------------------------------------------------------------
      Title II, emission standards for motor vehicles: Develop 
more stringent emissions standards for cars, buses, trucks, and nonroad 
vehicles and engines, such as construction equipment, boats, lawn and 
garden equipment, and locomotives.
      Title II, clean fuels: Develop reformulated gasoline, 
diesel fuel, and oxygenated fuels to reduce carbon monoxide emissions.
      Titles I and II, inspection and maintenance and onboard 
diagnostics: Develop programs to identify faulty emission controls and 
ensure that vehicles remain clean in actual customer use.
      Title I, clean transportation alternatives: Develop 
strategies to encourage transportation alternatives to address vehicle 
travel growth.
                         STATUS OF REQUIREMENTS
    To accomplish the mobile source objectives of the Clean Air Act 
Amendments of 1990, EPA identified 89 requirements. \19\ These 
requirements include promulgating new regulations to establish Federal 
programs that resulted in cleaner passenger vehicles, trucks, and buses 
and cleaner-burning gasoline and diesel fuel. The amendments also 
authorized EPA for the first time to set national emissions standards 
for non road vehicles and engines, such as locomotives, boats, and 
marine vessels; lawn and garden equipment; and engines used in 
construction and agricultural equipment. The status of the 
implementation of these requirements is shown in table 3.
---------------------------------------------------------------------------
    \19\ The number of requirements identified in this section relates 
to title II requirements only.

                                 Table 3
           Status of Requirements Designed for Mobile Sources
------------------------------------------------------------------------
        Requirements with statutory deadlines               Numbers
------------------------------------------------------------------------
 Met on time.........................................  6
Met late.............................................  21
Deadlines prior to February 2000.....................  0
Deadlines after February 2000........................  0
    Subtotal.........................................  27
    Requirements without statutory deadlines\1\......  62
        Total........................................  89
------------------------------------------------------------------------
\1\ EPA has met 51 of the 62 requirements.

    EPA's most recent data show that it has taken the required action 
to meet all 27 of the mobile source requirements established by the 
legislation. However, as indicated in table 3, EPA was late in meeting 
21 of its requirements. According to EPA officials, there were several 
reasons why the rules were late. One reason for the rules' lateness was 
that EPA began to operate differently in the early 1990's by bringing 
in more people to get their input and comments before issuing the 
rules. As a result, according to EPA, the process took longer but, in 
the end, turned out better because by the time the requirements were 
completed, most stakeholders were in agreement.
    EPA officials believe that one of its greatest challenges will be 
to find ways to reduce emissions from motor vehicles, whose numbers and 
miles traveled continued to increase every year. According to EPA, 
despite the tremendous success of the Federal program to reduce motor 
vehicle emissions over the past 25 years, they still represent the 
single largest category of air pollution in most cities around the 
country. An example of this challenge is the potential for an increase 
in the number of diesel-powered passenger vehicles that may enter the 
market in the coming years. The trend to more diesels is driven in part 
by their better fuel efficiency compared with gasoline engines. 
Diesels, however, produce significantly greater amounts of particular 
matter and nitrogen oxide than gasoline counterparts, according to EPA. 
Working with manufacturers of diesel engines to develop clean diesels 
for the future is one of the great challenges facing EPA in meeting the 
nation's clean air goals.
 VIEWS OF KEY STAKEHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
        TITLES I AND II OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    Several stakeholders from environmental and industrial groups agree 
that titles I and II of the 1990 amendments have made a significant 
impact on reducing pollution from mobile sources. For example, one 
environmental group stated that the emissions requirements for new 
vehicles have been quite effective in reducing emissions, as have the 
reformulated gasoline fuels programs. EPA estimates that oxygenated 
fuels reduced ambient carbon monoxide concentrations 7 to 14 percent 
overall for the winter seasons from 1986 to 1994. These groups, 
however, believe that improvements can and should be instituted in two 
areas involving mobile sources: (1) the inspection and maintenance 
programs and (2) considering and regulating pollution control devices 
and fuel requirements as one system.
Inspection and Maintenance Program
    According to some state and local government stakeholders, and an 
independent research organization, although the inspection and 
maintenance program for in-use motor vehicles has resulted in 
significant reductions in emissions in the past, they are concerned 
that public support for the program may not remain. One state agency 
commented that improvements in the inspection and maintenance program, 
such as including the use of technology to lessen the program's costs, 
are needed if it is to continue receiving public support. In addition, 
the cost of the inspection and maintenance program has already led to 
declining support. Opposition to EPA's enhanced inspection and 
maintenance regulation--including the reluctance of some state 
legislatures to provide the legislative authority and funding needed to 
implement these programs--caused many states to delay implementation 
several years after the required start date of 1995. \20\
---------------------------------------------------------------------------
    \20\ See Air Pollution: Delays in Motor Vehicle Inspection Programs 
Jeopardize Attainment of the Ozone Standard (GAO/RCED-98-175 , June 15, 
1998).
---------------------------------------------------------------------------
    Opposition to what they view as the stringent requirements of the 
program led to the reluctance of some state legislatures to authorize 
and fund it. In order to decrease the cost, some stakeholders believe 
that there must be increased emphasis put on using new state-of-the-art 
technology, such as roadside testing using remote sensors, that is 
available to identify vehicles in need of repair. A stakeholder 
commented that these high-tech solutions to the identification of high-
pollution-emitting vehicles are available but that they are not being 
used to the degree that they should. This stakeholder added that other 
types of in-use testing, such as remote-sensing devices, should be used 
instead of relying solely on inspection and maintenance facilities to 
identify vehicles needing repair. According to EPA officials, the 
agency currently allows states to use remote-sensing technology in 
their inspection and maintenance program as a form of ``clean 
screening.'' These same officials said that a state might elect to use 
remote sensing to identify clean vehicles, whose owners would then be 
informed that it was unnecessary to bring their vehicles to an 
inspection and maintenance facility. In EPA's opinion, however, remote-
sensing technology has not yet been demonstrated as a reliable 
alternative to replace standard inspection and maintenance testing. A 
stakeholder believes that the on-board diagnostic equipment, which is 
required in 1996 and newer model vehicles, should be used to identify 
problems in pollution-emitting vehicles instead of relying solely on 
inspection and maintenance equipment. According to EPA officials, on-
board diagnostic equipment has been proven to be accurate in 
identifying high-emitting vehicles, on the basis of a recently 
completed 2-year test program. On-board diagnostic equipment has also 
been proven to reliably identify malfunctioning components and allow 
for more accurate diagnosis of vehicles' emission control systems than 
was possible with previous technology. EPA is currently working on a 
plan that will incorporate on-board diagnostic checks as part of state 
inspection and maintenance programs, and according to the agency, it 
will be implemented as soon as practical.
Vehicle Pollution Control Devices
    According to one industrial stakeholder, the effectiveness of 
vehicle pollution control devices depends upon the types of fuels that 
are used in engines. The use of inferior fuels leads to less than 
desirable results in emissions reductions. Therefore, when one system 
is adopted without the other, opportunities for improving air quality 
are lost. The stakeholder is concerned that this interrelationship is 
sometimes overlooked. For example, according to this stakeholder, 
several northeastern states decided to require vehicles sold there to 
meet the pollution control requirements applicable to vehicles sold in 
California. The industrial group we interviewed commented that these 
states required California's vehicle standards but did not require 
California's fuels standards, and, thus, the effectiveness of the 
control devices was diminished. In addition, this group stated that the 
Clean Air Act should be changed to make it clear that advanced-
technology vehicles like those required under the California standards 
should be used with cleaner-burning fuels like those required under the 
state's standards. EPA officials pointed out that in its recently 
announced vehicle program rulemaking, the agency, for the first time, 
considered vehicles and fuels as an integrated system and regulated 
each in a single rulemaking.
                                 ______
                                 
                              Appendix III
                  TITLE III--HAZARDOUS AIR POLLUTANTS
    Title III of the Clean Air Act Amendments of 1990 established a new 
regulatory program to reduce the emissions of hazardous air pollutants, 
specifying 189 air toxics whose emissions would be controlled under its 
provisions. The list includes organic and inorganic chemicals, 
compounds of various elements, and numerous other toxic substances that 
are frequently emitted to the air. Title III was intended to reduce the 
population's exposures to these pollutants, which can cause serious 
adverse health effects such as cancer and reproductive dysfunction.
    Under the hazardous air pollutant program prior to title III, EPA 
identified only seven hazardous pollutants in 20 years and then 
developed emission standards for those pollutants using a risk-based 
approach. The approach of the new program differs from this in that, as 
a first step, title III identifies the pollutants to be regulated and 
directs that EPA impose technology-based standards, or Maximum 
Achievable Control Technology (MACT) standards, on industry to reduce 
emissions. As a second step, once EPA finishes the technology-based 
standards, it is to consider the remaining risks to the public and 
issue health-based standards to address such risk.
    The Act requires EPA to publish the technology-based emissions 
standards for both major and area sources from 1992 to 2000. The Act 
also required EPA to publish a list of source categories by November 
15, 1991, for these hazardous pollutants, but the agency did not do so 
until July 16, 1992. At that time, EPA listed 174 source categories. 
The Clean Air Act established milestones for issuing the MACT 
regulations as follows:
      Twenty-five percent of the MACTs to be issued by November 
15, 1994.
      Fifty percent of the MACTs to be issued by November 15, 
1997.
      One hundred percent of the MACTs to be issued by November 
15, 2000.
                         STATUS OF REQUIREMENTS
    To accomplish the objectives of title III of the 1990 Clean Air Act 
Amendments, EPA has identified 221 requirements. The implementation 
status of these requirements is shown in table 4.

                                 Table 4
      Status of Requirements Designed for Hazardous Air Pollutants
------------------------------------------------------------------------
        Requirements with statutory deadlines                Number
------------------------------------------------------------------------
Met on time..........................................  15
Met late.............................................  102
Deadlines prior to February 2000.....................  3
Deadlines after February 2000........................  94
    Subtotal.........................................  214
    Requirements without statutory deadlines\1\......  7
        Total........................................  221
------------------------------------------------------------------------
\1\ EPA has met all seven requirements.
Note: The numbers in table 4 do not include the requirement for EPA to
  conduct residual risk determinations for each of the final MACT
  standards.

    EPA's most recent data show that it has taken the required action 
to meet 117 of the title III requirements established by the 
legislation, although 102 of these were met late. As shown in table 4, 
EPA has 94 unmet requirements with statutory deadlines after February 
2000. Ninety-two of the 94 requirements are to be addressed with the 
promulgation of 62 MACT standards. EPA took more than 9 years to 
promulgate the first 92 MACT standards. However, according to EPA, over 
that time period, it has taken much initiative in expediting the MACT 
development process. Nonetheless, EPA officials do not believe they 
will meet the November 15, 2000, deadline for all of the remaining MACT 
standards but estimate that they will do so for about three MACT 
standards. While they do not anticipate meeting the deadline for 59 
MACT standards, they do believe they can promulgate the rules within 18 
months after the deadline. This is significant in that the Clean Air 
Act requires that if EPA fails to finalize the rules within 18 months 
of the deadline, the states themselves must develop their own 
standards. According to EPA, this would be very expensive and 
cumbersome. EPA officials point out that while the agency has missed 
previous deadlines, it has virtually always issued the standards within 
18 months of the deadline, and in no case has any state had to develop 
its own case-by-case MACT determinations.
    According to EPA officials, the development of the MACT standards 
requires a significant amount of time and money. They explained that 
many previous requirements were met late because of the need to 
prioritize, given resource limitations, the time needed to develop the 
policy framework and infrastructure of the MACT program, and the 
complexity and stakeholder participation involved with some industrial 
source categories. EPA noted that the successful completion of the 
remaining MACT requirements is contingent upon adequate resources.
 VIEWS OF KEY STAKEHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
           TITLE III OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    Although EPA has not finished the technology-based standards, the 
stakeholders from an industrial group, environmental group, and state 
governments we interviewed stated that the program has been very 
effective, resulting in the reduction of millions of tons of air toxics 
and smog-forming volatile organic compounds from the air.
    In the second step in the program to control hazardous air 
pollutants, EPA will assess the risk remaining to the public from these 
pollutants once the technology-based standards are in place. If 
necessary, the agency would then publish health-based standards to 
address that risk. It is in this second phase that some stakeholders 
from environmental and industrial groups, and state and local 
governments believe EPA will have the most difficulty. For example, one 
of the problems mentioned is that EPA will lack the necessary data to 
do the residual risks assessments.
    Stakeholders are concerned that the second step--involving residual 
risk assessments--; will be problematic. This second step will involve 
the evaluation of the risks remaining after the technology-based 
standards are in place and setting standards that are based on the 
risks to the public's health from air toxics remaining in the air. One 
industrial stakeholder commented that the ``residual risk'' program 
will be more difficult for EPA to implement, since it will involve 
defining what ``risk'' is, and ``how clean is clean,'' as well as 
modeling issues. According to EPA officials, the agency is mandated to 
set a residual risk standard if the existing MACT standard does not 
protect the public health with an ample margin of safety. EPA outlined 
the general approach that it will use to make decisions whether to set 
residual risk standards in its peer-reviewed 1999 Report to Congress 
(EPA-453/R-99-001). The report states that, for carcinogens, EPA will 
continue to apply the 1989 Benzene National Emission Standard for 
Hazardous Air Pollutants, commonly referred to as the Benzene rule, 
which laid out EPA's approach for making decisions under the ample 
margin of safety language. Given that residual risk assessments will 
assess noncancer risks as well as cancer risks, EPA stated that it will 
use the best available models to assess residual risk and plans to 
apply them consistently.
    In developing an overall approach to the residual risk program, EPA 
believes it may be able to learn from several states that have had 
risk-based programs. For example, over the last 15 years, Georgia has 
addressed residual risk by doing its own screening and modeling of the 
health effects of air toxics and set its own standards for allowable 
concentrations of toxins in the air. In addition, according to an 
industrial stakeholder, the upcoming residual risk program will require 
EPA to know a lot about individual industries and require an intensive 
data collection effort. According to EPA officials, they recognize that 
in many cases, conducting residual risk assessments will require the 
agency to expand upon the data collected for the development of the 
MACT standards. EPA states that it can gather these additional data 
from several sources, including EPA's National Toxics Inventory, state 
data bases and permits, compliance reports, and industry. According to 
EPA, it will use the best available data to conduct residual risk 
assessment.
    Insufficient data have caused data collection efforts in the past 
to be deemed unsuccessful. As a result, industrial stakeholders believe 
that problems with residual risk assessments will occur. According to 
one industrial stakeholder, because of time pressures and the lack of 
resources, EPA may be forced to make decisions using inadequate data. 
An environmental group stakeholder also commented that EPA would find 
it difficult to amass the information that will be necessary to develop 
the residual risk assessments. According to EPA officials, as with any 
risk assessment, there will be gaps in some data bases used and 
uncertainties in the results of the residual risk assessments. EPA 
stated that it would make every effort to collect the necessary data 
for these assessments and will clearly articulate the uncertainties 
that exist in the data as well as the assumptions used.
                                 ______
                                 
                              Appendix IV
                   TITLE IV--ACID DEPOSITION CONTROL
    Title IV of the Clean Air Act Amendments of 1990 establishes the 
acid deposition control program to reduce the adverse effects of acid 
rain deposition through reductions in the annual emissions of 
pollutants--mainly sulfur dioxide. It provides an alternative to 
traditional ``command and control'' regulatory approaches by using a 
market-based approach to allow electric utilities to trade 
SO2 allowances with other utilities to achieve cost-
effective reductions. After setting the overall reductions in 
SO2 emissions to be achieved, the Act defined each source's 
specific emissions limits and directed the allocation of allowances to 
sources in amounts equal to the emissions limits. These emissions 
limits for all sources are combined to meet a total emissions cap. The 
sources that emit SO2 must install continuous emissions 
monitors and keep records in accordance with regulations issued by EPA. 
The utilities that reduce their emissions below the required levels can 
sell their extra allowances to other utilities to help them meet their 
requirements. The utilities that exceed their emissions allowances 
forfeit allowances to cover the excess emissions and must pay fines 
that are set at several times the estimated average cost of complying 
with SO2 emissions limits.
    In July 1997, we reported that the acid rain program, including the 
use of emissions trading, has been successful in achieving greater-
than-planned reductions in the emissions of SO2 from 
facilities and projected significant cost savings compared with a 
traditional command-and-control regulatory approach. \21\ More 
recently, we reported on trends in emissions and their effects. \22\
---------------------------------------------------------------------------
    \21\ See Air Pollution: Overview and Issues on Emissions Allowance 
Trading Programs (GAO/T-RCED-97-183 , July 9, 1997).
    \22\ See Acid Rain: Emission Trends and Effects in the Eastern 
United States (GAO/RCED-00-47 , Mar. 9, 2000).
---------------------------------------------------------------------------
                         STATUS OF REQUIREMENTS
    To accomplish the objectives of title IV of the 1990 Clean Air Act 
Amendments, EPA identified 44 requirements. These requirements included 
promulgating new regulations for an allowance-trading system, 
continuous emissions monitoring, and an acid rain permit program and 
issuing a report to the Congress on an acid deposition standard 
feasibility study. The status of these requirements is shown in table 
5.

                                 Table 5
        Status of Requirements Designed for Acid Rain Deposition
------------------------------------------------------------------------
        Requirements with statutory deadlines                Number
------------------------------------------------------------------------
Met on time..........................................  9
Met late.............................................  15
Unmet--deadlines prior to February 2000..............  2
Deadlines after February 2000........................  0
    Subtotal.........................................  26
    Requirements without statutory deadlines\1\......  18
        Total........................................  44
------------------------------------------------------------------------
\1\EPA has met all of the 18 requirements.

    EPA's most recent data show that it has met 24 of 26 of the title 
IV requirements established by legislation, although it was late in 15 
instances. According to EPA officials, the agency was late with some of 
the requirements because interagency review and consultation with the 
Acid Rain Advisory Committee added time to the process. Officials 
consider that the time spent was worthwhile because it allowed for more 
stakeholders' input in the rules process, thereby making them less 
controversial.
    According to officials of EPA's Office of Atmospheric Programs, 
Acid Rain Division, the program has been much more successful than 
initially envisioned--both in terms of emissions reductions and in 
terms of the cost to implement the program. Furthermore, they said the 
use of continuous emissions monitoring and the cap and trade program, 
which limits the amount of pollutants while allowing industry the 
flexibility to determine how best to reach those limits, can be 
considered as contributors to the overall success of the program. Also, 
EPA officials stated that both approaches might have applications to 
other pollutants and problems in addition to SO2 for acid 
rain.
 VIEWS OF KEY STAKEHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
            TITLE IV OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    Stakeholders from both the industrial sector and from state 
governments whom we spoke with agree that, overall, title IV is one of 
the most effective titles of the Clean Air Act. Title IV serves as an 
example of a title that provides sources with the flexibility to reduce 
emissions cost-effectively--through the allowance-trading program--
while establishing clearly defined objectives, firm deadlines, 
mandatory monitoring, and significant penalties for noncompliance. For 
example, one environmental stakeholder commented that the 
SO2 emissions reduction-trading program has been implemented 
in a timely and efficient way and that emissions reductions are well 
documented as a result of acid rain reporting through the emission/
allowance tracking system.
    Currently, the control of nitrogen oxide under title IV does not 
include a cap on emissions nor provisions for nitrogen oxide trading. 
Stakeholders from an industrial group and a state would like to see the 
trading program's focus expanded, believing it could have beneficial 
applications to other pollutants associated with acid rain, such as 
nitrogen oxides, and also those not associated with acid rain. One of 
the stakeholders commented that if the trading program is employed for 
these pollutants, the program should provide the ability to trade 
emissions between sectors. For example, the mobile source component 
would be allowed to trade with the stationary source components. EPA 
agrees that a cap and trade approach could be applied to more air 
pollution problems and sectors, but emissions monitoring and accounting 
as well as administrative feasibility are important considerations in 
such expansion. EPA suggests that the approach should be extended to 
other stationary sources before considering its application to mobile 
sources.
                                 ______
                                 
                               Appendix V
                        TITLE V--PERMIT PROGRAM
    The principal purpose of title V of the Clean Air Act Amendments of 
1990 is to establish a national permit program to ensure compliance 
with all applicable regulations of the Clean Air Act. According to EPA, 
the program will enhance the agency's and the public's ability to 
enforce the Act by making it easier to detect noncompliance and by 
requiring sources to take certain actions to demonstrate compliance. 
The program requires major stationary sources to obtain operating 
permits that contain all existing Federal clean air requirements 
applicable to the source in one document. Title V was not intended to 
impose new substantive requirements. It requires industry to pay permit 
fees to cover the costs incurred by state air pollution control 
agencies in approving and administering these permits. According to EPA 
officials, over 18,000 sources have submitted permit applications. Of 
this number, approximately 7,000 permits have been issued.
    EPA is responsible for promulgating regulations establishing the 
minimum elements of a title V permit program; reviewing, approving, and 
overseeing state programs; and reviewing permits issued by the states. 
EPA is also responsible for implementing permit programs for any states 
or tribal governments that do not implement their own programs. States 
are responsible for establishing and implementing their permit 
programs, issuing permits to pollution sources, collecting fees to 
cover the cost of the programs, and ensuring that sources comply with 
permit requirements.
                         STATUS OF REQUIREMENTS
    To accomplish the objectives of title V of the 1990 Clean Air Act 
Amendments, EPA identified 14 requirements. These requirements included 
promulgating new regulations such as state permit program requirements, 
as well as publishing guidance on state programs to assist small 
businesses. The status of these requirements is shown in table 6.

                                 Table 6
         Status of Requirements Designed for the Permit Program
------------------------------------------------------------------------
        Requirements with statutory deadlines                Number
------------------------------------------------------------------------
Met on time..........................................  1
Met late.............................................  2
Unmet--deadlines prior to February 2000..............  0
Deadlines after February 2000........................  0
    Subtotal.........................................  3
    Requirements without statutory deadlines\1\......  11
        Total........................................  14
------------------------------------------------------------------------
\1\EPA has met 8 of the 11 requirements.

    EPA's most recent data show that it has taken the required action 
to meet the title V requirements established with specific statutory 
deadlines in the legislation, although EPA was late in meeting two 
requirements. For example, title V charged EPA, by November 1991, with 
issuing a permit rule that would identify the minimum elements of state 
permit programs and govern their implementation. According to EPA, 
disagreement between the Office of Management and Budget and the then 
Council on Competitiveness over certain requirements in the final rule 
delayed its issuance 8 months until July 1992. While waiting to learn 
what the final rule would require, EPA and the states postponed some 
efforts to implement title V. \23\ In addition, after promulgation, 
states, industry, and environmental groups sued EPA over this rule, and 
EPA agreed to propose changes to portions of the rule to address 
litigants' concerns. According to EPA officials, the agency has moved 
the completion date for the rulemaking promulgating revisions to the 
operating permits program from April to November 2000 because of the 
need to repropose part of the package as a result of stakeholders' 
extensive comments. Until then, the original rule remains in effect, 
and states continue to issue title V permits.
---------------------------------------------------------------------------
    \23\ See Air Pollution: Difficulties in Implementing a National Air 
Permit Program (GAO/RCED-93-59 , Feb. 23, 1993).
---------------------------------------------------------------------------
    According to EPA's Office of Air Quality Planning and Standards, 
about 19,000 sources are subjected to the permit program. Between 
18,000 and 18,400 sources had submitted permit applications. Of this 
number, 7,000 permits have been issued. As a result of the slow 
progress in approving permits, EPA has sought to identify and, where 
possible, correct the obstacles to faster permit issuance. The statute 
requires that permits be issued or denied within 3 years of the date 
that a state program is approved. \24\ EPA officials predict an 
incremental climb in the number of permits being issued as a result of 
this effort. The effort has identified several reasons why the states 
have problems with meeting their established milestones. According to 
EPA, where possible, it has attempted to respond to these problems 
through guidance or other assistance. However, states also identified 
some internal issues. For example, one of the main reasons presented by 
the states is the turnover of permitting staff, compounded in some 
cases by hiring freezes and the lack of expertise that results when 
state staff leave and are not replaced.
---------------------------------------------------------------------------
    \24\ Program approval dates range from December 1, 1994, to June 
10, 1997.
---------------------------------------------------------------------------
 VIEWS OF KEY STAKEHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
            TITLE V OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    Some stakeholders from the industrial sector and from state 
governments questioned the cost-effectiveness of the permit program, 
observing that it does not directly lead to emission reductions, is 
more administrative in nature, and takes a lot of time and manpower. 
Industrial stakeholders also cited as an implementation issue the 
perceived inconsistency of EPA's interpretation of ``modifications'' to 
permits.
Cost-Effectiveness of Permit Program
    According to EPA officials, Title V was added to address existing 
shortfalls in compliance. However, state agencies and an industrial 
stakeholder whom we interviewed agreed that the permit program consists 
primarily of accounting and reporting processes rather than inspection 
processes. One state stakeholder commented that the permit program 
attempts to enforce environmental rules through a paper trail rather 
than by inspections of specific sources. According to EPA, however, a 
permit that clearly contains all Clean Air Act requirements for a 
facility can serve as a valuable inspection tool.
    A state stakeholder told us that title V is more administrative in 
nature than other provisions of the Act, yet it takes more time and 
more manpower than anything the state must do under the Clean Air Act 
Amendments of 1990. From the state's perspective, the program has 
become an administrative grind: when the permits are finished, what 
remains is a voluminous document that few will read. According to EPA, 
the initial steps of getting the program up and running and issuing the 
initial round of permits certainly could require significant resources, 
but the Act funds this effort with permit fees that sources pay to the 
states. EPA believes that since the permit is a single document 
containing all applicable requirements, it should be of interest and 
use to the industrial sources, air pollution control agencies, and the 
public.
    When the permit program was implemented, several states already had 
permit programs in place. For example, according to a state official, 
California has had a permit program for 30 years and would rather 
enforce its regulations through inspections. According to a state 
stakeholder, the Clean Air Act Amendments allow for state permit 
programs that provide equivalent results, but EPA wants the permit 
programs in each state to be identical. According to EPA officials, the 
title V regulations allow significant flexibility in tailoring state 
programs, but each program must meet the minimum criteria established 
by the Act.
    Costs are associated with both approaches--paper trail or 
inspection--and several state stakeholders believe that the actual 
inspection of emissions is more effective than wading through volumes 
of permit paperwork. For example, according to an industrial 
stakeholder, one permit application for a source is 15,000-pages long 
and contains several thousand requirements. State officials commented 
that they would rather inspect the source than go through the 
voluminous permit package page-by-page.
    However, according to EPA, preliminary data indicate that as 
sources undertake the compliance review required by title V, as many as 
70 percent of them in some states are finding Clean Air Act 
requirements that they had been unaware of or had been complying with 
improperly. Actual inspections always have a place in an air program, 
according to EPA, and should continue. However, the process of 
compiling all requirements in a single place and the requirement that 
sources review and certify compliance with these requirements are 
clearly leading to the correction of instances of noncompliance that 
were not caught by inspection programs, according to EPA. This leads to 
actual emissions reductions and a more level playing field for sources, 
the agency said. According to EPA, it also complements the inspection 
approach by providing inspectors with a permit that clearly describes 
what requirements apply to the industrial source, thus enabling more 
efficient inspections.
    From the industrial perspective, significant costs have resulted 
from the permit program with minimal, if any, air quality improvements. 
According to an industrial stakeholder, at the time of the permit 
program's enactment, EPA estimated that the program would have no 
costs. In 1992, when the first regulations were issued, EPA estimated 
that the permit program would cost $360 million. Industrial 
stakeholders said that the actual costs are substantial. According to 
the First Annual Title V Report of the Clean Air Implementation 
Project, \25\ the cost of the permit program has averaged $100,000 per 
facility for the 20,000 facilities subject to title V, resulting in 
total costs of at least $2 billion just for the preparation of title V 
permit applications. For example, according to one industrial 
stakeholder, the automobile industry has spent millions of dollars in 
preparing voluminous permit applications, yet only two assembly 
facilities have received approved permits. According to EPA officials, 
early estimates of the costs of the program are uncertain and vary 
widely because of differing early interpretations of various 
requirements. For example, according to EPA, many industrial sources 
and states took a very strict view of the permit application 
requirements of EPA's rules, leading to early concerns about voluminous 
permit applications. According to EPA, when it learned of these 
concerns, it issued two guidance documents to clarify that applications 
need not contain such exhaustive detail.
---------------------------------------------------------------------------
    \25\ See Getting the Title V Program on Track: Will EPA Make the 
Necessary Changes to It Policies? First Annual Report of the Clean Air 
Implementation Project (Apr. 1999). The Clean Air Implementation 
Project is an organization of major industrial corporations, which 
joined together in 1991 to focus on a broad range of issues under the 
1990 Clean Air Act Amendments.
---------------------------------------------------------------------------
    EPA has since issued several guidance documents that clarify and 
streamline permit application requirements. For example, according to 
EPA, it worked extensively with stakeholders in the automobile 
manufacturing industry to develop streamlined monitoring reference 
materials for use in their operating permit. EPA's latest estimates are 
that the administrative burden of the permit program is about $10,000 
per source per year, but it acknowledged that the total costs could 
exceed $100,000 for some of the largest and most complex sources. EPA 
expects this burden to lessen after the initial round of permit 
issuance is completed.
    By clarifying how Clean Air Act requirements apply to specific 
sources, and requiring responsible officials at the sources themselves 
to review their compliance with these requirements, EPA believes title 
V is achieving several direct and indirect air quality benefits. As the 
program is being implemented, EPA is compiling a list of benefits that 
sources, states, citizens, and EPA report finding. Such benefits to 
date have fallen into several categories: (1) emissions reductions as 
sources begin to comply with requirements they had previously not been 
complying with; (2) improving monitoring, which allows sources to 
ensure their compliance with the Act and to discover and correct 
deviations from the Act's requirements more promptly; (3) 
identification of, and subsequent clarifying and streamlining of, 
permit or rule requirements that were overlapping, unclear, or 
obsolete; (4) improvements in the development of rules benefiting the 
regulated community, as rule writers develop rules with an emphasis on 
how these rules will be implemented through permits; (5) an improved 
awareness of pollution control requirements, resulting in sources' 
improved ability to do comprehensive air quality management and for 
states to conduct regional air quality planning; and (6) improved 
public involvement in air pollution control decisions.
Permit Modification
    A problem with the permit program, according to an industrial 
stakeholder we spoke to, is EPA's interpretation of section 502(b)(10) 
of the Clean Air Act. Under that section, permit programs must have 
provisions to allow changes within a permitted facility without a 
permit revision as long as (1) the changes are not ``modifications'' 
under any provision of title I, (2) the changes do not exceed emissions 
allowable under the permit, and (3) the permit holder notifies EPA and 
the permitting authority. The stakeholder stated that EPA has 
interpreted this section to mean that any change in a facility, 
regardless of how small, requires the permit's revision and the 
agency's permission. According to the First Annual Title V Report of 
the Clean Air Implementation Project, EPA's history of interpreting the 
term modifications shows how the agency significantly increased the 
level of review required for minor changes without revising its 
regulations. Under the current permit rule, whether a change 
constitutes a modification in large part determines whether an 
industrial source can change its manufacturing process without the 
necessity of a permit revision. The industry report found the 
following:
      Consistent with Congress's clear intention, the preamble 
to EPA's 1992 title V rule made it clear that minor changes do not 
constitute modifications.
      EPA subsequently announced, in numerous Federal Register 
notices, that states must treat minor changes as modifications.
      In an August 1994 proposal, EPA confirmed this revision 
of the original title V rule.
      In August 1995, EPA rescinded this interpretation and, 
consistent with its original title V preamble, announced that it would 
define ``modifications'' to exclude minor changes.
    According to the industry report, EPA's history of changing its 
interpretation of modifications is an example of how title V should not 
be implemented, if the program is to meet the essential policy 
objectives.
    According to EPA officials, the definition of ``modification'' has 
been difficult to interpret and remains the subject of litigation. 
However, according to EPA, this term relates to the system for revising 
permits and should not affect the initial issuance of permits. EPA 
expects to resolve the litigation before a significant number of permit 
revisions occurs.
    A related issue concerns the timing of permit modifications. 
According to an industry stakeholder, under the Clean Air Act, sources 
are allowed to wait to make any changes in their permits until the 
permits are renewed, as long as the time remaining on the permits is 3 
years or less. According to EPA officials, the 3-year timeframe applies 
to newly promulgated requirements, but nothing in the Act allows 
sources to wait for up to 3 years to incorporate requirements that they 
themselves trigger by making a change at a source.
                                 ______
                                 
                              Appendix VI
                TITLE VI--STRATOSPHERIC OZONE PROTECTION
    Title VI of the Clean Air Act Amendments of 1990 pertains to the 
protection of the stratospheric ozone layer. Such protection is to be 
accomplished by limiting the production and consumption of substances 
with ozone-depletion potential.
    Title VI categorizes substances that deplete the stratospheric 
ozone layer as either class I (i.e., chloroflurocarbons, 
methylchloroform, carbon tetrachloride, and halons) or class II (i.e., 
hydochlroflourocarbons) substances. Title VI required the phasing out 
of the production of class I substances by January 1, 2000, except in 
the case of methyl chloroform, which is to be accomplished by January 
1, 2002. Title VI also allows for an acceleration of the phaseout if 
Parties to the Montreal Protocol determine that the stratospheric ozone 
layer is depleting more rapidly then estimated earlier.26 According to 
EPA officials, under the accelerated phaseout approved by the Parties, 
class I production and import were phased out.
    As for class II substances, the title provides, effective January 
1, 2015, that it shall be unlawful to introduce them into interstate 
commerce or use except under certain circumstances. Such circumstances 
pertain to (1) substances that have been used, recovered, and recycled; 
(2) substances consumed in the production of other chemicals; and (3) 
substances used as a refrigerant in appliances manufactured prior to 
January 1, 2020. The production of class II substances shall be 
unlawful after 2030. According to EPA officials, the Montreal Protocol 
Parties accelerated the phaseout of class II substances as well, 
beginning in 2004.
    Other sections of title VI concern the use, disposal, recovering, 
and recycling of class I substances during the service, repair, or 
disposal of appliances; industrial process refrigeration; and the 
servicing of motor vehicle air conditioners. For the class I and class 
II substances being phased out, title VI provides for approving the 
replacement of chemicals, product substitutes, or alternative 
manufacturing processes that will reduce the overall risks to human 
health and the environment.
                         STATUS OF REQUIREMENTS
    To accomplish the objectives of title VI of the 1990 Clean Air Act 
Amendments, EPA identified 29 requirements. These requirements included 
promulgating class I phaseout regulations, new class I labeling 
regulations, bans on nonessential products using ozone-depleting 
substances, and determinations of acceptability for alternatives to 
class I and class II substances and issuing reports to the Congress on 
the production/consumption of ozone-depleting chemicals. The status of 
the implementation of these requirements is shown in table 7.

                                 Table 7
   Status of Requirements Designed for Stratospheric Ozone Protection
------------------------------------------------------------------------
        Requirements with statutory deadlines                Number
------------------------------------------------------------------------
Met on time..........................................  2
Met late.............................................  10
Unmet--deadlines prior to February 2000..............  0
Deadlines after February 2000........................  0
    Subtotal.........................................  12
    Requirements without statutory deadlines\1\......  17
        Total........................................  29
------------------------------------------------------------------------
\1\EPA has met 16 of the 17 requirements.

    EPA's most recent data show that it has taken the required action 
to meet all 12 deadlines of the title VI requirements established by 
the legislation. EPA met all the deadlines, although, as indicated in 
table 7, it was late in meeting 10 of its requirements. For example, 
the Clean Air Act Amendments of 1990 required EPA to promulgate the 
mobile air-conditioning recycling regulations by November 1991; 
however, EPA did not meet this date. The regulation was promulgated in 
July 1992. According to EPA officials, the basic reason for being late 
with the requirements was the need to prioritize the large workload 
under the Act.
 VIEWS OF KEY SHAREHOLDERS ON MAJOR ISSUES AFFECTING IMPLEMENTATION OF 
            TITLE VI OF THE CLEAN AIR ACT AMENDMENTS OF 1990
    The stakeholders we interviewed from both the industrial sector and 
the environmental sector agreed that title VI has been effective in 
reducing ozone-depleting chemicals from the environment. According to 
two industrial stakeholders, the most effective requirements under 
title VI are (1) the recycling and emissions reduction program for 
class I and II substances and (2) the servicing of the motor vehicle 
air conditioners rule.
    According to one stakeholder, EPA faces a challenge to implement 
the regulations judiciously so that ozone-depleting pollutants can be 
removed from the ambient air in a timely manner. According to EPA, the 
basic reason why regulations are issued late is the lack of sufficient 
EPA staff to handle the large work load. Delays in issuing regulations 
may result in the emission of ozone-depleting substances or their 
substitutes into the ambient air. For example, absent a final rule 
addressing the recovery of refrigerant substitutes, some industrial 
refrigeration owners or operators may be venting refrigerant, while 
others may be complying with the statutory requirements of the Clean 
Air Act. The latter are likely following the detailed requirements set 
out in an EPA proposal that regulates the recovery of substitute 
refrigerants.
                                 ______
                                 
                              Appendix VII
            SELECTED ORGANIZATIONS INCLUDED IN GAO'S REVIEW

------------------------------------------------------------------------
            Organization                           Purpose
------------------------------------------------------------------------
Air Conditioning Refrigeration       The national trade association
 Institute.                           representing manufacturers of more
                                      than 90 percent of U.S.-produced
                                      central air-conditioning and
                                      commercial refrigeration
                                      equipment.
Alliance of Automobile               A coalition of nine global
 Manufacturers.                       automakers that provides member
                                      companies a forum to work together
                                      on public policy matters of common
                                      interest and to work with
                                      government and other stakeholders
                                      to find sensible and effective
                                      solutions to improve the
                                      environment and motor vehicle
                                      safety.
Alliance for Responsible             A coalition of companies that
 Atmospheric Policy.                  produce and use
                                      chlorofluorocarbons,
                                      hydrochlorofluorocarbons, and
                                      hydroflourocarbons. Coordinates
                                      industry's participation in the
                                      development of international and
                                      U.S. Government policies regarding
                                      ozone protection and global
                                      climate change.
 American Lung Association.........  A health organization formed to
                                      fight lung disease and promote
                                      lung health through education,
                                      research, and advocacy.
American Petroleum Institute.......  The primary trade association for
                                      the U.S. petroleum and allied
                                      industries engaged in oil and
                                      natural gas exploration,
                                      production, transportation,
                                      refining, and marketing.
Association of International Auto    The trade association for U.S.
 Manufacturers.                       subsidiaries of international
                                      automobile companies. The
                                      association acts as the voice of
                                      the International Automakers in
                                      America, speaking to the public,
                                      the press, and the government.
Chemical Manufacturing Association.  Represents the chemical industry on
                                      public policy issues, coordinates
                                      the industry's research and
                                      testing programs, and administers
                                      the industry's environmental,
                                      health, and safety performance
                                      improvement initiative.
Clean Air Network..................  An alliance of nearly 1,000
                                      national, regional, state, and
                                      local citizens groups that work to
                                      protect human health and
                                      environmental quality.
Edison Electric Institute..........  The trade association of
                                      shareholder-owned electric
                                      utilities, whose members generate
                                      and distribute more than three-
                                      quarters of the nation's
                                      electricity. The institute
                                      provides information on energy and
                                      environmental issues of national
                                      importance.
Natural Resources Defense Council..  Actively involved in major national
                                      environmental issues and many
                                      regional and international issues
                                      as well. Its primary strategies
                                      include scientific research,
                                      public education, lobbying, and
                                      litigation.
Resources for the Future...........  Nonprofit and nonpartisan think
                                      tank that conducts independent
                                      research--rooted primarily in
                                      economics and other social
                                      sciences--on environmental and
                                      natural resource issues.
State and Territorial Air Pollution  Association representing air
 Program Administrators/Association   pollution control agencies in 54
 of Local Air Pollution Control       states and territories and over
 Officials.                           150 major metropolitan areas. The
                                      association serves to encourage
                                      the exchange of information among
                                      air pollution control officials;
                                      enhance communication and
                                      cooperation among Federal, state,
                                      and local regulatory agencies; and
                                      promote good management of our air
                                      resources.
------------------------------------------------------------------------

    We also interviewed representatives from four states--California, 
Georgia, Illinois, and New York--and the nation's largest local 
program--California's South Coast Air Quality Management District. The 
state and local programs were chosen in coordination with EPA and the 
State and Territorial Air Pollution Program Administrators/Association 
of Local Air Pollution Control Officials to select a nationwide 
representation of the organizations responsible for implementing the 
requirements of the Clean Air Act Amendments of 1990.
                                 ______
                                 
                              Appendix VII
           COMMENTS FROM THE ENVIRONMENTAL PROTECTION AGENCY

                                 ______
                                 
          Letter Submitted for the Record from Senator Baucus
                           Environmental Protection Agency,
                               Office of Air and Radiation,
                                      Washington, DC, May 16, 2000.

Mr. Peter F. Guerrero, Director,
Environmental Protection Issues,
U.S. General Accounting Office
Washington, DC 20548

Dear Mr. Guerrero: Thank you for the opportunity to comment on the 
draft General Accounting Office (GAO) report entitled, ``Air Pollution: 
Emission Sources Regulated by Multiple Clean Air Act Requirements.''
    In developing the Clean Air Act (CAA), Congress created several 
programs targeted at a variety of air pollution problems, recognizing 
that effective strategies would need to be tailored to each problem. 
The multiple provisions of the law reflect real-world complexities such 
as different types of pollutants (e.g., criteria versus toxic 
pollutants; local versus regional threats), differences in economic and 
technical feasibility of pollution controls for new and existing 
sources, the potential for pollution increases when existing plants are 
modified, and the multiple health and environmental effects from the 
same pollutant. For example, Congress found that the Act's program for 
protecting public health against local health threats from sulfur 
dioxide was not an adequate response to the regional acid rain problem 
caused by the same pollutant.
    GAO correctly points out that industries such as utilities and 
petroleum refiners must comply with emission reduction requirements 
under more than one CAA program. This is because these facilities 
release a variety of pollutants, often in large amounts, that can 
contribute to a variety of different health and environmental problems. 
Even individual units within a facility often emit a variety of 
pollutants. In addition, the complexity of large industrial facilities 
such as petroleum refineries and chemical plants--which can have 
multiple types of processes with literally hundreds, or even thousands, 
of emission points--can lead to different requirements for different 
types of processes or emission points at the same site.
    In carrying out Act, the Environmental Protection Agency (EPA) has 
helped industries subject to multiple requirements in a Amber of ways--
by providing increased flexibility in regulatory requirements, by 
involving stakeholders in developing integrated strategies and new 
rules, and by conducting several industry-specific initiatives Also, 
the operating permits program, which brings a facility's CAA 
requirements together in one place, is designed to make it easier for 
facilities to understand and comply with multiple requirements.
    The draft GAO report focuses on two of EPA's industry-specific 
initiatives. But, it does not give a full picture of the ways in which 
EPA, working closely with affected industries, reduces potential 
inefficiencies in cases where multiple CAA requirements may apply. An 
overview is presented below.
Increased Flexibility for Industry
    EPA has used a variety of regulatory approaches that provide 
industry with flexibility on ways to achieve air pollution reductions, 
while still providing accountability for the results. Among these are 
numerical emission limits, multiple compliance options, and averaging 
and trading programs. By not mandating use of a particular control 
technology, flexible rules allow a facility to devise compliance 
strategies that satisfy the purposes and emissions reduction 
requirements of different air programs, including multiple requirements 
where they may exist.
    A prime example of this flexibility is the expanded use of 
emissions averaging and trading programs. EPA'S acid rain program, 
which is a market-based, cap-and-trade allowance system, has been 
highly effective and far less costly than originally predicted. 
Building on this experience and efforts by the Northeast Ozone 
Transport Commission to reduce nitrogen oxides (NOx) through a trading 
program, EPA recently issued a model trading program for states to 
achieve regional NOx reductions over much of the Eastern United States. 
EPA has issued broader guidance for states on how facilities can use 
averaging and trading to achieve criteria pollutant reductions needed 
to meet air quality standards. In some cases, EPA has worked with 
states to set plant-wide limits that work as a cap on total amounts of 
emissions from an individual plant site, but allow the plant 
flexibility in meeting that overall limit In numerous air toxics 
emissions standards, the Agency has provided compliance flexibility 
through averaging and other means.
Stakeholder Involvement to Promote Program Integration
    Since 1990, EPA has increased its efforts to involve stakeholders. 
including affected industries, throughout the process of developing 
regulatory requirements and establishing implementation strategies. 
This involvement results in better coordinated programs and 
requirements.
    An example was EPA's efforts to develop an integrated strategy for 
implementing the 1997 national air quality standards for ozone and 
particulate matter along with regional haze program EPA spent over 2 
years working with over 115 representatives from states, tribes, 
industry, environmental groups, and other Federal agencies seeking 
advice on innovative, flexible, and cost-effective implementation 
strategies to integrate ozone, particulate matter and regional haze 
issues. Based on these interactions and expert advice, EPA has 
developed strategies that incorporate market-based systems, positive 
incentive systems, and a mixture of national, regional, and local 
emission reduction measures.
    EPA also has worked with affected industries to coordinate 
requirements of new rules with other CAA programs As GAO notes, EPA has 
coordinated development of several toxics rules with requirements for 
control of smog-forming volatile organic compounds (VOCs), reducing 
complexity and avoiding potential duplication. In the case of aerospace 
and shipbuilding and coating operations, EPA set equivalent limits for 
VOCs and toxic air pollutants. In the case of pharmaceutical 
production, EPA's air toxics rule gives the industry flexibility to 
comply either with new source performance standards for storage tanks, 
or storage tank requirements in the toxics rule. EPA a15Q worked with 
the wood furniture manufacturing industry to avoid conflict or 
duplication between toxics and VOC requirements.
    In evaluating the need for future regulatory requirements, the 
Agency considers current requirements placed on a particular industry 
by state, local or other Federal measures. For example, EPA's regional 
NOx program builds off current and projected NOx reductions from EPIL's 
acid rain program.
Operating Permit Program
    The operating permit pro gram is designed to make it easier for 
sources to understand and comply with control requirements under the 
CAA. For each major facility, the Title V permit will consolidate all 
of its CAA air pollution control requirements into a single document.
    In addition, the permitting process can serve as a forum for 
consolidating multiple applicable requirements into a single set of 
streamlined permit conditions for a facility, which can reduce 
compliance costs associated with monitoring, record keeping and 
reporting. EPA has issued guidance to states (known as ``White Paper 
#2'') that outlines ways to do this. EPA has helped facilitate the 
issuance of permits in California and Oklahoma where national air 
toxics emissions standards, new source performance standards, and state 
implementation plan rules were consolidated into one set of permit 
conditions using this approach. Other states also are using Title V 
permits in similar ways, and EPA expects that the use of this approach 
will become more widespread as more permits are issued with successful 
permit streamlining examples.
Industry Sector Initiatives
    As GAO notes, EPA also has pursued and is continuing to pursue 
initiatives that involve exploring ways to consolidate or coordinate 
multiple requirements with a variety of industry sectors.
    Detailed comments on the drain report, including clarifications and 
corrections, are included in an enclosure to this letter. Thank you 
again for the opportunity to comment.
            Sincerely,
                Robert Perciasepe, Assistant Administrator.
                               __________
   Statement of James E. Rogers, Vice Chairman, President, and Chief 
                    Executive Officer, Cinergy Corp.
    Good morning. My name is Jim Rogers, and I am the Vice Chairman, 
President, and CEO of Cinergy Corp. I am pleased to be here today to 
testify on the importance of developing an integrated air emission 
strategy for electric generating power plants.
Background on Cinergy
    As background for my testimony, let me tell you about Cinergy. We 
are one of the nation's leading diversified energy companies, with a 
total capitalization of $7.2 billion and assets of $10 billion. 
Cinergy's operating companies, The Cincinnati Gas & Electric Company 
and PSI Energy, Inc., serve more than 1.4 million electricity customers 
and 478,000 gas customers in Indiana, Ohio, and Kentucky. Cinergy owns 
or operates more than 16,500 megawatts of electrical and combined heat 
plant generation that is either operational or under development. 
Approximately 11,000 of those megawatts comprise our core system of 14 
baseload stations and seven peaking stations located in the three 
States where we currently have retail customers. Cinergy is active in 
U.S. power and natural gas markets and maintains a 24-hour-a-day, 7-
day-a-week trading operation. The company's international business 
unit, Cinergy Global Resources, has assets in power generation, 
transmission, and distribution projects in the Czech Republic, Spain, 
the United Kingdom, Zambia, Estonia, and the United States.
    While recently Cinergy has made substantial investments in 
renewables, combined heat and power units, micro turbines and fuel 
cells, most of the electricity sold by Cinergy's U.S. operations is 
produced at coal-fired units. Coal is a reliable, widely available and 
low cost energy source, particularly in the Midwest. Coal-fired 
generation now accounts for over 55 percent of the nation's electricity 
supply over 80 percent throughout the Midwestern States located in the 
East Central Area Reliability region (ECAR) and Cinergy believes it 
will and must continue to play an important role well into the future.
    I want to personally compliment both Senators Smith and Inhofe for 
their interest in an integrated emissions reduction strategy for the 
electric power sector. Senator Smith led the way earlier this year by 
initiating stakeholder discussions. Today's hearing also represents 
another important step by Senator Inhofe to review key Clean Air Act 
implementation issues.
    We at Cinergy have been pursuing the concept of a comprehensive 
environmental strategy for coal-fired power plants for well over a 
year. We firmly believe that a comprehensive strategy will yield the 
greatest environmental benefits for the lowest costs to consumers. And 
we are not alone in our thinking. The Edison Electric Institute (EEI), 
whose Environmental Policy Committee I currently chair, has begun both 
internal and preliminary external discussions with various 
stakeholders. We are pleased that the Vice President recognized the 
benefits of this approach in his Earth Day remarks. Further, several 
specific companies and organizations are following this issue closely 
as it underscores the current policy constraints on energy system 
modernization and efficiency gains. Cinergy views all these interests 
as evidence of support for this subcommittee's as well as the full 
committee's attention to this matter and of the need for congressional 
action.
The Importance of An Integrated Emission Reduction Strategy for the 
        Generation Sector
    According to data provided to FERC, our industry spent over $32 
billion for air pollution controls between 1976 and 1996. During this 
period, power plant emissions declined substantially even though 
electricity generation and use increased as a result of economic 
growth. Despite this progress, we recognize that the public expects 
additional air quality improvements and that power generators will need 
to do their share. We also recognize that the costs of further emission 
reductions to our industry will be significant, but that we have an 
ongoing responsibility to make the investments necessary to achieve 
cleaner air.
    The real question, I submit, is whether our nation has the right 
strategy for meeting environmental goals while maintaining a 
competitive and efficient energy sector. Today's answer to this 
question is not reassuring. In the current regulatory landscape, U.S. 
power plants face an array of existing and proposed emission controls 
for four key substances: sulfur dioxide (``SO2''), nitrogen 
oxides (``NOx''), mercury, and carbon dioxide (``CO2''). 
Please see Charts ``A'' and ``B'' appended at the end of this statement 
for further details (courtesy of the Edison Electric Institute, March 
2000). Federal and State agencies, and even neighboring countries, are 
seeking to regulate these substances through many initiatives, each 
involving different sources, control levels, implementation mechanisms, 
and compliance dates. These initiatives are not necessarily coordinated 
and in many cases conflicting. The timing, impact, and cost of any 
combined emission controls that may be required are nearly impossible 
to predict with any accuracy. As a result, the electric power industry 
faces enormous uncertainties as it contemplates long-term investment 
decisions involving billions of dollars. Inevitably, the lack of 
coordination and consistency among the many existing and proposed 
initiatives will mean that energy consumers as well as our shareholders 
will bear far higher costs than necessary to achieve clean air.
    The many unresolved emission issues affecting the power generation 
sector have also led to protracted conflict in the courts and the 
political arena. A divisive climate now exists in which region is 
pitted against region, environmental groups are pitted against 
industry, and EPA is pitted against individual States and power 
producers. Continuation of this divisive climate may well mean that our 
collective energies are focused more on litigation than on emission 
reductions. This serves absolutely no good public policy purpose.
    Is there a better way? Cinergy does not believe that we can fix the 
existing system through further piecemeal action. However, we do 
believe that legislation holds great promise which, if properly 
crafted, can establish a comprehensive air quality framework for the 
power generation sector which meets both our energy and environmental 
objectives. In Cinergy's judgment, this legislation should focus on 
four key objectives:
      Setting appropriate emission reduction goals that address 
long-term air quality needs and assure protection of human health and 
the environment.
      Creating a stable and predictable climate for capital 
investment in emissions controls and in new and upgraded generation 
facilities to meet current and future requirements for electric power.
      Implementing new reductions in a flexible, cost-effective 
manner which preserves the benefits of efficient and reliable power 
production and ensures the greatest environmental return possible on 
our compliance investment.
      Providing electric utilities with the proper incentives 
to encourage the smooth transition to cleaner, more efficient 
generating units.
    I recognize that developing legislation which meets these goals 
will require hard work by Congress and many different stakeholders. 
However, Chairman Smith has already begun this process by announcing a 
new legislative initiative for the power plant sector and, with his and 
this subcommittee's leadership, I am very optimistic we can be 
successful.
The Current Regulatory Landscape
    Congress last amended the Clean Air Act (CAA) in 1990. Although 
these amendments were extensive, Congress could not have foreseen the 
problems created over the past decade by the Act's often conflicting 
requirements, particularly as electric utilities reinvent themselves to 
face deregulation and the new competitive reality. The 1990 Amendments 
do not set specific air quality goals for the generation sector or 
provide a coordinated approach for reducing power plant emissions over 
time. While EPA has attempted to fill these gaps administratively as 
new emission reduction challenges have emerged, its efforts have 
achieved only limited success. Statutory deadlines and other 
constraints have discouraged coordinated strategies for controlling 
different pollutants in the most cost-effective manner and limited the 
use of emissions trading and other mechanisms for reducing emission 
control costs. Meanwhile, without a comprehensive legislative mandate, 
EPA has pursued a piecemeal approach to power plant regulation rather 
than a multi-pollutant strategy that would maximize environmental 
benefits while reducing costs to producers and consumers.
    The current debate over air emission controls for power plants 
focuses on five main issues:
      Nitrogen oxides. Because NOx emissions can contribute to 
the formation of ozone, NOx control has been one element of State 
strategies to attain EPA's 1-hour standard for ozone. Title IV of the 
CAA also mandates NOx controls to address acid rain concerns, and 
substantial NOx reductions are now being implemented by large electric 
generating plants in response to Phase 2 Title IV requirements.
    EPA maintains that long-range transport of NOx emitted from power 
plants in the Eastern U.S. is contributing to ozone non-attainment in 
downwind States. Consequently, EPA issued a 22-State SIP call in 1998 
that seeks to create a regional NOx control program. Under this 
program, power plants would be required by 2003 to install stringent 
NOx controls that, by EPA's own estimate, would impose industry-wide 
capital costs of $14.1 billion. Adding to the uncertainty, EPA has 
moved ahead to impose parallel NOx control requirements in response to 
petitions filed by the Northeastern States under Section 126 of the 
CAA. EPA's Section 126 rule, which is intended to impose federally 
enforceable controls to ``backstop'' the SIP call, imposes a separate 
regime of NOx reductions.
    Cinergy continues to be willing to achieve substantial additional 
NOx reductions beyond Title IV in an orderly manner, but we now find 
ourselves confronting a monumental compliance challenge under an 
impossibly tight time-frame with no certainty about our own or our 
States' legal obligations. Cinergy alone could incur control costs of 
over $700 million under the SIP call, which could escalate depending on 
how much of a premium we must pay to secure necessary trade laborers 
and materials. We are further troubled by the very real threat to 
system reliability that is anticipated as essential generating units 
must be shut down for extended periods to install controls at a time 
when there is a historically small reserve margin in the region.
    Furthermore, even deeper NOx reductions are possible in the near 
future in response to EPA's new 8-hour ozone standard for nonattainment 
areas, which is currently being reviewed by the courts. Such additional 
requirements could result in new NOx mandates in conflict with the NOx 
control strategies currently being pursued by States and industries in 
response to EPA's SIP Call. Finally, while EPA currently is 
implementing NOx controls for the ozone season, this does not rule out 
further action to require annual controls to address visibility and 
acid deposition issues.
      Sulfur dioxide. Despite considerable progress in reducing 
SO2 loadings under the Acid Rain provisions of Title IV of 
the CAA , including further reductions being made this year under Phase 
II , additional SO2 controls are under consideration for a 
variety of reasons: (1) to support attainment of the new fine 
particulate standard (assuming it is ultimately upheld by the courts), 
(2) to implement the emission reduction goals set by EPA's regional 
haze strategy, and (3) to address continuing concerns about 
acidification of lakes and streams . However, there is no consensus at 
this time on the stringency and timing of further SO2 
controls. Moreover, if additional SO2 controls are required, 
it is unclear whether EPA could or would build on the proven and cost-
effective emissions trading program established under the Title IV acid 
rain provisions.
      Mercury. Section 112(n) of the CAA requires EPA to study 
the economic and environmental impacts of power plant emissions of 
mercury and other pollutants and to regulate these emissions if it 
determines that regulation is ``appropriate and necessary.'' EPA is 
expected to make this determination later this year. Depending on what 
decision EPA makes--and there is considerable evidence that the known 
health effects of mercury do not warrant regulation at this time--EPA 
might attempt to impose controls on power plant sources under the Title 
III air toxics program. Under this program EPA could impose expensive 
unit-by-unit control requirements as soon as 2007. There are currently 
no commercially proven technologies for removing mercury during coal 
combustion, so it is not possible at this time to plan for the capital 
costs or the deployment of control equipment. If we are going to face 
new mercury requirements, we should have the lead time to develop new 
mercury removal technologies, coordinate mercury reductions with 
emission control programs for other pollutants, and develop emissions-
trading systems which achieve overall mercury reductions at the lowest 
possible cost. The current statutory framework would rule out these 
options.
      Carbon dioxide. I have long expressed concerns with the 
Kyoto Protocol and am very concerned that the framework it creates is 
unworkable and needlessly expensive. Also, I do not believe that this 
legislative effort is the place to resolve disputes about the 
agreement. Still, the prospect of future CO2 emissions 
controls is a major source of uncertainty for the power generation 
sector. If CO2 requirements are imposed that compel massive 
expenditures by companies to switch coal-fired power plants to natural 
gas or to purchase expensive allowances, the sizable investments we 
will make to install pollution control equipment over the next 10 years 
could be wasted.
    For these reasons, Cinergy could support a CO2 component 
in this bill, especially if it helped encourage the further commercial 
development of carbon-friendly technologies such as solar and wind 
power, micro turbines, fuel cells that are the key to making real 
progress on this issue. I believe that with your leadership and a 
little creativity, the stakeholders here can create a program fostering 
technological innovations and reducing CO2 emissions, while 
leaving for another day the question of Kyoto implementation.
      New Source Review. The New Source Review (NSR) and 
Prevention of Significant Deterioration (PSD) permitting programs were 
intended to ``backstop'' Federal and State emission reduction efforts 
by minimizing large emissions increases from new sources or 
``modified'' existing sources. From an industry point of view, these 
programs have the unintended consequence of stifling modernization and 
innovation as companies try to navigate the Byzantine rules that have 
grown up around the program. Comprehensive legislation will allow 
Congress to reexamine the role of NSR/PSD in achieving CAA air quality 
goals for power plants. Simply put, if Congress were to put in place a 
system of multi-pollutant emission reduction targets for power plants, 
the need for an NSR/PSD backstop for covered units would be 
dramatically reduced. I therefore urge you to include a new, simplified 
new source review program in any bill.
Why The Absence of An Integrated Air Quality Framework Is Harming 
        Industry and Consumers
    The fragmented regulatory framework which now applies to electric 
power plant emissions is blocking progress toward our long-term energy 
and environmental goals in several different ways:
      Power producers must make costly control decisions for 
some pollutants without knowing what requirements will apply to other 
pollutants. Without understanding the full range of emission reductions 
that will be needed at their plants, generating companies may commit to 
controls that are effective for some pollutants but not others, 
resulting in unanticipated and perhaps avoidable costs when later 
requirements take effect. Alternatively, they may decide to invest in 
continued operation of plants that might be retired or repowered if the 
full extent of environmental control costs were known in advance.
      Because the compliance dates for different control 
requirements are highly uncertain, electric generators cannot develop 
comprehensive long-term capital investment strategies. The lack of 
clarity regarding what emission reductions will be required and when 
they will be implemented has made long-term capital planning difficult 
if not impossible a serious problem in an industry which is capital-
intensive and needs long lead-times for plant construction and 
modification.
      The poor alignment of different emission reduction 
initiatives discourages cost-effective multi-pollutant approaches. Some 
control technologies are likely to be beneficial in controlling 
multiple pollutants, but these co-benefits will not be realized unless 
the compliance dates and control levels for these pollutants are 
coordinated.
      The potential for multiple emission reduction 
requirements for the same pollutant adds uncertainty to capital 
investment decisions and will unnecessarily increase compliance costs. 
For several pollutants, different levels of control and compliance 
schedules are being adopted on the State and Federal level and even 
under different EPA programs. For example, requirements for NOx 
reductions are in place or under consideration by EPA under CAA Title 
IV, the 22-State SIP call and Sec. 126 rulemaking, the regional haze 
rule, the NSR enforcement initiative, and implementation strategies for 
the new 8-hour ozone and PM2.5 standards not to mention 
State programs like the MOU for the Ozone Transport Region (OTR) and 
treaty negotiations between the U.S. and Canada. Electric power 
producers faced with these multiple requirements will have no assurance 
that control strategies they adopt for NOx today will be viable 2 years 
from now, let alone the 10 or so necessary to recoup the investment. 
The same uncertainties exist for SO2 and mercury, both of 
which could be subject to multiple control regimes at the State and 
Federal level.
      There is no consistency in the use of trading programs 
across pollutants, adding complexity to the implementation process and 
increasing compliance costs. Congress established an allowance trading 
program for Title IV SO2 reductions in the 1990 CAA 
Amendments but did not follow a similar approach for other pollutants. 
Congress did not give EPA specific authority to implement a national 
NOx trading program in 1990; thus, EPA has adopted a ``model'' trading 
program under the NOx SIP call. The adoption of this program has been 
left to the States, encouraging a patchwork of trading regimes that 
will preclude companies from initially being able to rely on a liquid 
multi-state trading market since various State trading rules won't be 
sufficiently known in advance of the compliance deadline to provide for 
planning certainty. The technology-based provisions of Title III appear 
to rule out allowance trading for mercury (assuming EPA decides to 
regulate this pollutant) even though the nature of mercury emissions 
and the range of sources may be ideal for a trading program to moderate 
the enormous costs of mercury controls. And since no framework now 
exists for CO2 emission reductions, the availability of 
trading and other market-based mechanisms while generally viewed as 
essential for cost-effective implementation remains highly uncertain.
      Because multiple initiatives are being pursued at the 
Federal and State level without any overall coordination, no effort has 
been made to set emission reduction priorities which assure that 
available resources are used as cost-effectively as possible. The 
numerous ongoing or proposed programs to control NOx, SO2, 
and mercury at the national and State levels are largely intended to 
achieve unrelated objectives and have been developed in isolation from 
each other. Accordingly, neither the control levels nor the compliance 
schedules for these programs reflect an assessment of their relative 
importance in addressing environmental problems and their potential 
benefits in relation to the costs incurred. Thus, there is no assurance 
that the current piecemeal approach to electric power plant regulation 
will address the most important air quality concerns or provide the 
largest possible return on the industry's sizable investment in 
pollution controls.
      Conflicts exist between the goals of different air 
quality initiatives for electric power plants and between these 
initiatives and other important energy policy objectives. For example, 
EPA's expansive interpretation of NSR/PSD requirements emphasizes the 
installation of maximum achievable control technology, whether or not 
needed for air quality protection, while other initiatives for the same 
pollutants, like the NOx SIP call and regional haze rule, are driven 
solely by air quality concerns. Similarly, the lengthy delays and 
enormous control costs associated with NSR/PSD permitting are 
discouraging investments in improved power plant efficiency which can 
lower energy costs, introduce promising new technologies, and 
ultimately enhance environmental performance.
Benefits of an Integrated Strategy
    Given the need for a coordinated multi-pollutant framework for 
power plant emissions, a comprehensive legislative approach targeted at 
the generation sector is the path most likely to achieve the goals of 
industry, the public, and policymakers. Such legislation would have the 
following benefits:
      Air Quality Benefits provides emission reductions needed 
to achieve existing or anticipated air quality goals to protect public 
health and the environment as opposed to requiring controls based on 
technological feasibility.
      Comprehensive addresses all the major air quality 
challenges affecting power plants, including NOx, SO2, 
mercury, CO2, and NSR.
      Planning Certainty creates a stable environment for 
capital investment by providing long-term certainty (10-15 years) about 
the industry's emission reduction obligations.
      Cost-effective uses trading and other market-based 
mechanisms on a comprehensive basis to ensure maximum emission 
reductions for minimum cost.
      Flexibility provides electric power generators with the 
ability to make prudent investments in plant efficiency while assuring 
that air quality needs are met.
      Eliminate Regional Conflicts with a clear emissions 
control road map to remove ambiguities in current law, interstate 
disputes and costly litigation can be curbed.
      Adequate Lead Time establishes reasonable timetables for 
implementation and aligns these timetables across pollutants so that 
long-term investments in control technology can be made prudently and 
economically.
      Innovation encourages modernization and technological 
innovation in the generation industry, reducing the cost of electricity 
and enhancing environmental performance.
      Reliability enables pollution controls to be implemented 
in a phased manner which does not jeopardize system reliability.
      Energy Diversity avoids imposing prohibitive costs on any 
one type of generation, thus maintaining a diverse mix of fuel sources, 
including coal, natural gas, oil, and non-fossil energy.
      Legally Authorized provides a clear, well-defined legal 
framework for power plant regulation, reducing uncertainty and 
minimizing litigation.
Conclusion
    Mr. Chairman, let me reiterate our strong support for your 
continued examination of Clean Air Act issues, and specifically for 
holding today's hearing on efforts to develop a comprehensive 
legislative framework for controlling electric power plant air 
emissions. We believe that, if properly crafted, such legislation would 
provide substantial benefits to both industry and the environment. We 
recognize that development of such legislation will require hard work 
and considerable dialog among stakeholders, and we will work with this 
subcommittee and the full Environment and Public Works Committee to 
move this process forward. Thank you for this opportunity to present 
our views.
                               __________
 Testimony of Charles D. McCrary President, Southern Company Generation
    Chairman Inhofe, Senator Graham and members of the subcommittee, it 
is a pleasure for me to present testimony to you on significant issues 
related to the reauthorization of the Federal Clean Air Act 
specifically as they relate to the electric power generation industry. 
There are few industries as heavily regulated under Federal, State and 
local environmental laws as electric power generation. The industry has 
made remarkable strides in providing reliable economic electric power 
to a growing economy while steadily improving its environmental 
performance and reducing emissions. There is growing pressure at many 
levels for the industry to reduce its environmental impact even 
further. ? If; is certainly appropriate for this subcommittee to 
explore ways to improve thus environmental performance of our electric 
generation infrastructure while at the same time making sure that we do 
not disrupt the supply of economic energy that is so necessary for our 
continued economic growth.
    I am President of Southern Company Generation, which provides 
services to the fossil and hydro generation assets owned and operated 
by the operating companies of Southern Company in our traditional 
Southeastern U.S. service area. Southern Company is the largest 
generator of electricity in the United States including operating about 
30,000 Megawatts of fossil-fueled generation in the Southeast. In this 
area, encompassing more than 120,000 square miles, Southern Company 
also operates 5800 Megawatts of nuclear capacity and 2700 Megawatts of 
hydroelectric capacity. We serve 3.8 million retail customers in this 
area through our operating affiliates: Alabama Power, Georgia Power, 
Gulf Power, Mississippi Power, and Savannah Electric.
    About 70 percent of Southern Company's generating capacity is 
fueled by coal, which is the most abundant domestic supply of energy 
for electricity generation. In Act coal is used to generate 55 percent 
of the electric energy in the United States and its ready availability 
and low cost have been key factors in providing an economic supply of 
electric energy to fuel America's growing economy over the last decade.
    Background There are presently over 25 Federal programs that 
regulate air emissions from electric generating plants and some of 
these programs are over 30 years old. (See Figure 1) The 1977 and 1990 
amendments to the Federal Clean Air Act set up a structure for 
requiring reductions of air emissions along with technology 
requirements, and very stringent permitting and monitoring 
requirements. Title IV of the 1990 amendments required a 50 percent 
reduction in sulfur dioxide emissions and a 2 million-ton reduction of 
nitrogen oxide emissions from electric generating plants. Further 
reductions of nitrogen oxide emissions are occurring under the ozone 
non-attainment provisions of Title I of the 1990 amendments.
    The electric generating industry, and specifically Southern 
Company, has stepped up to the plate and met the challenge of reducing 
emissions as required by legislation and the follow-on regulatory 
programs. We have accomplished this by taking advantage of lower than 
projected costs for low-sulfur coal and by increased competition in 
coal transportation. Southern Company has also harnessed the power of 
the marketplace by playing a leading role in developing an emission 
trading market in sulfur dioxide and been an industry leader in the 
development and use of advanced emissions controls.
    These reductions in emissions have occurred while the generation of 
electricity and the use of coal has increased to fuel a growing 
economy. Figure 2 shows that over the last 30 years America's growth in 
Gross Domestic Product (GDP) has been almost exactly matched by the 
growth in sales of electricity. While this has occurred, however, 
industry wide emissions of sulfur dioxide and nitrogen oxides have gone 
down. (See Figure 3)
    In the case of Southern Company, while our generation is projected 
to increase by 49 percent between 1990 and 2010, our emissions of 
nitrogen oxides and sulfur dioxide are both projected to decline by 
about 42 percent. Our emission rate or emissions per unit of product 
are projected to decline even further.
    These reductions include our commitment in Alabama and Georgia to 
assist in those State's efforts to demonstrate compliance with the 1-
hour ambient ozone standard. We will spend over $1 billion in those 
States on control technology for further reductions of nitrogen oxides. 
This involves the installation of selective catalytic reduction 
technology at seven units in Georgia and one unit in Alabama as well as 
burner modifications at numerous other plants. This cost means that in 
the case of Georgia, 85 percent of the State's reductions of nitrogen 
oxides under its recently revised State Implementation Plan will come 
from power plants while those plants only represent some 40 percent of 
the total emissions.
    There will also be a steep increase in the use of lower emitting 
natural gas in Southern Company's future generating fleet. By the year 
2010 natural gas will make up 26 percent of our total fuel mix as 
compared to 2 percent in 1998. Coal is expected to fall from 77 percent 
of our fuel mix in 1998 to 58 percent in 2010. This does not represent 
a decrease in our use of coal but reflects the fact that almost all of 
the growth in demand over the next decade is expected to be met with 
natural gas fired technology.
Regulatory Agenda
    Even with this record of performance, pressure has built for even 
more reductions in emissions from coal fired generation. An aggressive 
regulatory agenda has been advanced by the EPA that appears to be 
targeted specifically at coal fired generation. There are over a dozen 
proposed or pending regulatory actions that could drive up the cost of 
coal fired generation or make it impractical. These include the 
Regional NOx SIP Call, the adopted (though remanded) new 8-hour ozone 
and fine particle standards, and a proposal to adopt a radically 
different approach to applying new source review at existing 
facilities. (See Figure 4) The possible adoption of the Kyoto Protocol 
or other mandatory program for the reduction of carbon emissions would 
also demand a large replacement of coal-fired generation with natural 
gas or some other less carbon intensive fuel.
    An issue that greatly concerns us is EPA's recent actions on New 
Source Review. For several years EPA has been considering modifications 
to the existing new source review program in ways that would limit the 
ability of utilities to perform routine maintenance on power plants to 
ensure their safety and reliability without triggering extremely costly 
NSR requirements. To meet EPA's goals in a more cost effective manna,-' 
Southern Company and other utilities in the Utility Air Regulatory 
Group (UARG) in the spring of 1999 developed an alternative proposal 
that would ensure the reduction of generating plant emissions beyond 
current requirements over time.
    EPA never engaged in serious negotiations over the UARG proposal 
but in November 1999 filed lawsuits against Southern Company and seven 
other utilities alleging numerous past violations of new source review 
requirements. Under EPA's interpretations, new source review would be 
triggered by many common routine maintenance operations including 
operations that improve plant efficiency. Trying to retroactively apply 
a new interpretation to actions clearly considered acceptable in the 
past has resulted in litigation that is diverting major amounts of time 
and other resources that could be used more productively in working 
together to solve problems. In addition, future efficiency and 
reliability improvements are now being discouraged.
    These issues can all be addressed but it is extremely important 
that it be done in an orderly manner that avoids threatening the 
continued economic supply of electric energy. The potential 
requirements, as currently being applied, are often duplicative, 
piecemeal and do not allow time for the design and installation of 
multiple additional pollution control systems. In many cases decisions 
to install pollution control equipment can be rendered uneconomic in 
just a few years due to future regulations. For example, the decision 
to install flue gas desulfurization to remove sulfur dioxide may be 
ultimately be uneconomic with the prospect of some future program to 
reduce carbon emissions, which could require the retirement of coal 
units to be replaced with natural gas.
Clean Air Act Reauthorization
    You have asked me here today to testify about ``incentives'' for 
utility emission reductions in regard to the reauthorization of the 
Clean Air Act. There certainly are many challenges ahead for the 
electric generation sector as I have discussed. I am not here today 
however to tell you that these challenges are due to the Clean Air Act 
being broken. In fact Southern Company thinks that the foundation for 
the Act is sound. The goals and objectives are clear and the processes 
that are set forth for the EPA to follow in adopting standards and 
regulations are comprehensive and allow for the best decisions to be 
made to protect the public health and welfare. Deliberations on 
reauthorization of the Clean Air Act should examine both the strengths 
and weaknesses of the Act and not focus only on what to ``fix''.
    We believe that most of the problems related to the future 
regulatory agenda for electricity generation stem from the EPA's 
failure to follow the proper procedures and appropriately apply 
available scientific information in implementing the Clean Air Act. 
They also have improperly revised the historic application of rules to 
create wholly new interpretations of existing law. Recent court actions 
have supported this view with several rulemakingsbeing remanded due to 
EPA's failure to follow proper procedure. Other potential regulatory 
conflicts we ark facing could have been avoided if EPA had more closely 
followed the recommendations from the Agency's own scientific advisory 
committees.
Alternative Approaches
    Some parties have espoused changes in the Clean Air Act and other 
Federal laws that would constitute alternatives to the way that 
emissions from electric generating plants are now regulated. These 
alternatives deserve inquiry and we agree that the subcommittee should 
include them in its deliberations on reauthorization of the Act. The 
examination of these approaches must include looking at ways to meet 
clean air goals in the most cost effective and efficient manner 
possible. The benefits of alternative legislative approaches should be 
compared against the provisions of the existing Act as intended by 
Congress.
    Some examples of alternative approaches that have been discussed 
include:
Comprehensive Approach
    A proposal to develop a comprehensive package of emission reduction 
requirements that would combine many of the pending and proposed 
regulatory programs has been suggested by some in the industry. It is 
argued that this could provide some efficiency as compared to an 
unorderly pollutant by pollutant approach. It is also believed that 
this approach could provide some regulatory ``certainty'' for a period 
of time during which capital investment decisions could be made. This 
general concept has been discussed in several forums and we feel that 
there are potential positives but also potential hurdles to this 
approach. Positives include possible cost savings from a multi-
pollutant approach compared to command and control for individual 
pollutants on single generating units at different timelines. Issues to 
overcome include ensuring that such an approach does not codify 
requirements that could not otherwise be justified on scientific or 
economic grounds, that deadlines make sense from a reliability and 
economic standpoint, ensuring that ``regulatory certainty'' could in 
reality be achieved, and reaching agreement on a large number of other 
details that are likely to be controversial.
Financial Incentives
    The adoption of financial incentives to encourage cleaner 
generation and the installation of emission controls has been urged by 
some. Examples include:
    1. Investment Tax Credits
    2. Production Tax Credits
    3. Accelerated Depreciation
    4. Grants, Low interest loans and tax exempt bonds Individually or 
in combination such proposals could provide an incentive to early 
reductions by generating companies or help to mitigate the impacts of 
regulatory requirements.
    Advancement of New Technology: Proposals have been made to 
facilitate the development and installation of new technologies. At 
Southern Company we believe that the development and commercialization 
of advanced technologies holds the key to improving the environmental 
performance of electricity generation. We have been leaders in the 
Department of Energy's Clean Coal Technology demonstration program and 
currently operate DOE's Power Systems Development Facility in 
Wilsonville, Alabama. The PSDF is the nation's premier testing and 
development site for the demonstration of technologies that increase 
the efficiency and environmental performance of coal in the generation 
of electric energy. Our goal is to demonstrate technologies that 
ultimately will mean coal fueled generating facilities that are as 
clean as natural gas fired plants.
    Southern Company is also a leader in the development of distributed 
generation options including fuel cells and micro-turbines. We have 
developed partnerships with some of our key commercial customers to 
demonstrate these technologies including the installation of a 250-
kilowatt molten carbonate fuel cell at a Daimle? Chrysler plant near 
Tuscaloosa, Alabama.
Principles for Clean Air Programs
    We believe that the development and implementation of any clean air 
program that applies to the electricity generation sector should 
include certain common principles. These principles will help to ensure 
that improvements in environmental performance will result in real 
enhancements of environmental quality in the most cost-effective manner 
possible. Most of these could be incorporated under the provisions of 
the existing Clean Air Act. They are:
    Any new program for controls must be based on sound peer-reviewed 
science and an accurate assessment of the environmental improvements 
expected from existing regulatory programs.
    Targets and timetables for emission controls should reflect 
environmental needs and priorities and not controls for controls sake 
or a ``one size fits all'' approach.
      Air quality control programs should consistently utilize 
unencumbered market based trading systems. The SO2 control 
program under Title IV of the 1990 Amendments has been very successful 
in accelerating emission reductions and minimizing costs and we should 
build on the success of those provisions.
      Any control program should allow a source to meet 
reduction requirements in the most cost-effective and flexible manner 
possible and avoid unit-by-unit technological controls.
      Compliance with new emission reduction requirements 
should be timed to recognize the size of the generating fleet and phase 
in compliance requirements over a long enough period to allow the 
orderly installation of controls and the avoidance of a supply 
disruption.
Summary
    Southern Company and the electric utility industry have made 
tremendous strides in improving the environmental performance of 
electricity generation. Emissions have been reduced and the quality of 
our air and water have substantially improved. This has occurred even 
while electricity generation and the use of coal has increased. 
Southern Company is committed to continuing to improve environmental 
quality in the areas that we serve. The future regulatory agenda put 
forth by the EPA however will present great challenges in ensuring that 
we can continue to utilize coal, the most abundant domestic energy 
supply in the generation of economic electric energy. This is not due 
to the failure of the Clean Air Act but the failure of EPA to follow 
the proper procedures and effectively utilize its discretion under the 
Act in making regulatory decisions. There are numerous proposals to 
amend the Clean Air Act to implement alternative approaches to 
regulating the electric generating industry. All of these concepts 
should be examined against the benefits of the implementing the 
existing Act in a proper manner.
    Southern Company is committed to playing a constructive role during 
the process of reauthorizing the Clean Air Act. We will continue to 
work with Congress, EPA, States, courts and other interest groups to 
meet the challenges of maintaining a clean and safe environment and an 
adequate and affordable supply of energy.
                               __________
         Statement of Frank Cassidy, President, PSEG Power LLC
    Mr. Chairman and members of the subcommittee, I am pleased and 
honored to appear before you this morning to represent my company, 
PSEG, and our coalition, the Clean Energy Group.
    The Clean Energy Group members are Consolidated Edison Company, 
KeySpan Energy, Niagara Mohawk Power Corporation, Northeast Utilities, 
PECO Energy, PG&E Generating Company, Sempra Energy, and my company 
PSEG. We share a commitment to providing clean energy and adopting 
progressive environmental policies that are sustainable from both 
environmental and economic perspectives. We believe the best way to 
accomplish this goal is by working cooperatively with government, 
industry, and the environmental community.
    I thank you for taking the time from what I know is a very busy 
legislative schedule to engage in discussions which we believe can lead 
to meaningful consensus on a question of vital importance to our 
nation--how best to foster the economic reform of the electric power 
industry while protecting and improving air quality and the 
environment.
    The companies of the Clean Energy Group believe very strongly that 
we can and should do both.
    Our industry is in the process of fundamental change. The Clean 
Energy Group supports and embraces the transformation of the electric 
power industry into a competitive marketplace. We also recognize that 
the generation of electricity has a significant impact on the 
environment. We agree with the U.S. Environmental Protection Agency and 
other stakeholders that this impact must be reduced if the Nation is to 
achieve its air quality goals. And we share a common concern that the 
economic benefits of a fair and robust competitive energy marketplace 
and the social and public health benefits of improved air quality will 
not be achieved unless the relationship between national energy policy 
and environmental policy is recognized and rationalized.
    While the Clean Energy Group has supported EPA's regulatory 
initiatives to reduce emissions of pollutants traditionally associated 
with the industry--nitrogen oxide and sulfur dioxide--we also share 
concerns that compliance delays and litigation spurred by these 
initiatives during a period of such unprecedented structural change in 
the electric power industry has contributed to a climate of business 
uncertainty that is becoming increasingly more difficult to manage. The 
strong probability that environmental policymakers will, in the near 
future, begin to regulate mercury emissions and that requirements to 
reduce carbon dioxide emissions also are on the horizon, increases 
concerns that a pollutant-by-pollutant regulatory strategy will result 
in a continued cycle of political agitation, litigation, and delay. 
This is a scenario in which progress toward meeting clean air goals is 
frustrated and uncertainty about making business decisions involving 
assets worth billions of dollars and the lives and livelihoods of 
millions of investors and employees is exacerbated.
    The Clean Energy Group believes there is a common sense policy 
solution--an integrated air quality strategy--to control and reduce 
emissions of nitrogen oxide, sulfur dioxide, mercury and carbon 
dioxide. We believe a coordinated, multi-pollutant approach will 
deliver significant and timely emissions reductions necessary to meet 
health-based air quality standards and provide members of our industry 
regulatory certainty about the amount and timetable for emissions 
reductions that can be factored into investment decisions and emissions 
control strategies.
    Our proposal calls for mandatory, nationwide emissions caps for 
nitrogen oxide, sulfur dioxide, mercury, and carbon dioxide; 
established dates certain for producing the necessary emissions 
reductions; implementation through emissions banking and trading; 
credit for early reductions; and streamlining of EPA's New Source 
Review process to provide industry with clear and unambiguous 
compliance guidelines.
    We are aware of recommendations to address these issues with 
voluntary or regional programs. We believe, however, that only a 
national, mandatory program implemented under authority of legislation 
enacted by Congress will provide the scope and compliance certainty 
necessary to facilitate a fair competitive market, achieve necessary 
emissions reductions and provide our industry with the regulatory 
certainty essential for sound business planning and rational investment 
decisionmaking.
    The inclusion of market-based compliance methods, similar to the 
existing national Acid Rain program, reflects the realities of the 
emerging competitive energy marketplace and will provide companies the 
flexibility to decide how to achieve reductions at the lowest possible 
cost.
    This approach will:
    Allow and encourage companies to plan and coordinate emissions 
control strategies on a comprehensive, multi-pollutant basis and reduce 
the potential for stranded investment in pollution control 
technologies.
    Provide a higher degree of certainty for compliance with EPA's New 
Source Review requirements.
    Deliver timely and necessary emissions reductions that will help 
attain national clean air objectives.
    Foster a fair competitive energy market.
    And, encourage investment in new electric generation capacity that 
will reduce emissions and enhance electric system reliability.
    I'd like to summarize the emissions caps and compliance schedules 
included in the Clean Energy Group proposal.
    We believe the following recommendations are consistent with sound 
environmental policy and are achievable at reasonable and acceptable 
cost:
    For nitrogen oxide, we are calling for a two-phase program that 
would cap emissions at 4.2 million tons by 2003--a target consistent 
with EPA's call for State NOx reduction implementation plans (NOx ``SIP 
Call'') for 19 eastern States--and a further 50 percent reduction to 
2.1 million tons by 2008. This target is based on applying the SIP Call 
reductions on an annual basis nationwide.
    We would impose a 4.5 million ton cap on sulfur dioxide emissions 
by 2008, which represents a 50 percent reduction below Phase II 
requirements of the Acid Rain program. This goal is consistent with 
meeting proposed new National Ambient Air Quality Standards for fine 
particulates.
    We anticipate EPA is expected to call for mercury regulation later 
this year. We are recommending a two-phase program that would require a 
50 percent reduction and a 26-ton emissions cap by 2008 and, if deemed 
necessary, a further reduction to 70 percent to 90 percent below 
current levels by 2012.
    For carbon dioxide, we're proposing an initial control strategy 
that would stabilize emissions at 1990 levels, resulting in a 1.9 
billion ton emissions cap also by 2008. Further reductions in the 2012 
timeframe would be implemented in accord with national Climate Change 
policy as it evolves.
    Mr. Chairman, and members of the subcommittee, the companies of the 
Clean Energy Group believe our industry is at an important juncture in 
its transition to competition. We know that we must improve our 
environmental performance as we make this journey. An integrated and 
coordinated approach will provide the direction and regulatory 
certainty that will facilitate business planning, make investment 
decisions more rational, and ultimately, deliver to our nation 
improvements in air quality at costs that are reasonable and fairly 
allocated.
    Again, I an honored by the opportunity to make this statement and 
would be happy to respond to your questions.
    Thank you.
                               __________
  Statement of Armond Cohen, Executive Director, Clean Air Task Force
    Mr. Chairman and members of the subcommittee, I appreciate the 
opportunity to testify before you on an issue of intense concern to 
hundreds of environmental organizations and the public throughout the 
nation: power plant air pollution.
    Electric power plants are by most measures the nation's largest 
industrial air polluter. Power plant air emissions cut a broad swath of 
damage across human health, and the local, regional and global 
environment. Unhealthy levels of ozone smog; premature death and 
respiratory distress from fine particles; damage to forests, lakes, 
bays and crops; mercury contamination of fish and wildlife; dark 
curtains of haze in our national parks; and contributions to greenhouse 
gasses--these are some of the major problems associated with the 
nation's electric generating fleet.
    Nor are these impacts confined to the Northeastern U.S., as is 
sometimes thought. Power plant emissions dramatically affect health and 
environmental conditions throughout the West, South, and Midwest as 
well. Indeed, the damages are often larger in regions such as the 
Tennessee and Ohio River Valleys where power plants are most densely 
concentrated. Power plant air pollution is at the same time intensely 
local, regional and inter-regional. Significant power plant emissions 
reductions across the Nation will be necessary to curtail the damage.
    The time has come for significant changes in Federal policy to 
address these emissions problems. The current Clean Air Act, while well 
intended, has in practice unreasonably delayed environmental 
improvements in the power-generating sector. The Act's pollutant-by-
pollutant, State-by-State structure has also resulted in uncertainty 
and fragmented decisionmaking by generation operators that has in turn 
prevented them from making rational long-term choices with regard to 
pollution control options. The problem is further exacerbated by the 
Act's exemption of generating plants older than roughly 30 years from 
meeting emissions standards applicable to newer plants an exemption 
that artificially perpetuates this sector's pollution legacy.
    We urge you to consider Federal policy changes with the following 
elements:
      Reductions in power plant emissions of sulfur dioxide and 
nitrogen oxides on the order of 75 percent below levels set under 
current law.
      Mercury emission reductions of 90 percent from current 
levels.
      Power plant carbon dioxide caps set at 1990 levels.
      Meeting each of the above pollution reduction targets in 
an expeditious manner--within 5 years, or 2005.
      Trading of sulfur dioxide and nitrogen oxide where it 
will not harm local and regional health and the environment, but no 
trading of toxic pollutants such as mercury.
      Provisions to spur ongoing environmental performance 
improvements.
    Mr. Chairman and members of the subcommittee, My name is Armond 
Cohen. I am Executive Director of the Clean Air Task Force, an 
organization that advocates Federal, State and private sector action to 
reduce power plant air emissions. I appreciate the opportunity to speak 
before you today.
    Today I am also testifying on behalf of Clear the Air: The National 
Campaign Against Dirty Power, a joint effort of the Task Force, the 
National Environmental Trust, and the United States Public Interest 
Research Group Education Fund; the Natural Resources Defense Council; 
the Izaak Walton League of America; and nine State and regional 
environmental organizations. Together, these organizations represent 
hundreds of thousands of Americans. As this grouping indicates, 
environmental organizations in every part of the Nation are intensely 
focussed on the need to clean up power sector air pollution.
    I am also heartened to see recent indications from many companies 
in the electric power industry that they may be open to comprehensive 
solutions that address the problem, and hope that today you will see 
many more areas of agreement than disagreement among the panelists on 
the general direction to take.
Power Sector Air Pollution and the Need for Clean-Up
    The reason for this broad public concern is plain. Electric power 
plants are by most measures the nation's largest industrial air 
polluter. Power plant air emissions cut a broad swath of damage across 
human health, and the local, regional and global environment. Unhealthy 
levels of ozone smog; premature death and respiratory distress from 
fine particles; damage to forests, lakes, bays and crops; mercury 
contamination of fish and wildlife; dark curtains of haze in our 
national parks; and contributions to greenhouse gasses these are just 
some of the major problems associated with the nation's electric 
generating fleet.
    Nor are these impacts confined to the Northeastern U.S., as is 
sometimes thought. Power plant emissions dramatically affect health and 
environmental conditions throughout the West, South, and Midwest as 
well. Indeed, the damages are often larger in regions such as the 
Tennessee and Ohio River Valleys where the plants are more densely 
concentrated. Power plant air pollution is at the same time intensely 
local, regional and inter-regional. Significant power plant emissions 
reductions across the Nation will be necessary to curtail the damage.
    Some highlights of these damages are briefly reviewed below:
Ozone Smog
    Ground level ozone is a colorless, odorless pollutant that causes 
respiratory damage ranging from temporary discomfort to long-term lung 
damage. According to a recent study, in the Eastern half of the United 
States, ground level ozone sends an estimated 159,000 people to 
emergency rooms each summer; triggers 6.2 million asthma attacks, and 
results in 69,000 hospital admissions. Many more millions of Americans 
experience other respiratory discomfort. 1999 was one of the worst 
ozone summers in recent history, with more than 7,500 violations of the 
Federal ozone health standard.
    Although much of the controversy around ground level ozone in 
recent years has centered on ozone levels in the Northeast, and the 
impact of Midwest and Southern emissions on the Northeast, this misses 
an important part of the story. In fact, many Midwestern and 
Southeastern States suffer greater volumes of ozone exposure and health 
impacts than many Northeast States. According to a recent study by the 
Ohio Environmental Council, in collaboration with the University of 
Michigan and Harvard University, people in Ohio River Valley 
communities such as Cincinnati and Marietta, Ohio are often exposed to 
dangerous levels of ground level ozone as much as 75 percent more often 
than people in Boston and New York. Ohio River Valley ozone hospital 
admission rates also track this pattern with admission rates higher in 
the Ohio Valley than in the East. Similarly, some of the nation's 
highest and most persistent ozone smog violations are outside of the 
cities, in places considered pristine places like the Great Smokies 
(there were an astonishing 52 exceedances days of the 8 hour ozone 
standard in the Great Smoky Mountains National Park in 1999 where it is 
now unhealthy to breathe on about half of the days of summer), Door 
County, Wisconsin, and the nation's seashore points.
    The reason is not hard to discern. There is a high correlation 
between elevated ground level ozone and proximity to power plants 
especially in the Midwest and Southeast where roughly 60 percent of the 
nation's coal-fired generating capacity is located. In the Ohio Valley 
area studied, for example, emissions from coal- and oil-fired power 
plants contribute nearly 50 percent of elevated ozone levels in the 
Valley, enough by themselves to cause violations of the Federal health 
standard.
    Human health is not the only victim. There is strong scientific 
evidence showing that current levels of ground level ozone are reducing 
yields, particularly in sensitive species soybean, cotton, and peanuts. 
Annual crop loss from ozone for soybeans alone in Illinois, Indiana and 
Ohio has been calculated to fall between $200 350 Million. Ozone-
induced growth and yield losses for the seven major commodity crops in 
the Southeast (sorghum, cotton, wheat barley, corn, peanuts and 
soybeans) are costing southeast farmers from $213-350 Million annually.
Fine particles
    It is becoming increasingly clear that particulate matter is one of 
the most pervasive and dangerous air pollutants. Tens of thousands of 
deaths per year as many as 70,000--are attributable to fine particulate 
matter as well as hundreds of thousands of cases of heart and pulmonary 
disease. And a recent reanalysis by the Health Effects Institute of the 
landmark Harvard Six Cities and American Cancer Society studies--that 
led to the setting of the PM2.5 NAAQS and which were harshly 
criticized by industry -independently confirmed the robust link between 
PM2.5 and premature death.
    Emissions from the electric power industry currently account for 
half or more of the fine particulate matter (PM2.5) in the 
U.S. east of the Mississippi, largely as a result of sulfur dioxide 
emissions. A recent study by researchers at the Harvard University 
School of Public Health of two coal-fired plants in Massachusetts, 
Brayton Point and Salem Harbor, estimated that particulate emissions 
from those two plants alone accounted for 159 premature deaths per 
year. Moreover, combining their fine particle and ozone precursor 
emissions, these power plants alone annually spawned 1,700 emergency 
room visits and more than 350,000 asthma attacks and other respiratory 
symptoms. Importantly, the highest mortality risks fall within 30 miles 
of the plants.
Acid Deposition
    Acid deposition a problem still driven principally by sulfur and 
nitrogen emissions from the nation's power plants is a persistent 
problem that is unlikely to be solved by the existing Clean Air Act.
    Lakes and streams and aquatic life that live in them are 
experiencing the most widespread impact from high concentrations of 
acidity. The majority of sensitive water bodies are those that are 
located atop soils with a limited ability to neutralize (or buffer) 
acidic compounds. Sensitive areas in the US include the Adirondack 
Mountains, Mid-Appalachians, southern Blue Ridge and high-elevation 
western lakes. Water bodies are affected not just by the chronic 
acidification that occurs from cumulative deposition but also by 
episodic acidification that occurs when pulses of highly acidic waters 
rush into lakes and streams during periods of snowmelt (acids have 
collected in the snow over the winter) and heavy downpours.
    In some places, chronic and episodic acidification together has 
completely eradicated fish species. For example, acid-sensitive fish 
have disappeared and/or populations have been reduced in Pennsylvania 
streams where they formerly occurred in large numbers. Acidification, 
together with high levels of aluminum leaching, is blamed for the 
reduction in fish diversity that many Pennsylvania streams have 
experienced over the past 25-34 years.
    Acid rain also saps calcium from the needles of trees, weakening 
the cell membranes and making the trees susceptible to damage from 
freezing in the winter and more vulnerable to diseases and/or insect 
outbreaks. Acid rain also depletes soil nutrients largely calcium and 
magnesium needed for healthy forest growth. The U.S. Geological Survey 
has shown that calcium in forest soils has decreased at locations in 
the northeastern and southeastern U.S. forest soils, with acid rain 
being one of the major factors contributing to this depletion.
    Although most evidence shows that conifers tend to be more impacted 
than hardwood trees, acid rain is also hurting deciduous trees. 
Detection of patches of dead trees in northern hardwood forests of the 
Southern Appalachian National Forests has been attributed to the 
interactions of many stressors, including air quality.
    Despite declines in power plant sulfur emissions due to 1990 Clean 
Air Act amendments, the acidity of many water bodies has not improved. 
Scientists believe that cuts called for in the 1990 amendments to the 
Clean Air Act will not be adequate to protect surface water and forest 
soils of the northeastern US. To restore the very sensitive sites of 
southeastern Canada, the Canadian National Air Issues Coordinating 
Committee has called for a 75 percent cut of US SO2 beyond 
the current requirements of the Clean Air Act Amendments of 1990.
Haze and Visibility
    In the last several decades, visibility how far you can see on an 
average day has declined dramatically, especially in the Eastern half 
of the United States. In the East, annual mean visibility is commonly 
one quarter of natural conditions and as little as one eighth in the 
summer. One of the greatest casualties of this upsurge in regional haze 
has been the national parks. An example of the magnitude of visibility 
decline due to high air pollution levels is shown in the Shenandoah 
Park slide attached to this testimony.
    There is no question that power plants are a major driver of this 
problem: visibility impairment has tracked closely in parallel with 
sulfate and electric power production for nearly half a century. Taken 
together, sulfur, carbon and nitrogen oxide emissions are responsible 
for well over 80 percent percent of this visibility impairment. When 
these components are assessed for their contribution to the problem, 
electric power is accountable for about two-thirds of the emissions 
that lead to regional haze-related visibility impairment in the East, 
most of which is caused by sulfate.
Nitrogen deposition
    Power plant nitrogen emissions deposited on land and water 
sometimes at great distances from their original sources is another 
important contributor to declining water quality. Estuarine and coastal 
systems are especially vulnerable. Too much nitrogen serves as a 
fertilizer, causing excessive growth of seaweed. The result is visual 
impairment and loss of oxygen. With the loss of oxygen, many estuarine 
and marine species including fish cannot survive.
    The contribution of nitrogen from atmospheric deposition varies by 
watershed. In the Chesapeake Bay, atmospheric nitrogen accounts for 27 
percent of nitrogen entering the system. Of that amount, power plants 
account for about a third.
    Nitrogen is also being deposited on ocean surfaces many, many miles 
away from land. Atmospheric nitrogen accounts for 46 to 57 percent of 
the total externally supplied (or new nitrogen) deposited in the North 
Atlantic Ocean Basin.
Mercury
    Mercury is another power plant pollutant that poses a threat to 
human health and the environment. Exposure to mercury in the U.S. 
primarily comes from the consumption of freshwater, estuarine, marine 
fish and shellfish. Across the U.S., mercury contaminates freshwater 
and saltwater fish populations, poses health risks to the people and 
wildlife consuming these fish and threatens the multibillion-dollar 
recreational and commercial fishing industries. State health 
departments in 40 States have issued advisories warning the public 
about consuming certain species of fish in certain water bodies, 10 
States have advisories for every water body and 13 now issue 
consumption advice for certain marine species. Methylmercury (the form 
of mercury in fish) is a developmental toxin and poses the greatest 
hazard during prenatal development. EPA has estimated that 3 million 
children and 4 million women of childbearing age are exposed to 
methylmercury at levels above what EPA considers safe.
    Mercury pollution has been linked to a number of industrial 
sources. EPA estimates, however, that about a third of the nation's 
airborne mercury emissions come from power plant smokestacks; this 
assessment ignores the likely additional mercury flows coming from 
power plant solid waste streams. In addition, power plants are the only 
industrial source currently exempt from Federal rules controlling 
mercury emissions.
Carbon Dioxide Emissions
    The earth's temperature is on the rise, threatening wide-ranging 
climate change, and a likely driver of these changes, according to the 
United Nations' Intergovernmental Panel on Climate Change (IPCC) in its 
fall 1995 Report, is man-made greenhouse gas emissions. Increasingly, 
climate scientists have warned that if countries and industries do not 
stabilize and substantially reduce greenhouse gases we will see warmer 
temperatures, loss of coastal regions, the spread of infectious disease 
and increases in extreme weather events like heat waves, flooding, and 
tornadoes.
    The trends are alarming: All 10 of the warmest years on record have 
occurred since 1980, and this century has been the warmest of the past 
600 years.
    According to the Goddard Institute of Space Studies, the 1990's 
were warmer than the 1980's, previously the warmest decade on record. A 
Midwestern heat wave in 1995 caused more than 500 deaths in Chicago. In 
the summer of 1998, temperatures over 100 degrees for 15 straight days 
claimed more than 100 lives in the Dallas, TX region. 1998 was not only 
the hottest year on record it was also a record year for extreme 
weather damage. In 1998, the Federal Emergency Management Agency 
declared sixty-three weather-related major disasters in 34 States. By 
comparison, the average number of weather-related major disaster 
declarations per year in the 1980's was 22.
    The nation's electric power plants account for about a third of 
U.S. carbon dioxide emissions, the leading greenhouse gas.
Reductions appropriate in Federal policy
    In each of the above areas, the best scientific evidence calls for 
large reductions in emissions:
      In the case of sulfur, cuts of at least 75 percent are 
required to achieve ecosystem recovery and to protect human health from 
fine particle pollution. In addition, cuts at this level will improve 
visibility in our national parks.
      In the case of nitrogen oxides, cuts of at least 75 
percent year round are required to help reduce summer ozone smog to 
levels protective of human health. Cuts at this level will also 
significantly lessen the nitrogen and acid rain impacts on our forests 
and water bodies, and further reduce haze.
      Mercury is highly toxic in small amounts, and, as for 
other industries, maximum available control thresholds should be 
pursued. A 90 percent cut in mercury emissions is achievable and 
necessary to protect human health.
      The world's climate change problem will not be solved 
without U.S. leadership including significant reductions from the power 
sector. An important start, consistent with the ratified Rio treaty and 
current Kyoto Protocol commitments, would be a return by the power 
sector to 1990 carbon dioxide emission levels by 2005.
    Fortunately, the technology is at hand to dramatically reduce these 
power plant emissions and their resultant impacts throughout the 
nation, at reasonable costs. For example:
      Power sector reductions of sulfur dioxide of 75 percent 
beyond current law are readily achievable through a combination of flue 
gas desulfurization (scrubbing) and adoption of cleaner fuels.
      Year round nitrogen reductions of 75 percent or more are 
achievable through a range of controls including selective catalytic 
and non-catalytic reduction technology, low NOx burners, overfire air, 
and adoption of cleaner fuels.
      Power sector reductions of mercury of 90 percent are 
feasible using a combination of commercial control technologies, and 
increased reliance on cleaner fuels and efficiency.
      Capping power sector emissions of carbon dioxide at 1990 
levels is technically feasible. In the short run, this will require an 
expansion of the nation's use of gas-fired and low-carbon renewable 
energy sources; in the long run, solutions may also include expanded 
use of low-carbon renewable and advanced coal technologies.
Fixing the current system
    Unfortunately, in the absence of a change in current Federal 
policy, the Nation is unlikely to achieve these necessary targets in a 
timely way and certainly not in a cost-efficient way. The reasons lie 
less in bad intentions than in the institutional and economic realities 
that flow from the current Clean Air Act:
      The Act is designed to address air pollution from the 
power sector, and other economic sector, on a pollutant-by-pollutant 
basis. The result is that there are numerous EPA regulatory initiatives 
all underway at present affecting different pieces of the power plant 
pollution problem on different time scales, and with different 
geographic targets and often different criteria. (See schematic chart 
attached to this testimony). Each of these regulatory proceedings are 
subject to delay and court review: for example, it took nearly 20 years 
for EPA to promulgate final region-wide power plant NOx controls and 
regional haze targets. In addition, the regulated companies tend to 
respond to each new requirement with a short term focus that often 
precludes long term solutions with multiple benefits. For example, a 
failure to put in place sulfur and carbon targets at the same time as 
NOx controls will likely be received as a market signal to continue to 
ignore those pollutants, and attendant solutions, as NOx compliance 
plans are made.
      The Act's requirements related to power plants are still 
largely driven by State-specific attainment of ambient pollution 
concentration limits rather than by the physical realities of power 
plant emissions which have simultaneous and far-ranging local, 
regional, and inter-regional impacts. A more common sense approach is 
to establish uniform, minimum environmental performance standards that 
reflect our best current understanding of emissions impacts at all 
geographic ranges, informed by the best available science, current 
technical feasibility, and reasonable technology-forcing requirements.
      Finally, to date, enforcement of the Act has not 
addressed the significant problem of power plant longevity. Unlike 
autos, the bulk of the nation's power plants are more than 30 years 
old. While the 1970 Act requires modified and expanded older sources to 
meet modern emission performance standards, many such modified plants 
continue to operate in compliance with older standards resulting in 
emissions levels three to four times looser than modern emission 
requirements. By establishing emission caps for the power sector that 
reflect modern performance capabilities, we can end this pollution 
haven for ``grandfathered'' plants.
Elements of the solution
    The time has come to improve on the Act's current regulatory scheme 
for power plants. Key elements of a better system include:
      Mandatory and certain emissions targets for all four 
pollutants as described above.
    While some have spoken of their interest in voluntary compliance 
approaches, we believe logic, equity and history counsel against this 
approach. First, breathing is not a voluntary choice, and polluters 
should not be permitted the choice to avoid requirements that permit 
safe breathing. Second, voluntary approaches potentially penalize 
companies that step forward, by giving their dirtier competitors a 
market edge. Third, perhaps because of this penalty, the history of 
voluntary emissions reductions in the power sector is not encouraging: 
experiments such as the Southern Appalachian Mountain Initiative, the 
Federal greenhouse gas commitment program, the EPA's 1995-96 ``Clean 
Air Power Initiative,'' and the Texas voluntary emissions reductions 
initiatives have yielded small participation and often poor followup.
      Timely compliance.
    Each of the pollutants under discussion are associated with 
different time scales for impacts, but the levels of reduction we have 
proposed should be achievable in a prompt manner. The burden of proof 
should be on those who believe that achieving these targets by the 2005 
date specified in S. 1369, authored by Senator Jeffords, is not 
feasible.
      Flexibility.
    While flexibility measures such as emissions trading should be 
considered for some pollutants, they should be balanced by the 
imperatives of local health and ecosystem protection.
      Incentives for continuous environmental improvement.
    We must be careful, as we establish new emissions targets for the 
power sector, not to simply create a new class of ``grandfathered'' 
plants. Sensible measures for ensuring continuous environmental 
improvement in plant performance, as well as technology, should be 
considered.
    The Senate bill that currently captures these desirable features 
most closely is the one sponsored by Senator Jeffords, S. 1369.
The time for action is here
    The discussion we are having today is hardly new. It goes back at 
least to 1995, when EPA initiated its ``Clean Air Power Initiative'' 
designed to bring stakeholders together around a comprehensive set of 
pollution reductions. For a variety of reasons, that initiative never 
came to a consensus conclusion.
    However, much has changed in the last 5 years to alter the 
landscape:
      The science underlying reduction targets for ozone smog, 
acid rain, fine particles, haze, mercury and global warming has become 
more compelling.
      Many States have moved ahead of the Federal Clean Air Act 
signaling discontent with the status quo. Recently, for example, 
Massachusetts and New York announced initiatives to chop air pollution 
from ``grandfathered'' power plants by up to 75 percent. In Texas, some 
limited plant ``degrandfathering'' was enacted last year. And 
Connecticut and Illinois are actively considering such measures. While 
appropriately demonstrating leadership, however, the ultimate success 
and comprehensiveness of State actions will be limited due to the 
transport of pollution across State boundaries, and the fear of 
competitive economic disadvantage from taking unilateral State action.
      Public opinion is increasingly supportive of steep power 
plant emission cutbacks. Opinion leaders throughout the Midwest and 
Southeast have voiced a concern about current emission levels, as 
evidenced by the major newspaper stories and editorials attached to 
this testimony.
      Many voices in industry are recognizing the value of a 
comprehensive rather than a balkanized approach and the wisdom of not 
throwing good money after bad. Surely the devil will be in the details, 
but the stage has been set for a policy discussion that could drive us 
to a better, cleaner outcome.
    I again appreciate the opportunity to speak, and look forward to 
your questions.
                                 ______
                                 
                                 
                                 
      Supplemental Statement of Armond Cohen, Clean Air Task Force
    With respect to the hearing at which I was a witness, I wish to 
clarify my remarks as follows:

    1. In response to Chairman Inhofe's question regarding emissions 
trading, I did not mean to suggest that trading for mercury emissions 
should be allowed. Mercury emissions pose significant local hot spot 
problems close to the plants from which they are emitted especially for 
the communities that fish in nearby water bodies, and consequently the 
full recommended reductions must occur at each plant.
    2. In response to Chairman Inhofe's questions regarding carbon 
dioxide as a ``pollutant'' within the definition of the current Clean 
Air Act, I declined to take a legal position on behalf of the Clean Air 
Task Force. However, I wish to affirm that, whether or not carbon 
dioxide meets the current statutory test, it is indeed an 
environmentally harmful gas that should be regulated consistent with 
the targets specified in my testimony.

    Thank you for the opportunity to offer these clarifications to my 
testimony.
            Sincerely,
                                              Armond Cohen.
                               __________
   Testimony of Wayne Brunetti, Chairman, New Century Energies, Inc.
    Mr. Chairman. My name is Wayne Brunetti, and I am the Chairman and 
Chief Executive Officer of New Century Energies, Inc. New Century 
Energies is a public utility holding company headquartered in Denver, 
Colorado, serving 1.6 million customers in Colorado, Texas, Wyoming, 
New Mexico, Kansas and Oklahoma. NCE will soon merge with Northern 
States Power, a utility based in Minneapolis, Minnesota, to form Xcel 
Energy. Xcel Energy will be the eighth largest utility in the country, 
serving 3.1 million customers and generating over 21,000 megawatts of 
electricity.
    NCE has made environmental excellence one of its priorities. It has 
been responsible for a number of innovative environmental programs, 
such as its Windsource program. Windsource is the largest customer 
driven renewable energy program innovative program that in the country. 
Later, I will discuss another is especially pertinent to your efforts.
    I appreciate the opportunity to testify today regarding some of our 
experiences with the Clean Air Act. As in other parts of the country, 
the West has often grappled with the Clean Air Act's rigidity and the 
EPA's inflexibility. In the last 5 years, we have found that one of our 
greatest challenges is complying with the requirements imposed on us by 
EPA under the Clean Air Act.
    Much of the electricity in the West is generated by coal-fired 
power plants. For example, 74 percent of the electricity generated by 
NCE comes from coal-fired facilities. The West also produces a growing 
percentage of the coal burned in power plants throughout the country. 
The popularity of Western coal arises from its low sulfur content, 
something we in the West have known about for a long time. Typically, 
even our uncontrolled plants emit sulfur dioxide at a lower rate than 
two-thirds of the country's coal-fired plants.
    The air quality concerns in the West are also different from the 
East. Most of the country's National Parks, Wilderness Areas and other 
``Class I'' areas are located in the West, so the region is naturally 
concerned about the impact of emissions from mobile and stationary 
sources on visibility in these areas. For our company, that translates 
into concerns about emissions of sulfur dioxide, in spite of the fact 
that these emissions are already relatively low.
    The West's urban centers have made great progress addressing air 
quality. For example, although it is still characterized as a ``non-
attainment'' area, Denver has not violated an ambient air quality 
standard for 5 years. As the committee may know, the Denver 
metropolitan area is among the fastest growing in the country. Our 
company struggles daily to provide adequate power supplies to meet this 
expansive growth. Air quality issues have a significant impact on this 
effort.
    In the West, as elsewhere, EPA administers the Clean Air Act in an 
irrational, costly way that often does not benefit the environment. Let 
me give you some examples:
    As I mentioned, growth in Colorado is substantial and requires that 
we obtain significant new generating capacity to avoid energy shortages 
in the Denver metropolitan area. The Colorado Public Utilities 
Commission requires our subsidiary, Public Service Company of Colorado, 
to acquire these new resources through competitive bidding and 
encourages the company to enter into contracts with independent power 
producers rather than build new plants itself. Last fall, EPA ruled 
that a new, independent power plant owned by a third party was a 
modification of a nearby, existing plant. EPA based this ruling only on 
the fact that the independent power plant would be connected to the 
Public Service Company electric system. The effect of EPA's 
interpretation is to require expensive emission controls on new, 
independent ``peaking'' power plants that operate only a few hours a 
year--often making them uneconomical to operate. Because it may stand 
in the way of our efforts to provide adequate power to the people of 
Colorado, we have challenged EPA's interpretation in the 10th Circuit 
Court of Appeals.
      Earlier this year, we were attempting to obtain a 
Prevention of Significant Deterioration permit for a new gas-fired 
generating unit at our Fort St. Vrain plant. Rather than install EPA's 
preferred nitrogen oxide control equipment (selective catalytic 
reduction), we proposed to make much greater nitrogen oxide emission 
reductions--at much lower cost--at one of our existing coal-fired 
units. The State of Colorado and the environmental community were 
supportive of this proposal. EPA, however, rejected it as an affront to 
the ``integrity'' of the Clean Air Act.
    These are just two examples of the perverse outcomes that often 
result from EPA's interpretation of the Clean Air Act. Our experience 
with the Agency stands in sharp contrast to our dealings at the State 
level, and I think you might find our experience useful as you grapple 
with these problems.
    At NCE, one of our operating priorities is ``Customer First.'' We 
try to be responsive to our customer needs and desires. During the 
initial phase of our Windsource program, we conducted surveys that 
indicated 62 percent of our customers would be willing to pay a little 
bit more for ``cleaner'' power.
    As a result, we began to consider alternatives to address the 
customers' concerns. Our best opportunity was in Denver itself. Public 
Service Company operates three coal-fired power plants in the Denver 
metropolitan area. We became convinced that, unless we responded to the 
community's concerns, our next great challenge would be over the 
emissions from these plants. Therefore, in 1997 after much study of 
different alternatives, we proposed a voluntary emission reduction 
program to reduce sulfur dioxide emissions from those plants by 70 
percent and nitrogen oxide emissions by 40 percent. We stated that we 
would need three things to implement our proposal:
      Flexibility in the operation of the facilities;
      Assurance that new State regulations would not require 
additional reductions from those facilities for a period of 15 years; 
and
      Recovery of the cost of the new controls.
    Having worked successfully with the environmental community on our 
Windsource program, we first presented this proposal to them. We also 
took it to a wide range of other interested parties, including 
businesses, labor unions, coal suppliers, the local air quality 
planning agency and the appropriate Colorado State agencies. We worked 
closely with these groups to develop and pass legislation that would 
allow our proposal to become a reality. That legislation, Colorado 
Senate Bill 98-142, was passed by the General Assembly during the 1998 
session. Senate Bill 142 encourages the Colorado Air Pollution Control 
Division to enter into flexible voluntary emission reduction agreements 
with stationary sources. It grants such sources a period of 
``regulatory assurance'' during which they will not be subject to 
additional State regulatory requirements. For coal-fired power plants, 
Senate Bill 142 specifies that a 70 percent reduction in sulfur dioxide 
emissions will result in a fifteen-year period of regulatory assurance. 
The Act also ensures that regulated utilities (such as Public Service 
Company) can recover the costs of these controls from its customers.
    In July 1998, Colorado and Public Service Company entered into a 
voluntary emission reduction agreement to implement our proposed Denver 
emission reduction program. The Agreement grants Public Service Company 
flexibility in complying with its requirements--through annual 
emissions averages, flexible tonnage caps and trading of emissions 
between the different plants. It grants us certainty by ensuring that 
the plants will not be subject to new or different State requirements 
for a period of 15 years. And, it assures that we can recover the costs 
of these controls in a way that does not put the plants at a 
competitive disadvantage should the electric utility industry in 
Colorado be restructured.
    Unlike traditional command and control approaches, Senate Bill 142 
allowed us to define the most cost-effective way to reduce emissions 
from the plants. Our analysis led us to retire the two oldest and 
smallest units, install relatively low cost, less effective controls on 
the smallest of the remaining units and install controls to achieve the 
maximum reductions on the largest units. We are now in the process of 
engineering these controls and will be in compliance with the new 
emission limits beginning on January 1, 2003.
    The success of this plan was the result of a great deal of hard 
work by a broad range of interests. I do not believe that, under the 
current Clean Air Act, we could have reached such an environmentally 
beneficial result by working with EPA. This plan became a reality 
largely because of the leadership of the State of Colorado.
    As compared to our Denver emission reduction program, EPA's 
regulation of air quality under the Clean Air Act appears to be broken. 
It frequently creates obstacles to cost-effective environmental 
improvements. Our recent experience at our Fort St. Vrain plant 
confirms that fact. As Senate Bill 142 demonstrates, there are ways to 
make environmental improvements without jeopardizing the financial 
integrity of companies. We did it in Colorado.
    Again, this committee is to be commended for exploring a new 
approach to regulation of air quality. I urge you to learn from our 
experience. I believe that the four broad concepts embraced in Colorado 
Senate Bill 142 should form the basis of any reforms to the Clean Air 
Act: flexibility, regulatory assurance, cost recovery and State 
control. These four concepts were at the heart of Senate Bill 142. We 
have already seen how effectively they can result in significant 
emission reductions. I believe that, in one form or another, they will 
work in your process as well. With them, you will be surprised by the 
degree of environmental progress that the utility industry can achieve.
    Thank you for allowing me to be here today. We look forward to 
working with you and your staff on these issues in the months ahead.

                               __________
   Voluntary Emissions Reduction Agreement between the Colorado Air 
   Pollution Control Division and Public Service Company of Colorado
    This First Amendment (``Amendment'') to the Voluntary Emission 
Reduction Agreement (``Agreement'') is entered into this 6th day of 
September, 1999, by and between Public Service Company of Colorado 
(``PSCo''), a Colorado corporation with offices at 1225 17th Street, 
Denver, Colorado, and the Colorado Air Pollution Control Division 
(``Division''), a division of the Colorado Department of Public Health 
and Environment.
    WHEREAS the Division and PSCo entered into the Agreement pursuant 
to the Voluntary Emission Reduction Act of 1998 (the ``Act''), C.R.S. 
Sec.  25-7-1201 et seq.;
    WHEREAS the Division and PSCo wish to make non-material 
modifications to the Agreement;
    WHEREAS the Division and PSCo have determined and agreed that the 
Act and the Agreement do not require that such nonmaterial 
modifications undergo review by the Colorado Air Quality Control 
Commission.
    NOW THEREFORE, in consideration of the mutual promises made herein 
and in the Agreement and in accordance with the Act, PSCo and the 
Division agree as follows:

    A. The definition of ``Compliance Date'' in Paragraph 1 of the 
Agreement is amended to read as follows:

    ``Compliance Date'' means January 1, 2003.''

    B. The first sentence of Paragraph 9(a) is amended to read as 
follows:

    ``Nothing in this Agreement shall be binding upon PSCo or the 
Division unless and until PSCo, in its sole discretion, ratifies this 
Agreement in writing within 120 days after the Public Utilities 
Commission proceeding (including any associated appeals) regarding 
PSCo's right to recover its air quality improvement costs pursuant to 
Sec. Sec. 40-3.2-102, C.R.S.''

    C. The last sentence of Paragraph 14 is amended to read as follows:

    ``The parties recognize that modifications to the Agreement may 
also require action by the Public Utilities Commission prior to 
becoming effective.''

    D. Exhibit A to the Agreement is deleted and replaced with ``First 
Amended Exhibit A,'' attached to this Amendment.
    IN WITNESS WHEREOF, the parties hereto, intending to be bound 
hereby, have caused this Agreement to be executed by their officers, 
duly authorized, as of the day and year first written above.
                            For: PUBLIC SERVICE COMPANY OF COLORADO
 Charles H. Fuller, Vice President, Generation and Thermal 
                                                    Energy.

                   For: THE COLORADO AIR POLLUTION CONTROL DIVISION
        Margie M. Perkins, Director, Air Pollution Control 
                                                  Division,
                                 ______
                                 
                VOLUNTARY EMISSIONS REDUCTION AGREEMENT
    This Voluntary Emission Reduction Agreement (``Agreement'') is 
submitted to the Colorado Air Quality Control Commission (``AQCC'') for 
approval this 16th day of July, 1998 by Public Service Company of 
Colorado (``PSCo''), a Colorado corporation with offices at 1225 17th 
Street, Denver, Colorado, and the Colorado Air Pollution Control 
Division (``Division''), a division of the Colorado Department of 
Public Health and Environment.
    WHEREAS PSCo owns and operates three coal-fired electric generating 
stations in the Denver Metropolitan Area known as the Arapahoe, 
Valmont, and Cherokee Stations (collectively the ``Metro Facilities''); 
and
    WHEREAS PSCo has proposed to add voluntarily SO2 
controls to reduce the average uncontrolled SO2 emissions 
from the Metro Facilities by 70 percent; and
    WHEREAS PSCo's proposal will result in reductions in the Metro 
Facilities' SO2 emission rate by at least 50 percent from 
the average actual emission rate as represented by typical operations 
at the Metro Facilities; and
    WHEREAS PSCo has proposed to reduce voluntarily the average 
uncontrolled NOx emissions from the Metro Facilities by 40 percent; and
    WHEREAS the Division has determined that these proposed emission 
reductions are consistent with the requirements of Voluntary Emission 
Reduction Act of 1998 (the ``Act''), Sec. Sec.  25-7-1201 C.R.S. et 
seq., which is incorporated herein by reference.
    NOW THEREFORE, in consideration of the mutual promises made herein 
and in accordance with the Act, PSCo and the Division agree as follows:

    1. Definitions. The capitalized terms used herein shall have the 
meaning given to them in the Act. In addition, the terms set forth 
below shall have the following definitions:

    ``Metro Units'' means coal-fired electric generating units located 
at electrical generating stations in the Denver Metropolitan Area owned 
by Public Service Company of Colorado and specifically consisting of 
all of the following:

    i. Cherokee Electric Generating Station, 6198 North Franklin St., 
Denver, Colorado, Units 1, 2, 3, and 4.
    ii. Arapahoe Electric Generating Station, 2601 South Platte River 
Drive, Denver, Colorado, Units 1, 2, 3, and 4.
    iii. Valmont Electric Generating Station, 1800 North 63rd Street, 
Boulder, Colorado, Unit 5.
    ``Force Majeure'' means any event arising in whole or in part from 
causes beyond the control of PSCo that delays or prevents or can 
reasonably be anticipated to delay or prevent PSCo from meeting the 
emission limitations by the Compliance Date despite PSCo's good faith 
efforts to meet the Compliance Date. Increase in costs does not by 
itself constitute a Force Majeure event.
    ``Upset Condition'' means ``upset condition'' as defined under the 
Colorado Air Quality Control Regulations, Common Provisions Regulation, 
Sec. II.E.
    ``Compliance Date'' means the first day of January of the year 
following 4 years after the date that PSCo ratifies this Agreement as 
set forth in Paragraph 9.
    ``Significant Control Equipment Failure'' means a substantial 
failure of control equipment that is caused by a force that PSCo could 
not have reasonably controlled and that prevents PSCo from complying 
with the SO2 emission limitation contained in this 
Agreement. Significant Control Equipment Failures include, but are not 
limited to, acts of God, acts of war or terrorism, acts of the public 
enemy, and structural or operational failure of the control equipment 
not caused by poor or improper maintenance by PSCo.
    ``Startup Period'' means the 1 year period following the Compliance 
Date.
    ``Startup Problem'' means (1) defects in the design or construction 
of any pollution control equipment that PSCo could not have reasonably 
controlled; or (2) equipment or operational problems arising in any way 
from the startup of new pollution control equipment.
    ``Emission Credits'' means the difference in tons of SO2 
between the SO2 emission limitation imposed on the Metro 
Units under this Agreement and the Metro Units' actual emissions of the 
SO2 during any calendar year. One Emission Credit represents 
the right to emit one ton of SO2 in any one calendar year.
    ``Banked Emission Credits'' means Emission Credits that PSCo may 
use to comply with SO2 emission limitation as set forth in 
Paragraph 2. Banked Emission Credits are accumulated only in years in 
which the Metro Units' SO2 emissions are less than the 
10,500 ton per year SO2 emission limitation contained in 
this Agreement. Banked Emission Credits may be used in any year after 
the year in which they are banked. Any Banked Emission Credits used by 
PSCo to meet the SO2 emission limitation in 1 year shall be 
deducted from the Banked Emission Credits available for use in future 
years. To the extent they are available, PSCo shall use Banked Emission 
Credits to offset any SO2 emissions in excess of the 
limitations contained in this Agreement that are attributable to Upset 
Conditions, Significant Control Equipment Failures, or Startup 
Problems. The Emission Credits available for use by PSCo as Banked 
Emission Credits may, at any time, include up to 2,000 Emission 
Credits.
    2. Sulfur Dioxide Emission Limitations.
    a. Limitation. Beginning with the calendar year that begins on the 
Compliance Date, the Metro Units shall be required to meet either of 
the following SO2 emission imitations:

    (i) The Metro Units considered as a whole shall not emit in excess 
of 10,500 tons of SO2 per year as determined on a calendar 
year annual basis. Emissions from the Metro Units shall be determined 
from data generated by the continuous emission monitors installed on 
each unit pursuant to Regulation 1, Paragraph VII.A. If, in any year, 
the Metro Units emit more than 10,500 tons of SO2, the 
Division shall, at PSCo's direction, deduct some or all of PSCo's 
Banked Emission Credits from the Metro Units' reported SO2 
emissions prior to determining whether the Metro Units have complied 
with the SO2 emission limitation. In no event shall PSCo be 
allowed to bank Emission Credits in any year in which the emissions 
limitations have been exceeded due to Upset Conditions, Significant 
Control Equipment Failures, or Startup Problems, and PSCo shall be 
required to deduct Banked Emission Credits to the extent they are 
available to offset any excess emissions attributable to these defined 
events. Except to the extent necessary to offset excess emissions 
attributable to Upset Conditions, Significant Control Equipment 
Failures, or Startup Problems, PSCo may not deduct more than 1,000 
Banked Emission Credits from the Metro Units' reported SO2 
emissions in any calendar year.
    (ii) In the alternative, instead of meeting the 10,500 ton per year 
limitation set forth in Paragraph 2(a)(i), the Metro Units considered 
as a whole may comply with the SO2 emission limitation 
contained in this Agreement by reducing uncontrolled SO2 
emissions by 70 percent as determined using the methods set forth in 
Exhibit A. The Metro Units' compliance with this alternative emission 
limit shall be determined on a calendar year annual basis.
    b. Unset Condition. If PSCo is precluded from complying with any 
emission limitation under this Agreement because of an Upset Condition, 
it may assert the existence of the Upset Condition as an affirmative 
defense to an enforcement action provided that it has complied with all 
of the requirements related to Upset Conditions found in the Colorado 
regulations. All emissions, including those related to Upset 
Conditions, must be reported to the Division in accordance with 
Paragraph 7 below.
    c. Significant Control Equipment Failure. In the event of a 
Significant Control Equipment Failure at any Metro Unit, PSCo may 
continue to operate the Metro Unit subject to the Significant Control 
Equipment Failure but shall be excused from complying with, and shall 
not be subject to penalties for failure to comply with, the 
SO2 emission limitation to the extent that its noncompliance 
is the result of the Significant Control Equipment Failure, provided 
that PSCo:

    (i) provides the Division with written notice of the Significant 
Control Equipment Failure within 15 working days after the date on 
which it first had knowledge of the Significant Control Equipment 
Failure; and
    (ii) enters into an enforceable consent order with the Division, 
negotiated in good faith by both parties, requiring PSCo to return the 
control equipment at the affected Metro Unit to normal operation as 
soon as reasonably practicable. The consent order entered under this 
paragraph shall (1) establish a reasonable schedule for repairs of the 
control equipment; (2) require PSCo to implement measures to minimize 
emissions during the Significant Control Equipment Failure; and (3) 
establish an alternate SO2 emission limitation for the Metro 
Units not subject to the Significant Control Equipment Failure. If PSCo 
and the Division cannot agree to an enforceable consent order after 
good faith negotiations, the Division may issue a compliance order 
without PSCo's consent. The issuance of such a unilateral compliance 
order and its terms will be subject to dispute resolution under 
Paragraph 10. During the negotiation of the consent order or resolution 
of any dispute regarding a unilateral compliance order, PSCo may 
continue to operate the Metro Unit subject to the Significant Control 
Equipment Failure even if such operation results in emissions in excess 
of the emission limitations contained in this Agreement.
    Notwithstanding the foregoing, the Division may, as appropriate, 
collect penalties for any violation of the emission limitations 
contained in this Agreement to the extent such violation is caused by 
operation of a Metro Unit subject to a Significant Control Equipment 
Failure for a period of time in excess of 30 days. Nothing in the 
preceding sentence is intended to require the collection of such 
penalties or limit the Division's discretion to impose a penalty, if 
any, appropriate to the circumstances of the Significant Control 
Equipment Failure that exceeds 30 days in duration.
    d. Startup Period. During the Startup Period, if PSCo cannot 
reasonably comply with the SO2 emission limitation contained 
in this Agreement as a result of a Startup Problem(s), PSCo shall be 
excused from complying with the SO2 emission limitation to 
the extent that the noncompliance is caused by the Startup Problem(s), 
provided PSCo (i) provides the Division with written notice of the 
Startup Problem(s) within 15 working days of the date on which it first 
had knowledge of the Startup Problem(s), and includes in its notice a 
description of the Startup Problem(s) and steps taken to correct the 
Startup Problem(s); and (ii) makes best efforts to operate the affected 
Metro Unit so that the Metro Facilities comply with the emission 
limitation. All emissions, including those related to Startup Problems, 
must be reported to the Division in accordance with Paragraph 7 below.
    3. Nitrogen Oxides. In lieu of a NOx emission limitation, PSCo will 
retire Arapahoe Units 1 and 2. Such retirement will be permanent and 
will be effective on the Compliance Date. Nothing herein shall prevent 
PSCo or any other person from constructing or operating a new source on 
the site of Arapahoe Units 1 and 2 provided that such construction or 
operation is authorized by law or regulation applicable to such new 
sources. The emission reductions resulting from the retirement of 
Arapahoe 1 and 2 shall not be used in any netting process to avoid New 
Source Review for sources constructed on the Arapahoe plant site.
    4. Division Determinations Regarding the Emission Limitations. 
Pursuant to Sec.  257-1203(2), C.R.S. the Division has evaluated the 
emissions limitations and operational changes required by this 
Agreement and has determined that the emission limitations will (1) 
result in reductions in actual emissions or actual emission rates; (2) 
result in reductions earlier than required by existing laws or 
regulations; (3) result in reductions significantly greater than 
required by existing laws or regulations; and (4) protect human health 
and the environment. The bases for the Division's findings are set 
forth in Exhibits B and C.
    5. Regulatory Assurance Period. Pursuant to the Act, the Metro 
Units are each granted the following Regulatory Assurance until the 
following dates:

    (a) Fifteen years after the Compliance Date for requirements to 
install additional pollution control equipment or implement additional 
pollution control strategies to reduce SO2 emissions; and
    (b) Ten years after the Compliance Date for requirements to install 
additional pollution control equipment or implement additional 
pollution control strategies to reduce NOx emissions.
    6. Division Evaluation of the Regulatory Assurance Period.
    (a) As set forth in Exhibit B. the Division has determined that the 
Metro Units are eligible for the 15 year Regulatory Assurance Period 
described in Paragraph 5(a) of this Agreement for SO2 
pursuant to Sec.  25-7-1206(1)(a), C.R.S., because they:

    (1) constitute a group of coal fired power plant units located 
within the same airshed;
    (2) will reduce uncontrolled SO2 emissions by an average 
of at least 70 percent; and
    (3) will reduce the actual emission rate of sulfur dioxide by at 
least 50 percent.

    (b) As set forth in Exhibits B and C, the Division has determined 
that the Metro Units are eligible for the Regulatory Assurance Periods 
described in Paragraph 5(a) and (b) of this Agreement for 
SO2 and NOx pursuant to Sec.  25-7-1203(2), C.R.S., based on 
the Division's evaluation of ( 1) the environmental benefits of the 
emission limitations and their significance; (2) the time necessary to 
achieve the emission limitations; (3) the capital, operating and other 
costs associated with achieving the emission limitations; and (4) the 
energy and non-air environmental impacts of achieving the emission 
limitations.
    7. Reporting and Recordkeeping.
    (a) Beginning 1 year after the Compliance Date, and continuing each 
year thereafter, PSCo shall submit an annual emissions report to the 
Division 30 days after the end of the first quarter following the 
anniversary of the Compliance Date. The annual report shall describe 
(1) the total tons of SO2 emitted from the Metro Units 
during the prior year; (2) PSCo's use, if any, of Banked Emission 
Credits to comply with the SO2 emission limitation; and (3) 
if PSCo uses the alternative emission limitation set forth in paragraph 
2(a)(ii), the percent reduction of SO2 calculated in 
accordance with Exhibit A. The annual report shall be in a form 
mutually agreeable to the parties.
    (b) PSCo shall maintain records of all data and other information 
used to prepare its annual report for a period of 5 years after the 
date of the report.
    8. Force Majeure. PSCo shall be excused from meeting the Compliance 
Date if an event of Force Majeure occurs. If an event of Force Majeure 
has occurred, PSCo shall notify the Division in writing within 30 days 
after it first knew that the event was likely to cause a delay in 
meeting the Compliance Date. Such notification shall include (i) a 
description of the event; (ii) the anticipated length of the delay; 
(iii) a description of the activities that will be delayed; and (iv) a 
proposed new Compliance Date. The Division shall review PSCo's 
notification and provide PSCo with the opportunity for a meeting to 
discuss the Force Majeure event. Unless the Division finds that no 
event of Force Majeure has occurred, it shall establish a new 
Compliance Date. The Regulatory Assurance Periods for SO2 
and NOx granted under this Agreement shall be determined as set forth 
in Paragraph 5 of this Agreement using the new Compliance Date. In 
establishing a new Compliance Date, the Division shall take into 
consideration the Metro Facilities' role in providing electric service, 
weather, outage schedules, and remobilization requirements. If the 
Division finds that no event of Force Majeure has occurred or if it 
establishes a Compliance Date different from that proposed by PSCo, 
PSCo may submit the Division's determinations to dispute resolution 
under Paragraph 10 of this Agreement.
    9. Approval and Ratification of Agreement.
    (a) This Agreement shall be effective as of the date that the AQCC 
approves this Agreement pursuant to Sec.  25-7-1203(4), C.R.S. Such 
approval shall be noted by formal vote of the AQCC recorded in the 
transcript from the relevant meeting at which the AQCC took the action 
to approve of this Voluntary Agreement. The transcript shall be 
attached to this Agreement after the AQCC meeting.
    (b) Nothing in this Agreement shall be binding upon PSCo or the 
Division unless and until PSCo, in its sole discretion, ratifies this 
Agreement in writing within 60 days after the Public Utilities 
Commission proceeding (including any associated appeals) regarding 
PSCo's right to recover its air quality improvement costs pursuant to 
Sec.  40-3.2102, C.R.S. PSCo's decision regarding ratification of the 
Agreement shall not be subject to review by the Division or the AQCC 
and shall not be subject to dispute resolution hereunder. 
Notwithstanding this paragraph, after AQCC approval, neither PSCo nor 
the Division may change any of the terms or conditions of this 
Agreement without the express written consent of the other party and 
AQCC approval, if such approval is required by the Act.
    10. Dispute Resolution. Any dispute that arises under this 
Agreement shall first be the subject of informal discussions between 
the parties. If PSCo concludes at any time that good faith informal 
discussions will not result in timely resolution of the dispute, it may 
appeal the dispute and any associated order, decision, determination, 
or finding of the Division to the AQCC in accordance with the AQCC's 
procedural rules as set forth in 5 CCR 1001-1, Sec.  1.6.0 and Sec.  
25-7-119, C.R.S.
11. Enforceability of Emission Limitations.
    (a) Within 1 year after the Compliance Date, PSCo shall apply for 
modifications of the Title V permits issued to the Metro Facilities. 
Such Title V applications shall include only the appropriate provisions 
contained in this Agreement concerning emission limitations, 
recordkeeping, reporting, and Regulatory Assurance, all as ``State-
only'' permit conditions. PSCo shall provide the Division with all 
information necessary in sufficient detail to process the permit 
applications and issue the permits as contemplated by this Agreement. 
This Agreement shall terminate upon issuance by the Division of the 
Metro Units' modified Title V permits, except that the Regulatory 
Assurance granted hereunder shall survive termination. It is the intent 
of the parties that the emission reductions achieved under this 
agreement shall continue after the end of the Regulatory Assurance 
Periods granted hereunder.
    (b) The Division will follow the ``WEPCO rule,'' 57 FR 32314, in 
determining whether any collateral increases in criteria pollutants 
other than SO2 and NOx that accompany the decreases in 
SO2 and NOx contemplated in this Agreement qualify for 
``pollution control project'' exclusions from New Source Review 
applicability.
    (c) Prior to termination of this Agreement, the Division may 
enforce the terms of this Agreement as if in accordance with the 
provisions of Sec.  25-7-1 15 and Sec. Sec.  25-7-121 and 122, C.R.S. 
PSCo agrees not to challenge the provisions of this Agreement, the 
Division's authority to bring, or the Court's jurisdiction to hear, any 
action to enforce the terms of this Agreement under the Colorado Air 
Pollution Prevention and Control Act, Sec.  25-7-101, et seq., C.R.S. 
Upon the issuance of the Title V permits and termination of this 
Agreement in accordance with Paragraph 11(a) above, the provisions of 
this Agreement shall be of no force and effect except as contained in 
the Title V permits issued under the State's Title V program authority 
or as set forth in Paragraph 11 (a) above. Notwithstanding the 
foregoing sentence, the emissions limitations contained in this 
Agreement shall remain state-only ``applicable requirements'' under the 
Title V program for the duration of the Regulatory Assurance Periods 
described in Paragraph 4 above.
    12. Assignment. If PSCo transfers ownership or operation of any 
Metro Unit to another person, PSCo shall assign its rights and 
obligations under this Agreement to such person in whole or in part, as 
appropriate in light of the nature of the transfer. Such assignment 
shall become effective upon PSCo's written notice to the Division. The 
Division shall cooperate with PSCo to effectuate the transfer in a 
manner consistent with this Agreement.
    13. Notice. All written communication required under this Agreement 
shall be directed to the individuals at their addresses set forth 
below, unless those individuals or their successors give notice of a 
change to the other party in writing:
                                FOR PSCO
    Charles H. Fuller General Manager, Commodity Services North Public 
Service Company of Colorado 1225 17th Street, Suite 900 Denver, CO 
80202
    Olon Plunk Director, Environmental Services New Century Energies 
550 15th Street, Suite 1000 Denver, CO 80202
                            FOR THE DIVISION
    Director, Colorado Air Pollution Control Division Colorado 
Department of Public Health and Environment 4300 Cherry Creek Dr. S. 
Denver, CO 80246-1530
    14. Modification. Modifications of this Agreement may be made only 
by mutual agreement of the parties. Material modifications of this 
Agreement must be in writing, signed by the Parties and reviewed by the 
AQCC in accordance with the Act. Non-material modifications must be 
made in writing and may be made by the parties without AQCC review. The 
parties recognize that modifications to the Agreement may also action 
by the Public Utilities Commission prior to becoming effective.
    15. Entire Agreement. This Agreement, its Exhibits and Attachments, 
embody the entire agreement of the parties with respect to its subject 
matter and supersede any and all prior oral or written agreements, 
negotiations and communications by or on behalf of the parties.
    IN WITNESS WHEREOF, the parties hereto, intending to be bound 
hereby, have caused this Agreement to be executed by their officers, 
duly authorized, as of the day and year first above written.
                            For: PUBLIC SERVICE COMPANY OF COLORADO
    Charles H. Fuller, General Manager, Commodity Services 
                                                     North.

                   For: THE COLORADO AIR POLLUTION CONTROL DIVISION
  Maggie Perkins, Director, Air Pollution Control Division.

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