    [Senate Hearing 107-570]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 107-570

                                CLEAN POWER ACT
    =======================================================================

                                    HEARINGS

                                   BEFORE THE

                     SUBCOMMITTEE ON CLEAN AIR, WETLANDS,
                               AND CLIMATE CHANGE

                                    AND THE

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                           FIRST AND SECOND SESSIONS

                                       ON

                                     S. 556

     A BILL TO AMEND THE CLEAN AIR ACT, TO REDUCE EMISSIONS FROM ELECTRIC
                      POWERPLANTS, AND FOR OTHER PURPOSES

                                   __________

                                 JULY 26, 2001
                                NOVEMBER 1, 2001
                               NOVEMBER 15, 2001
                                JANUARY 29, 2002
                                 JUNE 12, 2002

                                   __________

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

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    _____________________________________________________________________________

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                  COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS\1\

                          one hundred seventh congress
                      JAMES M. JEFFORDS, Vermont, Chairman
    MAX BAUCUS, Montana                  BOB SMITH, New Hampshire
    HARRY REID, Nevada                   JOHN W. WARNER, Virginia
    BOB GRAHAM, Florida                  JAMES M. INHOFE, Oklahoma
    JOSEPH I. LIEBERMAN, Connecticut     CHRISTOPHER S. BOND, Missouri
    BARBARA BOXER, California            GEORGE V. VOINOVICH, Ohio
    RON WYDEN, Oregon                    MICHAEL D. CRAPO, Idaho
    THOMAS R. CARPER, Delaware           LINCOLN CHAFEE, Rhode Island
    HILLARY RODHAM CLINTON, New York     ARLEN SPECTER, Pennsylvania
    JON S. CORZINE, New Jersey           PETE V. DOMENICI, New Mexico
                     Ken Connolly, Majority Staff Director
                     Dave Conover, Minority Staff Director
                                     ------
            Subcommittee on Clean Air, Wetlands, and Climate Change

                   JOSEPH I. LIEBERMAN, Connecticut, Chairman
    HARRY REID, Nevada                   GEORGE V. VOINOVICH, Ohio
    THOMAS R. CARPER, Delaware           JAMES M. INHOFE, Oklahoma
    HILLARY RODHAM CLINTON, New York     MICHAEL D. CRAPO, Idaho
    JON S. CORZINE, New Jersey           PETE V. DOMENICI, New Mexico

    \1\Note:  During the 107th Congress, Senator Ben Nighthorse
        Campbell of Colorado resigned from the full committee and the
        Subcommittee on Clean Air, Wetlands, and Climate Change, and,
        on April 23, 2002, was replaced by Senator Pete V. Domenici
        of New Mexico.

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page

                                 JULY 26, 2001
            ENVIRONMENTAL EFFECTS OF ELECTRIC POWER PLANT EMISSIONS
                               OPENING STATEMENTS

    Baucus, Hon. Max, U.S. Senator from the State of Montana.........    24
    Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of
      Colorado.......................................................    11
    Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island    17
    Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
      York...........................................................     7
    Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey..    23
    Crapo, Hon. Michael D., U.S. Senator from the State of Idaho.....    16
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     5
    Jeffords, Hon. James M., U.S. Senator from the State of Vermont..     3
    Lieberman, Hon. Joseph I., U.S. Senator from the State of
      Connecticut....................................................    25
    Reid, Hon. Harry, U.S. Senator from the State of Nevada..........    24
    Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....    18
    Specter, Hon. Arlen, U.S. Senator from the State of Pennsylvania.    18
    Voinovich, Hon. George V., U.S. Senator from the State of Ohio...    13

                                   WITNESSES

    Collins, Hon. Susan, U.S. Senator from the State of Maine........     1
        Prepared statement...........................................    57
    Gray, C. Boyden, Wilmer, Cutler and Pickering on Behalf of the
      Electric Reliability Coordinating Council......................    43
        Prepared statement...........................................    87
    Heydlauff, Dale E., Senior Vice President for Environmental
      Affairs, American Electric Power Company.......................    45
        Prepared statement...........................................    78
    Johnstone, Scott, Environmental Secretary, State of Vermont
      Agency of Natural Resources....................................    39
        Prepared statement...........................................    68
        Statement, New England Governors/Eastern Canadian Premiers
          Action Plan................................................    70
    Schneider, Conrad, Advocacy Director, Clean Air Task Force.......    46
        Prepared statement...........................................    90
    Thurston, George D., Associate Professor of Environmental
      Medicine, New York University School of Medicine...............    41
        Prepared statement...........................................    72
        Responses to additional questions from Senator Jeffords......    75
    Whitman, Hon. Christine Todd, Administrator, Environmental
      Protection Agency..............................................    26
        Prepared statement...........................................    57
        Responses to additional questions from Senator Jeffords......    66

                              ADDITIONAL MATERIAL

    Letter, Air Resources Board, California EPA......................   104
    Statement, New England Governors/Eastern Canadian Premiers Action
      Plan...........................................................    70
                                     ------

                                NOVEMBER 1, 2001
             FEDERAL AND STATE ROLES IN REDUCTION OF AIR POLLUTANTS
                               OPENING STATEMENTS

    Baucus, Hon. Max, U.S. Senator from the State of Montana.........   164
    Bond, Hon. Christopher S., U.S. Senator from the State of
      Missouri.......................................................   130
    Boxer, Hon. Barbara, U.S. Senator from the State of California...   118
    Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of
      Colorado.......................................................   120
    Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island   130
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...   107
    Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   114
    Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....   116
    Voinovich, Hon. George V., U.S. Senator from the State of Ohio...   123

                                   WITNESSES

    Boehlert, Hon. Sherwood, U.S. Representative from the State of
      New York.......................................................   109
        Prepared statement...........................................   165
    Callaghan, Michael, Secretary, West Virginia Department of
      Environmental Protection.......................................   159
        Prepared statement...........................................   265
    Colburn, Ken, Director of Air Resources, New Hampshire Department
      of Environmental Services......................................   157
        Prepared statement...........................................   240
        Responses to additional questions from Senator Smith.........   246
    Holmstead, Hon. Jeffrey, Assistant Administrator, Office of Air
      and Radiation, Environmental Protection Agency.................   133
        Prepared statement...........................................   166
        Report, Economic Analysis of a Multi-Emissions Strategy, EPA173-198
        Responses to additional questions from:
            Senator Jeffords.........................................   198
            Senator Smith............................................   210
            Senator Voinovich........................................   211
    Hutzler, Hon. Mary, Acting Administrator, Energy Information
      Administration.................................................   135
        Prepared statement...........................................   227
        Responses to additional questions from:
            Senator Jeffords.........................................   236
            Senator Smith............................................   239
    Nicholson, Brock, Chief, Air Quality Planning Division, North
      Carolina Department of Environmental Natural Resources.........   155
        Prepared statement...........................................   263
    Ouimette, David, Manager for Stationary Sources, Air Pollution
      Control Division, Colorado Department of Public Health and the
      Environment....................................................   153
        Prepared statement...........................................   259
        Responses to additional questions from Senator Smith.........   262

                              ADDITIONAL MATERIAL

    Report, Economic Analysis of a Multi-Emissions Strategy, EPA....173-198
    Statement, Global Climate Coalition..............................   266

             STAKEHOLDER MEETINGS, HOSTED BY EPW, OCTOBER 4-5, 2001

    Agenda...........................................................   268
    List of Participants.............................................   268
    Statements:
        American Chemistry Council...................................   269
        American Lung Association....................................   271
        American Public Power Association............................   272
        Americans for Equitable Climate Solutions....................   274
        Center for a Sustainable Economy.............................   275
        Center for a Clean Air Policy................................   276
        Clean Power Group............................................   281
        Electric Power Supply Association............................   282
        Energy for a Clean Air Future................................   283
        Environmental Defense........................................   284
        FirstEnergy Corp.............................................   286
        Hubbard Brook Research.......................................   288
        Izaak Walton League..........................................   290
        National Association of Manufacturers........................   291
        National Environmental Trust.................................   294
        National Rural Electric Cooperative Association..............   295
        Natural Resources Defense Council............................   296
        NESCAUM......................................................   299
        NiSource, Inc................................................   300
        Ohio EPA.....................................................   301
        U.S. PIRG....................................................   302
        Resources for the Future.....................................   303
        North Carolina General Assembly bill.........................   304
        STAPPA-ALAPCO, Georgia.......................................   306
                                     ------

                               NOVEMBER 15, 2001
          MULTI-POLLUTANT CONTROLS: IMPACTS ON UTILITIES AND CONSUMERS
                               OPENING STATEMENTS

    Bond, Hon. Christopher S., U.S. Senator from the State of
      Missouri.......................................................   326
    Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of
      Colorado.......................................................   314
    Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..   335
    Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island   326
    Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
      York...........................................................   334
    Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey..   325
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...   318
    Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   309
        Letter, President's energy policy, several Senators..........   311
    Lieberman, Hon. Joseph I., U.S. Senator from the State of
      Connecticut....................................................   316
    Reid, Hon. Harry, U.S. Senator from the State of Nevada..........   372
    Voinovich, Hon. George V., U.S. Senator from the State of Ohio...   323

                                   WITNESSES

    Anderson, Gerard M., President and COO, DTE Energy Resources, DTE
      Energy Company, Detroit, MI....................................   337
        Prepared statement...........................................   375
    Banig, Bill, Director of Governmental Affairs, United Mine
      Workers of America, Fairfax, VA................................   360
        Prepared statement of the United Mine Workers of America.....   478
        Responses to additional questions from Senator Jeffords......   489
    Dean, Hon. Howard, M.D., Governor of the State of Vermont........   320
        Prepared statement...........................................   372
    Hawkins, David, Program Director, Climate Center, Natural
      Resources Defense Council, Washington, DC......................   354
        Article, Reported Reductions, Rising Emissions...............   432
        Memorandum, Assessment of EIA multi-pollutant analysis.......   429
        Prepared statement...........................................   420
        Responses to additional questions from Senator Jeffords......   442
    Kirkwood, John, CEO, American Lung Association, New York, NY.....   358
        Articles:
            Annotated Bibliography of Recent Studies of Ozone,
              American Lung Association..............................   471
            Selected Key Studies on Particulate Matter and Health,
              1997-2001..............................................   458
        Prepared statement...........................................   454
        Responses to additional questions from Senator Jeffords......   477
    LaCount, Robert, Air Quality Manager, Office of Environmental
      Affairs, PG&E National Energy Group, Bethesda, MD..............   341
        Prepared statement...........................................   403
        Responses to additional questions from Senator Jeffords......   407
    Smith, Jeffrey C., Executive Director, Institute of Clean Air
      Companies, Washington, DC......................................   343
        Prepared statement...........................................   411
        Responses to additional questions from Senator Jeffords......   417
    Sterba, Jeffry E., Chairman, President and CEO, Public Service
      Company of New Mexico, Albuquerque, NM.........................   339
        Prepared statement...........................................   385
        Responses to additional questions from Senator Jeffords......   391
    Tipton, Ronald J. Tipton, Senior Vice President for Programs,
      National Parks Conservation Association........................   356
        Letter, BART, National Parks Conservation Association........   449
        Prepared statement...........................................   444
        Responses to additional questions from Senator Jeffords......   451

                              ADDITIONAL MATERIAL

    Articles:
        Annotated Bibliography of Recent Studies of Ozone, American
          Lung Association...........................................   471
        Selected Key Studies on Particulate Matter and Health, 1997-
          2001.......................................................   458
    Letter, BART, National Parks Conservation Association............   449
    Statement, United Mine Workers of America, Cecil E. Roberts......   478
                                     ------

                                JANUARY 29, 2002
        TECHNOLOGIES FOR REDUCING AIR POLLUTION FROM STATIONARY SOURCES
                               OPENING STATEMENTS

    Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of
      Colorado.......................................................   506
    Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..   505
    Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
      York...........................................................   497
    Corzine, Hon. Jon S., U.S. Senator from the State of New York....   502
    Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...   499
    Lieberman, Hon. Joseph I., U.S. Senator from the State of
      Connecticut....................................................   503
    Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....   500
    Voinovich, Hon. George V., U.S. Senator from the State of Ohio...   491
        Letter, Kansas City Power and Light..........................   493

                                   WITNESSES

    Alix, Frank, Chairman and CEO, Powerspan Corporation, New Durham,
      NH.............................................................   528
        Prepared statement...........................................   614
        Responses to additional questions from Senator Lieberman.....   618
    Amick, Phil, Vice President, Commercial Development, Global
      Energy, Inc., Houston, TX......................................   511
        Prepared statement...........................................   544
        Responses to additional questions from Senator Lieberman.....   560
    Durham, Michael D., President, ADA Environmental Solutions,
      Littleton, CO..................................................   525
        Article, Mercury Emissions, EM Magazine......................   593
        Prepared statement...........................................   577
        Report, E.C. Gaston PowerPlant...............................   580
        Responses to additional questions from:
            Senator Lieberman........................................   607
            Senator Voinovich........................................   609
    Kripowicz, Robert S., Acting Assistant Secretary for Fossil
      Energy, Department of Energy...................................   509
        Prepared statement...........................................   533
    Lowe, Edward C., Manager, Gas Turbine Combined-Cycle Product
      Lines, General Electric Power Systems, Schenectady, NY.........   507
        Prepared statement...........................................   539
        Responses to additional questions from:
            Senator Lieberman........................................   541
            Senator Voinovich........................................   543
    Miller, Richard L., Sales Manager, Fabric Filters and FGD
      Systems, Hamon Research-Cottrell, Somerville, NJ...............   527
        Prepared statement...........................................   610
        Responses to additional questions from:
            Senator Lieberman........................................   613
            Senator Voinovich........................................   614
    Offen, George R., Manager, Air Emissions and Combustion By-
      Product Management, Electric Power Research Institute..........   530
        Prepared statement...........................................   620
    Sandor, Richard L., Chairman and CEO, Environmental Financial
      Products, LLC..................................................   513
        Prepared statement...........................................   562
        Responses to additional questions from:
            Senator Corzine..........................................   576
            Senator Lieberman........................................   575
            Senator Voinovich........................................   576

                              ADDITIONAL MATERIAL

    Letters:
        Natural Gas Supply Association...............................   626
        Governors Kitzhaber and Locke................................   627
    Statement, Gasification Technologies Council.....................   622
                                     ------

                                 JUNE 12, 2002
               BENEFITS AND COSTS OF MULTI-POLLUTANT LEGISLATION
                               OPENING STATEMENTS

    Bond, Hon. Christopher S., U.S. Senator from the State of
      Missouri.......................................................   637
    Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island   644
    Graham, Hon. Bob, U.S. Senator from the State of Florida.........   635
    Jeffords, Hon. James M., U.S. Senator from the State of Vermont..   629
    Smith, Hon. Bob, U.S. Senator from the State of New Hampshire....   630
    Wyden, Hon. Ron, U.S. Senator from the State of Oregon...........   639
    Voinovich, Hon. George V., U.S. Senator from the State of Ohio...   640

                                   WITNESSES

    Barger, Don, Senior Director, National Parks Conservation
      Association, Southeast Regional Office Council.................   656
        Articles:
            Acadia's Green 45,000 Acres..............................   752
            Uncertain Parks Policy...................................   753
        Prepared statement...........................................   732
        Responses to additional questions from:
            Senator Graham...........................................   757
            Senator Voinovich........................................   755
    Hawkins, David G., Director, Climate Center, Natural Resources
      Defense Council................................................   653
        Prepared statement...........................................   701
        Responses to additional questions from:
            Senator Graham...........................................   720
            Senator Jeffords.........................................   717
            Senator Voinovich........................................   717
    Hughes, Lee, Vice President, Corporate Environmental Control,
      Bayer Corporation, on Behalf of the American Chemistry Council.   655
        Prepared statement...........................................   723
        Responses to additional questions from.......................
            Senator Graham...........................................   731
            Senator Jeffords.........................................   728
            Senator Voinovich........................................   729
            Senator Wyden............................................   731
    Kucinich, Hon. Dennis J., U.S. Representative from the State of
      Ohio...........................................................   645
        Prepared statement...........................................   674
    Methier, Ronald C., Branch Chief, Georgia Department of Natural
      Resources, Environmental Protection Division, Air Protection
      Branch, on behalf of STAPPA and ALAPCO.........................   648
        Prepared statement...........................................   676
        Responses to additional questions from:
            Senator Jeffords.........................................   679
            Senator Voinovich........................................   680
    Mullen, Tom, President and CEO, Catholic Charities Health and
      Human Services, Diocese of Cleveland...........................   658
        Prepared statement...........................................   757
        Responses to additional questions from Senator Jeffords......   758
    Page, Robert, Vice President of Sustainable Development,
      Transalta Corporation..........................................   650
        Prepared statement...........................................   680
        Responses to additional questions from:
            Senator Graham...........................................   690
            Senator Jeffords.........................................   688
            Senator Voinovich........................................   689
    Tyndall, William F., Vice President, Environmental Services and
      Federal Affairs, Cinergy Corporation, on Behalf of Edison
      Electric Institute.............................................   651
        Prepared statement...........................................   690
        Responses to additional questions from:......................
            Senator Graham...........................................   700
            Senator Jeffords.........................................   698
            Senator Voinovich........................................   699
            Senator Wyden............................................   701

                              ADDITIONAL MATERIAL

    Articles:
        Acadia's Green 45,000 Acres..................................   752
        Uncertain Parks Policy.......................................   753
    Letter, American Lung Association................................   754

                                CLEAN POWER ACT

                                  ----------

                            THURSDAY, JULY 26, 2001

                                           U.S. Senate,
                     Committee on Environment and Public Works,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:36 a.m. in room
    406, Senate Dirksen Building, Hon. James M. Jeffords (chairman
    of the committee) presiding.

            ENVIRONMENTAL EFFECTS OF ELECTRIC POWER PLANT EMISSIONS

        Present: Senators Jeffords, Campbell, Carper, Chafee,
    Clinton, Corzine, Crapo, Inhofe, Reid, Smith, Specter, and
    Voinovich.
        Senator Jeffords. The committee will come to order.
        I am pleased to welcome to the committee Senator Collins,
    who is a cosponsor of this bill which we will be considering,
    and I understand you have a tight schedule and I would like you
    to proceed.

    STATEMENT OF HON. SUSAN COLLINS, U.S. SENATOR FROM THE STATE OF
                                 MAINE

        Senator Collins. Thank you very much, Mr. Chairman, for
    your courtesy.
        Good morning Senator Jeffords, members of the committee.
        I would first like to start by thanking Senator Jeffords
    and Senator Smith for convening today's hearing on the
    Jeffords-Lieberman-Collins-Schumer Clean Power Act. Both
    Senators have shown great leadership in addressing our nations
    air pollution problems. Senator Smith, who has not joined us
    yet, but when he was chairman of the committee placed our
    nation's air pollution concerns at the top of the committee's
    agenda. Improving the quality of our nation's air remains at
    the top of the committee's agenda under the leadership of
    Senator Jeffords, with whom I have worked very closely on this
    issue and many others. I am confident that this committee will
    report legislation that will reduce emissions from our nation's
    dirtiest power plants and help restore the quality of our
    country's air.
        I particularly want to acknowledge all the members of the
    committee who are cosponsors of the Clean Power Act. Senators
    Jeffords, Lieberman, Schumer and I began developing this
    legislation last fall. They have a long history of working on
    behalf of clean air and their leadership was extremely valuable
    in devising a bill that sets the framework for returning our
    nation to the era of blue skies and smog-free days.
        I also want to acknowledge the role played by Conrad
    Schneider of Brunswick, Maine, who helped us in drafting the
    Clean Power Act. It is my understanding that Conrad will be
    testifying before the committee later today. He provided
    invaluable assistance in targeting the loophole in the Clean
    Air Act that has allowed the dirtiest, most polluting power
    plants in the nation to escape significant pollution controls
    for more than 30 years.
        Mr. Chairman, coal-fired power plants are the single
    largest source of air pollution, mercury contamination and
    greenhouse gas emissions in the nation. They are truly horrific
    polluters. Just one coal-fired power plant can emit five times
    more of all the pollutants that cause smog and acid rain than
    all of the industrial sources in the State of Maine combined.
    In fact, Mr. Chairman, members of this committee, if you took
    every car off the road in Maine and shut down every factory, we
    would still have an air pollution problem because of emissions
    from power plants from out of State. As the easternmost State
    in the nation, Maine is downwind of almost all power plants in
    the country. Most of the pollutants emitted by these power
    plants--mercury, sulfur dioxide, nitrogen oxide and carbon
    dioxide end up in or over Maine. Airborne mercury falls into
    our lakes and streams, contaminating freshwater fish and
    threatening the health of our people. Carbon dioxide is causing
    climate change that threatens to alter Maine's delicate
    ecological balance. Sulphur dioxide and nitrogen oxides come to
    Maine in the form of acid rain and smog that damages the health
    of our people, creates asthma and other problems for our
    children, and also hurts our environment.
        Mr. Chairman, Maine is tired of serving as the last stop
    for the nation's dirtiest power plant emissions. As I said when
    we joined together to introduce this legislation last fall, it
    is time to end the dirty air express. All power plants,
    wherever they are located in this country, should meet the same
    standards, and those standards must be sufficient to protect
    people's health and the health of our environment. I am very
    pleased that the hearing you have convened today moves us one
    step closer to ending the free ride for our nation's dirtiest
    power plants.
        This bill will also level the playing field between upwind
    and downwind States. Inexpensive electricity in other States
    has come at the expense of the health of the people in Maine,
    Vermont, New Hampshire and other downwind States. At the same
    time, power-intensive industries in our States--manufacturers
    in particular--have been forced into a competitive disadvantage
    with their competitors in States with lower-cost, dirty power.
        After causing some of the nation's worst pollution problems
    for decades on end, the time has come for power plants to stop
    using loopholes to evade emissions reductions. This bill
    demonstrates strong bipartisan, tripartisan support for clean
    air.
        I thank you, Mr. Chairman, for convening this hearing. I
    know that this is an issue of great importance to you and it
    has been a privilege to work with you and many other members of
    this distinguished committee toward this goal.
        Thank you, Mr. Chairman.
        Senator Jeffords. Thank you for an excellent statement. I
    have visited Maine many times. My sister lives there. I have
    been to Cadillac Mountain, which I believe is the point where
    the sun first reaches the country, and also where the pollution
    last reaches.
        Senator Collins. Mainers take a great deal of pride in
    making their own contributions to cleaning up the air and the
    water, but there is very little that we can do about air
    pollution that is blown in from other States, and that is what
    this bill is intended to target.
        Senator Jeffords. How urgent is this as far as Maine is
    concerned?
        Senator Collins. It is very important to the people of
    Maine, and it is something that is strongly supported by
    Maine's State Government as well. Our Governor and the
    Department of Environmental Protection in Maine have joined
    with other States to try to negotiate with and to work with EPA
    to try to reduce the emissions that are coming to our State. We
    know that increasingly we can tie the increase in children's
    asthma, for example, to increased levels of air pollution. It
    is also just something that is so important to our way of life
    in Maine. The outdoors is very much a part of the heritage of
    the people of Maine. We take great pride in having a wonderful
    environment that attracts thousands of tourists in the summer
    and the fall--throughout the year, actually. We want to make
    sure that we can control the quality of our air. But one State
    alone cannot do it. We have to have a national approach.
        Senator Jeffords. Any questions from my colleagues?
        Senator Campbell. I don't really have any questions, Mr.
    Chairman, but I have a few comments I would like to make. Are
    we going to do any form of opening statements or not?
        Senator Jeffords. We will have the opening statements. I
    just want to make sure that you had an opportunity to visit
    with Susan if you so desire.
        Senator Campbell. I wanted to make the comments while she
    is here.
        Senator Collins. I would be happy to stay and listen to
    your comments, and I thank you, Mr. Chairman, for the
    opportunity to testify.

             OPENING STATEMENT OF HON. JAMES M. JEFFORDS,
                 U.S. SENATOR FROM THE STATE OF VERMONT

        Senator Jeffords. Thank you very much.
        Now, I will make my opening statement, and then we will
    turn to you all for your opening statements.
        Today, the committee will hear from witnesses about the
    public health and environmental impact of power plant
    emissions. I am very interested about the power plant
    emissions. I look forward to hearing from the witnesses with
    regard to that, and listen to them describe these impacts of
    what levels of reductions are necessary to impact them. This is
    the first in a series of three or more hearings that will
    explore how air pollution from energy affects public health and
    the environment.
        First, however, I will make a short statement, and then
    turn to my colleagues for their remarks.
        This morning, I turned on the lights in my kitchen, and
    like a growing number of Americans, I thought about where the
    electricity came from. I wondered how many pounds of pollution
    and waste were created so I could make myself a cup of coffee.
    Then I opened my newspaper to the weather page like so many of
    us do every day, but the people I was thinking about are not
    farmers or ranchers or golf pros or construction workers. I was
    thinking about the tens of millions of people with asthma or
    who had children with asthma, and the people with emphysema,
    bronchitis, lung cancer and other illnesses related to air
    pollution. These people must check the weather page to see the
    air quality forecast. Will it be a code red day? Will they have
    to be careful about their outdoor activities? That is no way to
    live. We can do better in the way we use our energy.
        This morning also reminded me of a sultry summer morning in
    Vermont some 15 years ago. Yes, we really do have sultry summer
    mornings in Vermont on occasion, once or twice a year. I was
    hiking in the Green Mountains. I could barely see across Lake
    Champlain. The haze from fine particles were terrible. My
    friends in the area tell me that the fishing permits came with
    an advisory about mercury in fish. They are concerned that
    sugar maples are being affected by acid rain and global
    warming. Christmas tree growers are concerned and worried about
    the acid rain's impact on tree health and vitality. These are
    important businesses, and these are big concerns for
    Vermonters.
        I know the electric utility industry and its people have
    worked hard to provide our nation with the power to run our
    homes, schools and hospitals. The industry has done a good job
    of improving on the goals that Congress set in the Clean Air
    Act Amendments of 1990. But it is becoming increasingly clear
    that we should have asked for more, and we will.
        We made great progress in 1990 on reducing pollution.
    Today, we begin the next phase of those actions. Our task
    together on this committee is to find common ground on the
    issue so important to the entire nation. We must strive to
    improve the nation's air quality even further. We will also try
    to bring certainty to an industry facing an array of
    complicated rules. In the meantime, there are lots of
    Administration initiatives that could help us achieve greater
    reductions from power plants. Unfortunately, some of these seem
    stalled or tied up in the reviews of one kind or another. The
    President's energy policy supports a multi-pollutant approach,
    and I look forward to working with President Bush and Governor
    Whitman as they develop this proposal.
        Unfortunately, the President's policy backs away from a
    commitment to address carbon dioxide emissions from power
    plants. I am disappointed about the Administration's position
    on the Kyoto Protocol. I am disappointed in the
    Administration's approach to climate change and specifically
    the refusal to constructively engage the world in the solution.
        The Administration can refuse to commit the United States
    to the Kyoto Treaty. It can withhold offering its own
    alternative to the framework outlined in the Treaty, and it can
    reduce funding for implementing climate change reduction
    programs. That is their choice. But this Congress, this Senate,
    and especially this committee will not let our international
    partners down. We plan to take steps to reduce our nation's
    contribution to this growing problem by working with industry
    to reduce carbon emissions.
        So we can sit here and bemoan the fact that the United
    States has been left out of an important international treaty,
    or we can take action now to improve air quality and protect
    the environment. In the coming weeks, we will hold a series of
    hearings to review the possibilities available to clean our air
    and cut greenhouse gases, while maintaining the strongest
    economy in the world. Next week, we will review the
    transportation sector and later we will cover the commercial
    and industrial sectors. We really have to drastically rethink
    how we approach energy use if we are going to keep up with the
    electricity demand in an environmentally responsible way.
        I am neither a scientist nor a gloomy person, but I cannot
    help but wonder if the pollution generated by the electricity
    to make a cup of coffee is to blame for some of these problems.
        I would like to thank Senator Smith for all he has done to
    advance a comprehensive approach to power plant emissions. He
    really got the ball rolling and I look forward to working with
    him on this important matter. I also look forward to hearing
    from the witnesses, particularly Governor Whitman, Mr.
    Johnstone of Vermont, and I know the Governor has a long and
    personal interest in protecting the public health as she did so
    well in the State of New Jersey.
        Senator Smith?
        Senator Smith. Thank you, Mr. Chairman.
        Mr. Chairman, I did come in late and I am going to defer to
    my colleagues here, and I will go last since I do not want to
    hold them up.
        Senator Inhofe. Save the best until last?
        [Laughter.]
        Senator Jeffords. Senator Inhofe?

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

        Senator Inhofe. Thank you, Mr. Chairman, and thank you for
    having this hearing.
        I was listening to Senator Collins, and she did such an
    eloquent job of talking about her State of Maine that she is so
    proud of, and you, too, and your State of Vermont, Mr.
    Chairman. I think a lot of people forget there are other parts
    of the country, too. I have lived in Oklahoma virtually all my
    life. My wife and I built a place actually on a lake 41 years
    ago, and I live there. I mean, I can serve my State--I have a
    little runway there--and come back and run my trout-line at
    night. Not many people realize Oklahoma actually has more miles
    of freshwater shoreline than any of the other States. It is a
    real garden spot. People do not understand that. They think of
    the Northeast and some of the other places, perhaps, Senator
    Campbell, of Colorado, but there are a lot of other beautiful
    places and there is no one with my four kids and nine grandkids
    who enjoy a more beautiful environment than we have in
    Oklahoma. I think that is one thing we all have in common in
    this room. I think everyone does want to preserve and to
    develop an environment that is going to be cleaner for the
    future.
        I think we have done a lot. Air pollution is down. In
    almost every category, the amounts of pollutants have decreased
    substantially. People are breathing healthier air today than
    they were 10 years ago, than they were 20 years ago. A lot of
    people do not know that. A lot of people get information that
    is misinformation, but that is actually true.
        I look forward to working with all the members of this
    committee, Mr. Chairman, and with President Bush in developing
    a streamlined regulatory process that will significantly reduce
    mercury, NOx, SOx. These are types of initiatives that we need
    to examine if we as a nation are going to provide an affordable
    energy supply and make significant advances in the protection
    of human health and the environment.
        I believe that objective and sound science must be the
    basis of reductions which Congress adopts as a part of
    legislation. It will prevent our society from chasing after
    pennies of benefits for dollars of cost. It is called cost-
    benefit analysis. A lot of people do not like that term, but
    there is a cost to all of these things that we are doing.
        I think that we need to understand that it is not companies
    that ultimately pay for a lot of the environmental regulations
    that I believe are not based on sound science and have not
    considered cost-benefit analysis. It is the people of the
    middle and lower incomes, as the price of energy increases,
    that really are hurt the most. We hear from school after school
    about the problems out there with their heating bills and how
    it has depleted the funds that normally would go to supplies
    and books.
        We as a nation need to rethink the manner in which we
    approach regulation. We need to keep an open mind. During the
    debates on various regulatory reform initiatives, I was very
    disheartened to hear that these were sneak attacks on the
    environment. In fact, it is just the opposite. If we rethink
    regulation, we can better position ourselves for the future. We
    could find ourselves in a place where we can have far greater
    environmental protection and more reliable and diverse energy
    sources.
        Finally, on the issue of carbon, as the chairman has
    stated, the President will take meaningful steps to address
    this issue as appropriate, but at the same time consider the
    effect on our energy supply and the economy. You talked about
    the Kyoto Treaty. You know, I think it is smoke and mirrors.
    Besides that, we passed a resolution 95-0 prior to the Kyoto
    Convention, that if they came back with something that treats
    developing nations differently than developed nations, that we
    would reject it. That is 95 to 0. Unlike his predecessor, I
    think that President Bush cannot continue to place layer after
    layer of regulation without any consideration for the energy
    implications. There is a community that does not have to answer
    to the American people when energy crises go through the roof,
    or to worry about the national security ramifications of
    becoming dependent upon foreign sources for our ability to
    fight a war, but our President does.
        Thank you, Mr. Chairman.
        Senator Jeffords. Thank you. I am going to have to go to a
    map and take another look at Oklahoma.
        Senator Inhofe. I would love to invite you to come out
    there.
        Senator Jeffords. I think I would like to do that.
        Senator Clinton?

    OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
                       FROM THE STATE OF NEW YORK

        Senator Clinton. Mr. Chairman, I am fortunate because I
    know a lot about Oklahoma, and I can validate what Senator
    Inhofe is saying.
        Senator Inhofe. And I should have put you on that list,
    too, because there is nothing more beautiful than the
    environment in Arkansas.
        Senator Clinton. Arkansas, New York--beautiful States.
        [Laughter.]
        Senator Inhofe. Right.
        Senator Smith. Which one is better?
        [Laughter.]
        Senator Clinton. I was just about to say, not only am I
    glad to greet our new chairman, but I was going to say
    something very nice about our former chairman, but I will
    reconsider.
        [Laughter.]
        Senator Clinton. It is a great pleasure to be here at
    Chairman Jeffords's first hearing, but I also want to
    acknowledge the role that Senator Smith played in getting us to
    this point. He really started the ball rolling on a lot of the
    issues that I think are critical to our environment and to our
    country.
        I want to thank Senator Collins for her eloquent statement,
    which could have been given word for word by either Senator
    Schumer or myself on behalf of the damage that New York suffers
    from pollution.
        I am delighted to welcome Governor Whitman and the other
    witnesses, particularly Dr. George Thurston, who will be
    testifying. He is the director of the Community Outreach and
    Education Program at the New York University School of
    Medicine, which is a National Institute of Environmental Health
    Sciences Center of Excellence. Dr. Thurston and the other
    panelists, I am very grateful that you are here to talk about
    pollution from power plants, which is a hidden health hazard.
    The unnatural things in our world, namely what we put into it,
    are posing a threat to our human life and well being.
        I know that this has been a great concern to many of us on
    this committee, and it has become one for me as well--I spoke
    about it at the National Press Club last week--because chronic
    diseases like asthma and heart and lung diseases are caused by
    a combination of genetics, behavior and environment. Now, there
    may not be much we can do about our genetic predisposition to
    disease, there are things we can do about our behavior, and we
    of course should. But there are even more things that we can
    and should be doing about our environment than we have done up
    until now. I am pleased that we are going to be discussing how
    we can effectively reduce pollution from power plants in order
    not only to protect our environment, but to protect public
    health as well.
        Poor air quality, and in particular emissions of nitrogen
    oxide and sulfur dioxide lead to increases in ground-level
    ozone or smog, as well as increases in particulate air
    pollution. There have been at least 27 ozone action days so far
    in New York just this year. Like Chairman Jeffords, I wake up
    every morning and hear whether there is a red alert in
    Washington and what should be done about it, and people are
    told, ``Park your cars and try to stay indoors.'' It is a
    rather sad commentary on the state of our environment when
    those are the kinds of alarms that we have to hear on our radio
    and television weather reports.
        As we will hear from today's witnesses, we know that this
    poor air quality can cause, and is causing in many parts of our
    country, significant costs that have to be factored into the
    kind of cost-benefit analysis that Senator Inhofe was talking
    about. We are seeing increasing evidence that not only are
    there many hospital admissions, particularly connected to
    asthma attacks, but heart attacks, birth defects and outcomes
    and even premature death are now being more closely linked as
    we learn more from sound science.
        We are clearly in the midst of an asthma epidemic, with
    rates having increased 75 percent between 1980 and 1994, and
    New York State has the second-highest number of asthma
    sufferers. It is the highest cause of school absenteeism, which
    then has effects for parents having to take children to
    emergency rooms, and we obviously are going to have to address
    this growing problem.
        Mercury pollution poses other health concerns. We know it
    is highly toxic. It has been associated with both neurological
    and developmental effects in humans. Earlier this year, the
    U.S. Food and Drug Administration had to issue a consumer
    advisory on mercury in fish, cautioning pregnant women, women
    of childbearing age, nursing mothers and young children not to
    eat certain types of fish containing high levels of mercury. It
    may be hard at this point to put a cost on that, but we know
    that there are costs associated with it. According to the EPA,
    the number of States issuing mercury fish consumption
    advisories has risen steadily from 27 States in 1993 to 41 in
    1999. Because of mercury pollution, the State of New York has
    advised against consuming fish from over 16,000 acres of its
    lakes. Unfortunately, that does not always stop people who find
    fishing to be a good source for food and often on limited
    incomes, are still compelled to eat the fish even despite the
    advisories.
        We know that acid rain, as we heard from Senator Collins,
    continues to plague our environment. We see that clearly and
    with devastating impact in the Adirondacks. Because of acid
    rain, which is caused by emissions of sulfur dioxide and
    nitrogen oxide, 41 percent of the lakes in the Adirondacks are
    now in some way acidic. I have been those lakes. They are
    beautiful. If you were just to drop in and maybe fly out, you
    might wonder what the issue was. But there are no fish left.
    The loons do not come to Loon Lake anymore. It is a great loss
    to the environment. In 40 years, if we do not act, more than
    half the lakes of the Adirondacks will be dead.
        The Hubbard Brook study released earlier this year is an
    alarm bell warning us of what we already know. We cannot afford
    inaction. The emissions reductions mandated by the 1990 Clean
    Air Act are not adequately protecting our natural resources or
    our public health. The facts are so clear that some States are
    having to act on their own. Massachusetts recently instituted
    new regulations to require significant reductions in mercury,
    NOx, SOx, and carbon dioxide from power plants. In New York
    State, the Assembly passed legislation by a vote of 143-1 to
    control emissions of mercury, SOx, NOx, and carbon dioxide, and
    allowed for the establishment of an emissions credit trading
    mechanism for trading carbon dioxide. Suffolk County on Long
    Island, one of the most beautiful places in our State, recently
    passed legislation to establish a rate of allowable carbon
    dioxide emissions from power plants.
        We are going to start seeing this kind of local and State
    regulation that will cause enormous amount of problems for the
    utilities in our country that need to have a secure base of
    regulatory enforcement that they can count on when making
    plants for power plants. I would hate to see us go the
    direction of New York, Massachusetts, Suffolk County,
    California--other people creating a patchwork of regulation.
    Because pollution knows no boundaries. The same is certainly
    true of the global effort to reduce greenhouse gas emissions. I
    applaud the chairman's remarks today, because we know we have
    to reduce CO2 emissions, and certainly the United
    States must be a leader in this effort. We are the largest
    producer of greenhouse gases, and our participation is
    absolutely vital. Other countries have apparently reached an
    agreement on the Kyoto Protocol without U.S. participation. We
    need to demonstrate that we are serious about reducing our own
    emissions, and it is time that we address the power plant
    emissions that we are talking about today.
        I would like to say that we can consider a lot of different
    alternatives that I think are economically feasible and
    environmentally necessary. I hope that this committee will
    continue the work that was begun before by so many in the
    previous Congresses.
        We have heard testimony before this committee that in
    coming years there is going to be a global multi-trillion
    dollar market for energy-efficient technologies and products,
    which will help us achieve reductions in CO2
    emissions. We have a number of plants and businesses in New
    York that are pursuing this, such as a company in Buffalo
    working on the development of emission reduction and testing
    equipment, including a mobile air emissions monitor. I know
    that the trading floors on Wall Street would be very interested
    in trading greenhouse gas emissions. I have a certified and
    transferrable greenhouse gas offset title worth one metric ton
    of carbon dioxide, or about $3 in today's market. Shares of NOx
    and SOx are more expensive because there is currently a market
    for them under the Acid Rain Program under the Clean Air Act.
    If we created a market, we could sell these emissions as well.
    That would be one clear step that would use market incentives
    that would be effective and also clearly warranted since there
    is a market that needs to be encouraged.
        So I hope that despite some of the differences that we
    bring to this committee, that we find common cause in working
    together and that we provide incentives for those plants in
    States like Senator Voinovich's that need the incentives to be
    able to do all that is required to cut their emissions, and I
    look forward to working with the chairman in achieving those
    kinds of objectives.
        [The prepared statement of Senator Clinton follows:]
     Statement of Hon. Hillary Rodham Clinton, U.S. Senator from the State
                                  of New York
        Thank you, Mr. Chairman. Thank you for holding today's hearing to
    assess the impact that pollution from transportation sources has on
    public health and the environment.
        Before I continue, I just want to say how pleased I am by the press
    reports this morning that Governor Whitman has decided to move forward
    with the full cleanup plan for the Hudson River that was originally
    proposed this past December. We don't have all of the details yet, but
    this appears to be a significant environmental victory, not just for
    New York and New Jersey, but for communities around the country that
    are plagued by contaminated sediments. I know that this is not a final
    decision--that this is still in a review process and that the decision
    won't be officially announced until September--but this is welcome
    news.
        Having said that, I would like to welcome all of today's witnesses.
    In particular, I am pleased to welcome Mr. Omar Freilla from the New
    York City Environmental Justice Alliance. Omar, thank you for being
    with us today. Thank you for everything you do to improve air quality
    for New York City residents, and to address environmental justice
    issues in general in New York City.
        I understand that you are working on a very exciting project at the
    Hunts Point Market. Unfortunately, due to business in the HELP
    Committee that requires my attendance, I may not be able to be here for
    your testimony, but I will review your statement, and I urge all of my
    colleagues on the committee to review it as well.
        You know, we are a culture that is constantly on the move. We
    travel to and from work, to and from school, to and from the store.
    When we go to the store, we expect to find the products we want--
    products that are transported from near and far--by truck, by rail, by
    container ship, by plane. We are building buildings, and farming farms.
        Yet we often don't think about how all of these activities can have
    an impact on our ability to breath clean air--which you could say is
    probably one of our most important activities of all.
        In 1970, Congress amended the Clean Air Act to address pollution
    from the transportation sector, and we have benefited from the results.
    We have cleaner fuels. Removing lead from gasoline has reduced lead
    levels in the atmosphere--and in our children's blood--dramatically. We
    have cleaner cars. Cars are up to 95 percent cleaner than they were 30
    years ago, and there are rules on the books to make cars, trucks and
    buses even cleaner in the years to come. It is critical that we resist
    any efforts to delay or rollback these new standards.
        Yet even with these improvements, transportation activities still
    account for more than three-fourths of the nation's carbon monoxide
    emissions, more than half of the nation's nitrogen oxides emissions,
    and more than two-fifths of the nation's emissions of volatile organic
    compounds--or VOCs.
        Both nitrogen oxides and VOCs contribute to the formation of
    ground-level ozone or smog, which can aggravate asthma and other
    respiratory illnesses, and has even been shown to contribute to heart
    attacks. So far this year, we have had 27 bad air quality days in New
    York State caused by high ozone levels.
        We all know how it feels to get caught in that thick cloud of smoke
    that comes out of the back of many buses and trucks. I know my reaction
    is to close my mouth and try not to breathe. What many people don't
    know is that this diesel exhaust is classified as a likely carcinogen
    by the EPA.
        Earlier this year, the Natural Resources Defense Council released a
    report showing that children who ride to school in a diesel school bus
    are exposed to excess exhaust on the bus at levels 23 to 46 times
    higher than those levels already considered to be a significant cancer
    risk by EPA. I know that many of these same school buses sit and idle
    outside of schools, further exposing our children and the surrounding
    community to these harmful emissions.
        Overall, the transportation sector emitted approximately 2.3
    million tons of air toxics in 1996, including benzene, toluene,
    benzopyrene, and 18 other compounds known or suspected to cause cancer,
    birth and developmental defects, and other adverse health effects.
        What all of this tells me is that while we may be making progress,
    there is still more to be done. Omar's project at the Hunts Point
    Market is one example of how we can make further progress--and we will
    here more about that later.
        Another example of how we can make progress is the Central New York
    Regional Transportation Authority (CNYRTA), which is in the midst of an
    aggressive campaign to replace its aging bus fleet with a fleet largely
    comprised of clean, compressed natural gas buses. By converting to
    these cleaner buses, CNYRTA will significantly improve the metropolitan
    Syracuse area's air quality.
        I am pleased that in the transportation appropriations bill that is
    currently pending on the Senate floor, Senator Schumer and I were able
    to get another $4 million to help with this effort. With this
    appropriation, CNYRTA will be able to achieve an 84 percent conversion
    of its fleet to compressed natural gas.
        But even as we move to cleaner cars, trucks and buses, the shear
    number of vehicles on the road continues to grow--which counteracts the
    progress we are making. The overall number of cars on the road has more
    than doubled since 1970. In New York State today, there are over 10
    million cars, trucks, and buses on the road according to DMV estimates.
        We need to recognize that our efforts to improve our air quality
    and protect public health and the environment will be met with constant
    challenges.
        Fortunately, new technologies will help us meet these challenges.
    In New York, we are home to companies that are on the cutting-edge of
    technology--companies such as Corning Incorporated in Corning, NY, and
    Air Flow Catalyst Systems in Rochester. These companies are
    manufacturing emission control equipment--equipment that can be used to
    retrofit existing vehicles and make them dramatically cleaner.
        Companies like these are leading the way and demonstrating that
    investments in cleaner, more efficient technologies can help our
    economy, as well as our environment. But, it is the responsibility of
    government to foster the development of these cutting-edge
    technologies. We can accomplish this by providing regulatory certainty
    for industry, combined with appropriate incentives.
        Another reason that it is so important that we continue to make
    progress in this area is the issue of global warming. The
    transportation sector currently contributes one-third of all carbon
    dioxide emissions--a number that will continue to grow unless we take
    action.
        Just this week, the National Academy of Sciences reported that
    automobile manufacturers have the technology to make sport-utility
    vehicles and light trucks more fuel efficient, and therefore less
    polluting. According to the NAS, ``There are . . . other reasons for
    the nation to consider policy interventions of some sort to increase
    fuel economy. The most important of these, the committee believes, is
    concern about the accumulation in the atmosphere of so-called
    greenhouse gases, principally carbon dioxide. Continued increases in
    carbon dioxide emissions are likely to further global warming.''
        So we have a lot of ground to cover. I hope that this hearing will
    help lay the ground work for future committee efforts, whether it's
    addressing the MTBE issue, or issues that we may want to try and
    address in the Transportation bill.
        Again, I would like to thank the chairman for holding this hearing.
    I look forward to continuing to work with him and my other colleagues
    on the committee to find ways to improve our nation's air quality and
    protect human health in a common sense and cost-effective manner. Thank
    you.
        Senator Jeffords. Thank you, Senator.
        Senator Campbell?

    OPENING STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR
                       FROM THE STATE OF COLORADO

        Senator Campbell. Thank you, Mr. Chairman.
        I was in the back room about 15 minutes early kind of
    dozing in a chair before you were here, and a kind staffer gave
    me a cup of coffee to wake up with. After hearing your comments
    on how much energy it took to make that coffee and some of
    these depressing opening statements, I think I am going to quit
    drinking coffee.
        [Laughter.]
        Senator Campbell. Air emissions from electrical generating
    plants, indeed all energy-producing plants, are going to
    continue to be very controversial. I am on the Energy
    Committee, as are several other members. We we have had over 50
    hearings on the production of energy and over 160 witnesses in
    the last couple of years trying to deal with how we find the
    balance between the needs of people, and having strict
    environmental concerns.
        Certainly we have to take many things into consideration.
    When we deal with alternatives and renewables and fuel blends
    and conservation--all of the other things--I think it is
    important to recognize that we need to be careful in
    jeopardizing our electricity system by over-regulating from a
    Federal standpoint. We need, in my view, to come up with a
    solution that is fair, balanced, and takes everyone's needs
    into consideration, including the electricity generating
    plants. If California has taught us anything so far, it is that
    you cannot go for 30 years with increased needs going up every
    year and not building any generating plants.
        Now, of course, they're on a pell-mell rush. They are
    opening one a week, and I assume by opening one a week, there
    is going to be some pollutants in the air from opening those
    new generating plants. But everyone in this room, including
    everyone on this panel, is part of the problem. We are the
    demand. We are the ones that are demanding more energy. As long
    as we demand more energy, whether it is electricity or oil, we
    are going to have to open new plants to comply with that
    demand, or we are going to have to get more and more dependent
    on Saddam Hussein as we are now, because we have also had the
    same problem with developing domestic oil fields and domestic
    production of our oil refineries. I do not think Americans want
    that.
        One issue we have to preserve, I believe, though, is
    flexibility to comply with the standards. That will ensure that
    the smaller facilities, predominantly co-ops that are owned and
    all other generating plants can have the ability to attain
    compliance with air and environmental records. We must not
    throw regions of this country into a crisis by trying to
    implement stringent regulations that are impossible for small
    communities to achieve.
        Another issue that is being discussed is the new energy
    review. The New Source Review seems to be hindering new energy
    exploration, citing expansion and rejuvenating of generating
    facilities. We all know the intent, and I think the intent is
    good. I know of no one that supports the destruction of the
    environment or wants to jeopardize the public health. But as a
    nation, I think we have come a long way to improving our
    environment, the quality of our air. I know we have to keep
    working on that, but I really worry about the full weight of
    the Federal Government in their regulatory agenda what it will
    do to small communities. I certainly commend the Chair, for the
    way, for doing some of these hearings that somewhat parallel
    the ones we are doing in the Energy Committee, but I would hope
    as we move along we do not sort of throw the baby out with the
    bath water by coming up with a list of regulations that are
    impossible for small communities to comply with.
        Thank you.
        [The prepared statement of Senator Campbell follows:]
    Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from the State
                                  of Colorado
        Thank you, Mr. Chairman. I would like to welcome all of the
    witnesses before the committee today and I am looking forward to the
    testimony that they will be providing us shortly on the impacts of air
    emissions from electricity generating plants on public health and the
    environment.
        Air emissions from electricity generating plants and their
    potential impacts will continue to be controversial. Different regions
    of this country have different environmental regulations, and the role
    and scope of the Federal Government in this process is still being
    discussed. We have to take many things into consideration before we set
    a course of action.
        What we cannot do is to jeopardize our electricity system by over
    regulating this industry. But, we do need to come up with a solution
    that is fair, balanced and takes everyone's needs into consideration,
    including the electricity generating plants.
        One issue we must preserve is flexibility to comply with emission
    standards. This will ensure that smaller facilities' predominantly
    cooperative owned, and all other generating plants can have the ability
    to attain compliance with air and environmental regulations. We must
    not throw regions of this country into an energy crisis by trying to
    implement stringent regulations that are impossible to achieve.
        Another issue that needs to be discussed is New Source Review. New
    source review seems to be hindering new energy exploration, siting,
    expansion and rejuvenation of generating facilities. We all know the
    intent of new source review is needed, but the last set of rules and
    regulations is too stringent and will hurt us in the long run. No one I
    know supports the destruction of our environment and wants to
    jeopardize the public health. As a nation we have come a long way to
    improving our air and environment. Most of the electricity generating
    facilities comply with the law, and I don't feel the full weight of
    protecting and preserving our nation's air and environment should fall
    solely on the backs of the electricity industry.
        I am approaching the emissions debate very carefully because there
    are many interests that need to be addressed. have some questions for
    the witnesses that I would like them to answer so that we can further
    explore these issues during the time for questions.
        Thank you Mr. Chairman.
        Senator Jeffords. Thank you, Senator.
        Senator Voinovich?

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

        Senator Voinovich. Thank you, Mr. Chairman.
        I would like to welcome the Administrator. The
    Administrator and I have known each other a long time, and I
    have to say it is deja vu all over again.
        [Laughter.]
        Senator Voinovich. And the chairman will know as I continue
    my comments this morning.
        I thank you for calling this hearing. Discussion on the
    health and environmental impacts of utility emissions is very
    useful, and I think we all need to better understand the impact
    of emissions.
        As the past chairman of the Clean Air Subcommittee, I
    chaired four hearings on the harmonization of our environmental
    regulations with our nation's energy policy, and I think
    everyone would agree that those hearings were a success. We had
    some very helpful testimony and I encourage the chairman and
    his staff to review the hearing records.
        Over the last 10 years, Ohio has spent more on emission
    reductions than New York, New Jersey, Massachusetts,
    Connecticut, Vermont, Rhode Island, Maine, New Hampshire,
    Maryland, Delaware and Washington, DC combined. We reduced our
    air toxins from approximately 381 million pounds in 1987 to 144
    million pounds in 1996. When I began my term as Governor, eight
    of our largest cities--and we have large cities in Ohio--were
    not in attainment for the current ambient air standards.
    Currently, all 88 Ohio counties are in attainment for the
    national ambient air standards. No single State has done more
    to improve air quality in the last 10 years than Ohio.
    Admitted, we have real problems because we have utilities and
    we are one of the highest manufacturing States in the United
    States.
        I do believe Ohio and other States can do more, and
    improvement is needed. This is why I started working with
    Senator Smith on his multi-emissions legislation. Also after I
    became Chairman of the Air Subcommittee, I met with Senator
    Lieberman and Clinton and other members of the committee to
    begin a dialogue in order to reach a consensus on a emissions
    bill. I remain optimistic that we can reach a bipartisan
    compromise to continue to improve the environment and public
    health, reduce utility emissions, create greater regulatory
    certainty--and I am glad, in your remarks, Mr. Chairman, you
    talked about that--and ensure that American consumers will have
    safe, reliable and cost-effective electricity.
        I have a great deal of respect for the chairman of this
    committee, and I respectfully request that if we are going to
    have a bipartisan bill, one that is regionally supported and
    has the support of the Administration, then we must in addition
    to holding hearings examining the environmental and health
    impacts of emissions, hold hearings on the available control
    technologies for mercury and CO2. That is a major
    issue of disagreement in terms of CO2--the whole
    issue. We had hearing after hearing on global climate and the
    impact, and there are differences of opinion. How do we somehow
    bridge that gap and come up with something where we can get a
    consensus and get it through the Congress? Senator Lieberman
    and I agreed earlier this year to have hearings on those two
    topics.
        For example, I am told by experts that control technologies
    to reduce the reduction levels in the Jeffords bill for mercury
    are not available. In addition, the only way to reach the
    reduction levels for CO2 without increasing the
    emissions of other pollutants is to switch away from fossil
    fuels such as coal. Do we want to do away with coal? If we do
    want to do away with coal, what is going to take its place? I
    hear from everyone that we can try solar energy, or that we can
    build windmills, or we can try other technologies. If we look
    at the amount of energy that we are getting from those sources,
    it is relatively small. Let's be realistic. We are going to
    have coal.
        Looking at the chart, we see that this is where we are
    getting our energy, and you can see that nuclear, non-hydro-
    power renewables and others--this is what we are getting now
    from petroleum, this is what we are getting from coal and this
    is what we are getting from natural gas. Now, if the purpose is
    to put coal out of business, I ask the question, then where do
    we get the source of energy to go forward? That is a question.
        I think from a realistic point of view, we need to deal
    with coal. How do we do a better job? Senator Byrd and I have a
    bill in on clean coal technology. In our State of Ohio, we use
    about 85 percent coal. Nationally, it is about 55 percent. How
    do come up with a solution by which we can continue to improve
    the environment, improve public health, and at the same time
    provide low-cost, reliable energy for the citizens of my State
    and this country?
        I have chaired hearings, Mr. Chairman, in my State. I
    started out with the Salvation Army and with the Catholic
    Charities, Lutheran Housing, to look at the impact of heating
    costs on the people in our State. They were devastating,
    devastating, at the least, upon our people. I think that when
    we are talking about prescriptions to try and deal with the
    environment, we need to also think about the cost to our
    brothers and sisters who have to pay for the bills. I know your
    heating costs from oil are very high in your State. We have
    people that are giving up food, not being able to pay their
    bills because of high energy costs.
        Somehow we have got to reconcile these factors. We have got
    to stop throwing darts at each other. When I was Governor of
    Ohio, Christy and I had differences of opinion. It was Ohio
    causing the Northeast problem; we were polluting the lakes and
    streams; and the acid rain, and all the rest of it.
        I think the time has come when we ought to sit down to make
    some real decisions about these issues. I am not going to take
    the time of the committee to finish the rest of my statement,
    and will put it in the record.
        I really think it is time that we do reconcile these
    differences. People here representing environmental groups and
    people representing the industries, and those of us
    representing the citizenry--we all are worried about their
    health, aren't we? We all are worried about the environment. We
    all are also worried about the fact that these people have to
    have food on their table.
        In our State because of the fact that we have backed away
    from coal, we now are using natural gas. Natural gas use is
    skyrocketing in this country. If we do not have a balanced
    source of energy, Mr. Chairman, we are going to see an
    absolutely negative impact on the economy of this country. If
    you talk to Alan Greenspan and most of the experts, my State is
    in recession today. One of the reasons that it is because of
    the energy crisis.
        So somehow, we have to harmonize our environmental and our
    energy needs and come together and stop throwing stones at each
    other. Right now in our State, the utilities are kind of in
    limbo. We have this New Source Review thing. It is up in arms.
    They would like to spend a lot more money. They would like to
    take care of mercury. They would like to do more with NOx and
    SOx. They would like to figure out some alternative in terms of
    how to deal with this carbon problem in a way that is realistic
    and technologically feasible. They would like to have some
    certainty.
        I think we can do that, Mr. Chairman, but I do not think
    that just each group sitting in another room talking to each
    other is going to get the job done.
        Thank you for the opportunity.
        [The prepared statement of Senator Voinovich follows:]
    Statement of Hon. George Voinovich, U.S. Senator from the State of Ohio
        Mr. Chairman, thank you for calling today's hearing on this
    important topic. A discussion on the health and environmental impacts
    of utility emissions is very useful. We all need to better understand
    the impact of emissions.
        As the past chairman of the Clean Air Subcommittee, I chaired four
    hearings on the harmonization of our environmental regulations with our
    nation's energy policy. I think everyone would agree that the hearings
    were a success. We had some very helpful testimony and I would
    encourage the chairman to review the hearing records.
        Over the last 10 years Ohio has spent more on emissions reductions
    than New York, New Jersey, Massachusetts, Connecticut, Vermont, Rhode
    Island, Maine, New Hampshire Maryland, Delaware, and Washington DC
    combined. We reduced air toxins from approximately 381 million pounds
    in 1987 to 144 million pounds in 1996. When I began my term as
    Governor, eight of our cities were in nonattainment for ozone.
    Currently, all 88 Ohio countries are in attainment for the national
    Ambient Air Standards. No single State has done more to improve air
    quality in the last 10 years than Ohio.
        However, I believe Ohio and other States can still do more and more
    improvement is needed. This is why I started working with Senator Smith
    on his multi emissions legislation. Also, after I became Chairman of
    the Air Subcommittee I met with Senator Lieberman and Clinton and other
    members of the committee to begin a dialogue in order to reach a
    consensus on a utility emissions bill.
        I remain optimistic that we can reach a bipartisan compromise to
    continue to improve the environment and public health, reduce utility
    emissions, create greater regulatory certainty, and ensure that
    American consumers will have safe, reliable, and cost effective
    electricity.
        I have a great deal of respect for the chairman and respectfully
    request that if we are to have a bipartisan bill, one that is
    regionally supported and has the support of the Administration, then we
    must in addition to holding hearings examining the environmental and
    health impacts of emissions hold hearings on the available control
    technologies for mercury and CO2. Senator Lieberman and I
    agreed to this earlier this year and I believe this topic needs to be
    addressed before this committee considers any legislation.
        For example, I am told by experts that control technologies to
    reach the reduction levels in the Jeffords' bill for mercury are not
    available. In addition, the only way to reach the reduction levels for
    CO2, without increasing the emissions of the other
    pollutants, is to switch away from fossil fuels such as coal.
        Coal is our most abundant and cheapest source of energy, we have a
    250 year supply and whatever we do in this committee needs to take into
    account the fact that we will continue to be a fossil-fueled based
    economy for the conceivable future. This is why I support clean coal
    technologies and why I joined Senator Byrd in cosponsoring his Clean
    Coal Technology legislation.
        We all agree that we need to reduce emissions. We need to have
    hearings on how to reduce the emissions and the kind of time,
    flexibility, and regulatory environment that will result in reducing
    emissions and continue to allow the use of fossil fuels. Otherwise we
    will enter into a mark-up without all of the data.
        The finger pointing between the Northeastern States and the
    Midwestern States has gone on far too long. Currently nothing is
    happening to improve the environment and produce low cost energy. New
    generation facilities are being built using only natural gas. As a
    result the cost for natural gas has risen astronomically. This has
    resulted in high heating costs for consumers across Ohio and the entire
    country.
        Mr. Chairman, I do look forward to working with you on this issue
    and others, but if we are going to work together on this we need to
    collectively define what all of the issues are and then more forward to
    work out the solutions.
        Senator Jeffords. Thank you, Senator.
        Senator Crapo?

     OPENING STATEMENT OF HON. MICHAEL D. CRAPO, U.S. SENATOR FROM
                           THE STATE OF IDAHO

        Senator Crapo. Thank you very much, Mr. Chairman, and I,
    too, appreciate your holding this hearing.
        These issues are very critical. I chaired the committee
    that deals with the water pollution issues and the
    infrastructure needs we have in water. If you look at the water
    needs and the air quality needs that we face in this country,
    they are significant.
        I am not going to take long because I know we want to get
    on with the testimony, and Senator Voinovich basically laid the
    groundwork for what I was going to say, and so I will simply
    associate myself with his comments and amplify them in only one
    area. That is, if you look at that first chart that Senator
    Voinovich put up there, the nuclear capacity that we have in
    this country is providing about 20 percent of our national
    energy power. Is that the blue line there? Well, that does not
    show it on a percentage basis, but I believe that the nuclear
    line, and when you look at it in terms of the percentage of
    electric energy production in this country, is about 20 percent
    of our electricity production.
        We have a tremendous capacity in the arena of nuclear power
    to address the needs that we will be talking about in this
    hearing. It turns out that when you talk about air quality
    emissions, nuclear power is one of those sources of power that
    this country has a tremendous opportunity to explore. It can
    significantly decrease our dependence on foreign oil, decrease
    our dependence on the fossil fuels that Senator Voinovich has
    talked about that are creating a number of our air quality
    concerns in this nation, and increase not only our economic
    stability, but our national security as a result of the United
    States following what I believe would be a much better nuclear
    policy.
        There is not a single silver bullet that is going to solve
    this problem, but if you look at the role that we are now
    looking to nuclear power to play in this country and its
    potential for what it could mean to our country, it is dramatic
    and significant. Admittedly, there are problems with the
    wastestream of nuclear power that we are dealing with
    politically, and everybody in the Senate knows that we have had
    and will continue to have some difficult votes on those issues.
    But we are now getting to the point where the safety issues,
    the resolution of the wastestream issues, and the questions of
    technology with regard to how to reprocess the fuel are getting
    close to being answered. I would hope that this committee can
    help to address those issues as it moves forward in addressing
    the overall issue of air quality in this country.
        Thank you.
        Senator Jeffords. Thank you, Senator.
        Senator Chafee?

    OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE
                         STATE OF RHODE ISLAND

        Senator Chafee. Thank you, Mr. Chairman, for calling this
    hearing. I look forward to working with you and former Chairman
    Smith who is very interested in this subject. I look forward to
    hearing from the distinguished panelists.
        Thank you.
        [The prepared statement of Senator Chafee follows:]
    Statement of Hon. Lincoln Chafee, U.S. Senator from the State of Rhode
                                     Island
        Senator Jeffords, thank you for holding today's hearing on the
    public health and environmental impacts associated with emissions from
    electric utility power plants. I commend you on placing clean air at
    the helm of your priority list for the committee's agenda. I must also
    thank Senator Smith for his work on holding several hearings earlier
    this year on the Clean Air Act, global climate change and a multi-
    pollutant approach to addressing the nation's clean air concerns.
        I look forward to working with both Chairman Jeffords and Senator
    Smith as the committee proceeds with studying the effectiveness of our
    clean air laws and the public health concerns associated with emissions
    from the electric utility sector. Congress should address power plant
    emissions through legislation. Most agree that the Clean Air Act should
    be amended to provide reductions of nitrogen oxides (NOx), sulfur
    dioxide (SOx), and mercury. I believe that we must take carbon dioxide
    (CO2) into consideration. Science has indicated that the
    continued overproduction of carbon dioxide increasingly threatens the
    long term health of our planet. I firmly believe that the United
    States, as the world's leading industrial nation, must take the lead in
    curbing the disastrous effects of carbon dioxide overproduction.
        While opinions clearly vary on the best way to address these issues
    carbon dioxide in particular it is critical that the committee take a
    bipartisan approach in seeking to move multi-pollutant legislation, and
    carefully balance environmental protection with economic security. As
    we have seen on so many issues, Congress does its best work when we
    reach across the aisle. I have confidence that Senators Jeffords and
    Smith have the determination and the experience to craft a solution to
    the problems which will be addressed in today's hearing. I look forward
    to continuing a constructive dialogue and doing my part to reach a
    sensible solution.
        Senator Jeffords. Thank you.
        Senator Specter?

    OPENING STATEMENT OF HON. ARLEN SPECTER, U.S. SENATOR FROM THE
                         STATE OF PENNSYLVANIA

        Senator Specter. Thank you, Mr. Chairman.
        I join my colleagues, Administrator Whitman, in welcoming
    you here. I think people came to hear you and the panelists,
    and quite enough has been said by way of opening statements, so
    I shall be very, very brief.
        One observation is the Senators present seem to be tilted
    very heavily on the Republican side. If I could have the
    attention of the chairman, I was commenting, Mr. Chairman, that
    the weight seems to be tilted very heavily on the Republican
    side, and some of us still count you, so that makes it an even
    heavier tilt in this direction.
        My sole substantive comment, beyond the obvious necessity
    to have balance, is to determine where we are going to find the
    energy. I believe that when we find that it is coal and gas and
    oil, gas and oil are in very short supply, and we do not want
    to obligate ourselves any further to the stranglehold of OPEC,
    which is driving up prices with the cartel. There is an
    enormous supply of coal. I have joined Senator Byrd and Senator
    Voinovich and others on clean coal technology and have
    legislation in on tax credits. The Clean Air Act of 1990, which
    was very hotly debated in the Senate and in the House, has done
    a good bit to provide a balance, but the coal resources really
    provide an enormous opportunity. I believe we can, with clean
    coal technology and the scrubbers, protect the environment and
    provide the necessary balance.
        Thank you very much, Mr. Chairman.
        Senator Jeffords. Thank you.
        Senator Smith?

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

        Senator Smith. Thank you very much, Mr. Chairman, and
    apologies to the Administrator--just a couple more minutes of
    comments.
        This is the first opportunity I have had to address
    publicly this issue since Senator Jeffords has taken over the
    chairmanship. I want to thank him for convening this hearing,
    but also encourage the chairman to partake of nearly 18 months
    of research and work that some of us--certainly Senator
    Voinovich and others--that worked with me and others on the
    other side of the aisle as well. For the last 18 months, we
    have worked on this multi-emissions strategy, a cap-and-trade
    system. We have held a number of hearings, numerous stakeholder
    meetings. I know Senator Voinovich and I attended several of
    those together. It has been ongoing deliberative process. We
    wanted to do it right. We wanted to take the time to see that
    it was done right, to hear all points of view. Many have
    embraced the multi-emissions strategy, but as you use a trite
    expression, the devil is in the details. We do not know what
    the details are yet. Industry does not know. The Senate does
    not know. Until we know those details, it is going to be very
    difficult to come to any conclusions.
        If we are going to pass successful legislation, as Senator
    Voinovich said, it has got to be an inclusive process. It has
    to involve both sides of the aisle. If you look at the
    Everglades legislation, the brownfields legislation, clean
    beaches legislation and so forth that we passed over the last
    year or so, it was all on a bipartisan basis working together.
    If we do that, there really is not any reason why we cannot
    have a strong economy with energy security and a clean
    environment. I believe we can do both. I think there is
    interest in doing both by industry, as well as those of us in
    politics.
        The question before us today is really the consequence of
    emissions from the fleet of power generators. But I would also
    caution you as we go through this to know that the Clean Air
    Act does have two separate and distinct areas regarding mobile
    sources, as well as stationary sources, and I would also remind
    us to all be considerate of the fact that only half of the
    sources of the dirty air is coming from stationary sources. The
    other half is coming from automobiles, trucks, cars, buses et
    cetera. The technology that is moving in that area, with hybrid
    automobiles and ultimately hydrogen vehicles, should we get
    there in the next decade or two, we are going to see perhaps as
    much as 50 percent of the problem taken right off the table
    immediately. Then we would look at the question as, well, if we
    get there, then how much does that reduce the seriousness of
    the remaining 50 percent? We can talk about that.
        We are not taking full advantage of the most modern, most
    efficient power generation that is available to us. Our most
    effective zero-emissions power source, as already has been
    stated, is nuclear. We have to have the courage to look at that
    and make a statement so that coal understands, nuclear
    understands, oil--all the other sources--renewables--what is
    the energy policy of the United States of America? Are we going
    to go back to nuclear or not?
        In the field of fossil fuel, we are not making those
    technologies that are available to us. We're not using them for
    more power with less pollution. We have had so many
    opportunities with new technologies, and I have seen these
    technologies. I have gone to witness those technologies. I have
    heard testimony on those technologies and the innovative means
    to satisfy our energy needs and meet our environmental goals.
        These technologies will produce energy and they will make
    us good environmental stewards. We have got to give the
    technologies a chance. We are not doing that. We are still
    relying on power plants from the 1950's and 1960's and
    punishing people to operate those plants without giving them
    any other alternative. Ironically, unfortunately the Clean Air
    Act in many respects is the obstacle, and we have got to change
    that. We have to have the guts to change it. The status quo for
    power plants under the Clean Air Act is basically a regulatory
    maze that neither is effective nor efficient--a combative
    regulatory relationship that does little to increase any
    environmental protection, and does too much to increase
    litigation, delay and uncertainty which gets nobody any clean
    air. It does not make any sense.
        The current mandates discourage innovation. I promise you,
    they discourage innovation--absolutely discourage it. The fight
    over New Source Review is stifling investment that existing
    plants could be more clean and more efficient. It is stifling
    the opportunity to do that. I have spent the last year and a
    half looking at this directly. The uncertainty over the vast
    array of these rules has essentially stopped all Wall Street
    investment in newer and cleaner coal.
        Now, Senator Voinovich made the case. I do not need to
    repeat it. But the question is, if we are not going to do
    nuclear, you want to close down the coal industry--250 to 300
    years of coal--OK. That will take 75 percent of the energy
    produced in this country clean off the table. What are we going
    to do for it? What are we going to replace it with? Even if you
    get financing, siting such a facility under current law is
    almost inconceivable. We need to change this. We need to fix
    the Clean Air Act and we need to do it soon. We have to stop
    politicking and get it done.
        Now let me speak specifically for just a moment on coal. I
    live in New Hampshire, and it would be easy for me to go out
    and bash the coal industry. But coal is a part of our past, and
    it is going to be a part of our future. It is going to be part
    of the energy that we produce. So why not move toward clean
    coal, which is what industry wants to do and it is what we want
    to do. I know that many would like to end coal combustion, but
    again it is not politically feasible. It is not achievable. It
    is that simple. It is not wise. More than half of this nation's
    electricity comes from coal.
        I have maintained and advocated we can get more power with
    less pollution, but not for 1 minute am I going to suggest that
    we can do it and meet the energy needs of this country, as
    Senator Voinovich said, without coal. You cannot do it unless
    you want to go out and build a 100 more nuclear power plants.
    Sixty percent of the power in New Hampshire comes from nuclear
    power, and we had to fight to get that plant on line, and if we
    did not have it, we would probably have no power right now.
    Every region of the nation could economic consequences if we
    are irresponsible and too aggressive on our timeframes for
    reduction, or unrealistic about the levels of that reduction.
        Now, let me speak quickly. The chairman's bill is a very
    important contribution. It is quite different than mine, but it
    gives us the opportunity to work together, and I look forward
    to doing that with you, Mr. Chairman, to debate on this. It is
    not a complete package, though. The Jeffords bill does address
    the notion that we can use cap-and-trade, and I support that
    notion. I think most of us do here on this panel. But it
    overlooks the need for regulatory certainty. You have to have
    regulatory certainty, and that is where we need to work
    together.
        We want to unleash the innovative forces of the American
    market. We can do it. We can make a profit cleaning up the
    environment and producing energy. That is a win-win. Investment
    will not come as long as this uncertainty, Mr. Chairman,
    continues to hang out there. The scores of regulatory hurdles
    in the Clean Air Act, they make new investments in new clean
    technology, especially coal, all speculative. As long as it is
    speculative, no one is going to do it. We simply cannot afford
    to turn our backs on an industry that can help us. It is
    neither practical or in our national interest to do so.
        Truthfully, coal is a dirty fuel. So if we are to make
    significant gains in air quality and have efficient affordable
    power, then we must encourage investment in clean and efficient
    coal combustion, and we can do it. We will hear a great deal
    about the concerns raised by air pollution from the power. I
    take these concerns seriously. We can address them by calling
    for a specific limit on the level of emissions. At that point,
    the Federal Government should take a giant step back and let
    American ingenuity do it. Let American ingenuity do it.
        One company in New Hampshire called Powerspan--I brag a
    little bit about New Hampshire. This is a pilot project in
    Ohio--two States working together, reducing NOx and SOx as much
    as 45 to 75 percent, mercury 80 percent. Mercury is not even
    regulated and we are reducing under these initial pilot project
    returns 80 percent mercury reduction. No government regulation,
    and these people are doing this on their own, at their own
    cost, on their own initiatives. It is the role of the
    government to set environmental thresholds. It is not the role
    of the government to tell us how to get there. If you want to
    get there and say, here is where we want to be, then let's set
    that standard, let us set that threshold and then let it
    happen. If it does not happen, get the hammer our, but give
    them a chance to make it happen, and I promise you it will
    happen.
        I do not think any of us, regardless of where we are on the
    political spectrum, believes that the Federal Government is
    more innovative, more efficient and technically competent than
    the private sector. If somebody believes that, then I think the
    evidence is to the contrary. So let's not stifle, let's not
    punish. Let's work together. Let's work in a cooperative
    partnership with those people in the free market who can get
    this done.
        Just a final note, Mr. Chairman, in this cap-and-trade in
    the carbon issue, and I know it has been a source of
    frustration for Governor Whitman and the Administration and all
    of us, let me just say when we talk about three emissions, four
    emissions, the truth is carbon reduction will occur. We can
    provide the exchanges, the credits that Senator Clinton was
    just talking about for reducing carbon, without regulating it.
    If we do not need to regulate it, then let's not regulate it.
    Let's reduce it. That is more important than regulating it. We
    can do that by sealing natural gas pipes. We can give credits
    to companies for doing that. We can do that by producing more
    nuclear power plants if we want to give credit, or more
    renewables if we want to give credit to the companies to do
    that. We can buy rain forests or we can plant trees or we can
    create coral reefs. There are all kinds of things we can do to
    reduce carbon dramatically.
        Finally, we can sell this technology out there, instead of
    worrying about Kyoto, sell this technology out there to the
    rest of the world and let them skip the industrial revolution
    and bring in this new innovative technology that we have, and
    get this job done, not only on a national scale, but a global
    scale.
        So Mr. Chairman, I look forward to working with you to do
    just that, with the Administration, and I hope we will lay the
    politics at the door and work together to get it done.
        Thank you.
        [The prepared statement of Senator Smith follows:]
        Statement of Hon. Bob Smith, U.S. Senator from the State of New
                                   Hampshire
        Good morning everyone. I want to thank the chairman for convening
    this important hearing. Nearly 18 months ago, I announced my intention
    to begin a multi-emissions strategy. Since that announcement, I have
    held hearings and numerous stakeholder meetings. This had been an
    ongoing, deliberative process--I wanted to ensure that we took the time
    so that it was done right.
        Many have embraced the multi-emissions strategy. Of course the
    devil will be in the details and changing the Clean Air Act in any way
    is a challenging task. But if we are to ever see successful
    legislation, it must be an inclusive process. We proved last year with
    Everglades, and this year with brownfields, that only through a
    cooperative, bipartisan approach can we get anything done. If we work
    together, there is no reason we cannot be successful in achieving a
    clean environment in concert with a strong economy and energy security.
        The question before us today is the consequence of emissions from
    our nation's fleet of power generators. As long as we have been
    producing electricity, we have been creating air pollution. But today,
    we generate a great deal more power per pound of pollution than ever
    before. But we can do better, and everyone in this room knows that.
        We are not currently taking full advantage of the most modern, most
    efficient power generation available to us. Clearly our most effective
    zero-emissions power source is nuclear. But even in the field of fossil
    fuel-based generation we are not making full use of the technologies
    that allow for more power with less pollution.
        We have so many opportunities with new technologies and innovative
    means to satisfy our energy needs and meet our environmental goals.
    Technologies that produce energy and make us good environmental
    stewards.
        We still rely on power plants from the 1950's and 1960's.
    Ironically, the biggest obstacle to utilizing these clean technologies
    is the Clean Air Act. The Status quo for power plants under the Clean
    Air Act is a regulatory maze that is neither effective nor efficient
    plus a combative regulatory relationship that does little to increase
    environmental protection and does too much to increase litigation,
    delay, and uncertainty. The current mandates actually discourage
    innovation. The fight over New Source Review (NSR) is stifling
    investments that would existing plants more clean and efficient.
        The uncertainty over the vast array of rules has essentially
    stopped all Wall Street investment in newer and cleaner coal
    technologies. Even if you could get financing, siting such a facility
    under current law is almost inconceivable. We need to change this. We
    need to fix the Clean Air Act. However, we must also proceed carefully.
        Coal is a part of our past and will be a part of our future. I know
    that many would like to end coal combustion in this country. I would
    caution them that is not only politically unachievable, but also it is
    unwise. More than half of this nation's electricity is derived from
    coal.
        I have steadfastly maintained and advocated that we can get more
    power with less pollution. But not for 1 minute would I entertain the
    notion that we can do it, and meet the nation's energy needs, without
    coal. Nor can we achieve the desired results overnight.
        This map indicates that coal use is spread evenly throughout the
    country. Every region of the nation could face economic consequences if
    we are irresponsible and too aggressive on our time-frames for
    reduction, or unrealistic about the levels of reduction.
        The chairman's bill is an important contribution to the debate on
    the future of the Clean Air Act. But it is not a complete package in my
    view. While the Jeffords bill addresses the notion of using a cap-and-
    trade system, it overlooks the need for regulatory certainty. If we are
    to unleash the innovative forces of the American market in the quest of
    better performance, then we must encourage investment. Investment will
    not come if the uncertainty is too high. The scores of regulatory
    hurdles in the Clean Air Act make investments in new, clean
    technology--especially for coal--highly speculative.
        We simply cannot afford to turn our backs on coal--it is neither
    practical or in our national interest to do so. But the fact remains
    that coal is one of our dirtiest fuels. If we are to make significant
    gains in air quality and have efficient, affordable power we absolutely
    must encourage investment in clean and efficient coal combustion.
        We will hear a great deal about the concerns raised by air
    pollution from the power that we all use. These are concerns that I
    take seriously and must be addressed. We can address them by calling
    for a specific limit on the level of emissions we will allow. At that
    point, the Federal Government should take a giant step back and let
    American ingenuity take over.
        While it is the role of the government to set environmental
    thresholds, it shouldn't mandate how to get there. I don't think that
    any of us, regardless of where we are on the political spectrum,
    believe that the Federal Government is more innovative, efficient, or
    technically competent than the private sector. Instead of stifling,
    even punishing innovation, as is current practice, I want to provide
    incentives to be innovative, not only reach the cap, but to do better.
    This is about using the free-market process to reduce emissions. If we
    allow the flexibility for innovation, then technology that has already
    proven itself effective can find its way into the mainstream.
        Finally, on Monday the Wall Street Journal weighed in on the
    question of using a market-based system for emissions reduction. I
    would ask that a copy of this editorial be included in the record along
    with my statement.
        Thank you Mr. Chairman and I look forward to hearing from our
    witnesses.
        Senator Jeffords. Thank you, Senator, for a very forceful
    statement.
        Senator Corzine?

    OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE
                          STATE OF NEW JERSEY

        Senator Corzine. I am not going to preempt with a lengthy
    statement. Just let me say, Mr. Chairman, I appreciate you
    holding this hearing and a series of hearings on controlling
    emissions. I welcome my former Governor, as always, and I am
    anxious to hear what she has to say. She knows and I know in
    the most densely populated State in the nation, the issue of
    air pollution is absolutely essential for us to deal with. We
    have roughly 1,100 premature deaths that are identifiable with
    regard to a lot of these environmental issues that come about
    in New Jersey. We need to move on this. God knows I believe in
    the free market, but without some pressure to see some of these
    changes come in to place, I do not think we will address these
    issues directly, squarely and mean the kind of progress that I
    think the people of New Jersey want to see. I hope we can have
    a good, balanced discussion about how we deal with these
    things, but I think it is a partnership of our Federal
    Government and our States and the private sector to get to
    long-term solutions on this. I am very, very pleased we are
    having this hearing so that we can get on with this debate on
    these four pollutants.
        [The prepared statement of Senator Corzine follows:]
     Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New
                                     Jersey
        Thank you, Mr. Chairman. I want to thank you for holding this
    hearing, which is the first in a series of hearings on controlling
    emissions of SOx, NOx, mercury and carbon dioxide. Today's focus is on
    power plant emissions, and I understand that we will soon have hearings
    on emissions from the transportation and industrial sectors.
        Mr. Chairman, air pollution is one of the most pressing
    environmental health issues that we face. By some estimates, power
    plant emissions cause as many as 1,100 premature deaths in New Jersey
    each year. My State has extremely high smog-caused by NOx emissions-
    which exacerbates asthma and other respiratory ailments. SOx emissions
    are responsible for both ecological damage from acid rain and health
    impacts from fine particles. As a coastal State, we have many anglers,
    and I know they are concerned about high levels of mercury in fish.
        Finally, carbon dioxide emissions from power plants are major
    contributors to global warming. The events of the last couple weeks
    have underscored the need for U.S. action on climate change. Power
    plant emissions seems like a good place for us to start looking for
    solutions.
        Mr. Chairman, power plants are certainly not the only sources of
    these pollutants. But they are major sources, and I look forward to
    working with you to find market-based means of reducing their emissions
    of these four pollutants.
        Senator Jeffords. Thank you very much, Senator. Without
    objection the statements of Senators Baucus, Reid, and
    Lieberman will be placed in the record.
        [The statements of Senators Baucus, Reid, and Lieberman
    follow:]
      Statement of Hon. Max Baucus Senate, U.S. Senator from the State of
                                    Montana
        Thank you, Mr. Chairman for calling us here today to discuss such
    an important issue. I appreciate your efforts, and the efforts of
    Ranking Minority Member Smith, to move the debate forward on how best
    to achieve realistic reductions in power plant emissions. I would also
    like to give my sincere thanks to our distinguished panel of experts
    for testifying here today.
        When I go home to my ranch in Helena, MT, it is easy for me to
    forget some of the air pollution problems plaguing other parts of the
    country. In Montana, we are blessed with a small population and plenty
    of space. But, even in Montana, this is an issue we cannot ignore. For
    example, acid rain continues to be a significant problem in the Rocky
    Mountain region. But, I don't think anyone, on any side of this issue,
    is advocating that we do nothing. For instance, the Administration has
    directed the EPA to develop a proposal to reduce SOx, NOx, and mercury
    emissions from power plants. The problem is that as we in Congress try
    to fashion an appropriate response to the continuing problem of power
    plant emissions, there remain significant differences over the best way
    to achieve cleaner power. But as long as retain our common goal--
    cleaner and more efficient power--I am confident that we will find a
    way to reach a bi-partisan solution to this problem.
        We have already gone a long way toward reducing amount of
    pollutants we release into the atmosphere and in cleaning up our lakes,
    streams and oceans. The Clean Air Act has resulted in significant
    reductions in emissions of SOx and NOx from power plants. We are on
    target to achieve even more reductions in the near future, and
    emissions control technologies continue to advance. We of course want
    to make sure that industry has every incentive to invest in these new
    technologies. Hopefully as we continue to hold hearings and discuss
    this issue, we can find the best combination of carrot and stick--
    government regulation and market-based incentives--to ensure we are on
    track to produce the cleanest power we can.
        As for addressing emissions of greenhouse gases, I have stated
    before that I believe that we need to take action to address the
    consequences of climate change. Whether we like it or not, on this
    issue, the world still looks to the United States to take the lead,
    although that attitude may be changing, which is unfortunate. However,
    the proposed regulation of carbon emissions in the United States is
    controversial. Some argue that currently, there are no cost-effective
    control technologies for greenhouse gas emissions. However, I don't
    think anyone would argue that global emissions of greenhouse gases is
    something we can choose to ignore. The questions becomes, again, what
    is the best way to address the problem, and achieve realistic emissions
    reductions.
        I look forward to hearing the testimony of today's witnesses. My
    colleagues and I appreciate your insight and knowledge on this issue.
                                   __________
      Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada
        Mr. Chairman, I want to begin by thanking you for holding this
    important hearing. You have been a strong advocate for protecting the
    environment and human health throughout your distinguished tenure in
    Congress and I hope you will use this committee to continue this
    important work.
        This is a very important and timely hearing Mr. Chairman, because
    as you know, we are learning more every day about the linkage between
    polluted air and diseases such as asthma and lung cancer. We are also
    coming to realize the very real damage that air pollution does to the
    environment, both regionally, as in the case of acid rain, and
    globally, as in the case of climate change.
        I appreciate your determination to better understand and address
    the impacts that powerplants have on people and the environment and
    look forward to working with you on your four-pollutant bill. As you
    know Mr. Chairman, President Bush supported a four-pollutant approach
    to controlling emissions of sulfur dioxide, nitrous oxides, mercury and
    carbon during the Presidential campaign last year. Unfortunately, the
    Administration changed course on this issue after taking office.
        Electric utilities account for approximately: one-third of all
    emissions of mercury and particulate matter in America, one-third of
    all emissions of nitrogen oxides and carbon dioxide, and three-quarters
    of all U.S. emissions of sulfur dioxide. Electric powerplants are major
    contributors to global warming. Climate change will, in turn, have
    significant impacts on public and environmental health. Predicted
    impacts range from changes in temperature and precipitation patterns,
    which impact water resources, to the spread of diseases.
        Mr. Chairman, some would prefer that the Senate address only 3
    pollutants and ignore carbon dioxide. This would be a mistake. It would
    be like driving a car with one flat tire. Eventually we will have to
    fix that tire and it will cost us much more to fix it down the road. In
    addition, utilities need to have some business certainty regarding the
    regulatory environment.
        Mr. Chairman, I look forward to hearing from the witnesses and
    working with you as this committee develops 4-pollutant legislation
    dealing with reducing air emissions including carbon dioxide from
    electric power plants.
                                   __________
     Statement of Hon. Joseph I. Lieberman, U.S. Senator from the State of
                                  Connecticut
        Mr. Chairman, thank you for calling this hearing today on this
    critical issue. We have long worked together on our nation's air
    pollution concerns, and I look forward to continuing that cooperation
    as we undertake our new roles in this committee. I regret that I will
    be unable to attend this hearing due to a request from the President
    for a meeting on an unrelated matter, but I look forward to reviewing
    the testimony of the panel of witnesses.
        Mr. Chairman, I am pleased to join with you and Senator Collins as
    the primary cosponsors of the tripartisan Clean Power Act, legislation
    that will set practical limits on the power plant emissions of sulfur
    dioxide, nitrogen oxide, mercury and carbon dioxide. This bill will
    provide the utility industry with the flexibility and certainty they
    need to make business decisions while avoiding adverse environmental
    and public health impacts, which we will hear about today. If we can
    enact such multi-pollutant legislation, more Americans will be able to
    enjoy fishing in our rivers, swimming in our streams, and breathing
    cleaner air, all goals embodied in the Clean Water and Clean Air Acts.
    I look forward to working with you, Senator Smith, and Senator
    Voinovich to craft a multi-pollutant bill that can be signed into law.
        Unfortunately, I have been troubled by indications that the Bush
    Administration will propose legislation in the coming months that will
    resemble the Clean Power Act, but with one significant omission: a
    requirement to reduce carbon dioxide emissions. While I applaud the
    Administration's attention to critical air quality issues, I cannot
    support legislation that fails to address carbon dioxide emissions, the
    most abundant greenhouse gas that contributes to global warming.
        As the Bonn conference on the Kyoto Treaty reminds us, global
    warming is one of the most serious and pressing environmental
    challenges faced by the United States, and the world. The Earth's
    temperature is anticipated to rise between 3 and 10 degrees Fahrenheit
    in the next century, with a host of adverse environmental impacts, if
    we do not act to address this problem. While close to 200 nations
    agreed on a strategy for combating global warming, one did not. We are
    the one. Because the Kyoto agreement has set rules that were drafted
    without consideration of the interests of American industry or our
    environment--I am afraid that we will pay a big price for our
    isolationism. As a leader of the industrialized world and the world's
    largest emitter of carbon dioxide, we have a responsibility to do
    better.
        If we do not include carbon dioxide in a multi-pollutant bill, our
    industry will most certainly suffer as a result. To cite one example, a
    number of major utilities have expressed the concern that if they go
    forward with large capital investments now, relying on legislation that
    is inconsistent with addressing global warming, they may be faced with
    another round of regulation when this country eventually decides to
    join the rest of the world in controlling greenhouse gas emissions.
    Because of the real risk that today's investments would be rendered
    obsolete, they are reluctant to modernize.
        James Rogers, Chief Executive Officer and President of Cinergy,
    recently testified before our committee. This is what he had to say on
    this subject: ``My company seeks comprehensive multi-emission power
    plant legislation because we want long-term clarity and certainty built
    into our environmental compliance planning process . . . Without some
    sense of what our carbon commitment might be over the next 10, 15 or 20
    years, how can I or any other utility CEO think we have the complete
    picture of what major requirements our plants may face?''
        We would like to avoid that circumstance and provide utilities with
    the certainty they desire and their customers with the clean air they
    deserve.
        Indeed, the U.S. utility sector, which is responsible for 40
    percent of domestic and 10 percent of international carbon dioxide
    emissions, must be part of the solution. In fact, many of the most
    cost-effective measures to reduce emissions are available in the
    utility sector.
        Finally, when all of the various ramifications of multi-pollutant
    legislation are considered comprehensively, as was done in five recent
    studies, the net economic impact of the legislation is modest. Just
    recently, the International Project for Sustainable Energy Paths
    released a report finding that the United States could meet the
    national carbon emissions reduction targets set forth in the Kyoto
    Protocol while still increasing economic growth from baseline
    projections.
        We have a very real opportunity to work in a bipartisan, or should
    I say tripartisan, manner to pass meaningful clean air legislation in
    this Congress. I look forward to working with all members of this
    committee to draft comprehensive legislation to address emissions of
    nitrogen oxides, sulfur dioxide, mercury and carbon dioxide from power
    plants. We have the opportunity to provide certainty and flexibility to
    our nation's utilities while at the same time protecting our
    environment and public health, and we must seize it.
        Senator Jeffords. Governor, please proceed.

       STATEMENT OF HON. CHRISTINE TODD WHITMAN, ADMINISTRATOR,
                    ENVIRONMENTAL PROTECTION AGENCY

        Administrator Whitman. Mr. Chairman and members of the
    committee, I appreciate the invitation to be with you today.
        I would like to start, though, by thanking the chairman for
    a different set of hearings, and that was on four of our
    nominees yesterday, and thank you for your commitment to trying
    to move them through before the August recess.
        Senator Jeffords. We are going to get them through just as
    fast as we can.
        Administrator Whitman. I appreciate that--get them in
    place.
        I truly am pleased to have a chance to discuss this
    opportunity that we have to achieve significant improvement in
    the air quality in America. Consolidating many of the programs
    that regulate emissions from electric generation plants into
    one innovative and cost-efficient approach can significantly
    further the progress made since Congress passed the Clean Air
    Act 30 years ago.
        Under that landmark law, the United States has reduced
    emissions of six important air pollutants by more than 30
    percent, as the chart there will show you. The important thing
    to remember is that these reductions have been achieved while
    our economy has grown by nearly 150 percent, energy consumption
    has increased more than 40 percent, and coal consumption has
    increased more than 75 percent. Economic prosperity and
    environmental protection can go hand in hand.
        Despite these noteworthy statistics, however, we still face
    serious public health and environmental problems caused or made
    worse by air pollution. This Administration is prepared to take
    the next step toward achieving attainment of our air quality
    standards across the nation. President Bush promised this
    during the campaign and has directed me to fulfill that promise
    by modernizing our regulatory system. To address these
    concerns, this Administration is developing legislation that
    will significantly reduce emissions of sulfur dioxide, nitrogen
    oxide, and mercury, while also eliminating administrative
    burdens on both industry and government.
        As the American public has become more aware of the
    environmental and public health problems associated with
    pollution over the years, Congress, EPA and the States have
    responded by developing separate regulatory programs to address
    individual problems one at a time. Each program uses its own
    approach to serve its own purpose. The results for the power
    generation industry is a complex web of regulations and a great
    deal of uncertainty about future requirements.
        It is time to simplify the existing regulatory structure.
    We can replace many of these individual programs with a single
    cost-effective system that will achieve greater emission
    reductions than all of the current programs combined. Again,
    this chart will show you some of that. Such a system would use
    market-based incentives such as emissions caps, while allowing
    trading, to keep compliance costs low, provide industry with
    certainty about future obligations, and ensure that we meet and
    maintain our environmental goals.
        Congress established a wonderful model for such a system in
    1990 when you passed the Clean Air Act and created the Acid
    Rain Program. This revolutionary program--the 1990 Acid Rain
    Program--focused on reducing the SO2 emissions that
    cause acid rain by setting a nationwide cap on emission from
    electric generating facilities. It also created a tool to help
    achieve this reduction--an innovative, market-based allowance
    trading program. This cap-and-trade approach assured the
    American public that pollution reduction would be achieved and
    sustained.
        At the same time, the program allowed industry
    unprecedented flexibility in choosing how to meet the emissions
    reduction goals by using methods that were best suited to their
    needs. Now in its sixth year, the Acid Rain Program has been a
    resounding success. SOx and NOx emissions have dropped
    dramatically and acid rain levels have fallen by up to 30
    percent in certain areas of the country. These dramatic
    reductions cost nearly 75 percent less than initially
    predicted.
        We can build on the success of this program to reduce NOx
    and SOx and mercury emissions from power plants. Addressing
    these emissions will provide the country with a variety of
    environmental and public health benefits. Reducing SOx and NOx
    in the atmosphere would help us avoid thousands of premature
    deaths each year, improve the visibility at some of our most
    treasured national parks and wilderness areas, avoid conditions
    that aggravate asthma and other respiratory conditions, and
    prevent damage to sensitive waterways and ecosystems.
        I hope to be able to discuss with you soon the details of
    the legislative proposal to reduce power plant emissions of
    these three pollutants. I realize that some of you are
    disappointed that the President has decided not to include
    mandatory carbon dioxide reduction in his multi-pollutant
    approach. Chairman Jeffords, while I respect your decision to
    introduce legislation with different priorities, I want to
    explain to you why I believe it makes sense to move forward
    with a three-pollutant bill immediately.
        The public health and environmental gains that this bill
    would bring are too great to delay. One of the things that has
    surprised me since I became Administrator of the Environmental
    Protection Agency is how close we are to consensus on
    appropriate and feasible reductions in SOx and NOx. Though
    mercury has proven more difficult, I believe we can come to
    agreement in a relatively short period on that emission.
    CO2 stands in sharp contrast to these pollutants.
    Even if everyone decided today that power generators should
    reduce CO2 emissions, it would take considerable
    time to agree on the appropriate levels, as well as on a number
    of other issues including the extent to which power generators
    could trade with other industries. It would be a shame to delay
    achieving important public health protection while we await
    consensus on CO2 legislation.
        The President's National Energy Plan includes a number of
    recommendations to conserve energy, increase energy efficiency
    and spur advances in technology. Whether fuel cells for
    automobiles or combined heat and power facilities, these
    advances will be critical to reducing the damaging effects of
    greenhouse gas emissions. A three-pollutant bill may not solve
    every environmental problem associated with power generation,
    but it can help us address very significant public health
    problems--serious problems that we need to face today.
        We can make significant cuts in SOx, NOx, and mercury
    emissions with a program that is both effective and cost
    effective. The American public needs us to act now, and I look
    forward to working with you as you move forward in discussing
    this bill.
        Thank you.
        Senator Jeffords. Thank you very much. We appreciate your
    being here and as I said earlier, I am going to try to make
    sure you get your staff together very, very quickly.
        I know you are in the middle of responding to the White
    House direction to develop a three-pollutant bill, which you
    have just been discussing. What levels of reduction should we
    be aiming for?
        Administrator Whitman. I am not prepared to talk about
    specific levels of reduction. What our goal has to be is to
    ensure that we achieve at least as great, and hopefully--and we
    believe we can--much better reductions than we are getting
    today. The object has to be to improve our clean air.
        Senator Jeffords. Would you elaborate on the kinds of
    benefits that could be achieved by significant reductions in
    the pollutants of NOx and SOx and mercury? What are you looking
    for?
        Administrator Whitman. Well, certainly. SO2,
    SOx, has environmental effects. It helps produce fine
    particulate matter, and Senator Clinton went into some detail
    about the impact that has on human health. It aggravates
    asthma, chronic bronchitis, acute respiratory problems,
    hospital admissions, asthma among children, acidification in
    lakes. It helps cause acid rain, which obviously affects our
    lakes and our streams; soil acidification and soil nutrient
    depletion. It damages trees.
        NOx, again, has the same kind of human health
    implications--particulate matter, premature death, aggravated
    asthma and chronic bronchitis, acute respiratory problems. It
    also decreases visibility and is a major contributor to
    regional haze. It has an impact on coastal eutrophication over
    fertilization, which causes dead zones, as we have seen, and
    problems again in our coastal areas; soil acidification and
    soil nutrient depletion. It damages trees and crops, global
    warming and stratospheric ozone depletion.
        Mercury--the primary source of the problem is derived
    through eating fish that contain high levels of methyl-mercury.
    That is a neuro-toxicity producer that includes things such as
    mental retardation, cerebral palsy, difficulty speaking and
    hearing. Other impacts appear to include impaired reproductive
    systems--those are things that we are seeing some signs of;
    impaired immune system functioning and cardiovascular problems.
        Senator Jeffords. When will you be able to tell us what
    levels will adequately protect human health in the environment?
        Administrator Whitman. Well, we are working toward a bill,
    as you indicated, which would set some standards, and it is our
    hope to be able to do that early in the fall.
        Senator Jeffords. What kind of benefits could we get if we
    simultaneously cut carbon dioxide? It seems that the efficiency
    improvements that help cut carbon would also cut these other
    pollutants.
        Administrator Whitman. Well, really, I would approach it
    from the other way at this point, which says that the actions
    that we take to reduce SO2 and SOx and NOx--
    SO2 and NOx--actually help reduce carbon. We are
    doing a number of things now, as you may know, through
    voluntary programs that also achieve carbon reduction. The
    Energy Star Program, in and of itself, which is a voluntary
    program, last year alone reduced the equivalent in carbon
    emission of 10 million cars--as if we had removed 10 million
    cars from the road, which is a significant amount of that. It
    is also one of our best programs, and as I indicated before, is
    a totally voluntary one. Last year, and I can read you the
    actual statistics, Energy Star products and practices saved
    almost 10,000 megawatts of peak summer demand. The figures show
    that Energy Star commitments have prevented 864 billion pounds
    of carbon dioxide and will provide cumulative energy bill
    savings for consumers and businesses of $60 billion through
    2010.
        Senator Jeffords. Generally, doesn't it make more economic
    sense to invest in cutting all four pollutants at once, instead
    of cutting back at the sources----
        Administrator Whitman. I do not believe, Senator, that even
    if you were to do all four pollutants that that would
    necessarily provide the kind of certainty that you are looking
    for the utilities, because there is still so much of an
    international discussion that is going on on carbon. What we
    are finding statistically as we are doing our studies would
    mean that there may well be the need for further refinement of
    that sometime in the future. An appropriate cap-and-trade
    system for SOx and NOx, and we are looking at what we can do
    with that with mercury, would allow flexibility for the
    utilities to make some determinations to buy some allowance
    against any kind of future carbon cap.
        Senator Jeffords. Senator Smith, I would alert everyone
    that we are on a time basis, and I am trying to make sure that
    there should be available to you something which tells you how
    much time you have and have used.
        Senator Smith. Five minutes?
        Senator Jeffords. Right. My 5 minutes are now up.
        Senator Smith. Thank you, Mr. Chairman.
        Administrator Whitman, during the Acid Rain Program, isn't
    it true that the earliest reductions under that program came
    from the so-called dirtiest plants?
        Administrator Whitman. Yes, that is true.
        Senator Smith. And isn't it also true that under that acid
    rain trade and exchange cap-and-trade and exchange, that the
    majority of the reductions actually came earlier than we had
    expected and greater than we expected?
        Administrator Whitman. They did. Yes.
        Senator Smith. Let me ask you a question on the issue of
    regulatory relief. If we are going to go to a trade and
    exchange cap-and-trade and exchange of credits, and obviously I
    think that is where we are all headed, what would you suggest
    in terms of regulatory relief that should be put on the table
    in order to make some of those exchanges and credits work? On
    behalf of industry, what would you consider from the
    Administration's point of view putting on the table for
    regulatory relief?
        Administrator Whitman. We believe that, depending on what
    levels are set--I mean, obviously, the target levels are going
    to be important in determining the extent of regulatory relief,
    but we believe that there is significant regulatory relief to
    be achieved for the utilities. We have the 126 reg, the NOx SIP
    Call, BART. There are New Source Review. There are a number of
    these very time consuming and costly regulations that would no
    longer be necessary if the appropriate target levels were set
    in the bill. Acid rain, NOx controls, as you know, the
    utilities are subject to a huge host of different regulations
    that are attacking each one of the issues separately. What we
    are talking about here are overarching standards that would
    mean that we no longer needed to have the individual
    regulations.
        Senator Smith. Also, I would point out in my conversations
    with some of the industry folks, there was certainly interest
    in voluntarily reducing carbon dramatically, and I believe, and
    I would ask you just to comment on this, I believe that in the
    trade and exchanges that we do, there could be credits given
    for carbon reduction using such things as sinks.
        Administrator Whitman. Certainly sinks are certainly a way
    to address the issue of carbon and there has certainly been a
    lot of discussion about credits.
        Senator Smith. There also could be credits used in
    investment in renewables as credits, investment in perhaps
    other sources of power as credits as well--even solar, which
    could also be interesting in the sense that you would have
    perhaps the coal industry investing in solar power in terms of
    for credits on perhaps New Source Review.
        Administrator Whitman. Well, the President in the energy
    proposal that he has put forward has called for a number of
    different incentives to help promote new technology and to help
    promote clean coal technology, as well as alternate fuels and
    conservation, and all of those goals. You know, when we talk
    about conservation, to the extent that we can reduce the demand
    for a kilowatt, that is a kilowatt we do not have to produce.
    That is obviously perforce going to be cleaner.
        Senator Smith. I am ready to roll up my sleeves and work
    with you. I look forward to doing that. Thank you very much.
        I apologize for having to leave. I have another
    appointment.
        Senator Jeffords. Senator Clinton?
        Senator Clinton. Thank you, Mr. Chairman.
        I would endorse Senator Inhofe's request for a clean
    technology hearing, including clean coal technologies, because
    there is a lot of talk about it, but I think we need to have an
    in depth look at what does work, what the state of the
    technology is, and how we would proceed.
        I was pleased to hear your endorsement of the Energy Star
    Program because I think that your statistics certainly tell the
    story that is one that needs to be widely known. But I am
    concerned that the budget for the Energy Star Program is flat,
    so that it does not appear as though the Administration is
    supporting a proven program that has encouraged people to take
    the steps necessary to reduce their own energy usage, and
    thereby reduce the emissions. I hope that we will be able to
    look for a revision of that in the weeks ahead as we move
    toward appropriating the funds necessary to support an
    effective program.
        Administrator Whitman, Chairman Jeffords actually asked all
    my questions on pollution and emission, including the issue
    concerning the three-pollutant versus four-pollutant approach.
    I guess it was Senator Voinovich. I was giving you credit,
    Jim., for the clean technologies hearing, but I have just been
    told that it was Senator Voinovich. But it was a good idea, so
    we ought to followup on that.
        [Laughter.]
        Senator Jeffords. I approved of it.
        Senator Clinton. Good, excellent.
        I hope that we will start the kind of conversations that
    will lead us to figure out what we can do to move forward on
    CO2 controls, even if it is part of a four-pollutant
    strategy that does not have everything some of us would want
    with respect to carbon dioxide, because I think we need to
    establish the kind of certainty that the industry certainly has
    talked to me about.
        Governor Whitman, I cannot let an opportunity go by with
    you here without asking about an important environmental issue
    in New York and New Jersey, namely the cleanup of PCB
    contamination in the Hudson River. Today, a New York Times
    editorial states that rumors have been flying all week that
    Mrs. Whitman would shortly announce her own dredging plan that
    would reduce the Clinton Administration's plan to a mere pilot
    project, followed by years of additional study and analysis.
    The reports, none confirmed by Mrs. Whitman herself, have
    emerged from various Members of Congress with whom she has been
    conferring, and from lower echelon sources at her agency.
        Now, Governor, I know that the agency is still officially
    in a formal review process, but I would like to give you the
    opportunity now to confirm or clarify these rumors. First, is
    it true that you will be making, not necessarily announcing,
    but making a final decision by the end of this week?
        Administrator Whitman. I certainly hope to get it done as
    quickly as possible. I would like to get it done by the end of
    this week if I can.
        Senator Clinton. Second, is there any factual basis to the
    concern that you are considering a pilot project, followed by
    years of additional study and analysis?
        Administrator Whitman. Senator, as over the 10-year
    tortuous history of this case, there have been a lot of
    proposals put forward. Until the record is closed, it is my
    obligation to listen to all of them. I have made no decision. I
    have nothing in my hip pocket that I am preparing to spring on
    anyone at this time.
        Senator Clinton. I also understand that your decision, when
    it is made, will be followed by a 30-day period for the
    Governor of New York to review the decision. Is that how the
    process works? And what role will the Governor be able to play
    with respect to the final decision?
        Administrator Whitman. Well actually what happens is that
    since the--the record of decision, if that is the way we go,
    comes from the region. That has to come back to headquarters.
    It has to be reviewed by the people in headquarters. Then it
    goes--and this is after I have made a decision of go or no-go
    with that--then it has to go to the State of New York and they
    have a month's period in which to make additional comments or
    suggest additional changes if they feel they are necessary.
        Senator Clinton. And so at that point, then, the State's
    response will be taken into account before you issue a final
    decision?
        Administrator Whitman. Yes.
        Senator Clinton. Can you provide us with any additional
    information about the decisionmaking process or anything else
    regarding the timing? Are we just going to wait and see what
    happens in the next week or two?
        Administrator Whitman. It is safe to say that I am giving
    it attention. That there are lots of very deeply held opinions
    on this issue, and I am going to do what I think is in the best
    interest of the environment and for the public in all the
    States impacted by it.
        Senator Clinton. And will you also consider carefully the
    previous position of Governor Whitman of New Jersey?
        Administrator Whitman. Governor Whitman of New Jersey never
    endorsed the dredging plan. But Governor Whitman of New Jersey,
    as Administrator Whitman of the Environmental Protection
    Agency, is absolutely committed to cleaning up toxins where we
    find them.
        Senator Clinton. Thank you.
        Senator Jeffords. Thank you, Senator.
        Senator Inhofe?
        Senator Inhofe. Thank you, Mr. Chairman.
        Madam Administrator, I am not asking this critically, but I
    am just kind of curious. Senator Specter and I requested some
    information on New Source Review some time ago. We had a
    deadline of July 13. I know this came about the time that you
    are trying to get people confirmed, and you were kind of alone
    at that time, but can you give us a status on that, when we
    might get this report back?
        Administrator Whitman. Senator, we are moving to provide
    you with all the answers to questions that you have asked. As
    you know, in the President's energy plan, he required of us a
    report by the middle of August on New Source Review. We are on-
    target to reach that, to be able to provide him with that
    review that he required of us on New Source Review. But we will
    continue to do everything we can to answer the questions that
    you have as we reach them.
        Senator Inhofe. OK, I think that is important. When I
    chaired the Clean Air Committee, we had hearings on this--one
    was in the State of Ohio--and found some things that really
    need to be looked at. So we are anxious to get that report.
        I would just like for a minute to address this NAS study
    that was out, where the report concludes that global warming
    may be happening, and then, I'm quoting, ``emphasize that more
    systematic research is needed to reduce current uncertainties
    in climate change science.'' We recently had a hearing where we
    had a number of qualified witnesses, and I was shocked to find
    out how primitive even the best models which predict climate
    change are. It was Dr. Linzer, a renowned climatologist from
    MIT who stated in our hearing that the models we use have not
    been improved for 20 years and cannot be the basis for any
    conclusions. Then the recent NAS study agrees, and I will quote
    now, ``a thorough understanding of the uncertainties is
    essential to the development of good policy decisions, and
    without understanding the sources and degree of uncertainty,
    decisionmakers could fail to define the best ways to deal with
    the serious issues of global warming.''
        This concerned me at that time. Is the Administration going
    to be looking at updating these models so that we can have
    something a little better to work with than we have had in the
    past?
        Administrator Whitman. Yes, Senator. As you may know, when
    the President gave his June 11 speech on climate change, one of
    the things that he emphasized was the fact that he wanted to
    see additional dollars. Even though the United States far and
    away makes the largest commitment in research dollars of any
    nation on Earth, he intends and desires to increase that, as
    well as looking for our international partners, particularly
    the European Union, to step up their contribution to the
    scientific effort that is still needed to determine where the
    impacts are coming from, how much of this is naturally
    occurring, how much is manmade, and if so, what parts of man's
    activities are having the biggest impact, and therefore how can
    we best target our resources to address it if we are going to.
        Senator Inhofe. When I heard his speech where he said
    essentially what you just said, I was hoping that he was
    specifically referring, among other things, to those models.
    Because we spent a whole hearing listening to how deficient
    they were and how outdated they are, and yet it seems as if
    there is nothing newer, and so we are basing our conclusions on
    models that are antiquated. So I am glad to hear that that was
    one of them.
        Your chart--the second one you showed up there--I thought
    was very revealing. In my opening statement, I talked about the
    improvements that we have made over the years, but the public
    is not aware of that. I think the public is getting
    misinformation and is led to believe that things are really
    worse then they are. Your chart, which I looked through the
    material and I did not get a copy of--yes, it is that one right
    there--it showed that since 1970 that while the energy
    consumption went up 42 percent, emissions went down 31 percent.
    I think that is really astounding. I would hope that as you
    articulate this matter and the months go by, that you remind
    people that this is really a success story--that good things
    have happened. I know you have been trying to do that, but this
    is a good way of doing it and I applaud you for that and I hope
    you will continue to do that.
        Administrator Whitman. Senator, if I might just update on
    your initial question, because I got a more definitive answer
    for you, that we hope to have your letter--it is in final
    review, and we hope to have the letter completed by Friday,
    tomorrow.
        Senator Inhofe. That is great. All right.
        Administrator Whitman. Just to give you a--it is at OMB.
        Senator Inhofe. On this question, I think you have a good
    pulpit for this for the nation to say, you know, this is a
    success story. We are going to build on this success story. But
    let them know that it is not this dismal picture that we so
    often get.
        Administrator Whitman. What is important to me and the
    lesson there is that it is not an either/or. You do not have to
    have either a healthy economy or a clean environment; that if
    we are smart, if we use modern technology wisely, if we
    approach things in a systematic way, we can in fact do both.
        Senator Inhofe. I believe that is right. I think we can
    harmonize our efforts also with the energy problem. We cannot
    act like it is not there, and I hope that we will continue to
    do that, and the Administration will also.
        Thank you very much.
        Senator Jeffords. Senator Corzine?
        Senator Corzine. Thank you, Mr. Chairman.
        I will identify with the remarks of my colleague from New
    York, that a lot of the questions I might have wanted to ask
    have been asked, but I might even repeat some of them. I want
    to particularly identify with the questioning with regard to
    the judgment about the GE issues that are so important to the
    citizens of New Jersey and New York, and all those that touch
    up against the Hudson River. I would throw back to one of the
    reasons that there was such strong support for your
    participation is a belief, as the Administrator, was the
    people's belief of your commitment to a clean environment, and
    to some extent interpretation of your leadership with regard to
    this issue, which is very vital to a lot of folks. So while
    maybe the junior Senator from New Jersey is not reading the
    history and your words correctly, we felt very strongly that
    you were on the side of making sure that this was addressed in
    a very environmentally friendly format. So I will anxiously
    await seeing the results of your decision. I hope that we do
    not have to go back and argue over what the words meant and
    said, because I admired your leadership with regard to these
    things in days past.
        You can comment or not.
        Administrator Whitman. You do not need to worry, Senator.
    Those words--I meant it. I am committed to cleaning up the
    environment.
        Senator Corzine. On another note, one of the reasons this
    carbon dioxide issue, in my view, should be addressed now
    really gets at some of the things that I hear others talk about
    with regard to bringing free market or market issues to bear on
    how we deal with the environment. I am going to quote, and I
    think I have been here and done this in the private sector, but
    I am going to quote James Rogers who as the chief executive
    officer and president of Cinergy recently testified before the
    committee and said, ``My company seeks comprehensive multi-
    emission power plant legislation because we want long-term
    clarity and certainty built into our environmental compliance
    planning process. Without some sense of what our carbon dioxide
    commitment might be over the next 10, 15 or 20 years, how can I
    or my board or any other utility CEO think we have a complete
    picture of what major requirements our plants will face?'' You
    cannot make these type of long-term decisions--25- or 30-year
    decisions--without having the kind of information. So if we do
    not put something definitive or relatively defined on the
    table, it becomes very difficult for the business community to
    make the kinds of decisions that we need to see environmentally
    take place. So I identify with Mr. Rogers' comments on this
    issue, and I think it is one of the strongest reasons why we
    need to address this now.
        I would just add, I hear all this conversation about cap-
    and-trade work, which I think is a great idea. It certainly is
    with some of the ones where there is a greater degree of
    consensus. It is very hard to conceive of how one would put
    together a legitimate program about capping and trading with
    carbon dioxide if you did not have something definitive to work
    against. So I am troubled that we will not get those benefits
    that so many people want to talk about with regard to market-
    based initiatives if we do not do something that defines what
    cap-and-trade will be working against. So I am really
    interested in the GE issue, really interested in these other
    two market-based concepts.
        Administrator Whitman. Well, Senator, if I might again on
    the carbon issue, because I understand exactly what you are
    saying and we have certainly heard a lot of it, but even if the
    bill were to address carbon, I am not sure it would give the
    utilities the certainty they are seeking, because the whole
    issue of climate change is still one that is very much under
    discussion. There is still a lot of uncertainty, and it would
    not necessarily. We are a long way from knowing how to solve
    the problem, so it would not necessarily give them the kind of
    certainty that there would not be future reductions required
    that we can actually move forward with on SOx, NOx, and
    mercury. It is going to be easier to set those standards with
    some level of certainty and with a consensus than it will be on
    carbon. So that even if we did do it, it would still be open.
        Senator Corzine. Excuse me, Madam Administrator. I am not
    hearing you say that the scientific evidence on global warming
    is not coming to a conclusion.
        Administrator Whitman. There are conclusions being drawn,
    but I think that there still is a level of uncertainty as to
    what the carbon targets need to be and how to achieve them, and
    that there would not be further reductions required down the
    line. That is, of course, the bottom concern here, is what kind
    of credits you get up front if you move early, if you make a
    big investment and all of a sudden the rules change on you,
    what the impact is going to be. All I am saying is that there
    is more uncertainty with what are appropriate targets for
    carbon than there are for SOx, NOx and mercury.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. The Administration is working on a
    three-pollutant emissions bill?
        Administrator Whitman. Yes, Senator.
        Senator Voinovich. Do you know if that is going to be
    looking at the issue of New Source Review, which has got the
    utilities and many other people kind of in a state of limbo?
        Administrator Whitman. Well, it is our feeling that right
    now that depending on where you set the targets, that New
    Source Review is certainly one of those regulatory aspects that
    would no longer be necessary--the regional haze, the BART, as I
    mentioned before, the MACT standards, the NOx SIP Call, the 126
    Rule, acid rain--all of those could be eliminated and combined
    into one regulatory process under a new piece of legislation
    that would be vastly simplified. It depends where you go on
    those for utilities--we are talking for utilities now--as far
    as most of those are concerned. But where you go depends on
    what level is set in the final legislation, how far you can go
    to eliminating the additional regulations that we have in place
    now.
        Senator Voinovich. I think that the point that Senator
    Corzine made is a good one. I think from a realistic point of
    view, I agree with you and I agree with the Administration, but
    the fact of the matter is that we need to deal with the carbon
    issue--substantively or politically--if we are going to get any
    kind of consensus and get something through here. I would
    suggest that somebody really start to brainstorm on some method
    that will kind of respond to what Senator Corzine was saying
    with his comments.
        Administrator Whitman. I think it is important to know that
    when we look at the efforts that are underway or that are
    called for in the President's energy plan on energy
    conservation, we look at the efforts undertaken with Energy
    Star. I am happy to tell the Senator that we are going to in
    fact expand Energy Star--the number of buildings, the types of
    businesses to which it would be applied, and the number of
    appliances. We are going to be undertaking a consumer--a big
    effort starting in October to educate consumers on how to buy
    smart and what Energy Star means for them. Those things have
    had immeasurable impact on reducing carbon, on taking carbon
    out of the atmosphere. So they do work, and it is just
    important to recognize them as part of the equation.
        Senator Voinovich. We hear a lot about asthma, and we look
    at the chart and we see that pollution is down, energy is up. I
    spent a lot of time on that issue when we were talking about
    the ambient air standards. If you have anything authoritative
    on the issue of asthma and its causes--certainly, ozone does
    not help the situation, but I think so often what we do is we
    concentrate on one area, and are there some other things that
    we ought to be dealing with, because that problem is getting
    worse in this country, and if you have any information on it, I
    would be grateful if you would share it with me.
        The last issue is, we had a hearing at the Governmental
    Affairs Committee on Tuesday in regard to making science a
    cabinet position, and there is bipartisan support of a
    provision that would amend the bill that would create an
    assistant in the science area. Have you folks looked at that at
    all?
        Administrator Whitman. Yes we have, Senator, and as I
    testified on Monday, my only concern is, and Senator Thompson
    captured it well when he said this often happens here. Windows
    of opportunity are short and important to capture when you have
    the opportunity, and that keeping it a clean bill--this is our
    opportunity to get something through. While I believe science
    has got to be at the basis of every decision we make, it
    underlies our credibility for any regulation, and as I have
    indicated to you, I have already taken some steps internally to
    ensure that we are applying science at the beginning of any
    rulemaking process, that it is integral to the rulemaking
    process. My concern is that if we were to add that, that that
    would cause someone else to want to add something else.
        This has been the history since 1988, when a cabinet-level
    bill has been introduced, every time it has gone down. It has
    gone down under the weight of ideas, important issues that need
    to be discussed, but added on to that bill and it fell from its
    own weight. That is not to say, as I indicated, that we should
    not have that discussion and do it perhaps afterwards or take
    it up in another way. But my concern was simply that I think
    our window of opportunity is there for the elevation, but only
    if the bill is kept relatively clean.
        Senator Voinovich. I would say to you that the credibility
    of the agency is in question in terms of the issue of good
    science, and there have been some reports that some of the
    people that were on advisory committees were not objective in
    their decisionmaking because of boards that they served on and
    so on. What happens is if you have an agency that does not have
    good science, then one group attacks it because it is not good
    science, the other groups attacks it. It seems to me that when
    you have that kind of expertise aboard that people respect and
    know if objective, that it gives the agency a lot more
    credibility. I will tell you, it would eliminate a lot of
    lawsuits that are based on the fact they made this decision and
    it was not on good science, but it was made because of a bias
    either one way or the other way.
        Administrator Whitman. I agree, and the need to ensure that
    we are using the very best science, subject more of our
    decisionmaking to peer review, and we are taking a very serious
    look at the allegations that have been leveled about the
    composition of some of the boards, and we take that one very
    seriously.
        I did want to respond to your concerns about asthma, to say
    that we would be happy to share with you any of the data we
    have, and in fact we have started now--we are undertaking for
    the first time for the agency a public awareness campaign to
    help people understand what they can do themselves to reduce
    the likelihood of severe asthma attacks, what you can do--
    indoor air, not subject children to second-hand smoke, look for
    those indicators--pets, dust, other things that exist within
    the home to try to control the home environment and indoor
    environments. We are trying to give people some tools on that.
    But we do have additional information I would be happy to share
    with you.
        Senator Jeffords. Senator Chafee?
        Senator Chafee. Thank you, Mr. Chairman.
        Welcome, Governor. I know this is not a hearing on the
    Jeffords bill, but has the Administration or have you started
    to analyze that bill and taken a position?
        Administrator Whitman. We have not taken a position. We are
    still in the process of working on the Administration's three
    emission proposal.
        Senator Chafee. And obviously as we go forward, carbon
    dioxide is going to be the sticking point, and how are you
    going to approach reducing these emissions?
        Administrator Whitman. Well, as I had mentioned before, the
    President has called for a significant investment in
    conservation technology which obviously impacts on carbon. We
    have seen significant measurable reductions through programs
    that we already have through the Energy Star program being the
    lead one on that, which is a voluntary program. As we look at
    the kind of clean technologies or the standards that we set for
    SOx and NOx, that will have an impact on carbon. Those things
    are interrelated. So there are a number of initiatives being
    undertaken right now as part of the energy plan to address
    emissions in general that will have an impact on that. But the
    President is not looking for, at this point in time, a
    mandatory cap on carbon.
        Senator Chafee. Thank you.
        Senator Jeffords. Thank you, Governor. You have been very
    forthright and we deeply appreciate your answers. We, of
    course, reserve the right to submit to you additional questions
    to respond in writing.
        Administrator Whitman. Absolutely.
        Senator Jeffords. But for now, thank you very much, and we
    look forward to working with you.
        Administrator Whitman. Thank you.
        Senator Jeffords. While the next panel is getting
    assembled, I want to just take a moment to make a couple of
    housekeeping announcements. Senator Smith and I are going to
    direct our staff to pull together a group of stakeholders that
    have an interest in passing comprehensive legislation to
    address power plant emissions. The first meeting is likely to
    be in September. Members of the committee and their staff are
    obviously welcome to have input on these meetings.
        I am also hopeful that the committee will hold a
    legislative hearing on S. 556 not too long after the process
    concludes.
        One more additional matter. I would like to remind the
    witnesses that their verbal statement should be limited to 5
    minutes, and a little red light will come on when it is time to
    wrap up. No serious things will happen to you if you go a
    little bit beyond that, but I will just ask your help. Your
    written statements and any additional material will be included
    in the record, and members of the committee may be sending you
    all followup questions as well.
        Let us now proceed to Mr. Johnstone. It is good to see a
    Vermonter at the table, and I deeply appreciate your being
    here, and please proceed.

    STATEMENT OF SCOTT JOHNSTONE, ENVIRONMENTAL SECRETARY, STATE OF
                  VERMONT AGENCY OF NATURAL RESOURCES

        Mr. Johnstone. Thank you, Senator Jeffords, and members of
    the committee.
        It is my pleasure to appear before you today to offer
    testimony in support of comprehensive efforts to reduce power
    plant emissions, and in particular S. 556.
        We in the Northeast live down wind from virtually the rest
    of the nation. In fact, a quick look at a map showing air flows
    will tell you that we are, in effect, the tailpipe of the
    nation. In addition to the harm caused by pollution emitted
    within our region, pollutants from many of our nation's most
    industrialized regions find their way to our corner of the
    country. Every year brings more and more evidence that air
    pollutants of all types harm the health of our children, our
    seniors, those who suffer from respiratory diseases and our
    natural environment.
        Despite the Clean Air Act's original intent and subsequent
    amendments to the law, recent reports document many serious
    problems related to poor air quality, including ongoing
    acidification of lakes and ponds, increasing levels of carbon
    dioxide and other greenhouse gases in our atmosphere, and
    health advisories in many States recommending limited
    consumption of fish due to widespread mercury contamination. I
    believe the kind of comprehensive four-pollutant bill before
    your committee, focusing specifically on emissions from
    existing utilities, must be a critical component of any new
    clean air legislation.
        While protecting public health and the environment must be
    our goal, I recognize that promoting cost-effective approaches
    that inspire innovation is critical to achieving this goal. The
    key to comprehensive and cost-effective public health and
    environmental protection is the establishment of firm tonnage
    emissions caps for all pollutants of concern.
        The necessity for legislation such as S. 556 is apparent
    partly because of the unanticipated weakness in the existing
    Clean Air Act, and also because of new scientific evidence. In
    crafting the original Clean Air Act, Congress reasonably
    assumed that many of the largest, and arguably dirtiest,
    electric power plants--typically coal-fired--were nearing the
    end of their useful economic life, and therefore exempted them.
    Unfortunately, our nation's air quality continues to be
    adversely affected by these old power plants. There is no
    compelling reason to continue exempting high-emitting power
    plants from applying proven technology such as flue gas
    emission control devices.
        While we have made considerable progress reducing sulfur
    dioxide and nitrogen oxide emissions since 1990, recent
    findings demonstrate that much work remains. Because of acid
    deposition, 346 Adirondack lakes--one quarter of all surveyed--
    no longer support fish. In Vermont, we have identified 35 lakes
    as sensitive or impaired by acidification. In addition, on
    Camel's Hump--Vermont's fourth tallest peak--the red spruce
    canopy has been extensively damaged and new growth red spruce
    is showing signs of acidic damage.
        New air pollution concerns have also emerged in the past
    three decades. These are issues with perhaps even more
    significant adverse implications for the health and well being
    of our citizens and our environment. First, research clearly
    documents that the Earth's atmosphere has heated up during the
    past half century due to human-made air pollutants such as
    carbon dioxide, which is produced during the combustion of
    fossil fuels. The likely results of global climate change
    include widespread coastal flooding, immense changes in habitat
    for plants and animals, an increase in weather-related natural
    disasters, and in Vermont, possible crippling impacts on our
    ski areas and our maple sugar industry--potential devastating
    blows to our State's economy and to our State's culture.
        Furthermore, we know that the Kyoto Protocol, while the
    starting point which this country should embrace, falls well
    short of reducing emissions to a level that even stabilizes,
    much less reverses, global climate change.
        Second, mercury emitted in trace amounts by burning coal
    and other fossil fuels has found its way into fish throughout
    the Northeast. All six New England States, New York and New
    Jersey have issued fish consumption advisories. Fully 30
    percent or more of the mercury deposited in the Northeast
    originates from sources outside of the region.
        As a first step in addressing these many problems, I urge
    you to correct the faulty assumptions of 25 years ago and
    remove the exemptions that have allowed large plants to emit
    massive amounts of pollution into the atmosphere, and
    ultimately into the lungs of our citizens. Furthermore, power
    plants emit significant amounts of other toxic compounds in
    fine particulate matter. In order to avoid potentially
    conflicting requirements between existing and new power plant
    regulation, a truly comprehensive approach in new legislation
    should define requirements for utility power plants specific to
    all air pollutants emitted.
        I encourage the committee members to craft a national
    policy that recognizes that for every measure of pollution
    reduction, there is a benefit to society. This notion is
    embodied in the Binational Toxics Strategy which our government
    has entered into with Canada. This agreement states that for
    some pollutants, the goal must be the virtual elimination of
    the contaminant. Power plant emissions contribute to many of
    the major environmental issues before us--mercury, fine
    particulate matter, global climate change and airborne toxins.
    To address these threats to our environment and health, we must
    have a sound goal and a sound policy direction. Virtual
    elimination is the right goal. It is a long-term goal, and new
    technologies and renewable sources of energy will provide the
    solutions for achieving this goal.
        I urge you to adopt legislation that first imposes
    mandatory output-based emissions reductions for all currently
    grandfathered power plants as expeditiously as possible, and
    second, incorporates the concept of progressive reduction
    beyond currently identified achievable limits. We have learned
    from experience that thresholds for individual components of
    air pollution all too often need to be revised as we learn more
    about health effects of various pollutants, particularly
    toxics, which argues for the goal of virtual elimination.
        While the Northeast States in our region have been
    successful in collaborating on partial solutions to many of
    these environmental challenges, State and regional approaches
    are no substitute for sound, comprehensive national policy,
    which is why I am here today speaking in favor of the
    legislation.
        In closing, I want to thank you, Senator Jeffords and
    committee members, for this opportunity to testify. As you know
    far better than I do, Senator Jeffords, Vermont is a special
    place of outstanding natural beauty, and with a citizenry
    imbued with a strong environmental ethic. While nature dictates
    that winds blow from west to east across the North American
    continent, it is within the control of this Congress to decide
    if our corner of the country will remain the tailpipe of the
    nation.
        Thank you.
        Senator Jeffords. Thank you very much. In fact, I was going
    to have you repeat that, but I think I'll let it be.
        [Laughter.]
        Senator Jeffords. Dr. Thurston. I am going to go right down
    the line, and then we will have questions after everyone has
    had a chance to make their statement. As always, we reserve the
    right to pester you with questions in writing.
        So Dr. Thurston, please proceed.

      STATEMENT OF DR. GEORGE D. THURSTON, ASSOCIATE PROFESSOR OF
     ENVIRONMENTAL MEDICINE, NEW YORK UNIVERSITY SCHOOL OF MEDICINE

        Dr. Thurston. Thank you. Good morning, Senator Jeffords and
    members of the committee.
        I am George Thurston. I am a tenured Associate Professor of
    Environmental Medicine at the NYU School of Medicine. My
    scientific research involves investigations of the human health
    effects of air pollution.
        Despite progress over the last decade, Americans are still
    suffering from the adverse health effects of air pollution. The
    health consequences of breathing air pollution caused by
    emissions from utility power plants are severe and well
    documented. Over the past few decades, medical researchers
    examining air pollution and public health, including myself,
    have shown that air pollution is associated with a host of
    serious adverse human health effects, including asthma attacks,
    heart attacks, hospital admissions, adverse birth outcomes and
    premature death. Moreover, long-term exposure to air pollution
    has been estimated to take years from the life expectancy of
    Americans living in the most polluted cities relative to those
    living in cleaner cities.
        One of the air pollutants most carefully studied in the
    1990's is particulate matter or PM. Particulate matter is
    composed of two major components, primary particles including
    soot and ash emitted directly into the atmosphere by pollution
    sources; and secondary particles formed in the atmosphere from
    gaseous pollutants such as sulfur dioxide, SO2, and
    nitrogen oxides. Fine particles such as those that result from
    power plant emissions can bypass the defensive mechanisms of
    the lung and become lodged deep in the lung where they can
    cause a variety of health problems.
        Since the PM2.5 standard was set in 1997, many
    dozens of newly published in 1997, many dozens of newly
    published studies have collectively confirmed the relationship
    between PM2.5 fine particle pollution and severe
    adverse human health effects. In addition, this new research
    has eliminated many of the concerns that were raised in the
    past regarding the causality of the PM/health effects
    relationship, and has provided in addition plausible mechanisms
    for the severe health effects that have been associated with PM
    in past epidemiologic studies.
        Sulphur dioxide emissions from coal plants contribute the
    most to secondary particle formation. Sulphur dioxide is
    chemically converted in the atmosphere after it is released
    from the smokestack to become a sulfate particle. Sulfates
    include sulfuric acid particles. In the East and Midwest U.S.,
    sulfates make up the largest proportion of the particles in our
    air--in many regions, well over half of the fine particles.
    Moreover, power plants currently emit two-thirds of the sulfur
    dioxide in the U.S. Older, pre-1980 coal-fired power plants
    contribute about half of all electricity generation in the
    U.S., but produce nearly all of the sulfur dioxide and nitrogen
    oxide emissions from the national power industry.
        Therefore, to reduce particulate matter in the eastern
    U.S., major reductions in pollution emissions from older fossil
    fuel power plants are needed. As documented in my written
    testimony, the risk of particulate matter from power plants in
    particular have become clear in the past decade's research.
    Power plant PM is composed of very small and especially
    damaging particles that bypass the natural defenses of the
    body, and therefore can penetrate deep in the lung where they
    are not easily cleared and reside for long periods of time.
        Recent epidemiologic and toxicologic evidence indicates
    that the metals and acids contained in these particles make
    them especially toxic. This indicates an urgency to the need
    for reductions in the amounts of power plant pollution emitted
    into our air. Recent policy analyses have quantified some of
    the potential health benefits of cleaning up SO2 and
    NO2 and NOx emissions from presently uncontrolled
    grandfathered power plants. For example, Levy and Spengler in
    the April, 2001 issue of Risks and Perspective recently
    estimated that reducing SO2 and NOx emissions at
    only nine of these plants would annually avoid some 300 deaths,
    2,000 respiratory and cardiac hospital admissions, 10,000
    asthma attacks and 400,000 person-days of respiratory symptoms.
    Using a similar approach, a study by Abt Associates last year
    found that if all the uncontrolled power plants across the
    United States applied SO2 and NOx emission controls,
    some 18,000 premature deaths per year might be prevented.
        Thus, the evidence is clear and it has been confirmed
    independently. Fine particle air pollution, especially those
    particles emitted by fossil fuel combustion, are adversely
    affecting the lives and health of Americans.
        Finally, I would like to emphasize the importance of
    controlling carbon dioxide from such power plants, along with
    the precursor gases for PM and ozone. We now know that
    CO2 concentrations in the atmosphere can adversely
    affect our climate, and utility power plants are a major source
    of that problem. If we are going to continue to use coal as a
    major source of electrical energy, while at the same time
    addressing our growing CO2 emission problem,
    controls for CO2 will also need to be developed and
    applied to coal-fire power plants. Considering the magnitude of
    the health and climate risks posed by power plant emissions,
    the Congress should take action now to provide relief to
    Americans from the burden of air pollution presently resulting
    from fossil fuel power plant emissions.
        In summary, let me emphasize three points. Recent
    epidemiologic and toxicologic research has largely supported
    the toxicity of fine particles to human health and provided
    plausible biological mechanisms for the adverse health effects
    associations that we have found. Second, of the particles in
    the ambient atmosphere, evidence suggests that particles
    produced by fossil fuel combustion and by coal-fired power
    plants in particular are among the more toxic particles that we
    are exposed to in the ambient air. Last, controlling the
    grandfathered utility power plants is needed if we are to make
    significant further progress in meeting the new ozone and
    PM2.5 air quality standards and in protecting the
    public's health.
        Thank you.
        Senator Jeffords. Thank you very much, Doctor.
        Mr. Boyden, pleased to see you again. It is about 20 years
    ago, I guess, when we started having a working relationship, so
    it is a pleasure to have you here.

       STATEMENT OF C. BOYDEN GRAY, PARTNER--WILMER, CUTLER AND
     PICKERING, ON BEHALF OF THE ELECTRIC RELIABILITY COORDINATING
                                COUNCIL

        Mr. Gray. Thank you very much, Mr. Chairman.
        I want to point out that I have a summer house near Acadia
    National Park. I have climbed Cadillac Mountain many, many
    times. It is one of the hot spots for ozone readings, so I am
    familiar with these issues from a personal point of view, as
    well as a professional.
        I do not think I need to say much about the Clean Air Act
    record. Governor Whitman went over that. I think it is a very,
    very good record, given the economic growth that our country
    has experienced in the last two or three decades. The power
    plant record is especially good, and in terms of the Title IV
    acid rain reductions, dramatic--spectacular reductions which
    the New Republic recently referred to as ``spectacular.'' If
    this is a loophole or a grandfather, then I say let's have
    another one to get another set of such spectacular reductions.
        As I will say toward the end, the fact that the Clean Air
    Act Amendments of 1990 produced the 50 percent reduction in
    acid rain does not mean that that is the end of the issue, that
    you should not consider another 50 percent reduction, but as I
    will emphasize, please do it with market incentives, not with
    such things as the New Source Review.
        There are really three outstanding problems--two that are
    public health, which this hearing has addressed, and one that
    is not. The public health problems are ozone and fine
    particulates. As for ozone, I believe that is primarily now a
    mobile source problem of cars, trucks. There was a problem with
    diesel during the test and leaving 12 million tons on the table
    in the 1990's. Power plants do contribute some, but after the
    NOx SIP Call, it really do think it is primarily a mobile
    source problem. Ozone is improving, but we still have a way to
    go. Here in Washington, The Washington Post just recently
    referred to SUVs and the mobile source problem. There was no
    reference to power plants, and I think that is an accurate
    portrayal.
        On PM2.5, most people do not know this I think,
    but these pollutants have been coming down even as there has
    been a struggle over the new NAAQS--down 17 percent in the
    1990's. They will continue to come down because they are
    covered by the PM10 standard, the ozone standard,
    the Title IV acid rain reductions, the SIP Call and now the new
    visibility regulations. There are five programs that are going
    to keep driving fine particulates down regardless of what you
    do, although I am not saying you should not do more.
        Then, of course, there is the NSR Program, which is highly
    controversial. One could spend an hour or two or three talking
    about it. It is, in a sense, a retroactive administrative
    repeal of Title IV because what EPA is asking is, if you look
    at the past settlements, a 95 percent scrub of 70 percent of
    the output, notwithstanding the fact that you repealed the 95
    percent scrubber requirement in the 1990 amendments. We have
    heard discussion earlier here of possibilities for creative
    technologies to control all these pollutants in varying ways.
    An example I heard from one of the Senators talked about a 70
    percent removal. Well, that is not 95 percent, so you could not
    use it. But it is a very rigid, permitting nightmare. It is
    illicit, in my opinion, and I hope that if the goal is to get a
    50 percent cut, which is what a 95 percent scrub of 70 percent
    of the output would amount to, or a little bit more, if the
    goal is to get a 50 percent cut in these pollutants, then I
    would say do it with a cap-and-trade system. Extend the cap-
    and-trade system in. The current Title IV--extend it more
    clearly to NOx; have it include, as Governor Whitman suggested,
    the NOx SIP Call and the visibility regulations. Do it that
    way, rather than this piecemeal, piece by piece by piece
    command and control permitting nightmare that is good for
    lawyers like me, but not necessarily good for the economy.
        I remember growing up in the South--God bless the man who
    sues my client--and NSR is a dream come true for lawyers, but
    it is a very, very debilitating thing for the businessman who
    actually has to comply with your regulations.
        As for carbon, I just want to make one comment about that.
    People tend to forget that carbon is only one of four or five
    major manmade greenhouse gases. Ozone is one of them. Soot is
    another one. Methane, which contributes to ozone, is a third.
    Burning rain forests, of course, is a major fourth--a mixed bag
    of all kinds of problems, particulate matter and ozone and
    soot. We need to bear in mind that to take care of these other
    problems would buy us time on carbon, but at least they ought
    to be integrated in any kind of trading regime that you look at
    or that the world looks at. We are ahead, for example, of
    Europe in ozone. They do not want to try to comply with the
    existing World Health Organization standard, which is more
    relaxed than ours. I think we have to bear in mind that there
    are other issues other than just CO2 when you are
    talking about greenhouse gases.
        Thank you very much.
        Senator Jeffords. Thank you, Mr. Gray.
        Mr. Heydlauff?

         STATEMENT OF DALE E. HEYDLAUFF, SENIOR VICE PRESIDENT-
         ENVIRONMENTAL AFFAIRS, AMERICAN ELECTRIC POWER COMPANY

        Mr. Heydlauff. Thank you very much, Mr. Chairman, members
    of the committee. It is a privilege to be here before you
    today.
        I am the Senior Vice President for Environmental Affairs at
    American Electric Power Company headquartered in Columbus,
    Ohio. We are one of the largest generators of electric power in
    the nation. We are the largest consumer of coal in the western
    hemisphere. We are also the third largest consumer of natural
    gas in the United States. So we are a large energy producer,
    predominantly with fossil fuels. I am here today testifying on
    behalf of the Edison Electric Institute, which is the
    association for most of the industrial and electric utility
    community.
        Let me just start by telling you that I have the unhappy
    task on occasion of having to address my senior management and
    talk to them about the issues that we are debating here today.
    They look at me somewhat puzzled, and believe me I am not a
    popular man when I do it many times, and I recount the
    testimony of those who have preceded me and those who will
    follow, I suspect. They shake their head and they say, ``Well
    gosh, Dale, you know, perhaps we do not understand what the
    Clean Air Act really does.''
        It is partly my own fault because as I have explained it to
    them, the heart and soul of the Clean Air Act is a system of
    national ambient air quality standards which is explicitly
    designed to protect public health with an extra margin for
    safety. The country, by and large across the board, with some
    notable exceptions, has attained those standards, the
    presumption therefore being, what is the debate about?
        We have done it, I might add, in part through substantial
    reductions in emissions from our own sector, as well as those
    from the rest of industrial America. As this chart depicts, the
    electric utility industry by this year will have reduced its
    sulfur dioxide emissions by 50 percent. By the time we have
    fully implemented the NOx SIP Call that has been previously
    reported on, we will have reduced our nitrogen oxide emissions
    by 50 percent. We virtually eliminated particulate matter
    emissions by installing in the 1970's electrostatic
    precipitators that remove 99.8 percent on average of all
    particulate matter.
        This has come at a significant cost of $40 billion in
    capital costs, approximately $100 billion total in all end-
    costs. It has come at the same time, as Governor Whitman
    testified earlier, as we have seen a dramatic increase in
    electricity consumption. Just taking that electricity that
    comes from coal, we have generated 243 percent more electricity
    from coal in the last 30 years. At the same time, we are
    reducing these emissions. Coal consumption overall has gone up
    270 percent.
        Let me give you a case in point to underscore how these
    requirements have dramatically affected our industry. Senator
    Voinovich recently joined me on a tour of one of the largest
    generating plants in the country--the General James Gavin
    Plant, Cheshire, Ohio. He saw there a plant that when it was
    originally built cost us approximately $650 million--two 1,300
    megawatt coal-fired boilers, the largest of their kind ever
    built at the time. You can set the Statue of Liberty inside the
    boiler. It is enormous.
        We then showed him a advanced flue-gas to sulfurization
    system--essentially a chemical plant that removes sulfur
    dioxide. It cost us $650 million--roughly the same cost as the
    plant itself, to remove sulfur dioxide and essentially
    transform pollutant from one media to another. Then we showed
    him our latest retrofit at the plant, a $200 million selective
    keltic reduction system, which I unfortunately have to report
    we are having our growing pains in the operations of this
    technology, which is not uncommon when you retrofit an advance
    technology on a plant, the first of its kind, on a plant of
    this size with this type of coal.
        My point being there have been dramatic reductions in power
    plant emissions. I am not here to tell you that we do not need
    to continue to reduce. Frankly, what I am here to suggest to
    you is we want to take your overture, Mr. Chairman--that
    expressed by Senator Voinovich and other Senators. Let us sit
    down. Let us work this out. Let us find a rationale and
    reasonable path to addressing the myriad environmental concerns
    that have been testified to, first by Governor Whitman and
    those by my fellow panelists. Let us do it in a way that does
    not substantially disrupt the fuel diversity upon which we
    generate electricity, which has provided tremendous benefits to
    this country. Competition among fuel supplies is enormously
    important, particularly in an increasingly global marketplace.
    Let us do it in a way that provides us with enough time so that
    we can do it in a rationale way, so we can both install
    conventional pollution controls and those innovative pollution
    reduction technologies such as the technology being pioneered
    by Powerspan in New Hampshire that Senator Smith talked about.
    But let us do it being mindful that the nation does have a
    diversity of energy supplies, and we go about addressing and
    providing energy in this nation in different ways in different
    regions. I know coal is not a big player in New England, Mr.
    Chairman, I understand that. It is a huge issue to Senator
    Voinovich. It is what powers the industrial heartland of
    America and it literally has since the day we first started
    generating electrons in this country.
        So as we look at finding that right balance, and I
    understand it will not be easy. It will be difficult. We are
    going to have debates about the science and we should. We as an
    industry have spent tens of millions of dollars, literally, for
    the last decade studying these same issues. Probably not
    surprising to you, we reach different conclusion. But we do not
    differ with the understanding that additional emission
    reductions need to occur, and we look forward to working with
    you on the development of it and a greater emissions reduction
    strategy.
        Thank you, Mr. Chairman.
        Senator Jeffords. Mr. Schneider, please proceed.

      STATEMENT OF CONRAD SCHNEIDER, ADVOCACY DIRECTOR, CLEAN AIR
                               TASK FORCE

        Mr. Schneider. Thank you, Mr. Chairman. Good morning.
        My name is Conrad Schneider. I am the Advocacy Director for
    the Clean Air Task Force, a national environmental organization
    whose mission includes working to reduce power plant emissions.
        I appreciate the opportunity to speak to you today. I am
    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 U.S. Public Interest
    Research Group. It is a campaign that involves over 120
    organizations in 40 States and represents hundreds of thousands
    of environmentally aware Americans.
        Now, I look forward in future hearings we can address the
    issues that were raised by Senator Voinovich and some of the
    panelists about the future of coal, the feasibility of
    technology and so forth. But it is important not to jump over
    the problem statement as you consider the bills before you. My
    Governor likes to say, from the State of Maine, that we should
    not engage in ready, fire aim. So it is important that we know
    what we are shooting for when designing a bill to address the
    problems.
        The adverse impacts from power plant pollution on public
    health and the environment are so numerous and so profound that
    it is scarcely time in 5 minutes to do more than list them. My
    first poster, which you have in the handout before you if you
    cannot see over here, graphically illustrates the variety of
    ways in which power plant pollution affects our lives and the
    natural world around us, including acid rain, reduced life
    expectancy from fine particle inhalation, asthma attacks
    triggered by ozone smog, shrouds of haze that blanket our
    national parks, mercury contamination in fish, and the
    contribution to the problem of global climate change.
        If you leave here with only three points today, I want you
    to remember that one, power plant pollution is the single
    biggest contributor to each of these problems; two, that
    feasible solutions exist; and three, that nothing short of the
    levels of reduction prescribed in the Clean Power Act of 2001,
    that is S. 556, will be sufficient to protect public health and
    the environment.
        Let us examine each in turn. First, acid rain. Data
    gathered and analyzed by the nation's top acid rain researchers
    over the last years demonstrates that the acid rain problem has
    not been solved, nor will it be solved by the current Acid Rain
    Program in the Clean Air Act. The map here from 1999
    illustrates the continuing problem of high acidity of
    deposition in areas downwind of the nation's coal-fired power
    plant fleet. Over two-thirds of the sulfur dioxide that causes
    acid rain comes from these plants.
        Now, Dr. Charles Driscoll from Syracuse University and Dr.
    Gene Likens of New Hampshire's Hubbard Brook Research
    Foundation, the discoverers of acid rain in this country,
    appear this week on CNN with Administrator Whitman to discuss
    their research. Their work, which you have summarized before
    you in the report Acid Rain Revisited demonstrates that nothing
    short of a 75 percent cut beyond that required in the Clean Air
    Act of 1990 will allow recovery of sensitive ecosystems in the
    Northeast to begin by mid-century. That is, the Adirondacks,
    the Green Mountains, the White Mountains--those that have been
    damaged by acid rain will not get the relief they need without
    the level of reductions called for in the Jeffords bill.
        Now, turning to public health, fine particles from power
    plants are tied to a host of respiratory and cardiac problems,
    from triggering asthma attacks to reduced life expectancy.
    Legions of studies, literally, most of which have been
    published since the passage of 1990 Act, link particulate
    matter to these effects. Third-party reviewers from the Health
    Effects Institute have gone over that science with a fine-tooth
    comb and confirmed the results. Looking at the particulate
    matter filters on this poster, you will see an exposed filter
    from Portland, Maine which had been exposed only 24 hours at
    levels far below the current Federal health standard. Seeing it
    makes it more plausible the notion that breathing these
    particles 24 hours a day, day in and day out, could shave years
    off your life. As Dr. Thurston testified, studies indicate that
    power plants produce fine particles that are among the most
    toxic types of particles we breathe.
        Now, Abt Associates, a consulting firm that EPA uses to
    quantify the benefits of its air regulations, using methodology
    approved by EPA Science Advisory Board last year, found that
    power plant pollution cut short the lives of 30,000 people each
    year and that more than 18,000 of these lives could be saved by
    passing the Clean Power Act--more lives than are saved each
    year by safety belts. Using EPA's methodology for assessing
    benefits, Abt Associates calculated the benefits of this at
    $111 billion per year. Now, this map which was prepared by Abt
    Associates illustrates that the greatest risk of death from
    power plant pollution falls in the Midwest and the Southeast,
    and that should not be surprising because that is where the
    greatest concentration of plants are located. We often hear
    about the Northeast being the primary recipient of this air
    pollution. Well, the pollution falls most heavily where the
    plants are. Of course, the greatest benefits would occur there,
    too, as the next map indicates.
        Now, we know from scientific studies that the relationship
    between pollution and disease is linear. That means that for
    every ton we reduce, we can help save more lives. An analysis
    of several of the power plant bills that were introduced in the
    last Congress, and you have that before you in your packet,
    shows that the greater benefits are associated with the greater
    pollution reductions. Here are the differentials, and I think
    you can see more clearly in your packet, of what the lives
    saved would be for each of the different bills and the levels
    of cuts, particularly in sulfur. Greater reductions yield
    greater benefits, greater numbers of prevented deaths.
        Now, as the earlier map showed, particle pollution is not
    evenly distributed across the country. In fact, it is most
    intense near the plants themselves. The Spengler and Levy
    analysis, which appears in Risk in Perspective--that is John
    Graham's newsletter from the Harvard Center for Risk Analysis--
    indicates that people living in the vicinity of power plants
    face the greatest risk from power plant pollution. This work
    supports the birthday provision in the Jeffords bill that
    requires cleanup on the plant's thirtieth birthday, because the
    national cap-and-trade system that allows certain plants to
    avoid cleanup through purchase of emission credits created
    elsewhere may not protect the people living in the shadow of
    the smokestacks.
        Now, turning to ozone smog, we are in the middle of smog
    season right now. Earlier this week, ozone alerts were issued
    even in my home State of Maine. We were advised that our
    children should not go outside to play. Well, my kids are in
    summer camp this week, and I am frankly at a loss, even as a
    clean air expert, as to what to tell them to do. Power plant
    emissions contribute over one-quarter of the emissions that
    cause this problem in the East. If you pass this bill, ozone
    alerts could become as much of a curiosity to my kid's kids as
    civil defense alerts are to my kids.
        Now, another mark of air pollution is the shroud of haze
    that blankets our national parks--areas that are supposed to
    offer us pristine views, pristine air quality and majestic
    vistas. But all too often, we arrive at these destinations to
    find the view that we came to see obscured in haze. A 75
    percent cut in sulfur dioxide from power plants will be
    necessary to regain these vistas. I would like to just offer a
    brief demonstration. You really have to get to the last
    increment of pollution to see the benefit in these parks. This
    is a bottle of water and this is some food coloring. I am going
    to put one drop in, and you can see that the water which was
    previously clear is now green. Now, I can put more drops of
    food coloring into this and the water is a little darker green,
    but it is still green. If I wanted to clean up this problem,
    like I want to clean up the national parks, if I took a drop
    out, you would not see that much improvement. If I took three
    drops out, you would not see that much improvement. You have to
    get down to the last increment of pollution control in order to
    really see the difference when you are talking about cleaning
    up these parks. That is what the Jeffords bill requires.
        Now, another problem associated we have heard about today
    is mercury from power plants. I will not go into the details of
    that because time is limited here, but coal-fired power plants
    are the largest unregulated emitters of mercury in the nation.
    They account for 33 percent of the emissions. I think the most
    important thing to understand is what the impact is on children
    who have been exposed in utero to mercury contamination because
    their mothers ate fish. These children are likely, according to
    the National Academy of Sciences, to struggle to keep up in
    school and might even require remedial classes or special
    education because of the subtle effects of mercury. A recent
    CDC report found that 10 percent of women of childbearing age
    were above EPA's safe level for mercury exposure. Nationally,
    this translates into six million women who are at risk and
    400,000 newborns at risk from neurological effects of mercury.
        Now last, let me just touch on the issue of climate change.
    The buildup of carbon dioxide and other heat-trapping gases in
    the atmosphere is primarily responsible for the unprecedented
    global warming seen over the last 50 years, according to the
    National Research Council. The White House, as part of its
    review on climate change policy, requested that NRC review and
    the NRC found the major threats are frequency of transmission
    of infectious diseases, an influence on air quality and water
    quality, sea level rise and increased storm activity, and
    changed drop distributions that would disproportionately affect
    small farmers.
        Senator Jeffords. Bring your statement to a conclusion.
        Mr. Schneider. I would be happy to close, Mr. Chairman.
    Thank you.
        I would just point out that in this month's Science
    Magazine, the latest science on climate, suggests that there is
    a 50-50 chance that there will be a five degree increase in
    climate temperature by the end of the century, and a 90 percent
    chance between three and nine degrees. This is very significant
    and I would be happy to go into the details of that.
        In conclusion, you should understand that power plant
    pollution is the dominant industrial contributor to each of the
    problems that I have discussed today. Traditionally, we have
    dealt with those problems one pollutant at a time. However, the
    natural world, including our lungs, experiences them
    simultaneously. They interact in the environment
    synergistically. For regulatory certainty, for the environment
    and for industry alike, it makes sense to deal with them
    comprehensively and as soon as possible. Nothing short of the
    comprehensive cuts required by the Clean Power Act will be
    sufficient to do that. We urge its speedy enactment.
        I would be happy to answer your questions.
        Senator Jeffords. Thank you.
        Now, let me go back to the beginning of our line here and--
    Mr. Johnstone, if we do not move Federal legislation to cut
    power plant pollution soon, and electricity demand continues to
    grow, what will be the impact on Vermont and other States like
    Vermont that do not have major air quality problems now?
        Mr. Johnstone. Well, I think they will be numerous. First
    of all, while we are in attainment, we are always getting
    closer and closer as the impacts both of the way we live our
    lives in Vermont and the issues we have spoken about today
    continue to surround us. So it will mean that it will have much
    greater impact on our forests and our habitat, deeply impacting
    our natural resource base, which we are so proud of and so much
    is a part of our culture. We will have more Vermonters become
    ill from the effects of the pollutants increasing in our air,
    and them coming and going from our lungs.
        It will put more pressure on us to try to accomplish the
    goals through only State actions and only regional actions.
    Now, we have had some success at doing that, both with our New
    England State partners and with the Eastern Canadian Provinces
    in terms of putting together regional pacts. We will continue
    to do that, but I think it is a poor substitute to address the
    issues as compared with really creating a national policy that
    guides us and gets us to work at implementing the programs
    through the State level, which is how we usually do this.
        Senator Jeffords. Thank you for your support of the bill.
    We seem to be saying the same things about cutting mercury
    emissions. What other sources of mercury do we need to worry
    about and how can we control them?
        Mr. Johnstone. Well, I think we need to be looking at all
    sources of mercury that we as humans are enabling. In Vermont,
    we are looking at the use of mercury in classrooms and in labs,
    and we have done a successful school lab cleanup program. We
    have done thermometer exchanges where fully 40,000 households
    out of a total population of 600,000 came and exchanged their
    mercury thermometers. We are getting into our farms and pulling
    the mercury out of the farms and manometers that they use in
    our dairy farms.
        So we are actively trying to withdraw mercury from every
    source where it is. This is a great example of a source that
    over the long-haul I think the goal needs to be virtual
    elimination from sources that we can deal with, not from the
    naturally occurring sources. But we need to be able to achieve
    that goal if we are really going to positively impact our
    environment and the health of our citizens.
        Senator Jeffords. I gave a little preference to my
    Vermonter. I will ask a general question and ask each of you
    for your response.
        What do you think will be the economic and environmental
    effects if we proceed with a three-pollutant bill and address
    carbon 5 years later?
        Mr. Schneider--let us start at the other end.
        Mr. Schneider. I think probably one of the most articulate
    statements on that point has been made by industry so far,
    which is that it is a simple notion that we should not throw
    good money after bad. Different economic decisions will be made
    if industry needs to comply with a three-pollutant versus a
    four-pollutant approach. From the environmental perspective, it
    only makes sense because as I have said, these pollutants
    interact with each other and you can have some unintended
    consequences if you tradeoff among them. But from an economic
    perspective, we are not going to solve the problem and we are
    going to compound the problem of uncertainty that industry is
    complaining about. So that would be my response.
        Senator Jeffords. Mr. Heydlauff?
        Mr. Heydlauff. Mine, Mr. Chairman, would be it depends
    entirely on where you set the levels for the 3-P, certainly, to
    be able to give you some idea of the economic impacts of that.
    You know, carbon is a difficult topic. Yes, if I knew today
    what my mission reduction requirements were on a 4-P basis, it
    may very well change how I go about addressing my emission
    reduction obligations. But it depends entirely on what kind of
    compliance regime you put in place. I would point out to you,
    in the previous Administration the Council of Economic Advisers
    was asked by the President to do an assessment of the economic
    costs of complying with Kyoto, and they came up with an
    interesting conclusion, and that is that if we truly had
    complete flexibility in how we achieved our emission reduction
    obligations under the Treaty--this is the nation as a whole--87
    percent of our emission reductions would be achieved through
    actions taken outside our borders. Now, I would submit to you
    there is enormous low-hanging fruit around the world. There are
    ways in which we can help developing countries electrify their
    economies either in places where they do not have access to
    electricity--and about a third of the people alive on the
    planet today, two billion people, do not have access to
    electricity--or we could transform their current electrical
    supply system from very inefficient dirty diesel generators to
    renewable energy systems, transfer that credit back. There has
    been a lot of discussion about sink enhancement projects. We
    are doing a lot of that ourselves as a company, and our
    industry as well.
        There are lots of opportunities to reduce carbon dioxide,
    and I would submit to you in the near-term we would go an
    harvest those before we started to reduce emissions on-system
    in a significant way, in a significant way. Now, looking at
    pollution controls holistically, it may make economic sense
    just to make a decision to retire a plant and replace it with
    something that is less emitting for all the pollutants of
    concern here today. But it is not certain.
        So it all will depend, quite honestly, on how you fashion
    that compliance program.
        Senator Jeffords. Mr. Gray?
        Mr. Gray. I do not know that I can add much, except to say
    that the rational way to look at it is, what is the cost per
    ton? And the cost per ton of carbon removal in other countries
    and through other methods is so much lower than it is on a
    plant site today in the United States that it would not make
    any sense to do it. One way to handle this, of course, is to
    say that anything you do onsite here, in concert with any other
    pollution reduction measures you take, whether it is retiring a
    plant or putting new technology on an existing plant, is to
    assure in this legislation, if you pass it, what the baseline
    would be so that any reductions could be counted against any
    later obligations.
        I would second the cost per ton here, it does not make
    sense to do it here. You would do it abroad. That would have
    the added advantage, of course, of transferring technology
    abroad, but that is still very much up in the air and that is
    one of the reasons why I think Governor Whitman is reluctant to
    endorse flat targets and flat requirements in current
    legislation.
        Senator Jeffords. Dr. Thurston?
        Dr. Thurston. Well, in regard to the delay of 5 years for
    CO2, I would just say that with global warming, what
    we are talking about here is a real buildup of momentum, and
    the sooner we start working on the problem, the easier it will
    be to deal with the problem. I think Mr. Gray and others have
    made the point that we have had a very successful run with air
    pollution, and that success is largely due to command and
    control technology. Deadlines were set. When we set a goal, we
    meet it. That has been the history of the Clean Air Act. When
    we have set specific goals and deadlines, I mean, yes, we have
    discussions. Like with SO2, originally the people
    were saying, well, it is going to cost us $1,500 a ton to clean
    up SO2. Then EPA said $500. Well, it turned out now
    it is less than $100 a ton that it is trading at for cleanup of
    SO2.
        So you know, I think the history has been that when
    specific goals were set, specific deadlines, that our
    businesses have been able to meet that, and that is really the
    success of the Clean Air Act.
        Senator Jeffords. Mr. Johnstone?
        Mr. Johnstone. I would say that I think it is very
    important that all of the pollutants be included now, for many
    of the reasons that you have already heard. I think the real
    trick is, what are the targets in the short term, medium term,
    and what is long-term success? And I think that in those
    dialogues you can work toward finding the type of common ground
    that I have heard many people here talk about today. I think to
    proceed without one or the other just defers the question and
    certainly does not get to the issue of surety. Then it is all
    going to be a question of timing and how you blend and mix the
    issues.
        So I would certainly argue that they all ought to be
    included, and what is as important as the short-term goals I
    think is finally defining what success is in the real long
    term. Beyond the first sets of caps that you might want to talk
    about and might want to target, what do we really think that
    leads us to? Because I think that gets us to the issues of
    really how far and how hard do we have to innovate and is the
    current fuel mix the exact right fuel mix for 50 and 70 years
    from now? Or should we spur our innovation not only toward
    cleaning up existing fuels, but driving much further into the
    future about what it takes to actually have a healthy
    environment and healthy people.
        Senator Jeffords. Senator Voinovich, 10 minutes.
        Senator Voinovich. First of all, I congratulate you on
    putting this panel together.
        In my opening statement, I indicated that--and it is tough.
    I am the Senator from the culprit that is the bad guy. But I
    did mention that over the years, our utilities have spent more
    money to reduce their pollution than all of the utilities in
    your respective States. There has been a dramatic reduction in
    pollution. Obviously, it is still not good enough, and more
    needs to be done.
        In my opening statement, I also said that I have been told
    by the experts that the control technologies to reach the
    reduction levels in the chairman's bill for mercury are not
    available, and I have also been told to reach the reduction
    levels for CO2 without increasing emissions of the
    other pollutants means that you have to switch away from fossil
    fuels like coal.
        I would like Mr. Heydlauff and Boyden Gray to comment on
    that. I want to say, Mr. Heydlauff, I was very impressed when I
    visited your facility--$650 million to build it; $650 million
    to put on the scrubber, which we encouraged you to do while I
    was Governor, and now another $200 million to do something
    about the NOx problem that you have. But I would like your
    comments about that. If there is time, is there any way that we
    can get everybody in the room and come up with something that
    works?
        Mr. Heydlauff. Let me answer your question about technology
    first. We have gotten pretty good at building scrubbers. To be
    honest with you, we do not like building them. They are an ugly
    process. In Southern Ohio, we are transforming a valley into
    what will probably someday be the new ski slope in Southern
    Ohio with scrubber sludge. So there really does need to be a
    better way, and I think that is the promise of clean coal
    technologies. With NOx controls, we are building SCRs. We are
    building them rapidly. We are making some mistakes, but we will
    work them out. It will be a proven technology. It will
    consistently deliver 90 percent removal. Scrubbers I think
    should get you 95 percent--wet scrubbers.
        Mercury is the one that mystifies us. Quite honestly, it
    scares us the most. We do not know of a commercially available
    control technology for mercury. The industry is working hard on
    that. We do know that we capture mercury when we have a
    scrubber on a power plant. EPA believes, but we have seen no
    evidence to verify this, we hope that we will enhance mercury
    capture once we operate the selective keltic reduction for
    mercury control. We will know that soon. We are going to do a
    test this summer, Senator, at Gavin Plant to try to see whether
    or not mercury is enhanced. We had done a preliminary test and
    we saw some variability in mercury capture. It ranged from 40
    to 60 percent. We will see if it is enhanced as a result of the
    operation of the SCR system.
        Carbon dioxide is the interesting one. I already addressed
    it. Do we have technology today to remove carbon dioxide from
    coal-fired power plants? No. We are hopeful that someday in the
    future 20 years from now we can scrub out CO2, and
    safely and permanently dispose it in geologic formations deep
    under the earth. But we do not have that today. Certainly, if
    you forced me on a unilateral basis to reduce carbon dioxide
    and you did not give me that flexibility I just talked about,
    there is no question it would lead to widespread forced
    premature retirement of existing coal-fired power plants and
    their replacement with new, efficient natural gas generation in
    the near term. That is what it would do, no question about it.
        Mercury could quite honestly have the same effect if we do
    not come up with a cost-effective control technology to reach
    the emission reductions that the chairman's bill would require.
    We simply do not know how to do it.
        Mr. Gray. I am not an engineer, so I cannot--except to say
    that this is enormously complicated--speak to the
    CO2 question. Without a global regime where you are
    trading between greenhouse gases and between all countries, and
    you are taking sinks into account, it is really to imagine what
    a utility should do. You have to remember that, I do not know
    what the fraction is, but the mobile source side of this is
    very, very important and it does not make any sense to regulate
    CO2 just on power plants, and not do it vis-a-vis
    the mobile source sector. I would not make any sense, and how
    to trade between the two would be very, very important.
        As I said earlier, the CO2 costs are so much
    higher here than they would be in a developing country, that it
    just would not make any sense currently to do it here. You do
    it abroad.
        Senator Voinovich. So what you are basically saying is that
    the technology for mercury is still questionable, and in terms
    of the CO2, you have some real problems with that,
    and in all likelihood if that were mandatory, you would switch
    from coal to burning natural gas. Is that----
        Mr. Heydlauff. If you do not give me the flexibility. We
    are running, and this kind of goes to the chairman's earlier
    question, we have been running economic analyses of this, and
    just to put the cost in perspective of the mercury controls,
    because they actually exceed those of carbon dioxide
    significantly. A 90 percent mercury reduction requirement,
    according to recent economic analysis performed by the
    industry, which we would be happy to make available to the
    committee--may have already done so, I do not know--has found
    that the cost to the industry would be $226,000 per pound of
    mercury reduced. Staggering figures. Dr. Thurston's comments
    about CO2 were not quite correct. It is $200 a ton
    what sulfur dioxide is trading for today. But you put that--
    that's per ton, you know. With mercury, you are looking at
    pounds.
        Mercury is an interesting element. You could put all of the
    mercury we emit in the industry on this conference table. It
    certainly would collapse the table, but you are talking about
    trace amounts from any individual power plant. The science,
    despite what you heard here, is not as clear about the causal
    relationship between mercury emissions and methyl mercury
    concentrations in fish, which is the only pathway to human
    exposure. We do not have a population that eats a great deal of
    freshwater fish, so that population exposure is relatively
    limited.
        I do not say this to argue that we should not control
    mercury. We are going to control mercury. I think there is no
    question about that. EPA is on a path to do that. We are going
    to work with them on it. But I think it goes to the broader
    issue of balance that Senator Voinovich talked about. There
    will be profound energy policy implications and enormous
    economic costs associated with mercury controls on the level
    that you have proposed, Senator, based on the best knowledge to
    date. That knowledge will improve, will get better. We will
    develop the technologies probably in the future, but they do
    not exist today.
        Senator Voinovich. If you used natural gas, the mercury
    problem is eliminated?
        Mr. Heydlauff. Correct, but you still have a carbon dioxide
    emission issue. You would significantly reduce it in the near
    term. In the longer term, you are going to have to reduce
    carbon dioxide from natural gas plants as well.
        Just to echo Boyden Gray's comment, though, when you are
    looking at carbon dioxide, please put it in its proper context.
    It is a common global problem and it is also a century-scale
    threat. We have the time to develop the replacement
    technologies that are going to be necessary to stabilize
    greenhouse gas concentrations around the world in the
    atmosphere. We do not need a rush program that significantly
    distorts energy markets.
        Senator Voinovich. I would just make another comment or
    two, and one is that it was reported by the ISO in New
    England--the nonprofit operator of the power grid--and they
    found that the use of natural gas will increase from 16 percent
    in 1999 to a projected 45 percent in the year 2005. So there is
    going to be an enormous increase in natural gas. All of the new
    power plants in Ohio are all natural gas fired. The cost of
    that being passed on to people that live in your communities
    and in our community is going to be astronomic. It gets back to
    the issue of somehow we have got to figure out how we can
    continue to burn coal, and also nuclear energy. I would be
    interested in your comments about nuclear energy. How do you
    feel about nuclear energy? Any of the witnesses.
        Mr. Schneider. We generally oppose nuclear energy, as you
    can imagine, Senator. Nuclear power plants do not have air
    emissions very often, but when they do, they are real doozies.
    There is always the question of the waste. But I would take
    issue with your assumption that reliance on gas--I do not think
    that that is necessarily the best source of all of our new
    power. Energy efficiency, other renewables and so forth can
    play a role to keep natural gas prices low. But you made the
    assertion that increased reliance on gas would mean astronomic
    increases. I would be interested in your basis for that. We
    would be happy to address that issue more thoroughly, but there
    we are right now dependent 52 percent on coal and it strikes us
    that that may be a little bit out of balance; that being able
    to bring it more into line would be a bit more prudent and not
    necessarily mean huge cost increases. There is a lot of gas out
    there on limits to be drilled and brought to market. Certainly
    the markets are aware right now of the number of gas plants
    that have been proposed--400,000 megawatts of new gas. We
    believe probably about half of that is real, based on analysis
    that NorthBridge Group has done for us. I think it calls into
    question the issue of whether we are in an energy crunch or
    whether we are going to be awash in new power over the next few
    years. Right now, gas forward prices, which is where you look
    to see whether gas prices are going to be a problem, are going
    down. By the middle of next summer, they are approaching $3 a
    gain.
        So I am not sure that it is correct to assume that
    increased reliance on gas will necessarily----
        Senator Voinovich. OK, I would just like to say that
    basically, coal is not something that you are excited about.
    Nuclear, you are not excited about it, and you are saying that
    gas prices, if we have more available, will be something that
    we can look at. But I just put this chart up again because
    there are a lot of people in this country that feel that the
    renewables, solar, air are going to be able to take care of the
    demand for energy in the future. The fact of the matter is that
    they are just contributing a very small amount today.
    Ultimately with technology 20 years from now, that is going to
    go up quite a bit, but for the near term, we need to look at
    what is available today.
        I would just like to make one other point, Mr. Chairman,
    and it gets back to the ISO in your area. The ISO also said
    that the new gas-fired plant should develop the ability to burn
    oil as a backup; that the regional pipeline system must be
    expanded; and new compressors need to be added to existing
    pipelines to increase delivery capacity. The point they
    finished up with, Mr. Chairman, is one that I think this
    committee should be looking at in terms of national
    legislation, is the long and complicated Federal permitting
    process for building new interstate pipelines is a greater
    obstacle than the technical construction work. So that if you
    are talking about getting gas and these things happening, we
    need to be realistic today about the fact that if we are going
    to--whatever way we go, we going to have to do a much better
    job of getting this energy into the places where it is needed.
        Senator Jeffords. Thank you, Senator. You have made an
    excellent contribution to our morning hearing and deeply
    appreciate the time you have spent with us.
        We reserve the right to pester you with written questions.
    But I want to commend you for giving us a very realistic and
    very helpful look at the problems that we have and we face as
    we move forward on this legislation, and deeply appreciate your
    participation.
        Senator Jeffords. Is there any further business?
        [No response.]
        Senator Jeffords. Hearing none, thank you profusely for
    your very helpful testimony, and we wish you well.
        [Whereupon, at 12:17 p.m. the committee was adjourned, to
    reconvene at the call of the Chair.]
        [Additional statements submitted for the record follow:]
      Statement of Hon. Susan M. Collins, U.S. Senator from the State of
                                     Maine
        I would like to thank Senator Jeffords and Senator Smith for
    convening today's hearing on the Jeffords-Lieberman-Collins-Schumer
    Clean Power Act. Both Senator Jeffords and Senator Smith have shown
    great leadership in addressing our nation's air pollution problems.
    Senator Smith, when he was chairman of the committee, placed our
    nation's air pollution concerns at the top of the committee's agenda.
    Improving the quality of our nation's air remains at the top of the
    committee's agenda under Senator Jeffords. I am confident that, under
    the leadership of these two Senators, the committee will report
    legislation that will reduce emissions from the nation's dirtiest power
    plants and restore the quality of our nation's air.
        I particularly want to thank Senator Jeffords, Senator Lieberman,
    and the other members of the committee who are cosponsors of the Clean
    Power Act. Senators Jeffords, Lieberman, Schumer and I began developing
    this legislation last fall. I note that both Senators Jeffords and
    Lieberman have a long history of working on behalf of clean air, and
    their leadership was extremely valuable in devising a bill that sets
    the framework for returning our nation to an era of blue skies and
    smog-free days.
        I would also like to thank Conrad Schneider of Brunswick, Maine,
    for his input into the Clean Power Act. Conrad, who will be testifying
    before the committee later today, provided valuable assistance in
    targeting the loophole in the Clean Air Act that has allowed the
    dirtiest, most polluting power plants in the nation to escape
    significant pollution controls for more than 30 years.
        Coal-fired power plants are the single largest source of air
    pollution, mercury contamination, and greenhouse gas emissions in the
    nation. They are truly horrific polluters. Just one coal fired power
    plant can emit 5 times more of the pollutants that cause smog and acid
    rain than all industrial sources in Maine combined.
        As the easternmost state in the nation, Maine is downwind of almost
    all power plants in the United States. Many of the pollutants emitted
    by these power plants mercury, sulfur dioxide, nitrogen oxides, and
    carbon dioxide end up in or over Maine. Airborne mercury falls into our
    lakes and streams, contaminating freshwater fish and threatening our
    people's health. Carbon dioxide is causing climate change that
    threatens to alter Maine's delicate ecological balance. Sulfur dioxide
    and nitrogen oxides come to Maine in the form of acid rain and smog
    that damage the health of our people and of our environment.
        Mr. Chairman, Maine is tired of serving as the last stop for the
    nation's dirtiest power plant emissions. As I said when we introduced
    the Clean Power Act, it is time to end the ``dirty air express.'' All
    power plants should meet the same standards, and those standards must
    protect people's health and the health of the environment. I am pleased
    that today's hearing moves us one step closer to ending the free ride
    for the nation's dirtiest power plants.
        This bill will also level the playing field between upwind and
    downwind states. Inexpensive electricity in other States has come at
    the expense of the health of people in Maine, Vermont, New Hampshire,
    and other downwind States. At the same time, power-intensive industries
    in our States have been forced into a competitive disadvantage with
    competitors in States with dirty power.
        After causing some of the nation's worst pollution problems for
    decades on end, the time has come for power plants to stop using
    loopholes to evade emissions reductions. This bill demonstrates strong
    bipartisan support for clean air. I thank you, Mr. Chairman, for
    convening this hearing on our legislation, and I look forward to
    working with you to help ensure that this legislation becomes law.
                                   __________
         Statement of Hon. Christine Todd Whitman, Administrator, U.S.
                        Environmental Protection Agency
        Thank you, Mr. Chairman and Members of the committee, for the
    invitation to appear here today. The Administration and the
    Environmental Protection Agency (EPA) welcome the opportunity to
    address you on the need for a new approach to reducing emissions from
    power generation. The United States should take great pride in the
    progress we have made reducing pollution at the same time that we have
    had impressive economic growth. Over the last 30 years, we have reduced
    emissions of six key air pollutants by over 30 percent, at the same
    time that the gross domestic product has increased almost 150 percent,
    coal consumption has increased 77 percent and energy consumption has
    increased over 40 percent. This success story was made possible by
    American ingenuity spurred in large part by legislation that recognized
    the importance of a clean environment. We now have an opportunity to
    consolidate and replace several regulatory programs with an innovative,
    more cost-effective program that will achieve significant public health
    and environmental benefits. Our goal is to make significant strides
    toward attaining national air quality standards. Next generation
    thinking built on the successes of the past.
        The Administration proposal to limit emissions from power
    generation will be the centerpiece of the President's promise to deal
    with emissions from old power plants. During the campaign, the
    President said:

        ``As President, I will be firmly committed to providing a clean and
        healthy environment so that every American breathes clean air.
        That's why I believe old power plants should be held to higher
        emissions standards. The fact that different environmental
        standards apply to `old' and `new' power plants is a good example
        of how our environmental laws are too complex. The key to reducing
        emissions from older power plants on the Federal level is to cap
        emissions on a level that makes sense whether it be national,
        regional or local. Harness the power of the market place and
        provide economic incentives to produce better environmental
        results. I would want to make sure that any program we pursue does
        not result in excessive and unnecessary increases in electric
        bills.''

        In concert with this promise, the President's National Energy Plan
    recognizes that one of our principal energy challenges is increasing
    our energy supplies in ways that protect and improve the environment.
    This is a challenge we can meet through a careful blend of
    conservation, advances in technology, voluntary programs and improved
    regulatory programs. One of the keys to success will be new legislation
    significantly reducing emissions from power generators.
        In the near future, I hope I will have the opportunity to discuss
    with you the details of such a legislative approach. Today, I will
    describe the approach we will propose--which builds on the Acid Rain
    Program a successful model for future efforts. I will also discuss the
    programs to which the utility industry is currently subject--many of
    which could be replaced with a bill that provided significant
    reductions of NOx, SO2 and mercury. Finally, I will describe
    the types of public health and environmental benefits we can achieve
    from conserving energy and reducing NOx, SO2 and mercury
    emissions.
    I. The President's Approach Building on Success
        The President's Energy Plan includes a number of conservation,
    advanced research and development, and other efforts that will reduce
    electricity usage. Reducing the amount of electricity we use and the
    amount of fuel needed to produce it are part of the answers to the
    challenge of providing energy in an environmentally responsible way.
        The President's Energy Plan goes even further. The President has
    directed me to develop proposed legislation that would significantly
    reduce and cap NOx, SO2 and mercury emissions from power
    generation. Such a program (with appropriate measures to address local
    concerns) would provide significant health benefits even as we increase
    electricity supplies. The proposed legislation will:

          establish reduction targets for emissions of
    SO2, NOx and mercury,
          phase in reductions over a reasonable time period,
    similar to the successful Acid Rain Program established by the 1990
    amendments to the Clean Air Act and to State programs,
          provide regulatory certainty to allow utilities to make
    modifications to their plants without fear of new litigation, and
          provide market-based incentives, such as emissions
    trading, to help achieve the required reductions.

        Nationwide reductions of the three emissions, SO2, NOx
    and mercury, in an integrated approach would result in key benefits
    including thousands of avoided premature deaths and aggravation of
    respiratory and cardiovascular illness due to fine particles, reduced
    hospitalization and emergency room visits due to fine particles and
    continued exposure to ground-level ozone. It would also address
    interstate transport issues as they relate to meeting the new
    particulate matter and ozone air quality standards. Visibility
    improvement would be anticipated over large areas including national
    parks and wilderness areas and recovery of many freshwater and coastal
    ecosystems would be likely. Public health risks associated with
    mercury, particularly those posed to children and women of child
    bearing age, may be reduced. This includes risks of neurotoxic effects
    such as mental retardation, cerebral palsy, difficulty speaking and
    hearing others, and other learning disabilities. Currently, current
    forty plus States have fish advisories; that number would be reduced.
        The President's approach builds on the Acid Rain Program, which
    provides a wonderful model for future programs. It has not only met
    expectations, but exceeded them. Administering the Acid Rain Program
    has been a cost-effective experience. The program will achieve about 40
    percent of the total emission reductions required under the 1990 Clean
    Air Act Amendments at a low cost to industry and to the government. The
    program is administered with a relatively small staff relying on strong
    and state-of-the-art data tracking and reporting capabilities.
        When President George H.W. Bush signed the Clean Air Act Amendments
    of 1990, it revolutionized clean air policy regarding regional and
    national air pollution issues and drove environmental protection in new
    directions. First, the President and Congress designed the Acid Rain
    Program to focus on reducing the SO2 emissions that cause
    acid deposition and translated the emission reduction goal into a
    nationwide cap on emissions from electric generating sources. Second,
    Congress provided EPA with a tool to achieve this reduction--an
    innovative market-based allowance trading program. This ``cap-and-
    trade'' approach provided greater certainty that the emissions
    reductions would be achieved and sustained while at the same time
    allowing industry unprecedented flexibility in how to achieve the
    needed emission reductions. In return for this flexibility, sources
    were to provide a full accounting of their emissions through continuous
    monitoring and reporting, and there would be consequences for failing
    to comply. The objective was for sources to find the most cost-
    effective means for limiting SO2 emissions and to be
    responsible for achieving those emission reductions. There would be no
    government second guessing and lengthy permit reviews.
        Compliance with the Acid Rain Program began in 1995 and is now in
    its seventh year. It has been a resounding success, with SO2
    emissions from power generation dropping 4.5 million tons from 1990
    levels and NOx emissions down 1.5 million tons from 1990 levels (about
    3 million tons lower than projected growth). In addition, during the
    first Phase of the program (1995-1999), SO2 emissions were
    between 20 to 30 percent below their allowable levels. Furthermore,
    environmental monitoring networks tracked important environmental
    improvements--acid deposition was reduced by up to 30 percent in
    certain areas of the country.
        And, these environmental improvements cost less than predicted
    because of the built-in market based incentives. In 1990, EPA projected
    the cost of full implementation of the SO2ssions reduction
    with trading at $5.7 billion per year (1997 dollars). In 1994, GAO
    projected the cost at $2.3 billion per year (1997 dollars). Recent
    estimates of annualized cost of compliance are in the range of $1 to
    $1.5 billion per year at full implementation.
        President Bush has not only promised to take the SO2
    trading program to the next level but he has experience to lend to the
    matter. In 1999, then-Governor Bush signed legislation that permanently
    caps NOx and SO2 emissions from older power plants in Texas
    starting in 2003 and requires utilities to install a certain quantity
    of renewable and clean energy capacity by 2009. Environmental Defense
    hailed this legislation as a model for the country. The Emission
    Banking and Trading of Allowances Program is expected to achieve
    substantial reductions when it is fully phased in by 2003. It is
    estimated that this program will reduce NOx by 75,000 tons per year and
    SO2 by 35,000 tons per year. It is designed to give the
    utilities flexibility in determining how and where to achieve the
    reductions. Allowances are allocated to each power plant based on 1997
    emissions using a formula that does not penalize the ``clean'' plants
    that already have a low NOx or SO2 emission rate. Permitted
    power generating plants may opt into the trading program.
    II. Regulating Emissions from Power Generation
        The President's legislative approach stands in sharp contrast to
    the complex web of existing regulations which currently confront the
    industry. Over the years, Congress, EPA and the States have responded
    to specific environmental and public health problems by developing
    separate regulatory programs for utilities to address the specific
    problems. Each individual program uses its own approach to serve its
    own purpose. As I describe the different regulatory programs, I think
    you will understand why we believe it is time to simplify. If we have a
    new legislation that significantly reduces emissions of SO2,
    NOx and mercury, we can eliminate many of the individual programs that
    apply to the power generation sector and replace them with a system
    that will reduce the administrative burden on industry and governments,
    use market-based incentives to keep compliance costs low, and provide
    the industry with more certainty about its future regulatory
    obligations.
        There are many regulatory initiatives in place that will lead to
    reductions in air emissions from electric power generation. These
    regulations include both Federal and State requirements that address a
    variety of emissions including SO2, NOx, CO,
    PM10, and a number of hazardous air pollutants. The
    requirements also vary depending on the characteristics of the
    generating facility, including its boiler type, size, age and location.
    These programs include the National Ambient Air Quality Standards for
    particulate matter and ozone, the section 126 and the NOx SIP Call
    rules, new source review and new source performance standards, the
    regional haze rule and mercury regulation as a hazardous air pollutant,
    among others.
        EPA has set national ambient air quality standards (NAAQS) for six
    pollutants: ozone, carbon monoxide (CO); particulate matter (PM);
    SO2; NO2; and lead (Pb). The Clean Air Act calls
    upon States to adopt emissions control requirements in the form of
    State Implementation Plans (``SIPs'') to bring nonattainment areas into
    compliance with the NAAQS. Historically, most States' strategies to
    attain the SO2 and PM NAAQS included power plant controls.
        EPA has taken two actions to address the contribution of interstate
    transport of NOx emissions to downwind ozone nonattainment problems,
    and both of these actions affect the power sector. In 1998, EPA
    finalized the NOx SIP call, which now requires 19 States and the
    District of Columbia (whose emissions significantly contribute to
    downwind ozone nonattainment problems) to revise their SIPs to control
    summertime NOx emissions. In response, all of these States are choosing
    control strategies that focus on reducing power plant emissions. In a
    separate action aimed at the same interstate NOx transport problem, in
    January 2000, EPA finalized a rule which was issued in response to
    petitions from several northeastern States under section 126 of the
    CAA. In this rule, EPA found that emissions from large electric
    generating units and large industrial boilers and turbines in 12 States
    and the District of Columbia are significantly contributing to downwind
    States' ozone nonattainment problems. The rule requires these sources
    to control their summertime NOx emissions under the Federal NOx Budget
    Trading Program beginning May 1, 2003.
        The electric power generation sector is also regulated through a
    variety of traditional and innovative programs. Consistent with the
    Clean Air Act, many States have adopted NOx reasonably available
    control technology requirements for combustion facilities. In addition,
    several States have adopted market-based approaches. The South Coast
    Air Quality Management District in Southern California, for example,
    adopted a NOx and SO2 emissions trading program (called
    RECLAIM). The Northeast and mid-Atlantic States that comprise the Ozone
    Transport Region have developed a region-wide NOx emissions trading
    program (the Ozone Transport Commission NOx Budget Program). The
    revised ozone NAAQS and new PM2.5 NAAQS could lead to
    further regulation of power plant SO2 emissions (a precursor
    to ambient PM2.5) and NOx emissions (both for
    PM2.5 and ozone attainment strategies).
        The Act also requires State Implementation Plans to include a
    preconstruction permit program for new or modified major stationary
    sources, referred to as new source review (``NSR''). This program
    ensures that when large, new facilities are built--or major
    modifications to existing facilities are made that result in a net
    emissions increase--they include state-of-the-art air pollution control
    equipment. It also assures citizens who live near new major sources of
    air pollution that the facilities will be as clean as possible. The
    requirements are different for (1) the part of the program called the
    Prevention of Significant Deterioration program that applies to
    construction projects in areas where the air is already clean, and (2)
    the part of the program called the non-attainment NSR program that
    applies to construction projects in areas where the air is unhealthy to
    breathe. For attainment areas, to prevent significant deterioration of
    our nation's air quality, new major sources and major modifications to
    existing sources must apply the best available control technology
    (BACT) and ensure that the new pollution introduced into the
    environment does not adversely impact the air quality, such as in
    pristine areas like national parks. For nonattainment areas, in
    addition to applying control technology that represents the lowest
    achievable emission rates, new major sources and major modifications
    must offset their emissions increases. This can be done by getting
    reductions from other sources in the general area to compensate for the
    increases resulting from the new air pollution sources.
        The Act also requires EPA to establish new source performance
    standards (``NSPS'') that all new or modified sources must meet
    regardless of their location. The NSPS are technology-based numerical
    performance standards that apply to all sources in a particular source
    category, such as electric utility steam generating units or stationary
    gas turbines. These standards are intended to ``level the playing
    field'' so that all new facilities install a minimum amount of air
    pollution control equipment.
        The recently finalized regional haze rule will also require power
    generators to reduce SO2 and NOx emissions either through
    the implementation of best available retrofit technology (BART) or a
    trading program yet to be developed. States must show ``reasonable
    progress'' in their State Implementation Plans toward the
    congressionally mandated goal of returning to natural conditions in
    national parks and wilderness areas.
        EPA is developing a rule to limit mercury emissions from utilities.
    The 1990 CAA Amendments required EPA to study and prepare a report to
    Congress on the hazards to human health that can reasonably be expected
    to occur as a result of emissions of hazardous air pollutants (air
    toxics or HAPs) from fossil fuel-fired electric power plants. Based on
    the Report to Congress and on other available information, EPA found in
    December 2000 that air toxics control is appropriate for coal-fired and
    oil-fired utility boilers. As a result of that regulatory
    determination, EPA is scheduled to propose ``Maximum Achievable Control
    Technology'' (MACT) standards for these source categories by 2003.
    Given the conclusions of the Report, the regulation is likely to focus
    on mercury emissions.
        The utility industry is also required to reduce SO2
    emissions through the Acid Rain Trading Program described above. In
    addition, to address acid rain, the Clean Air Act requires utilities to
    reduce their emissions through emissions limits, which EPA established
    based on unit type.
    III. Health and Environmental Benefits of the President's Energy Plan
        The President's Energy Plan recognizes that by conserving energy
    and limiting NOx, SO2 and mercury emissions, we can provide
    the country with significant public health and environmental benefits.
    The problems we would address include: fine particle pollution,
    visibility degradation, ozone pollution, mercury deposition, acid rain,
    nitrate deposition and climate change. In turn, this will avoid
    incidences of premature mortality, aggravation of respiratory and
    cardiopulmonary illnesses, and diminished lung function which results
    in lost work days, school absences and increased hospitalizations and
    emergency room visits, and will also avoid damage to ecosystems, fish
    and other wildlife. To understand the tremendous benefits of the
    President's plan, we need to understand the public health and
    environmental issues.
    Emissions from Power Generation
        Power generators are a significant source of three key emissions:
    sulfur dioxide (SO2), nitrogen oxide (NOx), and mercury
    (Hg). The Clean Air Act has been, and will continue to be, a successful
    tool in reducing these emissions. However, while we are observing
    significant environmental improvement, power generation still
    contributes 67 percent of SO2, 25 percent of NOx, and 37
    percent of man-made mercury. (Power generation has other emissions,
    such as carbon monoxide and coarse particles, but the level of these
    emissions poses smaller risks for public health and the environment.)
        One of the reasons power generation accounts for such a large share
    of these key emissions is that significant emissions reductions have
    already been required from other sources. For example, a new car today
    is more than 90 percent cleaner than it was before Federal laws
    limiting emissions of CO, NOx and volatile organic compounds and they
    are subject to further reductions starting in 2004, as are heavy duty
    trucks in 2007. In contrast, some older power plants, built before
    certain Federal performance standards were put into place, are still
    operating without modern pollution control equipment for some
    emissions.
    Air Quality Effects
                Fine Particle Pollution
        The President's Energy Plan will reduce fine particle pollution.
    SO2 and NOx emissions from power generation react in the
    atmosphere to form nitrates and sulfates, which are a substantial
    fraction of fine particle (PM2.5) pollution. (Some
    PM2.5 comes from direct emissions from a variety of
    sources.) A source emitting NOx and SO2 can cause
    PM2.5 many miles away. A substantial body of published
    scientific literature recognizes a correlation between elevated fine
    particulate matter and increased incidence of illness and premature
    mortality. The health impacts include aggravation of chronic
    bronchitis, hospitalizations due to cardio-respiratory symptoms,
    emergency room visits due to aggravated asthma symptoms, and acute
    respiratory symptoms. Based on these findings, EPA and others estimate
    that attaining the fine particle standards would avoid thousands, and
    up to tens of thousands, of premature deaths annually.
        The significant expansion in scientific research in recent years
    has enhanced our understanding of the effects of particles on health.
    EPA is summarizing all new information in the ongoing review of the
    particulate matter standard in a ``criteria document'' that will
    undergo extensive peer and public review.
                Visibility and Regional Haze Impacts
        The President's Energy Plan will improve visibility by reducing
    SO2 and NOx emissions. Sulfates and nitrates that form in
    the atmosphere from SO2 and NOx emissions are significant
    contributors to visibility impairment in many national parks and
    wilderness areas, as well as urban areas across the country. Sulfates
    are a key factor in all areas of the United States, particularly in the
    East, where high humidity increases the light extinction efficiency of
    sulfates. Sulfates are responsible for 60-80 percent of total light
    extinction in the East, based on data collected during the 1990's in
    eastern national parks such as Acadia, Everglades, Great Smoky
    Mountains, Shenandoah, and in Washington, DC.
        In the West, sulfates account for approximately 25-50 percent of
    visibility impairment. Nitrates can play a larger role in visibility
    problems in some portions of the West than in the East. For example,
    nitrates account for 20-40 percent of visibility impairment in national
    parks and wilderness areas in Southern California. In many urban areas,
    NOx emissions from cars, trucks, and power plants contribute to winter
    time ``brown cloud'' situations.
                Ozone
        The President's Energy Plan will reduce ozone by reducing NOx, a
    key contributor to the formation of ground-level ozone. In the presence
    of sunlight, NOx and volatile organic compounds react photochemically
    to produce ozone. NOx can be transported long distances and contribute
    to ozone many hundreds of miles from its source. More than 97 million
    people live in areas that do not yet meet the health-based 1-hour ozone
    standard (based on 1997-1999 data). The number would be even higher for
    the new 8-hour ozone standard. Reducing ozone levels will result in
    fewer hospitalizations, emergency room and doctors visits for
    asthmatics, significantly fewer incidents of lung inflammation for at-
    risk populations, and significantly fewer incidents of moderate to
    severe respiratory symptoms in children.
        Not only will reducing ozone provide public health benefits, but it
    will avoid damage to ecosystems and vegetation. Ozone causes decreased
    agricultural and commercial forest yields, increased mortality and
    reduced growth of tree seedlings, and increased plant susceptibility to
    disease, pests, and environmental stresses (e.g., harsh weather). Since
    NOx emissions result in formation of ground-level ozone, reducing NOx
    emissions will reduce ozone levels and thus reduce the deleterious
    effects of ozone on human health and ecosystems.
    Deposition Effects
                Mercury
        The President's Energy Plan will benefit public health by reducing
    mercury air emissions. Mercury is highly toxic in small quantities and
    Americans with diets with high levels of mercury are at risk for
    adverse health effects. Mercury is a naturally occurring element, but
    human activity mobilizes mercury in the environment, making it more
    bioavailable. After mercury is emitted to the air, it can be
    transported through the atmosphere for days to years before being
    deposited into water bodies.
        Once mercury is deposited in lakes, rivers, and oceans, it
    bioaccumulates in the food chain, resulting in high concentrations in
    predatory fish. In the United States, most human exposure to mercury is
    the result of consumption of fish contaminated with methylmercury. A
    recent report of the National Academy of Sciences (NAS) concluded that
    while most Americans face a very low risk from methylmercury, children
    of women who consume large amounts of fish during pregnancy face a much
    higher risk. Fetuses are particularly vulnerable to methylmercury
    because of their rapidly developing nervous systems. These effects
    include cognitive, sensory, and motor deficits. The NAS study estimates
    as many as 60,000 children annually may develop neurological problems
    because of low-level methylmercury exposure through their mother prior
    to birth. Forty-one States have advisories warning the public to
    restrict eating fish from local waters due to methylmercury. EPA
    estimates that 5.6 million acres of lakes, estuaries and wetlands and
    43,500 miles of streams, rivers and coasts are impaired by mercury
    emissions.
                Acid Rain
        The President's Energy Plan will reduce acid rain by reducing
    SO2 and NOx. Acidic deposition or ``acid rain'' occurs when
    SO2 and NOx in the atmosphere react with water, oxygen, and
    oxidants to form acidic compounds. These compounds fall to the Earth in
    either dry form (gas and particles) or wet form (rain, snow, and fog).
    Some are carried by the wind, sometimes hundreds of miles, across State
    and national borders. In the United States, about 67 percent of annual
    SO2 emissions and 25 percent of NOx emissions are produced
    by electric utility plants that burn fossil fuels.
        Although we have made progress as a result of the 1990 Acid Rain
    Program, we have not fully addressed the problem. Indicators of
    recovery of lakes and streams do not show consistent change in response
    to reduced SO2 emissions. In sensitive areas such as the
    Adirondacks, for example, the majority of lakes have remained fairly
    constant in terms of acidification levels, while the most sensitive
    lakes continue to acidify. Overall, acid deposition continues to impair
    the water quality of lakes and streams in the Northeast: 41 percent of
    lakes in the Adirondack region of New York and 15 percent of lakes in
    New England exhibit signs of chronic and/or episodic acidification.
    Although sulfur deposition has declined, nitrogen emissions have not
    changed substantially region-wide. Moreover, recent findings also
    suggest that nitrogen is quantitatively as important or, in some areas,
    possibly more important than sulfur as a cause of episodic
    acidification because of short-term acidic pulses occurring during the
    most biologically sensitive time of the year, when fish reproduce.
    Reductions of NOx, particularly during winter and spring, are critical
    for addressing these concerns.
                Nitrogen Deposition
        The President's Energy Plan will improve ecosystems and water
    bodies by reducing NOx emissions. Some air emissions of NOx from power
    generation result in deposition of nitrogen in soils and water. While
    nitrogen is an essential nutrient, its availability is naturally
    limited, making it an important factor in regulating the structure and
    functioning of both terrestrial and aquatic ecological systems. Human
    activity has greatly altered the terrestrial and atmospheric nitrogen
    cycle, doubling the annual amount of nitrogen available in forms that
    are useful to living organisms. Nitrogen saturation of watersheds
    contributes to environmental problems such as reduced drinking water
    quality, nitrate-induced toxic effects on freshwater organisms,
    increased soil acidification and aluminum mobility, increased emissions
    from soil of nitrogenous greenhouse trace gases, reduction of methane
    consumption in soil, and forest decline and reduced productivity.
        Coastal water and marine environment are also impacted by
    atmospheric deposition of nitrogen. Depending upon the location, from
    10 to more than 40 percent of new nitrogen inputs to coastal waters
    along the East Coast and Gulf Coast of the United States come from air
    pollution. One of the best documented and understood impacts of
    increased nitrogen is the eutrophication of estuaries and coastal
    waters. Eutrophication refers to the increase in the rate of supply of
    organic matter to an ecosystem and its many undesirable consequences.
    Symptoms of eutrophication are found in many of our nation's coastal
    ecosystems. They include algal blooms that are potentially hazardous to
    human health, low dissolved oxygen concentrations, declines in the
    health of fish and shellfish populations, loss of seagrass beds and
    coral reefs, and ecological changes in food webs.
    Summary of Health and Environmental Effects
        Adopting a unified approach to reduce SO2, NOx and
    mercury is better than looking at each pollutant separately because of
    synergistic effects. Beyond their impacts as separate emissions,
    SO2, NOx, and mercury together contribute to many air
    pollution-related problems affecting human health and the environment.
    In certain cases, synergies exist between emissions and among the
    various reduction approaches available, making it imperative that
    efforts to reduce risk address all three emissions accommodate these
    synergies. In the case of fine particles, atmospheric chemical
    relationships suggest that when only reducing sulfate for example, it
    is replaced in the atmosphere by nitrate. Thus, simultaneous NOx and
    SO2 emission reductions are critical. In the case of acid
    rain, significant reductions in sulfur dioxide have not corresponded to
    ecological changes due to continuing high levels of nitrogen.
    Continuing levels of sulfur deposition, albeit smaller than before,
    also work to prevent recovery due to extremely large sulfur loadings
    over the years. Both emissions count in achieving the goal of recovery.
    Additionally, some synergies have been observed between methylmercury
    and lake acidity--the more acidic, the greater the mercury
    concentration.
        As more environmental data become available and science improves,
    we are observing some environmental improvement accompanying the
    downward trend in emissions. However, there are persistent and growing
    concerns regarding recovery of ecosystems and the risks that air
    pollution pose to human health. For instance, nitrate levels in surface
    waters are not significantly improving, and at best are constant.
    Logically, if emissions continue at the same level, or increase,
    pollution problems will mirror that trend. Visibility impairment in
    national parks, wilderness areas and urban areas also continues to be a
    problem. Many people continue to be exposed to unacceptable levels of
    smog. Of particular significance--the American public has become
    acutely aware of the hazards to their health, including the risk of
    mortality, posed by inhalation of fine particles and exposure to
    mercury through fish consumption.
    IV. Climate Change
        The President's Energy Plan, and the climate change strategy that
    is under development, will provide benefits by addressing climate
    change. Energy-related activities are the primary source of U.S. man-
    made greenhouse gas emissions. Power generators, which emit
    CO2, contribute abut 29 percent of the total emissions of
    all U.S. man-made greenhouse gases. Scientists continue to learn more
    about global climate change, its causes, potential impacts, and
    possible solution. We recently held Cabinet-level working group
    meetings to review the most recent, most accurate and most
    comprehensive science. During those meetings, we heard from scientists
    offering a wide spectrum of views. We have reviewed the facts and
    listened to many theories and suppositions. The working group asked the
    highly respected National Academy of Sciences to provide us the most
    up-to-date information about what is known and about what is not known
    on the science of climate change.
        We know the surface temperature of the Earth is warming. It has
    risen by 0.6 degrees Celsius over the past 100 years. There was a
    warming trend from the 1890's to the 1940's, cooling from the 1940's to
    the 1970's, and then sharply rising temperatures from the 1970's to
    today. There is a natural greenhouse effect that contributes to
    warming. Greenhouse gases trap heat and thus warm the Earth because
    they prevent a significant portion of infrared radiation from escaping
    into space. Concentration of greenhouse gases, especially
    CO2, have increased substantially since the beginning of the
    industrial revolution. The National Academy of Sciences indicates that
    the increase is due in large part to human activity. The Academy's
    report also tells us that there are many unanswered questions about
    climate change, which makes it difficult to determine what levels of
    greenhouse gas emissions need to be avoided.
        To address global climate change and greenhouse gas emissions, we
    are pursuing a broad array of conservation and energy efficiency goals
    under the Administration's National Energy Policy as well as the
    development of a comprehensive policy under the ongoing cabinet-level
    review for this issue. On June 11, President Bush announced the
    establishment of two major initiatives to address the major scientific
    and technological challenges presented by this serious, long-term
    issue: the U.S. Climate Research Initiative and the National Climate
    Change Technology Initiative. In addition, he committed the United
    States to increasing cooperative efforts in the Western Hemisphere, and
    with our allies globally, to aggressively pursue joint research and
    actions. These efforts have recently borne fruit, particularly recent
    agreements with Japan and Italy to collaborate on climate modeling
    efforts and with El Salvador in a ``forest for debt'' swap that will
    preserve tropical forests there that sequester carbon. The complex
    challenge of global climate change requires a global response that will
    draw on the power of global markets and the promise of technology to
    achieve emissions reductions most flexibly and cost-effectively in the
    coming century. The Administration intends to address this challenge in
    that context, and will leverage our national resources to enhance our
    scientific understanding of global climate change, and develop the
    advanced energy technologies that the world will need in coming decades
    to meet its energy and environmental needs.
    V. Conclusion
        Our country has made great progress in reducing air pollution over
    the last several decades, but pollution from power generation needs to
    be further controlled. We can draw no other conclusion given the
    significant contribution that power generation makes to the emissions
    that cause such serious public health and environmental problems.
        But our current regulatory programs are not the most efficient way
    to achieve the goal of ensuring a reliable energy supply in an
    environmentally responsible manner. Rather than take a pollutant-by-
    pollutant, problem-by-problem approach, we have the opportunity to
    examine the sector as a whole. Doing so provides us with the
    opportunity for cost-effective reductions and significant public health
    and environmental gains. That is why this Administration supports the
    development of new legislation that builds on the success of the
    market-based Acid Rain Program to reduce significantly the
    SO2, NOx and mercury emissions from power generation.
    Mandatory controls are not the only way to solve public health and
    environmental problems. President Bush's National Energy Plan also
    includes measures to increase conservation of energy, increase energy
    efficiency, and encourage technological advances such as clean coal
    technology, fuel cells, and combined heat and power facilities--all of
    which will contribute to addressing the energy and environmental
    challenges of this industry.
        I have already spent time with representatives of the power
    generation sector and have heard from a number of them who are
    interested in legislation that will provide the public health and
    environmental benefits we discussed today. I applaud their concern and
    their willingness to help craft a workable solution. I have also heard
    from environmentalists who are interested in these same issues. I know
    that many of you are interested in addressing these issues through
    legislation. I hope that our common interests will lead us to a
    consensus one that will provide the country with significant benefits.
    I look forward to working with you on these issues.

                                     ______

     Responses by Hon. Christine Todd Whitman to Additional Questions from
                                Senator Jeffords
        Question 1. During testimony, you indicated that requiring
    simultaneous emissions reductions in sulfur dioxide (SOx), nitrogen
    oxides (NOx), and mercury (Hg) from power plants would produce
    reductions in carbon dioxide. Please explain how that would occur and
    any technology assumptions made in your response.
        Response. EPA analysis estimates that there could be a decrease in
    the emission of uncapped pollutants and stack gases such as carbon
    dioxide (CO2), depending upon the levels at which the caps
    are set under a multi-pollutant approach for sulfur dioxide
    (SO2), NOx and mercury. This can be attributed to two
    factors. First, the program encourages more efficient generation by
    existing coal-fired boilers. Second, depending on the levels of the
    caps, a small percentage of sources may convert to different fuel
    sources in order to comply with the requirements to reduce emissions of
    the capped pollutants. Switching to cleaner burning fuels, such as
    natural gas, would reduce CO2 emissions. However, some SOx
    and NOx controls, such as scrubbers and selective catalytic reduction,
    have energy, consumption penalties that would increase carbon
    emissions.

        Question 2. Please provide the committee with the Agency's estimate
    of the carbon dioxide reductions that would result from the level of
    emissions reduction required for three-pollutants, SOx, NOx, Hg, in S.
    556, the Clean Power Act. Also, please include an estimate of the
    carbon dioxide reductions that would occur as a result of the Agency's
    three-pollutant bill, when and if it is transmitted to the Congress.
        Response. The estimated impact on CO2 emissions of a
    three-pollutant bill depends on what emission limits are set for
    various pollutants. The Administration is currently determining the
    most appropriate methodologies for analyzing various multi-pollutant
    approaches. When the Administration announces its multi-pollutant bill
    to reduce emissions from power plants, EPA will provide estimates of
    the effect on CO2 emissions of its bill and others.

        Question 3. In response to a comment from Senator Corzine about
    utility industry expressions of a need for certainty on all four
    pollutants, you said ``. . . that there is still a level of uncertainty
    as to what the carbon targets need to be and how to achieve them, and
    that there would not be further reductions required down the line.''
    Were you implying that we may not need also to make further reductions
    in the future in sulfur dioxide, nitrogen oxides, or mercury emissions
    from power plants, beyond whatever agreement the 107th Congress and the
    Administration might reach on reductions of those three pollutants? If
    not, please explain.
        Response. Although future Congresses can always enact new
    legislation, one of the goals for multi-pollutant power plant
    legislation is to provide regulatory certainty and predictability for
    covered emissions from covered sources for a set time period. My
    statement was not meant to imply anything about future regulation or
    reductions of SO2, NOx or mercury after that time period.

        Question 4. Can you please provide the committee with the
    approximate contribution of each major energy using sector--power
    generation, transportation, and industrial/commercial--to nonattainment
    of the ozone standard in each of the country's ozone nonattainment
    areas, in a graphic format?
        Response. EPA staff are working with Senate staff to clarify
    details necessary to prepare the requested analysis. From what we
    understand, the information requested is not routinely prepared and a
    special analysis will be required to respond. If details of the
    analysis were resolved soon, we expect to deliver the requested
    materials in April 2002.

        Question 5. Several EPA studies suggest that carbon emission
    reductions can be achieved at a net positive economic benefit. How does
    the Administration reconcile its current views on the costs and timing
    of carbon reduction with those studies? Specifically, please reference
    at least the study entitled, ``Technology and Greenhouse Gas Emissions:
    An integrated Scenario Analysis Using the LBLN-NEMS Model,'' by
    Jonathan G. Koomey, R. Cooper Richey, Skip Laitner, Robert J. Markel,
    and Chris Marnay.
        Response. The Administration bases its climate change policy on a
    thorough review of all available scientific evidence. The study
    referenced above is only one of many on the subject of the cost of
    reductions in carbon emissions from the U.S. economy. A broad range of
    estimates of impacts arise from the many modeling exercises that have
    examined greenhouse gas emissions reductions, which are heavily reliant
    upon input assumptions. For example, two studies from the Western
    Economics Association's International Conference in July 1999, which
    relied on price-driven policies, showed negative economic impacts. They
    Administration is concerned with the realities of turnover in energy
    sector capital stock (which is long-lived) and changes in domestic
    employment patterns to meet an immediate emissions reduction target. To
    the extent that immediate reductions are required without the time
    necessary for technology development and deployment in both demand-and
    supply side energy efficiency improvements, the costs of emission
    reductions are likely to be higher.

        Question 6. In response to question from Senator Voinovich on
    whether the Administration's 3-pollutant proposal would look at the
    issue of relief from New Source Review, you suggested that a variety of
    Clean Air Act requirements might no longer be necessary and could be
    eliminated or combined into one regulatory process in that proposal.
    You listed New Source. Review, the regional haze rule, the BART
    guidance, the section 126 rule, the MACT standards, acid rain [Title
    IV], the NOx SIP Call, as regulatory aspects that could go or be
    combined. Given that those rules and programs were promulgated by the
    Agency or required by Congress to obtain significant public health and
    environmental benefits, it is logical that Congress would want to be
    assured that any substitute program would have equal or greater
    benefits. Please provide the committee with a consolidated estimate of
    the public health and environmental benefits, including the tons of
    pollution avoided, through full implementation of all of the programs
    that you listed and any others relevant that may affect power plants,
    such as the revised NAAQS for ozone and fine particulate matter.
        Response. This will give the committee a baseline by which we can
    evaluate the Administration's 3-pollutant proposal and in preparing to
    move legislation.
        The Administration believes that any multi-pollutant legislation
    must provide environmental and public health benefits at least equal to
    the current regulatory approach. To ensure this, the Administration is
    working on developing a baseline based on current and future emissions
    regulations. After it is complete, the Administration will provide it
    to the Congress.

        Question 7. What would be the approximate percentage increase in
    power plant compliance costs if a three-pollutant bill were enacted
    with the levels and compliance deadlines for SOx, NOx, and mercury this
    year and a 30 percent reduction in carbon were required to be achieved
    5 years later?
        Response. Compliance costs for any regulatory program depend upon
    the levels of emissions reductions, the timing of those reductions and
    the scope of sources covered by the program. Without those specific
    numbers, we cannot determine costs or compare the costs of different
    scenarios. As part of the development of the Administration's multi-
    pollutant strategy, we are conducting modeling runs based on different
    emissions reduction scenarios. Once those modeling runs are complete,
    they will be provided to the Congress.

        Question 8. Mr. Gray seemed to state that ozone is primarily a
    mobile source problem. Please comment.
        Response. In deciding how to attain our health-based air quality
    goal for ozone, we need to consider what sources contribute to the
    problem and where reductions can be made cost-effectively. On both
    fronts, reductions from the power generation sector emerge as part o
    'the solution. Power plants are a major contributor to NOx emissions,
    which react with volatile; organic compounds (VOCs) to form ozone. On
    average, power plants contribute 23 percent of man-made NOx emissions.
    The relative contributions, however, can vary widely from one region to
    the next.
        To reduce ozone, Federal, State and local governments need to
    implement balanced programs that identify the most cost effective
    control measures for both stationary and mobile sources. EPA recently
    issued rules requiring significant reductions in mobile source NOx
    emissions. A new car today is more than 90 percent cleaner for NOx,
    carbon monoxide and VOCs than a new car in the 1960's. EPA's Tier 2
    rule (limiting emissions from cars and certain trucks) and Heavy Duty
    Diesel rule will require additional reductions in NOx. After these new
    rules are in place, cars, trucks and buses will be as much as 95
    percent cleaner than vehicles on the road today. NOx emission
    reductions from power plants are achievable at a cost per ton
    comparable to (or lower than) the cost per ton EPA estimated for these
    recent mobile source rules.
        Finally, Mr. Gray's comments primarily addressed ozone--only one of
    the public health and environmental reasons for limiting emissions from
    power plants. Reducing power plant NOx emissions will reduce fine
    particle pollution. Also, mobile sources do not emit large amounts of
    SO2 or mercury, which also contribute to public health and
    environmental problems.
                                   __________
       Statement of Scott Johnstone, Secretary of the Vermont Agency of
                               Natural Resources
        Senator Jeffords and members of the committee, it is my pleasure to
    appear before you today to offer testimony in support of comprehensive
    efforts to reduce power plant emissions and in particular S. 556.
        We in the Northeast live downwind from virtually the rest of the
    nation. In fact, a quick look at a map showing airflows will tell you
    that we are, in effect, the tailpipe of the nation. In addition to the
    harm caused by pollution emitted within our region, pollutants from
    many of our nation's most industrialized regions find their way to our
    corner of the country. Every year brings more and more evidence that
    air pollutants of all types harm the health of our children, our
    seniors, those who suffer from respiratory diseases, and our natural
    environment.
        The 1977 Clean Air Act Amendments that you and your congressional
    colleagues crafted a quarter century ago was a landmark piece of
    environmental legislation. The amendments required installation of
    state-of-the-art pollution control equipment on all new sources and
    included provisions intended to reduce pollution concentrations in all
    areas of the nation to levels where adverse human health effects would
    be eliminated.
        Despite the Clean Air Act's original intent and subsequent
    amendments to the law, recent reports document many serious problems
    related to poor air quality, including:

          Ongoing acidification of lakes and ponds;
          Increasing levels of carbon dioxide and other greenhouse
        gasses in our atmosphere; and
          Health advisories in many States recommending limited
        consumption of fish due to widespread mercury contamination.

        I believe the kind of comprehensive four-pollutant bill before your
    committee, focusing specifically on emissions from existing electric
    utilities, must be a critical component of any new Clean Air
    legislation. While protecting public health and the environment must be
    our singular goal, we recognize that promoting cost-effective
    approaches that inspire innovation is critical to achieving this goal.
    The key to comprehensive and cost-effective public health and
    environmental protection is the establishment of firm tonnage emission
    caps for all pollutants of concern.
        As we enter the 21st Century, the necessity for legislation such as
    S. 556 is apparent partly because of an unanticipated weakness in the
    existing Clean Air Act and also because of new scientific evidence. The
    admirable goals expressed in the original Clean Air Act were believed
    to be completely achievable within a timeframe of several years.
    Congress reasonably assumed that many of the largest and arguably
    dirtiest electric power plants, typically coal-fired, were nearing the
    end of their useful economic life, and therefore exempted them.
    Unfortunately, our nation's air quality continues to be adversely
    affected by these old power plants.
        Electric utilities account for approximately one-third of all
    human-made emissions of mercury and particulate matter in our nation,
    one-third of all emissions of nitrogen oxides and carbon dioxide, and
    nearly three-quarters of all U.S. emissions of sulfur dioxide. These
    grandfathered power plants account for more than two-thirds of the
    carbon dioxide, three-quarters of the nitrogen oxides and mercury, and
    80 percent of the sulfur dioxide emitted by all fossil fuel-burning
    utilities in the United States today.
        There is no compelling reason to continue exempting high-emitting
    power plants from applying proven technology such as flue-gas emission
    control devices.
        Although I am secretary of a natural resources agency, I want to
    note both human health problems and environmental damage caused by
    large power plants upwind from us. We know incidences of asthma in our
    nation have increased by more than 50 percent since 1980, and the
    Center for Disease Control now estimates that nearly 5 million American
    children suffer from asthma.
        In terms of continuing environmental damage, while we have made
    considerable progress reducing sulfur dioxide and nitrogen oxide
    emissions since 1990, recent findings from the Hubbard Brook Research
    Forest demonstrate that much work remains. Fifteen percent of the lakes
    in New England and more than 40 percent of lakes in New York's
    Adirondacks are either chronically acidic or seasonally acidic. Because
    of acid deposition, 346 Adirondack lakes--one-quarter of all surveyed--
    no longer support fish. In Vermont, we have identified 35 lakes as
    sensitive or impaired by acidification.
        In addition, on Camels Hump, Vermont's fourth tallest peak, where
    researchers have studied the impact of acid rain for decades, the red
    spruce canopy has been extensively damaged, and new growth red spruce
    is showing signs of acidic damage.
        New air pollution concerns have also emerged in the past three
    decades, and they too are linked directly to electric power plants,
    particularly those grandfathered by the Clean air Act. These are issues
    with perhaps even more significant adverse implications for the health
    and well-being of our citizens and our environment. I'll mention two
    here.
        First, research such as the analysis released this year by the
    Intergovernmental Panel on Climate Change clearly documents that the
    Earth's atmosphere has heated up during the past half century due to
    human-made air pollutants such as carbon dioxide, which is produced
    during the combustion of fossil fuels. The likely results of global
    climate change include widespread coastal flooding, immense changes in
    habitat for plants and animals, an increase in weather-related natural
    disasters, and, in Vermont, possible crippling impacts on our ski areas
    and maple sugar industry--potential devastating blows to our State's
    economy and culture. Furthermore, we know that the Kyoto Protocol,
    while a starting point which this country should embrace, falls well
    short of reducing emissions to a level that even stabilizes, much less
    reverses, global climate change.
        Second, mercury emitted in trace amounts by burning coal and other
    fossil fuels has found its way into fish throughout the Northeast. Due
    to mercury's ability to accumulate through the food chain, all six New
    England States, New York, and New Jersey have issued fish consumption
    advisories of some kind. These advisories are designed to protect the
    general population and sensitive sub-populations, particularly pregnant
    women and children younger than six. Computer modeling conducted for
    the Northeast States and Eastern Canadian Provinces Mercury Study
    indicates that 30 percent or more of the mercury deposited in the
    Northeast originates from sources outside of the region.
        As a first step in addressing these many problems, I urge you to
    correct the faulty assumptions of 25 years ago and remove the
    exemptions that have allowed large plants to emit massive amounts of
    pollutants into the atmosphere--and ultimately into the lungs of our
    citizens.
        Furthermore, power plants emit significant amounts of other toxic
    compounds and fine particulate matter. In order to avoid potentially
    conflicting requirements between existing and new power plant
    regulation, a truly comprehensive approach in new legislation should
    define requirements for utility power plants specific to all air
    pollutants emitted.
        I encourage committee members to craft a national policy that
    recognizes that for every measure of pollution reduction there is a
    benefit to society. This notion is embodied in the Bi-National Toxic
    Strategy, which our government has entered into with Canada. This
    agreement states that for some pollutants the goal must be Athe virtual
    elimination of the contaminant. Power plant emissions contribute to
    many of the major environmental issues before us: mercury, fine
    particulate matter, global climate change, and airborne toxins. To
    address these threats to our environment and health, we must have a
    sound goal and sound policy direction. Virtual elimination is the right
    goal--a long-term goal--and new technologies and renewable sources of
    energy will provide the solutions for achieving this goal.
        I urge you to adopt legislation that, first, imposes mandatory
    output-based emission reductions for all currently grandfathered power
    plants as expeditiously as possible and, second, incorporates the
    concept of progressive reduction beyond currently identified achievable
    limits. We have learned from experience that thresholds for individual
    components of air pollution all too often need to be revised as we
    learn more about the health effects of various pollutants, particularly
    toxics, which argues for adopting a goal of virtual elimination.
        Several States in the Northeast are working independently and
    collectively to adopt multi-pollutant regulatory controls on the power
    sector. These efforts build upon the progress we have made to cap
    nitrogen oxide emissions. The New England Governors and Eastern
    Canadian Premiers recently conducted a workshop to begin a
    collaborative approach toward addressing global climate change. This
    association has already outlined a framework for developing regional
    approaches to reduce mercury deposition and regional haze. Our region
    is also working together through NESCAUM to develop detailed policy
    recommendations and implementation strategies for multi-pollutant
    legislation, and I look forward to sharing these with the committee
    later this summer.
        State and regional approaches, however, are no substitute for a
    sound, comprehensive national policy, which is why I'm here today
    speaking in favor of this legislation. The written testimony which I
    have submitted contains additional information relevant to S. 556.
        In closing, I want to thank Senator Jeffords and committee members
    for this opportunity to testify. As you know far better than I do,
    Senator Jeffords, Vermont is a special place of outstanding natural
    beauty and with a citizenry imbued with a strong environmental ethic.
    While nature dictates that winds blow from west to east across the
    North American continent, it is within the control of Congress to
    decide if our corner of the country will remain the tailpipe of the
    nation.
                                     ______

      [From New England Governors/Eastern Canadian Premiers Action Plan,
                                     1998]
                                    Mercury
        Mercury levels in freshwater fish have been monitored in the
    northeastern U.S. region since the 1970's. The results of these
    monitoring programs indicate that levels of mercury significantly
    exceed acceptable values in fish species from certain water bodies in
    the region. This information has led public health officials in the
    northeastern United States to issue advisories recommending that people
    limit their consumption of potentially contaminated fish.
        Pregnant women, women of childbearing age, and children are at
    particular risk because the developing nervous system of fetuses and
    children are very sensitive to the toxic effects of mercury. Wildlife
    in the region may also be adversely affected, as high levels of mercury
    have been measured in fish-eating birds, such as loons and eagles.
        There are many sources of mercury in the environment. Although
    natural sources of mercury exist, recent research suggests that
    background concentrations of this metal in the atmosphere and sediments
    have increased by a factor of two to five since pre-industrial times.
    This suggests that anthropogenic sources have significantly increased
    mercury levels in the environment.
        Much of the mercury entering the waters of the region settles from
    the air or is deposited in rain or other precipitation. The mercury in
    the air originates from many sources both within and outside of the
    region. In the ambient air, mercury levels are not dangerous; it is the
    cumulative amount of mercury deposited to water bodies and its
    subsequent chemical transformation to methyl-mercury, that creates
    problems. Fish absorb and retain methyl-mercury, causing it to
    bioaccumulate until it is concentrated up to millions of times above
    the level in the surrounding water, particularly in older, predatory
    fish. Ingestion of contaminated fish is the primary pathway of human
    exposure to methyl-mercury.
        Rates of mercury deposition are estimated to be higher in the
    northeastern United States relative to most other parts of the country.
    This situation is in part due to the existence of significant sources
    of mercury within the region. There is also strong evidence showing
    that, similar to other pollutants, airborne mercury emitted by upwind
    sources is transported by prevailing winds into the region.
        Two other factors also thought to exacerbate the mercury problem in
    the region include (1) the acidified condition of many waters of the
    region, brought on by excess acid deposition, is associated with higher
    levels of methyl-mercury in fish in impacted lakes; and (2) elevated
    summertime levels of tropospheric ozone exacerbate the conversion of
    elemental mercury in the atmosphere to chemical forms that are more
    susceptible to deposition.
        Analyses suggest that a wide array of sources of mercury emissions
    contribute to overall deposition in the region. Municipal waste
    combustors are currently the largest emission source sector in the
    northeastern States; utility and industrial boilers are the largest
    source sector in the remainder of the United States, primarily from the
    combustion of coal; and non-ferrous metal production, (i.e., nickel,
    aluminum), is the major source of airborne mercury emissions in eastern
    Canada. Computer modeling conducted for the Northeast States and
    Eastern Canadian Provinces Mercury Study (NESCAUM/NEWMOA/NEIWPCC/EMAN
    1998) indicates that 30 percent or more of the mercury deposited in the
    Northeast originates from sources outside of the region. Because of the
    transboundary nature of mercury pollution, no single State or province
    will be able to solve its mercury problem alone. Concerted and
    coordinated regional efforts are needed. Ultimately, national and
    international efforts will be required to address transboundary mercury
    emissions, particularly from the utility sector.
                         CO2/Global Warming
        From the most recent Report of Working Group I of the
    Intergovernmental Panel on Climate Change (IPCC) which is the Third
    Assessment Report, 2001:
        ``Globally, it is very likely that the 1990's was the warmest
    decade and 1998 the warmest year in the instrumental record, since
    1861.''
        ``[T]he increase in temperature in the 20th Century is likely to
    have been the largest of any century during the past 1,000 years. It is
    also likely that, in the Northern Hemisphere, the 1990's was the
    warmest decade and 1998 the warmest year.''
        ``On average, between 1950 and 1993, night-time daily minimum air
    temperatures over land increased by about 0.2 degrees Celsius per
    decade. This is about twice the rate of increase in daytime daily
    maximum air temperatures (0.1 degrees C per decade). This has
    lengthened the freeze-free season in many mid-and high-latitude
    regions.''
        ``It is very likely that precipitation has increased by 0.5 to 1.0
    percent per decade in the 20th Century over most mid-and high latitudes
    of the Northern Hemisphere continents.''
        ``In the mid-and high latitudes of the Northern Hemisphere over the
    latter half of the 20th Century, it is likely that there has been a 2
    to 4 percent increase in the frequency of heavy precipitation events.''
        ``It is likely that there has been a 2 percent increase in cloud
    cover over mid-to high latitude land areas during the 20th Century.''
        ``Since 1950, it is very likely that there has been a reduction in
    the frequency of extreme low temperatures, with a smaller increase in
    the frequency of extreme high temperatures.''
        From EPA 236-F-98-007aa, Climate Change and Vermont, 1998: ``Over
    the last century, the average temperature in Burlington, Vermont, has
    increased 0.4 degrees Fahrenheit and precipitation has increased by up
    to 5 percent in many parts of the State.''
        ``[B]ased on projections made by the Intergovernmental Panel on
    Climate Change and results from the United Kingdom Hadley Centre
    climate model (HadCM2), a model that accounts for both greenhouse gases
    and aerosols, by 2100 temperatures in Vermont could increase by 4
    degrees Fahrenheit (with a range of 2 to 9 degrees Fahrenheit) in
    spring and 5 degrees Fahrenheit (with a range of 2 to 10 degrees
    Fahrenheit) in the other seasons. Precipitation is projected to show
    little change in spring, to increase by about 10 percent in summer and
    fall (with a range of 5 to 20 percent), and by 30 percent (with a range
    of 10 to 50 percent) in winter.''
        ``The amount of precipitation on extreme wet or snowy days in
    winter is likely to increase. The frequency of extreme hot days in
    summer would increase because of the general warming trend. Although it
    is not clear how the severity of storms might be affected, an increase
    in the frequency and intensity of winter storms is possible.''
    Based on these modeled projections, EPA estimates the following
            possible effects:
        Although Vermont is in compliance with current air quality
    standards, increased temperatures could make remaining in compliance
    more difficult (re: ozone).
        Warmer temperatures could increase the incidence of Lyme disease
    and other tick-borne diseases in Vermont, because populations of ticks,
    and their rodent hosts, could increase under warmer temperatures and
    increased vegetation.
        A warmer climate would lead to an earlier snowmelt, resulting in
    higher streamflows in winter and spring and lower streamflows in summer
    and fall. Warmer summer temperatures and longer summers could
    exacerbate water quality problems such as excessive growth of aquatic
    weeds in Lake Champlain and other lakes. Warmer water temperatures also
    reduce dissolved oxygen levels, adversely affecting fish habitat, and
    lower summer streamflows could reduce the ability of rivers to
    assimilate waste. Changes in timing and accumulation of snow could
    affect skiing in positive and negative ways, such as the timing and
    length of season and snow depth.
        In Vermont, very few of the farmed acres are irrigated. The major
    crops in the State are silage and hay. Yields of these crops and
    pasture could fall by as much as 39 percent under severe conditions as
    temperatures rise beyond the tolerance levels of the crop and are
    combined with increased stress from decreased soil moisture.
        Trees and forests are adapted to specific climate conditions, and
    as climate warms, forests will change. These changes could include
    changes in species composition, geographic range, and health and
    productivity. Although the extent of forested areas in Vermont could
    change little because of climate change, a warmer climate could change
    the character of those forests. Maple-dominated hardwood forests could
    give way to forests with more oaks and conifers, species more tolerant
    of higher temperatures.
        Across the State, as much as 30 to 60 percent of the hardwood
    forests could be replaced by warmer-climate forests with a mix of pines
    and hardwoods. The extent and density of the spruce and fir forests at
    higher altitudes and in the North, which support a large variety of
    songbirds, also could be reduced. The change in temperature also could
    cause maple sap to run earlier and more quickly, thus shortening the
    length of the season for gathering sap.
    From ``Climate Change, New Directions for the Northeast, a report
            produced at a workshop sponsored by the Governors of the New
            England States and the Premiers of the Eastern Canadian
            Provinces:
        Global climate change modeling projects a shifting of climate zones
    northward in the Northern Hemisphere. The temperature projections for
    the 21st century include greater warming in nighttime temperatures and
    in seasonal minimum temperatures. These variations could be moderated
    in coastal areas of the Northeast Region, by the influence of the
    ocean. A key issue for the Northeast Region could be changes in the
    timing of seasonal changes, such as earlier onset of spring snowmelt or
    later frosts.
        Animals need to adapt to the effects of climate change even if the
    forest remains intact. Changes in winter precipitation can have
    significant consequences for population balances of species like deer
    and their predators. If forest habitat for wildlife is lost, regional
    biodiversity will likely be reduced as well.
        The National Assessment Synthesis Report states for the Northeast
    that climate change is likely to decrease the number of some types of
    weather extremes, while increasing others. Over the coming century,
    winter snowfall and periods of extreme cold are projected to decrease.
    In contrast, heavy precipitation events have been increasing and
    warming would continue this trend. Heat waves and associated drought
    conditions may be both very much more frequent and more intense in the
    summer months.
                                   __________
    Statement of Dr. George D. Thurston, Sc.D., Professor of Environmental
                Science, New York University School of Medicine
        I am George D. Thurston, a tenured Associate Professor of
    Environmental Medicine at the New York University (NYU) School of
    Medicine. My scientific research involves investigations of the human
    health effects of air pollution.
        I am also the Director of the National Institute, of Environmental
    Health Sciences' (NIEHS) Community Outreach and Education Program at
    NYU. A goal of this program is to provide an impartial scientific
    resource on environmental health. issues to decisionmakers, and that is
    my purpose in testifying to you here today.
        Despite progress over the last decade, Americans are still
    suffering from the adverse health effects of air pollution. Now, with
    calls for more electrical energy from fossil-fuel combustion sources,
    such as coal-fired power plants, we may face a greater health burden on
    our children, older adults, and even healthy Americans.
        The adverse health consequences of breathing air pollution caused
    by emissions from utility power plants are severe and well documented
    in the published medical and scientific literature. Over the past few
    decades, medical researchers examining air pollution and public health,
    including myself, have shown that air pollution is associated with a
    host of serious adverse human health effects, including: asthma
    attacks, heart attacks, hospital admissions, adverse birth outcomes,
    and premature death. Ozone (03) and Particulate Matter (PM) are among
    the key air pollutants resulting from power plant emissions that have
    been found to adversely affect human health.
        One of the air pollutants most carefully studied in the 1990's is
    particulate matter. Fine particles, such as those that result from
    power plants emissions, can bypass the defensive mechanisms of the
    lung, and become lodged deep in the lung where they can cause a variety
    of health problems. Indeed, the latest evidence indicates that short-
    term exposures cannot only cause respiratory damage, but also cardiac
    effects, including heart attacks. Moreover, long-term exposure to fine
    particles increases the risk of death, and has been estimated to take
    years from the life expectancy of people living in the most polluted
    cities, relative to those living in cleaner cities (Brunekreef, 1997).
        Ozone is another pollutant that can result from power plant
    emissions that adversely affects human health. Ozone is a highly
    irritating gas that is formed in our atmosphere in the presence of
    sunlight from other ``precursor'' air pollutants, including the
    nitrogen oxides that are emitted by fossil fuel combustion pollution
    sources such as power plants.
        The state of the science on particulate matter and health was
    thoroughly reviewed in the recently released Draft 2001 U.S. EPA
    Criteria Document for Particulate Matter--of which I am a contributing
    author. Since the PM2.5 standard was set, the many dozens of
    new published studies, taken together, collectively confirm the
    relationship between PM2.5 pollution and severe adverse
    human health effects. In addition, the new research has eliminated many
    of the concerns that were raised in the past regarding the causality of
    the PM-health effects relationship, and has provided plausible
    biological mechanisms for the serious impacts associated with PM
    exposure.
        PM air pollution is composed of two major components: primary
    particles, or ``soot'' and ``ash'', emitted directly into the
    atmosphere by pollution sources, and; ``secondary particles'' formed in
    the atmosphere from gaseous pollutants such as sulfur dioxide
    (SO2), nitrogen oxides (NOx), and hydrocarbons.
        Sulfur dioxide emissions from coal plants contribute the most to
    secondary particle formation. Sulfur dioxide is chemically converted in
    the atmosphere after it is released from a smokestack to become a
    ``sulfate'' particle. Sulfates include sulfuric acid particles that,
    when breathed, reach deep into the human lung.
        In the East and Midwest United States, sulfates make up the largest
    proportion of the particles in our air-in many regions well over half
    of the fine particles. Moreover, power plants currently emit two thirds
    of the sulfur dioxide in the United States. Older, pre-1980 coal-fired
    power plants contribute about half of all electricity generation in the
    US, but produce nearly all the sulfur dioxide (SO2) and
    nitrogen oxide (NOx) emissions from the entire national power industry.
    Therefore, to reduce particulate matter in the Eastern United States,
    major reductions in pollution emissions from older fossil-fuel power
    plants are needed.
        The hazards of particulate matter have become particularly clear in
    the past decade's research. Two of the largest landmark studies on
    particulate matter and death, the Harvard Six Cities Study, published
    in 1993, followed by the American Cancer Society Study in 1995,
    demonstrated greater risk of premature death from particulate matter in
    more polluted cities, as compared to cities with cleaner air (Dockery
    et al, 1993; Pope et al, 1995). Fine particles, especially sulfates,
    were most strongly associated with excess mortality in polluted cities.
    The American Cancer Society study examined half a million people in
    over 150 metropolitan areas throughout the United States and found a 17
    percent greater risk of mortality between the city with the least
    sulfate and particulate matter and the city with the highest levels of
    this particulate pollution. The results of these studies were
    challenged by industry, resulting in an independent reanalysis by the
    Health Effects Institute (HEI)-funded by industry and EPA. HEI
    confirmed the associations found by the original investigators.
        Recent epidemiologic and toxicologic evidence also suggests that
    the particles resulting from fossil-fuel utility power plant air
    emissions, and especially those from coal-fired power plants, are among
    the most toxic in our air. Many studies in the published literature
    have indicated that sulfate particles, which are predominantly formed
    from coal-fired power plant SO2 emissions, are more strongly
    associated with human mortality than other components of PM. Also, my
    own published analysis of U.S. mortality and PM by source category
    found that coal combustion-related particles were more strongly
    associated with variations in annual mortality rates across U.S. cities
    than were other components of PM (Ozkaynak and Thurston, 1987). More
    recently, an analysis by Laden and co-authors (2000) at Harvard
    University of PM sources and daily pollution confirms that coal
    combustion particles, along with automobile pollution, were among the
    PM components that most affected daily variations in mortality. In
    addition, toxicological studies have indicated that particles resulting
    from fossil-fuel combustion that contain metals are very toxic to cells
    in the lung. Thus, both the toxicologic and epidemiologic evidence
    available indicate that pollution from fossil-fuel power plants are of
    great human health concern.
        The conclusion that power plant particle pollution is one of the
    more toxic types of particles that we breathe is supported by the facts
    that combustion particles have different sizes, physiochemical
    characteristics, and deposit in different parts of the lung than other
    more ``natural'' particles, such as wind-blown soil. Therefore, these
    particles can defeat the body's natural defenses, and may have a far
    greater adverse effect on health. In particular, these power plant
    particles are enriched in toxic metals, such as arsenic and cadmium, as
    well as in transition metals, such as iron and vanadium, that can cause
    damaging oxidative stress in lung cells (e.g., Costa et al, 1997;
    Dreher et al, 1997, and; Lay et al, 1999). This may also be especially
    true in the case of power plant particles because of the co-presence of
    acidic sulfates, such as sulfuric acid, that can make these transition
    metals even more bio-available and potent to damage the lung (e.g.,
    Chen et al. 1990, Gavett et al., 1997). Moreover, power plant PM is
    composed of very small particles that bypass the natural defenses of
    the lung, and therefore can penetrate deep into the lung where they are
    not easily cleared, and can therefore reside there for long times,
    potentially causing significant damage to the lung and to the human
    body. Thus, power plant air pollution is cause for special concern, and
    this indicates an urgency to the need for reductions in the amounts of
    this pollution emitted into our air.
        Recent policy analyses have quantified some of the potential health
    benefits of cleaning-up SO2 and NOx emissions from presently
    uncontrolled ``grandfathered'' power plants. For example, Levy and
    Spengler in the April, 2001 issue of Risks in Perspective recently
    estimated that reducing SO2 and NOx emissions at only nine
    of these ``grandfathered'' plants would annually avoid some 300 deaths,
    2000 respiratory and cardiac hospital admissions, 10,000 asthma
    attacks, and 400,000 person-days of respiratory symptoms. Using a
    similar approach, a study by Abt Associates (2000) recently found that
    if all such uncontrolled power plants across the United States applied
    SO2 and NOx emissions controls, some 18,000 premature deaths
    per year might be prevented. It is notable that the Levy and Spengler
    article shows that most of the effects are estimated to occur within
    100 miles of the plants studied, indicating that a national
    SO2 cap-and-trade policy would likely fail to protect the
    health of all Americans, as it would not reduce the risks in
    ``hotspots'' near the plants.
        Thus, the evidence is clear, and has been confirmed independently:
    Fine particle air pollution, and especially those particles emitted by
    fossil-fuel combustion, are adversely affecting the lives and health of
    Americans. The importance of these particulate matter-health effects
    relationships is made clear by the fact that virtually every American
    is directly impacted by this pollution.
        Finally, I would like to emphasize the importance of controlling
    Carbon Dioxide (CO2) from such power plants, along with the
    precursor gases for PM and O3. We now know that
    CO2 concentrations in the atmosphere can adversely affect
    our climate, and utility power plants are a major source of that
    CO2. In addition, coal as an energy source emits far more
    CO2 than other sources providing the same energy. Therefore,
    if we are to continue to use coal as a major source of electrical
    energy production, while at the same time addressing our growing
    CO2 emission problem, technology for the removal and
    sequestering of CO2 will also need to be developed and
    applied to these coal-fired power plants.
        In conclusion, it is important for committee members to realize
    that the downside to not acting to control power plant pollution at
    this time is the fact that these pollutants' adverse effects will
    continue to occur unabated. This would result in the public
    unnecessarily continuing to bear the ongoing diminished quality of life
    and the health care costs we presently pay because of the adverse
    health effects of this air pollution from fossil-fuel power plants.
        Technologies have existed for decades that can remove high
    percentages of the pollution from power plant smokestacks, so there is
    no reason to delay action. Considering the magnitude of the health and
    climate risks posed by this pollution, the Congress should take action
    now to provide relief to Americans from the burden of the air pollution
    presently resulting from fossil-fuel power plant emissions.
        Thank you for the opportunity to testify on this important issue
                                   references
    Abt Associates. The particulate-related health benefits of reducing
            power plant emissions. Bethesda, MD. October, 2000.
    Brunekreef, B. Air pollution and life expectancy: is there a relation?
            Occup Environ Med. 1997 Nov; 54 (11): 781-4.
    Chen, L.C.; Lam, H.F.; Kim, E.J.; Guty, J.; Amdur, M.O. (1990).
            Pulmonary effects of ultrafine coal by ash inhaled by guinea
            pigs. J. Toxicol. Environ. Hlth. 29: 169-184.
    Costa, D.L., Dreher, K.L. Bioavailable Transition Metals in Particulate
            Matter Mediate Cardiopulmonary Injury in Healthy and
            Compromised Animal Models. Environ Health Perspect. 1997 Sep;
            1055 (Supp 15): 1053-60.
    Dockery, D.W., Pope, C.A. 3d, Xu, X., Spengler, J.D., Ware, J.H., Fay,
            M.E., Ferris, B.G. Jr, Speizer, F.E. An association between air
            pollution and mortality in six U.S. cities. N Enel J Med. 1993
            Dec 9; 329 (24): 1753-9.
    Dreher, K.L., Jaskot, R.H., Lehmann, J.R., Richards, J.H., McGee, J.K.,
            Ghio, A.J., Costa, D.L. Soluble transition metals mediate
            residual oil fly ash induced acute lung injury. J Toxicol
            Environ Health. 1997 Feb 21; 50 (3): 2185-305.
    Gavett, S.H., Madison, S.L., Dreher, K.L., Winsett, D.W., McGee, J.K.,
            Costa, D.L. Metal and sulfate composition of residual oil fly
            ash determines airway hyperreactivity and lung injury in rats.
            Environ Res. 1997 Feb; 72 (2): 162-72.
    Laden, F., Neas, L.M., Dockery, D.W., Schwartz, J. Association of fine
            particulate matter from different sources with daily mortality
            in six U.S. cities. Environ Health Perspect. 2000 Oct; 108
            (10): 941-7.
    Krewski, D. et al. Reanalysis of the Harvard Six Cities Study and the
            American Cancer Society Study of Particulate Air Pollution and
            Mortality: Investigators' Report Part I: Replication and
            Validation. 2000. Health Effects Institute, Cambridge, MA.
    Lay, J.C., Bennett, W.D., Ghio, A.J., Bromberg, P.A., Costa, D.L., Kim,
            C.S., Koren, H.S., Devlin, R.B. Cellular and biochemical
            response of the human lung after intrapulmonary instillation of
            ferric oxide particles. Am J Respir Cell Mol Biol. 1999 Apr; 20
            (4): 631-42.
    Levy, J. and J. Spengler. Health Benefits of emissions reductions from
            older power plants. Risk in Perspective. Harvard Center For
            Risk Analysis. Boston, MA. Volume 9: 2. April, 2001.
    Ozkaynak, H., Thurston, G.D. Associations between 1980 U.S. mortality
            rates and alternative measures of airborne particle
            concentration. Risk Anal. 1987 Dec;7(4): 449-61.
    Pope, C.A. 3d, Thun, M.J., Namboodiri, M.M., Dockery, D.W., Evans,
            J.S., Speizer, F.E., Heath, C.W. Jr. Particulate air pollution
            as a predictor of mortality in a prospective study of U.S.
            adults. Am J Respir Crit Care Med. 1995 Mar; 151 (3 Pt 1): 669-
            74.
                                     ______

       Responses of George Thurston to Additional Questions from Senator
                                    Jeffords
        Question 1. EPA is in the process of implementing the new air
    quality standard. for fine particles and the revised air quality
    standard for ozone. What impact will sources like power plants have on
    the ability of Northeastern States like New York to meet these new
    standards?
        Response. It will be made very difficult, perhaps impossible in
    some cases, for Northeastern States to meet the new ozone and
    PM2.5 standards if the air that is transported into these
    States remains as polluted as it is today. Virtually all of the primary
    and secondary particulate matter (PM) that results from pollution
    emissions from power plants is as fine particles less than 2.5
    micrometers in diameter (PM2.5). Therefore, these power
    plants are major contributors to the PM2.5 problems in the
    downwind Northeastern States because they contribute greatly to the
    pollution that is transported into Northeastern States from the
    Midwest. They also emit large quantities of gaseous pollution, such as
    nitrogen oxides (NO) and sulfur dioxide (SO), that cause the downwind
    formation of secondary ozone and PM2.5. In addition, this
    pollution is emitted from utilities at high temperatures from tall
    stacks, causing power plant pollution to be carried far downwind. That
    transported pollution alone pushes ozone and PM2.5, levels
    in the Northeast near to the new standards even without the
    contribution of local source emissions. It will therefore likely be
    very difficult for these downwind States such as New York State to
    comply with the new law without mandates by legislation or litigation
    to clean up the pollution from upwind grand-fathered power plants,
    which are major sources of the pollution transported into the region.
    If the grand-fathered power plants are not controlled, then it seems
    likely that less effective and needlessly expensive emission controls
    may well end up being placed on Northeastern States' economies.

        Question 2. At the hearing, Mr. Gray commented that ozone is
    largely a mobile sources problem. Do you agree with his assessment?
        Response. Mr. Gray's assessment fails to consider the concentration
    of the grandfathered utility pollution emissions in the Midwest, and
    the fact that they are emitted from tall stacks, which increases their
    transport and residence time in the atmosphere, relative to mobile
    emissions. While mobile sources are responsible for more emissions of
    the ozone precursor NOx than are utilities on a nationwide basis, this
    is not the case in the Midwest. In the Ohio Valley, power plant
    emissions of NOx have a major role in causing ozone concentrations: so
    much so that individual Eastern U.S. States will have a great deal of
    trouble meeting the new O3 standard without controlling the
    grand-fathered coal-fired power plants operating upwind in Pennsylvania
    and the Midwest. For example, according to the EPA's Aerometric
    Information Retrieval System (AIRS) air pollution National Emissions
    Trends (NET) emissions data base, highway cars and trucks emitted
    358,000 tons of NOx in the State of Ohio in 1999, versus 431,000 tons
    of NOx fossil-fueled power plants (USEPA, 2001). In West Virginia,
    power plant emissions play an even larger relative role, emitting some
    286,000 tons of NOx in 1999, versus 74,000 tons by highway vehicles in
    that year (USEPA, 2001). Thus, mobile emissions do not play as large a
    role in the Eastern United States as the nationwide emissions would
    suggest, and the relative importance of power plant pollution in the
    Eastern United States is greater than in the nation as a whole.
        Furthermore, such a simple comparison of tonnage of emissions
    underestimates the role played by power plant emissions in the problem
    of transported air pollution. Since power plant emissions are emitted
    from stacks at much higher heights above the ground than mobile
    sources, such as cars and trucks, power plant emissions will be carried
    further by the winds before being reacted or deposited out (e.g., as
    acid deposition). This gives the power plant pollution more time in the
    atmosphere to generate ozone and/or fine particles. As a result, power
    plant NO. pollution has a greater impact on downwind concentrations of
    ozone and PM2.5 than similar amounts of NO, released at
    ground-level. Thus, power plants have a greater relative role in
    transported ozone and PM2.5 than would be indicated by the
    tons of precursor pollutants (e.g., NOx) emitted from their stacks vs.
    the NOx emitted from mobile sources.
        In the absence of new source controls over these plants, the
    emissions controls that will need to be placed on sources in the
    Northeast will likely be needlessly onerous, with little hope for
    complete success. Conversely, if these upwind gross-emitter power plant
    sources are in fact controlled using readily available control
    technology, and the air coming into the northeastern States is made
    cleaner to begin with, then the power of self determination to actually
    meet the new ozone and PM2.5 standards will be returned to
    these downwind northeastern States.

        Question 3. You say that children are especially affected by air
    pollution. In what ways, and why are children more affected?
        Response. Child health effects of air pollution include decreased
    lung function growth and increased numbers of asthma attacks.
    Furthermore, recent evidence suggests that, among children, infants are
    especially affected by air pollution, including increased infant
    mortality. These greater effects among children are due to the facts
    that: children are more active outdoors than adults, often getting
    higher pollution exposures, children (and especially infants) breathe
    more air per pound of body weight; and, children have higher underlying
    rates of respiratory problems than other age groups, making them
    especially susceptible to air pollution effects. In addition,
    children's bodies and their immune systems are rapidly developing as
    they grow. Evidence suggests that air pollution can interfere with this
    development, and that their undeveloped immune system makes them more
    susceptible to air pollution effects. Thus, children are more exposed
    and more susceptible to the adverse effects of ambient air pollution
    than are most adults.

        Question 4. Also, I understand that you have done extensive
    research on the impact that air pollution has on low-income families.
    Can you summarize the results of your research?
        Response. Yes, the effects of air pollution are apparently more
    severe on the poor and working poor than on more affluent members of
    our society. My peer-reviewed research paper on this topic (``The
    Burden of Air Pollution: Impacts among Racial Minorities'') has just
    been published in the August, 2001 supplement to the journal
    Environmental Health Perspectives. This research indicates that the
    hospital admissions effects of elevated PM and ozone air pollution in
    New York City are greater among minorities than among non-Hispanic
    whites, but that socio-economic differences account for most of these
    differences. When we looked at those New York City residents who were
    on public assistance health coverage (Medicaid) or who have no health
    insurance (the working poor) admitted to the hospital, we found greater
    pollution effects than among those financially better-off individuals
    (i.e., those who had private health insurance); both among non-Hispanic
    whites and among minorities Thus, the acute effects of air pollution
    appear to affect those who are among the poor and working poor,
    irrespective of race. Moreover, this indicates that those who are least
    able to afford the adverse health effects of air pollution are the most
    severely affected.
        The results of this study suggest that the financial savings that
    the lower energy costs of coal-fired power plants that Senator
    Voinovich alluded to in his opening statement may be false savings for
    the poor and working poor. Since it is the poor and working poor that
    are made the most severely ill by air pollution, the savings they get
    in terms of lower electricity costs would likely be more than offset by
    their increased risk of illness from the pollution caused by those
    coal-fired power plants. Lower energy costs of coal power will do the
    poor and the working poor little good if they are made sick in the
    process.

        Question 5. Over the years, EPA and States have implemented
    impressive pollution reduction programs. Have the health benefits of
    these programs been documented and quantified?
        Response. Yes, the EPA has evaluated the progress and health and
    net financial benefits that have resulted from the implementation of
    air pollution controls under the Clean Air Act. Indeed, the U.S.
    Environmental Protection Agency (USEPA) has estimated that air
    pollution reductions achieved by the Clean Air Act avoided some 200,000
    premature deaths, 300,000 hospital admissions, 22,000 cases of coronary
    heart disease, 850,000 asthma attacks, and 22 million lost work days in
    the year 1990 alone. During the 1970 to 1990 period, the valuation of
    such health benefits came to 22 trillion dollars, versus a cleanup cost
    of only 0.5 trillion dollars (USEPA, Benefits And Cost Of The Clean Air
    Act 1970-1990, Doe. EPA-410-R-97-002, Office of Air and Radiation, RTP,
    NC, 1997). Thus, the health and monetary benefits of cleaning the
    environment have been extremely large, and their monetary valuations
    have greatly outweighed the clean-up costs of achieving those air
    quality gains.
        Similarly, the EPA issued the second in this series of reports
    entitled, ``The Benefits and Costs of the Clean Air Act, 1990 to 2010''
    (USEPA, Doc. EPA-401-R-99001, Office of Air and Radiation, RTP, NC,
    1999). This report was issued after a 6-year process of study
    development and outside expert review. This prospective study also
    found that the benefits of the programs and standards required by the
    1990 Clean Air Act Amendments significantly exceed costs. This EPA
    study estimated that, in the year 2010, the CAA Amendments of 1990 will
    prevent some 23,000 Americans from dying prematurely, and avert over
    1,700,000 incidences of asthma attacks and aggravation of chronic
    asthma. In addition, in 2010 they will also prevent 67,000 incidences
    of chronic and acute bronchitis, 91,000 occurrences of shortness of
    breath, 4,100,000 lost work days, and 31,000,000 days in which
    Americans would have had to restrict activity due to air pollution
    related illness. Moreover, some 22,000 respiratory-related hospital
    admissions are expected to be averted, as well as 42,000 cardiovascular
    (heart and blood) hospital admissions, and 4,800 emergency room visits
    for asthma. For those health and ecological benefits that could be
    quantified and converted to dollar values, the EPA's best estimate was
    that, in 2010, the benefits. of Clean Air Act programs will total about
    $110 billion. This estimate represents the value of avoiding increases
    in illness and premature death that would have prevailed without the
    clean air standards and provisions required by the Amendments. By
    contrast, the detailed cost analysis conducted for this new study
    indicates that the costs of achieving these health and ecological
    benefits are likely to be only about $27 billion. This indicates that
    the health benefits of the Clean Air Act Amendments of 1990 outweigh
    the cleanup costs by at least a factor of 4. Similarly, given the ready
    availability of emission control technologies, the health and welfare
    benefits of reducing the air emissions from the grand-fathered utility
    power plants can be expected to greatly outweigh the costs of the
    needed emissions controls.

        Question 6. Any time we require reduction in air pollution, there
    are costs associated with achieving these reductions. In your opinion,
    do the health benefits of improved air quality balance the costs of
    reducing air pollution?
        Response. Yes, at present levels of air pollution, and given the
    reasonable goals of the Clean Air Act standards to protect public
    health, the benefits to our nation, and to the world, of cleaner air
    far outweigh the costs of control. As discussed above, this has been
    shown time and time again through cost-benefit analysis, despite the
    fact that such analyses must, by their nature, underestimate the
    benefits of clean air. This inherent underestimation of clean air
    benefits occurs because these analyses, as conducted today, only
    consider a subset of the pollutants and health effects that are curbed
    by such measures.
        One recent example of such an analysis of the health benefits of
    cleaner air that I have conducted in my research was recently presented
    in the Science Policy Forum entitled ``The hidden health benefits of
    Greenhouse Gas Mitigation'' that was recently published in the August
    17, 2001 edition of the journal Science (Cifuentes, Borja-Aburto,
    Gouveia, Thurston, and Davis, Science, Vol 293, pp. 1257-1259, 2001).
    In that work, we analyzed the human health benefits that would be
    derived by going forward with readily available greenhouse gas (GHG)
    mitigation measures in four North and South American cities: Mexico
    City, Mexico; New York City, USA; Santiago, Chile, and; Sao Paulo,
    Brazil, which have a combined population of 45 million people. As
    displayed in the figure below, we found that the adoption of readily
    available technologies to promote efficiencies and clean technologies
    to abate GHG emissions would also reduce fossil fuel emissions over the
    next two decades enough to reduce particulate matter and ozone
    concentrations by approximately 10 percent of present levels. This
    would avoid some 64,000 premature deaths (including infant deaths),
    65,000 chronic bronchitis cases, and 37 million person-days of work
    loss or other restricted activity. These findings illustrate that
    measures to mitigate GHG emissions of CO2 can also provide
    considerable local air pollution-related public health benefits to both
    developed and developing countries that choose to abate GHG emissions
    by taking conservation and efficiency steps to reduce fossil fuel
    combustion.

                                   __________
     Statement of Dale Heydlauff, Senior Vice President for Environmental
                        Affairs, American Electric Power
        Good morning Chairman Jeffords, Senator Smith, and distinguished
    members of the Senate Committee on Environment and Public Works, and
    thank you for inviting me here today. My name is Dale Heydlauff, and I
    am the Senior Vice President for Environment at American Electric Power
    Company. AEP is a multi-national energy company based in Columbus,
    Ohio. AEP owns and operates more than 38,000 megawatts of generating
    capacity, making it America's largest generator of electricity. AEP
    generates about 6 percent of the electricity in the United States, a
    figure comparable to the annual electric power consumption in Mexico
    and Australia. We are the largest consumer of coal and the third
    largest consumer of natural gas in the United States. AEP provides
    retail electricity to more than 6.8 million customers worldwide and has
    more than $55 billion in assets, primarily in the United States with
    holdings in select international markets.
        I am grateful for this opportunity to address the committee on
    behalf of the Edison Electric Institute (EEI). EEI is the association
    of U.S. shareholder-owned electric companies, international affiliates
    and industry associates worldwide. EEI's U.S. members serve over 90
    percent of all customers served by the shareholder-owned segment of the
    industry, generate approximately three-quarters of all the electricity
    generated by electric companies in the country, and service about 70
    percent of all ultimate customers in the nation.
        In my testimony, I will provide the committee with a context in
    which to view the statements of my fellow panelists. The electric
    utility industry has had a great deal of success, especially over the
    past 20 years, in achieving emissions reductions goals set by Congress,
    and is on course to make significant additional reductions over the
    next 20 years (see chart A-1). These goals, which were set largely
    under Title IV of the Clean Air Act, have been met through a well-
    crafted process and a shared implementation between State and Federal
    Government, a process which sets air quality standards, including an
    adequate margin of safety, and allows the States to develop specific
    plans for attainment of those standards.
        I hope to dispel some myths and misconceptions about electric
    utilities and environmental regulations, including the notion that some
    of our power plants have been ``grandfathered,'' or exempted from
    regulation, to build the committee's appreciation of our industry's
    ability to respond to changing policies and priorities, to reinforce
    the need for reliable and affordable energy. The electric power
    industry neither supports nor recognizes a dichotomy between
    environmental and economic energy policies. A sound economy and
    national energy policy is inextricably linked to our country's
    environmental priorities, and the electric power industry supports the
    recognition of that linkage in the crafting and implementation of
    present and future environmental goals. Finally, I will share with you
    our industry's understanding of what types of policies work best to
    maintain environmental progress and promote the availability of
    reliable and affordable energy, along with the vital economic goods
    provided through the use of electric power.
        Difficult choices have been made, and still others remain undecided
    regarding our national energy policies and priorities for improving the
    quality of the air, water, and land of the communities in which we all
    live. The-electric power industry supports and will continue to promote
    environmental policies based upon the best available science, an
    appreciation of the related energy policy challenges, and an
    understanding of the most effective types of policies and regulatory
    programs to accomplish environmental and energy policy goals.
    I. Electric Power and Air Emissions: The Clean Air Act is Working
        While our national energy needs continue to grow, so does our
    ability to produce electricity in an increasingly clean and efficient
    manner (See Appendix A-4). Comparisons of electric power production
    with emissions show that electric power produced in today's coal-fired
    electric power plants contributes far less sulfur dioxide
    (``SO2''), nitrogen oxides (NOx), and particulate matter
    (PM) than just two decades ago (See Appendices A2--A3). Coal, which
    currently accounts for more than half of the electricity produced
    nation wide (See Appendix AI) is an increasingly clean and an
    exceptionally reliable energy source, and a fuel whose use has shown
    great progress in the reduction of emissions from electric power
    plants, in the implementation of Title IV of the Clean Air Act, and in
    achievement of the standards set under the Act to protect public health
    and the environment.
        Electric utilities have implemented the first phase of this section
    of the Clean Air Act, including substantial reductions of NOx and
    SO2, as well as the second phase of NOx reductions, as
    illustrated in the attached graphs (Appendices A-2--A-3). Additional
    reductions in SO2 are currently underway, and requirements
    under the NOx State Implementation Plan (``SIP'') Call will result in
    additional NOx reductions of nearly one million tons. Over a period of
    just 10 years, utilities will have reduced SO2 emissions by
    about 50 percent compared to levels in 1980; national SO2
    emissions will be at their lowest level in one hundred years, largely
    due to utility reductions; and electric utility.
        NOx emissions will account for about 20 percent of all man-made
    emissions. When you combine these emission reductions with the fact
    that coal use increased dramatically, emissions of SO2 and
    NOx per ton of coal burned will be reduced by 75 percent compared to
    1980 levels (See Appendix A-4). This is a tremendous record.
        These advancements in the control and minimization of electric
    power emissions have resulted from significant capital investment in
    control technologies and a strong record of utility compliance. Over
    the past 25 years, the electric power industry has invested
    approximately $40 billion (capital) in technologies to reduce these air
    emissions. In addition, utilities spend $3 billion to $5 billion
    annually in operations and maintenance related to environmental
    performance. Conservative estimates assigning even half of these
    operational expenses to air-related activities indicates that total
    utility expenditures for the control of air emissions amount to $100
    billion over the past 25 years.
    II. New Source Performance Standards and the Myth of ``Grandfathering''
        Contrary to some claims that power plants were ``grandfathered''
    under the Clean Air Act in 1970, Congress did not exempt any sources of
    pollution from emission controls, but did differentiate between
    existing sources and new sources. Existing sources were required to
    make whatever level of emission reductions were deemed necessary by the
    States in their implementation plans to attain National Ambient Air
    Quality Standards (NAAQS). New sources were required to install the
    best available control technology (BACT) to guard against deterioration
    in air quality once it had been achieved. There were no special deals
    for electric generating units under the Act. They were treated just
    like all other sources of industrial pollution (whether chemical
    manufacturers, steel mills, aluminum smelters, petroleum refiners, or
    automobile assembly plants). The industry has an impeccable compliance
    record in meeting these standards, often exceeding emission reduction
    requirements in order to provide an extra margin to protect public
    health and the environment.
        While it is true that plants built before 1970 do not have to meet
    NSPS, this decision was a conscious one, made in full recognition of
    the following facts: First, Congress comprehensively regulates
    industry, including utilities, through enforceable State Implementation
    Plans (SIP'S) to meet NAAQS for NOx, SO2, and PM ozone and
    others. These standards are set in light of the best available science,
    and require an adequate margin of safety to protect public health. For
    decades each State has evaluated what emission reductions need to be
    made by each electric utility plant to meet the NAAQS and then required
    any needed emission reductions through a permit process. Second,
    Congress deliberately chose in 1970 to target improved air quality
    rather than mandate across-the-board technological solutions, primarily
    due to the difficulty and great expense of retrofitting new controls on
    already constructed facilities. Finally, perhaps most importantly, the
    1990 Clean Air Act Amendments included a cap on the total tons of
    SO2 and NOx and required all facilities to address these
    pollutants to mitigate acid rain (through Title IV). Additional new
    regulatory initiatives since, have served to significantly reduce the
    gap between the emissions levels of new versus older units (See
    Appendices A-2 and A-3).
        Simply put, in Title IV of the Clean Air Act, Congress crafted an
    environmental policy which maximized the effectiveness of environmental
    regulation while reducing the economic consequences. Strategies like
    these, which allow for flexibility and partnerships with State
    government to ensure effective and efficient compliance, do not ignore
    environmental challenges. Instead, they demonstrate what can be
    accomplished when policies integrate economic realities with
    environmental goals. Based upon the progress attained under Title IV,
    and the projected emissions reductions yet to come, as well as the
    rigorous State-level and other Federal environmental regulations which
    apply to all electric power plants, ``grandfathering,'' and the
    underlying implication that many power plants are unregulated, is
    neither an accurate nor an appropriate term. Furthermore, we have been
    shown by this experience what can be accomplished through flexible
    regulatory programs.
    III. Future Environmental Policy Challenges
                Mercury
        According to the Environmental Protection Agency (``EPA''), U.S.
    electric power companies are estimated to emit about 30 percent of
    manmade mercury emissions. Current research and information do not
    indicate that there is a direct link between electric utility mercury
    emissions and levels of mercury in fish that potentially affect public
    health. Even so, on December 14, 2000, EPA announced it would regulate
    mercury emissions from power plants. The agency likely will propose
    regulations by December 2003, promulgate a final rule by December 2004,
    and expect compliance by December 2007.
        Exposure to mercury can be toxic and lethal at high levels.
    However, there continues to be scientific uncertainty and disagreement
    as to what level of mercury exposure is harmful to public health. In
    1999, Congress instructed the National Academy of Sciences (``NAS'') to
    assess the validity of the EPA's ``reference dose'' the amount of a
    substance that can be consumed safely over a lifetime--for mercury and
    to provide recommendations on what level of mercury exposure is
    ``safe.'' The NAS panel, after actively reviewing existing mercury
    health studies, issued a final report in July 2000.
        While significant uncertainty remains regarding the health effects
    of mercury emitted from powerplants, EEI intends to work cooperatively
    with EPA as it determines the extent to which mercury reductions from
    power plants may be needed and how those reductions should be achieved.
                Climate
        EEI's members have long supported voluntary, flexible, and cost-
    effective approaches to reducing greenhouse gases. For example, under
    the Climate Challenge program initiated in 1995, the electric utility
    industry was projected to reduce 174 million metric tons of
    CO2-equivalent greenhouse gases in 2000.
        The electric power industry is currently developing the framework
    for a voluntary climate initiative that would serve as an extension of
    the Climate Challenge, a partnership program developed by EEI and the
    Department of Energy (DOE). The industry expects to partner with the
    Federal Government--particularly DOE--and other industries to pursue
    approaches that further reduce greenhouse gases. This initiative will
    reduce greenhouse gases in the near term, and promote a technology
    research, development and deployment (R, D&D) program that will lead to
    the development over the longer term of cost-effective options to
    reduce greenhouse gases.
        EEI supports continued scientific research to evaluate the extent
    to which human activity is adversely affecting the climate, to evaluate
    the causes, costs, policies and adaptation strategies to address
    possible solutions. EEI believes that any alternative to the Kyoto
    Protocol developed in the coming months should contain implementation
    rules for market mechanisms, forestry and compliance, that are cost-
    effective, flexible, inclusive and transparent.
        EEI opposes regulation of CO2 and other greenhouse gases
    as pollutants under the Clean Air Act or other legislation. Because
    there is currently no cost-effective control technology for greenhouse
    gas emissions, compliance with stringent, mandatory targets and
    timetables such as those contained in the Protocol would cause massive
    fuel switching in the electric utility industry from coal to natural
    gas,\1\  which would be very expensive and increase electricity
    prices.\2\  It also would further accentuate EEI's concerns, noted
    above, about fuel diversity.
    ---------------------------------------------------------------------------
         \1\ See, e.g., the reference study that demonstrates that under a
    Kyoto Protocol-type scenario, coal would decline from 50 percent of
    electric generation to as low as 13 percent in 2010, while natural gas
    would rise from 25 percent to 50 percent in the same timeframe.
    Research Data International, Inc., U.S. Gas and Power Supply under the
    Kyoto Protocol, Vol. I at 1-9 (Sept. 1999).
         \2\A recent EIA report (which actually understates costs because
    mercury had not yet been analyzed) found that reductions in sulfur
    dioxide, nitrogen oxides and CO2 consistent with recent
    legislative proposals would increase electricity prices by 17-33
    percent in 2005, and by 30-43 percent in. 2010. EIA, Analysis of
    Strategies for Reducing Multiple Emissions from Power Plants: Sulfur
    Dioxide, Nitrogen Oxides and Carbon Dioxide xvii, 27 (Dec. 2000). The
    bulk of the cost increases are due to CO2 restrictions.
    ---------------------------------------------------------------------------
        In summary, EEI believes that a climate policy premised on a
    voluntary climate initiative would achieve both environmental and
    economic objectives, and would help maintain fuel diversity. Such a
    strategy would reduce greenhouse gases in the short term as
    technological responses are developed for long-term availability, all
    the while maintaining the viability of coal as a vital component of
    electric generation. In short, environmental policy would complement
    energy policy, which is consistent with EEI's goal ensuring that
    climate change issues are addressed synergistically with a national
    energy policy that protects our environment, consumers, and economy.
    IV. Electricity: Powering Economic Growth
        Perhaps no single index serves as a better indicator of the growth
    and productivity of the U.S. economy than the trends in electricity
    use. In fact, since 1970, electricity growth has closely tracked the
    rise in GDP (See Appendix A-4). The electronic economy, and all of the
    telecommunications services and computing technology which support it,
    currently accounts for 3 percent of electricity use at the national
    level, a significant statistic which has outpaced past projections and
    is expected to increase in the near future.\3\  The Energy Information
    Administration (EIA) recently revised its estimates of future
    electricity demand growth from 1.3 to 1.8 percent per year between now
    and 2020. New electric generating capacity is needed in many areas of
    the country in order to avoid shortages and reliability problems. To
    meet increased demand and to offset retirements of existing power
    plants, EIA forecasts that 1,310 new power plants--with 393,000
    megawatts of capacity--will be needed by 2020.\4\  A sound national
    energy policy is needed to continue to assure the availability of
    affordable and reliable electricity supplies, and to meet future energy
    demands.
    ---------------------------------------------------------------------------
         \3\Koomey, Jonathan et. al. ``Electricity Used by Office Equipment
    and Network Equipment in the United States,'' Lawrence Berkeley Lab,
    U.S. Department of Energy, February 9, 2001
         \4\EIA, Annual Energy Outlook 2001, p.73.
    ---------------------------------------------------------------------------
        Even as it faces the new challenge of increasing demand, the
    electric power industry is well along the path toward the creation of a
    national retail energy market. Restructuring of the electric power
    industry is motivated by anticipation of the economic benefits these
    new markets will bring, but this change does not come without
    uncertainty. As our industry and our nation advances toward these new
    economic opportunities, we find ourselves at a point in history which
    brilliantly illustrates the need for sound and substantial coordination
    of energy needs and other national policy priorities. The role of
    policies concerning the development of retail energy markets is and
    should be focused on facilitating the necessary economic,
    organizational, and regulatory transitions within the industry, and on
    providing electricity producers and. service providers with the
    opportunity to conduct efficient market transactions with its
    customers. While EEI supports a balancing and coordination of energy
    and environmental policies, EEI does not support the incorporation of
    environmental policies in legislation or regulation concerning industry
    structure or retail energy competition.
        New environmental policies can benefit from the changes taking
    place in the structure of the electric power industry. Policies which
    include flexible implementation mechanisms, avoid prescriptive
    technology standards, and adopt compliance schedules which take
    advantage of the ability of the market forces in a competitive industry
    will help assure our continued progress as a provider of increasingly
    clean energy to a growing economy.
        EEI believes that fuel diversity--including the use of coal,
    natural gas, nuclear energy, oil, hydropower and other renewables, to
    generate electricity--must be maintained as a matter of national energy
    policy and national security (See Appendix A-1). An energy policy that
    maintains fuel diversity can appropriately balance continued
    utilization of coal, the most essential fuel for reliable and
    affordable electricity, with a sensitivity to the climate change and
    individual air quality issues that reflects both economic and
    environmental objectives. A diverse fuel mix helps protect companies
    and consumers from the impacts of fuel shortages and price
    fluctuations. Diverse fuel and technology options contribute to a
    stable, reliable and affordable energy supply over the long term.
        We need a national energy policy that takes advantage of energy
    resources available within our country. One of the most plentiful
    energy resources is coal, and more than 90 percent of U.S. coal usage
    is the generation of electricity. This valuable but underutilized asset
    can meet the nation's energy needs for about 250 to 350 years.\5\
    Nuclear power can also be a plentiful resource with a virtually
    unlimited supply potential. On the other hand, the known supply of
    natural gas reserves looks adequate only for 40 years, based on current
    consumption. When you consider the multiple beneficial uses for natural
    gas, especially for heating, it is reasonable to question its use for
    generating substantial amounts of power, when electricity from coal is
    available to do the same work. Coal-based capacity additions, which
    already look attractive, will look even better as technology drives
    down their costs.
    ---------------------------------------------------------------------------
         \5\EIA, Annual Energy Review 1999, T.11.2, T.11.3.
    ---------------------------------------------------------------------------
        As the nation's electricity reserve margins continue to decrease--
    from a high of 26 percent to a low of 11 percent just in the past
    decade--we must now look at coal in a renewed role of prominence in the
    United States energy mix. The combination of this old source of energy
    and new technology is an important part of the solution to meeting
    America's energy needs, which are projected to grow 44 percent by
    2020.\6\
    ---------------------------------------------------------------------------
        \6\EIA, Annual Energy Review 1999, T.8.2 & T.8.3; Annual Energy
    Outlook 2001, T.A.8.
    ---------------------------------------------------------------------------
        New technology puts coal-based plants in position to clear today's
    environmental hurdles. Although Germany and Japan have built generating
    plants using clean coal technology in the past decade, none have yet
    been built in the United States--other than subsidized or demonstration
    projects.
        Modern coal-based plants generate electricity with dramatically
    less environmental impact than traditional coal-based plants. The lower
    emissions and higher efficiency of new coal-based plants exceed current
    environmental requirements for sulfur dioxide (SO2) and
    nitrogen oxides (NOx). Clean coal technology also addresses greenhouse
    gases. Because of increased efficiency, new technology coal plants
    produce significantly less carbon dioxide (CO2) per megawatt
    hour than old plants. The units that we propose to build likely would
    result in a 30 percent reduction in the fuel needed to generate the
    same amount of electricity. In other words, the fuel once used to power
    three homes would power four. Consequently, the fourth home would be
    powered with virtually zero environmental impact, and the other homes
    would be served with less environmental impact than before.
                Certainty and Regulatory Flexibility
        Coal-based power plants, which supply more than half of the
    nation's electricity, face a wide range of existing and proposed
    emission control requirements from Federal and State agencies, and even
    neighboring countries (See Appendix A-5). These requirements and
    proposed new programs are focused primarily on the reductions of four
    power plant emissions: SO2, NOx mercury and CO2.
        Because these regulatory initiatives are largely uncoordinated and
    often conflicting, the electric power industry faces enormous
    uncertainty as it tries to develop appropriate plans to upgrade plants
    and add pollution control equipment. Utility planners are even more
    challenged by the need to ensure their customers continue to receive
    reliable and affordable energy. In essence, the unfortunate results of
    today's regulatory paradigm are higher costs for both shareholders and
    consumers, longer downtimes for our generating stations, and continued
    uncertainty in an industry that is critical to the U.S. economy (See
    Appendix A-5).
        America's electricity prices are substantially lower than most of
    our international competitors, giving our businesses and industries a
    significant competitive advantage in the global marketplace. The United
    States has enjoyed low electricity prices, in part, because we rely on
    a variety of fuels to generate electricity. The resulting competition
    among these fuels keeps prices in check.
        The combination of fuel sources used is referred to as the
    generation mix. Today, more than half of the nation's electricity
    supply is generated from coal. Nuclear energy produces nearly 20
    percent of the supply, while natural gas provides 16 percent.
    Hydropower and, to a much lesser extent, other renewable sources--
    biomass, geothermal, solar, and wind--provide nearly 11 percent of the
    supply. Fuel oil provides nearly 3 percent of the generation mix. There
    are sharp regional differences in generation mix.
    Summary
        The electric utility industry is committed to working with the
    committee to help design multi-pollutant control legislation that is
    comprehensive, cost-effective, employs market-based instruments to
    achieve compliance, provides the industry with sufficient time to
    install conventional or innovative pollution control technologies,
    avoids forced premature plant retirements, preserves fuel diversity,
    and ultimately provides the industry with planning certainty.
        Our nation is building a legacy for taking firm steps to address
    environmental challenges, promoting sustainable use of our natural
    resources and improving public health. Based upon our record of
    compliance, improved efficiency, and increasing emissions reductions,
    as well as our future commitments, the electric power industry will
    continue to be a key partner in the accomplishment of these national
    priorities. This industry is certain that these priorities can be
    balanced with a national energy policy which protects consumers from
    fuel market volatility, keeps electric power affordable and reliable,
    and promotes continuing investment in technologies which will ensure
    increasingly clean power supplies in the future.

                                   __________
     Statement of C. Boyden Gray, Wilmer, Cutler & Pickering, on Behalf of
                 the Electric Reliability Coordinating Council
        Thank you very much for the opportunity to testify on the issue of
    air emissions from power plants. I am a lawyer and not a scientist or
    public health officer, but I have had two decades of experience with
    the Clean Air Act (``CAA''), both in formulating the 1990 Amendments
    (``1990 CAAA'') and in implementing those Amendments as well as the
    other provisions of the Clean Air Act. What I can contribute is to
    provide some context for evaluating the role of utility emissions
    historically and as compared to mobile source emissions in the
    formation of pollution that is covered by the National Ambient Air
    Quality Standards (``NAAQS'') designed to protect public health.
        As a matter of background, I think it is important to stress that
    the United States has managed fairly successfully its overall public
    health responsibilities for air quality. The chart below reflects the
    overall reduction of pollution over the last three decades despite
    dramatic growth in GDP and population. As Peter Venturi, a California
    State Air Resources Board official stated at a recent EPA hearing in
    Sacramento, ``The system is working,'' noting that smog-forming
    emissions from businesses in the State have declined by 50 percent in
    the past 20 years despite a 40 percent increase in population and
    commensurate industry growth. As a result of three successive CAA
    enactments (in 1970, 1977 and 1990), the United States has phased out
    lead and CFCs, achieved attainment of a number of health standards,
    including CO, NOx and, except for 19 counties with a population of 20
    million, particulate matter (PM10), and made deep cuts in
    acid rain, notably a 50 percent reduction mandated by the 1990 CAAA.
        The acid rain reductions, contained in Title IV of the 1990 CAAA,
    are of special importance to these hearings because they involve the
    pollutants most directly associated with power plants. Title IV has, by
    all accounts, been highly successful. Gregg Easterbrook, a senior
    editor at the New Republic, wrote last week that the results have been
    ``spectacular. Acid rain levels fell sharply during the 90's, even as
    coal combustion (its main cause) increased.'' The Wall Street Journal
    on Monday described the program as ``fabulously successful,'' in part
    because the market-oriented emission trading aspect of the program has
    produced cost savings that ``should be as much as $2 billion a year--
    that's twice as much as originally estimated by EPA''--and, I might
    add, as much as five to ten times cheaper on a cost-per-ton basis than
    command-and-control.
        Notwithstanding these successes, there remain some difficult
    problems. Ozone levels, while improving, are still in violation of the
    NAAQS in substantial sections of the country. I think it's important to
    say here that while acid rain is primarily, though not exclusively, a
    power plant problem, ozone is primarily a mobile source problem today.
    Cars, trucks and buses account for twice the NOx produced by power
    plants, which in turn have no role in VOCs, the other smog precursor.
    Just Monday, The Washington Post noted that ``Cleaner fuels and newer
    cars with more effective emission controls are improving Washington's
    air--just not fast enough to meet Federal ozone standards by a 2005
    deadline.'' The article and a followup editorial yesterday focused
    exclusively on mobile sources (including the notorious SUVs) (although
    there is a long-range transport problem implicating Midwestern
    utilities, the District of Columbia Circuit has in the last 2 years
    affirmed two CAA programs, the NOx SIP Call and the Section 126
    interstate transport petition referred to again below, to eliminate
    this problem).
        The other major unresolved problem involves particulate matter.
    Thanks to a combination of the TSP and PM10 NAAQS, the ozone
    standard and the acid rain program, the United States has engineered a
    massive reduction of PM10, which is now largely in
    attainment (achieving a 15 percent reduction from 1990 to 1999 and a 80
    percent reduction from 1970). EPA has pending a NAAQS to control
    PM2.5 which could, if implemented, call for further
    reductions of power plant emissions, along with other pollutants. In
    the meantime, existing EPA control programs are producing continuing
    reductions of what EPA describes as the ``gaseous precursors of fine
    particles (e.g., SO2, NOx and VOC), which are all components
    of the complex mixture of air pollution that has most generally been
    associated with mortality and morbidity effects'' (PM2.5
    emissions declined 17 percent from 1990-1999).
        More specifically, the acid rain and interstate NOx SIP Call rules
    alone are projected to reduce electric utility NOx by 3.6 million tons
    by 2010 from 1990 levels; 2.1 million tons have been achieved already.
    Further, as yet undetermined reductions are anticipated under the
    Regional Haze ``visibility rules.'' A comparison of reductions required
    of mobile sources and electric utilities shows that the utilities are
    pulling their own weight. Mobile sources contribute 58 percent of
    annual NOx emissions, more than double the 25 percent generated by
    electric utilities, and consequently would seem to have much more scope
    for emissions reduction. However, utilities are projected to reduce
    their contribution by 54 percent by 2010 comparable to the mobile
    source reductions of 48 percent. Utilities are doing their fair share
    to reduce NOx under the law as it stands.
        For SO2, electric utilities represent 67 percent of
    SO2 emissions, while mobile sources represent only 7 percent
    of emissions. Title IV of the Clean Air Act mandates a reduction by
    electric utilities of 6.4 million tons of SO2 from 1990 to
    2010, more than 5 million tons of which have already been reduced in
    the last decade. Mobile source reductions will remove a further 1.25
    million tons of SO2 between 2000 and 2010. Utilities make by
    far the greatest quantitative reduction, although qualitatively it is a
    reduction of 50 percent compared to an 80 percent reduction by mobile
    sources projected over the next decade.
        Like the NOx reductions, SO2 reductions also will be
    further reduced by the regulations implementing the Regional Haze
    rules. For example, the Grand Canyon Visibility Transport Commission
    has instituted a voluntary reduction-trading program, which complies
    with the Regional Haze rule that is estimated to reduce SO2
    emissions by approximately 25,000 tons by 2010 and by a further 185,000
    tons by 2020. Although this number seems small, it is but the first of
    programs across the country that cumulatively will have a significant
    impact on SO2 emissions, above and beyond what is already
    required under the 1990 Clean Air Act Amendments.
        Given the pollution reduction initiatives outlines above that are
    still underway or just launched, and the PM2.5 NAAQS
    currently pending before the District of Columbia Circuit, it is
    unclear what additional measures are actually necessary at the present
    time from a public health perspective. EPA is now also engaged in a New
    Source Review (``NSR'') enforcement program that operates independently
    of all of the other initiatives described above and that is under
    review at EPA, the Department of Justice and the Department of Energy.
    The relevant question for this hearing is how many tons of pollution
    are at stake and at what cost, not the expected useful life of an
    average power plant. A review of a recent settlement agreement between
    EPA and a utility shows that EPA is attempting to require companies to
    install scrubbers for 95 percent removal on 70 percent of the MWs of
    energy produced by older plants--which really encompasses all plants
    over time that do not have scrubbers already. This will lead to over a
    50 percent further cut in SO2 above and beyond what is
    already required by Title IV and other requirements of the CAA. Under
    existing law, utilities engaging in such massive overcontrol beyond
    Title IV would normally be able to recoup control costs by selling the
    allowances created by their overcontrol; but EPA is prohibiting
    allowance sales, thus confiscating those allowances and raising serious
    takings questions in the process.
        There are many other questions raised by this new enforcement
    program. For example, it does not seem to be health-based--because it
    is not directed at attainment of the ozone standard (the object of the
    NOx SIP call) and does not appear to have any geographic focus. Rather,
    NSR seems to implicate some of the precursors of regional haze and
    PM2.5 at a time when new visibility rules have just been
    issued and it is unclear whether the new PM2.5 NAAQS will be
    implemented (and, if so, how any reductions required will relate, if at
    all, to NSR). In this context, the recent 9-0 Supreme Court decision in
    American Trucking is relevant, because it holds that EPA may not do
    more than ``is necessary'' to protect the public health. Further
    administrative reductions of PM2.5 beyond those achieved by
    the PM10 standard, the ozone standard, Title IV, the NOx SIP
    Call and the visibility rules must therefore await resolution of the
    PM2.5 NAAQS. Moreover, by identifying routine repair and
    maintenance activities of as much as two decades ago as having
    triggered a scrubbing requirement, EPA is saying that Congress' Title
    IV 50 percent reduction program of 1990 was totally unnecessary, its
    allowance trading system and its mandatory scrubbing repeal
    ineffectual, its resulting pollution control mechanism too cost-
    effective, and its focus misplaced to reduce pollution and increase
    efficiency rather than to promote litigation.
        It may well be that a further 50 percent cut in acid rain
    precursors is called for as a matter of public health and environmental
    protection. However, if this is truly the case, EPA's retroactive and
    economically costly reading of NSR is not the way to achieve it. Such a
    reduction beyond the provisions of Title I and Title IV of the Clean
    Air Act requires EPA either to institute new NAAQS for SO2
    and NOx through a notice and comment rulemaking or to turn to Congress
    for new legislation to revise the 1990 Clean Air Act Amendments,
    pursuant to which Congress hopefully would not revert to the outmoded
    command-and-control approach for compliance which it rejected in 1990,
    but which EPA seems so eager now to reembrace. It is worth pointing out
    here that while the United States may be producing more than its share
    of CO2 on a GDP basis, it is ahead of the rest of the world
    (including the EU) in reducing health-related pollutants, including the
    other major greenhouse gases (methane, soot and ozone).\1\  Increasing
    environmental costs imposed here relative to those imposed abroad
    exacerbates trade tensions here, especially where unnecessary command-
    and-control costs are involved.
    ---------------------------------------------------------------------------
         \1\The current WHO ozone standard applicable in the EU is
    currently significantly less restrictive than the U.S. standard, and
    the EU Environmental Minister is resisting the European Parliament's
    efforts to tighten the WHO standard on the grounds that there is
    ``insufficient scientific knowledge on ozone formation'' and that total
    compliance might not be ``efficient from an economic viewpoint.''
    ---------------------------------------------------------------------------
        When we worked on the CAA Amendments in 1990, we never assumed that
    they would not be supplemented in 10-15 years just as previous
    amendments had been periodically revised--or that the next revision
    might not seek an additional 50 percent SO2 cut. But, to
    repeat, it is imperative that if Congress is to seek any additional
    cuts, it do so not through the permitting nightmare and costly command-
    and-control methods of NSR, but rather through the highly successful
    and cost-effective cap-and-trade approach adopted in 1990. Failure to
    do so will abandon the market innovations of 1990, dramatically raise
    the cost and reduce the yield of air quality standards, and generally
    set back the efforts to curtail pollution by a decade or more.
                                    appendix

                                   Electric Utility NOx Emissions (million tons/year)
    ----------------------------------------------------------------------------------------------------------------
                         APPLICABLE RULE                          1990       1995       2000       2005       2010
    ----------------------------------------------------------------------------------------------------------------
    Acid Rain program/CAAA 90\2\.............................        6.7        6.1        4.6        4.3        4.2
    Ozone Transport/NOx SIP Call further reductions\3\.......  .........  .........  .........       -1.0     -1.142
        TOTAL................................................        6.7        6.1        4.6        3.3      3.058
    ----------------------------------------------------------------------------------------------------------------
    \2\ Source: Dept. of Energy, Annual Energy Outlook with Projections to 2020, December 2000 at 99.
    \3\ Source: Ozone Transport Rule.

     Electric Utility NOx Emissions Compared to Mobile Source NOx Emissions
                              (million tons/ year)
    ------------------------------------------------------------------------
                  SOURCE                   2000         2005         2010
    ------------------------------------------------------------------------
    Electric Utilities...............          4.6          3.3        3.058
    Mobile Sources\4\................       11.678        8.132        6.078
    ------------------------------------------------------------------------
    \4\ Includes Heavy Gas Vehicles, Heavy Diesel Engines, Diesel Engines,
      and other vehicles regulated under Tier II, Highway Diesel Fuel
      Sulphur, and Regulation of Heavy Duty Engine Rules.

              Electric Utility SO2 Reductions (million tons/ year)
    ------------------------------------------------------------------------
                                       1990    1995    2000    2005    2010
    ------------------------------------------------------------------------
    Electric Utilities..............    15.7    11.9    11.5    10.3     9.3
    Mobile Sources..................  ......  ......     1.5     0.8   0.255
    ------------------------------------------------------------------------

                                   __________
      Statement of Conrad G. Schneider, Advocacy Director, Clean Air Task
                   Force, U.S. Public Interest Research Group
    Summary of Testimony
        Mr. Chairman, members of the Senate Environment and Public Works
    Committee, Good morning, my name is Conrad Schneider, Advocacy Director
    of the Clean Air Task Force. I appreciate the opportunity to speak to
    you today. Based in Boston, the Clean Air Task Force is a national non-
    profit, environmental advocacy organization whose mission includes
    reducing the adverse environmental impacts of fossil-fuel electric
    generating plants. Our staff and consultants include scientists,
    attorneys, economists, and engineers. Today I am 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; a campaign
    that involves over 120 organizations in 40 States.
        The adverse public health and ecological impacts from the nation's
    older coal-and oilfired fleet of power plants are so numerous and so
    significant that it is scarcely possible to do more than list them in 5
    minutes of testimony. Electric power plants are by most measures the
    nation's largest industrial air polluter. Power plant emissions are the
    biggest contributor to the single largest environmental risk to public
    health: disease and premature death due to inhalation of fine
    particles. 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 that trigger millions of asthma attacks each
    summer; fine particles that shave years off peoples lives and damage
    lungs; the damage to forests, lakes, bays and crops due to acid rain;
    mercury contamination of fish and wildlife; shrouds of haze in our
    national parks; and contributions to greenhouse gasses; the damage from
    fuel extraction, and groundwater contamination from the lack of proper
    disposal of solid and liquid waste from power plant fuel combustion--
    these are just some of the major problems associated with the nation's
    fossil electric generating fleet. Attachment 1 illustrates the many
    different ways in which power plant pollution affects our lives and the
    natural world around us.
        The best available scientific evidence demonstrates that very deep
    cuts are needed in all four major power plant pollutants: sulfur
    dioxide, nitrogen oxides, mercury and other air toxics, and carbon
    dioxide:
          Research from the nation's top acid rain scientists at
    Hubbard Brook Research Foundation indicates that nothing short of the
    75 percent reductions in sulfur dioxide and nitrogen oxides called for
    in the Clean Power Act of 2001 (S. 556) will be sufficient to allow
    damaged ecosystems to begin to recover by mid-century.
          Analysis of power plant health impacts performed using
    methodology approved by U.S. EPA's Science Advisory Board found that
    fine particles from power plant sulfur dioxide and nitrogen oxide
    emissions shorten the lives of over 30,000 Americans each year, and
    that a 75 percent cut in these pollutants would avoid over 18,000 of
    these premature deaths. Lesser reductions will avoid fewer unnecessary
    deaths.
          Pristine vistas in our national parks and wilderness
    areas will be restored only with pollution reductions of this
    magnitude.
          Mercury from a variety of sources over the years has
    contaminated the food chain to the point that in over 40 States people
    are warned to limit or avoid consumption of fish for fear of
    neurotoxicological effects. Power sector reductions of mercury of up to
    90 percent are feasible with current technology, and reductions of 90
    percent or more appear commercially viable within the time horizon
    contemplated by the Clean Power Act of 2001. Technical means include
    coal cleaning, sulfur dioxide and nitrogen oxides scrubbing co-
    benefits, fabric filters, carbon sorbent injection, adoption of cleaner
    fuels, and a greater reliance on energy efficiency and clean renewable
    energy resources.
          The buildup of carbon dioxide and other heat-trapping
    gases in the atmosphere is primarily responsible for the unprecedented
    global warming seen over the last 50 years, according the National
    Research Council. As the Council recently concluded, the adverse health
    and environmental impacts of climate change are real. The largest
    source of carbon dioxide in the United States is the electric power
    industry, accounting for 40 percent of all U.S. emissions. Of that,
    more than 88 percent of power plant emissions come from older, less
    efficient coal-fired facilities. Any rational policy dealing with the
    U.S. contribution to climate change must include power sector carbon
    reductions. Capping power sector emissions of carbon dioxide at 1990
    levels, in accord with the Rio Treaty, is technically feasible. This
    will require an expansion of the nation's use of energy efficiency,
    clean renewable, and gas-fired energy sources, and potentially the use
    of advanced coal technologies.
        For a host of reasons, the time is right for action finally to
    reduce the devastating effects of power plant pollution. We commend
    Senator Jeffords and the members of this committee for advancing the
    issue and look forward to working with you as the process continues.
    There will be many points of agreement and disagreement among the
    affected parties around issues of implementation, costs, etc. However,
    public health and protection of the environment demand that emission
    reductions as prescribed by the Clean Power Act of 2001 must be
    achieved and achieved as quickly as possible. I would be happy to
    answer any questions.
        Mr. Chairman, members of the Senate Environment and Public Works
    Committee, Good morning, My name is Conrad Schneider, Advocacy Director
    of the Clean Air Task Force. I appreciate the opportunity to speak to
    you today. Based in Boston, the Clean Air Task Force is a national non-
    profit, environmental advocacy organization whose mission includes
    reducing the adverse environmental impacts of fossil-fuel electric
    generating plants. Our staff and consultants include scientists,
    attorneys, economists, and engineers. Today I am 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; a campaign
    that involves over 120 organizations in 40 States.
        Electric power plants are by most measures the nation's largest
    industrial air polluter. Power plant emissions are the biggest
    contributor to the single largest environmental risk to public health:
    death and disease due to inhalation of fine particles. 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;
    fine particles that shave years off peoples lives and damage lungs; the
    damage to forests, lakes, bays and crops due to acid rain; mercury
    contamination of fish and wildlife; shrouds of haze blanketing our
    national parks; contributions to greenhouse gasses; and groundwater
    contamination from the lack of proper disposal of solid and liquid
    waste from power plant fuel combustion--these are just some of the
    major environmental problems associated with the nation's fossil
    electric generating fleet. Attachment 1 illustrates the many different
    ways in which power plant pollution affects our lives and the natural
    world around us.
        Although to date the Clean Air Act has taken a pollutant-by-
    pollutant approach, the suite of pollutants from power plants: sulfur
    dioxide, nitrogen oxides, mercury and other air toxics, and carbon
    dioxide interact and operate synergistically to damage the environment.
    For example, global warming will likely increase the incidence and
    severity of summer smog episodes; acidification of water bodies
    mobilizes existing deposits of mercury meaning more mercury uptake into
    the food chain, etc. For these and other reasons (cost-effectiveness,
    planning certainty for industry, etc.) the problem of power plant
    pollution demands a comprehensive solution that includes all four major
    power plant pollutants.
        Moreover, the best science available demonstrates that public
    health and ecosystem protection demand steep cuts in all four of these
    pollutants:
          Reductions in power plant emissions of sulfur dioxide and
    nitrogen oxides on the order of 75 percent beyond current law.
          Mercury emission reductions of 90 percent from current
    levels.
          Power plant carbon dioxide caps set at 1990 levels.
        I will address the impacts from each of these pollutants in turn
    and discuss the science that supports these reduction targets:
    Sulfur Dioxide
        The problems associated with sulfur dioxide include: damage from
    acid rain, deadly fine particles, and the haze that obscures scenic
    vistas in national parks and our urban areas. Power plants emit about
    two-thirds of the sulfur dioxide emitted in the United States each
    year.
                Sulfur Dioxide Reductions of 75 Percent or More are
                        Necessary to Allow Ecosystem Recovery from Acid
                        Rain by Mid-Century
        It is increasingly well-documented that the problem of acid rain
    has not been solved and that the acid rain provisions of the 1990 Clean
    Air Act Amendments will not be sufficient to solve it. Over 150 years
    of deposition of sulfur has taken a serious toll on ecosystems.
    Although sulfur emissions have declined somewhat in recent years, they
    remain very high when compared to historic levels. See Attachment 2.
        As a result of this legacy, lakes and streams and the aquatic life
    that live in them are experiencing the most widespread impact from high
    concentrations of acidity. The majority of sensitive waterbodies are
    those that are located atop soils with a limited ability to neutralize
    (or buffer) acidity. Sensitive areas in the United States include the
    Adirondack Mountains, Mid-Appalachians, southern Blue Ridge\1\  and
    high-elevation western lakes.\2\  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.
    ---------------------------------------------------------------------------
        \1\US EPA 1995. Acid Deposition Standard Feasibility Study Report
    to Congress. EPA 430-R-95-001 a. http://www.epa.gov/acidrain/effects/
    execsum.html
        \2\National Acid Precipitation Assessment Program (NAPAP). 1998.
    Biennial Report to Congress: an Integrated Assessment. http://
    www.nnic.noaa.gov/CENR/NAPAP/NAPAP 96.htm
    ---------------------------------------------------------------------------
        In some places, chronic and episodic acidification together have
    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.\3\
    ---------------------------------------------------------------------------
        \3\Heard, R.M., W.E. Sharpe, R.F. Carline and W.G. Kimmel. 1997.
    Episodic acidification and changes in fish diversity in Pennsylvania
    headwater streams, Transactions Am. Fisheries Soc. 126: 977-984.
    ---------------------------------------------------------------------------
        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.\4\  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 United States, forest
    soils, with acid rain being one of the major factors contributing to
    this depletion.\5\
    ---------------------------------------------------------------------------
        \4\Dehayes, Donald H., P.G. Schaberg, G.J. Hawley, and G.R.
    Strimbeck. 1999. Acid Rain Impacts on Calcium Nutrition and Forest
    Health--Alteration of Membrane-Associated Calcium Leads to Membrane
    Destabilization and Foliar Injury in Red Spruce. BioScience: 49(10).
        \5\USGS. 1999. Soil-Calcium Depletion Linked to Acid Rain and
    Forest Growth in the Eastern United States. http://bgs.usgs.gov/
    acidrain/
    ---------------------------------------------------------------------------
        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.\6\
    ---------------------------------------------------------------------------
        \6\U.S. Forest Service. 1997. Forest Service and Air Management.
    George Washington and Jefferson National Forests. http://
    svinet2.fs.fed.us:80/gwjnf/airpollution.html
    ---------------------------------------------------------------------------
        Some specific problems that are documented to be associated with
    acidic deposition are:
          Preliminary work suggests that episodic acid deposition
    has contributed to the decline of Atlantic salmon in Maine, with this
    periodic acidification having the greatest impact on smolts and fry.\7\

    ---------------------------------------------------------------------------
        \7\Haines, T.A., S.A. Norton, J.S. Kahl, C.W. Fay, and S.J.
    Pauwels. 1990. Intensive studies of stream fish populations in Maine.
    Ecological Research Series. U.S. Environmental Protection Agency.
    Washington, DC. 354 pp.
    ---------------------------------------------------------------------------
          Forty-one percent of lakes in the Adirondack region of
    New York and 15 percent of lakes in New England are either chronically
    or periodically acidic. Nearly 25 percent of surveyed lakes in the
    Adirondacks do not support any fish, and many others have less aquatic
    life and reduced species diversity when compared to less acidic
    lakes.\8\  Acid rain is the major cause of red spruce mortality in New
    York.\9\
    ---------------------------------------------------------------------------
        \8\Baker, J.P., J. Van Sickle, C.J. Gagen, D.R. DeWalle, W.E.
    Sharpe, R.F. Carline, B.P. Baldigo, P.S. Murdoch, D.W. Bath, W.A.
    Kretser, H.A. Simonin, and, P.J. Wigington. 1996. Episodic
    Acidification of Small Streams in the Northeastern United States:
    Effects on. Fish Populations. Ecological Applications 6(2): 422-437.
        \9\Driscoll, C.T., Lawrence, G.B., Bulger, A.T., Butler, T.J.,
    Cronan, C.S., Eagar, C., Lambert K.F., Likens, G.E., Stoddard, J.L. and
    Weathers K.C., 2001. Acidic deposition in the Northeastern United
    States: Sources, inputs, ecosystem effects and management strategies.
    Bioscience. 51(3).
    ---------------------------------------------------------------------------
          Reduction in fish diversity in northwest Pennsylvania is
    linked to aluminum leaching from acid rain. Comparison of fish data
    collected in the Allegheny Plateau and Ridge and Valley region 40 years
    ago to data collected in the mid-1990's found an overall decrease in
    species diversity, with the most dramatic declines occurring in five
    species of non-game, acid-sensitive fish. Streams that experienced a
    loss of species had greater increases in acidity and more episodic
    acidification than streams that either gained or had no change in
    species.\10\  In the same area, acid rain has been associated with poor
    sugar maple and red oak regeneration as well as deterioration of tree
    health and excessive mortality in mature trees of both species.\11\
    ---------------------------------------------------------------------------
        \10\Heard, R.M., W.E. Sharpe, R.F. Carline and W.G. Kimmel. 1997.
    Episodic acidification and changes in fish diversity in Pennsylvania
    headwater streams. Transaction Am. Fisheries Soc. 126:977-984.
        \11\Sharpe, William and Joy R. Drohan, eds. 1998, The Effects of
    Acidic Deposition on Pennsylvania's Forests. Proceedings of the 1998 PA
    Acidic Deposition Conference. Vol. 1. Environmental Resources Research
    Institute, University Park, PA.
    ---------------------------------------------------------------------------
          The West Virginia Department of Natural Resources has
    identified hundreds of miles of streams that are chronically acidic and
    is currently liming 60 streams to offset the damage from acidic
    deposition.
        Episodic acidification is ``ubiquitous'' in Shenandoah National
    Park streams, and chronic acidification of surface; water is also a
    serious concern. Values of pH as low as 5.0 (nearly as acidic as lemon
    juice) are common in these streams.\12\  In spring, 2001, Paine Run
    River was placed on the American River's Most Endangered list because,
    without further cuts in air pollution, it will become too acidic to
    sustain populations of brook trout and other aquatic organisms. Thirty
    percent of trout streams in Virginia are either chronically (6 percent)
    or episodically (24 percent) acidic and therefore either marginal or
    unsuitable for acid-tolerant brook trout.\13\  By the time acid-
    tolerant species are affected, there are many acid-sensitive species
    that are no longer productive.
    ---------------------------------------------------------------------------
        \12\Bulger, A.J., B.J. Cosby, C.A. Dolloff, K.N. Eshleman, J.R.
    Webb, and J.N. Galloway. 2000. Shenandoah National Park. Fish in
    Sensitive Habitats Final Report. University of Virginia and Virginia
    Polytechnic Institute and State University. Report to the National Park
    Service, Coop Agreement CA-40002-1007.
        \13\Bulger, A.J., B.J. Cosby, and J.R. Webb. 2000. Current,
    reconstructed past, and projected future status of brook trout
    (Salvelinus fontinalis) streams in Virginia. Canadian Journal of Fish
    and Aquatic. Sci 57: 15151523.
    ---------------------------------------------------------------------------
          Great Smoky Mountains streams are very sensitive to
    acidic deposition. The sensitivity of these sites has emerged later
    than was observed in the Northeast, suggesting that it took longer to
    leach out agents that were able to buffer sensitive sites from acidity.
    Many high elevation streams are currently acidic.\14\  Acidic
    deposition is also causing forest soils to experience chemical
    imbalances that are contributing to tree stress.\15\ \16\
    ---------------------------------------------------------------------------
        \14\Cook, R.B., J.W. Elwood, R.R. Turner, M.A.. Bogle, P.J.
    Mulholland, and A.V. Palumbo. 1994. Acidbase chemistry of high-
    elevation streams in the Great Smoky Mountains. Water, Air and Soil
    Pollution 72:331-356.
        \15\DeFelice, T.P. 1997. Investigation of wet acidic deposition
    episodes capable of damaging Red Spruce in the Mt. Mitchell State Park.
    Atmospheric Research. 43: 325-344.
        \16\McLaughlin, S, J. D. Joslin; W. Robarge, A. Stone, R. Wiimer
    and S. Wullschleger. 1998. The impacts of acidic deposition and global
    change on high elevation southern Appalachian spruce-fir forests. From
    The productivity and sustainability of southern forests ecosystems in a
    changing environment. Springer-Verlag, New York: 255-277.
    ---------------------------------------------------------------------------
          Many soils in the Southeast are already nutrient-poor.
    Human intervention, and in particular the chronic loading of sulfate
    and nitrate from acidic deposition, has made already calcium-poor soils
    more calcium deficient. Analyses at forest sites in the southeastern
    United States suggest that within 80 to 150 years, soil calcium
    reserves will not be adequate to supply the nutrients needed to support
    the growth of merchantable timber. \17\
    ---------------------------------------------------------------------------
        \17\Huntington, Thomas. 2000. The Potential for Calcium Depletion
    in Forest Ecosystems of Southeastern United States: Review and
    Analysis. 14(2) 623-638.
    ---------------------------------------------------------------------------
          Because pollutants cross borders, there is documented
    damage in Canada as well. Atlantic salmon habitat in Nova Scotia rivers
    has been seriously reduced by increased acidity. A study of 49 rivers
    that historically supported salmon found populations to be extinct in
    14 rivers and severely impacted in 20. Loss of salmon is correlated
    with increased acidity.\18\  Sensitive watersheds, located primarily in
    central Ontario and Quebec, have not responded to reductions in sulfate
    deposition as well or as rapidly as those in less-sensitive regions. At
    the current sulfur deposition levels (20 kg wet sulfate/ha/yr.),
    roughly 95,000 lakes will continue to be damaged by acid deposition.
    Lakes continue to acidify despite reductions in sulfur deposition.\19\
    Modeling found that after full implementation of the acid rain program
    of the Clean Air Act Amendments of 1990 and Air Quality agreements that
    76,000 lakes in SE Canada will remain damaged, that is have a pH below
    6.\20\
    ---------------------------------------------------------------------------
        \18\Watt, W.D., C.D. Scott, P.J. Zamora and W.J. White. 2000. Acid
    Toxicity Levels in Nova Scotian Rivers have not Declined in Synchrony
    with the Decline in Sulfate Levels. Water Air and Soil Pollution.
    118(3-4): 203-229.
        \19\Environment Canada, 1997. Canadian Acid Rain Assessment, Volume
    3. The Effects on Canada's Lakes, Rivers and Wetlands.
        \20\Jeffries, D.S., D.C.L. Lam, I. Wong, and M.D. Moran, 2000.
    Assessment of Changes in the Lake pH in Southeastern Canada Arising
    from Present Levels and Expected Reductions in Acidic Deposition. Can.
    J. Fish Aquat. Sci. 57(Suppl2): 40-49.
    ---------------------------------------------------------------------------
          A continuing decline in soil nutrients, due to acidic
    deposition, is occurring in forest ecosystems in Ontario and Quebec. In
    Ontario, levels of acidic deposition are accelerating the loss of base
    cations and essential nutrients from soils that support sugar maple
    dominated hardwood forests. In Quebec, studies have shown the nutrient
    status of sugar maple seedlings declined as soil acidification levels
    and soil base saturation decreased. At current deposition levels, these
    effects will likely be sustained or increased. With sustained soil
    nutrient loss, not only will nutrient uptake by tree roots be reduced,
    but also forest ecosystem productivity will decline.\21\
    ---------------------------------------------------------------------------
        \21\Duchesne, D. Houle and P.A. Arp. 2000. Critical Loads and
    Exceedances of Acid Deposition and Associated Forest Growth in the
    Northern Hardwood and Boreal Coniferous Forests in Quebec, Canada.
    Water Air Soil Pollution
    ---------------------------------------------------------------------------
        Despite declines in power plant sulfur emissions due to acid rain
    provisions of the 1990 Clean Air Act amendments, the acidity of many
    waterbodies has not improved.\22\  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 United
    States.\23\
    ---------------------------------------------------------------------------
        \22\Stoddard, J.L.; D.S. Jeffries; A. Lukewill; T.A. Clair; P.J.
    Dillon; C.T. Driscoll; M. Forsius; M. Johannessen; J.S. Kahl; J.H.
    Kellog; A. Kemp; J. Mannio; D.T. Montelth; P.S. Murdoch; S. Patrick; A.
    Rebsdorf, B.L. Skjelkvale; M.P. Stainton; T. T'raaen; H. van Dam; K.E.
    Webster; J. Wieting and A. Wilander. 1999. Regional Trends in Aquatic
    Recovery from Acidification in North America and Europe. Nature. 401:
    575-579.
        \23\``Acid Rain Revisited: Advances in Scientific Understanding
    Since the Passage of the 1970 and 1990 Clean Air Act Amendments,
    Hubbard Brook Research Foundation (2000); Driscoll, Charles T., et al.,
    Acid Deposition in the Northeastern U.S.: Sources and Inputs,
    Ecosystems Effects, and Management Strategies. BioSience. Vol. 51, no.
    3; Likens, G.E., C.T. Driscoll and D.C. Buso. 1996. Science. Long-Term
    Effects of Acid rain: Response and Recovery of a Forest Ecosystem. 272:
    244-46.
    ---------------------------------------------------------------------------
        What will it take to reverse the impacts of nitrogen saturation,
    ozone and acid rain? Recent work by scientists with the Hubbard Brook
    Research Foundation found that an additional 80 percent reduction in
    sulfur from levels achieved by Phase II of the acid rain program of the
    Clean Air Act Amendments of 1990 would be needed to allow biological
    recovery to begin mid century in the Northeastern United States.\24\
    Model simulations in the Shenandoah project that greater than 1970
    percent reduction in sulfate deposition (from 1991 levels) would be
    needed to change stream chemistry such that the number of streams
    suitable for brook trout viability would increase. A 70 percent
    reduction would simply prevent further increase in Virginia stream
    acidification.\25\  In the Great Smoky Mountains National Park, two
    separate ecosystem models have concluded that sulfate reductions of 70
    percent are necessary to prevent acidification impacts from increasing.
    Deposition reductions above and beyond these amounts are necessary to
    improve currently degraded aquatic and terrestrial ecosystems.\26\ \27\
    To reverse and recover from acidic deposition impacts, Canadians in the
    Acidifying Emissions Task Group have recommended a 75 percent reduction
    in U.S. sulfur emissions, post Phase II of the acid rain program of the
    Clean Air Act Amendments of 1990.\28\  Thus, nothing short of the
    overall 75 percent reduction called for in the Clean Power Act of 2001
    will finish the job of solving the acid rain problem. Tighter targeted
    cuts may be necessary for sources directly impacting sensitive areas.
    The longer we wait for the reductions to begin, the longer we will
    await recovery of these systems.
    ---------------------------------------------------------------------------
        \24\Driscoll, C.T, supra.
        \25\Ibid.
        \26\Cosby, B.J. and T.J. Sullivan. 1998. Final Report: Application
    of the MAGIC Model to Selected Catchments: Phase I, Southern
    Appalachian Mountain Initiative (SAMI).
        \27\Munson, R.K. 1998. Application of the NuCM Model to Noland
    Divide, White Oak Run and Shaver Hollow for SAMI Phase I. Final Report.
        \28\The Acidifying Emissions Task Group. 1997. Toward a National
    Acid Rain Strategy submitted to the National Air Issues Coordinating
    Committee.
    ---------------------------------------------------------------------------
                A 75 Percent Reductions in Power Plant Sulfur Dioxide
                        Emissions will Avoid Over 18,000 Particulate-
                        Related Premature Deaths Each Year
        One of the air pollutants most carefully studied in the 1990's is
    particulate matter. Fine particles, such as those that result from
    power plants emissions, defeat the defensive mechanisms of the lung,
    and can become lodged deep in the lung where they can cause a variety
    of health problems. See Attachment 3. New evidence indicates that
    short-term exposures cannot only cause respiratory (e.g., triggering
    asthma attacks), but also cardiac effects, including heart attacks.\29\
     In addition, long-term exposure to fine particles increases the
    chances of death, and has been estimated to shave years off the life
    expectancy of people living in our most polluted cities, relative to
    those living in cleaner ones.\30\
    ---------------------------------------------------------------------------
        \29\Gold, D. et al., ``Ambient Pollution and Heart Rate
    Variability,'' Circulation, v. 101, 1267-1273, American Heart
    Association (March 21, 200); Peters, A. et al., ``Increases in Heart
    Rate Variability During an Air Pollution Episode,'' 150 American
    Journal of Epidemiology, p. 1094-1098 (1999); Peters, A. et al., ``Air
    Pollution and Incidence of Cardiac Arrhythmia,'' 11 Epidemiology, no.
    1, p. 11-17 (2000); Schwartz, J., ``Air Pollution and Hospital
    Admissions for Heart Disease in Eight U.S. Counties, 10 Epidemiology
    1722 (1999).
        \30\Pope, C.A., ``Epidemiology of Fine Particulate Air Pollution
    and Human Health: Biologic Mechanisms and Who's at Risk?'' 108 Env.
    Health Persp. (Supp 4) 713-723 (August 2000).
    ---------------------------------------------------------------------------
        Fine particulate matter may be emitted directly from tailpipes and
    smokestacks (known as ``primary'' particulate matter), but the largest
    proportion of fine particles come from gas emissions (called
    ``secondary'' particulate matter). Sulfur dioxide emissions from coal
    plants contribute the most to secondary particle formation. Sulfur
    dioxide is chemically altered in the atmosphere after it is released
    from a smokestack to become a ``sulfate'' particle. Sulfates include
    sulfuric acid particles that, when breathed, reach deep into the human
    lung. Indeed, analysis of the relative toxicity of particles indicates
    that sulfate particles are among the most toxic.\31\  In the East and
    Midwest United States, sulfate makes up the largest proportion of the
    particles in our air-in many regions well over half of the fine
    particles. Moreover, power plants currently emit two-thirds of the
    sulfur dioxide in the United States. Therefore, to reduce particulate
    matter, major reductions in pollution emissions from fossil-fuel power
    plants are needed.
    ---------------------------------------------------------------------------
        \31\Thurston, George, ``Determining the Pollution Sources
    Associated with PM Health Effects,'' Air And Waste Management
    Association (January 1998); Laden F, Neas LM, Dockery DW, Schwartz J.
    Association of fine particulate matter from different sources with
    daily mortality in six U.S. cities. Environ. Health Perspect. 108: 941-
    947(2000).
    ---------------------------------------------------------------------------
        The hazards of particulate matter have become particularly clear in
    the past decade's research. Two of the largest landmark studies on
    particulate matter and death, the Harvard Six Cities Study, published
    in 1993, followed by the American Cancer Society Study in 1995,
    demonstrated greater risk of premature death from particulate matter in
    more polluted cities compared to cities with cleaner air. The Harvard
    Six Cities study monitored particulate matter and tracked mortality in
    Six U.S. cities and discovered a 25 percent higher risk between the
    cleanest city, Portage Wisconsin and the dirtiest, Steubenville Ohio.
    Fine particles, especially sulfates, were most strongly associated with
    excess mortality in polluted cities. The American Cancer Society study
    examined half a million people in over 150 metropolitan areas
    throughout the United States and found a 17 percent greater relative
    risk of mortality between the city with the least sulfate and
    particulate matter and the city with the highest levels of this
    particulate pollution. The results of these studies were challenged by
    industry resulting in an independent reanalysis by the Health Effects
    Institute (HEI)-funded by industry and EPA. HEI found the results to be
    robust and actually strengthened the associations found by the original
    investigators.\32\
    ---------------------------------------------------------------------------
        \32\Krewski, D., Burnett, R.T. Goldberg, M.S., Hoover, K.,
    Siemiatycki, J., Jerrett, M., Abrahamowicz, A. and White, W.H.,
    ``Reanalysis of the Harvard Six Cities Study and the American Cancer
    Society Study of Particulate Matter and Mortality,'' Health Effects
    Institute, Cambridge, MA (2000).
    ---------------------------------------------------------------------------
        Thus, the evidence is clear, and has been confirmed independently,
    fine particle air pollution, and especially those particles emitted
    primarily by fossil-fuel power plants, are adversely affecting the
    lives and health of Americans. The importance of these particulate
    matter-health effects relationships is made clear by the fact that
    virtually every American is directly impacted by this pollution.
    Indeed, a recent analyses by Abt Associates using the methodology
    approved by EPA's independent Science Advisory Board estimated that
    emissions from power plants alone are responsible for about 30,000
    premature deaths per year--more than from drunk driving or homicides.
    That same study determined that a 75 percent reduction in power plant
    sulfur dioxide and nitrogen oxide emissions would result in reduced
    fine particle levels and avoid over 18,000 premature deaths per year--
    more lives than are saved by safety belts each year.\33\  The greatest
    risk is faced by people living in the Midwest and Southeast where the
    greatest concentrations of coal-fired power plants are located. See
    Attachment 4.
    ---------------------------------------------------------------------------
        \33\``Death, Disease, and Dirty Power,'' Clean Air Task Force
    (2000); ``The Particulate-Related Benefits of Reducing Power Plant
    Emissions,'' Abt Associates (2000).
    ---------------------------------------------------------------------------
        In addition, recent work by researchers at the Harvard School of
    Public Health including that summarized in ``Risk in Perspective'',\34\
     the journal of the Harvard Center for Risk Analysis, found that the
    risk from power plant pollution is not evenly distributed
    geographically. The risk was found to be greatest in relatively close
    proximity to the power plants: people living within 30 miles of a plant
    were found to face a risk of mortality from the plant's emissions 2-3
    times greater than people living beyond 30 miles do.\35\  These
    ``local'' impacts suggest that a national ``cap-and-trade'' program
    that allows some plants to escape pollution controls through the
    purchase of emission credits will not reduce the specific risk posed by
    those emissions to the surrounding population. This work supports the
    need for the ``birthday bill'' provision of the Clean Power Act of 2001
    that requires each facility to meet modern pollution standards by a
    date certain.
    ---------------------------------------------------------------------------
        \34\Levy, J. and Spengler, J., ``Health Benefits of Emissions
    Reductions From Older Power Plants,'' Risk in Perspective/Harvard
    Center for Risk Analysis Vol. 9, Issue 2 (April 2001).
        \35\Levy, J., Spengler, J., Hlinka, D. and Sullivan, D.,
    ``Estimated Public Health Impacts of Criteria Pollutant Air Emissions
    from the Salem Harbor and Brayton Point Power Plants.'' Available
    online at www.hsph.harvard.edu.
    ---------------------------------------------------------------------------
        These scientific studies have found that the relationship between
    fine particles and premature mortality is linear--meaning that every
    additional ton of pollution we remove from the air will carry an
    additional, incremental benefit in saving more lives. The chart in
    Attachment 5 compares the benefits of several power plant bills
    introduced in the last Congress. With technology available today that
    can cost-effectively reduce power plant sulfur dioxide emissions by up
    to 90-95 percent,\36\  public health demands that Congress adopt
    emissions cuts no less stringent than those called for in the Clean
    Power Act of 2001.
    ---------------------------------------------------------------------------
        \36\Srivastava, R.K. (2000) EPA ORD Control of SO2
    Emissions: An Analysis of Technologies. EPA/600R00/093.
    ---------------------------------------------------------------------------
                A 75 Percent Reduction in Power Plant Sulfur Dioxide will
                        be Necessary to Regain Pristine Vistas in our
                        National Parks and Wilderness Areas
        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 oneeighth 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 are shown in the Great: Smoky
    Mountains National Park slide attached to this testimony. See
    Attachment 6.
        There is no question that power plants are the 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 about well over 80 percent of this visibility impairment. When
    these components are assessed for their contribution to the problem,
    electric power is accountable for about \2/3\ of the emissions that
    lead to regional haze-related visibility impairment in the East, most
    of which is caused by sulfate.
        Half-measures will not solve the problem of visibility impairment
    in our nation's parks. EPA has set a long-term goal of eliminating man-
    made haze by 2060. That goal will never be achieved without steeply
    cutting power plant emissions consistent with the reduction targets in
    the Clean Power Act of 2001. Indeed, the cuts in sulfur dioxide to date
    under the acid rain program have not led to perceptibly improved
    vistas. Research shows that visibility improves more rapidly with
    deeper cuts in sulfate. Thus, we will achieve pristine views in those
    areas shrouded in a sulfate haze only when the deepest cuts in sulfur
    dioxide emissions have been achieved.
        There is concern about haze from other quarters as well. New
    research is showing that both haze and particulate matter are
    depressing optimal yields of crops.\37\  Yield decreases in the
    northeastern United States are estimated to be occurring in the 5--10
    percent range. In the Southeast the decrease in optimal yields for
    summertime crops is likely higher--about 10--15 percent.
    ---------------------------------------------------------------------------
        \37\Chameides, W.L., H. Yu, M. Bergin, X. Zhou, L. Megarns, G.
    Wang, C.S. Kiang, R.D. Saylor, C. Luo, Y. Huang, A. Steiner and F.
    Giorgi. 1999. Case: Study of the Effects of Atmospheric Aerosols and
    Regional Haze on Agriculture: An Opportunity to Enhance Crop Yields in
    China through Emission Controls? PNAS. 96(24): 13626-13633.
    ---------------------------------------------------------------------------
    Nitrogen Oxides
        The problems associated with nitrogen oxides include the massive
    health and ecosystem damage due to ozone smog and nitrogen deposition.
    Power plants are responsible for about one-quarter of the nitrogen
    oxides emitted in the United States each year.
                A 75 percent Reduction is Necessary to Reduce Ozone Smog
                        and Help Attain the New Ozone Standard
        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\38\ , 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. The year 2000 saw one of the
    worst ozone summers in recent history, with more than 7,000 violations
    of the Federal ozone health standard.
    ---------------------------------------------------------------------------
        \38\Abt Associates, ``Out of Breath: Adverse Health Effects
    Associated with Ozone in the Eastern United States,'' Abt Associates
    (October 1999).
    ---------------------------------------------------------------------------
        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 ozone exposures and per capita
    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,\39\  for example, 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 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 exceedance 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 Country, Wisconsin, and the nation's seashore points.\40\

    ---------------------------------------------------------------------------
        \39\``Ozone Alley,'' Ohio Environmental Council (2000).
        \40\``No Escape: Can You Really Ever Get Away-'from the Smog?''
    Clean Air Network and Clean Air Task Force (August 1999).
    ---------------------------------------------------------------------------
        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 fifty percent of elevated ozone levels in the
    Valley, enough by themselves to cause violations of the Federal health
    standard.\41\
    ---------------------------------------------------------------------------
        \41\``Ozone Alley'' supra.
    ---------------------------------------------------------------------------
    Crop Losses Due to Ozone Smog
        Human health is not smog's 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
    from NCLAN studies. Annual crop loss from ozone for soybeans alone in
    Illinois, Indiana and Ohio has been calculated to fall between
    $198,628,000--345,578,000. 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 southeastern
    farmers from $213-353 million annually.\42\
    ---------------------------------------------------------------------------
        \42\Production and yield figures come from 1997 United States
    Department of Agriculture, National Agricultural Statistics Service.
    Ozone impact data comes from EPA 1996. Office of Air Quality Planning
    and Standards Staff Paper. Review of National Ambient Air Quality
    Standards for Ozone. EPA-452/R-96007.
    ---------------------------------------------------------------------------
                Year Round Reductions of Nitrogen Oxides will be Necessary
                        to Minimize the Effects of Nitrogen Deposition
        Power plant nitrogen emissions deposited on land and water--
    sometimes at great distances from their original sources--is an
    important contributor to declining water quality.\43\  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.\44\
    ---------------------------------------------------------------------------
        \43\USEPA 1999 Office of Water, Oceans and Coastal Protection
    Division, Air Pollution and Water Quality, Atmospheric Deposition
    Initiative http://www.epa.gov/owow/oceans/airdep/
        \44\USEPA 1997. Deposition of Air Pollutants to the Great Waters.
    Second Report to Congress, Office of Air Quality Planning and
    Standards. http://www.epa.gov/oar/oagps/gr8water/2ndrpt/execsumm.html
    ---------------------------------------------------------------------------
        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.\45\  Of that amount, power
    plants account for about a third.
    ---------------------------------------------------------------------------
        \45\Valigura, Richard, Winston Luke, Richard Artz and Bruce; Hicks.
    1996. Atmospheric Nutrient Input to Coastal Areas. Reducing the
    Uncertainties. National Oceanic and Atmospheric Administration Coastal
    Ocean Program.
    ---------------------------------------------------------------------------
        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.\46\
    ---------------------------------------------------------------------------
        \46\Paerl, Hans, 1999. Atmospheric Nitrogen in North Atlantic Ocean
    Basin. Ambio (Royal Swedish Academy of Sciences Journal) (June 1999).
    Summary online: http://www.seagrantnews.org/news/19990630 n.html
    ---------------------------------------------------------------------------
    Mercury
                A 90 Percent Reduction in Mercury and other Power Plant
                        Toxic Emissions is Necessary to Minimize the Risk
                        to Children
        Mercury is another power plant pollutant that poses a threat to
    human health and the environment. Exposure to mercury in the United
    States primarily comes from the consumption of freshwater, estuarine,
    marine fish and shellfish. Across the United States, mercury
    contaminates freshwater and saltwater fish populations, poses health
    risks to the people and wildlife that consume these fish and threatens
    the multibillion-dollar recreational and commercial fishing industries.
    State health departments in over 40 States have issued advisories
    warning the public about consuming certain species of fish in certain
    water bodies, 11 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.
        Coal-fired power plants are the largest emitters of mercury in the
    nation--they account for 33 percent of air emissions and have been
    linked to contamination of the nation's fisheries.\47\  (Forty-one
    States have mercury fish consumption advisories, 11 have statewide
    advisories.)\48\
    ---------------------------------------------------------------------------
        \47\``USEPA, 1997. Mercury Study Report to Congress: Volume I
    Executive Summary.'' December. EPA 452/R-97-003.
        \48\http://www.epa.gov/ost/fish
    ---------------------------------------------------------------------------
        People are exposed to mercury primarily through eating contaminated
    fish. Most at risk is the developing fetus because mercury interferes
    with the normal development of the nervous system.\49\  The fetus is
    exposed to mercury when the mother eats fish. Infants appear normal
    during the first few months of life, but later display subtle effects
    such as poor performance on tests of attention, fine motor function,
    language, visual-spatial abilities (e.g., drawing), and memory.
    According to the National Academy of Sciences, these children will
    likely have to struggle to keep up in school and might require remedial
    classes or special education.\50\
    ---------------------------------------------------------------------------
        \49\USEPA, 1997b. Mercury Study Report to Congress, Volume VII:
    Characterization of Human and Wildlife Risks from Mercury Exposure in
    the United States. EPA-452/R-97-009.
        \50\Toxicological Effects of Methylmercury, National Academy Press,
    Washington, DC, 2000. http://www.nap.edu
    ---------------------------------------------------------------------------
        A recent Centers for Disease Control survey of hair and blood
    samples found that 10 percent of the women of childbearing age that
    were tested were above the EPA's safe level for mercury exposure.\51\
    Nationally, this translates into 6 million women of childbearing age
    with elevated levels of mercury from eating contaminated fish, and
    approximately 390,000 newborns at risk of neurological effects from
    being exposed in utero to elevated levels of mercury.\52\
    ---------------------------------------------------------------------------
        \51\U.S. Centers for Disease Control and Prevention. Blood and hair
    mercury levels in young children and women of childbearing age--United
    States, 1999. Morbidity and Mortality Weekly, March 2, 2001.
        \52\Derived from 1990 census data. http://www.census.gov
    ---------------------------------------------------------------------------
        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. EPA recently determined to regulate
    mercury from power plants, but industry has challenged that decision in
    court. Until these regulations go forward, power plants will remain the
    only large industrial source of mercury that is unregulated.
        Power plants emit many other (HAPs) air pollutants. In EPA tests,
    67 different HAPs were detected in the flue gas.\53\  Of these, 55 are
    known to be neurotoxic or developmental toxins (i.e., affect
    development of a child's brain, nervous system or body). Examples
    include cadmium, manganese and selenium.\54\  In addition, 24 are also
    known, probable or possible human carcinogens.\55\  Examples include
    arsenic, chromium, and beryllium. Power plants rank first in release of
    toxics to the air--842 million pounds of chemical releases to the air
    in 1999 (Toxics Release Inventory).\56\  This accounts for 40 percent
    of the nation's total.
    ---------------------------------------------------------------------------
        \53\USEPA, 1998. Study of hazardous air pollutant emissions from
    electric utility steam generating units--final report to Congress.
    February. 453/R-98-004a.
        \54\National Environmental Trust (NET), et al. 2000. Polluting Our
    Future: Chemical Pollution in the U.S. that Affects Child Development
    and Learning. September. www.environet.org.
        \55\USEPA, 1998. Study of hazardous air pollutant emissions from
    electric utility steam generating units--final report to Congress.
    February. 453/R-98-004a.
        \56\USEPA, 2001. 1999 Toxics Release Inventory--Public Data
    Release. www.epa.gov/tri
    ---------------------------------------------------------------------------
        The Clean Power Act of 2001 requires a 90 percent reduction in
    mercury emissions from power plants by 2007. Can a 90 percent reduction
    be in this timeframe? Yes. Numerous bench-scale and pilot-scale field
    studies of sorbent injection technologies developed specifically to
    capture mercury have demonstrated that removal efficiencies in excess
    of 90 percent are achievable\57\ \58\ Recent data collected by the EPA
    on the mercury capture efficiency of conventional pollution controls
    illustrates that for some coals and pollution control devices, more
    than 90 percent of the mercury is already being captured.\59\  In
    particular, for some coals, a combination of nitrogen oxides and sulfur
    dioxide controls can result in mercury removals ranging from 50 to more
    than 90 percent.\60\ \61\
    ---------------------------------------------------------------------------
        \57\USEPA, Mercury Study Report to Congress, Volume VIII, EPA--452/
    R-97-010, December, 1997.
        \58\ Northeast States for Coordinated Air Use Management.
    Environmental regulation and technology innovation: controlling mercury
    emissions from coal-fired boilers. September 2000.
        \59\Kilgroe, J. D. and R. K. Srivastava. EPA studies on the control
    of toxic air pollution emissions form electric utility boilers.
    Environmental Management, January 2001.
        \60\Gutberlet et. al. (1992). Measurement of the trace element
    mercury in bituminous coal furnaces with flue gas cleaning plants. As
    cited in Sloss, L. 1995. Mercury emissions and effects--the role of
    coal. IEA Coal Research, United Kingdom.
        \61\Kilgroe, J.D. and R.K. Srivastava. EPA studies on the control
    of toxic air pollution emissions form electric utility boilers.
    Environmental Management, January 2001.
    ---------------------------------------------------------------------------
        To optimize the mercury capture efficiency of existing technologies
    the Department of Energy has committed to full-scale demonstration
    projects that are underway right now. These demonstration projects will
    be completed between 2002 and 2005--a consistent timetable for
    achieving significant mercury reductions by 2007. Previous
    demonstration projects of emerging technologies have achieved mercury
    reductions in excess of 80 percent.\62\ \63\ In addition, the EPA
    states that controlling mercury emissions with multi-pollutant control
    technologies can be a cost-effective method for collectively
    controlling multiple pollutants. We believe that mercury legislation is
    needed as a technology-forcing mechanism and to provide the certainty
    that regulatory agencies, research groups, industry and equipment
    vendors need to carry their work through to full-scale
    commercialization within a reasonable, period of time.
    ---------------------------------------------------------------------------
        \62\Pavlish, J.H. and M.D. Mann, An economic basis for developing
    mercury control strategies. Energy and Environmental Research Center,
    University of North Dakota. Presented at Power-GEN International,
    Orlando, Florida, December 9-11, 1998.
        \63\Powerspan Press Release, August 23, 2000. Powerspan Corp.'s ECO
    Technology Demonstrates Unmatched Reductions in Mercury and Fine
    Particulate Matter.
    ---------------------------------------------------------------------------
    Carbon Dioxide
                The Power Sector Must Reduce Its Share of Greenhouse Gas
                        Emissions
        Carbon dioxide (CO2) is a byproduct of burning fossil
    fuels such as coal and oil. In a balanced system, carbon dioxide helps
    regulate the Earth's climate. However, too much carbon dioxide causes
    excess heat to be trapped in the atmosphere, forcing global
    temperatures upward, the process known as global warming.
        The largest source of carbon dioxide in the United States is the
    electric power industry, accounting for about 40 percent of all U.S.
    emissions. Of that, more than 88 percent of power plant emissions come
    from older, dirtier coal fired facilities. As a result of excessive
    burning of fossil fuels, carbon dioxide in the atmosphere has increased
    30 percent since the start of the industrial revolution, and is
    expected to continue climbing unless emissions are steadily reduced. If
    current energy trends continue, our atmosphere will contain twice as
    much carbon dioxide by 2050 as it did before the industrial revolution.
        The Intergovernmental Panel on Climate Change (IPCC) recently
    detailed the sensitivity, adaptive capacity, the vulnerability of
    natural and human systems and the potential consequences of climate
    change in its ``Climate Change 2001: Impacts, Adaptation, and
    Vulnerability'' report.\64\  For example, the IPCC found that a 5-
    degree increase in global temperatures over the next century could
    result in the death or displacement of hundreds of millions of
    people.\65\  The White House, as part of its review of U.S. climate
    change policy requested the National Research Council to conduct a
    review of the IPCC report.\66\  Among other questions, the White House
    asked the NRC to assess the likely consequences for the United States
    of climate change. In responding, the NRC relied heavily on the U.S
    National Assessment of Climate Change Impacts.\67\
    ---------------------------------------------------------------------------
        \64\International Panel on Climate Change, ``Climate Change 2001:
    Impacts, Adaptations, and Vulnerability--Summary for Policymakers
    (February 2001).
        \65\Ibid.
        \66\``Climate Change Science: An Analysis of Some Key Questions,''
    Committee on the Science of Climate Change, Division of Earth and Life
    Studies, National Research Council (National Academy Press 2001).
        \67\U.S. National Assessment. U.S. Global Change Research Program,
    ``Climate Change Impacts on the United States: The Potential
    Consequences of Climate Variability and Change'', 2001 Cambridge
    University Press.
    ---------------------------------------------------------------------------
                Health Effects Associated with Climate Change
        The NRC found that climate change has the potential to influence
    the frequency and transmission of infectious disease, alter heat-and
    cold-related mortality and morbidity, and influence air and water
    quality. Changes in the agents that transport infectious diseases
    (e.g., mosquitoes, ticks, and rodents) were found likely to occur with
    any significant change in precipitation and temperature. The Assessment
    tied increases in adverse air quality to higher temperatures. Children,
    the elderly, and the poor were considered most vulnerable to these
    adverse health outcomes.\68\
    ---------------------------------------------------------------------------
        \68\Ibid.
    ---------------------------------------------------------------------------
                Ecological Impacts Associated with Climate Change
        The Assessment found that coastal regions are at greatest risk from
    sea level rise and to increases in the frequency and severity of
    storms. Significant climate change will cause disruption to many U.S.
    ecosystems, including wetlands, forests, grasslands, rivers, and
    lakes.\69\
    ---------------------------------------------------------------------------
        \69\Ibid.
    ---------------------------------------------------------------------------
        Regarding effects on crops, the Assessment found: that many crop
    distributions would change, thus requiring significant adaptations.
    Such changes were found likely to be more costly to small farmers than
    large corporate farms. Hotter, drier scenarios increase the potential
    for declines in both agriculture and forestry.\70\
    ---------------------------------------------------------------------------
        \70\Ibid.
    ---------------------------------------------------------------------------
        Two articles in the most recent edition of the journal Science mark
    the first time scientists have computed the likelihood of a specific
    temperature increase rather than simply offering a range of
    possibilities. An Intergovernmental Panel on Climate Change committee
    released a report earlier this year saying a 5-degree increase would
    make it hot enough to cause severe weather that could kill or displace
    hundreds of millions of people. According to this latest research,
    there is a 90 percent chance that global warming will increase the
    Earth's temperature from 3 to 9 degrees Fahrenheit by the year 2100,
    and a 50-50 chance that a 5-degree increase will occur.\71\
    ---------------------------------------------------------------------------
        \71\Wigley, T.M.L, and Raper, S.C.B., ``Interpretation of High
    Projections for Global-Mean Warming `` Science (July 2001); Goldenberg,
    Stanley B., Christopher W. Landsea, Alberto M. Mestas-Nunez, and
    William M. Gray, ``The Recent Increase in Atlantic Hurricane Activity:
    Causes and Implications,'' Science (July 2000).
    ---------------------------------------------------------------------------
        Climate change cannot be reversed without significant cuts in U.S.
    emissions that contribute to the greenhouse effect. Thus was the
    conclusion that formed the basis for the Framework Convention on
    Climate Change and the 1992 Rio de Janeiro Treaty. The U.S. Senate
    unanimously ratified the Rio Treaty on October 7, 1992, shortly after
    its submission by President Bush. The Rio Treaty committed the United
    States to achieving a ``stabilization of greenhouse gas concentrations
    in the atmosphere at a level that would prevent dangerous interference
    with the climate system.'' Specifically, the Rio Treaty aimed at
    reducing carbon dioxide emissions to their 1990 levels by 2000.
    Obviously, the United States has not met the levels set out in the
    Accord. Instead, carbon dioxide emissions have risen by more than 15
    percent since 1990 according to the Energy Information Administration.
    Any rational plan to curb global warming must include sharp reductions
    in power plant carbon dioxide emissions. Power system reductions
    consistent with the Rio targets are included in the Clean Power Act of
    2001.
    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
    suggested by the imperatives of ecosystem recovery; huge health and
    environmental dividends in the form of fine particle reduction and
    reduced haze will result as well.
          In the case of nitrogen oxides, ozone smog health impacts
    are roughly linear, and 75 percent cuts in nitrogen oxides will
    dramatically reduce summer smog as well as year round nitrogen and acid
    rain impacts.
          Mercury is highly toxic in small amounts, and, as for
    other industries, maximum available control thresholds should be
    pursued.
          While reducing U.S. power plant emissions alone will not
    solve the world climate change problem, an important start can be made
    in this sector. Reductions consistent with the nation's Rio treaty
    commitments--a return to 1990 levels--are an appropriate starting
    point.
        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), use of cleaner fuels, and greater
    commitment to energy efficiency and renewable resources.
          Year round nitrogen reductions of 1975 percent or more
    are achievable through selective catalytic and non-catalytic reduction
    technology, low NOx burners, overfire air, and use of cleaner fuels,
    and greater commitment to energy efficiency and renewable resources.
          Power sector reductions of mercury in the range of up to
    90 percent are currently feasible with some coals, and reductions of 90
    percent or more from all coals appear commercially viable within the
    time horizon contemplated by the Clean Power Act of 2001. Technical
    means include coal cleaning, sulfur dioxide and nitrogen oxides
    scrubbing co-benefits, fabric filters, carbon sorbent injection, and
    adoption of cleaner fuels.
          The buildup of carbon dioxide and other heat-trapping
    gases in the atmosphere is primarily responsible for the unprecedented
    global warming seen over the last 50 years, according the National
    Research Council. As the Council recently concluded, the adverse health
    and environmental impacts of climate change are real. The largest
    source of carbon dioxide in the United States is the electric power
    industry, accounting for 40 percent of all U.S. emissions. Of that,
    more than 88 percent of power plant emissions come from older, less
    efficient coal-fired facilities. Any rational policy dealing with the
    U.S. contribution to climate change must include power sector carbon
    reductions. Capping power sector emissions of carbon dioxide at 1990
    levels, in accord with the Rio Treaty, is technically feasible. This
    will require an expansion of the nation's use of energy efficiency,
    clean renewable and gas-fired energy sources, and potentially the use
    of advanced coal technologies.
    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 change the
    landscape:
          The science underlying reduction targets for acid rain,
    fine particles, haze and mercury has become more compelling.
          Many States have moved ahead of the Federal Clean Air
    Act. Recently, for example, Massachusetts, Connecticut, and Texas have
    adopted regulations that will chop air pollution from grandfathered
    power plants by up to 75 percent. In Illinois, legislation has passed
    that will require promulgation of similar regulations by 2002. Such a
    measure has passed one house of the State legislatures in North
    Carolina and New York. While demonstrating leadership, however, the
    effectiveness of State action will be limited by transboundary impacts.
          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 many recent newspaper editorials.
          Many voices in industry are recognizing the value of a
    comprehensive multi-pollutant approach including carbon dioxide, rather
    than a balkanized approach--and the wisdom where possible of not
    throwing good money after bad.

                                   __________
                                           Air Resources Board,
                    California Environmental Protection Agency,
                                        Sacramento, CA, August 7, 2001.

    The Honorable James Jeffords, Chairman,
    Senate Committee on Environment and Public Works,
    Senate Office Building,
    Washington, DC, 20510.

    Dear Senator Jeffords: The purpose of this letter is to provide
    clarification to the testimony of Mr. C. Boyden Gray presented on July
    26, 2001, before the Senate Committee on Environment and Public Works.
    In his testimony Mr. Gray quoted excerpts of verbal testimony that Mr.
    Peter D. Venturini, Chief, Stationary Source Division, California Air
    Resources Board recently presented at a public meeting in Sacramento,
    California regarding the U.S. Environmental Protection Agency's draft
    New Source Review 90 Day Review Background Paper. The impetus for this
    letter is our concern that Mr. Gray's testimony (enclosed) mislead the
    committee to believe that since California has made considerable
    progress toward achieving clean air standards there is justification
    for relaxing or eliminating the New Source Review program.
        On the contrary, in both verbal and written comments to the U.S.
    Environmental Protection Agency (enclosed) we shared our experience
    with the success of New Source Review in California. Because of the
    serious nature of California's air quality problem, our State has
    adopted New Source Review requirements that go beyond Federal
    requirements. The cornerstone of our success has been the advanced
    emission controls that our State requires for new and expanding sources
    and the fact that California law does not allow sources to ``net out''
    of emission control requirements.
        Peter Venturini, in verbal testimony presented July 12, 2001,
    stated that the New Source Review program in California is working and
    has played an integral role in California's long history of achieving
    environmental progress. It has also resulted in the construction of
    some of the cleanest power plants in the nation. The context of Mr.
    Gray's quote implied that Mr. Venturini was discussing the success of
    the Federal air quality program. In fact, Mr. Venturini was discussing
    the success of the more stringent California program, and was using the
    effectiveness of achieving emission reductions through stringent
    emission controls imposed through New Source Review as an example for
    the rest of the nation to follow.
        Further, Mr. Gray misquoted the facts; the 50 percent reduction in
    overall statewide ozone exposures that has occurred in California over
    the past 20 years has been due to a combination of emission reductions
    from both stationary sources and mobile sources, not just from emission
    reductions from ``businesses in the State.''
        New Source Review is based on the solid premise that new emissions
    should be minimized and mitigated so that industrial growth can
    continue without undermining progress toward achieving clean air
    mandates. It is also based on the fact that the most cost-effective
    time to control a source is at the time of its installation or when it
    undergoes a significant modification. We believe that any weakening of
    New Source Review control requirements will increase the need to
    achieve a greater proportion of emission reductions from existing
    sources and will likely result in a less effective pollution control
    program.
        I appreciate this opportunity to clarify our comments. If you have
    any questions, please call me at (916) 445-4383.
                Sincerely,
                           Michael P. Kenny, Executive Officer.

                                CLEAN POWER ACT

                                  ----------

                           THURSDAY, NOVEMBER 1, 2001

                                           U.S. Senate,
                     Committee on Environment and Public Works,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:34 a.m. in room
    406, Senate Dirksen Building, Hon. James Jeffords [chairman of
    the committee] presiding.
        Present: Senators Jeffords, Bond, Boxer, Campbell, Carper,
    Chafee, Inhofe, Smith, and Voinovich.

             FEDERAL AND STATE ROLES IN REDUCTION OF AIR POLLUTANTS

        Senator Jeffords. The committee will come to order.
        We have a number of meetings and hearings going on and
    members are being squeezed considerably. So I will start off by
    delaying my opening statement and turn to Senator Inhofe.

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

        Senator Inhofe. Thank you, Mr. Chairman.
        I do appreciate it. I explained to the chairman we have our
    defense conference meeting in 15 minutes, and that is required
    attendance. So I would like to get a statement in. I will not
    be able to stay for the meeting.
        First of all, Mr. Chairman, I think those of us in our part
    of the country would be very much opposed to the provisions of
    S. 556. Quite frankly, I think it will pass the committee here,
    but will not pass on the floor.
        First, I believe S. 556 to be inequitable to require an
    across-the-board reduction in pollutants when States such as
    Oklahoma, and I would suggest Colorado and several of the other
    States that are represented on this panel, already are in
    attainment with these standards, and we are talking about all
    the way across the board.
        In the case of SOx, Oklahoma's coal-fired power plants had
    an average SO2 emission rate which is approximately
    half of the United States national average coal-fired emission
    rate. As a result, Oklahoma already over-complies with its
    phase two Acid Rain Program allocation by 27 percent.
        In the case of NOx, Oklahoma's coal-fired stations had an
    average NOx emission rate of roughly 20 percent below the
    national coal-fired emission and 10 percent below its 1995
    average mercury emissions. According to the EPA, Oklahoma
    mercury emissions from coal-fired utility boilers are 1.8
    percent of the nationwide total.
        In carbon, the regulation of CO2 would make the
    price and availability of energy a national crisis at a scale
    that our nation has never before experienced, even that just in
    recent months.
        Oklahoma's environmental profile mirrors that of many of
    the western States. Oklahoma does not have the SOx, NOx, or
    mercury problems. Therefore, before we are asked to reduce our
    emissions even further, other States in other parts of the
    country where there is a problem should have to start lowering
    theirs. Second, by limiting fuel options for power generation,
    increasing the cost of electricity to Americans and stopping
    the construction of new generating facilities, S. 556 is the
    very antithesis of sound national energy policy.
        You know, there has been a lot of talk about energy policy
    in this country, and I was severely criticized, Mr. Chairman,
    for trying to put H.R. 4 on the Senate authorization--Defense
    Authorization bill, and yet I see that as a national security
    policy. I mean, the fact that we are no 56 percent dependent on
    foreign countries for our ability to fight a war, and half of
    that is from the Middle East. The fastest-growing contributor
    to that deficit that we have is Iraq. So it is ironic that we
    would have to depend on Iraq for our ability to fight a war
    against Iraq, and that is kind of the situation that we are in.
        So we in Oklahoma right now are complying, and I do not
    think this approach is going to be working, and quite frankly,
    I do not think it is going to--I think it will pass the
    conference, and there are a lot of people here in the room who
    would be very distressed for a period of time. But I cannot
    imagine that this will pass the floor. We will at that point be
    making some challenges, some amendments, and trying to come up
    with a compromise that is better, particularly for States like
    my State of Oklahoma.
        [The prepared statement of Senator Inhofe follows:]
       Statement of Hon. James M. Inhofe, U.S. Senator from the State of
                                    Oklahoma
        I am afraid that our chairman has not come close to fully
    considering all the issues associated with his proposal. If such
    legislation is to ever be enacted into law, the compromise, unlike S.
    556, must contemplate and balance our nation's existing environmental
    achievements and energy supply and security.
        First, I believe S. 556 to be inequitable to require an across the
    board reduction in pollutants when states, such as Oklahoma, currently
    emit well below the national averages. According to EPA, Oklahoma is in
    attainment with ambient air quality standards for all six criteria air
    pollutants--carbon monoxide, nitrogen dioxide, lead, PM, ozone and
    sulfur dioxide. Let me specifically address SOx, NOx, Mercury, and
    Carbon emissions in Oklahoma:
        SOx: Oklahoma coal fired power plants had an average SO2
    emission rate, which is approximately half of the U.S. national average
    coal fired emission rate. As a result, Oklahoma already over-complies
    with its Phase II Acid Rain program allocation by 27 percent.
        NOx: Oklahoma's coal-fired stations had an average NOx emission
    rate of roughly 20 percent below the national coal-fired emission and
    10 percent below its 1995 average rate.
        Mercury: According to EPA Oklahoma mercury emissions from coal
    fired utility boilers are 1.8 percent of the nationwide total.
        Carbon: The regulation of CO2 would make the price and
    availability of energy a national crisis--at a scale that our nation
    has never before experienced.
        Oklahoma's environmental profile mirrors that of many western
    States. Oklahoma does not have SOx, NOx, or Mercury problems.
    Therefore, before we are asked to reduce our emissions even further,
    other States in the Midwest and North East should be expected to get
    their emission levels down to the levels cleaner States are today. It
    is ridiculous to impose percentage reductions on us--at enormous
    marginal expense--before those regions who have significant air
    problems do their part.
        Second, by limiting fuel options for power generation, increasing
    the cost of electricity to Americans, and stopping the construction of
    new generating facilities, S. 556 is the very antithesis of sound
    national energy policy. Coal-fired units provide 61.2 percent of the
    Oklahoma's electric generation. S. 556 would significantly change the
    source of energy in Oklahoma away from coal. Oklahoma utilities depend
    upon coal for power because of its much lower fuel cost versus natural
    gas and it's a clean source of energy. Since fuel costs account for the
    bulk of electric generating costs, Oklahoma's coal use has kept power
    rates lower than neighboring States of Arkansas, Kansas, Missouri and
    Texas.
        According to the U.S. Department of Energy, Oklahoma utility rates
    averaged 5.37 cents per kilo Watt Hour. That is 19 percent less that
    the national average power rate. These utility rates are much lower
    than States that depend heavily upon natural gas (e.g., New York, New
    Jersey, California ) or oil/renewables (e.g., Maine) for generation.
    When legislation is rushed into effect without adequate thought, it is
    likely to do more harm than good. Let's not forget. When the price of
    energy rises that means the less fortunate in our society must make a
    decision between keeping the heat and lights on or paying for other
    essential needs.
        As a Senator and grandfather, I want to ensure the cleanest
    environment for our nation. The real challenge with dealing with this
    issue isn't getting just environmental protection or just affordable
    energy. The real challenge is getting both. S. 556 does not even come
    close to getting us both, and a compromise is a lot of hard work away.
    That is why, with so many enormous issues to tackle pertaining to S.
    556 or other similar legislation, I think a markup in the near future
    would be a futile and divisive exercise. Rather than simply marking up
    a bill, which would be dead-on-arrival, a much more constructive
    exercise for the committee would be to work on a compromise with
    Energy, Interior, and EPA and all the other relevant agencies and
    stakeholders.
        Senator Jeffords. Thank you very much, Senator.
        Our first witness has now arrived. Congressman Boehlert
    would you mind coming forward?
        Senator Campbell. Mr. Chairman, are we going to have an
    opportunity for opening statements?
        Senator Jeffords. Yes, after Sherwood Boehlert.
        Welcome. I appreciate your cooperation and being with me in
    this endeavor. We've had many good times together and fought
    many battles, and we've got another big one on our hands.
    Please proceed.

     STATEMENT OF HON. SHERWOOD BOEHLERT, U.S. REPRESENTATIVE FROM
                         THE STATE OF NEW YORK

        Representative Boehlert. Thank you, Mr. Chairman. I am glad
    to see some good friends up there--friends, Senators.
        Thank you for allowing me to appear at this important
    hearing. My testimony will be brief. I am really here to make
    one simple, but significant point. The four-pollutant bill has
    bicameral and bipartisan, I guess I should say tripartisan,
    support. Congressman Waxman and I are as committed as ever to
    moving forward with the companion four-pollutant bill we
    introduced in the House.
        Now, some may say, how can we talk about environmental
    legislation at a time like this? My response is that just as we
    are being urged to carry on with our daily lives despite
    terrorist threats, we must carry on with the full gamut of our
    legislative business in the face of these threats. We must do
    so because our environmental problems are just as real, just as
    significant, and just as solvable as they were before September
    11.
        The lakes in the Adirondacks are still acidifying. The
    ecological and economic consequences of that acidification are
    still serious. The obvious damage caused by terrorists does not
    make the insidious damage caused by pollution any less
    threatening. Indeed, the consequences of global climate change
    will still be with us long after the war in Afghanistan is a
    distant event students will have to learn about from history
    books.
        Now, even those who accept this analysis may say, OK, but
    should we be passing laws now that could make us more dependent
    on imported sources of energy? My answer is that we ought to be
    attacking our dependence on foreign oil primarily by becoming
    more energy efficient and developing alternative fuels, not by
    blithely ignoring the long-term environmental and economic
    costs associated with our continuing dependence on coal.
    Moreover, coal would still be a significant fuel after the
    passage of a four-pollutant bill and substitutes for coal are
    readily available in North America.
        So I think that if anything, the debate this committee is
    beginning to bring to a head is long overdue, and I hope this
    hearing will be a first step in bringing all the Federal, State
    and private sector players to the table for serious and
    relatively swift discussions about how to phase in a strict
    four-pollutant regime, a cost-effective regime that would give
    Americans cleaner air, while giving utilities greater
    regulatory certainty.
        Let me emphasize, though, that regulatory certainty should
    come to be only as part of a new regime that will significantly
    reduce the emissions from power generation. I would strongly
    oppose making any changes in new source review unless they are
    implemented as part of and at the same time as a new pollution
    control regime.
        Let me add with my own committee hat on that we are being
    pushed toward a new pollution control regime by science. The
    more we learn about air emissions, the more we understand the
    imperative to limit them.
        For example, the new studies of acid rain that were
    released this past spring indicated clearly that without
    further cuts in both sulfur dioxide and nitrogen oxide, acid
    rain will continue to deplete soils, damage trees, acidify
    lakes and kill fish. The good news, though, is that the 1990
    Clean Air Act Amendments are having a noticeable positive
    impact, demonstrating that we have the power to remedy the
    situation.
        Similarly, the National Academy of Sciences review of
    climate change science issued this past spring at the request
    of the President clearly indicates that despite continuing
    uncertainties, climate change is a real and serious threat. But
    there, too, reviews such as the Department of Energy's Five
    Laboratories studies indicate that we have the wherewithal to
    attack the problem.
        So Mr. Chairman and members of this committee, I want to
    congratulate you for having this hearing, and I urge you to
    move forward as swiftly as possible with a four-pollutant bill.
    On the other side of the Capitol and on both sides of the
    aisle, we're ready to work with you.
        Thank you very much.
        Senator Jeffords. Thank you for an excellent statement, and
    I deeply appreciate your cooperation and look forward to
    working with you. This is a most critical issue, as you know,
    in this nation, and I would like to ask you a couple of
    questions.
        What are the obstacles in the House to moving forward with
    a 4-P legislation?
        Representative Boehlert. Well, I think we are advancing. We
    have 112 cosponsors of our bill now, and I think it is one of
    prioritizing. Obviously first and foremost, we are all
    concerned about the aftermath of September 11 and we are
    dealing, for example, today somewhat belatedly with the airline
    security bill, but we are going to deal with it. We have dealt
    with antiterrorism legislation. We have dealt with a lot of
    other issues that directly relate to the horrific episode of
    September 11.
        That does not mean we should stop all other activity. I
    would point out that we have a sizable and growing number of
    Republicans who are just as concerned as you and I are about
    this issue. I think when all is said and done, the likelihood
    of getting something done this year is diminished day by day,
    but next year I think we will do it.
        Do you want to know what? It not only is good policy, but
    it is good politics. We've got an election coming next year,
    and the American people are going to ask us, what are you doing
    about this very important issue? And I think we are prepared to
    respond with some solid legislation.
        Senator Smith, welcome. Good to see you.
        Senator Smith. Good to see you.
        Senator Jeffords. The EPA and the EIA analysis we requested
    came back with a rather gloomy view of technology innovation.
    What are your thoughts on that?
        Representative Boehlert. Well listen, we are going to
    promote technology innovation. I am privileged to chair the
    Committee on Science and we are doing a lot of things to get
    more investment within the Federal Government. But if the world
    out there sees that we are really serious about this, and I
    know you are and I am and others on this committee are, that
    innovation will come because there will be an incentive to
    invest. But the fact of the matter is, even using existing
    innovation, existing technology, we can do the job.
        I can recall back in 1990 when President Bush signed the
    Clean Air Act Amendments, a lot of people thought that was a
    minor miracle, but it was achieved. I hate to think of where we
    would be today if that legislation were not in effect.
        Senator Jeffords. Senator Smith?
        Senator Smith. I don't really have any questions of
    Congressman Boehlert. I do have a statement I would like to
    make, but if others have questions of the Congressman, I don't
    want to hold him up.
        Senator Jeffords. What I want to do is to let Sherry go
    first, but I am going to have everyone have an opportunity to
    ask questions. I will make my statement, and then we will go
    back to regular order, but I want to take care of my good
    friend from the House.
        Representative Boehlert. Thank you very much.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. I have looked at your legislation, and
    to be very frank with you, it would be a disaster for my State
    and for the manufacturing sector of the United States of
    America. Terrible. You have mentioned that there are
    alternative energy sources that could make up for perhaps coal.
    My statistics show that 0.1 of 1 percent of the energy in this
    country is being produced by renewables. If you look at the
    demand for energy in this country and look at our inability to
    provide for that energy demand that is going to be there, to
    not look at increasing gas, oil, coal, nuclear energy to meet
    that need puts us in a very, very bad position and a position
    where we will be relying too heavily on foreign sources of
    energy and not be competitive in that global marketplace in
    terms of this nation.
        I would just like you to comment how you think that
    renewables are going to make up for legislation that I think we
    can prove will put coal out of business in the United States of
    America.
        Representative Boehlert. Senator, I don't think it would
    put coal out of business by any stretch of the imagination. We
    get more than 50 percent of our energy needs from the coal
    industry, and as a matter of fact in my capacity as Chairman of
    the Science Committee, we worked very well with the coal
    industry on clean coal technology legislation.
        It is inevitable that we are going to be using coal for a
    long, long time to come. Let's use cleaner coal. But your
    statement just gave me one of the best testimonies I have heard
    for supporting my effort to increase CAFE standards for
    automobiles, for trucks and suburbans. As a matter of fact, if
    we do that we will save a lot. We will lessen the demand. We
    should not always think about the supply side of the equation.
    I am just as interested as you are in making sure the dynamic
    manufacturing sector in America continues to be dynamic. I want
    to work with them in cooperation and make sure they thrive, but
    they also should work with me and you and all of us on the
    committee to make sure the American people are factored into
    the overall equation in terms of their health and welfare and
    daily well-being.
        So I think we can do this in a responsible way that will
    not unduly burden any one sector of the economy; that will
    divert the attention from always focusing on the supply side of
    the equation and begin for all of us to think seriously about
    the demand side. We can address that.
        Senator Voinovich. Well, my feeling is this, is that unless
    we sit down and really negotiate these numbers, that nothing is
    going to be done.
        Representative Boehlert. I would agree with that, Senator.
        Senator Voinovich. Because those of us from the Midwest
    that are getting clobbered today and are in recession are going
    to do everything we can because if we don't stop this, we feel
    it is going to kill our economy. So it seems to me that what we
    need to do is to sit down and try and rationalize these things
    together, looking at clean coal technology, looking at ways
    that we can get conservation.
        The numbers that are in this bill are devastating, and it
    is really important that on a bipartisan, regional basis, we
    sit down and start to talk about this realistically, taking
    into consideration that we want to improve the air in this
    country and public health, but at the same time provide
    reasonable energy for the people in this nation, including our
    manufacturing sector, which is the backbone of the American
    economy.
        Representative Boehlert. Senator, I couldn't agree more. I
    am a realist and I know from reviewing your very distinguished
    career, you are too. Nothing is set in concrete. You can't be
    all for or all against. You've got to sit down at the table and
    talk reason. But in the final analysis, we have to do a hell of
    a lot better than we are now doing to protect the health and
    well-being of the American people. I think you are as committed
    to the proposition as I am.
        So there is room for discussion and compromise. But we
    should not come to this hearing or any hearing with a closed
    mind. So I am most anxious to work with you and other
    colleagues on the committee and the distinguished Chairman to
    do just that. In the final analysis, it does not serve us well
    if we cleanup the air and kill industry. I don't want to do
    that. My people work in industry just like your people do.
        I will tell you this, my experience in working very hard
    for a long time on the Clean Air Act Amendments of 1990, I
    mean, I came to Congress in 1982, first elected, freshman in
    1983, I came with the notion I was going to do something about
    acid rain because it was systematically destroying the lakes in
    the beautiful Adirondacks. Five hundred of those lakes are now
    dead.
        I was an instant success. It only took me 8 years to do
    anything. But in the final analysis, when I was developing that
    Clean Air Act Amendment with my colleague from California,
    Congressman Waxman, I didn't spend all the time talking with my
    colleagues in the Green community. I proudly identify with
    them. I spent the vast majority of my time talking to the
    people in the utility industry from places like Ohio and
    Indiana, because I knew they were going to be most severely
    impacted, and it would be a heavy negative impact unless we did
    it right.
        In the final analysis, we worked out some agreement, some
    adjustment, some compromises and we got a bill that President
    Bush signed on November 15, 1990. The utility industry in Ohio
    and Indiana didn't stand up and cheer when that passed because
    that made life a little more difficult for them. But they
    understood it was responsible legislation because we sort of
    worked it out together, and they did not try to put up
    roadblocks.
        So I will work with you, Senator, or anyone else who is as
    committed as you are to doing the right thing for the right
    reasons. But I say if we come to this discussion with an open
    mind, we have a great opportunity ahead of us.
        Thank you very much, Senator.
        Senator Voinovich. Thank you.
        Senator Jeffords. Senator Chafee?
        Senator Chafee. Thank you, Mr. Chairman.
        I know you have worked hard on this, and Senator Smith
    also. I commend you both for your hard work, and as we just
    heard in the exchange, this is going to take delicate
    compromise to come up with a good bill. I look forward to
    working with everybody on that.
        [The prepared statement of Senator Chafee follows:]
    Statement of Hon. Lincoln Chafee, U.S. Senator from the State of Rhode
                                     Island
        Senator Jeffords, thank you for holding today's hearing on the
    Clean Power Act. I commend you on placing clean air on the top of your
    priority list. I must also thank Senator Smith for his work over the
    last 2 years on a multi-pollutant approach to addressing the nation's
    clean air concerns.
        Let me start off by clearly stating that Congress must pass
    legislation that requires power plants to reduce emissions that
    contribute to acid rain, smog, respiratory disease, and global warming.
    Legislation should be enacted to provide reductions of nitrogen oxides
    (NOx), sulfur dioxide (SOx), mercury, and carbon dioxide
    (CO2). As this committee has heard, there is significant
    disagreement over the inclusion or exclusion of carbon dioxide in any
    given proposal. However, science has indicated that the continued
    overproduction of carbon dioxide increasingly threatens the long-term
    health of our planet. I firmly believe that the United States, as the
    world's leading industrial nation, must take the lead in curbing the
    disastrous effects of carbon dioxide overproduction.
        Senator Jeffords. Thank you.
        Representative Boehlert. Mr. Chairman, it's good to come
    over here and see all my former colleagues.
        Senator Jeffords. Yes, well, it is good to have you over
    here and straighten them out.
        Representative Boehlert. Thank you very much.
        [Laughter.]

    OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
                          THE STATE OF VERMONT

        Senator Jeffords. We will now sort of go back to regular
    order. I am going to make my opening statement, and then
    Senator Smith and others can make their opening statements.
        Today, the committee will hear testimony from Federal and
    State witnesses on S. 556, the Clean Power Act. We have asked
    them to tell us about the impact of this legislation on the
    environment, air quality goals, the economy and energy supply.
    We have also asked for their suggestions for any improvements
    or amendments to the bill.
        Unfortunately, because of the transportation delays, my
    friend, Governor Howard Dean of Vermont, will be unable to
    testify as planned. I am hopeful that he might be able to make
    it to the next committee hearing on multi-pollutants, which is
    scheduled for Thursday, November 15. However, I am pleased to
    welcome Sherry Boehlert, and we have heard from him, and are
    certainly pleased that he could be here.
        This is a busy day, so I will keep my remarks short and
    encourage everyone to do the same.
        Since the horrific events of September 11 and the more
    recent terrorism in these very buildings and around Washington,
    our world seems increasingly uncertain. Places we thought were
    secure now appear unsafe. Even the air we breathe cannot be
    taken for granted, we have found. My brief trip into the Hart
    Building last Thursday showed me how hard it is to walk around
    while only exhaling. It's very hard to do. You ought to try
    that.
        [Laughter.]
        Senator Jeffords. I don't mean to make light of the anthrax
    threat. It has caused great dislocation, inconvenience and
    several deaths. This is a serious and acute threat to our
    nation's capital and its people. The response was a little
    disorganized at first, since who could envision or predict the
    evil insanity of terrorists willing to use such weapons? Now,
    however, Americans are rising to the challenge. They are using
    their ingenuity to combat the health threat and our vast
    scientific know-how is being employed to track down those
    dangerous people.
        We are good at responding to short-term threats.
    Unfortunately, we don't do as well with long-term threats. That
    is why we are here today. That requires coordinated planning
    over the years, like global warming or acid rain. However, we
    know the world is warming, and that man-made emissions are
    primarily responsible for the warming. If we don't swiftly and
    radically change our behavior, Boston's weather will probably
    become more like Richmond's in the next 50 years.
        We also know that power plant pollution contributes to acid
    rain, causes lung disease and premature mortality, and a host
    of other problems. These are sometimes hard to see, because
    they take longer to clearly manifest than the effects of
    biological weapons. However, like this current plague, once the
    symptoms are full-blown, a cure is costly and difficult at
    best. We would be better off to take actions now to avert
    catastrophic necessities in the future.
        I am appreciate that the Energy Information Administration
    has provided the committee with the analysis we requested in a
    timely fashion. I thank them. Late yesterday, we finally
    received the EPA's analysis after much delay. Unfortunately,
    its late arrival gave us very little time to review it. If we
    are going to really meet the multi-pollutant challenge, I hope
    there will be more cooperation and openness than has occurred
    thus far.
        It will also take a much healthier dose of optimism about
    our ability to engineer solutions to achieve ambitious goals.
    Unfortunately, both analyses failed to address perhaps the most
    fundamental matter: What are the costs of full implementation
    of the existing statutory and regulatory requirements,
    including the mercury rule and the fine particulate matter
    standard
        Without that information, it is impossible to determine the
    true incremental costs of any additional control requirements.
    That is the same question that the committee asked the
    Administrator 2 months ago, with no response. I am a patient
    man, as my colleagues know. I am also respectful of the
    situation in which the White House, the Administration now
    face. But the time for delay is over and important work should
    resume. Climate change, in particular, must be addressed.
        The industrialized nations of the world are meeting in
    Marrakesh right now to discuss self-imposed carbon limits. Yet
    the largest emitter, the United States, will sit idly by
    without a plan. That is just not wise, nor is it sensible to be
    disengaged from helping the Congress develop smart and
    constructive environmental policy.
        I am hopeful that these things will change. I will continue
    to do my part, including the development of legislation to cap
    carbon emissions in other sectors, and other efforts to
    stimulate carbon reductions. We all need to work together a
    little harder to leave the next generation with a cleaner
    environment.
        Despite these troubled times, we have a responsibility to
    plan for a future where the air is safe to breathe and the
    world is more predictable.
        Senator Smith?

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

        Senator Smith. Thank you very much, Mr. Chairman.
        I was interested to hear your talk on delays. As you know,
    the Senate passed a brownfields bill that we finally got
    unclogged after years and years and years of being held up. It
    passed at 99 to nothing. It is now being held up in the House
    over Davis-Bacon because a few Democrat members have decided
    that that needs to be attached to the bill so we can run the
    costs up more to do the brownfield cleanups. This is the kind
    of thing that happens around here that frustrates all of us,
    and so I guess we shouldn't be too upset with the delays, but
    it is frustrating, I tell you.
        I want to thank all the witnesses, and a special welcome to
    Ken Colburn who came down from New Hampshire, who will be on
    one of the--I believe the third panel. He does a great job for
    the people in the State, and has been very helpful to me and my
    staff, and I appreciate it, Ken.
        Mr. Chairman, I have long been a proponent of reducing
    utility emissions, as you know. But I have a little bit of a
    different perspective. We all seek the same goal here. But I
    believe unfortunately current law fosters a combative
    relationship that does too little to increase environmental
    protection, and too much to increase litigation, delay,
    uncertainty and so forth. In many ways, the law actually
    contributes as an obstacle to cleaning up the air.
        Now, the bottom line is that we have a system that
    discourages new energy production, increases the cost for
    current production and delays environmental protection. This is
    just simply unacceptable. I would like to change it. I know
    many of my colleagues would like to change it. I began an
    inclusive process when I was the chairman 2 years ago, and I
    applaud you, Senator Jeffords, for continuing to have that kind
    of inclusive process and discussion. We have differences, but
    that's life and we will try to work them out.
        It is vital, though, that we reduce our emissions, and at
    the same time separate ourselves from the current command and
    control system that really helps no one. The command and
    control system is not effective and not efficient. We need to
    embrace free market mechanisms that rely on innovation.
    Innovation and technology 1 day, and maybe not too far away, is
    going to make regulation a thing of the past. If innovation and
    technology move past regulation, then we don't need to worry
    about regulation. We will do more if we are ahead of the game
    with innovation and technology, then we can let regulation sit
    aside and not worry about it. Believe me, it is happening in
    other countries of the world.
        We have a successful model to follow right here in the
    United States--Congressman Boehlert mentioned it--and that is
    the Acid Rain Program. I would like to, with the help of a
    couple of charts here, clearly we need further reductions in
    sulfur emissions, but no other environmental program compares
    with the efficiency and the effectiveness of the Acid Rain
    Program. It was criticized. We have seen compliance under this
    program exceed 99 percent. You tell me one environmental
    program that has been 99 percent successful. Many of the
    reductions were realized ahead of schedule, and this map proves
    it.

        There was concern that the acid rain cap-and-trade program
    would create so called ``hot spots,'' and EPA data has shown
    that is not occurring. On the contrary, if you look at this
    chart, it shows the monitored reductions in SO2
    deposition due to the Acid Rain Program. The map on the left
    shows deposition for 1989 through 1991, and the map on the
    right, for 1997 and 1999. Look at the difference. The red is
    the bad spots, and then in 1991, now in 1997 and 1999, you can
    see how much that has diminished. Where are the hot spots?
    There aren't any. The significant reduction in red and yellow
    areas on the map indicate that the most adversely affected
    areas have seen the greatest environmental benefit from the
    Acid Rain Program. The existing hot spots have cooled, and new
    ones have not occurred.
        Finally, one last success of this program has been the
    steady decline in estimates of annual compliance costs. The
    next chart, everybody said this was going to cost $7 billion to
    $10 billion, maybe more--the sky is the limit. It has cost
    about $1 billion. Look at the effectiveness. This was cap-and-
    trade. This was trade. It worked. It was market-based. It was
    flexible. It was incentive-driven, and it has proven that the
    most effective and efficient environmental program on the books
    works. If you could do it on acid rain, we can do it on other
    emissions as well, and we have proven we can do it.
        So let's move to innovation and replace regulation. I want
    to thank Chairman Jeffords for his leadership on this, but
    there is a lot of work to be done. With all due respect, S. 556
    is not ready for markup yet. Discussions with members simply
    have not yet gotten to the point where we are ready for a vote
    on the bill, and I think if we could have that discussion,
    Senator Voinovich and I and others, we can make this a reality.
        There is a lot to do to establish the broad support that we
    need, Mr. Chairman, in order to get legislation passed. If it
    is passed by a one-vote margin or up or down on Republicans one
    side, Democrats the other, it is not going to go anywhere. We
    need a consensus, otherwise we are not going to get progress.
    Even sometimes when you get a consensus and you pass a bill out
    of here, like brownfields, you still can't get it passed, which
    is the frustrating thing, as I said.
        It is my hope that this will be the first in a long line of
    legislative hearings, which I know you are prepared to do,
    where members are able to discuss options. I don't think we are
    very far away from reaching that consensus. I worked on this
    for 2 years as the chairman. We had a lot of meetings, a lot of
    discussions, there are lot of people very interested, both in
    industry and in the environmental community, to make this
    happen. There are some great models out there--acid rain here;
    the nation of Holland, which Governor Whitman is very aware of
    in terms of what they are doing with pilot projects there to
    reduce emissions, as opposed to with true innovation and
    technology, and not with regulation.
        If we do this right, with flexibility, market-based
    emissions trading, and clear limits, we will create a system
    that not only reduces air pollution, but costs less, while
    still enhancing fuel diversity. Both EIA and EPA have completed
    analysis of multiple pollutant reductions scenarios, and
    Senator Voinovich and I have requested those. Both indicate
    that we can make dramatic reductions for an annual cost that is
    below the original cost estimates for the Acid Rain Program--
    significant reductions in NOx, SOx, SO2, mercury--
    EPA's analysis also includes CO2--for less than the
    expected cost for partial reductions in just SO2.
    What is more, coal consumption in the East increased in this
    analysis. This makes me optimistic that we can improve on the
    current system.
        So I look forward to working with all my colleagues to make
    this happen.
        Thank you, Mr. Chairman.
        Senator Jeffords. Well, thank you, Senator Smith.
        I want to give all Senators a chance to comment, but we
    have a long list of witnesses also, so I would appreciate it if
    you could be brief.
        Senator Boxer?

    OPENING STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM THE
                          STATE OF CALIFORNIA

        Senator Boxer. Mr. Chairman, I will summarize my statement
    and ask unanimous consent that it be included in the record in
    its entirety.
        Senator Jeffords. That is granted.
        Senator Boxer. Thank you.
        Mr. Chairman, thanks for holding this hearing. As you
    probably know, I am a strong supporter of your legislation, and
    I was pleased to be an original cosponsor when you introduced
    the bill last November. I might say, Mr. Chairman, I hope we
    are as successful in this legislation as we were in getting the
    standard for arsenic reduced. As we all know today reading the
    paper, the Administration has gone from the 50 part per billion
    to 10, based on their own study. We were telling them all along
    that we had enough studies. This one even told them it ought to
    go lower than 10, because even at 10, the cancer risk is higher
    than what EPA puts forward as a goal.
        The bottom line is, we were successful. We kept the light
    on this, if you will, and I hope that you will do the same with
    your bill, because by requiring power plants to reduce
    emissions of sulfur, nitrogen, mercury and carbon dioxide, the
    bill will lead to great improvements in air quality, which will
    greatly benefit public health. That's our mission, it seems to
    me, is to benefit public health.
        I just want to flag three areas quickly that I will be
    watching that concern me. If we do move forward to a
    compromise, which Senator Smith I think rightly points out we
    might, I just want to let him know and others the areas I will
    be watching. First of all, as introduced, the bill is a
    supplement to existing Clean Air Act regulations, not a
    replacement. I think it must stay that way, and I will oppose
    efforts to use this bill as an excuse to weaken or eliminate
    existing protections found in Title I of the Clean Air Act.
        Second, the bill covers four pollutants, and to my mind
    that must not change because the science overwhelmingly shows
    that climate change is a reality. We cannot credibly address
    that problem without reducing carbon dioxide emissions. ``Some
    Like It Hot'' might have been a great movie, but I don't think
    it should be the motto of our country's environmental policy.
    Global warming is an issue that must be addressed.
        Let me say third, there may be some interest in attaching
    provisions which will allow power plants to avoid reducing
    carbon emissions if they create carbon sinks that literally
    store carbon in various forms. Forests, for example, serve as a
    natural repository of carbon. I am definitely intrigued by the
    possibility of a win-win situation, at least the protection of
    forests, and to reduction in the amount of carbon in the
    atmosphere, but I think it is very important we not leap to
    that solution unless we know it really will work.
        Finally, I do not dismiss cost considerations at all, but I
    believe that we must always remember the costs associated with
    illness in the general public--respiratory illness, cancer and
    the like. It is hard for a person to put a price on a family
    member's health.
        So I look forward to working with you. I am very excited
    about moving forward on this.
        Thank you.
        [The prepared statement of Senator Boxer follows:]
        Statement of Hon. Barbara Boxer, U.S. Senator from the State of
                                   California
        I want to thank the chairman for holding this hearing. I am a
    strong supporter of your legislation and was pleased to be an original
    cosponsor when you introduced the bill last November.
        By requiring power plants to reduce emissions of sulfur, nitrogen,
    mercury, and carbon dioxide, this bill will lead to important
    improvements in air quality that will provide great benefits to public
    health and environmental quality.
        1As the debate and discussions about this bill move forward, there
    are three specific aspects of this bill that I will be watching
    carefully. First, as introduced, this bill is a supplement to existing
    Clean Air Act regulations, not a replacement for existing protections.
    It must stay that way.
        I will strongly oppose efforts to use this bill as an excuse to
    weaken or eliminate existing protections found in Title 1 of the Clean
    Air Act.
        Second, this bill covers four pollutants. This also must not
    change. A 3-pollutants bill--one that excludes carbon dioxide as the
    Administration has suggested--is not acceptable. Indeed, it is
    irresponsible. There is no way that we can credibly address power plant
    emissions without including standards for carbon dioxide. The science
    overwhelmingly shows that climate change is a reality, and we cannot
    credibly address that problem without reducing carbon dioxide
    emissions.
        ``Some Like It Hot'' may have been a great movie, but it must not
    become the motto of this country's environmental policy. I would remind
    my colleagues that the carbon standard this bill sets is a standard
    that the first Bush Administration committed to meet--and that the
    Senate committed to meet when it ratified the United Nations Convention
    on Global Climate Change. We have done little to fulfill that
    commitment. This bill would help us to begin to remedy that.
        Third, I understand that there may be some interest in attaching
    provisions to this bill that would allow power plants to avoid reducing
    carbon emissions if they create carbon ``sinks.''--that literally store
    carbon in various forms. Forests, for example, serve as a natural
    repository of carbon.
        I am intrigued by the possibility of a win-win situation that leads
    to the protection of forests and to a reduction in the amount of carbon
    in the atmosphere. However, many questions remain about the long-term
    effectiveness of carbon sinks.
        Until those issues can be resolved, I am skeptical that such a
    provision should be used to exempt utilities from real emission
    reductions. Instead, perhaps we should promote pilot projects that can
    test the benefits of so-called carbon sinks.
        Let me make one final point, Mr. Chairman. I expect that we will
    hear concerns about the expense of these regulations. These are the
    same arguments that are raised any time a new environmental standard is
    proposed. While I don't dismiss cost considerations, I believe that the
    benefits these regulations will bring to human health and the
    environment are priceless. I look forward to working with the chairman
    to help move this bill forward as quickly as possible.
        Senator Jeffords. Thank you, Senator.
        Senator Campbell?

    OPENING STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR
                       FROM THE STATE OF COLORADO

        Senator Campbell. Thank you, Mr. Chairman.
        I think Senate Bill 556 is probably a good vehicle for
    debate, but I am inclined to think, as Senator Inhofe stated
    earlier, that it will never become law. I would like to welcome
    my fellow Coloradan who seems to be the sole voice from the
    West testifying before this committee. Mr. Dave Ouimette, I
    have not met Dave, so I am not sure where he is sitting. Dave,
    nice to have you here, and I am pleased that you are here, but
    I have to express my disappointment that the West is not better
    represented. Perhaps that is fitting since Western States
    really have a single voice in this matter, and I think most of
    them would be opposed to S. 556.
        I respectfully submit, Mr. Chairman, that this bill fails
    to acknowledge the inherent differences between air quality in
    the East versus the West in several says. First, this bill
    would impose significant reductions in nitrogen oxide emissions
    throughout the entire country. However, scientific data raises
    the issue whether in the West whether we even have a nitrogen
    oxide problem.
        Second, the bill ignores ongoing regional initiatives and
    approaches dealing with the air issues, particularly in the
    West. For example, the Western Regional Air Partnership is in
    consultation with EPA to develop a Western Sulfur Dioxide
    Reduction Program on a reduction schedule that is far different
    from that proposed in this bill.
        Also, the bill does not allow for flexible solutions for
    local air problems to be addressed through local partnerships.
    A few years ago, through legislation passed in the Colorado
    State Legislature, Excel Energy entered into an agreement with
    the State to dramatically reduce sulfur dioxide and nitrogen
    oxide emissions in the Denver metro area. That agreement
    represents an innovative partnership with industry and local
    residents to craft a realistic solution based on local needs.
    This bill threatens the future of these agreements and could
    undermine those that have already been reached.
        The purpose of reducing carbon dioxide emissions is not
    pollution abatement, but combating greenhouse gases. President
    Bush took a very strong position in opposing the Kyoto
    Protocol, yet this bill would have us circumvent his position.
    I would remind my colleagues that we had a vote, as I remember
    it, 98 to nothing to oppose implementing that Kyoto Accord.
    Assuming that we were to include carbon dioxide as a pollutant
    and contradict our president, and what would implementing that
    Kyoto Accord give us, except a bigger deterioration in our
    manufacturing and a higher unemployment rate? A new book by the
    European statistics Professor Bjorn Lomborg found that
    implementing the Kyoto Protocol could cost the world's
    industrialized nations $80 billion to $350 billion per year,
    only to postpone the warming for 6 years. Even the former
    Clinton officials admitted that their projected cost to
    implement the Kyoto Accord at around $12 billion a year for the
    United States alone was unrealistically low.
        In the West, more than 80 percent of our electricity, Mr.
    Chairman, is coal-fired. Coal-burning facilities are a major
    source of carbon dioxide, therefore dramatic reductions in
    carbon dioxide disproportionately affects the West and imposes
    additional costs on rate-payers who are already forced to deal
    with spikes and rolling blackouts.
        In short, S. 556 amounts to an eastern fix to address
    largely eastern problems being forced on the West. I would like
    to say, Mr. Chairman, if we do not recognize that in the Bush
    energy plan, which had about 120 parts, there were sections
    dealing with renewable energy and alternative energy and
    conservation and increased CAFE standards. I think all of us
    support those sections.
        There were really smaller areas that dealt with increasing
    our energy independence. If September 11 didn't teach us
    anything at all, it should have taught us that there is a
    connection between our energy dependence and our national
    security. I think one of my colleagues alluded to this already,
    but we are importing more oil from Iraq now than we did before
    the war, and we know that the money is being used to re-arm, I
    suppose with the intention of killing more Americans sooner or
    later, and yet it is our money being used against us.
        We know that millions--one-third of our whole trade deficit
    deals with oil now--and some of that money, a good deal of it,
    goes to the Saudis who produce about 25 percent of the world's
    oil. We know, as a member of the extended royal family, some of
    that money one way or another ends up getting into the hands of
    Mr. bin Laden, and we all know what his objective is in this
    country, too.
        So I have to tell you, Mr. Chairman, those ships, planes
    and tanks don't run on solar power, and we do not have any kind
    of a substitute for high BTU hydrocarbon energy at the present
    time. I would think that it would really be bad to further
    handicap ourselves by bad legislation that would make us more
    dependent on those very people who want to kill us.
        Thank you, Mr. Chairman.
        [The prepared statement of Senator Campbell follows:]
    Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from the State
                                  of Colorado
        I would like to take a moment to welcome a fellow Coloradan, and
    the sole voice from the West testifying before this committee, Mr. Dave
    Ouimette. Although I am pleased to see Mr. Ouimette, I must express my
    disappointment that this committee has not sought greater
    representation from those west of the Mississippi.
        Perhaps, it is fitting that Western States have a singular voice
    here today since such under representation mirrors the lack of
    deference that this bill gives to Western interests. This bill fails to
    acknowledge the inherent differences between air quality in the East
    versus the West in several ways.
        First, S. 556 would impose significant reductions in nitrogen oxide
    emissions throughout the entire country. However, data raises issue
    whether the West even has a NOx problem at all. Second, this bill
    ignores ongoing regional initiatives and approaches dealing with air
    issues particular to the West. For example, the Western Regional Air
    Partnership (WRAP) is in consultation with the EPA to develop a Western
    sulfur dioxide reduction program on a reduction schedule far different
    from that proposed in S. 556.
        Also, this bill does not allow for flexible solutions to local air
    problems to be addressed through local partnerships. A few years ago,
    through legislation passed in the Colorado State legislature, Xcel
    Energy entered into an agreement with the State to dramatically reduce
    sulfur dioxide and nitrogen oxide emissions in the Denver metro area.
    That agreement represents an innovative partnership with industry and
    local residents to craft realistic solutions based on local
    preferences. This bill threatens the future of such agreements, and
    could undermine those already reached.
        Furthermore, the inclusion of reductions in carbon dioxide
    emissions in a reform bill of the Clean Air Act necessarily assumes
    that carbon dioxide is a pollutant when it clearly is not. The purpose
    of reducing carbon dioxide emissions is not pollution abatement but
    combating green house gases. President Bush took a strong and brave
    position in opposing the Kyoto Protocol. Yet, this bill would have us
    circumvent our Commander-in-Chief and impose Kyoto-like reductions.
    Assuming that we were to include carbon dioxide as a pollutant and
    contradict our President, what would implementing the Kyoto reductions
    get us? A new book by a European statistics professor, Bjorn Lomborg,
    found that implementing the Kyoto Protocol would cost the world's
    industrialized nations $80 to $350 billion per year only to postpone
    warming by 6 years, from 2094 to 2100. Even former Clinton officials
    admitted that their projected costs to implement the Kyoto Protocol, at
    around $12 billion per year for the U.S. alone, were unrealistically
    low.
        Where before this bill fails to account for air quality in the
    West, the carbon dioxide reduction provisions fail to acknowledge that
    more than 80 percent of electricity in Colorado is coal fired. Coal-
    burning facilities are major sources of carbon dioxide. Therefore,
    dramatic reductions in carbon dioxide disproportionately affects the
    West, and imposes additional costs on ratepayers who are already forced
    to deal with spikes and rolling blackouts.
        If carbon dioxide is not a pollutant; if the dramatic reductions
    this bill calls for are unrealistic and costly; and if such reductions
    disproportionately disadvantage one region of the country that which is
    so under represented here today, then why are we addressing carbon
    dioxide in this bill? To be honest, I don't know. I hope that this is
    not an underhanded attempt to force our nation's consumers to choose
    one energy source over another. Such action would not only be wrong,
    but be coming at the worst of times.
        In short, S. 556 amounts to an Eastern fix to address largely
    Eastern problems being forced on the West. I look forward to working
    with all of the members of this committee to achieve a balanced,
    realistic, and flexible solution to reforming the Clean Air Act.
        Senator Jeffords. Thank you.
        Senator Voinovich?

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

        Senator Voinovich. Thank you, Mr. Chairman, for holding
    this hearing today. I am glad we are moving forward with this
    important work of the committee. This multi-emissions issue is
    important for both the environment and the larger issue of our
    nation's energy policy.
        Mr. Chairman, as I said at our hearing on July 26, I remain
    optimistic that we can reach a bipartisan compromise to
    continue to improve the environment and public health, reduce
    utility emissions, create greater regulatory certainty and
    ensure the American consumers will have safe, reliable and
    cost-effective electricity, particularly for the least of our
    brothers and sisters--the elderly and the low income.
        I know today's hearing is a legislative hearing on the
    chairman's bill, but I would hope we use today's hearing to
    explore some of the broader issues surrounding multi-emissions
    because I do not believe that the chairman's bill is workable
    as drafted. In addition to today's hearing, I understand the
    chairman is planning on at least one more legislative hearing
    to receive testimony. I believe before the committee acts,
    several more hearings are in order, particularly one that I
    discussed with the chairman and Senator Lieberman on the
    availability of control technologies for mercury and
    CO2.
        I believe S. 556 as drafted would be disastrous for our
    energy supply, our economy and our competitiveness in the
    global marketplace. While I agree with the goals of the
    legislation to reduce emissions from utilities and provide
    certainty in terms of emission levels, the bill offers nothing
    in terms of providing regulatory flexibility.
        The bill also sets emission levels which would lead to
    higher electricity prices for consumers, massive fuel switching
    and an overall reduction in our gross domestic product of $75
    billion by the year 2010 and $150 billion by the year 2020, and
    the loss of over 600,000 jobs in 2010. These impacts would be
    felt the hardest in the Midwest and the Atlantic States, from
    Florida up to New York. The Midwest in particular would be hit
    hard because it is the manufacturing base of our country.
        As you can see from this chart, 23 percent of our nation's
    GSP, gross State product for manufacturing, is concentrated in
    five States which comprise the Midwest--Ohio, Indiana,
    Michigan, Illinois and Wisconsin. One of the major reasons
    manufacturing is centered in the Midwest is the availability of
    reasonably priced and reliable energy and energy sources. This
    region and its border States of West Virginia, Pennsylvania,
    Virginia and Kentucky, are the source of low-cost, abundant
    coal and because of the iron ore coming in from the Great
    Lakes. This region is the heart of U.S. manufacturing, not only
    because of the low-cost energy, but because of our central
    location for transportation.
        This chart contrasts data with six States of New England.
    For years now, the discussion on utility emissions has turned
    into a regional debate--a regional debate between the Northeast
    and Midwest. I have been involved in this debate since the
    early 1970's from my time when I was mayor of the city of
    Cleveland and we operated a 57-megawatt municipally owned
    utility called Cleveland Public Power.
        I realize my colleagues in the Northeast will say that
    higher energy prices will impact on them as well. But the truth
    of the matter is that impacts on the Midwest will have a direct
    negative impact on the economy of the entire nation. The
    Midwest represents 23 percent of the U.S. total manufacturing
    GSP and almost three million manufacturing jobs, compared to
    New England's 5.6 percent of the U.S. total and 615,000
    manufacturing jobs.
        When energy prices go up, manufacturing declines and
    workers are laid off. I think we need to move past the regional
    differences and understand that what impacts on the Midwest
    manufacturing base has a direct impact on our nation's economy
    and our competitiveness in the global marketplace.
        Right now, the Midwest and Ohio are in a recession that
    began last year, and I want everyone to understand he said that
    we are in a recession. We've been in recession in the Midwest.
    That recession accelerated when natural gas prices increased
    fivefold last winter. Ohio is the leading producer, for
    example, of polymers in this country. Natural gas is used as a
    raw material in their production. Higher prices earlier this
    year took away our international competitive edge, threatening
    our domestic industry. That just goes to reiterate why it is so
    important that this Congress before we go home pass an energy
    bill. It is very important to our economic well-being and our
    national security.
        Over the last 10 years, Ohio has spent more on emission
    reductions than New York, New Jersey, Massachusetts,
    Connecticut, Vermont, Rhode Island, Maine, New Hampshire,
    Maryland, Delaware and Washington, DC combined. We reduced air
    toxins from approximately 381 million pounds in 1987 to 144
    million pounds in 1996, and I think, Senator Smith, your chart
    up here showed the effort that is being made and its impact.
    When I was Governor, I convinced AEP to install scrubbers
    costing $616 million to reduce SO2 emissions at the
    Gavin facility, which is the largest coal-powered facility in
    the United States of America. When I began my term as Governor,
    eight of our cities were in nonattainment for ozone and the
    current standards that we have now, Mr. Chairman. Today, all of
    them comply.
        At the same time, our emissions are higher than most other
    States, yes, because we produce more manufactured goods than
    most other States. That is chart two. You can see from the
    chart while Ohio produces 4.6 percent of the total U.S.
    electricity generation, we also employ 5.8 percent of the
    nation's manufacturing workforce--733,000 jobs. We also produce
    6.2 percent of the nation's manufacturing gross State product.
        Let's look at chart three. When you compare Ohio's
    manufacturing production . . .
        Senator Jeffords. Senator, speed up a bit.
        Senator Voinovich. I'm going as fast as I can, Mr.
    Chairman. I want to say this to you. I know you want me to
    speed up. I am talking about the lifeblood of my State. My
    State is suffering today. We have had people laid off. I am
    supporting extending unemployment benefits and dealing with the
    health care problems of my people. But this legislation is a
    threat to my economy, and I would like an opportunity--it will
    take me a couple more minutes to share this with you.
        Senator Jeffords. I appreciate that. The common practice is
    5 minutes and you have gone 7, so please proceed.
        Senator Voinovich. I am just going to finish up, and I will
    ask that this be put into the--I just want you to know, Mr.
    Chairman, you and I talked about this a long time. I want to
    have an energy policy here. I want to do something about multi-
    emissions. We've got a lot of people here from Buller's Place
    and out in your part of the country that want to do something
    about acid rain. We could very quickly deal with NOx and SOx
    and get it over with, but this legislation wants to drag in
    mercury; wants to drag in CO2. The bottom line is,
    it ain't going to happen because we have large regional
    differences. The president says if you've got CO2 in
    there, he is going to kill the bill. He will veto it.
        So we have gone through hearing after hearing after hearing
    after hearing. I think we ought to sit down with this like we
    sat down with some other things, get a table, get the best
    people we can and work at this and come up with something that
    makes sense, that will improve the environment, that will
    improve public health, and at the same time provide an
    environment where we can continue to have reasonable energy
    costs, continue to burn coal with clean-coal technology, and
    look at some of the other energy sources that we have.
        This is really serious. I want to say, this is not the same
    game we have had. Our country is in jeopardy today, and part of
    the reason is because we haven't got an energy policy.
        Thank you.
        Senator Jeffords. I agree with you on that.
        [The prepared statement of Senator Voinovich follows:]
     Statement of Hon. George V. Voinovich, U.S. Senator from the State of
                                      Ohio
        I would like to thank you, Mr. Chairman, for holding this hearing
    today. I am glad we are moving forward with the important work of this
    committee. The multi-emissions issue is important for both the
    environment and the larger issue of our nation's energy policy.
        Mr. Chairman, as I said at our hearing on July 26, I remain
    optimistic that we can reach a bipartisan compromise to continue to
    improve the environment and public health, reduce utility emissions,
    create greater regulatory certainty, and ensure that American consumers
    will have safe, reliable, and cost effective electricity, particularly
    for the least of our brothers and sisters who are elderly and low
    income.
        I know today's hearing is a legislative hearing on the chairman's
    bill, S. 556 but I hope we use today's hearing to explore some of the
    broader issues surrounding multi-emissions because I don't believe the
    chairman's bill is workable as drafted. I will outline some of my
    concerns with the bill in a few minutes.
        In addition to today's hearing I understand the chairman is
    planning at least one more legislative hearing to receive testimony
    from some of the interest groups. I believe before this committee acts,
    several more hearings are in order, including the hearing I previously
    discussed with the chairman and Senator Lieberman on the availability
    of control technologies for mercury and CO2.
        I believe S. 556, as drafted, would be disastrous for our energy
    supply, our economy, and our competitiveness in the world marketplace.
    While I agree with the goals of the legislation, to reduce emissions
    from utilities and provide certainty in terms of emission levels; the
    bill offers nothing in terms of providing regulatory flexibility. The
    bill also sets emissions levels which would lead to higher electricity
    prices for consumers, massive fuel switching, an overall reduction in
    our Gross Domestic Product of $75 billion by the year 2010, and $150
    billion in 2020, and a loss of over 600,000 jobs in 2010.
        These impacts would be felt the hardest in the Midwest and the
    Atlantic States (from Florida up to New York). The Midwest in
    particular would be hit hard because it is the manufacturing base of
    our country.
                                   [chart i]

        As you can see by this chart, 23 percent of our nation's GSP for
    manufacturing is concentrated in the five States which comprise the
    Midwest; Ohio, Indiana, Michigan, Illinois, and Wisconsin.
        One of the major reasons manufacturing is centered in the Midwest
    is the availability of reasonably priced and reliable energy and energy
    sources. This region, and its border States of West Virginia,
    Pennsylvania, Virginia, and Kentucky are the source of low cost and
    abundant coal and because of the iron ore in the Great Lakes. This
    region is the heart of U.S. manufacturing not only because of it's low
    cost energy but also because of its central location for
    transportation.
        This chart contrasts the Midwest data with the six States of New
    England. For years now the discussion on utility emissions has turned
    into a regional debate between the Northeast and the Midwest, and I
    have been involved in this debate since the early seventies and from my
    time as mayor of Cleveland when I operated a 57-megawatt municipally
    owned utility, Cleveland Public Power.
        I realize my colleagues in the Northeast will say that higher
    energy prices will impact them as well. But the truth of the matter is
    that the impacts on the Midwest will have a direct, negative impact on
    the economy of the entire nation. The Midwest represents 23 percent of
    the total U.S. manufacturing GSP (gross State product) and almost 3
    million manufacturing jobs compared to New England's 5.6 percent of the
    U.S. total and 615,000 manufacturing jobs. When energy prices go up,
    manufacturing declines and workers are laid off.
        I think we need to move past the regional differences and
    understand that what affects the Midwestern manufacturing base has a
    direct impact on our nation's economy and our competitiveness in the
    global marketplace.
        Right now Ohio and the Midwest are in a deep recession and although
    it began last year, the recession accelerated when natural gas prices
    increased fivefold last winter. Ohio is the leading producer of
    polymers in this country and natural gas is used as a raw material in
    their production. The higher prices earlier this year took away our
    international competitive edge, threatening our domestic industry.
        By the way, the effect on our economy is one of the reasons
    Congress needs to act on developing a national energy policy. What
    happened last winter underscores why Congress needs to adopt a national
    energy policy. The Administration has acted, the House of
    Representatives has acted, and it is time for the Senate to act.
        Over the last 10 years Ohio has spent more on emissions reductions
    than New York, New Jersey, Massachusetts, Connecticut, Vermont, Rhode
    Island, Maine, New Hampshire Maryland, Delaware, and Washington DC
    combined. We reduced air toxins from approximately 381 million pounds
    in 1987 to 144 million pounds in 1996. While I was Governor I convinced
    AEP to install scrubbers costing $616 million to reduce SO2
    emissions on the Gavin facility, the largest coal-fired power plant in
    the country. When I began my term as Governor, eight of our cities were
    in nonattainment for ozone. Currently, all 88 Ohio countries are in
    attainment for the national ambient air standards. No single State has
    done more to improve air quality in the last 10 years than Ohio.
        At the same time, our emissions are higher than other States,
    because we produce more manufactured goods than most other States.
                                   [chart ii]

        As you can see by this chart, while Ohio produces 4.6 percent of
    the total U.S. electricity generation, we also employ 5.8 percent of
    the nation's manufacturing work force (733,610 jobs). We also produce
    6.2 percent of the nation's manufacturing GSP (gross State product).
                                  [chart iii]

        When you compare Ohio's manufacturing production with the New
    England States, as you can see on this chart, Ohio's GSP for
    manufacturing is higher than all six of the New England States
    combined. (93.4 billion for Ohio, compared to 83.8 billion for all of
    New England.)
        Mr. Chairman, I use these charts only to point out that while our
    electricity generation is higher, we have also spent more on emissions
    reductions; and while our electricity generation is also higher, its
    because we produce more manufactured goods. Any legislation which
    jeopardizes our ability to produce manufactured goods will jeopardize
    our nation's economy.
        I am afraid Mr. Chairman, that your proposal as currently drafted
    will jeopardize our nation's economy. I will set aside the
    CO2 issue for a moment (which on its own would wreck the
    economy) and just concentrate on the other three pollutants as covered
    in your bill.
                                   [chart iv]

        This chart shows the expected costs of four different proposals
    addressing NOx, SO2, and mercury, according to EIA (Energy
    Information Administration). The first three scenarios show 50 percent,
    65 percent, and 75 percent reductions in all three pollutants by 2012.
    This is contrasted with the reductions in S. 556, which are called for
    by 2007. As you can see for mercury alone, the costs increase five-
    fold, from $90,000 per pound to almost $500,000 per pound of reduction.
        Although S. 556 calls for a 75 percent reduction level for NOx, the
    cost under S. 556 is $1,000 more per ton because of the change in the
    compliance dates, from 2007 to 2012. The SO2 numbers are
    lower because the mercury reductions drive the technology for
    SO2.
        According to analysis provided to me from the Edison Electric
    Institute, this bill would decrease Ohio's Gross State Product by $3
    billion dollars bt 2010 and $6 billion dollars by 2020. Overall Ohio
    would lose over 25,000 jobs by 2010 and over 37,000 jobs by 2020.
        Ohio families would pay $494 million dollars more for electricity
    by 2010 and over $1.5 billion dollars for electricity by 2020.
        nationwide, the Jeffords bill would decrease the national Gross
    Domestic Product by $75 billion in 2010 and $150 billion in 2020. The
    country will lose over 600,000 jobs in 2010 and 0ver 900,000 jobs in
    2020. Earnings would decline by $300--$550 dollars per household.
        This chart comparing the different plans, and the impacts on Ohio
    convinces me that we need to spend more time on this issue as a
    committee to better understand what the different reduction levels
    would mean for cost, fuel switching, and the effect on the economy. As
    well as what technologies are feasible and available for the reductions
    we need. The bill as drafted would be a disaster on the economy of Ohio
    and our nation's manufacturing industries.
        This bill will be like a tornado sweeping across the country,
    leaving in its wake ruined manufacturing facilities.
        I don't want to leave any doubt in anyone's mind, I do support a 3-
    pollutant strategy, and I am open to a voluntary CO2
    program, so long as it is cost-effective, makes real reductions in
    pollution, will not cause massive fuel switching away from coal, and
    will not harm our economy. However, I cannot support the reduction
    levels or dates that are found in S. 556 as drafted.
        Mr. Chairman, I hope this is just the beginning of the process in
    this committee and that we will have true bipartisan negotiations to
    reach a compromise bill that we all can support. I look forward to
    hearing from the witnesses.
        Senator Chafee?

    OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE
                         STATE OF RHODE ISLAND

        Senator Chafee. Thank you, Mr. Chairman.
        I think part of the process of crafting a bill is to get
    testimony from witnesses, and so I think it is important we
    move in that direction as swiftly as possible to hear the
    testimony of the people who have come such a long way.
        I will say that, as Senator Smith said earlier, there is
    always a sense that the sky is falling every time we try and
    pass some legislation. When we tried to do it with DDT, we said
    it would ruin the United States agriculture industry. It just
    didn't happen. When we said we were going to have unleaded
    gasoline, they said that will ruin the American automobile
    industry. It just didn't happen. I think sometimes the sky
    isn't falling, and we have to move forward and address some of
    these important concerns--acid rain, smog, respiratory disease
    and global warming. Let's move forward with it.
        Senator Jeffords. Thank you very much, Senator Chafee.
        Senator Bond?

      OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR
                       FROM THE STATE OF MISSOURI

        Senator Bond. Thank you very much, Mr. Chairman. I am sorry
    I was called out of the room briefly. I want to thank you for
    holding this hearing on the environmental effects of S. 556. I
    think it is vital we know the effects of this legislation as we
    consider how best to improve air quality.
        I want to associate myself with the remarks that some of my
    colleagues have made--Senator Smith, Senator Campbell, Senator
    Voinovich. I particularly want to commend and thank Senator
    Smith for his comments about the acid rain emissions trading
    system.
        Those of you who have not been around this place very long
    may know that we call that trading system, at least in
    Missouri, we call it the Bond-Byrd Compromise. I had the
    pleasure of doing the leg-work for the coal-producing States,
    and of course having the leadership of Senator Byrd enabled us
    to get a lot more done than a freshman Senator would have. But
    I think he is correct. This does show the model on how we can
    improve the environment at much less cost than we would
    otherwise do if it was strictly a command and control economy.
        In some ways, we will never recover from September 11. The
    attacks left indelible scars on thousands of families from New
    York, Washington and across the nation. Our nation is
    struggling in its recovery. We are a nation at war. A weak
    national economy shrunk last quarter and may very well be in
    recession. Companies are laying off tens of thousands of
    workers. Consumer confidence is at an all-time low. Our nation
    will and must recover from these trying times. We will come
    back.
        However, we as policymakers must do all we can to help get
    the nation back on its feet, moving forward. I am very troubled
    by the negative effects S. 556 would have on families,
    consumers and the economy. I do not believe that now is the
    time to put the parking brake on an economy already at a stop.
    According to independent experts, consumers would face
    skyrocketing energy costs under S. 556. Families trying to heat
    their homes would face electricity prices 30 percent higher and
    natural gas wellhead prices 15 percent higher by 2007. American
    consumers and businesses would spend an extra $40 billion to
    $60 billion on electricity. Total U.S. economic activity, GDP,
    would be reduced by almost $100 billion in 2007 alone.
        I am not an economist. I have two hands. But if the $75
    billion to $100 billion we are talking about now is enough to
    stimulate the economy as we are talking about a stimulus
    package, then a $100 billion brake seems like it would bring
    the economy to a stop. These numbers are not just empty talk.
    Most directly, they mean jobs. Reduction in coal demand would
    cost thousands of American coalworkers their jobs. Shutting
    down access to our most abundant supply of fossil fuel coal
    makes no sense. We have enough coal to provide energy to this
    country. We don't yet have enough petroleum-based products. The
    American people cannot afford the cost of S. 556. American
    consumers and employers need predictable, reliable and
    affordable energy to heat their homes and power their
    businesses.
        Earlier this week, I introduced a concurrent resolution
    which you, Mr. Chairman, joined, and Senators Crapo, Graham and
    Voinovich of this committee joined, commemorating the 30th
    anniversary of the Clean Water Act. Clean water in our nation's
    lakes and rivers is a national commitment and a national
    treasure. Clean air is also a national treasure. Every one of
    our families have treasures in the form of our children and
    grandchildren who are especially vulnerable to air pollution.
    We all depend on clean air and I believe everyone here supports
    improving air quality. We have a unique opportunity to reduce
    significantly air pollution from electric utilities.
        The Administration, Congress, environmental and public
    health advocates all agree that we should significantly reduce
    air emissions of sulfur dioxide, nitrogen oxides and mercury
    from electric power generators. A comprehensive market-based
    approach that reduces emissions would provide significant
    public health and environmental benefits, and provide greater
    regulatory certainty, encourage plant-owners to install newer,
    cleaner and more efficient systems to produce power.
        I believe that we need to achieve three clean air goals:
    meet health-based clean air goals out of reach today; provide
    regulatory certainty to industry, which will encourage
    innovation and keep our energy supply secure; keep energy costs
    stable. S. 556 does not meet these goals.
        Let me say, I have been assured by Administrator Whitman of
    the EPA that they are working on developing a sound, market-
    based approach which will make significant reductions. It is
    not easy. It takes a lot of work, and we should be working with
    them to develop a plan that can bring everybody together to
    achieve our goal of far less pollution, without costing our
    country jobs.
        To sum it up, the Jeffords-Lieberman bill is a recipe for
    recession. Total economic activity would be reduced somewhere
    between $82 billion to $97 billion in 2007 alone. Thousands of
    American workers would be out of work. Power plants would cut
    their use of coal by 40 to 50 percent, costing thousands of
    jobs. High energy costs would threat tens of thousands of jobs
    across the country.
        I am willing to work hard to develop legislation that
    provides clean, affordable, reliable energy for American
    consumers and the economy. I know it is a lot of work. We spent
    many, many months developing the acid rain trading system, and
    we are willing to do that again. I look forward to moving
    forward on this effort, but S. 556 is the wrong solution for
    the problem we face.
        [The prepared statement of Senator Bond follows:]
     Statement of Hon. Christopher S. Bond, U.S. Senator from the State of
                                    Missouri
        Mr. Chairman, thank you for holding this hearing on the
    environmental effects of S. 556, the Clean Power Act of 2001. I believe
    that it is vital that we know the effects of this legislation as we
    consider how best to improve air quality.
        Later today, this committee will hold another hearing. The topic
    will be infrastructure security and economic recovery in the aftermath
    of the September 11 attacks. In some ways, we will never recover from
    September 11. The attacks left indelible scars on thousands of families
    from New York, Washington, and across the nation.
        Our nation is also struggling in its recovery. We are a nation at
    war. A weak national economy shrunk last quarter and may very well be
    in recession. Companies are laying off tens of thousands of workers.
    Consumer confidence is at an all time low.
        Our nation will recover from these trying times. We will come back
    better than ever. However, we as policymakers must do all we can to
    help get the nation back on its feet and moving forward.
        I am very troubled by the negative effects S. 556 would have on
    families, consumers and the economy. I do not believe that now is the
    time to put the parking break on an economy already at a stop.
    According to independent experts, consumers would face skyrocketing
    energy costs under S. 556. Families trying to heat their homes would
    face electricity prices 30 percent higher and natural gas wellhead
    prices 15 percent higher by 2007. American consumers and businesses
    would spend an extra $40 to $60 billion on electricity. Total U.S.
    economic activity--or GDP--would be reduced by almost $100 billion in
    2007 alone.
        I'm not an economist, but if the $75 to $100 billion we are talking
    about now is enough to stimulate the economy, then a $100 billion brake
    seems like it would bring the economy to a stop. These numbers are not
    just empty talk, most directly they mean jobs. Reduction in coal demand
    would cost thousands of American coal workers their jobs. Expensive
    energy would threaten tens of thousands more jobs across the economy.
        The American people cannot afford the costs of S. 556. American
    consumers, and America's employers, need reliable, predictable and
    affordable energy to heat their homes and power their businesses.
        Earlier this week I introduced a Concurrent Resolution, with the
    support of Sens. Crapo, Graham, Voinovich and Jeffords, commemorating
    the 30th anniversary of the Clean Water Act next year. Clean water, in
    our nations lakes and rivers, is a national commitment and a national
    treasure.
        Clean air is also a national treasure. Every one of our families
    have treasures, in the form of children, who are especially vulnerable
    to air pollution. We all depend on clean air and I believe everyone
    here supports improving air quality.
        We have a unique opportunity to significantly reduce air pollution
    from electric utilities. The Administration, Congress, environmental
    and public health advocates all agree that we should significantly
    reduce air emissions of sulfur dioxide, nitrogen dioxides and mercury
    from electric power generators.
        A comprehensive, market-based approach that reduces emissions would
    provide significant public health and environmental benefits. It would
    also provide greater regulatory certainty and encourage plant owners to
    install new, cleaner and more energy efficient systems to produce
    power.
        I believe that we need to achieve three clean air goals: 1) meet
    health-based clean air goals out of reach today, 2) provide regulatory
    certainty to industry which will encourage innovation and keep our
    energy supply secure, and 3) keep energy costs stable. S. 556 does not
    meet these goals.
        I am willing to work hard to develop legislation that provides
    clean, affordable, reliable energy for American consumers and the
    American economy. I look forward to moving on to this effort as soon as
    possible. Thank you.
               doe study of jeffords' multi-pollutant legislation
          Consumers would immediately face skyrocketing energy
    costs--Average electricity prices for consumers would increase between
    27 and 32 percent in 2007, and would remain high (up 20 to 33 percent
    in 2020).
          America's Pocketbook would feel the hit--In 2007,
    consumers would be spending an extra $40 billion to $60 billion on
    electricity.
          The price of natural gas would rise dramatically--Average
    natural gas wellhead prices would increase 12 to 17 percent in 2007,
    and up to 20 percent in 2020.
          The Jeffords/Lieberman bill is a recipe for recession--
    Total U.S. economic activity--or GDP--would be reduced by $82 billion
    to $97 billion in 2007 alone.
          Thousands of America's workers would be out of work--
    Power plants would cut their use of coal by 40 to 45 percent, costing
    thousands of coal industry jobs. High energy costs would threaten tens
    of thousands of other jobs across the economy.
        Senator Jeffords. Thank you, Senator.
        Now we are ready to go to our witnesses.
        Mr. Holmstead, if you would please come forward?
        Mr. Holmstead. Mr. Chairman, I am very grateful to be here
    this morning.
        Senator Jeffords. Ms. Hutzler--I am sorry--I should have
    the others come to the table at the same time, on the first
    panel.
        Mr. Holmstead. Fine. We are all there now.
        Senator Jeffords. Thank you.

    STATEMENT OF JEFFREY HOLMSTEAD, ASSISTANT ADMINISTRATOR, OFFICE
       OF AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY

        Mr. Holmstead. I thank you for the opportunity to be here
    this morning. I felt a little rude sitting in the back room and
    not having the chance to be out here in person, but it was a
    wonderful opportunity to hear all the opening statements and
    get a sense for the issues that we will be discussing further
    this morning.
        Thank you for giving me the opportunity to testify about S.
    556 and to discuss how we can create a better approach for
    reducing pollution from power generations. I believe that this
    hearing is an important step toward reaching a bipartisan
    agreement on this matter.
        I would also just like to quickly address a concern that
    Senator Campbell raised about the lack of representation from
    the West. He may not be aware that I am actually from Colorado.
    I grew up in Boulder, and so I can assure you that the western
    perspective is also being understood and discussed within the
    Administration, and it is something that we do--we've
    appreciated the efforts of the western Governors and the WRAP,
    and we are trying to work with them as we move forward on
    something.
        We are pleased as an Administration that Chairman Jeffords
    and many of you on this committee share our commitment to
    modernizing the Clean Air Act. The Act has been very successful
    in many ways, but over the last decade we have learned a lot
    about how we can make our regulatory programs more effective.
    Given what we have learned, I think it is now clear to everyone
    that we can make the Clean Air Act better.
        As you know, the President has directed EPA to work with
    Congress to develop legislation that would establish a
    flexible, market-based approach to significantly reduce and cap
    emissions of NOx, SO2 and mercury from the power
    generation sector. We are still working within the
    Administration to develop a proposal that we can discuss with
    you and your staffs, and I hope to have the opportunity to
    discuss the details of this proposal with you in the near
    future.
        Over the years, Congress, EPA and the States have responded
    to a number of specific environmental and public health
    problems by developing separate regulatory programs with their
    own approaches and time lines. This chart over here gives you
    some sense for the complexity of that current program as it
    exists for public sectors, and I promise you I won't go over
    every word on that chart, but just a couple of highlights in
    terms of the timing.
        I think everyone on this committee is quite familiar with
    the NOx SIP Call and the section 126 petitions. In addition to
    that, by statute, we are required to issue a MACT standard for
    this sector in 2003. Compliance would take place at the end of
    2007. Farther out into the future, there is a visibility
    program that would also requires States to go out and impose
    source-specific controls on the power plant.
        In addition to that, and probably most importantly, States
    and EPA will be working together over the next five to 10 years
    to address the need to come into attainment with the new
    PM2.5 and 8-hour ozone standards. As a result of
    that, there will be individual States taking actions to reduce
    emissions from power plants in their own States. There are
    likely to be at least two rounds of additional 126 petitions
    for States that are concerned about up-wind sources. So as a
    result, there is this extremely complicated and uncoordinated
    set of regulatory requirements that will be coming into play
    over the next little while.
        Let me point out, and this chart here gives you a sense for
    the current projections as to the number of areas that will be
    out of attainment with either the PM2.5 standard,
    which I think everyone here is familiar with, or the ozone
    standard. The chart on the left shows the current conditions.
    The chart on the right shows what we project in 2020. You will
    see that because of a number of current programs, the problem
    actually begins to get better. But notwithstanding that fact,
    there are a number of areas that will be out of attainment with
    one or the other of those standards in 2020.
        Now, in place of this uncoordinated set of complex
    regulatory programs, we believe that there is a better way, one
    that would cost American consumers and industries far less,
    while still protecting our air quality. The country would be
    far better served by legislation that builds on the successful
    Acid Rain Program by establishing a flexible, market-based
    approach to significantly reduce emissions of NOx,
    SO2 and mercury. If the caps are protective enough,
    this legislation could replace many of the current regulatory
    requirements that apply to power generations. Such an approach
    would reduce the administrative burden on industry, reduce
    consumer costs, lower compliance costs and increase national
    energy security by providing the industry with more certainty
    about its future regulatory obligations.
        For all of these reasons, we applaud Chairman Jeffords for
    tackling this important issue and for recognizing that a cap-
    and-trade program is the best way to achieve these reductions.
    However, EPA and the Administration would oppose S. 556 as
    drafted. Because of the tight timeframes and cap levels, our
    analysis to date suggests that it would increase consumers'
    electricity rates by from 32 percent to 50 percent or even
    more. The bill's timeframes for installation of controls could
    lead power plants to be taken off-line at important times,
    which could lead to electricity shortages.
        In addition, our analysis found that it would force a
    substantial shift from coal to natural gas as an energy source,
    which would undermine the need to maintain fuel diversity and
    drive up natural gas prices for homeowners and others. We
    believe that these effects are not only unacceptable, but
    unnecessary.
        Let me also reiterate that the Administration strongly
    opposes including CO2 reductions in any multi-
    pollutant bill for power generators. The CO2
    provisions in S. 556 would be costly and endanger our energy
    security by causing fuel-switching from coal. We are also
    concerned that the health and environmental benefits of
    reducing NOx, SO2 and mercury should not be delayed
    while we take the time to reach a broader consensus on
    CO2.
        Notwithstanding these concerns, the Administration wants to
    commend Chairman Jeffords and the other members of the
    committee for taking on this important issue. I realize that S.
    556 was developed without the technical assistance that you
    would normally want to have from EPA and other expert agencies.
    As you move forward with your efforts, I hope to have the
    opportunity to work with you more closely. I look forward to
    working with the committee to develop legislation that we all,
    including the President, can support.
        Thank you.
        Senator Jeffords. Thank you.
        Ms. Hutzler?

        STATEMENT OF MARY HUTZLER, ACTING ADMINISTRATOR, ENERGY
                       INFORMATION ADMINISTRATION

        Ms. Hutzler. Mr. Chairman and members of the committee, I
    appreciate the opportunity to appear before you today to
    discuss Senate bill 556.
        While the Energy Information Administration has not
    prepared an analysis of the specific provisions of this bill,
    we did release on October 2 two service reports that examine
    the impacts of controlling multiple emissions at our nation's
    power plants. One of the requests from you and from Senator
    Lieberman specified power sector emission caps for nitrogen
    oxide, sulfur dioxide, mercury and carbon dioxide that are the
    same as those in S. 556, which are shown on this chart.
        However, our analysis differs in that we did not assume
    that all the plants would be required to meet new source
    performance standards, and we assumed that mercury emission
    reductions could be traded, rather than requiring all plants to
    reduce their mercury emissions to a specified target.
        Our analysis examined the impact of these limits under four
    scenarios, with different assumptions about technology costs
    and performance, energy policies and consumer behavior. The
    four scenarios are based on the annual energy outlook reference
    and high supply and demand technology scenarios, and the clean
    energy futures moderate and advanced scenarios. For each of
    these scenarios, two cases were prepared without and with the
    emission limits. This was done so that the impacts and costs of
    imposing the emission limits could be separated from the other
    changes in each scenario.
        Today, I will concentrate on the impacts of the emission
    limits on the annual energy outlook reference case, both to
    simplify the discussion and because we believe it to be the
    more likely outcome for future technology trends. Our results
    indicate that fuel-switching is a key compliance strategy.
    Because a cap on CO2 emissions is imposed, coal
    generation is reduced; natural gas, renewable and nuclear
    generation is increased; and electricity demand is lowered in
    response to higher prices.
        By 2020, coal generation is projected to be 55 percent
    below the reference case. In contrast, natural gas generation
    is higher by 39 percent, renewable generation by 30 percent,
    and nuclear generation by 10 percent. Sales of electricity are
    9 percent below the reference case.
        Among the various technology scenarios, the smallest change
    is in the clean energy futures advance scenario, because the
    carbon tax was included in that case even before the imposition
    of the emission caps. As a result, coal generation was already
    significantly reduced from what would otherwise be expected. In
    other analyses that we prepared where a CO2
    emissions cap is not included, we have found that the primary
    emissions reduction strategy is adding control equipment,
    rather than switching fuels.
        Increasing the use of natural gas, which is relatively more
    expensive than coal, and adding emission controls leads to
    higher electricity prices. The wide range in allowance prices
    shown in this chart occurs because of differences in emission
    levels and control costs for the various gases. The zero-
    allowance price for NOx is a result of sharply reduced coal use
    in order to comply with the CO2 cap. Also, controls
    added to meet the 2004 State Implementation Plan call enable
    power suppliers to meet the new NOx limits in 2007.
        The various emission caps and allowance prices are very
    interrelated. Often equipment added to remove one type of
    emission leads to reductions in others. Reducing coal use to
    lower CO2 emissions often tends to lower other
    emission allowance prices because less controls are needed to
    comply.
        My next chart shows the impact of the allowance prices on
    the operating costs of two types of coal plants--one that is
    relatively uncontrolled and one that is more controlled. In
    both cases, CO2 represents the largest component--
    over two-thirds of the total for the uncontrolled plant and 90
    percent of the total for the controlled plant.
        As the power sector turns increasingly away from coal to
    natural gas, the price of natural gas increases as the higher
    natural gas demand results in drilling from increasingly
    smaller and less economical fields. By 2020, wellhead natural
    gas prices are 20 percent higher when the emission limits are
    imposed, as you can see from this chart.
        The combination of higher fuel costs, increased investments
    in new plants to replace existing coal plants, and investments
    in control equipment cost electricity suppliers $177 billion
    over the 2001 to 2020 timeframe, an increase of about 9 percent
    from the case without controls. The higher resource costs, plus
    the costs of emission allowances, result in electricity prices
    that are 33 percent higher in 2020. Imposing these emission
    caps reduces GDP by $100 billion or .08 percent in 2007, and
    slightly over $50 billion, or .03 percent, 2020.
        As one might expect, numerous uncertainties exist in any
    analysis this complex. First, while the reference case in our
    new energy outlook incorporates improvements in technology,
    cost and performance over time, based on trends in historical
    data and consumer purchase decisions, it is very difficult to
    assess how much these trends might change in response to
    increased R&D, information and voluntary participation
    programs.
        Second, while technologies for controlling SO2
    are fairly mature, technologies for controlling NOx, mercury
    and CO2 are not as far in their development cycle.
    We assume that new selective catalytic reduction equipment will
    remove between 75 percent and 80 percent of NOx emissions, but
    there is little data on actual operating facilities. Small
    changes in the cost and performance of emissions control
    technologies can have significant impacts.
        Third, even among power plants with similar equipment,
    there is substantial variation in the amount of mercury removed
    by NOx and SOx control equipment.
        Fourth, there are numerous policy instruments for reducing
    emissions, with different implications regarding the impacts of
    emissions reductions. A cap-and-trade program, which is what we
    assumed in this analysis, is expected to lead to the lowest
    resource cost of compliance. Other options could lead to lower
    electricity price impacts, but they would have higher resource
    costs.
        Thank you, Mr. Chairman and members of the committee. I
    will be happy to answer any questions you may have.
        Senator Jeffords. Could you please leave that last chart up
    for the moment?
        It's a dangerous place in here.
        [Laughter.]
        Senator Jeffords. I want to more fully understand that
    chart. Now, as I look at the left, that is kilowatt hours--cost
    per kilowatt hour, or what is that?
        Ms. Hutzler. That is per kilowatt hour in 1999 real
    dollars.
        Senator Jeffords. So if you go from 1990 to the year 2020,
    there would be somewhere around maybe 1.5 cent increase, or you
    can give it 2 cents?
        Ms. Hutzler. Well, in 2020, we see it as 2 cents because
    have declining prices in our reference case, so we are
    declining from about 7 cents per kilowatt hour today to about
    6.1 cents in 2020. But the bill would in fact have the 2020
    price be 8.1 cents per kilowatt hour.
        Senator Jeffords. Does that assume or not assume any
    improvements in the production costs that could reduce that
    number?
        Ms. Hutzler. We have certain improvements in technology.
    For instance in clean coal technology, we have them improving
    over time. In terms of the controls for the specific--for
    controlling SOx, NOx and mercury, they do not improve over
    time. They are fairly constant, but we do feel those costs are
    fairly optimistic at their current levels that we have in the
    reference case.
        Senator Jeffords. What part of the 2 cents is related to
    power plant compliance with the fine particulate matter
    standard that will go into effect in about 2008?
        Ms. Hutzler. We do not have that in our reference case, so
    it is not modeled directly and as such I cannot give you the
    specific amount that particular policy would introduce into the
    cost of electricity.
        Senator Jeffords. Perhaps Mr. Holmstead can tell us what
    share of the PM2.5 nonattainment problem comes from
    power plants.
        Mr. Holmstead. I can tell you it is a significant share. I
    do not know that we have an exact number. What I can say is
    that the problem with high levels of PM2.5 is
    primarily a problem in the eastern part of the United States.
    We think that the largest single contributor is SO2
    sulfates, and we know that about 70 percent of the
    SO2 emissions in the East come from power plants. So
    there is no doubt that it is a significant share.
        Senator Jeffords. The EPA staff believes based on
    significant data that there has been collected that the MACT
    rule for mercury will in the 85 percent to 95 percent reduction
    range, at least for eastern coal. That rule is on a court order
    scheduled to become effective in 2004. Approximately how much
    will electricity prices increase when that rule is in place?
        Mr. Holmstead. First of all, let me just say I am not quite
    sure about your indication that the MACT levels would be 85 to
    90 percent. That does not sound right to me. As you know, we
    are at the very beginning stages of figuring out what the MACT
    standard would be. There is no doubt that that will impose
    significant costs on the industry, beginning probably in about
    2007, because that is when the compliance date first occurs.
    But I don't believe that we have specifically, in fact I know
    we haven't, because at this point we don't know enough about
    what the MACT standard will be to have a projection of the
    cost. But you are correct in suggesting that that will impose
    some additional compliance cost, probably a significant
    compliance cost on many utilities, and as a result probably
    increase electricity prices, but I can't tell you by how much.
        Senator Jeffords. Ms. Hutzler?
        Ms. Hutzler. Yes, I would just like to comment that I
    showed you a chart that shows on a cent-per-kilowatt-hour basis
    what the different targets would mean in terms of the cost. And
    CO2 outweighs all the other costs tremendously,
    depending on the coal plant. I mentioned it could be anywhere
    from two-thirds to 90 percent of it. If you are looking at
    controlling these other items that you have mentioned, if you
    also include a CO2 emission target, that is going to
    dominate. We have looked at various situations where we only
    look at controlling SOx and NOx. They alone will only increase
    the electricity price 1 percent. If you only control mercury,
    you are only going to see the electricity price rise by 3 or 4
    percent. But once you add on the CO2, you are
    getting this greater increase of 33 percent.
        So everything is relative. You have to realize that these
    different emissions and these different targets and the way to
    control them interacts, and you need to be very careful if you
    are talking about controlling three pollutants or controlling
    four pollutants in terms of how significant the cost is. I just
    wanted to mention that in terms of Mr. Holmstead's answer.
        Senator Jeffords. In our request, Senator Lieberman and I
    asked EPA to analyze the costs and benefits of controlling
    emissions from power plants. What are the specific and
    quantifiable environmental and public health benefits of the
    emission reductions in S. 556?
        Mr. Holmstead. As I think everyone on the committee is
    aware, actually quantifying benefits is a difficult thing to
    do, and in particular trying to quantify the benefits of
    mercury and CO2, for which no one really has any
    methodologies. I will also tell you that the process of trying
    to quantify--and typically when people ask us for a benefits
    estimate, they are asking for a monetized estimate, meaning
    that we would try to give some indication of the monetary value
    of those estimates. That is something that we have not been
    able to do for S. 556.
        I can tell you that qualitatively, there is no doubt that
    by reducing in particular SO2 and NOx, which
    contribute to PM2.5 levels, that there is no doubt
    that there would be significant environmental benefits from S.
    556.
        Senator Jeffords. Ms. Hutzler?
        Ms. Hutzler. We in EIA are an energy organization and we
    look at the impacts of what the energy situation is. We are not
    dealing with the environmental benefits and we have not
    actually analyzed what those might be, nor do we feel that we
    are expert in doing such.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. Ms. Hutzler, the charts that you have
    here, are they based on an analysis you did for Senators
    Jeffords and Lieberman?
        Ms. Hutzler. Yes, they are.
        Senator Voinovich. In your analysis, you were asked to make
    a number of assumptions based on future technologies, and in
    your report you made a number of qualifying statements, such
    as, quote, ``the scenarios are based on assumptions that EIA
    questions, including assumed changes in consumer behavior that
    are not consistent with historical behavior patterns,'' end of
    quote. The report also says R&D funding increases that have not
    occurred, voluntary and information programs from which there
    is no analytical basis for evaluating impacts; and last,
    legislative or regulatory actions that may not be enacted, even
    if enacted, may become effective at later dates than assumed,
    such as a $50 carbon tax.
        It seems to me that any one of these qualifying statements
    could refute the entire analysis that you did for Senator
    Jeffords and Senator Lieberman. Could you go into a little more
    detail about the uncertainties regarding the policies and
    technology underlying the assumptions of the Jeffords bill?
        Ms. Hutzler. We looked at four different scenarios. The
    first scenario was based on our annual energy outlook reference
    case. That is the scenario that I briefed today to you; that
    scenario we do believe is a realistic way of looking at the
    future because it is based on consumer behavior in terms of
    their historical behavior patterns, and it is also based on
    historical rates of R&D.
        There were three other scenarios that we were asked to look
    at. One of those scenarios was to combine all of the high-
    technology cases in our annual energy outlook, those cases
    being for each of the demand sectors, each of the conversion
    sectors and each of the supply sectors. Combining all those
    technology scenarios together we feel is highly unrealistic
    because we do not believe that technology in all those sectors
    could simultaneously come into effect.
        That particular case was also similar to one of the clean
    energy future cases, the moderate case, in terms of its
    electricity demand in the future. We had trouble with the clean
    energy future scenarios for the reasons that you already
    mentioned, that not all of the costs were embedded within those
    scenarios; that many of the policies are based on voluntary or
    information programs that we don't feel necessarily have the
    impact that some people do and they're also very difficult to
    quantify because we have not seen in history that much
    improvement based on voluntary or information programs.
        They also require legislative or regulatory changes such as
    the carbon fee that you mentioned, but others as well, such as
    the renewable portfolio standard, such as pay-at-the-pump
    insurance, such as tax credits for various technologies and
    also other appliance and efficiency standards. They also had
    cost reductions where advanced technology costs are to be
    reduced to where conventional technologies are today. We think
    R&D to get to that level of cost reduction is probably
    unlikely.
        Also, they assumed that consumers would behave differently
    by modifying hurdle rates. We haven't seen consumers behave
    that differently.
        Senator Voinovich. One of the things it seems to me, Mr.
    Chairman, that we need to do is to try and get the most honest,
    objective scenario when we're doing our projections about some
    of these things are going to do, and not make assumptions based
    on things that are not something that one could follow in terms
    of historical behavior by people, and look realistically at
    some of what is going to happen and not going to happen. We can
    play--we get different numbers based on what your scenarios
    are.
        I would love to have just your best estimate based on the
    real world on what all of this is going to do in terms of
    energy costs. Have you calculated, or Mr. Holmstead have you
    ever looked at the impact of this if it went through the way it
    is written today would have on our gross domestic product, on
    the use of coal, and on fuel-switching that would go on?
        Mr. Holmstead. We, like EIA, were asked to look at these
    four different technology scenarios, so what we have provided
    is a range of possible impact depending on which of the
    scenarios turns out to be accurate. What I can say is in terms
    of electricity prices, we believe that if it were to be enacted
    as it is drafted, S. 556 would increase electricity prices
    somewhere between about 30 percent and 50 percent or a little
    more than that. The reason I say it could be a little bit more
    is that like EIA, we assumed that the mercury cap would be
    fully tradeable, and as I understand S. 556 it would actually
    require source-specific controls to get to the five-ton cap,
    which would . . .
        Senator Voinovich. So you are saying that your estimate
    would be between 30 and 50 percent for electricity?
        Mr. Holmstead. For electricity prices.
        Senator Voinovich. OK. But the question I would like to add
    on that is that if you have an increase in the cost of
    electricity, it probably means that you are burning more
    natural gas in order to provide the electricity. Have you given
    any consideration that that demand on natural gas would have on
    heating costs, which we went through this last winter? In other
    words, the demand for natural gas escalated. Spot prices were
    $8 whatever unit they put it on, and from our perspective in
    Ohio, is that our electrical costs would go up, but not only
    would our electricity costs go up, because of the increased
    demand on natural gas our heating cost would go up.
        Mr. Holmstead. That is correct. We see in our analysis that
    you would get somewhere between a 25 and 30 percent decrease in
    the use of coal. Most of that is switched from coal to natural
    gas, which would also tend to drive up natural gas prices. I
    don't think we have quantified exactly what those increases
    would be. I think maybe EIA did do that, but we do believe that
    natural gas prices would also increase significantly.
        Senator Voinovich. Did you comment on that?
        Ms. Hutzler. Yes, we get a 20 percent increase in natural
    gas prices in 2020. That is about 60 cents per thousand cubic
    feet at the wellhead. So of course that would result in higher
    heating fuel costs.
        Senator Jeffords. Senator Boxer?
        Senator Boxer. Thank you.
        Mr. Chairman, let me just put on the record that no State
    had to face the kind of crunch that my State did, as I said to
    the good Governor recently. Everyone predicted blackouts and
    horror stories. The people rose to the occasion and without
    making one change in lifestyle, cut 12 percent of the energy
    use. So I think that energy efficiency when we talk about the
    kind of crunches that could come need to be the centerpiece of
    any energy policy. We do need an energy policy. We have
    agreement on that in this committee. I just think we see the
    policy playing out a different way.
        I also feel I want to respond to the statement that Senator
    Bond made that the Jeffords-Lieberman bill is a recipe for
    recession. You know, Mr. Chairman, the last time I heard that
    was when most Republicans, not all, most said that the Clinton
    economic plan would lead to major recession. The fact is, we
    had the greatest economic growth that we have had in our
    history.
        So I think those kind of predictions play to the worst
    prejudices, in a sense, because it is rhetoric. The fact is,
    and if you look at the facts, I agree with Senator Chafee's
    assessment here. The gloom and doom in every single
    environmental fight we have ever been in in the last 30 years
    never happened. I want to point to recent history, and I would
    ask to put into the record some pages here from an energy
    group. This is a private utility--their experience in
    Massachusetts, because they have a four-pollutants bill. Let's
    see what happened to the jobs surrounding this, and they
    reduced all these emissions we are talking about in your bill,
    Mr. Chairman.
        Their 5-year environmental improvement plan, as they call
    it, 300 to 500 construction jobs created; much of the
    construction done by local people; $12 million spent on
    purchases of local goods and services; and they were able to
    have enough affordable electricity to power 1.5 million homes
    and businesses in southeastern New England.
        So we see jobs. We see electricity. We see cleaner air. We
    see healthier people. The gloom and doom scenario just is not
    evident in our history here.
        I wanted to ask you, Mr. Holmstead, because I so disagree
    with you on CO2, but I will save that for a second
    round of questions because I disagree with you.
        Mr. Holmstead. I appreciate the warning.
        [Laughter.]
        Senator Boxer. I disagree with your position on
    CO2 as much as I disagree with you position on
    arsenic. It looks good. You moved in our direction, so I am
    ever hopeful we will move more together.
        Let me talk to you about mercury. What is the position of
    the Administration on mercury in terms of a standard?
        Mr. Holmstead. I believe that the only standard we have is
    something we call the reference dose, and that is something we
    refer to as the RFD, which actually--and it is based on body
    weight. So if someone consumes below the RFD, we believe that
    they are safe from having any difficulties.
        Senator Boxer. I mean standard from a power plant. You said
    we should move on limiting the mercury emissions. What is the
    standard that you are supporting?
        Mr. Holmstead. At this point, we are still--this is a very
    difficult issue as you will hear when you have the technology
    hearing, which I believe is scheduled to come up a little bit
    later on. The technology is . . .
        Senator Boxer. Do you have a position at this time on how
    to deal with it?
        Mr. Holmstead. No, we don't. This will be part of the
    proposal that we will be talking about soon.
        Senator Boxer. Do you lean in favor of trading?
        Mr. Holmstead. We do believe that some sort of mercury
    trading will allow us to dramatically reduce overall loadings
    at a much lower cost, yes.
        Senator Boxer. So that would mean you would allow different
    plants to have different levels of mercury emissions in that
    case, if you allowed that type of trading.
        Mr. Holmstead. That is correct. Let me just clarify why I
    think that that makes sense.
        Senator Boxer. That's OK. I don't have time. I want to
    stick to the 5 minute rule. We will come back to it. But I want
    to establish that.
        Mr. Holmstead. Right. But some plants right now emit
    perhaps less than half a pound of mercury. Other plants may
    emit several hundred pounds of mercury. So there is really
    quite a difference in terms of what plants are emitting now.
        Senator Boxer. I do understand, but this is why I think the
    chairman's bill is so important, because he does not allow that
    to happen. Because if you are fortunate enough to live in an
    area that emits a little bit, you are OK. If you live in the
    other one, you are not OK. Do you know, Mr. Holmstead, what the
    impact is of mercury--too much mercury, microscopic amounts
    that stay in the body?
        Mr. Holmstead. Yes, I have some sense of what those impacts
    are.
        Senator Boxer. Would you lay that out for us?
        Mr. Holmstead. Well, the impacts of mercury are very
    similar to the impacts of other heavy metals like lead, and I
    think the biggest concern is for children who were born to
    women who were exposed to high levels of mercury. There may be
    developmental effects. There may be IQ effects. So it is those
    sorts of effects that we are--and that is why, by the way, that
    the President is committed to having legislation that would cap
    mercury emissions. So that is something that we are very
    interested in pursuing, and we think that it makes sense to do
    it in a way that allows to achieve those in the most sensible
    way, and that is what we are planning on doing.
        Senator Boxer. Well, Mr. Holmstead, if I may I will just
    finish because my time is up. I want to put in the record a
    letter that I have here to all of us on the committee from the
    National Wildlife Federation, U.S. Public Interest Research
    Group, National Environmental Trust, Clear the Air, Sierra
    Club, Natural Resources Defense Council, Environmental Defense,
    Clean Air Task Force, American Lung Association, National Parks
    Conservation Association, and the Earth Justice Legal Defense
    Fund. I want to put this in the record because these
    organizations are extremely concerned about the intent of the
    Administration to allow different levels of mercury at
    different plants, because what you say is true. We are talking
    about pregnant women who are exposed to these higher levels
    having children with lower IQ, even retardation. There will be
    abnormal growth patterns in some of the children, central
    nervous system disorders.
        So how can we sit here and possibly even entertain the fact
    that some plants will give off higher levels. So I am just, as
    we work on the four-pollutant legislation as it deals with
    mercury should we have to go and do a mercury bill stands, and
    that we don't move toward this flexible approach which will put
    some of our people and children and women so on into harm's
    way.
        Mr. Holmstead. Mr. Chairman if I could just comment,
    because I am concerned about the implication that somehow the
    Administration's bill will lead to these sorts of problems.
    First of all, as I think you understand, S. 556 would continue
    to allow different plants to have different amounts of
    emissions. There is nothing that anybody has ever entertained
    or suggested that would have every plant emitting the same
    amount, because plants use different amounts of coal. Some emit
    very little; some emit a great deal. I think under your
    proposal, what that would be is just a uniform percent
    reduction so that everybody would reduce by some certain
    percentage.
        We think that a way that we could substantially reduce
    overall loadings of mercury is the most important thing to look
    at, because as I think Senator Boxer understands, the mercury
    that comes out of power plants is emitted in two different
    forms. Part of it is elemental mercury, which actually goes up
    into the global pool and could easily be deposited in China or
    Japan, and we think it is important to reduce the overall
    loadings of mercury. In addition, there is a part of the
    mercury that is known as non-elemental mercury that may deposit
    nearby, that may actually come to the ground in a closer area.
    We just think it is sensible to understand that the world is
    fairly complex, and so rather than simply requiring a specific
    percentage reduction from each plant, we can actually have a
    cap that allows some trading, that allows us to reduce the
    overall mercury loading in a much more efficient way, while at
    the same time making sure that there are mechanisms in place to
    address the kinds of local concerns that I know Senator Boxer
    and the rest of us are all concerned about.
        Senator Boxer. Mr. Chairman, if I just might--30 seconds--
    rebut that. This letter talks about the practical effect of the
    Jeffords bill as a 90 percent reduction in emissions from each
    power plant and the prohibition of mercury trading, which is
    quite different than what you said. In addition, if you look at
    page three of the law--if you would let me finish; I didn't
    interrupt you--if you look at page three of the law it says, we
    shall prevent localized adverse effects on public health and
    the environment, so that each locality will be subjected to the
    tougher standards, making sure no one is harmed.
        So I mean I'm glad that you think that we are close on
    this. I hope you are right, but it is not what I am getting and
    I hope we can put this letter from the environmental groups
    into the record at this time.
        Senator Jeffords. We can do that.
        Senator Chafee?
        Senator Chafee. Yes, Mr. Holmstead, thank you very much for
    your testimony.
        What is the timeframe for the Administration's multi-
    pollutant bill?
        Mr. Holmstead. I am hoping, and I believe it will be in the
    relatively near future. As you can imagine, a lot of the senior
    level people who had been sort of refereeing these issues and
    working them through have now been spending much more of their
    time on other issues. I can tell you it still is receiving very
    senior level attention, not only at EPA, but within the White
    House. So again, I hope it will be relatively soon, but I
    cannot give you a specific date.
        Senator Chafee. I can completely understand that relatively
    soon. Anything more specific on that?
        [Laughter.]
        Mr. Holmstead. No.
        [Laughter.]
        Senator Chafee. Do you envision when the Administration's
    bill is proposed that there will be an increase in energy costs
    associated with their bill?
        Mr. Holmstead. I think the answer is anytime that you
    impose additional requirements on an industry, you are likely
    to increase the--and in particular on this industry--you are
    likely to increase energy costs. I think the important thing to
    remember, though, is what we are committed to doing is
    something that really rationalizes the current system. I would
    be happy to talk more about this at some other time, if people
    are interested, but we think it makes sense to replace a number
    of the current requirements that are imposing costs right now.
    So by putting in place a highly efficient cap-and-trade program
    that replaces some of these other things, we think we could
    actually achieve greater environmental benefits at lower cost.
        So as a practical matter, we believe that we would actually
    be reducing, and again I cannot give you specific details until
    we have our proposal, but because of the inefficiencies in the
    current system, we think there is an opportunity to have
    greater environmental reductions at lower cost than we would
    otherwise have.
        Senator Chafee. I hope that is true.
        Thank you very much. Thank you.
        Thank you, Mr. Chairman.
        Senator Jeffords. I think we ought to take a look at the
    other side of the equation and the benefits that occur from
    these kind of reductions. The EPA's analysis of Senator
    Moynihan's bill from the last Congress said that smaller
    reductions than those in S. 556 would result in $59 billion in
    health benefits and $1 billion in visibility benefits. Do you
    agree that S. 556 would produce at least these level of
    benefits?
        Mr. Holmstead. Again, we have not specifically quantified
    it, but I think that something like that is not out of the--I
    think that is certainly the right range that we would be
    thinking about. There is a methodology that EPA has used and
    that others within the Administration have used to monetize the
    benefits, and most of those benefits, as you have indicated,
    tend to be from reducing PM2.5. So again, I think
    that that range is probably, at least that number is in the
    right range.
        Senator Jeffords. I just want to keep this in perspective
    here, because sometimes we only look at one side of the
    equation. From the perspective of the national policy, it leads
    us to the wrong solutions.
        How much will it cost consumers in cents per kilowatt hour
    if the power sector has to comply with all the numerous Clean
    Air Act regulations that you have identified?
        Mr. Holmstead. Again, we have not done that analysis, and
    one of the reasons we have not is because so much of the future
    is uncertain, not only to the industry, but to EPA. We are in
    the process right now of, in fact the very beginning part of
    the process, of trying to figure out what the MACT standards
    would need to be. As you know, there is a very detailed
    statutory regime that gives us a methodology for doing that. We
    are in the process of doing that now, but we can't tell you
    exactly what MACT will be or how much it will cost the
    industry.
        The same is true in particular with figuring out how much
    this industry will have to spend in order to help State come
    into attainment with the new MACT standards. So as I mentioned
    before, there is no doubt that they will face additional
    compliance costs and we believe that probably those compliance
    costs would be passed along to consumers in the form of higher
    energy prices. But at this point, we are just not able to
    estimate with any certainty what those will be.
        Senator Jeffords. You praise the cap-and-trade approach of
    the acid rain title of the Clean Air Act Amendments of 1990.
    You also said that it is not wise to just layer additional
    reduction requirements on top of existing programs, but that is
    more or less what Congress did in setting up the title's caps,
    isn't it?
        Mr. Holmstead. That is what Congress did back in 1990, but
    I think there are two points we need to keep in mind. The first
    and the most important point is what we have said and what
    Governor Whitman has said is that we would only be replacing
    existing programs assuming that the caps are stringent enough
    to warrant that. I don't think people believed back in 1990
    that the nine million ton cap was sufficiently stringent to
    warrant the elimination of some of these other programs.
        The other thing to keep in mind is, back in 1990 there was
    a great deal of skepticism about a cap-and-trade program. There
    were a number of people who were concerned about the impacts of
    that, but it has worked much better than I think anybody
    envisioned. I think the proof is in the pudding. I've been in
    Washington long enough to know how these things work, and since
    I have been at EPA I have met hundreds of outside consultants
    and lawyers who claim to have invented the acid rain trading
    program. Every day I run across somebody new who was the father
    or mother of that program.
        So it has worked out better than I think people expected.
    One of the interesting things is that, you know, one of the
    concerns was that it would lead to this issue of local hot
    spots. We have just not seen that at all. We have very detailed
    analysis now that suggests that in fact by bringing down the
    total loading of emissions, that we have not caused any
    localized hot spot problems. But again, if I could just say I
    think the important thing is that we believe these programs
    could be eliminated provided that the caps are sufficiently
    stringent to warrant that kind of an action.
        Senator Jeffords. As I remember, I was the father of that
    program.
        [Laughter.]
        Mr. Holmstead. Senator, I think that we can agree that you
    and I were the co-fathers of that program.
        [Laughter.]
        Senator Jeffords. Good answer.
        Your testimony provides the committee with ideas about what
    the agency thinks is wrong with S. 556. The invitation letter
    asked for suggestions or amendments that should be made to the
    legislation. When will you and the Administration be prepared
    to provide the committee with constructive suggestions like
    that?
        Mr. Holmstead. We look forward to working with you and with
    your staff, and I think now that we have the first round of the
    analysis that we provided to you, and I am sorry that we did
    not get that to you earlier, but we hope that that is the
    beginning of a relationship where we can provide you additional
    technical support that should be useful to you and your staff
    and the other members of the committee.
        I know that everyone is eager to have the Administration
    come up with a more concrete proposal, and again I hope that is
    something we can do. It is something that we will do, and the
    timing of that is just still uncertain because of everything
    else that is going on within the Administration.
        Senator Jeffords. I appreciate that answer, and we will be
    looking for it.
        Senator Voinovich?
        Senator Voinovich. Yes, Ms. Hutzler, I requested some
    information, and I will put this chart up from the Energy
    Information Administration and the Department of Energy. Are
    you familiar with this chart?
        Ms. Hutzler. Yes.
        Senator Voinovich. According to the information that I
    have, the chart shows that the expected cost of four different
    proposals addressing NOx, SO2 and mercury, that the
    first three scenarios show a 50 to 65 and 75 percent reduction
    of all three pollutants by the year 2012. This is contrasted
    with the reductions in S. 556 which are called for by 2007.
    Could you explain this chart to us?
        Ms. Hutzler. That chart shows different allowance costs
    under different scenarios of reductions, and we've added to it
    beyond what you had asked us to analyze. You asked us to
    analyze SOx, NOx, and mercury reductions of 50 percent, 65
    percent, and 75 percent versus some baseline. But we also took
    a look at looking at mercury reductions that went further--90
    percent below, rather than 75 percent below, which was the most
    stringent target you had requested us to analyze.
        What happens in that case is your mercury allowance price
    really increases dramatically. The reason for that is that to
    control mercury, we find it to be very non-linear; that there
    is sort of a knee in the curve where the costs increase
    substantially. When you push it to 90 percent, you have hit
    that knee in the curve. So that is pretty much what that chart
    is indicating.
        The point of it is that if you give more time in order to
    achieve the goals, that the costs are a lot less and less of an
    impact in terms of energy cost. Is that . . .
        Ms. Hutzler. That is another way of looking at it, because
    in your scenarios you also had it phased over a 5-year period--
    2007, half the targets had to be met; the full target in 2012.
    So you would also have lower costs, too, if you are giving the
    industry more time to comply.
        Senator Voinovich. I think that is one of the things that
    is being debated right now in terms of this legislation is the
    time line. How fast are you going to ask people to come on
    board and what is the status of the technology, and the issue
    of mercury and what you can do to bring it down. I visited
    power plants and talked to people about mercury, and they are
    not just sure what they can do in order to bring mercury down.
    According to your chart, it seems that if you address the
    mercury issue that you should at the same time be able to deal
    with the NOx problem. But I know at Gavin in Ohio, they put on
    that new SCR technology to get rid of the NOx, and they are
    still not sure just what impact it is having on NOx yet. They
    are having some problems with it, and they really can't come
    back and tell me what impact they think it is having on
    mercury.
        So there is a lot of uncertainty out there about whether or
    not you can deal with the mercury problem and how effective you
    can be with it.
        Have you done any calculation either in the EPA or in the
    Department of Energy on the impact that this legislation, if it
    was passed just as it is, would have on the gross State product
    or the domestic product of the United States in any sense? I
    mean, we are talking 30 percent to 50 percent increase in
    electricity cost; 20 percent cost, say, in heating. What
    impact--have you done any calculations about the impact that it
    would have on this nation's economy and its competitive
    position in the global marketplace?
        Ms. Hutzler. In our reference case, we say that the bill
    would have about a .08 percent impact on GDP in the year 2007.
    That is about $100 billion in reduction to the gross domestic
    product in that particular year. What we analyzed, though, was
    not specifically S. 556 because we did not look at two
    provisions precisely, but the analysis we did do was fairly
    similar.
        Senator Voinovich. And would you repeat that again? What is
    the date?
        Ms. Hutzler. In 2007, it would be a .08 percent reduction
    in GDP.
        Senator Voinovich. So that is about $100 billion.
        Ms. Hutzler. $100 billion.
        Senator Voinovich. We are trying to figure out $100 billion
    stimulus package right now to jack the economy up and get it
    going.
        Has EPA ever done that kind of analysis, Mr. Holmstead, do
    you know?
        Mr. Holmstead. As I think I mentioned, we have not analyzed
    S. 556 directly, and what we did was respond to the letter from
    Senators Jeffords and Lieberman. And S. 556 contains a couple
    of provisions that would make it more costly than what we have
    analyzed. What I can say is, and what we did analyze, in
    general our analysis was pretty consistent with EIA's. We did
    not see as big an effect on GDP, and in fact GDP was largely
    unchanged. But the reason for that is I think we agree with the
    EIA's analysis in terms of the increased cost in terms of the
    decline in consumer ability to purchase goods and services.
        What you have to remember is the GDP is a total measure
    of--includes government spending, includes investment for
    government-required programs. So to some extent, the control
    technologies that you and I would be paying for in the form of
    higher energy prices, that money then gets reinvested into the
    economy in the form of SCRs and scrubbers and other things. So
    that is why we don't see a big impact on GDP. But as I
    mentioned, we have never done that sort of analysis on S. 556.
        Senator Boxer. I am chairing this for the moment, just
    waiting for Senator Jeffords to come back.
        Do you have any more questions, Senator? Your time has
    expired, but would you like to ask another?
        Senator Voinovich. No, Madam Chairman.
        Senator Boxer. OK. Thank you.
        Mr. Holmstead, I am confused about something you said. You
    said that EPA has never done an analysis of S. 556, but I have
    it right here.
        Mr. Holmstead. That is an analysis of the request that we
    got from Senators Jeffords and Lieberman back in, I think in
    May.
        Senator Boxer. Yes.
        Mr. Holmstead. There are two important aspects--there were
    two important things about that analysis that are different
    from S. 556. The first one is, S. 556 actually would require
    all power plants after a certain period of time to come up to
    conformance with so-called NSPS, new source performance
    standards. That is something that was not included in our
    analysis.
        Senator Boxer. OK.
        Mr. Holmstead. Probably the more significant thing, though,
    is that the only way our models work allow us to model mercury
    trading, and so we have not been able to analyze the cost of
    mercury-specific controls on each plant, though we do know that
    that would drive up the cost pretty significantly.
        Senator Boxer. OK. Well, I am still confused because I have
    it here from the U.S. EPA, Office of Air and Radiation, Office
    of Atmospheric Programs, dated October 31, 2001.
        Mr. Holmstead. Right. But does it say that it is an
    analysis of S. 556, or does it--it is a response to the
    request, and the request was not that we analyze S. 556. The
    request was that we analyze certain parameters.
        Senator Boxer. OK.
        Mr. Holmstead. But those parameters are not exactly the
    same as S. 556.
        Senator Boxer. All right. Well, then I would suggest you
    let us know where this analysis falls short in its relation to
    S. 556. I would like to know because I would like you to then
    continue doing your analysis.
        In this non-analysis analysis, you say here . . .
        Mr. Holmstead. That is an analysis. It is the analysis for
    . . .
        Senator Boxer. It is the analysis?
        Mr. Holmstead. Yes, it is the analysis that we were asked
    to do by Senators Jeffords and Lieberman.
        Senator Boxer. Very good.
        Mr. Holmstead. They did not ask us to analyze S. 556.
        Senator Boxer. But they did ask you to analyze what they do
    in S. 556.
        Mr. Holmstead. No, they did not. They asked us to . . .
        Senator Boxer. OK. Because here it says--well, you have to
    read this. It sure sounds that way to me. Let's go take a look
    at it.
        Mr. Holmstead. Here is something that we could perhaps
    agree upon.
        Senator Boxer. Let me just read this, OK?
        Mr. Holmstead. Sure.
        Senator Boxer. Yes. In response to a May 17, 2001 request
    from Senators Jeffords and Lieberman, this report describes the
    results of a modeling study done to evaluate the potential
    impacts of reducing nitrogen oxide, sulfur dioxide, mercury and
    carbon dioxide emissions from the U.S. electric power sector.
    As far as I am concerned, if this is not a complete report, it
    is a good first step of analyzing the bill.
        So let me just say it clearly . . .
        Mr. Holmstead. That is correct. We agree. That is
    absolutely right. Yes.
        Senator Boxer. OK. It clearly says here that, and this is
    in response to Senator Voinovich's points about GDP, and I want
    to ask unanimous consent to place in the record page 24 here.
    There is little change in GDP under any of the policy
    scenarios, and they explain why--some of which you have
    explained.
        Mr. Holmstead. Right.
        Senator Boxer. So the macro impact on overall GDP,
    according to this first analysis, is that there isn't any
    impact in the macro picture of GDP for the reasons that you
    stated before.
        I want to read into the record a part of this letter from
    the environmental groups that I mentioned before, Mr.
    Holmstead, for you to consider what they are saying; and not
    for you to respond to it, but just to think about what they are
    saying, and this is I think important.
        Mercury exposure in the United States is real and
    widespread, and as a potent neurotoxin it persists in the
    environment and accumulates in the food chain. It demands an
    aggressive policy response. Most important, it demands that
    Congress not set a dangerous precedent by allowing trading of
    this toxic pollutant to meet a national reduction target.
        Then they explain why--and what I like about this, they put
    it into a real situation here. It is not just some bureaucratic
    thinking. It is a real situation. They say, for example,
    children of fishermen in the eastern United States living
    within 1.5 miles of a power plant are potentially exposed to
    mercury five times above the level EPA considers safe. Power
    plants' mercury emissions also could be transported through the
    atmosphere and deposited hundreds of miles away. For both
    reasons, stringent timely controls on each coal-fired plant are
    essential, and any program that would allow local mercury
    burdens to increase would be unconscionable.
        I just want you to think about that. I know you probably
    don't agree with what they are saying, but I think it is
    important to think about it, because I think the people in the
    country are going to agree with it, because it is common sense.
        Now, I also want to respond to what Senator Voinovich said,
    and the I will stop and I will wait for another round. In terms
    of the technological capabilities of controlling mercury, my
    understanding is that data from EPA show that power plants can
    capture 40 to 98 percent of their mercury emissions using
    existing controls for other pollutants. Mercury control
    technology recently tested on power plants is capable of
    capturing 80 to 90 percent of mercury in flue gas. One of these
    technologies is very widely used by other industries and proven
    to routinely capture over 90 percent of mercury.
        So this is a good news situation. I believe truly, you
    know, we will cerate jobs in moving these technologies forward.
    We will have healthier people and we will have no adversity on
    our GDP. That is the picture that I conclude, and as I say, it
    is from real-life experience seeing this in a western State
    called California, let me state, that has 34 million people and
    did elect Ronald Reagan, Richard Nixon and me.
        [Laughter.]
        Senator Boxer. So I think that it shows that our people are
    working together here, and we always have prized a clean and
    healthy environment.
        So Senator Chafee, I believe it is your turn.
        Senator Chafee. Thank you.
        I would only like to add that as we talk about GDP, I think
    it is important to also remember that if we push the envelope
    on clean air that we are also pushing American ingenuity, and
    there is a vast wide world out there that can depend on
    American ingenuity, whether it is Latin America, Africa or
    China wrestling with these problems that as we push the
    envelope, we can export that technology and help our GDP.
        So that is all I have to say.
        Senator Jeffords. Senator Voinovich, I know you are very
    interested, and I would let this panel . . .
        Senator Voinovich. I am going to let this panel go, but I
    would just like to ask one more question please.
        Senator Jeffords. Yes. Please go right ahead.
        Senator Voinovich. OK. And it deal with the same thing that
    Senator Chafee and others, and that is getting some information
    back as soon as possible, Mr. Holmstead, from the Environmental
    Protection Agency.
        In your ongoing analysis of the multi-emission strategy,
    either for the Administration's proposal, which we are anxious
    to see, or the independent analysis you are conducting for this
    committee, are you considering the potential costs to different
    industries in additions to the impacts on utilities? For
    example, impacts on manufacturers--higher fuel prices, higher
    cost to goods, loss of competitiveness; impacts on users of
    natural gas; farmers; agriculture; polymer chemical industries;
    impacts on small business.
        The Edison Electric Institute, which I am sure people would
    say is discredited, it represents the utility industry,
    estimates that the following industry sectors would be hit hard
    by this bill: the agriculture sector, loss of $2.27 billion
    gross output by 2010; manufacturing, loss $11.2 billion gross
    output by 2010; motor vehicles, loss of $1.6 billion, 2010;
    service sector, loss $57.2 billion gross input by 2010.
        Those kinds of--and this is an industry group's statistics,
    and I am sure people would debate them--but we need the best
    information we can in terms of the impact that this legislation
    is having, and the sooner we can get something back from the
    Administration and the EPA on where you are, the better off I
    think all of us are going to be.
        Senator Jeffords. Thank you.
        Senator Boxer?
        Senator Boxer. Thank you, Mr. Chairman.
        I find this so interesting because Senator Voinovich raises
    these costs that will absolutely occur. I don't deny that there
    will be costs overall. The GDP, according to this report, will
    not change, but there are clearly going to be impacts. But we
    have to remember smog also impacts agriculture. We know that.
    We take heavy losses because of it. So there are benefits as
    well.
        Because my Chairman wants to move on and because, Mr.
    Holmstead, I don't want to torture you anymore, I just would
    ask you to respond in writing to something. The Administration
    asked for a report from the National Academy of Sciences, said
    is there really global warming. The report came back and they
    said yes, there is global warming and it is happening and human
    actions are responsible.
        Now, I understand you have said sort of over your vehement
    objections, we will not touch this issue of CO2. We
    are going to fight you on it, and in terms of this--in this
    bill.
        Mr. Holmstead. That's not--I'm sorry. Right. I think that
    is an important distinction.
        Senator Boxer. I am making it. I am saying in this bill.
    All right? Even though 40 percent comes from the power plants.
    OK. So that leaves you just 60 percent to work on to improve. I
    want to know what you are going to do. I would be very
    interested to know what you are going to do. Obviously, staying
    away from the worldwide meetings on this is something that you
    have done, at least at the highest levels. So without getting
    into it today, I think it is extremely important for us to know
    what you are going to do. Because if you are not going to allow
    us to move forward with this, although I think we are going to
    try, and have our debate. In terms of these power plants, how
    are you going to get to those reductions? What is your plan? So
    if you could get that to me in writing, because it is way too
    long and my Chairman will not be happy with me, even though I
    am a strong supporter of his bill. He wants to move on.
        I want to thank you for this debate that we had, and Mr.
    Chairman, we clearly have a fight ahead of us, but I think it
    is a good one, and I look forward to it.
        Thank you.
        Senator Jeffords. You look forward to every fight.
        [Laughter.]
        Senator Boxer. My name is Boxer for a reason, and that's
    the deal.
        Senator Jeffords. That's right.
        Thank you. I deeply appreciate your cooperation and being
    very forthright this morning, and we look forward to working
    with you.
        I will now call the third and final panel for this morning.
    This is panel three--Kenneth Colburn, Director of Air
    Resources, Department of Environmental Services, Concord, New
    Hampshire; David Ouimette, Manager, Stationary Sources, Air
    Pollution Control Division, Colorado Department of Public
    Health and Environment, Denver, Colorado; Brock Nicholson,
    Chief, Air Quality Planning Division, North Carolina Department
    of Environmental Natural Resources, Raleigh, North Carolina;
    and Michael Callaghan, Secretary, Department of Environmental
    Protection, Charleston, West Virginia.
        Thank you, gentlemen, for being with us today. I deeply
    appreciate your willingness to come and to cooperate and to
    provide us with some good testimony.
        Our first witness is Mr. Ouimette, and if you will proceed.

     STATEMENT OF DAVID OUIMETTE, MANAGER, STATIONARY SOURCES, AIR
       POLLUTION CONTROL DIVISION, COLORADO DEPARTMENT OF PUBLIC
                       HEALTH AND THE ENVIRONMENT

        Mr. Ouimette. Thank you, Mr. Chairman.
        On behalf of the State of Colorado, thank you for the
    opportunity to present the State's views on S. 556, the Clean
    Power Act of 2001.
        My name is Dave Ouimette and I direct the activities of the
    Stationary Sources Program for the State of Colorado, and I
    have worked in that area for the past 17 years. Colorado is in
    support of legislation to reduce the health and environmental
    impacts of air pollution, especially if this includes some
    streamlining of the Clean Air Act by replacing outmoded
    procedures with stringent standards reducing air pollution.
        We examined the proposed legislation in relation to several
    broad principles, and I would like to tell you what those
    principles are and how they apply to the proposed legislation.
    The principles are, first, there cannot be any backsliding from
    the environmental protections found in current law. That is,
    there should be no less emissions reductions under a multi-
    pollutant control strategy than that under the current program.
    Also there should be no detrimental localized effects which
    would threaten the national ambient air quality standards.
        Our second principle is any new legislation should not
    simply overlay the new standards or requirements on top of the
    existing Clean Air Act. New requirements need to be integrated
    into the Act to avoid redundancy. For example, elements of some
    programs such as major modification permitting under the New
    Source Review Program and regional haze as they pertain to
    power plants may no longer be necessary. More discussion will
    be needed to determine which existing elements should possibly
    be abandoned.
        Our third principle is certainty--certainty for regulators
    and the regulated community, as well as the general public, is
    crucial. Certainty being clear program requirements that can be
    readily understood. Also, program requirements should be
    clearly identified in the law or in the regulations that
    implement them. I have noted in the past that policies, letters
    and written determinations from EPA have tended to confound the
    implementation of programs such as New Source Review and this
    needs to be addressed.
        Our last principle is energy demands in the West and the
    ability to develop the resources to meet that demand must be
    considered with any new legislation. In that regard, we do not
    fully understand the implications of the carbon dioxide
    emission reduction provisions, and there may be unintended
    consequences for energy supplies in the West that may be
    difficult to cope with. For this reason, we believe we should
    closely examine whether CO2 reduction targets are
    appropriate at this time.
        Instead, we recommend that an intense study of the impact
    of CO2 controls on power in the West, as well as
    perhaps future hearings on the topic, would be advisable to
    ensure that any reductions agreed upon do not have a secondary
    effect of causing power shortages or inflating the cost of
    power to consumers.
        Please don't misconstrue our statement to mean that we are
    not concerned about CO2 emissions. As you know,
    there are many dimensions to the CO2 debate beyond
    just power plants, including increased energy efficiency and
    use of renewable energy sources in other sectors of our
    economy. These strategies can effectively reduce overall
    CO2 emissions, and Colorado has robust, ongoing
    programs in these areas.
        I would like to now walk through a few additional comments
    on the provisions of S. 556. First, the western part of the
    country differs from the East, as you have heard previously,
    with regard to the nature and extent of air pollution problems.
    So we recommend that the bill be amended to reflect these east
    versus west differences where they exist. Your staff heard
    about this at some length during the October 4 and 5
    stakeholders meeting on this proposed legislation.
        Next, the timeframe for making the requisite emissions
    reductions is impractical, especially if these reductions are
    going to occur with the assistance of an emissions trading
    program. A 5-year time line is insufficient to adopt
    legislation at the Federal level, develop and implement Federal
    regulations, adopt legislation at the State level, and then
    provide facilities time to comply. The establishment of an
    emissions trading program in the same timeframe is also very
    aggressive and may not be possible.
        On the proposed nitrogen oxide reductions, with the
    exception of California, the West does not face ozone standard
    violations as do other areas of the country. Therefore, we
    believe that any reductions required of power plants be no
    greater than that which can be achieved by good combustion
    technology, as opposed to the use of add-on control devices. We
    also believe that this approach would still provide an
    environmental benefit in the West with respect to regional
    haze.
        Last, Colorado supports reducing mercury emissions and the
    benefits this will have for both air and water. We do believe
    than an appropriate reduction number can be placed in
    legislation in the near future, but that the issue warrants
    further consideration before an emission target is set, the
    reason being that the proposed legislation requires a 90
    percent reduction of mercury from 1999 levels without regard
    for the emissions reductions that may already be achieved as a
    co-benefit of operating existing non-mercury pollution control
    equipment. This may put State regulators in the untenable
    position of having to enforce a 90 percent reduction without
    having technology available to industry to achieve that goal.
        Also, it is our understanding that there are subtle
    differences between eastern and western coal that make it
    difficult to reduce mercury emissions from the burning of
    western coal, and this needs to be addressed.
        Finally, in the spirit of advancing the discussion on
    multi-pollutant legislation, we have a recommendation for the
    committee to consider. That is, in order for States and other
    stakeholders to more fully grasp the implications of the
    proposal, additional analyses would be helpful to flesh out
    various options as to how the multi-pollutant program would
    work.
        Thank you again, Mr. Chairman, for seeking Colorado's views
    on this important legislation.
        Senator Jeffords. Well, thank you, Mr. Ouimette.
        Mr. Nicholson?

       STATEMENT OF BROCK NICHOLSON, CHIEF, AIR QUALITY PLANNING
     DIVISION, NORTH CAROLINA DEPARTMENT OF ENVIRONMENTAL NATURAL
                               RESOURCES

        Mr. Nicholson. Good morning. My name is Brock Nicholson. I
    am chief of the planning function for the State of North
    Carolina's air program, and as such responsible for developing
    State Implementation Plans, regulation and working with the
    legislature on pieces of legislation.
        I am pleased to be here today to share some insights
    regarding the current North Carolina experience with multi-
    pollutant legislation and how that experience might relate to
    S. 556 under consideration by this committee.
        I will skip through some of the material on our bill that
    is contained in the handout, but simply I will say that it is
    approximately 70-plus percent reduction in both NOx and
    SO2 from actual 1998 levels in North Carolina, and
    that is of course a key feature, being a State-only type
    program. For mercury and CO2, it does not have
    specific limits, but it obligates the State to come forward to
    the legislature in future years. I will go into a little more
    detail on that in a moment, with recommendations.
        What I would like to do now is comment on S. 556.
    Fundamentally, the Department does support the aggregate
    emissions reduction concept contained in this bill. This
    approach would presumably incorporate a cap for each pollutant.
    Caps can provide for an efficient and flexible program to
    obtain reductions. Both implementing agencies and emission
    sources will benefit.
        This aggregate approach is one that, based on our
    consideration of and discussions about the North Carolina bill,
    gives the sources flexibility and certainty to make the
    business decisions that are in their best interest while they
    meet the requirements of the legislation. In our view, the
    aggregate emission reduction approach is a key feature--was a
    key feature in getting the utility industry to support our
    State bill.
        However, caps must be meaningful from the standpoint of
    protecting public health and the environment. By that, I mean
    they must be sufficiently stringent to assure that air quality
    goals are actually met. Caps must not be set at levels that
    merely facilitate a robust trading system. Our view is that S.
    556 appears to be sufficiently stringent to be meaningful,
    without commenting on exactly where it is the right level or
    not.
        However, unlike the North Carolina bill, which requires all
    of the actual reductions to be in North Carolina, I would
    presume that S. 556 and the regulations that implement it would
    allow for a national trading program. Such a program must not
    only achieve the national aggregate emissions reduction goal,
    it must also allow local pollution problems to be addressed in
    a way that protects health and the environment. There must be a
    States rights provision or authority provision that allows for
    actual controls, no trading credits, to be applied to specific
    units or areas to address local air quality needs.
        Since public health protection is an overall goal, States
    must be able to assure NAAQS attainment even if overall
    reductions exceed the national cap or such NAAQS controls
    conflict with the trading program. Such protections must apply
    not only to NOx and SO2 emissions, but to the
    associated ozone and fine particle matter, but also to mercury
    emissions which can give rise to special local concerns about
    public health impacts.
        Along with a strong Federal mobile program, the multi-
    pollutant approach such as this bill is critical for attainment
    of the 8-hour standard and the foreign particle standard. What
    I would like to do, I know my chart is a little smaller, maybe
    a little less lethal.
        [Laughter.]
        Senator Jeffords. We like small charts. Thank you.
        Mr. Nicholson. It is in the handout I think that we have
    passed, but it is color and I would be glad to send it around
    or leave it here. What I really want to point out is, this
    contains both modeling results for 2007-2015 that reflect the
    full NOx SIP call, assuming no trading, that every unit is
    controlled, and assuming all the mobile programs are in place,
    and we still show some local areas not attaining the ozone
    standard. So I will leave that.
        Regarding the compliance schedule in S. 556, we observe
    that in the discussions that led to the North Carolina bill
    that a consensus between the environmental groups and the two
    utilities produced a schedule which is longer than the one in
    S. 556, but nonetheless acceptable and would not adversely
    affect the economy or energy supply in North Carolina. These
    are 2009 to 2013 for final second phase of SO2
    control. However, I didn't say before, but is in the text here,
    most of the debate was on a cost recovery feature.
        As it is in many other States, mercury is a big public
    health issue in North Carolina. However, considering the
    uncertainties regarding measuring mercury and the expected and
    perhaps relatively large co-benefits of mercury reduction when
    scrubber and SCR controls are placed on bituminous coal plants,
    the drafters of the North Carolina bill decided not to specify
    a control level for mercury. Instead, there is a requirement
    that the State study the issue of co-benefit, report annually
    to the legislature, and make recommendations to that body by
    March of 2005 on additional controls that would be needed for
    public health protection from mercury in our State.
        With respect to carbon dioxide emissions, the North
    Carolina bill requires our Department to recommend action to
    the legislature by March, 2003. The 2003 date allows time to
    consider developments at the Federal level and in other States,
    and to understand the benefits of energy conservation, greater
    use of natural gas, and the developing clean coal technologies,
    including coal gasification.
        Finally, I will just very briefly say North Carolina, along
    with Georgia, South Carolina and Tennessee have been charged by
    our Governors to come up with a multi-pollutant recommendation
    by this spring, March of 2002, and also to look at innovative
    energy and transportation approaches that will benefit the air
    quality. While CO2 is not specifically identified,
    we are looking at measures that also give CO2
    benefits in that effort.
        In conclusion, thank you for this opportunity to speak on
    this very important issue. I will be glad to answer any
    questions.
        Thank you.
        Senator Jeffords. Thank you.
        Mr. Colburn?

       STATEMENT OF KEN COLBURN, DIRECTOR OF AIR RESOURCES, NEW
             HAMPSHIRE DEPARTMENT OF ENVIRONMENTAL SERVICES

        Mr. Colburn. Thank you, Mr. Chairman.
        My name is Ken Colburn. I direct New Hampshire's air
    quality programs, and I appreciate this opportunity to discuss
    multi-pollutant strategies with the committee.
        First, I applaud the chairman and the ranking member for
    tackling this issue, due to its importance not only to public
    health and the environment, but also to our nation's economic
    progress and the burdens States will face in wrestling with air
    pollution. I also applaud your staff, both personal and
    committee, for conducting groundbreaking stakeholder
    discussions on this issue in early October.
        A reassessment at this time is appropriate because it is
    over a decade since the last major amendments to the Clean Air
    Act. We have made good progress. Overall, pollution from power
    plants is down, despite increased economic activity and nearly
    a doubling of coal use. Still, the Act and its implementation
    must improve in order to capture the benefits of our experience
    in the last decade. We must build on our successes, like the
    Acid Rain Program, which has shown that environmental and
    economic interests can be aligned, rather than at odds. We must
    rectify several shortcomings in the Act.
        Most important, though, we need to improve its results.
    Many areas still violate health-based air quality standards.
    Forests and lakes throughout the Northeast continue to suffer
    acid rain damage, and growing scientific evidence points to the
    profound health effects of fine particulate matter, the long-
    term impacts of toxic metals, and the climate-altering effects
    of carbon dioxide.
        Multi-pollutant approaches like S. 556 promise to address
    all of these needs. That is why the northeastern States
    strongly support the committee's efforts. Only a 4-P approach
    can give industry the investment and planning certainty it
    needs, ensure reliability, and prompt a smooth transition to
    the future technologies and resources that we will need.
        A 3-P approach will not accomplish this goal.
    Scientifically and politically, climate change can no longer be
    ignored. We need to start decreasing our emissions of climate-
    forcing gases, and based on EIA's analysis, CO2
    prices could be as low as $10 a ton or even lower if
    sequestration is involved. This is an economic issue in New
    Hampshire because our economy is based on our quality of life,
    and our quality of life is clearly based on our climate.
        In short, we cannot gain on the future by wedding ourselves
    to the policies and programs of the past. Ultimately,
    efficiency will win out in an economy over inefficiency. So it
    is just a question of how much competitive advantage and
    technology opportunity we will squander by delay. Action now on
    a multi-pollutant bill is economically, not just
    environmentally, superior to inaction.
        States also seek Federal action now in order to deal with
    upcoming attainment dates and designations. States can do a lot
    of things better than the Federal Government, but adopting
    consistent regulations to equitably address the multi-State
    impacts of the interstate power industry probably isn't one of
    them. Reducing emissions from power plants through a nationally
    consistent output-based approach will take the smallest bite
    out of the economy and simultaneously enhance electric
    competition.
        Any emission reductions not achieved through a Federal
    multi-pollutant approach will have to be secured by imposing
    additional burdens on States, which in turn will have to impose
    additional burdens on other smaller sources. Thus, failure to
    adopt an effective national 4-P legislation is a recipe for
    adding costs in pursuit of identical environmental and public
    health goals.
        Further, since Federal preemption obstructs State controls
    on other major emissions sources like vehicles and fuels, small
    businesses will bear the brunt of making up for the missing
    reductions.
        High-tech States like New Hampshire also welcome the
    benefits that a multi-pollutant path will push. For example,
    energy efficiency in distributed generation can provide better
    reliability, cost savings, and greater energy security than
    simply erecting vulnerable power plants and pipelines.
        We would also like to solve transported pollution more
    constructively than the Act now allows. Though well-intended,
    sections 126 and 110 have divided the country into bitter
    upwind and downwind camps, and wasted scarce State resources on
    incessant litigation. Dramatically reducing power plant
    pollution is more cost-effective than burdening the States with
    solving interstate pollution transport through litigation.
        Finally, we also need to look at New Source Review. Many
    grandfathered power plants have actually increased output in
    recent years, rather than retired as anticipated. In this
    context, NSR has accomplished two important things. It has
    enabled States to reduce pollution, albeit from new sources,
    more than they otherwise would have, and it gave rise to the
    development and application of new emission control
    technologies. NSR at existing sources is more contentious, as
    the enforcement actions now under way demonstrate. The fact
    that a law is violated, however, does not mean we don't need
    it. The northeast States unequivocally support the current
    enforcement actions against NSR violators, and feel strongly
    that new legislation must not impede those actions or create a
    pretext to let past violators off the hook.
        Going forward, however, there should be opportunity for
    consensus on improving NSR. Progress is most likely if we take
    a systems approach to the interlocking provisions of the Act.
    The yardstick we will use to measure those new provisions will
    be whether they guarantee better health protection than the
    current statute. States will be willing to entertain greater
    regulatory relief if emission reduction commitments are larger,
    sooner, more certain and become progressively more protective
    over time. We will not support relief today in exchange for
    promises of future reductions. In addition, the full suite of
    existing State authorities to go beyond Federal requirements
    when necessary must not be abridged.
        In conclusion, several States are already moving ahead to
    create an energy future that is cheaper, cleaner, more secure
    and provides greater competitive advantage, job opportunity and
    quality of life. We urge the country as a whole to do so by
    adopting an aggressive national four-pollutant strategy
    reflecting the core concepts in S. 556. The northeast States
    have developed a general set of principles which was attached
    to my testimony, and I look forward to answering any questions.
    Thank you.
        Senator Jeffords. Thank you.
        Mr. Callaghan?

       STATEMENT OF MICHAEL CALLAGHAN, SECRETARY, WEST VIRGINIA
                 DEPARTMENT OF ENVIRONMENTAL PROTECTION

        Mr. Callaghan. Thank you, sir, and good morning. I am Mike
    Callaghan. I am head of the West Virginia Department of
    Environmental Protection. I have had that job since February.
    Prior to that I was a Federal prosecutor, and I will say it is
    a lot easier putting bad guys in jail than it is understanding
    the Clean Air Act.
        [Laughter.]
        Mr. Callaghan. So, for what that is worth.
        As most of you on this committee probably know, West
    Virginia, we are probably the largest supplier of coal of any
    State. I say that in this sense, Btu-wise, we surpass Wyoming
    and even the States out west. Quite simply, we supply high-tech
    States like New Hampshire with the power to run their computers
    and their Internet and things like that.
        In my role, I spend a good bit of time working with
    environmental issues related to the digging of coal, and more
    and more we are working on environmental issues related to the
    burning of the coal.
        This particular bill, and let me talk about the goals here.
    The 75 percent reduction of SO2, 75 percent NOx
    reduction, 90 percent mercury reduction and a reduction of
    CO2 to 1990 levels--looking at those things, and let
    me start with this premise. It may surprise many of you here to
    believe that I kind of support the concept of a multi-pollutant
    strategy. Many of our environmental programs that we have had,
    including the air program, have developed in a mix-matched
    fashion, and it has been a hodgepodge of complex regulations.
    The traditional command and control approach has often
    addressed only individual pollutants in a facility-specific
    manner. Control requirements or the lack thereof can vary
    widely across jurisdictional boundaries within the same air
    shed.
        For those reasons, I think a national multi-pollutant
    strategy is a superior environmental solution that could
    address many of these issues and clear up some complex and very
    confusing things like the regional haze issue, the 8-hour ozone
    standards and the PM2.5 standards. So that is the
    positive.
        The negative, I have to say, our problem with it is simply
    the CO2. We have severe reservations about including
    CO2 national emissions caps. I love to refer to our
    senior Senator Robert Byrd when he supported the Climate Change
    Strategy and Technology Innovation Act of 2001, which is S.
    1008. He stated the case far more eloquently than I am capable
    of doing. But the entire Senate adopted, as I understand it,
    Senate Resolution 98--an acknowledgement that climate change
    treaties, you must include commitments from all the developing
    nations, the heavy polluters, including the United States. We
    don't have that and we are not going to get there. So our
    recommendation is, let's not go there with the CO2.
    We recommend removing the CO2 cap from S. 556.
        Now, I say that, but we also acknowledge that global
    warming is a concern. It needs to be addressed in a meaningful
    way, and I suggest a far better approach is to start with S.
    1008 and move forward, and not put in the provisions in S. 55.
        Let me briefly address NOx and SO2 and mercury
    reductions. We have heard it today and you hear it all the
    time, anytime you talk about regulating industry you hear the
    same cry. First of all, they can't do it. Second if they could
    do it, it would cost us too much money and we would all go out
    of business. We are all hearing that on this particular issue.
        Past experience has told us, I think, that industry
    overstates their case, but in this particular instance I want
    to say I think there is legitimacy to the concern of the
    restrictions in S. 556. I think the focus needs to be placed on
    the level of the caps, not on whether we need caps or not. So
    with respect to the three pollutants, we are supportive of some
    type of cap. I think they might be just a little too high.
        When you put the caps on, I will sound this warning.
    Various levels, once the caps are determined, the next step is
    to ensure equity among the States. There needs to be some
    mechanism to ensure that legitimate issues concerning
    allocation under these caps are fairly resolved.
        I will give you an example here that is site-specific with
    West Virginia. We are involved in an ongoing feud with EPA over
    a growth assumption that they placed on West Virginia. EPA
    basically told West Virginia from the period of 1996 to 2007 we
    would have zero new power facilities in the State of West
    Virginia. Well, that strikes me as rather odd because there are
    eight of them sitting on my desk today that want to move
    forward. So when I talk about fairness, we need to be fair to
    States like West Virginia and not have EPA putting unreasonable
    growth assumptions on our State.
        Let me conclude, I see my time is out, we need to have a
    multi-pollutant strategy and eliminate things like the
    complexities of New Source Review, prevention of significant
    deterioration. We need to clarify enforcement issues under
    these programs. The strategy I think you should go in is to
    provide stability and certainty for the affected sources and
    limit liability for sources that demonstrate adequate
    compliance with the program provisions.
        Thank you.
        Senator Jeffords. Thank you all for very excellent
    statements. I deeply appreciate it. West Virginia, you
    certainly have Senators here that you can rely upon to take
    care of your interests, I can assure you of that.
        We have a difference of opinion across this nation on what
    to do, what the levels ought to be and who ought to be helped
    and hurt, so this is going to be a very long and lengthy
    dissertation in the committee before we probably end up with a
    bill that we would be pleased with, but we intend to go
    forward.
        I have questions which I will just take them in the same
    order that we spoke. The first question is, to achieve
    attainment with a new PM2.5 standard, what kinds of
    emissions reductions will be necessary from power plants in
    your State?
        Mr. Ouimette?
        Mr. Ouimette. Mr. Chairman, we are not anticipating being
    out of compliance with the PM2.5 standard. So we
    have no issues with that that I am aware of at this time.
        Mr. Nicholson. In North Carolina, we are having
    considerable problems with the PM standard presently. We have a
    very large percentage of our monitors that are over the
    standard. We would anticipate a very significant cut in
    SO2 emissions are necessary to obtain that standard.
    We don't have the number yet. We haven't finished that
    analysis. But we believe we need a very substantial cut, both
    in North Carolina, and certainly we need to reduce in North
    Carolina for North Carolina's benefit, but we also need it
    reduced in a broader region. These kinds of levels, I think,
    are probably--our gut sense is they are in the ballpark.
        Senator Jeffords. Mr. Colburn?
        Mr. Colburn. Senator, a similar answer. We anticipate or
    hope that we will not be in nonattainment of the new
    PM2.5 standards, but to the extent that we risk
    that, it is a function of regional sulfur emissions being
    transported to the State, and there is nothing I can do in my
    State to achieve that. However, we will ante up and do the same
    things required of other States to our own plants, and we
    believe that the sulfur and NOx requirements that you have
    outlined in S. 556 are about right.
        Senator Jeffords. Mr. Callaghan?
        Mr. Callaghan. We think we are going to be in compliance.
    We don't have any issues on attainment.
        Senator Jeffords. Next question--if the emission reductions
    in S. 556 don't take place, what steps will your State be
    required to take to ensure that the public health and
    environment are protected?
        Mr. Ouimette. Mr. Chairman, fortunately in Colorado we have
    had tremendous success, perhaps more than most States have had,
    in redesignating from nonattainment status to attainment
    status. In fact in the next year, approximately a year or year
    and a half, we anticipate that we won't have any nonattainment
    areas remaining in Colorado. So we are keeping our fingers
    crossed and I think if that in fact is the outcome, there will
    be nothing further that we have to do.
        Senator Jeffords. Mr. Nicholson?
        Mr. Nicholson. In North Carolina, we, as I explained, we
    have this legislation that I didn't mention before, but has
    passed our Senate and is still in the House. That is one step
    that the people in North Carolina believe is necessary. The
    other is to work collectively with our other regional States in
    an effort come forward with our own regional program. I think
    it is much more difficult, obviously, on a single-State basis
    or a regional basis, so it would be much tougher for us without
    a national program.
        Senator Jeffords. There is a vote going on now. I intend to
    get through, and it looks like I can make it in about another
    minute and I will be--you can use your own judgment, I guess,
    with what you want to do. But the committee would appreciate
    any specific recommendations any of you have for language
    changes to S. 556. A stupid question, because I know the
    answer, will you cooperate with us?
        [Laughter.]
        All. Yes, sir.
        Senator Jeffords. All right. That takes care of that
    question. If S. 556 were to be enacted as introduced, what
    would be the specific economic and environmental impacts on
    your State? If you could just briefly do that and maybe fill in
    with some paper later on, we would appreciate it.
        Mr. Ouimette?
        Mr. Ouimette. If passed as introduced, I think certainly
    there will be some benefits to the State, for example,
    especially in terms of regional haze and I think that is where
    we would see the primary benefit lying. Also, I would add that
    any mercury reductions would also be a benefit.
        Senator Jeffords. Mr. Nicholson?
        Mr. Nicholson. Well, if I recall, the question also
    involved costs to the State, and I think one of the issues that
    we are concerned about and it reflects in our legislation is
    the compliance schedule, the time to comply and allow some of
    these technologies to be better understood, particularly in the
    mercury area. We are uncertain exactly what the CO2
    course ought to be followed, so there is concern about cost
    there also.
        Senator Jeffords. Mr. Colburn?
        Mr. Colburn. Senator, if a bill that we are deliberating in
    Concord passes this session, there would be no incremental cost
    to this measure, with the possible exception of mercury, which
    still awaits greater definition on control technology costs and
    performance.
        Senator Jeffords. Mr. Callaghan?
        Mr. Callaghan. I would predict a significant impact on the
    economy in the State of West Virginia for this reason. Focusing
    on the CO2 issue, to my knowledge there is no
    technology out there available at any price to put on power
    plants to eliminate or decrease the CO2 to the
    extent that you have put it in your bill. So you are
    essentially talking about fuel switching, probably from coal to
    natural gas, to make those levels. That would cause significant
    impact. We have about 18,000 direct coal miners in the State of
    West Virginia; probably another 35,000 in support of those
    18,000. So you are talking about significant disruption of our
    economy if that were to happen.
        Again, I think where we should go on it is look to clean
    coal technology and see what we can do to reduce the
    CO2, instead of putting such a drastic impact on our
    State.
        Senator Jeffords. Thank you.
        Senator Voinovich?
        Senator Voinovich. Mr. Nicholson, I was interested--did
    your multi-emission legislation--it got through one house and
    it is still in another right now?
        Mr. Nicholson. It has passed the Senate and it is in the
    House.
        Senator Voinovich. Did it include CO2?
        Mr. Nicholson. It did not, other than the requirement that
    the State study the issue of CO2 and understand what
    we might be seeing from technology advances, clean coal
    technology et cetera, and make a recommendation back to the
    legislature.
        Senator Voinovich. Do the utilities support the
    legislation?
        Mr. Nicholson. They do support the legislation with the
    schedules that are particularly in it at this time to allow
    this knowledge gain.
        Senator Voinovich. But currently, no utility supports the
    Jeffords legislation--this legislation. I would be really
    interested in your providing me and the chairman of the
    committee the background of the legislation that you put
    together and how you were able to get people together at the
    table, and what the levels were and the numbers and so forth,
    because maybe we could learn something from what you did.
        Mr. Nicholson. I might . . .
        Senator Jeffords. Excuse me. All the members will have an
    opportunity to submit questions, and I intend to submit some
    too, so please proceed.
        Mr. Nicholson. I must say, though, that our bill is in the
    House and it has been stuck in our House Public Utilities
    Committee for quite a while. The real issue that bothers most
    people is the cost under a cost recovery provision, and
    particularly the non-utility industry is opposing it. So it is
    not clear sailing, totally.
        Senator Voinovich. I would still be interested to see what
    you've done with it. I appreciate it.
        Mr. Nicholson. Certainly.
        Senator Voinovich. Mr. Callaghan, you and I are neighbors.
        Mr. Callaghan. Yes, sir.
        Senator Voinovich. Southeastern Ohio. I was down in Belmont
    County here recently; a lot of miners. We had 14,000 of them.
    We have about 4,000 left in Ohio. You've got about 18,000.
    According to the people in my State in the coal industry, who
    are for clean coal technology and for moving forward with
    controlling emissions, their feeling is that if the
    CO2 provisions of this bill and the mercury
    provisions go into place, that they are out of business. I
    would like you to comment on what I have been getting.
        Mr. Callaghan. That is the same information I have
    received. Certainly in West Virginia, you have I-64 goes
    through the State, the middle. What is above I-64 is a little
    higher sulfur coal than what is below I-64. Without question,
    everything above I-64 would be eliminated. It's a high-sulfur
    coal and we just couldn't get there.
        Again, I'm not up here arguing that we ought to be putting
    more CO2 in the air. That is not what I am saying. I
    am saying that we need to be careful as we walk through this
    that we don't run away our 18,000 miners and your 4,000 are
    still left, because the country does rely on this 52 percent of
    our energy from coal. So I am hearing the same thing--
    significant impacts, significant reductions if CO2
    goes into effect.
        Senator Voinovich. My last question, Mr. Chairman. This is
    to Mr. Colburn. In your four-pollutant proposal for mercury,
    you endorse 70 percent reductions in 2004 to 2007; 85 percent
    to 95 percent reductions in 2009 to 2012. I think you probably
    saw the chart that I had up here before that showed the cost of
    90 percent reductions in 2007 at $5,000 per pound of mercury.
    Part of this estimate is based on the lack of proven technology
    for mercury reductions, and hopefully we are going to have
    another hearing on what is available out there.
        Would you endorse a mercury number based on co-benefits
    alone, or perhaps a co-benefits number with a trigger for a
    higher reduction only if the technologies prove to be
    available?
        Mr. Colburn. Senator, I think you get to precisely the
    point, and I would just come at it from a slightly different
    angle. That is that I don't believe the technology will be
    available unless there is a pretty aggressive number.
    Technology, as you know, doesn't develop for recreation. It
    develops to meet a need. If the Congress defines that need,
    then the technology will develop.
        I was saying that I offered an offer--ask an engineer to do
    something, and you will get nothing but problems. That is the
    stage that we are in now. Tell an engineer to do something and
    you will get nothing but solutions. That is why the gloom and
    doom scenarios have not occurred. I believe that we are in that
    situation now that putting an aggressive line of demarcation
    out there by the Congress will accomplish that technology
    development. If it doesn't, then I would be ready to join hands
    with you and say we need to back off on that to what we can
    achieve and set the next technology goal.
        Senator Voinovich. The only reason I mention that is my
    mentioning before that I visit these power plants and we have a
    company in Ohio that is really trying to do a job, and they've
    spent a lot of money over the years. I have been to other
    places, and they have just said that dealing with that problem
    is going to be very, very difficult, because they just say we
    don't have a handle on it. We know we can capture some of it,
    but how do we get the rest of it?
        Mr. Colburn. Senator, just to follow up, I think that coal
    does have a reasonably bright future, particularly over the
    next half century, and hopefully through coal gasification,
    which will probably address a substantial portion of the
    mercury issue itself. I know coal gasification has an energy
    penalty, but I suspect it is not as great as that we are
    already facing for example in ethanol energy technologies.
        Senator Jeffords. I want to thank you all. We have to
    sprint over to the floor to vote. But we reserve the right
    always to keep questions coming to you, and I know you will
    give us good answers or at least correct answers.
        Thank you very much.
        [Whereupon, at 12:15 p.m., the committee was adjourned, to
    reconvene at the call of the Chair.]
        [Additional statements submitted for the record follow:]
      Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
        Thank you, Mr. Chairman, for holding this hearing so that we can
    all continue to explore and debate this very important and complicated
    issue.
        There has been, and continues to be, a great deal of interest in
    multi-pollutant legislation, on both sides of the aisle and within the
    Administration. I believe that all have the same goal as they consider
    the best way to craft multi-pollutant legislation--to achieve maximum
    environmental benefits in the most efficient and effective manner
    possible, at the least cost to our economy.
        There are many reasons for this broad interest in taking another
    look at how the Federal Government regulates power plant emissions. Air
    pollution from the nation's power plants continues to be a significant
    public health and environmental problem, despite the great strides made
    in reducing emissions of SO2, NOx, and fine particulate
    matter prompted by the passage of the Clean Air Act, and the Clean Air
    Act Amendments of 1990. Deregulation and restructuring of the electric
    utility industry in many areas of the country have complicated the cost
    equation associated with updating pollution control technologies.
    Industry has come to Congress, asking for greater regulatory certainty
    to help them plan for long-term capital investments in the electric
    utility sector. Concerns about the effects of global warming have for
    years prompted many to call for restrictions on CO2
    emissions.
        I think the chairman's bill, S. 556, is a good starting point in
    this debate. I think Senator Jeffords does an admirable job of
    attempting to balance all of the competing interests and policies
    associated with a broad multi-pollutant strategy. However, I think we
    all realize that it will take a lot of time, discussion and debate to
    come to reach a final compromise that will work for the whole nation,
    and that will ultimately end up on the President's desk. I am committed
    to working with my colleagues on this committee in this effort.
        As I have stated many times in the past, I accept the science of
    global warming and believe that it poses a serious threat that our
    generation must begin to address. However, Montana relies on coal for
    nearly 70 percent of its electricity generation, and the nation as a
    whole relies on coal for more than 50 percent of its electricity
    generation. Montana is also a coal-producing State, with some of the
    largest coal reserves in the nation. This is an important sector of my
    State's economy. Again, I think we can all agree that we need to move
    in a direction that cleans up power plant emissions, including
    emissions of carbon dioxide. As usual, however, the devil is in the
    details.
        I also want to make sure that the interests of Western States are
    adequately addressed in any legislation that comes out of this
    committee. Western coal plants already tend to be cleaner and newer
    than plants in the midwest and east. They should not be unfairly
    penalized in relation to older, dirtier plants.
        I think this committee has a tremendous opportunity here to do some
    real and positive good for the environment, for public health, without
    putting the breaks on the nation's economy, or shutting down its coal
    industry. I commend the chairman for challenging all of us to
    accomplish that task.
                                   __________
     Statement of Sherwood Boehlert, U.S. Representative from the State of
                                    New York
        Mr. Chairman: Thank you for allowing me to appear at this important
    hearing. My testimony will be brief. I'm really here to make one
    simple, but significant point--the four-pollutant bill has bicameral
    and bipartisan (I guess I should say tri-partisan) support. Congressman
    Waxman and I are as committed as ever to moving forward with the
    companion four-pollutant bill we introduced in the House.
        Now some may say, ``How can you talk about environmental
    legislation at a time like this?'' My response is that just as we are
    being urged to carry on with our daily lives despite terrorist threats;
    we must carry on with the full gamut of our legislative business in the
    face of those threats.
        We must do so because our environmental problems are just as real,
    just as significant, and just as solvable as they were before September
    11.
        The lakes in the Adirondacks are still acidifying. The ecological
    and economic consequences of that acidification are still serious.
        The obvious damage caused by terrorists does not make the insidious
    damage caused by pollution any less threatening. Indeed, the
    consequences of global climate change will still be with us long after
    the war in Afghanistan is a distant event students will have to learn
    about from history books.
        Now, even those who accept this analysis may say, ``OK, but should
    we be passing laws now that could make us more dependent on imported
    sources of energy?'' My answer is that we ought to be attacking our
    dependence on foreign oil primarily by becoming more energy efficient
    and developing alternative fuels, not by blithely ignoring the long-
    term environmental and economic costs associated with our continuing
    dependence on coal. Moreover, coal would still be a significant fuel
    after the passage of a four-pollutant bill, and substitutes for coal
    are readily available in North America.
        So I think that if anything, the debate this committee is bringing
    to a head is long overdue. I hope this hearing will be a first step in
    bringing all the Federal, State and private sector players to the table
    for serious and (relatively) swift discussions about how to phase in a
    strict four-pollutant regime--a cost-effective regime that would give
    Americans cleaner air while giving utilities greater regulatory
    certainty.
        Let me emphasize, though, that that regulatory certainty should
    come to be only--only--as part of a new regime that will significantly
    reduce the emissions from power generation. I would strongly oppose
    making any changes in New Source Review (NSR) unless they are
    implemented as part of, and at the same time as, a new pollution
    control regime.
        And let me add with my own committee hat on that we are being
    pushed toward a new pollution control regime by science. The more we
    learn about air emissions, the more we understand the imperative to
    limit them.
        For example, the new studies of acid rain that were released this
    past spring indicated clearly that without further cuts in both sulfur
    dioxide and nitrogen oxides, acid rain will continue to deplete soils,
    damage trees, acidify lakes and kill fish. The good news, though, is
    that the 1990 Clean Air Act Amendments are having a noticeable,
    positive impact, demonstrating that we have the power to remedy the
    situation.
        Similarly, the National Academy of Sciences review of climate
    change science, issued this past spring at the request of the
    President, clearly indicates that, despite continuing uncertainties,
    climate change is a real and serious threat. But there, too, reviews,
    such as the Department of Energy's Five Laboratories study, indicate
    that we have the wherewithal to attack the problem.
        So I want to congratulate you for holding this hearing and urge you
    to move forward as speedily as possible with a four-pollutant bill. On
    the other side of the Capitol and on both sides of the aisle, we are
    ready to work with you. Thank you.
                                   __________
      Statement of Jeffrey Holmstead, Assistant Administrator for Air and
                   Radiation, Environmental Protection Agency
        Thank you, Mr. Chairman and members of the committee for the
    opportunity to speak with you today on the important issue of creating
    a better approach for reducing pollutant emissions from facilities that
    generate the electric power we rely on in this country. I believe that
    this hearing on S. 556 is an important step toward reaching a
    bipartisan agreement in this matter.
        The Bush Administration is committed to putting American ingenuity
    to work on this tough issue--significantly reducing air pollution from
    electric utilities. The Administration is committed to updating the
    Clean Air Act requirements for power generators for the 21st century--
    but it must be done right to provide a secure energy future for this
    country. These issues must be seen as one, integrated goal: cleaner air
    and affordable, reliable energy for American consumers.
        At the heart of our approach to multi-pollutant emissions
    reductions is the goal of achieving cleaner air and increasing energy
    supply. In his speech on the National Energy Policy in May, the
    President noted that a cleaner environment and adequate energy supplies
    are not competing priorities. Indeed, Mr Chairman, the opposite is
    true--as we saw just this past summer in California, not having an
    adequate electricity supply is bad for clean air.
        President Bush and Administrator Whitman have clearly warned that
    failing to carefully plan for adequate supplies of energy can be bad
    for the environment. We just witnessed an unfortunate circumstance in
    California this past summer, when to help keep the lights on State
    officials had to relax pollutant emissions on power plants and ease
    limits on high-polluting backup generators. The Federal Government has
    taken steps to make sure that the environment in California is made
    whole down the road, but we believe it is unacceptable to be forced to
    tolerate higher pollution emissions because of a failure to site and
    build adequate electricity capacity.
        We believe it is crucial that a comprehensive, legislative approach
    on multi-pollutant emissions reductions also provide industry and
    public planners with the certainty and flexibility they need to invest
    in new, clean power generation and efficient transmission. By carefully
    and responsibly planning, we can prevent in the future having to
    sacrifice clean air for power like California did last summer.
        As the Governor testified some months ago, the Administration
    approach is to use a market-based trading system that will modernize
    some of the old, out-of-date rules that are holding us back. We need to
    set new, ambitious goalposts for industry--and then let American
    ingenuity and America's businesses find the most cost-effective way of
    meeting those goals on a clear timeline.
        Thus, the President has directed the Administrator of the EPA to
    work with Congress to develop legislation that would establish a
    flexible, market-based approach to significantly reduce and cap
    emissions of NOx, SO2 and mercury from power generation. The
    Administration proposal to limit emissions from power generation will
    be the centerpiece of the President's promise to deal with emissions
    from old power plants.
        We are delighted that Senator Jeffords and others on this committee
    share our commitment to modernizing the Clean Air Act. We look forward
    to working with you to craft a common-sense approach to meeting the
    challenge of creating a clean, affordable energy supply for America. If
    we integrate and balance our pursuit of these goals, we can have
    cleaner air and more reliable, affordable energy. An appropriate, well-
    designed cap-and-trade program will create incentives to stimulate
    investment in clean energy technologies, while ensuring that American
    consumers can still pay their electricity bills.
        We are concerned that the approach taken in S. 556 would
    unnecessarily raise energy costs and jeopardize our energy supplies.
    Our economy can't afford that, especially at this time. American
    consumers, and America's employers, need reliable, predictable,
    affordable energy to light their homes and power their businesses. If
    we work together, we can achieve our most ambitious clean air goals--
    without crippling our economy.
        The President remains committed to introducing a plan to improve
    the way we control air emissions from power generators. In the near
    future, I hope I will have the opportunity to discuss with you the
    details of such a legislative proposal. I look forward to the
    additional hearings you will need to address these important issues and
    to working with the committee to develop an approach that the President
    can support.
    Introduction
        As recognized by the President's National Energy Plan (NEP), one of
    the principal energy challenges facing us is increasing our energy
    supplies in ways that protect and improve the environment. Thus, the
    President directed EPA to propose legislation that would significantly
    reduce SO2, NOx, and mercury emissions from power generation
    through a cap-and-trade program. Such a program, coupled with
    appropriate measures to address local concerns, would provide
    significant health benefits even as we increase energy supplies and
    maintain reasonable electricity rates.
        Our work on this issue has given us insight that I believe will be
    helpful to you. The more I learn about the cost and inefficiencies of
    the current and future regulatory regime to which power generators will
    be subjected if we do not have new legislation, the more I am convinced
    that we can--and must--develop a smarter approach that protects the
    environment and public health while reducing the cost to consumers and
    industry and optimizing the size of both the State and Federal
    Government machinery necessary to achieve that protection. It is
    possible to achieve better results at lower costs, but not if we simply
    add yet another program on top of all of the existing regulations.
        The current Clean Air Act has been enormously successful, but we
    can do better. Significant cost savings can be achieved for power
    generators and consumers through a comprehensive legislative package. I
    look forward to working with you to develop such an approach to reduce
    emissions from power generation. We applaud Senator Jeffords for
    tackling this important issue and for recognizing that a cap-and-trade
    program is the best way to achieve these reductions. However, we have
    significant concerns with S. 556 as drafted. Our analysis to date
    suggests that it could increase consumers' electricity rates by as much
    as 50 percent, which we believe is unacceptable.
        In addition, the combination of emission reductions and timing is
    not feasible and could threaten the reliability of electricity supply.
    We are concerned that S. 556's short timeframes for installation of
    controls could lead power plants to be taken off-line at important
    times, which could lead to electricity shortages. In addition, there
    are a number of issues that Congress should consider that S. 556 does
    not address. As drafted, S. 556 would make some existing requirements
    unnecessary, but would not eliminate them. Rather than add yet another
    layer of environmental regulations on top of the existing ones, we
    believe that S. 556 should eliminate those unnecessary existing
    requirements. S. 556 also does not have an allocation scheme. One
    lesson we should learn from the success of the Acid Rain cap-and-trade
    program is that when certain key issues can be resolved through clear
    legislation, we can avoid years of litigation, business uncertainty and
    costs, and delayed environmental protection.
        Finally, and most importantly, the Administration strongly opposes
    including CO2 reductions in any multi-pollutant bill. The
    CO2 provisions in S. 556 will cost consumers too much and
    endanger our energy security by causing too much electricity generation
    to switch from coal to natural gas. Greenhouse gas emissions should be
    addressed in the context of climate change, which is being undertaken
    by the President's Cabinet level working group. For all of these
    reasons, the Administration must oppose S. 556. In my testimony today I
    will elaborate further on these key points.
    Background
        Over the last 30 years, we have made substantial progress toward
    improved environmental quality under the Clean Air Act. During this
    time, gross domestic product has increased almost 160 percent. At the
    same time, we have reduced emissions of six key air pollutants by 29
    percent, while coal consumption has increased 77 percent and energy
    consumption has increased 45 percent. Eleven years ago President George
    H. W. Bush signed into law the most far reaching amendments to the
    Clean Air Act since its enactment in 1970. Included in those amendments
    was the Acid Rain cap-and-trade program, the first program tailored
    specifically to the utility sector, which is achieving significant
    environmental and public health benefits at a fraction of the initial
    cost estimates and with relatively little government bureaucracy. It is
    time to revisit and update the Clean Air Act once again in order to
    achieve the additional reductions needed to address public health and
    environmental problems in the most cost effective manner.
        The Acid Rain Program is achieving its emission reduction goal at a
    fraction of the estimated costs because it allows and encourages
    innovative thinking and long range planning.\1\  The existing program
    establishes a cap on SO2 emissions to ensure that the
    environmental goal is met, and employs an innovative market-based
    allowance trading program to achieve the goal at lowest cost.
    Allowances are the currency with which compliance with the
    SO2 emissions requirements is achieved. Sources, rather than
    government, decide the most cost-effective way to use available
    resources to comply. Units that reduce their emissions below the number
    of allowances they hold may trade allowances with other units in the
    system, sell them to other sources or save them for future use. There
    are neither restrictions on trading nor government second-guessing.
    ---------------------------------------------------------------------------
         \1\Governor Whitman's July 26, 2001, testimony before this
    committee contains a detailed discussion of the success of the Acid
    Rain cap-and-trade program.
    ---------------------------------------------------------------------------
        Allowance trading provides incentives for energy conservation and
    technology innovation that can both lower the cost of compliance and
    yield pollution prevention benefits. Simply, the allowance market puts
    a price or value on each ton of SO2 not emitted. The
    association of a monetary value with reduced emissions encourages
    innovation: in the 1990's, scrubber costs decreased by approximately 40
    percent and scrubber sulfur removal efficiencies improved from 90
    percent to 95 percent, and experimentation led to the blending of fuels
    to lower emissions. To ensure that the cap is met and to provide
    credibility, sources also are required to install systems that
    continuously monitor and report emissions.
        The Acid Rain Program has proven to be an excellent model for cap-
    and-trade programs. Compliance with the program has been nearly 100
    percent and annual emissions of SO2 from power plants have
    already been reduced over 6 million tons (about 35 percent) from 1980
    levels. Greater reductions earlier than expected have lowered risks to
    human health and provided benefits to the environment sooner. Acid rain
    levels were dramatically reduced over large areas of the United States
    and trading did not result in geographic shifting of emissions, or
    ``hot spots'', as some feared. Despite the significant progress we have
    made under the Clean Air Act, air emissions from power generators are
    still contributing to serious public health and environmental problems.
    Administrator Whitman addressed these concerns extensively in her
    testimony before you on July 26, 2001. Rather than reiterate her
    testimony, I will emphasize just a few of her key points. Problems
    associated with sulfur dioxide (SO2), nitrogen oxides (NOx),
    and mercury emissions are of national and international significance,
    and the interstate and long range transport of emissions continue to
    play significant roles in the nature and magnitude of the problems.
    Emission and deposition of SO2, NOx, and mercury and their
    transformation byproducts are known to have a wide range of adverse
    effects on human health and the environment, including:

          SO2 and NOx emissions contribute to fine
    particles, which are associated with premature mortality, aggravated
    chronic bronchitis, hospitalizations due to cardio-respiratory
    symptoms, emergency room visits due to aggravated asthma symptoms, and
    acute respiratory symptoms. Fine particles formed from power plant
    emissions as well as mobile source emissions are of concern.
          NOx emissions contribute to ground-level ozone, which
    aggravates respiratory illnesses and causes lung inflammation,
    particularly for at-risk populations such as children, the elderly and
    those afflicted with asthma, emphysema, and other respiratory ailments.
          Mercury emissions contribute to mercury deposition in
    water. Children born to women who consume large amounts of mercury-
    contaminated fish while pregnant may be at risk for neuro-developmental
    defects.
          SO2 and NOx emissions contribute to
    atmospheric sulfate and nitrate concentrations that cause visibility
    impairment, including impairment in many national parks and wilderness
    areas.
          SO2 and NOx contribute to acid deposition,
    which damages lakes and streams, adversely affecting the fish and other
    species that live in them, and leaches nutrients from the soil.
          NOx emissions contribute to nitrogen deposition that may
    lead to eutrophication of estuaries and near-coastal waters and can
    damage forested watersheds.

        EPA, States, and industry, working together, have made important
    strides in addressing the adverse impacts of fossil fuel combustion by
    the electric power industry since the passage of the Clean Air Act in
    1970. Despite significant improvements in air quality throughout the
    country however, emissions from power generation continue to result in
    serious health, environmental and economic impacts. In 1999, the
    electric power industry was responsible for 67 percent of sulfur
    dioxide emissions, 25 percent of nitrogen oxide emissions, and 37
    percent of mercury emissions in the United States.
    Business as Usual
        The President's flexible, market-based approach to reducing
    emissions from power generators stands in sharp contrast to the complex
    web of existing regulations which currently confront the industry. Over
    the years, Congress, EPA and the States have responded to specific
    environmental and public health problems by developing separate
    regulatory programs to address the specific problems. Each individual
    program uses its own approach on its own timeline to serve its own
    purpose. Absent changes to the Act, EPA and States will be forced to
    follow the same approach in future regulations. It is time to
    consolidate and simplify to achieve our clean air goals. A
    comprehensive legislative approach with mandatory caps could replace a
    good portion of the current regulatory requirements with a system that
    will reduce the administrative burden on industry and governments, use
    market-based approaches to lower compliance costs, reduce consumers'
    costs, and increase national energy security by providing the industry
    with more certainty about its future regulatory obligations. By
    enacting such an approach, we can achieve environmental and public
    health protection more effectively and at less cost. If we do it the
    President's way, it will be a win-win.
        There are many regulations in place that will reduce air emissions
    from electric power generation. These regulations include both Federal
    and State requirements that address a variety of emissions including
    SO2, NOx, CO, PM10, and a number of hazardous air
    pollutants. These programs include the National Ambient Air Quality
    Standards for SO2, particulate matter and ozone, the section
    126 and the NOx SIP Call rules, the Acid Rain Program, new source
    review, new source performance standards, and the regional haze rule.
        But the regulation of power generators does not end with existing
    regulations. EPA is obligated by a settlement agreement to issue by the
    end of 2004 a Maximum Achievable Control Technology (MACT) standard to
    require source-specific controls of mercury and other hazardous air
    pollutants from electric utilities. Emissions reductions are required
    by the end of 2007. States will also be requiring utilities to comply
    with Best Available Retrofit Technology (BART) programs (either source-
    specific standards or a trading program) to meet requirements to reduce
    regional haze.
        It is expected that the existing fine particle and ozone standards
    now in place will also result in further regulation of power
    generators. Modeling shows that when full implementation of existing
    regulations such as the acid rain program, the NOx SIP Call, the Tier
    II standards for cars and trucks, the heavy duty diesel engine
    standards, and the low sulfur gasoline and diesel fuel rules are taken
    into account, additional reductions will be needed to bring areas into
    attainment. States will be required to develop plans for these areas.
    In addition, NOx and SO2 reductions are also needed to
    reduce continuing damage from acid rain and nitrogen deposition.
        Because States and EPA will have to find some way to significantly
    reduce NOx and SO2 emissions, it is probable that power
    generators will be required to reduce their emissions significantly.
    Power generation accounts for a significant percentage of these
    emissions, and our analysis shows that there are significant reductions
    available at lower cost than from other sources. Additionally, States
    know that if they do not get the reductions from power generators, they
    will have to impose significant reduction requirements on other local
    industrial and commercial sources or impose local transportation
    control measures.
        Under current law, the necessary reductions would be achieved
    through the development of individual State plans. States will not just
    control their own sources, however. They will be reaching out to
    control power generators and large industrial facilities in other
    States because transport from other States contributes to both ozone
    and fine particle pollution in many areas. This is what has happened in
    the eastern part of the country when States realized that emissions
    from sources in other States were significantly contributing to their
    1-hour ozone non-attainment problems. Under section 126 of the Clean
    Air Act, a State can petition EPA and request that EPA require
    reductions from sources outside the petitioning State's borders. The
    petitioning State is entitled to relief if EPA finds that the sources
    are significantly contributing to the petitioning State's nonattainment
    problem. EPA's requirement, adopted in response to section 126
    petitions, that sources in a number of eastern States reduce NOx
    emissions was recently upheld by the Court of Appeals for the District
    of Columbia Circuit. Since States now know that EPA has authority to
    address transport pollution through responses to 126 petitions or by
    issuing a rule like the NOx SIP Call, we anticipate that States will be
    turning to these types of control approaches early in the SIP process.
    Although those of us who are traveling that path with the current 126
    petitions and NOx SIP Call believe it will eventually take us to our
    environmental goal, it has been--and still is--a very rocky road for
    industry, environmentalists, the States, EPA and other stakeholders.
        This one-at-a-time, uncoordinated series of regulatory requirements
    for the power industry is not the optimal approach for the environment,
    the power generation sector, or American consumers. With most plants
    needing to install control equipment to meet these requirements, it is
    likely that this approach would lead to installation of controls that
    become obsolete and stranded capital investments as additional
    requirements are promulgated. Further, the attainment efforts of
    individual States and localities not only impose costs on these
    entities, but also can increase complexity for companies which face
    differing requirements when operations cross State lines. These factors
    are exacerbated by limited timeframes that may constrain available
    compliance options and thwart long range planning. These and other
    inefficiencies point to the need for a nationally coordinated approach
    that could reduce cost while improving environmental progress and
    accountability.
    Changing the Way We Do Business: Certainty, Flexibility, Accountability
            and Innovation
        We believe there is a better way, one that could cost American
    consumers and industry far less than under current law and ensure
    protection of the air we breathe in a far more certain, straightforward
    manner. I know that many members of this committee share that belief
    and are also working to develop such an approach. It would provide
    power generators with more certainty about their regulatory future and
    thus allow them to make wiser decisions about investments in new
    technology, which would improve energy security. This Administration is
    developing such a proposal. It will build on the successes of the Acid
    Rain cap-and-trade program. It would establish national cap-and-trade
    programs for NOx, SO2 and mercury emissions from power
    generators (with appropriate measures to address local concerns). Such
    an approach will benefit the power generation industry, the economy,
    and the States, while improving public health and the environment.
        Up-front knowledge of future requirements for multiple pollutants
    would lead firms to follow significantly different and less expensive
    compliance strategies at individual plants, compared with compliance
    choices which must be made as requirements are addressed in a
    sequential manner under the current law. The savings come from the
    opportunity to make cost-effective plant investment and retirement
    decisions with full knowledge of upcoming SO2, NOx and
    mercury requirements, rather than investing in ``add-on'' control
    equipment to meet the requirements of each regulation. Integration,
    advance knowledge, and certainty regarding environmental requirements
    will have even greater value over the coming decade as the electric
    power industry undergoes further structural changes. An integrated
    package of measures that addresses both the existing regulatory
    requirements as well as many future environmental needs would provide
    the greatest degree of certainty and flexibility for the industry,
    while achieving the necessary emission reductions at lower cost than
    under current law.
        In exchange for flexibility in methods to control emissions, a full
    accounting of emissions through continuous monitoring and reporting is
    essential, as well as significant consequences for failing to comply.
    Such provisions have been critical to the success of the Acid Rain
    Program, encouraging individual sources to find the most cost-effective
    means of compliance with the collective emission reduction goal.
        Flexibility stimulates technological innovation, fuels economic
    activity and reduces cost to industry and consumers. Strategies and
    technologies for the control of SO2, NOx and mercury
    emissions exist now, and improved methods are expected to become
    available over the next several years. The air pollution control and
    monitoring technology industry is expected to continue to respond with
    cost-effective compliance solutions just as they have done for the past
    30 years. A predictable demand for such jobs over the next 15 years is
    preferable to the boom and bust cycle created by the current regulatory
    approach.
        This approach also would reduce States' administrative burdens and
    obligations. A national cap-and-trade program with appropriate caps for
    NOx and SO2 could provide the emission reductions necessary
    to bring a significant number of areas into attainment with the ozone
    and fine particle standards. Even those areas that would not be brought
    into attainment by these caps would need significantly fewer emission
    reductions to come into attainment. Our approach would significantly
    reduce the State resources needed to conduct modeling, planning and
    regulatory activities to attain the standards. Additionally, the Acid
    Rain cap-and-trade program is administered with a relatively small
    staff relying on strong, state-of-the-art data tracking and reporting
    capabilities. Thus, well-designed national cap-and-trade programs can
    help use government resources and taxpayer dollars more efficiently at
    both the State and Federal level.
        Caps ensure that environmental goals are met. A cap that represents
    significant reductions of emissions protects the environment by
    reducing overall loadings. Consideration of local concerns is important
    in conjunction with trading provisions. Therefore, the National Energy
    Plan recommended that the Administration's approach include appropriate
    measures to address local concerns, such as the unlikely occurrence of
    an SO2 ``hot spot'' or area of concentrated emissions.
    Significant reductions will go a long way toward addressing local
    concerns. In addition, EPA will be conducting modeling that will
    predict where emissions reductions will occur. Under the Acid Rain cap-
    and-trade program, we have not seen local hot spots because the highest
    emitters are often the most cost-effective to control and therefore,
    the most likely to control.
        As I mentioned, EPA and the Administration are still in the process
    of developing our proposal. Several guidelines are shaping our efforts.
    These guidelines may provide a valuable basis as you weigh the
    proposals before you. They will also guide our assessment of other
    proposals, including S. 556. These principles are structured to ensure
    consistency with the NEP objectives. The NEP goals of increasing energy
    supplies, accelerating the protection and improvement of the
    environment, and increasing our nation's energy supply must be
    advanced. Toward that end, energy diversity, the preservation of
    electricity generation and transmission reliability, and improvement of
    energy efficiency/energy intensity of the electric power industry
    should be a key consideration. In particular, to prevent the
    reoccurrence of energy shortages and price volatility, a diverse mix of
    fuel sources should be maintained.
    Specific Comments on S. 556
        We share the desire expressed in S. 556 to significantly reduce and
    cap emissions of SO2, NOx and mercury from power generation.
    We applaud your acknowledgment of market-based incentives, particularly
    cap-and-trade systems, as a powerful tool in environmental protection.
    In this way, S. 556 builds on successful elements of the Clean Air Act.
        We do, however, oppose S. 556 because of concerns with the bill--
    both with some provisions that are in the bill and with some that are
    missing. We believe the emission reductions and timing in the bill will
    be too costly for consumers and will endanger national energy security.
    We believe the bill is missing some provisions--it should address the
    allocation scheme and integration with existing programs. Finally, we
    oppose inclusion of CO2 in this bill.
        First, let me explain some of our specific concerns about the
    SO2, NOx, and mercury provisions in the bill. We are
    concerned that the significant emissions reductions are required too
    quickly. We do not believe it is reasonable to expect all the control
    technology installations to be completed in that timeframe without very
    high costs and electricity reliability problems. To meet these
    deadlines, facilities may need to be taken off-line during critical
    periods. Reliability problems could arise as large amounts of capacity
    are taken out of service for extended periods of time to install the
    control equipment necessary to meet the emissions reduction
    requirements. The abbreviated timeframe would force many generators to
    make these retrofits simultaneously. This would significantly reduce
    the amount of generating capacity available to meet consumer'
    electrical needs.
        We have not modeled the specific provisions in S. 556, but useful
    information is provided by comparing the analyses EPA and EIA conducted
    to respond to a request from Senators Smith, Voinovich and Brownback
    with the analyses responding to a request from Senators Jeffords and
    Lieberman. In the Smith/Voinovich/Brownback analysis, when we analyzed
    SO2 and NOx reduction levels similar to S. 556, mercury
    reduction levels more modest than S. 556 and no CO2
    reductions, we did not find significant impacts on coal production or
    electricity prices. However, in the analysis responding to the
    Jeffords/Lieberman request that had NOx, SO2, mercury and
    CO2 reduction levels similar to S. 556, we found significant
    ramifications: approximately a 20-30 percent decline of coal generation
    and a 30-50 percent increase in electricity prices compared to the
    reference case (depending on assumptions of energy technology
    penetration).
        The 90 percent source-specific control for mercury is also
    problematic. We have not seen anything that demonstrates that every
    coal-fired power plant would be able to achieve 90 percent source-
    specific controls for mercury by 2007, without considerable fuel
    switching, which would be very disruptive to our economy and undermine
    energy security. In addition, requiring the same level of reduction at
    a plant that emits 0.1 pounds of mercury and a plant that emits 2000
    pounds of mercury--regardless of cost--is neither efficient nor
    necessary.
        We are also very concerned about the ``outdated power plant''
    provision. Requiring every plant over 30 years old to meet New Source
    Performance Standards and New Source Review modification requirements
    seems unnecessary and could undermine the benefits of the cap-and-trade
    approach. Allowing sources to make reductions where it is most
    economical to do so is one of the reasons cap-and-trade programs should
    be less costly than command-and-control programs that achieve the same
    or even fewer reductions. When you have a hard cap, as you would under
    S. 556, requiring emission reductions at a specific source does not
    reduce the overall level of pollution, it just limits industry's
    flexibility about where to make the reductions. Layering additional
    requirements, such as the ``outdated power plants'' provision, on top
    of a cap-and-trade program is very likely to increase costs without
    providing significant environmental benefits.
        Second, we have concerns about what is not in S. 556. Comparing our
    experience on the Acid Rain Program with the NOx SIP Call and the
    Section 126 petitions demonstrates the benefit of having certain key
    issues decided by Congress rather than left to Agency rulemakings.
    Congressional resolution of key issues simplifies whatever Agency
    rulemaking is needed and decreases the opportunities for the program to
    get tied up in protracted litigation.
        Perhaps the most important program element not addressed in the
    bill is integration of this new program with the existing Clean Air Act
    provisions. An effective market-based approach would make some existing
    provisions of the Clean Air Act unnecessary. For example, depending on
    the ultimate cap levels chosen by Congress, this type of legislation
    would obviate the need for Best Available Retrofit Technology
    requirements, mercury MACT, and new source review case-by-case
    technology requirements for power generators.
        Also missing from S. 556 is the scheme for allocating allowances.
    Developing an allocation scheme requires answering numerous questions.
    Should the allowances be auctioned off or be handed out for free? If
    they are not auctioned, should they be allocated based on heat input or
    electrical and steam output? Should power generators that do not emit
    air pollutants (e.g., hydropower facilities) be given allowances?
    Should allowance allocations be updated, and if so, how frequently?
    Should allocations be fuel neutral? Imbedded in these and other
    questions are important environmental and energy policy choices with
    significant equity consequences. It may not be efficient for EPA to
    make these choices in rulemaking.
        There are other issues as well that this committee should consider,
    such as coordination with existing State and regional programs like the
    Western Regional Air Partnership and the NOx reduction programs in the
    east. The committee may also wish to consider provisions to track
    environmental progress to evaluate the efficacy of the program this
    bill would establish.
        Finally, the Administration strongly opposes including reductions
    for CO2 in S. 556 or any multi-pollutant bill. Pursuing
    sharp reductions in CO2 from the electricity generating
    sector alone would cause a dramatic shift from coal to natural gas and
    thus would run the risk of endangering national energy security,
    substantially increasing energy prices and harming consumers.
        The Administration will not support any legislation that would
    cause a significant decline in our nation's ability to use coal as a
    major source of current and future electricity. At the same time, the
    Administration will not support any legislation that does not enhance
    the cleanliness of coal-fired electricity generation and promote a
    future for clean coal technologies. In short, the Administration
    supports a clean coal policy as a critical component of our nation's
    energy and environmental policies, recognizing that other sources of
    energy also have a critical role to play.
        Additionally, as Governor Whitman said when she testified before
    you in July, including CO2 in this bill will slow down, if
    not prevent, the consensus necessary for passage of legislation to
    control multiple emissions from power plants. Governor Whitman and I
    both believe consensus on the appropriate levels and timing for
    reductions of NOx, SO2 and mercury is achievable relatively
    soon. We should not delay the public health and environmental benefits
    from reduction of these emissions while we wait for consensus to
    develop on CO2.
        We agree that climate change is a serious issue we need to address.
    However, CO2 has never been regulated as a pollutant under
    the Clean Air Act and does not pose any direct threat to human health
    unlike NOx, SO2 and mercury. The current body of scientific
    knowledge does not provide information regarding atmospheric
    concentrations of CO2 or reduction levels necessary to
    prevent dangerous interference with the climate system.
        In April, the President convened a Cabinet-level policy review of
    this issue and was provided with initial recommendations that he
    accepted and announced on June 11. In that regard, the Administration
    is implementing two major initiatives on climate science and advanced
    energy and sequestration technologies. The United States now spends
    $1.6 billion annually on climate science to reduce uncertainties--a
    commitment unmatched by any other nation. The ``National Climate Change
    Technology Initiative'' will accelerate priority research and the
    application of advanced energy and sequestration technologies,
    recognizing that the real answer to addressing climate change in the
    long term lies in the development and global introduction of such
    technologies in this century. The cabinet-level policy review is
    ongoing. Finally, as greenhouse gas emissions are projected to grow
    exponentially in the developing world in the next two decades, we must
    evaluate the costs of imposing domestic reductions as a very high cost
    against potentially low-cost opportunities for mitigating and
    sequestering carbon emissions in the developing world.
        We appreciate the role of S. 556 in generating important
    discussions and emphasizing the importance of a new approach to
    controlling emissions in the power sector. I look forward to the
    additional hearings you will need to address these important issues and
    to working with the committee to develop an approach that the President
    can support.
        The history of Clean Air Act legislation is one of great
    accomplishments made possible by bipartisan efforts. I thank you for
    the opportunity to work with you to continue that great tradition.
                                     ______

                                   Attachment

                Economic Analysis of a Multi-Emissions Strategy
        Prepared for: Senators James M. Jeffords and Joseph I. Lieberman
                      U.S. Environmental Protection Agency
           Office of Air and Radiation Office of Atmospheric Programs
                                October 31, 2001
    Executive Summary
        In response to a May 17, 2001 request from Senators James M.
    Jeffords (VT) and Joseph I. Lieberman (CT), this report describes the
    results of a modeling study done to evaluate the potential impacts of
    reducing nitrogen oxides (NOx), sulfur dioxide (SO2),
    mercury (Hg), and carbon dioxide (CO2) emissions from the US
    electric power sector. In their request, Senators Jeffords and
    Lieberman asked the Environmental Protection Agency to undertake an
    economic assessment of four technology-based scenarios designed to
    achieve the following emissions caps in the US electric power sector by
    the year 2007:

          Reduce nitrogen oxides (NOx) emissions to 75 percent
    below 1997 levels;
          Reduce sulfur dioxide (SO2) emissions to 75
    percent below full implementation of the Phase II requirements under
    title IV;
          Reduce mercury (Hg) emissions to 90 percent below 1999
    levels; and
          Reduce carbon dioxide (CO2) emissions to 1990
    levels.

        The request also specified that EPA should evaluate the cost of
    achieving these reductions using four alternative technology scenarios:

          The Energy Information Agency's Standard Technology
    Scenario.
          The Energy Information Agency's High Technology Scenario,
    including technology assumptions with earlier introduction, lower
    costs, higher maximum market potential, or higher efficiencies than the
    Standard Scenario.
          Two scenarios from Scenarios for a Clean Energy Future
    published by Oak Ridge National Laboratory, National Renewable Energy
    Laboratory, and Lawrence Berkeley National Laboratory, which include
    assumptions about changes in consumer behavior, additional research and
    development, and voluntary and information programs.

        Under each scenario, the costs of meeting the emission constraints
    are included in the price of electricity. Such costs include the
    purchase and installation of emissions control equipment and the
    purchase of emissions permits. Factors that mitigate projected cost
    increases include the availability of more cost-effective, energy
    efficient technologies for both consumers and electricity suppliers.
    EPA's analysis indicates that, under the conditions described above:

          Electricity prices in 2015 would increase by about 32
    percent to 50 percent, depending on the technology scenario.
          Coal-fired electric generation would decline by 25
    percent to 35 percent by the year 2015.
          Overall costs, measured by the decline in household
    consumption of goods and services, would be between $13 and $30 billion
    annually or 0.1 percent to 0.3 percent of total consumption. Under all
    four of the policy scenarios evaluated in this assessment, gross
    domestic product (GDP) would remain relatively unchanged as sacrificed
    consumption permits higher investment and government spending to reduce
    emissions.
          Oil and gas-fired generation would be expected increase
    by about 8 percent under more restrictive technology assumptions, but
    decrease by as much as 20 percent under scenarios that embody more
    optimistic assumptions about energy-efficiency demand and supply
    technologies.

        The combination of increased prices and the availability of more
    energy-efficient equipment and appliances are projected to reduce
    electricity demand by about 10 percent. With the combination of higher
    prices and improved efficiency, total expenditures for electricity
    consumption in 2015 are projected to increase by about 17 percent to 39
    percent, depending on the scenario.
        The increase in electricity prices and cost of the program, as well
    as the impact on the fuel mix, varies considerably based the technology
    future that is assumed. For example, the 30 percent electricity price
    increase, the $13 billion reduction in personal consumption, and the 25
    percent decline in coal use are all associated with the Clean Energy
    Future Advanced Scenario, which includes the most optimistic technology
    assumptions. Likewise, the 50 percent electricity price increase, the
    $30 billion reduction in personal consumption, and the 35 percent
    decline in coal usage are all associated with EIA's Standard Technology
    Scenario.
        EPA was not asked to evaluate the merits of the alternative
    technology scenarios. We note, however, that they are the subject of
    considerable controversy. The Clean Energy Future scenarios have been
    criticized on several grounds: assumed changes in consumer behavior
    that are not consistent with historic behavior patterns, results from
    research and development funding increases that have not occurred, and
    voluntary and information programs for which there is no analytic basis
    for evaluating the impacts. On the other hand, supporters of those
    scenarios point to economic analyses showing that the assumed
    investments can pay for themselves over time. The range of estimates
    associated with the different technology scenarios highlights the
    importance of the technology assumptions.
        In conducting the modeling requested by Senators Jeffords and
    Lieberman, EPA has assumed that the reductions would be achieved
    through a nationwide ``cap-and-trade'' system similar to the Acid Rain
    program established under the 1990 Amendments to the Clean Air Act,
    together with increasing penetration and performance of energy
    technologies. In accordance with the Senators' request, the analysis
    also assumes the use of banked allowances made possible by early
    emissions reductions achieved in the years 2002 through 2006. (In
    practice, significant reductions beginning in 2002 would be difficult
    to achieve.) Because of the contribution of those banked allowances to
    overall emissions reductions, the analysis shows emissions in 2007
    above the caps. Regardless, 2007 emissions are substantially reduced
    from current levels. At the end of 2015 a small pool of banked
    allowances continues to be available for use in later years. The
    analysis contained in the report covers the years 2002 through 2015.
        The results provided in this analysis should not be construed as
    forecasts of actual scenario outcomes. Rather, they are assessments of
    how the future might unfold compared to a previously defined reference
    case--given the mix of technology and policy assumptions embodied in
    each of the scenarios. The results also imply a national commitment
    that is successful in achieving the level of emission reductions
    described within the report.
        The economic impacts of the emissions reduction scenarios are
    evaluated using Argonne National Laboratory's AMIGA model, a 200-sector
    computer general equilibrium model of the U.S. economy. The modular
    design and economy-wide coverage of the AMIGA model makes it a logical
    choice to analyze alternative technology scenarios. Although it does
    employ the same plant-level coverage of the electricity sector as the
    IPM and NEMS models used in other analyses, the pollution control
    technology assumptions are not included at the same level of detail as
    the IPM model. This may be particularly relevant for mercury controls,
    where the effectiveness varies by coal type, and may be difficult to
    model correctly without additional detail. In addition, we note that
    the AMIGA model is relatively new and has not been subject to the same
    degree of peer-review and scrutiny as the older IPM and NEMS models. It
    would be desirable in future work to establish the comparability of
    results across these models.
    1. Introduction
    1.1. Background
        Responding to an earlier congressional request, the Energy
    Information Administration (EIA) released a detailed study reviewing
    the effects of a so-called ``three pollutant'' strategy in December
    2000 (Energy Information Administration, 2000). The three emissions in
    the EIA assessment included nitrogen oxides (NOx), sulfur dioxide
    (SO2), and carbon dioxide (CO2). Although a
    coordinated climate and air quality policy appeared to lower costs
    compared to a series of separate policy initiatives, the EIA assessment
    indicated significant costs associated with capping emissions.
        At about the same time, five of the nation's national energy
    laboratories released an extensive review of some 50 different policy
    options that might achieve cost-effective reductions of both air
    pollutants and carbon dioxide (CO2) emissions. The study,
    Scenarios for a Clean Energy Future (Interlaboratory Working Group,
    2000), indicated that domestic investments in energy-efficient and
    clean energy supply technologies could achieve substantial reductions
    in both sets of emissions at a small but net positive benefit for the
    economy.
        On May 17, 2001, Senators James M. Jeffords (VT) and Joseph I.
    Lieberman (CT) sent a letter to EIA and EPA seeking further clarity in
    the scenarios examined by the December EIA analysis, stating that ``the
    analysis appears to unnecessarily limit the market and technology
    opportunities that might significantly affect the costs and benefits of
    emission reductions. In particular, the potential contributions of
    demand-side efficiency, gas-fired cogeneration and of renewable energy
    sources appear to be inadequately represented.''
        In responding to this request, EPA modeled the combined impacts of
    both the emissions caps and the advanced technology scenarios specified
    by the Senators. We are aware that EIA has modeled the combined impacts
    but has also modeled the effects of the emission caps and the advanced
    technology scenarios separately. This approach provides perhaps a
    better technique for isolating the actual costs of the emissions caps.
    We have reviewed the EIA analysis of these separate effects and we
    believe that they offer interesting and important insights and that if
    we had performed the same kind of analysis we would have seen similar
    results.
        This report responds to the Senators' request. The results provided
    in this analysis should not be construed as forecasts of actual
    scenario outcomes. Rather they are assessments of how the future might
    unfold compared to a previously defined reference case--given a
    national commitment to achieve the emission reductions, and given the
    mix of technology and policy assumptions embodied in each of the
    scenarios.
    1.2. Technology Scenarios
        In the letter to Administrator Whitman, Senators Jeffords and
    Lieberman asked for an analysis of four different scenarios, requesting
    that EPA ``analyze the cost and benefits, including all sectors of the
    economy and impacts on both the supply and demand side of the equation,
    of the following multi-pollutant emission control scenarios for the
    nation's electricity generators. Where feasible, this should include
    power plants both within the conventionally defined electric utility
    sector as well as electricity generated by industrial cogenerators and
    other independent power producers.''
        The four scenarios are identified as follows:

          Scenario A: Standard Technology Scenario. Assume standard
    technology characteristics as defined in AEO2001. Further assume a
    start date of 2002. By 2007 reduce NOx emissions 75 percent below 1997
    levels, reduce SO2 emissions to 75 percent below full
    implementation of the Phase II requirements under title IV, reduce
    mercury emissions 90 percent below 1999 levels, and reduce
    CO2 emissions to 1990 levels.
          Scenario B: High Technology Scenario. Continue the 2002
    start date, but assume the advanced technology assumptions of both the
    supply and demand-side perspectives that are referenced in AEO2001. By
    2007 reduce NOx emissions 75 percent below 1997 levels, reduce
    SO2 emissions to 75 percent below full implementation of the
    Phase II requirements under title IV, reduce mercury emissions 90
    percent below 1999 levels, and reduce CO2 emissions to 1990
    levels.
          Scenario C: Moderate Clean Energy Future Scenario.
    Continue the 2002 start date, but assume the moderate supply and
    demand-side policy scenario of the Clean Energy Future (CEF) study. By
    2007 reduce NOx emissions 75 percent below 1997 levels, reduce
    SO2 emissions to 75 percent below full implementation of the
    Phase II requirements under title IV, reduce mercury emissions 90
    percent below 1999 levels, and reduce CO2 emissions to 1990
    levels.
          Scenario D: Advanced Clean Energy Future Scenario.
    Continue the 2002 start date, but assume the advanced supply and
    demand-side policy scenario of the Clean Energy Future study. By 2007
    reduce NOx emissions 75 percent below 1997 levels, reduce
    SO2 emissions to 75 percent below full implementation of the
    Phase II requirements under title IV, reduce mercury emissions 90
    percent below 1999 levels, and reduce CO2 emissions to 1990
    levels.

        In requesting an analysis of these four scenarios, the Senate
    request asked for ``. . . results through 2020, in periods of 5 years
    or less, using the Annual Energy Outlook 2001 (AEO2001) as the
    baseline.''
    1.3. Multi-Emission Targets
        Table 1 identifies the 2007 emission caps used for each of the four
    scenarios. The emission cap is defined by a benchmark emission level
    that is modified by the desired level (percentage) of reduction. For
    example, the benchmark for the SO2 emissions cap is the
    Phase II requirements of the Clean Air Act Amendments. That total, 8.95
    million short tons, is reduced by a specific percentage (75 percent) to
    reach the emissions cap of 2.24 million tons. Following a similar
    pattern, the remaining emission caps are set as 1.51 million tons for
    NOx emissions, 4.8 tons for mercury emissions, and 475 million metric
    tons (MtC) of carbon emissions.

                              Table 1. Benchmark Emission Levels and Assumed Emission Caps
    ----------------------------------------------------------------------------------------------------------------
            Pollutant (Benchmark)            Benchmark Emissions        Fraction Reduced        2007 Emission Cap
    ----------------------------------------------------------------------------------------------------------------
    SO2 (tons in Title IV)...............  8.95 million tons......  75 percent.............  2.24 million tons
    NOx (tons in 1997)...................  6.04 million tons......  75 percent.............  1.51 million tons
    Hg (tons in 1999)....................  48 tons................  90 percent.............  4.8 tons
    C (metric tons in 1990)..............  475 million metric tons                           475 million metric tons
    ----------------------------------------------------------------------------------------------------------------

    1.4. Other Analytical Assumptions
        As previously noted, the letter from Senators Lieberman and
    Jeffords requested that EPA use four different sets of technology and
    policy assumptions to meet the specified emission caps shown in Table
    1. The full set of technology and policy assumptions are described more
    fully in section two of this report. All scenarios are implemented in
    2002. At the same time, there are other key assumptions that EPA
    adopted to facilitate the evaluation of the four scenarios.
        In addition to the different technology scenarios, EPA was asked to
    include the assumption that utilities would begin to make cost-
    effective emission reductions in the 5 years that precede the 2007
    compliance date. These early reductions would be ``banked'' for use in
    the post-2007 period of analysis. For purposes of this simulation, the
    amount of allowances banked from 2002 through 2006 was calculated as
    the simple difference between the reference case projections and the
    actual emission trajectory of each scenario. The decision to earn and
    hold early allowances is based on the assumption that allowances are
    viewed as an asset that must earn at least an 8 percent real return.\1\

    ---------------------------------------------------------------------------
        \1\In practice, it is more likely that significant reductions that
    contribute to any kind of allowance bank would be difficult to achieve
    before 2004. Assuming a delay in implementation to 2004 would raise the
    economic impact of any of the scenarios.
    ---------------------------------------------------------------------------
        Following the assumption used in the CEF study, all four of the
    policy scenarios assume nationwide restructuring of the electric
    utility industry. This implies that prices are based on the marginal
    rather than the regulated, cost-of-service pricing now used throughout
    much of the country.
        EPA employed the Argonne National Laboratory's AMIGA modeling
    system to evaluate the impact of capping emissions under the four
    different technology scenarios. AMIGA is a 200 plus sector model of the
    U.S. economy that captures a wide variety of technology characteristics
    and their resulting impact on key indicators such as emissions,
    employment and income.\2\  EPA asked Argonne to benchmark AMIGA to the
    reference case projections of AEO2001. AMIGA was then modified to
    approximate the assumptions behind each of the four scenarios.
    ---------------------------------------------------------------------------
         \2\AMIGA is especially suited to the task identifying and
    evaluating a different mix of technologies in the production of goods
    and services within the United States. It is not only a 200 plus sector
    model of the U.S. economy, but it also includes the Argonne Unit
    Planning and Compliance model and data base that captures a wide
    variety of technology characteristics within the electric generating
    sector, including industrial combined heat and power systems and the
    typically available emission control technologies. When the electricity
    module is integrated with the larger macroeconomic system, the model
    can then generate key outputs including projected electricity sales and
    net generation, resulting emissions for each of the four pollutants
    under consideration, and the set of energy and permit prices associated
    with the resulting production levels. Finally, AMIGA can provide an
    estimate of the consequent impact on the economy including key
    indicators as consumption, investment, government spending, GDP, and
    employment (Hanson, 1999). For more background on the AMIGA model, see
    Appendix 5.1.
    ---------------------------------------------------------------------------
        An economic analysis of a policy compares the world with the policy
    (the policy scenario) to the world absent the policy (the reference
    case or baseline scenario). The impacts of policies or regulations are
    measured by the resulting differences between these two scenarios. In
    effect, any meaningful analysis should compare the full set of benefits
    and costs to the extent possible.
        For purposes of this exercise, there are at least seven categories
    of costs and four benefits that might be reviewed. The costs include:
    (1) direct investment costs, (2) operating and maintenance costs, (3)
    research and development and other government program costs, (4)
    transaction, search, and compliance costs, (5) adjustment costs
    associated with large changes in specific capital stocks, (6) lost
    economic flexibility created by additional emission requirements, and
    (7) potential interactions with the existing tax system. At the same
    time, there are at least four categories of benefits. These include:
    (1) direct savings from lower compliance costs, (2) process efficiency
    and other productivity gains, (3) environmental and health benefits not
    captured within normal market transactions, and (4) spillovers and/or
    learning induced by either the technology investment, or the R&D
    efforts.
        The costs associated with the emission limits in each scenario are
    computed as the increased expenditures on pollution control, investment
    in more efficient equipment and appliances, research and development,
    tax incentives, and additional government programs--all relative to the
    reference case. The increased costs are coupled with credits for
    reductions in fuel use and productivity gains from technology. The
    economic impact of each scenario is reported in two ways. The first is
    as a change in household personal consumption, measuring the goods and
    services available for consumers to enjoy after subtracting these net
    expenditures. The second is as a change in economic output measured as
    Gross Domestic Product (GDP).
        The AMIGA model reasonably captures those costs and benefits noted
    above that arise in market transactions. Some, such as loss of
    flexibility and adjustment costs on the cost side, and health benefits
    and spillovers on the benefit side, remain beyond the scope of this
    analysis.
    2. Multi-Emissions Analysis
        This section provides additional details about the technology
    assumptions that underpin the four emission scenarios. It also
    describes the results of the scenario analysis, both in terms of the
    various marginal costs associated with emission control strategies and
    the economy-wide impact of each scenario. Although EPA made every
    effort to calibrate AMIGA to the AEO2001 reference case, AMIGA is a
    different modeling system than EIA's National Energy Modeling System
    (NEMS). Hence, it was not possible to reproduce the exact AEO2001
    reference case projections. Moreover, Argonne researchers recently
    upgraded AMIGA to incorporate SO2, NOx, and mercury
    emissions. For this and other reasons, AMIGA currently reports results
    only through the year 2015. Nonetheless, the differences in the
    resulting baseline projections are minor for the purposes of this
    analysis.
    2.1. Modeling Technology Assumptions
        Scenarios A and B are based on the AEO2001 standard and advanced
    technology characteristics, respectively. The standard technology
    assumptions of scenario A were used by EIA in the development of the
    AEO2001 ``reference case'' projections. The advanced technology
    assumptions of scenario B were used as a sensitivity analysis in the
    AEO2001. They demonstrated the effects of earlier availability, lower
    costs, and/or higher efficiencies for more advanced equipment than the
    reference case.\3\
    ---------------------------------------------------------------------------
        \3\The AEO2001 was published in December 2000 (Energy Information
    Administration, 2000).
    ---------------------------------------------------------------------------
        Scenarios C and D are based on the recently published DOE-sponsored
    report, Scenarios for a Clean Energy Future (Interlaboratory Working
    Group, 2000; see also, Brown, et al, 2001). Both of the CEF scenarios
    assumed nationwide restructuring of the electric utility industry. From
    an analytical perspective, this means that prices are based on the
    marginal costs of generation, transmission and distribution of
    electricity rather than the regulated, cost-of-service pricing now used
    throughout much of the country. Moreover, both scenarios reflected
    increased spending for research and development and other programs
    designed to accelerate the development and deployment of low-carbon,
    energy efficient technologies. Each of the scenario assumptions are
    described more fully in the sections that follow.
    2.1.1. Reference Case Scenario
        The scenario A reference case assumes a ``business-as-usual''
    characterization of technology development and deployment. As projected
    in the AEO2001 assessment, the nation's economy is projected to grow at
    2.9 percent per year in the period 2000 through 2020. Given anticipated
    energy prices and the availability of standard technologies, the
    nation's primary energy use is expected to grow 1.3 percent annually
    while electricity consumption is projected to increase by 1.8 percent
    annually. Further details are provided in Appendix 5.2.1.
    2.1.2. Advanced Technology Scenario
        Under the AEO2001 advanced technology characterization, scenario B
    assumes that a large number of technologies have earlier availability,
    lower costs, and/or higher efficiencies. For example, the high
    efficiency air conditioners in the commercial sector are assumed to
    cost less than in scenario A. This encourages a greater rate of market
    penetration as electricity prices rise in response to the emissions
    caps. Building shell efficiencies in scenario B are assumed to improve
    by about 50 percent faster than in scenario A.
        On the utility's side of the meter, the heat rates for new combined
    cycle power plants are assumed to be less compared to the standard case
    assumptions. This means that more kilowatt-hours of electricity are
    generated for every unit of energy consumed by the power plants.
    Moreover, wood supply increases by about 10 percent and the capacity
    factor of wind energy systems increases by about 15-20 percent compared
    to the reference case assumptions. In the AEO2001 report, the
    combination of higher efficiencies and earlier availability of the
    technologies lowers the growth in electricity use from 1.8 percent in
    the reference case to 1.6 percent.
    2.1.3. CEF Moderate Case Scenario
        The authors of the Clean Energy Future (CEF) report describe their
    analysis as an attempt to ``assess how energy-efficient and clean
    energy technologies can address key energy and environmental challenges
    facing the US'' (Brown, et al, 2001). In that regard, they evaluated a
    set of about 50 policies to improve the technology performance and
    characterization of the residential, commercial, industrial,
    transportation, and electricity generation sectors. The policies
    include increased research and development funding, equipment
    standards, financial incentives, voluntary programs, and other
    regulatory initiatives. These policies were assumed to change business
    and consumer behavior, result in new technological improvements, and
    expand the success of voluntary and information programs.
        The selection of policies in the CEF study began with a sector-by-
    sector assessment of market failures and institutional barriers to the
    market penetration of clean energy technologies in the US. For
    buildings, the policies and programs include additional appliance
    efficiency standards; expansion of technical assistance and technology
    deployment programs; and an increased number of building codes and
    efficiency standards for equipment and appliances. They also include
    tax incentives to accelerate the market penetration of new technologies
    and the strengthening of market transformation programs such as Rebuild
    America and Energy Star labeling. They further include so-called public
    benefits programs enhanced by electricity line charges.
        For industry, the policies include voluntary agreements with
    industry groups to achieve defined energy efficiency and emissions
    goals, combined with a variety of government programs that strongly
    support such agreements. These programs include expansion and
    strengthening of existing information programs, financial incentives,
    and energy efficiency standards on motors systems. Policies in the CEF
    analysis were assumed to encourage the diffusion and improve the
    implementation of combined heat and power (CHP) in the industrial
    sector. For electricity, the policies include extending the production
    tax credit of 1.5 cents/kWh over more years and extending it to
    additional renewable technologies.
        Broadly speaking, the CEF Moderate scenario can be thought of as a
    50 percent increase in funding for programs that promote a variety of
    both demand-side and supply side technologies. For example, the
    moderate scenario assumes a 50 percent or $1.4 billion increase in
    cost-shared research, development, and demonstration of efficient and
    clean-energy technologies (in 1999 dollars with half as Federal
    appropriations and half as private-sector cost share). It further
    assumes a careful targeting of funds to critical research areas and a
    gradual, 5-year ramp-up of funds to allow for careful planning,
    assembly of research teams, and expansion of existing teams and
    facilities. In addition, the CEF moderate scenario anticipates
    increased program spending of $3.0 and $6.6 billion for the years 2010
    and 2020, respectively. These expenditures include production
    incentives and investment tax credits for renewable energy, energy
    efficiency and transportation technologies. They further include
    increased spending for programs such as DOE's Industrial Assessment
    Centers and EPA's Energy Star programs.
        The combined effect of the R&D and program expenditures, together
    with other policies described in the CEF report, implies a steady
    reduction in total energy requirements over the period 2000 through
    2020. By the year 2020, for example, primary energy consumption and
    electricity sales were projected to decrease by 8 percent and 10
    percent, respectively, compared to the CEF reference case.
    2.1.4. CEF Advanced Technology Scenario
        Building on the policies of the moderate scenario, the CEF advanced
    scenario assumes a doubling of cost-shared R&D investments, resulting
    in an increased spending of $2.9 billion per year (again, in 1999
    dollars with half as Federal appropriations and half as private-sector
    cost share). In addition, the advanced scenario anticipates increased
    program spending of $9.0 and $13.2 billion for the years 2010 and 2020,
    respectively. The added spending covers all sectors including
    buildings, industry, transportation, and electric generation.
        The combined effect of the program and R&D expenditures, together
    with other policies described in the CEF report (including a $50 carbon
    charge applied in the CEF Advanced Scenario), drove a steady reduction
    in the need for energy compared to the CEF reference case. By 2020
    total energy use fell by 19 percent compared to the reference case. At
    the same time, electricity sales in 2020 were projected to decrease by
    24 percent compared to the CEF reference case.
    2.1.5. Implementation of the Technology Assumptions
        The assumptions embedded in each of these scenarios have the effect
    of progressively increasing market penetration of higher performance
    energy efficiency and energy supply technologies. As shown in Table 2,
    the net effect of these assumptions is to lower the expected level of
    electricity consumption while continuing to meet the same level of
    service demanded by utility customers. The technology assumptions also
    have the effect of increasing the availability of cleaner energy supply
    technologies that reduce the level of emissions per kilowatt-hour of
    generation. The critical assumption used in the EPA analysis is that
    program spending affects both supply and demand technologies in a way
    that interacts with the emission caps that are to be imposed in 2007.
        Benchmarked to the year 2010, Table 2 shows the percentage change
    of key indicators for each scenario with respect to its respective
    reference case. These changes provide EPA with approximate targets so
    that each of the scenarios can be mapped into the AMIGA model. As such,
    the figures in Table 2 should be seen as inputs into the AMIGA model,
    not outputs of the model.

                      Table 2. Influence of Technology Assumptions on Key Scenario Indicators--2010
    ----------------------------------------------------------------------------------------------------------------
                                                                   Scenario A   Scenario B   Scenario C   Scenario D
                                                                    Standard     Advanced       CEF          CEF
                              Indicator                            Technology   Technology    Moderate     Advanced
                                                                      Case         Case         Case         Case
    ----------------------------------------------------------------------------------------------------------------
    Primary Energy..............................................    0 percent         -2.5         -3.4         -6.3
                                                                                   percent      percent      percent
    Electricity Sales...........................................    0 percent         -2.4         -5.9         -6.8
                                                                                   percent      percent      percent
    Carbon Emissions............................................    0 percent         -5.0         -7.4        -10.7
                                                                                   percent      percent      percent
    NOx Emissions...............................................    0 percent         -2.6         -5.4         -8.1
                                                                                   percent      percent      percent
    ----------------------------------------------------------------------------------------------------------------

        By definition, scenario A assumes the standard technology
    assumptions of the AEO2001 reference case. Hence, there are no
    additional programs or policies that generate changes in the reference
    case technologies when the emission caps are imposed by the year 2007.
    The level of technology responsiveness grows for scenarios B, C, and D
    as a result of greater program spending.
        The CEF advanced scenario, for example, assumes a significant
    increase in program funds to promote a variety of both demand-side and
    supply side technologies. As a result of this greater level of program
    activity, there is an accelerated penetration of energy-efficient
    technologies that drives electricity sales down by 6.8 percent in 2010
    (compared to the CEF reference case for that same year). At the same
    time, the combination of a lower demand for electricity and an
    increased investment in cleaner energy supply technologies reduces both
    carbon and NOx emissions by 10.7 and 8.1 percent, respectively (again,
    compared to the CEF 2010 reference case). As EPA modeled this scenario,
    the bundle of policies in the CEF advanced scenario became, in effect,
    a complement to the emission caps imposed by 2007.
        To avoid overestimating the impact of the policy scenarios in this
    analysis, EPA made a number of adjustments before implementing the CEF
    assumptions in the four scenarios reported here. First, the CEF
    analysis was benchmarked to a 1999 reference case. In the AEO2001
    reference case, however, the demand for electricity in 2020 is about 10
    percent higher compared to the CEF reference case. Second, the Senate
    request asked EPA to assume a 2002 start date in running the technology
    and policy scenarios. In effect, there are fewer years in which
    programs can achieve the desired level of technology improvement
    compared to the CEF scenarios. In addition, the CEF analysis includes a
    significant review of transportation technologies and policies. EPA
    chose to exclude all assumptions related to transportation, focusing
    only on the supply and demand-side technologies associated with
    electricity and natural gas consumption.
        With the adjustments described above now reflected in the current
    analytical framework, and using the program cost information documented
    in the CEF study, Table 3 summarizes the incremental program costs that
    were assumed as necessary to drive the kind of changes in electricity
    consumption and emissions described in Table 2. Since transportation
    programs drove a significant part of the CEF expenditures, and since
    there are fewer years to implement policies, the estimated program
    expenditures are also smaller compared to the CEF assumptions.

     Table 3. Incremental Policy Costs of the Technology Scenarios (billion
                                  1999 dollars)
    ------------------------------------------------------------------------
                    Scenario                   2002    2005    2010    2015
    ------------------------------------------------------------------------
    Scenario A..............................     0.0     0.0     0.0     0.0
    Scenario B..............................     0.8     1.6     2.7     2.9
    Scenario C..............................     1.2     2.3     4.3     4.8
    Scenario D..............................     2.1     3.9     5.2     5.5
    ------------------------------------------------------------------------

        Because scenario A characterizes existing program and technology
    performance, no additional funds are required to drive that scenario.
    Scenario B, on the other hand, anticipates some changes in the
    technology characterization that will affect the electricity sector as
    shown in Table 2. While the AEO2001 analysis anticipated no program
    spending to drive these changes, EPA assumed that additional spending
    would be required for scenario B. Calibrating to the CEF policy
    scenarios, EPA estimated that program and policy spending would
    increase by $0.8 billion in 2002, rising steadily to $2.9 billion by
    2015. For scenario C, program spending increased by $1.2 billion
    starting in 2002, rising to $4.8 billion by 2015. Finally, program
    spending in scenario D started at $2.1 billion in 2002 and increased to
    $5.5 billion by the last year of this analysis.\4\
    ---------------------------------------------------------------------------
        \4\The program spending assumptions developed in this analysis are
    used only to approximate the impact of the CEF scenarios. They do not
    reflect EPA endorsement of these spending levels.
    ---------------------------------------------------------------------------
        The net effect of mapping increased program spending together with
    adjustments needed to update the assumptions of the CEF policy
    scenarios can be highlighted by reviewing the change in electricity
    generation for scenario D. In the CEF Advanced Scenario (based on a
    1999 reference case), for example, the level of electricity generation
    in 2010 was lowered by 10 percent from the reference case requirements
    of 3,920 billion kilowatt-hours (kWh). As the CEF technology
    assumptions were applied in scenario D within this analysis (updated to
    the AEO2001 reference case), electricity generation was reduced by 9
    percent from 4,253 billion (kWh). The trend was more pronounced in
    2015. Rather than a roughly 16 percent reduction from a generation
    level of 4,200 billion kWh in the 1999 CEF Advanced Case, the scenario
    D equivalent in this analysis achieved only a 12 percent reduction from
    a generation of 4,580 billion kWh.
    2.1.6. Reasonableness of the Scenario Assumptions
        The results of the technology-driven scenarios should not be
    interpreted as an EPA endorsement of any of the policies or technology
    assumptions behind each of scenarios described in this report. On the
    one hand, EPA has not conducted any significant review of the EIA
    assumptions that underpin the AEO2001 projections. On the other hand,
    some analysts do not necessarily agree with the assumptions and
    projected level of impacts in the CEF assessment despite the fact that
    it was peer-reviewed and its findings published this fall in an
    academic journal. The EIA (2001), for example, notes that the CEF
    policies assume changes in consumer behavior that are not consistent
    with historically observed behavior patterns. Moreover, the EIA
    suggests that there is little documentation to support the assumed
    technological improvements generated by the research and development
    (R&D) initiatives described in the report. Finally, EIA notes that the
    effectiveness of voluntary or information programs may be less than
    assumed in the CEF scenarios. At the same time, the lead CEF analysts
    have responded to the EIA assertions by citing relevant economic
    literature and noting that the CEF study is one of ``the most carefully
    documented and complete analysis of U.S. energy futures that has ever
    been funded by the U.S. government'' (Koomey, et al, 2001).
        Notwithstanding these concerns, EPA attempted to respond to the
    Senators' request by mapping in the critical assumptions of the CEF as
    a range of policies that provide a set of alternative assumptions about
    the future. In this regard, the scenarios are more like descriptions of
    alternative future outcomes rather than predictions or recommendations
    about how the future should unfold.
        To provide a more complete context for understanding the magnitude
    of the changes in electricity generation that are suggested by the
    different scenarios, the figure below illustrates both the historical
    and projected trends in the nation's electricity generation. The
    information is shown as the number of kWh per dollar of GDP (measured
    in constant 1999 dollars). The historical data covers the period 1970
    through 2000 while the projected trends are through the year 2015. The
    historical period shows a moderate level of volatility. The reference
    case projections suggest an annual rate of declining intensity of 1.6
    percent per year through 2015 with a final value 0.33 kWh/$.
    Chart 1. Historical and Projected US Electricity Trends (kWh per 1999 $
                                      GDP)

        In comparison to the reference case, Scenario D (adapting the CEF
    Advanced Case assumptions) reflects a national commitment to improve
    both electricity supply and the efficiency of demand-side technologies.
    The presumption is that such a commitment would be supported by a
    significant increase in R&D and program spending as described above.
    Under these assumptions, the nation's electricity intensity is
    projected to decline at an annual rate of 2.5 percent, dropping to a
    final intensity of 0.28 kWh/$. This level of decline is greater than
    previously seen in the recent past. In the period 1980 through 1986,
    for example, and again 1993 through 2000, the annual rate of decline
    was only 1.7 percent. Hence, it appears that the assumptions driving
    the advanced scenario are aggressive. At the same time, however, the
    research undertaken by the CEF analysts indicates that the technology
    is available to achieve such a reduction should a national commitment
    be successful in driving similar policies.
    2.2. Results of the Scenario Analysis
        With the model benchmarked to AEO2001, and given the different mix
    of scenario assumptions previously described, AMIGA reports the results
    in the figures and tables that follow. More complete data, including
    reference case assumptions, are available in Appendix 5.2.
    2.2.1. Emission Projections
        All program and policy assumptions have a start date of 2002.
    Moreover, the analysis anticipates the use of banked allowances made
    possible by early emissions reductions achieved in the years 2002
    through 2006 (as requested in the Senate letter). Figures 1 through 4
    on the following page illustrate both the emissions projections and the
    impact of banking the early reductions on all four emissions caps
    implemented in 2007.
        Although all four categories of emissions are down substantially,
    they only achieve 50-75 percent of the proposed cap by 2007 (shown as
    the dotted horizontal line in each of the above figures). This is
    because of the availability of the banked allowances that can be used
    by sources to meet emissions caps in 2007 and beyond. Note that costs
    would be noticeably higher if power plants were required to actually
    hit the target in 2007. In 2015, carbon and mercury emissions continue
    to be 15 percent or more above the target.
        The reductions that generate the banked allowances are shown as the
    area to the left of each vertical dotted line as the differences
    between the reference case and scenario emission trajectories. The
    emissions above the cap are shown to the right of each vertical dotted
    line and between the scenario emissions and the dotted horizontal line.
    Subtracting these two areas on each graph reveals the level of the bank
    in 2015. Using Scenario D as an example, the remaining allowances in
    2015 are 100 million metric tons for carbon, 1.3 million tons for
    SO2, 0.2 million tons for NOx and 25 tons for mercury. In
    the case of carbon, the bank would last another 2 years at the rate of
    drawdown in 2015, or longer if the drawdown declined.
                Figure 1. Carbon Emissions (million metric tons)

               Figure 2. SO2 Emissions (million tons)

                     Figure 3. NOx Emissions (million tons)

                       Figure 4. Mercury Emissions (tons)

    2.2.2. Changes in Electric Generation Expenditures
        Given the assumptions and economic drivers in each of the
    scenarios, the AMIGA model calculates the capital investment, operation
    and maintenance, and fuel costs necessary to meet consumer demand for
    electricity. The incremental expenditures required to generate
    electricity under each of the four scenarios as compared to the
    reference case are summarized in Figure 5 (in billions of 1999
    dollars). In effect, the incremental expenditures reflect the range of
    decisions made by the electricity sector to comply with each of the
    four scenario constraints-but do not reflect efforts made outside the
    electricity sector. Because these expenditures ignore spending on
    energy efficiency, research and development outside the electricity
    sector-spending that can be substantial-they are not measures of
    program costs. Note that incremental expenditures are incurred as early
    as 2002 in all four scenarios to generate early reductions that can be
    banked for use in 2007 and beyond.
        The generation expenditures vary in each of the scenarios change
    for at least three reasons: (1) the size of the allowance bank made
    possible by early reductions driven, in part, by program spending prior
    to the introduction of the caps; (2) the varying levels of demand for
    electricity over time, resulting in changes in the overall mix of
    generation resources; and, (3) the gradual reduction in the banked
    allowances available for withdrawal necessitating additional actions to
    reduce emissions.
        As expected, scenario A has the largest increase with expenditures
    rising by nearly $17 billion in 2015 compared to the reference case.
    The higher level of expenditures is driven by a 21 percent increase in
    unit generation costs caused primarily by the emissions caps and offset
    only slightly by a small decrease in electricity demand. With less
    energy efficiency technology penetrating the market, a greater level of
    control equipment must be installed and operated which, in turn, drives
    up the cost of generation. Scenario B follows a similar pattern with
    expenditure increases being offset by further reductions in electricity
    demand as more efficient technology penetrates the market. The
    expenditures for scenario C decline even further as reduced demand
    continues to lower both the level generation and the unit cost of that
    generation compared to scenario A. Scenario D, on the other hand,
    actually shows a decline in total expenditures by 2015. The combination
    of a 12.5 percent reduction on generation load together with only an
    11.9 percent increase in the unit cost of generation (both with respect
    to the reference case) results in a $3.11 billion reduction in total
    electric generation expenditures.
    Figure 5. Incremental Expenditures on Electric Generation (Billions of
                                     1999$)

    2.2.3. Marginal Costs
        The marginal costs of emission reductions over the period 2005
    through 2015 are shown in Figures 6 through 9 for all four scenarios.
        Figure 6. Projected Marginal Cost of Carbon Reductions ($/Metric
    Ton)

        Figure 7. Projected Marginal Cost of SO2 Reductions ($/
    Ton)

        Figure 8. Projected Marginal Cost of NOx Reductions ($/Ton)

        Figure 9. Projected Marginal Cost of Hg Reductions ($ Million/Ton)

        The marginal cost of carbon reductions range from $46 to $138/
    metric ton through 2015 with each scenario showing successively smaller
    costs as technology characteristics improve and more energy-efficient
    and/or low carbon technologies penetrate the market. The marginal cost
    of SO2 and NOx reductions through 2015 are less than $450/
    and $2,300/ton, respectively, in all four multi-emissions reduction
    scenarios. The marginal cost of mercury reductions by 2015 ranges from
    $350 million/ton to $432 million/ton, again depending on the scenario.
        It is important to note that marginal cost reflects the additional
    cost of one more ton of reductions, and not the total cost associated
    with each pollutant. One can make a very rough estimation of this
    overall cost for each pollutant, on top of the costs associated with
    the other three, by multiplying half the marginal cost (to approximate
    average cost) by the volume of reductions. By 2015, as an example,
    scenario A returns cost estimates of $15.2 billion for carbon, $1.1
    billion for SO2, $2.7 billion for NOx, and $6.4 billion for
    mercury. In Scenario D, the cost estimates are $8.6 billion for carbon,
    $1.6 billion for SO2, $3.3 billion for NOx, and $7.8 billion
    for mercury. Note that these figures cannot be added together for an
    overall estimate because they (a) double count the benefits of
    controlling multiple pollutants simultaneously, and (b) ignore the
    consequences of the underlying technology policy. We discuss overall
    costs below.
        Surprisingly, the marginal cost of SO2, NOx, and Hg
    reductions increases as the marginal cost of carbon decreases. The
    reason appears to be that as efficiency technology penetrates the
    market and reduces carbon prices, more of a price signal is required to
    generate further reductions in the three conventional pollutants. In
    the advanced scenarios, for example, both demand reductions and the
    increased use of gas tends to reduce carbon emissions. But gas prices
    begin to rise which allows coal to make a modest comeback with respect
    to scenario A. This is especially true as cleaner and more efficient
    coal technologies begin to penetrate the market as assumed in scenarios
    B through D. In order to offset the tendency for coal-generated
    emissions to increase, permit prices need to adjust upward.
    2.2.4. Fuel Use Impacts
        Figure 10 shows both total electricity consumption and the fossil
    fuel consumption used in the generation of electricity for the year
    2010. The results are in quadrillion Btu in both the reference case and
    each of the four policy scenarios. As each successive scenario
    generates a greater reduction in electricity demand, coal use is
    reduced significantly (by about 30 percent). Gas consumption increases
    slightly in scenarios A and B, and decreases by a small amount in
    scenarios C and D as lower electricity consumption reduces the need for
    new capacity.
    Figure 10. Total Electricity Consumption and Fossil Fuel Generation in
                             2010 (Quadrillion Btu)

    2.2.5. Energy Price Impacts
        The model suggests that under the conditions described above,
    electricity prices are expected to increase by about 30 percent (under
    scenario D) to 50 percent (under scenario A) by the year 2015. This is
    the logical result of increased control costs and permit prices. The
    combination of increased prices and the availability of more energy-
    efficient equipment and appliances reduce electricity demand by about
    10 percent. Total electricity expenditures increase by about 15 percent
    to 30 percent depending on the year and the scenario (see Table 3,
    below, and the tables in Appendix 5.2 for more detail on the changing
    pattern of expenditures).
        2.2.6. Economy-wide Impacts
        Table 3 provides a summary of key macroeconomic data for the year
    2010 to compare the impact of emissions reductions on both personal
    consumption and other components of gross domestic product (GDP). The
    effects on personal consumption show a decline of between $13 billion
    and $31, or 0.1 percent to 0.3 percent, depending on the scenario. This
    reflects the cost of the program in terms of the decreased well being
    of households who must forego a fraction of their consumption of goods
    and services in order to pay for both research and development
    programs, energy efficiency improvements, and more expensive
    electricity production. Table 3 shows little change in GDP under any of
    the policy scenarios, reflecting the fact that this foregone
    consumption turns up as expenditures in other categories of GDP,
    namely, investment and government spending.\5\
    ---------------------------------------------------------------------------
        \5\A more complete assessment of each policy scenario can be made
    by reviewing the more detailed data contained in the Appendix.

                                                     Table 3. Summary of Economic Impacts by Scenario--2010
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Electricity                                                                     Gross
                                                                       End Use    Natural Gas  Coal Use in   Electricity    Personal   Investment   Domestic
                                                                        Demand       Use in    Electricity  Expenditures  Consumption   (Billion    Product
                          Analytical Scenario                          (Billion   Electricity   Generation    (Billion      (Billion      1999      (Billion
                                                                      Kilowatt-    Generation    (Quads)        1999          1999      Dollars)      1999
                                                                        hours)      (Quads)                   Dollars)      Dollars)                Dollars)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Reference......................................................       4,346          8.3         22.3         269.4      8,902.0      3,042.4   13,211.7
    A. Standard Tech...............................................       4,156          9.3         14.6         353.9      8,870.9      3,067.3   13,204.3
    B. High Tech...................................................       4,112          8.9         15.0         337.4      8,873.7      3,067.0   13,209.5
    C. Mod CEF.....................................................       4,070          8.2         15.6         323.0      8,881.7      3,066.8   13,218.9
    D. Adv CEF.....................................................       4,025          7.7         15.9         308.9      8,889.2      3,066.7   13,227.2
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        The AMIGA modeling system reports the costs and benefits of each
    scenario with several major exceptions. The first omitted benefit is
    spillover and productivity gains beyond energy bill savings. A number
    of studies suggest that energy efficiency technology investments also
    tend to increase overall productivity of the economy, especially in the
    industrial sector. (Sullivan, et al., 1997; Finman and Laitner, 2001;
    and Laitner, et al, 2001). To date, however, no systematic effort has
    been undertaken to incorporate such benefits into the current
    generation of policy models. Hence, this potential benefit is not
    reported at this time. The second missing benefit includes gains in
    environmental quality, especially improved health benefits.
        On the cost side, the model ignores costs associated with rapid
    changes in capital stocks, as well as potential loss of flexibility and
    interactions with the existing tax system. For example, the model
    forecasts significant changes in the level and composition of
    electricity generation in 2002, ignoring the difficulty of rapidly
    changing the capital stock by then end of 2001. Losses in flexibility
    occur when pollution control activities potentially interfere with
    efficiency and other operational programs at a regulated facility.
    Finally, there are interactions with the tax system when, in response
    to a rise in the relative cost of purchased goods, people decide to
    enjoy more leisure (which is now relatively less expensive), work less,
    and lower taxable income (Parry and Oates, 2000).
    2.3. The Results in Context
        Recent studies suggest significant economic consequences as a
    result of substantial emission reduction strategies (EPRI, 2000; and
    EIA, 2000). On the other hand, the presumption of a tradeoff between
    environmental and economic benefits may not provide an entirely
    appropriate framework for analysis of such policies (DeCanio, 1997).
    Indeed, there are a number of studies that show net economic benefits
    may be possible when a full accounting of both benefits and costs are
    included within an appropriate analysis (Krause, et al, 2001; and
    Bailie, et al, 2001).
        At the same time, understanding the proper characterization and
    role of technology improvements (Edmonds, et al, 2000), and then
    capturing that characterization within an appropriate model structure
    (Peters, et al, 2001), is a critical aspect of all such economic
    assessments.
        Finally, it is important to recognize that the mere existence of
    technologies and the potential for positive net benefits does not
    assure that these technologies will be commercialized and adopted, nor
    that the net benefits will be realized (Jaffe, et al, 2001). An
    unanswered question is whether and how policies might encourage these
    activities.
        This current study, while drawing on credible data sources and
    applying a state-of-the-art modeling system, cannot adequately capture
    all such nuances associated with emission reduction scenarios. The
    results of this analysis should be viewed within this larger context.
    3. Conclusions
        The analysis suggests that under the conditions described above,
    emissions through 2015 will be significantly reduced although they
    won't meet the 2007 target. This is largely because of assumptions
    about the banking of allowances earned prior to 2007. At the same time,
    coal-fired electric generation is expected to decline by 25 percent to
    35 percent by the year 2015. On the other hand, oil and gas-fired
    generation is projected to increase by about 8 percent under more
    restrictive technology assumptions, but decrease by as much as 20
    percent under scenarios that embody more optimistic assumptions about
    energy-efficiency demand and supply technologies. Electricity prices
    are expected to increase by 32 percent to 50 percent in 2015, depending
    on the scenario.
        The combination of increased prices and the availability of more
    energy-efficient equipment and appliances are projected to reduce
    electricity demand by about 10 percent compared to the reference case.
    With the combination of higher prices and improved efficiency, total
    expenditures for electricity consumption in 2015 are projected to
    increase by about 17 percent to 39 percent depending on the scenario.
    Interacting with other changes in consumer and business spending that
    is driven by each of the scenario assumptions, the personal consumption
    reduced by about 0.1 percent to 0.3 percent. This again depends on the
    year and the scenario.
        The results provided in this analysis should not be construed as
    forecasts of actual scenario outcomes. Rather they are assessments of
    how the future might unfold compared to a previously defined reference
    case--given the mix of technology and policy assumptions embodied in
    each of the scenarios. The results from these scenarios imply a strong
    national commitment, one that is successful in developing the programs
    and policies necessary to achieve the level of emission reductions
    described within the report.
    4. References
    Alison, Bailie, Stephen Bernow, William Dougherty, Michael Lazarus, and
            Sivan Kartha, 2001. The American Way to the Kyoto Protocol: An
            Economic Analysis to Reduce Carbon Pollution, Tellus Institute
            and Stockholm Environment Institute, Boston, MA, July, 2001.
    Brown, Marilyn A., Mark D. Levine, Walter Short, and Jonathan G.
            Koomey, 2001. ``Scenarios for a clean energy future,'' Energy
            Policy Vol. 29 (November): 1179-1196, 2001.
    DeCanio, Stephen J., 1997. ``Economic Modeling and the False Tradeoff
            Between Environmental Protection and Economic Growth,''
            Contemporary Economic Policy, Vol. 15 (October): 10-27, 1997.
    1Edmonds, Jae, Joseph M. Roop, and Michael J. Scott, 2000. Technology
            and the economics of climate change policy, Pew Center on
            Global Climate Change, Washington, DC, September 2000.
    E-GRID, 2000. Emissions & Generation Resource Integrated Data base, US
            Environmental Protection Agency, Washington, DC, http://
            www.epa.gov/airmarkets/egrid/factsheet.html.
    Electric Power Research Institute, 2000. Energy-Environment Policy
            Integration and Coordination Study, TR-1000097, Palo Alto, CA,
            2000.
    Energy Information Administration, 1998. Impacts of the Kyoto Protocol
            on U.S. Energy Markets and Economic Activity, SR/OIAF/98-03,
            Washington, DC, October 1998.
    Energy Information Administration, 2000. Analysis of Strategies for
            Reducing Multiple Emissions from Power Plants: Sulfur Dioxide,
            Nitrogen Oxides, and Carbon Dioxide, SR/OIAF/2000-05
            (Washington, DC, December 2000).
    Energy Information Administration, 2001. Analysis of Strategies for
            Reducing Multiple Emissions from Electric Power Plants with
            Advanced Technology Scenarios, SR/OIAF/2001-05 (Washington, DC,
            October 2001).
    Finman, Hodayah, and John A. ``Skip'' Laitner, 2001. ``Industry, Energy
            Efficiency and Productivity Improvements,'' Proceedings of the
            ACEEE Industrial Summer Study, American Council for an Energy-
            Efficient Economy, Washington, DC, August 2001.
    Hanson, Donald A, 1999. A Framework for Economic Impact Analysis and
            Industry Growth Assessment: Description of the AMIGA System,
            Decision and Information Sciences Division, Argonne National
            Laboratory, Argonne, IL, April, 1999.
    Interlaboratory Working Group, 2000. Scenarios for a Clean Energy
            Future, ORNL/CON-476 and LBNL-44029 Oak Ridge, TN: Oak Ridge
            National Laboratory; Berkeley, CA: Lawrence Berkeley National
            Laboratory, November 2000.
    Jaffe, AB, RN Newell, and RN Stavins, 2001. ``Energy-efficient
            technologies and climate change policies: Issues and
            evidence.'' In Climate Change Economics and Policy: An RFF
            Anthology, edited by MA Toman. Washington: Resources for the
            Future.
    Jeffords, James, and Joseph Lieberman, 2001. ``Letter to EPA
            Administrator Christine Todd Whitman,'' May 17, 2001.
    Koomey, Jonathan, Alan Sanstad, Marilyn Brown, Ernst Worrell, and Lynn
            Price, 2001. ``Assessment of EIA's statements in their multi-
            pollutant analysis about the Clean Energy Futures Report's
            scenario assumptions,'' Memo to EPA's Skip Laitner, Lawrence
            Berkeley National Laboratory, Berkeley, CA, October 18, 2001.
    Krause, Florentin, Paul Baer, and Stephen DeCanio, 2001. Cutting Carbon
            Emissions at a Profit: Opportunities for the U.S.,
            International Project For Sustainable Energy Paths, El Cerrito,
            CA, May 2001.
    Laitner, John A. ``Skip'', Ernst Worrell, and Michael Ruth, 2001.
            ``Incorporating the Productivity Benefits into the Assessment
            of Cost-effective Energy Savings Potential Using Conservation
            Supply Curves,'' Proceedings of the ACEEE Industrial Summer
            Study, American Council for an Energy-Efficient Economy,
            Washington, DC, August, 2001.
    Parry, I.W.H. and W.E. Oates. ``Policy Analysis in the Presence of
            Distorting Taxes'' Journal of Policy Analysis and Management
            19(4), pp 603-613.
    Peters, Irene, Stephen Bernow, Rachel Cleetus, John A. (``Skip'')
            Laitner, Aleksandr Rudkevich, and Michael Ruth, 2001. ``A
            Pragmatic CGE Model for Assessing the Influence of Model
            Structure and Assumptions in Climate Change Policy Analysis,''
            Presented at the 2d Annual Global Conference on Environmental
            Taxation Issues, Tellus Institute, Boston, MA, June 2001.
    Sullivan, Gregory P., Joseph M. Roop, and Robert W. Schultz, 1997.
            ``Quantifying the Benefits: Energy, Cost, and Employment
            Impacts of Advanced Industrial Technologies,'' 1997 ACEEE
            Summer Study Proceedings on Energy Efficiency in Industry,
            American Council for an Energy-Efficient Economy, Washington,
            DC, 1997.
    U.S. Environmental Protection Agency, 2000b. Guidelines for Preparing
            Economic Analysis, EPA-240-R-00-003, Office of the
            Administrator, Washington, DC, September 2000.
    5. Appendices
    5.1. Description of the AMIGA Model
        The All Modular Industry Growth Assessment (AMIGA) model is a
    general equilibrium modeling system of the U.S. economy that covers the
    period from 1992 through 2030.\6\  It integrates features from the
    following five types of economic models:
    ---------------------------------------------------------------------------
         \6\Because of recent upgrades and enhancements made in the model,
    the current reporting period is extended only through the year 2015. We
    expect the full reporting period to extend back to the year 2030 in the
    very near future.
    ---------------------------------------------------------------------------
        1). Multi-sector--AMIGA starts by benchmarking to the 1992 Bureau
    of Economic Analysis (BEA) interindustry data, which a preprocessor
    aggregates to approximately 300 sectors;
        2). Explicit technology representation--AMIGA reads in files with
    detailed lists of technologies (currently with a focus on energy-
    efficient and low-carbon energy supply technologies, including electric
    generating units) containing performance characteristics, availability
    status, costs, anticipated learning effects, and emission rates where
    appropriate;
        3). Computable General Equilibrium--AMIGA computes a full-
    employment solution for demands, prices, costs, and outputs of
    interrelated products, including induced activities such as
    transportation and wholesale/retail trade;
        4). Macroeconomic--AMIGA calculates national income, Gross Domestic
    Product (GDP), employment, a comprehensive list of consumption goods
    and services, the trade balance, and net foreign assets and examines
    inflationary pressures;
        5). Economic Growth--AMIGA projects economic growth paths and long-
    term, dynamic effects of alternative investments including accumulation
    of residential, vehicle, and producer capital stocks.
        In addition, the AMIGA system includes the Argonne Unit Planning
    and Compliance model that captures a wide variety of technology
    characteristics within the electric generating sector. This includes a
    system dispatch routine that allows the retirement and the dispatch of
    units on the basis of traditional cost criteria as well as the impact
    of various permit prices on operating costs. It also includes non-
    utility generation sources such as industrial combined heat and power
    applications and renewable energy systems.
        Climate change mitigation policy has been the main application of
    the AMIGA system to date. But the AMIGA modeling system recently has
    been enhanced to include policies involving the reduction of sulfur
    dioxide, nitrogen oxide, and mercury emissions. Moreover, a new
    intertemporal optimization module has been added to AMIGA that allows
    an evaluation of early reductions and the banking of allowances to be
    incorporated into policy scenarios. Hence, the system is well suited to
    evaluate a variety of multi-emission strategies that are driven by
    price incentives as well as R&D programs, voluntary initiatives, and
    cap-and-trade policies.
        The model includes a complete data base of all electric utility
    generating units within the United States. The cost and performance
    characteristics of the electricity supply technologies generally follow
    those modeled within the Energy Information Administration's National
    Energy Modeling System. The characteristics associated with the various
    emission control technologies generally follow those modeled within the
    Integrated Planning Model used by the Environmental Protection Agency.
        The AMIGA modeling system is a highly organized, flexible structure
    that is programmed in the C language. It includes modules for household
    demand, production of goods, motor vehicles, electricity supply, and
    residential and commercial buildings and appliances.
        The production modules contain representations of labor, capital,
    and energy substitutions using a hierarchy of production functions. The
    adoption rates for cost-effective technologies depend on energy prices
    as well as policies and programs that lower the implicit discount rates
    (sometimes referred to as hurdle rates) that are used by households and
    businesses to evaluate energy-efficiency and energy supply measures.\7\

    ---------------------------------------------------------------------------
        \7\For a more complete documentation of the AMIGA model, see
    Hanson, Donald A, 1999. A Framework for Economic Impact Analysis and
    Industry Growth Assessment: Description of the AMIGA System, Decision
    and Information Sciences Division, Argonne National Laboratory,
    Argonne, IL, April, 1999. For an example of other policy excursions
    using the AMIGA model, see, Hanson, Donald A. and John A. ``Skip''
    Laitner, 2000, ``An Economic Growth Model with Investment, Energy
    Savings, and CO2 Reductions,'' Proceedings of the Air &
    Waste Management Association, Salt Lake City, June 18-22, 2000. Also
    see, Laitner, John A. ``Skip'', Kathleen Hogan, and Donald Hanson,
    ``Technology and Greenhouse Gas Emissions: An Integrated Analysis of
    Policies that Increase Investments in Cost Effective Energy-Efficient
    Technologies,'' Proceedings of the Electric Utilities Environment
    Conference, Tucson, AZ, January 1999.

                                     ______

       Responses by Hon. Jeffrey Holmstead to Additional Questions from
                                Senator Jeffords

        Question 1. What is the current status of the Administration's
    review of New Source Review requirements and enforcement actions,
    relative to the President's direction in the National Energy Policy
    document?
        Response. As you are aware, the Environmental Protection Agency
    (EPA) has been reviewing the New Source Review (NSR) program. This
    review is still underway, and we plan to release the results as soon as
    possible. The Department of Justice recently released a separate review
    of NSR enforcement actions.

        Question 2. My and Senator Lieberman's request for analyses asked
    EPA to include electricity generated by industrial cogenerators and
    other independent power producers. These entities do not appear to have
    been included in the report that EPA prepared. Please explain why that
    was the case. If they were included in the analyses, what effect would
    that have on EPA's cost projections?
        Response. EPA's analyses did include both cogenerators and
    independent power producers. Please refer to table 3 in each of the
    five appendices, 5.2.1 through 5.2.5, which highlights the use of
    cogeneration and renewable resources. The tables are labeled ``Summary
    Data: Cogeneration Independent Power Production (Billion Kilowatt-
    hours)'' and include cogeneration by fuel type, and the amount of
    generation for onsite use versus sales to the grid. In the reference
    case, for example, gas/oil fired cogeneration increases from 240
    billion kWh in 2002 to 293 billion kWh by 2015. By comparison, scenario
    D shows gas/oil fired cogeneration increases to 331 billion kWh in
    2015.

        Question 3. Please provide the committee with reliable data on the
    emissions inventory, power/energy production, and any other relevant
    information for industrial cogenerators and other independent power
    producers that would be necessary for the committee to develop an
    accurate pollution credit allocation scheme for these sources.
        Response. The most current data on industrial cogenerators and
    other independent power producers can be found in EPA's Emissions &
    Generation Resource Integrated Data base (E-GRID). This information can
    be obtained at the following web address: http://www.epa.gov/
    airmarkets/egrid/index.html. We have also attached a CD-ROM version of
    this data base. Using that CD-ROM, open the Excel spreadsheet file
    EGRID98. Cogenerators and independent power generators are identified
    as NU.

        Question 4. In testimony, you indicated that stringent national
    caps, as part of a cap-and-trade system, would be sufficient to protect
    local air quality, achieve compliance with NAAQS and regional haze
    requirements, and, if they were low enough, would obviate the need for
    several statutory and regulatory requirements. What modeling or
    analyses has the Agency performed that supports all three of these
    components simultaneously? Please provide the committee with that
    information.
        Response. It is important to clarify that, even with new caps on
    power plants, there will be certain areas of the country that need
    additional emissions reductions to come into attainment with all the
    National Ambient Air Quality Standards (NAAQS) and to meet the goals of
    the regional haze program. We believe it would be inappropriate to
    attempt to address all State and local air quality concerns with a
    national cap on one industrial sector. Although national caps on
    utility emissions of sulfur dioxide (SO2), nitrogen oxide
    (NOx), and mercury could alone be sufficient to protect air quality in
    many parts of the country, certain States and local governments will
    likely need to take action to reduce emissions from other types of
    sources to meet their individual air quality needs.
        During the process of developing an Administration proposal to
    reduce emissions from power plants, EPA has started to conduct
    national-scale modeling that demonstrates the potential air quality
    benefits of multi-pollutant legislation. Attached are materials based
    on emissions projections for 2020 that show the relevant results of
    that modeling for a base case and for one possible, hypothetical multi-
    pollutant approach (Attachment A). The results illustrate improvements
    in regional and local air quality for fine particles (PM2.5)
    and ozone (O3), and have been provided to the committee
    previously in response to earlier inquiries.
        Our analysis indicates that caps on SO2 and NOx
    emissions from power plants could significantly reduce the number of
    PM2.5 and O3 nonattainment areas in the eastern
    United States. We also believe that national caps could greatly improve
    visibility throughout the country, although we also believe that any
    multi-pollutant bill should be consistent with the SOx reduction
    program developed by States participating in the Western Regional Air
    Program (WRAP) to improve western visibility.
        Although we have not yet developed a Maximum Achievable Control
    Technology (MACT) standard to reduce mercury emissions from power
    plants, we believe that a cap could achieve reductions in mercury
    emissions the same as or greater than would be achieved under the MACT
    program. A cap would also set a limit on future emissions of mercury
    from power plants, unlike the MACT program, which would allow mercury
    emissions to continue to increase once the MACT standards are in place.
    Moreover, establishing a cap would create incentives for development of
    more cost-effective mercury reduction technologies; incentives that
    would not exist under the MACT program.
        Given the substantial emissions reductions and air quality
    improvements that could be achieved by a well-designed multi-pollutant
    approach, we believe that, under such an approach, a number of current
    provisions that affect power generation may not be needed and could be
    phased out. Among these are the existing section 126 rule addressing
    interstate ozone transport, Best Available Retrofit Technology (BART)
    requirements, mercury MACT, and new source review technology-based
    requirements for sources covered by the legislation.

        Question 5. Please provide the committee with data tables that show
    the efficiency of each facility in today's fleet of electric generating
    units (EGU), industrial cogenerators, and independent power producers,
    in terms of the emissions of SOx, NOx, Hg, and CO2, in tons
    per MWh in the latest year for which there is reliable data.
        Response. The best source of data for the information on emissions
    in tons per MWh can be found in EPA's Emissions & Generation Resource
    Integrated Data base (E-GRID). This information can be obtained at the
    following web address: http://www.epa.gov/airmarkets/egrid/index.html.
    As noted in the response to Question 3, we have attached a CD-ROM
    version of this data base. Using that CD-ROM open the Excel spreadsheet
    file EGRID98. Cogenerators and independent power generators are
    identified as NU.

        Question 6. Assuming that S. 556 were enacted as introduced in
    2002, what would be the most economically efficient method of
    distributing allowances to EGU and non-EGU power producers? Which
    allocation method would result in the least cost to consumers in cents
    per kwh by 2010?
        Response. The most economically efficient method of distributing
    allowances would be an auction, but only if the proceeds are used to
    cut taxes, for example, on labor and capital. This conclusion is based
    on a large volume of research on environmental regulation and economic
    welfare. If auction revenue is not used to cut taxes or if the
    allowances are allocated to existing sources based on historic activity
    as occurred under the Title IV Acid Rain program the same research does
    not associate higher or lower efficiency with any particular allocation
    method with one exception. Inefficiencies can be created by frequently
    updating allowance allocations based on future source behavior in
    competitive electricity markets for example, giving larger allocations
    to those sources in 2010 who produced more electricity in 2005. This
    can create inefficiencies by distorting the decision to produce
    electricity in 2005 by effectively subsidizing electricity generation
    via the allowance allocation. The less frequent the updating, the
    smaller any inefficiency would likely be. However, the inefficiency can
    be quite dramatic when the electricity sector is deregulated, when
    aggressive caps are placed on carbon dioxide (CO2), and when
    updating is very frequent.
        This effective electricity subsidy associated with an updating
    allocation does lead to slightly lower electricity prices for consumers
    compared to other allocation methods. Although this might appear to be
    a good way to shift some of the cost burden from consumers to electric
    power producers, it has the negative consequence of encouraging
    electricity consumption. This leads to more emission controls to meet
    the emission cap, when energy conservation would be cheaper for
    society, in turn raising the overall cost of the program. However, it
    is highly unlikely that any allocation method would fully offset the
    electricity price impacts of a stringent carbon cap.
        Of course, economic efficiency is not the only issue associated
    with allowance allocation: It is also important to consider equity.
    Equity has many dimensions that must be addressed, including producers
    using different types of fuel, consumers versus producers versus fuel
    suppliers, owners versus employees, existing facilities versus new
    facilities, and those that have already taken actions to reduce
    emissions versus those who have not, as well as the distribution of
    costs among consumers of different socio-economic levels.

        Question 7. Assuming enactment of S. 556 in 2002, would an
    additional 5 years for compliance time change any of the answers to the
    previous question?
        Response. The answers provided in response to Question 6, which
    regard the selection of emission allowance allocation options, contrast
    different allocation options and are independent of compliance dates.

        Question 8. Assuming the technology level of the reference case,
    that S. 556 is enacted in 2002, and the pollution allowances or credits
    within that legislation's caps are distributed by each of three methods
    (grandfathering, an auction, or a 4-year updating output based system),
    how many allowances would the utility and non-utility generators in
    committee members' States require to maintain generation at current
    levels and keep pace with market growth (1.8 percent) in 2010 and 2015?
    Please reply for each allocation system.
        Response. Answering this question poses numerous challenges due to
    the complexity of the question and the detailed analysis that would be
    required. It would require substantial additional time and resources to
    conduct the necessary modeling and analysis.

        Question 9. Last year, Robert Perciasepe, former EPA Assistant
    Administrator for Air and Radiation, sent a letter to Congressman Dan
    Burton, chairman of the House Government Reform Committee stating that:
    ``EPA's analysis of H.R. 2569, 'the Fair Energy Competition Act,' found
    an overall annualized cost of $11.5 billion to simultaneously achieve
    major reductions of 4 pollutants--NOx, SO2, mercury, and
    carbon dioxide. This would result in an annual savings of $7.6 billion
    when compared to control responses that address each pollutant
    separately, while the benefits from SO2 and NOx reductions
    alone would be more than $75 billion.'' The analysis EPA submitted to
    the committee last week did not include estimates of the cost savings
    or benefits of the pollution reductions. What would be the cost savings
    to the utilities of pursuing the four pollutant targets in a
    comprehensive, integrated fashion, as opposed to doing them each
    separately?
        Response. EPA has not evaluated a ``piecemeal'' approach to
    achieving the emissions reductions called for in the Jeffords/Lieberman
    request. It would be difficult to conduct such an analysis without
    knowing more about how to assume that CO2 could be regulated
    separately, since there are no existing programs that allow for the
    regulation of CO2 from power plants. Unlike SO2,
    NOx, and mercury, CO2 is not regulated as a pollutant under
    the Clean Air Act.
        The Administration strongly opposes including reductions for
    CO2 in S. 556 or any multi-pollutant bill. Pursuing sharp
    reductions in CO2 from the electricity generating sector
    alone would cause a dramatic shift from coal to natural gas and thus
    would run the risk of endangering national energy security,
    substantially increasing energy prices, and harming consumers.
        The Administration will not support any legislation that would
    cause a significant decline in our nation's ability to use coal as a
    major source of current and future electricity. Half of the electricity
    generated in the country comes from coal. At the same time, the
    Administration supports efforts to substantially reduce emissions from
    coal-fired power plants and to promote a future for clean coal
    technologies. In short, the Administration supports a clean coal policy
    as a critical component of our nation's energy and environmental
    policies, recognizing that other sources of energy also have a critical
    role to play.

        Question 10. What would be the approximate additional cost (in the
    retail price of electricity) of enacting in 2007 (after enactment in
    2002 of the emission reduction requirements and timelines for SOx, NOx,
    and mercury in S. 556), a requirement that power plants must reduce
    carbon dioxide emissions to 1990 levels no later than 2012, versus the
    cost of including carbon dioxide as part of S. 556 enactment in 2002?
    In this hypothetical case, please note that the delinked carbon
    reduction requirement would not have been known in advance, and
    indicate in the response what assumptions the Agency makes regarding
    inter-sector and international trading of carbon credits.
        Response. EPA has not performed the analysis to provide a precise
    answer at this point. We note, however, that any reasonable approach to
    reducing greenhouse gas emissions would be designed to achieve such
    reductions at the lowest possible cost before seeking reductions that
    are relatively more expensive. Based on the EPA and EIA analyses
    conducted at the request of Senators Jeffords and Lieberman, as well as
    the EPA and EIA analysis conducted at request of Senators Smith,
    Voinovich and Brownback, it is clear that reducing greenhouse gas
    emissions from the utility sector is very expensive compared to other
    possible approaches to controlling greenhouse gases. We believe that
    any legislation that imposes an obligation on utilities to reduce
    greenhouse gas emissions should allow them to satisfy that obligation
    by finding the most cost-effective way to reduce emissions of a
    specified quantity of greenhouse gases, rather than requiring them to
    reduce emissions from their own facilities. Under this type of
    approach, enacting a requirement in 2007 (as compared to 2002) would
    not result in stranded investments that could adversely affect retail
    electricity prices. EPA believes that any provision that requires
    significant carbon reductions directly from the utility sector would
    substantially increase retail prices of electricity, regardless of when
    it is adopted. As noted above, any benefits that would result from such
    a provision could be achieved through much more cost-effective
    approaches.

        Question 11. EPA's analysis of policies to achieve the emissions
    reductions contained in S. 556, coupled with other energy efficiency
    and renewable energy policies such as those included in S. 556,
    concluded that utilities' expenditures would increase by $1.8 billion
    in investment costs in 2010 (Figure 5), while electricity bills would
    actually increase by $39.5 billion in 2010 (Table 13). EPA's analysis
    of a scenario that assumes no energy efficiency and renewable policies
    or technological advances as a result of this legislation shows that
    total electricity bills increase five times as much as the actual
    expense to industry, with industry receiving an annual profit of $68
    billion by 2010. Why would such profits accrue to the industry?
        Response. EPA has not done an analysis to specifically determine
    the source of the electricity price increases, but it is clear that
    this result is driven to some extent by our treatment of allowances and
    the costs associated with them, including the assumption that
    allowances were distributed at no cost to industry.
        In our analysis, we followed the assumption in the Clean Energy
    Future study of a fully restructured electricity market that results in
    marginal costs setting the electricity price. In other words, the last
    electricity generating unit brought on line to meet anticipated demand
    will set the price for all other generators. If the last unit is an
    expensive peaking plant that runs at 10 cents per kilowatt-hour (kWh)
    for 2 hours, that unit would set the marginal clearing price in a
    competitive market and all plants would be paid 10 cents per kWh for
    that same 2-hour period--even if their own operating costs were 3 cents
    per kWh. At the same time, the value of allowances are included in
    determinations of market electricity prices, driving electricity prices
    upwards. Since allowances were distributed at no cost to sources, yet
    drive electricity prices upwards, large profits may accrue to the
    industry, despite the expected increased level of generating costs. In
    this case, the higher electric rates are primarily driven by the value
    of carbon allowances (with SO2, NOx, and mercury permit
    values having relatively small effects).

        Question 12. Please comment on the attached chart drawn from EPA's
    analysis.

                     all figures in billions of 1999 dollars
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    U.S. electricity revenues, 2010--       $269.4  Source Table 3, page 17
     Reference Case.
    U.S. electricity revenues, 2010--        353.9  Source: Table 3, page 18
     Scenario A.
    Increase in electricity revenues,        $84.5  ........................
     2010.
    Incremental cost to electricity          $16.5  Source Figure 5, page 13
     sector, 2010--Scenario A.
    Profit to electricty generators,   ...........  ........................
     2010.
    U.S. electricity revenues, 2010--       $269.4  Source: Table 3, page 17
     Reference Case.
    U.S. electricity revenues, 2010--       $308.9  Source: Table 3, page 18
     Scenario D.
    Increase in electricity revenues,         39.5  ........................
     2010.
    Incremental cost to electricity           $1.8  Source: Figure 5, page
     sector, 2010--Scenario D.                       13
    Profit to electric generators,           $37.7  ........................
     2010.
    ------------------------------------------------------------------------

        Response. As described above, the incremental cost to electricity
    generators does not include the value of allowances, whereas the price
    of electricity does reflect the value of allowances.
        The increased revenues (shown in the table above), accruing to
    electric power generators that receive free carbon and other
    allowances, are not accrued under alternative policy designs (see
    Question 13 below), although we would still expect to see significant
    increases in retail prices independent of the allocation method.

        Question 13. What alternative policy designs, such as allocating
    allowances through an auction system that returns the revenues to
    consumers, or allocating to utilities in a fuel-neutral, output-based
    manner based on a generation performance standard, could reduce the
    costs to consumers implied by the chart in the previous question?
        Response. One way to reduce costs to consumers is to distribute
    allowances through an auction system, which would raise government
    revenues that could be redistributed back to consumers or businesses in
    a variety of ways, such as by reducing existing taxes. This approach
    could have a double dividend to the extent that it offsets inefficient
    taxes.
        Alternatively, allowances may be allocated at no cost to sources,
    as was done under the Acid Rain Program in the Clean Air Act (CAA). EPA
    has performed general analysis, noted also in Question 6, that show
    distributing allowances through an updating, output-based system for
    only those units that combust fossil fuel would result in the greatest
    decrease in electricity prices relative to other allocation methods. As
    we also noted, this can substantially raise the cost of the program in
    certain circumstances.
        Other than allocations schemes, policy options that could yield
    lower electricity rates include renewable portfolio standards, auctions
    for building clean generating capacity additions, renewable energy
    production credits, investment tax credits, and low-interest
    government-backed loans.

        Question 14. Has EPA conducted any modeling of alternative policy
    designs for achieving the specified cap levels that results in
    different electricity prices than those included in the report? If so,
    please provide the model results.
        Response. EPA has conducted sensitivity analyses of how prices
    might be moderated through a combination of supplementary policies,
    such as renewable portfolio standards and investment tax credits. Based
    on certain assumptions about these sorts of policies, we found that in
    the year 2015, for example, electricity prices could be closer to 6.8
    to 7.7 cents per kWh versus 8.6 to 9.7 cents per kWh. Of course, the
    total cost to society may be higher with these supplemental policies
    even though electricity prices are lower. For example, the burden of
    raising the necessary revenue to fund an investment tax credit or the
    cost of a renewable portfolio standard could well exceed the savings in
    electricity prices.
        Additional policy alternatives, such as intensified research and
    development to improve control technology performance and reduce
    control technology cost have been considered, but not subjected to
    rigorous quantitative analysis. Clearly, any effort to develop and
    demonstrate improved technologies would be much less effective if used
    to address near-term compliance deadlines.

        Question 15. As part of the regulatory impact analysis accompanying
    the PM-2.5 standard set in 1997, it seems that EPA estimated the
    reductions in SOx and NOx emissions from power plants that would be
    necessary to achieve compliance with that PM-2.5 standard. What
    reductions would be necessary? How have additional scientific studies
    and/or modeling done since the establishment of the standard changed
    the estimated necessary reductions and their health significance?
        Response. In the 1997 Regulatory Impact Analysis (RIA), EPA
    attempted to estimate the total emissions reductions from all sources
    that would likely be needed to achieve compliance with the PM-2.5 and
    8-hour ozone standards. Because emissions from many different types of
    sources contribute to concentrations of PM-2.5 and ozone, the Agency
    did not attempt to estimate the specific reductions in power plant
    emissions that would be necessary to achieve compliance with these
    standards.
        However, in order to examine the likely costs and benefits of
    attainment strategies for the PM2.5 and ozone standards, the
    1997 RIA explored two different scenarios under which power plant
    emissions of NOx and SO2 might be controlled.
        Under the first scenario, the Agency analyzed options for partial
    (not full) attainment of the standards. Under this scenario, the RIA
    assumed a multi-pollutant approach for the power generation sector,
    including a cap on SOx emissions 60 percent below that specified in
    Title IV. The Agency further assumed that, because of banking, this cap
    would achieve an actual 50 percent reduction in SOx emissions by 2010.
    Thus, under this scenario, actual SO2 emissions from power
    plants in 2010 were assumed to be approximately 4.5 million tons. The
    NOx limits for utilities were equivalent to those in the NOx SIP call.
    The model results showed that with these utility controls, coupled with
    a number of other source category controls, there would still be a
    number of residual nonattainment areas that do not meet the
    O3 or PM2.5 standards. Some have misinterpreted
    this early RIA work by claiming that EPA concluded that a 4.5 million
    ton SO2 cap would be the only reductions needed from the
    utility industry to bring the country into attainment with the
    PM2.5 standards.
        Under a second scenario, the RIA discussed possible options for
    full attainment strategies. Among 16 other options involving other
    emission sectors, it suggested that 90 to 95 percent reductions in SOx
    emissions from power plants (i.e., equivalent to a national cap of less
    than one million tons) and NOx limits that were 33 to 67 percent
    tighter than those included in the NOx SIP call might be relied upon by
    State and local agencies to improve local air quality in the remaining
    O3 and PM2.5 nonattainment areas.
        As noted above in our answer to question 4, we believe it would be
    inappropriate to attempt to address all State and local air quality
    concerns with a national cap on one industrial sector. Although
    national caps on utility emissions of SO2, NOx, and mercury
    could alone be sufficient to protect air quality in many parts of the
    country, certain States and local governments will likely need to take
    action to reduce emissions from other types of sources to meet their
    individual air quality needs.
        You also asked about the health significance of emissions
    reductions that would achieve compliance with the PM-2.5 standard. A
    number of studies that have been completed since 1997 appear to
    reinforce the scientific basis for the 1997 standard. These studies are
    summarized in EPA (2001) Air Quality Criteria for Particulate Matter,
    Second External Review Draft. U.S. Environmental Protection Agency,
    Office of Research and Development, Washington DC 20460. EPA 600/P-99/
    002aB-bB. EPA is assessing new science on the health effects of
    particulate matter as part of its ongoing review of the scientific
    criteria and standards. For example, it is currently not known whether
    certain PM2.5 components or precursors are more
    toxicologically important than others. While SO2 is a major
    contributor to PM2.5 loadings, it is not the only
    significant contributor. EPA is evaluating studies regarding the
    effects of the different components of PM2.5 on public
    health.

        Question 16. What would be the increase in the retail cost of
    electricity above the reference case, if the statutory/regulatory
    schedule that you outlined in the hearing were to be implemented with
    the following assumptions and modifications? 1) Non-attainment
    designations for the NAAQS for PM-2.5 as published are made in 2005; 2)
    EPA finalizes a MACT for mercury emissions of 90 percent for bituminous
    coal and 50 percent for sub-bituminous coal using power plants; and 3)
    the BART guidelines become final in 2002 as proposed on July 20, 2001.
        Response. In order to analyze future increases in the cost of
    electricity, we would need more information about the first assumption
    that PM-2.5 designations are made in 2005. Once such designations are
    made, States with PM-2.5 nonattainment areas will need to develop their
    own strategies for bringing these areas into attainment. As outlined in
    my testimony before the committee, we believe that many (if not all)
    States will seek further emissions reductions from power plants as part
    of their attainment strategies. They may seek reductions from power
    plants located within their own borders as part of the normal SIP
    development process. Under Section 126 of the Clean Air Act, they may
    also ask EPA to impose controls on upwind facilities in other States.
    We would need further information about the projected timing and
    magnitude of future actions to reduce emissions from power plants in
    order to project future increases in the cost of electricity under the
    assumptions outlined above.
        However, EPA agrees with the assumption in the question that the
    cost and electricity rates of a multi-pollutant approach should be
    evaluated in comparison to what would happen under a ``business-as-
    usual'' approach (i.e., what would happen under current law if no new
    Federal legislation were adopted). Under any conceivable business-as-
    usual scenario, electricity rates would be slightly higher compared to
    the reference case. Under S. 556, electricity rates would be
    significantly higher than under any business-as-usual approach because
    S. 556 has very short compliance timeframes for pollutants regulated
    under the Clean Air Act and would also require the utility sector to
    reduce its CO2 emissions, which are not regulated under the
    Act.

        Question 17. What would be the impact of S. 556 on public health
    and the environment? Please reply specifically using the format,
    assumptions, and model that were employed by EPA in developing Chapter
    4-Analysis of the Environmental and Human Health Consequences of S.
    172, which was part of a report done by EPA in the summer of 2000
    entitled ``Analysis of the Acid Deposition and Ozone Control Act (S.
    172)'' in response to a request from the Senate Subcommittee on Clean
    Air, Wetlands and Private Property.
        Response. EPA has not conducted a quantitative analysis of S. 556
    such as was done for S. 172. However, based on analyses EPA has done on
    a range of possible reductions of NOx, SO2 and mercury, EPA
    can provide a qualitative discussion of the potential health and
    environmental benefits of reducing NOx, SO2 and mercury.
        Emissions reductions of NOx and SO2 on the order of
    those in S. 556 and those being considered by the Administration are
    projected to reduce concentrations of fine particles and ozone, which
    should help a number of counties attain the fine particle and ozone
    NAAQS. This would lead to substantial human health benefits, including
    fewer premature deaths, as well as fewer incidences of respiratory
    diseases and incidents such as chronic bronchitis, asthma, and hospital
    admissions for acute respiratory problems. Reductions in NOx and
    SO2 emissions should also improve visibility across the
    country, particularly in eastern Class 1 areas.
        Emissions reductions of this scale are also expected to decrease
    the amount of sulfur and nitrogen deposition and improve water quality
    and ecosystem health. Experience with the Acid Rain Program has shown
    that sulfur deposition levels respond quickly to reductions in sulfur
    emissions. This pattern would be expected to continue with further
    reductions, especially when sulfur and nitrogen species are reduced
    simultaneously. Recovery of lakes and streams also requires reductions
    in deposition of both pollutants. Annual NOx emissions reductions would
    be expected to increase the benefits to water quality and ecosystem
    health attributed to seasonal NOx controls under EPA's 1998 NOx SIP
    Call, and provide additional incremental benefits to the significant
    emissions reductions required by the Tier II and Heavy Duty Diesel
    Rules. NOx and SO2 emissions reductions would decrease
    acidic lakes in the Northeast (except for naturally acidic streams) and
    would slow the rate of deterioration of stream water quality in acidic
    streams in the Southeast. Other ecological systems, including sensitive
    forests and coastal waters, would also be expected to benefit.
        Reductions in mercury emissions would reduce mercury deposition
    from sources in the United States. Atmospheric chemistry indicates that
    local sources contribute significantly to mercury deposition; therefore
    reductions from sources identified in S. 556 would reduce local
    deposition as well as the United States' contribution to the global
    pool. Reductions in mercury deposition would be expected to help reduce
    fish contamination from mercury.
        The CO2 emission reductions that would be required under
    S. 556 would not provide any direct benefit to human health or the
    environment. These reductions are intended to reduce the risk of
    adverse affects from future global warming, although the extent to
    which they would reduce this risk is impossible to quantify at this
    time.

        Question 18. Please compare the costs of electricity generation in
    the Moderate Clean Energy Future Scenario (C) and the Advanced Clean
    Energy Future (D) to the costs of electricity generation in the
    reference scenario.
        Response. The table below provides level of generation, total
    generation costs, and cost per kWh for all five scenarios analyzed in
    response to the request by Senators Jeffords and Lieberman. Total
    generation costs (part A) refers to sum of the amortized capital
    investments in both power plants and control technologies, energy
    costs, and operating and maintenance expenses. Electricity generation
    (part B) refers to the amount of power supplied by the electric utility
    sector's own power plants. The generation cost per kilowatt-hour (part
    C) is the average cost found by dividing part A by part B for each year
    and each scenario.

    ----------------------------------------------------------------------------------------------------------------
                                                             2002        2005        2007        2010        2015
    ----------------------------------------------------------------------------------------------------------------
    A. Total Generation Costs (Billions of 1999 dollars)
    Reference Case......................................      140.16      140.38      151.41      139.54      150.29
    Scenario A..........................................      142.58      147.09      160.27      156.06      167.28
    Scenario B..........................................      142.05      144.63      157.84      152.10      162.98
    Scenario C..........................................      141.51      142.27      153.43      145.15      150.76
    Scenario D..........................................      140.70      139.86      150.60      141.40      147.18
           B. Electricity Generation (Billion kWh)
    1Reference Case.....................................       3,648       3,866       4,021       4,253       4,580
    Scenario A..........................................       3,536       3,667       3,784       3,970       4,202
    Scenario B..........................................       3,548       3,663       3,769       3,937       4,141
    Scenario C..........................................       3,552       3,653       3,749       3,900       4,077
    Scenario D..........................................       3,556       3,642       3,726       3,859       4,009
       C. Generation Cost ($ per kWh in 1999 dollars)
    Reference Case......................................      0.0384      0.0363      0.0377      0.0328      0.0328
    Scenario A..........................................      0.0403      0.0401      0.0424      0.0393      0.0398
    Scenario B..........................................      0.0400      0.0395      0.0419      0.0386      0.0394
    Scenario C..........................................      0.0398      0.0389      0.0409      0.0372      0.0370
    Scenario D..........................................      0.0396      0.0384      0.0404      0.0366      0.0367
    ----------------------------------------------------------------------------------------------------------------

        Question 19. Please compare the total quantity of natural gas
    consumption for electricity generation and for all uses in the Moderate
    Clean Energy Future (C) and the Advanced Clean Energy Future Scenario
    (D) to the quantity of natural gas consumption in the reference
    scenario.
        Response. For the analysis requested by Senators Jeffords and
    Lieberman, the table below shows three different aspects of natural gas
    consumption (measured in quadrillion Btus) for each scenario by year.
    Part A shows total natural gas usage for all end uses including
    industrial boilers and home heating systems as well as for electric
    generation units. Part B shows the consumption for only electric
    generation units of the nation's utilities. Finally, Part C shows all
    remaining gas consumption not used in the generation of electricity.

                           Natural Gas Consumption Referenced in EPA Multi-Emissions Analysis
    ----------------------------------------------------------------------------------------------------------------
                                                             2002        2005        2007        2010        2015
    ----------------------------------------------------------------------------------------------------------------

              A. Total Natural Gas Use (Quads)
    Reference Case......................................       24.41       26.07       27.56       29.81       34.18
    Scenario A..........................................       25.31       26.90       28.21       30.78       34.61
    Scenario B..........................................       25.34       26.56       27.95       30.19       33.46
    Scenario C..........................................       25.36       26.23       27.32       29.38       32.25
    Scenario D..........................................       25.36       25.96       26.95       28.78       31.15
             B. Natural Gas for Elec Gen (Quads)
    Reference Case......................................        4.96        5.71        6.70        8.25       11.39
    Scenario A..........................................        5.56        6.35        7.27        9.30       12.17
    Scenario B..........................................        5.67        6.16        7.16        8.91       11.22
    Scenario C..........................................        5.73        5.93        6.63        8.23       10.14
    Scenario D..........................................        5.77        5.74        6.34        7.74        9.16
            C. Natural Gas for Other Uses (Quads)
    Reference Case......................................       19.45       20.36       20.86       21.56       22.79
    Scenario A..........................................       19.75       20.55       20.94       21.48       22.44
    Scenario B..........................................       19.67       20.40       20.79       21.28       22.24
    Scenario C..........................................       19.63       20.30       20.69       21.15       22.11
    Scenario D..........................................       19.59       20.22       20.61       21.04       21.99
    ----------------------------------------------------------------------------------------------------------------

        Question 20. Why did EPA assume a fully deregulated retail
    electricity market in its analysis?
        Response. In our analysis in response to the request by Senators
    Jeffords and Lieberman, EPA assumed a fully deregulated retail
    electricity market to be consistent with the Clean Energy Future (CEF)
    study, which assumed full national restructuring by 2008. We note
    however, that there is considerable uncertainly as to whether full
    restructuring will occur by 2008. We assumed that pricing of
    electricity generation would be competitive, in contrast to power
    generators receiving regulated cost-of-service prices. The power
    generation part of the electricity supply business is generally
    considered to be moving toward being a competitive market. In effect,
    prices reflect the cost of the marginal unit brought on-line.

        Question 21. Does the Administration intend to exempt utilities
    from all Title I--CAA requirements in its multi-pollutant proposal?
        Response. EPA believes that, compared with existing regulatory
    programs, a multi-pollutant approach would be a much more effective way
    of achieving many of the goals of the Clean Air Act. Thus, we believe
    that many current requirement that apply to power plants (including
    requirements under Titles I, III, and IV) should be replaced by a well-
    designed multi-pollutant approach. We also believe that it would be
    highly inefficient simply to add a multi-pollutant approach on top of
    existing requirements. Retaining all existing requirements on top of
    national caps on SO2, NOx, and mercury would not provide any
    additional meaningful environmental benefits and would needlessly
    increase costs to businesses and consumers. The Administration is still
    formulating its multi-pollutant proposal, which will specify the
    existing Clean Air Act requirements that we believe should be replaced
    under our approach. We intend to provide you with our proposal soon.

        Question 22. Please describe the EPA activities that will lead up
    to the final MACT rule for hazardous air pollutants, and specifically
    mercury, including the approximate schedule and data requirements.
        Response.

                REGULATORY DEVELOPMENT SCHEDULE FOR UTILITY MACT
    ------------------------------------------------------------------------
                    Activity                               Date
    ------------------------------------------------------------------------
    Data analysis and regulatory             1/2001--8/2003
     development.
    Convene the panel established under      Meets periodically
     Federal Advisory Committee Act.
    Sign Proposal..........................  12/15/2003
    Public comment period..................  Early 2004
    Sign and Promulgate Final Action.......  12/15/2004
    ------------------------------------------------------------------------
    EPA will promulgate a MACT for hazardous air pollutants for utilities
      based on the data collected for the 1998 Utility Report to Congress,
      data on mercury collected throughout 1999, and any other data that
      becomes available to EPA.

        Question 23. What is the current status of the EPA review of the
    WRAP (Western Regional Air Partnership) submission on SOx reductions?
    What changes, if any, to the regional haze rule is EPA considering as a
    result of this submission?
        Response. EPA has just begun the interagency review process of the
    WRAP Annex proposal. The WRAP Annex proposal was submitted to the
    Office of Management and Budget (OMB) on November 29. OMB will have up
    to 90 days to review the proposal. Once published in the Federal
    Register, there will be a public review period, and everyone who is
    interested will have the opportunity to comment on the proposal.
        The changes which EPA intends to propose to the Regional Haze rule
    reflect the package that the WRAP submitted to EPA. The Annex includes
    milestones for emission reductions and a backstop market trading
    program.

        Question 24. If S. 556 were enacted in 2002, what impact would that
    have on emission reduction targets assumed in the regional haze rule?
        Response. The regional haze rule requires States to develop State
    Implementation Plans (SIPs) which establish ``reasonable progress''
    goals for the 2008 to 2018 time period for improving visibility in each
    federally protected Class I area. The SIPs must also provide for the
    specific emission reductions measures necessary to meet the selected
    reasonable progress goals. One emission reduction measure that is
    specifically required under the CAA is best available retrofit
    technology (BART) for certain large older stationary sources. States
    are also required to revise their goals and strategies to improve
    visibility in 2018 and every 10 years thereafter.
        The emission reductions provided by the national emission caps in
    S. 556 clearly go beyond what is likely to be required under the BART
    requirement for utilities. While these emission reductions would
    achieve substantial visibility improvements in Class I areas, we note
    that it would still be important to retain the requirements for SIPs
    for regional haze to ensure that a program is in place to
    comprehensively address the need and effectiveness of measures for
    visibility improvement from all types of emission sources.

        Question 25. What change in the national inventory of criteria air
    pollutants would occur if the President's National Energy Policy plan
    were implemented? All of the committee's Democrats requested this
    information on May 21, 2001, from the Administration, without an
    acknowledgment or response thus far.
        Response. Because this request was not directed to EPA, we are
    unaware of the Administration's response to it. We note, however, that
    the Administration is committed to reducing air emissions to ensure
    that all parts of the country meet the national ambient air quality
    standards for criteria air pollutants. We would expect the
    comprehensive programs called for in the the National Energy Policy
    (NEP) to substantially reduce emissions of criteria pollutants. These
    programs include a multi-pollutant proposal to significantly reduce and
    cap emissions of SO2, NOx and mercury from power plants; a
    robust renewables portfolio; a program to reduce truck idling
    emissions; and the promotion of energy efficiency and conservation.

        Question 26. Please describe the data and the sources of data on
    greenhouse gas emissions that EPA currently collects.
        Response. EPA is responsible for publishing the Inventory of U.S.
    Greenhouse Gas Emissions and Sinks each year, which is submitted to the
    United Nations Framework Convention on Climate Change (UNFCCC) as the
    official U.S. emissions inventory. Developing the emission estimates
    and the annual U.S. GHG Emissions Inventory document is an extensive
    effort, involving modeling and estimation by many Federal and State
    government agencies, research institutions, universities, and
    consultants. In addition, numerous statistical and informational data
    bases compiled by all levels of government, by trade and research
    associations, and by other public and private institutions, are
    valuable source of data inputs, or may supply secondary data sources,
    to the inventory development process.
        The Office of Atmospheric Programs (OAP) within EPA provides
    technical oversight, performs quality assurance on all aspects of
    inventory development, and coordinates the expert and public review
    processes. Also within EPA, several offices coordinate in researching
    emission pathways and developing new procedures for estimating
    greenhouse gas emissions and sinks:

          The Clean Air Markets Division (CAMD) within OAP is home
    to the overall United States' greenhouse gas inventory program,
    including coordination and publication of the United States' inventory
    and participation in the technical discussions of the UNFCCC and
    Intergovernmental Panel on Climate Change (IPCC) related to emissions
    and inventories. It also prepares fossil fuel combustion emission
    estimates (based on energy data and emissions factors provided by the
    Energy Information Administration) along with estimates from a variety
    of other source categories.
          Under the authority of Section 821 of the Clean Air Act,
    CAMD collects CO2 emissions data from electric generation
    sources affected under Title IV of the Act. These data are collected
    using continuous emissions monitors and are published annually as part
    of EPA's Annual Emissions Scorecard for Title IV affected sources.
    These sources represent over a third of United States CO2
    emissions.
          The Climate Protection Partnerships Division within OAP
    produces annual estimates for some of the non-CO2 greenhouse
    gas emissions from a variety of agricultural, waste, energy, and other
    source categories (e.g., methane from landfills and coal mines). These
    estimates are based, in part, on information voluntarily provided by
    firms claiming emissions reductions pursuant to their participation in
    EPA voluntary programs.
          The Global Programs Division within OAP tracks emission
    trends for the ozone depleting substances and their substitutes,
    including HFCs, PFCs, and SF6. They also track emissions from other
    industrial sources of these gases, such as PFC emissions from aluminum
    smelting.
          The Office of Research and Development conducts research
    into a variety of source categories.
          The Office of Solid Waste and Emergency Response provides
    additional information on landfills and solid waste management systems,
    as well as the fate of products in landfills. These statistics
    contribute to estimates of methane emissions.
          The Office of Water provides information on domestic and
    industrial wastewater that is used in calculating emissions.
          The Office of Transportation and Air Quality (OTAQ)
    develops emission factors and detailed emission estimates for the
    transportation sector. Together with the Federal Highway
    Administration, OTAQ reports vehicle miles traveled, which are used to
    develop methane, nitrous oxide, and trace gas emission estimates.

        In addition to the EPA, a number of United States agencies and
    departments are important contributors to the greenhouse gas emission
    inventory. A partial list of the roles of different Federal Government
    entities supplying data for the inventory or contributing directly to
    its preparation includes the following:

          The Energy Information Administration (EIA) gathers and
    compiles detailed information on energy production and consumption,
    which forms the foundation for the energy-related greenhouse gas
    emission estimates. The EIA also reports on the carbon content of
    fossil fuels consumed in the United States and develops emission
    factors that relate carbon emissions to fuel quantity burned. Likewise,
    the Department of Energy provides review and analysis.
          The Department of Agriculture compiles and reports
    information on fertilizer use, crop production statistics, and
    agricultural practices. The U.S. Forest Service (USFS) regularly
    assembles and reports an inventory of forest and soil carbon in the
    United States. This forest inventory is tracked over time to develop
    annual flux estimates. The EPA works closely with the USFS to expand
    the analysis of land use change, and forestry-related carbon fluxes
    embodied in the inventory.
          The Department of Transportation, the Federal Highway
    Administration, the Treasury Department, the Federal Aviation
    Administration, the Department of Commerce, the Bureau of Census, the
    United States Geological Survey, and the Bureau of Transportation
    Statistics are sources of valuable information.

        Private groups publish several reference materials that provide
    data on industrial production and chemical use that are key to
    inventory development. State government agencies, academic researchers,
    consultants, and others also contribute to developing inventory
    estimates or serve as reviewers of the final estimates.

        Question 27. Please provide any estimates that EPA has made or
    published in the last 5 years of the potential impact on the U.S.
    economy due to the direct and the indirect effects associated with
    global warming and climate change.
        Response. In the last 5 years, EPA has conducted a number of
    studies on this topic, either directly or through funding other
    organizations. EPA has also participated with other government agencies
    and international organizations in analyses that have examined the
    human health, environmental, and economic consequences associated with
    climate change. In particular, EPA participated in the development of
    the recent U.S. National Assessment of the Potential Consequences of
    Climate Variability and Change for the nation. The following is a list
    studies that have focused on the development of methods, models and
    tools for assessing the economic impacts of climate change:

          Impacts to the Mid-Atlantic Region: As part of the U.S.
    National Assessment of ``The Potential Consequences of Climate
    Variability and Change on the U.S.,'' EPA's Global Change Research
    Program within the Office of Research and Development sponsored a Mid-
    Atlantic Regional Assessment. This assessment was conducted in
    partnership with The Pennsylvania State University. One part of the
    assessment examined the potential impacts of climate change on forest-
    related sectors in the Mid-Atlantic Region. (Reference: Rose et al.,
    ``Simulating the economic impacts of climate change in the Mid-Atlantic
    Region,'' in ``Mid-Atlantic Regional Assessment of Climate Change
    Impacts,'' B. Yarnal, L.S. Kalkstein, and J.D. Scheraga, eds., Climate
    Research, Special 7, Volume 14, No. 3, May 2, 2000, pp. 175-183.)
          Sea Level Rise: EPA has conducted a number of studies of
    the potential impacts of sea level rise (due to climate change) on
    coastal property. Included in these studies have been evaluations of
    alternative adaptation options for coping with sea level rise. For
    example, one EPA-supported study examine land use planning options by
    which coastal States might retain some of their public trust tidelands
    in perpetuity no matter how much the sea rises--at least in areas that
    have not yet been developed. (Reference: James G. Titus, ``Rising Seas,
    Coastal Erosion, and the Takings Clause: How to Save Wetlands and
    Beaches Without Hurting Property Owners,'' Maryland Law Review, Volume
    57, 1998, 1279-1399.
          State-level Impacts: EPA has published state-specific
    ``fact sheets'' that discuss the potential impacts of climate change on
    each of the 50 States. Included in some of these fact sheets are
    estimates of the economic impacts of climate change on specific
    sectors. (These fact sheets can be found on EPA's climate change
    website: http://www.epa.gov/globalwarming/impacts/stateimp/index.html)

        Question 28. What is the status of the climate change policy review
    directed by the President?
        Response. The climate change policy review is ongoing. The
    President's policy will be designed to advance the development and
    deployment of technology and other measures that will achieve real
    reductions in greenhouse gases and with the ultimate goal of
    stabilizing atmospheric concentrations of greenhouse gases.

        Question 29. Is the Administration committed to adopting policies
    and measures aimed at returning U.S. anthropogenic emissions of
    greenhouse gases--individually or jointly with other nations--to 1990
    levels?
        Response. Article 4, section 2(b) of the Framework Convention on
    Climate Change requires Parties to communicate to the Secretariat on
    their policies and measures to mitigate emissions ``with the aim of
    returning individually or jointly to their 1990 levels . . . '' The
    prior section (Article 4, section 2(a)) describes the policies and
    measures that Parties shall adopt: ``to demonstrate that developed
    countries are taking the lead in modifying longer-term trends in
    anthropogenic emissions consistent with the objective of the
    Convention.''
        The President outlined the position of the Administration on June
    11, 2001. The U.S. Government is currently pursuing a broad range of
    strategies to reduce emissions of greenhouse gases in the major
    greenhouse gas emitting sectors of our economy. The U.S. Government
    climate change programs are achieving real results, helping to reduce
    greenhouse gas emissions by 66 million metric tons of carbon equivalent
    in 2000. The President's speech and the accompanying fact sheet can be
    found at: http://www.whitehouse.gov/news/releases/2001/06/20010611-
    2.html

        Question 30. Does the Administration believe that ozone depleting
    substances, such as chlorofluorocarbons (CFCs), pose a direct threat to
    human health?
        Most ozone depleting substances do not present a direct hazard to
    human health. Chlorofluorocarbons (CFCs), for example, are stable,
    nonflammable, low in toxicity, and inexpensive to produce. For these
    reasons, CFCs were thought of as ``miracle chemicals'' for the first 50
    years they were in use before their destructive impacts on the
    stratospheric ozone layer were discovered. Some of the other ozone
    depleting chemicals such as methyl chloroform, carbon tetrachloride,
    halons, and methyl bromide range from moderately to extremely toxic but
    have been used in applications where exposures can be controlled to
    safe levels. An essential component of the rapid transition out of CFCs
    and other ozone depleting chemicals has been the development and
    regulatory approval of safe alternatives in dozens of critical
    industrial, consumer, and military applications. EPA's Significant New
    Alternatives Policy (SNAP) program under Section 612 of the Clean Air
    Act ensures that only alternatives that pose minimal risk to human
    health and the environment are used.
        While ozone depleting chemicals in most cases do not pose a direct
    threat to human health, emissions into the atmosphere of these
    chemicals do significantly increase adverse health and environmental
    risks. Stratospheric ozone absorbs a large portion of ultraviolet light
    in the UVB wavelength region, and acts to protect the earth from much
    of these damaging rays. While limited sun exposure may be beneficial,
    excessive UVB radiation is associated with many harmful effects in
    humans including skin cancer, cataracts, and immune suppression. In
    addition, UVB also affects crop yields, degrades certain building
    materials, and may harm plankton and other marine life. Because of the
    detrimental health and ecosystem effects of increased UVB due to ozone
    depletion, the United States has joined 170 other countries under the
    Montreal Protocol in phasing out all ozone depleting substances.
                                     ______

     Responses Hon. Jeffrey Holmstead to Additional Questions from Senator
                                     Smith

        Question 1. Some critics of a market-based multi-pollutant approach
    have said trading will lead to hot-spots. Others, critical of further
    emissions reduction regulation, have said it will mean the demise of
    coal combustion. How would you address these criticisms? Could the same
    criticisms be made of the Clean Air Act as currently written?
        We are aware of concerns that have been expressed about hot spots.
    However, we have carefully monitored the existing Acid Rain Program and
    found no evidence to support this concern. The existing Acid Rain
    Program (Title IV of the Clean Air Act), has substantially reduced
    total emissions of SO2 from power plants without increasing
    SO2 concentrations or sulfur deposition in any localized
    area. In any event, Title I of the Clean Air Act contains a number of
    provisions that require State and local government and EPA to address
    unhealthy levels of regulated pollutants. These safeguards should
    remain intact as a backstop to ensure achievement of air quality goals.
    Additionally, as in the case of the Acid Rain Program, we intend to
    perform modeling during policy formulation to determine whether hot
    spots are a potential risk. When the Administration announces its
    proposal, we will make public modeling regarding that proposal.
        The Administration also shares concerns regarding fuel diversity,
    and believes strongly in the importance of continued reliance on coal
    as an important source of energy. EPA analysis shows that fuel
    diversity would be preserved under further emission reductions of the
    stringency proposed in the letter from Senators Smith, Voinovich and
    Brownback as well as for the stringency levels being considered by the
    Administration, with most of the existing coal units installing control
    equipment and continuing to generate electricity. Additionally, EPA's
    analysis indicates that there would be more coal-fired generation under
    any reasonable multi-pollutant approach than under the Clean Air Act as
    currently written. The greater certainty provided under a multi-
    pollutant approach would allow more lead time for owners/operators to
    plan compliance and to build or repower coal-fired facilities,
    preserving more coal-fired generation than under the current Clean Air
    Act.

        Question 2. I understand from utility representatives that EPA
    staff had a meeting with representatives of the Edison Electric
    Institute (EEI) in September, 2001, at which EPA staff presented a
    ``business as usual'' scenario that estimated the timing and levels of
    NOx, SO2, and mercury emissions that would be likely to
    occur under existing law. Please describe that scenario, including the
    estimated timing and levels of reductions. Please provide any analysis
    EPA has prepared showing the costs and/or benefits of that ``business
    as usual'' scenario and any analysis EPA has that compares that cost to
    the cost of attaining comparable reductions under a cap-and-trade
    program. Please provide any slides EPA showed representatives of EEI at
    any meetings held between EPA and EEI representatives in September,
    2001.
        The slides from the presentation to EEI are attached as Attachment
    B. As indicated in the slides, EPA has started to analyze a regulatory
    ``business-as-usual'' future to provide a baseline for comparison of
    various multi-pollutant scenarios, including information about the true
    (or net) cost of scenarios, and the impact on electricity prices and
    coal consumption. While future requirements would likely include MACT
    standards for mercury and reductions in both NOx and SO2 to
    help achieve the PM2.5 and 8-hour ozone NAAQS, the specific
    levels of emission control are uncertain.
        For the purposes of considering possible business-as-usual
    scenarios, EPA is estimating the scope and timing of these
    requirements. In doing so, EPA has made some preliminary assumptions
    about State and Federal rulemakings that have not been completed or, in
    some cases, not even started. Rulemaking will be conducted through the
    usual notice-and-comment process. These assumptions should not be
    viewed as prejudging the outcome of that process.

        Question 3. Assuming promulgation of each of the rules on the chart
    you presented at the hearing (Electric Power Sector Faces Numerous CAA
    Regulations), please describe the effect on the level of coal
    combustion and the cost of electricity.
        Although the chart lists a number of rules that we anticipate could
    be promulgated, it does not predict specific levels of reductions for
    those rules and the specific levels will affect the level of coal
    combustion and the cost of electricity.

        Question 4. In your written testimony, you stated that there is a
    better way to achieve our air quality goals, ``one that could cost
    American consumers and industry far less than under current law and
    ensure protection of the air we breathe.'' I am interested in
    determining how much cheaper it would be to reduce power generators'
    emissions through a new, cap-and-trade program than it would be under
    existing law. Has EPA conducted any analyses comparing the cost of
    reducing NOx and SO2 emissions from power plants to
    specified levels under a cap-and-trade program with the cost of
    reducing emissions from power plants to the same levels under existing
    law? If so, please describe the scenarios EPA analyzed, including what
    EPA assumed for mercury reductions, and, for each scenario, describe
    the cost, the effect on coal consumption, and the cost of electricity.
        EPA has not completed an analysis comparing the cost of reducing
    SO2 and NOx under a multi-pollutant approach to the cost of
    reduction SO2 and NOx to the same levels under the current
    Clean Air Act. However, as indicated above, EPA has started to analyze
    a business-as-usual approach under current Clean Air Act authority to
    provide a more accurate measure of the costs of a three-pollutant
    strategy. Under any scenario, however, a well-designed multi-pollutant
    approach would be significantly less costly than achieving the same
    reductions with existing regulatory tools.

        Question 5. Prior to the stakeholders' meetings in early October,
    EPA released four maps showing non-attainment areas for the 8-hour
    ozone standard and the fine particles standard. Two maps showed areas
    that are not in attainment based on current data. Two maps showed
    projections for 2020 based on implementation of several EPA rules,
    including the Tier 2 rules, heavy duty diesel rules, and the NOx SIP
    Call. Please provide comparable maps showing projections of non-
    attainment areas for ozone and fine particles in 2020 making the same
    assumptions you made for the 2020 projection maps you provided to us
    plus the assumptions that power generators are subject to emission
    limits described in the letter Senators Voinovich and Brownback and I
    sent, dated June 8, 2001, requesting a multi-emission analysis.
        Preparing the requested maps for the particular scenarios you
    describe would take a long time and a significant amount of resources
    because of the very involved computer modeling that would be required.

        Question 6. In response to a follow-up question to Administrator
    Whitman after she appeared before us on July 26, 2001, she stated that
    ``the Administration is working on developing a baseline based on
    current and future emissions regulations. After it is complete, the
    Administration will provide it to the Congress.'' When will you provide
    this baseline to the committee?
        EPA will provide this analysis to the committee after it is
    complete and has finished interagency review.
                                     ______

       Responses by Hon. Jeffrey Holmstead to Additional Questions from
                               Senator Voinovich

        Question 1. In your testimony you mention under the business as
    usual approach that ``modeling shows that when full implementation of
    existing regulations such as the acid rain program, NOx SIP Call, Tier
    Two, and other regulatory programs are taken into account, additional
    reductions will be needed to bring areas into attainment for the ozone
    and fine particulate matter standards.'' What have you evaluated to
    reach this conclusion? Have you done any new modeling on these
    standards and the fine particulate matter precursors? Has this modeling
    been updated since the modeling for the 1997 standards: Can you please
    supply the committee with any additional modeling completed since the
    1997 standards.
        First, let me clarify that the modeling to which I was referring is
    modeling that assumes implementation of existing regulatory programs
    such as those listed above, as well as the heavy duty diesel engine
    standards, and the low sulfur gasoline and diesel fuel rules. The
    modeling did not assume that States or EPA would adopt new regulations
    to meet the PM2.5 or 8-hour ozone standards. In contrast, in
    modeling a ``business as usual'' approach that predicts what would
    happen in the absence of new Federal legislation, one would need to
    assume that States and/or EPA will need to adopt additional regulations
    to meet current Clean Air Act requirements (such as attaining the
    PM2.5 and 8-hour ozone standards).
        EPA has always known that additional emissions reductions beyond
    those required under existing programs would be required to bring areas
    into attainment with the ozone and PM-2.5 standards. We believe that a
    well-designed mult-pollutant approach would be the least costly way to
    achieve a substantial portion of the additional reductions that will be
    needed. However, it is important to clarify that, even with new caps on
    power plants, there will be certain areas of the country that need
    additional emissions reductions to come into attainment with all the
    NAAQS and to meet the requirements of the regional haze program. We
    believe it would be inappropriate to attempt to address all State and
    local air quality concerns with a national cap on one industrial
    sector. Although national caps on utility emissions of SO2,
    NOx, and mercury could alone be sufficient to protect air quality in
    many parts of the country, certain States and local governments will
    likely need to take action to reduce emissions from other types of
    sources to meet their individual air quality needs.
        During the process of developing an Administration proposal to
    reduce emissions from power plants, EPA has started to conduct
    national-scale modeling that demonstrates the potential air quality
    benefits of multi-pollutant legislation. Attached are materials based
    on emissions projections for 2020 that show the relevant results of
    that modeling for a base case and for one possible, hypothetical multi-
    pollutant approach (Attachment A). The results illustrate improvements
    in regional and local air quality for PM2.5 and
    O3, and have been provided to the committee previously in
    response to earlier inquiries.
        Our analysis indicates that caps on SO2 and NOx
    emissions from power plants could significantly reduce the number of
    PM2.5 and O3 nonattainment areas in the eastern
    United States We also believe that national caps could greatly improve
    visibility throughout the country, although we also believe that any
    multi-pollutant bill should be consistent with the SOx reduction
    program developed by States participating in the Western Regional Air
    Program (WRAP) to improve western visibility.
        In the 1997 RIA, EPA attempted to estimate the total emissions
    reductions from all sources that would likely be needed to achieve
    compliance with the PM-2.5 and 8-hour ozone standards. Because
    emissions from many different types of sources contribute to
    concentrations of PM-2.5 and ozone, the Agency did not attempt to
    estimate the specific reductions in power plant emissions that would be
    necessary to achieve compliance with these standards.
        However, in order to examine the likely costs and benefits of
    attainment strategies for the PM2.5 NAAQS, the 1997 RIA
    explored two different scenarios under which power plant emissions of
    NOx and SO2 might be controlled.
        Under the first scenario, the Agency analyzed options for partial
    (not full) attainment of the standards. Under this scenario, the RIA
    assumed a multi-pollutant approach for the power generation sector,
    including a cap on SOx emissions 60 percent below that specified in
    Title IV. The Agency further assumed that, because of banking, this cap
    would achieve an actual 50 percent reduction in SOx emissions by 2010.
    Thus, under this scenario, actual SO2 emissions from power
    plants in 2010 were assumed to be approximately 4.5 million tons. The
    NOx limits for utilities were equivalent to those in the NOx SIP call.
    The model results showed that with these utility controls, coupled with
    a number of other source category controls, there would still be a
    number of residual nonattainment areas that do not meet the
    O3 or PM2.5 standards. Some have misinterpreted
    this early RIA work by claiming that EPA concluded that a 4.5 million
    ton SO2 cap would be the only reductions needed from the
    utility industry to bring the country into attainment with the
    PM2.5 standards.
        Under a second scenario, the RIA discussed possible options for
    full attainment strategies. Among 16 other options involving other
    emission sectors, it suggested that 90 to 95 percent reductions in SOx
    emissions from power plants (i.e., equivalent to a national cap of less
    than one million tons) and NOx limits that were 33 to 67 percent
    tighter than those included in the NOx SIP call might be used by
    (relied upon) by State and local agencies to improve local air quality
    in the remaining O3 and PM2.5 nonattainment
    areas.
        As noted above, we believe it would be inappropriate to attempt to
    address all State and local air quality concerns with a national cap on
    one industrial sector. Although national caps on utility emissions of
    SO2, NOx, and mercury could alone be sufficient to protect
    air quality in many parts of the country, certain States and local
    governments will likely need to take action to reduce emissions from
    other types of sources to meet their individual air quality needs.

        Question 2. Based on your ongoing analysis of a multi-emissions
    strategy, either for the Administration's proposal or the independent
    analysis you are conducting for this committee, what are the potential
    costs to non-utility industry sectors (for example, traditional
    manufacturers; other users of natural gas, farmers, polymers and
    chemical industries; and small businesses)?
        The analysis used to support the development of an Administration
    multi-pollutant proposal is not yet complete, and will be made
    available as soon as it has undergone an interagency review. For at
    least two reasons, however, we believe that non-utility industry
    sectors would greatly benefit from a well-designed multi-pollutant
    approach. First, as noted above, a well-designed multi-pollutant bill
    would replace a number of existing (and relatively less efficient)
    regulatory programs. It would thus (1) be less costly to the utility
    sector than the existing Clean Air Act and (2) lower the demand for
    natural gas by allowing sufficient time for coal-fired utilities to
    install cost-effective control technology. Thus, industrial sectors not
    involved in the production of electricity will benefit from lower
    electricity and natural gas prices. Second, if the reductions are not
    achieved from the power generation sector, they will have to come from
    other sectors so that States can meet the national ambient air quality
    standards. Thus, a well-designed multi-pollutant bill is likely to
    reduce the regulatory burden that would otherwise need to be imposed on
    other industry sectors. Because emissions reductions in other sectors
    are generally much more expensive than equivalent reductions from power
    plants, the overall cost of the Clean Air Act would also be lower.

        Question 3. Based on the S. 556, please provide the committee with
    a list of all power plants which would be subjected to section (D)
    MODERNIZATION OF OUTDATED POWERPLANTS, which requires power plants over
    15 MW and 30 years old to update within 5 years to the most recent new
    source performance standards promulgated under section 111. Along with
    the list please include what NSPS requirements each facility must
    install, the size of the facility, the cost estimates, and the
    availability of the necessary workforce. In addition, please include a
    list of those facilities required to make the updates 6-10 years after
    the enactment date.
        The data necessary to create the lists you have requested is not
    readily available. We are currently assembling this information to
    provide you with the lists as soon as possible.

        Question 4. Did you perform an independent analysis of the CEF
    program proposals? Do you believe that the CEF are reasonable? How can
    consumer behavior be changed so radically?
        EPA did not perform an independent analysis of the Clean Energy
    Futures (CEF). However, as we pointed out in our response to the
    Jeffords/Lieberman request, this study has been the subject of
    considerable controversy since its release. It has been criticized on
    several grounds, including: assumed changes in consumer behavior that
    are not consistent with historic behavior patterns; results from
    research and development funding increases that have not occurred; and
    inclusion of voluntary and information programs for which there is no
    analytic basis for evaluating the impacts. On the other hand,
    supporters of the report's findings point to economic analyses showing
    that the assumed investments can pay for themselves over time.

        Question 5. Why didn't you compare the results of each case with
    the emissions caps to the same case without the emissions caps?
    Wouldn't this give the truest measure of the costs of imposing
    electricity sector emission caps? Aren't the savings you report in some
    of the cases simply a result of the assumed changes in technology and
    consumer behavior (which were not evaluated as to cost) and not the
    costs of achieving the emissions reductions?
        EPA does not believe it was asked to do the analysis in this way.
    However, we agree that this comparison would provide important insights
    into the cost of the emissions control levels under the alternative
    scenarios of demand and supply side technologies. As you know, EIA did
    perform the analysis in this way and found, not surprisingly, that as
    one assumes more penetration by demand and supply side technologies, as
    described in the Clean Energy Futures, both the cost of producing the
    nation's electricity and the cost of achieving the emissions reductions
    declined. For the most aggressive technology scenario (which is likely
    to be unrealistic), EIA found the decline in the cost of meeting the
    emissions reduction targets is approximately 28 percent. Thus, the more
    aggressive technology scenario is likely to understate the actual cost
    of achieving emissions reductions. As we pointed out in our October
    report, we believe that if we had performed the same kind of analysis
    (as EIA) we would have found the same results.

        Question 6. Can you explain how forcing electricity producers to
    incur costs to reduce their emissions further than now required can
    lead to stronger economic growth? This result seems very
    counterintuitive and needs substantial explanation.
        The October EPA report notes that the higher electricity prices
    caused by the emission reductions targets do, in all the cases we
    studied, reduce personal consumption. Personal consumption is what
    determines our well being and changes in personal consumption should be
    viewed as the best aggregate measure of the costs of any program. GDP,
    in contrast, includes both investment and government spending from
    which households receive no direct benefit. In some cases analyzed in
    the report, the research and development and other program initiatives
    defined in the technology scenarios led to additional investment and
    government spending that were, in turn, large enough to offset the
    decline in personal consumption. Put another way, when households give
    up $100 per year to pay for pollution control, that $100 might remain
    in measures of GDP (if it pays for increased capital investment) or not
    (if it pays for increased operating costs). Either way, the cost is
    $100.

        Question 7. Do you believe the rapid rate of banking of allowances
    that occurs in your cases? Figures 1 through 4 in your report show
    dramatic changes right away. For example, CO2 emissions
    appear to drop by almost 100 million metric tons in 2002 in one
    scenario while SO2 emissions decline by almost 2 million
    tons. If this did not occur, would the costs of achieving the
    reductions rise substantially? Were cases prepared with more realistic
    banking scenarios?
        We note in our October report that the request called for us to
    assume implementation in 2002 with banking beginning at that date. As
    noted in the report, a more realistic assumption would have been to
    begin implementation at a later date. If the final compliance dates
    were not extended, the overall cost of the required programs would
    likely be higher. However, since we did not analyze this scenario we
    cannot describe the size of the likely cost implications.

        Question 8. Is the 300+ percent increase in non-hydroelectric
    renewables reasonable by 2010 in Scenario A? This seems very
    unrealistic. Can you provide the specific non-hydroelectric resources?
        The model estimates that a large increase in renewables (primarily
    wind, geothermal and biomass resources) will result from electricity
    market conditions created by the increase in the price of electricity
    and the constraints on emissions, particularly CO2, as
    described in Scenario A. We note that this represents 9 percent of the
    electricity supply, whereas non-hydroelectric renewables currently meet
    only about 2 percent of our electricity needs. To understand more fully
    whether this is ``unrealistic'' we would need to carry out additional
    engineering studies. These studies would help us gain a better
    understanding of the lead-time and funding constraints on these
    technologies.
                                  attachment a

                                  attachment b

                                   __________
        Statement of Hon. Mary J. Hutzler, Acting Administrator, Energy
                Information Administration, Department of Energy
        Mr. Chairman and Members of the committee: I appreciate the
    opportunity to appear before you today to discuss the Energy
    Information Administration's analysis of multiple emission targets
    based on the provisions of S. 556, ``The Clean Power Act of 2001.''
        The Energy Information Administration (EIA) is an autonomous
    statistical and analytical agency within the Department of Energy. We
    are charged with providing objective, timely, and relevant data,
    analysis, and projections for the use of the Department of Energy,
    other government agencies, the U.S. Congress and the public. We do not
    take positions on policy issues, but we do produce data and analysis
    reports that are meant to help policymakers determine energy policy.
    Because we have an element of statutory independence with respect to
    the analyses that we publish, our views are strictly those of EIA. We
    do not speak for the Department, nor for any particular point of view
    with respect to energy policy, and our views should not be construed as
    representing those of the Department or the Administration. However,
    EIA's baseline projections on energy trends are widely used by
    government agencies, the private sector, and academia for their own
    energy analyses.
        The projections in this testimony are taken from the two reports we
    recently released entitled Analysis of Strategies for Reducing Multiple
    Emissions from Electric Power Plants With Advanced Technology
    Scenarios, prepared at the request of Senators Jeffords and Lieberman;
    and Reducing Emissions of Sulfur Dioxide, Nitrogen Oxides, and Mercury
    from Electric Power Plants, prepared at the request of Senators Smith,
    Voinovich, and Brownback. These reports analyzed the impacts on
    electricity producers and consumers of constraints on the emission of
    sulfur dioxide, nitrogen oxides, carbon dioxide, and/or mercury at
    electric power plants. The assumptions used in the analysis cases
    prepared for these reports, as described below, were specified by the
    requesters for each report. This includes the emission limits
    specified, and, in the case of the report requested by Senators
    Jeffords and Lieberman, the technology assumptions used in each case.
        The projections in these reports are not meant to be exact
    predictions of the future, but represent possible alternative energy
    futures, given technological and demographic trends, current laws and
    regulations, and consumer behavior as derived from known data. EIA
    recognizes that projections of energy markets are highly uncertain,
    subject to many random events that cannot be foreseen, such as weather,
    political disruptions, strikes, and technological breakthroughs. In
    addition to these short-term phenomena, long-term trends in technology
    development, demographics, economic growth, and energy resources may
    evolve along a different path than projected in the reference case used
    in these reports. The costs to consumers and the impacts on the economy
    that are presented here are subject to considerable uncertainty,
    depending upon how the complex inter-relationships among many variables
    evolve.
        S. 556 includes a provision that requires that all existing power
    plants must meet the most recent new source performance standards
    within 5 years of the enactment of the legislation, or on the plant's
    30 th birthday, whichever date is later. In effect, this would likely
    require all existing coal plants to retrofit with scrubbers and NOx
    reduction equipment if they have not done so already, or retire. Since
    this provision was not included in the letter from Senators Jeffords
    and.
        Lieberman requesting the study cited here, it was not included in
    EIA's analysis. Inclusion of this provision in the analysis would
    likely have changed the results of the study; in particular, the
    projected share of coal in electricity generation would likely have
    been lower, with consequent impacts on electricity prices and the cost
    of emission allowances.
    Analysis of Strategies for Reducing Multiple Emissions from Electric
            Power Plants With Advanced Technology Scenarios
        In the request from Senators Jeffords and Lieberman, the Energy
    Information Administration (EIA) was asked to analyze the impacts of
    emissions limits on nitrogen oxides (NOx), sulfur dioxide
    (SO2), carbon dioxide (CO2), and mercury (Hg)
    from electricity generators against four cases with different
    assumptions concerning technology development and policies to reduce
    energy consumption and promote the use of cleaner technologies. The
    first case used the reference case technology characteristics in the
    Annual Energy Outlook 2001 (AEO2001). The second case assumed the high
    technology assumptions for energy demand, electricity generation, and
    fuel supply in AEO2001. The other two cases were based on the moderate
    and advanced cases from Scenarios for a Clean Energy Future. In all
    four cases, the same emissions limits were imposed on all electricity
    generators, excluding cogenerators. The start date for the reductions
    was assumed to be 2002. By 2007, NOx emissions are reduced to 75
    percent below 1997 levels, SO2 emissions to 75 percent below
    the full implementation of the Phase II requirements under Title IV of
    the Clean Air Act Amendments of 1990, Hg emissions to 90 percent below
    1999 levels, and CO2 emissions to 1990 levels, exactly as
    specified in S. 556 (Figure 1).
        In this testimony, we focus on the reference case shown in the
    report, with and without emissions limits, in order to simplify the
    discussion and also because we believe this is the most likely future
    outcome. In general, the higher the assumed level of technology
    improvement in producing and consuming energy in a given case without
    more stringent emission targets, the lower will be the impact on
    electricity prices and electricity production resource costs\1\  as a
    result of imposing emission limits in that case. However, in all cases
    the additional electricity production resource costs for meeting
    emission targets range from 8 to 9 percent of the corresponding costs
    in the cases with no additional emission controls. Also, the additional
    costs of developing and installing advanced technologies in the end-use
    and electricity sectors are not always explicitly considered in the
    advanced technology cases. Although the cost impacts of reducing
    emissions in these cases would be lower, the total cost including that
    of purchasing more efficient energy-consuming and producing equipment
    would likely be considerably higher than the impacts of controls in the
    reference case. .
    ---------------------------------------------------------------------------
         \1\The total cost of producing electric power, including the cost
    of fuels to generate electricity, operations and maintenance costs,
    investments in plants and equipment, and costs to purchase power from
    other generators.
    ---------------------------------------------------------------------------
    Summary Results
        Prices: With the imposition of emissions limits identical to those
    specified in S. 556 on the reference case, the average delivered price
    of electricity in 2020 is projected to be 33 percent higher than in the
    reference case due to the cost to electricity generators of meeting the
    limits (Table 1). Projected wellhead natural gas prices are also higher
    by 20 percent as a result of higher natural gas consumption by
    electricity generators.
        Consumption: Due to the higher energy prices that result from the
    assumed emissions limits, total energy consumption is projected to be
    reduced by 7 quadrillion British thermal units (Btu) in 2020, or 5
    percent, and projected energy expenditures are higher. The primary
    energy intensity of the economy-defined as total energy consumption per
    dollar of gross domestic product (GDP)-is projected to decline at an
    average annual rate of 1.9 percent between 1999 and 2020, compared to
    1.6 percent in the reference case. Projected consumption of coal and
    electricity is lower with the emissions limits than in the reference
    case without the limits; however, as electricity generators reduce the
    use of coal, the projected use of existing nuclear power plants and
    natural gas and renewable generating technologies is higher, raising
    the consumption of these energy sources, relative to the reference
    case.
        Emissions: Because of reduced energy consumption and the shift in
    the fuel mix to more natural gas, renewables, and nuclear power,
    projected CO2 emissions in 2020 are reduced by 287 million
    metric tons carbon equivalent, or 14 percent, relative to the reference
    case, and emissions of SO2, NOx, and Hg are also reduced
    consistent with the assumed targets.
        Emission Controls: In order to meet the emissions caps, electricity
    generators must retrofit existing generators with equipment that
    reduces emissions of SO2, NOx, and Hg. By 2020, an
    additional 19 gigawatts of scrubbers are projected to be added above
    the reference case level, while 6 gigawatts of NOx combustion
    retrofits, and 11 gigawatts of selective catalytic reduction post-
    combustion units, the most expensive of the NOx-reduction retrofits,
    are added above reference case levels. Selective non-catalytic
    reduction post-combustion retrofits are about 9 gigawatts lower than in
    the reference case, mainly because the case with emissions controls
    reduces coal consumption enough to make those retrofits unnecessary. Hg
    controls added include 49 gigawatts of spray coolers, and 88 gigawatts
    retrofitting with fabric filters, neither of which is needed in the
    reference case since no Hg emission targets are assumed in that case.
        Resource Costs and GDP: Total resource costs to meet the cap are
    $177 billion\2\  higher than in the reference case over the 2001-2020
    forecast horizon. Real GDP is 0.8 percent, or nearly $100 billion,
    lower in 2007 in the case with emissions compared to the reference
    case, falling to 0.3 percent, or just over $50 billion, lower by 2020.
    ---------------------------------------------------------------------------
         \2\All prices and expenditures are in real 1999 dollars.
    ---------------------------------------------------------------------------
    Electricity and Renewables
        The introduction of emissions limits in the reference case results
    in substantially higher projected average delivered electricity prices
    relative to the reference case. Projected prices are 31 percent higher
    in 2010 and 33 percent higher in 2020 even as consumers reduce their
    consumption of electricity by 6 and 9 percent in 2010 and 2020,
    respectively (Figure 2). Annual expenditures are expected to be $158
    more per household in 2010 and $154 more in 2020 as revenue to
    electricity providers is $58 billion and $59 billion higher in 2010 and
    2020, respectively, some of which goes to pay for the higher costs of
    electricity production as described below.
        Prices are expected to increase because the cost of producing power
    with emissions limits is more expensive than without limits. There are
    additional costs associated with the installation of emission control
    equipment, the purchase of emissions permits, and costs for fuels used
    to generate electricity. For example, in the case with emissions
    limits, 37 gigawatts of flue gas desulfurization equipment are expected
    to be constructed in 2020 compared with 17 gigawatts in the reference
    case. Combustion controls for NOx are installed at 52 gigawatts of
    generating capacity, compared to 47 gigawatts in the reference case,
    with additional retrofits of selective catalytic reduction post-
    combustion units for NOx control as well. There are also additional
    investments for fabric filters and spray coolers to reduce emissions of
    Hg, as well as use of activated carbon. Prices for fossil fuels are
    also expected to be higher. Natural gas prices to electricity
    generators are projected to be $4.52 per thousand cubic feet in 2020 in
    the reference case with limits compared with $3.68 in the reference
    case without limits. The effective price of natural gas to electricity
    generators, which includes the cost of a CO2 allowance\3\ ,
    reaches $6.31 per thousand cubic feet when the emissions limits are
    imposed. The higher projected price for natural gas also results from
    the higher costs associated with producing additional quantities of
    natural gas in the case with limits, which raises the average wellhead
    price of natural gas. Although the price of coal delivered to
    electricity generators is lower in 2020 when emissions limits are
    imposed, $17.28 per short ton compared to $19.34 per short ton in the
    case without limits, the effective price is projected to reach $81.28
    per short ton, after including the CO2 allowance cost.
    ---------------------------------------------------------------------------
         \3\It is assumed in this analysis that electricity generators
    would need to purchase an allowance for each ton of CO2
    emitted, similar to the SO2 control provisions of the Clean
    Air Act Amendments of 1990.
    ---------------------------------------------------------------------------
        The projected higher electricity prices cause consumers to reduce
    their use of electricity, although higher projected natural gas prices
    dampen the impact of the higher electricity prices. Sales of
    electricity are expected to be lower by 261 billion kilowatthours in
    2010 and by 443 billion kilowatthours in 2020 (Figure 3). These lower
    levels of consumption, combined with fuel switching by electricity
    generators, are reflected in the levels and types of generation.
    Projected coal-fired generation is reduced by 962 billion kilowatthours
    in 2010 and by 1,261 billion kilowatthours in 2020, 43 percent and 55
    percent, respectively (Figure 4). The lower levels of coal-fired
    generation are expected to occur because emissions limits on controlled
    gases and Hg discourage the use of coal more than other fuels. Compared
    with coal, natural gas has lower emissions per unit, resulting in
    higher projected consumption levels for natural gas compared with the
    reference case without limits. The use of renewable sources and nuclear
    power is also expected to be higher in the case with limits because the
    costs of coal-and petroleum-fired generation are relatively more
    expensive. By 2010, nonhydropower renewable technologies, including
    geothermal, wind, biomass, municipal solid waste and landfill gas, and
    solar, are expected to produce 94 billion kilowatthours more than the
    95 billion kilowatthours generated in the reference case without
    limits. In 2020, these renewable technologies are expected to generate
    217 billion kilowatthours in the reference case with emissions limits,
    compared to 99 billion kilowatthours in the case without limits.
    Projected nuclear generation is higher by 21 billion kilowatthours in
    2010 and by 59 billion kilowatthours in 2020, 3 percent and 10 percent,
    respectively, compared to the case without limits.
        The higher projected price for electricity is due, in part, to the
    costs of obtaining emission permits. CO2 emissions permit
    costs are included in the price of the fossil fuel to electricity
    generators. For the other three emissions, the permit costs are
    effectively included in the electricity price based on the cost
    incurred by the marginal generator.
        The costs for SO2 permits (allowances) are projected to
    be $46 per ton in 2010 and $221 per ton in 2020 in the reference case
    with emissions limits (Figure 5). The current price level for
    SO2 permits is approximately $175 per ton. In 2020, the cost
    of SO2 permits is projected to be $21 per ton higher than in
    the reference case without emissions limits, reflecting lower emissions
    limits and additional investments in emissions control equipment. The
    price for CO2 permits is expected to be $93 per metric ton
    carbon equivalent in 2010, increasing to $122 per metric ton carbon
    equivalent in 2020 (Figure 6). This cost for CO2 permits
    reflects the need to retire existing coal-fired capacity and switch to
    less carbon-intensive fuels, primarily natural gas. Currently, there
    are no economical technologies to sequester CO2 emissions
    from coal plants. The cost for NOx emission allowances is expected to
    decline to zero by 2010 because the actions taken to meet the
    CO2 limits result in NOx emissions being within the
    specified limit (Figure 7). The Hg allowance costs are expected to be
    $482 million per ton in 2010 and $306 million per ton in 2020 (Figure
    8). Although the unit cost of Hg removal is high, the total cost for
    reducing Hg emissions is small when compared with costs to reduce
    CO2 emissions.
        To put the various allowance prices on comparable terms, Figure 9
    converts the 2010 projected allowance prices for the four emission
    types to a cents per kilowatthour basis for two typical coal plants--
    one relatively uncontrolled and one equipped to remove 75-80 percent of
    NOx emissions and 95 percent of SO2 emissions. As shown, for
    both plants the carbon allowance price would be expected to have the
    greatest impact on the operating costs of the plant. In the relatively
    uncontrolled plant carbon allowances would account for over two thirds
    of the total allowance cost, while in the more controlled plant, it
    would account for over 90 percent of the total. In reality, the impacts
    would vary from plant-to-plant depending on each plant's configuration
    and the quantity of coal consumed. However, this figure illustrates the
    relative importance of each of the allowance costs. For the industry as
    a whole, the cost of carbon allowances is by far the largest of the
    four emissions considered. The total value of carbon allowances in 2010
    is about $44 billion, rising to $58 billion in 2020. This compares with
    the total value of allowances for the other emissions in 2010 of just
    over $2 billion, falling to under $2 billion by 2020. .
        There are costs to power producers associated with electricity
    generation resulting from the emissions limits. The total cost of
    producing electric power includes the cost of fuels to generate
    electricity, operations and maintenance costs, investments in plants
    and equipment, and costs to purchase power from other generators. The
    sum of all these costs is called the resource cost. This resource cost
    is different from the marginal cost of generating electricity because
    it includes fixed costs, such as investments and portions of operations
    and maintenance costs, that do not vary based on production levels.
    Producers may not recover these fixed costs in competitive markets when
    the market price of electricity is at the same level as their marginal
    production costs, which only include fuel and certain other costs that
    vary with output levels. However, over time, producers need to recover
    their resource costs in order to remain in business. In the competitive
    marketplace which is assumed in these projections, a power producer
    would recover these costs during periods when the market price of power
    is higher than its production cost, for example, when a high-
    production-cost combustion turbine sets the market price while a low-
    production-cost pulverized coal unit is producing electricity.
        For all the cases with emissions limits analyzed in this study, the
    resource costs are projected to be higher relative to the resource
    costs in the comparable cases without emissions limits. The largest
    increase is for fuels used to generate electricity. There are also
    costs associated with purchases of power from other generators and
    investment costs for new generation facilities or for retrofitting
    plants with emission control equipment.
        From 2001 through 2020, the cumulative resource costs to generate
    electricity are expected to be $2,208 billion (undiscounted 1999
    dollars) in the reference case with emissions limits, compared to
    $2,031 billion in the same case without the limits. Thus, the projected
    incremental cumulative expenditures attributable to emission limits
    that would be incurred by electricity generators is $177 billion, a 9-
    percent increase (Figure 10). These costs exclude the costs of emission
    permits that must be purchased by electricity generators because they
    are funds that are transferred among industry participants and do not
    represent actual resource consumption. The costs of the emissions
    permits are included in the delivered price of electricity, to the
    extent that they can be passed through to consumers.
        In the reference case with emissions limits, the annualized
    resource costs in 2007 (the year the limits are fully imposed), which
    include financing and capital recovery costs, are $19.9 billion higher
    than projected in the reference case without limits. These incremental
    costs due to emissions limits are expected to be reduced to $19.1
    billion and $18.1 billion in 2010 and 2020, respectively.
        Resource costs are computed for the projected levels of consumption
    for each case. Since consumption is lower in the case with emissions
    limits (due to higher prices) there is also a loss in consumer surplus
    as a result of the reduced consumption.\4\
    ---------------------------------------------------------------------------
         \4\Consumer surplus is a measure of the benefit accruing to
    consumers who would be willing to pay more than the market price of
    electricity. For example, when the price of electricity is 6 cents per
    kilowatt-hour, a consumer who would have been willing to pay 8 cents
    gains a benefit of 2 cents per kilowatt-hour. By raising the market
    price to 8 cents, that surplus is lost. A rough estimate of the loss in
    this analysis is $2.5 billion in 2010, rising to about $4.5 billion in
    2020. Over the period from 2001 to 2020, the total (undiscounted) loss
    to consumers is about $45 billion.
    ---------------------------------------------------------------------------
    Natural Gas
        In the reference case, natural gas consumption is expected to
    increase at an average annual rate of 2.3 percent over the forecast
    horizon. By 2020, total natural gas consumption is expected to reach
    35.0 trillion cubic feet, an increase of 61 percent from 1999 levels.
    One of the fastest growing sectors for natural gas consumption is
    electricity generation. By 2020, the amount of natural gas consumed by
    electricity generators, excluding cogenerators, is expected to reach
    11.2 trillion cubic feet, three times the volume used in 1999. In the
    next few years, natural gas prices are expected to decline from their
    record-high levels reached over the winter of 2001, dropping to $2.84
    per thousand cubic feet at the wellhead by 2006. Although increased
    domestic production and imports keep pace with consumption, prices in
    the longer term rise as total demand grows, and wellhead prices are
    projected to reach $3.10 per thousand cubic feet by 2020 in the
    reference case.
        Imposing emissions limits on electricity generators is expected to
    increase the demand for natural gas, during a period when the demand is
    already expected to be growing quickly. Because CO2
    emissions from natural gas are relatively low compared with other
    fossil fuels and natural gas is virtually free of SO2 and
    Hg, electricity generators can help meet their emissions requirements
    by switching to natural gas. Imposing the limits on the reference case
    leads to higher natural gas demand by electricity generators. By 2020,
    the demand for natural gas by electricity generators is expected to
    reach 13.9 trillion cubic feet, 24 percent higher than the level of
    11.2 trillion cubic feet projected in the case without emissions
    limits. Also, projected natural gas consumption in the commercial and
    industrial sectors is higher, primarily for cogeneration, which is not
    assumed to be subject to the emission limits imposed on other
    electricity generation, providing a stimulus for additional generation
    for self-use in these sectors. As a result, total natural gas
    consumption in 2020 is projected to increase to 38.4 trillion cubic
    feet, compared to 35.0 trillion cubic feet in the reference case
    without emissions limits.
        Higher natural gas demand results in higher prices. By 2020, the
    projected wellhead price reaches $3.72 per thousand cubic feet in the
    case with the emissions limits, compared to $3.10 per thousand cubic
    feet in the case without the limits (Figure 11). This results in higher
    natural gas prices for end users. Industrial prices, which are more
    closely tied to the wellhead price, are higher by 16 percent in 2020
    compared to the reference case, while residential prices, which include
    more distribution costs, are higher by 8 percent.
    Coal
        Primarily due to the CO2 limits, projected coal
    consumption is sharply reduced from the level in the reference case
    when emissions limits are imposed. When the costs associated with
    acquiring CO2 allowances are added to the delivered price of
    coal, the effective delivered price to generators is projected to
    triple relative to that in the reference case by 2010 and reaches $3.97
    per million Btu in 2020, approximately four times the reference case
    price. Due to CO2 emissions reductions and measures taken to
    meet the Hg limit, coal-fired electricity generation is projected to
    lose a substantial share of the market to natural gas-fired generation,
    compared with the share of coal-fired generation in the reference case.
    In addition, higher projected electricity prices cause total
    electricity sales to decline, reducing overall generation requirements.
        Because of lower installed coal-fired generation capacity and lower
    utilization of the remaining coal-fired capacity, projected coal
    consumption for electricity generation in 2020 is reduced to a level
    that is 43 percent of that in the reference case. Total coal production
    is projected to decline at a slower rate than the demand for coal in
    the electricity generation sector because, as a result of lower coal
    prices, consumption is projected to increase in other sectors not
    subject to the CO2 limits, including industrial and coking
    coal and coal exports, assuming other countries do not impose new
    limits on coal consumption (Figure 12).
        Although CO2 limits have the greatest impact on coal
    consumption, both SO2 and Hg emissions limits are projected
    to add to the cost of using coal and contribute to further reductions
    in coal-fired generation. In 2020, an additional 20 gigawatts of
    scrubber retrofits are projected to be added to meet the more stringent
    emissions limits on SO2 and Hg. The assumed technology costs
    for emissions removal are based on current estimates. Coal production
    is projected to be reduced in all regions and shift to sources with
    lower Hg content, such as mines located in the Rocky Mountains, and
    away from lignite and waste coal, which have relatively high Hg
    content.
    Residential End-Use Demand
        Relative to the reference case, average residential energy prices
    from all sources (electricity, natural gas, and petroleum) are
    projected to be 17 percent higher in both 2010 and 2020. However,
    projected residential prices of electricity are 25 and 26 percent
    higher in 2010 and 2020, respectively. The higher prices in the case
    with emissions limits are projected to reduce residential energy
    demand, as consumers react to the higher prices by purchasing more
    efficient appliances and reducing their demand for energy services
    (Figure 13).
        Since residential electricity prices are projected to increase more
    than the other fuels as a result of the emissions limits, the projected
    demand for electricity shows the largest decrease, as consumers switch
    to other fuels for their heating needs and overall appliance efficiency
    increases for electric equipment, such as air conditioners. The
    projected reduction in electricity demand is reflected in reduced
    CO2 emissions attributed to energy use in the residential
    sector. Of the projected CO2 reduction of 76 million metric
    tons carbon equivalent in the residential sector in the case with
    emissions limits in 2010, virtually all is attributed to the projected
    decrease in electricity demand. In 2020, the projected residential
    CO2 emissions are reduced by 102 million metric tons carbon
    equivalent, or 27 percent, relative to the reference case.
    Commercial End-Use Demand
        The imposition of emissions limits in the reference case results in
    a 4-percent reduction in projected commercial delivered energy use in
    2010, with electricity accounting for 83 percent of the projected
    decrease. In 2020, commercial energy demand is projected to be reduced
    by 2 percent, relative to the reference case. The cost of complying
    with emissions limits causes projected commercial electricity prices to
    be 33 percent higher in 2010 and 34 percent higher in 2020, compared to
    the reference case, while average natural gas prices to the sector are
    projected to be higher by 9 percent and 10 percent in 2010 and 2020,
    respectively, as electricity generators turn to natural gas to minimize
    their compliance costs. Commercial consumers are expected to minimize
    their own energy costs in the case with emissions limits through
    measures such as shutting off lights and equipment while not in use and
    by purchasing more efficient equipment.
    Industrial End-Use Demand
        Imposing emissions limits on the electric generation sector has
    essentially no impact on total delivered industrial energy consumption
    in the reference case because the industrial sector chooses to generate
    more of its own electricity (which is assumed to be exempt from the
    emissions limits), primarily from natural gas, accounting for a slight
    increase in total industrial energy consumption. While total delivered
    energy consumption is not significantly affected by the emissions
    limits, the fuel mix is altered. The projected industrial electricity
    price in 2010 is 40 percent higher than in the reference case due to
    the emissions limits and 43 percent higher in 2020. As a result,
    purchased electricity consumption is projected to be lower by 7
    percent, or 0.3 quadrillion Btu, relative to the reference case in 2010
    and by 13 percent, or 0.6 quadrillion Btu in 2020. At the same time,
    consumption of both petroleum products and natural gas is projected to
    be higher. Projected cogeneration from natural gas is higher by 61
    percent in 2010 and 128 percent in 2020 compared to the reference case
    without emissions limits.
        CO2 emissions attributable to the industrial sector are
    reduced by 62 million metric tons carbon equivalent, or 12 percent, in
    2010 and by 83 million metric tons carbon equivalent, or 14 percent, in
    2020. The CO2 reductions result from the reduction in
    purchased electricity.
    Macroeconomic Impacts
        The imposition of emission limits on electricity generators is
    expected to affect the U.S. economy primarily through higher delivered
    energy prices. Higher energy costs would reduce the use of energy by
    shifting production toward less energy-intensive sectors, by replacing
    energy with labor and capital in specific production processes, and by
    encouraging energy conservation. Although reflecting a more efficient
    use of higher cost energy, the change would also tend to lower the
    productivity of other factors in the production process because of a
    shift in the prices of capital and labor relative to energy. Moreover,
    an increase in energy prices would raise non-energy intermediate and
    final product prices and introduce cyclical fluctuations in the
    economy, resulting in output and employment losses in the short term.
    In the long term, however, the economy can be expected to recover and
    move back to a more stable growth path. . 10 Relative to a reference
    case projection for energy markets, a case with emissions limits has
    impacts on the aggregate economy. However, with alternative projections
    for energy markets, the same emissions limits will have different
    impacts on energy markets and subsequently different impacts on the
    economy. The macroeconomic assessment in this testimony evaluates the
    impacts of emissions limits on the reference case.
        The macroeconomic analysis assumes a marketable emissions permit
    system, with a no-cost (grandfathered) allocation of permits. In
    meeting the targets, power suppliers are free to buy and sell
    allowances at a market-determined price for the permits, which
    represents the marginal cost of abatement of any given emission.
        The introduction of emissions limits in the reference case results
    in a substantial increase in energy prices and subsequently in
    aggregate prices for the economy. The wholesale price index for fuel
    and power (WPI-Fuel and Power) gives an indication of the overall
    change in energy prices across all fuels. The WPI-Fuel and Power is
    projected to rise rapidly above the reference case without emissions
    limits by 14.6 percent in 2007, the target year for emissions
    reduction. Thereafter, this index remains approximately 15 percent
    above the reference case without limits through 2020. Higher projected
    electricity and natural gas prices initially affect only the energy
    portion of the consumer price index (CPI). The higher projected energy
    prices are expected to be accompanied by general price effects as they
    are incorporated in the prices of other goods and services. In this
    case, the level of the CPI is projected to be about 0.7 percent above
    the reference case without limits by 2007 and to moderate only slightly
    to approximately 0.6 percent above the reference case level through
    2020.
        How would the projected changes in energy prices affect the general
    economy? Capital, labor, and production processes in the economy would
    need to adjust to accommodate the new, higher set of energy and non-
    energy prices. Higher energy prices would affect both consumers and
    businesses. Households would face higher prices for energy and the need
    to adjust spending patterns. Rising expenditures for energy would take
    a larger share of the family budget for consumption of goods and
    services, leaving less for savings. Energy services also represent a
    key input in the production of goods and services. As energy prices
    increase, the costs of production rise, placing upward pressure on the
    prices of all intermediate goods and final goods and services in the
    economy. These transition effects tend to dominate in the short run,
    but dissipate over time. The unemployment rate is projected to rise by
    0.4 percentage points above the reference case with no limits in 2007.
    Along with the projected increase in inflation and unemployment, real
    output of the economy is projected to be lower. Real GDP is projected
    to be 0.8 percent, or about $100 billion, lower relative to the
    reference case with no limits in 2007, and employment in non-
    agricultural establishments is projected to be lower by one million
    jobs. Similarly, real disposable income is expected to be reduced by
    1.0 percent.
        As the economy adjusts to higher energy prices, projected inflation
    begins to subside after 2007. At the same time, the economy begins to
    return to its long-run growth path. By 2020, the projected unemployment
    rate is 0.1 percentage points above the reference case, and real GDP is
    projected to be 0.3 percent, or about $50 billion, below the reference
    case projection. The impact on non-agricultural employment is projected
    to moderate to just over 400,000 jobs relative to the reference case in
    2020.
    Reducing Emissions of Sulfur Dioxide, Nitrogen Oxides, and Mercury from
            Electric Power Plants
        This analysis responded to a request from Senators Smith,
    Voinovich, and Brownback to examine the costs of specific multi-
    emission reduction strategies in the electricity generation sector. In
    their request, Senators Smith, Voinovich, and Brownback asked EIA to
    analyze the impacts of three scenarios with alternative power sector
    emission caps on NOx, SO2, and Hg:
        Scenario 1: Reduce NOx emissions by 75 percent below 1997 levels,
    SO2 emissions by 75 percent below full implementation of
    Title IV of the Clean Air Act Amendments of 1990 (CAAA90), and Hg
    emissions by 75 percent below 1999 levels by 2012, with half the
    reductions for each of the emissions occurring by 2007.
        Scenario 2: Reduce NOx emissions by 50 percent below 1997 levels,
    SO2 emissions by 65 percent below full implementation of
    Title IV of the Clean Air Act Amendments of 1990 (CAAA90), and Hg
    emissions by 65 percent below 1999 levels by 2012, with half the
    reductions for each of the emissions occurring by 2007.
        Scenario 3: Reduce NOx emissions by 50 percent below 1997 levels,
    SO2 emissions by 50 percent below full implementation of
    Title IV of the Clean Air Act Amendments of 1990 (CAAA90), and Hg
    emissions by 50 percent below 1999 levels by 2012, with half the
    reductions for each of the emissions occurring by 2007.
        The key results included:
          Adding emissions control equipment to reduce NOx,
    SO2, and Hg is projected to be the dominant compliance
    option. Emissions control equipment is expected to be added to many of
    the existing U.S. coal-fired electric power plants, which currently
    total just over 300 gigawatts of capacity.
          Decreased use of coal and increased use of natural gas in
    the electricity sector is projected to result when emission reduction
    efforts of these levels are required. By 2020, coal-fired electricity
    generation is projected to be between 4 percent and 10 percent below
    the reference case level, and natural gas-fired generation is projected
    to be between 4 percent and 10 percent above the reference case level.
          Emission allowance costs and electricity prices are
    projected to increase as the caps on NOx, SO2, and Hg are
    tightened across the cases. The price of electricity is projected to be
    between 1 percent and 6 percent higher in 2020 than in the reference
    case. The nation's total electricity bill (in 1999 dollars) is
    projected to be between $3 billion and $13 billion (1 to 5 percent)
    higher in 2020 than projected in the reference case.
          Over the 2001 to 2020 forecast period, power supplier
    resource costs (in 1999 dollars) are projected to be between $28
    billion and $89 billion higher than in the reference case. .
        A key difference between this study and the one done for Senators
    Jeffords and Lieberman relates to the treatment of CO2
    emissions. In the Jeffords-Lieberman report, CO2 emissions
    were specified to reach 1990 levels by 2007. In this report, there were
    no specific emissions limits for CO2 in the main cases.\5\
    Therefore, the results of the two reports can be compared to show how
    limits on CO2 affect the costs of mitigating SO2
    and NOx; and how the costs of Hg mitigation rise as the target becomes
    more stringent.
    ---------------------------------------------------------------------------
         \5\A second set of cases with CO2 emissions held at
    2008 levels was run in order to examine the costs of purchasing offsets
    for any further increases in CO2 emissions, as requested by
    Senators Smith, Voinovich, and Brownback.
    ---------------------------------------------------------------------------
        Figure 14 shows the allowance costs for SO2, NOx, and Hg
    based on the three scenarios described above. The 75 percent reduction
    case has the same targets for SO2 and NOx as in the
    Jeffords-Lieberman report. Comparing these allowance costs to those
    shown in Figures 5 and 7, it is clear that the addition of
    CO2 emission targets helps to reduce the costs of meeting
    the targets on SO2 and NOx. For example, in 2020, the cost
    of reducing NOx emissions to 75 percent below 1997 levels without a
    CO2 cap is $2825 per ton; when CO2 emissions at
    1990 levels are included, the cost drops to zero, because coal
    generation is reduced sufficiently to enable NOx emission targets to be
    met without further incentives to reduce coal use or add NOx reduction
    equipment. Similarly, the cost of reducing SO2 emissions to
    75 percent below the CAAA90 Phase II limits is $1737 per ton in 2020
    without limits on CO2 emissions, dropping to $221 per ton
    when CO2 emissions must meet 1990 levels. As with NOx
    emissions, the reduction in coal use allows generators to meet the
    targeted SO2 levels at a much lower marginal cost when
    CO2 emissions are capped.
        A comparison of Hg targets between the two reports indicates that
    the cost of mitigation rises more than proportionately with the amount
    of Hg to be reduced. Under Scenario 1 above, the costs of reducing Hg
    by 75 percent from 1997 levels is $85,000 per pound in 2020. In the
    Jeffords-Lieberman analysis, reducing the cap such that emissions would
    be 90 percent below 1997 levels yields an Hg allowance cost of $153,000
    per pound in 2020, 80 percent above the 75-percent case when the
    mitigation is only 20 percent higher. The more stringent the cap, the
    more such expensive options as activated carbon to remove the Hg must
    be used, greatly increasing the marginal cost compared to less
    stringent targets.
        Finally, Figure 15 shows the resource costs for meeting the targets
    in the scenarios described at the beginning of this section. Over the
    2001-2020 time period, total resources would range from $28 billion to
    $89 billion (1999 dollars) above reference case levels in order to meet
    the three-pollutant targets specified for this report. This compares
    with Figure 10 from the Jeffords-Lieberman analysis, which shows
    increased resource costs of $177 billion to reach the levels specified
    in that report, including CO2, relative to the reference
    case. Both the more stringent Hg limits, and the cap on CO2
    emissions, have a significant impact on the cost to the industry of
    meeting the increased mitigation required by the Jeffords-Lieberman
    assumptions. The difference between the two sets of cases-the Jeffords-
    Lieberman case and the Scenario 1 (75 percent emission reduction)
    Smith-Voinovich-Brownback case--could be even higher, for.13 several
    reasons. The loss of consumer surplus as a result of the lower
    electricity consumption is greater in the Jeffords-Lieberman case.
    Also, changes in resource costs in the Jeffords-Lieberman analysis are
    higher in the earlier years of the forecast horizon due to the earlier
    assumed compliance dates, the more stringent cap on mercury, and the
    cap on carbon dioxide. If the costs were discounted over time to
    reflect a higher value in the earlier years, this result would also
    raise the difference between the two analyses.
    Conclusion
        Based on the Jeffords-Lieberman analysis of the emission caps
    required by S. 556, electricity prices would be expected to be about 2
    cents per kilowatt-hour higher (33 percent) in 2020 than in a case
    assuming current laws and regulations and assuming reference case
    technology assumptions. Consumption of coal would be greatly reduced,
    by about 50 percent in the case with emission controls compared to the
    case without controls. Additional use of natural gas, renewables, and
    existing nuclear units, as well as lower electricity consumption, is
    projected to offset the reduced coal usage. Resources for producing
    electricity would be about $177 billion higher under emission targets
    than in the reference case without targets (based on annual changes
    from 2001 through 2020 with no discounting). This does not include the
    loss of consumer surplus as a result of the reduction in consumption
    due to higher prices, which would represent an additional economic
    cost.
        Thank you, Mr. Chairman and members of the committee. I will be
    happy to answer any questions you may have.

                                     ______

      Responses of Hon. Mary Hutzler to Additional Questions from Senator
                                    Jeffords
    Efficiency of coal-fired generating plants

        Question 1. What is the average efficiency of today's fleet of
    coal-fired steam electric generating plants?
        Response. Based on the latest EIA data available in 2000, the
    average efficiency of the coal-fired electricity generating plant fleet
    was 32.7 percent.
    Historical graph of efficiency of coal-generating plants

        Question 2. Please provide a historical graph which shows the
    average efficiency of the coal-fired fleet over the last 25 years or as
    far back as reliable data is available.
        Response. Please see the following graph which covers the period
    from 1949 through 2000:

        Question 3. You indicated there would be certain improvements in
    technology that would reduce coal plant electricity production costs.
    What improvements are those, and what increases in efficiency result
    from their implementation? Would it be reasonable to assume that the
    efficiency of pollution control methods for SOx, NOx, and mercury,
    would improve similarly?
        Response. Over time we expect that the cost and performance of new
    generating technologies will improve as they enter the market. For
    example, we assume that the efficiency of new pulverized coal-fired
    generators will improve from 36 percent to 38 percent while the
    efficiency of new advanced coal-fired plants will reach 49 percent.
    Similarly, the efficiency of new advanced natural gas-fired combined-
    cycle plants is projected to reach 54 percent. We also assume that the
    cost of a new generating technology will decrease over time as the
    technology is successful in penetrating the market. This is called the
    ``learning effect.'' For example, the overnight cost of an advanced
    coal-fired unit (based on the integrated gasification combined cycle
    technology) in 2000 in the study Analysis Strategies for Reducing
    Multiple Emissions from Electric Power Plants with Advanced Technology
    Scenarios is $1220 per kilowatt. By 2020, due to efficiencies in
    manufacturing as more units are sold, the overnight cost in the
    reference case for that study is projected to drop to $1100 per
    kilowatt. Finally, we also assume that competition in electricity
    generation will have an impact on the operating costs of existing coal-
    fired and other generating technologies, based on historical
    improvements during the 1990's. For coal-fired steam plants, we assumed
    that general and administrative expenses will decline at an annual
    average rate of 2.5 percent through 2005, at which time it is expected
    that staffing will have been reduced to optimum levels. We also assume
    a reduction in operating costs of all fossil fuel plants of 2.5 percent
    annually through 2005, by which time the competitive impacts of
    electricity restructuring are expected to be complete. We currently
    assume that the cost and performance of emissions control technologies
    will remain fixed over the forecast period. These assumptions, however,
    are generally aggressive regarding both cost and performance. For
    example, we assume that a new selective catalytic removal system. (SCR)
    for nitrogen oxide (NOx) control on a 400-megawatt plant will cost
    approximately $60 per kilowatt. While only a small number of facilities
    have added them recently, analysis by the National Energy Technology
    Laboratory shows that the current costs average over $100 per kilowatt.
    Similarly, while most existing SCRs on U.S. coal-fired generating
    plants show NOx removal rates between 40 and 60 percent, we assume new
    facilities will achieve removal rates between 75 and 80 percent. It is
    certainly possible that further improvements in emissions control
    technology cost and performance characteristics will occur beyond what
    we assume. However, because S. 556 requires full compliance in 2007,
    the time available to make significant additional improvements in these
    technologies is not sufficient to expect these assumptions to vary.
    Electricity price impacts of the National Energy Policy

        Question 4. What would be the incremental change in the retail
    price of electricity in 2010 and 2020 above the reference case, if the
    President's National Energy Policy plan were implemented?
        Response. We have not analyzed the impacts of the President's
    National Energy Policy plan. There are over 100 provisions in the plan,
    and most of them have not been fully defined at this time. For example,
    the plan recommends that the President direct the Secretary of Energy
    to set higher efficiency standards for covered products ``where
    technologically feasible and economically justified.'' To date, the
    specifications for the new standards have not been set, and thus, we
    are not able to estimate their impacts on energy consumption. Until the
    specifications for each provision of the plan are determined, we will
    not be able to assess the potential impact of it on electricity prices.
    Electricity-price impacts of environmental regulations

        Question 5. What would be the increase in the retail cost of
    electricity above the reference case, if the statutory/regulatory
    schedule outlined by Mr. Holmstead in the hearing were to be
    implemented with the following assumptions: 1) Non-attainment
    designations for the NAAQS for PM-2.5 as published are made in 2005; 2)
    EPA finalizes a MACT for mercury emissions of 90 percent for bituminous
    coal and 50 percent for sub-bituminous coal using power plants; and 3)
    the BART guidelines become final in 2002 as proposed on July 20, 2001?
        Response. The chart presented by Mr. Holmstead at the hearing
    presented the planned statutory/regulatory schedule. However, it did
    not provide enough detail for us to analyze its potential impact. To
    analyze the impact of the program outlined by Mr. Holmstead we would
    need to know what areas would be designated as non-attainment and what
    types of emissions levels and programs would be put in place to achieve
    the NAAQS standards. For example, we would need to know the emission
    limits or caps that might be placed on NOx and SO2 emissions
    to meet the NAAQS and what type of program would be used. Without these
    details the program is only partially specified, and we are unable to
    estimate the potential price impacts. We would be able to answer this
    question once these specifications have been finalized by the
    Environmental Protection Agency.
    Natural gas consumption impacts of environmental regulations

        Question 6. What would be the change in natural gas consumption for
    electricity generation above the reference case if the statutory/
    regulatory schedule outlined by Mr. Holmstead were to be implemented,
    using the assumptions from the previous question?
        Response. The chart presented by Mr. Holmstead at the hearing
    presented the planned statutory/regulatory schedule. However, it did
    not provide enough detail for us to analyze it potential impact. To
    analyze the impact of the program outlined by Mr. Holmstead we would
    need to know what areas would be designated as non-attainment and what
    types of emissions levels and programs would be put in place to achieve
    the NAAQS standards. For example, we would need to know the emission
    limits or caps that might be placed on NOx and SO2 emissions
    to meet the NAAQS and what type of program would be used. Without these
    details the program is only partially specified and we are unable to
    estimate the potential price impacts. We would be able to answer this
    question once these specifications have been finalized by the
    Environmental Protection Agency.
    Incorporation of global warming into EIA projections

        Question 7. How does EIA incorporate global warming's effects into
    its projections for the number of annual cooling degree or heating
    degree days?
        Response. EIA has not analyzed the potential impacts of global
    warming. The 20-year projections of energy markets published by EIA in
    its Annual Energy Outlook assume that weather patterns will be
    ``normal'' as determined by recent trends. Global warming would have
    future impacts on heating and cooling demand for residential and
    commercial customers, but the magnitude of those impacts has not been
    estimated, nor have assumptions about the increase in cooling degree
    days or decrease in heating degree days associated with global warming
    been made. If assumptions were to be developed concerning the effects
    on hearing and cooling degree days of future global warming, we could
    provide estimates of the impacts on space heating and cooling
    requirements in the residential and commercial sectors.
    Effect of global warming on future energy markets

        Question 8. What effect does the EIA project that global warming is
    likely to have on energy markets, supply, or demand, by 2020 and 2050?
        Response. EIA's projections only extend to 2020. As noted in the
    response to question 7 above, EIA has not analyzed the potential
    impacts of global warming; rather, we assume that future weather
    patterns will be ``normal'' through 2020. Assumptions about the effects
    on heating-and cooling-degree days would have to be developed in order
    to estimate the impacts of global warming on future energy markets.
    Impact of assumptions about retail electricity deregulation

        Question 9. What impact does EIA's assumptions about the level,
    pace, and depth of deregulation in the retail electricity market have
    on EIA's projections of retail prices in the next two decades?
        Response. EIA assumes that wholesale and retail electricity markets
    will become increasingly competitive over the next 10 to 20 years. In
    those regions and portions of regions that have already passed
    legislation or regulations calling for a movement to retail competition
    EIA assumes full competitive pricing based on the marginal costs of
    producing electricity, phased in through about 2005 to 2010. Roughly
    half of the States have so far adopted some form of restructuring.
        The combination of increasing competition, falling coal prices and
    the improvement in the cost and performance of new generating
    technologies all contribute to the 9 percent decline in electricity
    prices seen in own reference case over the next 20 years. However, it
    should be pointed out that in some circumstances competitive markets
    can lead to higher prices than would historical cost of service
    markets. For example, if fuel prices to plants setting the market price
    or electricity went up sharply, consumers would see the impact
    immediately in fully competitive markets. In cost of service-based
    markets the higher fuel costs would be averaged in with all other costs
    and their impact would be muted. To the extent that there is an impact
    on the operating costs of fossil fuel plants as a result of
    competition, prices are expected to be lower in the near term compared
    to prices under cost-of-service regulation. However, once those
    efficiencies have been obtain prices could increase depending upon the
    behavior of coal and natural gas prices to electricity generators,
    particularly the price of natural gas.
                                     ______

      Responses of Hon. Mary Hutzler to Additional Questions from Senator
                                     Smith
    Electricity rates

        Question 1. As shown in Figure 2 of your written testimony, EIA
    estimated that electricity rates would increase under the scenario
    analyzed. How would the electricity rates compare to today's rates?
        Response. Figure 2 of the written testimony shows electricity
    prices under the reference case, and under the reference case assuming
    the more stringent emissions caps of S. 556. In the reference case,
    average electricity prices fall to 6.1 cents per kilowatt-hour (in 1999
    dollars) by 2020, compared to an estimated price in 2000 of 6.5 cents
    per kilowatt-hour (1999 dollars). In the reference case with additional
    emissions controls, the price of electricity is projected to reach 8.1
    cents per kilowatt-hour (in 1999 dollars), about 25 percent above the
    2000 estimate. This is due to the costs of the additional equipment
    that power plants would need to retrofit in order to meet the given
    emissions targets, the higher price of natural gas that would result
    from power plants switching from coal to natural gas, and the costs of
    emissions allowances.
    Assumptions for future regulation

        Question 2. Please explain the assumptions for future regulation
    under current Jaw used in comparing electricity rates for the scenarios
    with and without emission limits. Did your analysis assume reductions
    would be required under the mercury MACT? Did your analysis assume any
    additional reductions would be required of power generators to meet the
    fine particle or 8-hour ozone standard? On what did you base your
    assumptions? Is it reasonable to assume that power generators will not
    be required to make additional reductions under the mercury MACT or so
    that States can meet the fine particle and/or 8-hour ozone standard?
        Response. In Energy Information Administration (EIA) analyses, the
    reference case incorporates laws and regulations in place at the time
    of the analysis. Rules or regulations not finalized, in early stages of
    implementation (without specific guidelines), or still being developed
    or debated are not represented. As an independent statistical and
    analytical agency, EIA does not take positions on how legislative or
    regulatory issues will be resolved or how regulations will, or should
    be, implemented.
        The reference case for our analysis excludes several potential
    environmental actions, such as new regulations affecting regional haze,
    for which States are developing implementation plans; and State plans
    to meet the new National Ambient Air Quality Standards (NAAQS) for
    particulates, still being reviewed by the U.S. Environmental Protection
    Agency (EPA) and the courts. In addition, no effort is made to predict
    the Hg emission reductions that will ultimately be required by the
    Environmental Protection Agency under the authority of the Clean Air
    Act, or the outcome of lawsuits against the owners of 32 coal-fired
    power plants accused of violating the Clean Air Act, although those
    cases that have been settled are included.
        As we state in our forecast publications, the reference projections
    are based on known technologies and their potential improvements,
    technological and demographic trends, and current laws and regulations.
    All laws are assumed to remain as now enacted. The impacts of emerging
    regulatory changes and their market effects are reflected. For the
    emissions scenarios included in this testimony and the study Analysis
    of Strategies for Reducing Multiple Emissions from Electric Power
    Plants with Advanced Technology Scenarios, we assumed the same laws and
    regulations as for the reference case, and evaluated the impact of the
    more stringent caps on sulfur dioxide and nitrogen oxides; and the
    proposed caps on carbon dioxide and mercury, on electric generators. We
    did not assume in either case the reductions that would be required for
    a mercury MACT, or that there would be additional reductions in
    SO2 or NOx to reduce particulates or comply with the 8-hour
    ozone standard. We based our assumptions on EIA's long-stated standard
    that until specific rules and regulations are promulgated, together
    with the details as to how they are to be implemented, EIA does not
    speculate on the form they may take or the stringency that they may
    require. While it is not unreasonable that additional reductions in
    SO2 or NOx may be required to reduce particulates or ozone
    formation in various States, these rules have not been promulgated and
    are therefore not included in the reference case nor in the emission
    reduction cases, as they were not specified in the letters from
    Congress requesting multiple emission studies. In fact, the letters
    specified using the assumptions from the Annual Energy Outlook 2001.
    Tools for projecting the range of baselines under current regulations

        Question 3. The baseline EIA uses in its analysis assumes no
    further regulation under current. Even unamended, however, the Clean
    Air Act provides authority for further regulations the mercury MACT
    rule, for example. Does EIA have the tools necessary to project the
    range of baselines possible under current authority?
        Response. EIA has the tools within its National Energy Modeling
    System to project energy market impacts under a wide range of input
    assumptions, including assumptions about mercury, both under a cap-and-
    trade system and under a MACT. What EIA does not have are the specific
    assumptions regarding the implementation of the regulations in the
    Clean Air Act. When these rules and regulations have been promulgated,
    EIA will include them in its reference case. EIA can also provide
    analysis that includes these regulations if the requestor(s) provide(s)
    the specific assumptions about their perceptions of the final form of
    the rule(s).
                                   __________
        Statement of Kenneth A. Colburn, Director of the Air Resources
          Division, New Hampshire Department of Environmental Services
        Good morning. My name is Ken Colburn. I am the Director of New
    Hampshire's air pollution control program, and I appreciate the
    opportunity to share with the committee some ideas regarding multi-
    pollutant approaches to reduce emissions from power plants. I applaud
    the chairman and ranking member for your leadership in tackling this
    issue due to its importance not only to public health and our natural
    environment, but also to our nation's economic future and global
    competitiveness, and what burdens the States will face in wrestling
    with these pollutants in the future.
        A reassessment is timely, since it's been more than a decade since
    the last major amendments to the Clean Air Act. We've made significant
    progress. Overall pollution from power plants is declining--and air
    quality in many places is improving--despite substantial increases in
    economic activity and a near-doubling of coal consumption. In short,
    the Clean Air Act remains one of the most successful and important
    pieces of environmental legislation ever passed by Congress.
        At the same time, the Act--and its implementation--must continue to
    evolve and improve in order to afford the public and industry the
    benefit of our collective learning since the 1990 Amendments. We should
    build on the successes of the past 10 years, particularly the Acid Rain
    Program's cap-and-trade approach, which--through cost-effective,
    market-based approaches--has shown that environmental and economic
    interests can be aligned, rather than at odds. We need to rectify
    several shortcomings, like how the Act ignores wind and how resistant
    some of its provisions have been to embracing new scientific
    developments and innovative pollution control approaches.
        Most important, we need to improve its results. Many areas of the
    country still violate health-based air quality standards. Forests and
    aquatic ecosystems throughout the Northeast continue to suffer acid
    rain damage. Growing scientific evidence points to the profound health
    effects of fine particles in the body, the long-term consequences of
    toxic metals like mercury building up in the environment, and climate
    altering effects of carbon dioxide building up in the atmosphere.
        Fortunately, multi-pollutant approaches like S. 556 promise to
    address all of these needs simultaneously. That's why the Northeast
    States strongly support the committee's efforts to draft comprehensive
    legislation to further reduce power sector emissions of SO2,
    NOx, mercury and carbon dioxide. Only a comprehensive, ``4-P'' approach
    can give industry the investment and planning certainty it needs, while
    ensuring a reliable electricity supply and promoting a smooth
    transition to the mix of resources and technologies that will be needed
    to improve public health, sustain environmental progress, and enable
    continued economic growth in the future.
        Note that a ``3-P'' approach will not accomplish this goal.
    Scientifically and politically, it is clearer than ever that climate
    change cannot be ignored. At some point, it will be necessary to not
    only hold the line against emissions increases, but to begin to
    decrease our contribution to the global burden of climate-forcing
    gases. In this regard, my understanding is that based on the Energy
    Information Administration's (EIA) analysis (of the Smith, Voinovich,
    Brownback proposal)--which is apt to represent a relatively
    conservative estimate--prices for CO2 would be as low as $10
    per ton, and could go even lower with the inclusion of sequestration
    activities and non-CO2 gases. The bottom line is that
    control programs for just three pollutants--if they result only in
    additional smokestack controls--will not provide industry with
    meaningful, long-term investment certainty, nor will it spur
    development in the United States of new, advanced energy technologies
    and renewable power sources to meet the global market demands of a
    carbon-constrained world.
        In short, we won't gain on the future by wedding ourselves to the
    technologies and policies of the past. Ultimately, in the marathon of
    global competition, energy efficiency will win out over inefficiency--
    it's just a question of how much technology opportunity and competitive
    advantage we will squander by delaying. So, whether to provide existing
    utilities with greater certainty, or to give technology developers a
    clear reason to move forward, high-technology States like New Hampshire
    believe that action today on a multi-pollutant approach is economically
    (let alone environmentally) superior to inaction. Note that these views
    aren't limited to State air officials--many of the nation's largest
    utilities concur with this assessment.
        States also have a more direct economic interest in Federal action
    now. All of us want to deal with upcoming attainment dates and
    designations in the most cost-effective way possible. States can do a
    lot of things better than the Federal Government, but adopting
    consistent regulations that effectively and equitably address the
    multi-State impacts of an industry involved in aggressive interstate
    competition is not a task best left to the separate States. Addressing
    power plants emissions--the largest, most cost-effectively controlled
    sources--through a nationally consistent, output-based approach--will
    take the smallest ``bite'' out of the nation's economy. Any emission
    reductions not achieved through an aggressive Federal multi-pollutant
    approach will have to be secured by imposing additional burdens on
    State and local governments to impose additional regulatory burdens on
    other, smaller sources. Failure to adopt effective, national 4-P
    legislation is a recipe for adding cost and needlessly burdening the
    economy in pursuit of the same environmental and public health
    objectives. Further, since Federal preemption puts substantial
    obstacles in the way of State efforts to control other major pollution
    sources (e.g., vehicles and fuels), small businesses will bear the
    brunt of achieving the emission reductions not secured through multi-
    pollutant legislation.
        States like New Hampshire are also interested in the combined
    economic, health, and environmental benefits that a federally inspired
    technology push will provide. Specifically, energy reliability, energy
    cost savings, and energy security can be better served by energy
    efficiency and distributed generation technologies than by resorting to
    the historical practice of erecting vulnerable power plants and
    pipelines.
        In addition, we'd like to address the persistent problem of
    transported air pollution in a more constructive fashion than the Act
    now allows. The Clean Air Act provided a mechanism--albeit an
    incomplete, cumbersome, and exhausting one--to address some transported
    pollution (i.e., that from stationary sources only). Although admirable
    in its intent, this mechanism has divided the country into bitterly
    opposing ``upwind'' and ``downwind'' camps, and wasted scarce State
    resources pursuing or responding to incessant litigation. Congressional
    inaction now will force States to continue to rely upon divisive
    interstate petitions under Section 126 and Section 110 of the Act to
    protect the health of our citizens. Dramatically reducing power plant
    pollution--through aggressive Federal multi-pollutant legislation using
    proven market mechanisms to produce economically efficient choices and
    provide regulatory flexibility--seems unquestionably more productive
    and cost-effective than burdening the States with solving interstate
    pollution transport problems through inherently litigious means.
        Speaking of regulatory flexibility, New Source Review (NSR) has
    been the focus of much recent attention. Over the past decade, when
    many old, grandfathered power plants not only did not retire (as
    premised in Clean Air Act deliberations), but actually increased their
    output, the NSR program accomplished two very important things. First,
    it enabled States to secure much-needed pollution reductions at new
    sources that a business-as-usual approach could not have achieved.
    Second, NSR gave rise to the development and application of new and
    better emission control technologies. The application of NSR to
    modifications at existing sources has been more controversial, leading
    to contentious enforcement actions by EPA and several States.
        The fact that a law is sometimes violated, however, doesn't mean we
    don't need it. The New England States unequivocally support the ongoing
    enforcement actions against companies that violated NSR requirements in
    the past, and feel strongly that any new legislation must not impede
    those actions or provide a pretext for letting past violators off the
    hook.
        Going forward, however, there may be opportunity for consensus in
    making NSR improvements. Constructive progress is most likely to occur
    if we take a ``systems approach'' to the interlocking provisions of the
    Act. The ultimate lens we will use to evaluate the resulting
    combination of new provisions will be whether they guarantee
    substantially greater public health protection than the current
    statute. Specifically, States will be more willing to entertain greater
    regulatory relief if emission reduction commitments are larger, timely,
    certain (i.e., ``locked down''), and become progressively more
    protective over time. We will not support relief today in exchange for
    promises of future reductions. In addition, the full suite of existing
    State authorities to go beyond Federal requirements when necessary to
    protect public health and the environment must not be abridged.
        In conclusion, several States are already moving ahead to create an
    energy future that is cheaper, cleaner, more secure, provides greater
    competitive advantage, and more opportunity for technology jobs. We
    recommend that country as a whole do likewise by adopting an
    aggressive, national, 4-pollutant emission reduction strategy
    reflecting the core concepts of S. 556. The Northeast States have
    developed a set of general, consensus principles for such legislation--
    a copy of which is attached to my testimony--and I'd be pleased to
    discuss targets and timelines if you wish.
        Thanks again for the opportunity to share these thoughts. I look
    forward to any questions you may have.
                                  Attachment I
      summary of northeast states' perspective on national legislation to
                reduce power plant emissions, september 7, 2001
    Emissions Reduction Targets
        Northeast States agree that Federal efforts to achieve integrated
    reductions in multiple power plant pollutants should be implemented on
    an annual, output-basis with caps to limit overall pollutant levels.
    Possible reduction targets and timeframes are identified below. To ease
    comparison with other proposals they are presented in terms of a cap
    target and equivalent output-based emissions rate. However, this
    presentation is not intended to preclude discussion of dynamic or
    declining caps, a concept that we continue to explore, or of more
    aggressive targets than those described here.
        SO2 Target: National annual cap of approximately 4
    million tons by 2004-7, with a further reduction to 2 million tons in
    the 2009-12 timeframe. These caps translate to average emissions rates
    of approx. 3.0 and 1.5 lbs/MWh, respectively and represent a 55 to 78
    percent reduction from eventual 8.9 million ton Acid Rain cap.
    Implications of existing allowance ``bank'' must be addressed in
    developing SO2 requirements.
        NOx Target: National annual cap of approximately 2 million tons by
    2004-7, with a further reduction to 1.3 million tons in the 2009-12
    timeframe. These caps translate to average emissions rates of about 1.5
    lb/MWh and 1.0 lb/MWh, respectively and represent a 70 to 80 percent
    reduction from current annual emissions of approx. 7 million tons. The
    2 million ton cap can be achieved by annualizing NOx SIP Call
    requirements.
        Mercury Target: National reductions greater than 70 percent by
    2004-7 with a reduction goal of 85-95 percent by 2009-12. Further work
    needed to determine how to set standards that will achieve desired
    goals and to explore feasibility/acceptability of using market
    mechanisms to implement mercury reductions.
        CO2 Target: Return power sector emissions to 1990 levels
    by 2010 with an additional reduction of at least 10 percent to be
    achieved by 2020.\1\  Additional work is needed to explore possible
    role of flexibility mechanisms (e.g., trading, early action, off-sector
    credits, etc.), cost caps, implications of recent international
    developments, etc.
    ---------------------------------------------------------------------------
         \1\The Conference of the New England Governors and Eastern
    Canadian Premiers have committed to the long-term goal of reducing
    society-wide emissions of greenhouse gas by 75-85 percent. To meet
    these targets, it is likely that declining caps will need to be
    employed.
    ---------------------------------------------------------------------------
        Other Power Plant Pollutants: In the interests of regulatory
    certainty and comprehensiveness, other important power plant
    pollutants--such as primary particulate matter, other air toxics and
    carbon monoxide--may need to be addressed as part of multi-pollutant
    legislation. NE States are exploring potential options/targets
    appropriate to these pollutants.
    Other Key Issues
        As indicated above, a number of details concerning each of the
    targeted pollutants must still be addressed. In addition, the Northeast
    States are coordinating to develop specific recommendations in four
    broad issue areas likely to be closely linked to the multi-pollutant
    debate:
          Interaction of multi-pollutant legislation with New
    Source Review (NSR), Prevention of Significant Deterioration (PSD) and
    other existing or pending regulatory programs (e.g., BART, mercury MACT
    determination, etc.). Under no circumstances should new Federal
    legislation obstruct or limit enforcement actions undertaken to remedy
    violations of existing NSR requirements.
          Interaction of Federal multi-pollutant requirements with
    existing or future State requirements. Because States bear ultimate
    responsibility for meeting ambient air quality standards and protecting
    public health, any new Federal legislation must maintain the full scope
    of existing State authority to adopt more protective requirements.
          Addressing local pollution concerns and their
    implications for the design of future regulatory requirements (such as
    trading). States must retain the authority to respond as they deem
    necessary to remedy adverse local impacts. Provisions must also be
    included that require a Federal response to remedy local impacts of an
    interstate nature.
          The ability to include additional provisions to address
    long-term clean energy needs, including: ensuring the reliability of
    power grids, promoting clean distributed generation, encouraging
    renewable energy resources, continuing demand-side management,
    promoting combined heat and power, and supporting systems benefits
    programs.
                                 Attachment II
        Delaying optimal energy path decisions puts our competitive
    advantage at risk.

                                 Attacment III
        The economic and environmental fortunes of States appear to be
    positively correlated, contrary to conventional wisdom that suggests
    they are mutually exclusive:

        In addition, electricity costs do not appear to determinative of
    economic well-being--as measured by per capita income--also contrary to
    conventional wisdom:

                                   __________
    Responses by Kenneth Colburn to Additional Questions from Senator Smith

        Question 1. Describe the actions that would be required by the
    Clean Air Act of the Air Resources Director in a State like New
    Hampshire over the next several years if the Congress fails to pass a
    multi-pollutant bill. Explain how those actions might affect New
    Hampshire's economy.
        Response. This is a difficult question to answer specifically,
    because most of the actions that will be required of States like New
    Hampshire in the event that an aggressive multi-pollutant bill does not
    pass Congress remain unspecified by the U.S. Environmental Protection
    Agency (EPA). What is known, however, is that EPA has promulgated new,
    more stringent air quality standards for ground level ozone and fine
    particulate matter, standards that will be difficult to attain--
    particularly for downwind States like New Hampshire. In addition, EPA
    is in the process of establishing a concerted national program to
    improve visibility by reducing regional haze. This program will have
    the practical effect of imposing additional standards on the State.
        What is also known is that the Federal Clean Air Act largely
    ignores the phenomenon of wind. It assumes that a State's air quality
    problems are of its own making. As a result, many wasteful,
    prescriptive, and cost-ineffective control measures have been mandated.
    The real pollution sources--when addressed at all--have achieved
    significant delay through litigation. This situation will persist until
    Congress acts--either to require large pollution sources such as coal-
    fired power plants to clean up their emissions of several pollutants
    that create environmental problems downwind, or to eliminate the
    culpability of downwind States for the pollution that they receive from
    upwind sources.
        The latter is not a workable course, because it violates one of the
    principal purposes of the Clean Air Act--the protection of public
    health. The status quo is not a workable course, because the new
    Federal air quality standards will require new control measures--such
    as costly motor vehicle tailpipe testing (estimated previously at $10
    million for New Hampshire) and controls on small businesses. In fact,
    it no amount of emission control in New Hampshire--no matter how
    expensive--would lead to ozone attainment within the State. The only
    workable, cost-effective course is to secure the reductions that would
    be provided by an aggressive, multi-pollutant emission reduction bill
    in Congress.
        Without such legislation, the economic impacts on New Hampshire
    will be significant as the new Federal air quality standards are
    implemented. The direct costs of control measures, of course, will come
    directly out of the State's economy. Because in-state emissions are not
    the primary cause of New Hampshire's air quality problems, these
    controls will not achieve the desired goals.
        Of equally profound impact are the indirect effects the State is
    likely to face. In the absence of Federal legislation to address
    multiple pollutants, New Hampshire will likely remain in nonattainment
    for certain pollutants. A nonattainment designation imposes significant
    sanctions to discourage additional economic development. In addition,
    New Hampshire's crucial recreational and tourism industries suffer
    disproportionately from the visibility, acid rain, mercury deposition,
    and climate impacts of emissions from uncontrolled or inadequately
    controlled power plants upwind.
        The passage of an aggressive multi-pollutant emission reduction
    bill by Congress will dramatically reduce the harmful public health and
    environmental effects of air pollution in New Hampshire, and it is the
    most responsible and cost-effective way to bring New Hampshire and
    other downwind States into attainment with Federal air quality
    standards.

        Question 2. In your testimony, you discuss the idea that a multi-
    pollutant bill could have beneficial effects for the economy and could
    improve energy security; can you elaborate on that?
        Response. Several issues bear on this question. Attachment 2 to my
    written testimony (copy attached) offers a general principle regarding
    America's energy choices, a principle I will flesh out along with
    additional issues in my comments below. Ultimately, multi-pollutant
    legislation will make for more economically sound decisions, whether
    this happens through the inclusion of explicit energy efficiency and/or
    renewable energy incentives (as in State legislation proposed in New
    Hampshire), through a more level electric generation playing field as a
    result of a multi-pollutant reduction in the environmental subsidy that
    fossil-fired power plants now enjoy, or through the technological
    progress that such requirements are known to spur.
        Ultimately in a competitive global economy, competitors possessing
    greater efficiency in utilizing resources will triumph over less
    efficient market entrants. Concerted efforts to enhance efficiency,
    then, are not a question of ``if'' but ``when.'' Attachment 2
    illustrates that, all else being equal, competitors that achieve
    superior efficiency sooner will enjoy a significant competitive
    advantage over those who first choose a less efficient path and then
    try to ``catch up'' later. In what Tom Friedman describes in his
    seminal book The Lexus and the Olive Tree as an increasingly ``winner
    take all'' global economy, catching up is very hard, if not impossible,
    to do.
        This is particularly true of energy efficiency. If one considers
    the four ``factors of production'' or avenues of competition--Man,
    Material, Method, and Machine--aggressive efforts to enhance energy
    efficiency enhance each one. Material represents the resources and raw
    materials consumed. Opportunities to dramatically reduce the amount of
    energy resources consumed are now available for every sector of the
    economy. To the extent that energy efficiency opportunities are
    realized, greater competitiveness will accrue, and the economic
    resources thus freed up can be applied toward developing greater
    competitiveness in the other three factors of production.
        One obvious candidate is enhancing Method--the technology and know-
    how that differentiates competitors in their cost structure and market
    presence. The development and use of advanced energy efficiency
    technologies is particularly significant because it offers a dual
    competitive advantage--such technologies both reduce the costs of
    production domestically and are marketable to others internationally. A
    good example--albeit an unfortunate one for the United States--is found
    in wind power. Today, as America looks increasingly to wind power as a
    cheap, clean, renewable energy resource, we find that our nation's
    market share of wind power manufacturers has shrunk from a dominant
    position to small minority in the last few decades. Companies from
    nations such as Germany and Denmark, that better perceived the dynamic
    illustrated in Attachment 2 (i.e., efficiency ultimately wins) than the
    United States did, are today selling their technology to us instead of
    vice versa. The same is occurring in solar energy applications.
        In terms of energy, the other two factors of production--Man (or
    labor) and Machine (or capital)--initially play off against each other.
    One can invest in large, capital-intensive energy production
    facilities, or one can invest in smaller, labor-intensive facilities.
    The former--large central power plants linked together by a
    sophisticated transmission grid--characterizes the approach that
    America has taken to date. The latter is characterized by small-scale,
    renewable, distributed generation sources such as wind, solar, biomass,
    etc. Among many organizations to have investigated the economic
    opportunities provided by energy efficiency and renewables, the
    Worldwatch Institute considered the differences between labor-intensive
    and traditional capital-intensive energy approaches in a September 2000
    paper, Working for the Environment: A Growing Source of Jobs:

      Numerous studies find that wind power compares favorably in its job-
        creating capacity with coal-and nuclear-generated electricity. In
        Germany, although wind energy contributed a still miniscule 1.2
        percent of total electricity generation in 1998, it provide some
        15,000 jobs in manufacturing, installing, and operating wind
        machines. In comparison, nuclear power had 33 percent of the
        electricity market, but supported a relatively meager 38,000 jobs;
        coal-generated power had a 26 percent market share and gave rise to
        80,000 jobs. Given the rapid expansion of wind power in Germany,
        wind will likely overtake nuclear power as a source of jobs in
        2000. [Page 41]

        The benefits of siding with less capital-intensive distributed
    energy resources do not stop with job creation, however. Overlooked in
    the above analysis, for example, are substantial savings associated
    with enhancing and maintaining the nation's increasingly fragile
    electric transmission and distribution infrastructure. In addition,
    labor-intensive options better match costs to benefits, rather than
    requiring substantial initial capital outlays. The capital thus freed
    up can be utilized for other, more economically beneficial investments.
    Further, resources directed to labor-intensive rather than capital-
    intensive channels circulate faster in the economy (creating a greater
    multiplier effect), and are superior in fostering economically
    essential consumer demand.
        Furthermore, traditional central-station-and-grid power is becoming
    increasingly unsatisfactory to meet the demands of tomorrow's
    businesses. Companies for which high power quality and reliability are
    essential cannot rely on grid power. Bank of Omaha's credit card
    processing operations, for example, depend on minimally polluting fuel
    cells--not for their environmental characteristics, but for the quality
    and reliability of their power. Far from ``tracking'' the economy,
    energy has declined over 40 percent in terms of energy per dollar of
    gross domestic product since the 1970's according to the American
    Council for an Energy Efficiency Economy. The fact that today's
    technology demands higher power quality and reliability than the grid
    can provide will only compound this decline.
        Finally, energy security is a major concern since the September 11,
    2001 terrorist attacks. Multi-pollutant legislation, and the relative
    opportunity that it would provide to energy efficiency and distributed
    energy sources, would contribute--rather than detract from--greater
    energy security in America. First and foremost, centralized power
    plants, transmission facilities, and pipelines are all very vulnerable
    targets. The least vulnerable energy is that which is never used, and
    that is what energy efficiency achieves. The next least vulnerable
    energy is that which is provided by relatively numerous, small,
    difficult-to-disable distributed sources. Furthermore, to the extent
    that renewable energy sources rather than oil-fired energy sources are
    utilized, greater energy security will be achieved over the relative
    insecurity of our current dependency on foreign oil. Correspondingly,
    energy efficiency could help ease many of the international tensions we
    now face, including those which derive from the U.S.'s current role in
    the Mideast and those relating to global climate change. The resulting
    contribution to greater multi-lateralism would, in turn, enhance both
    energy security and national security.
        In short, one might analogize the race toward cleaner, more
    efficient energy supplies--a goal that will be materially assisted by
    the passage of aggressive multi-pollutant legislation in Congress--to
    the race to the moon back in the 1960's. No one would suggest that the
    lunar effort was easy or inexpensive, but nor would anyone suggest that
    the benefits that accrued from it--including numerous technological
    breakthroughs, the competitive advantage they provided, and
    international respect--were not worth the price.

        Question 3. Please explain the charts in Attachment 3 of your
    written testimony and their relevance to our discussion of a multi-
    emissions approach to reducing power plant emissions.
        Response. Attachment 3 of my written testimony (copy attached)
    contains two charts that are relevant to the committee's deliberation
    of multi-pollutant emission reduction strategies because the committee
    often hears testimony suggesting that economic and environmental
    interests are largely incompatible. Some interests suggest, for
    example, that the attendant increase in the cost of electricity
    following the passage of aggressive multi-pollutant legislation would
    cause the economy to suffer. Following this reasoning, one would
    necessarily conclude that (1) States which choose to be greener-than-
    average in their policies must do so at the cost of tolerating worse-
    than-average State economies; and (2) States with relatively high
    electricity costs must possess relatively distressed economies. The two
    charts in Attachment 3 illustrate that the facts clearly contradict
    this reasoning. Neither corollary is true, and as a result, the
    underlying assertion of incompatibility is incorrect.
        The first chart in Attachment 3, Green and Gold 2000, Rankings of
    the States, graphically juxtaposes the most recent rankings of the
    States by the Institute for Southern Studies. The Institute for
    Southern Studies periodically creates separate rankings of the States
    based on economic criteria (the basis of the ``Gold'' ranking), and
    environmental criteria (the basis of the ``Green'' ranking). However,
    when these two rankings for each State are paired on a scatterplot, a
    clear positive correlation emerges (i.e., ``greener'' States are more
    likely to have healthy economies than less green States and vice
    versa). The conventional wisdom employed by the interests which oppose
    aggressive multi-pollutant legislation requires the existence of a
    negative correlation (i.e., ``greener'' States will be less ``gold''
    and vice versa). The actual data clearly shows that this is not the
    case.
        The second chart in Attachment 3, Per Capita Personal Income versus
    Utility Average Electicity Price for the 50 States and Washington, DC,
    shows that opponents' assertion that increased electric rates lead to
    economic detriment is similarly contradicted by the facts. Using per
    capita income as a measure of State economic health, per capita income
    is graphically juxtaposed with State average electric rates. Once
    again, a positive correlation actually exists between higher per capita
    income and higher electric rates, rather than the negative correlation
    presumed to exist by opponents to aggressive multi-pollutant
    legislation.
        Please note regarding both charts that correlation does not address
    causality. I do not maintain, for example, that higher electric rates
    cause higher per capita income, or that higher per capita income causes
    higher electric rates. However, causality is not important to this
    argument. The argument made by opponents is grounded upon the
    cornerstone that a negative correlation exists. The simple clear fact
    that a negative correlation does not exist is sufficient to render
    opponents' arguments bankrupt.

                                   __________
     Statement of Dave Ouimette, Manager, Air Pollution Control Division,
                 Colorado Department of Health and Environment
        On behalf of the State of Colorado, I thank you for the opportunity
    to present the State's views on Senate bill 556, The Clean Power Act of
    2001. My name is David Ouimette and I direct the activities of the
    Stationary Sources Program for the State of Colorado. I have worked in
    this area for the last 17 years.
        Colorado is in support of legislation to reduce the health and
    environmental impacts of air pollution especially if this includes some
    streamlining of the Clean Air Act by replacing outmoded procedures with
    stringent standards for reducing air pollution. I will speak more about
    this streamlining in a moment.
        However, prior to commenting on S. 556, I would like to point out
    the important strides made by Colorado in the recent past in improving
    air quality. Two years ago we negotiated a voluntary emissions
    reduction agreement with our local utility. The Agreement is now being
    implemented and it will result in a reduction of up to 10,000 tons per
    year of sulfur dioxide. This will aid in reducing the ``Brown Cloud''
    so often seen in the Denver metro area.
        In addition to this, we have begun to implement creative
    enforcement settlements that call for the violator to purchase green
    power and to implement other measures to improve energy efficiency.
    Such activities have resulted in small, but measurable decreases in
    demands for power from traditional electric utilities.
        These efforts are above and beyond what is required by the Clean
    Air Act, and we believe it is important for the committee to keep in
    mind that States are not only implementing basic requirements but are
    also taking the initiative to go beyond what is envisioned in the Act.
        Moving on to S. 556, we examined the proposed legislation in
    relation to several broad principles and I would like to first tell you
    what they are and how they would apply to the proposed legislation. Our
    principles are:
        1. There cannot be ``backsliding'' from the environmental
    protections found in current law;
        2. Any new legislation should not overlay the new standards or
    requirements on top of the existing Clean Air Act. Instead, any new
    requirements need to be integrated into the Act to avoid redundancy;
        3. ``Certainty'' for both regulators and the regulated is crucial.
    Certainty, in this case, means establishing clear regulations all can
    readily understand;
        4. With respect to the West we believe that there needs to be
    consideration of our energy demands and our tight supplies.
        Let me elaborate on each of these principles.
    1. No backsliding
        There should be no less, aggregate emissions reductions under a
    multi-pollutant control strategy than that which would be achieved
    under the current ``command and control'' permitting program. We
    believe this principle can be met through an emissions trading program
    such as that contemplated by S. 556.
        In addition, there should be no detrimental, localized effects
    which would threaten or exacerbate attainment of the National Ambient
    air quality Standards. In this regard, States need to continue to have
    the authority to deal with ambient air problems even after passage of
    multi-pollutant legislation.
    2. New requirements should not merely be added to the existing program
        We believe S. 556 is incomplete because it does not eliminating
    unnecessary parts of the Clean Air Act. For example, we believe that
    while crucial portions of the New Source Review permitting program,
    such as modeling and ambient air protection, should be maintained for
    new sources, we also believe that there are other parts of the NSR
    program that would be unnecessary. To illustrate, this legislation
    would likely result in the placement of all facilities under an area-
    wide or national emissions cap which will, presumably, require
    pollutant reductions at many facilities. In our opinion, these
    reductions in the aggregate will exceed that which could be obtained on
    a facility-by-facility basis, and, if this is so, there is no need for
    major modification permitting under the New Source Review rules.
    Therefore, States would no longer need to worry about interpreting what
    exactly constitutes a ``Major Modification'' versus ``Routine
    Maintenance, Repair, or Replacement.'' Concerns about whether repair/
    replacement of certain power plant components once a year might be
    viewed as routine maintenance, but twice a year might be a major
    modification, would no longer exist saving considerable State and local
    program resources. S. 556 could serve as an excellent tool for cutting
    through these issues and instead substitute certainty with respect to
    both environmental gains as well as an understanding of the rules that
    regulators and the regulated must abide by.
        An additional part of the Clean Air Act that should be examined is
    Regional Haze. Colorado strongly believes that the visibility of our
    pristine areas should be improved. However, to have both a multi-
    pollutant bill as well as a regional haze rule apply to utilities will
    be redundant. Either the Regional Haze rule needs to be implemented or
    multi-pollutant legislation, but probably not both. At this point we
    believe that it is still too early to make the determination as to
    which is best for the West and for improving visibility; both options
    have benefits and we hope the committee does not forestall either
    without further discussion. If Congress, in consultation with Western
    States, determines that eliminating the Regional Haze rule as it
    applies to utilities is the appropriate policy then more State efforts
    could be spent on other issues which will require regional
    collaboration, such as mercury control.
    3. Regulatory Certainty
        By this we mean that certainty is necessary for both the regulated
    entities and States who are responsible for implementing and enforcing
    the rules. One of the issues where Colorado, and most likely other
    States, have concerns is with respect to our ability to rely upon
    determinations made by EPA. Without wandering too far afield from our
    topic today, the numerous informal policies, letters, and written
    determinations from EPA make implementing the New Source Review program
    very difficult. In fact we are often subject to critical review from
    EPA because we made a decision based upon our understanding of the
    rules only to find we were unaware of the existence of an old
    interpretive memo. S. 556, with some changes, could provide us with an
    opportunity to start over and create a new program that will
    significantly lessen the burden to States to implement these complex
    rules.
    4. Energy Demands in the West
        Our last guiding principle is that new legislation should take into
    account the West's growing power needs. Earlier this year California
    had tremendous electrical power stresses that affected all of the West.
    We think it is important that legislation reflect that power supplies
    in the West are at a crucial juncture. While we made it past this
    summer without brownouts next summer will again be a challenge for the
    State. It is because of this future challenge to our generating
    capacity that we believe we should closely examine whether
    CO2 targets are appropriate at this time.
        Our concern is that we do not fully understand the implications of
    the CO2 rollback provisions and there may be unintended
    consequences for energy supplies in the West that may be difficult to
    cope with. Conventional wisdom indicates that the only practical way to
    reduce CO2 emissions from power plants while at the same
    time meeting electricity demand, is to burn fossil fuel more
    efficiently. This is an admirable goal. However, Colorado, like many
    Western States, depends upon coal-fired plants for a substantial
    portion of its generating capacity and these plants have limited
    ability to improve efficiency. The result is that they may not be able
    to be run at present levels and some may need to be shutdown. Given our
    tight energy supply, this could be a major problem for Western States.
    In lieu of the current CO2 proposal in S. 556, we believe
    that an intense study of the impact of CO2 reductions on
    power in the West as well as perhaps future hearings on the topic would
    be advisable to ensure that any reductions agreed upon do not have a
    secondary effect of causing power shortages or dramatically inflating
    the cost of power to consumers.
        I hasten to add my hope that you do not misconstrue our statements
    to mean we are not concerned about CO2 emissions. As you
    know there are many dimensions to the CO2 debate beyond just
    power plants, including increased energy efficiency and use of
    renewable energy sources in other sectors of our economy. These
    strategies can effectively reduce overall CO2 emissions and
    Colorado has robust, ongoing programs in these areas.
        I would now like to walk through some additional comments on the
    provisions of S. 556. As your staff has already heard at a stakeholders
    meeting conducted October 4 and 5, the Western part of the country
    differs from the East with regard to the nature and extent of air
    pollution problems. For instance, with the exception of California,
    there are few serious ground level ozone problems out West that would
    argue for aggressive nitrogen oxide reductions at power plants. While
    we strongly believe that there should be no backsliding with respect to
    any proposal, we also believe that there needs to be a common sense
    approach to regulation such that if an area does not have a problem
    with a certain pollutant then programs in those areas should be able to
    focus efforts elsewhere where problems do exist. Therefore, we
    recommend that the bill be amended to reflect these East vs. West
    differences where they exist.
        As a general proposition, Colorado supports emissions trading in a
    way that reduces overall costs to society to achieve emissions
    reductions. Colorado believes that a trading program would be
    beneficial in two ways, first it would provide incentives for sources
    to go beyond compliance in order to have marketable credits; and,
    second, it would allow certain sources to determine what is most cost
    effective for them in terms of coming into compliance. Therefore, we
    support the emissions trading provisions in S. 556.
        Next, it is our view that the timeframe for making the requisite
    emissions reductions is impractical especially if these reductions are
    going to occur with the assistance of a trading program. In order for a
    2007 target date to work, Federal legislation will have to pass, a
    market for emissions trading will have to be set up, EPA will have to
    promulgate the appropriate regulations, industry will have to determine
    if it is more cost effective for them to reduce emissions or buy
    reduction credits, and, States will have to work with their
    legislatures to make any necessary changes to State laws. A 5-year
    timeframe for all of this is insufficient and this issue needs to be
    addressed.
        On the proposed Nitrogen Oxides reductions, again we note that the
    West does not face the same problems as other areas and, because of
    this, suggest that any reductions required of power plants be no
    greater than that which can be achieved by good combustion technology,
    as opposed to use of add-on control devices. This approach would still
    provide an environmental benefit to the West with respect to regional
    haze reduction.
        Next, Colorado supports the goal of reducing mercury emissions
    especially since the benefits of doing so are multi-media, affecting
    both air and water. However, the proposed legislation requires a 90
    percent reduction of mercury from 1999 levels without regard for the
    emissions reductions that may already be achieved as a co-benefit of
    operating existing non-mercury pollution control equipment. This may
    put State regulators in the untenable position of having to enforce a
    90 percent reduction without having technology available to industry to
    achieve that goal. Of further concern to State regulators is that
    current information suggests to us that the chemistry of Western coal
    with respect to mercury content and the presence of other minerals is
    such that mercury emissions are very difficult to control. This is an
    issue that warrants more study before emission reduction targets are
    set. Having said this, we do believe that an appropriate reduction
    number can be placed in legislation in the near future.
    Final Recommendation
        In the spirit of advancing the discussion on multi-pollutant
    legislation, we have a recommendation for the committee to consider.
    That is, in order for States and other stakeholders to more fully grasp
    the implications of the proposal, additional analysis would be helpful
    to flesh out various options as to how the multi-pollutant program
    would work. These analyses would be helpful for each pollutant, for
    market trading programs, for West vs. the East issues and for ideas to
    streamline existing Clean Air Act requirements.
        Thank you again Mr. Chairman for seeking the views of Western
    States. We are a large and diverse area and more than one voice is
    necessary to adequately understand the concerns and environmental
    issues we face. We believe that the time is right for a multi-pollutant
    bill and that it would be of great benefit to human health and the
    environment.
                                     ______

      Responses by David R. Ouimette to Additional Questions from Senator
                                     Smith
        Question 1. How should the Clean Power Act, S. 556, be amended to
    address the East vs. West differences that you mentioned in your
    testimony?
        Response. One of the big issues facing Colorado and other Western
    Regional Air Partnership (WRAP) States is the timing of implementation
    of various requirements with respect to any multi-pollutant legislation
    versus the Regional Haze Rule. In that regard, as proposals such as S.
    556 are discussed and advanced there should be consideration of whether
    the Regional Haze Rule can either be eliminated with respect to
    SO2 targets for power plants or, alternatively, whether such
    targets can be substituted for ones that may be contained in any multi-
    pollutant legislation.
        Similarly, the legislation must require the EPA to coordinate other
    requirements of S. 556 with those imposed by the Regional Haze Rule, as
    that rule is implemented in the West. For example, one of the paths
    western States may take under Section 309 is to implement an emissions
    trading program for sulfur dioxide (SO2). A trading program
    appears to also be contemplated by S. 556. It makes little sense to
    have two trading programs existing side by side; one should suffice.
    WRAP States should be given the option of joining a larger trading
    program if legislation like S. 556 is passed after implementation of
    the Regional Haze Rule.
        Next, with the exception of California, there is no need for
    western States to reduce nitrogen oxide emissions to the levels
    required in the East to meet the ozone standard. Colorado suggests that
    aggressive combustion control may be adequate and additional
    technologies such as Selective Catalytic Reduction devices may not be
    needed for affected power plants. S. 556 should allow for an
    alternative nitrogen oxide reduction target in the West.
        Regarding mercury emissions, as was pointed out in our testimony,
    western coal differs from eastern coal in ways that make it more
    difficult to reduce mercury emissions from western coal by using
    traditional control technologies. Colorado is still compiling
    information on this issue so it is difficult for us to say precisely
    what the legislative solution should be. Perhaps the emissions
    reductions targets should be based upon the type of coal burned rather
    than establishing just one target that all must meet even if that
    target may, in some cases, be unachievable. Whatever the approach used,
    sufficient time should be allowed for scientists to sort through the
    technology control options to determine what works best under varying,
    real-life circumstances.

        Question 2. Would the benefits from implementing S. 556 in terms of
    regional haze be greater than those produced or required by the current
    WRAP process?
        Response. This is not an easy question to answer without
    considerable analysis of various options allowed under the Regional
    Haze Rule. Our best guess is that the benefits would be similar but not
    identical, and would depend, in part, on how many States choose to take
    the section 308 or 309 planning option. That is, how many choose to
    participate in the emissions trading program under section 309 (if the
    requirement for one is triggered), and how many choose to go their own
    way under section 308 and require Best Available Retrofit Technology
    (BART) on affected facilities. The analysis is further clouded by the
    fact that the WRAP has not yet addressed pollutants like nitrogen
    oxides and particulate matter. How these pollutants are controlled
    could affect the answer to the benefits question.
        Additionally, more facilities are brought into the program under
    the Regional Haze Rule than just power plants. Although power plant
    emissions predominate, emissions from other facilities contribute to
    the haze problem. Reducing those emissions will have a net benefit to
    the environment that will not be achieved by S. 556.
        Since the question of benefits is a complex one, Colorado suggests
    that more analysis should take place to further describe the effects of
    S. 556 and the Regional Haze Rule before S. 556 is moved forward. In
    any event we believe that SO2 should be addressed, but only
    under one regulatory scheme.
                                   __________
        Statement of Brock M. Nicholson, Division of Air Quality, North
            Carolina Department of Environment and Natural Resources
        Good morning. My name is Brock Nicholson, and I am the Chief of
    Planning for the Division of Air Quality, North Carolina Department of
    Environment and Natural Resources. I represent the State agency that is
    responsible for developing, adopting and implementing the State
    Implementation Plan (SIP) for the State of North Carolina. In this
    role, I am involved in both regulation adoption and legislation dealing
    with sources of air pollutants, including utility boilers. I'm pleased
    to be here today to share some insights regarding the current North
    Carolina experience with multi-pollutant legislation and how that
    experience might relate to S. 556 under consideration by this
    committee.
    Background
        I would like to begin by giving some background on North Carolina
    Senate bill, S1078, which many people in our State refer to as the
    ``Clean Smokestacks'' bill. Today I will refer to the proposed
    legislation as the ``NC bill.'' This bill was developed through a
    series of discussions conducted by the bill sponsors with various
    environmental groups, the State's two largest utility companies, and
    the State. The parties to those discussions reached a consensus in
    support of the NC bill.
        Some industrial customers and groups, some agricultural customers
    and groups, a couple of small environmental groups, and a few other
    groups and individuals have opposed the NC bill. The part of the NC
    bill that opponents most frequently cite as the reason for their
    opposition is a provision that allows the utilities to recover, under
    the oversight of the NC Utilities Commission, control costs that are
    just, reasonable and prudently incurred under a cost recovery mechanism
    different from a normal rate-making case.
        In general, the public and newspaper editors have been very
    supportive. The NC bill quickly passed the Senate 43 to 5 in the
    spring. It is currently in the House Public Utilities Committee, with
    cost to ratepayers and the mechanism for cost recovery being the major
    topics of discussion.
        The NC bill requires all coal-fired utility generating units over
    25 MW (all 14 plants in our State) to meet in-State aggregate mass
    emissions caps for sulfur dioxide (SO2) and nitrogen oxides
    (NOx). These caps represent actual reductions of 73 percent and 77
    percent respectively from 1998 levels. The SO2 cap must be
    met in two phases; by January 1, 2009, about a 50 percent reduction;
    and by January 1, 2013, another approximate 50 percent reduction. The
    year-round NOx cap is to be met by January 1, 2009. There is an
    additional requirement that the State annually consider and report to
    the legislature whether controls beyond those in the NC bill have
    become both technically and economically feasible. If necessary, the
    legislature could then tighten the requirements.
        For mercury, the NC bill requires an annual assessment of the state
    of knowledge on the expected co-benefit of mercury control when
    SO2 scrubbers and NOx selective catalytic reduction (SCR)
    controls are installed. By March 2005, the State must recommend to the
    legislature specific additional control requirements if the co-benefits
    are less than expected and needed.
        For carbon dioxide, there is a similar requirement in the NC bill
    to report annually to the legislature on control options and to make
    recommendations by March 2003.
        The NC bill directs the State to use all available resources and
    means, including, but not limited to, negotiation, participation in
    interstate compacts and multi-state agreements to achieve comparable
    emission reductions in nearby States whose emissions affect North
    Carolina.
    Comments on S. 556
        Our department supports the aggregate emissions reduction approach.
    This approach would presumably incorporate a cap for each pollutant.
    Caps can provide for an efficient and flexible program to obtain
    reductions. Both implementing agencies and emission sources will
    benefit. This aggregate approach is one that, based on our
    consideration of and discussions about the NC bill, gives the sources
    flexibility and certainty to make the business decisions that are in
    their best interests while they meet the requirements of the
    legislation. In our view, the aggregate emission reduction approach was
    a key feature in getting the utility industry to support our bill.
        However, caps must be meaningful from the standpoint of protecting
    public health and the environment. By that I mean that they must be
    sufficiently stringent to assure that the air quality goals are
    actually met. Caps must not be set at levels that merely facilitate a
    ``robust'' trading system. S. 556 appears to be sufficiently stringent
    to be meaningful.
        However, unlike the NC bill, which requires all of the actual
    reductions to be in North Carolina, I would presume that S. 556 and the
    regulations that implement it would allow for a national trading
    program. Such a program must not only achieve the national aggregate
    reduction goal, it must also allow local air pollution problems to be
    addressed in a way that protects health and the environment. There must
    be a ``states rights'' or ``authority'' provision that allows for
    actual controls (no trading credits) to be applied to specific units
    for local air quality needs. Since public health protection is an
    overall goal, States must be able to assure NAAQS attainment even if
    the overall reductions exceed the national cap or such NAAQS controls
    ``conflict'' with the trading program. Such protections must apply not
    only to NOx and SO2 emissions and the associated ozone and
    fine particulate matter, but also to mercury emissions, which can give
    rise to special local concerns about public health impacts.
        Along with a strong Federal mobile source program, a multi-
    pollutant approach such as S. 556 will be a critical and important
    centerpiece of a strategy that is necessary for States to meet the
    NAAQS for 8-hour ozone and fine particles, PM2.5. North
    Carolina, like many others, is a high-growth State in which about 70
    percent of the counties where monitors are located violate the NAAQS
    for 8-hour ozone (aspects of which remain under review by the courts).
    For PM2.5 the corresponding percentages of violating
    counties is about 50 percent. Our projected future emissions for NOx
    and SO2 show that power plants are the substantial majority
    contributor in both categories. Control of these two pollutants is a
    must for public health now and in the future. The attached graphic of
    some recent ozone modeling shows that even with full NOx SIP call
    controls and all of the expected Federal mobile source controls in
    place, the NAAQS is not fully met.
        Regarding the compliance schedule in S. 556, we observe that in the
    discussions that led to the NC bill, a consensus between the
    environmental groups and the two utilities produced a schedule, which
    is longer than the one in S. 556, but is nonetheless acceptable and
    would not adversely affect the economy or energy supply in North
    Carolina. However, as I said before, there has been more discussion in
    our legislature on cost recovery than on schedule.
        As it is in many other States, mercury is a big public health issue
    in North Carolina. However, considering the uncertainties regarding
    measuring mercury and the expected, and perhaps relatively large, co-
    benefits of mercury reduction when scrubber and SCR controls are placed
    on the bituminous coal power plants, the drafters of the NC bill
    decided not to specify a control level for mercury. Instead, there is a
    requirement that the State study the issue of co-benefit, report
    annually to the legislature and make recommendations to that body by
    September 2004 on additional controls that would be needed for public
    health protection from mercury in North Carolina.
        With respect to carbon dioxide emissions, the NC bill requires our
    department to recommend action to the legislature by March 2003. The
    2003 date allows time to consider developments at the Federal level and
    in other States and to understand the benefits of energy conservation,
    greater use of natural gas, and the developing clean coal technologies
    including coal gasification.
        North Carolina along with Georgia, South Carolina and Tennessee
    have been charged by their Governors to develop recommendations by
    March 2002 regarding a multi-pollutant strategy for utilities and
    innovative energy and transportation strategies that benefit air
    quality in the four-State region. Although the Southern Air Principles
    agreement signed by the Governors focuses on NOx, SO2 and
    mercury, the States are also studying energy strategies that reduce
    carbon dioxide. We will also be monitoring the national scene for
    action on this important subject.
        In conclusion, thank you for this opportunity to speak on this very
    important subject, and I am glad to answer any questions. Thank you
    again.
                                   __________
    Statement of Michael O. Callaghan, Secretary, West Virginia Department
                          of Environmental Protection
        Good morning, my name is Michael Callaghan and I am the Cabinet
    Secretary of the West Virginia Department of Environmental Protection.
    I appreciate this opportunity to appear before the Senate Environment
    and Public Works Committee to comment on Senate Bill 556, the Clean
    Power Act of 2001. As most of you know, our State is one of the top
    producers of coal in the nation. I can tell you that I spent a large
    part of my work time dealing with environmental issues related to
    mining coal; some of the recent developments and initiatives may
    require my renewed focus on environmental issues related to burning
    coal.
        Among other provisions, the bill calls for regulation of
    powerplants to achieve a 75 percent SO2 reduction (beyond
    Title IV); a 75 percent NOx reduction (1997 base); a 90 percent mercury
    reduction (1999 base) and a reduction of CO2 to 1990
    emission levels. It may surprise some of you to learn that, with a few
    caveats, I am strongly supportive of the concept of multi-pollutant
    emission controls. Many of our environmental protection programs,
    including air quality, have developed in a somewhat parochial fashion,
    sometimes leading to a hodgepodge of complex regulations. Traditional
    command and control approaches often address only individual
    pollutants, in a facility specific manner. Furthermore, control
    requirements (or the lack thereof) can vary widely across
    jurisdictional boundaries within the same airshed. A national multi-
    pollutant strategy offers a superior environmental solution that could
    address many of issues relating to the existing and near-term air
    quality programs, such as visibility improvement (regional haze), 8-
    hour ozone standards and PM2.5 standards.
        First, I must state our biggest problem with the present content of
    S. 556. That is the provision regarding CO2. We have severe
    reservations about the inclusion of a national emissions cap for carbon
    dioxide. Our senior Senator, Robert C. Byrd (in his support of the
    Climate Change Strategy and Technology Innovation Act of 2001, S.
    1008), has stated the case much more eloquently then I possibly could.
    Furthermore, the entire Senate, in its adoption (by large majority) of
    Senate Resolution 98 (1997) acknowledged that a climate change treaty
    must include commitments from developing nations, especially heavy
    polluters. We recommend removing the CO2 cap provisions from
    S. 556 but we also acknowledge that global warming needs to be
    addressed in a meaningful way, beginning with the approach set forth in
    S. 1008.
        Now, I would like to discuss the NOx, SO2 and mercury
    (Hg) reductions. Nearly always when regulations are proposed, there is
    an outcry from potentially affected industries telling us:

        1) Why they can't do it; and
        2) How much it would cost (a whole lot) if they could.

        Of course, most of us are already hearing feedback to that effect
    on these provisions. Past experience has indicated that these arguments
    are frequently overstated but that doesn't mean they should be entirely
    discounted. I believe the primary issue is the level of the cap.
    Perhaps the stringency of the proposed caps is overly ambitious. Just
    as we are trying to effect a more holistic solution to the
    environmental aspect of the problem, we should concurrently embrace a
    broader view of the energy and economic impacts of potential
    strategies. That is where the Department of Energy and the Department
    of Commerce may provide a more comprehensive view than U.S. EPA alone.
    We must be especially careful if the cap is contemplated at a
    technology-forcing level or could lead to comprehensive fuel switching.
    If appropriate, viable levels of caps are determined, then the next
    step is ensuring equity. There must be some mechanism to ensure that
    legitimate issues concerning allocations under the cap(s) are fairly
    resolved. For example, we still have outstanding issues with EPA on the
    growth assumed in the NOx SIP Call. We fail to understand how the
    assumption for zero (1996-2007) new power plants could be considered
    reasonable.
        Ultimately, we would like to see a multi-pollutant strategy that
    simplifies some of the existing control programs, including New Source
    Review (NSR) and Prevention of Significant Deterioration (PSD) and one
    that clarifies enforcement issues under those two programs. Such a
    strategy should also provide stability and certainty for affected
    sources by limiting liability (e.g., from Petitions under Clean Air
    Act, Section 126) for sources that demonstrate adequate compliance with
    the program provisions.
        Thank you again for this opportunity to address the committee.
                                   __________
                   Statement of the Global Climate Coalition
        The member organizations of the Global Climate Coalition, and the
    over six million businesses, companies, and corporations we represent,
    thank Chairman Jeffords and ranking member Smith for the opportunity to
    comment on S. 556, the Clean Power Act of 2001.
        The GCC is the voice for business in the climate change debate,
    representing every major sector of the U.S. economy--including
    agriculture and forestry, electric utilities, railroads,
    transportation, manufacturing, small businesses, mining, oil and
    natural gas, and coal. Our members have participated in domestic and
    international discussions on the issue of climate change virtually from
    their beginning. Moreover, the industries represented by GCC members,
    by their own initiative, are responsible for some of the most
    innovative and technologically advanced solutions for addressing
    greenhouse gas emission issues. We remain committed to applying
    constructive approaches to voluntarily address the climate issue.
        As the GCC represents a considerable portion of U.S. economic
    activity, any proposals to reduce emissions of criteria pollutants or
    carbon dioxide will have a substantial impact on the way our members do
    business, the States in which they operate, and on the consumers who
    use their products to enhance everyday life. Thus, our interest in this
    legislation is motivated by a desire to better understand the proposals
    now being considered and to offer the committee the benefit of our
    experience, wherever that experience can add constructively to the
    debate in the weeks ahead.
        The GCC believes that S. 556, as a proposal to reduce greenhouse
    gas emissions, is seriously flawed and virtually unworkable. We base
    this assertion on the fact that the structure of S. 556 is virtually
    indistinguishable from the Kyoto Protocol, and thus prescribes the same
    types of unreasonable targets and timetables that would cause immediate
    and long-term damage to the U.S. economy, workers, and consumers.
        Despite a continuing long-term trend of improved energy efficiency
    in our economy, U.S. economic strength, output, and energy use are
    directly related to carbon dioxide emissions. At a time when the U.S.
    economy is in a period of dangerous uncertainty, and thus highly
    sensitive to negative stimuli, the language regulating carbon dioxide
    found in S. 556 would increase energy costs, restrict productivity and
    impair overall growth.
        S. 556 would increase the difficulty of maintaining the reliability
    of the electricity grid that links our homes, businesses, communities,
    cities, and States. Put simply, achieving the goal of reducing
    CO2 emissions to 1990 levels in the year 2007 will require
    that a significant portion of the nation's electricity sector be shut
    down. Because America's demand for energy--specifically, electricity--
    is growing, this strategy would be unwise.
        CO2 emissions from electric power plants, despite
    efficient technologies and practices, are projected to increase by 217
    million metric tons (or 39 percent) over the next 20 years as the
    demand for electricity increases. While acknowledging that 75 percent
    of the increase in electricity generation between 1999 and 2020 is
    projected from natural gas, power sector CO2 emissions in
    2020 are projected to be from 262 to 286 million metric tons above 1990
    levels. A reduction of the magnitude required by S. 556 would be
    impossible to achieve without fencing in a significant portion of the
    nation's electricity generating infrastructure.
        The levels of emissions reduction in S. 556 is on par with those
    called for under the Kyoto Protocol, which has been rejected by both
    the Bush Administration and Congress, in part, as being too costly to
    the U.S. economy. This notion was recently reinforced by the U.S.
    Energy Information Administration (EIA). In an analysis prepared for
    the Senate, EIA concluded that a multi-emissions reduction strategy
    ``[meeting] the individual emissions limits for NOx, SO2,
    mercury, and CO2 [in S. 556] will all require significant
    effort; the CO2 and mercury limits are likely to be the most
    difficult to meet.''\1\  Moreover, ``to meet the assumed CO2
    limit, significant switching from coal to other fuels is expected,
    because low-cost technologies for capturing and sequestering
    CO2 are not expected to be widely available'' even by 2020,
    let alone in the 2002-2007 timeframe established in S. 556.\2\
    ---------------------------------------------------------------------------
        \1\Strategies for Reducing Multiple Emissions From Electric Power
    Plants, U.S. Energy Information Agency, October 2001, x.
         \2\Ibid.
    ---------------------------------------------------------------------------
        While GCC members, as noted above, remain committed to developing
    and deploying technologies and innovations that reduce, avoid, or
    sequester emissions, we oppose a command-and-control approach to the
    issue precisely for the reasons put forth by EIA: ``Among the four
    emissions that have limits in these cases, CO2 emissions
    tend to be the most costly to reduce, largely through the premature
    retirement of existing coal plants and the increased use of natural gas
    and renewable technologies.''\3\
    ---------------------------------------------------------------------------
        \3\Ibid.
    ---------------------------------------------------------------------------
        It must also be emphasized that the scenarios with the lowest costs
    for reducing CO2 emissions (as outlined in an earlier EIA
    report, Scenarios for a Clean Energy Future) are based on assumptions
    that EIA itself questions. These include assumed changes in consumer
    behavior that are not consistent with historical behavioral patterns;
    results from R&D funding increases that have not occurred; and
    voluntary and information programs for which there is no analytical
    basis for evaluating the impacts. Furthermore, some of the policy
    assumptions in Scenarios for a Clean Energy Future require legislative
    or regulatory actions that may not be enacted or, if enacted, may
    become effective at later dates than assumed.
        If the Committee on Environment and Public Works reports out S.
    556, it does so in the face of clear evidence the U.S. manufacturing
    sector has entered a downturn. Indeed, the manufacturing sector has
    been in recession since Fall 2000, triggered, in part, by the sharp
    increase in overall energy prices, particularly for natural gas and a
    concern over energy-supply reliability. During the last 7 months of
    2000, more than 200,000 net manufacturing jobs were lost, largely due
    to sudden energy price increases. This human cost, combined with the
    $115 billion in higher energy prices paid by all energy consumers
    during 2000, cut about one-half of a percentage point off anticipated
    GDP growth just last year.
        Energy-intensive industries, such as steel, auto making, chemistry,
    paper, coal mining and oil and gas extraction are especially affected
    by rises in energy costs. These costs vary widely across States and
    regions, as these industries tend to be located unevenly across the
    country. The East South-Central and East North-Central regions, heavy
    in coal mining and energy-intensive industry, shoulder a
    disproportionate share of the burden on manufacturing. Short supplies
    of electricity and natural gas, and the world price of petroleum,
    already have contributed to current economic hardships. In addition,
    the requirements of S. 556 would apply to many highly efficient
    combined heat and power units and boilers at industrial facilities,
    which would bear significant capital costs in addition to rising energy
    costs.
        S. 556 would permanently impose these conditions on the economy by
    forcing electric generators to choose between investing large amounts
    of capital to continue using coal or building the new facilities
    necessary to switch to more expensive natural gas--perhaps jeopardizing
    the energy system's reliability during the transition. This, in the
    words of one manufacturing trade association, is a ``Hobson's choice''
    not acceptable ``absent an overwhelmingly compelling argument that
    human health, the environment or national security requires it.''\4\
    ---------------------------------------------------------------------------
        \4\Position on Multi-Emissions Legislation, National Association of
    Manufacturers, October 2001.
    ---------------------------------------------------------------------------
        This last statement prompts the GCC to question the need to
    establish policy on emissions reductions whose extent reaches far
    beyond even the Clean Air Act. According to the latest Environmental
    Protection Agency (EPA) report on national long-term trends in air
    pollution, ``the trend toward cleaner air has continued since EPA's
    formation in 1970, while during the same time, the gross domestic
    product increased 158 percent, miles traveled by cars and trucks
    increased 143 percent, and energy consumption increased by 45
    percent.''\5\  The government's environmental arm has said that air is
    getting cleaner. There is every reason to expect, with government-
    private sector partnerships, and industry's continued commitment to
    voluntary approaches, that this trend will continue to be the norm in
    the United States even in the absence of legislation such as S. 556.
    ---------------------------------------------------------------------------
         \5\Headquarters Press Release, Environmental Protection Agency,
    October 18, 2001.
    ---------------------------------------------------------------------------
        As we have stated many times in the past, answering the challenge
    posed by climate change is a long-term proposition that will require
    new technologies and new ways of doing business. However, S. 556, which
    implicitly assumes the development, deployment, and consumer adoption
    of renewable energy and energy-efficient technologies by 2007, is
    unrealistic in this regard.
        And it is a simple fact that renewable energy has not developed in
    such a way as to sustain the nation's growing appetite for energy. Even
    if it had, there are no assurances of affordability or that the public
    would embrace renewables. In a 2000 analysis of the Climate Change Tax
    Initiative, EIA argued that consumers would be ``reluctant to invest in
    more expensive technologies with long payback periods to recover the
    incremental costs,'' and that energy efficiency is ``only one of many
    attributes'' they consider when purchasing appliances.
        GCC also believes that this particular aspect of the multi-
    emissions issue suffers from the tendency by many to express overly
    optimistic assumptions about emissions control technology efficiencies
    on the one hand, and too conservative estimates of future growth in
    electricity demand on the other.
        The Global Climate Coalition believes that S. 556 should be set
    aside in favor of a cooperative approach with the Bush Administration
    on this issue. The Administration's cabinet-level review of climate
    change policy, and its planning on power plant emissions, are ongoing;
    it should at least be given the time to complete its work and propose
    policy. S. 556's resemblance to the Kyoto Protocol--which has been
    dismissed by President Bush and effectively opposed by the Senate in
    the form of S. Res. 98--virtually ensures that it will be neither
    enacted nor signed into law. In the months ahead, we look forward to
    continuing to work with both the committee and the Administration in
    fashioning common sense policy approaches to these very complex issues.
                                   __________

      STAKEHOLDER MEETING HELD BY ENVIRONMENT AND PUBLIC WORKS COMMITTEE
                               OCTOBER 4-5, 2001

                      List of Participating Organizations
        The Adirondack Council
        American Chemistry Council
        American Forest and Paper Association
        American Lung Association
        American Public Power Association
        Clean Air Task Force
        Clean Water Action (Connecticut State Chapter)
        Edison Electric Institute
        Electric Power Supply Association
        Environmental Council of the States
        Environmental Defense
        The Izaak Walton League of America (Minnesota State Chapter)
        National Environmental Trust
        National Parks Conservation Association
        National Rural Electric Cooperative Association
        Natural Resources Defense Council
        Northeast States for Coordinated Air Use Management (NESCAUM)
        Ohio Environmental Council
        Ohio Environmental Protection Agency
        Southern Alliance for Clean Energy
        State and Territorial Air Pollution Program Administrators/
    Association of Local Air Pollution Control Officials (STAPPA/ALAPCO)
        Union of Concerned Scientists
        U.S. Public Interest Research Group
        Western Regional Air Partnership
                                     ______

                                     Agenda
        Purpose of the Meeting--To identify issues, provide an opportunity
    to offer constructive proposals, and in other ways elaborate upon
    matters that need to be resolved in moving forward on multi-pollutant
    legislation in the 107th Congress.
    Thursday, October 4, 2001
          9:30 a.m.--Welcome and Opening Remarks by Senators
    Jeffords, Smith, and Voinovich
          9:45 a.m.--Introductions and Opening Remarks by Senate
    EPW Staff
          10:00 a.m.--Review Agenda and Ground Rules; Meridian
    Institute
          10:10 a.m.--Technical Overview by EPA--current Acid Rain/
    NOx SIP Call program functioning, effectiveness, and cap/trade programs
        The objective for each of the following four agenda items is to
    focus the discussion on how to solve environmental problems associated
    with the four pollutants. Thus, Day One will be focused more on the
    initial issue identification objectives of the meeting while still
    encouraging constructive proposals to emerge. There will be more time
    to explore such proposals on Day Two.
          10:45 a.m. Business As Usual
        Discussion of future under the Clean Air Act as written.
          11:45 a.m. Lunch Break
          12:45 p.m. Sulfur dioxide
        1. Levels/timing
        2. Technology
        3. Trading/markets
        4. Compliance/measurement
          2:00 p.m.--Nitrogen oxides
        1. Levels/timing
        2. Technology
        3. Trading/markets
        4. Compliance/measurement
          3:15 p.m.--Mercury
        1. Levels/timing
        2. Technology
        3. Trading/markets
        4. Compliance/measurement
          4:30 p.m.--Carbon Dioxide
        1. Levels/timing
        2. Technology
        3. Trading/markets
        4. Compliance/measurement/standards
          6:00 p.m.--Adjourn
    Friday, October 5, 2001
          9:00 a.m.--Summary and reflections on the prior day's
    discussion
        Recognizing that aspects of the ``cross cutting'' issues of
    ``flexibility'' and ``allocation'' are likely to arise during Day One,
    the objective of Day Two, in general, is to build upon the constructive
    ideas that may have been expressed during the pollutant-by-pollutant
    discussion. In addition, specific subtopics, as listed, will also be
    discussed.
          9:30 a.m.--Flexibility
        1. Incentives
        2. Regulatory Relief
        3. Compliance
          10:45 a.m.--Break
        11:00 a.m.--Allocation Issues
        1. Baseline
        2. Auction
        3. Generation Performance Standard
        4. Output Based
        5. Declining Cap
          12:00 noon--Break for Lunch
          1:00 p.m.--Open Session: Continue discussion of
    flexibility and/or allocation issues or followup discussion of concrete
    constructive proposals made at the meeting.
          2:00 p.m.--Wrap up and Summarize Outcomes of the Meeting
          2:30 p.m.--Adjourn
                                     ______

        STATEMENTS SUBMITTED BY PARTICIPANTS OF THE STAKEHOLDER MEETING

                    Statement of American Chemistry Council
                  position on ``multi-pollutant'' legislation
        The American Chemistry Council is pleased to participate in the
    Senate Environment and Public Works Committee's stakeholder dialogue on
    ``multi-pollutant'' legislation. The American Chemistry Council
    represents the leading companies engaged in the business of chemistry.
    Council members apply the science of chemistry to create innovative
    products and services that make people's lives better, healthier and
    safer. The business of chemistry is a $460 billion enterprise and a key
    element of the nation's economy. It is the nation's largest exporter,
    accounting for ten cents out of every dollar in U.S. exports. Chemistry
    companies also invest more in research and development than any other
    business sector.
        Council members support protecting human health and the
    environment, including the air resources of the nation. Over the past
    twenty-five years, Council members have made their operations more
    energy efficient and reduced their air emissions. During that period,
    Council members constructed many ``combined heat and power'' systems--a
    significantly more efficient way of producing power than conventional
    electric generating units--and co-generation units produced 80 billion
    kilowatt-hours of electricity in 1998--and our members contributed
    nearly 45 billion kilowatt-hours of that total. These and other
    projects helped make the chemistry business 41 percent more energy
    efficient per unit of output than it was in 1974. Council members have
    also dramatically reduced air emissions while increasing production.
    For example, core Toxic Reduction Inventory (TRI) emissions are down 63
    percent since 1988 even though production was up 27 percent. According
    to EPA data, ACC members also led all of industry in cutting emissions
    of 30 key HAPs--including mercury, since 1990. Likewise, ACC members
    have aggressively reduced SO2 and NOx emissions.
        ``Multi-pollutant'' legislation appears to be driven by three
    primary issues. First is the need to spur development of additional
    electric generating capacity. Second, is the dissatisfaction of certain
    stakeholders over the degree of emissions control achieved by the
    utility industry. Finally, is the willingness of certain portions of
    the utility industry, fueled by enforcement actions over alleged
    violations of the Act's New Source Review provisions, to consider a
    different regulatory scheme to address emission reductions of certain
    substances.
        As the nation's major manufacturers of chemical products, many of
    which are derived from fossil-fuel feedstocks, Council members were
    significantly affected by the recent energy shortage. Its impact on the
    price of natural gas, which the chemistry business uses as both a fuel
    and a feedstock for making its products, significantly interfered with
    plant operations, causing plant closings, lay-offs, and cutting our
    exports by half. Being a major purchaser of electricity as well, we
    strongly favor maintaining a diversity of fuel sources, e.g., coal,
    oil, nuclear and natural gas, as a way of keeping energy supplies
    balanced and affordable.
        Council members are highly regulated under the Clean Air Act and
    are constantly upgrading their facilities to comply with its various
    provisions. Our members (and others) are reducing mercury emissions
    pursuant to section 112 of the Clean Air Act, NOx emissions through
    Section 126 and EPA's NOx ``SIP call'' and some have opted into the
    Act's Title IV acid rain program.
        Complying with the Clean Air Act has been difficult and costly for
    our members. Consequently, we have called upon EPA to revise some of
    its policies, including its implementation of the New Source Review
    (NSR) program which has stymied our ability to increase energy
    production, improve energy efficiency, and reduce emissions at our
    facilities. ``Multi-pollutant'' legislation--which will affect many CAA
    programs, yet only narrowly address the current problems with NSR, is
    not a substitute for complete NSR reform. Nonetheless, we are
    interested in innovative approaches that can ensure a consistent energy
    supply, improve the overall functioning of the Clean Air Act, and
    provide our members with cost effective options to continue improving
    their operations consistent with their commitment to Responsible
    Care(r), the industry's voluntary initiative to make our operations
    safer, cleaner and more responsible to the communities in which they
    operate. In this spirit, we suggest that the stakeholders consider the
    following important issues that should be resolved in the drafting of
    this legislation:
      suggested questions for considering ``multi-pollutant'' legislation
    I. Basis and Purpose of Legislation
        A. What are the problems, their cause, and scientific basis that
    the legislation aims to correct?
        B. Does sound science underlie the diagnosis of the problem?
        C. Is the current law unable to address the problem?
        D. How will a ``multi-pollutant'' approach successfully address the
    problem?
    II. Coverage
        A. What sources and pollutants should be included in the
    legislation?
        B. Does including controls for CO2 unduly complicate
    passage of the bill?
    III. Program
        A. What level of control is needed to adequately address the
    problem?
        B. Should the degree of control be based on a percentage reduction
    or specify a particular level of performance? If a percentage
    reduction, what should be the baseline for measurement?
        C. What are the compliance mechanisms?
        D. If facilities are required to achieve these levels of control,
    what provisions of the Clean Air Act should no longer apply to them and
    for how long?
    IV. Timing
        A. By what date will the facility be required to achieve the
    emission reduction?
        B. If the bill applies to different source categories, will they
    all have the same compliance date?
    V. General Policy Issues
        A. How will the legislation affect the supply of natural gas and
    what impacts will that have on the manufacturing and residential
    sector?
        B. How will local/State air quality problems be addressed if
    ``multi-pollutant'' legislation is enacted, e.g., if the degree of
    reduction is not sufficient to achieve attainment of ambient air
    quality standards, who will be required to bear the burden of achieving
    additional reductions and how will previous activities by sources to
    reduce emissions, be considered?
        C. Does the ``multi-pollutant'' approach make sense for industries
    outside the utility sector?
        D. How will combined heat and power units be addressed through this
    approach?
       suggested principles for drafting ``multi-pollutant'' legislation.
        If, after careful consideration of these questions, the Committee
    decides that ``multi-pollutant'' legislation is needed, the American
    Chemistry Council suggests that the following principles guide its
    development.
        I. Coverage: ``Multi-pollutant'' legislation should cover only
    those industries and sources that want to participate in such a program
    by specifying those sources that opt in during the drafting of the
    bill. Generating units in other industries should be given the
    opportunity to voluntarily participate in the program. If the
    legislation addresses emissions from utilities, then Congress should
    adopt the definition of utility generating units in Title IV (acid rain
    provisions) of the CAA. This approach must be consistent with NAAQS
    implementation.
        II. Program: ``Multi-pollutant'' legislation should only apply to
    emissions of SO2, NOx and mercury and should not address
    CO2. The legislation should establish emission levels for
    each of these three pollutants that require reductions to specified
    levels, needed to achieve specified goals, such as attaining National
    Ambient Air Quality Standards, considering technological limitations,
    costs, equity, and the effect on energy supplies such as natural gas.
    The participating industry or facility could achieve those emission
    levels through onsite reductions or through market oriented programs
    such as purchasing offsets and emissions trading. Emission levels
    should accommodate using a diversity of fuel sources, including coal,
    oil, nuclear and natural gas and must not discourage or restrict the
    use of any currently available fuels. It also should not result in non-
    participating facilities having to achieve more stringent reductions
    than the levels specified in the legislation in order to attain or
    maintain air quality. Last, any industry or facility participating in
    the program would be exempt from NSR, NSPS, BART, NAAQS, NESHAP for Hg,
    and other specified provisions of the statute for a specified period.
                                   __________
    Statement of American Lung Association Statement on the Four Pollutant
                                  Legislation
        The American Lung Association supports S. 556, the Clean Power Act.
    This comprehensive legislation will reduce and cap emissions of all
    four major air pollutants from power plants. We support the emissions
    targets and timetables in S. 556. Power plant emissions are seriously
    damaging public health and the environment.
        The explicit recognition by S. 556 of the sanctity of the Clean Air
    Act is the cornerstone of the American Lung Association's support.
    Subsection 132 (e) states, ``This section does not affect the
    applicability of any other requirement of this Act.''
    National Ambient Air Quality Standards
        In July 1997, EPA issued new National Ambient Air Quality Standards
    (NAAQS) for ozone and fine particles. This action was based on EPA's
    findings that available research data showed that millions of Americans
    are exposed to levels of ozone and fine particles that are unhealthy
    and cause or contribute to illness, hospitalization and premature
    death.
    New Research Confirms the Need to Implement the New Health Standards
        Research programs on the health effects of particulate air
    pollution have been carefully coordinated to advance our understanding
    of the most important scientific issues. These studies show:
          Six dozen new short-term studies confirm the effects of
    particle pollution on premature death, hospitalization, emergency room
    visits, respiratory and cardiac effects;
          Recent laboratory and chamber studies of animals and
    humans have elucidated possible biologic mechanisms by which
    particulates contribute to mortality and morbidity;
          Studies demonstrate that infants and children, especially
    asthmatic children, the elderly, and those with heart or lung disease
    are especially sensitive to the effects of fine particle pollution.
        Recently, more research has begun to focus on the effect of long-
    term, repeated exposures to high level of ozone. These include:
          A study of college freshmen who were lifelong residents
    of Northern or Southern California found a strong relationship between
    lifetime ozone exposure and reduced lung function.
          A study of 1,150 children followed for 3 years suggest
    that long-term ambient ozone exposure might negatively affect human
    lung function growth.
        A 10-year study of 3,300 school children in Southern California
    communities found that girls with asthma, and boys who spent more time
    outdoors experienced diminished lung function in association with
    ozone.
    Hundreds of Counties Violate the 8-Hour Ozone NAAQS
        An examination of AIRS monitoring data for 1997-1999 found that 333
    counties in 33 States have a 3-year average that exceed the 8-hour
    ozone NAAQS. Nearly 117 million people live in these counties. These
    data also show that in nearly all the States east of the Mississippi
    river 50 percent or more of the monitored counties violated the 8-Hour
    NAAQS.
    Many of the Same Areas May Have Unhealthy Levels of Fine Particles
        The fine particles monitoring system has only been operational
    since 1999. However, preliminary EPA data show a pattern of high fine
    particle levels across the eastern United States.
    Protect the Clean Air Act
        The Clean Air Act should not be weakened. The strict enforcement of
    the Clean Air Act enjoys broad public support. A broad consensus
    acknowledges that the existing provisions of the Clean Air Act have
    been very successful at reducing air pollution amid significant
    economic and population growth. The revised ambient air quality
    standards for fine particulate and ozone will create additional
    obligations to reduce pollution. Any Clean Air Act amendments must
    recognize the public health imperative of reducing criteria air
    pollutants and provide the necessary emissions reductions to achieve
    and maintain these air quality standards as expeditiously as
    practicable and no later than the deadlines required under the existing
    statute. We oppose proposals to repeal or weaken existing Clean Air Act
    requirements designed to protect and enhance regional and local air
    quality.
                                   __________
               Statement of The American Public Power Association
        The American Public Power Association (APPA) is the national
    service organization representing the interests of the more than 2000
    State, municipal and other local government-owned electric utilities in
    the United States. Publicly owned electric utilities are among the most
    diverse of the three electric utility sectors, representing utilities
    in small, medium and large communities in 49 States, all but Hawaii.
    Seventy-five percent of public power utilities are located in cities
    with populations of 10,000 or less. Overall, public power utilities
    provide approximately 14 percent of all kilowatt-hour sales to ultimate
    consumers in the United States.
        APPA feels that, done correctly, a market-based program for
    controlling multiple air pollutants such as nitrogen oxides, sulfur
    dioxides and mercury may prove more effective than the current
    piecemeal approach to achieving environmental goals. However, any such
    program must yield equal or superior environmental quality in a more
    cost-effective manner. We believe that one key element to making this
    approach more cost effective is to eliminate programs made redundant by
    this new approach. The New Source Review (NSR) program may well fit in
    this category. The underpinning goal of this integrated approach should
    be to achieve emission reductions at lower costs while assuring
    electric reliability, reasonable electricity costs, and energy
    security. Recent Energy Information Administration (EIA) studies
    indicate that this is possible for SO2 and NOx and, if done
    correctly, mercury, however, these same studies indicate that including
    the greenhouse gas carbon dioxide (CO2) as classic air
    pollutant in a multi-pollutant control program would have severe
    economic and energy security consequences.
        APPA believes that a greenhouse gas strategy should be developed as
    a separate program that considers (1) the discrete characteristics of
    greenhouse gases (as distinct from the identifiable public health
    consequences of pollutants), (2) recognizes that absent affordable
    technologies to capture ghgs it poses a technological challenge, and
    (3) takes into account the difference in timelines (SO2,
    mercury and NOx are pollutants that pose short-term health threats
    while ghgs that could potentially affect climate can be addressed over
    much longer periods of time to achieve results by the end of the
    century).
        Unlike health-based pollutants that have measurable cost/benefit
    ratios and emissions reduction technologies, there are no similar
    benchmarks by which to measure the costs and benefits of carbon capture
    technologies available to assist industry and policymakers in
    establishing policies for the reduction of these gases. The
    technological challenges posed by CO2 reductions in
    particular, the fact that CO2 is not a pollutant that poses
    imminent health risks, and the fact these CO2 emissions and
    reduction policies are directly related to electricity generation and
    energy policy, strongly suggest placing any Federal oversight or
    management responsibility of such gases within the U.S. Department of
    Energy.
        APPA believes that as policymakers deliberate reform to the Clean
    Air Act regulatory program in conjunction with tightening emissions
    limits for SOx, NOx and mercury, critical attention must be given to
    the economic, consumer electric utility rate, electric reliability and
    energy security impacts of requiring such limits. Overall, reduction
    obligations need to be tied to overall impacts on human health, the
    environment, the nation's energy needs and economic growth. We are
    compelled to ask whether appropriate and accurate analyses of these
    impacts have been done. In addition, proper implementation of air
    quality programs must be based on sound science and must provide
    quantifiable benefits.
        Following is a list of principles for consideration during the
    multi-pollutant control program stakeholders meeting. Cost-effective
    reform of the Clean Air Act to improve air quality should:
          Limit the emissions of NOx, SO2 and mercury
    only. A multi-pollutant control program should not address greenhouse
    gas emissions, including CO2. The Department of Energy
    should address voluntary approaches to CO2 and ghg
    emissions.
          Move away from unit-by-unit, command and control
    approaches to programs that integrate flexible options such as
    emissions cap-and-trade strategies. Trading programs must recognize and
    credit utilities that have already made investments in air pollution
    control technology and newer 'cleaner' generating units. Over 56
    percent of public power's operating coal units are less than 20 years
    old.
          Allow flexible market-based mechanisms with broad
    emissions trading and banking within and between utility systems.
          Promote technology and incentive based programs designed
    to foster development and greater use of clean coal technologies and
    renewable energy programs. Any cost-share or incentive program that may
    be developed to offset the cost of emissions controls under a multi-
    pollutant control program must provide benefits to all affected
    electric utility sectors on a competitively neutral basis.
          Include adoption of a multi-pollutant control program
    that is tied to Clean Air Act regulatory reforms designed to remove and
    replace existing programs that would be made redundant by a multi-
    pollutant approach. CAA reforms, at the very least, should include
    changes to the New Source Review program. Unit specific technology
    controls imposed under NSR and New Source Performance Standards (NSPS)
    programs significantly limit the emissions trading flexibility required
    for companies to achieve greater reductions in the most cost-effective
    and efficient manner. Underlying programs, including the NOx SIP call,
    Section 126 rulemakings, the proposed regional haze rule and new rules
    for ozone and particulate matter must be removed entirely or, in some
    cases, streamlined and coordinated with the new program to assure
    greater certainty for future planning.
        In conclusion, APPA supports efforts to bring a rational approach
    to what currently is an uncoordinated and overly costly patchwork of
    new Clean Air Act regulatory requirements. Public power believes that
    additional ways to prevent stranded investments and reduce the
    uncertainties of incremental ratcheting of emission reduction
    requirements must be identified and implemented wherever reasonably
    practical.
                                   __________
             Statement of Americans for Equitable Climate Solutions
        Americans for Equitable Climate Solutions (AECS) is committed to
    developing and promoting policies by which the United States can
    achieve economically efficient solutions to the problem of climate
    change. The organization has 501(c)(3) status and is financially
    supported by both individual donations and foundation grants.
        AECS regards the Stakeholder meeting being conducted by the Senate
    Committee on Environment and Public Works as an important step toward
    developing a viable U.S. policy for protecting the climate system. We
    appreciate the Committee's invitation to comment on the aspects of the
    multi-pollutant legislation relevant to climate system protection.
    Items ``D'', ``E'', and ``F'' on the Committee's meeting agenda are
    directly relevant to the concerns of AECS.
        There are three basic issues that AECS believes are of paramount
    importance in shaping the climate related provision of a multi-
    pollutant bill. Each of these large issues also involves a few
    important sub-points. The main points are:
        1. The climate related provisions of an electric utility sector
    multi-pollutant bill must be structured to facilitate and encourage,
    rather than inhibit, the eventual transition to an eventual economy-
    wide domestic carbon emission control policy. The electric power sector
    accounts for only about one third of domestic carbon emissions. So
    clearly an electric power emission control bill represents only a start
    toward an adequate policy.
        a. A comprehensive economy-wide system of carbon emission controls
    would be incomparably more cost-effective than a patchwork of sector
    specific regulatory systems.
        b. To set carbon control policy on the path toward an efficient
    comprehensive system, rather than toward a wasteful patchwork, an
    electric power sector carbon emission control system must be, in
    effect, the first module of a more comprehensive policy. It must, in
    particular, avoid features that cannot be easily generalized to other
    sectors of the economy.
        c. A patchwork of sector-specific programs would also be extremely
    difficult to adjust as new emissions data or new scientific evidence
    called for either increases or decreases in the stringency of emission
    controls.
        2. Cost-effective economy-wide carbon emission control plans reduce
    emissions by creating property rights that reflect the scarcity of the
    atmosphere's ability to absorb greenhouse gases without triggering
    harmful climate change. Once such property rights have been created,
    the normal workings of the market ensure that uniform price signals
    discourage emissions throughout the economy. Specific structural
    features include:
        a. Creating of a limited number of tradable emission allowances and
    allowing businesses wishing to introduce carbon-based fuels into the
    U.S. economy to purchase these allowances.
        b. Establishing a ``safety valve'' price for carbon emission
    allowances at which unlimited quantities of allowances become
    available. The safety valve ensures that the economy is protected from
    harm even if the task of reducing carbon emissions proves to be
    unexpectedly expensive.
        c. Recognizing that interests who are importantly disadvantaged by
    emission controls should be aided in their economic adjustment through
    grants of some emission allowances, tax concessions, or direct
    financial assistance.
        d. Requiring emission allowances at or near the first point at
    which fossil fuel enters the U.S. economy in order to ensure
    comprehensive and uniform incentives and to minimize enforcement and
    compliance costs.
        3. Auctioning carbon emission allowances would be far superior to
    allocating them by a GPS. The generation performance standard (GPS)
    would be a highly problematic feature and perhaps a fatal flaw in the
    carbon provisions of any electric power multi-pollutant legislation.
    The generation performance standard works like the combination of a tax
    on carbon emissions and a subsidy to electricity production. The tax
    and subsidy aspects are contradictory. This inherent contradiction
    undermines the cost-effectiveness of any policy using a GPS allocation
    of emissions allowances. As a result, allocating carbon emissions
    through a GPS would entail several serious disadvantages, including:
        a. A GPS allocation of carbon emission allowances would impose much
    larger costs on society than would other available allocation methods
    such as an auction. Two analyses, one by Resources For the Future, an
    independent think tank, and another by the Energy Information
    Administration of DOE have both concluded that GPS entails far higher
    resource costs than auctioning allowances.
        b. As shown in the just cited analyses, one specific consequence of
    the GPS as applied to the electric utility sector would be a sharp
    spike in natural gas prices, i.e., allocating carbon emission
    allowances by GPS would cause a considerably larger natural gas price
    increase than would be occasioned by the same level of carbon emission
    control accomplished with a more efficient system for allocating
    emission allowances.
        c. The RFF analysis shows that the GPS would also cause a greater
    decrease in the asset value of the existing capital plant of the
    electric power sector than do other methods of allocating carbon
    allowances.
        d. Systems using GPS cannot readily be generalized to the economy
    as a whole. Because the GPS subsidizes each unit of economic output, it
    requires a legal definition of every specific kind of output to be
    covered by the emissions regulations. It also requires a regulatory
    standard to stipulate the amount of the subsidy to be granted for each
    unit of output. Thus, an economy wide version of a carbon GPS system
    would seem to entail either in a tangle of carbon regulatory standards
    covering nearly everything in the economy or--since that is clearly
    impossible--a discriminatory and partial system filled with gaps,
    loopholes, and special exceptions.
                                   __________
                 Statement of Center for a Sustainable Economy
        Thank you, Mr. Chairman, for the opportunity to present the Center
    for a Sustainable Economy's (CSE) comments as stakeholders consider
    proposals to reduce greenhouse gas emissions.
        Founded in 1995, CSE is a non-partisan, non-profit research and
    policy organization focused on market-based solutions to achieving a
    sustainable economy--one that integrates long-term economic prosperity
    and environmental quality.
        We have used extensive economic modeling and analysis to examine
    the effects of market-based approaches to energy and climate change
    policy on the economy, business, and workers. Our latest study--
    released July 12 in advance of the last round of U.N. climate change
    negotiations in Bonn, Germany--shows that several of the largest
    economies in Europe have tailored market-based proposals to reduce
    greenhouse gas emissions without harming their economies.
        CSE recommends that three basic elements be a part of any Committee
    proposal for reducing sulfur dioxide, nitrogen oxides, mercury, and
    carbon dioxide emissions: revenue-generation; ``just transition''
    provisions for workers; and technology incentives.
    Revenue
        One of the proposals on your agenda is ``cap-and-trade,'' where the
    government charges for the right to emit through sales or an auction at
    the time it distributes permits. This creates a market through which
    companies can buy and sell permits to meet their emissions targets. The
    revenues generated through initial government distribution can then be
    recycled back into the economy through incentives for the production of
    more energy-efficient technologies and vehicles; programs to develop
    alternative and renewable energy sources; transition assistance for
    energy-intensive industries and affected communities; improvements in
    energy infrastructure; or cuts in other taxes.
        This revenue-generating approach has wide support among policy
    experts and economists. In a report released last June, the
    Congressional Budget Office said that the government's selling of
    emission allowances--as opposed to giving them away--and recycling the
    revenue back into the economy would reduce the overall cost to the
    economy of cutting greenhouse gas emissions by 50 percent.
        In 1997, more than 2,500 economists, including eight Nobel
    Laureates, endorsed this kind of proposal to slow climate change. They
    stated that the most efficient approach the United States and other
    countries can use to reduce emissions of greenhouse gases is market
    mechanisms, such as the sale of emissions permits, in which ``revenues
    generated . . . can effectively be used to reduce the deficit or to
    lower existing taxes.''
        It's important to remember that what the Committee proposes with
    respect to electric utilities will have profound and far-reaching
    implications for other sectors of the economy as we move forward on
    energy and climate change policy. It is our strong view that
    ``grandfathering'' companies based on past performance, if applied
    beyond the utility sector, could become an insurmountable
    administrative burden and would leave the government with inadequate
    revenues to address critical issues arising in the transition to an
    economy based on lower greenhouse gas emissions.
    ``Just Transition"
        This debate has raised concerns in the labor community, especially
    in heavy manufacturing and energy-intensive industries, as to how they
    will fair if a multi-pollutant bill becomes law. CSE has consistently
    recommended that market-based policy packages be designed to minimize
    job dislocation and maximize job creation. These policies should be
    phased in gradually in an effort to hold the rate of shrinkage to the
    natural rate of turnover, so any change in employment level can be
    achieved through attrition rather than through layoffs.
        Where this kind of job-loss mitigation is not feasible,
    policymakers should consider including a remedy that leaves displaced
    workers, on the average, as well off economically as if they had not
    lost their jobs. For example, in our forthcoming report Clean Energy
    and Jobs: A Comprehensive Approach to Climate Change and Energy Policy
    (Barrett and Hoerner), which analyzes a specific climate change
    proposal, we recommend income replacement, including health insurance
    and retirement plan contributions, as well as worker training. Since
    large-scale layoffs affect entire communities, we also recommend that
    funds generated from auctioned permits or other provisions be provided
    for investment in local community development.
    Technology
        Another critical concern is the need to advance new, cleaner, and
    renewable technologies. Properly structured incentives for these
    technologies can accelerate the rate of technology development and
    provide a variety of other benefits that would not otherwise occur with
    greenhouse gas emission limits alone. In fact, promotion of clean
    technologies can help mitigate some of the economic impacts of
    addressing greenhouse gas emissions.
        CSE research indicates that providing incentives for clean
    technologies can have positive spillover effects for other related
    technologies that do not benefit from the incentive. This would happen,
    for example, if a tax credit for super-efficient vehicles resulted in
    higher gasoline mileage for vehicles that are not eligible for the
    credit.
        There are also a variety of benefits to society as a whole from
    providing incentives for clean and renewable technologies. These public
    benefits include improved balance of trade; reduced national security
    risks associated with the need to maintain uninterrupted oil flow;
    reduced environmental impacts in the United States from local air
    pollution; and reduced risk of climate change from greenhouse gas
    emissions. Our survey of the research indicates that the local
    environmental benefits alone make incentives for clean and renewable
    technologies well worth the investment.
        Thank you for considering these important issues as you debate the
    various multi-pollutant proposals.
                                   __________
                    Statement of Center for Clean Air Policy
           who wins and loses under a carbon dioxide control program?
    Results
          An auction allowance allocation can result in lower costs
    to the economy than a grandfathering allocation.
          Stock value of electricity sector decreases under 100
    percent auction allocation. Situation reverses with modest
    grandfathering.
          Shareholder value can be made constant by offsetting
    losses through grandfathering of allowances.
    Key Assumptions
          Assumes the economy is on the economic efficiency
    frontier except for taxes. The only way to gain efficiencies is by
    lowering taxes. Assumes all energy efficiency measures have been
    exhausted.
          Assumes regulation applies to all sectors (economy-wide),
    not just the power sector.
          Assumes Annex 1 only trading.

        Result No. 1: An auction allowance allocation can result in lower
    costs to the economy than a grandfathering allocation.
          Auctioning allowances and recycling revenues through
    marginal tax rate cuts instead of grandfathering allowances can
    significantly reduce the total cost to the economy of an economy-wide
    CO2 control program.
          When allowances are auctioned and revenues recycled
    through a personal income tax rate cut, the negative impact on the
    economy is half what it would be if all allowances are grandfathered.
        Result No. 2: Stock value of electricity sector decreases under 100
    percent auction allocation. Situation reverses with modest
    grandfathering.
          An auction allocation in which all revenues are recycled
    to taxpayers through a marginal income tax rate cut results in a net
    loss in equity value of almost 5 percent in the electricity sector.
          Grandfathering 25 percent of allowances to industries--14
    percent to utilities and 11 percent to all other industries--and
    recycling 75 percent through marginal income tax rate cuts raises
    electricity sector stock value by 18 percent compared to a business as
    usual, no policy scenario.
        Result No. 3: Shareholder value can be made constant by offsetting
    losses through grandfathering of allowances.

          The above figure shows the percentage of allowances
    needed to be given to each sector to hold stock value constant.
          Grandfathering 3.2 percent of allowances to the coal
    mining sector and 2.4 percent of allowances to the electricity sector
    mitigates reductions in stock value for these industries.
          The average equity value of the coal mining, crude oil/
    natural gas extraction, electricity generation, gas distribution and
    petroleum refining industries can be maintained at business as usual
    levels by grandfathering these industries only 9 percent of the total
    allowances under the full national carbon cap.
    Applicability of Results to Sector-Specific Emission Caps
          This analysis assumed a large, economy-wide carbon cap
    applied equally to large and small users of energy, whereas several
    carbon policy proposals are focused on programs that control emissions
    from one sector only. The results of this study of economy-wide
    CO2 regulation cannot be extended directly to a sector-
    specific program, but the finding that wholesale grandfathering of
    allowances will result in increases in a sector's stock value are
    likely to hold.
          The macroeconomic merits of recycling allowance auction
    revenues to reduce marginal tax rates would likely apply in a sector-
    specific approach as well.
          A sectoral approach is inherently less economically
    efficient than an economy-wide approach.
          This study's findings are promising enough to suggest
    that the cost-equity tradeoffs in using a mix of auctions and
    grandfathering should be carefully assessed for cap-and-trade programs
    targeting specific sectors.
    Allowance Allocation Methods
        Auction--Sources must purchase allowances to cover every emission
    generated. In this scenario, we evaluate the effects of an auction
    allocation for carbon in the context of a four-pollutant (4-P)
    approach. A GPS allocation is used for NOx, SO2 and Hg. This
    scenario is our ``4-P Auction'' approach.
        Generation Performance Standard (GPS) or Output-Based-Sources that
    generate electricity are allocated emissions according to a standard
    national emission rate. Sources may purchase any additional allowances
    needed to cover every emission generated (or sell excess allowances).
    In this scenario we evaluate the effects of a GPS allocation for carbon
    in the context of a 4-P approach. A GPS allocation is also used for
    NOx, SO2 and Hg. This scenario is our ``4-P GPS'' approach.
        Result No. 1: Allowance allocation has a small effect on compliance
    strategy and emissions.
    Generation Mix-Base Case v. 4-P Cases
        (Gas price = $2.26/mmbtu, Elasticity not included)

          In both 4-P policy scenarios, we see a significant amount
    of fuel switching from coal to natural gas as well as additions of
    technology-based control measures.
          At the same allowance price for carbon, the auction
    allocation leads to slightly more fuel switching from coal to gas. The
    GPS allocation, in contrast, leads to more end-of-pipe control
    technologies than the auction approach.
        Result No. 2: Allowance allocation has a large effect on
    electricity price, affecting electricity demand.

    Change in Electricity Generation Price from 4-P Cases
        (Gas price = $2.26/mmbtu, Elasticity not included)
          An auction allocation leads to a higher electricity price
    as fossil generators pay for each unit of emission.
          A GPS allocation leads to a lower electricity price to
    the extent that gas-fired generators set the price.
          The lower electricity price associated with the GPS
    allocation leads to increased electricity demand, and the higher
    electricity price associated with the auction leads to lower
    electricity demand.

        Demand Response to Price Elasticity (Price elasticity =-0.1)
          GPS leads to increased electricity demand while auction
    encourages conservation.
        Result No. 3: Allowance allocation has almost no effect on industry
    profits.
    Economic Performance of 4-P Policy Cases
        (Gas price = $2.26/mmbtu, Elasticity not included)

          Revenues and compliance costs are higher under the 4-P
    Auction case and lower under the 4-P GPS case.
          Net revenues to the utility sector is virtually the same.
    About the ORCED Model
          The model used in this analysis is the Oak Ridge
    Competitive Electricity Dispatch Model (ORCED), a dispatch model
    developed by Oak Ridge National Laboratory and adapted by the Center
    for Clean Air Policy.
          ORCED was used in the DOE Five-Lab Study as well as in
    other DOE projects.
          Modeling was conducted on the ECAR region.
                                   __________
         Principles on Multi-Pollutant Powerplant Clean Air Legislation
                             overarching principles
          The decade since the last Clean Air Act Amendments has
    brought an overwhelming body of fresh scientific evidence of human
    health and environmental damage associated with power plant air
    emissions, as well as increasingly cost-effective technology to reduce
    that damage.
          CATF supports the Clean Power Act of 2001 (S. 556).
    Sulfur dioxide
          Compelling evidence of unacceptable long range impacts of
    sulfur dioxide emissions (e.g., ultrafine particles, acid rain, haze)
    as well as significant local impacts (e.g., PM2.5 health
    impacts, visibility impacts on adjacent parks) has mounted consistently
    in 1990's.
          The evidence firmly establishes that nothing less than a
    75 percent reduction in sulfur emissions from Phase II levels (to
    approximately 2.25 million tons) will begin to address the problem
    adequately. Provision should be made for even deeper cuts in later
    years to spur development and commercialization of cleaner technology.
          In addition, protection for near-plant communities and
    particularly sensitive resources and ecosystems must be assured. The
    best mechanism to assure broad local protections is the application of
    a date certain by which all plants must meet best available control
    technology; in turn, this standard should be revised periodically to
    incorporate technological and economic progress.
          Because of special haze and acidification problems in the
    Western States, a Western sub-national sulfur dioxide cap should be
    included to ensure that pro rata emissions reductions occur in those
    States.
    Nitrogen oxides
          As with sulfur dioxide, the last decade has brought
    increasing evidence of unacceptable local impacts from nitrogen oxide
    emissions, both locally (ozone, PM2.5) and long range
    (eutrophication, PM2.5, ozone acid rain, haze)
          Nothing less than 75 percent year round reduction in
    nitrogen oxide emissions to 1.5 million tons will appropriately address
    these problems. Provision should be made for even deeper cuts in later
    years to spur development and commercialization of cleaner technology.
          Protections for local public health, ecosystems, and
    resources should be provided for as above in sulfur dioxide section.
    Mercury
          Evidence of the potency and persistence of human health
    and environmental impacts of this substance is increasingly clear and
    grave in its implications.
          Plant-by-plant mercury cuts in the 90 percent range
    appear feasible through mercury-specific control technologies; there is
    the potential for significant co-benefit mercury reductions from other
    pollutant initiatives as well.
          Accordingly, there is no compelling reason at this time
    to consider mercury emissions trading/averaging.
          A comprehensive bill must address all mercury emission
    pathways, including re-emission and dispersal from fossil fuel
    combustion waste disposal sites.
    Other air toxics
          The full range of air toxics should be addressed in any
    comprehensive bill if existing regulatory mechanisms for addressing
    these emissions such as section 112 are to be suspended.
          Details of these measures will depend on the specific air
    toxic in question.
          A comprehensive bill must address all air toxic emission
    pathways, including re-emission and dispersal from fossil fuel
    combustion waste disposal sites.
    C02
          CATF supports a power sector CO2 cap-and-trade
    system with caps set at 1990 power sector emission levels.
    Regulatory relief
          New clean air legislation concerning power plants must
    further rather than replace the Clean Air Act's current key goals and
    benchmarks, including, without limitation, the attainment of national
    ambient air quality standards, prevention of significant deterioration
    in air quality, remedying visibility impairment, application of maximum
    available control technology for toxic emissions, and the advancement
    of new, cleaner technologies.
          States and localities must not be preempted from enacting
    tighter emissions controls than those contained in the Act.
                                   __________
                         Statement of Clean Power Group
    Key Principles
          A suitable multi-pollutant cap-and-trade program can be
    an environmentally beneficial replacement for conventional new source
    review while improving industry certainty and reducing costs to
    industry and consumers.
          Under a cap, NSR does not provide emission reductions.
          A suitable cap without NSR will yield lower emissions
    than a conventional program with NSR.
          NSR reform must include both new and existing sources.
          All participants in a trading program should be treated
    the same with respect to allocation.
          Allowances should be redistributed frequently, based on
    output.
          New technology needs to be encouraged for all fuels.
          Caps should be phased in gradually with an economic
    circuit breaker.
    Clean Power Group Proposal
          Apply gradually declining caps on NOx, SOx, mercury and
    potentially CO2 for all generators.
          Caps replace BACT/LAER, offsets, mercury MACT, regional
    control programs.
          Backstops:
          NSPS requirement and local air quality impact review.
          Guaranteed cap ``way-points''.
          Minimum compliance levels for mercury.
          Economic circuit breaker slows tightening of cap if
    required.
    Benefits
          Earlier reductions and more continuing reductions than
    other approaches.
          More complete/efficient NSR reform.
          Promotes adoption of energy efficiency and new
    technologies for all fuels.
          Minimizes cost through gradual implementation and
    technology forcing.
          Promotes timely development of new generating capacity.
          Compatible with future potential programs to control
    CO2.
                                   __________
                 Statement of Electric Power Supply Association
        Thank you for inviting the Electric Power Supply Association (EPSA)
    to participate in the Senate Environment and Public Works Committee
    stakeholder meeting to discuss proposed multi-pollutant legislation.
    EPSA and its member companies, who are participants in the competitive
    electric power market, look forward to participating in the meeting.
        EPSA is a trade association that represents the competitive power
    supply industry including generators and marketers. The competitive
    power supply industry owns at least 33 percent of the existing
    generation capacity in the United States and has announced plans to
    build over 300,000 MWs of new generation. While most new generation
    facilities are fueled by natural gas, existing competitive generation
    burns all fuel types including renewables, coal and nuclear.
        EPSA members recognize environmental policy has a significant
    impact on energy resources and investments. EPSA supports environmental
    legislation that takes advantage of competitive and market-based
    forces. Environmental policies should recognize and value the
    significant contribution to environmental quality improvement made by
    newer and cleaner sources of power generation and remove environmental
    legal and regulatory barriers to full and fair competition among these
    generators. At the same time, environmental policies should recognize
    and value the importance of existing facilities' contributions to
    national environmental improvements and their role in maintaining the
    reliability of the electric power system . As requested, EPSA provides
    the following principles and comments in advance of the stakeholder
    meeting:
    I. EPSA Supports a Multi-pollutant Approach
        EPSA member companies are now making and will continue to make
    large investments in pollution control equipment. Well-crafted
    legislation will enhance environmental compliance planning by companies
    and provide greater energy and environmental investment certainty while
    achieving air quality goals. Multi-pollutant legislation must include
    consideration of the following:
          A multi-pollutant approach that is flexible, market-based
    and recognizes the importance of fuel diversity in preserving the
    nation's energy security,
          Reductions in NOx, SO2, and mercury (Hg) based
    upon careful consideration of national human health and air quality
    needs. Implementation schedules must allow time for project planning
    and construction and emission limitations must be within the bounds of
    technological capabilities,
          Inclusion of a CO2 program to achieve the goal
    of enhanced planning and investment certainty needs to be part of the
    discussion. Any CO2 program, whether mandatory or voluntary,
    must be flexible in its application, and market-based,
          Recognition of environmental performance improvements
    already made under the 1990 Clean Air Act.
    II. EPSA Supports a Market Based Trading Approach
        The cap-and-trade approach captures the power of free markets while
    satisfying air quality goals in a flexible, least-cost way. Appropriate
    caps for NOx, SO2 and Hg must be established using the
    principles stated above. EPSA particularly emphasizes that any
    allowance trading system must provide for ready entry into the system
    by new, competitive power generation facilities. Trading systems will
    work best if allowance credits are:
          Broadly and fairly distributed,
          Available to new participants, and
          Freely traded in a robust market.
        EPSA members have not reached agreement on the issue of a cap for
    CO2, but do agree and support trading as a key element of a
    CO2 program. Any CO2 program must:
          Maximize trading flexibility, allowing trading or
    averaging within a company's portfolio of assets, both domestically and
    internationally, and
          Allow trading with other entities, and include offsite
    carbon offsetting or sequestration projects, both domestically and
    internationally.
    III. EPSA Supports New Source Review Reform
        Appropriate national caps for NOx, SO2 and Hg must
    consolidate and replace the current and future requirements for
    numerous national and regional programs such as regional haze,
    PM2.5, ozone transport and Hg Maximum Achievable Control
    Technology (MACT), as well as allow for reform of the New Source Review
    (NSR) process. NSR reform must include:
          Elimination of burdensome NSR requirements at existing
    power facilities,
          Replacement of BACT/LAER review with a modern new source
    standard that provides for expedited permitting of new, clean
    technology power facilities,
          Elimination of current offset requirements under any cap-
    and-trade system requirements.
    IV. EPSA Supports a Legislative Safe Harbor Period
        The goal of planning and investment certainty is only achieved if
    multi-pollutant legislation is comprehensive in scope and provides a
    safe harbor from further national and regional air emission reduction
    requirements for a period of 15 years or more.
        The Electric Power Supply Association recognizes the importance of
    multi-pollutant legislation and offers the abovementioned principles
    and comments in support of a successful stakeholder meeting and
    ultimate legislation. EPSA and its member companies recognize that
    there are many complexities that surround each of the issues discussed
    above. We stand ready to assist you as you work toward successful
    development of a national multi-pollutant strategy.
                                   __________
                   Statement of Energy for a Clean Air Future
    I. Goals
          Set emission reduction targets that respond to current
    and anticipated air quality needs
          Protect the environment while preserving the diverse fuel
    mix required for future economic growth and energy security
          Create a stable and predictable climate for capital
    investment in the energy sector
          Replace the multiple deadlines and requirements that now
    apply to the power sector with clear long-term emission reduction goals
          Implement emission reductions in phases to avoid
    jeopardizing reliability and allow development of advanced emission
    control technologies
          Rely on cost-effective trading programs as opposed to
    source-specific technology mandates
    II. Three-Pollutant Framework
          Require a 62 percent nationwide reduction in annual NOx
    emissions, implemented in two phases (2004 & 2010) under a national
    cap-and-trade program (2.35 million ton cap)
          Require a 50 percent nationwide reduction in
    SO2 emissions in two phases (2008 and 2012) building on
    framework of the Title IV national trading program (4.5 million ton
    cap)
          Reduce mercury emissions in two phases--30 percent by
    2010 and a minimum of 50 percent by 2013, with deeper reductions if
    warranted by independent review, implemented through a national system
    of tradable mercury allowances
          Eliminate NSR/PSD program for existing generating units
    and control new units with NSPS-type guidelines requiring cost-
    effective controls reflecting energy and environmental impacts
          Assure that national programs for NOx, SO2 and
    mercury will be the exclusive vehicle for national and regional
    controls for these pollutants, superseding existing authorities
          Create ``safe harbor'' for new reduction requirements
    until 2015
    III. CO2
          Set fuel-and-technology specific benchmarks for new units
    (no overall emissions target)
          Set fuel-and technology-specific heat utilization
    benchmarks for existing units or allow plants to use emissions baseline
    benchmarks
          Implement program through flexible market-based systems
    with the option of generating credits for cost-effective on-system or
    off-system reductions of CO2 or other GHGs
          Assuming full industry participation, program would
    result in flattening rate of CO2 emissions growth and
    addressing emissions from power plants (e.g., stabilizing existing
    units at 2000 levels by 2010)
          To encourage voluntary industry participation, provide
    safe harbor protection, baseline protection and credit for early action
                                   __________
                       Statement of Environmental Defense
        Environmental Defense welcomes the opportunity to participate in
    the stakeholder session convened by the Environment and Public Works
    Committee. We believe that the case for a comprehensive effort to
    address utility air emissions is compelling. Power plant emissions
    contribute critically to the problems of climate change, acid
    deposition, haze and air quality degradation in the West and non-
    attainment of the health-based standards for ground-level ozone and
    fine particles. A comprehensive approach must mandate aggressive
    reductions in all power plant emissions that lead to these crucial
    threats to human health and the environment. For that reason,
    Environmental Defense has endorsed the Jeffords-Lieberman power plant
    legislation.
    Mandatory carbon dioxide reductions are essential
        A comprehensive effort to address utility emissions in the United
    States must include provisions to cap and reduce emissions of carbon
    dioxide, the principal anthropogenic greenhouse gas. The United States
    is legally bound to observe the objective of ``stabilization of
    greenhouse gas concentrations in the atmosphere at a level that would
    prevent dangerous anthropogenic interference with the climate
    system.''\1\  The Third Assessment Report of the Intergovernmental
    Panel on Climate Change (IPCC), released earlier this year, states that
    ``most of the observed warming over the last 50 years is likely to have
    been due to the increase in greenhouse gas concentrations,'' and
    estimates that warming in the coming century will reach 1.4-5.8 C if
    emissions are not limited. IPCC finds that warming of between 1 and 2
    degrees C is likely to pose high risks to unique and threatened
    ecosystems, and to lead to increases in the risk of extreme climate
    events.\2\  This translates to an atmospheric concentration target of
    approximately 450 ppm CO2-equivalent. In the view of
    Environmental Defense, the U.S. electricity sector, as one of the
    largest emitting sectors in the nation that is the world's largest
    emitter of CO2, thus has an undeniable responsibility to
    make substantial CO2 reductions to assist in meeting this
    target. Imposing this obligation on this sector is one of the most
    cost-effective policies the United States can adopt to meet its current
    treaty obligations. To date, however, notwithstanding the large number
    of voluntary efforts to achieve emissions reductions in the sector,
    total CO2 emissions from electric utilities have continued
    to rise. Environmental Defense therefore urges enactment of legislation
    that places a strong, mandatory cap on CO2 emissions from
    this sector and requires reductions to levels that are consonant with
    the goal of preventing dangerous interference in the climate system.
    ---------------------------------------------------------------------------
         \1\United Nations Framework Convention on Climate Change (UNFCCC),
    Article 2, ratified by the United States with the unanimous consent of
    the Senate in 1992.
         \2\In 2001, the U.S. National Academy of Sciences, at the request
    of President George W. Bush, issued a report analyzing climate science,
    finding that ``temperatures are in fact rising. The changes observed
    over the last several decades are likely mostly due to human
    activities.'' NAS reported that IPCC's findings are ``robust'' and its
    work is ``admirable.''
    ---------------------------------------------------------------------------
        If land use crediting is to be included in multi-pollutant
    legislation, it must be done only in a way that guarantees the
    environmental integrity of the CO2 emissions reduction
    program, and that supports a regulatory system for reducing greenhouse
    gas emissions from the utility sector. With poor design, the inclusion
    of credit for such activities could undermine a regulatory system, the
    principal purpose of which is to reduce emissions from utilities.
    However, it is possible that with appropriate rules, the inclusion of
    land use crediting in multi-pollutant legislation would provide the
    potential to make deeper and more rapid reductions in atmospheric
    greenhouse gases. Moreover, done properly, land use crediting can also
    provide ancillary environmental benefits, such as tropical forest
    conservation, forest restoration, and reduced soil erosion.
    Further reductions in SO2 and NOx are required
        The sulfur dioxide program for curbing acid rain established by
    Title IV of the Clean Air Act has achieved a signal success in
    decreasing emissions of the pollutants that cause acid deposition at
    the lowest possible cost to emitters. During Phase I of the program
    sulfate deposition has been observed to decrease in many areas. For
    these results and for its forging of a new ``cap-and-trade'' template
    the program has been widely touted as a success. Notwithstanding these
    results, the program has not yet achieved the environmental objectives
    of safeguarding for the recovery of vital ecosystems from the ravages
    of acid deposition. Advances in atmospheric and health sciences
    strongly suggest that we must reduce SO2 emissions by an
    additional 80 percent and, at the very least, extend the NOx reductions
    mandated in the NOx SIP call to nationwide coverage on a year-round
    basis. Recent EPA analysis has shown that these reductions can be made
    well under $2,000 per ton for each pollutant, making them among the
    most cost-effective reductions available. Indeed, using that economic
    benchmark even deeper reductions, at least in the case of NOx, are
    available at similarly low cost from the power plant sector.
        Since 1990, a body of scientific investigations has documented the
    deleterious health effects associated with fine particles and the need
    for policy actions to address these effects. Sulfur dioxide and
    nitrogen oxides are major precursors to the fine particles that reach
    the deep recesses of the lungs. These fine particles present distinct
    risks for individuals with respiratory and cardiovascular disease, the
    elderly who are at risk of cardiopulmonary impacts, children who are at
    greater risk of increased respiratory symptoms and decreased lung
    function, and asthmatic children and adults who are at risk of more
    serious symptoms. The benefits of safeguarding Americans from the
    harmful effects of fine particles are well-documented in EPA's
    Regulatory Impact Analysis for the 1997 NAAQS and recent analysis by
    Resources for the Future on the considerable benefits of expanding the
    NOx SIP call year-round.
        We also now know that NOx emissions, which were underestimated as a
    cause of air pollution, in fact play an important role in the formation
    of fine particle concentrations, ground level ozone, acid deposition,
    western haze, and nitrogen deposition. We have also learned that sulfur
    dioxide not only contributes significantly to fine particle
    concentrations and acid deposition, but also to reduced visibility in
    our great scenic vistas. Thus, at the likely costs of achieving
    reductions in SO2 and NOx emissions, national legislation
    that capped power plant emissions at these levels would provide the
    foundation, if not the complete structure, for highly cost-effective
    ozone and fine particle attainment strategies in a great many areas--in
    addition to addressing western haze and nitrogen deposition.
        Further, acid deposition associated with SO2 emissions
    is still a serious environmental problem. Sulfate concentrations of
    surface waters in the Southern Appalachian Mountains have been
    increasing steadily for more than a decade, making for an increasingly
    inhospitable environment for trout and other fish species. A majority
    of Adirondack lakes have not shown recovery from high acidity levels
    first detected decades ago. Forests, streams, and rivers in the Front
    Range of Colorado, the Great Smoky Mountains of Tennessee, and the San
    Gabriel and San Bernardino Mountains of California are also now showing
    the effects of acidification (NAPAP 1998). As documented in GAO's March
    2000 Report to Congress (Acid Rain: Emission Trends and Effects in the
    Eastern United States), we must substantially curtail both
    SO2 and NOx emissions to effectively protect threatened
    ecosystems.
        Nitrogen deposition also threatens other important resources.
    Airborne deposition of nitrogen accounts for a significant percentage
    of the nitrogen content of coastal water bodies stretching from the
    Gulf Coast up and around the entire length of the eastern seaboard.
    Long Island Sound, the Chesapeake Bay, Delaware Bay, Tampa Bay, and
    North Carolina's Newport River are estimated to receive considerable
    nitrogen inputs from the air (Ecological Society of America, 1997).
    Indeed, the National Academy of Science's recent report on nutrient
    pollution in coastal waters estimates that atmospheric deposition is
    the dominant source of nitrogen from non-point sources in the
    Chesapeake Bay's major tributaries.
        In sum, our current understanding of both sound science and sound
    economics obligate Congress and the President to move quickly to reduce
    substantially emissions of SO2 and NOx. Again, only a
    substantial, year-round lowering of emissions levels will help address
    harmful fine particle concentrations, acid rain, and nitrogen
    deposition in coastal waters.
    WRAP conclusions should guide policymaking in the West
        The Grand Canyon, Rocky Mountain, Zion, Glacier, and Yellowstone
    National Parks are some of the most recognized natural wonders in the
    world. But each, as well as numerous other class I areas in the West,
    suffer from air pollution--known as regional haze--that can
    dramatically impair the vistas that attract millions of tourists to
    these vital parts of our national heritage annually. In the 1977 Clean
    Air Act Amendments, the Congress established a visibility protection
    program that was expressly intended to remedy existing and prevent
    future visibility impairment at class I areas. That statutory program
    was modestly successful in lowering emissions from large power plants
    whose plumes could be directly traced to impairment in a class I area.
    For years, EPA failed to adopt regulations to deal with the broader
    problem of regional haze--the regionally homogenous haze that emanates
    from a large number of sources and impairs visibility over a large
    area.
        As a result, the Congress reinvigorated the program in 1990 by
    charging the Grand Canyon Visibility Transport Commission with making
    recommendations to address haze. The Commission, composed of western
    Governors, tribal leaders and Federal agencies, relied heavily on
    citizen, business, and conservation group participation in fashioning a
    comprehensive approach for abating regional haze. Its successor
    agency--the Western Regional Air Partnership or ``WRAP"-recently
    proposed to EPA a detailed plan for reducing SO2 emissions
    from all stationary sources larger than 100 tons/year by 2018. That
    plan is based on a regional trading program with a declining cap, and
    would cut SO2 emissions from western utilities by about 65
    percent beyond the allocations under phase II of the acid rain program.
    The WRAP retained ICF Consulting to perform an economic analysis of the
    program, which found that a regional SO2 cap in the West
    would have inconsequential impacts on the region's economy. The
    consensus-based, decentralized process that shaped this western policy
    has been broadly embraced by a bipartisan group of western Governors
    which have heralded this as a quintessential example of their ``en
    libra'' doctrine.
        Any multi-pollutant legislation should ensure sulfur dioxide
    emission reductions in the West that are at least as protective of the
    nation's crown jewels as provided for under the recommendations put
    forward by western States and tribes. The national legislation must
    include an effective ``nested'' regional SO2 cap.
    NOx emission reductions in the West are imperative
        There are compelling reasons to lower NOx emissions from the
    electric utility sector in the West. The West has its own ozone-related
    health problems. Places like Phoenix, Reno, Salt Lake City, Las Vegas,
    Denver, and broad reaches of California, home to millions of
    westerners, have elevated ozone pollution concentrations relative to
    the old 1-hour ozone standard or the new health-based 8-hour ozone
    standard. In addition, long-term monitoring data from the National Park
    Service indicate that ozone pollution concentrations in Canyonlands,
    Grand Canyon, Rocky Mountain, and Yellowstone National Parks are
    significantly worsening. This suggests that rising NOx emission levels
    in the West are increasingly reaching and impinging upon remote rural
    areas. NOx emissions in the West also contribute to deleterious fine
    particle concentrations, regional haze in several national parks,
    ``brown clouds'' in major western cities, and nitrate deposition in
    sensitive ecosystems. NOx emissions from the electric utility sector
    are a consequential source of this contaminant. While NOx emissions
    from the transportation sector will be lowered with fleet turnover
    under EPA's new emission standards for onroad light-duty and heavy-duty
    vehicles, NOx emissions from the electric utility sector will be of
    increasing importance relative to these reductions and in absolute
    terms as utilization of existing power plants increases and new sources
    come on line.
        Multi-pollutant legislation must ensure considerable, year-round
    NOx emission reductions in both the eastern and western regions of the
    country.
    Existing local protections must be maintained
        Under no circumstances must the air quality protections provided by
    the Clean Air Act be weakened in power plant emissions control
    legislation.
        For example, the NAAQS and PSD programs are the cornerstones of the
    Clean Air Act, establishing the framework for achieving and maintaining
    clean, healthy air across the country. While we vigorously support the
    use of well-designed, geographically tailored emissions cap-and-trade
    programs to address regional and national air quality concerns
    efficiently--and with superior environmental performance, such programs
    cannot supplant the core elements of Title I that protect local air
    quality. Comparisons between pure emissions caps with the emissions
    cap-and-trade program erected under the Clean Air Act's acid rain
    program are misplaced. The acid rain program was designed to
    complement, not replace, vital local air quality protections.
    Accordingly, we also oppose eliminating time-tested, effective local
    protections in favor of a national emissions cap. Vital programs and
    policies include, but are not limited to: nonattainment NSR and the
    corresponding requirements for LAER and offsets; PSD and the
    corresponding requirements for BACT; increments and class I area
    protection; the BART requirement under the visibility protection
    program; the requirement for existing sources in nonattainment areas to
    install RACM, and the safeguards on public participation in the
    permitting process for new and modified sources.
        Multi-pollutant legislation must not become the guise for
    dismantling core Clean Air Act programs, including NSR, PSD, BART,
    RACM, and public participation in the permitting processes for new and
    modified sources.
                                   __________
       Statement on Allowance Allocation Systems, Presented by E. Donald
                     Elliott on behalf of FirstEnergy Corp.
        FirstEnergy supports the proposal to allocate allowances based on
    output on a generation-neutral basis to all sources of electrical
    power. This simple system allocates to each company a share of
    available allowances proportional to its contribution to electrical
    power.
        FirstEnergy is a diversified energy services holding company
    headquartered in Akron, Ohio. It's four electric utility operating
    companies comprise the nation's tenth largest investor-owned electric
    system serving 2.2 million customers within 13,200 square miles of
    northern and central Ohio and western Pennsylvania. FirstEnergy is in
    the process of merging with New Jersey-based GPU, Inc., a transaction
    that will make FirstEnergy the fourth-largest investor-owned electric
    system in the country, based on serving 4.3 million customers.
    FirstEnergy owns and operates more than 13,000 megawatts of generation.
    Of this, 62 percent is coal-fired, 32 percent is nuclear and the rest
    is natural gas, oil, or pumped-storage hydro.
        FirstEnergy has been a long-time supporter of market-based
    mechanisms to control pollution, and we believe that the next step in
    the evolution of trading systems is to allocate tradeable allowances to
    all producers of electricity on a fair and equal basis, not just those
    sources that are contributing to the pollution problems. In short, we
    support the ``output-based, generation-neutral'' method for allocating
    allowances.
        The idea is a simple one: allowances should be allocated for
    producing electricity, not for producing pollution. This principle of
    allocating allowances based on output (rather than heat input) has been
    used successfully in several other environmental trading programs, such
    as the lead phase down for refineries, and Individual Transferable
    Quotas under the Marine Fisheries Act.
        FirstEnergy filed extensive comments on the advantages of the
    output-based approach with EPA in the NOx SIP-call and we and others
    supporting this approach have discussed its advantages in series of
    meetings and other public forums with EPA and others over the last few
    years. In brief, the output-based, generation-neutral approach is
    superior to other methods for allocating allowances (such as the
    historic heat-input method used in the Acid Rain trading program) for
    the following reasons:
          Increases incentives for renewables and non-emitting
    generation.
          Rewards more energy efficient generation of electricity.
          Forces technology by creating strong incentives to
    develop new methods to reduce pollution.
          It is Fair--It does not favor one form of power
    generation over another, but lets the market decide between various
    forms of power generation.
          More fully internalizes externalities and creates dynamic
    incentives to invest more in non-polluting and less-polluting
    technologies.
          Promotes liquidity by creating a pool of readily
    tradeable allowances.
          Produces substantial co-pollutant benefits.
          Promotes energy diversity.
        We are pleased that leading environmental economists such as
    Professors Robert Hahn (of AEI-Brookings) and Professor Robert Stavins
    (of Harvard University) have endorsed the output-based, generation
    neutral approach. In addition, during the last Administration, after
    substantial study and stakeholder participation, EPA in its action on
    the Section 126 petitions announced its intention to transition to an
    output-based method of allocating allowances.
        We believe that the intellectual case for output-based allocation
    is clear in papers by Professors Hahn and Stavins and elsewhere. A
    comprehensive, output-based system produces far better policy
    incentives than an Acid Rain-type allocation system without creating
    the enormous capital demands on the utility industry and resulting
    instability that would accompany an auction. With the transition to
    competition, it is particularly important to allocate allowances on a
    far and even-handed basis that does not favor some methods of power
    generation or regions of the country. With output-based allocation of
    allowances, the only competitive difference between companies is
    properly based on the amount of pollution they produce per unit of
    power.
        Some have tried to steal the name ``output-based'' by suggesting an
    approach that they call ``output-based'' but which excludes certain
    types of power generation for political reasons. We are strongly
    opposed to picking some forms of power-generation and disqualifying
    others. We think that the market should decide on the relative mix of
    technologies and fuels, but with a level-playing field that allocates
    valuable allowances equally to all technologies based on their
    contributions to power generation. We favor internalizing
    externalities, and allocating allowances to all forms of power
    generation equally and on a nondiscriminatory basis in proportion to
    their contribution to meeting the consumer's demand for power. A true
    ``output-based'' system is based just on electrical output and not
    other extraneous factors. Such a system will help to insure that we
    have a diversity of fuel-sources by creating stronger incentives for
    non-emitting generation and thereby providing more ``room for coal''
    under stringent pollution caps.
        Output-based, generation-neutral is a fair, non-discriminatory
    approach to allocating allowances, and we commend it to the Committee's
    attention.
                                   __________
               Statement of the Hubbard Brook Research Foundation
        The Hubbard Brook Research Foundation recently convened a team of
    scientists to synthesize over thirty years of acid rain data. The
    results of effort are relevant to the current mulit-pollutant
    legislation and are summarized below. This summary is based on a paper
    published in BioScience, vol. 51, no. 3, 2001. As legislation is
    developed, it is critical to include a provision for long-term
    observation and monitoring of the regulated pollutants and their
    effects. To this end, a summary of recommended funding to secure and
    improve existing national monitoring networks is included as well.
        Long-term research from the Hubbard Brook Experimental Forest
    (HBEF) and other sites across the northeastern US were used to
    synthesize data on the effects of acidic deposition and to assess
    ecosystem responses to reductions in emissions. Based on existing data,
    it is clear that in the northeastern US:
          Reductions of SO2 emissions since 1970 have
    resulted in statistically significant decreases in
    SO42-in wet/bulk deposition and surface water.
          Emissions of NOx and concentrations of NOx in wet/bulk
    deposition and surface waters show no increase or decrease since the
    1980's.
          There is considerable uncertainty in estimates of
    NH3 emissions, although atmospheric deposition of NH4' is
    important for forest management and stream NOx loss.
          Acidic deposition has accelerated the leaching of base
    cations from soils, delaying the recovery of ANC in lakes and streams
    from decreased emissions of SO2. At the HBEF, the available
    soil Ca pool appears to have declined 50 percent over the past 50
    years.
          Sulfur and N from atmospheric deposition have accumulated
    in forest soils across the region. Slow release of these elements from
    soil has delayed recovery of lakes and streams.
          Acidic deposition has increased the concentration of
    toxic forms of Al in soil waters, lakes and streams.
          Acidic deposition leaches cellular Ca from red spruce
    foliage, which makes trees susceptible to freezing injury, leading to
    over 50 percent mortality of canopy trees in some areas of the
    Northeast.
          Extensive mortality of sugar maple in Pennsylvania has
    resulted from deficiencies of Ca2 and Mg2.
    Acidic deposition has contributed to the depletion of these cations
    from soil.
          41 percent of lakes in the Adirondacks and 15 percent of
    lakes in New England exhibit chronic and/or episodic acidification. 83
    percent of these impacted lakes are acidic due to atmospheric
    deposition.
          There have been modest increases in the ANC of surface
    waters in New England and no significant improvement in the Adirondack
    and Catskill regions with recent decreases in atmospheric S deposition.
          Acidification of surface waters results in a decrease in
    the survival, size and density of fish, and loss of fish and other
    aquatic biota from lakes and streams.
        Further, it is anticipated that recovery from acidic deposition
    will be a complex, two-phase process in which chemical recovery
    precedes biological recovery. The time for biological recovery is
    better defined for aquatic than terrestrial ecosystems. For acid-
    impacted aquatic ecosystems, it is expected that stream
    macroinvertebrate and lake zooplankton populations would recover in 3-
    10 years after favorable chemical conditions were re-established, and
    fish populations would follow. For terrestrial ecosystems, trees would
    probably respond positively to favorable atmospheric and soil
    conditions over a period of decades.
        Indicators of chemical recovery (soil percent base saturation, soil
    Ca/Al ion ratios and surface water ANC) were used to evaluate ecosystem
    response to proposed policy changes in SO2 emissions.
    Projections using an acidification model (PnET-BGC) indicate that full
    implementation of the 1990 CAAA will not result in substantial chemical
    recovery at the HBEF and many similar acid-sensitive locations. While
    uncertainties remain, our analysis indicates that current regulations
    will not adequately achieve the desired ecological outcomes of the 1990
    CAAA. These desired outcomes include: increases in the ANC of lakes and
    streams, improvements in the diversity and health of fish populations,
    decreases in the degradation of forest soil and stress to trees. Model
    calculations indicate that the magnitude and rate of recovery from
    acidic deposition in the northeastern US is directly proportional to
    the magnitude of emission reductions. Model evaluations of policy
    proposals calling for additional reductions in utility SO2
    and NOx emissions, year-round emission controls, and early
    implementation (2005) indicate greater success in facilitating the
    recovery of sensitive ecosystems and accomplishing the goals of the
    Clean Air Act than current 1990 CAAA targets. Note that until
    transportation emissions of NOx are curtailed, there will be increased
    potential for a condition where improvements in acidic deposition from
    SO2 controls by utilities will be offset somewhat by NOx
    emissions. Specific emission reductions targets should be based on
    clear goals for the desired extent and schedule of recovery of
    sensitive aquatic and terrestrial ecosystems which are consistent with
    the goals of the Clean Air Act.
        Environmental monitoring is critical to national environmental
    policy. Monitoring of atmospheric deposition and surface water
    chemistry provides the only quantitative means of assessing the
    efficacy of State and Federal policy. There are several national
    monitoring networks that provide data to scientists and policymakers
    and need greater security and support. Five specific networks require
    increased Federal funding to stabilize, expand and/or update the
    monitoring network.
        1. National Atmospheric Deposition Program (NADP)--The NADP program
    is a successful inter-agency network that monitors wet deposition of
    sulfate and nitrate associated with fossil fuel emissions. The USGS is
    the lead Federal agency and the EPA plays a strong supporting role. The
    coverage and baseline funding for this program are adequate to ensure a
    high-quality network. However, as the oldest network in the United
    States, the system needs substantial modernization and a modest number
    of new sites.

    ------------------------------------------------------------------------
              Proposal                   Amount                Agency
    ------------------------------------------------------------------------
    Federal support for annual    $3.6 million........  Inter-agency
     operating costs.
    Modernization of existing     $6.0................  EPA
     260+ sites and installation
     of 10 new sites.
    ------------------------------------------------------------------------

        2. Clean Air Status and Trends Network (CASTNet)--The CASTNet
    program, administered by the EPA, measures the component of atmospheric
    deposition that enters the environment in dry forms such as particles
    and gases. Monitoring dry deposition is critical to determining the
    total pollution load across the United States. In some areas, dry
    deposition contributes as much as 59 percent of the total sulfur
    deposition. At present, CASTNet is a sparse network with only 70 sites
    nation-wide and none in the central United States.

    ------------------------------------------------------------------------
              Proposal                   Amount                Agency
    ------------------------------------------------------------------------
    Federal contribution to       $5.0 million........  EPA
     annual operating costs.
    Installation of 30 new sites  $1.5................  EPA
    Modernization of existing 79  $3.1................  EPA
     sites.
    ------------------------------------------------------------------------

        3. Mercury Deposition Network (MDN)--The mercury deposition network
    is a patchwork of sites, occurring mostly in the Northeast, that is
    funded through contributions by State agencies. Some of the highest
    mercury emitting States, such as Ohio, Kentucky and West Virginia, have
    no deposition monitoring. Given the tremendous public importance of
    mercury pollution, it is essential that monitoring be established to
    develop a mercury deposition baseline and to track changes over time.

    ------------------------------------------------------------------------
              Proposal                   Amount                Agency
    ------------------------------------------------------------------------
    Federal contribution to       $1.0 million........  EPA
     annual operating costs.
    Installation of 60 new sites  $2.0................  EPA
     and upgrade existing sites.
    ------------------------------------------------------------------------

        4. Temporally Integrated Monitoring of Ecosystems (TIME) and Long-
    Term Monitoring--The TIME/LTM program monitors lake and stream
    chemistry and documents changes in response to changing emissions and
    acid deposition. This program is administered through the EPA. TIME/LTM
    is the only national network that directly measures the impact of
    atmospheric deposition and quantifies the affect of emissions controls.
    Funding for the TIME/LTM program is both inadequate and unstable.
    Funding has been cut 50 percent over the past 2 years and the program
    appears to be sited for discontinuation.

    ------------------------------------------------------------------------
              Proposal                   Amount                Agency
    ------------------------------------------------------------------------
    Federal contribution to       $2.5 million........  EPA
     annual operating costs.
    ------------------------------------------------------------------------

        5. Atmospheric Integrated Research Monitoring Network (AIRMon)--The
    AIRMon program provides high resolution precipitation and dry
    deposition chemistry using daily sampling methods operated by the
    National Oceanic and Atmospheric Administration (NOAA). Funding for
    this program has been flat for 10 years resulting in the unfortunate
    closer of 3 AIRMon dry depositionsites (Sequoia. CA; Panola, GA; and
    Burlington, VT). Without an increase in annual operating funds, more
    site closures are inevitable. Moreover, AIRMon equipment dates to 1984
    and has exceeded its life expectancy.

    ------------------------------------------------------------------------
              Proposal                   Amount                Agency
    ------------------------------------------------------------------------
    Federal contribution to       $1.5 million........  NOAA
     annual operating costs.
    Modernization of existing 20  $1.0................  NOAA
     sites.
    ------------------------------------------------------------------------

                                   __________
          Statement of Izaak Walton League of America, Midwest Office
        ``Clean air is a public necessity; no person or agency has the
    right to degrade this resource.'' This statement from the Izaak Walton
    League of America's conservation policies embodies our position on
    multi-pollutant legislation intended to reduce pollution from the
    electric utility sector. The Izaak Walton League of America (the
    ``League''), represents 50,000 hunters, anglers and outdoor enthusiasts
    from across the United States. We are united in our commitment to a
    basic mission that demands controls be placed on sources of pollution
    that endanger our health and environment.
        As the largest single source of air pollution nationally, electric
    power plants pose a threat to our human and environmental health. The
    League's Midwest, Minnesota and Virginia power plant campaigns, active
    for over 4 years, are aimed at addressing this source of pollution.
        In the upper Midwest, mercury pollution threatens our human health
    and our outdoor heritage, including angling. Fish in lake after lake
    have been tested and found too contaminated with mercury, a potent
    neuro-toxin, for consumption by significant portions of the population.
    As an excellent source of protein, fish should be safe for everyone to
    eat, including children and pregnant women. Economically, the impact on
    recreational fishing in upper Midwestern States like Minnesota cannot
    be overstated. In Minnesota alone, the overall economic impact of the
    sport-fishing industry tops $3.5 billion a year. If mercury pollution
    continues to degrade these areas, the communities dependent upon this
    activity to provide income to their families could be diminished. Only
    by reducing mercury-causing pollution can we begin to ameliorate the
    devastating impacts of mercury pollution. Electric utilities contribute
    over 30 percent of mercury pollution both in the United States and in
    Minnesota.
        In addition, any comprehensive power plant legislation should
    include provisions to reduce other air toxic pollution resulting from
    power plant emissions. All pathways should be addressed, including re-
    emissions from fossil fuel combustion waste disposal sites.
        Throughout the Midwest and Southeast, sulfur dioxide pollution
    threatens trout streams with acidification, national parks with
    regional haze that reduces natural visibility by more than 90 percent,
    and cities with health-endangering levels of particulate matter that
    causes asthma attacks and even death. Electric utilities contribute 65
    percent of sulfur dioxide pollution in the United States and over 75
    percent in Minnesota.
        In the Midwest, crops are adversely impacted by the day-to-day
    exposure to ozone; there is no ``safe'' level of ozone exposure for
    crops. After entering a plant, ozone interferes with its ability to
    absorb sunlight, resulting in plant growth reduction that is costing
    Midwestern farmers over $200 million a year in crop loss. Nitrogen
    oxide pollution also endangers city residents, causing asthma attacks
    and other respiratory crises. Electric utilities contribute over 25
    percent of nitrogen oxide pollution in the United States and over 40
    percent in Minnesota.
        The Midwest is home to the world's largest freshwater lakes system,
    the Great Lakes. We take great pride in the natural beauty, recreation
    and shipping opportunities these waters afford. But higher
    temperatures, like those experienced in the last two decades, mean
    higher rates of evaporation, the greatest influence on a lake's water
    levels. Many models predict a 1-5 foot drop in the Great Lakes, despite
    an increase in precipitation, causing devastating environmental and
    economic damage to ecological systems, the shipping industry and marina
    owners. In Minnesota, we cannot imagine our State without a Boundary
    Waters Canoe Area. However, in regions characterized by continual
    warming, the transition zones between forest types could migrate
    northward far enough to push our beloved ``north shore'' boreal forest
    into Canada. Electric utilities contribute over 30 percent of carbon
    dioxide pollution in the United States and nearly 40 percent in
    Minnesota.
        Taken together, the effects of pollution from electric utilities
    cut across all regions and populations, and endanger our health and
    environment. Multi-pollutant legislation is the most effective and
    efficient manner by which to reduce power plant pollution, both in
    terms of cost and implementation. By requiring strict levels of
    reductions over an appropriate number of years, industry's concerns
    regarding reliability and certainty can be addressed. The League
    believes that Federal legislation should offer versatility in meeting
    emission reduction targets through, for example, plant modernization
    and fuel switching, while setting reduction requirements at the lowest
    achievable levels in the shortest possible timeframes. Specifically,
    the League supports S. 556, the Clean Power Act of 2001, which calls
    for strict levels of pollution reduction from power plants by 2007.
        Finally, no comprehensive power plant legislation should preempt
    the ability of States to take further action to protect local health,
    including requiring more stringent emission limits.
        The Izaak Walton League of America was founded in 1922 by concerned
    sportsmen and women working together to improve the quality of
    Midwestern waters. Enduring through the Great Depression, World War II,
    the creation of the Clean Air Act and many other national conflicts,
    clean air and water are still the guiding principles for the League's
    efforts around the country. Air pollution from power plants poses a
    serious threat to our nation's water, air, soil and health. Multi-
    pollutant legislation is the necessary first step to reduce pollution
    from the electric utility sector.
                                   __________
             Statement of the National Association of Manufacturers
        The goal of multi-emissions legislation is to replace conflicting
    and burdensome regulations with one clear set of goals that meet
    environmental and consumer goals of cleaner air and affordable power,
    as well as to give regulatory certainty to the electric utility
    industry. In addition, any multi-emissions legislation must be fuel-
    neutral and not inconsistent with an achievable fuel mix for running
    the economy. S. 556 achieves none of these goals. Instead, it sets
    unreasonable targets on top of existing regulations which would create
    a nationwide energy crisis. This country cannot afford further
    legislation that adds uncertainty to investment decisions, constrains
    productivity and conflicts with sound energy policy.
        The National Association of Manufacturers (NAM) supports the goals
    of the Clean Air Act (CAA), as well as the need to provide greater
    simplicity and certainty in its implementation. However, the targets
    and timetables set forth in S. 556 achieve neither, and the NAM
    vigorously opposes them. The NAM is also opposed to including carbon
    dioxide in any multi-emissions proposal. Fixing the problems with new
    source review (NSR) reinterpretation can remove much of the uncertainty
    confronting U.S. manufacturing.
        The NAM--18 million people who make things in America--is the
    nation's largest industrial trade association. The NAM represents
    14,000 members (including 10,000 small and mid-sized companies) and 350
    member associations serving manufacturers and employees in every
    industrial sector and all 50 States. The NAM's mission is to enhance
    the competitiveness of manufacturers and improve American living
    standards by shaping a legislative and regulatory environment conducive
    to U.S. economic growth. Accordingly, the NAM has a direct interest in
    the multi-emissions legislation being considered by the Senate
    Committee on Environment and Public Works.
        The manufacturing sector has been in recession since fall 2000,
    triggered, in part, by the sharp increase in overall energy prices,
    particularly for natural gas and a concern over energy-supply
    reliability. S. 556 would permanently impose those conditions on the
    economy by forcing electric generators to choose between spending large
    amounts of capital to continue using coal or to switch to increasingly
    expensive natural gas, perhaps jeopardizing the energy system's
    reliability during the transition. This Hobson's choice is not
    acceptable, absent an overwhelmingly compelling argument that human
    health, the environment or national security requires it.
        S. 556 will adversely affect electric generation, drive up the
    demand for natural gas and, in turn, negatively impact manufacturers
    and the overall U.S. economy. The United States is already a net
    importer of natural gas and the likelihood of very large supply
    increases at reasonable prices is in question. Proposals to expand
    imports, including liquefied natural gas, should not be viewed as
    superior to using our most abundant, cheap and safely transportable
    energy source: coal. As stated in the President's National Energy
    Policy (issued May 16, 2001), ``A primary goal of the National Energy
    Policy is to add [energy] supply from diverse sources. This means
    domestic oil, gas and coal.''
        Instead of maintaining coal-based generation as part of the
    electricity supply mix, S. 556 would require most coal-based plants to
    switch fuel, apply very expensive controls or shut down. Coal is the
    most abundant and inexpensive domestic energy natural resource. Coal-
    fired generation provides approximately 52 percent of the nation's
    electricity. Multi-emissions legislation should support--not
    discourage--clean affordable use of coal. Coal must be maintained and
    expanded as a viable energy source, or natural gas will increasingly
    become more expensive and potentially less readily available for
    homeowners, manufacturers and electric generators. New clean-coal
    technologies, particularly new coal gasification, can provide clean
    electricity and supplement natural gas supplies for other uses. This
    technology is only viable if emission standards support it.
        In addition, the current gas transmission infrastructure is
    insufficient to handle the large increase in demand for natural gas
    expected for electricity generation. Major new investments will be
    required for adequate pipelines. The Energy Information Administration
    (EIA) estimates that coal-based generation would be reduced 38 percent
    to 42 percent from projected 2010 levels as a result of S. 556 and
    natural gas prices would increase about 18 percent. An independent
    electric utility industry study estimates a reduction of 54 percent in
    coal-based generation and natural gas price increases of 11 percent.
    Under the EIA analysis, the use of natural gas for electricity
    generation will increase by 60 percent.
        Both studies envision huge increases in natural gas consumption and
    the NAM is concerned that the price-increase projections are grossly
    underestimated because of overly optimistic supply scenarios and
    inadequate consideration of the large gas infrastructure construction
    costs required. Tight supplies of natural gas could further exacerbate
    the energy problems presented by S. 556. For example, the EIA
    ``integrated high gas price'' sensitivity case will result in a 42
    percent increase in natural gas prices in 2010.
        Even without considering secondary natural gas industry costs, the
    July 2001 EIA report estimates that the cumulative compliance costs
    (2001 through 2010) for S. 556 will be $140 billion. EIA estimates that
    the price of electricity will be 29 percent to 32 percent higher in
    2010, a $145 to $163 higher annual electricity bill for the average
    consumer. The utility industry estimates that costs between now and
    2020 could be even higher--up to $578 billion (in present value) under
    a ``high natural gas price'' sensitivity. Whatever the costs turn out
    to be, S. 556 will result in substantial economic impacts, not just on
    regions affected by plant closings, but throughout the country, with a
    commensurate impact on Federal tax revenues.
        The influence of S. 556 goes well beyond the utility industry. The
    economic costs, in terms of increased energy prices and losses in
    manufacturing production, are considerable. The electric utility
    industry estimates that S. 556 would reduce the Gross Domestic Product
    (GDP) for the United States by $75 billion in 2010 and nearly $150
    billion in 2020. Job losses could reach more than 600,000 jobs in 2010,
    increasing to more than 900,000 jobs by 2020. For those still in the
    workforce, earnings may decline by $38 billion to $75 billion--or $300
    to $550 per household. Increases in energy expenditures, along with the
    reduction in earnings, could erase any benefits from the President's
    2001 tax cut.
        S. 556 will have significant and negative implications for the
    manufacturing base of the U.S. economy. Energy-intensive industries,
    such as steel, auto making, chemistry, paper, coal mining and oil and
    gas extraction, will be especially affected by a substantial rise in
    energy costs. These costs will vary widely across States and regions,
    as these industries tend to be located unevenly across the country. The
    East South Central and East North Central regions, heavy in coal mining
    and energy-intensive industry, will shoulder a disproportionate share
    of the burden on manufacturing. Short supplies of electricity and
    natural gas, and the world price of petroleum, already have combined to
    create economic hardships. During the past 7 months of 2000, more than
    200,000 net manufacturing jobs were lost, largely due to sudden energy
    price increases. This human cost, combined with the $115 billion in
    higher energy prices paid by all energy consumers during 2000, cut
    about one-half of a percentage point off anticipated GDP growth just
    last year. In addition, the requirements of S. 556 would apply to many
    boilers at industrial facilities, which would bear significant capital
    costs in addition to rising energy costs.
        Under S. 556, manufacturers, as well as homeowners and other energy
    and feedstock consumers, will pay more for their electricity and
    natural gas. Manufacturers operate in a highly competitive world
    economy and are generally unable to pass those added costs on to their
    customers. Accordingly, sustained high energy costs, as would be
    created by S. 556, would limit available investment capital and dampen
    the robustness of the manufacturing community's economic recovery.
        The NAM is also concerned that S. 556 contains excessive targets
    beyond the requirements in the Clean Air Act. The Clean Air Act
    currently regulates emissions through a range of programs that were
    designed to protect human health and the environment. Any additional
    ambient air pollutant reduction targets should be justified by
    objective and peer-reviewed epidemiological and laboratory studies to
    both demonstrate the need for and set reasonable targets to achieve any
    additional reductions. Reductions also should be targeted to specified
    levels to achieve specified goals. Excessively stringent emissions-
    reduction targets waste capital dollars that can otherwise be put into
    increasing productivity, energy efficiency and employment.
        The NAM also is concerned that the timetables in S. 556 are too
    short. Not only would the deadlines create economic waste by forcing
    premature abandonment of capital assets, they would also prevent the
    deployment of promising renewable and clean-coal, electricity-
    generation technologies. Technological innovation is the key to
    maintaining both a strong economy and environmental quality, and
    therefore should be encouraged--not locked out. Even attempts to comply
    through large-scale substitution of natural gas may be thwarted by a
    lack of natural gas production and delivery capacity, as well as a
    backlog of new turbines. This raises serious electricity and natural
    gas reliability concerns.
        Under S. 556, many plants would be forced to apply unproven and
    expensive technologies over a very short time period. In July 2001, an
    EIA analysis expressed concern that system reliability would suffer
    during the period when a large amount of emissions-control equipment
    would have to be added. Consumers could experience electricity
    shortages during the closing, siting and construction of new generation
    and the ``down time'' of existing facilities, seriously affecting the
    cost, availability and reliability of electric power. The EIA study
    also questioned the availability of appropriate technology, expressing
    in particular that mercury emission-reduction technologies are
    relatively new and untested on a commercial scale.
        The NAM is adamantly opposed to creating a mandatory cap on carbon
    dioxide. Creating a regulatory scheme for CO2 emissions
    would limit the use of fossil fuels and needlessly hinder the goals of
    current energy legislation moving through Congress that addresses
    infrastructure, supply and efficiency issues. Concerns about potential
    climate change are best addressed globally through more scientific
    study, voluntary technological initiatives and inclusion of developing
    countries in any climate change path forward. The best way to develop
    and implement the goals of climate change policy is through a strong
    economy with incentives coupled with removal of disincentives for
    energy efficiency and environmental improvements (such as NSR as
    currently implemented).
        The need to stimulate development of additional electricity-
    generating capacity requires a new approach to air quality regulation.
    Projections of a 22 percent increase in U.S. demand for electricity
    over the next 20 years necessitate a fresh look at the
    interrelationship between energy and environmental policy goals. The
    NAM feels that the current regulatory structure of the Clean Air Act
    impedes regulatory certainty and stability, decreases compliance
    flexibility, increases compliance costs, hinders energy efficiency and
    reliability and actually impairs air quality. For example, the CAA's
    new source review (NSR) program tends to frustrate industries' ability
    to make continuous improvements to their facilities, processes and
    products that improve productivity, advance energy efficiency and
    enhance environmental quality. Clearly, environmental legislation that
    creates energy-reliability concerns, distorts investments and imposes
    excessive costs will dampen economic growth and prolong the current
    manufacturing recession.
                                   __________
                 Statement of the National Environmental Trust
        National Environmental Trust (NET) supports the emissions reduction
    targets and timetables in the Clean Power Act, S. 556. NET believes
    that multi-pollutant reduction legislation for power plants should
    achieve the following:
        1. Reduce emissions of the four major power plant pollutants by
    2007:
          Nitrogen oxides (NOx) emissions should be cut by 75
    percent from 1997 levels;
          Sulfur dioxide (SO2) emissions should be cut
    by 75 percent below the requirements of the 1990 Clean Air Act acid
    rain program;
          Mercury emissions should be cut by 90 percent from 1999
    levels; and
          Carbon dioxide (CO2) emissions should be cut
    to 1990 levels.
        2. Include mandatory, on-system reductions in carbon dioxide.
          Recent findings by the U.S. National Research Council and
    the Intergovernmental Panel on Climate Change confirm that global
    warming is real and will cause serious damage to human health and the
    environment, and that carbon dioxide emissions from manmade sources are
    the major contributor to the problem. We must begin to reduce carbon
    dioxide emissions now to lessen the damage to human health and the
    environment from global warming.
          Including carbon dioxide emission reductions as part of a
    comprehensive cleanup plan for all major power plant air pollutants is
    the most economically efficient approach, and provides electric
    utilities with the greatest degree of regulatory certainty. Excluding
    carbon dioxide from the plan and leaving it for later regulation will
    increase costs for electric utilities and consumers.
          A return to 1990 carbon dioxide emissions levels for the
    electric utility sector is consistent with longstanding U.S. law--the
    Framework Convention on Climate Change, which was signed by former
    President George H.W. Bush and unanimously ratified by the U.S. Senate.
          Carbon dioxide reductions necessary to return to 1990
    electric sector levels must be met within the electric generating
    sector and among sources subject to the emissions cap. Power plants
    should not be allowed to obtain emissions credits necessary to return
    to 1990 electric sector levels from sources that are not subject to the
    cap.
        3. Close the ``grandfather'' loophole that exempts power plants
    permitted before 1977 from modern pollution standards.
          Every power plant should meet the most recent state-of-
    the-art pollution control standards for new pollution sources. The new
    standards should be met either on the plant's 30th birthday, or 5 years
    after enactment of comprehensive power plant cleanup legislation,
    whichever is later.
          More than two-thirds of the power plants operating today
    were built before 1970. These plants were exempted from modern
    pollution control standards because it was assumed that they would
    retire and be replaced by new, cleaner plants. However, these plants
    have not retired, and will continue operating and emitting high levels
    of pollutants unless and until they are required to meet modern
    pollution control standards by a date-certain.
        4. Protect local air quality and public health by reasonable limits
    on emissions trading.
          Trading sulfur dioxide and nitrogen oxide emissions
    credits under a national cap-and-trade system has the potential to
    create localized ``hot spots'' of high emissions levels and adverse
    impacts on human health. A trading program for these pollutants among
    electric utilities should contain safeguards to prevent such hot spots
    and assure improvements in local air quality affected by power plant
    emissions.
          The mercury cap should not be met through a trading
    program. Very small quantities of mercury can contaminate large
    geographic areas, rendering fish unsafe to eat, among other dangers.
    There is a real potential that trading mercury credits will result in
    the buildup of toxic mercury in certain local areas. Mercury reductions
    should be achieved at each and every plant.
        5. Retain core Clean Air Act programs that achieve air quality
    objectives that are not met through a cap-and-trade system.
          Regulatory streamlining and compliance flexibility
    measures should not result in the elimination of core Clean Air Act
    programs that have a demonstrated track record of reducing power plant
    pollution, and that are not achieved through a cap-and-trade program.
          A cap-and-trade program is not designed to achieve the
    health-based National Ambient Air Quality Standards for fine particle
    matter and ozone. Fundamentally, the NAAQS apply potentially to all
    sources of air pollution, not just electric utilities. Moreover,
    trading of SO2 and NOx could contribute to NAAQS violations
    in certain regions of the country.
          Power plant cap-and-trade legislation is not likely to
    reduce NOx emissions prior to 2007, while the NOx SIP Call and
    Section126 Petitions call for reductions to begin in the 2003-2004
    timeframe. Eliminating these programs will lead to many more years of
    ozone smog violations in the Northeast, South and Midwest.
          A cap-and-trade system cannot take the place of New
    Source Review. NSR protects local air quality by requiring individual
    plants to meet modern pollution control standards whenever they expand
    in a way that significantly increases emissions. A cap-and-trade
    program for NOx and SO2, by itself, does not require
    individual plants to clean up, thus leaving open the possibility of
    damaging localized pollution impacts.
          The ``Best Available Retrofit Technology'' or ``BART''
    rule cannot be replaced by a cap-and-trade system for electric
    utilities. First, BART applies to dozens of industries, not just
    electric utilities. Second, BART's goal is to restore pristine
    visibility to the nation's national parks and wilderness areas,
    something cap-and-trade is not designed to do. In fact, trading NOx and
    SO2 emissions credits under a cap-and-trade program could
    make visibility worse in some areas.
          A cap on power plant mercury emissions does not take the
    place of the utility air toxics ``Maximum Available Control
    Technology'' or MACT rule. There are more than 67 different toxic air
    pollutants emitted by electric utilities. The utility MACT rule
    currently under development should apply to all of these, not just
    mercury.
        6. Protect against contamination of soil and groundwater by air
    pollutants removed from electric utility stack emissions.
          Pollutants removed from electric utility stack emissions
    can be highly toxic.
          Comprehensive power plant cleanup legislation should
    ensure that these pollutants are properly managed and disposed of, and
    are not released to the environment or allowed to contaminate soil or
    groundwater.
                                   __________
          Statement of National Rural Electric Cooperative Association
          multi-emission legislation--electric cooperative principles
        Electric cooperatives support an effort to achieve regulatory
    certainty that will allow for the efficient management of the resources
    needed to produce electricity and achieve reasonable emission
    objectives. Electric utilities are faced with ever expanding
    environmental requirements that are duplicative, piecemeal and
    unnecessarily expensive. A new approach would be welcome, but only if
    it addresses improvements in air quality in a way that harmonizes
    economic, energy and environmental goals. Any plan must at a minimum
    provide regulatory certainty and stability, increase compliance
    flexibility, reduce compliance costs, and maintain coal-based
    generation as part of the electricity supply mix while maintaining
    affordable rates for consumers and guarantee electric reliability.
        Rural electric cooperatives serve three-quarters of the land mass
    in the United States and provide power to more than 35 million
    consumers in the rural and suburban areas of this country. Electric
    cooperatives generate over 32,000 megawatts of electricity for
    distribution to their consumers. Seventy-five percent of this
    generation is coal-based and will be the target of any multi-emissions
    legislation.
        As small consumer-owned utilities, the nation's electric
    cooperatives provide their consumer-members with the lowest possible
    electricity rates and advocate fiercely for the well-being of their
    local communities. Any multi-emissions legislative proposal that would
    impact those rates will need to be closely reviewed to insure that the
    adoption is cost-effective and do not drain a local community's
    financial and economic resources and their most economically vulnerable
    citizens while at the same time protecting the environment.
        Electric cooperatives support the effort to develop legislation
    that meet the aforementioned goals, nevertheless are concerned about
    the potential elements and details of the proposals. In general,
    electric cooperatives because of their size, characteristics, and
    dependence on coal for electric generation could be put at a severe
    economic disadvantage if a multi-emissions strategy is improperly
    designed.
        Electric cooperatives are also extremely concerned that while
    multi-emissions policy has merit, legislation could be drafted without
    sufficient benefits to offset those additional costs. Multi-emission
    legislation must insure that once enacted that electric generating
    facilities have regulatory certainty for the future. If new legislation
    simply adds an additional requirement on electric generating stations
    without the removal of or non-application of existing requirements, the
    promise of any commensurate regulatory benefit will not be met.
        Electric cooperatives believe that any legislation to alter the
    current regulatory scheme for electric power plants must include the
    following principles to achieve economic, energy and environmental
    goals. These goals will not be advanced if legislation only adds
    environmental costs and requirements.
    Cooperative Principles
        1. Programs to reduce emissions should be flexible and include
    emissions trading to minimize the costs of these programs on individual
    sources and the nation. Consistent with flexibility, programs should
    not include unit-by-unit or other command-and-control requirements,
    since the size, configuration and utilization of a given unit will
    determine the most cost-effective compliance option for it.
        2. The timing and magnitude of emissions reductions for any program
    or combination of programs should not impair fuel diversity needed to
    provide affordable and reliable electricity to the nation's consumers
    over the coming decades. Collectively, the programs should reconcile
    any conflicting national energy and environmental objectives.
        3. Programs to reduce emissions should incorporate adequate future
    regulatory certainty, whereby utilities making capital investments and
    other major changes would be reasonably assured that subsequent new or
    additional requirements would not prematurely supercede efforts to
    comply with the original programs or curtail the recovery of capital
    costs.
        4. A program to reduce mercury emissions should be phased. The
    initial phase should be timed and directed toward recognizing and
    accounting for mercury reductions resulting from existing and
    additional controls installed to reduce SO2, NOx and
    particulates. The latter phase should be timed so as to allow the cost-
    effective addition of controls, specifically for mercury, as needed to
    meet overall final program goals.
        5. Any program directed at curtailing CO2 emissions from
    coal-based units should be phased to bring about regulatory certainty,
    maintain national fuel diversity, and guarantee electric reliability.
    The initial phase should be directed at ensuring that technologies are
    available and cost effective for (1) the construction of new coal-based
    units that are significantly more carbon efficient than today's
    technologies can render and (2) the sequestration or capture of
    CO2 emissions from the flue gas of existing coal-fired
    units. The latter phase should be timed to incorporate CO2
    requirements that are consistent with the ability to economically
    implement the technological capabilities developed during the initial
    phase.
        6. Programs should allow sufficient lead times and phase-in periods
    for installation of additional pollution controls. Compressed timelines
    would unnecessarily escalate overall compliance costs due to supply
    shortages and would especially drive-up compliance costs up for smaller
    systems that generally are less attractive candidates for consultants
    and equipment vendors in a tight supply market.
        7. Programs incorporating the trading of emissions credits,
    including a modified SO2 allowance program, should be
    structured to equitably benefit all those entities that must comply
    with program requirements as well as the nation's electric consumers.
    Any allocation of emissions credits should be based on fossil fuel
    utilized to generate electric power.
        8. Under programs incorporating national caps and trading of
    emissions credits, New Source Review requirements addressing
    modifications at existing units are unnecessary and should be
    eliminated.
        9. Provisions for government/private sector R&D collaboration to
    advance combustion and pollution control technologies, such as those
    advanced in the NEET bill, should be incorporated into any
    ``comprehensive air'' legislation. When incorporated, these provisions
    should be structured such that all segments of the utility industry,
    including not-for-profit entities, can equitably benefit from them.
        10. Programs that incorporate emissions trading should be
    structured to ensure no potential adverse effects on emissions credit
    pricing or emissions credit availability due to discriminatory market
    power. Smaller entities, and ultimately their electric consumers, must
    not be unfairly discriminated against in the emissions trading market
    place. Both generators and electric consumers should equitably benefit
    from emissions markets and their structures.
                                   __________
               Statement of the Natural Resources Defense Council
        NRDC supports comprehensive power plant clean-up legislation to
    reduce and cap emissions of all four major air pollutants from fossil-
    fueled electricity generating units. We support the emissions targets
    and timetables in the Clean Power Act, S. 556, for carbon dioxide
    (CO2), mercury (Hg), nitrogen oxides (NOx) and sulfur
    dioxide (SO2). Power plant emissions of these four
    pollutants are seriously damaging public health and the environment. S.
    556's emissions targets and timetables are necessary, feasible, and
    affordable measures to address these damages.--Power generation is
    responsible for 40 percent of U.S. emissions of carbon dioxide, the
    main cause of global warming, That is 10 percent of total world
    CO2 emissions from fossil fuels and equals the total
    CO2 output of Germany, Italy, and India combined.
          Power plant pollution is causing 30,000 premature deaths
    each year and a host of other damage to health and the environment.
    Reducing SO2 and NOx to S. 556's targets would save tens of
    thousands of lives and avoid hundreds of thousands of illnesses each
    year by reducing levels of fine particles and ozone smog.
          Power plants are the last unregulated source of mercury
    into the air. Mercury is a potent neurotoxin and causes birth defects.
    Serious health hazards are posed both by Hg emissions that settle in
    the vicinity of sources and by Hg emissions that are transported long
    distances, Hg emissions that reach lakes and other water bodies enter
    the food chain and reach dangerously high concentrations in fish that
    are a regular part of the diet of millions of Americans.
    Four Pollutants, Not Three
        A four-pollutant strategy that includes CO2 is needed to
    address the full range of damage to human health and the environment
    from power plant air pollution and at the same time provide the power
    industry greater certainty regarding future regulatory requirements. A
    three-pollutant plan that excludes CO2 would result in
    additional irreversible damage from global warming. Controlling
    CO2 is inevitable. A piecemeal program for the power sector
    would threaten the environment and cause higher costs for electricity
    producers and consumers.
    Protecting Local Air Quality
        Even under a program of tight national caps, local air quality
    improvement cannot be assured if new or expanded power plants can be
    built without modern, state-of-the-art pollution controls, or if large,
    old generating units are permanently grandfathered at high emission
    rates.
          NRDC opposes proposals to repeal existing Clean Air Act
    programs designed to protect and enhance regional end local sir
    quality. These include non-attainment, ``PSD,'' visibility, and ``new
    source review'' programs, which are effectively cutting pollution in
    our biggest cities and protecting the vistas of our priceless national
    parks.
          In addition, NRDC supports S. 556's requirement that each
    generating unit older than 30 years must meet modern, state-of-the-art
    performance standards. Experience has now demonstrated that without
    such a requirement, dirty older plants will be life-extended
    indefinitely as a deliberate strategy that maintains, and even
    increases, high pollution levels.
    Emissions Trading
        NRDC can support emissions trailing provided the legislation adopts
    limitations appropriate to the characteristics of each pollutant.
          We can support trading of CO2 control
    obligations between electric generating sources subject to S. 556's
    emissions cap. Power plants should not be allowed to meet their
    obligations with credits derived from other sectors that are not
    subject to emissions caps.
          For SO2 and NOx, NRDC can support emissions
    trading among electric generating sources with safeguards to assure
    improvements in local air quality affected by existing power plant
    emissions, and with provisions to ensure that the Western region of the
    United States will achieve emission reductions at least proportional to
    the required national reductions.
          NRDC opposes trading of His control obligations because
    we have seen no analysis demonstrating that such trading will not
    compromise local health protection.
    Allocating Allowances
        Three allowance allocation approaches have been discussed.
          A system that grandfathered emissions allowances to power
    plants based on their ``baseline'' emissions would penalize sources
    that have invested in cleaner energy and reward the most polluting
    sources. We oppose this approach.
          Auctioning the allowances would avoid these adverse
    consequences while recognizing that no existing emitter has a ``right''
    to use the atmosphere to dispose of its wastes. An auction could be
    designed to be revenue-neutral and to mitigate any potential adverse
    economic impacts on venous stakeholders.
          An output-based allocation system with periodic updating
    would also avoid penalizing cleaner sources and rewarding high
    emitters. Any output-based system should allocate allowances to
    electricity production by renewable sources and to verifiable demand-
    side efficiency projects as well as to production from fossil
    generators. Allocations should not be made for nuclear generating
    facilities because of other significant environmental externalities
    outside the arena of air emissions.
    Efficiency and Renewables Mean Pollution Reduction at Lower Cost
        A power plant bill that takes advantage of efficiency and renewable
    energy sources could lower Americans' electric bills by $30 trillion
    per year, cut CO2 pollution by a third, and slash emissions
    of other pollutants in half, according to the November 2000 Department
    of Energy report, ``Scenarios for a Clean Energy Future.'' Congress can
    assure these results by complementing emissions caps with provisions
    for:
          Stronger efficiency standards for appliances and
    buildings.
          A renewable power portfolio standard for each generating
    company.
          A public benefit fund to increase energy efficiency
    investments, supported by a charge on electricity distribution.
        Also needed through other legislation are tax incentives to expend
    the market for today's best performing efficiency technologies and
    renewable generation, as well as increased R&D funding to develop the
    efficiency and renewable technologies of tomorrow.
    Other Safeguards
        NRDC supports requirements to assure that pollutants removed from
    fuels or stack gases will not be re-released into the environment. This
    provision is particularly important for volatile toxins such as
    mercury.
                                     ______

     key findings from eia's analysis of jeffords-lieberman clean power act
                 (By Alexander Perera and Daniel Lashof, NRDC)
        EIA's analysis\1\  of reducing multiple emissions from electric
    power plants demonstrates that the Clean Power Act (S. 556) can reduce
    emissions of soot, smog, and acid rain precursors by 75 percent, reduce
    mercury emissions by 90 percent, and reduce emissions of carbon dioxide
    to 1990 levels. The integrated policies in S. 556 simultaneously
    produce lower electricity and natural gas bills, both for households
    and the country as a whole.
    ---------------------------------------------------------------------------
         \1\Energy Information Administration, 2001. ``Analysis of
    Strategies for Reducing Multiple Emissions from Electric Power Plants
    with Advanced Technology Scenarios.'' SR/OIAF/2001-05. October.
    ---------------------------------------------------------------------------
        Some key findings of the EIA analysis are:
          Average annual household expenditures on electricity can
    be reduced by $40 in 2010 and $200 by 2020 under the provisions of the
    Clean Power Act.\2\  Assuming only ``Moderate'' energy efficiency
    measures, average annual household energy bills would be unchanged in
    2010 and would be reduced by $100 in 2020.
    ---------------------------------------------------------------------------
         \2\CEF-JL Advanced scenario with emission limits relative to the
    Reference scenario.
    ---------------------------------------------------------------------------
          Despite a slight increase in electricity prices, the
    nation's net electricity bill\3\  in 2010 would be $27 billion less
    under the Clean Power Act scenario when compared to EIA's reference
    case, assuming ``Advanced'' energy efficiency measures. By 2020 the
    savings rise to $60 billion. With ``Moderate'' energy efficiency
    measures the national net electricity bill savings would still be $16
    billion in 2010 and $41 billion in 2020.
    ---------------------------------------------------------------------------
         \3\The net electricity bill is calculated from the gross
    electricity bill (total electricity sales multiplied by average
    electricity prices) by subtracting the cost of carbon emission
    allowances (carbon emissions multiplied by carbon allowance prices).
    This reflects a scenario where allowances are auctioned and the
    revenues are returned to consumers. If allowances were allocated based
    on electricity output rather than being auctioned, electricity prices
    (and the gross electric bill) would increase less than they do under
    the assumptions used by EIA.
    ---------------------------------------------------------------------------
          Compared to the Reference case, the cumulative resource
    costs of providing electricity services through 2020 would be reduced
    by $220 billion assuming ``Advanced'' energy efficiency measures, or
    $120 billion assuming ``Moderate'' efficiency measures.
          Natural gas consumption in 2020 will be nearly 4 Trillion
    Cubic Feet/yr lower than in the Reference case, reducing natural gas
    expenditures by just under $30 billion, assuming Advanced energy
    efficiency measures. Natural gas expenditures would be reduced by $12
    billion assuming moderate efficiency measures.
          Carbon dioxide emissions from electricity generators are
    reduced to 1990 levels, as called for by the Rio Climate Treaty that
    was ratified by the U.S. Senate in 1992. This represents a reduction
    relative to the reference case of 220 million metric tons of carbon in
    2010 and 300 million metric tons of carbon in 2020.
          EIA's analysis shows that the Clean Power Act's
    integrated approach is far more cost effective than a hypothetical bill
    that only caps emissions of sulfur, nitrogen, and mercury. Net
    electricity bills would be $30 billion lower in 2010 and $75 billion
    lower in 2020 under the Clean Power Act assuming Advanced energy
    efficiency measures compared to a case that only includes 75 percent
    reductions in sulfur, nitrogen, mercury emissions.\4\  With only
    Moderate efficiency measures net electricity bills would be $20 billion
    lower in 2010 and $57 billion lower in 2020.
    ---------------------------------------------------------------------------
         \4\Energy Information Administration, 2001. ``Reducing emissions
    of Sulfur Dioxide, Nitrogen Oxides, and Mercury from Electric Power
    Plants.'' SR/OIAF/2001-04. September.
    ---------------------------------------------------------------------------
        Comparison of Results from EIA Scenarios

    ----------------------------------------------------------------------------------------------------------------
                                                                                  3P-75
                                                                   Reference   percent Cut  S. 556-Mod.  S. 556-Adv.
    ----------------------------------------------------------------------------------------------------------------
    Net Electric Bill 2010......................................         $250         $252         $240         $230
    (Billion dollars) Net Electric Bill 2020 (Billion dollars)..         $290         $290         $250         $230
    Carbon Emissions 2010 (Million tonnes carbon)...............          690          690          470          470
    Carbon Emissions 2020 (Million tonnes carbon)...............          770          770          470          470
    ----------------------------------------------------------------------------------------------------------------

                                   __________
                              Statement of NESCAUM
        Northeast States agree that Federal efforts to achieve integrated
    reductions in multiple power plant pollutants should be implemented on
    an annual, output-basis with caps to limit overall pollutant levels.
    Possible reduction targets and timeframes are identified below. To ease
    comparison with other proposals they are presented in terms of a cap
    target and equivalent output-based emissions rate. However, this
    presentation is not intended to preclude discussion of dynamic or
    declining caps, a concept that we continue to explore, or of more
    aggressive targets than those described here.
        SO2 Target: National annual cap of approximately 4
    million tons by 2004-7, with a further reduction to 2 million tons in
    the 2009-12 timeframe. These caps translate to average emissions rates
    of approx. 3.0 and 1.5 lbs/MWh, respectively and represent a 55 to 78
    percent reduction from eventual 8.9 million ton Acid Rain cap.
    Implications of existing allowance ``bank'' must be addressed in
    developing SO2 requirements.
        NOx Target: National annual cap of approximately 2 million tons by
    2004-7, with a further reduction to 1.3 million tons in the 2009-12
    timeframe. These caps translate to average emissions rates of about 1.5
    lb/MWh and 1.0 lb/MWh, respectively and represent a 70 to 80 percent
    reduction from current annual emissions of approx. 7 million tons. The
    2 million ton cap can be achieved by annualizing NOx SIP Call
    requirements.
        Mercury Target: National reductions greater than 70 percent by
    2004-7 with a reduction goal of 85-95 percent by 2009-12. Further work
    needed to determine how to set standards that will achieve desired
    goals and to explore feasibility/acceptability of using market
    mechanisms to implement mercury reductions.
        CO2 Target: Return power sector emissions to 1990 levels
    by 2010 with an additional reduction of at least 10 percent to be
    achieved by 2020.\1\  Additional work is needed to explore possible
    role of flexibility mechanisms (e.g., trading, early action, off-sector
    credits, etc.), cost caps, implications of recent international
    developments, etc.
    ---------------------------------------------------------------------------
         \1\The Conference of the New England Governors and Eastern
    Canadian Premiers have committed to the long-term goal of reducing
    society-wide emissions of greenhouse gases by 75-85 percent. To meet
    these targets, it is likely that declining caps will need to be
    employed.
    ---------------------------------------------------------------------------
        Other Power Plant Pollutants: In the interests of regulatory
    certainty and comprehensiveness, other important power plant
    pollutants--such as primary particulate matter, other air toxics and
    carbon monoxide--may need to be addressed as part of multi-pollutant
    legislation. NE States are exploring potential options/targets
    appropriate to these pollutants.
    Other Key Issues
        As indicated above, a number of details concerning each of the
    targeted pollutants must still be addressed. In addition, the Northeast
    States are coordinating to develop specific recommendations in four
    broad issue areas likely to be closely linked to the multi-pollutant
    debate:
          Interaction of multi-pollutant legislation with New
    Source Review (NSR), Prevention of Significant Deterioration (PSD) and
    other existing or pending regulatory programs (e.g., BART, mercury MACT
    determination, etc.). Under no circumstances should new Federal
    legislation obstruct or limit enforcement actions undertaken to remedy
    violations of existing NSR requirements.
          Interaction of Federal multi-pollutant requirements with
    existing or future State requirements. Because States bear ultimate
    responsibility for meeting ambient air quality standards and protecting
    public health, any new Federal legislation must maintain the full scope
    of existing State authority to adopt more protective requirements.
          Addressing local pollution concerns and their
    implications for the design of future regulatory requirements (such as
    trading). States must retain the authority to respond as they deem
    necessary to remedy adverse local impacts. Provisions must also be
    included that require a Federal response to remedy local impacts of an
    interstate nature.
          Ability to include additional provisions to address long-
    term clean energy needs, including: ensuring the reliability of power
    grids, promoting clean distributed generation, encouraging renewable
    energy resources, continuing demand-side management, promoting combined
    heat and power, and supporting systems benefits programs.
                                   __________
                          Statement of Nisource, Inc.
        NiSource, Inc. appreciates the opportunity to participate as an
    observer in the Stakeholder Meeting organized by the Senate Environment
    and Public Works Committee and to submit a brief statement of our views
    concerning goals and principles to include in multi-emission
    legislation. NiSource, a Fortune 300 energy company, is an investor
    owned public utility which is engaged in the businesses of generating
    electricity (primarily by combustion of coal) and distributing that
    electricity in Indiana, of transporting and distributing natural gas in
    numerous States in the Midwest, Southeast and Northeast, and of
    providing combined heat and power energy systems to commercial and
    industrial customers.
        NiSource will support legislation that promotes wise energy and
    environmental objectives. Aggressive targets for reduction of emissions
    from the electric generating sector must be coupled with aggressive
    fostering of additional energy reliability and efficiency. Market
    mechanisms should be flexible to optimize investments in both
    objectives. We strongly believe that one of the best methods to achieve
    both environmental and energy policy goals is through maximizing the
    efficiency with which energy products are produced in this country. We
    have been actively seeking ways to enhance the efficiency of our coal-
    fired electric generating facilities and have also been active in
    developing extremely clean and efficient combined heat and power
    projects.
        The current Clean Air Act regulatory regime is not conducive to,
    indeed in some ways is positively hostile to, generation efficiency.
    For example, current emissions standards often result in providing the
    quickest permitting and least stringent emissions requirements to
    energy projects that use fuel least efficiently. This is the opposite
    of what we believe is sound policy, and we urge that legislation set
    multi-emission targets and distribute allowances on an output basis,
    that recognizes the pollution prevention aspects of energy efficiency.
        We also support the view that new source review discourages
    efficiency enhancements at existing facilities. However, we think that
    new source review of new facilities has even greater negative impacts
    on efficiency. It would not make sense, in our view, to foster
    efficiency modifications of existing sources while leaving intact a
    system that discourages construction of new clean and highly efficient
    sources.
        Under current law a simple cycle gas peaking plant built on a
    greenfield can completely avoid Federal new source review requirements.
    At the same time, a far more efficient combined heat and power project
    planned for an urban area where the power is most needed and where it
    can be supplied without line losses and without exacerbating
    transmission bottlenecks, must run a long and uncertain Federal new
    source review gauntlet. Such new source review is very resource
    intensive, not only for the applicant, but also for resource
    constrained government agencies. Yet, under a system of emission caps,
    which is the most likely format of any multi-emission legislation, this
    long, resource intensive and discouraging process produces no overall
    reduction in emissions. There is legitimate concern about the local
    impacts of new sources, but such concerns can certainly be dealt with
    effectively without having to cling to the cumbersome and inefficient
    new source review process.
        Some persons disparage concerns over new source review for new
    sources by pointing to the large number of new power plant projects
    that have been announced. Yet the impressive number for announced
    capacity reflects in large part what can be more easily permitted-such
    as greenfield peaking units. Even so, many of these announced projects
    will never see the light of day. The announced projects will also fail
    to adequately address the objective of optimizing fuel efficiency,
    solving transmission congestion in urban areas, and providing cleaner
    base-load energy.
        More importantly, the burdens of new source review fall unequally
    on projects depending on size. Smaller projects, often connected with
    new construction, have far tighter margins for delay and uncertainty.
    Thus, the current list of announced power plant projects (some of which
    can avoid new source review as ``synthetic minors'') may well mask the
    fact that the smaller highly efficient combined heat and power
    projects, and other environmentally desirable projects, are not being
    pursued due to the disincentives presented by new source review.
        The nation will benefit from multi-pollutant legislation that
    provides both regulatory certainty and the flexibility to invest in
    sustainable efficient energy projects.
                                   __________
                             Statement of Ohio EPA
        Mr. Chairman, Thank you for the opportunity to speak to you today.
    My name is Christopher Jones and I am Director of the Ohio
    Environmental Protection Agency. As Director of Environmental
    Protection of a large industrial State, there are many challenges in my
    position. I welcome the opportunity to participate today so that our
    viewpoint will be considered prior to Congress initiating debate on the
    issue of multi-pollutant control for the utility industry.
        Even after thirty years of various controls and standards, power
    plants remain the largest emitting category of sources in our State. At
    this time, there is an opportunity for Congress to move forward with a
    control regime that will substantially reduce emissions from power
    plants over the long term. Ohio EPA supports the concept of a multi-
    pollutant control program to cover three pollutants: sulfur dioxide,
    nitrogen oxides and mercury.
        In Ohio, there has been a substantial reduction in emissions of
    sulfur dioxide over the past few years. However, despite these
    reductions, sulfur dioxide remains a pollutant of concern not due to
    its primary effect, (Ohio is within the ambient air quality standards
    for sulfur dioxide), but as a result of the secondary effect of sulfur
    dioxide emissions on fine particles and visibility. It is generally
    believed that sulfate particles make up a significant portion of the
    fine particulates in the eastern United States. It is likely that
    reductions in sulfur dioxide emissions, possibly along with other
    pollutants, will be needed to meet the PM2.5 ambient air
    quality standard.
        For nitrogen oxides, there is a current plan in place to
    substantially reduce emissions by means of the NOx SIP Call and the US
    EPA Section 126 action. These reductions will require expenditures of
    significant capital to control this pollutant. Many plants will be
    upgraded to emit NOx at levels that would be expected from a new coal
    boiler and we believe that any additional controls beyond the NOx SIP
    Call will need to be carefully reconciled with the SIP Call.
        Finally, there remains excessive loadings of mercury into many of
    the streams and lakes in the State. Ohio has a statewide fish advisory
    in effect as a result of mercury in streams. The cumulative effect of
    the release of mercury into the environment from multiple media has
    lead to this condition, with air deposition being an important
    component. Additional legislation has the potential to lessen the
    impact of mercury deposition on the aquatic environment and should be
    included in the package.
        The level and timing of the control are an important piece in any
    legislative package. In the NOx SIP Call rules drafted by Ohio EPA, we
    provided sources with additional time to comply with the NOx SIP Call
    requirements if there was a commitment to reduce sulfur dioxide
    emissions by 50 percent and mercury by 60 percent along with complying
    with the NOx SIP call by 2007. We believe that this level of control
    can be reasonably achieved within this timeframe. However, additional
    levels of control will take a longer time to achieve. Also, Ohio EPA
    believes that the legislation should focus on electric generating
    stations. Although some industrial facilities have large industrial
    boilers, it has been our experience that the combined effect of the
    emissions from industrial sources are not significant enough to warrant
    inclusion of industrial boilers in any bill.
        Ohio EPA further supports the concept of a multi-pollutant control
    plan in order to provide for more regulatory certainty for the utility
    industry. If Congress can develop legislation that provides clear,
    achievable targets, the industry will be able to develop a
    comprehensive program to reduce emissions with the certainty that there
    will not be future regulatory standards that will need to met with
    respect to the traditional criteria pollutants. As part of the
    implementation of the visibility requirements, many utilities will need
    to install Best Available Retrofit Technology (BART). A multi-pollutant
    control bill should, by the end of the implementation phase, bring the
    existing fleet of utility boilers up to grade with standards that would
    meet the requirements to install BART. The level of control that is
    decided for the various pollutants is a critical factor in the ability
    to achieve additional reductions and continue the use of the domestic
    fuel supply of coal. Any limits that are ultimately developed should be
    reasonably achievable by the majority of the existing coal fired power
    plants in this country. It would not be prudent to set standards at
    such a level that for practical purposes there is a widespread
    conversion to natural gas in the electric generating capacity in this
    country.
        At this time, Ohio EPA does not believe that any multi-pollutant
    control bill should include carbon dioxide. The fact is that this
    country has not agreed to the Kyoto Protocol or any other binding
    agreement to reduce carbon dioxide and other greenhouse gases. Until
    that occurs, it would be speculative to suggest that a certain level of
    control of greenhouse gases should be achieved. That being said, Ohio
    EPA supports energy efficiency and believes that energy efficiency
    credits can be one mechanism to provide an incentive to obtain
    emissions in both criteria pollutants and greenhouse emissions. Ohio
    EPA would support some modest incentives for energy efficiency projects
    from both the user and producer side that would result in lower
    electrical demand or that would result in more electricity being
    produced for the same amount of fuel burned. In either case, there
    would be a reduction in emissions in criteria pollutants and a
    secondary benefit of the reducing the emissions of greenhouse gases.
        Thank you for your attention and I look forward to participating in
    the remainder of the discussions on multi-pollutant controls.
                                   __________
                Statement of U.S. Public Interest Research Group
        U.S. PIRG strongly supports the provisions of the Clean Power Act
    (S. 556). We believe that this legislation strikes the appropriate
    balance between protecting public health and the environment, and doing
    so in a manner that affords plant owners ample time and flexibility.
    The following principles underlie our support for the Clean Power Act
    or any other power plant emission reduction policy:
    Comprehensive legislation must address the impacts of all major power
            plant pollutants
        U.S. PIRG would oppose an approach that omits any of the four major
    power plant pollutants, including nitrogen oxides, sulfur dioxide,
    mercury and carbon dioxide.
    Clean Power Act's emission reduction targets are warranted
        Pollution from the electric power sector is taking a very serious
    toll on public health and the environment. The severity of these
    impacts warrant reductions at least as deep as those proposed in the
    Clean Power Act, and within the timeframe proposed in the Act. For
    example:
          Premature death: Sulfur dioxide from power plants forms
    fine particulate pollution (soot) in the air, which is responsible for
    an estimated 30,000 premature deaths each year. By weakening the
    respiratory system, soot is taking months and even years off of the
    lives of tens of thousands of Americans. Two thirds of all sulfur
    dioxide pollution emitted nationwide comes from power plants.
          Asthma Attacks and ER visits: Nearly half of the U.S.
    population lives in areas that do not meet basic health standards for
    ground-level ozone, commonly called smog. Scientists estimate that smog
    triggers six million asthma attacks and sends 159,000 Americans to
    hospital emergency rooms each year. One-quarter of the nitrogen oxide
    (NOx) pollution that causes formation of smog comes from electric power
    plants.
          Mercury contamination: Thousands of lakes and streams in
    40 States have been posted with warnings not to eat the fish due to
    mercury contamination. Consumption of these fish can cause neurological
    problems, including developmental retardation in fetuses and young
    children. The biggest source of mercury contamination is from the
    smokestacks of coal-burning power plants, which are responsible for 32
    percent of human caused mercury in the environment.
          Global warming: More than 2,500 of the world's leading
    climate experts have concluded that the planet is getting warmer due to
    pollution from burning fossil fuels such as coal. If this continues,
    scientists predict more violent weather, the northward spread of
    insect-borne disease, rising sea levels, and widespread disruption of
    ecosystems. Electric power plants are responsible for 40 percent of the
    nation's total emissions of carbon dioxide (CO2).
    CO2 is the main cause of global
        The Clean Power Act provisions must not replace any other provision
    of the Clean Air Act, nor should the Clean Power Act be accompanied by
    language exempting any entity from applicability of the current law.
        The four-pollutant emissions policy for the electric power sector
    should supplement rather than replace existing obligations to reduce
    emissions from power plants. No entity should be afforded an exemption
    from any exiting Clean Air Act program, including but not limited to
    New Source Review (NSR), prevention of significant deterioration (PSD),
    the National Ambient Air Quality Standards (NAAQS), the regional haze
    program, and the maximum achievable control technology (MACT) standards
    for air toxics.
    Health of people living near power plants must be protected
        There is considerable and mounting evidence that power plant
    pollution has its greatest impact on nearby communities. Consequently,
    an acceptable regulatory scheme for power plant pollution must ensure
    that every plant eventually meet the standard that reflects the
    emission rate achievable through the use of the best available control
    technologies. The Clean Power Act achieves this objective by requiring
    that every covered facility begin to meet these tighter emission
    standards at the time of its 30th year of operation. A regulatory
    regime that simply set a national cap and allowed individual plants to
    operate indefinitely with outmoded pollution controls would fail to
    adequately protect public health.
        With respect to mercury and other air toxics, we believe that any
    level of emission trading could produce adverse health impacts for
    communities near plants that failed to adopt the most aggressive
    mercury reduction strategy. We therefore oppose emission trading to
    meet the emission reduction targets for mercury or other air toxics.
                                   __________
                     Statement of Resources for the Future
        Since 1952, scholars at Resources for the Future (RFF) have
    published more than 10,000 peer-reviewed articles. To gain more
    information; to discuss the methodology, analytical models, and/or
    assumptions upon which the points below are based; or to reach an RFF
    scholar, please contact the Communications Department at Resources for
    the Future, at 202-328-5188 or on the Web at www.rff.org.
     auction of emission allowances would dramatically reduce the cost of
                               carbon reductions
        The success of the sulfur dioxide emission-allowance trading
    program\1\  provides a justification for using a cap-and-trade approach
    to limit emissions of carbon and other pollutants from electricity
    generators. President Bush has spoken about the need for market-based
    approaches to reducing carbon emissions. Several legislative proposals
    now under consideration have suggested that carbon policies should
    first be applied to the electricity industry.\2\  A critical issue in
    the design of a trading program is how emission allowances would be
    distributed at the start.
    ---------------------------------------------------------------------------
         \1\The sulfur dioxide emission-allowance trading program was
    created by Title IV of the 1990 Clean Air Act Amendments.
         \2\Even in the context of an economywide carbon policy, the
    electricity sector will play an important role. This sector is
    responsible for one-third of U.S. carbon emissions, but is likely to be
    responsible for close to three-quarters of domestic carbon reductions
    under any cost-effective U.S. policy to combat global warming. Impacts
    of the Kyoto Protocol on U.S. Energy Markets and Economic Activity,
    U.S. Energy Information Administration (US EIA), 1998. (SR/OIAF/98-03),
    October.
    ---------------------------------------------------------------------------
          The cost to the economy of initially auctioning emission
    allowances would be roughly one-half the cost of an approach that would
    allocate emission allowances at no cost to industry.\3\
    ---------------------------------------------------------------------------
        \3\``The Effect of Allowance Allocation on the Cost of Carbon
    Emission Trading,'' by Dallas Burtraw, Karen Palmer, Ranjit Bharvirkar,
    and Anthony Paul, 2001. Resources for the Future Discussion Paper 01-30
    (August) (www.rff.org/disc--papers/PDF--files/0130.pdf).
    ---------------------------------------------------------------------------
          An auction leads to higher electricity prices than a free
    allocation, while it leads to smaller increases in natural gas prices.
    A generation performance standard (GPS)--a method that would update
    emission allocations based on shares of current generation--leads to
    the smallest increase in electricity prices, but the largest increase
    in natural gas prices. Grandfathering--an approach that allocates
    allowances based on historic generation--falls midway between the other
    two approaches with respect to energy prices.\4\   \5\
    ---------------------------------------------------------------------------
        \4\``Power Plant Emission Reductions Using a Generation Performance
    Standard,'' by Alan J. Beamon, Tom Leckey, and Laura Martin, 2001. US
    EIA (March).
         \5\See note 3 above.
    ---------------------------------------------------------------------------
          The auction approach does a better job of preserving the
    value of existing power generation assets than does the GPS
    approach.\6\  The value of assets would actually increase under the
    grandfathering approach, representing a substantial transfer of wealth
    from consumers to producers.\7\
    ---------------------------------------------------------------------------
        \6\See note 3 above.
         \7\``An Evaluation of Cap-and-Trade Programs for Reducing U.S.
    Carbon Emissions,'' Congressional Budget Office, 2001 (June).
    ---------------------------------------------------------------------------
          Auctioning allowances creates a source of revenue that
    could be returned to households by the Federal or State government, or
    by industry.\8\   \9\  The relative efficiency of an auction would be
    even greater if the revenues were used to reduce taxes on capital or
    labor income, which tend to reduce the level of economic output.\10\  A
    portion of revenues could be directed to support energy conservation
    and other benefit programs.
    ---------------------------------------------------------------------------
         \8\``Returning Carbon Permit Proceeds to the Economy: Three
    Options'' by Martha Phillips, 2001. Americans for Equitable Climate
    Solutions (February, www.aecs-inc.org/indexn.html, accessed 9/25/01)
         \9\``A Proposal for Credible Early Action in U.S. Climate
    Policy,'' by Raymond Kopp, Richard Morgenstern, Billy Pizer, and
    Michael Toman, Resources for the Future (www.weathervane.rff.org/
    features/feature060.html, accessed 9/25/01).
         \10\``When Can Carbon Abatement Policies Increase Welfare? The
    Fundamental Role of Distorted Factor Markets,'' by Ian W.H. Parry,
    Roberton C. Williams, and Lawrence H. Goulder, 1998. Journal of
    Environmental Economics and Management
    ---------------------------------------------------------------------------
          If an auction approach is used, it is possible to offset
    potential losses faced by electricity generators by giving them about
    11 percent of the allowances for free, as compensation to fully
    maintain the value of their existing assets.\11\  Granting a comparable
    amount of allowances (or dedicating revenues from an auction) to
    upstream providers of fossil fuels and workers in these industries
    would be sufficient to compensate them as well.\12\
    ---------------------------------------------------------------------------
        \11\See note 2 above.
         \12\``Confronting the Adverse Industry Impacts of CO2
    Abatement Policies: What Does It Cost?'' by Lawrence H. Goulder, in
    Climate Change Economics and Policy, edited by Michael A. Toman, 2001.
    Washington, DC: Resources for the Future.
    ---------------------------------------------------------------------------
          An efficient carbon policy should cover the entire
    economy rather than function as a patchwork of options affecting
    sectors differently.\13\  The auction approach can be readily expanded
    to address all sources of carbon emissions.
    ---------------------------------------------------------------------------
         \13\See note 9 above.
    ---------------------------------------------------------------------------
        A hybrid approach might be considered to meet various goals of
    efficiency and fairness. A hybrid could combine giving away a portion
    of the allowances through either the GPS or grandfathering approaches
    as compensation, with an auction set up to handle the rest. Over time,
    the auction approach could be phased in to achieve efficiency goals,
    which are especially important to long-term economic growth.
                                   __________
                  Statement of North Carolina General Assembly
        SENATE BILL 1078: Improve Air Quality/Electric Utilities.
        Committee: House Public Utilities
        Introduced by: Senator Metcalf
        Summary by: George Givens, Committee Counsel Tim Dodge, Research
    Assistant
    Summary
        Senate Bill 1078 would require reductions in the emissions of
    certain pollutants from large-scale coal-fired generating units owned
    by investor-owned public utilities. The bill would establish collective
    emission caps for nitrogen oxides (NOx) and sulfur dioxide, as well as
    a timetable for meeting these standards. The proposed bill would also:
          Direct the Environmental Management Commission (EMC) to
    develop and adopt standards and plans to implement programs to achieve
    the collective reductions in the timeframe established.
          Direct the Utilities Commission to allow each electric
    utility to recover the full costs of compliance with this bill.
          Direct the State to use its resources to compel other
    States and entities to make similar reductions, particularly those
    States whose emissions adversely impact air quality in North Carolina
    or whose failure to make similar reductions would put the economy of
    North Carolina at a competitive disadvantage.
          Direct the EMC to evaluate the need for further
    reductions of NOx and sulfur dioxide (SO2), and report its
    findings to the General Assembly and the Environmental Review
    Commission annually beginning September 1, 2004.
          Direct the Division of Air Quality to study issues
    related to the monitoring and control of mercury emissions from coal-
    fired generating units.
          Direct the Division of Air Quality to study issues
    related to setting standards for carbon dioxide emissions from coal-
    fired generating units and other stationary sources of air pollution.
        The act would become effective when it becomes law.
    Current Law
        Under G.S. 143-215.107, the EMC is directed and empowered to
    prepare and develop plans for the prevention, abatement, and control of
    air pollution in the State. This includes regulation of the use of
    SO2 allowances and NOx emissions in accordance with Title IV
    and implementing regulations adopted by the United States Environmental
    Protection Agency (EPA). In addition, the EMC is directed to develop
    and adopt a program of incentives to promote voluntary reductions of
    emissions of air contaminants.
    Bill Analysis
        Sections 1 and 2 would direct the EMC to develop and adopt
    standards and plans that would require reductions in both
    SO2 and NOx emissions over the next 12 years. The bill would
    apply only to coal-burning power plants with a generating capacity
    greater than 25 megawatts that are operated by investor-owned, public
    utilities. 14 facilities in North Carolina meet this description, and
    are identified on the attached map. The emissions caps, and the
    reductions that would be necessary to achieve these caps, are
    illustrated in the table below:

                        Table 1: Proposed Maximum Annual Emissions Levels under Senate Bill 1078.
    ----------------------------------------------------------------------------------------------------------------
                                                          Proposed Emissions  Proposed Emissions  Proposed Emissions
                Pollutant              Quantity Emitted     January 1, 2007     January 1, 2009     January 1, 2013
                                        in 1998 (tons)          (tons)              (tons)              (tons)
    ----------------------------------------------------------------------------------------------------------------
    Nitrogen Oxides (NOx)...........  244,8621\1\.......  Not to exceed       Not to exceed       Not to exceed
                                                           60,000.             56,000.             56,000
    Sulfur Dioxide (SO2)............  475,5082\2\.......  Not specified.....  Not to exceed       Not to exceed
                                                                               250,000.            130,000
    ----------------------------------------------------------------------------------------------------------------
    \1\U.S. Environmental Protection Agency, ``The Emission and Generation Resources Integrated Data base (E-
      GRID),'' Clean Air Markets Programs, 2000. Online: http://www.epa.gov/airmarkets/emissions/.
    \2\U.S. Environmental Protection Agency. ``Emission Data for Power Plants, North Carolina, 1999.'' Online: http:/
      /www.epa.gov/acidrain/emission/index.htm.

        Section 3 would create a mechanism for recovery of costs associated
    with implementation of the bill by the affected utilities. The
    Utilities Commission would set an environmental compliance expenditure-
    recovery factor on an annual basis allowing each electric utility to
    recover all just, reasonable, and prudently incurred environmental
    compliance expenditures separate from the electric utility's base
    rates. This recovery factor would include only include expenditures
    incurred after July 1,2001, that exceed the expenditures required to
    comply with the revisions to the State Implementation Plan (SIP) to
    reduce emissions of NOx pursuant to the final notice published by the
    EPA\3\ .
    ---------------------------------------------------------------------------
         \3\40 CFR Sec. 51.121. July 1, 2001, Edition.
    ---------------------------------------------------------------------------
        Section 4 would provide that the State actively seek to induce
    other States and entities, including the Tennessee Valley Authority
    (TVA), to achieve NOx and SO2 reductions comparable to those
    proposed in this bill. The State would give particular attention to the
    States and entities whose emissions negatively affect air quality in
    North Carolina or whose failure to make similar reductions would put
    the economy of North Carolina at a competitive disadvantage.
        Section 5 would direct the EMC to study the desirability and
    feasibility of reductions of NOx and SO2 beyond those
    proposed in Sections 1 and 2 of the bill. The study would consider a
    variety of factors, including available technology, costs to consumers
    of electric power, reliability of electric power supply, actions taken
    by other States and entities that affect North Carolina, and the
    effects that further reductions would have on public health, the
    environment, and natural resources, including visibility. The EMC would
    report the findings of the study to the General Assembly and the
    Environmental Review Commission annually beginning on September 1,
    2004.
        Sections 6 and 7 would direct the Division of Air Quality
    (Division) of the Department of Environment and Natural Resources to
    study issues related to the development and implementation of standards
    to control mercury and carbon dioxide emissions. The Division is to
    perform cost benefit analyses of the available control technologies and
    alternative strategies for reduction of emissions for mercury and
    carbon dioxide. For mercury, the Division would also study issues
    related to monitoring. The study of mercury emissions is limited to
    coal-fired generating units, while the study of carbon dioxide would
    evaluate all stationary sources of air pollution. Both studies would
    report to the EMC and the Environmental Review Commission, beginning
    March 1, 2002.
        Section 8 provides that act would become effective when the act
    becomes law.
    Background
        The Federal Clean Air Act Amendments of 1990 addressed numerous air
    quality problems in the United States, including smog and acid rain
    caused by SO2 and NOx emissions from fossil-fueled electric
    power plants. Because of concerns over these problems, the EPA in 1997
    adopted a stricter Federal ozone standard. At the time, the EPA
    directed States to develop plans for meeting the new standard by July
    18, 2003, with new controls phased in over several years. In September
    1997, however, the EPA shortened the timetable and ordered North
    Carolina and 21 other Eastern and Midwestern States to revise their
    State Implementation Plans (SIPs) for controlling nitrogen oxide
    emissions by September 30, 1999. Under the accelerated ``SIP Call,''
    all of North Carolina's utilities and some large industries would be
    required to cut their NOx emissions by about two-thirds by 2003.
        In 1999, The General Assembly took several steps to address air
    quality problems in North Carolina. The Ambient Air Quality
    Improvements Act (Act),\4\  set limits on the sulfur content of motor
    fuels sold in the State and set out a schedule for enhancing and
    expanding the State's automobile emissions inspection program. These
    efforts were aimed in part at bringing the State into compliance with
    new Federal air quality requirements for ground level ozone. The Act
    also directed the EMC to develop and adopt incentives to promote
    voluntary reductions of emissions of air contaminants from industrial
    sources. These incentives included emissions banking and trading and
    credit for voluntary early reductions.
    ---------------------------------------------------------------------------
         \4\SL 1999-328.
    ---------------------------------------------------------------------------
                                   __________
                       Statement of Georgia STAPPA-ALAPCO
        This is an important issue for Georgia and the Southeast, given the
    unique air quality problems we have. A multi-pollutant strategy needs
    to be integrated with existing air requirements, and needs to consider
    regional differences
        Many of the reasons to consider a multi-pollutant approach for the
    country are magnified in Georgia and much of the Southeast. The unique
    meteorological conditions we have-hot, humid days with periods of high
    stagnation-lead to formation of ozone, fine particulate matter, and
    regional haze in amounts and frequencies greater than in other parts of
    the country. The South's rapid growth, including its dramatic increase
    in permitting of new power plants, continues to aggravate these
    environmental problems.
        The Southern Oxidant Study focused attention and generated a much
    better understanding on how air pollution forms and can be best
    controlled in the Southeast. The Southern Oxidant Study has pointed out
    the high naturally occurring vegetative volatile organic compound
    emissions in the Southeast, and the greater effect controlling nitrogen
    oxides must play in meeting air quality requirements for ground level
    ozone. This study is continuing, with a new focus on fine particulate
    matter. What we are finding so far is not good. Almost every new fine
    particulate matter monitor we have in place throughout Georgia is
    measuring levels above the present USEPA annual standard. Our neighbors
    are measuring similar levels, indicating that this is a regional
    problem that will require a regional and national solution to solve.
    Many areas of the Northeast and Midwest are not measuring such
    concentrations, which again points out the regional differences, which
    need to be taken into account with any national legislation. While we
    have yet to fully monitor and analyze the cause of these high fine
    particulate levels, indications are that sulfur dioxide emissions
    contribute significantly to this.
        Georgia has been an active participant in the Southern Appalachian
    Mountains Initiative (or SAMI), which has been working to identify and
    recommend reasonable measures to remedy existing and prevent future air
    pollution adverse effects on air quality related values in sensitive
    areas of the Southern Appalachian area. This includes the effect of
    acid deposition on vegetation and streams, ozone on forest health, and
    multiple pollutants like sulfur dioxide and nitrogen oxides on regional
    haze. SAMI has been analyzing whether or not existing mandated
    controls, like the Title IV acid rain program, the NOx SIP rules, new
    vehicle standards and others, will be sufficient to remedy these
    environmental effects in the near term (2010) and in the longer term
    (2040). While
        SAMI's work is not yet final, the initial results indicate that
    significant sulfur dioxide and nitrogen oxide emission reductions
    beyond what is presently required and on the way will be required to
    address near term and longer term environmental needs.
        Georgia is also concerned about mercury in aquatic systems, or more
    directly, in fish. For most aquatic systems, atmospheric deposition is
    thought to be the primary source of mercury. We know that there are
    many sources of mercury to the atmosphere, both natural and human
    related. Some of the human related sources that are currently receiving
    attention include coal combustion, waste incineration, chloralkali
    production, and metal processing.
        Since 1994, we've chosen to evaluate this issue and begin to
    address concerns by measuring fish tissue mercury concentrations and
    developing conservative fish consumption guidelines or advisories to
    help protect public health. Even though we've monitored thousands of
    fish samples for more than 40 chemicals, mercury currently is
    responsible for more than 70 percent of the advisories restricting fish
    consumption on Georgia's rivers, lakes, and coastal waters.
        Because of these fish consumption advisories, mercury is currently
    a significant problem as we work through the difficult process of
    developing comprehensive Total Maximum Daily Loads or TMDLs for many of
    Georgia's waters. In this particular instance, we are trying to address
    inputs from all possible sources (and perhaps traveling great
    distances) by setting limits in one medium, water.
        A coordinated, integrated program to significantly reduce mercury,
    sulfur dioxide, and nitrogen oxides, therefore, would greatly enhance
    our ability to solve air and water quality problems in Georgia. We
    understand that the regulated community is interested in more certainty
    about what will be required and when to meet all of these different
    requirements. States like Georgia are already looking ahead to critical
    dates in the future when regional haze and fine particulate State
    Implementation Plans will be due, and in what years additional
    reductions to support those plans will be needed. These dates all need
    to be carefully integrated with any multi-pollutant control strategy to
    maximize the impact of the emission reductions as soon as practicable.
        With the projected future growth in the Southeast, we need some way
    to rely on how much sulfur dioxide, nitrogen oxides, and mercury will
    be allowed, so that growth does not offset any progress made with
    stricter emission limits on large power plants and industries. A cap-
    and-trade system could achieve this need. A trading program to
    implement this system would be most cost effective, but we would have
    concerns on how large the trading area could be, given the national
    legislation being considered, or if there would be any limitations on
    additional local control requirements. Emission reductions far outside
    Georgia or the Southeast will not have the impact of more localized
    reductions, especially given the unique meteorological conditions we
    have.
        On June 1, the Governors of Georgia, North Carolina, and Tennessee
    signed the Southern Air Principles (see attached). These States agreed
    to consult, consider, and formulate a proposed joint multi-pollutant
    strategy for reducing nitrogen oxides, sulfur dioxide, and mercury. We
    would like a strong national approach to help support any State or
    regional programs we may develop.
        In summary, we do see the need for and benefit of a national
    approach to regulating these pollutants. This will go a long way to
    helping us solve our problems with any additional local control
    measures that may be required.

                                CLEAN POWER ACT

                                  ----------

                          THURSDAY, NOVEMBER 15, 2001

                                   U.S. Senate,
             Committee on Environment and Public Works,
                                                Washington, DC.
        The committee met, pursuant to recess, at 9:34 a.m. in room
    406, Senate Dirksen Building, Hon. James M. Jeffords [chairman
    of the committee] presiding.

          MULTI-POLLUTANT CONTROLS: IMPACTS ON UTILITIES AND CONSUMERS

        Present: Senators Jeffords, Lieberman, Clinton, Corzine,
    Carper, Chafee, Campbell, Inhofe, Voinovich, and Bond.

    OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
                          THE STATE OF VERMONT

        Senator Jeffords. Good morning, everyone. The hearing will
    come to order.
        Two weeks ago we heard from Federal and State witnesses
    about their views on S. 556. In this second hearing, we will
    receive testimony from affected companies and environmental and
    labor groups.
        First, we are lucky to be joined by my good friend Governor
    Dean of Vermont. I appreciate your willingness to appear before
    the committee on this important issue, Governor, and especially
    after making the effort to get here last time and not quite
    doing it.
        As my colleagues may know, the Governor is a medical
    doctor, an avid hiker. He has seen first hand what power plant
    pollution can do from the haze and the tree damage in the Green
    Mountains to the respiratory problems of children. The Governor
    has done great things for Vermont and will always be remembered
    as a statesman and environmentalist.
        I am pleased that we are making progress in preparing a
    legislative record that supports a four-pollutant bill. I
    understand that the Administration's proposal will be out no
    later than the end of January. I look forward to that.
        So it seems we are on a track of a markup of S. 556 in the
    first part of February; that is my goal. That should give our
    staff plenty of time to work out all the details for a smooth
    markup.
        At the last hearing we heard a great deal about estimated
    increases in the price of electricity from the 4-P approach.
    But it was not all gloom and doom from the economists. There
    was good news. The overall cost to the economy of adopting the
    Clean Power Act would be essentially unchanged from the
    reference case almost regardless of which technology
    assumptions are made. And, of course, we know that the
    reference case does not accurately portray the world as it
    really is. It still does not consider the cost of many of the
    regulatory actions which EPA must take in the coming years to
    protect public and environmental health.
        Given a more thorough consideration of the benefits and a
    more accurate baseline on the reference case, we are looking at
    positive economic impacts from the multi-pollutant bill.
    According to one of our witnesses today, that should include a
    net increase in new jobs.
        At our last hearing, Senator Chafee asked an excellent
    question of the Administration witnesses. He asked: ``What are
    the consumer cost impacts that will be associated with the
    Administration's multi-pollutant proposal?'' The committee has
    been waiting for an answer from the Administration on that
    question, and the air quality and environmental effects of the
    National Energy Policy, not just the multi-pollutant proposal.
    Without objection, I would like to place the May 21 letter into
    the record.
        We can help assure that the Clean Power Act has a positive
    impact by keeping the fourth P in the bill despite the
    Administration's views. We might be able to avert some of the
    economic damage that several studies have associated with the
    doubling of the greenhouse gas concentration. They say that the
    doubling will result in a loss of GDP of 1 to 2 percent, and
    will be reached by approximately 2060.
        Two very important announcements were made since the last
    hearing. EIA reported that carbon dioxide emissions from
    electricity generation has risen by 26.5 percent since 1990,
    and total greenhouse gas emissions from the U.S. have increased
    by 13.6 percent. A more positive announcement came from
    Marrakesh. The Kyoto Protocol is now more or less complete.
    Japan plans to ratify it in the very near future and many other
    nations are expected to follow shortly thereafter.
    Unfortunately, these announcements reflect poorly on the United
    States. We have lost credibility with our global neighbors at a
    very delicate time, and our long-term business and
    environmental interests have been left unattended.
        Real greenhouse gas reductions require real leadership, and
    real leadership requires taking real risks. Stemming the rate
    of growth of emissions is not adequate or responsible. Long
    ago, there was a famous Vermonter named Ethan Allen. He was the
    leader of the Green Mountain Boys, an important figure in the
    Revolutionary War. The story goes that he entered into
    negotiations to have the independent Republic of Vermont become
    part of Canada. Yes, Vermont was an independent republic for 14
    years. Some say we still are.
        [Laughter.]
        Senator Jeffords. However, scholars now believe that his
    real motive was to provoke the United States into granting
    Vermont full and expeditious statehood by threatening to join
    Canada. Vermont was a hot commodity back then.
        Much worse things than joining Canada could have happened.
    At least then Vermont would be part of a coordinated
    international effort to stop global warming. Ethan Allen and
    Vermont took a real, but calculated, risk in exploring this
    avenue. It paid off in statehood eventually, which, lucky for
    me, leads to having two senators in the U.S. Senate.
        We know with some certainty that failure to significantly
    reduce all four pollutants in a coordinated fashion will lead
    to a worsening environmental and public health conditions, and
    it will simply exacerbate this certainty the power generators
    currently face. I hope the other members of the Administration
    will join me in taking the risk of leadership and helping us
    move the Clean Power Act through Congress early next year.
        [The referenced letter follows:]

        Senator Campbell.

    OPENING STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR
                       FROM THE STATE OF COLORADO

        Senator Campbell. Thank you, Mr. Chairman. I appreciate
    this second opportunity to hear some testimony on S. 556. I
    would also like to reiterate my opposition to the bill as it
    stands, for several reasons.
        Principally, I oppose it because it fails to recognize the
    distinctions in air quality between the East and the West, as I
    mentioned the last time you called for a hearing.
    Traditionally, the Federal Government has recognized the
    inherent differences between the East and the West and has
    allowed disparate treatment in the law to reflect those
    differences. For example, the Federal Government has recognized
    the particular scarcity of water in the West and that water
    rights are treated separate from the land. It has historically
    deferred to the State water courts in adjudicating claims.
        First, this bill mandates sulfur dioxide emissions
    reductions by 75 percent but completely ignores the regional
    approaches to address the pollutants. S. 556 fails to even
    consider the careful work of the Western Regional Air
    Partnership, amounting to a slap in the face to many of us in
    the West.
        Further, the Clean Power Act would impose significant
    reductions in nitrogen oxide emissions throughout the entire
    country. Yet, data raises issues whether the West even has a
    problem or not. Surely this bill is not intended to require
    power plants to make significant reductions where there are no
    problems in the first place.
        One of the witnesses today, the American Lung Association,
    which is an organization which I respect a great deal, states
    that sulfur dioxide and nitrogen oxide emissions shorten the
    lives of 31,200 people each year. We already know that this is
    not a big problem in the West. Something like one-tenth of the
    emissions are in the West compared to the rest of the nation.
    So I would assume they mean that most of the people affected
    are concentrated in the East, not the West. Perhaps the East
    does have a poor quality of air, and maybe that is also the
    reason my home State of Colorado is expected to increase in
    population by 40 percent in the next 13 years.
        I highlight these points in order to show that this bill is
    tailored specifically for eastern concerns with very little
    regard for the West. S. 556 pollution reduction schedule has
    been widely criticized as unrealistic, and that mercury
    monitoring and abatement technology is untested and untrue.
    Some members of the committee might scoff at that criticism,
    and I expect they are sincere in that, but I think that there
    may be something to that. I would also like to ask the Senators
    to consider that there are counters to the power industry.
    According to witnesses today, they are relying on the Institute
    of Clean Air Companies, which is a national association of
    companies that sell the very same technology that industry must
    purchase in order to meet what I think are unrealistic targets.
        I should also note that when I refer to the West, and I
    know we have several members of the far West on the committee,
    I am not referring to California, where I was born and raised,
    but I am thinking in terms of the Rocky Mountain States and the
    basin States and the desert States----
        Senator Inhofe. And Oklahoma.
        Senator Campbell. And Oklahoma, excuse me.
        By any measure, S. 556 would significantly affect the coal
    industry, resulting in likely fuel switching to natural gas and
    definite and dramatic electricity cost increases to ratepayers.
    While I think that some are driven by real environmental
    concerns, some probably are also driven by the potential of
    bottom line profits. This bill would particularly disadvantage
    the people of Colorado as more than 80 percent of our State's
    electricity is coal-fired.
        Simply put, I oppose this legislation, any legislation, in
    fact, that would significantly raise the cost to lower-and
    medium-income families without any corresponding gains in
    health or the quality of life.
        Last, I do not support this bill because it calls for
    significant reductions in carbon dioxide, effectively reducing
    the use of coal. Our nation is at a time when we should be
    focusing on diversifying energy sources and improving the ones
    we have rather than becoming more dependent on foreign energy.
    Rather than debating the Global Warming Protocol, I would ask
    the committee what we would gain if it were implemented.
    Research has demonstrated that we would effectively postpone
    warming by 6 years, from 2094 to 2100, at a cost to the
    industrialized nations of the world that may lead from between
    $80 to $350 billion per year. We would certainly promote an
    exodus of American companies out of this country to the ones
    that are not bound by that accord and certainly detract from
    our tax base in the corresponding loss of jobs and the
    manufactured goods that we now rely on.
        In any event, Mr. Chairman, I do appreciate your calling
    this hearing, and look forward to testimony from our panelists.
        Senator Jeffords. Senator Lieberman?

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

        Senator Lieberman. Thanks, Senator Jeffords. Mr. Chairman,
    I appreciate very much your reference to Ethan Allen and the
    tradition of independence from Vermont, which you have
    certainly kept alive in our time. Let me just say that I am
    proud to declare myself one of your Green Mountain Boys.
        Senator Jeffords. Wow. Thank you.
        Senator Lieberman. I am also proud to be one of the primary
    cosponsors with Senator Collins and yourself of this bill,
    making it, as we have all said, a tripartisan bill. This would
    set what I think are practical limits on the power plant
    emissions of sulfur dioxide, nitrogen oxide, mercury, and
    carbon dioxide.
        I appreciate your steadfastness, Mr. Chairman, in going
    ahead with this second hearing and indicating that we will go
    to a markup in February. I hope that these discussions are not
    occurring without engaging the interest and involvement of the
    Administration. I was pleased to hear you indicate in your
    opening statement that you have had some reason to believe that
    the Administration will be coming forward with its bill by the
    end of January. While we naturally wish that the President had
    stayed with the position he took during last year's campaign to
    be in favor of four-pollutant legislation to reduce emissions,
    not just the three that we hold in common as targets of
    reductions but also carbon dioxide, nonetheless, at this point,
    for the Administration to come forward with a three-pollutant
    bill will at least join the issue and advance the discussion. I
    think that would be critically important.
        As I look at the testimony for today, I worry that there is
    a danger here that we are not moving toward a solution, but we
    are moving toward stalemate. That would be disheartening. I
    feel very strongly that if we embrace this four-pollutant
    approach, it would be good not only for the environment, but
    certainly also for the utility industry which otherwise will
    continue to face an increasing mountain of regulation.
        The need for action is clear here. The best science tells
    us that global warming is one of the most serious and pressing
    environmental challenges we face. If anything, the evidence is
    getting more compelling. If we do not act, scientists worldwide
    tell us the Earth's temperature is anticipated to rise between
    3 and 10 degrees fahrenheit in the next century, with a host of
    extraordinary environmental, economy, and, not least, human
    consequences.
        As you have said, Mr. Chairman, just last week close to 200
    nations in the world agreed on a strategy for combatting global
    warming. Unfortunately, we were not among them. Because the
    Kyoto Agreement has now set rules that were drafted without
    consideration of the interests of America, of our environment
    and of our industry, I am afraid that we are going to pay a
    significant price for sitting on the sidelines.
        As we look to the future, engaged as we are through the war
    against terrorism in very aggressive, multi-lateral global
    action, I hope that we will extend that very favorable policy
    to the environment, and particularly to global warming, as
    well.
        With regard to the economic advantages of the legislation
    before us, I just want to quote James Rogers, President and CEO
    of Synergy, from testimony he gave before this committee in
    May. He said: ``My company seeks comprehensive multi-emission
    power plant legislation because we want long-term clarity and
    certainty built into our environmental compliance planning
    process. Without some sense of what our carbon commitment might
    be over the next 10, 15, or 20 years, how can I or any other
    utility CEO think we have the complete picture of what major
    requirements our plants may face.'' That certainty is exactly
    what the Clean Power Act would provide.
        In the last hearing, Mr. Chairman, we heard EIA and EPA
    testimony regarding the cost analysis of this bill. Frankly, I
    think the testimony did not clarify but clouded the situation.
    Most importantly, it ignored regulations that are already in
    the pipeline and, therefore, did not in their estimates provide
    an accurate picture of the eventual costs of business as usual;
    that is, going ahead with the current system and not providing
    a certain system through this bill of regulating the emissions
    of carbon dioxide. That is unfortunate and misleading, because
    it is the costs of these regulations that I think have driven
    the debate to this point.
        The EIA assessment also had a very pessimistic view of
    technology development. In fact, EIA did not even testify
    regarding more optimistic scenarios that we had requested their
    counsel on. That was a mistake, I say respectfully, because
    technology has advanced remarkably through other cap-and-trade
    proposals that have been implemented.
        I must say, finally, about the economic analyses that we
    received at the last hearing, even with the flaws, in my
    opinion, that I have just mentioned, these analyses ultimately
    found just a minimal impact on GDP from the Clean Power Act. If
    we assume technological innovation, lower resources costs to
    the utility industry, then business as usual is the conclusion
    I draw from their testimony.
        So, we have got some work to do here. But it is critically
    important work. I know that you and I and Senator Collins are
    open to discussion and negotiation. I have in mind Senator
    Campbell's statement. I know that we are beginning to develop
    language that we want to present to senators from the western
    States to see if we could engage them further in the process of
    achieving some limits on carbon dioxide emissions. But bottom
    line, this is important work that affects the health and future
    of every American, and even more directly our children and
    grandchildren.
        So I thank you, Mr. Chairman, for taking the lead in this.
    I look forward to the testimony of our witnesses today.
        Senator Jeffords. Thank you.
        Senator Inhofe?

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

        Senator Inhofe. Thank you, Mr. Chairman. Senator Smith had
    asked that I request unanimous consent that his statement be
    put in the record at this point.
        Senator Jeffords. Without objection, it will be accepted.
        [The prepared statement of Senator Smith follows:]
        Statement of Hon. Bob Smith, U.S. Senator from the State of New
                                   Hampshire
        Good Morning. I would like to thank Chairman Jeffords for holding
    this second in a series of hearings on legislation to reduce emissions
    from our nation's electric utilities. Thanks also to the witnesses for
    appearing before us here today.
        I offered most of my comments on this issue in my opening statement
    2 weeks ago at the first legislative hearing on S. 556. I won't take up
    our time by repeating myself this morning. I would, however, like to
    emphasize that we now have two sets of analyses--one from EIA and one
    from EPA--that underscore the value of a multi-emissions approach.
    These analyses show that we can make significant reductions in NOx,
    SO2, and mercury for less than the expected cost for partial
    reductions in just SO2.
        In the Clean Air Act Amendments of 1990, we committed to reducing
    sulfur dioxide emissions by nearly 7 million tons at an EEI-estimated
    annual cost of $7 billion. I'd like to point out that actual annual
    costs have been right around $1 billion--nowhere near as expensive as
    the original estimates. The EIA and EPA analyses show that we can
    achieve additional substantial reductions in SO2 in
    combination with significant reductions in nitrogen oxides and mercury
    for less than $7 billion--the original estimates for the Acid Rain
    Program alone.
        We need to remember, however, that it is not merely the existence
    of a market-based multi-pollutant system that will provide efficiency
    benefits--appropriate levels and timing are critical to the success of
    any such program. The chairman's bill, for instance, likely would not
    achieve the economic efficiencies available from a market-based multi-
    pollutant approach due to insufficient time to meet the aggressive
    target levels.
        A comparison of the EIA analysis requested last year by
    Representative McIntosh--which is the closest to an analysis of S. 556
    we have to date--with the analysis I requested earlier this year
    emphasizes the importance of setting appropriate emission levels and
    timeframes. For instance, average electricity prices in 2020 under the
    McIntosh scenario would be 25 percent higher than 1999 prices while
    2020 average prices would be either lower or no more than 6 percent
    higher than 1999 prices under the most stringent scenario I had
    analyzed. Incremental resource costs also are significantly higher
    under the McIntosh scenario--$132 billion compared to only $89 billion.
        These analyses show that if we set up a market-based multi-
    pollutant system correctly, we can achieve desired emission reductions
    in a cost-effective manner. If we don't do it correctly, however, we
    will impose unnecessary costs on industry and consumers alike.
        Senator Inhofe. Let me build on this a little bit. I do
    think that when February comes around there are going to be a
    lot of changes and a lot of things will be considered. I think
    when that time comes we are going to have to come up with
    something that would contemplate and balance our nation's
    existing environmental achievements and the energy supply and
    security. I have four basic concerns with this legislation.
        First of all, it is inequitable to require an across-the-
    board cut for all States as if we are all starting at the same
    point. My State of Oklahoma currently emits well below the
    national average. Oklahoma's environmental profile mirrors that
    of many of the western States, as was brought out by Senator
    Campbell. We do not have the SOx, NOx, and mercury problems.
    Therefore, before we are asked to reduce our emissions even
    further, other States in other regions should be expected to
    have their emission levels down to cleaner levels and closer to
    what Oklahoma is doing today. I think it is ridiculous to
    impose percentage reductions on us, at enormous marginal
    expense, before those regions who have significant air problems
    do their part.
        Second, I think it is just very bad energy policy. By
    limiting fuel options for power generation, increasing the cost
    of electricity to Americans, and stopping the construction of
    new generating facilities, this bill is the very antithesis of
    sound national energy policy, which we have been talking about
    for quite some time. It would undo everything that proponents
    of a national energy policy have been fighting for, and we are
    still fighting for today and hopefully we will be somewhat
    successful before the end of this session.
        It also is the antithesis of economic stimulus. S. 556
    would make the price and availability of energy an economic
    national crisis. In Oklahoma, it would significantly change the
    source of energy away from affordable coal to a more expensive
    option, probably natural gas. Oklahoma depends upon coal for
    over 60 percent of our power. This is because coal is a much
    lower fuel cost versus natural gas, and the coal is a clean
    source of energy. The result is, Oklahoma utility rates are 19
    percent less than the national average power rate, our utility
    rates are much lower than States that depend heavily upon
    expensive natural gas, such as New York, New Jersey, and
    California, or on renewables, such as Maine, and I know that
    Senator Collins is concerned about that, for generation.
        S. 556 would ensure that our rates would go through the
    roof. Higher energy prices affect everyone. However, when the
    price of energy rises, it means that the less fortunate in our
    society have to make a decision between keeping their heat and
    their lights on and buying other essentials such as food.
        One other area that concerns me, because, as I often say,
    back when Republicans were important and I was Chairman of the
    Clean Air Committee, we held hearings in quite a number of
    different places, including in Ohio, Senator Voinovich, about
    the problems with new source review. We have been wanting new
    source review reform. I think this adds even more regulations
    to an already over-complex regulatory scheme which includes the
    resource reform. As you know, I have been saying for quite
    awhile now that, unless reformed, EPA's new source review
    policies will continue to interfere with our nation's ability
    to meet our energy and fuel supply needs. I think this just
    magnifies the problem.
        So, I think we need to address this. I know we are going to
    be doing it. I would like to make sure that anyone who happens
    to be listening to us now and is concerned with the higher
    prices of energy, with the predictable energy supply, that, by
    ignoring the Administration's policy, this bill in this form
    will pass this committee but we will have a much more
    reasonable approach when we get to the floor. Thank you, Mr.
    Chairman.
        Senator Jeffords. Governor, how are you fixed for time?
        Governor Dean. I think I have got until about 10:30.
        Senator Jeffords. Without objection, I will let the
    Governor speak next.
        Senator Inhofe. I am going to be reserving the right to
    object. There are others who want to have opening statements.
    Is it your intention to have those opening statements after the
    Governor speaks?
        Senator Jeffords. Yes. Right. I would just let the Governor
    slip into one of the slots on this side.
        Senator Bond. What is your timeframe, Mr. Chairman, because
    some of us have commitments as well.
        Senator Jeffords. Well, I do not think the Governor will
    take long.
        Senator Voinovich. Mr. Chairman, I would be more than happy
    to allow the Governor to go forward and testify now before
    giving my opening statement. But I would do so on a commitment
    from the Governor that he would read my opening statement and
    the charts that accompany it. Do I have that commitment,
    Governor?
        [Laughter.]
        Governor Dean. Senator, not only will I be very brief, but
    I promise not to leave until I absolutely have to. So I may get
    to hear your opening statement.
        Senator Voinovich. I would just like to welcome you,
    Governor Dean. We have worked together in the National
    Governors Association on so many things and I have such high
    admiration for you, and many of the programs that you have put
    into place in your State we have copied in Ohio, and we are a
    better State because of some of the things that you have done
    in your own State. So, we are glad to have you here today.
        Senator Jeffords. Please proceed, Governor.

     STATEMENT OF HON. HOWARD DEAN, M.D., GOVERNOR OF THE STATE OF
                                VERMONT

        Governor Dean. Let me first thank Senator Voinovich for his
    kind words. It was a great joy to work with a person who was
    very interested in bipartisan relationships, and I think we
    share a deep commitment to children. I certainly appreciate it
    and I look forward to hearing your views on these issues as in
    some of the other things that we worked together on. Let me
    also say in response to Senator Lieberman's comment about being
    a Green Mountain Boy, he may be closer than he knows, because
    the great shame of Vermont is that Ethan Allen in fact was born
    in Connecticut and immigrated.
        [Laughter.]
        Senator Lieberman. I know that well. We carry on that
    tradition in Connecticut with a great furniture company that
    you may know about.
        [Laughter.]
        Governor Dean. I have testimony which I have submitted. I
    thought I would simply go over the salient points. I was very
    interested in Senator Campbell's opening statement because it
    immediately reminded me of how this problem is perceived as a
    regional problem and a regional conflict. I think we have to
    look at it as an American problem, not a regional problem. I
    would urge all the Senators to try to come up with some kind of
    compromise bill that we really can move forward on. This has
    been a problem in the United States for 20 years. I do not know
    what the proper solution is. Obviously, I am very enthusiastic
    about your bill. But we really do need some help here.
        I think those of us in the East, including the eastern
    Canadian premiers who the New England Governors meets with on a
    regular basis, cannot help the fact that the winds blow from
    west to east. We certainly have things that we need to do in
    terms of mobile sources. But in Vermont, even though
    manufacturing is our largest industry, we create about one
    pound per person per year of these four pollutants each. The
    American average is, say, 90 pounds of carbon dioxide and in
    the 30's and 40's for the other pollutants. So, we really do
    more than our share in terms of power and yet we still have
    days where we exceed the 1-hour and the 8-hour ozone limits
    because the wind blows from west to east, a fact that I do not
    think anybody in this room can do a whole lot about. So we
    really do need some resolution of this problem.
        Our power source is very interesting. In our State, we get
    about one-third of our power from fossil fuel, most of which is
    natural gas which is a common fuel in New England, we get about
    30 percent roughly from nuclear power, and roughly 40 percent
    of hydropower which we import from Quebec. So we do not make
    much power using coal. Therefore, our emissions are very, very
    low and we are almost always in compliance with Clean Air. In
    the days that we are not, it is because there is a wind that is
    blowing things in from elsewhere.
        We really need to deal with that problem in some way,
    because there are a lot of issues that go along with it. The
    most spectacular is acid rain. Thirty-five percent of the lakes
    in the Adirondacks, which are just across Lake Champlain, are
    dead. There is no more fishing in those lakes, there is very
    little life in those lakes. A significant portion of our lakes
    have suffered dramatically because of acid rain. These are the
    pollutants that we are talking about in your bill that need to
    be reduced. That is an American problem, not a regional
    problem. I do not think that any region of the country would
    take glee in the fact that 35 percent of the lakes in the
    Adirondacks no longer have life in them because of the
    utilities.
        So it is important that we address this problem in some
    way. We do need to be sensitive to the concerns of the West in
    terms of their power. We do not want to jack up power rates.
    New England power rates are higher than they are in the West,
    and, an interesting statistic, we have the seventh highest
    electric rates in the country in Vermont. You would say, well,
    what do you expect with a power policy like that; you do not
    have coal. But the interesting thing is that our electric bills
    are twenty-second highest in the country. The reason for that
    is that we do an enormous amount of conservation. In fact, we
    started the only utility of its kind in the country last year
    called the Energy Efficiency Utility, where power companies
    actually pay something to a private group who got a contract
    and which goes around helping industries and, to a lesser
    extent, homes become more energy efficient. So, although our
    electric rates are high, the effect of our electric rates on
    the economy is roughly the average of the United States.
        I am a physician, as you pointed out in the introduction.
    Clearly, these pollutants are problems for our health. Asthma
    is of concern. There are other concerns with these,
    particularly the sulfur and the nitrogen. We really do need
    some relief from this.
        We just had a meeting of the National Regulatory
    Commissions. They all voted across-the-board, nationally, all
    regions voted to deal with a four-pollutant bill. I think that
    was a very positive step. Everybody in the country recognizes
    this is a problem. Everybody in the country, not just the East
    or the folks up in Canada across our border, but everybody in
    our country and, frankly, everybody in North America. The
    question is what can we do to deal with the problem. In our
    State again, we hope that we are going to meet the increasing
    demands through renewables, a program that the Federal
    Government has pretty much ignored since Jimmy Carter was
    President. We need to deal with these things. These things are
    more expensive in terms of kilowatt hour and initial
    production, but over the long-run they are not more expensive,
    especially is you couple it with a vigorous effort toward
    conservation and efficiency.
        So, Mr. Chairman, I thank you for the opportunity to
    testify. I deeply hope that this bill passes, and I deeply hope
    that in the course of this bill passing we will be able to work
    out the regional concerns that we have. I think it is essential
    that we have a bill. Christine Whitman, who was one of the
    great Governors leading the fight against acid rain and against
    air pollution, is now the EPA Administrator. I hope that you
    will be able to work closely with her because she was one of
    the leading Governors in this country in fighting air pollution
    when she was the Governor of New Jersey. I know she feels that
    way as the Administrator of the EPA.
        I really do believe that we can have a bill that makes
    sense, and I hope that we will be able to do that. It is
    important that this bill not only pass this committee, pass the
    Senate floor, but pass the House and be signed by the
    President. Thank you.
        Senator Jeffords. Thank you very much, Governor. I could
    not have asked for a better or more supportive witness. I
    understand the National Governors Association has begun to
    address this matter, too. Do you know what they have been doing
    on this?
        Governor Dean. We have the same political problems that you
    have in the Senate, except that we operate by consensus which
    makes it very difficult to adopt anything that is the least bit
    controversial to more than one Governor. We have agreed on a
    three-pollutant bill. There are many who would like a four-
    pollutant bill, but we have agreed to support a three-pollutant
    bill. There are many of us, as I say, who would support more
    than that, and the Association of Regulatory Boards actually
    does support a four-pollutant bill.
        Senator Jeffords. You mentioned BACT, Best Available
    Control Technology, for new sources as one important provision
    of the Clean Air Act that should not be negotiated away. Are
    there other provisions, like Section 126 on interstate
    pollution, that you think need to be maintained?
        Governor Dean. Well, our pollution basically comes from two
    sources--mobile sources, cars are a problem for everybody in
    the country, and the East or Vermont is not an exception; and
    the stuff that blows in from elsewhere. I think we have a
    responsibility to deal with mobile sources, but that is not a
    subject of this bill. I believe in our State it makes sense to
    support the most vigorous, aggressive approach that we possibly
    can, and of course that is what we are supporting. Again, I
    would not negotiate that away. But we have to have a bill and I
    think the bill ultimately has to have the support of the broad
    base of the American people. I think the American people do
    support this bill no matter where they live. I think we need to
    get a bill that reflects their views that air pollution is
    something that we cannot continue to live with.
        Senator Jeffords. Senator Voinovich, you may make your
    opening statement or ask a question, whichever you prefer.

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

        Senator Voinovich. I think I will make my opening
    statement, Mr. Chairman. I would like to say that I am happy
    that you are having this second hearing. As I stated at the
    last hearing, I am opposed to S. 556, as written. But I do
    agree that we need a multi-emissions bill, and so does the Bush
    Administration.
        Governor Dean, it would be nice maybe if the Governors sat
    down on that three-pollutant thing and maybe gave us their
    thoughts on some of the numbers that are in this bill. I
    believe we could do a three-pollutant bill pretty quick if we
    all sat down and worked together on that. I know the people in
    your part of the country are interested in NOx and SOx and
    mercury, and I think we could get on with it. But by adding
    that fourth one, I think it really presents a situation where
    the Administration would not support it and many of us in the
    Congress would not be supportive of that.
        I am pleased to have utilities, environmentalists, and mine
    workers testifying today. I understand, Mr. Chairman, that you
    propose a markup of this bill in February. I want you to know
    that Senator Smith and I believe that we need a hearing on the
    technologies for reducing mercury and CO2, and we
    also I think need to hear from impacted groups, such as:
    chemical industry, manufacturers, mining industry, public
    power, and rural co-ops.
        At our last hearing, I began to address the devastating
    impacts of S. 556 on Ohio and the midwest and on our nation's
    economy. I believe this bill will strike at the heart of our
    nation's manufacturing base in the industrial midwest. For
    example, Ohio produces 6.2 percent of our nation's
    manufacturing gross State product. When you compare Ohio's
    manufacturing production with New England, as you can see on
    this chart, Ohio's GSP for manufacturing is higher than all six
    of the New England States combined. There is Ohio at 93.4, and
    the rest of the New England States at 83.8 percent.
        As I pointed out last week, one of the main reasons Ohio
    and the midwest are the center of U.S. manufacturing is our low
    cost supply of electricity and the use of coal. However, S. 556
    will cause massive fuel switching away from coal. This will
    drive up the price of electricity and also cause massive job
    losses in Ohio and throughout Appalachia. By the way,
    Appalachia is one of the poorest parts of the United States of
    America. That is why we have the Appalachian Regional
    Commission.
        Some of my colleagues discount such predictions of job
    losses. But the truth of the matter is that Ohio and the
    midwest in general have steadily lost coal industry jobs since
    the 1990 Clean Air Act Amendments. As Chart 2 shows, since
    1990, Ohio has lost over 54 percent of its coal jobs. For the
    region--Illinois, Indiana, Kentucky, Ohio, Pennsylvania,
    Tennessee, Virginia, and West Virginia--coal jobs have declined
    46 percent, from just over 108,000 jobs in 1990 to 58,000 in
    1999.
        When jobs are lost in one industry the repercussions are
    felt across every industry in the region. Indeed, from 1990 to
    2000, Ohio coal mining companies lost $382 million in direct
    revenue from lost coal sales per year. If you use economic
    multipliers by the Department of Commerce, the economic impact
    for all industries in Ohio was about $824 million per year. For
    Ohio, the lost household earnings were about $224 million per
    year, and the total number of lost jobs was about 8,000. This
    is just one part of the picture. When you factor in the impact
    on businesses from higher natural gas prices, you can see the
    economic impact of S. 556 will be devastating to the entire
    economy. In fact, at the last hearing, if you recall, the
    witnesses said that if this bill passed the electricity rates
    would go up in our part of the country 50 percent, and because
    we would be using a lot more natural gas, our gas heating costs
    would go up at least 20 percent.
        I do not think people realize how many industries use
    natural gas and the number of employees in those industries.
    You can just see what we have--farming, steel, metal, polymers,
    chemicals, food processing, all of these industries use natural
    gas. As we use more and more of it, you use it, Governor, in
    your State, one-third natural gas, we are using a lot more of
    it in Ohio, the demand for it goes up, the price goes up for
    it, and this winter it was devastating in our State,
    particularly for the least of our brethren, the poor and the
    elderly in our inner-cities and urban areas.
        It is obvious that what we are doing is going to have a
    dramatic impact on our nation's economy and our competitive
    position in the world marketplace, and, Mr. Chairman, our
    national security. It is true that even though we come from
    different regions in this country, we are part of the same
    country. We do have a symbiotic relationship. If all of us want
    to achieve our goals of a clean environment, of meeting the
    energy needs of this country and having reasonable energy
    costs, we have to sit down together and try to reason and come
    up with a bill that we can all live with.
        I am optimistic that all of us can reach a bipartisan
    compromise to continue to improve the environment and public
    health, reduce utility emissions, and I want you to know our
    utilities want to reduce emissions. You mentioned Mr. Rogers,
    Senator Lieberman. I will tell you, Senator, Mr. Rogers is
    opposed to this piece of legislation. He is supportive of
    legislation if we could just sit together and talk about it. We
    want to have greater regulatory certainty and ensure that
    American consumers will have safe, reliable, and cost-effective
    electricity. It is time for bipartisan discussions on a
    compromise bill. I believe working together we can get such a
    bill out of this committee. Thank you, Mr. Chairman.
        Senator Jeffords. Thank you, Governor.
        I understand that the chairman of the clean air
    subcommittee is going to hold a hearing this January.
        Senator Lieberman. Yes. Just to say to my friend and
    colleague from Ohio, we will hold a hearing on technological
    innovations that you have requested. I will be glad to work
    with you on it.
        Senator Jeffords. Senator Corzine?

    OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE
                          STATE OF NEW JERSEY

        Senator Corzine. Thank you, Mr. Chairman. I have a formal
    statement I will put into the record. But I will just commend
    you for holding this hearing today. As one might suspect, where
    New Jersey is located, how Governor Whitman reacted when she
    was Governor of the State, we have a very strong interest in
    making sure that the arguments, that I think actually do
    reflect the national interest, come forward with support for
    the four-pollutant approach. I appreciate the Governor being
    here today and the others who will testify.
        I would reinforce that there is a growing weight of
    scientific and I think global political consensus with regard
    to issues on climate change which I think raise the bar with
    respect to the debate on this issue. None of us want to
    undermine the strength of our national economy. But that also
    has to be weighed against the real impact on the lives of
    people. So, this is a worthy discussion, whether from a
    technological point of view, economic point of view, political
    point of view, and I feel you should be commended and that all
    of us need to sit around this round table and come up with an
    action that addresses the needs of the people and our economy.
    Thank you, Mr. Chairman.
        [The prepared statement of Senator Corzine follows:]
     Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New
                                     Jersey
        Thank you, Mr. Chairman. I commend you for holding another hearing
    on the important public health and environmental issues addressed by S.
    556.
        Like other committee members, I have delivered prior statements
    about the bill and listened to the statements of my colleagues. I think
    we all support SO2, NOx and mercury reductions. I want to
    explain why I think it's so important to include carbon dioxide in the
    bill.
        The scientific and political consensus have shifted toward action
    on climate change.
        On the scientific front, the evidence grows ever more persuasive
    that human activities are the primary cause of the warming we have
    already observed, and that warming is expected to continue.
        Just last week, researchers presented a paper at the Geological
    Society of America's annual meeting last week in Boston showing
    unprecedented rates of change in sea level during the past 250 years.
    The scientists showed that sea level has risen between 12 and 20 inches
    along Maine's coast, and as much as two feet in Nova Scotia during the
    past 250 years.
        As a New Jerseyan, I am extremely concerned about this problem, and
    how it may relate to the beach erosion problems that we continually
    battle in my State. I think that may well be an example of the kind of
    hidden climate change costs that we are just now beginning to
    understand.
        But it's not just the scientific consensus that's changing--the
    global political consensus is moving as well.
        Last week's climate treaty in Marrakesh established a binding
    agreement on greenhouse gas reductions. Unfortunately, the United
    States was not engaged in those discussions, although we are the
    world's largest greenhouse gas emitters.
        We need to support a four pollutant approach.
        If the Administration won't lead on this issue, it's incumbent on
    Congress to do so. I want to thank Senator Jeffords and Senator
    Lieberman for providing that leadership in this committee. I want to
    reiterate my commitment to dealing with four pollutants in this
    legislation.
        Reducing the other three pollutants should not come at the expense
    of existing protections.
        Finally, I just want to add that reducing SO2, NOx, and
    mercury should not come at the expense of provisions that protect local
    communities or provide for their public input. I'm referring to Title
    One provisions that some have suggested need to be eliminated in the
    name of economic efficiency.
        Efficiency is not our only goal--we need to keep fairness in mind,
    and I think many of the Title One provisions under discussion are
    designed to ensure fairness and should not be undermined. Thank you,
    Mr. Chairman.
        Senator Jeffords. Senator Chafee?

    OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE
                         STATE OF RHODE ISLAND

        Senator Chafee. Thank you, Mr. Chairman, very much. It is
    evident from the hearing 2 weeks ago and also some of the
    comments today that this is obviously a contentious bill. A
    four-pollutant bill is going to be very, very contentious.
    Unfortunately, as Governor Dean says, it does pit the coal
    producing States against the downwind States as well as those
    who believe that global warming is a serious threat to our
    planet and those who do not. So I think through hard work, open
    minds, and a mutual desire to protect our economy as well as
    improve the air we breath we must hammer out a good bill. I do
    agree with Senator Lieberman that the next important step is to
    get the Administration to introduce their three-pollutant bill,
    which they have testified is forthcoming, and then we can move
    from there.
        Mr. Chairman, I will cosponsor your bill S. 556 and look
    forward to working with everybody in this room to strive to
    make progress. I think it is interesting, Governor Dean, about
    how you talked about the price of energy being high but the
    actual bills being in the middle of the pack. That I think is
    inspiration to those that might be opposed to this bill that it
    is possible through conservation and good technology to solve
    some of the problems that we hear here in this hearing.
        So thank you, Mr. Chairman.
        Senator Jeffords. Thank you.
        Senator Bond?

      OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR
                       FROM THE STATE OF MISSOURI

        Senator Bond. Thank you, Mr. Chairman. Welcome, Governor
    Dean. We did not exactly overlap in the National Governors
    Association much, but I do appreciate your perspective. I would
    say that over a decade ago when we were talking about the Clean
    Air Act amendments and acid rain the midwest did take on a very
    heavy burden to try to clean up the acid rain. I happened to be
    a player in the Bird-Bond or Bond-Bird emissions trading to try
    to make that burden somewhat less. As you saw from the chart
    that Governor Voinovich entered about Ohio, it was still a very
    heavy burden.
        Unfortunately, those amendments were pushed through just
    prior to the completion of a very expensive, very long-term
    national acid precipitation assessment project, NAPAP, I
    believe those are the appropriate terms, which said the most
    important thing we could do would be to put lime in some of
    those lakes, it would be far less expensive. I hope that you
    are considering that. I would support providing lime
    applications to regain the lives in those lakes, if that is
    appropriate.
        Having said that, I think you recognize that we have the
    option for cleaning up our environment. Things like nuclear
    power, unfortunately, this committee has not been strongly in
    favor of it. We have not done enough to use a truly emissions-
    free source of electric energy. I would agree with everybody
    who said we need to use renewables. We use a lot of renewables
    in the midwest. But when you talk about natural gas being a
    significant source of your power, I think using natural gas as
    baseline electricity production is a terrible waste of a
    valuable resource. I heard Professor Glen Seaborg a number of
    years ago say that using natural gas for baseline electric
    power production is like taking priceless antique furniture and
    throwing it in the fireplace. It is a very real waste and it is
    a total misallocation of energy resources. In fact, if
    something like S. 556 were to pass, over my dead body----
        [Laughter.]
        Senator Bond. There would be such a tremendous increase in
    prices for coal that we would all shift to natural gas, we
    would freeze out the low income people in Missouri, and you
    would see your natural gas bills going through the roof.
        Mr. Chairman, at our last hearing we did hear testimony
    about how this bill would cause American consumers to spend an
    extra $40 to $60 billion on electricity, force power plants to
    cut their use of coal by 40 to 50 percent, threaten tens of
    thousands more jobs across the country, force U.S. economic
    activity or GDP downward by almost $100 billion in 2007 alone.
    Unfortunately, 2 weeks after that we are still debating a
    multi-billion stimulus package.
        Now putting aside the question of why we would depress the
    economy by $100 billion at the same time we are trying to
    stimulate it, I just want to raise for you the concern about
    some of the people this would affect. Most of us believe that
    the stimulus bill should include help for people suffering in
    the aftermath of the September 11 attacks. What would S. 556 do
    to them? Those people are out of work, unable to pay bills,
    unable to put food on the table. Well, the answer is that S.
    556 will hurt those currently most in need. It would harm low
    income families and children. EPA estimates that a bill similar
    to this one would raise electricity prices 30 to 50 percent by
    2015. We may not care that we are forcing big utilities to pay
    higher costs, but we should care that they will pass these
    costs on to their consumers. In the end, it would hurt our
    families, particularly those who are the most needy in our
    country.
        Here is an article from the Kansas City Star that I ask to
    be placed in the record. It is entitled ``Aid Agencies Brace
    for Winter Rush. Need May Exceed Money Available for Utility
    Bills Some Fear.'' If you have no objection, I would like to
    submit that for the record.
        Senator Jeffords. It will be placed in the record.
        Senator Bond. The article describes how large utility bills
    are forcing families to raid their food budgets to maintain
    their utilities. Relief agencies are seeing working families
    with five children trying to get by on $75 per week for food.
    As a result, food pantries are seeing an upswing in food
    requests. This article describes Sabrina McCoy, a Kansas City
    mother of two who supplements her $490 social security check
    with $60 a week she earns cleaning a bar. She was waiting for
    emergency food at a pantry, and she said: ``I pay one bill and
    the others, the utilities get cutoff. Then I will pay what was
    cutoff and get something else cut.'' And low income families
    like Sabrina's have to spend 20 percent of their income on
    utility bills.
        Last winter's bitter weather forced many to spend up to 30
    percent of their incomes on utilities. We can cite the problems
    all across the State but, for the sake of time, I will not go
    into all of these. But because of last year's higher utility
    bills, 30 percent more families are on our State's LIHEAP
    crisis list; meaning, they have exhausted their assistance
    grants. California had 140 percent increase. These increases
    showed up all across the country. Lower gas prices this winter,
    which are temporary, will not help these people.
        I support legislation, reasonable legislation to reduce air
    pollution. But we have to keep energy costs stable. The article
    concludes, ``As cold weather creeps into Kansas City, the
    economy reels from terrorist attacks, area social service
    providers expect a flood of low income families seeking help
    with delinquent natural gas bills.'' I really think that this
    measure would make their situation much harder. I hope that we
    can go back to the drawing board and come up with a reasonable
    approach that will achieve our environmental goals without
    subjecting those most in need in our economy to the severe
    burdens that S. 556 would put on them. Thank you, Mr. Chairman.
        [The prepared statement and referenced material of Senator
    Bond follow:]
     Statement of Hon. Christopher S. Bond, U.S. Senator from the State of
                                    Missouri
        Thank you, Mr. Chairman, for holding another hearing on S. 556. We
    must know all the effects of this bill as we consider how best to
    improve air quality.
        At our last hearing, we heard how this bill will hurt the economy.
    Independent experts testified that this bill would:
          cause American consumers to spend an extra $40 billion to
    $60 billion on electricity
          force power plants to cut their use of coal by 40 to 50
    percent, costing thousands of jobs
          threaten tens of thousands more jobs across the country
    through higher energy costs
          force total U.S. economic activity, or GDP, downward by
    almost $100 billion in 2007 alone
        Unfortunately, 2 weeks later, we are still debating a multi-billion
    dollar stimulus plan. Putting aside the question of why we would
    depress the economy by $100 billion at the same time we are trying to
    stimulate it, I would like to talk about who these measures will
    affect.
        Most of us believe that the stimulus bill should include help for
    people suffering in the aftermath of the 9/11 attacks. What would S.
    556 do to people who are now hurting--those people out of work, unable
    to pay bills, unable to put food on the table?
        The answer is that S. 556 will hurt those currently most in need.
    S. 556 will disproportionately harm low-income families and children.
    EPA estimates that a bill similar to S. 556 would raise electricity
    prices between 30 and 50 percent by 2015.
        We may not care that we are forcing big utilities to pay higher
    costs. We should care that they will pass these costs on to their
    consumers. In the end, we will hurt our families, our single mothers,
    our elderly.
        I have here an article from the Kansas City Star from September 27,
    2001, that I would like placed in the record. [waive article] The title
    is ``Aid agencies brace for winter rush; Need may exceed money
    available for utility bills, some fear.''
        The article describes how large utility bills are forcing families
    to raid their food budgets to maintain their utilities. Relief agencies
    are seeing working families with five children trying to get by on $75
    per week for food. As a result, area food pantries are seeing an
    upswing in food requests.
        Sabrina McCoy, a Kansas City mother of two, supplements her $490
    Social Security check with $60 a week she earns cleaning a bar. As she
    stood waiting for an emergency food box at a pantry, she said ``I pay
    one bill, and the other (utilities) get cutoff. Then I'll pay the bill
    that was cutoff, and something else gets cut.''
        Low-income families like Sabrina's must spend 20 percent of their
    income on utility bills. Last winter's bitter weather forced many in
    Kansas City to spend nearly 30 percent of their income on utilities.
    Where did these people cut back to make ends meet? In their food
    budgets. At the Olathe office of Catholic Charities, almost 700
    families asked for food help in August, up from 352 last year.
        Many of these poor households are still struggling to catch up from
    last winter. They had their gas shut off in the spring for failure to
    pay their bills and are surviving without heat during the warm weather.
        According to Missouri Gas Energy, about 12,500 residential
    customers in Kansas City, Joplin and St. Joseph are without service now
    because they owe $10 million in utility bills. When winter comes, these
    people will be in very bad shape.
        This problem is not unique to Missouri. Last winter, nearly 5
    million American households applied for Federal Low-Income Home Energy
    Assistance Program funding--an increase of 1.2 million families over
    the previous year.
        Because of last year's higher utility bills, 30 percent more
    families are on States' LIHEAP Crisis list, meaning they have exhausted
    their assistance grant and are in danger of shut-off.
        California had a 140 percent increase in Crisis caseloads last
    year. Nevada had nearly a 1,000 percent increase in Crisis caseloads.
    In Rhode Island through September, fifty percent more families than
    last year have lost their gas or electric service.
        Lower gas prices this winter will not help these people. Even a
    normal winter and normal energy prices can lead to severe hardship
    among the nation's low-income households.
        Witnesses later in the hearing will talk about the health benefits
    of this bill. That is important. However, we must also look at the
    human toll we will force our families to pay. We must ask how many
    homes will go without heat due to higher utility costs? How many
    families will cut back on food to keep their children warm?
        I would support legislation to reduce air pollution from utilities.
    We need to provide certainty to industry to encourage them to innovate
    and keep our energy supply secure. However, we must also keep energy
    costs stable. The families in need in Kansas City, Missouri cannot
    afford higher utility bills. They cannot afford colder houses and less
    food on the table.
        I will end with how the article begins, ``As cold weather creeps
    into Kansas City, and the economy reels from the terrorist attacks,
    area social service providers expect a flood of low-income families
    seeking help with delinquent natural-gas bills.'' I hope we will not
    make their lives harder with S. 556.

        Senator Jeffords. Thank you, Senator.
        Governor, several States have expressed concern that
    without Federal legislation it might be politically difficult
    to control power plants so that local air quality is protected.
    Is that consistent with your view?
        Governor Dean. Clearly, the Clean Air Act, which was passed
    when Senator Stafford was chairing this, slightly before, has
    not been sufficient to deal with the national air pollution
    problems. I think if we have a concern about fuel prices, the
    solution is not to simply continue to pour vast amounts of
    these pollutants into the air, it is to ask the President, as
    we have asked, to release the extra $300 million of LIHEAP aid
    so that these folks can get the help they need.
        I do not think we should be in the position of, as for
    example China does, of trading off economic growth with
    extraordinary pollution. That is a serious, serious issue.
        This is a Federal problem. This cannot be solved at the
    local level. For exactly the reasons the Senators from the
    midwest have said, there is no incentive to control the
    pollution if all this stuff is going up the smoke stack and
    going to somebody else's backyard because there is a benefit to
    the people from Ohio and Missouri from burning coal without
    scrubbing it because they do get lower utility prices out of
    that. The problem is that does not take into account the
    incredible damage to the atmosphere, damage to the natural
    resources of our region of the country, which does not include
    just New England but also includes most of the entire eastern
    seaboard, and, interestingly enough, Kentucky and Tennessee and
    areas of that sort.
        We have to have a national solution. That is why I am
    supporting your bill. We have to have a national solution
    because regions simply cannot do this on their own. Pollution
    knows no boundaries. Air pollution certainly knows no
    boundaries. Without a national solution, it just simply is not
    going to work.
        I understand the concerns of the Senators who oppose this
    bill. But I would hope that we could all work together to try
    to come up with a solution where we are not going to do the
    terrible things that they have talked about to their economies
    but we also are not going to have the kinds of rushes on the
    emergency room that we have in New York City during the high
    ozone alert days, which are a high number and are increasing
    every year as the temperature goes up and the amount of
    pollutant load goes up.
        Senator Jeffords. Are there other questions for the
    Governor?
        Senator Chafee?
        Senator Chafee. Governor, you mentioned that this is an
    American problem. Senator Bond was saying put lime in your
    rivers and lakes. Would it be fair to say that if Missouri had
    the same situation we would probably come up with a better
    solution than putting lime in the Missouri lakes and ponds?
        Governor Dean. Senator, that has been widely discredited.
    The notion of putting lime in the lakes is clearly not going to
    work. I have not seen any scientific evidence, except for the
    one paper that he cited, that that is a reasonable solution.
        It is not only the lakes. We do have to deal with the air.
    It is just simply not of acid rain killing the lakes, what
    about the problems of people's health? Putting lime in the lake
    is not going to reduce the number of kids who come to the
    emergency room with asthma.
        So we do have to deal with this. I do not think that we
    need to make the midwest the boogie-man here. I do think there
    is a national solution. Everybody is going to have to figure
    out what it is. I also do not think the eastern States have
    clean hands either. We ought to do more about mobile sources.
    Perhaps we can come to a compromise where everybody deals with
    their particular problems. But it is a very, very serious
    national health problem and it is a national environmental
    problem. We cannot sweep it under the rug any longer.
        Senator Chafee. Thank you, Governor.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. There is a real difference of opinion
    about global warming in the U.S. Senate. I have held hearings
    on it, Senator Lieberman has had hearings on it. The
    Administration has made it very clear that they would not
    support a four emissions piece of legislation. In other words,
    they are not going to go along with the CO2. We
    might be able to work some kind of a compromise on giving some
    kind of credit for carbon sinks or something of that sort. But
    fundamentally, if we want to get something done in Congress to
    deal with this problem, we are probably going to be dealing
    with three emissions. The issue then becomes what the numbers
    should be in terms of those emissions.
        If you knew that the emissions numbers in S. 556 would
    literally put coal out of business, would you have a different
    opinion in regard to those percentages? What we are trying to
    do is to reach percentages which will allow us to use clean
    coal technology, continue to be using this wonderful 250 year
    source of energy that we have in this country and, at the same
    time, cleanup our environment. If you knew that to be a fact,
    would you back away from this bill, at least the numbers that
    are in it and the timeline?
        Governor Dean. That is a difficult question. On the
    science, I do not think anybody in the United States, there are
    a few people, but the majority of people and policymakers in
    the United States would not want to eliminate coal as a source
    of power. I do not think that is reasonable. I do not think
    that is good for the economy. On the other hand, there are some
    huge improvements that could be made, which many of us believe
    should have been made under the terms of the Clean Air Act
    many, many years ago and have not been made. So, from a
    scientific point of view, I guess my answer is nobody wants to
    eliminate coal. We do need the technology to make it burn
    cleaner.
        Now we get to the politics of it. I think we all know in
    Washington and other legislative bodies, which you and I have
    spent a great many of our years in, that if you do not ask for
    a lot, you end up with nothing at the end. So I would say the
    nature of what comes out of the Congress, particularly in
    negotiations with the House where this is going to be a very
    difficult issue, is really up to the people in this room to
    figure out, not for me. So I would try to refrain from giving
    advice about where we might go and what bill this committee
    ought to come up with, because this bill is really important.
    Nothing has been done for a long, long time on these issues,
    for over a decade, and I think we need the strongest possible
    bill that we can get for as far as we can get it because I
    think it is going to face a very difficult road through the
    Senate, the House, and then to the Administration's desk.
        Senator Voinovich. I do not know how many hours I have
    spent on this, and many other people probably more than I have.
    I would like to see something come as a result of all of this
    work that we have put into it. What I am concerned about is
    that at the end of the road we are going to have a stalemate
    and nothing is going to get done, we are not going to improve
    the environment, and at the same time not do anything to deal
    with this looming problem that we are going to have to provide
    enough energy for the demands that we hope this nation is going
    to need in the future.
        Governor Dean. Well, there is a Senator who is not on this
    committee who one of his favorite phrases, which I think it is
    a wonderful phrase, is ``we should never let the perfect become
    the enemy of the good.'' I am, in general, an incrementalist
    and I believe that passing something that really is
    significant, not something that is there for political reasons
    or to make people think we did something when we did not, but
    passing a significant improvement is always better than passing
    nothing. Then eventually you come back and see. Oftentimes, we
    find that when we pass significant improvements that they are
    not as expensive or as bad as the antis thought, or maybe they
    are not as complete as the pros thought either. So, again, that
    is really part of the process of the give and take.
        From a political point of view should this bill get through
    the Senate, I think a bill like this will get through the
    Senate, I am not sure what will be in it when it does, but I
    think it will be a lot and it will be a good bill. What happens
    when you go over to the other side, it is clear that the more
    we give up in the Senate the more difficult it is if we ever
    get anything out of the House. One thing I will say, Senator,
    is you and I have known each other a long time and I know you
    to be an absolute person of your word. I have no doubt that if
    you could get a compromise out of this committee which you
    could support, that you would also vigorously support it in the
    House. I have such respect for you, having worked with you for
    so long in the National Governors Association, that that gives
    me some real hope if it is possible to come to a bill the
    committee could agree to.
        Senator Voinovich. You can bet on it, if we can work it out
    here.
        Governor Dean. I know it will be difficult.
        Senator Jeffords. Senator Lieberman?
        Senator Lieberman. Thanks, Mr. Chairman. Thanks, Governor
    Dean, for your leadership and your excellent testimony. Thanks
    for what you just said to Senator Voinovich. I agree with you.
    I hope we can work together to do something constructive here.
        Just one question. I was quite impressed and encouraged by
    the agreement between the New England States and the Eastern
    Canadian Provinces on a climate change. I wonder if you could
    just talk about that for a little bit.
        Governor Dean. We meet every year with the Eastern Canadian
    Premiers, the six New England Governors, and we also involve in
    some instances Pennsylvania, New York, and New Jersey, although
    they are not signatories to this agreement. This is an
    international issue because winds know no boundaries. The
    Eastern Canadian Provinces, including Quebec, which is pretty
    substantial and has a significant economy, are deeply concerned
    about these four pollutants, particularly mercury, but all four
    pollutants. We have passed very, very stringent resolutions,
    even tougher I think perhaps than this bill, requiring or
    requesting our governments, both the Federal Canadian
    Government and the Federal American Government, to do something
    such as this legislation.
        We are serious about it. We have actually passed in Vermont
    legislation that would allow us to phaseout the use of mercury
    in many, many industrial products over a period of years. That
    has been agreed to by all the six States and the five Eastern
    Canadian premiers. We feel very strongly about this. This is
    important for our environment, it is important for the health
    of our kids, particularly asthmatics, and it is something that
    has to be dealt with.
        Senator Lieberman. I appreciate the answer. Of course, the
    New England Governors are a bipartisan group.
        Governor Dean. Right.
        Senator Lieberman. Perhaps not as bipartisan as you and I
    would like.
        Governor Dean. I think we are two Democrats, three
    Republicans, and one Independent.
        Senator Lieberman. That is what I meant. OK. Thanks.
        Senator Jeffords. Senator Clinton?

    OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
                       FROM THE STATE OF NEW YORK

        Senator Clinton. Thank you, Mr. Chairman. I am delighted to
    see you, Governor Dean. Thank you for your leadership on this
    and so many other issues. I share your analysis that in the
    absence of a strong bill that takes into account what we do
    know about the scientific basis for reducing the four
    pollutants that have adverse health effects coming out of this
    committee, it will be difficult to end up anywhere in
    negotiations, starting on the floor of the Senate, with a bill
    that actually produces results.
        Governor Dean, perhaps you could share maybe some insights
    into how you have built what is a remarkable consensus in your
    State about what needs to be done with respect to energy
    efficiency and alternative energy sources, and how you have
    also taken the health effects that you are also so concerned
    about and injected those into the discussion effectively.
        Governor Dean. There is a consensus and our State has a
    particularly high environmental conscientious, although I have
    received some flack actually for some of the sources of power
    that we do use. There are those who would criticize every
    source of power and then demand as much as they possibly want
    regardless of what the source is. As I had mentioned
    previously, we are fortunate in that we get about 40 percent of
    our power from Canada, it is hydropower so it is completely
    renewable; we get about 30 percent of our power from nuclear
    power, we have a plant in our State; and the rest is from the
    New England power grid, which is mostly natural gas although
    there is a mixture.
        Our principal problem is mobile sources, which is not
    addressed in this bill, but which I recognize we have an
    obligation to address. Our State along with California,
    Massachusetts, and New York has also been pivotal in pushing
    electric vehicles, not because electric vehicles are going to
    take over Vermont, it is hilly terrain and cold climate, but
    because it is a technology that has enormous value particularly
    in cities and somebody has got to push the technology. The four
    States, I think going back to Governor Wilson, Governor Weld,
    and myself, and Governor Pataki, have really pushed hard in
    those areas. We recognize that our States cannot just simply
    complain about stuff blowing in from the West, we have also got
    to do something about our own concerns.
        In the health areas, the issue is more serious in your
    State or in Senator Corzine's State, large urban areas, than in
    our State, although we do trace the few out of compliance days
    that we have, particularly on one-and 8-hour ozone limits, with
    increases in the visits of asthmatic kids to emergency rooms.
    It is a very, very clear connection to what happens when the
    level of air pollutants rise, particularly the ones that we are
    discussing here, and the number of kids that get into trouble.
    Again, we do not have the problem that you have in New York and
    New Jersey and other urban States, but we do notice the
    correlation. That is one of the reasons that I am here to
    support this bill.
        Senator Clinton. I appreciate very much your commitment as
    a doctor as well as a Governor and as someone who is interested
    in these important energy and pollution issues. One of our
    challenges is obvious--we have to persuade people that carbon
    dioxide is a problem and we have to figure out how to deal with
    it. Do you have a particular way you explain that to skeptics
    or how you try to demonstrate that the United States should be
    concerned about this issue, it is in short as well as long-term
    interest to address it now, it is not going to get any better
    in the absence of our taking action?
        Governor Dean. I think that, basically, my attitude as a
    physician is that science explains itself. Initially, when the
    concerns about global warming were raised over a decade ago
    there were a lot of skeptics. Now there are fewer and fewer as
    we see what the numbers are, and as we see what modeling does
    around the world, and as we actually begin to see some climate
    changes as we look back over the records to look at past
    climatic changes and what their various involvements were.
        I am not an expert in global warming and so I would
    hesitate to venture what I would consider a scientific opinion.
    But I do read the literature and I think I am equipped to do
    that because of my scientific background. I came to the
    conclusion some time ago that global warming was a serious
    threat, and I have come to the conclusion over the last couple
    of years that it is a very serious threat and that we are going
    to have to deal with it. It is not going to do any good to put
    it off because we are going to have more of a problem later on.
        I saw some very interesting statistics from folks who said
    that even if we pass this bill, the amount of carbon dioxide is
    not going to go down dramatically and there is only going to be
    a fairly minimal change. But it is like fixing a budget
    problem, which I am in the middle of doing in our State, the
    earlier you go after it the lower the base is and the better
    off you are, because this is all cumulative.
        So I do happen to favor dealing with a four-pollutant bill
    and dealing with the carbon dioxide problem. Although, I would
    basically take any substantial and significant bill that we
    could get through both houses and get the President to sign,
    because I think this is a critical issue that cannot wait for
    another year.
        Senator Jeffords. Senator Carper?

     OPENING STATEMENT OF HON. THOMAS R. CARPER, U.S. SENATOR FROM
                         THE STATE OF DELAWARE

        Senator Carper. To my old compadre and running mate,
    Governor Dean, welcome. I understand you have another meeting
    at 10:45. If that is the case, I will withhold any questions. I
    just want to be respectful of your time.
        Governor Dean. I appreciate that, Senator. I think this is
    the first time we have actually gotten to talk in your new
    capacity. I appreciate all the leadership that you showed when
    you were chair of the National Governors Association. I also
    thank you for mentioning the time because I had not looked at
    my watch and I now see that I am about 10 minutes late for my
    next appointments. Senator Carper. All right. Just one quick
    comment. Governor Dean and I were invited almost 2 years ago to
    come as Governors to meet with the Senate Democratic Caucus I
    think over in the Library. They invited us down just to talk
    about what was going on in States, and we had the opportunity
    for about an hour to share with the Democratic Senators what we
    were doing with respect to welfare reform, childhood education,
    early childhood, providing health care for people, prescription
    drugs, and on and on. When the session was over, I will never
    forget, one of the Senators said to me during the intermission,
    I think you were within ear-shot, he said, ``We invited both of
    you down here in the hopes that someday you would consider
    running for the U.S. Senate. After listening to all that you
    are doing as Governors in your respective States, we want to go
    home and be Governors.''
        Governor Dean. We already have two great Senators that I
    like and I intend to support them.
        Senator Carper. I understand. If time would have permitted,
    I would say one of us has had the opportunity already to serve
    now in the Senate, and someday you will too, if that is what
    you would like to do. But if you could maybe submit in writing,
    Governor, if you were sitting here and the rest of us were
    sitting out there, what would you do as a Senator on the issues
    that are raised in the legislation that your Senator has
    introduced.
        Governor Dean. I think I want to refrain from that
    question. That is essentially political advice. I, first of
    all, think it is a bad idea to give Members of the U.S. Senate
    political advice, especially when you are not in the Senate.
        Senator Carper. Everyone else does.
        [Laughter.]
        Senator Carper. Even my 11 year-old son yesterday. So why
    shouldn't you?
        Governor Dean. Let me just thank you very much for your
    kind remarks, and I thank the chairman very much for his
    kindness and his leadership on this issue which is an
    extraordinarily important issue.
        I do want to just conclude by saying that I do hope we have
    a bill this year. I hope that this bill will make it all the
    way through. I understand there will have to be some
    compromises. You started off with an outstanding bill and
    certainly one that I support. But in the end, at the end of the
    day, it is just critical that we get a bill through both houses
    that is a meaningful bill which really significantly and
    substantially improves both the environment and the health of
    Americans.
        Again, I urge the committee and the Congress to look at
    this as not an eastern problem, but as an American problem that
    all of us have to deal with in some way. We certainly do not
    wish to cripple anybody's economy or take coal off the table as
    a fuel because we have a 250 year supply of it and we need to
    continue to use that as a fuel. But we do substantially need to
    improve this problem. It is a very significant problem that has
    made a big difference, and not for the good, both in the health
    of our kids and in the nature of our environment. So I hope
    that the committee will be able to move forward on this.
        Senator Jeffords. Thank you very much for your most helpful
    testimony. You certainly are excused. Thank you for coming. We
    share your optimism and also understand the problems. Thank
    you.
        Governor Dean. Thank you.
        Senator Jeffords. Our next panel is Gerard M. Anderson,
    president and COO of DTE Energy Resources and DTE Energy
    Company, Detroit, Michigan; Mr. Jeffry Sterba, chairman and
    president and CEO of the Public Service Company of New Mexico;
    Robert LaCount, air quality manager of the environmental
    affairs of PG&E National Energy Group, Bethesda, Maryland; and
    Jeffrey C. Smith, executive director, Institute of Clean Air
    Companies, Washington, DC.
        Thank you, gentlemen, for being here this morning. We are
    going to have a vote sometime within the next 20 minutes or so.
    I am not asking you to rush, but just noting that we may have
    to interrupt at that time while members vote.
        Mr. Anderson?

    STATEMENT OF GERARD M. ANDERSON, PRESIDENT AND COO, DTE ENERGY
            RESOURCES, DTE ENERGY COMPANY, DETROIT, MICHIGAN

        Mr. Anderson. Good morning, Mr. Chairman and Senators.
    Thank you for inviting me here today. I appreciate the
    opportunity to address you on this important issue. Let me
    state at the outset that our industry supports making continued
    progress on emission reductions. Let me also state the EEI
    supports an integrated multi-emissions approach that, if
    designed properly, can achieve important environmental, energy,
    and economic goals.
        Because of multiple, uncoordinated, overlapping existing
    regulations, the electric power industry faces enormous
    challenges and uncertainty as it tries to devise appropriate
    plans for our country to develop new generation capacity,
    upgrade existing plants, and add emission controls. A
    reasonable, integrated multi-emission strategy would streamline
    the regulatory process, accomplishing meaningful air quality
    benefits at much lower cost while protecting electric
    reliability.
        To achieve these results, EEI has developed a set of six
    criteria that we believe should underlie a multi-emissions
    approach, and I would like to take the remainder of my time to
    go through those six criteria.
        First criteria: Fuel diversity should be maintained for
    generating electricity as a matter of both national energy and
    national security. Coal is currently the backbone of our
    electricity production in this country, accounting for 50 to 55
    percent of all our electricity in our nation. The EIA has
    recently determined that coal-based electricity generated in
    this country would decline by 40 percent or more if this bill
    is enacted, and, in turn, natural gas generation would increase
    by roughly 60 percent. The challenges and costs that such a
    shift would entail should not be underestimated by this
    committee.
        Second principle: Maximum flexibility should be provided to
    achieve the emission reductions we all are targeting. This
    bill, in our estimation, takes a step backward in terms of the
    need for regulatory flexibility and efficiency. In addition to
    the stringent emission caps mandated by the bill, it also
    introduces a new concept--modernization--which would require
    every single power plant to install the most stringent
    controls. Many power plants would be forced to shut down due to
    the cost of emission control retrofits. I can say that with
    absolute certainty.
        Furthermore, the bill requires extreme levels of reduction
    in mercury emissions and specifically excludes the trading of
    mercury. Rejecting mercury trading does not make sense.
    Rejecting trading will substantially increase compliance costs
    and will reduce the incentives for companies like mine and our
    suppliers to innovate and be creative. Further, we believe an
    honest assessment of science demonstrates that hot spots are
    not an issue, or at least are an issue that can be dealt with.
        Third principle: Every element of a comprehensive multi-
    emission approach, beyond just the amounts and timing of
    emission reductions, needs to be resolved in order for a
    balanced package to be achieved. Such a package must include
    reform of the new source review program.
        The EPA's current interpretation of NSR is a departure from
    how the program has been understood and implemented for
    decades, and it prevent power plant operators, like us and
    existing plants, from making necessary improvements and
    undertaking routine maintenance. I will give you an example. At
    our Monroe Power Plant, one of the largest in the country, we
    have the opportunity to increase efficiency of our generating
    units and produce more electricity with the same fuel input,
    something that is good for our environment, something that is
    good for our customers. However, because of current NSR
    regulations, our ability to undertake these projects has been
    substantially complicated, to put it mildly.
        Fourth principle: Adequate time for compliance must be
    provided. Compliance within the timeframe set forth in this
    bill would leave companies like mine no choice but to begin a
    massive construction effort essentially immediately. This fact
    has two practical consequences. The first is, the ability for
    technology innovations to come into play would be all but
    eliminated. Much of what we are discussing here today will be
    achievable in the future at much lower cost if technological
    innovation is given an opportunity to play its natural role.
    Second, the scale of the construction effort required by this
    bill would require large numbers of our power plants to be off-
    line for long periods of time.
        Put very simply, the required construction effort would
    dwarf anything our industry has seen previously. This would
    certainly increase the cost of power and, in many regions, I
    believe would severely impact the reliability of the overall
    electric grid as well.
        Fifth principle: This legislation should not include
    mandatory CO2 reductions. CO2 emissions
    are a national policy issue affecting all segments of the
    economy. If a national consensus is reached on this issue, our
    industry will do its part. Until such time, however, addressing
    CO2 in isolation in the power generation sector is
    ill-advised.
        Instead, we recommend that Government continue to work with
    our industry to improve the voluntary climate challenge
    program. This program has produced very real and meaningful
    reductions in our sector of the economy, and we think it is a
    model that can be extended to other sectors as well.
        Sixth, and final, principle: The emissions reductions must
    be cost-effective, in an aggregate, be manageable. Put
    differently, our industry needs to be able to undertake the
    emissions reductions without rocking its financial core. I will
    quickly shed some light on this by giving you an example from
    our company.
        We estimate the cost of this bill for us to be $2 billion
    in capital, and that our annual operating costs would rise by
    $200 to $300 million annually. I can tell you unequivocally
    that those expenditures would absorb every dollar of cash
    generated by our power production fleet for the next 15 years
    at minimum. Given that prognosis, my decision would be
    straightforward--a substantial portion of our generating fleet,
    especially our coal generating fleet, would be retired, with
    the attendant impact on jobs, tax base, and power costs. I do
    not believe an outcome like this is necessary for us to
    continue to make progress in reducing emissions, improving the
    environment, and improving public health.
        Since 1975, my company has reduced particulate emissions 90
    percent, sulfur emissions 60 percent, NOx emissions 40 percent,
    while increasing output 45 percent. We are currently in the
    process of reducing NOx an additional 70 percent. Such strong
    progress can continue without forcing large portions of our
    plant fleet into retirement. I thank you.
        Senator Jeffords. Thank you very much.
        Mr. Sterba?

      STATEMENT OF JEFFRY E. STERBA, CHAIRMAN, PRESIDENT AND CEO,
     PUBLIC SERVICE COMPANY OF NEW MEXICO, ALBUQUERQUE, NEW MEXICO

        Mr. Sterba. Thank you, Mr. Chairman. I appreciate being
    able to address you all today. I am Jeff Sterba, chairman,
    president and CEO of Public Service Company of New Mexico. From
    the opening comments that the Senators made, it is clear that
    there is a consensus that now is the time for a coherent and
    cohesive energy and environmental policy that will assure
    reliability and security of supply, economy of resources, and
    environmental protection.
        As a company, we support a streamlined power plant emission
    reduction program that improves air quality, provides the
    industry with appropriate regulatory certainty, and brings
    order to what can really be called chaos caused by duplicative
    and ineffective regulatory programs that in some instances
    impede us from even being able to improve the operating
    efficiency of existing power plants. We are committed to
    working with this committee and others to develop appropriate
    legislation that requires the further reduction of
    SO2, NOx, and mercury, and provides the operational
    certainty power producers need to meet growing demand for
    electricity.
        There are several reasons, however, why PNM cannot support
    a uniform, one-size-fits-all emission reduction program as
    proposed by this bill. First, I would generally echo the
    comments that have been made by Gerry on behalf of EEI. But
    additionally, and I think most importantly, the emission
    reduction levels that are mandated by this bill appear to be a
    policy response to environmental conditions that simply do not
    exist in our region.
        I agree with the notion that pollution does not adhere to
    State and local boundaries. But in the western region, we are
    talking about a territory that encompasses 40 percent of the
    land mass and has significantly different characteristics in
    terms of the air pollutants which are emitted from power
    plants. I have attached a series of charts in my testimony
    which reflect these different emission levels between the West
    and the nation as a whole. Let me refer to them briefly.
        The main air quality challenge in the West related to power
    plant emissions is visibility impairment and national parks and
    wilderness areas. There is not a single non-attainment of
    national ambient air quality standards for ozone or fine
    particles resulting from power plant emissions. The pollutant
    of interest for visibility protection is SO2. If you
    look at Figure 1, you will notice that western power plants are
    already well controlled for SO2 emissions, with
    rates of one-third of what the average across the entire
    nation, including this part of the country, is.
        Furthermore, in response to the recently promulgated
    regional haze rule, new regional emission limits have been
    agreed to as part of a true collaborative, regional,
    stakeholder-based consensus process known as the Western
    Regional Air Partnership, or WRAP. The WRAP, and that is not
    rock music, consisting of State air regulators, environmental
    groups, Federal land managers, EPA, tribes, industrial sources
    and power companies, has developed SO2 emission
    limits that respond to real-time air quality conditions in the
    western United States and will result in a further emissions
    reduction of SO2 by more than 30 percent. It is our
    view that any Federal multi-emission reduction proposal should
    embrace the WRAP's work with respect to SO2 and not
    overlay additional reductions to respond to issues in other
    regions of the country.
        With respect to NOx, again western power plants emit NOx at
    a much lower rate, greater than 20 percent lower, than other
    power plants across the country. This is demonstrated in Figure
    2 of the attachment to my testimony. In addition, work done by
    the Grand Canyon Visibility Transport Committee showed that NOx
    emissions from power plants have very little impact on
    visibility impairment in the western National Parks and
    Wilderness Areas. Furthermore, with the exception of
    California, which does not have a single coal-fired power
    plant, the western States have very few areas that are in non-
    attainment status for ozone, which is demonstrated in Figure 3
    of the attachment. In those areas, the non-attainment results
    not from stationary sources, power plants, but from mobile
    transportation sources.
        Thus, the ozone non-attainment issues that are severe
    issues in other parts of the country do not justify further NOx
    emission reduction from power plants in the West. It would be
    wrong to require western customers to pay for the installation
    of expensive retrofit controls to reduce NOx emissions when
    that expense would result in no meaningful environmental
    benefit and in an area in which NOx emissions have already been
    reduced.
        Concerning mercury, as Figure 4 in my testimony
    illustrates, western coal-fired power plants burn primarily
    sub-bituminous coal that has a much lower mercury content than
    coal burned in other regions. Additionally, mercury emissions
    from western sub-bituminous coal are primarily elemental
    mercury as opposed to particle-bound our ionized mercury, the
    methyl mercury that I am sure you have heard about.
        All research that I am aware of clearly points out that it
    is methyl mercury that must be limited for the health of the
    food chain. No technology that I am aware of has demonstrated
    effectiveness in controlling elemental mercury on a consistent
    basis. It would be impossible for our power plants to comply
    with the bill's 90 percent mercury reduction requirements from
    their existing low levels.
        Concerning the individual pollutants, western
    considerations can be taken into account by:
        Building on the recommendations of the successful WRAP
    stakeholder process for SO2. Legislation should
    respect both the magnitude and the timing of the WRAP
    SO2 emission reductions.
        Ensuring that the costs associated with NOx emission
    reduction requirements are reasonably proportional to the
    potential benefits from those controls. Although the
    appropriate NOx emission level and implementation schedule for
    western power plants has not been finally determined in the
    WRAP process, the appropriate emission levels should be
    achievable with aggressive combustion controls.
        Third, developing a mercury control program that accounts
    for the difficulty in reducing elemental mercury emissions with
    presently available control technologies and allows time for
    the development and demonstration of new technologies.
        Let me take just a brief moment to address the issue of
    greenhouse gas emissions, an issue that I, too, am very
    concerned about. This is a long term global challenge. For
    power plants, the challenge is improving combustion efficiency
    and capitalizing on technology advances that over time will
    reduce our dependency on fossil fuels. Prematurely forcing the
    retirement of existing capital stock will freeze this
    technology transition, forcing a massive shift to natural gas.
    Not only does this potentially disrupt reliability and
    security, cause higher prices, and create significant
    competition for limited gas resources with other important
    industries, I believe it will impede the ability to transition
    to new technologies that will emit less CO2 that
    today are not proven or cost-effective. A better alternative is
    to encourage experimentation through voluntary programs,
    incentive improvements in combustion efficiency, and strongly
    support R&D and pilot programs.
        We are committed to working with this committee to develop
    a program that will work for the benefit of the country. Thank
    you.
        Senator Jeffords. Thank you.
        Mr. LaCount?

    STATEMENT OF ROBERT LaCOUNT, AIR QUALITY MANAGER, ENVIRONMENTAL
        AFFAIRS, PG&E NATIONAL ENERGY GROUP, BETHESDA, MARYLAND

        Mr. LaCount. Thank you. Mr. Chairman and members of the
    committee, I am pleased to appear before you this morning to
    represent my company, PG&E National Energy Group, and our
    coalition, the Clean Energy Group. The CEG members are listed
    on the chart to my left. With assets in every region, we share
    a commitment to providing clean energy and promoting policies
    that are sustainable from both environmental and economic
    perspectives. We believe that the best way to accomplish this
    is to work cooperatively with Government, industry, consumers,
    labor, and the environmental community.
        Thank you for taking the time to engage in discussions that
    can lead to a very meaningful consensus on a question of
    national importance--how best to foster energy security,
    reliability, and economic growth, while protecting the
    environment and improving air quality. The time to begin
    discussions on these issues is now, because our industry is
    facing a series of regulations that could be more efficiently
    and economically addressed in an integrated and comprehensive
    manner.
        CEG believes there is a common sense solution to reduce
    emissions in nitrogen oxide, sulfur dioxide, as well as mercury
    and carbon dioxide. An integrated approach would deliver
    significant and timely emissions reductions and provide our
    industry with needed regulatory certainty.
        Mr. Chairman, we commend you and Senator Lieberman for
    introducing legislation that addresses air quality and climate
    change issues in an integrated manner. Although CEG is in
    general agreement with the scope of the emissions addressed in
    S. 556, we are not in agreement with the emission reductions
    levels, the timelines for achieving these reductions, and the
    limits placed on flexibility. Also, we believe that the
    birthday provision is unnecessary. Finally, an integrated air
    quality program must address the current deficiencies of the
    new source review program.
        CEG has spent considerable time in analyzing how to balance
    these key provisions so that both environmental and economic
    results may be optimized. Our approach sets defined targets for
    emissions reductions on a national basis and uses market-based
    systems to achieve these reductions. We believe that only a
    legislatively established national program will provide the
    needed compliance certainty.
        The reductions and timelines set out in our proposal are
    shown in this chart. Our proposal capitalizes on the co-
    benefits of various emission reduction technologies, provides
    the industry adequate time to make investment decisions, and
    allows time for the commercialization of new technologies. The
    first level of reductions builds off the existing NOx SIP Call
    and the Acid Rain Program, coincides with the compliance
    schedule for EPA's mercury regulations, and complements the
    expected timelines for PM2.5 and regional haze
    rules. Our proposal, therefore, allows the time for current
    compliance schedules to be fully implemented, while
    coordinating the schedules and approaches for future programs.
        With regard to carbon dioxide, CEG advocates a unique
    approach that results in minimal cost and resource impacts
    while encouraging renewable resource development and energy
    efficiency investments and maintaining fuel diversity. Our
    program is based on three underlying principles: timelines for
    reductions must be reasonable; flexibility is required; and
    verification of reductions is essential.
        With regard to NSR, the Clean Energy Group proposal does
    not advocate eliminating the NSR program. However, CEG believes
    that the existing NSR program must be changed to ensure that it
    complements the integrated program by facilitating expedient
    emission reductions, promoting clean energy sources, and
    encouraging efficiency improvements without imposing
    unnecessary cost and delays.
        With regard to cost, we are currently finalizing an
    analysis of our proposal. We believe this analysis differs from
    the EPA and the EIA analyses presented at the November 1
    hearing, in two main ways. The CEG analysis employs a business
    as usual scenario that accounts for both current regulations as
    well as those authorized under the Clean Air Act for future
    implementation. It includes significant flexibility for
    complying with carbon requirements, including the use of
    offsets generated outside of the power sector. In terms of
    national average residential energy prices, our proposal would
    result in minimal price increases on the order of $5 per month
    by 2015. Our proposal maintains fuel diversity in that it
    results in a shift of about 5 percent from coal to natural gas
    use, while the impact on natural gas prices would be less than
    6 percent by 2015. In terms of coal production under both our
    business as usual and our policy case, Rocky Mountain and
    midwestern coals become more economically competitive and gain
    market share as many coal-fired units install scrubbers to
    comply with new SO2 and mercury limits.
        The series of air quality regulations that our industry
    currently faces is not just a result of Federal activities.
    Some of the greatest pressures are coming from States. At least
    a dozen States, including Illinois, Michigan, and Texas, are
    addressing or are considering addressing one, two, three, or
    all four emissions. Some are even designing separate trading
    systems. If this continues, and we believe it will, our
    industry will have to comply with 50 standards, 50 sets of
    rules, and 50 trading regimes.
        This is particularly true for companies such as ours that
    have operations in multiple States. In fact, we operate two
    large coal-fired facilities in Massachusetts. We will be
    meeting some of the toughest emissions standards in the country
    for all four emissions at these facilities. However, we believe
    that if a national program were in place, we would be able to
    do so more efficiently and cost-effectively.
        I look forward to responding to your questions. Thank you.
        Senator Jeffords. Thank you, Mr. LaCount.
        Mr. Smith?

    STATEMENT OF JEFFREY C. SMITH, EXECUTIVE DIRECTOR, INSTITUTE OF
                  CLEAN AIR COMPANIES, WASHINGTON, DC

        Mr. Smith. Thank you, Mr. Chairman. I am Jeff Smith,
    executive director, Institute of Clean Air Companies. It is a
    pleasure to be here on November 15, the eleventh anniversary of
    the Clean Air Act Amendments of 1990. The Institute is a
    national association of companies that supply air pollution
    control and monitoring technology for all types of stationary
    sources, including power plants. ICAC members supply the
    complete spectrum of competing control technologies for
    emissions of mercury, SOx, NOx, all the other criteria
    pollutants, and all 189 air toxins. Thus, the Institute speaks
    for the entire industry, not just one technology. We do not,
    however, supply technology for CO2 control, and I
    will not therefore address CO2.
        The air pollution control industry believes that the
    technology will be available to achieve the NOx, SOx, and
    mercury reductions in S. 556. During the 31-year history of the
    Clean Air Act, the air pollution control technology industry
    has always delivered on the charge this committee has given it.
    There is no reason to believe this time will be any different.
    A multi-pollutant bill makes sense both technically and cost-
    wise, as my colleagues on this panel have stated.
        A reliable, demonstrated control technology exists for
    coal-fired power plants to remove over 95 percent of
    SO2 emissions, over 99.9 percent of particulate
    emissions, over 90 percent of NOx emissions. These levels are
    being guaranteed in the field today. The somewhat harder
    question is what to do about mercury emissions from coal-fired
    power plants, and that is where I will focus my testimony.
        There has been some discussion of markets this morning, and
    I think it is important to note at the outset that the air
    pollution control technology markets have historically worked
    well. Setting regulatory drivers spurs technical performance
    and cost improvement. Total costs fall dramatically as control
    technology moves from R&D to full-scale commercialization. For
    reasons developed in my written testimony, it is reasonable to
    assume that this traditional successful operation of the air
    pollution control market will apply to the development and
    enhancement of mercury control technology.
        The key to well-functioning markets is regulatory
    certainty. We heard that a moment ago with regard to the
    utility industry. It is certainly true with regard to control
    technology development. If the goal is technology innovation,
    then it is important to enact a clear, certain, performance-
    based mandate. Mr. Chairman, your bill would do this and allow
    coordinated compliance with numerous programs, such as acid
    rain, attainment of the one-and 8-hour ozone standards,
    regional haze, fine PM, and so on. For example, controls to
    remove SO2 may significantly reduce mercury and
    PM2.5, thus lowering the evaluated cost for each
    individual pollutant that may otherwise be addressed in a
    separate regulatory program.
        Dollars spent on compliance are recycled in the economy,
    generating jobs in construction and materials fabrication, in
    addition to jobs in air pollution control technology companies.
    For example, compliance with the NOx SIP Call alone is creating
    over 25,000 person years of employment a year for the 7 years
    begun in 1999, as detailed in Appendix III of my written
    testimony.
        EPA's data shows that existing controls are already
    removing mercury, and in some cases large amount of mercury, as
    a side benefit of removing other pollutants. In general, we
    believe technology available today can achieve total mercury
    reductions of 90 percent on bituminous coals, and 70 percent on
    sub-bituminous coals.
        Research on mercury control technology has been underway in
    the United States for a decade, and a multi-pollutant law would
    stimulate more R&D and results. Appendix II of my testimony
    contains a partial list and summary of ongoing R&D projects
    which are in general designed for 90 percent mercury removal,
    with the added goal of cutting costs 50 to 75 percent over the
    next one to 10 years.
        The important point here is that R&D is maturing to full-
    scale demonstrations today, even in the absence of a
    legislative mandate, and covers a wide range of coal types and
    existing equipment configurations. Many of the project teams
    include utility end-users as well as technology developers,
    which indicates the wide-ranging, cooperative effort underway.
    By the required compliance deadline, this R&D, along with
    already demonstrated technology, will, in our opinion, yield a
    variety of increasingly cost-effective options for achieving
    the NOx, SOx, and mercury removal requirements of S. 556.
        In conclusion, we believe that this committee does not have
    to pick a technology winner. The marketplace is adept at doing
    so. The course of technology development is too unpredictable
    to say what the best approach will be in 7 years, in 10 years.
    Experience strongly indicates, however, that there will not be
    one universal approach. Technology development markets will
    continue to work well, and the chairman's bill provides the
    requisite incentives for these markets by providing clear goals
    without specifying the precise compliance technology.
        Mr. Chairman, Senators, that concludes my testimony. I look
    forward to your questions.
        Senator Jeffords. Thank you all for very excellent
    statements. We will now go into the question period.
        For Anderson, Mr. Sterba, and Mr. LaCount, I am sure you
    have all seen the chart that Mr. Holmstead brought with him at
    the last hearing. It showed the numerous regulations that power
    sector will face in coming years. Has the Administration
    presented any of you with an estimate of the projected cost of
    industry compliance with those regulations?
        Mr. Anderson. The Administration itself has not presented
    us with estimates of those, but we certainly have on our own
    tried to best forecast as we can the status quo or business as
    usual and then calculate the cost of those.
        Senator Jeffords. Mr. Sterba?
        Mr. Sterba. Same answer. I am not aware of it.
        Senator Jeffords. Mr. LaCount?
        Mr. LaCount. One of the difficulties in trying to even
    estimate the cost of those programs is one of the main point
    for which we are here today; and that is, the regulatory
    uncertainty. As we look over the next 10 years, it is very
    difficult for us at this time to even estimate the cost for
    those programs because there are so many questions yet to be
    answered about exactly how they would be implemented, what
    authorities under the Clean Air Act will they exactly take, and
    exactly how the decisions will be made in the proposals and
    implementation of those programs, and in many cases court
    decisions as well.
        So, that is why it is very difficult at this time for us to
    even quantify cost on those programs and then think about how
    we would comply with them.
        Senator Jeffords. Thank you. Assume the EPA or industry
    has, or can, come up with a reasonable, accurate baseline cost
    of these regulations, would it not be most appropriate to
    subtract that baseline cost from EPA analysis done for the
    committee to get an incremental cost estimate for S. 556?
        Mr. Anderson?
        Mr. Anderson. Well, I think that we certainly have compared
    our perceived cost of this to what we perceive the business as
    usual case to be, and we perceive the cost here to be
    substantially higher than the business as usual case. I think,
    in addition, we would recommend to this committee that economic
    efficiency in energy policy would suggest that there is a lot
    that can be accomplished but that we ought to be very careful
    about the levels and the timing at which those levels are
    implemented to minimize cost here.
        So, we are certainly advocates of continued progress and
    advocates of continued reductions. But the timing of those
    reductions is critical, as are the absolute levels.
        Mr. Sterba. I guess the only thing I would add, Senator,
    would be that, as has been stated already, the difficulty of
    estimating what the cost of compliance with the existing
    multiplicity of regulations makes what would otherwise be a
    simple arithmetic calculation problematic. This bill, it is
    very clear what is intended, it is very clear to estimate what
    the cost of it would be, and we believe that those costs have
    been fairly represented by the EIA and EPA analyses.
        Mr. LaCount. Although it is very difficult for us to
    exactly estimate the cost of each of those programs that would
    be implemented over the next 10 years, we think it is important
    to make an attempt to quantify the overall, generally speaking,
    what kind of cost that it would be to compare proposals such as
    S. 556 with.
        In our modeling we have made an attempt to do that. So, in
    our business as usual case, we have looked at not only
    regulations that are on the books today, but also those that
    the Clean Air Act currently authorizes for implementation over
    the next ten to 12 years. When we do that, and then we look at
    certain proposals that provide a lot of market-based
    incentives, we find that the cost increases beyond the business
    as usual, in many cases it is very minimal. With our proposal,
    even when we throw in carbon with maximum flexibility, again,
    we do find minimal cost increases above the business as usual
    case.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. Mr. LaCount, in your testimony you
    mention that your company, which owns two large coal-fired
    facilities in Massachusetts, will be complying with the State's
    new four-pollutant reduction regulations. What are the
    CO2 and mercury levels under the Massachusetts
    proposal, and how will your company comply with those two for
    your two coal-fired plants?
        Mr. LaCount. Particularly the mercury component of the
    Massachusetts regulations, actually it leaves a lot of
    uncertainty for us at this time because the regulation does not
    specify an exact requirement for mercury. It creates a process
    for continuing to look at what is feasible at that plant, and
    then comes up with a date on which that final reduction
    requirement would be set in regulations. A lot of the timing of
    that fits in with existing technology processes that are
    underway at EPA, specifically speaking of the mercury
    regulations that are being developed.
        In terms of CO2, the regulations talk about
    capping emissions at 1990 levels and having an ability to
    generate emission reductions of CO2 both on-system
    as well as off-system. So at this time as we are developing a
    compliance plan, we are certainly looking for energy efficiency
    increases that are available at the plants to reduce
    CO2 emissions, but also at the same time looking for
    other market-based solutions that would allow us for off-
    setting emissions outside of the plant as well.
        Senator Voinovich. I understand that your group supports a
    four-pollutant approach. But I want to make it clear. Do any of
    your companies support the Jeffords-Lieberman bill as drafted?
        Mr. LaCount. We think it is, first of all, very important
    to include carbon. We think it is a lost opportunity if that is
    not included in legislation at this time. However, we think in
    doing that maximum flexibility needs to be a part of that
    program as well. At this time, we think it is important that
    more flexibility would be there and be allowable than what is
    currently in S. 556.
        Senator Voinovich. You have got a fairly diverse membership
    in your group?
        Mr. LaCount. Yes, we believe we do.
        Senator Voinovich. I know nationally over 50 percent of
    electricity comes from coal. What would be the overall fuel mix
    for companies in your coalition?
        Mr. LaCount. I can say that for the coalition overall, we
    certainly represent significant amounts of the same fuel mix
    that the nation currently has. I can speak more specifically to
    my company, and my company is made up of approximately 50
    percent coal at this time.
        Senator Voinovich. Mr. Anderson, in your testimony you give
    an example of how the EPA's current interpretation of NSR
    prohibited your company from increasing the efficiency of your
    Monroe Plant while at the same time not increasing emissions.
    Can you explain to the committee what happened and how the
    EPA's program has changed in recent years. This is a big, big
    issue here.
        Mr. Anderson. Yes, this is a lost opportunity for our
    industry. The particular case can be generalized to many
    turbines across not only our company but the industry. We filed
    for an applicability determination for replacing an old turbine
    with a higher efficiency new turbine, one that would allow us
    to use 5 percent less fuel in producing the same amount of
    energy. What we got back was a determination that NSR did apply
    and what would therefore be required is a restriction of the
    output of that turbine should we choose to put it in place.
        The result of restricting output is simply to not take
    advantage of a higher efficiency turbine and to shift that
    output to lower efficiency turbines. I think this will either
    have that impact as people around the industry look at it or
    simply force people to choose not to do these projects.
        Senator Voinovich. Mr. Sterba, do you think it is possible
    today to meet the mercury reductions in S. 556?
        Mr. Sterba. Whether it is technically possible across some
    sources of coal, I cannot comment on that. I can comment
    specifically that relative to the coal that is burned
    predominantly in the West, I know of no technology that can
    gain 90 percent removal of mercury given that the predominance
    of it, about 80 percent of it, is elemental. So I am not aware
    of a technology that can accomplish it in the West--at any
    cost.
        Senator Voinovich. I am glad you pointed out the
    differences in terms of the kind of emissions from mercury that
    we have. I know that is a big problem and that is why I am
    interested in having a hearing on the issue of the technology
    in terms of mercury, because I have been to company after
    company and they are at wits end in terms of what they can do
    in order to bring down the mercury.
        Mr. Sterba. Senator, one of the things that is interesting
    about mercury is that if you look, and I am not the person that
    is most technically involved with this in our company, but if
    you look across the experiments that have been done and the
    testing that has been done, the difficulty is consistency of
    removal. You see very different kinds of outcomes depending on
    the coal chemistry and the formation of the boiler.
        I think that this committee undertaking that kind of a
    hearing is a very important aspect. Technology is how we are
    going to get there. Trying to do it too fast, turn over capital
    stock too fast, has an enormous cost that not only has a cost
    side, it also freezes what technology options are available as
    you have to make a massive investment to reach a 2007-2008
    timeframe.
        Senator Voinovich. Mr. Smith, you represent the technology
    people. What is your response to that question in terms
    mercury?
        Mr. Smith. I think he is absolutely right, and you are too,
    Senator Voinovich, in the sense that coal type is important.
    Sub-bituminous, found more out in the West, is lower in
    chlorine, and for various chemical and other reasons is more
    difficult to control. As you know, in my testimony I
    distinguished between bituminous and sub-bituminous, and I said
    we as an industry feel 70 percent is probably doable today, not
    90, 70. But looking down the road a year, 2 years, 5 years, 10
    years, making reasonable extrapolations of the development of
    R&D and test programs underway, I think it is reasonable to
    assume we could get there. But you are right, there is a very
    distinct difference in the ease of controlling bituminous
    versus sub-bituminous coal.
        Senator Voinovich. Mr. LaCount, do you intend to keep
    burning coal at your Massachusetts plants?
        Mr. LaCount. At this time, absolutely. The work that we are
    doing right now is developing compliance plans for those
    regulations that were adopted in Massachusetts, and those
    compliance plans involve significant capital investment in
    controlling the emissions while continuing to burn coal.
        Senator Voinovich. Thank you. I think my time is up.
        Senator Carper. Senator Jeffords had to leave the hearing
    for about 15 minutes and he has asked me to just take over and
    run it. I was reluctant to do it, but I finally relinquished.
        I would ask Senator Chafee to go ahead and ask the next
    round of questions, and then I will take the next after him.
        Senator Chafee. Thank you very much. Thank you for your
    testimony. Very interesting. I have just one question. Do Mr.
    Anderson, Mr. Sterba, or Mr. LaCount wish to comment on Mr.
    Smith's testimony? It seemed a little bit in contrast to the
    previous three testimony. Any of the three of you wish to
    comment on Mr. Smith's?
        Mr. Anderson. I could start by echoing the comments around
    mercury, which is that of the three elements this is the one
    that gives us the most concern. The technology is the least
    developed. From what I have seen, from what our technologists
    have told me, the 70 percent is a very optimistic figure at
    this point in technology development. I echo Mr. Sterba's
    comments about consistency. Results at one facility oftentimes
    have no approximation to results at another.
        I would add one other comment, and that goes back to my
    testimony about allowing enough time to let technology and
    technological innovation occur. As we approached this round of
    NOx reductions, the ones we are currently involved with, and we
    are spending $630 million on NOx removal, we looked at a
    technology known as Power Span that offered the promise of
    removing not only NOx, but SO2 and mercury as well.
    At that point it was in a 5 megawatt test phase being expanded
    to a 50 megawatt test phase, and we had about a year to decide
    whether we thought that was well enough developed for us to
    apply it to a 3,000 megawatt power plant. With everything that
    was bearing on that decision, we in the end decided not only
    not to invest in the technology, but not to invest in the
    company, because we had considered an equity position in the
    company. Given more time, that technology might have proven
    itself and might have dealt with a number of the issues that we
    are here talking about today.
        I think if we want to deal with this issue efficiently from
    an economic perspective, we need to give technology the time it
    needs to emerge and address these issues. A 2-year, 3 year
    timeframe that we would have to commence construction to meet
    this set of requirements would by no means be enough time for
    those sorts of technologies to emerge.
        Senator Chafee. Before Mr. Sterba answers, Mr. Smith, maybe
    you would care to comment on that. Is he accurate, in your
    opinion?
        Mr. Smith. Well, he is certainly accurate in saying he
    agrees with me that mercury is the most difficult pollutant of
    the three that I talked about to control. You know, it is an
    arms, legs, knees issue, Senator Chafee, where are you going to
    draw the line. As I said, the most critical element in spurring
    technical innovation is the existence of a business market,
    which in this industry is brought about by legislative mandate.
    So it is a bit of a chicken and egg thing. I am a CEO of a
    company wondering whether I am going to allocate scarce dollars
    into R&D in my air pollution control technology business, and
    without that legislative mandate I may be considerably less
    skeptical to do that. Because the industry, as I said in my
    written testimony, is like nature herself, very competitive,
    and dollars are scarce.
        Senator Chafee. Thank you, Mr. Smith. Mr. Sterba?
        Mr. Sterba. Yes, Senator Chafee. We have talked about
    mercury. Relative to the others, I think it is not just an
    issue of technical viability, it is also an issue of economy
    and equity. When you have power plants that are emitting one-
    third per unit of heat input of what the average is for
    SO2, I question the logic of imposing the same level
    of additional reduction on those resources as resources that
    are emitting three times that amount. So I think there is an
    equity issue that is really an issue that we are concerned
    about, because our customers have already paid for scrubbers,
    they have already paid for more recent power plants that are
    removing a level of emissions. So I think that needs to be
    taken into account.
        On this issue of certainty, there is no doubt that
    certainty is necessary for a market to operate efficiently. I
    would differ, though, that that means it requires a mandate.
    Let me give you one brief example involving my company. We have
    a 1,500 megawatt coal-fired power plant that we just recently
    finished investing over $80 million in to upgrade the
    scrubbers, not because there was a legislative mandate, not
    because there was a regulatory requirement, but because it made
    good sense and because we had a trading emissions mechanism
    that exists that incented us to go above and beyond what is
    required so that we could effectively increase the level of
    removal by over 20 percent of the sulfur dioxide in the flue
    gas.
        So I do not believe that you have to have a mandate for
    increasing, ratcheting, and particularly overlapping elements
    of regulation. You do have to have certainty around the
    regulatory construct, and I think in that element I would agree
    with Mr. Smith.
        Senator Chafee. Thank you, Mr. Sterba. Mr. LaCount?
        Mr. LaCount. One of the key messages I heard in Mr. Smith's
    testimony is the ability for his industry to ever increase both
    performance and cost of control technologies and pointing out
    that there are certain ways new requirements can be constructed
    that provide even more drivers for that innovation and other
    ways that the technologies that are required can be more of a
    static compliance with the program and not a continual driver.
    From an industry side, having that pressure for that industry,
    for the control technology industry, to continue to improve
    cost and performance is something that we would like to see. We
    think to do that it is important to have a market-based program
    in place to continue to apply that driver. Because as a
    competitor lowers their compliance costs, we continue to want
    to do the same. And many times that also means better
    environmental performance.
        I would also extrapolate from his testimony and think about
    not only in terms of three emissions, but four. We think those
    same drivers are the same things that we are talking about by
    having a cap and having that regulatory construct that we are
    talking about, but then having the flexibility to achieve those
    requirements. We think actually all four emissions work in that
    very similar fashion.
        Senator Chafee. Thank you, gentlemen.
        Senator Carper. Gentlemen, the bells and whistles you hear
    going off tells us there is a vote on the Senate floor and you
    have 15 minutes to get there. We will be voting on the
    agricultural appropriations bill conference report. But for
    now, our focus is right here.
        A couple of you have mentioned the fact that some States
    are developing emissions controls, laws, regulations of their
    own with which you are expected to comply. I do not know how
    many States have. Let me just ask, what is going to be the
    impact of trying to deal with what I would call sort of a
    patchwork quilt of regulations as opposed to a national uniform
    policy? A couple of you have mentioned this in your testimony.
    I would like to hear it again.
        Mr. Anderson. Well, I would comment on that, Senator, that
    we at EEI and across our industry certainly support a Federal
    policy here as opposed to State-specific policies. Especially
    for companies that operate in multiple States, a patchwork
    quilt creates a very difficult environment for us to operate
    within. So we are certainly supportive of trying to come up
    with a broad Federal approach to this, and have stated that
    clearly not only here but as we make our opinion know in the
    State environment.
        Senator Carper. OK. Thanks. Mr. Sterba?
        Mr. Sterba. I would agree with that. At the same time,
    though, I would note that the WRAP process in the western
    United States embraces 12 or 13 States and I think that
    represents such a strong consensus that has been developed
    through a very good process that I would hope it would be fully
    recognized in Federal legislation.
        Senator Carper. You are really into this WRAP stuff, aren't
    you?
        Mr. Sterba. Yes. I try not to do any dances or slip-
    sliding.
        Senator Carper. If you did, you would sure get our
    attention. We would never forget this hearing.
        Mr. Sterba. Not the kind of attention I would like to get.
        Senator Carper. Maybe not, maybe not. We all know about
    that. Mr. LaCount?
        Mr. LaCount. As the air quality manager at PG&E National
    Energy Group, it is my role to take a very close look at many
    of those regulations and legislation that is developed, both
    adopted and proposed, in many States. I can speak more
    specifically to the States in which we have assets or are
    currently developing assets. The list pretty much covers most
    of those States, frankly. If you think about it, Massachusetts
    has regulations for all four emissions that have been adopted;
    Connecticut has regulations adopted for SO2 and NOx;
    we are waiting to see the new regulations in New York for
    SO2 and NOx that all go beyond the acid rain
    requirements; and we are currently looking at legislation that
    is being discussed in Illinois and Michigan that includes all
    four emissions. Frankly, the list goes on.
        In each of those cases, we are not only asking how those
    different requirements impact existing assets in place and how
    we will comply, but it also brings in an uncertainty about how
    do we want to continue to plan our investment for future
    development going off into the future. To take a look at how
    that system might look, I think it is good to step back and ask
    how current programs that are being adopted in multi States are
    currently operating. I think a good example is the NOx budget
    program currently operating within the northeastern United
    States, from roughly Pennsylvania on up to New Hampshire, and
    roughly around the 2004 timeframe we are going to see that
    program expand southward down to the Carolinas and westward to
    Illinois.
        Senator Carper. To Delaware?
        Mr. LaCount. Delaware is currently in the program. One of
    the keys of this program, even though it was designed to sort
    of link up and provide the ability for emissions trading
    between the different States, many of the aspects of that
    program were developed within each State. So, for instance, the
    development of the budgets were done consistently but how those
    allocations for different sources were designed and adopted are
    done differently for each State. So even though we are trying
    to comply with a market-based system that is designed to lower
    cost, the fact that it was independently done in multi States
    means that there is a much higher transaction cost for us;
    meaning that the efficiency that we want to capture from the
    market are being much more reduced than we currently find
    within say the national SO2 trading program where it
    is a consistent set of rules across the country.
        Senator Carper. Mr. Smith, I do not know if you want to
    comment given that you wear a somewhat different hat than these
    fellows. But if you want to jump in, fine. If not, I will go
    ahead to my next question.
        Mr. Smith. Go ahead.
        Senator Carper. OK. Mr. Sterba spent a fair amount of time
    talking about the WRAP process, it developed the consensus that
    he spoke of earlier. Mr. LaCount, you were good enough to
    present us with some information about a comprehensive approach
    that you think makes sense. Could you just talk a little bit
    about the process that you folks followed to develop that kind
    of proposal?
        Mr. LaCount. Absolutely. First of all, the key driver I
    think was important for us to point out, and that really then
    laid in place the next steps that we took in the process. Our
    key driver was the development opportunity to create regulatory
    certainty for not only regulations currently on the books or
    currently being adopted, but those regulations and programs
    that are expected to be implemented over the next ten to 15
    years. In addition to that, we took a look at what other
    requirements and environmental concerns are being discussed. We
    think that to get that regulatory certainty, and if we are
    asking for ten to 15 years of certainty, we have to also at the
    same time be willing to accommodate what environmental concerns
    would be addressed over that time period. Having identified
    then those different areas of environmental concerns, ranging
    from primarily the NOx emissions, the SO2, and the
    mercury being driven by the mercury MAC process within EPA, it
    is also clear to us that for CO2 that is happening.
    As I said, many of the State actions we are already seeing are
    covering CO2. So that is why we think it is very
    important to cover all four.
        As far as exactly what levels and timeframes, we took a
    look at the existing processes in place and said how can we
    coordinate those so that we do not have the mercury requirement
    1 year and then 2 years later an SO2 requirement in
    place. That is a lost opportunity for co-benefits of investment
    between the two. So we have tried to line them up so that we
    have best matched the current process but at times moved things
    up and back a little bit, which primarily has resulted in a
    two-step process--a 2008 first step in our program, and then a
    later step in 2012. As far as the exact levels for that, it
    again looked at existing programs and a balance between
    economics and environmental concerns.
        Senator Carper. If we had time, what I would do is ask Mr.
    LaCount to just briefly go back through the highlights of his
    proposal and I would ask the others at the table to critique
    it. We have heard from some folks within our own State, the
    Connective Power Delivery, which is our major utility, and they
    seem to find some favor in what you are suggesting.
        Rather than ask you to go through and highlight again your
    recommendations, Mr. Anderson, Mr. Sterba, Mr. Smith, would you
    care to comment on any aspect of what Mr. LaCount has proposed
    that you find especially endearing or not endearing?
        Mr. Anderson. Endearing or not endearing. I guess I would
    start by saying we have not analyzed this proposal in detail,
    but we have analyzed numerous other proposals with timeframes
    like these. As he mentioned, regulatory certainty is very
    important to us. It is also important to get that certainty at
    a cost that our fleets can bear so that we do not unduly impact
    the mix and viability.
        A quick reaction to the timeframes and levels would suggest
    to me that the costs would probably for us be of an order that
    I would recommend to our board that a substantial part of our
    fossil fleet not be in operation in the not too distant future.
    As we evaluate these, we are trying to lay the importance of
    getting certainty with the need to get it at a cost that can be
    borne. Without having analyzed the specifics of this, I can
    only give you that as a general answer.
        Senator Carper. That is fair. Mr. Sterba, any comment?
        Mr. Sterba. Yes. I think the add-on comment I would make is
    that regardless of the levels that are set, then the question
    is how they are allocated. I would once again----
        Senator Carper. Say that again.
        Mr. Sterba. Regardless of what levels are set for national
    removal standards, the question is then how are they allocated
    amongst either the States, regions, or power plants. To me, I
    do not understand the equity argument that would apply the same
    percentage reduction to resources that are only emitting one-
    third per unit the level of emissions that other plants are. So
    there is really a two part question and I really cannot answer
    it without understanding the second part. The limited
    understanding I have is that they are across the board
    reductions that have been proposed. In that instance, I do not
    understand why that would be an appropriate policy position to
    take.
        Senator Carper. Fair enough. Mr. Smith, last word.
        Mr. Smith. Yes, just to answer to your threshold issues.
    First, is technology available to achieve that within the
    timeframes set out? Clearly, yes, and guaranteed. Everything
    that we supply, technology that we supply we have to guarantee.
    Second, would the cost be less than the business as usual
    approach? Clearly, yes. We would sell a lot less technology
    under this approach or under the Jeffords bill than we would
    with business as usual approach.
        Senator Carper. All right. Good.
        Senator Voinovich, Senator Chafee, any last parting words
    before we go vote?
        Senator Voinovich. The only thing that I would like one
    comment about, and that is for Mr. Anderson, you are a leader
    in renewable fuels. If you look at the chart and go down and
    look at 2025 in terms of the energy needs of this country,
    there is a large area there where we currently are not, if you
    look at our projections, are not going to be able to produce
    the energy that we are going to need for this country. There
    are some people that say that the answer to that is renewables.
    My statistics say that renewables provide about one-tenth of 1
    percent of the energy in this country today. I would just like
    you to respond to where do you think that is going in terms of
    taking the place of coal, gas, oil.
        Mr. Anderson. Senator, I individually and our company are
    big supporters of renewable energy. We have a fleet of 35 power
    plants that are fired by renewables. So I support making the
    maximum use we can of those resources.
        That said, I would be forced to concur with your assessment
    that the long term prospects for renewables taking a
    significant slice of production in this country is not very
    positive. I think that we can look for it to play a role long
    term of a couple of percent. But given the ongoing growth in
    demand for energy in this country, we are simply going to need
    to resolve the roles of coal, nuclear, hydro, and other more
    traditional resources in order to be able to move forward.
        Senator Carper. Good. It has been most illuminating. We are
    grateful that you are here, grateful for the time you put into
    preparing your testimony. We look forward to working with you.
        We are going to vote on a compromise that has been hammered
    out between House and Senate appropriators on agriculture, what
    we should be spending on agriculture this year. That is an
    example of where we work together to reach a consensus. So that
    is an important area. The one that we are discussing here is
    important as well. Knowing that people like Senator Voinovich,
    Senator Chafee, and even myself are the kind of people who like
    to hammer out consensus and have worked on a lot of things, and
    we are going to work on this together as well.
        The committee is going to stand in recess for about 10
    minutes, then Senator Jeffords will reconvene us at that time.
    Thank you all.
        [Recess.]
        Senator Jeffords. The committee will come to order.
        Thank you all for being here. As usual, we always run into
    votes and we have more votes coming up. So I want to get
    started again and make sure we do not have to interrupt again.
    You all have statements I am sure.
        We will start with Mr. Hawkins.

     STATEMENT OF DAVID HAWKINS, PROGRAM DIRECTOR, CLIMATE CENTER,
           NATURAL RESOURCES DEFENSE COUNCIL, WASHINGTON, DC

        Mr. Hawkins. Thank you, Senator Jeffords. I would like to
    make five points about the carbon dioxide control provisions in
    your Clean Power Act. The first is that further delay in
    controlling CO2 emissions will threaten huge
    disruptions not only to our climate, but to our economy. The
    second is that controlling carbon under the Clean Power Act
    will improve our economy, not harm it. Third, that the bill
    will help consumers, not hurt them. Fourth, that the bill will
    reduce electric generators reliance on natural gas compared to
    business as usual. Fifth, refusing to control carbon is not
    going to help the viability of coal as an energy resource in
    our country. To the contrary, refusing to control carbon will
    only delay the investments needed to modernize the use of coal
    in our energy system.
        So turning to each of those. Let me just summarize where
    the Planet is on carbon. We now have levels in the atmosphere
    about 30 percent above pre-industrial levels. Those are the
    highest in over 400,000 years. Over the last couple of
    centuries, humans have put about 300 billion tons of carbon
    into the atmosphere, carbon that was stored over tens of
    millions of years and we put it back in a couple of centuries.
    That is one-third of the amount of carbon cumulatively that the
    Planet can put back into the atmosphere if we want to stabilize
    concentrations at something like 60 percent above pre-
    industrial levels. Not a guaranteed safe level, but anything
    above that is very risky.
        The bad news is that if we do nothing, in the next 30 years
    we will put another third back into the atmosphere. So we are
    rapidly denying ourselves the opportunity to stabilize
    concentrations at anything resembling safe levels. If we delay,
    we are going to face the American public with two very bad
    choices--either live for hundreds of years with an unstable
    climate and elevated CO2 concentrations, or adopt
    wrenching changes to achieve very rapid reductions and very
    rapid changes in our energy system.
        Now the impact of the Clean Power Act on the economy has
    been the subject of a lot of misleading discussion. But let me
    just clarify some of the things that were in EPA's October 31st
    analysis. What it showed, contrary to what was emphasized in
    Mr. Holmstead's testimony, is that the gross domestic product
    of the United States would actually be better under the Clean
    Power Act than without it. EPA has also submitted analyses to
    the Congress showing that controlling three pollutants now and
    then adding carbon later would actually cost the economy an
    additional $7 billion or more per year than doing the control
    program together.
        Turning to impact on consumers, both EIA, the Energy
    Information Administration, and EPA studies show that the Clean
    Power Act emission caps, when combined with the efficiency
    programs and the renewable energy programs that are also in the
    Clean Power Act, actually save consumers money compared to
    business as usual.
        Why is this? Because under the Clean Power Act, the
    efficiency and renewable programs do double duty. First, those
    programs cut pollution and thereby lower the cost of meeting
    the Clean Power Act's emission caps. Second, the efficiency and
    renewable programs cut the growth rate in demand for
    electricity and for natural gas. That reduces the upward
    pressure on prices for those commodities, also helping to lower
    consumers' bills.
        Fourth, let me turn to the impact on natural gas. Again,
    the arguments about fuel diversity are misplaced. Under the
    Clean Power Act, again due to the integrated program of
    efficiency and renewable energy sources, the electric sector's
    demand for natural gas will be less than it will be under
    business as usual. EPA's calculations were that under business
    as usual in the year 2010 there would be 8.3 quads, that is
    quadrillion BTUs, of natural gas used in the electric power
    sector, and under the Clean Power Act the number would be
    lower, 7.7 quads. EIA has made similar analyses. In fact, they
    analyze what will happen in the economy as a whole, and there
    the economy-wide reductions in natural gas use would be 2 quads
    compared to business as usual. That will help lower prices not
    only for electricity consumers, but for all natural gas
    consumers.
        Fifth, the role of coal. Coal is the biggest fuel source
    for electric generators today. Under the Clean Power Act coal
    would still be the biggest fuel source for electric generators.
    The role of coal is going to be made viable in a climate regime
    not by delaying action on this, but by taking action. The
    longer we wait to face up to the fact that carbon needs to be
    managed, the longer we send signals to investors to not make
    investments in technology that could be both friendly to
    climate and friendly to coal. In my testimony I give several
    examples, but I see the light is on so I will just touch on a
    couple in concluding.
        Enhanced oil recovery. We put over 20 million tons of
    CO2 a year into the ground to recover oil in the
    southwestern United States. Most of that does not come out of
    power plants, it comes out of other holes in the ground. We are
    pulling CO2 out of the ground in order to pipe it
    hundreds of miles and stick it back in the ground. Why are we
    doing it that way? Because we can dump CO2 for free
    from combustion sources and there is no economic incentive to
    separate it out and use that source of CO2.
        Enhanced coal bed methane is another coal market
    opportunity that is not being pursued, again because of the
    lack of an economic signal. In the new power market, most
    investors are putting their money into natural gas plants, not
    into coal plants. Why? Because of uncertainty and because of
    the competitive advantage that the current prices give to
    natural gas.
        Hinally, coal gasification technologies. There is something
    that had the potential to be both environment friendly and coal
    friendly. But they are not being pursued at anything like the
    pace they need to be in order to move this technology ahead,
    and therefore coal is missing that market opportunity as well.
        That concludes my summary, Mr. Chairman. Thank you very
    much.
        Senator Jeffords. Thank you, Mr. Hawkins.
        Mr. Tipton?

       STATEMENT OF RONALD J. TIPTON, SENIOR VICE PRESIDENT FOR
    PROGRAMS, NATIONAL PARKS CONSERVATION ASSOCIATION, WASHINGTON,
                                   DC

        Mr. Tipton. Thank you, Mr. Chairman. I am here on behalf of
    the National Parks Conservation Association, which is the
    nation's only organization that is dedicated specifically to
    the health and welfare of our national parks. I am here to
    testify in strong support of the thrust of S. 556, and I really
    appreciate that this committee has taken the time to look at
    the impacts on our National Park System from declining air
    quality.
        We have tried for three decades to struggle with a series
    of air quality problems in this country. One of them is the
    quality of our air in our national parks. Today, however, our
    great national parks--where we had 287 million visits to our
    national parks last year and the places that are expected to
    feature some of the best air quality and some of the most
    spectacular vistas--have in many cases experienced declining
    air quality.
        I think it would surprise most Americans to know that some
    of our national parks have some of the highest levels of air
    pollution in the country. Visibility impairment is widespread
    throughout the park system. But scenic views are not the only
    resource at risk. The same pollutants that reduce visibility
    also contribute to thousands of premature human deaths each
    year. Acid deposition hurts natural and cultural resources.
    Ground level ozone, or smog, threatens the health of park
    visitors and workers, and the health of park vegetation. It
    goes on and on.
        In fact, the authorizing legislation for numerous national
    parks specifically mentions scenic vistas as among the reasons
    for the park's establishment. We have provided for the record a
    compilation of excerpts from legislative history for specific
    national parks that demonstrate that.
        Now in 1977, in the first set of amendments to the Clean
    Air Act, Congress decided to declare a total of 158 areas,
    including all national parks over 6,000 acres, of which there
    are 48, and wilderness areas over 5,000 acres that were in
    existence at that time as Class I areas ``deserving of the
    greatest protection under the Clean Air Act. Congress declared
    as a national goal ``the prevention of any future, and the
    remedying of any existing, impairment of visibility in
    mandatory Class I Federal areas which impairment results from
    manmade air pollution.''
        Regrettably, we are almost 25 years later and many national
    parks throughout the country suffer from deteriorating air
    quality caused in large part, not exclusively, by emissions
    from old, dirty power plants, and from the fact that many of
    those facilities impacting visibility operate under a loophole
    in the 1977 Act that exempted them from complying with modern
    pollution emission control requirements. We were led to believe
    at the time that those plants would be phased out or they would
    be retrofitted with scrubbers or whatever the latest technology
    was to control particularly SO2 emissions. In many
    cases, that has not happened. In fact, according to EPA, the
    average visibility in eastern Class I areas is 15 to 25 miles,
    when the natural visibility is about 90 miles. There are
    similar numbers in the West.
        Just to highlight the problem at one park I know very well,
    I want to quote from a very recent letter from Senator Fred
    Thompson to President Bush, as follows: ``Most shocking to me
    is that, according to Park officials, air quality in the
    Smokies is so poor during the summer months that hiking our
    backcountry trails is more hazardous to your health than
    walking along city streets.'' If Americans expect clean air
    anywhere, it is in our national parks. We are seeing some of
    the same problems at Shenandoah National Park. As you may know,
    Mr. Chairman, the ozone levels in Acadia can be as high as the
    ozone levels in Boston. The Grand Canyon has many of the same
    problems, Yosemite, Mesa Verde, Rocky Mountains. They are not
    all declining, but in some cases they are. In some places the
    situation has been pretty bad for a long time.
        We believe America's national parks cannot be protected
    without significant reductions in the sulfur and nitrogen
    pollution that form regional haze and acid rain, and we also
    must deal with the ozone as well. We believe the need to reduce
    emissions is not a regional problem, it is a national problem.
    We endorse the four-pollutant approach for the national parks
    because we are concerned about the impacts of mercury and of
    climate change, that is global warming, on our park system.
        I just want to make a couple other points. I only have a
    little bit more time.
        It is important to think about the economics involved in
    this debate as well. Obviously, the national parks are
    important to the country and to the world. They are a vital
    resource for many communities and metropolitan areas around the
    country. A report issued in 2000 called ``Out of Sight: Haze in
    our National Parks,'' by Abt Associates, which was commissioned
    by Clear, the air coalition, found that, ``increases in
    visibility could raise park visitation by as much as 25 percent
    which could yield approximately $30 million in increased fee
    collection and $160 million in additional concession sales.
    This would in turn add nearly $700 million in retail sales to
    the economies around the park, $53 million in local tax
    revenue, and create 15,896 jobs.''
        In closing, I want to emphasize that it is important to use
    what we call effects-based monitoring or look at the impacts,
    to say it another way, of emissions on the things, the values,
    the places that the Clean Air Act and the subsequent amendments
    to the 1970 Act were intended to address. We think that
    emission-based multi-pollutant strategies must be linked to
    specific results. There is a lot of talk about a cap-and-trade
    program, but that in itself will not offer specific protection
    to Class I areas.
        We must have cleanup of power plants that are producing
    sulfur dioxide and nitrous oxide and helping create ozone in
    our great national parks. While emissions nationwide have been
    reduced under implementation of the Clean Air Act Amendments of
    1990, emissions affecting some Class I areas have increased.
    For example, the largest polluter that affects the Great Smokey
    Mountains National Park is the Tennessee Valley Authority. It
    emitted approximately 700,000 tons of sulfur dioxide last year,
    which is 300,000 tons above their allocation under the 1990
    amendments. That is an impact on the park due to the trade
    system that has occurred there.
        Finally, Mr. Chairman, enactment of S. 556 would provide a
    critical step to protect America's national parks. Our national
    parks and wilderness areas, our Class I areas deserve and
    demand the protection that S. 556 would provide, that the
    American public expects to see when they visit their national
    parks.
        Thank you.
        Senator Jeffords. Thank you very much.
        Mr. Kirkwood?

     STATEMENT OF JOHN KIRKWOOD, CHIEF EXECUTIVE OFFICER, AMERICAN
                  LUNG ASSOCIATION, NEW YORK, NEW YORK

        Mr. Kirkwood. Thank you, Senator. I am John Kirkwood. I am
    the chief executive officer of the American Lung Association.
    The mission of our organization is to prevent lung disease, and
    in this capacity we are here today to support S. 556. We
    support the emission targets and timetables in this legislation
    because power plants are one of the largest single sources of
    industrial pollution, emissions from power plants can seriously
    damage public health and the environment.
        Pollution from power plants risk the lives and health of
    millions of Americans. These pollutants contribute to the
    formation of smog and fine particles, with well-documented and
    dangerous consequences to human health. There are more than 141
    million Americans living in areas where the air is unhealthy
    because of ozone pollution. Power plants contribute to the
    problem, especially in the eastern part of the United States.
    The Environmental Protection Agency estimates that some 82
    million people live in areas with unhealthful levels of fine
    particles. Let me briefly outline the human toll.
        The most serious problem is premature death. According to a
    study conducted last fall by Abt Associates, emissions from
    coal-fired power plants contributed to an estimated 31,000
    premature deaths each year, a figure that was referred to
    earlier today by Senator Campbell. Based on other recent
    research, we know that the lives of these 31,000 people were
    shortened, not by days, and not by months, but in many cases by
    years.
        The causative factor is the emissions of sulfur dioxide and
    nitrogen oxides, which are transformed into ultra fine
    particles in the air. These small particles are less than one-
    tenth the diameter of a single human hair. They are so small
    that they bypass our normal defense mechanisms and lodge deep
    within the lung, where they can adversely affect human health.
    Studies demonstrate that infants and children, especially
    asthmatic children, the elderly, and people with heart or lung
    disease are especially sensitive to fine particle pollution.
        In addition, fine particle pollution is responsible for an
    estimated 20,000 hospital admissions each year from respiratory
    and cardiac illness. This was a determination that was also
    made by a study done by Abt Associates.
        Nitrogen oxides are a key ingredient in the formation of
    ozone, or smog, that blankets many parts of the United States
    during the summer months. Ozone caused an estimated 7,000
    emergency room visits due to asthma and other breathing
    difficulty. That same ozone also triggered an estimated 600,000
    asthma attacks.
        Recent research underscores the need to move forward to
    clean up these power plants. Dozens of new short-term studies
    confirm the effects of particle pollution on premature death,
    hospitalization, emergency room visits, and respiratory and
    cardiac affects. I have cited these studies in footnotes that
    are attached to my testimony. They present a compelling case
    for taking action as soon as possible.
        Power plants also produce a number of other hazardous
    pollutants besides sulfur dioxide and nitrogen oxide. Of most
    concern is mercury, known for inflicting permanent damage on
    the nervous and kidney systems, and especially threatening to
    fetal development and children's mental health.
        The weight of evidence against these pollutants is solid
    and increasing. These new studies lend a profound urgency to
    the national effort to reduce emissions from power plants. It
    is difficult to deny the need for dramatic additional
    reductions from these sources. For example, there are maps,
    which are also attached to my testimony that was submitted to
    the committee, which demonstrate the convergence between the
    location of power plants and high levels of fine particles.
    These power plants are shown on the map as black and white
    dots, and the corresponding high levels of fine particles are
    also shown on the map, a map that was produced by the
    Environmental Protection Agency. Preliminary fine particle
    monitoring data show many of these areas may violate the new
    PM2.5 standard.
        The American Lung Association supports S. 556 because it
    targets levels of pollutants that must be reduced from power
    plants and it leaves the other provisions of the Clean Air Act
    in place. These two components ensure that power plants become
    cleaner and local air quality is protected.
        The American Lung Association also supports including
    carbon dioxide as part of the reduction package. Many of the
    fossil fuel combustion processes that contribute carbon dioxide
    to the problem of global climate change also contribute to
    other forms of pollution.
        The explicit recognition of S. 556 of the sanctity of the
    Clean Air Act is the cornerstone of our support. The American
    Lung Association opposes replacing the new source review
    provisions or any other provisions existing in the Clean Air
    Act with a power plant emissions cap-and-trade program. This
    can be an addition, but it should not be a replacement. I think
    we will all agree that the Clean Air Act has worked very well
    for 30 years. It should continue to work well.
        The American Lung Association is committed to ensuring that
    Americans can breathe clean air. Frankly, the efforts under
    existing provisions of the Clean Air Act are moving too slowly.
    The new ambient standards for ozone and PM2.5 set in
    1997, as you well know, are still tied up in litigation and
    remain unimplemented.
        We now need to address the stationary source side of the
    problem. This legislation will allow us to do that in a
    comprehensive way, requiring a major source of industrial air
    pollution, coal-fired power plants, to do their share to help
    us all breathe easier.
        Thank you for the opportunity to share our views with the
    committee this morning.
        Senator Jeffords. Thank you, Mr. Kirkwood.
        Mr. Banig.

      STATEMENT OF BILL BANIG, DIRECTOR OF GOVERNMENTAL AFFAIRS,
           UNITED MINE WORKERS OF AMERICA, FAIRFAX, VIRGINIA

        Mr. Banig. Mr. Chairman, members of the committee, on
    behalf of the United Mine Workers of America, I appreciate the
    opportunity to provide our views on efforts to reduce emissions
    from coal-fired power plants. The UMWA supports additional
    reductions of SO2, NOx, and mercury, provided that
    the reductions are designed in a way that preserves coal miners
    jobs. However, we do not support reduction schemes that force
    or encourage utilities to switch away from coal, thereby
    causing economic harm to coal miners and their communities.
        Before getting to my comments on S. 556, let me say at the
    outset that coal miners did not fare well under the Clean Air
    Act Amendments of 1990. Utilities engaged in substantial fuel
    switching in response to Title IV and UMWA members and high
    sulfur coal producing regions were displaced by the thousands.
    Overall, major eastern coal producing States lost over 113
    million tons of production from 1990 to 2000, and employment
    was down by over 30,000 jobs. Having gone through that
    experience, we view with a skeptical eye any legislative
    proposal that sets emission reduction targets and timetables
    that surpass our technological capabilities.
        We believe that S. 556 falls into that category. Indeed, it
    appears from Government analyses that S. 556 may threaten to
    disrupt coal mining communities far more than Title IV.
    Analyses by EIA and EPA show that emission reductions called
    for in the bill would be achieved in large part by utilities
    switching away from coal, resulting in as much as a 50 percent
    reduction in coal use in electric utilities. Much of the loss
    in coal production stems from the bill's mercury and carbon
    caps. As a result of these two requirements, the utilities are
    expected to engage in substantial fuel switching away from
    coal.
        The United States currently produces about 1.1 billion tons
    of coal annually. In its analysis of S. 556, EIA found that the
    implementation of the reductions would cause the loss of 506
    million tons of coal production nationwide from its reference
    case in 2010, rising to a loss of 657 million tons in 2020.
    Such coal market disruptions far exceed the coal switching that
    resulted from Title IV. These losses are likely to have a
    negative economic impact on all coal producing States. EIA
    projects a loss of 190 million tons in 2010 from eastern coal
    producing States, and a loss of 316 million tons from the
    western States.
        What would be the economic cost of this loss of coal
    production? Tens of thousands of coal miners would lose their
    jobs in areas of the country that have little or no comparative
    alternative employment. Using conservative economic multipliers
    from the U.S. Commerce Department, we estimate that the loss of
    506 million tons of coal in 2010 would mean the loss of $7.7
    billion annually in direct coal mining revenue, $14.4 billion
    per year in lost economic output in all industries, $3.9
    billion in lost household earnings, and the loss of more than
    135,000 jobs in all industries. In addition, over a hundred
    thousand retired coal miners look to the coal industry for
    lifetime retiree health benefits that were earned during their
    working lives. If we wipe out half the coal industry, where are
    the retirees going to get their health care? Who will finance
    those life-saving benefits when we have removed $7.6 billion of
    revenue from the coal industry?
        The UMWA believes that the burdens that would be placed on
    coal miners and their communities by S. 556 are unacceptable.
    They should not be asked to give up their jobs, their health
    care, and their economic futures because of arbitrary deadlines
    and reduction targets that cannot be reasonably met with
    available technological controls.
        The UMWA supports appropriate additional reductions in
    SO2, NOx, and mercury. We do not support inclusion
    of carbon dioxide in the committee's emission reduction bill.
    Inclusion of carbon dioxide in this bill, in our opinion, force
    utilities to switch away from coal and will unnecessarily
    delay, and possibly prevent, its enactment.
        We believe that a properly designed plan could provide the
    electric utility industry with greater certainty for planning
    and investments, lead to the simplification of regulatory
    programs, and create significant job opportunities for the
    construction and operation of pollution control devices. At the
    same time, such a strategy would allow coal miners and their
    communities to retain the high paying jobs they so desperately
    need.
        EIA's analyses suggests that a 50 to 65 percent reduction
    in SO2 and NOx could be achieved without severe loss
    of coal markets and coal mining jobs. We believe these
    reductions should occur in one phase, with appropriate
    deadlines to ensure that utilities will have enough lead time
    for the orderly installation of technology. In addition, the
    committee should consider the compliance deadlines with an eye
    toward the financial condition of the Nation's electric
    utilities, particularly the medium-sized utilities.
        In terms of mercury, we are concerned that the technology
    for reducing mercury emissions are in a very early stage of
    commercial development. Setting an overly ambitious target for
    controlling mercury could be harmful to coal mining communities
    and be at odds with the larger national energy policy debate.
    Therefore, we recommend that mercury controls occur in two or
    more phases. It is likely that a more modest reduction could be
    achieved at substantially lower costs through available
    technologies. In all events, it would be desirable to postpone
    setting a final mercury target until the co-benefits through
    NOx and SO2 controls are demonstrated through a
    first phase control program.
        A target for annual NOx emissions of about 2 million tons
    should be feasible with the use of selective catalytic
    reduction and other NOx control equipment. Based on a variety
    of studies that have been done, we see a somewhat more modest
    SO2 reduction target, roughly in the range of 3 to 4
    million tons, as representing both a technically achievable and
    cost-effective control level.
        An SO2 and NOx control plan along these lines
    could be implemented as a first step in a longer-range plan to
    reduce mercury emissions. The experience in mercury co-benefits
    achieved by the first phase controls for these emissions would
    be vital in assessing the feasibility of ultimate mercury
    reduction targets.
        In summary, Mr. Chairman, the UMWA is prepared to work with
    the proponents of additional reductions in SO2, NOx,
    and mercury emissions in coal-fired power plants, provided that
    the reduction provisions are designed in such a way that
    preserves coal miners' jobs. We look forward to working with
    you to achieve these goals.
        Senator Jeffords. Thank you very much, Mr. Banig.
        For the three of my environmental friends, do you have any
    words you would like to express with respect to the previous
    panel, not Mr. Banig, but the previous panel we had, anything
    that you would like to clear up?
        Mr. Hawkins?
        Mr. Hawkins. Yes, Mr. Chairman. In response to a question
    about the new source review provisions, Mr. Anderson from
    Detroit Edison answered that a turbine project at their Monroe
    plant was responded to by EPA with EPA saying that the new
    source review program would apply to that efficiency program.
    That is not correct. I think it is important to correct the
    record because that misstatement continues to be made as a
    criticism of the new source review program. In fact, the May
    2000 letter that EPA sent to Detroit Edison explicitly said
    that, based on the facts that Detroit Edison provided to them,
    the project was not subject to the new source review program.
        Perhaps the confusion arises about whether this was what is
    called a routine maintenance operation versus whether that
    routine maintenance operation has to apply for a new source
    permit. What the agency concluded was that buying new turbine
    blades that would allow increased production would not qualify
    as routine maintenance, which would seem logical even without
    the help of a lawyer, but that because the project would not
    increase emissions, the facility did not need a permit to
    undertake that project. So I just wanted to correct the record
    in that regard.
        Senator Jeffords. Mr. Tipton?
        Mr. Tipton. I think the only point I would add to what
    David Hawkins said is that this whole question about when a
    plant has undergone a major modification that requires it to
    clean up has been debated now for the extent of the Clean Air
    Act Amendments. That affected the national parks and the
    regional haze provisions. The fact is that we have come to the
    year 2001 and we still have many, many power plants that have
    avoided what I think was a clear intent of the 1977 amendments,
    that have been, in our opinion, in some cases modified in a
    major way. We have gotten the energy benefits but we have not
    gotten the environmental benefits that would help our national
    parks.
        Senator Jeffords. Mr. Kirkwood?
        Mr. Kirkwood. Just a brief comment, Senator. I heard the
    word ``certainty'' used several times in the earlier testimony.
    I think that is a very important concept for the committee to
    consider, and also the need for uniformity throughout the
    country. I recently came to my position at the American Lung
    Association after 25 years in Illinois at the American Lung
    Association in metropolitan Chicago. In fact, last year I was
    working in the Illinois General Assembly with respect to
    emission requirements for older power plants. If the industry
    is faced with a patchwork of requirements around the country as
    States take the initiative in the absence of some type of
    Federal action, then there is this patchwork and there is also
    this lack of certainty which I think is important.
        I think those comments were well taken this morning, that
    the industry needs to have certainty, they need to know what
    they are faced with in the future, and that it needs to have
    some uniform characteristics around the country. Otherwise,
    what I think you will see is State legislatures beginning to
    take the initiative, which then could create even more problems
    and more uncertainty.
        Senator Jeffords. Mr. Banig?
        Mr. Banig. I agree, the utility industry desperately needs
    certainty. But we also have to recognize that how effective the
    control technology is varies plant to plant. It might work well
    in one plant and not so well in another. So we have to look at
    this on a plant-by-plant basis.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. Thank you, Mr. Chairman.
        Mr. Banig, in addition to the lost coal jobs that you think
    would result in the passage of S. 556 as it is currently
    constituted, would you like to comment on the impact that it
    would have on Appalachia, which runs through several States, in
    terms of that economy?
        Mr. Banig. Well, as I stated in my testimony, the enactment
    of S. 556 would probably lead to about 135,000 jobs being lost.
    That is not just in the coal industry. For every mining job,
    conservatively, another three jobs are created in the
    community. As these mining jobs disappear, those jobs disappear
    along with them. Unfortunately, when you are looking at
    Appalachia and other coal producing regions of the country, for
    example the Illinois Basin, these are the jobs that are in
    those communities. There are not other employment opportunities
    for an unemployed miner or an unemployed grocer to turn to. So
    it has a very devastating impact. We have seen that in
    Appalachia, in the midwest with the passage of the 1990 Clean
    Air Act Amendments. I can speak from personal experience. I
    come from southeastern Ohio. The mines have closed. New
    industry has not come into southeastern Ohio. So it has a very,
    very devastating impact.
        Senator Voinovich. There was some testimony that going
    forward with this legislation would produce new cleanup
    equipment. I get from your testimony that you doubt whether
    those jobs of cleaning up would be coming to southeastern Ohio
    or Appalachia.
        Mr. Banig. It is a question of whether or not the utilities
    actually install the pollution control technology in the
    utility plants. If technology is installed, jobs are going to
    be created; coal mining jobs are going to be preserved,
    construction jobs are going to be created, jobs are going to be
    created in the utility plant to maintain this equipment. But
    our experience in dealing with the 1990 Clean Air Act
    Amendments is, quite frankly, that has not happened.
        Senator Voinovich. Well, your bottom line is that if S. 556
    passes, in all likelihood what will happen is that they will
    fuel switch.
        Mr. Banig. Most definitely.
        Senator Voinovich. I would like the other witnesses to
    comment on this question. I have pressed the utilities, I have
    had people come to my office to talk about clean coal
    technology and the Texaco coal gasification and so forth, and
    have said to them, well, you know, there is some new technology
    out there where you could burn coal and pulverize it and so
    forth. The answer that I get back is that, first of all, it
    would require in some instances just tearing down the
    facilities they have right now and building new facilities to
    take their place. But faced with the reality of that, their
    response is that what they would do is fuel switch. Any of you
    have any comment on that?
        Mr. Hawkins. I will start, Senator Voinovich. I think the
    way to ensure that they will fuel switch is to pursue kind of a
    piecemeal approach to the problem of air pollution from
    electric generation, including air pollution from coal. I think
    that if you put an integrated program together, you will
    deliver a market signal to the vendors of advanced technology
    that there is something to value from technology that actually
    controls all of these pollutants.
        In my testimony I referenced a technical presentation by
    Chevron-Texaco that basically said you can build a new
    integrated gasification coal-fired unit and put carbon capture
    technology onto it for less than a 4 percent increase in
    capital cost and less than a 2 percent impact on efficiency.
    But that is not happening today. Instead, most new plants are
    gas fired.
        I think as long as there is no value to being able to
    advance technology that will capture all of these pollutants,
    you are going to see people take the cheapest short-term route,
    which will tend to be fuel switching. The way to change that is
    to send a signal to the market as a whole that these clouds of
    uncertainty that face future use of coal and other fuels with
    higher carbon content are going to be managed and there is a
    program to do so. But not engaging in this issue is a way of
    delaying investments in that technology, in my view.
        Senator Voinovich. Would you suggest any incentives in this
    legislation that would encourage companies to not fuel switch?
        Mr. Hawkins. I think that there is value in an integrated
    approach that will promote a wide range of techniques. I would
    point out that efficiency and renewables are a technique for
    controlling carbon and minimizing the impact on coal
    production. Basically, you get twice as much carbon reduction
    per impact on coal production if you use efficiency and
    renewables. Because if you switch to gas, then you have got one
    ton of carbon left for every two tons that you avoided by
    switching away from coal. If you go to an efficiency program,
    then you do not have double the hit on coal.
        So I think there are a variety of things that can be done.
    Basically, those who want to preserve a certain amount of coal
    in our nation's energy supply should be advocating efficiency
    programs, should be advocating renewable energy programs, and
    should be advocating sending the market a signal that it makes
    sense to invest in technologies that will cleanup carbon from
    coal and remove the cloud of uncertainty that faces that fuel.
        Senator Jeffords. Senator Lieberman?
        Senator Lieberman. Thanks, Mr. Chairman. Thanks to the
    witnesses.
        Mr. Hawkins, in my opening statement I referred to the EIA,
    EPA testimony at the first of this committee's hearings on the
    Clean Power Act which I found misleading or mistaken, I say
    respectfully. One of the conclusions of it was that the
    resource cost to industry from the Clean Power Act went down as
    a result of the legislation but electricity prices went up.
    That is the way I read it anyway. I wonder if you could help
    explain that disparity.
        Mr. Hawkins. Sure. As an example, the EPA analysis of the
    Clean Power Act, with the efficiency and renewable programs
    called for by the legislation, concluded that there would be
    essentially a $3 billion saving in production costs of
    electricity compared to business as usual but that the prices
    charged to consumers would go up. Now how did they reach that
    conclusion? Well, basically, they assumed that the permits for
    emitting carbon would be given to the companies for free, but
    then their accountants would say, well, there is a value to
    these carbon permits and it is the marginal price of
    controlling carbon for the most expensive ton in the system, so
    every ton that we use in generating electricity we are going to
    charge to consumers, and it will not reflect our actual cost of
    production, it will reflect what we could have gotten on the
    market if we had not generated that electricity and sold the
    permit to someone else.
        They assume that the Congress in its wisdom is going to let
    the utility generators pocket about $50 billion that rightfully
    belongs to the public. We do not think that is a sensible
    assumption and it is not consistent with the provisions in the
    Clean Power Act. But that is what they assumed. So, if you
    think Congress is going to pass a bill that will allow
    basically the carbon permit profits to be kept by the utilities
    and passed on to consumers, then you conclude that there will
    be a price increase. But if you assume that Congress will find
    a way to avoid that kind of a windfall profit rip-off, then
    consumer bills will actually be lower because they will have
    smarter ways of using energy and reduce their household
    consumption.
        Senator Lieberman. I could not have said it better myself.
        [Laughter.]
        Senator Lieberman. I appreciate that analysis very much. I
    have too high an opinion of Congress to think that the result
    would be other than the one you have foreseen.
        Mr. Hawkins. Same here, Senator.
        Senator Lieberman. Thank you. Mr. Tipton, you testified
    that the levels of reduction in the Clean Power Act are a
    critical step toward protecting our national parks. Others
    obviously have said they are too strict. I wonder whether there
    is a way in which you can help us, particularly as we go into
    the next phase of consideration and head toward markup, what
    levels are necessary to protect our national parks? To put it
    more directly, is there much room to move from the levels that
    we have posited in the Clean Power Act as it exists now?
        Mr. Tipton. Let me answer that this way, Senator Lieberman.
    First of all, one of the provisions of the Jeffords-Lieberman-
    Collins bill that we really like is the fact that it says that
    the aging coal-fired power plants that were exempted 1977 will
    no longer be exempted under this date, the so-called birthday
    provision which would require those plants, once they reach the
    age of 30 or 5 years after this act was passed, would have to
    be cleaned up.
        The total pollution reduction that is necessary to protect
    national park vistas, national park air quality and the health
    of park visitors, it varies park by park. The EPA and the
    National Park Service are now looking hard at the Great Smokey
    Mountains, Shenandoah, and other parks. But they believe that
    the ultimate reduction from both existing sources and also new
    sources may require in some cases a 90 percent reduction in NOx
    and SO2. That is not uniform by any stretch. The
    Navajo plant, which is a coal-fired plant near Grand Canyon
    National Park, was cleaned up under a court order and the
    reduction was in excess of 90 percent. But in that case, of
    course, we are talking about very pristine air quality and
    highly valued air quality. So it would not be the same for
    every park.
        Senator Lieberman. Thank you. That is a helpful answer. I
    hope that we will stay in dialogue as we go forward.
        Mr. Kirkwood, in July of last year the EPA put out an
    analysis of another piece of legislation aimed at reducing
    power plant pollution, S. 172. Very interesting. Based solely
    on the benefits of further reductions in NOx and
    SO2, EPA found that the bill would result in
    tremendous environmental and public health benefits, this is
    the EPA analysis, including more than 10,000 avoided premature
    deaths annually, more than 5,000 avoided new cases of chronic
    bronchitis, and more than 3,000 avoided respiratory/
    cardiovascular hospital emissions annually, more than 17,000
    avoided cases of acute bronchitis, 2,000 fewer asthma emergency
    room visits, and so on. Has there been any similar analysis
    done thus far, I know it has not been done by EPA, but, for
    instance, by the Lung Association, regarding the Clean Power
    Act?
        Mr. Kirkwood. No, Senator, we have not done anything
    ourselves. But there are other studies that have been done by
    the Health Effects Institute, the studies that Joel Schwartz
    did. There is a building body of evidence that now supports the
    adverse health effects, most of it is epidemiological data that
    extrapolates out into the population the number of deaths, the
    number of hospital admissions and so forth. I think in recent
    years that body of knowledge has increased substantially and
    that is really information that I think needs to drive the
    decision before this committee.
        Senator Lieberman. I agree. I hope we can get it either
    from organizations like yours or from the EPA.
        Mr. Kirkwood. I appended to my testimony that was submitted
    citations on a lot of studies that we have looked at that
    support these kinds of conclusions.
        Senator Lieberman. Great. My time is up. I think I am going
    to have to submit a question to you, Mr. Banig, in writing.
    Basically, it is to ask whether caps on carbon dioxide--
    obviously, I understand your concern and respect it as to the
    impact of legislation on coal miners--but whether it is not
    possible that the caps on carbon dioxide such as those involved
    in this bill would drive technology in a way that would
    actually in the long run be a boost to the utility of coal or
    the degree to which coal is used in our country. I happen to
    cosponsor with Senator Bird a bill which is aimed at creating
    funding to create breakthrough technologies that will let coal
    survive, and I wonder whether the cap would do the same.
        Mr. Banig. The problem with carbon--a little history. Going
    back to the acid rain days in the 1980's, UMWA with Senator
    Mitchell came up with a compromise, what we thought was very
    good legislation to actually install pollution control devices,
    scrubbers, in about 25 or 30 large utility plants in this
    country. Part of that was putting a fee on utilities, coal
    generation, that would help pay for this technology. We wanted
    to devote then a part of that money for carbon research. That
    goes all the way back to 1988.
        The problem that we have with carbon today is quite simply
    that the technology does not exist. It takes time to develop
    this technology. As was said earlier today, you could put
    technology on a 5 megawatt plant, it is a little bit different
    putting it on 1,000 megawatt plant. We strongly support Senator
    Bird's legislation; I am glad that you are cosponsoring it. But
    quite frankly, that technology needs time to be developed. The
    timeframes that we are looking at with this legislation do not
    allow that to happen.
        Senator Lieberman. Thanks for that answer. I would like to
    continue that conversation. Thanks, Mr. Chairman.
        Senator Jeffords. Mr. Banig, according to a May report from
    the National Coal Council, there is commercially available
    technology, IGCCC, integrated gasification coal combined
    cycling, that could repower old coal plants and reduce carbon
    dioxide emissions by as much as 20 percent, sulfur dioxide and
    nitrogen dioxide 95 percent, and mercury by 50 percent. This is
    available right now as I understand. Were you aware of this
    report? It seems like that should reduce your concern about job
    losses. Do you believe the National Coal Council on that?
        Mr. Banig. I am vaguely aware of that report. On certain
    plants that might be the case. But again, as I alluded to
    earlier, we have to look at this on a plant by plant basis. For
    some plants it is not feasible to put in technology,
    particularly peaking plants. Again, we have to look at that on
    a case by case basis.
        I would also like to point out that what we have
    recommended includes some pretty progressive steps in reducing
    SO2 and NOx and mercury. And through repowering, if
    we increase the efficiency of the plant, yes, we are going to
    reduce the carbon at the same time. But to do the scale of
    carbon reductions that we are talking about in this bill will
    require the installation of technology to sequester or remove
    carbon from coal gases. It quite simply does not exist today on
    the scale that we need it in this country.
        Senator Jeffords. Any response from anyone else?
        [No response.]
        Senator Jeffords. All right. Senator Voinovich?
        Senator Voinovich. Mr. Kirkwood, in your testimony you say
    the State and local governments support the continuation of the
    new interpretation on the guidance of new source review. It is
    my understanding that the National Governors Association has
    called for the new source review program to be reformed and to
    achieve improvements that enhance the environment, increase
    energy production capacity while encouraging energy efficiency,
    fuel diversity, and the use of renewable resources. Is that
    different than your understanding?
        Mr. Kirkwood. Yes, Senator. Perhaps I should clarify what I
    said. I do not think that State and local governments support
    that. What I was saying is that initiatives have been taken in
    the legislature, for example in Illinois where legislation was
    introduced that was not passed, but there have been initiatives
    taken in the legislatures to move this forward. But I am not so
    sure there is local and State government support it, as witness
    the fact that the legislation did not pass in Illinois. But I
    see that developing over time because of pressure at the State
    level.
        Senator Voinovich. I can tell you from my observation that
    unless some resolution of that issue occurs, we are going to be
    in limbo in terms of getting anything done. The utilities are
    not going for it and doing many things because they are
    concerned that it would trigger new source review. So you are
    not getting too much done in terms of the environment, and you
    are not getting much done to improve the efficiency of these
    plants.
        Mr. Kirkwood. Right.
        Senator Voinovich. One of the things that I am really
    interested in, and Mr. Kirkwood, you referred to the health
    aspects of this, Senator Lieberman in his comments talked about
    the EPA statistics, I have always been interested in just how
    reliable that information is. If we were to just shut down all
    of the coal-fired plants in the United States, what impact
    would that have on the public health statistics that you are
    talking about? And for Mr. Tipton, too. We know there are other
    sources of pollution that exist in this country today. And the
    question is, how much of the harmful effects that we are
    talking about today, you are talking about 31,000 deaths, that
    is pretty serious stuff, how much of that is attributable to
    power plant emissions, and how much of it is attributable to
    mobile sources that exist in a lot of these areas where you see
    this high ozone level?
        Mr. Kirkwood. That is a tough question, Senator. There are
    confounding variables that are involved in all of this and to
    isolate them one at a time becomes difficult. There are
    attempts being made to do that. I think the recent studies
    trying to correlate mortality with power plant emissions are an
    attempt to get at the question that you have raised, and there
    is some data that does make that correlation. Whether or not
    you shut down every power plant in the country, if that would
    eliminate all of these deaths, I cannot answer that because
    there are so many other variables. However, the more recent
    studies, the Abt study, there was a Harvard study done about a
    year ago that attempted to make the kind of a correlation that
    you are addressing that did quantify mortality with respect to
    power plant emissions, and, in fact, specific power plant
    emissions. Those studies I quoted in my testimony for further
    review.
        Senator Voinovich. I would like you to submit them to me. I
    would be interested in them.
        Mr. Kirkwood. I have them on the record, sir.
        Senator Voinovich. That is the other thing, Mr. Tipton, is
    I hear about the letter that Senator Thompson wrote that
    walking through the parks now is more dangerous than walking
    down the street of New York City in terms of one's health.
        Mr. Tipton. Well, one of the reasons that I think, and you
    have to ask Senator Thompson about this, one of the reasons I
    believe that he said what he said in that letter is that what
    we are starting to see in the Great Smokies, and people have
    told me this who have done this, is not only have people lost
    the aesthetic value of a 70-mile view from the top of
    Klingman's Dome, but they are beginning to worry about the
    health impacts of a vigorous hike on a summer's day with a late
    afternoon high ozone level and people are starting to switch to
    hike in the winter rather than the summer. And this is more
    than anecdotal evidence, it is what the Park Service is
    hearing. I am sure that both Senator Thompson and Senator Frist
    who visit the park frequently are aware of that.
        Two years ago, the Great Smokey Mountain Park had 52
    violations in 1 year of the Federal ozone standard. They had
    violations in March and as late as late October. In year 2000,
    I was in western North Carolina in early November and there
    were two violations of ozone standards. Now the weather was
    very warm, unseasonably warm, and it was very humid. But you
    did not see this kind of thing historically in the Smokies. You
    did not see it in the 1970's or the 1980's.
        It is not all coming from power plants, nor, I should say
    very clearly, are we as an organization saying that all coal-
    fired plants should be shut down or that fuel switching is
    necessary in all cases. We suspect it is a case by case
    approach. We know that coal-fired power plants in the southern
    Appalachian region are having a major contribution to sulfur
    dioxide levels and to a lesser extent nitrous oxides that are
    going into the park.
        Senator Voinovich. The point is this, that you believe that
    if this bill passes with all of the numbers in it and the
    timelines that it is going to have a dramatic impact on the
    environment in the Smokies?
        Mr. Tipton. We believe that if the best available retrofit
    technology regulations go ahead, which can be done under
    current law, and if this bill would assure that would happen,
    and if this bill's standards were imposed for NOx and sulfur
    dioxide, we believe it would greatly improve the air quality in
    the Great Smokies.
        Senator Voinovich. The problem that I think we have is to
    try and weigh these environmental benefits that are
    attributable to this legislation against the cost involved in
    implementing it and its impacts on the health of the economy.
    That is the real tough thing to try and reach. I think if we
    are going to get anywhere with this legislation, one group has
    got to recognize the health benefits, and I think the people on
    the health benefits side of it, the environmental side of it
    have to look at it also on the economic impact that this would
    have on the economy of places like my State, my region, and of
    the impact on the economy of the United States. Because if we
    just go to fuel switching and we drive up our costs, it will
    impact certainly on our manufacturing because one of the
    reasons why we are competitive in the global marketplace is
    because we have reasonable energy costs.
        Then to take it one step further and you go the global
    route, if we lose the jobs here and they go someplace else,
    what kind of environmental restrictions are they going to have
    in China or Russia or wherever else these jobs will go? In
    terms of global warming or whatever the case may be, have we
    enhanced the situation or have we made it worse?
        Maybe I am taking it to a much larger level, but I think
    these are some of the considerations that we need to grapple
    with if we are going to come out with something that is
    reasonable and fair and that really makes a difference.
        Senator Jeffords. Mr. Kirkwood?
        Mr. Kirkwood. I was interested in your comment earlier,
    Senator, about incentives. I do not know whether that issue has
    been looked at by the committee, but there may be incentives
    for the installation of control technology, tax incentives,
    accelerated depreciation or whatever, that might be blended in
    with this legislation that would help to mitigate against the
    problem that you have just outlined in terms of jobs and costs
    and things like that. I just raise that as a consideration.
        Senator Voinovich. I am cosponsoring a couple of pieces of
    legislation with Senator Bird to do that.
        Senator Jeffords. Mr. Hawkins, there do not seem to be
    serious technological, economic obstacles to achieving the
    reduction levels in the Clean Power Act. What would you say is
    preventing us from moving more swiftly toward enactment?
        Mr. Hawkins. Well, I think that there are interest groups
    that are focusing on short-term economic issues, and that is
    understandable. And it is the job of Congress to basically
    listen to those concerns but then to represent the greater
    public interest. And it is the job of groups like ours and
    others to present the clearest information possible. I think,
    frankly, part of this is just people getting geared up to fight
    with kind of old assumptions about what is possible, and once
    they get geared up to do the battle that way it takes a while
    for them to look over the horizon and figure out that, gee,
    there is a way to address our concerns and address the concerns
    that the environmental and public health community have as
    well. I think that is what we need to do.
        We need to recognize the power of energy efficiency, of
    renewable energy programs. We need to recognize the power of
    sending a market signal that controlling these pollutants
    actually adds value to an investment. As I was saying before,
    coal gasification, which you mentioned, right now it is not
    competitive with just building a new gas-fired power plant.
    Why? Well, in large part it is because the carbon capture
    potential of that technology is not valued by the marketplace.
    You can dump carbon for free, so why would anyone spend a
    dollar more to come up with a technology to reduce emissions.
        That is why we have to continue this discussion and try to
    get those facts out there so the people understand it, and then
    look for some leaders in the industry. The Clean Energy Group
    is a good example of a group of companies that has stepped
    forward and said, yes, we understand that for good business
    reasons controlling all four of these pollutants makes sense,
    we cannot do sensible business planning without it.
        Senator Jeffords. Mr. Tipton, you are nodding your head.
        Mr. Tipton. Well, I cannot say what David said better than
    he said it. But I can say something a bit different on the same
    point. And that is, it is kind of irrational to have a law, the
    1977 Amendments, which set up a prevention of significant
    deterioration, PSD, program for Class I areas and yet we allow
    this large number of coal-fired power plants that were built in
    the 1950's, 1960's, and 1970's to continue to operate without
    observing the same kind of level of emission control that we
    require today. That is itself the single biggest factor that is
    resulting in loss of visibility and some significant health
    detriments, and detriments to trees and plants and animals as
    well in our National Parks. That is not rational. We should
    have a system that requires everyone to attain a certain level
    of cleanup. The benefits would be tremendous to the National
    Parks and to our society.
        Senator Jeffords. Thank you.
        Mr. Banig, I just want to thank you for giving me a real
    good perspective on the impact in the coal industry. This
    committee is very concerned about that impact.
        I want to thank all of you for very excellent testimony. I
    have to run over for another vote, my exercise for the day. So,
    thank you all.
        [Whereupon, at 12:56 p.m., the committee was adjourned, to
    reconvene at the call of the Chair.]
        [Additional statements submitted for the record follow:]
      Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada
        Mr. Chairman, I want to begin by thanking you for holding this
    important hearing. We need to take a serious look at controlling all
    emissions from power plants.
        The health effects of polluted air range from asthma to lung cancer
    to heart disease and worse. Mercury deposited in lakes and rivers can
    bioaccumulate in fish. Each year about 60,000 children may be born in
    the United States with neurological problems as a result of their
    mothers' consumption of contaminated fish and seafood during pregnancy.
        Emissions from power plants also contribute to environmental
    degradation: power plants release one-third of nitrogen oxides and
    three-quarters of sulfur dioxide emissions in the US, and both
    pollutants cause acid rain. Some Senators would like to exclude carbon
    dioxide from caps on power plant emissions. However, carbon dioxide is
    one of the greenhouse gases contributing to global warming, and
    electric utilities account for one-third of U.S. carbon dioxide
    emissions. Mr. Chairman, global warming is already occurring.
        Seven of the ten warmest years in the 20th century occurred in the
    1990's, and warming in the 20th century is greater than at any time
    during the past 400-600 years. The environmental consequences of this
    warming are becoming obvious. Mountain glaciers around the world are
    receding, the Arctic ice pack has lost 40 percent of its thickness, and
    there is evidence that plants and animals are changing their behavior
    in response to shifts in climate.
        The human consequences of global warming may include: disruptions
    in agricultural production; more wind, flood, and drought damage;
    greater range of disease-carrying insects; and increases in respiratory
    illnesses and heat stress. These consequences will have real effects on
    public health and the U.S. economy.
        Mr. Chairman, we cannot ignore the impact of air pollution on our
    quality of life. I look forward to working with you and the committee
    to develop 4-pollutant legislation dealing with reducing air emissions,
    including carbon dioxide, from power plants.
                                   __________
     Statement of Hon. Howard Dean, M.D., Governor of the State of Vermont
        Thank you Mr. Chairman and members of the committee for this
    opportunity to share my thoughts regarding multi-pollutant legislation.
    I would like to applaud Members of Congress, especially the chairman
    and ranking member, for their leadership in tackling this issue of
    great importance for public health, the environment, and the economy of
    Vermont, other States in the Northeast and elsewhere. This is a good
    bill, and I appreciate the opportunity to speak about why the goals to
    be achieved through the bill are so important.
        While we have made great strides reducing air pollution since
    Congress enacted the Clean Air Act of 1970, much remains to be done.
    Power plants remain one of the largest sources of air pollution in the
    country. Electric utilities account for approximately one-third of all
    man-made emissions of mercury and particulate matter in our nation,
    one-third of all emissions of nitrogen oxides and carbon dioxide, and
    nearly three-quarters of all U.S. emissions of sulfur dioxide.
        As a doctor, I am particularly concerned about the fact that many
    areas of our nation still violate the health-based 1-hour standard for
    ozone and that many more will violate the new 8-hour ozone standard.
    This is occurring at the same time that a growing body of scientific
    evidence clearly demonstrates the many and varied adverse health
    effects associated with exposure to fine particle air pollution.
    Similarly, the long-term consequences of a continued buildup of toxic
    metals in the environment also represent a demonstrable health threat.
    For example, the threat posed by mercury deposition to pregnant women
    and their babies is both serious and preventable. In recognition of
    this threat the New England Governors and Eastern Canadian Premiers
    have embarked on an aggressive campaign to dramatically cut mercury
    emissions in our region. Our ultimate goal is the virtual elimination
    of manmade mercury emissions.
        Like public health, the environment also remains at risk from air
    pollution. Despite significant progress under the Federal Acid Rain
    Program, forests and aquatic ecosystems throughout much of the
    Northeast continue to suffer damage from acid rain. Recent findings
    from the Hubbard Brook Research Forest, the nation's oldest acid rain
    research effort, and parallel studies conducted by researchers in
    Vermont and other regions of the United States and Canada, demonstrate
    that we have a great deal of work left to do. Fifteen percent of the
    lakes in New England and over 40 percent of Adirondack lakes are either
    chronically or seasonally acidic. These conditions negatively affect
    fish and other aquatic life. Nearly one-quarter of Adirondack lakes
    surveyed in one study no longer support fish. In Vermont, 35 lakes have
    been deemed sensitive and impaired by acidification. On Camels Hump,
    one of Vermont's tallest peaks and the State symbol engraved on the new
    Vermont State quarter, researchers have studied the impact of acid rain
    for decades. Here, the red spruce canopy has been extensively damaged,
    and new growth red spruce is showing signs of acidic damage. Power
    plants are also the primary cause of regional haze, which reduces
    average visibility in the Northeast to only about one-third of the
    visual range typical of natural conditions.
        It is essential that your deliberations result in defining ``multi-
    pollutant'' as a minimum of four pollutants. Climate-altering gases
    such as carbon dioxide represent a significant long-term global threat.
    The possible impact of global climate change include widespread coastal
    flooding, immense changes in habitat for plants and animals, an
    increase in weather-related natural disasters, and, in Vermont,
    possible crippling impacts to our ski areas and maple sugar industry--
    potential devastating blows to our State's economy and culture.
    Scientifically and politically, it is clear that climate change is an
    issue that will not go away. As a nation, it is important that we both
    hold the line against future emissions increases and begin to actually
    decrease our contribution to the global burden of climate-changing
    pollutants. The New England Governors and Eastern Canadian premiers
    expect to achieve reduction in greenhouse gases to 10 percent below
    1990 levels by 2020. This bi-national regional plan adopted by the
    Governors and Premiers in August of this year, further established a
    long-term goal of achieving reductions of 75 to 85 percent below
    current levels to eliminate any dangerous threat to the climate. I have
    attached a copy of the adopted plan for your consideration.
        One way Vermont intends to meet its obligations under the bi-
    national regional climate action plan, and at the same time address
    energy issues in Vermont, is through my recently unveiled long-term
    energy initiative for Vermont. That plan promises to help Vermont meet
    its future electric energy needs by developing a clean, reliable and
    renewable energy infrastructure. In recent debates over national energy
    policy, some have questioned whether renewable generation, conservation
    and small-scale power can meet future electric power needs. Analysis of
    Vermont's particular needs and opportunities shows that renewable forms
    of energy, together with wise and efficient energy use do have the
    potential to meet our future demand--at low cost to consumers.
        Our initiative addresses issues that will be pressing on Vermont in
    the coming years. Although New England does not face an energy supply
    crisis right now, we have recognized for some time that increasing
    electric demand in Vermont will eventually require expanding supply. At
    the same time, Vermont utilities serve more than two-thirds of the
    State's electric demand with power from two electric energy sources:
    Hydro Quebec and the Vermont Yankee nuclear power plant. Both of these
    sources of energy are non-carbon based, however, both are time-limited
    and face uncertain futures. Not only are these sources of power both
    renewable and not carbon based, both are provided through long-term
    contracts, which provide power stability and cost certainty to
    consumers.
        New England as a whole is addressing its growth through the
    construction of large-scale natural gas-fired plants, with advanced air
    pollution control systems, concentrated in the high demand areas of
    southern New England. These plants are less carbon intensive than other
    thermal generation plants and they will protect the region from
    shortages resulting from lack of capacity--and from the kinds of
    consequences we saw in California. I am not convinced however that
    reliance on one fuel source makes sense for a variety of reasons, not
    least of which are possibilities of price spikes and supply
    disruptions. Consumers do not benefit from a speculative, single fuel
    approach to supplying power.
        In addition to these issues of supply, Vermonters have long placed
    a priority on environmental quality. Thus any solutions to Vermont's
    future power needs must take into account the large impact of electric
    generation on environmental quality, both at home and nationally.
        For these reasons I have made a commitment to meet increased
    electric consumption in Vermont by developing three Vermont-based
    alternatives to large-scale generation or purchased power. First,
    developing new sources of renewable energy. Second, expanding Vermont's
    already successful energy conservation efforts. And third, fostering
    small-scale, clean and efficient generation, particularly advanced
    technology combined heat and power projects at Vermont businesses and
    institutions.
        I will ask our legislature to appropriate funds this year for
    renewable energy incentives. These funds represent a step in a period
    of public support that is needed so the market for renewable resources
    can ultimately stand on its own. Policy initiatives such as a Renewable
    Portfolio Standard (a requirement that utilities include at least a
    threshold amount of renewables in their supply mix) will aid in moving
    from a period of subsidy to a fully functioning market that no longer
    requires public subsidy.
        The economic costs of our initiative may well be less than the cost
    of energy purchased in the market. When environmental and local
    economic benefits are taken into account, the economic analysis becomes
    even more favorable. For example, individuals and businesses
    participating in efficiency programs in Vermont have done so at a cost
    of approximately 2.6 cents per kilowatt-hour at a time when wholesale
    electricity supply costs about 5.2 cents per kilowatt-hour. And the
    carbon dioxide emissions avoided by these efficiencies equals taking
    2,100 cars off the road.
        Realizing this achievable vision strengthens our State and our
    country through diversification of our energy resources, significant
    economic benefits, and a reduction in the environmental consequences
    associated with meeting our electric power needs.
        Given that the Northeast is downwind from the rest of the nation,
    pollutants from many of our nation's most industrialized regions find
    their way to our corner of the country. Therefore, effective national
    legislation is essential to adequately protect the health of citizens
    and our environment.
        For all of these reasons, Vermont strongly supports the committee's
    efforts to draft comprehensive, meaningful legislation to reduce power
    sector emissions of NOx, SO2, mercury and carbon. Only a
    comprehensive approach addressing all four pollutants can give industry
    the investment and planning certainty it needs, while ensuring a
    reliable electricity supply and promoting a smooth transition to the
    mix of resources and technologies needed to sustain environmental
    progress and improve public health despite continued demand growth.
        Control programs for other pollutants, if they result only in the
    addition of smokestack controls will not achieve the needed reductions
    in CO2 emissions. Any program that excludes carbon cannot,
    at this point, provide industry with meaningful longer-term investment
    certainty they need, nor will it provide impetus for the new generation
    of renewable and advanced technologies that are needed in a carbon-
    constrained world.
        I believe that setting a cap on the amount of a pollutant that may
    be emitted and allowing trading of emissions between polluters as a
    means of controlling power plant emissions can have merit. Any so-
    called ``cap-and-trade'' program however cannot be a ``gimmick.'' It
    must be meaningful. In my view a meaningful program would provide a
    stringent cap, utilize market forces to achieve reductions, be based
    upon an open process and an informed public, include strong emission
    tracking and data reporting mechanisms, and be subject to strict
    compliance oversight and significant penalties in the face of
    noncompliance. To keep such a program relevant over time it would need
    to contain a review and revise provision to push the cap downward. This
    could be accomplished by authorizing the U.S. Environmental Protection
    Agency to adopt rules.
        I also believe it critical to include in a multi-pollutant power
    plant bill some of the fundamental cornerstone provisions of the Clean
    Air Act, such as requirements for the best available emission control
    technology on new sources. This particular provision carries out the
    adopted philosophy of Congress ``when building new, build clean.'' This
    policy has served the nation well since incorporated into the Clean Air
    Act of 1977 and must be upheld.
        It is absolutely essential to establish an emissions cap that
    requires deep reductions in the emissions of all four pollutants from
    the large number of grandfathered power plants that continue to operate
    in this country. These grandfathered power plants account for more than
    two-thirds of the carbon dioxide, three-quarters of the nitrogen oxides
    and mercury, and 80 percent of the sulfur dioxide emitted by all fossil
    fuel-burning utilities in the United States today. There is no
    compelling reason to continue exempting high-emitting power plants from
    applying proven control technology. I urge you to correct the faulty
    assumptions of the 1970 Clean Air Act that these plants would be
    retired by now and remove the exemptions that continue to allow these
    facilities to spew massive amounts of pollutants into the atmosphere--
    and ultimately into the lungs of our citizens. The time has come for
    these facilities to upgrade to current standards or close.
        In crafting a national policy for controlling power plant
    emissions, it is important that Congress remember that for every
    measure of pollution reduction there is a benefit to society. This
    notion is embodied in the Bi-National Toxic Strategy, which our
    government has entered into with Canada. This agreement states that for
    some pollutants the goal must be ``the virtual elimination of the
    contaminant.'' Power plant emissions contribute to many of the major
    environmental issues before us: mercury, fine particulate matter,
    global climate change, ozone pollution and regional haze. To address
    these threats to our environment and health, we must have a sound goal
    and sound policy direction. Virtual elimination is the right goal--a
    long-term goal--and new technologies and renewable sources of energy
    will provide the solutions for achieving this goal.
        I appreciate very much the work of this committee on this issue, I
    support this bill and I thank you again for this opportunity to speak
    with you.
                                   __________
    Statement of Gerard M. Anderson, President and Chief Operating Officer,
        DTE Energy Resources, on Behalf of the Edison Electric Institute
        Good morning Mr. Chairman and distinguished members of the Senate
    Environment and Public Works Committee, and thank you for inviting me
    here today. My name is Gerry Anderson and I am President and Chief
    Operating Officer of DTE Energy Resources, one of three major business
    units of DTE Energy Company. I am responsible for the company's more
    than 11,000 megawatts of generation and the associated fuel supply
    organization. I am also responsible for the company's subsidiaries
    focused on energy projects and services (DTE Energy Services), energy
    trading (DTE Energy Trading), non-regulated power generation (DTE
    Generation), coal marketing and transportation (DTE Coal Services), and
    biomass energy (DTE biomass Energy).
        DTE Energy Company is a Detroit-based, diversified energy company
    involved in the development and management of energy-related businesses
    and services nationwide. Its combined electric and natural gas
    utilities create a premiere regional energy provider.
        DTE Energy has regulated and unregulated subsidiaries involved in a
    wide range of energy-related businesses. The subsidiaries sell
    electricity, steam, natural gas, landfill methane gas, coal and
    metallurgical coke, and are involved in the management and development
    of energy-related businesses and services. In addition, DTE Energy
    affiliates are developing electric fuel cells for homes and
    automobiles, and other cutting-edge energy technologies. The company's
    growth strategy is focused on continued excellence of its core utility
    businesses, the development of non-regulated, energy-related ventures
    and investment in and development of emerging technologies.
        I appreciate the opportunity to address the committee on this
    important issue on behalf of the Edison Electric Institute (EEI). EEI
    is the association of U.S. shareholder-owned electric companies,
    international affiliates and industry associates worldwide. EEI's U.S.
    members serve more than 90 percent of all customers served by the
    shareholder-owned segment of the industry, generate approximately
    three-quarters of all of the electricity generated by electric
    companies in the country, and serve about 70 percent of all ultimate
    customers in the nation.
    I. EEI Supports The Concept Of Integrated, Comprehensive Multi-
            Emissions Legislation
        Let me state at the outset that EEI supports an integrated, multi-
    emissions approach that includes reform of the new source review (NSR)
    program that, if designed properly, can achieve important
    environmental, energy, and economic goals. Because of multiple,
    uncoordinated, and overlapping existing and proposed emission control
    requirements from Federal and State, and even neighboring countries
    (See Appendix A-1), the electric power industry faces enormous
    uncertainty as it tries to develop appropriate plans to develop new
    generation capacity, upgrade plants and add pollution controls. In lieu
    of the current regime, a reasonable, sound, and integrated multi-
    emissions strategy would streamline the regulatory process,
    accomplishing meaningful air quality benefits at a much lower cost,
    while protecting electric reliability. To achieve these results, EEI
    developed a set of criteria that must underlie a well-designed multi-
    emissions approach to accomplish important air quality objectives:

          Each and every element of a comprehensive multi-emissions
    approach, beyond just amounts and timing of emission reductions, must
    be resolved in order to achieve a balanced package.
          Emission reductions must be cost-effective and overall
    costs must be reasonable. Costs and cost-effectiveness are influenced
    by timing, flexibility, emissions reduction goals, and incentives.
          Maximum flexibility must be provided to achieve
    reductions. This must include unconstrained cap-and-trade programs to
    provide the greatest flexibility.
          Adequate time for compliance must be provided, with a
    timescale that should allow for orderly implementation of emission
    reduction measures. To the extent possible, the timing of reductions
    should accommodate development and deployment of new technologies.
          Regulatory certainty and stability are essential. A safe
    harbor provision is necessary to assure certainty. Multiple regulatory
    requirements and different schedules for SO2, NOx, and
    mercury should be eliminated, as well as uncertainty caused by NSR.
          Proper incentives should be provided to help facilitate
    emission reductions and to promote research, development, and
    deployment of technologies.
          Forced premature plant retirements are to be avoided as
    severe emission reductions can make some coal-fired plants uneconomic.
    Retirements can represent stranded investments.
          Fuel diversity must be maintained. In addition to other
    fuel sources, coal should continue to be a viable source for generating
    electricity.

        With respect to this last point, I want to emphasize that EEI
    believes fuel diversity--including the use of coal, natural gas,
    nuclear energy, oil, hydropower and other renewables, to generate
    electricity--must be maintained as a matter of national energy policy
    and national security. See Appendix A-2. A diverse fuel mix protects
    consumers and electric companies from fuel unavailability, price
    fluctuations, and changes in regulatory practices. Diverse fuel and
    technology options contribute to a stable, reliable and affordable
    energy supply over the long term.
        We need a national energy policy that takes advantage of energy
    resources available within our country. One of the most plentiful
    energy resources is coal, and more than 90 percent of U.S. coal usage
    is the generation of electricity. This valuable but underutilized asset
    can meet the nation's energy needs for about 250 to 350 years.\1\
    Nuclear power can also be a plentiful resource with a virtually
    unlimited supply potential. On the other hand, according to EIA, the
    known supply of natural gas reserves looks adequate only for 40 years,
    based on current consumption (and much less given anticipated increased
    consumption levels). And when one considers the multiple beneficial
    uses for natural gas, especially for residential heating, it is
    reasonable to examine its use for central station power generation when
    electricity from coal is available to do the same work. Coal-based
    capacity additions, which already look attractive, will look even
    better as technology drives down their costs.
    ---------------------------------------------------------------------------
         \1\ Energy Information Administration (EIA), Annual Energy Review
    1999, T, 11.2, T, 11.3.
    ---------------------------------------------------------------------------
        New technology puts coal-based plants in position to clear today's
    environmental hurdles. The lower emissions and higher efficiency of new
    coal-based plants exceed current environmental requirements for
    SO2 and NOx. Clean coal technology also addresses greenhouse
    gases. Because of increased efficiency, new technology coal plants
    produce significantly less carbon dioxide (CO2) per megawatt
    hour than old plants.
        I also want to return to a point mentioned in the criteria
    discussed above. The concern is with the new source review program. NSR
    is one of the most complex programs of the Clean Air Act. NSR presents
    a significant challenge to the safe, reliable, and affordable
    operations of the nation's current fleet of electric generating power
    plants. The NSR program generally has been successful in assuring that
    major new emission sources install the best available control
    technology (BACT). However, EPA's current reinterpretation of NSR, a
    departure from how the program had been understood and implemented for
    decades and contrary to the existing regulations, would prevent power
    plant operators at existing plants from making necessary improvements
    and undertaking routine maintenance and repair activities that allow
    reliable electricity generation, increase plant efficiency, and provide
    more electricity to meet our nation's energy demands. For example, due
    to the need to make safety and reliability maintenance repairs to units
    at our Monroe Power plant, we have the opportunity to increase the
    efficiency of those units and produce more electricity with the same
    fuel input, something good for the environment and our customers'
    costs. However, because of the present reinterpretation by EPA of the
    NSR regulations, as demand for electricity increase, we will have to
    limit the use of these units to the levels they have been used in the
    recent past and serve that increased demand with less efficient units.
    This does not help our customers or the environment. Therefore, while
    administrative changes are needed to address problems with the NSR
    program in the short term, a comprehensive multi-emissions legislative
    package must also include necessary long-term reforms of the NSR
    program.
    II. Specific Comments On S. 556
        As I have stated, EEI supports the concept of a well-designed
    multi-emissions bill provided it satisfies the criteria outlined above.
    S. 556, however, fails to do so, and thus EEI does not support the
    legislation. We are not alone in this respect. Other representatives of
    the electric power industry oppose S. 556. Many other industry sectors
    have expressed their strong opposition as well. The Bush
    Administration, in recent testimony before this committee, also has
    registered its opposition.
    A. S. 556 Should Recognize Progress That Has Already Been Made
        The electric utility industry has made remarkable progress in
    reducing air emissions. While coal use tripled between 1970 and 1999
    due to increasing demands for electricity, emissions from electricity
    generation from coal declined significantly--and will continue to
    decline--as a result of current emission reduction programs.
        Control programs for NOx (in 1996, 2000, and 2004) and
    SO2 (starting in 1995 and concluding later this decade) will
    reduce both emissions by about half from their highest levels.\2\
    Meanwhile, the SO2 emission rate\3\  will drop 80 percent,
    and the NOx emission rate will decline about 70 percent. In other
    words, only one-fifth as much SO2 and one-third as much NOx
    will be produced with each kilowatt of electricity. Perhaps more
    importantly, these programs already cap future power plant emissions.
    Additionally, existing control technologies at power plants reduce
    mercury emissions by an average of 40 percent. Since 1974, DTE
    emissions of SO2 have been reduced by 61 percent, NOx by 41
    percent, particulate matter by 89 percent, and mercury by 4 percent.
    During this same period, DTE's annual system generation rose 44 percent
    or more than 15 billion kilowatt hours.
    ---------------------------------------------------------------------------
         \2\Based only on EPA's acid rain program and the so-called NOx
    State Implementation Plan (SIP) Call regulations.
         \3\Measured by the pounds of emissions per thousand kilowatt-hours
    generated by coal.
    ---------------------------------------------------------------------------
        These advancements in the control and minimization of electric
    power emissions have resulted from significant capital investment in
    control technologies and a strong record of utility compliance. Over
    the past 25 years, the electric power industry has invested
    approximately $40 billion (capital) in technologies to reduce these air
    emissions. In addition, utilities spend $3 billion to $5 billion
    annually in operations and maintenance related to environmental
    performance. As we speak, DTE Energy, similar to many other companies,
    is spending approximately $630 million on NOx reductions to address
    ozone transport issues.
    B. S. 556 Will Compromise Electric Reliability
        According to a recent analysis conducted by the Energy Information
    Administration (EIA) of the U.S. Department of Energy,\4\  coal-based
    electricity generation is predicted to decline 38-42 percent on a
    national scale if S. 556 is enacted. In turn, natural gas-based
    generation is projected to increase 60 percent. The rapid fuel
    switching--in this case the substitution of natural gas for coal--that
    would occur as a result of S. 556 could produce short-term power supply
    interruptions. According to EIA, ``[T]he annual increases in production
    [of natural gas] required between 2005 an 2010 would be near record
    levels, representing a serious challenge for the industry--it is far
    from certain that the power sector would be able to move from
    dependence mostly on coal to dependence on natural gas and renewables
    in a relatively short time period without encountering supply
    problems.''
    ---------------------------------------------------------------------------
         \4\All references to EIA in this section are taken from its
    October 2001 report, Analysis of Strategies for Reducing Multiple
    Emissions from Electric Power Plans with Advanced Technology Scenarios.
    ---------------------------------------------------------------------------
        EIA also cautions that stringent emissions reductions like those
    proposed in S. 556 would require large amounts of pollution control
    equipment to be installed at power plants around the country over a
    very short period of time. Consequently, ``system reliability could be
    of particular concern during the period when a large amount of
    emissions control equipment would have to be added.'' In effect,
    construction, operation, and maintenance of these new control
    technologies will mean more ``down time'' for existing power plants,
    and in some cases multiple power plants in the same region severely
    impacting the availability, cost, and reliability of electric power.
    Consumers could face electricity shortages during the lag between the
    closing of these facilities and the siting and construction of new
    generation, resulting in increased prices and reduced reliability.
        Furthermore, due to regional electric transmission constraints, it
    will be difficult, and in some areas impossible, to import the electric
    power necessary to meet demand while coal-based generation is fitted
    with new emission controls, or replaced with gas-based generation. The
    strain of re-routing electric power to serve areas impacted by the
    shutdown, restoration, and maintenance of power plants could further
    compromise the reliability of the nation's electric power grid. This is
    a particular concern in Michigan where due to our peninsula nature
    there is already limited external transmission access that the State is
    trying to address.
        S. 556 does not allow sufficient time for the major construction
    activities associated with installing necessary control technologies.
    The Clean Air Act Amendments of 1990 gave the utility industry 10 years
    to comply with the acid rain requirements for SO2 and NOx.
    S. 556 calls for much more stringent reductions for SO2,
    NOx, and mercury over a much shorter time period. Many of the plants
    will also be forced to apply the most advanced technologies over this
    short timeframe, even though many of the technologies are yet unproven
    and still in the introductory phases of development. As EIA observed,
    ``[T]he evolution of new technologies is unpredictable, and Hg
    [mercury] emissions control technologies are relatively new and
    untested on a commercial scale.'' Mercury is a particular concern to
    DTE Energy because we are such a large burner of western low sulfur
    sub-bituminous coal. Mercury emissions from such coal is lower and in
    an elemental form which minimizes environmental impact. However,
    elemental mercury is extremely difficult to remove. With a 90 percent
    reduction requirement by 2007, we do not know how we could continue
    burning this fuel.
        In addition, the short timeframes for compliance mandated by S. 556
    will drive manpower and material shortages, unnecessarily increasing
    compliance costs and further impact reliability. In fact it now appears
    that short timeframes, manpower and material availability, and other
    factors have greatly increased compliance costs. For example, earlier
    estimates of $60/kW for SCR capital costs have been overshadowed by
    publicly announced costs above $100 kW. It is notable that these much
    higher costs are being incurred for various company's' first SCR
    installations, which are being undertaken at facilities where SCR would
    be most cost-effective. SCR applications in less-optimal circumstances
    are costing well above $100/kw.
    C. S. 556 Will Result In Significant Adverse Economic Impacts To Both
            Industry and Consumers
        While claims have been made that the reductions called for in S.
    556 will be cost-effective with available technology, a closer look at
    the numbers reveals that enormous costs will be imposed on the utility
    industry and its customers. In its October 2001 report (referenced
    earlier), EIA estimates that the cumulative costs (2001 through 2020)
    for S. 556 will be $177 billion. EIA estimates that the price of
    electricity will be 33 percent higher in 2020. EIA also noted that
    electricity prices could be substantially higher if natural gas prices
    turn out to be higher.
        Because of the integral role that low-cost and reliable energy
    plays in our economy, and our lives, the influence of S. 556 goes well
    beyond the utility industry. In the case of S. 556 the combination of
    increased costs of production and decreased household income will lead
    to significant impacts on the production of non-energy goods, extending
    the effects of S. 556 well beyond the electricity sector. Energy-
    intensive industries will be especially hard hit by the rise in energy
    costs. A broad cross-section of service industries will absorb a large
    loss in output, although in percentage terms such industries are less
    affected than other industries due to their relatively low energy use.
    In addition, exports of goods will fall as U.S. firms lose
    competitiveness internationally as a result of higher costs of
    production.
        All regions of the country would bear economic losses if S. 556
    becomes law. However, the economic losses are not expected to be
    distributed evenly across the regions within the U.S. The economic
    burden of S. 556 will vary across States/regions in the U.S. because
    the industries most likely to be most affected (coal mining, oil and
    gas extraction, and the energy intensive industries) are not evenly
    spread across the country. Thus, those regions where these industries
    make up a disproportionate share of the economy, relative to the U.S.
    as a whole, will be likely to incur a disproportionate share of the
    losses. The impact of S. 556 on energy prices would have important
    implications for the manufacturing base of the U.S. economy that is
    unevenly distributed across the nation. Some regions like the East
    North Central, and individual States within regions (e.g., Michigan),
    will shoulder a significant portion of the burden on manufacturing
    firms.
    D. S. 556 Mercury Reduction Targets May Be Impossible to Meet
        There is no single control technology that can effectively remove
    all forms of mercury. Mercury control options are highly dependent on
    the existing power plant's design and operating characteristics and the
    fuel used. Potential mercury emission reductions are unique to each
    unit.
        The characteristics of the coal-based plant that most greatly
    affect emissions of mercury and the type of control technology used
    include: the mercury content and other chemical aspects of the coal,
    the design of the particulate collection devices, and the design of the
    flue gas treatment systems. For some plants, mercury emissions
    reductions from 70 to 90 percent may be impossible to achieve. As
    indicated earlier, this is a particular concern to DTE Energy because
    of our large reliance on western low sulfur sub-bituminous coal. The
    only full-scale demonstration of mercury control on a coal-based
    utility boiler lasted just 7 days and produced sustained mercury
    reductions of only 80 to 85 percent under well-controlled and
    supervised conditions. Long-term testing may reveal coal-type and plant
    operation restrictions with this technology. There exists no proven
    technology to control mercury emissions from oil-based power plants.
    Also, since no reliable monitoring technology for mercury has been
    developed, there is still considerable uncertainty in the measurement
    of mercury emissions and/or reductions.
        Research is ongoing to improve the understanding of mercury
    combustion chemistry and physics, and to find ways to reduce mercury
    emissions in the most efficient and cost-effective manner possible.
    Other technologies (including advanced coal washing, the use of
    alternative sorbents, systems to recycle activated carbon for reuse,
    and systems to control NOx, SO2, and mercury emissions
    together) are in various stages of research and development. In fact,
    full-scale demonstrations of mercury control technologies at individual
    power plants are just beginning and will not be completed for 2 to 3
    years.
        Requiring a 90 percent mercury emissions reduction by 2007, as
    required by S. 556, would cause significant fuel switching from coal to
    natural gas. This is inconsistent with national energy policy
    objectives because it will limit fuel choices, impede the construction
    on new power plants, and increase the cost of electricity. The
    excessive reduction requirements and short timeframe also would lead to
    the installation of a large amount of mercury retrofit control
    technologies and other pollution control equipment, the actual mercury
    emissions reduction potential of which is as yet still unclear.
        Notwithstanding the practical problems with S. 556's requirement of
    90 percent mercury reduction from current emissions levels will be very
    expensive to attain. Economic analysis by EIA and the electric utility
    industry show that the mercury component of S. 556 would cost more than
    both the NOx and SO2 components combined. Best current
    estimates by the Department of Energy are about $5-$8 billion annually,
    in addition to the cost of other emission controls. Again, these costs
    are based on emerging control technologies, which are relatively new
    and untested on a commercial scale.
        Compounding these problems is the fact that S. 556 does not allow
    trading for mercury emissions. Opposition to mercury emissions trading
    centers on concerns about potential hot spots, where mercury emissions
    might not be reduced or could even increase as a result of emissions
    trading However, there are several reasons why this should not be
    concern:

          Based on 5 years of real world experience, studies of the
    SO2 allowance trading program by EPA, the Environmental Law
    Institute, and Resources for the Future demonstrate that trading did
    not significantly change where SO2 reductions actually
    occurred.
          A July 2001 EIA report found that controlling mercury
    emissions through a cap-and-trade program does not affect the regional
    distribution of emissions.
          Electric power generation in the United States currently
    accounts for about 20 percent of the mercury emitted from anthropogenic
    sources in the United States, northern Mexico, and southern Canada. If
    power generation sources reduced their emissions by 50 percent from
    current levels, then the utility contribution would be about 10
    percent. If trading then changed the power generation contribution in a
    region from 10 percent to 8 percent, or from 10 percent to 12 percent,
    the difference would be environmentally insignificant.

        Rejecting mercury trading simply does not make sense and in fact
    can result in adverse consequences:

          It eliminates the significant cost savings that would be
    realized from mercury emissions trading. An analysis conducted for the
    EEI on behalf of the electric utility industry indicates cost savings
    from mercury trading of approximately $5 billion through 2020
    (comparing the same mercury cap levels, with and without trading).
          It creates a major compliance problem for sources that
    have already cut mercury emissions through past actions (e.g., fuel use
    or emissions control equipment). S. 556
          requires every source to reduce mercury by 90 percent
    from 1999 levels. S. 556 would not allow a source that has already
    reduced mercury to buy credits to meet the 90 percent target.
          It can erase the benefits of SO2 trading. The
    unit-by-unit 90 percent mercury reduction requirement outlined in S.
    556 can force plants to install a scrubber or switch to natural gas (in
    contrast to S. 556 allowing SO2 compliance through both low-
    sulfur coal and SO2 emission trading).
          It can reduce the incentive for utilities and vendors to
    innovate. A prohibition on trading will force today's technology to be
    installed throughout the industry, even though it will be in a rather
    early state of development as of the S. 556 2007 compliance deadline.
    E. S. 556's ``Modernization'' Program Is Counter To The Clean Air Act
        S. 556 takes a step backward in terms of the need for regulatory
    flexibility and efficiency in achieving air quality goals. In addition
    to the stringent emissions caps mandated in the bill, S. 556 also
    introduces a new concept, ``modernization,'' which would require every
    single power plant to install the most stringent controls, while
    producing little marginal environmental benefit. Many power plants
    would, in all likelihood, be forced to shut down due to the cost of
    emission control retrofits, even though those units are critical to a
    reliable and diverse electric supply. The ``modernization'' concept is
    currently not part of the Clean Air Act.
        The ``modernization'' program is a response to claims concerning
    ``grandfathered'' power plants, the popular definition of which is
    older plants that are uncontrolled or exempt from the CAA. However,
    there are no power plants in the United States that are exempt from the
    CAA. The CAA regulates power plants through State Implementation Plans
    (SIPs) to meet national ambient air quality standards (NAAQS). For
    decades, States have evaluated what emission reductions are needed to
    meet the NAAQS and then included these reductions in permits. In
    addition, the 1990 CAA amendments required all electric plants to
    address their SO2 and NOx emissions related to acid rain.
    Further, other new initiatives (NOx SIP call, ozone and fine particle
    standards, mercury, regional haze) will further reduce the gap between
    the emissions levels of new and older units. In reality, these programs
    are dramatically reducing all emissions everywhere. As indicated
    earlier over the last 26 years DTE Energy has reduced its particulate
    emissions by approximately 89 percent, SO2 approximately 61
    percent, and NOx approximately 41 percent with additional ongoing
    extensive further reductions. There has been no ``grandfathering.''
        The ``modernization'' program would effectively supersede the
    already stringent S. 556 emission caps for SO2 and NOx
    because:

          Most existing power plant facilities would be subject to
    ``modernization'' early in the program:

          80 percent of coal-fired units generating capacity will
        be 30 years old in 2007.
          92 percent of coal-fired units generating capacity will
        be 30 years old in 2012.
          EPA's current interpretation of a modification could
        bring most units into the program almost immediately.

          The sources to be modernized would be subject to strict
    new source performance standards (NSPS), best available control
    technology (BACT), or lowest achievable emission rate (LAER)
    requirements.

        Other problems with the ``modernization'' provision that I would
    like to note include:

          ``Modernization'' is a clear example of reductions for
    reductions sake, since health and environmental benefits are in no way
    linked to emission reductions by scientific studies, etc.
          To require ``modernization'' of many older plants, which
    have already been retrofitted with expensive emission controls to meet
    the requirements of programs like Title IV and SIPs but that do not
    meet the current definition of NSPS, BACT or LAER, would create small
    emission reductions while being cost prohibitive.
          Many small, older units would be likely to shut down due
    to the cost of emission control technology retrofits or due to site-
    specific physical limitations, even though these units are critical to
    a reliable and diverse U.S. electricity supply.
          The ``modernization'' program included in S. 556 is a
    return to an inefficient, costly, command-and-control approach to
    achieving emissions reductions, will effectively negate the market-
    based approach that has worked so well under Title IV, and will render
    moot the trading provisions included in the bill.
    F. Legislation Must Not Include Mandatory CO2 Reductions
        EEI opposes regulation of carbon dioxide (CO2) and other
    greenhouse gases as pollutants under the Clean Air Act or other
    statutes. Because there is currently no cost-effective control
    technology for greenhouse gas emissions, compliance with stringent,
    mandatory targets and timetables such as those contained in the Kyoto
    Protocol would cause massive fuel switching in the electric utility
    industry from coal to natural gas,\5\  which would be very expensive
    and increase electricity prices.\6\  It also would further exacerbate
    EEI's concerns, noted above, about fuel diversity.
    ---------------------------------------------------------------------------
         \5\Under a Kyoto Protocol-type scenario, coal would decline from
    50 percent of electric generation to as low as 13 percent in 2010,
    while natural gas would rise from 25 percent to 50 percent in the same
    timeframe. Research Data International, Inc., U.S. Gas and Power Supply
    under the Kyoto Protocol, Vol. I at 1-9 (Sept. 1999).
         \6\A recent EIA report (which actually understates costs because
    mercury had not yet been analyzed) found that reductions in sulfur
    dioxide, nitrogen oxides and CO2 consistent with recent
    legislative proposals would increase electricity prices by 17-33
    percent in 2005, and by 30-43 percent in 2010. EIA, Analysis of
    Strategies for Reducing Multiple Emissions from Power Plants: Sulfur
    Dioxide, Nitrogen Oxides and Carbon Dioxide xvii, 27 (Dec. 2000). The
    bulk of the cost increases are due to CO2restrictions.
    ---------------------------------------------------------------------------
        On March 13, 2001, President Bush wrote to four Senators stating
    his preference for an appropriate multi-pollutant strategy addressing
    SO2, NOx and mercury emissions but also stating that the
    Federal Government should not ``impose on power plants mandatory
    emission reductions for carbon dioxide, which is not a `pollutant'
    under the Clean Air Act.'' In testimony before this committee several
    weeks ago, U.S. EPA Assistant Administrator for Air Jeff Holmstead
    reiterated the Administration's strong opposition to including
    CO2 reductions in any multi-emissions bill. In his testimony
    Mr. Holmstead stated that greenhouse gas emissions ``should be
    addressed in the context of climate change, which is being undertaken
    by the President's Cabinet level working group.'' EEI agrees with the
    President's CO2 policy and believes it to be sound from
    policy, legal and scientific perspectives.
        Instead of mandatory regulation of CO2, the government
    should consider working with industry to develop successors to the
    highly successful, voluntary Climate Challenge program. The utility
    Climate Challenge program reduced, avoided or sequestered 124 million
    metric tons of CO2-equivalent (MMTCO2E)
    greenhouse gases in 1999, and according to the Department of Energy
    (DOE), utilities were projected to reduce, avoid or sequester 174
    mmtCO2E greenhouse gases in 2000.
        A robust, enhanced, national voluntary climate initiative should
    consist of these major elements:

          The program should complement overall U.S. energy policy
    and the Framework Convention on Climate Change. It should include all
    sectors of the economy.
          In the near term, the climate initiative should further
    an appropriate national policy objective, such as reducing greenhouse
    gas/carbon intensity. The Federal Government would facilitate the
    initiative by policies, laws and incentives, including those that
    encourage full flexibility for offsets, emission credits and trading
    programs.
          Further mitigation of greenhouse gases in the medium to
    long term would result from the development and application of more
    energy-efficient, cost-effective technologies for energy and
    electricity supply, transmission and distribution, and end use that
    supports a reliable and affordable energy supply.
          A climate technology research, development, demonstration
    and deployment (RDD&D) program is needed to ensure that cost-effective
    technologies are developed over the long term. Most experts believe
    that higher levels of funding and greater international cooperation are
    needed over at least the next two decades in order to address long-term
    technology RDD&D needs properly. America needs both a long-term climate
    technology strategy--which focuses on greenhouse gas emission
    reductions and offsets--and a long-term energy technology strategy that
    addresses energy supply and demand issues as well as helps to reduce or
    offset greenhouse gases. Long-term climate technology strategies and
    long-term energy technology strategies are contained in both S. 1294--
    sponsored by Senators Murkowski, Craig, Hagel, Domenici, Roberts and
    Bond, and S. 1008--sponsored by Senators Byrd and Stevens.
        Among the advantages of a national voluntary program are that: 1)
    it would address all sectors of the economy, not just the electric
    utility industry (which comprises about \1/3\ of U.S. emissions); and
    2) it would facilitate trading and offsets projects with other sectors
    of the economy, such as forestry and farming.
        In addition to the Federal Government incentivizing and
    facilitating the enhanced voluntary program by initiating new policies
    and regulations, Congress will likely need to enact legislation
    establishing:

          National goals in terms of an appropriate national policy
    objective, such as reducing greenhouse gas/carbon intensity, with a
    long lead-time sufficient to avoid the premature turnover of capital
    stock. A national policy objective of reducing greenhouse gas/carbon
    intensity would be consistent with the President's National Energy
    Policy, which has a priority recommendation ``to improve the energy
    intensity of the U.S. economy as measured by the amount of energy
    required for each dollar of economic productivity.'' National Energy
    Policy (May 2001), App. One. Reducing greenhouse gas/carbon intensity
    would also be consistent with S. 1294. Importantly, reducing greenhouse
    gas/carbon intensity would be consistent with economic growth, which
    will required additional electric generation facilities as well as
    additional transmission lines and capacity.
          Mandatory reporting of greenhouse gas emissions annually,
    as well as a national registry based on the U.S. national inventory and
    the mandatory reports.
          Baseline protection and safe harbor protection.
          Realignment of the current Federal R&D budget ($50
    billion) and capital infrastructure spending ($120 billion) affecting
    climate change, including: 1) long-term climate technology RDD&D and 2)
    incentives for voluntary commitments by industry (i.e., participation
    incentives) and incentives for industry greenhouse gas actions (i.e.,
    greenhouse gas action incentives).

        With regard to timing, as previously noted, long lead times are
    needed for the electric utility industry to avoid the premature
    retirement of capital stock. In addition, any national goal or policy
    objective embodied in legislation should be based on an appropriate
    baseline, such as the year of enactment of legislation or some future
    year, not a historical artifact such as 1990.
        With regard to technology, climate change is a long-term issue
    that, as previously noted, will require a transition in the medium to
    long term for cost-effective climate technology RDD&D to develop. There
    is no technological ``silver bullet'' or ``magic bullet,'' such as a
    carbon scrubber, for CO2. The Department of Energy and other
    government agencies, as well as private firms, are currently engaging
    in RD&D of carbon capture, storage and disposal of CO2 from
    stacks. We support this R&D effort, but believe that the government
    should be budgeting as much as $500 million annually for 10 years of
    R&D and 5 years of deployment in order to jump start the implementation
    of cost-effective and feasible technology.
        Ultimately it may take a menu of technological options to address
    greenhouse gases in the long term. The government has supporting and
    partnership roles to play, but it should not put all of its
    technological eggs in one basket, regardless of whether the technology
    is integrated gasification combined cycle (IGCC); carbon capture,
    storage and disposal; clean coal technologies; etc. In the medium to
    long term, any number of cost-effective technologies may emerge,
    including clean coal technologies; IGCC (particularly in the 2012-2018
    timeframe); renewables; nuclear; forestry and soils offset projects;
    hydrogen and fuel cells; and technologies that we are not now even
    aware of. The nation's energy needs and security are well served by
    fuel diversity in electric generation supply, and that statement is
    true in the greenhouse gas context as well as other contexts.
        At DTE Energy we strongly support continued research and technology
    development to facilitate a good long-term policy/program to address
    the global climate issue. We support EPRI research, we are a member of
    the PEW Center on Global Climate Change Business Environmental
    Leadership Council and we recently joined the Chicago Climate Exchange
    to develop a GHG trading program. We support distributed generation and
    have made significant investments in fuel cell development through the
    partnership formation of Plug Power and believe that hydrogen based
    energy is a likely long term solution. In the short term, we strongly
    support taking reasonable steps that make sense to address the issue.
    We support preservation of rainforest in Belize, in conjunction with
    the Michigan Department of Natural Resources we have planted nearly 20
    million trees in Michigan and with the strong operation of our Fermi
    nuclear plant we avoid further emissions of carbon dioxide. Finally, we
    have a subsidiary, DTE Biomass, that develops landfill methane gas to
    energy projects across the country (approximately 35 presently in
    service and others under development). Methane is approximately 21
    times more potent a greenhouse gas than carbon dioxide. All of these
    voluntary efforts have allowed us to significantly offset our
    increasing CO2 emissions as a result of increasing
    electricity demand.
    III. Conclusion
        If designed properly, a multi-emissions approach can meet important
    environmental, energy, and economic goals without threatening electric
    reliability or driving up electricity prices unreasonably. Such an
    approach would impose reasonable emissions reduction targets and
    timetables for SO2, NOx, and mercury, and would allow the
    industry to continue, on a parallel course, to reduce CO2
    emissions voluntarily through flexible, cost-effective, and market-
    based programs.
        A well-designed multi-emissions approach that regulates
    SO2, NOx, and mercury would:

          Accomplish meaningful air quality benefits;
          Maintain fuel diversity; Replace the current
    uncoordinated regulatory approach;
          Provide business certainty by establishing specific and
    reasonable emissions reduction requirements that remain unchanged for a
    definite period of time;
          Provide long term reform the NSR program;
          Allow flexible, market-based approaches (e.g., emission
    trading) to emissions reductions; and
          Substantially reduce compliance costs.

        S. 556 simply cannot deliver these results. A well designed,
    coordinated, and comprehensive integrated approach to the development
    and implementation of environmental regulations offers a better way to
    achieve air quality goals. With adequate time and flexibility, the
    electric power industry can continue to reduce emissions, provide
    affordable and reliable electricity, and meet the goals of energy and
    environmental policy. The electric utility industry and DTE Energy
    specifically is committed to working with the committee, and the
    Administration, to design multi-emissions legislation that fulfills
    these criteria.
                                   appendices

                                   __________
     Statement of Jeff Sterba, Chairman of the Board, President and Chief
            Executive Officer, Public Service Company of New Mexico
        Good morning Chairman Jeffords, Senator Smith, and distinguished
    members of the Committee on Environment and Public Works. Thank you for
    inviting me here today. My name is Jeff Sterba, and I am chairman of
    the board, president, and Chief Executive Officer of the Public Service
    Company of New Mexico. PNM is an investor-owned utility primarily
    engaged in the generation, transmission, distribution, and sale of
    electricity and in the transmission, distribution, and sale of natural
    gas within the State of New Mexico. Our electric generation is a mix of
    natural gas, coal, and nuclear. PNM's San Juan Generating Station, a
    coal-fired plant, is an ISO 14001 certified facility and is a charter
    member of EPA's Performance Track Program which recognizes a commitment
    to environmental excellence at the plant.
        I appreciate this opportunity to address the committee on behalf of
    PNM and the Edison Electric Institute (EEI). Today, I will provide the
    committee with PNM's views on multi-emission reduction proposals,
    emphasizing the need to consider the differences in air quality issues
    and power plant emissions in the West. PNM supports a streamlined power
    plant emission reduction program that improves air quality, provides
    the industry with regulatory certainty, and eliminates duplicative and
    ineffective regulatory programs. We believe that multi-emission
    reduction legislation is an opportunity to address the myriad of
    duplicative and ineffective environmental regulations that in some
    instances prevent us from even improving the efficiency of our power
    plants. Consequently, we support legislation that requires utilities to
    reduce emissions of SO2, NOx and mercury, and provides the
    operational certainty we need to meet growing demand for electricity.
        There are several reasons, however, why PNM cannot support a
    uniform, ``one size fits all'' emission reduction program as proposed
    in S. 556. First, and most importantly, the emission reduction levels
    mandated in S. 556 appear to be a policy response to environmental
    conditions that simply do not exist in our region of the country.
    Second, S. 556 would reduce fuel diversity and operational flexibility,
    thereby jeopardizing system reliability and our ability to provide the
    power needed for continued regional (and national) economic growth.
    Third, S. 556 would impose all of these costly requirements on top of
    all of the existing Clean Air Act authorities. It would not grant
    industry any relief from the overlapping, burdensome requirements of
    the Clean Air Act or provide industry with the flexibility and
    certainty that are necessary to meet the country's growing energy
    demands.
    I. Air Quality Issues Are Different in the West
        The main air quality challenge in the West related to power plant
    emissions is visibility impairment in National Parks and Wilderness
    Areas. There is not a single non-attainment of National Ambient Air
    Quality Standards for ozone or fine particles (PM2.5)
    resulting from power plant emissions. The pollutant of interest for
    visibility protection is SO2. Western power plants are
    already well controlled for SO2 with emission rates much
    lower than the emission rates from power plants in other regions of the
    country. Figure 1 indicates the SO2 emission rate in the
    West and the national SO2 emission rate.
        Additionally, in response to the recently promulgated regional haze
    rule, new regional SO2 emission limits have been developed
    as part of a collaborative, regional, stakeholder-based consensus
    process known as the Western Regional Air Partnership (WRAP). The WRAP,
    consisting of State air regulators, environmental groups, Federal land
    managers, EPA, industrial sources and power companies, developed
    SO2 emission limits that responded to real-time air quality
    conditions we face in the western United States. It is PNM's view that
    any Federal multi-emission reduction proposal should embrace the WRAP's
    work with respect to SO2 as opposed to overlaying additional
    reductions to respond to issues in other regions of the country.
        With respect to NOx, again the emissions from Western power plants
    are much lower than emissions from other power plants. Figure 2
    indicates the NOx emission rate in the West and the national NOx
    emission rates. What is more, according to work done by the Grand
    Canyon Visibility Transport Committee (GCVTC), NOx emissions from power
    plants have very little impact on visibility impairment in the western
    National Parks and Wilderness Areas. Finally, with the exception of
    California--which does not have a single coal-fired power plant--the
    western States have very few areas that are in non-attainment status
    for ozone. Ozone non-attainment areas in the country are shown in
    Figure 3. In western non-attainment areas, the non-attainment results
    from transportation sources and not power plant emissions. Simply put,
    the ozone non-attainment issues in other parts of the country that are
    a major factor justifying further NOx emission reductions from power
    plants are not present in the West. PNM strongly believes that
    electricity consumers in the West should not be required to pay for the
    installation of expensive retrofit controls to reduce NOx emissions
    that would result in no meaningful environmental benefit.
        Concerning mercury, it is important to note first that there are no
    demonstrated health problems in the West associated with mercury
    emissions. Western coal-fired power plants burn primarily sub-
    bituminous coal that has a lower mercury content than coal burned in
    other regions. In addition, mercury emissions from western sub-
    bituminous coal are extremely low to begin with, and are primarily
    elemental mercury as opposed to particle-bound mercury or ionized
    mercury. Figure 4 shows mercury emissions nationwide and in the West.
    In considering mercury control requirements, please keep in mind that
    while scrubbers are effective in controlling some forms of mercury,
    they are not effective in controlling elemental mercury. Thus, it
    cannot be assumed that mercury emission reductions achieved by the
    application of technology to eastern (bituminous) coal also will be
    achieved by use of the same technology on western (sub-bituminous)
    coal.
        The West does not differ from other parts of the country with
    respect to carbon dioxide emissions in the same way that it does with
    respect to SO2, NOx and mercury. However, since 1990, the
    West has enjoyed substantial growth, most of which has been supported
    by increased generation of electricity from fossil fuel plants.
    Similarly high rates of growth in demand for electricity are projected
    for the west looking out to 2010. Thus, requirements to reduce Western
    greenhouse gas emissions to levels existing a decade or more ago will
    be particularly punitive for the West.
    II. Multi-Emission Legislation Must Take Western Differences Into
            Account
        PNM generally supports multi-emission legislation that will set a
    cap and allow trading beneath this cap. Our experience has shown that
    this type of cap-and-trade system encourages innovation and allows
    companies maximum flexibility in achieving environmental goals cost-
    effectively. In a cap-and-trade system, allocations of emission
    allowances are critical. It is not enough to propose caps and let the
    allocations be determined though the political process. It is our view
    that multi-emission legislation needs to prospectively define how
    emission allowances are to be allocated.
        Concerning the individual pollutants, western considerations can be
    taken into account by:

        1. Building on the recommendations of the successful WRAP
    stakeholder process for SO2 reductions. Legislation should
    respect both the magnitude and the timing of the WRAP SO2
    emission reductions. We define this as the West receiving
    SO2 allocations in the amount of, and timed to correspond
    with, the WRAP's SO2 milestones.
        2. Insuring the costs associated with NOx emission reduction
    requirements are reasonably proportional to the potential benefits from
    those controls. An appropriate NOx emission level should be achievable
    with aggressive combustion controls, and should not require widespread
    deployment of expensive SCR technology. The schedule of reductions
    should be synchronized with the WRAP schedule for NOx reductions when
    the schedule is developed.
        3. Developing a mercury control program that accounts for the
    difficulty in reducing elemental mercury emissions with presently
    available control technologies and allows time for the development and
    demonstration of new technologies.
        4. Eliminating the overlapping and burdensome programs of the
    existing Clean Air Act such as NSR.
        With respect to carbon dioxide, PNM supports a voluntary program to
    minimize greenhouse gas emissions as part of a multi-pollutant bill.
    This program should build on the successes of the Energy Policy Act
    section 1605 reporting provisions, but should be strengthened and made
    even more credible. In the longer term, more steps may be needed to
    move the nation toward lower levels of greenhouse gases. The following
    principles should guide any such future steps :

          all sectors of the economy that produce greenhouse gas
    emissions, including the utility sector, should be covered;
          reasonable time to make emission reductions should be
    provided, so as not to disrupt electricity supply and harm our economy,
    rather than basing emission caps on some arbitrary past date;
          all varieties of flexibility mechanisms (such as trading,
    offsets, international projects, and the like) should be allowed in
    order to broaden compliance options and thus reduce costs; and
          broader technology research, development, and deployment
    that lowers or offsets greenhouse gas emissions must be pursued and
    factored into efforts to minimize greenhouse gas emissions.
    III. S. 556 Would Impose Emission Reduction Requirements That Are Too
            Severe and Fail to Take Western Differences Into Account
        In a little more than 5 years from now, January 1, 2007, S. 556
    would require 75 percent reductions of SO2 and NOx emissions
    from power plants. Carbon dioxide emissions from power plants could be
    no higher than levels in 1990. Finally, S. 556 would require a 90
    percent reduction in mercury emissions at each power plant, regardless
    of a plant's existing level of mercury emissions. These requirements
    are simply ``too much, too soon.'' The costs would be extremely high.
    In some cases, (for example, mercury control requirements) it would be
    impossible for PNM's plants to comply with the bill's requirements
    given the present and near-term state of demonstrated control
    technology.
        S. 556 also fails to recognize the fundamental distinctions between
    the West and the rest of the country with respect to current emission
    levels in the West and air quality issues in the West.
        For these reasons, PNM cannot support S. 556.
    Conclusion
        As a participant in the WRAP, PNM firmly believes that it is
    possible, through collaboration and hard work, to develop a plan for
    emission reductions that meets both air quality and energy needs. PNM
    pledges to work with this committee to develop multi-pollutant
    legislation that also can meet our objectives of a cleaner environment,
    and reliable, affordable electricity supplies.

                                     ______

      Responses of Jeffry E. Sterba to Additional Questions from Senator
                                    Jeffords

        Question 1. Please find enclosed a copy of the chart that EPA
    Assistant Administrator Holmstead brought with him to the committee's
    hearing on November 1, 2001. It shows the numerous regulations that the
    power sector will face in coming years. Has the Administration
    presented any of you with an estimate of the projected costs of
    industry compliance with those regulations? If so, what was it?
        Response. EPA staff has estimated, using modeling and policy
    assumptions with which we disagree, that what it calls ``business as
    usual'' (BAU) will cost approximately $12 billion annually in 2020.

        Question 2. Assuming EPA or industry has or can come up with a
    reasonably accurate baseline cost of those regulations, wouldn't it be
    most appropriate to subtract that baseline cost from the EPA analysis
    (done for the committee) to get an incremental cost estimate for S.
    556?
        Response. Yes, if a reasonable accurate estimate could be
    generated. However, estimating the required reductions is virtually
    impossible. The outcome of future rulemakings is impossible to predict.
    Moreover, stakeholders who are dissatisfied with the outcome of
    rulemakings are likely to contest those results in the courts, likely
    resulting in delays.
        I believe that EPA staff's current estimate of BAU is not
    supportable. EPA has assumed emission reduction requirements and
    implementation dates for SO2 and NOx that are not
    supportable as an accurate representation of BAU. EPA's analysis also
    greatly overstates the future costs to industry of BAU. EPA's modeling
    approach appears to exaggerate the costs of the BAU case by assuming
    utilities have no foresight in how they decide to meet the numerous
    regulations facing them under the BAU scenario.

        Question 3. Out of all the emission reduction requirements that Mr.
    Holmstead identified (the mercury rule, the NOx SIP Call, the fine
    particulate standard, etc.) as probable in the next 2-5 years, which
    ones do you believe will be implemented, whether or not a multi-
    pollutant bill is enacted?
        Response. The NOx SIP Call is a final regulation that will be
    implemented in the next few years. The mercury MACT is scheduled to be
    proposed and finalized by December 2004. Compliance with the final
    regulations is currently scheduled for December 2008; however, the
    details regarding implementation have not been established. Reductions
    associated with a particulate matter or ozone National Ambient Air
    Quality Standards are uncertain and likely to occur much later than the
    next 2-5 years.

        Question 4. Could you tell us approximately how efficient are your
    current fleet of plants, by fuel type? How has that changed over the
    last 15 or 20 years?
        Response.

    ----------------------------------------------------------------------------------------------------------------
                                                                              Heat Rate 15 Years
                  Plant                      Fuel          Current Heat Rate          Ago           Percent Change
    ----------------------------------------------------------------------------------------------------------------
    San Juan Generating Station.....  Coal..............  10,700 BTU/kwh....  12,100 BTU/kwh....  11 percent
                                                                                                   decrease
    Four Corners Units 4&5..........  Coal..............  9,956 BTU/kwh.....  9,956 BTU/kwh.....  No change
    Reeves..........................  Gas...............  11,300 BTU/kwh....  11,300 BTU/kwh....  No change
    ----------------------------------------------------------------------------------------------------------------

        Public Service Company of New Mexico has ownership in Palo Verde
    Nuclear Generating Station. Since 1992, the capacity factor of the
    station has increased from 79 percent to 92 percent. This increase is
    due primarily to a decrease in the average annual refueling time which
    has gone from 125 days to 31 days.

        Question 5. Based on the EPA analysis from last week, it seems that
    company revenues could rise significantly under a 4-p future. For
    example, EPA said that the standard technology scenario with the 4-
    pollutant bill (Scenario A) would show electricity revenues of $84.5
    billion more than the reference case with no new controls. But, the
    incremental cost of the 4-P controls would only be $16.5 billion. That
    seems to leave a profit of $68 billion for the industry. Do you have
    any comments on those numbers? These numbers are based on the enclosed
    chart prepared by the national Wildlife Federation.
        Response. I am unfamiliar with this chart and its referenced
    source, and therefore I do not know the assumptions used to develop the
    information. I am concerned that one of the assumptions used is the
    out-of-date belief that utilities will be able to recover their capital
    costs associated with these new controls. This is most definitely not
    the case and furthermore is contrary to how the utility industry is
    moving forward. Finally, it is unfathomable to me how a costly control
    program would ever be a profit generator for my company or the industry
    generally.

        Question 6. The Clean Energy Group's position is that a flexible
    compliance approach to achieving an industry-wide CO2 cap at
    1990 levels by 2015 is not overly costly or burdensome. What are your
    specific concerns about some type of CO2 cap in a 4-p bill
    with such an approach?
        Response. The Public Service Company of New Mexico is not a member
    of the Clean Energy Group, so I do not fully understand why that group
    believes a cap at 1990 levels by 2015 would not be overly costly or
    burdensome. However, such a cap would be costly and burdensome to the
    electric utility industry as a whole. The Clean Energy Group only
    represents a small number of companies in my industry. In addition,
    there is a clear distinction between the fuel mix of the members of the
    Clean Energy Group and my company particularly with respect to the
    percentage of coal-fired generation.
        I have several specific concerns about a CO2 cap in a
    four-emissions bill (CO2 is not a pollutant under the Clean
    Air Act). First, CO2 emissions and the need for reductions
    are not issues that are unique to the electric utility industry, and
    therefore single industry legislation is inappropriate. All sources of
    CO2 emissions must be considered in the formulation of any
    legislative proposal that effectively and fairly addresses
    CO2. Second, President Bush has stated that while he is in
    favor of a three-pollutant proposal under certain conditions, he is
    opposed to mandatory reductions in CO2 emissions from the
    electric utility industry. Third, recent studies by the Department of
    Energy (DOE) Energy Information Administration and the Environmental
    Protection Agency (EPA) have shown that the costs of CO2
    control--for which there is no ``magic'' or ``silver'' bullet--would be
    greater than the costs for controlling SO2, NOx or mercury.
    Fourth, the only way to obtain co-benefits from controlling
    CO2 is by shutting down coal plants or via massive fuel
    switching to natural gas, which I do not favor.

        Question 7. Mr. Anderson of DTE mentioned the need for mandatory
    reporting of greenhouse gas emissions. I'm working on legislation with
    Senator Corzine and other members of the committee to establish such an
    inventory or registry. Do you have a view on how that should be
    structured?
        Response. The electric utility industry is already subject to
    mandatory reporting off CO2 emissions under the Clean Air
    Act and engages in voluntary reporting of greenhouse gas emission
    reductions, avoidances, and sequestrations under the Energy Policy Act.
    Any future legislation that includes mandatory reporting of greenhouse
    gas emissions must be carefully structured. First, the overall context
    or ``package'' of legislative provisions is very important. Mandatory
    reporting of greenhouse gases cannot be viewed in isolation. For
    example, I do not favor a mandatory cap on greenhouse gas emissions, so
    I would have to oppose a bill that included a mandatory reporting
    requirement in furtherance of a binding target and timetable.
        Second, the agency selected to oversee a national inventory or
    registry (or both) is critical. The Department of Energy (DOE) and the
    Energy Information Administration (EIA) have had longstanding, key
    roles in publishing annual inventories under section 1605(a) of the
    Energy Policy Act (EPAct) and in recording reductions, avoidances and
    sequestrations of greenhouse gases under section 1605(b) of EPAct. In
    fact, those agencies have 7 years of experience with such inventory and
    reporting functions. EIA is the logical place to house a national
    inventory or registry (or both) due to its independence, non-regulatory
    nature, and experience.
        Third, the voluntary reporting program of EPAct section 1605(b)
    must be an integral part of any national registry. Annual recognition
    of reductions, avoidances and sequestration reported in the 1605(b)
    program--as exemplified in S. 1294--must be part of any national
    greenhouse gas emissions registry. Concepts of ``recognition'' are
    essential for baseline protection purposes, and they provide a concrete
    link between 1605(b) reports and any national registry.
        Finally, I urge you and other members of the committee to consider
    carefully whether a program based on guidelines and voluntary reporting
    could be more appropriate than one that relies on regulations and
    mandatory reporting. For example, S. 1766 has a threshold for reporting
    of 1,000 metric tons of carbon dioxide-equivalent greenhouse gases
    which would require most small businesses and organizations to report.

        Question 8. Given the enormous market changes in the power
    generation business, it seems that certainty in terms of environmental
    regulations is very important. How important is certainty, and what
    kind of savings can your businesses gain from it?
        Response. The desire for certainty is one of the primary reasons
    that my company and others in the utility industry are interested in
    multi-emission legislation.
        Currently, coal-fired power plants are subject to over 20 major
    Clean Air Act requirements and face the possibility of many additional
    new requirements. These requirements are duplicative, piecemeal and
    unnecessarily expensive. Multi-emission legislation could correct these
    problems and further environmental goals. However, these reductions
    must be reasonable. Multi-emissions legislation should provide
    regulatory certainty and stability while increasing compliance
    flexibility through market-based approaches. Coal-fired generation must
    be maintained as an important part of the electricity supply mix.
    Designed properly, such legislation would be a more efficient way to
    achieve economic, energy and environmental goals. A single set of
    reduction requirements with achievable deadlines and market-based
    mechanisms should be the cornerstone of this legislation.
        The savings associated with regulatory certainty are difficult to
    quantify. The electric sector models account for regulatory certainty
    through their ability to account for multiple constraints (both
    emissions and years). The models estimate the least cost solution for
    the sector as a whole taking into account all known constraints.

        Question 9. Have you seen the EPA straw proposal that was
    circulating early this year? If you have, what comments did you provide
    any Federal agency regarding it?
        Response. There have been numerous published reports of various EPA
    straw proposals. Attached are two documents prepared in the September/
    October timeframe by the Edison Electric Institute that comment on the
    EPA straw proposal available at that time.
                              sterba attachment i
          major problems with epa's ``multi-emissions staff proposal''
        During a period of time when demand for electricity has increased
    significantly and coal use has tripled, electric utilities have
    continued to make major emissions reductions. Within a decade,
    utilities will have reduced SO2 emissions by more than 50
    percent compared to levels in the early 1970's. By 2010, national
    SO2 emissions will be at their lowest level in one hundred
    years. NOx emissions have been cut by well over two million tons and
    will be reduced by another one million tons in the 2003/2004 timeframe
    after which the utility industry will represent less than 20 percent of
    NOx emissions.
        Besides the reductions already committed to, the utility industry
    is ready to commit to substantial additional reductions. However, these
    reductions must be reasonable. They should increase compliance
    flexibility through market-based approaches. They should also maintain
    coal-fired generation as an important part of the electricity supply
    mix and facilitate the building of new coal-fired plants.
        The following summarizes the major problems with the EPA multi-
    emission staff proposal:
          EPA's ``regulatory business as usual'' (BAU) case is
    unrealistic and, by greatly overstating the BAU cost to industry, EPA
    makes its proposal appear ``inexpensive'' in comparison.
          EPA has assumed extreme emission reduction requirements
        and implementation dates for SO2 and NOx that are not
        supportable as accurate representations of BAU. Thus, their
        analysis greatly overstates the future costs to industry of BAU.
        While it is possible that SO2 reductions associated with
        a PM2.5 NAAQS might be required as early as 2012, the
        extreme emission reduction level EPA assumes is mere conjecture and
        the more likely scenario is a delay well beyond 2012.
          The modeling approach also artificially exaggerates the
        costs of the BAU case by assuming utilities have no foresight at
        all (EPA runs, then locks down the results in 2-year increments
        from 2008 through 2012).
          This overstatement of the BAU case masks the unreasonable
        nature of the EPA proposal in an attempt to convince others that it
        is not extreme.
          The EPA proposal is inconsistent with the goals of the
    Administration's national energy policy and reduces U.S. energy
    security by erecting barriers to the use of domestic natural resources.
          The stringency of the proposed caps and emission rates
        will discourage or even eliminate the possibility of new coal-fired
        generation. See page entitled ``Stringency of the EPA Staff
        Proposal.''
          Industry analysis shows that the EPA proposal will result
        in at least a 9 percent reduction in coal-fired generation in 2020
        beyond the decreases expected in the baseline and an additional 9
        percent increase in natural gas use for electricity generation in
        2020.
          Industry estimates that, under the EPA proposal, by 2020
        there will be an additional 10 quads of natural gas used annually
        to generate electricity (compared to 4 quads currently). It is
        uncertain whether the natural gas infrastructure will be able to
        support these projected increases.
          EPA's technical analysis has critical technical flaws
    regarding the costs and impacts of its proposal. Taken together these
    flaws result in a significant underestimate of costs.
          Electricity demand--EPA assumes low increase in
        electricity demand (1.2 percent annually) based upon Clinton
        Administration climate change policy, compared to EIA's 1.8 percent
        rate.
          Natural gas prices--EPA assumes low natural gas prices.
        DOE observes, ``EPA predicts optimistic (low) natural gas prices.
        Most other experts predict slowly rising prices.''
          Mercury costs--Costs could be significantly higher than
        EPA assumes because of: lower SO2 and NOx mercury co-
        benefits, higher costs for activated carbon, and the need for
        fabric filters. EPA assumes high mercury co-benefit SO2
        and NOx reductions based on limited data from tests at two plants
        while having no data on more common combinations of fuels and
        control equipment.
          SCR costs--EPA and EEI both estimated selective catalytic
        reduction (SCR) capital costs too conservatively. It now appears
        that short timeframes, manpower and material availability, and
        other factors have greatly increased compliance costs.
          The economic impact is likely to be significant, and
    especially difficult for small and mid-sized companies.
          The capital investments and operating costs associated
        with EPA's stringent caps are estimated to cost the electric
        utility industry over $14 billion per year which makes this
        proposal the most expensive environmental proposal in history.
          EEI estimates that costs could be 90-120 percent higher
        than the EPA estimates if 40 percent higher natural gas costs are
        assumed.
          The economic impact is likely to be shouldered
    disproportionately by the Midwest and Southeast.
          These areas have the highest percentage of generation
        from coal.
          EPA, relying on an incomplete and controversial analysis
    related to the ``NOx SIP call,'' assumes no reliability impacts due to
    installing a very large amount of controls over a short period of time.
          Many plants will be forced to apply the most advanced,
        but yet unproven, technologies. Since the great majority of coal
        units will have to install FGD for SO2, SCR for NOx, and
        probably activated carbon injection and fabric filters for mercury,
        there would be a level of plant outages that compromise reliable
        electric generation.
          Installing multiple controls is more complicated than
        installing only one type of controls.
          DOE states, ``EPA's proposal will result in massive
        retrofits, which will remove capacity for extended time periods.''
          There could be labor and materials bottlenecks and
        unexpected operational problems.
          Delays can also result from permitting of air pollution
        controls and from siting and permitting of solid waste disposal
        facilities.
          The EPA staff proposal would provide minimal real
    flexibility and eliminate meaningful opportunities to reduce compliance
    costs through trading.
          Including all controls installed previously and those
        required by the EPA staff proposal, the vast majority of coal
        capacity would have these controls:
          SO2 scrubbers (FGD) on 70-90 percent of coal
    capacity.
          SCR for NOx on 70-80 percent of coal capacity (or
    greater, according to DOE analyses).
          The mercury cap explicitly limits trading. Contrary to
        EPA's analysis, the DOE and EEI analyses indicate that a large
        amount of mercury technological controls will be necessary,
        suggesting that even the potential trading opportunities under the
        EPA proposal would be severely limited.
          EIA found ``controlling mercury emissions through a MACT
        rather than a cap-and-trade program does not affect regional
        distributions of emissions.'' EEI modeling found that mercury
        trading could lower compliance costs by as much as $5 billion
        through 2020.
          EPA's cost-effectiveness ``demonstration'' is
    unpersuasive.
          EPA has used unrealistic assumptions and a simplistic,
        pollutant-by-pollutant spreadsheet technique to support the
        reasonableness of its selected levels. However, its approach
        ignores the synergies inherent in multi-emissions strategies and
        the intricacies of modeling and thus does not give an accurate
        picture of how costs escalate.
          EPA's approach is based on an ``ordering'' of electric
        generating units on the basis of each unit's ``cost per ton'' to
        control the individual pollutant under consideration. This
        ``ordering'' for a given pollutant will vary, depending on what is
        assumed about control of the other pollutants. The ``cost per ton''
        ordering is also likely to be different for SO2, NOx,
        and Hg.
          The EPA approach also ignores the fact that actual cost
        will depend on the dispatch order of the units. The dispatch order
        is determined by each unit's total variable cost, not just the
        emission control cost.
          When these realities are taken into account, it is highly
        likely that the true marginal cost for each of the pollutants will
        be above EPA's estimated ``knee in the curve.''
          The EPA cost estimates do not include the estimated
    annual $1 billion cost of disposal of additional coal combustion
    products (CCPs).
          There will be a significant amount of CCPs generated by
        the installation of SO2 scrubbers needed to meet the
        proposed SO2 cap. Non-hazardous disposal costs of CCPs
        can range from $15 to $20 per ton. There will also likely be an
        adverse impact on the ability to reuse CCPs. An additional
        complicating factor is the need for additional landfill capacity.
          There has been no thorough, open peer or external review
    of the EPA analysis.
          EPA staff have yet to provide many of the details of
        their analysis, limiting others' ability to analyze and understand
        it.
          EPA has greatly overstated the potential particulate
    matter (PM) health benefits of its proposed emission reduction levels.
          EPA's estimates of health benefits are based on
        epidemiological studies that fail to control for pollutants other
        than particulate matter. Consideration of additional air pollutants
        typically reduces the strength or magnitude of the association
        between PM and health endpoints.
          Many in the scientific community, including the National
        Academy of Science PM panel, agree that the size and chemical
        composition of the potential ``bad actor'' is unknown. They also
        agree that all particulate matter is not equally toxic.
          Some new scientific evidence suggests that the sulfate
    and nitrate constituents of fine particles--those formed from
    SO2 and NOx emissions--may not be associated with mortality.
          Thus, there is no assurance regarding the assumed health
        benefits resulting from reductions of SO2 and NOx
        emissions from power plants.
          Ambient PM2.5 is a mixture of chemical
        compounds. Sulfates and nitrates are a variable amount of that
        mixture. Recent data suggest they frequently constitute a smaller
        fraction of urban PM2.5 than do carbon based compounds,
        even in the East.
          The mercury health benefits are even more tenuous.
          Power plant emissions are responsible for about one-third
        of the mercury emitted to the air from industrial sources in the
        United States.
          Research has shown that no more than 20 percent of the
        mercury emitted by power plants is deposited in local environments
        (within 30 miles of the source), and only 1-3 percent of the amount
        deposited remains in water bodies, with the remainder moving
        rapidly into sediments.
          Routine mercury exposure in the United States is low. It
        comes almost exclusively from methylmercury via fish consumption,
        and does not appear to pose a health threat for the general public.
    Stringency of the EPA Staff Proposal
          The amount of controls forced by the EPA Staff Proposal
    over the next 10 years or less will dwarf the total amount of control
    equipment over the past 35 years:

    ------------------------------------------------------------------------
                                   Through Title IV &      New--EPA Staff
                                      NOx SIP Call*           Proposal
    ------------------------------------------------------------------------
    SO2--FGD....................  90,000 (DOE)........  135,000 (EPA)
                                                        139,000-201,000
                                                         (EEI)
    NOx--SCR....................  80,000 (EPA)--98,000  140,000 (EPA)
                                   (EEI) [all during    109,000--146,000
                                   2000-2004].           (EEI)
    Hg--ACI.....................  0...................  35,000 (EPA)
                                                        241,000--265,000
                                                         (EEI)
    Hg--FF......................  20,000 (DOE)........  0-35,000 (EPA)
                                                        225,000--246,000
                                                         (EEI)
    ------------------------------------------------------------------------
    * Through 2000 for Hg--ACI and Hg--FF

          The EPA Staff Proposal emission caps lead to extremely
    low beginning emission rates:
          The SO2 cap dictates an initial emissions rate
    of 0.18 lb/million Btu, which is difficult for new plants to meet with
    high sulfur coal.
          The NOx cap dictates an initial emissions rate of 0.11
    lb/million Btu, which is much more stringent than the NOx SIP Call.
          These emissions rates are well below NSPS for
    SO2 and NOx.
          These emissions rates go far beyond addressing claims
    about ``grandfathering.''
          The mercury cap reduction of 90 percent (about 1lb/
    trillion Btu) would be difficult, maybe impossible, to achieve even
    with maximum controls.
          These already stringent emissions rates would shrink over
    time:
          As more generation is needed (to meet increasing demand
    for electricity) and as new facilities come on line (and are likely
    given some of the existing pool of allowances), these emission rates
    would shrink.
          This causes installation of even more control technology
    or fuel switching.
          Electric utility systems in rapidly growing parts of the
    United States are experiencing much higher than the anticipated 1.8
    percent annual increase in electricity demand (per EIA) and would see
    their effective emissions rate plummet.
                              sterba attachment 2

                                                                              Draft
                                                           Multi-Emission Proposals--Emissions Levels
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                  Emission                        Units              Historical High         1999 (actual)              S. 556                  EPA
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Sulfur Dioxide.....................  Million tons..........  17.2 (1973)...........  12.7.................  2.2 (2007)...........  2.0 (2010)
    Nitrogen Oxides....................  Million tons..........  7.0 (1970)............  5.7..................  1.5 (2007)...........  1.87 (2008)
                                                                                                                                       1.25 (2012)
    Mercury............................  Tons..................  *.....................  45...................  4.5 (2007)...........  24 (2008)
                                                                                                                                       7.5 (2012)
    --------------------------------------------------------------------------------------------------------------------------------------------------------

          Approximately 75 tons of mercury currently in fuel used
    to generate electricity. Existing control equipment and fuel processing
    activities reduce emissions by approximately 40 percent to 45 tons.
                 epa staff multi-emission proposal--stringency
        1. More stringent than S. 556 for Sulfur Dioxide (SO2)
    and Nitrogen Oxides (NOx).
        2. The EPA Staff Proposal will require far more substantial
    reductions than the 1990 Clean Air Act amendments (1990 CAAA) plus the
    NOx SIP Call:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    SO2:
        1990 CAAA (TITLE IV)....  ABOut 50 percent      (from 1980)
                                   reduction.
        EPA Staff Proposal......  About 78 percent      (beyond 1990 CAAA)
                                   reduction.

    NOx:
        1990 CAAA & NOx SIP Call  About 40 percent      (from 1980)
                                   reduction.
        EPA Staff Proposal......  About 70 percent      (beyond 1990 CAAA &
                                   reduction.            NOx SIP Call)
    ------------------------------------------------------------------------

        3. The EPA Staff Proposal will require substantially more control
    equipment for compliance than all prior Clean Air Act requirements:

    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    SO2                           Flue gas
                                   desulfurization
                                   (FGD or scrubbers).
    1990 CAAA (Title IV)........  10,000 MW...........  (EPA estimate)
    1990 Title IV plus other      90,000 MW...........  (DOE data)
     thru 2000.
    EPA Staff Proposal            135,000 MW..........  (EPA estimate)
     (incremental).
    EPA Staff Proposal            139,000-201,000 MW..  (EEI estimate)
     (incremental).

    NOx.........................  Selective catalytic
                                   reduction (SCR).
        1990 CAAA & NOx SIP Call  80,000 MW...........  (EPA estimate)
        1990 CAAA & NOx SIP Call  98,000 MW...........  (EEI estimate)
        EPA Staff Proposal        140,000 MW..........  (EPA estimate)
         (incremental).
        EPA Staff Proposal        109,000--146,000 MW.  (EEI estimate)
         (incremental).

    Mercury.....................  Activated Carbon
                                   Injection.
        1990 CAAA & NOx SIP Call  0 MW................  (EPA estimate)
        EPA Staff Proposal        35,000 MW...........  (EPA estimate)
         (incremental).
        EPA Staff Proposal        241,000--265,000 MW.  (EEI estimate)
         (incremental).

    Mercury.....................  Fabric Filter.......
        All thru 2000...........  20,000 MW...........  (DOE data)
        EPA Staff Proposal        0-35,000 MW.........  (EPA estimate)
         (incremental).
        EPA Staff Proposal        225,000--246,000 MW.  (EEI estimate)
         (incremental).
    ------------------------------------------------------------------------

        4. Including all controls installed before and because of the EPA
    Staff Proposal, the vast majority of coal capacity would have these
    controls (MW):

    ----------------------------------------------------------------------------------------------------------------
                                                                          Mercury Activated   Mercury Fabric Filter
                                         SO2 FGD            NOx SCR         Carbon (ACI)*             (FF)*
    ----------------------------------------------------------------------------------------------------------------
    EPA...........................            225,000            220,000             35,000          20,000-55,000**
    EEI...........................           229,000-           207,000-           241,000-                 245,000-
                                              291,000            244,000            265,000                  266,000
    ----------------------------------------------------------------------------------------------------------------
    * EIA, DOE, EPRI and EEI all believe that EPA's prediction of the amount of mercury controls is underestimated,
      perhaps dramatically, because EPA assumes (based upon 2 limited tests) that SO2 and NOx controls will lead to
      a high level of mercury controls. This is a controversial and unproven assumption.
    **EPA has indicated, alternatively, that no fabric filters are needed with ACI and that an equal amount of
      fabric filters to ACI are needed

          70-90 percent of coal capacity would have FGD, initially
    (assuming about 320,000 MW of coal capacity)
          65-75 percent of coal capacity would have SCR, initially.
          10-80 percent of coal capacity would have ACI, initially.
          5-80 percent of coal capacity would have FF, initially.
        5. The EPA Staff Proposal emission caps lead to extremely low
    emission rates:
          The SO2 cap dictates an initial emissions rate
    of 0.18 lb/million Btu, which is lower than that required in recent
    years at new coal units.
          The NOx cap dictates an initial emissions rate of 0.11
    lb/million Btu, which is more stringent than the NOx SIP Call.
          These emissions rates are well below New Source
    Performance Standards for SO2 and NOx. and go far beyond
    that needed to address environmental claims about ``grandfathering.''
          The mercury cap reduction of 90 percent (about 1lb/
    trillion Btu) would be difficult, maybe impossible, to achieve even
    with maximum controls.
        6. These already stringent emissions rates would shrink over time,
    as more generation is needed to meet increasing demand for electricity:
          This causes installation of more control technology or
    fuel switching to meet the shrinking emissions rates.
          Some electric utility systems in rapidly growing parts of
    the United States are experiencing much higher than the anticipated 1.8
    percent annual increase in electricity demand (per EIA) and would see
    their effective emissions rate plummet.
        7. The EPA Staff Proposal provides minimal flexibility and allows
    little trading:
          The shrinking emissions rates require increasing amounts
    of control technologies and fuel switching.
          The SO2 cap initially requires FGD on 70-90
    percent of coal capacity and, thus, limits opportunities for trading.
          The NOx cap initially requires SCR on 70-80 percent of
    coal capacity (or greater, according to DOE analyses) and, thus, limits
    opportunities for trading.
          The mercury cap explicitly limits trading. All analyses
    except EPA's indicate a large amount of mercury technological controls.
        8. A new analysis of the EPA Staff Proposal by ECAF shows that the
    EPA Staff Proposal is too stringent:
          EPA has not taken into account the beneficial emission
    reductions of new regulations affecting mobile and other sources.
          The EPA Staff Proposal plus other regulations require far
    greater emissions reductions for SO2 and NOx than EPA has
    previously claimed in its own regulatory analyses are needed to meet
    the 8-hour ozone standard, the fine particle standard and the regional
    haze program.

                    EPA Staff Multi-Emissions Proposal--Cost
                          Annual costs (billion $1999)
    ------------------------------------------------------------------------
                EPA Staff Proposal Cost                 2015         2020
    ------------------------------------------------------------------------
    EPA Estimate..................................           $9          $10
    EEI Estimate..................................          $14          $15
    ------------------------------------------------------------------------

        Significance:
          Most expensive environmental legislative proposal in
    history.
          EEI estimates costs to be about 50 percent higher than
    EPA's estimates.
          EEI estimates that costs could be 90-120 percent higher
    ($17 and $22 billion in 2015 and 2020, respectively) than EPA's
    estimates if higher natural gas costs are assumed (40 percent higher).
          EPA and EEI both estimated selective catalytic reduction
    (SCR) capital costs too conservatively. It now appears that short
    timeframes, manpower and material availability, and other factors have
    greatly increased compliance costs. For example, earlier estimates of
    $60/kW for SCR capital costs have been overshadowed by publicly
    announced costs above $100/kW. It is notable that these much higher
    costs are being incurred for various company's first SCR installations,
    which are being undertaken at facilities where SCR would be most cost-
    effective.

                       EPA Staff Multi-Emissions Proposal
                      Energy Assumptions & Technical Issues
    ------------------------------------------------------------------------
                                   EPA Staff Proposal     Industry Analysis
    ------------------------------------------------------------------------
    Electricity demand growth...  Assumes low increase  EPA fails to account
                                   in electricity        for EIA's
                                   demand (1.2 percent   electricity growth
                                   annually) based       projection (1.8
                                   upon Clinton          percent annually),
                                   Administration        which is the basis
                                   climate change        for the Bush
                                   policy.               Administration
                                                         National Energy
                                                         Plan. EPA
                                                         underestimates
                                                         future electricity
                                                         generation by 11
                                                         percent over 10
                                                         years.
    Impact on natural gas.......  DOE observes, ``EPA   This may lead to
                                   predicts optimistic   unrealistically low
                                   (low) natural gas     costs. Due to
                                   prices. Most other    increased demand,
                                   experts predict       the price of
                                   slowly rising         natural gas,
                                   prices.''.            including for
                                                         residential and
                                                         other markets,
                                                         could increase.
    Reliability of electric       EPA assumes no        EPA, based upon a
     supply.                       adverse impact on     cursory analysis
                                   reliability.          relying on an
                                                         incomplete and
                                                         controversial
                                                         analysis related to
                                                         the ``NOx SIP
                                                         call,'' assumes no
                                                         reliability
                                                         impacts. DOE
                                                         states, ``EPA's
                                                         proposal will
                                                         result in massive
                                                         retrofits, which
                                                         will remove
                                                         capacity for
                                                         extended time
                                                         periods. EPA has
                                                         not addressed this
                                                         point.'' Since the
                                                         great majority of
                                                         coal units will
                                                         have to install FGD
                                                         for SO2, SCR for
                                                         NOx, and probably
                                                         activated carbon
                                                         injection and
                                                         fabric filters for
                                                         mercury, there
                                                         could be a level of
                                                         plant outages that
                                                         compromises
                                                         reliable electric
                                                         generation. There
                                                         could also be labor
                                                         and materials
                                                         bottlenecks as well
                                                         as unexpected
                                                         operational
                                                         problems.
                                                         Transmission (due
                                                         to grid
                                                         constraints) is not
                                                         a viable solution
                                                         to these
                                                         challenges.
                                                         Industry-wide,
                                                         there are presently
                                                         few SCR's and
                                                         combined FGD/SCR
                                                         systems on which to
                                                         base assumptions
                                                         regarding outage
                                                         times during
                                                         construction and
                                                         installation.
                                                         Further, installing
                                                         multiple controls
                                                         is more complicated
                                                         than installing
                                                         only one type of
                                                         controls. Delays
                                                         can also result
                                                         from permitting and
                                                         from siting and
                                                         permitting of solid
                                                         waste disposal
                                                         facilities.
    Fuel mix....................  4 percent decrease    9 percent decline in
                                   in coal consumption   coal and 9 percent
                                   and 4 percent         increase in natural
                                   increase in natural   gas use.
                                   gas consumption.
    Mercury (Hg) controls.......  50 percent of all     EPA survey of
                                   mercury reductions    industry's data
                                   are expected to be    (the ``ICR'')
                                   achieved at no cost   showed wide
                                   as co-benefits of     variability in Hg
                                   SO2 and NOx           control levels for
                                   controls. Remaining   the same equipment.
                                   reductions of only    This demonstrates
                                   about 11-14 tons      that we have a poor
                                   are achieved          understanding of Hg
                                   through use of        chemistry and the
                                   activated carbon      abilities of
                                   treatments on about   current control
                                   35,000 mW of          technologies to
                                   capacity. EPA         reduce mercury.
                                   assumes no need for   Technology
                                   fabric filters/       demonstrations are
                                   baghouses.            several years from
                                                         completion. Costs
                                                         could be
                                                         significantly
                                                         higher than EPA
                                                         assumes because of:
                                                         lower SO2 and NOx
                                                         co-benefits, higher
                                                         costs for activated
                                                         carbon, and the
                                                         need for fabric
                                                         filters. EPA
                                                         assumes high co-
                                                         benefit SO2 and NOx
                                                         reductions based on
                                                         limited data from
                                                         tests at two plants
                                                         while having no
                                                         data on more common
                                                         combinations of
                                                         fuels and control
                                                         equipment. There
                                                         are indications
                                                         that such
                                                         assumptions do not
                                                         hold up after SCR
                                                         catalyst ages. To
                                                         replace catalyst
                                                         much earlier would
                                                         probably be a very
                                                         expensive option to
                                                         control mercury.
                                                         Also to be
                                                         considered is the
                                                         potential for
                                                         hazardous waste
                                                         disposal costs for
                                                         byproducts. Both
                                                         activated carbon
                                                         injection and
                                                         fabric filers could
                                                         be required on well
                                                         over 200,000 mW of
                                                         capacity.
    Mercury trading.............  EPA would only allow  EIA found
                                   mercury trading       ``controlling
                                   after 70 percent      mercury emissions
                                   controls at each      through a MACT
                                   plant.                rather than a cap-
                                                         and-trade program
                                                         does not affect
                                                         regional
                                                         distributions of
                                                         emissions.'' EPA's
                                                         ``Comprehensive
                                                         Approach to Clean
                                                         Electric Power
                                                         Generation'' shows
                                                         no difference in
                                                         the distribution of
                                                         mercury emissions
                                                         with full trading.
                                                         EEI modeling found
                                                         that mercury
                                                         trading could lower
                                                         compliance costs by
                                                         as much as $5
                                                         billion through
                                                         2020.
    Federal budget impacts......  not available.......  Increased demand for
                                                         energy assistance
                                                         funding. Higher
                                                         Federal energy
                                                         expenditures.
                                                         Impacts for fossil
                                                         fuel resources on
                                                         Federal lands.
    Optimized control levels....  EPA has performed     EPA analyses are
                                   ``knee in the         based on simplistic
                                   curve'' analyses,     assumptions and can
                                   trying to determine   be misleading. It
                                   at which point        is important to
                                   costs rise            realize that the
                                   dramatically.         ``knee'' for any
                                                         single emissions
                                                         cost curve is
                                                         greatly influenced
                                                         by assumptions
                                                         about fuel prices,
                                                         electricity demand
                                                         and controls of
                                                         other emissions.
                                                         The validity of
                                                         these analyses is
                                                         questionable.
    Other environmental/energy    not available.......  DOE observes, ``All
     policy goals.                                       3-P related
                                                         activity must be
                                                         considered in the
                                                         context of their
                                                         implications on CO2
                                                         related issues, or
                                                         they could
                                                         unnecessarily
                                                         restrict policy
                                                         choices to address
                                                         the climate change
                                                         issue. Once firms
                                                         invest in Phase II
                                                         and III controls,
                                                         it becomes
                                                         increasingly
                                                         difficult to
                                                         squeeze out carbon
                                                         reductions, such as
                                                         through a voluntary
                                                         program.''
                                                        Complicating mercury
                                                         controls is mercury
                                                         in solid waste and
                                                         the impact of
                                                         activated carbon on
                                                         reuse of coal
                                                         combustion
                                                         byproducts.
                                                        Complicating SCR are
                                                         concerns regarding
                                                         ammonia and
                                                         catalyst as waste
                                                         and effects on
                                                         reuse of coal
                                                         combustion
                                                         byproducts.
                                                        Complicating FGD is
                                                         the large amount of
                                                         scrubber sludge
                                                         that would need to
                                                         be landfilled.
    Regulatory Certainty........  DOE states, ``EPA's   DOE states that EPA
                                   proposal does not     should look at
                                   clearly indicate      ``all major SO2,
                                   which existing and    NOx, MACT, BART,
                                   nascent air quality   etc. rules.'' EPA
                                   programs would be     does not address
                                   replaced or           crucial components
                                   modified by           of a multi-
                                   proposal.''.          emissions strategy:
                                                         safe harbor period
                                                         and regulations to
                                                         be replaced or
                                                         modified,
                                                         especially New
                                                         Source Review.
    Health and environmental      EPA assumes $154      Fine particle health
     benefits.                     billion in health     impacts are a
                                   benefits, all         matter of active
                                   related to avoided    debate by EPA's
                                   fine particle         CASAC and others.
                                   health impacts.       Recent studies
                                                         raise questions
                                                         about the impact of
                                                         SO2 emissions and
                                                         associated
                                                         secondary
                                                         particulate
                                                         formation on human
                                                         health. DOE
                                                         observes that there
                                                         is ``Substantial
                                                         uncertainty over
                                                         what types of PM
                                                         2.5 (or other
                                                         pollutants) may be
                                                         responsible for
                                                         adverse health
                                                         effects. For
                                                         example: vehicular
                                                         PM 2.5 is
                                                         implicated in many
                                                         new studies, which
                                                         could suggest
                                                         limited role of
                                                         power plant
                                                         emissions.'' In
                                                         addition, there is
                                                         the question of
                                                         what are the
                                                         marginal benefits
                                                         associated with the
                                                         most stringent end
                                                         of the control
                                                         requirements.
                                                        DOE states in its
                                                         critique of the EPA
                                                         Staff Proposal,
                                                         ``No environmental
                                                         justification
                                                         offered for such a
                                                         stringent level of
                                                         Hg removal.''
                                                        A new analysis of
                                                         the EPA Staff
                                                         Proposal by the
                                                         ECAF shows that the
                                                         EPA Staff Proposal
                                                         is too stringent.
                                                         EPA has not taken
                                                         into account the
                                                         beneficial emission
                                                         reductions of new
                                                         regulations
                                                         affecting mobile
                                                         and other sources.
                                                         The EPA Staff
                                                         Proposal plus other
                                                         regulations require
                                                         far greater
                                                         emissions
                                                         reductions for SO2
                                                         and NOx than EPA
                                                         has previously
                                                         claimed in its own
                                                         regulatory analyses
                                                         are needed to meet
                                                         the 8-hour ozone
                                                         standard, the fine
                                                         particle standard
                                                         and the regional
                                                         haze program.
                                                        This is especially
                                                         true for NOx where
                                                         EPA has previously
                                                         found that the NOx
                                                         SIP call would
                                                         solve nearly all 8-
                                                         hour ozone
                                                         nonattainment
                                                         concerns and that
                                                         NOx is not a
                                                         significant
                                                         contributor to fine
                                                         particle levels.
    ------------------------------------------------------------------------

                                   __________
     Statement of Robert LaCount, Jr., Air Quality Manager, PG&E National
                                  Energy Group
        Mr. Chairman and members of the committee, I am pleased and honored
    to appear before you this morning to represent my company, PG&E
    National Energy Group (NEG), and our coalition, the Clean Energy Group
    (CEG).
        The Clean Energy Group members are Consolidated Edison, Inc.,
    KeySpan, Northeast Utilities, Exelon, PSEG Power, Sempra Energy,
    Conectiv, and my company, PG&E National Energy Group. We share a
    commitment to providing clean energy and promoting 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, consumers, labor, and
    the environmental community.
        First, I want to thank you and the members of the committee for
    your leadership in tackling a complex but important set of issues. We
    are fully aware of the very pressing issues facing the country and the
    Congress at this moment. We want to thank you for taking the time to
    engage in discussions that can lead to a meaningful consensus on a
    question of national importance--how best to foster energy security,
    reliability, and economic growth, while protecting the environment and
    improving air quality. We believe that the time to begin discussions on
    these critical issues is now, because our industry is facing a series
    of regulations that could be more efficiently and economically
    addressed in an integrated and comprehensive manner. By developing an
    integrated program to improve air quality and begin to address climate
    change, CEG believes that not only the environment will benefit, but
    industry and consumers will, as well. This is because the power sector
    will be able to plan investments in a way that maximizes efficiencies,
    minimizes costs, and provides greater benefits for the environment, in
    which we all live.
        Our industry is in the process of a fundamental change: not only
    regulatory changes impacting the environment, but changes impacting the
    very manner in which the electricity marketplace functions. CEG
    supports and embraces the transformation of the electric power industry
    into a competitive marketplace--one that is not confined by the
    boundaries of a service territory or a State line. We also recognize
    that the generation of electricity has a significant impact on the
    environment (both air quality and climate change)--again, one which is
    not confined by the boundaries of a service territory or a State line.
    We agree with those who believe this impact must be reduced if the
    nation is to achieve its air quality and environmental protection
    goals. We also share a common concern that the economic benefits of a
    competitive energy marketplace, and the public health benefits of
    improved air quality, will not be achieved unless the relationships
    among national energy policy, air quality and climate change are
    rationalized.
        While CEG has supported several of EPA's past regulatory
    initiatives, such as the NOx SIP Call, to reduce emissions
    traditionally associated with the industry, we also share concerns that
    compliance delays and litigation during a period of such unprecedented
    change and challenging economic times has contributed to, and continues
    to contribute to, significant business uncertainty. We also recognize
    that uncoordinated, regulatory emission reduction programs greatly
    increase compliance costs and reduce operational flexibility.
        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 (or NOx), sulfur dioxide (or
    SO2), as well as, mercury, and carbon dioxide (or
    CO2). We believe that a coordinated approach will deliver
    significant and timely emissions reductions and provide members of our
    industry regulatory certainty about the amount of and timetable for
    these reductions, which can be factored into investment decisions and
    emission control strategies.
        Mr. Chairman, we commend you and Senator Lieberman for developing
    and introducing legislation that addresses air quality and climate
    change in an integrated manner. Although CEG is in general agreement
    with the scope of the emissions addressed in S. 556, and the integrated
    manner in which reduction targets are set, we are not in agreement with
    the levels of emissions reductions, the timelines for achieving these
    reductions, and the limits placed on flexibility in meeting the
    specified targets. Also, we believe that the ``birthday'' provision is
    unnecessary and that an integrated air quality program must address
    some of the current deficiencies in the New Source Review program. CEG
    has spent considerable time in analyzing how to balance these key
    provisions so that both environmental and economic results may be
    optimized. In that regard, we look forward to working with you in the
    coming months on development of an effective integrated air quality
    approach.
        Toward this end, CEG has developed what it believes is an effective
    proposal to improve air quality, begin to address climate change and
    modify the NSR program, and to do so in a way that results in
    reasonable cost and resource impacts versus a piecemeal approach. The
    basis of our approach is that it sets defined targets for emissions
    reductions on a national basis and uses a market-based approach to
    achieve these reductions. We believe that only a national 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 environmental objectives,
    and provide our industry with the regulatory certainty essential for
    sound business planning and rational investment decisionmaking.
        We in the power sector are trying to plan for promulgated Federal
    regulations (including Phase II Acid Rain and the NOx SIP Call),
    current regulatory initiatives authorized under the existing Clean Air
    Act (including Mercury, PM2.5 and Regional Haze
    regulations), as well as initiatives we predict will occur over the
    next ten to 15 years (carbon regulations and additional SO2
    and NOx requirements). By coordinating emissions reduction targets,
    encouraging early reductions, and providing a phased approach to
    achieving ultimate reduction targets, the Clean Energy Group believes
    that its proposal will exceed the environmental benefits of individual
    programs and do so at a lower cost.
        The emission reduction targets and timelines set out in our
    proposal are shown in the attached chart. Essentially, the schedule was
    established to maximize the co-benefits associated with implementing
    emission reduction technologies, to provide the industry adequate time
    to make investment decisions, and to allow time for the
    commercialization of new technologies. The first level of reductions,
    starting in 2008, builds off of the existing NOx SIP Call and Acid Rain
    Program, coincides with the compliance schedule for EPA's mercury
    regulations, and complements the expected timelines associated with
    PM2.5 and regional haze rules. We believe it is important to
    (1) build off of existing, proven programs, (2) allow time for current
    compliance schedules to be fully implemented, and (3) rationalize
    future emissions reduction programs by coordinating timetables and
    implementation approaches.
        With regard to carbon dioxide, CEG believes that comprehensive
    legislation must include all four emissions in order to achieve the
    necessary business certainty for our industry. To this end, CEG
    advocates a unique approach, one that we believe will lead to
    reasonable cost and resource impacts, while encouraging renewable
    development and energy efficiency investments, and maintaining fuel
    diversity. Our program is based on three underlying principles: (1)
    timelines for reductions must be reasonable; (2) flexibility is
    required; and (3) verification of reductions is essential. In short,
    the program established by the CEG proposal provides for early
    reduction credits, creates a process for developing verification
    standards, builds upon EPA's successful Acid Rain Trading Program,
    encourages investments in renewable development and energy efficiency
    programs, allows for both on-and off-system reductions, and can be
    easily adapted to any future multi-sectoral or international program.
    CEG does not believe it is necessary to wait for an economy-wide
    greenhouse gas reduction program to be in place for the power sector to
    take advantage of reductions that can be achieved both within and
    outside of the power sector now. Instead, we believe it is important
    for this industry to play a leadership role in spearheading a
    greenhouse gas reduction program because of our significant
    contribution to U.S. greenhouse gas emissions, and because of the
    strategic advantages gained by providing time for a gradual transition
    to a less carbon-intensive electric generating fleet.
        With regard to NSR, the Clean Energy Group proposal does not
    advocate eliminating the NSR program. As a matter of principle, CEG
    supports the goals and objectives of NSR. However, CEG believes that
    the existing NSR program must be changed to ensure that it complements
    the integrated program by facilitating expedient emissions reductions,
    promoting clean energy sources, and encouraging efficiency improvements
    without imposing unnecessary costs and delays.
        I stated before that we believe our proposal will impose reasonable
    cost and resource impacts on the power sector and the economy, as a
    whole. CEG is currently finalizing an analysis of our proposal using
    one of the models that EPA employs to assess impacts of various air and
    climate programs on the industry and the economy. The analysis compares
    the economic and emissions impacts of our proposal with a business as
    usual scenario. We believe this analysis differs from the EPA and EIA
    analyses presented at the previous hearing, in two main ways. First,
    the CEG analysis employs a business as usual scenario that accounts for
    both current regulations as well as those authorized under the Clean
    Air Act for future implementation. And, second, the CEG analysis
    includes significant flexibility for complying with carbon requirements
    including the use of offsets generated outside of the power sector.
    This provides dramatic cost-savings compared to the other analyses that
    only modeled CO2 reductions within the power sector.
        In terms of impacts on national average residential energy prices,
    our proposal would result in price increases on the order of 5 percent
    by 2010 and less than 6 percent by 2015. This translates into an
    increase of about $5 per month in the average residential customer's
    bill by 2015. With regard to fuel mix, the CEG proposal would result in
    a shift of about 5 percent from coal to natural gas use, while the
    impact on natural gas prices would be an approximate increase of 6
    percent over the 2005 to 2015 period. In terms of coal production under
    both our business as usual and policy cases, Rocky Mountain and
    Midwestern coals become more economically competitive and gain market
    share as many coal-fired units install scrubbers to comply with new
    SO2 and mercury limits. So, essentially, under the CEG
    proposal, significant emissions reductions can be achieved in
    reasonable timeframes and our industry can begin transitioning to less
    carbon-intensive operations for reasonable cost and infrastructure
    impacts, beyond what are already expected to occur.
        The Clean Energy Group believes that taking a national,
    coordinated, and comprehensive approach to addressing air quality and
    climate change now is the most responsible course of action that
    Congress can take. Again, our industry is facing serious regulatory
    challenges that will continue over the course of the next decade while,
    at the same time, additional challenges are being placed on our
    industry in terms of competitiveness, reliability, and security. And
    these challenges are not just occurring as a result of Federal
    activities. In fact, some of the greatest pressures are coming from
    States, in terms of environmental initiatives and market dynamics.
        For example, Massachusetts has already imposed regulations
    requiring emissions reductions in SO2, NOx, mercury and
    CO2, while Illinois passed legislation setting in place a
    framework by which to do so; New Hampshire and Michigan also proposed
    legislation to do the same. Legislation is pending in North Carolina to
    significantly reduce emissions of SO2 and NOx, while
    Connecticut has adopted regulations requiring significant reductions in
    SO2 and NOx. New York has draft regulations pending. New
    Jersey is moving forward with programs related to mercury, while
    Wisconsin is currently debating rules on mercury reduction. The Texas
    Natural Resources Commission recently suggested that the State should
    implement its own multi-emissions approach, which would address
    CO2, while Oregon has a CO2 mitigation fund in
    place. The point is that States are moving and will continue to move in
    the direction of requiring additional cuts in emissions from power
    plants. Although environmental benefits will result from these various
    State actions, we believe that only a coordinated, national approach
    will maximize environmental benefits and minimize costs. The worst
    result for the industry, and the nation, would be to have in place
    fifty different programs, with fifty different sets of rules, and fifty
    different trading regimes.
        This is particularly true for companies such as PG&E National
    Energy Group that have operations in multiple States (we currently
    operate generating assets over a dozen States and will operate assets
    in approximately a half-dozen more by 2005). In fact, we operate two
    large coal-fired facilities in Massachusetts. We will be meeting some
    of the toughest emissions standards in the country for all four
    emissions (SO2, NOx, mercury, and CO2) at these
    facilities. However, we believe that if a national program were in
    place, we would have been able to do so more efficiently and cost-
    effectively.
        As we have stated, in order to achieve this sort of efficiency,
    programs must pay attention to the timing of emissions reductions
    required as well as the sequencing of these reductions. We have heard
    discussions about this in past hearings and debates. There is truly a
    continuum of legislative options with regard to air quality and climate
    change policies. CEG understands this and has crafted what it believes
    is a program that carefully weighs and balances economic and
    environmental impacts. Drilling down too quickly or too far on any one
    environmental concern, while not addressing another, is not sustainable
    and inserts extreme uncertainty into our planning and investment
    processes--that is where we believe we are headed now. At the same
    time, drilling down too far and too quickly inserts significant
    uncertainty into the reliability and security of the system. However,
    there is a happy medium along that continuum where we can achieve both
    significant air quality and climate change benefits, provide industry
    with the certainty it requires, and do so at minimal cost and resource
    impacts. That is why we believe that it is imperative that Congress
    enact legislation that sets a balanced framework for reducing emissions
    of SO2, NOx, mercury and CO2.
        Again, I am honored by the opportunity to make this statement and I
    would like to thank the committee for moving forward in a thoughtful
    manner on such an important issue. An integrated and coordinated
    approach will inject certainty and rationality into business planning
    and investment decisions and maximize environmental benefits. I look
    forward to responding to your questions.
        Thank you.

                                             CEG Pollutant Caps and Schedule
    ----------------------------------------------------------------------------------------------------------------
                Pollutant              National Tonnage Cap           Reduction Target                 Schedule
    ----------------------------------------------------------------------------------------------------------------
    NOx..............................  2.11 million tons...  Roughly a 50 percent reduction      2008
                                                              from current commitments
                                                              (including implementation of the
                                                              NOx SIP Call in the eastern
                                                              United States), resulting in an
                                                              average emission rate of roughly
                                                              0.15 lbs/mmBtu.
    SO2..............................  4.5 million tons....  50 percent reduction beyond Phase   2008
                                       3.6 million tons....   II Acid Rain requirements,         2012
                                                              resulting in an average emission
                                                              rate of between 0.3 and 0.4 lbs/
                                                              mmBtu..
                                                             60 percent reduction beyond Phase
                                                              II Acid Rain requirements,
                                                              resulting in an average emission
                                                              rate of between 0.2 and 0.3 lbs/
                                                              mmBtu.
    Mercury..........................  Roughly 26 tons.....  65 percent reduction (from mercury  2008
                                       Roughly 5-16 tons...   present in as-delivered coal).     2012
                                                             79 percent to 93 percent reduction
                                                              (from mercury present in as-
                                                              delivered coal).
    CO2..............................                        Stabilization at 2000 emission      2008
                                                              levels (plus specified             2012
                                                              flexibility mechanisms).           2015
                                                             Stabilization at 1990 emission
                                                              levels (plus specified
                                                              flexibility mechanisms).
                                                             Stabilization at 1990 emission
                                                              levels (plus specified
                                                              flexibility mechanisms/
                                                              internationally agreed upon
                                                              flexibility measures).
    ----------------------------------------------------------------------------------------------------------------

                                     ______

       Responses by Robert LaCount to Additional Questions from Senator
                                    Jeffords

        Question 1. Please find enclosed a copy of the chart that EPA
    Assistant Administrator Holmstead brought with him to the committee's
    hearing on November 1, 2001. It shows the numerous regulations that the
    power sector will face in coming years. Has the Administration
    presented any of you with an estimate of the projected costs of
    industry compliance with those regulations? If so, what was it?
        Response. The Administration has not presented my company with
    information about the costs of complying with the regulations presented
    in the attached chart.

        Question 2. Assuming EPA or industry has or can come up with a
    reasonably accurate baseline cost of those regulations, wouldn't it be
    most appropriate to subtract that baseline cost from the EPA analysis
    (done for the committee) to get an incremental cost estimate for S.
    556?
        Response. In the absence of multi-pollutant legislation, pollutant-
    by-pollutant regulation of power plant emissions will continue and will
    unquestionably become more stringent. It is appropriate to include any
    cost estimates associated with these ``business-as-usual'' (BAU)
    activities in the baseline against which all proposals, including S.
    556, are judged. For any baseline estimate of future industry
    compliance costs, the Clean Energy Group (CEG), of which we are a
    member, believes it is appropriate to include further reductions in
    emissions of nitrogen oxide (NOx), sulfur dioxide (SO2) and
    mercury beyond levels required under existing regulatory programs. As I
    mentioned in my testimony before the committee on November 15, CEG is
    in the final stages of completing an economic analysis of its own
    multi-pollutant proposal. For its BAU case, CEG chose conservative
    emission reduction assumptions in the absence of multi-pollutant
    legislation: for NOx, the requirements of EPA's State Implementation
    Plan (SIP) Call; for SO2, a 50 percent reduction beyond
    Phase II acid rain program levels; and for mercury, a 70 percent
    reduction.
        To provide a better sense of the impact of CEG's multi-pollutant
    case, CEG also modeled a Minimum Base Case. This case simply evaluated
    existing regulatory programs including EPA's NOx SIP Call and Phase II
    of the Acid Rain Program with no reduction requirements for mercury or
    carbon. CEG's analysis indicates that costs associated with even a
    conservative BAU case are significant when compared to the cost of
    existing regulatory programs. In fact, the modeling shows that in a
    multi-pollutant program that includes maximum trading flexibility for
    carbon as proposed by CEG, it is the mercury and SO2
    reduction requirements, not CO2 requirements, that will have
    the largest impact on the cost of emission reductions. This result
    further highlights the importance of comparing multi-pollutant
    proposals against reasonable BAU scenarios so that the true costs of
    various proposals may be illuminated.
        It is also important to note that in a perfect world, analysis of a
    comprehensive BAU case would not only include imminent Federal programs
    such as EPA's NOx SIP Call and mercury standards, but it would also
    assess the variety of State initiatives currently in place or under
    development. Many of these new State programs, including promulgated
    regulations in Massachusetts and Connecticut, represent emission
    reduction requirements that go far beyond what CEG modeled in its BAU
    case. As the trend for additional State action continues in the absence
    of multi-pollutant legislation, compliance costs will continue to mount
    for this patchwork of individual State regulatory programs. Although it
    may not be practicable to assess the economic impact of these State
    actions within a BAU baseline, the conservative nature of any BAU case
    should at least be recognized in their absence.

        Question 3. Out of all the emission reduction requirements that Mr.
    Holmstead identified (the mercury rule, NOx SIP Call, the fine
    particulates standard, etc.) as probable in the next 2-5 years, which
    ones do you believe will be implemented, whether or not a multi-
    pollutant bill is enacted?
        Response. Compliance with EPA's NOx SIP Call is currently scheduled
    for May 2004, with the Ozone Transport Commission's NOx Budget Program
    requiring May 2003 compliance. The majority of State regulations that
    are necessary to implement this program are finalized at this time. In
    addition to the NOx requirements, EPA is also preparing to propose new
    mercury Maximum Achievable Control Technology (MACT) standards by
    December 2003. The agency is operating under a court ordered mandate to
    finalize these regulations by December 2004 with a compliance deadline
    expected by 2008.
        In terms of SO2, the timelines for future requirements
    under a multitude of Clean Air Act authorities, including those for
    fine particulate matter and regional haze, are less clear. What is
    clear, however, is that many States are no longer willing to wait for
    further Federal action. For example, PG&E National Energy Group
    operates two large coal-fired facilities in Massachusetts. We will be
    meeting some of the toughest emissions standards in the country for all
    four emissions (SO2, NOx, mercury, and CO2) at
    these facilities. And Massachusetts is not alone, actions have been
    finalized or are under development in a growing list of States
    including Connecticut, Illinois, Michigan, Wisconsin, New Hampshire,
    New York, North Carolina, and Texas.
        Even for plants operating in locations that will not be directly
    impacted by State or Federal actions to further control SO2
    emissions within the next 2 to 5 years, operators will still be forced
    to plan for future SO2 requirements as compliance decisions
    are made concerning other pollutants. With the amount of capital that
    is required to effectively control any pollutant, a plant operator is
    forced to consider an overall compliance strategy for multiple
    pollutants even if only one must be controlled in the short-term. In
    many cases, such as for SO2, the horizon for future control
    requirements is ambiguous at best. In these situations, the plant
    operator is forced to guess the most likely compliance scenarios so
    that the most robust capital investment decisions may be made for the
    plant and the operator's overall portfolio of plants.
        This uncertainty even exists where there are regional programs in
    place or under development to address specific regional air concerns.
    For example, the Western Regional Air Partnership, a group consisting
    of nine western States, tribal governments and various Federal
    agencies, has developed a specific proposal to address the impact of
    SO2 emissions on regional haze. Although this program may
    prove to be an effective tool for addressing this specific
    environmental concern, generators located throughout the region still
    have to comply with a series of other regulations including New Source
    Review, mercury and even possibly NOx requirements to further address
    regional haze concerns. Again, even for those generators that believe
    they understand what is required of them for SO2 in terms of
    regional haze requirements, their actions to comply with WRAP will be
    greatly impacted by other regulations. By continuing to apply
    additional programs in a piecemeal approach, operators will continue to
    be faced with significant ambiguity in terms of how to invest in
    existing generation as well as in new generation, particularly coal-
    fired facilities.

        Question 4. Could you tell us approximately how efficient are your
    current fleet of plants, by fuel type? How has that changed over the
    last 15 to 20 years?
        Response. While PG&E National Energy Group is a member of the Clean
    Energy Group, with regard to fleet and specific plant information, I
    have access to only data on our company. PG&E NEG, with assets in every
    region of the country, has ownership and management interests in a
    generation portfolio of over 7,500 MW in operation, and over 10,000 MW
    in either construction or advanced development. Our generating fleet
    includes coal-fired facilities, developed both prior to and after
    enactment of New Source Performance Standards (NSPS), natural gas-fired
    facilities, waste coal facilities, as well as wind, hydroelectric, and
    pumped storage. With the exception of our Brayton Point Generating
    Station (on-line date 1974), Salem Harbor Generating Station (on-line
    date 1952) and our hydroelectric and pumped storage facilities, the
    rest of our operating assets have either come on-line or been repowered
    since 1990.
        Specific information regarding heat rates by facility is considered
    proprietary information by PG&E National Energy Group. However, in
    general terms, new natural gas-fired combined-cycle facilities
    represent the most fuel-efficient fossil fuel-fired plants in the
    country. In terms of coal-fired facilities, plants that are fully
    controlled with state-of-the-art emission control technologies tend to
    be less efficient than comparable plants that are not operating similar
    controls. This characteristic exists because the emission control
    technologies require a significant amount of energy to operate and
    therefore, reduce the net amount of electricity that a plant may send
    to the transmission grid for sale. As a plant's efficiency goes down,
    the amount of carbon dioxide (CO2) emissions per megawatt of
    electricity generated goes up. This is an important reason why
    CO2 emissions should be addressed through comprehensive
    legislation at the same time other emissions are addressed. By applying
    a cost to CO2 emissions through a market-based program and
    by revising the New Source Review requirements to promote efficiency
    improvements, comprehensive air legislation will enable plant operators
    to develop balanced compliance strategies for all four emissions.
        In terms of environmental performance, the record at PG&E NEG's
    facilities has been, and will continue to be, notable. For example,
    PG&E NEG was the first company in the country to install SCR on a
    natural gas plant and on a coal-fired plant, and also the first to
    install SNCR on a coal-fired plant. Currently, our hydroelectric
    facilities located in Vermont have received the Governor's Award for
    Environmental Excellence in Pollution Prevention. Our hydro generating
    facilities on both the Connecticut and Deerfield Rivers are also
    charter members in EPA's National Environmental Achievement Track Award
    Program, and are the only hydroelectric facilities in the United States
    so designated. Our coal-fired facilities in New Jersey and waste coal-
    fired facilities in Pennsylvania have been recognized by their
    respective State agencies for their environmental performance over the
    years. Examples of awards these facilities have received include two
    State of New Jersey Silver Track I Awards from the Department of
    Environmental Protection, an Excellence in Reclamation Award for the
    Department of Interior (for our waste-coal facilities), and
    Pennsylvania's Governor's Award for Environmental Excellence.

        Question 5. Based on the EPA analysis from last week, it seems that
    company revenues could rise significantly under a 4-p future. For
    example, EPA said that the standard technology scenario with the 4-
    pollutant bill (Scenario A) would show electricity revenues of $84.5
    billion more than the reference case with no new controls. But, the
    incremental cost of the 4-p controls would only be $16.5 billion. That
    seems to leave a profit of $68 billion for the industry. Do you have
    any comments on those numbers? These numbers are based on the enclosed
    chart prepared by the National Wildlife Federation.
        Response. In general, I do agree that under certain scenarios,
    asset values and company revenues could rise for many companies. But
    the ratio of revenues to costs will not always resemble these numbers
    under a multi-pollutant scenario. The amount by which asset values and
    revenues will change depends on how the program is implemented,
    including the timelines and emissions reduction targets selected, the
    allocation method used to provide allowances to sources, and the
    flexibility provided the industry in meeting specified emission
    reduction targets.

        Question 6. Could you elaborate on your remarks regarding New
    Source Review?
        Response. First, I would like to reiterate hat the Clean Energy
    Group proposal does not eliminate the New Source Review (NSR) Program.
    As a matter of principle, the Clean Energy Group supports the goals and
    objectives of NSR. However, CEG believes that the existing NSR program
    must be changed to ensure that it complements the integrated program we
    recommend by facilitating expedient emissions reductions, promoting
    clean energy sources, and encouraging efficiency improvements without
    imposing unnecessary costs and delays.
        Under the Clean Energy Group proposal, Section 165 of the Clean Air
    Act would be amended such that the New Source Review (NSR) and
    Prevention of Significant Deterioration (PSD) applicability criteria
    for affected units and the requirements for new units are revised. The
    proposed changes to NSR, coupled with the emission reduction targets
    proposed, would benefit both new and existing plants without negatively
    impacting the environment. The NSR process is altered and streamlined
    and would expedite capital additions to existing facilities and the
    development of new generation.
        Physical changes or changes in the method of operation at existing
    units will not be subject to NSR/PSD review if the project is not a
    ``reconstruction'' under EPA regulations and does not result in an
    increase of the unit's emission rate on a pound/megawatt hour basis. By
    using a unit's emission rate in terms of emissions per power output as
    a metric for NSR applicability, operators will have greater flexibility
    for improving energy efficiency at their plants, while still being
    subject to the overall emissions caps established under the
    legislation. Furthermore, projects, both large and small, that increase
    a unit's emission rate will be subject to the NSR rules as they exist
    today.
        The NSR regulations shall continue to apply to new units. New
    sources will be subject to existing state-of-the-art control technology
    requirements and will also be subject to the existing siting and impact
    analyses currently conducted prior to approving a new plant. The
    technology requirements will be revised, however, so that the
    definition of Lowest Achievable Emission Rate (LAER) technology
    includes limited economic considerations as well as the existing
    technical feasibility criteria. This change in definition will avoid
    situations in which costly incremental investments are required in
    control technologies with minimal improvements in emissions control
    performance.
        The NSR regulations will also be revised so that new sources will
    not be required to obtain emission offsets. By maintaining the existing
    siting and impact analyses coupled with the national tonnage caps on
    SO2, NOx, mercury, and CO2, the burdensome offset
    requirements may be eliminated without adversely impacting air quality.
    By eliminating the offset requirement while maintaining the other NSR
    safeguards, clean new sources will be positioned to provide ever-
    increasing competition against more polluting generating sources.

        Question 7. Mr. Anderson of DTE mentioned the need for mandatory
    reporting of greenhouse gas emissions. I'm working on legislation with
    Senator Corzine and other members of the committee to establish such an
    inventory registry. Do you have a view on how that should be
    structured?
        Response. At a national level, a greenhouse gas registry provides
    value if it assures consistency across jurisdictions in the methodology
    and format in which greenhouse gas emissions (both historic and future)
    are reported. A properly designed registry should also provide a
    mechanism that allows project-based reductions from any sector to be
    measured, verified and reported in a consistent and transparent manner.

        Question 8. Given the enormous market changes in the power
    generation business, it seems that certainty in terms of environmental
    regulations is very important. How important is certainty, and what
    kind of savings can your businesses gain from it?
        Response. Understanding what is going to be expected of a business
    in terms of capital expenditures is very critical to our industry. The
    power generation sector is in the midst of transition from a regulated
    to a competitive marketplace. According to the Electric Power Supply
    Association, for example, in 1997, competitive power suppliers
    accounted for only about 8.5 percent of the nation's installed
    generating capacity, but as of the end of 2001, their share is likely
    to be about 36 percent. This percentage will only increase.
        The implications of this shift from regulated to competitive power
    supplies from a regulatory certainty aspect are enormous. Competitive
    power suppliers must make long-term investments (anywhere from 15 to 25
    years) and rely on the market to recoup these investments, not captive
    ratepayers. Therefore, competitive power suppliers base investment
    decisions on the best available information in terms of current and
    future regulations and market dynamics. To mitigate risks, competitive
    power suppliers will undertake a number of activities, including
    selecting technologies that are proven and positioned to respond to
    potential changes in, for example, environmental regulations. It is not
    by accident that of the 68 GW that will be added to the system, 61 GW
    are natural gas-fired. The uncertainty of future regulations with
    regard to SO2, NOx, mercury and CO2 requirements
    are factored into technology selection, just as are future power and
    fuel prices.
        In terms of the exact savings, the Clean Energy Group has not
    modeled what it would cost the industry to move forward with a program
    that sets national standards for three pollutants now and then sets
    standards for carbon at a later date. However, the EPA apparently
    conducted that analysis as part of a larger assessment of multi-
    pollutant strategies that it performed within the last 2 years. In
    January 2001, EPA presented findings of this analysis at the Electric
    Utility Environmental Conference in Tucson, Arizona. EPA indicated that
    the cost savings from implementing a comprehensive strategy versus
    implementing comparable requirements in a piecemeal fashion would be on
    the order of 30 percent per year.

        Question 9. Have you seen the EPA straw proposal that was
    circulating early this year? If you have, what comments did you provide
    any Federal agency regarding it?
        Response. EPA did not provide my company with a copy of its straw
    proposal, therefore we did not provide any Federal agency with
    comments.
                                   __________
        Statement of Jeffrey C. Smith, Institute of Clean Air Companies
        Good morning, Mr. Chairman. I am Jeff Smith, Executive Director,
    Institute of Clean Air Companies (``ICAC'' or ``the Institute''). The
    Institute is the nonprofit, national association of companies that
    supply air pollution control and monitoring technology for all types of
    stationary sources, including coal-fired power plants that are the
    subject of this hearing. Members supply the complete spectrum of
    competing control technologies for emissions of mercury, sulfur dioxide
    (SO2) and nitrogen oxide (NOx), along with all other
    criteria pollutants and the 189 hazardous air pollutants identified to-
    date. Thus the Institute speaks for the entire industry, not just one
    technology. We do not, however, supply technology for CO2
    control and I will therefore not address CO2. For more on
    the Institute, see www.icac.com. I have submitted detailed testimony
    for the record, but in the few minutes I have here this morning, I will
    begin with the ``bottom-line.''
    I. Summary
        The air pollution control technology industry has the technology to
    achieve the NOx, SO2, and mercury reductions contemplated by
    Sen. Jeffords' bill (S. 556), and the resources to deliver that
    technology within the timeframes the bill contemplates. Of course there
    will be site-specific issues, but in the 31-year history of the Clean
    Air Act the air pollution control technology industry has always
    delivered on the charge this committee has given it. There is no reason
    to believe this time will be any different. A multi-pollutant approach
    makes sense both technically and cost-wise. And experience strongly
    suggests that a multi-pollutant bill will be the committee's one chance
    to achieve the twin goals of an adequate energy supply and clean air.
    Here is why we feel this way.
    II. Discussion
        Well-Demonstrated, Conventional Control Technologies Exist to
    Reduce SO2, NOx, and PM2.5 Emissions.--There is
    no real debate that reliable, demonstrated-in-practice control
    technology exists for coal-fired power plants to remove 95 percent of
    sulfur dioxide (SO2) emissions, 99.9 percent of particulate
    matter (PM) emissions, and 90+ percent of nitrogen oxide emissions
    (NOx). Members of our industry are guaranteeing these removal levels
    today. The harder question is what can be done to control mercury
    emissions, and I will focus my testimony on that question.
        Air Pollution Control Technology Markets Have Worked Well.--The 31-
    year history under the Clean Air Act shows that clear, enforceable
    standards yield cost-effective compliance options. Study after study
    shows a strong link between establishment of regulatory drivers and
    technical performance and cost improvement. This is true even when
    control options have been limited or untested at the time the rules
    were introduced. The advanced state of technologies for controls of
    sulfur dioxide (SO2) and nitrogen oxide (NOx) emission was
    reached after (not before) regulatory drivers were adopted. Total costs
    (capital and O&M) fall dramatically as control technology moves from
    research and development to full-scale commercialization. In the case
    of selective catalytic reduction--widely used to remove NOx emissions
    from coal-fired boilers--the costs in $/ton removed fell 80-90 percent
    from 1989 to 1998. See, e.g., Environmental Regulation and Technology
    Innovation: Controlling Mercury Emissions from Coal-Fired Boilers,
    Northeast States for Coordinated Air Use Management, Boston, September
    2000.
        Technology users (e.g., electric utility industry) and suppliers
    have proven to be more innovative than one may expect at the outset of
    a regulatory program. Electric utility users are outstanding in their
    ability to use control technology effectively. The air pollution
    control technology industry, like nature herself, is extremely
    competitive, ``red in tooth and claw.'' This is good for technology
    users and government regulators, because it yields increasingly cost-
    effective solutions; if your competitor discovers a way to reduce
    emissions more cost-effectively, you will be out of business quickly if
    you do not improve as well. And many have exited our industry for that
    reason.
    The key to well-functioning markets is regulatory certainty. If the
            goal is technological innovation, then issue a clear, certain,
            performance-based mandate
        Dollars spent on compliance with clean air mandates, such as S.
    556, are not lost down a black hole, either. They are recycled in the
    economy, generating jobs in construction and materials fabrication, in
    addition to jobs in air pollution control technology companies. Indeed,
    compliance with the NOx SIP Call alone is creating 25,392 person-years
    of employment a year during 1999-2005, less than 10 percent of which is
    in the air pollution control technology industry. (Appendix III).
        Although we do not have expertise in macroeconomic models, we note
    that just last month the utility industry's own North American Electric
    Reliability Council (NERC) reported that generating capacity margins in
    the United States will increase markedly over the next 5 years, peaking
    at more than 20 percent in 2004. NERC says 138,000 MW of the 245,000 MW
    of proposed new merchant generation will come on-line by 2005, far
    outstripping a projected 63,800 MW increase in electricity demand. (For
    more details, go to www.nerc.com). Whatever the relevance of the NERC
    report, however, we believe as discussed below that control technology
    exists to allow this nation to continue to burn coal and cost-
    effectively achieve the NOx, SO2, and mercury emission
    reduction goals of S. 556.
        Development of Mercury Removal Technologies Will Be No Different.--
    It is reasonable to assume that the traditional, successful workings of
    the air pollution control market will apply to the development and
    enhancement of mercury emission controls. The technology supplier
    industry is more competitive that ever. Utilities are increasingly
    sophisticated as customers of technology, and more demanding of cost-
    effectiveness in a deregulated environment. The development focus for
    mercury controls is in many areas on optimizing controls already
    demonstrated for other pollutants (e.g., SO2, PM, NOx), so
    the learning curve is not as steep. Financial incentives for our
    industry are sufficient to invest in research and development,
    particularly once a clear, certain regulatory goal is set. Even in the
    absence of a legislative directive, there are a large number of mercury
    control demonstrations underway along with significant investment by
    both technology suppliers and end-users (Appendix II). Indeed, we have
    already seen cost estimates of mercury-and multi-pollutant control by
    the U.S. Environmental Protection Agency (EPA) and others fall
    dramatically.
        A Multi-Pollutant, Performance-Based Approach Is Sensible from a
    Technology-Development Standpoint.--The Institute applauds and confirms
    S. 556's approach. It allows both utilities and technology suppliers
    like ourselves to develop integrated compliance plans and maximizes
    incentives for innovation and competition.
        ICAC also supports performance-based approaches, which harness
    market mechanisms. As Sen. Smith noted at the committee's recent
    hearing on November 1st, original estimates of the cost of removing
    SO2 in the acid rain program were $7 billion, but the actual
    cost was about $1 billion. This is a dramatic example of the market's
    power, as well as the positive effects of regulatory certainty on cost
    and performance improvements of air pollution control technology.
        A Multi-Pollutant, Performance-Based Approach Is Sensible from
    Policy and Cost-Effectiveness Standpoints Too.--This multi-pollutant
    approach has the potential to lead to simultaneous compliance with
    numerous regulatory programs, including acid rain, ozone attainment
    (both the 1-hour and 8-hour), regional haze, and fine particulate
    (PM2.5). We feel insufficient attention has been given to
    the benefits of PM2.5 reductions that S. 556 would achieve
    by lowering SO2 and NOx levels (which contribute to
    PM2.5 formation in the atmosphere). Indeed, by default
    PM2.5 is the fifth pollutant controlled in this bill.
        The effect of this multi-pollutant approach is to lower the
    evaluated cost for each individual pollutant that may otherwise be
    addressed in a separate regulatory program. For example, if a scrubber
    is installed to control acid rain and PM2.5, but it reduces
    mercury emissions as well, only a portion of its cost should be
    attributed to compliance with the mercury reduction requirements. Cost
    estimates for mercury controls should therefore be scrutinized
    carefully for how they allocate technology costs among various
    regulatory elements of a multi-pollutant bill.
        Conventional Emissions Controls Are Removing Mercury Without Even
    Trying.--As EPA's data shows (see Appendix I), existing controls are
    already removing mercury, and in some cases large amounts of mercury,
    as a side-benefit of the removal of other pollutants. For example,
    controls to remove SO2 may significantly reduce mercury and
    PM2.5 (precursor) emissions as well. Mercury removal
    efficiencies depend on numerous factors. Among the biggest is whether
    the coal burned is bituminous or sub-bituminous.
        Control Technology Demonstrated Today Can Achieve Mercury Removal
    of 90 percent on Bituminous Coals, and 70 percent on Sub-Bituminous
    Coals.--Of course there may be site-specific issues, but in general the
    industry believes technology available today can achieve total mercury
    reductions of 90 percent on bituminous coals, and 70 percent on sub-
    bituminous coals. This conclusion is supported by measurement programs
    the electric utility industry conducted for EPA (Appendix I). What is
    the most cost-effective approach will differ for site-specific reasons,
    such as the type of control equipment currently being used.
        Research on mercury control technology has been underway in the
    United States for a decade, and the enactment of a multi-pollutant bill
    will, as discussed above, stimulate more R&D and results. Appendix II
    is a partial list of on-going R&D projects. They are in general
    designed for 50-70 percent mercury removal by 2005, and 90 percent
    removal by 2010, with the additional objective of cutting costs by 50-
    75 percent by 2010. The important point here is that the R&D is
    maturing to the point of full-scale demonstrations today and covers a
    wide range of coal types and existing equipment configurations. Note
    that many of these project teams include utility end-users as well as
    technology developers, which indicates the wide-ranging, cooperative
    effort underway. By the required compliance deadline, therefore, we
    believe this R&D, along with already-demonstrated technology, will
    yield a variety of increasingly cost-effective options for achieving
    the NOx, SO2 and mercury removal requirements of S. 556.
        (A question for the committee, however, is whether it makes sense
    to base the level of required control on what can be guaranteed today,
    or rather what history and other factors show will likely be available
    in seven or ten or 12 years when compliance is required. This is
    particularly appropriate since as discussed below it is not likely that
    this program will be amended mid-stream, and indeed the premise of
    certainty in this multi-pollutant approach is that the rule will not be
    amended. An answer is suggested by hockey great Wayne Gretsky, who said
    a reason for his success was that he skated to where the puck was going
    to be, not to where it was.)
        The committee does not have to pick technology winners and losers;
    the marketplace is adept at doing so. The course of technology
    development is too unpredictable to say what the best approach will be
    in 7 or 10 or 12 years for each unique application. Industry experience
    strongly indicates that there will not be one universal approach. We
    suggest you must simply have a reasonable assurance that technology
    markets are working and that you have provided an incentive for
    development. As I have said, these markets will continue to work well,
    and S. 556 provides the requisite incentives for technology development
    by providing clear goals without specifying the precise compliance
    technology.
        This Is Likely the Committee's One Chance to Assure Twin Objectives
    of Adequate Energy Supply and Clean Air.--For now and the near future,
    an adequate energy supply arguably depends on burning coal. Coal-
    burning electric utilities are the largest industrial source of air
    pollution, with adverse health effects well-documented by scientific
    and medical authorities. Fortunately, air pollution control technology,
    if required, can allow coal to be consistent with human health and
    environmental imperatives. This, it should be noted, is likely the
    committee's one chance to assure these goals are met. The history of
    the Clean Air Act shows that it is not easily amended, and indeed the
    premise of certainty in this multi-pollutant approach is that the law
    will in fact not be amended mid-stream.
    III. Conclusion
        The multi-pollutant, performance-based approach reflected in the
    Jeffords bill (S. 556) makes sense from a technical and cost viewpoint.
    The required reductions for NOx, SO2, and mercury are
    achievable assuming, in the case of sub-bituminous coals, continued
    technological progress with control technology, which is a reasonable
    assumption. Control technology markets have worked well and will
    continue to do so, yielding progressively more cost-effective
    compliance solutions. Therefore, the issue of control technology should
    not determine whether the NOx, SO2, and mercury removal
    requirements in this bill, or a similar one, are enacted. History under
    the Clean Air Act suggests strongly that consideration of a multi-
    pollutant bill is likely to be the committee's one chance to assure our
    Nation's twin goals of adequate energy and clean air over the
    foreseeable future.
        Thank you for this opportunity to testify. I look forward to your
    questions.
                                   appendix i

     The Mercury Reductions Conventional Controls Can Achieve on Coal-Fired
    Power Plants (Without Even Trying) (average mercury control, percentage)
    ------------------------------------------------------------------------
             Technology*             Bituminous Coal     Sub-bituminous Coal
    ------------------------------------------------------------------------
    CS-ESP......................  29 (18).............  3 (9)
    HS-ESP......................  11 (9)..............  0 (12)
    01FF                          89 (6)..............  73 (6)
    SDA+ESP.....................  45 (3)..............  0 (9)
    SDA+FF......................  93+ (9).............  23 (9)
    CS-ESP+Wet FGD..............  78 (6)..............  16 (9)
    HS-ESP+Wet FGD..............  39 (9)..............  8 (9)
    FF+Wet FGD..................  97 (6)..............  ----
    ------------------------------------------------------------------------
    *CS-ESP=cold-side ESP; HS-ESP=hot-side ESP; SDA=dry scrubber; FGD=wet
      scrubber
    Source: USEPA, ICR Control Data Summary, 4/24/01,
    www.epa.gov/ttn/atw/combust/utiltox/utoxpg.html. Parenthetical number
      denotes number of tests. I Technology* Bituminous

                                 hs-appendix ii
    Research on Mercury Emissions Control Technology
        A great deal of research is currently underway regarding the
    capabilities of technology to remove mercury from coal-fired power
    plants. Much of this R&D focuses on enhancements of conventional
    technology, that is, technology that would be used anyway to remove
    SO2, NOx, and/or PM2.5 to achieve compliance with
    programs such as acid rain, regional haze, and attainment of the one-
    and 8-hour ozone and fine particulate (PM2.5) ambient
    standards. For example, R& D is underway to assess the ability of the
    most widely used high efficiency NOx control technology, selective
    catalytic reduction (SCR), to oxidize mercury so that it can be removed
    by other control technology that might already be in-place or installed
    for other purposes. Other private R&D will demonstrate (full-scale) the
    conversion of a technology that has been successfully applied to
    control mercury emissions at waste combustors to coal-fired power
    plants.
        Since, however, private research is to some extent just that, i.e.,
    private, for competitive reasons, we have supplied the following non-
    exclusive list of ongoing public research projects funded by the U.S.
    Department of Energy. These projects are nearly all in advanced
    development stages. They are in general designed for 50-70 percent
    mercury removal by 2005, and 90 percent removal by 2010, with the
    additional objective of cutting costs by 50-75 percent by 2010. Many of
    these technologies would tie-in mercury controls with processes that
    reduce other air pollutants such as SO2 and NOx. This
    partial list illustrates the wide-range of on-going research based only
    on an expectation of a legislative directive. Note that many of these
    project teams include utility end-users as well as technology
    developers, which indicates the market forces driving development. (For
    more information, go to the press releases dated June 18, 2001 and
    October 16, 2001, at www.fe.doe.gov/).
    McDermott Technology, Alliance, Ohio
        Project Summary: The goal is to commercialize a method for enhanced
    control of mercury emissions from Michigan South Central Power Agency's
    55 MW Endicott Station and Cinergy's 1,300 MW Zimmer Station (OH)
    equipped with wet FGD systems. The two specific objectives are
    demonstration of 90 percent total mercury removal (stack emission
    versus mercury in the coal burned) and annual levelized costs 50-75
    percent less than commercial available, activated carbon mercury
    removal technologies.
    ADA-Environmental Solutions, Littleton, CO
        Project Summary: This project involves testing on a plant owned by
    Alabama, a plant owned by Wisconsin Electric power company, and two
    PG&E sites. The company's technology requires minimal equipment and
    minimal downtime for installation. Flue gas is injected with a sorbent
    of activated carbon which combines with the mercury so that it can be
    removed with a filter.
    The Energy & Environmental Research Center at the University of North
            Dakota, Grand Forks, ND
        Project Summary: The Energy & Environmental Research Center at the
    University of North Dakota, Grand Forks, ND, will develop an advanced
    hybrid particulate collector (AHPC) that promises to remove 90 percent
    of all mercury emissions at a price lower than today's estimates. The
    AHPC combines the best features of electrostatic precipitators and
    baghouses in a configuration that boosts efficiency between particulate
    collection and dust disposal. By doing so, the problem ESPs generally
    have in collecting excessive fine particulates is solved as is re-
    collecting dust in conventional baghouses. The system is to be bench-
    scale batch tested so that new work is tied to earlier results; the
    AHPC would also undergo larger, pilot-scale testing on a coal-fired
    combustor. The technology could be retrofitted to ESP-equipped plants,
    installed in a new plant or applied to industrial boilers requiring
    mercury control. Partners are W.L. Gore & Associates, Elkton, MD, and
    the Otter Tail Power Company, Fergus Falls, MN, which will host field
    tests.
    URS Group, Inc., Austin, TX
        Project Summary: URS Group, Inc., Austin, TX, will pilot test
    mercury-oxidation catalysts already identified as being effective
    through earlier, smaller-scale research funded by DOE. The project's
    pilot tests, conducted at plants using wet flue gas desulfurization
    systems and particulate collection systems, are on a larger scale and
    will be conducted for longer periods to provide data for future, full-
    scale designs. Mercury-oxidation potential will be measured continually
    to provide longer-term catalyst life data. The project is applicable to
    about 90,000 megawatts of generation capacity. Project partners are the
    Electric Power Research Institute, Palo Alto, CA, which will co-manage
    and co-fund the pilot tests, and two utilities.
    CONSOL, Inc., Library, PA
        Project Summary: CONSOL, Inc., Library, PA, will construct a pilot-
    plant facility producing flue gas from a coal-fired utility to test
    technologies that remove not only mercury, but will reduce nitrogen,
    sulfur and carbon dioxide emissions as well. The facility will be
    composed of an air preheater, an electrostatic precipitator (ESP) to
    collect fine particulates, and an alkaline-sorbent injection system to
    control sulfur condensation. An alkaline additive is injected into the
    air heater, which will operate at 200-250 deg. F, to neutralize the
    sulfur. Mercury will be collected with the fly ash in the ESP. The work
    addresses several utility issues: mercury removal at lower-than-normal
    temperatures, using spray cooling to lower temperatures, and the
    additive's effects on specific plant components performance.
    Southern Research Institute, Birmingham, AL
        Project Summary: Southern Research Institute will test the
    effectiveness of calcium-based sorbents and oxidizing agents in
    controlling mercury from coal plants by using a technique that combines
    mercury oxidation with adsorption. Incorporating mercury oxidation
    along with lime and silica lime additives produces more efficient
    sorbents that remove sulfur dioxide in addition to mercury. Pilot-scale
    studies will be performed on a coal-combustion system using a
    recirculating fluidized bed for multi-pollutant control. Lime and
    silica lime sorbents will be tested because they are chemically similar
    to wastes produced by dry scrubbers. Using calcium-based sorbents could
    lower mercury removal costs by almost 50 percent from current
    estimates. Project partners are ARCADIS Geraghty & Miller Inc., Denver,
    CO; Southern Company Services, Birmingham, AL; and the Tennessee Valley
    Authority, Knoxville, TN.
    Powerspan Corp., Durham, NH
        Project Summary: Powerspan Corp. will pilot test a multi-pollutant
    technology that converts mercury into mercuric oxide, nitrogen oxide to
    nitric acid and sulfur dioxide to sulfuric acid from coal-fired flue
    gas streams with gas flow rates up to 4,000 cubic feet/minute. Fine
    particulates will also be collected. Mercury capture is to exceed 90
    percent, and an understanding of what influences mercury removal is to
    be investigated. The project will be conducted at FirstEnergy
    Corporation's R.E. Burger Generation Station in Akron, OH.
    Apogee Scientific Inc., Englewood, CO
        Project Summary: Apogee Scientific Inc. will assess up to a dozen
    carbon-based and other sorbents that are expected to remove more than
    90 percent of mercury and cost 40 to 75 percent less than commercial
    sorbents because they feature inexpensive precursors and simple
    activation steps. Six to 12 sorbents will undergo fixed-bed adsorption
    tests with the most promising three to six being further evaluated by
    injecting them into a pilot-scale electrostatic precipitator and
    baghouse. Commercial flue gas desulfurization activated carbon will
    provide the baseline for comparisons. A portable pilot system will be
    constructed and would accommodate a slipstream ESP or baghouse at
    minimal cost. Tests will be conducted at Wisconsin Electric's Valley
    power plant in Milwaukee, WI, and Midwest Generation's Powerton Station
    in Pekin, IL. The project team consists of URS Radian, Austin, TX; the
    Electric Power Research Institute, Palo Alto, CA; the Illinois State
    Geological Survey, Champaign, IL; ADA Environmental Solutions,
    Littleton, CO; and Physical Sciences Inc., Andover, MA.
    CONSOL Energy Inc, South Park, PA
        Project Summary: CONSOL will demonstrate a multi-pollutant system
    to reduce NOx, SO2, mercury, acidic gases, and fine
    particles from smaller coal plants for less money than it costs to
    control NOx and SO2 separately. Among the innovations CONSOL
    plans to install at the AES Greenridge Power Plant near Dresden, NY, is
    a catalytic NOx reduction technology that works inside the plants
    ductwork, a low-NOx combustion technology that burns coal mixed with
    biomass, and a flue gas scrubber that is less complex and half the cost
    of conventional systems.
    The Energy and Environmental Research Center at the University of North
            Dakota, Grand Forks, ND
        Project Summary: The project addresses the impact that SCR, SNCR,
    or flue gas conditioning systems have on total mercury emission and on
    the speciation of mercury. The completion date for the final report is
    June 30, 2002.
                                  appendix iii
        A. Employment Created by NOx SIP Call Controls Alone

    ------------------------------------------------------------------------
                                                      Person-    Average No.
                       Category                     Years ('99-  of Jobs per
                                                        05)          Year
    ------------------------------------------------------------------------
      Direct Labor
        System Design, Manufacture, Supply........       16,495        2,356
        Construction/Installation.................       16,915        2,416
        Component/Auxiliary.......................        8,750        1,250
        Other Technology-specific--Raw Materials,         3,090          442
         Outside A/E and Consulting Firms, Testing
         (Performance, Startup)...................
        Other Direct--Additional Utility Support         14,000        2,000
         Staff, R&D, Sales Reps, Consults./
         Services.................................
            Subtotal Direct Labor.................       59,250        8,464
            Indirect Labor........................      118,500
                                                         16,928
            Total SIP Call NOx-related Labor......      177,750       25,392
    ------------------------------------------------------------------------

    Assumptions/Comments
          This table shows employment created directly from the NOx
    SIP-call and Section 126 Petitions over the 7-year period 1999-2005. It
    does not include effects from other market influences such as new gas
    turbine/combined cycle plants, new coal-fired units, refinery/process
    heaters, industrial boilers, IC engines, and other industrial sources
    (e.g., cement, steel), which would substantially increase the labor
    figures given. Also not included are effects from other regulatory
    drivers such as ozone attainment controls outside the SIP Call region
    (e.g., California, Texas), new source review, regional haze, and multi-
    pollutant.
          The figures are based on assumptions and analysis from a
    March 1994 study prepared by H&W Management Science Consultants (co-
    sponsored by ICAC) for the U.S. EPA entitled, ``Employment Created by
    NOx Control and Continuous Emission Monitoring Requirements of Title IV
    of 1990 Clean Act Amendments.'' This study developed labor factors
    associated with specific NOx-control technologies in terms of labor
    hours per kW based on in-depth interviews with air pollution control
    industry stakeholders. These factors were applied to projections of
    affected megawatts.
          The above table assumes that the SIP Call will generate
    110 GW of SCR, 24 GW of SNCR/Reburn, and 34 GW of low NOx burner (LNB)
    and other activity from 1999-2005. These assumptions are consistent
    with ICAC and H&W's ``Air Pollution Control Equipment Market
    Forecasts,'' Issue No. 20, September 2001. After applying the labor
    factors, in terms of labor hours, SCR, SNCR, and LNB account for 84
    percent, 6 percent, and 10 percent respectively.
          This analysis assumes 2,080 person-hours in a year. It
    further assumes the technology costs from the March 1994 study, i.e.,
    $60/kW for SCR, $20/kW for SNCR/Reburn, and $20/kW for LNB/Other
    combustion modifications. Higher (lower) costs will inflate (deflate)
    employment figures proportionately.
          Economists frequently multiply the number of direct
    person-hours by two, and sometimes three, to estimate indirect
    employment. The purchase power associated with goods and services
    provided by direct labor is called ``the multiplier effect.'' To be
    conservative, we applied a ratio of two indirect jobs for each direct
    job in this analysis.
    B. Employment in the Air Pollution Control Technology Industry
        Dollars spent on compliance are recycled in the economy, generating
    jobs in construction and materials fabrication, in addition to jobs in
    air pollution control technology companies. According to the U.S.
    Department of Commerce, in 1997 air pollution control equipment firms
    employed over 111,000 men and women, with companies and jobs arrayed
    throughout the United States, as shown in Table 1.

        Table 1. Employment in the Air Pollution Control Equipment Sector
            (1997)* (States Represented by committee members, Total)
    ------------------------------------------------------------------------
                                                                   Revenues
                         State                       Number of    (millions
                                                        Jobs     of dollars)
    ------------------------------------------------------------------------
    California....................................       13,107      1,848.1
    Colorado......................................          993        139.9
    Connecticut...................................        1,681        237.0
    Delaware......................................          707         99.6
    Florida.......................................        3,235        456.1
    Idaho.........................................          235         33.2
    Missouri......................................        2,862        403.5
    Montana.......................................          225         31.7
    Nevada........................................          218         30.7
    New Hampshire.................................          334         47.1
    New Jersey....................................        6,736        949.7
    New York......................................        7,204      1,015.8
    Ohio..........................................        6,569        926.2
    Oklahoma......................................        2,235        315.1
    Oregon........................................        1,025        144.4
    Pennsylvania..................................        9,841      1,387.5
    Rhode Island..................................          259         36.4
    Vermont.......................................          140         19.7
    Virginia......................................        2,012        283.7
        TOTAL.....................................      111,560       15,730
    ------------------------------------------------------------------------
    *All figures taken from U.S. Department of Commerce, International Trade
      Administration, Environmental Technologies Exports, Environmental
      Industry of the United States, January 1999, Washington, DC.

                                     ______

      Responses of Jeffrey C. Smith to Additional Questions from Senator
                                    Jeffords
        Question 1. Out of all the emission reduction requirements that Mr.
    Holmstead identified (the mercury rule, the NOx SIP Call, the fine
    particulate standard, etc.) as probable in the next 2-5 years, which
    ones do you believe will be implemented, whether or not a multi-
    pollutant bill is enacted?
        Response. As Yogi Berra reportedly said, ``Predictions are tough,
    especially about the future.'' The answer to your question depends on
    assumptions about the future actions of the Bush (and subsequent)
    Administrations. But for the reasons stated below, it seems clear that
    numerous regulatory actions will be implemented in the near future
    whether or not a multi-pollutant bill is enacted.
        The NOx SIP Call will be implemented. Legal challenges to this
    action have been exhausted, and back-up regulatory drivers (the so-
    called section 126 petitions) are available if for some reason
    enforcement of the NOx SIP Call lags. In addition, a lot compliance has
    already occurred, and planning for compliance is far along everywhere.
    All this provides substantial momentum. Finally, atmospheric modeling
    continues to show that full implementation of the NOx SIP Call is
    necessary to achieve attainment of the 1-hour ozone national ambient
    air quality standard in the eastern half of the United States.
        NOx reductions outside the NOx SIP Call region will be implemented.
    The reason for the NOx SIP Call is that NOx is a precursor of ozone,
    and NOx is also transported across State lines interfering with the
    ability of downwind States to attain the 1-hour standard. Beyond the
    NOx SIP Call region, many States (e.g., Texas, California) are
    requiring significant reductions of NOx emissions from electric
    utilities. These NOx reductions outside the SIP Call region are certain
    to continue. In addition, EPA plans to re-propose NOx rules next month
    for two States (Georgia and Missouri) whose original NOx limits were
    invalidated by the U.S. Court of Appeals for the District of Columbia
    Circuit in the judicial challenge to NOx SIP Call. This proposal will
    lead to compliance within the next 5 years.
        The fine particulate standard (the so-called PM2.5
    standard) will be implemented. These 1997 standards have withstood
    judicial review through the U.S. Supreme Court. Epidemiological studies
    since 1997 have confirmed the health reasons to regulate these
    pollutants. EPA several years ago deployed a fleet of monitors (we
    think the total number was 1,500) around the country to gather 3 years
    of data. In the face of this data, it seems unlikely that any
    Administration would not implement the PM2.5 standards. In
    order to achieve compliance with a PM2.5 standard, States
    would need to further reduce emissions of SO2 and NOx, as
    well as primary particles. S. 556 would go a long way to achieving
    these needed reductions. This is why in my testimony I called
    PM2.5 ``by default the fifth pollutant controlled in this
    bill [S. 556].'' The principle issue remaining is timing, and here we
    are less comfortable predicting the Administration's actions. Efforts
    to control PM2.5 and its precursors seem certain; whether
    controls are implemented in the next 2-5 years is less certain.
        The 8-hour ozone standard will be implemented. EPA re-proposed
    these 1997 standards several weeks ago in response to a partial remand
    by the U.S. Court of Appeals for the District of Columbia Circuit.
    Fundamentally, these rules have been upheld by the U.S. Supreme Court.
    As with the PM2.5 standards, it seems clear that the 8-hour
    ozone standards will be implemented, although how much progress will be
    made over the next 2-5 years is difficult to say. EPA's current
    schedule is to propose the new 8-your rules by mid-2002, finalize them
    by mid-2003, call for attainment/nonattainment designations by mid-
    2004, and call for attainment 3-10 years after designation(depending on
    the severity of the nonattainment), i.e., by 2007-2014. To attain these
    standards, considered somewhat more restrictive than the 1-hour ozone
    standard, States are likely to among other things require NOx
    reductions from electric utilities.
        EPA is required to reduce emissions of mercury from power plants by
    2007 under section 112 of the Clean Air Act. EPA is currently
    developing rules to require power plants to reduce mercury emissions.
    There is a work group of the Clean Air Act Advisory Committee that is
    assisting the agency (ICAC is a member of this work group). The next
    work group meeting is December 18, 2001. At present, it is unclear what
    mercury reduction requirements EPA will propose, and exhaustive
    litigation is expected. Nevertheless, the Clean Air Act is clear that
    these rules must be promulgated. Moreover, as discussed below, several
    States are developing their own mercury reduction requirements for the
    electric utility industry. Although it is unclear which if any of these
    State approaches will be implemented over the next 2-5 years, it seems
    certain that public and State interest in cutting mercury emissions
    will remain due to the high number of lakes across the country that are
    subject to fish consumption advisories due to mercury deposition and
    the highly toxic and well-publicized human health effects of mercury.
        Regional haze rules will be implemented beyond the next 2-5 years.
    Although compliance with the regional haze rules will occur beyond the
    next 2-5 years, it is worth noting that S. 556 would go a long way
    toward achieving compliance with the Clean Air Act's goal of preventing
    and remedying visibility impairment. This is because anthropogenic
    visibility impairment is caused in large part by fine particles which
    preferentially scatter light. These fine particles come from emissions
    of SO2 and NOx, which would be reduced under S. 556.
        State concerns about acid rain and mercury are likely to require
    further reductions of these pollutants. For example, Massachusetts has
    imposed SO2, NOx, mercury and CO2 emission
    reduction requirements. Illinois has passed a bill putting in place a
    framework for multi-pollutant legislation, and New Hampshire and
    Michigan have proposed multi-pollutant legislation. North Carolina has
    legislation pending to control SO2 and NOx, and Connecticut
    has adopted SO2 and NOx rules. New York has draft multi-
    pollutant rules pending. New Jersey and Wisconsin are debating mercury
    reduction. It is unclear if all these States will require in-state
    power generators to achieve further emissions reductions over the next
    2-5 years, but it seems clear that in the absence of Federal
    legislation a haphazard hodgepodge of State rules will emerge. This
    will be especially inefficient for companies that have operations in
    multiple States. From an air pollution control industry/technology
    development standpoint, conflicting, sporadic State rules would not
    provide the certainty that a national rule would provide. And as I
    stressed in my testimony, certainty is the No. 1 driver of
    technological innovation in our industry.
        In sum, most of the potential emission reduction requirements Mr.
    Holmstead identified are likely to occur even in the absence of a
    multi-pollutant bill. But multi-pollutant legislation is a more
    efficient mechanism for reducing emissions across the board while
    providing regulated industry the certainty it needs to be productive
    and comply with environmental objectives. If a multi-pollutant bill is
    enacted it is likely that other potential emission reduction
    requirements will largely rely on implementation of the multi-pollutant
    bill, then fine tune emission reductions to meet localized and regional
    objectives. Part of that fine-tuning process will likely involve
    evaluating the need for additional emission reductions and include
    sources and industries not directly impacted by a multi-pollutant bill.

        Question 2. I am glad to hear that you're so optimistic about the
    technologies that will help achieve the 4-p requirements. Your
    companies are going to make them possible to implement. How many new
    jobs do you think will be created in your industry if the Clean Power
    Act becomes law?
        Response. A precise assessment of the jobs that might result from
    enactment of The Clean Power Act (S. 556) requires an extensive,
    detailed analysis beyond the scope of ICAC's current resources.
    Important in such an analysis would be careful attention to the
    synergistic effects of individual and multiple pollutant control
    technologies together with simultaneous regulatory program compliance.
        We have, however, estimated the jobs that would likely be created
    by The Clean Power Act. This estimate excludes consideration of the
    effect of the CO2 provisions (since as noted in my November
    15 testimony we do not provide technology for CO2 control).
    Our estimate is based on a variety of assumptions which we have
    identified; obviously, different assumptions would yield different
    results. Finally, this estimate is of jobs created, and does not
    include jobs lost (if any) due, e.g., to higher electricity prices that
    could result.
        As shown in the following table, we predict that S. 556 would
    create a total of 362,850 1-year jobs, or on average 60,477 1-year jobs
    per year over the timeframe 2005-2010. This estimate relates to control
    of SO2, NOx, and mercury (Hg). CO2 effects were
    not included; considerably more jobs would likely result from capital
    and labor-intensive CO2 control approaches. Reduction
    measures might include improvements in electrical generation and
    transmission, fuel switching, cogeneration, repowering, plant upgrades,
    Demand Side Management, CO2 capture, and tree planting.
    Effects from other regulatory drivers, e.g., NOx SIP-call, regional
    haze, and NAAQS were also not included. We attempted to avoid double-
    counting jobs created by installing one-type of technology (e.g.,
    scrubbers) that inherently reduces other pollutants (e.g., Hg and
    PM2.5).
        Direct labor given in the SO2, NOx, and Hg rows of the
    table below include system design, manufacture and supply, construction
    and installation, component and auxiliary labor, and other technology-
    specific labor related to raw materials, outside architect/engineering
    and consulting firms, and testing for performance/startup. The control
    technology is evolving; once a bill is enacted, there will be a greater
    incentive to improve performance while reducing cost. This may reduce
    the number of jobs created.

         Jobs Created by S. 556's NOx, SO2, and Hg Reduction Provisions
    ------------------------------------------------------------------------
                                           Person-Years      Jobs Per Year
                 Category                   (2005-10)            (avg.)
    ------------------------------------------------------------------------
    Direct Labor
        SO2 RELATED (1)...............             62,500             10,417
        NOx related (2)...............             21,490              3,582
        Hg related (3)................             16,800              2,800
        Other Direct (4)..............             21,160              3,360
                                       -------------------------------------
            Subtotal Direct Labor.....            120,950             20,159
    Indirect Labor (5)................            241,900             40,318
                                       =====================================
            Total CPA-related Labor...            362,850             60,477
    ------------------------------------------------------------------------
    Notes and Assumptions
    (1) For SO2 control, we assumed wet or dry flue gas desulfurization
      systems (``FGD,'' also called ``scrubbers'') would be the predominate
      control, along with purchasing SO2 allowances. In a study by H&W
      Management Science Consultants (H&W) for ICAC in 1982, ``Employment in
      the Air Pollution Control Industry,'' the labor content for various
      air pollution control technologies was tracked for specific projects
      from inception to completion. For dry FGD, 396 person-years were
      expended while wet FGD consumed 458 person-years. The DOE in a
      November 1999 report, ``Clean Coal Technology--The Investment Pays
      Off,'' indicated that a typical retrofit pollution control project
      employs 100-200 construction workers and an advanced power generation
      project can require thousands. Adding design, engineering, operating
      and other associated jobs increases these figures. But technology
      improvements, experience and market forces have driven costs down in
      recent years. Therefore, we use a conservative assumption of 250
      person-years per FGD system. Since about two-thirds of the existing
      301,500 (NERC-reported) MW of coal-fired power plant generating
      capacity have no FGD, and assuming one-half of these will install FGD
      due to S. 556, approximately 100,000 MW of FGD systems will result.
      Assuming an average plant size of 400 MW, then 250 FGD systems will
      result and create 62,500 person-years of employment over the 6-year
      period of 2005-2010, or an average of 10,417 jobs per year.
    (2) For NOx control, we assumed that S. 556 will trigger 80 GW of air
      pollution control equipment split 65 percent selective catalytic
      reduction (52 GW), 15 percent selective non-catalytic reduction (12
      GW), and 20 percent low NOx burners (16 GW) over the 2005-2010
      timeframe. Applying labor factors (in terms of labor hours/kW) for
      each of these technologies from the H&W/ICAC study, ``Employment
      Created by NOx Control and Continuous Emission Requirements of Title
      IV of 1990 Clean Air Act Amendments,'' prepared for the US EPA in
      March 1994, and then dividing by 2,080 person-hours/year (assumed)
      yields 21,490 person-years shown in the above table.
    (3) For Hg control, we assumed that S. 556 would lead to 150 GW (or 50
      percent of reported utility coal-fired capacity) to install Hg control
      technology as an add-on or integrated part. Technologies will vary
      from combinations of conventional technologies to newer approaches
      including activated carbon injection, advanced hybrid particulate
      collectors, mercury-oxidation catalysts, and use of novel sorbents. To
      estimate mercury control jobs, the labor factor (in hours/kW) for SNCR
      (an injection technology) from the 1994 Employment Study mentioned in
      note ``(2)'' above, was applied to the affected GW. About 16,800
      person-years of labor will be created from 2005-2010.
    (4) Other Direct Labor encompasses additional utility support staff, R&D
      personnel, sales representatives, consultants and services. An
      additional 20 percent of the total technology-related direct labor
      figure was assumed to account for the other direct labor component.
      This is consistent with results from the March 1994 study.
    (5) Indirect Labor represents the multiplier effect from direct labor.
      Economists often multiply the number of direct person-hours by two,
      and sometimes three, to estimate indirect employment. The purchase
      power associated with goods and services provided by direct labor is
      called ``the multiplier effect.'' To be conservative, we applied a
      ratio of two indirect jobs for each direct job in this analysis.

        As noted, the preceding analysis looks at employment created and
    not jobs lost. However, history has shown that clean air legislation
    has not caused significantly negative macroeconomic impacts, and may
    even have created some positive ones. Consider:
          Numerous, rigorous studies conclude that environmental
    protection is compatible with and can even aid economic growth
    (Goodstein, E.B., Jobs and the Environment, Economic Policy Institute,
    1994, pp. 7-12; Meyer, S., Environmentalism and Prosperity: Testing the
    Environmental Impact Hypothesis, MIT, 1992; Meyer, S., Environmentalism
    and Prosperity: An Update, MIT, 1993; Templet, P.H., The Complementary
    Nature of Environment and Economy, Environmental Science & Technology
    (American Chemical Society), vol. 27, 1993; Wendling, R.M. and Bezdek,
    R.H., Acid Rain Abatement Legislation: Costs and Benefits, OMEGA
    International Journal of Management Science, vol. 17, 1989).
          Environmentally regulated industries do better than
    others (Repetto, R., Jobs, Competitiveness, and Environmental
    Regulation: What Are the Real Issues?,'' World Resources Institute,
    1995).
          Studies speculate that investing in clean air technology
    stimulates investment in more productive technology generally (Business
    Week, Do Pollution Regs Cost Jobs? November 16, 1998.).
          In fact, improved environmental performance can increase
    a firm's stock value from 5 percent to as much as 10 percent (Dow Jones
    Newswires, KPMG Survey on Environmental Reporting, September 1, 1999).
          From 1990-1995, there was a net gain of 2.2 million jobs
    in nonattainment areas (which must achieve the greatest air quality
    improvements), and 63 percent of those areas had average annual
    employment growth rates greater than that of their region of the
    country (U.S. Environmental Protection Agency, Urban Air Toxics
    Strategy Briefing Document, September 1, 1998).
          Even in Los Angeles, site of the most costly air
    pollution control rules in the nation, researchers found the rules
    caused a slight net positive effect on employment (Business Week,
    supra).
          Nationwide, from 1970-1997, emissions of the six criteria
    pollutants declined 31 percent, while U.S. population increased 31
    percent, gross domestic product increased 114 percent, and vehicle
    miles traveled increased 127 percent (U.S. Environmental Protection
    Agency, National Air Quality Trends Report, 1997, December 1998).

        Question 3. Can you elaborate further on the concern that you
    expressed about the cost estimate for mercury controls and how those
    related technology costs are allocated?
        Response . Our concerns are two-fold. The first flows from the
    comments we made in answer to your first question. Controls to remove
    SO2, NOx, and/or mercury may help achieve compliance with
    more than one Clean Air Act program. For example, controls to remove
    SO2 may significantly reduce mercury and PM2.5
    precursor emissions too. If the cost of a SO2 control
    technology is $100, for example, then only part of that the $100 should
    be allocated to the cost of mercury control; some of $100 should be
    allocated to attainment of the PM2.5 standards. S. 556 is
    not only a multi-pollutant bill, it is a ``multi-benefit'' bill.
        In addition, it is important to use accurate assumptions about the
    performance of air pollution control technology in developing overall
    cost estimates. For example, a NOx control technology known as
    ``selective catalytic reduction'' is routinely achieving (and being
    guaranteed at) 90+ percent removal efficiency on coal-fired power
    plants. In testimony delivered on November 1, 2001, however, the Energy
    Information Administration witness noted that EIA had assumed far less
    than 90 percent control. This assumption causes the cost estimates to
    be too high, other things being equal.
                                   __________
     Statement of David G. Hawkins, Director, NRDC Climate Center, Natural
                           Resources Defense Council
        Mr. Chairman and members of the committee, thank you for providing
    the Natural Resources Defense Council (NRDC) the opportunity to present
    its views on S. 556, the Clean Power Act of 2001. The Natural Resources
    Defense Council is a national, non-profit organization of scientists,
    lawyers, and environmental specialists, dedicated to protecting public
    health and the environment. Founded in 1970, NRDC serves more than
    500,000 members from offices in New York, Washington, Los Angeles, and
    San Francisco.
        NRDC strongly supports enactment of S. 556; the comprehensive
    clean-up program for electric power plants contained in the bill is
    vital to reduce the health and environmental toll from the continuing
    air pollution released by these plants.
        Electricity has brought us an unequalled quality of life and a
    thriving economy but it continues to be produced in ways that also
    bring us large and unnecessary harm to human health and to the
    environment. The electric generating sector remains the largest single
    polluting activity in the United States. Electric generators are
    responsible for two-thirds of America's sulfur dioxide pollution,
    nearly one-third of its nitrogen oxides, forty percent of carbon
    dioxide and more than one-third of remaining mercury emissions.
        Together these ``four horsemen'' of power plant pollution cause
    tens of thousands of premature deaths each year and hundreds of
    thousands of respiratory illness cases. They also kill lakes and
    threaten forests, contaminate fish, and fill the skies over national
    parks with haze. Carbon dioxide from the electric generating industry
    traps heat in the atmosphere, leading to disruption of the climate that
    we all depend on to maintain life as we know it on this planet.
        There is broad recognition that the time has come to reduce
    pollution from this industry. We have the means to do so and the job is
    affordable. Indeed, when pollution caps are integrated with expanded
    reliance on energy efficiency and renewable energy sources, as called
    for in S. 556, we can save consumers money while reducing the damage
    electricity production does to health and the environment.
        Opponents of S. 556 have raised a number of issues but I'd like to
    focus in this testimony on two topics: the bill's requirements for
    control of the global warming pollutant, carbon dioxide
    (CO2); and issues relating to control requirements for
    western States.
                           managing carbon pollution
        S. 556 calls for the electric generating sector to return its
    CO2 emissions to 1990 levels. The power industry often
    argues for voluntary approaches to CO2 control, but it is
    now abundantly clear that voluntary measures alone do not work. In
    fact, despite widespread participation in the voluntary ``Climate
    Challenge'' program, CO2 from electric power plants grew
    over the PAST decade by a rate triple the growth rate of other energy
    consuming sectors: 26.5 percent compared to 8.9 percent. This huge
    increase occurred even while the industry was claiming to have made
    millions of tons of CO2 ``reductions'' under the Climate
    Challenge program's creative but ineffective accounting rules. I am
    attaching NRDC's recent report ``Reported `Reductions,' Rising
    Emissions'' for the record.
        It is not surprising that voluntary programs have failed to reduce
    CO2 pollution. As long as CO2 can be dumped for
    free into the air, competitive pressures will reward behavior that
    increases this pollution.
        S. 556 would cap CO2 from the power sector at its 1990
    levels--a target consistent with our pledge in the 1992 Framework
    Convention on Climate Change signed by the first President Bush and
    ratified by the Senate. It should be noted that this is not the level
    specified in the 1997 Kyoto Protocol, which the current Administration
    has rejected. But the current Administration apparently opposes capping
    CO2 at any level. In testimony on November 1 of this year,
    EPA Assistant Administrator Holmstead set forth the Administration's
    reasons for its opposition to any requirement to control CO2
    from power plants. The Administration claims that CO2
    controls will cost consumers too much and make generation too dependent
    on natural gas. The Administration also asserts that decisions to
    control CO2 should be made as part of broad climate change
    policy.
        Contrary to the Administration's claims, S. 556 will save consumers
    money, will reduce growth in consumption of natural gas and will lay
    the groundwork for broader efforts to combat climate change.
    The Costs of Delay
        The Administration states that it takes the issue of climate change
    very seriously. But its opposition to controlling power plant
    CO2 is a serious mistake. This past weekend, the world's
    other industrialized countries agreed to take steps to significantly
    limit global warming pollution over the coming decade. In response, the
    President's spokesman is quoted as saying the President ``agrees with
    the need to reduce greenhouse gas emissions. His Cabinet review is
    under way, to determine a way that can be done without forcing America
    into a deep recession.''
        The fact is that the October 31 analysis of S. 556 submitted by Mr.
    Holmstead for the Administration demonstrates that controlling
    CO2 from power plants will help the economy, not harm it.
    That analysis concludes that US gross domestic product would be higher
    under S. 556, not lower.\1\
    ---------------------------------------------------------------------------
        \1\USEPA, October 31, 2001, ``Economic Analysis of a Multi-Emission
    Strategy,'' at 24-28. (``EPA J-L Study'')
    ---------------------------------------------------------------------------
        To take climate change seriously, one must look at the costs of
    delay in taking action. The assumption of many is that by delaying
    action to limit global warming pollution we will reduce costs. That
    assumption is wrong and ignores the nature of the global warming
    problem. Today's atmospheric concentrations of CO2 are 30
    percent above pre-industrial levels, higher than they have been in over
    400,000 years. They have reached that level in a geological blink of an
    eye due to our burning of fossil fuels. By burning these fuels we are
    returning to the atmosphere heat-trapping gases that were isolated over
    a period of about 75 million years. The speed at which we are reversing
    the earth's geologic history is astounding: each year we put back into
    the atmosphere an amount of CO2 that took 100,000 years to
    store in fossil fuels. CO2 stays in the atmosphere hundreds
    of years once it is released, so each year we allow CO2
    emissions to grow, we are committing many generations to the
    consequences of the resulting change in climate.
        The only way to limit the extent of the climate change we inflict
    on future generations and ourselves is to limit, or stabilize,
    atmospheric CO2 concentrations and to do that we must act to
    reduce emissions. The longer we wait to start, the more expensive we
    make it to achieve any particular stabilization target. To stabilize
    CO2 levels in the atmosphere, we must limit the total
    cumulative tons of CO2 we release. For example, to limit the
    atmospheric buildup of CO2 to a level about 60 percent
    higher than pre-industrial levels (today it's 30 percent higher),
    cumulative global manmade carbon emissions up to the year 2100 must be
    kept below 950 billion metric tons. We have already released about one-
    third of this budget. But the real problem lies immediately ahead: at
    current emission rates we will consume half of the remaining budget in
    less than 30 years.
        Imagine you are on a supertanker so close to a reef that you will
    cover half the remaining distance in the next 20 minutes. There is time
    to avoid the reef only if the tanker alters course immediately. Our
    economy can grow without increasing carbon emissions but only if
    Congress acts now to signal the market that these emissions can no
    longer be dumped for free. Unless we act now to lower the business as
    usual growth in CO2 emissions, we will eliminate our ability
    to stabilize concentrations at more protective levels or force later
    action that is wrenching and expensive, requiring extremely rapid
    reductions in these gases.
        The other feature of the climate problem is that energy systems
    cannot turn on a dime. While some may use this fact to argue against S.
    556, the opposite is true. To establish the market signals needed to
    promote cleaner and smarter energy technologies we need to adopt
    policies now to limit CO2 emissions. As long CO2
    can be dumped for free, the market will discourage the investments
    needed to modernize our energy technologies.
        Let me give an example of how the status quo distorts decisions
    away from climate friendly actions. In the United States today, there
    is much talk about the need for energy security. While energy
    efficiency will give us the largest, most secure additional domestic
    supply, investments in efficiency continue to be undervalued, in large
    part because there is no value assigned to the pollution that
    efficiency prevents, particularly carbon emissions. As I discuss below,
    investments in energy efficiency make it possible to implement S. 556
    while saving consumers money. But it is unlikely the market will spur
    adequate efficiency programs as long as carbon emissions are ignored in
    calculating the value of efficiency improvements.
        Energy production choices are also distorted. For example, there
    are potentially more than 2 billion barrels of domestic oil in current
    producing fields that could be developed using enhanced oil recovery
    (EOR) techniques. In today's EOR operations companies are injecting 20
    million tons a year of CO2 into depleting wells to increase
    production. But nearly all that injected CO2 comes not from
    power plants or other industrial sources. Rather, the CO2 is
    pulled out of natural reservoirs and piped hundreds of miles to the oil
    fields.
        EOR operators enjoy a 15 percent tax credit for expenses, including
    the cost of the CO2 they buy. So today American taxpayers
    are subsidizing businesses to pull new CO2 out of the ground
    when that CO2 could be supplied instead by the nation's huge
    combustion sources--while at the same time keeping it out of the
    atmosphere. But as long as CO2 can be freely dumped into the
    air, the economics favor pulling CO2 out of the ground. And
    it gets worse. Much more oil could be produced through EOR but for the
    ``shortage'' in CO2 for injection. Aging coal-fired power
    plants could be repowered with integrated coal-gasification combined
    cycle technology to provide that CO2 while making
    electricity at competitive prices.\2\  But when it costs electric
    generators nothing to dump their CO2 in the air, they have
    no incentive to invest in capture equipment. Rather, under the status
    quo, investments are being made instead in developing new
    CO2 reservoirs to meet demand by pulling more CO2
    from the earth rather than capturing what we are releasing to the
    atmosphere. Nowhere is this more striking than in Arizona, where Tucson
    Electric is applying for permits to build two new coal-fired units at
    Springerville while Ridgeway Petroleum is planning to extract
    CO2 from a natural reservoir that is literally underneath
    the power plant.
    ---------------------------------------------------------------------------
         \2\ Chevron, Texaco and General Electric report that they can
    build a new IGCC generator with carbon capture for less than the cost
    of a new conventional pulverized coal plant and that the carbon capture
    equipment increases the project's capital cost by about 4 percent with
    only a 2 percent efficiency penalty. O'Keefe, et al, 2001, ``A Single
    IGCC Design for Variable CO2 Capture.'' Presented at EPW
    Staff Briefing, October 17, 2001.
    ---------------------------------------------------------------------------
    The Costs of S. 556
        Adopting the CO2 caps in S. 556 would change the
    incentives and promote investments in efficiency, renewable energy and
    CO2 capture and avoidance measures. But the Administration
    says it would cost consumers too much, with Mr. Holmstead's testimony
    claiming that the bill would cause a 30-50 percent increase in
    electricity prices. This committee heard similar claims in the 1980's
    when industry and the Reagan Administration claimed that enacting acid
    rain controls would raise electric rates by 30 percent or more. Of
    course, nothing like that happened, nor will it under S. 556.
        Two assumptions affect forecasted costs of S. 556 more than any
    others: what is the predicted growth in electricity and natural gas
    demand, and will Congress adopt revenue recycling provisions to prevent
    windfall profits to electric generating companies? One can calculate
    high costs for controlling carbon emissions only if one assumes little
    is done to improve energy efficiency and use of renewable energy and if
    one assumes that Congress will let electric generators retain $50-100
    billion in windfall profits. Mr. Holmstead's testimony makes both these
    assumptions in predicting large price rises for electricity.
        However, according to the full EPA study of S. 556, U.S. gross
    domestic product would actually be higher under S. 556 than under
    business-as-usual as a result of the stimulus-producing programs for
    energy efficiency and renewable energy promoted by the bill. As for
    natural gas dependence, the S. 556 program of efficiency and renewable
    energy would actually reduce natural gas use for electricity generation
    compared to the Administration's energy plan. With the S. 556 emission
    controls and advanced energy efficiency and renewable energy programs
    implemented, expenditures on electricity generation would actually be
    $3 billion per year less in 2015 than under the Administration's energy
    plan.
    The Role of Energy Efficiency and Renewable Energy
        EPA's underlying report documents the power of the integrated
    strategy of emission caps, improved efficiency, and greater renewable
    energy sources that is called for in S. 556. By improving efficiency
    and increasing the share of renewable energy sources, we can reduce the
    rate of growth in demand for electricity and for natural gas, thereby
    allowing the emission reductions required by S. 556 to be achieved
    without diminishing economic growth. The tools to accomplish this
    smarter energy future have been documented in the November 2000 report
    by the Department of Energy's principle research labs. ``Scenarios for
    a Clean Energy Future'' shows that an integrated program of efficiency
    and renewable energy policies can save consumers money and help achieve
    reduced emissions, including CO2 emissions at much lower
    costs.
        The Energy Information Administration (EIA) has criticized the
    Clean Energy Futures (CEF) policies as not being realistically
    achievable. But EIA has not supported its criticism with any real
    analysis--rather EIA merely asserts that this rapid deployment of
    energy efficiency and renewable power technology is unlikely It is
    important to understand the relative competencies of these two
    different institutions within DOE. EIA's expertise is in retrospective
    analysis of energy market statistics, so it is not surprising that its
    projections forward are heavily colored by its familiarity with the
    past trends. In contrast, the National Energy Labs that prepared the
    CEF report are expert in the engineering and economics of conventional
    and advanced energy efficiency and renewable energy technologies. The
    CEF experts have prepared a rebuttal to EIA's criticism that adds
    further support to the CEF report's findings.\3\  I have attached this
    to my testimony and ask that it be included in the record.
    ---------------------------------------------------------------------------
         \3\Koomey, et al., October 18, 2001, ``Assessment of EIA's
    statements in their multi-pollutant analysis about the Clean Energy
    Futures Report's scenario assumptions.''
    ---------------------------------------------------------------------------
        An examination of the CEF report demonstrates the reasonableness of
    the National Energy Labs' view that we have a large untapped potential
    to improve efficiency and save money. The measures called for in the
    CEF report are not dream technologies, waiting to be invented; they are
    common-sense initiatives designed to increase the use of technologies
    that already exist. The CEF measures include improved appliance
    efficiency, through labeling, standards, and financial incentive
    programs. They include similar measures for buildings, calling for less
    wasteful heating, cooling and lighting systems and weatherization and
    rebate programs to reduce gas and electric use in existing buildings.
        EIA claims the CEF's projected rate of deployment for these
    technologies is unreasonable. But in only 6 months, Californians were
    able to reduce their electricity consumption by 6 percent during the
    summer of 2001, with no deprivation. This experience should encourage
    us not to sell short our ability to be smarter about energy use, given
    the appropriate policy support.
        The Administration asserts the goal of its energy plan is to reduce
    demand and greenhouse gas emissions to levels well below EIA's business
    as usual (BAU) forecasts.\4\  These are laudable goals but the
    Administration's use of BAU forecasts to critique S. 556 is
    inconsistent with those goals. The Administration needs to frame
    specific policies to achieve appropriately ambitious goals for energy
    efficiency and renewable energy. When it does so, it will conclude, as
    DOE's experts have, that S. 556 will help, not hurt consumers.
    ---------------------------------------------------------------------------
         \4\Kahn, ``Bush is Revising Energy Policy to Address Global
    Warming,'' New York Times, June 12, 2001, at 32.
    ---------------------------------------------------------------------------
        When policies to promote efficiency and renewables are combined
    with emission caps the cost of meeting S. 556's pollution targets is
    dramatically reduced compared to BAU assumptions. Under BAU, EPA
    calculates S. 556 would increase costs of electric generation by $17
    billion per year in 2015; with very modest efficiency efforts the cost
    drops to under $13 billion; with the CEF moderate policies the costs
    drop to $500 million; and with the CEF advanced policies called for in
    S. 556 there is a savings of $3 billion a year in electric generation
    costs. We can cleanup power plants and save consumers money through
    smart policies to reduce waste and increase renewable energy supplies.
    Who Profits--Polluters or Consumers?
        EPA's analysis makes another unstated assumption that drives up
    costs for consumers. Mr. Holmstead blamed S. 556 for these consumer
    cost increases but the real blame lies with the policy chosen by EPA.
    Even though EPA's study shows changes in generating costs under S. 556
    range from a maximum increase of $17 billion per year to a savings of
    $3 billion per year, the study calculates consumers' bills would go up
    by $50 to $100 billion per year. EPA reaches this conclusion by
    assuming that the law you will enact will let generators retain
    windfall profits from the value of carbon permits under a cap-and-trade
    program. EPA's approach assumes a large transfer of wealth from
    consumers to shareholders of generating companies, by grandfathering
    the value of carbon permits to the polluters themselves.
        S. 556 does not call for any such result. With more sensible
    approaches to carbon allowance allocation than the Administration
    assumes, households will have lower net costs under S. 556. There are a
    number of approaches to deny windfall profits to generators and recycle
    revenue to consumers and S. 556 encourages EPA to adopt such approaches
    in designing the cap-and-trade program for carbon.
    The Role of Natural Gas
        The Administration also claims that S. 556 will endanger energy
    security by requiring too much natural gas for electric generation. But
    large increases in natural gas use do not occur if the integrated CEF
    efficiency and renewable policies called for in S. 556 are implemented.
    Under either the moderate or advanced CEF policy programs, EPA's study
    confirms that natural gas use in electric generators will be less than
    under BAU growth with no emission controls.\5\  There is no reason to
    oppose limits on carbon pollution in order to avoid excessive
    dependence on natural gas or any other single fuel for electricity
    generation. Smart policies that harness the largely untapped potential
    of efficiency and renewable energy do a better job of promoting fuel
    diversity and attack the problem of global warming at the same time.
    ---------------------------------------------------------------------------
         \5\EPA J-L Study, Table 3. BAU gas use is 8.3 quads in 2010 and is
    8.2 quads with CEF moderate measures and 7.7 quads with CEF advanced
    measures.
    ---------------------------------------------------------------------------
    The Role of Coal
        Mr. Holmstead states the Administration's goal of preserving our
    ability to use coal as a major fuel source for electricity. It bears
    emphasis that under all analyses of S. 556, coal would continue to
    provide the largest single share of fuel input for electricity. NRDC is
    neither for nor against an expanded role for coal or any other fuel for
    its own sake. We do believe that the public health and environmental
    harm caused by coal has not been adequately addressed, including the
    harm from global warming. But we do not agree that refusing to address
    global warming will help keep coal viable. To the contrary, if Congress
    fails to adopt requirements to limit CO2, it will send a
    signal to the market that delay in perfecting techniques to manage
    carbon from coal is a smarter course than moving forward with
    investments to modernize coal use.
        Our nation and others do face a challenge in addressing the future
    role for coal in the carbon-constrained world of the future. But the
    way to meet that challenge is not to deny the need for action now to
    limit global warming pollution. Contrary to some claims, there is
    technology to separate and capture CO2 from coal and other
    fuels. Like many technologies, current processes were not developed for
    pollution control purposes and are not optimized for that purpose
    today.
        There is reason for optimism that we can both fight global warming
    and continue to rely on coal as a major fuel in the decades ahead.
    Systems that separate CO2 from fossil fuels, both in pre-
    combustion and post-combustion configurations, have been commercially
    demonstrated. For new applications, vendors are offering quotes for
    IGCC plants with only modest additional costs for carbon capture.
    Current systems to capture CO2 from existing units have high
    economic and energy penalties. That is not surprising since there has
    been almost no market reason to invest resources to improve these
    systems.
        On the storage side of the carbon management issue, as I mentioned
    above, commercial operators are currently injecting large amounts of
    CO2 into oil fields for enhanced oil recovery. But, as
    mentioned, nearly all of that CO2 comes not from fossil-
    fired plants,\6\  but from natural underground CO2
    reservoirs. The pipelines that carry CO2 from these
    reservoirs in Utah and New Mexico run close to much larger man-made
    sources of CO2 at coal-fired power plants but as long as
    those plants can dump their CO2 for free, investors will not
    turn to those sources to meet the growing demand for CO2 for
    oil recovery. Coal industry supporters should be looking at every ton
    of CO2 that is pulled out of natural reservoirs as a lost
    market opportunity for plants that use coal but they appear to be stuck
    in the position of delaying policies that would stimulate use of their
    CO2 in this market.
    ---------------------------------------------------------------------------
         \6\The government-supported coal gasification plant in Beulah,
    North Dakota, is a notable exception. It is capturing CO2
    and piping it to Canada to enhance oil recovery there.
    ---------------------------------------------------------------------------
        Other markets, such as enhanced coal bed methane recovery, are
    likely to emerge for captured CO2, if S. 556 is enacted.
    Enhanced coal bed methane involves injecting CO2 into coal
    beds to drive off methane, which we know as natural gas. There is a
    thriving conventional coal bed methane industry in Wyoming and Montana
    today. Unfortunately, short-sighted operators have chosen to dump
    massive amounts of production water on the ground rather than managing
    these wastes responsibly but these problems can and should be solved if
    we want to use this resource. Other coal seams suitable for enhanced
    coal bed methane are located in eastern coal provinces.
        As our country struggles with concerns about energy security,
    increased focus will be placed on developing alternatives to petroleum
    for transportation sources. Coal can play a role here as a feedstock
    for production of liquid fuels and hydrogen to fuel transportation
    systems. But this will not happen if the plants to produce such fuels
    are not designed to capture and safely store the CO2 from
    coal. It will not happen because of environmental opposition and
    because of investor uncertainty of the viability of such plants in a
    world where carbon emissions are likely to be regulated.
        So, it is hard to see that the status quo is good for coal's
    future. Most new electric generating plants are being built to use gas,
    not coal. Potential markets for CO2 from coal-fired plants
    to recover oil and coal bed methane are being ignored. New markets for
    transportation fuels from coal gasification plants are not being
    developed. This state of affairs is likely to continue until Congress
    takes steps to limit carbon emissions and signal the market that
    deploying advanced coal systems makes good business sense.
                       power plant pollution in the west
        Some have argued that the requirements for power plant clean-up for
    plants located in western States should not be as strict as for the
    rest of the country. NRDC disagrees with this argument. Air pollution
    from electric generation in the west continues to contribute to adverse
    health and environmental effects. There is no compelling case that
    control of pollution from these plants is uniquely difficult or
    expensive to achieve.
        On good days the air quality in the western United States is a
    resource that is unparalleled in the industrialized world. Visitors
    from around the world come to marvel at the landscapes of the west and
    the crystal blue skies that are still present in many places on many
    days. Great cities in the west have grown in part due to the attraction
    of clean air and the quality of life provided by unspoiled
    surroundings.
        But air pollution has come to the west as well. Sulfur dioxide
    pollution is acknowledged to be a major contributor, particularly in
    the summer, to regional haze that degrades visibility. SO2
    also leads to elevated fine particle concentrations in metropolitan
    areas of the west, contributing to significant health threats; and
    SO2 damages sensitive species and other air quality related
    values in parks and wilderness areas.
        To address regional haze, the Western Regional Air Partnership
    (WRAP) has recommended a schedule for western regional SO2
    reductions. Some have proposed that any new Federal law to cut power
    plant pollution limit the requirements for western plants to the level
    and schedule recommended by the WRAP. As we understand it, the
    timetable for cutting SO2 under the WRAP recommendations is
    much slower than under S. 556 (compliance by 2018 instead of 2007). The
    emissions remaining at western plants may also be higher than under S.
    556.
        Given the special resource that western air quality represents, it
    is important to assure that an SO2 trading program does not
    result in a level of actual emissions in the west greater than that
    recommended by the WRAP. A regional cap on western SO2
    emissions as part of a national SO2 trading program is
    needed to assure that the full emission reductions recommended by the
    WRAP are in fact realized in the west.
        It is not entirely clear but it appears that representatives of
    some western generators are arguing that they should be allocated a
    greater share of the national cap on emissions than a national uniform
    formula would provide. The WRAP process is one of many facts that
    contending interests will no doubt bring to bear to support particular
    advantageous allocation formulas during the legislative process. While
    it deserves consideration, we see no reason why it deserves a
    presumptive priority over other competing arguments for different
    allocation approaches.
        Some have argued that the west does not have a significant NOx
    problem. We disagree with that claim. Of course, California's NOx-
    driven smog problem is legendary and still with us. But turning to the
    ten States in the western power grid outside California, the problems
    posed by NOx are also significant. Consider the following information
    assembled by the Clean Air Task Force and Environmental Defense:
          Nitrogen oxide emissions have been climbing in nearly
    every western State in the past 30 years.
          Between 1997 and 1999, there have been unhealthy ozone
    days (based on the 8 hour ozone standard) in Phoenix, Denver, Las
    Vegas, Medford (OR), Salt Lake City, Provo (UT), Seattle, Tacoma,
    Albuquerque, and Tucson. Ozone is getting worse at a number of national
    parks in the region, including Grand Canyon NP, AZ, Mesa Verde NP, CO,
    Canyonlands NP, UT, Great Basin NP, NV, Rocky Mountain NP, CO,
    Yellowstone NP, MT & WY, Craters of the Moon NM, ID.\7\
    ---------------------------------------------------------------------------
        \7\USEPA, 2001. Air Trends, Office of Air and Radiation. Ozone Air
    Quality at National Parks, http://www.epa.gov/oar/aqtrnd00/pdffiles/
    natpark.pdf
    ---------------------------------------------------------------------------
          In winter months, nitrates make up a larger contribution
    of PM2.5 than in the summer months. Nitrates accounted for
    21 percent of the PM2.5 mass in Denver in the winter of 1997
    and 32 percent at more rural Colorado sites.\8\  Elevated nitrate
    levels contribute to the winter Brown Clouds over Denver, Albuquerque,
    Phoenix and Salt Lake City. A Columbia University study has linked the
    nitrate fraction of inhalable particulates to asthma mortality.\9\
    ---------------------------------------------------------------------------
        \8\Colorado State University, 1998 Northern Front Range Air Quality
    Study http://www.nfraqs.colostate.edu/Files/Final/Rep2Gov.pdf
         \9\Carlson, Barbara. 2001. Goddard Institute for Space Studies,
    Columbia University. http://icp.giss.nasa.gov/outreach/newsletter/v3i1/
    rsedv3i1--aerosols.pdf
    ---------------------------------------------------------------------------
          As one of the components of fine particulates, nitrates
    play a role in visibility impairment. In western States, on an annual
    basis, nitrates account for an average of 7-12 percent of the light
    extinction.\10\  However, in a given month the number can be much
    higher. Over a 3-year monitoring period, nitrates were responsible for
    much greater shares of aerosol light extinction in specific months: 32
    percent in the Badlands National Park in March; 23 percent in Bryce
    Canyon National Park in December; 19 percent in Glacier National Park
    in December and January; and 42 percent in Lone Peak Wilderness Area UT
    in December.\11\  Year-round nitrate-related visibility impairment is
    an increasing problem in three Class 1 airsheds: Badlands, NP, Mesa
    Verde NP and Weminuche NP.\12\  In the winter of 1998-99, Denver's
    urban visibility standard was exceeded on about 70 days.
    ---------------------------------------------------------------------------
         \10\Malm, et al. 2000. Spatial and Seasonal Patterns and Temporal
    Variability of Haze and Its Constituents in the United State, May; CO
    Dept. of Public Health and Environment
         \11\IMPROVE 2000, Monthly Light Extinction Budget http://
    vista.cira.colostate.edu/DatawareHouse/IMPROVE/Data/SummaryData/
    ReconBext--month.txt
         \12\IMPROVE 2000, Map summarizing trends in nitrate mass
    concentration.
    ---------------------------------------------------------------------------
          High elevation areas are particularly impacted by the
    acidity from increased nitrates and the over-fertilization that comes
    from both nitrates and ammonium. Extensive research in the Colorado
    Front Range of the Rocky Mountains has shown that this region is
    experiencing the highest levels of wet and dry nitrogen deposition in
    the ten-State (not including California) region.\13\ ,\14\  Data from
    two high elevation Front Range watersheds show surface water nitrate
    concentrations that reflect both stage 1 and 2 nitrogen saturation,\15\
     levels comparable to the advanced stages of nitrogen saturation in
    watersheds in eastern North America that receive twice as much
    atmospheric nitrogen deposition.\16\  Episodic acidification, the
    pulses of acid entering waters after snowmelt and heavy rains, has been
    widely reported in the waters of the Front Range.\17\  Nitrates are
    frequently associated with episodic acidification, and their role in
    these watersheds is under study.
    ---------------------------------------------------------------------------
         \13\National Atmospheric Deposition Program, 2000. National
    Atmospheric Deposition Program 1999 Wet Deposition. NADP Data Report
    2000-02. Illinois State Water Survey, Champaign, IL.
         \14\Sievering, H., Rusch, D., and Marquez, L., 1996. Nitric acid,
    particulate nitrate and ammonium in the continental free troposphere:
    nitrogen deposition to an alpine tundra ecosystem: Atmospheric
    Environment
         \15\Williams, M.W., and Tonnessen, K.A., 2000, Critical loads for
    inorganic nitrogen deposition in the Colorado Front Range, USA:
    Ecological Applications. 10:1648-1665.
         \16\Stoddard, J.L., 1994, Long-term changes in watershed retention
    of nitrogen, in Baker, L.A., ed., Environmental Chemistry of Lakes and
    Reservoirs: ACS Advances in Chemistry Series No. 237, American Chemical
    Society, Washington, DC.
         \17\Williams, M.W., and Tonnessen, K.A., 2000, Critical loads for
    inorganic nitrogen deposition in the Colorado Front Range, USA:
    Ecological Applications. 10:1648-1665.
    ---------------------------------------------------------------------------
          Many of the desert soils of the Colorado Plateau region
    are protected by soil crusts made up of a living ground cover of
    lichens, algae, mosses, and fungi that have adapted to low nitrogen
    conditions. Atmospheric deposition of nitrogen shifts the balance of
    these well-adapted systems. Increasing available nitrogen can changes
    these crusts, and in doing so, can compromise the protective qualities
    of these soils.\18\
    ---------------------------------------------------------------------------
        \18\National Park Service, 1999. Nitrogen deposition and UV
    stressor impacts in Canyonlands National Park as affected by climatic
    pulse events, http://www.2.nature.nps.gov/ard/prime/belnap.htm
    ---------------------------------------------------------------------------
          Power plants produce nearly 20 percent of the region's
    NOx emissions.\19\  From 1997 to 1999, the power plant contribution of
    NOx in the region increased by nearly 2 percent.\29\  During the same
    period, contributions from other sources decreased by 1.5 percent.
    Power plant contribution to NOx in the region will continue to increase
    significantly over the next 10-20 years due to increasing emissions
    from growth in electric generation.
    ---------------------------------------------------------------------------
         \19\USEPA, 2000, 1999, 1998,1997. National Air Quality and
    Emissions Trends Reports. http://www.epa.gov/oar/aqtrends.html/
         \20\USEPA, 2001. Emission Scorecard, from years 1995 through 2000.
    http://www.epa.gov/airmarkets/emissions/score00/index.html
    ---------------------------------------------------------------------------
        In sum, NOx causes significant problems in the west; power plants
    are a significant source; and their contribution to western NOx
    problems will grow unless they are cleaned up.
        Turning to mercury, some have claimed that western power plants
    need special treatment for that pollutant as well. Again, we do not
    agree. Power plants west of the Mississippi emit over 16 tons of
    mercury--33 percent of the national mercury total from power
    plants.\21\  Nine of the 11 States in the western power grid have
    issued fish consumption advisories for some waterbodies due to mercury
    contamination.
    ---------------------------------------------------------------------------
         \21\USEPA, June 2001, Emissions of mercury by State (1999) based
    upon reported fuel use and mercury tests. http://www.epa.gov/ttn/atw/
    combust/utiltox/utoxpg.html
    ---------------------------------------------------------------------------
        Western power companies argue that it is not possible to achieve
    high levels of mercury control from sub-bituminous coal and lignite.
    These claims are not well-supported. Sub-bituminous coals do contain a
    higher proportion of elemental mercury relative to oxidized mercury,
    when compared to bituminous coals. Nonetheless, according to data
    collected from power plants by EPA (ICR data), power plants burning
    sub-bituminous coals can capture 75 percent or more of the mercury in
    stack gas with conventional controls. Fabric filters in combination
    with other controls have the highest capture rate (> 70 percent). The
    capture efficiencies vary depending on a number of factors, including
    the boiler type, SO2 controls, NOx controls, and coal-type.
    For example, based on stack tests conducted in 1999, higher capture
    efficiencies range from:

          75 percent (Public Service Co. of Colorado, burning sub-
    bituminous coal in a tangential-fired boiler with a low NOx burner and
    fabric filter (FF))
          79 percent (TX-NM Power Company, burning lignite in a FBC
    boiler with limestone injection and a FF)
          84 percent (Intermountain Power Agency, UT, burning sub-
    bituminous & bituminous in a wall-fired boiler with a low NOx burner,
    FGD, and FF)

        EPA data also demonstrate that the fraction of mercury that is
    elemental or oxidized varies widely from plant to plant, and even
    between units at the same plant. No generalizations about western
    plants as a category are appropriate.
        Emerging technologies will improve mercury capture from western
    coals. Sorbent technology, including carbon injection, is capable of
    capturing a high percentage of mercury in stack gas. In the 2007-2008
    timeframe, EPA estimates that activated carbon technology will be
    capable of capturing up to 85 percent of total mercury from sub-
    bituminous coals (presentation by Jim Kilgroe to MACT Working Group,
    August 1, 2001. Washington, DC). In addition, significant research is
    underway to develop more cost-effective sorbents and to optimize the
    oxidation of mercury upstream of the control device. DOE's goal is to
    develop mercury technologies that will achieve 90 percent reduction by
    2010. Finally, S. 556' integrated strategy of improved energy
    efficiency and increasing use of renewable energy will enable sharp
    cuts in mercury emissions throughout the United States.
        A second claim made by western generators is that their mercury is
    innocuous because most of it is not deposited locally. This argument
    too lacks merit. Mercury deposition varies depending on a number of
    factors, including stack height, mercury species and precipitation.
    While EPA modeling does show that within a 30-mile radius of the plant,
    mercury deposition is less in an arid climate than in a humid climate,
    deposition is nonetheless still occurring. It would be wrong to assume
    that mercury from western power plants doesn't deposit locally or
    regionally. Elemental mercury can be oxidized (and deposited) anywhere
    from a few days to a few years, with deposition ranging from a few
    miles to a few thousand miles. Also, atmospheric chemistry and the
    chemistry of stack gas can change the form of mercury, causing
    reactions to change elemental to oxidized, and vice versa, thereby
    affecting deposition.
        One deposition study underway by U.S. EPA and Tetra Tech is
    investigating the sources of mercury in two reservoirs in Colorado.\22\
     Given that mercury fish consumption advisories have already been
    issued in many western States, it is apparent that mercury in the
    atmosphere is making its way into these aquatic environments.
    ---------------------------------------------------------------------------
         \22\USEPA & Tetra Tech, Inc, 2001 Draft. Technical support for
    developing a total maximum daily load for mercury in McPhee and
    Narraguinnep reservoirs, Colorado.
    ---------------------------------------------------------------------------
        In addition, to the extent mercury emissions from western power
    plants is not deposited locally, it is deposited further downwind,
    including eastern States. Allowing western plants to emit more mercury
    means more mercury gets dumped in States that lie to the east of these
    plants.
        Western mercury emissions also add to the global pool of mercury.
    The primary way people are exposed to methylmercury is through the
    consumption of fish, and the majority of this exposure (for the general
    population) is from eating marine fish. Atmospheric deposition of
    mercury to the open ocean from the global pool of mercury is the cause
    of this contamination. Western power plants, like all other sources of
    elemental mercury, contribute to the mercury burden in the oceans,
    which comes back to us when we eat ocean fish.
        The fundamental fact about mercury in coal is that for millions of
    years this source of mercury has been isolated from living things. By
    burning these mercury-containing fuels we are adding significant
    amounts of this poison to environments where humans and other species
    are exposed through a continuing accumulation in the food-chain. Once
    released from fossil fuels this mercury does not disappear; rather it
    builds up continuously. Prudent policy demands that we minimize the
    additional buildup of this toxin in the environment from all
    controllable sources.
        Mr. Chairman and members of the committee, this concludes my
    testimony. I am happy to answer any questions you may have.
                                     ______

        [From the Ernest Orlando Lawrence Berkeley National Laboratory]
                                                      October 18, 2001.
    TO: Skip Laitner
    FROM: Jonathan Koomey, Alan Sanstad, Marilyn Brown, Ernst Worrell, Lynn
        Price
    RE: Assessment of EIA's statements in their multi-pollutant analysis
        about the Clean Energy Futures Report's scenario assumptions
    CC: Mark Levine, Walter Short, Steve DeCanio

        At your request, we examined the following statement from the
    Energy Information Administration's report on multi-pollutant
    strategies (US DOE 2001):
        These policies are due to assumed changes in consumer behavior that
    are not consistent with historical behavior patterns, result from
    research and development funding increases that have not occurred and
    for which there is no analytical basis for the impacts of the funding
    on technological improvements, and voluntary or information programs
    for which there is also no analytical basis for the impacts.
        This quotation summarizes EIA's view of the Clean Energy Futures
    (CEF) study (Interlaboratory Working Group on Energy-Efficient and
    Clean-Energy Technologies 2000), but it reflects an incorrect
    interpretation of the intent and methodology of CEF and a fundamental
    misunderstanding of how to conduct analysis of alternative energy
    futures.
        1) The purpose of the CEF was to assess the impacts of a specified
    set of programs and policies that were assumed to be undertaken in the
    face of a national commitment to tackle a variety of energy-related
    challenges. The fact that the analysis assumes R&D ``funding increases
    that have not occurred'' is not surprising, since we were not modeling
    the business-as-usual (BAU) world, but one in which there is an
    increased sense of urgency to deal with energy-related challenges. In
    such a world, R&D spending and other policy efforts would (by
    definition) vary from those found in a BAU world.
        2) EIA states that the estimated effects of CEF ``policies are due
    to assumed changes in consumer behavior that are not consistent with
    historical behavior patterns.'' This statement is both misleading and
    wrong. It is misleading because the point of a scenario planning
    exercise is to model a world in which there are changes in historical
    patterns (if our goal were to model historical patterns, we would be
    analyzing a BAU world, not an alternative policy scenario). It is wrong
    because there have been historical periods when rates of change in
    energy use per unit of GDP have equaled or exceeded those analyzed in
    the CEF study, and these periods correspond to those where there was an
    increased sense of national urgency for dealing with energy-related
    challenges (Koomey et al. 1998). It is also critical to recognize that,
    in the past, history has not been a good guide to future energy market
    trends, and that unforeseen technological improvements have resulted in
    higher levels of aggregate energy efficiency than have been projected
    by modelers (Sanstad et al. 2001b).
        3) EIA's statements that there is no analytical basis for
    estimating the impacts of R&D, voluntary programs, or information
    programs are incorrect. The CEF chapters on each sector summarize the
    references and analytical basis for the assumptions we made. The whole
    point of the analysis was to produce a fully documented, defensible,
    and transparent assessment of the impacts of specific policies. In some
    cases we needed to make judgments based on previous program experience,
    but this approach is more accurate than assuming that these programs
    can (by definition) have no impact, which is EIA's implicit position.
    EIA's attitude is reflected throughout the document, for example in the
    following quotation from the EIA report:
        It is difficult to quantify the impact of increased funding on
    specific improvements in technology development . . . because funding
    increases are questionable and the link between funding and technology
    development is tenuous, the technology improvements in CEF based on
    these [R&D] policies are also questionable.
        A recently completed study by the National Academy of Sciences
    (National Research Council 2001) concluded that significant
    technological improvements have resulted from past Federal investments
    in energy efficiency R&D, and that these technological improvements
    were cost effective for society. The exact return on investment is not
    known with precision, but it is clear that significant paybacks in
    terms of energy savings have resulted from past R&D programs. We agree
    with EIA that it is difficult to quantify the impacts of R&D and other
    policies, but this difficulty does not imply that their impacts should
    be assumed to be zero in a scenario analysis. Instead, we made the best
    judgments we could after consulting the relevant literature and experts
    in the field, and carefully documented those judgments so that others
    could evaluate them on a case-by-case basis.
        4) Contrary to what the EIA argues in their report, it is well
    established that historical patterns of consumer demand for energy-
    efficient technologies do not reflect full information optimizing
    behavior (DeCanio 1993, DeCanio 1998, Howarth and Andersson 1993,
    Huntington et al. 1994, Sanstad and Howarth 1994). The literature is
    full of examples of implicit discount rates vastly exceeding the risk-
    adjusted cost of capital to consumers and businesses (EPRI 1988a, EPRI
    1988b, Gately 1980, Hausman 1979, Howarth and Sanstad 1995, Koomey
    1990, Koomey et al. 1996, Meier and Whittier 1983, Ruderman et al.
    1987, Sanstad et al. 1995, Train 1985). Furthermore, the program
    evaluation literature shows that efficiency programs and policies can
    change behavior and reduce energy demand at a total cost to society
    that is less than the cost of preserving the status quo (Eto et al.
    1994, Eto et al. 1995, Greening et al. 1997, Koomey et al. 1999, Koomey
    et al. 1996, Krause et al. 1993, Krause et al. 1995, Krause et al.
    1989, Levine et al. 1992, Webber et al. 2000). In other words, the high
    hurdle rates (and thus the market failures and barriers that cause-
    them) are reducible by appropriate policy actions, and these policy
    actions result in greater economic efficiency.
        EIA appears to be confused on this point:``. . . many of the
    presumed `market failures' are actually rational, efficient decisions
    on the part of consumers given current technology, expected prices for
    energy and other goods and services, and the value they place on their
    time to evaluate options . . .'' The words ``rational'' and
    ``efficient'' are not equivalent. Consumers' decisions may very well be
    rational given their availability of information and the presence of
    transaction costs, but rational decisions by individual actors do not
    necessarily result in `efficient' market outcomes from society's
    perspective, given the complexities surrounding information costs and
    asymmetries, increasing returns to scale, and multiple equilibria
    (Arthur 1990, Sanstad et al. 2001a). EIA's statements on this point are
    inconsistent with the research over the past two decades by economists
    on decisions regarding energy efficiency. Econometric, not
    `engineering', studies have long shown a high rate of implicit
    discounting, and this finding has been recognized by economists as an
    anomaly requiring explanation. No conclusive explanation has to date
    been advanced, and EIA errs by implying otherwise.
        5) The EIA analysis largely ignores the endogenous effect of prices
    on technological change. For example, energy price increases of the
    magnitude considered in the EIA analysis would surely cause consumers
    and businesses to develop and deploy new energy efficiency and supply
    technologies. Both theory and the current evidence demonstrate that
    this effect is real (Goulder and Schneider 1999, Newell et al. 1999,
    Nordhaus 1999, Popp 2001, Sanstad 2000), and that the EIA results are
    likely to be biased by omitting it. More complete analyses attempt to
    overcome this omission (despite measurement difficulties) by making
    reasoned and documented assumptions related to such changes.
        In summary, EIA's statement reflects their misunderstanding of the
    purpose of scenario exercises, of the relevant economic literature, and
    of the CEF study itself, and it does not hold up under scrutiny.
    Without analytical support for the statements contained in the above
    quotation, they should be considered no more than unsubstantiated
    allegations. The CEF study stands on its own as the most carefully
    documented and complete analysis of U.S. energy futures that has ever
    been funded by the U.S. Government.
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                                     ______

          [From the Natural Resources Defense Council, November 2001]
                   Reported ``Reductions,'' Rising Emissions
       the failure of voluntary commitments and reporting to reduce u.s.
                   electric industry co2 emissions
                       (By Project Manager Daniel Lashof)
                               executive summary
        Electric power plants generate more carbon dioxide (CO2)
    than any other source in the United States, and are therefore the
    leading contributors to global warming. Despite the dangers associated
    with CO2, power plants do not yet have mandatory limits on
    how much they can emit. Some members of the energy industry say that
    non-binding emissions reduction programs provide the best way to limit
    CO2. In fact, voluntary programs, such as the Department of
    Energy's Climate Challenge, have failed to achieve their goals.
        The Department of Energy launched the Climate Challenge program in
    1993 in an effort to reduce electric sector CO2 emissions to
    1990 levels by the year 2000. Despite significant industry
    participation and reporting of emissions ``reductions,'' actual
    electric industry CO2 emissions increased by 20 percent
    between 1990 and 1999. Estimates based on Energy Information
    Administration (EIA) generation data indicate that the increase was 25
    percent by 2000.
        The Climate Challenge program is one of many domestic and
    international voluntary efforts to reduce global warming pollution that
    the United States has adopted during the last decade.\1\
    Unfortunately, these programs have failed to reverse the trend of
    rising emissions. In fact, total U.S. carbon dioxide emissions from
    fossil fuel combustion increased by more than 15 percent during the
    last decade.\2\
    ---------------------------------------------------------------------------
        \1\For examples of other voluntary programs that have not been
    effective at reducing emissions see: NRDC, Voluntary Greenhouse Gas
    Reduction Programs Are Not Enough, June 2001. http://www.nrdc.org/
    globalWarming/avoluntary.asp.
         \2\Energy Information Administration, U.S. Carbon Dioxide
    Emissions from Energy Sources: 2000 Flash Estimate. June 2001. http://
    www.eia.doe.gov/oiaf/1605/flash/sld001.htm.
    ---------------------------------------------------------------------------
        By enabling companies to calculate and report emissions
    ``reductions,'' while actual emissions were increasing, the Climate
    Challenge program stimulated artful emissions accounting procedures,
    but did little to alter electricity industry business practices or
    reduce emissions. Major shortcomings of the program include:
          Most commitments and ``reductions'' are calculated using
    theoretical reference cases that have no basis in reality.
          Emissions ``reductions'' reported under the program are
    paralleled by emissions increases from other activities that are not
    reported.
          The vast majority of reported emissions ``reductions''
    are simply business-as-usual activities. In 1999:
          Seventy percent of all emissions ``reductions'' reported
    were based on the standard operation of nuclear power plants. The
    entire output of at least three nuclear power plants--Browns Ferry
    (TVA), Watts Bar (TVA), and Comanche Peak (TXU)-were reported as
    CO2 emissions reduction projects, accounting for about 45
    million tons, or over 30 percent of reported ``reductions.''
          Ten percent of reported ``reductions'' were attributed by
    the reporting companies to ``routine maintenance'' at fossil fuel power
    plants.\3\
    ---------------------------------------------------------------------------
        \3\In an effort to circumvent air pollution control requirements,
    many power companies have classified a variety of projects as ``routine
    maintenance,'' when in fact these projects represented ``major
    modifications'' to existing power plants under the Clean Air Act.
    Regardless of their legal status, these projects often represent
    business-as-usual investments to maintain or expand capacity at aging
    units.
    ---------------------------------------------------------------------------
          Demand side management programs that were funded by
    ratepayers and initiated well before the Climate Challenge are reported
    as energy efficiency ``reductions'' under the program.
          Commitments for participation in a number of industry
    technology and research programs, as well as forestry and sequestration
    projects, look good on paper, but provide very little benefit compared
    to the emissions increases occurring in the electric industry.
        The lesson from the Climate Challenge program is that enforceable
    emissions reduction requirements are needed to make real progress in
    reducing global warming pollution. Voluntary commitments are not
    sufficient because they do not significantly alter business planning or
    investment decisions. As a result, power plants continue to increase
    their contribution to global warming.
                   reported ``reductions,'' rising emissions
        In 1992 the United States ratified the United Nations Framework
    Convention on Climate Change, committing to adopt national policies
    aimed at returning emissions of global warming pollution to 1990
    levels. Acting on this commitment, President Clinton announced in 1993
    the U.S. Climate Change Action Plan (CCAP), which established specific
    (mostly voluntary) steps the United States would take to stabilize
    emissions at 1990 levels by the year 2000. A cornerstone of the
    president's plan was the Climate Challenge program for the electric
    utility sector, which established voluntary commitments from electric
    utility companies to reduce carbon dioxide (CO2) emissions
    to below 1990 emissions levels by 2000.
        The program did not come close to meeting this objective. According
    to EIA, CO2 emissions from electric power plants increased
    20.3 percent between 1990 and 1999, outpacing the overall growth in
    U.S. greenhouse gas emissions and resulting in an annual emissions
    increase of over 400 million tons by 1999 (Figure 1).\4\  Based on year
    2000 EIA generation data, we estimate that CO2 emissions
    increased to 2.57 billion tons in 2000, a 25 percent increase over 1990
    levels.\5\
    ---------------------------------------------------------------------------
        \4\Energy Information Administration (EIA) data indicate that
    between 1990 and 1999 overall U.S. greenhouse gas emissions increased
    10.7 percent and U.S. CO2 emissions increased 13.1 percent.
    During the same period, electric industry CO2 emissions
    increased 20.3 percent. See http://www.eia.doe.gov/oiaf/1605/ggrpt/
    index.html.
         \5\Based on 2000 net electricity generation data from Energy
    Information Administration (EIA), Annual Energy Review 2000, August
    2001, Table 8.2; and average 1999 lbs/MWh emissions rates for coal
    (2,095), oil (1,969) and natural gas (1,321) from DOE, Carbon Dioxide
    Emissions from the Generation of Electric Power in U.S., July 2000,
    Table 1.
    ---------------------------------------------------------------------------
        This emissions increase occurred despite significant participation
    by the industry in voluntary CO2 emissions reduction
    programs. By 1999, 124 participation agreements had been signed with
    electric companies under the Climate Challenge program. Participating
    companies represented over 70 percent of 1990 CO2 emissions
    in the industry. By 1999 one hundred electric power companies reported
    emissions ``reductions'' from over 450 voluntary projects under Section
    1605(b) of the Energy Policy Act. The ``reductions'' reported from
    these projects totaled over 136 million CO2-equivalent tons.
       Figure 1. Electric Industry CO2 Emissions by Fuel Type

        Why have electric industry emissions steadily risen despite
    voluntary reduction commitments and significant reporting of emissions
    reduction progress? This report examines this question by taking a
    closer look at the voluntary commitments made under the Climate
    Challenge program and by reviewing the ``reductions'' reported under
    the 1605(b) program.
                           industry emissions trends
        Growth in electric industry CO2 emissions in the last
    decade has closely paralleled the industry's growth in electricity
    production (Figure 2). As a result, the carbon intensity of electricity
    generation, expressed as CO2 emissions per kilowatt-hour of
    generation, has remained virtually unchanged, decreasing less than 2
    percent between 1990 and 1999. This modest change is a strong
    indication that no fundamental changes have taken place in the industry
    to improve CO2 emissions performance as a result of the
    voluntary programs that have been in place.
        Furthermore, if all of the ``reductions'' reported by the electric
    industry in 1999 were real and additional to what would have happened
    without the Climate Challenge program, then emissions would have
    increased by another 136 million tons in 1999 (above the 420-million-
    ton increase that did occur) if the program didn't exist. Had this
    theoretical scenario occurred, the industry's average CO2
    emissions rate would have actually increased 3.5 percent between 1990
    and 1999, an unlikely outcome since it would suggest that the industry
    would have become more carbon-intensive during the decade absent the
    Climate Challenge program.
    Figure 2. Percent Change in CO2 Emissions and Net Generation
                                   from 1990

        The CO2 emissions trends shown in Figures 1 and 2 are in
    sharp contrast to the trend in sulfur dioxide (SO2)
    emissions from the industry. Electric industry SO2 emissions
    have been on a declining path and are projected to continue on this
    path as a result of the acid rain emissions trading program. The
    SO2 program, which includes firm emissions caps and strong
    enforcement provisions, has resulted in a 36 percent reduction in
    average SO2 emissions per kilowatt-hour of generation in the
    industry since 1990. Figure 3 provides a comparison of historic and
    projected changes in electric industry SO2 and
    CO2 emissions since 1990, illustrating the different results
    achieved by enforceable and voluntary emissions reduction programs.
                         climate challenge commitments
        By 1999, 124 participation agreements had been signed by electric
    companies under the Climate Challenge program. These agreements commit
    the companies to take specific actions to reduce emissions, or to make
    emissions reduction progress against a specific emissions baseline.
    Importantly, the commitments are non-binding and not enforceable,
    stating, ``either party may withdraw . . . without penalty and without
    being subject to remedies at law or equity.'' Many types of commitments
    have been made under the Climate Challenge, but most do not involve
    serious actions to reduce emissions beyond what would be achieved
    through ongoing business activities. Many of the commitments focus on
    operating power plants the way the plants were designed to be operated.
    Many also involve commitments to a variety of industry initiatives and
    indirect emissions reduction programs, with very limited benefits
    compared to emissions from the industry. Only four of the agreements
    reviewed for this analysis include a commitment to reduce emissions
    back to or below 1990 levels. These companies have had mixed results.
    Figure 3. Historic and Projected Change in CO2 Emissions vs.
                            SO2 Emissions

    Commitments to ``Business-as-Usual'' Activities
        The vast majority of emissions ``reductions'' committed to under
    the Climate Challenge relate to ongoing operations of nuclear and
    fossil fuel power plants. The largest of these are commitments to
    continue standard operation of nuclear facilities.\6\  For example:
    ---------------------------------------------------------------------------
         \6\Climate Challenge Agreements are available for review at:
    http://www.eren.doe.gov/climatechallenge /cc--accords.htm.

          Texas Utilities (TXU) committed to continue to operate
    its Comanche Peak nuclear plant as a base load facility.
          Tennessee Valley Authority (TVA) committed to operate its
    Browns Ferry and Watts Bar nuclear plants.
          Duke Energy, Baltimore Gas and Electric, Entergy, and
    several others agreed to increase generation from their nuclear
    generating facilities by improving availability of their plants.

        Climate Challenge commitments based on nuclear power plant
    operations, which amount to companies committing to run these plants as
    profitably as they can, accounted for about 70 percent of the total
    voluntary emissions ``reductions'' reported in 1999, including
    virtually all of the largest ``emissions reduction projects'' (see
    detailed discussion on page 6).
        Many companies made similar commitments regarding the operations of
    fossil generating stations. Primarily, the commitments related to heat
    rate maintenance and improvement programs. As an example of these
    activities, Figure 4 illustrates General Public Utilities' (GPU)
    commitment for capital improvement projects at the Shawville power
    plant. The list is comprised of typical activities that prevent an
    aging power plant from de-rating over time. Most of the largest fossil
    plant operators, such as American Electric Power, Southern Company, and
    Tennessee Valley Authority, made similar heat rate commitments. Like
    commitments to operate nuclear plants, commitments to invest in fossil
    plants so they continue to be profitable and operate as designed amount
    to no more than commitments to conduct business as usual.
      Figure 4. Heat Rate Maintenance and Improvement Measures at General
                    Public Utilities (GPU) Shawville Unit 3

          Flue Duct Expansion Joints, 1991
          Economizer Inlet Header Replacement, 1994
          High Temperature Reheater, 1994
          Air Heater Cold End Replacement, 1994
          Boiler Control Replacement, 1997
          Condenser Cleaning System Replacement, 1997
          10A & 10B FWH Replacement, 1999
          Feedwater Heater Replacement, 1999
     Source: Energy Information Administration, 1601(b) Public
                                                  Use Database.

        In addition to commitments focused on energy supply, there are also
    many relating to demand side management (DSM) programs. These programs,
    which reduce consumer demand for electricity by helping facilitate the
    enhanced use of energy-efficient technologies, are an important means
    of reducing CO2 emissions. However, it is doubtful many (if
    any)of them were made in response to the Climate Challenge program.
    Most of the demand side programs described, such as Wisconsin Electric
    Power Companies ``Smart Money Energy Program'' and Southern California
    Edison's energy-efficiency program, began years before the Climate
    Challenge and were built into regulated electricity rates. As described
    in Southern California Edison's 1999 1605(b) filing,'' most of the
    savings responsible for the CO2 reductions are due to
    ratepayer-funded survey and rebate programs.'' Far from increasing its
    investments in energy efficiency in response to the Climate Challenge
    program, industry-wide energy-efficiency program expenditures declined
    by about 50 percent between 1994 and 1999.\7\
    ---------------------------------------------------------------------------
        \7\Richard Cowart, ``Efficient Reliability: The Critical Role of
    Demand-Side Resources in Power Systems and Markets,'' (National
    Association of Regulatory Utility Commissioners, June 2001) at 12-13.
    ---------------------------------------------------------------------------
    Industry and Forestry Programs
        Commitments were also made to support industry programs designed to
    promote climate friendly technologies and research. The most popular
    were commitments to fund the Utility Forest Carbon Program (funding
    projects to reduce and sequester greenhouse gases), the National Earth
    Comfort Program (promoting use of geothermal heat pumps), and EV
    America (supporting development and use of electric vehicles). Most
    companies do not specifically report information on the carbon
    reduction benefits of these programs, but in some cases, companies
    estimate their proportionate share of ``reductions,'' and these shares
    serve to illustrate the small scale of these projects. TVA, for
    example, estimated its share of ``reductions'' from the Utility Forest
    Carbon Management Program to be 50,000 tons of CO2 annually
    by 2000. By comparison, TVA's fleet of power plants emitted an average
    of over 240,000 tons of CO2 per day in 1999.
        In addition, 43 electric companies sponsored forestry sequestration
    projects, which included both afforestation and reforestation
    initiatives. The average emissions ``reductions'' estimated for all
    sequestration projects reported under 1605(b) was about 25,000 tons of
    annual CO2 sequestration per project. This is approximately
    equivalent to the CO2 emissions from operating a single 500-
    megawatt coal plant for 2 days. While industry technology programs,
    sequestration projects, and other similar initiatives agreed to under
    the Climate Challenge should not be completely discounted, they do not
    begin to offset emissions or emissions growth in the electric industry.
    Commitments to Stabilize Emissions at or below 1990 Levels
        Of the Climate Challenge agreements reviewed in this analysis,
    which included over 25 percent of the agreements and all agreements
    from companies reporting the largest emissions ``reductions'' under
    Section 1605((b), four companies were identified as having made
    commitments to reduce overall corporate emissions back to or below 1990
    levels. Of these, at least one company is clearly not on a path to
    achieve its commitment, one company has made real progress, one
    company's commitment is largely irrelevant because it has divested its
    generating assets, and the progress of one company cannot be determined
    from data reported. The four commitments identified include:
        Cinergy Cinergy's participation agreement commits the company ``to
    develop and implement a voluntary program of comprehensive and flexible
    least-cost activities to reduce, avoid, or sequester greenhouse gas
    emissions to return the Cinergy Companies' emissions to 1990 levels by
    the year 2000.'' Although Cinergy did not report emissions information
    under 1605(b)in 1999, by 1998 Cinergy reported total CO2
    emissions that were 40 percent above 1990 levels, suggesting the
    company would not meet its commitment.
        Niagara Mohawk Niagara Mohawk committed to limit company
    CO2 emissions to its 1990 baseline level and to maintain
    that level through 2000. However, as noted in the 1605(b) filing by
    Niagara Mohawk, the ``reduction'' reported in 1999 ``does not reflect
    new reduction projects and activities; it is rather a consequence of
    electric utility restructuring in New York State,'' which required the
    company to divest its generating assets. The sale of its power plants
    has made Niagara Mohawk's ``reduction'' commitment largely irrelevant.
        The Sacramento Municipal Utility District (SMUD) SMUD committed to
    reduce CO2 emissions to 30 percent below its 1990 baseline
    emissions of 3.9 million tons by 2000. As of 1999, SMUD reported
    emissions that were 21 percent below its reported 1990 CO2
    emissions level, signaling real progress toward meeting its commitment.
    The progress is based primarily on the purchase of less coal-fired
    electricity to meet its demand. SMUD points out that this progress
    represents a 33 percent ``reduction'' when adjusted for increased
    electricity sales. However, SMUD's commitment does not mention
    adjusting for increased electricity sales.
        The Salt River Project (SRP) SRP agreed to stabilize its greenhouse
    gas emissions at 1990 levels by 2000. However, SRP has not been
    reporting corporate emissions information under the 1605(b) program,
    making it impossible to assess its progress from publicly reported
    data.
        The commitments of these four companies are the types of
    commitments that would have been needed across the industry for the
    Climate Challenge to meet its objective of returning emissions to 1990
    levels by 2000. However, as one might expect under a non-binding
    voluntary program, only a small minority of companies agreed to these
    types of commitments, and even for these self-selected companies the
    results were mixed.
                   1999 ``reductions'' reported under 1605(b)
        Section 1605(b)of the Energy Policy Act provides a mechanism for
    the voluntary reporting of annual reductions of greenhouse gas
    emissions. Electric companies that made emissions reduction commitments
    under the Climate Challenge program also agreed to report their
    emissions reduction progress under the 1605(b)reporting program. The
    program enables companies to report emissions reductions on a project-
    by-project basis, as a single corporate entity, or both. Most, but not
    all, reporting companies provide information on both project and entity
    level ``reductions,'' which largely overlap.

                                                         Table 1
     Emissions and Emissions Reductions of 20 Companies Reporting over 20 Million Tons of CO2 Equivalent Reductions
                                          over the Life of the 1605(b) Program
    ----------------------------------------------------------------------------------------------------------------
                                                                                        1999 Entity
                                     Program Total                                      Direct CO2
                                    CO2 Equivalent   Reporting Basis   1999 Project     Reductions     1990 to 1999
                                      Reductions       for Program      Direct CO2         from        CO2 Emissions
                                       Reported           Total         Reductions      Stationary        Change
                                                                                        Combustion
    ----------------------------------------------------------------------------------------------------------------
    FPL Group.....................     179,591,355  Entity..........             N/A      18,316,000      24,852,000
    Tennessee Valley Authority....     149,728,565  Entity..........      28,398,668      28,389,780       5,880,041
    TXU...........................     149,320,163  Project.........      20,908,112             N/A             N/A
    Duke Energy...................      87,420,473  Entity..........      14,480,357      14,480,357      10,029,016
    KeySpan Energy................      53,374,582  Entity..........             N/A       4,063,200      -1,730,900
    FirstEnergy...................      51,582,962  Entity..........      11,545,699      11,543,721      -8,674,000
    AES...........................      49,667,625  Entity..........             N/A             N/A       1,655,183
    Niagara Mohawk................      37,442,511  Entity..........       2,668,228      10,739,100     -10,739,000
    Carolina Power & Light........      36,994,932  Project.........       8,161,891             N/A             N/A
    Pacific Gas & Electric........      35,346,135  Entity..........       4,784,977       4,698,673         396,505
    Southern Company..............      34,155,175  Entity..........       5,939,803       4,973,494      20,901,270
    Baltimore Gas & Electric......      31,797,949  Entity..........       5,568,779       5,571,504       6,800,000
    Wisconsin Electric Power......      30,953,598  Project.........       3,351,543             N/A             N/A
    Reliant Energy................      28,861,943  Entity..........         894,153       3,884,000       5,613,000
    Entergy Services..............      28,161,439  Entity..........       4,151,247       4,144,288      27,484,683
    Florida Power.................      27,694,761  Entity..........             N/A       5,555,831         680,448
    Southern California Edison....      24,953,373  Project.........       4,348,026             N/A             N/A
    GPU, Inc......................      24,541,630  Project.........       2,680,450             N/A             N/A
    Central Hudson Gas & Electric.      20,483,077  Entity..........         355,159         802,750        -802,750
    Northeast Utilities...........      20,313,480  Entity..........             N/A       2,440,000        -940,000
        Totals....................   1,102,385,728                       118,237,091     119,602,698      81,405,496
    ----------------------------------------------------------------------------------------------------------------
    Source: Energy Information Administration (EIA) 1605(b) Public Use Data base. 1999 emissions values for Southern
      Company are reported incorrectly by EIA. Corrected values supplied by company are used to calculate 1990 to
      1999 emissions change. Values for AES represent corporate total based on reporting of three separate entities

        In 1999,100 electric companies reported 453 projects, resulting in
    reported ``reductions'' of 136 million CO2 tons. In
    addition, 42 electric companies reported entity level ``reductions''
    from stationary combustion, totaling 137 million CO2 tons.
        Over the 9 years of reporting under the 1605(b) program, 20
    electric companies have individually reported ``reductions'' exceeding
    20 million CO2 equivalent tons, either on a project or
    entity basis. The emissions ``reductions'' reported by these 20
    companies account for over 80 percent of electric industry emissions
    ``reductions'' reported over the life of the program and 87 percent of
    ``reductions'' reported in 1999. Table 1 illustrates the total
    emissions ``reductions'' reported by these companies from 1991 to 1999,
    the ``reductions'' reported by each in 1999, and their reported change
    in emissions between 1990 and 1999.
        Table 1 indicates that 10 of the 15 companies reporting emissions
    information reported emissions increases between 1990 and 1999. Most of
    these 10 companies also reported significant emissions ``reductions''
    in 1999 ((Figure 5). Florida Power and Light (FPL) Group, for example,
    reported an emissions increase of 24.9 million tons between 1990 and
    1999. At the same time, FPL Group reported 18.3 million tons of
    CO2 ``reductions'' from stationary combustion activities.
    The total discrepancy between the emissions increase and the reported
    ``reductions'' was 43.2 million tons. This circum-stance highlights why
    the Climate Challenge and 1605(b)were ineffective at reducing actual
    emissions--companies have been able to report significant emissions
    ``reductions'' while emissions increased.
       Figure 5. Discrepancies between Reported Emissions and Emissions
                                   Reductions

        At least three related factors account for this seemingly
    inconsistent reporting: 1) the 1605(b) program allows companies to
    establish baselines for emission ``reduction'' calculations using
    hypothetical scenarios of ``what would have happened'' that have no
    basis in fact; 2) the programs allow companies to commit to and report
    ``reductions'' for what can only be described as business-as-usual
    activities; and 3) the programs allow companies to report
    ``reductions,'' while ignoring emissions increases in other areas.
    Hypothetical Baselines
        The 1605(b) program enables companies to use so-called ``modified
    baselines'' to calculate emission ``reductions.'' Modified baselines
    are a hypothetical construction of ``what would have happened'' without
    the so--called emissions ``reduction'' activity. All but two of the
    companies shown in Table 1 that report entity level ``reductions'' used
    modified baselines. Modified baselines are also used to calculate the
    vast majority of project ``reductions.'' Prominent examples of the use
    of modified baselines include:

          Tennessee Valley Authority (TVA) uses a generation
    planning model to calculate a baseline of what emissions would have
    been had it continued to use the set of generating units operating in
    1990 at their 1990 capacity factors and heat rates. Since neither the
    Browns Ferry, nor the Watts Bar nuclear facilities operated in 1990,
    TVA uses this baseline to calculate emissions ``reductions'' assuming
    the total output of these nuclear facilities offsets hypothetical
    emissions that would have been associated with the 1990 generating
    fleet. These reported ``reductions'' totaled 27.6 million
    CO2 tons in 1999.
          Texas Utilities (TXU) uses a baseline of what would have
    taken place if the Comanche Peak nuclear facility had not operated.
    This baseline assumes additional construction and use of lignite coal
    plants. TXU calculates 19.4 million CO2 tons of emissions
    ``reductions'' in 1999, assuming the entire 18 million MWh of
    generation from the Comanche Peak station offsets emissions from
    hypothetical lignite coal facilities.
          Florida Power and Light (FPL) Group uses a hypothetical
    baseline to claim ``reductions ``for building natural--gas-fired
    generating stations. FPL Group's baseline assumes incremental capacity
    additions would have been coal-fired, had they not built gas-fired
    plants. Therefore, when the company built gas-fired plants, emissions
    increased, but increased less than they would have if coal-fired plants
    had been built. The new plants lead to an emissions increase, but a
    reported ``reduction.'' Hypothetical baselines enable companies to
    commit to and report emissions ``reductions'' that don't exist in fact.
    Virtually all companies reporting substantial emissions ``reductions''
    under 1605((b)are using modified baselines.
    Business-as-Usual ``Reductions''
        With modified baselines, companies are able to report emissions
    ``reductions'' under 1605(b)for many ``business-as-usual'' activities.
    By far the largest of these involve reporting emissions ``reduction''
    projects associated with availability improvements at existing nuclear
    power plants. Others involve regular maintenance or upgrades at
    existing fossil plants, shutting down plants, fuel switching,
    repowering, and other activities. It is not clear that any of these
    ``reduction'' activities resulted from changes in business behavior due
    to the Climate Challenge program. Ten of the companies listed in Table
    1 reported ``reduction'' projects associated with nuclear facilities.
    These projects accounted for 80 percent of the project direct
    ``reductions'' reported by companies in Table 1, and 70 percent of
    total project direct ``reductions'' reported by the electric industry
    under 1605((b)in 1999. Figure 6 illustrates the portion of
    ``reductions'' resulting from nuclear projects for the industry and for
    the companies included in Table 1 reporting nuclear projects.
        Most of the nuclear ``reductions'' reported--aside from the
    examples of companies reporting ``reductions'' for a facilities entire
    output--were associated with availability improvements that increased
    generation at a facility.\8\  Availability improvements are increases
    in the amount of time a plant operates during the year, which at base
    load nuclear plants is strictly a function of how well the plants are
    operated and maintained.
    ---------------------------------------------------------------------------
         \8\Of companies in Table 1, CP&L, Duke Energy, Entergy,
    FirstEnergy, Niagara Mohawk, and Southern Company reported emissions
    ``reductions'' from nuclear plant availability improvements.
    ---------------------------------------------------------------------------
        Availability improvements at base load nuclear facilities directly
    and substantially improve plant profitability, making them a top
    priority for all nuclear plant operators. Over the past decade, nuclear
    operators have been successful at improving availability, as the
    average capacity factor of nuclear power plants (the amount of annual
    generation as a percent of the plant's total generation capability),
    increased from 66 percent in 1990, to over 85 percent in 1999.\9\  This
    industry-wide phenomenon is not limited to plants associated with the
    Climate Challenge commitments or 1605(b) reporting.
    ---------------------------------------------------------------------------
         \9\Energy Information Administration (EIA), Annual Energy Review
    2000, Table 9.2.
    ---------------------------------------------------------------------------
        Fossil-fuel power plant operation provides another set of reported
    ``reductions.'' These range from maintaining and upgrading equipment to
    fuel switching, re-powering, or shutting down outdated generating
    plants. Projects that companies claimed were routine repair and
    maintenance accounted for by far the largest ``reductions'' in this
    category, with 159 projects reported for a total emissions
    ``reduction'' of 16 million tons of CO2 in 1999, or 10
    percent of total reported ``reductions.''\10\  As noted above, these
    ``reductions'' amount to nothing more than reporting of business-as-
    usual activities to service aging power plants.
    ---------------------------------------------------------------------------
         \10\See Note 3.
    ---------------------------------------------------------------------------
    Selective Reporting
        Under 1605(b), companies are able to report emissions
    ``reductions'' from one set of activities, while ignoring other
    activities that increase emissions. For example, Duke Energy reports
    significant emissions ``reductions'' associated with increased
    generation at three of its nuclear power plants, but the company
    recorded an overall emission increase from its fossil generation fleet
    of over 26 percent between 1990 and 1999. None of the emissions
    increases were reported as projects or counted against claimed
    ``reductions.'' Similarly, Baltimore Gas &Electric reported
    ``reductions'' associated with heat rate improvements at three fossil
    fuel power plants in 1999, but emissions from its fleet increased 50
    percent between 1990 and 1999. Allowing for reporting of ``reductions''
    from one set of operations, and simultaneously ignoring emissions
    increases from other activities is a significant accounting loophole in
    the 1605(b) program. To achieve real emissions reductions, programs
    must clearly account for all emissions activities.
             Figure 6. Reductions from Operation of Nuclear Plants

                                   conclusion
        The failure of the Climate Challenge program to reduce emissions
    was arguably predictable. Without binding commitments or enforcement
    provisions, electric power producers had no incentive to pursue real
    changes in business practices to reduce CO2 emissions.
    Furthermore, by enabling companies to claim ``reductions'' using
    hypothetical baselines, report ``reductions'' from business--as-usual
    activities, and ignore emissions increases that parallel reported
    ``reductions,'' the Climate Challenge and 1605(b) allowed companies to
    essentially print their own emissions ``reductions.'' Real progress in
    improving electric industry environmental performance must involve
    enforceable requirements that make global warming pollution reduction
    an integral factor in business planning and investment decisions.
                                     ______

      Responses of David G. Hawkins to Additional Questions from Senator
                                    Jeffords
        Question 1. We've heard from EPA and industry that stringent enough
    caps could obviate the need for New Source Review and a host of other
    Clean Air Act requirements. What are your views on this position?
        Response. NRDC does not believe that a set of national caps on
    emissions would obviate the need for New Source Review or justify
    amending other programs in the current Act that address pollution
    problems caused by electric generating sources. New Source Review
    programs are designed to achieve two important objectives: first, to
    assure that when new plants are built or emission-increasing
    modifications are made to existing plants, that the plants are required
    to meet modern performance standards to prevent and reduce pollution;
    second, to assure that impacts on local air quality are assessed prior
    to construction to prevent an exacerbation of health problems and to
    protect places where the air is still clean.
        Neither of these objectives can be fully achieved only with a
    program that caps emissions on a national level. Investments in
    electric generating facilities are particularly long-lived and it
    continues to make sense that new facilities and major modifications of
    existing plants incorporate state-of-the-art environmental performance
    into the project design when these investments are made.
        For example, the acid rain program of 1990 capped sulfur oxide
    emissions but Congress continued to require new plants to meet best
    performance levels for that pollutant. This was a wise decision because
    plants built in the last decade will be around for several more
    decades. By minimizing the emissions from these long-lived plants up
    front, Congress reduces the costs of achieving additional reduction
    goals such as those in S. 556. While S. 556 is a comprehensive program,
    new plants will be operating 50 years from now and S. 556 is unlikely
    to be the last air pollution program enacted during the next five
    decades.
        A national cap program also will not achieve the second objective,
    protecting local air quality. National caps will bring down total
    pollution loads, which is important. But local loadings of pollution
    will remain important. Major metropolitan areas continue to have air
    pollution problems that harm public health. A reduction in total
    loadings nationally will improve air quality in general but will not
    provide a complete cure for the most polluted places. In addition,
    achievement of the caps will not occur overnight. For both these
    reasons, we need to maintain a program that reviews projects with
    significant emission increases so that localized pollution problems are
    prevented from getting worse.
        National Parks and other places with very clean air also can be
    damaged by large new projects if emissions are not well controlled.
    Without a New Source Review program the degradation of clean air in
    regions like the intermountain west could be rapid and large. Areas
    experiencing rapid growth in energy generating plants could have very
    dramatic increases in regional pollution if new plants could be built
    without modern emission controls. Such a scenario could occur under a
    national cap bill without a New Source Review requirement for new plant
    owners could take credit for reductions hundreds or thousands of miles
    away rather than minimizing emissions from the newly constructed
    plants. For these reasons a national cap program cannot replace the
    Act's New Source Review programs.
        Other Clean Air Act programs will continue to serve critical
    purposes if the caps in S. 556 are enacted. The Act's ``nonattainment''
    programs are a structured set of requirements designed to assure the
    public that public officials will adopt pollution controls sufficient
    to achieve the health-based National Ambient Air Quality Standards
    (NAAQS) on a congressionally specified timetable. Both the NAAQS and
    deadlines for achieving these standards must be preserved to assure
    timely progress toward public health protection in metropolitan areas
    where tens of millions of people live.
        Included in the Act's nonattainment program are tools, such as
    petitions under section 126 of the Act, to empower States to force
    remedial action by EPA to address interstate transport of pollution.
    The national caps in S. 556 will greatly reduce the number of occasions
    when State officials might need to petition EPA. To the extent that the
    caps result in a well controlled fleet of electric generating plants,
    S. 556 will aid planning efforts both for the generating industry and
    for State officials. As a practical matter, the caps in S. 556 will
    allow public officials to focus their efforts on other more polluting
    sectors. However, these facts do not support creating a special
    exemption from section 126 for all electric generators. Because there
    is compliance flexibility in S. 556 as to how, when, and where affected
    sources must achieve their obligations under the cap, there will likely
    remain some instances of interstate pollution problems tied to
    particular sources or groups of sources. States and their citizens
    should not be deprived of the current Act's remedies to address these
    situations.
        Regional haze problems will also be helped greatly by the caps in
    S. 556. However, this does not call for an elimination of the Act's
    current program. Rather, the caps in S. 556 will greatly reduce the
    burden on the State's of assembling programs adequate to address the
    remaining problems. In developing their regional haze response plans,
    States will be able to account for the progress that will be made with
    the reductions required by S. 556 and focus their attention on the
    remaining additional actions needed to reduce impairment.
        Another area identified by some, are the requirements for MACT
    controls for mercury. The Act's current program requires hazardous air
    pollutants to be minimized at each existing and new plant, with
    reduction implemented on a rapid schedule. While one could, in theory,
    achieve a consensus for a legislative design that would achieve the
    same results, that consensus does not appear to have arrived regarding
    the mercury provisions of S. 556. Accordingly, there is no basis to
    suggest a change in the statutory requirements to control hazardous air
    pollutants from electric generating units.
        Even with preservation of the Act's current programs, enactment of
    national caps will provide value for the private sector and consumers.
    The caps provide a predictable structure for achieving the great bulk
    of the emission reductions that otherwise would have to be secured only
    by the much less certain processes of hundreds or thousands of
    individual rulemaking decisions by numerous State and local agencies.
    With the caps enacted, individual firms can share their compliance
    plans with local, State, and Federal authorities, as well as the
    public. Those authorities can take account of the reductions under the
    caps in developing their State Implementation Plans and Regional Haze
    programs, greatly reducing the need for additional rulemaking to
    produce complete plans and programs. This reduction in the need for
    rulemaking will dramatically improve the private sector's ability to
    reduce compliance costs and to plan on a long-term basis. Fewer
    rulemakings also will reduce the workload on State and local agencies,
    making their job more manageable.

        Question 2. Some of your panel have expressed concern about the
    local impacts of trading. How do we run a national cap-and-trade
    program efficiently without jeopardizing local environmental quality
    and public health?
        Response. The Act's 1990 acid rain control program provides the
    answer to this question. Under that program large reductions in sulfur
    dioxide have been achieved at great savings in compliance costs
    compared to pre-enactment estimates. Local environmental quality and
    public health have not been jeopardized by the compliance flexibility
    in the national cap-and-trade program because the Act's existing
    programs to protect local air quality were preserved. Contrary to
    claims now being made, preserving the Act's local protection programs
    under the acid rain program has not conflicted with the efficient
    operation of the national trading system. The compliance cost savings
    of the flexible national cap program have been achieved while
    maintaining compliance with the critical local protection requirements
    of the Act.
        For the three pollutants for which trading is permitted under S.
    556, NRDC expects that efficient trading systems will prosper while the
    Act's current requirements protect local air quality. A number of
    America's remaining air pollution problems, such as fine particles,
    ozone smog, and acid rain, and regional haze, have a large regional
    component in addition to the impacts of local sources. The national
    caps in S. 556 will help reduce the regional component of these
    pollution problems. By allowing the market an opportunity to select the
    most efficient pattern of reductions to address the regional
    contribution to our pollution problems, the national caps will reduce
    the overall compliance costs of achieving our air quality objectives,
    compared to a system that relies much more heavily on source-specific
    emission limits on existing sources to meet those objectives. Of
    course, for carbon dioxide, there is no local air quality concern from
    emission sources and S. 556's trading program for this pollutant can
    operate without the need for additional measures to address.
                                   __________
     Statement of Ronald J. Tipton, National Parks Conservation Association
        Mr. Chairman and members of the committee, I am Ronald J. Tipton,
    Senior Vice President of Programs at the National Parks Conservation
    Association (NPCA). NPCA is America's only private, nonprofit advocacy
    organization dedicated solely to protecting, preserving, and enhancing
    the National Park System. NPCA was founded in 1919 and today has more
    than 425,000 members who care deeply about the well being of our
    national parks, including protection of Class I air quality and related
    values in 48 national parks. NPCA's president since 1998, Thomas
    Kiernan, served in the first Bush Administration's Environmental
    Protection Agency (EPA), and helped craft the agreement to reduce air
    pollution from the Navajo generating station in order to protect air
    quality related values in Grand Canyon National Park. Thank you for the
    opportunity to testify today on S. 556, the Clean Power Act of 2001.
        While we greatly appreciate the opportunity to appear before you
    today, we are compelled to note that the last oversight hearing
    specifically to address impacts of air pollution on national park units
    was held 16\1/2\ years ago in May 1985 by the House Subcommittee on
    National Parks and Recreation. We respectfully request that this
    committee schedule a hearing in the near future dedicated to impacts of
    air pollution on America's national parks.
        For three decades the nation has struggled with how to implement
    Federal legislation to achieve national air quality goals. The good
    news is that we have achieved a certain degree of success in this
    effort; there have been notable and undeniable improvements in air
    quality for many major metropolitan areas; automobiles are much cleaner
    and more fuel efficient than before Federal emission limits were
    improved; and many power plants, factories, and manufacturing
    facilities have also reduced their emissions.
    Air pollution continues to harm national parks
        At the same time, however, our great national parks--the places in
    America that are expected to foster some of the best air quality and
    most spectacular vistas--have in many cases experienced declining air
    quality despite the Clean Air Act mandates.
        In fact, it would surprise Americans to learn that many of our
    beloved national parks are suffering from some of the highest levels of
    air pollution in the country. The 1916 statute creating the National
    Park System states that the purpose of the National Park Service is to
    ``conserve the scenery and the natural and historic objects and the
    wild life therein--and leave them unimpaired for the enjoyment of
    future generations.''\1\  While visibility impairment is widespread
    throughout the park system, scenic views are not the only resource at
    risk. The same pollutants that reduce visibility also contribute to
    thousands of premature human deaths each year. Acid deposition hurts
    natural and cultural resources. Ground level ozone, or smog, threatens
    the health of park visitors and workers, and the health of park
    vegetation. Mercury deposition threatens fish and wildlife in a number
    of parks. Finally, global warming impacts parks in many ways, from
    rising sea level to melting glaciers to reduced biodiversity.
    ---------------------------------------------------------------------------
         \1\The National Park System Organic Act of 1916 (16 USC Sec. 1).
    ---------------------------------------------------------------------------
    Scenic vistas are key features in many national parks
        The authorizing legislation for numerous national parks
    specifically mentions scenic vistas as among the reasons for the park's
    establishment. NPCA will submit for the record a compilation of key
    excerpts from the legislative history of most of the National Park
    System units in which specific references are made to the vistas that
    were the purpose for which these areas were established. (Note:
    Attachment 1 is retained in committee files.)
        Recognizing that pristine air quality and scenic vistas are highly
    valued features of national parks, Congress amended the Clean Air Act
    in 1977, declaring a total of 158 areas including all international
    parks, national parks over 6,000 acres and wilderness areas over 5,000
    acres and in existence on August 7, 1977 as ``Class I areas,''
    deserving of the greatest protection under the Clean Air Act. Congress
    declared as a national goal ``the prevention of any future, and the
    remedying of any existing, impairment of visibility in mandatory Class
    I Federal areas which impairment results from manmade air
    pollution.''\2\
    ---------------------------------------------------------------------------
        \2\42 USC Sec. 7491(a)(1).
    ---------------------------------------------------------------------------
    Visibility remains impaired in numerous national parks
        Regrettably, almost 25 years since enactment of the 1977 Clean Air
    Act Amendments, many national parks throughout the country suffer from
    deteriorating air quality caused in large part by emissions from old,
    dirty power plants, and from the fact that many of the facilities
    impacting visibility operate under a loophole in the 1977 Clean Air Act
    Amendments that exempts them from complying with modern pollution
    emission control requirements. NPCA will submit for the record two
    National Park Service photos which contrast good and poor visibility at
    Shenandoah National Park, as representative of the many parks across
    the country that suffer significant visibility impairment. (Attachment
    2)
        According to EPA, average visual range in most Eastern Class I
    areas is 15-25 miles, compared to estimated natural visibility of about
    90 miles. In the West, average visual range is 35-90 miles for most
    Class I areas, compared to estimated natural visibility of about 140
    miles.\3\  According to the Department of the Interior, ``Visibility
    impairment is the most ubiquitous air pollution-related problem in our
    national parks and refuges--parks and refuges such as Grand Canyon,
    Cape Romain, and Great Smoky Mountains have evidenced declining
    visibility--all areas monitored for visibility show frequent regional
    haze impairment.''\4\
    ---------------------------------------------------------------------------
        \3\Latest Findings on National Air Quality: 1999 Status and Trends,
    U.S. Environmental Protection Agency, August 2000, p.19.
         \4\U.S. Department of the Interior to U.S. Environmental
    Protection Agency, Docket No. A-2000-28, September 17, 2001.
    ---------------------------------------------------------------------------
    Smokies, Big Bend, and other parks suffer numerous problems
        NPCA included Great Smoky Mountains National Park in Tennessee and
    North Carolina and Big Bend National Park in Texas on its 2001 list of
    America's Ten Most Endangered National Parks as representative of the
    many national parks suffering from poor air quality. Millions of
    Americans who escape urban congestion by visiting national parks are
    greeted by dim, hazy vistas and unhealthful air instead of the
    expansive views and scenery that have made these areas our national
    treasures. In a letter to President George W. Bush dated June 19, 2001,
    Tennessee Senator Fred Thompson wrote: ``Most shocking to me is that,
    according to Park officials, air quality in the Smokies is so poor
    during the summer months that hiking our backcountry trails is more
    hazardous to your health than walking along (city) streets . . .'' If
    Americans expect clean air anywhere, it's in our national parks.
        The time is ripe for Congress to act now to fulfill the promises
    made to America almost 25 years ago, not only to clear the air in our
    national parks, but in our nation as a whole. NPCA fully supports S.
    556 and commends Senators Jeffords and Lieberman for introducing it.
    The bill's ``birthday provision'', which phases out the exemption
    granted in 1977 to older coal-and oil-fired plants, is critical to the
    clean-up of Class I areas like Great Smoky Mountains National Park, our
    nation's most-visited national park, with more than 10 million visitors
    each year. Great Smoky Mountains National Park has recorded the highest
    level of nitrogen deposition of any monitored site (urban or rural) in
    North America. Scenic views that historically stretched for more than
    60 miles in the summer and more than 90 miles during the rest of the
    year are typically reduced to 15-25 miles now. In the park, researchers
    have documented that at least 30 different species of plants are
    suffering foliar damage from ground-level ozone; an additional 60
    species exhibit the same symptoms. The National Park Service has had to
    issue ``unhealthful air'' notices to employees and park visitors on 140
    days over the last 4 years.
        America's national parks cannot be protected without significant
    reductions in the sulfur and nitrogen pollution that form regional haze
    and acid rain, and the nitrogen pollution that is also a building block
    of ground-level ozone. Moreover, the 75 percent reductions in sulfur
    and nitrogen pollution called for in the Jeffords-Lieberman bill may
    not be sufficient to protect some of our most threatened national parks
    including Great Smoky Mountains and Shenandoah, where preliminary
    modeling analyses indicate that reductions of up to 90 percent may be
    necessary. At Shenandoah National Park, streams continue to acidify,
    especially during the winter when native fish are most sensitive. While
    sulfur deposition has decreased, nitrogen deposition has increased.
    Intense storms with highly acidic precipitation can kill young of even
    the most tolerant fish species, brook trout. Acidification is suspected
    in the loss of the blacknose dace in the park's Meadow Run, and
    scientists are concerned that high levels of precipitation over short
    periods of time, combined with the chronic acidity in the streams,
    could further reduce fish species diversity.
    Park pollution remains a national problem
        The need to reduce emissions from power plants is not a
    southeastern problem, however, nor even an eastern problem. Excess
    emissions from power plants impacts national parks throughout our
    country; from Acadia in Maine, to Shenandoah in Virginia, Mammoth Cave
    in Kentucky, Big Bend in Texas, Mesa Verde in Colorado, Canyonlands in
    Utah, to Mount Rainier in Washington State, Sequoia-Kings Canyon and
    Joshua Tree in California, and numerous other parks in between.
    Americans support clean air
        In the mid-1980's, the National Park Service conducted studies at
    five parks surveying visitors on the importance of various park
    features to their recreational experience. At all five parks--Grand
    Canyon, Mount Rainier, Everglades, Mesa Verde and Great Smoky
    Mountains, ``clean, clear air'' was ranked among the top four features.
    Recent polling in Tennessee, New Hampshire and Oregon also demonstrates
    overwhelming public support for restoring clean air and scenic vistas
    to our national parks. In the Commonwealth of Virginia, a poll
    conducted in May 2001 showed that eight out of ten Virginians (77
    percent) believed older power plants should meet modern pollution
    control standards.\5\
    ---------------------------------------------------------------------------
        \5\The Tarrance Group, statewide poll conducted for the League of
    Conservation Voters Education Fund, May 6-8, 2001, p. 10.
    ---------------------------------------------------------------------------
    Global warming and mercury pollution impacts parks
        NPCA is also highly concerned about the impacts of global warming
    and mercury contamination in our national parks. We fully support the
    mandatory reductions of mercury and carbon dioxide included in S. 556,
    The Clean Power Act.
        The Energy Information Administration (EIA) of the Department of
    Energy released on November 9, 2001 a comprehensive official accounting
    of emissions changes from 1990-2000. According to the report, total
    U.S. carbon dioxide emissions increased by 16.8 percent during this
    period, with carbon dioxide emissions from electricity generation
    increasing 26.5 percent. Mandatory reductions clearly are needed to
    reduce the impacts we face from global warming. The very real threat of
    sea levels rising due to human-caused global warming will have a
    dramatic effect on coastal national seashores and parks such as Cape
    Cod, Cape Hatteras and Everglades. According to the EPA, the Gulf and
    Atlantic coasts are likely to rise 1 foot by 2050, and over the next
    100 years, could rise 2-4 feet. Imagine the possibility that the $7.8
    billion Everglades ecosystem restoration plan--which this committee
    helped design--could be offset by sea level rise and massive climate
    alterations in south Florida! At Glacier National Park in Montana, park
    managers believe that many park species may be particularly sensitive
    to global warming. The park's largest remaining glaciers are now only
    about one-third as large as they were in 1850, and one study estimates
    that all glaciers in the park may disappear completely in 30 years.\6\
    ---------------------------------------------------------------------------
        \6\USEPA website, www.epa.gov/globalwarming/impacts/mountains/
    index.htm.
    ---------------------------------------------------------------------------
        Mercury exposure in the United States is widespread, and as a
    potent neurotoxin that persists in the environment and bioaccumulates
    in the food chain, mercury pollution demands an aggressive policy
    response. National parks including Acadia, Isle Royale in Michigan, and
    Big Bend are studying the effects of mercury contamination on fish and
    wildlife. Scientists at Acadia have concluded that aquatic resources
    are at risk from mercury contamination. Scientists at Big Bend believe
    that above threshold levels of mercury may be causing reproductive
    failures of the Peregrine Falcon--a species listed as ``Endangered''
    following catastrophic impacts from the pesticide DDT, and de-listed in
    1999.
        In summary, Mr. Chairman, in order to protect the natural and
    cultural resources in America's national parks, significantly reducing
    sulfur, nitrogen, mercury, and carbon dioxide pollution now simply
    makes sense.
    BART provides a needed step toward cleaner air for parks
        NPCA is pleased that, in July 2001, the EPA published a draft rule
    to require Best Available Retrofit Technology (BART) on many of
    America's old, dirty power plants and industrial facilities that have
    largely avoided emissions controls due to a loophole in the 1977 Clean
    Air Act Amendments. In its role as steward of national parks and of
    many non-park Class I areas, the Department of the Interior filed
    comments strongly supportive of the most effective final BART rule.
    Thousands of citizens, including realtors and other business
    representatives in park gateway communities, submitted oral testimony
    at public meetings or written testimony in support of an effective BART
    rule. For the committee's reference, the attachments to NPCA's
    testimony today include a copy of NPCA's comments (Attachment 3) and of
    Interior's comments (Attachment 4) on the draft BART rule.
    Park protection benefits local economies also
        There was much discussion during the 2-day stakeholder meetings in
    October 2001 and at the November 1, 2001 hearing before this committee
    about whether requiring older power plants to clean up will hinder or
    help our nation's economy. I would like to suggest a slightly different
    perspective. A 2000 report titled, Out of Sight: Haze in our National
    Parks by Abt Associates, commissioned by the ``Clear the Air''
    coalition found that: ``increases in visibility could raise park
    visitation by as much as 25 percent which could yield approximately $30
    million in increased fee collection and $160 million in additional
    concession sales. This would in turn add nearly $700 million in retail
    sales to the economies around the park, $53 million in local tax
    revenue, and create 15,896 jobs.''\7\  Not only would this legislation
    improve the condition of park resources and help protect them from
    future impairment, it would also provide a major boost to park revenues
    and to the many gateway communities and cities whose economy depends on
    the well being of these parks.
    ---------------------------------------------------------------------------
         \7\Out of Sight: Haze in Our National Parks, Clean Air Task Force
    for Clear the Air, August 29, 2000.
    ---------------------------------------------------------------------------
        Moreover, as noted by Interior, ``State and local air pollution
    agencies, as well as affected industries and their consultants, have
    been applying (a process of assessing feasibility of applying the best
    of current technology and balancing that with costs and other
    environmental impacts) for over a decade, without harm to economic
    development.''\8\
    ---------------------------------------------------------------------------
        \8\U.S. Department of the Interior to U.S. Environmental Protection
    Agency, Docket No. A-2000-28, September 17, 2001.
    ---------------------------------------------------------------------------
    National parks measure effectiveness of pollution control programs
        In closing, I want to emphasize the imperative to use effects-based
    monitoring and evaluation of Class I areas as the measuring stick for
    the efficacy of pollutant-reduction strategies. Emission-based multi-
    pollutant strategies must be linked to specific results. A simple cap-
    and-trade program offers no specific protection to Class I areas as
    required by the Clean Air Act. Strategies must be multi-faceted, and
    linked to continuous and timely progress toward effect-based goals. The
    New Source Review (NSR) and Prevention of Significant Deterioration
    (PSD) programs currently provide the only effect-based monitoring and
    permitting of stationary sources of sulfur and nitrogen pollution, and
    we've seen no proposal that provides effect-based monitoring and
    permitting in the absence of the NSR and PSD programs.
        The utilities seek ``certainty'' by asking for a phased reduction
    schedule with no measurement of the resulting effects and no
    accountability for the cumulative impact of the hundreds of proposed
    new sources. The ``certainty'' that such a strategy would produce for
    our national parks is the abandonment of America's national commitment
    to our descendants that we have the wisdom to create our future without
    destroying our past.
        Recent history is instructive. While emissions nationwide have been
    reduced under implementation of the Clean Air Act Amendments of 1990,
    emissions affecting many Class I areas actually have increased. Due to
    the use of emission reduction credits under the national trading
    program, the Tennessee Valley Authority emitted approximately 700,000
    tons of sulfur dioxide last year, 300,000 tons above their Phase II
    allocation. Accordingly, visibility in and around Great Smoky Mountains
    National Park is very poor and continues to worsen. With little ability
    to influence reductions at existing sources, the Federal land managers'
    only tools have been new source review.
        Enactment of S. 556 provides a critical step to protect America's
    national parks. Our national parks and wilderness areas deserve and
    demand the protection that S. 556 will provide; the American public
    expects no less. We are eager to work with the committee to fulfill the
    vision of the Clean Air Act to protect and restore air quality in
    America's national parks. We must work together to meet the goals of
    the 1977 amendments to the Clean Air Act to prevent future impairment
    and remedy existing visibility impairment in all Class I areas. Thank
    you for inviting NPCA to appear before you today and for considering
    our views.

                                     ______

                       National Parks Conservation Association,
                                                       October 5, 2001.
    The Honorable Christine Todd Whitman, Administrator
    U.S. Environmental Protection Agency
    Air and Radiation Docket and Information Center (6102)
    Attention: Docket No. A-2000-28
    1200 Pennsylvania Ave., NW Washington, DC 20460

    RE: Proposed Guidelines for Best Available Retrofit Technology
    (B.A.R.T.) Determinations Under the Regional Haze Regulations; Proposed
    Rule

    Dear Administrator Whitman: As president of the National Parks
    Conservation Association (NPCA), the only national nonprofit
    organization dedicated solely to protecting and enhancing America's
    National Park System, I am writing to you today on behalf of our
    425,000 members. Under your leadership, the Environmental Protection
    Agency has an historic opportunity to take action to achieve the vision
    of the 1977 amendments to the Clean Air Act, which acknowledged that
    pristine air quality and scenic vistas are highly valued features of
    national parks and wilderness areas, meriting the greatest protection
    under the Clean Air Act. The proposed national park visibility
    protection guidelines (or Best Available Retrofit Technology rule)
    could mean significant reductions in sulfur dioxide, nitrogen oxide and
    particulate matter pollution--improving America's national parks and
    wilderness areas, and also improving human health. NPCA appreciates
    EPA's action in moving forward to implement the regional haze program.
    We urge you to adopt a final rule that will accomplish long-overdue,
    necessary benefits for parks and people.
        NPCA is pleased to be working with an Administration that has made
    protecting and restoring America's national parks the centerpiece of
    its conservation agenda. President George W. Bush repeatedly has spoken
    of his commitment to protect and restore America's National Park
    System. Adopting and implementing an effective and enforceable final
    B.A.R.T. rule is essential to fulfilling that commitment.
        In many of America's most popular national parks, regional haze
    threatens park resources and values, as well as the health of park
    visitors. NPCA included Great Smoky Mountains and Big Bend National
    Parks on our 2001 list of ten most endangered national parks precisely
    because of deteriorating air quality in those parks. The scenic vistas
    that draw millions of visitors annually to these and many other beloved
    national parks are often shrouded in haze. But if Americans expect
    clean air anywhere, it's in our national parks.
        Air pollution respects neither State boundaries, nor park
    designations, nor sensitive economies, nor sensitive people. The
    benefits of cleaning up old, dirty power plants and industry
    smokestacks transcend the national parks. Residents and economies
    hundreds of miles away from the parks also will benefit from requiring
    older, dirty power plants and industrial boilers to meet modern
    standards. A 2000 report commissioned by the Clean Air Task Force for
    Clear the Air states:
        ``Haze comes at no small cost to our national parks. A report by
    Abt Associates estimates that the value of eliminating power plant haze
    is over seven billion dollars a year (emphasis added).'''
        At EPA's B.A.R.T. public hearing in Arlington, Virginia on August
    21'', 2001, Ms. Mary Johnson, a realtor who serves on NPCA's Board of
    Trustees, addressed the impacts of regional haze on real estate values
    in park gateway communities:
        ``An informal analysis was conducted in one mountain community
    outside Great Smoky Mountain National Park in an attempt to discover
    just how' much a mountain view is worth in real dollars. We found in a
    multitude of actual listings that the average increased value of a
    property sold with a mountain view was $25 per square foot above those
    with no view. That has a cumulative impact of 30-40 percent increase in
    the sale price of mountain view land, amounting to millions and
    millions of dollars in the local economies with ongoing property tax
    support in addition.''
        An effective final B.A.R.T. rule giving priority consideration to
    the best available control technologies would result in major
    reductions in emissions of sulfur dioxide and nitrogen oxide, the
    pollutants that contribute to regional haze. This has great potential
    for improving air quality in America's national parks and in
    neighboring communities. Moreover, the proposed rule provides an
    extraordinary degree of flexibility for utilities.
        In conclusion, NPCA urges you to incorporate the following points
    in order to finalize an effective B.A.R.T. rule:

        1. All States must participate in the B.A.R.T. program.
        2. EPA must choose the preferred alternative: reviewing the most
    advanced technology with the highest removal rate first. State and
    local air pollution agencies have been using this approach in related
    programs for the past decade, during which our country experienced
    record economic growth. Best Available Retrofit Technology should be
    just that--the best. Any other approach will lead to confusion,
    inconsistent application, unfair competitive advantage, and
        1 Out of Sight: Haze in our National Parks, 2000. A Clear The Air
    Report.
        continued damage to Class I areas and their neighbors.
        3.. Sulfur dioxide can and must be controlled at least at levels of
    90-95 percent. Weaker restrictions will not protect and restore the
    resources now being damaged by excess emissions of sulfur dioxide.
        4. Nitrogen oxide can and must be controlled at least at a 90
    percent level. Weaker restrictions will not protect and restore the
    resources now being damaged by excess emissions of nitrogen dioxide.
        5. B.A.R.T. controls must apply to all sources that affect Class I
    areas, not just the 750-megawatt utilities.
        6. The 250-ton cutoff should not apply only to one pollutant. The
    250 tons should be the total tonnage of all pollutants of concern
    summed together.
        7. B.A.R.T.-related reductions should be in addition to other Clean
    Air Act programs such as the Title IV acid rain program and the NOx SIP
    call. It should be over and above these limits.
        8. If B.A.R.T. applies to any one unit of a utility plant, then it
    should apply to all. The current proposal could apply to as few as one
    unit of a facility, a flawed and ineffective approach.
        9. EPA must include control technologies that remove more than one
    pollutant in the ``best options'' category.
        10. EPA must ensure that any Cap and Trade program will
    significantly improve visibility in America's Class I areas. The
    national cap-and-trade program for sulfur dioxide under the 1990 Clean
    Air Act Amendments unfortunately has not benefited many areas suffering
    the greatest damage from acid deposition.
        Thank you for considering our comments. America's national parks
    deserve and need the protection that an effective, enforceable B.A.R.T.
    rule will provide. The measure for the regional haze program's
    effectiveness is the restored health of Class I areas.
                Sincerely,
                                  Thomas C. Kiernan, President.
                                     ______

      Responses of Ronald J. Tipton to Additional Questions from Senator
                                    Jeffords
        Question 1. We've heard from EPA and industry that stringent enough
    caps could obviate the need for New Source Review and a host of other
    Clean Air Act requirements. What are your views on that position?
        Response. The New Source Review (NSR) program is a mechanism for
    States to maintain National Ambient Air Quality Standards (NAAQS)
    protecting human health while simultaneously defending national parks
    and wilderness areas. It encompasses two separate requirements-
    Nonattainment New Source Review for plants located in designated
    nonattainment areas, and Prevention of Significant Deterioration for
    plants sited in attainment areas.
        NPCA is very concerned that EPA, in conjunction with the Department
    of Energy, may change the NSR program in ways that result in more
    pollution, not less, in America's national parks and wilderness areas.
    By redefining key provisions, EPA would create loopholes for utilities
    and industry to increase their emissions. This would set a dangerous
    precedent as EPA is also developing a multi-pollutant proposal to
    reduce emissions from power plants. In the name of responding to
    industry requests for streamlining, EPA risks rendering ineffective
    programs that now make progress to protect national parks and
    wilderness areas, and public health.
        In the northwest, the Bonneville Power Administration conducted a
    cumulative analysis on 45 proposed plants. The analysis led park
    officials to conclude that if all were constructed, Olympic, Mount
    Rainier, and North Cascades National Parks would be harmed. These
    situations would be drastically worse if a new NSR program were
    initiated to permit new sources with fewer pollution controls while
    simultaneously paving the way for existing sources to avoid reducing
    emissions under existing programs.
        The shortcomings of a national cap without taking into account
    local impacts is made clear by the implementation of the acid rain
    program established by the 1990 clean air act amendments. Despite
    reductions in total national emissions, local emissions have stayed the
    same or even increased in many areas. If a cap-and-trade program by
    itself was effective, improvement in visibility should have been
    evident at Great Smoky Mountains National Park. It is not.
        We are very concerned that an EPA briefing to the Edison Electric
    Institute in September 2001 showed an increase in sulfur emissions
    nationwide, and an increase in nitrogen emissions in some areas, under
    the draft Administration 3-pollutant bill.
        We are also very concerned that industry is fighting the
    ``birthday'' provisions of the Jeffords bill. If the national cap would
    require all these older plants to meet modern standards anyway, the
    birthday provision simply provides a deadline.
        A strong New Source Review program is a crucial component of the
    Clean Air Act. Any changes must result in achieving the goals of the
    1977 Clean Air Act to protect and restore air quality and related
    values in Class I areas. Effects-based monitoring, analysis, and
    decisionmaking is critical to protect parks and wilderness areas. NSR
    rollback will continue polluted skies in America's national parks.

        Question 2. You indicated that the reduction requirements in the
    Clean Power Act might not be enough to protect some of our most
    important Parks. Could you elaborate on that concern?
        Response. The Clean Air Act (CAA) amendments of 1977 mandated the
    protection of air quality related values (AQRVs) in Class I areas,
    which include 156 national parks and wilderness areas. Congress stated
    that Class I areas are afforded the greatest degree of air quality
    protection under the CAA, and should have the cleanest and clearest air
    in the United States. The 1977 amendments to the CAA give Federal land
    managers the affirmative responsibility to protect the natural and
    cultural resources of Class I areas unimpaired for the enjoyment of
    future generations, erring on the side of protection. The AQRVs include
    such things as visibility, vegetation, healthy streams and soils, and
    human health. Since emissions of mercury and carbon dioxide have not
    been previously regulated, there are no current Class I metrics against
    which to measure the efficacy of the reductions proposed by the Clean
    Power Act. However, such information does exist for the effects of
    SO2 and NOx on Class 1 areas.
        It is important to understand that our job is not just to protect
    Class I areas from future pollution, but to reduce existing (and
    future) emissions to levels which enhance and remedy the AQRVs of these
    areas. While ongoing programs such as Title IV have brought about
    nationwide reductions of some pollutants, these programs have failed to
    address the protection of Class I areas. For instance, monitoring sites
    at Great Smoky Mountains National Park (GRSM) have registered the
    highest level of nitrogen deposition of any monitored location in North
    America. At least 30, and as many as 90, different species of plants
    are currently exhibiting foliar injury from ambient levels of ozone
    pollution in the park. Some species, such as black cherry and yellow
    poplar, are showing reduced growth rates.
        Since measures to protect Class I areas are necessarily effect-
    based standards, the best way to examine these metrics is by the
    effects caused by the pollutants of concern. While air pollution
    chemistry is quite complex, approximations based on the presence of
    various pollutants helps answer the question before us. An examination
    of metrics developed for GRSM and Shenandoah (SHEN) National Parks is
    particularly instructive (see attached).
    SO2 Emissions
        The principle effects of SO2 on the AQRVs of Class I
    areas are visibility impairment and acidification of soils and streams.
    For nearly 10 years, the Southern Appalachian Mountains Initiative
    (SAMI) has sought to develop computer modeling which quantifies the
    sources and effects of SO2 on Class I areas. SAMI modeled
    two different reduction scenarios beyond existing and ``on the way''
    regulatory programs. The more aggressive scenario (B-3) approximates
    the kind of reductions proposed by the Clean Power Act and, thus,
    serves as a useful benchmark for evaluating the efficacy of this level
    of reductions.
    Visibility Impairment/Regional Haze
        The operative questions seem to be: ``What is natural visibility?''
    ``What is visibility in these Class I areas now?'' and ``Will the
    emission reductions proposed in the Clean Power Act restore natural
    visibility to these areas?'' The answer is ``no.''
        About 80 percent of the SO2 emitted in the 8-State SAMI
    region comes from utility sources. Accordingly, the Clean Power Act
    would have a substantial impact on visibility improvement, especially
    in the Eastern United States. Visibility is reported in units called
    deciviews, (a 10 percent change in light extinction) or perceptible
    changes in visibility. EPA's draft guidance for its Regional Haze rule
    estimates that GRSM and SHEN need about a 20 deciview improvement on
    the 20 percent haziest days in order to approach natural visibility in
    these areas. SAMI's modeling of its B-3 strategy (which assumes
    scrubbers on all utilities and large industrial boilers) has
    tentatively predicted less than half of the necessary improvement. This
    demonstrates the importance of keeping the current BART rule in place
    while focusing specific attention on additional, necessary reductions
    from utility sources.
    Acid Deposition
        Since acidification of soils and streams is a result of both
    SO2 and NOx, we will address it in the following discussion
    of NOx effects.
    Public Health
        While the impacts of particulate matter (PM) on human health are
    well documented (e.g., premature death), particles other than sulfates
    contribute to our PM problems. Even though these health effects have
    not been speciated to determine which particles are causing specific
    health effects, we do know that at GRSM (and rural areas throughout
    much of the Eastern United States), sulfate particles comprise about 70
    percent of the fine particulate matter during the summer season when
    visitation is highest.
    NOx Emissions
        The NOx emitted by power plants, mobile, industrial and other
    sources is a precursor to ground-level ozone, a powerful respiratory
    irritant that causes breathing problems in people and damages
    vegetation. When NOx combines with volatile organic compounds (VOCs) in
    the presence of sunlight, ozone is produced.
        Power plants are responsible for about 40 percent of the NOx
    emitted in the SAMI region. Accordingly, a 75 percent reduction in
    utility-generated NOx could produce, at best, about a 30 percent
    reduction in total nitrogen deposition in GRSM.
    Visibility Impairment
        Nitrate particles are also a significant contributor to visibility
    impairment.
    Acid Deposition
        About a 55-70 percent reduction in total deposition of acidity
    (from all sources) would be necessary just to prevent further loss of
    ANC (acid neutralization capacity) in the soils of the Class I areas of
    this region. That means that even further reductions would be necessary
    in order to reverse the acidification process and see gradual
    improvement to streams and soils. GRSM currently experiences a total
    annual nitrogen deposition of about 33 kilograms/hectare/year (kg/ha/
    yr). While natural condition is estimated to be 0.5 kg/ha/yr, the
    National Park Service (NPS) has determined that the critical load for
    nitrogen at GRSM (the level needed for resource protection) is 4.5 kg/
    ha/yr of total annual nitrogen or about an 85 percent reduction in
    total annual nitrogen deposition.
    Vegetation Impacts
        Cumulative seasonal exposures of ozone, measured as a W126 index in
    ppm-hours, that would avoid the currently observed foliar injury to
    plants and prevent a 10 percent growth loss to individual species has
    been determined to be <4 ppm-hours and <6 ppm-hours respectively.
    Observed data at GRSM show that current W126 levels measure 97 ppm-
    hours. While the Clean Power Act will make a significant and necessary
    contribution to the needed reductions, it cannot, in and of itself,
    solve the problem of foliar injury without similar reductions in the
    other source sectors.
    Public Health
        Information continues to emerge about the dire effects of PM and
    ozone on human health. Again, due to the multiple sources involved in
    the production of ozone, reductions in all source sectors will be
    needed to eliminate the exacerbated effects at higher altitudes.
    Funding has been secured by GRSM to document in detail the effects of
    ozone on high elevation hikers. The park will also begin monitoring
    mercury deposition this year.
        Nearly 25 years after the passage of the 1977 CAA amendments, many
    Class I areas continue to be some of the dirtiest places in America.
    The levels of reduction proposed by the Clean Power Act are even more
    critical when viewed in the context of the current growth in energy
    usage and the Administration's proposal for the growth of the energy
    production industry. Even though these reductions will not completely
    resolve the current impacts in some Class I areas, NPCA fully supports
    the legislation as a significant and necessary step forward in the
    protection of some of America's most valued assets.

        Question 3. Some of your panel have expressed concern about the
    local impacts of trading. How do we run a national cap-and-trade
    program efficiently without jeopardizing local environmental quality
    and public health?
        Response. Although a national cap-and-trade program will provide
    utility companies with efficiency and flexibility, it offers no
    specific protection to Class I areas as required by the Clean Air Act.
    A simple cap-and-trade program cannot prevent individual plants from
    increasing emissions and potentially harming local air quality. The
    Clean Power Act's ``birthday provision'', which phases out the
    exemption granted in 1977 to older coal-and oil-fired plants, is
    critical to the clean-up of Class I areas like Great Smoky Mountains
    National Park, our nation's most-visited national park, with more than
    10 million visitors each year. Due to the use of emission reduction
    credits under the national trading program, the Tennessee Valley
    Authority emitted approximately 700,000 tons of sulfur dioxide last
    year, 300,000 tons above their Phase II allocation. Consequently,
    visibility in and around Great Smoky Mountains National Park is very
    poor and has not improved.
        The single biggest impediment to siting new power sources is the
    existing, dirty power sources that produce up to 10 times the pollution
    to produce the same kilowatts of power as a new plant. It took an
    agreement crafted during President George Herbert Walker Bush's
    Administration requiring the Navajo Generating Station to reduce
    emissions, in order to protect air quality related values in Grand
    Canyon National Park. A similar, recent collaboration of power plant
    owners, State and Federal regulatory agencies, and Federal land
    managers will result in significant emission reductions from Centralia
    Power Plant in Washington State, near Mount Rainier National Park.
    Visibility impairment at Mount Rainier National Park is among the
    highest of all sites monitored in the west.
        We must maintain the provisions of the Clean Air Act and subsequent
    amendments giving Federal land managers the responsibility of
    protecting Air Quality Related Values (AQRV) in Class I areas. Clean
    Air Act standards to protect Class I areas are by necessity effects-
    based. It is also essential that the Best Available Retrofit Technology
    (BART) rulemaking remains on track. BART provides States with
    guidelines on how they should control power plant emissions that cause
    regional haze problems in national parks and wilderness areas.
                                   __________
     Statement of John L. Kirkwood, Chief Executive Officer, American Lung
                                  Association
        Good morning. I am John Kirkwood, Chief Executive Officer of the
    American Lung Association, the nation's oldest voluntary health
    association. Our mission is to prevent lung disease and promote lung
    health. The American Lung Association supports S. 556, the Clean Power
    Act. This comprehensive legislation will reduce and cap emissions of
    all four major air pollutants from power plants. We support the
    emission targets and timetables in S. 556. Power plants are the largest
    single source of industrial pollution, emissions that seriously damage
    public health and the environment.
        Pollution from power plants puts at risk the lives and health of
    millions of Americans. These pollutants contribute to the formation of
    smog and deadly fine particles, with well-documented and dangerous
    consequences to human health. More than 141 million Americans live in
    areas where the air is unhealthful to breathe because of ozone
    pollution.\1\  Power plants contribute significantly to the problem,
    especially in the Eastern United States. The Environmental Protection
    Agency estimates that some 82 million people live in areas with
    unhealthful levels of fine particles.\2\  Let me briefly outline the
    human toll we are forced to pay.
    ---------------------------------------------------------------------------
         \1\American Lung Association. State of the Air 2000. May 2001.
         \2\EPA, map presented at Stakeholders' Conference, October 2001.
    ---------------------------------------------------------------------------
        The most egregious harm is premature death. According to a study
    conducted last fall, the coal-fired plants produce pollution that
    results in the premature deaths of an estimated 31,200 Americans each
    year.\3\  Based on other recent research, we know that the lives of
    these 31,200 people were shortened, not by days, but by anywhere from
    months to years.\4\  The causative factor is the emissions of tons of
    sulfur dioxide and nitrogen oxides, which are transformed into ultra
    fine particles in the air. These tiny particles are less than one-tenth
    the diameter of a single human hair. They are so tiny they bypass the
    body's natural defenses and lodge deep within the lung, there to
    adversely affect human health. Studies demonstrate that infants and
    children, especially asthmatic children, the elderly, and those with
    heart or lung disease, are especially sensitive to the effects of fine
    particle pollution.\5\
    ---------------------------------------------------------------------------
        \3\Abt Associates, Inc. with ICF Consulting, and E.H. Pechan
    Associates, Inc. Prepared for Clean Air Task Force. The Particulate-
    Related Health Benefits of Reducing Power Plant Emissions. October
    2000. Used to develop: Clean Air Task Force. Death, Disease, and Dirty
    Power: Mortality and Health Damage Due to Air Pollution from Power
    Plants. October 2000.
         \4\Schwartz, Joel. Is There Harvesting in the Association of
    Airborne Particles with Daily Deaths and Hospital Admissions.
    Epidemiology, Vol. 12, No. 1, pp 56-61, January 2001; Brunekreef, Burt.
    Air Pollution and Life Expectancy: Is There a Relation? Occup Environ
    Med 1997 Nov; 54(11):781-4; Pope, C.A. III, Epidemiology of Fine
    Particulate Air Pollution and Human Health: Biological Mechanisms and
    Who's at Risk? Environ Health Perspect 108 (suppl 4):713-723 (2000).
         \5\Many studies show children, the elderly, and persons with
    respiratory and/or coronary disease as particularly vulnerable to PM.
    The following are a few of the most recent: Goldberg, M.S., Bailar,
    J.C. III, Burnett, R.T., Brook, J.R., Tamblyn, R., Bonvalot, Y., Ernst,
    P., Flegel, K.M., Singh, R.K., and Valois, M-F. Identifying Subgroups
    of the General Population That May be Susceptible to Short-Term
    Increases in Particulate Air Pollution: A Time-Series Study in
    Montreal, Quebec. Health Effects Institute, Research Report Number 97,
    October 2000; Delfino, R.J., Murphy-Moulton, A.M., Burnett, R.T.,
    Brook, J.R., and Becklake, M.R. Effects of Air Pollution on Emergency
    Room Visits for Respiratory Illnesses in Montreal, Quebec. Am J Respir
    Crit Care Med 1997; 155:568-576.; Zanobetti, A., Schwartz, J., and
    Gold, D. Are There Sensitive Subgroups for the Effects of Airborne
    Particles? Environmental Health Perspectives Vol. 108, No. 9, pp. 841-
    845, September 2000.; Gauderman, J.W., McConnell, R., Gilliland, F.,
    London, S., Thomas, D., Avol, E., Vora, H., Berhane, K., Rappaport,
    E.B., Lurmann, F., Margolis, H.G., and Peters, J. Association between
    Air Pollution and Lung Function Growth in Southern California Children.
    American Journal of Respiratory and Critical Care Medicine, Vol. 162.
    pp 1383-1390, 2000.
    ---------------------------------------------------------------------------
        Death is not the only harm caused by these pollutants. They are
    responsible for an estimated 20,000 hospital admissions annually from
    respiratory and cardiac illnesses. Nitrogen oxides are a key ingredient
    in the formation of ozone, or smog, that blankets much of the United
    States during the summer months. Ozone created by emissions from these
    power plants caused an estimated 7,000 emergency rooms visits due to
    asthma and other breathing difficulties. That same ozone also triggered
    an estimated 600,000 asthma attacks. We also pay an economic price:
    these power plants caused the loss of an estimated 5 million work days,
    and forced people to curtail their routine activities for a total of
    another estimated 26 million days.\6\
    ---------------------------------------------------------------------------
        \6\Abt Associates, Inc.
    ---------------------------------------------------------------------------
        Recent research underscores the need to move forward to clean up
    these power plants. Six dozen new short-term studies confirm the
    effects of particle pollution on premature death, hospitalization,
    emergency room visits, respiratory and cardiac effects.\7\  I have
    cited them in the attachments to my testimony. Recently, more research
    has focused on the effect of long-term, repeated exposures to high
    levels of ozone. Three of these studies that are summarized below
    focused on the impact of the natural development of children's lungs.
    ---------------------------------------------------------------------------
         \7\See the complete listing of current studies in the attached
    bibliography.
    ---------------------------------------------------------------------------
          A study of college freshmen found that lifetime ozone
    exposure was linked to a reduced ability to breathe.\8\
    ---------------------------------------------------------------------------
        \8\Kunzli, N., Lurmann, F., Segal, M., Ngo, L., Balmes, J., and
    Tager, I.B. Association between Lifetime Ambient Ozone Exposure and
    Pulmonary Function in College Freshmen--Results of a Pilot Study.
    Environmental Research, Vol. 72, pp. 8-23, 1997.
    ---------------------------------------------------------------------------
          A 3-year study of 1,150 children suggests that long-term
    ambient ozone exposure might hinder the natural development of their
    lungs to function normally.\9\
    ---------------------------------------------------------------------------
        \9\Frischer, T., Studnicka, M., Gartner, C., Tauber, E., Horak, F,
    Veiter, A., Spengler, J., Kuhr, J., and Urbanek, R. Lung Function
    Growth and Ambient Ozone: A Three-Year Population Study in School
    Children. Am J Respir Crit Care Med, Vol. 160, pp. 390-396, 1999.;
    Gauderman, J.W., McConnell, R., Gilliland, F., London, S., Thomas, D.,
    Avol, E., Vora, H., Berhane, K., Rappaport, E.B., Lurmann, F.,
    Margolis, H.G., and Peters, J. Association between Air Pollution and
    Lung Function Growth in Southern California Children. American Journal
    of Respiratory and Critical Care Medicine, Vol. 162. pp 1383-1390,
    2000.
    ---------------------------------------------------------------------------
          A 10-year study of 3,300 school children found that girls
    with asthma, and boys who spent more time outdoors, suffered reduced
    ability to breathe in association with ozone.\10\
    ---------------------------------------------------------------------------
        \10\Peters, J.M., Avol, E., Gauderman, W.J., Linn, W.S., Navidi,
    W., London, S.J., Margolis, H., Rappaport, E., Vora, H., Gong, H., and
    Thomas, D.C. A Study of Twelve Southern California Communities with
    Differing Levels and Types of Air Pollution. II. Effects on Pulmonary
    Function. American Journal of Respiratory and Critical Care Medicine,
    Vol. 159, pp. 7680775, 1999.
    ---------------------------------------------------------------------------
        These studies present a compelling case for taking action as soon
    as possible.
        Power plants also produce a number of other hazardous pollutants
    beyond sulfur dioxide and nitrogen oxides. Of most concern is mercury,
    known for inflicting permanent damage on the nervous and kidney
    systems, and especially threatening to fetal development and children's
    mental health. Although emitted to the air, mercury most often is
    ingested when people eat fish from rivers and lakes where high levels
    of this toxic substance have settled in the water. Mercury accumulates
    in the fish, becoming increasingly toxic.\11\  Women of childbearing
    age and their children who eat such fish are the ones most at risk. A
    recent CDC study showed that 10 percent of such women have blood levels
    of mercury that already places them and their unborn children at
    risk.\12\
    ---------------------------------------------------------------------------
        \11\Agency for Toxic Substances and Disease Registry. Toxicological
    profile for mercury. 1999; National Research Council, Toxicological
    Effects of Methylmercury, 1999
         \12\Center for Food Safety and Applied Nutrition, Food and Drug
    Administration. US Environmental Protection Agency. National Energy
    Technology Laboratory, Dept of Energy. National Marine Fisheries
    Laboratory, National Oceanic and Atmospheric Administration. National
    Center for Health Statistics; National Center for Environmental Health,
    CDC. Bood and Hair Mercury Levels in Young Children and Women of
    Childbearing Age--United States, 1999. CDC, MMWR, March 2, 2001
    ---------------------------------------------------------------------------
        The weight of evidence against these pollutants is solid and
    increasing. These new studies lend a profound urgency to the national
    effort to reduce power plant emissions. Outside of the electric utility
    industry itself, few people would deny the need for dramatic additional
    reductions from power plants. For example, the attached maps
    demonstrate the obvious convergence between the location of power
    plants and high levels of fine particles. Preliminary fine particle
    monitoring data show many areas may violate the new PM2.5
    standard.
        The American Lung Association supports S. 556 because it targets
    levels of pollutants that must be reduced from power plants and leaves
    the other provisions of the Clean Air Act in place. These two
    components ensure that power plants become cleaner and local air
    quality is protected. Reducing power plant emissions alone will not
    bring many areas in the country into compliance with the 8-hour ozone
    or the fine particle standard. Under S. 556, reductions we know we need
    from power plants will occur expeditiously.
        The American Lung Association supports including carbon dioxide as
    part of the reductions package in S. 556. Many of the fossil fuel
    combustion processes that contribute carbon dioxide to the problem of
    global climate change also contribute to other forms of air pollution.
        Indeed, it is our hope that S. 556 would promote new momentum
    toward increasing energy efficiency and use of renewable energy sources
    that reduce or eliminate all four pollutants regulated under the bill.
    Instead, we are seeing hundreds of new power plants proposed throughout
    the nation. Even if these plants were built to use natural gas with
    state-of-the-art pollution controls, they still will add to air
    pollution unless they replace older dirtier plants.
        The rush for new power plants also demonstrates why we need to
    maintain the existing provisions of the Clean Air Act. Under the
    current law, these plants would be subject to ``New Source Review''
    requirements that would ensure their emissions did not increase local
    levels of air pollution. To ensure that no one adds to the burden of
    air pollution in a community, companies seeking to build or expand in a
    non-attainment area must obtain offsets from nearby pollution sources.
    If these plants were proposed in areas that meet the standards, other
    provisions of the Act would ensure that the air quality does not
    significantly deteriorate. In this way, local air quality can be
    protected. Under the approach advocated by Assistant EPA Administrator
    Holmstead, the Clean Air Act's protective measures would be eliminated.
    As long as a new power plant had purchased sufficient emissions
    reduction ``allowances,'' no matter how distant the source that
    generated them, it would be immune from the requirements that currently
    protect the health of the local community.
        The explicit recognition by S. 556 of the sanctity of the Clean Air
    Act is the cornerstone of the American Lung Association's support.
    Subsection 132 (e) states, ``This section does not affect the
    applicability of any other requirement of this Act.'' The American Lung
    Association opposes replacing the New Source Review provisions or any
    other provisions of the existing Clean Air Act with a power plant
    emissions cap-and-trade program.
        Currently, Title IV, the Acid Rain Program, supplements the other
    Clean Air Act requirements. Any new program to reduce power plant
    emissions should also supplement the Clean Air Act. That is exactly
    what S. 556 does. We note that State and local air regulators supported
    the continuation of New Source Review. In their comments to the EPA,
    they remarked, ``we believe that the NSR requirements under the Clean
    Air Act are an essential tool, critical to State and local air
    pollution control agencies' ability to attain and maintain the health
    and welfare standards mandated in the Act.''\13\
    ---------------------------------------------------------------------------
        \13\Paul, J., on behalf of State and Territorial Air Pollution
    Program Administrators, and O'Sullivan, W., on behalf of Association of
    Local Air Pollution Control Officials. Letter entered as comments in
    EPA Docket No. A-2001-19, New Source Review 90-Day Review Background
    Paper, June 27, 2001.
    ---------------------------------------------------------------------------
        The American Lung Association is committed to ensuring Americans
    can breathe clean air. Frankly, the efforts under existing provisions
    of the Clean Air Act are moving too slowly. The new national ambient
    air quality standards for ozone and PM2.5 set in 1997 are
    still tied up in litigation and remain unimplemented. Despite that, in
    recent years, landmark regulations that cleanup cars, SUVs, and heavy-
    duty diesel vehicles and their fuels have been finalized. When
    implemented, these regulations represent important progress on the
    mobile source side of the air pollution equation. EPA should also move
    ahead to clean up non-road diesel vehicles, such as construction
    equipment.
        We now need to address the stationary source side of the problem.
    S. 556 will allow us to do that in a comprehensive way, requiring the
    No. 1 source of industrial air pollution, coal-fired power plants, to
    do their share to help us all breathe easier.

              [From the American Lung Association, March 5, 2001]
        Selected Key Studies on Particulate Matter and Health: 1997-2001
     new studies confirm that current levels of particulate air pollution
                          are harmful to human health
        The Clean Air Act requires the U.S. Environmental Protection Agency
    (EPA) to review and update the National Ambient Air Quality Standards
    for major air pollutants every 5 years, in light of the latest
    scientific evidence.
        More than 800 new scientific studies related to the effect of
    airborne particulates on human health have been published since 1996,
    when EPA last reviewed the standards for particulate matter. The new
    studies validate the earlier research and address the most important
    arguments raised by industry critics. Taken together, the studies
    confirm the relationship between particulate air pollution, illness,
    hospitalization, and premature death. The major themes of the new
    research are that the:
          Major long-term studies have been fully validated.
          New short-term studies from across the United States and
    around the world confirm the mortality effects.
          New analyses show that lives may be shortened by months
    or years, rather than days.
          Recent studies of laboratory animals and humans have
    identified cardiac responses to particles, thus elucidating possible
    biologic mechanisms for mortality.
          New studies demonstrate that infants and children,
    particularly asthmatic children, are especially sensitive to the
    effects of fine particle pollution.
        In 1997 when EPA announced the establishment of new NAAQS for fine
    particles, the President directed EPA to complete a review of the
    standards by July 2002.
        The National Academy of Sciences (NAS) has issued several reports
    recommending research priorities to increase scientific understanding
    of particle pollution. To address the scientific issues raised by the
    NAS panel, EPA increased funding for research on particulates to more
    than $50 million per year. As part of this effort, the Health Effects
    Institute, jointly sponsored by industry and EPA, has committed
    substantial resources to research on PM.
        As a result of this infusion of research funds, hundreds of
    scientific papers and research reports have been published since EPA
    last issued its ``Air Quality Criteria for Particulate Matter'' in
    1996.
        This annotated bibliography presents the findings of some of the
    most significant new research studies that advance our understanding of
    the harmful health effects of particulate air pollution. The peer-
    reviewed papers cited here represent a small sample of the scientific
    articles on the health effects of particulate air pollution published
    since 1996. This bibliography does not attempt to be comprehensive:
    exclusion does not imply that a study is unimportant; inclusion does
    not imply endorsement.
                         long-term studies of mortality
    Prospective Cohort Epidemiological Studies Are Validated in Independent
            Reanalysis
        Two landmark prospective cohort studies reported that chronic
    exposure to particulate pollution increases the risk of premature
    mortality. In the 1993 Six Cities Study, Harvard University researchers
    followed the health of more than 8,000 people in six small cities that
    fell along a gradient of air pollution concentrations for a period of
    14 to 16 years. As particle concentrations increased, there was an
    almost directly proportional increase in the death rate in the
    residents studied. Residents of the most polluted city in the study,
    Steubenville, Ohio, had a 26 percent increased risk of premature
    mortality, compared to the residents of the cleanest city studied,
    Portage, Wisconsin. The increased risks were associated with a
    difference in ambient fine particle concentrations of 18.6 micrograms
    per cubic meter.
        The 1995 American Cancer Society study reported an association
    between fine particle air pollution and premature death by cardio-
    pulmonary and other causes in a study group of over half a million
    people in 151 U.S. cities. All cause mortality increased by 17 percent
    with a 24.5 microgram per cubic meter difference in fine particle
    pollution between the cleanest and dirtiest city studied.
        These original studies used statistical techniques to adjust for
    age, and to control for the effects of smoking, diet, and occupational
    exposure.
        Health Effects Institute funded researchers, led by Dr. Dan Krewski
    of the University of Ottawa, undertook a reanalysis of the original
    studies and a quality audit of the underlying data. Researchers
    performed an extensive sensitivity analysis using alternative
    statistical methods, and considering the role of 20 potential
    confounders such as other pollutants, climate, and socioeconomic
    factors on study results. The sensitivity analysis largely confirmed
    the original results of the Harvard Six Cities Study and the American
    Cancer Society Study. In addition, the sensitivity analysis identified
    higher educational status as a factor associated with reduced risk to
    air pollution exposure, and reported an association between sulfur
    dioxide pollution and mortality.
          Krewski, D., Burnett, R.R., Goldberg, M.S., Hoover, K.,
    Siemiatyeki, J., Jerrett, M., Abrahamowicz, M., White, W.H, and Others.
    Reanalysis of the Harvard Six Cities Study and the American Cancer
    Society Study of Particulate Air Pollution and Mortality. Health
    Effects Institute, July, 2000.
          Dockery, D.W:, Pope, C.A., Xu, X., Spengler, J.D., Ware,
    J.H., Fay, M.E., Ferris, B.G., and Speizer, F.E. An Association Between
    Air Pollution and Mortality in Six U.S. Cities. New England Journal of
    Medicine, 1993:329:1753-9.
          Pope, C.A., Thun, M.J., Namboodiri, M.M., Dockery, D.W.,
    Evans, J.S., Speizer, F.E., and Heath, C.W. Particulate Air Pollution
    as a Predictor of Mortality in a Prospective Study of U.S. Adults.
    American Journal of Respiratory Critical Care Medicine, 1995:151:66974.
    Chronic Exposure to Particulate Pollution Shortens Lives by One to
            Three Years
        There have been two recent attempts to quantify the extent of life
    shortening predicted by the long-term epidemiological studies. Dutch
    scientist Dr. Burt Brunekreef made such an estimate in a paper prepared
    for the World Health Organization's consideration of revisions to the
    Air Quality Guidelines for Europe. Using risk ratios reported in the
    Harvard Six Cities Study and the Study of the American Cancer Society
    cohort, Brunekreef conducted a life table analysis to estimate the
    effect of particulate air pollution on the survival rate of 25 year-old
    Dutch men. An extrapolation based on U.S. life tables yields an
    estimated diminished life expectancy of 1.31 years due to ambient
    pollution.
        Dr. C. Arden Pope III, of Brigham Young University, analyzed
    reductions in life expectancy in the U.S. population due to chronic
    exposure to particulate matter. He applied relative risks for premature
    death derived from the prospective cohort studies, and estimated loss
    of life expectancy ranging from one to 3 years, depending upon
    assumptions about the age at which susceptibility to the effects of air
    pollution begins.
          Brunekreef, Burt. Air Pollution and Life Expectancy: Is
    There a Relation? Occup Environ Med 1997 Nov;54(11):781-4.
          Pope, C.A. III, Epidemiology of Fine Particulate Air
    Pollution and Human Health: Biological Mechanisms and Who's at Risk?
    Environ Health Persect 108 (suppl 4):713-723 (2000).
                            daily mortality studies
    90-City National Morbidity, Mortality and Air Pollution Study (NMMAPS)
            Shows that Contemporary Levels of Air Pollution are Killing
            People
        The Health Effects Institute, which is jointly funded by EPA and
    industry, commissioned an original nationwide study of the short-term
    effects of air pollution on human health, known as the National
    Morbidity, Mortality and Air. Pollution Study, or NMMAPS. A team of
    investigators led by Dr. Jonathan Samet of the Johns Hopkins University
    School of Public Health developed and applied a standardized
    methodology for examining pollution effects across many cities.
    Investigators from Johns Hopkins University and Harvard University
    developed and applied state-of-the-art statistical techniques to
    examine the effects of multiple pollutants, the extent of
    lifeshortening; and the degree of ``exposure measurement error'' due to
    reliance on centrally located air quality monitors.
        In its study of the 90 largest U.S. cities, NMMAPS found strong
    evidence linking daily increases in particulate pollution to increases
    in death. On average, overall mortality increased by 0.5 percent for
    every 10 microgram per cubic meter increase in PM10 measured
    the day before death. The effect was slightly greater for deaths due to
    heart and lung disease than for total deaths. This risk ratio is
    somewhat lower than reported by earlier meta-analyses, perhaps due to
    certain methodological assumptions such as a 1-day lag.
        Samet et al. report that the relative increases in daily mortality
    partly reflect life shortening on the order of months. The association
    between particulate matter and mortality persists even when other
    pollutants are included in the statistical model. Their analyses also
    provide evidence against arguments that exposure measurement error
    could explain the associations between particulate matter and adverse
    health effects.
        In addition, in a study of 14 U.S. cities, NMMAPS found strong and
    consistent associations between particulate air pollution and hospital
    admissions among the elderly. Hospital admissions data was obtained
    from the Medicare program. The cities were selected for study because
    they had daily PM10 measurements.
        For each 10 microgram per cubic meter increase in PM10,
    there was approximately a 1 percent increase in hospital admissions for
    cardiovascular disease, and about a 2 percent increase in admissions
    for pneumonia and chronic obstructive pulmonary disease. Cities studied
    were Birmingham, AL, Boulder, CO, Canton, OH, Chicago, IL, Colorado
    Springs, CO, Detroit, MI, Minneapolis/St. Paul, MN, Nashville, TN, New
    Haven, CT, Pittsburgh, PA, Provo/Orem, UT, Seattle, WA, Spokane, WA,
    and Youngstown, OR
        Investigators concluded that the complementary analyses of
    mortality and morbidity provide ``new and strong evidence'' linking
    particulate air pollution at current levels to adverse health effects.
        Some of the results from the NMMAPS study were published in an
    article in the New England Journal of Medicine. Samet, et al. examined
    the effect of five of the most widespread outdoor air pollutants--
    particulate matter, ozone, nitrogen dioxide, sulfur dioxide, and carbon
    monoxide in 20 of the largest cities in the United States. The study
    was specifically designed to address many of the criticisms of earlier
    single-city studies. The study found consistent evidence that
    relatively small daily increases in particulate pollution were followed
    by daily increases in death rates, particularly from heart-and lung-
    related causes. Study authors noted that other analyses have
    demonstrated that the amount of life lost due to particulate pollution
    goes beyond just a few days. The study investigators also reported an
    association between summertime ozone levels and mortality.
        The New England Journal of Medicine article concludes, ``there is
    consistent evidence that the levels of fine particulate matter in the
    air are associated with the risk of death from all causes and from
    cardiovascular and respiratory illness. These findings strengthen the
    rationale for controlling the levels of respirable particles in outdoor
    air.''
          Samet, J.M., Dominici, F., Zeger, S.L., Schwartz, J., and
    Dockery, D.W. The National Morbidity, Mortality, and Air Pollution
    Study. Part I: Methods and Methodologic Issues. Health Effects
    Institute Research Report 94, Part 1, May 2000.
          Samet, J.M., Zeger, S.L., Dominici, F., Curriero, F.,
    Coursac, I., Dockery, DW, Schwartz, J., and Zanobetti, A. The National
    Morbidity, Mortality, and Air Pollution Study. Part II: Morbidity,
    Mortality and Air Pollution in the United States. Health Effects
    Institute Research Report 94, Part II, June 2000.
          Samet, J.M., Dominici, F., Curriero, F.C., Coursac, I.,
    and Zeger, S.L. Fine Particulate Air Pollution and Mortality in 20 U.S.
    Cities, 1987-1994. New England Journal of Medicine, Vol. 343, No. 24,
    pp. 1742-1749, December 14, 2000.
    Air Pollution Effects Persist for Several Days, Increasing the Overall
            Risk of Exposure
        Epidemiological studies have used different assumptions about the
    number of days following exposure to air pollution that effects will
    occur. Some studies have assumed that effects occur the day after
    exposures. However, toxicological evidence suggests that effects of
    exposure may be observed over several subsequent days. In an analysis
    using data from New Haven, Birmingham, Pittsburgh, Canton, Detroit,
    Chicago, Minneapolis, Colorado Springs, Spokane, and Seattle, Dr. Joel
    Schwartz, of the Harvard School of Public Health, has shown that
    statistical models that assume a 1-day lag, such as NMMAPS, grossly
    underestimate the effect of PM10 on mortality. Assuming that
    effects continue over several days, as demonstrated by this analysis,
    roughly doubles the relative risk of premature mortality.
          Schwartz, Joel. The Distributed Lag Between Air Pollution
    and Daily Deaths. Epidemiology 2000;11:320-326).
    PM2.5 from Motor Vehicles and Coal Combustion is Linked to
            Increased Mortality
        Investigators from Harvard Medical School used data on the
    elemental composition of size-fractionated particles to identify the
    sources of fine particles in six eastern U.S. cities that have been the
    subject of a long-term air pollution study: Watertown, MA, Kingston-
    Harriman, TN, St. Louis, MO, Steubenville, OH, Portage, WI, and Topeka,
    KS. For example, lead was used as a tracer for motor vehicle exhaust,
    selenium for coal combustion, and silicon for soil and crustal matter.
    Each of these fractions was examined in association with daily
    mortality rates in each city. The study reported that a 10 g/
    m3 increase in PM2.5 from mobile sources accounted for a 3.4
    percent increase in daily mortality, while the equivalent increase in
    fine particles from coal combustion sources accounted for a 1.1 percent
    increase. Fine particles from crustal sources were not associated with
    mortality. The study concludes that ``the results indicate that
    combustion particles in the fine fraction from mobile and coal
    combustion sources, but not fine crustal particles, are associated with
    increased mortality.''
          Laden, F. Neas, L.M., Dockery, D.W., and Schwartz, J.
    Association of Fine Particulate Matter from Different Sources with
    Daily Mortality in Six U.S. Cities. Environmental Health Perspectives
    108:941-947, October 2000.
    Daily Mortality Studies Pour In From Cities Around the World
        Studies in new locations and by additional investigators with
    consistent results help strengthen the case for a causal relationship.
        EPA's 1996 review of the PM standards cited over two dozen short-
    term epidemiological studies. Since then, time series studies reporting
    an association between short-term exposure to particulate matter and
    early mortality have been published for these U.S. cities:
    Philadelphia; Ogden, Salt Lake City, and Provo/Orem, Utah; Seattle;
    Santa Clara County, California; and Buffalo. Additional studies have
    been published for these major cities all over the world: Toronto;
    Mexico City; London; Edinburgh; Birmingham, UK; Rotterdam; Helsinki;
    Madrid; Rome; Milan; Brisbane; Sydney; Delhi; Bangkok; and Seoul and
    Ulsan, Korea. Many of the new studies have evaluated the sensitivity of
    the estimated PM effects to the inclusion of other pollutants in the
    statistical model. Overall, the associations of PM with adverse effects
    continue to be consistently observed, and sometimes, effects of other
    air pollutants such as ozone, sulfur dioxide, nitrogen dioxide, and
    carbon monoxide are also reported.
        A multi-city study of the short-term health effects of air
    pollution on mortality and hospital emergency admissions was initiated
    by the European Union Environment Programme. The study, known as Air
    Pollution and Health: A European Approach or APNEA, investigated the
    effects of several pollutants on mortality in 12 European cities. The
    study reported positive associations with sulfur dioxide and
    PM10, and daily increases in mortality, with stronger and
    more consistent associations observed in western European cities.
        A quantitative meta-analysis by Jonathan Levy et al. of the Harvard
    School of Public Health set out to compare mortality estimates from
    over 20 daily time series studies. Their analysis estimated that
    mortality rates increased by approximately 0.7 percent per 10 microgram
    per cubic meter increase in PM10 concentrations.
    Investigators reported ``our model finds compelling evidence that the
    PM10-mortality relationship is stronger in locations with
    higher PM2.5/PM10 ratios, supporting the
    hypothesized role of fine particles.''
          USEPA, Office of Research and Development. Air Quality
    Criteria for Particulate Matter. EPA/600/P-99/002b, Oct. 1999, External
    Review Draft.
          Katsouyanni, K., Touloumi, G., Spix, C., Schwartz, J.,
    Balducci, F., Medina, S., Rossi, G., Wojtyniak, B., Sunyer, J.,
    Bacharova, L., Schouten, J.P., Ponka, A., and Anderson, H.R. Short Term
    Effects of Ambient Sulphur Dioxide and Particulate Matter on Mortality
    in 12 European Cities: Results From Time Series Data From the APNEA
    Project. British Medical Journal 1997; 314:1658 (7 June).
          Levy, J. I., Hammitt, J.K., and Spengler, J.D. Estimating
    the Mortality Impacts of Particulate Matter: What can be Learned from
    Between-Study Variability? Environ Health Perspect 108:109-117(2000).
                        ``harvesting'' theory disproven
    Mortality Reported in Short Term Community Health Studies is Not Due to
            ``Harvesting''
        Numerous short-term epidemiological studies have reported that
    short-term increases in air pollution are followed by an increased
    number of deaths. Some have argued that the associations between day to
    day variations in mortality and air pollution represent a
    ``harvesting'' effect, that is, the advancement of death by a few days
    in people already about to die from other causes. If air pollution
    advances death of the very frail by only a few days (the ``harvesting''
    hypothesis), then you would expect that an increase in daily deaths
    would be followed by a decrease in deaths within a few days.
        Professors Scott Zeger and Francesca Dominici of the Johns Hopkins
    School of Public Health developed a statistical technique to examine
    harvesting using data on total suspended particulate matter (TSP) and
    total mortality in Philadelphia. They found that removing the shortest
    term fluctuations from their time series increased rather than
    decreased the estimates of pollution effects. This is the opposite of
    what would be expected if ``harvesting'' accounted for all the deaths.
        As part of the NMMAPS study, Dr. Joel Schwartz of the Harvard
    School of Public Health studied this issue using data from Boston. He
    reported that for chronic obstructive pulmonary disease and ischemic
    heart disease, most of the deaths seem to be advanced by a few months
    on average. The statistical approach did not allow estimates of life
    shortening beyond 2 months. In contrast, for pneumonia, the analysis
    showed that some deaths are brought forward by a few days, consistent
    with the harvesting hypothesis. Effect estimates increased when
    examining longer time periods, suggesting that cumulative exposures are
    more harmful than daily exposures. Overall, these results suggest that
    the short-term epidemiological studies underestimate the number of
    early deaths.
          Zeger, S.L., Dominici, F, and Samet, J. Harvesting-
    Resistant Estimates of Air Pollution Effects on Mortality. Epidemiology
    1999 Mar;10(2):171-5.
        Schwartz, Joel. Harvesting and Long Tenn Exposure Effects in the
    Relation between Air Pollution and Mortality. Am J Epidemiol
    2000;151:440-8.
    Most Air Pollution Related Deaths Are Being Advanced By Months to Years
        While the association between particulate air pollution and
    mortality is generally acknowledged to be causal, critics have claimed
    that the public health impact is minor, because people are dying just a
    few days early. This theory is sometimes called ``harvesting.'' This
    study is based on an examination of daily deaths and hospital
    admissions in Chicago for the years 1988-1993. If people are dying a
    few days early, then the death rate should drop a few days after the
    air pollution event. The analysis shows that this is not the case. The
    results confirm findings previously reported for Boston and
    Philadelphia, using a different methodology. The author concludes that
    the results indicate that air pollution may be increasing the overall
    number of people at risk of death, and that most of the deaths are
    being advanced by months to years.
          Schwartz, Joel. Is There Harvesting in the Association of
    Airborne Particles with Daily Deaths and Hospital Admissions.
    Epidemiology, Vol. 12, No. 1, pp 56-61, January 2001.
            pm-mortality relationship is linear, with no thresholds
    No Threshold is Evident for the Effect of PM10 on Daily
            Deaths
        In the Schwartz and Zanobetti study, Harvard University researchers
    applied a statistical method to examine the shape of the dose-response
    relationship between air pollution and daily deaths in ten U.S. cities.
    The cities studied were New Haven, Birmingham, AL, Pittsburgh, Detroit,
    Canton, OH, Chicago, Minneapolis-St. Paul, Colorado Springs, Spokane,
    and Seattle. Simulation studies demonstrated that the method used can
    detect threshold and other nonlinear relationships in epidemiologic
    studies. But when used to analyze the association between
    PM10 and mortality, no evidence of a threshold was found,
    and the associations appeared to be linear down to the lowest levels
    studied. This is consistent with earlier results.
        An analysis of data for the 20 largest U.S. cites from 1987-1994
    from the NMMAPS study also reported that a linear model, without a
    threshold, was most appropriate for assessing the effects of
    particulate air pollution on daily mortality for total mortality and
    for mortality from cardiovascular and respiratory causes, but not for
    other causes of mortality. Daniels et al conclude:``. . . the continued
    demonstration of adverse effects of air pollution over recent decades,
    even as concentrations of pollutants have declined, suggests that
    exposures have not yet gone below no-effects thresholds, if such
    exist.''
          Schwartz, Joel and Zanobetti, Antonella. Using Meta-
    Smoothing to Estimate Dose-Response Trends across Multiple Studies,
    with Application to Air Pollution and Daily Death. Epidemiology, Vol.
    11, No. 6, pp. 666-672, November 2000.
          Daniels, M.J., Dominici, F., Samet, J.M., and Zeger, S.L.
    Estimating Particulate Matter-Mortality Dose-Response Curves and
    Threshold Levels: An Analysis of Daily Time-Series for the 20 Largest
    U.S. Cities. American Journal of Epidemiology, Vol. 152, No. 5, pp.
    397-406, September 1, 2000.
                  exposure measurement error criticism refuted
    Air Quality Monitors Can Be Used to Track Exposure to Fine Particles
        Epidemiological studies generally rely on centrally located air
    quality monitors to assess exposure to ambient air pollutants. Some
    have argued that these monitors do not represent actual exposures,
    because people spend a large portion of their day indoors.
        A study by Dutch scientist Nicole Janssen et al., of 10--12 year
    old school children in Wageningen, The Netherlands compared personal
    exposure to fine particles with classroom concentrations, and with
    ambient measurements at an outdoor location. Researchers found that
    personal fine particle concentrations were highly correlated with
    ambient concentrations. This finding supports the use of ambient
    monitoring measurements as an indicator of exposure to fine particles
    in epidemiological time series studies.
        Dr. David Mage, of U.S. EPA's Office of Research and Development,
    and colleagues, demonstrated that human exposure to fine particles of
    ambient origin is highly correlated in time to ambient PM
    concentrations measured at monitoring stations within the communities
    being studied.
        The NMMAPS study discussed above also addressed the issue of
    measurement error, through the development of a model to systematically
    test what effect the relationship between personal exposure and ambient
    exposure might have on the observed increase in mortality associated
    with PM. While data to test the model is limited, ``theoretical and
    actual analyses generated appear to refute the criticisms that exposure
    measurement error could explain the associations between PM and adverse
    health effects.''
          Janssen, N.A.H., Hoek, G., Narssema, H., and Brunekreef,
    B. Personal Exposure to Fine Particles in Children Correlates Closely
    with Ambient Fine Particles. Archives of Environmental Health, March/
    April 1999, Vol. 54, No., 2, 95-101.
          Mage, D., Wilson, W., Hasselblad, V., Grant, L.
    Assessment of Human Exposure to Ambient Particulate Matter. J. Air &
    Waste Manage. Assoc. 49:1280-1291, Nov. 1999.
          Zeger, S.L., Thomas, D., Dominici, F., Samet, J.M.,
    Schwartz, J., Dockery, D.W., and Cohen, A. Exposure Measurement Error
    in Time-Series Studies of Air Pollution. In: The National Morbidity,
    Mortality, and Air Pollution Study, Part I: Methods and Methodologic
    Issues. HEI Research Report 94, May 2000.
    Criteria for Asserting Causality Have Been Met
        In responding to an article by Dr. John Gamble, Epidemiologist for
    Exxon Biomedical Sciences, Dr. David Bates, Professor Emeritus of
    Medicine at University of British Columbia, has reevaluated the recent
    evidence health evidence regarding particulate matter and mortality.
    Determination of causality does not rest on any one study. Instead, a
    weight of evidence approach is used to evaluate the scientific
    literature across a series of criteria such as coherence, consistency,
    strength of association, temporality, analogy, and biologic
    plausibility. Dr. Bates asserts that all of these criteria have been
    met by an avalanche of new data that strengthen the case for a causal
    relationship.
          Bates, D.V. Lines that Connect: Assessing the Causality
    Inference in the Case of Particulate Pollution. Environ Health Perspect
    108: 91-92: 2000.
        Gamble, John F. PM2.5 and Mortality in Long-term
    Prospective Cohort Studies: Cause-Effect or Statistical Associations?
    Environ Health Perspect 106:535-549 (1998).
          Kunzli, N. and Tager, I.B. Comments on ``PM2.5
    and Mortality in Long-term Prospective Cohort Studies: Cause-Effect or
    Statistical Associations?'' and Gamble, John. Reply to Kunzli and Tager
    Regarding Causality in PM2.5 Cohort Studies. Environ Health
    Perspect 107-5, 1999; Correspondence.
    People With Pre-Existing Cardiac or Respiratory Conditions Have Higher
            Than Average Risk of Death from Exposure to Particles
        Canada's national health insurance system enables access to
    detailed health records of patients. This permitted Dr. Mark Goldberg
    and colleagues at McGill University to conduct a detailed analysis of
    particle pollution and mortality in Montreal. Investigators were able
    to link individual deaths in Montreal to medical information up to 5
    years before death. These data were used in conjunction with clinical
    expertise to define susceptible subgroups at risk of premature death
    from several different measures of particulate pollution. Subjects with
    acute lower respiratory disease, congestive heart failure, and a
    combination of cardiovascular diseases died at higher rates for
    increases in each of the three particulate matter measures.
    Associations with coefficient of haze and predicted PM2.5
    were reported for subjects with cancer, chronic coronary artery
    disease, and coronary artery disease, while effects of sulfate were
    associated with acute and chronic upper respiratory disease.
          Goldberg, M.S., Bailar, J.C. III, Burnett, R.T., Brook,
    J.R., Tamblyn, R., Bonvalot, Y., Ernst, P., Flegel, K.M., Singh, R.K.,
    and Valois, M-F. Identifying Subgroups of the General Population That
    May be Susceptible to Short-Term Increases in Particulate Air
    Pollution; A Time-Series Study in Montreal, Quebec. Health Effects
    Institute, Research Report Number 97, October 2000.
    ``Coarse'' Particles are Also Linked with Disease and Death
        This study by Dr. Morton Lippmann and colleagues from the New York
    University School of Medicine attempted to identify components of
    particulate matter and other air pollution mixtures that were
    associated with excess daily deaths and hospital admissions of the
    elderly in the Detroit metropolitan area. Investigators reported that
    deaths from repiratory diseases were associated with PM10
    and total suspended particulates. Unexpectedly, they found that
    relative risks for PM10-2.5, the coarse particle fraction,
    were similar to those for PM2.5, and even higher in the case
    of ischemic heart disease and stroke. The authors conclude that ``the
    finding of elevated and significant effects for PM10-2.5
    suggests that there may still be a rationale to consider the health
    effects of the coarse fraction as well as the fine fraction of PM.''
          Lippmann, M., Ito, K., NAdas, A., and Burnett, R.T.
    Association of Particulate Matter Components with Daily Mortality and
    Morbidity in Urban Populations. Health Effects Institute Research
    Report Number 95, August 2000.
                    biologic mechanisms and cardiac effects
    Air Pollution Tied to Low Heart Rate Variability, a Risk Factor for
            Heart Attacks
        Particulate air pollution has been linked to cardiovascular
    mortality in a number of studies, but the mechanisms for this effect
    are not well understood. Recent research centers on the effect of
    pollution on heart rate and heart rate variability. Low heart rate
    variability is a marker of poor cardiac control by the autonomic
    nervous system, and is associated with a higher risk of heart attacks
    and sudden cardiac death. One hypothesis is that inhalation of particle
    air pollution may trigger an inflammatory response in the lung,
    followed by the release of chemical mediators that--affect autonomic
    nervous system control of the heart beat.
        Pope, et al. measured oxygen saturation and pulse rate in a panel
    of 90 elderly residents of the Utah Valley, using a small medical
    device known as an oximeter. The experiment was conducted during the
    winter months, when PM concentrations are highest. Researchers found
    little evidence of pollution effects on the oxygen carrying capacity of
    the blood, but observed that a small elevation in pulse rate was
    associated with a rise in PM10 levels. The medical and
    biological relevance of this effect is unclear.
        Dr. Duanping Liao, of the University of North Carolina, and cb-
    investigators, conducted daily electrocardiogram measurements on
    elderly nursing home residents outside Baltimore, Maryland. Harvard
    physician Dr. Diane Gold et al. studied 53-to 87-year old active
    residents of Boston. 25 minutes of electrocardiogram measurements
    during different exercise states were taken on a weekly basis. Both the
    Baltimore and Boston studies found that elevated concentrations of fine
    particulate matter were associated with lower heart rate variability,
    and that the association was stronger for people with pre-existing
    cardiovascular conditions.
          Pope, C.A., Dockery, D.W., Kanner, R.E., Villegas, G.M.,
    and Schwartz, J. Oxygen Saturation, Pulse Rate, and Particulate Air
    Pollution: A Daily Tune-Series Panel Study. Am J Respir Crit Care Med
    1999;159:363-372.
          Liao, D., Creason, J., Shy, C., Williams, R., Watts, R.,
    and Zweidinger, R. Daily Variation of Particulate Air Pollution and
    Poor Cardiac Autonomic Control in the Elderly. Environ Health Perspect
    107:521-525 (1999).
          Gold, D.R., Litonjua, A., Schwartz, J., Lovett, E.,
    Larson, A. Nearing, B., Allen, G., Verrier, M., Cherry, R., and
    Verrier, R. Ambient Pollution and Heart Rate Variability. Circulation.
    2000;101:1267.
          Stone, P.H. and Godleski J.J. First Steps Toward
    Understanding the Pathophysiologic Link Between Air Pollution and
    Cardiac Mortality. Am Heart J 1999;138:803-7.
    Increased Heart Rate and Plasma Viscosity During an Air Pollution
            Episode Suggest Possible Mechanisms
        The World Health Organization Monitoring Survey of Trends and
    Determinants in Cardiovascular Disease (the ``MONICA'' survey) took
    place in Augsburg, in Southern Germany during the winter of 1984-1985.
    Over 4,000 randomly selected adults participated, and received
    electrocardiograms to measure their resting heart rate, and donated
    blood samples to measure plasma viscosity. Electrocardiograms were
    administered again in 1987-1988.
        In January 1985, an air pollution episode occurred throughout
    central Europe, with elevated concentrations of sulfur dioxide, total
    suspended particulates, and carbon monoxide. During the air pollution
    episode, higher heart rates were observed for men and women, after
    adjusting for cardiovascular risk factors and weather. An elevated
    resting heart rate is a risk factor for death and fatal heart disease,
    and may signal changes in the autonomic control of the heart, that
    might partially account for the adverse health effects observed in
    association with air pollution.
        One hypothesis is that increased plasma viscosity might lead to
    constricted blood flow in the heart (ischemia), which can be fatal in
    people with severe coronary heart disease. During the air pollution
    episode, increases in plasma viscosity were observed, and persisted
    after adjusting for other cardiovascular risk factors and weather.
    German researcher Annette Peters, et al. conclude that ``the increased
    plasma viscosity observed in these analyses of a cross-sectional survey
    might therefore represent a part of the pathophysiological chain
    linking high ambient air pollution to increased mortality and hospital
    admissions for cardiovascular diseases'':
        An alternate hypothesis is proposed by Professor Anthony Seaton of
    the University of Aberdeen Medical School. He collected blood samples
    from 112 elderly people in two cities in the U.K. over an 18-month
    period, and examined various blood values in comparison to
    PM10 concentrations. Based on the analysis, Seaton
    suggests--that inhalation of some component of PM10 may
    cause sequestration of red blood cells, which may explain the
    cardiovascular effects reported in other studies.
          Peters, A., Perz, S., Doring, A., Stieber, J., Koenig,
    W., and Wichmann, H.E. Increases in Heart Rate During an Air Pollution
    Episode. Am J Epidemiol 1999;150:1094-8.
          Peters A., Doring A., Wichmann H.E., and Koenig, W.
    Increased Plasma Viscosity During an Air Pollution Episode: A Link to
    Mortality? Lancet 1997 May 31;349(9065):1582-7.
          Seaton, A., Soutar A., Crawford, V., Elton, R., McNerlan,
    S., Cherrie, J., Watt, M., Agius, R., Stout, R. Particulate Air
    Pollution and the Blood. Thorax 1999 Nov;54(11):1027-32.
    Heart Patients Vulnerability to Potentially Fatal Arrhythmias Increases
            After Exposure to Air Pollution
        A pilot study was designed to test the hypothesis that heart
    patients with a history of serious arrhythmia requiring implanted
    cardiac defibrillators experience potentially life-threatening
    arrhythmias following short term increases in air pollution.
    Defibrillators monitor electrical activity of the heart and initiate
    interventions such as pacing or shock therapy to restore a normal
    heartbeat. The devices record information on arrhythmic, events.
        One hundred heart patients in eastern Massachusetts were followed
    for a 3-year period. The study found that a subgroup of these
    patients--those with more than ten defibrillator events--were most
    susceptible to pollution, with effects occurring one to 2 days after
    exposure. Among these patients, the strongest associations were with
    nitrogen dioxide, but positive associations were reported for
    PM10 and PM2.5 exposures as well.
          Peters, A., Liu, E., Verrier, R.L., Schwartz, J., Gold,
    DR., Mittleman, M., Baliff, J., Oh, J.A., Allen, G., Monahan, K., and
    Dockery, D.W. Air Pollution and Incidence of Cardiac Arrhythmia.
    Epidemiology 2000 Jan; 11(1):11-7.
    Combustion Source Metals May Trigger Biologic Responses to Ambient
            Particulate Matter
        Researchers have been trying to determine whether one component of
    particulate matter--such as metals--is responsible for the toxic
    effects. U.S. EPA investigators led by Dr. Daniel Costa obtained
    samples of particulate matter from oil and coal fly ash and ambient air
    from St. Louis, MO, Washington, DC, Dusseldorf, Germany, and Ottawa,
    Canada. The fly ash is rich in metal components such as iron, copper,
    nickel, vanadium, and zinc, as well as sulfate. Laboratory rats were
    instilled with PM samples from these sources, and lung cells were
    obtained via bronchoalevolar lavage and analyzed for signs of cell
    injury. Investigators found that the constituent metals and their
    bioavailability determine the acute inflammatory response of PM samples
    in lung tissue.
        In a second experiment, rats were pretreated with a chemical
    intended to model certain disease conditions, namely inflammation of
    blood vessels and high blood pressure in the lungs. These animals were
    instilled with the fly ash samples, and lung cells were obtained for
    laboratory examination. After 96 hours of exposure, there was clear
    evidence of lung inflammation, however many of the test animals had
    died, apparently due to altered cardiac function. Survivors had
    increased electrocardiographic changes. Investigators hypothesize that
    soluble metals from PM mediate an array of injuries to the
    cardiopulmonary system of healthy and at-risk subjects.
          Costa, D. L., and Dreher, K.L. Bioavailable Transition
    Metals in Particulate Matter Mediate Cardiopulmonary Injury in Healthy
    and Compromised Animal Models. Environ Health Perspect 105 (Supp15):
    1053-1060 (1997).
    Laboratory Research on Dogs Suggests that PM May Harm People with Heart
            Disease
        This toxicology study by Harvard pathologist Dr. John Godleski is
    one of the first to test whether exposure to particulate matter can
    change heart function in laboratory animals. Two groups of dogs were
    tested--healthy dogs, and dogs with an induced coronary occlusion
    intended to simulate human coronary artery disease. Researchers exposed
    dogs to concentrated particles from the ambient Boston air. Both the
    normal and the compromised animals showed effects, but the clearest
    sign of PM effects was found in the dogs with the induced heart
    condition. The occluded animals were more susceptible to serious
    arrhythmias when exposed to air pollution. The electrocardiogram
    signals for these dogs indicated more rapid development of ischerma, an
    inadequate flow of blood through the heart that can lead to a heart
    attack. Study reviewers concluded: ``this is a plausible and important
    mechanism to explain the association of increased cardiopulmonary
    mortality and exposure to particle pollution.''
          Godleski, J.J., Verrier, R.L., Koutrakis, P., and
    Catalano, P. Mechanisms of Morbidity and Mortality from Exposure to
    Ambient Air Particles. Health Effects Institute Research Report Number
    91, February 2000.
    Concentrated Air Particles Induce Pulmonary Inflammation and Blood
            Changes in Humans
        Effects of particles are showing up not only in laboratory animals,
    but also in a chamber study with human subjects performed by EPA
    research physician Dr. Andrew Ghio and colleagues. This controlled
    exposure study of young, healthy volunteers examined the effect of
    exposure to concentrated ambient particles from Chapel Hill, North
    Carolina. Volunteers alternated between moderate exercise and rest over
    a 2-hour period in a chamber with high particle concentrations. No
    symptoms or decrements in pulmonary function were noted. However, 18
    hours after exposure, lung tissue had a higher concentration of
    neutrophils, a marker of inflammation. Blood work indicated a higher
    concentration of fibrinogen, which is a risk factor for clotting and
    heart attacks.
          Ghio, A.J., Kim, C., and Devlin, R.B. Concentrated
    Ambient Air Particles Induce Mild Pulmonary Inflammation in Healthy
    Human Volunteers. In Press.
                       hospital and emergency room visits
    Air Pollution May Account for Five Percent of Cardiac Hospital
            Admissions
        Numerous studies have focused on mortality because it is an easy to
    measure effect for which data is readily available. It is important to
    note that early deaths represent just the tip of the iceberg of
    particulate related health effects. For each death, there are many more
    people admitted to the hospital, and for each hospital admission, many
    more visits to emergency departments and doctors offices. Similarly,
    for each patient who visits an emergency clinic, many more experience
    uncomfortable respiratory symptoms or days when they must restrict
    their activity, increase their use of medication, or remain indoors.
        Increased hospital admission rates represent one of the most
    serious effects of air pollution. This study examined the association
    between PM10, carbon monoxide, and hospital admissions of
    the elderly for heart disease across eight urban counties with
    different pollution and weather profiles. The eight locations are:
    Chicago; Colorado Springs; New Haven; Minneapolis; St. Paul; Seattle;
    Spokane; and Tacoma. The study design was intended to minimize
    confounding by weather or other pollutants. Associations of both
    PM10 and CO with cardiovascular hospital admissions were
    observed in areas with widely varying correlations between these
    pollutants and weather factors or other air pollutants. Overall, the
    results suggest that air pollution may be responsible for 5 percent of
    hospital admissions for heart disease, representing an enormous public
    health impact.
          Schwartz, Joel. Air Pollution and Hospital Admissions for
    Heart Disease in Eight U.S. Counties. Epidemiology 1999; 10:17-22).
    Emergency Room Visits for the Respiratory Illness in the Elderly Linked
            to Air Pollution
        Consistent with reports of aggravated symptoms in those; with
    chronic respiratory conditions, a study in Montreal, Canada found
    strong associations between air pollution and emergency room visits for
    patients over 64 years of age during 1993, when more data were
    available. Positive associations were reported for ozone,
    PM10, PM2.5, and sulfate, at air pollution levels
    well below the U.S. air quality standards. The elderly are especially
    susceptible to the effects of air pollution.
        The NMMAPS study, discussed above, reported strong and consistent
    associations between particulate air pollution and hospital admissions
    among the elderly for cardiovascular disease, pneumonia, and chronic
    obstructive pulmonary disease.
          Delfino, R.J., Murphy-Moulton, A.M., Burnett, R.T.,
    Brook, JR., and Becklake, M.R. Effects of Air Pollution on Emergency
    Room Visits for Respiratory Illnesses in Montreal, Quebec. Am J Respir
    Crit Care Med 1997;155:568-576.
    Pre-Existing Cardiovascular Disease Increases the Risk of PM-Related
            Hospital Admissions for Respiratory Causes
        This 10-year study of Medicare patients in Chicago was designed to
    identify subgroups that are especially susceptible to particulate
    pollutions. Researchers examined records of previous hospital
    admissions and secondary diagnoses to determine wither people with
    certain conditions were predisposed to having a greater risk from air
    pollution. Investigators found that people with asthma had double the
    risk of a PM10-associated hospital admission, and that
    people with heart failure had double the risk a PM10-induced
    COPD admission. The authors conclude, ``the results suggest that
    patients with acute respiratory infections or defects in the electrical
    control of the heart are a risk group for particulate matter effects.''
          Zanobetti, A., Schwartz, J., and Gold, D. Are There
    Sensitive Subgroups for the Effects of Airborne Particles?
    Environmental Health Perspectives Vol. 108, No. 9, pp. 841-845,
    September 2000.
                    infant mortality and effects on children
    Growth in Children's Lung Function is Slowed by Air Pollution
        Researchers with the Children's Health Study led by the University
    of Southern California have monitored levels of major air pollutants in
    a dozen southern California communities since 1993, while tracking the
    respiratory health of more than 3,000 school age children. The 12
    communities, which fell along a gradient of air pollution levels, were
    all within a 200-mile radius of Los Angeles. The California towns
    studied were Alpine, Atascadero, Lake Arrowhead, Lake Elsinore,
    Lancaster, Lompoc, Long Beach, Mira Loma, Riverside, San Dimas, Santa
    Maria, and Upland.
        In fourth-graders, significant deficits in growth of lung function
    were associated with various measures of fine particles
    (PM10, PM2.5, and PM10-2.5), nitrogen
    dioxide, and inorganic acid vapor, but not with ozone. The deficits
    were larger for children that spent more time outdoors. ``This is the
    best evidence yet of a chronic effect of air pollution in children,''
    said Dr. John Peters, University of Southern California professor of
    preventative medicine and one of the study authors. The study concluded
    that ``the results suggest that exposure to air pollution may lead to a
    reduction in maximal attained lung function, which occurs early in
    adult life, and ultimately to increased risk of chronic respiratory
    illness in adulthood.''
          Gaudennan, J.W., McConnell, R., Gilliland, F., London,
    S., Thomas, D., Avol, E., Vora, H., Berhane, K., Rappaport, E.B.,
    Lurmann, F., Margolis, H.G., and Peters, J. Association between Air
    Pollution and Lung Function Growth in Southern California Children.
    American Journal of Respiratory and Critical Care Medicine, Vol. 162.
    pp 1383-1390, 2000.
    Doctor Visits Climb In Relation to Air Pollution
        In Paris, France, doctors still make house calls, and public
    records on the reason for the visits are available through the French
    national health insurance program. This enabled investigators to
    examine a significant but understudied health endpoint; doctor visits,
    that affects a much larger number of patients than those admitted to
    hospitals or treated in emergency departments of hospitals. The
    statistical model of daily air pollution effects used in this study
    controlled for season, pollen counts, influenza epidemics and weather.
    Medina et al. report that house calls for asthma for children 0-14
    years old showed the strongest association with air pollution.
          Medina, S., Le Tertre, A., Quenel, P., Le Moullec, Y.,
    Lameloise, P., Guzzo, J.C., Festy, B., Ferry, R., and Dab, W. Air
    Pollution and Doctors' House Calls: Results from the ERPURS System for
    Monitoring the Effects of Air Pollution on Public Health in Greater
    Paris, France, 1991-1995. Environmental Research 75, 73-84, 1997.
    Air Pollution May Contribute to Infant Mortality
        A small but growing body of literature suggests that air pollution
    may contribute to infant mortality. British scientists Bobak and Leon
    analyzed infant mortality and several measures of long-term exposure to
    air pollutants in highly polluted regions of the Czech Republic. They
    found a consistent, positive association between PM10 levels
    and post neonatal infant mortality from respiratory causes, after
    controlling for socioeconomic factors and other pollutants.
        Dr. Dana Loomis, of the University of North Carolina, and co-
    workers found that air pollution is associated with acute increases in
    infant mortality in Mexico City after controlling for temperature and
    other factors. Increases in fine particles, ozone and nitrogen dioxide
    resulted in an increased number of infant deaths 3 to 5 days later. The
    effect of particles was the most consistent and the least sensitive to
    the presence of other pollutants.
        A study by EPA scientist Dr. Tracey Woodruff et al., of 86 cities
    in the United States reported an association between infant mortality
    and the level of inhalable particles in the first 2 months of life.
          Bobak, M. and Leon, D.A. The Effect of Air Pollution on
    Infant Mortality Appears Specific for Respiratory Causes in the
    Postneonatal Period. Epidemiology 1999;10:666-670.
          Loomis, D., Castillejos, M., Gold, D.R., McDonnell, W.,
    and Borja-Aburto, V.H. Air Pollution and Infant Mortality in Mexico
    City. Epidemiology 1999;10:118-123.
          Woodruff, T.J., Grillo, J., and Schoendorf, K.C. The
    Relationship Between Selected Causes of Postneonatal Infant Mortality
    and Particulate Air Pollution in the United States. Environ Health
    Perspect 1997;105:607-612. `
    Air Pollution In Highly Polluted Regions May Cause Low Birth Weight
            Infants
        Low birth weight is the most important predictor for neonatal
    mortality in developed and developing countries, and is a significant
    determinant of infant health and survival. A large study in Beijing,
    China looked at maternal exposure to air pollution during pregnancy and
    subsequent birth weight of infants. Coal stoves used for heating and
    cooking are a major source of indoor and outdoor air pollution in the
    study region. Xiaobin Wang of the Boston University School of Medicine
    and colleagues found a significant exposure-response relationship
    between maternal exposure to sulfur dioxide and total suspended
    particles during the third trimester of pregnancy and low birth weight.
          Wang, X., Ding, H., Ryan, L., and Xu, X. Association
    Between Air Pollution and Low Birth Weight: A Community-Based Study.
    Environ Health Perspect (1997);105:514-520.
                              asthma exacerbation
    Children's Emergency Room Visits for Asthma Increase on High Air
            Pollution Days
        ``Asthma is the most common chronic illness in children and the
    cause of most school absences,'' state Norris et al., in their study of
    children's emergency department visits for asthma. University of
    Washington investigators found significant associations between
    pediatric hospital visits for asthma and increased daily concentrations
    of PM and carbon monoxide in Seattle. Significantly, exacerbation of
    asthma was evident even when daily PM2.5 concentrations were
    substantially below the level of the newly adopted National Ambient Air
    Quality Standard of 15 g/m3 annually.
        In perhaps the largest study of pediatric asthma visits to date,
    Dr. Paige Tolbert, of the Rollins School of Public Health at Emory
    University, and co-investigators, obtained data on emergency department
    visits for three summers from seven large Atlanta area hospitals. The
    study included information on a variety of pollutants including spatial
    resolution of ozone data, a broad range of exposure levels, and a
    balanced distribution of socioeconomic status in the study population.
        Increases in both ozone and particulate matter were found to
    heighten the risk of pediatric emergency room visits for acute asthma.
    According to the authors, ``the study suggests continuing health risks
    at pollution levels that commonly occur in many U. S. cities,'' and
    ``supports accumulating evidence regarding the relation of air
    pollution to childhood asthma exacerbation.''
          Norris, G., YoungPong, S.N., Koenig, J.Q., Larson, T.V.,
    Sheppard, L., and Stout, J.W. An Association Between Fine Particles and
    Asthma Emergency Department Visits for Children in Seattle. Environ
    Health Perspect 107:489-493 (1999).
          Tolbert, P.E., Mulholland, J.A., MacIntosh, D.D., Xu, F.,
    Daniels, D., Devine, O.J., Carlin, B.P., Klein, M., Dorley, J., Butler,
    A.J., Nordenberg, D.F., Frumkin, H., Ryan, P.B., and White, M.C. Air
    Quality and Pediatric Emergency Room Visits for Asthma in Atlanta,
    Georgia. Am J Epidemiol 2000;151:798-810.
    Children with Asthma are More Susceptible to Respiratory Effects
        Increased particle concentrations have been associated with acute
    reductions in lung function and increased symptom reporting in
    children, including children with asthma. Dr. Sverre Vedal, Professor
    of Medicine at the University of British Columbia, and co-workers
    followed a group of 2,200 elementary school children in a pulp mill
    community on Vancouver Island, in Canada. Concentrations of potentially
    important copollutants such as sulfur dioxide, ozone, and acid aerosol
    were very low in the study community.
        Vedal et al. found that children experience declines in peak
    expiratory flow, a measure of respiratory function, and increased
    symptoms such as cough, phlegm production, and sore throat, after
    increases in relatively low 24-hour PM10 concentrations.
    Children with asthma were found to be more susceptible to these effects
    than other children.
          Vedal, S., Petkau, J., White, R., and Blair, J. Acute
    Effects of Ambient Inhalable Particles in Asthmatic and Nonasthmatic
    Children. Am J Respir Crit Care Med 1998, Vol. 157, No. 4, 1034-1043.
    Children's Asthma Symptoms Increase on High Pollution Days
        This study followed a group of 133 children with mild to moderate
    asthma, ages 5-13, in the Seattle, Washington area. Daily reports of
    asthma symptoms were obtained from study diaries and compared with
    daily air pollution levels during 1994 and 1995. Researchers found that
    a 30 percent increase in symptoms for each 10 g/m3 increase in
    PM10 and an 18 percent increase in symptoms for a 10
    g/m3 increase in PM10 Effects were also increased
    with carbon monoxide increases, which authors assume serves as a marker
    for vehicle exhaust. Study authors conclude: ``These results for daily
    symptoms complement the other Seattle-area studies that found air
    pollution health effects for emergency department visits and hospital
    admissions. Taken together, these .studies suggest that the health
    effects among asthmatics from short-term changes in air pollution
    levels are an important public health problem.''
          Yu, O., Sheppard, L., Lumley, T., Koenig, J.Q., and
    Shapiro, G.G. Effects of Ambient Air Pollution on Symptoms of Asthma in
    Seattle--Area Children Enrolled in the CAMP Study. Environmental Health
    Perspectives, Vol. 108, No. 12, pp. 1209-1214, Dec. 2000.
    Particulate Pollution Worsens Bronchitis in Asthmatic Children
        A University of Southern California School of Medicine study of
    more than 3,600 fourth, seventh and tenth grade children relied on
    parent questionnaires to identify children with pre-existing asthma or
    wheeze, and to assess their bronchitic symptoms. The students lived in
    12 communities in Southern California with a broad range of air
    pollution levels: Alpine; Atascadero; Lake Elsnore; Lake Gregory;
    Lancaster; Lompoc; Long Beach; Mira Loma; Riverside; San Dimas; Santa
    Maria; and Upland, California. Children with asthma were much more
    likely than other children to experience bronchitis and phlegm in
    relation to PM10 exposures.
          McConnell, R., Berhane, K., Gilliland, F., London, S.J.,
    Vora, H., Avol, E., Gaudernan, W.J., Margolis, H.G., Lurmann, F.,
    Thomas, D.C., and Peters, J.M. Air Pollution and Bronchitic Symptoms in
    Southern California Children with Asthma. Environ Health Perspect
    107:757-760 (1999).
          Peters, J.M., Evol, E., Navidi, W., London, S.J.,
    Gauderman, W.J., Lurmann, F., Linn, W.S., Margolis, H., Rappaport, E.,
    Hong, J. Jr., and Thomas, D.C. A Study of Twelve Southern California
    Communities with Differing Levels and Types of Air Pollution; l.
    Prevalence of Respiratory Morbidity. Am J Respir Crit Care Med
    1999;159L760-767.
          Etzel, Ruth A. Research Highlights: Air Pollution and
    Bronchitic Symptoms in Southern California Children With Asthma.
    Environ Health Perspect Vol. 107, No. 9, September 1999.
    Cleaning Up Air Pollution Improves the Respiratory Health of Children
        A rather dramatic improvement in air quality in East Germany
    occurred following the German reunification in 1990. Researchers wanted
    to study if the declines in air pollution had produced a corresponding
    improvement in health, and they focused in on a cohort of first-,
    third-, and sixth-grade children in three East German communities.
    During the study period, bronchitis, ear infections, and frequent colds
    Were dramatically reduced. Authors found that ``the prevalence of
    nonasthmatic respiratory symptoms and diseases was higher in children
    living in more polluted communities, especially with respect to TSP and
    .f02, suggesting that disease occurrence may be reduced within a short
    period by improvement in air quality.''
          Heinrich, J., Hoelscher, B., and Wichmann, H.E. Decline
    of Ambient Air Pollution and Respiratory Symptoms. American Journal of
    Respiratory and Critical Care Medicine, Vol. 161, pp. 1930-1936, 2000.
                            recent risk assessments
    Air Pollution from Power Plants Responsible for 30,000 Premature Deaths
            Each Year in U.S.
        This analysis by Abt Associates used EPA-approved emissions and air
    quality modeling techniques to forecast ambient air quality in 2007,
    assuming full implementation of the Clean Air Act's acid rain control
    program, and the EPA's 1999 ``NOx State Implementation Plan (SIP)
    call.'' Analysts then applied risk functions derived from
    epidemiological studies to estimate health impacts of power plant
    emissions in the U.S. The focus of the study was on gaseous emissions
    of sulfur dioxide and nitrogen oxides that are converted in the
    atmosphere to fine particle sulfates and nitrates. The analysis
    estimated that 30,100 deaths maybe attributed to power plant emissions
    each year. In addition, power plant emissions causes 20,100
    hospitalizations for respiratory and cardiovascular causes, more than
    7,000 asthma-related emergency room visits, 18,600 cases of chronic
    bronchitis, 600,000 asthma attacks, over 5 million lost work days, and
    over 26 million minor restricted activity days. Reductions in emissions
    from uncontrolled power plants could substantially reduce the adverse
    health effects.
        In addition, analysis used a simpler model to estimate the impacts
    of emissions from on-and off road diesel engines. The analysis reported
    that 15,400 premature deaths each year are attributable to the diesel
    contribution to fine particle concentrations. In addition, there are an
    estimated 11,100 cases of chronic bronchitis due to diesel emissions,
    thousands of hospitalizations due to chronic obstructive pulmonary
    disease, pneumonia, asthma, and cardiovascular causes, and over a
    million cases of minor illness such as acute bronchitis, upper and
    lower respiratory symptoms, and asthma attacks. Because of the use of
    different models, these results are not directly comparable to the
    power plant estimates.
        Abt Associates, Inc. with ICF Consulting, and E.H. Pechan
    Associates, Inc. Prepared for Clean Air Task Force. The Particulate-
    Related Health Benefits of Reducing Power Plant Emissions. October
    2000.
    Air Pollution Causes 40,000 Premature Deaths Each Year in Alpine
            Countries
        As part of an assessment prepared for the World Health
    Organization, Nino Kunzli and coauthors estimated health risk
    attributable to PM10 pollution in three European countries,
    Austria, France, and Switzerland. Using functions of health risk
    obtained from epidemiological studies, the authors estimate that air
    pollution caused 6 percent of total mortality, or more than 40,000
    cases each year, with about half associated with motor vehicle
    pollution. In addition, the study estimated that 47,000 new cases of
    chronic bronchitis in adults, more than 500,000 episodes of bronchitis
    in children, and more than a million asthma attacks are attributable to
    air pollution each year. Despite uncertainties inherent in risk
    assessment, this analysis highlights the magnitude of the public health
    burden attributable to current levels of air pollution.
          Kunzli N., Kaiser, R., Medina, S., Studnicka, M., Chanel,
    O., Filliger, P., Herry, M., Horak, F. Jr., Puybonnieux-Texier, V.,
    Quenel, P., Schneider, J., Seethader, J., Vergnaud, J-C., and Sommer,
    H. Public-Health Impact of Outdoor and Traffic-Related Air Pollution: A
    European Assessment. The Lancet, Vol. 356, pp. 795-801, September 2,
    2000.
                                     ______

               [From the American Lung Association, June 1, 2001]
    Annotated Bibliography of Recent Studies of the Health Effects of Ozone
                            Air Pollution 1997-2001
        In 2001, the U.S. Environmental Protection Agency (EPA) will
    commence a periodic review of the National Ambient Air Quality
    Standards (NAAQS) for ozone, a common and pervasive air pollutant in
    the United States. The review will begin with a compilation of all the
    scientific and medical studies published on ozone air pollution since
    EPA's last review.
        In 1997, EPA revised the standard for ozone from 0.12 ppm averaged
    over 1 hour, to a standard of 0.08 ppm averaged over 8 hours. The new
    standard was set to reflect the findings of chamber studies performed
    in the early 1990's, which found that ozone poses health problems when
    people are exposed to lower levels for longer periods of time.
        Ozone is the principle component of ground-level smog. It is formed
    when hydrocarbon and nitrogen oxide pollution from vehicles, power
    plants, refineries . and other sources react in the atmosphere in the
    presence of sunlight. Ozone is a powerful oxidizing agent that damages
    lung tissue.
        Recent research with laboratory animals, clinical subjects, and
    human populations has identified a cascade of adverse health effects
    from ozone at levels common in the United States. Effects include
    increased respiratory symptoms, damage to cells of the respiratory
    tract, pulmonary inflammation, declines in lung function, increased
    susceptibility to respiratory infections, and increased risk of
    hospitalization and early death.
        Four groups of people are especially sensitive to ozone: children,
    people with chronic obstructive respiratory disease (chronic bronchitis
    and emphysema) and asthma, persons who exercise or work outdoors, and
    people who, for reasons that remain unknown, are more sensitive to the
    physiologic effects of ozone.
        This bibliography represents a sampling of the peer-reviewed
    scientific literature on the health effects of ozone air pollution
    published since EPA's last revision of the standards in 1997.
        Air pollution research may involve epidemiological studies of human
    populations, chamber studies . where human volunteers are exposed to
    air pollution under controlled conditions, and toxicological studies
    with laboratory animals. In recent years, air pollution research funds
    have been largely directed toward the study of particulate matter.
    Nevertheless, there were some important developments regarding the
    health effects of ozone. Important new findings include:

          Identification of the possible genetic basis for
    susceptibility to ozone;
          Increasing evidence of a mortality effect of ozone;
          Evidence of long-term impacts on lung function from
    chronic exposure; and
          Increased evidence of the effects of ozone on sensitive
    groups such as children and asthmatics.

        This bibliography does not attempt to be comprehensive: exclusion
    does not imply that a study is unimportant; inclusion does not imply
    endorsement.
                               long-term studies
    Ozone Harms the Respiratory Health of U.S. Military Academy Cadets
        Researchers from Columbia University and New York University sought
    to determine whether changes in lung function or respiratory symptoms
    would occur over the course of a summer among healthy young adults
    working outdoors in the presence of ozone. The study followed 72
    sophomore cadets from the U.S. Military Academy at West Point, New
    York, during their summer training at Fort Benning, GA, Fort Leonard
    Wood, MO, Fort Sill, OK, and Fort Dix, NJ. All the subjects on average
    experienced a decline in lung function over the course of the summer.
    There were also significant increases in reports of cough, chest
    tightness, and sore throat. The decline in lung function was greatest
    in the group of military cadets who attended training in Fort Dix, New
    Jersey, where peak hourly ozone concentrations above 100 ppb occurred
    frequently. ``These results suggest a possible adverse respiratory-
    health impact of exposures to particulate matter and ozone in healthy
    young adults engaged in intensive outdoor training,'' conclude the
    authors.
          Kinney, P.L. and Lippmann, M. Respiratory Effects of
    Seasonal Exposures to Ozone and Particles. Archives of Environmental
    Health, Vol. 55, No. 3, pp. 210-216, May/June 2000.
    Lifetime Ozone Exposure Exerts Negative Effect on Small Airways of Lung
        This pilot study is the first attempt to relate lifetime cumulative
    ozone exposure to small airway pulmonary function. 130 nonsmoking, non-
    asthmatic freshmen from the University of California at Berkeley who
    were lifelong residents of the Los Angeles Basin or the San Francisco
    Bay
        Area volunteered to participate in lung function testing.
    Researchers observed declines in midand end-expiratory flow measures of
    the small airways that are considered early indicators for pathologic
    changes that might ultimately progress to chronic obstructive lung
    disease. These declines were associated with estimated long-term ozone
    exposures.
          Kunzli, N., Lurmann, F., Segal, M., Ngo, L., Balmes, J.,
    and Tager, I.B. Association between Lifetime Ambient Ozone Exposure and
    Pulmonary Function in College Freshmen-Results of a Pilot Study.
    Environmental Research, Vol. 72, pp. 8-23, 1997.
    Lung Function in Girls and Boys is Diminished by Ozone
        The California Children's Health Study followed 3,300 school
    children that lived in 12 Southern California communities that fell
    along a gradient of air pollution levels for a period of 10 years. Four
    different measures of pulmonary, function were tested, with different
    pollutants most strongly associated with each measure. Girls with
    asthma, and boys who spent more time outdoors experienced diminished
    lung function in association with ozone.
          Peters, J.M., Avol, E., Gauderman, W.J., Linn, W.S.,
    Navidi, W., London, S.J., Margolis, H., Rappaport, E., Vora, H., Gong,
    H., and Thomas, D.C. A Study of Twelve Southern California Communities
    with Differing Levels and Types of Air Pollution. II. Effects on
    Pulmonary Function. American Journal of Respiratory and Critical Care
    Medicine, Vol. 159, pp. 7680775, 1999.
    Long-Term Ozone Exposure Diminishes Respiratory Health
        Few studies have reported on the respiratory effects of prolonged,
    multi-year exposures to ozone. This study examined data from health
    status questionnaires and lung function measurements in relation to
    residence histories to examine the effect of long-term ozone exposures
    on over 500 non-smoking Yale college students. Investigators found that
    ``living for four or more years in regions of the country with high
    levels of ozone and related copollutants is associated with diminished
    lung function and more frequent reports of respiratory symptoms.''
          Galizia, A. and Kinney, P.L. Long-Term Residence in Areas
    of High Ozone: Associations with Respiratory Health in a nationwide
    Sample of Nonsmoking Young Adults. Environ Health Perspect, Vol. 107,
    No. 8, pp. 675-679, August 1999. .
    Long-Term Ozone Exposure Might Inhibit Lung Function Growth in Children
        Frischer et al. followed a group of 1,150 first and second grade
    children in two counties in Austria from 1994-1996, to investigate the
    long-term effects of ambient ozone. The highest and lowest exposure to
    ozone differed by a factor of two. Researchers found small but
    consistent decrements in lung function associated with ambient ozone.
    They conclude: ``This is the first study that suggests chronic effects
    of ozone on lung function growth in children. Thus, ozone would
    constitute a risk factor for premature respiratory morbidity during
    later life.''
        A subsequent long-term study in Southern California by Gauderman et
    al. found an association between particulate matter and children's lung
    function growth, but not with ozone.
          Frischer, T., Studnicka, M., Gartner, C., Tauber, E.,
    Horak, F, Veiter, A., Spengler, J., KUhr, J., and Urbanek, R. Lung
    Function Growth and Ambient Ozone: A Three-Year Population Study in
    School Children. Am J Respir Crit Care Med, Vol. 160, pp. 390-396,
    1999.
          Gauderman, J.W., McDonnell, R., Gilliland, F., London,
    S., Thomas, D., Avol, E., Vora, H., Berhane, K., Rappaport, E.B.,
    Lurmann, F., Margolis, H.G., and Peters, J. Association between Air
    Pollution and Lung Function Growth in Southern California Children.
    American Journal of Respiratory and Critical Care Medicine, Vol. 162.
    pp 1383-1390, 2000.
    Long-Term Exposure to Ozone is Related to Asthma Development in Men
        Asthma is a multi-factor disease with many contributing factors.
    Air pollution is generally considered to be an exacerbating, rather
    than a causal factor. This prospective cohort study of over 3,000
    adults in the nonsmoking Seventh Day Adventist community sought to
    examine the whether long-term exposure to ozone air pollution can
    contribute to the prevalence of asthma. The study found that 8-hour
    average ambient ozone concentration averaged over a 20-year period was
    associated with doctor diagnoses of adult-onset asthma in nonsmoking
    males.
          McDonnell, W.F., Abbey, D.E., Nishino, N., and Lebowitz,
    M.D. Long-Term Ambient Ozone Concentration and the Incidence of Asthma
    in Nonsmoking Adults: The Ashmog Study. Environmental Research, Section
    A Vol. 80, pp. 110-121, 1999.
    Nasal Biopsies from Children Reveal Ozone Damage
        Children in Mexico City are routinely exposed to high levels of
    ozone, particulate, and aldehyde air pollution. Biopsies taken from
    these children exhibit a wide range of pathologic changes to the cells
    of the nasal passages. ``The severe structural alteration of the nasal
    epithelium together with the prominent acquired ciliary defects are
    likely the result of chronic airway injury in which ozone, particulate
    matter, and aldehydes are thought to play a crucial role,'' conclude
    researchers. ``The nasal epithelium in SWIIhIC [Southwest Metropolitan
    Mexico City] children is fundamentally disordered,' and their
    mucocilliary defense mechanisms are no longer intact. A compromised
    nasal epithelium has less ability to protect the lower respiratory
    tract and may potentially leave the distal acinar airways more
    vulnerable to reactive gases.''
          Calderon-Garciduenas, L., Valencia-Salazar, G.,
    Rogriguez-Alcaraz, A., Gambling, T.M., Garcia, R., Osnaya, N.,
    Villarreal-Calderon, A., Devlin, R.B., and Carson, J.L. Ultrastructural
    Nasal Pathology in Children Chronically and Sequentially Exposed to Air
    Pollutants. American Journal of Respiratory Cell and Molecular Biology,
    Vol. 24, pp. 132-138, 2001.
                               short-term studies
    Lung Function Diminishes Following Exposure to Air Pollution
        Swiss researchers followed a group of 3,900 nonsmoking adults from
    eight areas of Switzerland that represent a range of urbanization, air
    pollution, altitude, and weather conditions. In this study, researchers
    obtained three different measures of lung function and compared the
    results with prior days measurements of ozone, total suspended
    particulates, and nitrogen dioxide. Daily average concentrations of
    ozone were significantly associated with mean respiratory function
    measures during the summer months. Associations remained stable after
    controlling for other pollutants and for pollen. Though the effects
    were small, researchers conclude that current levels of air pollution
    have public health significance.
          Schindler, C., Kunzli, N., Bongard, J.-P:, Leuenberger,
    P., Karrer, W., Rapp, R., Monn, C., Ackermann-Liebrich, U., and The
    Swiss Study on Air Pollution and Lung Diseases in Adults Investigators.
    Short-Term Variation in Air Pollution and in Average Lung Function
    Among Never-Smokers: The Swiss Study on Air Pollution and Lung Diseases
    in Adults (SAPALDIA). American Journal or Respiratory and Critical Care
    Medicine, Vol. 163, pp. 356-361, 2001.
    School Absences Rise With High Ozone Days
        School absenteeism is used as an indicator of the overall health of
    school-aged children. A study by Chen et al. assessed the association
    between daily air pollution concentrations and absences among 28,000
    elementary school children in Washoe County, Nevada, home of Reno
    between 1996 and 1998. Investigators found that ozone and carbon
    monoxide, but not PM10, were statistically significant
    predictors of daily absenteeism in elementary schools.
        The Children's Health Study is being carried out in 12 southern
    California communities that fall along a gradient of air pollution.
    This study explored the effect of ozone, PM10, and nitrogen
    dioxide on school absenteeism due to upper-and lower-respiratory
    illness in a cohort of fourth graders. Researchers found that
    relatively small short-term changes in ozone, but not the other
    pollutants, were associated with increases in school absences due to
    respiratory illness in children 9-10 years of age. ``Because exposures
    at the levels observed in this study are common, the increase in school
    absenteeism from respiratory illnesses associated with relatively
    modest day-to-day changes in ozone concentration documents an important
    adverse impact of ozone on children's health and well-being,'' state
    the authors.
          Chen, L., Jennison, B.L., Yang, W., and 0maye, S.T.
    Elementary School Absenteeism and Air Pollution. Inhalation Toxicology,
    Vol. 12, pp. 997-1016, 2000.
          Gilliland, F.D., Berhane, K., Rappaport, E.B., Thomas,
    D.C., Avol, E., Gauderman, W.J., London, S.J., Margolis, H.G.,
    McConnell, R., Islam, K.T., and Peters, J.M. The Effects of Ambient Air
    Pollution on School Absenteeism Due to Respiratory Illness.
    Epidemiology, Vol. 12, No. 1, pp. 43-54, January 2001.
    Summertime Haze Air Pollution Exacerbates Asthma in Children
        This study focused on children ages 7-13 with moderate to severe
    asthma who attended a summer ``asthma camp'' in the early 1990's in the
    Connecticut River Valley. Daily records were kept of environmental
    conditions, as well as of subject medication use, lung function, and
    medical symptoms. Air pollution, especially ozone, was consistently
    correlated with acute asthma exacerbations, chest symptoms, and lung
    function decrements. ``.:. the monotonic nature of the relationships of
    ozone with reduced lung function and increased numbers of asthma
    symptoms and exacerbations found in this work indicates that these
    effects extend will below the present 120 ppb concentration level, so
    that even meeting this standard will not be fully protective for these
    sensitive individuals. Past medical advice that children with asthma
    should take care to avoid exposure to air pollutants is further
    supported by the results of this research.''
          Thurston, G.D., Lippman, M., Scott, M.B., and Fine, J.M.
    Summertime Haze Air Pollution and Children with Asthma. Am J Respir
    Crit Care Med, Vol. 155, pp. 654-660, 1997.
    Ozone Plus Allergens Exacerbates Asthma
        Asthma is an inflammatory disease of the airways. This is the first
    epidemiologic study to demonstrate a difference in the inflammatory
    reaction of the upper airways to ozone as compared to allergens in
    patients with intermittent to severe persistent asthma. The study of
    sixty asthmatic patients of the Leiden University Hospital in The
    Netherlands took samples of nasal lavage and analyzed it in the
    laboratory for signs of inflammation. Researchers found that ``both
    ambient ozone and allergen exposure are associated with inflammatory
    responses in the upper airways of subjects with asthma, although the
    type of inflammation is qualitatively different.'' They speculate that
    ``during episodes with both increased allergen levels and high ambient
    photochemical air pollution asthma exacerbations are more likely to
    develop than during periods with either increased allergens or ambient
    photochemical air pollution alone.''
          Hiltermann, T.J.N., de Bruijne, C.R., Stolk, J.,
    Zwinderman, A.H., Spiksma, F.T.M., Roemer, W., Steerenberg, P.A.,
    Fischer, P.H., van Bree, L., and Hiemstra, P.S. Effects of
    Photochemical Air Pollution and Allergen Exposure on Upper Respiratory
    Tract Inflammation in Asthmatics. Am J Respir Crit Care Med, Vol. 156,
    pp. 1765-1772, 1997.
    Children with Mild Asthma Suffer the Effects of Air Pollution
        A number of important studies have been conduced in Mexico City
    where air pollution levels are high. This study involved a panel of
    Mexican children ages 5-13 with mild asthma. Researchers determined
    that a 50 ppb increase in the daily 1-hour maximum ozone was related to
    an 8 percent increase in cough, a 24 percent increase in phlegm, and an
    11 percent increase in other respiratory symptoms in the study
    population.
          Romieu, I., Meneses, F., Ruiz, S., Huerta, J., Sienra,
    JJ, White, M., Etzel, R., and Hernandez, M. Effects of Intermittent
    Ozone Exposure on Peak Expiratory Flow and Respiratory Symptoms among
    Asthmatic Children in Mexico City. Archives of Environmental Health,
    Vol. 52(5), pp. 368-376, Sep-Oct 1997.
    Ozone is a Risk Factor for Respiratory Problems in Kids, Especially
            Babies, Toddlers, and Adolescents
        Burnett et al. examined the association between air pollution and
    hospital admissions for acute respiratory problems in babies and
    toddlers during a 15-year period in Toronto, Canada. A 35 percent
    increase in the daily hospitalization rate for respiratory problem was
    associated average ozone concentrations in the summer, but not during
    other seasons. The ozone effect persisted after adjustment for other
    air pollutants and weather:
        Braga and coworkers examined daily hospital admission records for
    children of different ages, compared to daily concentrations of ozone,
    particulate matter, sulfur dioxide, carbon monoxide, and nitrogen
    dioxide over a 5-year period in Sao Paulo, Brazil. The study showed
    that daily respiratory hospital admissions for children and adolescents
    increased with air pollution, with children less than 2 years old the
    most susceptible, and adolescents were the next most susceptible age
    group.
          Burnett, R.T., Smith-Doiron, M., Stieb, D., Raizenne,
    M.E., Brook, J.R., Dales, R.E., Leech, J.A., Cakmak, S., and Krewski,
    D. Association between Ozone and Hospitalization for Acute Respiratory
    Diseases in Children Less than 2 Years of Age. American Journal of
    Epidemiology, Vol. 153, No. 5, pp. 444-452, 2001.
          Braga, A.L., Saldiva, P.H., Pereira, L.A., Menezes, J.J.,
    Conceicao, G.M., Lin, C.A., Zanobetti, A., Schwartz, J., and Dockery,
    D.W. Health Eflects of Air Pollution Exposure on Children and
    Adolescents in Sao Paulo, Brazil. Pediatric Pulmonology, Vol. 31 (2),
    pp. 106-113, Feb. 2001.
    Low Levels of Ozone Contribute to Hospitalization for Respiratory
            Disease
        A study by Health Canada researcher Richard Burnett et al. compared
    air pollution data to hospital admissions in 16 Canadian cities, over a
    10-year period. The study controlled for many factors including day of
    week, season, other air pollutants, and climate. The prior day's peak
    hourly ozone concentration was positively associated with respiratory
    hospital admissions during the April-December period. The effects
    varied from city to city. Researchers conclude that ``these results
    suggest that ambient air pollution at the relatively low concentrations
    observed in this study, including tropospheric ozone, is associated
    with excess admissions to hospital for respiratory diseases in
    populations experiencing diverse climates and air pollution profiles.''
        In Brisbane, Australia, ozone levels are reasonably constant year
    round. This large study of daily admissions to public hospitals during
    the period 1987-1994 found that ozone was consistently associated with
    admissions for asthma and respiratory disease-with little evidence of a
    threshold.
          Burnett, R.T., Brook, JR., Yung, W.T., Dales, R.El, and
    Krewski, D. Association between Ozone and, Hospitalization for
    Respiratory Diseases in 16 Canadian Cities. Environmental Research,
    Vol. 72, pp. 24-31, 1997.
          Petroeschevsky, A., Simpson, R.W., Thalib, L., and
    Rutherford, S. Associations between Outdoor Air Pollution and Hospital
    Admissions in Brisbane, Australia. Archives of Environmental Health,
    Vol. 56(1), pp. 37-52, Jan-Feb 2001.
    Summertime Ozone Sends the Elderly to the Emergency Room
        This study examined daily emergency room visits for respiratory
    illnesses in 25 hospitals in Montreal, Quebec in relation to summertime
    air pollution. Though the ozone levels never exceeded the 1-hour NAAQS
    of 120 ppb, statistically significant relationships were found between
    respiratory emergency room visits for patients over age 64, and both 1-
    hour and 8-hour maximum ozone levels measured the day before. ``These
    findings confirm the impression that while air quality standards may
    protect the respiratory health of the general population, this is not
    the case for susceptible subgroups such as the elderly,'' conclude the
    researchers.
          Delfino, R.J., Murphy-Moulton, A.M., and Beeklake, M.R.
    Emergency Room Visits for Respiratory Illnesses among the Elderly in
    Montreal: Association with Low Level Ozone Exposure. Environmental
    Research, Section A, Vol. 76, pp. 67-77, 1998.
    Ozone Exposure May Make the Heart Work Harder
        This study is the first chamber study to directly measure the
    effect of ozone on the function of the human heart. Investigators
    studied a small group of healthy adult males and those with high blood
    pressure. Overall, researchers did not find evidence of major short-
    term cardiovascular effects from ozone exposure. However, they reported
    that their results ``suggest that ozone exposure can increase
    myocardial work and impair pulmonary gas exchange to a degree that
    might be clinically important in persons with significant preexisting
    cardiovascular impairment, with or without concomitant lung disease.''
          Gong, H. Jr., Wong, R., Sarma, R.J., Linn, W.S.,
    Sullivan, E.D., Shamoo, D.A., Anderson, K.R., and Prasad, S.B.
    Cardiovascular Effects of Ozone Exposure in Human Volunteers. Am J
    Respir Crit Care Med, Vol. 158, pp. 538-546, 1998.
    Ozone Damages the Lungs of Exercisers
        The lungs work harder and take in more air when people are
    exercising. A study by Frampton et al. of healthy adult smokers and
    nonsmokers subjected volunteers to exercise while exposing them to
    ozone and filtered air in a laboratory chamber. The authors conclude
    that: ``exposure to ozone with exercise, at concentrations relevant to
    urban outdoor air, results in ozonation of lipids in the airway
    epithelial lining fluid of humans.''
        A study of adult cyclists in Parma, Italy measured levels of lung-
    specific proteins in the blood following a 2-hour bicycle ride during
    the summer, under differing ozone smog conditions. Researchers
    Broeckaert et al. found increased airway permeability in moderately
    exercising participants exposed to an average of 0.07 ppm ozone over 2
    hours.
          Frampton, M.W., Pryor, W.A., Cueto, R., Cox, C., Morrow,
    P.E., and Utell, M.J. Ozone Exposure Increases Aldehydes in Epithelial
    Lining Fluid in Human Lung. Am J Respir Crit Care Med, Vol., 159, pp.
    11134-1137, 1999.
          Broeckaert, F., Arsalane, K., Hermans, C., Bergamaschi,
    Brustolin, A., Mufti, A., and Bernard, A. Lung Epithelial Damage at Low
    Concentrations of Ambient Ozone. The Lancet, Vol. 353, pp. 900-901,
    March 13, 1999.
    Ozone Increasingly Implicated in Premature Mortality
        Recent studies of air pollution and mortality have looked at the
    impacts of all the major pollutants, and have increasingly been
    reporting positive associations with ozone. Dr. Jonathan M. Samet and
    coauthors from the Johns Hopkins University School of Public Health
    examined five major air pollutants in 20 of the largest cities in the
    United States from 1987 to 1994, as part of NMMAPS--the National
    Morbidity, Mortality, and Air Pollution Study. Ozone levels were
    positively associated with mortality rates during the summer months
    when ozone levels were highest, though effects are not as strong as
    with particulate matter.
        A similar study known as the APNEA project--Air Pollution and
    Health: a European Approach--of six cites in Central and Western Europe
    examined data on daily deaths and daily air pollution levels.
    Significant positive associations were found between daily deaths and
    ozone. Positive associations were also reported for nitrogen dioxide,
    but study authors believe this may be due to confounding by other
    vehicle-derived pollutants and needs further study.
        Thurston and Ito poled data from 15 studies and estimated a small
    effect of ozone on total mortality. According to Samet et al.: ``Taken
    together, the results of these three studies provide consistent
    evidence that exposure to ozone also increases the risk of death.''
          Samet, J.M., Dominici, F., Curriero, F.C., Coursae, I.,
    and Zeger, S.L. Fine Particulate Air Pollution and Mortality in 20 U.S.
    Cities, 1987-1994. New England Journal of Medicine, Vol. 343, No. 24,
    pp. 1742-1749, December 14, 2000
          Tuoloumi, G., Katsouyanni, K., Zmirou, D., Schwartz, J.,
    Spix, C., de Leon, A.P., Tobias, A., Quennel, P., Rabezenko, D.,
    Bacharova, L., Bisanti, L., Vonk, J.M., and Ponka, A. Short-Term
    Effects of Ambient Oxidant Exposure on Mortality: A Combined Analysis
    Within the APHEA Project. American Journal of Epidemiology, Vol.
    146:14o. 2, pp. 177-185, 1997.
          Thurston, G.D., and Ito, K. Epidemiological Studies of
    Ozone Exposure Effects. In, Air Pollution and Health, Edited by S.T.
    Holgate, J.M. Samet, H.S. Koren, and R.L. Maynard, Academic Press,
    1999.
                                 other studies
    Genetic Basis for Ozone Responsiveness Identified
        It is well established that ozone induces lung hyperpermeability
    and inflammation in humans and in laboratory animals, and that some
    individuals are more susceptible than others to ozone damage. A number
    of factors may contribute to this differential responsiveness,
    including age, sex, nutrition, and pre-existing disease, such as
    asthma. This study by Dr. Steven Kleeberger of the Johns Hopkins School
    of Hygiene and Public Health explores the genetic basis for
    Susceptibility, after controlling for other known susceptibility
    factors. The study identifies a likely ozone ``susceptibility gene'' in
    mice.
          Kleeberger, S.R., Reddy, S., Zhang, L.-Y., and Jedlicka,
    A.E. Genetic Susceptibility to Ozone-Induced Lung Hyperpermeability. Am
    J. Respir. Cell Mol. Biol., Vol. 22, pp. 620-627, 2000.
    Inner-City Asthmatic Children Born Prematurely or with Low Birth Weight
            Have Greatest Response to Ozone
        This study sought to ascertain which subgroups in a cohort of 846
    inner-city asthmatic children aged 4-9 years old were most susceptible
    to the effects of summertime ozone. The children were recruited from
    emergency departments and primary care clinics in the Bronx and East
    Harlem in New York City, Baltimore, Washington, DC, Detroit, Cleveland,
    Chicago, and St. Louis, MO. The study reported that ``children of low
    birth weight or of premature birth are at greater risk for respiratory
    problems, and appear to be substantially more susceptible to the
    effects of summer air pollution than children of normal birthweight or
    full-term gestation.''
          Mortimer, K.M., Tager, I.B., Dockery, D.W., Neas, L.M.,
    and Redline, S. The Effect of Ozone on Inner-City Children with Asthma:
    Identification of Susceptible Subgroups. Am J Respir Crit Care Med,
    Vol. 162, pp. 1838-1845, 2000.
    During Atlanta Summer Olympus, Decreased Traffic Reduced Asthma
            Incidents in Children
        The 1996 Summer Olympics in Atlanta, a concerted effort was made to
    lower traffic congestion to enable spectators to get to the games.
    Public transit was enhanced, the downtown was closed to private cars,
    and businesses were encouraged to promote telecommuting and alternative
    work hours. As a result, there were large: and significant decreases in
    ozone concentrations, and somewhat lesser reductions in carbon monoxide
    and PM10 concentrations. During this period, researchers
    found significant reductions in the numbers of urgent care visits,
    emergency care visits, and hospitalizations for asthma among children
    ages 1--16 years. Dr, Michael S. Friedman of the Centers for Disease
    Control and Prevention and coauthors conclude: ``Our finding suggest
    that efforts to decrease ozone and PM10 concentrations from
    moderate to low levels can decrease the burden of asthma.''
          Friedman, M.S., Powell, K.E., Hutwagner, L., Graham,
    L.M., and Teague, W.G. Impact of Changes in Transportation and
    Commuting Behaviors During the 1996 Summer Olympic Games in Atlanta on
    Air Quality and Childhood Asthma. Journal of the American Medical
    Association, Vol. 285, No. 7, pp. 897-905, 2001
                                     ______

        Responses of John Kirkwood to Additional Questions from Senator
                                    Jeffords
        Question 1. We've heard from EPA and industry that stringent enough
    caps could obviate the need for New Source Review and a host of other
    Clean Air Act requirements. What are your views on the position?
        Response. We believe the number, diversity, and geographic
    distribution of emissions sources will make it impossible to monitor
    the local impact of cap-and-trade proposals. This program will be more
    challenging because the ``easy'' reductions have been obtained during
    implementation of the Title IV program. Existing Clean Air Act programs
    must be maintained as a safeguard to protect against adverse local air
    pollution impact.

        Question 2. I share your concern about the speed with which the
    Administration is moving on implementing the new ozone and fine
    particulate standards. That seems to make the Clean Power Act all the
    more important. Do you have any further thoughts on how we might move
    the Administration along?
        Response. We believe the Bush Administration has devoted far too
    few resources to implementation of the new ambient air quality
    standards for ozone and fine particles. We urge you to utilize all the
    oversight tools at your disposal to re-new a focus on implementing
    these critical standards. The Administration appears to be satisfied
    with blaming litigation for the delays. However, substantial evidence
    suggests it will not be ready to move forward with necessary
    implementation measures once the litigation is concluded.

        Question 3. Some of your panel have expressed concern about the
    local impacts of trading. How do we run a national cap-and-trade
    program efficiently without jeopardizing local environmental quality
    and public health?
        Response. The American Lung Association has grave concerns whether
    any national cap-and-trade program can operate in a way that assures
    local environmental quality and public health will not be jeopardized.
    Such a program must be a supplement to current Clean Air Act
    authorities. In this way, current law provides some protections. It is
    of paramount importance that State authority to protect its citizens
    not be preempted.

        Question 4. During the hearing, Senators Lieberman and Voinovich
    requested information on the contribution that reduced power plant
    emissions would make to reducing premature mortality and providing
    other health benefits. Can you submit for the record any additional
    studies together with any additional observations you may have on this
    question?
        Response. The American Lung Association is not aware of any study
    which has evaluated the health benefits that would be achieved from the
    specific power plant emissions reduction levels called for in the Clean
    Power Act, S. 556. However, we submit for the record a study entitled,
    ``The Particulate-Related Health Benefits of Reducing Poser Plant
    Emissions'' by Abt Associates. This study used the same peer-reviewed,
    state-of-the art research methodology used by EPA to estimate the
    health benefits of power plant control Exhibit 6-2 from that study
    (attached) shows that a ``75 Percent Reduction'' Scenario which,
    notwithstanding its name, represents a two-thirds reduction from
    expected power plants SO2 emissions under existing law in
    2007 would yield a mean reduction of 18,700 premature deaths per year
    and over 15,000 fewer hospitalizations per year plus many other health
    benefits. Since the Clean Power Act would require a true 75 percent
    reduction of SO2 from power plants it is safe to say that
    health benefits would significantly exceed those described in the Abt
    Associates study. We caution that it is not appropriate to
    mathematically project the increase in benefits from the Clean Power
    Act based on the Abt study findings.
        Senator Voinovich asked during the hearing what the health benefits
    would be from ``turning off'' all coal-fired power plants. Exhibit 6-3
    of the Abt Associates study (attached) estimated that all power plant
    emissions cause a mean of 30,100 premature deaths annually, based on
    projected emissions levels in 2007 plus many other enumerated adverse
    health effects. Presumably if these power plants were ``turned off''
    these adverse health outcomes would be avoided.

        Question 5. Senator Voinovich inquired whether the National
    Governors Association policy on New Source Review was at odds with the
    support of this program expressed by the American Lung Association as
    well as State and local air regulators. Please elaborate your views on
    this matter.
        Response. We do not interpret the NGA energy policy that addresses
    New Source Review to be inconsistent with our views.
        The NGA policy advocates improvements to NSR that ``enhance the
    environment and increase energy production capacity, while encouraging
    energy efficiency, fuel diversity, and the use of renewable
    resources.'' (Section NR-18.6) We take this statement to mean that the
    NGA supports changes to the NSR program that achieve greater
    environmental protection in ways that improve the efficiency and
    certainty of the review process. The ALA supports regulatory changes to
    the NSR program that would provide greater health and environmental
    benefits while achieving the other goals endorsed by the NGA. The
    Natural Resources Defense Council has provided proposed regulatory
    changes in the NSR program to the Environment and Public Works
    Committee that incorporate these concepts. The American Lung
    Association opposes the changes proposed by the utility industry that,
    in our view, would weaken the health protections provided by the NSR
    program.
                                   __________
       Statement of Cecil E. Roberts, President, United Mine Workers of
                                    America
        Mr. Chairman and members of the committee: As president of the
    nation's first and foremost energy union, I appreciate the opportunity
    to participate in the committee's consideration of legislation to
    reduce emissions from coal-fired powerplants. The United Mine Workers
    of America (UMWA) supports additional reductions in sulfur dioxide
    (SO2), nitrogen oxides (NOx) and mercury from coal-fired
    power plants, provided that the reductions are designed in a way that
    preserves coal miners jobs. However, we do not support reduction
    schemes that force or encourage electric utilities to switch away from
    coal, thereby causing economic harm to coal miners and their
    communities.
        UMWA members mine, process, transport and consume coal in their
    daily jobs. That's how most of them put food on the table, pay their
    bills and build a future for their families. Their economic interests
    are entwined with energy and environmental issues more than most other
    workers. The issues being discussed by the committee with regard to S.
    556 not only raise the question for them of how much their utility
    bills may rise as we seek to reduce emissions, but whether they can
    remain gainfully employed and support their families.
    The Role of Coal in America's Energy Supply
        Coal is an indispensable part of America's energy supply, and the
    United States is blessed with an abundance of coal. The latest
    estimates indicate that the United States has a demonstrated coal
    reserve base of over 500 billion tons, with an estimated 275 billion
    tons of recoverable reserves. At current production rates, this
    represents about 275 years of recoverable coal reserves. Coal
    represents about 95 percent of all U.S. fossil fuel energy reserves.
    About one-quarter of all the world's known coal reserves are found in
    the United States. U.S. recoverable coal reserves have the energy
    equivalent of about one trillion barrels of oil. That is comparable to
    all of the world's known oil reserves.
        Coal is used to generate some 56 percent of our nation's
    electricity. To back coal out of our nation's energy supply mix means
    that we would have to find some other fuel to replace it, most likely
    natural gas. Such a fundamental shift in U.S. energy policy brings into
    question not only the cost, but also the availability of natural gas
    supplies. We know that we have enough identified, economically
    recoverable coal reserves to last for hundreds of years. While
    sufficient domestic supplies of natural gas may be currently available,
    future availability--and cost--is much less certain than in the case of
    coal. We believe that substantial increases in demand for natural gas
    inevitably will lead to higher costs and greater dependence on foreign
    sources for supply. And we should all be mindful of the fivefold
    increase in natural gas prices that some of our citizens faced last
    winter. Environmental policies that drive electric utilities away from
    coal and toward more natural gas use may well be in conflict with our
    energy policy goals of maintaining a reliable, low-cost mix of
    generating sources that can temper the price increase of one particular
    fuel.
        While we are blessed with an abundant supply of coal, we are
    challenged in its use because of the nation's concern about the
    environment. Americans demand a cleaner environment at the same time
    they demand low-cost, reliable and available energy. For coal to
    continue to play the vital role that it can--and should--play in our
    energy mix, we must ensure that coal is consumed with the minimum
    amount of emissions that technology will allow. This means that we must
    continue to develop highly advanced technologies to convert coal to a
    usable form of energy more efficiently and to capture any harmful
    emissions before they escape into the atmosphere.
    How Coal Miners Fared Under the 1990 Clean Air Act Amendments
        Before getting to specific comments on S. 556, let me say at the
    outset that coal miners did not fare well under the Clean Air Act
    Amendments of 1990. Electric utilities engaged in substantial fuel
    switching in response to Title IV acid rain controls and UMWA members
    in the high sulfur coal producing regions in northern Appalachia and
    the Midwest were displaced by the thousands. Nearly 60 percent of the
    SO2 reductions achieved in Phase I were accomplished through
    fuel switching and only about 28 percent were accomplished through
    installation of scrubbers. This coal switching proved to be devastating
    to high sulfur coal mining communities. Let me cite just a few
    examples. In 1990, coal mines in northern West Virginia produced 56.6
    million tons and employed 10,053 coal miners. In 2000, production had
    fallen to 37.6 million tons and employment had declined to 3,712 coal
    miners, a 33.6 percent drop in production and a 63.1 percent drop in
    employment. In Ohio, coal production was 35.3 million tons in 1990 and
    the state's coal mines employed 5,866 mine workers. By 2000, output had
    declined to 22.3 million tons and employment had dropped to 2,688 mine
    workers, a 36.8 percent drop in coal production and 54.2 percent
    decline in coal mining jobs. In Illinois, coal production was 60.4
    million tons in 1990 and 10,018 coal miners were working. By 2000,
    production had fallen to 33.4 million tons (a 44.6 percent reduction)
    and only 3,454 coal miners were working (a decline of 65.5 percent). In
    western Kentucky, 5,586 coal miners produced 44.9 million tons in 1990;
    by 2000, only 2,510 coal miners were employed (a drop of 55.1 percent)
    and production had declined to 25.8 million tons (a drop of 42.6
    percent). That's a 78 million ton loss of coal production and over
    19,000 lost jobs in those four states alone. Overall, the major eastern
    coal producing states lost over 113 million tons of coal production
    from 1990 to 2000 and employment is down by over 30,000 jobs.
        Although nationwide coal production was essentially unchanged over
    the decade, the high sulfur coal regions suffered serious economic harm
    as a result of the 1990 Amendments. And the sad fact is that the coal
    producing states that gained output from the utilities' fuel switching
    did not gain significant numbers of new jobs. Having gone through that
    experience with the 1990 Amendments, we view with a skeptical eye any
    legislative proposal that sets emission reduction targets and
    timetables that surpass our technological capabilities.
    S. 556 Would Be Devastating to Coal Miners and Their Communities
        We believe that S. 556 falls into that category. Indeed, it appears
    from government analyses that S. 556 may threaten to disrupt coal
    mining communities far more than Title IV. Emission reductions called
    for in the bill would be achieved in large part by utilities switching
    away from coal, not by installation of control technology. As we
    understand it, S. 556 would require electric utilities to meet the
    following emission reduction targets by 2007:

          Sulfur dioxide--75 percent reduction from Title IV Phase
    II levels, a cap of about 2.2 million tons nationwide;
          Nitrogen oxides--75 percent reduction from 1997 levels, a
    cap of about 1.5 million tons nationwide;
          Mercury--90 percent reduction from 1999 levels, a cap of
    about 5 tons nationwide; and,
          Carbon dioxide--reduction to 1990 levels, a cap of about
    500 million tons nationwide.

        We have reviewed economic analyses of S. 556 conducted by the U.S.
    Energy Information Administration (EIA) and the U.S. Environmental
    Protection Agency (EPA). These studies find that implementation of the
    targets and timetables in S. 556 would result in a one-third to one-
    half reduction of coal use in the electric utility sector. Much of the
    loss in coal production stems from the bill's requirement for a 90
    percent reduction in mercury and the 1990 carbon dioxide cap.
    Technology to control mercury is in various stages of research and
    development, and is unlikely to be in widespread commercial application
    by 2007. As a result, utilities faced with a 90 percent reduction
    requirement are likely to switch from coal to natural gas. In the case
    of carbon, there is no current technology to capture and sequester
    carbon from electric utility emissions. Indeed, the Federal Government
    has only recently begun research and development of such technologies.
    Faced with a requirement to return to 1990 carbon emission levels,
    utilities are expected to engage in substantial fuel switching away
    from coal.
        Because the mercury and carbon dioxide reductions called for in S.
    556 cannot be met with technology, the end result of the bill is to
    require utilities to switch from coal to natural gas. The United States
    currently produces about 1.1 billion tons of coal annually. In its
    analysis of S. 556, EIA found that implementation of the reductions
    would cause the loss of 506 million tons of coal production nationwide
    from its reference case in 2010, rising to a loss of 657 million tons
    in 2020. Even if we assume that there would be no growth in coal
    production in the reference case, S. 556 would mean the loss of 319
    million tons by 2010 and 423 million tons by 2020. Such coal market
    disruptions far exceed the coal switching that resulted from Title IV.
    In addition, these losses are likely to have a negative economic impact
    all coal producing states, not just the high sulfur states in the
    eastern coal fields. For example, EIA projects a loss of 190 million
    tons in 2010 from eastern coal producing states (from a base of 564
    million tons) and a loss of 316 million tons from western states (from
    a base of 725 million tons). We have attached summary coal production
    impacts from two EIA studies at the end of this statement.
        What would be the economic cost of this loss of coal production?
    Tens of thousands of coal miners would lose their jobs in areas of the
    country that have little or no comparable alternative employment. These
    are the jobs, in fact, that support other jobs in the region. Coal
    mining jobs, along with the railroad and electric utility jobs that
    depend on coal mining, tend to be the economic engines of their
    communities. As these jobs disappear, other jobs that directly or
    indirectly provide goods and services to the these industries and their
    workers are affected. Using conservative economic multipliers from the
    U.S. Commerce Department, we estimate that the loss of 190 million tons
    of coal in eastern coal producing states in 2010 would mean the loss of
    $4.7 billion annually in direct coal mining revenue, $9.1 billion per
    year in lost economic output in all industries, $2.5 billion per year
    in lost household earnings, and the loss of more than 85,000 jobs in
    all industries. In the western states, the loss of 316 million tons of
    coal by 2010 would mean the loss of $2.9 billion annually in direct
    coal mining revenue, $5.3 billion per year in lost economic output in
    all industries, $1.4 billion per year in lost household earnings, and
    the loss of nearly 50,000 jobs in all industries. In addition, over a
    hundred thousand retired coal miners look to the coal industry for
    lifetime retiree health benefits that were earned during their working
    lives. If we wipe out half the coal industry, where are the retirees
    going to get their health care? Who will finance those life-saving
    benefits when we have removed $7.6 billion of revenue from the coal
    industry?
        The UMWA believes the burdens that would be placed on coal miners
    and their communities by S. 556 are unacceptable. They should not be
    asked to give up their jobs, their health care and their economic
    futures because of arbitrary deadlines and reduction targets that
    cannot be reasonably expected to be met with available technological
    controls. S. 556 would be punitive in the extreme for coal miners and
    their communities. It should be rejected for more cost-effective
    reductions that will allow coal to continue its vital role in our
    energy mix and coal miners to continue their employment.
    The UMWA Supports A Three-Pollutant Approach That Preserves Coal
            Miners' Jobs
        The UMWA supports appropriate additional reductions in sulfur
    dioxide, nitrogen oxides and mercury from coal-fired powerplants,
    provided that they are designed in a way that preserves coal miners'
    jobs. We do not support inclusion of carbon dioxide in the committee's
    emission reduction bill. By enacting a three-pollutant bill, we believe
    that the United States can make considerable strides in environmental
    control and public health while still pursuing a national energy
    strategy that includes coal. Inclusion of carbon dioxide in this bill,
    in our opinion, force utilities to switch away from coal and will
    unnecessarily delay, and possibly prevent, its enactment.
        A clear plan for reducing emissions of sulfur and nitrogen oxides
    could provide the electric utility industry with greater certainty for
    planning and investments, lead to the simplification of regulatory
    programs, and create significant job opportunities for the construction
    and operation of pollution control devices. At the same time, such a
    strategy would allow coal miners and their communities to retain the
    high-paying jobs that they so desperately need.
        In reviewing S. 556, we are concerned that the legislation has gone
    too far in specifying the magnitude of emission reductions to be
    accomplished over the next decade. We believe that a more realistic--
    and more cost-effective--set of reductions can be enacted that would
    not conflict with the nation's need to continue using coal, while
    improving air quality and enhancing the use of available air pollution
    control technologies. For example, EIA's analyses suggests that a 50
    percent-65 percent reduction in SO2 and NOx could be
    achieved in the electric utility sector without severe loss of coal
    markets and coal mining jobs. We believe that these reductions should
    occur in one phase, with appropriate deadlines to ensure that utilities
    will have enough lead time for the orderly installation of technology
    without potential disruptions of the nation's power supply. In
    addition, the committee should consider the compliance deadlines with
    an eye toward the financial condition of the nation's electric
    utilities, particularly the medium-sized utilities.
        In terms of mercury, we are concerned that technological controls
    for reducing mercury emissions from coal-fired powerplants are in a
    very early stage of commercial development. Setting an overly ambitious
    target for controlling mercury--where there is simply no evidence of an
    imminent threat to public health--could be harmful to coal mining
    communities and be at odds with the larger national energy policy
    debate. Therefore, we recommend that mercury controls occur in two or
    more phases.
        The UMWA participates in an EPA workgroup on mercury control. We
    are not confident that technologies will be available by 2007 to ensure
    S. 556's reductions are achieved. It is likely that a more modest
    reduction could be achieved at substantially lower costs through
    available technologies, without imposing any risk to public health. In
    all events, it would be desirable to postpone setting a final mercury
    target until the ``co-benefits'' of mercury reductions through NOx and
    SO2 controls are demonstrated through a first phase control
    program focused on reducing these emissions.
        A target for annual NOx emissions of about 2 million tons should be
    feasible with the use of selective catalytic reduction (SCR) and other
    NOx control equipment. However, some utilities are encountering
    difficulties with SCR equipment in boilers designed to burn high-sulfur
    coals. Again, these difficulties highlight the need to set reasonable
    deadlines to ensure that the technologies used to meet the reductions
    work well in tandem.
        Based on our experience with the Ozone Transport Assessment Group
    process, and EPA's subsequent NOx SIP Call, we would recommend a NOx
    emission rate of 0.20 lb. NOx/MMBTU as the planning basis for new NOx
    control requirements outside of the eastern 18-State SIP Call region,
    and for non-ozone season emission controls within the SIP Call region
    itself. We recognize that the 0.15 lb. ozone season limit on plants in
    the SIP Call region would be difficult to change given recent court
    decisions.
        In general, a NOx emission limit of 0.20 can be achieved more
    readily than a limit of 0.15 because it provides greater opportunities
    for the use of low-NOx burners, overfire air, and other less capital-
    intensive equipment. Unlike the densely populated East, there are no
    ozone problems in western states other than California justifying an
    extremely low NOx limit below the levels otherwise required by the
    Clean Air Act.
        S. 556's proposed 2.2 million ton cap on annual SO2
    emissions, compared to the 8.9 million ton cap that will result once
    the 1990 acid rain program is fully implemented, would represent a very
    significant further reduction of sulfur emissions that contribute to
    acid deposition and to other environmental problems. The 8.9 million
    ton SO2 cap in the 1990 Clean Air Act Amendments itself
    represents a 50 percent reduction of SO2 emissions from 1980
    levels.
        Based on a variety of studies that have been done in the private
    sector and by government agencies, we see a somewhat more modest
    SO2 reduction target--roughly in the range of 3.0 to 4.0
    million tons--as representing both a technically achievable and cost-
    effective control level that would not conflict with our goal of
    ensuring that coal miners can continue to provide for their families.
        An SO2 and NOx control plan along these lines could be
    implemented as a first step in a longer-range plan to reduce mercury
    emissions. The experience in mercury ``co-benefits'' achieved by the
    first phase controls for SO2 and NOx emissions would be
    vital in assessing the feasibility of ultimate mercury reduction
    targets. In light of this, the committee may want to consider early
    reduction allowances for SO2 controls that also reduce
    mercury emissions on the theory that such reductions are more valuable
    than those strategies that only reduce SO2 alone. There is
    precedent for such extra credit in Title IV of the 1990 Amendments,
    which allocated 2:1 bonus allowances to utilities that chose to install
    control technology.
        In summary, Mr. Chairman, the UMWA is prepared to work with the
    proponents of additional reductions in SO2, NOx and mercury
    emissions in coal-fired power plants, provided that the reduction
    provisions are designed in a way that preserves coal miners' jobs. We
    look forward to working with you to achieve these goals.

                                     ______

    Responses of Bill Banig, United Mine Workers of America, to Additional
                        Questions from Senator Jeffords
        Question 1. You mentioned that the nation has 275 years worth of
    recoverable coal reserves at today's production rates. If we use
    today's fleet that would certainly add a lot of carbon to the
    atmosphere. Carbon concentrations would go higher than the planet has
    had for hundreds of millions of years. What kind of cap on greenhouse
    emissions can the UMW live with? And, maybe more important, when would
    the UMW support setting that cap?
        Response. I agree that use of coal will add carbon to the
    atmosphere if we do not develop technology to capture and sequester
    carbon emissions. That is why we have advocated the development of such
    technologies since the late-1980's. Unfortunately, while the United
    States and other nations have spent billions of dollars over the last
    20 years studying the phenomenon of climate change, expenditures for
    research into technology to capture and sequester carbon have only
    recently begun and amount to only a few tens of millions of dollars. We
    need to accelerate that research and development.
        The UMWA does not currently support a cap on carbon because no
    technology currently exists to remove carbon from coal. The obvious
    result from a cap without a means to achieve reductions was shown
    clearly in the EIA studies that were attached to my testimony coal use
    would plummet and coal miners would be unemployed by the thousands.
    Most disturbingly, their economic devastation would not result in a
    ``cure'' for climate change. Dr. Bert Bolin, former head of the U.N.
    Intergovernmental Panel on Climate Change (IPCC), wrote in Science
    magazine shortly after the 1997 Kyoto conference that if the world does
    nothing to reduce carbon emissions, global concentrations of carbon
    dioxide will be 383 parts per million (ppm) in 2010. With full
    implementation of the Kyoto Protocol, carbon dioxide concentrations
    will be 382 ppm. In other words, full compliance with Kyoto at the
    expense of coal miners and other energy-related workers will only
    reduce carbon concentrations by one part per million. The change in
    projected temperature 50 years from now will be measured in tenths of a
    degree.
        We believe that it is wrong to ask one group of workers to
    sacrifice their jobs for a treaty (or Federal legislation) that does
    nothing to resolve the problem. We would support carbon caps that can
    be met by technology that will allow coal miners to continue to support
    their families. We will vigorously oppose treaties or legislation that
    result in the destruction of our members' jobs.

        Question 2. Would it be easier for the United Mine Workers to
    support a carbon cap, if they received allocations or received funds
    for covering costs like retraining for dislocated workers?
        Response. Your question is premised on the assumption that coal
    miners must lose their jobs in order for the nation to address climate
    change. We reject the notion that coal miners' jobs should be
    sacrificed. As noted above, we believe that the United States should be
    aggressively developing technology to capture and sequester carbon, not
    looking for ways to reduce the use of our most abundant domestic fuel.
    The fact is that coal will be burned in substantial quantities in the
    coming decades, regardless of what the United States chooses to do with
    its domestic energy policy. India, China and other nations with vast
    coal resources will use their domestic energy supplies to grow their
    economies. The United States should lead in the development of
    technology to ensure that coal will be consumed in ways that are
    compatible with a cleaner environment. The best way to do that is to
    develop technology to reduce or eliminate carbon emissions from coal
    combustion domestically and then lead the technology transfer to
    developing nations as they use their indigenous resources.
        With regard to retraining or transition funds for dislocated
    workers, we believe that all workers who are dislocated by government
    policy or economic circumstances should receive transition assistance.
    Particularly in the case of government policies to achieve a public
    good, the workers and the communities affected should be made whole
    economically, not just offered some temporary retraining assistance.
    Having said that, however, we do not believe that such transition
    programs should be linked to support for carbon caps. Offering a first
    class funeral provides little comfort to workers and communities that
    have been executed economically.

                                CLEAN POWER ACT

                                  ----------

                           TUESDAY, JANUARY 29, 2002

                                   U.S. Senate,
             Committee on Environment and Public Works,
       Subcommittee on Clean Air, Wetlands, and Climate Change,
                                                Washington, DC.
        The subcommittee met, pursuant to notice, at 9:40 a.m. in
    room 406, Senate Dirksen Building, Hon. Joseph Lieberman
    [chairman of the subcommittee] presiding.

        TECHNOLOGIES FOR REDUCING AIR POLLUTION FROM STATIONARY SOURCES

        Present: Senators Lieberman, Voinovich, Smith, Corzine,
    Clinton, and Carper.

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

        Senator Voinovich [assuming the chair]. I've been asked by
    the majority if I would begin the hearing this morning. Senator
    Lieberman is on his way. We have some important witnesses here,
    and I'd just like to thank the chairman of the subcommittee for
    holding this hearing today on the available technologies for
    controlling CO2 and mercury.
        I requested this hearing last year when the committee first
    began hearings on S. 556, the Jeffords-Lieberman 4-Pollutant
    Bill. I'm pleased that the chairman has chosen this topic for
    the first hearing as his chairmanship of the subcommittee.
        It's my understanding that the chairman of the full
    committee, Senator Jeffords, has announced that he intends to
    mark up his bill on February 14. While I believe it is
    important to move forward if we hope to get a bill this year,
    and I think it is important that we spend a lot of time, that
    we do really work conscientiously to get a bill out this year,
    I think it's important that we cover the necessary issues and
    understand what the impact of the bill will be on the
    environment, our energy supply, on our Nation's economy. And so
    far as a committee and a subcommittee, we have not begun to
    answer any of these very important questions.
        We are told that the chairman's bill, as drafted, is not
    supported by a single utility in this country. We know that the
    National Governor's Association has endorsed a three-pollutant
    strategy, not the four-pollutant strategy found in the
    chairman's bill. We also know that the chairman's bill will
    mean the end of coal as a viable source of energy in this
    country. In my particular State, that's pretty significant,
    because it's about 85 percent in Ohio and across the country
    it's about 50 percent.
        What we don't know is what the impact of this bill will
    have on our energy supply or what the impact will be for our
    Nation's manufacturing base. And again, my State and others in
    my region of the country are the manufacturing backbone of
    America. The chairman's bill will cause massive fuel switching
    to natural gas, which is an important raw material for our
    Nation's chemical and plastic industry, for the fertilizer for
    our farmers and for food preparation and the service industry.
    In other words, if we eliminate coal, and we go to gas, we're
    going to drive up the demand for natural gas. I think we saw
    early last year what can happen to this country when natural
    gas prices skyrocket.
        We also don't know what the impact will be on the Nation's
    public power sector or our co-ops. All of these issues need to
    be addressed by the subcommittee or the full committee before
    we move forward with this legislation. The fact of the matter
    is, if we want a bill with a chance of passing, then we need to
    sit down together on both sides of the aisle and work through
    these issues. That's really something that I've been trying to
    underscore constantly over all these hearings.
        I want to work together with the chairman of the committee
    and the chairman of this subcommittee to pass meaningful
    legislation, which will make significant emission reductions.
    We need to get emission reductions. And also, will secure safe,
    efficient, reliable and cost effective energy for the American
    consumer.
        Today's hearing is an important first step. As a committee
    and as a country, we are all familiar with the available
    control technologies for reducing NOx and SOx. Although it is
    important to note that some of these technologies are still in
    their infancy and we'll be hearing about some of those today,
    such as SCR units. And we need to monitor closely the problems
    some utilities are having as they install these devices. We're
    getting mixed reaction from some of this technology around the
    country.
        What is less well known are the available technologies for
    reducing mercury and CO2. According to the EPA,
    current technologies can reduce mercury anywhere from 40 to 90
    percent, depending upon the type of coal burned. In addition,
    some of the test cases seem to show that it's easier to reduce
    mercury levels when the concentration of mercury in the coal is
    very high. It is much harder to obtain the same mercury
    reduction percentage from coal containing lower amounts of
    mercury. Therefore, it would be difficult to reduce mercury to
    the levels required under the Jeffords bill if you start with
    relatively clean coal.
        It's also my understanding that some of the state-of-the-
    art facilities around the country have had a difficult time
    reducing mercury. For example, I have a letter from Kansas City
    Power and Light which I'd like to introduce into the record and
    would like to read a brief passage from. ``Kansas City Power
    and Light just rebuilt a 550 megawatt unit at our Hawthorne
    five facility, using a state-of-the-art combination of SCR, dry
    scrubber and fabric filter and burning low sulfur sub-
    bituminous coal. This combination of equipment and fuel, making
    Hawthorne Five the cleanest coal-fired plant in the country,
    maybe able to achieve a 45 percent level of mercury reduction,
    based on currently available information.''
        [The information referred to follows:]
                                   Kansas City Power and Light,
                               Kansas City, MO 64141, January 28, 2002.

    The Honorable George Voinovich
    Committee on Environment and Public Works
    United States Senate
    Washington, DC 20510

    Dear Senator Voinovich: Thank you for inviting Kansas City Power &
    Light to comment on provisions in S. 556, the Clean Power Act of 2001,
    to address mercury emissions from coal-fired electric generating units
    and the technology currently available to address such emissions.
        Kansas City Power & Light is the second largest investor owned
    electric utility in Missouri, with 70 percent of its more than 3,733
    megawatt generation capacity being coal-fired. The remainder of Kansas
    City Power & Light's generation is made up of nuclear, natural gas and
    oil.
        At the outset, let me say that Kansas City Power & Light supports a
    multi-emissions strategy that imposes reasonable emissions reductions
    of sulfur dioxide, nitrogen oxides, and mercury under timeframes that
    allow us to achieve such reductions in a cost-effective manner. In our
    view, this approach should allow ``co-benefits'' for mercury control
    through installation of currently available technology to remove
    emissions of sulfur dioxide, nitrogen oxides and particulate matter
    rather than impose a rigid 90 percent source specific reduction
    mandate. We firmly believe a co-benefits approach can achieve real
    environmental benefits while providing our company and other companies
    a degree of business certainty in the foreseeable future.
        The treatment of mercury emissions under S. 556 and a recent
    proposal by the Environmental Protection Agency (EPA) is a significant
    concern to Kansas City Power & Light because we use western low sulfur
    subbituminous coal. Mercury emissions from low sulfur subbituminous
    coal are lower and in a form, known as ``elemental'' mercury, which is
    extremely difficult to remove, a fact with which virtually everyone,
    including EPA, agrees.
        The amount of mercury emitted from a coal-fired power plant is
    impacted by a number of factors, including the type of coal being
    fired, boiler design and operation, fly ash characteristics, and
    associated environmental controls. Estimates of mercury removal are
    made even more difficult due to the large volumes of gas to be treated,
    low concentrations of mercury, and the presence of difficult to capture
    species such as elemental mercury.
        The capture of mercury by flue gas cleaning devices is dependent on
    the chemical and physical forms of mercury. Factors that affect the
    speciation and capture of mercury in coal-fired combustion systems
    include the type and properties of the coal, the combustion conditions,
    the type of flue gas cleaning technologies employed, and the
    temperatures at which the flue gas cleaning systems operate. There are
    three basic forms of mercury in the flue gas from coal combustion:
    elemental mercury (Hg0, ionic mercury [Hg(ii)], and
    particulate-bound mercury [Hg(p)].
        Both Hg0 and Hg(ii) are in the vapor phase at flue gas
    cleaning temperatures. Hg0 is insoluble in water and cannot
    be captured in wet scrubbers.
        To comply with the provisions of S. 556, taking into account proven
    commercially available control equipment currently available, each
    coal-fired unit in the United States would be required to install a
    scrubber system for sulfur dioxide. Selective catalytic reduction for
    nitrogen oxides, and a fabric filter for particulate control.
        Currently there is no proven or demonstrated technology to control
    mercury emissions. There is evidence, however, based on experience in
    Europe and the Electric Power Research Institute's (EPRI) bench scale
    studies, that mercury can be co-beneficially removed by air pollution
    control equipment required to comply with other Clean Air Act
    requirements, i.e., wet (flue gas desulfurization, also known as FGD)
    or dry scrubber systems (SDA) for sulfur dioxide (SO2)
    control, selective catalytic reduction (SCR or SNCR) for nitrogen
    oxides (NOx), and fabric filters or baghouses for capture of
    particulate matter (PM).
        After a thorough study of the research information presently
    available, KCPL is confident that any coal- fired unit equipped with
    SCR, SDA, and fabric filters, as would be required by S. 556, will
    achieve the maximum degree of reduction in emissions of mercury through
    co-benefits, taking into consideration the costs of achieving such
    emission reduction, any non-air quality health and environmental
    impacts, and energy requirements associated with the emission
    reduction.
        The level of control of mercury through co-benefits is based on
    several assumptions:

          All of the mercury produced in the combustion process
    from low sulfur subbituminous coal is in the elemental form;
          An SCR catalyst converts 60 percent of this elemental
    mercury to ionic mercury;
          25 percent of the ionic mercury material is removed in
    the dry scrubber; and
          70 percent of the remaining ionic mercury material is
    removed in the fabric filter.

        These assumptions are based on the limited amount of research data
    available, and resume that the EPRI research studies and analyses from
    Phase ill of EPA's Information Collection Request (ICR) are correct and
    applicable.
        At an August 2001 meeting, an EPA official observed that SCR and
    SNCR might improve mercury removal. This confirmed the utility
    industry's position that the use of post-combustion NOx controls such
    as SCR and SNCR may enhance oxidation of Hg0 to Hg(ii) and
    thus result in the co-benefit of increased mercury removal in FGD
    systems.
        EPA's analyses from Phase III of its ICR provide mercury removal
    efficiencies of existing air pollution control equipment as shown in
    the attached chart.
        EPA and industry appear to agree that there are presently two
    primary technologies that could be considered in establishing a
    regulatory standard for mercury. They are co-control with FGD and
    powdered activated carbon injection.
        The injection of powdered activated carbon or other absorbents
    upstream of a particulate control device is one of the most promising
    methods for controlling mercury emissions from existing utility boilers
    equipped only with electrostatic precipitators (ESPs) or fabric
    filters. The key statement is controlling mercury emissions from
    existing utility boilers equipped only with electrostatic precipitators
    or fabric filters. Should S. 556 be enacted in its present form, each
    coal-fired unit in the United States will be required to install a
    scrubber system for sulfur dioxide control, selective catalytic
    reduction for nitrogen oxides, and a fabric filter for particulate
    control. This therefore would negate any benefit to be achieved because
    utility boilers would not be equipped only with electrostatic
    precipitators or fabric filters.
        A number of studies carried out at bench, pilot, and full-scale
    levels have examined the influence of carbon type, carbon structure,
    carbon surface chemistry, injection method (dry or wet), amount of
    carbon injected, and flue gas temperature on mercury removal. Results
    indicate that a wide variety of factors influence the mercury removal
    obtained with sorbent injection upstream of an ESP or fabric filter
    baghouse. These factors include the mercury species being removed
    (oxidized vs. elemental), the flue gas composition, process conditions
    (e.g., temperature), sorbent characteristics (e.g., size), and the
    presence of other active surfaces (e.g., fly ash). Results also show
    that although general trends between different sorbents and test
    conditions exist, sorbent performance tends to be site-specific and
    depends on the exact nature of the flue gas at a particular site.
        Based on review of the available information, a new unit firing
    subbituminous coal, which produces primarily elemental mercury (the
    hardest form to remove), equipped with SCR, SDA, and a fabric filter,
    may not realize any additional mercury removal due to the addition of
    powdered activated carbon or other dry sorbent injection. This is of
    great concern to Kansas City Power & Light because we just rebuilt a
    550 megawatt unit, our Hawthorn 5 facility, using a state-of-the-art
    combination of SCR, dry scrubber and fabric filter and burning low
    sulfur subbituminous coal. This combination of equipment and fuel,
    making Hawthorn 5 the cleanest coal-fired power plant in the country,
    may be able to achieve a 45 percent level of mercury reduction based on
    currently available information.
        We therefore urge the committee to develop a more flexible
    legislative approach to mercury that recognizes the limited
    effectiveness of state-of-the-art technology in removing elemental
    mercury from flue gas emissions. Until there are better technological
    advances, we believe the committee should allow a co-benefits approach
    to mercury.
        We appreciate your good work on this important issue. We encourage
    you to continue your efforts to balance an outcome that will protect
    the environment and a reliable and affordable supply of electricity
    throughout the country.
                Sincerely,
                                           Bernard J. Beaudoin,
           Chairman of the Board President and Chief Executive Officer.
       attachment: mean mercury emission reductions for pc-fired boilers

        Senator Voinovich. We clearly need to be careful about
    requiring more than co-benefits for mercury reductions. As far
    as CO2 is concerned, there are some controlled
    technologies for coal that allow for the capture or
    sequestration of CO2 such as the integrated
    gasification combined cycle, or IGCC, and some other
    technologies. I'm glad that both GE, one of the producers of
    that technology, and Global Energy, a Cincinnati based company,
    are here today to testify.
        However, we must not lose sight of the fact that while the
    technology is old, its application to the energy industry and
    its ability to capture carbon are relatively new. In addition,
    it's my understanding that this technology can be expensive. It
    is not simply adding a new component to an existing unit, such
    as a scrubber, but basically building a new plant from the
    ground up. I'd like to hear specifically from the witnesses on
    this point.
        Unfortunately, we are not the only ones new to this
    technology. I understand the State of Florida is considering
    requiring the DOE IGCC pilot facility in Tampa to either add a
    scrubber to the facility, which creates significant technical
    problems, or burn a combination of coal and biomass which
    defeats the purpose of clean coal technology. It's kind of an
    interesting situation. If this committee is going to encourage
    this technology, we must first understand how the States will
    regulate them.
        In addition, according to Tampa Electric, ``Although
    theories exist on methods to control mercury and carbon dioxide
    from IGCC facilities, no technology exists that could be
    implemented today. The projects remain in the development phase
    and have not yet been demonstrated as commercially viable.''
        I look forward to the testimony of all the witnesses, and I
    look forward to working with all of my colleagues on a
    bipartisan and multi-regional approach to this issue. I really
    genuinely want the witnesses to know and the people that are in
    this room that I really believe that all of us, if we can sit
    down and work on this, that we can dramatically reduce
    emissions from power plants in this country and also provide a
    situation where we can have, we can continue to burn coal and
    the other sources that we have to keep energy costs competitive
    so that we can maintain the economy of our great Nation.
        [The prepared statement of Senator Voinovich follows:]
     Statement of Hon. George V. Voinovich, U.S. Senator from the State of
                                      Ohio
        Mr. Chairman, thank you for holding this hearing today on the
    available technologies for controlling CO2 and mercury. I
    requested this hearing last year when the committee first began holding
    hearings on S. 556, the Jeffords/Lieberman 4-pollutant bill, and I am
    pleased that you have chosen this topic for your first Hearing as
    chairman of this subcommittee.
        It is my understanding that the chairman of the full committee,
    Senator Jeffords, has announced that he intends to markup his
    legislation on February 12. While I believe it is important to move
    forward if we hope to get a bill this year, I also believe it is
    important that we cover the necessary issues and understand what the
    impact of the bill will be on the environment, our energy supply, and
    our nation's economy. So far, as a committee and as a Subcommittee, we
    have not begun to answer any of these questions.
        We are told that the chairman's bill, as drafted, is not supported
    by a single utility in this country. We know that the National
    Governor's Association has endorsed a 3-pollutant strategy, not the 4-
    pollutant strategy found in the chairman's bill. And, we also know that
    the chairman's bill will mean the end of coal as a viable fuel source.
        What we don't know, is what the impact of this bill will have on
    our energy supply or what the impact will be for our nation's
    manufacturing base. The chairman's bill will cause massive fuel
    switching to natural gas, which is an important raw material for our
    nation's chemical and plastic industry, for the fertilizer for our
    farmers, and for the food preparation and service industry. We also
    don't know what the impact will be on our nation's public power sector
    or the Coops. All of these issues need to be addressed by this
    Subcommittee or the Full committee before we move forward with the
    legislation.
        The fact of the matter is, if we want a bill with a chance of
    passing then we need to sit down together, on both sides of the aisle,
    and work through these issues. Mr. Chairman, I want to work together to
    pass meaningful legislation which will make significant emission
    reductions and which will secure our safe, efficient, reliable and
    cost-effective energy supply for the American consumer.
        Today's hearing is an important first step. As a committee and as a
    country, we are all familiar with the available control technologies
    for reducing NOx and SO2. Although it is important to note
    that some of these technologies are still in their infancy, such as SCR
    units, and we need to monitor closely the problems some utilities are
    having as they install the devices.
        What is less well known, are the available technologies for
    reducing mercury and CO2. According to the EPA, current
    technologies can reduce mercury anywhere from 40 percent to 90 percent,
    depending upon the type of coal burned. In addition, some of the test
    cases seem to show that it is easier to reduce mercury levels when the
    concentration of mercury in the coal is very high.
        It is much harder to obtain the same mercury reduction percentage
    from coal containing lower amounts of mercury. Therefore, it could be
    difficult to reduce mercury to the levels required under the Jeffords'
    bill if you start with relatively clean coal. It is also my
    understanding that some of the state-of-the-art facilities around the
    country have had a difficult time reducing the mercury. For example, I
    have a letter from Kansas City Power and Light, which I would like to
    introduce into the record, and I would like to read a brief passage,
    ``Kansas City Power and Light just rebuilt a 550 megawatt unit, our
    Hawthorn 5 facility, using a state-of-the-art combination of SCR, dry
    scrubber and fabric filter and burning low sulfur subbituminous coal.
    This combination of equipment and fuel, making Hawthorn 5 the cleanest
    coal-fired power plant in the country, may be able to achieve a 45
    percent level of mercury reduction, based on currently available
    information.''
        We clearly need to be careful about requiring more than co-benefits
    for mercury reductions. As far as CO2 is concerned, there
    are some control technologies for coal that allow for the capture or
    sequestration of CO2, such as the Integrated Gasification
    Combined Cycle or IGCC and some other technologies. I am glad that both
    GE, one of the producers of the technology and Global Energy, a
    Cincinnati based company are here today to testify.
        However, we must not lose sight of the fact that while the
    technology is old, its application to the energy industry and its
    ability to capture carbon are relatively new. In addition, it's my
    understanding that this technology can be expensive. It is not simply
    adding a new component to an existing unit, such as a scrubber, but
    basically building a new plant from the ground up. I would like to hear
    specifically from the witnesses on this point.
        Unfortunately we are not the only ones new to this technology. I
    understand that the State of Florida is considering requiring the DOE
    IGCC pilot facility in Tampa to either add a scrubber to the facility,
    which creates significant technical problems, or burn a combination of
    coal and biomass, which defeats the purpose of clean coal technology.
    If this committee is going to encourage this technology then we must
    first understand how the States will regulate them.
        In addition, according to Tampa Electric, ``Although theories exist
    on methods to control mercury and carbon dioxide from IGCC facilities,
    no technology exists that could be implemented today. The projects
    remain in the development phase and have not yet been demonstrated as
    commercially viable.''
        And I would like to introduce a letter into the record from Tampa
    Electric which goes into more detail. I look forward to the testimony
    of all of the witnesses and I look forward to working with all of my
    colleagues on a bipartisan and multi-regional approach to this issue.
    Thank you.
        Senator Voinovich. I would now like to call on, I think,
    Senator--I'm trying to think, who is the next seniority on the
    Democrat side? This is the first hearing, by the way, we've had
    of this subcommittee this year.
        Senator Clinton. Well, I have a little tiny bit of
    seniority. But Senator Corzine was here first. So I think he
    should go first.
        Senator Corzine. Ladies first.

    OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
                       FROM THE STATE OF NEW YORK

        Senator Clinton. Now he's being very chivalrous. All right,
    well, then, I will go ahead.
        Thank you so much, Senator Voinovich. You know, yesterday,
    January 28, it was 67 degrees in the Washington area. And the
    67 degree temperature at Dulles Airport tied the record high
    for that location, which was set way back in 1999. In New York
    City, where I was yesterday, temperatures were also very high,
    and today they're expected to rise in the low to mid 60's,
    breaking the 55 degree record for the day which was set in
    1975. Temperatures in the city over the last couple of days
    have far surpassed the 38 degree norm for this time of year.
        Now, as enjoyable as this winter respite may be, it
    definitely, I think, makes us stop and wonder if this is simply
    an anomaly or part of a more disturbing trend that is of
    concern to us. The Administration in its testimony today before
    the committee ``recognizes the seriousness of the buildup of
    greenhouse gases in the atmosphere,'' and acknowledges that
    ``reducing greenhouse gas emissions will be a necessary part of
    a long term solution to climate change.''
        I agree that we need a solution to climate change, and
    that's why I'm pleased that we're here today to learn about
    available and emerging technologies and market-driven
    mechanisms we can use to reduce harmful emissions of sulfur
    dioxide and, nitrogen oxide, mercury and yes, CO2.
    It would be difficult to overstate the importance of these
    technologies. I believe they are our road map to a balanced
    national energy policy that embraces energy efficiency measures
    and new, cleaner sources of power, including renewable energy
    sources alongside traditional energy sources. I'm very proud
    that companies in New York are helping to pave the way by
    creating new technologies that we can take advantage of.
        I thank Chairman Lieberman for holding today's hearing, and
    I applaud our ranking member, Senator Voinovich, for
    continually pushing us to hold this important hearing.
    According to the written testimony we've received for today's
    hearing, the Administration will testify that ``addressing
    CO2 is a question of climate change policy and
    separate from clean air policy.''
        I think we will hear from today's witnesses that policy
    perspectives aside, from a technical standpoint, this is not
    the case. Through existing and emerging technologies, we can
    achieve significant reductions in all four emissions and
    oftentimes simultaneously. We can do so while continuing to
    maintain a robust and diverse energy supply that includes power
    generation from coal, natural gas, renewables and other forms
    of energy.
        Now, in New York, we are already playing an important role
    in helping to achieve a balanced national energy policy as well
    as a sound environmental policy. In fact, New York is the
    birthplace of an exciting cutting edge technology, integrated
    gasification combined cycle, known as IGCC, which we will hear
    about today. This is a technology that delivers environmentally
    superior power generation from coal.
        Now, while coal gasification has a long history going back
    at least to the 1930's, IGCC's roots trace back to GE's Global
    Research Center in Schenectady, to the early 1970's. And it was
    at GE's Schenectady facility that pilot testing of this IGCC
    technology demonstrated the ability to convert dirtier, solid
    fuels into clean gas fuel, and it was possible to integrate
    this gasification technology into a gas turbine.
        Further work at GE's Global Research Center led to the
    first full scale clean coal demonstration of IGCC in the
    1980's. And New York continues to serve as the central hub of
    GE's efforts to move this technology into global commercial
    projects. The Schenectady main plant, which is home to 4,800 GE
    employees, is now in the process of expanding rather
    significantly. And the GE Global Research Center will be, I
    predict, a global leader in this technology and its commercial
    application.
        I'm delighted that Ed Lowe, GE manager for the gas turbine
    and combined cycle product lines, is here with us today. I
    thank Mr. Lowe and I thank GE, and welcome all the other
    witnesses.
        Mr. Chairman, unfortunately, as we know in the Senate, I
    will have to leave probably earlier than I would like because
    of a hearing in the Budget Committee. But I would be remiss in
    not applauding this committee and its hard work on the
    Brownfields Bill, which was finally signed into law, which I
    think will make such a significant difference in our
    reclamation and redevelopment efforts, and the kind of
    environmental stewardship, as well as meeting our energy needs,
    that this committee is working very hard to achieve. I applaud
    your leadership, and I very much appreciate Senator Voinovich's
    strong call to working together to try to see what we can
    achieve. I think technology will play a major role in the
    achievements that we can put forward in the year to come.
        Thank you very much.
        Senator Lieberman [assuming the chair]. Thanks so much,
    Senator Clinton. I thank Senator Voinovich and apologize to all
    my colleagues on the committee and the witnesses. It was one of
    those mornings where I got held up at a breakfast meeting. But
    I'm very glad you went forward, and I'm going to hold my
    statement until the end.
        Senator Smith, why don't you go forward.
        Senator Smith. Thank you very much, Mr. Chairman, and thank
    you and Senator Voinovich for your leadership in having this
    hearing and working so hard on the issue of clean air.
        I would ask unanimous consent to put a statement into the
    record for Senator Inhofe.
        Senator Lieberman. Without objection, so ordered.
        [The prepared statement of Senator Inhofe follows:]
    Prepared Statement of Hon. James M. Inhofe, U.S. Senator from the State
                                  of Oklahoma
        I commend the chairman on holding this hearing to hear testimony on
    compliance options for electric power generators to meet new limits on
    carbon and mercury emissions contained in S. 556. When drafting S. 556,
    I am afraid that the full committee chairman has not come close to
    fully considering all the issues associated with his proposal. If such
    legislation is to ever be enacted into law, the compromise, unlike S.
    556, must contemplate and balance our nation's existing environmental
    achievements and energy supply and security.
        I have four concerns with this legislation:
    S. 556 ignores regional differences
        I believe S. 556 to be inequitable to require an across the board
    reduction in pollutants when States, such as Oklahoma, currently emit
    well below the national averages. Oklahoma's environmental profile
    mirrors that of many western States. Oklahoma does not have mercury
    problems. In fact, according to EPA, Oklahoma mercury emissions from
    coal fired utility boilers are 1.8 percent of the nationwide total.
    Therefore, before we are asked to reduce our emissions even further,
    other States in the Midwest and North East should be expected to get
    their emission levels down to the levels cleaner States--like
    Oklahoma--are today. It is ridiculous to impose percentage reductions
    on us--at enormous marginal expense to Oklahomans--before those regions
    who have significant air problems do their part.
    S. 556 is horrible energy policy
        By limiting fuel options for power generation, increasing the cost
    of electricity to Americans, and stopping the construction of new
    generating facilities, S. 556 is the very antithesis of sound national
    energy policy. This bill would undo everything that proponents of a
    national energy policy have been fighting for.
    S. 556 is also the antithesis of economic stimulus
        S. 556 would make the price and availability of energy an economic
    national crisis. In Oklahoma, S. 556 would significantly change the
    source of energy away from affordable coal to more expensive options--
    in addition to causing power plant closures. Oklahoma depends upon coal
    for 61.2 percent of our power. This is because of coal's much lower
    fuel cost versus natural gas, and coal is a clean source of energy.
        The result is Oklahoma utility rates are 19 percent less that the
    national average power rate. Our utility rates are much lower than
    States that depend heavily upon more expensive natural gas (e.g., New
    York, New Jersey, California) and oil/renewables for generation. S. 556
    would ensure that our rates would go through the roof. Higher energy
    prices affect everyone. However, when the price of energy rises that
    means the less fortunate in our society must make a decision between
    keeping the heat and lights on or paying for other essential needs.
    Where is the New Source Review Reform?
        Additionally, S. 556 adds even more regulations to an already over-
    complex regulatory scheme, which includes things such as New Source
    Review. As many of you know, I have been saying for quite a while now
    that, unless reformed, EPA's NSR policies will continue to interfere
    with our nation's ability to meet our energy and fuel supply needs. S.
    556 will just magnify this problem.
    Conclusion
        As a Senator and grandfather, I want to ensure the cleanest
    environment for our nation. The real challenge with dealing with this
    issue isn't getting just environmental protection or just affordable
    energy. The real challenge is getting both. S. 556 does not even come
    close to getting us both. With that being said, I reiterate my pledge
    to work with this committee to develop legislation on this matter of
    enormous importance.

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

        Senator Smith. Mr. Chairman, I'll be very brief. I want to
    also, as Senator Clinton has said, apologize to the witnesses.
    There are so many things going on today we're probably not
    going to be able to stay very long. But I certainly want to
    extend a special welcome to Mr. Frank Alix, the chairman and
    CEO of Powerspan, a company in New Durham, New Hampshire, who
    will be testifying a little later on. He's no stranger to the
    committee, he's testified before actually. I've read that
    testimony and I'm very familiar with your technology.
        You know, Senator Voinovich, a few years ago, when I was a
    relatively junior member of the committee and you were Governor
    of Ohio, there was a lot of talk about the friction and
    confrontation between your region of the country and New
    England. There was a lot of anger and frustration expressed,
    and now we're seeing cooperation.
        There's some irony perhaps in the fact that Frank Alix's
    company is working on a pilot project in Ohio to bring
    reductions in NOx, SOx and mercury at dramatic levels with
    technology. We have to see how this works when it gets out to
    the commercial level. I know Mr. Alix will be talking about it.
    I don't want to put him on the spot, but at least in the pilot,
    we're seeing well over 80 percent reduction in mercury, perhaps
    as 99 percent in SOx and 75 to 80 percent in NOx, in the pilot
    projects working with Ohio and the company in Ohio.
        So this is tremendous and very exciting. I'm proud to say
    that we have a company in New Hampshire that's doing that. But
    certainly, if we allow the entrepreneurship and innovation to
    lead the way, regulation may not be necessary to the extent
    that it is now.
        I know that we're going to be voting on a bill soon, and I
    want to identify myself with the remarks of Senator Voinovich
    in saying, I hope that we can work together to get a bill that
    is not going to shut down the utilities, and it can be a
    bipartisan bill, so that we can get help in this area to clean
    up the air and still produce the energy we need, and not demand
    the impossible of the utility sector. I think these kinds of
    results that we're seeing show that we can get the results and
    still keep the utilities working.
        The last thing we need to do is create more uncertainty in
    our energy markets. We need to ask, are the demands that we're
    contemplating technologically feasible. That's really the
    issue. Certainly that's a question worth answering before we
    proceed.
        I believe we need to look beyond the capabilities of the
    technology of today and look at the technology of tomorrow,
    which I think people like Frank Alix are doing. We need to
    create a regulatory structure that allows flexibility to
    implement newer and more effective technologies, not shut those
    technologies down. We need to get out of this regulatory box,
    relying on technology that is in many ways already obsolete,
    and we can't get out of the box.
        That's why I'm a very strong advocate of the cap-and-trade
    system. I know there are some critics, the left and the right,
    about it, saying it's still Government involvement. But we have
    a system, we have a Clean Air Act. I don't think anybody's
    going to repeal it any time soon, so we need to be working
    within that Act and we can do that with cap-and-trade, as we
    did, Senator Voinovich, with acid rain a few years ago and it
    worked. People said it was going to cost $5 billion or $6
    billion. It cost less than a billion, and we made dramatic
    reductions in the acid rain that affects New York and New
    Hampshire and Connecticut and so many other States. We're not
    there yet. But we have made dramatic reductions.
        So I think a system based on performance that encourages
    technological advances is the right way to go. Environmental
    benefits are going to come sooner rather than later under the
    old command and control approach. Allowing flexibility for new
    technologies and incentives is a win for the environment, it's
    a win for energy and it's a win for the consumer and the
    economy. And that's the right approach to both energy security
    and environmental problems.
        I firmly believe that new technologies can compete in an
    open market where the most important test is cost
    effectiveness. We can make money, if companies can make money
    cleaning up the environment and producing energy, that's got to
    be a win-win. We get a faster, higher reduction in air
    pollution. The utility sector will get more security through
    performance based, predictable system of targets. And we
    eliminate what I think is a bewildering, certainly confusing
    network of regulations.
        The American consumer is going to win because secure and
    predictable energy markets reduce the cost of goods and
    services. The economy is going to benefit because the inventors
    of new emissions control technologies create dynamic new
    companies. And we're seeing now that in the old scrubbers that
    was the technology of the 1980's, we're now seeing this new
    technology may in fact bring costs down as much as 50 or 60
    percent less than the cost to the companies and utilities of
    the scrubbers.
        So that's why it's exciting. I think that companies who are
    producing this kind of technology are setting a national
    standard which of course is going to have huge export potential
    in the international arena. So all of these countries that are
    now developing that haven't yet come to the level that we've
    come to in producing some of the problems that we've had with
    coal and other technology, we'll now export that technology to
    them, and they'll be building plants that will be state-of-the-
    art rather than 20 years or 30 years behind where we are now.
        That's the American way, innovation, flexibility,
    ingenuity, and export these technologies to the developing
    countries of the world who are going to need the energy of the
    future. So Mr. Chairman, I look forward to hearing the
    discussion from the witnesses and again, thank you and Senator
    Voinovich for having the hearing today.
        Senator Lieberman. Thank you, Senator Smith, for a very
    excellent statement.
        Senator Corzine.

    OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE
                           STATE OF NEW YORK

        Senator Corzine. Thank you, Mr. Chairman. I appreciate your
    holding this hearing. It is truly one that is important to all
    of us. I concur that we have an issue of both clean air but
    also climate change. I look at that thermometer that Senator
    Clinton talked about and then some of the academic studies that
    would reinforce the thoughts that may be reflected there, and
    think there is much for us to do.
        I welcome the witnesses. I will study your comments,
    because I have two other hearings at this time. So I apologize,
    I will be leaving. I want to welcome particularly Dr. Sandor.
    At another time in our lives, he and I worked on developing
    financial instruments that created the futures markets for
    government securities. I think that some of those same concepts
    apply potentially very well in this cap-and-trade concept that
    offers some opportunity to bring the benefits of technology to
    the economics of power production. So I look forward to working
    very closely with him.
        Before I start, turn it back over, I want to take note of
    an announcement that was made in New Jersey this week, the end
    of last week, by one of our great companies, PSE&G Power, which
    has been dealing with the four-pollutant issue. They just
    agreed to a settlement, both with EPA and the New Jersey
    Department of Environmental Protection, with regard to a
    comprehensive plan on all four pollutants, agreed to a $300
    million investment dealing with NOx, SOx, mercury and carbon
    dioxide in a very proactive and comprehensive agreement.
        I have a statement from the company that I think I would
    like to put in the record which is very detailed with regard to
    all the activities. But they have a strong statement, we are
    backing up our advocacy for four-pollutant power plant
    legislation at the Federal level with real local action. And
    we're leading where industries should follow if we are to help
    this nation meet the unrealized goals of the Clean Air Act.
        They go on to say that they continue to believe that coal
    has been and will continue to be the backbone of affordable
    energy in this country, but technologies exist to burn coal
    cleanly. Our investment in these technologies is an investment
    in the future of coal.
        So I think that the do-able is a reality, if a good company
    that's interested in rates of return like all other companies
    across this country, if there is a commitment to making sure
    that we incorporate all of the issues of cleaning up our air
    and protecting our climate are at hand. By the way, they had
    agreed to a voluntary 15 percent reduction in carbon dioxide
    emissions, they may be looking for more. So there are ways to
    move in this area and I congratulate them and I also think it
    can be used as an example that we can take more broadly across
    the Nation.
        This really is an important issue for us all to agree to
    debate and to get conclusion on. I agree with the
    bipartisanship, the partnership that's necessary regionally,
    public and private sector. But it's also something we need to
    work on, and I congratulate you, Mr. Chairman, for your efforts
    in ventilating this issue as well as possible. Thank you.
     Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New
                                     Jersey
        Thank you, Mr. Chairman. I want to thank you for holding this
    hearing on S. 556, the Clean Power Act. Today's focus on the potential
    impacts of this legislation on the environment, the economy, energy
    supply, and existing mandates is a critical part of the discussion. Mr.
    Chairman, air pollution is one of the most serious environmental health
    issues that we face. As we all know, power plants are significant
    emitters of SOx, NOx and mercury. While great strides have been made in
    the control of SOx and NOx, we need to do more and do so in a cost-
    effective, energy efficient manner. Including mercury in the package
    will allow us to address a serious public health issue and provide a
    stable regulatory regime for the power industry.
        Finally, global warming is a pressing issue that we need to address
    seriously and soon. Just this week it was reported that the nine-island
    nation of Tuvalu has conceded defeat to rising seas and is seeking
    refuge for its 11,000 citizens. My state of New Jersey has been a
    leader in facing up to the issue of global climate change, committing
    to reducing statewide greenhouse gas emissions 3.5 percent below 1990
    levels by 2005. While New Jersey is making impressive strides with this
    voluntary initiative, they are looking for the Federal Government to
    take the lead in setting mandatory caps on carbon dioxide. Power plants
    are a good place to start. Power plants represent \1/3\ of New
    Jersey's--and the Nation's--carbon dioxide emissions. Limiting their
    CO2 emissions would be an important step in combating
    climate change.
        Mr. Chairman, power plants are certainly not the only sources of
    these 4 pollutants. But they are major sources, and there is great
    opportunity for cost-effective reductions to be made, particularly
    through a comprehensive approach, as the Clean Power Act provides. I
    look forward to hearing the testimony of the witnesses and thank you
    again for holding this hearing.

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

        Senator Lieberman. Thanks very much, Senator Corzine.
        Let me just say a few words, asking the indulgence of the
    witnesses before we go to you. I believe that one of this
    committee's, and indeed the Congress's, highest priorities in
    this session, should be the passage of multi-pollutant
    legislation. Today's hearing is on compliance options for
    electric power generators to meet the limits on carbon and
    mercury emissions that are contained in S. 556, which is the
    Clean Power Act that Senator Jeffords and Senator Collins and I
    and several other sponsors, including members of this
    committee, I believe that Senator Clinton and Senator Corzine
    are both co-sponsors, we're up to 19 at this point.
        Clearly, there's a disagreement here on one of the four
    pollutants, which is carbon. The Administration is for a three-
    pollutant approach. We feel very strongly that it's critical to
    our future well-being and indeed, economic well-being, that we
    go after all four and that we can do it. This hearing is very
    much done at the encouragement of Senator Voinovich, who I'm so
    pleased to have as my ranking member on this subcommittee. I
    thank him for his not only encouraging this hearing, but for
    the statement and the spirit of the statement that he made
    earlier, because I do think while we have some disagreements
    here, in that spirit we can build toward some kind of
    accomplishment.
        It is one measure of America's economic strength than even
    in less than stellar economic times we as a nation still
    consume a great deal of electricity. We need it. It takes
    electricity, obviously, not only to heat our homes and cool our
    refrigerators, but to run the technological tools that power
    the innovation economy. And all that electricity isn't just
    conjured up magically out of the ether. It comes from a variety
    of sources, and those sources produce emissions in the process.
        So I think all of us here understand that it is essential
    that we tackle the environmental effects resulting from
    electricity generation. First, that means achieving steep
    reductions in two pollutants we're not going to talk about
    specifically today, nitrogen oxides and sulfur dioxide.
    Reductions in the emissions of NOx will reduce smog that too
    often makes it difficult for asthmatics, children, the elderly
    and others to breathe. As Senator Smith has referred to,
    reductions in sulfur dioxide will help stem the systemic
    problem of acid rain by further controlling the harmful
    compound that creates it and that too many of our smokestacks
    pump into the air.
        These chemicals are only half the problem. If we want a
    future with cleaner air and water for our kids and their kids,
    we've got to also address, I believe strongly, emissions of the
    other two substances covered by the Clean Power Act that I've
    referred to, and that's mercury and carbon dioxide. Today, coal
    burning electric utilities emit more mercury into the
    environment than any man-made source, largely through
    atmospheric deposition, but also through non-point runoff. That
    mercury can accumulate in fish and animal tissue in a toxic
    form, which is not only a danger to the fish but also to those
    of us humans who consume a fair amount of fish.
        Methyl mercury exposure, especially when it occurs to a
    developing fetus or a younger child, can cause serious
    neurological impairments. This is a serious problem that's been
    worsening over the course of many years to the point that
    nationwide, 41 States now have fish advisories that warn people
    against eating fish, and that cumulatively covers 60 percent of
    all the water bodies in the United States. In my own home State
    of Connecticut, there are fish advisories for all lakes based
    on mercury accumulation in fish. So this is a real problem, not
    an imagined one.
        The problems associated with uncontrolled emission of
    carbon dioxide are probably better known. Global warming is one
    of the most serious and pressing environmental challenges that
    we face here in the United States and the world. We can't
    address global warming without focusing directly on America's
    utility companies, because they account for about 40 percent of
    the Nation's greenhouse gas emissions, 40 percent from our
    utilities, and 10 percent of the world's greenhouse gas
    emissions come from right here, from our utility plants.
        Global warming is a serious problem. But there is some good
    news here, and some hope if we act wisely. Because as has been
    said by my colleagues, and is the reason for this hearing,
    there are remarkable technological answers to this problem that
    are within our reach. And that's what we're going to hear about
    today.
        I do want to stress that I feel strongly that technology
    will allow us to answer the challenges that we face without, as
    some have suggested, ``moving beyond coal.'' Coal can be a part
    of the solution, that's a fact. From the American point of
    view, we ought to do everything we can technologically to try
    to make coal continue to be part of the solution, because it is
    such an enormous American natural resource. And of course, the
    challenge is to have technology that will enable us to continue
    to use coal without polluting our environment.
        All the technologies that will be discussed here today I
    think present not only real opportunities for environmental
    protection, but for economic growth. I look forward to hearing
    about them right now.
        I thank the witnesses for being here. Senator Carper, your
    timing is beautiful and incredible. Would you like to make an
    opening statement?

     OPENING STATEMENT OF HON. THOMAS R. CARPER, U.S. SENATOR FROM
                         THE STATE OF DELAWARE

        Senator Carper. I'll be really brief, thank you very much.
    I look forward to hearing from our witnesses, and thank you
    very much for scheduling this hearing today.
        In the State of Delaware, we have, like most places, a lot
    of rivers, streams and ponds, that kind of thing. We cannot eat
    the fish in more than 60 percent of those streams. And as it
    turns out, neither can people in about 40 other States. The
    reason why is, part of it, contamination from mercury, not so
    much put into the air from sources in our State, but from other
    places out to the west of us. They simply come in, it rains not
    just on our parade, it rains on our bodies of water and we
    can't eat our fish.
        We have problems with ozone, ozone alerts. Part of that is
    from our own doing, but a lot of it is not. And we face the
    nitrogen oxide, again, that comes from places outside of
    Delaware and simply ends up deposited in our air and makes our
    breathing more difficult. And it causes us to make adjustments,
    economic adjustments and just adjustments with our daily lives
    that grow out of that ozone that's traced back to the nitrogen
    oxide.
        We have some large bodies of water that we're very proud
    of: Delaware Bay to the east, the Chesapeake Bay to the west,
    and a whole lot of inland bays in the southern part of our
    State. They face problems with nutrient loading. Again, part of
    that nutrient loading comes from air pollution, washes down out
    of the sky when it rains. And we have to figure out what other
    ways to reduce point and non-point sources of pollution that
    lead into the inland bays in an effort to try and clean them
    up. We have to do more than rightfully we ought to, simply
    because of the sources that come to us from other places.
        So for us, these issues in Delaware are more personal in
    nature. We have a real stake in this, this is not just some
    philosophical argument. We want to see these emissions of
    nitrogen, sulfur dioxide, we want to see the emissions of
    mercury and we want to see CO2 reduced as well. With
    respect to CO2, we've got a bunch of beaches, some
    of the people here in this hearing and on this committee come
    to our beaches throughout the year, especially during the
    summer months, to enjoy them.
        As we look at the rise in the temperature on our planet,
    and we see over the next 100 years we're hearing anywhere from
    2 to 10 degrees an increase in temperature, what that means for
    a little State like Delaware, which is flat and not very big in
    the first place, is that we're going to lose some maybe
    significant part of our land, our beach front, to the ocean.
    The sea level rise will be absorbed, washed over. And that is a
    matter of concern for us economically but it's also a matter of
    survival. We don't have much State to lose. The idea of us
    seeing an incursion of the ocean by a couple of miles, it's
    more than we want to contemplate.
        So from all those perspectives, these issues are important
    to us. Having said that, there are right ways to address these
    issues and wrong ways. I'm grateful for the approach that our
    colleagues Senator Jeffords and Senator Lieberman have taken,
    the leadership that they've shown. Obviously there are concerns
    with the legislation, we've all heard those, we want to address
    those and hopefully today we'll move toward a markup, to get to
    where we all want to be, and that's reductions in NOx and SOx
    and carbon dioxide and mercury. But at the same time, to do so
    in a way that uses market systems, that doesn't put our
    utilities in sort of the difficult position that for some of
    them it's a matter of not being able to survive.
        I'm the guy that always sees the glass as half full, even
    when it's empty. I think this stuff is not an empty glass, this
    is one that's at least half full. I look forward to working
    with especially the people sitting around this table, see if we
    can't tackle this one and do something good, not just for
    Delaware, but for all of us and for our country, maybe even for
    the rest of the world later this year. Thanks.
        Senator Lieberman. Thanks, Senator Carper. I like your
    optimism and your vision.
        Senator Voinovich. Mr. Chairman, Senator Campbell
    apologizes for not being here today. He has a statement he
    would like inserted into the record.
        Senator Lieberman. Without objection, so ordered.
        [The prepared statement of Senator Campbell follows:]
    Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from the State
                                  Of Colorado
        Mr. Chairman, first off, I would like to recognize and welcome a
    fellow Coloradan, Dr. Michael Durham of ADA Environmental Solutions of
    Littleton.
        Mr. Chairman, Senator Voinovich, this is the third hearing relating
    to S. 556, and this time we focus on perhaps the most controversial
    aspects of the bill--whether technology even exists that would allow
    power producers to meet the aggressive carbon dioxide and mercury
    emissions reduction schedule in S. 556.
        I am deeply concerned over the process in formulating this dramatic
    and sweeping legislation. This is a major change in policy that should
    be carefully reviewed. We have had two hearings at the full committee
    level. However, today, we hold a hearing on the most contentious issues
    only at the Subcommittee level. Second, we are going to hold one
    member's meeting next week, and then the majority intends to mark-up
    this bill. I am an optimist, but I am also a realist. Do we seriously
    think that given our members' strong disagreement on S. 556, that we
    can reach consensus in just one meeting? I hope that my friends
    supporting S. 556 come around, but I imagine that we will need to work
    together a bit more.
        Again, this is the third hearing on S. 556, and this is the third
    hearing where I state, in no uncertain terms, my strong opposition.
    This bill is a one-size fits all approach that detrimentally affects
    the Western United States.
        Fundamentally, the West differs from the East in several ways, and
    any legislation should reflect those differences. Yet, this bill
    ignores them completely. Again, it is important to note that this bill
    would require significant reductions in NOx where no problem exists,
    and similar command and control SOx reductions on a very minor Western
    problem.
        Mercury is recognized as a harmful pollutant. However, we aren't
    sure how much is harmful and whether adequate technology exists to deal
    with it.
        In December 2000, the EPA found cause for mercury reductions, but
    lacked sufficient information as to the degree of reductions. Today,
    the Agency is in the process of gathering scientific data in order to
    develop the proposed rule, set to be published by December 2003. The
    Agency charged with Enforcing the Environment needed additional time
    and study to make an educated decision based on clear science.
        However, the distinguished sponsors of S. 556 somehow know the
    proper reduction levels with such certainty that they make it a part of
    their bill.
        This bill's approach to mercury reductions mirror those taken for
    NOx and SOx, by completely ignoring Western differences. Mercury
    emissions from Western coal-fired plants is about 40 percent lower than
    the national average. Yet, S. 556 would require the same level of
    reduction as if the West's mercury emissions were much higher. Such an
    effect can only be a result of two things: (1) S. 556 completely
    ignored Western differences, or (2) S. 556 penalizes good actors in the
    West.
        I am sure that proponents of S. 556 did not intend to penalize the
    West. Therefore, we can only assume that they ignored the critical
    differences of the West.
        Well, I am here to tell you that the West isn't ignoring this bill.
    The State of Colorado opposes this bill, Xcel Energy opposes this bill,
    Colorado's municipal and cooperatively owned utilities oppose this
    bill, the Western Governor's Association oppose this bill, and I oppose
    this bill.
        S. 556 also includes significant reductions in carbon dioxide in
    order to curb global climate change. First, carbon dioxide is not a
    pollutant and should not be treated as one. NOx, SOx, and mercury can
    affect people's health within their lifetime. Global warming cannot.
    Carbon dioxide's inclusion in a ``multi-pollutant bill'' amounts to an
    obstacle to doing what we all want to do, and that is to make sure that
    we have clean, safe air.
        Second, the Constitution's Foreign Affairs Clause ensures that the
    nation speaks with one voice in international affairs. Our Commander-
    in-Chief has taken a position on the Kyoto Protocol, and is developing
    a strategy to deal with global warming. I look forward to the
    Administration's position on the issue.
        Last, the carbon dioxide reductions called for in this bill would
    disproportionately impact the West and my State of Colorado in
    particular. Eighty-two percent of Colorado's electricity comes from
    coal-fired plants. The incredible costs associated with S. 556's carbon
    dioxide reductions is tantamount to a fuel switching mandate, placing
    everyone at the mercy of natural gas price swings. Whether or not fuel
    switching is the intent this de facto result would hurt my State and
    ratepayers across the Nation.
        Both parties agree that energy security is a top priority. We
    should not implement uncertain policies that would effectively decrease
    our energy supply unless the gains are sure.
        In sum, S. 556 is a short-sighted approach based on incomplete
    information that completely ignores Western differences and even
    penalizes good actors.
        I hope that the majority reschedules the mark-up of this bill, and
    takes some of the West's concerns to heart. Thank you.
        Senator Lieberman. Let's go now and we'll go right across
    the table, beginning with Mr. Edward Lowe, Manager of Gas
    Turbine Combined-Cycle Product Lines, General Electric Power
    Systems, Schenectady, New York, international headquarters,
    Fairfield, Connecticut.

      STATEMENT OF EDWARD C. LOWE, MANAGER, GAS TURBINE COMBINED-
         CYCLE PRODUCT LINES, GENERAL ELECTRIC POWER SYSTEMS,
                         SCHENECTADY, NEW YORK

        Mr. Lowe. Good morning, Mr. Chairman and members of the
    subcommittee. I appreciate the opportunity to testify this
    morning and to share our views about the benefits that
    integrated gasification combined cycle technology can deliver.
        IGCC can cost effectively produce power from solid fuels
    such as coal with substantial environmental benefits over other
    coal power generation technologies. IGCC can help the country
    and our customers meet the environmental goals of reducing NOx,
    mercury, CO2 and other pollutants, while also
    advancing sound energy policy goals of retaining a secure and
    diverse mix of fuels for electric power generation in improving
    the efficiency of the coal power generation base.
        IGCC is a process that converts fuel such as coal,
    petroleum, coke, biomass and municipal waste into a low BTU,
    environmentally friendly natural gas type fuel called synthesis
    gas or syngas. Though coal gasification in the United States
    dates back to 1842, it was, as Senator Clinton mentioned, the
    1970's before GE's Global Research Center in Schenectady, New
    York, demonstrated that poor fuels could be converted into low
    BTU syngas and integrated with a gas turbine cycle.
        This work directly led to the first large commercial IGCC
    plant, the 120 megawatt cool water plant in California that was
    commissioned in 1984. Cool water was followed by two commercial
    250 megawatt coal IGCC plants in the 1990's: Public Service of
    Indiana's Wabash River plant, commissioned in 1995, and Tampa
    Electric's Polk plant commissioned in 1996. These two plants
    utilize GE gas turbines and have successfully logged over
    50,000 operating hours on coal syngas.
        In IGCC, powerful pollutants are removed from the syngas
    before they reach the gas turbine. Therefore, end of pipe/stack
    cleanup is not necessary. Emissions of SOx, NOx, mercury, heavy
    metals and particulate from an IGCC plant are fractions of the
    emissions from other coal plants. Over 90 percent work removal
    is being achieved by a chemical process gasification plan in
    Kingsport, Tennessee.
        High IGCC efficiencies yield CO2 emissions that
    are 12 percent lower than those of modern coal steam boiler
    plants and about 30 percent lower than the average operating
    coal plant. Additionally, in the gasification process, carbon
    may be removed from the syngas to create a hydrogen rich fuel
    that can further reduce CO2 gas emissions.
        GE's commitment to advancing IGCC design is continuing at
    our Global Research Center in Schenectady, New York, and our
    recently commissioned combustion development facility in
    Greenville, South Carolina. In spite of these significant
    environmental benefits, we are concerned that permitting bodies
    may burden IGCC with duplicative and reliability reducing end
    of pipe controls for NOx emissions, such as selective catalytic
    reduction. These systems cannot work as reliably on IGCC as
    they do on natural gas fired units. The pollution prevention
    combustion technology on GE's IGCC gas turbines delivers NOx
    emissions below that of existing coal technologies. We strongly
    believe that IGCC must be evaluated as a coal technology with
    consideration given for the total environmental benefits when
    setting emission targets.
        The cost to build a large IGCC plant has steadily decreased
    over the last 20 years, with installed prices now projected to
    be $1,200 a kilowatt, making IGCC cost competitive with modern
    coal plant options that utilize state-of-the-art emission
    controls. Coal IGCC offers superior environmental performance
    while projected to produce electricity prices that are
    competitive with modern directed fired coal plants.
        Thank you for giving me the opportunity.
        Senator Lieberman. Thanks, Mr. Lowe. Very exciting
    testimony. I look forward to the questioning period.
        Next we'll hear from Robert Kripowicz, Acting Assistant
    Secretary for Fossil Energy, U.S. Department of Energy. Good
    morning.

     STATEMENT OF ROBERT S. KRIPOWICZ, ACTING ASSISTANT SECRETARY
                FOR FOSSIL ENERGY, DEPARTMENT OF ENERGY

        Mr. Kripowicz. Good morning, Mr. Chairman and members of
    the subcommittee.
        In my testimony, I've attempted to describe a wide range of
    activities associated with managing emissions of carbon from
    the Nation's power industry. But let me say at the outset, I am
    best able to discuss those options that deal with power plant
    efficiency improvements and carbon sequestration. As the
    opening of my formal statement stresses, the Administration
    does not support the reductions in carbon dioxide called for in
    S. 556. Imposing such sharp reductions on the power generating
    industry alone would cause a dramatic shift from coal to
    natural gas, at exactly a time when, for the energy security
    and economic reasons, we need to be looking for ways to
    continue using all of our domestic energy resources.
        In my formal statement, I provided a brief overview of the
    current U.S. power industry. This section makes two key points.
    First, that fossil fuels, and especially coal, are the dominant
    suppliers of electric power in this country, and one of the
    reasons why the United States benefits from some of the lowest
    cost electric power of any free market economy. The
    Administration has placed a major emphasis on efforts to
    enhance the environmental acceptability of coal-fired power
    generation and to provide a future for clean coal technology.
    We cannot support legislation that would cause a significant
    decline in our Nation's ability to use coal as a major source
    of current and future electricity.
        The second point is that advanced technology works. Given
    time to mature and be deployed, improvements in pollution
    control technology have helped clean our air. Emissions levels
    of criteria air pollutants, such as particulates and sulfur
    dioxide, have declined significantly in the last three decades,
    even as the Nation's use of coal has tripled. Importantly, with
    advanced technology, we have achieved significant air quality
    improvements without imposing harsh economic penalties on our
    consumers. We need to allow the same cost effective progress to
    be made in technology that can reduce carbon emissions without
    acting prematurely and causing harmful disruptions in the
    economy.
        There are three basic options for decoupling greenhouse gas
    emissions from the use of our low cost, abundant domestic
    energy resources. One is to improve efficiency. Most people
    associate this with enhancing the performance of automobiles or
    appliances or other end use systems, but efficiency
    improvements can also be applied at the power plant. Today's
    typical coal-fired power plants convert only a third of the
    energy value of coal into electricity. The rest is released as
    waste heat. Even the best natural gas combined-cycle turbines
    discard up to half of the fuel's energy.
        If we could increase today's coal-fired power plant
    efficiencies just from 33 to 35 percent, we could reduce carbon
    emissions by nearly 26 million tons per year. But our
    technology program envisions much greater efficiency gains than
    just 2 percentage points. We see the potential for boosting
    power plant efficiencies into the 40 to 50 percent range during
    this decade and ultimately, to as high as 60 percent by the
    middle of the next decade.
        Already operating in this country are the first two power
    plants that show how this can be done. In Tampa, Florida and
    West Terra Haute, Indiana, the Nation's first two commercial
    scale gasification combined-cycle plants are operating. Both
    are the result of DOE's clean coal technology program with
    industry. Both are demonstrating first of a kind efficiencies
    in the 40 to 45 percent range. So we believe we are well on our
    way to significant carbon emission reductions, simply as a
    function of the market adopting improved economically viable
    technology.
        The second approach is to rely more on low or no carbon
    fuels. Natural gas is one of those fuels, emitting about half
    the carbon dioxide of coal. Most new power capacity additions
    in the foreseeable future, in fact, about 90 percent of them,
    are expected to use natural gas. So we must recognize the
    dangers of an over-reliance on any one energy resource. Such a
    heavy reliance on natural gas for future power needs may not
    necessarily be desirable from an economic or energy security
    standpoint.
        The greater use of nuclear power, which emits no carbon
    along with renewable energy resources, can also play a long
    term role in reducing greenhouse gas emissions and the
    President's national energy plan supports both. Considerable
    progress has been made in bringing down the cost of renewable
    technologies, especially wind. But even if the contribution of
    these technologies expanded 90-fold, they would still represent
    a small fraction of the power needs of the country.
    Nonetheless, over the long run, they will inevitably play an
    increasingly important role in reducing greenhouse gases.
        This leads to the third option, carbon sequestration. In
    terms of the others, this option is relatively new. Five years
    ago, few people would have mentioned carbon sequestration as a
    viable climate change mitigation approach. But that thinking
    has changed dramatically in the last few years. Carbon
    sequestration involves the capture and storage of carbon
    dioxide and other gases from fossil fuel combustion or perhaps
    from the atmosphere itself.
        Research we've sponsored over the last four to 5 years now
    shows that it may be possible to develop ways to carry out
    carbon sequestration that are both effective and affordable.
    For example, in recent experiments, we've seen dramatic
    reductions in the cost to capture CO2 from the flue
    gas at power plants. Technologies like coal gasification lend
    themselves to even more affordable sequestration, because they
    produce concentrated streams of CO2 that are easy to
    capture and dispose of.
        We're investigating approaches in which carbon
    sequestration might be geologically practical. Many of the
    Nation's coal-fired power plants overlie deep, unusable, saline
    aquifers which could hold huge quantities of CO2,
    perhaps permanently. We're studying ways in which carbon
    sequestration might actually produce a supplemental source of
    revenue. For example, injecting CO2 into oil fields
    or into coal seams can lead to enhanced production of
    marketable quantities of oil or natural gas.
        Five years ago, we asked the technical community whether
    there were any good ideas in this area. We really didn't know.
    Today we're supporting more than 50 technically solid carbon
    sequestration projects in our research program, and we're
    investing more than $30 million a year to develop the testing.
    I might also mention the industry is contributing a like
    amount, another indication that these technologies hold
    promise. Carbon sequestration has become one of the highest
    priorities in our program.
        In short, Mr. Chairman, although we cannot agree to
    mandated CO2 reductions from the power industry, we
    can agree that research into new carbon management technologies
    and strategies is warranted, and in the long run, we believe
    the use of these technologies will be the most cost effective
    way to make significant reductions in greenhouse gases.
        That completes my statement. Thank you.
        Senator Lieberman. Thanks very much, Mr. Kripowicz.
        Now we'll go to Mr. Phil Amick, Vice President of
    Commercial Development, Global Energy, Inc., of Houston. Thanks
    for being here.

          STATEMENT OF PHIL AMICK, VICE PRESIDENT, COMMERCIAL
            DEVELOPMENT, GLOBAL ENERGY, INC., HOUSTON, TEXAS

        Mr. Amick. Good morning. My name is Phil Amick and I'm Vice
    President of Global Energy. Global Energy is headquartered in
    Cincinnati. I'd like to thank the chairman and the other
    members of the subcommittee for allowing me to appear at this
    hearing.
        Global Energy owns and operates the Wabash River Energy
    Limited Gasification Facility in Terra Haute, Indiana. We run
    this with synergy, with the Public Service of Indiana operating
    the power plant side of the plant. It's a 262 megawatt
    facility, powering about 250,000 homes while utilizing high
    sulfur local coals and even petroleum coke feed stocks with
    sulfur contents up to 5 and a half percent. More to the point
    of this hearing, it's the cleanest coal-fired power plant in
    the world of any technology. That may be disputed by others,
    but we really believe it.
        The Wabash River plant is a repowering of a 1953 vintage
    pulverized coal plant, one that was operating on compliance
    call and had precipitators but was on scrub. Compared to the
    performance prior to repowering to the 1990 data for the older
    plant, the new facility makes six times as many megawatt hours
    of electric power, but has reduced emissions of SOx by over
    5,500 tons a year, NOx by 1,180 tons per year and
    PM10 particulates by 100 tons per year.
        The Wabash facility and the Tampa Electric Polk Power
    Station in Florida were the first of a new class of coal-based
    electric generation facilities with superior environmental
    performance. The Wabash plant has been operating since 1995
    with emission rates lower than coal plants that are now being
    permitted for operation in 2005. The Wabash is a power plant
    that uses high sulfur coal feed stocks, but has SO2
    emissions that have run as low as one fortieth of the Clean Air
    Act year 2000 standards.
        Sulfur is chemically extracted from the syngas and sold for
    use in the fertilizer industry. We make about a tank car per
    day of pure sulfur, sulfur that used to go up into the stack.
        It's a coal power plant where all the ash products emerge
    as a vitrified black sand by-product which we market as
    construction material for asphalt applications. There are no
    solid wastes in the coal gasification process, there's no
    scrubber sludge, no fly ash or bottom ash. In our plant, the
    wastewater from the chemical process itself meets the national
    drinking water quality standards. Our carbon dioxide emissions
    are 20 percent lower than conventional unscrubbed coal-fired
    power plants because of the inherent efficiency of the
    gasification process. Our plant as well with no additional
    special equipment has a mercury removal rate of about 50
    percent.
        The key to this superior environmental performance is the
    fact that the gasification process takes place at high
    pressure. This facilitates the chemical processes that remove
    the pollutants. The high pressure operation also will
    facilitate additional carbon dioxide reduction and mercury
    removal on future plants that incorporate gasification. DOE and
    industry studies have indicated that significant reductions can
    be achieved with much less cost and performance impact than
    possible with the coal combustion technologies that operate
    near atmospheric pressure.
        While the Wabash carbon dioxide emissions are already 20
    percent less than conventional units, this emission could be
    reduced more than 75 percent by shifting the syngas to hydrogen
    by additional processes. This technology, already in use at
    some hydrogen production facilities, and I think Tampa, the
    TECO letter is right, it isn't in use at any utility plants
    yet, it could be retrofit to a gasification facility for as
    little as 2 percent of the original capital cost. The plant
    output reduction for this additional process step is a fraction
    of what would be seen in a conventional technology plant, and
    in a gasification facility, where it's just another process
    unit on the end of the pipeline, it can be retrofitted any time
    in the future.
        Mercury removal is also much simpler in the gasification
    process. A plant like the Wabash River facility could be
    upgraded to 80 percent or better mercury removal by the
    addition of a single carbon bed vessel at a cost of less than
    $1 million. A facility such as the Tennessee Eastman
    gasification plant for chemical feedstock production in
    Kingsport, Tennessee, has achieved better than 90 percent
    mercury removal to meet their process constraints. They've been
    doing it for nearly two decades.
        Gasification technology for coal based power generation is
    being commercially marketed by ourselves and others. We feel it
    is the most environmentally friendly solution for diversifying
    the fuel mix of new electrical power plant capacity. Through
    repowering much of the existing aging coal generation base can
    be upgraded as well, as was done at Wabash River.
        Thank you, Mr. Chairman. That concludes my oral statement.
    With your permission, I have additional materials that could be
    put in the record.
        Senator Lieberman. Thanks, Mr. Amick. We'll include those
    all in the record. Thanks for your very helpful testimony.
        Dr. Richard Sandor is the Chairman and CEO of Environmental
    Financial Products LLC of Chicago, Illinois and benefits before
    this committee from having once worked with Senator Corzine.

    STATEMENT OF RICHARD L. SANDOR, CHAIRMAN AND CEO, ENVIRONMENTAL
                         FINANCIAL PRODUCTS LLC

        Dr. Sandor. Thank you very much, Mr. Chairman. It's a great
    pleasure to be here with you today to talk about a subject
    which is very, very dear to my heart, and that is market based
    solutions to environmental and social problems.
        I would like to describe a current effort which is going on
    in the private sector and share some of the activities and
    ideas that we're generating in that. I have the privilege of
    serving as the chairman of the Chicago Climate Exchange, which
    is an 18 month old project with the goal of establishing a
    voluntary cap-and-trade system for the trading of carbon. While
    this is only 15 or 18 months, the initial market architecture
    was proposed in 1992 at the Earth Summit in Rio in which we
    discussed the difficulties and technicalities with establishing
    a market for carbon.
        The project that we have right now was funded by the
    Chicago based Joyce Foundation through a special Millennium
    grant to Northwestern University's Kellogg Graduate School of
    Management. The thought process was to take the upper midwest,
    essentially Minnesota, Wisconsin, Iowa, Illinois, Indiana,
    Michigan and Ohio, and use this as a pilot to learn more about
    implementing a private sector market based solution.
        The upper midwest, while we think of it as a tiny
    geography, it's important to recognize it as a GDP of about $2
    trillion, has a wide variety, which would rank it the fourth
    largest economy in the world, if it was taken on its own, its
    sectors include agriculture, forestry, manufacturing,
    automobiles, chemicals, pharmaceuticals, etc. So it has a broad
    base.
        The feasibility study would determine one, proof of
    concept, two, provide some price discovery and inform the
    debate so that we could learn more about what the marginal
    costs of mitigation of greenhouse gases are. We went through
    the study, we talked about monitoring, verification, and 6
    months ago we got a renewal to actually commit to the design.
    We'd hoped to get four entities, a couple of utilities and a
    couple of farmer cooperatives. The utilities providing credits
    generated for emissions reductions and the farmers providing
    sequestration and thereby pairing and trading with each other.
        Well, we didn't get four entities, we ended up getting 46
    entities. And they are now in the design process and have
    signed a non-binding letter of intent to take on a cap-and-
    trade system on a voluntary basis and to develop a consensus.
    The members include Ford, Dupont, American Electric Power,
    Cinergy, Growmark, Agriliance, International Paper, Stora Enso,
    etc. The power sector in this voluntary pilot program that
    we're having basically includes three of the top ten utilities
    and constitutes 180,000 megawatts of capacity, representing 20
    percent of the entire U.S. electricity sector.
        By the way, a pilot that in and of itself in this sector is
    bigger than the emissions of the country of France. So we think
    we have scalability here and the ability to implement.
        We've got Brazilian members as well, Cataguazes. We've
    expanded into Canada with OPG and Manitoba Hydro. We've added
    CEMEX and IMSA, two major Mexican companies, and a month ago we
    thought we had a new sector, which is very challenging and
    exciting, and that is municipalities. The city of Chicago has
    joined, it gives us transportation, and about 3 weeks ago,
    Mexico City.
        We've done this with a blue ribbon advisory committee. The
    blue ribbon advisory committee does include former members of
    this august group, David Boren, who is President of the
    University of Oklahoma, Joe Kennedy, Jr., a former member of
    the House, Jim Thompson, a former Governor of the State of
    Illinois, Jeff Garten, Senator, the head of Yale School of
    Management, Don Jacobs, Maurice Strong, who was Under Secretary
    General of the United Nations and organized the Rio summit. So
    we've benefited from enormous input.
        Where does that take us? It takes us to the point now that
    we are thoroughly into the design process. We think a sector
    approach, which allows power companies to trade with
    manufacturing companies to trade with forest product companies
    will in fact give us some insight into how we can design a
    system like this in the most effective manner, serving both
    cheap electricity and mitigating greenhouse gas emissions.
        Thank you.
        Senator Lieberman. Thank you, Dr. Sandor.
        We'll begin, why don't we do 7 minute rounds, then we'll go
    as long as we need to. I'll pick up right at the end.
        As you know, I believe my office has been in touch with
    you, Senator McCain and I are working together to see if we can
    develop a cap-and-trade system for carbon emissions as a way to
    reduce the threat from global warming. And we've had a series
    of interesting discussions with representatives of different
    sectors of the economy and we hope to get to a point before
    long where we can introduce legislation on this. But we're
    trying to do it in a way that's cooperative.
        So your initiative is very interesting to us. I notice that
    you have several electric power companies that are heavy users
    of coal that are active participants in the Chicago climate
    exchange process. I wonder if you could talk just a little bit
    about their participation and whether by participating they
    have agreed to reduce their CO2 emissions.
        Dr. Sandor. The participation in the process today, Senator
    Lieberman, is a commitment to work in the design, develop a
    consensus cut level and then to participate if the consensus is
    reached. So it is a conditional commitment. But I honestly
    believe that almost all of the companies, if we can reach the
    consensus and design the market architecture, will indeed go
    forward on a voluntary basis and accept caps and trade within
    the system. Part of it to learn, part of it to mitigate, and
    part of it to have it start in a way in which they can
    influence the design and objectives of the program.
        Senator Lieberman. We'll be watching it real closely. I
    appreciate very much what you're doing and I hope you look back
    at it and say it was a pioneering effort that led to a
    consensus response to climate change.
        Mr. Lowe, I think I said your report was very exciting,
    which I find it to be. Clarify for me how many plants now are
    using the IGCC technology.
        Mr. Lowe. We right now have about 23 units in operation
    using IGCC. A number of these utilize petroleum coke as a
    feedstock, not coal. The reason being that petroleum coke is
    essentially a waste fuel with very little value. IGCC can end
    up burning that in an environmentally beneficial manner and
    generating electricity on a cost competitive basis.
        I think you all know that the primary power generation
    technology of the past decade has been natural gas fired gas
    turbine based technology. And in that situation with gas prices
    as low as they are, that has been the selection for power
    generation for the past decade.
        Senator Lieberman. And help me understand just a little bit
    more about what the potential of the IGCC technology is in
    reducing carbon, specifically, as a pollutant.
        Mr. Lowe. I think the key to this, as was mentioned by Mr.
    Kripowicz, is the efficiency benefit that IGCC can end up
    delivering. As I've indicated, this is probably about five
    points more efficient or about 13 percent more efficient than
    comparable coal technologies right now. Now, I think both
    technologies are going to advance over the decade and there are
    going to be increases. But inherently, by using the combined
    cycle technology, there should be an advantage there. So just
    from the efficiency benefit, you will end up getting a
    comparable reduction in CO2 emissions.
        Senator Lieberman. Efficiency in this case means what?
        Mr. Lowe. It means when you figure the amount of coal that
    you have going into the unit and you consider the amount of
    electricity you have going out of the unit, you consider the
    total energy content going in with the total energy content
    going out. It was mentioned that the average unit today is
    about 33 percent efficient, the average coal unit. I think if
    you take a look at current modern coal units, they're probably
    approaching 39 or 40 percent efficiency. Mr. Amick mentioned
    that for something like the unit that he has referenced we're
    up at 44 percent efficiency.
        So 39 to 44 percent efficiency is the five point difference
    I'm talking about. If you take that five points and divide it
    by the base of 39, you come up with a 13 percent difference in
    efficiency which ends up translating to 13 percent less carbon
    dioxide going out for a comparable amount of energy going in.
    That's what it has, and also we talked about carbon stripping
    or sequestration. Those are others that I think are longer
    range technologies.
        Senator Lieberman. But the most significant advantage will
    be because of the efficiency in regard to carbon?
        Mr. Lowe. I think that's the inherent benefit that IGCC
    has, yes.
        Senator Lieberman. Let me ask what value or commitment GE
    has to the continued development of this technology. I guess
    I'm asking for the obvious reason, I'm trying to measure what
    this company, which is an extraordinarily well respected
    company, has judged to be the market appeal and viability of
    this technology.
        Mr. Lowe. Well, certainly we believe that our customers
    ought to have a variety of different alternatives available to
    them in meeting whatever the emissions and energy benefits are.
    They should be using, as an example, pulverized coal for the
    burning of coal. We also believe that IGCC has a benefit in
    this area, too. And we have invested in this technology,
    between our corporate research and development center and our
    actual power systems business over the past 25 years and the
    tens of millions of dollars on this.
        Senator Lieberman. OK, keep it up.
        Mr. Lowe. Thank you.
        Senator Lieberman. Mr. Kripowicz, your testimony suggests
    that a four-pollutant bill would result in a move away from
    coal. But at the same time, in your testimony you've told us,
    and I think there's general agreement on this, building off of
    what Mr. Lowe has just said, that there is tremendous potential
    for efficiency gains for coal plants in the next decade. So I
    want to ask you to try to bring those together. In other words,
    how can you then assert that compliance with a four-pollutant
    bill is not possible for coal plants?
        Mr. Kripowicz. The basic reason, Mr. Chairman, is that the
    options for greatly increasing the efficiency of coal are not
    in the market at this particular point. So if you have a
    control, a mandated control strategy right now about the only
    technology that is viable is natural gas, and you will have a
    tremendous effect on the amount of coal capacity used, until
    there is an economic benefit to going to coal gasification.
        On the margin right now, for the next several years, we
    don't see with current gas prices a large market for integrated
    combined cycle coal gasification.
        Senator Lieberman. My time is up, I just want to ask you if
    you'd response to that, Mr. Lowe. Do you think that a four-
    pollutant bill would lead inevitably to a shift from coal to
    natural gas, allowing for what you see as the increasing
    efficiency that will come, for instance, with IGCC technology?
        Mr. Lowe. I think if you take a look at the overall
    emissions that you're going to be having that certainly, if
    future plants going forward have a very low CO2
    emissions reduction requirement on them that yes, you'll look
    for the most efficient way to do that, and natural gas would be
    certainly an economically viable alternative for utilities to
    look at.
        Senator Lieberman. So how to avoid that?
        Mr. Lowe. The way that I think you have to look at this,
    and I am certainly not a policymaker or policy judge, I am a
    technologist, and the issues are extremely complicated, as all
    of you are aware. But from a technology standpoint, I think we
    need to develop all of the possible technology alternatives
    that there are for increasing efficiency and decreasing
    CO2 emissions and then let the market decide what is
    the economic way to comply with this.
        Senator Lieberman. Yes. Obviously the key is, if we want to
    deal with global warming, carbon reduction, and we want to
    continue to use coal to drive the technology as forcefully as
    we can, last year in May, the National Coal Council, if I'm
    correct, said that IGCC could get 20 percent increases in
    efficiency over the next 5 years. I think if that begins to
    happen, we'll move in exactly the direction we want to go.
        Senator Voinovich.
        Senator Voinovich. Yes, I think I'd like to get to the
    bill, and to the difficulty that we have. Senator Carper and I
    have talked, he's for the four Ps, I'm for the three Ps. The
    issue is, what does the fourth P mean. I'd like your--are you
    familiar with the Jeffords bill, all of you?
        Mr. Lowe. No, I am sorry, I have not gone into the details
    of these bills and I really don't feel comfortable being able
    to give you an intelligent position on that.
        Senator Voinovich. I'd like you to look at it and get back,
    because the concern is, the same question that Senator
    Lieberman asked, if you put the cap on carbon, is that going to
    result in people's fuel switching to some other fuel and see
    the demise of coal. That's one issue. The other issue is the
    mercury issue, which is something that all of us want to do
    something about.
        The question is, are the numbers in the legislation for
    mercury realistic in terms of timing to achieve them. For
    example, many of us believe that if we would reach the higher
    standards for sulfur and for nitrogen that we would get a lot
    more co-benefit in terms of the mercury. If we come in and say,
    this is what you've got to do on the mercury, set it high and
    everybody puts their money into that, we're not going to have
    this efficient--again, it's going to cause some tremendous
    problems in the marketplace.
        So I'm really interested in your comments about the
    CO2 and the mercury. And then if we're looking at
    some other way of dealing with the carbon problem, Mr. Sandor,
    I'm really excited about what you're talking about, the private
    sector getting together and looking at it, but I think that in
    the work that you're doing, in S. 556, you're not going to be
    able to take credit for carbon sequestration from forests or
    agriculture, methane captured from landfills, and so forth.
    You're looking at the whole big picture, aren't you, in terms
    of your cap-and-trade?
        Dr. Sandor. Yes, because we think it's very important to
    have both an allowance based system, which is the Clean Air
    Act's approach with sulfur dioxide, and to have an offset
    system. Because it may be possible, and the market will tell
    us, that coal can be used extensively if we offset through
    renewables like methane destruction and landfills, reforests,
    we've got hundreds of millions of acres that are out there
    which we could potentially do that, reductions by chemical
    companies of N2O, which is very, very potent
    relative to carbon, could be used by utilities.
        This is what we're hoping to learn, how much interaction
    there will be and therefore, how cheap can we get mitigation
    down. And it is a multi-sector approach.
        Senator Voinovich. But the bill, the Jeffords bill, would
    not allow that to take place, it doesn't include other beyond
    the utilities. The real issue is, if you don't cap the carbon,
    but you want to do something about carbon, what would be the
    vehicle that you could put in place that would give us reason
    to believe that you would start to reduce the carbon. I think
    that's really what I'm really interested in anybody's thoughts
    on, on how you achieve that.
        Could you comment, any of you that are familiar with the
    numbers, in terms of the mercury requirements that are in the
    Jeffords bill and the timing and whether that's realistic or
    not?
        Mr. Kripowicz. Senator, as you know, the Administration
    agrees with the three-pollutant strategy approach, because we
    think we can get significant pollution reductions at a reduced
    cost. The Administration is now in the process of analyzing on
    an interagency basis the proper set of numbers for the
    Administration to come forward with, and we expect that we will
    do that in the near future. The numbers will probably be
    different than those that are in the bill, but they will
    definitively state what the Administration's position is.
        Senator Voinovich. I would say, Mr. Chairman, that the
    Administration ought to get moving.
        Mr. Kripowicz. It's not an easy problem, Senator.
        Senator Voinovich. We've been waiting and waiting and
    waiting. I think it's time for somebody to sit down at a table
    and work the numbers out and come back, because we are anxious
    to hear from the Administration about where you stand on some
    of these numbers. Because I think it's important to our maybe
    coming to some kind of a consensus or compromise or something
    like that. But as long as you're sitting out there and we don't
    know where you are, it's not helping the situation.
        Mr. Kripowicz. I understand.
        Senator Voinovich. The other thing I'm interested in, and
    maybe this is not relevant, but we have new source review,
    which is an issue that's now before the Administration, a lot
    of controversy about whether or not they should change it or
    not, and so forth, and when it came in. But one of the things
    that I have heard in terms of the limbo, is that nobody is
    doing anything in terms of efficiency, because they're
    concerned that if they do, they may be violating the new
    requirements for new source review. Does that have anything to
    do with the issue of energy efficiency that you're talking
    about, Mr. Kripowicz?
        Mr. Kripowicz. It has some effect. I think the report that
    Senator Lieberman referred to from the National Coal Council
    said that if they made changes to existing capacity they could
    get as much as a 20 percent increase in generating capacity out
    of the existing plants. I think that is what is not moving
    forward because of the uncertainty over the new source review.
        Senator Voinovich. That's the first time I became
    familiar--you're basically saying if you can make these
    facilities much more efficient that it will genuinely, from a
    technological point of view, definitely it will reduce carbon?
        Mr. Kripowicz. Yes, sir, that's correct. We can provide the
    National Coal Council report to the committee if you'd like to
    see it.
        Senator Voinovich. Mr. Lowe, would you want to talk about
    your IGCC and your Tampa Electric facility? In my opening
    statement, I referenced it and it appears that the State of
    Florida now is superimposing some new things. This is supposed
    to be a coal-fired facility with your technology, now they're
    saying it's not enough and they want you to put a scrubber on.
        Mr. Lowe. Yes, that's absolutely right. At that facility,
    we originally started that facility up, Tampa did, it was
    operating. That along with another recent permit that has come
    out have had either five or 3 year, what we call back tree
    openers in it, whereby after three or 5 years of operation, the
    operator is now faced with potentially additional controls to
    put on it.
        What's being thought of at Tampa is to put a selective
    catalytic reduction device on it to further lower NOx emissions
    and selective catalytic devices work well on natural gas-fired
    units. We have them on a number of our gas turbines that are
    out and operating.
        However, there are some significant reliability concerns
    associated with trying to put these on an integrated
    gasification combined-cycle unit because of chemical
    interactions that can occur, and can significantly decrease the
    reliability of this unit, which would be a significant
    disincentive to trying to go to a coal-burning technology like
    this.
        So we strongly believe that the emission requirements that
    should be developed for IGCC should be coal-based emission
    requirements and that if either policy or regulatory decisions
    drive this to try and achieve equivalent natural gas type
    emissions, it will dissuade the implementation of what we
    believe to be a very positive coal-burning technology.
        Senator Lieberman. Thanks, Senator Voinovich. Senator
    Carper.
        Senator Carper. Robert Byrd has been a Senator here almost
    forever. Among the things he does is look out for West
    Virginia. As we all know, West Virginia sits on an abundance of
    coal. He's used his good offices to try to ensure that we
    infuse a lot of Federal research dollars into taking that
    abundance of coal and finding ways to extract energy from it in
    ways that are cleaner and less harmful to our environment.
        A couple of you talked about clean coal technology. I want
    those of you who are familiar with that, just step back and
    give us a bit of an update on where we are. We've put a lot of
    money into it. There are, I think, a lot of reasons why I want
    it to work, and how are we doing?
        Mr. Kripowicz. Actually, through the Department's clean
    coal program, what I want to say at the outset, it was a
    program in cooperation with the industry. We put a third of the
    money in and the industry actually put two-thirds of the money
    in. We've demonstrated technology that increases the efficiency
    and reduces the cost of SO2 scrubbers by 50 percent.
        We demonstrated the technology for low NOx burners, which
    now will be on about 85 percent of the existing coal plants,
    resulting in billions of dollars of sales. We demonstrated
    improvements in the selective catalytic reduction technology
    for nitrogen oxide, reductions that have decreased the cost of
    that technology by about 50 percent. And now those systems are
    also being applied to coal plants.
        The two demonstration plants that have been mentioned here,
    Wabash and TECO, were part of the clean coal demonstration
    program, and they provide the basis for going forward with
    gasification technology and atmospheric fluidized beds which is
    a very clean way of burning coal, similar to a normal
    pulverized coal plant. There's now commercial technology, both
    in the United States and in the rest of the world, and there
    have been, I believe, over $10 billion worth of sales of that
    technology, all based on the demonstrations that were performed
    in this program and the follow-up by the industry in
    commercializing the technology.
        Senator Carper. Any other comments from those of you that
    are familiar with the work, the progress?
        Mr. Lowe. Just addressing IGCC in particular, I think when
    you take a look at the potential risk from going from a cool
    water design at 120 megawatts up to 250 megawatts for the
    Wabash and the Polk unit, I'll tell you, technology challenges
    are not linear. So although you're doubling the size, it's more
    like the square of that for the technology challenges.
        Those would not be commercial today if it weren't for the
    incentives in the clean coal technology programs.
        Senator Carper. I think, Mr. Lowe, you're the one who
    mentioned the petroleum coke and the use of petroleum coke. Do
    you see it in lieu of coal?
        Mr. Lowe. At different refineries around the country, you
    see a situation where are burning petroleum coke in
    gasification processes that are burning this waste fuel and
    also generating power generation, yes.
        Senator Carper. When you burn it, what do you harvest in
    terms of emissions or waste from the burning of the petroleum
    coke and what do you do with it?
        Mr. Lowe. It's the same kind of vitrified slag that you get
    out, which means that it's a non-leaching silicone gaseous kind
    of slag that you end up getting out. In fact, I believe that
    Mr. Amick can probably comment, at the Wabash unit I believe
    you are using some mixtures and sometimes totally petroleum.
        Mr. Amick. We have run Wabash on 100 percent petroleum coke
    many times in the last year. We've found that even when we're
    running petroleum coke, which is 5 and a half and 6 percent
    sulfur, that we make virtually the same environmental standards
    as we do with coal in our plant, which was designed for high
    sulfur coal in the first place.
        The main difference is----
        Senator Carper. You say high sulfur coal, you mentioned 5,
    5 and a half percent sulfur content in the petroleum coke. How
    does that compare with the high sulfur coal?
        Mr. Amick. While Wabash was originally designed for some 5
    percent sulfur coals, by the time we built it, the high sulfur
    coal mines had mostly closed down. So we have run 3 and a half
    percent sulfur coal, which is seven times more sulfur than the
    sub-bituminous powder river basin type coals.
        On petroleum coke, we have found the primary difference is
    in the ash by-product, the slag by-product. It's a reduced
    volume, but we've found that all of the trace metals that are
    in the pet coke get captured in the slag and passes not only
    the T clip, the first level of leachate testing, but the RCRA
    and the universal standard testing, too, all the higher limits
    that the EPA has not enforced on the coal-fired power plants
    yet. So we're putting these into asphalt and even some landfill
    cover applications.
        Senator Carper. I just want to fully understand the
    potential, just sitting here and listening for the first time
    to what you're trying to do, the potential sounds rather
    dramatic. Am I over-reacting?
        Dr. Sandor. I personally don't think so. I think that
    establishing markets look formidable. It appeared to be
    incomprehensive 30 years ago that you could transfer interest
    rate risk and develop a futures market for Government
    securities. Yet it made living with the vicissitudes of markets
    easy. We have worked on things like catastrophe index bonds,
    hurricane index bonds, earthquake index bonds, which transfer
    major risks. And in the SO2 program, everybody
    thought that that would be very difficult and it was indicated
    that the costs would be ridiculous, $1,800, and they averaged
    $138 for the decade in the 1990's at the Chicago Board of Trade
    auctions.
        I think this is, and the Joyce Foundation believes this is
    potentially a transformational project that we have the ability
    to draw lots of sectors and the debate now, and I heard one
    last week at the UNDP, some forecasts are for $7 a barrel oil
    equivalent in the costs. I happen to think it's going to be two
    cents. So I think we're at dramatically different scales here.
    Hopefully, the price discovery, the entities we have, cities
    like Mexico City, companies like Ford and AEP and Dupont
    working together, building this consensus, we hope in our own
    small way can turn this into a demonstration project that has
    real meaning.
        Senator Carper. The legislation that several folks have
    alluded to today is called the four-pollutant bill. I'll try to
    cap its slant on four areas. One is CO2, my
    recollection is the legislation would require us by 2007 to
    have returned to 1990 levels of CO2 emissions. My
    recollection is that the legislation also says that with
    respect to mercury, we have to peel back mercury emissions by
    about 90 percent by 2007. With respect to SOx and NOx, I think
    the legislation calls for a 75 percent reduction by 2007.
        I don't know that the legislation provides for a trading,
    market mechanisms to facilitate our getting to those points.
    I'm not so much interested in asking our witnesses to tell us
    whether those goals or guidelines are doable. I would say to
    Mr. Kripowicz, just to sort of follow up on what Senator
    Voinovich said, we're all looking forward to your input and are
    anxious to have your input. We can go forward and mark up a
    bill and all, but it would be terrific if we had the
    Administration's input to work with as we go forward.
        Given the objectives for by 2007 in those four areas, I'd
    welcome any thoughts that you have, not so much with respect
    to, is it doable, but with respect to costs, the cost
    implications to us as consumers, to those who are running
    businesses to provide electricity, the costs for buying the
    electricity that is generated, and maybe even the cost that's
    harder to measure, and that's the cost to our health and to our
    environment. Would you all want to take a shot at that?
        Mr. Kripowicz. There's no question that if you control
    versus not controlling, you're going to have a higher cost than
    you do now. But we believe that the costs for a three P
    approach, not necessarily as I said, the Administration will
    come up with alternatives to what the bill itself has, but it
    will address and assess the manageability of the cost for three
    P. But we think a three P strategy can be done with minimal
    cost to the consumer for the environmental benefit that you
    get.
        One of the biggest problems with the carbon emission cap is
    that we think it will be extremely costly. And there are
    varied, I know EPA has done a study, but our Energy Information
    Administration has also done a study which I believe the
    committee has, that an emission cap would increase electricity
    prices by 43 percent between now and 2010 and by 38 percent by
    2020 over the reference case that they normally run. So it
    would be a tremendous increase in cost, which is one of the
    reasons why the Administration opposes that approach.
        Senator Carper. Does anybody else want to jump in on that
    point, the costs that might be associated with CO2
    reductions? Mr. Sandor?
        Dr. Sandor. Yes, I think that one of the reasons that we're
    working on this demonstration project is because there is not
    significant empirical data to really forecast the price. That's
    why the private sector is saying, let's get a handle on price.
    If we make the mitigation efforts as broad as possible, perhaps
    we're going to discover, as we did with sulfur, that forecasts
    of $1,800 or $1,500 a ton turn into reality to 130, to 10
    percent or 20 percent. But we think you need to learn from this
    sort of real empirical data that economists, while providing
    the construct for intelligent insight into matters like this
    from a forecasting point of view really need empirical data.
        Senator Carper. Mr. Kripowicz.
        Mr. Kripowicz. Senator, I would just add that we agree
    definitely with the concept of trading. It's a market based
    mechanism, it's worked very well in the Clean Air Act to reduce
    the costs. They are actually much lower than they were
    projected originally. So in any control scheme, a trading
    system helps a great deal, because you end up doing the
    cheapest thing in order to encourage trades. So then the market
    plays a role. So that's very important.
        Senator Carper. And you expect that will be part of the
    Administration's proposal?
        Mr. Kripowicz. I don't know that for a fact. We'll see
    soon.
        Senator Carper. Well, I'll be disappointed if it isn't.
        Mr. Chairman, you've been generous with our time. Thanks
    very much. And to all the witnesses, thank you.
        Senator Lieberman. Thank you, Senator Carper.
        Just a final word, and I think Senator Voinovich would like
    to say a word, too. I thank the panel.
        I do want to indicate that Senator Jeffords and I are very
    serious about moving forward as far and as fast as we can with
    the Clean Power Act. I know that Senator Jeffords wants to sit
    down with at least the two of us and Senator Voinovich, Senator
    Smith as well as the ranking member on both the full committee
    and this subcommittee. Because we think this problem is so
    important.
        We also just, drawing from what I've heard from this
    excellent panel, our feeling is that if we set a cap on not
    just the three pollutants, but carbon also, we will drive the
    technologies that will in turn not only make the production of
    electricity more efficient, including with the use of coal, but
    will have a whole host of other positive effects, one of which
    will be that the projected cost increases in electricity that
    Mr. Kripowicz has said will be far below anything that would be
    experienced.
        We've just seen so much unbelievable beyond our imagination
    happen through technology and markets, and in an unusual way, I
    think we can say that in this war we've been waging in
    Afghanistan, we've seen the capacity to do things that, you
    know, not just Eisenhower wouldn't have dreamed of, Schwarzkopf
    wouldn't have dreamed of. We've got unmanned aerial vehicles
    flying 20,000 feet overhead at night that are able to see
    people and animals moving on the ground and track enemy and
    then hit them with laser precision guided weapons.
        I use that because it's on my mind, and it's on all of our
    minds. If we can do that, we can figure out a way to drive
    technology to produce energy efficiently and without inflating
    the price through the use of technology. The experience here is
    exactly the one that Dr. Sandor and others have talked about,
    which is that we've had such a great experience with the market
    based caps on acid rain causing pollutants that were part of
    the 1990 Clean Air Act amendments, that have not only achieved
    enormous reductions in acid rain, but at a fraction of the cost
    projected.
        So just to answer or pick up on something that Senator
    Carper said, the four-pollutant bill doesn't specifically set
    up a trading system after the cap, but it is certainly
    contemplated as one of the responses that the Administrator
    under the bill could adopt. The project that Senator McCain and
    I are involved in with folks at the Pugh Trust particularly
    would specifically, if enacted, establish a cap-and-trade
    system, pattern on acid rain.
        So I think we've got a serious problem here in all the
    effects that global warming will have on the geography of the
    State of Delaware, which though a small State, is beloved by
    many.
        [Laughter.]
        Senator Lieberman. But on our health, and on our economy.
    So I think it's worth trying to do. I just wanted to state that
    for the record, as we conclude.
        Senator Voinovich.
        Senator Voinovich. It's interesting that Senator Carper is
    worried about his State being inundated with water, and our
    major concern in Ohio is Lake Erie's low levels. So it's
    interesting.
        My comment would be that this technology is expensive to be
    installed. Wouldn't you agree that if we're going to come up
    with some new legislation in this area in terms of setting some
    new caps on the emissions that we will need to continue to
    provide money for continuing clean coal technology and also
    some incentive to the utilities to utilize the technology
    that's available rather than fuel switch?
        Mr. Lowe, you've been using your technology, but the word I
    get back from a lot of utilities is that yes, you've got some
    new technology out there, Senator, but a lot of it's very, very
    expensive and we're going to weigh the cost of that versus fuel
    switching and we'll put it on the balance sheet and if it looks
    like it's better to go with it, we'll do it, if not, we'll fuel
    switch to gas. And frankly, when you really think about this,
    they can do that and just pass it on to the customers. They are
    utilities. They just pass it on.
        So I think that I'd like your comment on having this
    legislation and the importance of continuing the money for
    clean coal technology and also some vehicle that's available
    that would help encourage these people to make it worth their
    while to install the technology. Whoever wants to answer.
        Mr. Kripowicz. Senator, the Administration's budget has an
    emphasis on clean coal technology, as you know. President Bush
    has championed clean coal technology and has provided
    significant funding for it, which includes improvements in the
    kind of technology that we've talked about this morning, but
    also in the area of mercury control. We also had large
    increases last year in our carbon sequestration budget, because
    in the long term, we believe we'll have to sequester carbon
    too, and those technologies are now in the process of being
    developed.
        So we very strongly support the development of the
    technology in the President's budget.
        Senator Voinovich. Mr. Amick.
        Mr. Amick. I can say unequivocally, our technology, which
    is one of the top three coal gasification technologies in the
    world today, wouldn't be where it is today without the DOE
    support we've had at Wabash and at other research projects
    we've done. The technology today, I mean, it's not only
    technically ready, but it's commercially ready, because we've
    had plants like Wabash and like Tampa that have been
    demonstrations where not only the utilities but the bankers can
    go out and kick the tires and take a look at it.
        You talk about things, mechanisms to motivate people to use
    the new technologies, what we saw in H.R. 4, which was
    production credits for clean coal technology, tied to very much
    improved efficiencies. From our standpoint, that was a great
    thing.
        Senator Voinovich. Any comments, Mr. Lowe?
        Mr. Lowe. I think I clearly stated that IGCC technology
    would not be where it is today without clean coal technologies.
    I think that needs to be continued to be funded over the coming
    years.
        Senator Voinovich. Well, we're hoping to have an energy
    bill debated in the Senate. And one of the parts of it that's
    going to be very important is that the Finance Committee is
    going to be considering the tax portions of H.R. 4. I think
    it's incumbent upon those of us that are interested in this
    area to make sure that that part of H.R. 4 that deals with
    technology incentives to move forward are maintained, so that
    if we do come up with a compromise, that it will be melded into
    that compromise and we can move forward and people will feel a
    lot more comfortable about what we're asking them to do.
        Thank you.
        Senator Lieberman. Thanks, Senator Voinovich. Incidentally,
    one of the other committees I'm on, the Governmental Affairs
    Committee, reported out last fall or early winter an excellent
    proposal introduced by two of the titans of the Senate,
    Senators Byrd and Stevens, on climate change, which requires
    the establishment of an office in the White House to develop a
    national strategy to deal with climate change. But I mention
    this because significantly, and perhaps not surprisingly, but
    appropriately, it focuses and increases support for clean coal
    technologies through the Energy Department.
        The other thing I meant to say at the end of my previous
    remarks, in terms of the discussion about new source review,
    just to put an optimistic ribbon on it, which is that if caps
    or other methods, but I believe caps, drive technology to make
    the production of electricity more efficient, then the plants
    will be more efficient and they won't trigger the new source
    reviews. So that's another way to avoid the kind of conflict
    that we're talking about.
        I think we'd better go on to the second panel. So I thank
    the first panel, you've been very, very helpful and very
    encouraging. Have a good day.
        Our first witness on the second panel is Mr. Michael
    Durham, President, ADA Environmental Solutions of Littleton,
    Colorado. The second witness will be Mr. Richard Miller of the
    Fabric Filter and FGD Sales Manager, Hamon Research-Cottrell,
    Inc., Walnutport, Pennsylvania. Then to Mr. Frank Alix, CEO of
    the Powerspan Corporation, of New Durham, New Hampshire. And
    finally, George Offen, Area Manager for Air Emissions and By-
    products of Electric Power Research Institute of Palo Alto,
    California.
        This is a remarkably geographically diverse panel. We thank
    you for coming from as far and wide as you have come and Dr.
    Durham, we'll begin now with your testimony.

     STATEMENT OF MICHAEL D. DURHAM, PRESIDENT, ADA ENVIRONMENTAL
                     SOLUTIONS, LITTLETON, COLORADO

        Mr. Durham. Good morning, Mr. Chairman. I'm Dr. Michael
    Durham, President of ADA Environmental Solutions. We are a
    company that develops and commercializes new air pollution
    control technology for the power industry.
        We are currently managing a $7 million program involving a
    team of the Nation's leading engineers and scientists to scale
    up and demonstrate sorbent-based mercury control technology.
    The Department of Energy is providing two-thirds of the funding
    for the program. The remaining funds are provided by team
    members, including PG&E, Southern Company, Wisconsin Electric,
    EPRI, Ontario Power, FirstEnergy and TVA.
        During 2001, we successfully completed two short term
    programs that represent the first full scale demonstrations of
    sorbent-based mercury control technology in the U.S. power
    industry. Tests were conducted on both bituminous and sub-
    bituminous coals. I have submitted detailed documents
    presenting results from these two successful programs. These
    results provide us with an early indication both of the high
    potential and the current limitations of this technology. This
    morning I will briefly summarize results and discuss plans for
    continued development.
        Sorbent injection technology represents the simples and
    most mature approaches to controlling mercury emissions from
    coal-fired boilers. It involves injecting a solid material,
    such as powdered activated carbon, into the flue gas. The gas
    phase mercury contacts the sorbent and attaches to its surface.
    The sorbent with the mercury attached is then collected by the
    existing particle control device along with the fly ash.
        Two 150 megawatt demonstrations were conducted during 2001.
    The first program was completed in the spring at the Alabama
    Power Gaston Station, which burns a low sulfur bituminous coal
    and uses a fabric filter to collect the carbon and fly ash. The
    second program was conducted during the fall at the Wisconsin
    Electric Pleasant Prairie Power Plant, which burns a sub-
    bituminous PRB coal and uses an electrostatic reciprocator to
    collect the carbon and fly ash.
        These programs demonstrated that it is possible to design,
    build and operate equipment at a scale capable of treating
    power plant flue gas. We are encouraged by the potential shown
    for this technology in that short term removal levels in excess
    of 90 percent were achieved. These tests also prove that
    activated carbon was effective on both forms of mercury,
    including elemental mercury, which has been proven to be the
    most difficult form of mercury to collect. Elemental mercury is
    a dominant species produced by PRB coal and it is also produced
    by many bituminous coals.
        However, these results also documented limitations of the
    technologies. Please refer to figure one in my submitted
    testimony, which is a comparison of the results from these two
    sites. You will see that the downstream particle device is the
    dominating factor in determining removal efficiency. While
    removal levels of 90 percent were obtained with a fabric
    filter, even with spray cooling ESP was limited to removal
    levels of 50 to 70 percent.
        Since only 10 percent of plants currently have fabric
    filters, additional capital expenditures were required to
    achieve the higher levels at the majority of the power plants.
    It was also discovered that the presence of activated carbon in
    the ash prevented its use in concrete. This represents a
    significant expense that must be incorporated into the cost of
    technology.
        Also it should be noted that these tests ran only for short
    periods of time with the longest continuous run being 2 weeks.
    Even with constant load conditions, with variations in the
    coal, it was not possible to maintain the 90 percent removal
    levels over a 5-day continuous run.
        In conclusion, powdered activated carbon injection offers a
    promising approach for mercury control for coal-fired boilers.
    The injection equipment is relatively inexpensive and can be
    installed with minimal down time to the plant. It is effective
    for both bituminous and sub-bituminous coals, and when
    interfaced with a fabric filter, is capable of high levels of
    mercury removal.
        However, additional testing is required to further
    characterize the capability and overcome the limitations of
    this technology. It is important to determine performance on a
    wider variety of coals and different plant operating
    conditions. Long term testing will be necessary to document
    impacts on downstream equipment.
        As with other air pollution control technologies, sorbent-
    based mercury control needs to go through a phased approach as
    it matures to become accepted as commercially viable. We plan
    to participate in partnerships with DOE and power companies in
    risk shared programs, such as the clean coal power initiative,
    to continue to advance this promising technology.
        Thank you for this opportunity to testify.
        Senator Lieberman. Thanks, Dr. Durham. I look forward to
    questions and answers.
        Next is Richard Miller of Hamon Research-Cottrell,
    Somerville, New Jersey.

     STATEMENT OF RICHARD L. MILLER, SALES MANAGER, FABRIC FILTERS
       AND FGD SYSTEMS, HAMON RESEARCH-COTTRELL, SOMERVILLE, NEW
                                 JERSEY

        Mr. Miller. Thank you, Mr. Chairman.
        As was said, my name is Richard Miller. I'm Sales Manager
    for Fabric Filter and FGD Systems at Hamon Research-Cottrell.
    We've been in the business since 1907, when Dr. Frederick
    Cottrell first invented the first industrial electrostatic
    reciprocator. So our company has a long history of solving
    environmental air pollution control problems. This is just one
    of them.
        In part of my testimony I wish to offer the following
    information, just as some highlights of it. Effective mercury
    reduction levels have been shown to occur naturally to various
    degrees across existing power stations. This is from the coal
    pile to the stack, so it depends on what type of environmental
    devices are in between.
        Removal rates in excess of 90 percent have been achieved at
    some of these plants. Data suggests that it is easier to remove
    the mercury from eastern coals than it is from western or even
    some low grade coals such as lignite. Most existing power
    stations have electrostatic precipitators installed for
    particulate removal. A smaller number, but growing number, have
    fabric filter stations or installations, which generally remove
    a greater amount of particulates than other flues.
        One commercially available removal technology which we want
    to talk about is called COHPAC, which stands for compact hybrid
    particulate collector. This was originally developed by the
    Electric Power Research Institute, or EPRI, as a multi-
    pollutant control device. It combines the existing precipitator
    with a hybrid pulse jet fabric filter that's added in series
    with it. It acts as a final polishing device.
        With the use of COHPAC under recent short term test program
    conducted by DOE and operated by ADA-ES, an aging Hot-Side
    electrostatic precipitator which originally had shown levels as
    low as zero percent mercury capture was able to effectively
    achieve mercury reduction levels of 80 to 90 percent, using an
    activated carbon injection system. Additional testing is
    encouraged to confirm long term removal rates and any potential
    impacts on the existing system.
        Mercury removal rates of 50 to 70 percent can be reasonably
    be expected to be achievable across precipitators alone, but it
    is expected to require greater amounts of sorbent, such as
    powderized activated carbon, which could result in higher O&M
    costs than fabric filter systems alone. Today, commercially
    available cost effective air pollution control technology have
    already achieved 90 percent mercury reduction levels on certain
    coals and operating conditions, again depending on the type of
    air pollution equipment present.
        We in our industry recognize there's a cost to achieve the
    improved air quality. But you must also recognize that this
    investment has a high rate of return, not only in improved air
    quality but also in a highly efficient economic stimulus to a
    sluggish economy, which results in the creation of many jobs.
    Some utilities are even now ready to meet these challenges and
    await the implementations of these new regulations and time
    schedules.
        As we heard earlier, Mr. Chairman, by Senator Corzine, Mr.
    Frank Cassidy of PSE&G Power back in July 12 last year, in a
    testimony before the Senate Committee on Commerce, Science and
    Technology, gave his support for the four-pollutant emission
    reduction program for the electric power industry. This past
    Thursday, on January 24, they announced an agreement with EPA
    and New Jersey Department of Environmental Protection for a 10
    year comprehensive program to reduce emissions at their New
    Jersey coal-fired power plants, which currently burn low sulfur
    eastern bituminous coals.
        PSE&G agreed to install state-of-the-art SCR and dry FGD
    technologies at both their Hudson and Mercer facilities, as
    well as a fabric filter system to be added to their Hudson
    facility. Guaranteed reductions included the 90 percent NOx, 90
    percent SO2 reduction, plus a 90 percent reduction
    in mercury levels across their systems, not to mention an
    additional 90 percent reduction at Hudson Station by adding in
    the fabric filter collector to the system. This is in addition
    to a 15 percent voluntary CO2 reduction level.
        So you can see the utilities are ready, they just need a
    little bit of a push sometimes to get started. And we ourselves
    are ready to deliver the equipment to meet the requirements.
        So again, thank you, Mr. Chairman, for the opportunity to
    present my case to you.
        Senator Lieberman. Thank you, Mr. Miller.
        Mr. Alix, of Powerspan Corporation.

         STATEMENT OF FRANK ALIX, CHAIRMAN AND CEO, POWERSPAN
                 CORPORATION, NEW DURHAM, NEW HAMPSHIRE

        Mr. Alix. Thank you, Mr. Chairman, for the opportunity to
    present Powerspan's perspective on the Clean Power Act.
        Powerspan is a company formed in 1994, we're located in New
    Hampshire. We have about 50 scientists and engineers and we've
    had about $30 million of outside capital from venture
    capitalists and utilities invested to develop this technology.
    Our technology is called electrocatalytic oxidation, or ECO.
    It's distinguished by the ability to remove high levels of
    SO2, NOx, mercury and fine particles in one compact
    installation.
        We've got funding from FirstEnergy, American Electric
    Power, Cinergy, Ameren and Allegheny Energy. In a two megawatt
    slipstream test conducted for FirstEnergy in Ohio, we reduced
    emissions of mercury below minimum detectable limits, which is
    greater than 81 percent in that installation. We also believe,
    based on recent tests, our technology will be commercially able
    to remove 99 percent of the SO2, 90 percent of the
    NOx or better, and we believe 80 to 90 percent of the mercury.
        We produce a commercially valuable by-product, avoiding the
    need for new landfill disposal sites. We also estimate that our
    capital and operating costs will be about one half that of FGD
    and SCR systems when commercial.
        Our first commercial unit, we've done the engineering and
    expect the installation to commence in the spring, also in
    Ohio, at FirstEnergy's Burger Plant. It's a 50 megawatt
    slipstream unit. It will be scaled commercially in all
    component and major designs. Based on that, we expect to have
    the commercial units available for larger installations
    beginning in 2003 and on out into 2005.
        In considering the legislation, the Clean Power Act, we
    think there are some things that can play a real vital role in
    bringing new technology to the forefront that we'd like the
    committee to consider. First off, as you've mentioned,
    environmental technology is driven completely by environmental
    regulations. But we need certainty and time, as well as the
    utilities, to deploy our technology.
        It takes a great deal of capital and about 5 years to get a
    technology like ours to market. So a legislation where you can
    telegraph the requirements 5, 10, 15 years in advance are a
    great aid to developing the most cost effective technology.
        Second, the cost of environmental compliance is usually
    quite a bit less than predicted. The panel before made that
    quite clear on SO2. We expect the cost of compliance
    with the provisions in the Clean Power Act will be quite a bit
    less, including mercury. I think there is some fine technology
    being demonstrated for activated carbon and fabric filters that
    we've heard discussed already. Our technology being retrofit to
    a coal-fired plant without any controls could get that done for
    an incremental cost that is quite small compared to current
    estimates.
        I think the type of legislation, in terms of how individual
    pollutants are regulated, is also important. Traditionally, one
    pollutant is regulated at a time. So a plant owner might have
    to install mercury controls today, NOx controls in 5 years,
    SO2 controls in 10 years. For a technology like ours
    that removes all three, that makes it very difficult to sell a
    multi-pollutant approach. We'd like to see limits that have a
    transition period that's very similar and overlap, so that we
    have some incentive to install the most cost effective
    solution.
        Another potential problem is that reductions can be made
    early when compliance benefits are given for early compliance,
    then other reductions are made at the last possible minute. I
    think this makes good business sense for a utility, but for the
    air pollution control industry, it puts them in a feast or
    famine mode. I think that whatever reductions are called out in
    the Clean Power Act, it would be helpful for the industry to
    make those staged over time, so that we didn't reach a limit in
    10 years that dropped off a cliff, and it wasn't until 8 years
    from now when people got serious about putting in controls. It
    makes a big difference for us.
        Last, I think there is a lot of uncertainty about mercury
    and carbon control technologies. One thing I will say for
    certain, though, is that if you don't have a regulation for
    either, you'll never have the technology. So we're quite clear
    about that. I think one way of limiting risk and potentially
    coming out with a good outcome is things that we use in the
    financial community. Certainly my investors are quick to use
    them with me, and that's something called a ratchet or circuit
    breaker. In the case of a circuit breaker, of course, you set a
    fairly strict limit. But if the costs become prohibitive, you
    give the administrator some type of relief that they could
    either impose on a State basis or an industry basis or a plant
    basis.
        In the case of a ratchet, if the costs are much lower than
    predicted, you could continue to drive down the cap. That would
    be a great incentive for a company like us, that we believe we
    have a very low cost combined technology available to continue
    developing our technology and to get even greater benefits than
    might be conceived today five to 10 years from now.
        So I just suggest that as a potential opportunity to bridge
    this gap between the uncertainty of wanting fairly significant
    emission reductions but not knowing if the technology will be
    there. I'd like to propose that they be done in combination, so
    that if the technology in fact surpasses our expectations, then
    perhaps there's a way to ratchet these limits even tighter.
        In summary, I believe, like you do, that we need to have a
    cleaner environment and power and security. I think that we do
    have an innovative entrepreneurial spirit in our country. There
    are a lot of people like this at Powerspan out there trying to
    make this happen. I think if you take a leap of faith and
    deliver the legislation, we'll show you, like companies have in
    the past, that we'll deliver the technology to do it. Thank you
    very much.
        Senator Lieberman. Thank you, Mr. Alix. We appreciate your
    testimony very much. I like the vision of this as a faith based
    initiative.
        [Laughter.]
        Senator Lieberman. Mr. Offen.

       STATEMENT OF GEORGE R. OFFEN, MANAGER, AIR EMISSIONS AND
       COMBUSTION BY-PRODUCT MANAGEMENT, ELECTRIC POWER RESEARCH
                               INSTITUTE

        Mr. Offen. Thank you, Senator Lieberman, and thank you for
    inviting EPRI to address your subcommittee on this important
    subject of mercury control.
        As you mentioned, I manage EPRI's programs in air emission
    reduction and beneficial use of combustion by-products, which
    we've put together because of their relationship. EPRI was
    established nearly 30 years ago as a non-profit, collaborative
    R&D organization to carry out electricity related supplies,
    delivery, end-use and environmental R&D in the public interest.
        We've been supported voluntarily since our founding in 1973
    and our funders include electric power companies that are
    responsible for over 90 percent of the electricity sold in the
    United States, as well as 60 companies overseas. We also
    cooperate very closely with Government agencies in our research
    programs, including EPA and DOE. I would point out this is
    especially true in the case of mercury, the demonstrations that
    Dr. Durham and Mr. Miller talked about earlier were ones in
    which we collaborated.
        For well over a decade, EPRI has been conducting research
    on all aspects of mercury, on the sources of it, the way it
    moves in the atmosphere and how it gets changed in the
    atmosphere, the potential health effects and control
    technology. In my remarks today, we'll focus just on the latter
    topic. We'll provide you with EPRI's conclusions on today's
    state of the technology in mercury control. We provide
    supporting facts in the submittals.
        I just emphasize the word today, because our understanding
    of the technology is changing, and often dramatically, on a
    daily basis. We know quite a bit about the current emissions of
    mercury, we have quantitative data on mercury emission rates
    and reductions obtained by controls that are currently in place
    to reduce particulate and SO2 emissions. These data
    have shown us that the emissions vary significantly from power
    plant to power plant depending on the fuels they fire and the
    air pollutant controls they have for other pollutants.
        However, because these data are all based on measurements
    that are snapshots in time, and unfortunately, several years
    ago, when these measurements were made, we did not know all the
    properties of the gases that we now know are important to have
    measured, they weren't all collected. So we do have a
    substantial uncertainty about how to relate those measurements
    to averages that could be used to set realistically achievable
    emission limits for all plants.
        Similarly, we've seen cases where the combination of SCR
    for NOx controls and SO2 scrubbers do capture a
    significant amount of mercury. But it seems to be only with
    certain designs, and there's a question that has arisen as of
    some data we obtained earlier this year about the durability of
    the catalyst to do that, does that only happen when catalysts
    are fresh.
        We go beyond the capture available from controls and other
    air pollutants, and we're rapidly gaining experience, as you
    heard earlier, with activated carbon injection, which we think
    is the technology most likely to be available first. At this
    point, we can estimate emission reductions within a range of 10
    to 20 percent, but our experience is limited to a few
    combinations of fuel and air pollution controls. All of it is
    short term. I apologize for repeating comments you've heard
    already.
        We therefore think that additional long term full scale
    tests are needed to obtain data on what we would call
    sustainable emission levels and on the impacts of the added
    carbon on both other air pollution controls and the usability
    of fly ash. These all affect the real costs of this technology
    and can dramatically.
        Looking to the future, EPRI, DOE and others such as
    Powerspan are actively developing new technologies aimed at
    providing lower cost options than carbon injection or providing
    methods for taking advantage of an existing plant
    SO2 scrubber, and methods that don't produce the
    waste. While some of these processes are quite innovative and
    look very promising, most are still in the early stages of
    development.
        EPRI believes that some 20 full scale long term
    demonstrations of carbon injection and promising emerging
    technologies are needed to provide industry and the regulatory
    community with the information required to establish realistic
    emission limits for mercury. To conduct a program of this
    magnitude on an expedited schedule requires a public/private
    partnership. We're discussing such a collaborative program with
    both our funders and with DOE.
        To conclude, I offer you EPRI's assessment of mercury
    control capabilities as we know them today. About 40 percent of
    the potential mercury emissions are already being removed by
    air pollution controls that are in place today across the
    electric power industry. And actually, more is being removed if
    you consider the amount that's removed by coal washing, and
    that doesn't seem to be discussed or measured too much, mainly
    on eastern coals.
        Further reductions are definitely expected as additional
    NOx and SO2 controls are added to meet current
    regulatory programs for acid rain, attainment of ozone and fine
    particulate standards. But exactly how much mercury will be
    removed as a result of these programs and at which sites
    remains a question, again, largely due to the question on SCRs
    role that I mentioned earlier. Depending on the particular
    controls in place, or added for the purposes of mercury
    controls, activated carbon injection could be expected to
    capture between 50 and 90 percent of the potential mercury
    emissions. Again, we need to answer questions on sustainable
    operation, impacts and costs using long term tests on full
    scale.
        Emerging technologies do offer the promise of similar
    reductions at lower costs as well as solutions for difficult
    plant configurations. However, we will require a substantial
    research investment and therefore, we cannot really predict the
    availability dates, performance and final cost until the
    research is further along. EPRI has been in the business of
    evaluating technologies for many years. We have seen many
    successes and we've also seen many changes in direction.
    Unfortunately, one of these experiences was last spring when an
    ADP demonstration was stopped prematurely, as an example.
        So that's our summary, and I thank you again for giving
    EPRI the opportunity to provide these comments.
        Senator Lieberman. Thanks very much, Mr. Offen, and thanks
    to the entire panel very interesting and encouraging reports.
        I'm just going to ask one brief question. Unfortunately,
    the bells you heard behind you and the lights I see on the
    clock are telling me I've got about 3 minutes to get over to
    the floor and cast a vote. I think I made my inclinations
    pretty clear in the last panel, which is, I do feel strongly
    that the kinds of encouraging technological developments that
    you've spoken to here really would benefit from caps. Those
    caps would both give the consumer, in this case utilities,
    certainty of what the field was going to be, and then would in
    turn drive and assist the technologies you're developing.
        My short question, asking a short answer, is, do you agree
    with me? Do you favor the caps that we've talked about?
        Mr. Alix. I favor caps.
        Mr. Miller. We need some kind of cap where you have nothing
    to target toward. We have to have that as a target.
        Mr. Durham. And also, anything that provides flexibility to
    the utilities in achieving the caps will help the cost benefit
    of the process.
        Senator Lieberman. Well said.
        Mr. Offen. I'm not going to comment on caps, because
    everyone takes a position on this legislation. I will say some
    of the comments that Mr. Alix made, though, I think, could be
    tied into that. He's absolutely right on the ball, on the
    button, when he said that what you need is a phased in program
    so that you learn, the reason some of the technologies have
    been reduced in cost, like scrubbers, is the initial
    installation, they were all high cost. But the fact that later
    installations learned from earlier installations, a phased-in
    approach is essential to achieving whatever goals you want to
    achieve at the best, most economical way and least destructive
    way.
        Senator Lieberman. Thank you all very much. I'm going to
    leave the record of the hearing open for 2 weeks. We'll
    probably want to direct some questions to you in writing. Your
    testimony today has been very helpful, we look forward to
    continuing to work with you on this problem. I thank everyone
    who's put the hearing together, and the hearing is now
    adjourned.
        [Whereupon, at 11:30 a.m., the subcommittee was adjourned,
    to reconvene at the call of the Chair.]
        [Additional statements submitted for the record follow:]
    Statement of Robert S. Kripowicz, Acting Assistant Secretary for Fossil
                       Energy, U.S. Department of Energy
        Mr. Chairman and members of the subcommittee: I am pleased to have
    the opportunity to participate in the discussion today. As Acting
    Assistant Secretary for Fossil Energy, my remarks will concentrate
    primarily on the programs in my area.
        The Administration will have activities that are carried out by
    many agencies throughout the government. While I will touch on issues
    and activities in other areas, I would defer to experts in other
    programs to discuss their efforts with you in more detail. The
    Administration strongly opposes including reductions for carbon dioxide
    in S. 556 or any multi-pollutant bill. Pursuing sharp reductions in
    CO2 from the electricity generating sector alone would cause
    a dramatic shift from coal to natural gas and thus would run the risk
    of endangering national energy security, substantially increasing
    energy prices, and harming consumers.
        Unlike sulfur dioxide, nitrogen oxides, and mercury, carbon dioxide
    is not a pollutant. Addressing CO2 is a question of climate
    change policy and separate from clean air policy, which the
    Administration's pending multi-pollutant proposal will address.
        The Administration will not support any legislation that would
    cause a significant decline in our nation's ability to use coal as a
    major source of current and future electricity. At the same time, the
    Administration supports efforts to enhance the cleanliness of coal-
    fired electricity generation and promote a future for clean coal
    technology. In short, the Administration supports a clean coal policy
    as a critical component of our nation's energy and environmental
    policies, recognizing that other sources of energy also have a critical
    role to play.
        The Administration recognizes the seriousness of the buildup of
    greenhouse gases in the atmosphere, even as scientists attempt to learn
    more about their actual effect on the earth's climate.
        We know that the surface temperature of the earth is warming. We
    know that there is a natural greenhouse effect caused by atmospheric
    concentrations of carbon dioxide, water vapor, and other gases that
    contributes to this warming.
        We know that the increases in atmospheric greenhouse gas
    concentrations since the beginning of the Industrial Revolution are due
    in large part to human activity.
        Yet there is much we do not know. We do not know how much effect
    natural climate fluctuations have had on warming. We do not know how
    much our climate could, or will, change in the future. We do not know
    how fast change will occur, or even how many of our actions could
    impact it. We do not know the degree to which actions taken by one
    country, or group of countries, might be offset by the actions, or
    inactions, of other countries.
        None of these uncertainties are cause for inaction, however. As
    President Bush said on June 11, 2001, ``The policy challenge is to act
    in a serious and sensible way, given the limits of our knowledge. While
    scientific uncertainties remain, we can begin now to address the
    factors that contribute to climate change.''
        The Framework Convention on Climate Change, to which the United
    States is one of 186 signatories, sets the long-term goal of
    stabilizing future concentrations of greenhouse gases at a level that
    would avoid ``dangerous anthropogenic interference with the climate
    system.'' There are two ways to achieve this stabilization. One is to
    avoid emitting greenhouse gases in the first place; the other is to
    capture and store them after they have been emitted.
        While we are not now able to identify a concentration level that
    would pose ``dangerous interference,'' the President's National Climate
    Change Technology Initiative, which he announced on June 11, will focus
    on cutting-edge technologies to avoid, capture and store carbon dioxide
    missions as we pursue the long term goal of stabilization.
    The Nation's Power Industry
        To understand the long-term need for an expanded menu of carbon
    management options for electric utilities, it is important to
    understand the current make-up of the Nation's electric power industry.
        The U.S. power generating sector remains the envy of the world. On
    any given day, 3200 utility and 2100 nonutility generators can make
    available up to 775,000 megawatts of electricity for virtually every
    home and business in the country.
        As the pie chart shows, fossil fuels supply about 70 percent of the
    Nation's requirements for electricity generation. Coal, alone, accounts
    for more than 50 percent of the electricity Americans consume.
    Primarily because of the power sector's use of abundant supplies of
    American coal and natural gas, consumers in the United States benefit
    from some of the lowest cost electricity of any free market economy.
    U.S. Electricity Generation by Fuel
        America's economic progress and global competitiveness have
    benefited greatly from this low cost electricity.
        Electricity is an essential part of America's modern economy. As
    this chart shows, while the nation has made dramatic progress in
    ``decoupling'' overall energy consumption from economic growth,
    increased economic activity remains closely linked to the availability
    of affordable electric power--and is likely to remain so for well into
    the future.
        The Nation's demand for electricity is projected to grow
    significantly over the next 20 years. Between now and 2020, the United
    States will likely have to add from 350,000 to 400,000 megawatts of new
    generating capacity to meet growing demand. This is equivalent to
    adding the entire power generation sectors of Germany and Japan,
    combined, to the U.S. power grid. Or put another way, to keep up with
    demand, the United States will have to build 60 to 90 new generation
    units of typical size each year for the next 20 years--in other words,
    adding more than one new plant every week.
        Concurrent with this dramatic--and capital intensive--expansion of
    the Nation's power fleet, power generators will also be called upon to
    make new investments in pollution control technologies to meet
    tightening environmental standards.
        Over the past 25 years, America's electric utility industry has
    invested billions of dollars in advanced technologies to improve the
    quality of our air. Each year, a substantial portion of normal plant
    operations costs--again amounting to several billions of dollars a
    year--are also associated with operating technologies that reduce air
    emissions.
        The investment has returned dividends. By installing new
    technologies to capture particles of fly ash, the power industry has
    dramatically reduced particulate matter governed by the PM-10 national
    air quality standard. The power industry has also installed sulfur
    dioxide controls on more than 90,000 megawatts of capacity as part of a
    successful effort that has cut SO2 emissions substantially
    since 1970. Many of the nation's coal-fired plants have also installed
    nitrogen oxide controls that have helped keep these emissions in check
    until more substantial controls are placed on these units in the
    future.
    Energy and Economic Growth
        In short, advanced technology--given the time to mature and be
    deployed--can be effective. Technological improvements have permitted
    the Nation's power sector to continue generating relatively low cost
    power and, at the same time, use the energy resources America has in
    most abundance. America's use of coal, for example, has actually
    tripled since 1970 even as our air has become cleaner. Advanced
    technology also offers a pathway toward the prospects of achieving even
    greater reductions in air pollutants in the future. An important
    question confronting policymakers today is: can the same cost-effective
    progress be made in reducing carbon emissions using improved
    technology?
    Carbon Management Options for Power Generators
        A number of factors--both natural and manmade--contribute to the
    greenhouse effect. Water vapor in the air, for example, has the largest
    greenhouse effect, but its concentration is determined internally
    within the climate system, and on a global scale, is not affected by
    human sources and sinks. Methane, ozone, nitrous oxide, and
    chlorofluorocarbons are other greenhouse gases in addition to carbon
    dioxide.
        In terms of carbon dioxide, utilities currently account for about
    one-third of the CO2 emissions released in the United States
    by human activity. One challenge is to decouple greenhouse gas
    emissions and the use of low-cost, reliable fuel resources--in other
    words, reduce emissions while avoiding the economic disruption of a
    massive overhaul of the Nation's energy supply system.
        There are generally three approaches for accomplishing this
    ``decoupling.'' One is to use energy more efficiently. The second is to
    place greater reliance on renewables, nuclear power, and low-carbon
    fuels such as natural gas (and eventually perhaps, hydrogen). The third
    is a more recent approach now gaining increasing momentum in the
    technical community: to capture carbon gases from energy systems and
    store them.
        Approach 1--More Efficient Energy Use: Most people associate the
    term ``energy efficiency'' with the consumption of energy--i.e., more
    efficient automobiles, home appliances, and manufacturing equipment.
    Indeed, the United States has become a much more energy-efficient
    nation in the past quarter century. Had Americans continued to use
    energy as intensively as they did in 1970, the U.S. economy would today
    be consuming about 177 quadrillion Btus (quads) of energy, rather than
    the 99 quads we actually consume.
        But as the President's National Energy Policy points out, ``energy
    efficiency'' improvements can also be applied at the point where power
    is generated--at the power plant itself.
        Today, an average coal-fired power plant converts about 33 percent
    of the energy value of the incoming fuel into usable electric power. An
    average natural gas combined cycle turbine plant converts from 40 to 50
    percent of its fuel into electricity. Most of the unused energy is
    discarded as waste heat.
        This offers tremendous potential for energy savings--and
    corresponding carbon reductions--by improving the fuel-to-electricity
    efficiencies of both current and future power plants. For example, if
    we could boost just the average coal-fired power plant efficiency,
    alone, from 33 percent to 35 percent, the energy savings would be
    equivalent to:
          weatherizing 82 million homes--or roughly every home in
    the country that isn't currently weatherized, or
          replacing 300 million 100-watt incandescent light bulbs
    with fluorescents, or
          installing 7.4 million commercial heat pumps.
        Such an efficiency gain would also reduce carbon emissions from
    power generators by nearly 26 million tons per year.
        Achieving this modest efficiency improvement in today's power
    plants could be relatively cost-effective. In some cases, advances in
    computer systems--i.e., the use of artificial intelligence to optimize
    burner performance and other plant operations--might be sufficient to
    achieve the increased efficiencies.
        Moreover, 66 percent of U.S. coal-fired power plants--representing
    200,000 megawatts of power capacity--are 20 to 40 years old and could
    be candidates for ``repowering'' with improved, higher efficiency
    combustors or new, even more efficient power generating options.
        A renewed interest in supercritical coal-fired power plants is
    occurring as power plant designers incorporate major improvements in
    materials for boilers and steam turbines that have occurred since the
    early 1980's. These plants, which operate at higher steam temperatures
    and pressures, will show significant efficiency advantages over older
    ``sub-critical'' units.
        As important as these incremental advances in efficiency will be,
    in actuality, we believe they are only a small step toward what might
    ultimately be feasible. With technology development underway in the
    United States and overseas, the power industry is now preparing for a
    major step forward with a new generation of even more efficient power
    plants.
        We see the potential for coal-based power technologies emerging
    within this decade with efficiencies in the range of 40-45 percent; and
    by the middle of the next decade, we could have technologies in place
    to boost efficiencies to as much as 60 percent.
        One of the best prospects for achieving these significant boosts in
    power efficiencies is coal gasification combined cycle--an emerging
    technology in which coal is converted into a combustible gas, rather
    than burned directly, and the gas is cleaned and burned in a gas
    turbine. The exhaust from such a system remains hot enough to drive a
    conventional steam turbine, producing a second output of power--
    accounting for the name combined cycle--and resulting in the
    significant boost in efficiencies.
    The Tampa Electric Coal Gasification Combined Cycle Plant
        The first pioneering coal gasification combined cycle plants are
    already operating. Two are in the United States. Built as government-
    industry ``clean coal technology'' partnerships, commercial-scale (250-
    megawatt class) power plants are running near Tampa, FL, and West Terre
    Haute, IN. They are the cleanest coal-fired power plants in the world.
    Their first-of-a-kind efficiencies are already approximately 40 percent
    or more, and they are providing the essential ``real-life'' data that
    engineers can use to make further efficiency improvements in the
    future.
        Natural gas systems are also benefiting from gains in efficiencies
    brought about by recent R&D. Within the last 2 years, as a result of
    DOE-industry technology partnerships, U.S. turbine manufacturers have
    introduced advanced turbines that will top the 60-percent efficiency
    mark for combined cycle operation--a threshold once considered the
    ``four minute mile'' of turbine technology.
        Not only will advanced high-efficiency turbines be used in future
    gas-fired power plants--including plants now being built in New York
    and Florida--they also provide a means for enhancing the performance of
    future coal gasification power plants.
        Even higher efficiencies may be possible by developing ``hybrid''
    combinations of advanced gas turbines and fuel cells. The first
    prototype systems are being designed and tested. A 220-kilowatt solid
    oxide fuel cell/microturbine is being readied for operation in
    California. A 1-megawatt system is on the drawing boards for Ft. Meade,
    Maryland. If the current high costs of fuel cells can be reduced and
    the technical challenges of linking a fuel cell with a turbine can be
    overcome, it may be possible in the future to generate electric power
    from fossil fuels at efficiencies of 75 to 80 percent or higher.
        The carbon reduction potential is significant. If power plant
    efficiencies can be increased by 50 percent over today's deployed
    plants, greenhouse gas emissions could be reduced by more than 340
    million tons of carbon per year by 2050.
        Approach 2--Greater Reliance on Low-or No-Carbon Fuels: Natural gas
    currently provides only 16 percent of U.S. electricity generation. But
    natural gas is projected to be the dominant source of fuel for new
    power plants in the next two decades. As much as 90 percent of capacity
    additions between 1999 and 2020 could burn natural gas. The amount of
    natural gas used in electricity generation is projected to triple by
    2020.
        Natural gas emits about half the carbon emissions of coal. Yet, the
    dominant growth of natural gas use in the power markets is neither
    certain, nor necessarily desirable from an energy diversity and
    economic standpoint.
        Low natural gas prices in 1998 and 1999 caused the industry to
    scale back drilling and production. In 2000, natural gas prices
    quadrupled, which led to substantially higher prices for electricity
    generated with natural gas. While supplies are up this winter, these
    price fluctuations illustrate some of the difficulty of over-reliance
    on natural gas.
        Natural gas will likely be the preferred fuel for new power
    capacity if natural gas prices remain below $3.00 per thousand cubic
    feet. If gas prices, however, rise much above $4.00 per thousand cubic
    feet, it is likely that many power generators will turn back to coal or
    other power generating options.
        Nuclear energy accounts for 20 percent of all U.S. electricity
    generation. Nuclear power emits no carbon dioxide emissions at all;
    therefore it holds great potential for contributing to the long-term
    goal of stabilizing greenhouse gas concentrations. Yet, for a variety
    of reasons, including uncertain capital costs and length of
    construction, no new nuclear plants have been ordered in the United
    States since 1973.
        Since the 1980's, nuclear power plant operations have substantially
    improved. While U.S. nuclear plants once generated electricity only 70
    percent of the time, today's average plant is online close to 90
    percent of the time, which has helped lower the cost of nuclear-
    generated power. As the President's National Energy Policy describes,
    by increasing operating performance to 92 percent, an additional 2,000
    megawatts of electricity could be generated from existing plants, and
    by ``uprating'' current plants with new technologies and methods,
    another 12,000 megawatts of generating capacity might be possible.
        Utilities are also considering nuclear energy as an option for new
    generation. The Nuclear Regulatory Commission has certified three
    standardized nuclear power plant designs, and Congress enacted
    legislation in 1992 to reform the nuclear licensing process. Advanced
    reaction designs offer the enhancements to safety and economics needed
    for these technologies to come to market in the next decade and beyond.
    New nuclear generators could also be built on existing sites; many
    current sites were designed for 4-6 reactors, and most operate only 2-
    3.
        Renewable energy, although a relatively small contributor to
    current U.S. power generation, could play a major role in achieving
    greenhouse gas stabilization. Wind energy, for example, currently
    accounts for only 0.1 percent of total electricity supply; however,
    technological advances have helped cut wind energy's costs by more than
    80 percent during the last 20 years. The President's National Energy
    Policy supports activities that could lead, by mid-century, to a
    national energy system comprised increasingly of distributed energy
    generation devices that use wind, solar, biomass, hydroelectric and
    geothermal sources, and some of which would be supplied by natural gas.
    Renewable energy technologies could also be used for baseload power in
    central stations or to produce hydrogen. For this to occur, advanced
    technologies will need to be developed. These include biopower
    technologies that can be fueled by biomass or perhaps a combination of
    coal and biomass fuels, advanced hydropower such as micro-hydro systems
    (less than 100 kilowatts), biomass-fuel cell power technology, advanced
    wind energy, geothermal energy, and advanced photo-conversion power
    systems.
        Approach 3--Carbon Sequestration: Barely 5 years ago, virtually no
    one discussing climate change mitigation options used the term ``carbon
    sequestration.'' The concept of removing carbon dioxide from either
    manmade emissions or the atmosphere, then safely and permanently
    storing it or converting it to value-added products was thought too
    farfetched for serious discussion.
        Today, however, there has been a remarkable turnaround in the
    scientific and engineering community.
        Carbon sequestration is now considered to be a viable ``third
    option'' for future greenhouse gas reductions. President Bush gave it
    special attention in his June 11, 2001, remarks, saying ``We all
    believe technology offers great promise to significantly reduce
    [carbon] emissions--especially carbon capture, storage and
    sequestration technologies.''
        Carbon sequestration, if it can be developed to the point where it
    is practicable, affordable and environmentally safe, offers the
    potential for dramatic CO2 reductions over the long-term,
    perhaps even more than would be possible through efficiency
    improvements and low-carbon fuels together.
        The following shows one possible pathway to the long-term goal of
    stabilizing atmospheric concentrations of greenhouse gases. This
    scenario is but one of many which could be envisioned. In it the growth
    in greenhouse gas emissions is slowed over the next 20 years and
    eventually stopped at the reference case 2010 level. The upper arrow
    refers to current Energy Information Administration projections for
    efficiency advances and low-carbon fuel use; the lower arrow,
    consistent with atmospheric stabilization, assumes a combination of
    additional efficiency gains and a large contribution from carbon
    sequestration.
        By working with growth and natural capital stock turnover, this
    pathway to stabilization allows time for new technology and low-cost
    options and the long-term introduction of carbon sequestration. It also
    prevents a rapid increase in greenhouse gas emissions over the next 20
    years, thus reducing the need for steep, economically harmful
    reductions in the future.
        Why the recent surge of interest in carbon sequestration? There are
    three primary reasons.
        First, many in the technical community now believe it will be
    possible to develop carbon capture and storage technologies which will
    add less than a 5 percent increase in energy system costs--equivalent
    to only 2/10ths of a cent per kilowatt-hour to today's average cost of
    electricity.
        Second, the past 5 years have seen a wealth of high-potential
    concepts emerge from the scientific and engineering community, and many
    of the ``blue sky'' ideas of four or 5 years ago are now maturing into
    actual processes on the threshold of their first field trials.
        A third reason may be the realization of many in the energy
    industry that carbon sequestration may be geographically and
    economically practical, and in some cases, could actually become a
    revenue-generating venture. For example, from a geographic standpoint,
    storing CO2 in underground saline formations has the benefit
    of being in close proximity to many large power plants. From a revenue
    standpoint, storage of CO2 in oil reservoirs and unmineable
    coal seams could lead to increased oil and natural gas recovery,
    generating additional cash-flow.
        Five years ago, the Department of Energy offered modest, $50,000
    grants to proposers who might have worthwhile ideas for carbon
    sequestration. Twelve grants were awarded, but the number of good
    proposals far exceeded the funding available. Today, the Department's
    Office of Fossil Energy has more than 50 carbon sequestration research
    projects, with an fiscal year 2002 budget of more than $32 million.
        Partners in our carbon sequestration program range from small
    entrepreneurial developers to large energy companies such as BP and
    environmental organizations such as The Nature Conservancy.
        Today our development program encompasses five major technological
    ``pathways:'' (1) carbon separation and capture, (2) geologic storage,
    (3) terrestrial storage, (4) ocean storage, and (5) novel sequestration
    systems.
        Progress is being made in all five. For example:
          We now have empirical evidence that advances in sodium
    carbonate technology can capture 50 percent of the CO2
    emission from a power plant at cost of $15 per ton of carbon--a 10fold
    reduction in costs compared to previously available technology.
          An innovative ``CO2 Wash'' process is being
    used at the New Jersey EcoComplex to capture CO2 before its
    escapes from a nearby landfill and use it to clean impurities from the
    landfill gas, which can then be used as a clean fuel.
          Preparations are underway to begin monitoring the
    injection of carbon dioxide from the Great Plains Coal Gasification
    Plant in North Dakota into the Weyburn oil field in southeastern
    Saskatchewan. Although 30 million tons of CO2 are injected
    into geologic formations each year in the United States as part of
    enhanced oil recovery, this is will be the first large scale test to
    monitor the capacity, movement, and storage integrity of CO2
    injected into a geologic formation.
          Terrestrial carbon sequestration projects are underway in
    Pennsylvania and Kentucky, both using surface mine reclamation lands to
    determine if newly planted trees and vegetation can serve as
    ``biological scrubbers'' for carbon dioxide.
          Scientists at the Department's Albany Research Center
    have made dramatic breakthroughs in a process that converts CO2
    into an environmentally benign mineral by reducing processing times
    from weeks to under 30 minutes, an advance that greatly improves
    prospects for a future commercially viable process.
        If it can be successfully developed, carbon sequestration could
    ultimately lead to a fossil fuel-fired power plant that has virtually
    no net emissions of any type.
        As described in Approach 1--More Efficient Energy Use, gasification
    combined cycle technologies are becoming increasingly attractive for
    the next fleet of coal-fired power plants. Not only do these plants
    offer the potential for 99 percent or greater reductions in air
    pollutants (such as sulfur dioxide, nitrogen oxides, and particulates),
    most configurations will also produce a highly concentrated stream of
    CO2 (in contrast to a conventional coal-burning plant in
    which the CO2 is diluted with large quantities of nitrogen
    from the air). This makes processes for separating and capturing
    CO2 much easier and more cost-effective. Future concepts
    using gasification to produce hydrogen will separate the CO2
    as part of the production process.
        The concept of an emission-free fossil fuel energy plant is far
    from unreasonable. In fact, the Department, in collaboration with the
    power industry, has set a goal to develop the basic configuration of
    such a plant by 2015.
        Termed Vision 21, the new energy plant would virtually eliminate
    concerns over emissions of regulated air pollutants. Combined with
    carbon sequestration, such a plant could virtually eliminate all
    environmental concerns over carbon dioxide buildup from fossil fuel
    power generation.
    A Question of Timing
        As I've described in this testimony, there are a wide range of
    potential options for reducing greenhouse gas emissions from power
    generating plants and other energy facilities. Most are in various
    stages of development, and none by themselves offer a ``silver bullet''
    to resolving climate change concerns.
        Even if they did, requiring sharp reductions in CO2
    before new technologies can be developed and deployed can have major
    negative ramifications for both America's economy and our energy
    diversity. Imposing compliance requirements before a wider range of
    options is available would drive many power suppliers to shift away
    from coal to natural gas and, to a lesser extent, renewable fuels.
        This sudden and sharp change in fuel mix would inevitably drive up
    prices. Analyses by the Energy Information Administration of S. 556
    show the likelihood that a CO2 emission cap could increase
    electricity prices by 43 percent in 2010 and by 38 percent in 2020 over
    the reference case. As much as $80 billion in 2010 and $63 billion in
    2020 could be diverted from other areas of the economy to pay the
    Nation's increased electricity bill. The Administration strongly urges
    the Congress to take a more prudent, deliberative approach to climate
    change mitigation. We strongly request that Congress work with the
    Administration to create a technology R&D and investment climate that
    will produce low cost options to address climate change.
        Finally, a program that focuses exclusively on power plants ignores
    opportunities for cheaper reductions in greenhouse gas emissions that
    may exist elsewhere in the economy and around the world. While electric
    power generation represents a large portion of direct emissions--and
    reducing those emissions will be a necessary part of a long-term
    solution--it does not follow that they represent the only or even
    greatest opportunity for inexpensive emission reductions in the shorter
    term. A reasonable and balanced approach to climate change should
    consider this broader universe of opportunities.
        This concludes my prepared statement. I will be pleased to answer
    any questions Members may have.
                                   __________
       Statement of Edward Lowe, Gas Turbine-Combined Cycle Product Line
                    Manager, General Electric Power Systems
        Good morning, Mr. Chairman and members of the Subcommittee. My name
    is Ed Lowe. I am the Gas Turbine-Combined Cycle Product Line Manager
    for GE Power Systems. I appreciate the opportunity to testify this
    morning.
        I am pleased to be here today to share with you our views about the
    benefits that Integrated Gasification Combined Cycle (IGCC) technology
    can deliver. IGCC can cost effectively produce power from solid fuels,
    such as coal, with substantial environmental benefits over other coal
    power generation technologies. If IGCC is adopted as the preferred coal
    based power generation technology, it will help the country and our
    customers meet the environmental goals of reducing NOx, mercury and
    other air pollutants, while also advancing sound energy policy goals of
    retaining a secure and diverse mix of fuels for electric power
    generation and improving the efficiency of coal based power generation.
                          overview of igcc technology
        IGCC is a process that converts low value fuels such as coal,
    petroleum coke, orimulsion, biomass, and municipal wastes into a high
    value, low Btu, environmentally friendly natural gas-type fuel, also
    called ``synthesis gas'' or simply ``syngas.'' When used to fuel a
    combined gas turbine and steam turbine plant, known as a combined cycle
    system, coal based syngas fuel produces electricity more efficiently
    and with lower emissions than traditional direct fire coal boilers.
        Coal gasification is not new, although there have been many
    technological improvements over its development cycle. The first
    mention of using coal gasification in the United States to produce
    ``Town Gas'' was by the Baltimore Gas Company in 1842, and by the
    1910's, commercial coal gasification was commonly used in the United
    States and Europe to provide cities with gas for streetlights and
    domestic consumption.
        However, the combination of gasification with gas turbine power
    plants--the IGCC concept--had to wait until gas turbine combustion
    technology had advanced to the point that it was ready to accept the
    significant technical challenge of combusting low Btu IGCC fuels. Gas
    turbines for IGCC are markedly different from the vast majority of gas
    turbines that are fueled by natural gas. IGCC gas turbines must be
    specifically engineered to achieve highly efficient and reliable
    service on syngas. These design enhancements relate primarily to the
    combustion and fuel systems, but also encompass special safety,
    packaging, and controls modifications.
        IGCC's roots trace back to GE's Global Research Center in
    Schenectady, NY. In the early 1970's pilot testing demonstrated poor
    fuels could be converted to clean syngas, and that it was possible to
    integrate a gas turbine and a chemical gasification plant. Further
    work, at GE's Schenectady laboratories, continued in the early 1980's
    on gas cleanup and with full-scale combustion development. This work
    led to the first large commercial coal IGCC Plant, the 120 MW Cool
    Water Plant located in California. This was a partnership funded
    project with EPRI and other participants that utilized GE's innovative
    gas turbine combustion technology. Commissioned in 1984, Cool Water
    demonstrated the technical feasibility of IGCC.
        In the 1990's commercial IGCC plants were successfully built and
    operated with steady improvements in reliability, efficiency and cost.
    Two examples of current coal IGCC plants are Tampa Electric Company's
    Polk 250 MW IGCC plant in Florida, commissioned in 1996, and the Public
    Service of Indiana's (now Cinergy) Wabash River 250 MW IGCC plant in
    Indiana, commissioned in 1995. These two plants, utilizing GE gas
    turbines, have successfully logged over 50,000 operating hours on coal
    synthesis gas.
        Since GE pioneered IGCC nearly three decades ago, we have developed
    a broad IGCC product line of gas turbines with matching steam turbines
    spanning the 100 to 400 MW module range. GE has sold over 23 IGCC gas
    turbines and attained over 400,000 gas turbine operating hours on
    syngas. GE is committed to developing new and improving existing IGCC
    gas turbine designs. New York continues to serve as the central hub of
    our efforts to advance this technology. The development of concepts for
    further improvement in emissions is continuing at our Global Research
    Center in Schenectady, and we recently strengthened our commitment to
    advance IGCC technology with the commissioning of a new combustion
    development facility in Greenville, South Carolina.
                        environmental advantages of igcc
        IGCC is inherently less polluting and more efficient than any other
    coal power generation technology. In IGCC, harmful pollutants are
    removed from the syngas before they reach the gas turbine; therefore,
    end-of-pipe/ stack cleanup is not necessary. IGCC efficiently removes
    ash, sulfur compounds, ammonia, mercury, other metals, and any
    particulate matter to reduce air pollution. Emissions of SOx, NOx,
    mercury, heavy metals, and particulate from an IGCC plant are fractions
    of the emissions from conventional, coal power plants.
        For example:

          IGCC NOx emissions are approximately half those of modern
    pulverized coal steam-boiler plants. About 0.07 lb/million Btu NOx
    emissions can be achieved through IGCC. This is approximately a 60
    percent reduction in NOx emissions from the average coal plants
    operating today. Since 1980, the can-annular combustors employed by GE
    have been continuously improved to handle a wide variety of fuels and
    to reduce NOx emissions. Beginning with the Cool Water Coal IGCC test
    program, NOx emission performance was demonstrated at less than 0.125
    lb/million Btu using ``E'' class gas turbine technology. The recent
    TECO Polk and PSI Wabash plants, have achieved similar NOx values (less
    than 0.1 lb/million Btu), using higher efficiency ``F'' class
    technology. Similarly, full pressure and temperature laboratory test
    programs using various process diluents, including N2,
    H2O, and CO2, lead us to believe that the
    challenging target of single digit NOx emissions (0.04 lb/million Btu)
    may be possible. GE is evaluating whether to implement a development
    program with the goal of achieving this challenging target, and the
    support of EPA, or legislative changes, would encourage our initiation
    of such a program.
          95 percent mercury removal is being achieved by a
    gasification plant in Kingsport, Tennessee. Similar mercury removal
    systems can be used to economically and reliably remove mercury for new
    IGCC plants.
          Sulfur can be recovered from the syngas either as
    elemental sulfur or sulfuric acid in pre-combustion cleanup. Both
    elemental sulfur and sulfuric acid are marketable industrial by-
    products depending on local economics. With little sulfur remaining in
    the syngas stream that enters the gas turbine, the emissions of SOx for
    an IGCC plant are less than half of those of even state-of-the-art
    direct combustion coal boiler plants.

        GE's emphasis on improving turbine and combined cycle efficiencies
    has directly benefited IGCC emissions performance. High IGCC
    efficiencies yield CO2 greenhouse gas emissions that are 12
    percent lower than those of state-of-the-art coal steam-boiler plants.
    These emissions are approximately 30 percent lower than those of
    average coal plants operating today, for comparison purposes.
    Additionally, in the gasification process carbon can be removed from
    the syngas to create a hydrogen-rich fuel that can further reduce
    CO2 greenhouse gas emissions. In our combustion development
    programs, GE has successfully demonstrated combustion of 90 percent
    hydrogen syngas fuel to demonstrate the technical feasibility of power
    plants with ultra low CO2 emissions.
        Let me emphasize this key point: In the IGCC process harmful
    pollutants are removed from the syngas stream before combustion, rather
    than in post combustion flue gas treatment. The pressurized syngas
    stream represents less than 1/100 of the volume of flue gas from direct
    coal combustion and the contaminants in syngas are concentrated.
    Therefore, IGCC pre-combustion clean-up is far more effective and much
    lower cost than the post-combustion clean-up employed in direct
    combustion coal steam-boiler plants.
        And there is another important environmental benefit: In IGCC coal
    ash is converted in the gasifier into a solid, vitreous slag which is
    chemically inert. This non-leaching slag can be employed in the
    construction industry as road fill or as strengthening aggregate for
    building concrete. IGCC does not require secure landfill sites for ash
    storage and ash-landfill pollutant leaching into the groundwater is not
    an issue.
      environmental regulation should not be a barrier to igcc deployment
        In spite of these significant environmental benefits, we are
    concerned that permitting bodies may burden IGCC with duplicative and
    reliability reducing end-of-pipe controls for NOx, such as SCR
    (selective catalytic reduction). These systems cannot work as reliably
    on IGCC as they do on natural gas fired units. The pollution prevention
    combustion technology on GE's IGCC gas turbines delivers NOx emissions
    below that of alternative coal technologies and we strongly believe
    that IGCC must be evaluated as a coal technology with consideration
    given for its total environmental benefits when setting emission
    targets.
                              optimal uses of igcc
        Gasification is a steady state chemical process and therefore IGCC
    plants perform best in base-load applications. IGCC gas turbines
    require natural gas or distillate as a startup fuel; so that all IGCC
    gas turbines must be dual fuel capable. As a consequence, IGCC plants
    can switch to the backup fuel when syngas is unavailable or co-fire
    when syngas is limited. With the availability of backup fuels and
    combustion design flexibility, IGCC plant power availability can
    approach that of natural gas combined cycle plants.
        IGCC must be optimized based on the design requirements, which is
    primarily defined by the fuel characteristics--there is no universal
    IGCC design that will satisfactorily meet all expectations. A myriad of
    technical possibilities must be balanced for each gasifier type and
    each syngas fuel to optimize IGCC systems for specific fuel type and
    site conditions. Through cycle optimization studies and by
    incorporating lessons learned from successful operation of many IGCC
    units, GE has optimized system configurations for all major gasifier
    types and most GE heavy-duty industrial gas turbine models.
        GE is conducting continuous improvement programs, which endeavor to
    further enhance the overall performance level of IGCC plant designs.
    Working with various process technology suppliers, GE is helping to
    facilitate, define and develop lower cost and higher efficiency IGCC
    plant designs.
                              favorable economics
        The cost to build large IGCC plants has steadily decreased over the
    last 25 years; the installed turnkey Engineer Procurement Construct
    (EPC) price is now projected to be $1200 per kW. This makes the
    superior IGCC technology cost competitive with other modern coal power
    plant options such as Circulating Fluid Bed, or super critical and
    ultra-super critical pulverized coal boiler plants with state-of-the-
    art emission control systems.
        Continuous gas turbine technology improvements raise the prospect
    for further economic improvements as output power and plant
    efficiencies increase. As additional IGCC plants go operational,
    improvements in system performance and plant design cost can be
    expected from a growing and maturing technology experience base.
                                   conclusion
        IGCC clearly becomes the superior coal technology option when its
    higher plant efficiency--5 percentage points above other coal
    technologies--and significant environmental advantages are considered.
        Coal IGCC offers superior environmental performance while projected
    to produce electricity at prices competitive with modern direct-fired
    coal power plants. IGCC also provides an inherent capability to cost
    effectively meet future environmental needs because contaminates are
    removed in a low volume, high concentration, pre-combustion fuel gas
    steam. We look forward to exploring options with you and with
    regulatory agencies to ensure that appropriate laws and policies are in
    place to allow IGCC's environmental and efficiency benefits to be
    achieved.
                                     ______

       Responses of Edward D. Lowe to Additional Questions from Senator
                                   Lieberman
        Question 1. In your company's October 2000 review of this
    technology, it wrote that ``[t]he economics of IGCC systems now allow
    the technology to successfully compete in competitive power bidding
    situations where low cost indigenous gas is not available.'' It also
    stated that ``[t]he introduction of the next generation of gas turbine
    technology is expected to further reduce the cost of IGCC systems. What
    is the prognosis for the introduction of the next generation of turbine
    technology? Do you expect to be competitive, even with low cost natural
    gas?
        Response. The prognosis is excellent for GE to develop and
    commercially introduce enhanced gas turbine technology that will
    further reduce IGCC cost. GE is making significant investment in a
    Multi-Generation Product Plan (MGPP) for IGCC. GE's commitment is
    underscored with our investment in a state-of-the-art IGCC combustion
    development facility at Greenville, SC.
        GE's MGPP for IGCC has three major goals--1) increasing the output
    of our heavy duty gas turbines with syngas firing, 2) increasing
    efficiency through higher firing temperatures and 3) developing fuel
    systems and combustors that can handle multiple fuels. All
    significantly affect the cost factors considered in utility decisions
    for new power generation.
        Increased power output decreases overall specific capital cost ($/
    kW) because fixed plant costs are spread over higher power output. This
    additional output is achieved at a small cost penalty to the overall
    plant. GE's MGPP for IGCC also targets further efficiency improvements.
    Higher efficiency reduces the fuel component of the cost of
    electricity. The first commercial plants at Polk and Wabash achieved
    38.5 percent and 40.2 percent efficiency respectively. A current IGCC
    plant using a 7FA+e turbine would achieve a 42 percent efficiency,
    which compares favorably to 40.1 percent for a supercritical PC plant.
        Fuel flexibility further reduces fuel cost. The robustness of a gas
    turbine to handle gases produced from a wide range of feedstocks
    expands IGCC's ability to use lower cost, opportunity fuels. This
    compliments the ability of gasification to deal with a wide variety of
    feedstocks. GE's state-of-the-art combustion facility at Greenville
    provides capability to test full size combustors over a wide range of
    fuel compositions.
        A cost-of-electricity analyses based on current machines shows IGCC
    to be competitive with natural gas combined cycle plants for natural
    gas price at a $2.50/MMBTU price premium over the IGCC fuel stock.
    Therefore, at a coal price of $1.00-$1.25/MMBtu, IGCC is competitive
    with $3.50-$3.75/MMBtu natural gas.

        Question 2. I have been told that commercial financing is readily
    available for the IGCC installations that have been built recently in
    the US and abroad. Doesn't this suggest that investors believe that any
    technical risks associated with this technology are no greater than
    conventional technology?
        Response. Yes--investors have been willing to finance projects.
    However, this source of financing currently comes at a high price based
    on IGCC's relatively short history compared to traditional coal
    technologies. Investor financing is contingent upon receiving
    significant additional long-term performance and operating guarantees
    compared to those provided for traditional coal technologies. These
    requirements impose a significant cost burden on an emerging technology
    such as IGCC.

        Question 3. I noted your objection to the imposition of technology-
    based permitting on IGCC plants. One of the beauties of the multi-
    pollutant legislation we are talking about here today is that it does
    not require permitting bodies to pick and choose technologies; rather,
    it allows industry to decide the best way forward, as long as they meet
    the caps. Do you support a move to this sort of regulatory system? Do
    you believe that IGCC will succeed under such a system?.
        Response. GE supports a system that gives industry maximum
    flexibility to choose the most efficient technologies over a reasonable
    time period at a reasonable cost. The benefits of IGCC in reducing
    pollutants make it a logical choice for efficiently burning coal under
    a cap system. Our country's abundant, recoverable coal reserves are key
    to achieving energy security through a robust and diverse energy
    system. Any cap system limits must allow continued use of coal, albeit
    more efficiently and in a less polluting manner.
        If IGCC is subjected to moving regulatory permit demands that would
    later impose add-on controls (like SCR--selective catalytic reduction)
    not appropriate for this technology, the resulting reliability,
    efficiency and cost uncertainties would chill investments in IGCC
    plants. Innovative technology development is better attained through
    incentives that reward pollution reduction and allow recapture of
    investments than through rigid regulatory imposition of one-size-fits-
    all, end-of-pipe technologies.

        Question 4. It has been my experience that to stimulate the
    development of clean air technologies, we must impose a cap on
    emissions. That was certainly the case with the 1990 Clean Air Act,
    where the market-based caps on acid rain causing pollutants has
    triggered the widespread adoption of advanced scrubbers, at much less
    cost than was first projected. Would the maturation of IGCC benefit
    from such regulatory certainty?
        Response. IGCC technology is available for widespread
    commercialization now. Investment in IGCC and many other advanced new
    technologies should benefit from a greater degree of regulatory
    certainty.

        Question 5. I noticed that several IGCC plants, including Mr.
    Amick's plant in Indiana, were retrofitted for IGCC. Would it be
    possible to apply this technology to these grandfathered plants that
    are causing all this controversy over new source review.
        Response. Yes, IGCC can be used as a retrofit technology; however,
    the cost for any repowering application is very site-specific. A few
    key parameters that would make repowering an existing older coal fired
    unit economically viable are: (1) sufficient work area to easily remove
    the existing boiler equipment and accommodate the new gasifier
    equipment, (2) a boiler that needs significant maintenance and has no
    existing SO2 scrubbers, and (3) a steam turbine of at least
    100 MW.

        Question 6. I noted that your IGCC facilities can also burn natural
    gas. If you located an IGCC facility near a supply of natural gas,
    could you use both fuels depending on the pricing between the fuels? If
    so, wouldn't this buttress the fuel diversity of our nation's
    utilities?
        Response. An IGCC plant requires a backup fuel--either natural gas
    or distillate--for startup of the gas turbine. The combustor design for
    IGCC turbines allows for firing of either 100 percent natural gas or
    syngas, or for co-firing a mixture of syngas and natural gas. Co-firing
    enables an IGCC plant to provide full output when the gasifier is
    either out of service or unable to provide full syngas output during
    plant maintenance work. The plant.-4-owner could switch to 100 percent
    natural gas provided that economics were favorable; however, given the
    already-invested capital in the gasification plant, natural gas would
    have to fall to below the $1.50/MMBTU range to economically justify a
    switch.
                                   __________
       Responses of Edward C. Lowe to Additional Questions from Senator
                                   Voinovich
        Question 1. Please describe the equipment changes that are
    necessary to install an IGCC unit. Can new equipment be added to an
    existing coal plant, or must the facility be razed and a new one
    constructed? What is the economic impact of this plan?
        Response. It is not necessary, nor economically advisable, to raze
    an entire existing plant to install an IGCC unit. Depending upon age
    and condition, much of the major equipment from an existing plant,
    including the coal delivery, storage, preparation and handling
    equipment, steam turbine(s), water supply, water treatment, reusable
    electrical substation equipment, stack and foundations, could be
    reused. For a pulverized coal (PC) plant, the boiler, ductwork and air
    pollution control equipment, including sludge dewatering and ash
    handling equipment, would be removed or retired-in-place as
    appropriate. Sludge and ash ponds would be closed. New equipment would
    include the gasifier, slag handling equipment, quench and associated
    piping, acid-gas removal system, filters, sulfur recovery system,
    ductwork, gas turbine, fuel skid, heat recovery steam generator,
    controls and additional substation equipment to handle the increased
    output.
        The economic impact is site-specific. The key factors that would
    make repowering economically viable are: (1) sufficient work area to
    easily remove the existing boiler equipment and accommodate the new
    gasifier equipment, (2) a boiler that needs significant maintenance and
    has no existing SO2 scrubbers, and (3) a steam turbine of at
    least 100 MW. The capital cost of repowering could be 10 percent lower
    than a new ``Greenfield'' IGCC plant.
        There are other questions that need to be answered to determine if
    repowering is economically justifiable. How profitable is the existing
    power plant? The repowered plant will have up to 200 percent greater
    output based on the ability to match gas turbine exhaust energy to
    existing steam turbine needs. How does the profitability of the larger
    repowered plant compare to the base existing plant and does it justify
    the significant capital investment? Lower cost, higher sulfur coal can
    be used. The potential sales of sulfur and slag byproducts provide
    additional income streams. Also, the superior environmental performance
    of IGCC can provide additional revenue through generation of emissions
    credits.

        Question 2. What potential problems does installing scrubbers or
    requiring the use of biomass present for an IGCC unit? How does the
    possibility of a State requiring the addition of scrubbers or the use
    of biomass as a fuel source, impact a utility's decision to use IGCC
    technology?.
        Response. It is not necessary to install separate, post-combustion
    scrubbers on an IGCC plant. Sulfur is very effectively removed from the
    syngas by the acid gas removal (AGR) process. The AGR system would
    include either scrubbing or filters for particulate removal. Typical
    sulfur removal efficiencies are 98 percent or higher.
        IGCC would be included in a utility's consideration of options for
    biomass. IGCC is suitable for use of biomass either as a primary fuel
    or co-gasified with coal. These would generally be smaller plants that
    are consistent with the fuel availability. GE's products include
    smaller gas turbines--starting with the GE10 at 10MW--that are syngas
    capable and well suited for biomass plants. Also, an alternative
    approach would be co-gasification of biomass with coal as has been
    successfully demonstrated at the Polk IGCC plant.

        Question 3. What is our view of the deadlines in Jeffords/Lieberman
    and would utilities use new technologies like IGCC to meet deadlines,
    or do it with more traditional technologies and fuel switching?
        Response. GE does not offer a view on the specific deadlines in
    Jeffords/Lieberman, other than noting that they are aggressive and
    would require rapid, substantial changes by generators, at substantial
    cost. We believe that generators would use all available means to meet
    the proposed deadlines, including short term fuel switching and
    traditional technologies, as well as IGCC. As natural gas prices rise,
    new coal technologies, such as IGCC, will become more attractive to the
    marketplace. Coal will play a key role in our energy security for
    decades to come, and commercially available and proven IGCC technology
    provides the most environmentally sound way to use coal.
                                   __________
    Statement of Phil Amick, Vice President, Commercial Development Global
                                  Energy, Inc.
        Good morning. My name is Phil Amick and I am Vice President,
    Commercial Development for Global Energy Inc., headquartered in
    Cincinnati, Ohio. I would like to thank the chairman and the other
    members of the Subcommittee for allowing me to appear at this hearing.
        Global Energy owns and operates the Wabash River Energy Ltd.
    gasification facility in Terre Haute, Indiana. The affiliated power
    generation plant is owned and operated by Cinergy. This 262 MW facility
    powers about 250,000 homes while utilizing local high sulfur coals, and
    even petroleum coke feedstocks, with sulfur content of 5.5 percent and
    more. More to the point for this hearing, it is the cleanest coal fired
    power plant in the world, of any technology.
        The Wabash River IGCC is a repowering of a 1953 vintage pulverized
    coal plant, one that was operating on compliance coal and had
    precipitators but was unscrubbed. Compared to the performance prior to
    repowering, based on 1990 data for the older plant, the new facility
    makes almost six times as many megawatt hours of electrical power yet
    has reduced emissions of SO x by over 5500 tons per year, NO x by 1180
    tons per year and PM10 particulates by 100 tons per year.
        The Wabash facility, and the Tampa Electric Polk Power Station in
    Florida, are the first of a new class of coal-based electrical
    generation facilities with superior environmental performance compared
    to other technologies such as pulverized coal and fluidized bed. Wabash
    has been operating since 1995 with emissions lower than coal plants
    that are now being permitted for operation in 2005.
        Wabash is a power plant using high sulfur coal that has
    SO2 emissions as low as one fortieth of the Clean Air Act
    Year 2000 standard. Sulfur is chemically extracted from the syngas and
    sold for use in the fertilizer industry, about a railcar per day of
    pure sulfur that used to go into the atmosphere.
        It's a coal power plant where the coal ash products emerge as a
    vitrified black sand byproduct and are marketed as construction
    material. There are no solid wastes from the coal gasification
    process--no scrubber sludge, fly ash or bottom ash.
        In this plant, the wastewater stream from the chemical process
    meets current National Drinking Water Standards.
        Carbon dioxide emissions are 20 percent lower than conventional
    unscrubbed coal fired plants because of the inherent efficiency of the
    gasification combined cycle process. The plant, with no additional
    special equipment, also has a mercury removal rate of about 50 percent.
        One of the keys to this superior environmental performance is the
    fact that the gasification process takes place at high pressure. This
    facilitates the chemical processes that remove the pollutants.
        High pressure operation also will facilitate additional carbon
    reduction and mercury removal measures on future plants. Department of
    Energy and industry studies indicate that significant reductions can be
    achieved with much less cost and performance impact than possible with
    coal combustion technologies that operate near atmospheric pressure.
        While carbon dioxide emissions already 20 percent less than
    conventional units, this emission can be reduced more than 75 percent
    by shifting the syngas to hydrogen. This technology, already in use at
    some hydrogen production facilities, can be retrofit to a gasification
    facility for as little as 2 percent of the original capital cost. The
    plant output reduction for this additional process step is a fraction
    of what would be seen in a conventional technology plant. In a
    gasification facility, it can be retrofit at any time in the future.
        Mercury removal is also much simpler in the gasification process. A
    plant like the Wabash River facility could be upgraded to 80 percent or
    better mercury removal by the addition of a single carbon bed vessel,
    at a cost of less than $1 million dollars. Other facilities, such as
    the Tennessee Eastman gasification plant for chemical feedstock
    production in Kingsport, Tennessee, achieve better than 90 percent
    mercury removal to meet their process constraints, and have been doing
    it for nearly two decades.
        Gasification technology for coal based power generation is being
    commercially marketed by ourselves and others. We feel that it is the
    most environmentally friendly solution for diversifying the fuel mix of
    new electrical power plant capacity. Through repowering, much of the
    existing, aging coal generation base can be upgraded as well, as was
    done at Wabash River.
        Thank you, Mr. Chairman, that concludes my oral statement. With
    your permission, I have additional materials that can be included in
    the record.

                                     ______

     Responses by Phil Amick to Additional Questions From Senator Lieberman
        Question 1. We have heard from Mr. Lowe about the continuing
    development of this technology. If you were faced with new clean air
    legislation requiring steep reductions in NOx, SOx, mercury and
    CO2, what technology would you choose to produce electricity
    from coal?
        Response. Integrated Gasification Combined Cycle (IGCC) is the
    environmentally superior technology for producing electricity with coal
    and many other carbonaceous fuels. The Wabash River facility, as
    mentioned in my testimony, is the cleanest coal fired power plant in
    the world of any technology. Global Energy has committed itself to
    developing applications for IGCC facilities since the early 1990's to
    provide this type of environmental solution for new power generation.
        The next generation of IGCC facilities (which could be on line
    2006-2010) will be able to operate at NOx, SOx and mercury levels
    approaching those set forth in DOE's Vision 21 guidelines for 2015
    designs (2020 implementation).
        Carbon dioxide emission reduction of approximately 20 percent
    (compared to conventional combustion technologies) is achieved with
    gasification combined cycle due to efficiency improvements. Further
    reductions can be achieved through additional process units which will
    separate the carbon components in the syngas produced. This has been
    technically achieved in other industries where there is a need to have
    the syngas further converted to hydrogen for chemical feedstock usage.
    However, implementation of these technologies in the power generation
    industry is constrained because there are no practical economic choices
    for either marketing or sequestration of the carbon dioxide in nearly
    all plant locations.

        Question 2. It is been my experience that to stimulate the
    development of clean air technologies, we must impose a cap on
    emissions. That was certainly the case with the 1990 Clean Air Act,
    where the market-based caps on acid rain causing pollutants has
    triggered the widespread adoption of advanced scrubbers, at much less
    cost than was first projected. Would the maturation of IGCC benefit
    from such regulatory certainty?
        Response. The Clean Air Act, incorporating a market based system
    for trading SO2 emission credits beneath its cap, was indeed
    very effective. However, this was due as much, or maybe even more so,
    to the electric utilities switching to low-sulfur western coals as it
    was to new scrubber applications.
        In today's market, even the viability of existing coal plant
    operation on western coals is threatened by regulatory uncertainty.
    Capital expenditures for new coal plant generation has been at a near
    standstill for more than a decade for this same reason. A planned
    implementation of any level of standards, especially a multi-pollutant
    approach, will benefit the decisionmaking process for new coal based
    generation. Implementation of tighter standards will support the market
    penetration of IGCC technology because of its superior environmental
    performance compared to coal combustion technologies.

        Question 3. I noted that your IGCC facilities can also burn natural
    gas. If you located an IGCC facility near a supply of natural gas,
    could you use both fuels, depending on the pricing between the fuels?
    If so, wouldn't this buttress the fuel diversity of our nation's
    utilities?
        Response. The combustion turbines installed at IGCC facilities are
    always supplied with dual fuel capability (i.e., the ability to operate
    on syngas, or on either natural gas or fuel oil.) This is necessary for
    the startup of the facility, because the combustion turbine does not
    operate well at low loads (less than 20 percent) with low-to-medium Btu
    fuels.
        Aside from the short duration of the startup however, the plant
    would have the ability to run at full capacity with either fuel. Both
    the Tampa and Wabash IGCC's currently have this capability, and can
    utilize natural gas as fuel when the syngas supply is unavailable. This
    enhances the power plant availability. Having said that, one must
    realize that the plant must operate with coal as the preferred fuel in
    order to justify the additional expense of the gasification facility.
    In most of the planned IGCC facilities that Global is aware of,
    additional equipment is provided in the gasification facility to
    enhance its availability (extra gasification trains for instance)
    rather than rely on natural gas for any large portion of the annual
    operation. This decisionmaking is driven by concerns of natural gas
    pricing volatility.

        Question 4. I noticed that your plant was retrofitted for IGCC.
    Would it be possible to apply this technology to these grandfathered
    plants that are causing all this controversy over New Source Review?
        Response. At Cinergy's Wabash River Generating Station, the Unit 1
    steam turbine was repowered with the addition of a new combustion
    turbine and heat recovery steam generator, and the new syngas
    production facility. Net output of this unit increased from about 100
    MW to 262 MW, annual operating hours were increased and yet emissions
    of SOx, NOx and particulate were reduced by thousands of tons per year.
        Many of the older coal fired generating plants in the United States
    are also candidates for repowering with gasification. Technically, the
    best candidates will have steam turbines over 100 MW in rating and
    steam pressure levels from 600 psig to 2000 psig. The plants must also
    have sufficient area available in close proximity of the steam turbine
    for the new construction. However, even if little of the existing power
    station equipment can be incorporated into the new design, there remain
    advantages of using existing sites which have significant transmission
    and coal handling infrastructures.
        Economically, the best candidates will be those plants where major
    investments have not been made in cleanup of the current flue gas
    stream. Plants where scrubber additions have not yet been made, for
    instance. Also plants where the boiler, which will be decommissioned in
    an IGCC repowering, is due for significant repairs or costly
    maintenance. Avoiding these costs helps offset the cost of the new IGCC
    facility. Many of these facilities (which may have avoided scrubber
    additions by switching to low sulfur compliance coals) will also be
    able to return to operation with coal from local mines, reducing
    transportation costs and boosting local economies while still reducing
    SOx emissions. With gasification, local sulfur coal with 3-6 percent
    sulfur can be utilized and the facility can achieve SOx emission levels
    as low as 0.04 lb/MMBtu, which would be an improvement over the SOx
    emissions of an unscrubbed plant with even 0.5 percent sulfur western
    coal.
        The older and dirtier the existing plant is, the more advantage
    there is to be gained by gasification repowering, both in improvement
    of operation and output and in reduction of emissions.
                                   __________
       Statement of Dr. Richard Sandor, Chairman and CEO, Environmental
                            Financial Products, LLC
    Context
        The debate over appropriate actions to address the risks arising
    from changes in the Earth's climate--the ``greenhouse effect''--suffers
    from two major information gaps. The first is a lack of consensus
    regarding the damages that could occur to the environment without
    action to reduce greenhouse gas (GHG) emissions. The scientific process
    may not precisely predict the nature and implications of climate
    changes that would occur if society does not make significant changes
    in energy and land use patterns associated with higher levels of GHG
    emissions. That is, the costs of inaction and the benefits of taking
    mitigation actions are uncertain.
        The second information gap is lack of understanding of the monetary
    costs associated with undertaking mitigation to reduce greenhouse
    gasses. The absence of hard, proven data on greenhouse gas mitigation
    costs reduces the quality of the climate policy debate.
        The nature of the implied cost-benefit analysis underlying the
    climate debate suggests that for any particular level of benefits
    accruing from action to mitigate climate change, a high cost of
    mitigation will lead policymakers to take less action. If mitigation
    costs are proven to be low, it appears policymakers would support
    stronger action to address climate change. At this time, however, we
    lack the data for realizing the costs involved in pursuing climate
    mitigation actions.
        To help fill this gap, Environmental Financial Products, in
    collaboration with the Kellogg Graduate School of Management at
    Northwestern University, received a Millennium grant of $374,000 from
    the Chicago-based Joyce Foundation in May 2000. With $900 million in
    assets, the Foundation has been a longtime and well-respected funder of
    efforts to protect the natural environment of the Great Lakes region.
    The grant, part of a series supporting work on significant
    intergenerational issues, enabled us to explore the feasibility of
    designing a voluntary market to help answer the second question: the
    cost of steps to reduce climate change. A second grant to fund the
    design phase of the market was granted in August of 2001.
        The ultimate objective of the proposed Chicago Climate Exchange is
    to generate price information that provides a valid indication of the
    cost of mitigating greenhouse gases. By closing the information gap on
    mitigation costs, society and policymakers will be far better prepared
    to identify and implement optimal policies for managing the risks
    associated with climate change.
    Overview and Methodology
        This report presents a feasibility analysis and initial
    architecture for a voluntary pilot greenhouse gas emissions trading
    program that would be launched in the Midwest and expanded over time.
    The objectives of the pilot program--hereafter called the Chicago
    Climate Exchange (CCX)--are:
    Proof of Concept

          demonstrate the ability to cut and trade greenhouse gases
    in a market system involving multiple industrial sectors, mitigation
    options and countries;
          initiate greenhouse gas reductions through a modest size
    but scalable program;
          form a basis of experience and learning for participants;
          introduce a phased, efficient process for achieving
    additional GHG reductions in the future.
    Price Discovery

          provide realistic information signaling the cost of
    mitigating greenhouse gases;
          enhance the quality of climate policy decisionmaking by
    providing hard data on mitigation costs to the public and policymakers.

        The strategy used to assess the feasibility of a pilot GHG market
    relied on several research methodologies. A theoretical economic
    assessment accompanied by quantified data guided the structure of the
    study. The proposed market architecture was influenced by lessons from
    other successful emissions, financial, and commodity markets. The
    successful USEPA SO2 emissions trading program to reduce
    acid rain served as a model for the design of key elements of the
    Chicago Climate Exchange.
        The research is a continuing work in progress. The current stage of
    the process is to incorporate industry input to refine the initial
    proposed market terms and conditions. This process will yield a working
    prototype for which an attempt to build a consensus will be initiated.
    That consensus design would represent a functional architecture for the
    first phase of a market. Implementing the proposed market design and
    incorporating lessons from practical experience are core elements of
    the program.
    Market Architecture and Participants: Theory and Design
        The negative effects caused by the release of greenhouse gases are
    currently not priced. Consumers and businesses do not fully take
    account of such effects in their economic decisionmaking because there
    is no price on the use of the atmosphere. The goal of the proposed
    pilot greenhouse gas trading program is to establish the market for
    discovering the price for reducing emissions. The core steps are to
    limit overall consumption of the atmosphere (GHG emissions) and
    establish trading in instruments that allow participants to find the
    most cost-effective methods for staying within a target emission limit.
    The market price of those instruments will represent a value signal
    that should stimulate new and creative emission reduction strategies
    and technologies. Emissions trading is a proven tool that works with
    and harnesses the inventive capabilities of business.
        Various market architecture design options were considered. A
    market could include emission limits taken by fossil fuel producers and
    processors--the ``upstream'' entities in the carbon emissions cycle--or
    by major ``downstream'' sources that burn fossil fuels, such as
    electric power generators, factories, and transport firms. An
    ``intermediary'' level approach could focus on firms that produce
    energy consuming devices, such as automobiles, or other intermediaries
    such as fuel distributors. Based on responsiveness (the ability of
    participants to directly cut emissions), administrative costs and
    existence of successful precedents, the recommended approach is a
    predominantly ``downstream'' approach. Accordingly, the research
    findings suggest the CCX should aim to include participation by large
    emission sources at the downstream level (e.g., power plants,
    refineries, factories, vehicle fleets).
        In order to incorporate other mitigation projects that add to the
    flexibility of the market (and which are gaining international
    recognition as valid projects), the proposed design would also allow
    crediting for a range of offset projects that encourage micro-level GHG
    mitigation actions. Reflecting international consensus and successful
    precedent, the items to be traded in the pilot market--GHG emission
    allowances and offsets--are instruments representing one ton of carbon
    dioxide (CO2) or their equivalent (CO2e). For
    every ton of CO2 emitted, a participating emission source
    must relinquish one allowance or offset.
    Potential For A Market Initiated in the U.S. Midwest
        The Midwest represents a microcosm of the United States. The
    region's economy is as large as the economies of the United Kingdom
    (UK) and the Netherlands combined and has annual GHG emissions equal to
    those of the UK plus France (1.375 billion tons CO2). The
    region's industrial diversity--including a broad range of energy, heavy
    manufacturing, transport, agriculture, pharmaceuticals, electronics and
    forestry--make it well-suited as a starting point for a robust and
    representative greenhouse gas emissions trading market.
        The feasibility analysis suggested a hypothetical target market
    covering 20 percent of all Midwest emissions. The scale of such a
    market and the proposed GHG mitigation goals are summarized in Table A.
    The Table portrays a proposed GHG reduction schedule calling for
    emissions in the first year of a pilot market, 2002, to be 2 percent
    below 1999 levels (the baseline year) and falling a further 1 percent
    each year from 2003 through 2005.

                                     Table A
     Scale of a Hypothetical Midwest GHG Market and Mitigation During 2002-
                                      2005
                     (in million metric tons CO2 equivalent)
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Estimated Midwest 1999 emissions.............  1,375
    1999 emissions of a hypothetical 20 percent    275
     coverage market.
    Cumulative baseline emissions during 2002-     1,100
     2005 under for the 20 percent coverage
     scenario.
    Cumulative 2002-2005 CCX emissions target for  1,061.5
     hypothetical 20 percent coverage program (2
     percent below 1999 levels during 2002, 3
     percent below 1999 in 2003, 4 percent below
     in 2004, 5 percent below in 2005).
    Four-year Mitigation Demand (baseline          38.5 mil. tons CO2e
     emissions--target).
    ------------------------------------------------------------------------

        The hypothetical 20 percent coverage Midwest market appears to
    provide sufficient scale for a pilot market that could be
    representative of a larger market. Total emissions covered in such a
    market would equal the emissions of Scandinavia (Denmark, Finland,
    Norway and Sweden) and would be more than double the emissions covered
    in the successful internal GHG market operated by BP. While broad
    coverage is an ultimate goal, the main benefits of a pilot--proof of
    concept and price discovery--can be realized with a modest size but a
    diverse set of participants.
    Proposed Market Architecture and Mechanics
        Table B summarizes the core elements of the proposed market
    architecture.

                         Table B--Indicative Term Sheet
              Market Architecture for the Chicago Climate Exchange
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Geographic Coverage..........  2002: emission sources and projects in
                                    seven Midwest states (IA, IL, IN, MI,
                                    MN, OH, WI), offsets accepted from
                                    projects in Brazil; 2003-2005: emission
                                    sources and projects in United States,
                                    Canada and Mexico, offsets accepted from
                                    projects in Brazil.
    Greenhouse Gases Covered.....  Carbon dioxide, methane and all other
                                    targeted GHGs
    Emission Reduction Targets...  2002: 2 percent below 1999 levels,
                                    falling 1 percent per year through 2005
    Industries and Firms Targeted  Primarily ``downstream'' participants:
                                    power plants, refineries, factories,
                                    vehicle fleets; approximately 100 firms
                                    initially targeted; individual entities
                                    or operating groups must produce over
                                    250,000 tons CO2e to become a
                                    participating emission source
    Tradable Instruments.........  Fully interchangeable emission allowances
                                    (original issue) and offsets produced by
                                    targeted mitigation projects
    Eligible Offset Projects.....    Carbon sequestration in forests
                                    and domestic soils
                                     Renewable energy systems
                                    activated after 1998
                                     Methane destruction in
                                    agriculture, landfills and coalbeds
                                     Offset projects must be over
                                    100,000 tons CO2e; smaller offset
                                    projects must aggregate reductions to
                                    meet the requirement
    Annual Public Auctions.......  2 percent of issued allowances withheld
                                    and auctioned in ``spot'' and
                                    ``forward'' auctions, proceeds returned
                                    pro rata
    Central Registry.............  Central data base to record and transfer
                                    allowances and offsets; interfaces with
                                    emissions data base and trading platform
    Trading Mechanisms...........  Standardized CCX Electronic Market,
                                    private contracting
    Trade Documentation..........  Uniform documentation provided to
                                    facilitate trade
    Accounting and Tax Issues....  Accounting guidance suggested by
                                    generally accepted accounting
                                    principles; precedent exists for U.S.
                                    tax treatment
    Market Governance............  Self-governing structure to oversee
                                    rules, monitoring and trade
    ------------------------------------------------------------------------

        The following summarizes the mechanics of the proposed system:
        1. Participating emission sources agree to the prescribed emission
    limits and standardized emissions monitoring and reporting rules.
        2. Participating emission sources receive a 4-year stream of
    emission allowances equal to their target emission level.
        3. Emission offsets may be generated by independently verified GHG
    mitigation projects.
        4. Starting in 2002, annual allowances and offset holdings must
    cover annual emissions.
        5. Participants can comply by cutting their own emissions or
    purchasing emission allowances from those who make extra emission cuts
    or from offset projects.
        6. Failure to fulfill commitments triggers automatic non-compliance
    penalties.
        7. Periodic auctions and organized trading will reveal market
    prices.
        Tradable emission allowances and offsets exist and are transferred
    as records in a publicly accessible computerized tracking system called
    the Registry. Each unit is assigned a unique identification number. A
    variety of best-practice methods for measuring or calculating GHG
    emissions will be applied, including continuous emissions monitoring,
    fuel records and mass balance calculations. Methods for addressing new
    entrants and facilities and partial ownership of emission sources have
    been proposed but need further refinement based on industry input.
        Emission offsets reflect mitigation actions generated by individual
    projects undertaken by entities not qualified to be emission sources
    (generate less than 250,000 tons CO2e emissions reductions
    per year). When possible, standard rules and conservative reference
    emission values can be used to determine offset project effectiveness.
    Offsets are earned by undertaking specified mitigation projects that
    must be independently verified. Multiple small offset projects will be
    grouped into 100,000 ton pools. Offset projects must follow
    standardized registration, reporting and verification processes. This
    design feature is intended to produce fungible instruments that will be
    recognized in other emerging carbon markets.
        Examples of eligible offset projects include:

          Carbon sequestration from forest expansion, and domestic
    no-till agricultural soils and agricultural tree and grass plantings;
          Electric power generated by wind, solar and geothermal
    systems;
          Methane capture and destruction (e.g., from agricultural
    waste, landfills and coal mines).
        Selected categories of offsets can be implemented in Brazil. This
    feature allows the pilot market participants to develop expertise on
    issues associated with cross-border transactions, including the
    opportunity to develop trading across differing legal and regulatory
    systems. Brazil also represents a natural location as it has extensive
    linkages to many Midwest businesses, presents a variety of low-cost
    mitigation opportunities, and its policymakers are actively preparing
    for the international carbon market.
        Annual auctions of emission allowances will be held to help
    stimulate the market and publicly reveal prices. To complement private
    contracting, an electronic mechanism for hosting CCX trading will
    provide a central location that facilitates trading and publicly
    reveals price information. Several existing trading systems will be
    considered for use in the CCX market. Trading will be encouraged by
    provision of uniform trade documentation and by listing standardized
    spot and forward contracts on the CCX electronic market.
    Market Administration Issues, Public Policy Context
        Administration of the CCX market by an efficient, corporate style
    governance system, with an elected Board of Directors and a strong
    Chief Executive, is recommended. The rules structure and decisions of
    the governing body should be codified through a Rulebook. Under the
    guidance of the Board and the Rulebook, a professional staff should be
    responsible for making most operational decisions and managing outside
    vendors. In order to assure the market incorporates current best
    practices, several expert advisory committees will be convened,
    including committees on rules and enforcement; market operations and
    technical specifications; and emissions and project monitoring,
    verification and audits.
        The capabilities of various service providers who might construct
    and/or operate an emissions and emissions trading registry were
    examined. In order to assess the options available for implementing
    important elements of the CCX market, EFP staff has examined the
    capabilities of various service providers who might construct and/or
    operate an emissions and emissions trading registry. Discussions have
    been held to assess the capabilities of such vendors ranging from
    multi-national providers of trading technology to vendors of specific
    technology. EFP also met with a B2B trading platform for the forest
    products sector, which is used and recommended by two CCX participants.
    Each group offers potentially attractive features that will be further
    examined. Negotiations with potential trading system partners should
    commence as soon as possible to enable a second quarter 2002 system
    activation. Conversations have also been ongoing with clearing
    organizations, including an organization that has achieved a AAA credit
    rating from Standard & Poor's, a $100 million default insurance policy
    and a credit facility of $200 million. EFP has also worked to build
    links to other emerging GHG markets (e.g., the UK), multi-lateral
    organizations, national governments, corporations, non-governmental
    organizations and financial and commodity exchanges.
        Professional research on the accounting and tax issues associated
    with participating in the CCX was conducted under subcontract by
    PricewaterhouseCoopers LLP. An extensive body of guidance on both
    accounting and tax issues associated with emissions trading has been
    established in the U.S. Preliminary indicative guidance is provided on
    proper accounting and income tax treatment for issues associated with
    enrollment in the market, trading, swaps, auctions and participation
    costs.
        A variety of legislative proposals have provided further indication
    that participation in CCX will help position participants to
    intelligently influence and benefit from possible future regulations.
    Legislative proposals to require reductions in power plant
    CO2 emissions, and to assist or reward farm and forest
    carbon sequestration, could introduce a policy environment that
    provides competitive advantages to CCX participants.
    Industry Outreach, Response
        In order to identify potential CCX participants, a data base
    containing salient information on major Midwest emission sources was
    assembled and screened based on various criteria. Many Midwest
    businesses have already initiated climate change programs, and some
    industries, including the electric power industry, are already involved
    in emissions trading. Approximately 100 companies met the screening
    criteria. Additional screening identified forty firms that received
    first-round invitations to participate in forming the market. Sectors
    represented in this list include: electric power, auto manufacturers,
    petroleum refining, transport, pharmaceuticals, forest and paper,
    chemical manufacturers, and computers and telecommunications.
        The outreach and communications effort has also included speeches
    and presentations, authored articles and dissemination of the CCX
    message through the media. This has resulted in four published articles
    authored by EFP executives, coverage in twenty-seven print and
    electronic media sources, five radio interviews, one web cast and
    twenty-five presentations at industry conferences, congressional
    hearings and other events in eight countries (United States., Canada,
    Mexico, Brazil, Germany, Morocco, Switzerland, and the United Kingdom).
        Environmental Financial Products LLC initiated empirical research
    to assess interest among potential participants in the Chicago Climate
    Exchange. That effort, which is continuing, has included extending
    invitations for participation to a diverse group of entities. The
    invitations asked for a response consisting of a letter indicating a
    non-binding intent to help form final rules for CCX, and, provided the
    rules are consistent with the entity's interests, a non-binding intent
    to participate in the CCX market. To date forty-six targeted entities
    have given affirmative responses. Included are major manufacturers such
    as DuPont and Ford Motor Company, leading diversified energy companies
    such as American Electric Power and Cinergy, major international
    financial entities such as Swiss Re, agricultural businesses such as
    Growmark and Agriliance, and the two largest forest products companies
    in the world, International Paper and Stora Enso. The international
    presence in the CCX includes major Mexican corporations such as CEMEX
    and Grupo IMSA and a leading generator of electricity in Brazil
    (Cataguazes-Leopoldina). A new sector has been added: two major
    municipalities in North America (Chicago and Mexico City) have also
    agreed to participate in the design phase. We believe this new sector
    will add some important dynamics to the market and allow for incentives
    to achieve environmental improvements in cities. Appendix A provides a
    brief description of the entities from which a positive response has
    been received to date.
    High-Level CCX Advisory Board
        The Hon. Richard M. Daley, Mayor of the city of Chicago, accepted
    the invitation to become the Honorary Chairman of the CCX. A high-level
    Advisory Board has been formed to receive strategic input from top
    world experts from the environmental, business, academic and
    policymaking communities. Members of the Board include internationally
    recognized environmental leaders such as Maurice Strong and Israel
    Klabin, former Governors of U.S. States (James Thompson and David
    Boren), and individuals who have served in senior positions in major
    businesses and academic institutions, such as Donald Jacobs and Jeffrey
    Garten. The dignitaries serving on this Board can help inform corporate
    and governmental decisionmakers and contribute to the formation of a
    robust group of CCX market participants. Appendix B provides a brief
    biographical summary of each of the individuals who have agreed to
    serve on the CCX Advisory Board.
    Research Methodology
        The research methodology applied a ``bottom-up'' approach. The
    investigators focused their initial analysis at the micro level. The
    research identified six major sectors: electric power, energy (oil and
    gas systems), manufacturing, forest products, waste/landfills and
    agriculture. Individual interviews and discussions were then held with
    representatives of these sectors to gather input on a set of draft
    market rules. The researchers also considered two categories of
    offsets, those generated domestically (e.g., agricultural soil
    sequestration and renewable energy systems) and those offsets created
    in Brazil (e.g., forestry-based projects, fuel switching).
        The decision to build the model from the micro to the macro level
    is based on a philosophical framework that has become a cornerstone of
    the CCX design: the creation of a set of common standards that can
    facilitate the operation of a market. An apt analogy might come from
    monetary policy theory. Policymakers are often faced, when setting a
    monetary regime, with choice of following a ``rules'' or
    ``discretion''-based approach. It is our belief that the CCX should
    strive to be as much of a rules-based system as possible. Our
    experience as professional market inventors and participants is that a
    system that makes use of common practices and a set of standard rules
    has greater chances of being viable.
    Current activities
        Current activity in the design phase involves building consensus on
    the initial architecture by further incorporating industry input
    through a Technical Committee comprised of experts, including
    representatives of the entities identified in Appendix A. Meetings of
    the Technical Committees for the Agriculture, Electricity, Industry,
    Landfill and Forestry Products sectors were held in December 2001 and
    January 2002. These detailed discussions with participants and service
    providers are being undertaken in order to identify a consensus on the
    market architecture and implementation plan. This effort will aim to
    finalize emission baselines, targets, timetables, as well as rules on
    emissions monitoring, non-compliance penalties, new entrants, and
    jointly owned facilities. Proposed rules must be finalized for emission
    offset standards, mechanics of aggregating offsets and project
    verification.
        A simultaneous effort is being undertaken to select vendors for the
    registry and trading platform, and to enroll project verifiers. The
    consensus market design will be codified in the CCX Rulebook, which
    will also establish the responsibilities and operating procedures of
    the CCX governance structure.
    Next steps
        The subsequent steps will be preparation and launch of the first
    phase of the pilot market. Further iteration will involve refinement of
    market operations based on actual experience with the market, and
    expansion to allow increased participation and broader geographic
    coverage.
        Pre-launch preparation of the market will entail official
    enrollment of participating emission sources, activation of the
    Registry, and placing emission allowances in the accounts of
    participants. Launch of the market will require initiation of the
    emission monitoring and reporting procedures, accepting applications
    from offset projects, and activation of the electronic trading
    mechanism.
        Operation of the market during the first year will include
    execution of the first auction, acceptance of quarterly emission
    monitoring reports, issuance first-year offsets based on independent
    verification reports, and the compliance ``true-up'' subsequent to year
    end. A process for expanding the market will be established in order to
    allow for orderly growth of participation.
                                   appendix a
    Entities participating in the design phase of the Chicago Climate
            Exchanges
        Agriliance: Agriliance is a partnership of agricultural producer-
    owners, local cooperatives and regional cooperatives. Agriliance offers
    crop nutrients, crop protection products, seeds, information
    management, and crop technical services to producers and ranchers in
    all 50 states as well as Canada and Mexico. It has sales and marketing
    offices in St. Paul, Minn., and Kansas City, Mo. Agriliance, LLC was
    formed on February 3, 2000, as an agronomy marketing joint venture
    between Cenex Harvest States Cooperatives, Farmland Industries, Inc.
    and Land O'Lakes, Inc.
        Alliant Energy: Alliant Energy Corporation is a growing energy-
    service provider with both domestic and international operations.
    Headquartered in Madison, Wis., Alliant Energy provides electric,
    natural gas, water and steam services to more than two million
    customers worldwide. Alliant Energy Resources Inc., the home of the
    company's non-regulated businesses, has operations and investments
    throughout the United States, as well as Australia, Brazil, China,
    Mexico and New Zealand.
        American Agrisurance represents the third largest crop insurance
    company in the United States. From its home office in Council Bluffs,
    Iowa, the company writes business in 37 states. American Agrisurance
    markets crop insurance coverage to producers as a source of risk
    protection. Its extensive product line includes Multiple Peril Crop
    Insurance, Market PricePlustm, Crop Revenue Coverage, Crop
    Revenue CoveragePlus, Revenue Assurance, Income Protection,
    MVP wheattm, MVP corntm, MVP
    soybeanstm, Crop Hail Insurance, Companion Hail Insurance,
    Field Grain Fire, and Named Peril Insurance.
        American Electric Power (AEP) is a multinational energy company
    based in Columbus, Ohio. AEP owns and operates more than 38,000
    megawatts of generating capacity, making it America's largest generator
    of electricity. The company is also a leading wholesale energy marketer
    and trader, ranking second in North America in wholesale electricity
    and wholesale natural gas volume. AEP provides retail electricity to
    more than 7 million customers worldwide and has holdings in the United
    States and select international markets. Wholly owned subsidiaries are
    involved in power engineering and construction services, energy
    management and telecommunications.
        BP p.l.c. is the holding company of one of the world's largest
    petroleum and petrochemicals groups. BP's main activities are
    exploration and production of crude oil and natural gas; refining,
    marketing, supply and transportation; and manufacturing and marketing
    of petrochemicals. BP has a growing activity in gas and power and in
    solar power generation. BP has well-established operations in Europe,
    North and South America, Australasia and Africa.
        Calpine: Headquartered in San Jose, CA, Calpine has an energy
    portfolio comprised of 50 energy centers, with net ownership capacity
    of 5,900 megawatts. Located in key power markets throughout the United
    States, these centers produce enough energy to meet the electrical
    needs of close to six million households. Calpine was ranked twenty-
    fifth among FORTUNE magazine's 100 fastest growing companies and it was
    recently ranked by Business Week as the 3rd best performing stock in
    the S&P 500.
        Carr Futures/Credit Agricole Indosuez: Carr Futures, a subsidiary
    of Credit Agricole Indosuez, is a global institutional brokerage firm
    headquartered in Chicago. Carr holds memberships on all major futures
    and equity markets worldwide, and consistently ranks among the largest
    futures brokerage firms in the world.
        CEMEX is a leading global producer and marketer of cement and
    ready-mix products, with operations primarily concentrated in the
    world's most dynamic cement markets across five continents. CEMEX
    combines a deep knowledge of the local markets with its global network
    and information technology systems to provide world-class products and
    services to its customers, from individual homebuilders to large
    industrial contractors.
        Cinergy Corp.: Based in Cincinnati, Ohio, Cinergy Corp. is one of
    the leading diversified energy companies in the United States. Its
    largest operating companies, The Cincinnati Gas & Electric Company
    (Ohio), Union Light, Heat & Power (Kentucky), Lawrenceburg Gas
    (Indiana), and PSI Energy, Inc. (Indiana), serve more than 1.5 million
    electric customers and 500,000 gas customers located in a 25,000-
    square-mile service territory encompassing portions of Indiana, Ohio
    and Kentucky. The interconnections of Cinergy's Midwestern transmission
    assets give it access to 37 percent of the total U.S. energy
    consumption. Chicago is the fourth largest city in the United States
    and the Midwest's major industrial and financial center. The city is
    home of world-renowned financial exchanges and international
    corporations. Approximately 8 million people live in Chicago's
    metropolitan area.
        CMS Generation is the tenth-largest U.S.-based company developing
    and operating independent power projects around the world. CMS
    Generation owns interests in independent power plants totaling more
    than 9,742 gross megawatts and more than 4,621 megawatts are under
    construction. CMS Generation currently operates plants in 10 countries,
    including the United States, India, Morocco, Argentina, Chile and
    Thailand. Three of its plants--in North Africa and Australia--are the
    largest independent power plants on their continents.
        Cia Forca e Luz Cataguazes-Leopoldina is a 100-year old holding
    company, and a major shareholder on five regional electricity-service
    providers--CFLCL, CENF, CELB, SAELPA and ENERGIPE, located in four
    different Brazilian states, with assets valued at U.S. $1 billion and
    over 1.6 million customers. Headquartered in Cataguazes, Minas Gerais,
    the company supports, among other initiatives, an extensive power
    generation program, consisting mostly of hydro and combined-cycle
    thermal power plants.
        Ducks Unlimited--The mission of Ducks Unlimited is to fulfill the
    annual life cycle needs of North American waterfowl by protecting,
    enhancing, restoring, and managing important wetlands and associated
    uplands. Since its founding in 1937, DU has raised more than $1.6
    billion, which has contributed to the conservation of almost 10 million
    acres of prime wildlife habitat in all 50 states, each of the Canadian
    provinces and in key areas of Mexico. Some 900 species of wildlife live
    and flourish on DU projects, including many threatened or endangered
    species. DU is the leading land restoration organization in North
    America and has much experience partnering with private landowners to
    deliver projects. Restoration activities such as reforestation and
    establishing grasslands serve to sequester carbon.
        DuPont: DuPont is a science company, delivering science-based
    solutions that make a difference in people's lives in food and
    nutrition, health care, apparel, home and construction, electronics,
    and transportation. Founded in 1802, the company operates in 70
    countries and has 93,000 employees.
        DTE Energy is a Detroit-based diversified energy company involved
    in the development and management of energy-related businesses and
    services nationwide. DTE Energy's principal operating subsidiaries are
    Detroit Edison, an electric utility serving 2.1 million customers in
    Southeastern Michigan, and Michigan Consolidated Gas, serving 1.2
    million customers in Michigan.
        Exelon Corporation is one of the nation's largest electric
    utilities with approximately five million customers and more than $15
    billion in annual revenues. The company has one of the industry's
    largest portfolios of electricity generation capacity, with a
    nationwide reach and strong positions in the Midwest and Mid-Atlantic.
    Exelon distributes electricity to approximately five million customers
    in Illinois and Pennsylvania and gas to 425,000 customers in the
    Philadelphia area. The company also has holdings in such competitive
    businesses as energy, infrastructure services and energy services.
    Exelon is headquartered in Chicago.
        FirstEnergy, headquartered in Akron, Ohio, is a registered public
    utility holding company whose subsidiaries have annual revenues of more
    than $12 billion, and electricity sales of approximately 124 billion
    kilowatt-hours. Its seven electric utility operating companies--Ohio
    Edison, The Cleveland Electric Illuminating Company, Toledo Edison,
    Metropolitan Edison, Pennsylvania Electric, Pennsylvania Power and
    Jersey Central Power & Light--comprise the nation's fourth largest
    investor-owned electric system, based on serving 4.3 million customers
    in a 36,100-square-mile service area that stretches from the Ohio-
    Indiana border to the New Jersey shore. FirstEnergy subsidiaries and
    affiliates provide a wide range of energy and energy-related products
    and services, including the generation and sale of electricity;
    exploration and production of oil and natural gas; transmission and
    marketing of natural gas; mechanical and electrical contracting and
    construction; energy management; and telecommunications.
        Ford Motor Company is the world's second largest automotive
    company. Its Automotive operations include: Ford, Mercury and TH!NK
    brands; wholly owned subsidiaries Volvo, Jaguar, Aston Martin and Land
    Rover; Mazda (33 percent ownership); and Quality Care and Kwik-Fit.
    Ford Financial Services, providing automotive financing and other
    services, and The Hertz Corporation, providing car rental services, are
    the other major components of Ford Motor Company. Ford's vision is to
    become the world's leading consumer company for automotive products and
    services. Ford Motor Company cares about preserving the environment for
    future generations, and is dedicated to providing ingenious
    environmental solutions that will position them as a leader in the
    automotive industry of the 21st century and contribute to a sustainable
    planet.
        GROWMARK, Inc.: GROWMARK, headquartered in Bloomington, Illinois,
    is a federated regional cooperative that provides agriculture-related
    products and services primarily in Illinois, Iowa, Wisconsin and
    Ontario, Canada. FS-brand farm supplies and related services are
    marketed to farmers in these areas by nearly 100 GROWMARK member
    cooperatives. Visit the GROWMARK Web site at www.fssystem.com.
        Grupo IMSA, a holding company, was founded in 1936 and is today one
    of Mexico's leading diversified industrial companies. The Group
    operates in four core businesses: steel processed products; automotive
    batteries and related products; aluminum and other related products;
    and steel and plastic construction products. With manufacturing
    facilities in Mexico, the United States and throughout Central and
    South America, Grupo IMSA currently exports to all five continents. In
    2000 Grupo IMSA's sales reached US$2.2 billion, of which close to 45
    percent was generated outside Mexico. Grupo IMSA shares trade on the
    Mexican Stock Exchange (IMSA) and on the NYSE (IMY).
        Interface, Inc. is a global manufacturer, marketer, installer and
    servicer of products for the commercial and institutional interiors
    market. The Company is the worldwide leader in the modular carpet
    segment, which includes both carpet tile and two-meter roll goods. The
    Company's Bentley, Prince Street, and Firth brands are leaders in the
    high quality, designer-oriented sector of the broadloom segment. The
    Company provides specialized carpet replacement, installation and
    maintenance services through its Re:Source Americas service network.
    The Company's Fabrics Group includes the leading U.S. manufacturer of
    panel fabrics for use in open plan office furniture systems. The
    Company's specialty products operations produce raised/access flooring
    systems, antimicrobial additives, adhesives and various other specialty
    chemical compounds and products.
        International Paper: With over 12 million acres of land managed in
    the United States alone, International Paper is one of the world's
    largest private landowners. International IP has significant global
    businesses in paper and paper distribution, packaging and forest
    products, including building materials.
        Iowa Farm Bureau Federation: The Iowa Farm Bureau is a Federation
    of 100 county Farm Bureaus in Iowa. The organization was founded in
    1918 and is currently comprised of more than 154,000 member families
    throughout the state. Numerous legislative, educational and service-to-
    member programs are provided for the members' benefit. The Iowa Farm
    Bureau's mission is to help farm families prosper and improve their
    quality of life. It is an independent, non-governmental, voluntary
    organization. It is local, statewide, national and international in its
    scope and influence and is nonpartisan, nonsectarian and nonsecret in
    character.
        IT Group, Inc. is a provider of diversified, value-added services
    in the areas of consulting, engineering and construction, remediation
    and facilities management. Through the Company's diverse group of
    highly specialized companies, clients can take advantage of a single,
    fully integrated delivery system and expertise to meet their global
    environmental needs. Its broad range of services includes the
    identification of contaminants in soil, air and water and the
    subsequent design and execution of remedial solutions.
        Manitoba Hydro is a major energy utility headquartered in Winnipeg,
    Manitoba serving 403,000 electric customers throughout Manitoba and 248
    000 gas customers in various communities throughout southern Manitoba.
    Virtually all electricity generated by the provincial Crown Corporation
    is from self-renewing water power. We are the major distributor of
    natural gas in the province. The Corporation's capital assets-in-
    service at original cost exceed $8 billion, making it the fourth
    largest energy utility in Canada.
        Mead Corporation a forest products company with $4.4 billion in
    annual sales, is one of the leading North American producers of coated
    paper, coated paperboard and consumer and office products, a world
    leader in multiple packaging and specialty paper, and a producer of
    high-quality corrugating medium. In management of the company's more
    than two million acres of forests, Mead is committed to practicing
    principled forest stewardship and using resources in a responsible and
    sustainable manner. Headquartered in Dayton, Ohio, Mead has more than
    15,100 employees and offices and operations in 32 countries.
        Mexico City is Mexico's capital and its seat of government. The
    city is also the country's major center of commerce, finance and the
    arts. Mexico City is the world's largest metropolis, with over 20
    million people. Midwest Generation: Headquartered in Chicago, Midwest
    Generation, a subsidiary of Edison Mission Energy, owns 13 electricity
    generating units in Illinois and Pennsylvania. With a total generating
    capacity of over 11,400 megawatts, Midwest Generation can generate
    enough electricity to meet the needs of more than 13 million homes.
        Midwest Generation is exclusively in business to sell wholesale
    power in competitive electricity markets. The company is currently
    undertaking a major program to reduce emissions from its coal-fired
    plants.
        National Council of Farmer Cooperatives: NCFC's mission is to
    protect the public policy environment in which farmer-owned cooperative
    businesses operate, promote their economic well-being, and provide
    leadership in cooperative education. NCFC remains the only organization
    serving exclusively as the national representative and advocate for
    America's farmer-owned cooperative businesses.
        Navitas Energy is an independent power producer that develops, owns
    and operates renewable energy production facilities in the United
    States. Navitas currently has over 650 MW of clean energy under
    development, leveraging the environmental benefits of wind energy with
    the dispatchability of combustion turbines to produce a cleaner blend
    of affordable electric energy.
        NiSource Inc., is a holding company with headquarters in
    Merrillville, Ind., whose operating companies engage in all phases of
    the natural gas and electric business from exploration and production
    to transmission, storage and distribution of natural gas, as well as
    electric generation, transmission and distribution. Its operation
    companies provide service to 3.6 million customers located within the
    high-demand energy corridor that stretches from the Gulf of Mexico
    through the Midwest to New England.
        NUON is one of the largest multi-utility companies in the
    Netherlands, serving more than 2.5 million residential and business
    customers with electricity and, in many instances, with gas, water and
    heat as well. The company is in the forefront in the marketing of green
    energy and renewable energy generation in the Netherlands and is
    extending its knowledge and experience in the area of renewable energy
    internationally. Nuon's activities in the field of renewable energy
    include wind power, small hydropower, thermal and photovoltaic solar
    energy, landfill gas, biogas, biomass and ambient heat.
        Ontario Power Generation (OPG) is an Ontario based company, whose
    principal business is the generation and sale of electricity to
    customers in Ontario and to interconnected markets. OPG's goal is to be
    a premier North American energy company while operating in a safe, open
    and environmentally responsible manner. OPG's focus is to produce
    reliable electricity from competitive generation assets, power trading,
    and commercial energy sales activities.
        ORMAT: ORMAT is the world leader in distributed reliable remote
    microturbine power units (also known as Closed Cycle Vapor Turbo
    Generators). ORMAT's operations use locally available heat sources,
    including geothermal energy (steam and hot water), industrial waste
    heat, solar energy, biomass, and low grade fuels.
        Pinnacle West Capital Corp: Based in Phoenix, Ariz., Pinnacle West
    is the parent company of APS and Pinnacle West Energy. APS is Arizona's
    largest and longest-serving electric utility, serving more than 857,000
    customers, and Pinnacle West Energy is the company's unregulated
    wholesale generating subsidiary. Among the utilities listed in the S&P
    500, Pinnacle West is ranked in the top 10 percent for environmental
    performance by an international investment advisory firm. The Company
    also is ranked in the top 10 percent by Fortune magazine for total
    shareholder return over the last 5 years.
        PG&E National Energy Group, headquartered in Bethesda, Md.,
    develops, owns and operates electric generating and gas pipeline
    facilities and provides energy trading, marketing and risk-management
    services in North America. The National Energy Group operates power
    production facilities with a capacity of about 7,000 megawatts, with
    another 10,000 megawatts under development, and more than 1,300 miles
    of natural gas transmission pipeline with a capacity of 2.7 billion
    cubic feet per day. (PG&E National Energy Group is not the same company
    as Pacific Gas and Electric Company, the California utility, and is not
    regulated by the California Public Utilities Comission. Customers of
    Pacific Gas and Electric Company do not have to buy products or
    services from PG&E National Energy Group in order to continue to
    receive quality regulated services from Pacific Gas and Electric
    Company.)
        STMicroelectronics: STMicroelectronics is the world's third largest
    independent semiconductor company whose shares are traded on the New
    York Stock Exchange, on Euronext Paris and on the Milan Stock Exchange.
    The Company designs, develops, manufactures and markets a broad range
    of semiconductor integrated circuits (ICs) and discrete devices used in
    a wide variety of microelectronic applications, including
    telecommunications systems, computer systems, consumer products,
    automotive products and industrial automation and control systems. In
    2000, the Company's net revenues were $7.8 billion and net earnings
    were $1.45 billion.
        Stora Enso: Domiciled in Finland, Stora Enso is an integrated
    global forest products company producing magazine papers, newsprint,
    fine papers and packaging boards, areas in which the company holds a
    leading global market position. Stora Enso is the world's second
    largest papermaker and also conducts extensive sawmilling operations.
    Stora Enso's global sales total approximately EUR 13 billion, with
    annual paper and board production capacity of about 15 million tonnes.
    The company has some 45,000 employees in more than 40 countries. Its
    shares are listed in Helsinki, New York and Stockholm. Stora Enso North
    America (formerly Wisconsin-based Consolidated Papers, Inc.) a Division
    of Stora Enso Oyj, is North America's leading producer of coated and
    supercalendered printing papers for the printing and publishing
    industries and is a premier producer of specialty papers, paperboard
    and paperboard products.
        Suncor Energy, Inc. is a Canadian integrated energy company that
    explores for, acquires, produces, and markets crude oil and natural
    gas, refines crude oil, and markets petroleum and petrochemical
    products. Suncor has three principal business units: Oil Sands,
    Exploration and Production, and Sunoco. Oil Sands produces light sweet
    and light sour crude oil, diesel fuel and various custom blends from
    oil sands and markets these products in Canada and the United States.
    Exploration and Production explores for, acquires, develops, produces
    and markets crude oil in Canada and natural gas throughout North
    America. Sunoco refines and markets crude oil and a broad range of
    petroleum and petrochemical products in Ontario and the United States.
        Swiss Re: Founded in 1863 in Zurich, Switzerland, Swiss Re is the
    world's second largest reinsurer, with roughly 9,000 employees and
    gross premiums in 2000 of CHF 26 billion (USD$15.3 billion). Standard &
    Poor's gives the company its AAA rating; Moody's rates it Aaa. Swiss Re
    does business from over 70 offices in 30 countries. The world over,
    Swiss Re offers insurers and corporates: classic (re)insurance covers,
    alternative risk transfer (ART) instruments, and a broad range of
    supplementary services for comprehensive risk management.
        Temple-Inland Inc. is a diversified forestry, forest products and
    financial services company. Its three main operating divisions include
    a Paper Group, which manufactures corrugated packaging products; a
    Building Products Group, which manufactures a wide range of building
    products and manages the Company's forest resources consisting of
    approximately 2.2 million acres of timberland in Texas, Louisiana,
    Georgia and Alabama; and the Financial Services Group, which consists
    of savings bank, mortgage banking, real estate, and insurance brokerage
    activities.
        The Nature Conservancy: The Nature Conservancy, a nonprofit
    organization founded in 1951, is the world's largest private
    international conservation group. TNC has protected over 12,089,000
    acres of land in the United States.
        TXU Energy Trading is a player in the highly competitive energy
    trading market. Through its headquarters in Dallas and regional offices
    across the country, it sells natural gas and electricity to more than
    6,700 retail commercial and industrial customers across the United
    States. The company also offers a wide selection of other energy
    products and services including comprehensive risk, asset and portfolio
    management.
        Waste Management, Inc. as a leading provider of comprehensive waste
    management services, Waste Management serves municipal, commercial,
    industrial and residential customers throughout North America.
    Headquartered in Houston, Texas, the Company's network of operations
    includes 284 active landfill disposal sites, 16 waste-to-energy plants,
    73 landfill gas-to-energy facilities, 160 recycling plants, 293
    transfer stations and more than 1,400 collection facilities. Combined,
    these resources allow Waste Management to offer a full range of
    environmental services to approximately 25 million residential and two
    million commercial customers nationwide.
        Wisconsin Energy Corporation, headquartered in Milwaukee, Wis., is
    an $8.4 billion holding company with a diversified portfolio of
    subsidiaries engaged in electric generation; electric, gas, steam and
    water distribution; pump manufacturing and other non-utility
    businesses. The corporation's utilities subsidiaries serve more than
    one million electric and 950,000 natural gas customers in Wisconsin and
    Michigan's Upper Peninsula.
                                   appendix b
    Biographies of the CCX Advisory Board
        David L. Boren is the President of the University of Oklahoma. Mr.
    Boren has had a distinguished career in public service as a member of
    the Oklahoma House of Representatives (1967-1975), Governor of Oklahoma
    (1975-1977) and as a U.S. Senator (1979-1994). As a U.S. Senator, Mr.
    Boren was the longest-serving chairman of the Senate's Select Committee
    on Intelligence. Mr. Boren was educated at Yale and attended Oxford
    University as a Rhodes Scholar. He also earned a law degree from the
    University of Oklahoma College of Law.
        Lucien Y. Bronicki is the chairman of Ormat International, an
    Israeli company leader in the field of innovative technology solutions
    to geothermal power plants, power-generation from industrial waste heat
    and solar energy projects. Mr. Bronicki has been chairman of Ormat
    since he founded the company in 1965. Mr. Bronicki holds various
    professional affiliations and memberships, including chairman World
    Energy Council's Israeli National Committee, Member of the Executive
    Committee of the Weizmann Institute of Science and member of the Board
    of Ben Gurion University. He is also the recipient of several business
    and science related awards.
        Ernst Brugger is Founding Partner and chairman of Brugger Hanser &
    Partner Ltd. in Switzerland, a business consulting firm with
    international experience and range. He is also a professor at the
    University of Zurich, chairman and member of the board of various
    companies and a member of the International Committee of the Red Cross
    (ICRC). Dr. Brugger serves as chairman of the Board of Directors of
    Sustainable Performance Group, an investment and risk management
    company which invests in pioneering and leading companies which have
    taken up the cause of sustainable business.
        lizabeth Dowdeswell is internationally recognized for her global
    and highly diverse experience in building consensus and managing
    change. She advises both public and private sectors on environmental
    issues worldwide. Ms. Dowdeswell is a former Executive Director of the
    United Nations Environment Programme (UNEP). Before joining UNEP, Ms.
    Dowdeswell was the Assistant Deputy Minister of Environment Canada. In
    that capacity she played a leading role in global efforts to negotiate
    the treaty on climate change adopted at the 1992 United Nations
    Conference on Environment and Development. She was Canada's permanent
    representative to the World Meteorological Organization, principal
    delegate to the Intergovernmental Panel on Climate Change, and Canadian
    chairman of the Great Lakes Water Quality Board. She is currently a
    Visiting Professor at the University of Toronto, a senior associate at
    Royal Roads University and an associate fellow of the European Centre
    for Public Affairs. She also serves on the governing and advisory
    boards of several institutions. Ms. Dowdeswell is the author of
    numerous publications in both the popular press and professional
    journals.
        Jeffrey E. Garten is dean of the Yale School of Management.
    Formerly undersecretary of commerce for international trade in the
    first Clinton Administration, he also held senior economic posts in the
    Ford and Carter Administrations. From 1979--1992, he was a managing
    director first at Lehman Brothers, where he oversaw the firm's Asian
    investment banking activities from Tokyo, and then at the Blackstone
    Group. Currently a monthly columnist for Business Week, his latest book
    is ``The Mind of the CEO'' (2001).''
        Donald P. Jacobs is Dean of the Kellogg Graduate School of
    Management and its Gaylord Freeman Distinguished Professor of Banking.
    Under his leadership, the Kellogg School has become a leader in the
    field of business and finance and is consistently ranked as one of the
    top five business schools in the United States. Dean Jacobs is a former
    chairman of the Board of Amtrak (1975-1979) and currently serves on
    several corporate boards. His work on banking, corporate governance and
    international finance has been published in many scholarly journals and
    he holds several honorary degrees and professional awards.
        Dennis Jennings is the Global Risk Management Solutions Leader for
    PricewaterhouseCoopers' (PwC) Global Energy and Mining Industry
    Practice. Mr. Jennings previously served as the Dallas/Fort Worth
    Energy Industry Market Leader; Co-Chairman of the U.S. Oil and Gas
    Industry Program; and on Steering Committee of the International Energy
    Practice. Mr. Jennings is experienced in all sectors of the petroleum
    industry (upstream, downstream, domestic and international) and the
    service industry. His responsibility have included leading PwC's global
    risk management practice for the energy and mining industry, providing
    financial advice and performing due diligence reviews on numerous
    merger, acquisitions and divestiture efforts by major international
    corporations.
        Joseph P. Kennedy II is chairman and President of Boston-based
    Citizens Energy Group. Before returning to Citizens Energy, Mr. Kennedy
    represented the Eighth Congressional District of Massachusetts in the
    U.S. House of Representatives for 12 years. Mr. Kennedy founded the
    non-profit company in 1979 to provide low-cost heating oil to the poor
    and elderly. Under his leadership, Citizens grew to encompass seven
    separate companies, including the largest energy conservation firm in
    the United States. Mr. Kennedy also advises and serves on the boards of
    several companies in the energy, telecommunications, and health care
    industries. Mr. Kennedy is the son of the late U.S. Senator Robert F.
    Kennedy.
        Israel Klabin is the president of the Brazilian Foundation for
    Sustainable Development, a major Brazilian non-governmental
    organization devoted to issues of environmental and sustainable
    development policy. Mr. Klabin is the former chairman of Klabin SA, one
    of the largest forestry companies in Latin America. He is a former
    mayor of Rio de Janeiro and was one of the main Brazilian organizers of
    the United Nations Conference on the Environment (Rio 92). He is also
    actively involved in several philanthropical activities.
        Bill Kurtis has had a distinguished career in broadcasting for over
    30 years, as a news anchor in Chicago and later of the national CBS
    Morning News. He started his own company, Kurtis Productions, when he
    returned to Chicago in the mid 1980's and currently hosts shows on the
    Arts and Entertainment network. Mr. Kurtis is involved in The National
    Science Explorers Program, Electronic Field Trips and the Electronic
    Long Distance Learning Network, all aimed at teaching children about
    science. Mr. Kurtis and his shows have been the recipients of several
    awards. He serves on the board of directors of organizations devoted to
    natural history and the environment, including the National Park
    Foundation, the Nature Conservancy and the Kansas State Historical
    Society.
        Jonathan Lash is President of the World Resources Institute (WRI),
    a Washington, DC-based non-governmental organization that provides
    solutions to global environment and development problems. From 1993
    until 1999, Mr. Lash served as co-chair of the President's Council on
    Sustainable Development, a group of government, business, labor, civil
    rights, and environmental leaders that developed recommendations for
    national strategies to promote sustainable development. For 2 years
    before joining WRI, Mr. Lash directed the environmental law and policy
    program of the Vermont Law School. From 1987 to 1991, Mr. Lash headed
    the Vermont Agency of Natural Resources, having served the previous 2
    years as Vermont's Commissioner of Environmental Conservation. He is
    the author of several books on environmental topics.
        Thomas E. Lovejoy, is a world-renowned tropical and conservation
    biologist. Dr. Lovejoy is generally credited with having brought the
    tropical forest problem to the fore as a public issue, and is one of
    the main protagonists in the science and conservation of biological
    diversity. In 1987, he was appointed Assistant Secretary for
    Environmental and External Affairs for the Smithsonian Institution and
    is Counselor to the Smithsonian's Secretary for Biodiversity and
    Environmental Affairs. Dr. Lovejoy is also Chief Biodiversity Advisor
    to the President of the World Bank and the Bank's Lead Specialist for
    the Environment in Latin America. From 1989 to 1992, he served on the
    President's Council of Advisors in Science and Technology (PCAST), and
    acted as scientific adviser to the Executive Director of the United
    Nations Environment Programme (1994-97). He was the World Wildlife
    Fund's Executive Vice President from 1985 to 1987. Dr. Lovejoy is the
    author of numerous articles and books.
        David Moran is vice president of ventures for the Electronic
    Publishing group of Dow Jones & Company and president of Dow Jones
    Indexes. Mr. Moran became president of Dow Jones Indexes on a full-time
    basis in June 1998. He was elected to a 1-year term as chairman of
    STOXX, Ltd., an index creator that is a joint venture of the German,
    Paris and Swiss stock exchanges and Dow Jones, in April 1999. He is
    also chairman of Dow Jones Sustainability Group Index GmbH. Prior to
    joining Dow Jones, Mr. Moran was an associate with Patterson, Belknap,
    Webb & Tyler, a New York City law firm, from 1979 to 1985.
        Dr. R.K. Pachauri is the Director-General of the Tata Energy
    Research Institute (TERI) which does original work and provides support
    in energy, environment, forestry, biotechnology, and resource
    conservation to governments, institutions, and corporates worldwide.
    Dr. Pachauri is currently a Vice-Chairman of the Intergovernmental
    Panel on Climate Change; a Director of the Indian Oil Corporation
    Limited (a Fortune 500 company); and a member of the Board of Directors
    of the Institute for Global Environmental Strategies, Japan. He has
    been President (1988) and Chairman (1989-90) of the International
    Association for Energy Economics and is President of the Asian Energy
    Institute since 1992. He has been a member of numerous committees and
    boards, including those of the International Solar Energy Society,
    World Resources Institute, World Energy Council, and has acted as an
    Advisor to the Government of India, reporting directly to the Prime
    Minister. Dr. Pachauri has also served as a member of the faculty of
    several prominent academic and research institutions and has published
    22 books and several papers and articles. He was recently awarded the
    Padma Bhushan, one of India's highest civilian awards. In July 2001 Dr.
    Pachauri was appointed a member of the Economic Advisory Council to the
    Prime Minister of India, which is chaired by the Prime Minister.
        Les Rosenthal is a former chairman of the Chicago Board of Trade
    (CBOT) and a principal of Rosenthal Collins, a leading Chicago-based
    commodities and futures trading firm. During his time as member of the
    Board and chairman of the CBOT, Mr. Rosenthal was instrumental in
    advancing the cause of new and innovative exchange-traded products such
    as Treasury Bond futures and insurance derivatives.
        Mary L. Schapiro is President of NASD Regulation, Inc. (NASDR) and
    a member of the Board of NASD, Inc. NASDR was created as an independent
    National Association Securities Dealers, Inc. (NASD) subsidiary
    responsible for regulating 5,500 member brokerage firms, 670,000
    individual registered representatives and oversight of The Nasdaq Stock
    Market. Ms. Schapiro was formerly the chairman of the Commodity Futures
    Trading Commission. Ms. Schapiro also served as a Commissioner of the
    Securities and Exchange Commission (SEC). Ms. Schapiro was an active
    member of the Technical Committee and the Developing Markets Committee
    of the International Organization of Securities Commissions (IOSCO) and
    has worked extensively with developing markets on capital markets
    regulatory structure. In May 2000, Ms. Schapiro was named the Financial
    Women's Association Public Sector Woman of the Year.
        Maurice Strong is a former Secretary General of the 1992 United
    Nations Conference on Environment and Development (the Rio Earth
    Summit) and Under-Secretary General of the United Nations. He is
    currently the chairman of the Earth Council, a non-governmental
    organization dedicated to the cause of sustainable development. In June
    1995, he was named Senior Advisor to the President of the World Bank.
    From December 1992 until December 1995, Mr. Strong was chairman and
    Chief Executive Officer of Ontario Hydro, one of North America's
    largest utilities. Mr. Strong is an advisor to the United Nations, and
    has been a director and/or officer of a number of Canadian, U.S. and
    international corporations.
        James R. Thompson is a former four-term Governor of Illinois and
    currently a managing partner of Winston and Strawn. During his last
    term as Governor, Mr. Thompson was involved in the implementation of
    the sulfur dioxide (SO2) market created by the 1990 Clean
    Air Act. During his last term as Governor he was the Head of the Global
    Climate Change Task Force at the National Governors' Association (1988-
    1989). Governor Thompson is also a director of the Chicago Board of
    Trade (CBOT).
        Sir Brian Williamson is the chairman of the London International
    Financial Futures and Options Exchange (LIFFE), one of the world's
    largest exchanges. Mr. Williamson has been involved in trading
    financial futures for almost three decades in London, New York and
    Chicago. He held senior executive positions for prominent trading firms
    and was a member of the International Advisory Board of the Nasdaq
    Stock Market, becoming chairman in 1996. He was also Governor-at-Large
    of the National Association of Securities Dealers in Washington DC.
    (1995-1998).
        Robert K. Wilmouth is President and CEO of National Futures
    Association (NFA). NFA, the industry-wide, self-regulatory organization
    for the futures industry. Mr. Wilmouth has served as NFA's President
    since 1982. Formerly, he served as President and CEO of the Chicago
    Board of Trade for approximately 5 years following a 27-year career in
    the banking industry, which included a term as President of the Crocker
    National Bank of San Francisco. He was chairman of LaSalle National
    Bank for over two decades, is currently a member of the Economic Club
    of Chicago, the chairman of the Consultative Committee of IOSCO, a
    Lifetime Trustee of the University of Notre Dame and a former chairman
    of its Investment Committee. Mr. Wilmouth is a graduate of Holy Cross
    College and holds a Masters degree from the University of Notre Dame.
                                     ______

    Responses of Dr. Richard L. Sandor to Additional Questions from Senator
                                   Lieberman

        Question 1. Let me first say that I appreciate all the work that
    you have done with Northwestern University and wish you much success
    with the Chicago Climate Exchange. In your written testimony, you state
    ``Emissions Trading is a proven tool that works with and harnesses the
    inventive capabilities of business.'' Could you expand on the statement
    a bit for us? S. 556 contains cap-and-trade provisions for carbon
    dioxide, nitrogen oxides, and sulfur dioxide, and we would appreciate
    your insights.

        Question 2. I noticed that several electric power companies that
    are heavy users of coal are active participants in the Chicago Climate
    Exchange process. Can you talk about their participation and whether
    they have agreed to reduce their CO2 emissions?
        Response to Questions 1 and 2. We believe the evidence is now quite
    convincing that a well-designed emissions trading program--that is, one
    where the commodity is well-defined, monitoring protocols are
    specified, rules are clear and stable, transaction costs and other
    trade impediments are minimal, and a diverse participant group is
    present--can yield faster emission reductions at lower cost to society.
    I would note that while these conditions are present in the highly
    successful sulfur dioxide allowance trading system adopted in the acid
    rain provisions of the 1990 Clean Air Act Amendments, but have been
    absent in several other ``trading'' programs that have been attempted.
        Over the past decade the management of emissions and emission
    allowance accounts have become a routine business matter. Businesses
    are attempting to optimize their compliance strategies in much the same
    way they manage fuel consumption and electricity sales. Exposure to
    emissions markets is being approached as an asset or liability to be
    managed in much the same way other commodities and financial accounts
    are handled. By establishing a price on pollution where none existed
    before, we have seen the emergence of a variety of creative techniques
    for mitigating pollutants at lower cost. Some companies have also
    uncovered profit opportunities through intelligent management of
    emission allowances. For example, fuel vendors, scrubber manufacturers,
    investment banks and others have found creative ways to package
    emission allowances with their products to provide convenient and cost-
    effective techniques that power companies can use to meet their
    reduction commitments.
        1. At this stage none of the entities that are participating in the
    design phase of the Chicago Climate Exchange (CCX) has been asked to
    accept to specified emission reduction commitments. We do not feel it
    is logical to ask them to accept such commitments until they can assess
    the full package of emission limits, mitigation options and market
    rules to be employed in the program.
        However, once the rules of the CCX are set, emissions sources will
    be invited to accept such a commitment. To date, the participation of
    the electric power companies has seen a very strong and good faith
    effort to identify fair and functional rules for the exchange.
    Naturally, each company has specific design features they wish to
    include (e.g., credit for mitigation actions taken prior to launch of
    the market), so the design process must weigh these varying preferences
    and settle on a fair program that achieves the goals set out for the
    pilot market.
                                   __________
    Responses of Dr. Richard L. Sandor to Additional Questions from Senator
                                   Voinovich

        Question 1. How do the limits on trading of carbon credits found in
    the Jeffords/Lieberman bill impact your recommended approach to carbon
    trading in general? Would enough credits be available if we limit the
    trading just to the utility industry?
        Response. Because the climate protection benefits realized from
    effective mitigation actions are realized regardless of how and where
    such mitigation occurs, to achieve cost-effectiveness we believe that
    greenhouse gas mitigation should be encouraged in the maximum range of
    sectors and activities, provided they can be monitored with reasonable
    cost and accuracy. It is likely that requiring that emissions
    mitigation occur in a single targeted sector would yield higher
    mitigation costs compared to a system that allowed mitigation to occur
    in a larger number of sectors and activities.

        Question 2. Would the Jeffords/Lieberman bill do anything to
    encourage technology sharing with other nations to solve problems like
    ``black soot carbon'' in India or China?
        Response. It is not possible to answer this question without having
    detailed information on the rules and regulations to be applied in the
    implementation of the proposed legislation. It is conceivable that the
    rules could allow for credits to be earned in other sectors and
    countries, and this latitude could cause the search for low-cost
    emission credits to result in actions that address the specific
    problems addressed in your question.
                                   __________
    Responses of Dr. Richard L. Sandor to Additional Questions from Senator
                                    Corzine

        Question 1. There are a variety of sectors represented by the
    companies that are participating in the Chicago Climate Exchange. Do
    you think that protocols, standards and calculation tools for measuring
    GHG emissions are mature enough to enable all of these sectors/
    companies to accurately estimate their GHG emissions? What about the
    protocols, standards and calculation tools for measuring emissions
    reductions and carbon sequestration?
        Response. We believe that emission quantification protocols for a
    variety of emitting industries are now sufficiently mature to warrant
    their use in a pilot greenhouse gas trading program. Protocols for the
    main emission sources--fossil fuel combustion and process emissions
    from chemical reactions in industrial processes--have been developed in
    the private and non-governmental sectors and by governments and
    international panels.
        At this time we believe there are adequate protocols for
    quantifying limited-scale reforestation carbon sequestration projects.
    In addition, there is a growing wealth of scientific findings and
    modeling techniques that, with proper discounting, can allow one to
    form reasonable estimates of the agricultural soil carbon sequestration
    benefits associated with certain widely practiced best management
    practices (e.g., conservation tillage). As a general rule we will
    adjust such procedures to make them conservative. For example, a
    technique called overcollateralization, which is frequently used in the
    capital markets, can be used as an adjustment methodology to overcome
    measurement uncertainties. We should note that currently there is not
    an industry-accepted standard technique for quantifying annual carbon
    sequestration increments in large-scale industrial forests. We continue
    to examine options for addressing this important issue.
        The historical experience shows that emissions trading systems (as
    well as other financial and commodity markets) can succeed even when
    measurement protocols are known to be subject to error. Provided the
    protocols are fundamentally sound, accepted by market participants, and
    applied consistently, trading can succeed in such a rules-based system.
    In response to potential cost savings or profit opportunities,
    participants may be incented to devise superior quantification
    techniques.

        Question 2. Many of the companies participating in the Chicago
    Climate Exchange are multi-nationals. Are any of them already doing GHG
    emissions reporting or planning to do GHG emissions reporting outside
    the United States?
        Response. Many of the multi-nationals participating in the CCX are
    required to report GHG emissions under the programs now being adopted
    in the United Kingdom and under voluntary programs in place in Canada.
                                   __________
    Statement of Michael D. Durham, Ph.D., MBA, ADA Environmental Solutions
        Good morning, Mr. Chairman, I am Dr. Michael Durham, President of
    ADA Environmental Solutions (ADA-ES). ADA-ES is a company that develops
    and commercializes novel air pollution control technology for the power
    industry. We are currently managing a $6.8 million program involving a
    team of the-nations leading engineers and scientists to scale-up and
    demonstrate sorbent-based mercury control technology. The Department of
    Energy National Energy Technology Laboratory (NETL) is providing two
    thirds of the funding for the program. The remaining funds are provided
    by co-funding team members including: PG&E National Energy Group,
    Southern Company, Wisconsin Electric-Wisconsin Gas (WE-WG), EPRI,
    Ontario Power Generation, FirstEnergy, TVA, and Kennecott Energy
    Company as well as ADA-ES and other equipment suppliers.
        During 2001 we successfully completed two short-term programs that
    represent the first full-scale demonstrations of sorbent-based mercury
    control technology in the U.S. power industry. Tests were conducted on
    both bituminous and subbituminous coals. I have submitted detailed
    documents describing our program and am presenting results from these
    two demonstrations. These results provide us with an early indication
    of both the high potential and limitations of this technology. This
    morning I will briefly summary results and discuss plans for the
    continued development of this technology.
    I. Summary
        Sorbent injection technology represents one of the simplest and
    most mature approaches to controlling mercury emissions from coal-fired
    boilers. It involves injecting a solid material such as powdered
    activated carbon (PAC) into the flue gas. The gas phase mercury in the
    flue gas contacts the sorbent and attaches to its surface. The sorbent
    with the mercury attached is then collected by the existing particle
    control device along with the other solid material, primarily fly ash.
    This combined material is then either disposed of or beneficially used
    in building materials.
        Two demonstrations were conducted during 2001. The first program
    was completed in the spring at the Alabama Power E.C. Gaston Station.
    This unit burns a low-sulfur bituminous coal and uses a COHPAC baghouse
    to collect the carbon and flyash. The second program was conducted
    during the fall at the WE-WG Pleasant Prairie Power Plant. This unit
    burns a subbituminous Powder River Basin (PRB) coal and uses an
    electrostatic precipitator (ESP) to collect the carbon and flyash.
        These programs demonstrated that it is possible to design, build,
    and operate equipment at a scale capable of treating power plant flue
    gas. To date, the injection equipment has operated successfully at both
    sites. The results from the short-term (8 hour) parametric tests from
    both programs are plotted in Figure 1. We are encouraged by the
    potential shown by the PAC technology during these two successful
    demonstrations in that short-term removal levels in excess of 90
    percent were achieved in the case where COHPAC was used. These tests
    also proved that activated carbon was effective on both forms of
    mercury, elemental and oxidized. Elemental mercury has been proven to
    be the most difficult form of mercury to capture. It is the dominant
    species in PRB coal (83 percent at Pleasant Prairie) but it is also
    found in bituminous coals (40 percent at Gaston).

        However, these results also documented several limitations of the
    technology. From the data in Figure 1 it is obvious that the downstream
    particle control is the dominating factor in determining removal
    efficiency. While removal levels of 90 percent were obtained with the
    fabric filter (baghouse), even with spray cooling the ESP collecting
    PRB ash was limited to levels of 50-70 percent. Since only 10 percent
    of the plants have baghouses, capital expenditures of $40-50/kW would
    be required to achieve the higher levels. Operating data obtained at
    Gaston also showed that PAC injection produced increased pressure drop
    in the baghouse. This will require that COHPAC baghouses designed for
    use with PAC will have to be larger to accommodate the increased mass.
    At Pleasant Prairie, it was discovered that the presence of activated
    carbon in the ash prevented WE-WG from selling the ash for use in
    concrete. This represents a significant cost that must be incorporated
    into the economics of the technology.
        It must also be noted that these tests only ran for very short
    periods of time with the longest continuous runs being 2 weeks. During
    the test program, the plants accommodated the needs of the R&D program
    by operating at full load conditions. This produces more of a steady
    state condition than is found during their typical load cycling
    operations. Even with constant load conditions, with variations in coal
    characteristics, it was not possible to maintain the 90 percent removal
    levels over a 5-day continuous run, with the average dropping to 80-85
    percent.
    II. Background on Sorbent Injection
        Sorbent injection technology involves the injection of a dry
    sorbent, such as activated carbon powder, into the flue gas duct
    somewhere between the air preheater and the ESP or fabric filter (FF),
    as shown in Figure 2. This is typically in the 250-350 degree F range.
    Vapor-phase mercury is adsorbed onto the activated carbon, which is
    then collected in the ESP or FF. The mercury-activated carbon
    interaction continues to occur in the ESP or FF. The technology can be
    used in conjunction with flue gas temperature control, usually
    accomplished through the injection of water (spay cooling) droplets
    into the flue gas.
        A variation of the configuration shown in Figure 2 using a high
    air-to-cloth Pulse-Jet Baghouse installed downstream of the existing
    ESP was developed and patented by EPRI. This configuration, without
    carbon injection, is called COHPAC. When a sorbent is injected into the
    baghouse for pollutant control, the process is called TOXECON. This
    approach focuses on improving the efficiency of sorbent injection by
    providing high efficiency particulate collection as well as a good
    ``contact'' scheme for the sorbent and mercury (e.g., the FF). This
    technology also minimizes the amount of the fly ash that can be
    contaminated by the mercury sorbent.
        The most commonly studied sorbent for mercury control has been
    activated carbon. This material has been successfully used as a sorbent
    in municipal and hazardous waste combustors. Activated carbon is carbon
    that has been ``treated'' to produce certain properties such as surface
    area, pore volume, pore size. Activated carbon can be manufactured from
    a variety of sources, (e.g., lignite, peat, coal, wood, etc.). More
    commonly, steam is used for activation, which requires carbonization at
    high temperatures in an oxygen-lean environment. As some carbon atoms
    are vaporized, the desired highly porous activated carbon is produced.
    Commercially, activated carbons are available in a range of particle
    sizes, as well as other characteristics that are needed for a specific
    application.

        Laboratory, pilot scale and modeling programs have indicated that
    the following parameters can affect the ultimate performance of the
    technology:
          Particulate control device: ESP vs. fabric filter,
          sorbent type and properties,
          gas-phase mercury species (Hg0 or
    HgCl2),
          temperature,
          concentration of acid gases (HCl, SO2, NO,
    NO2) in the flue gas, and
          residence time.
        The type of particulate control equipment is a key parameter
    defining both the amount of sorbent that is required and provides the
    ultimate limitation of the amount of mercury that can be removed. When
    the sorbent is injected into the flue gas it mixes with the gas and
    flows downstream. This provides an opportunity for the mercury in the
    gas to contact the sorbent where it is removed. This is call ``in
    flight'' capture. The sorbent is then collected in the particulate
    control device where there is a second opportunity for sorbent to
    contact the mercury in the gas.
        In an ESP, the carbon is collected on plates that are spaced
    parallel to the gas flow. Although the residence time in the ESP can be
    several seconds long, there is a limited amount of contact between the
    gas and the collected particles because the gas can be as far as four
    inches from the plates. On the other hand, the fabric filter provides
    the ideal opportunity for good interaction between the gas and the
    sorbent as the gas makes intimate contact with the sorbent collected on
    the filter. Therefore, sites with fabric filters will achieve higher
    levels of mercury removal and higher levels of sorbent utilization.
    Unfortunately, only 10 percent of the coal-fired power plants in the
    United States have fabric filters.
    III. Conclusions and Future Plans
        The injection of powdered activated carbon offers a promising
    approach for mercury control for coal-fired boilers. The injection
    equipment is relatively inexpensive ($2/kW) and can be installed with
    minimal downtime of the plant. It is effective for both bituminous and
    subbituminous coals and when interfaced with a fabric filter it is
    capable of high levels of mercury removal. It is versatile in that it
    could also be integrated with a wet scrubber to remove elemental
    mercury that escapes the scrubber.
        However, a great deal of additional testing is required to further
    characterize the capabilities and limitations of this technology. It is
    important to determine performance on a wider variety of fuels and
    plant operating configurations. Long-term testing will be necessary to
    discover if there are any negative impacts of the PAC on downstream
    components. Impacts such as deposition, fouling of the ESP, corrosion,
    and shortened bag life often take months to years to be observed or
    measured.
        As with all other air pollution control technologies, sorbent-based
    mercury control is a developing technology that needs to go through a
    phased approach as it matures to become accepted as commercially
    viable. This approach to implementation of new technology has evolved
    from 30 years of lessons learned by the power industry from applying
    new technology.
        The schedules announced by EPA and Federal and State legislatures
    to require widespread implementation of mercury control for the coal-
    fired boiler industry by 2007 represents an extremely challenging
    schedule. To advance the sorbent injection technology to meet this
    tight timeframe, we plan to participate in partnerships with DOE and
    power companies in risk-shared programs such as the Clean Coal Power
    Initiative (CCPI). The following schedule will allow us accomplish this
    in a controlled manner that doesn't put generation capacity at risk:
          Short-term full-scale evaluations (2000-2003)
          Parametric evaluations
          Multiple sites to evaluate different configurations and
        fuels
          Long-term full-scale demonstrations (2003-2005)
          First commercial installations at a few early adopters
    (2005-2007)
        In addition, there are two other areas where advancements must be
    made to assure the ultimate success of this technology. In order to
    respond to changes in fuel and operating conditions, it is critical to
    have a reliable continuous measurement of the mercury in the flue gas.
    This is important from both a process control and a compliance
    monitoring perspective. The other area involves increasing the
    production of activated carbon to a level sufficient to supply the
    power industry. Current capacity of U.S. suppliers is only 10 percent
    of what may be required for widespread implementation of the
    technology.
                                     ______

      Full-Scale Evaluation of Mercury Control with Sorbent Injection and
                      COHPAC at Alabama Power E.C. Gaston
    c. jean bustard, michael durham, ph.d., charles lindsey, travis starns,
       ken baldrey, cameron martin, richard schlager, ada-es, llc, 8100
                    southpark way, b-2, littleton, co 80120
    sharon sjostrom, rick slye apogee scientific, 2875 w. oxford ave, suite
                             1, englewood, co 80110
      scott renninger us department of energy, national energy technology
    laboratory, collins ferry road, p.o. box 880, morgantown, wv 26507-0880
         i89larry monroe, ph.d. southern company, 600 north 18 th st,
                              birmingham, al 35203
        richard miller hamon research cottrell, inc, 4589 lehigh drive,
                              walnutport, pa 18088
       ramsay chang, ph.d. epri, po box 10412, palo alto, ca 94393-0813.1
    Abstract
        The overall objective of this project was to determine the cost and
    impacts of mercury control using sorbent injection into a COHPAC
    baghouse at Alabama Power's Gaston Unit 3. This test is part of a
    program funded by the Department of Energy's National Energy Technology
    Laboratory (NETL) to obtain the necessary information to assess the
    costs of controlling mercury from coal-fired utility plants that do not
    have scrubbers for SO2 control. The economics will be
    developed based on various levels of mercury control.
        Gaston Unit 3 was chosen for testing because COHPAC represents a
    cost-effective retrofit option for utilities with existing
    electrostatic precipitators (ESPs). COHPAC is an EPRI patented concept
    that places a high air-to-cloth ratio baghouse downstream of an
    existing ESP to improve overall particulate collection efficiency. Dry
    sorbents such as activated carbons were injected upstream of COHPAC,
    downstream of the ESP to obtain performance and operational data.
    Residue hopper ash and carbon samples were collected to evaluate the
    impact ash properties. A series of parametric tests were conducted to
    determine the optimum operating conditions for several levels of
    mercury control up to 90 percent mercury removal. Based on results from
    these tests, a longer-term test with one sorbent and optimized
    conditions was conducted to assess impacts to COHPAC and auxiliary
    equipment.
    Introduction
        In December 2000 EPA announced their intent to regulate mercury
    emissions from the nation's coal-fired power plants. In anticipation of
    these regulations, a great deal of research has been conducted during
    the past decade to characterize the emission and control of mercury
    compounds from the combustion of coal. Much of this research was funded
    by the Department of Energy, EPA, and EPRI. The results are summarized
    in the comprehensive AWMA Critical Review Article\1\. As a result of
    these efforts, the following was determined:

        1. Trace concentrations of mercury in flue gas can be measured
    relatively accurately;
        2. Mercury is emitted in a variety of forms;
        3. Mercury species vary with fuel source and combustion conditions;
    and
        4. Control of mercury from utility boilers will be both difficult
    and expensive.

        This latter point is one of the most important and dramatic
    findings from the research conducted to date. Because of the large
    volumes of gas to be treated, low concentrations of mercury, and
    presence of difficult to capture species such as elemental mercury,
    some estimates show that 90 percent mercury reduction for utilities
    could cost the industry as much as $5 billion per year\1\. Most of
    these costs will be borne by power plants that burn low-sulfur coal and
    do not have wet scrubbers as part of the air pollution equipment.
        With regulations rapidly approaching, it is important to
    concentrate efforts on the most mature retrofit control technologies.
    Injection of dry sorbents such as powdered activated carbon (PAC) into
    the flue gas and further collection of the sorbent by ESPs and fabric
    filters represents the most mature and potentially most cost-effective
    control technology for power plants.
        Under a DOE/NETL cooperative agreement, ADA-ES is working in
    partnership with PG&E National Energy Group (NEG), Wisconsin Electric,
    a subsidiary of Wisconsin Energy Corp., Alabama Power Company, a
    subsidiary of Southern Company, EPRI, and Ontario Power Generation on a
    field evaluation program of sorbent injection upstream of existing
    particulate control devices for mercury control\2\. The test program,
    which will take place at four different sites during 2001 and 2002, is
    described in detail in the July 2001 EM Journal\3\. Other organizations
    participating in this program as team members include EPRI, Apogee
    Scientific, URS Radian, Energy & Environmental Strategies, Reaction
    Engineering, Inc, Southern Research Institute, Hamon Research-Cottrell,
    and Norit Americas. Gaston Unit 3 was chosen as the first test site
    because COHPAC represents a cost-effective retrofit option for
    utilities with electrostatic precipitators (ESPs). COHPAC is an EPRI
    patented concept that places a high air-to-cloth ratio baghouse
    downstream of an existing ESP to improve overall particulate collection
    efficiency. The advantages of this configuration are:

        1. Sorbents are mixed with a small fraction of the ash (nominally 1
    percent) which reduces the impact on ash reuse and waste disposal.
        2. Pilot plant studies and theory\4\  indicate that compared to
    ESPs, baghouses require one-tenth the sorbent to achieve similar
    removal efficiencies.
        3. Capital costs for COHPAC are less than other options such as
    replacing the ESP with a baghouse or larger ESP.
        4. COHPAC requires much less physical space than either a larger
    ESP or full-size baghouse system
        5. Outage time can be significantly reduced with COHPAC systems in
    comparison to major ESP rebuilds/upgrades.
    E.C. Gaston Site Description
        The E.C. Gaston Electric Generating Plant, located in Wilsonville,
    Alabama, has four 270 MW balanced draft and one 880 MW forced draft
    coal fired boilers. All units fire a variety of low-sulfur, washed,
    Eastern bituminous coals.
        The primary particulate control equipment on all units are hot-side
    ESPs. Units 1 and 2 and Units 3 and 4 share common stacks. In 1996
    Alabama Power contracted with Hamon Research-Cottrell to install COHPAC
    downstream of the hot-side ESP on Unit 3. This COHPAC system was
    designed to maintain Unit 3 and 4's stack opacity levels below 5
    percent on a 6-minute average\5\ .
        The COHPAC system is a hybrid pulse-jet type baghouse, designed to
    treat flue gas volumes of 1,070,000 acfm at 290 deg.F (gross air-to-
    cloth ratio of 8.5 ft/min with on-line cleaning). The COHPAC baghouse
    consists of four (4) isolatable compartments, two compartments per air-
    preheater identified as either A- or B-Side. Each compartment consists
    of two bag bundles, each having a total of 544, 23-foot long, PPS felt
    filter bags, 18 oz/yd\2\ nominal weight. This results in a total of
    1,088 bags per compartment, or 2,176 bags per casing\5\. The evaluation
    was conducted on one-half of the gas stream, nominally 135 MW. The side
    chosen for testing was B-side. A-side was monitored as the control
    unit.
        The hot-side ESP is a Research-Cottrell weighted wire design. The
    specific collection area (SCA) is 274 ft\2\/1000 acfm. Depending on the
    operating condition of the hot-side ESP, nominally 97 to 99+ percent of
    the flyash is collected in the ESP. The remaining flyash is collected
    in the COHPAC system. The average inlet particulate mass concentration
    into COHPAC between 1/97 and 4/99 was 0.0413 gr/acf\5\. Hopper ash from
    both the ESP and baghouse are sent to a wet ash pond for disposal. A
    hydrovactor system delivers the flyash to the pond.
        Figure 1 shows a diagram of the location of the various components
    of the air pollution control train. Design parameters for Gaston Unit 3
    are presented in Table 1. For the mercury control program, carbon-based
    dry sorbents were injected upstream of COHPAC, downstream of the ESP
    over an 8-week period.

    Site-Specific Equipment
        The critical elements of the program were the actual field tests
    and measurements, which relied upon accurate, rapid measurements of
    mercury concentration and an injection system that realistically
    represented commercially available technology.
        Near real-time vapor phase mercury measurements were made using a
    Semi-Continuous Emissions Monitor (S-CEM) designed and operated by
    Apogee Scientific. This instrument was developed with EPRI funding to
    facilitate EPRI research and development efforts\6\. The locations of
    the analyzers are shown in Figure 1. The S-CEMs operated continuously
    for over 7 weeks providing speciated, vapor phase mercury
    concentrations at the inlet and outlet of COHPAC.
        Norit Americas' supplied a portable dilute phase pneumatic
    injection system that is typical of those used at Municipal Solid Waste
    (MSW) facilities for mercury control with activated carbon. ADA-ES
    designed the distribution and injection components of the system.
        Sorbent requirements for various levels of mercury control were
    predicted based on empirical models developed through EPRI funding\4\.
    The values used were based on a uniform sorbent size of 15 microns and
    a bag cleaning frequency of 2 pulses/bag/hr (also assumed all bags were
    cleaned at the same time when in practice, the bags are cleaned in
    sections or rows). Rates used to design equipment for the Gaston test
    are presented in Table 2. The system was sized for a maximum injection
    rate of 100 lbs/h.

        Figure 2 is a picture of the portable injection skid supplied by
    Norit Americas and installed for use at Plant Gaston Unit 3B. Activated
    carbon delivered to the plant in 900 lb supersacks was loaded onto the
    skid by a hoist. The sorbent was metered by a variable speed screw
    feeder into an eductor that provided the motive force to carry the
    sorbent ?100 ft to the injection point.
        Sorbent was pneumatically transported via flexible hose from the
    feeder to a distribution manifold at the injection level and injected
    into the flue gas through six injection probes (three/duct). Figure 3
    is a photograph of the distribution manifold. The injection system
    operated without plugging while injecting carbon based products with
    D50 particle size of 18 micron. The distribution system plugged once
    while feeding a finer material with a D50 of 6-7 microns.

    Test Results
                               pre-baseline tests
        The first field measurements were made prior to installing the
    injection equipment. The objectives for the pre-baseline tests were to:

        1. Document mercury emissions across COHPAC; and
        2. Perform screening tests for mercury adsorption characteristics
    of several activated carbons that were candidate sorbents for the full-
    scale tests.

        Table 3 presents vapor phase mercury measurements during the pre-
    baseline tests in January on Unit 3. Two analyzers were used for these
    tests. The analyzers were set-up to measure simultaneously either
    across the hot-side ESP or COHPAC. The results show that vapor phase
    mercury varied between 7 and 10 g/dNm\3\ at all three
    locations. There was no measurable removal of vapor phase mercury
    across either the hot-side ESP or COHPAC.

        These results are comparable to those made during ICR measurements
    on Unit 1 for total mercury concentrations and removal efficiencies.
    ICR measurements showed total mercury concentrations between 6.0 and
    7.5 g/dNm\3\ and no mercury removal across the hot-side
    ESP\7\.
        No mercury removal was measured across COHPAC without the addition
    of sorbents. Review of data collected through the ICR at other plants
    shows that there was significant natural mercury capture on units with
    conventional type baghouses when firing bituminous coals\7\. This
    natural collection is assumed to occur because of exposure of the flue
    gas to ash on the bag dustcake. The ash at Gaston was tested for
    mercury adsorption capacity by URS Corporation. Analysis of the ash
    showed high carbon content throughout the total size distribution and
    an adsorption capacity that was reasonable when compared to other
    ashes. However, since COHPAC is downstream of the hot-side ESP and the
    ESP was in excellent condition at the time of the tests, the inlet
    loading to COHPAC was very low (0.04 gr/acf on average and less than
    0.01 during the tests), so there was a relatively small amount of ash
    present on the bags to react with the mercury.
        The portion of vapor phase mercury in the oxidized state increased
    in the direction of flow. There was a greater percentage of elemental
    mercury at the hot-side inlet (economizer outlet) than there was at
    either the COHPAC inlet or outlet. The most significant oxidation
    occurred across the COHPAC baghouse. Similar phenomena have been
    documented across baghouses with fiberglass and PPS fabric bags\8\.
                                 baseline tests
        After equipment installation and checkout, a set of baseline tests
    were conducted immediately prior to the first parametric test series to
    document current operating conditions. During this test boiler load was
    held steady at ``full-load'' conditions during testing hours, nominally
    7 am to 7 pm. Mercury across B-Side of COHPAC was measured using two
    separate methods:

        1. S-CEMs; and
        2. Modified Ontario Hydro Method.

        In addition to monitoring mercury removal, it was also important to
    document the performance of COHPAC during sorbent injection. The
    primary COHPAC performance indicator at this site was cleaning
    frequency. Pressure drop/drag is controlled by the cleaning frequency.
    It was expected that cleaning frequency would increase with the
    increased particulate loading from sorbent injection. Cleaning
    frequency was monitored before, during and after sorbent injection.
        Results from the Ontario Hydro tests conducted by Southern Research
    Institute are presented in Table 4. Similar to pre-baseline
    measurements, there was no measurable mercury removal across COHPAC.
    The average of the inlet and outlet total mercury measurements was
    about 15 g/dncm. Coal analyses showed mercury levels in the
    three coal samples varied between 0.06 and 0.17 g/g. Since
    Gaston burns coals from several different coal sources each day it is
    difficult to correlate mercury level in the coal to a specific flue gas
    measurement; however, the higher coal mercury values correlate well
    with mercury measured in the flue gas.
        The Ontario Hydro measurements also showed oxidation across COHPAC.
    At the inlet the average fraction of oxidized mercury was 61 percent,
    and increased to 77 percent at the outlet. Flue gas temperatures during
    this tests were nominally 255 deg.F.

                                parametric tests
        A series of parametric tests was conducted to determine the optimum
    operating conditions for several levels of mercury control up to 90
    percent mercury removal, for several activated carbon products. To
    minimize permitting issues, only coal-based sorbents were considered at
    this site. Norit Americas lignite-based PAC, Darco FGD, was chosen as
    the benchmark sorbent. Sorbent type and injection concentration for the
    long-term tests were chosen based on results from these tests.
        In all, 15 different parametric conditions were tested. The primary
    variables were carbon type and target mercury removal level. Other
    variables included COHPAC cleaning settings and flow through the
    baghouse. Although lower flue gas temperatures have been correlated
    with increased mercury removal, temperature was not a variable during
    these tests because normal operating temperatures at this plant were
    between 250F and 270F, which is cool enough for
    acceptable removal. A summary of the parametric tests is presented in
    Table 5. Unless noted, all tests were conducted with the boiler at full
    load conditions and COHPAC cleaning at a drag initiate setpoint of 0.6
    inches w.c./ft/min. A description of the different carbons used in
    these tests is presented in Table 6.

        Parametric testing measured mercury removal as a function of
    injection concentration and sorbent type, and the impact of sorbent
    injection on COHPAC performance. Feedback from the S-CEMs were
    invaluable in making timely, real-time decisions on test conditions.
    Examples of the data provided from the S-CEMs are presented in Figure
    4. These data are from the first week of parametric tests, test numbers
    1--5, with Darco FGD. Reduction in outlet mercury concentration can be
    seen to correlate with relative injection rates.

        Figure 5 presents mercury removal efficiencies as activated carbon
    injection concentrations were varied during the parametric tests for
    several activated carbons (see Tables 5 and 6 for description of test
    conditions). This figure shows that mercury removal increased nearly
    linearly with injection rate up to 2 lbs/MMacf and then leveled off at
    about 90 percent removal with higher injection providing no additional
    benefit. This figure also shows that there was no measurable
    performance difference between the different PAC's.

        Carbon injection significantly increased the cleaning frequency of
    the COHPAC baghouse. Figure 6 presents actual cleaning frequencies at
    different carbon injection concentrations. At an injection
    concentration of 2.0 lbs/MMacf the cleaning frequency increased from
    0.5 to 2 pulses/bag/hour, or a factor of 4. Acceptable cleaning
    frequencies at this site has been set at 1.5 pulses/bag/hour, to
    maintain long-term bag life.

                                long-term tests
        Long-term testing at ``optimum'' plant operating conditions as
    determined from the parametric tests, was planned to gather data on:

        1. Mercury removal efficiency over time;
        2. The effects on COHPAC and balance of plant equipment of sorbent
    injection; and
        3. Operation of the injection equipment to determine the viability
    and economics of the process.

        During these tests, carbon was injected continuously 24 hours per
    day, for 9 days. Based on results from the parametric tests, Darco FGD
    activated carbon was chosen as the sorbent for these tests. Injection
    rate was determined taking into consideration both mercury removal and
    the projected increase in COHPAC cleaning frequency. An injection
    concentration of 1.5 lbs/MMacf was chosen to maintain COHPAC cleaning
    frequency below 1.5 pulses/bag/hour.
        Similar to the baseline test series, mercury was measured by both
    the S-CEMs and manual methods (Ontario Hydro). COHPAC performance, coal
    and ash samples, plant CEM data were collected. During these tests an
    EPA audit of the manual measurements was performed. The long-term tests
    started on April 18 and carbon was injection continuously until April
    26. Full load boiler conditions were held between the times of 0700 and
    2000, with load following at other times for the first 5 days. During
    the 3 days when the Ontario Hydro tests were conducted, full load was
    maintained 24 hours/day. At the beginning of the tests time was needed
    to work out a COHPAC cleaning logic issue and there was a short period
    when load was lowered to fix a mill problem. The final 7 days of the
    test were conducted at the optimized PAC feedrate and COHPAC cleaning
    logic.
        Three sets of Ontario Hydro measurements were made at three
    locations: 1) inlet of the hot-side ESP, 2) COHPAC inlet and 3) COHPAC
    outlet. Southern Research Institute conducted tests across COHPAC and
    Arcadis G&M Inc. made the measurements upstream of the hot-side ESP.
    The hot-side measurements were made using an experimental in-duct,
    quartz thimble to minimize sampling artifacts often seen with this
    method. Artifacts have been known to occur when the particulate
    collected on the filter captures vapor phase mercury, resulting in
    higher particulate phase mercury than is really present. Sampling
    artifacts from particulate on the filter were not as much of a concern
    at the other two locations because most of the particulate was already
    removed by either the hot-side ESP or COHPAC.
        Table 7 presents the results from each of the Ontario Hydro
    measurements. These data show that the inlet to the hot-side ESP and
    the inlet to COHPAC have similar, average mercury concentrations and
    speciation, and that mercury is oxidized across COHPAC. The outlet
    mercury concentrations show the effect of carbon injection with overall
    low mercury emissions for all species. Table 8 presents average,
    speciated mercury removal across COHPAC. The overall average reduction
    in total mercury is 90 percent. At the outlet the predominate species
    of mercury is the oxidized form; however, it is still 85 percent less
    than what was present upstream of PAC injection.
        Figure 7 presents inlet and outlet mercury concentrations as
    measured by the S-CEMs, boiler load, and PAC injection concentration
    during the last 5 days of the long-term test. Periods when Ontario
    Hydro measurements were made are also identified. The S-CEMs indicate
    that mercury removal was nominally 87, 90, and 88 percent during the
    Ontario Hydro tests. This correlates well with the manual measurements.
    However, it is important to note that the S-CEMs showed that the
    average mercury removal efficiency over the multi-day time period was
    78 percent, with variations between 36 percent to over 90 percent. This
    difference is probably due to varying coal and operating conditions
    over time. Figure 7 also shows that during this 5-day period inlet
    mercury concentration varied by nearly a factor of five. Outlet
    concentrations can be seen to follow the inlet and there are times
    during these transitional periods when removal efficiencies are fairly
    low. During the period when the Ontario Hydro tests were run, inlet
    mercury levels were low and fairly steady. These tests were conducted
    under ideal conditions and may show the best case condition for mercury
    control at this injection rate.
        During the test program sorbent was injected at a constant rate
    with no attempt to increase sorbent when the inlet mercury
    concentration increased. However, the data in Figure 7 highlight the
    importance of having CEMs to use as process control for a permanent
    mercury control system.

        The most challenging time for COHPAC performance was during the
    period with continuous full-load operation and PAC injection. The
    cumulative cleaning frequency increased to a high of 1.3 pulses/bag/
    hour, but was mostly maintained at levels less than 1.0 pulses/bag/
    hour.
                         coal and ash characterization
        Coal and ash samples were collected daily during the baseline,
    parametric and long-term tests. Gaston fires a variety of washed, low
    sulfur eastern bituminous coals. Because several different coals can be
    fired in a day, the daily coal samples provide relative mercury
    concentrations, but may not be representative of specific test periods.
    Standard ultimate and proximate analyses were conducted, plus
    measurements for mercury, chlorine, and sulfur.
        Ash samples were collected from the hot-side ESP, control side (A-
    side) COHPAC, and test side (B-side) COHPAC hoppers. Ash generated from
    the E.C. Gaston Plant is impounded using a wet ash handling system. The
    ash is not currently beneficially reused, therefore ash
    characterization testing concentrated on measuring mercury and carbon
    content.
        The mercury content of coal samples taken during the long-term
    tests varied between 0.09 and 0.21 g/g. This is consistent
    with flue gas mercury measurements that showed considerable variability
    in mercury concentration. This variability has implications on how
    mercury control technologies will be implemented.
        The B-side ash, mixed with sorbent, showed about 30 percent carbon
    content as compared to 12 percent on the A-side ash. The sorbent-ash
    mixtures from the B-side had about 30 times the mercury of the A-side
    hopper ash, indicating removal of mercury by the sorbent across COHPAC.
    Cost Analysis
        The requirements and costs for full-scale, permanent, commercial
    implementation of the necessary equipment for mercury control using PAC
    injection technology are being finalized for Gaston Unit 3. Preliminary
    capital and sorbent costs for 80 percent mercury removal have been
    developed.
        The estimated uninstalled cost for a sorbent injection system and
    storage silo for the 270 MW unit is about $350,000. Sorbent costs were
    estimated for nominally 80 percent mercury control based on the long-
    term PAC injection concentration of 1.5 lbs/MMacf. For Gaston Unit 3,
    this would require an injection rate of nominally 80 lbs/h. Assuming a
    unit capacity factor of 80 percent and a delivered cost of $0.50/lb for
    PAC, the annual sorbent cost for injecting PAC into the existing COHPAC
    baghouse would be $270,000. Additional cost information is being
    developed for balance of plant impacts.
    Conclusions
        A full-scale evaluation of mercury control using activated carbon
    injection upstream of a COHPAC baghouse was conducted at Alabama Power
    Company's Plant Gaston Unit 3. Results and trends from these relatively
    short term tests were encouraging.
          Effective mercury removal, up to 90 percent efficiency,
    was obtained for short operating periods (8 hrs) by injecting powdered
    activated carbon upstream of COHPAC.
          A significant increase in the cleaning frequency of the
    COHPAC baghouse occurred with the injection of activated carbons. At
    this site, the maximum acceptable cleaning frequency and pressure drop
    limited the amount of sorbent that could be injected and therefore the
    maximum mercury removal actually achievable. Based on these results, it
    will be necessary to take into consideration the sorbent injection rate
    in the design of future COHPAC baghouses and perhaps design the
    baghouses more conservatively.
          On average, around 78 percent mercury removal was
    obtained when PAC was injected into COHPAC 24 hr/day during long-term
    tests. Mercury removal varied throughout the period and ranged from 36
    percent to 90 percent.
          To verify S-CEM measurements during the long-term tests,
    mercury removal across COHPAC was measured following the draft Ontario
    Hydro method. Results show an average 90 percent removal for the three
    tests periods. These results confirm the high mercury removal measured
    with the S-CEMs.
          Actual mercury removals were in reasonably close
    agreement with theoretical model predictions for 80 to 90 percent
    removal (1.5 to 2 vs 3 lbs/MMacf) considering that the model is based
    on a uniform PAC particle size of 15 microns when in fact the actual
    FGD carbon used has a wide size distribution with significant numbers
    of particles below 15 microns. The model also assumed a cleaning
    frequency of 2 pulses/bag/hr (all bags cleaned at the same time)
    whereas the bags were actually cleaned at ? 1 to 2 pulses/bag/hr (bags
    cleaned 15 (one row) at a time) during the tests.
          Additional testing over longer periods (up to a year)
    need to occur to determine the impact of carbon injection on bag life
    (pressure drop and bag strength) and outlet particulate emissions.
                                   references
        1. Brown, T.D., D.N. Smith, R.A. Hargis and W.J. O'Dowd. ``Mercury
    Measurement and Its Control: What We Know, Have Learned, and Need to
    Further Investigate,'' J. Air & Waste Management Association, pp. 1-97,
    June 1999.
        2. Durham, M.D, C.J. Bustard, R. Schlager, C. Martin, S. Johnson,
    S. Renninger. ``Field Test Program to Develop Comprehensive Design,
    Operating and Cost Data for Mercury Control Systems on N-on Scrubbed
    Coal-Fired Boilers.'' Presented at the Air & Waste Management
    Association 2001 Annual Conference and Exhibition, June 24-28, 2001,
    Orlando, FL.
        3. Durham, MD, C.J. Bustard, R. Schlager, C. Martin, S. Johnson, S.
    Renninger. ``Controlling Mercury Emissions from Coal-Fired Utility
    Boilers: A Field Test'' EM, Air & Waste Management Association's
    Magazine for Environmental Managers, pp 27--33, July 2001.
        4. Meserole, F.B., R. Chang, T.R. Carey, J. Machac, and C.F.
    Richardson, ``Modeling Mercury Removal by Sorbent Injection,'' J. Air &
    Waste Mange. Assoc., 49, 694-704, 1999.
        5. Miller, Richard, W. Harrison, B. Corina, K. Cushing, R. Chang.
    ``COHPAC (Compact Hybrid Particulate Collector) The Next Generation in
    Particulate Control Technology Alabama Power Company's E. C. Gaston
    Units 2 and 3 ``A Success Story''. Presented at the EPRI-DOE-EPA
    Combined Utility Air Pollution Control Symposium: The MEGA Symposium,
    Atlanta Georgia, August 16--20, 1999.
        6. Sjostrom, S, T. Ebner, T. Ley, R. Slye, C. Richardson, T.
    Machalek, R. Richardson, R. Chang, F. Meserole. ``Assessing Sorbents
    for Mercury Control in Coal-Combustion Flue Gas''. Presented at the
    ``A&WMA Specialty Conference on Mercury Emissions: Fate, Effects and
    Control,'' Chicago, IL, August 21 -23, 2001.
        7. EPA website, http://www.epa.gov/ttn/atw/combust/utiltox/
    utoxpg.html.
        8. Sjostrom, S.M., J. Bustard, M. Durham Ph.D, R. Chang Ph.D.
    ``Mercury Removal Trends in Full-Scale ESPs and Fabric Filters''.
    Presented at the ``A&WMA Specialty Conference on Mercury Emissions:
    Fate, Effects and Control,'' Chicago, IL, August 21 -23, 2001.
        9. Hassett, D.J., D.F. Pflughoeft-Hassett, D.L. Laudal and J.H.
    Pavlish. ``Mercury Release from Coal-Combustion By-Products to the
    Environment,'' Mercury in the Environment Specialty Conference,
    Minneapolis, MN, September 15-17, 1999.
                                     ______

                         [From EM Magazine, July 2001]
    Controlling Mercury Emissions From Coal-Fired Utility Boilers: A Field
                                      Test
       (By Michael D. Durham, C. Jean Bustard, Richard Schlager, Cameron
                 Martin, Stephen Johnson, and Scott Renninger)
        This article is based on a presentation given at A&WMA's 94th
    Annual Conference & Exhibition in June in Orlando, FL. It describes a
    comprehensive multisite test program to demonstrate mercury control at
    four full-scale power plants. Tests results from three of these sites
    will be presented for the first time at A&WMA's Specialty Conference on
    Mercury, ``Mercury Emissions: Fate, Effects, and Control,'' which will
    be held at the Arlington Heights Sheraton in Chicago, IL, August 21-23,
    2001. For more details on the conference, see p 33.
                                  introduction
        On December 14, 2000, the U.S. Environmental Protection Agency
    (EPA) announced that it plans to develop regulations to reduce mercury
    emissions from coal-fired utility boilers (see ``EPA Studies on the
    Control of Toxic Air Pollution Emissions from Electric Utility
    Boilers,'' EM, January 2001, pp 30-36). This decision is based on
    growing concerns of adverse health effects due to current levels and
    potential buildups of methylmercury in lakes and rivers. Methylmercury
    is capable of bioaccumulation, resulting in higher levels being found
    in game fish. Mercury is a neurotoxin that impacts rapidly developing
    cells; people at greatest risk of exposure are pregnant women who
    consume fish with elevated levels of mercury.
        The following article describes a field test program being
    conducted by ADA-ES that represents EPA's first step toward defining
    technology to be used by power-generating companies in meeting new
    mercury regulations. The company is working in partnership with several
    organizations to design and engineer systems to maximize effectiveness
    and minimize costs in order to reduce mercury emissions from coal-fired
    utility boilers.
        The levels currently being found in lakes in several areas of the
    country are sufficiently high that state health agencies are issuing
    advisories to restrict fish consumption. Over the past 10 years, much
    effort has been directed toward reducing the use of mercury in consumer
    products. In addition, new emission control technologies have been
    implemented on medical waste and municipal waste incinerators. As a
    result, coal-fired electric generators now represent the largest single
    source of anthropogenic mercury emissions in the United States. In
    anticipation of potential regulations, considerable research has been
    conducted during the past decade to characterize the emissions and
    control of mercury compounds from coal combustion. The U.S. Department
    of Energy (DOE), EPA, and the Electric Power Research Institute (EPRI)
    funded much of this research. These research efforts are summarized in
    A&WMA's 1999 Critical Review, entitled ``Mercury Measurement and Its
    Control: What We Know, Have Learned, and Need to Further
    Investigate.''\1\
    ---------------------------------------------------------------------------
        \1\ Brown, T.D.; Smith, D.N.; Hargis, R.A.; O'Dowd, W.J. Mercury
    Measurement and Its Control: What We Know, Have Learned, and Need to
    Further Investigate; J. Air & Waste Manage. Assoc. 1999, 49, 628-640.
    ---------------------------------------------------------------------------
                               program objectives
        With stricter regulations imminent, it is important to concentrate
    the development effort on the most mature control technologies.
    Injection of dry sorbents (e.g., such as activated carbon) into the
    flue gas and further collection of the sorbent by conventional
    particulate control devices, such as electrostatic precipitators (ESPs)
    and fabric filters, represents the most mature and potentially most
    cost-effective control technology for power companies. However, work
    has been limited to bench-scale and pilot experiments.\2\  \3\ Although
    these reduced-scale programs provide valuable insight into many
    important issues, they cannot fully account for impacts of additional
    control technology on plantwide equipment. For example, it has been
    possible to measure high mercury capture at relatively low temperatures
    in small pilot systems for relatively short periods. However, these
    lower temperatures may not be practical in a full-scale system
    continuously without deposition and corrosion in cold spots of ducting
    and particulate control equipment. Therefore, it is necessary to
    perform full-scale field tests to document actual performance levels
    and determine accurate cost information. The objectives of this field
    test program are to
    ---------------------------------------------------------------------------
        \2\ Haythornthwaite, S.; Sjostrom, S.; Ebner, T.; Ruhl, J.; Slye,
    R.; Smith, J.; Hunt, T.; Chang, R.; Brown, T. Performance of Activated
    Carbon for Mercury Control in Utility Flue Gas Using Sorbent Injection.
    Presented at the EPRI-DOE-EPA Combined Utility Air Pollutant Control
    Symposium, Washington, DC, August 1997.
        \3\ Sjostrom, S.; Smith, J.; Chang, R.; Brown, T. Demonstration of
    Dry Carbon-Based Sorbent Injection for Mercury Control in Utility ESPs
    and Baghouses. Presented at the 90th Annual Meeting & Exhibition of
    A&WMA, Toronto, Ontario, June 1997.
    ---------------------------------------------------------------------------
          accelerate the availability of commercial mercury control
    systems for coal-fired plants;
          obtain data on the control systems'operability, main-
    tainability, and reliability;
          determine maximum mercury removal for various plant
    configurations; and
          determine the total costs associated with mercury control
    as a function of fuel and plant characteristics.
        The program is intended to provide critical data that will be used
    by many different groups: It will provide EPA with accurate information
    on the levels of control that can be reasonably attained for different
    plants; it will complement the emission inventory data obtained during
    the 1999 EPA Information Collection Request (ICR) data collection
    effort; and it will provide power-generating companies with the means
    to estimate costs to perform strategic planning on a systemwide basis.
    The economic analysis will include capital costs; sorbent usage costs;
    impact on operation of particulate control equipment; balance of plant;
    waste disposal and byproduct utilization issues; enhancements, such as
    cooling; and operation and maintenance (O&M) requirements.
        ADA Environmental Solutions (ADA-ES) has assembled a program team
    consisting of technical leaders in the areas of mercury measurement,
    transformation during coal combustion, capture by existing emission
    control equipment, and design of integrated emission control systems.
    The qualifications of individual team members were determined by their
    contribution to pioneering mercury control work in the United States
    over the past decade. Organizations represented on the team include URS
    Radian, Inc.; Physical Sciences, Inc.; Apogee Scientific; EPRI; Energy
    & Environmental Strategies; EnviroCare; Microbeam Technologies; Energy
    and Environmental Research Center (EERC); Environmental Elements Corp.;
    Consol Energy, Inc.; Hamon Research Cottrell; and NORIT Americas.
                                   test sites
        The program is directed at providing sufficient data to determine
    costs and capabilities for plants that do not have flue gas
    desulfurization (FGD) systems. This group represents not only the
    largest proportion of coal-fired power generators (83 percent by number
    or 75 percent by generation capacity), but it also represents the most
    difficult application for mercury control. To gather data on the
    application of sorbent injection for removal of mercury from coal
    combustion flue gas that can be used for as many plants as possible,
    sites were selected to take into account factors related to the fuel
    characteristics, the operating conditions of the unit, and interactions
    with other air pollution control devices. Sites that burn both eastern
    bituminous and western subbituminous coals were included because of
    differences in speciation of mercury in the flue gas, which greatly
    affects the efficiency of mercury removal in air pollution control
    devices. Measurements of the concentration of mercury species taken in
    the stacks of pilot and full-scale coal combustion systems reported
    anywhere from 10 percent to 95 percent Hg0 upstream of the
    air pollution control device.1 Oxidized mercury, particularly when
    present as HgCl2, is far easier to capture than is mercury
    in elemental (Hg0) form.
        In addition to differences in the forms of mercury produced by
    different coals, the fly ash produced by bituminous and subbituminous
    coals result in different mercury capture characteristics. For example,
    subbituminous ashes produce higher absorption rates of mercury at
    higher temperatures and lower levels of carbon than do ashes from
    bituminous coals. There are other important differences between the
    flue gas produced by eastern and western coals. For eastern bituminous
    coals, a small proportion (2 percent to 3 percent) of the sulfur
    dioxide (SO2) is converted to sulfur trioxide
    (SO3). SO3 is important because it reacts with
    the water vapor to form sulfuric acid. The gas stream for a low-sulfur
    eastern coal will have sufficient SO3 that sulfuric acid
    will begin to condense at 270+F. This means that the gas
    stream cannot be cooled for enhancement of mercury capture without
    first eliminating the SO3, or else severe corrosion of
    ducting and ESP components would be expected. On the other hand, the
    higher alkali content of a western subbituminous coal neutralizes all
    of the SO3, resulting in a dew point of 120+F.
    This means that a flue gas cooling system could be operated without
    sulfuric acid corrosion. If an SO3 injection system is used
    to control particle resistivity in the ESP, its operation must be
    integrated with the gas cooling system to provide both resistivity and
    control without causing corrosion problems.
        Although fabric filters represent only 10 percent of the current
    power plant applications, they are an important part of the program
    because the number of fabric filters could increase significantly as a
    result of stricter mercury control regulations. If a high level of
    mercury removal is mandated, a baghouse may be the most economical
    choice. Meserole\4\ predicts that achieving 80 percent mercury removal
    at a plant with an ESP would require 10 times the amount of sorbent as
    would be required if a fabric filter were installed. The difference in
    the cost of the additional sorbent would be greater than the annualized
    cost of a new fabric filter. In addition, a number of power plants use
    ESPs with small specific collection areas (SCAs) that would have
    difficulty dealing with the additional loading of the difficult-to-
    collect carbon sorbent.
    ---------------------------------------------------------------------------
        \4\ Meserole, F.B.; Chang, R.; Carey, T.R.; Richardson, C.F.
    Estimating Electric Utility Mercury Control Costs using Sorbent
    Injection. Presented at the EPRI-DOE-EPA Combined Utility Air Pollutant
    Control Symposium, Atlanta, GA, August 1999.
    ---------------------------------------------------------------------------
        As a result, we decided to include a COHPAC baghouse in the test
    program, a cost-effective retrofit option for power plants with ESPs.
    COHPAC, EPRI's patented Compact Hybrid Particulate Collector concept,
    places a high air-to-cloth ratio baghouse downstream of an existing ESP
    to improve overall particulate collection efficiency.
         Table 1. Mercury emissions data from three of the host sites.

        Dry sorbents can be injected upstream of the COHPAC and downstream
    of the ESP. There are three main advantages to this configuration: 1.
    sorbents are mixed with a small fraction of the ash (nominally 1
    percent), which reduces the impact on ash reuse and waste disposal; 2.
    sorbent requirements are reduced by a factor of 10 relative to the
    existing ESP; and 3. capital costs for COHPAC are less than other
    options, such as replacing the ESP with a baghouse or installing a
    larger ESP. Four power plants are participating in the field test
    program: Alabama Power Co.'s Gaston facility; Wisconsin Electric Power
    Co.'s Pleasant Prairie facility; and PG&E National Energy Group's Salem
    Harbor and Brayton Point facilities. These four plants provide a means
    to document the performance of mercury control technology for both
    subbituminous Powder River Basin (PRB) coals and low-sulfur bituminous
    coals. Three of the plants have ESPs, while the fourth plant has both a
    hot-side ESP and a COHPAC baghouse. Table 1 presents data on mercury
    emissions from three of the four plants as determined during the ICR
    testing. Additional details on the four plants are provided below.
        Alabama Power's Gaston Unit 3 is a 270 MW B&W wall-fired boiler
    that burns a washed Alabama bituminous coal. The coal has a heating
    value of 13,700 BTU/lb, with a mercury content of 0.06 g/g and 0.03
    percent chlorine. Particulate is captured by a Hamon Research Cottrell
    hot-side weighted-wire ESP with an SCA of 274 ft2 /kacfm. A
    Hamon Research Cottrell COHPAC baghouse is used with an air-to-cloth
    ratio of 8.5:1 gross; the temperature of the baghouse ranges from 240
    to 300+F. During the test program, the sorbent will be
    injected downstream of the ESP and air preheater and upstream of the
    baghouse. This test program was conducted during spring 2001.
        Wisconsin Electric's Pleasant Prairie Unit 2 is a 600 MW Riley
    Stoker balanced-draft, turbofired boiler that burns PRB coal. The coal
    has a heating value of 11,897 BTU/lb, with 0.1 g/g mercury and
    0.0015 percent chlorine. Particulate is captured by a Hamon Research
    Cottrell coldside weighted-wire ESP with an SCA of 468 ft2 /
    kacfm. A Wahlco SO3 system is used to condition the fly ash.
    The unit operates in a temperature range of 280 to 310+F.
    Mercury control testing will be conducted during September and October
    2001.
        PG&E's Salem Harbor Unit 1 is an 85 MW B&W radiant boiler that
    fires a South American bituminous coal. The coal has a heating value of
    11,300 BTU/lb, with 0.0?g/g mercury and 0.03 percent chlorine.
    Particulate is captured by an Environmental Elements cold-side rigid-
    electrode ESP with an SCA of 474 ft2 /kacfm. A FuelTech
    urea-based selective noncatalytic reduction system is used to control
    levels of nitrogen oxides (NOx). The ESP operates at temperatures as
    low as 250+F. Tests were scheduled to be completed in spring
    2001.
        PG&E's Brayton Point is a 122 MW CE tangential, twin-furnace boiler
    burning a low-sulfur eastern bituminous coal. The coal has a heating
    value of 12,319 BTU/lb, with 0.05 g/g mercury and 0.08 percent
    chlorine. A pair of ESPs is used in series to capture particulate: a
    Koppers weighted-wire cold-side ESP with an SCA of 156 ft2 /
    kacfm and a Hamon Research Cottrell rigid-electrode ESP with an SCA of
    403 ft2 /kacfm. An EPRICON SO3 system is used to
    condition the fly ash. The plant uses Separations Technology equipment
    to process the collected fly ash by electrostatically separating carbon
    from the fly ash.\5\ These tests are scheduled for fall 2002.
    ---------------------------------------------------------------------------
        \5\ Gasiorowski, S., Bittner, J., Willauer, C., and Vasiliauskas,
    A. Reliability and Quality through Processing: Beneficiation of High
    LOI Fly Ash for Concrete. Presented at the 1998 Conference on Unburned
    Carbon on Utility Fly Ash, Pittsburgh, PA, May 1998.
    ---------------------------------------------------------------------------
                        sorbent selection and screening
        The test program at each site allows for the evaluation of two
    sorbents: a lignite-derived activated carbon supplied by NORIT
    (referred to as Darco FGD carbon) and one alternative sorbent. FGD is
    considered the benchmark for these tests because of its wide use in
    DOE/EPRI/EPA-sponsored testing. Because of the economic impact of
    sorbent costs on the overall cost of mercury control, it is desirable
    to find either less expensive sorbents, such as fly ash-derived
    products, or a less expensive form of activated carbon. Sorbent
    selection criteria have been developed so that sorbent vendors/
    developers can clearly understand the needs and requirements of this
    program. In summary, an alternative sorbent must be

          at least 25 percent less expensive than FGD carbon;
          available in quantities of at least 15,000 lbs (and
    potentially as high as 250,000 lbs) for site tests;
          available in sufficient quantities to supply at least
    100,000 tons per year by 2007; and
          demonstrate a capacity for mercury capture of at least
    100 g/g as measured by URS.

        Sorbents will be tested on a slipstream of flue gas for site-
    specific mercury capacity using URS' fixed-bed mercury absorption
    device. This device was developed with funding from EPRI and has been
    used to screen dozens of sorbents. Adsorption tests are conducted by
    saturating sorbents with either elemental mercury or mercuric chloride
    in the presence of simulated flue gas. The test apparatus is
    illustrated in Figure 1. In the laboratory, simulated flue gas is
    prepared by mixing heated nitrogen gas streams containing
    SO2, hydrochloric acid (HCl), NOx, carbon dioxide, water,
    and ozone. Mercury is injected into the gas by contacting nitrogen
    carrier gas with either recrystallized mercuric chloride solids or an
    elemental mercury permeation tube housed in a mercury diffusion vessel;
    mercury concentration is controlled by the temperature of the diffusion
    vessel and the nitrogen carrier gas flow rate. During field tests,
    actual flue gas is drawn into the apparatus.
        The amount of mercury exiting the sorbent column is measured on a
    semi-continuous basis. Gas is passed through the column until 100
    percent of the inlet mercury is detected at the outlet (100 percent
    breakthrough). The 100 percent breakthrough (equilibrium) capacity of
    the sorbent g Hg/g sorbent) is determined by summing the total
    mercury adsorbed until the outlet mercury concentration is first equal
    to the inlet concentration.
                       semi-continuous emissions monitor
        Semi-continuous gaseous mercury analyzers built by Apogee
    Scientific will be used during this program to provide near realtime
    feedback during baseline, parametric, and long-term testing. Continuous
    measurement of mercury at the inlet and outlet of the particulate
    collector, where mercury levels fluctuate with boiler operation
    (temperature, load) and decisions must be made concerning parameters
    such as sorbent feedrate and cooling, is considered a critical
    component of a field mercury control program. The analyzers that will
    be used for this program consist of a commercially available cold vapor
    atomic absorption spectrometer (CVAAS) coupled with a gold amalgamation
    system (AuCVAAS). One analyzer will be placed at the inlet and one at
    the outlet of the particulate collector during this test program.
           Figure 1. Bench-scale, fixed-bed mercury adsorption system

        Although it is very difficult to transport nonelemental mercury in
    sampling lines, elemental mercury can be transported without
    significant problems. Since the Au-CVAAS measures mercury by using the
    distinct lines of ultraviolet absorption characteristic of elemental
    Hg0, the nonelemental fraction is either converted to
    elemental mercury (for total mercury measurement) or removed (for
    measurement of the elemental fraction) near the sample extraction
    point. This minimizes any losses due to the sampling system. For total
    vaporphase mercury measurements, all nonelemental vapor-phase mercury
    in the flue gas must be converted to elemental mercury. A reduction
    solution of stannous chloride in HCl is used to convert Hg 2+ to
    Hg0. The solution is mixed as prescribed in the draft
    Ontario Hydro Method for manual mercury measurements.\6\
    ---------------------------------------------------------------------------
        \6\ American Society for Testing and Materials. Standard Test
    Method for Elemental, Oxidized, Particle-Bound, and Total Mercury in
    Flue Gas Generated from Coal-Fired Stationary Sources (Ontario Hydro
    Method); ASTM draft method; American Society for Testing and Materials,
    October 1999.
    ---------------------------------------------------------------------------
        To measure speciated mercury, an impinger of potassium chloride
    solution mixed as prescribed by the draft Ontario Hydro Method is
    placed upstream of the stannous chloride solution to capture oxidized
    mercury. Unique to this instrument is the ability to continuously
    refresh the impinger solutions to assure continuous exposure of the gas
    to active chemicals. The Au-CVAAS system is calibrated using elemental
    mercury vapor, by injecting a metered volume of mercury-laden air from
    the air space of a vial containing liquid mercury at a precisely
    measured temperature into the analyzer.
        The Au-CVAAS can measure mercury over a wide range of
    concentrations. Since the detection limit of the analyzer is a function
    of only the quantity of mercury on the gold wire and not the
    concentration in the gas, the sampling time can be adjusted for
    different situations. Laboratory tests with stable permeation tube
    mercury sources and standard mercury solutions indicate that the noise
    level for this analyzer is 0.2 ng mercury. To sample at 50 to 100 times
    the noise level during field testing, the sampling time is set so at
    least 10 ng mercury is collected before desorption. For example, if the
    mercury concentration is 5 g/m3, a 1-minute sample
    time would be required, where as for a concentration of 0.5 g/
    m3, 10 minutes of sample time would be required.
        Particulate is separated from the gas sample using a self-cleaning
    inertial gas separation arrangement modified for use with this mercury
    analyzer under an EPRI mercury control program. This arrangement uses a
    system where excess sample flow continuously scours particulate from a
    secondary filter so as to minimize any mercury removal or conversion
    due to the presence of particulate.
                          sorbent injection equipment
        The sorbent injection equipment is a skid-mounted, portable,
    dilute-phase pneumatic system. The activated carbon will be delivered
    to the plant in 900-lb supersacks, which will be stored on pallets
    adjacent to the injection skid. The reagent is metered by a variable-
    speed, screw feeder into an eductor that provides the motive force to
    carry the reagent to the injection point. A positive displacement
    blower provides the conveying air. A programmable logic controller is
    used to control system operation and adjust injection rates. Flexible
    hoses will carry the reagent from the feeder to a distribution manifold
    located upstream of the particulate collector feeding multiple
    injection probes inserted into the duct to distribute the sorbent
    evenly across the flue gas.
                                 field testing
        Prior to installing injection equipment, preliminary system
    operation, performance, and mercury-level measurements will be made.
    Mercury will be measured using a semi-continuous emissions monitor (S-
    CEM) across the particulate control device, which will be run
    continuously for a minimum of 24 hours at each site. These measurements
    will be used to expedite the parametric evaluation and provide insight
    as to current mercury removal efficiencies during ``normal'' operation
    with varying boiler load. These data will be used to design the
    parametric tests with the minimum number of uncontrolled variables.
        After installation of the sorbent injection equipment, a second set
    of baseline tests will be conducted to fully document baseline
    conditions. During this test, boiler load will be held steady at
    ``full-load'' conditions during testing hours (7:00 a.m. to 7:00 p.m.).
    Mercury levels across the particulate control device will be measured
    using two separate methods: the S-CEM and standard Ontario Hydro
    Testing. This baseline test is expected to run for 1 week. Following
    the baseline test, a parametric series of tests will be conducted to
    document mercury removal levels as a function of injection rate and gas
    temperature. The flue gas temperature will be lowered at each condition
    to document the effect of a 10 to 20+F decrease in
    temperature on mercury removal efficiencies. The maximum sorbent
    injection rate will be established using either a 90 percent mercury
    removal level or a sorbent feed proportional to 30 lb/Macf, which is
    considered an economic maximum. The next series of parametric tests
    will be conducted using an alternative sorbent. Mercury removal as a
    function of injection rate will be measured at the optimum temperature
    measured during the previous test series. After this test the field
    crew will analyze the data and work with team members on establishing
    conditions for the long-term test. The final test will be a mercury
    removal validation program conducted for a maximum of 14 days at the
    ``optimum'' plant operating conditions (lowest cost/highest mercury
    removal) as determined from the parametric tests. The S-CEM will be
    used for continuous monitoring of mercury removal. Ontario Hydro
    measurements will be conducted at the inlet and outlet.
        During each field test program, samples of the ash/sorbent mixture
    from the hoppers will be collected and analyzed. The standard testing
    technique used for assessing hazardous waste characteristics is the
    Toxicity Characteristic Leaching Procedure (TCLP). A 100-g sample of
    ash is exposed to 1 liter of acidic solution (acetic acid- or acetate-
    based) for 24 hours. The solution is then analyzed for several metals
    (including mercury) to determine how much of each target metal was
    leached from the solid sample. Results are compared against limits
    established by regulation. In the case of mercury, a maximum leachable
    level of 0.2 g/liter has been established.
        A second series of tests will be performed by EERC to answer the
    question of the stability of the mercury. The potential long-term
    environmental impact of the mercury-laden ash will be determined using
    two techniques: leaching and thermal desorption. Leaching tests are
    done using a method known as the synthetic groundwater leaching
    procedure (SGLP).\7\ This test is modeled after the TCLP, but modified
    to allow for disposal scenarios. A shake-extraction technique is used
    to mix the solid sample with an aqueous solution; aliquots of the
    liquid are analyzed after 18 hours, 2 weeks, and 4 weeks. Thermal
    desorption tests will be performed using a special test fixture that is
    heated using a programmable temperature controller. The temperature of
    the ash sample is ramped to 500+C at a rate of
    20+C per minute. Mercury that is released by the sample is
    swept into a spectrophotometer for mercury measurement as a function of
    time and temperature.
    ---------------------------------------------------------------------------
        \7\ Hassett, D.J.; Pflughoeft-Hassett, D.F.; Laudal, D.L.; Pavlish,
    J.H. Mercury Release from Coal-Combustion By-Products to the
    Environment. Presented at the Mercury in the Environment Specialty
    Conference, Minneapolis, MN, September 1999.
    ---------------------------------------------------------------------------
        After completion of testing and analysis of the field data, the
    requirements and costs for full-scale, permanent commercial
    implementation of the necessary equipment for mercury control using
    sorbent injection technology will be determined. The following need to
    be considered: the size and design of process equipment, based on test
    results and plant-specific requirements (reagent storage capacity,
    plant arrangement, retrofit issues, winterization, controls interface);
    modifications to existing plant equipment, including the particulate
    collector, ash handling system, compressed air supply, electric power
    capacity, other plant auxiliary equipment, utilities, and other balance
    of plant engineering requirements; and type and source of reagent to
    determine the most cost-effective reagent(s) for the site.
                              technology transfer
        Transferring the information generated during this field test
    program to the coal-fired power-generation industry will be an
    important part of the program. This will be accomplished through
    technical papers presented at various forums, including A&WMA's Annual
    Conference and Specialty Conference on mercury, Institute for Clean Air
    Companies (ICAC) meetings, and the EPRI/ DOE/EPA Mega Symposium (see
    opposite). In addition, results from the test programs will be made
    available to the public via the ADA-ES Web site, www.adaes.com as soon
    as DOE approves them.
                                acknowledgements
        Such a large-scale field test program could not be conducted
    without technical and administrative support from a large number of
    people at the various power-generating companies. The authors would
    like to acknowledge all of these individuals and especially the
    following key personnel: Dr. Larry Monroe, Southern Company Services;
    Herb Stowe, PG&E; and Dick Johnson, Wisconsin Electric. Also, the
    authors acknowledge the valuable input provided by Dr. Ramsay Chang,
    EPRI, and James Kilgroe, EPA.

                                     ______

       Responses of Michael Durham to Additional Questions from Senator
                                   Lieberman

        Question 1. Your testimony indicates that carbon injection is much
    more effective when power plants have fabric filter systems in place,
    but that only 10 percent of electric power plants have those systems in
    place now. Why is there such a low percentage of those systems in place
    now? Are there other benefits besides higher mercury removals levels
    available to companies who install fabric filter systems?
        Response. Since the first installation of an electrostatic
    precipitator (ESP) on a pulverized-coal-fired boiler at the Detroit
    Edison Company Trenton Channel Station in 1924, ESPs have been an
    integral part of coal-fired-boilers. ESPs were specified for most coal-
    fired boilers because they offered several attractive advantages over
    other particulate control equipment: ESPs can be designed to provide
    very high collection efficiency for virtually all sizes of fly ash
    particles; they have low power requirements, virtually no pressure
    drop, and require minimal maintenance; they can be successfully scaled
    to treat very large gas flows; they are flexible in that they can
    operate over a large range of temperatures, pressures, and gas
    characteristics; and they can continue working for the life of the
    boiler. In 1977, there were more than 1300 fly ash precipitator
    installations treating over 500 million actual cubic feet per minute of
    flue gas.
        ESPs were especially well suited for higher sulfur coals, which was
    the coal fired by many older plants. When newer plants started firing
    lower sulfur coals to meet the requirements of the Clean Air Act in
    1970, performance difficulties with ESPs on this new type of ash became
    apparent. These operating limitations were overcome by making the ESPs
    larger and adding flue gas conditioning.
        Because of the difficulties encountered by ESPs collecting ash from
    low-sulfur coals, power companies began to consider the use of fabric
    filters or baghouses. Fabric filters control particulate matter by
    passing the flue gas through a tightly woven fabric that collects the
    particles in the form of a dust cake. These devices are relatively
    insensitive to the differences in ash characteristics produced by low-
    and high-sulfur coals. Although fabric filters were common in smaller
    industrial applications, the flue gas produced from burning coal
    creates a number of challenges because of high volumes, high
    temperature, and presence of acid gases.
        The first fabric filter on a coal-fired boiler was built in the
    early 70's. More FFs were installed in the 80's and 90's when plants
    started firing low-sulfur coals and had to meet more stringent
    particulate emission standards. However, ESPs continued to be the
    choice in most cases based on economics. Even though the fabric filters
    are capable of achieving lower particulate emissions, often Public
    Utility Commissions (PUC) would not approve the purchase of a more
    expensive piece of capital equipment if it exceeded the performance
    required by current regulations.
        Are there other benefits besides higher mercury removal levels
    available to companies who install fabric filter systems?
        There are several benefits of a fabric filter. For plants burning
    low-sulfur coal, especially western subbituminous coals, fabric filters
    can operate at very high collection efficiencies and are insensitive to
    changes in ash characteristics that can impact ESP performance. For
    most low-sulfur coals, the fabric filter will produce lower particle
    emissions than an ESP. However, for high-sulfur bituminous coals, the
    ESP may still be the control device of choice as the gas stream
    produces many challenges for performance and survival of the fabric
    material.
        Another benefit of the fabric filter occurs when it is used in the
    EPRI COHPAC configuration. This allows the ash to be collected
    separately from the activated carbon so that the plant can sell their
    ash for use in concrete. The ability to continue to sell their ash and
    avoid land disposal costs could save a large power plant as much as $10
    million per year.

        Question 2. Your testimony notes that the mercury reduction levels
    and the timing of those reductions are very challenging for the
    industry. It seems to me that a mandatory reduction in mercury
    emissions would greatly facilitate the development of further
    technology developments. Could you comment on that?
        Response. One of the biggest benefits of a definitive regulation is
    providing certainty. This will help the power companies as they perform
    long-term planning. It will help the technology developers target and
    refine their control devices. When the target removal level is unknown,
    the R&D must proceed in a wide variety of directions. However, with a
    well-defined target, many approaches will be dropped as impractical
    allowing the developers to focus on only those concepts capable of
    achieving the target levels. This should result in more rapid
    development of effective, lower-cost approaches.
        Another positive impact of an explicit regulation is that it will
    encourage investment in the infrastructure that will be necessary to
    supply the industry with powdered activated carbon for mercury control.
    A significant barrier to the PAC technology will be the cost of
    building new kilns and furnaces that will be necessary to increase the
    production of activated carbon to meet the potential market for coal-
    fired boilers. The current market for activated carbon in the US is
    250,000 tons/yr. Once mercury regulations are fully implemented, this
    could increase the demand to 2-3 million tons/yr. Activated carbon
    suppliers will be very hesitant to invest capital resources to increase
    capacity based on only the promise of a new regulation. Several years
    ago, the carbon industry increased capacity when EPA announced that
    they were going to tighten up drinking water standards. After the new
    capacity was added, EPA did not followup with new regulations thus
    producing a glut of activated carbon. Some companies went out of
    business because of this, and the industry as a whole is just now
    recovering.
        Another positive result would occur if the regulation rewarded
    early adopters. Technology is best introduced into the power industry
    in a stepwise orderly fashion. With a few early adopters, it is
    possible to address problems that arise by making a limited number of
    modifications to equipment and processes. There are many examples of
    new technology being brought into the power industry where lessons
    learned from the early adopters have been critical to the success of
    the broad-based implementation across a large number of plants. Since
    the bioaccumulation of mercury in fish results from the cumulative
    impact of emissions from a variety of sources, credits provided for
    early reduction of emissions would provide both a potential
    environmental effect as well as greatly assisting the maturing of the
    control technology.

        Question 3. It appears that you initial tests have been very
    promising. What are the next steps for test in order to move forward?
        Response. There will be two additional short-term demonstration
    programs conducted at two plants in Massachusetts during 2002 under our
    current program funded by the Department of Energy National Energy
    Technology Laboratory (NETL). The short-term tests have identified a
    need for additional testing at sites representing different plant
    configurations and coal types. In addition, longer term tests at
    selected sites will be necessary to demonstrate that it is possible to
    maintain high levels of mercury removal over extended periods of time
    and for changing operations conditions such as load cycling and fuel
    changes. Completion of these tests will require continued funding from
    NETL and cost sharing from power companies. Two proposals were
    submitted to NETL in 2002 for this funding.
        We are also identifying utility partners to participate in the
    Clean Coal Power Initiative. These programs would allow us to install
    and operate state-of-the-art equipment at plants to obtain performance
    and operating data for a few years. This will provide the mechanism to
    further define optimum operation, solve current problems, and address
    any new problems that may arise. This is a critical step in the
    development process and must be completed before any widespread
    implementation of the technology.
                                     ______

       Responses of Michael Durham to Additional Questions from Senator
                                   Voinovich

        Question 1. The Jeffords/Lieberman Bill requires 90 percent mercury
    reduction by 2007. In your testimony you state that the timeframe is
    extremely challenging and you lay out a plan to have the ``first
    commercial installations at a few early adopters in 2005-2007.'' Even
    if no problems arise, I don't see how this would allow the entire
    industry to comply with the Jeffords' Lieberman Bill by 2007. Is it
    possible and what are the potential problems?
        Response. There are several critical components to the
    implementation of this technology including the carbon injection
    equipment, the production and supply of powdered activated carbon, and
    the fabrication and installation of fabric filters.
        The injection equipment if relatively simple and inexpensive and is
    based on experience gained from using similar technology for other
    applications. The equipment is not very specialized and can be
    fabricated offsite by a wide variety of manufacturers. Once built, the
    equipment can be installed with little or no downtime of the plant and
    requires only general labor skills. Therefore, I do not expect that the
    injection equipment will be a limiting factor in the widespread
    implementation of the technology.
        As mentioned earlier, there is currently insufficient production of
    powdered activated carbon to meet the demands of the power industry for
    mercury control. It is unlikely that the carbon companies will invest
    in new production facilities until a new regulation requiring mercury
    control has been passed. Once a regulation is in place, the carbon
    companies will build new facilities to meet the demand created by the
    law, which they view represents a very desirable business opportunity.
    Their current business is seasonal and weather dependent. In contrast,
    mercury control in the power industry would create a base-loaded demand
    that is predictable, continuous, and relatively constant. Therefore, it
    would be easier to design production equipment to meet this type of
    demand.
        From our initial data, the injection of activated carbon can reduce
    mercury emissions by 50 to 70 percent with existing equipment (ESPs)
    found at the vast majority of the plants. However, if the target
    removal level is 90 percent mercury removal, it will be necessary to
    install fabric filters to provide the necessary contact between the
    carbon and the flue gas. The availability of fabric filters is the
    subject of Question 6.

        Question 2. Your two test trials only ran for 2 weeks, and 90
    percent reductions were only possible for 5 continuous days, then the
    reduction level dropped to 80-85 percent. What's to say it wouldn't
    drop more after 2 months or even 2 years?
        Response. This can best be answered by referring to Figure 1, which
    presents the mercury removal measurements obtained during the 5-day
    test. The top graph shows the inlet and outlet mercury measurements.
    The bottom graph shows the plant load and the sorbent feed rate. During
    this program we asked the plant to maintain full-load operation, which
    they did for most of the time. The lower line shows the sorbent feed
    rate, which we held constant during this test period.
        These results show that at certain periods, it was possible to
    obtain 90 percent mercury removal. This can be seen during the last 3
    days of operation, which also corresponds to the period when the
    Quality-Assured Ontario Measurements were made. However when we look at
    the removal levels over the entire 5 day period, we see that the
    average is less than 90 percent, because during the first 2 days the
    inlet mercury levels went up unexpectedly due to a change in coal
    resulting in lower mercury removal.
     Figure 1. Inlet and Outlet COHPAC Mercury Concentrations, Boiler Load
                               and PAC Injection

    Concentration During Long-Term Tests, April 2001
        Therefore, it is not a matter that the technology deteriorated from
    90 percent to 80 percent over the 5 days but that variations in plant
    operating conditions led to reduced collection efficiency during
    certain time periods. Because we are constantly putting in fresh
    sorbent to react with the mercury, we do not expect that performance
    will deteriorate over time, whether it be 2 months or 2 years. However,
    the challenge for this technology is to operate the sorbent injection
    system to achieve high levels of mercury removal under variable
    operating conditions, such as changing load and different coals, which
    are typical of the modern day power plant. We are planning for a 1-year
    test program at this site to resolve these issues.

        Question 3. I understand that you must have a baghouse filter for
    the technology to work at the optimum level, and only 10 percent of the
    coal plants have baghouse filters. Considering labor and supply, as
    well as cost, how quickly could the other 90 percent install baghouse
    filters and can every facility do so?
        Response. ADA Environmental Solutions only provides the carbon
    injection equipment and does not have the resources or experience to
    provide large capital equipment such as fabric filters. Therefore, I do
    not feel qualified to address this question. I would recommend
    contacting Mr. Jeff Smith of the Institute for Clean Air Companies,
    which represents several fabric filter manufacturers, or Mr. Rich
    Miller of Hamon Research Cottrell, who testified on the mercury panel
    on January 29, 2001.
                                   __________
     Statement of Richard L. Miller, Hamon Research-Cottrell, Somerville,
                                   New Jersey
        Good morning, Mr. Chairman. My name is Richard Miller, Sales
    Manager for Fabric Filters and FGD Systems at Hamon Research-Cottrell
    (HRC) located in Somerville, New Jersey. For the past 25 years, I have
    been serving the air pollution control industry in various technical
    and managerial roles, with a specialty in fabric filter particulate
    removal systems. In addition, I have served as Fabric Filter Committee
    Chairman for the Institute of Clean Air Companies (ICAC) for the past 5
    years and have authored dozens of technical papers and conducted
    numerous technical presentations during my career period.
        I wish to take a few moments to share a little history about the
    company I work for. Dr. Frederick Cottrell who was the inventor of the
    first industrial electrostatic precipitator originally founded
    research-Cottrell in 1907. To support scientific research, Dr. Cottrell
    co-founded the non-profit Research Corporation in 1912. Forty years
    later, the Research Corporation gave birth to Research-Cottrell, which
    is now known as Hamon Research-Cottrell. To this date, our company
    continues the tradition of engineering excellence by designing,
    building, and servicing high quality air pollution control systems for
    the various industries and electric utilities of the world.
        Our products range from particulate control devices such as
    electrostatic precipitators (ESP's) and fabric filter systems (FF's),
    also known as baghouses, to flue gas de-sulfurization (SO2)
    systems, including both Wet FGD and Dry FGD type systems, Nitrogen
    Oxide (NOx) reduction systems and other supporting technologies such as
    U2A which is primarily designed to generate onsite ammonia from urea
    for SCR type NOx reduction systems. All of these technologies are
    designed to meet both current and hopefully future air pollution
    control legislations. We are but one of several highly skilled
    organizations in our industry who have developed air pollution control
    technologies designed to achieve the same goals. Currently HRC does not
    design or manufacture any type of CO2 control technologies
    so I therefore will not address this pollutant in my testimony. I do
    wish, however to address the issue of mercury control for the remainder
    of this testimony.
                                    summary
        As testified by the Mr. Jeff Smith, Executive Director of ICAC
    during his previous testimony on November 15, 2001, I believe the air
    pollution control industry currently has the existing technologies
    required to achieve NOx, SO2, and Mercury reduction levels
    as proposed under Senator Jeffords' bill (S. 556), and the required
    resources to further develop and deliver this technology within the
    timeframe outlined under this bill. This is consistent with the past
    history of the air pollution control industry to develop the
    technologies required to achieve emission control technologies
    regulated since the first Clean Air Act was enacted. Whether
    particulate emissions, sulfur dioxide, nitrous oxide, mercury or fine
    particulate (PM10 or PM2.5) removal, we have
    found ways to meet the challenges established by regulations. These
    include the challenge of making it both technically feasible as well as
    economically available.
        Effective mercury reduction has been measured and shown to occur
    naturally to various degrees across existing air-pollution control
    devices, and removal rates in excess of the ultimate goal of 90 percent
    reduction have been achieved across the entire train of existing
    emissions control devices or better stated as being from the coal pile
    to stack. ICR Emission summary data gathered by EPA, and made available
    to the public from dozens of electric utility power stations and firing
    various type of coal types, shows that even without additional control
    devices or enhancements, natural mercury removal rates are currently
    being accomplished with removal levels anywhere from zero to as high as
    97 percent+. This data shows that it is easier to remove mercury from
    Eastern Bituminous coals than it is from Western Sub-Bituminous or even
    worse from poorer grade fuels such as lignite.
        The success of many of these sites depends upon many variables,
    including; type of coals, operating temperatures, and especially which
    type of air pollution control devices are present. Most existing power
    stations have ESP's for removal of particulates, while a smaller but
    growing number of plants have fabric filter systems installed.
    Additionally, some of these installations have also installed
    SO2 scrubbing systems and SCR systems, which can all jointly
    or independently help in the removal of mercury from the gas stream. So
    the control of multi-pollutants which requires many of these existing
    devices to be installed at the same time, can and do help together in
    reaching the goals of this bill. The best removal rates appears to be
    from fabric filter systems which generally remove a greater amount of
    particulates than electrostatic precipitators can by filtering the ash
    across a synthetic, high temperature filter media.
        For those existing plants that have electrostatic precipitators
    installed, even if they do not currently provide effective mercury
    reduction levels, there does exist commercially available technology
    that has been proven to enhance these devices in the removal of total
    particulates and recently demonstrated mercury emissions with proven
    removal levels of 80 to 90+ percent. This technology is called COHPAC,
    which stands for a COmpact Hybrid PArticulate Control technology, which
    was originally developed by the Electric Power Research Institute
    (EPRI) in 1991 as a multi-pollutant control device. It involves the
    joining or marriage of both ESP and high velocity pulse jet type fabric
    filter technologies, with the fabric filter portion acting as a final
    collection polishing device. To date, significant improvements in the
    removal of particulates have been demonstrated at four existing coal
    fired power plant sites, as well as two refuse fired combustors
    utilizing this hybrid technology. Additionally, under an existing DOE/
    NETL sponsored test program which is being implemented by ADA-ES and
    co-sponsored by several electric utility generators, EPRI, as well as
    Hamon Research-Cottrell, it has been shown that on an existing utility
    coal-fired boiler that utilizes this COHPAC technology, with the simple
    addition of a dry sorbent such as pulverized activated carbon (PAC), an
    aging hot-side electrostatic precipitator can effectively achieve
    reduction levels of 80 to 90 percent. ICR data has shown that Hot-Side
    precipitator particulate collection devices, due primarily to the high
    flue gas temperature range they normally operate at, have shown to
    provide little if any natural mercury collection. Even though this
    power plant was firing an Eastern bituminous coal which tends to
    provide greater amounts of natural mercury reduction levels, the fact
    that it increased the total reduction levels from 0 percent to over 90
    percent is remarkable in itself and demonstrates that it may be
    possible to achieve similar results on other fuels where higher initial
    mercury capture rates are already present. Additional longer-term
    research and demonstrations will need to be conducted in order to
    confirm these assumptions.
        Even without the addition of the COHPAC technology, evidence
    suggests that existing power plants outfitted with electrostatic
    precipitators may also benefit from the injection of activated carbons.
    Fly ash removal rates of 50 to 70 percent can be reasonably expected to
    be achievable across these existing devices, while however requiring
    greater amounts of PAC sorbent injection levels. Although achievable,
    injection rates 10 to 30 times higher than fabric filters alone or when
    using COHPAC technology are expected with ESP's alone. Depending upon
    the initial cost of the PAC material, this higher injection feed rate
    could equate to a significant increase in annual operating costs of
    several millions of dollars per year.
        Additional financial penalties to the utilities may also result due
    to the potential loss in the marketability of the ash from the
    injection of the activated carbon into either a conventional fabric
    filter and/or an electrostatic precipitator. The higher LOI content of
    the ash makes in unattractive to market as a concrete supplement. This
    results in the requirement to landfill the entire amount of fly ash,
    which depending upon the plants location, could be very expensive, thus
    potentially losing additional compensation and increasing the financial
    cost to the utility to remove the high mercury levels. However, with
    the use of the COHPAC technology, the majority or 96 to 98 percent of
    the fly ash is typically removed in the primary ESP particulate removal
    device. Only the remaining 2-4 percent of the total amount of ash is
    actually being treated with the activated carbon. Thus the majority of
    the ash could still be sold by the utilities and only the much smaller
    percentage of the ash which has now been treated for mercury reduction,
    can be disposed into a normal land fill or ash settling pond.
        The initial installed cost on a flange-to-flange basis for the
    installation of the COHPAC technology appears to range anywhere from
    $20 to $30/KW, excluding any additional costs associated with the
    possible need for new or improved induced drafts fans, modified
    ductwork, additional foundations or engineering and in-house costs.
    However, for an example, on a typical 400 MW size coal-fired boiler
    facility, the difference in total annual levelized cost for pulverized
    activate carbon (PAC) injection to achieve 80 percent mercury removal
    across an existing ESP collector vs either a conventional fabric filter
    or COHPAC hybrid removal system is $13.5 Million vs $2.8 million, with
    the total injection system capital equipment cost equaling
    approximately $940,000 .
                                   conclusion
        As an individual who has suffered with Asthma all his life and
    having a child who also has the same health disorder, it is important
    to me as well as all individuals to have the cleanest air possible
    available to us all. I have strived to achieve this throughout my
    career through the advancement of air pollution control technologies.
    However, without the enforcement resulting from tougher emission
    control legislation such as the multi-pollutant performance based
    approach reflected in the Jeffords bill (S. 556), current emission
    levels for all pollutants, including mercury, will not be reduced
    voluntarily by the electric power producers, nor will the advancement
    in pollution control technologies continue with any speed. Without the
    additional enforcement levels provided under this bill, current air
    pollution levels will remain as is, as the financial incentives needed
    to develop and demonstrate the required mercury control technologies
    and other pollutant controls will not be made available to the air
    pollution control industry.
        Today, commercially available, cost effective air-pollution control
    technologies have already achieved 90 percent mercury removal
    reductions on certain coals. I am confident with the initiation of
    clean air regulations including reasonable deadlines for compliance;
    those 90 percent removal efficiencies can be achieved across a broad
    spectrum of available fuels. The Clean Air Industry has a well-
    documented history of successful response to regulatory initiative:
    when clear regulations have been enacted; the industry has achieved the
    desired results in a cost effective and commercially reasonable basis.
        Failure to implement this legislation because of incomplete
    technical data creates the ultimate Catch 22. The Clean Air Industry
    cannot reasonably invest in the products or systems that will achieve
    the goals of the legislation without the regulatory drivers creating
    demand to justify investment but the regulations are being upheld
    because the products and systems have not been fully developed.
        I am confident the goals can be achieved if the investment impetus
    of legislation exists.
        We recognize that there is a cost to achieve the improved air
    quality, but you must also recognize that this investment has a high
    rate of return, not only in improved air quality but also as a highly
    efficient economic stimulus to our sluggish economy. Indeed, it is hard
    to identify a better government stimulus than air pollution control
    regulations in Power Generation. This is because:

          Cost is widely distributed and incurred by the entity/
    person using the power (as opposed to taxing everyone regardless of
    use)
          Electricity costs for the great majority of individuals
    and businesses are a small fraction of their operating expense.
          No risk of negatively impacting United States power
    generators because they are free from foreign competition in the United
    States. and they pass the cost on to their customers. The power is
    minimal, and can be addressed on case-by-case basis.
          No increase in government deficit and NO NEW Taxes
          The money must be spent within the US
          The liquidity exists in the capital markets to support
    this initiative-it just needs a stimulus for release
          Hundreds and thousands of jobs can be created in the
    United States, across a wide variety of businesses, not just for air
    pollution control companies like ourselves, but also architect and
    engineering companies, fabrication companies, steel companies,
    instrumentation and control companies and construction companies and
    their workers.
        Thank you for this opportunity to testify. I look forward to any
    questions you may have.
                                     ______

       Responses of Richard Miller to Additional Questions from Senator
                                   Lieberman

        Question. Mr. Miller, could you address some of the issues
    associated with controlling mercury emissions from different types of
    coal? It seems like there are a range of opinions on the control levels
    that are achievable for the three major types of coal. It seems like
    your bottom line is that you have faith in technology development in
    the context of mandated reductions to achieve pretty high levels of
    mercury control for all coals.
        Response. The three major types of coals are:
          Western Sub-bituminous
          Eastern Bituminous
          Lignite
        The difficulty in the removal of mercury from any of these coals
    depends in a large part on the amount or ratio of elemental vs. ionic
    (soluble) forms of mercury present in the coal. The higher the soluble
    portion, the easier it is to remove naturally in existing air pollution
    control equipment, or via the use of either dry or wet FGD systems.
        The most difficult coal to remove high levels of mercury from is
    Lignite which has natural reduction levels in the area of only 10
    percent. It also has the highest amount of elemental mercury and these
    boilers typically operate hotter than units firing more conventional
    coals. Some type of water spray type, humidification system would also
    be required to cool the flue gas down to levels more attuned for
    mercury reduction in the area of 275 to 320 F from common boiler/air
    heater exit flue gas operating temperatures of 340 to 400 F.
        As you indicted, yes I am confident in technology development in
    the context of mandated reductions to achieve pretty high levels of
    mercury controls for all coals. As indicted previously, some coals may
    require either more or less control equipment in combination to achieve
    the proposed reduction levels.
        Of the existing equipment present, fabric filters naturally remove
    the highest amount of elemental mercury across the filter cake,
    although in most cases under the targeted reduction rates. With the
    addition of an activated carbon injection system, high levels of
    mercury reduction is anticipated. The injection rates are anticipated
    to vary depending upon the type of coal and operating temperatures. For
    more difficult coals, the amount of activated carbon injected is
    expected to increase and the type of carbon may also be modified to
    enhance its properties. Higher costs would be expected for these
    modified sorbents and higher injection rates. Greater long-term studies
    would be required on the various types of coals and filtration systems
    to determine exactly what level of mercury reduction is feasible.
                                   __________
        Response of Richard Miller to Additional Question from Senator
                                   Voinovich

        Question. In my opening statement I quoted a letter from Kansas
    City Power and Light which states that:
        ``Kansas City Power and Light just rebuilt a 550 megawatt unit, our
    Hawthorn 5 facility, using a state-of-the-art combination of SCR, dry
    scrubber and fabric filter and burning low sulfur sub-bituminous coal.
    This combination of equipment and fuel, making Hawthorn 5 the cleanest
    coal-fired power plant in the country, may be able to achieve a 45
    percent level of mercury reduction, based on currently available
    information.''
        They can't do better than a 45 percent reduction in mercury. Should
    they rebuild their system again, and if so, what should they add to get
    to the 90 percent reduction level?
        Response. To achieve higher mercury reduction levels on
    installations where an existing DFGD and fabric filter system is
    present, you would have to install a carbon injection system designed
    to inject activated carbon at the inlet to the fabric filter system.
    The installation of this enhancement to the system would not require
    rebuilding of the existing system, just the addition of an activated
    carbon injection system which includes a storage silo, metered feeder,
    blower, injection distributor and associated piping and hoses. This
    would be a fairly easy and relatively inexpensive system to install.
        As there is a DFGD system present, a modified type activated carbon
    would most likely be required which involves the use of a iodine
    impregnated, activated carbon. This is commercially available, but at a
    higher cost than conventional activated carbon. The final amount of
    carbon required to meet the 90 percent requirement would have to be
    determined by field measurements. It is anticipated, however that by
    use of this type of technology that mercury reduction levels of up to
    90 percent is achievable. A field demonstration program should be
    performed to confirm these assumptions.
                                   __________
                 Statement of Frank Alix, Powerspan Corporation
        Chairman Lieberman and distinguished members of the Senate
    Subcommittee on Clean Air, Wetlands, and Climate Change, thank you for
    the opportunity to share Powerspan's perspective on compliance options
    for electric power generators to meet new limits on carbon and mercury
    emissions contained in S. 556.
        My name is Frank Alix and I am the chairman and Chief Executive
    Officer of Powerspan Corp.
        Powerspan is a clean energy technology company headquartered in New
    Hampshire. Our company was founded in 1994 and has grown to employ 50
    scientists, engineers and other high-tech workers. In order to fund
    technology development, the company has raised over $29 million to date
    from private, institutional, and corporate investors.
        Over the past 4 years, we have focused our resources on developing
    and commercializing a patented multi-pollutant control technology for
    coal-fired electric generating plants called Electro-Catalytic
    Oxidation, or ECOTM. Our ECO technology is designed to cost-effectively
    reduce emissions of sulfur dioxide (SO2), nitrogen oxides
    (NOx), mercury (Hg), and fine particles (PM2.5) in a single,
    compact system. Several leading power generators are investors in the
    company or partners in ECO development. These include FirstEnergy,
    American Electric Power, Cinergy, Ameren, and Allegheny Energy. In
    addition, the Department of Energy recently issued Powerspan a $2.25
    million Cooperative Agreement to demonstrate the mercury removal
    capabilities of ECO under various conditions.
        We have successfully tested our ECO technology in a 2-megawatt
    slipstream of a coal-fired plant owned by FirstEnergy. During this
    testing, ECO reduced emissions of mercury to below minimum detectable
    limits, representing an 81 percent reduction from incoming mercury
    levels. In addition, recent testing indicates that our ECO technology
    is capable of reducing sulfur dioxide by 99 percent and nitrogen oxides
    by 90 percent, thereby providing Best Available Control Technology--or
    BACT--removal levels in a single, multi-pollutant control system.
    Furthermore, ECO produces a commercially valuable fertilizer byproduct,
    avoiding the need for large, new landfill disposal sites to accept flue
    gas desulfurization (FGD) waste. Finally, our commercial cost estimates
    indicate that ECO capital and operating costs will be about half of the
    combined costs of FGD and selective catalytic reduction (SCR) systems,
    which are the closest alternative technologies for reducing
    SO2 and NOx emissions.
        Powerspan has begun installation of our first commercial ECO
    demonstration in a 50-megawatt slipstream at FirstEnergy's Burger Plant
    near Shadyside, Ohio. The project is being co-funded by a $3.5 million
    grant from the Ohio Coal Development Office within the Ohio Department
    of Development. Successful completion of this demonstration in early
    2003 will lead to the availability of full-scale commercial ECO systems
    beginning in 2005.
        As you consider compliance options for power generators to meet new
    limits on emissions of carbon and mercury, I would like to make the
    following points on the potential impact of new technology and the
    important role that regulations can play in promoting new technology:

        1. Environmental technology development is driven by environmental
    regulations. Regulatory certainty and time are important factors that
    impact the degree to which environmental technology is deployed.
        2. The cost of achieving environmental compliance is usually
    significantly less than estimated at the time regulations are
    developed.
        3. Environmental regulations are not all created equal. Some are
    more likely to spur innovation than others.
        Let me briefly address each of these points.
          Both the electric generating industry and the
    environmental technology community need long-term certainty in
    environmental regulation. For the capital-intensive electric generating
    industry, long-term regulatory certainty allows for the orderly
    improvement of generating assets without undue financial risk or threat
    to the availability of electricity supplies. For the technology
    community, regulatory certainty provides the incentive and time to
    deploy resources to develop and commercialize new technology that will
    meet the regulatory goals in the most cost-effective manner possible.
          In the process of crafting environmental legislation, the
    cost associated with the law's implementation is normally evaluated.
    These cost assessments are inevitably based upon what is known or
    commercially proven at the time. The objective of technology
    developers, however, is to make what is known and commercially proven
    obsolete. This they do on a regular and dependable basis. Therefore, it
    is important to remember that, given time, technology developers will
    ensure that environmental compliance costs are far less than predicted
    today.
          Our ECO technology could provide the environmental
    benefits of reductions in a number of air emissions, including mercury,
    years ahead of a typical regulatory schedule, and at a much lower cost
    than conventional pollution control technologies. However, the existing
    regulatory requirements significantly limit the generating industry's
    compliance flexibility, thereby making the use of lower cost, multi-
    pollutant approaches less viable.
        Air regulations traditionally limit the emissions of a single
    pollutant independent of other regulated pollutants. Thus, a plant
    owner may need to install NOx controls today, Hg controls in 5 years,
    and SO2 controls in ten. This approach does not serve the
    plant owner well, as it could require three separate outages to install
    control equipment; and it does not promote the use of more affordable
    multi-pollutant control technologies. Therefore, it is important that
    new regulations require that all regulated emissions be reduced during
    a similar, overlapping timeframe.
          Another potential problem with air regulations is that
    some reductions are made early, when credit is given for early
    compliance, and the remainder are made at the last possible moment to
    achieve compliance deadlines. While this makes good business sense for
    power generators, it puts the air pollution control industry in a feast
    or famine mode, and limits the available window to deploy new
    technologies. Therefore, I recommend a staged reduction approach for
    all new emission limits.
          Last, while there are many uncertainties related to
    mercury and carbon control technologies, one thing is certain. Until
    you require emission reductions, there will never be a commercially
    available control technology.
        The extent to which mercury and carbon reductions can be made
    without threatening the availability of electricity supplies is also
    uncertain. However, the innovative use of ratchets, circuit breakers,
    and tolls may provide a reasonable approach to achieve the best
    possible outcome. With a ratchet, emission limits are continually
    reduced as long as the cost of reduction does not exceed a preset
    limit. With a circuit breaker, a stringent emission limit is set, but
    the EPA could provide relief if the compliance cost exceeds a certain
    threshold. And the toll, which might be best applied to carbon
    emissions, assigns a cost per unit emitted and thereby results in
    predictable compliance costs while, at the same time, providing a
    financial incentive to reduce emissions. One or more of these features,
    when combined with a cap-and-trade framework, could achieve the clean
    air goals desired at the lowest cost and with the least risk.
        In summary, I believe that increasing our energy supply, and at the
    same time, improving our environment is not only possible, but also
    imperative for the future well-being of our society. Fortunately, our
    nation is blessed with an innovative and entrepreneurial spirit that
    will rise to such challenges. I believe that political leaders must
    exercise a degree of faith in order to establish the environmental laws
    that look out over a decade or more to protect public health. Given
    time and the right regulatory framework, the technology community will
    find an economical way to achieve the desired environmental benefits.
    History has demonstrated this time and again. And there are many
    companies like Powerspan full of talented individuals who are dedicated
    to this goal.

                                     ______

     Responses of Frank Alix to Additional Questions from Senator Lieberman

        Question 1. Mr. Alix, your testimony noted that your technology is
    expected to cost significantly less than other control technologies to
    reduce SO2 and NOx emissions from coal-fired power plants.
    What about the costs of reducing mercury emissions?
        Response. The ECO technology removes high levels of SO2,
    NOx and mercury (Hg) simultaneously, and therefore the costs of
    removing an individual pollutant are not easily distinguishable, as
    they are with single pollutant control technologies. The table below
    may prove helpful in understanding the estimated overall costs of ECO
    compared to the single pollutant control technologies required to
    obtain comparable emission reductions.

                       Table I: Efficiency and Capital / Operating Costs of Deploying Single Pollutant Technologies versus ECO Technology
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Separate Technologies                         ECO Technology
                                                                        ------------------------------------------------------------------------------------
                                                                                                                                          Total
                                                                                                Total    Increase                        Capital   Increase
                   Pollutant                         Technology            Percent   Capital   Capital   in Annual    Percent   Capital    Cost    in Annual
                                                                           Removal     Cost   Cost for  Production    Removal     Cost   for 500  Production
                                                                         Efficiency    (per    500 MW      Costs    Efficiency    (per      MW       Costs
                                                                                       kW)      Plant      ($mm)                  kW)     Plant      ($mm)
                                                                                                ($mm)                                     ($mm)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    SO2....................................  1. FGD....................        95%     $ 175    $ 87.5      $ 9.0         99%        --       --       ----
    NOx....................................  2. SCR....................        90%      $ 88    $ 44.0      $ 5.0         90%        --       --       ----
    Hg.....................................  3. Activated Carbon.......        80%      $ 55    $ 27.5      $ 4.5         90%        --       --       ----
                                                                                    -------------------------------            -----------------------------
                                                                                       $ 318   $ 159.0     $ 18.5                  $150   $ 75.0     $ 10.0
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Source: SO2 removal efficiency and costs based on EPA estimates. NOx removal efficiency and costs based on Northeast States for Coordinated Air Use
      Management (NESCAUM) estimates. Hg removal efficiency and costs based on Southern Company estimates. ECO technology estimates provided by the Company.

        There is no accepted manner by which to allocate the ECO costs to
    individual pollutants, as multi-pollutant control technologies are
    relatively new. However, since ECO costs are about one half of the
    combined costs of the individual control technologies required for
    equivalent emission reduction of all three pollutants, it would be fair
    to characterize Hg pollutant control costs with ECO as about half the
    estimated costs of activated carbon control of Hg. This would be true
    when the plant is utilizing ECO for reductions of SO2, NOx
    and Hg. In real dollars based on the estimates in Table I above,
    conventional Hg controls (i.e., activated carbon) would add costs of
    about 2.5 mils or $0.0025 per kilowatt-hour (kWh), and ECO costs
    allocated to Hg would be about half that cost. It is worth noting that
    the ECO system, which could provide all reductions in SO2,
    NOx and Hg required by S. 556, would only add costs of approximately 6
    mils, or about half a cent per kWh, to the cost of coal-fired power
    generation.
        There are no specific ECO costs that could be attributed to Hg
    removal alone, unless the Hg regulation requires separate disposal of
    Hg. If the Hg removed from the flue gas stream by ECO is required to be
    isolated and disposed of separately from other coal-combustion
    byproducts, then the costs associated with separate Hg disposal can be
    estimated. In this scenario, we would use activated carbon adsorption
    to remove the mercury from our liquid effluent stream prior to
    processing the effluent into a commercial fertilizer byproduct. The
    operating costs for separate Hg disposal are estimated at $1,000 per
    pound of Hg, which includes both activated carbon material costs, and
    transportation and disposal costs at a hazardous waste facility. The
    increased capital cost for the equipment required to remove Hg from the
    ECO liquid effluent is about 1 percent of the ECO costs in Table I
    above, with a similar 1 percent increase expected for overall costs.

        Question 2. Your testimony noted that environmental technology
    development is driven by environmental regulations. Could you talk a
    little bit more about that, especially in light of the proposed limits
    on 4 pollutants contained in S. 556 and the timing of those new limits?
        Response. The proposed new limits for SO2, NOx and Hg
    contained in S. 556 are strict, but I believe achievable with
    conventional pollution control technologies or ECO. While uncertainty
    exists with the cost and performance of Hg controls because they are in
    the early stages of commercial deployment, we and other Hg control
    technology developers believe that 90 percent reductions are achievable
    across the fleet without causing significant early retirement of
    existing coal-fired generating plants. Still, without a regulatory
    limit on Hg emissions, the Hg control technologies in development would
    likely never be commercialized.
        The timing of proposed new limits for SO2, NOx and Hg in
    S. 556 is too aggressive for either conventional technologies or new
    technologies. Currently, about 30 percent of existing coal-fired
    capacity has SO2 scrubbers (FGD) installed and about 25
    percent of the existing fleet will install SCRs to comply with the NOx
    SIP Call. We have modeled the reductions required by S. 556 and
    estimate that of the existing coal-fired generating capacity, 80
    percent would require FGD levels of pollution control and 75 percent
    would require SCR levels of control to meet the S. 556 limits. Our
    model assumes growth in coal-fired generation per EIA estimates, no
    existing coal-fired plants are retired, and all new coal-fired plants
    have FGD and SCR installed.
        Therefore, we assume that about 50 percent of the existing coal-
    fired fleet would have to add FGD, SCR and Hg controls, or ECO, to meet
    the S. 556 limits. In complying with existing Clean Air Act
    regulations, generating utilities have typically waited as long as
    possible to install pollution controls. Experience from this practice
    indicates that approximately 5 percent of the existing fleet can be
    upgraded with either FGD or SCR types of controls in a given year
    without jeopardizing generation reliability (i.e., having too many
    plants out of service at a time).
        Therefore, our model combined with past utility practice would
    suggest that the generating utilities need about 10 years to upgrade 50
    percent of their capacity to comply with the new limits in S. 556. Two
    years of up-front planning to begin plant modifications would also be
    required, or in total, about 12 years for compliance with limits in S.
    556. Staged implementation of the new limits is desirable, as it would
    ensure that pollution control equipment is installed over the entire
    time period. In addition, this type of long-term reduction program is
    optimum to promote the development of new technologies, because time
    and certainty are required to devote the necessary resources to develop
    and deploy new technology.
        Regarding timing and limits for CO2 controls, our
    research indicates that there is no new technology on the horizon that
    could cost-effectively reduce CO2 emissions from the
    existing coal-fired fleet. Without very substantial gains in energy
    efficiency, particularly from the transportation sector (i.e., much
    tougher CAFE standards) as an offset, the CO2 limits in S.
    556 risk causing substantial retirement of coal-fired generating
    plants, as a DOE analysis indicates. While combined-cycle generation
    based on coal gasification has the potential for significant gains in
    coal-fired plant efficiency (and consequently reduced CO2
    emissions), these plants take over 5 years to permit and build, meaning
    any shift from coal combustion to coal gasification would require
    significant time and capital.
        It is clear, however, that technology will not be developed and
    deployed to make meaningful reductions in CO2 emissions
    without some type of hard cap or economic penalty. Hard caps and
    deadlines do not always lead to the most technologically advanced
    solutions, as technology development (e.g., invention) is notoriously
    difficult to schedule. In addition, hard caps and deadlines,
    particularly those for CO2 in S. 556, may have unpredictable
    economic consequences. Therefore, a more attractive alternative may be
    an economic penalty associated with CO2 emissions, and one
    that does not discriminate on sources. For example, one could charge
    $1.00 per ton of CO2 emitted, which would add about $0.001
    per kWh to the cost of coal-fired generation (?5 percent increase),
    about half as much to gas-fired generation, and if applied to
    transportation, would add about $0.01 to the cost of a gallon of
    gasoline.
        Such modest economic penalties would nonetheless serve as a clear,
    unambiguous incentive to develop technologies that can reduce
    CO2 emissions. And the broader you apply the penalty, the
    more people and industries would be involved in developing innovative
    solutions to reduce CO2 emissions. As more becomes known
    about the capabilities of technology or the climate change consequences
    of CO2 emissions, the penalty amount could be increased or
    decreased, or a cap could be instituted at much lower risk. The total
    cost of such economic penalties on GDP could be accurately estimated,
    as well as the specific burden to any industrial or consumer segment of
    the economy, so the economic uncertainty with the regulation would
    largely be eliminated.
        As with other emission reducing regulations, time is required to
    produce the best results. As a potential starting point, I would
    suggest a $1.00 per ton CO2 emission penalty beginning in
    2005, $2.00 per ton in 2010, $3.00 per ton in 2015 and $4.00 per ton in
    2020. An increasingly stringent penalty would give technology
    developers a big, long-term target, so that resources (people and
    money) could be deployed to develop the best new solutions. This type
    of environmental regulation is best suited to promoting technology
    development.
                                   __________
    Statement of George R. Offen, Manager, Air Emissions and Combustion By-
                            Product Management, EPRI
        Mr. Chairman and members of the subcommittee: Thank you for
    inviting EPRI to address the Senate Committee on Environment and Public
    Work's Subcommittee on Clean Air, Wetlands, and Climate Change on the
    important subject of mercury reductions from power plants. I am George
    Offen and I manage EPRI's programs in air emission reductions and the
    beneficial use of combustion by-products. EPRI was established nearly
    30 years ago as a non-profit, collaborative R&D organization to carry
    out electricity-related supply, delivery, end-use, and environmental
    R&D in the public interest. EPRI has been supported voluntarily since
    our founding in 1973. Our funders include electric power companies
    responsible for over 90 percent of the electricity sold in the US as
    well as over 60 companies worldwide. We also cooperate closely with
    government agencies in our research programs, including EPA and DOE.
    EPRI operates as an independent technical organization maintaining
    access to and engaging the best technical talent in the world, and I am
    both pleased and honored that you have selected two excellent examples
    from this community of experts to be co-panelists this morning.
        For well over a decade, EPRI has been conducting research on all
    aspects of this environmental concern, from emission source
    characterization and atmospheric processes that transport, change, and
    eventually deposit some of the emitted mercury onto land and water
    bodies to the processes that allow the mercury to end up in fish and
    the health effects of eating fish containing different concentrations
    of mercury, to the search for methods to reduce mercury emissions from
    power plants. My remarks will address just the last topic, presenting
    you EPRI's conclusions on today's state-of-the-technology in mercury
    control. This written statement is supplemented by an updated version
    of a viewgraph presentation to staff of several members of the
    Environment and Public Works Committee in an informal briefing on
    October 17, 2001.
        I just emphasized the word today because our understanding of the
    technology is changing, often dramatically, on a daily basis. In March,
    I would have said that the addition of selective catalytic reduction
    (SCR) for NOx control would improve the capture of mercury by an
    SO2 scrubber for plants equipped with these devices. Now I'm
    not so sure. Up until October, I would have said that you need to
    inject large amounts of activated carbon into the flue gas of a boiler
    equipped with an electrostatic precipitator in order to capture even 30
    percent mercury, but that you could theoretically capture over 70
    percent of the mercury by injecting even larger amounts of carbon--
    neglecting the impacts that such large amounts of carbon would have had
    on the particulate collection device (electrostatic precipitator, ESP)
    and ash. Now, we think you can capture 30 percent of the mercury with
    much smaller amounts of carbon addition, but may never be able to
    exceed 50-70 percent capture in this configuration. Finally, all the
    data we have are short-term, mostly instantaneous snapshots in time,
    and in all cases no more than 7 days of sustained operation. One 7-day
    test showed that we could get up to 95 percent capture on a given day
    and hour but could only sustain 78 percent average over the whole week;
    we do not know if we could sustain that level over a month or a year.
    Clearly, there is a desperate need for more long-term, full-scale tests
    to resolve these uncertainties. EPRI thinks 20 such field tests are
    needed, and these should and could be conducted in the 2003-2005
    timeframe in a public/private collaboration. EPRI is committed to
    seeking and coordinating the private partners for such a collaborative
    effort.
        What do we believe is attainable today? 10-99 percent from existing
    particulate and SO2 controls, depending largely on the fuel
    and air pollution controls. If we focus on units with the most common
    air pollution controls, the range is more like 40-80 percent mercury
    reduction. As a reminder of the percent reduction math, to achieve a
    total of 90 percent capture, these units would need to add supplemental
    technology capable of reducing mercury by an additional 50-83 percent.
        As implied, we believe that it is premature to rely on the
    combination of SCR and SO2 scrubbers to capture mercury.
    Tests on young catalysts do show benefits if enough catalyst is used--
    about twice as much as would be required to achieve NOx reduction
    requirements. However, we now have two tests showing a near total loss
    of benefit after several thousand hours of operation at units firing
    the popular western low sulfur coal called Powder River Basin, or PRB.
    EPRI, in collaboration with DOE and EPA, plans to revisit during 2002
    and 2003 the sites that were tested in 2001, as well as to conduct
    laboratory and pilot-scale tests throughout the year, to resolve this
    uncertainty.
        If additional reductions are deemed necessary beyond those that
    will be realized by controls for particulates, SO2, and,
    maybe, NOx, the most likely choice in the near term would be the
    injection of activated carbon ahead of a particulate control. My co-
    panelists will (have) describe(d) results from two of the three full-
    scale tests conducted to date--the only full-scale tests of mercury
    controls on power boilers in the world; the third was an EPRI project
    on a small eastern bituminous fueled boiler equipped with an ESP that
    found similar results.
          Based both on these few results and our many smaller-
    scale studies, EPRI's tentative assessment is that activated carbon
    injection ahead of an ESP should be able to provide 50-70 percent
    mercury reduction, depending on the size of the ESP. EPRI and DOE are
    actively discussing possible tests in 2003 on representative small
    ESPs. Again, the ability to sustain this level over the long-term is
    unknown, and the addition of activated carbon to fly ash will make it
    expensive, if not impossible, to use the ash in concrete--the largest
    volume user of fly ash.\1\
    ---------------------------------------------------------------------------
        \1\ Replacing Portland cement with fly ash reduces CO2
    emissions by nearly one ton for every ton of cement replace.
    ---------------------------------------------------------------------------
          Activated carbon injection at a site with a conventional
    baghouse should provide 90 percent removals, or maybe somewhat more on
    an instantaneous basis. However, there is no experience to tell us if
    this level can be sustained. The unknown is whether the added fine
    carbon material will cause the resistance across the bags (called
    pressure drop in engineering terms) to increase too quickly. In the
    COHPAC configuration (compact baghouse--similar to a few thousand
    vacuum cleaner bags side-by-side--added after the ESP, and with
    activated carbon injected between the ESP and COHPAC unit), the 7-day
    test suggests that this configuration can achieve about 80 percent
    mercury removal at a unit where the baghouse is sized for particulate
    control. At a cost penalty, 90 percent reduction might be achievable
    with a larger COHPAC design, again with the uncertainty on sustainable
    operation. Here, too, EPRI and DOE are discussing a joint long-term
    evaluation at the COHPAC unit that was tested last year.
        I have not yet referred to cost. In brief, capital costs range from
    a low of $1-3/kW for injection ahead of an ESP to as much as $45/kW for
    a COHPAC unit (e.g., one-third to one-half the cost of an SCR). Costs
    for the activated carbon could be around 2 mills/kWh (5M/yr
    for a 500 MW plant) with an ESP and about one-fifth that amount with
    COHPAC (see the back-up material). None of these figures include
    potential impacts--a need to enlarge the ESP to handle the added
    carbon, more frequent bag replacement, loss of ash sales, or other
    unknown impacts that could appear with longer term operation.
        What can we expect in the future? In a nutshell, many more options.
    They will try to provide lower cost options than carbon injection,
    methods for taking advantage of the SO2 scrubber, solutions
    for applications where carbon injection would be impractical, and/or
    methods that do not produce a waste. Many firms and institutions--
    including EPRI and, of course, DOE--are actively engaged in this
    challenge. While some of these processes are quite innovative and look
    very promising, all are still in the early stages of development. The
    recent experience with a simple add-on to an SO2 scrubber
    for NOx reduction, however, does remind us that the path to
    commercialization can have many barriers. In addition, the experience
    with new technology across all industries tells us that the costs of
    the commercial systems will be several times greater than the initial
    projections. Equally important, this experience has shown that the cost
    of the ``nth'' installation can be reduced significantly if incentives
    and implementation timetables are managed in a way that allows rapid
    feedback from the initial experiences into the final designs. As with
    carbon injection, multiple long-term, full-scale field tests will
    eventually be required to determine the sustainable performance and
    costs of these emerging technologies.
        In summary, about 40 percent of the potential mercury emissions are
    being removed now by air pollution controls already in place across the
    electric power industry (more if one considers the mercury removed
    during coal cleaning), and further reductions are expected as
    additional NOx and SO2 controls are added to meet current
    regulatory programs. Activated carbon injection, if applied today,
    could be expected to capture about 50-90 percent of the potential
    mercury emissions, but a number of long-term, full-scale tests are
    needed to determine its ability to sustain these reduction levels;
    associated costs and impacts also need further study. Emerging
    technologies offer the promise of lower cost and solutions for
    difficult plant configurations. However, recognizing this promise will
    require substantial research investment, and, thus, we cannot predict
    availability dates, performance, and final costs until the research is
    further along.
        Thank you, again, for giving EPRI the opportunity to provide these
    comments.
                                   __________
        Statement of James Childress, Executive Director, Gasification
                              Technologies Council
    Introduction
        The Gasification Technologies Council wishes to submit this
    statement regarding the opportunities that Integrated Gasification
    Combined Cycle (IGCC) power plants offer coal based electric power
    generators to meet more stringent SO2 and NOx emissions
    standards as well as possible new limitations on carbon and mercury
    emissions.
        The Council's member companies own, operate or provide
    technologies, equipment or services to plants that account for more
    than 95 percent of the world's gasification capacity.
        This summary statement is based upon technical papers, studies and
    data available on the Council's web site--http://www.gasification.org.
    Gasification is a Commercially Proven Technology
        Gasification is a widely used, commercially proven technology.
    Today there are approximately 130 gasification plants in operation
    around the world with some 35 additional facilities in various stages
    of development, design and construction. When all of these plants are
    operating they will have the capacity produce the energy equivalent of
    750,000 barrels per day of clean gas for use in power generation as
    well as for the production of fuels and chemicals. In the United States
    there are 20 gasification plants in operation producing a variety of
    products including electricity; at least one-half again that many are
    in the pipeline.
        The commercial value of gasification is based on its strong
    environmental performance and its ability to convert a variety of low-,
    or negative-value feedstocks such as coal, petroleum coke and other
    petroleum residues, and waste materials into commercial products. The
    greatest level of interest in the United States today, and the focus of
    this statement, is in the use of modern, high temperature gasification
    technologies in IGCC power plants to produce clean gas for generation
    of electricity. This application accounts for more than 90 percent of
    planned new U.S. gasification capacity.
    The Gasification Process is Inherently Clean
        Gasification is a process technology that reacts coal and other
    carbon-containing materials at high temperature and pressure under
    controlled conditions that convert the coal into a ``synthesis gas''
    (syngas). The syngas is composed primarily of carbon monoxide, hydrogen
    and carbon dioxide and can be burned to recover its energy value or,
    using other commercial processes, converted into a variety of chemicals
    and fuels.
        An IGCC plant is generally configured with a gasifier, oxygen
    plant, gas cleanup system(s) and a high efficiency combined cycle power
    island. Most commercially available systems can range in size from 250-
    300 megawatts of capacity to more than 1,000 megawatts, using multiple
    gasifiers.
        During the gasification process, the syngas is cleaned of
    particulates, sulfur and other potential pollutants using proven,
    commercially available processes. The sulfur is recovered in its
    elemental state or as sulfuric acid, both widely traded commodities.
    The temperature of the gasification process turns ash and other inert
    material in the feedstock into a molten liquid that, when cooled, is an
    inert, non-leaching, sand-like material--called frit or slag--that has
    construction uses. If the frit is landfilled, it exhibits none of the
    leaching characteristics of scrubber wastes from conventional
    pulverized coal (PC) plants that can cause water pollution problems.
        At the end of the process, a modern, high temperature slagging
    gasifier provides a clean gas that can be sent to a highly efficient
    combined-cycle power block without the need for post-combustion
    emissions controls. This obviates the need for baghouses, scrubbers and
    other ``end of the pipe'' cleanup methods used on PC plants that
    generate large volumes of wastes and reduce plant efficiency. It also
    reduces significantly the size of equipment needed for removal of
    sulfur, particulates, and other potential pollutants.
    IGCC Criteria Pollutant Emissions Are Well Below Even Newest PC Plants
        Because the syngas is cleaned prior to combustion, criteria
    pollutant emissions for a coal-based IGCC plant are well below those of
    even the most modern pulverized coal plants with post combustion
    cleanup.
              Figure 1. Air Emissions for Coal-Based Power Plants

        The chart above compares air emissions from three coal-based power
    plants. It illustrates the actual 1998 emissions for an IGCC plant that
    began operating in 1995 (IGCC 1998). Its emissions of SOx and NOx are
    below those of a new, ``state-of-the-art'' PC plant (described as the
    ``cleanest coal plant of its size east of the Mississippi'') being
    proposed to startup in 2006 (PC 2006).
        The next generation of IGCC employing the same technology (IGCC
    2006), but reflecting improvements made through actual operating
    experience, will have SOx emissions that are only 13 percent of those
    of the PC plant and NOx emissions that are 50 percent lower.
    IGCC Provides Cost-Effective Mercury Emissions Reductions
        An IGCC plant will also have a significant economic advantage over
    a PC plant if limitations on mercury emissions are placed on coal-based
    power generation. Because the gasifier operates under high pressure,
    the syngas stream is compressed to a volume that is approximately 1-2
    percent that of the post-combustion flue gas from a similar-sized
    pulverized coal plant. This concentrates the mercury in the syngas,
    making its removal less costly and more efficient than doing so from
    the much larger volume of flue gas of a PC plant.
       Figure 2. Cost of Mercury Removal from Coal-Based Power Generation

        A recently completed economic analysis by the Department of Energy
    found that, to achieve 90 percent removal of mercury from the syngas,
    the cost to remove a pound of mercury in a coal-based IGCC plant using
    an activated carbon bed is less than one-tenth the cost of removing the
    same amount from the flue gas of a PC plant.
        Mercury removal from coal-based syngas is being practiced
    commercially today. Removal of mercury from the flue gas of a PC plant
    is still in the R&D phase and may not be commercially available for
    years.
    IGCC Can Reduce Carbon Dioxide Emissions from Coal-Based Power
            Generation
        Carbon dioxide emissions from an IGCC plant are typically 15-20
    percent below those of a comparably sized PC plant because of the
    IGCC's greater efficiency. If additional CO2 emissions
    reductions are required, an IGCC plant can be configured to convert
    most of the carbon in the syngas into CO2. The fuel for the
    combustion turbine then becomes mostly hydrogen and water. The
    concentrated CO2 in the pre-combustion gas stream can be
    captured. In a PC plant CO2 capture is post-combustion, more
    costly and inefficient.
    Conclusion
        Gasification is a proven technology, being widely practiced
    commercially in the United States and around the world. Integrated
    Gasification Combined Cycle Power Generation is the cleanest, most
    efficient means of generating electricity from coal. Because
    gasification technologies are inherently clean, an IGCC reduces
    criteria pollutants to levels not economically achievable in pulverized
    coal plants. Mercury and carbon emissions reductions are also available
    if limitations on these emissions are required.
                                   __________
                                Natural Gas Supply Association,
                                                     November 14, 2001.

    Hon. James M. Jeffords, Chairman,
    Committee on Environment and Public Works,
    U.S. Senate,
    Dirksen Senate Office Building,
    Washington, DC 20510.

    Dear Mr. Chairman: Our two trade associations, the Natural Gas Supply
    Association and the Interstate Natural Gas Association of America,
    represent both natural gas producers and interstate pipelines. We are
    proud that natural gas has been used for over 130 years to heat our
    homes, cook our food, and provide comfort to residential customers. We
    are equally proud that natural gas plays an important role in our
    future energy needs. Today, U.S. companies are spending hundreds of
    millions of dollars developing 21st century electricity generating
    technology based on natural gas because it is clean, domestic, reliable
    and efficient. The market, not the government, has decided that we need
    to move forward to improve our energy security by using natural gas to
    replace our aging electricity infrastructure.
        We applaud your efforts to clean up power plants using a market-
    based trading program that allows flexible implementation. We are also
    writing to respond to some accusations that were made about the natural
    gas industry in a letter to you, from several labor leaders, dated
    October 24 of this year.
        We want to challenge the notion, implied in the labor letter, that
    the U.S. power generation industry is becoming too dependent on natural
    gas. This statement is disingenuous, given the nation's dependence on
    coal--not natural gas--to generate 51 percent of its electricity. And
    that reliance is even greater in certain regions of the country, such
    as the Midwest, where coal-fired generation is 75 percent of total
    generation (some states depend on coal for as much as 99 percent of
    total generation). Natural gas-fired generation, on the other hand,
    accounts for only 15 percent of the market nationwide.
        We agree with the labor leaders that fuel diversity is an important
    public policy goal. It is true that natural gas is the leading fuel
    source of new generation units, but even after all these natural gas
    units are built, coal will still dominate the electric generation
    market. In other words, in moving to natural gas the market is
    diversifying away from coal's inferior environmental performance.
        Furthermore, less than 10 percent of all new natural gas-fired
    plants will operate as baseload facilities. And many of these new
    baseload plants are replacing older inefficient natural gas-fired
    plants, not replacing coal.
        We do have enough natural gas to meet future demand. According to
    the National Petroleum Council Study titled ``Natural Gas, Meeting the
    Challenges of the Nation's Growing Natural Gas Demand,'' the natural
    gas resource base in the lower 48 states is 1,466 Trillion cubic feet.
    At current consumption levels this is enough natural gas to last us 77
    years. Similar conclusions were reached by the Gas Technology Institute
    and Energy Information Administration. In addition, Canada has
    substantial reserves and provides the United States with over 15
    percent of our natural gas. And liquefied natural gas is becoming an
    increasingly important part of our supply and may grow from less than 1
    percent today to over 5 percent in 2005. When combined, all of these
    factors show that the United States has a robust natural gas supply
    that will continue to meet our energy needs today and in the future.
        We also need to respond to the statement that the natural gas
    delivery system is not up to the job. Quite the opposite. While it is
    true that significant natural gas pipeline and distribution expansions
    are needed in order to keep up with anticipated demand, those
    expansions are currently taking place at an unprecedented level. The
    natural gas pipeline industry expects to spend $4.5 billion per year
    between now and 2015, just on new pipeline expansions. We can, and are,
    meeting the challenge. The current delivery system is more than
    adequate to meet demand, and we will take the steps necessary to
    continue that level of performance.
        We appreciate the opportunity to set the record straight. Natural
    gas is an important component in meeting your goal of lower power
    plants emissions. With our brethren in the coal, nuclear and renewable
    communities, we can meet the challenge of providing low-cost, reliable,
    clean electricity.
                Respectfully,
                                    R. Skip Horvath, President,
                                        Natural Gas Supply Association.

                                Jerald V. Halvorsen, President,
                         Interstate Natural Gas Association of America.
                                   __________
                                    Governor John A. Kitzhaber,
                                                       State of Oregon,

                                           Governor Gary Locke,
                                State of Washington, November 14, 2001.

    Hon. James Jeffords,
    Hon. Bob Smith,
    Dirksen Senate Office Building,
    U.S. Senate,
    Washington, DC 20510.

    Dear Senators Jeffords and Smith: Washington, Oregon and other western
    states have been assessing the concepts and implications of national
    multi-pollutant legislation. Discussions have been occurring in many
    forums including the Western Regional Air Partnership (WRAP), Western
    States Air Resources Council (WESTAR), between neighboring states and
    within individual states. Although these discussions have been valuable
    and some principles seem to be emerging, at this point there is not a
    ``western'' consensus on the appropriate scope or design of such
    legislation. We are writing to share our perspective and urge you to
    consider the following in crafting multi-pollutant legislation for
    utilities and industrial boilers.
        While we see merit in the concept of multi-pollutant legislation,
    we cannot support any version of this legislation that would force our
    states to suffer air quality degradation, and we could not support
    legislation that would exclude us from receiving a reasonable share of
    the projected air quality benefits. Further, we oppose any multi-
    pollutant legislation that establishes an emissions trading program in
    lieu of existing pollution control requirements for utilities and other
    industrial boilers, unless such legislation includes safeguards to
    ensure protection for public health and the environment.
        Presently, we rely on New Source Review, New Source Performance
    Standards, Maximum Achievable Control Technology, and other existing
    programs to ensure that new and modified industrial facilities are well
    controlled. If these programs are replaced with a cap-and-trade
    approach, the cap and trading procedures must ensure that new and
    modified facilities achieve, on average, significantly better levels of
    pollution control in the west than they would achieve under existing
    programs. In particular, the legislation should ensure that national
    trading does not penalize western utilities nor interfere with progress
    in meeting air quality goals in the west.
        In addition, it is very important that the legislation does not
    prevent more stringent state requirements if needed to meet ambient
    standards, protect public health or solve other local air quality
    problems. Older and dirtier power plants and boilers should not be
    allowed to indefinitely trade out of more stringent controls. Although
    timelines for compliance would not necessarily have to be the same, any
    national program should provide an emissions ceiling for each type of
    affected facility based upon the available technology. Such an
    emissions ceiling would serve as a uniform maximum emission rate or
    backstop to the cap-and-trade program and help to prevent the
    occurrence or continuation of more localized pollution problems.
        Western states and tribes are working hard to meet the requirements
    of the Environmental Protection Agency's Regional Haze rule. States and
    tribes, through WRAP, have developed a set of emission milestones and a
    contingency emissions trading program for major industrial sources of
    SO2--including utilities and boilers--to reduce haze on the
    Colorado Plateau. We are comfortable with the agreement reached
    regarding the Colorado Plateau. The WRAP is working to expand this
    program to include additional western areas and to address nitrogen
    dioxide emissions. It is important that any national multi-pollutant
    legislation for utilities and boilers builds upon the WRAP's program.
        However, because the multi-pollutant legislation would potentially
    address a much larger set of air quality concerns (ozone, acid rain,
    global climate change, eutrophication, fine particulates, mercury
    contamination) beyond just regional haze, the WRAP's work should not be
    viewed as a substitute for--or the western version of- the national
    legislation. In addition, any national program should consider the
    unique concerns of economic fairness that have been expressed by tribal
    governments.
        When crafting your legislation, we urge you to consider the unique
    air quality conditions of different regions of the country but also be
    cautious to not exacerbate equity concerns between states, tribes,
    affected industries and regions.
        Thank you for your consideration of these important issues.
                Sincerely,
                                        John A. Kitzhaber, M.D.
                                                    Governor of Oregon.
                                                    Gary Locke,
                                                Governor of Washington.

                                CLEAN POWER ACT

                                  ----------

                            WEDNESDAY, JUNE 12, 2002

                                           U.S. Senate,
                     Committee on Environment and Public Works,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:38 a.m. in room
    406, Dirksen Senate Building, Hon. James M. Jeffords [chairman
    of the committee] presiding.

               BENEFITS AND COSTS OF MULTI-POLLUTANT LEGISLATION

        Present: Senators Jeffords, Bond, Smith, Voinovich, Chafee,
    Graham, Wyden, and Lieberman.

    OPENING STATEMENT OF HON. JAMES M. JEFFORDS, U.S. SENATOR FROM
                          THE STATE OF VERMONT

        Senator Jeffords. The committee will come to order.
        Today, we will take another look at the benefits and cost
    of multi-pollutant legislation and the Clean Power Act. This is
    a busy morning in the Senate and we have many witnesses, so I
    will ask that everyone try to keep their opening statements to
    5 minutes. That will give us plenty of time for questions.
        So far in this Congress, the committee and subcommittee
    leaders have tried twice to reach an agreement on principles
    for action on multi-pollutant legislation. Both times policy
    announcements by the White House interrupted that process but
    we cannot afford to let the momentum die there without further
    action. This is too important to the public health and the
    health of the planet.
        Given the testimony the committee has received at many
    hearings on the problems of acid rain, mercury contamination,
    global warming, and ozone pollution, it is our responsibility
    to act and our duty to lead. There is no time for delay.
    Working together we can move a strong pollutant bill through
    the committee and the Senate this year. Unfortunately, there
    appears to be little interest in moving any kind of multi-
    pollutant legislation in the House and we are still awaiting
    the Administration's legislative proposal on their three fee
    approach. So to maintain some momentum on this critical issue
    and without any counterproposal to the Clean Power Act which
    could make for fruitful discussion, the committee will proceed
    to mark up S. 556 at the end of this month. That leaves us with
    about 40 or less working days in the Senate to get it done. I
    am an optimist so I don't think we will need a lame duck
    session to finish it. At least, I hope not.
        In January of last year, EPA gave information to the
    committee about the cost of the bill similar to the Clean Power
    Act. That estimate included the renewable portfolio standards,
    RPS, similar to now what is in the Senate Energy Bill. EPA came
    up with a $14.5 billion incremental cost above business as
    usual and conservative benefits of $75 billion annually. The
    cost due to the RPS was about $3 billion. EPA said that a
    comprehensive approach covering all four pollutants would cost
    approximately $11.5 billion in the 2010. Addressing them in
    piecemeal fashion would cost closer to $16 billion annually.
        People may question these numbers as they do all modeling
    exercises but I use them just to show that there is one or more
    scenarios in which a four-pollutant bill costs less than
    dealing with each pollutant independently. Some advise taking
    that less efficient route and dealing with three pollutants
    now, leave carbon dioxide for later action but there is no
    perfect way to predict how the future technology will unfold.
    Utilities today do a far more cost effective job in reducing
    sulfur dioxide under the 1990 amendments than anyone expected.
    That happened because Congress changed the investment dynamic
    and the future. That is what we must do again in this
    legislation.
        It wasn't in our national interest in 1990 to let acid rain
    and its health threatening precursors rise unchecked. Now, it
    isn't in our national interest to let carbon dioxide emissions
    rise 43 percent by the year 2020 as projected in the
    Administration's Climate Action Report. The potential
    consequences are just to serious. Some cost estimates are $100
    to $300 billion annually in the year 2060.
        We have an opportunity to change the future. Our actions on
    this matter can positively affect investment for decades to
    come. Plants built to the performance standards we will set out
    in this legislation will last for more than 40 years if the
    current fleet is any indication. We cannot afford not to be
    ambitious.
        I am pleased to welcome Congressman Kucinich, who is here.
        I will now yield to the Senator from New Hampshire.

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

        Senator Smith. Thank you very much, Mr. Chairman.
        I know this is an issue that you and I share a deep
    commitment to and I really appreciate you calling this hearing.
        A couple of years ago, I began a process as chairman of a
    committee with all stakeholders on this issue to begin the goal
    of trying to achieve bipartisan consensus to reduce emissions
    and to provide the National with cleaner, healthier air. It was
    very clear to me as we held those meetings that without any
    bipartisan consensus on the issues we agree on, it would be
    very difficult to pass legislation on the Senate floor.
        I think back to MTBE which with your help we passed this
    committee, brownfields last year, the restoration of the
    Everglades, and there were many, many differences but what we
    kept the common ground on the issues where we agreed and moved
    the legislation forward and kept that bipartisan consensus even
    though on some cases people on the left would want more in or
    out in some cases on the right, I would want more in or out; we
    kept it on common ground and stayed with the approach and were
    successful. I am proud of that. Providing clean, healthy air is
    no different. This is a worthy goal.
        It is amazing and may not seem obvious but with one
    exception, we are not that far off. The exception is carbon.
    There is a difference of agreement, difference of opinion on
    carbon but other than that, the Democratic proposal, your
    proposal, and the President's proposal, are very similar and
    will dramatically reduce unhealthy emissions. I would hope we
    don't let our disagreement on carbon stop us from moving
    forward on the common ground that we have.
        Let me make an observation. I think prior to the election
    of President Bush, if somebody had said he would come forth
    with a proposal to reduce by 70 percent NOx, SOx and mercury
    from our Nation's power plants, we probably would have heard
    howls of disbelief from the other side, but that has happened.
    Now we are hearing howls that it is not enough.
        We are working closely with the White House to make this
    effort a success. Senator Voinovich has just been tremendous in
    his support as we have worked together. Even though we have
    differences in my State and his State in terms of the air
    problems, we have worked together as I have said many times in
    this committee with a company from New Hampshire, New Durham
    Power Span, working with a utility in Ohio to reduce NOx, Ox,
    and mercury and having tremendous success. I commend you,
    Senator Voinovich, for your cooperation on this with me.
        We do need to have an honest discussion, Mr. Chairman, on
    the clear skies initiative. I have told the President that to
    me it is a starting point that would get us into the debate
    which is why I support bringing this initiative forward. If we
    do, I am optimistic that we will get a bipartisan consensus.
    The proposal will do the job, the Clear Skies proposal will do
    the job that it was designed to do, reducing emissions. I
    think, with all due respect, it will do it faster and cheaper
    than current law. It is worth just taking a brief comparison
    with the President's proposal with Senator Jeffords' bill.
        This chart shows the reductions of SO2 under the
    Jeffords proposal and the President's proposal. The red is
    Clear Skies and the dark is the Jeffords proposal. As you can
    see, when we get down to 2020, they are very close. So it is
    not so far apart that we can't reach some consensus if that is
    the difference where those two come together. I just want to
    point out that in the end, Clear Skies calls for a 73 percent
    reduction and Jeffords calls for 79 percent reduction, so we
    are talking about 6 percent in the year 2020.

        Senator Smith. The second chart that I have relates to
    nitrogen oxide emissions, NOx. Again look at the comparison in
    2020, the President's proposal reduces the emissions by 67
    percent and Senator Jeffords' proposal by 70 percent. So
    clearly, there is enough common ground that we could work a
    compromise on that one.

        Senator Smith. We don't have any particular charts for
    mercury, however, as I mentioned some of the new pilot projects
    that are going on, there are some dramatic reductions in
    mercury being done by some of the new technology. So when it
    comes to the protection of public health, Clear Skies and S.
    556 are close enough that we can find the common ground we
    need.
        Currently, EPA estimates that 305 counties failed the new
    ozone standards and 140 failed the new soot standards. Under
    Clear Skies, both of these numbers dropped to 27 counties. That
    is a pretty big gain in healthy counties under the President's
    proposal. Under Senator Jeffords' proposal, it drops to 21.
    There again, we are very, very close, similar results.
        If there is a major difference between the two proposals, I
    think it is cost. That is something I hope we can look. While
    the reductions in emissions are similar under Senator Jeffords'
    proposal, there is a greater burden on the economy and more
    important than the cost is the effect on our national security.
    We have 460 years worth of coal reserves in this country versus
    65 years worth of natural gas. Let me say that again, depending
    on the estimates you use, but certainly 300 to 400, a minimum
    of 300 depending who you talk to, it might be 460 years of good
    coal reserves and 65 years of natural gas.
        Now, look at the fuel mix under this chart. S. 556 would
    cause fuel switching from coal to natural gas. You can see in
    the first chart where it says coal, second is natural gas and
    natural gas spikes and coal goes down. So we are not keeping
    that diversification that we have had in our fuel mix for
    sometime. We are taking a dramatic turn in the fuel mix and
    taking natural gas, which is somewhat limited, and coal, which
    is much more prevalent.

        Senator Smith. I respect your commitment, Mr. Chairman. I
    have no issue here with that, but I hope we can move toward
    energy independence and not increase our dependence on foreign
    sources which I think would ultimately happen.
        I think there is one more chart on the cost and then I will
    wrap up here. Coal is abundant and cheap. It needs to be
    cleaner and we are doing a lot to do that. If you can see here,
    the green is the cost, the Clear Skies Initiative is in the
    middle with $6.4 billion, cleaning up the emissions that are
    out there and $17 billion under S. 556. So it is almost triple
    the cost.

        Senator Smith. I know that Senator Jeffords' cost proposal
    does have carbon in the mix, to be fair, and that is correct,
    but even if you take out carbon, the Jeffords proposal is still
    about 55 percent more expensive.
        Let me conclude on the issue of carbon. No bill that
    includes a mandatory carbon piece is going to pass the U.S.
    Senate, whether we like it or not. So I would say, Mr.
    Chairman, let us pass a bill that will reduce three emissions
    dramatically, come to an agreement and then let the Senate work
    its will, if we need an amendment or whatever. If the Senate
    passes it, it passes it; if it rejects it, it rejects it. The
    point is we can then move to a further discussion of carbon
    later on.
        During the debate on the energy bill a couple of months
    ago, three times the Senate voted against carbon limitations.
    It is worth nothing they were bipartisan votes; it is not going
    to pass. It is too important to have us get bogged down because
    of this one issue where we have some dramatic disagreements.
    The fact is mandatory carbon caps will kill an emissions
    reduction bill. I do not want to kill an emissions reductions
    bill. I do not see any reason why, if we disagree on carbon, we
    should continue to inhale more mercury, more NOx and more SOx
    over the next 20 years. It makes no sense to me.
        If we care about the health of our children, care about the
    cleaner air, let us do the right thing and go forward where we
    agree and fight over what we do not agree on. Why fight over
    what we do not agree on and not move forward with what we do
    agree on. I am the first to admit, I did not get everything I
    wanted in the brownfields bill. I voted against amendments
    right here in this chair that I supported because I knew if we
    passed them, it would have broken the compromise and right now
    we are cleaning up brownfields all over America.
        I will accept my fair share of the blame for it in the
    sense that we kept brownfields locked in with Superfund, we
    could not get Superfund reformed for 20 years, so all the
    brownfields were becoming Superfund sites and nobody was
    cleaning them up. We took it out, we passed it and that is what
    we need to do here.
        I did not get everything with MTBE either. The guys in the
    ethanol industry got more than I wanted them to have but I
    needed to get MTBE out of the water in my State and we
    accomplished that with the legislation that passed that is now
    part of the energy package.
        I think, Mr. Chairman, I would ask you, let us work
    together to pass a bill that makes our air cleaner and
    healthier and one we know can we signed into law. I think that
    would be bipartisan on the three emissions I spoke of.
        Thank you.
        Senator Jeffords. Senator Graham.

      OPENING STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR FROM THE
                            STATE OF FLORIDA

        Senator Graham. Thank you, Mr. Chairman.
        I have an opening statement I would like to file for the
    record and just a few comments.
        [The prepared statement of Senator Graham follows:]
      Statement of Hon. Bob Graham, U.S. Senator from the State of Florida
        Thank you, Mr. Chairman, for calling this hearing today. There is a
    lot of information before this committee regarding multi-pollutant
    legislation. Today's hearing provides the much-needed opportunity for
    this committee to obtain more information on this complex issue and to
    take a closer look at the details of proposed legislation.
        Preserving and protecting the environment is vital for both the
    physical health and economic health of our nation. This is dramatically
    illustrated in my homestate of Florida where our economy is linked with
    our environment. It is our beaches, parks, and other places that fuel
    our No. 1 revenue generator--tourism.
        Balanced with the need for a clean and healthy environment is the
    need for affordable and reliable energy.
        This morning's hearing will provide the Environment and Public
    Works Committee the opportunity to weigh all of these interests and
    find the best way to make progress in each area. I have reviewed the
    written testimony of today's witnesses, and I look forward to hearing
    what they have to say this morning. Thank you, Mr. Chairman.
        Senator Graham. I think the issue of science has now been
    resolved. I found the EPA study that was submitted as the
    United States official document to the United Nations to be
    compelling and it is consistent with the vast majority of
    science on this issue over the past decade.
        The question today is also not one of whether we are going
    to take action on that science. I happen to have a parochial
    stake in this. If the science in the EPA study is correct, and
    I think it is, a good section of my State will be under water
    three generations from now. So we have an immediate concern
    about whether we are going to act on this. Are we going to act
    on it like the Dutch and build walls around our coastal areas
    in order to protect the dry land or are we going to take a more
    global perspective of how we are going to defend ourselves
    against rising seas and the other consequences of a warming
    clime?
        This is also a generational issue. Which generation is
    going to face the matter? We have the option of deferring it to
    our great grandchildren to face and there are many attractive
    reasons to let the great grandchildren deal with the
    consequences as opposed to our generation. I think that would
    be generationally irresponsible. We can do it today without the
    kinds of severe threats of dislocation that our great
    grandchildren are going to face and at considerably less cost
    than it would be to them if we defer this matter for a century
        The issues I am going to be interested in hearing about
    today are what are the consequences of a generational shift of
    this forward to our great grandchildren, what would be the cost
    to them as opposed to the cost to us today, what are the
    dislocations of that generational movement of responsibility,
    and what will be the consequences to the United States in its
    role of leadership to the world as the only power with the
    combination of economic, cultural, political and military
    influence that we have essentially saying this is an issue that
    we will consciously elect to forget.
        I look forward to the testimony, Mr. Chairman.
        Senator Jeffords. Thank you.
        I will interrupt here briefly to note that we have six
    members of the committee present, including two from the
    minority. Pursuant to Committee Rule No. 2, this constitutes a
    quorum for the purpose of approving a committee resolution
    which is I think agreeable. Pursuant to Committee Rule No.
    1(d), I now make a motion that the committee resolve to conduct
    a closed hearing on the top of nuclear security. This will be a
    classified hearing which it will be necessary that matters
    disclosed are kept secret in the interest of the national
    defense. The hearing date and location will be the subject of
    an official committee notice in the near future. Is there a
    second to the motion?
        Senator Smith. Second.
        Senator Jeffords. All those in favor, say aye.
        [Chorus of ayes.]
        Senator Jeffords. Opposed?
        [No response.]
        Senator Jeffords. The ayes have it and the motion is
    adopted.
        I am sorry, but we have to have a roll call vote on this.
    The Clerk will call the role.
        The Clerk. Mr. Baucus?
        [No response.]
        The Clerk. Mr. Bond?
        Mr. Bond. Aye.
        The Clerk. Mrs. Boxer?
        [No response.]
        The Clerk. Mr. Carper?
        Mr. Carper. Aye.
        The Clerk. Ms. Clinton?
        [No response.]
        The Clerk. Mr. Corzine?
        [No response.]
        The Clerk. Mr. Crapo?
        [No response.]
        The Clerk. Mr. Domenici?
        [No response.]
        The Clerk. Mr. Graham?
        Mr. Graham. Aye.
        The Clerk. Mr. Inhofe?
        [No response.]
        The Clerk. Mr. Lieberman?
        [No response.]
        The Clerk. Mr. Reid?
        [No response.]
        The Clerk. Mr. Smith?
        Senator Smith. Aye.
        The Clerk. Mr. Specter?
        [No response.]
        The Clerk. Mr. Voinovich?
        Senator Voinovich. Aye.
        The Clerk. Mr. Warner?
        [No response.]
        The Clerk. Mr. Wyden?
        Senator Wyden. Aye.
        The Clerk. Mr. Jeffords?
        Senator Jeffords. Aye.
        The Clerk. The vote is 7 Ayes, no Noes.
        Senator Jeffords. The motion carries. Thank you.
        Senator Bond?

      OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, U.S. SENATOR
                       FROM THE STATE OF MISSOURI

        Senator Bond. Thank you for holding this hearing and also
    for scheduling the classified hearing.
        On S. 556, I think it is vital for everyone to know the
    high price that American families would have to pay for
    electricity under S. 556 with very little clear benefit to the
    environment or public health over and above the President's
    Clear Skies proposal. Independent experts appearing before this
    committee have testified that S. 556 would cause American
    consumers to spend an extra $40-$60 billion a year on
    electricity; would force power plants to cut their use of coal
    by 40-50 percent costing thousands of jobs in the coal sector;
    threaten tens of thousands more jobs across the country through
    higher energy costs; and force total U.S. economic activity or
    GDP down by almost $100 billion in 2007 alone.
        The high cost of S. 556 will hurt those most in need. S.
    556 would disproportionately harm low income families,
    struggling even to pay their current utility bills. The EPA
    estimates that a bill similar to S. 556 would raise electricity
    prices between 20 and 50 percent by 2015, and the EIA estimates
    that natural gas prices at the wellhead would jump 20 percent
    by the year 2020.
        We may not care that we are forcing big utilities to pay
    higher costs but we should care that they will have to pass
    these costs on to their consumers. In the end, that will hurt
    all who are consumers. That means our families, single mothers,
    elderly; all will be faced with much higher electric utility
    bills. Consumers will pay about $11 billion more per year under
    S. 556 than under the President's Clean Skies Initiative.
        What do we get in return for raising electricity rates on
    American families by 30 to 50 percent? Are there any
    significant benefits from S. 556 to the health of our families
    or the environment above and beyond the President's Clear Skies
    plan? The astonishing answer is no.
        The ranking member, Senator Smith, has already pointed out
    the significant reductions under the President's Clear Skies
    plan, how it would reduce major air pollution levels, would
    reduce them by 75 percent and would achieve virtually identical
    dramatic results as S. 556. The EPA has estimated that 2,981
    counties would meet EPA clean air health standards under Clear
    Skies and 2,987 counties would meet the standards under S. 556.
    That is an additional 6 counties out of 2,980 plus, a
    difference of less than .2 of a percent.
        Both the President's plan and S. 556 would do great things.
    They would reduce premature deaths from air pollution, multi-
    emission legislation would achieve the goals of the Clean Air
    Act much faster and for less money than current law, and there
    is a strong bipartisan agreement, as already pointed out, for
    reducing air pollution in the form of SO2, NOx and
    mercury. Unfortunately, some of my friends are more interested
    in going for another bite, the fourth bite, than they are in
    giving the American families a chance at clean air. These good
    friends would include carbon dioxide in the multi-pollutant
    bill.
        The main reason we have taken so long to bring S. 556 to
    mark up is the refusal to accept the reality that, as Senator
    Smith pointed out, no legislation can pass Congress with
    mandatory carbon dioxide caps. Just this spring, there were
    three climate-related proposals rejected on a bipartisan basis
    and there is no reason for us to go down that road when we know
    the Senate is going to reject it. I am going to be strong in
    opposition to it.
        Another area where some refuse to face reality is in
    mercury reduction levels. We have a problem in that the
    technology simply does not exist to reduce mercury in Missouri
    power plants to the levels called for in S. 556. Even if
    Missouri residents wanted to pay electric bills 30 to 50
    percent higher than current rates and switched to natural gas
    burning power plants, the pipeline capacity in my State of
    Missouri simply does not exist to supply these plants.
        I urge my colleagues to lay aside political differences and
    don't try to do the impossible. Let us work together to avoid
    imposing unnecessary billions of dollars in higher electric
    costs for very little gain. We can debate, we can pass an
    important, significant, three-pollutant bill.
        I look forward to working with all of my colleagues on this
    committee to get past our differences and bring cleaner air to
    millions of Americans. There is one way to do it, go for three,
    not four.
        [The prepared statement of Senator Bond follows:]
     Statement of Hon Christopher S. Bond, U.S. Senator from the State of
                                    Missouri
        Thank you, Mr. Chairman, for holding another hearing on S. 556. I
    think it is vital for everyone to know the high price that American
    families would pay for electricity under S. 556, with very little
    benefit to the environment or public health versus the President's
    Clear Skies proposal.
        Independent experts appearing before this committee testified that
    S. 556 would:

          cause American consumers to spend an extra $40 billion to
    $60 billion on electricity;
          force power plants to cut their use of coal by 40 to 50
    percent, costing thousands of jobs in the coal sector;
          threaten tens of thousands more jobs across the country
    through higher energy costs;
          force total U.S. economic activity, or GDP, downward by
    almost $100 billion in 2007 alone.

        The high costs of S. 556 will hurt those most in need. S. 556 will
    disproportionately harm low-income families struggling to pay even
    their utility bills.
        EPA estimates that a bill similar to S. 556 would raise electricity
    prices between 30 and 50 percent by 2015. The EIA estimates that
    natural gas prices at the wellhead will jump 20 percent by 2020.
        We may not care that we are forcing big utilities to pay higher
    costs. We should care that they will pass these costs on to their
    consumers. In the end, we will hurt our families, our single mothers,
    our elderly, with higher electric bills.
        Consumers will pay $11 billion more per year under S. 556 than
    under the Presidents Clears Skies Initiative. What do we get in return
    for raising electricity rates on American families by 30 to 50 percent?
    Are there any benefits from S. 556 to the health of our families or the
    environment above and beyond the President's Clear Skies plan? The
    astonishing answer is no!
        The President's Clear Skies plan to reduce major air pollution
    levels by 75 percent would achieve virtually identical, dramatic
    results as S. 556. EPA estimates that 2,981 counties would meet EPA
    clean air health standards under Clear Skies and 2,987 counties would
    meet the standards under S. 556. That's a difference of 2/10th of a
    percent.
        Both the President's plan and S. 556 would avoid thousands of
    premature deaths from air pollution. Multi-emissions legislation would
    achieve the goals of the Clean Air Act much faster and for far less
    money than current law.
        There is strong bipartisan agreement and support for reducing air
    pollution in the form of SO2, NOx, and Mercury.
    Unfortunately, my friends on the opposite side of the aisle are
    blocking American families' chances at cleaner air.
        The Democrats insist on including carbon dioxide in their pollutant
    bill. The main reason we have taken so long to bring S. 556 to markup
    is the other side refuses to accept the reality that no legislation can
    pass this Congress with mandatory carbon dioxide caps.
        Just this Spring during the Energy Bill debate, the Senate on a
    bipartisan basis rejected 3 climate-related proposals. I would hate to
    think that some are still willing to make carbon dioxide a priority
    over our health.
        Another area where some refuse to face reality is in mercury
    reduction levels. The technology simply does not exist to reduce
    mercury in Missouri power plants to the levels called for in S. 556.
        Similarly, even if Missouri residents wanted to pay electric bills
    30 to 50 percent higher than current rates and switch to natural gas
    burning power plants, the pipeline capacity in Missouri does not exist
    to supply these plants.
        So, I urge my colleagues to lay aside political differences.
        I urge my colleagues lay aside the impossible. I urge my colleagues
    to lay aside plans that will impose billions of dollars in higher
    electric bills for very little gain in public health or the
    environment.
        We can debate and pass a three-pollutant bill. I look forward to
    working with my colleagues to get past our differences and bring
    cleaner air to millions of Americans.
        Thank you.
        Senator Jeffords. Senator Wyden?

      OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM THE
                            STATE OF OREGON

        Senator Wyden. Thank you.
        I look forward to working with you and all our colleagues
    on a bipartisan basis. I want to particularly make clear that I
    think it would be a tragedy to not push for significant limits
    on carbon dioxide. I think it is clear that it is central to
    addressing this global warming issue. I would like to say, as
    we have talked about in this committee before, I think we can
    do this in a bipartisan way. For example, Senator Craig and
    Senator Brownback and I have keyed up on carbon sequestration
    efforts which allow us to use the agricultural sector and the
    forestry sector.
        Science shows, for example, that we could address about a
    quarter of the global warming problem with significant carbon
    sequestration efforts that I think can get major bipartisan
    support in the U.S. Senate. These are approaches that bring
    together the environmental community, the industry and I think
    if we wash our hands of any effort to try to deal with carbon
    dioxide, No. 1, we are going to miss the boat with respect to
    global warming.
        Second, we are going to miss out on an extraordinary
    opportunity to work in a bipartisan way. There is legislation,
    the bill done with Senator Craig and Senator Brownback is one
    approach but there are certainly other kinds of ideas. We are
    not going to solve the entire carbon dioxide problem that way
    but it would be a shame not to try when you have approaches
    that can bring together the environmental community, the
    industry, allow us to follow good science.
        I am looking forward to working with you, Mr. Chairman, and
    Senator Smith because I think we can address some of these key
    issues in a bipartisan way. That is what we get an election
    certificate to do.
        I thank you.
        Senator Jeffords. Senator Voinovich?

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

        Senator Voinovich. Thank you for holding this additional
    hearing on this multi-emissions legislation. I am glad we are
    having some of the witnesses I have requested in the past,
    specifically a representative of the chemical industry and an
    advocate for low income housing. I still believe we need to
    hear from public power and the electric coops before the
    committee attempts to move the legislation. The bill as drafted
    will have a great cost impact on coops and municipal power than
    investor-owned utilities.
        It is my understanding that the chairman has announced the
    mark-up later this month. As we look today at the costs and
    benefits of the bill, it is important to keep in mind a few
    points. One, not a single utility in the country supports the
    Jeffords-Lieberman as drafted. Two, under S. 556 coal use would
    be cut in half decimating the manufacturing economy of the Mid
    West and therefore the country. The Midwest is responsible for
    23 percent of U.S. manufacturing. In fact, when you compare
    Ohio's manufacturing production with the New England States,
    Ohio's Gross State Product for manufacturing is higher than all
    six of the New England States combined, $93.4 billion in Ohio
    compared to $83.8 billion for New England. Definitely there is
    a difference in our respective economies. If you want to put us
    out of business, the jobs we will lose will not go to other
    States, they will go overseas.
        This legislation is a killer to the Ohio economy and is a
    terrible burden on a residential ratepayer, particularly the
    least of our brothers, the elderly, the poor and the disabled.
    Our Ohio General Assembly on March 28 passed a resolution by a
    vote of 86 to 5 in the House and 27 to 5 in the Senate opposing
    S. 556 due to concerns about fuel switching, cost to consumers,
    and economic impacts.
        The bill will decrease the U.S. GDP by $75 billion by 2010.
    This is according to data by the Edison Electric Institute
    which is very similar to data calculated by the Energy
    Information Administration at DOE. The cost estimates we have
    for S. 556 are not even complete. They do not even involve the
    so-called birthday provision which requires all facilities over
    30 years of age to install the latest control technology.
        It is my understanding that 80 percent of our Nation's coal
    units would fall under this category by 2007 and 92 percent by
    2012. Mr. Chairman, I have to ask, how are we going to get this
    equipment installed on 80 percent of our units nationwide by
    2007? Who will build the equipment on time? Who will install
    the equipment on 80 percent of our units all at the very same
    time? We also know the National Governors Association has
    endorsed a three-pollutant, not a four-pollutant, strategy.
        With these facts in mind, we need to look at the rationale
    for marking up this bill as it is currently written.
    Personally, I remain committed to a multi-emissions approach as
    the one laid out by Senator Smith and others. As I said before,
    I want to work together to pass meaningful legislation which
    will make significant emission reductions and which will secure
    our safe, efficient, reliable and cost effective energy supply
    for the American consumer.
        However, we have less than 50 legislative days left and
    zero chance of the Jeffords-Lieberman bill being signed into
    law this year. Therefore, we can take one of two general
    approaches. We can either identify those issues which we can
    agree on and move a bipartisan bill forward with some hope of
    passage, or we can mark up a partisan bill which stands no
    chance of passing. Unfortunately, it appears that the chairman
    has decided to mark up a partisan bill with no chance of
    passing all because of carbon. Three times this year, the
    Senate has rejected mandatory carbon controls, as Senator Bond
    just said, twice on votes regarding CAFE on the energy bill and
    once when the Senate rejected the mandatory carbon registry in
    the energy bill and replaced it with a voluntary program.
        I would like to say to Senator Wyden about the carbon, the
    compromise that came up on the energy bill with the voluntary
    carbon filing for 5 years with credits for reducing carbon to
    those that adopt those credits and if people are not compliant
    after the 5 years voluntarily, make it mandatory might be a
    good compromise to deal with the carbon issue so that we can
    move on and deal with the other three pollutants that we all
    agree on.
        The fact of the matter is if this committee does not vote
    out this bill, if you decide to mark it up, there will not have
    to be a single Republican hope because members of your own
    party will put a hold on this bill. Mr. Chairman, I have said
    it right from the very beginning, I really want to work on a
    bipartisan bill. I think it is vital that we aggressively
    reduce levels of NOx, SOx and mercury. These pollutants cause
    real health concerns and there is no reason why we cannot move
    forward on these reductions this year.
        Senator Schumer and Clinton introduced the Acid Rain
    Control Act which is championed by the Adirondack Council. This
    bill will actually make real reductions in utility emissions. I
    met recently with representatives from the Adirondack Council
    because we both have been named villain of the month by the
    Clean Air Trust and I wanted to understand why. After talking
    to them, I realized that we both received the so-called award
    because we both want to make real reductions now, now, in
    emissions. We don't want to sacrifice real emission reductions
    because of the politics surrounding CO2.
        Mr. Chairman, I implore you not to turn your back on real
    emissions reductions just for political debate on
    CO2. This committee should be concentrating, sitting
    down and dealing with the real issues which will get us real
    reductions in emissions and provide reliable, cost effective
    energy for the American consumers. We should be dealing with
    the three pollutants: NOx, SOx, and mercury--the 126 petitions.
        Mr. Chairman, you also know that I joined with Senator
    Conrad in a letter to the Administration calling for NSR
    reform. That has to be done. Twenty-five of us, nine Democrats
    and the rest Republicans said do something about NSR because
    everything today is in limbo because of the fact that we don't
    have any authoritative information coming out on new source
    review.
        I really believe, and I have said it over and over again,
    it is time, if we really want to do something about this, that
    we get into a room and sit down and try and hack this out to
    come up with a piece of legislation that is going to get the
    job done. If we want to make a political statement, fine. You
    an make the political statement and say the majority of this
    committee is for climate control and go on and on, knowing full
    well nothing is going to happen. We make a political statement.
    In the meantime, we are not doing anything to reduce emissions
    in this country and this will go on and on and on. It is time
    to take action now, make the compromise and move on.
        Thank you.
        [The prepared statement of Senator Voinovich follows:]
    Statement of Hon. George Voinovich, U.S. Senator from the State of Ohio
        Mr. Chairman, thank you for holding this additional hearing on
    multi-emissions. I am glad that we are having some of the witnesses I
    have requested in the past, specifically a representative of the
    chemical industry and an advocate for low-income housing. I still
    believe we need to hear from public power and the electric Coops before
    the committee attempts to move legislation.
        The Jeffords/Lieberman bill as drafted will have a greater cost
    impact on Coops and municipal power than the investor-owned utilities.
    I understand from the Public Power Association that those cities who
    generate their own power will have a very difficult, if not impossible
    time complying with S. 556. As the former head of a muni, Cleveland
    Power, I know firsthand the problems that they have.
        It is my understanding that the chairman has announced a markup of
    S. 556 for later this month. As we look today at the costs and benefits
    of the Jefffords/Lieberman bill, it is important to keep a few points
    in mind:
        1) Not a single utility in this country supports the Jeffords/
    Lieberman bill as drafted.
        2) Under S. 556, coal use would be cut in half, decimating the
    manufacturing economy of the Midwest, and therefore the country.
    (Midwest is responsible for 23 percent of U.S. manufacturing) In fact,
    when you compare Ohio's manufacturing production with the New England
    states, Ohio's GSP for manufacturing is higher than all six of the New
    England States combined. (93.4 billion for Ohio, compared to 83.8
    billion for all of New England.) If you want to put us out of business,
    the jobs that we will lose will not go to other States, they will go
    overseas.
        3) The Jeffords/Lieberman bill will decrease the U.S. GDP by $75
    billion by 2010. This is according to data by the Edison Electric
    Institute, which is very similar to data calculated by the Energy
    Information Administration at DOE.
        4) The cost estimates we have for S. 556 are not even complete.
    They do not include the so-called ``birthday provision'' which requires
    all facilities over 30-years old to install the latest control
    technology. It is my understanding that 80 percent of our nation's coal
    units would fall under this category by 2007, and 92 percent by 2012.
    Mr. Chairman, I have to ask how would we get this equipment installed
    on 80 percent of our units nation-wide by 2007? Who will build the
    equipment in time? Who will install the equipment on 80 percent of our
    units all at the very same time?
        5) We also know that the National Governor's Association has
    endorsed a 3-Pollutant strategy, not the 4-Pollutant strategy found in
    the Jeffords/Lieberman bill.
        With these facts in mind, we need to look at the rationale for
    marking this bill up, as it is currently written.
        Personally, I remain committed to a multi-emissions approach and as
    I have said before I want to work together to pass meaningful
    legislation which will make significant emission reductions and which
    will secure our safe, efficient, reliable and cost-effective energy
    supply for the American consumer. However, we have less than 50
    legislative days left and zero chance of the Jeffords/Lieberman bill
    being signed into law this year. Therefore we can take one of two
    general approaches. We can either identify those issues in which we can
    agree and move a bipartisan bill forward, with some hope of passage, or
    we can mark up a partisan bill which stands no chance of passing.
        Unfortunately it appears that the chairman has decided to markup a
    partisan bill with no chance of passing, all because of carbon.
        Three times this year the Senate rejected mandatory carbon
    controls. Twice on votes regarding CAFE on the Energy bill and once
    when the Senate rejected the mandatory carbon registry in the Energy
    bill and replaced it with a voluntary program. For this committee to
    report out a mandatory CO2 provision ignores what the Senate
    as a whole has done this year. And the fact of the matter is Mr.
    Chairman, if this committee does vote out this bill, there will not
    have to be a single Republican hold because members of the Democratic
    caucus will kill this bill.
        Mr. Chairman, I have said it right from the very beginning, I
    really want to work together on a bipartisan bill. I think it is vital
    that we move aggressively to reduce the levels of NOx, SO2,
    and mercury. These pollutants cause real health concerns and there is
    no reason why we can not move forward to make those reductions this
    year.
        Senator's Schumer and Clinton have introduced the Acid Rain Control
    Act which is championed by the Adirondack Council. This bill will
    actually make real reductions in utility emissions. I met recently with
    representatives from the Adirondack Council because we both had been
    named Villain of the Month by the Clean Air Trust and I wanted to
    understand why. After talking to them I realized why we both received
    the so-called award, its because we both want to make real reductions
    now in utility emissions. We don't want to sacrifice real emissions
    reductions because of the politics surrounding CO2. Mr.
    Chairman, I implore you not to turn your back on real emissions
    reductions just for a political debate on CO2.
        What this committee should be concentrating on is sitting down and
    dealing with the real issues which will get us real reductions in
    emissions and provide reliable and cost-effective energy for the
    American consumers. We should be dealing with the three pollutants,
    NSR, the NOx SIP Call and the 126 petitions. Mr. Chairman, last month I
    joined Senator Conrad in a letter to the Administration calling for NSR
    reform. We had 25 signatures on that letter including 9 democrats
    calling for reform, in fact I would like to submit the letter for the
    record. If we, as a committee, can make these changes then we can
    reduce utility emissions significantly and provide low-cost energy to
    our people.
        Mr. Chairman, I do appreciate you holding this additional hearing,
    and I hope we can reach a bipartisan agreement to reduce the utility
    emissions. Thank you.

        Senator Jeffords. Senator Chafee?

    OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE
                         STATE OF RHODE ISLAND

        Senator Chafee. Thank you.
        I will be brief. I believe the Australian Prime Minister is
    going to be here and I know we want to get to the witnesses.
        I do think the science is getting more and more solid on
    the subject. Even the Administration itself is recognizing that
    with the EPA study and it is a matter of us being on a freight
    train headed down the tracks toward the bridge that is out. Are
    we going to put on the brakes now or are we going to put them
    on later when it is much more difficult for the economy.
    Senator Voinovich says this bill is a killer to the economy.
    Think of what we have to do down the road if we are going to
    address the carbon emissions. That is the issue. Everybody
    recognizes that. Are we going to have carbon in this bill and
    limit it, and what is the timetable going to be?
        As to whether this bill will never pass, we will engage in
    the debate, let us talk about the limits and the timetable
    rather than just saying we will not consider carbon as a
    pollutant. That is what I would say to those who oppose this
    bill. I think there is room for debate on it, I think we can
    pass it, I think the Administration is coming around to
    recognizing the cataclysmic consequences of not addressing this
    issue.
        Thank you.
        Senator Jeffords. Thank you very much.
        We now have a request to testify and I really appreciate
    your coming over, Mr. Congressman Kucinich from Cincinnati.
    Please proceed.

    STATEMENT OF HON. DENNIS J. KUCINICH, U.S. REPRESENTATIVE FROM
                           THE STATE OF OHIO

        Mr. Kucinich. I thank the Chair. It would be fun to
    represent Cincinnati but I am the Congressman from Cleveland.
        Senator Jeffords. Sorry about that.
        Mr. Kucinich. I am glad to be here on behalf of your bill.
    I also want to acknowledge the presence of my good friend,
    Senator Voinovich, who followed me as Mayor of Cleveland. We
    thank him for his service in the U.S. Senate and also to let
    your co-sponsor on the bill, Senator Lieberman, know how much I
    have appreciated working with him on environmental issues. He
    and I were representing the United States in Buenos Aires at
    the Conference of Parties a few years ago. I thought that was
    very productive.
        I want to thank the committee for the opportunity to
    testify today regarding the Clean Power Act, S. 556. This
    legislation addresses the fundamental issue of ethics and
    justice, how our nation should use natural resources, and how
    our use of them affects each other and our surroundings for
    air, like water or food, is a basic human need. It is a work of
    mercy to give water to a thirsty person or to give food to a
    hungry person. It is a work of justice to help people breathe
    who cannot get air. Do we not praise the heroism of one who
    resuscitates a drowning swimmer or prevents a child from
    choking. Why not then is ensuring that all of us can breathe
    easily on a day-to-day basis, not just in an emergency, subject
    to debate?
        In his 1967 encyclical, Pope Paul VI gave an address
    ``Popularum Progressio'' and the development of peoples and he
    said, ``Development cannot be limited to mere economic growth.
    In order to be authentic, it must be complete, integral, that
    is. It has to promote the good of every man and a whole man. As
    an imminent specialist has rightly and emphatically declared,
    we do not believe in separating the economic from the human,
    nor development from the civilizations in which it exists. What
    we hold important is man, each man, and each group of men, and
    we include the whole of humanity.''
        As our country moves forward with greater and greater
    economic progress, how can we call this development when it
    withholds a basic human right for many of our citizens? How can
    we call this development when it makes families poor from
    health costs, when it debilitates children from filling their
    lungs, when it leads to early deaths among the sick and the
    elderly?
        I strongly support the Clean Power Act as do many of my
    constituents in the Cleveland area for the sake of their health
    and the environment. My constituents have good reason to
    support it. Unfortunately, the Cleveland area suffers from
    severe air pollution and two summers ago, had 39 violations of
    the Smog Standard in a period of 64 days. That means that two-
    thirds of the time during the summer when people and children
    are most likely to be outside, they are breathing air that is
    dirtier than what the EPA considers safe. As a result, summer
    smog in the Midwest triggers 34,000 emergency room visits,
    14,700 hospitalizations, and 1.4 million asthma attacks each
    year. At these levels, air pollution can have a life or death
    effort, especially on vulnerable populations.
        A study reported in the Journal of the American Medical
    Association this past March proved the association between the
    day to day air pollution and the increased risk of lung cancer,
    cardiopulmonary death and other adverse health effects.
    Children have lifelong health problems as a result of air
    pollution. It will cause senior citizens to suffer premature
    deaths.
        The Center for disease control estimates that 4.8 million
    children have asthma nationally. A conservative estimate is
    that for every child, about $500 is spent on medications,
    physician care, hospital treatment, not including other costs
    such as school absenteeism, psychological effects and others.
    Power plant pollution is responsible for over 6,000 premature
    deaths per year, more than from all the deaths due to non-use
    of seatbelts.
        Health cost is a very real part of the discussion of costs
    and benefits. Because they are so enormous, they are impossible
    to ignore. The medical community is increasingly reporting
    public health implications of polluted air and global climate
    change. Just last month, the Medical Student Journal of the
    American Medical Association devoted its entire issue to the
    topic.
        Some opponents of the Clean Air Act made rather exaggerated
    claims such that compliance will mean an massive shift to other
    fuel sources and that compliance costs will be extremely
    burdensome, especially for low income families. These opponents
    are, for the most part, the utility industry. The industry
    claims that the Clean Power Act and similar legislation
    mandates a switch away from coal. This is a myth. It does not
    forbid the use of coal as an energy source. There are a number
    of options for reducing power sector carbon emissions. These
    include replacing inefficient coal plants with advanced, highly
    efficient coal generation; shifting generation from coal to low
    carbon natural gas or no carbon renewable sources, captured and
    geological sequestration of carbon dioxide from fossil power
    plants.
        The fact is there are many options for reducing power
    sector carbon emissions. This means there is considerable
    flexibility for meeting a carbon cap and deep carbon reductions
    do not require substantial reductions in the use of coal. The
    industry also complains that compliance costs will also be
    extraordinary. On the contrary, an October 2001 report by the
    Department of Energy's Energy Information Administration who
    that scenarios similar to the Clean Power Act, households will
    actually save money.
        As time goes on, they will continue to save even more
    money. Specifically., the average annual household expenditures
    would be $40 less in 2010, $200 less by 2020; nationwide
    consumers would save $27 billion on their electric bill and in
    2010 if the Clean Power Act were enacted, and save $60 million
    by 2020.
        I think the answer to today's hearing are weighing of the
    costs and benefits of most pollution legislation is
    overwhelmingly in favor of benefits. Practically, it will mean
    more efficient use of resources, lower energy costs over the
    long term and improvement in public health.
        As a Member of Congress, I think we are obligated to
    consider the principles of this legislation without acting in
    favor of multi-pollutant legislation. Increased energy use
    results in a disproportionate burden of suffering and costs on
    the young, the sick, the low income who cannot afford to move
    away from polluted areas or for the sake of the Health Care
    they desperately need.
        From a principles' perspective, it is the responsible,
    ethical and just policy to support. I thank the chairman for
    the opportunity to testify.
        Senator Jeffords. Thank you for an excellent statement.
        I have no questions. Does anyone?
        Senator Wyden. Just one. I too thought the Congressman made
    an excellent statement. I am wondering if there are any
    significant bipartisan discussions going on now in the House
    particularly on this question of limiting carbon dioxide? I
    think that Senator Voinovich made the key point which is to try
    to get people together. That is why when I talked about efforts
    to limit carbon dioxide, I stressed the efforts that Senator
    Craig and Senator Brownback and I have made for a number of
    years. I think there are some significant possibilities for
    making real reductions in carbon dioxide in a way that is good
    for the environment and good for key industries.
        Because I agree with Senator Voinovich's point about
    bipartisanship and getting people together, I am curious about
    what is going on in the House with respect to any discussions
    to try to bridge this polarized divide?
        Mr. Kucinich. I would say that we certainly want to avoid
    making clean air a partisan issue and there are members of the
    House on the Republican side of the aisle that I have been in
    discussions with to try to see if we can come to some kind of a
    bipartisan position. These hearings help to lead us to some
    areas where we might be able to find some agreement.
        I have the greatest respect for Senator Voinovich. We may
    have a difference of opinion on this but I have every
    confidence in his goodwill and his intention to try to find a
    bipartisan approach.
        Senator Wyden. How many members are involved in these
    discussions over there? Is it a significant number?
        Mr. Kucinich. I am not going to exaggerate, it was a few,
    but hope springs eternal in the heart of men.
        [Laughter.]
        Senator Wyden. Thank you, Mr. Chairman.
        Senator Jeffords. Senator Graham?
        Senator Graham. I was also impressed with your remarks,
    particularly the fact that you elevated our discussion to an
    ethical context as you have on so many other issues in the
    past. I stated my concern that this is an issue that cannot be
    avoided, it is just a question of which generation is going to
    have to face the consequences. Do you share that view and what
    do you think are the ethical implications of our essentially
    saying to our great grandchildren, largely yet unborn, they are
    the ones we expect to deal with this unavoidable issue?
        Mr. Kucinich. To answer your question, there are ethical
    implications. In reading from this papal encyclical on the
    ``Development of Peoples,'' I was struck by a quote which I did
    not use in my testimony. The Pope had quoted St. Ambrose where
    he said, ``You are not making a gift of your possessions to the
    poor person, you are handing over to him what is him for it has
    been given in common for the use of all. You have relegated it
    to yourself.'' There is an economic component to this debate
    where the profits of a few can create the suffering of the
    many. This relates not only on an economic level but also
    relates to the concerns we should have for future generations.
        Senator Jeffords. Further questions
        [No response.]
        Senator Jeffords. Thank you very much for an excellent
    statement. We appreciate your appearance.
        Mr. Kucinich. I want to thank the members of the committee
    for their indulgence.
        Senator Jeffords. If the panel would come forward.
        I appreciate the panel being here to help us out. I would
    urge the panel if possible to keep your statements to 5
    minutes. We will have questions.
        We will start at the far right with Ron Methier. Please
    introduce yourself and proceed.

         STATEMENT OF RONALD C. METHIER, BRANCH CHIEF, GEORGIA
       DEPARTMENT OF NATURAL RESOURCES, ENVIRONMENTAL PROTECTION
     DIVISION, AIR PROTECTION BRANCH ON BEHALF OF STAPPA AND ALAPCO

        Mr. Methier. Good morning. I am Ron Methier, Chief of the
    Air Protection Branch, Georgia Environmental Protection
    Division. I am testifying today on behalf of STAPPA and ALAPCO,
    the two national associations of air quality officials in 54
    States and territories and over 165 major metropolitan areas
    across the country. The members of these associations have the
    primary responsibility under the Clean Air Act for implementing
    our Nation's air pollution laws and regulations.
        While we have made significant progress over the last three
    decades in cleaning up our air, our nation continues to face
    substantial public health and environmental problems as a
    result of air pollution. Approximately 121 million people still
    reside in areas that exceed at least one of the six health-
    based national ambient air quality standards, including over 80
    million in areas that monitor violations of the new 8 hour
    ozone standard and 75 million in areas that, based on the most
    current monitoring data available, violate the new
    PM2.5 standard. Moreover, millions more live in
    areas where hazardous air pollutants continue to pose a serious
    and pervasive health threat and many regions of the country
    experience significant visibility impairments that obscure our
    beautiful vistas.
        Electric utilities are one of the most significant sources
    of harmful air emissions that contribute to all these problems.
    These sources are responsible for 64 percent of annual sulfur
    dioxide emissions, acid rain and the formation of
    PM2.5. Their emissions also account for 26 percent
    of nitrogen oxide emissions which are not only a precursor to
    ground level ozone but also a contributor to such public health
    and welfare threats as secondary PM2.5, acid rain,
    eutrophication of water bodies and regional haze.
        In addition, electric utilities are responsible for 37
    percent of U.S. carbon dioxide emissions and emit 67 hazardous
    air pollutants including mercury. The magnitude of these
    emissions from power plants and the serious public health and
    welfare implications these emissions have make controlling
    electric utilities a top priority.
        Fortunately, there are tremendous opportunities for doing
    so in a very cost effective manner. Among the most important
    steps Congress can take to address air pollution is to
    establish a comprehensive, national, multi-pollutant approach
    for cleaning up outdated power plants and ensuring that new
    plants are dramatically cleaner.
        STAPPA and ALAPCO strongly endorse the concept of a
    comprehensive strategy for reducing emissions from electric
    utilities, and to that end recently adopted a set of principles
    upon which we believe a viable multi-pollutant approach should
    be based. I have attached a copy of these principles to my
    testimony and would like to highlight these now.
        First, our associations believe that a multi-pollutant
    strategy for controlling power plants should address all
    significant emissions from electric power generation. If
    properly structured, such an approach can increase and
    accelerate protection of public health and the environment,
    reduce pollution more cost effectively and offer greater
    certainty to both industry and regulators.
        Second, the strategy should set expeditious deadlines. It
    is essential that utilities meet their requirements prior to
    the time States and localities must comply with the health-
    based air quality standards. To ensure steady progress toward
    the final compliance deadline, interim deadlines should be
    established with the first interim compliance requirements
    taking effect quickly.
        Third, the multi-pollutant strategy should supplement, not
    supplant, provisions of the existing Clean Air Act. We believe
    that programs like New Source Review, Regional Haze and Utility
    Maximum Achievable Control Technology must be retained. On the
    matter of NSR, our associations have suggested certain reforms
    to the program with respect to existing sources.
        Fourth, we believe emissions should be capped at levels
    reflecting the installation of technology no less stringent
    than best available controls on all existing units nationwide
    with existing power plants required to meet a minimum level of
    control by the final compliance deadline.
        In meeting these emissions goals, the regulated community
    should be afforded flexibility, including an emissions trading
    mechanism with appropriate limitations and protections against
    any adverse health or environmental impacts.
        Fifth, any multi-pollutant approach should strongly
    encourage energy efficiency and conservation. Further, it
    should support efforts to develop and deploy consistent
    approaches for distributed resources to mitigate the impacts of
    small units not otherwise covered by a national multi-pollutant
    strategy.
        Finally, a viable multi-pollutant strategy must ensure that
    regions, States and localities retain their authority to adopt
    and/or implement measures including local offset requirements
    that are more stringent than those of the Federal Government.
        Once again, on behalf of our associations, thank you for
    the opportunity to present our views.
        Senator Jeffords. Thank you.
        I am going to go through each of the witnesses and have
    their testimony before we get into questions. That was
    excellent on the timing and I hope everyone sticks within the 5
    minutes and we will get through expeditiously.
        Mr. Page.

        STATEMENT OF ROBERT PAGE, VICE PRESIDENT OF SUSTAINABLE
                   DEVELOPMENT, TRANSALTA CORPORATION

        Mr. Page. Thank you, Mr. Chairman.
        My name is Robert Page, Vice President, Sustainable
    Development for the Transalta Corporation headquartered in
    Calgary, Canada. As a Canadian company, we feel privileged to
    provide testimony to this committee which is highly respected
    in Canada for its important work. We have been invited to
    present on our climate change program.
        Transalta is Canada's largest private sector electric
    generating utility. We produce electricity in Canada, the
    United States, Mexico and Australia. We recently purchased the
    Centralia Power Plant in Washington State to give one example.
    Our generation mix includes coal, hydro, gas and wind. We
    believe that coal is an essential resource for North American
    power generation for the future.
        Also, environmental stewardship is one of our core values
    as a company and our company has received national and
    international recognition for climate change programs. Our
    principles are clear in our climate change strategy; as a
    company we accept that climate change is a significant public
    concern that must be addressed. This means stabilizing and then
    reducing CO2 emissions because society is moving
    toward a carbon constrained future. We must seek cost effective
    means to manage carbon in the interest of both our shareholders
    and our customers.
        In following this philosophy, we have created a blueprint
    for sustainable thermopower generation which will enable
    Transalta to achieve zero net emissions of greenhouse gases in
    our Canadian operations by the year 2024. With the right
    government policies and programs, we believe we can meet this
    very ambitious goal.
        Our blueprint involves two integrated strategies. First, in
    the near and medium term, we will stabilize our current
    emissions and through a combination of improved plant
    efficiency, offset projects, including sinks, renewable energy,
    and emissions trading and over the longer term, we will work
    toward developing, testing and applying new coal combustion
    technologies which when combined with SO2
    sequestration underground can substantially curtail atmospheric
    releases.
        We are committed to implementing these strategies through
    voluntary action, market mechanisms and sectorial agreements.
    Our company does not support mandatory carbon controls.
        Components in our program. It becomes important to look
    outside our plants to the surrounding carbon regimes to find
    cost effective opportunities for carbon reduction or capture
    through offsets, through credits, and through emissions
    trading. These are essential features of our program.
    Currently, we have a portfolio of projects and credits totaling
    60 million tons over 25 years of CO2. This is both
    in North America and abroad.
        A major focus has been methane emission reduction since
    methane is a very potent greenhouse gas and cost effective
    reductions can be achieved through things like landfill and
    coal mine methane recovery. We are also a leader in emissions
    trading and have done important trades between the European
    Union, the United States, Canada and Japan including trades
    with U.S. energy companies like Murphy Oil or Entergy.
        We are focusing on this long-term technology renewal in
    order to change our capital stock. Our objective is a
    commercial scale retrofit unit in operation by 2007 and
    greenfield plant by 2010.
        The lessons from the Canadian experience which we hope may
    be of some significance to your committee, our near term
    requirements with capped CO2 emissions substantially
    below current levels may force premature investment in current
    technology which in our opinion may become obsolete resulting
    in stranded costs when new clean coal technology will be
    available within a decade.
        As we address Kyoto implementation in Canada, the Alberta
    government is working in a flexible fashion with us.
        As with U.S. policies which integrate greenhouse gas
    reduction goals with the control of conventional pollutants, we
    feel we have much to offer. Because piecemeal approaches in our
    Canadian experience have hindered this long-term technology
    change, we are opposed to CO2 action on its own and
    are in favor of a Canadian policy covering all the major
    emissions for the electricity sector.
        Programs to reduce CO2 emissions need to reflect
    normal cycles of capital stock renewal, natural gas repowering
    has limited potential in our experience because of price
    volatility because there are better uses for natural gas from
    industrial points of view and also in terms of the supply
    questions we have dealt with. We have 900 years of coal supply
    in Alberta.
        Commitment to clean coal technology offers important social
    benefits for the communities that we serve with our mines and
    also added energy security for North America. We support
    government incentives for technology development and we are
    very concerned with the application of Kyoto protocol in Canada
    and the constraints that it would force on us.
        Mandatory systems for emission reporting, we are certainly
    in favor of, as discussed earlier this morning and we recognize
    and support efforts to develop an integrated approach.
        I appreciate the committee's consideration of my testimony
    and will welcome later questions.
        Thank you.
        Senator Jeffords. Thank you.
        Mr. Tyndall?

    STATEMENT OF WILLIAM F. TYNDALL, VICE PRESIDENT, ENVIRONMENTAL
    SERVICES AND FEDERAL AFFAIRS, CINERGY CORPORATION ON BEHALF OF
                       EDISON ELECTRIC INSTITUTE

        Mr. Tyndall. Thank you.
        My name is William Tyndall, Vice President, Environmental
    Services and Federal Affairs, Cinergy Corporation.
        My employer is a regional utility with 13,000 megawatts of
    capacity. We serve 1.5 million electric customers and 500,000
    gas customers in Ohio, Indiana and Kentucky. Our portfolio of
    generation includes 37 coal fired units. Of importance for
    today, 30 of which will be more than 30 years old in 2007.
        I am here today on behalf of Cinergy and also behalf of
    EEI. Cinergy has long been a supporter of multi-pollutant
    legislation. Our support stems from the reality that this
    industry faces a myriad of new piecemeal regulatory
    requirements under the Clean Air Act. The net result is a
    planning nightmare making it impossible for the industry to
    assess which plants should be retrofit with controls, which
    plants should be switched to natural gas, which plants should
    be retired, and when any of this should take place.
        Nor does the present system advantage the environmental
    community. The piecemeal approach involves many, many
    scientific and technical decisions that may not be resolved in
    their favor. Regardless, all regulatory decisions are typically
    late in being made and then taken to court by all sides,
    causing further delay. I would add that consumers lose. The
    piecemeal approach doesn't allow us to synchronize control
    installation so that we can get two pollutants with one
    installation as we might be able to if we knew what the full
    picture was.
        As discussed, the committee's task is to find a set of
    reduction targets that will satisfy both existing clean air
    requirements and create a workable road map for the industry. I
    too am an optimist and believe there is a series of timetables
    and targets that may be acceptable to both sides. I agree with
    the observation of Senator Smith and others that the
    President's numbers are really not that far afield from the
    numbers in 556. Apparently the President's proposal doesn't
    include CO2 which has caught the attention of some
    members of the committee but it goes further on mercury which
    is predicated on a 90 percent reduction, something that in my
    judgment isn't going to come out of existing MAC process since
    the MAC process by definition has to be based on what is out
    there in place in utilities and there are no mercury controls
    for controlling aimed at mercury out there right now. So I
    don't see the MAC reaching 90 percent.
        One of the provisions of the bill I want to make sure the
    committee focuses on as it moves forward is the provision
    regarding what is called the outdated power plant provision,
    what I call the birthday provision. This provision requires
    state-of-the-art controls on all units over 30 years old
    regardless of the environmental need. Since as pointed out by
    Senator Voinovich 80 percent of the generation will already be
    over this limit when the bill goes into effect, this provision
    will essentially make the cap-and-trade system pointless. By
    2010 or 2012, almost all the units in the country will be
    subject to individual non-tradable emissions caps and all the
    advantages of trading we have seen under the acid rain program
    will be lost.
        The other thing that obviously is different and what we
    feel very strongly should be included in the bill is that 556
    does not make any attempt to pair what is in the bill with what
    is in the existing Clean Air Act. Rather, all the new
    requirements are added on top of the existing morass adding to
    the complexity of an Act that already can give the Tax Code a
    run for the title of most byzantine and confusing and therefore
    most likely to be implemented through litigation, and I might
    add, employing a lot of people in this room.
        The committee has already heard a lot of testimony about
    the macro impacts. I would like to talk briefly about what it
    means for Cinergy.
        Already we are spending approximately $200 million a year
    on our generation, approximately $300 million on our
    transmission. We are in the middle of an $800 million
    expenditure on the NOx controls. These NOx controls will take
    care of the summer ozone issue that has been discussed by some
    of the witnesses. The $800 million is essentially the outer
    reach of what we can afford to do over a 5-year timeframe.
        S. 556, as written, requires, overlaying the same 5 year
    timeframe, expenditures of an amount more than five times this
    sum we are already spending right now. The $800 million we are
    already spending is more than the entire northeast is spending
    combined to meet NOx controls. We are being asked in this bill
    in a shorter timeframe to locate the money and get all this
    technology in place within 5 years. It cannot be done, cannot
    be done by a company the size of Cinergy, can't be done by the
    coops, the publics, the smaller investor utilities.
        This is not to say the committee can't construct timetables
    and timeframes that do better than what is going to happen
    under the Clean Air Act and that provide us with a workable
    road map but 556 is not that bill.
        Senator Jeffords. Thank you.
        Mr. Hawkins?

       STATEMENT OF DAVID G. HAWKINS, DIRECTOR, CLIMATE CENTER,
                   NATURAL RESOURCES DEFENSE COUNCIL

        Mr. Hawkins. Thank you.
        I am David Hawkins, representing the Natural Resources
    Defense Council. I am pleased to testify on behalf of our
    500,000 members in support of the Clean Power Act, S. 556.
        Today in America, air pollutants from power plants--sulfur
    dioxide, nitrogen oxide, mercury and carbon dioxide--are
    causing major health and environmental damages. Fine particles
    alone resulting mostly from power plant sulfur dioxide
    pollution are calculated as causing 30,000 premature deaths a
    year.
        On the easel is a map that shows the distribution of
    premature deaths from the current power plant pollution levels
    using the contractors used by EPA in analyzing the health
    benefits of air quality standards. It shows a huge toll and a
    very widespread toll, extending even to places that are thought
    to have quite clean air like Florida.
        The committee has before it the Clean Power Act which is a
    comprehensive response to power plant pollution. The bill
    combines emission caps with energy efficiency and renewable
    energy programs to clean up this pollution promptly and
    affordably.
        Some have argued, and you have heard it argued today, that
    the Administration proposal should be adopted instead but that
    proposal would leave more pollution in the air with a very
    heavy toll on health and on the environment. The Administration
    proposal completely ignores global warming pollution, even
    though the Government officially acknowledged 2 weeks ago that
    the very large threat to Americans that are posed by global
    warming and the role pollution from sources like power plants
    play in this threat.
        You will see on the chart about to be on the easel, the
    Clean Power Act does a much better job of cutting the pollution
    burden than the so-called Clear Skies Initiative that has been
    outlined but not actually drafted by the Administration. Under
    the CSI option, Americans would be exposed to more than 40
    million tons of excess sulfur dioxide between now and 2020 than
    under the committee's Clean Power Act.
        According to EPA's own reports, this added pollution alone
    would cause about 10,000 more premature deaths each year for
    about 10 years than the Administration proposal. I would submit
    that is not a small difference. You have heard arguments that
    there really are small differences between the Clean Power Act
    and the CSI approach. Ten thousand deaths a year is not a small
    difference, 1,000 deaths a year is not a small difference.
    These are big differences.
        As my testimony indicates acidification would also be
    larger under the Administration approach than it would be under
    the Clean Power Act. Cumulative toxic mercury pollution would
    be about five times higher under the CSI approach after the
    control period begins than under the Clean Power Act.
        With respect to NOx, my testimony has an incorrect figure.
    The excess pollution for the Administration proposal should be
    9 million tons of additional NOx, not 13 million. I will submit
    corrected testimony for the record.
        Finally, CO2, completely ignored under the CSI
    approach, would be nearly 10 billion tons higher than under the
    Clean Power Act. Importantly, that added CO2 will
    have consequences that Americans must live with for hundreds of
    years, the grandchildren that Senator Graham has talked about
    will be living with the consequences of the extra pollution
    that is put into the air under the CSI approach if that
    approach were adopted.
        The next chart shows how much more SO2 would be
    released in the DSI approach in various States compared to a
    proposal the Administration rejected from EPA. I don't have a
    comparison to the Clean Power Act because EPA has not yet run
    that State by State analysis. It shows dramatic larger
    pollution loadings in various States under the Administration
    approach. The dark brown bar shows what the 2010 levels are
    under the CSI approach.
        It is important to note the fine print in the
    Administration proposal. They want you to focus on their 2018
    second stage proposals but in the fine print the Administration
    says that is subject to an additional rulemaking, the very kind
    of process that Bill Tyndall has said is going to be
    complicated and overrun by lawyers. The only thing Congress can
    count on in the Administration proposal as it is drafted is the
    first stage of reductions which allow much higher pollutants.
        The next chart will also indicate what the additional
    pollution loadings for mercury are under an approach that was
    higher and allow more pollution than under the Clean Power Act.
    Again, very much larger cumulative loadings. Those additional
    tons of mercury will stay in the environment for decades and
    decades, contaminating more fish, creating more threats to
    children and pregnant women.
        Finally, I want to say a bit about the importance of the
    global warming emissions. As Senator Graham and others pointed
    out, it is critical that we get started now. One of the things
    the science has shown is there is a budget for the amount of
    carbon added to the atmosphere that the planet can tolerate.
    The point of this graphic is that delay is not our friend.
    Delay consumes the budget. In the next 10, 20, 30 years, we are
    going to consume, the plant is going to consume the budget we
    have to keep global warming a manageable problem.
        We have the opportunity now to preserve our ability to
    manage this problem. If we wait 10 years, we will have in
    developing countries around the world as well as in the United
    States, a very rapid consumption of a finite budget and the
    problem will become unmanageable.
        Thank you very much for the opportunity to testify.
        Senator Jeffords. Thank you.
        Mr. Hughes?

          STATEMENT OF LEE HUGHES, VICE PRESIDENT, CORPORATE
    ENVIRONMENTAL CONTROL, BAYER CORPORATION ON BEHALF OF AMERICAN
                           CHEMISTRY COUNCIL

        Mr. Hughes. Good morning.
        My name is Lee Hughes, Vice President, Corporate
    Environmental Control, Bayer Corporation. I am here today
    representing the American Chemistry Council. The Council
    represents the leading companies engaged in the business of
    chemistry.
        Council members have a significant stake in the continued
    success of environmental programs including the Clean Air Act.
    Our steady and dramatic emissions reductions have occurred
    while we have increased our production. While we have improved
    our energy efficiency for decades, we remain an energy
    intensive industry.
        Not only do we generate, use and purchase significant
    amounts of electricity, we are also a significant consumer of
    natural gas, both as a critical raw material and as a fuel.
    This makes our businesses very sensitive to both the
    availability of adequate supplies of natural gas and the
    fluctuations in energy prices.
        We support the national goal for continuing improvements in
    our air quality, building on the significant progress we have
    made to date. We also support the use of market-based
    mechanisms to achieve air quality goals. However, we are very
    concerned about S. 556 and its potential impact on our industry
    and the broader economy.
        We believe this bill, as currently written, will drive many
    utilities to switch to natural gas and cause a significant
    impact on its availability and on energy prices. We think it is
    important to set goals and timetables for additional emission
    reductions in a way that minimizes the sort of economic impacts
    while at the same time delivering improved air quality.
        I would like to discuss our three primary concerns. First,
    S. 556 adversely impacts fuel diversity. It is critical to the
    business of chemistry that multi-pollutant legislation not
    increase our reliance on natural gas to generate electricity
    without simultaneous congressional action to ensure adequate
    supplies of natural gas.
        For many utilities, natural gas becomes the fuel of choice
    to cost effectively meet the stringent targets and timetables
    currently in S. 556. In fact, even without S. 556, the Energy
    Information Agency predicts the use of natural gas by utilities
    will increase threefold by the year 2020.
        When natural gas prices rise, the U.S. chemical industry's
    cost of production correspondingly rises to the point where we
    cannot compete globally. We have just been through such a
    period. When the U.S. companies cannot compete in the global
    market, we lose jobs and investment in the U.S. Given the
    levels of reduction for SOx, NOx and mercury currently embodies
    in S. 556 and the time lines for meeting these levels, we can
    come to only one conclusion, S. 556 as currently written will
    adversely impact natural gas availability. Including carbon
    dioxide in these targets and timetables would only exacerbate
    the situation.
        Second, combined heat and power units are unique. The U.S.
    chemical industry continues to make significant investments in
    the use of combined heat and power technology. A typical CHP
    unit produces power twice as efficiently as a traditional
    utility and emits less than half the pollution.
        Under Carper's leadership and with your support, the Senate
    recently voted overwhelmingly to support both current and
    expanded use of CHP units. Including these units in S. 556 will
    erode incentives for their use. CHP units should therefore not
    be included in multi-pollutant legislation.
        Third, multi-pollutant legislation must be harmonized with
    the existing Clean Air Act. We support S. 556 using market
    driven approaches to achieve Clean Air Act goals. However, the
    Clean Air Act's existing command and control provision and S.
    556 target the same emissions. The existing provisions
    apparently would remain in effect under S. 556. This undermines
    the legislation's market mechanism. The ability to direct
    investments to the most cost effective reduction under a
    market-based approach would be seriously compromised.
        In summary, Council members believe that a carefully
    crafted, multi-pollutant program could work and could provide
    air quality benefits to the nationwithout serious economic
    disruption. To succeed, however, the program must first avoid
    creating supply demand imbalances for critical fuel such as
    natural gas, avoid significant increases in electricity cost,
    not include combined heat and power units but allow combined
    heat and power and other sources not covered to voluntarily opt
    in, to address three pollutants--SOx, NOx and mercury, and
    last, harmonize these provisions with the existing Clean Air
    Act requirements to ensure the market-based mechanisms function
    properly.
        We would be happy to work with the committee to amend or
    develop an alternative to S. 556 to assure these critical
    points are addressed.
        Thank you.
        Senator Jeffords. Thank you.
        Mr. Barger?

       STATEMENT OF DON BARGER, SENIOR DIRECTOR, NATIONAL PARKS
      CONSERVATION ASSOCIATION, SOUTHEAST REGIONAL OFFICE COUNCIL

        Mr. Barger. Thank you very much for the opportunity to
    testify today.
        Our nation creates and preserves national parks because of
    their inspirational, scientific and historic value to America's
    natural and cultural heritage. They are priceless and
    irreplaceable. Air pollution is among the most significant
    threats facing the parks.
        NPCA fully supports S. 556, the Clean Power Act, as a
    vehicle to require effective, timely and necessary reductions
    of the four key pollutants emitted by power plants.
        The air pollution in our national parks is a disaster in
    slow motion. A quarter of a century after Congress declared our
    national parks should have the Nation's cleanest air, they have
    some of the dirtiest. It is important to note this is not just
    a visibility problem in our parks. Our support for S. 556 is
    based on our belief that major reductions in all four of the
    key pollutants will be necessary for the long term health of
    our parks and for the people who visit them.
        Great Smoky Mountains National Park serves as an
    unfortunate poster child of Class I areas harmed by air
    pollution nationwide. This park has recorded the highest level
    of nitrogen deposition of any monitored site, anywhere in North
    America, urban or rural.
        Historic views of 113 miles annual average have been
    reduced to 25. Researchers have documented at least 30
    different species of plants being directly impacted by ground
    level ozone. The National Park Service has had to issue
    unhealthful air notices to staff and visitors on over 140 days
    in the last four summer seasons.
        While we were having the ozone red alert yesterday here in
    Washington, I checked the ozone levels both here and at the
    Great Smoky Mountains National Park. Bottom line, it would have
    been a lot healthier to run to work yesterday in Washington
    than it would have been to hike on the Appalachian Trail in the
    Smokies.
        The report recently delivered to the United Nations by the
    U.S. State Department documents the many dire consequences in
    the future with global warming. As Senator Graham noted, the
    sea along the Florida Coast is rising today at a rate of six to
    ten times faster than the average rate in this area over the
    last 3,000 years. This could mean that most of the Everglades
    National Park would essentially become an extension of Florida
    Bay, washing away the $7.8 billion Everglades restoration
    system which this committee helped to design.
        Carbon dioxide comprises 82 percent of the greenhouse gases
    emitted in the United States and power plants are responsible
    for 40 percent of that. We believe mandatory reductions clearly
    are needed to reduce these impacts.
        Mercury is a potent neurotoxin that persists in the
    environment and bioaccumulates in the food chain. As such, it
    demands an aggressive policy response, one which does not
    include trading that will allow its additional accumulation.
    Attachment 5 in your packet we gave out shows the atmospheric
    deposition of mercury at sites across the country with the
    Everglades registering some of the highest in the country.
        Preliminary monitoring data just begun at Mammoth Cave
    National Park indicates that episodic plumes of mercury many
    times expected background levels are entering that park.
        There is simply no combination of emission reductions that
    will clear the air in our parks without cleaning up the old
    grandfathered plants. Accordingly, a birthday provision
    requiring all power plants to install modern controls by a date
    certain is an essential component of multi-pollutant
    legislation if we are to clean up the air in our national
    parks.
        Based on the information and studies presented in our
    written testimony, we believe emission reductions at or beyond
    those proposed by S. 556 will be necessary. While emissions
    nationwide have been reduced, emissions affecting many Class I
    areas have actually increased. A cap-and-trade program
    instituted in lieu of, not in addition to, the current effect-
    based standards of the Clean Air Act cannot protect Class I
    areas from existing and future impairment.
        The proposal to draw 50 or even 100 kilometer circles
    around Class I areas would provide less protection than proper
    implementation of the current Clean Air Act provisions. While
    it would provide limited effect-based analysis within those
    zones, such a proposal would also create free fire zones
    outside those circles allowing large sources to proliferate
    without regard to their individual or cumulative Class I
    impacts.
        We have included a number of cites in our written testimony
    that speak to the quantified benefits of cleaning up the air in
    our national parks. In conclusion, I want you to know that
    scientists have recently found a bacterium in the pool in
    Mammoth Cave they believe may produce an important anticancer
    agent. The benefits we can count from preserving these places
    intact are exceeded only by what we have not yet discovered. I
    believe if we save our parks, they may very well save us.
        Thank you.
        Senator Jeffords. Thank you.
        Mr. Mullen?

    STATEMENT OF TOM MULLEN, PRESIDENT AND CEO, CATHOLIC CHARITIES
            HEALTH AND HUMAN SERVICES. DIOCESE OF CLEVELAND

        Mr. Mullen. I really want to spend a little time, 5
    minutes, to create the spirit I saw that occurred among the
    committee itself and also saw in my Congressman Kucinich
    alluding to bipartisan collaboration around this issue and for
    a simple reason, I would ask that we consider clearly those
    persons that may be impacted, I was about to say indirectly,
    but they would be directly by the enactment of S. 566 as it
    exists in its current fashion and from the numbers and
    understanding that I know economically it could impact on
    persons and families.
        I think a good way to highlight that would be to let me
    tell you about two people. One, a woman I know and talked with
    as recently as 10 days ago named Millie is 82 years old. Millie
    is a retired domestic. At 82, her fixed income is around $680 a
    month. She pays for rent and utilities $510 a month in
    Cleveland. We all can do the math. That leaves her about $170 a
    month or $5.66 a day for food, clothing, minimal public
    transportation and other needs a person of 82 may have.
        I know Millie cannot absorb any further costs, particularly
    in energy, and we at Catholic Charities in the Diocese of
    Cleveland have seen clearly a 200 percent increase in emergency
    needs of the last year and a half. So I think it critical we
    take into consideration those things.
        Another quick example would be a person who actually well
    be in our employ. We have a number of people in the health and
    human service business that work as child care workers, nurses
    aides, housekeepers in our nursing homes or child care
    institutions. Those in northeast Ohio are $9 a hour jobs. At $9
    a hour, an employee that could well be my own who is a single
    mother with two children 3 or 4 years old will make about
    $1,440 a month.
        By the time her social security, taxes, Medicare and health
    costs for the family portion, she finds herself at about $935 a
    month. When you look at either a one or two bedroom rented
    apartment in the Cleveland area, we are looking at $500, on top
    of the utilities for gas, electric and water. These are older
    buildings and not very efficient. The average will run about
    $175 because we pay a number of those bills.
        I think what you will find doing that math is that she ends
    up with about $7 a day for herself and her two kids. That is
    about $2.33 to feed, cloth and whatever other needs there may
    be in that family.
        I raised those two cases and just say that as we work
    through this and as you look at an approach that I think has to
    take into consideration the older generation, not only in Ohio
    but across the country, that also takes into consideration low
    income and so many persons that have moved themselves into the
    work force and off the welfare systems but by the skin of their
    teeth as it exists today.
        Any additional burden as it relates to any cost but
    particularly as S. 566 can impact energy, I would only ask and
    have you considered the Millies and the low income women and
    children I have presented to you today.
        Thank you.
        Senator Jeffords. Thank you. That is a very worthwhile
    statement to make us think and remember the consequences of
    what we do.
        Mr. Methier, your testimony seems to support the birthday
    provision in the Clean Power Act. Would you explain a little
    further why that is so necessary?
        Mr. Methier. This actually is an issue our associations
    discussed and debated at length, whether or not to allow the
    full flexibility of market trading without any final controls
    of units at the end or what sort of control we might need.
        In the end, our analysis was the same as many others, that
    old, outdated units at some point in time do need to have some
    minimum level of control at the end of their years of life of
    that unit or at the end of a compliance schedule that is in
    rule or law. But we are trying to deal with regional broad
    issues that you saw on the map this morning as well as local
    issues. I can speak from experience in Georgia and Atlanta that
    what happens locally is just as important as a broad reduction
    you can get across an area.
        So we do agree that some minimum level of control for these
    units is necessary.
        Senator Jeffords. Mr. Page, I am pleased to learn that your
    company has committed to the ambitious target of zero net
    emissions by 2024. That is a very positive step. What were the
    primary motivations to Transalta's decision to make this
    commitment?
        Mr. Page. The reasons for our decision was one, the
    background in Canada which is a little different where we have
    the Canadian Government and our Prime Minister committed to
    ratifying Kyoto; we have considerable potential for sinks and
    offsets in the western prairies of Canada. We were very early
    active on the emissions trading front so we were seeking some
    cost effective solutions and we were fortunate enough to be
    able, in terms of our own work and our work with our partners,
    to put the Canadian Clean Power Coalition together.
        Of all the major thermal utilities in Canada with backing
    from the Federal Government and some of our provinces we were
    able to put together our technology package, which is our key.
    Without the technology package of clean coal technology and the
    parallel sequestration of emissions, that goal would not be
    possible.
        Senator Jeffords. Mr. Barger, could you please explain the
    difference between an effects-based standard and an emissions-
    based standard and why you believe that distinction is so
    important for the national parks?
        Mr. Barger. Yes. Effect-based standards are standards that
    measure the effect or the impact of a proposed source of
    pollution instead of just its rate of emission. The prevention
    of significant deterioration, or PSD, is an effect-based
    standard.
        The only way to protect a Class I area is to determine
    whether a proposed new source is going to affect it. An effect-
    based standard measures not just how much are you putting into
    the air but where is it going and what is it doing. Therefore,
    if you are going to prevent those effects from happening in a
    Class I area, those kinds of standards have to be a part of the
    mix for any new proposed source.
        Senator Jeffords. Mr. Hawkins, would you respond to any of
    the comments or testimony you heard so far with any suggestions
    you might have?
        Mr. Hawkins. I guess I would start with the point that you
    just asked Mr. Page from Transalta. Here is a company that
    operates coal-fired generation and it has committed to a
    birthday approach that says after a plant reaches 40 years of
    age, it either will achieve zero net emissions of carbon or it
    will be retired. That is a very interesting and ambitious
    commitment.
        You asked what was the cause of that. I think I would like
    to restate the answer. I think the answer is that in Canada the
    government has committed to a binding limit on carbon emissions
    and the response is that one of the major electric utilities in
    Canada has said OK, we can do it, here is our plan.
        The cause and effect relationship here is very important to
    recognize. A binding limit gets responses. Voluntary programs
    which we have tried in the United States for the last 10 years
    do not get responses, they get emission increases. That is not
    going to be a solution.
        In response to Mr. Mullen's comments about the concerns of
    the less well to do, they are enormously important concerns.
    They are concerns this committee should certainly keep in mind
    as it drafts legislation. Two comments about those concerns.
        He mentioned Millie who has expenditures on rent and
    utilities of over $500 a month. If Millie is like most renters,
    she lives in an apartment where the landlord has no incentive
    to design the apartments to save energy for the renters because
    the renters pay the costs.
        Under the Clean Power Act, the structures would be put in
    place where landlords, power plant operators, private
    entrepreneurs all would have incentives to design in and rehab
    apartments so that the monthly electricity bills would go down,
    cutting pollution and actually cutting the amount they would
    pay.
        The other comment I have is that I believe Mr. Mullen said
    Millie was an elderly woman and the reality of the pollution
    problem from power plants today is that the elderly are most at
    risk from premature mortality due to today's air pollution. You
    saw the maps we put up and Cleveland is in one of the hottest
    spots in the country for that kind of mortality.
        We have to figure out a way where we can have a healthy
    life and affordable electricity and we think your bill will
    allow us to accomplish that.
        Senator Jeffords. I am going to limit the members to 5
    minutes so everyone can get a chance.
        Senator Smith. If each of you could comment quickly and
    briefly, since I only have 5 minutes.
        Mr. Page, I notice you kind of nodding not affirmatively on
    Mr. Hawkins' comments about your timeline on reduction. Do you
    want to make a 30 second response to that?
        Mr. Page. I appreciate that opportunity. I would like to
    make it very clear that Transalta Corporation is not in support
    of the current government's policy on Kyoto but we are faced
    with that and provincial regulations pressure which is forcing
    us to act.
        My main point here is the issue of the timeframe. As I
    emphasized earlier, our clean coal technology and parallel
    sequestration systems will not be in place for the first Kyoto
    period, 2008 to 2012 as they would not be in place for this
    bill.
        I think it is very important and wanted to make sure there
    was no misunderstanding that our company was supporting the
    Kyoto timeframe.
        Senator Smith. Mr. Tyndall, how would this legislation if
    it were to pass change the level of coal, if you had to move
    now from a basic dependence upon coal to produce the energy you
    are producing and having to go to natural gas or some other
    technique under this bill, how would that affect your company
    in terms of the infrastructure and the dollars?
        Mr. Tyndall. The macro numbers are that coal production or
    coal generation would fall 50 percent, natural gas generation
    would climb and natural gas production would need to double.
    The impact of that I think has been described both in terms of
    prices and utility natural gas purchases out competing
    industrial users and others and essentially forcing them out of
    the market.
        In terms of looking at it from our point of view, we have
    37 coal fired units. We have tried to figure out in a timeframe
    really so short as to defy belief that there is much we can do,
    we would be forced to essentially be saying which industry do
    we want to try to throw controls on and which units do we want
    to try to switch to natural gas.
        The costs are roughly about the same in terms of the amount
    of money we would be out to try and do either. I think it is
    important to note that this birthday provision which kicks in
    right at the beginning of the program as well would require us
    to repermit every single one of our power plants subject to it
    which means we have to start all over in terms of trying to go
    through a very elaborate public process. You wouldn't even know
    what reductions, just what targets you are supposed to hit
    until you went through this multi-year process.
        It is very difficult for me to answer your question in a
    more specific way because the bill as it appears to someone
    trying to run a utility business is utterly infeasible. I don't
    know how to put it any other way.
        Senator Smith. You heard the debate here in the beginning
    about the essential agreement on three pollutants and a
    dramatic disagreement on the fourth, with a lot of testimony
    about impact on people and so forth. Is it really any different
    than the situation one would face if a canoe with your four
    children flipped, you saw it all happen and you may a choice,
    you go out and save as many as you can as quickly as you can or
    you let them all drown because you may not be able to save them
    all.
        The bottom line is, if you had no other choice, if the
    choice facing you is no bill and no reductions in anything or a
    bill that goes NOx, SOx and mercury reductions without carbon,
    would that be acceptable to you? I'm not asking you to comment
    on the politics of it, just on the results.
        Mr. Hawkins. I think the Administration proposal is like
    teaching three of your children to swim and ignoring the
    fourth.
        Senator Smith. Interesting point but you didn't answer my
    question. You are willing to let them all drown because you
    can't save all four?
        Mr. Hawkins. That is not the choice this committee or this
    Senate has.
        Senator Smith. I agree. It is not the choice the Senate
    has, the Senate can do it either way. The Senate can do three
    things, nothing, pass a four-pollutant bill, or pass a three-
    pollutant bill or something in between. The point is the
    numbers are not there.
        I am not saying we should ignore the debate on carbon. I am
    saying we know we can get three pollutants passed through and
    gone and begin that process while we have the debate on carbon.
    Why not do that?
        Mr. Hawkins. We are going to do our best to try to persuade
    you and other members of the Senate that the four-pollutant
    approach is the appropriate one. We are confident that you and
    others will listen to the reasonable arguments. We think they
    are very strong arguments. Given the opportunity, we are
    confident you will see this is the right solution for the
    American public.
        Senator Smith. I would rather have that debate while the
    three children are safely on shore but we will move on.
        Senator Jeffords. Senator Lieberman?
        Senator Lieberman. I cannot resist getting into this
    metaphorical contest.
        I think the metaphor here is if there four different people
    pumping toxic material into the air around your house, would
    you try to stop only three of them or all four. I think you
    obviously would try to stop all four because all four were
    hurting your family and your kids.
        Senator Smith. If you could only stop three, would you stop
    them?
        Senator Lieberman. Yes, that is the basic premise. The
    premise of the Clean Power Act, which I am privileged to co-
    sponsor with the Chairman, Senator Jeffords, is that we can
    stop all four. I think if we get together here, we can.
        It is well known that the President had earlier support of
    the four-pollutant bill, changed his position. I hope we can
    get the Administration to look again at this because the facts
    are so clear. Of course the other three pollutants have toxic
    effects. In the last month, two reports from the Administration
    have come out which argue powerfully for a four-pollutant bill.
    The first, EPA's study of health care risk from air toxins
    concluded that two-thirds of Americans living in nearly every
    part of the country are subjected to an increased risk of
    cancer from air pollutants. The second study more recently as
    part of our obligations internationally is a study on climate
    change and made a powerful case that the planet is warming.
        I just want to give a sense of what motivates Senator
    Jeffords and I and others that we are not acting precipitously
    here. I had come across my desk a 1979 document for the
    National Academy of Sciences produced at the request of
    President Carter. The document says, ``When it is assumed that
    the CO2 content of the atmosphere has doubled, the
    more realistic of the modeling efforts predict a global surface
    warming of between 2 degrees and 3.5 degrees with greater
    increases at higher altitudes.'' That is eerily similar to this
    month's national communication which suggests the warming of
    2.5 degrees to 4 degrees.
        In one sense, we have known about the problem for at least
    23 years, so I don't think you and I and others are being rash
    or jumping ahead sooner than we should. We are right to be
    stubborn about this but we are not stubborn on the details. I
    think we are happy to enter into negotiations. If folks are
    opposed to it, we will enter negotiations which lead us to a
    four-pollutant bill. Shame on us if 50, 100 or 200 years from
    now our kids or grandkids are living on a planet that is much
    less hospitable than ours is now and they ask, how could they
    have let this happen. That is what this is all about.
        I want to ask Mr. Tyndall a question in that regard. A year
    ago May, Jim Rogers, the CEO of Cinergy testified on this
    question. He stated in a subcommittee of this committee, ``My
    company seeks comprehensive multi-emission power plant
    legislation because we want long term clarity and certainty
    built into our environmental compliance planning process.
    Without some sense of what our carbon commitment might be over
    the next 10, 15 or 20 years, how can I or any other utility CEO
    think that we have the complete picture of what major
    requirements our plants may face.''
        Mr. Tyndall, I know you don't support the speed of
    reduction proposed in the Clean Power Act, but I wanted to ask
    whether, only with regard to Cinergy and not the Institute,
    does your company still support legislation that would give you
    a sense of what your carbon commitment might be over the next
    10, 15 or 20 years?
        Mr. Tyndall. I am laughing because when you read a quote
    from my boss, I had better say I agree with that quote 100
    percent. Second of all, you relieved a lot of peoples' nerves
    when you said I could answer on behalf of Cinergy and not EEI.
        Senator Lieberman. Feel free to answer on behalf of EEI if
    you like.
        [Laughter.]
        Mr. Tyndall. Maybe it would spare me from ever having to
    testify again.
        Cinergy is looking for certainty and it is absolutely fair
    to say that part of understanding what investments you want to
    make on NOx, SOx and mercury is understanding what is going to
    happen on carbon. I would also say that Transalta has put on
    the table a very strong example of what they are willing to do
    on a voluntary basis.
        We joined EPA's climate leaders group earlier this year. We
    are in discussions along with a number of other companies
    around a proposal called the Chicago Climate Exchange which
    would have us managing our emissions at current levels and then
    decreasing 1 percent per year in a voluntary group.
        I think the utility industry in general and Cinergy
    specifically, is looking at the carbon issue and trying to
    figure out how do we work this in.
        I have to say there is sort of a hard way to do this and an
    easy way. If we could look at timeframes, if we could look at
    things like there is at least some evidence suggesting that
    black soot, that ozone reductions have a positive impact on
    carbon and the fact that my utility is spending $800 million
    right now putting on NOx controls which will reduce ozone which
    will have a positive impact on the climate situation according
    to the latest research, if we could look at what the utilities
    are doing voluntarily and trying to build a provision that
    works with all the capital demands, then I think there would be
    acceptance by Cinergy and others of it.
        That is the reality from our business point of view. How
    that plays out in terms of your politics, the Senators of the
    committee are the ones that are going to have to decide that.
    If you look at the votes earlier this year, it is hard to get
    optimistic that we are going to get anything if we hold out for
    resolving the Kyoto issue in this bill.
        Senator Lieberman. My time is up. Thank you for the answer.
        I would say finally the chairman is going to move to mark
    up on the bill. In a sense the train is moving out of the
    station but we need some of you, and the Institute is a perfect
    partner if you will, to come forward, sit and talk with us
    about how to do this right, so if I can complete this
    particular metaphor, there is a light at the end of this
    tunnel.
        Thank you for your answer. Mr. Rogers is not the only
    utility executive that has said that to me, the value of
    certainty, so I think we can combine the two if we can start
    talking to one another.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. I would like to comment that if we look
    at the differences of opinion of the witnesses that have
    appeared before you, we would be here next year or maybe the
    year after and nothing will have been done to reduce the
    emissions that so many of us are concerned about.
        Mr. Page, you are here as a witness for this legislation
    but you have also talked about you don't agree with the Kyoto
    provisions of the Canadian Government and some of the
    regulations, that you need some time to get on with what you
    want to do and you want to do it, most of the people here at
    this table want to go on and do some things. The issue is how
    do you deal with the carbon issue. Senator Lieberman made
    reference to that.
        We discussed the carbon issue during the energy bill and
    came up with little compromise about voluntary filing of impact
    if within 5 years more than 60 percent did not voluntarily do
    it to make it mandatory, give companies credit for the work
    they do to reduce carbon. It seems there is a disconnect.
        I met with a gentleman from the Park Service. I met with
    the Adirondack Council and they want to move forward with the
    Schumer-Clinton bill that says let us do NOx and SOx and do
    something mercury and we don't want to see this thing all
    delayed by carbon because we want to do something about our
    lakes and streams and deal with some of the problems you are
    talking about.
        There just doesn't seem to be a reasonable kind of attitude
    that exists here at the table. Mr. Hawkins you talk about your
    concern about these issues and made reference to Mr. Mullen.
    You talk easily about you are going to have incentives for
    people to build new housing for poor people.
        Mr. Mullen, I would like you to comment on how difficult it
    is to get anybody to do anything for poor people in terms of
    housing. It seems that some of the people in the environmental
    world don't understand the realities of some of how this
    impacts on human beings and the economy. Do we want to see the
    gas industry--Mr. Hughes you represent natural gas. When we had
    an uptake of natural gas prices 2 years, we almost put the
    chemical business out of business in the United States of
    America. It increased the cost of fertilizer.
        In Mr. Mullen's community, tell us how much did the rates
    go up for the poor people in Cleveland? Share that with us.
        Mr. Mullen. In Cleveland particularly for the poor people,
    I think a key element is if the rate goes up for myself or
    Senator Voinovich, the percentage of that rate is significantly
    different than it is for the two people I cited, Millie or the
    27 year old mom with two little children based on income.
        We know with the people who have come to us, we have an
    information referral system and I alluded that it has increased
    in the last 18 months on emergency needs by 200 percent, that
    has increased for them twofold relevant to their income. So it
    is a substantial increase. There is no question.
        Senator Voinovich. The other side of this is that the
    impact on the economy of a State like Ohio is devastating in
    terms of our manufacturing. These are people with good jobs but
    if we get legislation that forces fuel switching to natural
    gas, it will have a dramatic negative impact on the economy of
    a place like the State of Ohio.
        The issue is how do we deal with reconciling trying to
    bring down our emissions and at the same time don't kill the
    goose that laid the golden egg. How do we take care of Mr.
    Hawkins' concerns. You made a good point about the health of
    elderly but at the same time you have the other side of the
    coin, how are they able to buy food and clothing if they see
    what they saw 2 years ago when their energy costs went up.
        There has to be some place in here that we can figure out
    how some compromise can be derived to move forward. I think to
    go forward with 556, it is not going to happen. So all these
    people in this room, all the people in America who want to see
    emissions go down and people are concerned about reasonable
    energy costs and the jobs that would be impacted, somehow want
    us to get together and figure out how we get this done.
        The issue is how can you at this table reconcile some of
    the differences you have so that we can move forward with these
    issues. That is the real question here.
        Senator Jeffords. Mr. Tyndall, by how much does EEI think
    the price of electricity will increase by 2010 assuming there
    is no action on multi-pollution legislation?
        Mr. Tyndall. I don't know. I am not aware of any research
    that EEI has done on that but I would say that I don't
    subscribe to the school of thought that a lot is going to
    happen at EPA on these issues if we don't do anything with this
    committee with this bill.
        I strongly believe that the history of this Act, the
    history of the sources, the various regulatory programs we are
    working with will keep chugging along but the results will be
    disappointing for everyone.
        The existence of 556 is evidence that the environmental
    community has long viewed the reality that trying to resolve
    all these issues using the piecemeal provisions of the Clean
    Air Act isn't going to work in the near term. We can get into
    all sorts of debates about what different scenarios EPA looked
    at and compared but I can tell you when I was working for the
    House, I had a briefing by EPA under the Clinton Administration
    and they showed implementation of the fine particle standard
    continuing well into the teens of the next decade. I went to a
    Clean Air Advisory Committee last week and I saw a similar
    chart.
        The Clean Air Act allows 12 years from when an area is
    designated nonattainment before it runs out of extensions and
    has to be finally in attainment. The 12 years hasn't even
    started running on the fine particle standard. So if this
    committee does nothing, if the Congress does nothing, I don't
    know what expenses we will incur by 2010, I don't know what
    kind of controls we will have to put on by 2010, but I think
    there is a pretty good chance that we will still all be
    debating these issues.
        Senator Jeffords. Mr. Barger, you indicated the Tennessee
    Valley Authority emitted 300,000 tons of sulfur dioxide above
    the Phase II allocation last year. That is unfortunate
    particularly for a Federal agency that should be a model of
    environmental leadership and because it affects the Smoky
    Mountains, what do you think about the Administration's claim
    that NSR and other similar local air quality programs can be
    exchanged for emissions caps?
        Mr. Barger. The use of a cap-and-trade system by itself
    will not protect Class I areas and this is really a very good
    example. TVA made decisions strictly on a business sense to
    reduce the larger plants which are further away from the Great
    Smoky Mountains National Park as a Class I area. All of the
    east Tennessee plants actually increased their SO2
    output during that same period of time, making the haze
    situation, the visibility problem in the Great Smoky Mountains.
    During the decade of the 1990's when we were implementing Title
    IV, there was no improvement in visibility at Great Smoky
    Mountains National Park, in spite of the fact that emissions
    were being reduced nationwide.
        Without those effect based standards that allow you to find
    out what the effect of a particular proposal is going to be on
    a Class I area, there is no way to protect them.
        Senator Jeffords. Mr. Hughes, you indicated that my bill
    puts combined heat and power units in a competitive
    disadvantaged position of needing to buy credits. I don't think
    that is quite right since there is no specific overall
    allocation scheme in the bill right now.
        Rather than doing what you suggested, it seems fair to me
    to reward cleaner, more efficient generators with more
    allowance of credits rather than less. Do you disagree?
        Mr. Hughes. I think rewarding people for performance is a
    beneficial direction to have gone, combined heat and power
    because of the nature of getting two values for the price of
    the energy you put into the system is inherently better from
    that overall approach but we feel rather than having those
    because of their inherent clean nature to begin with already
    included in the bill because of the megawatt cutoff and the
    fact they might sell from time to time materials to the grid
    would draw them into some potential offsetting in credits that
    if they choose not to get into that business, fine, but they
    ought to have an option if they want or if it is beneficial for
    them to be able to get in. It was just the issue of potentially
    mandatorily bringing them into the purview of the Act from that
    perspective that we were referring to.
        Senator Jeffords. Mr. Methier, do you believe there is any
    level of emissions cap that obviates the need for NSR as Mr.
    Holmsted has suggested?
        Mr. Methier. No, we disagree. We believe that the stricter
    the cap, the better so that we can rely on those broad regional
    reductions. In the end, as Mr. Barger pointed out, NSR plays an
    important role. There are always the cases in urban areas or
    Class I areas where when major new sources are constructed, we
    need to look at those potential adverse impacts on either
    public health or visibility or other welfare issues. Major
    modifications at existing sources can have the same impacts. So
    we do not think that would be a good tradeoff.
        Senator Jeffords. Senator Smith?
        Senator Smith. Mr. Page, in your written testimony, I
    pulled out the second paragraph from the bottom of page five
    for your reference. You say, ``One response to a CO2
    cap could be repowering of coal units with natural gas. This
    approach has major problems. Existing supplies of low cost
    natural gas are constrained,'' and then you talk about the
    price volatility which could occur with that because there are
    better uses for natural gases than fuel for electricity
    generation.
        Then you say, ``Alberta has a 900 year supply of coal
    versus a 10 year supply of light conventional crude or a 20
    year supply of natural gas. This comparison highlights the
    importance of investing in clean coal technology and not rely
    on natural gas repowering.''
        Will the timeframes in this bill allow clean coal
    technology to advance so that we can use those reserves?
        Mr. Page. We could not use the new technology in the
    timeframe of 2007 or 2010. We are looking at a pilot retrofit
    in 2007, a greenfield plant in 2010, and an application of that
    technology in 2012 and beyond. So it is critical from our point
    of view in terms of the timing that in fact we have this
    leeway.
        It is also critical in terms of emissions trading and
    credits and other things that the financial resources are
    available for us to make this heavy investment over a period of
    time when the results are only going to be coming in 10 years
    from now in terms of the actual emission cuts in our existing
    plants.
        It is a complicated measure but it would not meet the
    timeframe for this bill which I believe was your original
    question.
        Senator Smith. So you do not support the mandatory controls
    in this bill?
        Mr. Page. I do not.
        Senator Smith. We also have, which is pretty obvious, some
    major national security concerns right now. My concern here in
    the United States is if we have the fuel switching--I don't
    have anything against natural gas, I think it is a great
    product, but if we have the fuel switching that S. 556 calls
    for, how in the world, using Canada's example of 900 to 10 in
    terms of years, I don't know what it is in the United States,
    if somebody knows, please say it, but how are we going to be
    able to provide the natural gas that would be required for a
    fuel switching of the magnitude called for in this bill? Mr.
    Tyndall or Mr. Hughes?
        Mr. Hughes. This is a major concern as to infrastructure in
    this country to be able to handle the transmission, to be able
    to handle the receipt of potentially these materials needing to
    come in from offshore if we don't have enough adequate supplies
    within our own country to be able to move it. That goes to the
    timing issue of the bill. Not only do we not need to go through
    and potentially put controls on operations but also rebuilding
    infrastructure to change how we move those fuels to the various
    power plants and then the ports getting them capable to move LP
    gas into unloading situations which from a national security
    issue one might wonder about. That whole issue will play
    heavily on the timing needs as well.
        Senator Smith. Let me correct myself because I mentioned in
    the opening statement we had approximately, depending on whose
    estimates you use, 450 or 460 years of coal and the estimates
    are about 65 years of natural gas in the United States.
    Obviously if you look at that diversification, the fuel mix on
    that chart, looking at coal at 24 and natural gas to 48 under
    S. 556, we are looking at putting a lot of pressure on our own
    natural gas that we don't have to and where are we going to get
    it if we don't have it? That 65 years is going to diminish
    quickly. It is not going to be 65 years if we go under
    diversification of this legislation, correct?
        Mr. Hughes. That is correct.
        Senator Smith. Therefore, where are we going to get it? I
    think the answer is pretty obvious where we have to get it and
    that is why I think we have to look realistically at this. It
    is an environmental issue but it is also an economic issue and
    maybe a survival issue in more ways than just environmental.
        I think we have to have balance here and to use this kind
    of logic and say we are going to squeeze out a resource that
    has 460 years of availability, assuming the technology advances
    and is going to do a lot of advancing in 400 years, why would
    we want to pass legislation that would make us dependent on
    foreign oil or natural gas and use up the 65 years of reserves
    in 25 years if we continue along that kind of schedule.
        I am very, very concerned about this and I am hopeful that
    we can get some compromise.
        Mr. Hawkins. It is important to understand what the Energy
    Administration says is going to happen under status quo. The
    EIA is forecasting under business as usual between now and 2020
    that there is going to be some 300,000 megawatts of new power
    plant capacity to be built; 90 percent of that is natural gas.
    The market is not looking to coal for new power generation
    today in the United States because of uncertainty. The 10
    percent that the EIA modelers predict is going to be coal, most
    of the market analysts don't think is going to happen either.
        This uncertainty is not promoting fuel diversity. It is
    promoting just doing what happens to be the cheapest in the
    short term interests of individual decisionmakers but is not in
    the long term interest of the United States. Today, it is
    technically feasible to build modern coal-fired capacity using
    gasification technology in a couple of States away in Delaware.
    There is a refinery operating a gasification technology that is
    using petroleum coke, just as hard a fuel to manage as coal,
    selling electricity into the grid but you won't find electric
    companies installing that because the logic of the market
    doesn't make sense unless you have a price for carbon and you
    won't have a price for carbon if you can dump it for free.
        Senator Smith. You are correct on the certainty issue but
    we don't have certainty largely due to the fact that we need to
    do something here. Clear Skies or a compromise between Senator
    Jeffords and Clear Skies will give the market that certainty,
    will give enough certainty to be able to move toward more
    diversity in terms of coal and less dependence upon other
    fuels.
        Mr. Hawkins. If I could only say adopting a three-pollutant
    bill will not provide certainty. It will leave a huge shoe, the
    carbon shoe, hanging in the air ready to drop.
        Senator Smith. I am not advocating leaving a carbon shoe
    hanging in the air; I am advocating moving now to move forward
    to get something done and then deal with the fourth issue.
        Senator Jeffords. Senator Voinovich?
        Senator Voinovich. In response to Senator Jeffords, you
    stated the States support controls on all facilities. I want to
    make clear, do you support the birthday provision as contained
    in the Jeffords bill which will require 80 percent of all of
    the coal units to upgrade within 5 years?
        Mr. Methier. Our associations have not been specific on
    when that would happen. We had considerable debate on this,
    whether or not we need that certainty, whether or not we need
    to allow the timing like the Administration's bill and at the
    end of that time, whether or not we should require some
    eventual minimum level of control.
        What we need as air regulators is some certainty that
    either at certain points of time whether it is based on the age
    of the plant or the compliance deadline schedule that we come
    up with, we have a minimum level of control at every plant so
    that we can get the local air quality benefits that we need in
    addition to the broad regional effects.
        Senator Voinovich. You talked about both new and existing
    plants continuing to be subject to NSR requirements. I suspect
    you are supportive of coming out with a clear statement on NSR
    from the Administration? Do you think that is important right
    now? We are looking for some new regulations to come out from
    the Administration. Is your organization anxious for those to
    come out?
        Mr. Methier. We are anxious to see what is proposed. We
    have been actively engaged in these issues for many, many
    years. We have testified in many forums and would be happy to
    supply that information. We do believe reform of new source
    review is required, there does need to be some more clarity and
    flexibility for major existing sources. We would like to see
    what is being proposed and would be ready to comment on that at
    the time.
        Senator Voinovich. I understand that under the previous
    Administration, STAPPA endorsed many of the NSR reforms
    contemplated by the Clinton Administration, including the so-
    called off-ramp provisions for the utility industry. This off-
    ramp would have provided the utilities with a lot of
    flexibility. Do you still support providing the utilities with
    that NSR flexibility?
        Mr. Methier. We believe particularly for the existing
    plants, the existing units, that some more clarity and
    flexibility is warranted. We believe that for new sources,
    speaking for my State, Georgia, we had plenty of new power
    plants, plenty of new generation built and new source review
    requirements don't slow that down.
        For the existing units, if there can be some way to get
    controls, the best time to control is at the time those
    modifications are made. If some period of time after that can
    be provided to allow certainty for other changes within that
    structure, we are on record supporting that.
        Senator Voinovich. Would any of the witnesses want to
    comment on the issue of the uncertainty of NSR and the effect
    it is having on the utilities and other industries in this
    country in terms of going forward with reducing their
    emissions?
        Mr. Hawkins. As you know from previous testimony I have
    given to this committee, this issue of uncertainty under NSR
    really misses the basic point which is that if you are an
    electricity generating company and have a project, if that
    project increases emissions and you do not do something to keep
    your emissions at their current levels, then you have to worry
    about new source review.
        If you have a project it doesn't matter what that project
    is, short of building an entirely new boiler, if you have a
    project that does not increase emissions over your current
    levels, you don't have to worry about NSR. So the whole issue
    is not about uncertainty of NSR, it is about whether the
    individual plants want the freedom to increase local pollution
    without having to do something about that. If they agree to
    keep their pollution at current levels, they have no NSR
    uncertainty whatsoever.
        Mr. Tyndall. We agree with that completely, so long as Mr.
    Hawkins understands if a tube is leaking or there are several
    different tubes leaking, so you replace them and now they can
    put through more steam, that is not changing the capacity of
    the power plant.
        Of course none of this is agreed to. You can only replace
    the miles and miles and miles and miles of equipment that
    handle water and steam through a power plant, you can only
    replace eight feet at a time or whether you can only replace a
    mile at a time or the level where you are just doing repairs
    before you get to some magic line where you are doing something
    different because the issue of whether these units are
    increasing emissions isn't driving EPA's current
    interpretation. It is issues like were you down two more days,
    were you off line 2 days last year and now you are not going to
    be off line.
        Senator Voinovich. The real question I have is this. From
    what I understand in terms of many of the industries, chemical
    and other industries including utilities, as far as their
    moving forward with replacement or modernization or whatever it
    is, they are in limbo right now because of the uncertainty in
    terms of new source review. Is that the case or not?
        Mr. Tyndall. There is not a clear line. It is easy for
    David to say here is the clear line, it is a very simple thing.
    That means day to day, someone having to make decisions about
    what they can and cannot do at a power plant or at a factory
    which is something where you get two different sets of lawyers
    and you all sit around and try and figure it out. It has been
    that way for 10 years.
        Senator Voinovich. Mr. Hughes?
        Mr. Hughes. From our particular perspective, the issue
    deals with the usage of actual to potential emissions. If for a
    period of time you have had an economic down turn and have sat
    there a couple of years and run your plant at 60 or 70 percent
    of capacity, the market and economy are now beginning to take
    off, you understand you now want to run your plant back to its
    original capacity, you want to go in and make improvements to
    that plant and the improvements aren't needed to get you back
    to capacity but because of the current usage of actual
    potential, making those improvements may pull you into a lot of
    additional controls and timing that cause you some difficulty.
    That is our issue that is on the table that hopefully will be
    addressed when the new programs come forward.
        Senator Voinovich. Many industries are in limbo in terms of
    whether they are going forward or not because they want these
    issues clarified as to whether or not they are going to be
    subject to new source review permits.
        Senator Jeffords. I want to thank you all but I am not
    going to necessarily end it. If any of you are sitting there
    with why didn't they ask me this because I have the answer to
    all your problems, I'll give each of you 30 seconds. Mr. Page?
        Mr. Page. We didn't get to talk about the incredible
    importance to many of us in industry of an effective open
    liquid emissions trading system. That is a key component in
    financing our technology renewal and capital stock renewal.
    Also it is a means whereby the United States can begin to reach
    out to the developing world and through investment show
    leadership in terms of climate change. We are involved in Latin
    America and Africa and Asia right now in terms of some of this.
    I think that is a win-win situation in terms of no hard
    currency transfer in many cases with these projects from the
    developing country.
        Clear verification of the environmental benefits is
    essential and at the same time, helping us to give more
    flexibility in terms of managing CO2 here in North
    America and CO2 being a global phenomenon, I really
    believe requires a global solution through emissions trading,
    not just individual national systems.
        Senator Jeffords. Thank you. Anyone else?
        Mr. Methier. Following up on the new source review issue,
    there is uncertainty. We spend a lot of time with people coming
    in wanting to know what are the rules, what can we do. We don't
    see things not happening but it is taking longer to work
    through the process. That is why we say new source review
    shouldn't be discarded. It does need to be fixed in some places
    but we do see investments being made, progress being made and
    businesses are moving forward but it is more difficult than it
    may need to be.
        Senator Jeffords. Mr. Hawkins?
        Mr. Hawkins. The committee may have been left with the
    impression that the only way to get some emissions reductions
    from today is to enact legislation. We favor comprehensive
    legislation, let me be clear, but let me also be clear that the
    Administration today has very broad authority to move forward
    and the State and local agencies have indicated a willingness
    to move forward on abating these emissions.
        Mr. Tyndall talked about the Clean Air Act allowing up to
    12 years to meet the fine particle standard. That is correct,
    but it is only partly correct. The Clean Air Act requires that
    the standards be met as quickly as possible. It would be
    possible today to designate areas as violating these standards,
    it would be possible for State agencies with EPA support to
    begin developing regulations today to dramatically cut the fine
    particle precursor pollution.
        I would predict if it doesn't start within a few months,
    you will see States and maybe environmental organizations using
    the courts to basically say it is time to get moving because
    the Clean Air Act requires action and you haven't taken that
    action.
        We can get benefits very quickly under the Clean Air Act if
    we have leadership from the Administration and if we have the
    cooperation of the States, and if we have the cooperation of
    the industry. Since all the panelists today have indicated a
    willingness to get those kind of environmental benefits, I
    would hope we could get that cooperation.
        Senator Jeffords. Mr. Hughes?
        Mr. Hughes. I think the one commonality I heard today was a
    strong support for making sure we do have clean air. The turn
    seems to be on how far, how fast we can move without causing
    disruption in other sectors. I look at this as kind of a 3E
    issue. We have energy, the environment and the economy. If we
    are not sure we are balancing those three, we can put ourselves
    on a very unsound base.
        I also thought about when Senator Chafee referred to the
    train that was now heading toward the bridge and something
    needed to be done. One needs to judge also how far down the
    track the bridge is and how fast do I now need to apply the
    brake because maybe there is some time on some of these issues,
    not a lot of time but some time that we can deal with rather
    than all of a sudden applying full brakes and have potential
    for a derailment.
        Senator Jeffords. Mr. Tyndall?
        Mr. Tyndall. I agree completely with what David said. As he
    knows and he has lived it, these programs do take a lot longer
    than we want to run through the process. They all end up with
    everybody in court because that is what inevitably happens
    because that is where we are.
        We have proven with the acid rain program if we have a
    simple set of statutory targets, and give the industry workable
    lead time to hit them, we can do it and stay out of court and
    get the job done.
        There is also an opportunity here for the committee I
    really think is going to disappear in a very short time because
    we are sort of at the beginning of a lot of regulatory battles
    that are going to start. One is going to be what the
    Administration is going to do on mercury. Once that happens,
    what we do on fine particles, and all the other regulatory
    things that you don't see a lot but we see day to day, once
    those things start it is going to be a lot harder for Congress
    to act.
        Right now there is this window before all this gets
    started, before everybody is in the trenches where we might be
    able to resolve some of these. That is our hope if we cannot
    make reasonable progress.
        Senator Jeffords. Mr. Barger?
        Mr. Barger. I would like to begin to attempt some of the
    resolution that Senator Voinovich asked for. I find myself in
    complete agreement with Mr. Mullen that the poor get
    increasingly squeezed in this society.
        I don't believe that the cost of controlling pollution that
    has been grandfathered for a quarter of a century necessarily
    has to be passed on directly to those people.
        Before I came I also talked to two people. The first was a
    fellow by the name of Michael O'Donovan, who lives in
    Pensacola. He has a daughter who is affected by asthma. I asked
    him how much absent insurance he had to pay per month to take
    care of her. He said $400.
        The second person I talked to was my father, who is 80
    years old. At the age of 70 after being an athlete all his
    life, he came down with exercise induced asthma. My father
    spends $500 a month taking care of his asthma and he doesn't
    have insurance that covers those medications.
        I would urge there are a lot of other costs we need to look
    at in relation to what the effects of our actions are going to
    be. I would have to extend the transportation analogies in
    relation to CO2 by saying the boat we are on may be
    the Titanic and we see this white thing out in the distance and
    we are pretty sure it is an iceberg. It kind of makes sense to
    me to go ahead and start turning the wheel now.
        Senator Jeffords. Mr. Mullen?
        Mr. Mullen. I think there is agreement with everyone and
    that was referenced in terms of removing pollutants. There is
    no question about that. I think what is relevant is two other
    pieces. One is that as much as it is difficult to--as part of
    my business, this isn't my business, I run another business--
    but in the business I run, I think there is a great deal of
    similarity. That is there has to be a concern not only for the
    certainty I hear you talking about, there needs to be some
    certainty rather than this uncertainty because that will
    generate certainty for a lot of others.
        Senator when we met with folks in the Cleveland area, one
    of the things that was most difficult for them is to see double
    or triple energy cost increases because there was uncertainty.
        So from my business or what I do every day, establishing
    certainties not only in energy costs but in health care, I
    think it is the same principle. One can only accomplish that
    candidly through what I hope I'm hearing is some type of
    compromise and looking at the whole, not the parts.
        Senator Jeffords. Thank you all.
        Before you go, we reserve the right to ask for answers to
    questions in writing.
        This has been extremely helpful to the committee and I
    can't thank you enough for all the work and effort that went
    into preparing for our questions and your answers.
        Senator Voinovich. Mr. Chairman, I would like to ask
    permission of the committee to insert in the record, the
    resolution passed by the Ohio General Assembly in regard to
    556.
        Senator Jeffords. Without objection, so ordered.
        The meeting is adjourned.
        [Whereupon, at 12:05 p.m., the committee was adjourned, to
    reconvene at the call of the Chair.]
        [Additional statements submitted for the record follow:]
     Statement of Hon. Dennis Kucinich, U.S. Representative from the State
                                    of Ohio
        I thank the committee for the opportunity to testify today
    regarding the Clean Power Act, S. 556.
        This legislation today addresses a fundamental issue of ethics and
    justice, of how our nation should use natural resources, and how our
    use of them affects each other and our surroundings. For air, like
    water or food, is a basic human need. It is a work of mercy to give
    water to a thirsty person, or give food to a hungry person. It is a
    work of justice to help a person breathe who cannot get air. Do we not
    praise the heroism of one who would resuscitate a drowned swimmer, or
    prevent a child from choking? Why not, then, is ensuring that all of us
    can breathe easily on a day-to-day basis, and not just in an emergency,
    subject to debate?
        In 1967, Pope Paul VI gave an address, Populorum Progressio, On the
    Development of Peoples. In that address, he said: ``Development cannot
    be limited to mere economic growth. In order to be authentic, it must
    be complete: integral, that is, it has to promote the good of every man
    and of the whole man. As an eminent specialist has very rightly and
    emphatically declared: `We do not believe in separating the economic
    from the human, nor development from the civilizations in which it
    exists. What we hold important is man, each man and each group of men,
    and we even include the whole of humanity'.''
        As our country moves forward with greater and greater economic
    prowess, how can we call this development when it witholds a basic
    human right from many of our citizens? How can we call this development
    when it makes families poor from health costs, when it debilitates
    children from filling their lungs, and when it leads to early deaths
    among the sick and elderly?
        I strongly support the Clean Power Act, as do many of my
    constituents in the Cleveland area for the sake of their health and
    their environment.
        My constituents have good reason to support it. Unfortunately, the
    Cleveland area suffers from severe air pollution, and two summers ago,
    had 39 violations of the smog standard in a period of about 60 days.
    That means that two-thirds of the time during the summer, when people
    and children are most likely to be outside, they are breathing air that
    is dirtier than what EPA believes is safe. As result, summer smog in
    the Midwest triggers 34,000 emergency room visits, 14,700
    hospitalizations, and 1.4 million asthma attacks each year.
        At these levels, air pollution can have a life-or-death effect,
    especially on vulnerable populations. A study reported in the Journal
    of American the American Medical Association (JAMA) this past March
    proved the association between day-to-day air pollution and the
    increase risk of lung cancer, cardiopulmonary death, and other adverse
    health effects. Children will have life-long health problems as a
    result of air pollution. It will cause senior citizens to suffer
    premature deaths.
    Health Costs
        The Centers for Disease Control estimate that 4.8 million children
    have asthma nationally. A conservative estimate is, that for every
    child, about $500 per year is spent on mediations, physician care, and
    hospital treatment, not including other costs, such as school
    absenteeism, psychological effects and others. Power plant pollution is
    responsible for over 6,000 premature deaths per year; more than that
    from auto deaths due to nonuse of seatbelts.
        Health costs are a very real part of the discussion of costs and
    benefits, because they are so enormous, they are impossible to ignore.
    The medical community is increasingly reporting on public health
    implications of polluted air and global climate change. Just last
    month, the Medical Student Journal of the American Medical Association
    devoted its entire issue to the topic.
    Impact on Energy Sources
        Some opponents to the Clean Power Act have made some rather
    exaggerated claims, such that compliance will mean a massive shift to
    other fuel sources, and that the compliance costs will be extremely
    burdensome, especially for low-income families. These opponents are,
    for the most part, the utility industry. The industry claims that the
    Clean Power Act and similar legislation mandates a switch away from
    coal. This is a myth. It does not forbid the use of coal as an energy
    source. There are number of options for reducing power sector carbon
    emissions. These include:
          Replacing inefficient coal plants with advanced, highly
    efficient coal generation.
          Shifting generation from coal to low carbon (natural gas)
    or no carbon generation (renewable) sources.
          Capture and geologic sequestration of carbon dioxide from
    fossil power plants. The fact that there are many options for reducing
    power sector carbon emissions mean that there is considerable
    flexibility for meeting a carbon cap, and deep carbon reductions do not
    require substantial reductions in the use of coal use.
    Impact on Energy Costs
        The industry also claims that compliance costs will be
    extraordinary. On the contrary, an October 2001 report by the
    Department of Energy's Energy Information Administration (EIA) showed
    that, under scenarios similar to the Clean Power Act, households would
    actually save money. As time goes on, they would continue to save even
    more money. Specifically, the average annual household expenditure
    would be $40 less in 2010, and $200 less by 2020. Nationwide, consumers
    would save $27 billion on their electric bills in 2010 if the Clean
    Power Act were enacted, and save $60 billion by 2020.
        I think the answer to today's hearing, a weighing of the costs and
    benefits of multi-pollutant legislation, is overwhelming in favor of
    benefits. Practically, it will mean more efficient use of resources,
    lower energy costs over the long term, and improvements in public
    health. As Member of Congress, I think we are also obligated to
    consider the principles of this legislation. Without acting in favor of
    multi-pollutant legislation, we allow injustice to continue where
    increased energy usage results in a disproportionate burden of
    suffering and costs on the young, the sick, the elderly, and low-income
    people who cannot afford to move away from polluted areas or for the
    health care they desperately need. From a principled perspective, it is
    the responsible, ethical and just policy to support.
                                   __________
      Statement of Ronald Methier, Chief, Air Protection Branch, Georgia
         Environmental Protection Division, on behalf of the State and
       Territorial Air Pollution Program Administrators (STAPPA) and the
         Association of Local Air Pollution Control Officials (ALAPCO)
        Good morning, Mr. Chairman and members of the committee. I am
    Ronald Methier, Chief of the Air Protection Branch of the Georgia
    Environmental Protection Division. I am testifying today on behalf of
    STAPPA--the State and Territorial Air Pollution Program
    Administrators--and ALAPCO--the Association of Local Air Pollution
    Control Officials. I am a past President and member of the Board of
    Directors of STAPPA and currently serve as Co-Chair of the STAPPA/
    ALAPCO Energy Committee. STAPPA and ALAPCO are the national
    associations of air quality officials in 54 states and territories and
    over 165 major metropolitan areas across the country. The members of
    STAPPA and ALAPCO have primary responsibility under the Clean Air Act
    for implementing our nation's air pollution control laws and
    regulations and, moreover, for achieving and sustaining clean,
    healthful air for our citizens. Accordingly, we are pleased to have
    this opportunity to provide our perspectives regarding the benefits and
    costs of multi-pollutant legislation.
        Over the past three decades, since authorization of the first
    Federal Clean Air Act, the United States has made significant progress
    in reducing air pollution, while, at the same time, experiencing strong
    economic growth. In fact, since 1970, Gross Domestic Product has
    increased by 158 percent, energy consumption by 45 percent and vehicle
    miles traveled by 143 percent. Notwithstanding this progress, our
    nation continues to face substantial public health and environmental
    problems as a result of emissions into our air.
        According to EPA's Latest Findings on National Air Quality: 2000
    Status and Trends (September 2001), more than 160 million tons of
    pollution are still emitted into the air each year. Approximately 121
    million people still reside in areas that exceed at least one of the
    six health-based National Ambient Air Quality Standards, including over
    80 million in areas that monitor violations of the new 8-hour ozone
    standard and 75 million in areas that, based on the most current
    monitoring data available, violate the new fine particulate matter
    (PM2.5) standard (when monitoring for PM2.5 is
    complete, even more areas may be found to exceed this standard);
    millions more live in areas where hazardous air pollutants continue to
    pose a serious and pervasive health threat; and many regions of the
    country experience significant visibility impairment that obscures our
    beautiful vistas.
        Electric utilities are one of the most significant sources of the
    harmful air emissions that contribute to all of these problems.
    Nationally, these sources are responsible for 64 percent of annual
    sulfur dioxide (SO2) emissions, which contribute to acid
    rain and the formation of PM2.5. Their emissions also
    account for 26 percent of oxides of nitrogen (NOx) emissions, which are
    not only a precursor to ground-level ozone, but also a contributor to
    such public health and welfare threats as secondary PM2.5,
    acid rain, eutrophication of water bodies and regional haze. Further,
    it is important to note that in some areas of the country, power plant
    contributions to SO2 and NOx levels are considerably higher.
    In addition, electric utilities are responsible for 37 percent of U.S.
    carbon dioxide emissions (EPA's Inventory of U.S. Greenhouse Gas
    Emissions and Sinks: 1990-1998, April 2000).
        Add to this list of emissions no less than 67 hazardous air
    pollutants (HAPs)--including nickel, arsenic and dioxins--which power
    plants also emit in substantial quantities (EPA's Study of Hazardous
    Air Pollutant Emissions from Electric Utility Generating Units--Final
    Report to Congress, 1998). The persistent and bioaccumulative nature of
    mercury makes it of particular concern relative to aquatic ecosystems,
    where it can contaminate aquatic life and pose a serious threat to
    humans who consume the contaminated species. Based on just such a
    threat, over 40 U.S. states and territories have issued fish
    consumption advisories for mercury for some or all water bodies in
    their jurisdictions.
        The magnitude of emissions from power plants, and the serious
    public health and welfare implications these emissions have, make
    controlling electric utilities a top priority. Fortunately, there are
    tremendous opportunities for doing so in a very cost-effective manner.
    Our nation's electricity generation infrastructure is aged, comprised
    of many 30-, 40- and 50-year-old plants that continue to operate
    without modern pollution control technology. Among the most important
    steps Congress can take to address air pollution is to establish a
    comprehensive national multi-pollutant approach for cleaning up
    outdated power plants and ensuring that new plants are dramatically
    cleaner.
        STAPPA and ALAPCO endorse the concept of a comprehensive strategy
    for reducing emissions from electric utilities and, to that end,
    recently adopted a set of principles upon which we believe a viable
    multi-pollutant approach should be based. I have attached a copy of
    these principles to my testimony.
        Our associations believe that a multi-pollutant strategy for
    controlling power plants should address all significant emissions from
    electric power generation. If properly structured, such an approach can
    increase and accelerate protection of public health and the
    environment, reduce pollution more cost-effectively than incremental
    approaches and offer greater certainty to both industry and regulators.
        STAPPA and ALAPCO call for this integrated approach to be based on
    an expeditious schedule that will allow us to reduce emissions as
    rapidly as we can, and certainly prior to the time that states and
    localities are required to meet health-based air quality standards. In
    addition, to ensure steady progress toward the final compliance
    deadline, interim deadlines should be established, with the first
    interim compliance requirements taking effect quickly.
        Further, a multi-pollutant approach should supplement, not
    supplant, provisions of the existing Clean Air Act. We believe programs
    such as New Source Review (NSR), regional haze and Maximum Achievable
    Control Technology standards for utilities must be retained. I will
    elaborate a bit more on NSR in a moment.
        A viable multi-pollutant approach will also establish the most
    stringent enforceable national emission reduction goals feasible by
    capping emissions at levels that reflect the installation of technology
    no less stringent than best available controls on all existing units
    nationwide, with existing power plants required to meet a minimum level
    of control by the final compliance deadline.
        STAPPA and ALAPCO further believe that in meeting these emission
    goals, the regulated community should be afforded flexibility,
    including an emissions trading mechanism with appropriate limitations
    and protections against any adverse health or environmental impacts. If
    emissions allowances are required under a multi-pollutant approach,
    then they should be allocated equitably, and provisions for allocating
    to new sources should be established. Additionally, sources should be
    encouraged to reduce emissions as soon as possible and, to the extent
    early reduction credits are provided for, the use of such credits
    should be appropriately limited.
        On the matter of NSR, as I just mentioned, STAPPA and ALAPCO
    believe firmly that power plants--both new and existing--must continue
    to be subject to NSR requirements. Over the past 8 years, our
    associations have been actively engaged on the issue of NSR and NSR
    reform and have a lengthy and very detailed record of comments in this
    regard. In our recently adopted multi-pollutant principles for power
    plants, we address the topic of NSR for power plants in particular.
        Specifically, STAPPA and ALAPCO believe that current NSR
    requirements for new sources should remain intact, including, among
    others, those related to the installation of control technology (i.e.,
    the state-of-the-art Lowest Achievable Emission Rate in nonattainment
    areas and Best Available Control Technology in attainment areas), the
    acquisition of offsets in nonattainment areas and the protection of air
    quality increments to guard against adverse local air quality impacts
    in attainment areas. Further, while certain NSR reforms for existing
    sources are definitely in order, such sources making major
    modifications to existing units should be required to install the best
    available controls on affected units at the time of the modification,
    acquire any emissions allowances required to address emission increases
    and ensure against adverse local health or environmental impacts.
        In addition, a multi-pollutant approach to reducing emissions from
    power generation should strongly encourage the most efficient use of
    any fuel used as input to electric generation or process energy
    sources, as well as energy efficiency, energy conservation and
    renewable electric energy. Further, it should support efforts to
    develop and deploy consistent approaches for distributed resources to
    mitigate the impacts of small units not otherwise covered by a national
    multi-pollutant strategy.
        Finally, a viable multi-pollutant strategy will ensure that
    regions, states and localities retain their authority to adopt and/or
    implement measures--including local offset requirements--that are more
    stringent than those of the Federal Government.
        As our nation approaches the issue of a multi-pollutant strategy
    for one of our most significant sources of air emissions, we should do
    so in a way that institutes an appropriately rigorous emissions
    reduction scheme on a timely schedule and compels the use of state-of-
    the-art technology, commensurate not only with the substantial
    contribution of power plants to our nation's continuing air quality and
    public health challenges, but also with the level of reductions we will
    garner from new regulatory programs addressing other big-emitting
    sources, like passenger cars and heavy-duty diesel engines. Our goal
    should be to reap every potential benefit that we can so that we are
    able to ensure both an adequate energy supply and clean, healthful air.
    Mr. Chairman and members of the committee, STAPPA and ALAPCO look
    forward to working with you and others as we, collectively, consider
    alternatives for accomplishing this goal. Once again, on behalf of our
    associations, thank you for this opportunity to present our views on a
    multi-pollutant strategy for controlling power plant emissions.
                                     ______

                                   attachment
           Principles for a Multi-Pollutant Strategy for Power Plants
          adopted by the state and territorial air pollution program
       administrators and the association of local air pollution control
                             officials, may 7, 2002
    Introduction
        Over the past three decades, since authorization of the first
    Federal Clean Air Act, Federal, state and local governments have made
    significant progress in reducing air pollution in the United States. In
    the aggregate, emissions of the six ``criteria pollutants'' for which
    health-based National Ambient Air Quality Standards (NAAQS) have been
    established have been reduced by 29 percent while, at the same time,
    Gross Domestic Product has increased by 158 percent, energy consumption
    by 45 percent and vehicle miles traveled by 143 percent.
    Notwithstanding this progress, our nation continues to face substantial
    public health and environmental problems as a result of emissions into
    our air.
        According to the U.S. Environmental Protection Agency's (EPA's)
    Latest Findings on National Air Quality: 2000 Status and Trends
    (September 2001), the agency's most recent evaluation of our nation's
    air quality status and trends, more than 160 million tons of pollution
    are still emitted into the air each year and approximately 121 million
    people still reside in areas that exceed at least one of the six
    health-based NAAQS. This report also points to electric utilities as
    one of the most significant sources of harmful air emissions,
    responsible for 64 percent of annual sulfur dioxide (SO2)
    emissions, which contribute to acid rain and the formation of fine
    particulate matter (PM2.5), and 26 percent of oxides of
    nitrogen (NOx) emissions, which are not only a precursor to ground-
    level ozone, but also a contributor to such public health and welfare
    threats as secondary PM2.5, acid rain, eutrophication of
    water bodies and regional haze. EPA also estimates that electric
    utilities are responsible for 37 percent of the carbon dioxide
    (CO2) emissions released in the United States (Inventory of
    U.S. Greenhouse Gas Emissions and Sinks: 1990-1998, April 2000).
        Power plants also emit substantial quantities of hazardous air
    pollutants. EPA's Study of Hazardous Air Pollutant Emissions from
    Electric Utility Generating Units--Final Report to Congress (1998)
    concludes that electric utility steam generating units emit 67
    hazardous air pollutants (HAPs), including mercury, arsenic, nickel,
    hydrogen chloride and dioxins. In fact, electric generating units are
    the major emitter of hydrochloric acid, which is the HAP emitted in the
    greatest quantity in the U.S. Electric generators are also one of the
    largest sources of mercury in this country, responsible for more than
    one-third of anthropogenic mercury emissions. The persistent and
    bioaccumulative nature of mercury makes it of particular concern
    relative to aquatic ecosystems, where it can contaminate aquatic life
    and pose a serious threat to humans who consume the contaminated
    species. Based on just such a threat, as of July 2000, at least 41 U.S.
    states and territories had issued fish consumption advisories for
    mercury for some or all water bodies in their jurisdictions (National
    Air Quality and Emissions Trends Report, 1999).
        Given the significant contribution of power plant emissions to
    public health and environmental problems in the United States, the
    State and Territorial Air Pollution Program Administrators (STAPPA) and
    the Association of Local Air Pollution Control Officials (ALAPCO)
    believe that, if properly structured, a comprehensive, integrated
    control strategy for electric utilities is an appropriate approach that
    will offer multiple important benefits.
        First, such a multi-faceted approach for power plants will provide
    an excellent opportunity to address multiple pollutants in an
    integrated and holistic manner, thus increasing and accelerating
    environmental and public health protection by yielding far greater
    environmental gains than those achieved by the various existing
    programs to which power plants are subject. Such an approach will also
    enhance opportunities for pollution prevention and sustainability, as
    well as promote more expeditious compliance.
        Second, a comprehensive, integrated approach could offer important
    advantages to the regulated community in the form of increased
    certainty and cost efficiencies. Today, the power generation industry
    is subject to almost a dozen separate programs to reduce air pollution.
    Many of these programs regulate different pollutants and impose varying
    compliance deadlines and requirements. An integrated approach could not
    only provide far greater certainty for the regulated community, it
    could promote enormous cost efficiencies in developing and implementing
    control measures for multiple pollutants. For example, EPA has
    estimated that harmonizing control strategies for NOx, SO2
    and CO2 in an integrated fashion could save approximately $4
    billion, compared to controlling these pollutants separately (EPA
    presentation to STAPPA/ALAPCO, October 2000).
        Finally, a comprehensive, integrated approach could also increase
    efficiency and certainty for state and local air quality regulators.
    These 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. Further, litigation
    that could delay emission reductions and environmental improvements
    would likely be reduced.
        Currently, proposals for multi-pollutant strategies for power
    plants are under consideration in Congress, as well as in a number of
    states. As discussion ensues regarding these proposals, STAPPA and
    ALAPCO offer the following principles upon which the associations
    believe a viable multi-pollutant approach should be based.
    STAPPA/ALAPCO Principles for a Multi-Pollutant Strategy for Power
            Plants
        1. Establish an integrated approach for regulating air emissions
    from electric power plants on an expeditious schedule with synchronized
    deadlines.
        2. Address all significant emissions from electric power
    generation.
        3. Supplement, but do not supplant, the existing Clean Air Act.
        4. Cap emissions from power plants to establish the most stringent
    enforceable national emission reduction goals feasible, and to reflect
    the installation of technology no less stringent than best available
    controls on all existing units nationwide, with each existing power
    plant required to meet a minimum level of control by the final
    compliance deadline.
        5. Equitably allocate any required emissions allowances to all
    existing sources; include provisions for new sources.
        6. Encourage sources to reduce emissions as soon as possible; if
    early reductions credits are provided, use of such credits should be
    appropriately limited.
        7. Establish interim and final deadlines to ensure steady progress,
    with the first interim compliance requirements taking effect quickly.
        8. Require new units to acquire any required emissions allowances
    and to comply with existing New Source Review control technology
    requirements (i.e., Lowest Achievable Emissions Rate in nonattainment
    areas and Best Available Control Technology in attainment areas), as
    well as other existing NSR requirements, including, but not limited to,
    those for offsets in nonattainment areas and for protection of air
    quality increments to guard against adverse local air quality impacts
    in attainment areas.
        9. Allow existing sources to make major modifications to existing
    units, provided best available controls are installed on affected units
    at the time of the modification, the source acquires any required
    emissions allowances to address emission increases and there are no
    adverse local health or environmental impacts.
        10. Afford the regulated community flexibility in meeting their
    required emissions reductions, including an emissions trading mechanism
    with appropriate limitations and protections against any adverse health
    or environmental impacts.
        11. Establish measures that strongly encourage the most efficient
    use of any fuel used as input to electric generation or process energy
    sources, including combined heat and power applications.
        12. Encourage energy efficiency, energy conservation and renewable
    electric energy, such as output-based standards and/or allowance
    allocations.
        13. Support efforts to develop consistent approaches for
    distributed resources and encourage the use of such approaches by
    jurisdictions interested in regulating the impacts of small units not
    otherwise covered by a national multi-pollutant strategy.
        14. Retain the authority of regions, states and localities to adopt
    and/or implement measures that are more stringent than those of the
    Federal Government, including retention of local offset requirements.
                                     ______

    Response by Ronald Methier to Additional Question from Senator Jeffords

        Question. You mentioned, that ``some'' NSR reforms for existing
    sources would be acceptable and you specifically mentioned BACT (or
    best available control technology). Could you describe what that
    technology would be for the existing sources, and what kinds of
    reductions and costs go with it?
        Response: In addition to complying with sector-wide emission caps,
    each existing source should be required to meet performance standards.
    These performance standards should be based on today's Best Available
    Control Technology (BACT) levels. Emission levels on the order of those
    specified for new units in the recently introduced ``Clear Skies Act of
    2002'' would be appropriate for existing facilities, 'provided they are
    required on a well-defined expedited schedule. We firmly believe,
    however, that new units should continue to be subject to existing NSR
    control technology requirements--including LAER in nonattainment areas
    and BACT in attainment areas--as well as other existing NSR
    requirements.
        For existing sources the performance standards should reflect the
    following currently available technologies; the efficiencies noted are
    typical of well-designed control systems:
          Particulates--baghouse or equivalent (over 99.9 percent)
          Sulfur Dioxide--wet or wet/dry scrubber (over 95 percent)
          Nitrogen Oxides--selective catalytic reduction or
    equivalent (over 90 percent)
          Mercury--multiple' control technologies, often with
    carbon injection (75 percent to 95 percent),
                                     ______

        Response by Ronald Methier to Additional Questions from Senator
                                   Voinovich

        Question 1. In your testimony, you suggested that NSR must be
    retained as part of any multi-pollutant legislation. Is there, however,
    any provisions in the Clean Air Act that STAPPA would view as
    unnecessary if the Senate passes a multi-pollutant bill?
        Response: STAPPA and ALAPCO have recommended that multi-pollutant
    legislation supplement, but not supplant, the existing Clean Air Act.
    With respect to NSR reform, our associations have a lengthy record.
    While we believe the current NSR program remains appropriate for 'new
    sources' and certain significant modifications; it is our position that
    several changes are, in fact, in order for existing sources. A
    compilation of comments 'reflecting our positions on NSR is attached
    for your reference.

        Question 2. How do you foresee the so-called ``birthday'' provision
    being enforced? What are the consequences for regulatory agencies,
    industry, and citizens?
        Response: STAPPA and ALAPCO believe that an age-based trigger for
    NSR can provide certainty for industry and for continuing environmental
    improvement. Some in the industry sector have also supported age-based
    triggers for upgrades to existing major equipment, including age-based
    upgrades in exchange for less NSR on modifications. While our
    associations disagree with the long unit lifetime that has been
    proposed by industry, we believe the concept of an age-based trigger
    has merit.
        Implementation of age-based NSR, and its coordination with other
    aspects of a multi-pollutant strategy, could be accomplished by
    allowing a phase-in period for older existing plants already Over a
    specified useful life (such a concept is included in all the major
    multi-pollutant proposals currently under consideration); newer units
    would be on a schedule to be upgraded prior to reaching the specified
    useful life.
        Such an approach provides certainty to industry, regulatory
    agencies and, most importantly, the local public, in that the timing
    for upgrades to 'best technology would be clearly known to all.
    Installation, of an upgrade would then restart the clock for the next
    upgrade, thus ensuring that air pollution control technology
    improvement and emission reductions continue into the future.
        The use of caps would facilitate the phase-in of reductions from
    the older existing units already past their specified useful life and
    compel additional reductions below the performance standards, in the
    later years. of the phase in. Requirements to periodically evaluate and
    reduce caps are also appropriate, to reflect emission reductions
    achieved as the age-based NSR continues to drive advances in air,
    pollution control technology and lower-emission electricity production.
    More information on STAPPA and ALAPCO's views in this regard is
    included in the attached compilation of comments on NSR.
                                   __________
                Statement of Robert Page, Transalta Corporation
        Thank you, Mr. Chairman. My name is Robert Page. I am Vice
    President, Sustainable Development, for TransAlta Corporation, which is
    headquartered in Calgary, Canada. I have with me Paul Vickers, who
    heads up our offsets and emissions trading efforts.
        We very much appreciate your kind invitation to provide testimony
    to the committee today. As a Canadian, I feel privileged to share our
    thoughts on environmental protection with members of the U.S. Senate, a
    body that we in Canada hold in the highest regard. I am pleased to note
    that several committee members represent states that are our immediate
    neighbors, including Montana, Idaho, Ohio, New Hampshire, Vermont and
    New York.
    Who is TransAlta?
        Before discussing TransAlta's climate change strategy, some
    background on our company is in order.
        TransAlta is Canada's largest non-regulated electric generation and
    marketing company, with more than $7 billion in assets and 9,000
    megawatts (MW) of generating capacity either in operation or under
    construction. We recently established a presence in the United States
    by purchasing a coal-fired power plant in Centralia, Washington. We
    also have generating units in Mexico and Australia.
        Our company has an aggressive growth strategy in North America. We
    plan to increase our generation capacity to 15,000 MW by 2005 by
    building or acquiring additional power plants. We therefore favor
    government policies that accommodate growth in our economy and power
    supply while protecting the environment.
        Our generation mix includes coal, hydro, gas, and wind. In our home
    province of Alberta, we operate three large coal-fired units and have a
    50 percent interest in a fourth. We believe that coal is an essential
    resource for power generation in North America and are committed to
    operating coal-fired units on a long-term basis even as we further
    diversify our generation portfolio.
        Environmental stewardship is one of TransAlta's core values. We
    were recently one of four companies worldwide recognized by the World
    Business Council for Sustainable Development for voluntary approaches
    to climate change. We were also chosen in 1998 and 2002 as the top
    electric utility in Canada for leadership on voluntary greenhouse gas
    (GHG) reductions. In 2002, we received a national award for the best
    environmental reporting in Canada and Wall Street again chose us for
    the Dow Jones Sustainability Index.
    Principles in Our Climate Change Strategy
        As a company, we accept that climate change is a significant public
    concern that must be addressed. This means stabilizing and ultimately
    reducing emissions of CO2 and other greenhouse gases into
    the atmosphere. Because society is heading for a carbon-constrained
    future, our company believes we must seek out cost-effective means to
    manage carbon in the interests of our shareholders and our customers.
    We take this responsibility very seriously knowing that TransAlta is
    currently the second largest single emitter of greenhouse gases in
    Canada.
        Based on this philosophy, TransAlta has developed a Blueprint for
    Sustainable Thermal Power Generation. Our Blueprint identifies steps
    that would enable TransAlta to achieve zero net emissions of greenhouse
    gases in our Canadian operations by 2024. We know that this is a very
    ambitious goal. Our success in reaching it is not a given but will
    depend on both the existence of the right government policies and
    programs and development and application of breakthrough, commercially
    viable technology that is not in use today.
        Our Blueprint envisions two integrated strategies--one for the
    near- and medium-term and the second for the long-term. Under the first
    strategy, we will maintain emissions at current levels at existing
    units and any new units we build or acquire through a combination of
    offset projects, renewable energy, improved plant efficiency, and
    emissions trading. Under the second strategy, we will work toward
    developing and testing new technologies for combustion and for
    sequestering CO2 emissions and then deploying these
    technologies through the normal process of capital stock turnover and
    renewal.
        We are committed to implementing these two strategies through
    voluntary actions, market mechanisms, and negotiated sectoral
    agreements. Our company does not support mandatory carbon controls.
    However, we do believe that government should provide clear market
    signals for new technology developers and policies and procedures that
    ensure the orderly development and functioning of emissions trading
    markets.
    Components of Our Program
        Two aspects of our program merit special comment.
        Offsets and Credits. The first is the importance we attach to
    offsets and credits in achieving emission reductions. Short of
    premature plant retirements or costly repowerings, we can only lower
    emissions at plants using existing technology by improving fuel
    utilization or replacing equipment to increase efficiency. While we are
    committed to continuous improvement in plant efficiency, we can expect
    at best modest gains in emissions performance by this route. Therefore,
    it becomes important to look outside our system for emission reduction
    or avoidance measures that we can apply against emissions from our
    plants. Since CO2 is not a toxic chemical and its
    environmental impacts are long-term and global in nature, we believe
    government policies should officially recognize these ``offsets''
    regardless of where they are generated. Carbon reduction activities
    conducted anywhere in Canada or the world should receive the same
    credit since they will achieve the same environmental benefit
    regardless of location.
        One of TransAlta's highest priorities is to create workable
    mechanisms for generating and trading CO2 offsets. Since
    1996 we have assembled a portfolio of emission reduction projects that
    will deliver approximately 60 million tonnes of reductions over 25
    years. We are currently assessing further additions. The reductions
    come from a variety of projects undertaken in Canada, the United States
    and around the world. A major focus has been methane emission reduction
    since methane is considered to be a very potent greenhouse gas and
    there are cost-effective reduction opportunities. Projects in this area
    include landfill and coal mine methane recovery and use and ruminant
    methane reductions. Other offset projects we have pursued include fuel
    switching, forests and soils sequestration, and renewable energy
    generation.
        We were also an early pioneer in domestic and international
    emissions trading and have executed groundbreaking trades with partners
    in North America, Europe and Japan. Amongst our many trades are
    transactions in the US with Murphy Oil (El Dorado, Ark.) and Entergy
    Corp. (Louisiana and Texas).
        Technology. I also want to comment on the importance we attach to
    the design, demonstration, and application of new clean coal combustion
    systems and the permanent sequestration underground of CO2
    and other emissions.
        Our objective is to have a commercial scale retrofit unit in
    operation by 2007 and a Greenfield facility operational by 2010.
    Several technologies are being evaluated in development programs: coal
    gasification and power generation from hydrogen, advanced emission
    capture technologies and oxy-fuels technologies. Our objective is to
    reduce the production cost of electricity to levels comparable to
    today's technologies while dramatically reducing atmospheric emissions
    of not just CO2 but conventional pollutants as well. To
    reach this goal, CO2, or exhaust gases, would be sequestered
    underground in oil reservoirs (EOR), deep coal seams (CBM) or in
    aquifers.
        We are exploring these approaches in a number of ways. TransAlta is
    participating in a Canadian-based program managed by the Clean Power
    Coalition (see Appendix 1), whose members include coal and power
    companies, the Canadian Federal and several Provincial Governments as
    well as EPRI. Since 1997, TransAlta has participated in a number of
    research and development efforts targeted at developing commercial
    opportunities for sequestering power plant exhaust and/or
    CO2 in underground oil and gas reservoirs. These programs
    have focused on developing understanding of reservoir characteristics
    that affect economic application of CO2 stimulation;
    developing a ranking of potential reservoir stimulation opportunities;
    and field testing of injection techniques and reservoir responses.
    Starting with a one-well trial in 2000, we expanded to a five well
    program in 2001. In 2002, the program is being further expanded to
    include a detailed, Province-wide study of CO2 supply
    sources, pipelining economics and routing and reservoir stimulation.
        While we are hopeful that these technologies will be ready for
    deployment in the next two decades, we have no assurance that this will
    occur. The initial results of our work are promising and appear to
    confirm our commitment but many uncertainties need to be addressed
    before we can be confident that carbon capture and sequestration
    techniques can be incorporated in new (or retrofitted) coal plants at a
    reasonable cost. A concerted effort by government and industry will be
    essential for the substantial progress that we know will be required.
    Lessons from Our Canadian Experience
        Generalizing from TransAlta's experience in Canada is risky because
    our two countries--while sharing a common language and border--have
    different cultures, laws and political institutions. One obvious
    difference is that Canada intends to ratify the Kyoto Protocol while
    the US will not. In all candor, the prospect of Kyoto implementation in
    Canada has been a major factor in designing TransAlta's carbon
    management strategies. Clearly, a different set of considerations
    applies to US-based power producers.
        We do believe, however, that we can offer some observations that
    are useful to this committee as it considers proposals for multi-
    pollutant legislation:
          Since we need time and capital to develop new
    technologies, near-term requirements, which cap CO2
    emissions at levels substantially below current emissions, are
    counterproductive. Our province--Alberta--currently advocates flexible
    approaches that the Kyoto timeframe (2008-2012) does not allow. We
    agree with our Provincial Government that pursuing aggressive
    reductions in this timeframe will punish industry economically by
    forcing investments in available technology which will quickly become
    obsolete--and result in stranded costs--when new clean coal technology
    is available.
          The concept of an integrated multi-pollutant framework--
    under which targets, incentives, and emissions trading for greenhouse
    gases are coordinated with government policies for pollutants such as
    NOx and sulfur dioxide--is one we support. We have seen some piecemeal
    approaches in Canada which have hindered long term technology
    development. To avoid this problem, we have begun discussions in Canada
    about an electricity sector agreement. We are trying to shape this
    agreement to provide more flexibility on near-term emission reductions
    in return for the opportunity to develop technologies that achieve more
    substantial reductions over the long term. Depending on their outcome,
    these discussions could have useful policy implications for the US.
          As we design programs to reduce emissions of greenhouse
    gases and conventional pollutants, we need to align our timetables and
    targets with normal cycles of capital stock turnover and renewal.
    Premature retirement of assets will reduce return on investment and
    weaken the financial position of asset owners. This in turn will make
    it tougher to invest in new plants that use the latest technology.
    Since the buildup of GHG emissions is a long-term problem and not an
    immediate threat, allowing existing plants to complete their useful
    lives without large economic penalties should not be unacceptable
    environmentally. We would urge this committee to avoid fixed
    ``anniversary'' dates (e.g., 30 years) for applying new technology to
    old plants. The optimal date for plant renewal needs flexibility to
    adapt to individual plant conditions and to local electricity
    economics.
          While one response to a CO2 cap could be
    repowering of coal units with natural gas, this approach has major
    problems. Existing supplies of low-cost natural gas are constrained;
    price volatility is common; and there are better uses for natural gas
    than as fuel for electricity generation. Moreover, reserves of coal
    greatly exceed those of natural gas. Alberta has a 900-year supply of
    coal versus a 10-year supply of light conventional crude or a 20-year
    supply of natural gas. This comparison highlights the importance of
    investing in clean coal technology and not relying on natural gas
    repowering.
          In financing this technology change, government support
    and incentives for design and demonstration of new technologies are
    essential. We are strongly advocating government assistance in Canada
    and would welcome cooperative programs between our two nations.
    Government funding for new technologies will need to be substantial and
    sustained. We believe the long term environmental and social benefits
    of technology renewal will be large. The approach we are recommending
    would limit economic distortions and job losses for many communities in
    the coal sector both in Canada and the US and would offer the added
    benefit of a more secure, North American, supply of energy.
          Equally important for sending the correct market signals
    is a well-functioning emissions trading market. We feel that access to
    least cost verifiable offset credits and emission trading is essential
    during and even after the transition to new technologies. The
    availability of offsets from outside our system and outside our sector
    is critical to our ability to stabilize or reduce emissions in the
    early years without constraining us from increasing generating
    capacity. As part of any system of offsets and trading, there must be
    credit for all current and future reduction measures so that early
    actors receive real recognition and benefits. To preserve our
    competitive position in light of Kyoto requirements, we in Canada must
    also have access to cost-effective international credits; we could
    start with a NAFTA emissions trading scheme that would make credits
    available from the US and Mexico. A robust, liquid trading market that
    accommodates cross-border transactions within and ultimately beyond
    North America will be essential so TransAlta can meet increasingly
    stringent State and Provincial targets for emission reductions. Knowing
    that cost-effective trading opportunities exist will set the stage for
    making commitments to meet these targets under Federal voluntary or
    covenant-based programs.
          Credible and reliable programs for reporting GHG
    emissions, recording and verifying measures to reduce, avoid or
    sequester these emissions, and tracking credit transactions are all
    critical for effective carbon management strategies. Industry
    participation in these programs must be broad-based for them to
    function successfully. We are pleased that the US Senate has responded
    to this need by creating a comprehensive GHG reporting and registry
    system in recently enacted energy legislation.
          We recognize the value of integrated sector-based
    strategies for addressing emissions challenges facing power generators
    and understand the committee's interest in legislation for the
    electricity sector (similar to sectoral initiatives underway in
    Canada). However, we wish to see the timely application of similar
    policies and regimes to other industrial sectors, reflecting principles
    of equitable burden sharing and the need for large, liquid emissions
    markets.
        Because of our Centralia, Washington operations, we are
    participating in a group of US power producers--Energy for a Clean Air
    Future--that developed a multi-pollutant proposal last fall for review
    by Congress and the Administration. Many of the concepts I've discussed
    in my testimony are reflected in the portion of the ECAF proposal
    addressing GHG emissions. I'm attaching relevant sections of the ECAF
    proposal (Appendix III) so they're available to the committee.
        In conclusion, I appreciate the committee's consideration of my
    testimony and welcome any questions.
                                     ______

                                   appendix i
       overview of clean power coalition's (cpc) clean coal research and
                              development program
    Purpose and Objectives
        To develop a proposal for a retrofit of an existing coal fired
    electricity-generating plant to low or zero emission technology such
    that a commercial installation could be commissioned no later than
    2007. To develop a proposal for a new zero or low emission coal fired
    electricity-generating plant such that a commercial installation could
    be commissioned no later than 2010
    Funding and Partners
        Funding of up to $5,000,000 (Canadian) is in place now. This is
    sufficient to allow the development of the feasibility study of the
    alternative technologies under consideration. This phase of the work
    will be completed 1 year from now (mid summer 2003).
        Participants in the CPC to date are:
        Nova Scotia Power
          Ontario Power Generation
          Saskatchewan Power
          ATCO Electric
          EPCOR
          TransAlta
          Luscar Coal
          EPRI
          Federal Government (Natural Resources Canada)
          Government of Alberta through the Alberta Energy Research
    Institute
          Saskatchewan Government (Industry and Resources)
          Nova Scotia Government (Department of Natural Resources)
    Technologies and Development Targets
          Coal Gasification
          Syngas production
          CO2 capture and separation (amine extraction)
          Hydrogen fueled combined cycle power plant integrated
    with gasification and syngas
          Air separation
          Combined air/oxygen firing steam boilers

        Target is to develop a design for a retrofit and a design for a new
    power plant such that the costs (capital and operating) are within the
    costs of a conventional pulverized coal steam plant with equivalent air
    emissions control technologies and CO2 capture.
        The research efforts will be directed at developing dramatic
    improvements in the following areas:
          Reduction of auxiliary power requirements
          Dramatic improvement in the capacity, reliability and
    flexibility of amine systems for CO2 capture
          Elimination of the air separation plant or dramatic
    reductions in energy consumption
          Improvement of the reliability of the integrated systems
    to the levels achievable today
                                     ______

                                  appendix ii
    Brief Biographies
        Robert J.D. Page, Vice President, Sustainable Development,
    TransAlta Corporation Calgary, Alberta, Canada (1997-present); Former
    Dean, Faculty of Environmental Design, University of Calgary (1990-
    1997); Currently Adjunct Professor, Environmental Science Chair, Board
    of Directors, International Emissions Trading Association (Geneva);
    Chair, Board of Directors, BIOCAP Canada Foundation (National Climate
    Change Sinks Research Program); Member, Board of Directors,
    International Institute for Sustainable Development; Member, Business
    Environmental Leadership Council, Pew Center for Climate Change
    (Washington DC).
        Paul A. Vickers, Director, Offsets and Strategy, Sustainable
    Development, TransAlta Corporation Calgary, Alberta, Canada (1996-
    present); Prior to 1996; Shell Canada Ltd; varied assignments in
    refinery and chemical plant management, business development, research,
    chemicals marketing and environment and safety; Board of Directors,
    Emissions Marketing Association (Washington and Milwaukee); Member,
    Public Advisory Panel of the Vinyl Manufacturers Association of Canada.
                                     ______

                                  appendix iii
           ecaf framework for addressing the climate change challenge
        ECAF members have given considerable thought to the complex and
    important issue of global climate change and its relationship to other
    environmental challenges confronting the power generation sector. ECAF
    has developed a general framework for addressing the climate issue for
    power plants. Using this framework as a basis for dialogue, ECAF is
    committed to working cooperatively with the Administration and Congress
    to develop responsible approaches to climate change that are compatible
    with national energy policy and continued economic growth.
    Rationale for Addressing Power Plant Emissions of CO2
        Carbon dioxide (CO2) is a byproduct of the combustion of
    fossil fuels and is produced and emitted by power plants fired with
    coal and other hydrocarbon fuels. It is also produced and emitted by
    many other industrial sources as well as by the transportation sector.
    These emissions are believed to contribute to the buildup of greenhouse
    gases (``GHGs'') in the atmosphere and may play a significant role in
    causing temperature rises and other changes in the global climate.
    Although many scientific uncertainties remain about the causes and
    impacts of global warming, there is a growing consensus that
    precautionary measures should be taken to moderate the rate of
    greenhouse gas buildup by stabilizing and ultimately reducing
    CO2 emissions. On a long-term basis, GHG concentrations in
    the atmosphere need to be stabilized at a level which prevents
    unacceptable impacts on global climate.
        The prospect of future CO2 emission controls is a major
    source of uncertainty for the power generation sector and greatly
    complicates long-term planning and capital allocation decisions. If
    stringent CO2 reduction requirements are imposed at some
    future date, they could dramatically add to the large expenditures that
    will be required to control traditional pollutants and Undermine the
    financial basis for investments that otherwise seem prudent in the
    current regulatory climate. Accordingly, ECAF members believe that, to
    comprehensively address the emission challenges facing the industry, a
    thoughtful, well-defined program for addressing CO2
    emissions by the power sector should be developed in parallel with a
    sound three-pollutant legislative framework.
        Importantly, the power generation sector is only one of several
    sectors responsible for emissions of CO2 and other GHGs.
    Power plants should not bear the entire brunt of GHG mitigation
    measures. Thus, while initial steps can and should be taken by power
    producers, these actions need to be integrated into an economy-wide
    climate change strategy which fairly allocates responsibility for
    addressing this issue across all sectors.
    Goals of a Climate Strategy
        As President Bush has emphasized, a multi-generation commitment
    will be needed to attain the ultimate goal of stabilizing GHG
    concentrations in the atmosphere. The ECAF's Climate Change Framework
        September, 2001 foundation for this effort will be the development
    of new technologies that do not exist today. Additional research to
    better understand the causes and impacts of climate change will also be
    needed. The President has launched major initiatives to develop carbon-
    friendly technologies and accelerate climate change research. These
    initiatives deserve strong support.
        In the near-term, a ``transitional program'' is needed to begin
    moderating the rate of greenhouse gas buildup in the atmosphere. ECAF
    agrees with President Bush that the targets and timetables in the Kyoto
    Protocol are not viable for the U.S. economy and should not form the
    basis for climate change policy. We do believe that a reasonable goal
    of U.S. CO2 programs should be to flatten the rate of
    emissions growth from the power sector with the goal of stabilizing
    emissions at a level above the current emissions baseline but below
    projected emissions under a ``business as usual'' scenario. This
    approach would enable the U.S. power sector to take concrete steps down
    the path toward overall CO2 emission reductions without
    erecting barriers to new generation or imposing hardships on producers
    and consumers.
    Principles for Designing a Stabilization Program
        Four principles should shape design of a program to stabilize power
    plant CO2 emissions:
          Maintaining a level playing field among fuels so that
    individual fuel types are not disadvantaged and the diversity of the
    nation's fuel supply is preserved.
        Responsibility for CO2 mitigation measures should be
    distributed in a manner that does not disadvantage specific types of
    fuels. A primary energy policy goal is to promote our nation's energy
    security by obtaining electricity from diverse sources, including gas,
    coal, nuclear, hydropower and renewables. Because coal-fired power
    plants emit more CO2 per unit of energy produced, an
    approach that establishes uniform CO2 emission targets
    across fuel types would significantly penalize coal plants. Fuel-and
    technology-specific CO2 emission benchmarks can
    appropriately ensure further progress in stabilizing greenhouse gas
    emissions without jeopardizing the nation's energy security or creating
    an uneven playing field for selecting fuel types for new generation.
          Protecting historic investment in power plant assets
    while encouraging investment in new generating facilities.
        Since emissions growth would be slowed and ultimately halted under
    a stabilization program, the burden of making needed reductions should
    be distributed between new and existing power plants on a basis that
    does not penalize either. This will serve the nation's interest in both
    maintaining the efficiency of the existing power plant fleet and
    encouraging new generation to meet future energy needs.
          Taking advantage of the most cost-effective GHG reduction
    opportunities both within and outside the power plant sector (including
    on-system and off-system reductions).
        Companies can implement a number of carbon mitigation measures
    within their own systems, including improvements in efficiency, plant
    retirements or repowerings, and investment in low-emitting power
    sources (fuel cells, renewables). A wide variety of off-system
    mitigation measures in the United States and overseas are also
    recognized as offering verifiable carbon benefits. These include
    reforestation and other carbon sequestration projects, energy
    efficiency programs, methane recovery programs and clean development
    projects. Power producers should have broad opportunities to access
    these GHG mitigation opportunities whether they involve on-system or
    off-system mitigation measures.
          Building on the expected path for technological
    innovation and capital turnover in the energy sector.
        Over time, technological innovation and capital turnover in the
    energy sector will yield important and steadily increasing
    CO2 benefits. As plant efficiencies improve, marginal units
    are shut down or repowered and new technologies are phased-in, the
    energy sector will transition to power-generation facilities that emit
    less carbon per unit of electricity output. This ongoing process of
    capital turnover and technological advancement in the industry should
    be encouraged, not disrupted. Programs to stabilize CO2
    emissions by power plants should create incentives for companies to
    invest in on-system or off-system projects with CO2
    mitigation benefits. At the same time, the government should not
    interfere with market forces or dictate the direction of capital
    investment in the energy sector.
    Key Elements of A Stabilization Program
        ECAF believes that a program based on these principles should have
    the following elements:
          Existing units. The goal should be to stabilize overall
    CO2 emissions for existing units at 2000 levels by 2010.
    ECAF has identified and is reviewing two different ways to assign
    CO2 mitigation responsibility to existing plants for
    purposes of achieving this goal:
          Fuel utilization benchmark. DOE would set fuel-
    differential benchmarks for each fuel and technology category. These
    benchmarks could be expressed as differential heat rate targets (in
    Btu/kwhr), since CO2 emissions are a direct function of fuel
    utilization. Thus, a different heat rate target might be set for
    combined cycle gas plants and for each of the different types of coal
    plants (e.g., pulverized coal, fluidized bed coal, IGCC, etc.) The heat
    rate target would be lower than the current average for that category.
    The exact level would depend on further analysis of the improvement in
    heat utilization necessary to maintain emissions from existing plants
    at 2000 levels by 2010. Our initial view is that the benchmarks would
    be no greater than 5 percent lower than current average rates.
    Commencing in 2010, plants that do not meet their applicable benchmarks
    would be required to mitigate their CO2 emissions by
    obtaining GHG credits. These credits would be expressed as
    CO2 tons using a formula for converting units of heat
    utilization to CO2 emissions. Companies could pool their
    assets for the purpose of determining compliance with the fuel
    utilization benchmark. Companies that shut down or repower their plants
    would receive appropriate credit for these actions.
          Emissions baseline benchmark. Plants would be assigned an
    annual CO2 budget based on the average of the highest 3
    years from the period 1998-2001 and would thereafter need to maintain
    emissions at this level or obtain credits. To achieve 2000 levels by
    2010, some adjustment in the initial baseline determination may be
    needed across the board to conform the aggregate plant baselines to
    national 2000 emission levels. Companies would be able to meet their
    budgets on a system-wide basis. If they are above budgeted levels, they
    would need to obtain credits or pay into a greenhouse gas mitigation
    fund. Again, credit would be provided for plant shutdowns or
    repowering.
        ECAF members are not in a position to endorse either approach at
    this time. We are also evaluating a ``hybrid'' approach under which
    plants/companies would have the option of addressing their
    CO2 mitigation responsibilities by electing in advance
    either the fuel utilization benchmark or the emissions baseline
    benchmark applicable to their units.
          New units. New units would not be subject to an overall
    emission target but would need to meet fuel-and technology-specific
    efficiency benchmarks. Again, separate benchmarks would be set for
    different classes of generation (coal, gas, etc.) so that no fuel type
    is penalized. Benchmarks could be tightened over time as technology
    improves. As with new units, companies not meeting targets would need
    to obtain credits.
          Credits. Where companies need credits to meet their
    responsibilities for new or existing units, these credits could be
    obtained from a variety of on-system and off-system measures (including
    sinks, methane recovery, efficiency programs, etc.). Emission
    reductions achieved from these activities in the United States or
    overseas should give rise to tradable credits. Power companies should
    have the option to generate these credits through direct investments in
    mitigation projects or through financial contributions to third-parties
    (qualified greenhouse gas mitigation funds) that invest in GHG
    reduction measures.
          Credits for other GHGs. Cost-effective GHG mitigation
    strategies include efforts to reduce non-CO2 GHGs, including
    methane, HFC5, nitrous oxide and others. In part, this increased cost-
    effectiveness results from the fact that some of the non-CO2
    GHGs have much larger ``global warming potentials'' than
    CO2. This means that pound for pound, these other GHG5
    contribute more to global warming than does
        For example, a ton of methane has the same global warming potential
    as 21 tons of GO2, while a ton of nitrous oxide has the
    global warming potential of 320 tons of CO2. As a result,
    more expensive reductions of these other GHGs can translate into very
    cost-effective reductions of ``tons of carbon equivalent'' (``TCE'')
    (the metric into which GHG emissions reductions generally are
    translated).
          Trading. A program that utilizes credits will only
    function effectively if creditable emission mitigation measures are
    marketable assets that have a recognized value among buyers and
    sellers. Thus, a market for credits will need to be created in which
    creditable GHG mitigation measures can be bought and sold among energy
    producers and across industry sectors.
          Dollar-per-ton limit on cost of credits. Since there are
    major technological and economic uncertainties surrounding any carbon
    mitigation program, some mechanism is needed for limiting the financial
    exposure of power generators if the overall costs of stabilization
    prove unacceptably high. This goal would be accomplished by
    establishing a dollar/ton limit on the obligations of generators who
    must obtain credits to meet their responsibilities under the program.
    Thus, a generator whose average heat rate exceeds the benchmark heat
    rate or whose emissions exceed the baseline emissions benchmark could
    offset the resulting excess tons of CO2 by directly
    undertaking credit-generating activities, purchasing credits on the
    open market or making payments to a greenhouse gas investment fund at
    the specified dollar/ton amount. The greenhouse gas investment fund,
    which could be publicly or privately administered, would use these
    payments to fund cost-effective greenhouse gas reductions.
          New tracking and data-gathering systems. Improved data-
    gathering and tracking systems will be essential for effective
    implementation of a stabilization program. These systems will need to
    obtain reliable and current information on fuel utilization and
    electricity production so that the responsibilities of new and existing
    plants can be determined and performance can be verified. In addition,
    a common emissions tracking system--with safeguards and procedures for
    quantifying, verifying and reporting emission reductions in the United
    States and globally--will be required so that emissions progress can be
    measured and assessed.
    Critical Elements for Industry Participation
        ECAF would hope that a program with the above elements can be
    implemented voluntarily. Whatever legal mechanism is chosen, however,
    effective industry participation will require the following critical
    protections:
          Safe harbor protection--assurance that no new
    requirements will be imposed until after the program completion date:
    necessary for planning certainty and return on capital
          Baseline protection--assurance that reductions made after
    the baseline year will be fully credited in any future program.
          Credit for early action--assurance that reductions made
    in the early years of the program can be used in future years.
    Programs to Foster Long-term R&D Investments
        CO2 is a necessary by-product of all fossil-fuel
    combustion--and fossil-fuel combustion remains the safest, most
    widespread and most cost-effective method of energy production
    currently available. While increases in generating efficiency can
    reduce the amount of CO2 created per unit of energy
    produced, they cannot eliminate CO2 emissions using current
    technology. As a result, significant reductions in CO2
    emissions require either: (1) development of technologies that produce
    energy without emitting GO2 or (2) development of methods to
    ``sequester'' the CO2 produced during energy production so
    that it is not emitted into the atmosphere. While some very promising
    energy production and carbon sequestration technologies currently are
    under development, these technologies are not yet cost-effective;
    indeed, most are not yet ready for commercial deployment. Thus, while
    efficiency improvements, conservation programs, carbon sequestration
    projects and plant repowerings, and reductions in other GHGs can all
    contribute to an emission stabilization program, new technologies are
    essential for long-term success in reducing CO2 emissions.
        As proposed by President Bush, a comprehensive program doubling the
    current resources allocated to carbon-related R&D activities should be
    undertaken to develop clean coal production facilities and other
    advanced energy production technologies necessary to achieve a long-
    term reduction in CO2 emissions and stabilization of
    CO2 atmospheric concentrations. This effort would have
    several components, including: (1) expanding DOE R&D programs such as
    Vision 21; (2) providing credit for R&D investments by the private
    sector as part of the CO2 stabilization program; (3)
    offering tax benefits for qualifying R&D; and (4) encouraging
    technology demonstration and technology transfer projects. Federal
    research funding would be allocated to focus on high risk, breakthrough
    technologies with the potential to reduce significantly the overall
    cost of stabilization of GHG concentrations. Public and private sector
    partnerships would focus on facilitating the rapid commercialization
    and deployment of promising breakthrough technologies.
                                     ______

      Responses of Bob Page to Additional Questions from Senator Jeffords

        Question 1. When do you think that IGCC for coal will become
    economic? What would the price of carbon have to be to make it useful?
        Response. TransAlta estimates that IGCC technology will be economic
    by 2007--2010, especially in situations where power plants can be built
    close to demand for hydrogen and high purity CO2. This may
    necessitate a change of traditional thinking about plant siting, where
    power plants are built close to these byproduct markets and fuel supply
    is transported to the plants. We estimate that IGCC plants are
    competitive against natural gas supply at a price of $4.90 US per
    MMBTU. In our conservative forecast of economic viability by 2007--10,
    we have not included a value for carbon reductions because of
    uncertainty about future regulatory regimes. Obviously the ability to
    claim and monetize carbon reductions would improve the economics--we
    estimate by about 10 -15 percent.

        Question 2. You mentioned that you are actively engaged in trading
    carbon reductions. From previous testimony before the Committee, it
    seems that a really robust trading scheme requires some kind of cap or
    limitation on emissions. Could you comment on that?
        Response. TransAlta believes that emission caps are an important
    component of viable emission trading mechanisms. They provide direction
    and clarity to industry. We believe the key is to have the caps applied
    over a broad enough, multi-sectoral industrial base to ensure liquid
    trading markets. This is particularly relevant in Canada where the
    industrial base is relatively dispersed. Emission caps do not have to
    be regulatory in nature in order to function. Voluntary caps can be
    just as effective given appropriate controls. In Canada we are
    discussing with governments the concept of a negotiated cap under a
    covenant mechanism.

        Question 3. Would you expect to make any reductions in carbon
    dioxide emissions from your plants in the U.S. unless there is some
    kind of price or regulatory pressure?
        Response. TransAlta does expect to offer voluntary greenhouse gas
    reductions from our U.S. plants. We believe that such actions carry
    intrinsic business value, are consistent with regulatory intent, and
    being voluntary can be implemented with maximum cost-effectiveness. We
    are currently working on our U.S. strategy in this regard and will
    announce it when complete.

        Question 4. What are TransAlta's projections for the costs per ton
    in greenhouse gas offsets the company would need to purchase for
    TransAlta net emissions to meet your objective of reducing net
    emissions from your Canadian operations to zero by 2024?
        Response. TransAlta projections for greenhouse gas offset prices
    are similar to those used by Shell, equivalent to $10 U.S. per tonne in
    2010. This range was used in the assessment of our 2024 target, with
    some firming of price after 2010. Russia will play a key role in the
    determination of the international price.
                                     ______

      Responses of Bob Page to Additional Questions from Senator Voinovich

        Question 1. During your testimony, you briefly discussed the future
    of carbon control technology. Where do you think carbon control
    technologies are headed over the next 10 to 20 years?
        Response. We believe that clean coal technologies will be viable
    within the next 10 years, but the form of technology is still not
    clear. We are participating in a number of technology development
    project partnerships. We expect that early carbon control technologies
    may well focus on carbon capture and sequestration for both retrofit
    and new plants. In the mid-term, coal gasification technologies look
    most promising, especially when byproduct synergies are realized.
    Longer-term there appear to be several low-or zero emission
    technologies that hold promise but are beyond a decade from
    commercialization. This includes technologies that shift toward
    hydrogen-based systems.

        Question 2. According to our analysis of the three pollutants,
    mercury is the most expensive, how do you intend to address mercury?
        Are you making specific mercury reductions, and if so, what is the
    level and timeframe?
        Response. Mercury is certainly the most expensive pollutant of the
    three to control on a cost/kg basis, but not in total capital cost.
    TransAlta believes that mercury should not be controlled separately but
    as an integral part of NOx, SO2, CO2 and
    particulate emission reductions. Mercury control technology is still in
    its infancy and more work is required to ensure cost-effective
    solutions. In Canada we are undertaking a 2-year, industry-wide mercury
    testing program which will provide data on various plants and coal
    sources, and will guide the development of Canada Wide Standards for
    mercury slated for 2005.

        Question 3. What is the basic framework of the laws governing air
    pollution in Canada?
        Response. More specifically, can you comment on the strengths and/
    or weaknesses related to industry certainty and statutory complexity?
        There is growing complexity and jurisdictional uncertainty
    regarding Canadian air quality regulations. Both Federal and provincial
    regimes are currently under review and the future regulatory
    requirements are unclear. The Federal/Provincial split in terms of
    environmental jurisdiction in Canada, coupled with the Provincial
    regulation of the electricity industry does create significant
    uncertainty, especially with the regulation of greenhouse gases. There
    is a greater possibility for conflicting regulatory initiatives and a
    resultant need for industry to argue for a multi-pollutant approaches.
    Balancing that uncertainty, we find by contrast to our U.S. operations
    that in Canada there are significantly fewer regulatory bodies that
    must be dealt with--generally a single provincial authority and
    occasionally a Federal agency. We have found that this diversity of
    U.S. regulatory authorities creates less coordination and more industry
    uncertainty. Another observed difference between the two countries lies
    in the Canadian tendency to seek negotiated compliance which leads to
    greater flexibility and regulatory efficiency, as opposed to a strict
    legal adversarial approach.

        Question 4. During your testimony, you warned the committee to use
    a ``slow integrated approach,'' regarding any multi-pollutant bill. Can
    you expand on this premise?
        Response. For TransAlta the slow integrated approach will allow us
    to develop clean coal technology as a real solution. Given the nascent
    nature of new combustion technology, if we were to apply today's
    technology it would be a costly and short-term measure, and the
    technology would soon be obsolete. We also believe that with time it
    can address the need for an integrated multi-pollutant approach. Our
    CO2 extraction technology when combined with underground
    sequestration would deal with all the emissions. By adopting the
    longer-term framework we can deliver much more in emission reductions.
                                     ______

       Responses of Bob Page to Additional Questions from Senator Graham

        Question 1. The most surprising part of your testimony is
    TransAlta's goal of zero net emissions of greenhouse gases by 2024. You
    also mentioned that one of the reasons that this goal seems feasible in
    Canada is because of the political institutions and laws. Obviously,
    the government of the United States is dramatically different. Do you
    have any recommendations on actions that can be taken by this
    committee, such as simplifying laws or consolidating programs, that
    could help U.S. companies comply with a carbon standard?
        Response. TransAlta's 2024 proposal is based on a Kyoto regime for
    Canada, and a regulatory environment that allows the lowest-cost, most
    flexible international emission offset and trading solutions,
    grandfathering of existing plants to accommodate capital stock
    turnover, and significant government and industry investment in
    renewables and new combustion technologies. To us this implies a much
    more cooperative working environment between government and industry.
    We believe that the dichotomy of government as an adversarial regulator
    and government as a participant with industry in structural change is
    inefficient. One positive example of cooperation is the Canadian Clean
    Power Coalition, a coalition sponsored by governments and industry in a
    concerted effort to implement new clean coal technology in Canada.
        Additionally the consolidation of not just regulations, but
    regulatory authorities as well, would help support the much-needed
    coordination on the multiple pollutants to be managed.
                                   __________
    Statement of William F. Tyndall, Vice President, Environmental Services
                   and Federal Affairs, Cinergy Services Inc.
    Introduction
        Good morning. My name is William Tyndall and I am employed by
    Cinergy Services, Inc., as the Vice President of Environmental Services
    and Federal Affairs. In this position I manage a department that
    provides Cinergy Corp. and its operating subsidiaries with, among other
    things, information and analysis regarding environmental issues and the
    risks they pose. I am also in charge of the company's Congressional and
    other Federal relations and advocacy.
        Cinergy Corp. has a balanced, integrated portfolio centered on its
    energy merchant and regulated operations. The company is a Midwest
    leader in electricity generation owning 13,000 megawatts of capacity
    with a profitable balance of stable existing customer portfolios, new
    customer origination, marketing and trading, and industrial-site
    cogeneration. Cinergy's regulated delivery operations in Ohio, Indiana,
    and Kentucky serve 1.5 million electric customers and about 500,000 gas
    customers.
        Cinergy's core energy system comprises approximately 13,000
    megawatts at 14 base load stations and seven peaking stations. This
    portfolio includes 37 coal-fired units that we operate and at least
    partially own. Of importance to our discussion today, 30 of these units
    will be more than 30 years old in 2007.
        Today I am also testifying on behalf of the Edison Electric
    Institute (EEI). EEI is the association of U.S. shareholder-owned
    electric companies, international affiliates and industry associates
    worldwide. EEI's U.S. members serve more than 90 percent of all
    customers served by the shareholder-owned segment of the industry,
    generate approximately three-quarters of all of the electricity
    generated by electric companies in the country, and serve about 70
    percent of all ultimate customers in the nation.
    The Need for Multi-Pollutant Legislation
        As most of you know, Cinergy has been a long time supporter of
    multi-pollutant legislation for coal-fired power plants. In fact, I
    like to think that we had a hand in bringing this idea to this
    committee. Jim Rogers, Cinergy's CEO, has long thought that both the
    environmental community and industry can do better than the crazy
    patchwork of rulemakings that currently loom on the horizon for coal-
    fired power plants.
        We count nearly a score of new requirements that may impact fossil
    power plants, all with separate and often conflicting timetables,
    implementation rules, and purposes. The net result is a planning
    nightmare that makes it virtually impossible for Cinergy to have any
    stable notion of what requirements will be in place for our plants at
    any point in the future. In this chaos, we simply cannot accurately
    assess which plants should be retrofit with controls, which plants
    should be switched to natural gas, which plants should be retired, and
    when any of this should take place.
        Nor does the present system advantage those seeking further
    emissions reductions from these power plants. This piecemeal approach
    necessarily involves many sequential scientific and technical decisions
    by EPA and the States that may not necessarily be resolved in favor of
    the environmental community, and regardless are typically late in being
    made and then litigated by all sides, causing further delay.
        Because of this dysfunction from all directions, more than 3 years
    ago Mr. Rogers and I met with the then-Chairman Chafee to seek his
    assistance in crafting legislation to combine the morass of air
    pollution initiatives aimed at power plants into a single set of
    statutory emissions reduction targets. At that meeting, he directed his
    staff to move forward to develop a proposal. Later, Senator Smith
    stepped into the breach and made the issue one of his top priorities.
    We are gratified that when the present chairman took over, he too
    viewed passage of multi-pollutant legislation as a top priority for the
    committee.
        At this time, the idea has garnered tremendous support from a
    diverse group of stakeholders including the Edison Electric Institute,
    the United Mineworkers of America, International Brotherhood of
    Electrical Workers, the National Governors Association, the
    Environmental Council of States, Candidate Al Gore and President Bush.
        The idea also attracted the support of many environmental groups
    including NRDC, the Clean Air Task Force, and the National
    Environmental Trust. Let me quote their reasons in their testimony 2
    years ago before this committee:

        ``The Act is designed to address air pollution from the power
    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. Each of these regulatory proceedings are subject to delay and
    court review--The time has come to improve on the Act's current
    regulatory scheme for power plants--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.''\1\
    ---------------------------------------------------------------------------
        \1\Testimony of Armond Cohen before the Subcommittee on Clean Air,
    Wetlands, Private Property and Nuclear Safety, committee on Environment
    and Public Works, May 17, 2000. Testimony submitted on behalf of Clean
    Air Task Force, Clear the Air, National Environmental Trust, United
    States Public Interest Research Group Education Fund, Natural Resources
    Defense Council, Izaak Walton League of America, Ohio Environmental
    Council, Illinois Environmental Council, Southern Environmental Law
    Center, Legal Environmental Assistance Foundation (Florida), Southern
    Alliance for Clean Energy, Campaign for a Prosperous Georgia,
    Physicians for Social Responsibility--Southeast Region, Citizens for
    Pennsylvania's Future, and New York Public Interest Research Group.
    ---------------------------------------------------------------------------
        I think we all can agree that the ``devil will be in the details.''
    S. 556
        While it may cause a great deal of pain on both sides to admit, I
    think the end points of the emissions programs of the President's Clear
    Skies Initiative and S. 556 are not that far apart for sulfur dioxide
    (SO2), nitrogen oxide (NOx) and mercury. See Exhibit A,
    attached. However, S. 556 does go further, at a much, much faster clip,
    and, significantly, does not provide for any averaging or trading for
    mercury.
        The proposal also includes an ``outdated power plants'' provision
    requiring the retrofitting of best available controls on all units over
    30 years old regardless of the environmental need. This provision if it
    is left in will make the caps irrelevant since, according to EEI, 80
    percent of coal-fired units will be 30 years old in 2007. By 2012, the
    percentage grows to 92 percent. At that point, the cap program will be
    a pointless paper shuffle since the overwhelming majority of units will
    be under individual, non-tradable, emissions limits. The bill also
    creates a mandatory ``on system'' carbon cap designed to return the
    industry to CO2 emissions levels of 17 years earlier.
        Absent from the bill is any attempt to parse these new requirements
    with the existing Clean Air Act. Rather, all of the new requirements
    would be placed on top of the existing Clean Air Act exacerbating the
    complexity of an Act that already can give the Tax Code a run for the
    title of ``Most Byzantine and Confusing and Therefore Most Likely to Be
    Implemented Through Litigation.''
        So while the Clear Skies Initiative and S. 556 may be in hailing
    distance in terms of the caps, the lack of trading, the forced
    retrofits, the truncated timelines, all make S. 556 a much more
    draconian measure. Because of this, S. 556 threatens the nation's
    supply of reliable power and the financial integrity of an essential
    industry, a potential outcome that is not needed to achieve the
    nation's clean air goals.
    S. 556's Macro Economic Impacts
        This committee has already developed an extensive record on the
    impact of S. 556 on electricity prices, natural gas prices, coal
    consumption and other key variables.
        As you know, last November, Assistant Administrator Jeff Holmstead
    stated in his testimony before this committee that the reduction levels
    similar to S. 556 would result in a 30 to 50 percent increase in
    electricity prices and a 20 to 30 percent decline in coal
    generation.\2\  As the committee knows, the low ends of these EPA-
    assumed ranges are based on ambitious technology penetration and demand
    reduction scenarios.
    ---------------------------------------------------------------------------
         \2\See Testimony of Jeff Holmstead, Assistant Administrator, U.S.
    EPA, before the committee on Environment and Public Works, U.S. Senate
    (November 1, 2001) p. 10.
    ---------------------------------------------------------------------------
        At the same hearing, Mary J. Hutzler, the Acting Administrator of
    the Energy Information Administration, stated that as a result of S.
    556, ``the average delivered price of electricity in 2020 is projected
    to be 33 percent higher'' and ``natural gas prices are also higher by
    20 percent.''\3\  An earlier EIA report pegged the loss of coal
    generation at 38 to 42 percent while natural gas generation increased
    by 60 percent.
    ---------------------------------------------------------------------------
         \3\Statement of Mary J. Hutzler, Acting Administrator, Energy
    Information Administration, Department of Energy, before the committee
    on Environment and Public Works (Nov. 1, 2001) p.3
    ---------------------------------------------------------------------------
        S. 556 would also create huge short-term imbalances in the supply
    and demand for natural gas. According to EIA's July 2001 report, the
    increase in natural gas use by electricity generators under S. 556 will
    in turn require near record levels, of production after 2005 and
    consumption will reach nearly four times the volume used in 2000. To
    meet this demand, suppliers will need to tap into new reserves. For
    instance, EIA suggests that North Slope drilling may provide at least
    some of the supply needed. Inevitably natural gas producers will clamor
    for additional access to Artic and coastal drilling sites to meet the
    voracious new appetite for natural gas that S. 556 will unleash.
        And by the way, none of these economic analyses actually capture
    the full costs of S. 556. Neither EPA nor EIA modeled the ``Outdated
    Power Plants'' provision, yet this section will immediately cancel out
    the cap-and-trade program supposedly contained in the bill, and dictate
    compliance strategy. As I mentioned, in 2007 80 percent of the
    generation will be under this command and control provision; 92 percent
    will fall under the mandate by 2012. For Cinergy and for the industry,
    this is the provision that will drive costs and it has not even been
    modeled by EPA or by EIA.
        But those are the macro effects of this legislation. Let me
    describe its impact on Cinergy.
    Impacts on Cinergy
        To start, let me say a little about who Cinergy is and what we have
    done to address environmental issues so far.
        Between 1990 and the present, Cinergy invested approximately $800
    million on air pollution control equipment for its coal-fired power
    plants. In addition, we are currently in the middle of a huge capital
    investment program to add nine selective catalytic reduction units
    (``SCR's'') to our system as well as taking other steps to meet the
    stringent NOx SIP Call requirements. This summertime NOx program goes
    into effect in 2004. When all is said and done, Cinergy will invest
    $800 million to comply with this program. By the way, to put our
    expenditures in context, Cinergy alone is installing as many megawatts
    of SCR's as the entire Ozone Transport Region.
        Cinergy has reduced its NOx emissions rate since 1990 by 45 percent
    and its SO2 emissions rate by almost 50 percent. Under the
    NOx SIP call, we will operate under emissions caps that are based on a
    target emissions rate of 0.15 lbs/MMBtu. This is much lower than the
    EPA New Source Performance Standard of 0.6 lbs/MMBtu and is reflective
    of BACT determinations for new coal units made as recently as 5 years
    ago. For SO2, our allowance allocation under the current
    acid rain program works out to about 0.8 lbs/MMBtu emissions rate, as
    compared to the EPA New Source Performance Standard maximum of 1.2 lbs/
    MMBtu.
        But these reduction levels do not begin to meet the requirements we
    will face if S. 556 passes in its present form. According to our
    modeling, reduction levels equivalent to S. 556 will require the
    installation of 14 new scrubbers and 12 new SCR's by 2007. Mercury
    controls (probably carbon injection with fabric filters but who knows)
    will need to be installed on every unit except perhaps for those units
    with a SCR and a scrubber. Indeed, depending on the coal type burned,
    the mercury requirement would probably turn into a mandate to switch to
    natural gas since there is no existing technology that delivers 90
    percent reductions for all coal types.
        And this does not even count the outdated plant provision. Under
    this provision, all of Cinergy's plants over 30 years old must be
    retrofit at 5 years from passage. Of Cinergy's 37 coal fired units, 30
    are more than 30 years old so we would face the added expense in the
    next 4 years of retrofitting these units with SCR's, SO2
    scrubbers, and particulate controls.
        To give the committee an idea of the magnitude of this undertaking,
    typical capital costs to install ``best available'' controls for a
    medium size (500 megawatts) coal-fired unit are as follows: Scrubbers
    to remove SO2 will cost approximately $125 million; SCR's to
    control NOx will cost approximately $60 million; and particulate
    controls (ESP's and/or fabric filters) will cost approximately $30
    million.
        As a result, we estimate that S. 556 would require Cinergy to
    invest $4.3 billion on new pollution control equipment.
        However, over the next 5 years, Cinergy must invest approximately
    $300 million per year just to maintain its existing electricity and gas
    distribution system, and to meet new service demands. At the same time,
    we also must invest approximately $100 to 200 million per year to
    create the capacity to serve the steady load growth we are experiencing
    and to meet the reserve margin requirements of our three retail
    jurisdictions. For instance, we are currently in the middle of a 3-year
    $211 million project to transform one coal-fired power plant in Indiana
    into a state-of-the-art, natural-gas combined-cycle power plant.
        In addition, to meet the requirements of the NOx SIP Call that will
    go into effect in 2004, Cinergy is investing approximately $800 million
    dollars in control equipment over 5 years. We are meeting this
    challenge without sacrificing the reliability of our existing gas and
    electricity distribution assets and without sacrificing the ongoing
    need to maintain sufficient generation resources to meet demand.
        The $4.3 billion investment dictated by S. 556 are more than 5
    times the sums being spent on NOx controls and represent approximately
    80 percent of our existing market capitalization of approximately 6
    billion. And this sum must be raised and spent largely by 2007, giving
    us really only 2 years after our NOx expenditures are completed to meet
    this fiscal challenge.
        It is financially impossible for a company of Cinergy's size to
    make investments of this size in the timeframe provided. And lest you
    think we are an aberration, there are some 65 other power generators
    around the country that are Cinergy's size or smaller and who generate
    more than 50 percent of their power from coal. I have no doubt that
    each and every one of these entities will view S. 556 as economically
    infeasible as well.
        This is not to say that Congress cannot impose stringent new
    emissions targets that maintain the financial integrity of one coal-
    centric company or the entire industry. Time is the key. The industry
    needs at least a 5-year window once it is finished with the NOx SIP
    Call construction to begin to meet new requirements. This means a 2010
    start for those portions of the program that necessitate new capital
    expenditures. The industry also needs phased reductions so that capital
    expenditures can be staggered over longer periods. For instance, the
    phased caps included as part of the Clear Skies Initiative provides
    both a strong emissions reduction roadmap and a reasonable amount of
    time to construct the scrubbers, SCR's and other projects that will be
    required--without jeopardizing the industry's ability to maintain the
    grid, add generation and deliver reliable service to our customers.
    Other Issues
        Aside from the affordability issue, which needless to say, captures
    my company's primary attention, there are many other reasons why S. 556
    is unworkable.
        Reliability Issues Due to Retrofits: Adding scrubbers, SCR's and
    other pollution control equipment requires long design and planning
    lead times, expanding or creating new landfills (for additional
    scrubber sludge) and securing all of the permits thereto, careful
    coordination of the labor, cranes, sheet metal and other aspects of the
    construction, and long down times at plants to tie equipment in. To
    meet the NOx SIP Call, Cinergy had to pay huge premiums to secure the
    material and laborers needed to meet the tight deadlines. S. 556
    involves more requirements on more plants in a shorter timeframe. Both
    the construction and the chaos that will result when companies cannot
    finish the work in time will negatively impact reliability.
        Re-Permitting: The modernization provisions ofS. 556 essentially
    require every power plant that has reached its 30th birthday to be re-
    permitted under the provisions of the Clean Air Act's new source review
    program. Under the applicable requirements, this would mean not only
    that plants would need to secure a case-by-case determination of the
    level of reductions they would need to hit, they would also need to
    have their air quality impacts measured, modeled, assessed and approved
    by States, Federal land managers and EPA, and in non-attainment areas,
    secure emissions reductions offsets--despite their participation in a
    stringent cap-and-trade program. Plants could not start construction of
    the controls until the process has been completed and the requirements
    for the ``modernized'' unit formally assigned. This tortuous public
    process normally takes years for any one source.
        It is impossible to predict how long it will take the crush of
    units that will initially be covered by the program to secure their
    permits but I have no doubt that the vast bulk of these permits and the
    work that must follow will not be completed by the deadline in the
    bill.
        Technological Innovation: There will not be any under S. 556. A new
    emissions reduction target set far enough in the future can drive
    technological innovation. But the stringent targets in S. 556 will not
    drive new technologies because of the minute lead time. Since these
    massive pollution control projects take years to plan and execute yet
    the bill imposes the reductions within 5 years, companies will need to
    start making compliance decisions immediately upon passage. And
    companies will have no choice but to go with the technologies that are
    commercially available at the time of passage or switch to natural gas.
    This is especially true for mercury controls and monitoring technology.
        Allocation of Allowances: Essentially, S. 556 leaves this issue up
    to EPA. However, an issue of this magnitude needs to be resolved in the
    legislation itself. Cinergy strongly encourages the continued reliance
    on the allocation approaches that Congress used for the Acid Rain
    program. This system has not resulted in any windfalls but has resulted
    in low compliance costs. I have provided additional comments on this
    topic on behalf of Cinergy at Exhibit B.
    Conclusion
        I do believe that this committee can craft multi-pollutant
    legislation that both meets environmental goals and provides the
    industry with a workable roadmap. I urge the committee to carefully
    consider the views of industry, of the Administration, and of the
    breathing public, and create that bill. In my view, well-crafted multi-
    pollutant legislation can pass through this committee, the Senate, the
    Congress, and start creating emissions reductions and cleaner air. S.
    556, while allowing for wonderful debate, does not offer that hope.

                     key points about allowance allocations
    Using the Current system of Allowance Allocations
          Allocating emission allowances on the basis of heat
    input, as provided under the current system for SO2
    allowances, would provide allowances to those generators that are also
    making significant reductions under a multi-emission approach (or even
    under current regulation).
          When comparing impacts on two states, one in the Midwest
    and one in the Northeast with less coal-fired generation, allocation of
    allowances under the current system naturally would mean more
    allowances to the Midwest state.
          The current system will make for an easier transition to
    a new cap and will provide greater incentives for credit for early
    action proposals. Re-allocating allowances will increase uncertainty
    and will delay any early action by facilities that might otherwise be
    inclined to participate.
    Switching to an Output Based Approach
          Allocating on the basis of output would provide
    allowances to facilities such as nuclear plants that don't participate
    in a cap-and-trade program and are not investing in expensive emission
    control equipment. In addition, this system arguably gives allowances
    to those that are already more competitively advantaged under a strict
    emission reduction program than those having to make the reductions.
    Such an allocation approach thus would further penalize plants making
    reductions, and in fact would require them to make even further
    emission reductions than under an input based system.
          The relative gains to a northeast state relative to a
    Midwest state are illustrated in the following graphs. The graphs show
    potential allocations to the two states under the input-based and
    output-based approaches. The graphs illustrate the costs to meet a cap
    and the allocations under the two formulas. Results are presented in
    per capita values to standardize for the large differences in the size
    of the two states. Results are based on numbers for sulfur dioxide
    reductions as indicated by S. 556, but are readjusted to eliminate a
    carbon cap which would result in plant shutdowns and a skew of the
    entire allowance system.
          Under the output-based approach, the Northeast state
    would gain relative to the Midwest state. This gain occurs despite the
    fact that the Northeast state would have substantially lower emission
    reduction requirements than the Midwest state.
       (S. 556 without CO2, using illustrative permit prices):
      Annual Emissions Allocations Under Input and Output based formulas
                                     (tons)
    Midwest State

        Source: Calculations based on EIA data.
      Annual Emissions Allocations Under Input and Output based formulas
                                     (tons)
    Northeast State

        Source: Calculations based on EIA data.
          These illustrative results indicate that while residents
    of the Northeast state would bear a relatively small burden in terms of
    the costs of emission reductions called for under the cap, they would
    reap a windfall in terms of a favorable allowance allocation. In
    contrast, residents of the Midwest state both would bear substantially
    greater per capita costs for controls and also receive fewer
    allowances. Thus, a switch to an output-based approach would further
    exacerbate an already significant burden borne by Midwest states that
    will be required to shoulder the bulk of increased costs due to the
    more stringent emission reduction programs.
    Why Auctions Would Make Any Multi-emission Bill Unworkable
          Auctioning allowances would substantially increase costs
    to generators and ultimately consumers, on top of the substantial costs
    required to meet the emission targets. In contrast to the situation in
    all other cap-and-trade programs in which all participants can gain
    either as buyers or sellers relative to a less flexible command-and-
    control approach--under an auction approach all participants would
    lose.
          Auctioning would mean that participants would pay for all
    of their emissions, an approach that is inconsistent with the spirit of
    the national ambient air quality standards. This basically assumes that
    all power plants start with zero emissions, and must purchase
    allowances in order to operate at any level. On top of the purchasing
    of allowances, generators would also be required to spend millions to
    add emission control equipment to their plants
          Auctioning of all (or even a substantial share) of
    allowances would be unprecedented.
          Although some suggest that an auction is a means of
    reducing the cost of meeting a cap on emissions, the main impact of an
    auction would be to transfer revenue to the government. An auction
    would be equivalent to a tax on electricity--imposed on the industrial
    heartland and on states that are already suffering job losses and a
    lagging economy.
          In our example of a Northeast vs. Midwest state,
    auctioning of allowances would substantially increase overall
    compliance costs for residents of both states.
          The net effect of the auction on residents of the two
    states of course would depend upon how the revenues were used, which is
    difficult to project.
    Illustrative Calculations of Annual Per Capita Control Costs and Permit
        Costs for SO2-, NO-X, and Mercury Under Alternative
                                  Allocations
    Midwest State

        Source: Calculations based on EIA data.
    Illustrative Calculations of Annual Per Capita Control Costs and Permit
        Costs for SO2-, NO-X, and Mercury Under Alternative
                                  Allocations
    Northeast State

        Source: Calculations based on EIA data.
    Assumptions
        The results provided in the preceding graphs are based upon the
    following assumptions. The graph depicts a three-pollutant bill similar
    to S. 556 but without CO2 reductions:--NOx emissions capped
    at 75 percent below Title IV levels (i.e., to 1.51 million tons) by
    2007.--SO2 emissions capped at 75 percent below the Phase II
    Title IV cap (i.e., to 2.24 million tons) by 2007.--Mercury emissions
    capped at 90 percent below 1997 levels by 2007.
          Permit prices for NOx, SO2 and mercury are
    illustrative. The conclusions regarding the relative implications of
    allocation approaches for the two States depicted should not be
    sensitive to these allowance prices. The permit prices used are the
    following:--$2,000 per ton for NOx;--$1,500 per ton for SO2;
    and--$150,000 per pound for mercury.
                                     ______

     Responses of William F. Tyndall to Additional Questions from Senator
                                    Jeffords

        Question 1. Does EEI support the President's Clear Skies proposal,
    S. 2815, or any multi-pollutant legislation or proposal?
        Response. EEI does support the concept of a multi-emission approach
    although it has not endorsed a specific legislative proposal at this
    time. EEI sent a letter to the Committee reaffirming its support of
    multi-emission legislation on April 11, 2002 and I have attached a copy
    of that letter to these answers.

        Question 2. The timeline for mercury reductions in S. 556 is about
    the same as the one that is likely to be in the final mercury MACT
    rule, which is due in 2004. How much will it cost Cinergy to comply
    with a rule that required reduction of 90 percent before 2008?
        Response. The mercury MACT implementation timeframe that you
    outline assumes no delays due to insufficient data regarding the actual
    mercury removal performance of existing units in the MACT pool or the
    performance of mercury control technologies in general. It also
    presumes that EPA will ignore the data variability and inconsistency
    issues in the data sets it does have and set an unattainable standard.
    It also presumes that all sides will not litigate at least some aspects
    of the rule and delay its implementation.
        Nonetheless, to respond to the question you pose, stand alone,
    stringent mercury MACT rule requiring compliance in 2008 is expected to
    be very costly. Due to the lack of commercially proven technologies and
    the lack of reliable data on control costs, it is very difficult to
    provide a cost estimate of the standard you posit. To provide a rough
    estimate, initial modeling suggests that Cinergy will face a capital
    expenditure of approximately $500 million to comply with a stringent
    mercury MACT standard. Annual operating costs cannot be guessed at due
    to the large uncertainty surrounding the exact reduction that can be
    achieved with any specific technology and the lack of data regarding
    the actual costs of operating and maintaining specific mercury control
    technologies at large power plants.
                                     ______

     Responses of William F. Tyndall to Additional Questions from Senator
                                   Voinovich

        Question 1. If you were to comply with the Jeffords/Lieberman bill,
    what would it cost your company and how does that cost relate to your
    bottom line?
        Response. We estimate that S. 556 would require Cinergy to make
    capital expenditures totaling $4.3 billion on new pollution control
    equipment within approximately 5 years. This represents approximately
    80 percent of our existing market capitalization. We do not believe
    that we would be able to either raise this sum in the equity or debt
    markets or spend it on the necessary projects within the timeframe
    provided. For these reasons, were S. 556 to pass in its present form,
    it would have a devastating impact on our bottom line and the bottom
    line of every other investor or publicly owned utility in the Country
    with any reliance on coal as a fuel.

        Question 1a. Can a company your size comply?
        Response. We would do everything we could to comply with the law.
    However given S. 556 unrealistic timetables and targets and its
    reliance on command and control implementation, full compliance within
    the short window allowed would be questionable as well as enormously
    expensive, if it could be achieved at all. Whether one company can
    comply is dependent on factors driven by both internal and external
    forces that companies may have limited ability to control. As I stated
    in my testimony, we anticipate industry-wide compliance within a 5-year
    window with the stringent caps and command and control features of S.
    556 would create energy, emissions, engineering, manufacturing and
    labor imbalances that would pale in comparison with what we experienced
    the NOx SIP call requirements. This would be further acerbated by the
    scheduling of virtually every one of our units (along with nearly every
    other coal or oil unit in the country) to shut down for weeks or months
    to install controls. Yet we will still be required to meet our
    customers' energy demands 24 hours a day, 365 days a year.

        Question 2. I understand that the Health Effects Institute has
    discovered a problem with the PM2.5 health studies. Could
    you give us your view (or what EPA has determined) on how many studies
    used the same flawed statistical software in 1997 when promulgating the
    PM2.5 standards?
        Response. Based on information provided by EEI and EPRI, I
    understand that on May 30, 2002, the Health Effects Institute (HEI)
    announced that researchers at Johns Hopkins University had discovered a
    flaw in the statistical techniques used by those researchers in
    conducting the HEI-sponsored National Morbidity, Mortality and Air
    Pollution Study (NMMAPS). The Johns Hopkins University researchers
    found that a flaw in the S-Plus program (a common statistical software
    package) ``can bias the estimate of relative risk of air pollution
    upwards or downwards,'' and that, after correcting the statistical
    problem, the relative risk estimates were ``sometimes larger, and more
    often smaller, than previously reported.'' In fact, the preliminary re-
    analyses by Johns Hopkins shows that only 2 of the 88 cities that were
    re-examined had a statistically significant association between
    PM10 and mortality.
        Two key studies on which EPA relied in setting the 1997
    PM2.5 standards likely used the flawed statistical software:
    Schwartz et al. (1994), Acute Effects of Summer Air Pollution on
    Respiratory Symptoms Reported in Children, and Schwartz et al. (1996),
    Is Daily Mortality Associated Specifically With Fine Particles?
    Moreover, a majority of the studies published since 1996 appear to have
    used the flawed statistical software. At least 21 studies listed in
    Tables 9-14 and 9-17 (which list the critical particulate matter
    epidemiological studies as identified by EPA) of the Third External
    Review Draft of the Particulate Matter Criteria Document released by
    EPA in May 2002 appear to suffer from this problem; this represents
    more than half the studies listed in those tables.
        On August 8, EPA wrote to its Clean Air Scientific Advisory
    Committee regarding its plan for addressing the statistical problems
    with PM2.5 studies and the schedule for completing its
    Criteria Document for particulate matter. EPA identified criteria for
    prioritizing which studies should be reanalyzed, provided a list of key
    studies for reanalysis, identified steps to facilitate analyses, and
    discussed a late September/early October workshop regarding the
    analyses. The next (fourth) draft of the Criteria Document is now
    scheduled for March 2003 public comment and completion by October 2003.

        Question 3. In your testimony, you stated that the so-called
    ``birthday'' provision would make the Clean Air Act's Acid Rain
    Program's cap-and-trade system pointless. Can you please explain?
        Response. S. 556 as it stood when I testified included an
    ``outdated power plants'' provision requiring the retrofitting of best
    available controls on all units over 30 years old regardless of the
    environmental need. This provision makes the caps irrelevant since,
    according to EEI, 80 percent of coal-fired units will be 30 years old
    in 2007. By 2012, the percentage grows to 92 percent. With the vast
    majority of the units forced to put on controls regardless of the
    environmental need, there will be no savings to consumers in a cap-and-
    trade program. Generators cannot over control at the most cost-
    efficient units and sell allowances to units with higher costs when the
    birthday provision overrides these investment decisions and instead
    forces controls to be installed on the basis of age. We do not view the
    changes to these provisions made in the Chairman's mark and
    subsequently adopted in the bill as it passed Committee as
    significantly fixing this problem.

        Question 4. According to testimony by other witnesses, Clean Air
    Act provisions, such as NSR and the regional haze standards, need to be
    retained in any multi-pollutant legislation to protect air quality in
    attainment areas. What is Cinergy's and / or EEI's opinion?
        Response. The intention of a multi-emission bill is to provide both
    economic and environmental certainty--to in effect create a roadmap for
    reductions that will meet the progress and protections inherent in the
    Clean Air Act while creating certainty and coordination savings for
    industry. Cinergy does not believe that the new source review program
    creates any emissions reductions since its unworkable and uneconomic
    structure simply leads to companies avoiding any changes that will
    trigger its permitting requirements. And even if you believe the myth
    that the program has been ignored by the industry and that the current
    enforcement initiative will lead to large reductions, these benefits
    are dwarfed by the reductions inherent in a strong multi-pollutant
    program. For instance, the President's Clear Skies Initiative generally
    requires Cinergy to install far more emissions control equipment on a
    faster time line than the agreement in principle Cinergy reached to
    resolve its NSR litigation.
        Other Title I programs including regional haze can and should also
    be combined into the overall legislative package. As you know, the
    environmental community developed a position on regional haze with
    western States that allows utilities through 2018 to meet regional haze
    requirements. In the Eastern States, the two phases of reductions in
    the Presidents Clear Skies Initiative, for example, should similarly
    provide sufficient visibility improvement to satisfy the Regional Haze
    program.
                                     ______

     Responses of William F. Tyndall to Additional Questions from Senator
                                     Graham

        Question 1. Do you have any recommendations on how multi-pollutant
    legislation should deal with cases such as TECO's? [TECO is the only
    company that has signed a consent decree with the EPA under NSR].
        Response. Companies that have negotiated in good faith and signed
    NSR settlement agreements prior to passage of multi-pollutant
    legislation should be allowed to use all of their pollution control
    projects and other reductions to meet the requirements of the
    legislation. To the extent these reductions occurred prior to deadlines
    imposed by the legislation and were not mandated by any State SIP
    requirement, they should be allowed to be counted as early reductions
    and valued in an emissions allowance market as such. To the extent NSR
    is changed by the legislation, companies should be able to use those
    NSR changes going forward even if their consent decree contains more
    onerous NSR provisions that were based on the statute as it stood at
    the time of the settlement. Finally, to the extent NSR is significantly
    modified or eliminated by the new system of stringent caps imposed by
    the legislation, and the government determines that further prosecution
    of NSR litigation against other companies is now irrelevant, it may be
    appropriate to allow TECO to have all or portions of its Consent Decree
    dissolved due to the subsequently imposed and more stringent statutory
    provisions.
                                     ______

     Responses of William F. Tyndall to Additional Questions from Senator
                                     Wyden

        Question 1. In Cinergy's 2000 Environmental Progress Report, you
    wrote that Cinergy CEO Jim Roger's ``sound view is that coal-fired
    power can meet tough new targets for reductions of key emissions
    including carbon dioxide if given sufficient flexibility and lead
    times.'' What, if any, changes does Cinergy believe are needed to the
    4-Pollutant bill to give sufficient flexibility and lead times for your
    company to meet tough carbon dioxide reduction targets?
        Response. The existing carbon reduction program in S. 556 is not
    workable since it results in significant retirement of coal units,
    massive natural gas fuel switching and large increases in the price of
    electricity.
        For Cinergy, a more realistic reduction target based, for instance,
    on a freeze of industry green house gas emissions at 2000 levels is
    achievable by the end of the decade when coupled with similarly timed
    reductions in mercury, NOx and SO2. Further reductions from
    this initial round can and will occur with the commercialization of
    coal gasification and other advanced ``zero-emissions'' technologies.
    To start on this path immediately--and to end a deadlock that will
    otherwise block progress for the foreseeable future--the Committee
    should consider creating a voluntary green house gas program initially
    coupled with a ``trigger'' provision that creates a mandatory program
    if there is insufficient participation or progress.
        Finally, the Committee needs to couple targets with incentives to
    ensure the development and deployment of the next generation of
    environmentally friendly power plant technologies.
                                   __________
     Statement of David G. Hawkins, Director, NRDC Climate Center, Natural
                           Resources Defense Council
        Five years ago Chairman Jeffords introduced S. 687, the first
    comprehensive bill to control the four major pollutants released by
    fossil-fuel power plants. Today we are gathered to discuss the bill he
    and others introduced in this Congress, S. 556, the Clean Power Act.
    There is broad agreement now that power plants should be cleaned up.
    But there are enormous differences in the benefits conferred by the
    Clean Power Act and the competing approach sketched by the
    Administration. I welcome the opportunity to testify on behalf of
    Natural Resources Defense Council's (NRDC) 500,000 members in support
    of the Clean Power Act and to describe why we believe it is the right
    approach for cleaning up power plant pollution.
        The Clean Power Act will produce major benefits for Americans'
    health and the quality of our environment. Indeed, the bill's
    provisions to limit global warming pollution can help America regain
    leadership in acting to protect the planet from devastating changes to
    the climate.
        Both the Administration and the Clean Power Act's sponsors agree
    that air pollution from power plants imposes large costs on health,
    environment and the economy in the United States. Sulfur dioxide
    (SO2) pollution is a major cause of fine particles that
    cause tens of thousands of premature deaths every year, with 30,000
    premature deaths attributed to pollution from the power sector.
    SO2 also acidifies lakes, streams, and soils and pollutes
    our national parks with haze that spoils vistas that once were clear.
    Nitrogen oxide (NOx) is another power plant acid rain pollutant. NOx
    also forms smog, fine particles and haze and overloads estuaries with
    nitrogen fertilizer contributing to dead zones in places like the
    Chesapeake Bay, Long Island Sound, the Gulf of Mexico and other coastal
    waters. Power plants also emit more mercury than any other remaining
    category of pollution sources. Mercury is a nerve poison that builds up
    to hazardous levels once released in the environment. Mercury
    contamination is so pervasive that 41 states have issued fish
    consumption warnings for their water bodies. Finally, and largest in
    terms of tonnage and extent of potential damage, heat-trapping carbon
    dioxide (CO2) from power plants is the largest U.S.
    contributor to global warming. While the Administration now
    acknowledges CO2's role in climate change, it continues to
    oppose any policy action to establish binding limits on CO2
    emissions.
    Comparing the Clean Power Act and the Administration Proposal
        In February, the Administration released a description of the power
    plant legislation it would support. NRDC's summary of the
    Administration's approach is that, compared to competing proposals, it
    condemns the public to much higher pollution exposures, threatens local
    air quality, and prevents timely action to address the risks of global
    warming. Not only did the Administration approach reject the bipartisan
    (more accurately, tri-partisan) Clean Power Act, it also rejected an
    August 2001 proposal from EPA, the expert agency Congress has charged
    with implementing clean air programs. While no legislation has been
    submitted and many details remain murky, enough is known about the
    Administration's proposal to demonstrate how poorly it performs, when
    compared to the Clean Power Act, or for that matter, to EPA's August
    2001 recommendation:
          For the three traditional pollutants, the Clean Power Act
    gets far greater pollution reductions much faster than the
    Administration proposal.
          The differences in total loadings under S. 556 compared
    to the Administration proposal between now and 2020 will result in
    significantly greater health and environmental damage with the
    Administration approach.
          By failing to address CO2 emissions from power
    plants, the Administration proposal delays action to limit emissions
    from America's largest single source of global warming pollution.
          The Administration proposal may save industry some
    compliance expenses in the short term compared to the Clean Power Act
    but the government's own analyses show that the added benefits provided
    to Americans by the Clean Power Act are much larger than the temporary
    industrial cost savings. Further, by incorporating effective measures
    to increase energy efficiency and the use of renewable energy sources
    to help meet the emissions caps called for in the bill, S. 556 can
    achieve a net reduction in consumer bills while delivering a dramatic
    improvement in environmental quality.
          While the Clean Power Act guarantees that all communities
    will enjoy major cuts in pollution from nearby and distant power
    plants, the Administration would allow increases in local pollution
    that would make some local communities worse off. The Clean Power Act,
    not the flawed Administration proposal deserves your support. We urge
    the committee to mark up S. 556 soon and report it to the Senate for
    consideration. The toll that the four-horsemen of fossil-fuel power
    plant pollution inflicts daily on Americans is far too great to delay
    action to clean up this industry.
    Clear Skies: Clearly Dirtier
        While the Administration has decided on an attractive sounding name
    for its proposal, the Clear Skies Initiative (CSI), the only thing that
    is clear about the proposal is that it is clearly dirtier than the
    Clean Power Act (and than the EPA August 2001 proposal). The caps and
    timetables proposed under CSI for the traditional pollutants would
    allow millions more tons of these hazards to be released over the next
    two decades than under the Clean Power Act, with clearly greater damage
    done to Americans' health and our environment. (See Figure 1).
        While the Clean Power Act requires an annual cap of 2.25 million
    tons of SO2 to be met by 2007, the Administration CSI
    proposal allows twice as much pollution, 4.5 million tons, and does not
    require that reduction until 2010. The CSI briefing materials also
    imply that the SO2 cap will be lowered in a second phase to
    a level of 3 million tons per year by 2018. But the fine print in the
    proposal states an administrative review process is required before the
    second phase cap is set. This means that the reductions claimed for the
    second phase are no more certain than the outcome of a future ambient
    air quality standard setting process. If CSI became law, the only thing
    Congress, the public and states could count on would be the first phase
    cap of 4.5 million tons. On the other hand, industry lawyers could
    count on thousands of billable hours (fees that electricity consumers
    will pay) as they assist their clients in the ``review'' of the second
    phase cap. (See Figure 2 for state-by-state comparisons of emissions
    under the CSI in 2010 and 2020 and the EPA August 2001 proposal).
        As a result of the much higher caps for SO2 under the
    CSI approach, the health and environmental damages would continue at
    much higher levels than under the Clean Power Act. Over the period
    2007-2020, the CSI approach would result in at least 40 million tons
    more SO2 emissions than under the Clean Power Act. The
    higher emissions allowed by CSI would inflict great damage to public
    health, including as many as 10,000 additional premature deaths every
    year for at least a decade. In its analysis of its August 2001 proposal
    (a document that the Administration still has not released officially),
    EPA calculated the health benefits from SO2 and NOx caps set
    at the level of the Clean Power Act as including the prevention of
    ``over 19,000 premature deaths'' annually.\1\  In contrast, EPA
    estimates the CSI approach will avoid ``up to 9,000 premature deaths''
    in 2010.\2\  (See Figure 3 for current mortality rates).
    ---------------------------------------------------------------------------
         \1\USEPA, ``A Comprehensive Approach to Clean Power,'' August 3,
    2001, at 21.
         \2\USEPA, ``Human Health Benefits of Clear Skies,'' May 2002.
    ---------------------------------------------------------------------------
        As indicated by the higher number of preventable deaths under the
    CSI approach, the larger SO2 caps in the Administration
    proposal would leave more areas violating the fine particle standard,
    placing a greater burden on state and local officials to pursue
    difficult and more expensive reductions in prolonged state-by-state
    rulemaking proceedings. According to EPA computer runs prepared last
    September but made available to the committee only last week, an
    SO2 cap of 3.58 million tons would leave nearly twice as
    many counties in the eastern United States in violation of the fine
    particle standard than would a cap of 2 million tons per year.\3\
    Since, as discussed above, the CSI proposal only guarantees a statutory
    cap of 4.5 million tons, this will complicate and most likely delay
    attainment planning efforts in areas where millions of people live.
    ---------------------------------------------------------------------------
         \3\ USEPA, ``Projected PM2.5 and Ozone Nonattainment
    Maps.''
    ---------------------------------------------------------------------------
        In addition to causing greater mortality and morbidity, the
    additional SO2 emissions under CSI would leave more lakes
    and streams susceptible to chronic acidity from acid deposition.
    According to computer runs made available to the committee last week,
    an SO2 cap greater than 2 million tons per year will leave
    15 percent of today's chronically acid lakes in the Adirondacks still
    chronically acidic as long away as the year 2030. In the Southeastern
    U.S. stream acidification will worsen under the caps above 2 million
    tons, with 44 percent of streams in the Southeast predicted to be
    either chronically or episodically acidic under a 3.58 million ton
    cap.\4\
    ---------------------------------------------------------------------------
        \4\USEPA, ``Water quality.ppt,'' May 2002.
    ---------------------------------------------------------------------------
        As with SO2, the CSI approach also allows much higher
    NOx emissions than the Clean Power Act: 2.1 million tons beginning in
    2008 compared to 1.51 million tons beginning in 2007. This results in 9
    million more tons of cumulative NOx loadings between 2007-2020, even if
    one assumes that EPA succeeds in lowering the cap to 1.7 million tons
    in 2018 as represented by the Administration's descriptions of the CSI
    proposal. These added emissions will also mean more acid deposition,
    more eutrophication of coastal waters, and more fine particle pollution
    than under the Clean Power Act.
        For mercury, the CSI proposal sets an initial cap five times higher
    than the Clean Power Act: 26 tons per year starting 2010 compared to 5
    tons per year starting in 2007 under the Clean Power Act. Even the
    optional second phase of CSI would leave 15 tons per year of mercury
    emissions and not be triggered until 2018. Compared to the Clean Power
    Act, the CSI approach would result in a cumulative added mercury burden
    of 330 tons between the years 2007-2020 even if EPA succeeds in
    lowering the cap in 2018. Because mercury is an accumulative toxin,
    these added tons will do their damage for scores of years after they
    are released.
        The committee should note that the current Clean Air Act requires
    EPA to adopt a performance standard based on Maximum Achievable Control
    Technology (MACT) in the next few years, with compliance required by
    the end of 2007. In the regulatory development process now underway,
    EPA is evaluating performance requirements that would achieve the 5
    ton-per-year cap in the Clean Power Act and the weakest option being
    analyzed by the agency (at the request of the utility industry) is a
    level only slightly higher than the nominal CSI phase 2 target. In sum,
    the CSI approach for mercury delays the cleanup of this toxin by 10
    years compared to the current law and calls for a cap that is three to
    five times larger than the more protective options currently under
    consideration at EPA.
        Finally, as the committee knows, the CSI proposal rejects any limit
    on CO2 emissions, despite the fact that power plants are
    responsible for 40 percent of U.S. emissions of this heat-trapping
    pollutant. Instead, the Administration has called for a continuation of
    voluntary measures even though electric sector CO2 emissions
    grew by more than 25 percent during the previous decade of voluntary
    ``commitments,'' a growth rate triple that of the rest of U.S. emission
    sources. In the next section of my testimony I will discuss why the
    committee should reject this terribly flawed approach to controlling
    power plant pollution and adopt the comprehensive program in the Clean
    Power Act.
    Global Warming and the Clean Power Act
        The Clean Power Act's provisions to cap CO2 pollution
    from power plants are responsive to several fundamental facts about
    global warming:
          The magnitude and the scope of the threat posed by global
    warming are already large and will grow the longer we delay action to
    address it.
          Power plants are responsible for 40 percent of US
    CO2 pollution and their emissions will continue to increase
    without action.
          It is in the strategic interest of the United States to
    commercialize modern technologies that reduce the growth in global
    warming pollution in all countries.
          An integrated strategy of emission caps and measures to
    increase energy efficiency and use of renewable energy sources can
    succeed in reducing all four air pollutants from power plants at lowest
    overall costs.
    The Challenge of Climate Change
        At the end of May the U.S. Government submitted its latest
    ``Climate Action Report'' (National Communication) to the United
    Nations under the Rio Treaty that the United States ratified 10 years
    ago. That report summarized the harm that could be done to America and
    Americans from a wide range of changes to our climate caused by human
    emissions of global warming pollutants. If left unchecked global
    warming will have profound effects on the United States from Florida to
    Alaska and from California to Maine. Based on research by top U.S.
    scientists over the last 4 years, and extensively peer reviewed, the
    report identifies many threats to our way of life, including:
          In Florida, rising sea levels, higher temperatures and
    higher CO2 concentrations threaten to literally reshape
    Florida. Much of the Everglades as well as other important coastal
    wetlands would be inundated. Florida's famed coral reefs, already
    suffering from the effects of coastal development and extreme heat
    during the 1998 El Nino, may be destroyed. Florida's growing elderly
    population, many of whom came to Florida to enjoy its mild climate, is
    particularly vulnerable to heat stress when mild weather is replaced by
    stifling heat.
          In Vermont and New York, sugar maples could disappear and
    ski areas will become increasingly snowless.
          In the West, alpine meadows could disappear and water
    resources could be stretched to the breaking point. Conflicting demands
    for water are already a source of tension between farmers and urban
    dwellers as well as between the United States and Mexico. These
    problems will be exacerbated by severe reductions in a critical natural
    reservoir: mountain snowpacks. Rising temperatures will result in more
    precipitation as rain, rather than snow, and an earlier spring
    snowmelt, resulting in an increased risk of spring flooding as well as
    summer drought.
        Two recent NRDC reports highlight some of the risks documented in
    the government's assessment of climate threats. Our report Feeling the
    Heat in Florida emphasizes that in addition to the threats described
    above, Florida's tourism industry would be severely damaged by
    disappearing beaches and the loss of other natural resources that bring
    divers and sport fishers to the state. More recently NRDC released a
    report on the effects of global warming on trout and salmon, which
    found that the habitat for individual species of these prized fish
    could shrink by 5 to 17 percent by 2030 and by 14 to 34 percent by
    2060, as the cold clear streams on which these fish depend become
    increasingly tepid.
        The opponents of action to combat global warming were quick to
    argue that the extent and location of harm is ``uncertain.'' Inaction
    is not excused by claims the threats are uncertain and the warnings not
    specific enough. We are not locked into a fate of exposing our children
    to future threats simply because we do understand today the size of the
    risk. We know now the prudent steps we can take to reduce the risks of
    harm from global warming. The key is to start now with effective
    programs to limit the emissions that cause global warming. The Clean
    Power Act is just such a step.
        To appreciate why it is necessary and productive to begin now to
    carry out an effective action program to cut emissions, a quick
    overview of climate change fundamentals is helpful. A variety of gases
    and compounds associated with human activity change the heat-trapping
    characteristics of the atmosphere. In particular, CO2
    released by fossil fuel burning and deforestation is the largest single
    source of heat-trapping emissions to the atmosphere. This increase in
    heat trapping is changing the climate, even while we argue how soon the
    changes will harm us.
        To avoid confusion caused by statements that CO2 is
    ``natural,'' it is important to understand how human activity has
    changed the earth's natural carbon cycle. CO2 in the
    atmosphere is part of a continuous cycle of exchanges of carbon between
    vegetation, animals, soils, the oceans and the air.\5\  While huge
    amounts of carbon flow between these pools every year, the amount of
    CO2 in the atmosphere since the last glacial period over
    12,000 years ago was fairly constant (around 600 billion metric tons of
    carbon) until we began widespread burning of fossil fuels around two
    hundred years ago. Our use of fossil fuels has fundamentally changed
    the natural carbon cycle by adding to the atmosphere immense quantities
    of carbon that have been stored underground, isolated from the natural
    cycle for hundreds of millions of years.
    ---------------------------------------------------------------------------
         \5\
    ---------------------------------------------------------------------------
        Humans do indeed exhale CO2 but that does not add to the
    total CO2 in the atmosphere. The CO2 we exhale
    comes from plants we eat (either directly, as vegetables, or
    indirectly, as meat). The plants we consume removed and stored carbon
    from the atmosphere while growing. Human breathing simply returns the
    same amount to the air.
        In the last couple of hundred years, burning fossil fuels has added
    about 300 billion tons of carbon to the atmosphere, half of that amount
    in the last 25 years.\6\  Under mid-range growth forecasts for the
    entire globe, humans will add nearly another 300 billion tons of fossil
    fuel carbon to the atmosphere in the next 25-30 years, driving
    CO2 concentrations ever higher. Without corrective action,
    this emissions growth will escalate every decade for the foreseeable
    future, resulting in middle-of-the road forecasts of 1500 billion tons
    of added carbon during the course of this century. This is an amount
    double the total amount of carbon that is now in the atmosphere.
    ---------------------------------------------------------------------------
         \6\Not all the added CO2 stays in the air. A
    significant amount is taken up by vegetation and by the ocean. If this
    did not happen, today's atmospheric CO2 concentration would
    already be 50 percent higher than pre-industrial levels rather than the
    measured 30 percent increases.
    ---------------------------------------------------------------------------
        This added carbon changes a natural, hospitable carbon cycle into
    one that poses threats of unprecedented harmful change to patterns of
    temperature, storms, rainfall, drought, fires, flooding, sea levels,
    and all other aspects of our life that are affected by climate. Beyond
    the scope of the threats, the other feature that makes carbon pollution
    different from traditional air pollution concerns is the long lifetime
    of carbon in the air. For every 1000 tons of carbon we emit today, 400
    tons will still be in the air when our great-great grandchildren are
    born 100 years from now; and 1000 years from now 150 tons will still be
    in the air. So the carbon train is not one we can shift into reverse.
    If we are to avoid climate changes that persist for centuries we have
    to do it by limiting the amount of carbon we put in the air in the
    first place, not by waiting for what we have emitted to ``disappear.''
        So how much fossil carbon is it ``safe'' to add to the natural
    carbon cycle? The short answer is, the more carbon we add to the
    atmosphere, the greater are the risks of serious irreversible harm.
    Today's atmospheric concentrations are already 30 percent higher than
    pre-industrial levels and we are on our way to doubling concentrations
    over the next several decades if we do not take action. The
    Intergovernmental Panel on Climate Change (IPCC) reports support a
    conclusion that to avoid serious, widespread risks of damage we should
    keep concentrations from rising above 50-60 percent higher than pre-
    industrial levels (450 parts per million (ppm) or less).
        Others will argue we may be able to go higher without great harm.
    But the point remains, without action to limit emissions, we will
    commit ourselves to much higher levels before we know if we, our
    children, and our children's children's children can live with the
    changes we have caused. Thus, responsible policy is to do as much as we
    can to preserve our options to stabilize concentrations at levels not
    too much higher than today while we learn more about how sweeping
    future climate changes may be.
        To preserve our options to keep long-term concentrations from
    exceeding prudent levels we must organize ourselves to live within a
    carbon budget. Given the long atmospheric life of carbon, once emitted,
    we know how many tons of carbon we can add to the atmosphere over a
    long period of time and still keep long-term concentrations below some
    target level. Scientists agree that to preserve the option of
    stabilizing CO2 concentrations at 450 ppm we must limit
    cumulative carbon emissions to about 900 billion tons in the two
    centuries from 1900-2100.\7\  These may seem, at first, like immense
    periods of time that someone else, someone later, can worry about; but
    they are not. As I mentioned above, we have already emitted 300 billion
    tons of our budget and the next 300 billion tons will be released in
    the next 25-30 years; without effective programs, humans are likely to
    put 1800 billion tons of carbon in the air between the start of the
    20th century and the end of this century.
    ---------------------------------------------------------------------------
         \7\For a target of 550 ppm (double pre-industrial levels) the two-
    century budget is about 1200 billion tons of carbon.
    ---------------------------------------------------------------------------
        We must understand that further delay in adopting policies to limit
    emissions means the remaining budget will be consumed at ever
    increasing rates. We all remember the idea of ``stopping distance''
    from high school drivers' education classes: the faster your speed, the
    more ground you cover before you can stop. The same lesson applies
    here: the expanding global economy means we are emitting carbon and
    consuming the global carbon budget more rapidly every year. In 1970
    when the Clean Air Act was passed, global carbon emissions from energy
    use were 4.1 billion metric tons; in 1999 they were 6.1 billion tons;
    and in 2020 they are forecast to be 10 billion tons. To avoid burning
    through our budget before we can deploy climate friendly technologies,
    we have to send the policy signal now to the private and public sectors
    that designing and using low-carbon systems makes good sense.
        These are no longer theoretical calculations. Figure 4 shows how
    much of a 450 ppm and a 550 ppm budget we have left today and how
    rapidly it will be consumed under a plausible business as usual
    scenario. By the years 2020 or 2030, we will have consumed more than
    half the budget consistent with stabilizing at either of these levels.
        New fossil power plants that are now in the planning and financing
    stage represent a major commitment of the remaining carbon budget. Once
    built, these long-lived capital investments will operate and emit
    carbon for a large fraction of this century. The International Energy
    Agency forecasts over 600 gigawatts\8\  of new coal plants will be
    built between 1997 and the year 2020, an increase of 60 percent above
    today's world coal capacity in a little over 20 years. Much of this
    capacity is in the fast growing economies of the developing world.
    Without a policy change, these plants almost certainly will use
    conventional combustion technology and will emit some 60-80 billion
    tons of carbon over their lifetimes.\9\  Business and government
    officials are designing and financing these plants today and they are
    doing so without an appreciation of how much of the global carbon
    budget their individual decisions will consume.
    ---------------------------------------------------------------------------
         \8\One gigawatt equals 1000 megawatts.
         \9\As I will describe below, it is now possible to build coal
    plants that are designed to be capable of storing carbon in geologic
    formations. But this technology will not be used without a policy
    signal that carbon emissions should be constrained.
    ---------------------------------------------------------------------------
        The fact is that rapid consumption of the carbon budget will hurt
    all countries by limiting our range of choices and making future
    negotiations of any climate agreement much more difficult. It is in the
    strategic interest of the United States (and other countries) to
    develop a cooperative program to convince decisionmakers around the
    world that all countries will benefit if each deploys low-carbon energy
    systems in order to slow the consumption of the global carbon budget.
    But without policy action in the United States, such efforts, if made,
    are likely to be met with a polite nod and dismissal.
    Breaking the Climate Impasse with the Clean Power Act
        The Clean Power Act can break the policy impasse on global warming
    and set in motion the changes in public and private sector investments
    that are essential for developed and developing countries alike to
    limit CO2 emissions to prudent levels over the course of the
    next century. While any path we pursue to combat global warming can
    take decades to finish, if we are to keep open the options of
    stabilizing CO2 concentrations below levels double pre-
    industrial concentrations it is essential that we begin now, not ten or
    twenty years from now.
        By putting in place a cap-and-trade system for the electric sector,
    the Clean Power Act will send a signal now to energy planners and
    private investors to find innovative ways to reduce carbon emissions
    associated with our production and use of electricity. There is no
    question that major reductions in CO2 from today's levels
    are technically and economically feasible today; the market actors
    simply need a reason to use the available menu of options. Greater use
    of lower carbon fuel, improved production and demand-side efficiency,
    expansion of cogeneration and combined heat and power systems,
    replacement of old and inefficient plants with modern technology all
    will reduce CO2 from our electric generating system. But
    these approaches will not be deployed in today's increasingly
    competitive electric power markets if they involve expenditures even
    slightly less profitable than what corporate investment hurdle rates
    demand. And as long as carbon can be emitted for free, there will be no
    value assigned to investment options that reduce carbon emissions, no
    matter how affordable they may be.
        Let me give an example of a promising, climate friendly system of
    investments that is not being pursued today even though its components
    are technically proven, profitable and would contribute to reducing our
    dependence on oil imports. For years, we have injected CO2
    into oil wells with declining production to boost the amount of oil
    that can be recovered. Today in the U.S. oil producers pump around 30
    million tons of CO2 into oil fields in a process known as
    enhanced oil recovery (EOR), supplying about 200,000 barrels a day of
    our oil needs. These EOR operations are largely concentrated in the
    southwestern United States where a network of pipelines ships
    CO2 to oilfields in the Permian Basin. Unfortunately for
    climate needs, nearly all of this CO2 comes from natural
    CO2 reservoirs rather than from the hundreds of combustion
    and natural gas processing sources that are also located in the region.
        Oil geologists believe that we could greatly increase EOR recovery,
    perhaps by an order of magnitude. But believe it or not, the constraint
    is a shortage of CO2 supply! While it is technically
    feasible to build industrial sources that would separate CO2
    and provide it for EOR use, that is not the path that the market is
    pursuing. Instead, operators of existing natural CO2
    reservoirs are proposing to drill new wells to meet demand. Later this
    week the comment period will close on a proposal to drill new
    CO2 extraction wells in the Canyons of the Ancients National
    Monument in southwestern Colorado.\10\  As long as CO2 can
    be dumped for free from power plants, the logic of the market favors
    pulling CO2 out of the ground to meet EOR demand rather than
    capturing it from sources that release it to the atmosphere.
    ---------------------------------------------------------------------------
         \10\See Environmental Assessment notice at http://www.co.blm.gov/
    canm/kdmorganea.htm.
    ---------------------------------------------------------------------------
        Meanwhile, in the San Joaquin Basin oil fields in California,
    potential EOR operations are on hold because of the lack of a developed
    CO2 supply. The Department of Energy has done an economic
    study of a proposal to build coal-based Integrated Gasification
    Combined Cycle (IGCC) plants near the California fields, separating the
    CO2 for EOR injection and selling the electricity in the
    western grid. The good news is that DOE concludes these projects could
    use commercially proven technology and make a profit without any
    government subsidies. The bad news, according to the same study, is
    that as long as CO2 can still be emitted for free, a project
    developer can make more profit building a conventional natural gas
    plant and venting the CO2 to the atmosphere.\11\  Absent a
    policy incentive, like that provided by the Clean Power Act, to make
    avoiding CO2 emissions economically attractive, these
    systems are not likely to be built.
    ---------------------------------------------------------------------------
         \11\Reuther, J, et al., ``Prospects for Early Deployment of Power
    Plants Employing Carbon Capture,'' U.S. DOE National Energy Technology
    Laboratory, 2002. Available at http://www.netl.doe.gov/publications/
    others/techrepts/2430-1a.pdf.
    ---------------------------------------------------------------------------
        The irony is that the coal industry is one of the most hostile
    opponents to adoption of binding limits on carbon emissions even though
    such limits are needed to stimulate a commercial market for IGCC power
    plants. At present nearly all new fossil generation planned for
    construction in the United States are natural gas plants, given the
    uncertainty that faces coal with climate policy in a state of
    confusion. If coal is to continue as a major player in the United
    States and elsewhere for more than a few decades it will only be if
    technologies like IGCC, that make it feasible to store carbon
    permanently in geologic formations, are commercially deployed at
    sufficient scale to buy down their costs to fully competitive levels.
    The United States is one of the few countries in the world with the
    resources to carry out such a program in a short period of time.
        Time is of the essence. While we argue domestically about whether
    to enact caps on carbon like those in the Clean Power Act, the rest of
    the world is making energy investment decisions. As I mentioned
    earlier, some 600 gigawatts of new coal capacity are on the drawing
    boards for construction in the next twenty years, most of that in the
    developing world. The logic of the market dictates that these plants
    will be conventional coal plants, which are still slightly cheaper than
    more efficient, sequestration-ready IGCC plants. The United States has
    the power to change that calculus. If we do so, the benefits to us and
    other countries will be enormous. We can provide a needed technology to
    a worldwide market and the use of that technology together with a
    balanced portfolio of efficiency programs and renewable energy systems,
    can avoid committing the planet to unmanageable growth in
    CO2 emissions. The opportunity cost posed by those 600
    gigawatts of new coal plants now being planned and built is enormous.
    We and others will rue our choice if we do nothing to steer that
    massive investment to a lower-carbon alternative. Enacting the Clean
    Power Act is a way to shape our future rather than just letting it
    happen to us.
    Comparing Benefits and Costs of Power Plant Proposals
        In developing its multi-pollutant proposal for the Administration
    last August, EPA calculated the benefits of a set of caps essentially
    the same as those in the Clean Power Act. EPA has concluded that these
    pollution reductions would provide enormous benefits for public health
    and the environment, including over 19,000 premature deaths avoided
    annually and larger reductions in pollution-related disease.\12\  Using
    standard methods, EPA estimated the economic benefits of these health
    improvements as worth $154 billion annually. The compliance costs to
    achieve these enormous benefits were calculated at about $10 billion
    per year.
    ---------------------------------------------------------------------------
         \12\``Comprehensive Approach'', note 1, supra.
    ---------------------------------------------------------------------------
        This analysis should have made clear to anyone concerned about the
    welfare of the public that the Clean Power Act's caps for traditional
    pollutants are a massive bargain for the American public. But the
    Administration ignored EPA's analysis and developed its much weaker CSI
    proposal.
        EPA estimates the CSI approach will cost industry about $3.5
    billion in 2010 and $6.5 billion in 2020 but cuts health benefits in
    half.\13\  These numbers reflect a remarkable and disappointing choice
    by the Administration: its proposal saves industry an average of $5
    billion annually over the decade from 2010-2020 but costs the public in
    excess of $50 billion in benefits annually over the same period in lost
    health benefits, most notably incurring an additional 10,000 avoidable
    premature deaths annually for most of this period. It is difficult to
    conceive of a justification for this decision and the Administration
    has offered none.
    ---------------------------------------------------------------------------
         \13\USEPA, ``Clear Skies Initiative Summary,'' at 17. See notes 1-
    2, supra.
    ---------------------------------------------------------------------------
        While EPA's analysis was ignored by the Administration, it stands
    as an uncontested estimate of the benefits of the caps for the
    traditional pollutants contained in the Clean Power Act. EPA's August
    analysis did not address the benefits or costs of controlling
    CO2 because the President in his letter of March 2001 had
    ruled out that option. However, in November 2001, EPA and the Energy
    Information Administration (EIA) provided the committee with reports
    estimating the total costs of the Clean Power Act, including its
    CO2 provisions.\14\  Below I will summarize why NRDC and
    others believe the costs estimated by EPA and EIA in their reference
    case scenarios dramatically overstate the actual costs of the bill.
    ---------------------------------------------------------------------------
         \14\The Administration has not provided a formal assessment of the
    benefits of controlling CO2 under S. 556 but as the
    Administration's May 2002 National Communication demonstrates, the
    benefits of effective action to limit global warming will be enormous.
    ---------------------------------------------------------------------------
    The True Costs of Limiting CO2
        Adopting the CO2 caps in the Clean Power Act would
    change incentives and promote investments in efficiency, renewable
    energy and CO2 capture and avoidance measures. But the
    Administration says it would cost too much. Last November, EPA
    Assistant Administrator Holmstead testified against S. 556, claiming
    that the bill would cause a significant increase in electricity prices.
    This committee heard similar claims in the 1980's when industry and the
    Reagan Administration claimed that enacting acid rain controls would
    raise electric rates by 30 percent or more. Of course, nothing like
    that happened, nor will it under the Clean Power Act.
        Five main assumptions affect forecasted costs of carbon limits: 1)
    the predicted growth in electricity and natural gas demand; 2) the
    expected deployment of new technology, 3) the method used to distribute
    emission allowances and recycle revenues to prevent windfall profits to
    electric generating companies; 4) the schedule of emission reductions
    required under existing law, and 5) the investments in new natural gas
    generating capacity expected to result from business-as-usual. One can
    calculate high costs for controlling carbon emissions only if one
    assumes little is done to improve energy efficiency and use of
    renewable energy; if one assumes that Congress will let electric
    generators retain $50-100 billion in windfall profits; if the reference
    case is chosen such that technologies and regulations are frozen at
    today's levels; and if the recent expansion of electricity generation
    from natural gas is ignored. Unfortunately, the published analyses by
    EPA and the Energy Information Administration (EIA) have emphasized
    cases that rely on all these flawed assumptions.
        It is worth noting though, that despite the use of multiple
    assumptions that drive costs upward, EIA concluded that the Clean Power
    Act would only raise the costs of generating electricity by about 9
    percent.\15\  Since generation costs are less than half of the rates on
    a typical customer's bill, if only the added generation costs were
    passed on to the consumer, the impact on rates would be even smaller.
    As discussed below, this can be achieved by intelligent design of the
    allowance allocation system.
    ---------------------------------------------------------------------------
         \15\Energy Information Administration ``Analysis of Strategies for
    Reducing Multiple Emissions from Electric Power Plants with Advanced
    Technology Scenario,'' Office of integrated Analysis and Forecasting,
    U.S. Department of Energy, October 2001.
    ---------------------------------------------------------------------------
        ``Business as usual'' or ``reference'' scenarios used by both EIA
    and EPA to project the future without new multi-pollutant power plant
    emissions controls do not include several Clean Air Act activities that
    will on their own require substantial additional power plant emissions
    clean-up. Future power plant emissions requirements not included in
    EIA/EPA baselines include: Section 112 MACT rulemaking (mercury and
    other hazardous air pollutants) and subsequent ``residual risk''
    rulemaking; PM2.5 NAAQS implementation; 8-hour ozone NAAQS
    implementation; and visibility requirements (regional haze). While
    future power plant emissions reduction requirements (reduction targets
    and dates) cannot be precisely predicted, plausible scenarios for such
    requirement can certainly be developed and modeled as opposed to being
    ignored as was done in the analyses presented to the committee last
    fall.
        Also worth noting is that none of the EIA or EPA analyses include
    scenarios with significant market penetration of coal gasification
    (IGCC) power plants. Congress is moving toward enacting financial
    incentives intended to move IGCC technology rapidly into the market.
    The Bush Administration strongly supports such incentives. As discussed
    above, penetration of IGCC technology into the market could
    fundamentally alter how the power system would respond (physically,
    economically and politically) to multi-pollutant clean up requirements.
    However, no EIA or EPA analyses to date appear to include scenarios
    with substantial deployment of this technology. Such scenarios should
    be included and would likely show significantly different results than
    the current EIA/EPA ``4-P'' scenarios.
        Another serious concern about the EIA/EPA reference case
    assumptions is that much of the costs projected for meeting ``4-P''
    caps similar to those in the Clean Power Act are for building and
    operating new natural gas power plants to displace coal generation.
    However, the market is already building many of these plants--so they
    should not be ``counted'' as a cost of the Clean Power Act.
        For example, 160,000 MW of combined cycle natural gas electricity
    generation capacity is scheduled to be operational by 2005 with about
    110,000 MW of that either already operating or under construction.\16\
    And, yet, EIA only has about 85,000 MW of online capacity in their 2010
    reference case projection, with EPA showing a similar result. There is
    obviously something wrong with these forecasts. Adjusting EIA and EPA
    analyses to reflect this market activity would substantially lower
    costs forecasted for the bill's carbon reductions.
    ---------------------------------------------------------------------------
         \16\Clean Air Task Force, ``Concerns with EIA and EPA Multi-
    Pollutant Power Plant Clean Up Studies,'' December 2001.
    ---------------------------------------------------------------------------
        The committee also should be aware that the models used to produce
    EPA's original cost estimates for S. 556 have been revised and the
    revisions result in significantly lower cost estimates. EPA's October
    2001 cost study\17\  contained a number of methodological flaws, which
    have been addressed in further analysis carried out by the original
    study's principal authors.\18\  The revised version of the original EPA
    modeling effort corrects a number of important errors. The gas supply
    function is now more responsive, so that a given increase in price
    results in a larger increase in supply. This change has lowered both
    the gas prices (thus reducing the cost of carbon reductions) as well as
    the control costs for mercury.
    ---------------------------------------------------------------------------
         \17\Report prepared for Senators Jeffords and Lieberman,
    ``Economic Analysis of a Multi-Emissions Strategy,'' USEPA, Office of
    Air and Radiation, Office of Atmospheric Programs, October 2001.
         \18\John A. Laitner and Donald A. Hanson, ``The Macroeconomic
    Impacts of a Multi-Emission Reduction Strategy,'' presented at Electric
    Utilities Environment Conference, Tucson, Arizona, January 22-25, 2002.
    ---------------------------------------------------------------------------
        The improved analysis also maps the technology scenarios from both
    the EIA's advanced technology case and the integrated program of
    efficiency and renewable energy policies from the November 2000 report
    by the Department of Energy's (DOE) principle research labs,
    ``Scenarios for a Clean Energy Future (CEF),'' more accurately than was
    previously done. This creates a better demand response and greater
    penetration of energy efficiency and other low-carbon technologies into
    the marketplace. These effects were underestimated in the original
    modeling done for EPA.
        According to the both the original EPA report and the updated
    analysis, U.S. gross domestic product would be consistently higher
    under the Clean Power Act than under business-as-usual as a result of
    the stimulus-producing measures for energy efficiency and renewable
    energy promoted by the bill. As for natural gas dependence, the bill's
    program of efficiency and renewable energy would actually reduce
    natural gas use for electricity generation compared to the
    Administration's energy plan. Thus, the large spike in natural gas use
    that the Administration has forecasted would simply not occur.
        Furthermore, price spikes for both electricity and natural gas were
    grossly exaggerated in previous analyses. For example, in its original
    analysis EPA projected an increase in average electricity price,
    compared to today's value, of more than 2 cents per kilowatt-hour in
    the year 2015, when the CEF ``moderate'' efficiency and renewable
    policies were assumed to be implemented. In contrast, the revised
    analysis projects an increase of less than one half of a cent per
    kilowatt-hour under the CEF moderate policy scenario.
        As for natural gas prices, the original EPA assessment projected
    that by 2015 wellhead natural gas prices under the Clean Power Act with
    CEF moderate policy initiatives would be about 5 percent higher than
    the reference case projection for that year. The new analysis finds
    that in fact the gas price will be lower than the business-as-usual
    projection by 3.5 percent. With the Clean Power Act carbon caps and the
    implementation of the EIA advanced technology case, the costs of
    generating electricity to meet forecasted demand would actually be as
    much as $26 billion less in 2015 than under the Administration's energy
    plan.\19\
    ---------------------------------------------------------------------------
        \19\It is also noteworthy that last November's EIA analysis
    predicts cumulative savings of as much as $220 billion in electric
    generation costs by 2020 if the Clean Power Act's caps and the advanced
    technology policies in the CEF study are implemented, even though EIA
    has emphasized other findings in presenting the results of the study.
    ---------------------------------------------------------------------------
    The Role of Energy Efficiency and Renewable Energy
        Both the EPA and EIA reports on the Clean Power Act demonstrate the
    power of the integrated strategy of emission caps, improved efficiency,
    and greater renewable energy sources that is called for in the bill. By
    improving efficiency and increasing the share of renewable energy
    sources, we can reduce the rate of growth in demand for electricity and
    for natural gas, thereby allowing the emission reductions required by
    the bill to be achieved without diminishing economic growth. The tools
    to accomplish this smarter energy future have been documented in DOE's
    ``CEF'' report, which shows that an integrated program of efficiency
    and renewable energy policies can save consumers money and help achieve
    reduced emissions, including CO2 emissions at much lower
    costs.
        The EIA has criticized the CEF policies as not being achievable.
    But EIA has not supported its criticism with any real analysis--rather
    EIA merely asserts that this rapid deployment of energy efficiency and
    renewable power technology is unlikely. It is important to understand
    the relative competencies of these two different institutions within
    DOE. EIA's expertise is in retrospective analysis of energy market
    statistics, so it is not surprising that its projections forward are
    heavily colored by its familiarity with the past trends. In contrast,
    the national energy labs that prepared the CEF report are expert in the
    engineering and economics of conventional and advanced energy
    efficiency and renewable energy technologies. The CEF experts have
    prepared a rebuttal to EIA's criticism that adds further support to the
    CEF report's findings.\20\  I attached this rebuttal to my testimony
    before this committee last November and would like to include it in the
    record of this hearing as well since their response has not been
    answered by EIA to my knowledge.
    ---------------------------------------------------------------------------
         \20\Koomey, et al., October 18, 2001, ``Assessment of EIA's
    statements in their multi-pollutant analysis about the Clean Energy
    Futures Report's scenario assumptions.''
    ---------------------------------------------------------------------------
        An examination of the CEF report demonstrates the reasonableness of
    the national energy labs' view that we have a large untapped potential
    to improve efficiency and save money. The measures called for in the
    CEF report are not dream technologies, waiting to be invented; they are
    common-sense initiatives designed to increase the use of technologies
    that already exist. The CEF measures include improved appliance
    efficiency, through labeling, standards, and financial incentive
    programs. They include similar measures for buildings, calling for less
    wasteful heating, cooling and lighting systems and weatherization and
    rebate programs to reduce gas and electric use in existing buildings.
        EIA claims the CEF's projected rate of deployment for these
    technologies is unreasonable. But in only 6 months, Californians were
    able to reduce their electricity consumption by 6 percent during the
    summer of 2001, with no deprivation. This experience should encourage
    us not to sell short our ability to be smarter about energy use, given
    the appropriate policy support.
        The Administration asserts the goal of its energy plan and carbon
    intensity initiative is to reduce demand and greenhouse gas emissions
    to levels below EIA's business as usual (BAU) forecasts.\21\  These are
    laudable goals but the Administration's use of BAU forecasts to
    critique the Clean Power Act is inconsistent with those goals. The
    Administration needs to adopt specific policies designed to achieve
    appropriately ambitious goals for energy efficiency and renewable
    energy. When it does so, it will conclude, as DOE's experts have, that
    S. 556 will help, not hurt consumers.
    ---------------------------------------------------------------------------
         \21\See President Bush' Climate Initiative announcement of
    February 14, 2002 at www.whitehouse.gov.
    ---------------------------------------------------------------------------
        When policies to promote efficiency and renewables are combined
    with emission caps the cost of meeting S. 556's pollution targets is
    dramatically reduced compared to BAU assumptions. In the revised EPA
    analysis they find that by implementing even the very modest efficiency
    efforts, as suggested in the EIA's ``advanced technology'' scenario,
    electricity generation costs fall below BAU costs. For example, in 2010
    for the EIA advanced technology case there would be a $12 billion
    savings in electric generation costs as compared to BAU costs, while by
    2015 with the slightly more aggressive CEF moderate efficiency and
    renewable policies, the saving would rise to as much as $26
    billion.\22\  We can clean up power plants and save consumers money
    through smart policies to reduce waste and increase renewable energy
    supplies.
    ---------------------------------------------------------------------------
         \22\Calculated as the difference from the base case in total
    retail expenditures on electricity minus the value of CO2
    allowances plus the costs of energy R&D and efficiency incentive
    programs.
    ---------------------------------------------------------------------------
    Who Profits--Polluters or Consumers?
        EPA's analysis from last fall makes another unstated assumption
    that drives up costs for consumers. Mr. Holmstead blamed S. 556 for
    these consumer cost increases but the real blame lies with the approach
    chosen by EPA. Even though EPA's earlier study shows changes in
    generating costs under the Clean Power Act range from a maximum
    increase of $17 billion per year to a savings of $3 billion per year,
    the study calculates consumers' bills would go up by $50 to $100
    billion per year.\23\  EPA reaches this conclusion by assuming that the
    law Congress will enact will let generators retain windfall profits
    from the value of carbon permits under a cap-and-trade program. EPA's
    approach assumes a large transfer of wealth from consumers to
    shareholders of generating companies, by grandfathering the value of
    carbon permits to the polluters themselves.
    ---------------------------------------------------------------------------
         \23\Note: no citation was supplied in the testimony.
    ---------------------------------------------------------------------------
        S. 556 does not call for any such result. With more sensible
    approaches to carbon allowance allocation than the Administration
    assumes, households will have lower net costs under the Clean Power
    Act. There are a number of approaches to deny windfall profits to
    generators and recycle revenue to consumers and the bill encourages EPA
    to adopt such approaches in designing the cap-and-trade program for
    carbon. The committee may wish to act affirmatively to be sure that the
    most effective allocation program is used.
    The Role of Natural Gas
        The Administration also has claimed that S. 556 will endanger
    energy security by requiring too much natural gas for electric
    generation. But large increases in natural gas use do not occur if the
    integrated CEF efficiency and renewable policies called for in S. 556
    are implemented. Under either the moderate or advanced CEF policy
    programs, EPA's study confirms that natural gas use in electric
    generators will by 2015 be slightly less then what is expected under
    BAU growth with no emission controls.\24\  There is no reason to oppose
    limits on carbon pollution in order to avoid excessive dependence on
    natural gas or any other single fuel for electricity generation. Smart
    policies that harness the largely untapped potential of efficiency and
    renewable energy do a better job of promoting fuel diversity and attack
    the problem of global warming at the same time.
    ---------------------------------------------------------------------------
         \24\In the updated EPA assessment BAU gas use in 2015 is 1333
    billion kWh and with the Clean Power Act and CEF moderate measures it
    is 1331 billion kWh.
    ---------------------------------------------------------------------------
    A Piecemeal Approach to Power Plant Pollution is Flawed
        Decoupling CO2 control from the control of traditional
    pollutants as the Administration proposes would lose valuable time that
    we need to prevent global warming from becoming an unmanageable
    problem. In addition this approach would increase costs and uncertainty
    for the electric generating sector. No one disputes that the strategies
    companies will use to clean up power plants will be different if they
    pursue a strategy to limit CO2 instead of a strategy that
    ignores the pollutant. The Administration's CSI approach will encourage
    investment in end-of-pipe controls that target one or possibly two of
    the traditional pollutants while doing nothing to reduce CO2
    emissions. These added investments will actually tend to prolong the
    lives of some of the CO2 emitting sources in the country. In
    contrast, a comprehensive program like the Clean Power Act will allow a
    full range of techniques to be used, including use of cleaner fuels,
    supply and demand-side efficiency programs and repowering existing
    plants with new technologies whose CO2 can be geologically
    sequestered.
        As the committee knows, even President Bush has indicated that
    climate policy is in flux and is subject to review in, what by utility
    planning terms, is the near future. In his February 14, 2002 statement
    the President said that the government would review its progress in
    2012 and decide on next steps. While this 10-year delay is long and
    harmful from a climate policy standpoint it provides no certainty to
    utility planners. Of course, 2012 is two Presidential terms away and
    the policy may well be reviewed long before then. But even if a company
    assumed the review would not occur until 2012, the potential for a
    policy change at that time implicates investment decisions being made
    today for large capital projects like power plants.
    CSI Threatens Local Air Quality
        Beyond the differences in the proposals to control traditional
    pollutants and CO2, there is another sharp difference
    between the Clean Power Act and the Administration's CSI approach.
    While the Clean Power Act would protect and improve local air quality,
    the CSI approach would threaten it. The Clean Power Act guarantees that
    each power plant community's pollution will improve by requiring old
    plants to meet modern performance standards after they have been fully
    paid off. The CSI approach contains no such safeguard. Indeed, high
    Administration officials have stated that they will advocate repeal of
    provisions in the current law that protect local air quality.
        The current law requires large pollution sources that undergo
    modifications to structure their projects so that they do not increase
    local pollution. If there is a significant emissions increase from such
    projects the Act requires the source to meet modern performance
    standards to minimize the pollution it adds to the community air shed.
    In a nonattainment area such projects must also offset their emissions
    to avoid making existing unhealthy air levels even worse. This offset
    program is the original emission trading program, put in place by the
    Ford Administration and ratified by Congress in 1977.
        The current Administration would scrap these safeguards, claiming
    that the caps it proposes will provide adequate protection. First, as
    discussed above, the CSI caps are so large that they will leave many
    areas with unhealthy air even if no hotspots developed. Second, the
    Administration argument ignores the fact that a national cap cannot by
    itself prevent increases in local air pollution. The Administration
    cites the operation of the 1990 Act's acid rain program to argue that
    national caps can avoid hot spots. But the 1990 acid rain cap program
    did not do away with the ``new source review'' (NSR) programs; it kept
    them in place. It is the combination of the cap and the NSR programs
    that has produced regional reductions without local pollution
    increases. This history is relevant for another reason: as the
    Administration notes, the acid rain cap program has been implemented
    with tremendous cost savings to industry. The point the Administration
    and industry critics of the NSR programs seem unable to acknowledge is
    that these cost savings were achieved with the NSR provisions remaining
    as a fully functioning part of the law. When the President's father
    proposed his acid rain cap legislation in 1990 he did not propose to
    get rid of the NSR safeguards. That was a wise decision and the current
    president should follow his lead. Thank for the opportunity to present
    these views. I'll be happy to answer your questions.
                     Figure 1. Emission Caps: CSI v. S. 556

                   Figure 2a. SO2--CSI v. EPA 8/01

                        Figure 2b. NOx--CSI v. EPA 8/01

                      Figure 2c. Mercury--CSI v. EPA 8/01

                 Figure 3. Mortality from Current Air Pollution

        Source: Abt Associates, 2000
                    Figure 4. Delays Cut All Carbon Budgets

                                     ______

     Response of David Hawkins to Additional Question from Senator Jeffords

        Question. When do you think that IGCC for coal will become
    economic? What would the price of carbon have to be to make it useful?
        Response. Gasification Combined Cycle technology is economic today
    with substantial and rapidly growing installed capacity worldwide.
    According to a data base compiled by SFA Pacific, there are more than
    130 commercial scale gasification projects in operation today with a
    combined capacity equivalent to 24,000 MWe. More than 30 additional
    projects are planned which would add almost 14,000 MWe to global
    gasification capacity.
        See http://www.gasification.org/98GTC/GTC01003.pdf.
        Most of the existing capacity is used to produce hydrogen and other
    chemicals in refineries and other chemical plants. Most of the planned
    additional capacity is for electric power applications. Somewhat less
    than half of the existing gasification technology uses coal as the
    primary fuel, with the remaining capacity using petroleum, petroleum
    coke, and biomass.
        New coal-fired gasification systems (CGCC) plants are highly
    competitive against new conventional coal steam plants today.
    Commercial investment in such plants is limited in the United States
    today for several reasons. First, lack of strong comprehensive emission
    limits and inadequate enforcement of the Clean Air Act's New Source
    Review program when existing plants are modified makes continued and
    expanded operation of obsolete grandfathered power plants artificially
    cheap. Second, due to lower capital costs, natural gas combined cycle
    plants are generally the lowest cost option for new plants at current
    and projected natural gas prices. Third, CGCC technology is primarily
    based on chemical engineering techniques that are less familiar than
    conventional boiler technologies to most electricity generation
    companies. CGCC plants will also become more attractive when
    standardized designs oriented to the power generation market are
    introduced. ChevronTexaco and General Electric have published
    descriptions of such a design. See http://www.gasification.org/98GTC/
    GTC01048.pdf.
        CGCC with carbon capture and disposal will be a very attractive
    option for complying with the comprehensive emission limits proposed in
    S. 556. The incremental costs of achieving the S. 556 targets for all
    four pollutants is far lower with CGCC technology than with
    conventional coal-steam plants because CGCC plants can be designed so
    that high pressure CO2 is separated from other emissions
    without a major increase in capital costs or loss of plant efficiency.
    Moreover, CGCC plants could be built today with the option of adding
    carbon capture and disposal in the future. Several factors will
    determine how quickly CGCC with carbon capture and disposal would be
    competitive with natural gas combined cycle units as a low-carbon
    supply option: the level of carbon emission limits, the price of
    natural gas, progress in reducing the capital costs of CGCC plants, and
    the value that can be obtained by selling CO2 for use in
    enhanced oil recovery operations.
                                     ______

        Responses of David Hawkins to Additional Questions from Senator
                                   Voinovich

        Question 1. An EIA analysis found that if the deadline was 2012
    instead of 2007, the costs would be substantially less. For example, a
    75 percent reduction of NOx by 2007 would cost $1,000 more per ton than
    if the compliance date was 2012. For mercury, a 90 percent reduction by
    2007 would cost about five times more than a 75 percent reduction by
    2012. I agree that the Jeffords proposal gets larger reductions in the
    three pollutants at a faster rate than the Administration's proposal,
    but at what point do we consider the costs and availability of
    technology and the work force to install it?
        Response. Excessive power plant emissions of NOx, SO2,
    CO2 and Hg are currently causing severe damage to public
    health and the environment. These emissions should be reduced as
    quickly as possible to levels consistent with the environmental
    performance of modern power plants. Representatives of the pollution
    control industry have testified before the Committee that the emission
    limits and schedule given in S. 556 are feasible (even prior to moving
    the deadline back to 2008 during markup). For example, Richard Miller
    of Hamon Research-Cottrell testified on January 29, 2002 that:

        ``As testified by the Mr. Jeff Smith, Executive Director of ICAC
    during his previous testimony on November 15, 2001, I believe the air
    pollution control industry currently has the existing technologies
    required to achieve NOx, SO2, and Mercury reduction levels
    as proposed under Senator Jeffords' bill (S. 556), and the required
    resources to further develop and deliver this technology within the
    timeframe outlined under this bill. This is consistent with the past
    history of the air pollution control industry to develop the
    technologies required to achieve emission control technologies
    regulated since the first Clean Air Act was enacted.''

        The costs of achieving emission reductions are difficult to predict
    in advance, and the history of Title IV of the Clean Air Act suggests
    that a priori projections of pollution control costs are likely to
    greatly underestimate the cost reductions that can be achieved once the
    lobbying is over and the engineers get to work. Furthermore, marginal
    allowance prices for a single pollutant are a poor measure of the cost
    of any given set of pollution limits. Costs are better measured by the
    total cost of electricity generation when all emission limits are
    achieved in an integrated fashion.
        While it is true that weaker or more delayed pollution targets
    would result in lower compliance costs for the industry, the public
    would pay a much higher price in health and environmental damage if
    weaker, slower targets were adopted. For example, EPA's analyses in the
    hearing record relating to different 3-pollutant programs show that
    targets and timetables like those in the Committee bill produce
    incremental public benefits about ten times larger than the incremental
    compliance costs when compared to the Administration's proposal.

        Question 2. During your testimony, you cited numerous health-
    related statistics. What are the scientific methods in those studies
    for measuring ``power plant deaths?''
        Response. In my testimony, I made reference to the findings of
    three studies of premature mortality attributable to power plants and
    the premature deaths that could be avoided by reductions in power plant
    pollution. I referred to the estimated 30,000 premature deaths from
    pollution from the nation's power plant fleet based on analysis by Abt
    Associates; the consulting firm relied upon by U.S. EPA to assess the
    health benefits of many of the Agency's air regulatory programs. ``The
    Particulate-Related Benefits of Reducing Power Plant Emissions'' (Abt
    Associates 2000). I cited a study by U.S. EPA finding that the Agency's
    August 2001 power plant cleanup proposal would result in over 19,000
    avoided premature deaths nationwide. (U.S. EPA, ``A Comprehensive
    Approach to Clean Power'' (August 3, 2001) available on the web at
    http://www.clnatf.org/publications/other/epa--straw--proposal.html). I
    also cited EPA's preliminary analysis of the Bush Administration's
    ``Clear Skies Initiative'' finding the proposed emission reductions
    would avoid up to 9,000 fewer deaths per year for a decade than the
    Agency's August 2001 proposal. U.S. EPA, ``Human Health Benefits of
    Clear Skies'' (May 2002). Since the time of my testimony, EPA has
    released its final health benefits assessment of the ``Clear Skies
    Initiative'' finding that it will avoid only 6,000 premature deaths per
    year in 2010 and 12,000 in 2020. http://www.epa.gov/clearskies/
    CSIhealth--env--benefits7-01.ppt. Thus, by EPA's own reckoning, my
    testimony understated the deficiency of the ``Clear Skies'' program
    relative to EPA's August 2001 proposal. Under the latest analysis,
    ``Clear Skies'' would mean over 13,000 unnecessary premature deaths per
    year for a decade and over 7,000 extra deaths per year thereafter.
        All these studies share the same basic methodology that has been
    thoroughly reviewed and approved by EPA's Science Advisory Board in the
    context of EPA's section 812 report to Congress on the Benefits and
    Costs of the Clean Air Act from 1990 to 2010 and EPA's risk assessment
    for the 1997 National Ambient Air Quality Standard for Fine Particulate
    Matter. See http://www.epa.gov/airprogm/oar/sect812/1990-2010/
    finaladv.pdf; http://www.epa.gov/science1/pdf/coua0001.pdf; http://
    www.epa.gov/science1/pdf/councila01004.pdf; http://yosemite1.epa.gov/
    ee/epa/eed.nsf/pages/guidelinesfiles/$file/Appendices.pdf.
        This methodology involves three steps: (1) power system economics;
    (2) air quality modeling; and (3) health impacts analysis and
    valuation. The first module of the analysis involves power system
    economics and asks the question: How will the power system respond to
    the imposition of the cost of cleanup? Possible compliance responses by
    power plants include reducing emissions through the installation of
    control equipment, obtaining emission reduction credits from other
    plants that ``overcontrolled'' their emissions relative to the required
    emission reduction levels, reduced utilization of the plant, or
    retirement and replacement of the generation from that plant with other
    sources of electricity. The analysis assumes that the power sector will
    meet the proposed power plant reduction goals in the most cost-
    effective manner available and provides critical information on the
    spatial distribution of power plant emissions before and after cleanup.
    Both Abt Associates and EPA used the Integrated Planning Model (IPM) to
    determine the spatial distribution of emissions under the scenarios
    analyzed.
        The outputs from the IPM model provide the inputs to the air
    quality modeling work that forms the second module of the analysis. All
    three analyses relied on EPA's approved Regional Emission Modeling
    System for Acidic Deposition (REMSAD). The model was run to estimate
    the fine particulate matter concentrations attributable to power plants
    and the reduction in pollutant concentrations due to the levels of
    pollutant reductions analyzed.
        The air pollution concentration outputs from the air quality
    modeling analysis provide the inputs for the third module of the
    analysis--estimating the health benefits from the pollution reductions.
    Utilizing health studies from the peer-reviewed, published literature
    that link changes in ambient fine particulate matter concentrations to
    risk of mortality, pollution dose-response functions were derived that
    quantify the relationship between the forecasted changes in exposure
    and the expected changes in specific health effects. In each analysis,
    published, peer-reviewed studies of chronic mortality were used to set
    the risk coefficient for premature death (e.g., Pope et al. 1995,
    Krewski et al. 2000, and Pope et al. 2002). In each analysis, the
    modeled changes in pollutant concentrations (from the base case to the
    emission reduction scenarios) were used to estimate the power plant
    attributable health impacts or avoided impacts from each. The
    difference between the based case and the emission reduction scenario
    yielded estimates of the health benefits (or avoided adverse impacts).
        Once the avoidable health impacts were determined, the monetary
    value of each of the various health endpoints was estimated through
    economic valuation techniques accepted for previous EPA analyses. Given
    the attributable and avoided health impacts calculated, the study
    authors tallied the health damages--from lost workdays and cost of
    emergency room care, to the statistical value of human lives lost from
    power plant emissions--and estimated the benefits of the health impacts
    avoided under the cleanup scenarios.
        How do these studies match-up against similar studies?
        I am aware of only four other studies that estimate the health
    impacts from power plant pollution. These studies tend to confirm the
    direction and order of magnitude of the results of the Abt Associates
    and U.S. EPA studies of power plant pollution health impacts discussed
    above.
        In 1996, Jonathan I. Levy and John D. Spengler at the Harvard
    School of Public Health began a series of studies that examined the
    health impacts of fine particulate matter from specific power plants.
    Each study looked at a different region. The first considered two coal
    plants in Massachusetts, the second examined nine plants in Illinois,
    and the third focused on five plants in Metropolitan Washington, DC. In
    1997, Jonathan Samet of Johns Hopkins University Medical School
    performed a similar analysis on a single power plant in southwest
    Washington State. The researchers examined impacts such as deaths,
    hospitalizations, asthma attacks, and other serious health outcomes.
    They asked several different questions, including: (1) What are the
    likely impacts of the plants based upon current emissions? (2) Would
    the impacts decrease if emissions were reduced using readily available
    pollution controls? (3) Are impacts uniformly distributed or are people
    closest to the plants at highest risk? And (4) Is there a disparate
    impact on certain vulnerable groups?
        For the two Massachusetts plants, Levy and Spengler found that
    current emissions are linked to over 110 deaths, 79 of which could be
    avoided by installing modern pollution controls. Levy, J.I., Spengler,
    J.D., ``Modeling the Benefits of Power Plant Emission Controls in
    Massachusetts,'' v. 52, 5-18. J. Air & Waste Manage. Assoc. (2002). For
    the pollution from the nine Illinois plants, they found approximately
    300 attributable deaths of which over 200 could be avoided by pollution
    controls. Levy, J. I., Spengler, J. D., et al. ``Using CALPUFF to
    Evaluate the Impacts of Power Plant Emissions in Illinois: Model
    Sensitivity and Implications,'' 36 Atmospheric Environment 1063-1075
    (2002). The pollution from the five D.C. area plants was found to be
    responsible for over 250 premature deaths annually, over 175 of which
    could be avoided by upgrading pollution controls on the plants. Levy
    and Spengler also found that even this standard analysis seriously
    understates the impact of power plant pollution on low-income and
    minority groups. Levy, Jonathan I, Susan L. Greco, and John D.
    Spengler, ``The Influence of Population Heterogeneity on Air Pollution
    Risk Assessment: A Case Study of Power Plants Near Washington, DC,''
    Environmental Health Perspective (in press). Last, Samet found
    pollution from the Centralia plant in Washington State responsible for
    51 deaths, while installation of desulfurization controls could cut
    that number to 12. Samet, J.M., et al., ``An Assessment of the Health
    Risks Due to Air Emissions from the Centralia Power Plant,'' (August
    17, 1997).
        The methodology in these studies of specific plants differs
    slightly from that used by Abt Associates and U.S. EPA to examine the
    impacts nationwide of the U.S. power fleet. First, Levy/Spengler and
    Samet analyses did not utilize an underlying power system economics
    model. They assumed constant generation at the plants after the
    imposition of pollution controls. Also, because the analyses examined
    the impacts of specific individual plant and small groups of plants on
    a smaller area, Levy/Spengler and Samet made use of a more refined
    regional air quality model that takes better account of dispersion and
    local terrain (i.e., CALPUFF Lagrangian puff model using NOAA's Rapid
    Update Cycle meteorological data. Also, in each study, the authors
    applied their own synthesis of the peer-reviewed, published health
    literature to derive risk coefficients for fine particulate matter-
    related mortality based on the body of literature available at the time
    of each analysis.

        Question 3. According to your testimony, you claimed that S. 556
    would create incentives for landlords to improve the efficiency of
    their existing rental properties. Can you cite the specific provision
    that provides incentives?
        Response. Section 707(c) of S. 556 provides significant incentives
    to landlords to improve the efficiency of existing rental properties.
    Subsection (c) allocates up to 20 percent of the emissions allowances
    for sulfur dioxide, nitrogen oxides, and carbon dioxide to encourage
    energy efficiency, renewable energy, and cleaner power sources. Under
    subsection (c)(2), owners and operators of energy efficient buildings,
    producers of energy efficient products, and entities that carry out
    energy efficiency projects will receive allowances in proportion to the
    amount of electricity or natural gas that is saved by those activities.
    These allowances can then be sold at market value, providing concrete
    financial incentives for undertaking these activities.
        These incentives will benefit owners of rental properties, as well
    as others. For example, the owner of a rental apartment building could
    obtain emissions allowances for making energy efficiency improvements
    in the building (e.g., adding insulation, upgrading heating systems)
    that verifiably reduce its electricity or natural gas consumption. The
    incentives will also encourage the building owner to purchase super-
    efficient products (e.g., refrigerators and other appliances, lighting
    products, water heaters and air conditioners), which will be available
    at lower prices due to the award of emissions allowances to producers
    of those efficient products. Allowances will also be available for
    constructing highly efficient new rental properties.
        Families who rent their homes will also benefit from Section
    707(a), which allocates most emissions allowances to households. The
    number of allowances awarded will reflect the relative amount of
    residential electricity consumption in various States, as well as the
    size of households. Revenue from the sale of these allowances will be
    distributed to rental households, as well as to other households. With
    these revenues, families who rent housing (as well families that own
    their own homes) will be able to invest in money-saving measures to
    further reduce their electricity expenditures. For example, a rental
    family could replace an inefficient television or window air
    conditioner with new super-efficient models described above.
                                     ______

      Response of David Hawkins to Additional Question from Senator Graham

        Question. I know that NRDC is an advocate of allocating the permits
    for pollutants in a manner that would allow the public to own them.
    That is, some entity would hold the permits in trust and sell them to
    companies as necessary. The revenues of such sales would then be used
    to offset increased utility rates.
        Could you provide me with further details on how the program would
    work and why you prefer this over a output-based allocation?
        Response. The findings in the Clean Power Act (Section 701(6))
    recognize that the atmosphere is a public resource and that emissions
    allowances represent permission for power companies to use this public
    resource to dispose of air pollution from electricity generation. For
    these reasons, S. 556 allocates emissions allowances to promote public
    purposes, including protecting electricity consumers from adverse
    economic impacts; providing transition assistance to adversely affected
    workers, communities, and industries; and promoting clean energy
    resources and energy efficiency. The bill accomplishes these goals with
    a combination of approaches, including both an allocation to consumers
    and an output-based allocation to electricity generators.
        First, Section 707(a) of the bill allocates the majority of
    allowances for SO2, NOx, and CO2 directly to
    residential households. Households receive more than 60 percent of all
    allowances in 2008, rising to nearly 80 percent in 2018. Proceeds from
    allowance sales will protect consumers from increases in electricity
    costs.
        Second, Section 707(c) sets aside 20 percent of the allowances--on
    an output basis--to encourage energy efficiency, renewable electricity
    generation, combined heat and power, and cleaner fossil generation.
    These incentives will help realize multi-billion dollar costs savings
    for consumers and for the economy as a whole. As demonstrated in the
    Department of Energy's Scenarios for a Clean Energy Future
    (www.ornl.gov/ORNL/Energy--Eff/CEF.htm), energy efficiency and
    renewable power could meet 60 percent of the need for new power plants
    projected by the Bush Administration's energy plan.
        According to the Clean Energy Future study, an energy path that
    improves efficiency and uses more renewable resources would save
    Americans more than $30 billion per year on their electric bills. Power
    plant emissions that cause smog and dangerous fine particles could be
    cut by more than half from current levels. Power plant emissions of
    carbon dioxide could be cut by a third.
        Under the Clean Power Act, a new wind generator would earn
    emissions allowances as it generates electricity. The allowances can
    then be sold. In this way, the bill encourages more renewable
    generation by improving the rate of return from such projects. In
    effect, the bill creates a market value for cleaner energy that is not
    captured in the current market where electricity suppliers can release
    unlimited carbon dioxide pollution for free. In addition, by allocating
    allowances to other clean resources, the bill encourages an array of
    energy efficiency measures, from the production of more EnergyStar
    products to the construction of more energy-efficient homes and
    commercial buildings. Industrial facilities can also earn allowances
    for projects that accomplish verified electricity or natural gas
    savings. These provisions also encourage faster penetration of combined
    heat and power systems, which would earn allowances both for their
    electricity and thermal energy output. Finally, the bill encourages
    construction of more low-emitting natural gas generators and coal
    gasification plants (CGCC). Coupled with permanent storage of carbon
    dioxide underground, CGCC offers a potential way to use coal without
    continuing to dump CO2 into the atmosphere. All of these
    incentives are provided to electricity generators and consumers on the
    basis of megawatts of electricity output (or in the case of energy
    efficiency measures, on the basis of megawatts avoided).
        Other provisions provide a portion of the allowances to fossil-
    fueled electric generators without charge for a 10-year period, based
    on their electricity output in the year 2000. Another share of
    allowances is dedicated to transition assistance to adversely affected
    employees and communities, and to the most electricity-intensive
    industries. Transition assistance programs can be funded by the
    proceeds from selling these allowances. Finally, shares of allowances
    are made available to encourage techniques for geological and
    biological carbon sequestration.
        The basic approach is illustrated below:
        You asked for more information on the program would work. A first
    question would be how households, employees, and communities will
    obtain the value of their allowances. Household allowances would be
    transferred initially to trustees appointed by the Administrator, who
    will obligated to obtain fair market value for them by means of
    periodic auctions. Proceeds will then be directed to residential
    households primarily through credits on their electricity bills. The
    credits stemming from the household allowances will offset increases in
    electricity rates for residential consumers.
        Allowances allocated to adversely affected employees and
    communities will also be transferred to and auctioned by Administrator-
    appointed trustees. Proceeds could be used to fund training programs,
    income maintenance, and other forms of assistance to communities.
        The Clean Power Act uses trustees because it would not be practical
    or efficient to distribute allowances directly to millions of
    beneficiaries (e.g., each residential household) and then to expect the
    beneficiaries individually to bear the inconveniences and expenses of
    arranging to sell their allowances. Trustees could be banks or other
    institutions that agree to accept strict fiduciary responsibilities on
    behalf of their household beneficiaries.
        The Clean Power Act does allocate a small percentage of the
    allowances directly to electric generators free of charge. Numerous
    studies show that this approach is sufficient to protect those firms,
    and their shareholders, from any losses in the value of electric
    generating companies as the result of the bill's emission control
    program. According to Resources for the Future (RFF), ``it would be
    sufficient for the government to allocate at zero cost only 7.5 percent
    of the emissions allowances to completely offset the losses within the
    electric sector.'' Burtraw, D. et al., ``The Effect on Asset Values of
    the Allocation of Carbon Dioxide Emission Allowances,'' Resources for
    the Future (Mar. 2002) p.13, http://www.rff.org/disc--papers/PDF--
    files/0215.pdf (emphasis added). Other studies have reached similar
    conclusions: Smith, A. et al., ``Allowance Allocation: Who Wins and
    Loses Under a Carbon Dioxide Control Program?'' Prepared by Charles
    River Associates for the Center for Clean Air Policy (Feb. 2002),
    www.ccap.org (click on 'climate' link); Goulder, L., ``Confronting the
    Adverse Industry Impacts of CO2 Abatement Policies: What
    Does it Cost?'' Resources for the Future (Sept. 2000), http://
    www.rff.org/issue--briefs/PDF--files/ccBrf23--goulder.pdf. In fact, RFF
    found that electric generators would reap huge windfall profits--nearly
    13 times the impact on their firms--if they were given all emissions
    allowances free of charge.
                                     ______

     Responses of David Hawkins to Additional Questions from Senator Wyden

        Question 1. What options do coal-fired utilities have, besides fuel
    switching, in order to meet the carbon dioxide reduction target in the
    Clean Power Act?
        Response. Coal-fired utilities would have many options for
    complying with the carbon dioxide reduction target in S. 556 in
    addition to fuel switching from coal to natural gas. These include
    improving the efficiency of existing plants; repowering coal-fired
    units with gasification technology; investing in renewables (e.g., wind
    turbines to generate electricity with zero emissions, or co-firing
    biomass in coal boilers to reduce the effective emissions rate);
    investing in demand-side management investments to reduce overall
    generation requirements; and purchasing allowances through the trading
    system.
        Improve power plant heat rates. Improving the efficiency of coal-
    fired plants may reduce carbon dioxide emissions while maintaining, or
    even increasing, electricity generation capacity. Investments in heat
    rate improvements save fuel costs and are frequently undertaken as a
    standard measure at older plants. In contrast to the current situation,
    a cap on carbon emissions will guarantee that a heat-rate improvement
    at one plant achieves a reduction in total system emissions, rather
    than possibly displacing other cleaner resources.
        Repower with Coal Gasification-Combined Cycle (CGCC). Coal
    gasification is an option that increases thermal efficiency and thus
    lowers CO2 emissions. It also has lower emissions of the
    other three pollutants. This technology is an option both for new
    plants as well as plants that would consider fuel switching. Coal
    gasification also has the advantage of being compatible with carbon
    dioxide capture and geologic storage (because of the relatively
    concentrated stream of carbon dioxide compared to conventional
    combustion), which would give plant operators additional long-term
    options. The CGCC repowering option when equipped with carbon capture
    and geologic storage can achieve a 90 percent reduction in
    CO2 emissions while still using coal as the fuel.
        Invest in renewables, end-use efficiency, and lower-carbon
    intensity generation. Electric power companies may reduce the emissions
    of their entire generation portfolio while still operating coal-fired
    generation by investing in non-coal fired generation sources (e.g.,
    renewables, combined-cycle gas) or energy efficiency and conservation.
    This investment could occur in the firm's service area or, by virtue of
    the emissions trading system, anywhere nationwide. The Clean Power Act
    also uses allowance allocations to provide incentives for renewables,
    conservation, and highly efficient new generation, which will
    indirectly benefit existing coal-fired generation by reducing
    compliance costs and the associated allowance prices.
        Purchase allowances to cover emissions. One of the principle
    features of the Clean Power Act is the use of a cap-and-trade approach
    for carbon dioxide, maximizing flexibility and minimizing regulatory
    costs for power plants. Individual coal plant operators may purchase
    allowances to cover all or part of their carbon emissions. Overall, not
    all coal plants could meet their obligations in this manner, but it
    will be an option available to all plants. Under the Clean Power Act,
    some of these allowances could be purchased from entities participating
    in eligible forest carbon sequestration programs.
        Retire oldest, dirtiest generation. The most efficient way to meet
    the overall caps in the Clean Power Act will likely involve some
    limited retirement of the oldest, dirtiest, and least productive
    generating units. All analyses, however, show that the cleaner and more
    productive coal-fired plants can continue to be operated, at a profit,
    under the emissions caps of the Clean Power Act.

        Question 2. Do you agree that it would be beneficial for both the
    environment and for generators of electricity to include allowances
    based on CO2 reductions from forest sequestration as a
    component in the 4-P bill?
        Response. The Clean Power Act allocates allowances from within the
    carbon dioxide cap to eligible forest carbon sequestration programs.
    NRDC believes that forest sector activities have an important role to
    play in a comprehensive climate policy. The Clean Power Act approach is
    the best way to include the forest sector within the scope of power
    plant legislation while maintaining the bill's CO2 cap and
    its objective of promoting a lower carbon energy system.
        The Clean Power Act provides new financial resources to support and
    incentivize forest carbon sequestration, above and beyond existing
    public and private programs, while maintaining the bill's cap on
    emissions from the power sector. The additional resources are provided
    by allocating emissions allowances to landowners who take specified
    actions to increase sequestration. Landowners will be able to sell the
    allowances to power generators who need them for compliance. The
    allowances that landowners receive come from the original amount
    created by the Clean Power Act. Thus, forest sequestration activities
    receive new support without generating new allowances or credits that
    would ``bust the cap.''
        The bill's approach is more responsible than alternative approaches
    that would inflate the emissions cap by creating new allowances (i.e.,
    offsets). The off-the-books offset approach would weaken the carbon cap
    for the power sector and would undermine the objective of transforming
    the power sector over time to a sustainable energy producer, relying on
    cleaner generation and efficiency to help us meet our long-term climate
    protection needs.
        In the context of more comprehensive carbon mitigation programs,
    forest carbon sequestration policies will benefit the environment if
    they include rules that ensure real climate benefits and environmental
    co-benefits. Climate benefits are provided only if forest activities
    result in additional removal of carbon dioxide from the atmosphere,
    compared to the business-as-usual case in the absence of those
    policies. In addition, sequestration policies must take into account
    the fact that forest (and agricultural) sequestration is not permanent.
    That is, stored carbon may be subsequently lost, either through
    intentional land use decisions or by foreseeable occurrences such as
    fire or pest outbreaks. Policies must include provisions to assure that
    the atmosphere will be made whole whenever stored carbon is lost.
    Without such provisions, carbon sequestration cannot be considered on
    an even footing with other emission reductions.
        Forest carbon sequestration can benefit the broader environment if
    the types of forest management activities implemented improve water
    quality, wildlife habitat, and other factors. While some sequestration
    practices meet these objectives, some others can be harmful to the
    environment. The Clean Power Act forest sequestration programs include
    appropriate guidelines to assure accurate assessment of net climate
    benefits and the promotion of projects with environmental co-benefits.
                                   __________
      Statement of Lee P. Hughes, Vice President, Corporate Environmental
     Control, Bayer Corporation on behalf of the American Chemistry Council
        My name is Lee Hughes and I am Vice President of Corporate
    Environmental Control for Bayer Corporation. I am responsible for the
    environmental matters of Bayer's U.S. operations. This includes
    compliance with the Clean Air Act. Thank you for the opportunity to
    appear before you today.
        I am here today representing the American Chemistry Council.
    Leading companies engaged in the business of chemistry make-up the
    membership of the Council. Consistent with our goal of continuous
    improvement in our environmental performance, the chemical industry
    supported the 1990 Clean Air Act Amendments. For over a decade we have
    worked with EPA to implement its many programs and in the development
    of programs that continuously make people's lives better, healthier,
    and safer.
        Council members have a big stake in the continued success of
    environmental programs, including the Clean Air Act, and have worked
    hard to ensure that success. Overall environmental, health and safety
    spending by Council members for the year 2000 alone was roughly 3.4
    billion dollars. We have steadily reduced emissions while increasing
    production, thereby increasing economic productivity while reducing our
    environmental footprint. One-way Council members have accomplished this
    is by using ``combined-heat-and power'' (``CHP'' or ``co-generation'')
    units to increase our energy efficiency and cut emissions from power
    generation as well.
        While we have improved our energy efficiency for decades, we remain
    an energy intensive industry. Not only do we use a lot of electricity,
    we are major consumers of natural gas, both to power our energy
    efficient operations and as a raw material. In fact, we are the major
    user of natural gas for non-energy purpose. This makes our businesses
    very sensitive to energy prices and to the availability of natural gas
    as one of our core materials. While S. 556's provisions are aimed
    largely at the utility sector, some of our operations would be directly
    affected. Moreover, as major users of energy, Council members will be
    directly impacted by any increase and availability of critical raw
    materials such as natural gas that are driven by the provisions of S.
    556.
    General Position and Concerns
        We support the goal of continued improvement in air quality,
    building on significant progress to date. We also support the use of
    market-based mechanisms to achieve these goals. However, we are very
    concerned about S. 556's potential impact on our industry and the
    broader economy. The one million employees of the business of chemistry
    are just beginning to rebound from two very tough years of economic
    slowdown, and are poised for an upturn. We are concerned that this
    bill's impact on energy prices and natural gas availability could send
    us the other way by driving many utilities to switch to natural gas as
    a fuel source. We think it is important to set our goals and timetables
    for additional emissions reductions in a way that takes account of and
    minimizes these sorts of economic impacts while delivering improved air
    quality. We also believe it is important to harmonize any new
    requirements with existing provisions of the Clean Air Act, rather than
    to simply layer an entire set of new provisions over an already complex
    matrix of existing requirements.
        Because of these reasons, the American Chemistry Council is opposed
    to S. 556 in its current form. We believe that S. 556 needs to be
    reconsidered and amended. Our three primary concerns are:

        1. Ensuring fuel diversity.
        2. Recognizing the benefits of CHP Units.
        3. Harmonizing the various sections of Clean Air Act with new
    requirements.
    The Need for Continued Fuel Diversity
        It is critical to the business of chemistry that S. 556 and similar
    proposals not result in an over-reliance on natural gas to generate our
    nation's electricity needs unless there is simultaneous government
    action to ensure access to an adequate supply of natural gas. The
    business of chemistry relies on natural gas as an energy source and as
    a basic raw material. For many utilities, the most cost-effective, or
    perhaps only, way to meet the stringent targets in S. 556 would be to
    switch to natural gas, accelerating the trend toward gas as a preferred
    fuel. Without any increased initiatives, the Energy Information Agency
    (EIA) is predicting that the use of natural gas to power our utilities
    will increase threefold by 2020 in their ``business as usual'' case.
    This increasing demand for gas is occurring at the same time we are
    restricting access to supplies of natural gas. S. 556 would exacerbate
    this shift.
        When the supplies of natural gas are short and demand is high,
    prices rise with a significant impact on our industry. In fact, each
    dollar rise in the price of natural gas means about $1 billion in
    additional annual cost for our members--costs that we cannot recover in
    the price of our products in the global marketplace in which we
    compete. When U.S. companies cannot compete in the global market, we
    lose jobs and investment in the United States (and production increases
    in parts of the world where local companies may be allowed to have much
    higher emissions). Last year's spike in gas prices was disastrous for
    our U.S.-based industry.
        When the price of natural gas approaches $4.00 per MBTU, the U.S.
    chemical industry's costs of production rise to the point where we are
    no longer competitive with foreign producers. Gas prices increased to
    over $10.00 per MBTU during our most recent spell of demand-supply
    imbalance, the winter of 2000-2001, and the industry had one of its
    worst years in 50 years. Last year we saw several plant closings
    because of that price spike.
        To the extent that multi emission proposals result in significant
    fuel switching by utilities from coal to natural gas and public
    policies do not provide for adequate gas supplies, demand for gas can
    reasonably be projected to outpace supply. Growth in demand for
    electricity is already affecting the supply/demand balance for natural
    gas before any additional fuel switching is encouraged. EIA reports
    that 90 percent of our new electric power facilities will rely on
    natural gas as their sic fuel. Actions that further alter our basic
    fuel mix for electricity and drive up demand for natural gas create
    significant problems for our industry and we urge this committee to
    evaluate them carefully.
        Given the levels of reduction currently required by S. 556, and the
    time lines for meeting these levels, we conclude that enactment of this
    legislation will result in significant additional fuel switching by the
    utilities. In particular, the CO2 component of the bill
    would virtually guarantee that the utilities would need to abandon coal
    use in favor of natural gas. Existing technology cannot accomplish the
    CO2 reductions currently sought by S. 556, and the bill's
    timetable does not provide for adequate technology development. The
    short deadline for meeting S. 556 deadlines in 2007 does not allow new
    and developing technology-based solutions to come on line in time to
    make a difference. Fuel switching to natural gas would be the only
    viable alternative for the utilities, at the expense of the broader
    U.S. economy.
    Congress Must Not Penalize Co-generation or Combined Heat and Power
            (CHP) Units
        S. 556 covers more than power generating units in the electric
    utility industry. It also covers combined heat and power units (CHP)
    that produce thermal energy and electricity for onsite consumption, but
    who may also sell small amounts to the electric grid. This puts these
    already efficiently operating units in a competitively disadvantaged
    position of now needing to buy credits--essentially penalized for being
    ``ahead of the curve.''
        The U.S. chemical industry continues to make significant
    investments in the use of combined heat and power (CHP) technology to
    provide much of its electrical and thermal energy needs. CHP, also
    referred to as ``co-generation,'' produces both thermal power and
    electricity, from the same fuel input. Where utilities generally
    discard the thermal energy produced from combustion, CHP units capture
    it for use in a manufacturing plant.
        The advantages of CHP cannot be overestimated. A typical CHP unit
    produces power twice as efficiently as a traditional utility and emits
    at least 50 percent less pollution. In this regard, generation of
    energy needs by CHP technology is extraordinarily beneficial toward
    meeting the nation's air quality goals.
        We know members of the Environment and Public Works Committee
    appreciate the role of CHP, since most of them, including the
    committee's chairman, supported Senators Carper and Collins on their
    amendment to restore the incentives for CHP in the recently passed
    energy bill. It is most surprising then that S. 556 appears to ignore
    the beneficial aspects of CHP units because it includes them within its
    coverage. CHP units should not be included in S. 556, but should be
    provided with an opportunity to opt-in to the program.
    Harmonize New Requirements With The Clean Air Act
        We support using a market driven approach to achieve the goals of
    the Clean Air Act. We believe the market will do a significantly better
    job of allocating scarce resources to accomplish the goals of the Clean
    Air Act than a confusing, overlapping, and constantly changing command
    and control regulatory regime. However, to achieve the true benefits of
    a market-based system, it must be properly structured and it must be
    allowed to work. And, it must not penalize good performers.
        Currently, S. 556 meets neither of these tests. Its compliance
    timelines are too short to allow the market to develop and function.
    Further, by not providing relief from any of the command and control
    requirements of the Clean Air Act, the uncertainty of meeting the
    various regulatory program requirements in the coming years will
    discourage facilities from participating in market-based trading.
    Companies will likely decide that they need any ``credits'' within
    their company--or worse, they simply may not be able to generate
    credits because of other overlapping regulatory requirements.
        The trading mechanisms of the Clean Air Act acid rain program were
    successful because that program was the mechanism for reducing acid
    rain and the program focused only on a single, similar sector, i.e.,
    utilities. By design, S. 556 isn't the only program that will apply to
    a facility, and S. 556 will also cover non-utilities such as combined
    heat and power units from the chemical sector and others.
        These two factors will contribute to a higher cost program and
    severe inequities between industrial sectors with different margins and
    a constrained allocation. This means that a source subject to S. 556
    will still face the uncertainty of meeting all other Clean Air Act
    requirements for the same pollutants in addition to meeting S. 556
    requirements. Not only does this remove any incentive for an industry
    to support S. 556, but also it eliminates any perceived benefit of
    certainty and cost-effectiveness that a properly crafted market-based
    system could provide.
        Finally, because S. 556 adds another mechanism for meeting Clean
    Air Act emission goals without ensuring that these programs will work
    in concert, sources will not be able to benefit from the market-based
    approach of S. 556. Instead, they will still be required to adopt each
    additional command and control approach implemented by the CAA over the
    next two decades.
        As additional support for our views, the committee should consider
    that,

          the Clean Air Act is working and air quality has
    improved;
          the nationneeds to maintain diversity of fuel sources;
          the business of chemistry is vitally important to the
    U.S. economy;
          the business of chemistry is competitively disadvantaged
    by high natural gas prices; and
          including combined heat & power units in S. 556 will add
    significant burden to these highly efficient and well-controlled units.
    The Clean Air Act Is Working and Air Quality Has Improved
        The Clean Air Act, now nearing thirty years old and with amendments
    through the years, is a complex, command and control driven series of
    requirements and deadlines. While fraught with cumbersome programs,
    such as new source review, and full of complex and costly requirements,
    emissions have been dramatically reduced since the early 1970's.
    Furthermore, the Nation's air quality keeps improving as demonstrated
    by declines in annual emissions for all measured categories over the
    past 14 years. The 1990 amendments added significant control
    requirements and deadlines extending the scope and reach of the Act.
    Combined with EPA's 1997 decision to tighten standards for ozone and
    add a standard for fine particulates--we see a continued stream of
    requirements through 2020.
        Because of this improvement, decisions about what to control, and
    the stringency of the control can have a critical impact on entire
    business sectors. The chemical industry is a prime example of a highly
    regulated and controlled industry that may now have to face significant
    raw material cost increases if a bill like S. 556 attempts to move too
    far too fast. In addition, S. 556, in its current form, would regulate
    combined heat and power units from the chemical and other industries.
    The cost of achieving any incremental environmental gains in emission
    reductions from these units will be prohibitive.
        As you move forward with the development of multi-pollutant
    legislation, we ask the committee to carefully consider the progress
    that has already been made in reducing emissions, the increasingly
    complex and costly requirements still under development, and the need
    for equity in determining the scope of the program. Many combined heat
    and power facilities, like those in the chemical industry, are highly
    regulated and tightly controlled. Sweeping one-size fits all approaches
    will put us at a further economic disadvantage. In fact, structuring a
    program that doesn't provide credit for previous emission reductions
    penalizes sources and industries that have dramatically reduced their
    emissions in favor of those who currently use energy less efficiently.
    The Need for Continued Diversity and Balance in our Nation's Energy Mix
        The crippling run-up of energy prices in 2001 is still fresh in our
    minds and we still face a continuing threat of a repeat of that crisis.
    Current natural gas production and the recent decline in exploration
    almost guarantee it. Carefully crafted multi-pollutant legislation
    could help minimize this threat. In turn, by statutorily influencing
    the delicate balance of supply and demand for energy resources, multi-
    pollutant legislation could have a detrimental impact on our efforts to
    address our Nation's basic energy needs.
        Our industry is an example of one that uses energy efficiently to
    make products that consumers use to make their lives better and in many
    cases, help our nation improve the efficiencies of energy generation
    and utilization. The business of chemistry converts certain petroleum
    products, natural gas, and other naturally occurring raw materials into
    a wide variety of basic chemicals. These basic chemicals are then
    converted by other sectors of the chemical industry into chemical
    intermediates and final chemical products such as plastics, synthetic
    fibers, and rubber. In turn, these chemical products are fabricated by
    many different industries into thousands of essential consumer products
    such as detergents, antifreeze, medical and sanitary products including
    sterile medical applications, food-packaging, and energy efficient uses
    such as insulation. All segments of our society use these products to
    make their lives better, safer and more energy efficient.
    The Business of Chemistry is Vitally Important to the U.S. Economy
        We are the nation's largest exporting sector, larger than
    agriculture, computers, or aircraft/aerospace. Exports grew 13.4
    percent to a record $79.9 billion in 2000. The $6.3 billion trade
    surplus in 2000 continued a seventy-year-old tradition. In the United
    States, more than ten cents of every export dollar are due to chemicals
    and related products. That said, all of these numbers are down
    dramatically in the past year due largely to the run up of natural gas
    prices during the energy crisis of 2000--2001.
        More than one million people are employed by the business of
    chemistry, and companies that purchase the products of the business of
    chemistry employ more than 36 million workers.
        To maintain our position, the business of chemistry depends on
    reasonable prices and a secure supply of raw materials. Among these raw
    materials, natural gas is one of the most important. The chemical
    industry is the nation's biggest industrial user of natural gas,
    accounting for 11 percent of total U.S. consumption, and 30 percent of
    industrial consumption.
    The Business of Chemistry is Competitively Disadvantaged by High
            Natural Gas Prices
        High natural gas prices have an adverse effect on the business of
    chemistry in the United States. Although the market for chemicals is
    global, the price of natural gas is not. When U.S. firms are paying
    higher disproportionate prices for natural gas, chemical products made
    in the United States are at a competitive disadvantage in the global
    marketplace.
        Not only does the relative price of natural gas affect chemical
    producers, so does the degree to which chemical producers rely on
    natural gas as a feedstock. For example, 70 percent of U.S. ethylene
    production relies on natural gas liquids as a feedstock, whereas 70
    percent of global ethylene production relies on heavy liquids such as
    naphtha and gas oil. Therefore, as the price of natural gas rises
    disproportionately to that of heavy liquid feedstocks, the competitive
    position of U.S. ethylene producers is further weakened.
        Last year's price shocks greatly affected U.S. production. The
    price of natural gas liquids (ethane, propane, butane) rose such that
    heavier feedstock chemicals (naphtha, gas oil, condensate) became more
    attractive economically. Unfortunately, few chemical production
    facilities that use natural gas as a feedstock could use these heavier
    liquids. In the short run, these high natural gas prices in the United
    States had a dramatic effect on companies in the business of chemistry.
    Here are some examples:
          Shut down almost one-half the nation's methanol capacity
    and one-third of its ammonia capacity. Five years ago, the United
    States was self-sufficient in methanol. Now we import about the same
    amount of methanol as we do oil.
          Ethylene capacity dropped between 10 percent and 15
    percent, with at least 5 percent of this drop due to plant shutdowns.
    Net trade in ethylene was at one-fifth the 1997 level in 2001.
          High electrical power requirements and cost adversely
    affected choralkali, atmospheric gas, and ethylene oxide production
    facilities.
          The Gulf Coast region's economy, where most of the U.S.
    petrochemical industry is located, was hit particularly hard with
    widespread job losses due to plant shutdowns.
          The combined effect of higher natural gas prices led to
    fewer U.S. exports, greater U.S. imports, and a rising U.S. trade
    deficit. As a result, net trade for the United States last year fell at
    least $13.5 billion (4.5 billion attributable to the business of
    chemistry). In the long-term, the outlook remains uncertain:
          Domestic natural gas prices that remain year-on-year
    above $4 per mm BTU will severely damage U.S.-based chemical producers
    ability to participate in world trade. This impact is predicated on oil
    prices remaining below $25 per barrel. Plant closures, employment loss,
    reduced international investment in U.S. capacity, and an increase in
    semi- and finished goods imports will occur.
          Capital investment will be negatively affected. For
    example, a new ethylene plant costs about $400 million to build, but
    the rising price of natural gas in this country, coupled with the
    historically flat global price of ethylene (the 1999 price was the same
    as the 1980 price) makes new investment in the United States unlikely.
          Rising natural gas prices are inherently inflationary and
    have ripple effects on other products and services. An acceleration in
    inflation preceded every post-World War II recession.
          If chemical companies cannot pass on the cost increase to
    their customers, more plant shutdowns will occur, exports will continue
    to diminish, and more jobs will be lost.
        Manufacturing and the chemical industry create the demand at our
    colleges and universities for scientists and engineers. As we continue
    to diminish these sectors in our economy, we hurt the technological
    base we often look to for solving the issues we face. These facts
    convey the critical nature of developing a multi-pollutant program that
    doesn't upset our balanced energy supply. Legislation should not
    discourage further development of CHP facilities.
    Including Combined Heat & Power Units in S. 556 Will Add a Significant
            Burden To These Highly Efficient and Well-controlled Units
        Combined heat and power (CHP) generating systems, also known as
    cogeneration, are cost effective and environmentally beneficial
    projects that provide both electricity and steam power. They are over
    50 percent more efficient than typical power production units. A form
    of distributed generation, CHP plants are located at or near
    manufacturing facilities that require large amounts of electricity and
    steam. They offer several advantages over purchasing utility-generated
    power to run manufacturing processes:
        CHP systems are more reliable and require fewer down times than
    utility power plants. In addition, since they are located at or near
    the site of the consumer there is no reliance on the transmission
    system to move these large blocks of power. The result is fewer
    bottlenecks and greater available transmission capacity for utilities
    to serve other customers.
        CHP systems are, on average, twice as fuel efficient as
    conventional utility power plants because the heat that is wasted in a
    utility plant is captured for use in the associated manufacturing
    facility in the form of steam. By getting twice the amount of power
    from the same fuel input, CHP systems generally produce less than half
    the emissions of conventional utility power plants.
        Combined heat and power systems offer benefits beyond those
    realized by the manufacturing community. Because it is distributed
    generation, CHP offers communities an additional option for power in
    times of emergencies. Furthermore, since the cost of building an
    industrial CHP plant is borne by the manufacturing plant, consumers are
    not held responsible for recovery of that capital investment, as with
    regulated utility plant investments.
        Because of their numerous benefits in energy generation and minimal
    environmental footprint, CHP units cannot be considered in the same
    vein as electric power generating units. Multi-pollutant legislation
    that encompasses CHP units would put them at a significant economic
    disadvantage as they are already highly controlled. Cost per ton of
    emissions removed range well over $5,000 per ton removed as compared to
    electric generating units where cost per ton removed would average
    under $1500 per ton removed.
        Some have suggested that these units would be ``credit generators''
    under a multi-pollutant approach. In fact, these highly controlled
    units would be purchasers because uncontrolled units would generate
    more credits, and much more cheaply. By not accounting for the relative
    efficiency of various units, the unintentional result is to reward the
    less efficient production.
    Summary
        In summary, the Council's members believe that a carefully crafted
    multi-pollutant program could work and could provide air quality
    benefits to the nationwithout serious economic disruption. To succeed,
    however, the program must:
        1) avoid creating supply/demand imbalances for critical fuels such
    as natural gas,
        2) avoid significant increases in electricity costs,
        3) not include CHP units,
        4) allow CHP and other sources not covered to voluntarily opt-in,
        5) address three pollutants, SOx, NOx and mercury, and
        6) harmonize these provisions with existing CAA requirements to
    ensure that market mechanisms function properly.
        We oppose S. 556 in its current form, as this bill does not meet
    these criteria. We would be happy to work with the committee to amend
    or develop an alternative to S. 556.
                                     ______

     Responses of Lee Hughes to Additional Questions from Senator Jeffords

        Question 1. You indicated that my bill puts combined heat and power
    units in a competitively disadvantaged position of needing to buy
    credits. Please review the enclosed version of S. 556, which the
    Committee approved on June 27, 2002, and tell me if you still hold that
    opinion and, if so, why?
        Response. We continue to believe that S. 556 will competitively
    disadvantage CHP units. Under S. 556, CHP units would invariably be net
    purchasers of credits generated from inherently less efficient electric
    generating units, or in some instances, from units that may not have
    been previously controlled, as such purchases would be less costly than
    making the reductions at CHP units. This sends the wrong message--that
    adopting more environmentally and energy efficient technologies ahead
    of regulatory requirements will put you at a competitive disadvantage.
        Combined Heat and Power units (CHP) are typically much smaller and
    at least 50 percent more efficient than a typical electric generating
    unit. Many CHP units are powered by natural gas and/or already have in
    place emissions controls that exceed those on typical coal fired
    electric utility generating units. CHP units are also generally much
    smaller than typical electric utility generating units, and due to the
    economies of scale require larger investment per unit of emissions
    reductions vs. electric generating units. S. 556 would treat these
    highly efficient units the same as a typical electric utility
    generating unit. Achieving a 70 percent reduction in emissions from
    these highly efficient units would generally be more costly per unit of
    emissions reduction than for large electric utility generating units
    for reasons of both economies of scale and the general rule that
    additional reductions for already controlled sources are more costly
    than the initial reductions. For these reasons the cost per unit
    emissions reductions for the electric utility generating units will
    generally be lower than for CHP units, such that the economically
    rational way for a CHP operator to meet the requirements of S. 556
    would be to purchase credits from a utility generator.

        Question 2. The National Coal Council report in May 2001 said that
    IGCC for coal could increase efficiency of existing coal-fired plants
    by 20 percent. That comes close to meeting the targets in the Clean
    Power Act and wouldn't ``virtually guarantee that utilities would need
    to abandon coal use in favor of natural gas.'' Are any of your member
    companies working on this technology?
        Response. The various ``clean coal'' technologies that are under
    development do show promise of greatly increasing efficiency and
    reducing emissions. To our knowledge, these technologies for use in
    large electric utility generating applications are still going through
    considerable pilot testing and would not be verified, available, and
    cost-competitive until at least sometime in the next decade. The tight
    timeframes imposed by S. 556 would not allow these technologies to come
    on-line before industries would need to meet the requirements.
    Requirements for CO2 sequestration to also be applied to
    gasification technology significantly increase the cost, as pointed out
    by the EIA in their report responding to your request. They assumed
    that technologies using sequestration of CO2 were allowed to
    enter the market starting in 2010. Increased costs were noted to be
    equivalent to an increase of $550/kw for IGCC plants and $270/kw for
    advanced combined cycle plants. This differential is another driver
    toward increased use of natural gas for power generation, thus
    aggravating the potential upward price pressure on gas. (Ref. SR/OIAF/
    2001-05, Analysis of Strategies for Reducing Multiple Emissions from
    Electric Power Plants with Advanced Technology Scenarios, October,
    2001, p.75).
        One ACC member company does already utilize coal gasification
    technology to supply feedstock. While there is a high potential for
    further feedstock or combined feedstock/power application, considerable
    further development is needed to make the complex technology and
    equipment more competitive; it is unlikely that will result in a high
    level of market penetration prior to the tight timeline requirements of
    S. 556.
        Another ACC member company recently evaluated the use of
    gasification technology for a cogeneration unit as a solution to NOx
    reductions required by the Houston SIP. This plant with the capacity to
    provide significant electricity to the grid would emit less NOx than
    the existing boilers. Steam from the cogeneration unit would replace
    that currently produced in the member company's boilers. An additional
    benefit from the gasification technology was the production of
    synthesis gas for feedstock use which improved the overall project
    economics. After serious negotiations, this project did not go forward
    due to 1) risk surrounding gasification technology and 2) high capital
    cost. The decision was made to expand current natural gas based
    cogeneration to allow shutdown of existing boilers. This is under
    existing NOx regulations--before any additional impact from S. 556.

        Question 3. Does the American Chemistry Council support the
    implementation of the fine particulate matter (PM2.5)
    standard? Will that increase natural gas demand?
        Response. ACC members are committed to complying with all statutory
    and regulatory requirements, including EPA's fine particulate standard.
    We anticipate that, along with many other CAA requirements, the fine
    particulate standard will drive up the demand for natural gas as
    sources fuel switch as the most efficient way to grapple with meeting a
    plethora of control requirements. ACC noted in our written testimony
    that the reference case scenario (without multi-pollutant legislation
    or any future regulatory requirements) including compliance with
    existing CAA requirements would increase natural gas use dramatically.
    (Reference: EIA, SR/OIAF/2001-04, Reducing Emissions of Sulfur Dioxide,
    Nitrogen Oxides, and Mercury from Electric Power Plants, September
    2001).
        This reference case is cause enough for our concerns about
    increased demand for natural gas and we expect that the reference case
    will upset the balance and diversity of fuels. We are concerned that
    supply of natural gas, to which Congress continues to restrict access,
    cannot keep up with demand. As we've seen in recent months, exploration
    and development of natural gas fields continue to be restricted--which
    will only further increase prices as demand outpaces the supply. S. 556
    would then impose an even greater demand on the natural gas supply as
    switching from coal to gas is highly likely to be the preferred way to
    achieve the tight timelines for compliance, the stringent reduction
    requirements, including CO2 reductions that S. 556 would
    impose in addition to existing CAA requirements. S. 556 will exacerbate
    pressures on natural gas pricing.
                                     ______

     Responses of Lee Hughes to Additional Questions from Senator Voinovich

        Question 1. Ohio is a major producer of polymers. Last year when
    the natural gas prices spiked, our companies were negatively impacted
    and they lost their international competitive edge. What would the
    impact of the Jeffords/Lieberman Bill be on our domestic polymer and
    chemical industries? Job Loss?
        Response. Polymers originate from the building block chemicals like
    ethylene. The US historically has had a global competitive advantage
    due to natural gas prices vs. the petroleum-based feedstock in other
    parts of the world. As the relative prices of US feedstock gas goes up,
    our cost to produce ethylene and other polymer raw materials goes up
    and the US industry loses our competitive advantage against Europe,
    Asia and the Middle East, where gas is increasingly being converted to
    ethylene. In this global market the other regions become low cost
    producers, and so they make money and expand capacity while US
    producers lose money and shrink capacity, with job loss resulting. In
    essence the high gas prices kill polymer manufacturing in the US and
    shift it overseas.
        Unlike the utility sector, ACC members compete globally and this
    makes us very sensitive to spikes in the cost of our feedstock and
    energy supplies. ACC members use natural gas both as a feedstock and as
    an energy source. Any run-up of natural gas prices will have a direct,
    negative impact on our industry and last year's spike cost the industry
    in lost jobs, plant closings and dramatically eroded our global
    competitiveness. In general, each $1.00 per million Btu increase in
    natural gas price costs the chemical industry $2.7 billion. And when
    the historical price of natural gas rises above approximately $4.00 per
    million BTU, we lose our competitive advantage. S. 556 will lead many
    coal-burning utilities to switch to natural gas. This will directly
    lead to increased natural gas prices as demand increases. Further, as
    noted above, the ongoing energy debate highlights that little is being
    done to increase the exploration and supply of natural gas.

        Question 2. According to testimony by other witnesses, the Clean
    Air Act provisions, such as NSR and the regional haze standards, need
    to be retained in any multi-pollutant legislation to protect air
    quality in attainment areas. What is Bayer's and/or the American
    Chemistry Council's opinion?
        Response. ACC supports provisions that recognize when a source has
    installed the latest technology and thus would allow them to have
    satisfied NSR requirements for at least 10 years. After that,
    additional technology should be required only if a source makes
    modifications that would result in a real actual increase in emissions
    determined by the maximum hourly rate of emissions of a regulated NAAQS
    compound, before and after a change. The only potential exception might
    be if the cost effectiveness of controls for a local problem were much
    more cost effective for a participating source than from any other
    sources. The additive and duplicative nature of the existing statute is
    one of the problems that will only be exacerbated by S. 556. That said,
    we do not believe that the existing Clean Air Act requirements should
    be eliminated for those sources that are not subject to S. 556. These
    requirements may also be necessary to address localized problem areas,
    or to address regional haze issues in certain instances where S. 556
    would not achieve all of the necessary reductions to meet the programs'
    goals. Further, States should also be allowed to retain their authority
    to require additional reductions beyond the scope of multi-pollutant
    legislation when necessary to address their air quality problems.

        Question 3. In your testimony, you described combined heat and
    power units. Can you expand on this and how these types of units will
    be affected by S. 556?
        Response. Cogeneration, or CHP, units are typically units operating
    at manufacturing sites that generate both electricity and thermal
    energy, in the form of steam, from the same fuel for use primarily at
    the manufacturing facility. S. 556 expands the definition of utility
    unit beyond that under the current Clean Air Act Acid Deposition title.
    The current definition specifically excludes a unit that cogenerates
    steam and electricity unless the unit is constructed for the purpose of
    supplying, or commences construction after the date of enactment and
    supplies more than one third of its potential electric output capacity
    and more than 25 MW output to any utility power distribution system for
    sale (reference CAA Amendments of 1990, Sec.402 (17)(C)). S. 556, in
    contrast, is applicable to any combination of units with a nameplate
    capacity of 15 MW or more that generate any electricity for sale. This
    change draws into the scope of regulation small boilers and combustion
    turbines that heretofore were not considered as utility units, and
    which may in fact only sell power intermittently as needed to balance
    energy outputs when process upsets occur, or as economically possible
    under periods of high customer demand--to the benefit of all consumers
    by providing peak period supply. Obviously such units would have a very
    high emissions control cost compared to typical large electric utility
    units. Retaining the Acid Rain definition is a logical approach that
    would not drive smaller units to install exceedingly high cost
    controls, purchase allowances from utility units, or to simply shut
    down those highly energy efficient facilities.
        Similarly, many CHP units are gas fired combustion turbine based,
    thus already emitting at significantly lower levels than typical
    electric utility units. The combination of low-emitting gas firing
    along with the high efficiency of CHP units should be used as
    justification for not including those units in the applicability of
    multi-emission legislation.
                                     ______

       Response of Lee Hughes to Additional Question from Senator Graham

        Question. In your written testimony you devote a section to the
    need to harmonize requirements in the Clean Power Act with existing
    Clean Air Act Program. You mention New Source Review specifically,
    which is interesting to me because one of our Florida companies (Tampa
    Electric) has signed a consent decree with EPA and has been working to
    clean up their coal plants.
        Do you have suggestions on how proposed legislation should
    streamline all of these different programs and regulations into one
    seamless program?
        Response. We are not familiar with all of the details of the NSR
    case that you referenced and therefore cannot comment specifically on
    that matter. With regard to streamlining multi-pollutant legislation
    with the Clean Air Act, the significant overlap occurs with the new
    source review program, the regional haze program, the NOx SIP Call, and
    the Section 112 MACT rules.
        Congress needs to provide certainty in the legislation for sources
    subject to the multi-pollutant requirements. The single greatest
    benefit of a cap-and-trade approach is that sources are given a target
    and then allowed flexibility in meeting the goals in the manner that
    they deem most cost effective. Layering multi-pollutant requirements on
    top of other existing requirements removes this incentive and retains
    the uncertainty of the underlying Clean Air Act. As an example, if a
    source moves forward with its planning for future electrical generating
    capacity under the coverage of the multi-pollutant program will it
    still find its operations subject to the myriad other requirements as
    well.
        Specific underlying control requirements addressing other
    pollutants from these facilities would continue to apply and would be
    addressed in the source's permit. The legislation should specifically
    state that sources subject to the multi-pollutant requirements would
    not be subject to underlying standards, such as new source review,
    regional haze, the NOx SIP call, and MACT for those pollutants
    specifically covered by multi-pollutant legislation. The only exception
    to this would be the need to retain a State's authority to act if a
    local air pollution problem is still determined to be attributable to
    that source after considering the source's compliance with the
    legislation's requirements.
                                     ______

        Response of Lee Hughes to Additional Question from Senator Wyden

        Question. You argue that Combined Heat and Power (CHP) systems
    should not be included under S. 556 since they are already operating at
    very low levels of pollution. Would you agree that there are some CHP
    facilities that may not have advanced control technology because they
    may have ``netted out'' of the New Source Review requirements? Up until
    now, they've been given a free pass under NSR. Do you believe it would
    be unreasonable to require them to cut emissions under this bill,
    really for the first time?
        Response. Encouraging new capacity to use combined heat and power
    (CHP) brings more benefits than adding pollution control equipment to
    either existing utility or cogeneration units. Combined heat and power
    systems have not received a ``free pass'' in that they had to invest a
    higher amount of capital to build these units to realize this
    efficiency benefit. New investments of this type will be more likely if
    the investment risk due to regulatory changes or need to purchase
    credits is reduced. Allowing for a known economic life without the risk
    of regulatory or other economic changes would support this goal.
        Whether or not a source has netted out of NSR should not be a
    criterion for inclusion in the multi-emissions applicability.
    Regardless of net-out, a new source would most likely have already gone
    through the State delegated air permitting process, with proper
    applicability of NSPS or even BACT in some cases. Those CHP facilities
    meeting the applicability requirements of the current act would have
    been included under the CAAA Title IV Acid Rain program so they have
    already been controlled. Requiring the additional emissions controls as
    in S. 556 to smaller CHP units than currently covered by legislation
    would impose heavy cost penalties to those facilities that have proven
    to be highly efficient, thus penalizing rather than supporting
    continued/increased use of CHP by the industrial and commercial
    sectors.
                                   __________
        Statement of Don Barger, National Parks Conservation Association
        Mr. Chairman and members of the committee, I am Don Barger, the
    Southeast Regional Director for the National Parks Conservation
    Association (NPCA). Thank you for the opportunity to testify about the
    national park-related benefits and costs of reducing multiple
    pollutants from power plants.
        NPCA is America's only private, nonprofit advocacy organization
    dedicated solely to protecting, preserving, and enhancing the National
    Park System. NPCA was founded in 1919 and today has more than 350,000
    members who care deeply about the well being of our national parks.
    Protecting and restoring air quality in America's national parks,
    including the 49 national park units defined as Class I areas by the
    1977 Clean Air Act amendments, long has been one of NPCA's top
    priorities.
        Our nation creates and preserves national parks because of their
    spectacular, inspirational, scientific and historical value as pieces
    of America's natural and cultural heritage. They are irreplaceable,
    priceless icons. Our national parks are sanctuaries sought by the
    American people for countless reasons and at innumerable times. Air
    pollution is among the most significant of the many threats our parks
    face. Because America's national parks are priceless, our testimony
    focuses primarily on the costs air pollution levies on these national
    treasures that are so central to the American spirit and to our
    national identity.
        We will begin our testimony by discussing the centrality of clean
    air to the purpose of many national parks. We will briefly discuss the
    legislative framework that governs the management and preservation of
    national parks, next discuss the negative impact of air pollution on
    the parks, and then describe the benefits of protecting the scenic
    values and other precious resources that comprise our parks. Finally,
    we will outline the impact of specific regulatory approaches on
    protecting the air in our national parks.
    Clean Air: A Central Value of National Parks
        Our national parks--places where polls consistently show Americans
    expect to breathe clean air and be inspired by spectacular vistas--have
    become unfortunate laboratories for studying the impacts of air
    pollution on our nation's natural and historic treasures. Americans are
    shocked to learn that many of our beloved national parks suffer from
    some of the highest levels of air pollution in the country. While
    visibility impairment is widespread throughout the park system, scenic
    views are not the only resource at risk. The same pollutants that
    reduce visibility also contribute to 30,000 premature human deaths each
    year\1\ . Acid deposition damages natural and cultural resources.
    Mercury deposition threatens fish and wildlife in a number of parks.
    Ground level ozone, or smog, threatens the health of park visitors and
    workers, and damages park vegetation. Finally, as the Bush
    Administration's 2002 U.S. Climate Action Report concludes, global
    warming threatens parks in many ways, from rising sea level to melting
    glaciers to changes in biodiversity.\2\
    ---------------------------------------------------------------------------
        \1\Abt Associates, The Particulate-Related Health Benefits of
    Reducing Power Plant Emissions, October 2000. For a quick reference to
    the key findings of the Abt Associates study, see Clear the Air, Death,
    Disease, & Dirty Power: Mortality and Health Damage Due to Air
    Pollution from Power Plants, October 2000, p.3; http://cta.policy.net/
    fact/mortality/mortalitylowres.pdf.
         \2\U.S. Department of State, U.S. Climate Action Report 2002,
    Washington, DC, May 2002, http://www.epa.gov/globalwarming/impacts/
    parks/index.html.
    ---------------------------------------------------------------------------
        NPCA fully supports S. 556, the Clean Power Act, because it would
    best protect our parks. The bill requires effective, timely, and fair
    reductions of four key pollutants emitted by power plants--sulfur
    dioxide, nitrogen oxide, carbon dioxide, and mercury. The authors of S.
    556 recognize that significant and mandatory reductions by a date
    certain in these pollutants are essential elements of a responsible
    approach to this issue. Reductions in carbon dioxide are essential to
    provide certainty that new electric power plants must include controls
    from the beginning, rather than retrofitting years later, and to ensure
    that coal, a domestically abundant fuel, is burned as cleanly as
    possible.
                             legislative framework
    Preserving Clean Air Is Central to the Purpose of Parks
        In 1916, Congress created the National Park System and required the
    National Park Service to ``conserve the scenery and the natural and
    historic objects and the wild life therein--and leave them unimpaired
    for the enjoyment of future generations.''\3\  Many national parks were
    established in part to offer the public access to inspirational scenic
    vistas and clean air, as reflected in their legislative histories:
    ---------------------------------------------------------------------------
         \3\The National Park System Organic Act of 1916 (16 USC Sec.  1).
    ---------------------------------------------------------------------------
        `` The air around Lake McDonald is remarkably clear and pure. . .
    .''\4\
    ---------------------------------------------------------------------------
        \4\House Report No. 1456, 62d Congress, Glacier National Park,
    February 6, 1913.
    ---------------------------------------------------------------------------
        ``The Big Bend area is a region of inspiring scenery. . . .''\5\
    ---------------------------------------------------------------------------
        \5\House Report No. 878, 74th Congress, Big Bend National Park, May
    13, 1935.
    ---------------------------------------------------------------------------
        ``. . . the Grand Canyon of the Colorado is one of the most
    stupendous scenic wonders of the world . . . .''\6\
    ---------------------------------------------------------------------------
        \6\Senate Report No. 1082, 64th Congress, Grand Canyon National
    Park, Arizona, February 20, 1917.
    ---------------------------------------------------------------------------
        ``. . . For the purpose of protecting the scenery, the wildlife,
    and other natural features of the region authorized to be established
    as the Everglades National Park . . . .''\7\
    ---------------------------------------------------------------------------
        \7\16 USC Sec.  410d.
    ---------------------------------------------------------------------------
        Scenic vistas cannot inspire if they cannot be seen. The National
    Park Service must maintain the integrity of these scenic values while
    also ensuring that cultural, historic, and natural resources are not
    impaired by air pollution.
        Congress amended the Clean Air Act in 1977 to address growing
    concerns about pollution damaging public lands and Americans' enjoyment
    of their national treasures. Recognizing that pristine air quality and
    scenic vistas are highly valued features of national parks, Section 169
    (A) established as a national goal ``the prevention of any future, and
    the remedying of any existing, impairment of visibility in mandatory
    Federal Class I areas in which impairment results from man-made
    pollution.'' Congress designated 156 areas including national parks
    over 6,000 acres\8\  and wilderness areas over 5,000 acres in existence
    on August 7, 1977 as ``Class I areas,'' to be afforded the greatest
    protection under the Clean Air Act.\9\  (Attachment 1)
    ---------------------------------------------------------------------------
         \8\http://www2.nature.nps.gov/ard/parks/npscl1b.pdf
         \9\42 USC Sec.  7491 (a)(2).
    ---------------------------------------------------------------------------
        The 1977 amendments also created specific programs to deal with
    chronic threats to park resources. They charged the Secretary of the
    Interior and other Federal officials with the ``affirmative
    responsibility'' to protect ``air quality related values'' in Class I
    areas. These officials must participate in the Prevention of
    Significant Deterioration (PSD) program, part of the permitting process
    for new and modified air pollution sources, by determining if the
    emissions will have an adverse impact on park resources.\10\  The 1977
    Amendments also established the Best Available Retrofit Technology
    program to require certain existing sources located in close proximity
    to a class I area to install pollution controls.
    ---------------------------------------------------------------------------
         \10\42 USC Sec.  7475.
    ---------------------------------------------------------------------------
              pollution impacts on park resources and human health
    Pollution Continues To Shroud Scenic Views in National Parks
        Twenty-five years after Congress established the national
    visibility goal to remedy existing and prevent future man-made
    visibility impairment in Class I areas, unnatural haze continues to
    shroud scenic vistas at national parks throughout the country.
    Emissions from outdated power plants, lacking controls required of
    modern facilities, contribute a large portion of the pollution hurting
    our parks. National Park Service photos contrast good and poor
    visibility in a few of America's national parks established for their
    spectacular and inspirational scenery.\11\  (Attachment 2)
    ---------------------------------------------------------------------------
         \11\http://www2.nature.nps.gov/ard/pubs/Core--Slides/visimp.htm
    ---------------------------------------------------------------------------
        The National Park Service and U.S. Fish and Wildlife Service
    reported in December 2000 that pervasive ``visibility impairment in all
    national parks and wilderness areas'' is adversely affecting these
    public lands.\12\  According to the Department of the Interior,
    ``Visibility impairment is the most ubiquitous air pollution-related
    problem in our national parks and refuges--parks and refuges such as
    Grand Canyon, Cape Romain, and Great Smoky Mountains have evidenced
    declining visibility--all areas monitored for visibility show frequent
    regional haze impairment.''\13\  The EPA reports that the mean visual
    range in Eastern Class I areas was 14.4 miles in 1999, compared to
    estimated natural visibility of 45-90 miles. In the West, the mean
    visual range was 48 miles for Class I areas, compared to estimated
    natural visibility of 120-180 miles.\14\
    ---------------------------------------------------------------------------
        \12\National Park Service Air Resources Division and U.S. Fish and
    Wildlife Service Air Quality Branch, Technical Information in Support
    of the Department of the Interior's Request for a Rule to Restore and
    Protect Air Quality Related Values, December 2000, p.1-1.
         \13\U.S. Department of the Interior to U.S. Environmental
    Protection Agency, Docket No. A-2000-28, September 17, 2001.
         \14\U.S. Environmental Protection Agency, Latest Findings on
    National Air Quality: 2000 Status and Trends, September 2001, p.19.
    ---------------------------------------------------------------------------
        Congress realized that unnatural haze was both a national and a
    regional problem, and revisited the problems of polluted parks in the
    1990 Amendments to the Clean Air Act. Section 169B designated funds to
    research ``sources and source regions'' contributing to visibility
    impairment. Studies and reports verified widespread assumptions, and
    EPA promulgated the Regional Haze Rule in 1999. The Regional Haze Rule
    seeks to improve visibility by 2064 attempting to fulfill the national
    goal of ``the prevention of any future, and the remedying of any
    existing'' visibility impairment. EPA set decade benchmarks to ensure
    that the ``least impaired'' or clearest visibility days would suffer no
    degradation and the ``most-impaired'' or haziest days would improve.
    EPA reported to Congress in November 2001 that from 1994-1998, on the
    clearest days, 13 percent of the monitored Class I areas have shown
    improvement while 87 percent have shown no change or degradation. On
    the haziest days, 11 percent have shown improvement while 89 percent
    have shown no change. Any improvement on the haziest days is still
    slight at best.\15\
    ---------------------------------------------------------------------------
        \15\USEPA, Visibility in Mandatory Federal Class I Areas (1994-
    1998): A Report to Congress, November 2001. http://www.epa.gov/oar/
    visibility/report/ES.pdf.
    ---------------------------------------------------------------------------
    Air Pollution Hurts Park Resources
        Emissions from power plants harm national parks throughout the
    country, from Acadia in Maine, to Shenandoah in Virginia, to Mammoth
    Cave in Kentucky, to Big Bend in Texas, to Mesa Verde in Colorado, to
    Canyonlands in Utah, to Mount Rainier in Washington State, to Sequoia-
    Kings Canyon and Joshua Tree in California. Air pollution poses one of
    the top threats to America's parks.
        NPCA included Great Smoky Mountains National Park in Tennessee and
    North Carolina and Big Bend National Park in Texas on its 2002 list of
    America's Ten Most Endangered National Parks, because they represent
    the many national parks suffering from poor air quality. Others also
    recognize the threats posed by air pollution to parks and people. In a
    letter to President George W. Bush dated June 19, 2001, Tennessee
    Senator Fred Thompson wrote: ``Most shocking to me is that, according
    to Park officials, air quality in the Smokies is so poor during the
    summer months that hiking our backcountry trails is more hazardous to
    your health than walking along (city) streets. . .''
        Great Smoky Mountains National Park serves as an unfortunate poster
    child of Class I areas harmed by air pollution. The park has recorded
    the highest level of nitrogen deposition of any monitored site (urban
    or rural) in North America. Clouds blanketing the highest peaks often
    engulf sensitive spruce-fir forests with pH levels as low as 2.0. On
    average, rainwater registers five to ten times more acidic than normal
    rainwater. Scenic views that historically stretched for more than 77
    miles in the summer and more than 113 miles during the rest of the year
    are reduced to 15-25 miles.\16\  Researchers have documented that at
    least 30 different species of plants show visible symptoms of leaf
    damage or reduced growth from ground-level ozone, including up to 90
    percent of black cherry trees in locations throughout the park. On 140
    days over the last four summers, the National Park Service has had to
    issue ``unhealthful air'' notices to employees and park visitors as
    ground-level ozone levels reached unhealthful levels. The park's
    average daily ozone levels are often two times higher than those in
    urban areas.
    ---------------------------------------------------------------------------
         \16\National Park Service, 2002 Air Quality Issues at Great Smoky
    Mountains National Park, Tennessee/North Carolina, 2002.
    ---------------------------------------------------------------------------
    Park Biodiversity Offers Irreplaceable Scientific Values
        The values we have yet to discover in our national parks may be at
    least as significant as those about which we already know. To the
    extent we allow polluted air to jeopardize those values, humanity could
    lose extraordinary resources that could yield enormous benefits in the
    future. For example, scientists announced in May 2002 discovery of
    organisms in a pool in Mammoth Cave that they believe may be an
    important anti-cancer agent.\17\  (Attachment 3) At Great Smoky
    Mountains National Park, only 2 years of study as part of the All-Taxa
    Biodiversity Inventory have documented 1500 species previously unknown
    in the park, and 250 species completely new to science. Both of these
    parks suffer from air pollution and acid deposition that could threaten
    many of these remarkable organisms.
    ---------------------------------------------------------------------------
         \17\Environmental News Service, ``Mammoth Cave Bioprospecting
    Produces Potential Cancer Drug,'' May 21, 2002, http://ens-news.com/
    ens/may2002/2002-05-21-09.asp.
    ---------------------------------------------------------------------------
    Glacier-free Glacier National Park and Everglades National Underwater
            Historic Park: potential costs of global warming
        Glacier National Park preserves more than 1 million acres of
    forests, alpine meadows, and lakes. Its spectacular glaciated landscape
    hosts one of the largest intact ecosystems in the lower 48 states.\18\
    ---------------------------------------------------------------------------
        \18\www.nps.gov/glac/index.htm.
    ---------------------------------------------------------------------------
        The largest remaining glaciers at Glacier National Park in Montana
    are now only about one-third the size they were in 1850, and one study
    estimates that all glaciers in the park may disappear completely in 30
    years.\19\  Our testimony includes two photos, one taken in 1938 and
    one in 1981 of the Grinnell Glacier. By 1993, the glacier shrank about
    63 per cent in area and had receded more than half a mile since
    1850.\20\  (Attachment 4) The area of the park covered by glaciers
    declined by 73 percent from 1850-1993. A regional warming trend that
    some scientists believe may be related to global climate change causes
    this phenomenon. Since 1900, Glacier National Park's average summer
    temperatures have increased by about 1.8 degrees Fahrenheit.\21\
    ---------------------------------------------------------------------------
        \19\USEPA website, www.epa.gov/globalwarming/impacts/mountains/
    index.html.
         \20\U.S. Geological Survey, http://nrmsc.usgs.gov/research/
    glacier--retreat.htm
         \21\U.S. Department of State, U.S. Climate Action Report 2002,
    Washington, D.C., May 2002, http://www.epa.gov/globalwarming/impacts/
    parks. Click on ``western mountains and plains.''
    ---------------------------------------------------------------------------
        Florida's Everglades are the largest remaining subtropical
    wilderness in the United States. Water management and development
    systems have dramatically altered freshwater flow through the
    Everglades, with consequences ranging from contaminated freshwater
    aquifers to near-decimation of wood stork populations. While an
    unprecedented restoration effort is now underway, some scientists are
    concerned that the Everglades faces an even greater threat in rapidly
    rising seas and climate changes associated with global warming.
        The sea along the Florida coast is rising today at a rate
    equivalent to 8-16 inches per century, a rate that is 6-10 times faster
    than the average rate for this area over the past 3,000 years. By 2100,
    the best available science indicates that south Florida seas will be
    approximately 20 inches higher than they were in 1990. EPA researchers
    estimate that the south Florida sea probably will rise 30 inches above
    1990 levels by 2150. This would mean that most of Everglades National
    Park could essentially become an extension of Florida Bay,\22\  washing
    away the $7.8 billion Everglades ecosystem restoration plan that this
    committee helped design.
    ---------------------------------------------------------------------------
         \22\U.S. Department of State, U.S. Climate Action Report 2002,
    Washington, DC, May 2002, http://www.epa.gov/globalwarming/impacts/
    coastal/cs--ever2.html
    ---------------------------------------------------------------------------
        The four national parks and preserves of south Florida are home to
    sixteen endangered and six threatened wildlife species. Scientists are
    concerned that the remaining populations of endangered species such as
    the Florida panther and key deer could be pushed even closer to
    extinction as their habitats are further limited by rising seas and
    sprawling human settlements.\23\
    ---------------------------------------------------------------------------
        \23\Ibid.
    ---------------------------------------------------------------------------
        The Energy Information Administration (EIA) of the Department of
    Energy released on November 9, 2001 a comprehensive official accounting
    of emissions changes from 1990-2000. According to the report, total
    U.S. carbon dioxide emissions increased by 16.8 percent during this
    period, with carbon dioxide emissions from electricity generation
    increasing 26.5 percent. Carbon dioxide comprises 82 percent of the
    greenhouse gases emitted in the United States\24\ , and power plants
    emit 40 percent of that carbon dioxide.\25\  Mandatory reductions
    clearly are needed to reduce the impacts we face from global warming.
    ---------------------------------------------------------------------------
         \24\U.S. Department of State, U.S. Climate Action Report 2002,
    Washington, DC, May 2002, http://www.epa.gov/globalwarming/
    publications/car/index.html.
         \25\U.S. Department of Energy, Energy Information Administration,
    Emissions of Greenhouse Gases in the United States 2000, http://
    www.eia.doe.gov/oiaf/1605/ggrpt/summary/pdf/0573(2000es).pdf
    ---------------------------------------------------------------------------
    Mercury Deposition Hurts Parks
        Because mercury is a dangerous, persistent poison that accumulates
    through the food chain and can result in neurodevelopmental damage in
    young children and the unborn, trading to allow more mercury pollution
    in some places than in others is dangerous and ill advised. As a potent
    neurotoxin that persists in the environment and bioaccumulates in the
    food chain, mercury pollution demands an aggressive policy response.
        Power plants are the largest uncontrolled sources of mercury
    deposition in the United States. National parks including Acadia, Isle
    Royale, and Big Bend are studying the effects of mercury contamination
    on fish and wildlife. Scientists at Acadia have concluded that aquatic
    resources are at risk from mercury contamination. Scientists at Big
    Bend believe that above-threshold levels of mercury may be causing
    reproductive failures among Peregrine Falcons--a species listed as
    ``Endangered'' following catastrophic impacts from the pesticide DDT,
    and de-listed in 1999. Florida has issued fish consumption advisories
    for water bodies found in Everglades National Park due to high levels
    of mercury found in largemouth bass and other species. Mammoth Cave has
    also been affected by a statewide fish consumption advisory due to
    mercury on all rivers and streams in Kentucky. Forty-one states and
    territories have issued fish consumption advisories due to mercury
    contamination.
        For the first time, Mammoth Cave and Great Smoky Mountains National
    Parks during 2002 have begun monitoring atmospheric deposition of
    mercury. On April 25, the Kentucky Division for Air Quality began
    monitoring ambient levels of mercury at Mammoth Cave. Preliminary
    modeling data indicates that episodic plumes of mercury many times
    expected background levels enter the park and can remain up to 24
    hours. Mercury monitoring has been in place since 1995 in the
    Everglades as part of the National Atmospheric Deposition Program
    Mercury Monitoring Network. Everglades registers some of the highest
    levels of mercury deposition of any site across the country.
    (Attachment 5)
                            protecting scenic values
    Improving Visibility in National Parks Offers Many Benefits
        Visitors to national parks and wilderness areas consistently rate
    visibility and clear scenic vistas as one of the most important aspects
    of their experience. Out of Sight: Haze in our National Parks, a report
    published in 2000 by Clear the Air (Attachment 6) found that, given the
    degree to which air quality and visibility influence visitor experience
    in the national parks, continuing declines in visibility of park vistas
    could reduce visitation to these national treasures. The report also
    found: ``increases in visibility could raise park visitation by as much
    as 25 percent which could yield approximately $30 million in increased
    fee collection and $160 million in additional concession sales. This
    would in turn add nearly $700 million in retail sales to the economies
    around the park, $53 million in local tax revenue, and create 15,896
    jobs.''
        Based on the public's willingness to pay for cleaner air where they
    live and in national parks and wilderness areas, the report estimates
    the value of eliminating haze from power plants at more than $7 billion
    annually. The report cites studies that found that the average
    household in the southeast would be willing to pay $68 (in 1999
    dollars) a year for a 100 percent increase in visibility in national
    parks in that part of the country, and $84 (in 1999 dollars) a year for
    a 200 percent increase in visibility. Eighty percent of respondents in
    a New Hampshire study said they would not accept a hazier wilderness
    vista in exchange for a lower electricity bill.
        Recently, EPA estimated the benefits and costs of implementing the
    most stringent emissions-control strategy outlined by the Southern
    Appalachian Mountains Initiative (SAMI).\26\  This strategy, among
    other things, would require that all power plants be controlled to
    modern standards. The analysis found that this level of control would
    result in a $12-per-year increase in the electric bill of the average
    household. While not a comprehensive analysis, the study found that
    this SAMI strategy would reduce healthcare costs associated with
    respiratory illnesses such as asthma and agriculture loss from reduced
    tree growth. In their analysis of a strategy controlling only one
    pollutant-fine particulate matter (PM2.5) EPA estimated
    8,000 fewer premature deaths and 16,000 fewer cases of acute bronchitis
    in children, with economic benefits ranging from $36-68 billion
    annually.\27\
    ---------------------------------------------------------------------------
        \26\SAMI was a voluntary 10-year consortium of state and Federal
    agencies, business, utilities, and public interests which met to study
    problems faced in Class I areas in the eight Southern Appalachian
    states, and to seek consensus on solutions to those problems. SAMI's
    final written report is due in August 2002.
         \27\USEPA, National Park Service, and U.S. Forest Service, Impacts
    of the SAMI Strategies: An Independent Analysis of the Benefits and
    Economic Impacts, April 2002.
    ---------------------------------------------------------------------------
        At the Arlington, Virginia hearing on EPA's proposed Best Available
    Retrofit Technology amendment to the Regional Haze Rule in August 2001,
    realtor Mary Johnson testified about a quick survey she had done on the
    Multiple Listing Service of listed properties near Great Smoky
    Mountains National Park. By comparing properties that were in every way
    ``comparables'' except for the existence of a ``mountain view'', she
    found that the value of that view ranged around $25-$30 per square
    foot. If one were to assume that even 1/100th of that value would
    increase with improved views, the economic benefit derived would dwarf
    every other consideration.
    Parks Benefit the Economies of Gateway Communities
        The natural and cultural values protected by the National Park
    Service are beyond price. At what price would we sell the biodiversity
    of the Great Smoky Mountains, the mystery of Carlsbad Caverns or the
    meaning of the Statue of Liberty? However, there are many measurable
    direct monetary benefits produced by our parks, particularly as they
    relate to gateway communities adjacent to them.
        National Park Service units hosted more than 275 million
    recreational visits in 2001.\28\  They serve as economic anchors in
    many communities, providing jobs within the parks and fostering
    economic opportunity outside park boundaries. Occasionally, park
    economies actually replace declining sectors of existing rural
    economies, and can soften what could otherwise be a significant
    economic blow to declining economic opportunity in some rural
    communities. Enactment of S. 556 not only would improve the condition
    of park resources and help protect them from future impairment, it
    would also provide a boost to park revenues and to the many gateway
    communities and cities whose economies benefit from the health and
    beauty of our national parks. In addition, the residents of gateway
    communities would in many cases breathe healthier air.
    ---------------------------------------------------------------------------
         \28\National Park Service, Public Use Statistics Office, National
    Park Service Statistical Abstract 2001.
    ---------------------------------------------------------------------------
        A Department of Interior study cited in the report found that
    travel-related expenditures by visitors to national parks totaled an
    average of $14.55 billion (in 1996 dollars) and generated approximately
    210,000 jobs. While the approximately 600 concessionaires in operation
    throughout the park system generated sales estimated at $650 million,
    the majority of revenues associated with park visitation, nine billion
    dollars in 1997, was spent on goods and services in communities
    neighboring national parks.\29\
    ---------------------------------------------------------------------------
        \29\Clean Air Task Force for Clear the Air, Out of Sight: Haze in
    Our National Parks, August 29, 2000.
    ---------------------------------------------------------------------------
        Great Smoky Mountains National Park, the most visited national
    park, receives more than 9 million visitors each year. These visitors
    annually spend more than $618 million in the local area, supporting
    more than 12,000 local tourism-related jobs and close to 15,000 total
    jobs due to secondary effects.\30\  Similarly, the 12 national capital
    parks in Washington, DC draw more than 15 million recreational visits
    per year. These tourists spent $660 million in 2000, generating
    approximately $202 million in direct income and more than 16,000 direct
    and indirect jobs in the District of Columbia metropolitan area.\31\
    ---------------------------------------------------------------------------
        \30\Department of Park, Recreation and Tourism Resources, Michigan
    State University, Economic Impacts of Great Smoky Mt. National Park
    Visitors on Local Region, 1997-2000, February 2002.
         \31\Department of Park, Recreation and Tourism Resources, Michigan
    State University, Economic Impacts of National Parks on Gateway
    Communities; Summary of MGM2 Shortform Analyses, January 2002, pp.7-16.
    MGM2 is the National Park Service's Money Generation Model version two,
    used to estimate park visitor impacts on local economies in terms of
    contribution to sales, income, and jobs. Model documentation and
    economic impact reports for individual parks may be found at the MGM2
    website: http://www.prr.msu.edu/mgm2/mgm2toc.htm.
    ---------------------------------------------------------------------------
        On a strictly per-acre basis, logging the 17.7 million acres of
    Maine timberlands is not nearly as economically productive as the
    45,000 acres of mostly undeveloped land and easements that make up
    Acadia National Park. While each acre of private forest annually
    contributes $368 in direct and indirect benefits to Maine's economy,
    publicly owned Acadia yields $3,400 per acre in sales of goods and
    services, including $1,200 in wages. In 2000 Acadia visitors spent $130
    million for meals, room rentals, campsites, services, and other
    transactions in nearby towns, supporting 3,300 direct and indirect
    jobs. Total value of primary and secondary sales was $155 million, with
    personal income totaling $55 million.\32\  (Attachment 7)
    ---------------------------------------------------------------------------
         \32\W. Kent Olson, ``Acadia's green 45,000 acres,'' Bangor Daily
    News, April 24, 2002.
    ---------------------------------------------------------------------------
                        methodology for protecting parks
    Significant Emission Reductions Are Needed From Power Plants
        To improve visibility, reduce smog, and restore acidified
    ecosystems to natural states, emissions from power plants, regardless
    of when they were built, must be significantly reduced.
        In Great Smoky Mountains National Park, emissions from outdated
    power plants produce most of the pollution threatening the resources,
    staff, and visitors. Power plants emit 77 percent of the sulfur dioxide
    emissions that eventually form sulfate particles. In the summer, these
    particles contribute 73 percent of the yellow or grayish layers of haze
    hanging over the Smokies. Power plants also emit 38 percent of the
    nitrogen oxides that combine with sunlight and other compounds to
    create ground-level ozone or smog. There simply is no proposal that
    will clear the air in our parks if it fails to require the clean up of
    these older, grandfathered power plants. Accordingly, a provision
    requiring each old power plant to install modern pollution controls by
    its 30th birthday, or within 5 years of enactment, is an essential
    component to multi-pollutant legislation.
        The Acid Rain Program established in the 1990 Amendments to the
    Clean Air Act set the goal of cutting sulfur emissions 10 million tons
    from 1980 levels.\33\  Despite reductions made to date, acid deposition
    continues to be a significant threat to ecosystems. 41 percent of lakes
    in the Adirondacks suffer from chronic or episodic acidification along
    with 15 percent of lakes throughout New England. According to recent
    studies, sulfur emissions must be reduced by an additional 80 percent
    beyond Phase II of the Acid Rain Program to bring these ecosystems from
    an acidic to nonacidic state in 20 to 25 years.\34\  In Great Smoky
    Mountains National Park, in which streams and soils have been adversely
    impacted by acid deposition, the average combined nitrogen and sulfur
    deposition continues to be at least 6 times beyond natural
    conditions.\35\  To restore Class I areas to their natural state and to
    realize the benefits Congress envisioned when it established Class I
    areas 25 years ago, emissions from power plants must be reduced to
    levels at or beyond those proposed in S. 556.
    ---------------------------------------------------------------------------
         \33\http://www.epa.gov/airmarkets/arp/overview.html#phases
         \34\Driscoll, C.T., G.B. Lawrence, A.J. Bulger, T.J. Butler, C.S.
    Cronan, C. Eagar, K.F. Lambert, G.E. Likens, J.L. Stoddard, K.C.
    Weathers. 2001. Acid Rain Revisited: Advances in scientific
    understanding since the passage of the 1970 and 1990 Clean Air Act
    Amendments. Hubbard Brook Research Foundation. Science Links
    Publication. Vol. 1, no.1.
         \35\National Park Service to SAMI, Proposed Air Quality Benchmarks
    at Great Smoky Mountains and Shenandoah National Parks, November 7,
    2001.
    ---------------------------------------------------------------------------
    Reduction Program Must Prevent Hotspots
        Effects-based monitoring and evaluation of Class I areas provide an
    appropriate measuring stick for the efficacy of pollutant-reduction
    strategies. Emission-based multi-pollutant strategies must be linked to
    specific results. A simple cap-and-trade program offers no specific
    protection to Class I areas as required by the Clean Air Act.
    Strategies must be multi-faceted, and linked to continuous and timely
    progress toward effect-based goals. The New Source Review (NSR) and PSD
    programs currently provide the only effect-based monitoring and
    permitting of stationary sources of sulfur and nitrogen pollution, and
    we've seen no proposal that provides effect-based monitoring and
    permitting in the absence of the NSR and PSD programs.
        The utilities seek certainty by requesting a phased reduction
    schedule with no measurement of the resulting effects and no
    accountability for the cumulative impact of the hundreds of proposed
    new sources. The certainty that such a strategy would produce for our
    national parks is the abandonment of America's national commitment to
    our descendants that we have the wisdom to create our future without
    destroying our past.
        Experience with the cap-and-trade system established in the 1990
    Clean Air Act Amendments indicates the potentially devastating impacts
    of a national emissions cap without clear and enforceable protections
    against local hotspots. While emissions nationwide have been reduced,
    emissions affecting a number of Class I areas have increased. Due to
    the use of emission reduction credits under the national trading
    program, the Tennessee Valley Authority emitted approximately 700,000
    tons of sulfur dioxide last year, 300,000 tons above their Phase II
    allocation. As a result of this and other factors, visibility in and
    around Great Smoky Mountains National Park remains consistently
    impaired. A similar situation exists in Florida where power plants
    increased their sulfur emissions from 1995-2000.\36\  (Attachment 8)
    ---------------------------------------------------------------------------
         \36\USPIRG Education Fund, Darkening Skies, Trends Toward
    Increasing Power Plant Emissions. http://floridapirg.org/reports/
    darkeningskies/darkeningskiespdf.pdf. Chart at http://floridapirg.org/
    reports/darkeningskies/floridatopten.pdf
    ---------------------------------------------------------------------------
        In order for Federal land managers to meet their affirmative
    responsibility to protect the air quality related values of these
    precious resources, effect-based analyses as prescribed in the PSD
    program are necessary for any proposed sources which might individually
    or cumulatively adversely impact the area, regardless of distance. The
    Administration's proposal to draw 50 kilometer or even 100-kilometer
    circles around Class I areas would provide less protection than proper
    implementation of the current Clean Air Act. While it would provide
    limited effect-based analysis within those zones, such a proposal would
    also create ``free-fire zones'' outside those circles, allowing large
    sources to proliferate without regard to their individual or cumulative
    impacts on Class I areas, impacts now analyzed in the PSD program. A
    cap-and-trade program instituted in lieu of the current effect-based
    programs of the Clean Air Act cannot protect Class I areas from
    existing or future adverse effects.
                                   conclusion
    Americans Want To Protect Our Parks
        Our national parks have been called the best idea America ever had.
    That may become particularly true as we seek to control not just the
    amounts, but also the effects of air pollution. America's parks are the
    measuring sticks by which the effectiveness of any national pollution
    control policy can be judged. If we clean up the air in our parks, we
    will clean up the air in our neighborhoods. If we save our parks, they
    may very well save us.
        Enactment of S. 556 provides a critical step to protect America's
    national parks. Our national parks and wilderness areas deserve and
    demand the protection that S. 556 will provide; the American public
    expects no less. A May 2001 poll showed that nearly eight out of ten
    Virginians (77 percent) believed older power plants should meet modern
    pollution control standards.\37\  In a 1996 survey, 84 percent of
    visitors at Great Smoky Mountains National Park responded that scenic
    views are ``extremely important.''\38\  The National Park Service
    conducted similar studies in the mid 1980's, surveying visitors at five
    parks on the importance of various park features to their recreational
    experience. At all five parks--Grand Canyon, Mount Rainier, Everglades,
    Mesa Verde and Great Smoky Mountains--``clean, clear air'' ranked among
    the top four valued features. A 1998 survey of Tennessee residents
    showed that 75 percent of the citizens wanted new rules to control
    emissions from power plants, while 85 percent thought that all plants
    should be required to meet the same standards regardless of when they
    were built. From the same survey, 69 percent of Tennesseans were
    willing to pay at least $12/year more on their electric bills,
    including some who were willing to pay up to $240/year more, to reduce
    air pollution from electricity generation.\39\
    ---------------------------------------------------------------------------
        \37\The Tarrance Group, statewide poll conducted for the League of
    Conservation Voters Education Fund, May 6-8, 2001, p. 10.
         \38\Great Smoky Mountains Natural History Association and the
    National Park Service, Great Smoky Mountains National Park Management
    Folio 2: Air Quality, 1997, p. 2.
         \39\Beth Schapiro & Associates, Public Opinion and Air Quality
    Issues, 1998, pp. 10-16.
    ---------------------------------------------------------------------------
        We are eager to work with the committee to fulfill the vision of
    the Clean Air Act to protect and restore air quality in America's
    national parks. We must work together to meet the goals of the 1977
    Clean Air Act Amendments to prevent future impairment and remedy
    existing visibility impairment in all Class I areas.
        While we greatly appreciate the opportunity to appear before you
    today, we are compelled to note that the last oversight hearing
    specifically to address impacts of air pollution on national park units
    was held 17 years ago in May 1985 by the House Subcommittee on National
    Parks and Recreation. That hearing, chaired by the late Rep. Bruce
    Vento of Minnesota, focused on the damage acid rain, regional haze, and
    ozone were causing in national parks.\40\  An oversight hearing to
    provide a comprehensive update from scientists, park officials, and
    others concerning the range of pollutants and their impacts in national
    parks would be useful as Congress considers changes in the Clean Air
    Act. We respectfully request that this committee schedule a hearing in
    the near future dedicated to impacts of air pollution on America's
    national parks. Thank you for inviting NPCA to appear before you today
    and for considering our views.
    ---------------------------------------------------------------------------
         \40\House Committee on Interior and Insular Affairs, Subcommittee
    on National Parks and Recreation, Impacts of Air Pollution on National
    Park Units, Serial No. 99-10, May 20-21, 1985, 586 pp.
    ---------------------------------------------------------------------------
                                  attachments
                    1: National Park Service, Class I areas.

      2: National Park Service, Good and poor visibility days in selected
                                national parks.

     3: Environmental News Service, ``Mammoth Cave Bioprospecting Produces
                     Potential Cancer Drug,'' May 21, 2002.
    Available at http://ens-news.comlens/may2002/2002-05-21 -09.asp (click
                          on the below article title)
            mammoth cave bioprospecting yields potential cancer drug
        Salt Lake City, Utah--A bacterium discovered in Kentucky's Mammoth
    Cave National Park produces a substance that may be an effective anti-
    cancer drug, researchers announced Monday.
        ``We have isolated numerous bacteria from Mammoth Cave in Kentucky.
    One of these bacteria produces a substance that appears to inhibit the
    activity of a protein involved in the formation of new blood vessels
    [angiogenesis],'' said Dr. Ryan Frisch of Grand Valley State
    University, one of the researchers on the study.
        ``When cancer cells begin to form tumors, one of the requirements
    is the formation of new blood vessels to provide the tumor with oxygen
    and nutrients,'' explained Frisch. ``One of the strategies in the fight
    against cancer is to discover drugs that are anti-angiogenic because,
    if blood vessels are not produced, the tumor does not grow and prosper.
    These experiments indicate that the substance produced by this
    bacterium may be a new tool in the fight against cancer.''
        The research was released this week at the 102d General Meeting of
    the American Society for Microbiology in Salt Lake City.
        Human diseases, such as cancer and the increasing number of
    antibiotic resistant bacteria, require a constant supply of new drugs
    for effective treatment. Screening substances from native plants and
    bacteria, which often have far more complexity than compounds
    synthesized in the laboratory, is considered a major opportunity for
    drug discovery.
        One rich source of new, uncharacterized species is found in
    inaccessible ecosystems such as those found in caves, or in the
    geothermal springs of Yellowstone National Park.
        But the biological exploration of these areas, dubbed
    bioprospecting is controversial. Bioprospecting--the exploration for
    and collection of biological resources for commercial purposes--has
    been sanctioned in national parks for the last decade as part of larger
    research projects.
        Under a proposed new policy, the Park Service would reap financial
    rewards from bioprospecting through benefit sharing agreements with
    business and industrial groups that would be permitted to take samples
    of species on park lands and patent the products they produce. The
    potential profits for the agency could create a conflict of interest
    and encourage the Park Service to issue more bioprospecting permits
    than natural ecosystems can bear.
        The Park Service is now soliciting public comments on the scope of
    an upcoming Environmental Impact Statement on bioprospecting. Several
    conservation groups are urging the agency to require individual
    environmental studies, including public comment periods, for all
    bioprospecting contracts on public lands.
                                     ______

      4: USGS, photos of the Grinnell glacier in Glacier National Park in
                                 1938 and 1981.

    5: National Atmospheric Deposition Program: Mercury Deposition Network
       map showing mercury advisories and deposition at sites across the
          country, with the Everglades registering the highest levels.

      6: Clear the Air, Out of Sight: Haze in our National Parks, August
       2000. Clean Air Task Force, Boston, MA. (Kept in committee files).
     7: W. Kent Olson, ``Acadia's green 45,000 acres,'' Bangor Daily News,
                                April 24, 2002.
          [From the Bangor (ME) Daily News, Wednesday, April 24, 2002]
                          Acadia's Green 45,000 Acres
                               (By W. Kent Olson)
        The Maine Woods, famous from Thoreau's book of the same name, is
    the State's commercial mother lode. In aggregate, this huge this huge
    complement of mostly private timberlands occupies 17.7 million acres,
    89 percent of Maine. The working forest is a crucial capital asset,
    underpinning the timber and paper industries that have driven the
    State's economy for centuries. But for all its outputs the forest is
    not nearly so economically productive on a strictly per-acre basis, as
    the 45,000 acres of mostly undeveloped land and easements that make up
    Acadia National Park, where not a tree is harvested commercially.
        It Is total land volume that pays off, of course, $6.5 billion from
    commercial woodlands. But an arithmetic reduction is instructive. While
    each acre of private forest land annually contributes $368 in direct
    and indirect benefits to Maine's economy, publicly owned Acadia
    produces $3,400 per acre in sales of goods and services alone. The
    figure includes $1,200 in wages, or 4.7 percent of the average of Maine
    income.
        This is not to imply that just any 45,000-acre tract could be so
    generative. Or that if you stopped cutting it, a working forest would
    magically sprout cash. Rather, the idea is that exceptional places,
    thoughtfully and calculatedly set aside from the market system's
    general reach, can themselves create and help sustain markets. Well-
    tended public lands can strengthen capitalism, especially in the
    immediate surroundings. So it is with Acadia.
        Michigan State University professors Daniel Stynes and Dennis
    Propst, using work initiated by Ken Hornback, developed the ``Money
    Generation Model,'' for determining economic effects of national parks
    (www.prr.msu.edu/mgm2). Stynes and Propst estimated that in 2000,
    Acadia visitors spent $130 million in nearby towns for meals, room
    rentals, campsites, services, etc. This sum underwrote 2,300 jobs
    directly, and employed another 1,000 people supplying products or
    services to the primary businesses. Total value of primary and
    secondary sales was $155 million, and personal income was $55 million,
    creating significant tax effects.
        Even with its intrinsic worth, the park is not the sole actor. The
    view from, say Cadillac Mountain extends seaward beyond its boundaries.
    The ocean, a commons, thus subsidizes Acadia's amenity value. Still,
    the park's core real estate--location, location, location--is the
    working capital, a public asset producing private wealth.
        Unfortunately that asset is underfunded by 53 percent annually,
    according to Acadias' Business Plan, a rigorous financial analysis
    certified by PriceWaterhouseCoopers and published by the park, National
    Parks Conservation Association and Friends of Acadia. Within a larger
    effort benefiting all 386 national park units, Friends formed the
    Acadia Full Funding Coalition, in Maine, to increase this park's yearly
    operating funds to $14 million through appropriations and park entry
    fees. That's what is needed to keep Acadia unimpaired forever, the Park
    Service's mission.
        Sens. Olympia Snowe an Susan Collins and Reps. John Baldacci and
    Tom Allen have pledged strong support. Thanks to State Sen. Jill
    Goldthwaite and others, the Maine Legislature recently passed a
    resolution urging the president and Congress to back the idea.
        Private donations have an important sharply focused role in park
    funding. Friends of Acadia's goal is to supplement Federal funds, not
    replace them. Contributors add a margin of excellence to resource
    protection beyond what government can do. This increases the park's
    ``book'' value, benefiting all of Maine.
        With full Federal appropriations, entry fees that meet market
    standard, upped concession revenues and laser-beam philanthropy of the
    kind Friends of Acadia has pioneered, park staff can manage future
    visitation and protect Acadia for the ages.
        Question: what other 45,000-acre forested area, with 121 employees
    doing the work of 230, with half the budget needed to meet legal
    mandates, is a season barely 6 months long, and with all its vegetation
    left upright, gives Maine 3,300 jobs and $130 million in cash, year
    after year?
        Answer: None. This rare and precious Acadia National Park--a ``gem
    on a shoestring.'' Said the Portland Press Herald--deserves constant
    reinvestment.
        Tiny Acadia is not exactly the Maine Woods of legend, but it is our
    national park, a capital asset if ever there was one. Maine owes a
    tremendous debt to all who bring a vital margin of excellence to this
    phenomenal place.
                                     ______

    8: U.S. PIRG, Florida's Top Ten: Power Plants that increased emissions,
                                   1995-2000.

                                     ______

             [From the New York Times, Wednesday, January 2, 2002=
                           An Uncertain Parks Policy
        Just over one year ago, President-elect Bush introduced Gale Norton
    as his choice for secretary of the interior, handed her the task of
    fixing the national park system and promised $1 billion in new money
    every year for 5 years to help her do it. As promises go, revitalizing
    the parks did not seem very adventurous. Everyone loves the parks.
    Still, president after president had taken the parks for granted,
    leaving an overdue repair bill of more than $5 billion as well as an
    annual operating shortfall in the hundreds of millions. Thus Mr. Bush's
    promise was no small thing.
        So how has he done? In the year now ending, Mr. Bush asked for and
    Congress provided an increase of only $90 million or so in the
    operating budget. But Mr. Bush was operating within the constraints of
    President Clinton's last budget; next year will be a better indication
    of his resolve. It will also be helpful if, as the National Parks
    Conservation Association has suggested, he instructs his interior
    secretary to use this money to protect the parks' historical, cultural
    and natural resources--its plants and animals and their habitat--in
    addition to repairing roads and buildings.
        Money, in fact, is only one measure of Mr. Bush's commitment. A
    truer test is whether he and by extension Ms. Norton are genuinely
    committed to the values that animated the founders of the national park
    system. Chief among these is keeping ecosystems intact. That means
    nourishing the natural environment and keeping the animals that depend
    on it as healthy and stress-free as is humanly possible in a system
    besieged with nearly 300 million visits a year.
        On this score, Mr. Bush has given pause. One distressing example is
    the Administration's sneaky effort to reverse a Clinton rule phasing
    out snowmobiles from Yellowstone National Park--a rule buttressed by
    overwhelming public approval and years of conscientious science. Ms.
    Norton seems convinced that industry can come up with a kinder, gentler
    snowmobile than the infernal machines that gather near the park
    entrance at West Yellowstone and then proceed to foul the air, ruin the
    natural quiet and scare the animals. So far as we know, there is no
    such machine.
        The larger point about the snowmobile issue is that it reflects a
    commercial bias that really has no place in Federal policy regarding
    the parks. Yellowstone will survive snowmobiles, but such a bias could
    be disastrous elsewhere. The future of the Everglades, for example,
    depends on whether the Administration is willing to honor the wishes of
    Congress as expressed in the Everglades restoration plan and give the
    natural system its fair share of South Florida's copious rainfall,
    instead of allowing the developers and big farmers to grab it all.
        Similarly, the smoggy haze that afflicts so many national parks
    from Big Ben in Texas to Acadia in Maine will never improve unless the
    Administration cracks down on emissions from older coal-fired power
    plants. The Environmental Protection Agency has yet to issue final
    rules on park haze. Meanwhile, its administrator, Christie Whitman, is
    under pressure to roll back a provision in the Clean Air Act known as
    ``new source review'' that has done much to reduce air pollution.
        Mr. Bush's promises of more money are welcome, and his selection of
    Frances Mainella to run the National Park Service has been widely
    applauded. Yet at every turn, he faces the choice between short-term
    commercial and local interests and the long-term health of the parks.
    So far, on most environmental issues, commercial interests have got the
    upper hand. Mr. Bush can achieve some redemption by doing right by the
    parks.
                                     ______

         10: American Lung Association and National Parks Conservation
     Association, letter to Members of Congress seeking support for S. 556
                       and H.R. 1256, February 14, 2002.
                                     American Lung Association.
                                                     February 14, 2002.

    Dear Member of Congress:

        Visitors to America's national parks should not have to risk their
    health by breathing park air. Yet, those who hike in some of our
    national parks can no longer be confident about the purity of the air
    they breathe.
        We are becoming much too familiar with the problem of haze air
    pollution at majestic treasures like the Grand Canyon, Canyonlands,
    Great Smoky Mountains, Big Bend, Shenandoah, Mount Rainier and Acadia.
    However, not only is our ability to enjoy the scenic value of these
    glorious places at ever increasing risk, but at some of them our health
    may be as well., Our nation's most visited park, Great Smoky Mountains
    National Park, has one of the most serious air problems of any national
    park and consistently records higher concentrations of ozone smog than
    Atlanta. The National Park Service has had to issue ``unhealthful air''
    notices to employees and park visitors on 139 days over the last 4
    years. In 1999, the air in the park was unhealthy to breathe on one out
    of every 3 days during the summer tourist season.
        More recently, the University of Southern California released some
    of the strongest evidence to date that confirms the danger of ozone to
    physically active children. It confirms previous evidence that clearly
    demonstrated that ozone can aggravate existing cases of asthma, while
    highlighting results that point to ozone as potentially causing the
    actual onset of the disease.
        Parents who live around our country's metropolitan areas must
    already keep their children indoors during too many summer days when
    the alternative is breathing unhealthy air. When those families travel
    to their national parks, they should not have to face the same choice.
    Our nation can and must do better.
        Americans care about the purity of their air, and we all have the
    right to breathe clean air when we visit our national parks. Yet, the
    energy industry is using its influence to gut critical clean air
    protections that Americans expect. Some of the old power plants that
    may be given a greater license to pollute by undermining the Clean Air
    Act's new source review provisions have a direct impact on the air
    quality in our national parks and are threatening not only the long
    term vitality of precious places like the Great Smoky Mountains, but of
    the health of families who visit them. It is simply wrong to place the
    health of the millions of annual visitors to our nation's most visited
    national park at risk in order to benefit the bottom line of a handful
    of powerful energy companies.
        We ask for your help in rejecting any proposed rollback in the
    protections already available under the Clean Air Act. Further, we ask
    that you support S. 556, Clean Power Act, and H.R. 1256, the Clean
    Smokestacks Act. Both of these bills protect human health while
    preserving critical provisions of one of the most effective
    environmental laws ever written, the Clean Air Act.
        We ask that you not support the proposals announced by the Bush
    Administration. By contrast, the Administration proposals would
    significantly roll back provisions of the Clean Air Act. The
    Administration proposals would limit the ability of States to act to
    reduce air pollution. Their provisions would actually allow more
    pollution than in provisions currently in place under the Clean Air
    Act.
        For the protection of some of our most precious national treasures-
    our national parks and our children's health-we urge you strongly to
    support S. 556 or H.R. 1256.
        For more information, please feel free to contact the National
    Parks Conservation Association at 202-223-6722 or the American Lung
    Association at 202-785-3355.
                                                    Craig Obey,
                                     Vice President Government Affairs,
                               National Parks Conservation Association.

                                              Paul G. Billings,
                          Assistant Vice President, Government Affairs,
                                             American Lung Association.
                                     ______

     Responses of Don Barger to Additional Questions from Senator Voinovich

        Question 1. It is my understanding that the Adirondack Council is
    mostly concerned about NOx and SO2 because of the real
    impacts today. Hence, they support the President's proposal. In your
    opinion, what is more important to the parks-real reductions today or
    waiting perhaps years to include CO2?
        Response. My testimony before the Committee was that we cannot
    afford for those to be the only two choices. I believe that what's
    important is for us to fulfil our commitments to the parks and to the
    people of the United States by insuring that these precious resources
    are inherited unimpaired by future generations. In order to do that, we
    have to understand that the impacts of mercury and global climate
    change are, in fact, also ``real impacts today.'' It is the nature of
    climate change that the impacts will extend over a very long period of
    time. This fact makes those impacts more, not less, profound and the
    need to act now even more immediate. I would request that you closely
    examine the photographs from Glacier National Park that were included
    in my testimony. How will we explain Glacier National Park to our
    grandchildren 30 years from now if there are no longer any glaciers?
    During the hearing, there were numerous analogies to our current
    situation as a ship. I believe that the most important thing for us to
    understand about global climate change is that we are all in the same
    boat. And that our economy is in here with us.
        Mercury is a bio-accumulating neuro-toxin that is being found
    increasingly in our environment. According to the National Atmospheric
    Deposition Program 2000 Annual Summary (pp. 12-13), every State in the
    Lower 48 States that monitors mercury has had to issue fish and
    wildlife consumption advisories to its citizens. The 6 States that do
    not have advisories do not monitor mercury. Attachment 5 in the packet
    submitted by NPCA at the hearing is a map of atmospheric deposition of
    mercury at sites across the country. Some of the highest levels in the
    country are found in south Florida and the delicate ecosystems of
    Everglades National Park. Preliminary monitoring data at Great Smoky
    Mountains and Mammoth Cave National Parks are showing elevated levels
    of mercury in precipitation there. Due to its persistence in the
    environment and the food chain, mercury pollution is inappropriate for
    trading programs (such as the one in the President's proposal) that
    would allow its concentration and prolonged deposition.
        I cannot speak to the Adirondack Council's decision to support a
    plan that the Bush Administration's own research indicates will not be
    adequate to reverse the continuing acidification of streams in Great
    Smoky Mountains National Park. In the 2001 report, Acid Rain Revisited:
    Advances in scientific understanding since the passage of the 1970 and
    1990 Clean Air Act Amendments, the Hubbard Brook Research Foundation
    determined that:
        Recent water quality data show that:
          41 percent of lakes in the Adirondack Mountain region of
    New York and 15 percent of lakes in New England exhibit signs of
    chronic and/or episodic acidification.
          Only modest improvements in ANC, an important measure of
    water quality, have occurred in New England. No significant improvement
    in ANC has been measured in the Adirondack or Catskill Mountains of New
    York.
          Elevated concentrations of aluminum have been measured in
    acid-impacted surface waters throughout the Northeast.
        Given the loss of acid-neutralizing base cations and the
    accumulation of sulfur and nitrogen in the soil, many ecosystems are
    now more sensitive to the input of additional acids and recovery from
    acid deposition will likely be delayed. Research shows that emissions
    reductions mandated by the 1990 CAAA are not sufficient to achieve full
    ecosystem recovery in watersheds in the Northeast that are similar to
    the HBEF within the next 25-50 years. Analyses of policy proposals
    calling for an additional 40-80 percent reduction in electric utility
    emissions of sulfur beyond the levels set by the 1990 CAAA show that
    such proposals would result in measurable improvements in chemical
    conditions. Specifically, with an additional 80 percent reduction in
    sulfur emissions from electric utilities, streams such as those at the
    HBEF would change from acidic to non-acidic in approximately 20-25
    years. (Emphasis added)

        Question 2. According to your testimony, you said that during this
    week's ozone alert day in Washington, DC, the air for pedestrians was
    better in downtown Washington, than the air in our national parks. Can
    you explain this statement?
        Response. Yes. I testified: ``While we were having the ozone red
    alert yesterday here in Washington, I checked the ozone levels both
    here and at the Great Smoky Mountains National Park. Bottom line, it
    would have been a lot healthier to run to work yesterday in Washington
    than it would have been to hike on the Appalachian Trail in the
    Smokies.'' The pollutant of concern here is ground-level ozone, a
    secondary pollutant produced when NOx and hydrocarbons known as
    volatile organic compounds (VOCs) combine in the presence of sunlight.
    Ozone is a strong lung irritant that can burn and even scar the
    delicate tissue of the lung at elevated levels.
        The comparison I made was between the 8-hour average ozone
    concentration at 8 a.m. on the morning of June 11 at monitoring sites
    in Washington, DC and at Great Smoky Mountains National Park. Data from
    the park is from the Clingman's Dome monitoring station that sits along
    side the Appalachian Trail (AT); the Washington, DC data is from the
    McMillan Reservoir monitoring station near Howard University, the
    closest site to the center of Washington. The comparison showed that
    the concentration of ozone in Washington was 39 parts per billion
    (ppb); the concentration at that same moment along the AT was 102 ppb.
    This situation was not a fluke. Long-term monitoring data show that in
    the last 8 years, there have been more days that exceeded the 8-hour
    standard in the park than there have been in Washington. All of this
    data can be found at the follow link:
        EPA's Ozone Monitoring and Mapping Data: ftp://
    SHCoperator@ftp.airnowdata.org/outgoing/data/
        Further tests of the direct impacts on hikers along the Appalachian
    Trail in the park are currently ongoing. These tests are described in a
    series of five articles that appeared in last Sunday's (8/14/02)
    Knoxville News-Sentinel (links provided below). I would also be glad to
    connect you to the researchers at the University of Tennessee if you
    desired more technical descriptions of this testing.
        Inhaling the haze: http://www.knoxnews.com/kns/local--news/article/
    0,1406,KNS--347--1332527,00.html
        Scientist climb up for a breath of unfresh air: http://
    www.knoxnews.com/kns/local--news/article/0,1406,KNS--347--
    1332669,00.html
        Public opposes weakening of the clean air act: http://
    www.knoxnews.com/kns/letters--to--editor/article/0,1406,KNS--363--
    1330779,00.html
        Emissions limit to have big effect on counties: http://
    www.knoxnews.com/kns/local--news/article/0,1406,KNS--347--
    1332668,00.html
        Environmentalist activist takes the clean air fight personally:
    http://www.knoxnews.com/kns/local--news/article/0,1406,KNS--347--
    1332667,00.html
                                     ______

      Responses of Don Barger to Additional Questions from Senator Graham

        Question 1. I visited Great Smoky Mountains National Park last
    August and I had the opportunity to learn about the problems that air
    pollution has created for visibility. Most visitors to the Park don't
    realize that the smoke-covered mountains that they see first thing in
    the morning are a result more of pollution than the natural phenomenon
    for which the mountains are named.
        In your testimony, you write about that ``scenic vistas cannot
    inspire if they cannot be seen.'' There are also other harms caused to
    natural resources by pollutants. Can you provide with some further
    information on these problems?
        Response. The Cherokee Indians called these mountains
    ``Shaconage'', the Place of Blue Smoke. It was named for the wisps of
    moisture that spiral up from the sides of the mountain after a rain.
    The uniform grayish-yellow haze that greets most of the park's visitors
    in the summer is a chemical soup generated largely by the combustion of
    fossil fuels. You are correct that visibility impairment is only one of
    a number of serious problems created by air pollution in our national
    parks. These other problems include acidification of soils and streams,
    foliar damage to plants and the very serious health impacts of
    pollution on park visitors and park staff.
        Research detailing the numerous adverse impacts to Class 1 areas
    from air pollution is voluminous and overwhelming. Perhaps the best
    summary of that research can be found in the ``Technical Information in
    Support of the Department of the Interior's Request for a Rule to
    Restore and Protect Air Quality Related Values'' which accompanied a
    formal Petition for Rulemaking submitted by the Department of the
    Interior (DOI) to the Environmental Protection Agency (EPA). It should
    be noted that this Petition for Rulemaking by DOI has not been acted
    upon by EPA.
        DOI's petition for AQRV rulemaking: http://www2.nature.nps.gov/ard/
    epa/index.htm
                                   __________
     Statement of J. Thomas Mullen, President and CEO, Catholic Charities
                    Health and Human Services, Cleveland, OH
        Chairman Jeffords and distinguished Members of the U.S. Senate,
    Committee on Environment and Public Works: I thank you for the
    opportunity to testify today regarding Senate bill 556, referred to as
    the Clean Power Act. My name is Tom Mullen and I am President of
    Catholic Charities Health and Human Services in Cleveland, Ohio.
    Catholic Charities in Cleveland serves over 600,000 people annually and
    has an $87,000,000 annual operating budget, while employing of 1,700
    people. We provide services to children and families; older adults;
    persons with disabilities; and those with emergency and basic
    transitional needs. (Last year we served over 4.5 million meals to the
    hungry and provided tens of thousands nights of shelter to homeless
    women, men and children). This service area is in the eight-county
    Cleveland Catholic Diocese in Northeast Ohio.
        I want to acknowledge the support and involvement that committee
    Member Senator George V. Voinovich has given to our communities and the
    people we serve in Ohio. I want to share with you today what impact
    that Senate bill 556 would have on a number of the people we serve
    daily in Northeast Ohio.
        Senator Voinovich, in the last couple of years, has convened people
    most directly impacted by the rise in utility costs. The elderly on
    fixed limited incomes and the working poor with families have made it
    clear to him during these meetings and to me on a daily basis that they
    cannot afford increases in costs for their basic needs. Many indicate
    that, currently, they cannot afford basic needs without either falling
    behind in payments and/or ignoring one of those needs like rent,
    utility, or health care bills. Senate bill 556 on the surface strives
    to cleanse the environment of many of the oxides and, in particular,
    carbon dioxide and mercury. These gases are given off through the
    burning of coal. I ask the committee to carefully review the negative
    impact that would occur on millions of people in our country and in my
    state of Ohio if the bill is enacted without deeper consideration and
    further research.
        The State of Ohio's energy production is provided by 86 percent use
    of coal. If Senate bill 556 is enacted, the conversion to natural gas
    from coal would have a devastating effect on the people of Ohio and our
    country, particularly the poor and the elderly. The Edison Electric
    Institute estimates that, if enacted, the loss in America in gross
    domestic product by the year 2010 would be $75 billion and grow to $150
    billion in 2020. In the State of Ohio, the loss would be $3 billion and
    grow to $6 billion by 2020.
        Employment in Ohio would be dramatically impacted with job losses
    estimated at 25,000 by 2010 and 37,000 by 2020. With all of this, the
    most vulnerable of our people economically, would see their electric
    costs in Ohio soar to $494,000,000 in 2010 and to $1.5 billion in 2020.
        The overall impact on the economy in Northeast Ohio would be
    overwhelming, and the needs that we address at Catholic Charities in
    Ohio with the elderly and poor would be well beyond our capacity and
    that of our current partners in government and the private sector.
        In a recent study on Public Opinion on Poverty, it was reported
    that one-quarter of Americans report having problems paying for several
    basic necessities. In this study, currently 23 percent have difficulty
    in paying their utilities--that is, one out of four Americans. If
    Senate bill 556 is passed, we could see the difficulty in Cleveland
    reach beyond one out of two people and families not able to pay
    utilities. This is based on the current fact that, in Cleveland, 25.8
    percent of people are below the Federal poverty level and from the 200
    percent increase in emergency assistance needs we are experiencing at
    Catholic Charities in the last 18 months. This is all without the
    domestic increase these same individuals and many thousands of others
    will experience through job loss and utility cost increase as a result
    of the Clean Power Act.
        I want to emphasize, again, the two groups of our most vulnerable
    population in Ohio that would be impacted by this bill. First, the
    elderly in Cleveland--approximatelyone-half (49.4 percent) of persons
    over 65 years old have incomes less that $15,000 per year. In Cuyahoga
    County, nearly one-third (31.5 percent) fall into the same category.
    Northeast Ohio reflects realistically what negative impact the increase
    in utility cost would have for all our seniors in Ohio and through
    similar states throughout the nation.
        The second group that I have real concern for and will be hurt
    similarly by this is children. In Cleveland, over one-fourth of all
    children live in poverty and are in a family of a single female head of
    household. These children will suffer further loss of basic needs as
    their moms are forced to make choices of whether to pay the rent or
    live in a shelter; pay the heating bill or see their child freeze; buy
    food or risk the availability of a hunger center. These are not choices
    any senior citizen, child, or, for that matter, person in America
    should make.
        I ask the committee to look carefully at the ramifications of
    Senate bill 556 and its impact on employment and energy costs. We have
    many vulnerable people in Cleveland, in Ohio, and across America who
    cannot carry the burden of this legislation. Chairman Jeffords and
    Senators of the committee, thank you for your time.
                                     ______

     Responses of Tom Mullen to Additional Questions from Senator Jeffords

        Question 1. As you may know, I've always been a strong proponent of
    the LIHEAP program. So, I'm not interested in harming low-income people
    by imposing pollution controls. But, I think we can work together to
    keep the 40-50,000 low-income people in Cleveland who use electricity
    for heat from being harmed by control costs and by pollution. Would you
    agree, though, that we need to reduce our carbon dioxide emissions
    soon.
        Response. Yes, we need to find ways to accommodate both.

        Question 2. In the ``Straw'' Proposal analysis, EPA concluded that
    power plan emission reductions similar to the levels in the Clean Power
    Act would not only bring cleaner air but would also save the average
    family of four in places like Cleveland $2500 each year in avoided
    health care costs. How does that compare to the average expenditure on
    electricity in a low-income home in Cleveland.
        Response. If the $2,500 is accurate, it would come very close to
    being equal; yet we must remember that 100 percent expenditure covering
    health care for the poor does not come directly from their pockets as
    energy costs do. Health care coverage for the poor and elderly comes
    from Medicaid and Medicare.
        Responses of Tom Mullen to Additional Questions from Senator
    Voinovich:

        Question 1. Specifically, how much have high energy costs in the
    past increased requests for help from the people you serve?
        Response. The increased energy costs impact all basic needs. The
    attached analysis covering a 2-year period (1999-2001) speaks directly
    to this concern and also provides information on the growth.

        Question 2. Can you please illustrate your organization's current
    abilities to meet the needs of those you serve, and how, as you stated
    in your testimony, the impact of S. 556 to the elderly and poor would
    be ``well beyond'' your capacity?
        Response. We do not have a capacity to meet the needs currently and
    further impact on the poor and elderly would additionally increase the
    percentage of need, further decreasing our capacity from a fiscal and
    human resources perspective to serve them.
        Responses of Tom Mullen to Additional Questions from Senator
    Graham:

        Question 1. I come from a State where a large segment of the
    population lives on a fixed income. This fact makes issues of cost very
    important to Floridians.
        What kinds of Federal programs exist that could be used to help
    Americans living on fixed incomes if their utility bills rise as much
    as your cost estimates predict?
        Response. The HTF, TANF, AEA and HEAP programs increase and
    discussions with utilities to work with the poor and elderly in budget
    payments and extended payment plans. This would allow for budgeting and
    increase the predictability of these costs.

        Question 2. Do you have any recommendations for ways that these
    programs or new programs could be used to help alleviate these effects?
        Response. Refer to the answer in Question 1. I am providing a
    summary (attached) of the Cleveland, Ohio situation in the area of
    basic needs for the first half of 2002, as prepared by Catholic
    Charities Information and Referral Services. These figures focus
    primarily on Cuyahoga County (Greater Cleveland) and not the other
    eight counties of the diocese.