[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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              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.
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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.
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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.
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     \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.''
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    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.
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     \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.
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     \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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DeCanio, Stephen. 1993. ``Barriers within firms to energy-efficient 
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DeCanio, Stephen J. 1998. ``The efficiency paradox: bureaucratic and 
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    Energy Policy. vol. 26, no. 5. April. pp. 441-454.
EPRI, Electric Power Research Institute. 1988a. Implicit Discount Rates 
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Eto, Joe, Edward Vine, Leslie Shown, Richard Sonnenblick, and Chris 
    Payne. 1994. The Cost and Performance of Utility Commercial 
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Eto, Joseph H., Suzi Kito, Leslie Shown, and Richard Sonnenblick. 1995. 
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Gately, D. 1980. ``Individual Discount Rates and the Purchase and 
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Greening, Lorna A., Alan H. Sanstad, and James E. McMahon. 1997. 
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Hausman, J.A. 1979. ``Individual Discount Rates and the Purchase and 
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Howarth, Richard B., and Bo Andersson. 1993. ``Market Barriers to 
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Howarth, Richard B., and Alan H. Sanstad. 1995. ``Discount Rates and 
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Huntington, Hillard G., Alan H. Sanstad, and Lee J. Schipper. 1994. 
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    22, no. 10. October. pp. 795-797.
Interlaboratory Working Group on Energy-Efficient and Clean-Energy 
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    Berkeley National Laboratory. ORNL/CON476 and LBNL-44029. November.
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    Buildings: An Investigation of Market Failures and Corrective 
    Policies. PhD Thesis, Energy and Resources Group, University of 
    California, Berkeley.
Koomey, Jonathan G., Susan A. Mahler, Carrie A. Webber, and James E. 
    McMahon. 1999. ``Projected Regional Impacts of Appliance Efficiency 
    Standards for the U.S. Residential sector.'' Energy: the 
    International Journal. vol. 24, no. 1. January. pp. 69-84.
Koomey, Jonathan G., R. Cooper Richey, Skip Laitner, Robert J. Markel, 
    and Chris Marnay. 1998. Technology and greenhouse gas emissions: An 
    integrated analysis using the LBNL-NEMS model. Berkeley, CA: Ernest 
    Orlando Lawrence Berkeley National Laboratory. LBNL-42054. 
    September.
Koomey, Jonathan, Alan H. Sanstad, and Leslie; J. Shown. 1996. 
    ``Energy-Efficient Lighting: Market Data, Market Imperfections, and 
    Policy Success.'' Contemporary Economic Policy. vol. XIV, no. 3. 
    July (Also LBL-37702.REV). pp. 98-111.
Krause, Florentin, Eric Haites, Richard Howarth, and Jonathan Koomey. 
    1993. Cutting Carbon Emissions-Burden or Benefit?: The Economics of 
    Energy-Tax and Non-Price Policies. Energy Policy in the Greenhouse. 
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Krause, Florentin, David Olivier, and Jonathan Koomey. 1995. Negawatt 
    Power: The Cost and Potential of Low-Carbon Resource Options in 
    Western Europe. Energy Policy in the Greenhouse. Volume II, Part 
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Krause, Florentin, Ed Vine, and Sunita Gandhi. 1989. Program Experience 
    and its Regulatory Implications: A Case Study of Utility Lighting 
    Efficiency Programs. Lawrence Berkeley Laboratory. LBL-28268. 
    October.
Levine, Mark D., Howard Geller, Jonathan Koomey, Steve Nadel, and Lynn 
    Price. 1992. Electricity End-Use Efficiency. Experience with 
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    by Purchases of Energy-Efficient Refrigerators.'' Energy. vol. 8, 
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    It?--Energy Efficiency and Fossil Energy Research 1978 to 2000. 
    Washington, DC: National Academy Press.
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    induced innovation hypothesis and energy-saving technological 
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Nordhaus, William D. 1999. Modeling Induced Innovation in Climate-
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    National Bureau of Economic Research. Working Paper 8284.
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Sanstad, Alan H., Stephen DeCanio, Gale Boyd, and Jonathan G. Koomey. 
    2001a. ``Assessment of Macroeconomic Impacts from the CEF 
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Sanstad, Alan H., and Richard Howarth. 1994. ``'Normal'' Markets, 
    Market Imperfections, and Energy Efficiency.'' Energy Policy. vol. 
    22, no. 10. October. pp. 826-832.
Sanstad, Alan H., Jonathan G. Koomey, and Skip Laitner. 2001b. ``Back 
    to the Future: A Note on Long-Range Energy Price and Quantity 
    Projections in Restrospect.'' To be submitted to Energy Economics 
    (also LBNL-48107,). no. January. pp.
Train, Kenneth. 1985. ``Discount Rates in Consumers'' Energy-Related 
    Decisions: A Review of the Literature.'' Energy. vol. 10, no. 12. 
    pp. 1243-1253. US DOE. 2001. Analysis of Strategies for Reducing 
    Multiple Emissions from Electric Power Plants with Advanced 
    Technology Scenarios. Washington, DC: Energy Information 
    Administration, U.S. Department of Energy. SR/OIAF/2001-05. 
    October.
Webber, Carrie A., Richard E. Brown, and Jonathan G. Koomey. 2000. 
    ``Savings Estimates for the ENERGY STAR Voluntary Labeling 
    Program.'' Energy Policy. vol. 28, no. 15. December. pp. 1137-1150.
                                 ______
                                 
      [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\ 
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    \2\42 USC Sec. 7491(a)(1).
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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\ 
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    \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.
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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\ 
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    \8\U.S. Department of the Interior to U.S. Environmental Protection 
Agency, Docket No. A-2000-28, September 17, 2001.
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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.
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    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).
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     \1\USEPA, ``A Comprehensive Approach to Clean Power,'' August 3, 
2001, at 21.
     \2\USEPA, ``Human Health Benefits of Clear Skies,'' May 2002.
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    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.
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     \3\ USEPA, ``Projected PM2.5 and Ozone Nonattainment 
Maps.''
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    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\ 
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    \4\USEPA, ``Water quality.ppt,'' May 2002.
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    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.
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     \5\
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    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.
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     \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.
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    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.
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     \7\For a target of 550 ppm (double pre-industrial levels) the two-
century budget is about 1200 billion tons of carbon.
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    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.
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     \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.
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    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.
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     \10\See Environmental Assessment notice at http://www.co.blm.gov/
canm/kdmorganea.htm.
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    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.
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     \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.
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    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.
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     \12\``Comprehensive Approach'', note 1, supra.
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    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.
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     \13\USEPA, ``Clear Skies Initiative Summary,'' at 17. See notes 1-
2, supra.
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    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.
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     \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.
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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.
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          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://
[email protected]/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.

                              



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