- CLEAN POWER ACT

[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

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

U.S. GOVERNMENT PRINTING OFFICE
80-655 WASHINGTON : 2002
_____________________________________________________________________________

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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

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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

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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.
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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.
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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\
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\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.
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\33\``Death, Disease, and Dirty Power,'' Clean Air Task Force
(2000); ``The Particulate-Related Benefits of Reducing Power Plant
Emissions,'' Abt Associates (2000).
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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.
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\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.
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\36\Srivastava, R.K. (2000) EPA ORD Control of SO2
Emissions: An Analysis of Technologies. EPA/600R00/093.
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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.
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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).
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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.
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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.
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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\
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\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.
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\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.
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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\
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\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
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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.
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\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.
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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.
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\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.
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Allowance trading provides incentives for energy conservation and
technology innovation that can both lower the cost of compliance and
yield pollution prevention benefits. Simply, the allowance market puts
a price or value on each ton of SO2 not emitted. The
association of a monetary value with reduced emissions encourages
innovation: in the 1990's, scrubber costs decreased by approximately 40
percent and scrubber sulfur removal efficiencies improved from 90
percent to 95 percent, and experimentation led to the blending of fuels
to lower emissions. To ensure that the cap is met and to provide
credibility, sources also are required to install systems that
continuously monitor and report emissions.
The Acid Rain Program has proven to be an excellent model for cap-
and-trade programs. Compliance with the program has been nearly 100
percent and annual emissions of SO2 from power plants have
already been reduced over 6 million tons (about 35 percent) from 1980
levels. Greater reductions earlier than expected have lowered risks to
human health and provided benefits to the environment sooner. Acid rain
levels were dramatically reduced over large areas of the United States
and trading did not result in geographic shifting of emissions, or
``hot spots'', as some feared. Despite the significant progress we have
made under the Clean Air Act, air emissions from power generators are
still contributing to serious public health and environmental problems.
Administrator Whitman addressed these concerns extensively in her
testimony before you on July 26, 2001. Rather than reiterate her
testimony, I will emphasize just a few of her key points. Problems
associated with sulfur dioxide (SO2), nitrogen oxides (NOx),
and mercury emissions are of national and international significance,
and the interstate and long range transport of emissions continue to
play significant roles in the nature and magnitude of the problems.
Emission and deposition of SO2, NOx, and mercury and their
transformation byproducts are known to have a wide range of adverse
effects on human health and the environment, including:

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

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

Attachment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Figure 2. SO2 Emissions (million tons)

Figure 3. NOx Emissions (million tons)

Figure 4. Mercury Emissions (tons)

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

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

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

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

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

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

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

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

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

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

______

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Responses Hon. Jeffrey Holmstead to Additional Questions from Senator
Smith

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

attachment b

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

______

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

__________
Responses by Kenneth Colburn to Additional Questions from Senator Smith

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

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

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

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

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

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

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

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

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

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

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

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

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

STATEMENTS SUBMITTED BY PARTICIPANTS OF THE STAKEHOLDER MEETING

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

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

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

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

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

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

Revenues and compliance costs are higher under the 4-P
Auction case and lower under the 4-P GPS case.
Net revenues to the utility sector is virtually the same.
About the ORCED Model
The model used in this analysis is the Oak Ridge
Competitive Electricity Dispatch Model (ORCED), a dispatch model
developed by Oak Ridge National Laboratory and adapted by the Center
for Clean Air Policy.
ORCED was used in the DOE Five-Lab Study as well as in
other DOE projects.
Modeling was conducted on the ECAR region.
__________
Principles on Multi-Pollutant Powerplant Clean Air Legislation
overarching principles
The decade since the last Clean Air Act Amendments has
brought an overwhelming body of fresh scientific evidence of human
health and environmental damage associated with power plant air
emissions, as well as increasingly cost-effective technology to reduce
that damage.
CATF supports the Clean Power Act of 2001 (S. 556).
Sulfur dioxide
Compelling evidence of unacceptable long range impacts of
sulfur dioxide emissions (e.g., ultrafine particles, acid rain, haze)
as well as significant local impacts (e.g., PM2.5 health
impacts, visibility impacts on adjacent parks) has mounted consistently
in 1990's.
The evidence firmly establishes that nothing less than a
75 percent reduction in sulfur emissions from Phase II levels (to
approximately 2.25 million tons) will begin to address the problem
adequately. Provision should be made for even deeper cuts in later
years to spur development and commercialization of cleaner technology.
In addition, protection for near-plant communities and
particularly sensitive resources and ecosystems must be assured. The
best mechanism to assure broad local protections is the application of
a date certain by which all plants must meet best available control
technology; in turn, this standard should be revised periodically to
incorporate technological and economic progress.
Because of special haze and acidification problems in the
Western States, a Western sub-national sulfur dioxide cap should be
included to ensure that pro rata emissions reductions occur in those
States.
Nitrogen oxides
As with sulfur dioxide, the last decade has brought
increasing evidence of unacceptable local impacts from nitrogen oxide
emissions, both locally (ozone, PM2.5) and long range
(eutrophication, PM2.5, ozone acid rain, haze)
Nothing less than 75 percent year round reduction in
nitrogen oxide emissions to 1.5 million tons will appropriately address
these problems. Provision should be made for even deeper cuts in later
years to spur development and commercialization of cleaner technology.
Protections for local public health, ecosystems, and
resources should be provided for as above in sulfur dioxide section.
Mercury
Evidence of the potency and persistence of human health
and environmental impacts of this substance is increasingly clear and
grave in its implications.
Plant-by-plant mercury cuts in the 90 percent range
appear feasible through mercury-specific control technologies; there is
the potential for significant co-benefit mercury reductions from other
pollutant initiatives as well.
Accordingly, there is no compelling reason at this time
to consider mercury emissions trading/averaging.
A comprehensive bill must address all mercury emission
pathways, including re-emission and dispersal from fossil fuel
combustion waste disposal sites.
Other air toxics
The full range of air toxics should be addressed in any
comprehensive bill if existing regulatory mechanisms for addressing
these emissions such as section 112 are to be suspended.
Details of these measures will depend on the specific air
toxic in question.
A comprehensive bill must address all air toxic emission
pathways, including re-emission and dispersal from fossil fuel
combustion waste disposal sites.
C02
CATF supports a power sector CO2 cap-and-trade
system with caps set at 1990 power sector emission levels.
Regulatory relief
New clean air legislation concerning power plants must
further rather than replace the Clean Air Act's current key goals and
benchmarks, including, without limitation, the attainment of national
ambient air quality standards, prevention of significant deterioration
in air quality, remedying visibility impairment, application of maximum
available control technology for toxic emissions, and the advancement
of new, cleaner technologies.
States and localities must not be preempted from enacting
tighter emissions controls than those contained in the Act.
__________
Statement of Clean Power Group
Key Principles
A suitable multi-pollutant cap-and-trade program can be
an environmentally beneficial replacement for conventional new source
review while improving industry certainty and reducing costs to
industry and consumers.
Under a cap, NSR does not provide emission reductions.
A suitable cap without NSR will yield lower emissions
than a conventional program with NSR.
NSR reform must include both new and existing sources.
All participants in a trading program should be treated
the same with respect to allocation.
Allowances should be redistributed frequently, based on
output.
New technology needs to be encouraged for all fuels.
Caps should be phased in gradually with an economic
circuit breaker.
Clean Power Group Proposal
Apply gradually declining caps on NOx, SOx, mercury and
potentially CO2 for all generators.
Caps replace BACT/LAER, offsets, mercury MACT, regional
control programs.
Backstops:
NSPS requirement and local air quality impact review.
Guaranteed cap ``way-points''.
Minimum compliance levels for mercury.
Economic circuit breaker slows tightening of cap if
required.
Benefits
Earlier reductions and more continuing reductions than
other approaches.
More complete/efficient NSR reform.
Promotes adoption of energy efficiency and new
technologies for all fuels.
Minimizes cost through gradual implementation and
technology forcing.
Promotes timely development of new generating capacity.
Compatible with future potential programs to control
CO2.
__________
Statement of Electric Power Supply Association
Thank you for inviting the Electric Power Supply Association (EPSA)
to participate in the Senate Environment and Public Works Committee
stakeholder meeting to discuss proposed multi-pollutant legislation.
EPSA and its member companies, who are participants in the competitive
electric power market, look forward to participating in the meeting.
EPSA is a trade association that represents the competitive power
supply industry including generators and marketers. The competitive
power supply industry owns at least 33 percent of the existing
generation capacity in the United States and has announced plans to
build over 300,000 MWs of new generation. While most new generation
facilities are fueled by natural gas, existing competitive generation
burns all fuel types including renewables, coal and nuclear.
EPSA members recognize environmental policy has a significant
impact on energy resources and investments. EPSA supports environmental
legislation that takes advantage of competitive and market-based
forces. Environmental policies should recognize and value the
significant contribution to environmental quality improvement made by
newer and cleaner sources of power generation and remove environmental
legal and regulatory barriers to full and fair competition among these
generators. At the same time, environmental policies should recognize
and value the importance of existing facilities' contributions to
national environmental improvements and their role in maintaining the
reliability of the electric power system . As requested, EPSA provides
the following principles and comments in advance of the stakeholder
meeting:
I. EPSA Supports a Multi-pollutant Approach
EPSA member companies are now making and will continue to make
large investments in pollution control equipment. Well-crafted
legislation will enhance environmental compliance planning by companies
and provide greater energy and environmental investment certainty while
achieving air quality goals. Multi-pollutant legislation must include
consideration of the following:
A multi-pollutant approach that is flexible, market-based
and recognizes the importance of fuel diversity in preserving the
nation's energy security,
Reductions in NOx, SO2, and mercury (Hg) based
upon careful consideration of national human health and air quality
needs. Implementation schedules must allow time for project planning
and construction and emission limitations must be within the bounds of
technological capabilities,
Inclusion of a CO2 program to achieve the goal
of enhanced planning and investment certainty needs to be part of the
discussion. Any CO2 program, whether mandatory or voluntary,
must be flexible in its application, and market-based,
Recognition of environmental performance improvements
already made under the 1990 Clean Air Act.
II. EPSA Supports a Market Based Trading Approach
The cap-and-trade approach captures the power of free markets while
satisfying air quality goals in a flexible, least-cost way. Appropriate
caps for NOx, SO2 and Hg must be established using the
principles stated above. EPSA particularly emphasizes that any
allowance trading system must provide for ready entry into the system
by new, competitive power generation facilities. Trading systems will
work best if allowance credits are:
Broadly and fairly distributed,
Available to new participants, and
Freely traded in a robust market.
EPSA members have not reached agreement on the issue of a cap for
CO2, but do agree and support trading as a key element of a
CO2 program. Any CO2 program must:
Maximize trading flexibility, allowing trading or
averaging within a company's portfolio of assets, both domestically and
internationally, and
Allow trading with other entities, and include offsite
carbon offsetting or sequestration projects, both domestically and
internationally.
III. EPSA Supports New Source Review Reform
Appropriate national caps for NOx, SO2 and Hg must
consolidate and replace the current and future requirements for
numerous national and regional programs such as regional haze,
PM2.5, ozone transport and Hg Maximum Achievable Control
Technology (MACT), as well as allow for reform of the New Source Review
(NSR) process. NSR reform must include:
Elimination of burdensome NSR requirements at existing
power facilities,
Replacement of BACT/LAER review with a modern new source
standard that provides for expedited permitting of new, clean
technology power facilities,
Elimination of current offset requirements under any cap-
and-trade system requirements.
IV. EPSA Supports a Legislative Safe Harbor Period
The goal of planning and investment certainty is only achieved if
multi-pollutant legislation is comprehensive in scope and provides a
safe harbor from further national and regional air emission reduction
requirements for a period of 15 years or more.
The Electric Power Supply Association recognizes the importance of
multi-pollutant legislation and offers the abovementioned principles
and comments in support of a successful stakeholder meeting and
ultimate legislation. EPSA and its member companies recognize that
there are many complexities that surround each of the issues discussed
above. We stand ready to assist you as you work toward successful
development of a national multi-pollutant strategy.
__________
Statement of Energy for a Clean Air Future
I. Goals
Set emission reduction targets that respond to current
and anticipated air quality needs
Protect the environment while preserving the diverse fuel
mix required for future economic growth and energy security
Create a stable and predictable climate for capital
investment in the energy sector
Replace the multiple deadlines and requirements that now
apply to the power sector with clear long-term emission reduction goals
Implement emission reductions in phases to avoid
jeopardizing reliability and allow development of advanced emission
control technologies
Rely on cost-effective trading programs as opposed to
source-specific technology mandates
II. Three-Pollutant Framework
Require a 62 percent nationwide reduction in annual NOx
emissions, implemented in two phases (2004 & 2010) under a national
cap-and-trade program (2.35 million ton cap)
Require a 50 percent nationwide reduction in
SO2 emissions in two phases (2008 and 2012) building on
framework of the Title IV national trading program (4.5 million ton
cap)
Reduce mercury emissions in two phases--30 percent by
2010 and a minimum of 50 percent by 2013, with deeper reductions if
warranted by independent review, implemented through a national system
of tradable mercury allowances
Eliminate NSR/PSD program for existing generating units
and control new units with NSPS-type guidelines requiring cost-
effective controls reflecting energy and environmental impacts
Assure that national programs for NOx, SO2 and
mercury will be the exclusive vehicle for national and regional
controls for these pollutants, superseding existing authorities
Create ``safe harbor'' for new reduction requirements
until 2015
III. CO2
Set fuel-and-technology specific benchmarks for new units
(no overall emissions target)
Set fuel-and technology-specific heat utilization
benchmarks for existing units or allow plants to use emissions baseline
benchmarks
Implement program through flexible market-based systems
with the option of generating credits for cost-effective on-system or
off-system reductions of CO2 or other GHGs
Assuming full industry participation, program would
result in flattening rate of CO2 emissions growth and
addressing emissions from power plants (e.g., stabilizing existing
units at 2000 levels by 2010)
To encourage voluntary industry participation, provide
safe harbor protection, baseline protection and credit for early action
__________
Statement of Environmental Defense
Environmental Defense welcomes the opportunity to participate in
the stakeholder session convened by the Environment and Public Works
Committee. We believe that the case for a comprehensive effort to
address utility air emissions is compelling. Power plant emissions
contribute critically to the problems of climate change, acid
deposition, haze and air quality degradation in the West and non-
attainment of the health-based standards for ground-level ozone and
fine particles. A comprehensive approach must mandate aggressive
reductions in all power plant emissions that lead to these crucial
threats to human health and the environment. For that reason,
Environmental Defense has endorsed the Jeffords-Lieberman power plant
legislation.
Mandatory carbon dioxide reductions are essential
A comprehensive effort to address utility emissions in the United
States must include provisions to cap and reduce emissions of carbon
dioxide, the principal anthropogenic greenhouse gas. The United States
is legally bound to observe the objective of ``stabilization of
greenhouse gas concentrations in the atmosphere at a level that would
prevent dangerous anthropogenic interference with the climate
system.''\1\ The Third Assessment Report of the Intergovernmental
Panel on Climate Change (IPCC), released earlier this year, states that
``most of the observed warming over the last 50 years is likely to have
been due to the increase in greenhouse gas concentrations,'' and
estimates that warming in the coming century will reach 1.4-5.8 C if
emissions are not limited. IPCC finds that warming of between 1 and 2
degrees C is likely to pose high risks to unique and threatened
ecosystems, and to lead to increases in the risk of extreme climate
events.\2\ This translates to an atmospheric concentration target of
approximately 450 ppm CO2-equivalent. In the view of
Environmental Defense, the U.S. electricity sector, as one of the
largest emitting sectors in the nation that is the world's largest
emitter of CO2, thus has an undeniable responsibility to
make substantial CO2 reductions to assist in meeting this
target. Imposing this obligation on this sector is one of the most
cost-effective policies the United States can adopt to meet its current
treaty obligations. To date, however, notwithstanding the large number
of voluntary efforts to achieve emissions reductions in the sector,
total CO2 emissions from electric utilities have continued
to rise. Environmental Defense therefore urges enactment of legislation
that places a strong, mandatory cap on CO2 emissions from
this sector and requires reductions to levels that are consonant with
the goal of preventing dangerous interference in the climate system.
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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
SO4^2-in wet/bulk deposition and surface water.
Emissions of NOx and concentrations of NOx in wet/bulk
deposition and surface waters show no increase or decrease since the
1980's.
There is considerable uncertainty in estimates of
NH3 emissions, although atmospheric deposition of NH4' is
important for forest management and stream NOx loss.
Acidic deposition has accelerated the leaching of base
cations from soils, delaying the recovery of ANC in lakes and streams
from decreased emissions of SO2. At the HBEF, the available
soil Ca pool appears to have declined 50 percent over the past 50
years.
Sulfur and N from atmospheric deposition have accumulated
in forest soils across the region. Slow release of these elements from
soil has delayed recovery of lakes and streams.
Acidic deposition has increased the concentration of
toxic forms of Al in soil waters, lakes and streams.
Acidic deposition leaches cellular Ca from red spruce
foliage, which makes trees susceptible to freezing injury, leading to
over 50 percent mortality of canopy trees in some areas of the
Northeast.
Extensive mortality of sugar maple in Pennsylvania has
resulted from deficiencies of Ca² and Mg².
Acidic deposition has contributed to the depletion of these cations
from soil.
41 percent of lakes in the Adirondacks and 15 percent of
lakes in New England exhibit chronic and/or episodic acidification. 83
percent of these impacted lakes are acidic due to atmospheric
deposition.
There have been modest increases in the ANC of surface
waters in New England and no significant improvement in the Adirondack
and Catskill regions with recent decreases in atmospheric S deposition.
Acidification of surface waters results in a decrease in
the survival, size and density of fish, and loss of fish and other
aquatic biota from lakes and streams.
Further, it is anticipated that recovery from acidic deposition
will be a complex, two-phase process in which chemical recovery
precedes biological recovery. The time for biological recovery is
better defined for aquatic than terrestrial ecosystems. For acid-
impacted aquatic ecosystems, it is expected that stream
macroinvertebrate and lake zooplankton populations would recover in 3-
10 years after favorable chemical conditions were re-established, and
fish populations would follow. For terrestrial ecosystems, trees would
probably respond positively to favorable atmospheric and soil
conditions over a period of decades.
Indicators of chemical recovery (soil percent base saturation, soil
Ca/Al ion ratios and surface water ANC) were used to evaluate ecosystem
response to proposed policy changes in SO2 emissions.
Projections using an acidification model (PnET-BGC) indicate that full
implementation of the 1990 CAAA will not result in substantial chemical
recovery at the HBEF and many similar acid-sensitive locations. While
uncertainties remain, our analysis indicates that current regulations
will not adequately achieve the desired ecological outcomes of the 1990
CAAA. These desired outcomes include: increases in the ANC of lakes and
streams, improvements in the diversity and health of fish populations,
decreases in the degradation of forest soil and stress to trees. Model
calculations indicate that the magnitude and rate of recovery from
acidic deposition in the northeastern US is directly proportional to
the magnitude of emission reductions. Model evaluations of policy
proposals calling for additional reductions in utility SO2
and NOx emissions, year-round emission controls, and early
implementation (2005) indicate greater success in facilitating the
recovery of sensitive ecosystems and accomplishing the goals of the
Clean Air Act than current 1990 CAAA targets. Note that until
transportation emissions of NOx are curtailed, there will be increased
potential for a condition where improvements in acidic deposition from
SO2 controls by utilities will be offset somewhat by NOx
emissions. Specific emission reductions targets should be based on
clear goals for the desired extent and schedule of recovery of
sensitive aquatic and terrestrial ecosystems which are consistent with
the goals of the Clean Air Act.
Environmental monitoring is critical to national environmental
policy. Monitoring of atmospheric deposition and surface water
chemistry provides the only quantitative means of assessing the
efficacy of State and Federal policy. There are several national
monitoring networks that provide data to scientists and policymakers
and need greater security and support. Five specific networks require
increased Federal funding to stabilize, expand and/or update the
monitoring network.
1. National Atmospheric Deposition Program (NADP)--The NADP program
is a successful inter-agency network that monitors wet deposition of
sulfate and nitrate associated with fossil fuel emissions. The USGS is
the lead Federal agency and the EPA plays a strong supporting role. The
coverage and baseline funding for this program are adequate to ensure a
high-quality network. However, as the oldest network in the United
States, the system needs substantial modernization and a modest number
of new sites.

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

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

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

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

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

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

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

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

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

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

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

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

__________
Statement of NESCAUM
Northeast States agree that Federal efforts to achieve integrated
reductions in multiple power plant pollutants should be implemented on
an annual, output-basis with caps to limit overall pollutant levels.
Possible reduction targets and timeframes are identified below. To ease
comparison with other proposals they are presented in terms of a cap
target and equivalent output-based emissions rate. However, this
presentation is not intended to preclude discussion of dynamic or
declining caps, a concept that we continue to explore, or of more
aggressive targets than those described here.
SO2 Target: National annual cap of approximately 4
million tons by 2004-7, with a further reduction to 2 million tons in
the 2009-12 timeframe. These caps translate to average emissions rates
of approx. 3.0 and 1.5 lbs/MWh, respectively and represent a 55 to 78
percent reduction from eventual 8.9 million ton Acid Rain cap.
Implications of existing allowance ``bank'' must be addressed in
developing SO2 requirements.
NOx Target: National annual cap of approximately 2 million tons by
2004-7, with a further reduction to 1.3 million tons in the 2009-12
timeframe. These caps translate to average emissions rates of about 1.5
lb/MWh and 1.0 lb/MWh, respectively and represent a 70 to 80 percent
reduction from current annual emissions of approx. 7 million tons. The
2 million ton cap can be achieved by annualizing NOx SIP Call
requirements.
Mercury Target: National reductions greater than 70 percent by
2004-7 with a reduction goal of 85-95 percent by 2009-12. Further work
needed to determine how to set standards that will achieve desired
goals and to explore feasibility/acceptability of using market
mechanisms to implement mercury reductions.
CO2 Target: Return power sector emissions to 1990 levels
by 2010 with an additional reduction of at least 10 percent to be
achieved by 2020.\1\ Additional work is needed to explore possible
role of flexibility mechanisms (e.g., trading, early action, off-sector
credits, etc.), cost caps, implications of recent international
developments, etc.
---------------------------------------------------------------------------
\1\The Conference of the New England Governors and Eastern
Canadian Premiers have committed to the long-term goal of reducing
society-wide emissions of greenhouse gases by 75-85 percent. To meet
these targets, it is likely that declining caps will need to be
employed.
---------------------------------------------------------------------------
Other Power Plant Pollutants: In the interests of regulatory
certainty and comprehensiveness, other important power plant
pollutants--such as primary particulate matter, other air toxics and
carbon monoxide--may need to be addressed as part of multi-pollutant
legislation. NE States are exploring potential options/targets
appropriate to these pollutants.
Other Key Issues
As indicated above, a number of details concerning each of the
targeted pollutants must still be addressed. In addition, the Northeast
States are coordinating to develop specific recommendations in four
broad issue areas likely to be closely linked to the multi-pollutant
debate:
Interaction of multi-pollutant legislation with New
Source Review (NSR), Prevention of Significant Deterioration (PSD) and
other existing or pending regulatory programs (e.g., BART, mercury MACT
determination, etc.). Under no circumstances should new Federal
legislation obstruct or limit enforcement actions undertaken to remedy
violations of existing NSR requirements.
Interaction of Federal multi-pollutant requirements with
existing or future State requirements. Because States bear ultimate
responsibility for meeting ambient air quality standards and protecting
public health, any new Federal legislation must maintain the full scope
of existing State authority to adopt more protective requirements.
Addressing local pollution concerns and their
implications for the design of future regulatory requirements (such as
trading). States must retain the authority to respond as they deem
necessary to remedy adverse local impacts. Provisions must also be
included that require a Federal response to remedy local impacts of an
interstate nature.
Ability to include additional provisions to address long-
term clean energy needs, including: ensuring the reliability of power
grids, promoting clean distributed generation, encouraging renewable
energy resources, continuing demand-side management, promoting combined
heat and power, and supporting systems benefits programs.
__________
Statement of Nisource, Inc.
NiSource, Inc. appreciates the opportunity to participate as an
observer in the Stakeholder Meeting organized by the Senate Environment
and Public Works Committee and to submit a brief statement of our views
concerning goals and principles to include in multi-emission
legislation. NiSource, a Fortune 300 energy company, is an investor
owned public utility which is engaged in the businesses of generating
electricity (primarily by combustion of coal) and distributing that
electricity in Indiana, of transporting and distributing natural gas in
numerous States in the Midwest, Southeast and Northeast, and of
providing combined heat and power energy systems to commercial and
industrial customers.
NiSource will support legislation that promotes wise energy and
environmental objectives. Aggressive targets for reduction of emissions
from the electric generating sector must be coupled with aggressive
fostering of additional energy reliability and efficiency. Market
mechanisms should be flexible to optimize investments in both
objectives. We strongly believe that one of the best methods to achieve
both environmental and energy policy goals is through maximizing the
efficiency with which energy products are produced in this country. We
have been actively seeking ways to enhance the efficiency of our coal-
fired electric generating facilities and have also been active in
developing extremely clean and efficient combined heat and power
projects.
The current Clean Air Act regulatory regime is not conducive to,
indeed in some ways is positively hostile to, generation efficiency.
For example, current emissions standards often result in providing the
quickest permitting and least stringent emissions requirements to
energy projects that use fuel least efficiently. This is the opposite
of what we believe is sound policy, and we urge that legislation set
multi-emission targets and distribute allowances on an output basis,
that recognizes the pollution prevention aspects of energy efficiency.
We also support the view that new source review discourages
efficiency enhancements at existing facilities. However, we think that
new source review of new facilities has even greater negative impacts
on efficiency. It would not make sense, in our view, to foster
efficiency modifications of existing sources while leaving intact a
system that discourages construction of new clean and highly efficient
sources.
Under current law a simple cycle gas peaking plant built on a
greenfield can completely avoid Federal new source review requirements.
At the same time, a far more efficient combined heat and power project
planned for an urban area where the power is most needed and where it
can be supplied without line losses and without exacerbating
transmission bottlenecks, must run a long and uncertain Federal new
source review gauntlet. Such new source review is very resource
intensive, not only for the applicant, but also for resource
constrained government agencies. Yet, under a system of emission caps,
which is the most likely format of any multi-emission legislation, this
long, resource intensive and discouraging process produces no overall
reduction in emissions. There is legitimate concern about the local
impacts of new sources, but such concerns can certainly be dealt with
effectively without having to cling to the cumbersome and inefficient
new source review process.
Some persons disparage concerns over new source review for new
sources by pointing to the large number of new power plant projects
that have been announced. Yet the impressive number for announced
capacity reflects in large part what can be more easily permitted-such
as greenfield peaking units. Even so, many of these announced projects
will never see the light of day. The announced projects will also fail
to adequately address the objective of optimizing fuel efficiency,
solving transmission congestion in urban areas, and providing cleaner
base-load energy.
More importantly, the burdens of new source review fall unequally
on projects depending on size. Smaller projects, often connected with
new construction, have far tighter margins for delay and uncertainty.
Thus, the current list of announced power plant projects (some of which
can avoid new source review as ``synthetic minors'') may well mask the
fact that the smaller highly efficient combined heat and power
projects, and other environmentally desirable projects, are not being
pursued due to the disincentives presented by new source review.
The nation will benefit from multi-pollutant legislation that
provides both regulatory certainty and the flexibility to invest in
sustainable efficient energy projects.
__________
Statement of Ohio EPA
Mr. Chairman, Thank you for the opportunity to speak to you today.
My name is Christopher Jones and I am Director of the Ohio
Environmental Protection Agency. As Director of Environmental
Protection of a large industrial State, there are many challenges in my
position. I welcome the opportunity to participate today so that our
viewpoint will be considered prior to Congress initiating debate on the
issue of multi-pollutant control for the utility industry.
Even after thirty years of various controls and standards, power
plants remain the largest emitting category of sources in our State. At
this time, there is an opportunity for Congress to move forward with a
control regime that will substantially reduce emissions from power
plants over the long term. Ohio EPA supports the concept of a multi-
pollutant control program to cover three pollutants: sulfur dioxide,
nitrogen oxides and mercury.
In Ohio, there has been a substantial reduction in emissions of
sulfur dioxide over the past few years. However, despite these
reductions, sulfur dioxide remains a pollutant of concern not due to
its primary effect, (Ohio is within the ambient air quality standards
for sulfur dioxide), but as a result of the secondary effect of sulfur
dioxide emissions on fine particles and visibility. It is generally
believed that sulfate particles make up a significant portion of the
fine particulates in the eastern United States. It is likely that
reductions in sulfur dioxide emissions, possibly along with other
pollutants, will be needed to meet the PM2.5 ambient air
quality standard.
For nitrogen oxides, there is a current plan in place to
substantially reduce emissions by means of the NOx SIP Call and the US
EPA Section 126 action. These reductions will require expenditures of
significant capital to control this pollutant. Many plants will be
upgraded to emit NOx at levels that would be expected from a new coal
boiler and we believe that any additional controls beyond the NOx SIP
Call will need to be carefully reconciled with the SIP Call.
Finally, there remains excessive loadings of mercury into many of
the streams and lakes in the State. Ohio has a statewide fish advisory
in effect as a result of mercury in streams. The cumulative effect of
the release of mercury into the environment from multiple media has
lead to this condition, with air deposition being an important
component. Additional legislation has the potential to lessen the
impact of mercury deposition on the aquatic environment and should be
included in the package.
The level and timing of the control are an important piece in any
legislative package. In the NOx SIP Call rules drafted by Ohio EPA, we
provided sources with additional time to comply with the NOx SIP Call
requirements if there was a commitment to reduce sulfur dioxide
emissions by 50 percent and mercury by 60 percent along with complying
with the NOx SIP call by 2007. We believe that this level of control
can be reasonably achieved within this timeframe. However, additional
levels of control will take a longer time to achieve. Also, Ohio EPA
believes that the legislation should focus on electric generating
stations. Although some industrial facilities have large industrial
boilers, it has been our experience that the combined effect of the
emissions from industrial sources are not significant enough to warrant
inclusion of industrial boilers in any bill.
Ohio EPA further supports the concept of a multi-pollutant control
plan in order to provide for more regulatory certainty for the utility
industry. If Congress can develop legislation that provides clear,
achievable targets, the industry will be able to develop a
comprehensive program to reduce emissions with the certainty that there
will not be future regulatory standards that will need to met with
respect to the traditional criteria pollutants. As part of the
implementation of the visibility requirements, many utilities will need
to install Best Available Retrofit Technology (BART). A multi-pollutant
control bill should, by the end of the implementation phase, bring the
existing fleet of utility boilers up to grade with standards that would
meet the requirements to install BART. The level of control that is
decided for the various pollutants is a critical factor in the ability
to achieve additional reductions and continue the use of the domestic
fuel supply of coal. Any limits that are ultimately developed should be
reasonably achievable by the majority of the existing coal fired power
plants in this country. It would not be prudent to set standards at
such a level that for practical purposes there is a widespread
conversion to natural gas in the electric generating capacity in this
country.
At this time, Ohio EPA does not believe that any multi-pollutant
control bill should include carbon dioxide. The fact is that this
country has not agreed to the Kyoto Protocol or any other binding
agreement to reduce carbon dioxide and other greenhouse gases. Until
that occurs, it would be speculative to suggest that a certain level of
control of greenhouse gases should be achieved. That being said, Ohio
EPA supports energy efficiency and believes that energy efficiency
credits can be one mechanism to provide an incentive to obtain
emissions in both criteria pollutants and greenhouse emissions. Ohio
EPA would support some modest incentives for energy efficiency projects
from both the user and producer side that would result in lower
electrical demand or that would result in more electricity being
produced for the same amount of fuel burned. In either case, there
would be a reduction in emissions in criteria pollutants and a
secondary benefit of the reducing the emissions of greenhouse gases.
Thank you for your attention and I look forward to participating in
the remainder of the discussions on multi-pollutant controls.
__________
Statement of U.S. Public Interest Research Group
U.S. PIRG strongly supports the provisions of the Clean Power Act
(S. 556). We believe that this legislation strikes the appropriate
balance between protecting public health and the environment, and doing
so in a manner that affords plant owners ample time and flexibility.
The following principles underlie our support for the Clean Power Act
or any other power plant emission reduction policy:
Comprehensive legislation must address the impacts of all major power
plant pollutants
U.S. PIRG would oppose an approach that omits any of the four major
power plant pollutants, including nitrogen oxides, sulfur dioxide,
mercury and carbon dioxide.
Clean Power Act's emission reduction targets are warranted
Pollution from the electric power sector is taking a very serious
toll on public health and the environment. The severity of these
impacts warrant reductions at least as deep as those proposed in the
Clean Power Act, and within the timeframe proposed in the Act. For
example:
Premature death: Sulfur dioxide from power plants forms
fine particulate pollution (soot) in the air, which is responsible for
an estimated 30,000 premature deaths each year. By weakening the
respiratory system, soot is taking months and even years off of the
lives of tens of thousands of Americans. Two thirds of all sulfur
dioxide pollution emitted nationwide comes from power plants.
Asthma Attacks and ER visits: Nearly half of the U.S.
population lives in areas that do not meet basic health standards for
ground-level ozone, commonly called smog. Scientists estimate that smog
triggers six million asthma attacks and sends 159,000 Americans to
hospital emergency rooms each year. One-quarter of the nitrogen oxide
(NOx) pollution that causes formation of smog comes from electric power
plants.
Mercury contamination: Thousands of lakes and streams in
40 States have been posted with warnings not to eat the fish due to
mercury contamination. Consumption of these fish can cause neurological
problems, including developmental retardation in fetuses and young
children. The biggest source of mercury contamination is from the
smokestacks of coal-burning power plants, which are responsible for 32
percent of human caused mercury in the environment.
Global warming: More than 2,500 of the world's leading
climate experts have concluded that the planet is getting warmer due to
pollution from burning fossil fuels such as coal. If this continues,
scientists predict more violent weather, the northward spread of
insect-borne disease, rising sea levels, and widespread disruption of
ecosystems. Electric power plants are responsible for 40 percent of the
nation's total emissions of carbon dioxide (CO2).
CO2 is the main cause of global
The Clean Power Act provisions must not replace any other provision
of the Clean Air Act, nor should the Clean Power Act be accompanied by
language exempting any entity from applicability of the current law.
The four-pollutant emissions policy for the electric power sector
should supplement rather than replace existing obligations to reduce
emissions from power plants. No entity should be afforded an exemption
from any exiting Clean Air Act program, including but not limited to
New Source Review (NSR), prevention of significant deterioration (PSD),
the National Ambient Air Quality Standards (NAAQS), the regional haze
program, and the maximum achievable control technology (MACT) standards
for air toxics.
Health of people living near power plants must be protected
There is considerable and mounting evidence that power plant
pollution has its greatest impact on nearby communities. Consequently,
an acceptable regulatory scheme for power plant pollution must ensure
that every plant eventually meet the standard that reflects the
emission rate achievable through the use of the best available control
technologies. The Clean Power Act achieves this objective by requiring
that every covered facility begin to meet these tighter emission
standards at the time of its 30th year of operation. A regulatory
regime that simply set a national cap and allowed individual plants to
operate indefinitely with outmoded pollution controls would fail to
adequately protect public health.
With respect to mercury and other air toxics, we believe that any
level of emission trading could produce adverse health impacts for
communities near plants that failed to adopt the most aggressive
mercury reduction strategy. We therefore oppose emission trading to
meet the emission reduction targets for mercury or other air toxics.
__________
Statement of Resources for the Future
Since 1952, scholars at Resources for the Future (RFF) have
published more than 10,000 peer-reviewed articles. To gain more
information; to discuss the methodology, analytical models, and/or
assumptions upon which the points below are based; or to reach an RFF
scholar, please contact the Communications Department at Resources for
the Future, at 202-328-5188 or on the Web at www.rff.org.
auction of emission allowances would dramatically reduce the cost of
carbon reductions
The success of the sulfur dioxide emission-allowance trading
program\1\ provides a justification for using a cap-and-trade approach
to limit emissions of carbon and other pollutants from electricity
generators. President Bush has spoken about the need for market-based
approaches to reducing carbon emissions. Several legislative proposals
now under consideration have suggested that carbon policies should
first be applied to the electricity industry.\2\ A critical issue in
the design of a trading program is how emission allowances would be
distributed at the start.
---------------------------------------------------------------------------
\1\The sulfur dioxide emission-allowance trading program was
created by Title IV of the 1990 Clean Air Act Amendments.
\2\Even in the context of an economywide carbon policy, the
electricity sector will play an important role. This sector is
responsible for one-third of U.S. carbon emissions, but is likely to be
responsible for close to three-quarters of domestic carbon reductions
under any cost-effective U.S. policy to combat global warming. Impacts
of the Kyoto Protocol on U.S. Energy Markets and Economic Activity,
U.S. Energy Information Administration (US EIA), 1998. (SR/OIAF/98-03),
October.
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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).
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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\
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\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.
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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).
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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
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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\
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\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.
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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\ .
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\3\40 CFR Sec. 51.121. July 1, 2001, Edition.
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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.
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\4\SL 1999-328.
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__________
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.
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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.
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\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.
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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 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 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 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\
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\1\USEPA, October 31, 2001, ``Economic Analysis of a Multi-Emission
Strategy,'' at 24-28. (``EPA J-L Study'')
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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.
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\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.
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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.''
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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.
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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.
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\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.
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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.
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\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\
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\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
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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\
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\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
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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.
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\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.
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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.
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\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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Arthur, W. Brian. 1990. ``Positive Feedbacks in the Economy.'' In
Scientific American. February. vol. 262, no. 2. pp. 92-98.
DeCanio, Stephen. 1993. ``Barriers within firms to energy-efficient
investments.'' Energy Policy. vol. 21, no. 9. pp. 906.
DeCanio, Stephen J. 1998. ``The efficiency paradox: bureaucratic and
organizational barriers to profitable energy-saving investments.''
Energy Policy. vol. 26, no. 5. April. pp. 441-454.
EPRI, Electric Power Research Institute. 1988a. Implicit Discount Rates
in Residential Consumer Choices: Vol.]: Investments in Conservation
Measures. EPRI. EM-5587, Project 2547-1. February.
EPRI, Electric Power Research Institute. 1988b. Implicit Discount Rates
in Residential Consumer Choices: VoLl: Investments in Efficient
Appliances. EPRI. EM-5587, Project 2547-1. February.
Eto, Joe, Edward Vine, Leslie Shown, Richard Sonnenblick, and Chris
Payne. 1994. The Cost and Performance of Utility Commercial
Lighting Programs. Lawrence Berkeley Laboratory. LBL-34967. May.
Eto, Joseph H., Suzi Kito, Leslie Shown, and Richard Sonnenblick. 1995.
Where did the money go? The--cost and performance of the largest
commercial sector DSM programs. Berkeley, CA: Lawrence Berkeley
Laboratory. LBL-38201. December.
Gately, D. 1980. ``Individual Discount Rates and the Purchase and
Utilization of EnergyUsing Durables: Comment.'' Bell Journal of
Economics and Management. vol. 11, no. 3 Spring. pp. 373-4.
Goulder, Lawrence H., and Stephen H. Schneider. 1999. ``Induced
technological change and the attractiveness of CO2
abatement policies.'' Resource and Energy Economics. vol. 21, no.
pp. 211-253.
Greening, Lorna A., Alan H. Sanstad, and James E. McMahon. 1997.
``Effects of Appliance Standards on Product Price and Attributes:
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Hausman, J.A. 1979. ``Individual Discount Rates and the Purchase and
Utilization of Energy-Using Durables.'' Bell Journal of Economics
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Howarth, Richard B., and Bo Andersson. 1993. ``Market Barriers to
Energy Efficiency.'' Energy Economics. vol. 15, no. 4. October. pp.
262-272.
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.
``Editors'' Introduction in Huntington, Sanstad and Schipper, Eds.,
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22, no. 10. October. pp. 795-797.
Interlaboratory Working Group on Energy-Efficient and Clean-Energy
Technologies. 2000. Scenarios for a Clean Energy Future. Oak Ridge,
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Berkeley National Laboratory. ORNL/CON476 and LBNL-44029. November.
Koomey, Jonathan. 1990. Energy Efficiency Choices in New Office
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
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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.
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Koomey, Jonathan, Alan H. Sanstad, and Leslie; J. Shown. 1996.
``Energy-Efficient Lighting: Market Data, Market Imperfections, and
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Krause, Florentin, Eric Haites, Richard Howarth, and Jonathan Koomey.
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`Volume II, Part 1. El Cerrito, CA: International Project for
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Krause, Florentin, Ed Vine, and Sunita Gandhi. 1989. Program Experience
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Price. 1992. Electricity End-Use Efficiency. Experience with
Technologies, Markets, and Policies Throughout the World. Lawrence
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are Option Values in Energy-Efficiency Investments?'' Energy
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Sanstad, Alan H., and Richard Howarth. 1994. ``'Normal'' Markets,
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to the Future: A Note on Long-Range Energy Price and Quantity
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Webber, Carrie A., Richard E. Brown, and Jonathan G. Koomey. 2000.
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______

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Question 2. Some of your panel have expressed concern about the
local impacts of trading. How do we run a national cap-and-trade
program efficiently without jeopardizing local environmental quality
and public health?
Response. The Act's 1990 acid rain control program provides the
answer to this question. Under that program large reductions in sulfur
dioxide have been achieved at great savings in compliance costs
compared to pre-enactment estimates. Local environmental quality and
public health have not been jeopardized by the compliance flexibility
in the national cap-and-trade program because the Act's existing
programs to protect local air quality were preserved. Contrary to
claims now being made, preserving the Act's local protection programs
under the acid rain program has not conflicted with the efficient
operation of the national trading system. The compliance cost savings
of the flexible national cap program have been achieved while
maintaining compliance with the critical local protection requirements
of the Act.
For the three pollutants for which trading is permitted under S.
556, NRDC expects that efficient trading systems will prosper while the
Act's current requirements protect local air quality. A number of
America's remaining air pollution problems, such as fine particles,
ozone smog, and acid rain, and regional haze, have a large regional
component in addition to the impacts of local sources. The national
caps in S. 556 will help reduce the regional component of these
pollution problems. By allowing the market an opportunity to select the
most efficient pattern of reductions to address the regional
contribution to our pollution problems, the national caps will reduce
the overall compliance costs of achieving our air quality objectives,
compared to a system that relies much more heavily on source-specific
emission limits on existing sources to meet those objectives. Of
course, for carbon dioxide, there is no local air quality concern from
emission sources and S. 556's trading program for this pollutant can
operate without the need for additional measures to address.
__________
Statement of Ronald J. Tipton, National Parks Conservation Association
Mr. Chairman and members of the committee, I am Ronald J. Tipton,
Senior Vice President of Programs at the National Parks Conservation
Association (NPCA). NPCA is America's only private, nonprofit advocacy
organization dedicated solely to protecting, preserving, and enhancing
the National Park System. NPCA was founded in 1919 and today has more
than 425,000 members who care deeply about the well being of our
national parks, including protection of Class I air quality and related
values in 48 national parks. NPCA's president since 1998, Thomas
Kiernan, served in the first Bush Administration's Environmental
Protection Agency (EPA), and helped craft the agreement to reduce air
pollution from the Navajo generating station in order to protect air
quality related values in Grand Canyon National Park. Thank you for the
opportunity to testify today on S. 556, the Clean Power Act of 2001.
While we greatly appreciate the opportunity to appear before you
today, we are compelled to note that the last oversight hearing
specifically to address impacts of air pollution on national park units
was held 16\1/2\ years ago in May 1985 by the House Subcommittee on
National Parks and Recreation. We respectfully request that this
committee schedule a hearing in the near future dedicated to impacts of
air pollution on America's national parks.
For three decades the nation has struggled with how to implement
Federal legislation to achieve national air quality goals. The good
news is that we have achieved a certain degree of success in this
effort; there have been notable and undeniable improvements in air
quality for many major metropolitan areas; automobiles are much cleaner
and more fuel efficient than before Federal emission limits were
improved; and many power plants, factories, and manufacturing
facilities have also reduced their emissions.
Air pollution continues to harm national parks
At the same time, however, our great national parks--the places in
America that are expected to foster some of the best air quality and
most spectacular vistas--have in many cases experienced declining air
quality despite the Clean Air Act mandates.
In fact, it would surprise Americans to learn that many of our
beloved national parks are suffering from some of the highest levels of
air pollution in the country. The 1916 statute creating the National
Park System states that the purpose of the National Park Service is to
``conserve the scenery and the natural and historic objects and the
wild life therein--and leave them unimpaired for the enjoyment of
future generations.''\1\ While visibility impairment is widespread
throughout the park system, scenic views are not the only resource at
risk. The same pollutants that reduce visibility also contribute to
thousands of premature human deaths each year. Acid deposition hurts
natural and cultural resources. Ground level ozone, or smog, threatens
the health of park visitors and workers, and the health of park
vegetation. Mercury deposition threatens fish and wildlife in a number
of parks. Finally, global warming impacts parks in many ways, from
rising sea level to melting glaciers to reduced biodiversity.
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\1\The National Park System Organic Act of 1916 (16 USC Sec. 1).
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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\
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\5\The Tarrance Group, statewide poll conducted for the League of
Conservation Voters Education Fund, May 6-8, 2001, p. 10.
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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\
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\6\USEPA website, www.epa.gov/globalwarming/impacts/mountains/
index.htm.
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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.
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\7\Out of Sight: Haze in Our National Parks, Clean Air Task Force
for Clear the Air, August 29, 2000.
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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.
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\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.
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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\
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\6\Abt Associates, Inc.
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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.
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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.
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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\
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\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.
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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 PricePlus^tm, Crop Revenue Coverage, Crop
Revenue CoveragePlus, Revenue Assurance, Income Protection,
MVP wheat^tm, MVP corn^tm, MVP
soybeans^tm, Crop Hail Insurance, Companion Hail Insurance,
Field Grain Fire, and Named Peril Insurance.
American Electric Power (AEP) is a multinational energy company
based in Columbus, Ohio. AEP owns and operates more than 38,000
megawatts of generating capacity, making it America's largest generator
of electricity. The company is also a leading wholesale energy marketer
and trader, ranking second in North America in wholesale electricity
and wholesale natural gas volume. AEP provides retail electricity to
more than 7 million customers worldwide and has holdings in the United
States and select international markets. Wholly owned subsidiaries are
involved in power engineering and construction services, energy
management and telecommunications.
BP p.l.c. is the holding company of one of the world's largest
petroleum and petrochemicals groups. BP's main activities are
exploration and production of crude oil and natural gas; refining,
marketing, supply and transportation; and manufacturing and marketing
of petrochemicals. BP has a growing activity in gas and power and in
solar power generation. BP has well-established operations in Europe,
North and South America, Australasia and Africa.
Calpine: Headquartered in San Jose, CA, Calpine has an energy
portfolio comprised of 50 energy centers, with net ownership capacity
of 5,900 megawatts. Located in key power markets throughout the United
States, these centers produce enough energy to meet the electrical
needs of close to six million households. Calpine was ranked twenty-
fifth among FORTUNE magazine's 100 fastest growing companies and it was
recently ranked by Business Week as the 3rd best performing stock in
the S&P 500.
Carr Futures/Credit Agricole Indosuez: Carr Futures, a subsidiary
of Credit Agricole Indosuez, is a global institutional brokerage firm
headquartered in Chicago. Carr holds memberships on all major futures
and equity markets worldwide, and consistently ranks among the largest
futures brokerage firms in the world.
CEMEX is a leading global producer and marketer of cement and
ready-mix products, with operations primarily concentrated in the
world's most dynamic cement markets across five continents. CEMEX
combines a deep knowledge of the local markets with its global network
and information technology systems to provide world-class products and
services to its customers, from individual homebuilders to large
industrial contractors.
Cinergy Corp.: Based in Cincinnati, Ohio, Cinergy Corp. is one of
the leading diversified energy companies in the United States. Its
largest operating companies, The Cincinnati Gas & Electric Company
(Ohio), Union Light, Heat & Power (Kentucky), Lawrenceburg Gas
(Indiana), and PSI Energy, Inc. (Indiana), serve more than 1.5 million
electric customers and 500,000 gas customers located in a 25,000-
square-mile service territory encompassing portions of Indiana, Ohio
and Kentucky. The interconnections of Cinergy's Midwestern transmission
assets give it access to 37 percent of the total U.S. energy
consumption. Chicago is the fourth largest city in the United States
and the Midwest's major industrial and financial center. The city is
home of world-renowned financial exchanges and international
corporations. Approximately 8 million people live in Chicago's
metropolitan area.
CMS Generation is the tenth-largest U.S.-based company developing
and operating independent power projects around the world. CMS
Generation owns interests in independent power plants totaling more
than 9,742 gross megawatts and more than 4,621 megawatts are under
construction. CMS Generation currently operates plants in 10 countries,
including the United States, India, Morocco, Argentina, Chile and
Thailand. Three of its plants--in North Africa and Australia--are the
largest independent power plants on their continents.
Cia Forca e Luz Cataguazes-Leopoldina is a 100-year old holding
company, and a major shareholder on five regional electricity-service
providers--CFLCL, CENF, CELB, SAELPA and ENERGIPE, located in four
different Brazilian states, with assets valued at U.S. $1 billion and
over 1.6 million customers. Headquartered in Cataguazes, Minas Gerais,
the company supports, among other initiatives, an extensive power
generation program, consisting mostly of hydro and combined-cycle
thermal power plants.
Ducks Unlimited--The mission of Ducks Unlimited is to fulfill the
annual life cycle needs of North American waterfowl by protecting,
enhancing, restoring, and managing important wetlands and associated
uplands. Since its founding in 1937, DU has raised more than $1.6
billion, which has contributed to the conservation of almost 10 million
acres of prime wildlife habitat in all 50 states, each of the Canadian
provinces and in key areas of Mexico. Some 900 species of wildlife live
and flourish on DU projects, including many threatened or endangered
species. DU is the leading land restoration organization in North
America and has much experience partnering with private landowners to
deliver projects. Restoration activities such as reforestation and
establishing grasslands serve to sequester carbon.
DuPont: DuPont is a science company, delivering science-based
solutions that make a difference in people's lives in food and
nutrition, health care, apparel, home and construction, electronics,
and transportation. Founded in 1802, the company operates in 70
countries and has 93,000 employees.
DTE Energy is a Detroit-based diversified energy company involved
in the development and management of energy-related businesses and
services nationwide. DTE Energy's principal operating subsidiaries are
Detroit Edison, an electric utility serving 2.1 million customers in
Southeastern Michigan, and Michigan Consolidated Gas, serving 1.2
million customers in Michigan.
Exelon Corporation is one of the nation's largest electric
utilities with approximately five million customers and more than $15
billion in annual revenues. The company has one of the industry's
largest portfolios of electricity generation capacity, with a
nationwide reach and strong positions in the Midwest and Mid-Atlantic.
Exelon distributes electricity to approximately five million customers
in Illinois and Pennsylvania and gas to 425,000 customers in the
Philadelphia area. The company also has holdings in such competitive
businesses as energy, infrastructure services and energy services.
Exelon is headquartered in Chicago.
FirstEnergy, headquartered in Akron, Ohio, is a registered public
utility holding company whose subsidiaries have annual revenues of more
than $12 billion, and electricity sales of approximately 124 billion
kilowatt-hours. Its seven electric utility operating companies--Ohio
Edison, The Cleveland Electric Illuminating Company, Toledo Edison,
Metropolitan Edison, Pennsylvania Electric, Pennsylvania Power and
Jersey Central Power & Light--comprise the nation's fourth largest
investor-owned electric system, based on serving 4.3 million customers
in a 36,100-square-mile service area that stretches from the Ohio-
Indiana border to the New Jersey shore. FirstEnergy subsidiaries and
affiliates provide a wide range of energy and energy-related products
and services, including the generation and sale of electricity;
exploration and production of oil and natural gas; transmission and
marketing of natural gas; mechanical and electrical contracting and
construction; energy management; and telecommunications.
Ford Motor Company is the world's second largest automotive
company. Its Automotive operations include: Ford, Mercury and TH!NK
brands; wholly owned subsidiaries Volvo, Jaguar, Aston Martin and Land
Rover; Mazda (33 percent ownership); and Quality Care and Kwik-Fit.
Ford Financial Services, providing automotive financing and other
services, and The Hertz Corporation, providing car rental services, are
the other major components of Ford Motor Company. Ford's vision is to
become the world's leading consumer company for automotive products and
services. Ford Motor Company cares about preserving the environment for
future generations, and is dedicated to providing ingenious
environmental solutions that will position them as a leader in the
automotive industry of the 21st century and contribute to a sustainable
planet.
GROWMARK, Inc.: GROWMARK, headquartered in Bloomington, Illinois,
is a federated regional cooperative that provides agriculture-related
products and services primarily in Illinois, Iowa, Wisconsin and
Ontario, Canada. FS-brand farm supplies and related services are
marketed to farmers in these areas by nearly 100 GROWMARK member
cooperatives. Visit the GROWMARK Web site at www.fssystem.com.
Grupo IMSA, a holding company, was founded in 1936 and is today one
of Mexico's leading diversified industrial companies. The Group
operates in four core businesses: steel processed products; automotive
batteries and related products; aluminum and other related products;
and steel and plastic construction products. With manufacturing
facilities in Mexico, the United States and throughout Central and
South America, Grupo IMSA currently exports to all five continents. In
2000 Grupo IMSA's sales reached US$2.2 billion, of which close to 45
percent was generated outside Mexico. Grupo IMSA shares trade on the
Mexican Stock Exchange (IMSA) and on the NYSE (IMY).
Interface, Inc. is a global manufacturer, marketer, installer and
servicer of products for the commercial and institutional interiors
market. The Company is the worldwide leader in the modular carpet
segment, which includes both carpet tile and two-meter roll goods. The
Company's Bentley, Prince Street, and Firth brands are leaders in the
high quality, designer-oriented sector of the broadloom segment. The
Company provides specialized carpet replacement, installation and
maintenance services through its Re:Source Americas service network.
The Company's Fabrics Group includes the leading U.S. manufacturer of
panel fabrics for use in open plan office furniture systems. The
Company's specialty products operations produce raised/access flooring
systems, antimicrobial additives, adhesives and various other specialty
chemical compounds and products.
International Paper: With over 12 million acres of land managed in
the United States alone, International Paper is one of the world's
largest private landowners. International IP has significant global
businesses in paper and paper distribution, packaging and forest
products, including building materials.
Iowa Farm Bureau Federation: The Iowa Farm Bureau is a Federation
of 100 county Farm Bureaus in Iowa. The organization was founded in
1918 and is currently comprised of more than 154,000 member families
throughout the state. Numerous legislative, educational and service-to-
member programs are provided for the members' benefit. The Iowa Farm
Bureau's mission is to help farm families prosper and improve their
quality of life. It is an independent, non-governmental, voluntary
organization. It is local, statewide, national and international in its
scope and influence and is nonpartisan, nonsectarian and nonsecret in
character.
IT Group, Inc. is a provider of diversified, value-added services
in the areas of consulting, engineering and construction, remediation
and facilities management. Through the Company's diverse group of
highly specialized companies, clients can take advantage of a single,
fully integrated delivery system and expertise to meet their global
environmental needs. Its broad range of services includes the
identification of contaminants in soil, air and water and the
subsequent design and execution of remedial solutions.
Manitoba Hydro is a major energy utility headquartered in Winnipeg,
Manitoba serving 403,000 electric customers throughout Manitoba and 248
000 gas customers in various communities throughout southern Manitoba.
Virtually all electricity generated by the provincial Crown Corporation
is from self-renewing water power. We are the major distributor of
natural gas in the province. The Corporation's capital assets-in-
service at original cost exceed $8 billion, making it the fourth
largest energy utility in Canada.
Mead Corporation a forest products company with $4.4 billion in
annual sales, is one of the leading North American producers of coated
paper, coated paperboard and consumer and office products, a world
leader in multiple packaging and specialty paper, and a producer of
high-quality corrugating medium. In management of the company's more
than two million acres of forests, Mead is committed to practicing
principled forest stewardship and using resources in a responsible and
sustainable manner. Headquartered in Dayton, Ohio, Mead has more than
15,100 employees and offices and operations in 32 countries.
Mexico City is Mexico's capital and its seat of government. The
city is also the country's major center of commerce, finance and the
arts. Mexico City is the world's largest metropolis, with over 20
million people. Midwest Generation: Headquartered in Chicago, Midwest
Generation, a subsidiary of Edison Mission Energy, owns 13 electricity
generating units in Illinois and Pennsylvania. With a total generating
capacity of over 11,400 megawatts, Midwest Generation can generate
enough electricity to meet the needs of more than 13 million homes.
Midwest Generation is exclusively in business to sell wholesale
power in competitive electricity markets. The company is currently
undertaking a major program to reduce emissions from its coal-fired
plants.
National Council of Farmer Cooperatives: NCFC's mission is to
protect the public policy environment in which farmer-owned cooperative
businesses operate, promote their economic well-being, and provide
leadership in cooperative education. NCFC remains the only organization
serving exclusively as the national representative and advocate for
America's farmer-owned cooperative businesses.
Navitas Energy is an independent power producer that develops, owns
and operates renewable energy production facilities in the United
States. Navitas currently has over 650 MW of clean energy under
development, leveraging the environmental benefits of wind energy with
the dispatchability of combustion turbines to produce a cleaner blend
of affordable electric energy.
NiSource Inc., is a holding company with headquarters in
Merrillville, Ind., whose operating companies engage in all phases of
the natural gas and electric business from exploration and production
to transmission, storage and distribution of natural gas, as well as
electric generation, transmission and distribution. Its operation
companies provide service to 3.6 million customers located within the
high-demand energy corridor that stretches from the Gulf of Mexico
through the Midwest to New England.
NUON is one of the largest multi-utility companies in the
Netherlands, serving more than 2.5 million residential and business
customers with electricity and, in many instances, with gas, water and
heat as well. The company is in the forefront in the marketing of green
energy and renewable energy generation in the Netherlands and is
extending its knowledge and experience in the area of renewable energy
internationally. Nuon's activities in the field of renewable energy
include wind power, small hydropower, thermal and photovoltaic solar
energy, landfill gas, biogas, biomass and ambient heat.
Ontario Power Generation (OPG) is an Ontario based company, whose
principal business is the generation and sale of electricity to
customers in Ontario and to interconnected markets. OPG's goal is to be
a premier North American energy company while operating in a safe, open
and environmentally responsible manner. OPG's focus is to produce
reliable electricity from competitive generation assets, power trading,
and commercial energy sales activities.
ORMAT: ORMAT is the world leader in distributed reliable remote
microturbine power units (also known as Closed Cycle Vapor Turbo
Generators). ORMAT's operations use locally available heat sources,
including geothermal energy (steam and hot water), industrial waste
heat, solar energy, biomass, and low grade fuels.
Pinnacle West Capital Corp: Based in Phoenix, Ariz., Pinnacle West
is the parent company of APS and Pinnacle West Energy. APS is Arizona's
largest and longest-serving electric utility, serving more than 857,000
customers, and Pinnacle West Energy is the company's unregulated
wholesale generating subsidiary. Among the utilities listed in the S&P
500, Pinnacle West is ranked in the top 10 percent for environmental
performance by an international investment advisory firm. The Company
also is ranked in the top 10 percent by Fortune magazine for total
shareholder return over the last 5 years.
PG&E National Energy Group, headquartered in Bethesda, Md.,
develops, owns and operates electric generating and gas pipeline
facilities and provides energy trading, marketing and risk-management
services in North America. The National Energy Group operates power
production facilities with a capacity of about 7,000 megawatts, with
another 10,000 megawatts under development, and more than 1,300 miles
of natural gas transmission pipeline with a capacity of 2.7 billion
cubic feet per day. (PG&E National Energy Group is not the same company
as Pacific Gas and Electric Company, the California utility, and is not
regulated by the California Public Utilities Comission. Customers of
Pacific Gas and Electric Company do not have to buy products or
services from PG&E National Energy Group in order to continue to
receive quality regulated services from Pacific Gas and Electric
Company.)
STMicroelectronics: STMicroelectronics is the world's third largest
independent semiconductor company whose shares are traded on the New
York Stock Exchange, on Euronext Paris and on the Milan Stock Exchange.
The Company designs, develops, manufactures and markets a broad range
of semiconductor integrated circuits (ICs) and discrete devices used in
a wide variety of microelectronic applications, including
telecommunications systems, computer systems, consumer products,
automotive products and industrial automation and control systems. In
2000, the Company's net revenues were $7.8 billion and net earnings
were $1.45 billion.
Stora Enso: Domiciled in Finland, Stora Enso is an integrated
global forest products company producing magazine papers, newsprint,
fine papers and packaging boards, areas in which the company holds a
leading global market position. Stora Enso is the world's second
largest papermaker and also conducts extensive sawmilling operations.
Stora Enso's global sales total approximately EUR 13 billion, with
annual paper and board production capacity of about 15 million tonnes.
The company has some 45,000 employees in more than 40 countries. Its
shares are listed in Helsinki, New York and Stockholm. Stora Enso North
America (formerly Wisconsin-based Consolidated Papers, Inc.) a Division
of Stora Enso Oyj, is North America's leading producer of coated and
supercalendered printing papers for the printing and publishing
industries and is a premier producer of specialty papers, paperboard
and paperboard products.
Suncor Energy, Inc. is a Canadian integrated energy company that
explores for, acquires, produces, and markets crude oil and natural
gas, refines crude oil, and markets petroleum and petrochemical
products. Suncor has three principal business units: Oil Sands,
Exploration and Production, and Sunoco. Oil Sands produces light sweet
and light sour crude oil, diesel fuel and various custom blends from
oil sands and markets these products in Canada and the United States.
Exploration and Production explores for, acquires, develops, produces
and markets crude oil in Canada and natural gas throughout North
America. Sunoco refines and markets crude oil and a broad range of
petroleum and petrochemical products in Ontario and the United States.
Swiss Re: Founded in 1863 in Zurich, Switzerland, Swiss Re is the
world's second largest reinsurer, with roughly 9,000 employees and
gross premiums in 2000 of CHF 26 billion (USD$15.3 billion). Standard &
Poor's gives the company its AAA rating; Moody's rates it Aaa. Swiss Re
does business from over 70 offices in 30 countries. The world over,
Swiss Re offers insurers and corporates: classic (re)insurance covers,
alternative risk transfer (ART) instruments, and a broad range of
supplementary services for comprehensive risk management.
Temple-Inland Inc. is a diversified forestry, forest products and
financial services company. Its three main operating divisions include
a Paper Group, which manufactures corrugated packaging products; a
Building Products Group, which manufactures a wide range of building
products and manages the Company's forest resources consisting of
approximately 2.2 million acres of timberland in Texas, Louisiana,
Georgia and Alabama; and the Financial Services Group, which consists
of savings bank, mortgage banking, real estate, and insurance brokerage
activities.
The Nature Conservancy: The Nature Conservancy, a nonprofit
organization founded in 1951, is the world's largest private
international conservation group. TNC has protected over 12,089,000
acres of land in the United States.
TXU Energy Trading is a player in the highly competitive energy
trading market. Through its headquarters in Dallas and regional offices
across the country, it sells natural gas and electricity to more than
6,700 retail commercial and industrial customers across the United
States. The company also offers a wide selection of other energy
products and services including comprehensive risk, asset and portfolio
management.
Waste Management, Inc. as a leading provider of comprehensive waste
management services, Waste Management serves municipal, commercial,
industrial and residential customers throughout North America.
Headquartered in Houston, Texas, the Company's network of operations
includes 284 active landfill disposal sites, 16 waste-to-energy plants,
73 landfill gas-to-energy facilities, 160 recycling plants, 293
transfer stations and more than 1,400 collection facilities. Combined,
these resources allow Waste Management to offer a full range of
environmental services to approximately 25 million residential and two
million commercial customers nationwide.
Wisconsin Energy Corporation, headquartered in Milwaukee, Wis., is
an $8.4 billion holding company with a diversified portfolio of
subsidiaries engaged in electric generation; electric, gas, steam and
water distribution; pump manufacturing and other non-utility
businesses. The corporation's utilities subsidiaries serve more than
one million electric and 950,000 natural gas customers in Wisconsin and
Michigan's Upper Peninsula.
appendix b
Biographies of the CCX Advisory Board
David L. Boren is the President of the University of Oklahoma. Mr.
Boren has had a distinguished career in public service as a member of
the Oklahoma House of Representatives (1967-1975), Governor of Oklahoma
(1975-1977) and as a U.S. Senator (1979-1994). As a U.S. Senator, Mr.
Boren was the longest-serving chairman of the Senate's Select Committee
on Intelligence. Mr. Boren was educated at Yale and attended Oxford
University as a Rhodes Scholar. He also earned a law degree from the
University of Oklahoma College of Law.
Lucien Y. Bronicki is the chairman of Ormat International, an
Israeli company leader in the field of innovative technology solutions
to geothermal power plants, power-generation from industrial waste heat
and solar energy projects. Mr. Bronicki has been chairman of Ormat
since he founded the company in 1965. Mr. Bronicki holds various
professional affiliations and memberships, including chairman World
Energy Council's Israeli National Committee, Member of the Executive
Committee of the Weizmann Institute of Science and member of the Board
of Ben Gurion University. He is also the recipient of several business
and science related awards.
Ernst Brugger is Founding Partner and chairman of Brugger Hanser &
Partner Ltd. in Switzerland, a business consulting firm with
international experience and range. He is also a professor at the
University of Zurich, chairman and member of the board of various
companies and a member of the International Committee of the Red Cross
(ICRC). Dr. Brugger serves as chairman of the Board of Directors of
Sustainable Performance Group, an investment and risk management
company which invests in pioneering and leading companies which have
taken up the cause of sustainable business.
lizabeth Dowdeswell is internationally recognized for her global
and highly diverse experience in building consensus and managing
change. She advises both public and private sectors on environmental
issues worldwide. Ms. Dowdeswell is a former Executive Director of the
United Nations Environment Programme (UNEP). Before joining UNEP, Ms.
Dowdeswell was the Assistant Deputy Minister of Environment Canada. In
that capacity she played a leading role in global efforts to negotiate
the treaty on climate change adopted at the 1992 United Nations
Conference on Environment and Development. She was Canada's permanent
representative to the World Meteorological Organization, principal
delegate to the Intergovernmental Panel on Climate Change, and Canadian
chairman of the Great Lakes Water Quality Board. She is currently a
Visiting Professor at the University of Toronto, a senior associate at
Royal Roads University and an associate fellow of the European Centre
for Public Affairs. She also serves on the governing and advisory
boards of several institutions. Ms. Dowdeswell is the author of
numerous publications in both the popular press and professional
journals.
Jeffrey E. Garten is dean of the Yale School of Management.
Formerly undersecretary of commerce for international trade in the
first Clinton Administration, he also held senior economic posts in the
Ford and Carter Administrations. From 1979--1992, he was a managing
director first at Lehman Brothers, where he oversaw the firm's Asian
investment banking activities from Tokyo, and then at the Blackstone
Group. Currently a monthly columnist for Business Week, his latest book
is ``The Mind of the CEO'' (2001).''
Donald P. Jacobs is Dean of the Kellogg Graduate School of
Management and its Gaylord Freeman Distinguished Professor of Banking.
Under his leadership, the Kellogg School has become a leader in the
field of business and finance and is consistently ranked as one of the
top five business schools in the United States. Dean Jacobs is a former
chairman of the Board of Amtrak (1975-1979) and currently serves on
several corporate boards. His work on banking, corporate governance and
international finance has been published in many scholarly journals and
he holds several honorary degrees and professional awards.
Dennis Jennings is the Global Risk Management Solutions Leader for
PricewaterhouseCoopers' (PwC) Global Energy and Mining Industry
Practice. Mr. Jennings previously served as the Dallas/Fort Worth
Energy Industry Market Leader; Co-Chairman of the U.S. Oil and Gas
Industry Program; and on Steering Committee of the International Energy
Practice. Mr. Jennings is experienced in all sectors of the petroleum
industry (upstream, downstream, domestic and international) and the
service industry. His responsibility have included leading PwC's global
risk management practice for the energy and mining industry, providing
financial advice and performing due diligence reviews on numerous
merger, acquisitions and divestiture efforts by major international
corporations.
Joseph P. Kennedy II is chairman and President of Boston-based
Citizens Energy Group. Before returning to Citizens Energy, Mr. Kennedy
represented the Eighth Congressional District of Massachusetts in the
U.S. House of Representatives for 12 years. Mr. Kennedy founded the
non-profit company in 1979 to provide low-cost heating oil to the poor
and elderly. Under his leadership, Citizens grew to encompass seven
separate companies, including the largest energy conservation firm in
the United States. Mr. Kennedy also advises and serves on the boards of
several companies in the energy, telecommunications, and health care
industries. Mr. Kennedy is the son of the late U.S. Senator Robert F.
Kennedy.
Israel Klabin is the president of the Brazilian Foundation for
Sustainable Development, a major Brazilian non-governmental
organization devoted to issues of environmental and sustainable
development policy. Mr. Klabin is the former chairman of Klabin SA, one
of the largest forestry companies in Latin America. He is a former
mayor of Rio de Janeiro and was one of the main Brazilian organizers of
the United Nations Conference on the Environment (Rio 92). He is also
actively involved in several philanthropical activities.
Bill Kurtis has had a distinguished career in broadcasting for over
30 years, as a news anchor in Chicago and later of the national CBS
Morning News. He started his own company, Kurtis Productions, when he
returned to Chicago in the mid 1980's and currently hosts shows on the
Arts and Entertainment network. Mr. Kurtis is involved in The National
Science Explorers Program, Electronic Field Trips and the Electronic
Long Distance Learning Network, all aimed at teaching children about
science. Mr. Kurtis and his shows have been the recipients of several
awards. He serves on the board of directors of organizations devoted to
natural history and the environment, including the National Park
Foundation, the Nature Conservancy and the Kansas State Historical
Society.
Jonathan Lash is President of the World Resources Institute (WRI),
a Washington, DC-based non-governmental organization that provides
solutions to global environment and development problems. From 1993
until 1999, Mr. Lash served as co-chair of the President's Council on
Sustainable Development, a group of government, business, labor, civil
rights, and environmental leaders that developed recommendations for
national strategies to promote sustainable development. For 2 years
before joining WRI, Mr. Lash directed the environmental law and policy
program of the Vermont Law School. From 1987 to 1991, Mr. Lash headed
the Vermont Agency of Natural Resources, having served the previous 2
years as Vermont's Commissioner of Environmental Conservation. He is
the author of several books on environmental topics.
Thomas E. Lovejoy, is a world-renowned tropical and conservation
biologist. Dr. Lovejoy is generally credited with having brought the
tropical forest problem to the fore as a public issue, and is one of
the main protagonists in the science and conservation of biological
diversity. In 1987, he was appointed Assistant Secretary for
Environmental and External Affairs for the Smithsonian Institution and
is Counselor to the Smithsonian's Secretary for Biodiversity and
Environmental Affairs. Dr. Lovejoy is also Chief Biodiversity Advisor
to the President of the World Bank and the Bank's Lead Specialist for
the Environment in Latin America. From 1989 to 1992, he served on the
President's Council of Advisors in Science and Technology (PCAST), and
acted as scientific adviser to the Executive Director of the United
Nations Environment Programme (1994-97). He was the World Wildlife
Fund's Executive Vice President from 1985 to 1987. Dr. Lovejoy is the
author of numerous articles and books.
David Moran is vice president of ventures for the Electronic
Publishing group of Dow Jones & Company and president of Dow Jones
Indexes. Mr. Moran became president of Dow Jones Indexes on a full-time
basis in June 1998. He was elected to a 1-year term as chairman of
STOXX, Ltd., an index creator that is a joint venture of the German,
Paris and Swiss stock exchanges and Dow Jones, in April 1999. He is
also chairman of Dow Jones Sustainability Group Index GmbH. Prior to
joining Dow Jones, Mr. Moran was an associate with Patterson, Belknap,
Webb & Tyler, a New York City law firm, from 1979 to 1985.
Dr. R.K. Pachauri is the Director-General of the Tata Energy
Research Institute (TERI) which does original work and provides support
in energy, environment, forestry, biotechnology, and resource
conservation to governments, institutions, and corporates worldwide.
Dr. Pachauri is currently a Vice-Chairman of the Intergovernmental
Panel on Climate Change; a Director of the Indian Oil Corporation
Limited (a Fortune 500 company); and a member of the Board of Directors
of the Institute for Global Environmental Strategies, Japan. He has
been President (1988) and Chairman (1989-90) of the International
Association for Energy Economics and is President of the Asian Energy
Institute since 1992. He has been a member of numerous committees and
boards, including those of the International Solar Energy Society,
World Resources Institute, World Energy Council, and has acted as an
Advisor to the Government of India, reporting directly to the Prime
Minister. Dr. Pachauri has also served as a member of the faculty of
several prominent academic and research institutions and has published
22 books and several papers and articles. He was recently awarded the
Padma Bhushan, one of India's highest civilian awards. In July 2001 Dr.
Pachauri was appointed a member of the Economic Advisory Council to the
Prime Minister of India, which is chaired by the Prime Minister.
Les Rosenthal is a former chairman of the Chicago Board of Trade
(CBOT) and a principal of Rosenthal Collins, a leading Chicago-based
commodities and futures trading firm. During his time as member of the
Board and chairman of the CBOT, Mr. Rosenthal was instrumental in
advancing the cause of new and innovative exchange-traded products such
as Treasury Bond futures and insurance derivatives.
Mary L. Schapiro is President of NASD Regulation, Inc. (NASDR) and
a member of the Board of NASD, Inc. NASDR was created as an independent
National Association Securities Dealers, Inc. (NASD) subsidiary
responsible for regulating 5,500 member brokerage firms, 670,000
individual registered representatives and oversight of The Nasdaq Stock
Market. Ms. Schapiro was formerly the chairman of the Commodity Futures
Trading Commission. Ms. Schapiro also served as a Commissioner of the
Securities and Exchange Commission (SEC). Ms. Schapiro was an active
member of the Technical Committee and the Developing Markets Committee
of the International Organization of Securities Commissions (IOSCO) and
has worked extensively with developing markets on capital markets
regulatory structure. In May 2000, Ms. Schapiro was named the Financial
Women's Association Public Sector Woman of the Year.
Maurice Strong is a former Secretary General of the 1992 United
Nations Conference on Environment and Development (the Rio Earth
Summit) and Under-Secretary General of the United Nations. He is
currently the chairman of the Earth Council, a non-governmental
organization dedicated to the cause of sustainable development. In June
1995, he was named Senior Advisor to the President of the World Bank.
From December 1992 until December 1995, Mr. Strong was chairman and
Chief Executive Officer of Ontario Hydro, one of North America's
largest utilities. Mr. Strong is an advisor to the United Nations, and
has been a director and/or officer of a number of Canadian, U.S. and
international corporations.
James R. Thompson is a former four-term Governor of Illinois and
currently a managing partner of Winston and Strawn. During his last
term as Governor, Mr. Thompson was involved in the implementation of
the sulfur dioxide (SO2) market created by the 1990 Clean
Air Act. During his last term as Governor he was the Head of the Global
Climate Change Task Force at the National Governors' Association (1988-
1989). Governor Thompson is also a director of the Chicago Board of
Trade (CBOT).
Sir Brian Williamson is the chairman of the London International
Financial Futures and Options Exchange (LIFFE), one of the world's
largest exchanges. Mr. Williamson has been involved in trading
financial futures for almost three decades in London, New York and
Chicago. He held senior executive positions for prominent trading firms
and was a member of the International Advisory Board of the Nasdaq
Stock Market, becoming chairman in 1996. He was also Governor-at-Large
of the National Association of Securities Dealers in Washington DC.
(1995-1998).
Robert K. Wilmouth is President and CEO of National Futures
Association (NFA). NFA, the industry-wide, self-regulatory organization
for the futures industry. Mr. Wilmouth has served as NFA's President
since 1982. Formerly, he served as President and CEO of the Chicago
Board of Trade for approximately 5 years following a 27-year career in
the banking industry, which included a term as President of the Crocker
National Bank of San Francisco. He was chairman of LaSalle National
Bank for over two decades, is currently a member of the Economic Club
of Chicago, the chairman of the Consultative Committee of IOSCO, a
Lifetime Trustee of the University of Notre Dame and a former chairman
of its Investment Committee. Mr. Wilmouth is a graduate of Holy Cross
College and holds a Masters degree from the University of Notre Dame.
______

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

______

Responses of Michael Durham to Additional Questions from Senator
Lieberman

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

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

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

Responses of Michael Durham to Additional Questions from Senator
Voinovich

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

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

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

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

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

Responses of Richard Miller to Additional Questions from Senator
Lieberman

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

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

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

______

Responses of Frank Alix to Additional Questions from Senator Lieberman

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

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

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

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

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

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

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

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

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

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

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

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

CLEAN POWER ACT

----------

WEDNESDAY, JUNE 12, 2002

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

BENEFITS AND COSTS OF MULTI-POLLUTANT LEGISLATION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Senator Jeffords. Senator Chafee?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Response by Ronald Methier to Additional Question from Senator Jeffords

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

Response by Ronald Methier to Additional Questions from Senator
Voinovich

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

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

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

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

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

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

Responses of Bob Page to Additional Questions from Senator Jeffords

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

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

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

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

Responses of Bob Page to Additional Questions from Senator Voinovich

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

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

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

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

Responses of Bob Page to Additional Questions from Senator Graham

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Question 1. In Cinergy's 2000 Environmental Progress Report, you
wrote that Cinergy CEO Jim Roger's ``sound view is that coal-fired
power can meet tough new targets for reductions of key emissions
including carbon dioxide if given sufficient flexibility and lead
times.'' What, if any, changes does Cinergy believe are needed to the
4-Pollutant bill to give sufficient flexibility and lead times for your
company to meet tough carbon dioxide reduction targets?
Response. The existing carbon reduction program in S. 556 is not
workable since it results in significant retirement of coal units,
massive natural gas fuel switching and large increases in the price of
electricity.
For Cinergy, a more realistic reduction target based, for instance,
on a freeze of industry green house gas emissions at 2000 levels is
achievable by the end of the decade when coupled with similarly timed
reductions in mercury, NOx and SO2. Further reductions from
this initial round can and will occur with the commercialization of
coal gasification and other advanced ``zero-emissions'' technologies.
To start on this path immediately--and to end a deadlock that will
otherwise block progress for the foreseeable future--the Committee
should consider creating a voluntary green house gas program initially
coupled with a ``trigger'' provision that creates a mandatory program
if there is insufficient participation or progress.
Finally, the Committee needs to couple targets with incentives to
ensure the development and deployment of the next generation of
environmentally friendly power plant technologies.
__________
Statement of David G. Hawkins, Director, NRDC Climate Center, Natural
Resources Defense Council
Five years ago Chairman Jeffords introduced S. 687, the first
comprehensive bill to control the four major pollutants released by
fossil-fuel power plants. Today we are gathered to discuss the bill he
and others introduced in this Congress, S. 556, the Clean Power Act.
There is broad agreement now that power plants should be cleaned up.
But there are enormous differences in the benefits conferred by the
Clean Power Act and the competing approach sketched by the
Administration. I welcome the opportunity to testify on behalf of
Natural Resources Defense Council's (NRDC) 500,000 members in support
of the Clean Power Act and to describe why we believe it is the right
approach for cleaning up power plant pollution.
The Clean Power Act will produce major benefits for Americans'
health and the quality of our environment. Indeed, the bill's
provisions to limit global warming pollution can help America regain
leadership in acting to protect the planet from devastating changes to
the climate.
Both the Administration and the Clean Power Act's sponsors agree
that air pollution from power plants imposes large costs on health,
environment and the economy in the United States. Sulfur dioxide
(SO2) pollution is a major cause of fine particles that
cause tens of thousands of premature deaths every year, with 30,000
premature deaths attributed to pollution from the power sector.
SO2 also acidifies lakes, streams, and soils and pollutes
our national parks with haze that spoils vistas that once were clear.
Nitrogen oxide (NOx) is another power plant acid rain pollutant. NOx
also forms smog, fine particles and haze and overloads estuaries with
nitrogen fertilizer contributing to dead zones in places like the
Chesapeake Bay, Long Island Sound, the Gulf of Mexico and other coastal
waters. Power plants also emit more mercury than any other remaining
category of pollution sources. Mercury is a nerve poison that builds up
to hazardous levels once released in the environment. Mercury
contamination is so pervasive that 41 states have issued fish
consumption warnings for their water bodies. Finally, and largest in
terms of tonnage and extent of potential damage, heat-trapping carbon
dioxide (CO2) from power plants is the largest U.S.
contributor to global warming. While the Administration now
acknowledges CO2's role in climate change, it continues to
oppose any policy action to establish binding limits on CO2
emissions.
Comparing the Clean Power Act and the Administration Proposal
In February, the Administration released a description of the power
plant legislation it would support. NRDC's summary of the
Administration's approach is that, compared to competing proposals, it
condemns the public to much higher pollution exposures, threatens local
air quality, and prevents timely action to address the risks of global
warming. Not only did the Administration approach reject the bipartisan
(more accurately, tri-partisan) Clean Power Act, it also rejected an
August 2001 proposal from EPA, the expert agency Congress has charged
with implementing clean air programs. While no legislation has been
submitted and many details remain murky, enough is known about the
Administration's proposal to demonstrate how poorly it performs, when
compared to the Clean Power Act, or for that matter, to EPA's August
2001 recommendation:
For the three traditional pollutants, the Clean Power Act
gets far greater pollution reductions much faster than the
Administration proposal.
The differences in total loadings under S. 556 compared
to the Administration proposal between now and 2020 will result in
significantly greater health and environmental damage with the
Administration approach.
By failing to address CO2 emissions from power
plants, the Administration proposal delays action to limit emissions
from America's largest single source of global warming pollution.
The Administration proposal may save industry some
compliance expenses in the short term compared to the Clean Power Act
but the government's own analyses show that the added benefits provided
to Americans by the Clean Power Act are much larger than the temporary
industrial cost savings. Further, by incorporating effective measures
to increase energy efficiency and the use of renewable energy sources
to help meet the emissions caps called for in the bill, S. 556 can
achieve a net reduction in consumer bills while delivering a dramatic
improvement in environmental quality.
While the Clean Power Act guarantees that all communities
will enjoy major cuts in pollution from nearby and distant power
plants, the Administration would allow increases in local pollution
that would make some local communities worse off. The Clean Power Act,
not the flawed Administration proposal deserves your support. We urge
the committee to mark up S. 556 soon and report it to the Senate for
consideration. The toll that the four-horsemen of fossil-fuel power
plant pollution inflicts daily on Americans is far too great to delay
action to clean up this industry.
Clear Skies: Clearly Dirtier
While the Administration has decided on an attractive sounding name
for its proposal, the Clear Skies Initiative (CSI), the only thing that
is clear about the proposal is that it is clearly dirtier than the
Clean Power Act (and than the EPA August 2001 proposal). The caps and
timetables proposed under CSI for the traditional pollutants would
allow millions more tons of these hazards to be released over the next
two decades than under the Clean Power Act, with clearly greater damage
done to Americans' health and our environment. (See Figure 1).
While the Clean Power Act requires an annual cap of 2.25 million
tons of SO2 to be met by 2007, the Administration CSI
proposal allows twice as much pollution, 4.5 million tons, and does not
require that reduction until 2010. The CSI briefing materials also
imply that the SO2 cap will be lowered in a second phase to
a level of 3 million tons per year by 2018. But the fine print in the
proposal states an administrative review process is required before the
second phase cap is set. This means that the reductions claimed for the
second phase are no more certain than the outcome of a future ambient
air quality standard setting process. If CSI became law, the only thing
Congress, the public and states could count on would be the first phase
cap of 4.5 million tons. On the other hand, industry lawyers could
count on thousands of billable hours (fees that electricity consumers
will pay) as they assist their clients in the ``review'' of the second
phase cap. (See Figure 2 for state-by-state comparisons of emissions
under the CSI in 2010 and 2020 and the EPA August 2001 proposal).
As a result of the much higher caps for SO2 under the
CSI approach, the health and environmental damages would continue at
much higher levels than under the Clean Power Act. Over the period
2007-2020, the CSI approach would result in at least 40 million tons
more SO2 emissions than under the Clean Power Act. The
higher emissions allowed by CSI would inflict great damage to public
health, including as many as 10,000 additional premature deaths every
year for at least a decade. In its analysis of its August 2001 proposal
(a document that the Administration still has not released officially),
EPA calculated the health benefits from SO2 and NOx caps set
at the level of the Clean Power Act as including the prevention of
``over 19,000 premature deaths'' annually.\1\ In contrast, EPA
estimates the CSI approach will avoid ``up to 9,000 premature deaths''
in 2010.\2\ (See Figure 3 for current mortality rates).
---------------------------------------------------------------------------
\1\USEPA, ``A Comprehensive Approach to Clean Power,'' August 3,
2001, at 21.
\2\USEPA, ``Human Health Benefits of Clear Skies,'' May 2002.
---------------------------------------------------------------------------
As indicated by the higher number of preventable deaths under the
CSI approach, the larger SO2 caps in the Administration
proposal would leave more areas violating the fine particle standard,
placing a greater burden on state and local officials to pursue
difficult and more expensive reductions in prolonged state-by-state
rulemaking proceedings. According to EPA computer runs prepared last
September but made available to the committee only last week, an
SO2 cap of 3.58 million tons would leave nearly twice as
many counties in the eastern United States in violation of the fine
particle standard than would a cap of 2 million tons per year.\3\
Since, as discussed above, the CSI proposal only guarantees a statutory
cap of 4.5 million tons, this will complicate and most likely delay
attainment planning efforts in areas where millions of people live.
---------------------------------------------------------------------------
\3\ USEPA, ``Projected PM2.5 and Ozone Nonattainment
Maps.''
---------------------------------------------------------------------------
In addition to causing greater mortality and morbidity, the
additional SO2 emissions under CSI would leave more lakes
and streams susceptible to chronic acidity from acid deposition.
According to computer runs made available to the committee last week,
an SO2 cap greater than 2 million tons per year will leave
15 percent of today's chronically acid lakes in the Adirondacks still
chronically acidic as long away as the year 2030. In the Southeastern
U.S. stream acidification will worsen under the caps above 2 million
tons, with 44 percent of streams in the Southeast predicted to be
either chronically or episodically acidic under a 3.58 million ton
cap.\4\
---------------------------------------------------------------------------
\4\USEPA, ``Water quality.ppt,'' May 2002.
---------------------------------------------------------------------------
As with SO2, the CSI approach also allows much higher
NOx emissions than the Clean Power Act: 2.1 million tons beginning in
2008 compared to 1.51 million tons beginning in 2007. This results in 9
million more tons of cumulative NOx loadings between 2007-2020, even if
one assumes that EPA succeeds in lowering the cap to 1.7 million tons
in 2018 as represented by the Administration's descriptions of the CSI
proposal. These added emissions will also mean more acid deposition,
more eutrophication of coastal waters, and more fine particle pollution
than under the Clean Power Act.
For mercury, the CSI proposal sets an initial cap five times higher
than the Clean Power Act: 26 tons per year starting 2010 compared to 5
tons per year starting in 2007 under the Clean Power Act. Even the
optional second phase of CSI would leave 15 tons per year of mercury
emissions and not be triggered until 2018. Compared to the Clean Power
Act, the CSI approach would result in a cumulative added mercury burden
of 330 tons between the years 2007-2020 even if EPA succeeds in
lowering the cap in 2018. Because mercury is an accumulative toxin,
these added tons will do their damage for scores of years after they
are released.
The committee should note that the current Clean Air Act requires
EPA to adopt a performance standard based on Maximum Achievable Control
Technology (MACT) in the next few years, with compliance required by
the end of 2007. In the regulatory development process now underway,
EPA is evaluating performance requirements that would achieve the 5
ton-per-year cap in the Clean Power Act and the weakest option being
analyzed by the agency (at the request of the utility industry) is a
level only slightly higher than the nominal CSI phase 2 target. In sum,
the CSI approach for mercury delays the cleanup of this toxin by 10
years compared to the current law and calls for a cap that is three to
five times larger than the more protective options currently under
consideration at EPA.
Finally, as the committee knows, the CSI proposal rejects any limit
on CO2 emissions, despite the fact that power plants are
responsible for 40 percent of U.S. emissions of this heat-trapping
pollutant. Instead, the Administration has called for a continuation of
voluntary measures even though electric sector CO2 emissions
grew by more than 25 percent during the previous decade of voluntary
``commitments,'' a growth rate triple that of the rest of U.S. emission
sources. In the next section of my testimony I will discuss why the
committee should reject this terribly flawed approach to controlling
power plant pollution and adopt the comprehensive program in the Clean
Power Act.
Global Warming and the Clean Power Act
The Clean Power Act's provisions to cap CO2 pollution
from power plants are responsive to several fundamental facts about
global warming:
The magnitude and the scope of the threat posed by global
warming are already large and will grow the longer we delay action to
address it.
Power plants are responsible for 40 percent of US
CO2 pollution and their emissions will continue to increase
without action.
It is in the strategic interest of the United States to
commercialize modern technologies that reduce the growth in global
warming pollution in all countries.
An integrated strategy of emission caps and measures to
increase energy efficiency and use of renewable energy sources can
succeed in reducing all four air pollutants from power plants at lowest
overall costs.
The Challenge of Climate Change
At the end of May the U.S. Government submitted its latest
``Climate Action Report'' (National Communication) to the United
Nations under the Rio Treaty that the United States ratified 10 years
ago. That report summarized the harm that could be done to America and
Americans from a wide range of changes to our climate caused by human
emissions of global warming pollutants. If left unchecked global
warming will have profound effects on the United States from Florida to
Alaska and from California to Maine. Based on research by top U.S.
scientists over the last 4 years, and extensively peer reviewed, the
report identifies many threats to our way of life, including:
In Florida, rising sea levels, higher temperatures and
higher CO2 concentrations threaten to literally reshape
Florida. Much of the Everglades as well as other important coastal
wetlands would be inundated. Florida's famed coral reefs, already
suffering from the effects of coastal development and extreme heat
during the 1998 El Nino, may be destroyed. Florida's growing elderly
population, many of whom came to Florida to enjoy its mild climate, is
particularly vulnerable to heat stress when mild weather is replaced by
stifling heat.
In Vermont and New York, sugar maples could disappear and
ski areas will become increasingly snowless.
In the West, alpine meadows could disappear and water
resources could be stretched to the breaking point. Conflicting demands
for water are already a source of tension between farmers and urban
dwellers as well as between the United States and Mexico. These
problems will be exacerbated by severe reductions in a critical natural
reservoir: mountain snowpacks. Rising temperatures will result in more
precipitation as rain, rather than snow, and an earlier spring
snowmelt, resulting in an increased risk of spring flooding as well as
summer drought.
Two recent NRDC reports highlight some of the risks documented in
the government's assessment of climate threats. Our report Feeling the
Heat in Florida emphasizes that in addition to the threats described
above, Florida's tourism industry would be severely damaged by
disappearing beaches and the loss of other natural resources that bring
divers and sport fishers to the state. More recently NRDC released a
report on the effects of global warming on trout and salmon, which
found that the habitat for individual species of these prized fish
could shrink by 5 to 17 percent by 2030 and by 14 to 34 percent by
2060, as the cold clear streams on which these fish depend become
increasingly tepid.
The opponents of action to combat global warming were quick to
argue that the extent and location of harm is ``uncertain.'' Inaction
is not excused by claims the threats are uncertain and the warnings not
specific enough. We are not locked into a fate of exposing our children
to future threats simply because we do understand today the size of the
risk. We know now the prudent steps we can take to reduce the risks of
harm from global warming. The key is to start now with effective
programs to limit the emissions that cause global warming. The Clean
Power Act is just such a step.
To appreciate why it is necessary and productive to begin now to
carry out an effective action program to cut emissions, a quick
overview of climate change fundamentals is helpful. A variety of gases
and compounds associated with human activity change the heat-trapping
characteristics of the atmosphere. In particular, CO2
released by fossil fuel burning and deforestation is the largest single
source of heat-trapping emissions to the atmosphere. This increase in
heat trapping is changing the climate, even while we argue how soon the
changes will harm us.
To avoid confusion caused by statements that CO2 is
``natural,'' it is important to understand how human activity has
changed the earth's natural carbon cycle. CO2 in the
atmosphere is part of a continuous cycle of exchanges of carbon between
vegetation, animals, soils, the oceans and the air.\5\ While huge
amounts of carbon flow between these pools every year, the amount of
CO2 in the atmosphere since the last glacial period over
12,000 years ago was fairly constant (around 600 billion metric tons of
carbon) until we began widespread burning of fossil fuels around two
hundred years ago. Our use of fossil fuels has fundamentally changed
the natural carbon cycle by adding to the atmosphere immense quantities
of carbon that have been stored underground, isolated from the natural
cycle for hundreds of millions of years.
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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.
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\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.
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``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.
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\16\Clean Air Task Force, ``Concerns with EIA and EPA Multi-
Pollutant Power Plant Clean Up Studies,'' December 2001.
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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.
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\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.
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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\
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\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.
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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.
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\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.''
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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.
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\21\See President Bush' Climate Initiative announcement of
February 14, 2002 at www.whitehouse.gov.
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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.
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\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.
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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.
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\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:
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\3\The National Park System Organic Act of 1916 (16 USC Sec. 1).
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`` The air around Lake McDonald is remarkably clear and pure. . .
.''\4\
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\4\House Report No. 1456, 62d Congress, Glacier National Park,
February 6, 1913.
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``The Big Bend area is a region of inspiring scenery. . . .''\5\
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\5\House Report No. 878, 74th Congress, Big Bend National Park, May
13, 1935.
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``. . . the Grand Canyon of the Colorado is one of the most
stupendous scenic wonders of the world . . . .''\6\
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\6\Senate Report No. 1082, 64th Congress, Grand Canyon National
Park, Arizona, February 20, 1917.
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``. . . 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\
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\7\16 USC Sec. 410d.
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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)
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\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)
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\11\http://www2.nature.nps.gov/ard/pubs/Core--Slides/visimp.htm
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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\
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\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.
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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\
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\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.
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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.
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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.
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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\
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\18\www.nps.gov/glac/index.htm.
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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.
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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\
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\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\
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\29\Clean Air Task Force for Clear the Air, Out of Sight: Haze in
Our National Parks, August 29, 2000.
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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\
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\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)
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\32\W. Kent Olson, ``Acadia's green 45,000 acres,'' Bangor Daily
News, April 24, 2002.
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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.