[Senate Hearing 109-867]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-867
 
                S. 131, ``THE CLEAR SKIES ACT OF 2005''

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

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 2, 2005

                               __________

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


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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                       ONE HUNDRED NINTH CONGRESS
                             FIRST SESSION

                  JAMES M. INHOFE, Oklahoma, Chairman
JOHN W. WARNER, Virginia             JAMES M. JEFFORDS, Vermont
CHRISTOPHER S. BOND, Missouri        MAX BAUCUS, Montana
GEORGE V. VOINOVICH, Ohio            JOSEPH I. LIEBERMAN, Connecticut
LINCOLN CHAFEE, Rhode Island         BARBARA BOXER, California
LISA MURKOWSKI, Alaska               THOMAS R. CARPER, Delaware
JOHN THUNE, South Dakota             HILLARY RODHAM CLINTON, New York
JIM DeMINT, South Carolina           FRANK R. LAUTENBERG, New Jersey
JOHNNY ISAKSON, Georgia              BARACK OBAMA, Illinois
DAVID VITTER, Louisiana
                Andrew Wheeler, Majority Staff Director
                 Ken Connolly, Minority Staff Director

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

                            FEBRUARY 2, 2005
                           OPENING STATEMENTS

Baucus, Hon. Max, U.S. Senator from the State of Montana, 
  prepared statement.............................................    79
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................    26
Boxer, Hon. Barbara, U.S. Senator from the State of California, 
  prepared statement.............................................    80
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..     8
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island    29
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New 
  York...........................................................    29
DeMint, Hon. Jim, U.S. Senator from the State of South Carolina..    39
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     1
Isakson, Hon. Johnny, U.S. Senator from the State of Georgia.....     7
Jeffords, Hon. James M., U.S. Senator from the State of Vermont..     4
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................    20
Lieberman, Hon. Joseph I., U.S. Senator from the State of 
  Connecticut....................................................    24
Murkowski, Hon. Lisa, U.S. Senator from the State of Alaska......    21
Obama, Hon. Barack, U.S. Senator from the State of Illinois......    28
Vitter, Hon. David, U.S. Senator from the State of Louisiana.....    19
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...    31

                               WITNESSES

Breehey, Abraham, legislative representative, Government Affairs 
  Department, International Brotherhood of Boilermakers..........    72
    Prepared statement...........................................   260
    Responses to additional questions from:
        Senator Voinovich........................................   262
        Senator Lautenberg.......................................   262
Connaughton, James L., chairman, Council on Environmental Quality    40
    Prepared statement...........................................    81
    Responses to additional questions from:
        Senator Baucus...........................................    87
        Senator Inhofe...........................................    82
        Senator Jeffords.........................................    91
        Senator Lautenberg.......................................    86
        Senator Murkowski........................................    97
        Senator Obama............................................    90
        Senator Vitter...........................................    99
        Senator Voinovich........................................    87
Houseal, Brian, executive director, Adirondack Council...........    68
    Prepared statement...........................................   100
    Responses to additional questions from:
        Senator Inhofe...........................................   102
        Senator Jeffords.........................................   103
        Senator Lautenberg.......................................   103
Walke, John, Clean Air director, Natural Resources Defense 
  Council........................................................    70
    Prepared statement...........................................   105
    Responses to additional questions from:
        Senator Inhofe...........................................   148
        Senator Jeffords.........................................   158
        Senator Lautenberg.......................................   160

                          ADDITIONAL MATERIAL

Article, Associated Press, Warmer world shrinking glaciers, 
  January 31, 2005............................................... 66-67
Charts:
    Delivering Extensive Health Benefits and Widespread 
      Attainment.................................................    36
    EPA Projections of Coal-Fired Power Plants that will not have 
      applied modern NOx and SOx controls under Clear Skies by 
      2020.......................................................   270
    Industrial Price of Natural Gas..............................    35
    Timeline for the Ozone NAAQS.................................    37
Fact sheets, state-level snapshots of the number of facilities 
  that could be eligible for opt-in MACT provisions, Earthjustic168-211
Letters:
    Hubbard, James W., delegate, Maryland General Assembly and 
      chair, National Conference of State Legislatures' 
      Environment and Natural Resources Committee................ 10-17
    Marshall, David, senior counsel, Clean Air Task Force.......212-253
    Religious leaders in opposition to S. 131....................    44
    Tubbesing, Carl, deputy executive director, National 
      Conference of State Legislatures...........................    18
Presentation, Quin Shea, senior director for Environmental 
  Activities, Edison Electric Institute..........................   254
Statements:
    Cook, John, vice president and managing director, Eastern 
      U.S. Conservation Region, The Nature Conservancy...........   263
    Edison Electric Institute....................................    60
    Holmstead, Jeffrey, Assistant Administrator, Environmental 
      Protection Agency, July 8, 2003............................   287
    Large Public Power Council...................................   267
    McSlarrow, Hon. Kyle E., Deputy Secretary, Department of 
      Energy, May 8, 2003........................................   281
    Whitman, Hon. Christine Todd, Administrator, Environmental 
      Protection Agency, April 8, 2003...........................   274


                S. 131, ``THE CLEAR SKIES ACT OF 2005''

                              ----------                              


                      WEDNESDAY, FEBRUARY 2, 2005

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:15 a.m. in room 
406, Senate Dirksen Building, Hon. James M. Inhofe (chairman of 
the committee) presiding.
    Present: Senators Inhofe, Bond, Voinovich, Chafee, 
Murkowski, Thune, DeMint, Isakson, Vitter, Jeffords, Lieberman, 
Carper, Clinton, Lautenberg, and Obama.

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

    Senator Inhofe. The committee will come to order. We have a 
policy of starting on time, and we will do that. I see our 
witness is here on time, as he always is. Thank you.
    The committee has had more than 20 hearings examining 
issues related to motor pollutant legislation. Today's hearing 
is the final hearing I plan to hold as chairman of this 
committee on this issue. I intend to mark up this bill 2 weeks 
from today. We have talked to our committee members. I think we 
have had enough meetings on this. We had eight of these when I 
was chairman of the Clean Air Subcommittee, and there is not 
much more to talk about.
    The Clear Skies legislation is the largest reduction in 
utility emissions ever called for in the history of this 
Country or by any President, a 70 percent reduction by 2018 in 
SO2, NOX, and mercury. Although the air 
is much cleaner today than it used to be, with major pollutants 
being cut in half even as the population and economic activity 
increased substantially, when it comes to reducing utility 
emissions, the Clean Air Act is outdated and must be reformed.
    Every attempt to set a standard by regulation has resulted 
in endless litigation. The NOx SIP Call took over 7 years. The 
NAAQS process took over 10 years when you consider the 1997 
proposal was required by the court order. The residual risk 
program is in worse shape, and the agency's efforts to date to 
deal with the residual risk have been criticized by the 
National Academy of Sciences. Regardless of what you think 
about the NSR program, it has resulted in almost no emissions 
reductions, and its use in the courtroom will only delay the 
reductions. The only virtually litigation-free program to 
reduce utility emissions has been the Acid Rain Program.
    The success of the Acid Rain Program is the reason 
President Bush proposed the Clean Skies Initiative, and the 
reason Senator Voinovich and myself support it. This program 
has been practically litigation-free, whether it was in the 
implementing of regulations or the enforcement. It has been 
almost completely violation free.
    The Clear Skies legislation, S. 131, will cleanup the air 
by reducing utility emissions faster, cheaper, and more 
efficiently than the Clean Air Act. Anyone who doubts this 
either does not understand the legislation or has not paid 
attention to the endless litigation over the past 15 years. We 
will hear testimony today from a variety of witnesses in 
addition to the Administration witness. We will hear from: A 
well-respected environmental official who is dedicated to 
solving the Acid Rain problem in New York and New England, the 
area of the Country where its effects are the most devastating; 
an analyst for the labor union who is concerned that the 
alternatives to Clear Skies will cost jobs; and a lawyer for 
the national group which has brought numerous lawsuits under 
the current law. Why is it that only the lawyer supports the 
endless litigation that is in the current act? I think we 
understand that.
    What we are trying to accomplish with this act is to expand 
the Acid Rain Program in order to achieve the emissions 
reductions without the endless lawsuits. Maybe that is why so 
many large environmental organizations, who employ more lawyers 
than scientists, oppose this bill.
    They have thrown a number of unsubstantiated claims at this 
bill. They say this bill infringes on the States' rights. It 
does not, it reaffirms them. They claim it rolls back emission 
reductions the current act will achieve. It does not. It will 
make new reductions possible. They say the law requires, and we 
can achieve, a 90 percent reduction in mercury by 2008. It does 
not, and we cannot given the lack of technology. It just 
couldn't happen. Most ludicrous of all, they say it will 
engender lawsuits despite the fact that this bill is based on 
the litigation-free Acid Rain Program precisely to end 
litigation and ensure clean air progress.
    Last week, the Energy Information Administration released a 
report examining the economic impacts of mercury regulation. It 
found that the proposal favored by the national environmental 
groups, such as the NRDC, to regulate mercury by 90 percent by 
2008 would lead to a 26 percent increase in natural gas prices 
and a 22 percent increase in electricity prices by 2010 if 
technologies cannot achieve the mandate. EPA says they will 
not. The result: wholesale exports of American manufacturing 
jobs overseas, and we have already seen this started.
    Given the environmental benefits and predictability of this 
bill, I would question those who say that we are standing on 
ideology not to include carbon mandates. Who is standing on 
ideology? Carbon mandates cannot pass the Senate. We know that, 
we have had it up several times. To insist that that be a part 
of this bill would merely put us in a position where we would 
not be able to have a three pollutant bill.
    Finally, I am reminded in this debate of the debate that 
took place in this committee a few years ago about moving 
brownfields without Superfund liability reform. Everyone agreed 
we needed brownfields reform. Most of the Republicans on the 
committee wanted liability reform. We were cautioned by the 
other side that if we were to link both of them together and 
not let the perfect be the enemy of the good, we all listened 
and we, the Republicans, said, all right, fine, we won't do 
that, we will go ahead and do the brownfields without doing the 
liability reform.
    So, I think we have the same situation today, just the 
tables are turned, and I think that we need to consider this; 
we need to pass it, we need to get it to the floor, get it to 
conference, and start cleaning up the air.
    [The prepared statement of Senator Inhofe follows:]

         Statement of Hon. James M. Inhofe, U.S. Senator from 
                         the State of Oklahoma

    This Committee has had more than 20 hearing examining issues 
related to multi-pollutant legislation. Today's hearing is the final 
hearing I plan to hold as Chairman of this Committee on the issue. I 
intend to mark up this bill 2 weeks from today because it is past time 
for Congress to act.
    The Clear Skies legislation, is the largest reduction in utility 
emissions ever called for by an American President, 70 percent 
reductions is NOX, SO2, and mercury by 2018, with 
major reductions taking place in the first phase over the next 5 years.
    Although the air is much cleaner today than it used to be, with 
major pollutants being cut by half even as the population and economic 
activity increased substantially, when it comes to reducing utility 
emissions the Clean Air Act is outdated and must be reformed.
    Every attempt to set a standard by regulation has resulted in 
endless litigation. The NOX SIP Call took over 7 years. The 
NAAQS Process took over 10 years when you consider the 1997 proposal 
was required by court order. The residual risk program is in worse 
shape, and the agency's efforts to date to deal with residual risk have 
been criticized by the National Academy of Sciences. And regardless of 
what you think of the NSR program, it has resulted in almost no 
emissions reductions, and its use in the courtroom will only delay 
reductions. The only virtually litigation-free program to reduce 
utility emissions has been the acid rain program.
    The success of the acid rain program is the reason President Bush 
proposed the Clean Skies Initiative, and the reason Senator Voinovich 
and myself support it. This program has been practically litigation-
free, whether it was in the implementing of regulations or the 
enforcement. And it has been almost completely violation free.
    The Clear Skies legislation, S. 131, will clean up the air by 
reducing utility emissions faster, cheaper, and more efficiently than 
the Clean Air Act. Anyone who doubts this either does not understand 
the legislation or has not paid attention to the endless litigation 
over the last fifteen years.
    We will hear testimony today from a variety of witnesses in 
addition to the Administration witness. We will hear from: a well-
respected environmental official that is dedicated to solving the Acid 
Rain problem in New York and New England, the area of the country where 
its effects are most devastating; an analyst for a labor union who is 
concerned that the alternatives to Clear Skies will cost jobs; and a 
lawyer for a national group which has brought numerous lawsuits under 
the current act. Why is it that only the lawyer supports the endless 
litigation that is the current act?
    What we are trying to accomplish with this Act, is to expand the 
Acid Rain program in order to achieve the emissions reductions without 
the endless lawsuits. Maybe that is why so many large environmental 
organizations, who employ more lawyers than scientists, oppose this 
bill.
    They have thrown a number of unsubstantiated claims at this bill. 
They say this bill infringes on state's rights. It does not, it 
reaffirms them. They claim it rolls back emission reductions the 
current act will achieve. It does not. It will make new reductions 
possible. They say the law requires, and we can achieve, a 90 percent 
reduction in mercury by 2008. It does not and we cannot given the lack 
of technology. And, most ludicrous of all, they say it will engender 
lawsuits despite the fact that this bill is based on the litigation-
free Acid Rain program precisely to end litigation and ensure clean air 
progress.
    Last week, the Energy Information Administration released a report 
examining the economic impacts of mercury regulation. It found that the 
proposal favored by national environmental groups such as the NRDC to 
regulate mercury by 90 percent by 2008 would lead to a 26 percent 
increase in natural gas prices and a 22 percent increase in electricity 
prices by 2010 if technologies cannot achieve the mandate. And EPA says 
they will not. The result: wholesale exports of American manufacturing 
jobs overseas.
    Given the environmental benefits and predictability of this bill, I 
would question those who say we are standing on ideology not to include 
carbon mandates. Who is standing on ideology? Carbon mandates cannot 
pass the Senate. That is the simple truth of the matter. Those who 
would sacrifice the tangible benefits in cleaner air and improved 
health achieved in a ``3-P'' bill simply to make a political statement 
are the ones clinging to the worst parts of the Clean Air Act, the 
litigation, not the emissions reductions of the acid rain program.
    Thank you.

    Senator Inhofe. Senator Jeffords.

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

    Senator Jeffords. Thank you, Mr. Chairman, for holding this 
important hearing.
    A decade and a half ago I worked with many of the current 
members of the committee in crafting the Clean Air Amendment of 
1990. We and some of the legends of this committee and this 
institution--John Chafee, Pat Moynihan, George Mitchell, and 
others--banded together to write a law that has resulted in 
great health and environmental benefits. Today, in great 
contrast, we will debate the merits of S. 131.
    I am not putting it mildly when I state that S. 131 
eviscerates the Clean Air Act. S. 131, as introduced, 
represents the biggest rollback of the Act ever presented to 
this committee. I believe most laws can be improved. Once 
again, I repeat my willingness to negotiate and to compromise 
to make improvements in the existing Clean Air Act to increase 
guaranteed public health and environmental benefits, but S. 131 
is not a net improvement.
    The Clean Air Act is working, despite the continuing 
efforts of the Bush administration to undermine it and to 
protect industry at the expense of public health. I understand 
that power plant owners want a new law to escape vigorous 
enforcement of the Clean Air Act, particularly New Source 
Review. The power plant companies want further delay of legal 
deadlines to achieve the health-based standards of poor ozone 
and fine particulate matter. Utilities want to be shielded from 
reducing toxic air pollutants like mercury and other heavy 
metals, and from achieving modern emission standards, and most 
fuel plants want to put off dealing with the global warming 
forever, but now is not the time to fulfill the polluters' wish 
list.
    Since 1990, more than 70 million tons of pollution have 
been reduced, and the law is still working, accruing more than 
$110 million in net benefits every year. Amazingly, those 
reductions occurred while GDP rose considerably and electricity 
prices increased by less than 1 percent per kilowatt hour, an 
incredible success.
    S. 131 radically slows that progress and reverses course. 
S. 131 rewrites major portions of the Clean Air Act to delay 
attainment of the health-based standards, leaving millions of 
Americans to breathe dirty air longer. The bill never achieves 
the emissions reductions claimed by the proponents. The caps 
are not really caps and the bill is rife with loopholes for 
polluters and litigation.
    This bill takes the efficient market-based system set up in 
1990 and dismantles it. The States' ability to rely on Federal 
action to prevent interstate transport of air pollution is 
crippled by S. 131. The current Act's drive for continual 
improvement of pollution control technology, and for new and 
modified sources would be stifled. S. 131 actually increases 
greenhouse gas emissions by 13 percent or more in 2020.
    S. 150, the Clean Power Act, my bipartisan bill with 18 co-
sponsors, achieves greater pollution reduction faster, and with 
greater benefits for society, as does Senator Carper's.
    Unfortunately, S. 131 and the Administration's proposed 
interstate rule is much less about obtaining the maximum 
benefits than it is about providing maximum protection to the 
utility industry from the requirements of the present Clean Air 
Act.
    S. 131 is really quite a sweetheart deal: All of the 
permits or allowances to pollute are handed over to industry 
sources for free. Yes, for free. Under S. 131, the public, who 
really owns the rights to the air, would see higher medical and 
insurance costs due to the pollution that lingers longer than 
the law allows.
    Let me leave you with some sobering thoughts. Everyday 
power plant pollution contributes or causes 68 Americans to die 
prematurely, 1,000 to have non-fatal heart attacks, and 
thousands of adults and children to have asthma attacks so 
severe that they will go to the hospital, and 6.6 million tons 
of carbon dioxide will add to the already serious dangerous 
interference with the earth's climate system.
    Today, we spend about $1 billion or more of taxpayers' 
money on homeland security to protect against a certainly 
dangerous, but uncertain threat. How much will we spend to save 
lives and protect the quality of lives hurt by pollution? The 
Clean Air Act sets out air quality and the emissions 
performance standards aimed at constantly reducing the known 
threat of certain damage from dangerous manmade emissions.
    Our energy sector must do more to meet those standards. 
They and the Federal Government must invest more seriously and 
rapidly in cleaner, more efficient technologies to protect 
health and the environment. S. 131 does nothing to meet those 
challenges, and allows more pollution than current law.
    [The prepared statement of Senator Jeffords follows:]

        Statement of Hon. James M. Jeffords, U.S. Senator from 
                          the State of Vermont

    A decade and a half ago I worked with many of the current members 
of this Committee in crafting the Clean Air Act Amendments of 1990.
    We and some of the legends of this Committee and this institution, 
John Chafee, Pat Moynihan, George Mitchell and others banded together 
to write a law that has resulted in great health and environmental 
benefits.
    Today, in great contrast, we will debate the merits of S. 131. I am 
not putting it mildly when I state that S. 131 eviscerates the Clean 
Air Act. S. 131, as introduced, represents the biggest rollback of the 
Act ever presented to this Committee.
    I believe most laws can be improved. Once again, I repeat my 
willingness to negotiate and to compromise to make improvements in the 
existing Clean Air Act to increase guaranteed public health and 
environmental benefits. But, S. 131 is not a net improvement.
    The Clean Air Act is working, despite the continued efforts of the 
Bush Administration to undermine it and to protect industry at the 
expense of the public health. I understand that power plant owners want 
a new law to escape vigorous enforcement of the Clean Air Act, 
particularly New Source Review. The power plant companies want further 
delay of legal deadlines to achieve the health-based standards for 
ozone and fine particulate matter.
    Utilities want to be shielded from reducing toxic air pollutants, 
like mercury and other heavy metals, and from achieving modern emission 
standards. And most fossil fuel plants want to put off dealing with 
global warming forever.
    But now is not the time to fulfill the polluters wish list. Since 
1990, more than 70 million tons of pollution have been reduced and the 
law is still working, accruing more than $110 billion in net benefits 
every year.
    Amazingly, those reductions occurred while GDP rose considerably 
and electricity prices increased by less than one cent per kilowatt-
hour. An incredible success.
    S. 131 radically slows that progress and reverses course. S. 131 
rewrites major portions of the Clean Air Act to delay attainment of the 
health-based standards--leaving millions of Americans to breath dirty 
air longer.
    The bill never achieves the emissions reductions claimed by the 
proponents. The caps are not really caps and the bill is rife with 
loopholes for polluters and litigation.
    This bill takes the efficient market-based system set up in 1990 
and dismantles it. The states' ability to rely on Federal action to 
prevent interstate transport of air pollution is crippled by S. 131.
    The current Act's drive for continual improvement of pollution 
control technology from new and modified sources would be stifled. S. 
131 actually increases greenhouse gas emissions by 13 percent or more 
in 2020.
    S. 150, the Clean Power Act, my tri-partisan bill with 18 
cosponsors, achieves greater pollution reduction, faster and with 
greater benefits for society. As does Senator Carper's.
    Unfortunately, the S. 131 and the Administration's proposed 
interstate rule is much less about obtaining the maximum benefits than 
it is about providing maximum protection to the utility industry from 
the requirements of the current Clean Air Act. S. 131 is really quite a 
sweetheart deal. All of the permits or allowances to pollute are handed 
out to industry sources for free.
    Under S. 131, the public, who really own the rights to the air, 
would see higher medical and insurance costs due to pollution that 
lingers longer than the law allows.
    Let me leave you with some sobering thoughts. Everyday, on average, 
power plant pollution will contribute to or cause 68 Americans to die 
prematurely, 1000 to have a non-fatal heart attack, and thousands of 
adults and children to have asthma attacks so severe they will go the 
hospital. And 6.6 million tons of carbon dioxide will add to the 
already serious risk of dangerous interference with the earth's climate 
system.
    Today, we will spend about $1 billion or more of taxpayer's money 
on homeland security to protect against a certainly dangerous but 
uncertain threat. How much will we spend to save lives and protect the 
quality of lives hurt by pollution?
    The Clean Air Act sets out air quality and emissions performance 
standards aimed at constantly reducing the known threat of certain 
damage from dangerous manmade emissions.
    Our energy sector must do more to meet those standards. They and 
the Federal Government must invest more seriously and rapidly in 
cleaner, more efficient technologies to protect health and the 
environment. S. 131 does nothing to meet these challenges and allows 
more pollution than current law. It won't make a better tomorrow.
    Thank you.

    Senator Inhofe. Thank you, Senator Jeffords.
    We are going to adhere to the 5 minute rule on opening 
statements, because we have a long hearing here. So if you all 
would cooperate I would appreciate it. Don't feel compelled to 
spend a full 5 minutes if you don't want to.
    Senator Isakson, I believe.
    Senator Isakson. Thank you very much.
    Senator Inhofe. By the way, after we are completed with our 
opening statements, we will conclude opening statements and not 
go back to them if others come in.
    Yes, Senator Isakson.
    Senator Isakson. Thank you very much, Mr. Chairman. I ask 
unanimous consent my entire statement be submitted for the 
record.
    Senator Inhofe. All statements will be made a part of the 
record.

           OPENING STATEMENT OF HON. JOHNNY ISAKSON, 
             U.S. SENATOR FROM THE STATE OF GEORGIA

    Senator Isakson. I am delighted to be here, although this 
is my second participation as a member of this committee. I 
understand this is the 24th hearing the committee has held 
since 1998 on this issue, and I commend the Chairman for his 
dedication to bring the issue to the floor for us to have a 
full debate.
    It is a critical issue. In the State of Georgia it is a 
very critical issue. In my State, 28 of 159 counties, including 
Walker and Catoosa Counties in the mountains, through the 
metropolitan Atlanta area, down the Chattahoochee River to 
Muskogee County and the greater Columbus area, are non-
attainment for particulate matter; and 22 of those 150 counties 
in the same area are non-attainment for ozone. The fact is 
about 60 percent of Georgia's population lives in non-
attainment areas. I think the goals of Clear Skies and the 
goals of this bill are appropriate and will be good for 
Georgians.
    I am especially interested in the benefits for Georgia 
regarding the transition areas. Under Clear Skies, areas that 
are projected to meet ozone and fine particulate standards by 
2015 as a result of Clear Skies would have a legal deadline to 
do so. These areas would be designated transitional, rather 
than non-attainment, and would not have to adopt local 
measures, except as necessary, to quality for transitional 
status. Clear Skies will allow many of Georgia's counties to be 
designated transitional and ultimately in attainment. I believe 
that, with some minor change protecting States from the threat 
of lawsuit as a result of these designations, this provision 
will dramatically benefit not just Georgia, but the Nation.
    Clear Skies will help to solve the clean air crisis by 
responsibly synchronizing the Nation's environmental, energy, 
and economic policies. By reducing emissions to historic lows 
and helping to ensure continued access to reliable low-cost 
electricity, we are implementing a formula that is critical to 
job creation and to Georgia and to America's global 
competitiveness, and to the quality of life of the citizens of 
the State that I represent.
    I yield back.
    [The prepared statement of Senator Isakson follows:]

   Statement of Hon. Johnny Isakson, U.S. Senator from the State of 
                                Georgia

    Thank you, Chairman Inhofe, for holding this hearing. I hope that 
this hearing, the 24th hearing on this issue by my count since 1998, 
will underscore the need for Clear Skies. I know that I certainly am 
hopeful that we can report this legislation out of Committee, and to 
the floor for a vote where the entire Senate can debate the merits of 
the bill.
    In my state of Georgia 28 of 159 Counties, including Walker and 
Catoosa Counties in the mountains, through Metro Atlanta, and down to 
Muscogee County and the Metro Columbus area, are in non-attainment for 
particulate matter. 22 of 159 counties over the same geographic area 
are in non-attainment for ozone. In fact, about 60 percent of Georgia's 
population lives in a non-attainment area. We have impaired waters from 
high mercury levels and, in a state where we celebrate the outdoors, 
over half of Georgia's lakes and rivers have mercury-based fish 
consumption advisories. Coal fired power plants are a large source of 
these mercury levels. In light of the troubled history of Clean Air Act 
regulations and the delays that have prevented their full and timely 
implementation, Clear Skies is the best solution for reducing toxic 
power plant emissions by meaningful levels, and for making sure those 
reductions actually become reality.
    As I mentioned in last week's subcommittee hearing, I am especially 
interested in the benefits for Georgia in the section regarding 
``Transitional Areas''. Under Clear Skies, areas that are projected to 
meet the ozone and fine particles standards by 2015 as a result of 
Clear Skies would have legal deadline of 2015 for meeting these 
standards (i.e., will have an attainment date of 2015). These areas 
would be designated ``transitional'' areas, instead of ``non-
attainment'' or ``attainment,'' and would not have to adopt local 
measures except as necessary to qualify for transitional status). They 
would have reduced air quality planning obligations and would not have 
to administer more complex programs. Clear Skies will allow many of 
Georgia's counties to be designated ``transitional'', and ultimately in 
attainment. I believe that, with some minor changes protecting states 
from the threat of lawsuit as a result of these designations, this 
provision will dramatically benefit not just Georgia but the nation.
    America has made much progress since 1970 and the passage of the 
Clean Air Act, however we still face major air quality challenges in 
many parts of the country. Clear Skies is the most important step we 
can take to address these challenges. Clear Skies will help solve the 
current clean air crisis by responsibly synchronizing the nation's 
environmental, energy, and economic policies. By reducing emissions to 
historic lows and helping to ensure continued access to reliable, low-
cost electricity, we are implementing a formula that is critical to job 
creation and to Georgia and America's global competitiveness.
    Congress needs to act now so that we may begin achieving emissions 
reductions and their related health benefits sooner rather then later. 
I look forward to working with you Mr. Chairman to pass Clear Skies, 
and improve our nation's air quality. Thank you.

    Senator Inhofe. Thank you, Senator Isakson.
    Senator Carper.

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

    Senator Carper. Thank you, Mr. Chairman, and thanks for 
holding this hearing.
    Mr. Connaughton, welcome. I look forward to getting to know 
you better and having a chance to talk about some of these 
issues with you further, beyond our meeting today.
    Mr. Chairman, I have two unanimous consent requests, if I 
could. One, on my way to Washington earlier this week, I was 
looking through our local paper, the News Journal, and I came 
across an Associated Press story written by Charles Hanley. It 
may have appeared in your papers at home. But the headline is, 
``Warmer World, Shrinking Glaciers;'' the sub-headline: ``From 
Alaska to Patagonia, Climate Change is Taking a Toll.''
    Some of you have heard me say this: I am a Johnny-come-
lately on global warming, but I have become convinced over time 
that something is going on in our world. And to the extent that 
we begin taking some corrective actions now, not just us in 
this Country, but nations all over the world, we will be happy 
that we did, rather than taking some far more Draconian steps 
later on.
    Senator Jeffords has alluded to this. I have been here for 
4 years, but the history of this committee, this is a committee 
that works well across the aisle, Democrats and Republicans. To 
the extent we get anything done, whether it is brownfields or 
the earlier Clean Air Act, it is because we work together. If 
we don't do that in this case as well, we are not going to get 
much done. In fact, we will end up with the kind of gridlock 
that has characterized too much of what goes on in Washington 
in recent years.
    Later today I am going to be involved in a meeting with 
Republican and Democratic Senators on class action reform. 
Tomorrow there will be a markup in the Judiciary Committee on 
class action reform. It is a product of literally years of 
bipartisan effort to hammer out a compromise to bring to the 
Senate floor, I hope next week, legislation that will provide 
for, I think, a more level playing field in our legal climate 
in this Country.
    That is a contentious issue and, frankly, so are the issues 
that are before us today. The only way we have gotten to the 
point where we are in class action is we decided that the 
Republicans are not going to do this on their own, or Democrats 
either. It is going to be a genuine effort to reach across the 
aisle to work within the committees of jurisdiction and, 
frankly, to work outside those committees of jurisdiction; for 
the Administration to play a constructive role and to get us to 
a point where we are about to take up that legislation and, I 
think, pass it with a large bipartisan majority.
    That example and an earlier example that I cited last week, 
with the passage of 9/11 legislation, we had Senators Collins 
and Lieberman really providing what I call the gold standard 
for Democrats and Republicans working together and working 
through tough issues. We did that in those instances and, 
frankly, we need to do it here. I was privileged to spend an 
hour or so with my dear friend, Senator Voinovich, yesterday in 
his office to talk through some of these issues to see where we 
can begin to find common ground, and we are going to make every 
effort to do that.
    Mr. Chairman, I would just urge you to reach out to folks 
on our side in the same way that George and I have reached out 
to one another. It may be too late to do that, I hope not, and 
I would urge you to do that. I would urge my friend, Senator 
Jeffords, if that hand is extended, that we take it and see how 
we can move forward.
    The issues here are difficult: Should we include carbon? 
Should we address the issue of global warming or not? I think 
you have a proposal from Senator Jeffords which is the Kyoto 
standard and you have a proposal from the Administration that 
says we are not going to do anything at all. There has to be 
something in between those two polar positions. There is. I 
think it is the legislation that Senator Chafee and Senator 
Gregg and Senator Alexander introduced in the last Congress and 
will probably reintroduce shortly.
    But there has to be a middle ground. There has to be a 
middle ground between a position that says we are not going to 
change New Source Review at all and we are going to get rid of 
it entirely. There has to be some middle ground there where we 
cannot necessarily get rid of it, but we can improve it.
    I would ask unanimous consent for the record to submit this 
letter that we got today. It is from a legislator in Maryland 
who is the chairman of the National Conference of State 
Legislators Environmental and Natural Resources Committee, and 
it is basically a letter calling on us to not hamstring the 
States in their efforts to clean up their own air, and asking 
that we not doctor New Source Review. It doesn't say we 
shouldn't change it at all, but asks that we not doctor it.
    Senator Inhofe. Without objection, it will be a part of the 
record.
    [The referenced document follows:]
      
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    Senator Carper. The last thing I want to say is this. My 
time is almost up. I am just going to stop right here.
    Again, I urge a bipartisan effort. I will be happy to 
engage with the Chairman and others, Democrats and Republicans, 
on this committee. But if we don't do that, we are not going to 
get much done.
    Senator Inhofe. Thank you very much, Senator Carper.
    Senator Vitter.

 OPENING STATEMENT OF HON. DAVID VITTER, U.S. SENATOR FROM THE 
                       STATE OF LOUISIANA

    Senator Vitter. Thank you, Mr. Chairman. I want to thank 
you and Senator Jeffords for holding the hearings.
    Thanks to all of the witnesses for their upcoming 
testimony.
    I am very interested in this issue. It certainly affects 
Louisiana and communities across Louisiana, as it does 
communities across the Country, so I look forward to being very 
involved, proactive and constructive, on this issue. In terms 
of passing new legislation, I am eager to pass legislation more 
flexible and which actually allows us to make improvements in 
air quality in a more efficient and cost effective manner. 
Unfortunately, under existing law, I think you have a lot of 
examples contrary to that, including in places like Louisiana. 
I will give you an example for instance, which is a big case in 
Louisiana.
    In Baton Rouge, as we move from a 1-hour ozone standard to 
a more stringent 8-hour ozone standard, Baton Rouge's 
classification could go from severe to marginal. Yet, under 
existing law, even as that happens, Baton Rouge would be held 
to the existing severe restrictions under the old 1-hour 
standard. That seems to be inconsistent and almost nonsensical. 
The other thing it produces is litigation, which is ongoing and 
which just adds cost and delay into the whole notion of moving 
forward and actually producing cleaner air.
    So I think from that example and other similar examples 
across the country, there is a huge amount of room for 
improvement for increased flexibility, for increased 
opportunity, for efficiency and cost effectiveness in cleaning 
up the air and meeting much more stringent standards. I look 
forward to working toward that goal.
    I have a formal opening statement which I will submit to 
the Record. I will apologize ahead of time, I will have to 
leave soon to perform my freshman duties of presiding on the 
Senate floor, but that is no statement contrary to my great 
interest in this issue.
    [The prepared statement of Senator Vitter follows:]

    Statement of Hon. David Vitter, U.S. Senator from the State of 
                               Louisiana

    Thank you, Mr. Chairman for scheduling today's hearing on the Clear 
Skies Act of 2005. I also want to thank our witnesses for coming today 
to testify about this legislation, which is based on one of the more 
successful programs established by the Clean Air Act.
    We have made major strides in the fight for cleaner air since 
Congress first passed the Clean Air Act in 1970. But we continue to 
face air quality challenges in different parts of the United States, 
and Americans still suffer adverse impacts from air pollution. An 
important next step would be for Congress to enact sensible legislation 
that will achieve additional health benefits and reductions in air 
pollution without triggering endless lawsuits.
    In cities across the nation, our current approach to regulating air 
quality has generated ambiguities that have triggered such lawsuits. In 
Baton Rouge, Louisiana, for example, a lawsuit has been filed over 
Federal environmental officials' approach to regulating ozone levels 
there.
    Until 2004, the Environmental Protection Agency applied a so-called 
``one hour'' ozone implementation standard to the city of Baton Rouge. 
In 2004, however, the EPA replaced its ``one hour'' standard with a 
new, more stringent and protective ``eight-hour'' ozone implementation 
standard. Baton Rouge, which was classified as a ``severe'' non-
attainment area under the EPA's old ozone implementation standard, is 
now considered a ``marginal'' area under the agency's new standard.
    To re-classify Baton Rouge as ``marginal'' under EPA's more 
stringent standard and yet continue to insist that the city meet the 
requirements for areas that are designated as ``severe'' seems to me to 
be inconsistent--especially when Baton Rouge has not even implemented 
any of the ``severe'' requirements. But my constituents in Baton Rouge 
tell me that this is exactly what the government is requiring of them 
under the EPA rule implementing the 8-hour standard. Not surprisingly, 
this situation has resulted in the filing of a lawsuit.
    I look forward to hearing from our witnesses on this and other 
important issues. Once again, thank you, Mr. Chairman for your efforts 
to organize this hearing.

    Senator Inhofe. Thank you, Senator Vitter.
    I think by agreement, Senator Obama, that Senator 
Lautenberg will go next. Is that correct?

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

    Senator Lautenberg. Thank you, Mr. Chairman. I thank my 
colleague for deferring. I have a hearing on the soon to be, 
Secretary of Homeland Defense, so I appreciate it.
    The Clean Air Act has been called the most effective 
environmental law ever written, so I am not sure that it needs 
fixing. It may need extending, but I don't think it needs the 
kind of fixing that we are looking at presently. We heard last 
Wednesday, despite double and triple digit growth in our GDP, 
energy consumption and population, that clean air programs have 
succeeded in reducing pollution by 51 percent. We have made 
significant progress over the years, but we still haven't 
finished the job.
    Last year, Americans in over 450 counties had to breathe 
unhealthy air that failed to meet the Environmental Protection 
Agency's health standards for ozone. I have seen the tragic 
effects of air pollution first-hand. Asthma took my sister's 
life, and I have watched my 10-year-old grandson, who also has 
asthma, struggle at times just to breathe. As a father and 
grandfather, I don't want other members of my family poisoned 
by the air they breathe, and I don't want anybody else's family 
to have to breathe that air. That is why I have looked at this 
new Clear Skies bill and have become more concerned as I 
examine it.
    According to EPA, under the bill before us, about 200 of 
the dirtiest power plants wouldn't have to cut their emissions 
at all. In New Jersey, one-third of the ozone and over one-
third of the mercury emissions come from other States. But 
under this bill, we couldn't do anything about that upwind 
pollution, except hold our breath. Moreover, this bill doesn't 
require power plants to reduce any of their emissions of 66 
deadly toxic pollutants.
    Mr. Chairman, I appreciate the hard work that you and 
Senator Voinovich have put into developing the Clear Skies 
bill, but on reflection, I think that we are better off 
sticking with the Clean Air Act and do a better job of 
enforcing its provisions, and I thank you, Mr. Chairman.
    [The prepared statement of Senator Lautenberg follows:]

  Statement of Hon. Frank Lautenberg, U.S. Senator from the State of 
                               New Jersey

    The Clean Air Act has been called the ``most effective 
environmental law'' ever written. So I'm not sure that the Clean Air 
Act needs to be ``fixed.'' As we heard last Wednesday, despite double- 
and triple-digit growth in our GDP, energy consumption and population, 
Clean Air Act programs have succeeded in reducing pollution by 51 
percent.
    So we have made significant progress over the years, but we haven't 
finished the job by any stretch. Last year, Americans in over 450 
counties had to breathe unhealthy air that failed to meet the 
Environmental Protection Agency's health standards for ozone.
    I've seen the tragic effects air pollution can have first-hand. 
Asthma took my sister's life, and I've watched my 10-year old grandson, 
who also has asthma, struggle just to breathe. As a father and 
grandfather, I don't want my family to be poisoned by the air they 
breathe. That's why, the more I've looked at this new ``Clear Skies'' 
bill, the more concerned I've become.
    According to EPA, under the bill before us, about 200 of the 
dirtiest power plants wouldn't have to cut their emissions at all. In 
New Jersey, one-third of the ozone and over one-third of the mercury 
emissions come from other States. But under this bill, we couldn't do 
anything about that upwind pollution except hold our breath.
    About 10 percent of New Jersey's school kids have asthma, and about 
150,000 of them are hospitalized each year, yet the analysis shows that 
``Clear Skies'' would let industry off the hook for meeting vital 
health standards for three major pollutants until 2025 or even later. 
Any possible public health reason for such a bill completely escapes 
me. Moreover, this bill doesn't require power plants to reduce any of 
their emissions of 66 deadly toxic pollutants.
    Mr. Chairman, I appreciate the hard work that you and Senator 
Voinovich have put into developing the ``Clear Skies'' bill. But, on 
reflection, I think we're better off sticking with the Clean Air Act 
and do a better job of enforcing its provisions.
    Thank you, Mr. Chairman.

    Senator Inhofe. Thank you, Senator Lautenberg.
    Senator Murkowski.

OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM THE 
                        STATE OF ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
the opportunity this morning.
    Welcome to Mr. Connaughton and those other witnesses that 
we will hear this morning.
    This is a very important hearing, I think, to all of us. I 
think it is clear, as you listen to the discussion already, 
there is not agreement as to what it is that we do next, but I 
think it is important to take the step, I believe, with the 
legislation that we have before us, in recognizing that we must 
begin somewhere.
    The Clean Air Act, as Senator Lautenberg has mentioned, 
together with the amendments that were passed in 1990, has been 
remarkably successful in improving the Nation's air quality, 
and one of the most significant chapters in the clean air 
success story has been the reduction of emissions that 
contribute to acid rain through the cap and trade policies, 
which free the industry from the most onerous restraints of a 
command and control regime.
    I am pleased to note that the legislation before us does 
recognize the success of the Acid Rain Program and carries on 
that good work by taking the next steps toward further 
reduction in two key acid rain precursor chemicals, 
specifically the NOx and the SOx. It will also add a new and 
equally strict ceiling for mercury and, in the process, will 
achieve significant additional reductions in fine particulates 
and ozone.
    At the same time, it will provide a measure of certainty 
for the companies that it affects. It will neither cause 
massive power cost increases or open the door to excessive 
delays. If the goal is to reduce pollution, this is the most 
practical step that can be taken.
    Of course, one thing that we do not have in Clear Skies is 
regulation of carbon dioxide as a pollutant.
    Now, many people, many scientists believe very fervently 
that human-produced CO2 may cause or aggravate 
global climate warming, and many point to warming in my State 
of Alaska or situations up in the Arctic as evidence. But 
despite what we may see up North, the science on manmade 
CO2 as an agent of climate change, including in the 
Arctic, is anything but undisputed, is anything but conclusive.
    Now, we have had rising temperatures. We are seeing changes 
in the Arctic. That much we know. But the question is what is 
causing the changes. We have seen periods of higher 
temperatures and higher CO2 which have occurred 
multiple times in the past, raising questions about whether 
today's experience is truly unique or whether it is part of a 
cycle.
    Temperatures in the Arctic also seem to respond to a 
several-decade-long cycle which may be tied to an ocean 
phenomenon called the Pacific Decadal Oscillation. In other 
words, the warming that we may be seeing in the Arctic may be 
driven by regular predictable changes in the ocean, instead of 
by CO2 stimulated increases in the air temperature. 
But all of this together just kind of leads us to the place 
where we are--is there conclusive evidence, is there 
demonstrable evidence that says that CO2 is an agent 
of climate change?
    We do know that if we add CO2 regulation to this 
bill it will seriously delay action on NOx, SOx, mercury, 
ozone, and particulates, and that it would impose extraordinary 
costs by forcing a rapid, large shift toward natural gas. As 
you know, I have been pushing to get more of Alaska's natural 
gas to market here in the lower 48 States, but I believe it is 
better to let gas usage and gas supply grow in unison, rather 
than cause hardship through steps that create large, unplanned 
increases in energy costs.
    Balancing the need for improved air quality, while avoiding 
unrealistic demands that would damage our economy and social 
fabric, is not an easy task. This is a good start this morning, 
and I appreciate the work, Mr. Chairman, that you and so many 
others have made on this issue. Thank you.
    [The prepared statement of Senator Murkowski follows:]

Statement of Hon. Lisa Murkowski, U.S. Senator from the State of Alaska

    Thank you, Mr. Chairman. I too would like to welcome and thank our 
witnesses for taking time to explore the ramifications of this 
important legislation. I hope we can all agree on the importance of 
moving forward with this key part of the President's agenda.
    The Clean Air Act, together with amendments passed in 1990, has 
been remarkably successful in improving the nation's air quality. The 
2004 EPA annual report notes that since 1970, air pollution overall has 
been reduced almost 50 percent while economic growth in the U.S. has 
increased by 160 percent. This is one of the great success stories of 
the century.
    One of the most significant chapters in the Clean Air success story 
has been the reduction of emissions that contribute to acid rain 
through ``cap and trade'' policies that set solid upper limits, but 
allowed trading in allowances for certain pollutants, freeing industry 
from the most onerous restraints of a command and control regime and 
allowing it to develop more workable methods of reducing pollution.
    I'm pleased to note that this bill does recognize the success of 
the acid rain program and carries on that good work by taking the next 
steps toward further reductions in two key Acid Rain precursor 
chemicals emitted by many large electricity generation facilities, 
especially those using coal. These chemicals are nitrogen oxides 
(NOX) and sulphur dioxide (SO2). It will also add 
a new and equally strict ceiling for mercury (Hg), an emission which 
may have a variety of adverse health effects, especially on pregnant 
women and infants. In the process, it will achieve significant 
additional reductions in fine particulates and ozone.
    At the same time, it will provide a measure of certainty for the 
companies it affects. Unlike some proposals, and unlike the purely 
administrative approach which can be stymied by repeated litigation, it 
will neither cause massive power-cost increases or open the door to 
excessive delays. If the goal is to reduce pollution, this is the most 
practical step that can be taken.
    Clear Skies is consistent with the recommendations of the National 
Research Council, which encouraged air quality efforts that are ``less 
bureaucratic,'' with ``more emphasis on results than process.'' That is 
precisely what we have in Clear Skies.
    One thing we do not have in Clear Skies is regulation of carbon 
dioxide (CO2) as a pollutant. As someone said the other day, 
it is the proverbial ``elephant in the room.''
     CO2 is recognized as a ``greenhouse gas.'' Many people, 
including many scientists, believe fervently that human-produced 
CO2 may cause--or aggravate--global climate warming. Many 
point to Arctic areas including much of my State of Alaska and say that 
physical changes are occurring that prove the case. That being the 
case, they say, we should treat CO2 as a pollutant and bring 
it under the same system we are using for chemicals on which the 
scientific evidence is undisputed.
    However, the science on man-made CO2 as an agent of 
climate change including in the Arctic--is anything but undisputed.
     CO2 accounts for .04 percent of the atmosphere. Less 
than 5 percent of that is attributed to human emissions. The concern is 
that the earth's ability to scrub CO2 from the air through 
the growth of plants and other natural methods of sequestering carbon 
may be exceeded by the addition of human emissions to natural sources.
    Much of the debate over CO2 goes back to the so-called 
``hockey stick''--a temperature graph developed for the U.N.'s 
Intergovernmental Panel on Climate Change, which appeared to show 
relatively stable temperatures for hundreds of years, then a 
temperature spike during the 20th Century presumably due to increased 
CO2 emissions from internal combustion engines, electrical 
generation plants, and so on. However, recent published papers indicate 
it has serious problems, including adjustments that made past 
temperatures seem cooler than they were, reliance on overly narrow data 
sets, and worst, mathematical faults in the basic formula, which may be 
so flawed that it would have produced the same ``hockey stick'' even if 
one used it to graph random numbers instead of temperature estimates.
    Other research shows that in the Arctic, periods of higher 
temperatures and higher CO2 have occurred multiple times in 
the past, raising questions about whether today's experience is truly 
unique or just part of a natural cycle.
    Temperatures in my part of the Arctic also seem to respond to a 
several-decade long cycle, which may be tied to an ocean phenomenon 
called the Pacific Decadal Oscillation. In other words, warming Arctic 
temperatures and effects such as changes in the ice pack and permafrost 
structures may be driven by regular, predictable changes in the ocean, 
instead of by CO2-stimulated increases in air temperatures.
    All these questions about CO2 as an agent of climate 
change are still unresolved. Because of that, it is less than wise to 
rely on claims that there is a scientific ``consensus'' in which all 
the questions are answered and all the skeptics hushed.
    It does appear clear, however, that adding CO2 
regulation to this bill would seriously delay action on NOx, 
SO2, mercury, ozone and particulates, and that it would 
impose extraordinary costs by forcing a rapid, large shift toward 
natural gas. While I would very much like to see Alaska's abundant 
natural gas being utilized in the Lower 48 States, and intend to do 
everything I can to make that happen, I believe it is better to let gas 
usage and gas supply grow in unison, rather than cause hardship through 
steps that create large, unplanned increases in energy costs.
    Finally, Mr. Chairman, I want to congratulate both you and Senator 
Voinovich, the chair of the Clean Air Subcommittee, your very able 
staffs, and those in the Administration who helped develop the option 
before us today. Balancing the need for improved air quality while 
avoiding unrealistic demands that would damage our economy and social 
fabric is not an easy task. I believe this is a good start and look 
forward to a stimulating and informed discussion by our witnesses.

    Senator Inhofe. Thank you, Senator Murkowski.
    Senator Obama.
    Senator Obama. My understanding is that my distinguished 
senior colleague from Connecticut has to chair a committee, so 
I will defer to him.
    Senator Inhofe. Senator Lieberman.

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

    Senator Lieberman. Thanks, Mr. Chairman.
    Thanks, Senator Obama. You are building up a lot of credits 
with the rest of us this morning.
    Thanks, Mr. Chairman, for convening this hearing. I know 
that we all agree on the need for clean and unambiguous clean 
air legislation to protect the quality of the air we breathe. 
It obviously makes sense because it protects the health of our 
people, it makes sense because it gives business a clear set of 
rules to live by, and it makes sense because, if we do this in 
a way that allows us to achieve the greatest gains at the 
lowest possible cost, it will help our businesses compete in 
the global marketplace.
    Unfortunately, in too many ways, my conclusion is that the 
Clear Skies Act does not make sense and does not achieve the 
goals that we wanted to achieve. It damages the existing tools 
of the Clean Air Act that have worked very successfully and 
effectively to protect individual States; it drops requirements 
that EPA update its standards on a regular basis; it ends 
requirements that best pollution control technology be employed 
in new facilities; it permits some industries to opt in to 
Clear Skies provisions that may well be weaker than current 
Clean Air Act protections; it enacts SO2 and NOx 
provisions that are not strong enough; it does virtually 
nothing to reduce mercury pollution for more than a decade. Of 
course, as we all know, it does not deal with carbon dioxide 
emission and, therefore, the problem that to me is real, which 
is the warming of the globe.
    All this has an effect on my constituents in Connecticut, 
both individuals who suffer from air-induced diseases, such as 
asthma, and from businesses that are affected by the inadequacy 
of what exists now and what is being proposed in this 
legislation.
    I know that some have said that we should be realistic and 
that the choice here in this session is between the Clear Skies 
Act or nothing. I regret to say that if that is the choice, I 
would recommend that we do nothing. But there are better 
choices, and we can achieve them together. Naturally, I believe 
that the Clean Power Act, which Senator Jeffords and Senator 
Collins and I and many others have co-sponsored, is a better 
choice, but I understand that some parts of that are not 
acceptable to others.
    I hope we can find a way to do more than emit a lot of 
sound and fury that leads to nothing ultimately done in 
response to a very real and dangerous problem, which is the 
pollution from various sources of our air. Bottom line, I am 
convinced we can do better than the Clear Skies Act, and I know 
that we must in the public's interest, and I hope together that 
we can find a way to do that.
    Senator Obama, thank you very much.
    Mr. Chairman, thank you. I look forward to working with you 
to find some common ground on an urgent problem.
    [The prepared statement of Senator Lieberman follows:]

       Statement of Hon. Joseph I. Lieberman, U.S. Senator from 
                        the State of Connecticut

    Thank you Mr. Chairman, for convening this hearing to discuss 
multi-pollutant legislation, which is so important to the health and 
well-being of the American people.
    I know we all agree there is certainly a need for clear and 
unambiguous Clean Air legislation to protect the quality of the air we 
breathe. It makes sense because it protects the health of our citizens. 
It makes sense because it gives business a clear set of rules to live 
by. And it makes sense to do this in a manner that achieves the 
greatest gains at the lowest possible cost, to help our businesses 
compete in the global marketplace.
    Unfortunately, in too many ways S. 131, the so-called ``Clear 
Skies'' legislation, doesn't make sense.
    It damages the tools of the Clean Air Act that have worked so 
effectively to protect individual states. It drops the requirements 
that EPA update its standards on a regular basis. It ends requirements 
that best pollution control technology be employed in new facilities. 
It permits some industries to ``opt-in'' to Clear Skies provisions that 
may be weaker than current Clean Air Act protections.
    It enacts SO2 and NOx provisions that are too weak. It 
does virtually nothing to reduce mercury pollution for more than a 
decade. And Clear Skies does nothing to address carbon dioxide 
emissions and global warming, wasting an opportunity to deal with all 
pollutants at once--and give industry the certainty they need now to 
tackle pollutants in a clear and cost-effective manner.
    The Administration has been telling us that Clear Skies gives 
states the ``tools they need'' to combat air pollution. They say that 
it protects states rights by permitting them to set stricter standards 
within their own borders. But what they don't mention is that what 
Clear Skies takes away are the useful tools that states already have 
under current law to fight pollution that comes from outside their 
borders, from another state upwind.
    In Connecticut, we often suffer from ozone smog caused by NOx 
emissions. Asthmatic children and adults in our state have attacks 
triggered by ozone and by the fine particles formed from 
SO2. Parents who have children come to them in the middle of 
the night and say three simple words--``I can't breathe''--know just 
how frightening asthma can be. We can reduce the number of times this 
happens to children throughout our nation by implementing rigorous and 
fair pollution standards that can be met with today's technology at an 
affordable cost. To think that we won't because of Clear Skies should 
be reason enough to go back to the drawing board and get it right.
    The health effects of air pollution go beyond asthma. Each year, 
nationwide, these particles are also responsible for some 15,000 
premature deaths. These are preventable deaths. Does Clear Skies help 
reduce this number? Probably. What they won't tell you is that 
protections provided by the Clean Air Act--our current law--do a better 
job of reducing this number farther and faster.
    Throughout the country, many of our fish are tainted by high levels 
of mercury, which in the northeast is caused mostly by mercury emitted 
by U.S.-based power plants. There should be no debate that mercury, 
SO2, and NOx must be reduced decisively and quickly.
    What about carbon dioxide? The legislation before us does nothing, 
absolutely nothing, to begin to address CO2 emissions. Why? 
Many in industry have told us that it would be far more cost effective 
to factor CO2 requirements into their planning at the same 
time that they are making changes to control for SO2, NOx, 
and mercury.
    CO2 concentrations have been rising due to emissions 
from power plants, cars and other manmade sources. We have now reached 
the point where further study without action is both dangerous and 
costly. There is scientific consensus that global warming is a real and 
potentially disastrous phenomenon. The rest of the developed world is 
already taking steps, opening up market opportunities through 
development of new technologies and new trading markets while the U.S. 
stands behind and does nothing. Our businesses that compete in an 
international marketplace are facing carbon regulation overseas as we 
speak.
    Shame on us if 100 or 200 years from now our grandchildren and 
great-grandchildren are living on a planet that has been irreparably 
damaged by global warming, and they ask, ``How could those who came 
before us, who saw this coming, have let this happen?''
    Clear Skies falls far short of what is needed, what is achievable, 
what is cost-effective, and what makes good common sense. Some say be 
realistic. The choice is between the Administration's Clear Skies or 
nothing. If that is the choice, I choose nothing. But there are better 
choices, including the Clean Power Act that Senator Jeffords, Senator 
Collins and I and many others have introduced. Or there may be some, 
third alternative. The fact is we can do better than Clear Skies and we 
must.

    Senator Inhofe. Thank you, Senator Lieberman.
    Senator Bond.

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

    Senator Bond. Thank you, Mr. Chairman, for holding this 
hearing.
    Last week, one of our colleagues defined the Clear Skies 
debate as jobs versus the environment, and I know that both of 
them are very important. Jobs and job creation played a major 
role in the Presidential election. I would say it played a role 
in my election, too, because I was able to save 5,000 Missouri 
manufacturing jobs and 20,000 jobs across the Midwest and 
Southeast.
    Jobs are vital to our families. Without a job, families 
can't survive; heating bills are not paid, food is not put on 
the table. Without a job, medical insurance is not affordable, 
medical bills are not paid. A community without jobs cannot 
afford enough police, cannot afford fire stations and 
libraries. A community without jobs is a community without a 
future.
    I would say also, without jobs and economic growth, the 
environment suffers. The environment suffers mightily. I 
visited East Germany, Poland, and Czechoslovakia before the 
wall came down, and I saw the economic stagnation under the 
communist system and the absolutely appalling pollution, the 
rivers running brown and smelling worse from chemical 
companies, the haze from power plants that was unregulated. It 
was appalling. I have seen the same thing in other areas of the 
world that are not developed. So we have to have economic 
development along with environmental improvement.
    But environmental debates don't have to be solely about 
jobs versus the environment. I would say that the Missouri 
example I cited is an example where we protected jobs, the 
environment, and public safety, to boot. Now, my colleague on 
this committee from California won't like the example, but I 
understand where she comes from, literally. Two years ago we 
stopped a State regulation that would have killed 5,000 jobs in 
Missouri and 20,000 jobs elsewhere in the Country. That 
proposal would have cut emissions in lawnmowers, weed whackers, 
chainsaws by requiring the use of catalytic converters.
    Now, such a change would have put manufacturing companies 
in Missouri and Kentucky and Alabama out of business. 
Manufacturers would have closed their plants, laid off workers, 
most likely moved the jobs to China. Fire chiefs and consumer 
safety advocates were also deathly afraid of the proposal, 
these catalytic converters, operating at 1100 degrees only 
inches from hands or legs. A chainsaw scares me bad enough with 
a blade, not to worry about being fused into my leg. But 
firefighters feared a new round of forest and brush fires from 
operating these superheated engines.
    A long story short, we produced a win-win solution. 
California was allowed to keep its State rule, but we limited 
the ability to move the rule to other States. We protected the 
environment by requiring EPA to conduct a new round of national 
pollution cuts from small engines, and we will have pollution 
reduction from small engines across the Nation. Consumer safety 
is protected because the California rule and the EPA rule will 
be reviewed under the safety requirements of the Clean Air Act.
    I think we have a similar opportunity for a win-win with 
Clear Skies, which offers a balanced approach: it will protect 
jobs and the environment. It will be the largest ever pollution 
cut from electric power plants, reducing acid rain causing 
SO2 by 70 percent. Clear Skies will reduce smog 
causing NOx by 70 percent and, for the first time ever, mercury 
emissions will be reduced by 70 percent.
    Clear Skies is not without cost: It will impose a $50 
billion mandate on power companies to install new pollution 
control technologies. But it will prevent costly litigation 
from delaying environmental improvements and running up costs 
in the courtroom rather than in cutting pollution. Clear Skies 
omits a carbon mandate that would drive jobs out of this 
Country. If you were worried about air pollution and 
environmental pollution, just drive those jobs to China and 
India.
    Of course, they aren't covered by Kyoto; they will continue 
to grow in their pollution. The more jobs they steal, the more 
pollution will blow across to Alaska. If there is manmade 
CO2 and environmental changes, Alaska can look to 
its neighbors south and west. That is where the pollution will 
come from. But that isn't going to pass, because it would rob 
our families of jobs, threaten to drive up the heating bills of 
elderly people, who would have to choose between heating and 
eating; it would force farmers, putting tremendous burden on 
them and on other producers.
    But I think Clear Skies protects family budgets from steep 
electric increases, protects jobs, protects manufacturing by 
attaining clean air standards in almost every local area 
through power plant regulation alone, and protects 
transportation by attaining clean air standards in almost every 
local area through power plant regulation alone. It keeps coal 
flowing, it avoids a hyper-dependence on extremely expensive 
and short supply natural gas. It will protect our environment, 
our workers, and our families, and I urge my colleagues to 
support the Clear Skies bill.
    Senator Inhofe. Thank you, Senator Bond.
    Senator Obama, do you want to continue to yield to your 
colleagues?
    Senator Obama. If Senator Clinton needed to, I would yield 
to her happily. But I think she is going to be here for a 
second.
    Senator Inhofe. Fine. You are recognized.

 OPENING STATEMENT OF HON. BARACK OBAMA, U.S. SENATOR FROM THE 
                       STATE OF ILLINOIS

    Senator Obama. Thank you, Mr. Chairman, other members of 
the committee.
    I had the occasion of listening to some of the testimony 
during the subcommittee, and I think that Senator Bond is right 
to point out that there are economic costs to environmental 
regulation. I represent a State that depends heavily on the 
coal industry, particularly in southern Illinois. We have a 
large chemical industry that has been hurt by high natural gas 
prices. I think that there is no doubt that when we think about 
the environment, we have to balance costs and benefits.
    There also is a cost when our environment is degraded. As 
some of you may be aware, my daughter is one of the 230,000 
children in Illinois with asthma. Chicago is the second 
hardest-hit city in the Country from power plant pollution. 
Every single river and lake in Illinois has an advisory for 
fish consumption due to the risk of mercury consumption. As I 
mentioned in the subcommittee, when you have had a daughter who 
comes into your bedroom in the middle of the night and says she 
can't breathe, then you are mindful of the fact that even if 
there are some costs that go along with controlling pollution, 
those costs may well be worth it.
    Now, I recognize that many members of this committee have 
been frustrated because this issue has been debated for several 
years. There are no perfect answers to this issue. But there 
are a few things I think we should all be clear about. The 
option, at least as I understand it, is not between the Clear 
Skies Act and doing nothing at all. The question is, is the 
Clear Skies Act an improvement over the status quo, which is 
the Clean Air Act? It strikes me that one of the first tasks of 
our committee should be to take the physicians' axiom to heart, 
first do no harm.
    So, when I am weighing the benefits of Clear Skies, I am 
not weighing it against no environmental regulation whatsoever, 
I am weighing it against what would happen if we simply 
maintain the status quo. It seems to me, at least, that I have 
not heard any dispute that although Clear Skies would 
significantly reduce emissions compared to doing nothing 
whatsoever, that, in fact, it also represents a diminishing 
level of protection compared to what exists currently. I think 
that is something that we probably should acknowledge.
    The second point that has been raised several times is the 
issue of attainment, and Chicago is an area that is having 
difficulty achieving attainment. I am happy to discuss whether 
or not the mechanisms that we have set up for local communities 
to attainment are too onerous or too strict or there is too 
much command and control. While there is some flexibility in 
terms of how to do this, simply saying that since these 
communities are having trouble reaching attainment, we 
shouldn't even try, strikes me as a self defeating attitude. At 
the very least we should acknowledge that if we are lowering 
the standards, then there is going to be more air pollution in 
these communities than there otherwise would be.
    A final point I guess I would make is with respect to the 
issue of litigation, which has come up frequently. I think one 
of the things that I heard during the subcommittee was the 
complaint that the existing rules were consistently tied up in 
litigation and, as a consequence, we weren't getting sufficient 
environmental protection, period.
    This reminds me a little bit of the kid who murders his 
parents and then complains about being an orphan. I mean, if 
companies are initiating litigation because they don't want to 
be regulated at all, and then they come and complain about the 
fact that there is too much litigation, that doesn't seem to me 
a good reason for this committee to make changes on existing 
law.
    I know my time is up, Mr. Chairman, but I guess I would 
suggest that if we are going to have a debate about this issue, 
then it should be an honest debate. The fact that there is 
litigation out there is not, in and of itself, a justification 
for changing the law. If we are going to change the law, it 
should be because we are going to strike a better balance 
between the environment and economic issues than we are 
currently doing.
    Senator Inhofe. Thank you, Senator Obama.
    Senator Chafee.

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

    Senator Chafee. Thank you, Mr. Chairman, for holding this 
hearing. As you can tell by many of the opening statements, 
there is a lot of difference of opinion here, particularly 
between the Chairman and the ranking member. We are going to 
hear from Mr. Connaughton the benefits of the legislation 
before us, and then we will hear in the next panel from John 
Walke, who will testify the bill is far dirtier than simply 
implementing the Clean Air Act; that the bill is far dirtier 
than competing legislative proposals; that the bill is far more 
costly than competing legislative proposals; that global 
warming is urgent and real; and that delay increases both the 
danger and the cost.
    At the same time, our constituents are saying to us all we 
want is clean air; we send you to Washington to look after our 
health. From industry, at the many hearings we have had, all 
they are saying is give us some certainty. So I think the path 
that might be best taken is with Senator Carper and somewhere 
in the middle of some of the differences here so we can give 
both our constituents their healthy air and industry some 
certainty.
    So thank you, Mr. Chairman, for holding this hearing.
    Senator Inhofe. Thank you, Senator Chafee.
    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 think the last 
two statements really sum up my feelings. On the one hand, do 
no harm. There is significant evidence based on the analysis of 
this legislation that from many perspectives it would do harm.
    But, second, that there ought to be an opportunity for some 
kind of bipartisan effort that recognizes the costs and also 
the benefits of perhaps improving on the Clean Air Act.
    We have held numerous hearings in this committee on this 
issue, and one thing that has been established beyond any doubt 
is that the human health and environmental consequences of 
power plant emissions are real and substantial. I think we 
should just start with that, as opposed to dismissing it or 
diminishing it. A recent study estimates that current soot and 
smog from power plant emissions cause more than 24,000 
premature deaths, 38,200 non-fatal heart attacks, hundreds of 
thousands of asthma attacks, and millions of days of lost work 
each year. That goes right to the heart of our economic 
productivity.
    Now, in New York these effects are felt throughout our 
State, and we have perhaps borne the brunt of a lot of the 
environmental damage over the last decades. One of the other 
witnesses on the next panel will be the executive director of 
the Adirondack Council, Brian Houseal, and Dr. Houseal will 
represent a group that is perhaps one of the most effective 
advocates for clean air in our Country, and they are here to 
testify against this legislation, despite their longstanding 
belief that we could and should do better when it comes to NOx 
and SOx and mercury.
    Mercury pollution is an incredible problem throughout New 
York and the Country, and we have a lot of work that we could 
do together, and I am very proud that in New York our 
Republican Governor, our Democratic attorney general, and our 
leading utilities came together and reached an agreement about 
how to cut emissions from coal-fired plants in New York State. 
It seems to me that is the kind of model that we should be 
looking to follow here in the Senate.
    But Clear Skies does nothing to address the climate change 
effects of power plant emissions of carbon dioxide; it does not 
meet the test on any of the pollutants we are concerned about; 
it includes a weak mercury cap that requires no mercury-
specific pollution controls to be added until 2018. In 
addition, the bill allows unlimited mercury trading, something 
that I don't think should be permitted. Why should we be in the 
business of permitting the trading of poison? It ignores the 
significant evidence of local mercury deposition around power 
plants.
    Clear Skies effectively eliminates Clean Air Act tools such 
as New Source Review and section 126, tools that States such as 
New York have relied on to reduce pollution in a bipartisan 
fashion. Clear Skies weakens pollution control technology 
standards that apply to new power plants and other industrial 
sources, reduces protections for national parks. What do we get 
in return for these changes to the Clean Air Act? Well, we get 
promised reductions in NOx and SOx that are too small and too 
slow to enable States and localities to meet the ozone and fine 
particulate matter standards by the current deadlines. 
Realizing that caps would be inadequate to reach the ozone 
standards by the current Clean Air Act deadlines, this 
legislation simply delays these deadlines by up to 11 years.
    So there is just so much in this that sends us backwards. 
As a Senator from New York, the question for me is simple: Why 
would I support a bill that delays achievement of clean air 
goals in my State, while eliminating significant tools that my 
State has used in the past?
    I also want to point out that the cost estimates are very 
difficult to actually get a handle on, but it is important to 
recognize that when the Clean Air Act Acid Rain Program was 
debated in 1990, there were lots of rather high estimates. The 
Edison Electric Institute estimated compliance with SOx caps 
would cost utilities $7.4 billion by 2010; the EPA's estimate 
was $4.6 billion. In fact, the actual cost was considerably 
less, between $1.1 and $1.5 billion.
    So I think that we can do better. I don't believe this 
legislation puts us on the right path. I think that if there is 
an opportunity for legitimate compromise, I want to be part of 
that. But, if not, I certainly, on behalf of my State, cannot 
support legislation that turns the clock back instead of 
forward.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Clinton.
    We have two more. 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. I am pleased to be here today for our second 
meeting this year and our 24th hearing since 1998 on multi-
emissions issues.
    Today, we are here to discuss the Clear Skies Act, and I am 
sure that Mr. Connaughton will do a good job of outlining the 
fact that this will reduce power emissions by 70 percent. The 
beauty of Clear Skies is that the reduction levels and 
timelines are placed in statute and cannot be delayed. The bill 
expands the Acid Rain Program, our Nation's most successful 
clean air initiative, which has had virtually no litigation, 
100 percent compliance, and reduced sulfur dioxide emissions by 
38 percent below 1990 levels at less than the projected costs.
    As I discussed at our last hearing, it is important we put 
multi-emission legislation in context. We live in a global 
marketplace. Let us not fool ourselves, environmental and 
energy policies have a direct impact on our ability to keep and 
maintain jobs in this Country. Just ask the thousands of 
Ohioans who are in manufacturing who are no longer working. We 
simply cannot continue to rely on natural gas for power 
generation. Our clean air policies have played a major role in 
the fact that nearly 88 percent of the new power plants built 
since 1992 have been natural gas fired. We have a chart here 
that shows how natural gas costs have increased dramatically 
during the last several years. [See chart on page 35.]
    The chemical industry, which is very big in the State of 
Ohio, at one time was an exporter of products. Today, we have a 
9.6 billion deficit. That means that we have gone from a 
Country that exports chemical products to now that has changed 
and now we are importing those products.
    Annual funding for the Lehigh Program, a program for low-
income families, has increased 73 percent since 1999 because of 
higher heating prices.
    This legislation is also needed now because 509 counties 
were recently designated as non-attainment for the new National 
Ambient Air Quality Standards for ozone and particulate matter. 
This is a very serious problem in terms of job growth and 
capital investment.
    Chart 2 will show that under Clear Skies and EPA's new 
diesel fuel and engine regulations to reduce sulfur, 90 percent 
of the counties would come into attainment without any local 
effort. So we have the counties that are not in attainment. 
With Clear Skies and the new diesel, you see from that chart 
that most of them are going to come into compliance because of 
Clear Skies and the new diesel requirements. These designations 
are based on stricter standards, not dirtier air. [See chart on 
page 36.]
    I think a lot of people are under the impression that the 
air is dirtier today. It is much cleaner than it was. Since 
1970, while our Nation and economy have grown substantially, 
emissions of the six main pollutants have decreased by 50 
percent. We need Clear Skies to continue at a higher rate this 
Country's commitment to cleaning up the environment and 
protecting public health. You can just see our economy has 
grown, number of miles traveled, more people in this Country, 
and even during that period we have reduced the six worse 
toxins by over 50 percent.
    The Clean Air Act's highly litigated and cumbersome 
provisions make it unclear what or when reductions will be 
achieved. Critics of Clear Skies point to the section 126 
petition, NAAQS, and New Source Review program as affected, but 
history tells a different story. For example, chart 4. This 
chart shows the timeline for when EPA began considering a new 
standard for ozone and when State implementation plans are due. 
Folks, it took 15 years, 15 years to get the new ozone 
standards that are now for ozone and particulate matter. [See 
chart on page 37.]
    The New Source Review program is far worse. I will quickly 
run through some of it. Twenty pages of regulations in 1980 
defining NCRs turned into 4,000 pages of guidance documents. A 
1990 lawsuit and court decision resulted in EPA rulemaking. In 
1992 working groups were formed to reform New Source Review, 
with contradictory proposed changes in 1996 and 1998. EPA filed 
enforcement actions in 1999, of which several are still being 
litigated and different courts have reached different opinions 
in two of these cases.
    On top of this, critics have taken out of context two 
sections of a 208 National Academy of Science interim report to 
claim that New Source Review, if unchanged, will result in more 
reductions than Clear Skies. This is absolutely ridiculous. 
Clear Skies cap all power pollution immediately, while NSR is 
applied on a case-by-case basis under a standard that now has 
two different and litigated interpretations.
    With all this lengthy litigation, no one really can tell us 
when the NSR program is going to really take effect. It won't 
be until 2007 before you have oral arguments on two different 
cases on NSR. One says that the rule is OK, it complies with 
the law; the other one says it doesn't comply with the law. So 
that is what we get from NSR: More lawyers, more litigation.
    Until we get passed this rhetoric of the false charges that 
Clear Skies is less than existing law, we are going to go 
nowhere. Time is of the essence. If we continue the way we are, 
folks, we are going to have a stalemate of losses, uncertainty 
for jobs and our competitive position in the global 
marketplace, and, more importantly, more importantly, for those 
of us who are concerned about the environment, uncertainty for 
our environment and for public health in this Country.
    [The prepared statement of Senator Voinovich follows:]

       Statement of Hon. George V. Voinovich, U.S. Senator from 
                           the State of Ohio

    Good morning. I am pleased to be here today for our second meeting 
this year and our 24th hearing since 1998 on multi-emissions issues.
    Today we are here to discuss the Clear Skies Act, which would be 
the most aggressive clean air proposal ever enacted a 70 percent 
reduction of power plant emissions. In just 3 years, nitrogen oxides 
would be capped at a reduction level of 59 percent and in 5 years, at a 
59 percent reduction level for sulfur dioxide and 29 percent for 
mercury. As former EPA Administrator Leavitt stated before my 
Subcommittee on April 1 of last year, the sulfur dioxide and nitrogen 
oxides reductions ``will result in some $50 billion'' investment by 
power plants.
    The beauty of Clear Skies is that the reduction levels and 
timelines are placed in statute and cannot be delayed. The bill expands 
the Acid Rain Program our nation's most successful clean air 
initiative, which has had virtually no litigation, 100 percent 
compliance, and reduced sulfur dioxide emissions by 38 percent below 
1990 levels at less than the projected cost.
    As I discussed at our hearing last week, it is important that we 
put multi-emissions legislation in context. We live in a global 
marketplace. Let us not fool ourselves environmental and energy 
policies have a direct impact on our ability to keep and maintain jobs 
in this country.
    We simply cannot continue to rely on natural gas for power 
generation. Our clean air policies have played a major role in the fact 
that nearly 88 percent of the new power plants built since 1992 have 
been natural gas fired. [CHART 1] As a result of this increased demand, 
natural gas prices have doubled their historical price and we now have 
the highest prices in the developed world. As the second largest 
consumer of natural gas (quote): ``The chemical industry's eight-decade 
run as a major exporter (ended in 2003) with a $19 billion trade 
surplus in 1997 becoming a $9.6 billion deficit'' (March 17, 2004 
Washington Post article).
    Tom Mullen from Cleveland Catholic Charities testified in 2002 that 
we must also consider the devastating impact of increased electricity 
and home heating costs on the poor and elderly. Annual funding for the 
LIHEAP program to help low income families with their home heating 
bills has increased by 73 percent since 1999 due to higher prices.
    Clear Skies will keep jobs in America and energy prices stable, by 
allowing us to keep using coal our most abundant and cheapest energy 
source. This legislation is needed now because 509 counties were 
recently designated as in nonattainment for the new National Ambient 
Air Quality Standards for ozone and particulate matter. As Cincinnati 
Chamber of Commerce President Michael Fisher stated in testimony on 
April 1, 2004, ``job growth and capital investment are hindered by the 
nonattainment designation.'' [CHART 2] Under Clear Skies and EPA's new 
diesel fuel and engine regulations to reduce sulfur, 90 percent of the 
counties would come into attainment without any local effort.
    These designations are based on stricter standards, not dirtier 
air. [CHART 3] Since 1970, while our nation and economy have grown 
substantially, emissions of the six main pollutants have decreased by 
51 percent. We need Clear Skies to continue at a higher rate this 
country's commitment to cleaning up the environment and protecting 
public health.
    We all want cleaner air the important question is how we achieve 
it. Instead of having this debate, false claims are being made that 
existing programs are better than Clear Skies. Conrad Schneider from 
Clean Air Task Force testified last week that: (quote) ``. . . existing 
provisions of the Clean Air Act could potentially require future 
emission reductions beyond . . . '' Clear Skies.
    Could potentially require'? This is exactly the point. We need to 
stop talking about the ideal world and focus on the real world. The 
Clean Air Act's highly litigated and cumbersome provisions make it 
unclear what or when reductions will be achieved. Critics of Clear 
Skies point to the Section 126 petitions, NAAQS, and New Source Review 
programs as effective, but history tells us a different story:
     In 1997, eight Northeastern states petitioned EPA to force 
Midwestern states to reduce nitrogen oxides. After four Federal court 
decisions and EPA retooling, this culminated in the NOx SIP call, which 
went into effect not in May 1998 but in May 2004 7 years after the 
process began.
     [CHART 4] This chart shows the timeline for when EPA began 
considering a new standard for ozone and when State Implementation 
Plans are due. It took 15 years!
     The New Source Review program is far worse. I will quickly 
run through some of it:

           20-pages of regulations in 1980 defining NSR has 
        turned into 4,000 pages of guidance documents;
           A 1990 lawsuit and court decision resulted in an EPA 
        rulemaking in 1992;
           Working groups were formed in the 1990's to reform 
        NSR with contradictory proposed changes in 1996 and 1998;
           EPA filed enforcement actions in 1999 of which 
        several are still being litigated and different courts have 
        reached different opinions in two of the cases.
           In 2003, EPA issued two rules to reform the program, 
        both of which have spurred lawsuits. Oral arguments on one of 
        these rules are not expected to occur until at least 2006.
           On top of all this, critics have taken out of 
        context two sentences of a 208 page National Academy of 
        Sciences interim report to claim that the NSR program if 
        unchanged will result in more reductions than Clear Skies. This 
        is ridiculous. Clear Skies caps all power plant pollution 
        immediately while NSR is applied on a case-by-case basis under 
        a standard that now has two different--and litigated--
        interpretations. With all this lengthy litigation, no one can 
        really tell us what the NSR program will get us--except more 
        lawyers!

    Until we get past this rhetoric and the false charges that Clear 
Skies does less than existing law, we are going to go nowhere. In my 
opinion, these arguments are just a facade for the real motive of 
holding up this legislation for the political issue of capping carbon 
dioxide emissions which cannot pass the Senate and definitely not the 
House. This will leave us in this stalemate of lawsuits and uncertainty 
for businesses and more importantly uncertainty for our environment and 
public health.
    Time is of the essence. It is either now or never. I met with 
several of my colleagues on the other side and plan to keep working 
with them and every member on this Committee to get something done to 
reduce sulfur dioxide, nitrogen oxides, and mercury emissions 
substantially.
    I look forward to hearing from the witnesses. Thank you.

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    Senator Inhofe. Thank you, Senator Voinovich.
    Senator DeMint.

  OPENING STATEMENT OF HON. JIM DeMINT, U.S. SENATOR FROM THE 
                    STATE OF SOUTH CAROLINA

    Senator DeMint. Thank you, Mr. Chairman. I want to thank 
you and Senator Voinovich for your leadership on this issue.
    I am convinced that the Clear Skies Act will continue to 
improve air quality without making it prohibitively expensive 
to do business in the United States. The Commerce Department is 
already estimating that it is 22 percent more expensive to do 
business in this Country than our leading trading partners, and 
our good intentions when it comes to regulations are clearly 
hurting people. We must agree on this committee how to balance 
the quality of air, the quality of our life, with the quality 
of our jobs.
    I don't think anyone on this side is pretending that this 
bill will solve all the environmental problems that we have, or 
address all the concerns related to global climate change. But 
I think if we really look at the legislation, we can agree that 
this is a big step forward. We do now have a quagmire of 
antiquated regulations that are open to subjective and 
arbitrary interpretation. This is not just something we are 
coming up with here. The power companies and industries that 
have to deal with this are telling us that the regulations are 
clearly doing as much, if not more, to promote lawsuits than 
they are doing to really help us cleanup our air.
    I believe the Clear Skies Act does replace piecemeal 
regulations with a single set of requirements for our three 
major air pollutants and guarantees that specific emission caps 
are achieved by deadlines that have been enacted into law. We 
must translate our good intentions into good regulatory system, 
and I do believe that the Clear Skies Act is a major step 
toward not only cleaning up our air, but clearing out our 
courtrooms and helping to protect the jobs. I encourage all of 
my colleagues to take a look at the legislation itself, the 
deadlines, and see that this is a big step forward.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator.
    Senator Jeffords, did you want to make a statement for 
another member?
    Senator Jeffords. Senator Baucus contacted me earlier this 
morning and wanted me to mention that he had hoped to be here, 
but business in the Finance Committee--and if you have seen the 
load that he has, you will understand that--has kept him 
otherwise occupied.
    Senator Inhofe. All right. That is fine.
    All right, Mr. Connaughton, you have survived that. We will 
recognize you for a 5-minute opening statement. Can you hold it 
to that?
    Mr. Connaughton. I am going to do my best, Mr. Chairman.
    Senator Inhofe. All right.

    STATEMENT OF JAMES L. CONNAUGHTON, CHAIRMAN, COUNCIL ON 
                     ENVIRONMENTAL QUALITY

    Mr. Connaughton. Good morning, Senator Jeffords, members of 
the committee. I think it is fitting that we are here on 
Groundhog Day. Those of you who know the Bill Murray movie know 
that we went around and around and around and around, but it 
did have a happy ending. It had a happy ending with a lot more 
information, a lot of accommodation, a lot of understanding of 
each side's views, and I am hopeful that that is where we are 
going to come out 24-plus hearings later on this issue that we 
were actually debating since, really, Senator Moynihan led the 
charge back in the mid-1990s on this idea of a multi-pollution 
strategy.
    I am here before you today to strongly urge the passage of 
this initiative. The time is now, and if it is not now, the 
States won't get the assistance they need.
    President Bush is dedicated to providing our families and 
our children with a healthier, more economically vibrant and 
secure future. Now, important to achieving that future is 
bringing proven innovative tools to the task, and Clear Skies 
legislation is just such a tool. It means healthier citizens--
and that is paramount--stronger communities--and I will talk 
about that in a minute--more affordable, reliable, and secure 
energy; and improved wildlife habitat across America.
    First, Clear Skies will significantly expand the Clear Air 
Act's most innovative and successful program. We are working 
within the Clear Air Act here--we are not changing it--in order 
to cut power plant pollution of sulfur dioxide, nitrogen 
oxides, and, for the first time, mercury by an unprecedented 70 
percent in two phases. These cuts in pollution will provide 
substantial health benefits; they will prolong the lives of 
thousands of Americans annually; and they will improve the 
conditions of life for hundreds of thousands of people with 
asthma, other respiratory illnesses, and heart disease.
    Now, I am the son of a pediatrician who worked with inner-
city Baltimore populations, and my father is also a chronic 
asthmatic who, through my entire lifetime, every month I would 
take him to the emergency room. I have a deep personal reason 
for being involved in this policy discussion.
    Clear Skies will produce these health benefits, though, 
with greater certainty by imposing a mandatory, permanent 
multi-pollutant cap on emissions for more than 1300 power 
plants nationwide. That will reduce pollution by as much as 9 
million tons annually at full implementation. Utilities will 
achieve this by spending more than $52 billion, the single most 
costly Clear Air Act program in the history of the Clean Air 
Act, to install, operate, and maintain new, primarily clean 
coal pollution abatement technology on both old plants and all 
the new ones. Clear Skies will require only a few dozen 
government officials to operate it, and will assure compliance 
through a system that is both easy to monitor and extremely 
easy to enforce.
    Accordingly, the Clear Skies cap and trade approach will 
give our States the most powerful tool that we can provide to 
them for meeting our new tough health-based air quality 
standards for fine particles and for ozone. At the end of last 
year, EPA completed the process of informing over 500 
counties--and these are major manufacturing counties--that they 
either do not meet or that they contribute to another county 
not meeting these standards.
    That relatively straightforward act has now triggered a 
very complex process that will lead later this year to a frenzy 
of intrastate negotiation and conflict, interstate negotiation 
and conflict, Federal-State negotiation and conflict, with 
State and citizen petitions, with lawsuits, and heightened 
uncertainty in energy markets, producing an avoidable and 
negative impact on local investment, jobs, and consumer energy 
bills. Now, that is not a pretty picture. We can get there that 
way; we did it in the 1990s. But we have a better way.
    As a former Governor, the President personally experienced 
and understands the complexities of developing and implementing 
State plans to meet air quality standards. That is why he wants 
a common sense solution. Clear Skies, in conjunction with the 
cuts we just did on diesel pollution across the entire fleet of 
diesel engines, is going to provide that solution.
    Most counties, as Senator Voinovich indicated, are going to 
be able to meet these standards without having to do anything 
more at the local level. For the relative few that remain, for 
the first time in the history of the Clean Air Act, they will 
have less work to do. They will have an easier burden at the 
local level to design the strategies that they need to meet 
these standards.
    This simple approach could save our governments and our 
communities and the private sector, including environmental 
groups, literally tens of millions of dollars in negotiating 
costs alone. Now, that alone is something to be happy about.
    But more importantly, Clear Skies is about keeping 
communities together. The up-front assurance of meeting air 
standards will give communities the certainty they need not 
just to keep the manufacturing jobs they have got, but to 
actually attract new ones back into the places where 
generations of their families currently live, where they 
currently live, where they currently play together, and where 
they currently pray together. This is about keeping communities 
in our manufacturing centers. The absence of such certainty is 
what is driving an exodus of jobs out of these communities. 
They go either to greenfields locations in the United States 
or, more importantly, they go overseas. We can do better.
    We have talked about the affordability issues. I won't go 
into that further. But I also want to end with let us not 
forget the huge wildlife habitat benefits of this policy. These 
are guaranteed emission reductions of sulfur dioxide, nitrogen 
oxide, and mercury. That is great for our lakes, it is great 
for our streams, it is great for the Adirondacks.
    I just urge this committee to take the moment. Let us live 
the promise of Groundhog Day, that movie, and let us find that 
common ground, because it exists. We can find a path forward.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Mr. Connaughton.
    I noticed that you have charts here. Do you have a 
presentation that you are going to be making that would be 
beneficial to this hearing?
    Mr. Connaughton. Well, my chart here is similar to the one 
Senator Voinovich just put up. I have a second chart, if we get 
into Q&A, on sort of the relative proportion.
    Senator Inhofe. Oh, OK. Well, what I am going to do is I am 
going to give you some of my time. But I think first Senator 
Obama asked the question what will happen if we just maintain 
the status quo. Do you want to answer that question?
    Mr. Connaughton. Yes, I do.
    Actually, Senator Obama, I am a Chicago boy of 5 years and 
did a lot of work in my prior capacity doing environmental 
management work downstate. I have been in a lot of your 
manufacturing facilities.
    What the status quo means, especially for manufacturing 
communities, is it means they do not have the reliance that 
they are going to depend on for affordable and secure energy. 
We are already experiencing, especially in the manufacturing 
States, this volatility in natural gas prices that Senator 
Voinovich has pointed to. That is a direct result of the 
increase in the use of natural gas to generate energy. They are 
big hogs of natural gas.
    That creates a competition in a constrained market for 
natural gas that is much better as a feedstock, especially in 
chemical plants. Like auto parts manufacturers use natural gas 
as a direct energy source. That is the highest best use for 
natural gas in manufacturing. By the way, natural gas is the 
best thing to use, from an efficiency perspective, in people's 
homes. But every time you push natural gas into electricity 
generation, you are driving up the costs for these other--and, 
by the way, farmers, farmers in particular, they like low 
natural gas prices because that goes right into fertilizer.
    What the status quo is about, because we have just seen it 
in the last 4 or 5 years, is about shifting from coal fire 
generation to natural gas fire generation. What Clear Skies 
does is it creates the future for clean coal generation, and 
not just by putting massive controls on up to 86 percent of 
existing coal fire generation, but also by making sure that new 
coal fire generation is the next technology. Now, that is a 
great tradeoff.
    So you get a lot of clean coal and then you get a lot more 
stability in natural gas. That goes back to my community point. 
Then if you are in Decatur, Illinois and you are the mayor, you 
can actually invite manufacturers back in. I have reliable 
energy, I have clean air; the amenities of my community are 
what you would want them to be; you have efficiency by doing 
business here.
    That is really what is at stake in this whole discussion, 
and, again, I look forward to more questions on this point. 
This question is about meeting clean air standards. We all 
agree the standards are there, they are solid. We have 
deadlines. The States have to do it. This is a question of the 
method by which we get to meeting those air quality standards.
    Senator Inhofe. Very good.
    Now, Mr. Connaughton, now would be the time if you want to 
make any kind of reference to your charts and have someone 
assist you in doing that.
    Mr. Connaughton. Let me quickly have the first one go up.
    I just want to note this is for illustrative purposes. 
These are the 350-plus monitored counties that have to meet the 
new air quality standards. That is manufacturing America.
    Below is a chart that shows you with Clear Skies and the 
new diesel cuts. Based on EPA modeling, we expect the vast 
majority of those to meet the standard without having to do 
additional local controls. Now, those that are left, and there 
will be some left, they still have to take local action and 
they still have to meet the standards on time, it is just their 
burden will be easier. So we are not talking about putting off 
the date that they have to act, we are just talking about 
making their burden easier.
    And then the second one, if you would. This will actually 
be the first time in the history of the Clean Air Act that the 
utilities are going to end up doing more than their share of 
pollution cuts. Historically, for the last 35 years under the 
Clean Air Act, when the States have had the lead in cutting 
pollution, they always go to the utilities last, for all the 
obvious reasons. Under this scenario, utilities are currently 
responsible for nearly 69 percent of sulfur dioxide. Well, 
their share is going to get diminished to 44 percent. What that 
means is more flexibility for our manufacturers as they want to 
bring in new high tech facilities. That is what that means.
    Now, the same is true--we did the diesel cuts, and the 
diesel cuts are a massive reduction from the transportation 
sector for the first time. You all know how hard it is to 
control transportation at the local level.
    With these two programs we are getting the two hardest 
sectors to control to do more than their share for the first 
time. That is what we are talking about. So as we look at other 
legislative proposals, it is really a question of do you want 
to even go further in doing that. That is what the debate is 
about. And then we have to figure out the balance, the balance 
and how that affects these other strategies.
    Senator Inhofe. That is very good. Thank you, Mr. 
Connaughton.
    You will recall, I guess it was last year that we had the 
Catholic Charities man, Tom Mullins, I believe it was, from 
Ohio came in to talk about the devastating ability that the 
Jeffords bill--he was referring to your bill at that time, 
Senator Jeffords--would have on the impact to the elderly and 
the low-income families, and he described how over half of 
those residents in Ohio over the age of 65 have annual incomes 
under 15,000, and these people have a hard time just paying for 
bare necessities.
    A recent book called, ``Heat Wave, A Social Autopsy of 
Disaster in Chicago,'' chronicled the problems of elderly, low-
income Chicago residents in predominantly minority 
neighborhoods during the heat wave of 1995. Actually, over 700 
people died at that time. These are the same types of people 
that Mr. Mullins was referring to as having problems paying 
their electricity bills and would be the first harmed by the 
legislation.
    Have you taken all this into consideration? It is something 
nobody seems to ever want to talk about, but the economic 
impact that this would have on people.
    Mr. Connaughton. I think the best way to look at this in 
its most logical and politically understandable terms is what 
probable explains why we haven't done as much on power plants 
in the last 35 years is because the costs of these pollution 
controls get passed through directly to the consumers that you 
mentioned, especially the folks on low and fixed incomes.
    So especially in our big urban areas the mayors 
understandably have to make that tradeoff: Do I go after 
manufacturing sources? Do I go after other sources rather than 
go after my utilities to get these cuts. I believe, and 
certainly with my personal talks with a lot of mayors and 
county officials, that is what drives the fact that the 
localities haven't acted as much as they could.
    Now, we are in a great situation where, if we pursue the 70 
percent approach that gets us all the transport issues 
resolved, the solution is going to be controls on coal. So our 
projections show that we will continue to see electricity 
prices stay stable and continue to decline. That is great for 
people who have--was it Senator Voinovich? No, Senator Bond--to 
make a choice between heating and eating. And that is very real 
for a lot of people.
    So we can, through this approach, minimize the impact on 
the pass-through to our consumers, and we can maximize the 
cost-effectiveness of getting the pollution reductions. I think 
that is what we should all be after here.
    Senator Inhofe. Thank you very much.
    Senator Jeffords.
    Senator Jeffords. Mr. Chairman, before I start my 
questions, I ask consent that a letter from several religious 
groups opposing this bill be made a part of the record.
    Senator Inhofe. Without objection, so ordered.
    [The referenced document follows:]

        Testimony of Religious Leaders in Opposition to S. 131--
                      The Clear Skies Act of 2005

    As representatives of Christian denominations, we are called to 
express our grave moral concerns with the proposed changes to the Clean 
Air Act. After careful review of S. 131, the Clear Skies Act of 2005, 
we believe the legislation delays the critical action necessary to 
clean up our nation's air and fails altogether to address the real and 
present threat of global warming. We urge this committee to adopt 
amendments that would strengthen standards, speed up implementation, 
and control emissions of carbon dioxide.
    We believe clean air is a basic right and necessity for all life. 
Our faith teaches that human beings are stewards of God's creation. 
Unfortunately, we have too often abandoned this sacred responsibility 
at the altar of human consumption, arrogance and greed, leaving a 
legacy of pollution that threatens the health of communities and the 
very future of our planet. Today, we call on our elected leaders to 
reverse this legacy and enact bold legislation to reduce dramatically 
the emissions from power plants--the single largest stationary source 
of air pollution in the United States.
    We believe the costs associated with delay and inaction are 
unacceptable. The tragic toll of premature deaths, asthma attacks, lost 
days of school and work, polluted waterways and rising global 
temperatures is the result of an energy policy that is neither just nor 
moral. The heaviest toll is paid by the most vulnerable in our society 
including the poor, the elderly, children and pregnant women. Our faith 
calls us to speak out on their behalf and oppose legislation that would 
delay efforts to alleviate their suffering.
    We have embarked on a campaign within the religious community to 
educate and mobilize people of faith on the issue of air pollution. In 
the last year, we have encouraged our 100,000 congregations across the 
country to reflect on God's sacred gift of air by providing them with 
theological statements, worship materials, study guides and prayers. In 
addition, many of our denominations have adopted policy principles on 
power plant pollution and remain committed to supporting legislation 
that fulfills our biblically mandated responsibilities of stewardship 
and justice.
    In the Bible, the epistle James teaches us that faith without works 
is dead. It is not enough to simply proclaim respect and love for God's 
created world, we must live out that faith through our actions. Today, 
we call on our elected leaders to join us in defending God's creation 
by enacting strict emissions controls that will clean the air sooner 
rather than later and address the impending climate crisis.
    We appreciate the opportunity to share our concerns and we look 
forward to working with the committee to enact meaningful legislation 
this year.
            Sincerely,

          Rev. Brenda Girton-Mitchell,
          Associate General Secretary for Justice and Advocacy,
          National Council of the Churches of Christ in the USA
          Rev. Elenora Giddings Ivory,
          Director, Presbyterian Church (U.S.A.) Washington Office
          Maureen Shea, Director,
          The Episcopal Church Office of Government Relations
          Rev. Ron Stief,
          Minister and Team Leader, Washington Office,
          United Church of Christ Justice and Witness Ministries
          Karen S. Vagley,
          Director--Washington Office, Evangelical
          Lutheran Church in America (ELCA)
          Jim Winkler,
          General Secretary, General Board of Church and Society,
          The United Methodist Church.

    Senator Jeffords. Mr. Connaughton, does the President 
endorse S. 131?
    Mr. Connaughton. We don't take an Administration position 
until the bills are well evolved and on their way to a vote on 
the floor, Senator. But we think a lot of very good work has 
been done by the committee. I think it has incorporated a lot 
of input from outside groups, mayors, environmental groups, as 
well as the industry. So, we see very significant progress 
having been made to sharpen up the elements of this and, in 
fact, to address a number of the concerns that I have heard 
from this side of the dais.
    Senator Jeffords. Could you give us an idea of what changes 
would be necessary for the President to endorse it?
    Mr. Connaughton. We are still in the negotiation process, 
Senator, so I don't want to make specific points at this time. 
Our central concern has been that we attain a 70 percent cap in 
two phases, and that is in the bill; and the dates of the two 
phases are consistent with what we are after. Our central 
concern is this is designed in a way that we don't create an 
opt-in situation that will dilute the cap.
    That has been important to us and some good work has been 
done there. We want this designed in a way where, if this is 
producing the result that a current clean air program would 
otherwise produce, or do better, that that program would be 
replaced, but then it also retains the essential programs as it 
applies to the utilities--and this is something we cared 
about--it also retains the essential components.
    For example, the 126 process is kept, but is put in 
abeyance because we are effectively granting it up front in 
this first round, but we still have it come back again. That 
was important to us. It is also important to us to be sure that 
the bill clarifies that the States retain their full authority 
to act at the local level to get this remaining increment of 
pollution reductions that they will need. We did not want to 
impede their authority to do so. I think the bill has cleaned 
that up as well.
    So when you ask me, in broad measure, this bill, especially 
as it has evolved over the last couple of months, is now 
hitting the core points that we are most interested and 
concerned about.
    Senator Jeffords. That means, as I understand it, that you 
are not endorsing it at this time.
    Mr. Connaughton. Again, we do not take an endorsement of a 
bill until it is on the floor, but we are very pleased with the 
progress that has been made under the leadership of Senator 
Inhofe and Senator Voinovich.
    Senator Jeffords. Once upon a time in my office you told me 
that a three-pollutant bill would encourage power companies to 
invest in less carbon, more energy efficient generation. That 
is an odd and counterintuitive position, since there would be 
no carbon pricing or regulatory driver. But if you were 
accurate, then why does Clear Skies increase greenhouse gas 
emissions from the power sector by 13 percent, or 425 million 
tons in 2020?
    Mr. Connaughton. I do not recall that particular quote, 
but, if you will, I will talk about the carbon implications of 
Clear Skies. If you put a carbon cap into the utility sector 
process right now, the rational economic choice for those 
utility CEOs is to fuel switch to natural gas or to get out of 
natural gas. That is the rational economic choice. That is 
because the capital costs of getting the reductions that you 
would need are a lot cheaper. The up-front capital costs are a 
lot cheaper through natural gas or through getting other 
sources, like nuclear, for example.
    Coal, we don't have a technology today by which you can 
capture carbon from coal; it doesn't exist. In fact, the way 
you know that it is off in the future is the only thing we have 
going right now is a 2 billion plus investment of Federal 
taxpayer dollars that the Bush administration is moving forward 
with to try to find that opportunity for capturing carbon from 
coal. So that is the other issue, you can't meet a carbon cap 
by complying through coal.
    If, however, we sequence this process and we do a three-
pollutant strategy that is based on growing our reliance on 
clean coal, we can bring forward in the second phase the kind 
of technology that holds the promise of carbon capture. One of 
the most notable examples is the integrated gasification 
combined cycle process. That process, just by starting it up to 
cut air pollution, has a net efficiency--it is a huge net 
efficiency. I forget exactly the range, but I think it is 10 to 
25 percent. So that alone is a carbon offset in terms of coal 
fire generation. But it also holds the greater promise, because 
it is a much smaller engineered unit, it holds the greater 
promise of cost effectively removing carbon.
    Now, to get from here to there you have to have a pathway 
for a lot of investment in clean coal; otherwise, it will still 
be stuck in government laboratories, because there is no open 
market. So the way I see the issue, it is a matter of 
sequencing. If we can get $52 billion primarily oriented toward 
bringing online the next generation of clean coal, then we can 
spend that $2 billion in Federal subsidized research and put it 
on those units and do our best to find the most cost-effective 
ways to reduce coal. That is a much more powerful and more 
sustainable long-term strategy for dealing with carbon, and it 
is going to get us to our shared objective. And on this one we 
do have a shared objective: can we find a path of reducing 
carbon from coal that makes sense.
    Senator Jeffords. You stated that the U.S. Conference of 
Mayors endorsed the cap levels in S. 131. However, the mayors' 
position is still that until any new programs have been proven 
over time to be as protective as current Clean Air Act 
programs, they encourage EPA and the Congress to keep these 
programs in place, with multi-pollutant legislation as an 
addition to current clean air law. Why would you imply that 
they have endorsed this bill to gut the Clean Air Act?
    Mr. Connaughton. Actually, I don't imply that, Senator. My 
testimony indicated that the mayors specifically endorsed a 70 
percent cut in the three pollutants by 2020. They have then 
come forward and raised some of the same questions I am hearing 
about changes in other Clean Air Act programs. Now, I have 
heard many different concepts of what people are getting at 
with respect to that, and I think a lot of that has been raised 
with Senator Inhofe and Senator Voinovich. What I am seeing is 
adjustment of the bill to accommodate those concerns, because 
we share them. We want to be sure that the States do retain 
their authorities, the State-based authorities that are given 
to them under the Clean Air Act to do more.
    We also want to be sure we have a 126 process that does not 
go away. In fact, the NSR process, we have refined the NSR 
process, but that does not go away either, because we do want 
to be sure, if new plants come online, that they do go through 
a review process. In fact, what I have seen in the 
legislation--and we are negotiating the details of it right 
now--is the legislation will update the New Source performance 
standards for coal fire generation for the first time in a long 
time, which has been something that didn't happen under the 
prior Administration and we hadn't gotten to it yet. This 
legislation will do that.
    So I think the conversation, Senator, is moving in exactly 
the direction it should be moving to find that there is balance 
of tweaks to get the benefits of the Federal top-down mandate, 
but still reserve the flexibility the States need to implement 
their local programs.
    Senator Inhofe. Thank you, Senator Jeffords.
    Senator Isakson.
    Senator Isakson. Thank you, Mr. Chairman.
    Good morning. I apologize for having to be at another 
meeting during your testimony, but I have been reading it very 
quickly. Could you put the chart back up for just a second?
    Mr. Connaughton. Sure. The map?
    Senator Isakson. The map, I am sorry. I want to make sure I 
understand. At the top of those current 350-plus counties, the 
bottom, the reduction in the number of counties mean those that 
are no longer shown have gone into the transition category, is 
that correct?
    Mr. Connaughton. It means these counties meet the new 
standard. Now, some of them, I think a small subset of them--I 
think the transition discussion is about a small subset that, 
for example, if they have a 2013 date that they are supposed to 
meet the standard, that our models show that they will meet it 
in 2014 by reducing transported air pollution regionally. I 
think the transition process has tried to get at the point that 
some places--in fact, I think Georgia has one of them--they 
need the transported reductions to meet attainment. You 
couldn't do something locally to meet the standard.
    I think that is what they are trying to accommodate. But 
that is a small subset. Most of the counties that you see are 
counties that meet the attainment standards on time through the 
first phase cap, the 2010 cap; and then there is a much smaller 
set that have to work through meeting the standard with Clear 
Skies plus some local measures on time; and then this small 
category of counties that we are talking about in the context 
of this transitional strategy.
    But I want to underscore, from what I understand, the 
transition provisions will only apply to areas that can 
demonstrate that they cannot do local controls reasonably to 
meet the standard, that the transported pollution is what their 
solution is. That seems to me to be equitable. It is an 
equitable way--by the way, it is a much better process than 
what happens under the current structure, because under the 
current structure there is three, four, five different ways 
that EPA can and does grant extensions of time.
    But as you know, in Georgia, when they grant that extension 
of time, they exact an even steeper price. I think those are 
the equities that are being discussed and, again, I think they 
are to a rational policy outcome that can be achieved and get 
us to these air quality standards.
    Senator Isakson. You are correct, one of those areas is in 
Georgia, and I appreciate your mentioning that.
    In the earlier opening statements a statement was made with 
regard to Clear Skies either exempting or putting off or 
somehow lowering the requirements on some 200 power plants 
versus what would be true under the Clean Air Act. In your 
statement, you said that it would impose mandatory, permanent 
multi-pollutant caps on emissions for more than 1300 power 
plants nationwide, reducing pollution by as much as 9 million 
tons annually at full implementation. Based on everything I 
have heard and what I have seen, I concur with that statement. 
I am wondering is there, in going to the Clear Skies bill, any 
exemption or any lessening of standards on specific plants that 
you know of?
    Mr. Connaughton. I am not aware of any. We have a number of 
plants as a result of Federal action or State action that have 
controls. The entire generation sector that this bill applies 
to is 1300, and it would place a permanent cap on all of them.
    Senator Isakson. Collectively.
    Mr. Connaughton. Collectively. Now, to get there, this 
approach will actually create an incentive for the biggest 
power plants, with the biggest emissions, to reduce first. The 
current approach actually creates the opposite incentive. 
Because it is so expensive and you don't get any credit for 
doing it, usually you get to those ones last. So, one, it flips 
that around, so you will see the biggest one--and EPA's 
modeling bears this out; you can check out their Web site. We 
expect the biggest ones finally to go first.
    Now, it is the case with the trading system that the 
biggest ones go first and they over-control, they go beyond 
what they are allowed, because there is a smaller unit for whom 
it would be much more expensive, potentially technically 
infeasible to control. What happens is that smaller unit has to 
pay a price. If they can't put the control on, they have to pay 
this other unit for the privilege of controlling much further 
below what they are allowed. That is why the trading system 
works; it cuts the overall costs, but delivers the same or 
better performance.
    We know that is proven because that is what the Acid Rain 
Trading Program did, which is again--I have to be careful when 
you say current law versus this approach. This approach is an 
expansion of current law. The other is a different set of 
components under current law. We are talking about whether we 
move more of our effort to the better tool or keep our effort 
in the less effective tool.
    Senator Isakson. Thank you, Mr. Chairman.
    Senator Inhofe. Thank you, Senator Isakson.
    Senator Carper.
    Senator Carper. Thanks, Mr. Chairman.
    Mr. Connaughton, again, welcome. We are delighted that you 
are here, and thank you for your testimony. Senator Jeffords 
mentioned earlier that you had visited with him and met with 
him and presumably with his staff. Have you done that before 
today with any of the rest of us on our side of the aisle?
    Mr. Connaughton. I have not. This issue has been primarily 
led by EPA, but Mike Leavitt has gone over to HHS, so I am 
filling in the role that he would otherwise have played. I am 
aware that Mike Leavitt, and before that Governor Whitman, had 
had many conversations with folks on your side of the aisle. As 
you know, Senator, I look forward to that. I have put in a 
request to meet with you and I look forward to a longer 
conversation with you, I think, next week.
    I am filling in that role now, and I do look forward to 
that, and it is important. This is not a partisan issue. In 
fact, this is really a regional issue. You have the great 
advantage of being in Delaware and you meet the standards 
already, so you actually sit in a great site of objectivity. 
But what we are really trying to work with is the heartland, 
the manufacturing heartland, as they are really balancing their 
coal issues, their natural gas issues, and figuring out how to 
meet those air quality standards.
    Senator Carper. Thank you. I mentioned earlier while 
driving around Delaware, I think it was Monday, and reading the 
paper--we only have one statewide newspaper--I read the article 
that I alluded to earlier, an Associated Press story,``Warmer 
World, Shrinking Glaciers--From Alaska to Patagonia, Climate 
Change Is Taking a Toll.''
    You heard me say earlier today I am a Johnny-come-lately on 
global warming; I, frankly, didn't give much credence to it for 
a number of years. I have changed my mind, given what I believe 
is a growing body of evidence that something is happening here, 
and we need to take steps sooner rather than later, because if 
we take them sooner, they can be more measured; if we take them 
later, they may have to be more Draconian.
    Just to ask your own personal opinion, do you share my 
concern that something is going on with respect to the climate 
in the world that we are living in? All this stuff about 
glaciers going away. I have some seen with my own eyes. Is this 
fiction? What do you make of it yourself?
    Mr. Connaughton. I do share the concern, as does the 
President, that this is an issue that we must take very 
seriously. The National Academy has given us enough advice to 
warrant that seriousness and the seriousness of the investment 
that we are making as a Nation and internationally on this 
effort. There is still a lot of items that the National Academy 
outlined to us to understand further on the science. I think 
Senator Murkowski averred to that.
    I would also put it in this context: The question is to 
what extent is man part of this warming? The warming is 
happening, so we still, as policymakers, have to address that 
in any event. So we have a combination of understanding the 
fossil fuel contribution to this issue or not, as well as 
understanding to the extent we are experiencing these changes, 
much like what occurred back in the early part of this century. 
We had some pretty dramatic climate changes in this Country 
that we had to manage out West. We have to carry the collective 
set of policy measures forward.
    Now, if I may, we are moving forward seriously, and we are 
actually building on the work that the Clinton administration 
started in getting the research budgets up to where they needed 
to be, as well as we have dramatically gone beyond in terms of 
the technology budgets, as well as the mitigation strategies 
that we are employing. I would be happy to talk about those now 
or when we meet next week.
    Senator Carper. Well, let me stay with the issue of carbon. 
In an earlier exchange you had with one of my colleagues, you 
talked a little bit about coal gasification. The technology has 
been around for a long time. We don't have a whole lot of coal 
gasification plants that have been built. Common sense would 
seem to suggest, at least to me, that a country that has as 
much coal in the ground--we have more coal than Saudi Arabia 
has oil, and yet we are not using it. We have had the 
technology for years to be able to use the coal in a way that 
is environmentally safe and friendly, we reduce CO2 
emissions and enable us to reduce our dependence on foreign 
oil. What do we need to do as a Nation in order to take 
advantage of that natural resource and the technology that has 
been here for some time?
    Mr. Connaughton. First, I agree with all the points you 
just made. So let us talk about a common strategy.
    Senator Carper. My wife rarely does that. It is nice to 
know that someone does.
    Mr. Connaughton. We have this great opportunity finally in 
America to deal with the coal issue by making it clean. That is 
what this is all about. Can we get more coal and rely on it and 
make it clean? Gasification technology, as you have said, is 
proven on a small scale in the petrochemical industry, but we 
are talking about taking it from there and ramping it up to 750 
megawatt, 1,000 megawatt generation.
    Now, the scale of that engineering and the performance of 
that engineering is something that we have invested a lot of 
money in terms of we, the Federal taxpayer. There are two great 
plants, one in Florida, the Teka Plant. I don't know if you 
have been there yet. There is another one in Indiana that is 
producing hydrogen.
    But they are extremely expensive. The cost, just to give 
you an example, for a 750 megawatt sized power plant, a natural 
gas plant is $406 million to build it. Pulverized coal is $862 
million to build it. Nuclear is $900 million. This is the 
current technology of nuclear. Integrated gasification is $1.05 
billion; it is more expensive than a nuclear plant. And then 
the only thing more expensive than that is a next generation 
nuclear plant. So when you are talking about how do you get a 
utility in either a regulated market or, even harder, in a non-
regulated market to make a capital investment that is the 
second most expensive one, we have to come up with a 
combination of strategies to do that. This is before you figure 
out the added technologies you might need to capture and store 
carbon. This is a cost before you get to the carbon equation.
    That is why I am suggesting to you that if we can create 
this $52 billion private market that is oriented toward coal, 
that is going to create a very different dynamic for the 
venture capitalists and the technology innovators of the world 
to prove up on a big scale this--by the way, there are some 
other ones too, but gasification is the leading one right now--
to prove up on a big scale the availability of this just for 
the purposes of cutting pollution, harmful air pollution.
    And then, when you have several of these built, which we 
think--EIA suggested we might see 10 to 15 percent of new 
builds in gasification with the three pollutant approach--we 
can do that research to capture carbon off of it. That is a lot 
better than what would otherwise be a 15-year government 
demonstration project. We can actually apply it to commercially 
usable, reliable investment. That is what we are trying to get 
at, but it is a very complicated financing picture, and I am 
happy to talk to you about it further.
    Senator Carper. Thank you.
    Senator Inhofe. Thank you, Senator Carper.
    Senator Carper. Mr. Chairman, I want to yield back the 
balance of my time.
    Senator Inhofe. You did, 2 minutes ago. I hasten to say it 
is not your fault.
    Senator Carper. Thank you for your generosity there.
    Senator Inhofe. All right, let us see. I think it is 
Senator Murkowski.
    Senator Murkowski. Thank you.
    Mr. Connaughton, you had the opportunity to come and visit 
us in Alaska a couple years ago, so I know you have had a 
chance to come and see the clean skies and breathe the clean 
air and appreciate what we have to offer up there. We are in a 
very unique situation, almost a laboratory in the sense that we 
don't put out a lot of pollutants; and we like it that way.
    But where we are geographically, and with the winds and the 
ocean currents and all that happens in the Arctic, we are 
subjected to levels of pollution that come across from other 
countries. We have been talking here about how we can deal with 
it State to State, but Alaska's problem is more State to 
country. How do we deal with that?
    Mr. Connaughton. Thank you for the question, and I will 
start with that it is Alaska that is the benchmark for clean 
air when we set our standards for the rest of the Country. 
There is an area in Alaska that is the perfectly clean area of 
America.
    Senator Murkowski. Which one is that?
    Mr. Connaughton. I will let you know.
    Senator Murkowski. I need to know which town to brag on.
    Mr. Connaughton. It is near Denali.
    The transported air pollution problem, the Asian brown 
cloud, the way we address that is by us being able to advance 
new, more affordable clean coal technologies, because it is a 
given that Asia is going to continue to grow their economy on 
coal. You can't have a serious discussion about combating air 
pollution and the Asian brown cloud, and you can't have a 
serious discussion about climate change and the effects of 
carbon unless you tackle the issue of how we help Asia get on a 
technology path that is much more consistent with ours, and at 
a speed that is faster than the one we have worked our way 
through since Pittsburgh in the early 1990s.
    So it is our belief that if we can get ourselves on a 
pollution reduction path based on these new advance clean coal 
technologies that are also more efficient in their delivery of 
energy, and we can get the price down, we can work much more 
effectively with our counterparts in Asia, who are less 
concerned about carbon right now and much more concerned about 
choking smog and the health effects of that, we can get them to 
begin to design strategies where it is worth their investment 
to use good clean coal technology. And that will reduce sulfur, 
it will reduce nitrogen coming across, it will reduce mercury, 
and, importantly, it will put them on the same path of, again, 
creating an investment structure by which we hope, and it looks 
pretty promising, that we can capture carbon, as well, and put 
it to good use, rather than vent it to the atmosphere.
    We are talking about decadal time scales, but the question 
is are we doing it in 25 years or are we, on the current path, 
doing it in 60 or 70 years. And we would prefer to speed that 
up.
    Senator Murkowski. Let me ask you about the conversation a 
little bit around this table, but certainly in scientific 
journals. Alaska is being pointed to as the kind of poster 
child, if you will, for the effects of climate change, the 
effects of global warming. We are seeing treelines migrating 
southward; we are seeing erosion the likes of which we haven't 
seen in decades; we are seeing warmer temperatures. As a skier, 
we are really annoyed that the rain has come instead of the 
snow. But we are actually seeing some changes.
    We don't dispute, up North, that there is climate change 
taking place right now. In my opening I made mention to the 
fact that we don't know whether it is a natural cycle or how 
much man contributes to the change in temperature that we are 
seeing. Some are citing to Alaska as proof positive that 
CO2 pollutants are causing the climate change that 
we are seeing. What is your response to that?
    Mr. Connaughton. My response on the science side--I am not 
a scientist--is to revert back to the National Academy report 
of 2001 that really has guided our efforts in designing a 
climate change research strategy that can help us better answer 
the very questions that you have raised. The United States 
currently now invests more in advancing the science of climate 
change than the rest of the nations of the world combined, and 
importantly, what the NAS did for us, which was extremely 
valuable, is they zeroed in on the specific areas where we 
should be increasing our effort.
    One of them is global observation. And we are actually 
investing a lot more into the observational issues up in your 
part of the world, because that is a critical region to give us 
an indicator of what is happening. And then they have given us 
five or six other research items around which we have formed a 
10-year plan that the National Academy fully endorsed. They 
said this is exactly what we need. In fact, other countries are 
not teeing off of our research strategy.
    So we have to take what we know. We have calibrated our 
policies with what we know in terms of the range of reasonable 
actions we can take, both here and with developing country 
partners, even, that we are doing more of, and then we have to 
feed more information into it. But it will be much more 
observation-based and ground-based than it had been in the 
past. We need to evolve past our projections and into real data 
base models, and that is where we are going.
    Senator Murkowski. We want to work on that collaborative 
research, though.
    Thank you.
    Senator Inhofe. Thank you.
    Senator Clinton.
    Senator Clinton. Thank you, Mr. Chairman.
    Mr. Chairman, I want to publicly thank Mr. Connaughton for 
his cooperative and collaborative efforts. He and I have worked 
together on a matter of great concern to New York, and I am 
delighted to see him here.
    I also appreciate the fact that the Administration has not 
yet endorsed this bill, because I think there are a number of 
issues that need to be addressed. And let me just briefly refer 
to several of them and then ask for your response.
    First, as I tried to follow the questioning with Senator 
Isakson, I think that the bottom line with respect to utilities 
was that you said to Senator Isakson not all plants would 
install controls, but that the big ones would. Yet I have a 
list from the EPA which projects that there would be 198 power 
plants, with an average age of 48 years and an average 
generating capacity of 280 megawatts, who will not have 
installed modern pollution control for NOx or SOx before 2020.
    Now, that obviously means that 70-year-old power plants 
with 56,000 megawatts of generating capacity will still be 
operating with 1950s pollution control in 2020. And I would ask 
that the Administration consider seriously whether we want to 
allow 70-year-old plants to operate without controls. And, as I 
say, this is an EPA projection of coal fire power plants that 
will not have applied modern NOx and SOx controls under Clear 
Skies by 2020. I would be happy to provide that to you. I am 
sure that you can find that for yourself.
    Mr. Connaughton. Would you like me to speak to that issue?
    Senator Clinton. Let me just finish real quickly, because 
there is another major concern that I have.
    As I understand the President's Clear Skies initiative, it 
started out as a new way to reduce power plant emissions of 
SOx, NOx, and mercury. Although I might not have agreed with 
the route that the Administration was taking, it seemed to be a 
clear statement of purpose.
    Yet, S. 131 allows other major industries to opt in to the 
power plants allowance program and thereby escape major 
requirements of the Clean Air Act, reducing hazardous air 
pollution. And we need to know, does the Bush administration 
now support repeal of existing regulations that reduce cancer-
causing and other hazardous pollutants beginning in 2007? The 
regulations that this would apply to under section 
407(j)(1)(b), which permits the opting out provision, would 
include formaldehyde, acetaldehyde, hydrogen chloride, benzine, 
other chemicals that have been traditionally regulated.
    Again, this seems to be in stark contrast with what the 
President's initial description of Clear Skies was. And has the 
EPA provided the Administration with any estimate of how many 
facilities would qualify for these exemptions and the potential 
health impact that would flow from those exemptions?
    Mr. Connaughton. Let me take the first question. The design 
of the cap and trade is such that we will, when all is said and 
done, I think, capture and control up to 86 percent of the 
generation. There will be plants left, but, as I indicated, 
those plants will have paid the price of not putting on control 
by paying someone else to control even further than they are 
allowed. That is the way the cap and trade system works. That 
is what makes it effective.
    To the extent there are a few remaining plants out of this 
1300, we would expect them to be the smaller ones, not the 
bigger ones. But I will have EPA do some technical follow-up 
with you there. And, Senator, if they are in a region where 
either they are transported pollution or actually in an area 
that is out of attainment with the standard, the State will 
still remain free, today, as I understand it under the bill, as 
a matter of their local strategy, to directly regulate that 
plant if it is actually impacting their ability to meet the air 
quality standard.
    Senator Clinton. But, Mr. Connaughton, that means, though, 
that in New York, for example, we would have to rely on a State 
in, say, the Ohio Valley to regulate that utility, even though 
it is clear that there is transported pollution from that 
unregulated, out of compliance, in light of the larger mission 
of the bill.
    Mr. Connaughton. You raise a very important point, Senator, 
however, the cuts are big enough in the first phase that we 
believe will address nearly all of the transported pollution 
issue. If not, we have a second phase that will deal with it 
further. And during that second phase period the State of New 
York will be able to petition EPA, under the 126 petition----
    Senator Clinton. But, no, we lose the option of 126 and 
NSR.
    Mr. Connaughton. No, the way they have designed the bill, 
Senator, is in the first round it goes away, but largely 
because, the way I look at it, is we have granted it up front. 
We expect in the next 4 years that most of the major transport 
States will petition EPA. We expect that. What Clear Skies does 
is it says you don't need to petition us, we agree, you win; we 
are going to, up front, grant you the transport reductions that 
you otherwise would seek to get through this 4 year process.
    Now, after you get through that process, then there is a 
re-up. We will come back in the second round, after we see what 
in fact occurs and can get the data we need. So if New York--
and this is a legitimate issue that you are raising. So if New 
York sees in the second round that they still have a transport 
issue from across the border, they will be able to come back to 
EPA and petition them for assistance.
    Senator Clinton. I would just respectfully request that you 
look at the actual language of this bill, because the changes 
to the 126 test seem very difficult to meet, if not impossible, 
and it would be very helpful to have a dialog about that, 
because certainly reading this makes it less than the obvious 
presumption that you have just described.
    Senator Inhofe. Senator Clinton, your time has expired, but 
you asked two questions. Would you like to have him respond to 
the second question?
    Senator Clinton. Yes, Mr. Chairman.
    Senator Inhofe. We will give him some of our time, then.
    Mr. Connaughton. Uncharacteristically, Senator, it popped 
out of my head.
    Senator Clinton. Well, it is with respect to the opt-out 
provisions.
    Mr. Connaughton. I am sorry.
    Senator Clinton. That non-power plant sources of pollution 
and hazardous chemicals can basically opt in to the new 
regulatory structure, thereby, in my view, avoiding the 
regulations that are already in existence.
    Mr. Connaughton. First, I need to begin with we would 
strongly support the opt-in concept as long as it doesn't 
dilute the caps. So the goal of this is if we can even more 
effectively get the pollution reductions under the cap by 
having other sources opt in, that is great; otherwise, they 
still have to be subject to current requirements.
    With respect to the specific technical issue you have 
raised, that is not one that I have delved into, but is one 
that I would be very pleased to look at. We want an opt-in, we 
want SOx, NOx, mercury. If it has some unintended consequences 
with respect to these other programs, that is something we 
should be examining, and I am confident that we can have that 
in the conversation.
    Senator Clinton. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Inhofe. Thank you. Thank you, Mr. Connaughton.
    Let us see, I think Senator Chafee.
    Senator Chafee. Thank you, Mr. Chairman.
    Thank you again, Mr. Connaughton, for your time and your 
passion on this issue. The Clear Skies legislation allows for a 
cap and trade system for mercury, but does not place a cap on 
per facility emissions. How would this legislation prevent 
mercury hot spots from occurring in communities near power 
plants?
    Mr. Connaughton. A couple areas to go through there. This 
was a significant concern that was raised first with respect to 
the Acid Rain Trading Program, that there might be hot spots. 
And locally heavy concentrations of SO2 and NOx are 
an immediate health issue because they are immediately 
ingested. So it was a real concern then.
    Very soon after the early implementation of the Acid Rain 
Program, it was well established that it reduced hot spots, it 
reduced the number of areas that had locally heavy 
concentrations of SO2. EPA modeling suggests that we 
would see the same result with respect to mercury, because a 
chunk of it is a regional issue, and that is what we are going 
after with Clear Skies, it is addressing the regional disbursal 
that could buildup locally someplace else.
    So to the extent there remains locally heavy 
concentrations, we would expect, as a general matter, that 
those locally heavy concentrations would be much lower than 
they are today. I mean, today there are big hot spots, and in 
the future we would expect them to be significantly softened.
    The final piece, which is very important to us, is to the 
extent there is a locally heavy concentration that provides 
some residual risk, we would want to be sure that the States 
retain the authority, just as they would for SO2 and 
NOx, to address that locally remaining risk directly, as need 
be. So we have tried to layer this to address that concern 
because it is a shared one.
    I would note that we are hopeful that--mercury is new; we 
have never regulated it before from power plants. So we are 
hopeful that the cuts are massive enough here that, with the 
study work that will occur at the Federal and State level, that 
we will find that we have largely addressed the power plant 
contribution to that kind of an issue. But we will be steadfast 
in doing that work to be sure that we aren't getting the 
outcome that you described.
    Senator Chafee. Thank you. A lot has been made about the 
President's pledge in his campaign of 2000, as Governor Bush, 
to regulate carbon dioxide. Were you part of the discussion to 
change that position? Certainly, the President has a reputation 
for taking a position and sticking to it through all of the 
flack. Were you part of that discussion to reverse course on 
that?
    Mr. Connaughton. I was not. I had the great privilege of 
being unanimously confirmed by the Senate in June 2001, and 
walked in the first day of the job and was informed that I 
would have the clean air policy, the climate change policy, and 
the energy project policy all at once. So I was brand new to 
that whole set of discussions, and I took the political lay of 
the land as I got it and worked very hard to maximize the 
constructive outcomes as a result of that.
    Senator Chafee. Can you shed any light on some of the 
internal discussions that might have gone one?
    Mr. Connaughton. I think the President, as I recall, wrote 
a letter to Senator Hagel where he clearly articulated the 
basic rationale. I think, in sum, it was the concern about the 
huge economic dislocation in the face of an energy crisis that 
was driving up especially natural gas prices. It was 
particularly foreshadowing or particularly insightful when you 
look at Senator Voinovich's chart that he just put up today.
    I don't think anybody thought even then, when gas prices 
were spiking up to $4, that we would find ourselves at $6.5 or 
$7 natural gas. So the importance of a well-constructed carbon 
policy is even more paramount today than it was then, and that 
is why, again, I think we have go after the strategy of finding 
a way to create the transition to cleaner coal technology and 
find the ways to cut carbon from coal. And as I indicated, 
Senator, you don't do that with a carbon cap today. Carbon cap 
today still makes it more economically rational to build a 
cheaper natural gas plant than go for the more expensive coal 
plant.
    Senator Chafee. The Vice President received a fair amount 
of criticism for the energy task force and who was part of it, 
and I believe it is still in the court system, who was part of 
that energy task force, were environmentalists there. You 
entreated us at the end of your statement to find common 
ground, and you said that environmental organizations, some of 
them were supportive of this legislation. Which ones are 
supportive, and were they part of putting together this bill?
    Mr. Connaughton. A couple things. In terms of the bill that 
we constructed, we had a lot of input from groups, and EPA has 
a whole calendar; it was largely produced and created by EPA, 
so we can share with you the docket of outreach that they have 
had on this whole policy. One of our most regular interlocutors 
from the environmental community has been the Adirondack 
Council, who is here today, so I think I will let them speak 
for themselves in terms of their views on this. We have had a 
very constructive and productive set of conversations with them 
because they were the champions of this approach to begin with, 
and really saw it through and really produced the great result 
that we are getting from Acid Rain Trading Program.
    I would further note, just in conclusion, we have had so 
much interface on the Clean Air interstate rule, which is sort 
of the regulatory side of this same issue, with all the 
environmental groups as well. So we have had endless 
discussions docketed on the public record with everybody, and I 
don't want to leave out the mayors and county officials. They 
are as critical to this discussion as the non-governmental 
officials have been. And the unions, the unions, for that 
matter, they have been through a lot as well.
    Senator Inhofe. Thank you very much.
    Senator Voinovich.
    Senator Voinovich. I would like to put this into a big 
picture context. I come from a State that is in bad shape 
economically because of loss of manufacturing jobs. Would you 
agree that our energy costs are globally the highest that we 
have got in terms of nations that compete with us?
    Mr. Connaughton. They are among the highest, and currently 
they are among the more volatile, which makes it hard for 
businesses to do big capital planning.
    Senator Voinovich. And what we are striving to do here, and 
I attribute that to the fact that--this is, what, the 7th year 
that I have been involved with this; before I was a Governor 
involved in it--that we really haven't harmonized our energy 
and our environmental and our economic needs to put it on a 
kind of way of looking at cleaning up the environment, dealing 
with public health, and also dealing with the economic needs, 
energy needs that we have in our Country.
    And there are some who argue that we need more draconian 
cuts in emissions for NOx, SOx, mercury, and some want carbon 
involved. The issue is, the one that you made, is at what place 
does that force our utilities to go to natural gas. And I would 
argue that if we don't come up with some kind of compromise 
here, that we are going to continue to see the loss of jobs 
overseas. And particularly when you deal with the issue of 
carbon, everyone says carbon has got to be capped, that if that 
is the straw that breaks the camel's back, then we continue to 
have these high energy costs and our businesses go to China or 
India or some other place.
    Those that are concerned about global warming have got to 
understand that they are going to countries that don't have the 
environmental regulation that we have here in the United States 
of America. And I think the global competition has accelerated 
dramatically in the last several years, which makes this issue 
so much more important today then ever before.
    I would like your comments on that.
    Mr. Connaughton. A State like Ohio needs the air pollution 
reductions, and we have set the standard. So we know the mark 
that we want to hit; it has already been set and everybody 
agrees with it, bipartisan, across all spectrums. There are 
lawsuits on it. It took 4 years and your long list to get 
there, but now everyone accepts it.
    So what we need is the strategy to hit it right, and that 
is why 70 percent cut in these two phases addresses the 
transported air pollution issue. That is the one that is the 
hardest for the States to deal with. It does it. It just so 
happens that by picking those marks, you can do it in a way 
where most of your future is built on clean coal rather than 
switching to natural gas. That helps with the natural gas 
dynamic you discussed.
    I spent a lot of time in your State, Senator, in fact, once 
with you, and you have a lot of energy-intensive manufacturing 
and you have a lot of manufacturing that depends on natural gas 
as a feedstock. We saw, with last year's price spikes in 
natural gas, a lot of that production go overseas.
    Now, it is one thing for an existing plant to just move it 
overseas to another plant and shut down temporarily. What is 
worse, and this is what we are experiencing especially in the 
big heavy-duty States like Ohio or down in the Gulf, in 
Louisiana, is when they shut down the plant and they move the 
whole operation overseas. Those jobs are gone for three 
generations, and they don't come back again.
    And then we have this odd situation where we are buying the 
product and shipping it back here, which makes no sense from an 
efficiency perspective. So we have to calibrate how much we get 
from the power plants as part of this issue of meeting air 
quality standards against the concern about driving especially, 
again, the energy-intensive manufacturing elsewhere.
    And I do share the concern that you raised about any policy 
that merely moves our air pollution and greenhouse gases 
someplace else, because I care about the global issue here, and 
we don't solve the problem if we are moving greenhouse gases 
somewhere else, because then they accumulate back in the 
atmosphere. So we have just shifted it rather than--and we 
shouldn't claim credit for it here.
    Senator Voinovich. One last question. Some of my colleagues 
keep saying that you don't support the bill. Can you clarify 
this? For example, the Administration supported the No Child 
Left Behind in committee. Did you support Healthy Forest when 
it was in committee?
    Mr. Connaughton. The Administration does not take a 
position on bills when they are in committee. We take positions 
on bills when they are on the floor. However, I also made very 
clear that the Administration likes this bill; we want to see 
it get out of committee. We think it is making the 
accommodations that are moving toward meeting all of our 
concerns, and you have made a lot, which we really thank you 
for. And we understand you are incorporating a lot of the 
concerns from folks from the outside. That is exactly what the 
legislative process is about.
    We are strong proponents that this bill move as quickly as 
possible. And let me underscore that. If we don't get this 
legislation this year, the States will not have this very 
powerful tool, and we will go down the path of litigation and 
conflict that we experienced in the 1990s. We can get there, 
but getting there is ugly.
    This is a lot cleaner. Getting there is like going down a 
lumbering--18-wheeler truck on the highway in the middle of 
rush hour. That is what the standard path is. This is like 
getting into a sleek roadster that is hydrogen powered. We just 
get to that destination a lot more cleanly.
    Senator Inhofe. Thank you very much, Senator.
    We have been joined by Senator Thune.
    Senator Thune, as you know, we have a rule that we can't 
have opening statements after the first round is concluded, but 
you are recognized now for 5 minutes to ask questions of Mr. 
Connaughton, unless you would rather use that for an opening 
statement.
    Senator Thune. Well, Mr. Chairman, I would simply say thank 
you for your leadership on this issue. This is a priority for 
this committee and something that is of great interest to, I 
think, everybody in this Country. Those of us out in the upper 
Midwest also care a lot about finding ways and technologies 
that will make energy more affordable and more usable, and to 
take advantage of the great resources that we have in our part 
of the world to meet the energy needs of this Country, and that 
we base those solutions upon science; that we use science-based 
approaches to these issues. I very much look forward to being a 
part of this process as it moves forward.
    I don't have, at the moment, any questions for our witness, 
but appreciate the testimony and am anxious to see the 
legislation move and the many other priorities that we have 
before this committee. I think it says a lot that you have 
chosen to move this legislation quickly.
    Senator Inhofe. We commented several times before you were 
here that this is the 24th such hearing that we have had, and 
this is it.
    Thank you, Mr. Connaughton. You are an excellent witness 
and we appreciate your being straightforward, and we will 
dismiss you at this time.
    Mr. Connaughton. Thank you for your steadfast leadership, 
Mr. Chairman.
    Senator Inhofe. Thank you.
    While the other panel is being seated, we have a number of 
requested UCs. One is to be made a part of the record, and I 
ask unanimous consent that the Edison Electric Institute 
statement, the American Highway Users, USA Next--that is a 
grassroots network representing 1.5 million seniors--and a 
letter from the attorney general of North Dakota supporting 
Clear Skies. Without objection, so ordered.
    [The referenced documents are not available at time of 
print.]

               Statement of the Edison Electric Institute

    The Edison Electric Institute (EEI) appreciates the opportunity to 
submit this statement for the hearing record. EEI has testified before 
this committee on several occasions in recent years regarding its 
commitment to passage of comprehensive multi-emission legislation, and 
that commitment remains strong.
    EEI is the association of U.S. shareholder-owned electric 
companies, international affiliates and industry associates worldwide. 
Our U.S. members serve more than 90 percent of the ultimate customers 
in the shareholder-owned segment of the industry, and nearly 70 percent 
of all electric utility customers in the nation. They generate almost 
70 percent of the electricity generated by U.S. electric companies.
    In summary, it is EEI's view that sensible multi-emission 
legislation along the lines of the Clear Skies Act will ensure 
significant additional improvements in air quality nationwide. The 
electric power industry will be required to reduce emissions of sulfur 
dioxide (SO2), nitrogen oxides (NOx) and mercury by 70 
percent from 2002 levels, with substantial cuts required by 2010.
    Immediately upon passage of legislation, many companies will be 
spurred on by the emissions trading program that rewards early 
reductions and the need to meet the strict SO2 and NOx 
emission cuts in Phase 1, which account for three-quarters of Clear 
Skies' emission reduction requirements, and they will move quickly to 
design and install emissions control equipment. This is contrary to 
misleading claims by some stakeholders that Clear Skies' benefits will 
not accrue until full implementation of Phase 2 in 2018. In fact, 
legislation will produce earlier, verifiable reductions of 
SO2 and NOx than the combination of the Environmental 
Protection Agency's (EPA) proposed Clean Air Interstate Rule (CAIR)--
which will apply to only 29 states and likely take many years to move 
beyond litigation and state-specific implementation decisions--and 
reasonably predictable regulations in the future.
    Regulation under the Clean Air Act (CAA or Act) is fraught with 
uncertainty and delay. Power companies are subject to roughly a dozen 
major air quality programs, often with overlapping or conflicting 
requirements. In addition, EPA regulations typically are subject to 
litigation, adding additional uncertainty and delaying air quality 
improvements. Because of anticipated litigation, and because it will 
take several years for states and EPA to complete decisionmaking on 
implementation, the precise requirements of EPA's CAIR and mercury 
proposals may not be known for a long time.
    In contrast, sensible multi-emission legislation will harmonize CAA 
provisions, immediately establish mandatory emissions requirements, and 
break the cycle of perpetual litigation, allowing power companies to 
start implementing new requirements sooner than under continued 
piecemeal regulation.

                       THE PROGRESS WE HAVE MADE

    The electric power industry has reduced its air emissions 
significantly in recent years, even as demand for electricity has 
increased. Attached is a chart highlighting SO2 and NOx 
reductions since 1980.
    Electric generators have cut SO2 by 40 percent, with 
significant reductions over past 10 years due primarily to 
implementation of the Act's Acid Rain Program (through flue gas 
desulfurization, or scrubbers, and switching to low-sulfur coal). 
Reductions will grow to almost 50 percent. The annual cost of the 
program exceeds one billion dollars.
    Electric generators also have reduced NOx emissions by about 40 
percent since 1980, with significant reductions over the past 10 years 
attributable to installation of low NOx burners and/or overfire air to 
meet the Act's Acid Rain Program requirements, and selective catalytic 
reduction (SCR) in the eastern U.S. for ``NOx SIP Call'' and other 
programs in the Northeast to address ozone. When completed, our 
industry will have committed approximately $10 billion to install SCR 
and will expend hundreds of millions in annual operation costs. As a 
result, we will reduce NOx by 80-90 percent throughout most of the 
eastern U.S. during the 2005 summer ozone season.
    In addition, controls to reduce SO2, NOx and particulate 
matter currently are reducing mercury emissions by about 40 percent.
    We have done all of this despite a steady climb in electricity 
demand, and without sacrificing the reliability and affordability of 
the electricity that we produce. For example, between 1980-2003 
electricity from coal-fueled generation increased 67 percent.
    According to EPA, air quality has dramatically improved as a result 
of these and other industry successes. For example, national average 
SO2 ambient concentrations have been cut approximately 54 
percent from 1983-2002 (U.S. EPA, Latest Findings on National Air 
Quality: 2002 Status and Trends Report). Since 1976, the average 
national ambient NO2 concentration has fallen 41 percent 
(Pacific Research Institute's Index of Leading Environmental 
Indicators, April 2004). While monitoring for fine particles began only 
recently, average PM2.5 levels were reduced 10 percent from 
1999 to 2003 (U.S. EPA, The Particle Pollution Report, December 2004). 
And, a recent EPA report finds that ozone levels in 2003 were at their 
lowest level nationwide since 1980. (U.S. EPA, The Ozone Report--
Measuring Progress Through 2003, April 2004).
    Today, we are poised to make dramatic additional reductions through 
new rules or multi-emission legislation consistent with the scope and 
framework of Clear Skies. Sensible multi-emission legislation will 
ensure significant additional improvements in air quality nationwide by 
requiring the electric power industry to reduce emissions of 
SO2, NOx and mercury by 70 percent from 2002 levels, with 
substantial cuts required by the Phase I deadline of 2010. With such 
additional reductions, we will have cut by almost 90 percent the 
emissions of SO2, NOx and mercury per ton of coal used or 
kW-hour of electricity generated.

                       THE CURRENT CLEAN AIR ACT

    Coal-fueled electric generators face CAA emission control 
requirements that are duplicative, contradictory, costly and complex--
which creates enormous uncertainty for future investment. The net 
result of the current regulatory system is a planning nightmare that 
makes it virtually impossible for electric generators to clearly 
understand what requirements will be in place for their plants at any 
point in the future. In addition, there are long construction cycles 
and large capital expenditures that prohibit us from accurately 
assessing which plants should be retrofitted with controls, which 
plants should be switched to different coals or to natural gas, which 
plants should be retired, and when any of this should take place. The 
result is a system that threatens the reliability and affordability of 
our nation's electric supply.
    This regulatory morass also puts more pressure on the natural gas 
supply and delivery systems that already are yielding gas prices of 
great concern to the nation's industrial, commercial and residential 
gas, as well as electric customers.
    Ironically, the present system also does not advantage those 
seeking further emission reductions from coal-fueled power plants. The 
piecemeal approach inherent in the CAA necessarily involves many 
sequential scientific and technical decisions by EPA and the States. 
Often, these decisions are challenged by environmental groups and their 
allies, but may not necessarily be resolved in their favor. Regardless 
of the substantive outcome of individual rulemakings, prolonged 
regulatory development inevitably is followed by litigation involving 
environmental, industry and other stakeholders, causing decisionmaking 
delays of five or more years for each major rule. This regulatory soup 
eventually may deliver cleaner air, but the accompanying chaos makes 
the timing of that environmental progress speculative. Unfortunately, 
the unpredictability of these rulemakings leads to the far more certain 
consequences of significantly higher electricity prices and further 
delays in environmental benefits.

                 BENEFITS OF MULTI-EMISSION LEGISLATION

    In contrast to the current piecemeal approach to regulation 
inherent in the existing Act, a well-designed multi-emission approach 
is the best roadmap for further reducing power plant emissions. Such 
legislation would address SO2, NOx and mercury, and benefit 
the environment, states and electric generator customers, employees and 
shareholders by:
     Providing certainty for the environment through low caps 
and emissions monitoring.
     Reducing litigation and locking in major emission 
reductions today, so that control strategies can begin immediately--
resulting in cleaner air sooner.
     Substantially reducing the number of ozone and particulate 
matter non-attainment areas.
     Providing certainty for power companies due to a clear and 
simplified Clean Air Act, including coordinating reductions so that 
utilities are able to develop and use innovative multi-pollutant 
control technology.
     Addressing transported emissions and minimizing interstate 
conflicts.
     Allowing flexibility through emissions trading.
     Minimizing costs for consumers and cost impacts on 
shareholders.
     Maintaining coal as a generation fuel and avoiding major 
new pressures on natural gas supplies.
     Not disrupting reliable power generation.
     Avoiding a patchwork quilt of programs in different states 
and confusion and competitive issues for regulated sources.
     Providing the time necessary to attract capital for the 
multi-billion dollar investments needed to meet new requirements.
     Saving jobs at existing coal-fueled power plants and in 
the mining and rail industries, and creating jobs to construct massive 
pollution control projects.
    Multi-emission legislation that is directionally consistent with 
the Clear Skies Act has also garnered tremendous support from a diverse 
group of stakeholders, including the U.S. Conference of Mayors, 
National Association of Counties, National Conference of Black Mayors, 
the Alliance for Rural America, several state departments of 
environmental protection, the National Association of Manufacturers, 
the U.S. Chamber of Commerce, and a wide range of individual 
industries.

                 LEGISLATION IS SUPERIOR TO REGULATION

    EPA's CAIR and mercury proposals would reduce SO2 and 
NOx by about 70 percent from 2002 levels for 29 states, and would 
reduce mercury by 30 percent (through MACT) or 70 percent (through cap-
and-trade). The CAIR proposal also would contribute significantly 
toward attainment of the new air quality standards for 8-hour ozone and 
PM2.5. EEI estimates that the combination of the two 
proposed rules would yield the largest industry investment in emission 
reductions in CAA history, i.e., $20-$28 billion (NPV 2004-2020, 
1999$).
    Among EEI's recommendations to EPA are that the new regulations 
should integrate and streamline existing programs to the maximum extent 
possible, provide flexibility through unlimited emissions trading, and 
provide adequate time for implementation. Regarding mercury 
specifically, sufficient time is needed to implement any program 
because mercury control technologies are not yet ``commercially 
available.'' While there continues to be impressive research progress, 
there also exists minimal operational experience and limited vendor 
guarantees.
    However, there are many reasons why sensible multi-emission 
legislation would be superior to EPA's proposed regulations, and for a 
wide range of stakeholders. Compared to the conventional regulatory 
process, legislation would:
     Yield faster and greater air quality benefits.
     Require the largest single capital investment in air 
pollution controls in the nation's history.
     Reduce the uncertainty, delays and costs of litigation.
     Provide greater flexibility and cost-effectiveness due to 
trading, which also would attract other industry participants.
     Provide business planning certainty for power companies 
since targets and timeframes would be locked in and clearly defined.
     Provide consistency and predictability for states that 
share responsibility for implementing the CAA, and help reduce 
interstate conflicts.
     Promote continued use of the nation's abundant and low-
cost coal resources and alleviate pressure on the U.S. natural gas 
supply.

                              CLEAR SKIES

    The Clear Skies Act will require the most ambitious emission 
reductions ever from power plants. As noted above, it will deliver 
additional dramatic reductions of power plant emissions in the most 
cost-effective manner and provide greater business certainty. The 
emission reductions will be predictable and verifiable due to 
continuous emissions monitoring and large penalties for non-compliance.
    Clear Skies will preserve air quality protections. While it will 
replace some individual Clean Air Act programs with specific, 
aggressive caps on emissions of SO2, NOx and mercury, it 
will leave the Act's other key provisions in place. For example, 
legislation will maintain the National Ambient Air Quality Standards 
for SO2, ozone, particulate matter and other substances. 
These health-based standards comprise the cornerstone of CAA provisions 
that protect and improve local air quality. In fact, multi-emission 
legislation will bring the vast majority of non-attainment areas into 
compliance with new air quality standards. It also will preserve 
stringent, technology-based standards for new sources of electric 
generation; retain special requirements for sources located near 
national parks and wilderness areas; and maintain the rights of state 
and local governments to adopt more stringent controls on power plants 
within their borders.
    While Clear Skies precludes affected sources from regulating 
mercury using maximum available control technology standards (instead 
instituting tight emission caps for the entire industry), it preserves 
EPA's authority to regulate hazardous air pollutants. Clear Skies 
allows mercury trading, which will protect human health while also 
saving electricity customers billions of dollars. For the following 
reasons, it also will not produce mercury ``hot spots'':
     Power generation sources now make up about 10 percent of 
total man-made and natural sources in an area comprising the U.S. and 
bordering parts of Mexico and Canada. In fact, a 50 percent emission 
reduction would yield much less than a 5-percent reduction in 
deposition since a significant portion of U.S. deposition is released 
by foreign, particularly Asian, sources.
     Basic economics dictate that the largest sources will be 
controlled first.
     A significant percentage of power plant mercury emissions 
are elemental mercury, which tends not to deposit nearby and may remain 
in the atmosphere for months or years before it is deposited to the 
Earth.
     Notwithstanding predictions to the contrary, no ``hot 
spots'' occurred due to SO2 trading under the Acid Rain 
Program--the only relevant precedent.
     Modeling by the Energy Information Administration and 
Brookhaven National Laboratory predict no mercury ``hot spots'' due to 
emissions trading.
    A deliberate approach to meeting emission reduction goals is 
essential for continued reliable electric generation and cost-
effectiveness. Retrofits of additional SCR systems for NOx, scrubbers 
for SO2, and activated carbon and fabric filters for mercury 
will be needed on over 100 GW of power plants, which is the equivalent 
of 250 medium sized generation units. Each such installation will 
require capital expenditures of $60 million to more than $200 million.
    A deliberate approach also will provide sufficient time to go 
beyond mercury ``co-benefit'' reductions due to installation of 
SO2 and NOx controls. Reliable, cost-effective control 
technologies designed specifically for capturing mercury have not yet 
been fully developed or tested. It is critical that these technologies 
are ``commercially available'' and guaranteed by their vendors.
    Clear Skies represents one of the largest construction projects 
this nation will see, bigger even than the now famous ``Big Dig'' ($15 
billion over 14 years). Equipment installations must be spread over 
time to ensure reliability and stable prices that will not occur if too 
many large units are off-line for retrofits at once. A smooth timeline 
also will provide a steady construction program over the next 15 years. 
As we found with the NOx SIP Call rule, if controls are pushed within 
too narrow a time window, aside from increased pressure to switch to 
natural gas there will be labor and materials shortages and 
bottlenecks, which will greatly (and unnecessarily) increase costs.
    EEI supports the phased approach in Clear Skies. In passing the 
Clean Air Act Amendments of 1990, Congress afforded the industry a 
decade to comply with 50 percent reductions of SO2 and NOx 
emissions. At the time, Congress understood that defined emission 
targets set over a reasonable timeframe would result in real 
environmental improvements. Fast forwarding to the present, 70 percent 
emission reductions for three different pollutants will be more costly, 
resource intensive and time consuming. Providing two phases of 
reductions is consistent with the precedent established in 1990.

                     OTHER MULTI-EMISSION PROPOSALS

    EEI does not support other existing multi-emission legislative 
proposals. For example, the Clean Air Planning Act would require 
earlier emission reductions for SO2, NOx and mercury than 
Clear Skies, and includes significant carbon dioxide (CO2) 
emission reduction requirements. The issue of timing is crucial and 
these deadlines would be very difficult to meet without sacrificing 
cost-effectiveness and reliability of electric generation. The bill 
also would undermine emissions trading by imposing unit-by-unit limits 
in 2020 for SO2 and NOx for plants on which construction 
commenced before August 17, 1971, and establishing unit-by-unit 
limitations for mercury. The Clean Air Planning Act is modeled to cost 
$15-30 billion more ($1999, NPV 2004-2020) than Clear Skies. Finally, 
the Clean Air Planning Act could reduce electric generator coal use by 
about 25 percent and increase natural gas use about 25 percent (in year 
2020) while Clear Skies would impact fuel use minimally.
    A second legislative proposal, the Clean Power Act, would cause 
even greater economic hardship for the industry and the nation. All of 
the bill's requirements--including very stringent CO2 
limitations--would be placed on top of the existing Clean Air Act, 
thereby exacerbating the complexity of the Act. More importantly, the 
bill would dramatically impact electricity prices, natural gas prices 
and coal consumption. Finally, the ``Outdated Power Plants'' provision 
almost immediately would cancel out the bill's cap-and-trade program.

                          COAL AND NATURAL GAS

    Low-cost, reliable electricity results, in part, from our ability 
to utilize a variety of readily available energy resources--coal, 
nuclear energy, natural gas, hydropower, and new renewable energy 
resources, such as wind, biomass and solar. Fuel diversity is key to 
affordable and reliable electricity. A diverse fuel mix helps protect 
consumers and national security from contingencies such as fuel 
shortages or disruptions, price fluctuations and changes in regulatory 
practices. A diverse fuel mix takes advantage of regional differences 
in fuel availability that have evolved over many decades.
    While coal fuels slightly more than 50 percent of the generation 
produced in the U.S., it fuels upwards of 80 percent of the electrical 
generation in many specific states. These coal-fueled plants help to 
keep the price of electricity down for consumers and businesses, an 
extremely important issue in states whose economies are already 
financially strapped.
    Due in part to the complexity and uncertainty of existing clean air 
regulation, over 90 percent of new power plants built over the past 
decade have relied on natural gas to produce electricity. Limits on 
U.S. natural gas supply have contributed to high natural gas prices. As 
a result, the U.S. industrial sector, which relies heavily on natural 
gas, has seen an erosion of U.S.-based manufacturing jobs. The 
regulatory certainty provided by multi-emission legislation will 
promote continued use of the nation's abundant and low-cost coal 
resources and alleviate pressure on the natural gas supply.

                               CONCLUSION
 
   Sensible multi-emission legislation can reduce power plant 
emissions and improve air quality faster, with greater environmental 
certainty, and more cost-effectively than continued regulation under 
current law. EEI supports the Committee's efforts to craft multi-
emission legislation that meets environmental goals and provides states 
and industry with a workable roadmap.
    With the economy in the early stages of recovery at the national 
and state levels, Federal clean air policy must not force increases in 
the use of natural gas for electric generation. Environmental goals can 
and must be met, but fuel switching and consumer price increases must 
be kept to a minimum. That is why EEI supports multi-emission 
legislation along the lines of Clear Skies. It delivers clean air with 
certainty, while protecting workers, consumers and industry. A sensible 
multi-emission bill addressing SO2, NOx and mercury benefits 
the environment, states, and electric generators and their customers.
    The time to act is now. EEI respectfully requests members of this 
Committee to take advantage of this unique opportunity to create a new 
chapter of air quality progress for the American people. EEI pledges 
its full support, and looks forward to continuing to work with the 
Committee, the Administration and other stakeholders to help make 
multi-emission legislation a reality.

    Senator Inhofe. Senator Carper had two UCs. One was an 
article that was in, I believe, yesterday's paper, the 
Associated Press article having to do with glaciers.
    Well, we have lost our Senator from Alaska here, but it is 
kind of interesting, and I want to have this appear in the 
record responding to his comments or brought after his article 
is in.
    There have been 160,000--this is kind of fascinating--
160,000 glaciers right now. Of the 160,000, only 42 glaciers 
have been studied for 10 years or more.
    The glacier with the longest mass balance record of all is 
located in Northern Sweden, it has a 50 year record. For the 
first 15 years of that it was shrinking, but for the last 35 
years it has actually been getting bigger. And I think this is 
what science is showing us now, that in areas glaciers are 
receding, in other areas they are actually building.
    So I would ask unanimous consent this be made part of the 
record right after the AP article. Without objection, so 
ordered.
    [The referenced document follows:]

    [GRAPHIC] [TIFF OMITTED] T2206.013
    
    [GRAPHIC] [TIFF OMITTED] T2206.014
    
    Senator Inhofe. Well, we have a very distinguished panel.
    We have--thank you for your patience, I might add.
    Brian, is it called Houseal?
    Mr. Houseal. Houseal.
    Senator Inhofe. Houseal. I am sorry. My staff is wrong for 
the first time this year. The executive director of Adirondack 
Council; John Walke, the Clean Air Director, Natural Resources 
Defense Council; and Abraham Breehey, legislative 
representative, Government Affairs, International Brotherhood 
of Boilermakers.
    We will go ahead and start with your opening statements. We 
will start with you, Mr. Houseal.

  STATEMENT OF BRIAN HOUSEAL, EXECUTIVE DIRECTOR, ADIRONDACK 
                            COUNCIL

    Mr. Houseal. Good morning. Thank you, Mr. Chairman and 
committee members, for the opportunity to testify today. I am 
Brian Houseal, the executive director of the Adirondack 
Council.
    The Adirondack Council is a privately funded, not-for-
profit organization, with 18,000 members dedicated to ensuring 
the ecological integrity and wild character of the Adirondack 
Park, a 6-million-acre mix of public and private land, equal in 
size to the State of Vermont.
    Adirondack Park has suffered some of the greatest damage in 
the Country from acid rain due to its geography and geology. 
Prevailing winds bring power plant emissions from outside New 
York, where they are deposited as rain, snow, and fog. The acid 
deposition then leaches nutrients from the soil, affecting tree 
growth and often killing our spruce, fir, and sugar maples.
    Acid rain has reduced the pH of many of our lakes to the 
same level as vinegar. Approximately one-quarter of the park's 
2800 lakes and ponds are biologically dead; they don't sustain 
their native plant and animal life. The Adirondacks are not 
alone. Acid deposition affects every State along the 
Appalachian Mountain chain and the eastern seaboard.
    Although the 1990 Clean Air Act amendments began to lessen 
the impacts of acid rain, the problem has not been solved. 
Early data have shown a slight improvement in the acid 
neutralizing capacity of a handful of our lakes. This evidence, 
along with reports from government agencies and nonprofit 
research organizations, indicate that the 1990 amendments 
targeted the right pollutants to combat acid rain but did not 
sufficiently reduce the pollution levels.
    Today we are here to make three requests of your committee. 
First, action to stop acid rain must be taken this year. 
Second, any legislation must be as good as or better than as 
the Environmental Protection Agency's Clean Air interstate 
rule. Third, no individual State's current enforcement 
mechanism should be eroded.
    Action is long overdue to help the forests, water, and 
wildlife of places like the Adirondacks to recover. Studies 
have also shown that approximately 25,000 U.S. citizens die 
annually because of power plant pollution. We need progress 
this year.
    In the late 1990s, New York Senator Moynihan proposed 
legislation with significant emissions reductions that was 
considered neither politically nor economically feasible. 
However, we now know that this level of reductions is possible 
on both counts. The Moynihan bill became the floor that other 
proposals would have to exceed. Numerous members of this 
committee have introduced legislation that goes beyond what 
Senator Moynihan first suggested.
    Today we have a new floor, in the form of EPA's Clean Air 
Interstate Rule. CAIR represents reductions of 65 percent of 
nitrogen emissions and 70 percent of sulfur emissions, and is 
scheduled to be finalized in March. Any legislation that is 
passed must buildupon the floor established by CAIR.
    Lower emission caps and earlier compliance dates would 
obviously serve to speed up the environment's recovery. 
Lowering the cap on sulfur dioxide would also have a 
significant co-benefit by reducing mercury emissions. We would 
like to see deeper cuts in caps on mercury; however, we do not 
agree with the proposed trading regime due to the demonstrated 
neurotoxicity of mercury in both animal and human populations.
    This bill does not include reductions in carbon dioxide, 
one of the major ingredients of global climate change. While we 
are very concerned about the serious environmental impacts that 
are already underway, we do not think that this incremental 
legislative step of ending acid rain should be delayed while 
carbon is further debated.
    We support New York Governor's Pataki's 12-State greenhouse 
gas initiative, and we are very hopeful that the U.S. Senate 
will act soon upon the McCain-Lieberman bill. It was very 
interesting today to hear Senator Clinton portray our position 
as opposed to acid rain legislation and Mr. Connaughton say 
that we are for acid rain legislation. The energy industry 
holds one extreme; the environmentalists have another extreme. 
We have staked out the radical middle, sir.
    We urge the committee members to carefully consider if it 
is necessary to make other changes to the existing Clean Air 
Act that could have a negative impact on the very successful 
and effective Acid Rain Program started by the EPA Clean Market 
Division 15 years ago. We would also encourage you to consider 
strengthening provisions and continue funding that expand the 
mandates for rigorous chemical monitoring at the smokestacks 
and expand it to ecological monitoring on the ground.
    Enforcement tools currently used by the States to clean up 
their air should not be diminished in any way. These tools are 
crucial to a successful cap and trade program. A prime example 
came last month, when New York Governor Pataki and Attorney 
General Spitzer announced an agreement with some of New York's 
largest and dirtiest coal-fired power plants to settle 
potential violations of New Source Review requirements. This 
action will result in the largest reductions in air pollution 
ever attained in New York.
    In closing, the Adirondack Council first testified before 
this committee about acid rain in October 1999, on the same day 
Governor Pataki announced that he would enact the toughest acid 
rain regulations in the Country. After court challenges, those 
rules went into effect in 2004 with year-round nitrogen 
controls and further sulfur reductions. New York has taken 
exhaustive measures to clean up its own plants. We are now 
asking the rest of the Country to do the same.
    Thank you for the opportunity to testify.
    Senator Inhofe. Thank you, Mr. Houseal.
    Mr. Walke.

STATEMENT OF JOHN WALKE, CLEAN AIR DIRECTOR, NATURAL RESOURCES 
                        DEFENSE COUNCIL

    Mr. Walke. Mr. Chairman and members of this committee, I 
appreciate this opportunity to appear before you.
    In April 2001, the utility industry's top air pollution 
lobbyist addressed a coal industry group telling them, in a 
speech later published on the Internet and attached to my 
written testimony, that EPA was planning to require air 
pollution reductions from coal-burning power plants. But the 
lobbyist assured his colleagues that he and his friends in the 
White House had a plan. The Administration would introduce 
legislation creating a weaker, slower program, one that would 
allow coal plants to emit more pollution for much longer.
    The lobbyist promised that the weaker, slower cleanup 
requirements would be something that we could all live with and 
that someone else can't undo. He noted the Administration's 
voluntary global warming policies and said, ``The President 
needs a fig leaf.''
    The so-called Clear Skies bill before this committee is the 
legacy of the plan that the power lobbyists proudly described 
in 2001. S. 131 would harm public health and worsen global 
warming, and should not become law. To put it simply, the bill 
before you chooses polluters over the public. Current law 
requires delivery of clean air by 2009 for smog and 2010 for 
soot pollution. The Administration's bill allows those 
deadlines to be pushed back to 2022, and it undermines the 
tools available to States and EPA to achieve even that lax 
deadline. Enforcing today's Clean Air Act will achieve cleaner 
air sooner.
    The bill's backers claims lawsuits create uncertainty in 
carrying out current law. In evaluating this claim, it is worth 
remembering that polluters bring most of those lawsuits. The 
shortest way to prevent lawsuits, of course, is to eliminate 
laws. But that is not an effective way to regulate those who 
elevate their own profits above the public health. Enforcing 
the Clean Air Act promises more effective cleanup than 
certainty of moving backwards with this legislation.
    Without conceding our fundamental concerns with expressing 
human deaths and adverse health effects in monetary terms, it 
is also important to note that as of 2020 the public health 
costs of the Administration's bill will exceed those of EPA's 
earlier stronger proposals by $61 billion per year. Moreover, 
EPA's proposal would only cost industry $3.5 billion more per 
year in implementation expenses. In other words, the 
Administration is promoting a bill that as of 2020 costs the 
public $15 in health damage for every one dollar saved by 
industry. Where is this Administration's claimed commitment to 
cost benefit analysis when the benefits to the public vastly 
outweigh the cost to industry?
    Let me address four other secrets in the bill that are 
worth noting. The biggest lie behind this bill is the claim 
that it will cut power plant pollution 70 percent by 2018. It 
will not. EPA and the Energy Department have told us plainly 
that this legislation will not achieve actual pollution 
reductions of 70 percent until sometime after 2025. Chairman 
Connaughton's testimony this morning did not disagree with 
that. Enforcing today's Clean Air Act will cleanup power plant 
pollution more than a decade sooner than S. 131, enabling 159 
million additional Americans to breathe healthy air by the end 
of this decade. Second, the bill exempts more than half of the 
Nation's coal-fired power plant units from toxic mercury 
control. Mercury is a potent neurotoxin now present at 
unhealthy levels in the blood of nearly 5 million American 
women of childbearing age. The Country's 1100 coal-fired power 
plants are the largest source of that mercury. Yet the bill's 
cap and trade program to control mercury emissions simply 
exempts 582 of those plants. As a result, the claimed 70 
percent reductions in power plant mercury emissions are 
entirely fictional. Half of the plants must reduce their 
mercury pollution, but the remainder need not make any 
reductions at all.
    Further, due to other gimmicks that I detail in my written 
testimony, even the plants subject to some controls will not 
achieve 70 percent reductions. And whatever those reductions 
end up being, they will occur after 2025, not by 2018, as 
promised. Enforcing today's law would deliver far deeper 
mercury cuts at every power plant in the Country and would 
achieve those necessary cuts by 2008.
    Third, the Administration's bill exempts as many as 69,000 
dirty non-utility units from regulations already adopted by EPA 
to control air toxics other than mercury, including arsenic, 
lead, and carcinogens like formaldehyde. You heard me 
correctly. Although advertised as a power plant bill, this 
legislation actually confers unprecedented favors on oil 
refineries, chemical facilities, and other industrial 
categories.
    By ostensibly agreeing to reduce smog-causing emissions by 
30 percent by 2010 and 50 percent by 2018, an agreement with no 
teeth due to clever loopholes in the bill, polluters can gain 
exemptions from air toxic regulations already on the books. 
Those exemptions could increase air toxic emissions by as many 
as 74,000 tons per year compared to enforcing existing 
standards.
    Fourth, the bill introduces fatal loopholes into the Acid 
Rain Trading Program, stripping away safeguards and 
accountability measures that are integral to its effectiveness, 
enforceability, and reliability. Power plants are the largest 
source of global warming pollution in the United States, 
responsible for 40 percent of U.S. carbon dioxide emissions. 
Yet the Administration's bill allows those emissions to grow 
unchecked.
    In the 2 years since the bill's introduction, it has become 
increasingly obvious that the failure to address CO2 
emissions is out of sync with scientific and economic reality. 
While there are pockets of denial left in the business and 
political worlds, even leaders in the electric power industry 
recognize the obvious. Listen to American Electric Power: 
``Enough is known about the science and environmental impact of 
climate change for us to take actions to address its 
consequences. Delay only increases the danger we face, and at 
the same increases the cost of addressing that danger later.''
    We can do three things to limit CO2 emissions 
from the electric sector. First, produce and use electricity 
more efficiency; second, dramatically increase our reliance on 
renewable energy resources; third, pursue methods to capture 
and permanently store CO2 from the fossil energy 
sources we continue to use. Deployment of all three of these 
technologies will be stimulated by the market's signal from a 
limit on power sector CO2 emissions. All three will 
languish if Congress ignores CO2 in a power plant 
bill.
    The Administration's policy of ignoring CO2 
limits will lock our children and grandchildren into two truly 
bad choices: Either dangerously high CO2 levels or 
crash reductions later. This Congress must do better. Thank 
you.
    Senator Inhofe. Thank you, Mr. Walke.
    Mr. Breehey.

   STATEMENT OF ABRAHAM BREEHEY, LEGISLATIVE REPRESENTATIVE, 
  GOVERNMENT AFFAIRS DEPARTMENT, INTERNATIONAL BROTHERHOOD OF 
                          BOILERMAKERS

    Mr. Breehey. Mr. Chairman, Mr. Jeffords, thank you for the 
opportunity to present our views on this important bill. My 
name is Abraham Breehey. I am the legislative representative 
for the International Brotherhood of Boilermakers, Iron Ship 
Builders, Blacksmiths, Forgers, and Helpers.
    The Boilermakers are the principal union responsible for 
the installation, maintenance, and repair of industrial 
boilers, as well as the installation of the pollution control 
equipment utilized to achieve the emission reductions that are 
the goals of this legislation. Our members have a dual concern: 
First and foremost, to have safe, productive workplaces; and, 
second, to ensure the sensible implementation of clean air 
standards that foster a market for our labor while protecting 
the environment.
    The Boilermakers have a significant interest in ensuring 
the latest control technology is used to meet Federal multi-
pollutant emission standards. As an EPA analysis of the 
engineering factors affecting the installation of pollution 
control technology notes, the labor requirements needed to 
retrofit scrubbers to remove SO2 for a 500 megawatt 
utility include about 150,000 boilermaker manhours.
    Similarly, a retrofit of SCR NOx control technology of 500 
megawatts requires as much as 350,000 manhours of construction 
labor, with about half that amount available for boilermakers. 
However, the vast majority of our manhours are generated 
providing maintenance and upgrades to existing coal-fired 
electric utilities. Too often under the status quo this work is 
being put off or abandoned.
    This legislation requires $52 billion in investment to meet 
air quality standards, a significant portion of which will be 
paid in wages to Boilermakers and other union craftsmen. We 
believe it provides a clear path forward for new plant 
construction, sets standards that are both technologically 
feasible and no doubt within the current labor capacity.
    We believe this legislation achieves a significant balance 
in that it provides a protective approach on clean air that 
maintains the competitiveness of our industrial facilities, 
keeping Boilermakers and other union members' work from being 
outsourced. By ensuring a continued role of coal in our energy 
mix and providing greater regulatory certainty, this 
legislation will promote stable energy prices that are 
necessary for the economic growth that creates good paying 
manufacturing and industry jobs.
    I know we all agree that America's workers are the most 
productive in the world. However, we are forced to succeed 
under competitive disadvantages. Regulatory policies that delay 
efficiency improvements or might lead to fuel switching from 
coal to natural gas would only exacerbate our problems keeping 
good paying jobs here at home.
    The Boilermakers Union promotes the expansion of the Acid 
Rain Program cap and trade system for SO2 to NOx and 
mercury as suggested under this legislation because it sets 
predictable deadlines that are achievable with current 
technology.
    Workplace safety is a cornerstone of the Boilermakers 
National Joint Apprenticeship Program. Our members work 
together with our employers to limit workplace injury and 
promote efficient operations. Too often important work is 
delayed due to the uncertainty of the regulatory and permitting 
process. Power generating facilities operate most efficiently 
when they undertake repair and replacement projects on a 
regular basis.
    The varying interpretations of the requirements of New 
Source Review often forces facilities to delay maintenance 
while they await EPA approval. Further, the threat of 
litigation too often acts as a deterrence to capital 
investments that create work and maintain safe facilities for 
our members. S. 131 will also prevent the litigation and delay 
associated with the U.S. EPA rulemaking proceedings. The bill's 
approach to mercury emissions will avoid the need for a 
controversial EPA mercury rule, while ensuring the use of cost-
effective emissions trading as a means to achieve significant 
emission reductions.
    We specifically support the use of a co-benefits approach 
for the first phase of mercury control to enable more accurate 
measurements of the control capabilities of existing technology 
and allow time for advanced mercury specific control to mature 
in time to meet the final 2018 cap. Further, the caps, 
timetables, and incentives of the Clear Skies Act will result 
in high emissions reduction goals through the application of 
technology, as opposed to fuel switching.
    Sections 455 and 475 provide for early action reduction 
credits to encourage NOx and mercury reductions, respectively, 
through the application of technology. Certainly the 
Boilermakers will realize significant benefits from these 
provisions, but the implications of widespread fuel switching 
to costly natural gas would be devastating across the 
manufacturing sector. An important benefit of this legislation 
is that it fosters reliable, affordable energy generated from 
coal.
    In conclusion, our union believes that among the greatest 
challenges that the Senate is faced with this year is 
maintaining the competitiveness of American manufacturing in 
the global marketplace. Since its peak in 1998, the United 
States has lost 3 million manufacturing jobs. There is a 
palpable anxiety among working families across the Country.
    Our union is committed to providing the highly skilled 
labor needed to power the American economy, and we believe that 
the legislation proposed by Senators Inhofe and Voinovich sets 
our facilities on a path forward toward an affordable, stable, 
and domestically produced energy supply. I know our members 
look forward to continuing our role in this important debate.
    Again, thank you for this opportunity.
    Senator Inhofe. Thank you, Mr. Breehey, for an excellent 
statement.
    Mr. Houseal, you were here when Senator Clinton said that 
you do not support this bill. Could you clarify that for the 
record? Do you support the bill as it is being passed out of 
committee?
    Mr. Houseal. Sir, as my testimony indicated, I think there 
could be some positive changes to the legislation, and to go on 
record, we have said that we would support any legislation that 
would stop acid rain.
    Senator Inhofe. OK. Very good.
    Mr. Walke, there are so many things in your statement that 
totally contradict everything that Mr. Connaughton said, so I 
am going to ask unanimous consent that the record be held open 
so he can respond to some of your comments, and I am sure you 
would have no qualms with that.
    Mr. Walke. No, sir.
    Senator Inhofe. Mr. Walke, do you really believe that there 
is technology in place that would allow lignite-fired power 
plants to have a 90 percent reduction by 2008?
    Mr. Walke. Senator Inhofe, there was an excellent 
presentation yesterday that I believe your staff and others 
here attended by the Institute of Clean Air Companies that 
demonstrated tremendous advances in mercury pollution control 
technology for all types of coal, lignite, bituminous, sub-
bituminous, and the rest. And the Clean Air Act, if enforced 
today by EPA, would give a compliance window for that 
technology to be installed by 2008, with the law providing the 
opportunity for an extension of 2009 if technology were not 
available.
    So what the vendors have said and what State air regulators 
have said is that the availability of activated carbon 
injection technology with scrubbers and other types of 
technology by the time the compliance deadlines will arrive 
under EPA's rulemaking authority will achieve far, far greater 
reductions than the 29 percent cuts that this bill would allow 
to occur for an additional 13 years.
    As to any particular control level, EPA has yet to tell us 
what that will be. My organization has advocated for a 90 
percent level, and I have entered into the record through my 
testimony comments that we provided to EPA to address those 
technologies.
    Senator Inhofe. And, once again, what percentage of 
reduction would that be by 2008, the hearing that you had 
yesterday, or the briefing, what did they come up with?
    Mr. Walke. The presentation yesterday, to my knowledge, did 
not address your specific question by the specific date of 
2008, so I don't know that that question was answered 
yesterday.
    Senator Inhofe. OK. They are just saying that there is 
technology out there, but it doesn't say--the question I had 
for you was do you believe that a 90 percent reduction could--I 
have been handed a note by someone who attended that. They said 
that the vendors only promised 50 percent strict limits and 70 
percent if flexible implementation, and that is what this bill 
does. But it is 50 percent reduction according to a staffer who 
was there.
    Mr. Walke. The vendor is referring to authority under the 
current Clean Air Act to extend the deadline by an additional 
year, or even an additional 2 years with Presidential 
involvement, which I think is what they said would kick that up 
to a 70 percent. But, again, I don't believe that that precise 
question was answered, and I will have to look in our comments 
that were filed with EPA to see if it was answered there.
    Senator Inhofe. That is fair enough.
    Mr. Breehey, do you support the Clear Skies bill as it is 
written right now to be passed out of committee?
    Mr. Breehey. Yes, Mr. Chairman.
    Senator Inhofe. All right.
    I have a very distinguished group here for the national 
prayer breakfast from Uganda, and I am going to have to run out 
and say hello to them, so I am going to ask Senator Voinovich 
if you would preside for just a moment.
    Senator Jeffords.
    Senator Jeffords. Thank you, Mr. Chairman.
    I would like to ask each of you if you would like to take a 
minute or two to respond to anything that you have heard from 
the Senators or the first witnesses here.
    Mr. Houseal. I am sorry, Senator, I didn't get the 
question.
    Senator Jeffords. If you have something that you would like 
to relate to us relative to the first witnesses, we would be 
happy to hear you.
    Mr. Houseal. To further reflect on my answer to Senator 
Inhofe, the members of this committee have introduced several 
bills over the years that would address the issue of acid rain, 
and we have endorsed one bill which is actually in the House 
introduced by our New York Republican delegation, Sweeney 
McHugh, House Bill 227, and would certainly urge this committee 
to come to a compromise on the proposed bill and work with the 
House as well to get something through.
    Senator Jeffords. Mr. Walke.
    Mr. Walke. Senator Jeffords, I would like to address a 
statement that Chairman Connaughton made earlier in the panel, 
where he indicated that, to his knowledge, there were not 
exemptions from regulations that would be bestowed upon the 
affected units covered under this bill. As I detailed in my 
testimony, we have 582 of the 1100 power plants nationwide that 
would need not adopt any mercury controls.
    And because of the quite clever way the bill is structured, 
in fact, some untold number of other power plants could escape 
smog and soot controls as well under the cap because of the 
opt-in provisions that Senator Clinton was referring to. The 
truth is that EPA doesn't know how many power plants would be 
exempt or well controlled under this, because they haven't even 
analyzed this bill with the really devastating effect of the 
opt-in provisions.
    So I would encourage this committee to call upon EPA to 
fully analyze all provisions of the bill that is before this 
committee and to describe the impacts of those as compared to 
enforcing current law, which we believe will protect the public 
better.
    Senator Jeffords. Thank you.
    Mr. Breehey. Senator, as Mr. Connaughton discussed at 
length, one of our primary concerns is the impact of any clean 
air legislation on fuel switching to natural gas that will 
drive up manufacturing costs and increase the outsourcing of 
U.S. jobs. So we support the Administration's perspective on 
that particular issue and believe that the bill that Mr. Inhofe 
has put forward will go a long way to addressing it.
    Senator Jeffords. Mr. Walke, why do you think that until 
now no real effort has been made to mark up Clear Skies or move 
it through Congress, since it was first introduced at the 
request of the President July of 2002?
    Mr. Walke. Well, my view is that it was the responsible 
opposition of this Congress that prevented the bill from being 
taken up seriously in the past 2 years, and that realizing that 
EPA moved forward with regulations under its current authority 
under the Clean Air Act that would actually protect the public 
sooner and to a greater degree.
    I think that case is made even tenfold today, where we have 
a bill before us that is dramatically weaker and worse than the 
bill that was even introduced in the year 2001. So I am hopeful 
that with EPA facing deadlines to act in March, 2 months from 
now, that we will actually have rules that are issued that will 
protect the public and that Congress will move on to other 
business and not go forward with this bill.
    Senator Jeffords. Mr. Walke, also, according to the most 
information that is available today, power plants are the 
source of significant non-attainment in many parts of the 
Country. They are also the most cost-effective control options 
that States and local governments will rely upon to achieve 
attainment. What do you believe are the most cost-effective 
control options that will allow attainment to be reached on 
schedule?
    Mr. Walke. Senator, plainly, deeper reductions from the 
power plant sector are more cost-effective than the other 
cleanup measures that States would have to resort to in order 
to clean up their air. EPA has found in the past that cost-
effective reductions from power plants are $2,000 a ton, and if 
we were to adopt that same metric today, we would be cleaning 
up power plant emissions by 90 percent within the next 5 years, 
not by 70 percent over the course of the next two decades.
    The truth is that the Administration low-balled the 
requirements that they were willing to impose upon the power 
sector, which resulted in a scandalously low cost-effectiveness 
dollar figure of $700 a ton. The DC area has submitted controls 
that would require three to five to $7,000 of tons of 
reductions from other industry sectors, and we can do better 
and more cost-effectively with power plants.
    Senator Jeffords. Thank you, Mr. Chairman.
    Senator Voinovich [assuming Chair]. Mr. Houseal, as you 
know, some of my colleagues and witnesses claim that Clear 
Skies is a rollback of existing Clean Air Act provisions. I 
would just like you to comment on that.
    Mr. Houseal. We agree with the cuts as presented in the 
Clear Skies bill that are in front of you today, and in terms 
of a rollback, I would agree with Mr. Walke's comment that we 
have a floor available for us right now, which is the Clean Air 
Interstate Rule, and a deadline of March, so that if this bill 
is above that floor, I think we have a positive step forward 
here.
    Senator Voinovich. And your position is the one that you 
have maintained for several years. I will never forget your 
organization being criticized by the Clean Air Trust. You got 
the villain of the month award because you said let us do 
something about three Ps or three Es, and let us discuss carbon 
at some other time, but let us get on with it so we can do 
something about our problem.
    Mr. Houseal. That is correct. If Congress had moved in 
1995, when the first EPA study came out indicating further 
reductions were necessary in NOx and SOx, and if it had 
happened that year, I think the discussion today would be much 
different about a multi-pollutant bill. It is indeed 
unfortunate when we recognize that at the time of the Kyoto 
protocols the Senate voted it down 95 to 0. That was 
bipartisan. And more recently there has been slightly more 
progress with the McCain-Lieberman bill. But obviously the 
political will is not yet with us to have a bill.
    Senator Voinovich. You want us to move on.
    Mr. Houseal. Let us move on and get acid rain cured and 
have the debate about CO2.
    Senator Voinovich. Mr. Walke, as I stated in my opening 
statement, I hoped that we could move passed many claims 
against the bill and have a construction discussion about the 
legislation. Instead you have levied many attacks against this 
legislation that I disagree with, and I am glad the Chairman is 
going to leave the record open so we can get at that. But one 
of the things that bothers me about your testimony is this 
issue of sinister motives by those of us that are involved in 
this bill.
    You just said the clever way the bill was constructed.
    I want you to know that I was the chief environmentalist in 
the House of Representatives in Ohio. I want you to know that I 
was the father of the Ohio Environmental Protection Agency. I 
want you to know that when I was Governor of Ohio, we moved 
forward and we got every county to achieve the ambient air 
standards.
    I care about the people of Ohio. I care about the fact that 
I don't believe that we have been moving rapidly enough to do 
something about our environmental needs and our public health 
needs, and I am very concerned about the fact, because we 
haven't harmonized our energy and environmental and economic 
needs, that many Ohioans today have been hurt economically. So 
I just want you to understand that.
    First, you claim that more can be done under the existing 
Clean Air Act. I won't go into this again, but as I laid out in 
my opening statement, the current Act NSR Section 126 have not 
worked well in terms of meeting its deadlines. And I am glad 
that Mr. Connaughton clarified what we are doing in that area, 
and we would be glad to work on that area.
    Second, you cite an EPA staff proposal that is much 
stronger than Clear Skies. There is a long history on the Straw 
proposal. I would just quote from a recent article in the issue 
of Washington Monthly entitled, ``Partly Sunny, Why Enviros 
Can't Admit that Bush's Clear Skies Initiative Isn't Half 
Bad.'' One EPA career official said, ``We created the business 
as usual scenario of what would happen under the Clean Air Act 
out of whole cloth. To be honest, we wanted to scare the hell 
out of the industry. Early on, said EPA staffer John Bachman, 
we became convinced that we couldn't do the Straw proposal.''
    Third, you state, ``It is absurd to think that starting 
afresh with a new, untested legal framework would reduce future 
litigation delays.'' As you cite Mr. Schneider's testimony from 
last week, that two dozen rules are required to implement Clear 
Skies, so there are going to be extensive litigation. I hate to 
argue with you on this point, since your organization seems to 
be an expert on litigation, but I disagree.
    The rulemakings required are those that are required under 
the Acid Rain Program, and they were not litigated. Clear Skies 
contains provisions to assure the reductions. There is a 
prohibition against legal challenges of the annual allowance 
allocations and a default allowance procedure in case of any 
problems. And, most importantly, the emission caps and 
compliance deadlines to Clear Skies are set in statute and 
cannot be disputed, delayed, or legally challenged.
    Fourth, you claim that the Jeffords-Carper bill gets faster 
reductions without more cost. This doesn't make sense. If you 
look at the 2004 analysis of all three bills by the Energy 
Information Administration, those two bills cause more 
unemployment, higher natural gas and electricity prices, and 
lower coal use than Clear Skies.
    Fifth, you attack the transitional provision in the bill. 
This provision follows the National Academy of Sciences 
recommendation that ``the implementation of air quality 
regulations should be less bureaucratic, with more emphasis on 
results and the process.''
    Mr. Breehey, you made reference to that in terms of your 
people. It is stop, start, and you have no certainty there.
    I have run out of my time, but let me quote from 
Administrator Browner's testimony October 1, 1997, before a 
joint committee hearing of the House Committee on Commerce. She 
said, ``Our next implementation in this effort, NAAQS, is a 
regional strategy, it is designed to target major utilities for 
pollution reductions through a market-based cap and trade 
program. Once this plan is given a chance to work, we believe 
that the vast majority of cities that based on current data 
would not meet a more protective health standard would be able 
to go through this strategy without any additional new local 
pollution controls or measures. The States will receive a 
transitional classification. This classification will enable 
them to avoid undue local planning requirements and the 
restrictions on economic growth.''
    Now, that is not from Christy Todd-Whitman or Mike Leavitt; 
it is from Carol Browner, October 7, 1997.
    Senator Inhofe [resuming Chair]. Thank you very much, 
Senator Voinovich.
    And I thank the panel. I thank you for your patience. The 
first panel went a little bit longer than it was supposed to. 
We appreciate your service very much.
    We are adjourned.
    [Whereupon, at 11:52 a.m., the committee was adjourned.]
    [Additional statements submitted for the record follow:]
  Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
    Mr. Chairman, Ranking Member Jeffords, thank you for holding this 
hearing today on S. 131, the Clear Skies bill. This issue is very 
important, to the country and to my state of Montana.
    I believe we have an opportunity to craft a bi-partisan bill in 
this Committee. But, this is not a simple task. It will require 
difficult negotiations and a lot of hard work. We have to listen to 
each other, rather than talking past each other. We've held a lot of 
hearings, but we've had very little discussion about what was said at 
those hearings.
    I don't think there's a lot of disagreement over the basic 
principles in this debate. Cleaner air and a healthier environment; 
greater certainty for business; more efficient regulation; reduced 
costs of compliance. That's our goal, to take what we've learned from 
the implementation of the Clean Air Act Amendments of 1990, and craft a 
better program that reduces pollution and enhances our global 
competitiveness. The question, of course, is how do we achieve this? 
Certainly, there is a significant difference of opinion among members 
of this Committee as to what is the best approach.
    But, a difference of opinion doesn't mean a good compromise is out 
of our reach. It certainly doesn't mean that we shouldn't even try to 
find common ground. That's what we're here for in this Committee. 
That's what I want to see.
    In order to do this, though, we need to build some trust. There 
needs to been an understanding that this isn't a take it or leave it 
situation, that the legitimate concerns of members of this Committee 
about this legislation will not be ignored or dismissed, but considered 
and, where possible, addressed.
    Will we all be able to agree on what is the best way forward? 
Probably not. But, I think we can do better than an even split, or a 
bare majority. We should be shooting for as strong a bi-partisan vote 
as possible that will help this bill survive on the floor. We have to 
do that if we're serious about actually accomplishing something this 
year. We still need 60 votes to pass anything in this body.
    Personally, I have a few simple criteria for any multi-pollutant 
bill: First, it must represent a clear and positive step forward on 
clean air as compared to the status quo. I understand that we're facing 
very different challenges now than we did in 1990, even if we just 
consider the significant changes that have occurred within the utility 
industry during that time. New challenges call for a new approach, such 
as a sound multi-pollutant bill, but we have to make sure that we 
maintain and improve upon the Clean Air Act's success at reducing air 
pollution nationwide.
    Second, legislation must not harm, and if possible, must promote, 
the development of Montana coal. Montana sits on the largest coal 
reserves in the nation. These coal reserves represent an enormous 
economic potential for my state, in royalties, revenue and jobs. 
Unfortunately, we just haven't been able to develop the markets for our 
low-sulfur coal that our friends and neighbors in Wyoming have. I would 
like to see if there's a way we can fix that problem. Additionally, 
there are a lot of proposals out there right now to develop new power 
plants in Montana that burn Montana coal. Of course, not all of them 
will be built. But I want to be sure that any legislation treats new 
plants fairly and provides sufficient incentives for them to be built. 
New plants are cleaner and more efficient than older plants, 
particularly those plants that are 40 and 50 years old. Efficient and 
clean should be rewarded, not penalized, particularly if we want to 
continue to advance clean coal technologies to ensure that coal has a 
robust future.
    Third, the legislation must substantively address carbon dioxide. I 
think we can put together a strong package that passes the laugh test 
and pushes the technology envelope without penalizing coal or harming 
our economy. I think such a package would win the support of a majority 
of Senators on this Committee and on the floor.
    Right now, it's too soon for me to confirm whether Clear Skies 
satisfies the first two criteria; I know that it does not satisfy the 
third. However, I'm confident that we can find a compromise if, again, 
we work hard and talk to each other. And, if we have the time to work 
something out. A rush to mark-up, without laying any foundation for a 
bi-partisan compromise to take to the floor, is not a strategy for 
success. This is frustrating because I want a good bill. It's the right 
thing to do and I think we can get it done.
    I would like to associate myself with the earlier comments of 
Senator Carper, where he noted that there is a great deal of room for 
negotiation on this bill, in terms of caps and timelines, regulatory 
relief and CO2. I have a great deal of regard for both 
Senator Voinovich and Senator Carper, the Chairman and Ranking Member 
of the Clean Air Subcommittee. They are both former Governors, they 
know how to get things done. They have both indicated their willingness 
to start a dialog and find a compromise. I fully support their efforts 
and will do everything I can to help ensure they succeed.
    Mr. Chairman, let's set this Committee up to succeed. I think we're 
close on so many issues but the process needs time work itself out. 
Let's give it that time to see what can be done. It will be time well 
spent and I think it will only help this bill's prospects going 
forward.
    Thank you, Mr. Chairman.
                               __________

          Statement of Hon. Barbara Boxer, U.S. Senator from 
                        the State of California

    Mr. Chairman, I appreciate having a hearing before this Committee 
on the challenges of cleaning up the air. It is, however, unfortunate 
that you have chosen to focus this hearing on legislation that would 
actually increase pollution.
    Significant progress has been made since the Clean Air Act was 
enacted in 1970--U.S. emissions of smog forming pollutants have 
decreased more than 50 percent while economic growth has increased well 
over 150 percent. However, there is there is still much to be done to 
clean up our air.
    Dangerous levels of pollution are causing thousands of premature 
deaths, hundreds of thousands of asthma attacks, neurological 
disorders, and other illnesses each year, especially in our children, 
our most vulnerable population.
    According to the EPA, hospital admissions for asthma alone 
increased approximately 30 percent between 1980 and 1999. Further, one 
in six women of child bearing years has dangerous levels of mercury--a 
potent neurotoxin that threatens the health of developing fetuses, 
children, and other vulnerable populations in her system.
    These are the issues that we should be addressing today--how to 
reduce pollution and its public health and environmental effects.
    If the administration and this committee's leadership were serious 
about addressing pollution, this committee would not be discussing S. 
131, a wholesale roll back of the Clean Air Act. We would be discussing 
Senator Jeffords' bipartisan Clean Power Act, S. 150, which takes on 
the challenge of protecting public heath by aggressively reducing power 
plant emissions while keeping the Clean Air Act in tact.
    Although Senator Inhofe presents his bill as addressing power plant 
pollution--that is not the purpose of this bill. Make no mistake, the 
purpose of S. 131 is to undermine and unravel the Clean Air Act, 
undoing three decades of progress in cleaning up our air, under the 
guise of a power plant bill.
    Contained in S. 131 is virtually every roll back that industry has 
fought for since the passage of the Clean Air Act. S. 131:
     Delays implementation of public health air quality 
standards 5-17 years;
     Repeals air toxic regulations for power plants and more 
than 73,000 other facilities, including emissions of cancer-causing 
pollutants such as formaldehyde, benzene, arsenic, toluene and lead;
     Makes it harder for states to clean the air by removing 
states' tools, such as the requirements that old, industrial 
facilities, including power plants, install modern pollution controls 
when they make significant changes that result in an increase in air 
pollution or that they offset pollution increases; and
     Ignores emissions of carbon dioxide, the main cause of 
global warming.
    Each year of delay in cleaning up our air takes an unnecessary toll 
on our public health, welfare and the environment. The solution is not 
to defer deadlines and weaken regulations, but, rather, to accelerate 
industry compliance with the current Clean Air Act.
    Proposals such as S. 131 that fall short of protecting public 
health or that seek to use the power plant debate to unravel the 
current Clean Air Act should be soundly rejected because they do not 
address the fundamental issue--the threat to the health of our 
communities from air pollution.
    Remember, S. 131 is not really about power plants, S. 131 is about 
dismantling the Clean Air Act. It is an industry wish list that not 
only fails to adequately address power plant pollution, but which would 
result in at least 21 million tons of additional pollution placing 
public health and the environment at risk.
    We cannot, and will not, let the Clean Air Act be unraveled to 
appease a powerful lobby. We can and should have an open, honest 
bipartisan discussion about the threat that air pollution poses to 
public health and the environment and the steps that we can take to 
clean the air. I look forward to that discussion.

     Statement of James L. Connaughton, Chairman, U.S. Council on 
                         Environmental Quality

    Mr. Chairman, Senator Jeffords and members of the Committee. I 
appreciate the opportunity to appear before you today to strongly urge 
passage of the President's Clear Skies Initiative. President Bush is 
dedicated to providing our families and children with a healthier, more 
economically vibrant and secure future. Important to achieving that 
future is bringing proven, innovative tools to the task. Clear Skies 
legislation is just such a tool, and means healthier citizens, stronger 
communities, more affordable, reliable and secure energy, and more 
vibrant wildlife habitat across America.
    Clear Skies will significantly expand the Clean Air Act's most 
innovative and successful program in order to cut power plant pollution 
of sulfur dioxide, nitrogen oxides and, for the first time, mercury by 
an unprecedented 70 percent in two phases. These cuts in pollution will 
provide substantial health benefits, prolonging the lives of thousands 
of Americans annually, and improving the conditions of life for 
hundreds of thousands of people with asthma, other respiratory 
illnesses, and heart disease.\1\ As the son of a pediatrician who is 
also a chronic asthmatic, my passion for this policy is deeply 
personal.
---------------------------------------------------------------------------
    \1\Further detail about these benefits can be found in the 
materials accompanying this testimony and on the EPA and White House 
Web sites (www.epa.gov/clearskies and http://www.whitehouse.gov/ceq/
clear_skies.html).
---------------------------------------------------------------------------
    Clear Skies will produce these health benefits with greater 
certainty by imposing a mandatory, permanent, multi-pollutant cap on 
emissions from more than 1300 power plants nationwide, reducing 
pollution by as much as 9 million tons annually at full implementation. 
Utilities will achieve this by spending more than 52 billion dollars to 
install, operate and maintain new, primarily clean coal pollution 
abatement technology on both old and new power plants. Clear Skies will 
require only a few dozen government officials to operate and will 
assure compliance through a system that is easy to monitor and easy to 
enforce.
    Accordingly, the Clear Skies cap and trade approach will give our 
states the most powerful, efficient and proven tool available for 
meeting our new, tough, health-based air quality standards for fine 
particles and ozone. At the end of last year, EPA completed the process 
of informing over 500 counties that they either do not meet or that 
they contribute to another county not meeting the new standards. That 
relatively straightforward act has now triggered a very complex process 
that will lead later this year to a frenzy of intrastate negotiation 
and conflict, interstate negotiation and conflict, Federal-state 
negotiation and conflict, state and citizen petitions, lawsuits, and 
heightened uncertainty in energy markets, producing an avoidable and 
negative impact on local investment, jobs and consumer energy bills. 
Not a pretty picture.
    As a former Governor, the President personally experienced and 
understands the complexities of developing and implementing state plans 
to meet air quality standards. That is why he places a premium on 
practical, common sense solutions. Clear Skies, in conjunction with the 
Bush Administration's new rules cutting diesel engine pollution by more 
than 90 percent, provides that solution. Most counties will be able to 
meet the new standards without having to take any new local measures 
beyond the Clear Skies power plant reductions. For the relative few 
that remain, their burden will be substantially lighter and their 
likely challenges local ones. This simple approach could save 
governments and the private sector tens of millions of dollars in 
negotiations, litigating and otherwise inevitable delay in meeting air 
quality standards.
    Clear Skies will also help keep communities together. Up front 
assurance of meeting air standards will give communities the certainty 
they need to keep and attract manufacturing jobs in the places where 
generations of their families currently live, work, play, and pray. The 
absence of such certainty could exacerbate the breakup of communities 
experiencing the exodus of industrial jobs to either ``greenfields'' 
locations in the United States or, even more consequentially, overseas.
    Clear Skies will also make communities stronger economically by 
helping to keep energy affordable, reliable, and domestically secure 
for their businesses and homes particularly important to those least 
able to afford their energy needs. The market-based trading approach 
will substantially cut the overall cost of compliance that is passed on 
to consumers and shareholders. In addition, the specific cap levels in 
Clear Skies--endorsed by organizations such as the U.S. Conference of 
Mayors and National Association of Counties--are calibrated to 
encourage utilities to put controls on coal rather than switch to 
natural gas in order to comply. That minimizes the overall impact on 
energy prices. Forcing fuel switching to natural gas, by contrast, 
maximizes it.
    Finally, Clear Skies will help our ecosystems and wildlife thrive. 
It will eliminate chronic acidity in the Adirondacks and virtually 
eliminate it in other Northeastern lakes. It will improve long-term 
conditions in streams, rivers, lakes and bays. It will vastly improve 
visibility in many of our parks and other scenic locations.
    Mr. Chairman, for these reasons, a broad array of state, regional 
and local officials, as well as unions and non-governmental 
organizations, have endorsed the approach to meeting air quality that 
Clear Skies delivers. We look forward to the Congress delivering Clear 
Skies.
                                 ______
                                 
    Responses of James L. Connaughton to Additional Questions from 
                             Senator Inhofe

    Question 1. In the testimony submitted by Mr. John Walke, Natural 
Resource Defense Council, he states that a 2001 EPA document, entitled 
``Comprehensive Approach to Clean Power: Straw proposal and Supporting 
analysis for Interagency Discussion,'' shows that 115 counties will 
still be in non-attainment in 2010 and that 66 counties will be in non-
attainment by 2020. These estimates, however, appear to conflict with 
estimates included in EPA's 2003 analysis of the Clear Skies Act of 
2003 ``Section B: Human Health and Environmental Benefits.'' In that 
analysis, EPA concludes that only 45 counties (27 counties for the 8-
hour ozone standard and 18 for the PM2.5 standard) will 
remain in non-attainment out of a total of 419 counties deemed to be in 
non-attainment based on 1999 to 2001 data. This represents close to a 
90 percent reduction in the number of non-attainment areas. Please 
explain to the Committee which set of estimates provides the most 
accurate prediction of nonattainment counties likely to remain based on 
existing information?
    Response. In general, EPA's most recent modeling estimates are 
based on more up-to-date air quality and emissions data and improved 
modeling systems. The estimates in EPA's 2003 analysis are EPA's best 
estimates of how many counties will attain the standards or continue to 
monitor non-attainment in 2020 under the provisions of the Clear Skies 
Act of 2003.

    Question 2. Of the 45 counties that will remain in non-attainment, 
please list the counties and provide information on when the Agency 
expects that these counties will reach attainment based on the Agency's 
current models. For each county, please include information on the 
deadline assigned to the county in the recently promulgated 
implementation rules for the 8-hour and the PM2.5 standards. 
How many of these counties does EPA believe. will not attain the 
standard by their assigned deadline based on the Agency's current 
models?
    Response. The Clean Air Act requirement that states meet the 
National Ambient Air Quality Standards (NAAQS) is unchanged in Clear 
Skies legislation. By providing national and regional reductions in 
pollution, Clear Skies would assist local areas in reaching attainment. 
However, EPA cannot predict when some counties will actually reach 
attainment, because EPA's modeling does not take into account the 
local-level controls that could be adopted by areas to help them reach 
attainment. Clear Skies modeling may predict that a county will monitor 
non-attainment in 2020 with existing control programs and the Clear 
Skies Act of 2003 power sector reductions; however, the county must 
attain the air quality standards through imposition of local or State-
level controls.
    There are 38 counties in all that EPA projects will not meet the 
standards in 2020 without adoption of state or local control measures: 
27 counties projected to monitor non-attainment for 8-hour ozone and 18 
counties projected to monitor in non-attainment for PM2.5 
(see table below). Seven of these counties are projected to monitor 
nonattainment for both pollutants. The attainment deadlines for these 
38 counties depend on several factors.
    All PM2.5 non-attainment areas are required to attain 
the standards ``as expeditiously as practicable'' and no later than 5 
years from the effective date of designation, i.e., April 2010. The 
Administrator may grant an area an extension from 1 to 5 years (i.e., 
up to April 2015) based on the severity of the air quality problem and 
the availability of emissions reduction options.
    The attainment deadlines for the 8-hour ozone non-attainment areas 
depend on whether they are subject to Subpart 1 or Subpart 2 of the 
Clean Air Act. All 27 of these counties are subject to Subpart 2 of the 
Clean Air Act. Subpart 2 ozone non-attainment areas are classified 
according to the severity of their pollution problem. They must attain 
as expeditiously as practicable but no later than the maximum deadlines 
listed in the ozone implementation rule. These deadlines are the 
following number of years after the effective date of designation 
(which was 6/15/04 for each of the 27 areas):
     Marginal - 3 years after designations, or 2007
     Moderate - 6 years after designations, or 2010
     Serious - 9 years after designations, or 2013
     Severe - 15 or 17 years after designations, or 2019 or 2021
     Extreme - 20 years after designations, or 2024
    For each of the 27 Subpart 2 counties which are projected to 
monitor nonattainment for ozone in 2020 based on Clear Skies and 
existing control programs alone, the maximum statutory attainment date 
is listed in the table below. To meet these attainment deadlines, 
States will have to impose additional controls. The Administrator may 
grant up to two one-year extensions of the attainment deadlines for any 
PM2.5 or 8-hour ozone non-attainment area that has 
experienced only a minimal number of exceedances in its attainment year 
and for which the State has met all the requirements in its State 
implementation plan for the relevant area. In addition, if the State 
believes the area cannot attain by the maximum attainment date, the 
State may request that the area be reclassified to a higher 
classification, which would give it a later attainment date.



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            PM2.5: Counties                         Both: Counties
                                                                             projected to       Ozone: Counties      projected to
                                                                             monitor non-        projected to        monitor non-      Maximum statutory
                                                                          attainment in 2020     monitor non-     attainment in 2020    attainment date
                   STATE                               COUNTY               w/Clear Skies +   attainment w/Clear    w/Clear Skies +    for ozone Subpart
                                                                           existing programs   Skies + existing    existing programs      2 counties
                                                                            THUS must take    programs THUS must    THUS must take
                                                                             local action      take local action     local action
--------------------------------------------------------------------------------------------------------------------------------------------------------
AL                                          Jefferson Co................                  1   ..................  ..................  ..................
CA                                          Fresno Co...................                  1                   1                   1                2013
CA                                          Kem Co......................                  1                   1                   1                2013
CA                                          Merced Co...................                  1   ..................  ..................  ..................
CA                                          Stanislaus Co...............                  1   ..................  ..................  ..................
CA                                          Tulare Co...................                  1   ..................  ..................  ..................
CA                                          Los Angeles Co..............                  1                   1                   1                2021
CA                                          San Bernardino Co...........                  1                   1                   1                2021
CA                                          Orange Co...................                  1                   1                   1                2021
CA                                          Riverside Co................                  1                   1                   1                2021
CA                                          San Diego Co................                  1   ..................  ..................  ..................
GA                                          De Kalb Co..................                  1   ..................  ..................  ..................
GA                                          Fulton Co...................                  1   ..................  ..................  ..................
IL                                          Cook Co.....................                  1   ..................  ..................  ..................
MI                                          Macomb Co...................  ..................                  1   ..................               2010
MI                                          Wayne Co....................                  1                   1                   1                2010
OH                                          Cuyahoga Co.................                  1   ..................  ..................  ..................
OH                                          Jefferson Co................                  1   ..................  ..................  ..................
PA                                          Allegheny Co................                  1   ..................  ..................  ..................
CA                                          Ventura Co..................  ..................                  1   ..................               2010
CT                                          Fairfield Co................  ..................                  1   ..................               2010
CT                                          Middlesex Co................  ..................                  1   ..................               2010
CT                                          New Haven Co................  ..................                  1   ..................               2010
NJ                                          Hudson Co...................  ..................                  1   ..................               2010
NJ                                          Hunterdon Co................  ..................                  1   ..................               2010
NJ                                          Middlesex Co................  ..................                  1   ..................               2010
NY                                          Bronx Co....................  ..................                  1   ..................               2010
NY                                          Richmond Co.................  ..................                  1   ..................               2010
NY                                          Westchester Co..............  ..................                  1   ..................               2010
NJ                                          Camden Co...................  ..................                  1   ..................               2010
NJ                                          Gloucester Co...............  ..................                  1   ..................               2010
NJ                                          Mercer Co...................  ..................                  1   ..................               2010
NJ                                          Ocean Co....................  ..................                  1   ..................               2010
PA                                          Bucks Co....................  ..................                  1   ..................               2010
PA                                          Montgomery Co...............  ..................                  1   ..................               2010
TX                                          Galveston Co................  ..................                  1   ..................               2010
TX                                          Harris Co...................  ..................                  1   ..................               2010
WI                                          Kenosha Co..................  ..................                  1   ..................               2010
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Question 3. S. 150, the Clean Power Act requires a 90 percent 
reduction in mercury emissions by 2010 with no emission trading. If 
units are not allowed to trade emissions, what would happen to 
individual units that cannot reduce emissions by 90 percent? How many 
coal-fired units are at risk of not being able to reliably meet a 90 
percent reduction requirement by 2010?
    Response. Mercury specific control technologies are not expected to 
provide 90% control on all key combinations of coal type and control 
technology in this timeframe. Power companies and technology vendors, 
with substantial support from the Department of Energy (DOE), are 
working to develop and commercialize technologies that are specifically 
designed to control mercury emissions from coal-fired power plants. One 
of the most promising technologies is Activated Carbon Injection (ACI). 
However, except for testing purposes, no coal burning power plant is 
using ACI or any other technology designed to control mercury 
emissions. A limited number of full-scale ACI evaluations have been 
conducted for short periods of time on units representing a fraction of 
the boiler population. DOE is now implementing a second phase of field 
testing, focusing on longer-term, full-scale field-testing on a wide 
range of coal and device configurations. These longer-term tests will 
provide information important to subsequent commercial demonstration 
projects. Once ACI is commercially available, additional time will be 
necessary to enable this technology to be deployed widely in the power 
sector.
    Thus, there could be a significant number of units that would be 
unable to comply with a 90 percent reduction by 2010 and would likely 
shut down. The Energy Information Administration (EIA) analysis shows 
that the early timing and stringency of the emissions limits in the 
Clean Power Act combined with the birthday provision in the bill leads 
to the largest resource cost and electricity price impacts among the 
three bills they modeled in May 2004 (S.1844, S.843 and S.366)\1\. The 
stringent emission caps, particularly the CO2 cap, cause a 
large decline in coal generation. New coal capacity additions through 
2025 would amount to only 3 gigawatts under the Jeffords bill, and 
nearly 125 gigawatts of existing coal plants would be retired. Relative 
to the reference case\2\, coal generation would be 35.3 and 54.7 
percent lower in 2010 and 2025, respectively, under the Jeffords bill. 
Coal production tracks this decline. Relative to the reference case, 
coal production declines by 623.4 million tons (45.4 percent) in 2020 
and 771.6 million tons (50.4 percent) lower in 2025.
---------------------------------------------------------------------------
    \1\ Analysis of S. 1844, the Clear Skies Act of 2003; S. 843, the 
Clean Air Planning Act of 2003; and S. 366, the Clean Power Act of 
2003, May 2004, Energy Information Administration, Office of Integrated 
Analysis and Forecasting, U.S. Department of Energy.
    \2\ The reference case in the EIA May 2004 analysis is based on the 
reference case in the Annual Energy Outlook 20041, and it incorporates 
final regulatory action under existing laws. However, consistent with 
standard EIA practice requiring policy neutrality in baseline 
projections, it does not include pending or proposed actions at the 
time of the analysis, such as standards for mercury emissions from 
power plants or actions that might be taken to comply with the revised 
National Ambient Air Quality Standards for ozone and fine particulates.

    Question 4. Does EPA believe there is sufficient data, including 
full-scale test results of sufficient duration, to say with confidence 
that there are now commercially available technologies for lignite or 
sub-bituminous coal plants that can reliably achieve a 90 percent 
reduction in mercury emissions? Is EPA aware of any vendors that have 
guaranteed a 90 percent reduction in mercury emissions from either 
lignite or sub-bituminous powered coal plants? If there are guarantees 
available, how substantial are the penalties for failure to achieve the 
performance requirement? What would happen to the utility versus the 
vendor if the performance level was not achieved under legislative 
proposals, such as the Clean Power Act of 2005?
    Response. Power companies and technology vendors, with substantial 
support from the DOE, are specifically working to develop and 
commercialize technologies that are designed to control mercury 
emissions from coal-fired power plants. One of the most promising 
technologies is Activated Carbon Injection (ACI). However, except for 
testing purposes, no coal burning power plant is using ACI or any other 
technology designed to control mercury emissions because the technology 
has not been fully demonstrated. A limited number of full-scale ACI 
evaluations have been conducted for short periods of time on units 
representing a small fraction of the boiler population. DOE is now 
implementing a second phase of field testing, focusing on longer-term, 
full-scale field-testing on a wide range of coal and device 
configurations. These longer-term tests will provide information 
important to subsequent commercial demonstration projects. Once ACI is 
commercially available, additional time will be necessary to enable 
this technology to be deployed widely in the power sector.
    In terms of guarantees, assumption of risk is a contractual 
arrangement between the seller (vendor) and purchaser (utility). The 
level of risk a vendor will be willing to assume is unknown as this is 
a matter that would be subject to negotiation between the contracting 
parties, however, failure of the utility to comply with Clear Skies 
requirements would subject the company to serious penalties.

    Question 5. If legislation does not pass and if litigation delays 
the implementation of the CAIR rule, how much more costly will it be 
for states and locals areas to attain the 8-hour ozone and 
PM2.5 standards? How likely will it be that more areas will 
fail to meet their attainment deadlines? Will these areas be forced to 
bump-up to higher categories in order to avoid sanctions? What would 
happen to areas that are unable within the next three years to submit 
an implementation plan that can demonstrate attainment by the required 
deadline?
    Response. We do not know how much more costly it would be for 
states and local areas to attain the 8-hour ozone and PM2.5 
standards if litigation delays the implementation of CAIR and 
legislation does not pass nor can we predict how likely it would be 
that areas would fail to meet their attainment dates or whether ozone 
nonattainment areas would be forced to bump up to a higher 
classification in the event of litigation delaying implementation of 
CAIR. Our experience with passage of the Acid Rain Program and the NOx 
SIP Call illustrate our preference for legislation instead of 
rulemakings. Litigation did not delay the Acid Rain Trading Program at 
all, while litigation did delay the NOx SIP Call over a year in most 
states and even longer in other states.
    If EPA determines that a state fails to submit within three years 
of designation an implementation plan that demonstrates attainment by 
the required deadline, or if EPA disapproves a submitted plan, then two 
sanction clocks would start. Eighteen months after the clock is 
started, if the State has not submitted the plan where EPA found it had 
failed to do so, or if EPA has not approved a plan where it has 
disapproved the submission, sources in the area subject to the 
nonattainment new source review requirements would be subject to an 
increased offset requirement. If the deficiency has still not been 
corrected, six months later, the area would be subject to limitations 
on federal highway funding. In addition, EPA is required to promulgate 
a Federal Implementation Plan (FIP) no later than 24 months after it 
has found the state failed to submit the plan or it has disapproved the 
plan and that obligation remains until EPA has approved the required 
plan. EPA may grant extension(s) of the attainment deadline for Subpart 
I ozone nonattainment areas and all PM2.5 nonattainment 
areas (which are also covered under Subpart 1 of the Clean Air Act) for 
up to 5 years beyond the original 5-year attainment deadline if in its 
attainment demonstration, the state justifies such an extension based 
on the severity of the pollution in the area and the availability and 
feasibility of control measures.

    Question 6. In your testimony, you state that mandatory caps on 
CO2 emissions will not produce a favorable economic climate 
for investing in new clean coal technologies, such as IGCC, which are 
more efficient (less CO2 producing) and which hold the 
potential of allowing for future sequestration of CO2 
emissions. You also state, however, that these technologies are 
significantly more expensive to build when compared to traditional 
fossil fuel or nuclear powered electricity. What is the Administration 
currently doing to encourage the adoption of technologies, such as 
IGCC? How important is regulatory certainty to encouraging the 
construction of IGCC and other comparable next generation clean coal 
technologies?
    Response. Under Clear Skies, the power sector will spend more than 
$52 billion to install, operate, and maintain pollution abatement 
technology on both old and new power plants. The cap-and-trade system 
encourages investment in innovative pollution control technologies as 
we have seen under the Acid Rain Trading Program.
    This investment future is enhanced by DOE's Office of Fossil Energy 
research and, through programs such as FutureGen, development of future 
gasification concepts that offer significant improvements in 
efficiency, fuel flexibility, and economics. Tomorrow's IGCC plants 
could conceivably process a wide variety of low-cost fuels, handling 
not only coal but also biomass, municipal and other solid wastes, or 
perhaps combinations of these feed stocks. DOE is currently 
investigating new gasifier configurations that can adapt to variances 
in fuel composition, heating values, ash content, and other factors. 
DOE is also working with its private sector partners to develop a new, 
potentially low-cost configuration for a future gasifier-based advanced 
circulating fluidized-bed technology. Finally, DOE is looking to 
develop lower-cost ways to produce the oxygen used in the gasification 
process, including use new innovations in ceramic membranes to separate 
oxygen from the air at elevated temperatures.
    In addition, significant improvements in overall project economics 
can be obtained through actions to make the siting and permitting of 
IGCC plants more predictable and efficient. Pursuant to Executive Order 
13212, the Task Force on Energy Project Streamlining has begun a review 
of existing Federal permitting processes to identify potential 
opportunities to make such processes more efficient, and is consulting 
with States and interested private parties in an effort to reduce the 
barriers to deployment for IGCC and comparable clean coal technologies.
                                 ______
                                 
    Responses of James L. Connaughton to Additional Questions from 
                           Senator Lautenberg

    Question 1. Eight million New Jerseyans live where ozone health 
standards are being violated, yet one-third of our ozone comes from 
upwind. Why does this bill take away my state's ability to reduce out-
of-state pollution that threatens our health?
    Response. Changes to the Clean Air Act interstate transport 
provisions are designed to ensure that transported pollution is 
controlled from the power sector and preserve the flexibility and cost-
effectiveness of the trading program. Clear Skies reductions are 
greater or equal to the reductions over the next decade that could be 
requested of downwind states that submitted petitions today. This is 
why the President's Clear Skies legislation would not subject affected 
units to additional reductions as a result of section 126 petitions 
until 2012.
    The cap and trade approach to reducing emissions from the power 
generating sector is the most efficient and effective route to reduce 
transported air pollution from this sector. The Acid Rain Trading 
Program's outstanding success demonstrates the benefits of this 
approach. Clear Skies provides the power generation sector with 
certainty about upcoming regulations and promises the public a 
mandatory program to reduce air pollution.

    Question 2. About 10 percent of New Jersey's school kids have 
asthma, and about 150,000 of them are hospitalized each year. Why does 
``Clear Skies'' let industry off the hook for meeting the health 
standards until 2025 or even later? Does the president believe that we 
should aim to still protect the health of our children?
    Response. The Clean Air Act air quality goals, the National Ambient 
Air Quality Standards (NAAQS), are unchanged under the Clear Skies 
proposal. New Jersey is required to put in place a State Implementation 
Plan that will bring New Jersey into attainment with the new NAAQS for 
ozone and fine particulate matter on time. Clear Skies, by mandating 
enforceable emission caps for power plants, will help New Jersey attain 
these air quality standards.
    Clear Skies will provide significant air quality benefits to 
Northeastern states. Interstate ozone transport would be significantly 
reduced under these cap levels. The proposal recognizes the unique 
circumstances of various regions of the country while retaining the 
economic benefits of national emission allowance markets. The 
SO2 and NOx reductions required under Clear Skies in those 
states having or contributing to ozone nonattainment will address the 
problem of ozone and particulate matter nonattainment and transport on 
or ahead of schedule.

    Question 3. I'm sure you've taken your family to one of our 
national parks, where most of us expect to enjoy fresh air and 
beautiful vistas, yet shockingly the air in many of our National Parks 
is hazy and doesn't meet the ozone health standard (Including Yosemite, 
the Great Smoky Mountains, and Shenandoah). Why does Clean Skies remove 
the Clean Air Act's special protections for national parks?
    Response. Due to Clear Skies and the suite of diesel rules, major 
parks in the east are expected to come into attainment for smog by 
2015, to see substantial improvements in visibility, and reductions in 
acid rain. The Department of Interior and the National Park Service 
have been working collaboratively with EPA, States, Tribes, and 
stakeholders for many years to develop comprehensive pollution control 
strategies that will benefit the national parks.
    Clear Skies will modify certain Clean Air Act programs and retain 
important environmental backstops. Given the substantial and cost 
effective improvements in regional pollution which the President's 
Clear Skies Act could achieve, it is appropriate to consider ways to 
streamline the regulatory process for sources affected by the caps, 
while still providing appropriate protection for class I areas such as 
national parks. Accordingly, the President's Clear Skies legislation 
simplifies new source review because the Clear Skies mandatory caps and 
70% reduction make such programs largely redundant. At the same time, 
the legislation maintains the requirement that new or modified sources 
be assessed as to whether they would affect any air quality related 
values, including visibility, in class I areas. Because the major 
visibility impacts of well controlled single sources occurs relatively 
near the source, the requirement is limited to facilities located 
within 50 km of the area.
                                 ______
                                 
     Response of James L. Connaughton to Additional Question from 
                           Senator Voinovich

    Question 1. Some critics of Clear Skies claim that it is less 
stringent than existing law, and they advocate simply for the Clean Air 
Interstate Rule and Clean Air Mercury Rule. Is existing law better for 
the environment and are the rules better than Clear Skies legislation?
    Response. Clear Skies is not less stringent than existing law. 
Clear Skies does not change the new, more stringent health-based air 
quality standards that the federal government set and the states must 
now meet. What Clear Skies provides is an effective tool to help the 
states get there with certainty. Clear Skies will significantly expand 
the Clean Air Act's most innovative and successful program in order to 
cut power plant pollution of sulfur dioxide, nitrogen oxides and, for 
the first time, mercury by 70 percent in two phases. These cuts in 
pollution will provide substantial health benefits, prolonging the 
lives of thousands of Americans annually, and improving the conditions 
of life for hundreds of thousands of people with asthma, other 
respiratory illnesses, and heart disease.
    Clear Skies will produce these health benefits with greater 
certainty than the Clean Air rules because Clear Skies imposes a 
mandatory, permanent, multi-pollutant cap on emissions from more than 
1,300 power plants nationwide, reducing pollution by as much as 9 
million tons annually at full implementation.
                                 ______
                                 
    Responses of James L. Connaughton to Additional Questions from 
                             Senator Baucus

    Question 1a. Will Clear Skies provide adequate incentives for the 
construction of new, cleaner coal-fired power plants? If yes, why and 
how? How many new coal plants are projected to come on-line under Clear 
Skies versus the status quo?
    Response. Analyses by the Energy Information Agency (EIA) and the 
Environmental Protection Agency (EPA) show that Clear Skies helps 
maintain coal as an important fuel source. EIA and EPA both predict 
increases in coal production. EIA analysis shows, under the Clear Skies 
bill modeled in May 2004, that new coal capacity additions through 2025 
amount to 92 gigawatts under Clear Skies compared to 108 gigawatts in 
the reference case. EIA projections show an increase under Clear Skies 
of new, cleaner, more efficient Integrated Gasification and Combined 
Cycle (IGCC) additions to nearly 26 gigawatts compared to the reference 
case projection of only 14 gigawatts of IGCC capacity additions by 
2025. Both EIA and EPA projections show that power generators are 
expected to rely primarily on the addition of emissions control 
equipment to comply with the emission caps--little fuel switching from 
coal to natural gas is projected. In fact, EPA modeling projects that 
coal-fired generation will increase 9% by 2020 compared to 2003 levels. 
When EPA modeled Clear Skies with EIA assumptions for natural gas 
prices and electricity growth, coal-fired generation was projected to 
increase by roughly 54% compared to 2003 levels. The EPA 2003 analysis 
of Clear Skies shows that approximately 5.2 gigawatts of coal-fired 
capacity comprised mostly of small units under 100 megawatts will no 
longer be economic to maintain. Using EIA assumptions for natural gas 
prices and electricity growth leads to about 0.4 gigawatts of coal-
fired capacity that is no longer economic to maintain. EIA and EPA also 
project a small effect on national electricity prices under Clear 
Skies.
    To compare, EIA's May 2004 analysis shows that fewer new coal 
plants will be constructed under the Carper bill than under the Inhofe 
Clear Skies bill and the reference case. New coal capacity additions 
through 2025 range from 21 gigawatts to 35 gigawatts under the Carper 
bill analysis. Under the Jeffords bill, new coal plant additions are 
much lower while retirements are higher compared to the reference case. 
New coal capacity additions through 2025 amount to only 3 gigawatts 
under the Jeffords bill, and nearly 125 gigawatts of existing coal 
plants are retired.

    Question 1b. Could and/or should Clear Skies be improved to provide 
greater incentives for new coal-fired plants, and do more to encourage 
the retirement of older, less efficient facilities with no pollution 
controls? Can the Administration recommend any proposals along these 
lines?
    Response. Clear Skies is designed to cut emissions from the power 
sector thus assisting the states in meeting new stringent air quality 
standards for ozone and particulate matter while ensuring a diverse 
energy future for the U.S., including coal use.
    Flexibility of compliance choices for the power sector, maintenance 
of fuel diversity, and the cost savings passed on to consumers through 
low electricity prices are the benefits of the approach taken in Clear 
Skies, particularly when compared with the other proposals that support 
more stringent targets, shorter compliance periods, or command and 
control regulatory approaches. Low electricity prices are maintained 
under Clear Skies. EPA and EIA analysis shows that the power sector 
will rely heavily on emission control technologies under Clear Skies to 
meet the caps; EPA's analysis of the Clear Skies Act of 2003 projected 
that 80 percent of coal-fired capacity would have either SO2 
or NOx controls by 2020. Emissions trading will provide flexibility to 
the sector to keep their resource costs low. Coal is maintained as an 
important fuel source, thereby avoiding excessive pressure on natural 
gas prices; EPA and EIA both predict coal generation will grow under 
Clear Skies and natural gas consumption under Clear Skies tracks the 
reference case.
    In addition, President Bush pledged during the 2000 campaign to 
invest $2 billion over 10 years to fund research into clean coal 
technologies and is on track to exceed that goal by more than 50%. The 
2006 Budget provides $286 million, an increase of $13 million over 2005 
enacted levels, for the President's Coal Research Initiative to improve 
the environmental performance of coal power plants by reducing 
emissions and improving efficiency. This includes:
     $68 million for the Clean Coal Power Initiative, of which 
$18 million is allocated to continue development of FutureGen, the 
coal-fueled, near-zero--emissions electricity and hydrogen generation 
project announced by the President in February 2003;
     A commitment to FutureGen beyond 2006, by proposing a $257 
million advance appropriation for 2007 to provide the Federal share of 
FutureGen for several years; and
     $218 million for research and development of other clean-
coal technologies, such as Integrated Gasification Combined Cycle 
systems, carbon sequestration, and next-generation turbines.

    Question 1c. How will Clear Skies promote the deployment of 
advanced clean coal technologies, like IGCC, that currently face 
barriers to commercialization? Please be specific.
    Response. Under Clear Skies, the power sector will spend more than 
$52 billion to install, operate, and maintain pollution abatement 
technology on both old and new power plants. The cap-and-trade system 
encourages investment in innovative pollution control technologies as 
we have seen under the Acid Rain Trading Program.
    This investment future is enhanced by DOE's Office of Fossil Energy 
research and development of future gasification concepts that offer 
significant improvements in efficiency, fuel flexibility, and 
economics. Tomorrow's IGCC plants could conceivably process a wide 
variety of low-cost fuels, handling not only coal but also biomass, 
municipal and other solid wastes, or perhaps combinations of these feed 
stocks. DOE is currently investigating new gasifier configurations that 
can adapt to variances in fuel composition, heating values, ash 
content, and other factors. DOE is also working with its private sector 
partners to develop a new, potentially low-cost configuration for a 
future gasifier-based advanced circulating fluidized-bed technology. 
Finally, DOE is looking to develop lower-cost ways to produce the 
oxygen used in the gasification process, including use new innovations 
in ceramic membranes to separate oxygen from the air at elevated 
temperatures.
    In addition, significant improvements in overall project economics 
can be obtained through actions to make the siting and permitting of 
IGCC plants more predictable and efficient. Pursuant to Executive Order 
13212, the Task Force on Energy Project Streamlining has begun a review 
of existing Federal permitting processes to identify potential 
opportunities to make such processes more efficient, and is consulting 
with States and interested private parties in an effort to reduce the 
barriers to deployment for IGCC and comparable clean coal technologies.

    Question 2. How many facilities nation-wide that currently have not 
installed any pollution control equipment will install some form of 
pollution control equipment under Clear Skies? Where are the majority 
of these facilities located?
    Response. EPA's analysis of the Clear Skies Act of 2003 projects 
that an additional 270 units that currently do not have any advanced 
pollution controls to reduce emissions of SO2 and NOx will 
install controls to meet the emission reduction requirements of Clear 
Skies. Currently, roughly 55 percent of coal-fired capacity does not 
have advanced pollution controls for either SO2 or NOx 
removal (i.e., a scrubber or SCR). EPA's analysis of the Clear Skies 
Act of 2003 projected that 80 percent of coal-fired capacity would have 
either SO2 or NOx controls by 2020. The additional pollution 
controls projected to be installed for Clear Skies are geographically 
dispersed throughout the country. Clear Skies results in emission 
reductions where they are needed most and where they will have a high 
impact on attainment of air quality standards; in the highest emitting 
regions of the country such as the Mid-West, the Mid-Atlantic, and the 
South.

    Question 3a. Specifically, how will Clear Skies impact Montana coal 
production compared to the status quo? This includes Montana coal 
shipped out-of-state, as well as Montana coal consumed in-state for 
power production. Please explain your answer. If Clear Skies maintains 
current production levels, or decreases production, please explain how 
that outcome might be changed.
    Response. Although we have not performed similar analysis for 
S.131, EPA's 2003 analysis of the Clear Skies Act of 2003 projected 
that that coal production in Montana will increase from today's 
production levels.

    Question 3b. How will S. 131 impact air quality in Montana?
    Response. Although we have not performed similar analysis for S. 
131, EPA modeling of the President's 2003 Clear Skies Act projected 
that all counties in Montana would meet the 8-hour ozone and fine 
particle standards by 2020. Lincoln County would be brought into 
attainment with the fine particle standards by 2020 under existing 
programs. In addition, Clear Skies would reduce fine particle 
concentrations throughout the state and would prevent degradation of 
visibility in Montana's parks, ensure nitrogen deposition does not 
increase, and reduce mercury deposition.

    Question 4. I understand that EPA staff has verified an analysis 
performed by Westmoreland Resources, Inc. (WRI) that shows that market 
pressure created by implementation of Title IV of the Clean Act (CAA) 
will force the closure of the Absaloka Mine, owned by the Crow Tribe 
and operated by WRI. The market advantage that the Crow coal has had is 
that it is 300 miles closer by rail to customers in the Midwest than 
other producers of western low-sulfur coal. As successive phases of the 
Clean Air Act have been implemented, the Crow have lost customers to 
the point where now it has one customer who purchases 90% of the mine's 
production. This customer operates a scrubbed plant which emits 
SO2 below its permitted levels and is among the lowest 
emitting coal plants in the country. Losing this customer would close 
the mine.
    Please confirm this verification.
    Response. EPA agrees that the rising price of Title IV allowances 
is predicted to encourage the owners of the unit that the Crow Tribe is 
supplying to switch to a lower sulfur coal. Representatives of the Crow 
Tribe have explained to EPA that they are investigating other 
customers, including a new nearby coal plant and the possibility of 
building a plant on the reservation. EPA has not done any analysis of 
these scenarios or their impact on the Crow Tribe's mine.

    Question 5. I also understand that EPA staff agreed with the WRI 
analysis showing that granting the Crow Tribe and WRI relief will have 
negligible impacts on the SO2 emissions of the primary 
surviving customer of the Absaloka mine. This customer operates a 
scrubbed plant in the Midwest that emits SO2 below its 
permitted levels. This customer will coal source switch for economic 
purposes only--no tangible environmental gain will be had for closing 
the Crow Nation's main source of income. This relief will not increase 
emissions; switching coal will decrease emissions in a negligible 
amount.
    Please confirm this verification.
    Response. According to the information provided by the Crow Tribe, 
the switch to lower sulfur coal would result in about a 50% reduction 
in emissions (11,000 tons). EPA has not analyzed the environmental 
benefits of that reduction. However, this switch to low sulfur coal 
would not produce a net nationwide increase in emissions, since the 
customer would presumably free-up allowances for sale on the market. 
The impact of specific relief to the tribe on emissions at the 
customer's plant and the cap-and-trade program in general would depend 
on the nature of the relief being provided.

    Question 6. What has been the cumulative net cost (total cost minus 
the value of allowances distributed to them) of compliance incurred by 
electric generating unit owners under Title IV of the Clean Air Act 
Amendments of 1990?
    Response. The costs of Title IV are not typically estimated in this 
manner. Several outside experts have provided estimates of the cost of 
Title IV, and their estimates of the annualized costs of Title IV are 
in the range of $1 billion to $3 billion for 2010 when the program is 
to be fully implemented. OMB's 2003 Report to Congress on the Costs and 
of Federal Regulation reports EPA estimates that annual cost of Title 
IV's SO2 reductions ranged between $1.1 billion and $1.9 
billion (2001$); EPA estimates of the NOx program's annual costs added 
$0.4 billion.

    Question 7. How will S.131 impact visibility in National Parks and 
other Public Lands, and on air quality in existing Class I areas? What 
is the scientific basis for setting a 51 kilometer distance from Class 
I areas beyond which advanced pollution control requirements would not 
be required for new or modified sources? How does this distance comport 
with the requirements?
    Response. Although EPA has not analyzed how S. 131 would impact 
visibility in National Parks and other public lands or air quality in 
existing Class I areas, EPA's analysis of the effects of the 
President's Clear Skies legislation on visibility in these areas and 
found that the Clear Skies Act of 2003 would benefit the ecosystems and 
air quality in national parks across the country, especially in the 
eastern states.
    The 2003 analysis projected benefits due to improvements in 
visibility in National Parks and Wilderness areas in many Class I areas 
in the Southeast (including Shenandoah and Great Smoky Mountain 
National Parks), the Southwest, and California. The reductions in acid 
rain, eutrophication, mercury deposition and regional haze from Clear 
Skies would also improve these resources. By addressing air pollution 
from a regional perspective, the transport of air pollution into 
national parks and wilderness areas would be reduced. We expect that S. 
131 would have similar types of benefits to National Parks and Class I 
areas.
    Clear Skies would require all new facilities governed by Clear 
Skies to have, at a minimum, the level of modern pollution controls as 
specified in section 481 (National Emission Standards for Affected 
Units). Subsequent review by the Federal Land Manager of facilities 
within the 50 km of a National Park or other Class I area would ensure 
a review of potential impacts of new sources to avoid significant local 
effects.
                                 ______
                                 
    Responses of James L. Connaughton to Additional Questions from 
                             Senator Obama

    Question 1. Section 407(j)(1)(A): Please provide an estimate of the 
number of sources in Illinois that could potentially opt-in under this 
provision and specifically which hazardous air pollutants these sources 
may be withdrawing from regulation under Section 112 of the Clean Air 
Act. Please also provide an estimate of the amount of these pollutants 
that could be emitted under this provision and compare it with current 
emissions as currently regulated.
    Response. We cannot provide this data at the State level, because 
EPA only estimates emissions from source categories at the national 
level.

    Question 2. What safeguards could be added to Clear Skies to ensure 
the trading process does not create mercury hot spots?
    Response. The Agency believes that a cap and trade system, coupled 
with States' ability to control sources further, will effectively 
address any local risks from power plants.
    EPA analysis suggests that large coal-fired utility units--those 
that tend to have relatively high emissions of the type of mercury that 
can deposit locally--have greater local-scale deposition footprints 
than medium-sized and smaller coal-fired utility units. The trading of 
allowances is likely to involve large utility units controlling their 
emissions more than required and selling allowances to smaller units, 
rather than the reverse scenario. This prediction arises from the basic 
economics of capital investment in the utility industry. Under a 
trading system where the firm's access to capital is limited, where the 
up-front capital costs of control equipment are significant, and where 
emission-removal effectiveness (measured in percentage of removal) is 
largely unrelated to plant size, it makes more economic sense for the 
utility company to allocate pollution-prevention capital to its larger 
facilities than to the smaller plants. Any economies of scale of 
pollution control investment will result in investment at the larger 
plants.
    Second, the types of mercury that are deposited locally are 
controlled by the same equipment that controls criteria air pollutants 
(fine particles, SO2, and NOx). As utilities invest in 
equipment to comply with the Clear Skies SO2 and NOx 
requirements, the Agency expects a ``co-benefit'' in mercury controls 
as particulate controls, scrubbers, and SCR systems are installed on an 
increasing percentage of coal-fired utility units. The type of mercury 
that is most difficult to control is the elemental form of mercury that 
is most likely to be transported long distances from utility units. 
Effective control of this type of mercury may require significant 
investment in mercury-specific control technologies that are now only 
in the development stage. Considering the economies of mercury trading, 
utility units that have significant emissions of the elemental mercury 
may become buyers of allowances from plants that can cost-effectively 
control mercury. Consequently, the economics of the trading system are 
likely to favor controls of mercury that are likely to be deposited 
locally, thereby reducing any local hot spots. In addition, Clear Skies 
does not change Clean Air Act authority that allows States to adopt 
more stringent performance standards.

    Question 3. How will Clear Skies help states meet Clean Water Act 
requirements for impaired water bodies?
    Response. EPA analysis of the environmental impacts of the 
Administration's Clear Skies Act of 2003 projected that the required 
reductions in emissions of SO2, NOx, and mercury would 
result in significant reductions in acid deposition and deposition of 
nitrogen and mercury. All three types of deposition are responsible for 
or contribute to water quality impairments. EPA's 2003 modeling of 
Clear Skies shows that implementation of Clear Skies would virtually 
eliminate chronic acidification in Adirondack lakes and improve other 
areas of the Northeast and Southeast.

    Question 4. Under Clear Skies Illinois may have difficulty 
demonstrating attainment for the new 8-hour ozone and PM2.5 
standards. Please provide an analysis of other source categories that 
that can help Illinois meet these deadlines at a cost comparable to 
power plant reductions?
    Response. EPA's analysis shows that reductions from power plants 
are currently the most cost-effective measures that can be taken to 
demonstrate attainment for the new 8-hour ozone and PM2.5 
standards. EPA does not have comprehensive cost-effectiveness 
information for ozone precursors (NOx and VOC), direct 
PM2.5, and PM2.5 precursors (SO2, NOx, 
VOC). Also, the cost-effectiveness of measures will vary from state to 
state depending on measures already in place. Moreover, it is difficult 
to rank measures by cost effectiveness ($/ton) when comparing direct 
PM2.5 sources with sources whose emissions form 
PM2.5 only after reactions occur in the atmosphere. However, 
the local reduction measures listed below may help Illinois meet their 
deadlines.
    For the proposed CAIR rule, EPA conducted an analysis of available 
local measures (see pp 46 to 56 of http://www.epa.gov/air/
interstateairquality/tsd0162.pdf). The following measures, taken from 
this study, are examples of options states have the power to adopt as 
part of Implementation Plans under current law and under S. 131:
    Examples of direct PM measures:
     1. Programs to require or encourage retrofit controls for on-road, 
off-road, and stationary source diesel engines.
     2. Programs to curtail use of woodstoves on high-PM days and to 
encourage replacement of older high-emitting woodstoves with cleaner-
burning woodstoves.
      3. Emissions limitations (for example RACT for major sources) for 
industrial sources of PM2.5.
     4. Regulations to ban open burning of refuse, and programs to 
improve enforcement of bans which are already in place.
    Examples of SO2 reduction measures for categories other 
than electric power generation:
     5. Emissions limitations for coal-fired industrial boilers.
     6. Greater emission reductions for petroleum refineries.
     7. Emission limitations for sulfuric acid plants not currently 
meeting NSPS standards.
    Examples of NOx reduction measures for categories other than 
electric power generation:
     8. Emission limitations reflecting low NOx burners for industrial 
boilers.
     9. Requirements for emission reductions from cement kilns.
     10. RACT measures for major sources of NOx.
    Examples of VOC control measures:
     11. Adopt more stringent limits for architectural and industrial 
maintenance coatings.
     12. Requirements to prevent emissions from underground storage 
tanks at gasoline service stations.
                                 ______
                                 
    Responses of James L. Connaughton to Additional Questions from 
                            Senator Jeffords

    Question 1. Please provide by February 16, 2005, for the 
Committee's business meeting at which Clear Skies is expected to be 
marked up, an Administration analysis of the substantive changes to 
current laws, regulations and programs made by S. 131, if it were 
enacted, including the potential impact on state authorities.
    Response. S. 131 would not affect a state's ability to regulate 
sources within its borders. The EPA does not have an analysis of all 
the other substantive changes to current laws, regulations and programs 
made by S. 131.

    Question 2. Please provide a list of the ten most cost-effective 
control options that states have the power and authority to adopt, 
under current law and under S. 131, as part of a State Implementation 
Plan to attain the ozone and PM2.5 NAAQS by the deadlines 
specified in the Clean Air Act.
    Response. The EPA does not have comprehensive cost-effectiveness 
information for ozone precursors (NOx and VOC), direct 
PM2.5, and direct PM2.5 precursors 
(SO2, NOx, VOC). Also, the cost-effectiveness of measures 
will vary from state to state depending on measures already in place. 
Moreover, it is difficult to rank measures by cost effectiveness ($/
ton) when comparing direct PM2.5 sources with sources whose 
emissions form PM2.5 only after reactions occur in the 
atmosphere.
    For the proposed CAIR rule, EPA conducted an analysis of available 
local measures (see pp 46 to 56 of http://www.epa.gov/air/
interstateairquality/tsd0 162.pdf). The following measures, taken from 
this study, are examples of options states have the power to adopt as 
part of implementation plans under current law and under S. 131:
    Examples of direct PM measures:
     1. Programs to require or encourage retrofit controls for on-road, 
off-road, and stationary source diesel engines.
     2. Programs to curtail use of woodstoves on high-PM days and to 
encourage replacement of older high-emitting woodstoves with cleaner-
burning woodstoves.
     3. Emissions limitations (for example RACT for major sources) for 
industrial sources of PM2.5.
    Examples of SO2 reduction measures for categories other 
than electric power generation:
     4. Emissions limitations for coal-fired industrial boilers.
     5. Greater emission reductions for petroleum refineries.
     6. Emission limitations for sulfuric acid plants not currently 
meeting NSPS standards.
    Examples of NOx reduction measures for categories other than 
electric power generation:
     7. Emission limitations reflecting low-NOx burners for industrial 
boilers.
     8. Requirements for emission reductions from cement kilns.
     9. RACT measures for major sources of NOx.
    Examples of VOC control measures:
     10. Adopt more stringent limits for architectural and industrial 
maintenance coatings.
     11. Requirements to prevent emissions from underground storage 
tanks at gasoline service stations.

    Question 3. Please compare the difference in lives saved or 
premature deaths avoided and the number of people living in 
nonattainment areas as would occur between implementation of the Clean 
Air Interstate Rule as proposed and S. 131 as introduced for the 
following years: 2010, 2015, and 2020.
    The Clean Air Act requirement that states meet the National Ambient 
Air Quality Standards (NAAQS) is unchanged in Clear Skies legislation. 
By providing national and regional reductions in pollution, Clear Skies 
would assist local areas in reaching attainment of the air quality 
standards. Cap and trade systems have also been shown to encourage 
early reductions in emissions. Such reductions could assist areas with 
near-term attainment dates. EPA modeling of the President's Clear Skies 
legislation in 2003 shows dramatic attainment under the reductions. Of 
over 350 monitored counties which had violations, the 2003 analysis 
indicated that all but 38 counties would be in attainment by 2020 
solely with operation of the Clear Skies Act of 2003 and state and 
federal Clean Air Act programs already in existence. In addition, of 
the counties that monitored nonattainment with the PM2.5 
standard in the 2003 analysis, about 70% were expected to come into 
attainment by 2010. Should areas not come into attainment with these 
reductions from the power sector, they will still have to take 
additional local steps. Depending on the area, the Clear Skies 
reductions may make the burden on the need for additional local 
controls lighter.

    Question 4. If S. 131 were to be enacted as introduced, please 
describe the responsibility that a designated ``transitional area'' 
would have to ensure that its pollution did not cause or contribute to 
nonattainment in downwind areas, prior to and after such designation?
    Response. For transitional non-attainment areas, S. 131 does not 
change area specific requirements with respect to the need to address 
transport. Under S. 131, all areas-attainment, non-attainment, and 
transitional--would fall under the national and regional caps that are 
intended to reduce power sector SO2 and NOx contributions to 
transport affecting PM2.5 and ozone nonattainment. S. 131 
would not eliminate the fundamental requirements that sections 110 and 
126 impose on States regarding the need to address emissions from 
sources other than affected units under S. 131 that contribute 
significantly to nonattainment in downwind states.

    Question 5. According to EPA, the Clean Power Act, S. 150, when 
compared to the predecessor of S. 131, would prevent 13,000 fewer lives 
from ending prematurely in 2010, and 18,000 in 2015. Is that still 
accurate? How does S. 131 compare to S. 1844 or S. 2815 in avoiding 
premature mortality?
    Response. The Environmental Protection Agency (EPA) has not yet 
analyzed S. 131 with respect to the impact on statistical life. EPA has 
committed to provide this information under S. 131, S. 150, S. 485, S. 
843 and the Manager's Amendment for 2010 and 2015.
    However, as you know, the Clean Air Act requires that states meet 
Federal air quality standards designed to protect human health. States 
must meet the new national, health-based air quality standards for 
ozone and PM2.5 standards by requiring reductions from many 
types of sources. Clear Skies legislation and other multi-pollutant 
bills provide a Federal program to cut emissions from the power 
generation sector. The reductions from the power sector are substantial 
and cost-effective, so in many states, the reductions are large enough 
to meet the air quality standards. Some areas may need to take 
additional local actions. Depending on the area, the Clear Skies 
reductions may make the burden lighter on the need for additional local 
controls.

    Question 6. Why does the Administration's Clear Skies proposal 
result in an increase in greenhouse gas emissions from the power sector 
by 13% or by 425 million tons in 2020 from today's levels, according to 
EPA projections?
    Response. Greenhouse gas emissions will increase from the power 
sector over the next 15 years regardless of whether Clear Skies is 
enacted or not, as a result of an expected 1.5-2.0% per year growth in 
electricity demand to support a growing economy. Based on previous 
analysis of the Clear Skies Act of 2003, EPA believes most of this 
electricity demand will meet with new natural gas and coal-fired 
generation plants, as fossil fuels are expected to remain the cheapest 
sources of electricity for the country. This expected increase in 
fossil-fired generation, and not Clear Skies, is responsible for the 
projected increase in greenhouse gases in 2020.
    The President's Clear Skies proposal does not specifically address 
greenhouse gas emissions from the power sector, but it will encourage 
cleaner, more efficient electric generation technologies that produce 
fewer air pollutants and greenhouse gases than technologies in use 
today. This approach is consistent with the President's overall aim to 
reduce the greenhouse gas intensity of the U.S. economy by 18% by 2012 
compared to 2002, as the first step in a global, long-term effort to 
slow the growth of our greenhouse gas emissions and, as science 
justifies, to stop and then reverse the growth of emissions. The Bush 
Administration is carrying out a broad range of innovative domestic and 
international policies and programs to achieve this goal, and work in 
partnership with other developed and developing nations on a common 
approach to addressing global climate change.

    Question 7. A reasonable estimate of achieving attainment for the 
PM-2.5 standard in all areas by the statutory deadline of 
2010 is avoiding 25,000 premature deaths, 4,000 to 7,000 thousand heart 
attacks, and hundreds of thousands of asthma attacks each year. Could 
you provide the Committee with an estimate of the total annual health 
costs, including Medicare and Medicaid, associated with delaying 
attainment of the national air quality standards in all currently 
designated nonattainment areas by a year, and a separate estimate of 
the impact of the specific delays in attainment such as provided for in 
the designation of ``transitional areas'' in S. 131?
    Response. We do not have an analysis that would allow us to provide 
the requested estimates.

    Question 8. The Energy Information Administration analysis (May 
2004) from last year says that Clear Skies (S. 1844) never achieves a 
70% reduction in emissions. Do you agree with this analysis? If not, 
please describe the errors in that analysis that need correction.
    Response. In the Energy Information Agency (EIA) May 2004 analysis 
of S. 1844, emissions of nitrogen oxides (NOx) are projected to fall to 
1.79 million tons by 2025, meeting the target called for in the bill. 
Projected emissions of sulfur dioxide (SO2) and mercury (Hg) 
did not meet the bill's emission cap targets by 2025. For 
SO2 this occurs in the analysis because power companies 
reduce emissions early by banking 18.81 million tons before the first 
phase of the program. Early reductions are one of the most significant 
environmental benefits of a cap and trade program that allows banking. 
The power sector would then use the banked allowances during the Clear 
Skies compliance period. The bank balance is projected to fall to 12.33 
million tons in 2017 and further to 5.11 million tons in 2025. In 2025, 
SO2 emissions are projected to be 3.62 million tons, 0.62 
million tons above the 3.0 million ton cap that began in 2018. EIA 
predicts that if the usage of banked allowances were to continue at the 
rate seen between 2020 and 2025, the 5.11 million tons of banked 
allowances remaining in 2025 would be exhausted in 2030 or 2031. It is 
highly likely that the 3.0 million ton cap would be reached soon after 
2030-31. This gradual decline of SO2 emissions is consistent 
with the implementation of the Acid Rain program. For Hg, the 15-ton 
cap called for in 2018 and beyond was not achieved because power 
generators are expected to reduce their mercury emissions prior to 2010 
to take advantage of the early credit program. Between 2004 and 2009, a 
total of 42 tons of early reductions occurs because of the early credit 
program. Also, the $2,875.50 per ounce ($35,000 per pound) allowance 
price safety valve is triggered. Hg emissions in 2025 are projected to 
be 29 tons, 14 tons above the cap. If advancements in mercury control 
technologies lower the costs of control, as expected, for most plants 
and coals below the safety valve, then further reductions would occur.
    Emissions banking results in early reductions as companies over-
control their emissions early in the program and bank allowances for 
future use. Banked allowances can be used at any time so they provide 
flexibility for companies to respond to growth and changing marketplace 
conditions over time and, although banking can result in emissions 
above the cap level in the later years of the compliance period, 
because the cap is permanent banking does not result in an increase in 
cumulative emissions. This is an important trade-off for early 
reductions.

    Question 9. As the Chairman of the Council on Environmental 
Quality, you have the primary responsibility of ensuring the 
implementation of the National Environmental Policy Act or NEPA. That 
Act requires all Federal agencies to include in every recommendation or 
report on proposals for legislation and other major Federal actions a 
detailed statement for the public by the responsible official on 
alternatives to the proposed action. What alternatives did the Federal 
government present to the public when it sent up Clear Skies for 
Congress' consideration in July 2002 and again in February 2003?
    The President's Clear Skies legislation was not subject to NEPA. 
NEPA requires Federal agencies to prepare an environmental impact 
statement on ``every recommendation or report on proposals for 
legislation or other major Federal actions significantly affecting the 
quality of the human environment . . . .'' 42 U.S.C. Sec. 4332(2)(C). 
The President is not a Federal agency. (See 40 C.F.R. Sec. 1508.12 
``Federal agency' means all agencies of the Federal Government. It does 
not mean the Congress, the Judiciary, or the President . . . .'') In 
this particular case, Congress exempted federal agencies drafting 
legislation for the President from NEPA under Section 7(c)(1) of the 
Energy Supply and Environmental Coordination Act of 1973, 15 U.S.C. 
Sec. 793(c)(1). (``No action taken under the Clean Air Act [42 U.S.C.A. 
Sec. 7401 et seq.] shall be deemed a major Federal action significantly 
affecting the quality of the human environment within the meaning of 
the National Environmental Policy Act of 1969.'') Moreover, the 
Constitution vests exclusively in the President the authority to submit 
for the consideration of Congress such measures as he deems necessary 
and expedient, and in aid of that function, the President may direct 
that his subordinates in the executive branch provide him advice and 
assistance.
    Notwithstanding NEPA requirements, the Administration has provided 
for the public and for Congress' consideration extensive modeling by 
EPA and EIA on the President's Clear Skies bill and other multi-
pollutant alternatives such as Senator Carper's bill and your bill. 
Administrator Johnson has also committed to provide further analysis of 
S. 131, S. 150, S. 485, S. 843 and the Manager's Amendment per his 
letter to Chairman Inhofe on May 26, 2005. Further, EPA proposed two 
rulemakings, the Clean Air Interstate Rule and the Clean Air Mercury 
Rule, which are similar to Clear Skies. These rulemakings included an 
extensive and detailed technical analysis and lengthy public comment 
periods.
    EPA and EIA Analyses of Clear Skies and Multi-pollutant Legislation
     EIA December 2000 ``Analysis of Strategies for Reducing 
Multiple Emissions from Power Plants: Sulfur Dioxide, Nitrogen Oxides, 
and Carbon Dioxide''
    http://www.eia.doe.gov/oiaf/servicerpt/powerplants/pdf/
sroiaf(2000)05.pdf
     EIA July 2001 (Congressman McIntosh request) ``Analysis of 
Strategies for Reducing Multiple Emissions from Electric Power Plants: 
Sulfur Dioxide, Nitrogen Oxides, Carbon Dioxide, and Mercury and a 
Renewable Portfolio Standard''
    www.eia.doe.gov/oiaf/servicerpt/epp/pdf/sroiaf(2001)03.pdf
     EIA Sept 2001 (Smith/Voinovich/Brownback request) 
``Reducing Emissions of Sulfur Dioxide, Nitrogen Oxides, and Mercury 
from Electrical Power Plants''
    http://www.eia.doe.gov/oiaf/servicerpt/mepp/index.html
     EPA economic analysis of various multi-pollutant scenarios 
requested by Smith/Voinovich/Brownback June 8, 2001 ``Analysis of 
Multi-Emissions Proposals for the U.S. Electricity Sector''
    http://www.epa.gov/air/meproposalsanalysis.pdf
     EPA economic analysis of various multi-pollutant scenarios 
requested by Jeffords/Lieberman October 31, 2001 ``Economic Analysis of 
a Multi-Emissions Strategy''
    http://www.epa.gov/air/jeffordslieberm.pdf
     EIA economic analysis of the Jeffords bill October 
2001``Analysis of Strategies for Reducing Multiple Emissions from Power 
Plants: Sulfur Dioxide, Nitrogen Oxides, and Carbon Dioxide''
    http://www.eia.doe.gov/oiaf/servicerpt/powerplants/index.html
     EPA comprehensive modeling to support Clear Skies 
announcement Feb 2002 ``2002 Technical Support Package for Clear Skies; 
Section G: Summary of the Models used for the Analysis''
    http://www.epa.gov/air/clearskies/tech--sectiong.pdf
     EIA/EPA modeling of the Clear Skies mercury provisions 
Spring-Fall 2003 Testimony before Senate EPW committee (S. Hrg. 108-
359) July 29, 2003
    http://www.access.gpo.gov/congress/senate/senate09sh108.html
     EPA Clear Skies updated comprehensive analysis July 11th 
2003 ``The Clear Skies Act Technical Support Package''
    http://www.epa.gov/air/clearskies/03technical--packagetofc.pdf
     EIA economic analysis of Carper and Jeffords bills 
September 2003 ``Analysis of S. 485, the Clear Skies Act of 2003, and 
S. 843, the Clean Air Planning Act of 2003''
    http://www.eia.doe.gov/env/utility.html
     EIA economic analysis of Inhofe-Voinovich Clear Skies 
2003, Carper and Jeffords bills May 2004 ``Analysis of S. 1844, the 
Clear Skies Act of 2003; S.843 the Clean Air Planning Act of 2003; and 
S.336, the Clean Power Act of 2003''
    http://www.eia.doe.gov/oiaf/servicerpt/csa/executive--summary.html

    Question 10. My tri-partisan bill, the Clean Power Act of 2005, 
which has 18 co-sponsors, achieves more net benefits in 2010 and 2020 
than S. 131, as does Senator Carper's. Does the Administration support 
maximizing net benefits?
    Response. EPA's 2003 analysis shows that all three multi-pollutant 
bills--Clear Skies legislation, the Clean Power Act (CPA), and the 
Clean Air Planning Act (CAPA) would bring a significant number of areas 
into attainment with the fine particle (PM2.5) standard when 
compared with continued implementation of existing Clean Air Act 
programs. In 2010, Clear Skies is projected to bring 42 additional 
counties into attainment; the Clean Air Planning Act would bring 48 
additional counties into attainment; and the Clean Power Act would 
bring 53 additional counties into attainment. EPA's analysis of 
nitrogen oxide (NOx) emissions and ozone shows that there would be no 
incremental ozone attainment benefits from the Jeffords bill and the 
Carper bill over those projected for Clear Skies in 2010 or 2020.
    However, as you know, this does not mean that the three bills would 
result in different levels of air quality: the Clean Air Act requires 
that states meet Federal air quality standards. States must meet the 
new national, health-based air quality standards for ozone and 
PM2.5 standards by requiring reductions from many types of 
sources. Clear Skies legislation and other multi-pollutant bills 
provide a Federal program to cut emissions from the power generation 
sector. The reductions from the power sector are substantial and cost-
effective, so in many states, the reductions are large enough to meet 
the air quality standards. Some areas may need to take additional local 
actions. Depending on the area, the Clear Skies reductions may make the 
burden on the need for additional local controls lighter.
    The different approaches in the Jeffords bill and the Carper bill 
would, however, cost Americans significantly more than Clear Skies. The 
Carper bill program costs are 53% higher in 2010 ($6.6 billion) and 57% 
higher in 2020 ($9.9 billion) than Clear Skies. On a net present value 
basis, for the period 2005 to 2030, the cumulative cost of Senator 
Carper's bill is projected to be $82.7 billion--57% more than the net 
present value of the cumulative cost of the Clear Skies legislation for 
the same period ($52.5 billion). The projected cost differences are 
even greater for the Jeffords' bill. Relative to Clear Skies, CPA's 
program costs are projected to be almost 300% higher in 2010 ($16.5 
billion). In addition, pursuing sharp reductions in CO2 from 
the electricity generating. sector alone would cause a dramatic shift 
from coal to natural gas. The Jeffords bill is projected to increase 
electricity prices 39% in 2010 and 50% in 2015, whereas Clear Skies is 
projected to have only a small impact on electricity prices.
    The compliance dates and control levels of CPA and CAPA will also 
increase the cost to American consumers. In constructing the Clear 
Skies Act, we were conscious of not extending beyond the limits of 
available labor and other construction resources even though Clear 
Skies requires very substantial increases in installation of advanced 
pollution controls. CPA and CAPA require even more control technology 
installations in a very short time frame, which could hinder 
electricity reliability.

    Question 11. Under S. 131, what is likely to be the maximum number 
of major sources that could obtain an exemption from the air toxics 
requirements of the current Clean Air Act to use maximum available 
control technology? Considering those facilities, what is the 
approximate number of tons of HAPs currently emitted by those 
facilities and how much more would their annual emissions under S. 131 
be than under current applicable maximum achievable control technology 
requirements of section 112 of the Clean Air Act for those same 
sources?
    Response. EPA has not analyzed S. 131 with respect to the number or 
type of facilities that might take advantage of opting into the trading 
program. EPA does not have a database nor does it have a modeling tool 
that could predict which facilities would voluntarily opt-in.

    Question 12. Serious criticism has been leveled against the 
Administration for failing to follow an open and transparent process as 
required by EPA guidance and Executive Orders in the development and 
setting of the mercury reduction goal in Clear Skies and in the 
proposed mercury rule. Did you at any time instruct or otherwise 
encourage any CEQ or any EPA employees or appointees to disregard EPA 
guidance on rulemakings, or the directives in any of the Executive 
Orders, including no. 12866 on regulatory review and no. 13045 on 
children's health?
    Response. The EPA finalized a rule to control mercury emissions 
from the power sector on March 15 and we have followed guidelines for a 
proper rulemaking. Criticism of the rulemaking was addressed by 
Assistant Administrator Jeff Holmstead in his response letter to the 
EPA Office of Inspector General. It can be viewed at http://
www.epa.gov/oig,/reports/2005/20050203-2005-P-00003.pdf

    Question 13. You indicated that the cost to utilities to comply 
with the Clear Skies legislation would be approximately $52 billion. 
What is expected to be the cumulative value of the allowances allocated 
to utilities in the same time period that they spend this $52 billion? 
What is expected to be the cumulative value of allowances to non-
utilities participating in the program compared to their costs of 
compliance?
    Response. It is important to understand that the estimated cost of 
compliance with Clear Skies 2003 only includes the capital, operations 
and maintenance, and fuel use costs. We do not assume any costs 
associated with the use of allowances. This is because most of the 
value of the allowances is given to power companies. This cost does not 
have a significant impact in the early years of the program because the 
2003 legislation included an auction that was phased in. The power 
companies are then required to surrender allowances as part of 
compliance; thus on net, allowances do not represent either a cost or 
an expense. This could be different for individual power companies.

    Question 14. Please describe the effect, if any, that enactment of 
S. 131 would have on ongoing legal actions related to EPA regulations, 
programs, enforcement, or guidance, including New Source Review, New 
Source Performance Standards, and Hazardous Air Pollutants.
    Response. We have not analyzed the effect of enactment of S. 131 on 
ongoing legal actions.

    Question 15. What is the cumulative total of the President's budget 
requests, including FY06, for the FutureGen program and how much has 
been appropriated for this program to date?
    Response. FutureGen is a Presidential initiative to build the 
world's first integrated sequestration and hydrogen production research 
power plant. The $1 billion dollar project is intended to create the 
world's first zero-emissions fossil fuel plant. When operational, the 
prototype will be the cleanest fossil fuel fired power plant in the 
world. The FY 2004 budget included $9 million to initiate FutureGen, 
and the FY 2005 budget included another $18 million for FutureGen 
consistent with the funding profile contained in the Department of 
Energy's March 2004 Report to Congress. The President's FY 2006 Budget 
requests another $18 million to continue FutureGen, as well as ensures 
that the $257 million in unexpended funds available from prior years' 
clean coal projects are available to fund future clean coal activities, 
beginning with FutureGen. The total Federal contribution to FutureGen 
is expected to be $500 million in direct funding for FutureGen, and 
another $120 million from DOE's carbon sequestration programs.

    Question 16. An Associated Press report from December cited you and 
Secretary Leavitt as saying that President Bush had made a decision to 
finalize the Clean Air Interstate Rule by mid-March 2005, unless 
Congress passes the Administration's proposed Clear Skies Act by then. 
Did the President tell you or anyone else in the White House that he 
had made a decision to issue the Clean Air Interstate Rule by March 
unless Congress enacts Clear Skies by such date? Is it still the 
Administration's intention to promulgate the final rule by that date?
    Response. The EPA finalized the Clean Air Interstate Rule and the 
Clean Air Mercury Rule by March 15, 2005.

    Question 17. Has the Agency or the Administration analyzed setting 
more stringent caps than those in S. 131 that were as cost-effective or 
had greater net benefits? For instance, moving the SO2 
emissions cap to 3 or 2 million tons in 2012 instead of 2018. If so, 
please provide these analyses.
    Response. Extensive modeling has been done on the President's Clear 
Skies bill, Senator Carper's bill and Senator Jeffords bills since 2001 
by EPA and EIA and all of these analyses are publicly available:
     EIA economic assessments of various multi-pollutant 
scenarios, December 2000 and July 2001 (Congressman McIntosh request), 
September 2001 (Smith/Voinovich/Brownback request)
     EPA economic analysis of various multi-pollutant scenarios 
(Smith/Voinovich/Brownback request), 2001
     EPA economic analysis of various multi-pollutant scenarios 
(Jeffords/Lieberman request), 2001
     EIA economic analysis of the Jeffords bill, October 2001
     EPA comprehensive modeling to support Clear Skies, 
February 2002
     EPA costibenefits assessment of the Jeffords bill, June 
2002
     EPA Clear Skies updated comprehensive analysis, July 2003
     EIA economic analysis of Carper and Jeffords bills, 
September 2003
     EPA cost/benefit assessment of Carper and Jeffords bills, 
October 2003
     EIA economic analysis of Inhofe-Voinovich Clear Skies 
2003, Carper and Jeffords bills May 2004

    Question 18. S. 131 eliminates the National Acid Precipitation 
Assessment Program and that program's reporting requirement. As you may 
know, section 103(j) of the Clean Air Act requires the Administration 
to submit a report to Congress every two years showing acid deposition 
trends and every four years recommending the reduction in deposition 
rates that must be achieved in order to prevent adverse ecological 
effects. The last report was in 1998. Please provide by March 1, 2005, 
the status of these reports and any working drafts of the four-year 
report that are available.
    Response. The NAPAP Report is currently undergoing interagency 
review.
                                 ______
                                 
    Responses of James L. Connaughton to Additional Questions from 
                           Senator Murkowski

    Question 1. Mr. Connaughton, we in Alaska are lucky to have avoided 
many of the air pollution problems evident in more populous states. In 
fact, it has been suggested that much of the pollution that can be 
found in our state is transported from overseas. To what degree is 
pollution from other countries an issue and what can we do about it?
    Response. It is well established that the growing economies of East 
Asia are a large and growing source of pollution, and that these 
pollutants can be transported over large distances in the atmosphere. 
The Bush Administration is partnering with these nations, such as China 
and India, to develop and deploy cleaner, more efficient energy 
technologies that will provide more energy with fewer emissions that 
can be transported across the Pacific to North America.

    Question 2. There has been a lot of discussion in the media about 
whether human-caused CO2 is aggravating global warming. We 
are seeing events in Alaska that may be temperature-related, such as 
changes in ice cover in the Arctic Ocean, changes in the flora and 
fauna of different areas, insect infestations, and erosion, among 
others. Other than the general category of ``global warming,'' what 
other credible explanations exist for these events?
    Response. The IPCC notes that ``even without changes in external 
forcing, the climate may vary naturally, because, in a system of 
components with very different response times and non-linear 
interactions, the components are never in equilibrium and are 
constantly varying.'' An example of such internal climate variation is 
the El Nino and La Nina-Southern Oscillation (ENSO), resulting from the 
interaction between atmosphere and ocean in the tropical Pacific.
    Of importance to Alaska is the Pacific Decadal Oscillation (PDO), 
which is a natural oscillation of sea surface temperature in the North 
Pacific with a 20-30 year cycle. It has been linked to major changes in 
the productivity of northeast Pacific marine ecosystems, prevailing 
atmospheric winds and the average ``storm track'' location which 
affects erosion patterns, and the temperature of water entering the 
Arctic Ocean through the Bering Strait which affects the extent and 
thickness of Arctic sea ice. These natural cycles are being intensely 
studied through the Climate Change Science Program, and improved 
understanding of these cycles will yield improved climate forecasts on 
seasonal-to-decadal time scales.
    A sense of the natural variability of Arctic temperature can be 
obtained through an examination of the following diagram, which is 
based on data from the Global Historical Climatology Network, and is 
available from GISS.

[GRAPHIC] [TIFF OMITTED] T2206.158


    This figure shows that today's temperatures were comparable to 
those in the late 1930s. The highest annual temperature for the area 
between 64+ N and 90+ N occurred in 1938, while 
the 2000-2004 had the highest 5-year period.

    Question 3. Are you familiar with the papers that have raised 
questions about the ``hockey stick'' graph used by the IPCC? In your 
view, what effect do these questions have on the overall issue of the 
relationship between anthropogenic CO2 and climate change?
    Response. These questions are the focus of one of the ``synthesis 
and assessment reports'' that will be published as part of the Climate 
Change Science Program. The ongoing debate of reconstructing climate 
over the past 1000-2000 years underscores the need to invest in new 
knowledge on natural climate variability, including developing and 
deploying comprehensive and sustained global observations of the 
climate system through programs such as the U.S.-led Global Earth 
Observation System of Systems (GEOSS) international partnership.

    Question 4. I recently had a conversation in which a colleague 
suggested that we should act to reduce CO2 and commented 
that ``other countries'' are already doing it. Russia and the EU were 
specifically mentioned. Are other countries around the world actually 
taking the same level of action on CO2 that is recommended 
by U.S. proponents of Kyoto? Is the estimated effect on their economies 
the same as it would be on ours?
    Response. While the EU as a whole had 2002 emissions that were 2.5% 
below their 1990 levels, some individual EU members, such as Spain, 
Portugal, and Ireland had emissions increase at a faster rate that the 
U.S. over that same period of time. Many of the emissions reductions 
counted by the EU in their aggregate total come from improvements of 
efficiency within high-emitting industries in Germany, and from a 
switch (for other policy reasons) from coal to natural gas within the 
U.K. In the case of Russia, a significant decline in economic activity 
since 1990 has resulted in significant emissions reductions.

    Question 5. It has been suggested that stronger controls--as 
suggested in other proposed bills--would harm the economy by causing a 
larger and more rapid shift to alternative fuels such as natural gas. 
But I represent a state with abundant natural gas that we would like to 
market. Why would an immediate, largescale shift to natural gas NOT be 
in our best interest?
    Response. As documented in recent studies from the National 
Petroleum Council and the American Gas Foundation, we currently do not 
have enough natural gas supply within the Lower 48 and Alaska to meet 
our current needs. This has led to consistent upward price pressure on 
natural gas, augmented only by a modest increase in domestic production 
and in imports of LNG. These increased natural gas prices have already 
affected industries that rely on natural gas as a feedstock, such as 
chemicals, pharmaceuticals, and plastics. Even with access to the 
abundant natural gas supplies in Alaska and no change in emissions 
controls, we would be facing significantly higher future prices for 
natural gas.
    Unlike competing proposals that would result in shifts of capital 
investments from coal to natural gas, the Clear Skies legislation is 
designed to ensure that electricity generators are able to obtain 
financing and perform installation of the necessary pollution control 
equipment cost effectively. Clear Skies will ensure that our economy 
continues to grow and create new jobs, while other proposals would 
result in exports of jobs and revenue overseas to where natural gas is 
cheaper. More stable domestic markets for natural gas are in the long 
term interests of the nation and the state of Alaska.

     Responses of James L. Connaughton to Additional Questions from
                             Senator Vitter

    Question 1. Is there a basis in the CAA to require that an area 
implement requirements that would not be applicable under the 8-hour 
classification and are not part of an approved SIP? Isn't it true that 
anti-backsliding under the CAA involves holding in place the 
requirements found in a SIP or Applicable Implementation Plan and 
applying the requirements of the 8-hour standard?
    Response. The Clean Air Act does not expressly address the 
interplay between obligations that applied for a standard and the new 
obligations that arise when that standard has been revised. In the 
preamble to the proposed and final rule to implement the 8-hour ozone 
standard, EPA explained that in designing a transition from the 1-hour 
ozone standard to the 8-hour standard, we looked to various CAA 
provisions concerning anti-backsliding to ascertain Congressional 
intent. These provisions included section 110(1), section 193, subpart 
2 of part D of Title I together with the classification process under 
section 181, and section 172(e). See the April 30, 2004 (69 FR 23951 at 
23972) and the June 2, 2003 proposal (68 FR 32819) for a detailed 
discussion of the rationale. EPA concluded that Congress intended 1-
hour ozone nonattainment areas to remain obligated to adopt and 
implement those control obligations mandated by Congress for the area's 
1-hour classification. Thus, under our anti-backsliding regulation, 
areas must continue to implement control obligations that applied for 
purposes of the 1-hour standard and to adopt any control obligations 
that applied but that the area had not yet adopted. States may modify 
or remove control obligations in the SIP that were not mandated by 
Congress so long as the State demonstrates that removal or modification 
will not interfere with attainment or maintenance of the 8-hour ozone 
standard or interfere with any other applicable requirement.

    Question 2. If the City of Baton Rouge continues to be classified 
as severe under the 1-hour standard, major sources of VOCs in the 
nonattainment area would be subject to the imposition of penalty fees 
if the area fails to attain the standard by the attainment date. Have 
the major sources in any other city in the United States ever been 
required to pay fees under this standard?
    Response. The CAA Section 185 fees provision applies to ozone 
nonattainment areas classified as severe or extreme when such an area 
fails to attain the standard by its attainment date. Since severe and 
extreme areas have attainment dates of November 15, 2005 or later, no 
such area has yet failed to attain the 1-hour standard by its 1-hour 
attainment date. The Phase I Rule to implement the 8-hour ozone NAAQS 
(69 FR 23951) provides that once the 1-hour standard is revoked in June 
2005, EPA will no longer make findings of whether areas attain the 1-
hour standard and also provides that the section 185 fee provisions 
will no longer apply for purposes of failing to attain the 1-hour 
standard. On June 29, 2004, EPA received a Petition for Reconsideration 
that requested that the Agency reconsider, among other issues, the 
section 185 fee issue because EPA had not proposed that these 
provisions would no longer apply once the 1-hour standard is revoked. 
EPA granted the petition and issued a proposal seeking comment on the 
portion of the Phase I Rule that addressed the continued applicability 
of the section 185 fees (February 3, 2005; 70 FR 5593). This proposal 
reiterated EPA's belief that once the 1-hour standard is revoked, the 
section 185 fee provisions of the CAA should no longer apply for 
failure to attain the 1-hour standard because there will be no 
``applicable'' 1-hour attainment date. EPA plans to take final action 
on this issue by mid-May 2005.

    Question 3. On January 25, 2005, I requested that CEQ furnish my 
office with a detailed analysis of how S. 131, ``the Clear Skies Act of 
2005'' would impact the State of Louisiana (and Baton Rouge in 
particular) as compared to existing law. When can we expect to receive 
that information?
    Response. The EPA has not analyzed the impact of S. 131 on states; 
however, EPA has provided detailed analysis of state-by-state effects 
of the Administration's Clear Skies legislation. The Louisiana analysis 
can be found at http://www.epa.gov/air/clearskies/state/la.html.

                               __________

   Statement of Brian Houseal, Executive Director, Adirondack Council

    Good morning. Thank you, Mr. Chairman and Committee members, for 
the opportunity to testify before you today. I am Brian Houseal, the 
Executive Director of the Adirondack Council.
    The Adirondack Council is a privately funded, not-for-profit 
organization dedicated to ensuring the ecological integrity and wild 
character of the Adirondack Park. This year, the Adirondack Council and 
our 18,000 members are celebrating our 30th anniversary of protecting 
the Adirondack Park. We have been fighting to stop acid rain for 25 of 
those 30 years.
    New York's 6-million acre Adirondack Park is the largest park of 
any kind in the lower 48 states. It is nearly three times the size of 
Yellowstone National Park and roughly the size of Vermont. It contains 
the largest assemblage of old growth forest east of the Mississippi 
River. The Park contains over 1,500 miles of rivers and 30,000 miles of 
streams and brooks. It also has 46 mountain peaks of over 4,000 feet 
tall. The nearly three million acres of public land has been protected 
by our state constitution as ``Forever Wild'' for over 100 years, with 
one million acres being classified as Wilderness.
    The Adirondack Park has suffered some of the greatest damage from 
acid rain due to its geology and geography. Prevailing winds bring 
power plant emissions from outside New York into the Adirondacks where 
it is deposited in many forms including acid rain, acid snow and acid 
fog. The acid deposition then leaches nutrients out of the soil 
affecting the growth of vegetation. On many mountaintops, 80 percent of 
the lush red spruce and balsam fir forests have turned brown and died 
as the soil has been poisoned. Sugar maples and the maple syrup 
industry are also profoundly affected by acid rain.
    Acid rain has reduced the pH of some of our lakes to the same level 
as vinegar. Approximately one quarter of the Park's 2,800 lakes and 
ponds are biologically dead, meaning they can no longer sustain their 
native plant and animal life. Those lakes and additional waterways are 
further impacted seasonally by ``spring shock,'' a phenomenon that 
occurs when the winter snowpack melts and sends a high level of 
nitrogen into the water.
    Haze obscures the view for hikers who climb to the tops of the 
state's highest peaks. Whiteface Mountain, a place where the air should 
be clean, crisp, and healthy, is out of compliance for national air 
quality standards. Without Federal action, our Park will not recover 
and our ecosystems will continue to be unhealthy and unproductive.
    Acid rain affects all parts of the state, not just the Adirondack 
Park. A recent study found that many locations where historic marble, 
limestone and sandstone buildings are being eaten away by acid rain are 
in New York State. Albany, Buffalo, New York City, Rochester, and 
Syracuse all made the list of the top 20 areas (``The Effect of Acid 
Rain/Budget Cuts on Helping Our Community Treasures.'' DOC 
Communications, July 31, 2003). Our cities and our heritage can no 
longer withstand the effects of this pollution.
    In addition, grape growers from Long Island to the Finger Lakes 
note that their harvests are diminished in vitality each year as the 
nutrients needed to grow vines and fruit are depleted from the soil by 
polluted rain and snow. The Long Island Pine Barren, the Catskill Park, 
the Taconic Mountain Ridge near Massachusetts and the Hudson Highlands 
are all suffering extensive environmental damage from decades of acid 
rain.
    The damage that sulfur and nitrogen pollution causes is far from a 
regional issue. It is an issue of national, even international 
importance. Excess nitrogen in waters and in soils--``nitrogen 
saturation''--can be found in the Northeast and in West Virginia's 
Allegheny Mountains, Tennessee's Great Smoky Mountains, Colorado's 
Front Range of the Rockies and even as far west as the San Bernardino 
and San Gabriel Mountains of California. Studies conducted in the 
Shenendoah National Park show that fish species richness, population 
density, condition, age distribution, size and survival rate were all 
reduced in streams no longer able to neutralize acidity.
    Estuaries along the entire east coast suffer from airborne inputs 
of nitrogen that can make up nearly 40 percent of the total nitrogen 
loaded into their systems. In estuary systems such as Long Island 
Sound, Narragansett Bay, Chesapeake Bay and Tampa Bay in Florida, 
nitrogen-based pollution is overloading the water with nutrients. This 
causes ``eutrophication''--an overabundance of algae. When algae dies 
and decays, it depletes the water of precious oxygen needed by all 
aquatic animals. This condition is known as hypoxia. These blooms are 
associated with fin fish kills, shellfish kills and human illness.
    Acid rain is also falling on the District of Columbia. Acid rain is 
eating away at the marble of the Capitol building and many of the great 
monuments on the mall. The Lincoln memorial corrodes more every year. 
So it is with buildings and monuments throughout the Capitol. The 
monuments to the fallen on the great battle sites of the Civil War, 
Gettysburg and Vicksburg, lose their inscriptions and carved features 
from the acid bath they endure each rainy day. The Statute of Liberty 
simply slowly melts away, day by day. This is why the fight to stop 
acid rain has been joined by many of the nation's prestigious 
organizations dedicated to historic preservation.
    Although the 1990 Clean Air Act Amendments have begun to lessen the 
impacts of acid rain, the problem has clearly not been solved. Some 
early data has shown a slight improvement in the acid neutralizing 
capacity (ANC) of a handful of our lakes. This evidence, along with a 
litany of reports from government agencies and non-governmental 
organizations indicates that the 1990 amendments targeted the right 
pollutants to combat acid rain, but did not reduce the pollution levels 
sufficiently.
    Today, we are here to make three requests as you consider new 
legislation in order to help solve the acid rain problem. First, action 
to stop acid rain must be taken this year. Second, it must be as good 
as or better than the Environmental Protection Agency's Clean Air 
Interstate Rule (CAIR). Finally, no individual state's current 
enforcement mechanisms should be eroded.
    The Adirondack Council has been actively calling for further 
reductions in the emissions that cause acid rain for almost a decade 
since the EPA first reported in 1995 that further reductions beyond the 
1990 Clean Air Act Amendments would be necessary. In 1997, we 
encouraged then-New York Senators Moynihan and D'Amato to introduce 
legislation that would stop the damage and start the recovery process. 
That roughly translated into an additional 50 percent reduction in 
sulfur emissions below the phase 2 levels and a 70 percent cut in 
nitrogen from 1990 levels, including a year-round cap-and-trade 
program. This bill was later sponsored by New York's entire 
Congressional delegation and reintroduced several times through 2002 
when it was sponsored by our current New York Senators Clinton and 
Schumer.
    The Council has testified before this committee twice before on the 
problem of acid rain since the Moynihan bill was first introduced. It 
has now been 10 years since EPA's 1995 report detailing the need for 
additional cuts to help places like the Adirondacks recover. Something 
must be done this year to stop acid rain. Studies have shown that 
approximately 25,000 U.S. citizens die annually because of power plant 
pollution. In essence, the lack of action by Congress since the first 
time that the Adirondack Council testified here over 5 years ago has 
resulted in roughly 133,000 lives being needlessly cut short. We need 
progress this year--you cannot come home empty-handed yet again. Action 
is long overdue. While I am honored to testify before you and this 
committee, I would be even more honored if the problem was solved this 
year and I did not have to return again to testify.
    In the late 1990s the Moynihan proposal was considered neither 
politically nor economically feasible. However, we now know that this 
level of reductions is possible on both counts. For several years now, 
the Moynihan bill, once considered a radical notion, has become the 
``floor'' that other proposals would have to exceed. Numerous members 
of this committee have introduced or soon will introduce legislation, 
all of which go beyond what Senator Moynihan first suggested.
    Today, we have a new ``floor'' in the form of the Clean Air 
Interstate Rule (CAIR). CAIR represents a reduction of 65 percent of 
nitrogen emissions and 70 percent of sulfur emissions respectively from 
current levels in 29 eastern states plus the District of Columbia. This 
rule, proposed by the Environmental Protection Agency in December 2003, 
is scheduled to be finalized in March. Any legislation that is passed 
must buildupon the floor established by CAIR. In order to achieve this, 
Clear Skies would have to be amended to move the compliance dates up 
from 2018 to 2015. We believe this is possible as it would follow the 
model of the 10-year phase-in of the Clean Air Act Amendments of 1990. 
Even lower emissions caps and compliance dates would serve to speed up 
the recovery process of our lakes, streams and mountains. Lowering the 
cap on sulfur dioxide further would also produce a significant co-
benefit in terms of reducing mercury emissions.
    We would like to see deeper cuts for mercury, and do not agree with 
the proposed trading scheme due to the demonstrated neurotoxicity of 
mercury in both human and wildlife populations.
    This bill does not include reductions in carbon dioxide one of the 
major ingredients of global climate change. While we are very concerned 
about the serious environmental impacts that are already underway, we 
do not think that progress on ending acid rain should be delayed while 
carbon is further debated. We support Governor Pataki's twelve-state 
Regional Greenhouse Gas Initiative (RGGI), and the McCain-Lieberman 
bill, which we are hopeful the Senate will act on soon.
    While we support CAIR, we would like to see legislation to ensure 
more legal certainty in the cap levels and timelines. We have witnessed 
numerous regulations tied up in the court system for many years. 
Another benefit of legislation is that reports to Congress on the 
progress of the program, along with funding necessary to expand the 
chemical and ecological monitoring of sensitive ecosystems like the 
Adirondacks, can be mandated. We would encourage you to consider 
strengthening these provisions of the legislation as it is marked up in 
the near future.
    We would also urge the committee members to carefully consider 
whether or not it is necessary to make other changes to the existing 
Clean Air Act. While we understand the need for regulatory certainty 
for industry compliance, changing programs such as regional haze, 
Section 126 petitions, and rigorous monitoring from continuous 
emissions monitoring systems (CEMS) should be closely examined. 
Including new requirements such as early reduction credits (ERC's), 
opt-ins and safety valve provisions could also have a negative impact 
on the effectiveness of the successful acid rain program started by EPA 
and the Clean Air Markets Division fifteen years ago.
    Enforcement tools currently used by the states to clean up their 
air should not be diminished in any way. A prime example of the 
usefulness of these enforcement tools came last month from New York's 
Governor George Pataki and Attorney General Eliot Spitzer, two men who 
have done a great deal to protect the Adirondack Park from acid rain. 
They announced an agreement with the current and former owners of some 
of New York's largest and dirtiest coal-fired power plants to settle 
potential violations of the Clean Air Act's New Source Review (NSR) 
requirements. These settlements will result in the largest reductions 
in air pollution ever attained through a settlement in New York.
    Last week, our Governor and Governor Schwarzenegger of California 
sent you a letter stating, in part, ``These states, like ours, will 
need all the tools available under the Act to craft effective 
strategies to meet the standards,'' [referring to 8-hour ozone and 
particulate matter (PM2.5) standards.] We wholeheartedly 
agree with their position, which was also echoed by Massachusetts 
Governor Mitt Romney.
    The Adirondack Council first testified before this committee on the 
need to address acid rain in October 1999. On that same day, Governor 
Pataki announced that he would enact the toughest acid rain regulations 
in the country. After several court challenges, those rules went into 
effect on October first of 2004 with year-round nitrogen controls, and 
a month ago, further sulfur reductions. New York's regulations mirror 
the Moynihan legislation. New York has now taken exhaustive measures to 
clean up its own plants. We are now asking the rest of the country to 
do the same.
    Thank you again for allowing me to testify here today.
                                 ______
                                 
Response of Brian L. Houseal to Additional Question from Senator Inhofe

    Question. Do you believe that if the CAIR rule is delayed from 
litigation that it will achieve SO2 reductions equal to 
Clear Skies?
    Response. If CAIR is the subject of litigation, we hope that it 
will be implemented without a stay, in order to start the reductions as 
scheduled while the specific issues related to the litigation are 
resolved. Previous court decisions related to EPA Clean Air Act 
regulations have proceeded in this manner.
    As the CAIR rule is only a regional program and Clear Skies is 
national, the approximately 70 percent reductions in both for sulfur 
and nitrogen are similar in nature. The overall emissions reductions in 
Clear Skies may be greater over time, insofar as it covers the entire 
country.
    In order to ensure the eastern states see the benefits of the 
proposed reductions, east and west regions could be established for 
sulfur similar to the nitrogen program in Clear Skies.
    However, early reduction credits and opt-ins may have the 
unintended consequence of eroding the goal of 70 percent reductions in 
the Clear Skies bill.
                                 ______
                                 
          Response of Brian L. Houseal to Additional Question 
                         from Senator Jeffords

    Question. Do you support S. 131 as introduced?
    Response. We support the intent of the legislation to reduce the 
pollution that causes acid rain and we also support the mechanism by 
which this is achieved, the successful cap-and-trade program. As S. 131 
will be the vehicle for clean air legislation in the Senate this year, 
we respectfully request that the bill be improved before it is passed 
by the committee. These improvements include: making the reductions of 
sulfur dioxide and nitrogen oxides deeper and sooner; increasing the 
ratio of avoided emissions necessary for power plants to receive an 
allowance through the early reduction credit (ERC) program; and, 
determining if it is necessary to make any changes to new source review 
(NSR), Section 126 petitions, and continuous emissions monitoring 
systems (CEMS) requirements. We also urge you to also make deeper cuts 
for mercury but do not support the trading of mercury as it is a 
neurotoxin and has localized effects on both human and wildlife 
populations.
                                 ______
                                 
         Responses of Brian L. Houseal to Additional Questions 
                        from Senator Lautenberg

    Question 1. The Acid Rain Program's cap and trade approach has been 
very successful. Would this bill's cap and trade system be as 
protective of public health as that program?
    Response. This bill uses the successful Acid Rain Program cap and 
trade system administered by the EPA's Clean Air Markets Division over 
the past 15 years for sulfur dioxide and replicates it for nitrogen 
oxides. Public health will be improved by mandating deep cuts in these 
emissions as soon as possible. The faster and deeper the cuts, the 
better the results will be for public health and the environment.

    Question 2. As someone who came out of the corporate world, I can 
appreciate the importance of making sound investments in new 
technologies. Is the cap and trade system in Clear Skies as cost-
effective at reducing pollution as other approaches?
    Response. Yes, the 1990 Clean Air Act amendments provided clear 
results. EPA's acid rain program has nearly 100 percent compliance and 
costs for industry to comply were a fraction of the original estimates. 
In addition, the program is run by only a handful of EPA staff.
    The reductions mandated by the amendments were easily obtained by 
the industry ahead of schedule. In fact, that is why new legislation is 
necessary. Industry over-complied with the requirements and now have a 
``bank'' of excess allowances to use. Further cuts are necessary to 
provide the health and ecological benefits anticipated in 1990.
    New source review (NSR) can be an effective tool in terms of 
reducing power plant emission at individual plants. However, this is a 
long process and produces uncertain outcomes. Cap-and-trade is more 
certain and provides reductions for an entire airshed, which can help 
the Adirondacks recover from acid rain. Both cap-and-trade and NSR 
should be available as resources to clean up the air.

    Question 3. Clear Skies proposes giving many industries a free pass 
when it comes to reducing hazardous air pollutants--some of them known 
to cause cancer. What impacts do you foresee from this dramatic retreat 
from Clean Air Act protections?
    Response. The Adirondack Council claims no expertise in this area. 
It is our opinion that current Clean Air Act standards should not be 
weakened and the trading of mercury should not be allowed.

    Question 4. My entire home State of New Jersey was recently 
declared ``out of attainment'' for nitrogen oxides, which help form 
ozone and damage lungs--especially of kids. Do you believe this bill 
will improve New Jersey's air quality?
    Response. Insofar as this bill includes year-round controls on 
nitrogen oxides, New Jersey's air quality should improve. A 70 percent 
reduction in both sulfur and nitrogen should help New Jersey meet its 
attainment goals. We do not believe that any one proposal is a ``silver 
bullet,'' but think that cap-and-trade programs will limit interstate 
pollution, allowing individual states to take further actions on their 
own to meet the necessary requirements.

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  Responses by John Walke to Additional Questions from Senator Inhofe

    Question 1. Please disclose a listing of the number and caption of 
all cases filed by the Natural Resources Defense Council as plaintiff 
or as one of other plaintiffs against the U.S. Environmental Protection 
Agency seeking any action or relief under any section of the Air 
Pollution Prevention and Control Act, (``Clean Air Act,'' 42 U.S.C. s. 
7401 et seq.) since January 1, 1985.

    Question 2. Please disclose a listing of the number and caption of 
all cases against the U.S. Environmental Protection Agency wherein the 
Natural Resources Defense Council is a named party since January 1, 
1985.
    Response. The Natural Resources Defense Council's (``NRDC'') 
mission is ``to safeguard the Earth: its people, its plants and animals 
and the natural systems on which all life depends,'' ``to restore the 
integrity of the elements that sustain life,'' and ``to defend 
endangered natural places.'' \1\ Toward those ends, we pursue 
litigation challenging Environmental Protection Agency (``EPA'') 
rulemakings and other agency activities when the agency violates 
environmental or public health statutes or otherwise fails to perform 
its mission of ``protect[ing] human health and the environment.'' \2\
---------------------------------------------------------------------------
    \1\ NRDC: About Us,http://www.nrdc.org/about/default.asp.
    \2\ About EPA, http://www.epa.gov/epahome/aboutepa.htm#mission.
---------------------------------------------------------------------------
    The first table below identifies cases since 1985 in which NRDC has 
challenged an EPA rulemaking or other action. The table does not 
include attorneys fees cases (of which there have only been a few) nor 
cases in which NRDC intervened in support of the agency. (For our 
methodology in compiling this table, please see footnote 3.)
    Following this table of NRDC cases is a comparable table of cases 
since 1985 in which industry has challenged an EPA action. In virtually 
every such case, industry has sought not to assist EPA in performing 
its mission of protecting public health and the environment but instead 
to thwart and delay the agency's efforts. Due to time constraints, the 
list is significantly underinclusive, not least because it excludes (1) 
district court cases that were never appealed, and (2) the many cases--
including a significant number of NRDC's case--in which an industry 
party did not file the original complaint but did subsequently 
intervene against the agency. Despite that shortcoming, the list's 
relative length (339 industry-filed cases, versus 92 cases in which 
NRDC has opposed the agency) is quite telling. (For our methodology in 
compiling the table of industry cases, please see footnote 4.)

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    Question 3. Please disclose a listing of the number of consent 
agreements involving the U.S. Environmental Protection Agency to which 
the Natural Resources Defense Council has been a party since January 1, 
1985 including a listing of all parties involved and the terms of each 
agreement.
    Response. Consistent with NRDC's mission, described above, the 
organization occasionally enters into consent decrees with EPA. These 
judicially enforceable agreements limit litigation delays and assist 
EPA in protecting public health and the environment in a timely and 
mutually acceptable manner.
    NRDC does not have a data base identifying all of the consent 
decrees to which the organization has been a party. The Department of 
Justice does, however, publish notices of EPA consent decrees in the 
Federal Register. In addition, when EPA initiates a rulemaking pursuant 
to a consent decree, it identifies the decree in the rulemaking notice 
published in the Federal Register. Together, those two categories of 
notices should identify the terms of, and parties to, each consent 
decree between EPA and NRDC since the beginning of 1985. For the 
convenience of the Committee, we have searched Westlaw's Federal 
Register data base for all post-January 1, 1985 notices containing the 
terms ``Natural Resources Defense Council,'' ``Environmental Protection 
Agency,'' and ``consent decree.'' Due to time constraints, we have not 
further winnowed this list. It is therefore significantly 
overinclusive, as it includes all decrees that mention EPA and NRDC, 
whether or not the agency and the organization were parties to the 
decree.

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

------------------------------------------------------------------------
November 24, 2004 69 FR 68444-01..........  February 26, 1997 62 FR 8726-
                                             01
September 8, 2004 69 FR 54476-01..........  February 21, 1997 62 FR 8012-
                                             01
September 2, 2004 69 FR 53705-01..........  January 8, 1997 62 FR 1150-
                                             01
August 23, 2004 69 FR 51892-01............  December 16, 1996 61 FR
                                             66086-01
July 9, 2004 69 FR 41576-01...............  December 9, 1996 61 FR 64876-
                                             03
June 2, 2004 69 FR 31104-01...............  November 6, 1996 61 FR 57518-
                                             01
May 14, 2004 69 FR 26942-01...............  October 7, 1996 61 FR 52582-
                                             01
April 26, 2004 69 FR 22472-01.............  August 29, 1996 61 FR 45778-
                                             01
December 31, 2003 68 FR 75515-01..........  August 28, 1996 61 FR 44619-
                                             01
November 7, 2003 68 FR 63085-02...........  August 28, 1996 61 FR 44396-
                                             01
August 6, 2003 68 FR 46684-01.............  August 12, 1996 61 FR 41786-
                                             01
May 13, 2003 68 FR 25686-01...............  June 20, 1996 61 FR 31736-01
April 25, 2003 68 FR 21002-01.............  March 1, 1996 61 FR 8174-01
February 12, 2003 68 FR 7176-01...........  February 7, 1996 61 FR 4600-
                                             01
December 27, 2002 67 FR 79020-02..........  December 19, 1995 60 FR
                                             65438-01
December 9, 2002 EPA 67 FR 74232-01.......  December 19, 1995 60 FR
                                             65387-01
November 29, 2002 67 FR 71165-01..........  November 28, 1995 60 FR
                                             59658-01
November 20, 2002 67 FR 70070-03..........  August 3, 1995 60 FR 39804-
                                             01
October 17, 2002 67 FR 64216-01...........  June 29, 1995 60 FR 33926-01
September 12, 2002 67 FR 57872-01.........  May 30, 1995 60 FR 28210-01
August 27, 2002 67 FR 55012-01............  May 2, 1995 60 FR 21592-01
June 24, 2002 67 FR 42644-01..............  February 27, 1995 60 FR
                                             10654-01
June 18, 2002 67 FR 41417-01..............  February 17, 1995 60 FR 9428-
                                             01
March 26, 2002 67 FR 13826-01.............  February 9, 1995 60 FR 7824-
                                             01
February 25, 2002 67 FR 8582-01...........  January 27, 1995 60 FR 5464-
                                             01
February 4, 2002 67 FR 5170-01............  January 27, 1995 60 FR 5389-
                                             01
February 4, 2002 67 FR 5152-01............  January 24, 1995 60 FR 4712-
                                             01
January 23, 2002 67 FR 3370-01............  September 22, 1994 59 FR
                                             48664-01
December 18, 2001 66 FR 65256-01..........  September 20, 1994 59 FR
                                             48228-01
December 11, 2001 66 FR 63921-01..........  September 20, 1994 59 FR
                                             48198-01
December 3, 2001 66 FR 61268-01...........  September 19, 1994 59 FR
                                             47982-01
November 14, 2001 66 FR 57160-01..........  August 26, 1994 59 FR 44234-
                                             01
October 26, 2001 66 FR 54143-01...........  April 22, 1994 59 FR 19402-
                                             01
September 7, 2001 66 FR 46754-01..........  April 14, 1994 59 FR 17850-
                                             01
July 20, 2001 66 FR 37955-01..............  December 17, 1993 58 FR
                                             66078-01
July 12, 2001 66 FR 36542-01..............  October 29, 1993 58 FR 58168-
                                             01
July 11, 2001 66 FR 36370-01..............  October 27, 1993 58 FR 57898-
                                             01
June 8, 2001 66 FR 30902-01...............  September 28, 1993 58 FR
                                             50638-01
May 15, 2001 66 FR 26914-01...............  June 21, 1993 58 FR 33813-03
February 26, 2001 66 FR 11638-01..........  April 16, 1993 58 FR 20802-
                                             01
January 22, 2001 66 FR 6850-01............  April 7, 1993 58 FR 18011-01
January 12, 2001 66 FR 2960-01............  March 4, 1993 58 FR 12454-01
January 3, 2001 66 FR 666-01..............  December 4, 1992 57 FR 57534-
                                             01
January 3, 2001 66 FR 634-01..............  September 24, 1992 57 FR
                                             44210-03
January 3, 2001 66 FR 586-01..............  September 8, 1992 57 FR
                                             41000-01
January 3, 2001 66 FR 424-01..............  August 18, 1992 57 FR 37194-
                                             01
December 27, 2000 65 FR 81964-01..........  July 21, 1992 57 FR 32250-01
December 22, 2000 65 FR 81242-01..........  May 7, 1992 57 FR 19748-01
November 30, 2000 65 FR 73453-01..........  April 10, 1992 57 FR 12560-
                                             01
September 14, 2000 65 FR 55522-02.........  March 19, 1991 56 FR 11513-
                                             01
August 31, 2000 65 FR 53008-02............  February 11, 1991 56 FR 5488-
                                             01
July 13, 2000 65 FR 43586-01..............  January 30, 1991 56 FR 3526-
                                             01
July 12, 2000 65 FR 43002-01..............  August 8, 1990 55 FR 32268-
                                             01
June 16, 2000 65 FR 37783-01..............  March 27, 1990 55 FR 11183-
                                             01
May 1, 2000 65 FR 25325-01................  March 8, 1990 55 FR 8666-01
April 11, 2000 65 FR 19440-01.............  January 2, 1990 55 FR 80-01
February 24, 2000 65 FR 9322-01...........  December 20, 1989 54 FR
                                             52251-01
January 27, 2000 65 FR 4360-01............  December 20, 1989 54 FR
                                             52209-01
January 19, 2000 65 FR 3008-01............  June 2, 1989 54 FR 23868-01
December 21, 1999 64 FR 71453-01..........  March 29, 1989 54 FR 12926-
                                             01
November 22, 1999 64 FR 64023-01..........  October 17, 1988 53 FR 40562-
                                             01
August 23, 1999 64 FR 46012-01............  May 24, 1988 53 FR 18764-01
August 18, 1999 64 FR 45072-01............  April 26, 1988 53 FR 14926-
                                             01
June 7, 1999 64 FR 30276-02...............  November 24, 1987 52 FR
                                             45044-01
May 25, 1999 64 FR 28249-01...............  November 5, 1987 52 FR 42522-
                                             01
March 30, 1999 64 FR 15158-01.............  June 22, 1987 52 FR 23477-02
February 3, 1999 64 FR 5488-01............  December 4, 1986 51 FR 43814-
                                             01
January 13, 1999 64 FR 2280-01............  October 9, 1986 51 FR 36368-
                                             01
November 9, 1998 63 FR 61340-01...........  September 30, 1986 51 FR
                                             34904-01
October 21, 1998 63 FR 56292-01...........  August 22, 1986 51 FR 30166-
                                             01
September 21, 1998 63 FR 50388-01.........  August 4, 1986 51 FR 27956-
                                             01
September 4, 1998 63 FR 47285-01..........  June 12, 1986 51 FR 21454-01
April 15, 1998 63 FR 18504-01.............  June 4, 1986 51 FR 20426-01
April 3, 1998 63 FR 16500-01..............  January 17, 1986 51 FR 2492-
                                             01
February 6, 1998 63 FR 6426-01............  November 14, 1985 50 FR
                                             47142-01
February 6, 1998 63 FR 6392-01............  October 30, 1985 50 FR 45212-
                                             01
January 9, 1998 63 FR 1536-01.............  October 4, 1985 50 FR 40672-
                                             01
January 7, 1998 63 FR 846-01..............  September 20, 1985 50 FR
                                             38276-01
December 17, 1997 62 FR 66182-01..........  August 23, 1985 50 FR 34242-
                                             01
October 29, 1997 62 FR 58141-02...........  May 9, 1985 50 FR 19664-01
October 20, 1997 62 FR 54453-02...........  February 7, 1985 50 FR 5237-
                                             01
------------------------------------------------------------------------

                                 ______
                                 
 Responses by John Walke to Additional Questions from Senator Jeffords

    Question 1. What affect will the allocation system in S. 131 have 
on the development and enhancement of new and existing utility 
investments in cleaner and more efficient electricity generation?
    Response. The allocation system in S. 131 will have a negative 
impact on the development and enhancement of new and existing utility 
investments in cleaner and more efficient electricity generation, 
primarily due to the structuring of the allowance baselines provisions 
and the allocation of allowances for new sources. The legislation 
represents not only a transfer of wealth to the power sector and away 
from the public, in terms of higher health costs and other social 
costs. But even within the power sector, the legislation imposes 
relatively more of the burden of cleaner air policies on the most 
efficient, the newest and the lowest emitting sources.
    Along similar lines, the legislation misses an excellent 
opportunity to encourage more renewable sources of energy, since it 
does not appear to provide any allocation for renewable power.
    Given time constraints in responding to the Committee's questions, 
I will be pleased to provide you with additional information in 
response to this question if you wish.

    Question 2. What are the problems that S. 131 creates with respect 
to the integrity of the existing cap and trade system?
    Response. As detailed in my written testimony, S. 131 departs in a 
negative fashion from the basic role played by the acid rain cap-and-
trade program in the 1990 Amendments. Moreover, the bill does damage 
even to that role by eliminating or undermining the integrity and key 
accountability measures of the acid rain trading program, while 
introducing loopholes and destabilizing elements that Title IV does not 
contain. Indeed, S. 131 strips away safeguards and accountability 
measures that are integral to the effectiveness, enforceability and 
reliability of a national cap-and-trade program. The overall result is 
that the proponents of the bill cannot claim the successes of the acid 
rain program as a justification for their bill. To the contrary, the 
history and success of the acid rain trading program necessitate 
opposition to S. 131.
    First, S. 131 repeals or weakens an array of statutory safeguards 
protecting local and downwind communities from harmful smog and soot 
pollution (such as new source review (``NSR''), the section 126 
interstate air pollution program, new source performance standards 
(NSPS), and best available retrofit technology (BART), as well as toxic 
air pollution (Maximum Achievable Control Technology (MACT) standards). 
When Congress adopted the Clean Air Act amendments in 1990, it either 
added, retained, or strengthened each of these safeguards. The 
safeguards have helped to protect communities against local pollution 
increases that have occurred even as the acid rain program's national 
SO2 cap has been met and its NOx provisions have been 
implemented.
    Second, S. 131 abandons critical features of the acid rain trading 
program that have been integral to the integrity, accountability, and 
therefore success of that program. Inadequate monitoring requirements 
in S. 131 render its trading programs for SO2, NOx and 
mercury unverifiable and untrustworthy.
    The opt-in and ``early reduction'' provisions in the bill damage 
the integrity of the trading program and effectively authorize 
emissions above the caps. In particular, voluntary participation and 
self-selection associated with the opt-in provisions will ensure gaming 
and worsen emissions performance. Moreover, inflated pollution 
baselines for opt-in units produce bogus allowances that do not reflect 
actual emissions reductions--again, effectively raising the caps above 
the levels claimed by the Administration.
    In addition, the bill allows unlimited ``shutdown'' credits, 
creating bogus allowances that do not reflect actual emissions 
reductions. This is because the bill's limitation on shutdown credits 
is substantially weaker than the corresponding provision in the current 
acid rain program. These shutdown credit provisions, when combined with 
the inflated baseline provisions, allow for older sources to run hard 
for 3 years, opt in, then later shut down and create an enormous stream 
of added allowable emissions that can be transferred to any other unit 
in the cap programs--again, effectively raising the caps above touted 
levels.
    Finally, the bill allows mercury ``early reduction'' credits to be 
generated by opt-in units without limit, and even above the cap 
levels--effectively increasing the mercury caps. As detailed in my 
written testimony, Section 475 of the legislation allows the generation 
of early reduction credits for mercury emissions:
     Above cap levels, effectively raising the phase I and 
phase II mercury caps;
     Without any limitation on total mercury early reduction 
credits, rendering indeterminate the actual reductions achieved from 
the power sector or under the bill;
     Already required by state laws or regulations, obviating 
the benefits of those state mercury reductions, allowing windfall sales 
of mercury allowances from reductions already required by state law, 
and permitting other affected units to maintain high mercury levels or 
even increase those levels from allowance purchases; and
     From incidental mercury reductions occurring anyway as a 
result of SO2 or NOx reductions, allowing discredited 
``anyway tons'' to undermine the integrity of allowances and, again, 
raise the mercury cap levels.
    The effect of all this is that S. 131 re-introduces a host of 
loopholes, accounting gimmicks, free-rider problems and accountability 
defects that rightfully caused trading approaches to be held in low 
regard until the acid rain program corrected these deficiencies in the 
1990 Clean Air Act amendments. This bill strips the acid rain trading 
program model of the very integrity that has justified public 
confidence in the program, and ensures that S. 131 would not be as 
protective of public health as the acid rain program.

    Question 3. What, if any, comments would you care to make in 
response to the points made by the Chairman of the Council on 
Environmental Quality in his testimony?
    Response. As a general matter, neither the Council on Environmental 
Quality, Environmental Protection Agency, nor any other administration 
entity has provided analysis or data to the Congress, or the American 
people, to support the claim that S. 131 would protect Americans in a 
stronger and timelier fashion than enforcement of the current Clean Air 
Act. Nor have the sponsors of the legislation or other Members of 
Congress provided that information. Finally, none of the witnesses 
appearing before the Committee or Subcommittee in favor of S. 131 has 
provided that support either.
    NRDC's written testimony provides a detailed and comprehensive 
analysis of the many flaws in S. 131, flaws that would make the bill 
less protective of public health and America's lands and waterway, by 
weakening and delaying the Clean Air Act's protections. The 
administration has declined thus far to provide a comparable public 
analysis for the benefit of the American people, despite the EPA's role 
as guardian of the Clean Air Act and enforcer of its public health 
protections.
    Regrettably, the frustrating reality is that the administration has 
not provided analysis about the negative impacts of S. 131 on existing 
Clean Air Act safeguards; the failure of the bill to deliver healthy 
air to tens of millions of Americans by current statutory deadlines, 
within the next 5 years; the multitude of new harmful exemptions and 
other weaknesses added even since the introduction of the already lax 
Clear Skies bill (S. 485) in 2003; and the bill's introduction of 
loopholes and infirmities that damage the integrity of the acid rain 
trading program model. Accordingly, there is little administration 
analysis to which one could respond.
    With that caveat noted, I will address one central point made by 
Chairman Connaughton during his oral testimony. It is not correct that 
S. 131 will reduce emissions of sulfur oxides, nitrogen oxides and 
mercury by 70 percent in two phases. As detailed in my written 
testimony, S. 131 contains a host of provisions that ensure that the 
three caps tied to 70 percent emissions reductions will not be met, if 
industry simply acts in ways that the bill allows. This is primarily 
due to the opt-in provisions and early reduction provisions in the 
legislation. But it is also true because of provisions such as the 
exemption from the mercury cap for affected units emitting less than 50 
pounds of mercury annually. As discussed in my written and oral 
testimony, this exemption ensures that the bill would not reduce power 
plant mercury pollution 70 percent from today's levels of approximately 
48 tons nationwide.
                                 ______
                                 
Responses by John Walke to Additional Questions from Senator Lautenberg

    Question 1. The Acid Rain program's cap and trade approach has been 
very successful. Would this bill's cap and trade system be as 
protective of public health as that program?
    Response. No. As detailed in my written testimony, S. 131 departs 
in a negative fashion from the basic role played by the acid rain cap-
and-trade program in the 1990 Amendments. Moreover, the bill does 
damage even to that role by eliminating or undermining the integrity 
and key accountability measures of the acid rain trading program, while 
introducing loopholes and destabilizing elements that Title IV does not 
contain. Indeed, S. 131 strips away safeguards and accountability 
measures that are integral to the effectiveness, enforceability and 
reliability of a national cap-and-trade program. The overall result is 
that the proponents of the bill cannot claim the successes of the acid 
rain program as a justification for their bill. To the contrary, the 
history and success of the acid rain trading program necessitate 
opposition to S. 131.
    First, S. 131 repeals or weakens an array of statutory safeguards 
protecting local and downwind communities from harmful smog and soot 
pollution (such as new source review (``NSR''), the section 126 
interstate air pollution program, new source performance standards 
(NSPS), and best available retrofit technology (BART), as well as toxic 
air pollution (Maximum Achievable Control Technology (MACT) standards). 
When Congress adopted the Clean Air Act amendments in 1990, it either 
added, retained, or strengthened each of these safeguards. The 
safeguards have helped to protect communities against local pollution 
increases that have occurred even as the acid rain program's national 
SO2 cap has been met and its NOx provisions have been 
implemented.
    Second, S. 131 abandons critical features of the acid rain trading 
program that have been integral to the integrity, accountability, and 
therefore success of that program. Inadequate monitoring requirements 
in S. 131 render its trading programs for SO2, NOx and 
mercury unverifiable and untrustworthy.
    The opt-in and ``early reduction'' provisions in the bill damage 
the integrity of the trading program and effectively authorize 
emissions above the caps. In particular, voluntary participation and 
self-selection associated with the opt-in provisions will ensure gaming 
and worsen emissions performance. Moreover, inflated pollution 
baselines for opt-in units produce bogus allowances that do not reflect 
actual emissions reductions--again, effectively raising the caps above 
the levels claimed by the Administration.
    In addition, the bill allows unlimited ``shutdown'' credits, 
creating bogus allowances that do not reflect actual emissions 
reductions. This is because the bill's limitation on shutdown credits 
is substantially weaker than the corresponding provision in the current 
acid rain program. These shutdown credit provisions, when combined with 
the inflated baseline provisions, allow for older sources to run hard 
for 3 years, opt in, then later shut down and create an enormous stream 
of added allowable emissions that can be transferred to any other unit 
in the cap programs--again, effectively raising the caps above touted 
levels.
    Finally, the bill allows mercury ``early reduction'' credits to be 
generated by opt-in units without limit, and even above the cap 
levels--effectively increasing the mercury caps. As detailed in my 
written testimony, Section 475 of the legislation allows the generation 
of early reduction credits for mercury emissions:
     Above cap levels, effectively raising the phase I and 
phase II mercury caps;
     Without any limitation on total mercury early reduction 
credits, rendering indeterminate the actual reductions achieved from 
the power sector or under the bill;
     Already required by state laws or regulations, obviating 
the benefits of those state mercury reductions, allowing windfall sales 
of mercury allowances from reductions already required by state law, 
and permitting other affected units to maintain high mercury levels or 
even increase those levels from allowance purchases; and
     From incidental mercury reductions occurring anyway as a 
result of SO2 or NOx reductions, allowing discredited 
``anyway tons'' to undermine the integrity of allowances and, again, 
raise the mercury cap levels.
    The effect of all this is that S. 131 re-introduces a host of 
loopholes, accounting gimmicks, free-rider problems and accountability 
defects that rightfully caused trading approaches to be held in low 
regard until the acid rain program corrected these deficiencies in the 
1990 Clean Air Act amendments. This bill strips the acid rain trading 
program model of the very integrity that has justified public 
confidence in the program, and ensures that S. 131 would not be as 
protective of public health as the acid rain program.

    Question 2. As someone who came out of the corporate world, I can 
appreciate the importance of making sound investments in technologies. 
Is the cap and trade system in Clear Skies as cost-effective at 
reducing pollution as other approaches?
    Response. No. The pollution cap levels and schedules in the Clear 
Skies legislation are not as cost-effective at reducing pollution as 
other approaches for two fundamental reasons--the weak control levels 
and extended control schedules. Moreover, the legislation is less cost-
effective than other approaches, including the current Clean Air Act, 
using two different measures of cost-effectiveness.
    First, the bill stops well short of requiring feasible pollution 
control measures for power plants, allowing utilities to pollute well 
in excess of feasible control levels and well in excess of levels 
necessary to achieve timely public health standards. This is a 
consequence of the legislation's weak caps, i.e., the pollution levels 
at which the bill allows the electric utility sector to continue to 
pollute for the next two decades and beyond. This is discussed at 
greater length below.
    Second, in addition to refusing to impose feasible control measures 
on power plants, the legislation adopts unjustifiably extended 
timelines for requiring pollution cuts from power plants. This means 
that SO2 and NOx emissions reductions would be too little, 
too late to provide meaningful assistance to states required to meet 
public health standards for 8-hour ozone and PM2.5 by 2009 
and 2010, respectively. States would be forced to require more 
expensive, less feasible reductions from other industries and sources, 
and some would find it very difficult to meet deadlines to provide 
healthy air for their citizens.
    In effect, by taking more cost-effective pollution reductions from 
power plants off the table--by granting them more drawn out compliance 
deadlines and weaker pollution reduction obligations--the legislation 
saddles states, localities, other industries, the transportation sector 
and, ultimately, the public with less cost-effective options for 
meeting essential public health objectives.
    This outcome concerns the first measure of cost-effectiveness that 
the legislation fails--the measure of relative feasibility. By 
foregoing more cost-effective and feasible pollution reductions from 
power plants, the consequence is to impose less cost-effective, less 
feasible control obligations about other sources of air pollution.
    To better understand the question of cost-effective emissions 
reductions from power plants, and to compare those to less cost-
effective emissions reductions from other industries and sources to 
which states and localities would be forced to resort, I am attaching 
to these responses comments filed by a coalition of public health 
organizations on EPA's Proposed Rule to Reduce Interstate Transport of 
Fine Particulate Matter and Ozone (Interstate Air Quality Rule), 69 
Fed. Reg. 4566 (January 30, 2004).\1\
---------------------------------------------------------------------------
    \1\ Clean Air Task Force et al., ``Comments on Proposed Rule to 
Reduce Interstate Transport of Fine Particulate Matter and Ozone 
(Interstate Air Quality Rule), 69 Fed. Reg. 4566 (January 30, 2004),'' 
(``IAQR Comments''), April 2, 2004.
---------------------------------------------------------------------------
    As explained in those comments, in its 1998 NOx SIP Call 
rulemaking, EPA determined an appropriate level for reductions of 
regional NOx emissions by examining the cost-effectiveness of feasible 
control measures.\2\ EPA determined that ``highly cost-effective'' 
controls were those with a cost-effectiveness (measured in terms of 
average cost per ton of pollutant removed) equivalent to or slightly 
greater than that of controls that had already been implemented or 
planned, while achieving the greatest feasible emissions reductions.
---------------------------------------------------------------------------
    \2\ NOx SIP Call ,63 Fed. Reg. at 57399-402.
---------------------------------------------------------------------------
    Specifically, EPA determined in the NOx SIP Call that ``highly 
cost-effective'' controls were those that ``achieve the greatest 
feasible emissions reduction but still cost no more than $2,000 per ton 
of ozone season NOx emissions removed (in 1990 dollars), on average.'' 
\3\ EPA determined the $2,000/ton average cost figure based on ``NOx 
emissions controls that are available and of comparable cost to other 
recently undertaken or planned NOx measures.''\4\
---------------------------------------------------------------------------
    \3\ 63 Fed. Reg. at 57399.
    \4\ 63 Fed. Reg. at 57400.
---------------------------------------------------------------------------
    The proposed Interstate Air Quality Rule's (now called Clean Air 
Interstate Rule) establishes eastern regional caps for SO2 
and NOx that approximate Clear Skies' eastern regional caps for these 
pollutants. And the proposed CAIR caps result in SO2 control 
levels costing between $700 and $800 per ton on average, and NOx 
control levels costing between &700 and $800 per ton on average.\5\ 
Accordingly, there is reason to believe that the average control costs 
by utilities for SO2 and NOx reductions under Clear Skies 
would be comparable.
---------------------------------------------------------------------------
    \5\ See IAQR Comments at 11-12.
---------------------------------------------------------------------------
    But control levels for NOx and SO2 with average costs in 
the range of $700-$800 clearly do not achieve the ``greatest feasible 
emissions reductions.'' These cost figures are substantially less than 
what EPA determined to be highly cost effective 7 years ago; 
substantially less than the average cost effectiveness of other NOx 
control measures examined by the agency 7 years ago (63 Fed. Reg. at 
57400, Table 1); substantially less than the average cost of other 
control measures identified by EPA in its CAIR proposal (69 Fed. Reg. 
at 4613-4615); and even more substantially less than numerous other 
measures that public health groups identified and that states have 
either adopted or are proposing to adopt.\6\
---------------------------------------------------------------------------
    \6\ In fact, EPA states: ``These reductions are among the lowest 
cost EPA has ever observed in NOx control actions . . .'' 69 Fed. Reg. 
at 4614. Such reductions clearly come nowhere near to representing the 
``greatest feasible emission reduction'' as required by controlling 
Clean Air Act precedent and policy.
---------------------------------------------------------------------------
    If the Clear Skies legislation were based upon the ``highly cost-
effective'' criteria in EPA's NOx SIP Call rulemaking--an approach 
ratified by the United States Court of Appeals for the D.C. Circuit--
that approach would lead to a determination that ``highly cost-
effective'' controls are those that achieve the ``greatest feasible 
emission reductions'' \7\ but cost on average up to $2,000 per ton of 
SO2 removed and up to $2,500 per ton of NOx removed.\8\ This 
would yield regional annual control caps for power plants of 1.84 
million tons for SO2 and 1.04 million tons for NOx, well 
within these limits for highly cost-effective controls. Based on the 
relative percentage of national 2002 power plant NOx and SO2 
emissions that were within the IAQR, the recommended regional caps are 
equivalent to a 2.0 million ton national SO2 cap, and a 1.25 
million ton national NOx cap--well below the lax SO2 and NOx 
pollution caps reflected in S. 131.\9\
---------------------------------------------------------------------------
    \7\ NOx SIP Call, 63 Fed. Reg. at 57399: ``[T]he required emission 
levels . . . were determined based on the application of NOx controls 
that achieve the greatest feasible emissions reductions while still 
falling within a cost-per-ton-reduced range that EPA considers to be 
highly cost-effective.''
    \8\ Unless otherwise noted, all cost figures are in 1999$.
    \9\ Section V of the IAQR Comments contains a Clean Air Task Force 
analysis of the costs and benefits of a similar alternate control 
scenario.
---------------------------------------------------------------------------
    In effect, the Clear Skies bill short changes emissions reductions 
from power plants that should be considered the greatest feasible 
emissions reductions, based upon s refusal to require greater but 
eminently feasible SO2 and NOx reductions to better protect 
public health.
    The other side of the feasibility coin in the zero sum calculation 
of air pollution controls is the question of the cost-effectiveness of 
other state and local control measures--beyond power plant controls. 
The failure of the Clear Skies legislation to require the greatest 
feasible emissions reductions that are highly cost effective would 
force state and local jurisdictions to resort to control measures with 
average costs far in excess of the $700-800 average cost per ton of 
SO2 and NOx reductions. The following representative sample 
of control measure costs demonstrates the degree to which S. 131 would 
saddle state and local air pollution control agencies with far greater 
cost impositions on local businesses, while still failing to ensure 
that attainment of public health standards would be achieved as 
expeditiously as practicable:

        TEXAS EMISSION REDUCTION PLAN (TERP)--INCENTIVES GRANTS 
                       FOR REDUCING EMISSIONS\10\

---------------------------------------------------------------------------
    \10\ Texas Natural Resource Conservation Commission. Texas Emission 
Reduction Plan (TERP)--Incentives Grants for Reducing Emissions. 
Projects Selected for Funding to Date: http://www.tnrcc.state.tx.us/
oprd/sips/grants.html.
---------------------------------------------------------------------------
     The Texas Council of Environmental Quality's Emissions 
Reduction Inventive Grants Program provides grants to eligible projects 
in nonattainment areas and affected counties. The grants offset the 
incremental costs associated with reducing emissions of NOx from high-
emitting internal combustion sources.
     Cost-effectiveness of a project, other than a 
demonstration project, may cost up to $13,000 per ton of NOx emissions 
reduced in the eligible counties for which the project is propose. 
Infrastructure activities are excluded from the $13,000 per ton cost-
effectiveness limit.

------------------------------------------------------------------------
                                             Projected Project Cost Per
                                                  Ton NOx Reduction
------------------------------------------------------------------------
Grants Projects FY 2002-2003..............  Majority of projects $6,000
                                             to $12,118.
Eligible Application Recommended for        Majority of projects $11,000
 Funding FY 2004--1st Round.                 to $12,998.
------------------------------------------------------------------------

                  WASHINGTON DC METRO AREA--MWCOG\11\
---------------------------------------------------------------------------
    \11\ Metropolitan Washington Council of Governments. http://
www.mwcog.org/uploads/committee-documents/z1ZZXg20040217144350.pdf.
---------------------------------------------------------------------------
ANALYSIS OF POTENTIAL REASONABLY AVAILABLE CONTROL MEASURES (``RACM''): 
                   AREA, NON-ROAD, AND MOBILE SOURCES

     The cost to an affected area of any alternative emissions 
reduction program to offset internal combustion stationary sources 
significantly exceeds the cost to the stationary source of the 
equivalent emissions reduction. The potential emissions reduction of 
RACM projects may not exceed that of high-emitting stationary sources.
     Projects Determined to be ``Economically Feasible'' or 
``Possible'' by MWCOG:

------------------------------------------------------------------------
                                                            Cost ($/ton
          Source Category                  Measure             NOx)
------------------------------------------------------------------------
Area Sources:
  L1..............................  Control Locomotive            $1,250
                                     Idling.
  G6..............................  Preference for low-            7,238
                                     emissions lawn &
                                     garden equipment.
  S4..............................  Reduce idling by               3,155
                                     airport GSE.
Mobile Sources:
  B6..............................  Bicycle Racks in DC.           9,017
  E3..............................  Telecommuting                  7,279
                                     Centers.
  E10.............................  Government Actions             5,030
                                     (ozone action day
                                     similar to snow
                                     day).
  F3..............................  Permit Right Turn on           1,245
                                     Red.
  O4..............................  Employer Outreach              3,542
                                     (Private Sector).
  O6..............................  Mass Marketing                 2,393
                                     Campaign.
  T1..............................  Transit                        8,480
                                     Prioritization.
------------------------------------------------------------------------

    Finally, EPA has reviewed potential applications of local controls 
of PM precursor emissions to determine the extent to which such 
controls could solve the ozone and PM2.5 nonattainment 
problems.\12\ As part of that analysis, EPA listed a variety of control 
measures, and in some cases, their costs, that it believed would be 
appropriate to model for their air quality impact.\13\ In the 290 
county study, EPA listed a variety of local NOx control measures with 
costs ranging from $150/ton to $10,000/ton NOx removed.\14\ The 
emission-weighted average cost per ton of the measures for which costs 
are listed is about $2,545/ton, consistent with the position that 
regional NOx controls with average costs below $2,500 per ton be 
considered highly cost effective.
---------------------------------------------------------------------------
    \12\ 69 Fed. Reg. at 4596-99; EPA's Technical Support Document for 
the IAQR Air Quality Modeling Analyses (January 2004) (``AQMTSD'') at 
46-56, App. I-L.
    \13\ Id.
    \14\ In EPA's study of local measures in the IAQR, it listed 
several local SO2 reduction measures, but did not provide 
costs for any of them.
---------------------------------------------------------------------------
    A second measure of cost-effectiveness that the legislation also 
fails is one concerning net social benefits. As explained at pages 13-
14 of my February 2, 2005 written testimony, without conceding the 
fundamental concern with expressing human deaths and adverse health 
effects in monetary terms, as of 2020, the public health costs of the 
Administration's bill exceed those of EPA's original proposal by $61 
billion per year.\15\ Moreover, the EPA proposal's public health 
savings come at the relatively small annual price of $3.5 billion in 
implementation expenses.\16\ In other words, the Administration is 
promoting a bill that--as of 2020--costs the public $15 for every $1 
saved by industry. Plainly, much more protective pollution caps would 
still provide net social benefits and would be more cost-effective for 
society than the lax and delayed pollution reduction levels in S. 131.
---------------------------------------------------------------------------
    \15\ U.S. EPA, ``Comprehensive Approach to Clean Power: Straw 
Proposal and Supporting Analysis for Interagency Discussion'' (Aug. 3, 
2001), available at http://www.catf.us/publications/other/
EPA_Straw_Proposal.pdf.
    \16\ Id.

    Question 3. Clear Skies proposes giving many industries a free pass 
when it comes to reducing hazardous air pollutants--some of them known 
to cause cancer. What impacts do you foresee from this drastic retreat 
from Clean Air Act protections?
    Response. The Clear Skies legislation marks the first time in the 
35-year history of the Clean Air Act that a bill in Congress has sought 
to allow industrial polluters to escape air toxics regulations already 
adopted by the Environmental Protection Agency, here Maximum Achievable 
Control Technology (MACT) standards. Worse, the legislation does so 
without substituting any mandatory regulation for the air toxics 
pollution (except mercury) that the bill allows to escape regulation. 
Finally, for the first time in the Act's history, a Congressional bill 
would allow weak reductions in criteria air pollutants (SO2 
or NOx) to serve as the basis for emitting higher levels of 
uncontrolled hazardous air pollution, including probable carcinogens.

And S. 131 does so for not just one industrial source category, but 
four:

     Industrial, Commercial, and Institutional Boilers and 
Process Heaters (69 Fed. Reg. 55217);
     Plywood and Composite Wood Products (69 Fed. Reg. 45943);
     Reciprocating Internal Combustion Engines (69 Fed. Reg. 
33473); and
     Stationary Combustion Turbines (69 Fed. Reg. 10511).\17\
---------------------------------------------------------------------------
    \17\ S. 131, Sec. 407(j)(1)(A).
---------------------------------------------------------------------------
    From these four industrial source categories, the Administration's 
bill exempts as many as 69,000 industrial units from the Clean Air 
Act's mandate of deep emissions reductions by 2008.\18\ The result is 
to override the removal of as many as 74,000 tons-per-year of toxic and 
even carcinogenic chemicals from the air we breathe.\19\
---------------------------------------------------------------------------
    \18\ Id.
    \19\ See http://www.epa.gov/ttn/atw/rice/ricefactsheetfnl.pdf; /
boiler/bolersfactsheetfnl.pdf; /plypart/plywoodfactfinal.pdf; turbine/
turbine_fs.pdf.
---------------------------------------------------------------------------
    The following information is taken from EPA fact sheets issued with 
the promulgation of these four rules. These fact sheets provide EPA 
estimates of the number of current and future industrial units covered 
by the rules, as well as the nature and amount of hazardous air 
pollution (HAP) regulated. Critically, these fact sheets also provide 
estimates of the health benefits that EPA assigned to these 
rulemakings. Depending upon the extent of participation by industrial 
units that avail themselves of the air toxics regulatory relief in S. 
131, virtually all of these health benefits could be lost, and 
virtually all of the toxic air pollution emitted by these tens of 
thousands of industrial units could escape regulation.
 industrial, commercial, and institutional boilers and process heaters
    EPA estimates that 58,000 existing boilers and process heaters, and 
800 new boilers and process heaters built each year over the next 5 
years will be subject to this final rule.
    This rule reduces emissions of a number of toxic air pollutants, 
including hydrogen chloride, manganese, lead, arsenic and mercury, by 
more than 58,000 tons annually in the fifth year after promulgation.
    This rule also reduces emissions of sulfur dioxide and particulate 
matter in conjunction with the toxic air pollutant reductions. This 
rule may result in 2,270 fewer premature deaths, 5,100 fewer cases of 
chronic bronchitis, reduced hospital admissions for pneumonia, asthma 
and cardiovascular problems. It may also result in 150,000 fewer 
respiratory incidences in children, lost work days, and restricted 
activity days for people with respiratory problems.

http://www.epa.gov/ttn/atw/boiler/boilersfactsheetfnl.pdf

                  PLYWOOD AND COMPOSITE WOOD PRODUCTS

    EPA estimates that about 220 plywood and composite wood products 
facilities are major sources of air toxics.
    The rule will reduce air toxics from the manufacturing of Plywood 
and Composite Wood Products (PCWP) by between 6,600 and 11,000 tons per 
year, or a 35 to 58 percent decrease from 1997 levels. The final rule 
will also reduce volatile organic compound emissions by between 14,000 
and 27,000 tons per year, or a 28 to 52 percent decrease from 1997 
levels.

http://www.epa.gov/ttn/atw/plypart/plywoodfactfinal.pdf

               RECIPROCATING INTERNAL COMBUSTION ENGINES

    EPA estimates that approximately 8,120 new stationary RICE will be 
built at major sources of air toxic emissions by the end of the 5th 
year after this rule takes effect. In addition, about 1,800 existing 
stationary RICE located at major sources may potentially be subject to 
the rule.
    The final rule will reduce emissions of a number of toxic air 
pollutants such as formaldehyde, acrolein, methanol, and acetaldehyde 
by 5,6000 tons in the fifth year after promulgation. These pollutants, 
also known as air toxics, are known or suspected to cause adverse 
health and environmental effects. Formaldehyde and acetaldehyde are 
probable human carcinogens.

http://www.epa.gov/ttn/atw/rice/ricefactsheetfnl.pdf

                     STATIONARY COMBUSTION TURBINES

    EPA estimates that 9 new stationary combustion turbines will be 
built each year over the next 5 years and will be subject to the final 
rule.
    The final rule will provide improvements in protecting human health 
and the environment by reducing air toxic emissions 98 tons per year in 
the 5th year after the rule is final. The air toxics reduced are listed 
below:

Pollutant Emission Reductions Percent Reduction (in 5th yr after 
promulgation) (after controls are installed)

Formaldehyde 67 tons, 90 percent
Toluene 17 tons, 90 percent
Acetaldehyde 11 tons, 90 percent
Benzene 3 tons, 90 percent

http://www.epa.gov/ttn/atw/turbine/turbine_fs.pdf

    One additional observation bears mention. Of the four MACT source 
categories above that are eligible for regulatory relief in S. 131, at 
least three involved rulemakings where industry lobbyists were urging 
EPA and the Office of Management and Budget to adopt unlawful ``risk-
based exemptions'' from MACT standards.\20\ Industry was successful in 
persuading the Bush administration to adopt these harmful and illegal 
exemptions in the final MACT standards for Industrial, Commercial, and 
Institutional Boilers and Process Heaters, and Plywood and Composite 
Wood Products. The result of these exemptions is that thousands of tons 
of hazardous air pollution (HAP) would escape into the air we breathe, 
uncontrolled, when the Clean Air Act requires these pollutants to be 
minimized with advanced pollution control technology. EPA declined to 
adopt the same risk-based exemptions for the final Reciprocating 
Internal Combustion Engines MACT standard.
---------------------------------------------------------------------------
    \20\ See, e.g., ``EPA Relied on Industry for Plywood Plant 
Pollution Rule,'' Alan C. Miller & Tom Hamburger, L.A. Times (May 21, 
2004).
---------------------------------------------------------------------------
    Because these exemptions are plainly contrary to the language, 
structure, purposes and legislative history of the technology-based 
MACT program adopted by Congress in the 1990 Clean Air Act Amendments, 
NRDC and Earthjustice are currently challenging the two final rules 
that contain these exemptions in the U.S. Court of Appeals for the D.C. 
Circuit.
    Accordingly, S. 131 represents a blatant attempt to override those 
lawsuits before the judicial branch has the opportunity to review the 
lawfulness of EPA's actions. Worse, S. 131 would not simply override 
legal challenges by the public to illegal EPA rule exemptions; the 
legislation would allow tens of thousands of industrial polluters to 
escape HAP regulation altogether, going well beyond EPA's unjustified 
and unlawful exemptions. All without any risk determination, without 
any substitute HAP regulation for non-mercury HAPs, without any logical 
linkage to the putative power plant control purposes of S. 131--
ultimately, without any announced justification in the Congressional 
record for this legislation.
    Finally, it bears noting in conclusion that neither the bill's 
proponents or administration officials have provided data or analytic 
support--at least publicly--to explain or justify the impacts of these 
exemptions from already adopted protections against hazardous air 
pollution. The technical supporting documents for the legislation, 
which include the only assessment of health and environmental effects 
by the administration that we are aware of, were published in July of 
2003, 4 months before the regulatory relief from HAP protections for 
opt-in units first appear in Clear Skies legislation (S. 1844) and 7 
months before the appearance of the current iteration of this provision 
in S. 131.\21\
---------------------------------------------------------------------------
    \21\ ``The Clear Skies Act Technical Support Package'' is available 
at http://www.epa.gov/air/clearskies/03technical_packagetofc.pdf.
---------------------------------------------------------------------------
    Accordingly, the best information available concerning the public 
health and environmental impacts of the opt-in MACT exemptions comes, 
first, from a facial reading of the vast regulatory relief that the 
bill would authorize; and second, from EPA's own estimation of the 
total amount of HAPs controlled by these four rules, as well as the 
tremendous health benefits that these rules will deliver when fully 
implemented. On the basis of that information, the impacts from this 
drastic retreat from Clean Air Act protections could be devastating.
    The environmental and public health organization Earthjustice has 
produced a series a of fact sheets that use publicly available EPA 
information to produce state-level snapshots of the number of 
facilities that could be eligible for this opt-in provision. I am 
attaching these fact sheets to my responses.
    Using the listings of potentially regulated industries found in the 
final MACT rules noted above, and EPA's Enforcement and Compliance 
History Online (ECHO), Earthjustice determined that as many as 12,814 
facilities nationwide could be eligible for the opt-in provisions' 
regulatory relief, should it become law. At the state level, the 
organization found that as many as the following numbers of facilities 
in these states could be eligible for the bill's regulatory relief: 777 
facilities in California, 83 facilities in Connecticut, 511 facilities 
in Illinois, 438 facilities in Louisiana, 53 facilities in Montana, 220 
facilities in New Jersey, 347 facilities in New York, 35 facilities in 
Rhode Island, 1,021 facilities in Texas, and 16 facilities in Vermont. 
S. 131's regulatory relief would permit uncontrolled air toxic 
emissions (other than mercury) from affected units at those 
facilities.\22\
---------------------------------------------------------------------------
    \22\ For the purposes of estimating the number of potentially 
eligible facilities, Earthjustice only considered major sources. 
Enforcement and Compliance History online available at http://
www.epa.gov/echo/
---------------------------------------------------------------------------
    Earthjustice also used EPA's Toxic Release Inventory (TRI) data 
from 2002 to assess the quantity of toxic emissions reported by 
potentially regulated industries from the four relevant industrial 
source categories. Since the TRI data base contains emissions data at 
the facility level and not the unit level, this information does not 
purport to estimate the potential effect of the opt-in provision on the 
basis of unit participation. The data does demonstrate, however, that 
the potentially regulated industries that could escape air toxics 
regulation should S. 131 become law, are major contributors to toxic 
air pollution in this country. 2002 TRI data show that nationwide, 
potentially regulated industries under the four source categories 
affected by S. 131's opt-in provision reported more than 1.2 billion 
pounds of point source toxic air emissions. These are the very 
industries that should be doing more to control their toxic emissions--
as EPA founded in adopting rules to cover their toxics pollution--and 
not less, as S. 131 would allow.

    Question 4. My entire home State of New Jersey was recently 
declared ``out of attainment'' for nitrogen oxides, which help form 
ozone and damage lungs--especially of kids. Do you believe this bill 
will improve New Jersey's air quality?
    Response. This bill will not improve New Jersey's air quality 
compared to the timelier, better air quality improvements that New 
Jersey would experience from EPA and the states simply enforcing the 
Clean Air Act that we have today. This legislation delays the timelines 
and dilutes the rigor of pollution control measures that otherwise 
would apply to SO2 and NOx pollution from dirty coal-fired 
power plants located upwind of New Jersey, pollution that causes and 
contributes to New Jersey's ozone nonattainment problems.
    In other words, this legislation is worse for New Jersey and the 
country than the current Clean Air Act. Enforcing the current Clean Air 
Act will better protect Americans, and do so more quickly and cost-
effectively, than going backwards with the Clear Skies legislation.
    My February 2nd written testimony details the numerous and varied 
ways in which S. 131 weaken and delays more protective air pollution 
control measures currently afforded--and mandated--by the current Clean 
Air Act. These protections run the gamut from better protections 
against local smog and soot pollution contributing to nonattainment; 
protections against transported air pollution from upwind source, an 
especially critical concern for New Jersey; stronger protections 
against acid rain; more rigorous and timely protections against mercury 
poisoning and other hazardous air pollution; and better safeguards for 
visibility and ecosystem health in national parks and wilderness areas.

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     Presentation by Quin Shea, Senior Director for Environmental 
                 Activities, Edison Electric Institute

    Mr. Shea. What I want to share with you are some insights based on 
the work that I do every day and in the last couple months particularly 
so at the White House with key staff there that are working on the 
energy policy development task force, that are working on some of these 
EPA regulatory programs, and give you some thoughts as to what is going 
on behind the scenes to supplement maybe what you're reading in the 
newspapers. I think you'll find it interesting.
    Obviously, electricity and economic growth, linked. Almost, you 
know, right across the board for the last 30 years. We know that. It's 
a matter of fact of life. Electric drives the economic engine in the 
U.S. And demand of anything is going up. Jan mentioned that DOE--and 
these are rather conservative forecasts in my opinion--is estimating 
that we're going to need about 393,000 megawatts over the next 20 
years. And that's right, if you think about it, based on what we're 
using today, approximately 850,000 megawatts for total generation, 
close to 700,000 just in the utility sector. We're looking at between a 
50 and a 60 percent increase in the amount of generation that we're 
going to need over the next 20 years.
    Ladies and gentlemen, that is a lot of juice. And we do not have 
the ability right now in my industry to produce that. And there are a 
lot of impediments. California is perhaps the best example, but it's 
not the only one. I'm actually quite afraid when I'm listening to a 
number of our CEOs talk, that they know for a fact and there's nothing 
that they or the administration can do about it, that we're looking at 
extensive blackouts this summer in California and perhaps other parts 
of the country. It's very disheartening. And it is going to happen. And 
the underlying cause is the fact that we do not have sufficient 
capacity and generation in this country, we do not have sufficient 
infrastructure to allow for the transmission of power. And we need to 
have it.
    Now, as to fuel choice, obviously, my numbers will burn anything, 
up to and including dirty socks if it's economic and they can do it. It 
doesn't matter if it's nuclear, or if it's hydro, or if it's coal or if 
it's gas. I can tell you emphatically, not just being an old coal guy 
myself, that we want to burn more coal. We desperately want to burn 
more coal. We've got over 30 plants that were announced in the last 
year. Some of those I think are at risk for some of the issues that I'm 
going to get into.
    Coal is cost effective. Working with the Vice President, we're 
hoping that the market share goes up, we want it to go up as the fuel 
of choice. There simply isn't the gas out there to provide base-load 
generating capacity. Not a week goes by where I don't get a call from 
some of the industrials, the chlorine industry, the copper industry, 
saying they cannot compete, they cannot buy the electricity, because 
we're buying it all in the electricity industry or in the utility 
industry. And that's true.
    Now, you've already seen a number of iterations of this, the pie 
chart on fuel mix. Some call it sort of energy balance, and I call it 
fuel diversity. That's sort of the term of art that's used within the 
administration, fuel diversity. Again, I will reiterate what other 
people said. That is a good thing. The fact that you've got these 
different types of fuels, particularly in different parts of the 
country, is incredibly important. And it actually helps coal's case.
    Another handout that was over there was a one-page map of the 
United States depicting sort of the fuel choice by area of the country. 
That's very important. You obviously have the parts of the country 
where coal is the predominant source. Others like in the northwest 
where it's hydro. Take a good look at that. The underlying point there 
is you can't screw around with the generation mix in certain parts of 
the country, because it would be disastrous.
    Here's what you already know. It's out there. Coal is our friend. 
We know how to get it. We can do it cheaply. We can bring it to market. 
Abundant, affordable, reliable, increasingly clean. You'll hear me say 
that a couple times. You'll hear the administration use those terms 
quite a bit.
    Bottom point here actually applies to many of you in the room. We 
can bring it to market very effectively through our partners in the 
rail industry. Increasingly clean. This is a little tough to see, but 
again you have in your handout--again, as Jan and other speakers have 
mentioned, emissions are coming down. They're coming way down.
    What actually is not on this particular chart, we can also show 
that particulate matter emissions are coming way down. And now that 
we're moving into an area where we're looking at potential air toxics 
regulations for coal-fired generation, it's interesting to note that 
just through the application of existing controls on our facilities, 
whether it's scrubbers for SO2, low NOx burners or selective 
catalytic reduction for NOx, or precipitators for PM, we're getting 
about 40 percent of the mercury that's emitted from coal generation 
right now without doing anything else. Forty percent. The same for some 
of the other metals that are in the coal content. That actually is a 
piece of good news with respect to the pending mercury controls that 
we're looking at in the next few years.
    Now, the general outlook. I've got a lot of environmental concerns 
and I'm going to touch on a couple of the big ones in a second. These 
are a big, big deal. For those of you that work on sort of the negative 
side of the equation within your companies, not out there generating 
product and making sales, but trying to keep as much as possible of 
that from going away. Like in the environmental area, we work on--it's 
not a very glorious side, but we're trying to help. We've got some 
serious, serious problems. And they haven't gone away, even with the 
change in administration. Very important point. All right.
    Here, in my opinion, are sort of the main points that are coming 
through, when we have discussions with Andrew Lundquist, who heads the 
Vice President's energy policy task force at the staff level. Larry 
Lindsay, who's one of the President's principal economic advisors, 
Mitch Daniels, who heads the office of management and budget. These are 
the terms or the phrases that come out over and over and over again. 
When the energy policy task force report is issued in mid-May, you're 
going to see a lot of this in there.
    Diversity of fuels, new technology options, appropriate incentives 
for electricity generation. A lot of interesting things in there. Up 
and including possible tax relief. Develop and commercialize clean coal 
technologies and provide funding for coal R&D. I can give you an 
example of Senator Byrd's bill, the national electricity and 
environmental technology act, or F-60. These things are going to be in 
there, guaranteed.
    Now, you're also going to see a lot of words devoted to 
environmental policy. Now, the President's getting some opposition. 
Certainly among his staff and certainly within our party; the 
Republican party, about how much environmental stuff should be in this. 
He has argued, as have a number of his close advisors, that the two are 
inexorably intertwined. You cannot move forward on a national energy 
policy without taking into account where we are on environmental 
policy. It's very clear from his letter to the U.S. Senate on March 
13th which is the horse and which is the cart. Energy policy is going 
to drive the two in his administration, but he is going to include some 
addressing of environmental policies.
    Now, here are the points that you're going to see. Rely on sound 
science and verifiable health benefits. I love this one. Everyone knows 
what we went through over the last 5 or 6 years on the national ambient 
air quality standards. We had EPA coming out and saying 100,000 
children are at risk, or the elderly, for premature mortality. They're 
going to die in the streets from the fine particulate matter that's 
being emitted from coal-fired generation. Well, guess what? Six months 
later that number had become 75,000, then it was 65,000, then it was 
50,000, then it was 35,000, then it was 20,000, and now it's 15,000.
    Folks, these are just numbers. These are just numbers. They're 
scary numbers. They're used provocatively by those, particularly in the 
public health and environmental communities. They scare people. They've 
scared my grandmother. She's 97 and said, what is going on? I said, 
Gram, this is wrong. Plus, it's a premature mortality. If you die a day 
early, you're a statistic. She said, oh, OK. She didn't really 
understand, but she sort of got it that I was taking care of it and it 
wasn't a problem.
    Beware of these numbers. Verifiable health benefits. It's very 
important. Consider fuel costs. There's the link to energy policy. The 
environmental section is going to have a strong linkage to energy 
policy. Practical compliance deadlines. If we're going to set hard 
targets for reductions of different things, give us a reasonable amount 
of time to do it. Don't stick us with a deadline that's impractical or 
is effectively technology forcing or will cause fuel switching, because 
we can't meet it in an appropriate amount of time. That will not happen 
over the next few years.
    Reasonable certainty for investments. Do not tell me to do 
something today where I have to and plug in this widget or bolt on this 
piece of equipment and 2 years later it's effectively a stranded 
environmental requirements with a couple of new ones. Don't do that to 
me. Give me some certitude for investments along with those reasonable 
compliance schedules.
    Give states appropriate flexibility. This is a big one. You've got 
a Governor, you've got a lot of folks in the administration with state 
background. My opinion over the last 8 years we've seen a serious 
erosion in the so-called Federal-state partnership. A lot of these 
rules and regulations, whether they're health or environment, the big 
ones that you have to deal with every day are supposed to be 
implemented by the states. Sometimes without any money, and we call 
that an unfunded mandate. But in any event, there's supposed to be a 
balancing of power there. That hasn't occurred. There has been a steady 
erosion. We've got Big Brother basically telling the states what to do 
on most of these environmental issues. That's got to change. And it 
will change.
    Now, specific policies initiatives. Here are the big daddies, in my 
opinion. These are the issues, maybe there's 20 or 30, crossing the 
water area, the solid waste area, the air area and, of course, climate 
change that we all work on on any given day. These are the big ones. 
These are the coal killers. These are the ones that we need relief on 
and I'm actually fairly optimistic about.
    New source review. You can't help but have heard about this one, 
because basically we've had a reinterpretation of this entire program 
that EPA administers that does not allow our plants to conduct routine 
maintenance and repair. Now yeah, they're going to run the risk of 
violating the law and looking at penalties and possibly jail time for 
CEOs because they're not going to cutoff the power to the elderly 
citizens in Chicago in the middle of July or August. That's not going 
to happen. But this particular rule is the largest impediment to making 
changes, basic changes at plants. It's an impediment to environmental 
progress. It's an impediment to safety, worker safety. And ironically, 
the fact that it doesn't allow us to make efficiency improvements at 
our plants, ironically, it also doesn't allow us to do projects that 
could be a CO2 beneficial.
    I will point outside that this change started occurring in 1996, 
and then in earnest in 1998 when EPA tried to do away with the so-
called wet pro rule, which allows us some safety on new source review. 
I was at EPA for 4 years. I worked in the enforcement program. I was 
the chief of staff to the then-assistant administrator Jim Straff, who 
then went to California. I was very zealous at my job. We both had cots 
at our office. You can call that insane. We worked very hard. We used 
every enforcement tool in the tool kit available to us. So did our 
colleagues at Justice.
    Nowhere, nowhere in the deepest recesses of our gray matter did it 
ever occur to us that we could so warp the new source review program to 
do what was done in roughly 1998. This is going to change in the next 
few months. I guarantee it.
    Mercury. All right. Also on a substantive matter, we've talked 
about Kyoto a lot. That's been out there. It's the big boogie man in 
the last few years. Kyoto is dead. Kyoto is absolutely dead. It's not 
going to happen. We're taking steps right now to reverse every piece of 
paper that EPA has put together where they could call CO2 a 
pollutant under the Clean Air Act. That's going to be nailed down in 
the next few months.
    Internationally, the U.S. is not going to work on Kyoto. It is 
dead. For those of you, not you specifically, but for those who want to 
continue to beat that dead horse, let me tell you right now, there will 
be no equine resurrection here. Now, having said that, mercury, in my 
opinion, is very Kyoto-like in its potential impacts. Mercury to me is 
the issue that scares me the most of the ones that are out there right 
now.
    EPA had a regulatory determination in December of last year, 
another 11th hour initiative, where they basically determined, as they 
were supposed to, whether there would or would not be a mercury 
rulemaking over the next few years. And there will be. Could have been 
two paragraphs long. Instead, EPA went ahead of the multi-year process 
that will result in a program, basically prescribed the regulatory 
approach that we're going to have to comply with several years down the 
road. They did that now, before we've gone through rulemaking, public 
review and comment, before EPA builds a technical record. They did it 
now.
    Coincidentally, by virtue of having selected that particular 
approach, maximum achievable control technology, they also triggered 
another part of Title 3 of the Clean Air Act that means that any new or 
reconstructed coal-fired unit must go through what is called case-by-
case MACT review for mercury, and possibly other air toxics.
    The punch line of that, the 4 to 5 sometimes 6 years that you 
normally count on for permitting, procuring materials and then 
constructing a new coal-fired unit, start at adding a year, maybe 18 
months, maybe more. Of those 30 new coal-fired plants that were 
announced, a lot of them will never be built because my CEOs will 
figure out that it's not cost effective. They'll look for a way to do 
something else even though they don't want to. And it's because of 
mercury. Mercury is the killer.
    Harmonize conflicting compliance deadlines for implementation of 
the NOx rules. Not that big of a deal out west, you say. It's mostly a 
battle of the states, Midwest versus the Northeast. It all comes down 
to, well, we're going to do the NOx reductions, but what timeframe? And 
we're going to fix this one in the next few months, as well, we're 
going to get the more reasonable timeframe. Why should it be a big deal 
for you? I'll tell you why. Because the logical next step for NOx 
related programs nationally will be to take what is roughly now the 
Mississippi River border where these new controls are applying east, 
those are going to move west. That's going to happen. There is going to 
be a truing up of national NOx reduction programs probably within the 
next couple of years on this President's watch.
    Provide states with greater flexibility on regional haze. I think 
most everyone in this room is probably an expert on this issue. Terry 
Ross and others have worked on this very, very hard. It will be with us 
for a while. You know that a regional haze program, which is intended 
alleviate basically secondary impacts, visibility, can actually be more 
onerous than the particulate matter national ambient air quality 
standard. Finally, support programs for voluntary reductions of 
greenhouse gas emissions and technology solutions. Another very 
important footnote. Listen to this very carefully. Now, in the March 
13th letter to the Senate, the President made it very clear that he 
didn't support Kyoto, and if you read between the lines, we're going to 
be unraveling everything that Kyoto was based on. That's going to 
happen.
    But the President did two other things once we sort of came off of 
our cloud of euphoria. He committed to some kind of CO2 
program, a voluntary program. Think about that. Some day we're going to 
have to figure out what that means. He also talked about a multi-
pollutant strategy for further SO2 and. NOx reductions 
beyond what are required right now, as well mercury. He made that 
commitment.
    In two successive cabinet meetings following the issuance of that 
letter, he told his cabinet, you will do this. He's not backing away 
from that. We're going to have those reductions. We're going to have a 
voluntary program.
    This is not going to thrill some of you when I say that the utility 
industry right now is putting together a very comprehensive near-term-
reduction CO2 voluntary program. CEOs are working on this 
right now. I was actually showing a draft to a couple folks here like 
Greg Schaefer, just to see if I could survive the swing test, which is 
the right across to the nose.
    And what I'll say here is since the mid 1990s, EEI and the 
utilities have already had a voluntary program in place that has 
resulted in over 170 million metric tons of carbon being retired. We do 
it with DOE, not EPA. It's not regulatory, it's voluntary. There's 
going to be a next generation of this. We're working very closely right 
now with folks at the White House in putting this program together.
    Let me put it to you in political terms. The President needs a fig 
leaf. He's dismantling Kyoto, but he's out there on a limb. He's told 
his staff, you will come up with something. They're going to do it. 
Wouldn't you like to be involved in what they put together? We 
certainly have made the cut that way.
    This gives you another look at some of the things that are coming 
up, both definites and maybes. In summary, again, fuel diversity. Fuel 
diversity is the key here which allows us to push a very pro-coal 
agenda. Coal is affordable, reliable, adequate and increasingly clean.
    I'm going to switch gears here. I've talked about the President's 
commitment to the so-called multi-pollutant approach. It's going to 
happen. Terry Ross asked the question of Senator Enzi, Are we talking 
about legislation coming out of Senate Environment Public Works 
courtesy of Senator Smith from New Hampshire? Maybe, maybe not. I would 
suggest that certainly within this Congress these next 2 years and 
possibly within over the next 4 years, the chances of getting 
comprehensive, multi-emission legislation through are probably fairly 
low. It's not there. It's not there.
    Having said that, the President is prepared to do this 
administratively. Now, it won't be as robust a program because you 
won't, in effect, be amending the Clean Air Act and all of the other 
statutes that we're subject to right now, but it will be the next 
generation of regulatory programs. And the goal here will be to gain a 
foothold, an irreversible foothold on the next generation of reasonable 
cost effective SO2 and NOx reduction, plus air toxics that 
we can all live with and that someone else can't undo.
    I've laid out here, basically, the issue. You've already seen the 
list. I'll show it to you one more time. We've got a lot of things 
going on right now, whether it's the Clean Air Act of 1970, the 
amendments in 1977 or the 1990 amendments. The guys that do the permits 
for your companies will tell you, it's is a pain in the ass. You've got 
requirements coming over 30 years that are like on top of one another, 
they're duplicative, some of them lead to a forced result of a 
different technology or process that just doesn't make sense. But it's 
an artifact of how we do business.
    What if someone were to tell you that you had 15 or 20 years, here 
is the NOx reduction target we want you to hit in that timeframe, 
here's the SO2 reduction we want you to hit, and the here's 
the toxics reduction that we want you to hit. And those reductions are 
fairly reasonable, but it's one, one number, one timeframe, with lots 
of bennies built in. I will tell you that's very interesting to me, and 
I tend to be a big disbeliever of this, and still have sort of mixed 
views.
    Goals, provide regulatory certainty and stability. We want that. 
Continue improving air quality. We want that. Increase compliance, 
flexibility and reduce costs through market-based approaches. Sounds 
interesting, tell me more. Maintain coal-fired generation as part of 
the electricity supply mix. And I'm not talking about maintaining it at 
10, 20, 25 percent. I mean where it is or better. And it's possible.
    Benefits, talked about that. Single set of reduction requirements, 
Clean Air Act, lower cost of emission reductions, facilitates building 
of new plants. Part of the problem that we have right now, this lack of 
certainty that I keep talking about in terms of what's happening with 
the environmental controls, not being able to rely anymore on the U.S. 
Court of Appeals for the District of Columbia or even the Supreme Court 
to help us out in what are some of the most ridiculous rules on their 
face to ever occur. We can't rely on that. We need to have some 
certainty. This is possibly a way to get at that.
    Now, the elements, and these, I will tell you, again, working with 
our CEOs behind closed doors, some of them hate this idea because 
they'd rather take their chances under a business-as-usual approach, 
saying, well, we'll get Bush or Atilla the Hun as president for the 
next five terms, right? Well, maybe not. What happens if we don't? So 
we've got some guys way out there and some guys who have embraced this. 
All of them are continuing to work on this.
    Types of emission, reduction levels, deadlines, safe harbor. That's 
the big deal. If you do these things, you're into this program, you get 
that safe harbor, you're not going to get nickeled and dimed every 2 
years for additional reductions of different types of pollutants. New 
source review. We get that fixed. That is non-negotiable. Non-
negotiable. It's got to go away.
    Here's the list put another way. Comprehensive approach, single 
SO2 reduction requirement. Over on the right-hand side are 
some of the items, past and present and potential, that are out there 
that could affect SO2 reduction requirements. Same thing for 
NOx. On mercury, same thing here. We've got very--EPA, if nothing else, 
is very clever. And I'm a product, obviously, of that sort of way of 
thinking and they taught me well. And I know how they work and they're 
smart guys.
    What they figured out is that as you have sort of an impediment to 
maybe doing what you want to do through the front door, through the 
Clean Air Act, there's plenty of other ways to get at you. They're 
starting to look at hitting us with mercury controls through the water 
program. Through the water program. Very interesting.
    Internationally, the EPA ramped up its discussions with Canada. The 
northeastern states, any Federal EPA working with Canada, to see what 
they could do--they did this with NOx, as well--but to see what they 
could do to have Canada bring pressure on the U.S. Government to maybe 
speed up its mercury rule or to have Canada develop a mercury MACT at 
like 9 percent removal in the next couple years, again, to put pressure 
on. Very, very clever. And finally we have Henry Waxman and others on 
the hill putting out a bill a day with these just like crazy, not well-
thought-out plans. But they've got them in play, they get press, they 
get people scared, and they get a reaction. I put CO2 in 
here as a place holder. CO2 is not going to be part of a 
mandatory anything.
    Having said that, it is possible, important point, I will predict 
that when the President sort of finishes off his multi-pollutant 
approach or his ideas for an administrative program, he will package 
the voluntary CO2 program with whatever is mandatory, giving 
you the so-called four pollutant approach that everyone says he backed 
off on in terms of his campaign pledge. It's packaging, not substance, 
but it's a very important point inside the beltway.
    NSR, safe harbor, flexibility. All the elements are there.
    I want to talk to you about some numbers we ran. Again, putting 
myself at the top of the list of doubting Thomases, we have been 
spending hundreds of thousands of dollars over the last few months at 
EEI and some of our companies engaging some top notch economic 
consultants, people with no ax to grind in this debate, to start 
running scenarios for us; different combinations of reductions of 
SO2 and NOx, mercury, and seeing what that gets us. 
Different timeframes for having to do that. And then comparing that to 
several scenarios of what EPA would logically be expected to do in that 
same timeframe between now and 2020, including some very conservative 
ones. We used a lot of EIA's natural gas projections or we had other 
ones, perhaps even more conservative or more robust. We used those as 
well.
    Now, jump to the punch line. And this is what catches a CEO's 
attention or your shareholders. Net present value. I can also give you 
the numbers on sort of an annual basis between now and 2020. Scenario 
one is roughly 35 percent SO2 and NOx reductions beyond 
baseline, beyond what's required now, with no additional mercury 
requirement. We just go with co-benefits, roughly what we're getting 
from existing controls. Scenario two, we ramped that up a little bit, 
where I think we're looking at 50/50 and co-benefits. Scenario three, I 
think, it's 60, 60 and 60 percent for mercury, which I think is pretty 
realistic based on what the health evidence shows up. And finally the 
EPA future. These are extraordinary deltas here.
    Now, we've got to continue to refine these numbers. I'm going to 
spend the latter part of this week going over, talking to Jack Gerard. 
Well, maybe not. Our prayers are with Jack, hopefully he's better. But 
certainly with his staff and with some of the mining companies to let 
them go through this and see what they think. Because they have the 
most at risk. I already told you we don't. The mine industry and rail 
industry have more at risk. It's important that our partners understand 
what we're doing and see if they agree on these numbers.
    Finally, initial findings. Scenarios one, two and three, less 
expensive than the EPA future. Ninety percent mercury reduction. That's 
the number that EPA, the career staff, are looking at right now. 
They're even looking at 95 percent reduction. They're not equating this 
at all to public health benefit, they're just focusing on a number--
Henry Waxman uses numbers as well--as a hard target. That number is 
Kyoto. That number is Kyoto.
    EPA future, reduces coal use, increases gas. Uses more than 
scenarios one, two and three. We know that. The cost of reducing carbon 
can vary widely depending on the permit allocation scheme. It's 
interesting we're finding through some of the scenarios we're running, 
we can get some carbon co-benefits. Plus when you tack on the voluntary 
program, we think we can do a pretty good job of having a robust 
CO2 element to this program that does not hurt coal.
    There you have it. Basically, sort of some thoughts of mine on 
energy policy, a little bit on environmental policy at the 20,000 foot 
level, and something to think about in terms of what is being debated 
right now inside the beltway as an alternative to business as usual at 
EPA. Thank you very much.
    Mr. Linton. I'm just going to ask if Jan has any comments on Shea's 
presentation at this point? Or we'll hold for the questions, any other 
questions, I guess, from the audience until all four presenters 
present.
    Mr. Laitos. What do you think the chances are within the next 2 or 
3 years there will be a reauthorization of the Clean Air Act, Clean 
Water Act or CERCLA?
    Mr. Shea. I think the chances are very low. I'll tell you, maybe a 
little better on Clean Water Act. I think CERCLA, in my opinion, is 
sort of like coal. It's a fossil. I think CERCLA in its present format 
is an artifact of a time when there was a good idea but bad 
implementation. I see that possibly being dismantled.
    Clean Water Act, I take back what I said, I do see opportunity for 
Clean Water Act reauthorization over the next 4 years. I don't see it 
for air. I'll tell you why. Very simply that while we now know where we 
might make surgical fixes to make the Act run better, these are even 
things that we--Henry Waxman and I might agree that there's problems 
with the permitting process in the Clean Air Act that weren't 
envisioned in 1990 that need to be fixed. The problem is if you want to 
open the Act up to technical changes or to those streamline fixes, much 
less a broader reauthorization, people start piling on everything.
    Now to the extent that the President is pushing in concert with 
Senator Smith or others a so-called multi-pollutant bill, that might be 
a de facto substitute for Clean Air Act reauthorization. But Clean Air 
Act reauthorization amendments of 2004, right now I don't see it. 
There's no impetus there, there's no political will and there's too 
much risk.
    Mr. Laitos. One more question. Do you think, based on your 
experience with what's going on in the energy policy center in 
Washington, D.C. within the White House or within the executive branch, 
do you see any interest as there was in the 1970s, the late 1970s, in 
terms of providing incentives, initiatives or grants for coal 
gasification or coal liquification efforts?
    Mr. Shea. There is some. And that's a fair point. Because I stayed 
away from a couple points in my presentation that started talking about 
clean coal technology or future R&D.
    The Department of Energy is going to make out fairly well over the 
next few years. It's no longer going to be the red-headed stepchild 
cabinet office that it has been in the last 8 years. It's going to be 
reinvigorated. The fossil office and the policy office are going to be 
the key conduits to implementing a very important piece of the energy 
policy task force that's going to be issued, again, in mid-May. That's 
going to be long-term R&D.
    Jan was talking about coal gasification. That is going to continue. 
Obviously, it's very speculative. We're looking really at 10 years plus 
out. But that's OK. Yes, it is clearly in the mix right now. They are 
looking at it in addition to other basic clean coal technologies, and 
even carbon capture and sequestration technologies.
    I can't tell you how much of an emphasis proportion or percentage 
wise there will be, but I do know that there will be staff in fairly 
significant sums appropriated for that.
    Mr. Linton. Thank you.
      
 Statement of Abraham Breehey, Legislative Representative, Government 
      Affairs Department, International Brotherhood of Boilemakers

    Chairman Inhofe, Senator Jeffords, and Members of the Committee, 
good morning. I am Abraham Breehey, Legislative Representative for the 
International Brotherhood of Boilermakers, Iron Ship Builders, 
Blacksmiths, Forgers and Helpers. On behalf of our International 
President Newton Jones and our approximately 75,000 members across the 
country, thank you for the opportunity to present our views on S. 131.
    The Boilermakers are the principal union responsible for the 
installation, maintenance, and repair of industrial boilers, as well as 
the installation of the pollution control equipment utilized to achieve 
the emissions reductions that are the goals of this legislation. As a 
result, our members have a dual concern: first and foremost, to have 
safe and productive workplaces for boiler operations; and second, to 
ensure the sensible implementation of clean air standards that foster 
the market for our services while protecting the environment.
    Boilermakers have been active participants in the policymaking 
process. Representatives from our locals across the country have 
testified at EPA field hearings, and our Government Affairs Office has 
submitted testimony for the record and letters on Clean Air topics 
going back for some years. The discussion of Clear Skies is one in 
which all participants share the same goal: sensible protection of air 
quality. There are good natured disagreements about the best approach 
to achieve that goal, but that should not keep us from proceeding with 
dedication.
    Indeed, the Boilermakers have a significant interest in ensuring 
the latest control technology is used to meet Federal multi-pollutant 
emissions standards and we have much to gain through its deployment. As 
an EPA analysis of the engineering factors affecting the installation 
of pollution control technology notes, the labor requirements needed to 
retrofit flue gas desulphurization systems generally referred to as 
scrubbers to remove SO2 for a 500 MWe utility 
include approximately 150,000 boilermaker man-hours. Similarly, a 
retrofit of SCR NOx control technology of 500 MWe requires 
as much as 350,000 man-hours of construction labor, with 40-50 percent 
of that amount available for boilermakers. However, the vast majority 
of our man-hours are generated providing maintenance, renovations, and 
upgrades to existing coal-fired electric utilities. Too often, under 
the status-quo this work is being put off, delayed, or abandoned.
    The legislation before the Committee today would provide great 
benefits to our union, as well a number of other AFL-CIO affiliates in 
the energy and construction sectors. It requires $52 billion in 
investment to meet air quality standards, a significant portion of 
which will be paid in wages to Boilermakers and other union craftsman. 
We believe it provides a clear path forward for new plant construction, 
sets standards that are both technologically feasible and no doubt 
within the current labor capacity. We encourage the committee to 
support the Inhofe-Voinovich bill.
    Some would prefer to maintain existing Clean Air Act authorities to 
wring additional emissions reductions out of existing facilities. This 
``command and control'' approach relies on litigation-heavy, case-by-
case analysis, such as the New Source Review (NSR) program. While NSR 
can produce successes in some cases, it is too often cumbersome and 
slow as it applies to existing sources. We support the provisions of 
the Clear Skies bill for addressing these issues.
    The Boilermakers are aware of the balancing act that must be 
undertaken in developing environmental policy. However, we believe this 
legislation achieves a significant balance in that it provides a 
protective approach on clean air that maintains the competitiveness of 
our industrial facilities, keeping Boilermakers and other union 
member's work from being outsourced. By ensuring a continued role for 
coal in our energy-mix and providing greater regulatory certainty, this 
legislation will promote stable energy prices that are necessary for 
the economic growth that creates good paying manufacturing and 
industrial jobs.
    I know we all agree that America's workers are the most productive 
in the world. However, they are forced to succeed under tremendous 
competitive disadvantages resulting from several factors, including 
unfair tax and trade policies, foreign subsidies, and health care costs 
not assumed by overseas producers. In addition, American manufacturers 
spend relatively more on pollution control than foreign competitors. 
Regulatory policies that delay efficiency improvements or that might 
lead to fuel-switching from coal to natural gas would only exacerbate 
our problems keeping good paying manufacturing jobs here at home.
    The Boilermakers Union supports the expansion of the Acid Rain 
Program ``cap and trade'' system for SOx to NO2 and mercury 
as suggested under this legislation because it sets predictable 
deadlines that are achievable with current technology. Also, rather 
than proceeding case-by-case, they apply to all regulated facilities 
simultaneously. Under current law, our work often comes in fits and 
starts. This legislation will encourage a more steady work load for our 
members.
    Our union is committed to ensuring the safety of the facilities 
where our members and thousands of others work. It is a major and 
ongoing concern. Workplace safety is a cornerstone of the Boilermaker's 
National Joint Apprenticeship Program, and our members work together 
with our employers to limit workplace injury and promote efficient 
operations. Reasonable and consistent rules are needed to encourage 
repair and maintenance of power plants, and protect worker safety. Too 
often, important work is delayed due to the uncertainty of the 
regulatory and permitting process. Power-generating facilities operate 
most efficiently when they undertake repair and replacement projects on 
a regular basis. The varying interpretations of the requirements of NSR 
often forces facilities to delay maintenance work for 12 to 36 months 
while they await EPA approval.
    Further, the threat of litigation too often acts as a deterrent to 
capital investments that create work and maintain safe facilities for 
our members. Boilers operate under high temperatures and pressures with 
superheater tubes exposed to flue gases at temperatures as high as 
2,000 degrees and pressure around 3,000 lbs./square inch and must be 
maintained in order to be safe for workers. While NSR can present 
obstacles to maintenance and repair, Clear Skies does not.
    The good news about Clear Skies is that the program sets 
expectations that can be met with feasible technological applications. 
Our members training and expertise at installing pollution control 
technology is unmatched. However, applications that have not been 
tested across all fuel types and under actual operating conditions and 
for which there are no guarantees should not be the basis of clean air 
policy.
    S. 131 also will prevent the litigation and delay associated with 
U.S. EPA rulemaking proceedings. The bill's approach to mercury 
emissions will avoid the need for a controversial EPA mercury rule, 
while ensuring the use of cost-effective emissions trading as the means 
to achieve a significant reduction of emissions. We specifically 
support the use of a ``co-benefits'' approach for the first phase of a 
mercury control program to enable more accurate measurements of the 
mercury control capabilities of existing technologies, and to allow 
time for advanced mercury-specific control technologies to mature in 
time to meet the final 2018 mercury cap.
    Further, the caps, timetables, and incentives of the Clear Skies 
Act will result in high emissions reductions goals through the 
application of clean air technology, as opposed to fuel-switching. 
Sections 455 and 475 provide for early action reduction credits to 
encourage NOx and mercury reductions, respectively, through the 
application of technology, as opposed to fuel-switching. Certainly, the 
Boilermakers and the members of the United Mine Workers of America will 
realize significant benefits from the provisions, but the implications 
of widespread fuel-switching to costly natural gas would be devastating 
across the manufacturing sector. An important benefit of this 
legislation is that it will foster reliable and affordable electricity 
generated from coal. More than one-half of our nation's electrical 
output is generated by coal. Reducing the use coal in our energy supply 
mix would inevitably result in increased demand in natural gas, a 
fundamental change in energy policy that raises important concerns 
about natural gas availability and cost.
    The current regulatory framework has resulted in most new power 
generation facilities being gas-fired. With demand for natural gas 
spiking, and prices increasingly volatile, continuing down this path 
will have a devastating impact on American workers, as firms look to 
move operations overseas for cheaper natural gas prices. Under S. 131, 
any new coal plants will be included under the emissions cap and the 
clear path forward with regard to emission reductions requirements 
allows our employers improved investment planning, which contributes to 
reliable and affordable electricity generated from coal.
    Our union also recognizes the needs of states and localities to 
comply with U.S. EPA's new 8-hour ozone and fine particulate standards. 
The deadlines for compliance with these standards are approaching, and 
states are beginning to prepare State Implementation Plans. Computer 
modeling by U.S. EPA demonstrates that the reductions proposed by S. 
131 would allow many states and localities to meet the new ozone and 
PM2.5 standards in a timely manner. Some areas, however, may 
not be able to demonstrate attainment with the new standards. For this 
reason, some states advocate adjustment of the bill's final compliance 
deadlines for sulfur and nitrogen oxides. While we support the 
timetables established under S. 131, we note that reasonable 
adjustments of these final deadlines would not, in our judgment, raise 
issues about the availability of skilled labor to install and operate 
emission controls.
    In conclusion, our union believes that among the greatest 
challenges this distinguished body is faced with is maintaining the 
competitiveness of American manufacturing in the global marketplace. 
Since its peak in 1998, the United States has lost more than 3 million 
manufacturing jobs. There is a palpable anxiety among working-families 
across the country. The International Brotherhood of Boilermakers is 
committed to providing the highly skilled labor necessary to power the 
American economy. We believe the legislation proposed by Senators 
Inhofe and Voinovich, S. 131 sets our electric-generating facilities on 
a path forward toward an affordable, stable, domestically produced 
energy supply. I know our members look forward to continuing our role 
in this important debate.
                                 ______
                                 
         Responses by Abraham Breehey to Additional Questions 
                         from Senator Voinovich

    Question 1. You state in your testimony that steady employment is 
needed instead of peaks and falls and that Clear Skies provides for 
this for at least 15 years. However, some claim that Clear skies does 
no more than existing law--meaning your should have this environment 
already. What effect has regulatory uncertainty had on workers?
    Response. Due to the nature of the work our members perform, our 
man-hour rates are often cyclical--with peak seasons coming in the 
spring and fall. However, the permitting and regulatory process of New 
Source Review often prevents accurate planning and often delays 
anticipated work. The lack of clarity and case-by-case evaluation of 
what constitutes routine maintenance, repair, or replacement has forced 
industry to delay work for Boilermakers for as long as year. This 
creates difficulties in planning the deployment of our workforce, much 
of which often travels significant distances when the need arises.

    Question 2. Last week, Basin Electric CEO Ron Harper provided a 
specific example of how the New Source Review program has prevented an 
improvement at one of their units that would reduce energy use and 
emissions. You also talk about the NSR program as a roadblock for 
plants to put on pollution control technology--and as a roadblock to 
worker safety improvements. Do you have any examples of how NSR has 
prevented such improvements? Please provide additional thoughts on why 
NSR needs to be reformed.
    Response. Regretfully, it is difficult to identify a specific 
project simply because this is not a matter our employers are anxious 
to share with us. Our concerns are verified by anecdotal evidence, such 
as that provided by Mr. Harper, and we do not believe the case he 
points to is unique. Further, one opinion expressed in the debate over 
New Source Review is that only work performed by regular plant 
maintenance personnel should be considered ``routine,'' and that any 
work performed by outside contractors should be considered ``non-
routine.'' Our members are often called upon to supplement and 
complement the regular plant work force during planned outages. If the 
industry attempts to reduce its reliance on services from our members, 
their standard of living will be directly and adversely impacted.
                                 ______
                                 
         Responses by Abraham Breehey to Additional Questions 
                        from Senator Lautenberg

    Question 1.  The Acid Rain program's cap and trade approach has 
been very successful. Would this bill's cap and trade system be as 
protective of public health as that program?
    Response. While my experience relates mainly to the impact of the 
multi-pollutant cap and trade systems on our workforce, as opposed to 
the public health benefits, it is my understanding the expansion of the 
Acid Rain programs cap and trade approach will bring public health 
benefits. Since the Acid Rain program began, EPA has reported the 
largest emitting sources actually reduced emissions the fastest. The 
more a facility can reduce the more tradable credits it can generate. 
This is bound to have significant public health benefits.

    Question 2. As someone who came out of the corporate world, I can 
appreciate the importance of making sound investments sound investments 
in new technologies. Is the cap and trade system in Clear Skies as cost 
effective at reducing pollution as other approaches?
    Response. The incentives created through a cap and trade system 
will be applied on a national basis with clear and specific compliance 
deadlines. Contrasted with the resource-intensive and uncertain 
litigation that results from the new source review program, cap and 
trade is a cost effective approach. Creating a market for emissions 
through the creation of tradable credits ensures that those who can 
most efficiently reduce emissions will do so.

    Question 3. Clear Skies proposes giving many industries a free pass 
when it comes to reducing hazardous air pollutants--some of them known 
to cause cancer. What impacts do you foresee from this drastic retreat 
from Clean Air Act protections?
    Response. We have a number of Boilermaker locals with members who 
work at facilities eligible for the ``opt-in'' provisions of S. 131. 
The ability of these employers to participate the market based trading 
system will provide financial incentives for additional emission 
reductions where they can most cost-effectively be achieved.
    It is far from a ``free pass.'' In order to receive relief from the 
maximum achievable control technology standard (MACT) for boilers about 
which the question is asking, the facility must first ``opt in'' to the 
stringent requirements of the Clear Skies Act. To do so means to put a 
cap in place that would require the same types of control technologies 
or process improvements that the MACT standard likely would require. In 
addition, the boiler MACT has a risk-based alternative; meaning that 
existing law will not cover each and every hazardous air pollutant, as 
some opponents of S. 131 imply. Ironically, while the NRDC witness at 
the hearing argued against granting relief from boiler MACT, the same 
organization has sued to stop the boiler rule from even going into 
effect.

    Question 4. My entire home State of New Jersey was recently 
declared ``out of attainment'' for nitrogen oxides, which help form 
ozone and damage lungs--especially of kids. Do you believe this bill 
will improve New Jersey's air quality?
    Response. The 70 percent reductions in NOx and SO2 
called for under S. 131 will indeed improve New Jersey's air quality. 
Further, states are free to go beyond the minimum Federal standards 
with their own programs, just as New Jersey has done.
                               __________

 Statement of John Cook, Vice President and Managing Director, Eastern 
            U.S. Conservation Region, the Nature Conservancy

    Mr. Chairman and members of the Subcommittee, thank you for the 
opportunity to provide written testimony for the Committee on the 
effects of air pollution on ecosystem health. The Nature Conservancy 
applauds your interest in this matter and your efforts to find 
solutions to improve air quality in the United States. The Conservancy 
has a growing interest in solving the critical, globally significant 
problem that acid rain and other air-borne pollutants pose to 
biological diversity and the ecosystem processes on which it depends. I 
am pleased to present the Conservancy's views on this important topic.
    The Nature Conservancy is dedicated to preserving the plants, 
animals and natural communities that represent the diversity of life on 
Earth by protecting the lands and waters they need to survive. The 
Conservancy has more than one million individual members and programs 
in all 50 states and in 27 nations. To date, we have been responsible 
for conserving more than 14.5 million acres in the United States, and 
more than 83.5 million acres internationally. The Conservancy itself 
owns more than 1,340 preserves in the United States--the largest 
private system of nature sanctuaries in the world. Our conservation 
work is grounded in sound science, strong partnerships with other 
landowners, and tangible results at local places.
    In the eastern United States we are working to conserve such 
spectacular and irreplaceable natural treasures as the Adirondacks, the 
Chesapeake Bay, the Northern Forest, and the Appalachian Mountains. 
These places are within driving distance of many millions of citizens, 
who benefit from the wilderness, drinking water, wildlife, timber land, 
fisheries, natural areas, and recreational opportunities that they 
provide. Atmospheric deposition threatens the health and long-term 
sustainability of every one of these places.

                               BACKGROUND

    The atmospheric deposition of acidifying pollutants, in particular 
nitrogen and sulfur (also known as acid rain), and toxic airborne 
pollutants--especially mercury and ozone, are among the most pervasive 
and severe threats to The Nature Conservancy's conservation goals in 
the eastern United States. Although the Clean Air Act and other 
regulations and programs have achieved notable success in controlling 
these emissions, and will continue to do so as the law is phased-in, 
the level of pollution allowed under the Clean Air Act remains too high 
and will continue to harm plants and animals. For over a century we 
have been aware of the damage caused by that acid rain. Acid rain 
results in decreased forest health, as it can reduce tree growth and 
increase susceptibility to diseases, pests or even damage from cold 
weather. Acid rain also has toxic effects in the aquatic world. 
Increased acidity in water has been fatal to fish and other aquatic 
species, particularly in landscapes like the Adirondacks that contain 
soils that are poorly suited for absorbing the increased acidity.
    Recently there has been increasing concern over the multiple 
impacts that excess nitrogen is having on our environment. In 2003, the 
journal BioScience publishes a special section detailing the magnitude 
and severity of the problem throughout the continental United States. 
Of particular concern is that as nitrogen moves through ecosystems it 
causes multiple effects on the ecosystem, referred to as the ``nitrogen 
cascade'' (Galloway et al. 2003). For example, Aber et al. (2003) 
concluded that nitrogen deposition has altered the nitrogen status of 
northeastern forests. Not only does it have negative impacts on forest 
health, this deposition ultimately contributes to excess nutrient 
loading of estuaries as it ``cascades'' from upland deposition through 
forest soils and water to its eventual release into coastal estuarine 
systems (Driscoll et al. 2003). According to a National Oceanic and 
Atmospheric Administration study in 1999, 61 percent of the 23 
estuaries examined in the Northeast were classified as moderately to 
severely degraded by nutrient over-enrichment. Such enrichment has been 
shown to lead to multiple environmental problems for estuarine 
ecosystems. Ecological problems associated with nitrogen deposition 
have also been identified in the west (e.g., Fenn et al., 2003a,b). 
When combined with sulfur, nitrogen has contributed to the 
acidification of soils and surface waters as mentioned above, as well 
as increasing the availability of potentially toxic aluminum, and the 
long-term loss of some critical available nutrients in the soil. 
Consequently, nitrogen deposition, whether by itself, or in combination 
with sulfur, is having profound effects on ecosystems in this region 
and others.
    Mercury is a neurotoxin that accumulates in the food chain and is 
particularly damaging to higher-level consumers, such as loons. In 
humans, high mercury levels may result in neurological damage, 
including altered behavioral patterns known as the ``mad hatter'' 
disease. Human health concerns due to high mercury levels in many 
Adirondack lacks continue to result in fishing restrictions. Lower down 
in the food web, the flathead minnow has been documented to suffer 
reduced reproductive success with higher mercury contamination 
(Hammerschmidt et al., 2002). In larger fish that prey on minnows 
(e.g., walleye), similar impacts to reproduction have been documented 
(Lastif et al., 2001). Similarly, recent information on another top-
level fish predator--the Common loon--indicates that changes in loon 
behavior and decreased reproductive success contribute to declining 
loon populations as a consequence of high mercury concentrations.
    Finally, ground level-ozone, is formed when nitrogen oxides and 
volatile organic compounds combine in the presence of high temperatures 
and sunlight. Although technically not transported by atmospheric 
deposition, it is an important secondary pollutant inextricably linked 
to this issue. Ozone directly harms plants, causing lesions on leaves 
and altered cellular function. This has lead to altered composition and 
structure in early successional species (Barbo et al. 1998), and 
concern for a number of plant species in federally protected areas (NPS 
2003). A great concern is that the effects of ground-level ozone 
ultimately alter the ability of plants to perform one of the most basic 
and essential of all ecological processes--photosynthesis. The net 
effect is a decrease in vitality and increased susceptibility to 
diseases and severe weather events, both environmental conditions that 
appear to be on the increase.

                              ADIRONDACKS

    The Adirondacks probably exhibit the most severe ecological impacts 
from acidic deposition of any region in North America (Driscoll et al., 
2003a, b). This large forested area with over 2770 lakes, covering six-
million acres in northern NY, has served as the ``canary in a coal 
mine'' for acid rain in the United States due to the highly sensitive 
soils and significant deposition rates. Studies of 1,469 Adirondack 
lakes show that nearly half (41 percent) are acidic (i.e., pH below 
5.5), with the acidic condition in the vast majority of these impacted 
lakes (81 percent) directly attributable to atmospheric deposition. In 
addition to the chronic acidification described above, spring acidity 
peaks occur on a large percentage of Adirondack streams and lakes. The 
peaks are caused by the spring runoff of highly acidic water that has 
accumulated in the snow pack during the winter. The spring acidity 
peaks can result in spikes of acidification that are lethal to fish and 
change invertebrate communities--completely altering aquatic species 
composition and structure even in some highly protected, remote 
locations.
    Research shows that there has been a cumulative effect of 
atmospheric deposition on watersheds. Calcium--an essential element for 
healthy forests--has been depleted from the soil. In many acidified 
watersheds the calcium levels are at or below the thresholds known to 
cause dieback and reproductive failure of sugar maple and red spruce 
trees. Another effect of acidified watersheds is the mobilization of 
aluminum out of the soil and into the water, where it is toxic--and in 
many cases lethal--to fish, plants and other organisms.
    Mercury, another pollutant of atmospheric deposition, is also 
impacting the Adirondacks. At least 30 lakes--including remote 
wilderness lakes--have fish species considered unsafe for women and 
children to eat because of elevated mercury levels (13 were added to 
this list in the summer of 2004). Recent studies from the Adirondack 
Cooperative Loon Program show that 17 percent of the loons sampled have 
blood mercury levels that are high enough to alter behavior, resulting 
in the decreased reproductive success of loon populations.

                     CENTRAL APPALACHIAN MOUNTAINS

    The Central Appalachian Mountain region is exposed to acidic 
deposition levels that are among the highest in the United States. The 
National Acid Precipitation Assessment Program (NAPAP) identified this 
area and the Adirondacks as the two regions of the country most 
affected by acidic deposition (Baker et al. 1991). Unfortunately, the 
places in the Central Appalachian region most susceptible to these 
pollutants also contain the highest levels of biodiversity and 
sometimes are already under protected status. Susceptibility to acidic 
deposition in this region is determined by bedrock type, and the 
region's ridges are commonly associated with base-poor bedrock types 
that provide little acid-neutralizing capacity. Most of these ridges 
and streams are associated with public lands, including national 
forests, designated Wilderness areas, and the Shenandoah National Park. 
Stream surveys and long-term monitoring stations have shown that at 
least one-third of the landscape associated with the mountain ridges 
have been harmed by acidic deposition, as indicated by high 
concentrations of sulfur and acidity in streams and loss of aquatic 
biota.
    Modeling conducted for the Southern Appalachian Mountain 
Initiative, a multi-state, multi-stakeholder assessment, indicated that 
prospective reductions of acid-precursor emissions will be insufficient 
to prevent further acidification of sensitive streams and soils 
associated with forested mountain watersheds in this region (Sullivan 
et al. 2002). Trend analysis indicates that streams in this region have 
yet to show signs of recovery, and has the highest likelihood of 
further acidification in the eastern and northern United States 
(Stoddard et al. 2003).

                             CHESAPEAKE BAY

    The Chesapeake Bay is the largest estuary in the contiguous United 
States, and is extremely susceptible to atmospherically deposited 
pollutants (EPA 2004). While not especially vulnerable to 
acidification, atmospherically deposited nitrogen plays a significant 
role in the nutrient cycling of the Chesapeake Bay--as in other 
estuaries (NOAA 2004). Current estimates of the percent contribution of 
atmospherically deposited nitrogen to the Chesapeake Bay are 20-32 
percent--although such estimates are known to vary considerably due to 
small sample sizes, complexities of seasonal variation, and other 
factors (Sheeder et al. 2002).
    While nitrogen is a naturally occurring nutrient in the Chesapeake 
Bay, excessive additions of nitrogen have aided in the degradation of 
important habitat in what remains the most productive estuary in the 
world. Such nutrification results in algal blooms that reduce water 
clarity, diminishing the capacity for sunlight to penetrate to the Bay 
floor. Submerged aquatic vegetation (SAV) is unable to persist in these 
low-light conditions, resulting in loss of sediment holding functions 
and creating a positive feedback loop for increasingly turbid water. 
Additionally, algae-decomposing bacteria consume dissolved oxygen, 
leading to zones of anoxia (oxygen-poor regions) that are unable to 
support estuarine biota. The Chesapeake Bay Program recognizes that 
addressing atmospheric sources of nitrogen is a key strategy to Bay 
restoration.

                            RECOMMENDATIONS

    The National Research Council of the National Academies of Science 
published ``Air Quality Management in the United States'' in January 
2004. It called for a more thorough consideration of the impacts to 
ecosystem health in the design of air pollution control strategies. 
Specifically, the report's recommendation for improved air quality was 
to:

        Enhance protection of ecosystems and other aspects of public 
        welfare. Many of the programs and actions undertaken in 
        response to the Clean Air act have focused almost entirely on 
        the protection of human health. Further efforts are needed to 
        protect ecosystems and other aspects of public welfare.

        Specifically:
        Although mandated by the CAA, the protection of ecosystems 
        affected by air pollution has not received appropriate 
        attention in the implementation of the act. A research and 
        monitoring program is needed that can quantify the effects of 
        air pollution on the structure and functions of ecosystems. 
        That information can be used to establish realistic and 
        protective goals, standards, and implementation strategies for 
        ecosystem protection.

    The Nature Conservancy agrees with this and other recommendations 
in the report. The Conservancy would like to work with the Committee, 
with private industry and other interested parties to improve our 
understanding of the ecosystem level effects of atmospheric deposition 
and to incorporate ecosystem health concerns in setting appropriate 
standards in clean air policy and in the development of multi-emissions 
legislation.

                               CONCLUSION

    The Nature Conservancy is continuing its efforts to study the 
effects of atmospheric deposition on globally significant ecosystems. 
We look forward to working with the Committee staff and others in the 
public and private sector on the issue of atmospheric deposition Thank 
you for the opportunity to provide testimony on this important matter.
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                               __________

                Statement of Large Public Power Council

    The Large Public Power Council (LPPC) appreciates the opportunity 
to submit the following written statement in support of Clear Skies Act 
of 2005 (S. 131). LPPC has been a long-time supporter of passing 
comprehensive multi-pollutant control legislation for the power sector. 
We were the first industry group to endorse the Administration's 
original Clear Skies proposal with our letter to President Bush in 
September 2002 and our support remains strong. LPPC believes the time 
to act is now. The passage of the 2005 version of the Clear Skies Act 
will achieve not only a 70 percent reduction in power plant emissions, 
but also can improve air quality faster, with greater environmental 
certainty, and more cost effectively than continued regulation under 
current law.
    LPPC is an association of 24 of the largest public power systems in 
the United States. LPPC members directly or indirectly provide 
reliable, affordably priced electricity to most of the 40 million 
customers served by public power. We own and operate over 44,000 
megawatts of generation and approximately 26,000 circuit miles of 
transmission lines. LPPC member utilities and public power agencies are 
located in states and territories representing every region of the 
country. In addition, member utilities own and operate a diverse 
portfolio of fossil, nuclear, hydropower, and other renewable energy 
sources that reflect the national energy mix.
    All LPPC members are committed to environmental excellence and 
among the 24 LPPC member utilities we have some supporting more 
environmentally stringent provisions and others suggesting a narrower 
scope. LPPC looks forward to helping to shape revisions to the Clean 
Air Act.
    Stringent Emissions Reductions. If enacted into law, Clear Skies 
would be the most ambitious pollution control program ever established 
to reduce power plant emissions. The administration's proposal would 
cut SO2 emissions by 73 percent (from 11.2 to 3 million 
tons), NOx emissions by 67 percent (from 5.1 to 1.7 million tons) and 
mercury emissions by 69 percent (from 48 to 15 tons) from 2000 levels.
    Clear Skies' reductions would build upon the reductions in 
SO2 and NOx that the power sector has achieved to comply 
with the acid rain and NOx SIP-call programs (43 percent reduction in 
SO2 and 45 percent reduction in NOx from 1990 levels). What 
is especially impressive about the Clear Skies reduction targets is the 
long-term improvement in environmental performance achieved by the 
power industry. After full implementation of Clear Skies, fossil-fired 
power plants will achieve 76 percent reduction in NOx and 83 percent 
reduction in SO2 from 1980 levels. Moreover, the power 
industry will achieve these reductions while fossil-fueled electricity 
production will have more than double during the same period (1980 to 
2020). This means that, on average, for every unit of electricity 
generated from fossil fuels, the emissions after implementation of 
Clear Skies will be less than one tenth of the emissions for generating 
the same unit of electricity in 1980. (See Figure 1.)
[GRAPHIC] [TIFF OMITTED] T2206.157

    Environmental Certainty. The Clear Skies Act provides absolute 
environmental certainty. If enacted into law, the emissions reductions 
are locked in today by statute. Specifically, Clear Skies establishes 
emissions caps guaranteeing that power plants will not exceed the total 
allotted levels for each air pollutant. Moreover, Clear Skies contains 
specific compliance dates when those emissions caps begin to apply and 
when the power plant reductions must be achieved.
    The Clear Skies reductions are rock solid. Since the emissions caps 
and compliance deadlines are set by statute, they cannot be disputed, 
delayed or otherwise legally challenged in court. Similarly, Clear 
Skies contains other provisions to assure full and timely achievement 
of the mandated emissions reductions. One such provision is an absolute 
statutory prohibition against any legal challenge of the annual 
allowance allocations--which is a key component of the emissions 
trading program. Specifically, Clear Skies expressly bars anyone from 
legally challenging in court EPA's calculation of allowance allocations 
and the determination of any values used in such calculations. Another 
provision is the use of default allowance reconciliation procedures, 
which apply if EPA fails to promulgate the core rules for allocating, 
tracking, and trading allowances by the time that the reduction 
obligations take effect. These default procedures establish a fallback 
statutory framework for ensuring full implementation and compliance 
with the Clear Skies reduction requirements even if EPA has not yet 
promulgated sufficient implementing regulations.
    Key Tool for Achieving Clean Air Goals. The targets and time 
schedules set forth in the bill for reducing NOx, SO2, and 
mercury are ambitious, but appear appropriate to achieve the health and 
environmental goals established under the Clean Air Act. This is 
confirmed by the enormous air quality improvements that will result 
from implementation of the Clear Skies control program. The facts of 
Clear Skies tell a very positive story.
    The best way to measure the air quality benefits resulting from 
Clear Skies is to evaluate its contribution to attaining the new 
ambient air quality standards for fine particles and ozone. These air 
quality standards are ``the Clean Air Act bedrock measure of public 
health protection.'' Measured by this yardstick, Clear Skies does 
extraordinary well.\1\ Specifically, the Clear Skies reductions, in 
combination with existing control programs, are projected to reduce 
dramatically the number of areas currently not meeting the new air 
quality standards for fine particles and ozone. EPA modeling indicates:
---------------------------------------------------------------------------
    \1\ Note that the above projections are not entirely due to Clear 
Skies, but also benefit from emission reductions from other Clean Air 
Act programs such as the off-road diesel rule.
---------------------------------------------------------------------------
     Eastern state fine particle non-attainment counties are 
projected to decline from 114 currently, to 27 in 2010, to 8 in 2020 
(93 percent reduction).
     Eastern state 8-hour ozone non-attainment counties are 
projected to decline from 268 currently, to 44 in 2010, to 20 in 2020 
(92 percent reduction).
    Areas that are still non-attainment in 2020 are also much closer to 
attainment. In areas where EPA projects to be in nonattainment 
notwithstanding implementation of the Clear Skies program, Clear Skies 
still plays a crucial role in attaining the air quality standards. The 
air quality improvements (particularly, reductions in regional air 
pollution transport) achieved by Clear Skies will better position 
States in developing effective local air pollution control strategies 
for attaining the air quality standards as expeditiously as possible. 
Clear Skies was never intended to be the nation's sole control strategy 
for attaining the new standards--particularly since it addresses only 
one sector and source of emissions out of many in the economy.
    New Paradigm for Cleaner Air. The Clear Skies legislation 
establishes a new paradigm for bringing cleaner air, sooner, at a lower 
cost. This new paradigm is essential to assure that the stringent 
emission reductions required under Clear Skies levels are technically 
and economically feasible, as well as consistent with objectives to 
ensure adequate supplies of reasonably priced power. One essential 
element of this new paradigm is the use of emissions trading systems 
for achieving the reductions at the lowest possible cost to industry 
and the communities we serve. To this end, careful attention must be 
given to the methodology for distributing NOx, SO2, and 
mercury allowances to electric generating units. LPPC supports the 
Clear Skies methodology for allocating allowances to only those units 
subject to the multi-pollutant reduction requirements. We strongly 
oppose other legislative proposals to distribute allowances through any 
type of allowance auction system. Although different allowance 
allocation methodologies may be appropriate for different pollutants, 
whatever methodology adopted must result in an equitable allocation of 
the control obligations to those generating facilities.
    Another key component of a new air regulatory paradigm is a 
coordinated emission reduction strategy. Under existing law, the 
electric power sector currently faces emissions control requirements 
that are duplicative, contradictory, costly and overly complex. Such a 
regulatory scheme poses significant planning problems and makes it very 
difficult to formulate an efficient strategy for meeting future air 
regulatory control requirements, many of which require long 
construction cycles and large capital expenditures. The failure to 
improve planning certainty not only creates great investment risks, but 
could threaten the reliability and affordability of our nation's 
electric supply.
    LPPC is ready to work with the Senate Environment and Public Works 
Committee and other Members of Congress in developing a new regulatory 
paradigm that achieves superior environmental results in a more 
efficient and cost-effective manner. Key elements of this new paradigm 
include reform of new source review, elimination of redundant air 
regulatory requirements, and a period of regulatory certainty going 
forward for the power generation sector.
    In conclusion, LPPC appreciates the Committee's leadership on this 
important environmental initiative and stands ready to establish a new 
paradigm for bringing cleaner air, sooner, at a lower cost. The time to 
pass multi-pollutant control legislation is now. Passage of such 
legislation will ensure clean air for our nation and do so while 
protecting the economic well being of our communities and providing an 
adequate supply of reliable and affordable energy.

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[GRAPHIC] [TIFF OMITTED] T2206.155

[GRAPHIC] [TIFF OMITTED] T2206.156

     Statement of Hon. Christine Todd Whitman, Administrator, U.S. 
             Evironmental Protection Agency, April 8, 2003

                            I. INTRODUCTION

    Thank you, Mr. Chairman and Members of the Committee for the 
opportunity to speak with you today about the Clear Skies Act of 2003. 
Based on one of the most successful programs created by the Clean Air 
Act, Clear Skies is a proposal to substantially reduce emissions of the 
three most harmful pollutants from power generation--and to do so in a 
way that is much faster and more efficient than under current law. As 
President Bush said in the State of the Union Address, Clear Skies will 
advance our goal of ``promot[ing] energy independence for our country, 
while dramatically improving our environment.'' The Administration is 
committed to working with this Subcommittee and Congress to pass 
legislation this year. The widespread support for multi-pollutant 
legislation to reduce power plant emissions is a strong indicator that 
the time for action on this critical issue is now. Failure to enact 
Clear Skies this year will delay important public health and 
environmental benefits.
    This country should be very proud of the progress we have already 
made in cleaning up our air. Since the Clean Air Act was first enacted 
in 1970, we have reduced emissions of the six primary air pollutants by 
25 percent. During the same time period, the economy has grown 
significantly--the Gross Domestic Product increased 160 percent; 
vehicle miles traveled increased 150 percent; energy consumption 
increased 40 percent; and the U.S. population increased 35 percent.
    Although we have made much progress since 1970, we still face major 
air quality challenges in many parts of the country. Clear Skies is the 
most important next step we can take to address these challenges and 
achieve healthy air and a clean environment for all Americans. Clear 
Skies would make great strides toward solving our remaining air quality 
problems in a way that also advances national energy security and 
promotes economic growth. It would reduce power plant emissions of 
SO2, NOx and mercury by approximately 70 percent from 
today's levels and do it faster, with more certainty, and at less cost 
to American consumers than would current law. Last year's EPA estimates 
project that, over the next decade, all the programs of the existing 
Clean Air Act would reduce power plant emissions of SO2 and 
NOx by approximately 23 million tons. Over the same time period, Clear 
Skies would reduce emissions of these same pollutants by 58 million 
tons--a reduction of 35 million tons of pollution that will not be 
achieved under current law\1\.
    When fully implemented, Clear Skies would prolong thousands of 
lives each year, providing billions of dollars in economic benefits, 
save millions of dollars in health care costs, and increase by millions 
the number of people living in areas that meet our new, more stringent 
health-based national air quality standards. Clear Skies would also 
virtually eliminate chronic acidity in northeastern lakes, reduce 
nitrogen loading in coastal waters, and help restore visibility in our 
national parks.
    The Clean Air Act has been, and continues to be, a vehicle for 
great progress in improving the health and welfare of the American 
people. The Clear Skies Act substantially expands one of the most 
successful Clean Air Act programs--the Acid Rain Program--and reduces 
the need to rely on complex and less efficient programs. The result 
would be significant nationwide human health and environmental 
benefits; certainty for industry, states and citizens; energy security; 
and continuing low costs to consumers.

             II. CLEAR SKIES PROVIDES SIGNIFICANT BENEFITS

    The heart of Clear Skies is a proven cap-and-trade approach to 
emissions reductions. Mandatory caps restrict total emissions and 
decline over time. Clear Skies would continue the existing national 
cap-and-trade program for SO2, but dramatically reduce the 
cap from 9 million to 3 million tons. Clear Skies would also use a 
national cap-and-trade program for mercury that would reduce emissions 
from the current level of about 48 tons to a cap of 15 tons, and would 
employ two regional cap-and-trade programs for NOx to reduce emissions 
from current levels of 5 million tons to 1.7 million tons. The specific 
caps and their timing are set forth in Table 1.
Table 1. Clear Skies Emission Reductions Timetable
    Although national in scope, Clear Skies recognizes and adjusts for 
important regional differences in both the nature of air pollution and 
the relative importance of emissions from power generation. The eastern 
half of the country needs reductions in NOx emissions to help meet the 
ozone and fine particle standards, which generally are not an issue in 
the western half of the county (with the exception of California, which 
does not have significant emissions from existing coal-fired power 
plants). The western half of the country needs NOx reductions primarily 
to reduce the regional haze that mars scenic vistas in our national 
parks and wilderness areas, and the nitrogen deposition that harms 
fragile forests. Recognizing these regional differences, Clear Skies 
would establish two trading zones for NOx emissions and prohibit 
trading between the zones to ensure that the critical health-driven 
goals in the East are achieved.
    Clear Skies also recognizes the special visibility protection 
measures that have been developed by states participating in the 
Western Regional Air Partnership (WRAP). Clear Skies would essentially 
codify the WRAP's separate SO2 backstop cap-and-trade 
program, which would come into effect only if the WRAP states did not 
meet their 2018 SO2 emissions targets.
    Finally, Clear Skies requires tough, technology-based new source 
standards on all new power generation projects and maintains special 
protections for national parks and wilderness areas when sources locate 
within 50 km of ``Class I'' national parks and wilderness areas.
Significant Public Health and Environmental Benefits
    The public health and environmental benefits of Clear Skies present 
compelling reasons for its immediate passage. EPA projects that, by 
2010, reductions in fine particle and ozone levels under Clear Skies 
would result in billions of dollars in health and visibility benefits 
nationwide each year, including as many as 6,400 prolonged lives. Using 
an alternative methodology, 3,800 lives would be prolonged by 2010. 
Under EPA's base methodology for calculating benefits, Americans would 
experience significant benefits each year by 2020, including:
     12,000 fewer premature deaths (7,000 under an alternative 
analysis),
     11,900 fewer visits to hospitals and emergency rooms for 
cardiovascular and respiratory symptoms,
     370,000 fewer days with asthma attacks, and
     2 million fewer lost work days.
    Using the alternative methodology, by 2020 Americans would 
experience 7,000 fewer premature deaths each year.
    Methodologies do not exist to quantify or monetize all the benefits 
of Clear Skies. Still, it is clear that the benefits far exceed the 
costs. EPA estimates that the health benefits we can quantify under 
Clear Skies are worth $93 billion annually by 2020--substantially 
greater than the annual costs of approximately $6.5 billion. An 
alternative approach projects annual health benefits of $11 billion, 
still significantly outweighing the costs. The Agency estimates an 
additional $3 billion in benefits from improving visibility at select 
National Parks and Wilderness Areas. These estimates do not include the 
many additional benefits that cannot currently be monetized but are 
likely to be significant, such as human health benefits from reduced 
risk of mercury emissions, and ecological benefits from improvements in 
the health of our forests, lakes, and coastal waters.
    Clear Skies would achieve most of these benefits by dramatically 
reducing fine particle pollution caused by SO2 and NOx 
emissions, which is a year-round problem. Of the many air pollutants 
regulated by EPA, fine particle pollution is perhaps the greatest 
threat to public health. Hundreds of studies in the peer reviewed 
literature have found that these microscopic particles can reach the 
deepest regions of the lungs. Exposure to fine particles is associated 
with premature death, as well as asthma attacks, chronic bronchitis, 
decreased lung function, and respiratory disease. Exposure is also 
associated with aggravation of heart and lung disease, leading to 
increased hospitalizations, emergency room and doctor visits, and use 
of medication.
    By reducing NOx emissions, Clear Skies also would reduce ozone 
pollution in the eastern part of the country and help keep ozone levels 
low in the western portion of the country. Ozone (smog) is a 
significant health concern, particularly for children and people with 
asthma and other respiratory diseases who are active outdoors in the 
summertime. Ozone can exacerbate respiratory symptoms, such as coughing 
and pain when breathing deeply, as well as transient reductions in lung 
function and inflammation of the lung. Ozone has also been associated 
with increased hospitalizations and emergency room visits for 
respiratory causes. Repeated exposure over time may permanently damage 
lung tissue.
    Current estimates indicate that more than 350 counties fail to meet 
the health-based fine particle and ozone standards. As a result, 45 
percent of all Americans live in counties where monitored air was 
unhealthy at times because of high levels of fine particles and 
ozone.\2\ Clear Skies, in combination with existing control programs, 
would dramatically reduce that number, as shown in Figure 1. In areas 
where attainment is not projected, Clear Skies would assist those areas 
in addressing the air quality problems. Even counties currently 
measuring attainment would benefit from the reductions under Clear 
Skies. Throughout the West, Clear Skies would hold emissions from power 
plants in check, preserving clean air in high-growth areas and 
preventing degradation of the environment, even as population and 
electricity demand increase.
    [See Attached Figure 1, Widespread Attainment with Fine Particle 
and Ozone Standards]
    Clear Skies would also reduce mercury emissions from power plants. 
EPA is required to regulate mercury because EPA determined that mercury 
emissions from power plants pose an otherwise unaddressed significant 
risk to health and the environment, and because control options to 
reduce this risk are available. Mercury, a potent toxin, can cause 
permanent damage to the brain and nervous system, particularly in 
developing fetuses when ingested in sufficient quantities. People are 
exposed to mercury mainly through eating fish contaminated with 
methylmercury.
    Mercury is released into the environment from many sources. Mercury 
emissions are a complex atmospheric pollutant transported over local, 
regional, national, and global geographic scales. EPA estimates that 60 
percent of the mercury falling on the U.S. is coming from current man-
made sources. Power generation remains the largest man-made source of 
mercury emissions in the United States. In 1999, coal-fired power 
plants emitted 48 tons of mercury (approximately 37 percent of man-made 
total). These sources also contribute 1 percent of mercury to the 
global pool.
    Mercury that ends up in fish may originate as emissions to the air. 
Mercury emissions are later converted into methylmercury by bacteria. 
Methylmercury accumulates through the food chain: fish that eat other 
fish can accumulate high levels of methylmercury. EPA has determined 
that children born to women who may have been exposed to high levels 
may be at some increased risk of potential adverse health effects. 
Prenatal exposure to such levels of methylmercury may cause 
developmental delays and cognitive impairment in children. Clear Skies 
will require a 69 percent reduction of mercury emissions from power 
plants.
    In addition to substantial human health benefits, Clear Skies would 
also deliver numerous environmental benefits. For example, under Clear 
Skies, we project that 10 million fewer pounds of nitrogen would enter 
the Chesapeake Bay annually by 2020, reducing potential for water 
quality problems such as algae blooms and fish kills. In fact, the 
Chesapeake Bay States, including NY, VA, MD, PA, DE, WV and DC, 
recently agreed to incorporate the nitrogen reductions that would 
result from Clear Skies legislation as part of their overall plan to 
reduce nutrient loadings to the Bay. Clear Skies would also accelerate 
the recovery process of acidic lakes, virtually eliminating chronic 
acidity in many Northeastern lakes. For decades fish in the Adirondacks 
have been decimated by acid rain, making many lakes completely 
incapable of supporting populations of fish such as trout and 
smallmouth bass. The Acid Rain Program has allowed some of these lakes 
and the surrounding forests to begin to recover; Clear Skies would 
achieve additional needed reductions. Clear Skies would also help other 
ecosystems suffering from the effects of acid deposition by preventing 
further deterioration of Southeastern streams. Finally, Clear Skies 
would improve visibility across the country, particularly in our 
treasured national parks and wilderness areas.
    Clear Skies is designed to ensure that these public health and 
environmental benefits are achieved and maintained. By relying on 
mandatory caps, Clear Skies would ensure that total power plant 
emissions of SO2, NOx and mercury would not increase over 
time. This is a distinct advantage over traditional command-and-control 
regulatory methods that establish source-specific emission rates but 
which allow total emissions to increase over time. Like the Acid Rain 
Program, Clear Skies would have much higher levels of accountability 
and transparency than most other regulatory programs. Sources would be 
required to continuously monitor and report all emissions, ensuring 
accurate and complete emissions data. If power plants emit more than 
allowed, financial penalties are automatically levied--without the need 
for an enforcement action. More importantly, every ton emitted over the 
allowed amount would have to be offset in the following year, ensuring 
no net environmental harm. This high level of environmental assurance 
is rare in existing programs; Clear Skies would make it a hallmark of 
the next generation of environmental protection.
Reasonable Costs and Energy Security for Consumers and Industry
    The President directed us to design Clear Skies to meet both our 
environmental and our energy goals. Under Clear Skies, electricity 
prices are expected to remain at or below current levels over the next 
decade. Our extensive economic modeling of the power industry looked at 
a broad array of factors to gauge the effects of Clear Skies on the 
energy industry--and they all show that cleaner air and energy security 
can go hand-in-hand.
    Clear Skies would maintain energy diversity. With Clear Skies, coal 
production for power generation would be able to grow by almost 10 
percent from 2000 to 2020 while air emissions are significantly 
reduced. EPA's extensive economic modeling for Clear Skies demonstrates 
that the proposal's emission reductions would be achieved primarily 
through retrofitting controls on existing plants. Clear Skies's 
timeframe and certainty enable the power sector to meet aggressive 
emission reduction targets without fuel switching. This is important 
not only to power generators and their consumers who want to continue 
to rely on our most abundant, reliable, affordable and domestically 
secure source of energy, but also to other consumers and industries 
whose livelihoods could be hurt by a rise in natural gas prices. Our 
analysis shows that Clear Skies would not cause a significant increase 
in natural gas prices.
    Under Clear Skies by 2010, about three-fourths of U.S. coal-fired 
generation is projected to come from units with billions of dollars of 
investment in advanced SO2 and/or NOx control equipment 
(such as scrubbers and Selective Catalytic Reduction, which also 
substantially reduce mercury emissions). In 2020, the percentage is 
projected to rise to 85 percent. Cost effective strategies and 
technologies for the control of sulfur dioxide and nitrogen oxides 
emissions exist now, and--thanks in good part to the Clear Skies 
market-based system--improved methods for these pollutants, and for 
mercury, are expected to become increasingly cost-efficient over the 
next several years. In fact, the Institute of Clean Air Companies 
forecasts that the U.S. markets for most technology sectors will remain 
fairly strong, adding momentum to the air pollution control technology 
industry. We expect that the Clear Skies Act will provide great 
benefits to American jobs in the engineering and construction 
industries.
    One of the key reasons Clear Skies would be cost-effective is its 
reliance on cap-and-trade programs. Like the Acid Rain Program upon 
which it is based, Clear Skies would give industry flexibility in how 
to achieve the needed emission reductions, which allows industry to 
make the most cost-effective reductions and pass those savings on to 
consumers. Power plants would be allowed to choose the pollution 
reduction strategy that best meets their needs (e.g., installing 
pollution control equipment, switching to lower sulfur coals, buying 
excess allowances from plants that have reduced their emissions beyond 
required levels). Like the Acid Rain program, Clear Skies includes 
banking provisions, enabling companies to save unused allowances for 
future use. Banking creates a tangible, quantifiable, economic 
incentive to decrease emissions beyond allowable levels, which EPA 
projects will result in significant early benefits due to over-
compliance in the initial years, particularly for SO2. It 
also leads to gradual emissions reductions over time, and therefore a 
less disruptive transition to tighter emission controls needed to 
address lingering problems. Based on past experience under the Acid 
Rain Program, by placing a monetary value on avoided emissions, Clear 
Skies would stimulate technological innovation, including efficiency 
improvements in control technology, and encourage early reductions.
Assistance to State and Local Governments
    Under the current Clean Air Act, state and local governments face 
the daunting task of meeting the new fine particle and ozone standards. 
Clear Skies would substantially reduce that burden. By making enormous 
strides toward attainment of the fine particle and ozone standards, 
Clear Skies would assist state and local governments in meeting their 
obligation under the Clean Air Act to bring areas into attainment with 
these health-based standards, and provide Americans with cleaner air.
    Clear Skies' assistance to states goes beyond ensuring that power 
plants will reduce their emissions. Clear Skies relies on a common-
sense principle--if a local air quality problem will be solved in a 
reasonable timeframe by the required regional reductions in power plant 
emissions, we should not require local areas to adopt local measures. 
Under Clear Skies, areas that are projected to meet the ozone and fine 
particles standards by 2015 as a result of Clear Skies would have a 
legal deadline of 2015 for meeting these standards (i.e., will have an 
attainment date of 2015). These areas would be designated 
``transitional'' areas, instead of ``nonattainment'' or ``attainment,'' 
and would not have to adopt local measures (except as necessary to 
qualify for transitional status). They would have reduced air quality 
planning obligations and would not have to administer more complex 
programs, such as transportation conformity, nonattainment New Source 
Review, or locally based progress or technology requirements in most 
circumstances.

           III. IMPROVING THE CLEAN AIR ACT WITH CLEAR SKIES

    Clear Skies would improve the Clean Air Act in a number of ways. It 
would build on the proven portions of the Clean Air Act--like the 
national ambient air quality standards and the Acid Rain Program--and 
reduce reliance on complex, less efficient requirements like New Source 
Review for existing sources. The mandatory emissions caps at the heart 
of Clear Skies guarantee that reductions will be achieved and 
maintained over time. In contrast, uncertainties with respect to 
regulatory development, litigation, and implementation time make it 
difficult to estimate how quickly and effectively current regulations 
would be implemented under the current Clean Air Act. The level of 
SO2 and NOx reductions we expect over the next decade with 
Clear Skies legislation could not be achieved under the existing Act. 
After that, we know that Clear Skies would achieve significant 
reductions, while both the timing and level of reductions under the 
current Clean Air Act are unclear.
Early Reductions
    One of the major reasons we need Clear Skies now is that adoption 
of Clear Skies would provide greater protection over the next decade 
than the traditional regulatory path. The Clear Skies Act will result 
in significant over-compliance in the early years, particularly for 
SO2, because sources are allowed to bank excess emissions 
reductions. For reasons described below, our analyses indicate that the 
cumulative SO2 and NOx emissions reductions achieved by 
Clear Skies over the next decade would not be achieved in the same 
timeframe under the current Clean Air Act. Last year's EPA estimates 
project that power plants would emit 35 million fewer tons of NOx and 
SO2 over the next decade under Clear Skies than they would 
under the current Clean Air Act--this more than doubles the reductions 
otherwise expected and would ensure significantly larger human health 
and environmental benefits. Our analysis suggests that the amount of 
pollution controls that the industry will have to install under Clear 
Skies over the next decade will stretch the limits of available labor 
and other construction resources, but can in fact be accomplished while 
maintaining energy reliability and continuing the downward trend in 
electricity prices.

Legislation Now Is Better than Regulation Followed by Years of 
        Litigation
    Even if Clear Skies is not passed by Congress, power plants will be 
required to reduce their emissions of SO2, NOx and mercury. 
There is no more cost effective way than Clear Skies to meet the 
requirements of the current Clean Air Act or to achieve our public 
health and environmental goals. We know that, absent new legislation, 
EPA and the states will need to take a number of regulatory actions, 
although it is unclear now when the requirements will come into effect 
or what their control levels will be.
    Clear Skies has several benefits over the regulatory scheme that 
will otherwise confront power generators. Clear Skies is designed to go 
into effect immediately upon enactment. Power plants would immediately 
understand their obligations to reduce pollution and would be rewarded 
for early action. As a result, public health and environmental benefits 
would begin immediately. Given Clear Skies' design, it is unlikely that 
litigation could delay the program (particularly since Congress would 
decide the two most controversial issues--the magnitude and timing of 
reductions). In contrast, under the current Clean Air Act, power plants 
would not know what their obligations would be until after EPA and 
states started and completed numerous rulemakings.
    Past experience suggests that litigation delays on the regulatory 
path are likely. Our experience with two cap-and-trade programs--the 
legislatively created Acid Rain Trading Program and the 
administratively created NOx SIP Call--illustrates the benefits of 
achieving our public health and environmental goals with legislation 
rather than relying solely on existing regulatory authority.
    Though we project a great deal of benefits will arise from 
implementation of the NOx SIP call, the journey has been difficult and 
is not yet over. The NOx SIP call was designed to reduce ozone-forming 
emissions by one million tons across the eastern United States. The 
rulemaking was based on consultations begun in 1995 among states, 
industry, EPA, and nongovernmental organizations. A Federal rule was 
finalized in 1998. As a result of litigation, one state was dropped and 
the 2003 compliance deadline was moved back for most states. Most 
states are required to comply in 2004, although two states will have 
until 2005 or later. Meanwhile, sources in these states continue to 
contribute to Eastern smog problems. Although the courts have largely 
upheld the NOx SIP Call, the litigation is not completely over. 
Industry and state challenges to the rules have made planning for 
pollution control installations difficult, raised costs to industry and 
consumers, and delayed health and environmental benefits.
    In contrast, reductions from the Acid Rain Program began soon after 
it passed (even before EPA finalized implementing regulations). There 
were few legal challenges to the small number of rules EPA had to 
issue--and none of the challenges delayed implementation of the 
program. The results of the program have been dramatic--and 
unprecedented. Compliance has been nearly 100 percent. Reductions in 
power plant SO2 emissions were larger and earlier than 
required, providing earlier human health and environmental benefits. 
Now, in the ninth year of the program, we know that the greatest 
SO2 emissions reductions were achieved in the highest 
SO2-emitting states; acid deposition dramatically decreased 
over large areas of the eastern United States in the areas where they 
were most critically needed; trading did not cause geographic shifting 
of emissions or increases in localized pollution (hot spots); and the 
human health and environmental benefits were delivered broadly. The 
compliance flexibility and allowance trading has reduced compliance 
costs by 75 percent from initial EPA estimates.
    [See 2001 Acid Rain Program Progress Report submitted for the 
record.]
    It is clear from this example that existing regulatory tools often 
take considerable time to achieve significant results, and can be 
subject to additional years of litigation before significant emissions 
reductions are achieved. Under this scenario, there are few incentives 
to reduce emissions until rules are final and litigation is complete, 
posing potentially significant delays in achieving human health and 
environmental benefits.
    The Clean Air Act contains several provisions under which EPA will 
be required to impose further emission controls on power plants in 
order to allow states to meet the new national ambient air quality 
standards (NAAQS) for PM2.5 and ozone. For example, Section 
126 of the Clean Air Act provides a petition process that states can 
use to force EPA to issue regulations to reduce emissions of 
SO2 and NOx from upwind sources, including power plants. A 
number of states have indicated that they intend to submit Section 126 
petitions in the near future. However, compared to Clear Skies, this 
approach will almost certainly involve years of litigation and 
uncertainty about reduction targets and timetables.
    Additional reductions are required from power plants through the 
regional haze rule's BART (Best Available Retrofit Technology) 
requirements and forthcoming mercury MACT (maximum achievable control 
technology) requirements. EPA is required to propose by the end of 2003 
a MACT standard for utility mercury emissions that must be met, plant-
by-plant, by every coal-fired utility with unit capacity above 25 
megawatts. EPA is required to finalize this rule by the end of 2004. 
The Act generally gives sources 3 years within which to comply with 
MACT standards. This compliance obligation could be delayed by a court 
if EPA's rule is challenged.
    Because these regulations will be the product of separate Federal, 
state and judicial processes, comparable health and environmental 
protection is likely to cost more under the current Clean Air Act than 
under Clear Skies. EPA estimates that a comprehensive, integrated 
approach relying on cap-and-trade programs could reduce costs by one 
fourth as compared to the regulatory approach achieving comparable 
emission reductions. These cost savings would be passed on to the 
public through lower electricity prices and greater profitability to 
investors and owners of electric generation.

New Source Review
    Some have suggested that Clear Skies is an attempt to undermine the 
Clean Air Act. This is simply not true. To achieve the next generation 
of environmental progress, we must build on the successful provisions 
in laws that have served us well--and learn from those provisions that 
have not served us well, or have had only limited success. New Source 
Review (NSR) is an example of a program that EPA and stakeholders have 
long recognized is not working well.
    There is a misconception that the principle goal of the NSR program 
is to reduce emissions from power plants. This is simply incorrect. 
Reducing emissions from power plants is the principle goal of Clear 
Skies. The NSR program is triggered only when facilities emitting large 
amounts of air pollution are built, and when modifications at these 
facilities result in significant increases in air pollution. The NSR 
program is not designed to result in nationwide reductions of air 
pollution from power plants. When it comes to reducing harmful air 
emissions from power plants, Clear Skies would accomplish more than 
NSR.
    Clear Skies would significantly modify the NSR program for power 
plants, but contain some important backstops. We expect that existing 
power plants would not have to go through NSR for modifications. New 
sources would no longer have to go through the entire NSR process, but 
some aspects of the process would still apply. Although we believe that 
with a tight cap on emissions, new sources will always install good 
controls, we did not want to run the risk that a new source would be 
uncontrolled. Therefore, as a backstop, Clear Skies would require all 
new power plants to meet New Source Performance Standards that are set 
in the statute.
    In addition, new power generators locating within 50 km of a Class 
I area (e.g., national parks or wilderness areas) would still be 
subject to the current NSR requirements for the protection of those 
areas. Finally, new power plants will also have to meet the current NSR 
requirements that they will not cause or contribute to a violation of 
the national ambient air quality standards.

                       IV. WINDOW OF OPPORTUNITY

    Because of the lessons learned over the last decade, there is 
increasing support for legislation such as Clear Skies that would 
significantly reduce and cap power plant emissions and create a market-
based system to minimize control costs. From environmental groups to 
coal companies, there is increasing broad-based support demonstrating 
that multipollutant legislation is a preferable path to cleaner air. 
Such an approach would address an array of air pollution concerns 
associated with power generation--including fine particles, smog, 
mercury deposition, acid rain, nitrogen deposition, and visibility 
impairment--at lower cost and with more certainty than currently 
allowed by the Clean Air Act.
    The Acid Rain Program is widely accepted as one of the most 
effective air pollution programs ever adopted and has consequently 
attracted worldwide attention and emulation. The Program's track record 
has encouraged Congress to consider broader applications of cap-and-
trade programs to address multiple air pollutants. The common elements 
of the proposals considered by Congress are mandatory caps on emissions 
of multiple pollutants from the power generation sector, implemented 
through allowance trading programs modeled after the Acid Rain Program.
    There is no better time for Congress to be considering 
multipollutant legislation. President Bush has indicated that Clear 
Skies is his top environmental priority. The number of proposals being 
considered by Congress also indicates a consensus behind the basic idea 
of a multipollutant cap-and-trade approach. The Large Public Power 
Council, Edison Electric Institute, Adirondack Council, and numerous 
individual utilities have all expressed support for the scope and 
framework of Clear Skies. If legislation passes quickly, we will begin 
achieving emissions reductions and related health benefits now. 
Congress needs to act now so that we do not lose a decade's worth of 
health and environmental benefits from reducing fine PM pollution, 
smog, acid deposition, nitrogen deposition, and regional haze. Further, 
as EPA continues to implement additional forthcoming regulations under 
the existing framework of the Act, the likelihood of our ability to 
pursue an integrated program diminishes--and with it diminish the 
numerous advantages that I have delineated today of an approach like 
Clear Skies.
    Legislation is also needed now to help states with their air 
quality planning and provide incentives for industry innovation, which, 
in turn, would lower costs and emissions. Such incentives are 
particularly compelling this year as we approach the task of reducing 
mercury emissions from the power industry. If designed correctly, 
legislation could provide the incentive that spurs technological 
innovation. When stringent yet flexible mechanisms exist, substantial 
technological improvements and steady reductions in control costs can 
be expected to follow.
    Congress obviously has much to consider as it weighs Clear Skies 
and other multipollutant proposals this year. We anticipate and welcome 
a rigorous and healthy debate on these issues.

                                 NOTES

    \1\ Except where otherwise noted, the projected emission levels, 
costs and benefits in this testimony are all based on analyses of the 
Clear Skies Act of 2002 conducted in 2002. EPA is currently analyzing 
the Clear Skies Act of 2003 using updated modeling assumptions and 
other updated information. We expect that the new analyses will be very 
similar to the 2002 analyses, but specific projections will likely 
change somewhat.
    \2\ These numbers are based on the most current monitoring data 
available to EPA. It is more current than the data that was available 
at the time that EPA conducted its analyses last year of the Clear 
Skies Act of 2002. The newer data confirms that we have serious air 
quality problems in many counties, but it shows improvement--fewer 
counties violating the ozone and fine particle standards. As a result, 
compared to last year's analyses, the new analyses may show less 
residual non-attainment (counties out of attainment in 2010 and 2020).

Statement of Hon. Kyle E. McSlarrow, Deputy Secretary, U.S. Department 
                         of Energy, May 8, 2003

    Mr. Chairman, I am pleased to appear before you today to discuss 
the Administration's National Energy Policy and to discuss why we think 
Clear Skies is a critical component of the President's strategy to 
confront our energy and environmental challenges.
    Though it is often overlooked, the President's National Energy 
Policy directed the Administrator of the Environmental Protection 
Agency to work with Congress to propose legislation that would 
establish a flexible, market-based program to significantly reduce and 
cap emissions of sulfur dioxide, nitrogen oxide, and mercury from 
electric power generators. The President's National Energy Policy 
concluded that, as our energy needs grow, additional innovations would 
be necessary to continue improving our environmental conditions. The 
success of the Clean Air Act Acid Rain program in promoting innovation 
and emission reductions is well known--especially by Members of this 
committee--and served as the template for the Clear Skies legislation 
now before this Committee.
    We are pleased that the Senate is now considering a comprehensive 
energy bill reported out of the Senate Energy committee, and commend 
Chairman Domenici and the members of his committee for acting so 
swiftly. And, we commend you, Mr. Chairman, and this committee for 
moving aggressively to consider the Clear Skies legislation.

                        INTRODUCTION AND OUTLOOK

    Over the past century, we have witnessed the power of energy to 
drive global economic development. In the 1970s, we learned firsthand 
how energy shortages and resulting high prices can compromise economic 
growth and the quality of life to which Americans have grown 
accustomed. Clearly, the availability of reliable, affordable energy is 
critical to sustained economic growth.
    We have a series of long-term energy challenges that require action 
now. These challenges are present along the entire energy continuum, 
affecting crude oil, refinery products, natural gas, electricity 
generation and transmission, the environment, and economic growth.
The Nation's Power Industry
    To understand the need for Clear Skies, 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, approximately 5,000 generating plants can make available up 
to 900,000 megawatts of electricity for virtually every home and 
business in the country. 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. 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 well into the future.
    The Nation's demand for electricity is projected to grow 
significantly over the next 22 years. Between now and 2025, the United 
States will likely have to add between 446,000 and 656,000 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. 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 electricity 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 associated with operating installed technologies 
that reduce air emissions.
    The investment has returned dividends. By installing new 
technologies to capture tiny particles of fly ash, the power industry 
has significantly improved air quality by dramatically reducing 
particulate matter. 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. Most of the nation's coal-fired plants have also installed 
nitrogen oxide controls that have helped make initial NOx reductions. 
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.
    At this point, let me review long-term energy trends--with a focus 
on natural gas and coal--which should help illustrate our challenges. 
My comments here are based on analyses prepared by the Department of 
Energy's independent analytical arm, the Energy Information 
Administration, in its Annual Energy Outlook 2003 (AEO 2003). All 
statistics are based on EIA's reference case scenario for the year 
2025, which assumes current laws and regulations, including the Eastern 
U.S. ozone SIP call, but not future regulations, such as those to 
implement the new Clean Air Act ozone and particulate matter standards 
or the mercury MACT standard. The reference case also assumes continued 
improvement in energy consuming and producing technologies, consistent 
with historic trends.
Natural Gas Trends
    The natural gas share of electricity generation is projected to 
increase from 17 percent in 2001 to 30 percent in 2025. By 2025, total 
natural gas consumption is expected to increase to almost 35 trillion 
cubic feet, which will amount to 26 percent of U.S. delivered energy 
consumption. Industrial consumption--the largest natural gas-consuming 
sector--is expected to increase by 3.4 trillion cubic feet over the 
forecast, driven primarily by economic growth. Combined consumption in 
the residential and commercial sectors is projected to increase by 2.6 
trillion cubic feet between 2001 and 2025, driven by increasing 
population and healthy economic growth, and accompanied by gradually 
rising prices in real terms. Natural gas remains the overwhelming 
choice for home heating throughout the forecast period. Natural gas 
consumption in the generation sector doubles by 2025 due to lower 
capital costs, higher efficiencies, lower construction lead times, and 
lower emissions.
    In the short term, domestic natural gas prices are expected to 
remain high in 2003 and are at risk for significant volatility through 
at least the next 12 to 18 months. EIA estimates that the current 
natural gas storage level is the lowest on record for this point in the 
annual cycle. As long as temperatures remain at or below normal this 
summer, natural gas storage levels should rise sharply over the coming 
months. But if this summer is hotter than normal, natural gas prices 
would jump as cooling demand would compete with the need to build 
storage inventories. A large rebound in the economy, poor results from 
the ongoing increase in natural gas drilling, or a continued tight oil 
market might also spur volatility.
    On that note, drilling for natural gas expected to increase 
substantially, but a fourth U.S. LNG terminal is expected to open this 
year at Cove Point, Maryland, and a Kern River Pipeline extension from 
the Rockies to the West Coast opened earlier this month--greatly 
increasing the capacity to move gas from a key producing area. In 2004, 
declining oil prices should ease natural gas prices, and strong natural 
gas drilling should increase productive capacity through the end of the 
year.
    Domestic gas production is expected to increase more slowly than 
consumption over the long-term forecast, rising from 19.4 trillion 
cubic feet in 2001 to 26.8 trillion cubic feet in 2025. The national 
average wellhead price is projected to reach $3.90 per thousand cubic 
feet, in 2001 dollars, by 2025.
    Increased U.S. natural gas production through 2025 is projected to 
come primarily from unconventional sources and from Alaska. 
Unconventional gas production increases by 4.1 trillion cubic feet over 
the forecast period--more than any other source, largely because of 
expanded tight sandstone gas production in the Rocky Mountain region. 
Annual production from unconventional sources is expected to account 
for 36 percent of production in 2025, compared to 28 percent today. An 
Alaska natural gas pipeline is projected to begin flowing gas to the 
lower 48 States in 2021, reaching 4.5 billion cubic feet per day in 
2023, with further expansion beginning in 2025. In 2025, total Alaskan 
gas production is projected to be 2.6 trillion cubic feet.
    Conventional onshore non-associated production is projected to 
increase by 1.2 trillion cubic feet over the forecast, driven by 
technological improvements and rising natural gas prices. However, its 
share of total production declines from 34 percent in 2001 to 29 
percent by 2025. Non-associated offshore production adds 560 billion 
cubic feet, with increased drilling activity in deep waters; however, 
its share of total U.S. production declines from 22 percent in 2001 to 
18 percent by 2025. Associated dissolved production declines by 800 
billion cubic feet, consistent with a projected decline in crude oil 
production. Lower 48 associated-dissolved natural gas is projected to 
account for 8 percent of U.S. natural gas production in 2025, compared 
with 15 percent in 2001.
    A key question facing producers and policymakers today is whether 
natural gas resources in the mature onshore lower 48 States have been 
exploited to a point at which lower discoveries per well eliminate the 
possibility of increasing--or even maintaining--current production 
levels at reasonable cost. Depletion has been counterbalanced 
historically by improvements in technology that have allowed gas 
resources to be discovered more efficiently and developed less 
expensively, have extended the economic life of existing fields, and 
have allowed natural gas to be produced from resources that previously 
were too costly to develop. In EIA's projection, technological progress 
for both conventional and unconventional recovery is expected to 
continue to enhance exploration and reduce costs. However, there is a 
significant debate within the industry itself as to whether this will 
occur.
    The difference between U.S. natural gas production and consumption 
is net imports. Net imports of natural gas, primarily from Canada, are 
projected to increase from 3.6 trillion cubic feet in 2001 to 7.8 
trillion cubic feet in 2025. Net imports contributed 16 percent to 
total natural gas supply in 2001, compared to an expected 22 percent in 
2025. Almost half of the increase in U.S. imports is expected to come 
from liquefied natural gas (LNG). By 2025, EIA expects expansion at the 
four existing terminals and construction of three new LNG terminals.
    Growth in pipeline imports from Canada partly depends on the 
completion of the MacKenzie Delta pipeline, which is expected to be 
completed in 2016 and expanded in 2023. Net imports from Canada are 
projected to provide 15 percent of total U.S. supply in 2025, about the 
same as in 2001. Mexico is projected to go from a net importer of U.S. 
natural gas to a net exporter in 2020, as an LNG facility begins 
operating in Baja California, Mexico, in 2019, predominantly serving 
the California market. By 2025, the United States is expected to import 
about 350 billion cubic feet of natural gas from Mexico per year.
Coal Trends
    The share of electricity generated from coal is projected to 
decline from 52 percent in 2001 to 47 percent in 2025 as a more 
competitive electricity industry invests in less capital-intensive and 
more efficient natural gas generation technologies. Nonetheless, coal 
remains the primary fuel for electricity generation through 2025, and 
EIA projects that 74 gigawatts of new coal-fired generating capacity 
will be constructed between 2001 and 2025.
    EIA's analysis here does not incorporate a projection of several 
Clean Air Act programs that could have a significant impact on the use 
of coal such as the mercury MACT. Although this rule has not been 
proposed, based on requirements of the Clean Air Act it is designed to 
require the control of mercury on a source by source basis by the end 
of 2007, which could be very costly and cause an even greater decline 
in the share of electricity generated by coal.
    EIA projects growing domestic consumption over the forecast 
horizon, and projects a simultaneous reduction in real coal prices to 
generators by approximately 12 percent by 2025. Average annual coal 
consumption is projected to increase by 1.3 percent per year between 
2001 and 2025. As domestic coal demand grows, U.S. coal production is 
projected to increase at an average rate of 1.0 percent per year.
    The decline in prices is driven by the expectation of continued 
improvements in labor productivity, and the continued market expansion 
of western coal, which has a lower minemouth price than eastern coals. 
As western production makes further inroads into markets traditionally 
supplied by eastern coal, the average heat content of the coals 
produced and consumed will drop as well, reflecting the lower thermal 
content per ton of western than eastern coals.

                PRESIDENT BUSH'S NATIONAL ENERGY POLICY

    We long ago ceased to fully provide for our petroleum needs 
domestically, and though most of our current natural gas demand can be 
met with North American production, the trend here is also toward a 
greater share for imported natural gas. And coal, our most abundant 
energy resource, is actually projected to reduce its percentage share 
of electricity generation.
    We are often at the mercy of events and decisions over which we 
have often limited--and sometimes no--control. When winters and summers 
are mild; when all refineries or pipelines are online; when supply from 
abroad is abundant and reliable; when prices are reasonable, we do not 
feel this dependency. However, when almost any one of these factors 
breaks down, markets react instantly, and we face the higher prices and 
volatility that have become by now an almost certain cyclical 
phenomenon.
    These trends are a concern.
    President Bush recognized that to prevent these problems from 
becoming a permanent, recurring feature of American life, we needed a 
long-term plan for energy security that would promote reliable, 
affordable and environmentally sound energy for the future.
    President Bush's National Energy Policy, released in May, 2001, 
reflected a few, fundamental principles. First, we need to maintain a 
diversity of fuels from a multiplicity of sources. Second, we should 
seek opportunities for increased investment, trade, exploration and 
development, which are increasing every year, far beyond the 
traditional markets of the last 50 years. And third, we should focus on 
research and development on initiatives that seek long-term solutions 
to our energy challenges, as we have done with energy efficiency, 
renewables, hydrogen, fusion, and nuclear energy, as well as the 
recently announced zero-emission FutureGen coal project.
    While these initiatives hold enormous promise for the future, we 
recognize the need for immediate actions to address the nation's 
growing energy demand. Clear Skies figures prominently on this list. 
I'd like to mention just a few of the actions currently underway, 
particularly those focused on ensuring adequate supplies of natural gas 
and electricity.
    To increase and diversify domestic supplies of natural gas, the 
Administration, among other actions, has streamlined the process by 
which permits are granted for important energy projects, such as 
pipelines and refineries, and accelerated the leasing of non-restricted 
Federal lands where environmentally appropriate.
    The Administration is encouraging new gas well investment by 
allowing for access to high quality resources and growth in pipeline 
delivery capability. We recognize that recoverable resources tend to be 
more difficult to develop and produce because the U.S. is a mature 
producing area. This increases ultimate supply costs, which requires 
ever increasing prices to be economically viable. A number of 
locations, such as portions of the Rocky Mountain area and the eastern 
Gulf of Mexico, are currently unavailable to exploration and 
development even though they are expected to contain substantial 
volumes of recoverable natural gas.
    Interstate pipelines have been expanding delivery capacity, but 
additional expansions are needed to satisfy expected market growth. In 
2002, 54 interstate pipeline projects were completed, adding about 12.8 
billion cubic feet of capacity per day throughout the U.S., and 
proposals for expansions in 2003 through 2005 have been announced for a 
number of pipelines. The gas pipeline network has grown extensively 
over the past decade to meet the increasing demand for gas and to 
accommodate diversified gas sources. Regulatory lags in obtaining 
authorization for expansions of pipeline capacity are being addressed 
by initiatives at the Federal Energy Regulatory Commission (FERC) aimed 
at streamlining this approval process.
    The Administration also strongly supports the construction of a 
commercially viable Alaska natural gas pipeline as a critical part of 
our energy security portfolio.
    The National Energy Policy also highlighted the growing need for 
attention to the nation's electricity markets and infrastructure. The 
Administration's overarching goal is to ensure that Americans have 
abundant, affordable, clean and secure electricity supplies, and we 
strongly believe that Clear Skies is a key component of meeting this 
goal, as is a comprehensive energy bill that includes a sound 
electricity title to modernize our Nation's antiquated wholesale 
electricity laws.
    The Administration believes that there really is only one viable 
policy choice: we must complete the transition to effective competition 
in wholesale power markets.
    Well-functioning markets will, we believe, lead to lower costs for 
consumers and businesses. But there is more than simply the benefit of 
lower prices. A well-functioning market brings its own rewards. As 
confidence is gained that the system is reliable and capable of coping 
with high-demand for electricity, there will increasingly be less need 
for restrictive and prescriptive regulation. And that is the point when 
much-needed investment is likely to be attracted--investment in new 
technologies, and in improved generation and transmission facilities 
that produce additional energy and environmental benefits.
    When the opposite is true--when uncertainty reigns, when 
reliability is questioned, when prices seem detached from market 
forces--investment vanishes.
    The present uncertainty in the wholesale electricity market is not 
simply affected by policy choices that center on transmission assets 
and market designs. The uncertainty extends to the generation of 
electricity itself. That is why it is important to provide greater 
regulatory certainty about the kinds of investment choices that the 
generating industry will have to make over the next two decades.
    We believe that the President's Clear Skies proposal does just 
that.

                     S. 485 CLEAR SKIES ACT OF 2003

    In 2000, 39 percent of the total energy consumed in the U.S. was 
for power generation. Since 1975, total U.S. energy use has grown by 
about 1.1 percent per year, while GDP and electricity consumption have 
grown by nearly 3 percent per year. We project future electricity 
growth to be somewhat less, below 2 percent per year, but it is clear 
that electricity is either the fuel of choice or fuel of necessity for 
many applications.
    Our electric power is among the lowest in cost of any free market 
society. Low cost electricity is part of America's competitive edge in 
international markets. Cheap power translates to prosperity and 
available resources to overcome problems in many areas unrelated to 
energy but essential to our quality of life. A major reason that 
electricity in the U.S. is relatively inexpensive is that roughly one-
half of our generation comes from coal.
    S. 485, the Clear Skies Act of 2003, is a multi-pollutant, market-
based cap and trade program that will reduce power plant emissions of 
sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury by 
approximately 70 percent from today's levels--and do it faster, with 
more certainty, and at less cost to American consumers than would 
current law.
    Flexibility of compliance choices, maintenance of fuel diversity, 
and the cost savings passed on to consumers through lower electricity 
prices are among the benefits of the approach taken in Clear Skies, 
particularly when compared with other proposals that support more 
stringent targets, shorter compliance periods, or command and control 
regulatory approaches. The cap-and-trade system of emission reductions 
used in S. 485 should translate into reduced impacts on fuel markets--
in particular, coal and gas--than equivalent emission reductions 
achieved through other approaches.
    The Clear Skies Act substantially expands one of the most 
successful Clean Air Act programs--the Acid Rain Program--and reduces 
the need to rely on complex and less efficient programs. Power plants 
would be allowed to choose the pollution reduction strategy that best 
meets their needs (e.g., installing pollution control equipment, 
switching to lower sulfur or mercury coals, buying excess allowances 
from plants that have reduced their emissions beyond required levels). 
And like the Acid Rain program, Clear Skies includes banking 
provisions, enabling companies to save unused allowances for future 
use. The result would be significant nationwide human health and 
environmental benefits; certainty for industry, states and citizens; 
energy security; and continuing low costs to consumers.
    S. 485 establishes a coordinated timeline for control of major 
emissions that provides adequate time to attract investment funds and 
avoids premature retirement of working capital. The patchwork of 
existing and soon-to-be-implemented regulations under the Clean Air 
Act, coupled with the delays bred by continuous litigation over them, 
has created enormous uncertainty for utilities, co-ops, and municipal 
generators. This uncertainty has curtailed investments in technology 
that would reduce emissions at existing plants and prevented numerous 
new facilities from coming online. Clear Skies provides industry with 
the time needed to attract capital necessary to reduce emissions 
without jeopardizing energy security.

                     ENERGY IMPACTS OF CLEAR SKIES

    It is difficult to quantify what the cost or energy impacts will be 
if multipollutant legislation is not enacted. The EIA ``baseline'' 
includes all future legislation and regulations that have been 
specified, but does not include regulations that have not yet been 
promulgated. We know that in the absence of S. 485, mercury regulations 
will be promulgated by December 2004. But we do not know what those 
regulations will require; that knowledge will come only after a lengthy 
rulemaking process. We can anticipate that additional reductions in 
SO2 and NOx will be required to attain ambient air quality 
standards for fine particulate matter. But we do not know what those 
regulations will be. We can anticipate additional regulations to reduce 
regional haze, but again, we do not know what those regulations will 
require.
    What we should be concerned with is this: uncertainty, delay, and 
litigation are not likely to produce greater environmental benefits; 
they instead are likely to lead to more costly solutions, and they risk 
affecting the energy fuel mix in ways that are unwarranted and 
unforeseen.
    Although we have not contrasted Clear Skies to this unknown 
regulatory future, we have compared it to a future predicated on 
current control programs. Under Clear Skies, natural gas consumption, 
which is projected to increase from 23 to 35 trillion cubic feet of gas 
in our baseline projection to 2025, increases to 36 trillion cubic feet 
per year in 2025. However, we do not project that a significant change 
in natural gas supply is needed due to the implementation of Clear 
Skies. Wellhead natural gas prices follow the baseline pattern, after 
decreasing from the unusually high prices that occurred in 2001.
    Clear Skies helps maintain coal as an important fuel source, 
thereby avoiding excessive pressure on natural gas prices. In our 
baseline projection, coal consumption would increase about 38 percent 
through 2025. Under S. 485, we project approximately a 26 percent 
increase.
    EIA projects that electricity prices will be lower throughout the 
projection period than in 2001, for both the baseline scenario and 
under S. 485. The effect of the emission reductions is roughly a 0.3 
cent per kilowatt-hour price increase above the baseline in 2025.
    One of the concerns we have is in the ever-increasing reliance on 
natural gas for generation of electricity. As I have noted previously, 
this is primarily a function of efficiency and costs, but because our 
marginal supply of natural gas will increasingly come from imported LNG 
we should be concerned that we not place too much stress on natural gas 
supply by forcing a level of fuel switching from coal to gas that leads 
to higher volatility and higher prices. Natural gas supply as a low-
cost and reliable source of electricity is not automatic--one has only 
to witness the winters of 2000-2001, and 2002-2003 to see the point.
    In both the near and long term, the price of a commodity like 
natural gas is determined by the interaction of supply and demand. 
However, the determinants of supply and demand in the near term can be 
quite different than the factors that determine prices in the long 
term. In the near term, factors such as weather related increases in 
demand, storage levels, productive capacity at the wellhead, and 
disruptions in supply lines can be paramount because of the difficulty 
of quickly increasing the number of producing wells. Long-term market 
conditions, however, depend more on such factors as:
     The ability of markets to respond to price increases with 
adequate investments in new wells;
     Continuing availability of alternative fuels for 
generation;
     A viable market for imported gas;
     The continued development of new technologies; and
     Emissions reductions required under future regulation
    The difference in what affects natural gas prices in the near term 
versus long term has important policy implications. We have to 
recognize that in the short run it is hard to do much about natural gas 
supply. From the time natural gas prices spike, the industry rule of 
thumb is that it takes 6-18 months for production to increase. And, 
unlike oil, there is currently no large international spot market in 
liquefied natural gas to moderate gas supply scarcity.
    The elasticity of natural gas demand plays a significant role in 
price volatility. Because many users cannot switch to alternative fuels 
quickly, demand tends to be more inelastic in the short run. Inelastic 
demand means that small changes in demand lead to significantly higher 
prices than under less inelastic demand. Demand becomes less elastic as 
electric generators or industrial users lose their ability to switch to 
another fuel or as any user loses the ability to reduce consumption in 
response to higher prices.
    It is, therefore, critically important that we maintain a balanced 
diversity of fuels to provide low-cost and abundant electricity. And 
the key to this is that we not assume that all policy objectives can 
simply be achieved with unlimited reliance on natural gas.

                          THE ROLE OF RESEARCH

    One of DOE's fundamental missions is the advancement of energy-
related technology. I would be remiss if I did not emphasize again that 
the projections I have presented today assume only a continuation of 
historic trends in technology evolution. We have the ability to change 
those trends through dramatic technology improvements. We intend to do 
exactly that.
    The President has launched a suite of relevant technology 
initiatives: FreedomCAR and the Hydrogen Fuel Initiative (the hydrogen/
fuel cell vehicle and infrastructure program), FutureGen (a program to 
develop a zero-emission coal-based power plant, coproducing low-cost 
hydrogen and sequestering CO2), and fusion electric power 
plants. Success in these areas will dramatically change the energy, 
economic, and environmental future of the Nation.
    The future role of coal in our energy mix may also be highly 
sensitive to the success we have in our program to improve Integrated 
Gasification Combined Cycle (IGCC) technology, an inherently clean way 
to produce power from coal. This technology has already been 
demonstrated at commercial scale, but additional support is being 
provided by DOE to enhance its efficiency, reduce technological risk, 
and drive down capital costs. In addition, as I mentioned earlier, we 
are also pursuing R&D targeted specifically on one of the tougher 
challenges in Clear Skies--mercury control.

                               CONCLUSION

    In conclusion, we believe that Clears Skies, which provides a range 
of benefits--improved health, cleaner air, and economic efficiency--is 
the best approach to address our dual energy and environmental 
challenges. Clear Skies avoids the more serious economic consequences 
of other approaches to cleaner air and provides market-based 
flexibility to the energy sector. Clear Skies, combined with our many 
other efforts to develop new, reliable, and secure sources of energy, 
will deliver significant environmental protection. It will help us to 
achieve our national goal of abundant, affordable, and clean sources of 
energy by maintaining fuel diversity and by providing greater 
regulatory certainty.
                               __________

     Statement of Jeffrey Holmstead, Assistant Administrator, U.S. 
             Environmental Protection Agency, July 8, 2003

                            I. INTRODUCTION

    Thank you, Mr. Chairman and Members of the Committee for the 
opportunity to speak with you today about the Clear Skies Act of 2003. 
Based on one of the most successful programs created by the Clean Air 
Act, Clear Skies is a proposal to substantially reduce emissions of the 
three most harmful pollutants from power generation--and to do so in a 
way that is much faster and more efficient than under current law.
    As President Bush said in the State of the Union Address, Clear 
Skies will advance our goal of ``promot[ing] energy independence for 
our country, while dramatically improving our environment.'' The 
Administration is committed to working with this Subcommittee and 
Congress to pass legislation this year. The widespread support for 
multi-pollutant legislation to reduce power plant emissions is a strong 
indicator that the time for action on this critical issue is now. 
Failure to enact Clear Skies this year will delay important public 
health and environmental benefits.
    This country should be very proud of the progress we have already 
made in cleaning up our air. According to the Environmental Protection 
Agency's (EPA) first Draft Report on the Environment, since the Clean 
Air Act was first enacted in 1970, total national emissions of the six 
most common air pollutants have been reduced 25 percent. Remarkably, 
this improvement in national air quality has occurred even while, 
during the same 30-year period, the U.S. Gross Domestic Product 
increased 161 percent, energy consumption increased 42 percent, and 
vehicle miles traveled increased 149 percent.
    Although we have made much progress since 1970, we still face major 
air quality challenges in many parts of the country. Clear Skies is the 
most important next step we can take to address these challenges and 
achieve healthy air and a clean environment for all Americans. Clear 
Skies would make great strides toward solving our remaining air quality 
problems in a way that also advances national energy security and 
promotes economic growth. It would reduce power plant emissions of 
sulfur dioxide (SO2), nitrogen oxides (NOx) and mercury by 
approximately 70 percent from today's levels and do it faster, with 
more certainty, and at less cost to American consumers than would 
current law. With Clear Skies, power plants would emit far less over 
the next decade than they would under the current Clean Air Act. 
Because of the innovative cap-and-trade approach used in Clear Skies, 
power plants would have an incentive to start reducing emissions as 
soon as Clear Skies is passed, resulting in emissions reductions more 
quickly than required.
    EPA recently updated our analyses of Clear Skies using the most 
recent air quality data, population census information, and modeling 
techniques. This modeling represents the most sophisticated, 
comprehensive, detailed national modeling EPA has ever produced. These 
analyses reaffirm that Clear Skies would greatly reduce air pollution 
from power plants while ensuring a reliable, affordable supply of 
electricity.
    When fully implemented, Clear Skies would deliver tens of billions 
of dollars in annual health benefits, prolong thousands of lives and 
prevent millions of illnesses each year, provide billions of dollars of 
economic benefits, and save millions of dollars in health care costs. 
The added benefit of Clear Skies would virtually assure attainment of 
the new ozone and particulate matter standards for much of this 
country, providing air that meets the new, more protective health-based 
national air quality standards to millions of people. Achieving the 
national standards has been a problem that has plagued our nation's 
communities for decades. Clear Skies would also virtually eliminate 
chronic acidity in northeastern lakes, reduce nitrogen loading in 
coastal waters, and help restore visibility in our national parks and 
wilderness areas.
    The Clean Air Act has been, and continues to be, a vehicle for 
great progress in improving the health and welfare of the American 
people. The Clear Skies Act substantially expands one of the most 
successful Clean Air Act programs--the Acid Rain Program--and reduces 
the need to rely on complex and less efficient programs. The result 
would be significant nationwide human health and environmental 
benefits; certainty for industry, states and citizens; energy security; 
and continuing low costs to consumers.

             II. CLEAR SKIES PROVIDES SIGNIFICANT BENEFITS

    The heart of Clear Skies is a proven cap-and-trade approach to 
emissions reductions. Mandatory caps restrict total emissions and 
decline over time. When fully implemented, Clear Skies would result in 
a 70 percent reduction in emissions of SO2, NOx and mercury 
from today's levels. Clear Skies would continue the existing national 
cap-and-trade program for SO2, but dramatically reduce the 
cap from 9 million to 3 million tons. Clear Skies would also use a 
national cap-and-trade program for mercury that would reduce emissions 
from the current level of about 48 tons to a cap of 15 tons, and would 
employ two regional cap-and-trade programs for NOx to reduce emissions 
from current levels of 5 million tons to 1.7 million tons.
    Although national in scope, Clear Skies recognizes and adjusts for 
important regional differences in both the nature of air pollution and 
the relative importance of emissions from power generation. The eastern 
half of the country needs reductions in NOx emissions to help meet the 
ozone and fine particle standards, which generally are not a regional 
issue in the western half of the county (with the exception of 
California, which does not have significant emissions from existing 
coal-fired power plants). The western half of the country needs NOx 
reductions primarily to reduce the regional haze that mars scenic 
vistas in our national parks and wilderness areas, and the nitrogen 
deposition that harms fragile forests. Recognizing these regional 
differences, Clear Skies would establish two trading zones for NOx 
emissions and prohibit trading between the zones to ensure that the 
critical health-driven goals in the East are achieved.
    Clear Skies also recognizes the special visibility protection 
measures that have been developed by states participating in the 
Western Regional Air Partnership (WRAP). Clear Skies would essentially 
codify the WRAP's separate SO2 backstop cap-and-trade 
program, which would come into effect only if the WRAP states did not 
meet their 2018 SO2 emissions targets.
    Finally, Clear Skies requires tough, technology-based new source 
standards on all new power generation projects and maintains special 
protections for national parks and wilderness areas when sources locate 
within 50 km of ``Class I'' national parks and wilderness areas.
Significant Public Health and Environmental Benefits
    The public health and environmental benefits of Clear Skies present 
compelling reasons for its immediate passage. EPA's new analysis 
projects that, by 2010, reductions in fine particle and ozone levels 
under Clear Skies would result in billions of dollars in health and 
visibility benefits nationwide each year, including prolonging as many 
as 7,900 lives annually. Using an alternative methodology, Clear Skies 
would prolong 4,700 lives annually by 2010. EPA's base methodology for 
calculating benefits shows that Americans would experience significant 
health benefits each year by 2020, including:
     14,100 fewer premature deaths;
     8,800 fewer cases of chronic bronchitis;
     23,000 fewer non-fatal heart attacks;
     30,000 fewer visits to hospitals and emergency rooms for 
cardiovascular and respiratory symptoms, including asthma attacks; and
     12.5 million fewer days with respiratory illnesses and 
symptoms.
    Using an alternative methodology, by 2020 Americans would 
experience 8,400 fewer premature deaths each year.
    We have not developed methodologies for quantifying or monetizing 
all the expected benefits of Clear Skies. Still, under all of our 
analytical approaches, it is clear that the benefits far exceed the 
costs. EPA estimates that the monetized value of the health benefits we 
can quantify under Clear Skies would be $110 billion annually by 2020--
substantially greater than the projected annual costs of approximately 
$6.3 billion. An alternative approach projects annual health benefits 
of $21 billion, still significantly outweighing the costs. The Agency 
estimates an additional $3 billion in benefits from improving 
visibility at select national parks and wilderness areas. These 
estimates do not include the many additional benefits that cannot 
currently be monetized but are likely to be significant, such as human 
health benefits from reduced risk of mercury emissions, and ecological 
benefits from improvements in the health of our forests, lakes, and 
coastal waters.
    Clear Skies would achieve most of these benefits by dramatically 
reducing fine particle pollution caused by SO2 and NOx 
emissions, which is a year-round problem. Of the many air pollutants 
regulated by EPA, fine particle pollution is perhaps the greatest 
threat to public health. Hundreds of studies in the peer-reviewed 
literature have found that these microscopic particles can reach the 
deepest regions of the lungs. Exposure to fine particles is associated 
with premature death, as well as asthma attacks, chronic bronchitis, 
decreased lung function, and respiratory disease. Exposure is also 
associated with aggravation of heart and lung disease, leading to 
increased hospitalizations, emergency room and doctor visits, and use 
of medication.
    By reducing NOx emissions, Clear Skies also would reduce ozone 
pollution in the eastern part of the country and help keep ozone levels 
low in the western portion of the country. Ozone (smog) is a 
significant health concern, particularly for children and people with 
asthma and other respiratory diseases who are active outdoors in the 
summertime. Ozone can exacerbate respiratory symptoms, such as coughing 
and pain when breathing deeply, as well as transient reductions in lung 
function and inflammation of the lung. Ozone has also been associated 
with increased hospitalizations and emergency room visits for 
respiratory causes. Repeated exposure over time may permanently damage 
lung tissue.
    Clear Skies would help move us from a situation where nearly every 
major urban area is projected to be out of attainment with the ozone 
and fine particle standards, to a scenario where only a few major 
cities would continue to have nonattainment problems. Based on current 
data (1999-2001 data), 129 counties nationwide (114 counties in the 
East) currently exceed the fine particle standard and 290 counties 
nationwide (268 counties in the East) currently exceed the new ozone 
standard. As a result, 45 percent of all Americans live in counties 
where monitored air was unhealthy at times because of high levels of 
fine particles and ozone. Clear Skies would dramatically reduce that 
number. By 2020, the combination of Clear Skies, EPA's proposed rule to 
decrease emissions from nonroad diesel engines, and other existing 
state and Federal control programs, such as pollution controls for cars 
and trucks, would bring all but 18 counties nationwide (including only 
8 counties in the East) into attainment with the fine particle 
standards and all but 27 counties nationwide (including only 20 
counties in the East) into attainment with the ozone standards. Even in 
the few areas that would not attain the standards, Clear Skies would 
significantly improve air quality. This would make it easier for state 
and local areas to achieve the new ozone and fine particle standards. 
Throughout the West, Clear Skies would hold emissions from power plants 
in check, preserving clean air in high-growth areas and preventing 
degradation of the environment, even as population and electricity 
demand increase.
    [See Attached Figures 1 and 2, Attainment with Fine Particle and 
Ozone Standards]
    Clear Skies would also reduce mercury emissions from power plants. 
EPA is required to regulate mercury because EPA determined that mercury 
emissions from power plants pose an otherwise unaddressed significant 
risk to health and the environment, and because control options to 
reduce this risk are available. Mercury, a potent toxin, can cause 
permanent damage to the brain and nervous system, particularly in 
developing fetuses when ingested in sufficient quantities. People are 
exposed to mercury mainly through eating fish contaminated with 
methylmercury.
    Mercury is released into the environment from many sources. Mercury 
emissions are a complex atmospheric pollutant transported over local, 
regional, national, and global geographic scales. EPA estimates that 60 
percent of the mercury falling on the U.S. is coming from current man-
made sources. Power generation remains the largest man-made source of 
mercury emissions in the United States. In 1999, coal-fired power 
plants emitted 48 tons of mercury (approximately 37 percent of man-made 
total). These sources also contribute 1 percent of mercury to the 
global pool.
    Mercury that ends up in fish may originate as emissions to the air. 
Mercury emissions are later converted into methylmercury by bacteria. 
Methylmercury accumulates through the food chain: fish that eat other 
fish can accumulate high levels of methylmercury. EPA has determined 
that children born to women who may have been exposed to high levels 
may be at some increased risk of potential adverse health effects. 
Prenatal exposure to such levels of methylmercury may cause 
developmental delays and cognitive impairment in children. Clear Skies 
will require a 69 percent reduction of mercury emissions from power 
plants.
    In addition to substantial human health benefits, Clear Skies would 
also deliver numerous environmental benefits. Nitrogen loads to the 
Chesapeake Bay and other nitrogen sensitive estuaries would be reduced, 
reducing potential for water quality problems such as algae blooms and 
fish kills. In fact, the Chesapeake Bay States, including NY, VA, MD, 
PA, DE, WV and DC, recently agreed to incorporate the nitrogen 
reductions that would result from Clear Skies legislation as part of 
their overall plan to reduce nutrient loadings to the Bay. Clear Skies 
would also accelerate the recovery process of acidic lakes, eliminating 
chronic acidity in all but 1 percent of Northeastern lakes by 2030. For 
decades fish in the Adirondacks have been decimated by acid rain, 
making many lakes completely incapable of supporting populations of 
fish such as trout and smallmouth bass. The Acid Rain Program has 
allowed some of these lakes and the surrounding forests to begin to 
recover; Clear Skies would eliminate chronic acidity in Adirondack 
region lakes by 2030. Clear Skies would also help other ecosystems 
suffering from the effects of acid deposition by preventing further 
deterioration of Southeastern streams. Finally, Clear Skies would 
improve visibility across the country, particularly in our treasured 
national parks and wilderness areas, resulting in improvements of 
approximately two to seven miles in visual range in many areas. For 
example, in the Southeast, Clear Skies would improve the visual range 
by two to four miles.
    Clear Skies is designed to ensure that these public health and 
environmental benefits are achieved and maintained. By relying on 
mandatory caps, Clear Skies would ensure that total power plant 
emissions of SO2, NOx and mercury would not increase over 
time. This is a distinct advantage over traditional command-and-control 
regulatory methods that establish source-specific emission rates but 
which allow total emissions to increase over time. Like the Acid Rain 
Program, Clear Skies would have much higher levels of accountability 
and transparency than most other regulatory programs. Sources would be 
required to continuously monitor and report all emissions, ensuring 
accurate and complete emissions data. If power plants emit more than 
allowed, financial penalties are automatically levied--without the need 
for an enforcement action. More importantly, every ton emitted over the 
allowed amount would have to be offset in the following year, ensuring 
no net environmental harm. This high level of environmental assurance 
is rare in existing programs; Clear Skies would make it a hallmark of 
the next generation of environmental protection.

Reasonable Costs and Energy Security for Consumers and Industry
    The President directed us to design Clear Skies to meet both our 
environmental and our energy goals. Under Clear Skies, electricity 
prices are not expected to be significantly impacted. Our extensive 
economic modeling of the power industry looked at a broad array of 
factors to gauge the effects of Clear Skies on the energy industry--and 
they all show that cleaner air and energy security can go hand-in-hand.
    Clear Skies would maintain energy diversity. With Clear Skies, coal 
production for power generation would be able to grow by 10 percent 
from 2000 to 2020 while air emissions are significantly reduced. EPA's 
extensive economic modeling for Clear Skies demonstrates that the 
proposal's emission reductions would be achieved primarily through 
retrofitting controls on existing plants. Clear Skies's timeframe and 
certainty enable the power sector to meet aggressive emission reduction 
targets without fuel switching. This is important not only to power 
generators and their consumers who want to continue to rely on our most 
abundant, reliable, affordable and domestically secure source of 
energy, but also to other consumers and industries whose livelihoods 
could be hurt by a rise in natural gas prices. Our analysis shows that 
Clear Skies would have little effect on natural gas prices.
    Under Clear Skies by 2010, more than two-thirds of U.S. coal-fired 
generation is projected to come from units with billions of dollars of 
investment in advanced SO2 and/or NOx control equipment 
(such as scrubbers and Selective Catalytic Reduction, which also 
substantially reduce mercury emissions). In 2020, the percentage is 
projected to rise to over 80 percent. Cost effective strategies and 
technologies for the control of sulfur dioxide and nitrogen oxides 
emissions exist now, and--thanks in good part to the Clear Skies 
market-based system--improved methods for these pollutants, and for 
mercury, are expected to become increasingly cost-efficient over the 
next several years. In fact, the Institute of Clean Air Companies 
forecasts that the U.S. markets for most technology sectors will remain 
fairly strong, adding momentum to the air pollution control technology 
industry. We expect that the Clear Skies Act will provide great 
benefits to American jobs in the engineering and construction 
industries.
    One of the key reasons Clear Skies would be cost-effective is its 
reliance on cap-and-trade programs. Like the Acid Rain Program upon 
which it is based, Clear Skies would give industry flexibility in how 
to achieve the needed emission reductions, which allows industry to 
make the most cost-effective reductions and pass those savings on to 
consumers. Power plants would be allowed to choose the pollution 
reduction strategy that best meets their needs (e.g., installing 
pollution control equipment, switching to lower sulfur coals, buying 
excess allowances from plants that have reduced their emissions beyond 
required levels). Like the Acid Rain program, Clear Skies includes 
banking provisions, enabling companies to save unused allowances for 
future use. Banking creates a tangible, quantifiable, economic 
incentive to decrease emissions beyond allowable levels, which EPA 
projects will result in significant early benefits due to over-
compliance in the initial years, particularly for SO2. It 
also leads to gradual emissions reductions over time, and therefore a 
less disruptive transition to tighter emission controls needed to 
address lingering problems. Based on past experience under the Acid 
Rain Program, by placing a monetary value on avoided emissions, Clear 
Skies would stimulate technological innovation, including efficiency 
improvements in control technology, and encourage early reductions.
    EPA's models, however, do not predict this technological 
innovation. The updated analyses show that mercury control costs would 
be higher than were estimated last year. We are still in the early 
stages of understanding how different technologies will affect mercury 
emissions from power plants because mercury is not currently regulated 
in the power sector. There is an ongoing dynamic research process 
sponsored by EPA, the Department of Energy (DOE), the Electric Power 
Research Institute (EPRI), and vendors specifically aimed at furthering 
our understanding of mercury control, with new data being made 
available on a continuous basis.
    Over the last year, both EPA and DOE's Energy Information Agency 
(EIA) used updated information to reassess what mercury emissions 
levels would be in 2010 after installation of NOx and SO2 
controls necessary to meet the Clear Skies' SO2 and NOx caps 
(NOx and SO2 control equipment also reduce some mercury 
emissions--i.e., ``cobenefit'' reductions). Due to differences in 
assumptions and models, the Administration estimates that these mercury 
emissions would range from 34 to 46 tons. EIA's and EPA's updated 
analyses estimate the incremental cost now of complying with the 2010 
cap to be $650 to $750 million per year.
    A key feature of understanding this cost is the Clear Skies' safety 
valve provision that sets a maximum cost of $35,000 per pound of 
mercury emissions. The safety valve is designed to minimize 
unanticipated market volatility and provide more market information 
that industry can rely on for compliance decisions. The updated 
modeling projects that the safety valve provision would be triggered if 
technology does not improve in the future (the modeling does not 
include any assumptions about how technology will improve). If the 
safety valve is triggered, EPA will borrow allowances from the 
following year's auction to make more allowances available at the 
safety valve price. The future year cap is reduced by the borrowed 
amount, and the emissions reductions are ultimately achieved.
    EPA believes that, as technology develops, the cost of mercury 
controls will decrease. If it does not, the new analyses project 
greater mercury emissions in 2020 than did the 2002 analyses due to the 
triggering of the safety valve.

Assistance to State and Local Governments
    Under the current Clean Air Act, state and local governments face 
the daunting task of meeting the new fine particle and ozone standards. 
Clear Skies would substantially reduce that burden. By making enormous 
strides toward attainment of the fine particle and ozone standards, 
Clear Skies would assist state and local governments in meeting their 
obligation under the Clean Air Act to bring areas into attainment with 
these health-based standards, and provide Americans with cleaner air.
    As noted previously, the combination of Clear Skies, EPA's proposed 
rule to decrease emissions from nonroad diesel engines, and other 
existing state and Federal control programs--such as pollution controls 
for cars and trucks--would, by 2020, bring all but 18 counties 
nationwide (including only 8 counties in the East) into attainment with 
the fine particle standards and all but 27 counties nationwide 
(including only 20 counties in the East) into attainment with the ozone 
standards. Even in the few areas that would not attain the standards, 
Clear Skies would significantly improve air quality. This would make it 
easier for state and local areas to reach the ozone and fine particle 
standards.
    Clear Skies' assistance to states goes beyond ensuring that power 
plants will reduce their emissions. Clear Skies relies on a common-
sense principle--if a local air quality problem will be solved in a 
reasonable timeframe by the required regional reductions in power plant 
emissions, we should not require local areas to adopt local measures. 
Under Clear Skies, areas that are projected to meet the ozone and fine 
particles standards by 2015 as a result of Clear Skies would have a 
legal deadline of 2015 for meeting these standards (i.e., will have an 
attainment date of 2015). These areas would be designated 
``transitional'' areas, instead of ``nonattainment'' or ``attainment,'' 
and would not have to adopt local measures (except as necessary to 
qualify for transitional status). They would have reduced air quality 
planning obligations and would not have to administer more complex 
programs, such as transportation conformity, nonattainment New Source 
Review, or locally based progress or technology requirements in most 
circumstances.

           III. IMPROVING THE CLEAN AIR ACT WITH CLEAR SKIES

    Clear Skies would improve the Clean Air Act in a number of ways. It 
would build on the proven portions of the Clean Air Act--like the 
national ambient air quality standards and the Acid Rain Program--and 
reduce reliance on complex, less efficient requirements like New Source 
Review for existing sources. The mandatory emissions caps at the heart 
of Clear Skies guarantee that reductions will be achieved and 
maintained over time. In contrast, uncertainties with respect to 
regulatory development, litigation, and implementation time make it 
difficult to estimate how quickly and effectively current regulations 
would be implemented under the current Clean Air Act. The level of 
SO2 and NOx reductions we expect by 2010 with Clear Skies 
legislation would not be achieved under the existing Act. After that, 
we know that Clear Skies would achieve significant reductions, while 
both the timing and level of reductions under the current Clean Air Act 
are unclear.

Early Reductions
    One of the major reasons we need Clear Skies now is that adoption 
of Clear Skies would provide greater protection over the next decade 
than the traditional regulatory path. The Clear Skies Act will result 
in significant over-compliance in the early years, particularly for 
SO2, because sources are allowed to bank excess emissions 
reductions. Because of the incentives provided by the cap-and-trade 
approach used in Clear Skies, power plants would start reducing 
emissions almost as soon as Clear Skies is passed. Without Clear Skies, 
EPA and the states will have to go through regulatory processes to put 
the necessary emission control programs in place. These regulatory 
processes take years and are subject to litigation--and power plants 
would have no incentive to reduce emissions before the outcome of those 
regulatory processes were known.
    As a result, emission reductions under Clear Skies would start 
years earlier than under the current regulatory approach. Clear Skies' 
emissions reductions would cost less since EPA does not have statutory 
authority under the current Clean Air Act to design an integrated 
program that is as cost-effective as Clear Skies. Every year that 
emissions reductions are delayed, we delay the health and environmental 
benefits that would be achieved if Clear Skies were to become law.
    Our analysis suggests that the amount of pollution controls that 
the industry will have to install under Clear Skies over the next 
decade will stretch the limits of available labor and other 
construction resources, but can in fact be accomplished while 
maintaining energy reliability and continuing competitive electricity 
prices.

Legislation Now Is Better than Regulation Followed by Years of 
        Litigation
    Even if Clear Skies is not passed by Congress, power plants will be 
required to reduce their emissions of SO2, NOx and mercury. 
There is no more cost-effective way than Clear Skies to meet the 
requirements of the current Clean Air Act or to achieve our public 
health and environmental goals. We know that, absent new legislation, 
EPA and the states will need to take a number of regulatory actions, 
although it is unclear now when the requirements will come into effect 
or what their control levels will be.
    Clear Skies has several benefits over the regulatory scheme that 
will otherwise confront power generators. Clear Skies provides 
regulatory certainty and lays out the timeframes necessary for managers 
to design a cost effective strategy tailored to both their current 
budgets and future plans. Clear Skies is designed to go into effect 
immediately upon enactment. Power plants would immediately understand 
their obligations to reduce pollution and would be rewarded for early 
action. As a result, public health and environmental benefits would 
begin immediately and result in emissions reductions more quickly than 
required. Given Clear Skies' design, it is unlikely that litigation 
could delay the program (particularly since Congress would decide the 
two most controversial issues--the magnitude and timing of reductions). 
In contrast, under the current Clean Air Act, power plants would not 
know what their obligations would be until after EPA and states started 
and completed numerous rulemakings.
    Past experience suggests that litigation delays on the regulatory 
path are likely. Our experience with two cap-and-trade programs--the 
legislatively created Acid Rain Trading Program and the 
administratively created NOx SIP Call--illustrates the benefits of 
achieving our public health and environmental goals with legislation 
rather than relying solely on existing regulatory authority.
    Though we project a great deal of benefits will arise from 
implementation of the NOx SIP call, the journey down the regulatory 
path has been difficult and is not yet over. The NOx SIP call was 
designed to reduce ozone-forming emissions by one million tons across 
the eastern United States. The rulemaking was based on consultations 
begun in 1995 among states, industry, EPA, and nongovernmental 
organizations. A Federal rule was finalized in 1998. As a result of 
litigation, one state was dropped and the 2003 compliance deadline was 
moved back for most states. Most states are required to comply in 2004, 
although two states will have until 2005 or later. Meanwhile, sources 
in these states continue to contribute to Eastern smog problems. 
Although the courts have largely upheld the NOx SIP Call, the 
litigation is not completely over. Industry and state challenges to the 
rules have made planning for pollution control installations difficult, 
raised costs to industry and consumers, and delayed health and 
environmental benefits.
    In contrast, reductions from the Acid Rain Program began soon after 
it passed (even before EPA finalized implementing regulations). There 
were few legal challenges to the small number of rules EPA had to 
issue--and none of the challenges delayed implementation of the 
program. The results of the program have been dramatic--and 
unprecedented. Compliance has been nearly 100 percent. Reductions in 
power plant SO2 emissions were larger and earlier than 
required, providing earlier human health and environmental benefits. 
Now, in the ninth year of the program, we know that the greatest 
SO2 emissions reductions were achieved in the highest 
SO2-emitting states; acid deposition dramatically decreased 
over large areas of the eastern United States in the areas where they 
were most critically needed; trading did not cause geographic shifting 
of emissions or increases in localized pollution (hot spots); and the 
human health and environmental benefits were delivered broadly. The 
compliance flexibility and allowance trading has reduced compliance 
costs by 75 percent from initial EPA estimates.
    [See 2001 Acid Rain Program Progress Report submitted for the 
record.]
    It is clear from this example that existing regulatory tools often 
take considerable time to achieve significant results, and can be 
subject to additional years of litigation before significant emissions 
reductions are achieved. Under this scenario, there are few incentives 
to reduce emissions until rules are final and litigation is complete, 
posing potentially significant delays in achieving human health and 
environmental benefits.
    The Clean Air Act contains several provisions under which EPA will 
be required to impose further emission controls on power plants in 
order to enable states to meet the new national ambient air quality 
standards (NAAQS) for PM2.5 and ozone. For example, Section 
126 of the Clean Air Act provides a petition process that states can 
use to force EPA to issue regulations to reduce emissions of 
SO2 and NOx from upwind sources, including power plants. A 
number of states have indicated that they intend to submit Section 126 
petitions in the near future. However, compared to Clear Skies, this 
approach will almost certainly involve years of litigation and 
uncertainty about reduction targets and timetables.
    Additional reductions are required from power plants through the 
regional haze rule's BART (Best Available Retrofit Technology) 
requirements and forthcoming mercury MACT (maximum achievable control 
technology) requirements. EPA is required to propose by the end of 2003 
a MACT standard for utility mercury emissions that must be met, plant-
by-plant, by every coal-fired utility with unit capacity above 25 
megawatts. EPA is required to finalize this rule by the end of 2004. 
The Act generally gives sources 3 years within which to comply with 
MACT standards. This compliance obligation could be delayed by a court 
if EPA's rule is challenged.
    Because these regulations will be the product of separate Federal, 
state and judicial processes, comparable health and environmental 
protection is likely to cost more under the current Clean Air Act than 
under Clear Skies. EPA estimates that a comprehensive, integrated 
approach relying on cap-and-trade programs could reduce costs by one-
fourth as compared to the regulatory approach achieving comparable 
emission reductions. These cost savings would be passed on to the 
public through lower electricity prices and greater profitability to 
investors and owners of electric generation.

New Source Review
    Some have suggested that Clear Skies is an attempt to undermine the 
Clean Air Act. This is simply not true. To achieve the next generation 
of environmental progress, we must build on the successful provisions 
in laws that have served us well--and learn from those provisions that 
have not served us well, or have had only limited success. New Source 
Review (NSR) is an example of a program that EPA and stakeholders have 
long recognized is not working well.
    There is a misconception that the principal goal of the NSR program 
is to reduce emissions from power plants. This is simply incorrect. 
Reducing emissions from power plants is the principal goal of Clear 
Skies. The NSR program is triggered only when facilities emitting large 
amounts of air pollution are built, and when modifications at these 
facilities result in significant increases in air pollution. The NSR 
program is not designed to result in nationwide reductions of air 
pollution from power plants. When it comes to reducing harmful air 
emissions from power plants, Clear Skies would accomplish more than 
NSR. Figure 3 illustrates how the coordinated reductions that result 
from Clear Skies would improve air quality in the air shed that affects 
the Great Smoky Mountains National Park. In our estimate, such 
significant regional improvements could not be obtained in this 
timeframe under the NSR framework.
    Clear Skies would significantly modify the NSR program for power 
plants, but contain some important backstops. We expect that existing 
power plants would not have to go through NSR for modifications. New 
sources would no longer have to go through the entire NSR process, but 
some aspects of the process would still apply. Although we believe that 
with a tight cap on emissions, new sources will always install good 
controls, we did not want to run the risk that a new source would be 
uncontrolled. Therefore, as a backstop, Clear Skies would require all 
new power plants to meet New Source Performance Standards (NSPS) that 
are set in the statute at levels significantly more stringent than 
current NSPS levels.
    In addition, new power generators locating within 50 km of a Class 
I area (e.g., national parks or wilderness areas) would still be 
subject to the current NSR requirements for the protection of those 
areas. Finally, new power plants will also have to meet the current NSR 
requirements that they will not cause or contribute to a violation of 
the national ambient air quality standards.

                       IV. WINDOW OF OPPORTUNITY

    Because of the lessons learned over the last decade, there is 
increasing support for legislation such as Clear Skies that would 
significantly reduce and cap power plant emissions and create a market-
based system to minimize control costs. From environmental groups to 
coal companies, there is increasing broad-based support demonstrating 
that multipollutant legislation is a preferable path to cleaner air. 
Such an approach would address an array of air pollution concerns 
associated with power generation--including fine particles, smog, 
mercury deposition, acid rain, nitrogen deposition, and visibility 
impairment--at lower cost and with more certainty than currently 
allowed by the Clean Air Act.
    There is no better time for Congress to be considering 
multipollutant legislation. President Bush has indicated that Clear 
Skies is his top environmental priority. The number of proposals being 
considered by Congress also indicates a consensus behind the basic idea 
of a multipollutant cap-and-trade approach. Organizations including the 
National Governors Association, U.S. Conference of Mayors, National 
Association of Counties, Large Public Power Council, Edison Electric 
Institute, Adirondack Council, and numerous individual utilities have 
all expressed support for the scope and framework of Clear Skies. If 
legislation passes quickly, we will begin achieving emissions 
reductions and related health benefits now, not years from now. 
Congress needs to act now so that we do not lose a decade's worth of 
health and environmental benefits from reducing fine PM pollution, 
smog, acid deposition, nitrogen deposition, and regional haze. Further, 
as EPA continues to implement additional forthcoming regulations under 
the existing framework of the Act, the likelihood of our ability to 
pursue an integrated program diminishes--and with it diminish the 
numerous advantages that I have delineated today of an approach like 
Clear Skies.
    Legislation is also needed now to help states with their air 
quality planning and provide incentives for industry innovation, which, 
in turn, would lower costs and emissions. Such incentives are 
particularly compelling this year as we approach the task of reducing 
mercury emissions from the power industry. If designed correctly, 
legislation could provide the incentive that spurs technological 
innovation. When stringent yet flexible mechanisms exist, substantial 
technological improvements and steady reductions in control costs can 
be expected to follow.
    I hope this Congress will concur that there is no better time to 
pass this important legislation. Every day that passes represents a 
lost opportunity to reduce emissions and reap human health and 
environmental benefits. The ``regulatory window'' is open now, allowing 
Congress to pass Clear Skies, based on a proven program, before EPA and 
the states must embark on a more complex and expensive traditional 
regulatory process. Clear Skies provides a balanced approach that our 
nation needs for meeting clean air goals, while safeguarding our 
economy and promoting energy security. In short, Clear Skies is a clear 
win for the American people.
  

                                  
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