    [House Hearing, 110 Congress]
    [From the U.S. Government Publishing Office]

    AUTHORIZING SUPPLEMENTAL ENVIRONMENTAL PROJECTS TO INCENT REDUCTIONS OF
                                DIESEL EMISSIONS

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

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                   H.R. 3754

                                   __________

                               FEBRUARY 13, 2008

                                   __________

                               Serial No. 110-89

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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                        COMMITTEE ON ENERGY AND COMMERCE

                          JOHN D. DINGELL, Michigan, Chairman

    HENRY A. WAXMAN, California                 JOE BARTON, Texas
    EDWARD J. MARKEY, Massachusett                 Ranking Member
    RICK BOUCHER, Virginia                      RALPH M. HALL, Texas
    EDOLPHUS TOWNS, New York                    FRED UPTON, Michigan
    FRANK PALLONE, Jr., New Jersey              CLIFF STEARNS, Florida
    BART GORDON, Tennessee                      NATHAN DEAL, Georgia
    BOBBY L. RUSH, Illinois                     ED WHITFIELD, Kentucky
    ANNA G. ESHOO, California                   BARBARA CUBIN, Wyoming
    BART STUPAK, Michigan                       JOHN SHIMKUS, Illinois
    ELIOT L. ENGEL, New York                    HEATHER WILSON, New Mexico
    ALBERT R. WYNN, Maryland                    JOHN B. SHADEGG, Arizona
    GENE GREEN, Texas                           CHARLES W. ``CHIP'' PICKERING,
    DIANA DeGETTE, Colorado                       Mississippi
       Vice Chairman                            ROY BLUNT, Missouri
    LOIS CAPPS, California                      VITO FOSSELLA, New York
    MIKE DOYLE, Pennsylvania                    STEVE BUYER, Indiana
    JANE HARMAN, California                     GEORGE RADANOVICH, California
    TOM ALLEN, Maine                            JOSEPH R. PITTS, Pennsylvania
    JAN SCHAKOWSKY, Illinois                    MARY BONO MACK, California
    HILDA L. SOLIS, California                  GREG WALDEN, Oregon
    CHARLES A. GONZALEZ, Texas                  LEE TERRY, Nebraska
    JAY INSLEE, Washington                      MIKE FERGUSON, New Jersey
    TAMMY BALDWIN, Wisconsin                    MIKE ROGERS, Michigan
    MIKE ROSS, Arkansas                         SUE WILKINS MYRICK, North Carolina
    DARLENE HOOLEY, Oregon                      JOHN SULLIVAN, Oklahoma
    ANTHONY D. WEINER, New York                 TIM MURPHY, Pennsylvania
    JIM MATHESON, Utah                          MICHAEL C. BURGESS, Texas
    G.K. BUTTERFIELD, North Carolina            MARSHA BLACKBURN, Tennessee
    CHARLIE MELANCON, Louisiana
    JOHN BARROW, Georgia
    BARON P. HILL, Indiana

                                      ______

                               Professional Staff

                        Dennis B. Fitzgibbons, Chief of Staff
                        Gregg A. Rothschild, Chief Counsel
                           Sharon E. Davis, Chief Clerk
                        David L. Cavicke, Minority Staff Director

                                      (ii)

                     Subcommittee on Energy and Air Quality

                        RICK BOUCHER, Virginia, Chairman
    G.K. BUTTERFIELD, North Carolina,    FRED UPTON, Michigan
        Vice Chairman                         Ranking Member
    CHARLIE MELANCON, Louisiana          RALPH M. HALL, Texas
    JOHN BARROW, Georgia                 ED WHITFIELD, Kentucky
    HENRY A. WAXMAN, California          JOHN SHIMKUS, Illinois
    EDWARD J. MARKEY, Massachusetts      JOHN B. SHADEGG, Arizona
    ALBERT R. WYNN, Maryland             CHARLES W. ``CHIP'' PICKERING,
    MIKE DOYLE, Pennsylvania                 Mississippi
    JANE HARMAN, California              ROY BLUNT, Missouri
    TOM ALLEN, Maine                     STEVE BUYER, Indiana
    CHARLES A. GONZALEZ, Texas           MARY BONO MACK, California
    JAY INSLEE, Washington               GREG WALDEN, Oregon
    TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
    MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
    DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
    ANTHONY D. WEINER, New York          MICHAEL C. BURGESS, Texas
    JIM MATHESON, Utah                   JOE BARTON, Texas (ex officio)
    JOHN D. DINGELL, Michigan (ex
        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    H.R. 3754, to authorize the Administrator of the Environmental
      Protection Agency to accept, as part of a settlement, diesel
      emission reduction Supplemental Environmental Projects, and for
      other purposes.................................................     4

     Hon. Rick Boucher, a Representative in Congress from the
      Commonwealth of Virginia, opening statement....................     1
    Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................     8

                                   Witnesses

    Hon. Jim Costa, a Representative in Congress from the State of
      California.....................................................     6
        Prepared statement...........................................     8
    Tim Regan, senior vice president, Corning Incorporated,
      Washington, DC.................................................    11
        Prepared statement...........................................    13
    Conrad Schneider, advocacy director, Clean Air Task Force,
      Brunswick, ME..................................................    30
        Prepared statement...........................................    32

     H.R. 3754: AUTHORIZING SUPPLEMENTAL ENVIRONMENTAL PROJECTS TO INCENT
                         REDUCTIONS OF DIESEL EMISSIONS

                                  ----------

                          WEDNESDAY, FEBRUARY 13, 2008

                      House of Representatives,
                Subcommittee on Energy and Air Quality,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 1:27 p.m., in
    room 2322 of the Rayburn House Office Building, Hon. Rick
    Boucher (chairman) presiding.
        Members present: Representatives Barrow, Matheson, Upton
    and Shimkus.
        Staff present: Lorie Schmidt, Laura Vaught, Chris Treanor,
    Rachel Bleshman, Alex Haurek, Erin Bzymek, David McCarthy, Tom
    Hassenboehler, and Garrett Golding.

      OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

        Mr. Boucher. The subcommittee will come to order.
        I want to begin this afternoon by welcoming to our
    subcommittee the gentleman from Michigan, Mr. Upton, who is the
    new ranking member of our subcommittee. It has been a privilege
    to work with him over the years on a whole range of matters,
    telecommunications, energy issues, other things, and I am
    delighted that he is now going to be ranking member of this
    subcommittee for the balance of this Congress, and I just want
    to welcome him here today.
        Today the subcommittee will examine H.R. 3754, legislation
    introduced by our colleague, Jim Costa from California, which
    would allow the continued use of Supplemental Environmental
    Project funds for diesel retrofit projects. Identical
    legislation has been introduced by Senator Carper. That
    legislation last week was unanimously approved by the Senate
    Committee on the Environment and Public Works.
        Following this afternoon's hearing, the legislation will be
    considered for markup in this subcommittee and I will announce
    at this time that pursuant to a unanimous-consent request which
    will be made shortly, we will be proceeding directly to markup
    of this bill as soon as our hearing is concluded, and so
    Members who had planned to come here at some other time, 2:30,
    perhaps, should make their way to the subcommittee if they
    desire to take part in the markup process.
        Diesel emissions from on- and off-road vehicles and engines
    account for more than one-half of the nitrogen oxide and
    particulate matter emissions from mobile sources across our
    country. The Environmental Protection Agency has issued
    regulations to limit emissions from new diesel engines and
    vehicles, but the rules only apply to the new vehicles and not
    to the heavy-duty diesel fleet that is currently on America's
    highways. Given the long life of many diesel vehicles and
    engines, it is estimated that the existing fleet of vehicles
    will not be entirely cycled out of operation until about the
    year 2030.
        In order to achieve emission reductions from the existing
    diesel fleet, a number of actions have been taken to encourage
    the retrofit of these vehicles with emission reduction
    technologies. For example, the EPA has administered the Clean
    School Bus Program for a number of years, providing grants to
    school districts for the purpose of retrofitting diesel-powered
    school buses. As another example, as part of SAFETEA-LU, the
    Highway Transportation Reauthorization, Congress provided
    funding for diesel retrofits under the Congestion Mitigation
    and Air Quality Program. Under the Diesel Emissions Reduction
    Act, which was enacted as a part of the Energy Policy Act of
    2005, the expenditure of $200 million annually over a 5-year
    period for grants and loans funding diesel retrofit projects
    was authorized. And most recently, in December, the Congress
    passed, and the President signed into law, an appropriation of
    $49.2 million for fiscal year 2008 in that year's
    appropriations legislation.
        In addition to these initiatives administered by the EPA,
    private entities have also often funded clean diesel programs
    as part of settlement agreements reached with the EPA in cases
    in which the Agency had alleged that the private entity had
    violated the Clean Air Act. These Supplemental Environmental
    Projects devoted to diesel emission reductions have totaled
    approximately $45.4 million from fiscal year 2001 through
    fiscal year 2006. Unfortunately, as a result of the funding
    which was appropriated for the diesel emissions reduction
    program, the EPA has concluded that as a matter of law, it is
    required to cease allowing Supplemental Environmental Projects
    for diesel retrofits as a part of settlement cases for
    violations of the Clean Air Act. That decision was made based
    on the conclusion by EPA that continuation of the Supplemental
    Environmental Projects for diesel retrofits violates the
    Miscellaneous Receipts Act, which prohibits the augmentation of
    Agency budgets that are appropriated by the Congress from other
    means. Given the estimated 10 million heavy-duty diesel
    vehicles and engines in use today, there is an extraordinary
    need to continue to fund diesel retrofit programs. The
    reduction of diesel emissions through retrofit technologies is
    cost-effective, and it clearly will produce a needed
    environmental benefit.
        The legislation Mr. Costa has brought to us, H.R. 3754,
    would ensure that all available means of funding for these
    valuable programs are allowed to continue. It would grant EPA
    specific authority to accept diesel emission reduction
    Supplemental Environment Projects as part of the settlement of
    alleged violations of environmental laws, provided that these
    projects protect human health and the environment, are related
    to the underlying violation and do not constitute activities
    that the defendant otherwise would be required legally to
    perform, and do not provide funds for the staff of the Agency
    or contractors to carry out EPA's internal operations.
        I would note that this legislation has the support of more
    than 40 groups consisting of a broad range of health,
    environment, industry and non-governmental organizations. It
    reflects a commonsense approach to ensuring that we utilize all
    available and appropriate means to reduce diesel emissions, and
    I very much look forward to hearing from today's witnesses
    regarding this consensus measure.
        The bill before us, as I indicated, was authored by our
    colleague, Jim Costa from California, and I want to thank him
    for bringing this matter before the subcommittee. In just a
    moment we will welcome his comments. Following Mr. Costa's
    testimony and that of our second panel of witnesses, I will
    announce again that the subcommittee will proceed directly to
    markup on this measure.
        At this time I will include in the record a copy of the
    bill, H.R. 3754.
        [The bill follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Boucher. Jim, we are pleased to have you with us this
    afternoon, and we thank you for bringing this matter before us.
    We will be happy to hear your comments.

    STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM
                        THE STATE OF CALIFORNIA

        Mr. Costa. Thank you very much, Mr. Chairman, for allowing
    me to testify before the subcommittee on H.R. 3754.
        This bill is an important measure, not just for my district
    but I think it has national implications as it relates to air
    quality issues throughout the country, and with the
    subcommittee's efforts this afternoon, I think we will continue
    to provide greater opportunities to clean our air throughout
    the country. My cosponsors of this measure, Representatives
    Cardoza, McNerney, Nunes, Matsui, Kind, Bono Mack, Shimkus,
    Butterfield, Matheson and Hill, are also to be thanked for
    their support for this important measure.
        This measure would allow the Environmental Protection
    Agency, if it becomes law, to continue its prior practice of
    accepting diesel emission reduction projects as part of the
    environmental enforcement settlement agreements, as the
    chairman outlined in his opening statement.
        For many years the Environmental Protection Agency has
    funded diesel retrofit projects through Supplemental
    Environmental Projects, otherwise known as SEPs, with
    corporations as part of overall settlement agreements. From the
    fiscal year 2001 to the fiscal year 2006, the Environmental
    Protection Agency entered in diesel emission reduction SEPs
    that were valued at over $45 million. This bill would maintain
    that separate private source of funding for these projects and
    would continue these private-public partnerships to improve air
    quality throughout the country. This is particularly important
    to my district, which suffers from some of the worst air
    quality issues in the country as a nonattainment area.
        The map there that you have, of course you are familiar
    with California. I know the chairman has been in the valley in
    the past. This is the area we are talking about. It is over 250
    miles in length and 60 to 80 miles in width, and it is ringed
    by the Sierra Mountain range, the wonderful mountains of the
    Sierras that go up to 14,000 feet, and the Coast Range
    Mountains go to 4,000 to 6,000 feet, and the air quality
    therefore that comes in from the Bay area across the Pacheco
    Pass and the emissions, both stationary and mobile sources of
    emissions that we create, creates a very difficult problem, as
    we continue to grow in managing our mobile and stationary
    sources of emission.
        With me today, I have a group of folks who are very
    familiar with all of that area. They are a group of both
    elected and private citizens that are involved in commerce on
    the valley's one voice who come to Washington every year to
    advocate on behalf of the valley on a host of issues. I would
    like them all to stand briefly. I don't go anywhere without my
    group.
        Mr. Upton. You are just lucky we didn't impose the line-
    sitter fee today.
        Mr. Costa. But we are happy that they are here this week
    working with their valley representatives, and I thought that
    since all of them are involved in this issue in one fashion or
    another, they would like to listen and be a part of the hearing
    today.
        Anyway, as a result of the challenges that we face in the
    valley, coupled with the fact that two major transportation
    corridors cut through the valley, both Interstate 5 as well as
    Highway 99, that not only provide important corridors for the
    valley but commerce for the entire Nation as well, both north
    and south, contributes to a large portion of our pollution
    issues. Over 60 percent of our emissions are mobile sources of
    emissions. Less than 40 percent are stationary. The reason this
    is important is because State and local government have control
    to regulate and to provide solutions to the stationary sources
    of emissions, and I think we have done an effective job through
    an air pollution control authority that I helped create when I
    was in the State legislature back in the late 1980's.
        However, over 60 percent of the emissions come from mobile
    sources and that is the jurisdiction of the Federal Government
    and therefore this legislation becomes more important, not just
    to the rest of the country but to the valley as well that
    suffers from PM emissions, as well as smog, that provide health
    hazards for heart disease, lung cancer and asthma. The problem
    is considerable throughout the State, but particularly in the
    valley as a nonattainment area. We experience 35 to 40 days in
    which we exceed the Federal health standards for ground-level
    ozone and more than 100 days that we exceed the levels for
    State ozone standards.
        Today more than 90 percent of the commercial trucks are
    powered, as the chairman noted, by diesel engines. Two-third of
    all the farms and construction equipment run from diesel
    engines, and this valley that I outlined to you earlier is
    among the richest agricultural regions in the entire country
    and therefore the world. We produce half the Nation's fruits
    and vegetables, and we lead in a host of other specialty crops
    as well. So therefore when you look at the combination of the
    challenges, this legislation becomes more important. California
    has done a lot. We lead the Nation in clean diesel technology
    and diesel retrofit projects that can make important
    contributions to improve air quality, not only in California
    but throughout the country. In addition to retrofitting clean
    diesel technologies for diesel vehicles and equipment, we think
    this is one of the more cost-effective strategies for teaching
    tangible and immediate results when we look at our long-term
    strategies to cleaning up the air in this nonattainment area.
        The Environmental Protection Agency estimates that these
    retrofit projects have a 13 to 1 benefit-to-cost ratio. Let me
    repeat that. This project, these projects like this have a 13
    to 1 benefit-to-cost ratio, meaning that the $45 million
    invested during that 5-year period from fiscal year 2001 to
    2006 translated into almost $600 million in health benefits.
    That results obviously in fewer asthma cases, fewer
    cardiovascular cases and other health-related issues that we
    have to deal with.
        So in closing, Mr. Chairman, I want to thank you and the
    subcommittee members for inviting me to testify today. This
    bill is not just cost-effective in allowing us to try to
    provide meaningful air quality improvements in the valley but
    in the Nation as well, and for all of those reasons I ask the
    subcommittee to support this effort.
        [The prepared statement of Mr. Costa follows:]

    Prepared Statement of Hon. Jim Costa, a Representative in Congress from
                            the State of California

        First, I want to thank Chairman Boucher for inviting me to
    testify today. This is an important issue for my district, and
    for improving air quality throughout the country, and I
    appreciate the opportunity to discuss this bill.
        H.R. 3754 will allow the Environmental Protection Agency
    (EPA) to continue its prior practice of accepting diesel
    emission reduction projects as part of environmental
    enforcement settlement agreements.
        For many years, the EPA has funded diesel retrofit projects
    through Supplemental Environmental Projects (SEP's) with
    corporations as part of settlement agreements. From fiscal year
    2001 to fiscal year 2006, EPA entered into diesel emission
    reduction SEP's valued at $45.5 million. This bill will help
    maintain this separate, private source of funding for these
    projects.
        In recent years, there has been a new era in clean diesel
    technology, which includes three critical parts. First, a
    cleaner burning, lower sulfur diesel; second, lower-emitting
    diesel engines; and third, new emissions control technology.
        Retrofitting clean diesel technologies for diesel vehicles
    and equipment is one of the most cost-effective strategies for
    achieving tangible and immediate air quality benefits. Areas of
    the country struggling to meet clean air standards can greatly
    benefit from diesel retrofits to help improve air quality.
        Retrofits can be done on older vehicles or equipment. The
    EPA estimates these retrofit projects have a 13-to-1 benefit-
    to-cost ratio, meaning that the $45.5 million invested from
    fiscal year 2001 to 2006 translates into almost $600 million in
    health benefits--from fewer asthma cases to fewer
    cardiopulmonary deaths.
        Right now, more than 90 percent of commercial trucks are
    powered by diesel engines, and two-thirds of all farm and
    construction equipment run from diesel engines.
        Diesel retrofitting for these engines can make a
    significant contribution to improving air quality--in
    particular, by reducing particulate matter emissions, which are
    linked to health hazards such as heart disease and lung cancer.
        In closing, I want thank you, Chairman Boucher, and the
    members of the subcommittee, for inviting me to testify. This
    bill will allow cost-effective, meaningful air quality
    improvement to continue, and I hope that the subcommittee will
    give its support.
                                  ----------

        Mr. Boucher. Thank you very much, Mr. Costa. It is a
    pleasure to have you with us today, and you are quite right, I
    have on a number of occasions visited your part of California.
    It is indeed a gorgeous place, and I am impressed with the
    number of your constituents who have journeyed here to show
    their support for this measure. The only time I get that many
    of my constituents coming here is when they are angry about
    something. You are to be congratulated for having them here for
    a positive purpose.
        Mr. Costa. I promised them I would take them out this
    evening.
        Mr. Boucher. And they are to be congratulated for being
    here to show support for your efforts.
        I want to recognize Mr. Upton. I intended to recognize him
    for a statement earlier and neglected to do that, so at this
    time let me call on him for whatever statement he decides to
    make.

       OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Upton. I thank the chairman, and I appreciate Mr.
    Costa's work on this issue and the way that he has really begun
    on this from a bipartisan way from the get-go, and I know Mr.
    Shimkus and others are cosponsors and certainly I want to be
    part of the process to make sure that we have smooth sailing
    today and I suggested to my chairman that we move right away to
    the markup. We have had lots of extra votes today and we don't
    need to have this put off because of action on the House floor,
    so I would like to see this happen very quickly.
        This is an issue that we can all rally around, reducing
    diesel emissions in an immediate cost-effective manner that
    eliminates the need for new infrastructure requirements. This
    legislation will address EPA's legal interpretation that SEP
    money may not be used for diesel retrofits. Today we will take
    a legislative step forward to authorize the EPA to use these
    funds under the Diesel Emissions Reduction Act for reducing
    diesel emissions through retrofits. This is an issue that is
    supported by a broad coalition of environmental, science-based,
    public health, industry, State and local government groups.
        One of the groups that is in fact going to testify on the
    second panel is Corning, and at the invitation of our former
    colleague, Amo Houghton, I visited Corning's headquarters in
    Corning, NY, back in 2006. I was particularly impressed by the
    commitment that Corning has made toward advancing environmental
    technology. The company invests over 10 percent of its revenue
    in R&D. I visited the research lab that day to see the fruits
    of their investments. The advances being made to reduce
    pollution from diesel engines in fact are very significant and
    it is yet another example of how we can effectively address our
    environmental problems through technology. I know that they are
    in support of this legislation.
        I look forward to being part of the positive process of
    moving this legislation forward, and at this point I will yield
    back my time to my chairman. Thank you.
        Mr. Boucher. Thank you, Mr. Upton.
        Let me ask other members if they care to make opening
    statements. The gentleman from Georgia, Mr. Barrow.
        Mr. Barrow. No, I will waive my opening statement, Mr.
    Chairman.
        Mr. Boucher. That is fine.
        The gentleman from Illinois, Mr. Shimkus.
        Mr. Shimkus. Thank you, Mr. Chairman. I would just like to
    thank Jim for bringing the legislation, and I am proud to be a
    cosponsor.
        We are moving into an era where diesel is not a dirty word
    anymore. We all remember, especially in communities, diesel
    buses and the big fumes but with new technology, research and
    development, clean diesel, the fact that diesel is a primary
    fuel for automobiles in Europe is bringing a new venue, and we
    focus in this committee on energy security. Diesel is going to
    have a big role in that, and the fact that we can also tie this
    to this Supplemental Environmental Projects, it is a win-win
    all around, and I am just pleased to be a cosponsor.
        Thank you for your work, and I yield back my time.
        Mr. Boucher. Thank you, Mr. Shimkus.
        The gentleman from Utah, Mr. Matheson.
        Mr. Matheson. I waive.
        Mr. Boucher. Thank you, Mr. Matheson.
        Mr. Costa, I just have one question of you. I note that the
    legislation requires that for a project to be accepted under
    its terms, the project itself must be related to the underlying
    violation, and I am wondering if you can give us a sense of how
    that will apply, and I realize that was also a part of Senator
    Carper's legislation in the Senate, but do you have any
    examples for us of what would be in bounds and out of bounds,
    given that requirement?
        Mr. Costa. The committee has noted that in fact we need to
    ensure that we are flexible and it is my intent to ensure that
    we bring that about so as it relates to this legislation, I
    want to make sure that the conditions in which the EPA is
    working with private parties on settlement agreements that the
    enabling legislation will allow for that flexibility under
    those circumstances when we think it is deemed appropriate. But
    I think the sense of Congress clearly needs to be determined
    prior to us moving. So on the markup I would like to get a
    sense of the subcommittee's own experiences in terms of how we
    can best ensure that the individual examples that we have in
    our districts that we know of in which parties have had to
    negotiate with the Environmental Protection Agency on these
    matters that we include what is fitting and appropriate to
    address the air quality issues because whether it is in the San
    Joaquin Valley, in the area that I represent, or whether it is
    in other parts of the country where you have nonattainment
    issues, I think it is critical that we are able to leverage
    these dollars and to put them to the use of trying to provide
    for these Supplemental Environmental Projects that will do the
    most good.
        Mr. Boucher. OK. Thank you. And you don't see this
    requirement as unduly restricting the acceptance of projects by
    EPA?
        Mr. Costa. It has not come to my attention that it is. If
    you have some examples or other members do, I would clearly
    want to look at them to ensure that we address that issue.
        Mr. Boucher. OK. That is great. Thank you.
        Mr. Upton, any questions?
        Mr. Upton. I really don't have any questions. I just want
    to say thanks again for introducing the legislation and working
    in a bipartisan manner. Thank you.
        Mr. Boucher. Mr. Barrow.
        Mr. Barrow. Mr. Chairman, you don't know how long I have
    waited to get this witness on the stand where I could submit
    him to a thorough and sifting cross-examination. But
    unfortunately, there is nothing I can add by way of either
    eloquence or comprehension to his statement, so I just want to
    thank him for sponsoring this legislation and I will yield the
    balance of my time.
        Mr. Costa. And I want to thank my classmate for that
    wonderful response.
        Mr. Boucher. Thank you, Mr. Barrow.
        Mr. Shimkus?
        Mr. Shimkus. No questions.
        Mr. Boucher. Mr. Matheson.
        Mr. Matheson. No questions.
        Mr. Boucher. Mr. Costa, with the subcommittee's thanks, we
    excuse you and we will treat your legislation very tenderly.
        Mr. Costa. Thank you very much.
        Mr. Boucher. Thank you very much.
        Let me welcome now our second panel of witnesses, the
    senior vice president of Corning Incorporated, Mr. Tim Regan,
    speaking from an industrial perspective, and also Mr. Conrad
    Schneider, who is advocacy director of the Clean Air Task
    Force, an organization comprised of numerous environmental and
    health associations. We welcome both of you here today, and
    thank you for taking time to share your views with the
    subcommittee. Without objection, your prepared written
    statements will be made a part of the record. We would welcome
    your oral summaries and hope that you would keep those
    summaries to approximately 5 minutes.
        Mr. Regan, since I mentioned your name first, we will begin
    with you.

        STATEMENT OF TIM REGAN, SENIOR VICE PRESIDENT, CORNING
                      INCORPORATED, WASHINGTON, DC

        Mr. Regan. Thank you, Mr. Chairman, Mr. Upton, members of
    the committee. It is a pleasure to be here today. We are here
    to endorse the bill because we think it really is necessary to
    clear up a conflict that we have been the many acts of Congress
    that many of you have been involved with, as a matter of fact,
    and this interpretation of the Miscellaneous Receipts Act by
    EPA.
        I am here as president of the Emissions Control Technology
    Association. We are the guys that invented the material that
    sits inside a catalytic converter and creates a passive
    chemical reaction which breaks up the various pollutants in the
    exhaust. This technology has had a phenomenal impact to remove
    1.5 billion tons of pollution from the air we breathe over the
    last 35 years, and this is the successor technology. This is
    what we call a diesel particulate filter. This is a device that
    will filter out very, very fine particulate matter about 1 to 2
    percent of the width of your human hair and it will withstand
    thermal shocks and will last about 435,000 miles in a diesel
    truck.
        This here is an example of what we take out of the air.
    This is the amount of fine particulate matter that is generated
    out of a school bus over its operation for 500 miles. So I
    think you can see that this is very significant. This one
    device here which looks like simply a piece of ceramic, a
    rather large piece, cost Corning $850 million to invest and to
    invest to manufacture, so it is a rather significant
    achievement.
        The challenge, as has been said already before, is to see
    that this technology is now crafted onto the 11 million
    vehicles and engines that are out there today. It is on all new
    vehicles that have been on the road since January 1, 2007, as
    required equipment, but there are 22 times more vehicles and
    engines in the fleet today than are put on every year. So we
    have a rather significant source of pollution on these existing
    vehicles, and the goal here has been and Congress's goal has
    been to help get those vehicles retrofitted by providing the
    equipment owners with the financial resources to make those
    kinds of investments.
        Mr. Boucher reviewed with you all the things that have been
    done by Congress over the last 5 years and they are indeed very
    significant. Mr. Shimkus has been very much involved in moving
    ahead with the appropriation that the chairman mentioned, $49.2
    million last year, to retrofit the vehicles under the Diesel
    Emissions Reduction Act.
        The problem we have is--and of course, EPA has supplemented
    all that with these Supplemental Environmental Projects which
    have provided another source of funding for this kind of
    activity. In fact, 37 percent of the diesel retrofits that were
    diesel particulate filters that were deployed from 2003 to 2006
    were funded with SEPs, so it is a significant source. The
    problem we have is just not enough funds, and that is sort of
    exemplified by the EPA's school bus program. Seventy-five
    percent of the grants don't get funded. The applications don't
    get funded. And in the case of Virginia, for example, the
    chairman's State, there have been 11 grants requested and only
    one was funded. And so it demonstrates vividly the need for
    more resources. The problem we have now is that EPA is about to
    make a determination, in fact, has already made a determination
    or about to implement it that they can no longer fund diesel
    retrofits with these SEPs because of a potential violation
    relative to the Miscellaneous Receipts Act.
        Now, this is a real conflict, and we would argue in this
    particular instance a statutory exclusion would be appropriate.
    Statutory exclusions to the Miscellaneous Receipts Act have
    been adopted before and it has been ruled that where there is
    such an exclusion, SEPs can continue. This bill will
    effectively provide such an exclusion.
        We would say there are four compelling reasons to do this.
    One, the existing vehicles are a major source of pollution on
    the road today. Number 2, there are very sensitive populations
    that are being affected by this pollution, for example, the 25
    million students that are riding school buses every year that
    are affected by it. Third, Congress has obviously acted over
    and over again to provide such funding and the demand far
    exceeds the supply. And finally, this is not going to have any
    direct impact on the budget. So taken together, because of
    these factors, we were able to generate for you a letter from
    43 different groups from business, NGOs, trade associations in
    support of the bill. It passed unanimously out of the
    Environment and Public Works Committee last week on the Senate
    side, and we can really see no compelling public policy reason
    not to proceed with this.
        Thank you very much.
        [The prepared statement of Mr. Regan follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Boucher. Thank you, Mr. Regan.
        Mr. Schneider, we would be happy to hear from you.

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

        Mr. Schneider. Thank you, Mr. Chairman, Representative
    Upton and other members of the committee. My name is Conrad
    Schneider and I am the advocacy director of the Clean Air Task
    Force, an environmental advocacy group based in Boston but
    working nationwide, and we work with a national partnership to
    reduce diesel emissions, a coalition of hundreds of public
    health, environmental and other organizations and we support
    H.R. 3754 to allow the continued use of diesel retrofits in
    SEPs.
        As part of the recent budget bill, Congress for the first
    time appropriated money under the Diesel Emission Reduction
    Act, approximately $50 million, it has been said. That will
    help to pay for the retrofits that we so desperately need for
    public health reasons. That is the good news. The bad news is
    that EPA now has decided that these no longer qualify to be
    used as part of settlements under these Supplemental
    Environmental Projects, and that is because they say that it
    would violate the Miscellaneous Receipts Act. We ask for your
    support for this to create a clarification that EPA may
    continue to use that money.
        Why do we care about this as an environmental organization?
    We care about it because we are engaged in a comprehensive
    campaign to try to clean up diesel pollution, which is a brew
    of toxins and pollution particles that can be considered the
    number one environmental health problem that threats the United
    States today. Eleven million diesel engines and buses and
    trucks, construction equipment and so forth produce 1,000 tons
    of toxic particulate matter every year, and according to a
    study that was performed by EPA's benefits consultant using
    EPA-approved methodology, that pollution results in
    approximately 21,000 premature deaths each year plus tens of
    thousands of asthma attacks and heart attacks. Nationally,
    diesel exhaust poses a cancer risk that is more than eight
    times higher than all of the air toxics that EPA tracks
    combined. While EPA's new engine rules set the standards for
    emissions from new diesel engines, EPA estimates there are
    about 11 million engines currently in operation that will take
    decades to fully replace them with new, cleaner engines.
        This retrofit technology, as Mr. Regan mentioned, is proven
    and cost-effective and I would direct your attention both to
    the screen and toward I believe a piece of paper in front of
    you. We did some emissions testing of a vehicle, a box truck,
    before it had a diesel particulate filter on it, and you can
    see the emissions there on the left, and on the right-hand side
    of that chart, you can see that once it had a diesel
    particulate filter, those emissions were reduced by up to 90
    percent. That is the effective part of the cost-effective that
    we are talking about here.
        These SEP monies have been a very important funding stream
    for diesel projects, providing tens of millions of dollars. In
    fact, just this past December, EPA entered into a settlement
    with American Electric Power containing a Federal SEP,
    designating as much as $21 million for diesel retrofits. More
    of concern, there are settlements that are currently under
    consideration by the Agency that may exclude these very cost-
    effective measures because of EPA's current opinion on this. We
    feel that this position unnecessarily hampers the progress we
    could be making and we applaud Representative Costa and his
    cosponsors for addressing this problem by introducing this
    legislation to correct it.
        The Miscellaneous Receipts Act was really passed in order
    to ensure that government agencies didn't bypass your
    appropriations authority and keep monies that otherwise would
    inure to their agency budgets rather than turning them back
    over to the Federal Treasury. There is no legislative history
    in that act to suggest that it was meant to disturb private
    settlement agreements, particularly where the money as in here
    in SEPs is really not directed toward the Agency or to the
    Treasury. It is directed to really third parties who administer
    these Supplemental Environmental Projects. So there is no loss
    to either the Agency budget or to the Federal Treasury by
    creating this exclusion as we described it.
        We feel that rather than engage in a protracted argument
    with the Agency about their interpretation, a statutory
    clarification is in order if it can be enacted quickly,
    primarily because EPA is in the midst of negotiating many of
    these settlements and they won't be able to have these type of
    cost-effective projects if Congress fails to act, and it won't
    mean that additional dollars won't flow to the treasury. It
    will mean that probably the Supplemental Environmental Projects
    that are included won't be as effective as the ones that use
    diesel.
        So in conclusion, I just would also echo that this wouldn't
    be the first time that Congress created an exclusion to the
    Miscellaneous Receipts Act. It has happened many times before
    and I detailed those in my written testimony. And unlike the
    current bill, even those exemptions would have allowed the
    executive agencies to hold onto the money. That is not what we
    are asking here. We are asking that they continue to go to
    cost-effective pollution control.
        So thank you very much. I will be happy to answer any
    questions, and we just urge passage of the bill as soon as
    practicable. Thank you.
        [The prepared statement of Mr. Schneider follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Boucher. Thank you very much, Mr. Schneider and Mr.
    Regan. I think with your testimony and the clear understanding
    that we have of this matter, there are few questions that we
    need to propound.
        I want to ask Mr. Regan though what the cost of installing
    one of those devices on an existing vehicle is.
        Mr. Regan. Somewhere within a range of $5,500 to $8,500. It
    is a major undertaking.
        Mr. Boucher. It is a considerable expense.
        Mr. Regan. Yes, it is. It involves basically a systems
    change. It has to be engineered to the particular vehicle that
    it is on, and there has to be some systematic connection
    between this device and the engine.
        Mr. Boucher. And apart from these supplemental projects,
    how much retrofitting is taking place at the present time just
    because owners of these vehicles would like to emit less
    particulate matter, NOx, et cetera?
        Mr. Regan. Without funding, virtually none.
        Mr. Boucher. Virtually none. So this measure is essential
    in order to make sure that that happens on a broad basis?
        Mr. Regan. Absolutely.
        Mr. Boucher. OK. Let me ask Mr. Upton if he has any
    questions of these witnesses.
        Mr. Upton. Just briefly.
        Mr. Regan, did the Clean School Bus Fund, did that
    appropriate any money to help with school buses with retrofits,
    or not?
        Mr. Regan. Yes. The Clean School Bus USA Program was
    developed by EPA and has been funded by the Congress since
    fiscal year 2003.
        Mr. Upton. Since 2003?
        Mr. Regan. Since 2003. But the amount of funding for that
    whole period of time is only something on the range of $25
    million. So the Agency has not been able to even keep up with
    the grants. In the period from fiscal year 2003 to 2005, they
    had 292 requests for grants and they were only able to fund 72.
    So 75 percent of the grant applications went unfunded.
        Mr. Upton. And Mr. Schneider, do you have any record of
    what kind of reductions have occurred so far with the
    settlement payments?
        Mr. Schneider. In terms of tonnage reduced as a result of
    the money? I don't have that number but we could calculate that
    number. Because the settlement agreements--the information we
    have about them that the Agency keeps on that is really in
    dollars as opposed to tons of pollution reduced, but there is a
    calculation that we could do to get you that number.
        Mr. Upton. And are there any other ways to look at
    retrofits, any other funding sources that are out there, or
    not?
        Mr. Regan. This is a nationwide movement. States are moving
    ahead doing this as well as the Federal Government so we have
    got the DERA program underway. We have got the money coming out
    of the SAFETEA-LU. The SAFETEA-LU made funding diesel retrofits
    a priority under the CMAQ Program. There is potentially a lot
    of money. And then you have got States that are doing their own
    thing. California has had a program in placed called the Carl
    Moyer Program funding hundreds of millions of dollars for many
    years. Texas has a program, a TEFRA program to reduce emissions
    in Texas. And then New York and North Carolina recently put a
    law in place, and we have one in Massachusetts, in Connecticut,
    in Rhode Island, in Ohio, in Oregon. So States are stepping up
    because they know that this is a very cost-effective way to
    reduce emissions and meet their nonattainment goal.
        Mr. Schneider. Most of the States have nonattainment areas,
    and because they know this is one of the most effective things
    they can do, it is money well spent, and that also means that
    with respect to these environmental settlements, it is money
    well spent.
        Mr. Upton. It does make a lot of sense.
        Mr. Chairman, I have no further questions.
        Mr. Boucher. Thank you, Mr. Upton.
        Mr. Barrow.
        Mr. Barrow. Thank you, Mr. Chairman.
        Mr. Regan, I want to commend you and your outfit for what
    you all are doing for this huge research and development bullet
    that you all bit down on in order to be able to make this
    technology as available as you have. For the benefit of those
    who are here and don't realize, I represent Washington and
    surrounding counties in Georgia, the kaolin capital of the
    world, and you folks employ 700 families in order to try and
    bring this technology to the marketplace, trying to harvest the
    kaolin in that part of the world, and I commend you for what
    you are doing. One question I have, I represent the kaolin
    capital of the world but I also represent the birddog capital
    of the world. Over in Burke County, they are working with a
    sorry boy that doesn't want to try. It is a little bit like
    going bird hunting and having to tote the dog. Well, working
    with an Agency that doesn't want to do right can sometimes be
    like going bird hunting and having to tote the dog. And the
    question I have is, I respect an agency that has been doing
    something for a long period of time and all of a sudden they
    decide they haven't got the authority to do what they have been
    doing, and all of a sudden they adopt a principled stance.
    Well, we can fix that principled objection with a simple change
    in the law. We are going to do that. My question is, is there
    any reluctance or resistance on the part of the EPA to take the
    authority this bill would give them that is the next roadblock
    we have to encounter, or will we really get some response from
    them? Because giving them the authority that they ought to
    have, that they have had or exercised in the past is good but
    now they don't want to use it.
        So my question to you is, is this really the main hang-up
    or is there more to it than that?
        Mr. Regan. That is a question that EPA will have to answer
    itself but I think that EPA's lawyers have made a very cautious
    interpretation because the Miscellaneous Receipts Act basically
    says that you can't take funds for activities and use them to
    fund activities which have been mandated by Congress. Congress
    has the constitutional authority to appropriate funds and tell
    you what to do. So when you get funds, you got to put it back
    into the treasury. Well, they never really touched these funds,
    and so----
        Mr. Barrow. They did in the past, didn't they?
        Mr. Regan. No, they never really touched any of this money.
        Mr. Barrow. What I mean to say is, they funded SEPs in the
    past.
        Mr. Regan. Right. So what they did is, they said now you
    have done the DERA, you have appropriated money to do a task.
        Mr. Barrow. I think that is unintended consequences that
    actually strips their implied authority to use SEPs in this
    way. Well, we are going to fix that.
        Mr. Regan. Exactly. So our expectation is, based on our
    informal conversations with the Agency, is they really would
    like to continue to do this.
        Mr. Barrow. Excellent. That is what I wanted to hear. Thank
    you very much.
        Mr. Boucher. Thank you very much, Mr. Barrow.
        Mr. Matheson?
        Mr. Matheson. No questions.
        Mr. Boucher. Thank you, Mr. Matheson.
        At this time I am pleased to recognize Mr. Upton for a
    unanimous-consent request.
        Mr. Upton. Thank you, Mr. Chairman. I would ask unanimous
    consent that the bill H.R. 3754 be considered immediately by
    this subcommittee for markup and reporting to the full
    committee.
        Mr. Boucher. Without objection, the subcommittee will now
    considered H.R. 3754, and before we do that, I will excuse this
    panel of witnesses and thank both of you very much for your
    outstanding testimony here. We appreciate your joining us this
    afternoon.
        [Whereupon, at 2:05 p.m., the subcommittee proceeded to
    other business.]