[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.]

                                 
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