[Senate Hearing 111-1243]
[From the U.S. Government Publishing Office]




                                                       S. Hrg. 111-1243

                 OVERSIGHT: EPA'S PROPOSAL FOR FEDERAL 
IMPLEMENTATION PLANS TO REDUCE INTERSTATE TRANSPORT OF FINE PARTICULATE 
                            MATTER AND OZONE

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON CLEAN AIR 
                           AND NUCLEAR SAFETY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               ----------                              

                             JULY 22, 2010

                               ----------                              

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



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






         Available via the World Wide Web: http://www.fdsys.gov




























                                                       S. Hrg. 111-1243

                 OVERSIGHT: EPA'S PROPOSAL FOR FEDERAL 
IMPLEMENTATION PLANS TO REDUCE INTERSTATE TRANSPORT OF FINE PARTICULATE 
                            MATTER AND OZONE

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

                                HEARING

                               before the

                       SUBCOMMITTEE ON CLEAN AIR 
                           AND NUCLEAR SAFETY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 22, 2010

                               __________

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



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





         Available via the World Wide Web: http://www.fdsys.gov
                                  ______

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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                     ONE HUNDRED ELEVENTH CONGRESS
                             SECOND SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico
JEFF MERKLEY, Oregon
KIRSTEN GILLIBRAND, New York
ARLEN SPECTER, Pennsylvania

                    Bettina Poirier, Staff Director
                 Ruth Van Mark, Minority Staff Director
                              ----------                              

              Subcommittee on Clean Air and Nuclear Safety

                  THOMAS R. CARPER, Delaware, Chairman
MAX BAUCUS, Montana                  DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         GEORGE V. VOINOVICH, Ohio
BERNARD SANDERS, Vermont             CHRISTOPHER S. BOND, Missouri
JEFF MERKLEY, Oregon                 JAMES M. INHOFE, Oklahoma (ex 
BARBARA BOXER, California (ex            officio)
    officio)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                            C O N T E N T S

                              ----------                              
                                                                   Page

                             JULY 22, 2010
                           OPENING STATEMENTS

Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..     1
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...     4
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland     6
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...     8
Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee, 
  prepared statement.............................................   242

                               WITNESSES

McCarthy, Regina, Assistant Administrator, Office of Air and 
  Radiation, U.S. Environmental Protection Agency................   161
    Prepared statement...........................................   163
    Responses to additional questions from:
        Senator Sanders..........................................   174
        Senators Inhofe and Voinovich............................   176
        Senator Alexander........................................   188
Snyder, Jared, Assistant Commissioner for Air Resources, Climate 
  Change and Energy, New York State Department of Environmental 
  Conservation...................................................   254
    Prepared statement...........................................   257
    Response to an additional question from Senator Alexander....   267
Korleski, Chris, Ohio Environmental Protection Agency............   268
    Prepared statement...........................................   270
Svenson, Eric, Vice President, Policy and Environment, Health and 
  Safety, Public Service Enterprise Group........................   273
    Prepared statement...........................................   275
    Responses to additional questions from Senator Alexander.....   282
Schneider, Conrad G., Advocacy Director, Clean Air Task Force....   284
    Prepared statement...........................................   287

 
 OVERSIGHT: EPA'S PROPOSAL FOR FEDERAL IMPLEMENTATION PLANS TO REDUCE 
       INTERSTATE TRANSPORT OF FINE PARTICULATE MATTER AND OZONE

                              ----------                              


                        THURSDAY, JULY 22, 2010

                               U.S. Senate,
         Committee on Environment and Public Works,
              Subcommittee on Clean Air and Nuclear Safety,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10 a.m. in 
room 406, Dirksen Senate Office Building, Hon. Thomas R. Carper 
(Chairman of the Subcommittee) presiding.
    Present: Senators Carper, Inhofe, Voinovich, and Cardin.

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

    Senator Carper. This hearing will come to order.
    I welcome one and all for joining us today, our colleagues, 
our witnesses, and those that are in the audience.
    Today's oversight hearing is focused on the EPA's proposal 
for Federal implementation of plans to reduce interstate 
transport of fine particulate matter and ozone. Senators will 
have 5 minutes for their opening statements, and I will 
recognize after our colleagues have made their opening 
statements, recognize our panel of witnesses.
    Following panel statements we will have two rounds of 
questions.
    There is a signing ceremony at the White House later this 
morning on a piece of legislation I worked on for 6 years, and 
I think I am going to go to that.
    [Laughter.]
    Senator Carper. But that means we are going to move along 
fairly expeditiously, not rushed, but we are going to move 
expeditiously.
    As most of the folks in this room know--11:30. The bill 
signing is at 11:30.
    Almost 20 years have gone by since Congress last passed 
significant revisions to the Clean Air Act. And in those 20 
years we have made real progress in reducing our Nation's air 
pollution.
    However, many of our dirtiest polluters have kept 
polluting, albeit at a somewhat slower rate. Reductions have 
not kept pace with the public health risks and costs attributed 
to this harmful air pollution. Simply put, we have to do 
better, a lot better. And the good news is, we can.
    When Senator Alexander and I began working together to 
clean up our Nation's air about 6 years ago, we faced many 
challenges. I would just hasten to add that Senator Voinovich 
and I--and Senator Inhofe as well--were working on it even 
before Lamar and I teamed up on these issues.
    But I want to mention two of the challenges that we face 
today. The first major challenge that we face is that air 
pollution causes serious health effects, as we know, including 
asthma, cancer, brain damage, even death. According to the 
American Lung Association the majority of Americans, that is 
more than 175 million people, live in areas where there is 
enough air pollution to endanger their lives or threaten their 
health.
    The second challenge that we face is that air pollution 
knows no State boundaries. Air pollution emitted by our oldest 
and dirtiest fossil fuel power plants doesn't just affect the 
State in which they are located and the health of the people in 
those States in which they are located. In fact Mid-Atlantic 
and Northeastern States like Delaware, like Maryland, like New 
Jersey, Connecticut, and Rhode Island are located in what I 
call the end of America's tailpipe. We are among the States 
that receive a heavy dose of pollution from other States' dirty 
power plants.
    To ensure that States are good neighbors, regional and 
national regulations of air emissions are crucial. That is what 
brings us all here today. Over the past 10 years the EPA has 
attempted to regulate harmful power plant emissions that 
transport across State boundaries, but the court challenges 
have stood in their way. In 2005 the EPA issued the Clean Air 
Interstate Rule, affectionately known as CAIR, to reduce sulfur 
dioxide and nitrogen oxide emissions in 28 eastern States.
    After multiple lawsuits in 2008 the District of Columbia 
Circuit Court vacated CAIR in its entirety but later modified 
its decision to remand, allowing CAIR to remain in effect until 
a new rule was promulgated by the Environmental Protection 
Agency. The proposed Transport Rule is EPA's response to the 
Court's concerns.
    I believe the EPA has done a good job with the tools that 
they have to address interstate air pollution. To meet the 
Court's challenge, the Transport Rule is complex and limits 
business flexibility. However, it is clear this rule can make 
possible real gains in further cleaning our air and protecting 
public health.
    Today we will hear more details from EPA about how this 
complex rule will work. We will also hear from the States, from 
the environmental community, and from business on what they 
expect the impacts to be once this rule is implemented.
    I believe that EPA has written a rule that meets the 
Court's demands, but like other rules I expect we will see this 
rule litigated before the courts in the not too distant future. 
This is a rule to help meet the 1997 standards, 1997 standards. 
As we all know it is not 1997 anymore. It is 2010, and it is 
time we have clarity and certainty on clean air reductions. I 
believe this Congress needs to pass bipartisan legislation that 
I co-authored along with Senator Alexander and 14 others of our 
colleagues, Democrats and Republicans. Legislation that cuts 
mercury emissions by 90 percent and tightens national emissions 
of sulfur dioxide and nitrogen oxide. This legislation, as 
shown by EPA modeling, will save even more lives than the EPA's 
Transport Rule, at a very low cost to the consumer.
    However, it is clear that we should be debating how to 
strengthen the Clean Air Act so we can save thousands of lives 
and billions of dollars in health care costs rather than debate 
whether we should be weakening our ability to clean up the air.
    So that is the statement I wanted to offer today.
    I am going to call on Senator Inhofe next for his 
statement. I am glad that you are here, and thank you for your 
efforts in these venues.
    [The prepared statement of Senator Carper follows:]

                  Statement of Hon. Thomas R. Carper, 
                U.S. Senator from the State of Delaware

    Ladies and gentlemen, almost 20 years have gone by since 
Congress last passed significant revisions to the Clean Air 
Act. In those 20 years, however, we have made real progress in 
reducing our Nation's air pollution.
    However, many of our dirtiest polluters have kept 
polluting--albeit at a somewhat slower rate--but reductions 
have not kept pace with the public health risks and costs 
attributed to this harmful air pollution.
    Simply put, we've got to do better. Much better. And the 
good news is we can.
    When Senator Alexander and I began working together to 
clean up our Nation's air about 6 years ago, we faced many 
challenges. I'll mention two of these challenges today.
    The first major challenge we face is that air pollution 
causes serious health effects, including asthma, cancer, brain 
damage--even death.
    According to the American Lung Association, a majority of 
Americans--more than 175 million people--live in areas where 
there is enough air pollution to endanger their lives or 
threaten their health.
    The second challenge we faced is that air pollution knows 
no State boundaries.
    Air pollution emitted by our oldest and dirtiest fossil 
fuel power plants doesn't just affect the State in which they 
are located. In fact, mid-Atlantic and northeastern States like 
Delaware, Maryland, New Jersey, Connecticut, and Rhode Island 
are located at what I call ``the end of America's tailpipe.''
    We are among the States that receive a heavy dose of 
pollution from other States' dirty power plants.
    To ensure that States are ``good neighbors,'' regional and 
national regulations of air emissions are crucial. And that is 
what brings us all here today.
    Over the past 10 years the EPA has attempted to regulate 
harmful power plant emissions that transport across State 
boundaries, but court challenges have stood in their way.
    In 2005 the EPA issued the Clean Air Interstate Rule (CAIR) 
to reduce sulfur dioxide and nitrogen oxide emissions in 28 
eastern States. After multiple lawsuits, in 2008 the D.C. 
Circuit Court vacated CAIR in its entirety but later modified 
its decision to remand--allowing CAIR to remain in effect until 
a new rule was promulgated by the EPA.
    The proposed Transport Rule is EPA's response to the 
Court's concerns.
    I believe the EPA has done a good job with the tools they 
have to address interstate air pollution.
    To meet the Court's ruling, the Transport Rule is complex 
and limits business flexibility; however, it is clear this rule 
can make possible real gains in further cleaning our air and 
protecting public health.
    Today, we will hear more details from the EPA about how 
this complex rule will work. We will also hear from the States, 
environmental community, and business on what they expect the 
impacts to be once this rule is implemented.
    I believe that EPA has written a rule that meets the 
Court's demands, but--like other rules--I expect we will see 
this rule litigated before the Court in the not too distant 
future.
    This is a rule to help meet 1997 standards. 1997. As we all 
know, it's not 1997 anymore. It's 2010, and it's time we have 
clarity and certainty on clean air reductions.
    I believe this Congress needs to pass bipartisan 
legislation that I've authored along with Senator Alexander and 
14 of my other colleagues. Legislation that cuts mercury 
emissions by 90 percent and tightens national emissions of 
sulfur dioxide (SO2) and nitrogen oxides 
(NOx).
    This legislation--as shown by EPA modeling--will save even 
more lives than the EPA's Transport Rule, at a very low cost to 
the consumer.
    However, it's clear that we should be debating how to 
strengthen the Clean Air Act so we can save thousands of lives 
and billions of dollars in healthcare costs rather than debate 
whether we should be weakening our ability to clean up the air.

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

    Senator Inhofe. Thank you, Mr. Chairman. Thank you for 
having this hearing and also working together. I said the same 
thing about Senator Cardin, when he had his legislation here, 
that we have more of a spirit of cooperation than people on the 
outside want.
    Let me say at the outset, when it comes to reducing real 
air pollution from power plants the best way to accelerate 
environmental progress and institute certainty for businesses 
is through 3-P legislation. I am pleased that our staffs have 
been working across the aisle to find that common ground. Even 
if we fall short of reaching agreement we are laying the 
groundwork for bipartisan legislation in the next Congress.
    This is not something that is new for me, as everyone here 
knows. I supported the 3-P legislation when I was Chairman of 
the whole Committee, the Environment and Public Works 
Committee. I tried to advance the Clear Skies Bill, not all 
that dissimilar from what we are talking about now.
    Because that effort eventually failed for reasons we don't 
need to get into now, we got regulations under the Clean Air 
Act that the D.C. Circuit ultimately rejected. That is 
something that Senator Voinovich and I predicted was going to 
happen. Here is what I said when the Bush administration's 
Clean Air Interstate Rule was promulgated, the CAIR Rule, and I 
am quoting now from what I said at that time: ``This Clean Air 
Interstate Rule is significantly more vulnerable to court 
challenges than legislation and will undoubtedly be held up. 
Trying to litigate the way to cleaner air only delays progress, 
often yields little or no result, and wastes millions of 
taxpayers' dollars.''
    So here we sit, debating EPA's replacement regulations 
that, though admirable in their intent, are onerous and complex 
and vulnerable to the same lawsuits that stymied previous 
attempts to reduce emissions of SOx and 
NOx.
    Like the Bush administration's Clean Air Interstate Rule, 
EPA's transport rule addressees the transport of fine 
particles, the PM, and ozone across State lines. This rule, to 
put it mildly, is not a model for simplicity. For example, as 
the Clean Air Task Force has noticed under the rule, ``EPA will 
issue four discrete types of new emission allowances for four 
different cap and trade programs corresponding to four 
different control regimes.'' Utilities will also face moving 
and uncertain emission targets as EPA further tightens national 
ambient air quality standards, or the NAAQS, for ozone and PM 
over the next few years.
    In my State of Oklahoma this issue of uncertainty, 
uncertainty over the pending NAAQS revisions and future 
transport rules, is causing substantial concern. I look forward 
to addressing this issue with questions to our Assistant 
Administrator McCarthy.
    Also to address legal problems identified by the Court EPA 
greatly restricted the ability of the utilities to trade 
emissions rights. I am afraid that these trading restrictions 
and the resulting and devaluing of the previous banked 
allowances from the acid rain program have created a lack of 
confidence in emission trading markets.
    Now, on the question of trading, I want to quickly address 
the argument that trading for SOx and NOx 
is the same as trading for CO2. This is simply 
false. We have talked about this in this Committee many times. 
When the 1990 Clean Air Act Amendments were passed we had 
commercially available technology as well as low sulfur coal to 
meet emissions reductions requirements. As two EPA attorneys 
have noticed with acid rain, ``Little new technology or 
infrastructure was needed, and little was created.''
    Now, with CO2 we don't have emission-specific 
technology. Compliance would come in many cases from shutting 
down coal. That is why passing restrictions on CO2 
will mean, among other things, higher electricity prices, 
especially in the Midwest and the South. Serious reliability 
problems and fewer jobs.
    So let's avoid the temptation to re-introduce 
CO2 into this debate. I think we have pretty much 
agreed on that now. We can pass a straightforward 3-P bill that 
sets clear targets, and I would say achievable targets. We may 
have to get together and talk about these things, that sets 
clear targets and timetables and avoids endless litigation that 
enriches lawyers at the expense of obtaining certain public 
health and environmental benefits.
    We could surprise many in this city who don't think passing 
bipartisan legislation of this kind is possible. I stand ready 
to make it happen. And I thank you, Mr. Chairman.
    [The prepared statement of Senator Inhofe follows:]

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

    Chairman Carper, thank you for holding this hearing today 
to discuss EPA's new Transport Rule.
    Let me say at the outset that when it comes to reducing 
real air pollution from power plants the best way to accelerate 
environmental progress and institute certainty for businesses 
is through 3-P legislation. I'm pleased that our staffs are 
working across the aisle to find common ground that could lead 
to passage of 3-P legislation this year. Even if we fall short 
of reaching agreement we are laying the groundwork for 
bipartisan legislation in the next Congress.
    This is not something new for me. I supported 3-P 
legislation when as chairman of EPW I tried to advance the 
Clear Skies bill. Because that effort eventually failed for 
reasons I won't get into now, we received regulations under the 
Clean Air Act that the D.C. Circuit ultimately rejected--
something Senator Voinovich and I predicted would happen. 
Here's what I said when the Bush administration's Clean Air 
Interstate Rule was promulgated: ``This Clean Air Interstate 
Rule is significantly more vulnerable to court challenges than 
legislation and will undoubtedly be held up. Trying to litigate 
the way to cleaner air only delays progress, often yields 
little or no result, and wastes millions in taxpayer dollars.''
    So here we sit, debating EPA's replacement regulations 
that--though admirable in their intent--are onerous and complex 
and vulnerable to the same lawsuits that stymied previous 
attempts to reduce emissions of sulfur dioxide and nitrogen 
oxides.
    Like the Bush administration's Clean Air Interstate Rule, 
EPA's Transport Rule addresses the transport of fine 
particulate matter (PM) and ozone across State lines. This rule 
is, to put it mildly, not a model of simplicity. For example, 
as the Clean Air Task Force has noted, under the rule, ``EPA 
will issue 4 discrete types of new emission allowances for 4 
different cap-and-trade programs corresponding to the 4 
different control regimes.''
    Utilities will also face moving and uncertain emissions 
targets as EPA further tightens National Ambient Air Quality 
Standards (NAAQS) for ozone and PM over the next few years. In 
my State of Oklahoma this issue of uncertainty over the pending 
NAAQS revisions and future transport rules is causing 
substantial concern, and I look forward to addressing this 
issue with questions to Assistant Administrator McCarthy.
    Also, to address legal problems identified by the Court EPA 
greatly restricted the ability of utilities to trade emission 
rights. I am afraid that these trading restrictions and the 
resulting devaluing of previously banked allowances from the 
Acid Rain Program have created a lack of confidence in 
emissions trading markets.
    Now, on the question of trading, I want to quickly address 
the argument that trading for SO2 and NOx 
is the same as trading for CO2. This is simply 
false. When the 1990 Clean Air Act amendments were passed we 
had commercially available technology as well as low sulfur 
coal to meet emissions reduction requirements. As two EPA 
attorneys have noted, with Acid Rain, ``Little new technology 
or infrastructure was needed, and little was created.''
    With CO2 we don't have emissions specific 
technology; compliance would come in many cases from shutting 
down coal. That's why passing restrictions on CO2 
will mean, among other things, higher electricity prices, 
especially in the Midwest and South, serious reliability 
problems, and fewer jobs.
    So let's avoid the temptation to re-introduce 
CO2 into this debate. We can pass a straightforward 
3-P bill that sets clear targets and timetables and avoids the 
endless raft of litigation that enriches lawyers at the expense 
of attaining certain public health and environmental benefits. 
We could surprise many in this city who don't think passing 
bipartisan legislation of this kind is possible. And I stand 
ready to make it happen.
    Thank you.

    Senator Carper. I thank you for that spirit and very much 
for your statement.
    We have been by one of our co-sponsors of our legislation. 
I want to thank Senator Cardin for becoming a co-sponsor, and I 
want to thank you very much for being here today.
    Thank you. Welcome. You are recognized.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
            U.S. SENATOR FROM THE STATE OF MARYLAND

    Senator Cardin. Mr. Chairman, let me congratulate you; as I 
have said before, you have taken steps, I think, to bring us 
together on an extremely important legislation with 3-Ps. 
Senator Inhofe, thank you for your kind comments at the 
beginning of your testimony. You are right; when we work 
together we get things done. We also get better bills.
    So I hope that what we are doing here in this Committee in 
trying to bring us together on important environmental 
legislation can be a model for the type of civility that yields 
good results for the people of this Nation. Thank you both, and 
Senator Carper, as you know, you have been a real champion on 
this issue.
    And I thank you for your patience. We are getting closer, 
and we are making a lot of progress. Maryland has taken 
aggressive steps to reduce air pollution emissions within the 
State. In 2007 Maryland passed the Healthy Air Act, the 
country's most aggressive clean air legislation. Using 2002 as 
its emission baseline the Healthy Air Act has Maryland well on 
its way to reducing the State NOx emissions by 75 
percent by 2012 after already achieving an interim goal of 70 
percent reduction targets on NOx in 2009.
    SOx emissions will reduce by 80 percent this 
year with the second phase of controls in 2013 achieving 35 
percent SO2 emission reductions. Despite Maryland's 
successful efforts to reduce its in-State emissions of ground 
level ozone and PM2.5-causing emissions, pollution 
from upwind States prevent Maryland from reaching attainment 
under the Clean Air Act. On most bad air days somewhere between 
50 percent to 75 percent of Maryland's air pollution originates 
in upwind States.
    This June the Baltimore and Washington metropolitan areas 
experienced 22 moderate and unhealthy air days. Mr. Chairman, 
that is why your bill is just so important to this country and 
Maryland. More than 2 million Marylanders suffer from 
respiratory and cardiovascular diseases like asthma, emphysema, 
and diabetes. Unhealthy air days exacerbate health problems for 
at-risk populations that cost Americans billions of dollars in 
health care costs, loss of wages due to illnesses triggered by 
bad air that leads to absences from work and school.
    EPA's new proposed Transport Rule is a step toward 
addressing the persistent clean air issue Mid-Atlantic and 
Northeast States face. The Rule requirements for power plants 
to finally install modern pollution control technology across 
most of the eastern half of the United States is long overdue.
    However, EPA acknowledges that even with the new Clean Air 
Transport rules in place there will still be municipalities 
that will continue to struggle with meeting attainment as 
indicated throughout our region. Baltimore City and Anne 
Arundel County, Maryland, are two jurisdictions that are 
projected to have maintenance problems even with the new 
Transport Rules in place. This new rule is an important first 
step, but clearly there is more work that needs to be done.
    Fortunately, there are opportunities on the horizon to 
achieve emission reductions needed to allow all States to 
achieve attainment. I am committed to working with Chairman 
Carper and the members of this Committee so that we can achieve 
the type of national legislation to assist EPA in the work that 
it is doing and the work that is being done by many of our 
States.
    Mr. Chairman, again, thank you for your leadership. I look 
forward to working with you.
    [The prepared statement of Senator Cardin follows:]

                 Statement of Hon. Benjamin L. Cardin, 
                U.S. Senator from the State of Maryland

    Thank you, Senator Carper, for holding this hearing today 
to examine EPA's proposed Clean Air Interstate Rule. I 
appreciate our witnesses taking the time to come before your 
Subcommittee to discuss the important work that is being done 
to better protect our air quality.
    I know, Senator Carper, this is an issue you care deeply 
about and have spent a great deal of your career working on. I 
appreciate the time and attention that you and this 
Subcommittee spend on this important human health issue.
    Senator Carper and I understand the importance of 
addressing air pollution transport as it affects the health of 
our constituents living in or neighboring downwind States 
located at ``America's Tailpipe.'' For this reason I appreciate 
that EPA is in the process of addressing the issue of air 
pollution transport through its new Transport Rule.
    Maryland has taken aggressive steps to reduce air pollution 
emissions within the State. In 2007 Maryland passed the Healthy 
Air Act, the country's most aggressive clean air legislation.
    Using 2002 as its emissions baseline the Healthy Air Act 
has Maryland well on its way to reducing in-State 
NOx emissions by 75 percent by 2012 after already 
achieving an interim goal of 70 percent reduction target for 
NOx in 2009.
    SO2 emissions will be reduced by 80 percent this 
year with a second phase of controls in 2013 to achieve 85 
percent SO2 emission reductions.
    Despite Maryland's successful efforts to reduce in-State 
emissions of ground level ozone and PM2.5 causing 
emissions, pollution from upwind States prevents Maryland from 
reaching attainment under the Clean Air Act.
    On most bad air days somewhere between 50 percent and 75 
percent of Maryland's air pollution originates in an upwind 
State. This June the Baltimore and Washington metropolitan 
areas experienced 22 moderate and unhealthy air days.
    More than 2 million Marylanders suffer from respiratory and 
cardiovascular diseases like asthma, emphysema, and diabetes. 
\1\ Unhealthy air days exacerbate health problems of at-risk 
populations and cost Americans billions of dollars in health 
care costs and lost wages due to illnesses triggered by bad air 
that lead to absences from work and school.
---------------------------------------------------------------------------
    \1\ According to the American Lung Association's ``2010 State of 
the Air'' Report Card for Maryland.
---------------------------------------------------------------------------
    EPA's newly proposed Transport Rule is a step toward 
addressing the persistent clean air issues Mid-Atlantic and 
Northeast States face. The rule's requirement for power plants 
to finally install modern pollution control technology across 
most of the eastern half of the United States is long overdue.
    However, EPA acknowledges that even with the new Clean Air 
Transport Rule in place there will still be municipalities that 
will continue to struggle with meeting attainment, as indicated 
on this map.
    Baltimore City and Anne Arundel County, Maryland, are two 
jurisdictions that are projected to have ``maintenance 
problems'' even with the new Transport Rule in place. This new 
rule is an important first step, but clearly there is more work 
that needs to be done.
    Fortunately, there are opportunities on the horizon to 
achieve emissions reductions needed to allow all States to 
achieve attainment.
    I am committed to working to make sure that the Federal 
Government's efforts keep pace with and support the hard work 
Maryland is doing at the State level to protect Marylanders 
from unhealthy air.
    I want to urge EPA and my colleagues to continue working 
toward the goal of eliminating bad air days. I look forward to 
working with Senator Carper and other members of this Committee 
to achieve this end.
    Thank you, and I look forward to hearing the testimony of 
our witnesses.

    Senator Carper. We look forward to being your partner, and 
again, thanks very, very much.
    Senator Voinovich has worked on these issues I think 
probably for longer than I have. Unfortunately he is thinking 
of leaving us at the end of the year. He is on a mission--and I 
am, too--to make sure that a number of items on his agenda list 
get completed. This could be part of his legacy, and I think 
part of the legacy of this Committee. So thank you very much 
for all the work and the effort you have put into this. My hope 
is that we will find by the end of this year it will have been 
for a very, very good purpose.
    Senator Voinovich.

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

    Senator Voinovich. Thank you, Senator Carper. I smile 
because I can still remember when Senator Jeffords was Chairman 
of this Committee, and we were talking about the same thing 8 
years ago.
    I just would like to start out right now with a big picture 
thing. If you look at what we have done in health, we have 
looked at financial regulations, we are talking about climate 
change, this air rule, the CAIR Rule, issue of taxation, there 
is more uncertainty today in this country than I have ever seen 
in my entire life. There was a recent article in Newsweek by 
Fareed Zakaria who talked about the fact that we are sitting on 
about $2 trillion--businesses are, not doing anything because 
they just don't know where we are going. So they are just kind 
of sitting back and trying to figure out, where are we going.
    I think that is kind of a backdrop. The other is that I 
heard Senator Cardin's statement about all of the health 
problems that we have. From my side you will be hearing a lot 
about what the costs are for the companies and the people and 
so on and so forth.
    The problem is that in terms of the cost-benefit, we don't 
get into that. According to what I know Ms. McCarthy doesn't 
have to consider that part of it. She has to consider the 
health part of it. When you do the Water Rule you have cost-
benefit analysis, you have peer review, you have alternative 
regulations, et cetera. So we have never got there. And 
frankly, when I first came here, the first couple of years, I 
tried to get cost-benefit put in the air and just got blasted 
out. Just a terrible thing, we should never do it and so forth.
    But that is a fundamental thing that I think we all need to 
talk about one of these days. Because that is what we are 
running into.
    Senator Carper. When we get into questions, one of the 
questions I will be asking of the Administration is about cost 
and benefit.
    Senator Voinovich. So I would like to say that I am glad 
that you are calling this today. I am glad that Chris Korleski, 
head of Ohio's Department of Environmental Protection, is one 
of the witnesses. And I am anxious to hear everyone's thoughts 
about the EPA's proposed Transport Rule.
    As the Chairman knows, I have long sought a national policy 
that implements a comprehensive air quality strategy that helps 
attain our Nation's Ambient Air Quality Standards and 
streamlines Clean Air Act requirements. I have been working--
the first thing I did when I became Governor was to get Ohio to 
comply with the Ambient Air Standards because I knew its impact 
when I was Mayor, and we needed to get on with this. It had 
real, not only health benefits, but it also had economic 
benefits.
    I did sponsor the Clear Skies Act, and the Chairman and I 
know--we spent a lot of time on it. When the Court overturned 
EPA's first Interstate Transport Rule, CAIR, and the mercury 
rule, it left us with no comprehensive or cost effective policy 
to reduce emissions or untangle the complicated web of 
overlapping and redundant regulations affecting power plants. 
Senator Inhofe said this, we both feared, and it happened.
    EPA's Transport Rule does not allay these concerns. In 
fact, the proposal presents a string and inflexible regulatory 
regime that may be unworkable as a practical matter. If the 
agency finalizes its rule on schedule, spring of 2011, it would 
allow for little more than 6 months for compliance. Then a mere 
2 years later a second phase of caps would kick in, reducing 
SO2 and NOx by 71 and 52 percent, 
respectively.
    These timeframes do not recognize the realities associated 
with designing, permitting, and installing the equipment to 
meet the mandates. Because the proposal virtually eliminates 
emission trading the regulatory hurdles will be all that much 
greater. Adding to the challenge, EPA is proposing to revise 
the emission caps as new NAAQS are promulgated. This means that 
the electric sector will face ever changing compliance hurdles 
that will provide little clarity for business planning.
    With the added uncertainty of future greenhouse gas 
controls, the potential regulation of coal ash as a hazardous 
waste, the electric power industry is facing an uncertain and 
chaotic situation that I believe is incumbent upon Congress to 
fix. And the chart behind me is an indication of what they are 
going to be confronting, 2008 over here to 2017.
    This is what I am looking at, if I am running a utility 
company. Just think about this. Senator Carper, if we could 
work something out, we could eliminate all of this stuff, or 
most of it, so that people know where they are going, what am I 
going to have to do, how much am I going to have to invest, 
what am I going to have and so forth.
    And this fear that I have is not unfounded. The 2009 
National Energy Technology Laboratory analysis titled GDP 
Impacts of Energy Costs found that if 25 percent of the 
Nation's coal generating capacity is replaced with natural gas 
or renewables, electricity prices would increase by 25 percent, 
GDP would decrease by 2.6 percent, and the economy would shed 
nearly 3 million jobs. I would like to submit a copy of that 
report for the record.
    Senator Carper. Without objection, so ordered.
    Senator Voinovich. Then you compare this to a recent Edison 
Electric Institute analysis that depicts the cumulative effect 
of pending EPA rules on the electric power sector. This 
analysis shows that the agency's actions have the potential to 
shutter over 120,000 megawatts of coal-fired generation by 
2015. This is over 38 percent of our country's coal fleet. And 
I would like to submit a copy of that report for the record.
    Senator Carper. Without objection, so ordered.
    Senator Voinovich. Indeed, a major service provider in 
Ohio, AEP, projects that pending EPA regulations would cause 
them to shutter 4,000 to 6,000 megawatts, 20 to 35 percent of 
their coal-fired capacity, in their near eastern service area 
in the 2014-2015 timeframe. I have detailed testimony from AEP, 
and I would like to have that submitted for the record.
    Senator Carper. Without objection, so ordered.
    Senator Voinovich. We can alleviate these concerns by 
properly coordinating the compliance obligations for the 
electric power sector while giving the industry a predictable 
compliance road map over the next 10 to 20 years. This would 
promote efficiency, allow companies to make strategic error 
investments to reduce emissions and provide electric 
reliability.
    For these reasons a 3-P strategy continues to make sense. I 
am appreciative of the Carper-Alexander legislation. As you 
know, we are trying to work together to see if we can't get 
something done in that arena. I would love to do it, because 
maybe we wouldn't be here 5 years from now talking about the 
same subject.
    Thank you.
    [The referenced material follows:]
    
    
    
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    Senator Carper. Thank you very much.
    That would be a good goal to work toward. You and I have 
put a lot of time and energy into this. I know so has our 
former Chair, Senator Inhofe, and Lamar Alexander and others on 
the Committee.
    A lot of people think we can't get much done this year and 
that we are just going to ride it out and just end up with 
delay and inability to find common ground. I am more hopeful, 
particularly in this area, that we can surprise some people. So 
let's give it a shot.
    Our first witness, the entire panel is one person, one 
woman. It is Regina McCarthy, and she has been here a number of 
times before. We are grateful that you are willing to come back 
and to talk with us today.
    EPA Assistant Administrator for the Office of Air and 
Radiation, I think you have been in this job for almost 18 
months. It probably seems like 18 years. We thank you for your 
service and for your leadership, Gina.
    Ms. McCarthy, you have 5 minutes to read your opening 
statement. The full content of your written statement will be 
included in the record, and you are recognized. Please proceed. 
Thank you for joining us.

 STATEMENT OF REGINA MCCARTHY, ASSISTANT ADMINISTRATOR, OFFICE 
   OF AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY

    Ms. McCarthy. Thank you. It is great to be here, Chairman 
Carper, members of the Subcommittee. I thank you for inviting 
me to testify today on EPA's recently proposed Federal 
implementation plans to reduce interstate transport of fine 
particulate matter and ozone, which we call the Transport Rule, 
which we believe is an important step toward protecting public 
health, to helping States reduce their pollution, and to 
meeting our clean air standards.
    Millions of people continue to breathe unhealthy air that 
does not meet our National Ambient Air Quality Standards. This 
is due to a combination of pollution from local and in-State 
sources as well as pollution from upwind States that cross 
State lines. As a result the Clean Air Act assigns 
responsibility to meet the Clean Air Standards to both upwind 
and downwind States. EPA's recently proposed Transport Rule 
addresses upwind States' responsibilities while States and 
local agencies must continue to work on local and in-State 
pollution control measures.
    This transport rule represents a significant step that EPA 
is taking to help States implement the good neighbor provision 
of the Clean Air Act on an ongoing basis. It also fulfills our 
commitment to address interstate transport with the exact same 
urgency that we and other State partners bring to the local 
non-attainment planning obligations. From now on, each time a 
NAAQS is changed EPA will evaluate whether interstate pollution 
transport contributes to the air quality problem, and if so, 
whether new emissions reductions will be required from upwind 
States.
    Our proposed Transport Rule would require significant 
reductions in SO2 and NOx emissions from 
power plants in 31 States and the District of Columbia. The 
first phase would take effect in 2012 in all 31 States and DC, 
with a second phase that would take effect in 15 States in 
2014. By 2014 we project that power plant SO2 
emissions in the covered area will be 71 percent lower than 
2005 levels, and power plant emissions of NOx 
emissions will be 52 percent lower than 2005 levels.
    The emission reductions required by the Transport Rule in 
upwind States will provide health and environmental benefits 
both in-State and in downwind States. We estimate that by 2014 
it will prevent 14,000 to 36,000 premature deaths annually and 
provide more than $120 billion to $290 billion annual savings 
and benefits. These benefits will far outweigh the estimated 
annual cost of $2.8 billion in 2014. It will help all but a 
very few areas in the eastern part of the country come into 
attainment with the 1997 PM2.5 and ozone standards 
and make major strides toward attaining the 2006 24-hour 
average PM2.5 standard.
    When final, the proposed rule will replace the Clean Air 
Interstate Rule which was remanded back to EPA in 2008. In 
response to the Court decision EPA went back to the drawing 
board and developed a new rule that reflects the Court 
decision. Compared to CAIR some of the major differences in the 
Transport Rule include more emission reductions in 2012 and 
2014 and a definition of significant contribution that is based 
both on cost as well as downwind air quality impacts. We are 
closely adhering to the 2008 Court opinion with regard to 
establishing State budgets, interstate trading, use of title IV 
allowances, fuel factors, and other issues that the Court spoke 
to as well as developing a new methodology that can be applied 
to current and future NAAQS revisions.
    As you are all well aware, this proposal is the first of 
several rules that EPA intends to issue over the next 2 years 
that will yield substantial public health and environmental 
benefits and maintain a reliable and affordable supply of 
electric power across the country. In developing and 
promulgating these rules the agency will be providing States 
with the help that they need to attain the NAAQS and providing 
the power industry with a much clearer picture of what EPA will 
require of it in the next decade.
    As I have stated here before, my top priority is to work 
with you, with the power industry, with the other industry 
sectors, States, community groups and environmental groups, and 
with the full range of experts from government, business and 
universities to find the right path forward in crafting the 
laws and regulations we need to protect public health and the 
environment. I still believe that that is the most important 
responsibility I have right now.
    And to that end, let me note before I close how much I 
appreciate the substantial contribution that Senator Carper and 
S. 2995 have made to the debate and to our shared goal of clean 
air. S. 2995 offers emission reductions that would provide 
significant benefits to the public, and it would maintain 
critical authorities in the current Clean Air Act that are 
designed to ensure that every American breathes air that meets 
health-based National Ambient Air Quality Standards.
    I am confident that together we can make great strides to 
meet our shared goal. Thank you very much, and I am here to 
answer questions.
    [The prepared statement of Ms. McCarthy follows:]
    
    
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    Senator Carper. Thank you very much for your comments, 
especially that last paragraph.
    Ms. McCarthy. I appreciate that. Maybe I should have 
started with that one.
    [Laughter.]
    Senator Carper. Senator Alexander is not here. He and I 
were together earlier this morning. He is in a markup. I think 
he is the only Republican at the markup; he needs to be there. 
He is submitting a statement for the record. But this is 
something he and I worked on very closely, as I have with my 
colleagues to my right over the years. So this is a shared 
effort on our side. We are really pleased with what you just 
said.
    [The prepared statement of Senator Alexander follows:]

                  Statement of Hon. Lamar Alexander, 
                U.S. Senator from the State of Tennessee

    I am pleased that the Committee is holding this hearing 
today on an issue that I believe is of great importance. I see 
no reason why we cannot continue to improve on the significant 
reductions in harmful pollutant emissions from our coal-fired 
power plants. The EPA's efforts to improve air quality by 
reducing power plant emissions of SO2 and 
NOx are a positive step, but they are too regional, 
too complicated, and too weak to be a permanent solution for 
public health and for the certainty and flexibility that 
utilities need to keep electric rates down.
    While I applaud the fact that the EPA's Transport Rule 
requires greater reductions than under the previous Clean Air 
Interstate Rule, I am concerned about several things in the 
proposed rule.
    First, this rule will not address the issue of mercury. 
While I know that the EPA intends to propose a rule on mercury 
reductions in the future, the patchwork of regulations coming 
out of the agency reduces the certainty for electric utilities 
and their customers. It would be more efficient to discuss 
these proposals simultaneously so that we could better 
understand their interaction as well as the ultimate costs and 
benefits.
    Second, I am concerned that this rule will wipe out 
allowances that have been traded or purchased among the various 
regulated utilities, opening up the EPA to lawsuits for taking 
assets. Already we have seen the allowance values plummet in 
the SO2 and NOx markets.
    Next, I am concerned that the EPA's preference to only 
allow intrastate trading of allowances will increase the costs 
to customers. One needs to look no further than the home States 
of our colleagues on this Committee to see this disparity. 
Senator Voinovich's State of Ohio will end up with allowance 
costs far greater than those of Senator Sanders' utilities in 
Vermont. If these allowances were able to be traded across 
State lines we could see the evolution of a more efficient 
market and lower costs overall.
    I am also fearful that the EPA's rule will face legal 
challenges on the basis that it may not be in compliance with 
the 2008 ruling reinstating the Clean Air Interstate Rule. The 
continued legal and regulatory back and forth has resulted in a 
very uncertain regulatory environment for our Nation's 
electricity providers, and it is time to move forward on a path 
to certainty.
    My concerns lead me to believe that this EPA action is even 
more reason for Congress to pass the Carper-Alexander 
legislation that would establish a national program with 
stronger permanent reductions in SO2 and 
NOx emissions and eliminate 90 percent of mercury 
emissions.
    The bipartisan Clean Air Act Amendments of 2010 is 
cosponsored by 6 Republicans, 8 Democrats, and an Independent 
Senator. We have worked hard to provide a program that is 
nationwide, provides strong targets for emission reductions, 
and establishes an allowance and trading system that keeps 
costs down.
    The legislation puts strict limits on three noxious 
emissions--sulfur dioxide, nitrogen oxide, and mercury--that 
are produced when we burn the coal which provides 50 percent of 
our Nation's electricity. These pollutants affect the health of 
millions of Americans. The Environmental Protection Agency 
(EPA) estimates that 24,000 premature deaths a year from lung 
diseases are caused by coal pollution. Forty-eight States have 
issued fish consumption advisories due to mercury pollution, 
covering 14 million acres of lakes, 882,000 river miles, and 
the coastal waters of 13 entire States.
    Our legislation will also direct the EPA, for the first 
time, to reduce mercury emissions by at least 90 percent no 
later than 2015. By 2018 our bill will cut SO2 
emissions by 80 percent from current levels and by 2015 will 
cut NOx emissions by 53 percent from current levels. 
That should save more than 215,000 lives and more than $2 
trillion in health care costs by 2025 according to EPA's 
analysis. It will combine stronger national standards on these 
two pollutants with existing emissions trading systems so the 
market will determine the cheapest way to reduce emissions. The 
original trading system imposed on sulfur emissions in 1990 has 
cut emissions in half while the real cost of electricity at the 
same time decreased. The first estimates of the cost of our 
bill by the EPA and a recent study on mercury control 
technologies by the General Accounting Office show that the new 
standards in our bill will equal an increase of about $2-$3 per 
month on the average Tennessean's utility bill.
    I fear that the EPA's Transport Rule and an expected EPA 
rule on Hazardous Air Pollutants such as mercury will be more 
expensive for the country and yield more modest emissions 
reductions than our bill.
    As has already been stated this rule is over 1,000 pages, 
and we are just beginning to understand it. I look forward to 
learning more from our witnesses today regarding the costs and 
benefits of this proposed rule and will focus my questions on a 
comparison with the bipartisan legislation authored by Senator 
Carper, me, and 14 other cosponsors.
    Senator Carper and I have introduced clean air legislation 
every session I have been a Senator. We have a better chance to 
succeed this year because of stronger bipartisan support, more 
public understanding of the dangers of emissions, and improved 
technology for controlling these pollutants. Bipartisan support 
for the Clean Air Act Amendments shows that when it comes to 
air pollution we can find a way forward, and the American 
people will all be better for it.

    Senator Carper. We will have two rounds of questions, 5 
minutes each. I want to go back, the first question, just to go 
back to a point raised by Senator Voinovich. I think it is one 
of the most important issues that we are going to discuss 
today.
    On page 2 of your testimony you talk about how the proposed 
Transport Rule would prevent 14,000 to 36,000 premature deaths 
annually. And you suggest that the health and welfare benefits 
could be quantified. And you put a range on it, $120 billion to 
$290 billion annually. That is annually in 2014.
    Ms. McCarthy. That is correct.
    Senator Carper. And you go on to say that the benefits will 
far outweigh the estimated annual cost of $2.8 billion. I want 
my colleagues--and I am going to ask Senator Voinovich, I am 
just going to ask you if you could just bear with me here on 
this one point. You raised the issue of cost-benefit; great 
question. It is one that we have to be focused on. And in the 
testimony that we have heard, in the year 2014 the range of the 
benefits anywhere from $120 billion forecast to as much as $290 
billion.
    Let's take the low end of that range. Let's say it is not 
even the mid-range. Let's say that it is $120 billion. It is 
not $290 billion, it is $120 billion, the low end of the range. 
The costs that were projected were for the $2.8 billion. Let's 
say that is low. Let's say it is actually $3 billion.
    And what I want you to do is sort of using that 
information, talk to us about the cost-benefit of doing this. 
We are not interested in doing something, or taking an approach 
where the costs just are out of sight and really inconsistent 
with the benefit. Just talk to us about why this is important.
    Is it just 1 year? Do the numbers--going forward, do the 
numbers get worse in terms of the cost-benefit? Or do they get 
more favorable? Share with us. This is an important point.
    Ms. McCarthy. It is an important point. Let me just 
clarify, to begin with, that the standards that we set under 
the National Ambient Air Quality Standards are health-based 
standards. But cost-benefit analysis is always applied in the 
implementation of those standards. And the Transport Rule is 
the implementation of a variety of NAAQS standards to try to 
address upwind contributions.
    When we apply cost-benefit analysis what we see here is 
overwhelming public health benefits. Just to express that a 
little bit more specifically, we are talking about in 2014 
avoiding 14,000 to 36,000 premature deaths, 21,000 cases of 
acute bronchitis, 23,000 cases of non-fatal heart attacks, 
26,000 hospital and emergency room visits. I could go on and 
on. And those benefits translate into at least $120 billion 
annually. Those costs begin in 2014, and they continue every 
year.
    To compare that with the cost of this bill, the costs 
associated with this bill are $2.8 billion. It is not even 
close. This bill is overwhelmingly beneficial when you do it 
from traditional cost-benefit analysis. The simple reason for 
that is that there are very cost effective reductions available 
to us in the power sector that we should have taken advantage 
of many years ago. But we have not, and we plan to now. I think 
this is a reasonable and cost effective approach.
    Senator Carper. Let me follow up with this, if I could.
    When you analyze the impacts of this rule, what they might 
have on fuel use, the impacts on plant closures, the impact on 
electricity prices, do you see any significant changes over 
current status in those particular areas, please?
    Ms. McCarthy. We have looked at all of those issues. What 
we know is the average electricity prices could increase 
somewhere less than 2 percent. Our estimate is about 1.5 
percent. That would be by 2014, which means if you pay $100 now 
in your electric bill, you could pay $1.50 more. And our 
natural gas prices will increase less than 1 percent by 2014. 
And we don't see significant shifting away from the use of 
coal, although there will be some shifting to cleaner coal use.
    The simple fact is that as we looked at these reductions in 
detail we not only did a cost-benefit analysis, but we factored 
costs into decisions in terms of where the most, the highly 
most cost effective reductions could be achieved. There are 
many of them in the power sector.
    So we have an ability to get highly cost effective 
reductions there, and they provide tremendous public health 
benefits without significant impacts to consumers on 
electricity prices, but significant public health benefits.
    Senator Carper. Good.
    My time is expired.
    Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    As I said in my opening statement, Ms. McCarthy, the 
concern I have, a lot of concerns I have are on uncertainty. 
Just now I wrote down what you said, and they said that was 
also in your printed statement. You said, we supply the power 
industry with a clearer picture as to what to expect over the 
next 10 years. That is what I would like to achieve. 
Predictability is the problem.
    And I know that we go through this discussion all the time. 
While I agree with Senator Voinovich in his concern over how we 
can and how we cannot use cost-benefit analysis, nonetheless 
there is a cost to this stuff. Anything that we are doing and 
any level of uncertainty in the power industry is going to be 
paid for by everybody in this room. We are the ones who are 
going to have to be absorbing this.
    So I would start off by, how do you think the Transport 
Rule provides certainty to the regulated community? If you 
could comment to that.
    Ms. McCarthy. Senator, thank you for asking the question. I 
share your goal of trying to understand what the rules are that 
are moving forward and how they could impact the power sector, 
particularly to ensure that we continue to have a reliable and 
affordable energy supply.
    The best thing that I thought that we could do with this 
Transport Rule, which is what I think we accomplished, is to 
make it as legally defensible as we possibly could, to listen 
to the Court carefully and then to use as much of our technical 
ability as we could to identify the lowest cost opportunities 
to achieve the reductions we need not for the emission 
reductions but for the air quality impacts.
    So what you have here is a rule that is legally defensible, 
that we believe will--even though we expect it to be 
challenged--will hold up in court. We think it is a smart rule 
and it is cost effective.
    Senator Inhofe. First of all, would one of the staff hold 
up the chart that Senator Voinovich used there? This chart 
assumes that there is no litigation. That would have to be 
added on to all of these timelines that are in there. I am in a 
kind of position where I would say I don't think it is going to 
be litigated. I don't think it is. I know it is. This is going 
to happen. With the Bush administration's CAIR rule, that 
litigation took almost 3 years to get resolved.
    Is there any way that you can guarantee that litigation 
this time around will be dealt with more expeditiously? We know 
it is going to happen. But is there anything that you can think 
of that is going to be different now in terms of the litigation 
that we know is going to come?
    Ms. McCarthy. I fully expect that it will be litigated. I 
think the difference that I am trying to point out is I think 
it adheres much more closely to the requirements in the Clean 
Air Act. I think it is much more tied to the ability to achieve 
the air quality reductions that the Clean Air Act is requiring.
    Senator Inhofe. In my State of Oklahoma--it is included 
among the States in this Transport Rule. It wasn't under the 
CAIR rule. The EPA apparently included Oklahoma in the summer 
ozone season due to transport from the Dallas-Fort Worth areas 
and the impacts from that. The EPA modeling shows that 
approximately two parts per billion impact from transport on 
the Dallas-Fort Worth area. Yet your slide show of the 
Transport Rule indicates that Dallas and Fort Worth will be in 
attainment with the 1997 ozone NOx of 80 parts per 
billion by 2014 even without the Transport Rule.
    I have a couple of charts; they are not large enough to 
use, but they come from the EPA, and you are very familiar with 
them, showing where we are going to be with and without. So my 
question is, why would you include Oklahoma in the summer 
season regime if Dallas-Fort Worth will get into attainment 
even without the Transport Rule?
    Ms. McCarthy. My understanding, Senator, is that there are 
three States that actually were added into the transport region 
that will be impacted by this rule. Oklahoma is clearly one of 
them.
    If I could just step back, one of the ways in which we had 
to address the Court's challenge back to us was to very clearly 
articulate what significant contribution means for an upwind 
State in terms of the ability for downwind States to both 
achieve air quality reductions that are required as well as 
maintain them. My understanding is that for Oklahoma it wasn't 
a very close call in terms of the ozone level.
    Senator Inhofe. You say it was not?
    Ms. McCarthy. It was not. One percent is what we are using 
as a threshold for significant contribution. And Oklahoma 
actually does contribute to the air quality impacts associated 
with Dallas. So we are asking Oklahoma to pay its fair share 
and contribute to the relief of that downwind State in that 
area.
    Senator Inhofe. OK, my time has expired, but what are the 
other two States? You said it impacted three States.
    Ms. McCarthy. Nebraska and Kansas.
    Senator Inhofe. Thank you, Mr. Chairman.
    Senator Carper. Thank you.
    Senator Cardin.
    Senator Cardin. Thank you, Mr. Chairman.
    In the interest of continuing this bipartisan cooperation, 
Senator Inhofe, we have blown up that one chart. So if you need 
it blown up, you can certainly use our copy. Just want you to 
know we are all working together on this.
    But it is the same point; I guess I want to take it from a 
little bit different angle. I certainly support what EPA is 
trying to do with these transport rules. I certainly support 
what Senator Carper is trying to do with congressional 
authority. And I think certainty is an important issue here. 
Having clear authority under the Clean Air Act would also, I 
think, help in certainty.
    I come at this, though, from a little bit different angle. 
That is if the new Clean Air Transport Rules go into effect, 
and we achieve what we expect to be able to, there still will 
be gaps, including in my State of Maryland. There will be 
counties struggling to maintain attainment. Baltimore City, 
Anne Arundel County just south of Baltimore City are two 
counties that EPA projects will struggle to maintain air 
quality attainment.
    My point is, what else do we need to do either through the 
regulatory authorities that EPA currently has or through 
congressional authority or action? What more do we need to do 
in order to be able to achieve what science tells us we should 
achieve to protect the health of the people of our community?
    Ms. McCarthy. Senator, let me respond first by telling you 
that I share your interest in making sure that we actually, 
through these measures, achieve the air quality reductions that 
the Clean Air Act requires. I think we did our best in this 
Transport Rule to make it very clear that in the interest of 
getting the rule out in a timely way and capturing the 
reductions that we knew were going to be available to us in 
2012, that we put out the best rule that we could on the basis 
of the modeling that we had the time and the technical 
expertise to run.
    What we did find was that on the NOx reductions 
there would need to be additional NOx reductions, 
clearly, to get into compliance with the 1997 standard because 
there are two areas, as you say, that still remain in non-
attainment, even with these reductions.
    But we also acknowledge that we are working very hard at 
updating an ozone standard. As a result we have made a 
commitment that we will look at additional NOx 
reductions when we see a NAAQS standard is being revised. 
Because too often when the NAAQS standards have been revised we 
have put considerable pressure on each State to develop plans 
for attainment, but we haven't put commensurate pressure on the 
upwind States to contribute to that attainment challenge. And 
this is a model to be able to do that. And it is a clear 
commitment from EPA that we are going to also seek additional 
NOx reductions. We wish we had been able to do more 
with this rule.
    But given the time constraints that we had what we best did 
was achieve the reductions we thought we could as quickly as we 
could and put the challenges out there. We have asked for 
comments on how we could do better with these rules. We have 
asked for comments on the structure of the rule. And we have 
made a commitment that we need to do more; we know we need to 
do more, and we will.
    Senator Cardin. And I support your response. It is clear to 
me that you do have that authority under the Clean Air Act to 
take additional steps provided you follow the process that the 
Court has indicated needs to be followed. And you have the 
documentation to demonstrate the results that can be obtained.
    I know that Senator Carper in his efforts wants to make 
sure that although we give you clear guidance and we have some 
predictability we don't want to undermine the authority of EPA 
to act under the authority under the Clean Air Act itself. I 
will welcome your thoughts as we go through this legislative 
process, particularly as it relates to NOx, that 
yes, we want to make legislative progress here, but we don't 
want to undermine your authority to do what you are required to 
do currently under the Clean Air Act.
    Ms. McCarthy. Thank you, Senator. I guess the big challenge 
for us is that emissions reductions are welcome when they are 
cost effective. But the real challenge for us is the ultimate 
air quality that we are actually producing for the American 
people.
    Senator Cardin. Absolutely. I agree with Senator Voinovich. 
This is clearly, I think it is required by the courts anyway. 
But it is certainly a part of the process here.
    Thank you, Mr. Chairman.
    Senator Carper. Thank you, Senator Cardin.
    Senator Voinovich.
    Senator Voinovich. Thank you.
    Mr. Korleski is going to be testifying in the next panel, 
but I would like to get your reaction to a paragraph in his 
testimony. ``Next, we are concerned with the concept that each 
time USEPA promulgates a new, more restrictive air quality 
standard, USEPA intends to revise the Interstate Transport Rule 
by changing the emission budgets.''
    We have two main concerns with this approach. First, we 
expect that at some point it will be difficult or impossible to 
develop and implement technology that can achieve the new, more 
restrictive budgets. Second, the regulated community must have 
some degree of certainty to timely plan investments and 
controls, fuels and operations at generating facilities in 
order to achieve necessary emission levels by the relevant 
deadline. We would recommend that anything USEPA promulgates 
for an emission sector would not change for at least 10 years, 
and then only if USEPA demonstrates that additional controls 
are technically achievable and cost effective.
    How do you respond to what Mr. Korleski says here in his 
testimony?
    Ms. McCarthy. First of all, Senator, I would like to tell 
you that the next panel is represented by four close colleagues 
of mine, one of which is Chris Korleski. I respect his judgment 
tremendously. We are close colleagues.
    What I would suggest to you is that what we are doing in 
the Transport Rule is I believe doing what the courts tell us 
we must do under the Clean Air Act and what we believe we must 
do under the Clean Air Act. I think Mr. Korleski is providing 
you with his understanding of what he believes would be a 
better approach to that. But what we do in the Clean Air Act is 
on a 5-year basis where we are obligated to look at the 
National Ambient Air Quality Standards, identify those 
standards, and then if reductions are necessary to achieve 
those, we are required to implement them.
    I don't believe that the addition of the Transport Rule, 
which is really an obligation to address the upwind States' 
contributions, would do anything but fill in what has been a 
gap in the system in terms of how we have implemented the Clean 
Air Act. But Mr. Korleski is clearly sending Congress a signal 
that he would prefer a different approach.
    Senator Voinovich. I think we would recommend any budget 
USEPA promulgates for an emissions sector would not change for 
at least 10 years, and then only if USEPA demonstrates that 
additional controls are technically achievable and cost 
effective. I think that gets at the whole issue of this 
business of uncertainty about where are we going.
    Ms. McCarthy. The only thing I would clarify, Senator, is 
that EPA has made a commitment to using this model that we are 
proposing, when it is finalized, and that it is a good model to 
get at upwind contribution. Not every NAAQS might require that. 
But we are obligated to take a look at it.
    And the last issue I would indicate is that over the 40 
years of the Clean Air Act I think one of its major values has 
been that it has not waited for technologies to be available to 
achieve required air quality reductions but has driven those 
technologies forward. The Clean Air Act has really pushed the 
envelope in terms of developing new technologies that are now 
readily available, that now offer cost effective opportunities. 
Those are very technologies we are looking to take advantage of 
in this Transport Rule.
    Senator Voinovich. That is interesting, and I don't have 
the history of it, but I am going to look into it. When AEP put 
on a scrubber in 1992 or 1993, when I was Governor, at a cost 
of $650 million, the technology was there for them to do that. 
That is one of the big hang ups I have with EPA and many other 
people, is that the technology--for example, for greenhouse gas 
emissions--is not available today, not commercially deployable. 
If you are going to ask somebody to meet a standard, the 
technology ought to be there. What happened was, it was, and 
you guys mandated that it take place.
    But it wasn't, for example, you are talking about some new 
rulemaking based on MACT rulemaking. One of the things that we 
are all concerned about here is that we have the feeling that 
EPA is going to go in and look at other pollutants as it moves 
forward. The issue is, are they going to study whether or not 
these things really are making a difference, and are they going 
to have alternative control strategies, or are they just going 
to come down and say, here it is, and you do it. We run into 
this almost everywhere we go. It is, well, we have these MACT 
standards, back with the Water Act. They mandated MACT 
standards, and all hell broke loose in the country.
    Then we came back, and we amended the Water Act to say that 
if the technology that you have is getting the job done, that 
is fine. But the EPA said, they originally said no, you have to 
do this other. And in many instances, what they asked them to 
do was more expensive than the property values in the town that 
they were asking them to do it. It is a reasonableness thing 
that comes into play here.
    Ms. McCarthy. I appreciate that, Senator. I know there is a 
lot of concern in particular about the utility MACT standard 
which we are planning to propose under a court timeline next 
spring. But I will assure you that the MACT standards are based 
on already available and in-use technologies. There is a very 
serious requirement to look at costs associated with that. So 
we will do our best to balance as the Clean Air Act requires 
and that you are seeking.
    Senator Carper. All right, Senator Voinovich. There will be 
another round for 5 minutes of questions.
    Let me kick off that second round, Ms. McCarthy, by 
following up on some comments and questions from Senator 
Cardin. When you state that the EPA plans to move forward on an 
additional Transport Rule next year to help States meet the new 
ozone standards that will be finalized, I think, in August, are 
you saying that EPA will be looking to tighten the seasonal 
ozone cap, the seasonal ozone cap and not the annual 
NOx cap?
    Ms. McCarthy. That is correct, Senator.
    Senator Carper. Thank you.
    In your statement, you mention that there will be limited 
trading allowed under the Transport Rule. If a utility has any 
banked sulfur dioxide or nitrogen oxide credits from the old 
CAIR program or from the acid rain program, can they be used 
under this new system that you have envisioned?
    Ms. McCarthy. The Court was pretty clear to us, Mr. 
Chairman, that the title IV SO2 allowances 
associated with the acid rain program cannot be used as 
currency to achieve compliance with the Transport Rule. 
Concerning the CAIR NOx allowances, our proposal is 
that those allowances also not be used as currency in this 
program, but we are taking comment on that. The main concern 
with that was making sure that there was no legal vulnerability 
in the rule. Those allowances benefited by the fuel adjustment 
factor. They were based on the fuel adjustment factor. That was 
determined to not be legally defensible by the Court.
    So we felt that the most appropriate decision to make was 
to listen to the Court and to abide by that as closely as we 
could.
    Senator Carper. You talked earlier in your opening 
statement about trying to find a way for regulation to work 
with legislation. Is that an area where perhaps that could be 
brought to bear?
    Ms. McCarthy. I believe that the legislation that you have 
proposed and the way in which you have proposed does leave us 
considerable opportunity to marry those two to the benefit of 
the American public.
    Senator Carper. Just a follow-on. Are you worried about 
utilities increasing their emissions before 2012, emitting 
their bank, if you will, because the banks aren't worth 
anything? Is that a concern that you might have?
    Ms. McCarthy. Could you repeat the question?
    Senator Carper. Yes. Are you worried about the utilities 
increasing their emissions before 2012, sort of emitting their 
bank, if you will, because the banks aren't worth much of 
anything?
    Ms. McCarthy. Yes. We have been watching that very closely. 
We are not seeing that that has been the trend. One of the 
reasons why we felt it was pretty important to get a rule out 
quickly was so that it wouldn't allow backsliding. That is 
basically one of the considerations, was our 2012 targets in 
this rule are very much about making sure that we take 
advantage of the technologies that have been put in place as a 
result of CAIR phase one and that those technologies be run as 
much as they can so we can take advantage of those inexpensive 
reductions.
    Senator Carper. You may have responded to this question, 
but I want you to do it again, if you have. Will companies or 
will utilities be able to bank emissions in the future?
    Ms. McCarthy. Yes.
    Senator Carper. OK, thanks. Those were my questions.
    Senator Inhofe.
    Senator Inhofe. I just have, for clarification on the issue 
that I brought up, it appears to me, and as I am looking at 
this chart, as to what is going to happen without the proposed 
Transport Rule, you are familiar with this chart, that the 
Dallas-Fort Worth area will come into compliance with the 1997 
ozone NAAQS without the significant contribution you referred 
to of Oklahoma and you are requiring with this Transport Rule.
    Now, at least according to the chart, why would we go, why 
would you be listing Oklahoma, or counties in Oklahoma, if they 
are going to be in compliance without the rule? I don't 
understand that.
    Ms. McCarthy. Senator, I apologize if I don't have all the 
information that I need to provide you the best answers. But 
let me give you my understanding. That is that the courts told 
us one of the deficiencies of CAIR was that it first of all 
didn't look at contribution as well as it needed to State by 
State. But it also didn't look at the issue of maintenance. 
Because there are two obligations of upwind States. One is that 
you don't contribute to non-attainment, and second that you 
don't make it more difficult for a downwind State to maintain 
their attainment.
    My understanding is that in an effort to respond to the 
courts we established a significance threshold for both States 
that contribute to non-attainment and to address this 
maintenance issue. My understanding is that the State of 
Oklahoma does have an impact downwind in the Dallas area 
because it makes it more difficult for that area to maintain 
compliance with the NAAQS even if it is currently in 
attainment.
    Senator Inhofe. OK, now explain to me how this happens, 
then. I am not familiar with your modeling. You have come to 
some conclusions that I sit here and I wonder. We are talking 
about ozone; we are talking about the summertime. And where we 
have nothing but south winds. How does Oklahoma make this 
contribution?
    Ms. McCarthy. Senator, again, I'll be happy to sit down and 
our technical staff can walk through it. But our air quality 
modeling looks fully at all meteorological data. And it is very 
sophisticated. In the effort to do the work we needed to do for 
the courts to both identify contributions for non-attainment 
and for maintenance, we actually looked unit by unit at every 
power plant in the country. We looked at what obligations they 
had, what State obligations they had. We identified where we 
thought the reductions needed to be achieved upwind so that 
States could just look at their in-State compliance 
requirements and we could take care of some of those upwind 
challenges that they were facing.
    In your area, my understanding is that in looking at that 
in detail, that Oklahoma units would challenge Dallas in terms 
of their ability to maintain compliance because of emissions 
that were being generated there that would be contributing to--
--
    Senator Inhofe. In Oklahoma?
    Ms. McCarthy [continuing]. Dallas, to the Dallas area.
    Senator Inhofe. I am seeing behind you, you are flanked by 
a lot of people who I am sure know a lot more about this than I 
do. But when I am asked that question, I go back to the State 
of Oklahoma. What I would like to get from you is, for the 
record, is something that I can look at and analyze, see if I 
agree with it, and if not, call you up, and then something that 
I can pass on and explain. Because right now I am not able to 
do that.
    So if we could do that, and let us kind of get into the 
weeds on this thing, that would be helpful.
    Ms. McCarthy. I think that would be great. One of the 
reasons why we have a good comment period on this is that I am 
sure other States are going to have similar questions. We 
certainly want to know that we have done the right technical 
modeling to make the right decisions.
    Senator Inhofe. That is fair enough. Thank you.
    Senator Carper. Thank you.
    Senator Voinovich.
    Senator Voinovich. One of the things that I am doing is we 
are negotiating with Senator Carper right now on this 
legislation. And trying to see just what all the facts are. But 
I am going to read you from this paper that was done by 
American Electric Power. Assuming the proposed rule goes final 
a little less than a year from now, i.e., EPA's current 
schedule is spring of 2011, phase one of the program would 
allow only a little more than 6 months in total to implement 
the new emission budgets, establish emission trading programs, 
and for companies to make the needed investments to comply with 
these limits. Six months, let alone a year or 2, is not nearly 
enough time for this.
    Having a brand new emission cap, State budgets and 
allowance allocations in 2012 creates major logistical 
challenges for the electric power sector and for the States 
that must implement the programs. Companies will not have 
sufficient time to design, permit, fabricate, and install 
emissions controls that may be necessary for meeting the new 
reduction requirements.
    Moreover, additional time is necessary to coordinate 
installation of major pollution control equipment during spring 
and fall outage schedules to ensure reliability of the entire 
utility system. While the EPA claims that phase one will 
require little investment in the way of new controls, its 
assumption is predicated upon high level modeling and not the 
actual physical, contractual, and financial constraints at 
these facilities during such a short timeframe.
    We are talking now about numbers, NOx, 
SOx, mercury, and if you are going to take the 
numbers and agree to them, then it seems to me that you need to 
talk about implementation of how long it is going to take for 
this to be put in place. What is your reaction to what they 
have suggested here in terms of this Transport Rule and the 
timing needed to get the job done?
    Ms. McCarthy. Senator, I think we need to look at the 
comments when they come in to the Rule. So I appreciate that 
people could differ in terms of whether or not they think the 
timing is too tight. But my understanding is that the 
reductions we are looking to achieve in 2012 are primarily 
based on running the equipment that has already been invested 
in and that we believe will be installed and in place as a 
result of phase one of CAIR.
    So we really were looking at 2012 as locking in the 
investment that have already been made and should be in place 
and 2014 as a second opportunity to achieve some additional 
SO2 reductions, which will require investments. But 
that time line should provide an opportunity for those 
investments to be fully made and for companies to be able to 
comply.
    We did also in the rule indicate that we would love to have 
States come in to us and indicate how they would like the State 
allocation to be made, which gives an opportunity for a closer 
look, unit by unit, at where these investments have been made 
and what kind of reductions can be expected. We do allow a 
little bit of in-State trading as well. So there is an 
opportunity there.
    And I guess the last issue, Senator, is if any facility 
believes that they are in good faith trying to comply as best 
they can and cannot achieve that compliance, there are always 
opportunities for us to enter into consent agreements that will 
acknowledge real barriers that they may be facing, and take 
care of it in that way.
    Senator Voinovich. I have been watching the face of Mr. 
Korleski during your testimony. Mr. Korleski, you have listened 
to that, and I am expecting you when you come up to respond.
    Ms. McCarthy. I am sure he will be as nice to me as I was 
to him.
    [Laughter.]
    Senator Voinovich. You are both good friends, but there 
seems to be some difference of opinion. I know for example, EPA 
has assumed that AEP will have scrubbed its 585-megawatt 
Muskingum River Unit No. 5 in Ohio by January 1st, 2011, or 
only 6 months from now. However, while preliminary engineering 
was begun several years ago there is no ongoing construction 
activity associated with this retrofit project.
    Even with engineering and construction recommended today, 
the actual in-service date for the scrubber would still be at 
least 3 years from now. As such, the EPA assumption that this 
unit would be scrubbed by 2011 is completely infeasible and 
inaccurate. That is what they have to say about it.
    So there is some real difference of opinion here about how 
fast the technology is, how much it will cost, how much time it 
is going to take. It seems to me if we work something out there 
is going to have to be some compromise on both sides in terms 
of the numbers, as to the reduction in emissions and also the 
timeline that you put in to get it done. Or, the alternative 
is, let's just keep what we have been doing for the last 12 
years: lawsuits, delays, what the ambient air standards in 1997 
just finally went in. There has to be some kind of meeting of 
the minds if we expect to get it done.
    My experience has been over the years--we could have done a 

3-P bill 6 years ago. But the environmental groups, they wanted 
four Ps. If you don't have four Ps, we won't go with three Ps. 
The Adirondack Council comes along and says--and Senator 
Clinton was there at the time--hey, let's do the three Ps. We 
can get started reducing NOx, SOx, 
mercury. It will help us in the Adirondacks, the Smoky Mountain 
people came in and said, hey, that is going to help us. Oh, no, 
we didn't get it done. So we just meandered down the stream, 
lawsuit after lawsuit after lawsuit. It is not good for 
anybody.
    But the real issue is----
    Senator Inhofe. Only the attorneys.
    Senator Voinovich. Oh, yes, the attorneys make a lot of 
money, sure. But anyhow, the point is that these are some 
practical things that I think we have to deal with if we expect 
to get some kind of meeting of the minds. I won't be happy, 
maybe Senator Carper, you may not be happy. Utilities won't be 
happy. But I think it is worth it to try and get it done.
    Senator Carper. Thank you very much. That is a good note to 
end on. We have a lot at stake here. I think there is good will 
on all sides. Let's make as much progress as we can.
    I appreciate the spirit that I think everybody's 
participated in today. Thank you so much for coming today. 
Thank you not just for your testimony but for the work that has 
taken place to led up to this day as we try to find a way where 
regulation and legislation can lead to the kind of cost 
effective results that we all want.
    Senators will have 2 weeks to submit questions to you in 
writing. We ask that you respond as promptly as you can so we 
can publish our hearing in a timely manner. With that having 
been said, you are excused. Again, thank you so much for 
joining us.
    Ms. McCarthy. Thank you so much, Mr. Chairman.
    Senator Carper. And I would invite our second panel to come 
forward. While they are coming forward, I am looking at the 
clock up here. As much as I would like to ask the President to 
wait until I get there to sign this legislation, he is probably 
not going to be inclined to do that. They are going to kick off 
the signing ceremony about 11:25. And we are not going to have 
a police escort going to the White House. So we will have to 
move along here smartly. I am anxious to hear the testimony of 
each of our witnesses.
    I am going to go ahead and start the introductions, if I 
could. First of all, Jared Snyder, Assistant Commissioner of 
Air Resources, Climate Change and Energy, at the New York State 
Department of Environmental Conservation. Good morning and 
welcome. Mr. Chris Korleski, Director of the Ohio Environmental 
Protection Agency. We have a couple of Buckeyes up here at our 
side of the table, Senator Voinovich and myself. Whenever we 
have folks come in from Ohio, I usually start off in 
introducing them by saying two letters, O-H, and see what they 
say in response.
    Mr. Korleski. I-O.
    Senator Carper. That is good. That is good.
    Eric Svenson, Vice President of Environmental Health and 
Safety at PSEG. Delighted to see a neighbor across the Delaware 
River. Happy you are here.
    Finally, Conrad Schneider, Advocacy Director for the Clean 
Air Task Force. We are happy to see you today. Thank you for 
coming.
    Again, we would ask you to limit your statements to about 5 
minutes each. The full content of your written statements will 
be included in the record.
    With that, Mr. Snyder, you are recognized. Please proceed.

   STATEMENT OF JARED SNYDER, ASSISTANT COMMISSIONER FOR AIR 
RESOURCES, CLIMATE CHANGE AND ENERGY, NEW YORK STATE DEPARTMENT 
                 OF ENVIRONMENTAL CONSERVATION

    Mr. Snyder. Thank you, Senator Carper.
    Good morning, Senator Carper and members of the 
Subcommittee. I am Jared Snyder. I am the Assistant 
Commissioner for Air, Climate Change and Energy at the New York 
State Department of Environmental Conservation.
    I have been involved in efforts to reduce transported air 
pollution for approximately 15 years, first as an attorney for 
New York, then in my current capacity as a policymaker. Based 
on that experience I can say that as a result of your 
leadership, Senator Carper, and the hard work of EPA over the 
last couple of years, the forecast for clean air is much 
brighter now than it has been for a long time and certainly 
brighter than it was 2 years ago when I last testified before 
this panel.
    So I thank you for your leadership, Senator Carper, and for 
the opportunity to testify today on this important transport 
proposal of EPA's.
    Now, even a cursory review of this proposal reveals that it 
is an improvement over the CAIR Rule. The Transport proposal 
requires substantial reductions of sulfur dioxides. Those will 
help in reducing fine particulate pollution through the eastern 
half of the country. These reductions will have dramatic public 
health benefits, saving the lives of thousands of Americans 
annually.
    The proposal will also set specific emission caps for each 
State, requiring that each covered States reduces its 
SO2 emissions substantially. Because it does not 
allow sources to use banked emission allowances the required 
emission reductions will occur sooner under this proposal than 
they would have occurred under CAIR.
    This is just part of the good news. It actually gets 
better. Next month EPA will finalize a new ozone standard which 
will set the Nation on a path to having the cleanest air in 
decades.
    But the bad news is that there is a disconnect between 
those two actions. Although EPA recognizes that much lower 
ozone levels are needed to protect public health, it has 
designed the Transport Rule only to meet the obsolete and 
unprotective 1997 standard.
    I understand why EPA did that, but that is not providing 
the protection that we need. Simply put, the proposal will do 
very little to address the elevated levels of ozone that still 
plague the eastern half of the country.
    To its credit EPA does commit to a second transport rule, 
but more is needed now. This summer so far has provided 
irrefutable evidence in the forms of dozens of exceedances of 
EPA's ozone standards across the eastern half of the United 
States. Over the July 4th weekend in New York alone, we saw 27 
exceedances of that 2008 standard. And that standard is more 
lenient than the one that EPA is announcing next month. So more 
NOx reductions are needed.
    Now, we know from experience that control of NOx 
emissions from the power sector is one of the most cost 
effective ways of reducing ozone levels. And we know now that 
the technology and labor resources are available to achieve 
those reductions now. For New York and other States burdened by 
elevated ozone levels this is a very important issue. Once EPA 
finalizes the new standard next month, we will have our work 
cut out for us in meeting this standard by the statutory 
deadlines.
    In the Northeast we have harvested the low hanging fruit 
years ago. Like Maryland, New York has reduced NOx 
emissions 80 percent from the power sector over the last decade 
and a half. And although we have already implemented dozens of 
strategies to reduce ozone levels in the Northeast, we are 
going to have to dig even deeper to meet the new standard, 
requiring the implementation of ever more costly standards.
    But under no circumstances will we be able to meet a new, 
tighter standard without substantial regional reductions from 
the power sector as well as the implementation of other 
regional and national programs.
    We have urged EPA to address this important issue now in 
its Transport proposal. We had hoped that EPA would base this 
proposal on the 2008 NAAQS. Now, EPA has another option 
available, which is basing the final rule's emission reductions 
when this rule goes final on the ozone standard that it will 
adopt next month.
    EPA's alternate path forward, a second transport rule, will 
eventually result in the reductions needed if all goes as 
planned. But as I explain in more detail in my written 
testimony that will involve a substantial delay during which 
the adverse health effects will continue.
    We believe that those reductions can be achieved within the 
next 2 years. The technology is available. And those reductions 
will also have benefits; greater NOx reductions will 
have benefits that greatly exceed the cost. So we look forward 
to working with EPA to accelerate the reductions needed to 
enable us to meet the ozone standard.
    Thank you again for the opportunity to testify.
    [The prepared statement of Mr. Snyder follows:]
    
    
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    Senator Carper. Thank you, Mr. Snyder. Good to see you, 
thanks for your testimony and for working with us.
    Chris Korleski, please proceed. Welcome. Your entire 
statement will be made a part of the record.

  STATEMENT OF CHRIS KORLESKI, OHIO ENVIRONMENTAL PROTECTION 
                             AGENCY

    Mr. Korleski. Good morning. I am Chris Korleski, Director 
of the Ohio EPA. I would like to thank the Chairman, Ranking 
Member, and all the members of the Subcommittee for the 
opportunity to discuss the proposed Interstate Transport Rule.
    First, I do--just in light of Senator Voinovich's comments, 
Mr. Chairman, I do want to commend USEPA in general and Gina 
McCarthy. I do have the greatest respect for Gina McCarthy. She 
works very hard; we are good friends, and I commend them for 
the work that they have done here.
    Senator Carper. We will note that in the record. I saw 
members of her staff writing that down.
    [Laughter.]
    Mr. Korleski. As you know, the Clean Air Act requires 
States to develop approvable State Implementation Plans, SIPs, 
which set for the emission reduction measures that States will 
implement to achieve attainment within the NAAQS and address 
the transport of air pollutants downwind from upwind States. 
This now soon to be moribund CAIR served as an integral 
component of Ohio's plans to achieve necessary reductions in 
NOx and SOx from power plants.
    Without question the NOx and SOx 
emissions under CAIR would have greatly assisted Ohio and other 
States in attaining the standards for both PM and ozone and in 
addition were an essential component of USEPA's plan for 
addressing regional haze.
    Before I go into detail about the Interstate Transport 
Rule, it is very important that the panel be aware of the 
significant progress that Ohio has made in achieving ambient 
air quality standards. In the late 1970s the highest 8-hour 
ozone values we were measuring were over 140 parts per billion. 
Now, the worst sites in the States are in the range of 80 parts 
per billion. Currently the entire State is designated 
attainment for the 1997 ozone standard of 84 parts per billion, 
something that was unthinkable even 5 or 6 years ago.
    This progress has come primarily as a result of the 
hundreds of millions of dollars invested in air pollution 
control equipment in the State. However, we also recognize that 
more dollars and more effort will be needed to meet the 
seemingly ever increasingly restrictive air quality standards 
for ozone and other pollutants as well. We strongly support the 
concept of regulating the interstate transport of air 
pollution, and therefore we supported USEPA's promulgation of 
CAIR.
    We also understand USEPA's mandate to address judicially 
recognized flaws in CAIR. As we know, recently USEPA announced 
the proposal of the new interstate Transport Rule as a 
replacement for CAIR. Now, as has been pointed out I think by 
everyone, due to the length and complexity of the proposal, and 
it is very long, my comments must reflect a first impression of 
the proposed rule. But we do have some concerns that we would 
like to address today.
    First, we note that USEPA plans to implement a Federal 
implementation plan, or a FIP, for the Interstate Transport 
Rule. Although we understand the need for emission reductions 
as soon as possible, this concept of FIP first appears to usurp 
the fundamental right of the States to develop their own SIPs. 
The USEPA proposal goes into detail on how States are free to 
develop State plans as alternatives to the FIP, but it also 
makes clear that USEPA is unsure about and taking comment on 
the appropriate criteria for approval of these plans.
    In other words we are free to start work on our SIPs, but 
we cannot be certain as to their approvability until USEPA 
finalizes those criteria, which is going to take time. In our 
view this FIP first approach is not consistent with the spirit 
of cooperative federalism which has historically reflected how 
the Clean Air Act has worked.
    Second, we do not understand the significant differences in 
USEPA's approach to the proposed budget for SO2 as 
compared to the proposed budget for NOx. Under CAIR 
the State budget for SO2 for electric generating 
units in 2010 was roughly 333,000 TPY. And in 2015 was roughly 
233,000 TPY, that is tons per year.
    Under the Interstate Transport Rule USEPA is proposing a 
much more restricted limit of 178,000 TPY in 2014. In 2009 Ohio 
utilities emitted over 600,000 tons per year of SO2. 
Achieving these substantial SO2 reductions to meet 
this proposed SO2 limit will be a difficult task in 
the timeframe proposed. Additional time may be needed. Further, 
additional tightening of the SO2 budget in the 
future may simply not be technically feasible.
    Conversely, with respect to NOx we believe that 
the proposed limits can actually be tightened. The CAIR 
NOx budget for Ohio was roughly 45,000 tons during 
the ozone season of 2009, dropping to 39,000 tons in 2015. The 
Interstate Transport Rule proposes a budget of 40,000 tons in 
2012. In contrast Ohio utilities emitted roughly 36,000 tons in 
2009, due in part to a cool summer.
    In short the 2009 NOx emissions from Ohio 
utilities were less than the proposed 2012 NOx 
emissions budget. It would be our preference to see a more 
restrictive NOx budget, adequate time to reach that 
lower NOx level, and most importantly, have those 
NOx levels maintained for an extended time period.
    Next, we are concerned with the concept--and this is the 
concept that Senator Voinovich homed in on earlier--we are 
concerned with the concept that each time USEPA promulgates a 
new, more restrictive air quality standard USEPA intends to 
revise the Interstate Transport Rule by changing the emission 
budgets. To cut my testimony short I will just say we are 
concerned about continual changes, continual whiplash on our 
part and the regulated entities' part due to continual changes, 
and that is a concern to us.
    Senator Carper. I would ask you to go ahead and wrap it up 
if you would, please.
    Mr. Korleski. We continue to believe that the best approach 
to reducing SO2 and NOx emissions would 
include a surgical legislative fix that will allow USEPA to 
mandate a reasonable level of control and would clearly grant 
USEPA the authority to set up a more comprehensive trading 
program.
    I apologize for going over, and I thank you.
    [The prepared statement of Mr. Korleski follows:]
    
    
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    Senator Carper. We very much appreciate your being here 
today. Thanks for your work. Our best to Ohio.
    Mr. Svenson, of the PSEG, please proceed.

     STATEMENT OF ERIC SVENSON, VICE PRESIDENT, POLICY AND 
ENVIRONMENT, HEALTH AND SAFETY, PUBLIC SERVICE ENTERPRISE GROUP

    Mr. Svenson. Thank you very much, Mr. Chairman.
    Mr. Chairman and members of the Subcommittee, I am pleased 
and honored to appear before you today on behalf of Public 
Service Enterprise Group.
    PSEG is one of the Nation's largest independent power 
producers with more than 16,000 megawatts of electric 
generating capacity in the Northeast and in Texas. This 
includes 2,400 megawatts of coal-fired generation capacity and 
3,700 megawatts of nuclear capacity. We offer the following 
reactions to the EPA's draft Transport Rule, which we believe 
is essential to meet the air quality goals of the Clean Air 
Act.
    First, PSEG believes that the electric power industry can 
meet the emission caps and the timelines proposed by the 
Transport Rule. Second, we believe the Rule's preferred 
approach of a cap and trade with intrastate and limited 
interstate trading provides a reasonable compliance structure 
given the constraints imposed on EPA by the D.C. Circuit 
Court's opinion.
    However, we believe the program would be better served by 
providing for a more robust trading market and better 
integrating the program with the existing title IV 
SO2 allowances. We recognize that it might require 
legislation to address these issues.
    Third, regulatory certainty is critical for the electric 
power industry to be able to make long-term capital 
investments. Given the repeated litigation delays surrounding 
the EPA's air regulations we believe comprehensive legislation 
limiting power plant emissions with a robust trading mechanism 
that ensures achievement of National Ambient Air Quality 
Standards would provide the certainty our industry needs to 
make the right investment decisions.
    So let me elaborate briefly on each of these points. PSEG's 
electric generating fleet is among the cleanest in the country 
through significant investments in pollution control 
technologies such as scrubbers, SCRs and new clean generation. 
In the past 5 years we have invested more than $2 billion to 
improve the environmental performance of our generating fleet.
    As a result, we are very familiar with the technologies, 
the capital costs, and the logistics needed to comply with the 
proposed transport rule. Now, while the transport rule is quite 
complex and we continue to evaluate its details, we are 
supportive of the proposed emission caps for NOx and 
SO2 as well as the proposed compliance timelines. 
This program is essential to help States attain the current 
ozone and fine particulate National Ambient Air Quality 
Standards while providing substantial human health and 
environmental benefits as projected by EPA.
    In addition, it provides a reasonable compliance construct 
for updating emission caps to meet the new National Ambient Air 
Quality Standards. We believe that the electric power industry 
is capable of meeting its obligations under the Transport Rule 
while maintaining electric system reliability. The industry 
already has made substantial investments in air pollution 
technologies. The industry has excess generating capacity 
available to absorb the potential power plant retirements 
associated with this rule.
    And electric market operators in the industry sector have 
broad ranges of strategies available to them for reducing 
emissions while maintaining electric system reliability, 
including energy efficiency, load management strategies and the 
addition of renewable energy capacity. PSEG alone is investing 
over $1.25 billion in energy efficiency and renewable energy 
capacity.
    As I indicated earlier we do have some concerns that 
largely stem from the D.C. Circuit's opinion. PSEG is a strong 
supporter of market-based regulatory approaches because of 
their cost effectiveness. We would encourage EPA to establish a 
robust trading market.
    We are concerned that some of the options proposed by EPA 
may significantly curtail the trading of allowances. 
Additionally, because the Rule's preferred allocation method 
does not utilize existing title IV allowances, companies such 
as PSEG that have invested in pollution control equipment are 
effectively penalized as the value of their banked allowances 
are significantly reduced.
    Given the Court's decision both of these issues may be 
better addressed through legislation which could restore 
confidence in the market and ensure the ongoing value of 
allowances. Mr. Chairman, PSEG was an early proponent of your 
Clean Air Planning Act. We continue to urge Congress to enact 
this year a market-based program that limits the electric 
sector's greenhouse gas emissions. And we believe your proposed 
legislation, the Clean Air Act Amendments of 2010, would 
provide greater long-term business certainty than would 
otherwise be provided by the Transport Rule.
    So Mr. Chairman and members of this Committee, I thank you 
for the opportunity and your consideration of my comments and 
would welcome any questions you may have.
    [The prepared statement of Mr. Svenson follows:]
    
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    Senator Carper. Mr. Svenson, thank you for those comments. 
Special thanks to PSEG for working with all of us on these 
important issues for years. Thank you so much.
    Conrad Schneider, welcome. Please proceed.

STATEMENT OF CONRAD G. SCHNEIDER, ADVOCACY DIRECTOR, CLEAN AIR 
                           TASK FORCE

    Mr. Schneider. Thank you, Mr. Chairman, Senator Voinovich. 
My name is Conrad Schneider, Clean Air Task Force Advocacy 
Director. I appreciate the opportunity to speak to you today.
    We are based in Boston, and we have been working on 
cleaning up power plant pollution since our founding in 1996. I 
know you all have been working on that since you were 
Governors, as well.
    And I want to just acknowledge Senator Voinovich, whom I 
have been working with on this issue for so many years. I know 
he is retiring, and I wish him well; we all do. And I thank him 
and you, Mr. Chairman, for your persistence on this issue.
    The first thing I want to do today is bring you some good 
news. And that is regarding the substantial progress that has 
been made on SO2 emission reductions in the last 5 
years. In 2004 SO2 emissions nationally were 11 
million tons a year. Last year, they had fallen to 5.6 million 
tons. That is a 50 percent cut in 5 years.
    The cause? The cause was New Source Review enforcement 
actions by EPA and the States, effective new State regulations 
and compliance with the now-defunct CAIR rule. The economic 
recession did not cause these reductions. The installation of 
130 scrubbers did.
    Health researchers estimate that reductions of this 
magnitude can save tens of thousands of lives a year and note 
that these reductions came without any noticeable increase in 
electric prices, electricity bills, switching to natural gas, 
and without raising any reliability concerns whatsoever. Let me 
just repeat that: these reductions came without any noticeable 
increase in electricity prices, bills, switching to natural 
gas, and without raising any reliability concerns whatsoever.
    However, continued progress is now in jeopardy because the 
D.C. Circuit struck down the CAIR Rule. Scrubbers have an 
operation and maintenance cost, so utilities will not run them 
unless they are required to do so. So without the Transport 
Rule, emissions will go up.
    But even at today's pollution levels tens of thousands of 
American lives will be cut short, and there are still over 700 
coal units that do not have scrubbers. It is high time for 
every coal plant in the U.S. to be well controlled. That is why 
it is so important for EPA to strengthen and finalize the 
Transport Rule. First, it will lock in the gains that we have 
seen over the last 5 years. But second, it goes further in 15 
States and brings many if not all States into attainment.
    Senators Carper and Voinovich, as Governors, you used to 
see maps in which your States were full of red, full of red 
non-attainment counties like the one that is shown on the 
screen here. But under the Transport Rule proposal almost all 
the red is gone. With some tightening of the Transport Rule it 
looks like EPA can get the red out completely. Senator Carper, 
I would urge you to insist that EPA provide you a comparable 
map for your bill to see what it would do with respect to 
attainment in these same areas.
    At a minimum EPA should complete the analysis it has begun 
relating to persistent non-attainment areas like Cleveland, 
Chicago, Houston, Baton Rouge, and New York City, requiring 
upwind controls to potentially solve these areas' problems and 
save many more lives. As the proposed rule would only require 
14 gigawatts of additional scrubbers, and the benefits outweigh 
the costs 50 to 1, there is much more than can be done.
    In addition we agree that EPA should tighten the 
NOx cap in the east. These additional controls will 
be required to put those areas within striking distance of 
attainment.
    We do not support the so-called fix proposed by Mr. 
Korleski. Note that the old war between the States, that is 
between the Northeast and the Midwest, is largely over. All 
States have realized that their pollution contributes to their 
neighbors' non-attainment. And Ohio is one of the biggest 
beneficiaries, if you see this particular map, in which 1,300 
lives are saved per year, the most next to Pennsylvania.
    In addition to supporting EPA's strengthening and 
finalizing the Transport Rule, we support passage of S. 2995, 
the Clean Air Act Amendments of 2010, sponsored by Senator 
Carper, you and Senator Alexander. We have long favored a 
comprehensive legislative solution of the problem of power 
plant pollution. We recognize that in producing the Transport 
Rule, EPA has done a good job of navigating the mine field laid 
for it by the D.C. Circuit. But we know that just as the CAIR 
Rule was challenged and struck down, so a new set of power 
plant regulations may be as well.
    To guarantee the certainty of environmental improvement and 
public health benefit and the regulatory certainty that the 
electric power industry craves, Congress should act now to pass 
the bill. It would codify stringent national caps for 
SO2 and NOx while providing a crucial 
backstop for EPA's power plant air toxics rule. And your bill 
enjoys broad bipartisan support.
    A comparison of the two bills to each other shows that your 
bill would save 44,000 more lives by 2025. And importantly 
EPA's analysis demonstrates that passage of the bill would 
result in no noticeable increase in electricity prices, natural 
gas prices and no appreciable decrease in coal generation or 
use.
    Now, let me make just one final point. There has been a lot 
of discussion over the past couple of weeks about a possible 
climate title to a Senate energy bill. The focus is now on a 
power sector only bill. Especially where we are in this 
session, the Clean Air Task Force supports this approach. 
However, apparently some electric utilities are asking the 
Clean Air Act requirements for non-greenhouse gas pollutants, 
like today's Transport Rule and next year's MACT Rule, be 
scrapped in exchange for their support for the bill.
    To this we believe you should say, no deal. Congress, in 
considering the Climate Bill, should lay down a firewall to 
ensure that no Clean Air Act rollbacks with respect to power 
plant, sulfur, nitrogen, or toxic emissions occur. We must 
continue to make progress and clean up our air as we address 
climate change. We should not trade off the right of our 
children today to breathe clean air for the right of our 
grandchildren to live in a world without global warming.
    Senator Alexander said it best when he said last week: 
``You mean to spew more sulfur, nitrogen, and mercury and less 
carbon? That's not my idea of progress.'' And we agree with 
that statement.
    Thank you very much, and I would be happy to answer any 
questions.
    [The prepared statement of Mr. Schneider follows:]
    
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    Senator Carper. Senator Alexander will be pleased to know 
that even though he wasn't here, he was quoted. I think we have 
had excellent testimony from each of you, and we are grateful 
for that, for your contributions to the debate and hopefully 
the resolution of these issues in the months to come.
    I am just going to ask one question, and then I am going to 
head out the door and turn the gavel over to Senator Voinovich.
    A question, if I could, for Eric Svenson. In Mr. Korleski's 
statement, he indicated he is concerned about any tightening of 
the sulfur dioxide budget in the future might simply be 
technically really infeasible. The Clean Air Act Amendments of 
2010 that Senator Alexander and I and others have offered has 
much stronger sulfur dioxide marks than the Transport Rule.
    We have heard from utilities that tighter targets are 
feasible, although some would disagree on the timeline, as you 
know. But most agree that the reductions are feasible.
    Let me just ask, is PSEG on track to meet the levels and 
timetables in the Transport Rule, and second, do you believe 
that we can easily meet tighter targets in SOx and 
NOx than in the Transport Rule?
    Mr. Svenson. Relative to the question--thank you, Mr. 
Chairman, for the question--one is, PSEG is definitely on track 
to meet the targets. As a matter of fact where we are today in 
our requirements, the status of our coal burning plants and 
other plants, I believe we are really 4 years ahead of schedule 
relative to what the Transport Rule is going to require by 
2014.
    I actually also believe that PSEG's fleet is actually well 
positioned for even the mercury MACT rule and as well as for 
meeting future maximum achievable control technology 
requirements for hazardous air pollutants. I believe there are 
a lot of things--at least what I can see there--that are 
doable.
    But having said that, always these things are case-specific 
and so on. So as far as, health-based standards are going to be 
continually evolving. What I liked about the Transport Rule is 
it is constantly reflecting that it is going to take that 
updated information and there will be new requirements. I would 
like to point out that in the industry--back between 1999 and 
2008, the industry installed over 270 gigawatts--270 
gigawatts-- of natural gas-fired generation. In a period of 
2001 to 2003, installed 163 gigawatts of that generation, of 
new natural gas-fired generation.
    So my answer to you about can the industry adapt to these 
new, more stringent requirements, it may not all come down to 
simply adding back in controls onto a coal plant. It may 
necessitate, under these caps, eventually phasing out a plant 
and repowering it with a new natural gas combined cycle plant 
or something of that sort. I believe that that is doable.
    Senator Carper. Thanks very much. I apologize to our 
witnesses and my colleagues for slipping out on you. We all 
know we have problems, certainly challenges on the 
environmental front, on the health front. We also have 
challenges with respect to budget deficits. We are looking at a 
budget deficit; we basically doubled our Nation's debt from 
2001 to 2008. We are on track, if we are not careful, to double 
it again over the next decade.
    One of the issues that we have worked on, Senators Coburn, 
McCaskill, Collins, and I, on this legislation, in a day and 
age where last year, almost $100 billion of improper payments, 
mostly overpayments, made by Federal agencies, not including 
Department of Defense, not including part of Medicare, $98 
billion worth of improper payments. We are saying with this 
legislation that the President is going to sign in about 30 
minutes that agencies, all Federal agencies have to report 
their improper payments. They have to stop making their 
improper payments. And they have to go out and recover money 
that has been improperly paid, overpaid in some cases, 
fraudulently paid.
    So that is what we are about to do. And if we can do, after 
6 weeks of effort, achieve a bipartisan consensus, bicameral 
legislation, that the President is going to sign, maybe, 
George, maybe, my friend, maybe we can hammer something out 
here before you are ready to ride off into the sunrise.
    So with that said, the hearing is yours. I look forward to 
talking with you this afternoon. Thank you. Thank you all.
    Senator Voinovich [presiding]. One of the observations that 
I have had even most recently is the issue of the various 
positions taken by utilities depending on the percentage of 
energy generated. In your particular case, according to this, 
you have 16,000 megawatts produced, and about 2,400 comes from 
coal. So that is about 15 percent.
    I suspect that if you got First Energy and AEP in the same 
room with you they would have a different perspective on things 
just because of the fact of what they are burning in order to 
generate electricity. Just a comment that I make, and I would 
suspect that it is a little bit easier for you to meet some of 
these things than it may be for them because of their heavy 
reliance on coal. Would you think that that statement kind of 
reflects reality?
    Mr. Svenson. I think that there is a reality to that. But 
what I would just say is that a lot of it is not simply do I 
have more coal or less coal. It is a matter of some of us have 
already put certain controls on sooner than others. So that is 
another reality, is that what you will find is quite a 
disparity even within those who are burning coal and have 
different levels of control, depending on where we are in the 
country.
    Senator Voinovich. The thing that would be interesting for 
me, just to follow up on that, I know for example, because I 
have this testimony from AEP, that they have spent $5 billion 
during the last decade. They have reduced their NOx 
84 percent. That is probably reflective, Mr. Korleski, of what 
you are saying, that they have done a pretty good job in 
NOx. The rule could be, maybe not even tight enough 
for the NOx.
    On SO2, they are at 64 percent. Mr. Schneider, I 
was pleased that you have indicated that they have made some 
real progress on SO2. So the real issue, I think, is 
how do we make some sense out of this and get something done. 
As many of you know I have some real problems with the 
greenhouse gas emissions. I sometimes look at the emphasis that 
we are placing on greenhouse gas emissions because that is an 
international problem that we can impact upon.
    But I also think about NOx, SOx and 
mercury, which we have some really good statistics on. One of 
the things that I am going to look at, and I have been thinking 
about doing this, is who are the people that, I think one of 
you said that we have 1,600 less--maybe it was you, Mr. 
Schneider--that died. One of you did. The issue is, where do 
those statistics come from?
    Can you comment on that, Mr. Schneider? You have been 
following this for a long time. Where do we get those 
statistics that say the State of Ohio health care costs have 
increased because of bad air? Or in Ohio, X number of people 
are dead because of NOx, SOx, and 
mercury?
    Mr. Schneider. Senator, thank you for the question. There 
are a number of different--actually there are hundreds of 
different peer reviewed published studies that relate air 
pollution levels to different diseases and death. There are 
obviously--there are both prospective studies that look at what 
the prediction would be. But in the last few years there have 
actually been retrospective studies because the air pollution 
has gotten less. They have been able to go back and look at the 
incidence of a lot of these deaths and diseases over time and 
tease out from that, using their methodologies, what would be 
attributable to the improvement in air quality.
    So a lot of this is put together by, synthesized by the 
U.S. Environmental Protection Agency when they do a recap for 
you of what the benefits have been of the Clean Air Act both in 
the past and going forward.
    So these methodologies have been reviewed both by EPA's 
Science Advisory Board, which involves people from industry, 
people from academia, environmental groups, State governments, 
and so forth, but also by the National Academy of Sciences. So 
this is all very well reviewed information that has stood the 
test of peer review and publication. I think our view is that 
it is reliable. As you heard there is a range of numbers that 
EPA mentioned. So there is some uncertainty involved in the 
absolute magnitude depending on which study you follow. That is 
why you saw that range in Assistant Administrator McCarthy's 
testimony.
    But in general there is a robust set of scientific 
literature that helps us put some numbers on the, I would 
phrase it the other way, the benefits of cleaning up the air.
    Senator Voinovich. I would appreciate it if you would share 
that with my office. I don't mean reports like this, but if you 
have executive summaries from a couple of groups I would be 
appreciative of your giving them to me.
    Mr. Schneider. Sure.
    Senator Voinovich. Mr. Korleski, I see you have been, this 
is what, your fourth year in the EPA. I remember back when I 
was Governor, as I mentioned in my statement or comment and 
when I was the former mayor of Cleveland, and I noted that 
somebody mentioned Cleveland is still not doing its work. 
Interesting to find out if it is all because of automobiles or 
what the cause is.
    I know we wanted to get the ambient air standards taken 
care of as soon as possible because we did have businesses that 
were contemplating not expanding or even coming to the State 
because of the fact that we hadn't met the--and that meant they 
would have to expend more money in order to do business in the 
State.
    The question I have is, from your perspective, or maybe 
from, and I am sure you pay attention to the economic impact 
these have, and you just said you met the 1997 standards?
    Mr. Korleski. Yes, that is correct.
    Senator Voinovich. What impact, if any, has this had on 
Ohio's economy and on its ratepayers? And I guess the next 
thing would be is that you have a little problem with the 
timetable of implementing these. I would also be interested in 
your perspective on that. So what has happened in terms of what 
we already are doing, and then if you look down the road, what 
impact do you think that has on our State? The reason I mention 
it is because, as you well know, we are one of the leaders in 
the United States in unemployment.
    Mr. Korleski. Thank you, Senator. First, may I also say 
thank you for your many years of service. I have always very 
much enjoyed working with you. I very much respect the work 
that you have done in the U.S. Senate. Thank you very much, and 
I shall personally miss your services.
    In answering your question, even 5 or 6 years ago, as I 
think I mentioned, it was considered unthinkable that Ohio, and 
in particular the Cleveland and/or Cincinnati corridors would 
be able to achieve the 1997 Ambient Air Quality Standard. We 
finally did it, I think, for a number of reasons. Certainly one 
was putting controls in over time, changing our rules to 
reflect more stringent requirements on VOCs, on volatile 
organic compounds. I think it is because you are seeing cleaner 
auto fleets. There is no question that transportation has 
historically been an enormous source, a contributory source to 
the ozone problem. And I think we are seeing our fleet slowly 
get cleaner, which is wonderful.
    Frankly, I think, if I look back at the summer when the gas 
was $4 a gallon, perhaps people were driving less and that made 
a difference. I think it is probably a whole suite of factors 
that allowed us to get the point where we are today. But there 
is no question that a lot of it has been more stringent rules, 
additional controls on VOC sources, enforcement actions to get 
people to comply with those VOC rules, certainly both Federal 
and State enforcement actions. It took a number of things to 
get there.
    The biggest point that comes to mind when you raise that 
issue is, while I am absolutely delighted to have finally 
achieved the 1997 standards State-wide, I am also troubled--
that is probably not the right word--I feel somewhat whipsawed 
by the fact that back in 2008 there was a lower standard 
promulgated, and we expected there would be a lower standard. 
We certainly, I think Ms. McCarthy is right, the Clean Air Act 
requires that the standard be reviewed and amended as 
appropriate every 5 years.
    So in 2008 the standard was lowered to .075, if I'm 
remembering my numbers correctly. And we were just beginning to 
gear up to figure out, what do we do now? More VOC controls? 
Let's look at the transportation sector, et cetera.
    Then shortly after--and this is not about politics at all--
but shortly after the new Administration took place, there was 
a decision that that needed to be reviewed. Based on a number 
of reasons it was reviewed, and I believe my colleague, Mr. 
Schneider, is right, that it is likely here when they propose 
or when they finalize a standard it will be considerably lower 
than the 2008 standard.
    The difficulty that that places on Ohio, which undoubtedly 
is a heavy coal State, and you and I both know that, but the 
difficulty that that places on Ohio when you are changing 
standards that rapidly is we never have enough time. And I 
think industry and other regulated entities don't have enough 
time to get their feet clearly on the ground to figure out 
where are we going, what are we going to have to do, let's get 
a plan, let's move forward, let's fix this and meet the 
standard.
    It is difficult when you are constantly being asked to hit 
a moving target. I think anyone who has ever tried to any sort 
of a business, any sort of a regulatory agency, or anything 
realizes when you are hitting moving targets you are never on 
solid ground; you don't know exactly what is coming next, how 
soon will it change again, what are we going to have to do, are 
we going to have start over, are we just going to have 
basically toss out our older implementation plans, even plans 
that we had submitted just a year or two ago, et cetera. It 
creates great uncertainty across the board, uncertainty which 
hampers my ability to regulate effectively, uncertainty which 
hampers businesses' ability to function with a predictability 
and certainty that we all hear about so often.
    It also presents great economic uncertainty in terms of, 
for businesses, OK, what is going to happen in that State? Are 
those counties going to be in attainment or non-attainment? If 
they are non-attainment the issues that you raised a moment ago 
are still very much with us. Businesses are reluctant to locate 
or expand in non-attainment areas because it is more difficult. 
It is becoming more difficult to find the offsets. It is 
becoming more difficult and more expensive, certainly, to put 
on the additional controls that you would need in a non-
attainment area.
    But I think with all that, again, I go back to the biggest 
problem that I struggle with as a director, is continuing 
uncertainty about where the Federal and consequently the State 
regulatory system is heading. What are the rules that we are 
going to live by? You commented earlier and pointed out a 
portion of my testimony where I suggested a 10-year timeline 
before we started changing budgets. Maybe 10 years is too long. 
I am happy to talk to Ms. McCarthy and anybody else about that.
    But if you talk about proposing or finalizing a standard 
and then within some very short period of time changing it 
again because of a change in the National Ambient Air Quality 
Standard, again we will continue to have this whipsaw effect, 
this uncertain foundation that everybody is trying to operate 
on. It will cause great confusion.
    And Senator, I will be very candid. I am the EPA Director 
of the State of Ohio. It is first and foremost my 
responsibility to protect the public health and welfare and to 
protect the environment. That is my job. But having gone 
through and still living through the recession that we are 
seeing in Ohio, and seeing those very real-world impacts with 
respect to job losses and unemployment and families being 
unable to hold body and soul together and children being unable 
to have appropriate nutrition and to be educated properly, et 
cetera, I view that my job as a director, I have to take those 
real-world economic considerations into effect, well, I am not 
doing my job.
    I can be as theoretical as I would like to be, I can look 
at as many epidemiological studies and as many modeling 
activities as I can. But at the end of the day I have to look 
at what is happening on the ground in Ohio, and do people 
understand what the ground rules are, do they know where we are 
going. If the answer to those questions is no, I think we all 
suffer.
    I am sorry, that is a very long, long way around to 
answering your question, but I think that is how I would 
address it.
    Senator Voinovich. I would be interested, and Senator 
Carper has left the gavel to me, but you have heard Mr. 
Korleski's testimony, all the other three witnesses. I will 
give you an opportunity to comment on what he had to say, and 
then we will end the hearing.
    Mr. Svenson. Senator, if I could make a comment on Mr. 
Korleski's comments.
    Senator Voinovich. By the way, one of the things that maybe 
I can get the staff to do, I would be interested in knowing how 
many other States find themselves in the predicament that you 
do, and that is that you did the 1997, then the 2008 came out, 
and that was lower. And now there is some revision of that in 
terms of their respective SIPs because you have to put the SIP 
together. It takes a long time to do that. Then you get the SIP 
done, and then somebody comes along and says, hey, we changed 
this; it is going to be lower. Then you have to go back and 
again look at the SIP to figure out how do you get it done.
    Mr. Svenson. Senator, just a comment on Mr. Korleski's 
comments. First of all, New Jersey, most of the Northeast, 
where I am from, has been persistently into a non-attainment 
situation. Just to put it into business perspective, there is a 
provision in the Clean Air Act that is called section 185. It 
is a fee provision that says if you were in a severe or extreme 
non-attainment area back in the original 1990 Act amendments 
for ozone, if you didn't meet the attainment deadlines that 
were spelled out in the 1990 Act that there would be fees 
imposed, so much per ton per each source. It was $5,000 per 
ton, modified for a cost index.
    Today, even though the EPA is not yet collecting that or 
the States are not collecting that because that is a 
requirement that is in the, at least in the Act, there have 
been some court cases from California on this, we have looked, 
as a company, at a reserve for this. It is to the tune of about 
$6 million to $8 million a year, and we have been doing so for 
the past 2 years. That is a hard, real fact of being in a non-
attainment area as to what it means.
    There are other businesses that are also NOx 
emitters and VOC emitters. They are likely booking the same in 
our State as well as other States that had severe or extreme 
ozone non-attainment.
    So that is why there is a real, you asked a while back 
about perspective, why do I hear different views from different 
utilities. It is not just simply the makeup of our fleet, but 
it is also where we are located. Nobody wants to be in a non-
attainment area. There are not just simply the heath-based 
issues. There are economic issues. That is significant.
    But quite frankly, your State is contributing to my State's 
non-attainment. And you are causing jobs to flee my State. And 
they are hurting the Northeast. So said directly, when you are 
not doing what we think is required under the Clean Air Act you 
are hurting my State and making it more difficult and causing 
unemployment to occur.
    Put another way, too, we are talking about jobs. A lot of 
these control requirements are going to require retrofit of 
technologies. At the height of Mercer and Hudson's construction 
for the back-end technologies of scrubbers, SCRs, bag-houses, 
the height of construction over a 3-year period, 1,600 
construction jobs, I would suggest, by the way, 25 permanent 
operating positions have been created at each one of those coal 
plants for the back-end control technology.
    So there are, yes, there are costs in terms of costs borne 
in rates. The flip side of that is there are jobs created, 
needed construction jobs, as a result of this. I do agree with 
Mr. Korleski's comment about whipsawing. There has to be some 
certainty. I believe that the Assistant Administrator has 
really reached out to try over the past year to bring in the 
industry, Department of Energy, FERC, and others in the 
environmental community to anticipate what these emerging 
requirements are going to be to provide a road map. And 
actually it is some of our members of industry and others that 
have actually created some of the uncertainty because of the 
litigation and other things that have actually derailed what 
otherwise would have been in place by now.
    Senator Voinovich. Well, the argument on that might be that 
because of the fact that they feel that it is arbitrary, that 
they go to court in order to do it, and if they felt that it 
was less arbitrary and had more time they might not be going 
into court.
    I am very familiar with what you are talking about. I was 
Chairman of the National Governor Association. One of the 
biggest mistakes I made was to put Christine Todd Whitman in 
charge of the environment when I was with the NGA. There has 
always been this problem that Ohio is responsible for our 
situation.
    I thought that when we came forward with the Clear Skies 
that there was some understanding that that would eliminate the 
need, I think what are they, 126 petitions that the States file 
that they are saying, they have to file a petition in order to 
kind of say to the EPA, our problem, we are not creating our 
problem, somebody else is doing it, and kind of give them some 
relief. I thought at that time, the way it all worked out, that 
that would have eliminated some of what you are talking about.
    Does anybody want to comment on that?
    Mr. Snyder. I was actually going to respond to the previous 
question and respond to some of the comments.
    Senator Voinovich. The point is that the issue here is that 
you have States that feel that they are being penalized because 
other States aren't doing what they are supposed to be doing. I 
guess in Ohio we could argue that maybe we have problems 
because of Gary, Indiana, or whatever. Everybody is being 
impacted, and you would argue that you are being more impacted 
than Ohio is from air transport.
    So the point is, how do you work that out?
    Mr. Snyder. I think we are beyond the point of State versus 
State in this. I think some of the maps that you see show that 
now we are all in this together. And we all need to do our part 
to reduce emissions, to provide the benefits of clean air to 
all of our residents. EPA has an obligation to set air quality 
standards that protect public health. And we take that 
seriously, just like Mr. Korleski.
    It is my job, it is my boss's job, Commissioner Pete 
Grannis, to achieve, to meet those standards, to protect the 
environment of our people. That can be a difficult job when EPA 
lowers the standards--as we are already controlling the 
smallest products, consumer products, small sources--to find 
additional ways of getting the emission reductions. But we take 
that seriously, we do that.
    But what I think EPA recognizes with this Transport Rule is 
that we need the reductions on a regional basis, and it 
benefits all of us. It benefits us in New York if there are 
emission reductions in Ohio and Pennsylvania and New York. And 
as that map shows it benefits the people in Ohio, Pennsylvania, 
and New York also.
    It is a hard job to keep up with EPA's standards. But EPA 
has its job, and we have our job. And so far we have succeeded 
in doing it.
    I would like to make just a couple of points about the 
certainty question that has been raised a couple of times. This 
Transport Rule leaves many of the large sources uncontrolled. 
And so when EPA takes the next step and promulgates another 
transport rule, that is not going to mean additional controls 
on a plant that already has a scrubber and already has SCRs in 
place. It means the next plant will put scrubbers and SCRs on 
its facility to control emissions.
    So I don't think that the certainty issue is really that 
much of a problem.
    One final point on certainty is I think the best way of 
providing certainty is aligning all these obligations. EPA is 
doing a good job of that, especially with coming out with the 
mercury rule next year. I think the missing piece is climate. 
If Congress passes a climate bill then industry knows with 
greater certainty what the future holds, and it can make those 
investment decisions for the next 20 or 30 years with more 
certainty.
    Senator Voinovich. Mr. Schneider, then we will wrap it up.
    Mr. Schneider. Senator, I really couldn't add anything to 
what my colleagues have done. They have done a great job of 
explaining this issue. I guess, speaking to someone who is from 
Ohio, I would just say that Ohio stands to benefit the most 
from this, and I think it is in part because of what you said 
that this transport into Ohio from other States. I urged EPA to 
provide for this hearing a great map, which shows, we have a 
mental image in our mind that the air always blows from Ohio up 
to the northeast, that sort of the end of the tailpipe thing. 
But in fact, and that is the way weather systems move.
    But when there is a bad air day the systems as you know 
also are cyclonic. If you look at the weather maps, everything 
is in a circle. We are breathing all the same air in one big 
pool. And what actually gets emitted in the mid-Atlantic States 
blows back into you.
    So what Mr. Snyder said is exactly right; we are really all 
in this together, and I hope we can get past the idea that it 
is a blame game and look at these provisions as a good neighbor 
policy. We are close, as these maps show. We are very close to 
a solution for a lot of this. I think if we can move 
incrementally forward to tighten the Transport Rule or to pass 
the legislation that you and Senator Carper have been working 
on and crafting, we can meet a lot of the objectives that we 
have been working on for over a decade.
    Senator Voinovich. I want to thank the witnesses for being 
here today. It has been enlightening for me. Thank you.
    [Whereupon, at 11:25 a.m., the Subcommittee was adjourned.]

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