[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
 GREEN ISN'T ALWAYS GOLD: ARE EPA REGULATIONS HARMING SMALL BUSINESSES?

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

                                HEARING

                               before the

       SUBCOMMITTEE ON OVERSIGHT, INVESTIGATIONS AND REGULATIONS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                              MAY 12, 2011

                               __________


                                [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 112-014
          Available via the GPO Website: http://www.fdsys.gov


                  U.S. GOVERNMENT PRINTING OFFICE
66-749                    WASHINGTON : 2011
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


                   HOUSE COMMITTEE ON SMALL BUSINESS

                     SAM GRAVES, Missouri, Chairman
                       ROSCOE BARTLETT, Maryland
                           STEVE CHABOT, Ohio
                            STEVE KING, Iowa
                         MIKE COFFMAN, Colorado
                     MICK MULVANEY, South Carolina
                         SCOTT TIPTON, Colorado
                      CHUCK FLEISCHMANN, Tennessee
                         JEFF LANDRY, Louisiana
                   JAIME HERRERA BEUTLER, Washington
                          ALLEN WEST, Florida
                     RENEE ELLMERS, North Carolina
                          JOE WALSH, Illinois
                       LOU BARLETTA, Pennsylvania
                        RICHARD HANNA, New York
               NYDIA VELAZQUEZ, New York, Ranking Member
                         KURT SCHRADER, Oregon
                        MARK CRITZ, Pennsylvania
                      JASON ALTMIRE, Pennsylvania
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                     DAVID CICILLINE, Rhode Island
                       CEDRIC RICHMOND, Louisiana
                         GARY PETERS, Michigan
                          BILL OWENS, New York
                      BILL KEATING, Massachusetts

                      Lori Salley, Staff Director
                    Paul Sass, Deputy Staff Director
                      Barry Pineles, Chief Counsel
                  Michael Day, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page

                           OPENING STATEMENTS

Hon. Mike Coffman................................................     1
Hon. Jason Altmire...............................................     2

                               WITNESSES

Mr. Glenn Johnston, Vice President of Regulatory Affairs, Gevo 
  Inc., Englewood, CO............................................     4
Mr. John Ward, Chairman, Citizens for Recycling First, 
  Broomfield, CO.................................................    15
Mr. Bradford Muller, Vice President of Marketing & Corporate 
  Communications, Charlotte Pipe and Foundry Company, Charlotte, 
  NC.............................................................    27

                                APPENDIX

Prepared Statements:
    Hon. Allen West..............................................    45


  HEARING: GREEN ISN'T ALWAYS GOLD: ARE EPA REGULATIONS HARMING SMALL 
                              BUSINESSES?

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


                         THURSDAY, MAY 12, 2011

              House of Representatives,    
               Committee on Small Business,
                         Subcommittee on Oversight,
                            Investigations and Regulations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10 a.m., in room 
2360, Rayburn House Office Building. Hon. Mike Coffman 
(chairman of the Subcommittee) presiding.
    Present: Representatives Coffman, West, Landry, Altmire.
    Chairman Coffman. Good morning, everyone. And thank you for 
joining us. The hearing will now come to order.
    I thank all of you for joining us today for this hearing on 
EPA regulations and whether they are harming the ability of 
small businesses to compete, particularly in today's difficult 
economic climate.
    I would like to extend special thanks to our witnesses for 
making the trip to the Capitol and taking time out of their 
schedules to discuss this issue with us here today.
    Our Subcommittee will hear directly from small business 
owners about how existing and proposed EPA regulations are 
affecting their industry and hindering their ability to remain 
profitable and grow their businesses. According to a 2010 
report by the Office of Chief Counsel for Advocacy at the Small 
Business Administration, small businesses bear a significantly 
greater burden as a result of federal regulations than larger 
businesses. This report indicates that federal regulatory costs 
to small businesses per employee are $10,585, an amount that is 
36 percent higher than the cost borne by larger employers.
    Under the leadership of Administrator Lisa Jackson, the EPA 
is in the process of developing and finalizing some 30 
regulations and instituting new policy rules. The EPA has 
adopted a rigorous environmental agenda that gives little 
consideration to the impact on businesses in general and small 
businesses in particular. The actions of the EPA under 
Administrator Jackson are especially troubling due to their 
disregard for the Regulatory Flexibility Act, which seeks to 
reduce the undue burden of federal regulations on small 
businesses by requiring analysis of compliance costs and 
consideration of less onerous alternatives.
    Not only has EPA overlooked Federal law, but it has 
indicated a willingness to sidestep the president's wishes as 
well. This has been made especially evident in testimony 
received from Assistant Administrator Mathy Stanislaus at a 
House Energy and Commerce Subcommittee hearing on April 14th 
when he indicated that the EPA did not take into account job 
losses as the result of their rulemaking. This directly 
contradicts Executive Order 13563, which orders all federal 
entities to ``impose the least burden on society,'' taking into 
account ``the cost of cumulative regulations'' as well as 
requiring that agencies should ``analyze any rules that are 
excessively burdensome,'' speaking directly about small 
businesses which have accounted for about 70 percent of all new 
jobs in the United States. The EPA has also disregarded a 
January 18th presidential memorandum that solidifies the 
commitment of the Executive Branch to promote the importance of 
the Regulatory Flexibility Act to protect small businesses from 
onerous regulations.
    We owe it to our constituents to critically analyze the 
need for these regulations and the impact they will have on 
businesses in our districts, states, and country overall. It is 
paramount that regulations or rules that purport to protect the 
environment are balanced and do not turn a blind eye to the 
economic concerns of our nation's small businesses. These 
businesses are the engine that drives our economy, without 
which no true recovery will be possible.
    I look forward to hearing from our witnesses on the real 
world effect of these EPA regulations and the implications for 
business growth and job creation.
    I now recognize Ranking Member Altmire for his opening 
statement.
    Mr. Altmire. Thank you, Mr. Chairman.
    The mission of the Environmental Protection Agency is 
undisputed--protecting the public health and our natural 
resources. Every community in every congressional district 
depends on clear air and drinking water for their well-being 
and quality of life. Protecting natural resources and the 
health of every citizen through conservation and sensible 
regulation makes good business sense as a clean environment 
leads to a thriving community. However, in pursuing these 
goals, the federal government must do so carefully, making sure 
that we balance the benefits with the costs of the 
environmental regulations. Unfortunately, it has been small 
businesses which create two-thirds of all new jobs which have 
been most negatively impacted by EPA's recent rules.
    For small businesses, the cost of complying with EPA 
regulations is substantial. For firms with fewer than 20 
employees, they spend more than $4,000 per employee annually, 
which is double the amount spent by larger companies, to comply 
with federal regulations. As a result, some entrepreneurs are 
spending more on regulatory requirements than they are on 
expanding their businesses.
    In order to limit this burden, Congress enacted the 
Regulatory Flexibility Act in 1980 and the Small Business 
Regulatory Enforcement Act of 1986. Together these laws require 
the EPA to take into account the impact its regulations will 
have on small businesses. In some cases they have been 
successful at reducing compliance costs for small businesses, 
particularly with rules related to stormwater discharge from 
construction sites and emissions from diesel engines.
    Unfortunately, such positive outcomes have been the 
exception rather than the rule. In too many instances, the EPA 
has not used the tools it has had at its disposal to write 
sensible rules that take into account the unique nature of 
small businesses. When promulgating its series of landmark 
greenhouse gas rules, the Agency failed to convene a small 
business advocacy review panel, excluding small firms from 
being heard on the wide-ranging rule.
    The EPA rationalized its disregard for the panel by 
limiting the rules research reach on small business through a 
tailoring rule that lessened the impact of the greenhouse gas 
regulations on smaller firms. Despite the EPA's efforts, the 
SBA's Office of Advocacy estimates that 1,200 businesses would 
still be subject to the new regulations. This effect and the 
overall cost on small firms could become even more significant 
when the tailoring rule expires. Instead of neglecting small 
businesses' concerns, the EPA should have conducted meaningful 
outreach. More has to be done to ensure the Agency does not 
simply excuse itself from its obligations under the Regulatory 
Flexibility Act, particularly the review panel process. By 
strengthening these protections, we can strike an appropriate 
balance between regulations that protect the well-being of our 
communities but also limit costs they impose on small 
businesses.
    During today's hearing we will be able to hear from small 
businesses and learn about their experiences with the EPA, 
ensuring that the concerns of small firms are heard is 
critical, and it is my hope, Mr. Chairman, that the EPA will 
follow our lead and increase its outreach to these job 
creators. In my home state of Pennsylvania, small businesses 
account for more than 98 percent of employer firms. They remain 
the backbone of the U.S. economy and are absolutely critical to 
job creation. It is essential that the federal government 
carefully balance the costs and benefits of environmental 
regulations so that these businesses are not harmed and our 
nation's economic progress is not slowed.
    I want to thank all of our witnesses in advance for taking 
the time to travel here, giving up your time to be here. And I 
look forward to hearing your testimony. I yield back my time.
    Chairman Coffman. Thank you, Ranking Member Altmire.
    If Committee members have an opening statement prepared, I 
ask that they be submitted for the record.
    I would like to take a moment to explain the timing lights 
for those testifying today. You will each have five minutes to 
deliver your testimony. The light will start out as green. When 
you have one minute remaining, the light will turn yellow. And 
finally, it will turn red at the end of your five minutes. And 
I will ask that you try to keep to the time limit but I will be 
a little lenient as you finish.

   STATEMENTS OF JOHN WARD, CHAIRMAN, CITIZENS FOR RECYCLING 
   FIRST, BROOMFIELD, CO; GLENN JOHNSTON, VICE PRESIDENT OF 
REGULATORY AFFAIRS, GEVO INC., ENGLEWOOD, CO; BRADFORD MULLER, 
   VICE PRESIDENT OF MARKETING AND CORPORATE COMMUNICATIONS, 
       CHARLOTTE PIPE AND FOUNDRY COMPANY, CHARLOTTE, NC

    Chairman Coffman. It is my pleasure to introduce our first 
witness and my constituent, Glenn Johnston.
    Mr. Johnston is the Vice President of Regulatory Affairs at 
Gevo, Incorporated. Gevo is in the process of developing 
renewable alternatives to petroleum-based products that can be 
used in cars, airplanes, and even in synthetic rubber and 
plastics. We appreciate your testimony, Mr. Johnston.

                  STATEMENT OF GLENN JOHNSTON

    Mr. Johnston. Chairman Coffman, members of the Committee. I 
am honored to be with you this morning and discuss the great 
potential for isobutanol as an alternative transportation fuel 
in America and the current challenges we have with U.S. EPA 
regulations.
    Gevo is a leading renewable chemicals and advanced biofuels 
company. We are developing bio-based alternatives to petroleum-
based products using a combination of synthetic biology and 
chemistry. We plan to produce isobutanol, a versatile chemical 
platform for liquid fuels and the petrochemical markets.
    Isobutanol has a broad market application as a solvent and 
a gasoline blend stock and can help refiners meet their 
renewable fuel and cleaner obligations. It can also be further 
processed using well known chemical processes used today into 
jet fuel and feed stocks for the production of synthetic 
rubber, plastics, and polyesters. Gevo's technology is designed 
to retrofit existing ethanol plants and we are currently in the 
process of retrofitting an ethanol plant in southern Minnesota, 
which will come on line in the first half of 2012.
    Isobutanol is an important platform chemical with broad 
applications in large chemicals and fuel markets. As a drop-in 
product, isobutanol should allow customers to replace 
petroleum-derived raw materials with isobutanol-derived raw 
materials without modification to their equipment or production 
processes. Since isobutanol can be dropped into existing 
infrastructure, it provides for an easy integration into 
existing refining and petrochemical production processes. This 
type of technology is business born in America and is creating 
new jobs today to build the next generation of biofuels and 
make contributions towards reducing our dependence on foreign 
oil.
    We support the manner in which EPA has allowed the 
renewable fuel standard and advanced fuel mandates to continue 
despite shortfalls in some categories under the statute. This 
will help drive more gallons in the short term using 
technologies such as Gevo that is economically competitive with 
current oil prices. However, legacy EPA policies are creating 
supply chain challenges with second generation biofuels such as 
ourselves. Gevo and the advanced biofuels industry in general 
believe that EPA should review its regulatory regime and to the 
extent possible, should assure that biofuels other than ethanol 
have equal and unfettered market access.
    The EPA's one-pound waiver rule implementation is a 
regulatory obstacle to the development of second generation 
advanced biofuels. There is a relatively straightforward change 
that can be made to EPA's testing regime that would eliminate 
this hurdle. Under the Clean Air Act and 40 CFR, gasoline 
containing between 9 and 10 percent ethanol may exceed the 
revapor pressure, the RVP limit, for straight-line gasoline by 
one pound per square inch. EPA currently tests the RVP of 
gasoline by obtaining samples at retail outlets.
    Under current testing procedures, EPA protocol does not 
account for the presence of alcohol additives other than 
ethanol. Thus, if E10 is mixed with gasoline containing 
isobutanol or another drop-in fuel, the resulting mixture would 
be found noncompliant because ethanol would be diluted below 
the 9 to 10 percent ratio required under the Clean Air Act for 
the RVP waiver.
    Due to the fact that testing occurs in the field, there 
currently is no way to determine the E10 prior to mixing with 
another alcohol-blended fuel. We would have to meet the RVP 
limit. A direct linear relationship exists between ethanol and 
isobutanol and RVP, allowing the extrapolation of the ethanol 
content of the fuel before it was mixed and thus determining 
its compliance. Through guidance or a simple revision in EPA 
regulations, EPA could require ASTM tests used to determine the 
ethanol content of a fuel to also determine the amount of 
isobutanol and other alcohols. In the event that isobutanol 
and/or other alcohols were present, the revised regulation or 
guidance with direct laboratory to extrapolate the RVP of the 
fuel or that the fuel had not been mixed with isobutanol in the 
first place. Revising the test regulations provides for a 
noncontroversial, easily implemented solution to a major 
barrier.
    In conclusion, significant amounts of progress have been 
made over the last three years by Gevo with isobutanol and its 
potential in the advanced biofuels sector. Isobutanol can make 
a significant contribution towards diversifying America's world 
transportation fuels.
    Thank you for the opportunity to be with you today and I 
look forward to your questions.
    [The statement of Mr. Johnston follows:]

    [GRAPHIC] [TIFF OMITTED] T6749A.001
    
    [GRAPHIC] [TIFF OMITTED] T6749A.002
    
    [GRAPHIC] [TIFF OMITTED] T6749A.003
    
    [GRAPHIC] [TIFF OMITTED] T6749A.004
    
    [GRAPHIC] [TIFF OMITTED] T6749A.005
    
    [GRAPHIC] [TIFF OMITTED] T6749A.006
    
    [GRAPHIC] [TIFF OMITTED] T6749A.007
    
    [GRAPHIC] [TIFF OMITTED] T6749A.008
    
    [GRAPHIC] [TIFF OMITTED] T6749A.009
    
    Chairman Coffman. Thank you, Mr. Johnston.
    Our next witness is Mr. John Ward, chairman of Citizens for 
Recycling First. Mr. Ward has vast experience in issues 
affecting the coal industry, previously serving as President of 
the American Coal Council and was a member of the National Coal 
Council. Today he will be speaking about EPA regulations 
affecting coal ash recycling. We look forward to hearing your 
testimony, Mr. Ward.

                     STATEMENT OF JOHN WARD

    Mr. Ward. Thank you, Mr. Chairman, members of the 
Committee. Thank you for the opportunity to testify on this 
issue today.
    Citizens for Recycling First is comprised of about 1,500 
individuals, most of whom are small businesses, and they are 
specifically interested in preserving and enhancing recycling 
opportunities for coal ash.
    In the decade from 1999 to 2009, our nation successfully 
recycled 519 million tons of coal ash, about 38 percent of the 
coal ash that was produced in generating electricity. The 
businesses responsible for achieving this remarkable 
environmental success story are overwhelmingly small 
businesses. The utilities are not the recyclers. There is a 
network of small businesses who provide marketing services. 
There are companies who provide innovative technologies for 
using the coal ash. And the users themselves are overwhelmingly 
small businesses. For instance, 85 percent of the ready mix 
concrete producers in the United States have revenues under $30 
million.
    I appreciate the Committee's topic, Green Isn't Always 
Gold. In the case of EPA's current coal ash regulatory process, 
the Agency's actions are not only not gold; they are not even 
very green. In the Agency's single-minded quest to gain more 
enforcement authority over the disposal of coal ash, EPA 
appears resolved to ignore the negative impacts of its actions 
on an entire recycling industry and the small businesses that 
comprise it. If EPA succeeds in getting the regulations it 
wants, our nation will end up putting hundreds of millions of 
tons more material into landfills rather than safely recycling 
it. And that is hardly a green result.
    Furthermore, EPA appears content to create regulatory 
uncertainty that is already harming the recycling industry, 
even though formal regulations have not been finalized.
    A year ago EPA proposed labeling coal ash as hazardous 
waste when it is disposed. When that idea was confronted by a 
wall of opposition from other government agencies, 
academicians, recyclers, coal ash users and more, EPA responded 
by simply slowing the process down. EPA officials have recently 
been quoted as saying it may be 2013 before the Agency gets 
around to proposing a final rule. In the meantime, the coal ash 
recycling industry is twisting in the wind with the unresolved 
question will coal ash be a hazardous waste or not?
    Now, a couple of things about coal ash. First of all, it 
does not qualify as a hazardous waste based on its toxicity. 
That is not an opinion; that is a scientific fact. The level of 
metals that are in coal ash are similar to the levels of metals 
in the materials that it replaces when it is recycled.
    Secondly, EPA's proposals for regulating coal ash disposal 
basically boil down to a regulatory turf grab. The EPA has 
proposed both a hazardous and nonhazardous regulatory approach. 
The landfill standards that they are proposing under both 
approaches are essentially the same. You do not get a better 
landfill by designating the material hazardous waste.
    So why are they doing it? Because by designating it 
hazardous waste they are able to take enforcement authority 
away from the states and take it for themselves. Now, we have 
talked to EPA and told them the devastating effects this has on 
recycling. And even in advance of the rule being finished, we 
are already seeing users of coal ash taking it out of their 
specifications because they are worried about potential legal 
liability or the health issues if it is really hazardous. We 
are seeing manufacturers of products that compete with recycled 
coal ash run ads with skulls and crossbones, talking about how 
coal ash may be a hazardous waste if EPA goes forward with 
this. We are now beginning to see commercial liability 
insurance policy exclusions for products that contain coal ash.
    Now, all of these concerns have been conveyed to EPA over 
the last two years in meetings and formal written testimony; in 
all eight of the EPA's public hearings that were conducted last 
year. EPA's response has been twofold. Number one, they have 
refused to evaluate the impacts on small businesses in the 
recycling sector. Their excuse is we are only regulating 
utilities. You people are an indirect effect; we do not have to 
look at it. Their second response has been a hazardous waste 
designation will actually be good for you. People are going to 
want to use more coal ash if it is designated a hazardous 
waste. I see you raising your eyebrows. It is a nonsensical 
proposition. My written testimony spells out exactly why it is. 
But the bottom line is, this is not about coal ash. This is 
about coal. And EPA is waging a war on coal and coal ash is 
another way for them to get at it.
    We need Congress's help. Representative David McKinley has 
introduced a bill, H.R. 1391, which would prohibit EPA from 
regulating coal ash as a hazardous waste. It would not prohibit 
EPA from moving forward with improving landfill disposal 
standards. Remember, the landfill disposal standards under 
their nonhazardous approach are the same. But it would remove 
this regulatory uncertainty that is hanging over the heads of 
coal ash recyclers today and is already harming a tremendously 
environmentally beneficial business in our nation.
    Thank you very much for the opportunity to testify.
    [The statement of Mr. Ward follows:]

    [GRAPHIC] [TIFF OMITTED] T6749A.010
    
    [GRAPHIC] [TIFF OMITTED] T6749A.011
    
    [GRAPHIC] [TIFF OMITTED] T6749A.012
    
    [GRAPHIC] [TIFF OMITTED] T6749A.013
    
    [GRAPHIC] [TIFF OMITTED] T6749A.014
    
    [GRAPHIC] [TIFF OMITTED] T6749A.015
    
    [GRAPHIC] [TIFF OMITTED] T6749A.016
    
    [GRAPHIC] [TIFF OMITTED] T6749A.017
    
    [GRAPHIC] [TIFF OMITTED] T6749A.018
    
    [GRAPHIC] [TIFF OMITTED] T6749A.019
    
    Chairman Coffman. Thank you, Mr. Ward.
    I would like now to introduce Mr. Bradford Muller, Vice 
President of Marketing for Charlotte Pipe and Foundry Company, 
a 110-year-old family-owned business located in Charlotte, 
North Carolina. The Subcommittee appreciates you taking the 
time to speak to us today, Mr. Muller.

                  STATEMENT OF BRADFORD MULLER

    Mr. Muller. Thank you, Chairman Coffman, Ranking Member 
Altmire, and members of the Subcommittee. Thank you for the 
opportunity to testify before you today on the question of 
whether EPA regulations are harming small business, in 
particular the metal casting industry. And the answer is 
unequivocally, yes.
    Charlotte Pipe and Foundry is a family-owned, fourth 
generation company. We have been manufacturing cast iron pipe 
and fittings for plumbing systems for 110 years. Charlotte Pipe 
is one of only three U.S. foundries left that make these 
products with dozens of competing foundries having closed their 
doors over the last two decades.
    Charlotte Pipe and the entire metal casting industry has 
been hard hit by this recession. The manufacturing sector has 
lost 2.2 million jobs since the recession began and more than 
150 metal casters have closed their doors, forcing thousands to 
lose their jobs. In our case, commercial construction, the 
primary market for our products, was down 64 percent from its 
peak in 2006 before rebounding slightly this year. Despite such 
a massive loss of volume, we have not laid off any of our 450 
associates, sacrificing our profitability to give our people as 
many hours as possible while keeping their benefits and health 
insurance intact. In fact, we have not had a layoff in our cast 
iron division since the early 1950s when we mechanized the 
plant, despite several significant recessions since that time.
    I also serve as a member of the American Foundry Society, 
and I am pleased to testify on their behalf today. 
Headquartered in Schaumberg, Illinois, AFS is the major trade 
association for the North American metal casting industry, 
which comprises more than 2,000 casting facilities, many of 
which are in your districts.
    The metal casting industry is critical to the U.S. economy. 
More than 90 percent of all manufactured goods use metal 
castings as engineered components. The U.S. Military depends on 
metal castings for jet fighters, ships, tanks, trucks, and 
weapon systems. Without castings, we would not be able to draw 
oil, propel aircraft or space vehicles, or economically plant 
and harvest crops that feed the world's population.
    Metal casting is the sixth largest industry in America, 
shipping products valued at $20 billion and directly employing 
200,000 people. Over 80 percent of U.S. metal casters employ 
100 workers or less and these are green jobs. Foundries recycle 
millions of tons of scrap metal as a raw material each year. 
Unfortunately, some of the most economically threatening 
regulatory proposals to our industry are coming from EPA. 
Appropriate regulations that improve health, safety, and the 
environment are a necessary part of doing business. However, 
when the regulatory process can advance 29 major rules and 173 
others with little or no regard to the cost or their 
implications, the system is broken. I could regale you with 
countless examples but I will bring your attention to one 
situation that has directly cost North Carolina hundreds of 
jobs.
    A few years ago, Charlotte Pipe bought land in rural North 
Carolina with the hopes of building a new state-of-the-art 
foundry. Not only would the new facility allow us to operate 
more efficiently, it would remove a large stationary source of 
emissions from downtown Charlotte. After we drew up plans for 
the new facility, we submitted our air permit. A year and a 
half later the permit sat unapproved. Our state regulators 
eventually told us that while the previous air dispersion 
models only had to account for filterable particulate, new air 
permits now require condensables to be included in the total 
particulate matter 2.5 models. The state also came back to us 
and said since we would be relocating our plant to a poorer 
area, in the name of environmental justice we would have to 
look at how any additional pollution would impact the local 
community. They never asked us how creating hundreds of new 
construction jobs and ancillary small business jobs would have 
impacted the local community.
    Finally, the PM 2.5 standards are under review by EPA. 
Limits are currently set at 15 parts per billion. The new 
levels being considered are between 12 and 14 parts per 
billion. The naturally occurring levels on the land we bought 
in North Carolina is 12.8 parts per billion, higher than the 
low end of the range that EPA is proposing. Knowing the 
standards which were changed and changing in midstream, knowing 
we would not be able to meet these, we pulled our permit and 
suspended the project, killing all those construction jobs.
    Based on our recent experience, I can only conclude that 
our current government looks at manufacturers not as partners 
that would alleviate unemployment and generate tax revenues but 
as targets to regulate and intimidate to justify the ever-
expanding reach of the federal bureaucracy.
    Thank you for the opportunity to appear today and I welcome 
your questions.
    [The statement of Mr. Muller follows:]

    [GRAPHIC] [TIFF OMITTED] T6749A.020
    
    [GRAPHIC] [TIFF OMITTED] T6749A.021
    
    [GRAPHIC] [TIFF OMITTED] T6749A.022
    
    [GRAPHIC] [TIFF OMITTED] T6749A.023
    
    [GRAPHIC] [TIFF OMITTED] T6749A.024
    
    [GRAPHIC] [TIFF OMITTED] T6749A.025
    
    [GRAPHIC] [TIFF OMITTED] T6749A.026
    
    [GRAPHIC] [TIFF OMITTED] T6749A.027
    
    [GRAPHIC] [TIFF OMITTED] T6749A.028
    
    Chairman Coffman. Thank you, Mr. Muller. Let me ask a few 
questions of the panel and then I will defer to the ranking 
member and then to the other members present.
    My first question, and it is to all the members of the 
panel, how difficult is it for your businesses to deal with the 
regulatory uncertainty posed by the EPA. Mr. Johnston, if we 
can start with you.
    Mr. Johnston. Regulatory certainly would allow us to gain 
more funding through the public sector for projects as we go 
forward. And anytime you introduce regulatory certainty it is 
the number one and has been reviewed by investment firms as the 
number one risk that advanced biofuel corporations face today--
is that regulatory uncertainty. It would be very helpful to 
maintain that thorugh the RFS and vehicles like that through 
the future so that things can develop and that we do not have 
to run into the high interest rates and the risk comes down for 
our investments.
    Chairman Coffman. Mr. Ward.
    Mr. Ward. As the coal ash recycling industry, we thought we 
had regulatory certainty at one point. EPA in two previous 
reports to Congress and two previous regulatory determinations, 
one in 1993 and a 2000 final regulatory determination, 
concluded that coal ash did not warrant regulation as a 
hazardous waste. When that happened in 2000 and we got 
regulatory certainty with a final regulatory determination, the 
recycling rate for coal ash in this country increased from 30 
percent in 2000 to 44 percent in 2008. That is almost a 50 
percent increase in less than a decade by having that 
regulatory uncertainty. Today's EPA is talking about 
withdrawing their final regulatory determination and all of 
that benefit is gone.
    So I will answer the question that way. Regulatory 
certainty helped our business enormously but that is now all 
being taken away by reinjecting uncertainty.
    Chairman Coffman. Mr. Muller.
    Mr. Muller. Similar response. Regulatory certainty would 
allow us to determine whether we can build this new plant in 
North Carolina or not. It would be a much more energy efficient 
plant, state-of-the-art, straight-line foundry and it would 
remove a large source of emissions from downtown Charlotte. Not 
only do we have the particulate matter 2.5 issue, the National 
Ambient Air Quality standards are under review, ozone. And 
certainly, cap-and-trade or greenhouse gas regulation from EPA 
would most likely kill that foundry project as well.
    So these regulations that are hanging over our head are 
holding this project up and frankly we are not sure it would 
ever get permitted in the first place.
    Chairman Coffman. Mr. Johnston, in your opinion, what EPA 
regulatory changes could be made to allow for biofuels such as 
isobutanol to have equal access to the market?
    Mr. Johnston. We have spoken to the EPA about this and it 
is a very simple either guidance or an internal policy change 
that they need to make that would allow isobutanol to be mixed 
in a service station underground storage tank with E10. It is a 
very straightforward change that we feel if they move forward 
on right now would really assist us in the future.
    Chairman Coffman. Are there any differences environmentally 
in terms of emissions?
    Mr. Johnston. No. Our emissions, we have had testing done, 
a part of the EPA standards and submitted it to them. And our 
emissions from a burning of our fuel does not create any 
greenhouse gas issues.
    Chairman Coffman. Okay. Mr. Ward, our Subcommittee is 
especially concerned with the impacts of regulations on small 
businesses. Can you give me a couple of examples where EPA's 
proposed coal ash rule has created unwarranted challenges for 
small businesses or stifled their innovation?
    Mr. Ward. We have numerous examples and I am happy to share 
as many as we like with the Committee. For the purposes of a 
brief answer I will give you a big one and a small one. A big 
one, there are a number of small businesses who are developing 
innovative processes for improving the quality of coal ash so 
that it can be used in more recycling applications. For 
instance, in concrete which improves the durability of the 
concrete, makes our roads and bridges last longer. Those 
technologies are essentially dead in the water right now 
because nobody wants to invest 20 or 30 million dollars in a 
technology facility to clean up a source of ash that they do 
not know if they are going to be able to sell it after EPA 
declares it a hazardous waste. So there is an example of a 
larger industry that is already dead.
    Let me give you one that may sound humorous as a small one, 
but coal ash gets recycled in a lot of different areas. I know 
a producer down in the south who is looking at using coal ash 
to make clay pigeons for a shooting range. When this EPA thing 
started they stopped the project entirely. Now, this is a 
business that is spraying lead all over the field but they were 
afraid of having coal ash in the clay pigeons that were going 
to get shot as they were flying out in the field.
    It runs the gamut. We have literally dozens of examples 
like this going on right now.
    Chairman Coffman. Okay. Thank you.
    Mr. Muller, should EPA continue to place stricter 
environmental standards on businesses in the future, do you 
believe that small businesses such as Charlotte Pipe will be 
able to maintain or increase current staffing levels?
    Mr. Muller. No, I do not. You know, we have not contributed 
to the unemployment problem but we are also not in a position 
to help solve the unemployment problem by hiring new 
associates. So the continued hanging over our heads of 
greenhouse in particular, even the boiler MACT which we have 
not discussed, while it does not directly affect Charlotte Pipe 
and Foundry, anything that hurts a utility is going to drive up 
our energy costs. And we are a very energy-intensive industry, 
the foundry industry. So this constant uncertainty and constant 
attack that we feel that manufacturers are under in America 
will not help us solve the employment problem.
    Chairman Coffman. Okay. Thank you. At this time I would 
like to defer to Ranking Member Altmire.
    Mr. Altmire. Thank you, Mr. Chairman. Mr. Johnston, in 
promulgating its greenhouse gas rules, the EPA chose not to 
convene a small business advocacy review panel but it attempted 
to provide relief through the tailoring rule. The EPA instead, 
if it had held small business advocacy panels, do you believe 
the rules' impact on small firms could have been mitigated more 
appropriately or it would have made a positive difference?
    Mr. Johnston. I think so. With the tailoring rule, the 
greenhouse gas, I mean, we are in the midst of permitting a 
plant in southern Minnesota. And part of that permitting 
process was looking at what the effect of the new regulations 
were going to cost us to comply with. And when the tailoring 
rule came out and also the exemption of biogenic carbon from 
some of the greenhouse gas, it allowed us to look at the plant 
as an economic alternative. If they had kept it where it was 
and they had gotten that feedback earlier in the process it 
would have much more streamlined the regulation and given 
regulatory certainty to projects like ours.
    Mr. Altmire. Okay. Mr. Muller, do you have a comment on 
that?
    Mr. Muller. I am sorry, sir. Can you repeat what the 
question is?
    Mr. Altmire. Let me ask you something similar.
    Mr. Muller. Okay.
    Mr. Altmire. The EPA's greenhouse gas tailoring rule 
exempts smaller businesses from most of the requirements of the 
rule. Does this exemption ensure that small businesses like 
yours will not be affected by the rule?
    Mr. Muller. No, for the same reason that I gave the 
Chairman, that anytime you impact the utilities and the coal 
industry frankly. Coal is a major raw material for us, so 
anything that impacts the coal industry and the utility 
industry is going to drive our energy costs and our raw 
material costs up. So to claim that they are only targeting 
large sources of emissions does not hold water because everyone 
will be affected by this. Even homeowners' rates will--utility 
rates will increase.
    Mr. Altmire. Mr. Ward, I wonder if you could discuss the 
distinction between landfill for coal ash that you mentioned in 
your testimony versus the regulation that we are talking about 
today.
    Mr. Ward. The regulation we are talking about today is a 
direct outcome of an incident that occurred in December 2008 
when a large disposal pond in Tennessee failed, operated by the 
Tennessee Valley Authority. And EPA said we are going to 
regulate coal ash disposal now. Over the debate, however, the 
debate has shifted from regulating coal ash disposal methods to 
demonizing coal ash itself. If we had spilled a billion gallons 
of skim milk in the Clinch River, we would have had an 
environmental disaster but we would have been talking about 
improving standards for milk containment facilities, not about 
the milk.
    But now we have this parade of things about coal ash. What 
EPA is saying, this is supposed to be a coal ash disposal 
rulemaking in which they are improving standards for coal ash 
landfills and ponds where coal ash is disposed. We agreed with 
that. Those standards should be improved. But the way they are 
going about it by designating it a hazardous waste so that they 
can get more enforcement authority, they are creating a stigma 
that is seriously damaging a recycling market.
    And I saw your eyebrows all go up when I said, you know, 
they think that a hazardous waste designation will make people 
want to recycle more. I ask you. Would you want a material in 
your home, your school, or your business that is called a 
hazardous waste on the property of the person who made it but 
is not when you put it in your home? That is the problem. EPA 
will tell you they are not trying to regulate us, that the 
beneficial use industry is exempt, but the way they are trying 
to regulate disposal is killing us.
    Mr. Altmire. So you do not have a problem with the landfill 
regulations as they currently stand or the appropriateness of 
having those regulations.
    Mr. Ward. No.
    Mr. Altmire. It is that designation.
    Mr. Ward. The coal ash recycling industry, and by the way, 
the utility industry as well, is on record supporting new and 
better landfill and coal ash disposal regulations. Absolutely 
that is an appropriate thing. We should never, ever have 
another incident like the thing that happened at the TVA 
facility in 2008. That has to be done away with. But we can do 
it without creating an unjustified and unwarranted stigma on 
coal ash that is threatening to undo one of the largest and 
greatest recycling success stories in our nation's history.
    Mr. Altmire. Great. Thank you. One more, Mr. Chairman, for 
Mr. Muller.
    In your testimony, you discuss new greenhouse gas 
permitting requirements would cause bureaucratic gridlock 
creating another hurdle a company seeking to expand or rebuild 
would have to face. How do you see such administrative delays 
affecting investment in new facilities?
    Mr. Muller. Well, that is a great question. We, part of the 
decision we have to make if we were able to build our new 
foundry is whether to have a cupola melt or an electric melt. 
And the implications of either are dependent on what the 
greenhouse regulations are. Electric melt would be much more 
efficient way to operate the foundry but with electricity rates 
necessarily skyrocketing under such a regime then we would 
probably have to revoke--continue to do copula melt which would 
use coke and is far less efficient. So these are the types of 
decisions that hang in the balance when we are waiting for the 
final rules.
    Mr. Altmire. What about the decision to locate a plant 
operation overseas rather than domestic?
    Mr. Muller. Well, we are committed to manufacturing in the 
United States. Our management is fourth generation and they 
would not relocate overseas but some of our competitors have 
and a lot of our competitors have gone out of business. So it 
is absolutely understandable that a foundry could be built over 
in China and they can buy scrap metal here, ship it to China, 
melt it, ship it back here, and still sell at 25 percent below 
our market. So it is a very attractive alternative.
    Mr. Altmire. Thank you, Mr. Chairman.
    Chairman Coffman. Thank you, Mr. Altmire.
    Mr. West.
    Mr. West. Thank you, Mr. Chairman.
    We have kind of run into some difficulties down in Florida 
with the EPA and this thing called the numeric nutrient 
criteria which is really affecting our farmers and also some of 
our local municipalities as far as stormwater runoff. And one 
of the things that they have been asking is, you know, how do 
you determine the formulas for this numeric nutrient criteria 
regulation that they are coming down with.
    So when I was listening to you speak, Mr. Johnston, you 
know, obviously, you know, from being down south I cannot 
articulate all those highly technical things, but are there 
certain formulas that, you know, that you are developing with 
this conversion of the fuels or what have you that the EPA is 
not consulting with you on or, you know, are they coming down 
and showing you some type of calculation that they are using to 
bring this regulatory environment on you?
    Mr. Johnston. Mr. Congressman, interesting question. We 
have--there is obviously through the regulatory schemes there 
are many different formulas that work into our decision-making 
regarding regulatory compliance as well as listing our 
products. And a lot of them are based on historical data that 
in today's regime does not always necessarily apply. And what 
we would do with EPA is look at, for example, the isobutanol in 
the underground storage tank. When these regulations were made 
there really was only one biofuel. And calculations for our 
biofuel is really straightforward. It is really a simple 
calculation and EPA being able to take that and say, okay, 
there is more biofuels, there is more progress in the United 
States. I mean, small businesses are creating newer and newer 
materials. Being able to do that and move that forward would 
really help provide the American jobs and pull out foreign oil 
that is needed so desperately.
    Mr. West. Next question then, and this can be across the 
board, you know, obviously, in a regulatory environment that is 
on steroids there are increased costs to your businesses. So, 
you know, how do you contend with these, you know, rising 
costs? And we have not even talked about some of the other 
things like health care.
    Mr. Johnston. I will take the first shot at that, Mr. 
Congressman. When we put together our budgets, we put together 
a pretty big amount of money for the regulatory compliance. And 
that money could be used elsewhere in the business to provide 
more development, more jobs, where we are using that to simply 
file paperwork and comply. And it gets to be a pretty big 
percentage of any new project where you have to meet all these 
government regulations and be able to file all the paperwork 
required. Anything to streamline that and provide regulatory 
certainty would provide benefit to the overall company and 
reduce our costs.
    Mr. Ward. For a number of the companies in the coal ash 
recycling business, they are looking at not how to budget for 
the costs but whether they are going to stay in business. If 
coal ash is declared a hazardous waste when it is disposed and 
that stigma causes people not to want to use it for recycling 
applications, most of the businesses in our area, the folks who 
actually market coal ash and technologies for improving it, 
they are just going out of business.
    The users, the small businesses that rely on this material 
as a strategic building material--and they do--in many cases 
coal ash actually improves the quality of the products it is 
used in--they will just choose not to use it and they will go 
to other materials that have higher embodied energies and lower 
performance but they will just switch to other materials in 
order to avoid the potential liability risks instead of using 
this material.
    Mr. Muller. Congressman West, we spend millions of dollars 
every year on environmental compliance. We have full-time 
environmental engineers on staff. We employ environmental 
consultants to ensure our compliance and environmental lawyers.
    This is a good example of how this costs us money. We 
received a notice of violation a couple of years ago and it was 
a paperwork violation. We had not violated any EPA rules but 
our paperwork was not exactly correct. So that cost a fine. And 
then our lawyers and engineers have to work on that. And then 
the next time we submitted our paperwork we failed to note the 
NOV that they gave us and we got another notice of violation 
for failing to note the notice of violation that they had 
already given us. It is just silly and it is all paperwork. We 
were operating well within our permits. So it just costs money 
chasing our tails.
    Mr. West. If I could ask one last question, Mr. Chairman.
    So if there was one golden nugget recommendation that you 
could give to us to press forward on, what would that golden 
nugget recommendation be from each one of you?
    Mr. Johnston. From Gevo's standpoint, it is to be able to 
provide regulatory certainty in this complex world we live in 
and also to be able to talk to EPA and say these are easy 
solutions that we are providing as a company. These are not. We 
want to change the Clean Air Act. We do not have to change the 
40 CFR. These are simple interior pieces in EPA that can be 
done that will assist a small business to be able to 
commercialize their product.
    Mr. Ward. I would agree with Mr. Johnston's plea for 
regulatory certainty and add to that that as a small business 
committee it would be wonderful if EPA could be encouraged to 
follow their already existing guidance for evaluating impacts 
on small businesses. And not just direct impacts to the 
regulations but the indirect impacts on small businesses. If we 
could just get EPA to use their small business advisory review 
panel authority and follow the executive orders that they have 
already been given to properly assess the impacts on small 
businesses, I think we would see a tremendous change. But they 
spend most of their time telling us why they do not have to 
look at our issues.
    Mr. Muller. I would say the rules in place, the standards 
on air quality on ozone, on particulate, are already extremely 
stringent and protect the air and water. Constantly lowering 
these standards to points where they cannot even be met 
economically and for very little health benefit in return, that 
would be the golden nugget. We just need to keep things where 
they are and people can operate and they can hire again and we 
will be well in compliance of our permits.
    Mr. West. Thank you very much, gentlemen. I yield back.
    Chairman Coffman. Mr. Altmire, any further questions?
    Mr. Altmire. No.
    Chairman Coffman. Mr. West, any further questions?
    Mr. West. No, sir.
    Chairman Coffman. I would like to thank all of our 
witnesses once again for testifying before our Subcommittee. 
You have given our members a better perspective of how EPA's 
rigorous regulatory agenda is endangering your businesses. It 
is alarming to me that this government agency continues to 
propose increasingly stringent regulations when small 
businesses are already paying environmental costs per employee 
at a rate that is 364 percent higher than large businesses, 
adding insult to injury. Make no mistake, when EPA and other 
agencies effectively over-regulate small business, they also 
prevent job creation at a time when our country needs it most. 
Today's hearing marks the first step in a long journey of 
congressional oversight in matters affecting small businesses. 
This Subcommittee, along with the full Committee, will remain 
dedicated and vigilant in exposing these and other governmental 
hurdles to American prosperity.
    I ask unanimous consent that members have five legislative 
days to submit statements and supporting materials for the 
record. Any objection to that? Without objection, so ordered.
    This hearing is now adjourned.

    [GRAPHIC] [TIFF OMITTED] T6749A.029
    
    [GRAPHIC] [TIFF OMITTED] T6749A.030
    
