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




  EPA'S GREENHOUSE GAS AND CLEAN AIR ACT REGULATIONS: A FOCUS ON TEXAS' 
                    ECONOMY, ENERGY PRICES AND JOBS

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                             MARCH 24, 2011

                               ----------                              

                           Serial No. 112-26


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov





 EPA'S GREENHOUSE GAS AND CLEAN AIR ACT REGULATIONS: A FOCUS ON TEXAS' 
                    ECONOMY, ENERGY PRICES AND JOBS

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 24, 2011

                               __________

                           Serial No. 112-26








      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                                _____

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chairman                      DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky              Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 _____

                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
JOHN SULLIVAN, Oklahoma              BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               JAY INSLEE, Washington
GREG WALDEN, Oregon                  JIM MATHESON, Utah
LEE TERRY, Nebraska                  JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas            EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California         ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana             GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
PETE OLSON, Texas                    MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia     CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)














                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     2
    Prepared statement...........................................     4
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     7
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    22
Hon. Charles A. Gonzalez, a Representative in Congress from the 
  State of Texas, opening statement..............................    24
Hon. Pete Olson, a Representative in Congress from the State of 
  Texas, opening statement.......................................    25
Hon. Kevin Brady, a Representative in Congress from the State of 
  Texas, prepared statement......................................    27

                               Witnesses

Greg Abbott, Attorney General, State of Texas....................    30
    Prepared statement...........................................    33
Todd Staples, Commissioner, Texas Department of Agriculture......    46
    Prepared statement...........................................    48
Bryan W. Shaw, Chairman, Texas Commission on Environmental 
  Quality........................................................    55
    Prepared statement...........................................    57
    Answers to submitted questions...............................   255
James Griffin, Plant Manager, Dianal America.....................    71
    Prepared statement...........................................    74
James Marston, Regional Director, Texas Office, Environmental 
  Defense Fund...................................................    78
    Prepared statement...........................................    80
Kathleen Hartnett White, Director, Armstrong Center, Texas Public 
  Policy Foundation..............................................   209
    Prepared statement...........................................   212
Gina McCarthy, Assistant Administrator, Office of Air and 
  Radiation, Environmental Protection Agency.....................   234
    Prepared statement...........................................   238
    Answers to submitted questions...............................   473

                           Submitted Material

Letter, dated September 25, 2007, from John Blevins, Director, 
  Compliance Assurance and Enforcement Division, Environmental 
  Protection Agency, Region 6, to Flexible Permit owners, 
  submitted by Mr. Green.........................................     9
Letter, dated April 11, 2006, from David Neleigh, Chief, Air 
  Permits Section, Environmental Protection Agency, to Steve 
  Hagle, Special Assistant, Air Permits Division, Texas 
  Commission on Environmental Quality, submitted by Mr. Green....    13

 
 EPA'S GREENHOUSE GAS AND CLEAN AIR ACT REGULATIONS: A FOCUS ON TEXAS' 
                    ECONOMY, ENERGY PRICES AND JOBS

                              ----------                              


                        THURSDAY, MARCH 24, 2011

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:30 a.m., at 
the Garrett-Townes Auditorium, South Texas College of Law, 1303 
San Jacinto Street, Houston, Texas, Hon. Ed Whitfield (chairman 
of the subcommittee) presiding.
    Present: Representatives Whitfield, Olson, Barton, Green, 
and Gonzalez.
    Also present: Representative Brady of Texas.
    Staff present: Allison Busbee, Legislative Clerk; Cory 
Hicks, Policy Coordinator; Mary Neumayr, Counsel; Anita 
Bradley, Senior Policy Advisor to Chairman Emeritus; and 
Jacqueline Cohen, Democratic Counsel.
    Mr. Whitfield. Welcome. My name is Ed Whitfield. I am 
chairman of the Energy and Power Subcommittee of the Energy and 
Commerce Committee in Washington, DC. We're delighted to be 
here today. We're having a hearing on the EPA's Greenhouse Gas 
and Clean Air Act Regulations and its focus on the impact on 
Texas' economy, energy prices, and jobs.
    I'm sure I don't need to introduce the other Members here 
because you all know all of these people very well, but we 
certainly have with us this morning Mr. Joe Barton, the co-
chairman of the Energy and Commerce Committee. Still--is now 
emeritus of the committee and is one of the leaders of our 
committee for many years and has been a strong advocate, as you 
know, for energy issues and has provided great leadership in 
the State of Texas.
    Mr. Gene Green here is with us because I saw him just a few 
minutes ago. He is the ranking--serving as ranking member of 
the Energy and Power Subcommittee today. And, of course, you 
all know him because he's from Texas.
    In addition, we have Pete Olson, who is a member of the 
subcommittee from Texas.
    And we have Mr. Kevin Brady, who is not a member of the 
Energy and Commerce Committee but provides great leadership 
within the Congress. And we're delighted that he's here. I know 
he represents part of this area.
    And, of course, Charles Gonzalez, who is also from Texas, 
and is a member of the Energy and Commerce Committee and the 
subcommittee.
    So, we are delighted to be here today. And before I give my 
opening statement, the way we're going to operate this today is 
that each member is going to have 5 minutes for an opening 
statement and then we're going to introduce the panel and then 
they will give their 5-minute opening statements. And then at 
that point, well, each member will have the opportunity to ask 
questions and answers--have a question-and-answer period. And 
when that is over, not because we're trying to discriminate 
against Mr. Brady, but the rule is that since he's not a member 
of the committee, he simply would wait until last to ask his 
questions. His questions may be the very best, but the rules 
are he waits until we all finish. So, I know that he'll do a 
tremendous job.
    Voice. Mr. Chairman, don't they have different rules in 
Texas?
    Mr. Whitfield. Well, I haven't been informed yet. I'm sure 
I will be. I've heard that Texas frequently steps to its own 
drummer. So, I want to be compliant and flexible with Texas.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    But I'm delighted to be here today. The Environmental 
Protection Agency, as you know, has begun to impose greenhouse 
gas regulations under the Clean Air Act affecting both mobile 
and stationary sources, including new rules establishing 
initial new preconstruction permitting requirements under the 
Prevention of Significant Deterioration program which became 
effective January 2nd, 2011, and initial new operating permit 
requirements that will become effective July 1st, 2011, under 
the Title V program. These greenhouse gas rules, which have 
been subject to a variety of legal challenges, represent the 
beginning of EPA's regulation of greenhouse gas emissions under 
the Clean Air Act, and additional greenhouse gas-related 
rulemakings are scheduled or expected, including for power 
plants and refineries and other sectors.
    I will tell you that we've already reported out legislation 
in the Energy and Commerce Committee to prohibit the regulation 
of greenhouse gas emissions. We did that for a number of 
reasons. Number one, Congress, on three separate occasions, has 
said no specifically to that issue. In 1990 Congress said no. 
In 2007 the U.S. Senate by a vote of 97 to nothing sent a 
resolution asking the President not to even send up the kill of 
protocol for ratification. And then last year the Senate 
refused to act on the Cap and Trade bill.
    So, Congress has made its will very clear on this issue. In 
addition, the greenhouse gas regulations in 2010, EPA formally 
disapproved the Texas Commission on Environmental Qualities' 
Flexible Air Permits program. TCEQ submitted the original rules 
for this program to EPA for approval as a revision of the State 
Implementation Plan in 1994; and only recently, after about 16 
years, has that issue been resolved. And, of course, we don't 
consider it over yet.
    I might also say that it's very perplexing to see EPA 
trying to take this authority away from the State of Texas 
because from 2000 to 2008 Texas lowered nitrous oxide levels by 
46 percent, ozone levels were reduced by 22 percent, all major 
urban areas in Texas currently meet the Federal 8-hour ozone 
standard of 85 parts per billion except Dallas; and they have 
made remarkable improvement.
    Suffice it to say that Texas in this--on this regard has 
really been a leader in the Nation in meeting EPA standards.
    So, our objective today is to find out what's going on. And 
Congress is going to reassert itself into the Clean Air Act 
because for the last 10 or 15 years we've almost had a laissez 
faire attitude about it. But we cannot stand to simply sit by 
and we are going to reassert ourselves. And we want some 
questions answered. And if we have to do legislation, we're 
going to consider that, as well.
    [The prepared statement of Mr. Whitfield follows:]



    Mr. Whitfield. So, with that, it's my pleasure to introduce 
the ranking member at this time, Mr. Gene Green, for his 
opening statement.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. I want to welcome you 
not only to Texas but to Houston. It's great to have a 
Congressional hearing here. We don't always get these type of 
field hearings in our community. In fact, this is home. I wast 
born about five blocks from here at St. Joseph's Hospital. So, 
I take my Texas roots very seriously.
    And I want to welcome my colleague to Houston. As the 
energy capital of the world, I hope you enjoy your time here 
and that you have an informative visit. Sometime when you have 
more time I would love to take you over to what I call our 
``jobs corridor'' on 225 in East Harris County where you can 
see the huge amount of investment in the energy sector we have 
over there, along with the Port of Houston.
    In our district, which encompasses most of East Harris 
County here in the Houston area, we do everything energy, both 
upstream and downstream, including being the home of five 
refineries, several manufacturing facilities, and 50 plus 
chemical plants. For this reason I have closely watched the 
Texas Flexible Permit debate in order to ensure that our 
facilities have the permits they need to operate.
    In August of 2008, the Business Coalition of Clean Air and 
Fuel Group, the Texas Association of Business, and the Texas 
Oil and Gas Association filed suit against the EPA to take 
action on pending permit-related SIP actions such as flexible 
permits. In July of 2009 these groups reached an agreement 
regarding the timing of Federal Review of aspects of Texas' Air 
Permitting program, and in July of 2010 EPA took final action 
disapproving Texas' flexible permit program SIP provision. The 
EPA determined that the revisions proposed by the TCEQ's New 
Source Review program did not meet the Federal Clean Air Act 
requirements. Reaching a workable agreement that would make 
Texas compliant with the Clean Air Act without imposing 
excessive and unnecessary costs on refiners and other 
businesses is in the best interest of both the EPA and the TECQ 
or TCEQ. I would hope that both the EPA and the TCEQ would 
agree, and I look forward to an update from both on the status 
of these discussions.
    Now, I, like my colleagues on the other side of the aisle, 
have concerns about the timing of this issue, in particular, 
that the EPA did not object to the Texas Flexible Permit when 
they originally issued it in the early 1990s. But it's 
completely false to say that the EPA voiced no concerns over 
this program until they disapproved last year.
    In fact, both the Clinton and Bush Administration sent 
several letters to TCEQ outlining their concerns with the Texas 
SIP provisions. Additionally, the Bush Administration sent a 
Fair Notice letter to flexible permit holders in 2007 
emphasizing that they must comply with the Clean Air Act 
provisions in addition to the Texas Flexible Permit provisions.
    Mr. Chairman, without objection, I would like to ask 
unanimous consent to insert a copy of the Fair Notice letter 
that was sent to the flex permit holders into the record as 
well as a copy of the Warren TCEQ letter sent by the Bush 
administration to TCEQ.
    Mr. Whitfield. Without objection.
    Mr. Green. Thank you.
    [The information follows:]



    
    Mr. Green. It was only when the courts forced the EPA to 
make a decision on the flex permit program that they finally 
disapproved the program. I don't say this in an effort to take 
sides. I say this because I think it's important to set the 
record straight because unfortunately most of the rhetoric on 
this issue would have you believe that the issue just came to 
light in the last couple of years, when instead it was 
percolating for several years.
    Finally, concerning upcoming greenhouse gas rules to 
utilities and refineries, I must emphasize that I'm opposed to 
the EPA moving forward with regulations on large utilities and 
refineries in our country because I believe it's the Congress 
who should be the decision maker on these carbon-control 
issues.
    However, we can't discount the Supreme Court decision and 
say ``climate change is not an issue'' and move on without it, 
which is the approach some of my colleagues want to take. 
Instead we should pass a bill that would delay the EPA from 
moving forward with these regulations so that the Congress has 
the time to address this issue with input from Members that 
represent diverse constituencies nationwide.
    Again, I look forward to the testimony of our witnesses. 
And, again, thank you, Mr. Chairman, for coming to Houston and 
to Harris County. And you're welcome back any time.
    Mr. Whitfield. Thank you, Mr. Green.
    At this time I recognize the chairman emeritus, Mr. Barton.
    Mr. Barton. Well, thank you, Chairman Whitfield. We 
sincerely appreciate you coming to Houston, Texas. There are 
lots of things you could be doing in Kentucky, and we 
appreciate you spending a day to come down to the energy 
capital of the world and focus on a hearing that's very, very 
specific to Texas.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    I'm a strong proponent of strong environmental protection. 
I was a co-sponsor and voted for the Clean Air Act in the early 
1990s. I am a past subcommittee chairman of the Oversight 
Subcommittee of this committee and of the Energy Subcommittee 
with Mr. Whitfield, who is currently the chairman, and of the 
full committee. I have probably participated and chaired more 
hearings on the Clean Air Act and greenhouse gases than almost 
any current member of Congress and perhaps any member of 
Congress, ever.
    I want a strong EPA. I want a strong Texas Counsel of 
Environmental Quality. I want an Attorney General in Texas who 
enforces the environmental laws not only of the State of Texas 
but of the United States of America.
    So, we are not engaged today in a witch hunt against the 
Environmental Protection Agency, but we do believe that the 
Environmental Protection Agency, like every other agency of the 
Federal Government, should follow the law and not make it. And 
with regards to the air--Clean Air Act and the flexible permits 
that have been issued under that Act and with regards to the 
issue of greenhouse gases, you know, it is my strong belief 
that the EPA has acted without legal foundation in terms of the 
air quality permits and without due consideration in their 
promulgation and decision to try to regulate greenhouse gases 
under the Clean Air Act.
    There are two separate issues. Let's look at the first 
issue, the air permits. Under the Clean Air Act, beginning in 
the mid 1990s, States had to comply with the new law and submit 
to Washington State implementation plans and specific permits 
for various facilities that were jurisdictional under that Act 
for six criteria pollutants.
    In Texas, you know, our region and our industry were 
compliant with five of the six, I believe, almost from the get-
go. We have had a problem in the Houston area, the Beaumont-
Port Arthur area, the El Paso area, and the Dallas-Fort Worth 
area on ozone. So, Texas decided to use a facility-wide 
flexible permitting approach where they would set a cap for a 
facility and not try to set a standard within each facility for 
each piece of equipment. This was done under Governor Ann 
Richards' direction and under President Bill Clinton's 
Presidency. So, this was not some Republican initiative.
    Basically, as I understand it, the policy difference 
between the EPA today and the State of Texas today is that the 
Texas legislature and the Texas Counsel of Environmental 
Quality, all the various officials in Texas have decided to 
take a facility-wide approach where you decide to cooperate 
with the affected regulated industry, share a joint goal, and 
try to meet the Federal law that way.
    The EPA under President Obama has decided that they want a 
command and control and that we have got to force people to do 
things equipment by equipment. And I'm going to ask the 
Attorney General and the chairman of the Council of 
Environmental Quality here how many permits have been affected. 
But my information is it's about 180. So, we want strong air 
quality enforcement in Texas, but we want a State that can grow 
economically. And as the testimony will show, depending on your 
baseline, 1990 or 2000, Texas employment is growing, Texas 
population is growing, but Texas air quality is also improving. 
OK, if you can add 4 million people in 10 years and decrease 
emissions, that should be something that you're patted on the 
back and given a medal for, not something that your permits are 
revoked.
    So, Mr. Chairman, we are here to get to the bottom of this, 
to put some things on the record. We're going to hear from our 
State officials and then our industry officials, and then we 
have been blessed that the number two person at the EPA, the 
head of the Air and Radiation Agency there, is going to come 
and--what we're not going to hear from, Mr. Chairman, is the 
Regional VI administrator. He and his aides couldn't make it 
180 miles from Dallas to testify in public about this. So, we 
will have some questions for the record for our friends from 
Dallas, who probably had to get a haircut or something this 
morning and couldn't make it down.
    With that I yield back.
    Mr. Whitfield. Thank you, Mr. Barton.
    Yes, we are quite disappointed that the regional director 
of EPA is not with us this morning. Although, we certainly 
asked at the time.
    At this time I'd like to recognize the gentleman--another 
gentleman from Texas, Mr. Gonzalez, who will give a brief 
statement.

OPENING STATEMENT OF HON. CHARLES A. GONZALEZ, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Gonzalez. Thank you very much; and, Mr. Chairman, 
welcome to Texas. You are surrounded by Texans today from both 
sides of the aisle. And I can tell you now that regardless of 
party affiliation that I think and I believe that we often 
agree on the following: And that is that Texas has been, is, 
and will remain an energy State. We understand what we've done 
historically. We understand what need to effectuate as it 
relates to traditional fuels and sources of energy but we also 
will be a leader in the alternatives and the renewals.
    Now, much time is lost in the politics of the present 
subject matter that's before us today. If we were to believe in 
areas surrounding the flexible permit program, the Obama 
Administration disapproved the program in order to punish Texas 
and take over its program. What seems to get lost is that 
previous Administrations, as pointed out by Mr. Green, have 
expressed concerns with the flex permitting program for the 
past 16 years. Rather than favoring the EPA on this decision, 
the responsible thing to do is to figure out the past program. 
Past permit holders are now in limbo and that cannot be good 
for business. To create the regulatory certainty that 
businesses need, TCEQ and EPA need to reach an agreement. I've 
been told that they're at an impasse. They don't have ongoing 
discussions and negotiations, which is very unfortunate. I look 
forward to hearing both the EPA and TCEQ on what the next steps 
are and how we plan on working together to reach a resolution 
amenable to both sides.
    On the question of greenhouse gases, rather than stripping 
EPA of its authority to regulate greenhouse gases, Congress 
should pass legislation that creates a framework for how we 
deal with greenhouse gas emissions. We know that the House 
acted on this previously. The Senate did not. We'll see where 
we vote in 111th Congress.
    However, I've not been presented nor have I seen any 
proposals that would address this issue in a legislative way if 
we don't want a regulatory agency to do the work for us. All 
we've witnessed are against a critical EPA and to redebate the 
climate items without putting forward any new ideas on how we 
are going to address the problem and how we are going to 
compete with China, Germany, and other countries who have made 
key investments in alternative energy and positioned themselves 
to be leaders in this new energy sector.
    A secure energy future will no doubt include fossil fuels 
for the foreseeable future. It is needed and will serve as our 
transition fuel as we move to cleaner energy alternatives. Our 
State and Federal Government have a responsibility and a role 
to play in mitigating the effects of climate change and putting 
us on a sound path to making that energy transition. I believe 
our constituents expect and deserve as much.
    Again, thank you very much, Mr. Chairman. I yield back.
    Mr. Whitfield. Thank you, Mr. Gonzalez.
    At this time I recognize the gentleman from Texas, Mr. 
Olson, for 5 minutes.

   OPENING STATEMENT OF HON. PETE OLSON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Olson. Thank you, Mr. Chairman. And I want to thank you 
for bringing this hearing to Space City, USA, and the energy 
capital of the world. And I appreciate your courtesy for 
letting me deliver this speech. Unfortunately, I have to leave 
a little bit early here; and I apologize to the witnesses. 
Thank you for coming today; and, unfortunately, I won't be here 
for much of your testimony but we do have a record and we know 
we're going to be working close with you in the future.
    But make--make no mistake, we are here today because the 
EPA has overstepped its bounds and it does not respect the 
authority of the individual States. Unfortunately, Texas has 
found itself in the crosshairs of this radical EPA that simply 
refuses to acknowledge our successes in increasing production 
while reducing pollution. All this while we're the fastest-
growing State in population in the Nation. Since the recession 
of 2008, the great State of Texas has produced half the private 
sector jobs in our country--half the private sector jobs.
    Even with adding to the Nation's jobs, population and 
economic growth, Texas has improved air quality through its 
flexible permitting program, which the EPA has disapproved. 
We've had a 22 percent reduction in ozone and a 53 percent in 
NOx emissions. The national average was 15 percent for ozone, 
27 percent for NOx. And this was from the time period 2000 to 
2008. With those numbers, it's very clear: Flexible permitting 
works. These are successes that the EPA refuses to recognize.
    Another great example of the EPA overreach was in the 
emergency administrative order issued late last year by EPA to 
raise resources. Earlier this week the Texas Railroad 
Commission announced that it had determined that range 
resources was not--was not the source of the contaminant in any 
domestic water wells. This finding rightly indicates that the 
Texas Railroad Commission handled the contamination incident 
properly. And the EPA had no authority to take the 
extraordinary steps they did by going around our State 
regulators.
    The EPA improperly usurped State authority and has 
repeatedly demonstrated a disturbing pattern of behavior of 
abuse of their Federal authority in the State of Texas, and it 
must stop. I will continue to press the EPA to remain within 
their Federal parameters and exercise common sense and caution 
when attempting to intervene in matters under the jurisdiction 
of this State.
    And, finally, as our Nation's economy struggles to regain 
its footing, this Administration has continued its backdoor 
approach to cap and trade through EPA regulation. I believe 
this act is unconstitutional. We know these regulations will 
destroy jobs and hurt an already weak economy. At a time of 
near record gas prices, these regulations will only force 
Americans to pay more at the pump.
    This document, the Constitution, dictates that Congress, 
not unelected bureaucrats, has the authority to decide whether 
and how greenhouse gases are going to be regulated. As our 
chairman said in his opening statement, just last week this 
committee passed, with my strong support, the Energy Tax 
Prevention Act, which would prevent the EPA from implementing a 
cap and tax scheme through onerous regulation and restore much-
needed regulatory certainty to businesses trying to grow our 
economy. This bill would also roll back the rule that EPA has 
already implemented that has allowed them to seize control of 
Texas greenhouse gas permitting authority.
    Texas and American business owners alike need the assurance 
that this Government will not continue to regulate them out of 
business.
    Again, I appreciate the chairman's courtesy and I apologize 
to the witnesses for an early departure. I yield back my time.
    Mr. Whitfield. Thank you, Mr. Olson.
    We're sorry that you have another engagement, but thank you 
very much for coming on this issue. We appreciate your being 
here.
    In Washington we really do not allow members that are not 
members of the committee to make an opening statement. However, 
since Mr. Brady is with us today and he's informed me in Texas 
they have different rules, I thought I would give him an 
opportunity to speak.
    Mr. Barton. Mr. Chairman, point of parliamentary inquiry?
    Mr. Whitfield. Yes, sir.
    Mr. Barton. If we allow Mr. Brady--and I'm certainly 
encouraging you do that--if Congresswoman Jackson Lee comes, I 
would hope that we would give her the opportunity to give a 
statement, also.
    Mr. Whitfield. We will--we will do that.
    Mr. Barton. OK. Thank you.
    Mr. Whitfield. Mr. Brady, do you want to go?
    Mr. Brady. Thank you, Mr. Chairman. I thought you were just 
picking on us Ways and Means members.
    Mr. Whitfield. We just want your jurisdiction.
    Mr. Brady. I do have a compelling opening statement that is 
likely to bring you all to your feet. So, just save your 
comments until [inaudible].
    [The prepared statement of Mr. Brady follows:]



    Mr. Barton. The guys from Agriculture are fighting for jobs 
here in Texas and for the authorities to state to permit these 
businesses and to the fight that these mandates, the Federal 
Government has no authority to impose on us. I want to make two 
points. One is that there is, so far this morning, this belief 
that because there has been an exchange of letters between 
Texas and the Federal Government, that gives Washington the 
authority to seize our permitting process. The truth of the 
matter is this is to the contrary. With an exchange of letters 
between Washington and every State on issues for Medicaid, 
Medicare, clean water, highway transportation, and endangered 
species, and fisheries, and water, a normal routine exchange of 
letters between and among Federal programs is no basis for 
seizing our authority.
    And, secondly, let me be real clear, this isn't a choice 
between clear air and jobs. Texas is achieving both. The 
question here is, does Washington have the power to seize these 
States' permitting authority and impose among other mandates a 
global warming agenda that Congress has rejected? If the answer 
is yes, well, there is no limits to the power of the unelected, 
unaccountable bureaucracy in Washington. If the answer is no, 
factually, it restores Congress' constitutional jurisdiction 
over the districts and restores the State's rights as a partner 
with the Federal Government to achieve these goals.
    I'm anxious to hear from our witness, Mr. Shaw. Thanks for 
joining us, as well, today. Chairman, thanks for having me.
    Mr. Whitfield. Thank you very much.
    And I want to welcome the first panel. We appreciate you 
being here today.
    We have as a witness the Honorable Greg Abbott, who is the 
Attorney General of the State of Texas. In addition, we have 
Mr. Todd Staples, who is the Commissioner of Agriculture of 
Texas. And then we have Mr. Bryan Shaw, who is the chairman of 
the Texas Commission on Environmental Quality. So, we 
appreciate your being here. We look forward to your testimony.
    And Attorney General Abbott, I'll recognize you first for 
your opening statement.

 STATEMENTS OF GREG ABBOTT, ATTORNEY GENERAL, STATE OF TEXAS; 
 TODD STAPLES, COMMISSIONER, TEXAS DEPARTMENT OF AGRICULTURE; 
AND BRYAN W. SHAW, CHAIRMAN, TEXAS COMMISSION ON ENVIRONMENTAL 
                            QUALITY

                    STATEMENT OF GREG ABBOTT

    Mr. Abbott. Thank you, Mr. Chairman. And let me join in in 
welcoming you to Texas. I hope you could get some good food 
while you were here. Thank you for the opportunity to appear 
before this subcommittee.
    For the record, my name is Greg Abbott, and I am the 
Attorney General from Texas. And I'm here today to focus 
primarily on the litigation that Texas is waging against the 
EPA and explain why Texas believes the EPA is violating the 
Clean Air Act, as well as other laws.
    First, before I go into that--and we have submitted in 
greater detail in our prepared remarks--Texas has worked 
effectively with the EPA to enforce environmental laws. Texas 
also strives to prevent pollution before it occurs. Over the 
last decade, as has been recounted already, Texas cut NOx in 
half and reduced ozone more than any other State in the 
country. And Texas has achieved one of the largest reductions 
in greenhouse gas emissions of all the States in the country. 
Texas remains committed to working with the EPA to improve air 
quality and to hold polluters accountable. But Texas cannot 
support the EPA's efforts to regulate greenhouse gases and 
federalize the Texas air permitting system. Texas believes the 
EPA's actions are not only bad policy and harmful to creating 
jobs but also believes that EPA has repeatedly violated the 
law.
    Along these lines, the EPA has ignored the plain language 
of the Clean Air Act, violated notice and comment requirements, 
and attempted to rewrite Federal laws that were written by the 
United States Congress by way of the administrative rulemaking 
process.
    Texas lodges several legal challenges. I'll mention just 
three because of lack of time that reveal legal problems with 
the EPA's regulations. One is called the ``Tailoring Rule.'' 
The Clean Air Act defines in precise numerical terms the 
emission thresholds that trigger permitting requirements for 
stationary sources. The EPA conceived that the regulation of 
greenhouse gases at these stationary thresholds are 
inconsistent with the Congressional intent concerning the Clean 
Air Act by subjecting thousands of schools, churches, farms, 
and small businesses to Clean Air Act regulation. These harsh 
results show that greenhouse gases simply are not the kind of 
substance the Clean Air Act was designed to regulate. To get 
around Congress' clear instructions, the EPA basically amended 
the Clean Air Act by administrative fiat. The EPA calls the 
revised language the ``Tailoring Rule.'' The Tailoring Rule 
purports to create new thresholds for greenhouse gases in place 
of the thresholds that were mandated by Congress, itself.
    These new thresholds are several hundred times higher than 
those in the Clean Air Act. Well, with this Tailoring Rule, the 
EPA effectively rewrote the Clean Air Act by unilaterally 
raising emission thresholds.
    A second legal violation is in the SIP call rule issued by 
the EPA. The Clean Air Act gives States up to 3 years to bring 
their programs into compliance with major new Federal mandates, 
such as the greenhouse gas regulations. Well, the time allowed 
by the EPA violated the Clean Air Act by giving States only 15 
months rather than the allotted 3 years to change their laws 
and regulations to comply with the new greenhouse gas mandate. 
The EPA bases its decision on statutory provisions for bringing 
a SIP into compliance with existing standards, but the 
greenhouse gas rules are new standards. So, the 3-year 
requirement applies. EPA's failure to give States 3 full years 
violates the Clean Air Act.
    The last one I'll mention is the legal violation in the FIP 
rule. Absent an overriding emergency, the Administrative 
Procedure Act requires the EPA to solicit notice and comment 
from the public before issuing regulations. The FIP rule was 
issued without notice and comment in violation of the APA. 
There was no emergency to rush the rule. The EPA had plenty of 
time to respond to Texas' position on greenhouse gases. A 
notice and comment period was, therefore, required by the FIP 
rule. EPA's failure to provide it should doom the rule. Thank 
you.
    [The prepared statement of Mr. Abbott follows:]



    
    Mr. Whitfield. Thank you, Mr. Abbott.
    Mr. Staples, you're recognized for 5 minutes.

                   STATEMENT OF TODD STAPLES

    Mr. Staples. Thank you, Mr. Chairman and members, for the 
opportunity to be here with you today and thank you for your 
leadership for our country and our State.
    I'm here today to share with you concerns of Texas 
agriculture with a number of efforts underway to regulate 
greenhouse gases and to discuss the negative consequences not 
only to American agriculture, but particularly to consumers and 
its negative impact on jobs here in our country.
    American agriculture produces the safest, the most 
affordable, and the most reliable food supply in the world. 
Texas is a big part of that. Texas leads the nation in the 
production of cattle and cotton and sheep and goats and many 
other categories. It has an economic impact annually of about 
$100 billion on our State's economy and represents about 9 and 
a half percent of our entire gross State economy.
    To demonstrate the connectivity between agriculture in 
urban Texas right here in Houston, the Port of Houston is the 
biggest exporter of Texas agriculture products. We're all 
involved in agriculture at least in some form today.
    The EPA's regulation of greenhouse gases in Texas under the 
Clean Air Act will have a detrimental effect on Texas' 
agriculture. It will increase input costs which farmers and 
ranchers will have no choice but to either absorb or stop 
producing the food that we eat and the clothes that we wear. 
Ultimately, in this process, it is the consumer, American 
families, that will be picking up the tab for these higher 
costs. Based on a USDA study, released just this year, 
Americans spend about $41 billion for the transportation of 
food from the farm to the consumer. The Department of Labor 
reported that the increase in food costs are the highest in 
four decades. All with very minimal inflation. And I might add 
that these are natural, market-driven costs. And costs 
associated with greenhouse gas regulations will only add to 
these already higher costs that consumers are facing.
    Uncertainty of regulation threatens the health of 
production agriculture. Agriculture is an industry more 
vulnerable than most. Agriculture producers have to fight 
pests, disease, weather, and volatility of the market each and 
every day. They should not have to fight their own Governmental 
regulatory agencies.
    Since the EPA began consideration of the endangerment 
finding, analysts have sounded statistical alarm bells loudly 
and clearly. Costs estimates run the gamut but all prove that 
greenhouse gas regulation will have a negative impact on 
agriculture and a negative impact on consumers.
    If the input costs for American agriculture are higher than 
those of our competitors in other countries, this will have the 
net effect of moving production agriculture outside the borders 
of the United States and along with it the jobs that are 
created.
    These regulations, members, are proven in their cost but 
they are questionable in their benefit.
    Generally, when establishing regulations, we're doing it to 
achieve an end. There are consequences for every regulatory 
action. That's why following sound science is a fundamental 
principle by which all regulators across the United States have 
always lived and practiced. Now we believe the EPA is 
abandoning these principles and this process. In this case, 
there's no measurable positive impact and no way to determine 
if your regulation is achieving the result worth the economic 
disruption that it's causing.
    And this isn't just a disruption to farmers and ranchers. 
It's disruption to the consumers who benefit from American 
agricultural products is what is on the table. Today Americans 
spend about 10 percent of their disposable income on food. That 
compares to about 24 percent in Mexico and, roughly, 33 percent 
to our competitors in China.
    Food security is a part of national security. There are no 
greater better stewards than our farmers and ranchers. No one 
cares more for the land and air and water than them. We're 
pleading to you for your help today to turn to the courts, we 
have turned in voluminous communication to the EPA, and we're 
asking for your help in this process.
    Thank you for the opportunity to be here.
    [The prepared statement of Mr. Staples follows:]



    
    Mr. Whitfield. Thank you, Mr. Staples.
    And, Mr. Shaw, you're recognized for 5 minutes.

                   STATEMENT OF BRYAN W. SHAW

    Mr. Shaw. Thank you, Chairman and members. It is an honor 
to be here and to be able to address this group and talk about 
the issue of flexible permitting in Texas. And I hope to take 
the time that you've allotted me to give some background on why 
we are where we are as well as to address some of the issues as 
far as what is that path forward looking like.
    As a way of background--and, by the way, I am Bryan Shaw, 
the chairman on the Texas Commission on Environmental Quality, 
for the record.
    The flexible permit program is one of the tools in our 
toolbox to allow us to accomplish our agency's mission, which 
is to protect the environment in the state of Texas, to do so 
to induce it to continue economic development. As we recognize 
that we need to have both a strong economy and a strong 
environment or we'll have neither.
    So, toward that end we perceive that the Clean Air Act's 
delegation of authority to States such as Texas not only gave 
us an opportunity but we believe affords us a responsibility to 
customize our environmental regs with the program to find 
innovative ways to approach and to obtain the environmental 
goals that are set either by our State or by the Federal 
Government and to do so in a way that we can economically get 
there and ensure that we have a strong economy so that we can 
continue to improve our environment as well as recognizing the 
strong influence that a strong economy has on the health of our 
Texans because of the nutritional and other health care issues 
that are positively effected by a strong economy.
    If you look at the process of the flexible permit program, 
it was a tool that was developed largely to help us to find 
innovative ways to incentivize enhanced environmental 
performance. We were able to trade flexibility to the regulated 
communities for reductions in environmental emissions. This is 
something that was on the heels of a Federal program known as 
``Project XL.'' It's a program that we believed and to this day 
believe not only does it provide for a stronger economic base 
and in job creation because of that flexibility but also 
provides opportunity for environmental reduction and ensures 
the technique through the way that the program is set up.
    It has been in the past, as is mentioned, there have been 
letters exchanged between my agency and the EPA expressing 
concerns about the permit program. There have even been 
concerns expressed about individual permits. And when my agency 
has been given the opportunity to sit down with the EPA and 
address individual permits, we have been able to identify and 
explain where the misperceptions occurred, where the permit 
authorizations were indeed correct. And to this day, I'm 
unaware of any permit that has been discovered where our 
flexible permit program led to the exceedance of the Federal 
requirements.
    I think that's critical because we have indicated, I have 
multiple times, that I stand ready to stand with the EPA to 
identify a flexible permit when our program allows that 
facility to then operate to exceed Federal requirements. And, 
in fact, both the State, Federal laws as well as the State 
regulations prohibit flexible permit holders from circumventing 
Federal permit review to know where if the permit holders were 
to try to use that permitting program to get around the 
requirements of the Federal Government, the Federal emission 
laws, we would have enforcement action and it would potentially 
render that permit null and void.
    And, so, we had this process where these letters were 
exchanged over the years; and certainly it was 
miscommunication. And if we tried to address those off and on, 
we had occasional bouts of success and failure with regard to 
communicating that to the EPA. And the lawsuit that was 
mentioned previously where EPA was forced to go to the Federal 
Register with their perceived deficiencies in the program 
happened in 2009 and the final disapproval came in 2010. That 
forced the EPA to lay out what the perceived deficiencies of 
the program were.
    This was actually a relief for me because it allowed us to 
finally have EPA put into a legal context those concerns that 
they had with our program. And we were able to then take those 
concerns and explain how they were misconceptions. We did make 
some changes in an agreed rulemaking process with the EPA, an 
expedited process, to address and clarify concerns they had 
with the program. Unfortunately, the EPA has yet to consider 
those rule changes we made that only worked to clarify why our 
program does indeed meet Federal requirements. And, instead, 
they went ahead and disapproved our program without considering 
those changes that we need to address and clarify, concerns 
they had with the program.
    With regard to the path forward, we believe that our 
program has led to environmental enhances and the program was 
developed and it also is one of the concerns I have is that as 
we move away from the flex permit program, we've had several 
unintended consequences. Among those are environmental benefits 
that we had because of the way this program was set up which 
will be lost if we allow companies to overcontrol facilities 
located near grandfathered facilities, for example, and we've 
got additional reductions from that and if we start 
underflexing it, if you will, your options are--in many cases 
my concern is to either increase those emissions or to shut 
some of those facilities down.
    We have a number of facilities that are in the process of 
deflexing through the State. And I'm concerned that we may see 
the impact of that as we move forward. But we stand committed 
to allowing them to take advantage of the permitting tools we 
have and work with the EPA for a path forward. Hopefully, we 
can retain as much of the environmental benefit and economic 
development aspects of the flexible permit program as we move 
forward as possible.
    Thank you, sir.
    [The prepared statement of Mr. Shaw follows:]



    Mr. Whitfield. Well, thank you very much for your 
testimony.
    And I was just reading a sentence from Ms. McCarthy's 
testimony. She is the administrator for the EPA on air quality, 
and she'll be testifying later today. But in her testimony she 
said, ``Texas has been a part of the Clean Air Act success. For 
example, in 2000 the number of bad air days in Houston exceeded 
those in Los Angeles. Today Houston's ozone levels have 
decreased so that the area is currently meeting the 1997 ozone 
air quality standards.''
    So, one of the perplexing things about the flex permit 
issue is that it does appear that the flex permit worked well 
for Texas and did--as a result of that, Texas was able to meet 
the ambient air quality standards and did very well. I mean, 
would you agree with that, Mr. Shaw?
    Mr. Shaw. Yes, I would agree that the flex permit is one of 
those tools in our toolbox that has helped to obtain hundred of 
thousands of tons of reduced emissions based on what staff has 
reported to me. And, certainly, it's been one of those tools 
that has helped to incentivise companies to make voluntary 
reductions, which I will submit is one of the best ways we can 
move forward with environmental enhancement, to have 
regulations that offer to incentivise companies to move forward 
on their own, to develop better technologies.
    Mr. Whitfield. And, you know, one thing about the Clean Air 
Act, it is so complex and there are so many aspects to it that 
any way that you can simplify it and still meet the goal, seems 
to me to be an advantage.
    And on the Tailoring Rule, for a minute--we'll switch from 
there over to the greenhouse gas for just a minute. I know the 
EPA has been sued for their Tailoring regulation and my 
recollection is the Tailoring regulations would give the EPA 
authority to regulate any greenhouse gas emissions above 
100,000 tons per year. And as the law says, the Clean Air Act, 
itself, says anything above 150 or 250, depending on what it 
is. So, there's no question that the clear language is that the 
EPA violated the Clean Air Act and State of Texas did not sue 
them on the Tailoring Rule.
    Did you or didn't you?
    Mr. Abbott. We did.
    Mr. Whitfield. And environmental groups have also sued them 
on that. And--is that correct?
    Mr. Abbott. I'm not sure if they have done so yet. We 
anticipate those lawsuits coming, if they haven't been filed 
yet.
    Mr. Whitfield. Well, my understanding's that there was, but 
I maybe should be corrected on that.
    Mr. Abbott. I can't confirm it or deny it right now.
    Mr. Whitfield. But I do remember when Ms. Jackson--Lisa 
Jackson, the administrator of the EPA, appeared before our 
committee. She was asked a question back on the greenhouse gas 
issue, with--will your regulations be effective in reducing 
greenhouse gases. And she said it would be negligible because 
unless other countries are willing to take the same stand that 
we do in America, it's in the stratosphere, it's very difficult 
to control. And there's been a lot of discussion today about 
China. So, we know that China is relying more and more and more 
on coal. And, so, the whole issue here that bothers a lot of us 
is the ability of America to remain competitive in the global 
marketplace.
    But--but on this--back to the flex permits, just a minute, 
Mr. Shaw. Am I correct that you set an overall limit of 
emissions; and as long as you fall within that limit, then 
you're in compliance. Is that--is that true?
    Mr. Shaw. That's correct. And it's actually more complex 
than that. We actually require those companies to do what we 
call ``worst case modeling'' in order to prove that if that 
facility operates with that flexibility under that cap, if you 
will, under the worst-case scenario, the worst emissions and 
the worst location in that facility, that it will be protective 
of the health and environment off-site. And, so, it actually 
means that facility is going to be operating safer in normal 
operating mode because they have to model the worst-case 
scenario. So, yes, they do have to stay under that.
    There are rumors that they can, then, spew the evil things 
over the fence line. That's not correct. They have to upfront 
model and improve under the worst-case operating errors to 
ensure they meet the standards.
    Mr. Whitfield. And over the 16 years that we've been 
issuing these, it's my understanding you've issued over 120 
permits and that EPA never expressed any opposition at the 
time; is that correct?
    Mr. Shaw. Well, there have been those letters we've talked 
about. I think it's maybe 140. We can confirm the total number. 
But there has been a hot-and-cold relationship. The EPA has 
expressed concerns; we've addressed them in--on a--case by 
case. And, in fact, in one facility the region administrator 
was at a ribbon cutting and held his program up as innovative 
and what should be taken back to the EPA in DC and be spread 
across the United States as the type of program that we ought 
to be having for combating environmental challenges.
    Mr. Whitfield. I might just add, on the Tailoring Rule, Mr. 
Abbott, that when we know that it strictly violates the letter 
of law but the EPA--the officials at the EPA will tell you that 
the doctrine they use to give them the authority to change it 
administratively debate that they want to prevent an absurd 
result. And the absurd result is that they do not have the 
manpower, the money, or anything else to issue all the permits 
and do anything everything they would be required to do if they 
do not have the Tailoring Rule.
    Mr. Abbott. Right. And we don't believe the so-called 
``Absurd Results Doctrine'' is going to hold up in court. What 
is absurd is that a regulatory agency can come in and have 
unelected bureaucrats rewrite a law that the United States 
Congress wrote. We don't think the court will uphold that 
rewriting of a law by a Federal agency.
    Mr. Whitfield. Thank you.
    Mr. Green, you're recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Shaw, how long have you been the chair of the TCEQ?
    Mr. Shaw. Since September of 2009.
    Mr. Green. OK. And you know the letters we put in the 
record. There has been an exchange of letters in the last 7 
years, even back to President Clinton when the flex permits 
were started in '94, I think. And they're--they--TCEQ has 
worked out those differences between those administrations 
since 1990.
    Mr. Shaw. We had worked on regular basis, but I would say 
that while we attempted to bring those to a point where we 
thought the EPA would then approve the permit program, it's 
sort of getting put on the back burner historically and then 
maybe a couple years later there will be another letter. And, 
so, it was--and interestingly, those same concerns in those 
letters were finally in the Federal Register in 2009.
    Mr. Green. And I guess this didn't happen in January of 
2009. Those letters were far back and there's always been a 
relationship between the EPA and the TCEQ. Sometimes it's good 
and sometimes it's not so good.
    Mr. Shaw. I think I described it as ``hot and cold'' on 
this issue, sir.
    Mr. Green. Yes. I understand how Federal agencies work. 
Sometimes another fire picks up somewhere else and they get on 
that, not unlike a lawyer having one file and going to another 
one.
    So, we heard that TCEQ is at an impasse on this deal coming 
to a mutually agreeable resolution on deflexing the Texas 
permits. And I understand the concern, I think is--and correct 
me--that EPA needs to look back to ensure there are no Title V 
violations on the SIP cap.
    Are you still in negotiations with EPA or--and I know the 
lawsuit has been filed; but, you know, frankly, I've been told 
that because the lawsuit's filed, there's no new negotiations. 
Frankly, I thought that was when most attorneys negotiated.
    Mr. Shaw. We certainly stand ready to have additional 
discussions. And the key thing is there's really not a lot of 
fertile area for negotiations. I stand ready, but what has 
happened instead, Congressman, is that most facilities because 
of the uncertainty associated with the EPA's denial of the 
program and the threats that they want, I believe I've been 
told that I can't know specific permitting issues because of ex 
parte prohibitions under the Texas statutes. But I've been told 
that those permit holders have all indicated to the EPA that 
they would agree to get into more conventional permits. And, 
so, we have a number of them that I suppose are in-house going 
through and converting from flexible permits to a conventional 
permitting program.
    And my concern is are we going to have negative 
environmental components of that? That's sort of the path 
forward at this point is companies are availing themselves of 
an opportunity to get permits with more certainty.
    Mr. Green. Are you hearing from individual companies on the 
problems they're having deflexing their permits?
    Mr. Shaw. I can't hear those because that would officially 
be an ex parte prohibition. So, I'm not trying to avoid your 
question, but I--my staff may be hearing those, but I cannot.
    Mr. Green. I know we have a saying here, ``if it ain't 
broke, don't fix it.'' And Texas air quality has improved and 
Ms. McCarthy, who will be here later, will testify to that. 
Having represented a lot of these industries that achieved that 
reduction over a period of time and I congratulate them on 
that. My understanding is that the EPA does not contest that 
emissions have gone down, but rather they can't specifically 
tie the use of flex permits to this reduction.
    Is that your understanding?
    Mr. Shaw. My staff--and, again, it makes it somewhat 
difficult for me to look at individual permits. But when I've 
asked staff specifically that question, my staff has identified 
technologies that were developed through this flexible permit 
program because it incentivized developing new technology to 
overcontrol new facilities. That incentivized those companies 
and I understand that some of those areas are in the cat 
cracker unit. To reduce emissions, I suspect, if not, that 
those have then led to nominal reductions in those flexible 
permits holders but also led to reducing the control standard 
or the threshold for other permit areas in Texas and across the 
U.S. So, it incentivized development of greater technology for 
pollution reduction.
    Mr. Green. You may know this because I know we'll hear it 
later from the EPA. The number of flex permits that have been 
issued in Texas compared to our neighboring States, that I 
understood in discussions with the EPA, part of the problem is 
that other States are saying why can't we do this when Texas is 
doing hundreds, and I don't have any problem with that; but 
obviously some of the 48 States or 49 States may.
    Mr. Shaw. I haven't heard that complaint from other States. 
I know that there are a handful of other States that do have 
somewhat similar programs, and some--including, I believe 
Virginia and Florida have had EPA approve those fairly 
recently. They do have a similar flexible permit type. They 
call it something different, obviously. But it's similar to the 
Project XL that I mentioned in my opening remarks. So, there 
are other States that do have similar programs that EPA 
apparently hasn't taken issue with yet.
    Mr. Green. But Texas took advantage of it, and I don't 
fault that, in the '90s. You gave us some rules that we abided 
by to the best we could. But it seems like you give the numbers 
from other States that are very small compared to ours, but 
we'll get to that testimony later.
    Attorney General, again welcome. Welcome home.
    Mr. Abbott. Great to be back.
    Mr. Green. You appeared before our committee in Washington 
a few weeks ago, and your testimony states that Congress in 
effect they should decide on regulating carbon dioxide 
emissions; and, believe me, I agree with that. It should be a 
congressional responsibility.
    And I strongly agree with you. That's why I supported 
delaying regulations. Given Texas' opposition and EPA's 
approach to this issue, I'm curious, what type of Federal 
carbon-controlling program could Texas support?
    Mr. Abbott. Well, you know, my perspective comes from the 
legal perspective. And that's really a policy-laden question 
that I would have to defer to the policymakers.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. Barton, you are recognized for 5 
minutes.
    Mr. Barton. Thank you. Thank you, Mr. Chairman.
    Each of you gentlemen is an official of the State of Texas 
and as such have been elected by the people with the exception 
of Mr. Shaw, who is appointed by the Governor and I think 
confirmed by the Senate. But each of you do take an oath to 
defend and uphold the laws of the State of Texas but you also 
take an oath to defend and uphold the laws of the United 
States; is that not correct?
    Mr. Shaw. Yes, sir.
    Mr. Abbott. Yes, sir.
    Mr. Barton. So, there's not any of you that's here to say 
``Let's just do what's good for Texas and don't worry about the 
laws of the United States?'' I mean, we're all--we want to 
defend the laws at both the State level and the Federal level; 
is that not correct?
    Mr. Abbott. That's correct, sir.
    Mr. Shaw. Correct.
    Mr. Barton. Now, Mr. Shaw, I'm going to ask you, as the 
chief regulator for environmental protection, the chairman of 
the Texas Commission on Environmental Quality, is it your 
understanding that the reason the Flexible Air Quality 
permitting program was disavowed by the Federal government--was 
it disavowed on its own merits, that it wasn't effective, or 
was it disavowed because the State refused to submit a State 
Implementation Plan incorporating the greenhouse gases into its 
existing air programs?
    Mr. Shaw. The flexible permit program was disapproved 
theoretically because of concerns of it having deficiencies to 
meet Federal programs. Although, interestingly, what the EPA 
went forward with in the Federal Register was addressed both 
verbally with officials in the EPA and especially with the 
regional administrator. And when we addressed that those were 
incorrect, the discussion moved from it fails to meet those 
requirements to we don't want to have Federal flexible permit 
programs. That's separate from the greenhouse gases----
    Mr. Barton. Well, it's an important distinction. My 
understanding at the time was that the Federal--the EPA was 
disavowing our flexible air permits because of--of defects in 
that as a stand-alone program. Not because the State was 
refusing to submit greenhouse gas regulations to comply with 
the endangerment findings. So, that you've got two separate 
issues. You're looking at air quality and flexible permitting 
of existing permits in one box and then the whole debate that 
the Attorney General has educated us on is whether the Federal 
Government has the right to basically make law on its own by 
proposing these Tailoring Rules and all of that. So, it's two 
issues.
    Mr. Shaw. Correct.
    Mr. Barton. It's not one that's linked. They didn't--they 
didn't refuse or reject our air permits under flexible air 
permitting program because of controversy on greenhouse?
    Mr. Shaw. That's correct.
    Mr. Abbott. I agree.
    Mr. Barton. And Commissioner Staples, you agree?
    Mr. Staples. Yes.
    Mr. Barton. Now, having said that, did they--did the EPA 
allege specific permits that were not in compliance? Did they 
say the permit for Dow Chemical was not in compliance or did 
they say the--generically the ambient air quality standard for 
ozone in the North Texas region is deteriorating because your 
flex permitting systems are not working?
    Mr. Shaw. Yes. Their objections to these programs were 
based on our not having the same program that they have. The 
differences they perceived in theirs, but not on an individual 
failure to meet the ozone requirements that were individual 
permits. They did later take issues with individual permits. 
But in the Federal Register announcement, clearly it was based 
on those perceived initiatives. The program didn't do----
    Mr. Whitfield. So, the letter that Mr. Green or Mr. 
Gonzalez put in the record where EPA officials have had some 
problems with their flex permitting, those letters don't allude 
to a specific substantive difference. They basically refer to 
how to implement a particular permit or something like that.
    Mr. Shaw. Right. And--and to that end, when they have 
identified individual permits they thought they had concerns 
with, when we were able to sit down with them, we were able to 
explain where those were misunderstandings were.
    Mr. Whitfield. Now, Mr. Attorney General, I've got a 
document--a sworn affidavit that Ms. McCarthy put in the court 
record in one of the lawsuits that you're defending the State 
on. It's dated October the 28th, 2010.
    Have you seen that affidavit?
    Mr. Abbott. Personally, I have not. I am aware of it 
because it is a part of--frankly it was a part of the testimony 
that was provided----
    Mr. Barton. Is my time expired, Mr. Chairman?
    Mr. Whitfield. No. Go ahead.
    Mr. Barton. In that--that's a sworn affidavit and in that 
affidavit, at the end of the affidavit, she says that not only 
with regard to Texas, but I think with regard to any State, the 
EPA is not going to--to use a slang term--FIP a State program. 
In other words, they're not going to take over for a State if 
you don't have a State Implementation Plan that the EPA has 
agreed meets all the requirements under the Clean Air Act and 
their new greenhouse gas regulations. Isn't that true?
    Mr. Abbott. That's true, and it is part of our lawsuit--
part of our FIP lawsuit in explaining to the Court why we think 
that the EPA has acted illegally and improperly. And----
    Mr. Barton. And her sworn statement was that they weren't 
going to do anything for at least a year.
    Mr. Abbott. Her sworn statement was they were not going to 
do anything. They could not take over Texas' Air Permitting 
program, quote, until December 2nd, 2011, at the earliest. 
That, of course, is about eight months.
    Mr. Barton. And how many days later did they do just that?
    Mr. Abbott. It was--that was in October and it was about 
two months later where they issued an emergency FIP rule on 
December 23rd. The reason why I point that out is because it 
was done right before the Christmas/New Year's holiday. And----
    Mr. Barton. So, in October she says you've got at least a 
year and then two months later they do exactly opposite what 
she said they would do?
    Mr. Abbott. Under the cover of darkness. I don't----
    Mr. Barton. My time has expired, but we'll come back to it.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. Gonzalez, you're recognized for 5 
minutes.
    Mr. Gonzalez. Thank you, Mr. Chairman.
    Mr. Shaw, first of all, thank you for service and thank you 
for coming to Washington and meeting with us. You've always 
been incredibly informed and it's helped us, again, come to 
where we are today, trying to understand who [inaudible].
    Who is Dan Eder?
    Mr. Shaw. Dan Eder is a former employee of the agency TCEQ.
    Mr. Gonzalez. And the reason is we're going over the 
history and correspondence between your agency and the EPA--and 
there's numerous letters that have been introduced today--but 
there is a letter back in March 12th, 2008, and that's the date 
that I have here that's on it. And in it Congress meets Carl 
Edlund, director of Multi-Media Planning and Permitting 
Division of the EPA, does write a letter to Mr. Eaton and the 
reason that I want to read this to you is that you referred to 
the fact that other States have some sort of flex permitting 
protocols and you didn't indicate whether they're substantially 
different than the State of Texas. There may be a reason why 
EPA may be looking at Texas differently than other States. I 
think that may be the composition.
    Let me ask you if this still holds true, because in Mr. 
Edlund's letter, there's an enclosure. And it says unlike 
flexible permit programs in other States, the Texas Flexible 
Permit program is not limited to minor sources.
    Can you clarify? Is that a distinction? Are those others--
those other flex permit programs in other States different in 
that respect?
    Mr. Shaw. That is one of those--the reason--there was 
probably a lot of frustration because it was only in the last 
year and a half that EPA was made to realize that their 
perception that our program applied to major NSR was incorrect. 
In other words, our flexible permitting does not apply to major 
sources of NSR----
    Mr. Whitfield. So, that would be incorrect; and, in fact, 
in March 2008----
    Mr. Shaw. EPA was--was confused about our program. And it 
applied to major NSR [inaudible] where people specifically 
prohibit companies from circumventing major New Source Review. 
And that's one of the things that we were able to clarify then 
whenever EPA clearly explained----
    Mr. Gonzalez. To their satisfaction? Let me ask you that 
because I'm not in your position. I--you say you've explained 
it. I'm just wondering did they communicate that is a fair, 
complete, and acceptable explanation?
    Mr. Shaw. Not in writing, but we had several meetings. And 
this is important because we had a meeting where we talked 
about each of those individual items and it seemed that the 
consensus within the room was ``we now understand this.'' And I 
made the comment, to paraphrase, was not that we've addressed 
that these perceptions or the perceived failures of our program 
have been addressed, can we now move with how we can move forth 
to get this permit program approved. And the discussion moved 
to we are not interested in having the flex permit program 
fixed. So, that was our concerns. We had those issues that were 
legitimate----
    Mr. Gonzalez. Well, I mean----
    Mr. Shaw. And I think----
    Mr. Gonzalez. And that when you get that kind of an 
admission on a major issue, that it simplify would inquire and 
request something in writing from them. OK. And simply to 
recite it in letter and transpire it our discussion, that is 
our understanding, if we don't hear from you, we will assume 
that we are correct in our interpretation.
    But my question is, I think we're going to go round and 
round on these issues because your perception of things and 
their perception of things are different. And that's something 
that we just--I only have 5 minutes here.
    I'm going to go to General Abbott. It's good seeing you 
again. I must say it's been a lot more fun than our previous 
encounters, but it is good to see you, sir.
    Let me ask you a couple of questions about the lawsuit--or 
lawsuits. And this is from a memorandum that was prepared by 
the staff. In the 2007 decision, Massachusetts v. EPA, the 
Supreme Court held that greenhouse gases, including carbon 
dioxide are air pollutants under the Clean Air Act. Is that 
accurate?
    Mr. Abbott. Yes, sir.
    Mr. Gonzalez. And, so, that means that EPA would be the 
regulatory agency that would have jurisdiction regarding 
certain policies enforcing, regulating and such pollutants 
including greenhouse gases. Is that fair?
    Mr. Abbott. The jurisdictional component of your questions 
would be correct, that the issue does require a tiny bit of 
lead which it sounds like you may be getting to, before they 
can go ahead and begin that process of the regulation, they 
must have arrived at the endangerment finding. So, there's a 
predicate or a threshold that must be satisfied. And that's 
exactly what the Supreme Court said, that their decision was. 
Now, EPA, you can no longer avoid making the decision about 
whether or not there is an endangerment posed by greenhouse 
gases. You have to go ahead and make that decision and then if 
you make that decision, there's several other predicates that 
must be satisfied before they can begin the process of doing 
the regulation.
    Mr. Gonzalez. Fundamentally, then, I think you have an 
argument that they have not met certain preconditions and such 
requirements.
    Mr. Abbott. That would be one umbrella, if you would. There 
are several key points under that one umbrella or silo, but, 
yes, that would be one.
    Mr. Gonzalez. Mr. Chairman, if you'll allow me one last 
question because it is the Attorney General, and I'm going to 
read one paragraph from the memorandum.
    Once greenhouse gas became subject to regulation and the 
EPA issued the Tailoring Rule, State PESE permitting 
authorities needed to ensure that they had adequate authority 
to issue key PESE permits for greenhouse gases and that State 
permitting requirements would not be triggered and so on.
    Only Texas failed to take the necessary action. The 
chairman on the Texas Commission on Environmental Quality and 
the Texas Attorney General wrote to the EPA on August 2nd, 
2010, saying, quote, on behalf of the State of Texas we write 
to inform you that Texas has neither the authority nor the 
intention of usurping, ignoring, or amending each clause in 
order to compel the permitting of greenhouse gas emissions.
    Is it an issue of greenhouse gas emissions more than 
anything else, as Mr. Barton has already pointed out that may 
be a two-prong issue going on here.
    Is that statement that I just read to you about the 
intentions or the authority of Texas to do anything regarding 
permitting of greenhouse gas emissions something that is going 
to remain in place even if the EPA went through the three 
conditions that you have already outlined?
    Mr. Abbott. Well, a couple of things. The point of your 
question seems like it asks about the permitting process, and 
I'm not in charge of that. I would have to defer to Chairman 
Shaw about that. On the legal side, it is our contention and 
my--my position, unless I'm instructed otherwise by my client 
or other clients in the State of Texas, to press on with our 
lawsuit about greenhouse gases because of multiple reasons.
    The--we--we live under the rule of law. And the EPA has 
clearly violated the rule of law by failing and refusing to 
follow the Clean Air Act, by failing and refusing to follow the 
APA as well as other laws. And we--we believe that the 
regulations that they have come up with for greenhouse gases 
are completely noncompliant with the laws passed by the United 
States Congress. And, also, I will submit that--I'm sorry.
    Mr. Whitfield. No. Go ahead.
    Mr. Abbott. I submit, also, that what the EPA is doing is 
inconsistent with the Massachusetts v. the EPA decision upon 
which they claim provides them the authority to do this.
    Mr. Gonzalez. Thank you very much.
    Mr. Barton. Mr. Chairman, could I ask a follow-up 
question----
    Mr. Whitfield. Sure.
    Mr. Barton [continuing]. Since we were--yes. You're being 
very generous in allowing both sides more than 5 minutes.
    Your contention as the official legal representative of the 
State of Texas representing the Texas Council on Environmental 
Quality is that the EPA is violating the law because they're 
clearly ignoring the plain statutory language of the Clean Air 
Act and that any source that emits at least 100 tons per year 
is subject to the Act.
    Mr. Abbott. That's one of the things. That's--that's the 
Tailoring Rule.
    Mr. Barton. And my understanding is that the Tailoring Rule 
is exempting massive facilities from that requirement and I 
could speculate, but I don't won't do it, but--but that's one 
of the contentions of the lawsuit is that the EPA is not a 
legislative body and they're clearly legislating by exempting 
under the Clean Air Act large numbers of facilities, that 
according to the clear language, should be subject to the law.
    Mr. Abbott. Well, it--it creates that level of uncertainty 
because what they--the impression that we have is they have 
created this one level for now and they are going to be 
lowering that threshold later and when they lower that 
threshold later, it will begin to get into farms, ranches, 
hospitals, schools.
    But here's the key point, if I could bring this back to the 
one case that authorized and categorized the EPA to begin this 
in the first place, and that is the Massachusetts v. the EPA. 
And here's the key deal: What they said is if--if I could read 
one sentence to you from this opinion.
    If EPA makes a finding of endangerment, the Clean Air Act 
requires the agency to regulate emissions of the deleterious 
pollutants from new motor vehicles. I could repeat sentences 
like that in here. I don't have time; but the bottom line, this 
applies to new motor vehicles. It doesn't apply to stationary 
sources like what they're using the Tailoring Rule to try to 
apply to.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. Staples, I've been told that you have a 
previous appointment. Do you need to leave now or----
    Mr. Staples. [Inaudible.] A few more minutes----
    [Simultaneously speaking.]
    Mr. Whitfield. OK. All right. Mr. Brady is recognized for 5 
minutes.
    Mr. Brady. Thank you. I'll be [inaudible].
    Mr. Whitfield, Chairman, thank you for hosting this and 
coming to Houston.
    Mr. Whitfield. Very much appreciated.
    Mr. Brady. Ranking Member, to you, as well.
    A quick question to [inaudible] Commissioner Staples and 
the Attorney General. You testified that the Federal Government 
violated regulations and timetables regarding our State 
Implementation Plan. Are States allowed to ignore and violate 
Federal regulations and timetables in this regard?
    Mr. Abbott. Not that I'm aware of.
    Mr. Brady. What happens when we do?
    Mr. Abbott. We get sued.
    Mr. Brady. I thought it might be appropriate for you to 
respond to, as well [inaudible].
    Commissioner Staples, thank you for your leadership, too. 
You, as well, Commissioner.
    Energy is a big part of the Texas economy, but agriculture. 
As you [inaudible] before--we are very good at selling our ag 
products around the world and reaping the benefits with jobs as 
a result of that. If these greenhouse mandates piled a half a 
billion dollars or more on our Texas ag producers, does that 
make us less competitive? And what's the impact if they drive 
the prices up when we're competing around the world?
    Mr. Staples. Agriculture becomes extremely dependent on 
energy for its production. In fact, it's about 15 percent of 
the production costs, alone, for fuel and fertilizer and 
chemicals and utilities. And each and every day we compete with 
Countries that have lower labor standards than we do, lower 
environmental standards than we do. And we're having and seeing 
and dealing with this Environmental Protection Agency 
regulating us away from market-based solutions. And that's a 
concern and impact on jobs and food security.
    Mr. Brady. So, we lose sales and it drives up the prices at 
the dinner table because we lose sales, as well, for our 
local----
    Mr. Staples. Lose sales and lose the associated jobs with 
that and the domestically-based food sources that Americans 
have come to rely upon.
    Mr. Brady. Thank you for testifying on this issue. I 
appreciate it.
    Chairman Shaw, Texas has outperformed the rest of the 
country in reducing ozone and NOx emissions. That's correct?
    Mr. Shaw. That's correct.
    Mr. Brady. I get the impression from the EPA that we've 
literally done nothing to really make that happen. And one 
question is how much has Texas spent over the years to make our 
air cleaner? Is it a couple thousand dollars or----
    Mr. Shaw. No, Congressman. It's a fairly large expenditure. 
The agency that I chair typically has about a billion-dollar 
biannual budget. So, about $500 billion per year is spent in 
the various aspects of what we do. Perhaps, more importantly, 
if you look at these challenges that dictate fate meeting the 
ozone in our metropolitan areas, one of the big concerns and 
challenges have been that largely local sources are responsible 
to the tune of about 60 percent of ozone count being Dallas-
Fort Worth and Houston are mobile sources which we are pre-
empted from regulating because they are Federally regulated 
sources. That indicates legislature has appropriated and we've 
spent almost a billion dollars over the last 5 to 10 years in 
enhancing and speeding up [inaudible] over a motor vehicle to 
get those reductions. And that's just one of the many areas of 
expenditures. So, it has been a great investment that's taken 
seriously. And we're seeing the fruits of that investment.
    Mr. Brady. So, Texans have spent billions of dollars----
    Mr. Shaw. Yes.
    Mr. Brady [continuing]. To make our air cleaner and 
businesses have invested, as well, over the last decade; and 
yet the EPA is imposing and seizing our permits. Is that right?
    Mr. Shaw. That's correct.
    Mr. Brady. Thank you, Mr. Chairman.
    Mr. Green. Mr. Chairman, could I just--Attorney General, 
far be it from us to say you can't go to the courthouse since 
we're sitting at the South Texas College of Law. All right.
    Mr. Whitfield. Thank you, Mr. Brady. And I want to thank 
the first panel. We appreciate your being with us and answering 
our questions.
    Mr. Barton. Could I ask one question to the Ag 
Commissioner?
    Mr. Whitfield. Yes, sir.
    Mr. Barton. Mr. Commissioner, under the--under the--if 
greenhouse gas regulations were to be implemented and you did 
not have a Tailoring Rule, how much of Texas agriculture would 
be subject to the Clean Air Act?
    Mr. Staples. Let us thank you, the Congress, for exempting 
us. Even though the rules say that we would be and you have 
made certain that the appropriations process does not impact 
that directly; but if we were, just--we'd have 575 dairy 
facilities, 58 swine operations, 1300 corn farmers, and 28,000 
cattle ranchers would fall under this permitting and reporting 
process. And we're very concerned about that as it moves 
forward. We're particularly concerned about the impact on our 
energy costs today that we're so heavily intensive users of.
    Mr. Barton. And is there any truth to the rumor that, 
again, if greenhouse gas regulations were imposed on Texas 
agriculture, that animal emissions would be mobile source 
emissions under the Act?
    Mr. Staples. We have seen many different scenarios that are 
extremely troubling and we do support policies such as cat 3 
methane from our animal facilities, carbon sequestration. There 
are many things that we can do and want to do and are doing to 
help address this in a market-based program.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Whitfield. Well, if this Tailoring act is ruled 
invalid, you will come under it and the only way that would be 
able to be stopped would be to change the law or stop 
appropriations in some way.
    Mr. Staples. That's absolutely right, Mr. Chairman.
    Mr. Whitfield. Well, thank you all very much. And we look 
forward to continuing to work with you.
    Mr. Whitfield. At this time I'd like to call up the second 
panel. And on the second panel, we have Mr. James Griffin, who 
is plant manager of Dianal America and he's also chairman of 
the board of the East Harris County Manufacturers Association. 
We also have Mr. James Marston, who is of the Environmental 
Defense Fund, from Austin, Texas. And we have Ms. Kathleen 
Hartnett White, Director of the Armstrong Center, Texas Public 
Policy Foundation. So, I want to welcome all of you. We 
appreciate you being with us this morning very much.
    Well, once again, thank you all for joining us this morning 
and we do look forward to your testimony. And at this time, Mr. 
Griffin, we'll recognize you for your opening statements; and 
you'll be recognized for 5 minutes and the light there will 
denote where we are in the process. Thank you.
    So, if you would like to proceed.

  STATEMENTS OF JAMES GRIFFIN, PLANT MANAGER, DIANAL AMERICA; 
    JAMES MARSTON, ENVIRONMENTAL DEFENSE FUND; AND KATHLEEN 
HARTNETT WHITE, DIRECTOR, ARMSTRONG CENTER, TEXAS PUBLIC POLICY 
                           FOUNDATION

                   STATEMENT OF JAMES GRIFFIN

    Mr. Griffin. Well, Mr. Chairman, and local Congressman Gene 
Green and all the Representatives from Congress, welcome to 
Houston, Texas, on this beautiful day in spring; and we just 
appreciate you hearing from the constituents regarding the 
important issues on greenhouse gas.
    As you know, Houston is a global leader in energy and 
almost 50 percent of all the petrochemicals in the United 
States are right here in Houston. As we sit here in the shadows 
of these refineries and petrochemical plants, I want you to 
rest assured that we're in full compliance with the Clean Air 
Act and our skies are bluer and we continue to improve in 
emissions.
    The industry has worked very hard on this and over the 
years, working with the Texas Commission of Environmental 
Quality, we've continued to reduce these emissions and achieve 
compliance of with the Clean Air Act. And, of course, that's 
delegated with the authorities of the EPA.
    Again, my name is Jim Griffin, and I'm the chairman of the 
East Harris County Manufacturers, called ``EHCMA.'' And I'm one 
of your local plant managers. I've been in the industry for 30 
years.
    The East Harris County Manufacturers, EHCMA, is an 
organization of 120 manufacturing facilities, made up of 
refineries and petrochemical plants. We have 300,000 jobs here 
in East Harris County. 300,000 good jobs, scientists, 
engineers, skilled labor. The products that we make range from 
products that go into healthcare. Of course, chemicals for 
pharmaceuticals; ag chemicals, which we talked about earlier; 
and, of course, the fuel that brought you in on your plane 
today and fueled your car; also the plastics that make car more 
energy-efficient and that plane more environmentally-friendly.
    We do support regulations that are based on sound science 
and result in healthful air quality for our region. We've 
invested billion of dollars towards meeting regulations that 
reduce the ozone in the Houston area, leading to the 
unprecedented 2 years running of measured attainment with the 
EPA's air quality standard in ozone. And we're very proud of 
this accomplishment. Yet when it comes to greenhouse gas, we 
believe that the EPA is heading completely in the wrong 
direction.
    EHCMA members fully expect that implementing greenhouse gas 
regulations as planned and designed by the U.S. EPA will result 
in closures of manufacturing facilities here in Texas and 
across the United States. We already have a struggling economy 
and this will do us further harm.
    EHCMA fully supports action by Congress to strip EPA of any 
authority to regulate greenhouse gases. Overly burdensome and 
uncertain U.S. regulations which drive U.S. industry to 
developing countries with less or no regulations will likely 
increase greenhouse gas emissions.
    Last night I was at a community advisory panel. Once a 
month all the plant managers meet with the community and the 
community sets the agenda. Last month we covered air emissions. 
We do that every year. The trend is continue to improve. Last 
night's agenda was all about the economy and jobs and the 
importance of the industry to this community.
    EPA's greenhouse gas regulations require a convoluted 
regulatory path that is neither appropriate nor supported by 
EPA's authority. In order to move the program into play so 
quickly, EPA required individual States to develop State 
Implementation Plans in a fraction of the time required to 
develop these plans. The net result is 12 to 18 months for 
permits and high costs for permits, and it's unfortunate that 
Region VI is not represented here today because we met with 
senior officials, our committee, our environmental committee, 
our experts. And Region VI officials were unable to answer many 
questions that must be resolved in order to issue the very 
first Texas greenhouse gas permit.
    EHCMA urges members of Congress to work towards 
congressional legislation that fully strips EPA of any 
authority to regulate greenhouse gases unless and until 
Congress adopts new legislation structuring the policies and 
granting the authority to EPA.
    Prudent regulations must not only be based on sound science 
but also recognize the balance between clean air and a strong 
economy. Texas has proven we can do both. In my job as a plant 
manager, my boss is in Tokyo. I work for a global company. It's 
a very capital-intense business. When we make decisions on 
where to spend capital, we base that in big part due to 
regulations; and when regulations are burdensome and uncertain, 
we spend that capital in other geographic locations around 
world.
    So, again, thank you for allowing East Harris County 
Manufacturing to address the esteemed House and Energy 
Committee and we sure do appreciate you being in Houston.
    [The prepared statement of Mr. Griffin follows:]



    Mr. Whitfield. Thank you, Mr. Griffin.
    Mr. Marston, you're recognized for 5 minutes.

                   STATEMENT OF JAMES MARSTON

    Mr. Marston. Thank you. I'm Jim Marston. I'm the Regional 
Director of the Environmental Defense Fund and have been for 22 
years.
    In 1867 Mark Twain wrote, ``The most outrageous lies that 
can be invented will find believers, if a man only tells them 
with all his might.'' Sadly, I think this committee and many 
members of Congress have been told a bunch of Texas-sized 
whoppers by Texas officials. And my testimony is really to talk 
about the myths and the lies that have been permeating this 
debate. I'll talk about a couple of them in my oral testimony; 
and, certainly, will welcome questions on the rest.
    Let's start with the idea that this is somehow an Obama 
Administration vendetta against Texas. Since 1994 EPA has been 
saying the Texas flex program is illegal. It is a unique 
program. It's illegal, not like anything else in the country. 
And the Bush Administration in 2006 and 2008 wrote to TCEQ and 
said the program is illegal. And in 2007 said every one of the 
permit holders under the flex permits to tell them their permit 
was not legal. This is not new. There also is--and I will 
agree, the air quality has improved in Texas; and we're happy 
about that. But it did not improve because of the flex permits.
    In my testimony, I have six programs that are documented to 
improve the air quality in Texas. I'll be happy to talk about 
those in detail. But they're not the flex program.
    As proclaimed by Professor Shaw that the--the flex permit 
program improved our air quality reminds me of the rooster who 
believes that his crowing caused the sun to come up. The truth 
is that where we are on the flexible permit issue is really a 
much ado about nothing. Seventy-four companies had flex 
permits. Seventy-one of them have already come into EPA and 
said, ``We get it. We're fixing it. And we'll have a legal 
permit within a year.'' This is an issue that's now already 
passed. It's not an ongoing issue.
    And EPA is not also picking on Texas in regard to its 
greenhouse gas permits. The reason why we got sued, we were the 
only state that did not actually ask to get its permitting 
program in line. What we should have done is what Wyoming did. 
Start moving toward fixing our permit. If we didn't like it, 
sue like Wyoming. We got our permit program taken over because 
we did not file what other States did.
    Finally, let me talk just a bit about the science. 
Congressman Barton, you and I agree on a couple of things.
    Mr. Barton. Well, miracles do occur.
    Mr. Marston. You and I agree we need a college playoff 
system.
    Mr. Barton. Good.
    Mr. Marston. And we also agree that Texas A&M is a fine 
university. I'm a little confused----
    Mr. Barton. That's not debatable.
    Mr. Marston. I'm a little confused why we're here today and 
why you didn't take this committee and, frankly, Professor Shaw 
and the Attorney General down to A&M to the preeminent climate 
scientists there. And I wish you would ask them what their 
opinion is on the climate science. If you had--and they've just 
published this--they say we are all, the tenured and tenure 
tract faculty members of the atmospheric science program at 
Texas A&M University. We believe science is clear. Climate 
change is happening. It's caused mainly by humans. And if we 
don't act soon, we could have serious adverse impacts.
    I know the committee has already voted out this bill to 
strip EPA of the greenhouse gas authority. Before you actually 
go to the floor, I ask that--with that bill, I ask you all to 
go talk to the Aggie scientists. Please ask the Aggies about 
what role science plays. It's clear. And I know we think that 
this is the going to harm the Texas economy for claiming this. 
But there will be winners and losers in the greenhouse gas 
regulations. The States that are going to win are those who 
have large amounts of natural gas, a lot of wind and solar, 
have geologic formations that can handle carbon dioxide 
storage, where we use enhanced oil recovery, we have a good 
clean community, and where we have little energy deficiency 
investments.
    By the way, welcome to Texas. If we do it right, God has 
placed Texas in a perfect position to win under a low carbon 
economy.
    [The prepared statement of Mr. Marston follows:]



    
    Mr. Whitfield. Thank you, Mr. Marston.
    Ms. White, you're recognized for 5 minutes.

              STATEMENT OF KATHLEEN HARTNETT WHITE

    Ms. White. Thank you. I, also, would like to add I was 
chairman and commissioner of the Texas Commission on 
Environmental Quality for 6 years previously, and I've observed 
comments--my comments, in part, come from observing EPA actions 
over 25 years. And this is not business as usual.
    On March 4th an editorial in the Wall Street Journal 
referred to an--EPA's unprecedented regulatory spree. And I--I 
very much agree that I have never observed in the 40-year 
history of EPA what is going on now. Not merely issues like 
greenhouse gas regulations which get, appropriately, most of 
the headlines but the number of major rules now with billion-
dollar impacts at EPA's own estimate and not merely million-
dollar impacts, all of which have an effective date which may 
converge in the very near future, like 2012 to 2015. And part 
of the written testimony that I submitted has a time line, 
which shows the magnitude of these rules.
    So, I want to offer to this hearing something a little 
different, which, because of confines of time, will be very 
brief. It's highlights of 10 of these I call ``mega-major 
rules.'' And as an alarm bell that most people would view from 
a source which has no vested interest in the issue, the 
National Electric Reliability Council, NERC, on the basis of an 
analysis of only four of these rules, NERC concluded there's a 
risk of loss of up to 77 gigawatts of electricity in this 
country by 2015. Other studies, one done by Credit Suisse and 
others have found that those are actually conservative numbers 
and that perhaps 100 gigawatts of U.S. electricity could be 
lost.
    On the State level, for those NERC numbers means a risk of 
a loss of about 5700 megawatts of Texas electricity. This is a 
growing, growing State, our population and economically. ERCOT, 
Electric Reliability Outfit in Texas, projected this State 
needs up to 183,000 megawatts of electricity by 2020 to meet 
demand at that time. So, if--I think that it is fair to say 
from what most of you, as disinterested sources, the magnitude 
of impact of the EPA rules that are coming down the pike now is 
something we have never experienced.
    As many have said here before, I would also like to draw 
attention to the extraordinary record of economic improvement 
in Texas. This city, Houston, Texas, home of the Nation's 
petrochemical complex, with a Gulf climate that is--uniquely 
enhances ozone formation, did what almost no one would predict 
on the basis of what was really a statewide effort. Everybody 
worked, in my opinion. The State legislature, the Texas 
Commission on Environmental Quality, industry invested 
billions, State and local government, voluntary groups. It's 
really an extraordinary. The day when I was chairman that we 
finalized the plans for Dallas--in 2007 for Dallas and Houston, 
I believe it was no more than two weeks later EPA proposed a 
significant change in that standard. So, the goal post 
continually goes over.
    But for reasons of very little time, just let me go very 
quickly through the ten rules coming down the pike, either 
adopted, proposed, or amended. Of course, EPS's greenhouse gas 
regulation.
    The Clean Air Transport Rule, which in EPA's own estimate 
would cost about--the private sector about 7 billion.
    The Cooling Water Intake Structure Rule would impact about 
444 electric-generating plants. That's 30 percent of the 
national capacity, with potential costs of 64 billion. That 
rule would be to prevent fish ``impingement'' and has no real 
human health impact.
    The Coal Combustion and Residual Rule, affecting the units 
of disposal of fly ash, bottom ash, and residuals after coal 
combustion. The EPA has not decided whether they may classify 
those materials now used as valuable materials in road 
materials, in drywall, and other things. EPA may classify them 
as solid waste or either hazardous waste. The estimate on the 
cost of compliance if solid waste is 43 billion and if it's 
hazardous waste, perhaps 80 million.
    We proposed just last week what is called the ``Utility 
Maximum Achievable Control Technology Rule.'' It's probably the 
whopper of them all. A 900-page rule to control emissions of 
mercury and hazardous air pollutants have cost estimates of 
over 100 billion.
    The NERC report, that this risks perhaps 15 gigawatts of 
electric utilities.
    And then all the new ambient air quality standards. Never 
has EPA taken on changes in four of the national standards for 
four criteria pollutants: Ozone, PM, sulfur oxides, and 
nitrogen oxides.
    The ozone proposal would, pending and could be finalized at 
any time, according to congressional research service, would 
increase the number of non-attainment counties in the Nation 
from about--from currently about 85 to 650 of the approximately 
3,000 counties in the country. For Texas that might mean going 
to eight or twelve non-attainment counties, including Brewster 
County, Texas, which is about the most sparsely populated part 
of the country.
    I won't go into particulate matter but now, because of rule 
changes several years ago, actually country dust is not immune 
to control measures under a particulate standard. And the EPA 
has even mentioned that no-till days may be something that 
Texas farmers face in the future.
    Utility Boiler Rule, one of many of these rules that have 
the intense opposition from organized labor, the United Steel 
Workers, their numbers claim that rule risks 700,000 U.S. jobs.
    And then the Portland Cement Rule could have a remarkably 
broad impact. It impacted 165 of the 181 Portland Cement kilns. 
It was interesting to learn that we import now about 20 million 
tons of cement from--importing cement seems to be quite a 
challenge--but from China. And this rule has estimates of 
increasing that--that number to 50 million tons of imported 
cement.
    At this time of our struggling economy and high 
unemployment, I think it's really important that U.S. Congress 
really looks at the magnitude of all these rules, and what they 
mean. A kind of potential impact which has at EPA, I don't 
think has ever--could ever have had in the past.
    I think--and one quickly. Science is at the root of all 
this. And I think maybe everyone here that testifies wants 
good, rigorous sound science to ground our standards for 
environmental protection. I believe we need actually 
legislative reform to set really clear criteria to the science 
that EPA legally uses to base its standards.
    Thank you, sirs.
    [The prepared statement of Ms. White follows:]



    
    Mr. Whitfield. Thank you, Ms. White.
    And how long were you the chairman of Texas Commission on 
Environmental Quality?
    Ms. White. Yes. I was chairman for 4 years and the 
commissioner for 2 years.
    Mr. Whitfield. And did you deal with this issue on the 
flexible permits during your tenure?
    Ms. White. It never really came up in a sharp way. No. I 
remember--I remember the good news about it in the time--an era 
where there was far more easy cooperation with EPA. So, we----
    Mr. Whitfield. What were the years that you were the 
chairman?
    Ms. White. I was--2001 to 2007.
    Mr. Whitfield. And during that time, there was never a 
significant issue over this?
    Ms. White. I dealt with the regional administrator on a 
regular basis and there was never a time when this issue was 
ever raised----
    Mr. Whitfield. And did you feel that Texas' flexible permit 
program worked and accomplished----
    Ms. White. I did very much and I thought it was a way of 
actually getting more emission reductions from many of the 
facilities by using a very creative and targeted method that 
still allows them to vary it--vary production in parts of their 
unit, but ultimately to get more emission reductions.
    Mr. Whitfield. Now, Mr. Griffin, does your company have a 
flexible permit or----
    Mr. Griffin. No. We have an NSR, New Source Rule.
    Mr. Whitfield. OK. And you're in compliance, as far as you 
know?
    Mr. Griffin. Yes, we are. And I would comment on that and 
you heard Dr. Shaw talk about flexible permit as a tool. And I 
have operated at plants that had a flexible permit. We don't 
have it at the current plant that I have. It's single source; 
but, you know, the way I would look at it is if you had two 
stacks like this and they could total 20, it really doesn't 
matter if 18 is coming out of here and 2 out of here or 10 and 
10. It's a bubble over the plant and it gives that plant 
manager absolutely the skill to work with his engineering team 
and reduce the overall emissions.
    My particular plant, it isn't the tool for my plant. But, 
again, we have 130 petrochemical plants that are all a little 
bit different.
    Mr. Whitfield. Well, in preparation greenhouse gas emission 
regulations, does your company emit enough greenhouse gases 
that you would be over 100,000----
    Mr. Griffin. We would be below that level, sir.
    Mr. Whitfield. You----
    Mr. Griffin. My particular plant.
    Mr. Whitfield. OK. So, if the Tailoring Rule determined to 
be invalid, then you would be included at that point. And are 
you taking the steps now to address that issue?
    Mr. Griffin. No, I'm not.
    Mr. Whitfield. OK. Now, Mr. Marston, let me ask you a 
question. Did you support the EPA's Tailoring Rule?
    Mr. Marston. Yes.
    Mr. Whitfield. And do you think that it's a--that it will 
withstand court challenge?
    Mr. Marston. Yes.
    Mr. Whitfield. And you say that because why?
    Mr. Marston. Because the EPA has a lot of authority to 
interpret its own statute and the lawyer--the APA--or, first 
off, let's go to Massachusetts versus EPA.
    Mr. Whitfield. Well, no. I don't want to get into that. I 
just want to know about the Tailoring Rule.
    Mr. Marston. OK.
    Mr. Whitfield. And you think it's valid, though? In other 
words, you are willing stand----
    Mr. Marston. Yes.
    Mr. Whitfield. OK. OK. Ms. White, I had noticed that EPA 
proposed in the Federal Register an audit program for Texas' 
flexible permit holders accompanied by consent agreement and 
final order. That was basically an enforcement decree. And, 
although, it was labelled as voluntary, the audit agreement to 
allow continued operation, it's my understanding is not subject 
to negotiation. It requires, number one, an admission of 
violating Federal law.
    Are you familiar with that?
    Ms. White. Yes, I am.
    Mr. Whitfield. And then, also, it's my understanding, 
mandates payment by the company to a community project. And I'm 
not aware of anything in the Clean Air Act that gives EPA 
authority to say, ``You're going to pay a fine and I want you 
to make it to this community project.''
    Now, you've been involved in these issues much longer than 
I have. Am I correct in my----
    Ms. White. I think you are correct and I think that is what 
I will call ``rulemaking by enforcement action,'' which is 
adding something which is not--which EPA is not authorized as 
an EPA action in formal rule.
    I--I--your comment about the audit, I think, is a very 
important one. As a former regulator, I feel the flexible 
permit issue is really about rule language and terms between 
TCEQ and EPA, yet EPA chose to interpret that to mean all of 
the facilities who are in legal compliance with their State-
issued flexible permit are violating Federal law and subject to 
enforcement offers a voluntary audit but it is an enforcement 
consent decree is what it is, requiring acknowledgement of 
violating Federal law.
    Mr. Whitfield. OK. Well, thank you. My time has expired, 
and I recognize the gentleman, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    Let me just ask, that issue of payment to a community 
project in lieu of a fine has been around for, it seems like, 
decades and you weren't aware of that while chair of TCEQ? 
Because I know a lot of my industries have done that and we've 
had a win-win. One, they recognized their wrong but we also had 
some benefits in our community.
    Ms. White. Those are what we call in Texas, ``supplemental 
environmental project.'' That's an option to the enforcers 
sometimes that has various criteria. And on the Federal level 
there also are those. This was--and I won't remember the exact 
language in the proposed EPA audit, which I have read, but it 
just--it binds the person who signs the audit of a community 
project, but I believe would be determined by members of the 
community and not by--I mean, the supplemental environmental 
project that the State of Texas uses as well as EPA. They're 
very orderly and as far as what kind of project for this and 
what open-ended----
    Mr. Green. Oh, I thought that that was a shock to you that 
that program was available because I know a number of companies 
have--some of the companies have benefited from the public 
relations efforts that we worked on. I submitted some 
statements and some letters into the record. And one was when 
you were chair of TCEQ, to Steve Hagle, who was a special 
assistant.
    Ms. White. He was in the Air Quality Permitting Control 
Program. I'm not sure of his exact position at the time.
    Mr. Green. And we have a letter dated in April of '06 to 
him expressing the concern and follow-up on a meeting in '05 
and it seemed like in your testimony that you weren't aware of 
the disagreement between the EPA and TCEQ and the State of 
Texas on the flex permits.
    Ms. White. It was--in the 6 years I was in the office, it 
was never brought to my attention, and I recall this 
specifically because right after I left, I remember I heard 
about EPA had expressed concern about the program.
    Mr. Green. Well, we have a copy of a letter that was sent, 
I guess, to every flexible permit holder that was dated 
September of '07 and this letter is April 11. And understand, I 
know TCEQ is a big agency, and--but there were correspondence 
or was correspondence between TCEQ and EPA prior to January of 
2009.
    Let me go back. Mr. Griffin, I want to welcome you here. I 
appreciate it. I'm glad we were able to work it out to get an 
invitation to the East Harris County Manufacturers. I've worked 
with you and you've worked with our office for years. And it's 
great--on Port security, on air quality, on quality of life. 
It's amazing. And you represent a great bunch of companies that 
not only provide a tax base and employees' jobs but also just a 
resource in our community to work with.
    I'd like to ask you about the deflexing issue and the 
company's perspective. And I may have talked with you. I've 
talked with a lot of companies along this channel about my 
concern that deflexing may slow down some of the things they 
have to do because any given day, at any given minute, whether 
it's from Rhodia that's the closest petrochemical plant to 
downtown all the way out to ExxonMobil in our district, there 
are things going on and they need to have the ability to get 
permits and to expand their business. I know right now you go 
over the Beltway 8 bridge, and there's a Shell plant, a huge 
expansion there.
    Have you and any of the companies had problems getting 
permits under the deflexing on any of the plant expansions?
    Mr. Griffin. Yes. You know, certainly--you know, the issue 
with permitting, it's a very, very arduous process. You know, 
if you've looked at air permits, they write volumes and 
volumes. And I like to use the terminology we have so many 
calories to spend a day and we can optimize the process and we 
can grow our business or we can yet take another spin at 
permits. These permits worked. They work, the results are 
there, and we're held accountable. You know, I often get asked 
about the TCEQ. You can probably tell by my accent, I was not 
born and raised in Texas.
    Mr. Green. Stay around awhile, you'll get our accent.
    Mr. Griffin. Yes, sir. I'm working on it. But I have 
operated plants in Illinois and Ohio. And what I would tell you 
about the TCEQ is they're tough but fair and these permits 
work.
    Mr. Green. Yes, but--well, since the battle between TCEQ 
and EPA--and I know plants now are having to get their permits 
through the EPA. Has there been a problem at any of those 
plants, that you know of, because we've asked our plant 
managers and anyone else, including our new members, that we 
want to know if there's a problem because the last thing we 
want to do is shut down the biggest petrochemical complex in 
the country.
    Has there been any--have you heard of any problems or 
anything?
    Mr. Griffin. Yes, I don't have exact examples to share with 
you today, but I'll go back to our membership and get some more 
definition on that.
    Mr. Green. Great. And you know how to get ahold of me----
    Mr. Griffin. Yes, sir. You've been very accessible. Thank 
you.
    Mr. Green. Ms. White, let me go back to you. In December 
2002 the EPA finalized its reform of New Source Review 
regulations and did not include flexible permit programs but 
did include plantwide applicability limits called ``PALs.'' 
They're provisions that allow caps under an actual emission-
based concept, not in an allowable-based concept such as Texas' 
flex permit. And yet in February 2006, Texas adopted a separate 
PAL in its New Source Review regulations and retained its 
flexible permit regulations.
    Shortly thereafter, the EPA forwarded a letter to TCEQ 
informing Texas of EPA's concerns with the flexible permit rule 
and its reasons why it does not consider the current flexible 
permit rule to be approvable as a SIP provision. Then in 
February of 2007, the EPA additionally met with TCEQ where they 
discussed concerns with the flexible rule.
    Did TCEQ respond to this? And, again, this was under your 
watch as chair, I guess. When did you actually leave in 2007, I 
guess?
    Ms. White. August.
    Mr. Green. August. OK. So, it was during that time. I have 
some other questions that, Chairman, I would like to submit to 
you on what happened and how far back this disagreement goes 
with the TCEQ.
    Mr. Whitfield. Thank you very much.
    Mr. Barton, you're recognized for 5 minutes.
    Mr. Barton. Thank you. Mr. Chairman, I just want to read a 
Tweet that came out not 2 minutes ago from Mr. Armendariz. He--
he didn't have the time to come to a formal field hearing of 
your subcommittee and Mr. Green's subcommittee, but he is in 
Houston. This is what he Tweeted out about--oh, about 45 
minutes ago.
    ``Fantastic morning so far in Houston with Juan Parras''--
and I apologize if I don't get the pronunciations right--
``Matthew T., Hilton K. and others at the EJ Encuentro. I am 
humbled by their dedication.''
    So, he is here in Houston.
    Mr. Whitfield. In Houston?
    Mr. Barton. He's in Houston. He's just not at the formal 
hearing of the Energy and Power Subcommittee.
    Mr. Green. Well, Mr. Chairman, I think we've got the boss 
here that will testify next.
    Mr. Barton. Well, that's good and I'm glad that she's here. 
And I give her credit for that.
    Mr. Marston, before I ask my formal questions, are you any 
kin to Ed Marston?
    Mr. Marston. I'm not. A lot of people ask me that. But my 
father is Dale Marston, who was in the oil business for 37 
years.
    Mr. Barton. OK. Well, Mr. Ed Marston is a good friend of 
mine, and I thought maybe you were related to him in some way.
    Mr. Marston. I've heard good things about him. I don't know 
him.
    Mr. Barton. OK. You talk about the State officials 
basically telling lies and doing illegal actions, if I heard 
what you said correctly.
    Mr. Marston. Well, I do think that there's been lies from 
Texas officials and it's in my testimony and I'll describe lots 
of those.
    Mr. Barton. All right. Can you give the committee even one 
letter where EPA has rejected a flexible permit here in Texas?
    Mr. Marston. Well, certainly the letters in 2007----
    Mr. Barton. No. Can you give us a copy where they rejected 
a letter?
    Mr. Marston. Well, they've only----
    Mr. Barton. So, the answer is ``no''?
    Mr. Marston. No. You're asking a question----
    Mr. Barton. I'm asking a question. I want a straight 
answer.
    Mr. Marston. It does not have an answer to it----
    Mr. Barton. Is there an existing copy, that you're aware 
of, the rejection letter of a flexible permit here in Texas--
flexible air permit in Texas?
    Mr. Marston. Until Texas lost the power over its permitting 
and never--never corrected the flex permit, there was no 
authority and no process----
    Mr. Barton. Now, that's--so, there is no rejection letter?
    Mr. Marston. I'm sorry, sir?
    Mr. Barton. There is no rejection letter?
    Mr. Marston. Well----
    Mr. Barton. I want to read something from the appendix that 
you sent. This is your--your information----
    Mr. Marston. Yes, sir.
    Mr. Barton [continuing]. That you provided to this 
committee.
    Mr. Marston. OK.
    Mr. Barton. This--this is the signed by Mr. John Blevins, 
who is the Director of Compliance, Assurance, and Enforcement 
Division of the United States Environmental Protection Agency 
in Dallas, Texas. So, this is a letter----
    Mr. Marston. Yes, sir.
    Mr. Barton [continuing]. That he signed and you provided to 
the committee.
    Mr. Marston. What was----
    Mr. Barton. It says----
    Mr. Marston. What----
    Mr. Barton. Listen, listen. I'm going to read this. You 
submitted it. I'm going to read it. And then you can tell me--
--
    Mr. Marston. My only question----
    Mr. Barton [continuing]. If this was a rejection letter.
    Mr. Marston. OK.
    Mr. Barton. OK? TCEQ and the EPA both agree that it is now 
time--this is in 2007--that it is now time to focus resources 
on ensuring that all major sources with the State of Texas have 
federally enforceable State Implementation Plan-approved 
permits. The two agencies are working together--are working 
together to develop a flexible permit rule that can be approved 
as part of the Texas State Implementation Plan. Both TCEQ and 
the EPA have been aware of issues related to the flexible 
permit rule and have worked over the last several years to 
address various permitting issues as part of EPA's program 
revisions including permit streamlining within the context of 
Title V, the Federal PAL program, and the New Source Review 
reform. Because TCEQ is committed to ensuring the continued 
success of its efforts to maintain and improve the air quality 
of Texas, EPA is providing its assistance to ensure that the 
sources are also meeting their Federal obligation under the 
Clean Air Act.
    Does that sound like they're rejecting the Texas flexible 
permitting program?
    Mr. Marston. Well, sir, you're reading part of the letter, 
but it told you----
    Mr. Barton. I'm reading what you provided to the committee.
    Mr. Marston. I don't think you read the entire letter, sir.
    Mr. Barton. There is not one letter on the record where 
TCEQ has had a flexible permit rejected. There are letters--and 
some of them boilerplate--that seem to be just put a different 
date and--and various intermediary officials have--have 
questioned some parts of it. But there is not until this year a 
rejection of even one permit.
    Mr. Marston. May I answer your question?
    Mr. Barton. Now, I want to ask Ms.--you were the chairman 
of Texas Council of Environmental Quality----
    Ms. White. Yes.
    Mr. Marston. May I answer your question?
    Mr. Barton. I think you have failed to answer my question 
because you can't answer it, sir.
    Mr. Marston. Will you let me answer?
    Mr. Barton. I'm going to ask her. Did you, as your 
authority as chairman of the Texas Council of Environmental 
Quality ever receive a rejection letter?
    Ms. White. No.
    Mr. Barton. Did you ever have a discussion with a senior 
official at the EPA in Dallas or in Washington where you were 
told that they were going to reject the flexible permitting 
program in Texas?
    Ms. White. No.
    Mr. Barton. Were you ever briefed by your staff of such a 
concern at the Federal level?
    Ms. White. No, I was not. It was not brought to my 
attention and in my many, many conversations and interaction 
with the former regional administrator, the issue of flexible 
permits never were brought up.
    Mr. Barton. OK. Well, Mr. Chairman, time is expired, but I 
have asked the Attorney General of Texas, I have asked the 
chairman of the Texas Council of Environmental Quality, I have 
asked the commissioners of the Texas Council of Environmental 
Quality repeatedly to give me documentary evidence where the 
Federal EPA officials in Dallas or in Washington have done what 
Mr. Marston claims they have done and they have repeatedly told 
me, admittedly, not under oath, we haven't asked them to put 
their hand on a Bible, that that's never happened. There have 
been normal discussions about tweaking the program and things 
of this sort, but there has never been a rejection not only of 
the whole program but of a specific permit within the program.
    I yield back.
    Mr. Whitfield. Mr. Gonzalez, you're recognized for 5 
minutes.
    Mr. Gonzalez. Thank you very much, Mr. Chairman. I want to 
thank the members for taking time to be here today. We do 
appreciate your testimony today.
    Again, areas that we can agree on and that is when you have 
a Federal Government working with another other form of 
identity, they should be partners. There should be reasonable 
timelines and there are going to those that at are issue. And 
they should, as far as possible and with these days of 
camaraderie come politely with solutions and answers to 
whatever the problems may be.
    Now, the way I see, the only thing missing here is you have 
two differences of opinions as to what the problem is. For one 
party the problem exists. For the other party, it does not. So, 
maybe that's why things have come to a screeching halt.
    And, Ms. White, what years were you with the TCEQ?
    Ms. White. From fall 2001 to August of 2007.
    Mr. Gonzalez. All right. So, that would be the time period. 
And I know that you may have not been specifically involved in 
the ongoing questioning of the flexible permit protocol and 
requirements in the State of Texas, but there is no doubt that 
the record is replete, whether it was with Clinton or whether 
it was the Bush Administration, now the Obama Administration 
about the efficiencies of the flex permitting process in the 
State of Texas.
    But I'm going to ask you because I want to go back to the 
simple question because I think we're all going to talk about 
this because we just are ignoring what is the obvious.
    Do you believe that greenhouse gases are an air pollutant? 
And then the question is to Ms. White who has the most 
experience in this in the years that you served at State level.
    Ms. White. I will answer you in my opinion legally. Under 
the Supreme Court that--the 2007 Supreme Court ruling, under 
the language of the Federal Clean Air Act, carbon dioxide or 
other greenhouse gases might fit under that.
    Mr. Gonzalez. Do you think----
    Ms. White. I am not----
    Mr. Gonzalez. Massachusetts versus EPA, now it's a Supreme 
Court of the United States--it ends there. It doesn't matter 
what we have to say, the legislative branch or the executive 
branch. That's the way our founding fathers said it should be 
and it's served us well.
    Did it not find that greenhouse gases are an air pollutant? 
Can we agree on that?
    Ms. White. It said under the broad, broad language in the 
Federal Clean Air Act, carbon dioxide and--and carbon dioxide 
and oxygen is--as something in the ambient atmosphere could be 
determined a pollutant.
    Mr. Gonzalez. OK.
    Ms. White. Could be determined a pollutant. That's a legal 
decision--in a legal decision that EPA----
    Mr. Gonzalez. How about carbon dioxide that comes out and 
is inhaled by cars? Did they establish that as an air 
pollutant?
    Ms. White. I don't think--I don't think----
    Mr. Gonzalez. And I don't want to be--I think General 
Abbott could have better addressed some of these things, but I 
used up all my time and then additional time.
    But I do believe that General Abbott did acknowledge that 
Massachusetts versus EPA did establish carbon dioxide are a 
greenhouse gas or greenhouse gases as air pollutants. Now, I 
know what the General is saying. He's saying, ``Yes, Charlie, 
but only those that are emitted from the tailpipes of cars.'' 
And that sounds fairly reasonable except that I believe--and I 
think where this is going to end up, I'm not the lawyer for 
this and I'm surely not going to be the judge--but once you 
identify that as an air pollutant, it becomes regulated under 
the EPA, does it not?
    Ms. White. Not--no, it doesn't. There's--and--and the 
Attorney General referred to this. The EPA--and this is the 
most important for most people and for our country--in deciding 
the importance whether it is a pollutant that endangers human 
health. And that is the legal decision that EPA makes as the 
so-called endangerment finding. And that was the decision the 
Court left to EPA.
    Mr. Gonzalez. And EPA--and I know you are going to argue 
with the manner in which it has arrive at that determination 
and the timeline and the process. What if the timeline and the 
process and the reasoning is basically found to be valid? Would 
you still believe that greenhouse gases are air pollutants?
    Ms. White. I really--it doesn't matter to me what you call 
them. I do not believe that carbon dioxide endangers human 
health.
    Mr. Gonzalez. All right. That's my whole point. Now, the 
other point I want to make in my last few seconds is the same 
arguments that we've had today--and, believe me, I believe that 
this so prosperous a nation the we can even do better--because 
we have under the Clean Air Act and we did it and we have under 
the Clean Water Act. The same arguments that are here today, 
that's it's all going to be [inaudible] in jobs are--were 
advances at that time. There's no doubt that we learned lessons 
and we were more efficient about doing it.
    I think we can still do it. This is the United States of 
America. We're not some other Third World country. We're not 
someone else out there that doesn't have the history that we 
have, the pride, innovation, and the creativity that this 
country has.
    With that, Mr. Chairman, I will yield back.
    Mr. Whitfield. Well, thank you, Mr. Gonzalez. And I want to 
thank the panel very much for being with us this morning. We do 
appreciate your testimony and we look forward to working with 
you.
    Mr. Barton. Mr. Chairman, before--before we let this--I 
want Mr. Marston to be given every opportunity, if he wants to 
take advantage of it, to try to answer my question. My time ran 
out. So, I didn't----
    Mr. Whitfield. OK.
    Mr. Barton. I wasn't able to give him that, and I don't 
want him to walk away----
    [Simultaneously speaking.]
    Mr. Barton. I don't want him to go away and say he wasn't 
given a chance to answer his question.
    Mr. Marston. I am a very proud Horned Frog.
    Mr. Whitfield. So, would you like to respond, Mr. Marston?
    Mr. Marston. Well, I do think those--the letters in 2006 
and 2008 gave fair notice to the TCEQ and the permit did not 
meet the legal standard. They tried working with the agency for 
a long time. They were hopeful they could work out an 
agreement. In the end, the agency made some minor modifications 
but never made enough to meet the Federal Clean Air Act.
    Sadly, we're in that predicament because they wouldn't go 
further. Texas has a program that's unique among the States and 
they're in this predicament because they have a program that's 
different than everybody else, it doesn't follow the 
requirements of the Clean Air Act.
    Mr. Whitfield. OK. Thank you all very much. And we look 
forward to working with you as we move forward.
    Mr. Whitfield. At this time we'll call up the witness on 
the third panel, and I saw that she came. That's Ms. Gina 
McCarthy, who is the Assistant Administrator for Air and 
Radiation, United States Environmental Protection Agency.
    And, Ms. McCarthy, we appreciate your joining us here today 
in Texas and we look forward to your testimony. We were 
disappointed that Mr. Armendariz was not able to be with you 
but he did send a letter saying that he was attending another 
event here in Houston. So, we're delighted you're here and 
appreciate your coming down from Washington.
    And at this time, I'd like to recognize you for your 5-
minute opening statement.

STATEMENT OF GINA McCARTHY, ASSISTANT ADMINISTRATOR, OFFICE OF 
       AIR AND RADIATION, ENVIRONMENTAL PROTECTION AGENCY

    Ms. McCarthy. Thank you, Chairman Whitfield, Ranking Member 
Green, Members of the Committee, I'm pleased to be here in 
Houston to discuss how EPA is implementing the Clean Air Act to 
protect our locale.
    I bring Al's regrets. I'm sure he would have loved to have 
been here if he didn't have a prior speaking engagement.
    Air pollution threatens human health. It contributes to 
asthma attacks, other bronchial disorders, nervousness, and 
developmental problems, cancer, and even death. The very young 
as well as the elderly are especially vulnerable. Every citizen 
in every State, including Texas, has the right to the health 
protection provided by America's Clean Air Act.
    For 40 years the Act has reduced air pollution for all of 
us to breathe easier. In the last year alone, programs 
implemented pursuant to the Clean Air Act Amendments of 1990 
are estimated to have reduced premature mortality risks 
equivalent to saving over 160,000 lives, preventing millions of 
cases of respiratory problems, including bronchitis and asthma, 
and enhanced productivity by preventing 13 million lost 
workdays.
    In 2000 Houston's air quality was worse than Los Angeles'. 
Today Houston is meeting the '97 ozone air quality standard. 
Why? New Federal and State pollution control regulations. These 
include tighter Federal standards on passenger vehicles and 
diesel truck emissions, and vigorous enforcement of Clean Air 
Act requirements focussed on the largest polluters.
    However, few of the Federal emission control standards that 
gave us these huge gains in public health were uncontroversial 
when they were issued. They were adopted amidst claims that 
they would be bad for the economy and bad for the employment.
    It is terrifically misleading to say that enforcement of 
the Clean Air Act has cost jobs. That claim is simply untrue. 
Enforcement of the Clean Air Act has saved lives and allowed 
economy to grow. Families should never have to choose between a 
job and healthy air. They're entitled to both, and the Clean 
Air Act has delivered on both.
    In contrast to doomsday predictions, history has shown that 
we can clean up pollution, we create jobs, we grow our economy 
all at the same time. In the 40 years since the Act passed, the 
Gross Domestic Product of the U.S. grew by more than 200 
percent. In fact, some economic analysis suggests that the 
economy is billion of dollars larger today than it would have 
been without the Clean Air Act.
    One of the important benefits of the Clean Air Act is that 
it ensures equal public health protection nationally. 
Unfortunately, the Texas air permitting program does not ensure 
the same level of public health protection to its citizens that 
other States provide. And citizens in Texas have time and again 
asked EPA to rectify this problem. For example, the Texas 
program allows changes to occur at industrial facilities 
without adequate public notice, allows increases in actual 
emissions to go unchecked. It doesn't ensure the enforceability 
of the permit requirements.
    Unfortunately, the Texas State Government rules simply 
trust industrial sources to take action to protect public 
health without giving the citizens of Texans the ability to 
verify the results. No other State allows this. Instead, they 
ask for inherent enforceable permits that provide flexibility 
to industry. Even in Texas fewer than 10 percent of the major 
air pollution sources have these so-called flexible permits.
    These flexible permits failed to comply with Clean Air Act 
requirements to protect public health. EPA has been raising 
issues with Texas' permits since the 1990s. The problem 
worsened last decade when the Texas Government failed to take 
action to adjust their flexible permit program as other States 
did to keep it in line with the rules of the agency and with 
court cases that clearly said that the permit needed to be--the 
permit system needed to be adjusted.
    Then in 2006, 4 years ago, under then President Bush, EPA 
wrote a letter to the State of Texas outlining our concerns 
with the air permitting program and the failure of State 
Government to fix these programs.
    In 2007 EPA sent letters to every one of these flexible 
permit holders, letting them know that they had to worry about 
being in compliance both with their flexible permit and with 
EPA's Clean Air Act to ensure that they had a federally 
enforceable permit.
    We continue to work hard with representatives in industrial 
facilities, Texas officials, and other concerned citizens to 
fix this Texas air program. Our regional office in Dallas has 
long consulted with the Texas Government and citizens in 
efforts to achieve a State program that meets the necessary 
obligations under our Nation's Clean Air Act. I have personally 
come to Texas to try to work through these problems with the 
State, industries, environmental groups, and other 
stakeholders, as have other EPA officials and members of my 
staff.
    Our goals are rules that meet the minimum requirements of 
Federal law and clean air permits that are understandable to 
the public, that are enforceable by their regulators, that are 
legally valid, and that protect public health to the full 
extent that the Clean Air Act requires.
    A more recent problem has also arisen and that is really 
unique to Texas. And that unlike all other States, Texas' State 
Government is refusing to cooperate with EPA to address 
greenhouse gases in its permitting processes. It has forced EPA 
actions to prevent industry from being placed in an untenable 
position of having an obligation to obtain a legally valid 
permit addressing greenhouse gases before starting major 
construction, but when they have no way to obtain such a 
permit.
    In January, that's why EPA stepped up and hopefully 
temporarily began to issue and be responsible for greenhouse 
gas permitting in the State of Texas. Without that action, 
sources could not obtain legally required permits, projects 
could not go forward, and economic and jobs would really 
suffer. Some try to emphasize this recent disagreement between 
the State and EPA as if for decades EPA has not had to work 
with the State year after year to push and prod to get Texas to 
do what the Clean Air Act requires. This is simply not the 
case. But what is unique about greenhouse gas permits is that 
Texas has decided that it would simply not do what the Clean 
Air Act required and, in addition, it would take action to sue 
EPA and the Federal Government to ensure that we could not do 
what the Clean Air Act required.
    It's time for this bickering to stop. It's time for us to 
work together to find a common ground to deliver an effective 
Clean Air Act program, one that the Texas State Government can 
clearly implement, one that will meet legal obligations, one 
that would be amenable to the State, one that would provide 
clear public health protection, that is cost effective and that 
the people in this State deserve to have delivered to them in 
accordance with the laws of Congress.
    We pledge to keep trying to work with Texas leaders in the 
spirit of partnership and not adversarial politics to achieve 
these goals. Thank you very much.
    [The prepared statement of Ms. McCarthy follows:]



    Mr. Whitfield. Ms. McCarthy, thank you for your testimony.
    And, you know, one of the reasons Congress is getting 
really interested in this Clean Air Act and wants to reassert 
ourself is primarily because there is so much animosity about 
the whole issue. And you, in your opening statement, talk about 
how Texas has filed a lawsuit to prevent you from doing your 
job. I asked Lisa Jackson at our last hearing to provide us 
with the total number of lawsuits pending against the EPA 
today. She hasn't had enough time to do that yet. But I would 
ask you to do that. And I will tell you that Columbia Law 
School did do an analysis and they presented us with 290 pages 
of current lawsuits pending against EPA.
    So, you're probably involved in one of the most--agencies 
that has more lawsuits than any other part of the Federal 
Government. And that's one of the reasons we want to try to 
revisit the Clean Air Act, itself.
    I would ask you--one of things I find puzzling, as a 
layman, is that if you--in your testimony, you said that Texas 
had done a good job on its ambient air quality standards and 
ozone and it's really cleaning up and meets the 1997 standards. 
Well, if you have a flexible permit program that sets an 
overall emission cap over one particular industry that allows 
maybe one machine in there to exceed limits but another one to 
emit below limits and the overall comes within the regulated 
limit, why is that a problem?
    Ms. McCarthy. Well, not all flexible permits are alike, Mr. 
Chairman. And, so, the agency worked very hard over the course 
of the past----
    Mr. Whitfield. Well, excuse me for interrupting. But are 
you--you're saying, then, that not all of these permits that--
that have--some of these permits, they exceed their limit 
overall. They exceed the overall limit?
    Ms. McCarthy. I'm saying that fundamentally the provisions 
of the Clean Air Act are not complied with in the way that the 
State of Texas has designed its program.
    Mr. Whitfield. Ma'am, could you tell me the specific legal 
authority under the Clean Air Act that gives you the authority 
to say that the flexible permit is illegal?
    Ms. McCarthy. Actually, the--the Federal Government has the 
ultimate authority to ensure Clean Air Act compliance.
    Mr. Whitfield. OK.
    Ms. McCarthy. We--we essentially enter into contracts with 
States about how they can co-regulate with us.
    Mr. Whitfield. But is there a specific----
    Ms. McCarthy. There is a specific----
    [Simultaneously speaking.]
    Ms. McCarthy. We have actually noted----
    Mr. Whitfield. Is there is specific section of the Clean 
Air Act that gives you the authority?
    Ms. McCarthy. I actually would have to come back and tell 
you what the specific section is, Mr. Chairman, but we have 
noticed our decision to disapprove the flexible air permits.
    Mr. Whitfield. Well, would you do that for me, just to----
    Ms. McCarthy. Sure.
    Mr. Whitfield. And provide that?
    Ms. McCarthy. Sure.
    Mr. Whitfield. Thank you. Now, in the testimony before one 
of the panels here today before you, one of the witnesses said 
that other States have similar flex permits. Is that true?
    Ms. McCarthy. No, no.
    Mr. Whitfield. No, that's not true?
    Ms. McCarthy. No, that's not. Although other States use 
flexible permits, EPA has developed a flexible permit program 
that we call our ``PAL permit,'' which is similar to what 
you're describing. It is in no way similar to Texas. Texas is 
missing--really consistently missing fundamental principles 
under the Clean Air Act discounting enforceability----
    Mr. Whitfield. OK. But what EPA does----
    [Simultaneously speaking.]
    Ms. McCarthy [continuing]. Enforceability----
    Mr. Whitfield. EPA does allow flexible permitting?
    Ms. McCarthy. Absolutely. Absolutely.
    Mr. Whitfield. But you're saying that in Texas, they do not 
enforce it----
    Ms. McCarthy. That's correct.
    Mr. Whitfield. They do not enforce it?
    Ms. McCarthy. We have issued rules----
    Mr. Whitfield. Tell me the three things they don't do in 
Texas that bothers you.
    Ms. McCarthy. They don't require emissions to be calculated 
by actual emissions. They look at emissions based on what they 
assume that the plant could generate running 24 hours, 7 days a 
week, which we call----
    Mr. Whitfield. OK. And what else?
    Ms. McCarthy. They don't provide transparency. They don't 
provide enforceability, they don't provide reporting, they 
don't provide monitoring of the climate. So, they are 
unforceable under Federal law.
    Mr. Whitfield. OK. And the other States that have similar 
flexible permits, they do all of those things that you say?
    Ms. McCarthy. That's correct.
    Mr. Whitfield. Now, if that's true, why did it take the EPA 
16 years to take some action?
    Ms. McCarthy. Well, let me try to clear that up. The 
actual--the--Texas proposed this permit--this flexible permit 
back in 1994. Actually '92, then it was approved in '94. During 
that process we were looking at piloting different types of 
flexible permits. We actually wrote the State a letter and said 
you're going way out in front of this. We haven't yet developed 
our own rules about that----
    Mr. Whitfield. Look, I'm running out of time.
    Ms. McCarthy. OK.
    Mr. Whitfield. So, let me just--so, basically----
    Ms. McCarthy. Well, let me----
    Mr. Whitfield. Let----
    [Simultaneously speaking.]
    Ms. McCarthy. Let me look at my----
    Mr. Whitfield. So, initially----
    Ms. McCarthy. Let me say that we put them on notice.
    Mr. Whitfield. Initially, you all worked with them and over 
time, you just felt like it was not----
    Ms. McCarthy. No. We put them on notice when they developed 
it that they might have to adjust it.
    Mr. Whitfield. OK.
    Ms. McCarthy. The rules--they did not adjust themselves to 
the rules that were enacted.
    Mr. Whitfield. OK.
    Ms. McCarthy. And they did not adjust themselves in court 
cases that told them that the way in which they were 
calculating emissions in their permits were----
    Mr. Whitfield. Now, let me ask this one final question----
    Ms. McCarthy. Yes, sir.
    Mr. Whitfield [continuing]. Since my time has expired, too. 
We were already talking about all of the lawsuits pending 
against EPA.
    Ms. McCarthy. Yes.
    Mr. Whitfield. We know there's a lawsuit pending on the 
Tailoring Rule, correct?
    Ms. McCarthy. Yes.
    Mr. Whitfield. And in your testimony, you had indicated 
that if the Tailoring Rule was invalid, that the permitting 
authorities would have to spend in the neighborhood of $24 
billion to issue these permits. And the question I would have, 
if the EPA Tailoring Rule is determined to be invalid by the 
court, are you all--do you have a plan right now to deal with 
that?
    Ms. McCarthy. We do not believe that the Tailoring Rule 
will be invalidated. We believe it's consistent with Federal 
law.
    Mr. Whitfield. But there is a pending court case?
    Ms. McCarthy. There are many; but there are--in every rule 
that we do, we have challenges.
    Mr. Whitfield. So, you're not making any significant plans 
on this?
    Ms. McCarthy. We do not need to, no, sir.
    Mr. Whitfield. Thank you.
    Mr. Green?
    Mr. Green. Ms. McCarthy, how long have you been with EPA?
    Ms. McCarthy. I have been with EPA since June of 2009.
    Mr. Green. OK. So, it's relatively recent?
    Ms. McCarthy. Yes.
    Mr. Green. Following up on what the chairman said, and I 
talked about it in my opening statement, in August of 2008, the 
Business Coalition of Clean Air, Texas Association of Business, 
and Texas Oil and Gas Association filed suit against the EPA to 
take action on pending permits related to the SIP actions and 
the flexible permits. In July of 2009, there was a settlement 
reached between you two on that lawsuit regarding that.
    So, you know, this goes back to what the EPA was told and 
the agreed settlement by the parties was that EPA would enforce 
what you're trying to do now.
    Ms. McCarthy. Yes, that's correct. We were sued by citizens 
and industry, and it resulted in that settlement.
    Mr. Green. And I know you testified that this started 
actually in 1992 and goes back. I'm looking at a timeline and 
in late 1994, Texas adopted its flex permit regulations. Did 
EPA notify them at that time that EPA wasn't through with their 
New Source Review program and that their rules may be 
inconsistent so that was in late '94.
    Now, October of '94 EPA sent a letter to--at that time TNRC 
Commission--TNRC expressing concerns regarding the proposed 
flexible permit and the SIP revision. We're talking about 
October 1994.
    Ms. McCarthy. That's correct.
    Mr. Green. This has been an ongoing discussion between 
whatever agency we call it in Texas and the EPA----
    Ms. McCarthy. Yes.
    Mr. Green [continuing]. Under at least three Presidents.
    Ms. McCarthy. Yes.
    Mr. Green. And I guess that's my concern. You know, I like 
the flexible permits. I didn't come to Congress until '93, but 
20 years before that, I served in the legislature. And let me 
address Congressman Barton's concern. I remember in my 20 years 
in the legislature, we complained with the EPA on lots of 
issues, but we also recognized that they had the preemption 
right and over that 20 years, that was suggested many times 
that EPA could take over the permitting in Texas, I know 
between 1973 and 1993. And that's why the privacy of the 
Federal law is the issue here. And I know----
    Ms. McCarthy. It is also the protection of the industries 
who are operating under the permits that may not protect them.
    Mr. Green. Well--and that's my concern. And I don't know if 
you were here earlier, but at any given time any of the plants 
in our district are doing things that they need permits to do 
because they're expanding. We're fortunate. Most of those 
plants and our refineries have all expanded beyond the 
production of gasoline, but they need to have things going on. 
And they just can't have a battle between a Federal agency and 
a State agency or otherwise that would shut down the investment 
in our community.
    So, frankly, I'm a little frustrated. I have some questions 
about the PAL program, but I'd also like--somewhere along the 
way, we have to get the attention and say, TCEQ and the State 
of Texas need to sit down. They may do it on the Attorney 
General's lawsuit that he's filed, but there is going to be a 
negotiated settlement not unlike what was done back in 2009 
that's from the lawsuit filed in 2008. And that's what the 
hesitancy, I think, everyone has of doing anything. Because we 
have to deal with it.
    And I just encourage you, as best you can, to sit down with 
TCEQ and the Attorney General under that lawsuit and see what 
we can come up with. But we already have a settlement on the 
earlier lawsuit in 2009.
    Now, let me--I know the Chairman asked about the difference 
between the Texas flex permit and the plantwide applicability 
limits. Can you explain the difference between what the Texas 
flex permit does and the PALs? And why wouldn't Texas be able 
to fit under some of those plantwide applicability limits or 
PALs?
    Ms. McCarthy. I--I mentioned this before, but let me try 
and be clear. The Federal PAL is based on actual emissions. The 
Texas Flexible Permits are based on allowable emissions. 
Essentially what this means is that in Texas, a plant could 
significantly increase its pollution and not have to use the 
proper pollution control technologies.
    Secondly----
    Mr. Green. Well, we----
    Ms. McCarthy. I'm sorry.
    Mr. Green. Go ahead and finish.
    Ms. McCarthy. The number of--the permit program in Texas 
fails to meet a number of provisions to ensure that the permit 
is enforceable and the process is open entry apparent to the 
public. And, finally, the permit process in Texas does not meet 
the requirements of the Clean Air Act.
    Mr. Green. OK. When you show actual emissions, that's done 
by either--and we have fence-line monitors in so many of our 
plants already. We have so many monitors in East Harris County. 
That would be what we would need to find out, what was actually 
being emitted. Is that true? That's part of it?
    Ms. McCarthy. The total emissions and what timetable. That 
is the currency of the Clean Air Act. That's right, actual 
emissions. What you can measure leaving the plant that can 
injure public health.
    Mr. Green. So, we actually have some facts on the ground 
because I can tell you, I know, ExxonMobil, the biggest 
refinery in Texas and the country, actually, has fence-line 
monitoring right now. And I can go down--and I know Jim knows 
for sure, there's a whole bunch that in the last 10 years, even 
though it wasn't necessarily required, but they were doing it. 
So, they have the capability now to do that.
    Mr. Chairman, you've been gracious; and I appreciate you 
letting me run over my time.
    Mr. Whitfield. You say they have the ability for the actual 
emissions----
    Mr. Green. I think they're measuring right now.
    Mr. Whitfield. Actual emissions?
    Mr. Green. Actual emissions.
    Ms. McCarthy. We--we actually--we model those and we 
measure them directly, that's correct.
    Mr. Whitfield. Mr. Barton, you're recognized 5 minutes.
    Mr. Barton. Thank you.
    Well, first of all, thank you for showing up.
    Ms. McCarthy. Thank you for having me.
    Mr. Barton. It's amazing to me that the lady from 
Connecticut can fly 1400 miles and our Region VI Administrator 
can come to Houston but can't come and actually appear before 
an official committee of the United States Congress.
    Ms. McCarthy. He did send his regrets. He would have loved 
to have been here.
    Mr. Barton. Well, we will have an opportunity hopefully in 
the future to have him before our committee or subcommittee. 
But I am sincerely appreciative of your being here.
    I listened to--I read your testimony. I listened to what 
you said in response to the chairman's questions and the 
ranking member's questions and I feel like I'm in some 
alternative universe. I have not reviewed comprehensively all 
the documentation that's gone back and forth between the EPA 
and the State of Texas since the early '90s, but I have at 
least scanned most of the relevant documents. I have yet to 
find one that substantiates what you said in your testimony, 
that the Texas Flexible Permitting program is not transparent, 
it's not enforceable, it doesn't comply with the Clean Air Act.
    Let's set aside for a minute--I know there's a debatable 
issue about whether the greenhouse gases are regulated under 
the Clean Air Act. I know that you have the Supreme Court 
decision and the endangerment finding, which I think the 
endangerment finding is very flawed; but I'll put that aside 
and just focus on the Clean Air Act and its amendments.
    There are six criteria pollutants and the only one that 
Texas, unless you tell otherwise, is in noncompliance on is in 
some parts of the State, ozone. Do you agree with that?
    Ms. McCarthy. Yes.
    Mr. Barton. So, which of these flexible permits--and Mr. 
Marston, I think said there were 70. I've been told there are 
180. So, I don't know what the exact number is, but it's a 
finite number. Where in the Record do we have the documentation 
that they have been noncompliant in terms of their emissions 
being larger than allowed under the Clean Air Act? I don't find 
it.
    Ms. McCarthy. Well, let me explain. We did put a public 
notice out. We explained the reasons why we were proposing 
this. There's a due process here. We put that out September of 
'09. We explained what was wrong with the process----
    Mr. Barton. Where--where--where do you substantiate and 
back up what you've just said, that they're in noncompliance?
    Ms. McCarthy. It's in the notice. And any--any--and since 
that time any permit that has been a logic error----
    Mr. Barton. Can you--can you give the committee----
    [Simultaneously speaking.]
    Mr. Barton [continuing]. An example of----
    Ms. McCarthy [continuing]. We have objected----
    Mr. Barton [continuing]. A permit that is noncompliant?
    Ms. McCarthy. I can get all of the permits since--that have 
been issued since October--I'm sorry--September of '09 that we 
have objected to. And there have been many. I'm now in the 
process of trying to be corrected, either by going to the State 
or EPA----
    Mr. Barton. And I'm--I'm not trying to be argumentative.
    Ms. McCarthy. No, I'm trying to explain. There are many.
    Mr. Barton. I just--I don't see in the record where TCEQ or 
a particular company has knowingly and willfully violated the 
Clean Air Act on the regulated pollutants--again, separate 
greenhouse gas, which is a different debate that's--you know, 
your testimony would have one believe that we're some sort of 
an outlaw State and our regulatory authority kind of snubs its 
nose at the EPA and doesn't even require enforcement of the 
basic standards. Yet somehow our emissions are within the 
allowable, except for ozone. And, in that, even you admit we're 
making tremendous progress. It doesn't jive.
    Ms. McCarthy. Well, I think we're confusing the actions 
that you take to address ozone with a permitting program that 
is solely designed to mitigate additional emissions that 
contribute to air pollution.
    Mr. Barton. But ozone is part of that.
    Ms. McCarthy. It is part of that. But the efforts that have 
been ongoing at the Federal level are through the State 
implementation planning process. And, then, what has been 
successful in reducing very high levels of pollution down to 
more manageable levels.
    The permit process had nothing to do with that. That is not 
what contributed to that success. That is simply a way to try 
to make sure that you're not going to go back to fully emitting 
pollutants that will then bring you out of attainment with 
ozone standards.
    Mr. Barton. OK. My light's already on amber. Let me--I want 
to follow up with something that I asked the Attorney General.
    Ms. McCarthy. OK.
    Mr. Barton. Because of the lawsuit that the State of Texas 
has against your agency, you filed an affidavit in Federal 
court on October the 28th of 2010 in which you--you've, 
obviously, under oath, say that the information you're giving 
in this affidavit is correct and la-tee-da, da, da. And in that 
affidavit at the very end and in the annex--the appendix that 
you add to it say that it is not the intent and you had no 
knowledge that EPA is going to revoke any existing permits 
until at least 2000--in December of 2011. Yet within a few 
months, if not a few days, your agency did exactly what you 
said they wouldn't do.
    How do you reconcile that?
    Ms. McCarthy. I believe that my statement was referencing 
the fact that we were taking action to try to work with 13 
States that needed to make adjustments in their own State laws 
in order to provide an opportunity to greenhouse gas 
permitting. And what----
    Mr. Barton. This is--this is regarding directly the State 
of Texas.
    Ms. McCarthy. Well, that----
    Mr. Barton. It says no permitting authority will be in 
place as of January 2nd, 2011. FIP cannot be promulgated until 
December the 2nd, 2011, at the earliest. It's specifically on 
Texas.
    Ms. McCarthy. The particular issue that you're talking 
about is part of a larger effort to get 13 States into a 
position to either immediately regulate, to regulate 
afterwards, or to delegate back their----
    [Simultaneously speaking.]
    Mr. Barton. Well, did you know at the time that you made 
this affidavit what the EPA was going to do with regards to 
Texas?
    Ms. McCarthy. What I wasn't aware of is that the State of 
Texas prior to that had not made a statement either by the 
Governor or by the agency, itself, that it would simply refuse 
to regulate greenhouse gas permits, period.
    Mr. Barton. But this has nothing to do with greenhouse 
gases. We're talking about the State Air Quality permit.
    Ms. McCarthy. I'm sorry. I'll have to look at it. I thought 
we referencing the greenhouse gas permitting process.
    Mr. Whitfield. Gentlemen, the has time expired. Do you have 
another question, Mr. Green?
    Mr. Green. No. I'm just interested because, again, I know 
Texas, starting in '92, '94, really, we had--sometimes they 
call them ``loopholes'' in Washington, sometimes they call them 
``opportunities'' to be able to create a program that would 
make it easier and--and, you know, the EPA has been, it looks 
like from the records, we can't quantify what you're doing. But 
it's been going on so long that we just need to deal with it.
    And we had one court case already that was an agreed 
judgment. Maybe we have to have another one to see what we need 
to do in Texas. But my concern is with the fight between Texas 
and EPA, I want to make sure Mr. Griffin's plants can still do 
what they need to be doing, producing the products--but, also, 
without being held up by our fight between two States and there 
are--the country and the State.
    Ms. McCarthy. Congressman, I'm unaware of any business that 
has been interrupted as a result of our attempt to work with 
the State in resolving the issue.
    Mr. Whitfield. Ms. McCarthy, I have one other question and 
one comment and then, I think, Mr. Barton has another question 
or a comment or two.
    Under your SIP Call Rule, which was proposed in September 
2010 and finalized in early December 2010, you all require 
Texas and other States to changes their laws and regulations by 
December 22nd, 2010, in order to comply with the new greenhouse 
gas permitting requirements. And, usually, when you do these 
change in the State implementation plans, you typically give 
States up to 3 years.
    So, why in this instance did you give them, like, weeks to 
amend their State Implementation Plan?
    Ms. McCarthy. Well, what we did was we worked with all of 
the States and we developed a process where we would either 
take over the permitting, ourself or else they would identify a 
phased approach where they would be able to provide 
opportunities to change their laws and then take back the 
permitting process. In the rule we gave a number of choices to 
States on how to do this. What we were unaware of is that Texas 
would choose neither to accept or reject our offer but simply 
to refuse to do the greenhouse gas permitting, period. Which 
forced our hands in order to protect the interests of the 
business here to be able to get permits in a timely way, to at 
least temporarily take that----
    Mr. Whitfield. What I was told is that Texas made EPA aware 
of their position in August of 2010.
    Ms. McCarthy. I am not aware of that.
    Mr. Whitfield. We--I mean--well--oK. Let me just make a 
couple of other comments. One, would you please have your legal 
department provide us with a list of at least a number of 
lawsuits pending today against EPA and the actual budget 
amounts to defend those lawsuits in your budget.
    And then, number two, just a legal analysis, maybe a two-
page or so from your legal authorities on what the Federal 
authority is for your position on the flex plans--the flex 
permits.
    Ms. McCarthy. All right.
    Mr. Whitfield. Thank you. Mr. Barton?
    Mr. Barton. Isn't it Mr. Green's turn?
    Mr. Green. Following up on what the Chairman said, could 
Texas, by Administrative Rule, change their--what it takes to 
statutory law changed by the legislature?
    Ms. McCarthy. I believe it would take statutory change, but 
we will work with them in whatever they feel is legally 
appropriate.
    Mr. Green. Because I know sometimes most States meet every 
year. The Texas legislature only meets every 2 years and most 
governors don't really want the legislature there. So, they 
don't call special sessions. And we've had that problem in the 
past. A good example is the State--Children's Health Care 
Program created in '97. Texas didn't go back in session until 
'99 and didn't have any law until 2 years later for the 
Children's Healthcare Program. And, you know, our legislature 
is only in session in the spring of every odd year, which is 
sometimes good.
    Ms. McCarthy. We'd like nothing better in the world 
[inaudible] to phase approve legal authority to do it more 
quickly, we'll certainly be able to help you with that.
    Mr. Whitfield. Mr. Barton, you're recognized.
    Mr. Barton. Madam Administrator, am I correct in that the 
disagreement between Texas and EPA on greenhouse gases is a 
separate issue than the disagreement between Texas and EPA on 
their flexible permitting program under the other terms of the 
Clean Air Act?
    Ms. McCarthy. Yes.
    Mr. Barton. They're two separate issues?
    Ms. McCarthy. Yes.
    Mr. Barton. OK. Now, you said in your testimony and you 
said in response to a question that Texas is not requiring 
monitoring of their flexible permitting program?
    Did I hear you correct?
    Ms. McCarthy. Not sufficiently providing an opportunity for 
enforcement under the Federal law.
    Mr. Barton. Now, I'm not familiar with all the plants here 
in the Houston area; but I have several cement plants, I have a 
General Motors assembly plant, I have some defense plants, I've 
got a coal plant--several coal plants, several natural gas 
power plants. I have a number of qualified facilities under the 
Clean Air Act in my district and I that almost--I think every 
one of those, they have continuous monitoring of their 
smokestacks?
    Ms. McCarthy. They may very well. I'm not saying there is 
no monitoring, certainly; and I'm not implying that the 
businesses are doing anything inappropriate.
    What I'm suggesting is that the permit that they're 
operating under doesn't provide sufficient detail for it to be 
enforceable under Federal law and to mutual compliance.
    Mr. Barton. I don't----
    Ms. McCarthy. They simply don't have the recordkeeping 
requirements and in some cases, the monitoring necessary for us 
to measure actual emissions and to determine whether or not 
there are increased emissions when they're making and providing 
the changes, that the State allows to happen without public 
process and without permitting.
    Mr. Barton. Well, we just have a disconnect here because 
I'm, personally, familiar with several of the plants, again, in 
my congressional district that have continuous monitoring for 
SO2 and NOx and ozone. I'm aware in the Dallas-Fort 
Worth area and I assume here in the Houston area that you have 
these ozone monitors that are not plant-specific that are at 
locations around the community that continuously monitor and 
you're saying those are noncompliant with Federal law?
    Ms. McCarthy. What I'm saying is that--that the flexible 
permit is based on what's allowable for emissions and not based 
on actual emissions. It is a critical issue under the Clean Air 
Act.
    Mr. Barton. But isn't that a resolvable issue without 
revoking all these permits that have been existence for 16--I 
mean, you've known about it for 16 or 17 years.
    Ms. McCarthy. Well, we're kind of stuck between a rock and 
a hard place here. Because they were called ``regulators,'' the 
region respectfully worked for many years to try to resolve the 
problem. We were, then, sued because we didn't take quick 
interim action. We were sued by citizens under petition, the 
new supervisor of the business community who was worried about 
the legality of their permits. We were then forced to take the 
type of action that is now raising your eyebrows. I understand 
this.
    None of us want to be in this position. If we could sit 
down, we could easily resolve this problem. And, in fact, we 
are doing that. It's just--it's just we now do not have a 
flexible permit program under the State that the State and 
major industries can rely on to receive permits that will meet 
Federal requirements under the law.
    Mr. Barton. Well, I have a different opinion of our State 
regulators than Mr. Marston does. I think they're people of 
good conscious, and they want to enforce law--both the State 
and the Federal law and they want to work with our Federal 
officials at EPA. I also believe that our industry groups want 
a clean environment. I mean, they live in the same communities, 
they shop in the same shops, they have the same health interest 
as a regulator in Washington, DC.
    And when I look at the record, I go back 16, 17 years--and, 
again, I've not looked at every document. I can't stand here 
and take an oath that I've read every document. But the 
documents that I have read really refer to kind of generic--I 
won't say ``minor problems,'' but just general disagreements 
and uncertainty that they don't show what you just said. They 
don't say, ``You're not monitoring. You're not doing it. You're 
not''--I don't see any of that.
    And--and I would--you know, Mr. Green and I are not of the 
same political party, but we share the same general conclusion 
on this flexible permitting program that it ought to be able to 
be worked out. I don't see any irreconcilable issues here. If 
you need more monitoring, I have a pretty good feeling that the 
TCEQ people will agree to more monitoring.
    If you need some more transparent paperwork process, if you 
need a different calculation methodology, I've not--and I've 
repeatedly pushed the State officials, you know, tell me the 
truth, the whole truth, and nothing but the truth about what's 
going on here.
    So, is it--is it the Obama Administration's position that 
under no terms or conditions are they going to approve the 
flexible permitting program for existing facilities in Texas at 
all?
    Ms. McCarthy. Absolutely not. In fact, Texas does take 
advantage of our PALs Program. We certainly can take care of 
the 10 percent of major sources that are using the flexible 
permit. We certainly can provide an opportunity to transform 
those permits into Federally enforceable, compliant permits.
    Mr. Barton. Well, if can----
    Ms. McCarthy. And I'd much rather do that on a programatic 
level than individually. But right now we're working 
individually.
    Mr. Barton. If we can get some concrete issues that need to 
be addressed, I am sure that Chairman Whitfield and Chairman 
Upton, and Mr. Green, and Mr. Waxman and--I mean, whoever you 
want to be in the negotiations, can work with EPA in Washington 
and TCEQ in Texas and we can resolve this issue.
    I mean, I just--I can't stress enough, Mr. Chairman, it is 
important that we have an environmental program Nationally and 
at the State level that every citizen has confidence in that's 
going to give us the best air quality and the best water 
quality that is obtainable in the modern era with the 
technology that's available.
    Mr. Whitfield. I agree. It almost seems to me, from what 
you've said, that the objection is that in the flex permitting 
language, it does not say certain things; and, yet, we know 
that these industries around here we were just talking about, 
you didn't mention the difference between actual and what is 
allowed because it almost seems like the language in the permit 
needs to be changed to make sure that you're giving the 
information that you need.
    Ms. McCarthy. Mr. Chairman, it's a much more fundamental 
issue than that because under the Clean Air Act, if you 
significantly increase your emissions, you're required to look 
at controls and modernize them.
    So, what you're doing is providing--by basically casting in 
stone allowable, you are never going to operate those 
facilities from that point forward at an increased emissions--
--
    Mr. Whitfield. And you're talking about individual sources 
of emissions within an industry, as well?
    Ms. McCarthy. Or the entire facility.
    Mr. Whitfield. Yes.
    Ms. McCarthy. It's not that we're requiring unit by unit--
--
    Mr. Whitfield. And you will have your legal department 
provide us with a two-page or so----
    Ms. McCarthy. I will. And if I may, I am not indicating or 
trying to malign anybody at TCEQ. I've been met many of the 
commissioners and met with the staff. They're honorable human 
beings. I think right now we've made a lot of progress that we 
had to make since we had the noticed our disapprovals of their 
permit process being objected to permits. I wish we could do 
this in a little more gracious way so that it wasn't--so this 
disagreement wasn't so apparent. We are getting there. It's not 
easy, but I will pledge EPA's continued cooperation with TCEQ 
and we will get there.
    Mr. Whitfield. Well, good. You know, I think there's 
something wrong when we've got a Government agency with 290 
pages of lawsuits pending. Of course, I recognize that the law 
encourages the lawsuits and the law also gives Federal judges 
authority to reimburse the legal cost.
    But we appreciate your time today. We look forward to 
continuing to work with you on a lot of issues. And we'll keep 
the record open for 30 days for any additional material or 
questions.
    Mr. Green. I just want to thank South Texas Law School--I 
have a lot of friends and family who attended here--for 
allowing us this venue.
    Mr. Whitfield. Yes, so do I. And I appreciate the staff for 
helping get this organized. And with that, we'll conclude this 
hearing.
    [Whereupon, at 12:17 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]




                                 
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