    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

         NEW SOURCE REVIEW PERMITTING CHALLENGES FOR MANUFACTURING AND
                                 INFRASTRUCTURE

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

                                    HEARING

                                   BEFORE THE

                          SUBCOMMITTEE ON ENVIRONMENT

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               FEBRUARY 14, 2018

                                   __________

                               Serial No. 115-100

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                             _________

                    U.S. GOVERNMENT PUBLISHING OFFICE

    30-134                 WASHINGTON : 2019

                        COMMITTEE ON ENERGY AND COMMERCE

                              GREG WALDEN, Oregon
                                     Chairman
    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
    MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
    STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
    ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
    CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
    GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
    LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
    DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
    ADAM KINZINGER, Illinois             PETER WELCH, Vermont
    H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
    GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
    BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
    BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
    LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
    BILL FLORES, Texas                   JOSEPH P. KENNEDY, III,
    SUSAN W. BROOKS, Indiana                 Massachusetts
    MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, CaliforniaL RUIZ,
    RICHARD HUDSON, North Carolina           California
    CHRIS COLLINS, New York              SCOTT H. PETERS, California
    KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan
    TIM WALBERG, Michigan
    MIMI WALTERS, California
    RYAN A. COSTELLO, Pennsylvania
    EARL L. ``BUDDY'' CARTER, Georgia
    JEFF DUNCAN, South Carolina

                          Subcommittee on Environment

                             JOHN SHIMKUS, Illinois
                                     Chairman
    DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
      Vice Chairman                        Ranking Member
    JOE BARTON, Texas                    RAUL RUIZ, California
    TIM MURPHY, Pennsylvania             SCOTT H. PETERS, California
    MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
    GREGG HARPER, Mississippi            DIANA DeGETTE, Colorado
    PETE OLSON, Texas                    JERRY McNERNEY, California
    BILL JOHNSON, Ohio                   TONY CARDENAS, California
    BILL FLORES, Texas                   DEBBIE DINGELL, Michigan
    RICHARD HUDSON, North Carolina       DORIS O. MATSUI, California
    KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex
    TIM WALBERG, Michigan                    officio)
    EARL L. ``BUDDY'' CARTER, Georgia
    JEFF DUNCAN, South Carolina
    GREG WALDEN, Oregon (ex officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................     1
        Prepared statement...........................................     3
    Hon. Paul Tonko, a Representative in Congress from the State of
      New York, opening statement....................................     3
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, opening statement......................................     5
        Prepared statement...........................................     6
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     7

                                   Witnesses

    Stuart Spencer, Associate Director, Arkansas Department of
      Environmental Quality, Office of Air Quality, on Behalf of the
      Association of Air Pollution Control Agencies..................     9
        Prepared statement...........................................    12
        Answers to submitted questions...............................   163
    Kevin Sunday, Director of Government Affairs, Pennsylvania
      Chamber of Business and Industry...............................    22
        Prepared statement...........................................    24
        Answers to submitted questions...............................   174
    Paul Noe, Vice President Public Policy, American Forest and Paper
      Association and American Wood Council..........................    38
        Prepared statement...........................................    40
        Answers to submitted questions...............................   177
    Emily Hammond, Glen Earl Weston Research Professor of Law, The
      George Washington University Law School........................    63
        Prepared statement...........................................    65
        Answers to submitted questions...............................   185
    John D. Walke, Clean Air Director, Natural Resources Defense
      Council........................................................    72
        Prepared statement...........................................    74
        Answers to submitted questions...............................   188
    Jeffrey R. Holmstead, Partner, Bracewell LLP.....................   104
        Prepared statement...........................................   106
        Answers to submitted questions...............................   208

                               Submitted Material

    United States Environmental Protection Agency memorandum, 2005
      \1\............................................................   133
    Article entitled, ``EPA's New Source Review Program: Time for
      Reform?'' Environmental Law Institute, 2017....................   148

    ----------
    \1\ The attachment to this document can be found at: https://
      docs.house.gov/meetings/IF/IF18/20180214/106852/HHRG-115-IF18-
      20180214-SD007.pdf.

         NEW SOURCE REVIEW PERMITTING CHALLENGES FOR MANUFACTURING AND
                                 INFRASTRUCTURE

                                  ----------

                          WEDNESDAY, FEBRUARY 14, 2018

                      House of Representatives,
                           Subcommittee on Environment,
                               Committee on Energy and Commerce
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 2:00 p.m., in
    room 2123 Rayburn House Office Building, Hon. John Shimkus
    (chairman of the subcommittee) presiding.
        Members present: Representatives Shimkus, McKinley, Olson,
    Johnson, Flores, Hudson, Cramer, Walberg, Carter, Walden (ex
    officio), Tonko, Ruiz, Peters, Green, McNerney, Dingell,
    Matsui, and Pallone (ex officio).
        Staff present: Mike Bloomquist, Deputy Staff Director;
    Allie Bury, Legislative Clerk, Energy/Environment; Kelly
    Collins, Staff Assistant; Wyatt Ellertson, Research Associate,
    Energy/Environment; Margaret Tucker Fogarty, Staff Assistant;
    Jordan Haverly, Policy Coordinator, Environment; A.T. Johnston,
    Senior Policy Advisor, Energy; Ben Lieberman, Senior Counsel,
    Energy; Mary Martin, Deputy Chief Counsel, Energy &
    Environment; Dan Schneider, Press Secretary; Austin
    Stonebraker, Press Assistant; Hamlin Wade, Special Advisor,
    External Affairs; Jean Fruci, Minority Energy and Environment
    Policy Advisor; Caitlin Haberman, Minority Professional Staff
    Member; Rick Kessler, Minority Senior Advisor and Staff
    Director, Energy and Environment; Alexander Ratner, Minority
    Policy Analyst; Andrew Souvall, Minority Director of
    Communications, Outreach and Member Services; C.J. Young,
    Minority Press Secretary; and Catherine Zander, Minority
    Environment Fellow.

      OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Shimkus. The Subcommittee on the Environment will now
    come to order. The chair recognizes himself for 5 minutes for
    an opening statement.
        Today's hearing examines the impact of the EPA's new source
    review air permitting program, commonly referred to as NSR.
        Congress created this preconstruction permitting program
    with the goal of protecting air quality by ensuring that the
    use of appropriate pollution control devices on new and
    modified source of emissions such as power plants, factories,
    and industrial facilities.
        As you can imagine, the NSR permitting program reaches
    across several industry sectors and has far-reaching impacts on
    America's economy and global competitiveness. For these
    reasons, it is incredibly important for us to ensure that the
    preconstruction permitting program is working effectively and
    efficiently.
        Unfortunately, history shows that there are too many
    instances where New Source Review Program is anything but
    effective and efficient.
        As we will hear from many of our witnesses today, over time
    the NSR program has become more costly and time consuming which
    not only slows economic growth but also hinders the nation's
    ability to modernize infrastructure.
        Under the existing NSR program, it can take multiple years
    and millions of dollars to obtain the preconstruction air
    permits required to begin construction on a new facility. This
    significant time delay and cost burden makes it more difficult
    and less likely for owners to invest in new projects and
    facilities.
        Not only is the NSR process costly and time consuming, it
    is also complex and uncertain. Right now, on the EPA's Web site
    there are nearly 700 posted guidance documents that an
    applicant may need to be aware of when seeking a
    preconstruction permit.
        Companies must hire teams of lawyers just understand the
    requirements and processes established under the NSR program.
    The end result of this complexity is that companies are afraid
    of incorrectly interpreting NSR requirements and violating the
    rules that they are hesitant to pursue projects that require an
    NSR preconstruction permit.
        In other words, the NSR program is holding back needed
    investment in the nation's infrastructure, industrial capacity,
    and manufacturing capabilities.
        One particularly frustrating effect of the NSR program is
    that it discourages owners from carrying out projects that
    would improve the environmental performance of their
    facilities.
        For example, if a company wants to perform efficiency
    upgrades to install new pollution control technology, they
    typically have to obtain a preconstruction permit through the
    NSR program.
        However, because the NSR program is so burdensome, many
    owners are choosing to avoid the NSR process and facility
    upgrades altogether and are instead continuing to operate
    older, less efficient, and dirtier facilities.
        Clearly, there are significant problems and shortcomings
    with how the NSR program is being carried out today. The goal
    of this hearing is to identify and understand the challenges
    connected to the NSR program so that we can begin considering
    potential reforms to improve the program.
        To assist our work, we will hear today from witnesses who
    can explain the challenges faced by manufacturers and industry
    seeking to expand operations.
        We will hear from a state regulator who can explain the
    role NSR program plays in protecting local air quality and we
    will also hear from NSR policy experts who can discuss options
    for how to reduce unnecessary NSR permitting burdens.
        I am confident that through targeted changes to the NSR
    program we can not only reduce the unnecessary burden imposed
    upon industry but also maintain and enhance the NSR program's
    important protections for the environment and public health.
        [The prepared statement of Mr. Shimkus follows:]

                    Prepared statement of Hon. John Shimkus

        Today's hearing examines the impact of the EPA's New Source
    Review air permitting program, commonly referred to as NSR.
    Congress created this preconstruction permitting program with
    the goal of protecting air quality by ensuring the use of
    appropriate pollution control devices on new and modified
    sources of emissions, such as power plants, factories, and
    industrial facilities.
        As you can imagine, the NSR permitting program reaches
    across several industry sectors and has far reaching impacts on
    America's economy and global competitiveness. For these
    reasons, it is incredibly important for us to ensure that the
    preconstruction permitting program is working effectively and
    efficiently. Unfortunately, history shows that there are too
    many instances where the current NSR program is anything but
    effective and efficient.
        As we will hear from many of our witnesses today, over time
    the NSR program has become more costly and time-consuming,
    which not only slows economic growth but also hinders the
    nation's ability to modernize infrastructure. Under the
    existing NSR program, it can take multiple years and millions
    of dollars to obtain the preconstruction air permits required
    to begin construction on a new facility. This significant time
    delay and cost burden makes it more difficult and less likely
    for owners to invest in new projects and facilities.
        Not only is the NSR process costly and time-consuming, it
    is also complex and uncertain. Right now on the EPA's Web site,
    there are nearly 700 posted guidance documents that an
    applicant may need to be aware of when seeking a
    preconstruction permit. Companies must hire teams of lawyers
    just to understand the requirements and processes established
    under the NSR program. The end result of this complexity, is
    that companies are so afraid of incorrectly interpreting NSR
    requirements and violating the rules that they are hesitant to
    pursue projects that require an NSR preconstruction permit. In
    other words, the NSR program is holding back needed investment
    in the nation's infrastructure, industrial capacity, and
    manufacturing capabilities.
        One particularly frustrating effect of the NSR program, is
    that it discourages owners from carrying out projects that
    would improve the environmental performance of their
    facilities. For example, if a company wants to perform
    efficiency upgrades or install new pollution control
    technology, they typically have to obtain a preconstruction
    permit through the NSR program. However, because the NSR
    program is so burdensome, many owners are choosing to avoid the
    NSR process and facility upgrades altogether, and are instead
    continuing to operate older, less efficient, dirtier
    facilities.
        Clearly there are significant problems and shortcomings
    with how the NSR program is being carried out today. The goal
    of this hearing is to identify and understand the challenges
    connected to the NSR program so that we can begin considering
    potential reforms to improve the program.
        To assist our work, we will hear today from witnesses who
    can explain the challenges faced by manufacturers and industry
    seeking to expand operations. We will hear from a state
    regulator who can explain the role the NSR program plays in
    protecting local air quality and we will also hear from NSR
    policy experts who can discuss options for how to reduce
    unnecessary NSR permitting burdens.
        I am confident that through targeted changes to the NSR
    program, we can not only reduce the unnecessary burden imposed
    upon industry, but also maintain and enhance the NSR program's
    important protections for the environment and public health.

        And with that, I'd like to yield--so I will turn to the
    minority--are you ready to go? I would like to recognize the
    ranking member of the subcommittee, Mr. Tonko, for 5 minutes.

       OPENING STATEMENT OF HON. PAUL TONKO, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF NEW YORK

        Mr. Tonko. Thank you, Mr. Chair, and thank you to our
    witnesses for being here today.
        Today's hearing will examine EPA's new source review
    permitting program. As we have discussed on many occasions in
    this subcommittee, under the Clean Air Act, EPA is required to
    set health-based national ambient air quality standards, or
    NAAQS, for six criteria pollutants.
        As more medical and scientific evidence has come to light,
    NAAQS have been adjusted accordingly to ensure they continue to
    be protective of our health.
        Since the passage of the Clean Air Act, our nation has
    experienced the drastic reduction in these air pollutants, all
    while our economy has grown tremendously.
        It is beyond dispute that air pollution has serious health
    and economic consequences. When people are sick, hospitalized,
    and miss school are work we are a less productive society.
        The new source review program plays an important role to
    ensure that new and modified major sources use the appropriate
    pollution controls to limit emissions of criteria pollutants.
        This includes the best available controlled technology and
    locations with relatively clean air known as prevention of
    significant deterioration to ensure these areas continue to
    maintain healthy levels of air quality.
        For areas in nonattainment of a NAAQS this includes the
    lowest achievement emissions rate along with appropriate
    offsets from other existing sources. This is known as
    nonattainment new source review.
        The Clean Air Act has been successful because it is
    premised on making progress over time. We have made major
    strides in reducing pollution as our understanding of the
    health risks posed by dirty air has become more sophisticated.
        That is why I was pleased to see EPA's Web site recognized
    February as American Heart Month. EPA has some useful heart
    health statistics such as heart disease and stroke are the
    first and fourth leading causes of death in the United States.
        Air pollution can affect heart health and can trigger heart
    attacks and strokes that cause disability and death. One in
    three American adults has heart or blood vessel disease and is
    at higher risk from air pollution.
        It is critical that we acknowledge and educate people on
    the role air pollution plays in exacerbating heart disease,
    asthma, and other respiratory illnesses.
        So while EPA's Web site has taken steps to connect the dots
    between air pollution and threats to Americans' health, the
    actions by Administrator Pruitt and Assistant Administrator
    Wehrum have been troubling.
        On December 7th, Administrator Pruitt issued a memorandum
    with a new approach to implementation and enforcement of the
    new source review program.
        EPA will no longer review the permanent applicant's
    emissions projections nor will the agency enforce against an
    applicant that provides invalid estimates.
        In some cases, this lax attitude on enforcement will have
    consequences in downwind states, far away from the original
    permitting authority.
        And while not the subject of today's hearing, another data
    point from January 25th, Assistant Administrator Wehrum
    reversed EPA's longstanding once in always in policy for major
    source MACT requirements.
        Both decisions will review--will result, rather, in greater
    air pollution, and the new source review task force seems to be
    little more than a brainstorming session on how to evade air
    pollution controls rather than actually building a public
    record on how the program might be improved.
        Progress over time means ensuring we don't backslide and,
    sadly, I believe the direction of this EPA will cause us to do
    just that.
        My district and many great towns and cities across this
    country were built by manufacturers. But when many of those
    facilities were built, we didn't fully understand the
    consequences of dirty air. We didn't know that one in three
    American adults has heart or blood vessel disease and is at
    higher risk from air pollution.
        We know better today. Our health and environmental
    safeguards should reflect that. We shouldn't have to ask our
    constituents to bear all the costs of air pollution, especially
    not when they are--when there are effective and well understood
    pollution controls.
        I would urge EPA's leadership to stop going down this path
    and consider how the--how to best improve and preserve air
    quality.
        So again, I thank you. I thank the witnesses for being here
    and helping us better understand some of the potential changes
    to the new source review program.
        And with that, Mr. Chair, I yield back.
        Mr. Shimkus. Gentleman yields back his time.
        The chair now recognizes the chairman of the full
    committee, Mr. Walden for Oregon, for 5 minutes.

      OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF OREGON

        Mr. Walden. I thank the gentleman and appreciate the
    witnesses being here today. We look forward to your testimony.
        As we all know, the purpose of the Clean Air Act is, and I
    quote, to protect and enhance the quality of the nation's air
    resources, to promote the public health and welfare and the
    productive capacity of its population, closed quote.
        So in today's hearing, we will highlight the necessity to
    ensure the rules to protect and improve air quality, promote
    both of these core objectives.
        Effective clean air regulations should allow the nation to
    continue to expand its manufacturing and industrial capacity.
    But these goals are undermined when regulatory requirements no
    longer reflect practical reality.
        As a result, American communities are deprived of both
    continued environmental improvements and economic prosperity.
    The new source review permitting process serves as a case in
    point.
        Permitting requirements under EPA's NSR program have
    evolved in complexity and confusions as the program began in
    the 1970s and as a result complex preconstruction planning
    requirements present unnecessary delays and impediments to the
    expansion of manufacturing and industrial facilities.
        As we will hear in the testimony today, the complexity of
    the NSR process permitting time delays and regulatory
    uncertainty create powerful incentives to forego needed project
    upgrades even in areas that meet current air quality standards.
        And for other communities NSR complexity raises costs and
    otherwise harms the prospects for economic expansion and
    increased environmental benefits.
        In fact, the burdens associated with NSR can lead to
    communities losing the emissions benefits offered by more
    efficient modern technologies.
        Prineville, Oregon--that's in my district. Home to data
    centers for Facebook and Apple. Recently, a proposed data
    center expansion ran headlong into a permitting issue because
    of potential backup generator emissions.
        A single air sampling location, just one, and restrictive
    air quality rules made it unclear whether or not the expansion
    could go forward. It was only after the city persuaded the EPA
    to add an additional sampling location that they were then able
    to resolve the issue.
        That instance involved hundreds of millions of dollars in
    investments and hundreds of construction jobs. Multiply that by
    the thousands of projects waiting to take off around the
    nation--around the nation in response to our reformed tax
    structure and the urgency of addressing NSR problems becomes
    apparent.
        I would also say that when you're dealing with companies
    the capital and intellectual capacity of Facebook and Apple
    they are probably better positioned to challenge some of these
    issues.
        The witnesses today, you all bring a range of perspectives
    on the NSR permitting process. We appreciate your willingness
    to help us understand the challenges of the current process and
    what we can do to improve upon it.
        Our goal is to develop responsible targeted reforms that
    will provide for economic growth while maintaining the
    environmental protections we all agree are important. Doing
    this will ultimately benefit all American workers and
    consumers.
        [The prepared statement of Mr. Walden follows:]

                     Prepared statement of Hon. Greg Walden

        The purpose of the Clean Air Act is ``to protect and
    enhance the quality of the Nation's air resources to promote
    the public health and welfare and the productive capacity of
    its population.''
        With today's hearing, we will highlight the necessity to
    ensure the rules to protect and improve air quality promote
    both core objectives.
        Effective clean air regulations should allow the nation to
    continue to expand its manufacturing and industrial capacity.
    But these goals are undermined when regulatory requirements no
    longer reflect practical reality. As a result, American
    communities are deprived of both continued environmental
    improvements and economic prosperity.
        The New Source Review permitting process serves as a case
    in point. Permitting requirements under EPA's NSR program have
    evolved in complexity and confusion since the program began in
    the 1970s. As a result, complex pre-construction planning
    requirements present unnecessary delays and impediments to the
    expansion of manufacturing and industrial facilities.
        As we will hear in testimony this morning, the complexity
    of the NSR process, permitting time delays, and regulatory
    uncertainty, create powerful incentives to forego needed
    project upgrades, even in areas that meet current air quality
    standards.
        And for other communities, NSR complexity raises costs and
    otherwise harms the prospects for economic expansion and
    increased environmental benefits. In fact, the burdens
    associated with NSR can lead to communities losing the
    emissions benefits offered by more efficient modern
    technologies.
        Prineville, Oregon in my district is home to data centers
    for Facebook and Apple. Recently, a proposed data center
    expansion ran headlong into permitting issues because of
    potential backup generator emissions. A single air sampling
    location and restrictive air quality rules made it unclear
    whether the expansion could go forward. It was only after the
    city persuaded EPA to add an additional sampling location that
    they were able to resolve the issue.
        That instance involved hundreds of millions of dollars in
    investments and hundreds of construction jobs. Multiply that by
    the thousands of projects waiting to take off around the nation
    in response to our reformed tax structure and the urgency of
    addressing NSR problems becomes apparent.
        The witnesses today will bring a range of perspectives on
    NSR permitting to help us examine the challenges with the
    current process. I'm hopeful we can begin to identify practical
    reforms to ensure that the NSR program serves its environmental
    planning purpose while still allowing for economic expansion
    and infrastructure modernization.
        Our goal, is to develop responsible, targeted reforms that
    will provide for economic growth, while maintaining
    environmental protections. Doing this will ultimately benefit
    all American workers and consumers.

        I know Mrs. Blackburn is hoping to have a little time but
    she is not here. So with that, I will yield back.
        Mr. Shimkus. The gentleman yields back his time.
        The chair now recognizes the ranking member of the full
    committee, the gentleman from New Jersey for 5 minutes.

    OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pallone. Thank you, Mr. Chairman.
        We are here today to discuss one of the Clean Air Act's
    oldest and most debated programs, the New Source Review
    program. It's based on a simple principle--any new facility
    that emits pollutants should not increase local air pollution
    above levels that are safe to breathe.
        The NSR program ensures that we have growth in the economy
    and not in pollution. In December, Administrator Pruitt issued
    a memorandum altering longstanding NSR policy using an active
    case as justification for the change.
        The case was U.S. vs. DTF Energy Company, or DTE Energy
    Company, and the December memo actually reads as if it were
    prepared by DTE's legal team. I can't say that comes as a
    complete shock to me since Bill Wehrum, the man Administrator
    Pruitt put in charge of the office that drafted the memo, was
    previously part of DTE's legal team.
        The new policy is as suspect as the process used to
    initiate it. It will gut enforcement of the NSR program to the
    benefit of certain companies at the expense of the public
    health and companies that have cleaned up their act. The eight-
    page memo lays out a policy that invites polluters to skirt the
    law and dump tons of harmful pollution on our communities.
        Essentially, it's a recipe instructing polluters how to
    cook the books and get out from under the need for a permit
    under the NSR program.
        And this is certainly not a perfect program, but it has
    helped reduce harmful air pollution and improve public health,
    especially for people living in the communities close to these
    facilities. All of these gains will erode rapidly if we stay on
    the course this administration is following.
        Too many old facilities have already used loopholes to game
    the system and avoid cleaning up the pollution. Certainly there
    are challenges to those existing facilities. But the Clean Air
    Act never intended for them to be exempt from the NSR program
    forever.
        Also, it's important to remember that pollution control is
    zero sum game. Therefore, under Administrator Pruitt's NSR
    scheme, states and localities will have to make those that have
    played by the rules achieve greater pollution reduction in
    order to offset the excess pollution created by businesses that
    EPA is essentially allowing to go unregulated.
        And that's particularly outrageous to those of us who
    represent downwind states. We are tired of having to compensate
    for the lack of pollution control in neighboring states.
        The EPA should not be making life easier for polluters. The
    agency should do its job and ensure that lax implementation and
    enforcement in one state doesn't burden others.
        Now, Republicans argue that we need to ease the NSR program
    to expand manufacturing and infrastructure. But new
    manufacturing facilities aren't being held back by clean air
    requirements.
        Weakening the Clean Air Act is not going to create jobs.
    The fact is that the so-called NSR program improvements being
    suggested today by my Republican friends are not new ideas.
    They are just a bunch of toxic old policies bundled up in a
    heart-shaped box as a Valentine's Day present to polluters.
        Industry has been trying to get out from under this program
    for a long time and it looks like Scott Pruitt and the
    Republicans are working hard to try to grant their wish.
        But make no mistake, the Valentine's Day gift from Pruitt
    and Republicans gives polluters all the roses and sticks the
    public with the thorns. We would reject these policies that
    will harm the public health.
        Unless someone else wants my time on my side, I'll yield
    back, Mr. Chairman.
        Mr. Shimkus. The gentleman yields back the balance of his
    time.
        Do you have a new writer?
        Mr. Pallone. I don't know. I----
        Mr. Shimkus. That was pretty good.
        [Laughter.]
        Mr. Pallone. --I thought it was pretty good, myself.
        We now conclude with members' opening statements. The chair
    would like to remind members that pursuant to committee rules,
    all members' opening statements will be made part of the
    record.
        We want to thank all our witnesses for being here today and
    taking the time to testify before the subcommittee. Today's
    witnesses will have the opportunity to give opening statements
    followed by a round of questions from the members.
        Our witnesses--panelists for today's hearing will include,
    from my left to right, Mr. Stuart Spencer, who is associate
    director, Office of Air Quality, Arkansas Department of
    Environmental Quality, testifying on behalf of the Association
    of Air Pollution Control Agencies; Mr. Kevin Sunday, director
    of government affairs, Pennsylvania Chamber of Commerce
    Business and Industry; Mr. Paul Noe, vice president, public
    policy, American Forest and Paper Association and American Wood
    Council; Emily Hammond, Glen Earl Weston research professor of
    law, the George Washington University Law School; John Walke,
    clean air director, Natural Resources Defense Council; and a
    friend of ours from years past, Jeffrey Holmstead, who is a
    partner at Bracewell.
        So with that, we'd like to begin our testimony and we will
    begin with Mr. Spencer. Your entire record is in the file. You
    have 5 minutes and you can begin.

      STATEMENTS OF STUART SPENCER, ASSOCIATE DIRECTOR, ARKANSAS
    DEPARTMENT OF ENVIRONMENTAL QUALITY, OFFICE OF AIR QUALITY, ON
     BEHALF OF THE ASSOCIATION OF AIR POLLUTION CONTROL AGENCIES;
      KEVIN SUNDAY, DIRECTOR OF GOVERNMENT AFFAIRS, PENNSYLVANIA
      CHAMBER OF BUSINESS AND INDUSTRY; PAUL NOE, VICE PRESIDENT
       PUBLIC POLICY, AMERICAN FOREST AND PAPER ASSOCIATION AND
    AMERICAN WOOD COUNCIL; EMILY HAMMOND, GLEN EARL WESTON RESEARCH
    PROFESSOR OF LAW, THE GEORGE WASHINGTON UNIVERSITY LAW SCHOOL;
     JOHN D. WALKE, CLEAN AIR DIRECTOR, NATURAL RESOURCES DEFENSE
         COUNCIL; JEFFREY R. HOLMSTEAD, PARTNER, BRACEWELL LLP

                      STATEMENT OF STUART SPENCER

        Mr. Spencer. Thank you.
        Good afternoon, Chairman Shimkus, Ranking Member Tonko, and
    distinguished members of the subcommittee. I appreciate the
    invitation to join you today to discuss the important issue of
    New Source Review reform.
        I am here in two capacities. First, I am here as an
    associate director of the Arkansas Department of Environmental
    Quality. Our Office of Air Quality staff includes
    epidemiologists, engineers, ecologists, chemists, biologists, a
    meteorologist, and a lawyer in the primary branches of
    compliance, permits, policy, and planning in asbestos and
    enforcement.
        Our primary mission is to protect and improve air quality
    in Arkansas while fostering responsible economic expansion
    opportunities.
        Second, I am here as the president of the Association of
    Air Pollution Control Agencies, or AAPCA. AAPCA is a consensus-
    driven organization comprised of 45 state and local air
    agencies.
        The AAPCA board of directors is made up of the air
    directors from our 20 geographically diverse member states
    including states with representation on this subcommittee.
        As AAPCA's president, I serve on the board of the directors
    along with air directors from states as diverse as Wyoming,
    Maine, South Carolina, and Arizona, and despite the miles
    between our state borders, we have common goals and missions.
        Today, I will be addressing a few common themes in regard
    to NSR reform. The first thing is practical application.
        Environmental regulations should encourage necessary repair
    in replacement projects and should incentivize projects that
    improve the safety of operations increase energy efficiency or
    reduce the emissions of regulated air pollutants.
        The second theme is clarity. This includes removing
    undefined terms and exemptions such as routine maintenance and
    nonroutine modification from the NSR rules and guidance and
    replacing them with clear definitions.
        A prime example would also be refining the term
    modification to truly mean a substantial change. An ambiguous
    or muddy rule inhibits planning due to its lack of certainty
    and therefore stifles growth and innovation.
        This leads me to my final theme, modernization. NSR is
    outdated and cumbersome. The documents that comprise the NSR
    rules in the guidance take up at least two file boxes if
    printed out in hard copy form.
        The time to reform was yesterday so I am glad we are having
    this conversation today.
        With those themes in mind, I will speak first as the
    associate director of ADEQ. The Office of Air Quality
    implements all programs delegated by EPA Region 6 to the state
    of Arkansas.
        Under the leadership of one of your former colleagues and
    now governor of Arkansas, Asa Hutchinson, and ADEQ Director
    Becky Keogh, Arkansas has committed to protective permitting.
        This practice is essential to achieving our goals of
    maintaining our status as the natural state, protecting public
    health and the environment in our communities and promoting and
    sustaining economic growth.
        The Arkansas NSR program follows the federal program. ADEQ
    believes that the NSR rules should be clear and concise to
    allow companies to achieve compliance and ensure that both ADEQ
    and our regulated community have a well-defined understanding
    of what is required by the program.
        Arkansas believes that changes to the NSR program would
    support its efforts to ensure that our regulated community and
    the companies in our communities are in compliance with the
    rules and do not become subject to enforcement actions based on
    rule interpretations that are either not well defined or
    continue to evolve.
        For these reasons, we appreciate that EPA intends to tackle
    NSR reform again. The 2002 NSR reform rule was helpful but it
    did not go far enough to clarify the program and provide
    certainty to regulators and the regulated community.
        So based on these points that I've made, any efforts to
    modernize and reform NSR reform--NSR, particularly the upcoming
    EPA-directed NSR task forum discussions should address the
    following issues.
         Number one; revise the emission increase test under NSR to
    match the hourly test under New Source Performance Standards--
    our NSPS program.
        This would eliminate and streamline many of the issues with
    the current program. Many of the other changes could be avoided
    or simplified if NSR applicability was based on an increase in
    maximum achievable emission rates rather than annual tons.
        Next, clarify the factors to be considered in determining
    whether a project is a routine maintenance repair or
    replacement activity.
        Next, create an exemption from NSR for efficiency projects.
    The current program is a disincentive to companies undertaking
    projects to make their operations more efficient.
        Next, codify the information in EPA Administrator Scott
    Pruitt's December 7th, 2018 memo that EPA will not second guess
    a facility's emissions projections and clearly identify the
    circumstances when an emissions projection will be subject to
    review.
        Next, clarify the definition of a source in order to ensure
    that geographically separate sources are not artificially
    combined or aggregated to create a single major source for NSR
    purposes.
        And finally, clearly identify what types of projects should
    be considered as changes in the method of operation.
        Thank you for your time again today and I am available to
    answer any questions upon request.
        Thank you.
        [The statement of Mr. Spencer follows:]

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        Mr. Shimkus. Thank you. Excellent.
        I now turn to Mr. Kevin Sunday. You are recognized for 5
    minutes.

                       STATEMENT OF KEVIN SUNDAY

        Mr. Sunday. Good afternoon, Mr. Shimkus, Mr. Tonko, and
    members of the committee.
        My name is Kevin Sunday, director of government affairs
    with the Pennsylvania Chamber of Business and Industry. It's an
    honor to appear before you today to discuss the challenges our
    members have had when it comes to complying with New Source
    Review requirements.
        Our nearly 10,000 member companies are of all sizes and
    across all industry sectors. We, as an organization, seek
    stewardship of our nation's land, air, and water and we seek to
    provide thoughtful and balanced ways in which we can continue
    to reduce our environmental impacts and grow the economy.
        Thanks to tax reform and the prolific supply of our natural
    resources in nuclear, coal, gas, oil, and renewables we have
    before us a generational opportunity to invest in our
    workforces, our infrastructure, and our future.
        And we applaud the members of the House of Representatives
    and the United States Senate who took a bold stand for growth
    and sent the Tax Cut and Jobs Act to the president's desk for
    his signature last year, and we thank our senator, Pat Toomey,
    for his leadership in getting that bill through the Senate.
        In the short time since that bill was enacted, employers
    across the country have announced plans to increase hiring and
    wages, and it is expected that in the near term consumer
    spending and economic growth will increase considerably, as
    much as 4 percent on an annualized basis according to the
    Atlanta Fed.
        As the economy grows, capital is going to be repatriated
    and rates on employers come down. Manufacturers and businesses
    have a generational opportunity to secure global competitive
    advantage by reinvesting into their facilities, enhancing their
    sustainability profiles, and expand to capture a share of the
    growing economy, provided, of course, that regulatory
    obligations do not present unnecessary hurdles.
        What energy means to Pennsylvania and the region is
    significant. We are part of an endeavor called Forge the
    Future, which forecasts $60 billion in state GDP and 100,000
    new jobs because of energy assets.
        The Appalachian region at large including Pennsylvania,
    Ohio, West Virginia, and Kentucky could become a petrochemical
    and plastics manufacturing hub and, according to the American
    Chemistry Council, more than $28 billion in economic expansion
    and more than 100,000 new jobs could be created should the
    region capitalize on an ethane storage project and secure the
    construction and operation of several petrochemical plants.
        However, these projects too must wind through the
    permitting process to become reality. Our manufacturers in
    Pennsylvania have reported that the current NSR process is an
    impediment to investing in the efficiency of their operations
    and improve their ability to compete abroad.
        Because of the costs associated with crossing NSR
    thresholds, companies have shelved projects that would have
    reduced their emissions and their operating costs.
        Disputes between state and federal regulators over the
    interpretation and application of regulatory criteria have
    resulted in sizeable legal and engineering costs and left
    projects in limbo for months if not years.
        Lenders will not sign off on financing until the revolving
    door of lawsuits from third party groups over the perpetually
    changing universe of BACT and LAER control stops spinning.
        Economic growth and environmental progress depend upon a
    well functioning and rational regulatory system and the NSR
    program as it is being administered show signs of being
    neither.
        From a land use perspective alone, it's illogical that we
    would have a regulatory program that would encourage building
    entirely new facilities, oftentimes outside the U.S., when
    existing mothballs--when existing plants are being mothballed
    and retired that could have been upgraded. And how much has the
    closure of large-scale manufacturers in this country led to the
    flat electricity demand that has so troubled the power
    generation and utilities sectors.
        So that's why we applaud EPA Administrator Scott Pruitt and
    his team at EPA for the December 7th memo that clarifies how
    NSR requirements should be interpreted and applied.
        That's a crucial first step to reform of the program and we
    look forward to additional progress on that front.
        The National Federation of Independent Businesses yesterday
    came out and said a record number of small businesses believe
    now is a good time to expand.
        We believe we can ill afford to waste this opportunity in
    front of us by leaving up barriers to growth. We have the
    opportunity to make our regulatory process more efficient,
    allow our companies to invest, and reduce their environmental
    footprint and waste less of our natural resources.
        And if we don't capitalize on that opportunity, that's a
    failure. It's bad for business and it's bad for the
    environment.
        Instead, let us pursue stewardship of our natural resources
    and secure economic growth in a thoughtful responsible manner
    and that starts with NSR reform.
        Thank you.
        [The statement of Mr. Sunday follows:]

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        Mr. Shimkus. The chair thanks you.
        The chair now recognizes Mr. Paul Noe. You're recognized
    for 5 minutes.

                         STATEMENT OF PAUL NOE

        Mr. Noe. Chairman Shimkus, Ranking Member Tonko, and
    distinguished members of the committee, on behalf of the
    American Forest and Paper Association and the American Wood
    Council, I want to thank you for the opportunity to be here to
    discuss the challenges posed by EPA's NSR program for the
    forest products industry and to provide our perspectives on how
    it can be improved.
        This is consistent with the twin purposes of the Clean Air
    Act, which is to promote public health and welfare as well as
    the productive capacity of our nation.
        Unfortunately, NSR is an outdated, inefficient, and slow
    regulatory approach that currently just doesn't work very well
    for existing sources and it's impeding modernization and growth
    in the U.S. manufacturing sector.
        It just doesn't make sense to discourage upgrading plants
    already subject to a myriad of other regulatory requirements or
    to block beneficial projects using best controls simply due to
    unrealistic air quality modelling and assumptions.
        Our country has made great strides in improving air
    quality, largely under other programs. To borrow from my friend
    and former EPA general counsel Don Elliott when he testified
    before Congress 15 years ago on the need for NSR reform, quote,
    ``NSR is slow, costly, and ineffective, and those are the
    kindest things that one can say about it. It is the least
    successful of all the programs under the Clean Air Act.''
        The reality is that energy efficiency and modernization
    projects for existing sources are delayed, modified, or
    thwarted by complex NSR interpretations that have accumulated
    and evolved over time.
        The program requires expensive but unrealistic air
    modelling that frequently delays projects and can cost $100,000
    or more to complete. Unreasonable permitting delays tie up
    investment capital and undermine the economic benefits from
    expansion projects.
        There are many ways EPA could improve the permit process
    but let me focus on two key points. First, consistent with this
    statute, EPA should focus the NSR program on larger projects
    that really have a greater potential to impact air quality.
        Changing the NSR applicability criteria could reduce
    unnecessary workload on permitting agencies and create business
    certainty and positive incentives without jeopardizing air
    quality.
        For example, currently the NSR regulations use a two-step
    calculation process to determine of a project is subject to
    NSR. The emissions increases from a project are calculated
    first to see if they are significant before any decreases are
    subtracted.
        This step one then step two analysis is complicated,
    expensive, and time consuming. By simply allowing increases and
    decreases to be netted projects with emissions below
    significant levels could proceed.
        Second, once a project truly does trigger a higher level of
    scrutiny, EPA ought to use realistic assumptions and analytic
    tools, including probabilistic air quality modelling
    approaches.
        This is needed now more than ever because there is little
    room for error. This is because in recent years EPA has lowered
    the national ambient air quality standards close to background
    levels.
        This has left little room for permits, even in attainment
    areas. In the past, when NAAQS for PM or SO2 or nitrogen
    dioxide were higher, if you looked at that versus the ambient
    level in emissions from the nearby sources and the facilities
    exposures, there was enough room or head room, as we call it,
    for a permit.
        The problem seriously exacerbated by many of EPA's current
    policy approaches and modelling tools which significantly over
    predict impacts from facilities, especially when a series of
    unrealistic assumptions are compounded.
        So it's critical that the modelling results reflect the
    reality of local air quality.
        For example, EPA's current modelling guidelines have an
    expansive interpretation of where the general public must be
    protected from nearby plant emissions.
        Rather than focussing on where people actually are, it is
    assumed that ambient air is anywhere a person theoretically
    could be such as by illegally trespassing at the facility or
    where the general public in reality could not be, such as
    standing on a railroad or a road that runs through the
    facility.
        Overly conservative modelling analysis can lead to
    unverifiable and nonexistent concentration estimates that cause
    costly changes or cancellations of beneficial projects, even
    though real-world exposure to the general public around these
    locations is minimal, improbable, or even impossible.
        Therefore, EPA should issue new guidance to update its
    policies for placing receptors considering natural, manmade, or
    jurisdictional barriers.
        Although forest products mills typically are located in
    attainment areas with better quality, they face problems as
    soon as NAAQS are issued because they're immediately effective
    and EPA has compounded the confusion and delay by not providing
    implementation and modelling guidance until after the NAAQS are
    issued.
        I don't believe Congress intended this confusion and delay
    when it enacted the act and I believe the U.S. is the best
    place in the world for a robust manufacturing sector. We have
    the best workers in the world.
        We have created entrepreneurs and innovators. We have
    abundant resources. We have a strong free-market democracy and
    we have regulatory agencies that are capable of leading the
    world on sustainable regulation.
        Thank you, Mr. Chairman.
        [The statement of Mr. Noe follows:]

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        Mr. Shimkus. The gentleman's time is expired.
        The chair now recognizes Emily Hammond. You're recognized
    for 5 minutes.

                       STATEMENT OF EMILY HAMMOND

        Ms. Hammond. Thank you, Chairman Shimkus, Ranking Member
    Tonko, and distinguished members of the subcommittee.
        One year ago almost to the day, I testified before this
    subcommittee about the many health and environmental benefits
    of clean air protections and I cautioned against efforts to
    roll back progress achieved over decades of hard work.
        Today, I urge you to scrutinize recent actions by EPA that
    amount to nothing short of an abnegation of the agency's
    statutory responsibilities and I emphasize once more that human
    lives and our economy are at stake.
        The Clean Air Act is a technical and complex statute but
    two of its basic policies are straightforward. First, it is
    meant to clean up dirty air.
        Second, it aims to keep clean air clean. By keeping in mind
    these first principles, it's easy to see what's wrong with
    EPA's current approach.
        New Source Review makes sure that new or modified sources
    of air pollution use the right technology so that in areas
    where poor air quality harms human health, we can improve over
    time.
        And in areas where air quality meets human health
    standards, New Source Review guards against creating a new
    public health problem with new uncontrolled air pollution.
        But on December 7th of this past year, the same day that
    EPA Administrator Scott Pruitt testified to this subcommittee
    that EPA should not issue guidance documents, he issued a
    guidance document that promises to polluters that EPA won't
    check the work of those major polluters when they decide
    whether New Source Review is necessary.
        This approach opens a gaping hole in the statutory design
    and it violates fundamental principles of good governance and
    legitimacy.
        The president, Administrator Pruitt, and members of
    Congress have all spoken against the perils of overreach when
    agencies make major policies through nondemocratic procedures.
        Yet, the December 7th guidance does just that. When an
    agency adopts a policy so blatantly contrary to its mandate and
    does so without any public input, that action lacks legitimacy.
        In the words of the Supreme Court in Heckler v. Chaney, the
    agency has consciously and expressly adopted a general policy
    that is so extreme as to amount to an abdication of its
    statutory responsibilities.
        This institution should hold EPA to task, not give it cover
    to make our air dirtier. And what is at stake? The lives of
    people across our country and the benefits of economic growth.
        You will hear a lot from industry about the costs of clean
    air protections and the supposed impediments clean air poses to
    economic growth. But they won't tell you about the attendant
    benefits because the numbers are so compelling.
        Between 1970 and 2011, aggregate emissions of air
    pollutants dropped 68 percent while the U.S. gross domestic
    product increased 212 percent.
        During that same period, private sector jobs increased by
    88 percent. Our population has increased. We have used more
    energy. We have built more infrastructure, all while improving
    our environment.
        Consider as well that major regulations issued by EPA
    undergo a rigorous cost-benefit analysis. EPA is required to
    follow Office of Management and Budget accounting principles
    and assess both the costs and the benefits of regulations.
        Many researchers have concluded that these constrained
    analyses vastly understate the benefits of environmental
    regulations. So the values I am about to describe should be
    understood as very conservative.
        Even with this caveat, the results are compelling. A 2011
    peer-reviewed study showed that the benefits of the 1990 Clean
    Air Act amendments and implementing regulations exceed the
    costs by a factor of more than 30 to 1.
        The 2011 study also revealed that EPA's Clean Air Act rules
    saved over 164,000 lives in 2010 and are projected to save
    237,000 lives in 2020.
        These same rules saved millions of days of lost work and
    missed school and will continue to do so. Further, since EPA
    began regulating lead as a criteria pollutant under the NAAQS
    program, the median concentration of lead in the blood of
    children between one and 5 years old has decreased 93 percent.
        These numbers speak for themselves and they demonstrate
    that those who would roll back clean air protections have set
    up a false choice. Clean air and economic growth do indeed go
    hand in hand.
        Thank you.
        [The statement of Ms. Hammond follows:]

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        Mr. Shimkus. The chair thanks the gentlelady.
        And now the chair recognizes, and I mispronounce the last
    name--Mr. Walke. You're recognized for 5 minutes. I apologize
    for that.

                       STATEMENT OF JOHN D. WALKE

        Mr. Walke. You got my first name right so that's good.
    Thank you.
        Thank you, Chairman Shimkus, Ranking Member Tonko, and
    distinguished members. My name is John Walke and I am clean air
    director and a senior attorney for the Natural Resources
    Defense Council.
        Any so-called reform to the Clean Air Act's New Source
    Review program first should answer one simple question--will it
    let industry pollute more.
        In my experience, unfortunately, the answer to that
    question is usually yes. That is the case for changes to New
    Source Review safeguards that industries comment--that industry
    commenters are seeking from the Trump administration.
        That is also the case for changes sought in testimony by
    other witnesses at today's hearing apart from Professor
    Hammond's. Many of the requested changes would let industry
    pollute more by significantly higher amounts and in the process
    evade pollution controls and pollution offsets.
         Insufficient political attention and concern are being
    given to the problems with a tax on clean air safeguards. In a
    2017 Gallup poll, 67 percent of Americans favor setting higher
    emission standards for industry. In that same poll, 69 percent
    of Americans favor stronger enforcement of federal
    environmental regulations.
        New Source Review is a Clean Air Act preconstruction
    permitting program that imposes cleanup requirements only when
    industries--industrial facilities significantly increase air
    pollution.
        I urge you to remember that pollution increase trigger
    during today's hearing. Attempts to evade NSR applicability
    translate into the ability to increase air pollution
    significantly without control.
        Taking evasion that would allow huge air pollution increase
    is reflected in two bills referred to this committee--H.R. 3127
    and H.R. 3128.
        Several witnesses endorse the bill and the approach
    contained therein, which would allow huge air pollution
    increases so long as a source did not increase its capacity to
    pollute only by exceeding an extraordinarily high maximum
    hourly emissions rate plucked from its past history.
        One of the problems here is comparable to saying police
    should never fine drivers to be speeding if they don't exceed
    the maximum speed they have ever driven.
        The second problem is even worse. By weakening the law so
    extremely, to ask only whether a polluting facility exceeded
    its maximum capacity to pollute, this concept would allow
    massive enormous increases in actual emissions of harmful air
    pollution in the real world.
        Americans care about increases in actual pollution that
    worsens air quality and harms their health, not whether a plant
    exceeds its polluting capacity.
        For the parents of a child being rushed to the ER due to an
    asthma attack caused by massive pollution increases from a
    nearby plant, it is not solace to tell them that the higher
    pollution levels that choked their daughter's breathing did not
    result from the plant exceeding its maximum hourly emission
    rate.
        How bad could these pollution increases be? Well, under the
    Bush administration when Mr. Holmstead worked there, EPA's
    enforcement office calculated the weakening effect of a maximum
    hourly emissions rate approach.
        In just one power plant example, the plant increased its
    toxic sulfur dioxide pollution by 13,000 tons per year without
    exceeding this maximum rate. That is 327 times higher than the
    level that the law considers significant and subject to control
    today.
        My testimony identifies an astonishing number of coal-
    burning power plants that still lack air pollution--modern air
    pollution controls today or that are uncontrolled and these two
    bills and the approaches sought by some of the members of this
    panel would make that even worse by allowing emissions
    increases of thousands and even increases in excess of 10,000
    tons.
        No acceptable NSR reform should give an affirmative answer
    to the question posed at the top of this testimony--will it let
    industry pollute more.
        This committee should reject any appeals for reform that
    would let industries pollute more by significantly higher
    amounts and in the process evade are pollution controls and
    pollution offsets in areas already experiencing unsafe air
    quality.
        Americans deserve better.
        Thank you.
        [The statement of Mr. Walke follows:]

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        Mr. Shimkus. The chair thanks the gentleman.
        The chair now recognizes Mr. Holmstead for 5 minutes.
    Welcome back.

                   STATEMENT OF JEFFREY R. HOLMSTEAD

        Mr. Holmstead. Thank you. Thank you for inviting me to be
    here today.
        As some of you know, for almost 30 years I've focused my
    professional career on the Clean Air Act as a White House
    staffer, as head of the EPA Air Office, and as an attorney in
    private practice.
        I think even that my good friend John Walke here would
    concede that I know a lot about the various programs that apply
    to major manufacturing and energy facilities.
        But some of you may not be quite so aware--you might be
    surprised to know that there are many different Clean Air Act
    programs that regulate the very same pollutants from the very
    same facilities.
        For example, SO2 and NOx emissions from coal-fired power
    plants would seem to be the pollutants of greatest concern.
    These pollutants from these plants are regulated under at least
    14 different Clean Air Act programs--yes, 14--the acid rain
    program, the NOx SIP Call, MATS, NSPS, regional haze program,
    the 110(a)(2)(d) good neighbor provision, Section 126, CSAPR,
    BART, the SO2 NAAQS, the NO2 NAAQS, the Ozone NAAQS, the PM2.5
    NAAQS, and NSR.
        If I had said the full names of these programs instead of
    the acronyms, I would have used up all of my time. Over the
    last 25 years, serious regulators and researchers have learned
    that good regulatory design makes an enormous difference and
    they will tell you that of these programs, some of them are
    much more effective than others.
        Because of all of the overlapping regulatory programs, our
    society--you and I and all the people you represent--are paying
    much more than we need to pay for preserving and improving air
    quality.
        If we take advantage of the lessons that we have learned
    over the last 25 years and we use the most effective approaches
    for reducing air pollution, we can achieve the same air quality
    goals that we have today at a much lower cost.
        Today, we are talking about just one Clean Air Act program.
    As the name implies, New Source Review, this is an important
    program for regulating emissions from new sources.
        But over the last 20 years as EPA has tried to expand it to
    capture as many existing sources as possible, NSR has become a
    convoluted, burdensome, and completely unnecessary mess.
        As someone who has worked on Clean Air Act policy for
    almost three decades, I can say with confidence that the NSR
    program as it applies to existing facilities is the least
    successful and most counterproductive of the dozens of programs
    created under the Clean Air Act.
        To the extent it provides environmental benefits, those
    same benefits can be preserved by reforming the program in a
    thoughtful way and by relying on other much more effective
    programs that regulate the same pollutants from the same
    facilities.
        The critique offered by my friend here from NRDC is more
    than a bit over the top. I did a Word search last night and
    found 10 different places in his testimony where he says that
    the reforms being proposed by Congressman Griffith would allow,
    quote, ``massive or enormous increases in harmful air
    pollution,'' 15 places where he says the bills would allow
    facilities to evade pollution controls, and 11 places where he
    used the words reckless or irresponsible to refer to the
    proposed reforms.
        Statements like this are just plain silly and they are
    demonstrably untrue. They ignore the fact that every single
    existing facility that is covered by the NSR program is also
    regulated by multiple other Clean Air Act programs--in the case
    of coal-fired power plants by as many as 13 other programs that
    regulate the very same pollutants.
        Even--and I can guarantee you this--even if the NSR program
    disappeared completely tomorrow, there would not be a massive
    increase in air pollution.
        In fact, there would not be any increase in air pollution
    at all and we would see, because of the many other programs
    that regulate the same pollutants from the same facilities, air
    pollution would continue to decrease as it has since 1990.
        As I explain in my written statement, the reforms being
    proposed by Mr. Griffith would simply reintroduce some common
    sense into the NSR program and make sure that it does what it
    was intended to do--ensure that when a new industrial facility
    is built or an existing facility is significantly expanded,
    modern pollution controls will be used to minimize its
    emissions and, two, ensure that the NSR program does not make
    it hard for companies to keep their facilities in good working
    order and where possible to reduce the operating costs of these
    facilities by making them more efficient.
        Again, I thank you for inviting me here today. I hope we
    can have a serious discussion about Clean Air Act policy and I
    look forward to answering any questions that you might have.
        [The statement of Mr. Holmstead follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. And I thank the gentleman for his testimony
    and thank you all, and you all were very punctual to the--to
    the dot almost and that's going to be helpful.
        I recognize myself 5 minutes for the--for the opening round
    of questions, and Mr. Holmstead, you answered by question about
    how many different tools are there out there. So I don't need
    to ask that one.
        Mr. Spencer, first, just to clarify your role for the
    record, you are--you are the responsible authority in your
    state for implementing air quality standards which includes New
    Source Review permitting. Is that correct?
        Mr. Spencer. Correct. Yes.
        Mr. Shimkus. And to perform your job you rely upon
    engineers, scientists, and an attorney, I think you said in
    your----
        Mr. Spencer. I wanted to clarify. Yes, we do have one in-
    house in the Office of Air Quality.
        Mr. Shimkus. But you also have engineers and scientists
    and----
        Mr. Spencer. Epidemiologists, meteorologists, chemists,
    biologists.
        Mr. Shimkus. Given your experience, do you believe the New
    Source Review reforms you describe in your testimony will
    create a gap in protection or will result in declining air
    quality standards for your state, and let me add one other--
    will it allow industry to pollute more?
        Mr. Spencer. No and no, and I would like to acknowledge
    something that Mr. Holmstead said. It's important to recognize
    the projects or the programs that are working in tandem with
    each other. We have several different--we have our NAAQS SIPs
    that are state implementation plans that we prepare and submit
    to EPA that are--that indicate and acknowledge that we'll be
    protective of those individual criteria pollutants.
        We have our regional haze plans that we submit and, as Mr.
    Holmstead indicated, those are specific to controlling
    particularly NOx, SO2, and PM 2.5.
        So there are a number of different programs which we
    implement that stack up on each other to ensure that we have
    protective programs.
        Mr. Shimkus. So let me go to Mr. Noe. I was struck by the
    example you shared where it took--and I use this many times,
    this example, when I've talked about this program for 20 years
    now--the--when it took a paper mill owner 18 months to obtain a
    New Source Review preconstruction permit for a project to
    replace two older inefficient boilers with a single larger
    energy efficient boiler, which uses less energy, and I want to
    underline this because it's in response to one of the other
    panellist's statements--did not result in an emissions
    increase.
        So to you, Mr. Noe, does it really make sense that an owner
    has to receive a preconstruction permit just to install newer
    more environmentally beneficial technology, especially
    considering how long it takes to obtain a permit?
        Mr. Noe. What we would like, Mr. Chairman, is for projects
    that are going to have decreases associated as well as
    increases, just net the increases and decreases at the start.
        So if there's not really a significant net increase, why go
    through this onerous process and delay? If I could, I would
    like to give you another example where a company was going to
    do something that would decrease emissions but because of this
    way in which EPA does the math, this two-step process, it was
    slowed down and you basically took a longer time to get less
    emissions.
        This was a wood products facility that essentially wanted
    to use better emissions control, reroute its exhaust from a
    unit to better emissions control. It had to do a $100,000
    study.
        There was months of delay. The agency ultimately concluded
    this was a good thing. But there was a delay in getting a
    beneficial project done and more emissions because of the delay
    from NSR.
        Mr. Shimkus. And I think your response was following up on
    my second question about affecting the development of and
    implementation of newer and cleaner technologies. So I don't'
    need to ask that.
        Let me go to you all, if I have time. A report conducted by
    Resources for the Future showed that from 2002 to 2014 the
    average time to obtain a prevention of significant
    deterioration--an NSR permit--throughout the country was 420
    days.
        More specifically, in certain states, during that time
    period the average permit time was 770 days. Do you think--and
    if you can get yes or no or as short as possible--do you think
    that is reasonable for an owner to wait one or two years on
    average just to obtain a preconstruction permit?
        Mr. Spencer.
        Mr. Spencer. No. I can say that the permit backlog and
    permit issuance time frames were very important to our
    administration--to this current administration and we've seen
    that ----
        Mr. Shimkus. Quickly. Quickly. Quickly.
        Mr. Spencer. Yes. So no, that's not a reasonable time
    frame.
        Mr. Shimkus. Thank you.
        Mr. Sunday?
        Mr. Sunday. No.
        Mr. Shimkus. Mr. Noe?
        Mr. Noe. Agreed.
        Mr. Shimkus. Ms. Hammond?
        Ms. Hammond. I agree that efficiency is important to an
    agency but I think taking the time is worth it to do it right.
        Mr. Shimkus. OK.
        Mr. Walke?
        Mr. Walke. I am not here defending delays. I am opposing
    pollution increases. So no.
        Mr. Shimkus. OK.
        Mr. Holmstead?
        Mr. Holmstead. There's no reason for it to take that long.
        Mr. Shimkus. Thank you very much.
        My time is expired. The chair now recognizes the ranking
    member of the subcommittee, Mr. Tonko, for 5 minutes.
        Mr. Tonko. Thank you, Mr. Chair.
        New York has done a lot to clean up air pollution in our
    state but we are still facing problems that blow in from the
    West. We need the New Source Review program to work.
        We have to make progress on air quality together as a
    nation because cleaning up the air is a common responsibility
    and we all have to do our part.
        Mr. Walke, I am very concerned about the implications of
    Administrator Pruitt's December 7th memo for state enforcement
    of the New Source Review program.
        I have a number of questions for you related to that memo.
    In your experience both as an EPA employee and as a
    representative for various interests on clean air issues, would
    you say that it is usual or unusual for the administrator of
    EPA to issue a memo that announces the agency's intent not to
    enforce a statute, regulation, or other legal requirement?
        Mr. Walke. Extraordinary, and I've never seen it before.
        Mr. Tonko. So we go with unusual there.
        I have the 1984 enforcement office's memo related to
    issuance of assurances of no enforcement that you mentioned in
    your testimony.
        To your knowledge, has the policy in this 1984 memo issued
    during President Reagan's administration ever been rescinded or
    replaced?
        Mr. Walke. No, it has not.
        Mr. Tonko. Are there provisions of the Clean Air Act or
    within the NSR regulations that expressly provide EPA with
    discretion to not enforce the requirement for a facility to
    provide credible estimates of their projected actual emissions
    in the NSR program?
        Mr. Walke. No, and to the contrary, Mr. Pruitt contravened
    the EPA regulations.
        Mr. Tonko. Is there any credible argument that loosening
    the criteria for estimating projected actual emissions or
    foregoing enforcement of this NSR regulation would be in the
    public interest and therefore justify issuing an assurance of
    no enforcement as discussed in this memo?
        Mr. Walke. None whatsoever. Those emissions increases are
    what harm the public and Mr. Pruitt has granted amnesty to
    industries that get it wrong including badly wrong.
        Mr. Tonko. Administrator Pruitt has made much of his
    dedication to cooperative federalism. But this memo appears to
    do the opposite.
        Doesn't EPA's declaration that the agency will not pursue
    enforcement in these situations undercut states that want to
    enforce New Source Review standards?
        Mr. Walke. Yes. Many states will choose not to grant
    amnesty and the last paragraph of the memo is really coercive
    federalism--threatening states that don't buckle under to
    withdraw their program approval. Again, it's very unusual.
        Mr. Tonko. Thank you.
        Your written testimony refers to a cryptic warning in the
    memo to states that--to states to toe the line. Would you
    elaborate on that, please?
        Mr. Walke. Sure. So states administer the NSR program
    approved by EPA and states don't have to follow EPA's decisions
    to grant enforcement discretion or, in this case, outright
    amnesty across the board.
        Mr. Pruitt's memo seems to anticipate that and says in the
    very final paragraph in what's not even a very subtle veiled
    threat that EPA has the ability to withdraw its approval from
    states that don't conform to the understanding of the program
    that EPA has.
        And a memo like this, this is clearly a threat of coercive
    federalism to remove approval from states that don't follow
    this amnesty approach.
        Mr. Tonko. Thank you.
        As administrator of this agency, Mr. Pruitt is supposed to
    uphold and enforce the law, not subvert it. This program is
    supposed to clean up the air and bring older facilities up to
    modern pollution standards.
        The people that I represent need a functioning program. For
    us, cooperative federalism means that EPA is a partner in
    enforcement, not a partner in sidestepping the law and creating
    more pollution.
        Ms. Hammond, is there anything you want to add about the
    December 7th memo? Do you think if a polluter believes EPA will
    not check their work it incentivizes applicants to
    underestimate their emissions projections?
        Ms. Hammond. Absolutely. It incentivizes the kind of gaming
    that we've seen throughout the entire history of this program.
    Over and over again we see polluting industries, especially old
    dirty coal, looking for loopholes and this just opens that
    wider.
        Mr. Tonko. EPA's leaders often speak about the rule of law.
    That phrase takes an outsized role in the EPA's latest budget
    request.
        For Mr. Walke or Ms. Hammond, can you help us understand
    how EPA is upholding its rule of law commitment by shirking its
    responsibilities to enforce the Clean Air Act as outlined in
    the administrator's December 7th memo?
        Mr. Walke. Well, the president's budget now twice has
    proposed historically high cuts to EPA's enforcement program.
    Thankfully, Congress did not follow suit the first time.
        I hope they will not this time. But what we have seen is an
    enforcement amnesty memo issued by the administrator himself
    that does not contain the name of any enforcement official on
    it, and as I detail in my testimony there's some very serious
    concerns about the process that resulted in that amnesty.
        Mr. Tonko. Ms. Hammond, anything?
        Ms. Hammond. Yes. Just the further point that when an
    agency uses a guidance document to set binding policy, that
    evades the rule of law set forth in the Administrative
    Procedure Act. So we have that further problem as well.
        Mr. Tonko. Thank you.
        Mr. Chair, I yield back and thank you for your----
        Mr. Shimkus. Gentleman yields back his time.
        The chair now recognizes the vice chair of the
    subcommittee, Mr. McKinley, for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman.
        I've been listening to testimony about this for now seven
    years in Congress and I think one of the conclusions I am
    hoping we will come to is that the--something's broken, because
    we are hearing some strong push back from both sides.
        But I am--I feel like a couple of you up there are
    unwilling to recognize that the system may need some
    modification. Is that fair to say, Mr. Walke?
        Mr. Walke. No, sir.
        Mr. McKinley. You don't think it needs modification?
        Mr. Walke. We are happy to discuss modifications that don't
    result in pollution increases. But that's what's before this
    committee.
        Mr. McKinley. Well, no one's talking about increasing
    pollution ----
        Mr. Walke. I was answering your question, Congressman.
        Mr. McKinley. That's what I just--and thank you on that.
    But, you know, I just feel that in many respects the previous
    administrations have used--have weaponized the EPA's rule on
    NSR and it's delayed, cost grief and--I spent my career in the
    engineering field and many of them in power plants getting
    these permits and I saw the delay, the delay and delay and the
    costs that were associated with those, and it was unnecessary.
    But I believe their--the intent was to try to slow walk the
    project so it didn't happen.
        So I am first trying to recognize or get people to--the
    system, it's broken. It needs modification. Been talking about,
    I think, Mr. Holmstead, you said 15 years ago they were talking
    about making modifications to it.
        I don't know why we haven't during this--is this just
    because we've got people with their head in the sand? There's a
    problem here associated with this issue and we need to have an
    adult conversation instead of saying no and trying to focus on
    a distraction that none of us in the engineering field or in
    the energy generation want to have this problem or increased
    emissions.
        But I am afraid that what's going to happen is that we are
    going to close down more and more of our power plants and as a
    result--with this delay and the fear of the unknown of our
    power plants and we are going to reach into that issue that
    we've been talking about for now the last two years has been
    about grid reliability and resiliency.
        When we have more and more--since the Polar Vortex of 2014,
    we've had 82 coal-fired power plants shut down. I know during
    this last winter that many of our gas and coal-fired power
    plants were under advisory about that there was maybe a shut
    down because of the lack of supply, particularly in gas.
        So I am very concerned that we are continuing to focus on
    something where we should be able to cooperate and get
    something accomplished.
        So, Mr. Holmstead, I've seen you just be very frustrated
    with this. You and I have had numbers of conversations about
    this.
        Can you give us some direction or advice? Because I applaud
    what Morgan Griffith is trying to do is to have an adult
    conversation and address this issue.
        So, Mr. Holmstead, do you have some thoughts about how?
    Because I thought Mr. Spencer laid out a good plan. I thought
    Sunday did as well on that. But what's your perspective? What
    should we be doing to resolve the differences?
        Mr. Holmstead. I think we should just be having an honest
    conversation about how all of the Clean Air Act programs work
    together. I can't tell you how many times someone who's
    criticized a reform says that, you know, you're tearing at the
    heart of the Clean Air Act.
        As far as I know, the Clean Air Act must have 30 different
    hearts because no matter you try to reform, you know, you're
    tearing at the heart of the Clean Air Act.
        Look, there are--air pollution control is enormously
    important. The benefits of controlling air pollution are very
    significant.
        No one is talking about increasing pollution. There's no
    such thing as a massive increase that would occur even if we
    eliminated it.
        Come on, let's have a serious conversation about this and
    that's the frustrating part. Let's be honest with each other
    about how these programs work and how some of them don't.
        Mr. McKinley. Thank you.
        Speaker--Chairman, I yield back.
        Mr. Shimkus. Gentleman yields back his time.
        The chair now recognizes the ranking member of the full
    committee, Mr. Pallone, for 5 minutes.
        Mr. Pallone. Thank you, Mr. Chairman.
        My questions are of Mr. Walke and I am going to continue
    where my colleague, Representative Tonko, left off. I have also
    serious concerns about Administrator Pruitt's December 7th
    memo.
        In your written testimony, you discuss a number of concerns
    with the memo and I want to explore that you did not mention in
    your written testimony.
        I understand that several circuit courts have now rendered
    decisions that limit EPA's authority to enforce New Source
    Review violations by upholding a statute of limitation of 5
    years from the time the first violation occurs.
        Is that correct? Yes or no.
        Mr. Walke. Yes.
        Mr. Pallone. The December 7th memo states that EPA will not
    take enforcement actions against any facility operator in
    relation to preconstruction permit requirements under the New
    Source Review program and these requirements include estimating
    projected actual emissions, determining whether they need a
    permit or not, and any other actions that are required before a
    construction project is initiated and completed.
        Administrator Druitt justifies this in part by initiating a
    policy that defers consideration of enforcement actions until
    the agency sees the actual emissions ``during the 5- or 10-year
    record keeping or reporting period after,'' the project in
    question has been completed and the facility resumes operation.
        So, Mr. Walke, am I correct in my concern that deferring
    enforcement to this post-construction period places any
    enforcement action past the 5-year statute of limitations being
    upheld by the circuit courts? Again, yes or no.
        Mr. Walke. Absolutely. Yes, you are--have a right to be
    concerned.
        Mr. Pallone. Thank you.
        So it appears that Administrator Pruitt has ensured that
    the agency will never act because the time period for action
    designated in the memo will always be beyond the statute of
    limitations.
        Any action taken by the agency deferred until this time
    period would very likely be overturned by the courts. So Mr.
    Walke, again, do I have that right, yes or no?
        Mr. Walke. One hundred percent right.
        Mr. Pallone. OK. It doesn't seem likely to me that these
    circuit court decisions would be unknown or overlooked by the
    administrator or by Mr. Wehrum, the Air Office chief who came
    on board at the agency about one month before this memo
    appeared. What do you think about that? That's not a yes or no.
        Mr. Walke. I can guarantee you Mr. Wehrum is aware of those
    cases.
        Mr. Pallone. OK. So the next thing is, look, the bottom
    line is the policy Mr. Pruitt is pushing in the December 7th
    memo is inconsistent with the law, in my opinion, and clearly
    will allow any facility owner that wants to get around the NSR
    program to do so and that's terrible public policy and will
    commit us to many more tons of harmful pollution and, in my
    opinion, it should be rescinded immediately.
        So I just have a few more questions on this memo and its
    relationship to the policy memo from the Reagan administration
    mentioned by Mr. Tonko.
        Hasn't it been longstanding established EPA policy and
    direction to all agency personnel not to give either written or
    oral assurances to regulated parties that EPA will not take an
    enforcement action if a violation occurs?
        Mr. Walke. Yes, and Mr. Pruitt's memo directly contradicts
    a memo dating to the Reagan administration that lays out very
    specific criteria for no action assurances that he did not
    follow.
        Mr. Pallone. OK. However, I am aware that there are cases
    in which EPA has provided assurances of no action to regulated
    parties.
        But these are in special narrowly-tailored circumstances
    and with limited time periods often associated with emergencies
    such as in the aftermath of a catastrophic storm like Hurricane
    Maria, for example.
        So is that correct?
        Mr. Walke. Yes. They are very short lived, directed to
    specific companies, and not broad grants of amnesty like Mr.
    Pruitt's memo.
        Mr. Pallone. All right.
        So does the DTE Energy case or any other situation
    described in this memo fit within the narrow circumstances that
    warrant an enforcement holiday?
        Mr. Walke. It does not fit within EPA's policy.
        Mr. Pallone. All right. So Mr. Walke, I have another
    question related to the administrator December 7th memo. The
    memo appears to create a new exclusion for emissions increases
    based on a facility operator's intent to manage emissions
    increases once a project is completed.
        Now, how is such emissions management to be measured, if
    that's the case?
        Mr. Walke. We never know because they don't have to self-
    report. If it's done after 5 years, EPA cannot enforce. It's
    completely trusting the source with a promise that EPA will not
    second guess whatever they decide.
        Mr. Pallone. So if a facility operator intends to manage
    emissions but then does not manage them, how would this failure
    be documented? Could EPA enforce this policy?
        Mr. Walke. EPA would never know about it. It won't be
    documented because the memo doesn't require it and, indeed, the
    EPA will probably never find out about it and the emissions
    increases will go uncontrolled.
        Mr. Pallone. All right.
        Thank you so much. Thank you, Mr. Chairman.
        Mr. Shimkus. Gentleman yields back his time.
        The chair recognizes the gentleman from Texas, Mr. Flores,
    for 5 minutes.
        Mr. Flores. Thank you, Mr. Chairman. I appreciate the panel
    and their enlightened testimony today.
        Mr. Spencer, I am going to start with you. You support the
    administration's recent guideline memo on NSR permitting which
    clarifies that the EPA will not second guess a facility
    reconstruction emissions analysis.
        And so explain for me--for the committee what was the
    problem with the second guessing and why this memo is helpful
    for states' work on NSR permitting.
        Mr. Holmstead, I will follow up with you on this as well.
        Mr. Spencer. I think that the clarification was needed and
    it doesn't necessarily create a blanket exemption from the
    responsibility that facilities have.
        I think that there should be some accountability such as if
    there is an error in a calculation that's clear if their
    companies use a wrong significant emissions threshold. And so
    there are backstops for that kind of empirical data to be
    provided that would ensure that the calculations that have been
    submitted by the company are in fact accurate.
        Mr. Flores. OK.
        Mr. Holmstead, do you have any additional comments?
        Mr. Holmstead. Yes. This whole situation shows that--why
    this--why this program is so broken. Here's what happened.
        The company used a very sophisticated modelling technique
    that has been approved by, you know, other regulators to
    estimate its future emissions and it showed that there wouldn't
    be an emissions increase.
        EPA brought an enforcement action and they said you didn't
    do it right--you should use this methodology. Methodology that
    EPA enforcement officials wanted to use always showed every
    project would cause an emissions increase.
        So you have these two different ways of projecting out 5
    years into the future and it's so subjective and we have so
    much litigation over it that's why we just need to use the
    simple engineering technique of saying look, what is your--what
    is your hourly emission rate.
        That's what we do in other programs. That's knowable,
    that's ascertainable, and instead we have these kind of
    ridiculous fights, and what makes this particularly ridiculous
    is that case was brought more than 5 years ago.
        So we now have 5 years of data showing that the plant
    actually decreased its emissions. But EPA is insisting that
    they should have predicted an increase and we know that
    whatever EPA was--turned out to be wrong because emissions have
    actually gone down.
        Mr. Flores. OK. That leads me to into my next--a follow-up
    question for you and Mr. Noe and Mr. Sunday.
        An important component of the NSR program focuses on how an
    owner must calculate the anticipated emissions increase
    associated with the potential project which determines whether
    or not an owner is required to obtain an NSR reconstruction
    permit.
        So my questions are this. Did the NSR program's rules on
    emission accounting typically result in a calculated emissions
    value that accurately reflects the true emissions increase?
        Do you want--do you want to waive off to somebody else?
        Mr. Holmstead. No. I would just say there is not an
    approved EPA method for predicting and that's one of the
    problems.
        And because every circumstance is so different and because
    future emissions depends so much on things that are completely
    out of the control of the plant owner it's kind of a fool's
    errand to be saying that you can predict with accuracy what
    your emissions are going to be next year and year after.
        And we ought not to be putting people in the position to do
    that and one of the problems is there is no approved method for
    doing this.
        Mr. Flores. Now, does--do you think that the current NSR
    emissions projections are overestimating the actual change in
    emissions?
        Mr. Holmstead. Certainly, the current approach is better
    than the way it used to work. But, again, it creates all kind
    of uncertainty and problems and it ought to be fixed.
        Mr. Flores. OK.
        Mr. Noe, do the NSR program's rules on emissions accounting
    typically result in a calculated emissions value that
    accurately reflects a true emissions increase?
        Mr. Noe. My sense is not and----
        Mr. Flores. Oh, microphone. I am sorry. Yes.
        Mr. Noe. My sense, Congressman, is no and we'd like a
    simpler way to do the math that allows you to move quickly if
    you don't have a significant emissions increase.
        Mr. Flores. OK.
        Mr. Sunday, same question.
        Mr. Sunday. No. In general, our facilities are obligated to
    account for emissions that they're never going to produce.
        Mr. Flores. OK. All right.
        I yield back the balance of my time. Thank you.
        Mr. Shimkus. Gentleman yields back his time.
        The chair now recognizes the gentleman from California, Mr.
    McNerney, for 5 minutes.
        Mr. McNerney. Well, I thank the chairman.
        Mr. Walke, sometimes it's hard to see the negative
    consequences of deregulation, especially if they sound
    reasonable.
        In this case, industry recommended that to improve the NSR
    program, we should allow owners of a facility to avoid the
    requirements of the NSR program if they improve facility energy
    efficiency or if they invest in a project for pollution
    prevention or pollution control simply on those bases.
        What's wrong with that argument?
        Mr. Walke. Congressman, you have to look behind the labels.
    We all support energy efficiency projects that decrease
    emissions. Mr. McKinley said so.
        But these energy efficiency projects, the way the label is
    misused will allow and result in emissions increases. That's
    the only way that the New Source Review requirements apply.
        The same is true for the pollution control project label.
    If they just reduced emissions, NSR requirements would not
    apply. Instead, they increase emissions.
        So the labels are very important and the requirements only
    apply when pollution increases. They do so in both examples
    that you provided as used by industry.
        Mr. McNerney. I think that was pretty clear. Thank you.
        Mr. Walke. Thank you.
        Mr. McNerney. Ms. Hammond, it's clear that the Clean Air
    Act has driven innovation and the U.S. economy has continued to
    grow and innovation has continued to thrive.
        Is there any evidence that the cost of pollution controls
    are so high that we've seen massive layoffs and loss of
    revenue?
        Ms. Hammond. The studies that I am aware of suggest that do
    the extent companies do have to change their business plans
    because of Clean Air Act controls, it's not that.
        It's market conditions that they're responding to and,
    indeed, that's the case with coal, most certainly. And in fact,
    with New Source Review we are often talking about these very
    old, very dirty coal-fired power plants and what you don't hear
    is that in most jurisdictions these power plants can recover
    the cost of pollution control technology from their ratepayers.
    So they're not even asking shareholders to bear those costs.
        Mr. McNerney. So is there any evidence that current
    regulations have caused a reduction in economic growth?
        Ms. Hammond. No, and in fact, the opposite is true.
        Mr. McNerney. Well, industry claims that the NSR program
    has stifled innovation and discouraged investment in
    technologies, new factories, and renovations that would deliver
    significant benefits.
        Is there any evidence for that claim?
        Ms. Hammond. No, and in fact, pollution control technology
    is itself a business and there are many small businesses that
    benefit from developing those technologies.
        So you can also add that to the list of more generalized
    economic benefits that we see.
        Mr. McNerney. Geez, you're getting ahead of me. I was going
    to bring that up.
        Manufacturing gets left out of the conversation. American
    domestic manufacturing does get left out of the conversation--
    manufacturers that produce pollution control equipment.
        And a report from 2013 states that the market for these
    systems was expected to grow to $78 billion a year by 2019 and
    a 2017 report expects the market to grow to $92 billion by
    2022, and more than 75 percent of that growth is overseas and
    continues to grow as other countries invest in pollution
    control equipment, and these are medium to small-sized private
    businesses located throughout the country.
        Would you anticipate the economic impact of these companies
    and their employees to be if the air quality protections are
    deregulated and unenforced?
        Ms. Hammond. Indeed, they will suffer in that case.
        Mr. McNerney. So do you believe, based on facts and
    economic realities, that there is a choice between
    environmental control and regulation on the one hand and
    economic prosperity on the other hand?
        Ms. Hammond. No. It's a false choice. They go together. We
    see over and over again the clean air is good for the economy.
    It's good for health. People can go to school. They can work.
    We prosper with clean air.
        Mr. McNerney. OK.
        Mr. Holmstead, I am going to throw you a bone here. You
    talked about good regulatory design. What do you mean by that?
        Mr. Holmstead. I mean trying to find the most effective,
    the most cost-effective ways of reaching our air pollution
    goals.
        Mr. McNerney. Is there an academic model for good
    regulatory----
        Mr. Holmstead. Yes. There are academic studies that look at
    all kinds of regulatory programs and in particular--I will say
    this. The way we have regulated cars and fuels has been very
    successful. That's probably been the most successful part of
    the Clean Air Act.
        But if you look at these so-called stationary sources, the
    programs that have been most cost effective, where we have the
    highest rates of compliance, are these cap and trade programs
    where an overall cap is set.
        That really started with the acid rain program. There's
    been a number of programs that are built upon that--the NOx SIP
    Call, the Care Program, CSAPR, state programs, and those
    programs are very cost effective and very effective at reducing
    pollution.
        Mr. McNerney. So we shouldn't just deregulate everything?
        Mr. Holmstead. No, no, no. No one's----
        Mr. McNerney. And that's what I--what I hear a lot.
        Mr. Holmstead. No, no, no. No.
        Mr. McNerney. Not from you, necessarily.
        Mr. Holmstead. So I think what we need to do is just let's
    figure out the most cost effective ways of achieving our air
    pollution goals. That's what I--I mean, I agree about all the
    benefits of reducing air pollution. Let's just do it in the
    most cost effective way.
        Mr. McNerney. OK. Thank you.
        I yield back, Mr. Chairman.
        Mr. Shimkus. I apologize to my Republican colleagues for
    letting my Democratic colleague go so long.
        But the chair now recognizes the gentleman from Michigan,
    Mr. Walberg, for 5 minutes.
        Mr. Walberg. Thank you, Mr. Chairman. Thanks to the witness
    team here as well. Appreciate your involvement.
        Mr. Noe, you have highlighted a couple of improvements to
    the NSR and PSD programs in your testimony. Given your
    description of how broken the program is, are there any other
    reforms you think are critical to streamlining the permitting
    process while protecting the environment, which we all agree
    on?
        Mr. Noe. Thank you, Congressman.
        I think there's a couple I want to mention quickly. First
    of all, EPA presumes that emissions from multiple projects at a
    plant over several years should be aggregated when determining
    significance for NSR applicability.
        They believe the projects are connected economically if
    they serve the basic purpose of the plant even if they incur
    many years apart or undertaken for very different business
    reasons and by themselves are minor.
        Once those emissions are added together, NSR can
    potentially be triggered with its heavy burdens and delays and
    we believe the EPA should only add together emissions from
    projects that are truly linked. So that's one example.
        A second is EPA's PSD modelling guidelines historically
    have required excessively conservative assumptions about
    dispersion model inputs that frequently result in gross over
    estimates of a project's air quality impacts and regulatory air
    quality models have the capability to calculate ambient air
    concentrations based on variable emissions background and
    modern probabilistic tools and meteorological conditions.
        So rather than assuming, for example, that the facility is
    going to be running at maximum levels, all the other nearby
    sources are going to be running 24/7 at maximum potential level
    and that they ought to look at the distributions of the
    emissions in a probabilistic way.
        And EPA can address this rapidly-developing permit gridlock
    by having more flexible policies that actually reflect the
    realistic emissions and the realistic modelling.
        Mr. Walberg. Rather than always the worst case scenario?
        Mr. Noe. Yes, sir.
        Mr. Walberg. What other Clean Air Act obligations does the
    forest products industry face?
        Mr. Noe. You know, we have a whole bunch of regulations
    that we are covered by. Jeff gave you some examples with power
    plants.
        For us, let me just give you some of the major ones. So for
    hazardous air pollutants, EPA's MACT program has targeted pulp
    and paper operations, wood product driers and presses,
    industrial boilers and coating operations where emissions have
    reduced as much as 92 percent.
        For criteria pollutants that are regulated by the NAAQS,
    those criteria pollutants have been dramatically reduced
    through a regulatory action such as the NOx SIP Call regional
    haze program and state efforts to implement the NAAQS through
    state implementation plans.
        For example, our SO2 emissions are down by over 50 percent
    since the year 2000.
        Mr. Walberg. OK. Thank you.
        Mr. Holmstead, you were involved at the EPA in the early
    2000s, have, as you said, three decades of experience on NSR
    reform.
        As a former EPA official, speaking from that experience,
    why has EPA over the past 28 years had so much difficulty
    finalizing NSR guidance documents?
        Mr. Holmstead. Well, I think some of the controversy you
    have seen here gives you a hint at why that is.
        Mr. Walberg. I am not egging you on. I am just----
        Mr. Holmstead. No. But, you know, part of the problem here
    is that this NSR program has become primarily an enforcement
    program. We refer to it as a permitting program but when it
    comes to existing sources, it's become the program where EPA
    puts almost all of its money when it comes to enforcement. A
    huge percentage of the budget for EPA enforcement and DOJ
    enforcement goes to NSR.
        They love this program because they believe that if they
    just look long enough they can find NSR violations wherever
    they look and they don't want to give up that weapon because if
    we actually made the program more sensible so it really was a
    fair and predictable regulatory program you wouldn't be able to
    bring all these lawsuits.
        And that--I mean, I am being pretty candid here but that I
    think is the main reason why we haven't been able to reform the
    program.
        Mr. Walberg. Kind of target rich.
        To the extent court decisions and litigation have
    contributed to this, what's the cure to ensure regulatory
    certainty?
        Mr. Holmstead. Boy, if we could just have some narrow
    thoughtful legislative reforms, I mean, that's the best way to
    take care of it.
        Mr. Walberg. To get the job done and do it in the least
    restrictive but most efficient way?
        Mr. Holmstead. Yes, sir.
        Mr. Walberg. OK. Thank you. I yield back.
        Mr. Shimkus. Gentleman's time is expired.
        The chair now recognizes the gentleman from Texas, Mr.
    Olson, for 5 minutes.
        Mr. Olson. I thank the chair, and welcome to our six
    witnesses. A special welcome to you, Mr. Noe. I am a fellow
    paper guy. My dad got a Ph.D. in paper chemistry from the
    Institute of Paper Chemistry when it was in Appleton, Wisconsin
    in 1967--a long, long time ago.
        He spent over 30 years working for Champion International,
    now became International Paper. He worked at mills in Ohio,
    North Carolina, Alabama, and Texas.
        And your association has members all across America. As to
    the members of Region 6--Texas, Arkansas, New Mexico, Oklahoma,
    and Louisiana by their new regional administrator, Ann Idsal,
    and she has already said that she sees major differences
    between the regions in terms of enforcement of some of these
    things involving the NSR.
        My question is, as you deal with EPA's regional differences
    in the offices, do you see these differences and how they
    impact your members of your association?
        Mr. Noe. Yes, Congressman. We--our members do see these
    differences and, you know, there is, unfortunately, a lot of
    confusion with the NSR program.
        I can't tell you how complicated it is and, honestly, I've
    literally been in discussions with some of the best lawyers you
    could find anywhere and people get into debates and I've seen
    examples where none of them can figure it out and they maybe
    defer to one in the room.
        I mean, this is just not how our government should work
    where things are that complicated and where the law might be
    different based not only on what region in the country you're
    in but who actually is the person dealing with your permit.
    That's just not the way a democracy ought to work. That's not
    the way a good regulatory process should work.
        Mr. Olson. So there's lots of uncertainty in that process,
    correct?
        Mr. Noe. Yes, sir.
        Mr. Olson. Another question--a crucial step in any
    construction project, probably the most crucial step is to
    obtain necessary financing--the money.
        Have you members had a hard time getting project financing
    due to uncertainty like multiple standards in multiple regions
    of the EPA and time delays caused by the NSR process?
        Mr. Noe. I think any time there's regulatory uncertainty
    that creates business uncertainty. It creates risk. So it does
    impede projects from going forward.
        Mr. Olson. Mr. Sunday, how about you? Difficulty getting
    permitting process with all the financial stuff as well?
        Mr. Sunday. Yes. If you're going into the debt markets or
    to do private financing, the lender is not going to give the
    revenue or capital until all appeals are settled.
        And so what we've seen is perpetual litigation by third
    party groups where the permit goes through the process. There's
    a challenge. They go through the court. Now the universe of
    controls is different. Lender is still not giving the capital.
    We go through the litigation again. So it really hangs up the
    process because we can't get that clear path to yes.
        Mr. Olson. One question for you, Mr. Spencer. In your
    testimony, you describe some of the issues with the NSR in
    terms of enforcement.
        Specifically, you said, and I quote this, ``It's important
    to reorient policies toward pursuit of actual violations that
    create emissions increases,'' end quote.
        I assume the NSR was involved with pursuing actual
    violations and you say we have to reorient that process. Can
    you explain that more--elaborate on why you made that
    statement?
        Mr. Spencer. Yes. Thank you, Congressman.
        I have been dying to say bizarre NSR all day long. So I got
    that into the record.
        I wrote down a few phrases here--unintended consequences,
    perverse incentives, absurd results--and those are terms I've
    heard more in my practice with Clean Air Act regulations and
    enforcement than I've heard in my entire career.
        And so I think what you're looking at is something that Mr.
    Holmstead alluded to earlier. When you have a facility that has
    engaged in an emissions projection but the reality of the
    situation is that time had advanced since that projection was
    made and there has been no actual increase.
        And so as a state regulator, when we exercise our
    enforcement ability, we are looking for actual events--actual
    emission violation events.
        Mr. Olson. One final question. From your perspectives, does
    EPA's memo of December 7th improve the reorientation of the
    NSR? Is that what you tried to do? I am sorry, the NSR.
        Mr. Spencer. Yes. I would agree with that.
        Mr. Olson. OK.
        And Mr. Chairman, I yield back the balance of my time.
        Mr. Shimkus. The gentleman yields back.
        The chair now recognizes the gentleman from Georgia, Mr.
    Carter, for 5 minutes.
        Mr. Carter. Thank you, Mr. Chairman.
        Mr. Noe, I too--I grew up in the South where paper mills
    are plentiful. In fact, my dad worked in a paper mill. He
    didn't have a degree.
        He was just a laborer. He worked in a paper mill for over
    35 years and the best thing he ever did for me after my
    freshman year in college was to put me to work on a broke
    beater. Do you know what a broke beater is?
        Mr. Noe. I--I am not sure.
        Mr. Carter. Well, it's at the end of the process. It's
    where all the excess paper goes and you----
        Mr. Noe. The broke comes out. Yes.
        Mr. Carter. Yes, and you just take it and you assemble it
    and you put it back and then you recycle it, per se. But I can
    tell you that it was as close to hell as I've ever been.
        [Laughter.]
        I have never been that close. But it may--I could not get
    to school quick enough. I could not get back to school and
    study hard quick enough, I will tell you that. It was a life
    lesson.
        Air quality was important to us. People would visit us and
    they would say, ``What's that smell?'' And we'd say, ``That's
    money you smell,'' because that's what it was for us.
        But it is important and I understand that. But I want to
    try to understand. Tell me what project netting is. What
    essentially is that?
        Mr. Noe. So, basically, what we want to make sure we have
    is a system when we do the math and we look at a project to see
    if it results in a significant emissions increase. If it does,
    then by all means, let's go through the heightened scrutiny.
    Let's put on best controls if that's indeed the case.
        But when we do the math, let's look at the increases and
    decreases together so we don't wind up getting the project
    gummed up in the works, delayed, spend hundreds of thousands of
    dollars on consultant studies just to get to the obvious answer
    that when there's not a real significant emission increase we
    should be putting into NSR. We ought to go forward with the
    project because these beneficial projects.
        And one point I would like to make is, you know, I think
    one thing that's being lost is when a regulatory program
    inhibits efficiency improvements at one facility. It's doing
    that all around the country for a bunch of them.
        So when we have demand X to meet, we are going to do it as
    a nation in a more inefficient and higher-polluting way. When
    we can get these efficiency improvements in by nature we are
    going to have not only less CO2 but other pollutants as well.
        Mr. Carter. OK. You know, I've heard the process. Tell me--
    tell me how we reform the process. Tell me what we'd do
    differently from what we are doing now that makes it practical
    and sensible because that's what we all want to get to.

        Mr. Noe. Sure. And some of the things I've mentioned these
    are things EPA can do either through guidance or through rule
    making. There are some things Congress can do. Mr. Holmstead
    mentioned some of them.
        Ones I would like to highlight is we would like to ensure
    that clean units have legislative support. So, in other words,
    an emission unit that's been through the permitting process, to
    have best controls put on it--that that ought to be only an
    increase in the units permitted allowable emissions would
    trigger NSR.
        For pollution control projects, those need legislative
    support and they're excluded under the New Source Performance
    Standards program. It makes sense to do the same thing in the
    NSR program, we believe.
        Mr. Carter. Right. Right.
        Well, Mr. Noe, I want to--I want to thank you and I want to
    thank you for what the paper industry did for me and for my
    family.
        It provided us a living.
        Mr. Noe. Well, Congressman, if I could just briefly thank
    you and Mr. Olson and I am glad to hear you have a connection
    to the industry. Our workers are up here visiting many of your
    offices this week.
        Mr. Carter. Yes, they are.
        Mr. Noe. I hope you get to meet them. And you know these
    are very proud hardworking people----
        Mr. Carter. Absolutely.
        Mr. Noe. --and they're not asking for anything from any of
    you other than the right to compete in this country. They can
    beat anyone in the world as long as they are given a playing
    field that's workable.
        No one is here asking you to take controls off projects
    that ought to have emissions controls. We just don't want the
    delay and the unnecessary red tape that is gumming up our
    modernization.
        Mr. Carter. Thank you, Mr. Noe.
        Mr. Chairman, I yield back.
        Mr. Shimkus. Gentleman yields back his time and the chair
    now recognizes the gentleman, if he's ready, the gentleman from
    Texas. Do you want me to go to--all right. The gentleman is
    recognized for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman. I am thanking you and
    the ranking member for holding the hearing today on the New
    Source Review and I would also like to thank our panellists.
        I come from an area--a very urban area in Houston. We have
    issues. We have 5 refineries and more chemical plants than I
    can count.
        This is a question for, I think, everyone on there. Many
    stakeholders have noted that the substantial delays for air
    permits under the New Source Review program delays two years or
    even longer.
        My question is are the delays for issuing the permits the
    fault or the EPA or the state agencies that are administering
    the program?
        Mr. Spencer. Since I am with a state agency I am going to
    say it's EPA's fault.
        [Laughter.]
        No, I think that, as we've indicated in our testimony,
    certainty adds to the process of being able to issue timely
    permits. So the more certainty we have and clearing up the
    muddied guidance documents, applicability determinations, court
    cases, the better, and more efficient permits we can issue.
        Mr. Green. Anybody else?
        Mr. Noe. We'd like to say, Congressman, what we'd like to
    see happen to streamline the process is just make sure that we
    get the--sort the wheat from the chaff. The truly significant
    projects with significant increases ought to go through NSR.
    They ought to put on controls.
        But for these minor projects, why gum them up in the works
    with these consultant studies that take all this time and money
    and delaying these projects from going forward?
        So we'd like to streamline the process. I believe EPA could
    do that.
        Mr. Walke. Congressman, the permits in this country are
    issued primarily and overwhelmingly by the states, and it's
    the--it's, frankly, a lack of resources and capacity at the
    state level that's responsible for most of the permitting
    delays.
        There was a good Houston Chronicle article about a week or
    two ago in which a Texas regulator said exactly that about
    issuing air permits in Texas.
        Now, the Trump administration yesterday just proposed a 33
    percent cut to the state and tribal air grants, which are the
    moneys from Congress responsible for issuing permits in a
    timely fashion.
        So we've got cross purposes and I expect that our friends
    at AAPCA and the National Association of Clean Air Agencies
    would like to see Congress fully fund them so they can issue
    permits on time. We all want to see that.
        Mr. Green. I was involved in a permit a few years ago
    because right now we are seeing in east Harris County,
    particularly along the Gulf Coast, expansion of chemical plants
    just because of the low price of natural gas, and the delay in
    the permits were a combination. And I would call EPA and say,
    oK, tell me what's going on. It was for Exxon Mobil in
    Baytown--huge expansion of their chemical facility--jobs and
    everything else.
        And so sometimes it's both sides. It's both the Feds and
    the--because at that case it delayed it a little bit because
    there was--I didn't know the EPA, Mr. Chairman, had an appeals
    process within their agency and when I was told by the deputy
    EPA administrator he said, oh, we got a good result--I mean, we
    got a good brief and it'll go to this group.
        I said, ``Well, who are they? I want to do a letter to
    them.'' And he said, ``Oh, no, they're all EPA
    administrators.'' I said, ``Well, how long will that happen?''
    He said, ``It will take a few months,'' and it took six months
    to get through that EPA appeals board. So, you know, which
    didn't do anything to it. Just delayed it six months.
        Why are there long waits for air permits in industry-
    friendly states like Texas? Could delays from the state
    agencies be a result of the budget cuts? And I think you
    answered that.
        Earlier this week, President Trump's 2019 budget proposed a
    25 percent cut in EPA and reduced the EPA's workforce by over
    3,000 employees and I think it's already answered that if you
    believe these cuts in EPA will improve air permitting times, I
    don't know if you can do it with less--do it faster with less
    people. Is that possible?
        Mr. Walke. I don't see how it's humanly possible, and
    you're right, that it's EPA and states contributing and the
    Trump budget proposes cuts to both.
        Mr. Green. OK.
        Thank you, Mr. Chairman. I yield back.
        Mr. Shimkus. The gentleman yields back his time.
        The chair now recognizes the very patient, although he's
    not a member of the subcommittee, Mr. Griffith, for 5 minutes.
        Mr. Griffith. Mr. Chairman, I am just very appreciative to
    be here as we discuss this issue, which is very near and dear
    to my heart.
        I will say that I appreciated somebody saying that what we
    need is narrow thoughtful regulatory reform. I believe that was
    you, Mr. Holmstead, and I am attempting that with my bills and
    open to suggestions and, you know, I am looking in my file
    here--all kinds of changes and rewrites and so forth, and
    that's what we are trying to do is just have a narrow
    thoughtful regulatory reform that works right.
        And it comes about because, as some people say, you know,
    there's a lot of people out there that want to see this thing
    work. We all want clean air.
        Mr. Noe mentioned his industry. They were out in the
    hallway. I had to step out right at the beginning just to say
    hi because I have probably a couple thousand employees at West
    Rock at two different facilities in my district and it's
    important.
        Likewise, I thought we'd touched on maybe part of the
    problem in Ms. Hammond's comments earlier when she was talking
    about putting on controls at coal-fired power plants and she
    said the plants can--agencies or the power companies can pass--
    and I am going to--I hope I get it right but it's pretty
    close--can pass the cost on to the ratepayers so it doesn't
    cost their shareholders anything.
        That's the problem. It's the ratepayers who get it. And so
    I received--I thought it was interesting--exactly two weeks ago
    I received a series of texts from a friend of mine in the
    district and it said, ``Just opened my AEP bill.''
        She gives me the numbers and I calculated it. It's 70
    percent higher than what she said her highest bill was last
    year. She goes on to say, ``We can handle it but many are
    suffering. Do you think we can get it turned around?'' Big
    subject on Facebook. Everyone is panicking.
        So when we do regulations that--you know, maybe it doesn't
    affect the shareholder. But most of my constituents in
    southwest Virginia aren't shareholders. They're ratepayers, and
    it's easy to sit here in Washington where people have big
    incomes and say, well, we are just going to pass this on to the
    ratepayer.
        But when you're dealing with a lot of folks who have modest
    means, we can handle it. I can handle it. This lady who wrote
    me can handle it. But many in my district are suffering and we
    have to come up with reasonable reform that makes sense, where
    we don't open up for pollution but we do make sense.
        And I am going to give you another example. I got a
    furniture manufacturer in my district and I haven't been there
    in a couple years now so maybe they fixed it somehow.
        But Mr. Noe mentioned earlier about the confusion on the
    law, and he had a loop in his conveyer belt that was about half
    the size of this room and there was nothing there. It was just
    a big loop.
        And he said, ``I bet you wonder why we have that,'' and I
    said, ``Yes, I do.'' And he said, ``It's because if we change
    this--this was once a part of our paint system and if we change
    it, we have to get permission from the EPA in advance. So we
    built these ramps to go over it and we just leave it there and
    it just runs off here into the middle of nowhere and back.''
        That's what we are trying to fix. It is--you know, that's
    the one I can understand best. Some of you all can talk about
    all the different controls and different improvements at the--
    at the big power plants.
        But I know that it also deals with things like conveyer
    belts and the end result if we don't get it right, and we
    haven't, is a 70 percent increase and the people back home
    having to pay for their electricity.
        All right. Got that off my chest. I appreciate you all's
    patience on that.
        I do think that we can work together to get this done. Mr.
    Holmstead, you had some concerns that you raised earlier and I
    understand in the written testimony that Mr. Walke claims that
    when you were head of the EPA Air Office back in 2002 the Bush
    administration weakened the clean air regulations at issue here
    to insert loopholes and exemptions that let industry increase
    harmful air pollutants significantly and evade any modern
    pollution controls. Would you like to respond?
        Mr. Holmstead. Thank you.
        What you just read indicates part of the problem here, and
    just in terms of the honesty of the debate.
        So that was a quote from my friend's testimony who said
    that the Bush administration weakened them to insert loopholes
    and exemptions that let industry increase harmful pollution
    significantly and evade any modern pollution controls.
        I don't know how anyone can say that. That was 2002. You go
    on EPA's Web site. You do a search and you see where emissions
    have gone since 2002 and all of these pollutants that we are
    talking about have been reduced by about 35 percent since 2002.
        So we did do some important reforms that I think made the--
    made the program better. We didn't let industry increase
    harmful pollution significantly.
        We tried to do things in a thoughtful way, and that's part
    of the problem here.
        Mr. Griffith. And I appreciate that and I appreciate the
    opportunity to be with you all today and appreciate everybody's
    testimony.
        And what I appreciate most is that two of you who
    completely disagree--Mr. Holmstead and Mr. Walke--are sitting
    side by side and that's the way it's supposed to be in America.
        We can disagree. We can have battles of ideas. But we don't
    have to be completely disagreeable or get so angry that we
    can't sit at the table together.
        Thank you for that and appreciate your testimony. I yield
    back.
        Mr. Shimkus. The gentleman yields back his time.
        Seeing no further members wishing to ask questions for the
    first panel I would like to thank you for being here and
    joining us today.
        Before we conclude, I would like to ask unanimous consent
    to submit the following documents for the record.
        We have a letter on the EPA's NSR program. We have this
    article, ``EPA's New Source Review Program: Time for
    Reform?''--Mark Fraas, John Graham, and a guy named Jeff
    Holmstead.
        [The information appears at the conclusion of the hearing.]
        And pursuant to committee rules, I remind members they have
    10 business days to submit additional questions for the record
    and I ask the witnesses to submit their responses within 10
    business days upon receipt of the questions.
        Without objection, the subcommittee is adjourned and I
    would encourage my colleagues to get downstairs for our markup.
        [Whereupon, at 3:54 p.m., the committee was adjourned.]
        [Material submitted for inclusion in the record follows:]

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