[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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 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:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]