[Senate Hearing 107-315]
[From the U.S. Government Publishing Office]
S. Hrg. 107-315
CLEAN AIR ACT OVERSIGHT ISSUES
=======================================================================
HEARINGS
BEFORE THE
SUBCOMMITTEE ON CLEAN AIR, WETLANDS,
PRIVATE PROPERTY, AND NUCLEAR SAFETY
AND THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
MARCH 21, 2001
APRIL 5, 2001
APRIL 27, 2001--SALEM, NH
MAY 2, 2001
AUGUST 1, 2001
__________
Printed for the use of the Committee on Environment and Public Works
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78-066 WASHINGTON : 2002
____________________________________________________________________________
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred seventh congress\1\
first session: january 25-june 6, 2001
BOB SMITH, New Hampshire, Chairman
HARRY REID, Nevada, Ranking Democratic Member
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
JAMES M. INHOFE, Oklahoma BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California
MICHAEL D. CRAPO, Idaho RON WYDEN, Oregon
LINCOLN CHAFEE, Rhode Island THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah HILLARY RODHAM CLINTON, New York
BEN NIGHTHORSE CAMPBELL, Colorado JON S. CORZINE, New Jersey
Dave Conover, Republican Staff Director
Eric Washburn, Democratic Staff Director
----------
Subcommittee on Clean Air, Wetlands, Private Property, and Nuclear
Safety
GEORGE V. VOINOVICH, Ohio, Chairman
JAMES M. INHOFE, Oklahoma JOSEPH I. LIEBERMAN, Connecticut
MICHAEL D. CRAPO, Idaho THOMAS R. CARPER, Delaware
BEN NIGHTHORSE CAMPBELL, Colorado HILLARY RODHAM CLINTON, New York
JON S. CORZINE, New Jersey
----------
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
one hundred seventh congress
first session: july 10-december 20, 2001
JAMES M. JEFFORDS, Vermont, Chairman
MAX BAUCUS, Montana BOB SMITH, New Hampshire
HARRY REID, Nevada JOHN W. WARNER, Virginia
BOB GRAHAM, Florida JAMES M. INHOFE, Oklahoma
JOSEPH I. LIEBERMAN, Connecticut CHRISTOPHER S. BOND, Missouri
BARBARA BOXER, California GEORGE V. VOINOVICH, Ohio
RON WYDEN, Oregon MICHAEL D. CRAPO, Idaho
THOMAS R. CARPER, Delaware LINCOLN CHAFEE, Rhode Island
HILARY RODHAM CLINTON, New York ARLEN SPECTER, Pennsylvania
JON S. CORZINE, New Jersey BEN NIGHTHORSE CAMPBELL, Colorado
Ken Connolly, Majority Staff Director
Dave Conover, Minority Staff Director
----------
Subcommittee on Clean Air, Wetlands, and Climate Change
JOSEPH I. LIEBERMAN, Connecticut, Chairman
HARRY REID, Nevada GEORGE V. VOINOVICH, Ohio
THOMAS R. CARPER, Delaware JAMES M. INHOFE, Oklahoma
HILLARY RODHAM CLINTON, New York MICHAEL D. CRAPO, Idaho
JON S. CORZINE, New Jersey BEN NIGHTHORSE CAMPBELL, Colorado
\1\Note: During the first session of the 107th Congress, the
committee roster appeared in the Congressional Record on
January 25, 2001. The subcommittee memberships were
determined at an organizational meeting held on February 28,
2001.
On June 6, 2001, the majority of the Senate changed from
Republican to Democrat when Senator James M. Jeffords, of
Vermont, changed party affiliation from Republican to
Independent. Senator Harry Reid, of Nevada, assumed the
chairmanship of the committee. On July 10, 2001, Senator
Jeffords was appointed as chairman of the committee by the
Democratic Leader. At a business meeting held on July 25,
2001, two subcommittees were renamed and new subcommittee
assignments were made.
C O N T E N T S
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Page
MARCH 21, 2001
ENVIRONMENTAL REGULATIONS AND THE NATION'S ENERGY POLICY
OPENING STATEMENTS
Carper, Hon. Michael D., U.S. Senator from the State of Delaware. 29
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 11
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey.. 54
Crapo, Hon. Michael D., U.S. Senator from the State of Idaho..... 14
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 7
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 9
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 1
WITNESSES
Alexander, Anthony J., President, FirstEnergy.................... 34
Prepared statement........................................... 61
Responses to additional questions from Senator Lieberman..... 63
Hawkins, David, Director, Air and Energy Program, Natural
Resources Defense Council...................................... 38
Prepared statement........................................... 73
McGinty, Kathleen, former Chair, Council on Environmental Quality 18
Prepared statement........................................... 59
Nemtzow, David, President, Alliance to Save Energy............... 35
Prepared statement........................................... 64
Plunk, Olon, Vice President for Environmental Services, Xcel
Energy......................................................... 41
Prepared statement........................................... 83
Responses to additional questions from Senator Lieberman..... 86
Stuntz, Linda, former Deputy Secretary, Department of Energy..... 15
Prepared statement........................................... 54
------
APRIL 5, 2001
ENVIRONMENTAL REGULATIONS AND ENERGY POLICY
OPENING STATEMENTS
Campbell, Hon. Ben Nighthorse, U.S. Senator from the State of
Colorado....................................................... 129
Article, Impact of Environmental Regulations on Hydropower
Generation................................................. 130
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 95
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey.. 133
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 92
Letter, energy policy, to Vice President Cheney.............. 94
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 96
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 87
WITNESSES
Bowlden, Taylor, Vice President, Policy and Government Affairs,
American Highway Users Alliance................................ 118
Prepared statement........................................... 200
Grumet, Jason S., Executive Director, Northeast States for
Coordinated Air Use Management................................. 111
Prepared statement........................................... 177
Hirsch, Robert, board of directors, Annapolis Center, and Chair
of the NAS Energy and Environment Board........................ 97
Prepared statement........................................... 133
Porras, Carlos J., Executive Director, Communities for a Better
Environment.................................................... 116
Prepared statement........................................... 188
Report, Major Accidents and Serious Incidents: 1999-2000,
Contra Costa County, California............................ 193
Slaughter, Bob, Director, Public Policy, National Petrochemical
and Refiners Association....................................... 114
Prepared statement........................................... 182
Spitzer, Eliot, Attorney General, State of New York.............. 100
Prepared statement........................................... 135
Report, State of New York Action Plan for a Balanced Electric
Power Policy..............................................142-172
Stewart, Thomas, Executive Vice President, Ohio Oil and Gas
Association.................................................... 108
Prepared statement........................................... 172
ADDITIONAL MATERIAL
Article, Impact of Environmental Regulations on Hydropower
Generation..................................................... 130
Letter, Interstate Natural Gas Association of America............ 211
Reports:
Major Accidents and Serious Incidents: 1999-2000, Contra
Costa County, California................................... 193
State of New York Action Plan for a Balanced Electric Power
Policy..................................................... 142
Statements:
National Association of Manufacturers........................ 206
Robinson Oil Corporation..................................... 204
------
APRIL 27, 2001--SALEM, NH
USE OF METHYL TERTIARY BUTYL ETHER (MTBE)
OPENING STATEMENT
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire.... 213
Letter, to Administrator Whitman, Governor Jeanne Shaheen.... 217
Summary, Provisions of S. 2962, 106th Congress............... 218
WITNESSES
Aho, Patricia W., Executive Director, Maine Petroleum Association 232
Prepared statement........................................... 287
Statement, American Petroleum Institute...................... 289
Bogan, Doug, Director, New Hampshire Clean Water Action.......... 239
Glen, Howie...................................................... 251
Harrison, Margo.................................................. 245
Holmberg, William C., President, Biorefiner...................... 231
Prepared statement........................................... 268
Kinner, Nancy, Professor of Civil Engineering, University of New
Hampshire...................................................... 229
Prepared statement........................................... 272
Klemm, Hon. Arthur, President, New Hampshire State Senate........ 222
Prepared statement........................................... 255
Lang, Hal........................................................ 247
Maguire, Bob..................................................... 252
Martin, Mary Ellen............................................... 243
Miller, Christina, Derry, NH..................................... 220
Prepared statement........................................... 254
Norris, Richard.................................................. 238
Varney, Robert W., Commissioner, New Hampshire Department of
Environmental Services......................................... 221
Prepared statement........................................... 256
ADDITIONAL MATERIAL
Article, Salem Revisited: Updating the MTBE Controversy.......... 302
Letter, Gahagan and Associates................................... 305
Statements:
American Petroleum Institute................................. 289
Norris, Clint, BC International.............................. 303
Oxygenated Fuels Association................................. 298
------
MAY 2, 2001
SCIENCE OF GLOBAL CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS
OPENING STATEMENTS
Baucus, Hon. Max, U.S. Senator from the State of Montana......... 360
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island 318
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 322
Corzine, Hon. Jon S., U.S. Senator from the State of New
Jersey.......320, 361
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 320
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 336
Reid, Hon. Harry, U.S. Senator from the State of Nevada........315, 358
Smith, Hon. Bob, U.S. Senator from the State of New Hampshire.... 309
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 313
Wyden, Hon. Ron, U.S. Senator from the State of Oregon........... 317
WITNESSES
Brown, Marilyn A., Director, Energy Efficiency and Renewable
Energy Program, Oak Ridge National Laboratory.................. 346
Prepared statement........................................... 462
Responses to additional questions from:
Senator Corzine.......................................... 468
Senator Reid............................................. 469
Christy, John R., Professor, Department of Atmospheric Science,
University of Alabama at Huntsville............................ 339
Prepared statement........................................... 383
Edmonds, Jae, Pacific Northwest National Laboratory, Battelle
Memorial Institute............................................. 341
Prepared statement........................................... 392
Report, Global Energy Technology Strategy...................396-452
Lal, Rattan, School of Natural Resources, Ohio State University.. 343
Prepared statement........................................... 452
Responses to additional questions from Senator Corzine....... 456
Lindzen, Richard S., Alfred P. Sloane Professor of Meteorology,
Massachusetts Institute of Technology.......................... 324
Prepared statement........................................... 352
Responses to additional questions from Senator Reid.......... 366
Rogers, James E., Chairman, President and Chief Executive
Officer, Cinergy Corporation................................... 344
Prepared statement........................................... 457
Responses to additional questions from Senator Smith......... 461
Trenberth, Kevin E., Head, Climate Analysis Section, Climate and
Global Dynamics Division, National Center for Atmospheric
Research....................................................... 325
Article, Stronger Evidence of Human Influence on the Climate. 371
Prepared statement........................................... 367
Responses to additional questions from:
Senator Corzine.......................................... 380
Senator Reid............................................. 383
ADDITIONAL MATERIAL
Article, Stronger Evidence of Human Influence on the Climate,
Kevin Trenberth................................................ 371
Report, Global Energy Technology Strategy.......................396-452
Statements:
CMS Energy Corporation, John W. Clark........................ 495
International Project for Sustainable Energy Paths, Florentin
W. Krause.................................................. 471
National Environmental Trust, Kalee Kreider.................. 493
------
AUGUST 1, 2001
IMPACT OF AIR EMISSIONS FROM THE TRANSPORTATION SECTOR
OPENING STATEMENTS
Carper, Hon. Michael D., U.S. Senator from the State of Delaware. 506
Chafee, Hon. Lincoln, U.S. Senator from the State of Rhode Island 506
Clinton, Hon. Hillary Rodham, U.S. Senator from the State of New
York........................................................... 508
Corzine, Hon. Jon S., U.S. Senator from the State of New Jersey.. 507
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 504
Jeffords, Hon. James M., U.S. Senator from the State of Vermont.. 499
Lieberman, Hon. Joseph I., U.S. Senator from the State of
Connecticut.................................................... 501
Reid, Hon. Harry, U.S. Senator from the State of Nevada.......... 534
Voinovich, Hon. George V., U.S. Senator from the State of Ohio... 509
WITNESSES
Brenner, Rob, acting Assistant Administrator, Air and Radiation,
U.S. Environmental Protection Agency........................... 503
Prepared statement........................................... 534
Dana, Greg, Vice President, Environment, Alliance of Automobile
Manufacturers.................................................. 520
Prepared statement........................................... 544
Freilla, Omar, New York City Environmental Justice Alliance...... 523
Prepared statement........................................... 548
Greenbaum, Dan, President, Health Effects Institute.............. 521
Letter, Health Effects Institute............................. 552
Prepared statement........................................... 549
Mark, Jason, Clean Vehicles Program Director, Union of Concerned
Scientists..................................................... 518
Prepared statement........................................... 541
Saitas, Jeff, Executive Director, Texas Natural Resources
Conservation Commission........................................ 526
Prepared statement........................................... 556
ADDITIONAL MATERIAL
Letter, Health Effects Institute................................. 552
CLEAN AIR ACT OVERSIGHT ISSUES
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WEDNESDAY, MARCH 21, 2001
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Clean Air, Wetlands, Private Property, and
Nuclear Safety,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:10 a.m. in
room 406, Senate Dirksen Building, Hon. George V. Voinovich
(chairman of the subcommittee) presiding.
ENVIRONMENTAL REGULATIONS AND THE NATION'S ENERGY POLICY
Present: Senators Voinovich, Lieberman, Clinton, Corzine,
Inhofe, Crapo, Carper, and Smith [ex officio].
Senator Voinovich. Good morning. The hearing will come to
order. I have a statement I want to put in the record.
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
U.S. SENATOR FROM THE STATE OF OHIO
Today's hearing is on the interaction between our
environmental regulations and our nation's energy policy. This
is our first subcommittee hearing this year, and I'd like to
welcome our ranking member, Senator Joe Lieberman. I look
forward to working with him in Congress and in this committee.
Few would disagree that we are in the midst of an energy
crisis in this nation, one that is having a tremendous
influence over the state of our economy and affecting the
quality of life of the American people. The impact of this
energy crisis is, and will continue to be, of such a magnitude
that I believe what this committee does this year could have
more sway over what happens to our economy and the citizens of
the United States than at any other time in recent memory.
All we need do is look at what is happening in the State of
California and it is apparent how urgently we need to enact a
national energy policy. Brownouts, rolling blackouts, lost
business--all have brought chaos to this nation's largest State
and largest economy. Not only is California's energy crisis
impacting California; it reaches nationwide and across the
globe.
Since the beginning of the 107th Congress, I have been
holding a series of public meetings across the State of Ohio
where I have asked individuals and business owners to relay
their experiences as to how our energy crisis is impacting
them.
Last month in Cleveland I held a meeting with Catholic
Charities, Lutheran Housing, and the Salvation Army, as well as
senior citizens, low-income parents, and handicapped
individuals. The Catholic Diocese said the number of helpline
calls in 2000 was up 96 percent from 1999 and 194 percent from
1998 to 2000.
The Salvation Army, first 7 weeks this year, 559 families
seeking assistance with energy costs; last year, 330.
For the least of our brothers and sisters, the choice comes
down to paying for heat or paying for food, and because of this
many are having to rely on hunger centers for their meals.
A few weeks ago I met with business leaders in Cincinnati.
They weren't big businesses. They were small ones. Each of them
relayed how energy costs were impacting their particular
business.
Mr. Joe Maas, who owns JTM Provisions Company, a food
service company, indicated that JTM will pay $200,000 more this
year than last year for gas and electric, a 100 percent
increase for the business.
H.J. Benken Florists, owned by Mr. Michael Benken, is a
family owned business. He reports that energy costs for many
California-based companies that provide flowers to Mr. Benken's
shop have increased as high as 600 percent. As a matter of
fact, he said that most roses are now grown in Ecuador or other
Latin American countries where energy prices are lower.
We read the Wall Street Journal and New York Times,
business section and I would suspect that some of the
predictions that the profits aren't reaching what they
suspected them to have a lot to do with their energy costs.
Many Americans live paycheck to paycheck, and when they
have to allocate more of their paycheck for energy costs and
make a choice to meet the mortgage payments, pay their bills,
or cut back on other spending, usually they cut back on
spending, and since consumer spending makes up 68 percent of
our gross domestic product, America's competitiveness is
negatively impacted.
This hearing is the first in a series of hearings examining
our energy and environmental policies. To that end, I am
working closely with Senator Murkowski on his National Energy
Security Act. In fact, I am the fourth original cosponsor of
this legislation.
It is my intention to examine the various environmental
issues surrounding our energy policy in our subcommittee in
order to prepare for action by the Senate on the Murkowski
energy bill.
If you were to listen to the media, you'd think that the
only thing in the bill is oil drilling in ANWR. It is much more
than that. The bill is a comprehensive package of proposals and
it includes general provisions to protect energy supply and
security; it encourages clean coal technology, allowing us to
use our 250-year supply; it supports domestic oil and gas
exploration; it promotes energy conservation and efficiency; it
encourages alternative fuels and renewable energy supplies for
homes, businesses, and cars; and it provides continued
assistance under the Low Income Energy Assistance Program, or
LIHEAP program.
Today's hearing will begin with a broad perspective on the
energy end environmental issues, followed by a closer look at
utility-related issues. Our next hearing will look more
specifically at oil and gas issues. We will then have a hearing
on global climate change--which I think is going to be very
interesting and hopefully we can get the best and the brightest
to come in and talk about that--and nuclear issues and the
Smith multi-emissions strategy.
This year the subcommittee will also conduct general
oversight hearings on the Clean Air Act, budget oversight,
indoor air, and other issues. I promise it will be a very, very
busy year.
As I mentioned, I think these hearings will have a dramatic
impact on our economy. I don't know what the economic situation
is in the rest of our States and in our nation, but I've got to
tell you in Ohio that we're in recession. We are. How deep that
recession will be will largely be determined on what we do to
harmonize our energy and environmental needs.
I went through--and I think I shared this with Senator
Lieberman--I went through, as mayor of Cleveland, the recession
of 1981 and 1982. I don't want to go through that again. We've
got to take some action here to turn people's attitude around.
The energy crisis has several causes, all of which are
important: a lack of national energy policy for almost 30
years--and I want to say this, this is not a Republican or
Democratic issue, as far as I am concerned. My party is as
guilty as the other party in terms of putting energy policy
together.
Faulty deregulation law--where deregulation has worked in
other States, it has failed in California. It's working in
Ohio. This has placed a drag on California's economy, as well
as the rest of America, and they still haven't dealt with
resolving their energy problems.
It is an interesting thing to me, as a government official,
that so often when a problem arises that what we do is we point
to somebody else, instead of stepping forward and saying, ``mea
culpa.'' Some of it is because of me, and there are things that
I need to do to help the situation.
Third, environmental policies which have contributed to a
lack of fuel diversity and difficulties in siting new
generation facilities, pipelines, and transmission lines. These
policies have gotten much worse over the last 8 years,
particularly in terms of fossil fuel.
Fourth, we are too reliant on foreign sources of oil. In
January the OPEC nations cut back on production by 1.5 billion
barrels. That was January 17. Just this past weekend OPEC
announced they are decreasing production by another one billion
barrels per day. The Saudis have said, ``Don't worry about it.
We'll keep it around $28. Well, I'm not putting that in the
bank.
I think that we are going to be held hostage to the Middle
East, and I think that's another issue that we ought to look
at. The Middle East is--I spent time in Egypt and I spent 3
days in Israel, and the situation there to me is more critical
and I'd submit--and I have been going to Israel and visiting
that part of the world for 20 years. We have some real
difficult problems over there, and that may well have an impact
on us.
In 1973 we had 35 percent reliance. Today it is 56 percent.
It is projected by 2020 to be 65 percent.
The other thing is the inappropriate demonizing of nuclear
power. The U.S. industry uses this safely and other countries
use it safely. It's clean, and we need to deal with the waste
issue and move on with building new reactors.
On fuel diversity, current environmental laws have created
greater dependence on natural gas. Of currently planned new
electric generation, 90 percent is natural gas fired. Thirty-
one peaking plants are planned in Ohio. We just built 13 new
1,000-megawatt peaking plants, all fueled by natural gas.
The problem is natural gas production is down. It has
dropped 3.7 percent from the fourth quarter of 1999, and the
price of it has gone right through the roof.
We need to determine the necessary changes in environmental
laws for increased energy production from clean coal
technologies, increased nuclear generation, new refining
capacity.
Refining capacity--we could get oil tomorrow. We don't have
the refineries. We haven't built a new refinery in this country
in 25 years. We had 231 in 1983. We have 155 in 2000.
I think Secretary of Energy Spencer Abraham gave an
excellent speech on Monday to the U.S. Chamber of Commerce
laying out our current energy situation. I don't know whether
my colleagues read that or not, but it is, I think, one of the
most comprehensive reviews of where we are in terms of our
energy policy, and I'm going to include that in the record and
again urge people to read that.
As we begin today's hearing, I'd like to pose three
questions for the panelists to consider:
To what extent has the Clean Air Act affected
fuel choice and reduced fuel diversification?
To what extent has the Clean Air Act made it more
difficult to site and operate energy facilities such as power
plants, refineries, E&P facilities, transmission lines, and
pipelines?
What is the appropriate method for harmonizing
our nation's environmental laws with our energy needs? How can
policymakers better reconcile the sometimes conflicting policy
objectives?
I'd be curious to hear the answers put forth by today's
panelists, and I thank the witnesses for coming here to appear
before us. I really appreciate Senator Lieberman being here and
Senator Corzine. I will ask now Senator Lieberman for his
opening statement.
[The prepared statement of Senator Voinovich follows:]
Opening Statement of Hon. George V. Voinovich, U.S. Senator from the
State of Ohio
Today's hearing is on the interaction of our environmental
regulations and the nation's energy policy. This is the first
subcommittee hearing of the year and I would like to welcome our
ranking member Senator Joe Lieberman. Senator Lieberman and I have
worked well together in the past couple of years on a wide variety of
issues here in the Environment and Public Works Committee and also in
the Governmental Affairs Committee. I look forward to another 2 years
of productivity working with him in this Congress.
Few would disagree that we are in the midst of an energy crisis in
this nation, one that is having a tremendous influence over the state
of our economy and affecting the quality of life of the American
people. The impact of this energy crisis is, and will continue to be,
of such a magnitude that I believe what this committee does this year
could have more sway over what happens to our economy and the citizens
of the United States than at any other time in recent memory.
All we need do is look at what is happening in the State of
California and it is apparent how urgently we need to enact a national
energy policy. Brownouts, rolling blackouts, lost business--all have
brought chaos to this nation's largest State and largest economy. Not
only is California's energy crisis impacting California, it reaches
nationwide and across the globe.
California's problem--as large as it is--is just one of the many
energy problems faced by communities, cities and States across the
nation.
Since the beginning of the 107th Congress, I've been holding a
series of public meetings across the State of Ohio where I have asked
individuals and business owners to relay their experiences as to how
our energy crisis is impacting them.
Last month in Cleveland, I held a meeting with Catholic Charities,
Lutheran Housing and the Salvation Army as well as senior citizens, low
income parents and handicapped individuals. I heard many heart-rending
stories about the struggles that they were going through just to be
able to afford their monthly energy bills.
I was told that because of soaring energy costs, the dependency on
charitable organizations has risen dramatically.
The Catholic Diocese said that in the year 2000, their helpline
received 3,400 calls for basic needs; items such as food, utilities,
mortgage or rent. The number of calls the Diocese received went up 96
percent from 1999 to 2000, and 194 percent from 1998 to 2000.
In the first 7 weeks of 2001, the Salvation Army in Cleveland had
559 families seeking assistance with energy costs. In comparison, for
all of 2000, the Salvation Army helped 330 families.
For the least of our brothers and sisters, the choice sometimes
comes down to paying for heat or paying for food, and because of this,
many are having to rely on hunger centers for their meals. As more
people come into these programs, the more it is taking a toll on the
various philanthropic organizations to keep up with the demand.
A few weeks ago, I met with business leaders in Cincinnati, each of
whom relayed how energy costs were impacting their particular
businesses.
For instance, Mr. Joe Maas, who owns JTM Provisions Company, a
company which produces products for the food service industry,
indicated that JTM will pay $200,000 more this year than last for gas
and electric--a 100 percent increase. High energy prices have also
increased the prices of JTM's raw ingredients, such as tomato paste,
which Mr. Maas buys from California producers. The price of this
ingredient alone has increased $2,000 per load due to higher shipping
and processing costs.
Another example is H.J. Benken Florists owned by Mr. Michael
Benken. This family owned business reports that energy costs for many
California-based companies that provide flowers to Mr. Benken's shop
have increased as high as 600 percent. Energy prices have increased so
dramatically in California that most roses are now grown in Ecuador or
other Latin American countries where energy prices are lower. Mr.
Benken also stressed that his products--flowers--are luxury items, so
consumers will simply forgo buying them if their prices skyrocket, as
they have.
In December, Mr. Benken's heating bill was $15,000, just $200 more
than the previous December. However, that was to heat less than a third
of the space: Mr. Benken typically heats 20,000 square feet of
greenhouse space. This year, he is heating just 6,000 square feet.
The ``horror stories'' that I had heard from business owners in
Ohio were confirmed on a national scale when I addressed the Board of
Directors meeting of the National Association of Manufacturers last
month. Manufacturers from all over America complained bitterly over the
high price of energy they were experiencing.
Many expressed how they couldn't immediately pass these incredible
increases in energy costs because they knew their customers couldn't
afford it. This has led them to cut costs elsewhere by deferring
maintenance, freezing their hiring and even considering lay-offs.
Federal Reserve Chairman, Alan Greenspan, has indicated that
businesses don't have the same capital to invest, since more of it is
being used to pay energy bills.
Indeed, at my meeting in Cleveland, a businessman by the name of
Jim Krimmel told me that the price he paid for gas had increased from
$87,000 in January of 2000 to just over $197,000 in January 2001; even
though this year, he was using less gas. By his calculations, Mr.
Krimmel indicated that he will pay $1.5 million for gas in 2001--an
$867,000 increase over the price he paid just 2 years ago.
I believe the high cost of energy is a major contributing factor to
our current economic downturn, affecting both businesses and individual
consumers. Many Americans live paycheck to paycheck, and when they have
to allocate more of their paycheck for energy costs, they make a choice
to either meet their mortgage payments, pay their bills or cut back on
other spending. Usually, they cut back on spending, and since consumer
spending makes up 68 percent of our Gross Domestic Product, America's
competitiveness is negatively impacted.
Another aspect of our energy crisis that we must address is the
uncertainty over a large portion of our crude oil supply.
The United States is more dependent on foreign oil today than at
any other time in our history. I trust that my colleagues remember the
Arab Oil Embargo of 1973, when costs went up, gas shortages were
everywhere and people sat in long lines to get gas. At that time, the
U.S. relied on 35 percent foreign oil to meet our domestic needs. In
the year 2000, our reliance on foreign oil averaged some 56 percent. By
the year 2020, it is projected to hit 65 percent at our current rate of
consumption.
Our dependence on foreign oil is both a national security issue and
an economic issue, and a major reason why a lack of an energy policy
should be of great concern to all Americans.
In addition, we should be extremely concerned about how our
environmental policies have impacted our ability to meet our energy
needs here in America. That is the purpose of today's hearing.
This hearing is the first in a series of hearings examining our
energy and environmental policies. My goal as subcommittee chairman is
to harmonize our Federal clean air regulations with our nation's energy
needs. I want a clean environment and cost-effective reliable sources
of energy that will allow continued economic growth. To that end, I am
working closely with Senator Murkowski on his National Energy Security
Act, S. 388. In fact I am the fourth original cosponsor of his
legislation, right behind the Majority Leader.
If you were to listen to the media, you'd think that Senator
Murkowski's bill was just about oil drilling in ANWR. It's much more
than that. This bill is a comprehensive package of proposals:
It includes general provisions to protect energy supply
and security;
It encourages clean coal technology--(allowing us to use
our 250-year supply);
It supports domestic oil and gas exploration; it promotes
energy conservation and efficiency;
It encourages alternative fuels and renewable energy
supplies for homes, businesses and cars;
It provides continued assistance under the Low Income
Home Energy Assistance Program (LIHEAP).
It is my intention to examine the various environmental issues
surrounding our energy policy in the Clean Air Subcommittee in order to
prepare for action by the Senate on the Murkowski Energy Bill.
Today's hearing will begin with a broad perspective on America's
energy and environmental issues followed by a closer look at utility
related issues. Our next hearing will look more specifically at oil
and-gas issues. We will then have hearings on Global Climate Change,
Nuclear Issues, and Chairman Smith's Multi-Emissions Strategy.
This year, the subcommittee will also conduct general oversight
hearings on the Clean Air Act, Budget Oversight on the Office of Air
and Radiation of the EPA and Wetlands Of lice of the Army Corps of
Engineers, Indoor Air and a number of other issues. Needless to say, it
will be a very busy year.
However, in today's hearing we are addressing the impact between
our environmental and energy policies. As I indicated, I believe we are
not only entering into a recession, but also an energy crisis; and our
energy crisis will largely determine how deep of a recession, and how
long it will last.
In my opinion, this energy crisis has several causes, all of which
are important:
1) A lack of a national energy policy for almost 30 years.
2) A faulty deregulation law in California. Where deregulation has
worked in other States, it has failed in California. As I said earlier,
this has placed a drag on California's economy as well as the rest of
America's--and they still have not dealt with their problem. California
needs to take responsibility for its failed law because deregulation is
working in other States.
3) Environmental policies which have contributed to a lack of fuel
diversity and difficulties in siting new generation facilities,
pipelines, and transmission lines. These policies have gotten much
worse over the last 8 years, particularly with the previous
Administration's ``War On Fossil Fuel.''
4) We are too reliant on foreign sources of oil. Just this past
weekend, OPEC announced they are decreasing production by 1 million
barrels per day--on top of the 1.5 million barrel per day reduction we
faced in January. If we do nothing to shake our dependence on foreign
oil, we are going to be held hostage to unstable and/or unfriendly
regimes in the Middle East for years to come. It should not sit well
with the members of this subcommittee that while our troops are bombing
Saddam Hussein, he is selling us oil.
5) The inappropriate demonizing of nuclear power. The U.S. energy
industry uses it safely and other countries use it safely as well. The
two things we must do is address the waste issue and what to do with it
and move forward with building new reactors. We have been discussing
what to do with the nuclear repository in Yucca Mountain for some 15
years. It's time to make a final decision on whether or not Yucca
Mountain is a viable site for nuclear waste. Either it is the right
place to store our nuclear waste, or we should move on.
With respect to fuel diversity, our current environmental laws have
helped create greater dependence on cleaner-burning natural gas. Ninety
percent of currently planned new electric generation is from plants
that will be natural gas-fired. Right now, there are 31 ``peaking''
plants planned in Ohio--plants which operate at peak times--and all of
which would be natural gas-fired. The major problem with our growing
reliance on natural gas is the fact that natural gas production is
down. It has dropped 3.7 percent from the fourth quarter of 1999 and
has driven the price of natural gas through the roof.
We need to determine the necessary changes in environmental laws
for increased energy production. We need to look at the options that
tend to get ignored because they are not ``politically correct:'' from
clean coal technologies, to increased nuclear generation to new
refining capacity. If we are unable or unwilling to do so, I believe
that for the foreseeable future, we will only see more of the same of
what is occurring in California right now, but on a nationwide scale.
As we begin today's hearing I would like to pose three questions
for the panelists to consider:
Question 1. To what extent has the Clean Air Act affected fuel
choice and reduced fuel diversification?
Question 2. To what extent has the Clean Air Act made it more
difficult to site and operate energy facilities such as power plants,
refineries, and E&P facilities, transmission lines, and pipelines?
Question 3. What is the appropriate method for harmonizing our
nation's environmental laws with our energy needs? How can policymakers
better reconcile the sometimes conflicting policy objectives?
I will indeed be curious to hear the answers put forth by today's
panelists.
I thank the witnesses for appearing this morning, and I look
forward to your testimony.
Senator Lieberman. Mr. Chairma, thank you. I'm going to
yield to Senator Inhofe, who I know has another committee he
has to go to.
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. Thank you, Senator Lieberman.
All I want to do is insert a statement for the record, and
I'd like to repeat what the chairman said. This is not a
Republican/Democrat type of thing. We tried to get Ronald
Reagan to adopt a comprehensive national energy policy. He
didn't do it. I thought sure Bush would when he came in. He
didn't do it. The Clinton Administration didn't do it. So it is
overdue and certainly the regulations, the cost of regulations
is a very significant part of our cost of energy.
Just the other day they released a report that if you
regulate the CO2 emissions from utilities, the cost
would be somewhere between 60 and $115 billion a year--again
costs go up.
I would ask unanimous consent that my statement be put in
the record, and I thank Senator Lieberman for allowing me to do
that.
Senator Voinovich. Without objection.
[The prepared statement of Senator Inhofe follows:]
Opening Statement of Hon. James M. Inhofe, U.S. Senator from the State
of Oklahoma
In the last week, there has been an enormous amount of negative
press about President Bush's decision to not support mandatory carbon
reductions from utilities. However, with a looming recession and rising
energy prices, President Bush did the right thing.
When the price of gasoline went through the roof last summer, we
all witnessed the Clinton Administration's incredibly irresponsible
accusations that big oil companies were ``colluding.'' Price spikes
occurred last summer because of the large number of the Clinton
Administration's poorly implemented environmental regulations and our
dependence on foreign oil supplies.
The solution to the high prices is not found in cheap political
gimmicks like releasing oil from the Strategic Petroleum Reserve.
Rather, the solution relies on developing a strategic national energy
policy and having highly effective and streamlined environmental
regulations.
Currently, 56.6 percent of the U.S. oil needs are met by foreign
sources. This presents a real energy and national security problem.
The military is equally dependent on foreign oil as the general
public is. We must seek to encourage as great a domestically produced,
diverse energy supply as possible--including nuclear, coal, oil, gas,
and renewables.
When well thought out and reflecting consensus, environmental
regulations can certainly provide benefits to the American people. But
when regulations are rushed into effect without adequate thought, they
are likely to do more harm than good.
Congress should not let the extreme environmental group's tyranny
force the American people to pay sky high prices for fuel.
Over the years, I have witnessed the environmental movement fight
any and all attempts to reform and streamline environmental
regulations. We are dealing with this energy crisis largely because the
environmental extremists dictated our nation's energy policy for the
last 8 years. A consequence that they do not want to tell the American
people is a byproduct of their efforts.
If you do not do it the environmentalists way, then we see all of
the commercials detailing horror stories. Well, the energy crisis it a
real life horror story. A horror story, which will only get worse. If
we, as a nation, do not do something about it, it will affect every
aspect of everyone's life. I want all of the American people to take
notice!
Let's not forget. When the price of energy rises that means the
less fortunate in our society must make a decision between keeping the
heat and lights on or paying for other essential needs. I am hearing
from school after school that heating bills are depleting the funds
that usually go to supplies and books. Though we are seeing with the
rolling blackouts in California right now that it does not matter how
much money you have--because the energy just doesn't exist. There is a
real human cost to the extreme environmental movement.
Last December, the Department of Energy's Energy Information
Administration released a study on regulating CO2 emissions
from utilities. The study concluded that the mandatory regulation of
CO2 from utilities will cost $60-115 billion per year by
2005. The mandatory regulation of CO2 would make the price
and availability of energy a national crisis--at a scale that our
nation has never before experienced. Environmental regulations are a
large contributor to the energy crisis in California. Before we add to
the current regulatory web, our nation should look at how we can
implement our current environmental regulations--more effectively and
efficiently.
As a Senator and grandfather, I want to ensure the cleanest
environment for our nation. I am convinced that environmental
regulations can be harmonized with energy policy. Our current situation
demands it.
Unlike his predecessor, President Bush cannot continue to place
layer after layer of regulations without any consideration of their
energy implications. The environmental community does not have to
answer to the American people when energy prices go through the roof or
to worry about the national security implications of greater dependence
on foreign energy sources. However, the President does.
Senator Voinovich. I'd like to thank you for being here,
and, Senator Crapo, thank you for being here.
Senator Inhofe. One last thing. I always thought when
Republicans took over we'd run things better in the Senate, and
yet we have two significant committees taking place at the same
time now, so I guess that didn't happen.
Senator Lieberman. We're going to do better when we take
over.
[Laughter.]
Senator Voinovich. On that note, we'll hear from Senator
Lieberman.
OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,
U.S. SENATOR FROM THE STATE OF CONNECTICUT
Senator Lieberman. Thanks. Thanks, Mr. Chairman. Thanks
very much for convening this hearing today and this series of
hearings that you and I have agreed that we would do in this
Subcommittee on Clean Air and particularly the interaction of
our energy needs and our environmental goals.
These are complicated but urgent questions, and I think
they can benefit from just the kind of open, balanced
discussion that I hope we will have this morning, so I look
forward to being part of this with you.
This is one of those areas where, you know, everybody in
one sense is right, or, put another way, there are arguments on
both sides, and the truth is that we have to find a way to both
meet our energy needs and protect our environment, and we have
to do it in a way that doesn't just respond to short-term
pressures and problems but has long-term goals and values for
our country involved.
It is not going to be easy, but I think we can do it, and
we can do it if we share information in a mutually respectful
and open-minded way, and particularly if we take advantage of
the single-most significant new factor in our world today,
which is technology, and the extraordinary new opportunities
that technology gives us.
So we have an energy system now that is substantially
dependent on a source of energy, fossil fuels, which we do not
control, and it creates exactly the dependence that Senator
Voinovich has talked about and undercuts our own security and
our own national strength, no matter how strong we are in every
other way--economically and militarily.
So I think, as we go forward, we have to acknowledge--and
it is painful, because it represents change and dislocation--
that, one, we should try to develop and use as much of our
energy resources, natural energy resources, as we have within
our country--fossil fuel sources--in an environmentally
protective way, but that ultimately we have to look beyond
fossil fuel. While we're looking beyond, we have to make much
better use of efficiency, energy efficiency, and conservation,
but the next chapter of our history will involve new sources of
energy.
A while back--actually, it was at the time of the Kyoto
meetings on climate change. I spent a few days after the
meetings in Tokyo, and I had dinner one night with an executive
of Toyota Motors, and we were talking future, and he said--
because, obviously, the Japanese have their own problems about
how much energy they control within their resources, which is
not much, so they look for outside sources or new technologies.
He said Toyota has made a judgment that vehicles will be
powered in the future by fuel cells. He said, ``That's my
prediction to you.''
Now, it may happen in 10 years, it may happen in 30 years.
I think at the time he said it probably would happen in 20
years. But it is going to happen, and it is going to happen
because the logic of it, the efficiency of it, the cleanliness
of it, if you will, the economy of it is so overpowering that
it's just going to be, and the question is who is going to do
it first. In fact, the Japanese are investing extraordinary
amount of money from within their government and their
companies in fuel cell technology.
We're beginning to do that ourselves, although I think one
result of hearings such as this might be to create a much
bolder, more aggressive--I hesitate to use the metaphor. It is
used probably too often, but it is not a bad one--a moon shot
program focus for developing the energy sources through new
technology of the next generation to make sure, for our own
energy interests but also for our own economic interests, that
we are at least a significant factor in the global marketplace
for these new technologies, if not the dominant factor.
So the answer to the question is that somehow we've got to
do what our constituents want us to do and our national
interest suggests that we do and our national values compels us
to do, which is to both meet our energy needs, to have a
reliable, cost-efficient source of energy to power our economy,
but also to protect our environment.
I mean, we have been dealing with this lately in this very
interesting, complicated discussion, debate that we are having
over the so-called effort to regulate the four pollutants from
power plants. I mean, and this focuses it. Power plants produce
power. They produce energy. We need energy. We need that power.
Yet they are obviously also one of the major sources of air
pollution in our country.
Let me just give you a few statistics. Power plants
generate 24 percent of industrial nitrogen oxide emissions, 66
percent of industrial sulfur dioxide, 32 percent of mercury,
and 40 percent of carbon dioxide emissions.
Remarkably, almost 80 percent of those emissions come from
coal-fired power plants that were installed prior to 1977.
Those pollutants contribute to serious environmental and public
health problems such as smog, acid rain, climate change, and
cause effects such as respiratory problems, contamination of
fish and other wildlife, and even, according to some
scientists, developmental abnormalities in our children.
So we have a shared interest in doing something about
those, and the question is how to do it.
I was privileged last week to join with several colleagues,
a bipartisan group of colleagues, including Senator Clinton,
I'm proud to say, to introduce the Clean Power Act, which is a
proposal that tries to build on the market-based ideas that
were part of the Clean Air Act originally, the so-called ``cap
in trading system'' to fix limits on emissions of these four
pollutants.
I know they are controversial, particularly the carbon
dioxide provision, which, as we know, the President supported
and changed his mind on. We're going to argue about that,
because I think that's a critical element in the problem of
climate change that the public should and really wants us to do
something about.
To me here is a real, live issue that brings together our
need to have a reliable source of energy with our desire to
protect the environment and our public health.
I just offer this anecdote as an example of how complicated
these issues are. I sat last week with an executive of a
utility company, a major utility company. This one happens to
be supporting this four-pollutant bill. While there is a
tendency to say, ``This four-pollutant bill is against the coal
industry,'' this gentleman said to me that he expects that his
utility and the ones that he is associated with will want to
build coal-fired plants in the future, but they're not going to
build them unless they have the regulatory certainty that he
believes our four-pollutant bill will produce.
So I just present this--the irony that the bill is seen in
some ways as anti-coal, over-regulatory by its critics, and
here is a man in the utility industry saying he'd like to build
some more coal-fired plants because he thinks he can do it in
an environmentally protective way and still have a cost
advantage, but he's not going to do it unless he knows what the
regulatory environment is long term because that will help him
plan and make an investment with some sense of confidence about
what the future will hold.
These are critically important, as I say, complicated
matters. They are not inherently partisan. They ought not to be
partisan. I hope, Mr. Chairman, that, perhaps through the light
that we will shed on them in this hearing and others that we
will hold, we can find common ground to go forward and present
not just for ourselves, but particularly for our children and
grandchildren, a strong, reliable source of energy and a
cleaner and healthier planet.
I thank you very much, Mr. Chairman. I look forward to
these hearings. We've got two great witnesses here--Ms. McGinty
and Ms. Stuntz--and others to follow, and I look forward to
their testimony.
Senator Voinovich. Thank you, Senator Lieberman.
The subcommittee has been operating by the early bird rule,
and Senator Corzine was next in line, and Senator Crapo was
here, and, Senator Clinton, you are on.
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON,
U.S. SENATOR FROM THE STATE OF NEW YORK
Senator Clinton. I'm the only bird left. Thank you so much,
Mr. Chairman. I really want to commend both the chairman and
Senator Lieberman for holding this hearing today and trying to
get to the difficult questions that both the chairman and
Senator Lieberman just referred to with respect to the
interaction of environmental and energy policy. I'm delighted
to have our witnesses here and I look forward to hearing from
both of you, and I am particularly glad to see Ms. McGinty back
from India and other far-flung adventures.
This hearing is exceptionally timely, perhaps more than
anyone would have realized, given the events of the last week.
Before I continue to speak about the substance of the hearing,
itself, I'd like to just take a minute to express my extreme
disappointment with another action taken by the new
Administration yesterday.
You know, we've all heard about the President's charm
offensive, but when it come to the environment and public
health it sometimes appears as though his Administration is on
a harm offensive. Yesterday it was arsenic and about face.
We've seen the intention of this Administration to roll back an
important new drinking water standard for arsenic, a known
human carcinogen. The standard would have followed the
recommendations of the National Academy of Sciences. It would
have brought us in line with standards elsewhere in the world.
I think it is regrettable that we would turn our backs on an
effort to update a standard which has not been revised in
almost 60 years.
Rather than rolling back health standards, we should be
rolling up our sleeves and investing in our nation's water
infrastructure so that drinking water can be as clean and safe
as possible.
I know that meeting our nation's water infrastructure needs
is something we will be looking at in the committee, and I hope
it will be an issue that we can address legislatively in this
Congress, because when it comes to the environment and health,
whether it is the air we breathe or the water we drink, there
really shouldn't be any bigger or more important priority to us
as representatives of people, and I feel the same way when it
comes to the issue we are here today to discuss.
The answer to meeting our nation's energy challenges should
not be to lower the bar with respect to air quality, but to
look for ways that together we can make it cost effective and
efficient for us to meet the appropriate standards.
The Federal Government should be working to help industry
meet the bar by investing in research and development; by
providing incentives for more energy-efficient appliances,
homes, offices; providing incidents for the production and use
of renewable energy sources and other clean sources of energy;
and taking the additional steps necessary to ensure reliable
and affordable power, whether it is by establishing regional
transmission organizations or other measures.
Yesterday I met with a number of New York's winners of the
EPA Energy Star Award, and I was so impressed with their
individual stories. The energy conservation and efficiency
achievements and actual monetary savings realized by these
winners are on-the-ground proof that these kinds of efforts and
investments actually do work and are one of the ways we can
really bridge the dilemma that both the chairman and Senator
Lieberman addressed.
For example, in Kingston, New York, in the school district
there, a community located in the Hudson Valley, because of
Federal and State incentives and assistance, the school
district replaced windows, installed new boilers, made other
energy-efficient upgrades, and ended up saving more than
$395,000 last year--money that can be reinvested in education
programs.
Verizon Company also in New York has made a commitment to
buy energy-efficient products, communicate with employees, use
more fuel cells, because they recognize, as you said, Senator
Lieberman, that this is something that will save money and it
is a technology that should be in wider use.
There are stories like that all over America, and yet I'm
told that in the President's budget programs like this in both
EPA and the Department of Energy will be either eliminated or
severely cut back, which I think is exactly the wrong direction
for us to be going in.
We ought to be taking a look at effective cost-saving
programs that will help us deal with our energy needs in an
environmentally sustainable way and investing in such programs,
and that goes along with our major concern of this hearing of
ensuring that people in New York and across America have access
to reliable and affordable power.
I ran into a friend of mine at breakfast yesterday, the
recently retired chairman of Mobil Oil Company, Lou Noto, and I
was talking with him and he said something which made a big
impression on me. He said, ``You know, we've got to do more in
conservation.'' He said, ``For every gallon of oil that I've
brought up from the ground, 75 percent of its energy usage was
wasted, 25 percent was what we eventually ended up using.'' He
said, ``You know, that's just not something we can keep
doing.'' Well, we have to figure out a way how to avoid that.
Much of the concern in New York is divided between our
efforts to stimulate economic development in upstate New York
and not having access to affordable and reliable power at a
cost that many businesses feel they can pay, because you may
know that New York has the highest utility cost in the country.
We used to be second to Hawaii, but we have surpassed that
distinction. Downstate we have the highest of the high, and so
that is a real challenge for New York City, about how we are
going to be meeting the needs, particularly this summer. Now
that New York City's population has topped eight million for
the first time in history, more and more people are going to be
placing demands, and we have to be ready to meet those demands.
I don't think our concern about meeting our demands for
energy today should permit us to be short-sighted about our
long-term energy and environmental needs over the coming
decades.
I fully support Senator Lieberman's initiative, both with
respect to four pollutants but also with his strong stand
against drilling in the Arctic National Wildlife Refuge, which
is not an answer either to our short-term or our long-term
energy needs and postpones the moment of reality and reckoning
that our country has to come up to face. We have to decide
we're going to be more energy efficient. Yes, we have to
produce more, but what we produce, as Lou told me yesterday, we
have to use more efficiently and cost effectively.
So I'm very grateful that we are having this hearing,
because we represent people, as all of us in this Body do, who
need reliable and affordable power, but I also represent many
people who are just as concerned that, you know, we've killed
the lakes in the Adirondacks; that the Long Island Sound is,
you know, not what it used to be; that if global warming comes
to pass over the next 100 years, Long Island will become Short
Island. You know, we have a lot of concerns that we have to
confront.
So I think it is important that we are having this hearing
and trying to sort out all of these issues and trying to get a
good, solid basis in science and fact on which to build a
consensus that cuts across partisan lines.
I just want to conclude by really recognizing the
chairman's efforts, who I think has played a very important
role.
I hope, Mr. Chairman, that you will take me up on my offer
at an earlier hearing to come to Ohio and visit some of the
plants and the people that you represent and that you will come
and visit some of my folks in the Adirondacks and elsewhere,
because we have to figure out how to really protect the
interests of all of our people in a way that brings people
together and solves our problems, and I really applaud the many
efforts you have made over the years to do just that.
Senator Voinovich. Thank you.
Senator Crapo?
OPENING STATEMENT OF HON. MICHAEL D. CRAPO,
U.S. SENATOR FROM THE STATE OF IDAHO
Senator Crapo. Thank you very much, Mr. Chairman.
I also applaud your holding this and other hearings that
you are going to hold.
I didn't come here with a prepared statement, but as I
listened to the statements made by you and other Senators
something strikes me, and that is that there is a very clear
indication here that there is a broad bipartisan support for
developing a national energy policy and for a lot of the
elements that have to be in that energy policy.
I think that your statement, Mr. Chairman, very, very
adequately laid out the scope of the issue that we have to
address. Senator Lieberman and his focus on technology and
making sure that we have a shared interest in problem solving
plays right into what you were saying, Mr. Chairman, and I
believe that ultimately we have already, as I've listened here,
the basis for a good bipartisan approach to the issue.
Undoubtedly, as we develop our approach to a national
energy policy, we are going to have to focus on conservation
and on efficiencies and on renewables and other alternative
sources of energy. We're going to have to look at the short-
term needs and find out how to address the issues that Mr.
Chairman has raised already with regard to our lack of
development of supply alternatives, whether it be short-term or
long-term alternatives.
I strongly agree with the chairman's highlighting of the
fact that we have a significant source of power in this country
that we have not utilized effectively--nuclear power.
Admittedly, we have to address the waste stream issues, but
when we can solve those issues--and I believe that with all the
talk we have about technology and research and the American
ingenuity that needs to be brought to effect on these issues
that we will be able to resolve the waste stream issues with
nuclear power, and when we do we are going to see that there
will be a tremendous boon to our ability to generate self-
sufficiency in the power arena.
So, with those comments I would just say I see that, with
the statements that I've already heard here today, a broad area
of consensus has already been outlined. I believe that this is
a bipartisan issue where we have a strong commitment on all
sides to make it work. There will be areas where there is
disagreement, but from what I've heard today there's an awful
lot more area of agreement, and hopefully we'll be able to work
forward quickly to address both the short-and long-term needs.
Thank you.
Senator Voinovich. Thank you, Senator Crapo.
It is interesting that you mention nuclear power. I've
looked at the source of energy in our respective States, and it
is interesting that, Senator Lieberman, 73 percent of the power
in your State is from nuclear, and Senator Corzine 70 percent.
It looks like your part of the country uses more nuclear power
than the midwest and some other places in the country, and it
has been--it is expensive. It's clean, and it is not as
expensive as some other alternatives.
It is an area that I think--we also have the Nuclear
Regulatory Commission under our jurisdiction, and I've met now
with three of the commissioners, and they sincerely believe
that with some changes we could move forward with more
production with the current facilities that are available.
There are people in this country today that are giving
consideration to building more nuclear-generating plants.
The basic problem, of course, that we have is this whole
issue that we've had since I was a county commissioner in
Cuyahoga County, and that is: what do you do with the nuclear
waste?
Senator Crapo. Mr. Chairman?
Senator Voinovich. Yes?
Senator Crapo. Could I just make one interesting point
there. Senator Clinton pointed out how we apparently waste 75
percent of the power that comes from the oil that we take out
of the ground in just getting it up and generating it into
ultimate usage. I'm going to be a little bit off on these
statistics, but I'm in the ball park. My understanding is that,
with regard to the spent nuclear fuel, when those fuel rods
come out only about 10 percent of the power in those fuel rods
has been utilized, and that if they can figure out the
technology to refine and reconcentrate those fuel rods, there's
about 90 percent of the power left in them.
It's a tremendous--it's enough power to run the energy
needs of this country for 100s of years in a lot of different
areas, and so this focus we're talking about on research and
development and technology I think can be utilized very
effectively in nuclear power.
Senator Voinovich. Thank you.
We're very fortunate today to have two panelists that have
had a lot to do with our energy and environment over the years,
Ms. Linda Stuntz, former Deputy Secretary, Department of
Energy, and Kate McGinty, former chairman of CEQ. We're pleased
that you are both with us this morning.
Ms. Stuntz, we'll start with you. I think you are familiar
with the rules of the committee that we'd like you to try to
limit your testimony to 5 minutes. Your statements will be put
into the record, and so if you can do that we'd very, very
grateful to you.
Ms. Stuntz?
STATEMENT OF LINDA STUNTZ, FORMER DEPUTY SECRETARY, DEPARTMENT
OF ENERGY
Ms. Stuntz. Thank you, Mr. Chairman and members of the
subcommittee. I'm very grateful for the opportunity to testify
before you today on this extremely important and very timely
issue of harmonizing the Clean Air Act and the nation's energy
policy.
Some 12 years ago, before I was Deputy Secretary in the
Department of Energy, I was something called Deputy Under
Secretary for Policy, which meant I got the things to do that
nobody else really wanted to do. One of those things--and it
made an effect on me for my life, I will tell you--was to be
the Department's point person on the development of the Clean
Air Act Amendments of 1990, both within the Administration and
in meetings here in the Senate. I recall many days spent around
a conference table with then-Majority Leader Mitchell, working
out a deal that was going to be done between the Senate and the
Administration.
Senator Lieberman is laughing because he was a part of that
process, as well. I recall his constructive participation in
that process. I'm heartened this morning by what I've heard,
because I think--not that it was perfect--but those amendments
were important. They were a product of a bipartisan approach
that included the Administration. It is never easy to deal with
the Clean Air Act. I don't think you will be able to
reauthorize it as it needs to be done without a similar
approach, and so I think you are off to a good start. That
experience certainly impressed upon me the importance and the
difficulty of reconciling these competing objectives.
I will be brief this morning. At the risk of boring some of
you who I'm sure know this, I did attach to my testimony some
basic facts in hopes that it would be useful to you as you
continue your inquiries on this matter. I won't review in
detail our current energy consumption. I don't disagree with
Senator Lieberman that in the future we all must inevitably
evolve from a fossil-fuel-based economy to something else,
whether it is hydrogen or nuclear. We are right now very much a
fossil-fuel-based economy, and the charts I've showed you make
that quite clear.
Figure two, I would point out, also talks about the trends.
The trends you see are good in the sense that we use less oil
now in our economy. We are less oil dependent than we used to
be. That's primarily because we've backed it out of
electricity, but we remain, of course, extremely dependent on
it in transportation.
Coal is the single largest source of energy that we produce
as a nation. Natural gas--interestingly, those in the room who
are energy groupies will recall that in the early 1970's we
actually produced more natural gas than we produce now. Even
though there has been substantial attention to that, we have
yet to obtain the level of production we had back then. There's
a long, interesting story about why that occurred, and we can
go into that if it is of interest.
In terms of the less-emitting energy--and I hesitate to say
``emission free,'' because when the Energy Administration
information calculates non-hydro renewables, it includes
biomass and municipal solid waste. My friends in the
environmental community frequently have issues with those
factors, so non-hydro renewables and hydro-power and nuclear
together don't make up very much of the total. When we talk
about Clean Air Act policy I think that has to be kept in mind.
Let me move to figure three, because that's where it gets
interesting. We talk about where at least the Energy
Information Administration thinks we're going in the future.
One of the things we know about this for sure is that it
will be wrong, because we never do a very good job as a nation
in predicting exactly what we will use and how much it will
cost. But directionally I think it is important to look at what
they see happening.
Our production of petroleum is going to continue to
decline. Perhaps it will stabilize. Perhaps not. That depends
upon price, that depends upon technology.
Coal is going to continue to increase to meet our needs,
leveling off a little bit, but, nonetheless, remaining
extremely important.
With respect to nuclear energy--and the Energy Information
Administration has some, I believe, fairly pessimistic
predictions about relicensing. I think there will be more
relicensing of existing plants that could extend their lives
and extend the contribution of that source. I think it is an
important issue for this subcommittee to look into, because
without that what you see is that hydro power continues to be
static, could even decline. Non-hydro renewables increases
slightly but not a lot, and we remain primarily a fossil fuel
based economy.
This doesn't exclude, please, the importance of
conservation. Republicans always get hit with this--that we
don't care about conservation. In fact, the economy has grown
substantially more energy efficient as it has adopted new
technologies, and it will continue to do so. We need it all, I
think, is the bottom line.
Let me just close by talking about what I see as the
greatest challenge we face right now, and that's on the
electric side. We didn't need California and a lot of other
things, tightness in New York City this summer to tell this. If
you look at figure four, it really shows you where the
Government experts think we are headed with respect to the need
for new capacity.
Right now, as was pointed out in the opening statement, I
believe by the chairman, some 89 or 90 percent of that capacity
is predicted to be natural gas. As I point out in my statement,
I represent companies that drill for natural gas and build
pipelines in the Gulf of Mexico. There are credible
technological stories going on down there to produce gas from a
mile of water and 7,000 feet beneath that. I have great
optimism for their ability to do this.
Nonetheless, any time this nation in the past has decided
that we know the fuel that is going to carry us through,
whether it was nuclear too cheap to meter, coal, no more
natural gas, synthetic fuels, whenever we have done that we
have regretted it. It has been a costly mistake.
Therefore, I think this forecast should be troubling in
terms of fuel diversity, in terms of security, and in terms of
economics. As to the extent to which the Clean Air Act has
driven this development, it unquestionably has been a factor.
Perhaps we can discuss later the extent to which it has been a
factor. I think that is debatable, but it clearly has been an
issue in terms of the ability to build new coal plants,
uncertainty about the requirements, and the importance of
regulatory certainty for the future to make these large, long-
life capital investments.
So let me close with that. I look forward to your questions
and this important discussion.
Senator Voinovich. I thank you very much, Ms. Stuntz.
Ms. McGinty, thank you for being here.
STATEMENT OF KATHLEEN MCGINTY, FORMER CHAIR, COUNCIL ON
ENVIRONMENTAL QUALITY
Ms. McGinty. Thank you, Mr. Chairman and members of the
committee, for having me here to join you in this discussion
today.
Let me, if I might, move right to my bottom line. When it
comes to meeting our energy and environmental needs in this
country, we face an enormous wealth of opportunities. Yet,
instead of fostering these opportunities, leadership in
Washington today seems bent on creating a climate of crisis and
fear. The hyperbole being thrown around seems to me to bear
little resemblance to reality.
So what is going on? Sadly, one can only surmise that the
events of the day are being seized upon opportunistically to
promote narrow special interests and sacrifice the broader
public interest in the process.
To me, a glaring example of this pattern is the effort to
use the California energy situation as an excuse, frankly, to
sacrifice the Arctic National Wildlife Refuge. I can't build on
Senator Clinton's comments here. The bottom line is, as we
know, and as I think in an honest moment the Administration
should admit, that opening the Arctic National Wildlife Refuge
will do nothing to solve or even help what is a very tragic
situation in California today.
With all due respect to the members of this committee, I
suspect that for some, at any rate, this hearing is part of a
similar strategy--namely, to seize upon current energy issues
to push through policies that will roll back critical
environment and public health protections.
With the change of Administration, special interests are
seeing opportunity anew, I believe, and are grasping at any and
all developments to justify short-sighted and self-interested
campaigns.
To take the implicit premise of this hearing, did the
Federal Clean Air Act cause what are inarguably tremendous
problems now being suffered and experienced in California?
Answer--no. You don't have to go to the Sierra Club to obtain
that answer, just ask some of the major electricity generators
operating in California in response to assertions by the White
House and others that environmental regulations are holding
back output. Generators have repeatedly said--and I quote--
absolutely false.
What are the main drivers? They are economic and they have
to do with honest, earnest, but inevitably flawed, as Linda
just said, best guesses about markets. Power plants were not
built in California in the early 1990's because there was an
excess of power. Then came not new regulation but deregulation,
which offers many benefits, but in the mid-1990's it brought
with it some market uncertainty which further dampened
interests in building further generating capacity.
Then the unanticipated happened--stronger economic growth
than had been anticipated, stronger growth in electronic-based
commerce than had been anticipated, and, perhaps a harbinger of
climate change, the weather hit new extremes of hot and cold.
The result, instead of the excess which previously had been
anticipated broadly, there was a dearth of supply.
Let's look nationally. Is the Federal Clean Air Act
preventing increases in generation across the nation, as a
whole? Again, I think that is a hard case to make. I'd say
absolutely not.
Experts say that some 190,000 megawatts of new capacity is
in the pipeline. Now, that's a full 25 percent increase in the
nation's overall generating capacity. Of that, some 22,000
megawatts of this new capacity projected to come on line by
2020 is coal fired. If that amount of coal is being planned,
clearly Clean Air Act requirements are not shutting down coal
as an option.
Are environmental concerns completely irrelevant to the
California story? No. But to the extent they play a role they
do so largely related to local concerns, primarily on issues
like the siting of plants, pipelines, and transmission lines.
Now, since local control and State's rights seems to be an
article of faith among the Administration and some in Congress,
I assume that there is no Federal effort intended here to
reverse those local decisions and that those decisions might
earn some modicum of respect here in this forum.
To me, this whole debate actually is a tremendous tragedy.
Why? Quite simply, because I think our country is better than
these false choices that are being presented. Americans are
smarter. With inventiveness and ingenuity, we thankfully have
moved beyond the tired, old rhetoric of it's jobs or the
economy, it's the environment or the economy. We know that we
can and must have both or we will have neither.
This principle was proved repeatedly during the Clinton/
Gore Administration. While some of the most demanding
environmental protections were put in place, the nation also
enjoyed and experienced unsurpassed economic performance.
In the energy area, in particular, the record shows that
this false conflict is, in fact, a false choice. According to
numbers compiled by the Minerals Management Service in 1992,
the last year of the first Bush Administration, domestic oil
and gas drilling activity was at its lowest level since World
War II.
By contrast, under the Clinton/Gore Administration natural
gas production on Federal lands on shore increased 60 percent;
oil production offshore, particularly in the Gulf of Mexico, is
increased 65 percent; natural gas production, in especially the
deep waters of the Gulf, increased nearly 80 percent in just
the last 2 years. Even coal production was substantially higher
in the last Administration than in the previous two.
I would note that all of that was accomplished even while
the last Administration protected more lands than any
Administration since Teddy Roosevelt.
While shoring up conventional sources of energy, the
Clinton/Gore Administration also moved, however, aggressively
to achieve better balance in our energy sources. Contrary to
statements by the White House and congressional leadership----
Senator Voinovich. Ms. McGinty----
Ms. McGinty. I have about 3 minutes left, if the chairman
would indulge me.
Senator Voinovich. We'll indulge you.
Ms. McGinty. Thank you, sir.
Contrary to some statements that have been made, when
nearly 80 percent of our electricity is fossil fuel dependent,
you cannot achieve better balance by simply increasing supplies
of fossil fuels. To reduce risk, you have to diversity your
portfolio, and that's what we were working to do. Wind--we
invested. It is now the largest-growing source of energy in the
world. Geothermal--investments have reduced the cost by one-
third. Photovoltaics--dramatic increase of shipments of that
technology and efficiency, dramatic savings to consumers while
moving forward in environmentally sound ways.
These achievements, while impressive, are not enough, and
they represent actually only 12 percent of the increased
investments of these environmentally and energy sound
technologies that have been requested in the previous
Administration.
It is particularly troubling to me in this regard to learn
that the White House proposes to go in exactly the opposite
direction from investing in a diverse, robust set of energy
sources. Estimates are that the recently proposed budget will
slash efficiency and renewables by some 30 to 40 percent. This
policy simply can't be squared with a sincere effort to improve
balance and energy and security and energy.
Last point--perhaps the most compelling example of bringing
the environment and the economy together in the energy area is
the multi-pollutant approach that Senator Lieberman had
referred to. When former Vice President Gore first announced
this policy in April, 2000, the statement was supported by
everyone from the Sierra Club to some of our biggest coal-fired
power generators, and, indeed, even President Bush later
endorsed it.
Why? Because so many realized that, in fact, good energy
policy is good environmental policy, and they realized that we
need a comprehensive policy that protects the environment
while, as Senator Lieberman said, offering certainty to
business and operators out there.
That also means that climate must be in the mix. To fail to
include climate, as the White House now proposes, is
irresponsible because it virtually guarantees the supply
problems we see today will be repeated because climate is one
of the biggest drivers to energy on the horizon. Not including
climate and giving regulatory certainty is a threat to
reliability.
My hope is that this committee will chart a different
course on these issues, that this committee will see that
Americans have come together, business leaders and
environmentalists, alike. They've moved beyond the false
choices of the past, the choices that said you had to sacrifice
your quality of life, you have to choose either environment or
the economy.
This country is blessed with a wealth of opportunity to be
a technological leader, to improve the health and well-being of
our citizens, and to fuel our economy. That's the vision that
we are presented with, and it is my hope that this committee
can help lead the way to our securing that bright future. Thank
you very much.
Senator Voinovich. Thank you, Ms. McGinty.
Because of the fact that you had so much more time than Ms.
Stuntz, I'm going to allow Ms. Stuntz to have a little more
time to maybe respond to some of the things that you've said in
your testimony.
I'd like to say this, in all due respect. I'm hoping that
these hearings that we have are not looking back and knocking
the past Administration or the new Administration. I'm more
interested in how do we work together to move forward. I think
that to have hearings where we are, you know--there's no
question that this Administration has policies. The other one
had policies in regard to this. But we are trying to work
together to try and come up with some positive solutions to
things, and I hope we don't let these things get back to just
throwing daggers at the last 8 years or the last 30 years or
what this new Administration--I'd rather keep it on a more
positive note, if we can, because if we make it partisan,
frankly, we'll do what we've done around here in my 2 years
here--just keep throwing stones and end up getting nothing
done.
Ms. Stuntz, I'd like to give you a few more minutes.
Ms. Stuntz. Mr. Chairman, I appreciate that, but I really
would rather engage in a discussion with you if you are
interested, and perhaps you'll allow me some long-winded
answers.
[Laughter.]
Ms. Stuntz. That's what I'd like to do.
Senator Voinovich. Well, I'll start out the questioning,
then.
Senator Lieberman. We're unaccustomed to long-winded
answers here.
[Laughter.]
Senator Voinovich. OK. We're going to try to limit the
questioning to the 5-minutes, but to what extent has the Clean
Air Act, in your opinion, made it more difficult to site and
operate energy facilities such as power plants, refineries, E&P
facilities, transmission lines, and pipelines? That's the first
thing. I'd be interested also in your comments about where we
are going with these numbers.
You hear that we can do a better job in energy, and we are
doing a better job in conserving energy. We had a big program
in Ohio, Green Lights, in all of our public buildings and our
schools and so forth, but if you look at conserving energy and
then you look at the other sources of energy that are
available, you know, do these projections hold up?
Ms. Stuntz. Well, I think EIA has done a pretty good job
here. I think it sets up a challenge. Can we increase the
nuclear piece? Can we do something about--I think, frankly,
hydroelectric power, it's a crime. The two largest non-Federal
projects happen to be in upstate New York--Niagara and St.
Lawrence. They produce low-cost power. There are international
implications. One has been in relicensing for 5 years. It is
not close to being done. But out West there are many more--
Senator Crapo knows well the problems that hydroelectric power
encounters in trying to get relicensed. The process is broken.
It needs to be fixed. That's just one small example.
So I report these numbers to you, not because I believe
they can't be changed, but where we are going under current
conservation policies, that's where we will be.
It is a challenge. It is also a reality check. I have a
small disagreement with Katie. In today's Energy Daily, which I
grabbed before I left the office, a Duke executive said,
``Emission limits in California are going to cause it to shut
down plants.'' That is the last thing California needs right
now. This is NOx emission limits. The Governor is not going to
allow that to happen. He will waive or provide some low-cost
source of NOx emission allowances. As I mentioned in my
testimony, he has already issued an executive order to do that.
Clearly, the Clean Air Act in certain parts of the country
has made it very difficult to site new generation. Southern
California is probably one of the worst because they have to
find emissions offsets. Other parts of the northeast, for every
new source in places where there are not a lot of existing
industrial sources from which one can obtain offsets--I know in
southern California, for example, one of the plants that is
under construction, is closest to coming on line, desperately
needed, the developer bought emissions allowances from the
airport by converting the fleet of vehicles that run people
around to natural gas as a source of emissions allowances. That
is an example of how far and how deeply they have to go to get
emissions allowances to build new power plants.
One could say, ``Well, but California is a terribly bad air
quality area. They've got to do this.'' What you're seeing now
is perhaps they went too far too fast, and so it is going to
have to be relaxed. They're going to have to use diesel
generators. This is something that is coming up in New York and
the northeast, as well, this summer. Emissions from diesel
generators are much higher by magnitudes of five or six than a
coal-fired plant. But if the choice is shutting down a hospital
or something, what do you do?
So these are real choices, and it is not--I can't answer
the question generically across the country, but, with respect
to coal plants, I would say the Clean Air Act is a huge
impediment right now, not because there aren't plants out there
that could meet new source performance standards it's because
they don't know what the next things are going to be. What are
the NOx levels going to be? What are the SO2 levels
going to be? What is mercury? And what is going to happen on
CO2?
So I agree that there needs to be more certainty, and I
think an increasing percentage of the industry sees that, as
well. The problem is doing it in a manner that doesn't seem
punitive and doesn't wipe out existing generation at a time
when we really can't afford to lose any of the stuff we've got.
Senator Voinovich. What recommendations would you have to
make this a more-reasonable environment?
Ms. Stuntz. Well, I think that----
Senator Voinovich. And, at the same time, improving the
environment. I think it is a given here that we do not want to
go back, we want to go forward, and I think most people
understand that, and I think that I want to make it clear to
everyone on this committee and in this room that I don't want
to go back. I want to go forward and continue to improve
environment and our public health in this country. But how do
we do that and at the same time deal with this situation that
we're confronted with today?
Ms. Stuntz. That's the central question. The only answer I
can give you is I think you have to start from a basis, as I
believe you are starting here, which is: what are the facts?
What's the science? What is achievable? And I certainly agree
with you--I don't know of anyone that wants to go back. I don't
know of anyone that is advocating rollbacks. The question is:
how quickly can we go forward? My sense is that now may be an
excellent time to work out a deal with existing coal-fired
plants, being that natural gas prices are where they are and
look like they are likely to stay north of $4, for some time.
That has changed the economic dynamics, even from a year-and-a-
half ago.
There may be opportunities to work out deals to retrofit
existing coal plants and clean them up that might not have been
there before, but if we are going to continue to engage in, you
know, ``Well, you've got to commit to do new source performance
standards in 5 years or we're not going to let you in the
room,'' then we'll just continue to have a standoff, I believe.
Senator Voinovich. Well, it is--again, if you can get
people in the room and start talking to each other, there might
be something that could be achieved.
Do you believe that even if we are able to get more
transmission lines and all the rest of it that natural gas is
going to stay at--where, about, do you think? Did you say $4?
Ms. Stuntz. Well, in the near future I don't see it going
below there. I looked at some of the Government estimates, and
it depends on how quickly production responds to the recent
healthy prices. I hope we won't see $10 in the Mercantile
Exchange like we saw in January and December, but I don't think
it will be below $4 either. Remembering that just about a year
ago it was down around two, it presented then--since natural
gas sets the competition at the margin for electricity in most
regions, it makes it much more difficult for owners of large
coal fleets to say, ``Well, I can spend `X' billion dollars
installing new equipment,'' because they are very mindful of
putting that power out of the market.
So there has been a change in the market dynamics. I'm not
an economist, although I am occasionally accused of trying to
sound like one, but I do work with people in the industry and I
have just heard enough to suggest that there may be--the
economic dimension may have changed and there may be an
opportunity now to do some things, along with continuing
development of technology.
There are a lot of people looking for multiple pollutant
approaches, technologies that would not only address NOx and
SOx but look at mercury, too. They know it is coming. They want
to deal with it. They don't want to put a lot of retrofit
technology on now, SCRs and so forth, only to have that
obsolete in 2 or 3 years from now. It doesn't work.
Senator Voinovich. Well, I have looked at the numbers. The
people from Babcock and Wilcox were in. They're building a new
coal-fired facility out in Wyoming. Comparative cost, I think,
for coal is about $1.50, and I think natural gas right now is
about $5.50. Some of our people in Ohio on the spot market have
had to pay $7.50 for natural gas, which has been--you know, it
is unbelievable for them.
All of the new generating plants, as I've mentioned--in
Ohio we've got nine. There's another 20 or so. They are all, at
this stage of the game, talking about being natural gas fired.
I think the reason for it is because the alternative that you
just discussed in terms of using coal doesn't make very much
sense because of the hurdles that one has to overcome.
The other thing I just want to mention is I was in
Hamilton, Ohio. They have a little--and it's really
interesting. They have a hydroelectric facility they've built
on the Ohio River they call ``Green Up.'' They generate power
with coal. They bought, 5 years ago, a scrubber, $14 million,
and it is still not really operating today, and they were
bitter about the fact that it is 5 years and they've spent
almost a $0.5 billion on what they call ``paperwork'' to get
this thing so it is up and running.
So I think not only should we look at some of these new
ideas, but perhaps look at the capacity of some of these
regulatory agencies in order to deal with the problem.
That gets to another subject that I have, and that's the
human capital crisis that we have where one-third of our
workers are going to retire before the year 2004, another 22
percent are eligible for retirement, and if you start going
through these agencies, many of the key people that they are
going to need to get the ball across the field are leaving, and
our capacity to hire new people is limited.
So I think that has also got something to do with where we
are today in terms of moving forward with new facilities and
fines and the rest of it.
Senator Lieberman?
Senator Lieberman. Thanks, Mr. Chairman. Thanks, too, Ms.
Stuntz and Ms. McGinty.
I want to pick up on the words you spoke about
bipartisanship and also go back to those halcyon days in--I
think it was room 224 at the Capitol in 1990 when we adopted
the Clean Air Act Amendments. I must say that that was my
second year here. I'm now in my thirteenth year. If you ask me
to name three or four things I have been involved in here that
I am proudest of, that would definitely be one of them. It was
an extraordinary experience.
Part of what drove it in the midst--as you remember,
because you were there--in the midst of all of the complexities
of the science and the technology and all of the political and
regional differences and difficulties was that there was a
sense that we were all--we all had common goals here, and I
must say that President Bush--the previous President Bush--was
part of that. He set that standard, if you will; that sense
that we--and we were going to have arguments along the way. We
had a lot of work to do to balance them out, but we all
understood that there was a problem here.
I want to try to do this in a way that doesn't seem
partisan.
I think the first signals from this Bush Administration are
not similarly inclusive. They are not similarly balanced. It
may be that the true intention of the present Administration is
not getting through. But the two things that we looked at that
are most visible so far are drilling in the Arctic and the
change of position on CO2 emissions, and those are
both very controversial.
I want to put it this way--they get people's back up.
There's a sense that we are into a game of stark choices and
irreconcilable differences. I don't believe that is true. Just
the short exchanges that we've had here show that there is a
lot of common interest. But I do hope that we can get ourselves
to a point on some form of a multi-pollutant bill, on other
forms of the balance of energy and environmental policy where
we can find common ground and go back to some room somewhere,
maybe not too far, to try to negotiate with the same sense,
basically that same sense, we're not leaving the room until we
have an agreement, because the truth is that our country cannot
afford gridlock, cannot afford partisan debate that produces
nothing on these questions of energy and the environment. They
are too critical to our economy, to our health, to our
strength, as a nation.
So I don't know whether you want to comment on that
whatever that was--a sermon, evocation--but I think it is quite
possible--and this committee can play a role in it, but we need
our leaders, both in the Administration and in Congress, to
strike those notes that say, ``We're going to have some
arguments here, but we've got a goal that we share in common.''
Right now I don't feel that.
Ms. Stuntz. I would only say, Senator, I think your point
is well taken, but I would ask you not to--to keep alive the
possibility that it could work out that way again. President
Bush in Texas, as part of the electric restructuring program,
did--I believe unique among all of the electric restructuring
programs in the country--impose control requirements on
existing coal-fired power plants.
The issue of CO2 is a confounding one. I agree
with the President. It is not a pollutant under the Clean Air
Act. I'm afraid it could be allowed to continue to prevent
progress on anything else in this area. I don't represent the
Administration on these issues and can only say my hope would
be that perhaps that could be put, if not to the side, at least
back in the pack and progress made on other issues, or at least
see how much can be made on other issues.
It's like your work on a conference report--it's never done
until everybody has signed off on all the titles of the bill.
Right? But see what can be done and then, as I said, see what
is happening in the environment.
I believe there are a lot of companies that want to build
new coal-fired power plants----
Senator Lieberman. Right.
Ms. Stuntz [continuing]. That cannot afford--the reason,
Senator--and I don't think I was as clear as I should have
been--they do cost more money up front to build, to build them
to standards. It is an increased capital cost. The fuel cost,
you're right, is lower, but they cost more up front by way of
capital cost. If you're going to make that investment in a 30-
or 40-year long asset, you've got to have some understanding of
what is happening in the future.
There are people who will make that investment. I think
there are more people all the time that believe they can't do
that until they know where things are going to come down. We
could talk greenhouse gas emission minimization, as opposed to
rigid reductions. Those are decisions that you need to make.
But I believe that dialog can occur. I believe this is a
President that wants to be in that position. I think he needs a
little more time to get a few more people in place, a few more
conversations with you and Administrator Whitman, and perhaps
we can be back in that conference room again.
Senator Lieberman. Well, that's great. Look, it's early and
there's time, but we've really got to do it. As we say on our
side, we're always prepared to keep hope alive.
I thank you.
I guess I've used my time. I'm sorry about that. Thanks,
Mr. Chairman.
Thanks for the exchange, Ms. Stuntz.
Senator Voinovich. Senator Clinton?
Senator Clinton. Thank you both for your testimony.
I want to just throw one additional element into this
debate, because I really do appreciate greatly both what the
witnesses have said and my colleagues. I really think that we
have an opportunity to bring people back into that metaphorical
room, and I think that shame on us if we don't.
Just as in the 1950's we knew we needed a national highway
program to link our country together, I don't think it is any
overstatement at all to say that, if nothing else, California
should have persuaded us that we need a national approach to
try to work toward a national energy policy that does represent
the kinds of sensible conclusions that you are advocating.
I'm concerned, however, that, in spite of what might be
good intentions not yet expressed or realized in the
Administration, there is very little in the budget that we've
heard about which would support an effort that would enable us
here on this side to put in the incentives--the carrots that
are needed to go along with the sticks.
I am very concerned that if we rush to judgment and pass
the tax cut that the President is still urging on us, despite
what I think many of us now see as increasing doubt about these
10-year projections and growing concern about the impact that
such a large 10-year tax cut backloaded to the last 5 years
would have on the economy, as opposed to a smaller, more-
targeted stimulus if that is necessary, that, despite our best
efforts--suppose, you know, if this tax cut stays on this fast
track and the votes are there to push it through, May or June
or July, when we start trying to get people in the room, and we
say, ``OK, what is it we can offer to our generators? What is
it we can give to our utility companies to make sure that they
are not put at severe financial disadvantage? What can we help
with our States in order to be able to meet the generating
transmission and distribution needs that exist in their
States,'' we won't have any way to do that. We won't have any
way not just this year, but we won't have any way to do it for
the next 10 years.
So we can sit here and talk about how bipartisan we want to
be--and I believe that about this subcommittee, as I believe it
about the committee, and I hope that maybe somebody sitting
here would recognize that there is a great willingness on both
sides of the aisle to do the hard work that was done 10 years
ago on the Clean Air Act Amendments that I think were a
crowning achievement of the first Bush Administration and those
who served in Congress at that time, but we're not going to be
able to have the resources to do that.
I'm on the Budget Committee, and I'll offer an amendment if
we have a markup, which I'm told we may not even have a markup,
but if we have a markup I'm going to propose an amendment to
try to set aside some significant dollars for an energy
initiative that would come through this committee to the
Congress because I think we have to do more as a nation to
invest in some of these technologies. We have to help our
utility companies realize that we're all in this together. It
shouldn't be us versus them. I love to turn on the lights in my
house, you know. I don't have any bad feelings about people who
run utility companies and provide that energy for us. I want to
have us all in the same boat, just as in previous decades in
our country we all made those kinds of decisions. But we sure
can't do it if we are going to be saddled with a 10-year
uncertain set of projections that lead to large tax cuts that I
believe will take us back to deficits. So I think we have to be
honest in our assessment of what is possible.
I wanted to ask just a couple of quick questions.
I was recently visited by a utility executive--actually,
somebody I went to high school with who I haven't seen since we
graduated, but now that I am in the Senate he has discovered me
again, and I was more than happy to sit down and reminisce with
him.
Senator Lieberman. It wasn't enough when you were the First
Lady?
[Laughter.]
Senator Clinton. No. Never found his way to me there. I
think after the committee assignments were put out there might
have been some e-mails going.
In any event, I looked him up in my yearbook and I did
recognize him and we had a nice conversation.
[Laughter.]
Senator Clinton. But one of the points that he made, which
I was very grateful for, because I hadn't hear this, George. I
mean, I never had been told about this--is that there might be
some technology that has been used, particularly in South
Africa, to use coal for liquification that would enable us to
produce cleaner energy using this enormous coal reserve that we
do have that is cheaper to produce. That's something I think we
ought to look into. Again, I think that's something that, you
know, could help us on this chart that Ms. Stuntz has given us.
Could you, Ms. Stuntz, enlighten me even further than my
old classmate did about whether this is a realistic option that
this committee should look at and figure out if there's ways we
can promote it?
Ms. Stuntz. Senator, I think coal liquifaction, coal
gassification--there have been some tremendous recent
improvements in--it's called ``integrated gassification
combined cycle,'' which gassifies the coal, and then you've got
essentially natural gas, with good emissions performance and
efficiency of natural gas.
The issue is one of economics in terms of deploying it, and
it is the rules.
I believe that Senator Murkowski's bill, which is a
starting point, has a lot of investment in clean coal research
and development in there. I think sequestration has been, in my
opinion, tremendous underfunded by the Government. I think if
we have issues with respect to global climate change, we could
do substantially better by looking at the anemic budgets we
have now on carbon sequestration.
It is the sorts of things I think your Energy and Natural
Resources Committee will be looking at as they examine their
bill, but I think this committee has a very important stake in
that, and I do believe--and perhaps the witnesses behind me
from the utility industry could tell you more--I think the
Department of Energy has had a coal liquefaction program for
many, many years. The question is one of cost and
competitiveness. There are also some emissions issues with some
of the earlier versions of it. But I don't think we've tapped
the potential of that by any means.
Senator Clinton. I'd also like to ask Ms. McGinty, I know
that you have spent some time abroad recently.
Ms. McGinty. Yes.
Senator Clinton. And I am concerned about our national
leadership on global environmental issues and our need to
figure out ways of helping to control emissions, because, you
know, the worst of all possible worlds, it seems to me, is that
we would finally deal with, you know, sulfur dioxide and
mercury and diesel and other things here but take
CO2 off the table. Then, as we see China and India,
for example, industrializing and people being affluent enough
to buy automobiles, and we then are stuck in a situation where
whatever progress we've made domestically is overshadowed by
the extraordinary global impacts of the failure to have any
global agreements that control emissions elsewhere.
Would you comment on the role that you think the United
States should be playing in environmental and air quality
issues?
Ms. McGinty. Thank you, Senator. Yes. I think in this area,
as well, what we are faced with is an opportunity, and there
are two kinds of opportunities that come from looking overseas
on the climate issue, in particular. One is that, as Linda can
probably say better than I, some $25 trillion of energy
capacity will be put in place in the developing countries
between now----
Senator Clinton. Was that $25 trillion?
Ms. McGinty. Trillion, T--between now and the year 2050.
Some country is going to be supplying that technology. If we
partner with these countries, it increases the chances that it
will be U.S. companies doing that.
The second reason I think it is important to open that kind
of partnership with the developing world is, again, for
something Linda referred to, which is, as we look at our own
cost of reducing greenhouse gases, there is no question that it
is cheaper in many respects for U.S. business to be able to
invest in a country like India or China than simply to have to
meet the requirements within the four corners of the United
States, so we want to nurture those partnerships and it is an
opportunity for us if we do.
Thank you.
Senator Voinovich. It's interesting that you mentioned
that, because Senator Craig has a company in his State that has
the best technology, and they said to him, ``Unless this energy
thing is worked out here, we're moving. We can take 8,000 jobs
overseas. We can do that tomorrow.'' That's a threat that
they're not going to put up with this.
I think that's something else that we need to look at. Even
China, for example, used to provide oil. Now it is importing
oil. As its economy grows, and other parts of the world, some
of the things that we just take for granted are not going to be
available to us. We need to look at that. I think your point is
well taken on the environmental issue.
My good friend, Senator Carper?
OPENING STATEMENT OF HON. THOMAS R. CARPER,
U.S. SENATOR FROM THE STATE OF DELAWARE
Senator Carper. Thanks, Mr. Chairman. Thanks for bringing
us together today around these issues.
I have a statement I'd like to ask unanimous consent be
entered into the record.
Senator Voinovich. Without objection.
[The prepared statement of Senator Carper follows:]
Opening Statement of Hon. Thomas R. Carper, U.S. Senator from the State
of Delaware
I am grateful to the chairman, my friend from Ohio, and the ranking
member, my friend from Connecticut for calling this hearing. I
understand that this is the first of several hearings this subcommittee
will hold where we examine the nexus between clean air, the
environment, and the nation's energy policy. I am looking forward to
the testimony we will receive, and to working with my colleagues as we
move forward.
The issues of clean air, and energy policy are important to
Delaware. In my State, which has urbanized areas as well as rural
farming communities, it is important that we have both a clean
environment and a reliable energy supply. Delaware has come a long way
toward achieving this, but we still have work to do.
In Delaware, in-fact throughout the mid-Atlantic and northeast, we
are still faced with a clean air problem. In States like New Jersey,
New York, and Delaware we have been working hard over the past decade
to clean up the air by reducing or controlling the emissions from the
sources ranging from automobiles to factories to power plants within
our State borders.
This is not just a State problem however; it is a regional, and
national problem.
We need to be very smart about how we proceed on this. Last week, I
had a chance to speak at a conference on energy policy.
I told that group, and I'll repeat it today, we need to be broad-
minded and very creative. The link between this nation's energy use and
our air quality is not the question. The question is what do we do
about it? Clearly, we need to both protect our air and also provide an
abundant, reliable source of energy. We need to think about incentives
as well as regulations. The toolbox will need to be diverse.
Delaware is an importer of energy. The major power plants in the
State generate the majority of our electricity, mostly from coal, but
still we must import electricity from States such as Pennsylvania and
New Jersey to meet demand. Thus, we need to have a dialog with our
neighbors to determine what we can do to allow for both a reliable
energy supply, and clean air.
Last year, Delaware joined with the EPA and other eastern States in
urging the Midwest power utilities to clean up their emissions. As
others today have mentioned, those of us downwind from the Midwest
utility plants are faced with trying to clean up the air in our States
by controlling the emissions within our borders, while at the same time
facing penalties for pollutants imported from other regions. We have to
work together with States such as Ohio to achieve results, and I am
ready to work with everyone here to find a solution. I was pleased to
hear that recently the Supreme Court indicated that utilities need to
abide by provisions of the Clean Air Act, but I recognize that this
will be expensive and that the costs imposed on States and companies
with older power plants will be significant. That being said, we must
begin to find out how to address those costs, instead of how to avoid
them.
Generation of electricity releases more than two thirds of the
sulfur dioxide emitted, and close to half of U.S. carbon dioxide. The
bottom line is that we are accustomed to burning fossil fuels to
generate electricity and as long as we burn fossil fuels, we will have
to be mindful of the impacts on air quality. Through application of
various technologies, we've probably done the easy part in cleaning up
the majority of pollutants. Further progress will be difficult. But we
must keep moving. I look forward to today's discussions, and to working
with my colleagues this Congress on this issue.
Senator Carper. I was looking through my school yearbook
last night----
[Laughter.]
Senator Carper [continuing]. I was reminded, when I was at
Delaware graduate school in the mid-1970's that we were in the
throes of an energy crisis, concerned about clean air, as well.
I'm tempted to say sometimes it seems like we never learn, but
we can--we're always learning, I suppose.
I want to ask each of you the same question, and I'm going
to ask each of you to take about two or two-and-a-half minutes
or so to answer it for me, if you will. It's not a hard
question, but an important one.
Our friend, Senator Murkowski, and maybe this week or next
week Senator Bingaman will lay out their energy proposals for
our country. I talked with Senator Bingaman about it a little
bit yesterday to get a feel for what was coming from his
proposal.
I'm reminded that--and he shared with me a graph that
showed consumption of energy, particularly oil, that is
attributed to our transportation sector. I've had some
interesting conversations of late with friends from the auto
industry about hybrid technology that is coming in vehicles
that are literally in the pipeline--they're going to be out,
are out, are coming out--and about fuel cell vehicles, as well.
Here's what I want to ask you to do. Just help us briefly
piece together part of an energy policy for our country that
would encourage Americans to actually purchase hybrid vehicles,
fuel cell powered vehicles, other energy-efficient, clean-
operating vehicles in the years ahead. So that's No. 1. Give us
some thoughts on how do we actually encourage people to buy
them? I think they are going to be produced. The question is
whether anybody is going to buy them.
Second piece I want to ask, Senator Clinton has already
talked to you about coal, so I'll skip over that one, but I do
want you to give us some thoughts on nuclear power, and
particularly the environmental problems with nuclear power and
how maybe in 2001, maybe in this decade, we're better able to
deal with those problems.
The last piece, just some thoughts, if you will, on
renewable fuels, not so much photovoltaic or solar or wind, but
more bio--stuff that we grow, whether soybeans or ethanol, that
sort of thing.
Just those three components, if you will, for an energy
policy, and if each of you would take a couple minutes and
share some thoughts with us it might be helpful as we grapple
with these issues. I would be grateful.
Ms. McGinty. Thanks, Senator. I think you've outlined
several major pieces of the kind of comprehensive approach that
is being talked about here.
In terms of buying clean vehicles, several thoughts I would
offer. First, I think on the front end the Government has a
very important role to play in helping to reduce the cost of
those technologies up front by promoting research and
development partnerships. A fine example along these lines is
the current partnership for a new generation of vehicles. I
think it has shown this win/win we are struggling for in terms
of energy and environment and the transportation sector.
On the back end, in terms of a pull for those technologies
to help consumers afford them, proposals have been made to
offer tax credits to consumers or to businesses that would buy
fleets of these vehicles, for example, to again ease the up-
front cost of affording some of these vehicles.
I would add to this mix, in terms of the transportation
sector, I think it is very important not only to improve the
automobile but to offer consumers choices, and that means that,
again, what the Federal Government can do to invest in and
provide local communities resources for transportation
alternatives--mass transit, high-speed rail--those kinds of
investments are very critical to our infrastructure and to our
future.
I think as the sprawl issue demonstrates, there is a
quality of life issue there, too, where some people want to get
out of their car and out of traffic jams.
Nuclear power--I think the issues have been touched on
here. There is an opportunity to increase the operating life
and usefulness of our nuclear power plants, and the Federal
Government has made investments in partnership with industry
along those lines, but the waste issues, the storage issues,
and the proliferation issues are tough ones that need to be
wrestled with.
Senator Carper. Take 30 seconds on waste. Is there anybody
in the world who is doing a better job than we are with respect
to the waste recycling and that sort of thing?
Ms. McGinty. Well, I wouldn't present myself as any kind of
expert on that. I think that the French consider themselves to
be quite advanced in handling these issues. This country has
experimented with technologies like vitrification, which tries
to encase that waste in glass. So there are different
approaches that are being pursued.
We maybe have suffered from too single-mindedly pursuing
just things like Yucca Mountain, which need to be examined, but
maybe we have too single-mindedly focused on that.
I can't present a more-thorough analysis of that.
Finally, in renewable fuels, I think you are right to point
to biomass sources of fuels, in part because not only does it
offer us an opportunity for some more degree of autonomy, since
we have plenty of biomass that we can put toward fuel
production, but it is one of these things that improves the
environment, but also offers promising new economic
opportunity, even in depressed areas of the country like our
farming and rural sectors, where they could have whole new
business opportunities that they could pursue with Federal
Government support for biomass, both research and deployment.
Senator Carper. Ms. Stuntz, before you respond, for the
past year in Delaware we have been conducting an experiment in
Sussex County--actually, throughout that State--where we take
soybean oil and we mix it with diesel fuel, and we use it to
provide power for our vehicles in our Department of
Transportation, and we find that their performance is good,
energy efficiency is good. They burn more cleanly. The
emissions smell like kind of a cross between popcorn and french
fries.
[Laughter.]
Senator Carper. When people drive to the Delaware shore
this year or to Ocean City, Maryland, they're going to be
driving through these fields of soybeans. They can maybe think
of not how just we use that soybean to feed chickens and raise
chickens on the Delmarva Peninsula, but maybe some day to
provide power for our vehicles.
Ms. Stuntz?
Ms. Stuntz. Yes, Senator.
On hybrid vehicles, I think first the issue is performance.
If they don't provide the basic services--reliable, taking you
to the grocery store, dropping the kids off at school, or
whatever you need--I don't think it will work. But I believe we
are close on that. I, personally, am very excited about hybrid
vehicles. I would agree with Katie the keys would be perhaps
tax incentives to buy down any price differentials, and maybe
trying to get creative, maybe to give them access to HOV lanes.
Unlike some of the things we've discovered now, you let dual-
fuel cars in some places, fuel-flexible cars access, and then
they run on gasoline all the time, so is it just kind of a cute
way to avoid HOV requirements.
Those kinds of things in urban areas, which is where I
think some of these vehicles have their greatest potential,
might really encourage people to do that, because they're
getting some benefits they otherwise wouldn't get.
Nuclear power--I think it is a tragedy what this nation has
done in the area of nuclear power. In my views the issues are
not technical, they are political. I think, you know, France is
not known for being careless about its citizens' health and
well-being, and it is virtually entirely dependent on nuclear
power and it is very low cost and it is very reliable.
Our industry a great success story. The nuclear plants in
this country now operate at something over 90 percent capacity.
Their utilization, their performance, with very few exceptions,
has been extraordinary. It is one of the reasons that the air
in the northeast and elsewhere, even California, is better than
it otherwise would be with anything else, and yet we seem, as a
nation, not able to deal with the political issue of what to do
about the waste. We don't even have an EPA that can get out a
standard to allow people to determine whether Yucca Mountain
can meet it, and I just think that's wrong.
Renewable fuels--I am not as big a devotee, I guess, of
biomass. Certainly there is a role for biodiesel and ethanol.
Where it is available, close at hand, it play make a real role,
but I, personally, in the area of renewable fuels am most
excited about wind. I think wind is really taking off. I think
the Federal Government has played an important role.
Senator Carper. There's a pun in there somewhere.
Ms. Stuntz. I didn't mean one, but it is possible.
The Federal tax credit, production tax credit that came
about as part of the Energy Policy Act of 1992 and has been
extended by the Congress since then, along with some of the
State initiatives on renewable portfolio standards--in Texas,
for example, under the President--has made a huge difference.
There are wind farms of not just a few but hundreds of
megawatts worth popping up in Texas, Iowa, Wisconsin,
California, even Ohio, West Virginia, wherever there is a good
resource. We're getting a lot smarter about, yes, it is
intermittent and you can't always count on it, but now that
we've got wholesale deregulation--and this is a good side of
it--people are learning to firm it up by matching it up with
maybe some gas or something else so you can provide a firm
product, you can rely on it.
We taxpayers pay for the production of it. We don't just
pay for building machines that stand around and don't do
anything. I think it is an example that could be looked at that
has really helped to promote, I think, cost-effective,
renewable fuels around the country, and I think there is the
potential for more than that.
Senator Voinovich. Thank you.
Senator Carper. Mr. Chairman, there you have it. That could
be our energy policy.
Can I just say one last quick thing, and then I'll stop?
Senator Voinovich. Yes, you can.
Senator Carper. Solar and wind don't always work. The sun
doesn't always shine, and the wind doesn't always blow, as we
know. To the extent that we can develop the ability to better
harness and store the energy that is created for the times when
the sun is--like today. Today we could harness the wind, maybe,
but not the sun. But, to the extent that we can develop better
a way to store that energy when the sun is shining and the wind
is blowing, we will have struck a blow for cleaner air, I
think.
Thank you.
Senator Voinovich. Thank you.
We are very fortunate to have the chairman of our committee
with us this morning, Senator Smith.
Senator Smith. Thank you, Mr. Chairman.
I won't take any time for questions, because I came in
late, and I apologize for that and to the witnesses. But I
certainly want to thank you and Senator Lieberman for holding
the hearing. This is vital that we look closely at whatever
ways we can to improve the performance of the Clean Air Act.
That's what we're working on. I believe that we can find ways
to get better environmental results and at the same time reduce
the compliance costs, and that's what we're about. It needs to
be a bipartisan effort.
I was particularly impressed with the comments that you
just made, Ms. Stuntz. You don't hear that said too often on
the nuclear power side, but I think we need to say it more
often and we need to start thinking seriously about that.
I am looking forward to working with you, Mr. Chairman, as
we move down the road, and with others in a bipartisan way to
try to address the issue of clean air, and, at the same time,
more energy, which is obviously a need right now.
Thank you.
Senator Voinovich. Thank you, Mr. Chairman.
I want to thank the witnesses for coming here this morning.
We appreciate your being here and certainly will be reviewing
the questions and the testimony.
Thanks.
Ms. Stuntz. Thank you.
Ms. McGinty. Thank you.
Senator Voinovich. Our next panel is: Mr. Tony Alexander,
president of FirstEnergy; Mr. David Nemtzow, president of the
Alliance to Save Energy; Mr. David Hawkins, the Natural
Resources Defense Council; and Mr. Olon Plunk, who is vice
president for environmental services at Xcel Energy.
Good morning, gentlemen. Let me say welcome to all of you.
We appreciate your being here. I know some of you had to travel
to get here, and we appreciate it.
Mr. Alexander, are you ready to go if I start with you, or
would you prefer to go down the other end?
Mr. Alexander. I guess I am, Mr. Chairman.
Senator Voinovich. All right. We'll start with you,
president of FirstEnergy. Nice to have you here.
STATEMENT OF ANTHONY J. ALEXANDER, PRESIDENT, FIRSTENERGY
Mr. Alexander. Thank you. Good morning, Chairman Smith and
distinguished members of the Senate Subcommittee on Clean Air.
Thank you for the opportunity to share FirstEnergy's
perspective on this important issue.
My name is Tony Alexander, and I am president of
FirstEnergy. FirstEnergy is a diversified energy services
holding company headquartered in Akron, Ohio. We are in the
process of merging with New Jersey-based GPU, Incorporated.
That transaction will make FirstEnergy the fifth-largest
investor-owned electric system in the country, based on serving
4.3 million customers.
FirstEnergy owns and operates more than 12,000 megawatts of
generation. Of this, 62 percent is coal fired, 32 percent is
nuclear, and the rest is natural gas, oil, or pump storage
hydro.
FirstEnergy was the first U.S. company to install and use
large SO2 scrubbers, starting in 1976. We've also
participate in more clean coal technology projects than any
other company in the United States.
Since the Clean Air Act was amended in 1990, we've reduced
our emissions of nitrogen oxides by 60 percent, sulfur dioxide
by 57 percent, and carbon dioxide by 20 percent. I21As
electricity deregulation continues to evolve, we must strike an
appropriate balance between meeting the electricity needs of
our customers and our responsibilities to the environment. We
need to recognize that the rules of our industry have changed.
Under deregulation, the impact of environmental regulations on
the supply and the price of generation needs to be considered,
especially since customers will no longer have the protection
of regulated generation service when transition periods end.
This is not to say that competition and environmental
regulations are mutually exclusive. Environmental regulations
must be an integral part of a successful, competitive
electricity market.
FirstEnergy believes that the following five principles are
important to developing a comprehensive energy policy that
addresses both environmental and market issues.
First, the production of electricity from increasingly
clean and diverse fuel sources should be encouraged. A balanced
portfolio of generation, including coal, nuclear, natural gas,
solar, wind, and hydro will minimize the risk of price
fluctuations and better assure an adequate supply of
electricity for consumers.
Second, there must be recognition of the significant role
coal plays in meeting the nation's growing electricity needs.
Policies that would eliminate coal as a viable fuel source or
that would discourage ways to burn it cleaner and more
efficiently are counter productive.
Third, environmental regulations must be implemented fairly
and consistently across all geographic regions so that in the
competitive market all participants are subject to the same
rules.
Fourth, future environmental legislation must allow
adequate regulatory flexibility and certainty. Doing so will
encourage development of innovative and more cost-effective
control technologies and provide more options for existing
facilities when meeting new regulations.
I would point out that today's best available control
technology (or BACT) requirements significantly limit the
industry's flexibility in balancing the environmental and
energy needs of the public. For example, under the USEPA's
current interpretation of BACT, promising technology that is in
the development process today may never be deployed because,
while it would reduce pollutants at high levels--even mercury--
it may not be able to quite reach the best available technology
reduction levels for each of the pollutants that it would
otherwise control. Yet, if this emerging technology were
retrofitted throughout the industry, far more emission
reductions could be achieved than through selective best
available technology deployment.
This kind of interpretation doesn't make sense from a
business or an environmental perspective.
I would recommend that Congress determine what the
appropriate reductions requirements should be and the
timeframes and then allow the industry to meet them in the most
cost-effective ways possible, including through market-based
trading for all sources of generation. The command and control
approach will only serve to drive up costs and curb innovation.
Finally, and not least, we need to encourage energy
efficiency programs that would require, among other things, for
customers to experience real-time prices.
In summary, environmental regulations must work within, not
against, the competitive electricity marketplace. They should
provide flexibility, uniform performance obligations, and
reasonable compliance schedules. They should also encourage
fuel diversity, energy efficiency, and continued use of coal.
Thank you very much.
Senator Voinovich. Thank you, Mr. Alexander.
Mr. Nemtzow?
STATEMENT OF DAVID NEMTZOW, PRESIDENT, ALLIANCE TO SAVE ENERGY
Mr. Nemtzow. Thank you very much, Mr. Chairman and members
of the committee, for allowing the Alliance to Save Energy to
testify before you today.
I am David Nemtzow, president of the Alliance to Save
Energy. We are a bipartisan, nonprofit coalition of business
and government leaders who are dedicated to energy efficiency.
We were founded by Senator Charles Percy and we are chaired
today by your colleagues, Senators Jeff Bingaman and James
Jeffords. Over 70 companies are members.
Mr. Chairman, you know what a competitive world we live in.
It seems that whenever somebody wins, somebody else must lose.
After all, there is only one NCAA winner, only one survivor
gets to keep the million dollars, and only one film is getting
Best Picture this year. So it could be tempting today to think
that energy and environment goals are competitive and that one
must win and the other must lose. We've heard different
testimony--you'll hear more--suggesting that environmental
goals are interfering with energy goals and that energy goals
are interfering with the environment.
That is small wonder. You've heard other statistics, and
I'll give you some more about how intertwined energy and
environmental decisions are. We can never forget that over 80
percent of the air pollution generated every year in this
country is generated from the production, consumption, or
transportation of energy. The number is even higher for carbon
dioxide. The list doesn't end with air pollutants. It goes on
to water pollution, land use disruptions, toxic waste. We heard
about nuclear waste. So we have to accept how inter-twined the
energy and environment decisions are, and that is, of course,
why this subcommittee is holding this important hearing.
That is also why it is so essential to cut energy waste and
to use energy much more efficiently than we are. Energy
efficiency isn't the ``conservation'' of the past; energy
efficiency is using modern technologies to do the services that
we demand--the heating and cooling, transportation and lighting
services, information technology, all of the others--that is,
doing the same with less energy input. That means having the
same or superior services, the same or superior productivity in
the work force, the same or superior comfort for homeowners.
By having less energy input, it means less of the
environmental stresses that this subcommittee and this Congress
is so concerned about.
Separately--I know it is not the jurisdiction of this
subcommittee or full committee--you will also save Americans
money, and I suspect your constituents will be happy about that
as you do your work on tax and budget issues.
You can have it all. You can have a good energy policy,
good environmental policy, save money for businesses and
consumers.
I know this all sounds too good to be true, but I want to
say to you it not only can happen, it has happened, and it is
still happening.
I'd like to look at the record. I'd like to show you this
chart, if I could. What is key here is to remember that energy
efficiency is providing more energy to this nation today than
any other energy source but oil. If we look at energy
efficiency as an energy source--and you won't see these in the
other charts, the traditional charts that forget about the
efficiency side of the meter. You'll see it is ahead of natural
gas or coal or nuclear or the others, which, of course, are
very important to our nation's energy balance. Efficiency is
second only to petroleum. When we remember that over half of
our petroleum is imported, energy efficiency becomes our No. 1
domestic energy resource today, and that number can even go up
higher if this Congress adopts further policies.
The implications for environment I think are quite clear to
all of you, but I'd like to just show it graphically, if I
might. If we could start with the NOx chart, this is a chart
that shows two scenarios, Mr. Chairman. The top line is what
NOx emissions in this country would have been--this is from
1973 forward to 1997--if we hadn't embraced energy efficiency
as much as we had. NOx emissions would be that much higher.
That delta there between the higher bar and the actual bar is
the lowering due to the improvements that we've had in energy
efficiencies--more efficient refrigerators, lighting,
appliances. Your home State, Mr. Chairman, of course is a great
champion of energy efficiency. Owings Corning and many other
companies that are based in Ohio have been leaders
technologically, and Carrier in New York, and companies
throughout the country. I won't even speak to the Yankee
ingenuity in New Hampshire that has produced so much of these
important technologies. These technologies have lowered air
emissions, and we can see the same pattern for the other key
pollutants. With SO2 it's not as dramatic, but,
again, because of energy efficiency we have the lower level of
emissions, not the higher level.
Finally, the most dramatic graphically is carbon dioxide.
What CO2 emissions would have been in 1999 is that
higher number. Luckily, they were the lower. That's what energy
efficiency can do.
How do we get more energy efficiency? How do you make sure
that energy and environmental policies work together? I'd like
to offer some recommendations on how to do that.
First of all, cap and trade programs such as Chairman
Smith, described earlier are key. Cap and trade programs not
only give companies the flexibility that Mr. Alexander talked
about, but they create an implicit incentive to produce less
power because then they need less of the tradable permits.
Second, just as the Clean Air Act did in 1990, there should
be set-asides for energy efficiency and renewable energy so
that they remain the preferred approach to dealing with energy
and environmental issues at the same time.
Third, this committee and this Congress should support
energy efficiency standards that explicitly look at
environmental performance. The recent air conditioning standard
that was adopted will save seven million tons of carbon dioxide
annually in 2020 and will avoid the need for about a hundred
power plants that won't be needed because of more efficient air
conditioners.
Fourth, you should support programs that educate the public
about the linkage between energy and environment. Senator
Clinton talked about the Energy Star program. It has been a big
winner. One of the winners, Mr. Chairman, was from New
Hampshire, Harvey Windows, who has been a leader in energy-
efficient windows, as well as winners from other States.
I would encourage this subcommittee or full committee to
have a hearing on the Energy Star program. I think you might
agree, Senator, it is a wonderful program that was established
under the first President Bush and deserves your support.
Fifth, the public benefits fund for electricity consumers--
as Senator Bingaman will be introducing, we believe, in a few
days, and as Governor Pataki in New York has recently doubled
his State's public benefits fund, in a deregulated era you need
some kind of market-friendly mechanism to have the resources to
invest in energy efficiency.
I have to talk briefly about these proposed cuts we expect
in R&D spending for efficiency and renewables. I must say I
don't get it. If you had an encyclopedia of aphorisms and you
looked up ``penny-wise and pound-foolish,'' you'd see a chart
that looks like this budget cut--efficiency and renewables cut
by one-third while this country is going through the worst
energy crisis in a generation is something that I cannot
explain, and certainly not defend.
Finally, I would like to encourage you to support tax
credits for efficiency as your colleagues are doing. Senator
Grassley has a proposal for highly efficient appliances. Your
proposal, of course, Chairman Smith, for highly efficient
homes, and Congressman Bill Thomas in the House has a very
similar bill, we thank you for that. Of course, the bill
introduced by Senators Murkowski and Lott have half a dozen tax
credit proposals, and we expect Senator Bingaman's to, also.
The tax credits are a great way to help your constituents
embrace these technologies.
Finally, I want to thank you very much again. You can have
it all. You won't win the NCAA championship. You won't get the
million bucks. You won't get Best Picture. But you can have a
good energy and environmental policy simultaneously if you
tackle energy waste first.
Thank you.
Senator Voinovich. Thank you very much.
Our next witness is Mr. David Hawkins, who is the from the
Natural Resources Defense Council.
STATEMENT OF DAVID HAWKINS, DIRECTOR FOR AIR AND ENERGY
PROGRAMS, NATURAL RESOURCES DEFENSE COUNCIL
Mr. Hawkins. Thank you, Senator Voinovich, members of the
committee. I am David Hawkins. I am director of the air and
energy program at NRDC.
NRDC is a citizens advocacy organization devoted to
protection of the environment and public health. NRDC started
in New York 31 years ago and now has over 400,000 members
around the United States.
I'd like to address three points today. First, why we need
a comprehensive policy to clean up electric power plants.
Second, why President Bush's decision last week on
CO2 is bad policy. Third, why the public discourse
on energy policy, in my opinion, is off to a bad start.
Cleaning up power plants--the truth is, to have clean air
we need clean energy, but today's electric powerplant fleet is
dirty. It is dirtier than needed to protect public health. It
is dirtier than needed to protect the environment.
As Senator Lieberman summarized, and I'll repeat quickly,
electric generation today is responsible for two-thirds of
sulfur oxide emissions. It is responsible for 40 percent of
carbon dioxide, and it is responsible for about a third of
nitrogen oxides and mercury.
What do these pollutants do to us and to our planet? Much
too much. Let me quickly summarize.
Sulfur dioxide produces soot that causes tens of thousands
of premature deaths a year. That figure was challenged by
industry, but it was recently reaffirmed in an independent
analysis, and the Supreme Court has also upheld that standard
against legal challenges.
The same sulfur dioxide produces acid rain that continues
to destroy lakes and streams, forests, and monuments.
It also produces haze in our national parks that spoils
visits by millions of visitors every year, denying them an
opportunity to experience truly clean air.
Carbon dioxide--carbon dioxide is the driving force behind
climate change, a phenomenon that threatens to kill millions of
people due to increased, more-destructive floods, droughts,
heat waves, intense storms, and climate-related infectious
disease, to produce sea-level rise that would inundate the
homes of tens of millions of people and cost hundreds of
billions of dollars in damages, and for counter-measures in
those countries that are fortunate enough to have the resources
to respond.
Climate change also threatens to destroy complex ecosystems
that have evolved over thousands of years under the influence
of climate cycles that were not de-stabilized by fossil fuel
combustion.
Nitrogen oxide causes smog that blankets more and more of
our country, and it also contributes to the degradation of our
very productive estuaries through excess nutrients.
Mercury is a brain poison. The electric generating sector
is the only sector in the United States that is currently not
regulated for mercury. Mercury continues to buildup in the
environment, contaminating our lakes so that 40 States have to
issue warnings about eating the fish therein.
Dirty plants also waste energy. More energy is wasted in
making electricity each year in the United States than all the
energy in all the coal we burn in the United States. That's a
phenomenal figure. We can do something about it by modernizing
our powerplant fleet.
Dirty powerplants are also anti-competitive. They keep from
the market cleaner and more-efficient power sources, because,
absent comprehensive pollution control requirements, the market
places no value on the fact that cleaner plants emit far fewer
of each of these pollutants, what I call the ``four horsemen of
air pollution.''
Now, Chairman Smith, you have recognized the need to
address this problem, and we are proud of the fact that you
have done so, and other members of the committee have
recognized the need to do something about it, as well. In fact,
just last week the Clean Power Act of 2001, S. 556, was
introduced, and Senators Lieberman, Clinton, and Corzine of
this committee are among its lead sponsors. We hope others of
you will consider sponsoring, as well.
NRDC strongly supports S. 556, and we applaud these members
for their leadership.
The bill establishes industry-wide caps on the four
horsemen pollutants. Plant-by-plant reductions are required for
mercury, while, for the other three, market-based programs will
allow great flexibility for firms to meet the bill's targets.
This approach will not only protect the environment and public
health, it will give clean power the recognition in the market
that the current law impedes.
The bill will also give investors in the electric sector
certainty they now lack about future regulatory obligations and
help them avoid costly mistakes in investment strategies.
A critical feature of the bill is the cap on
CO2. The cap in the bill is set at 1990 levels.
That's the level that the United States agreed to to meet the
1992 Rio Climate Treaty, which was signed by the current
President's father and ratified by the Senate.
Now, in his campaign, the current President pledged to
support a powerplant bill requiring mandatory reductions in all
four pollutants, including CO2, but last week he
announced he would not honor that promise. That, in my opinion,
was a mistake, and we urge Congress to proceed with a bill that
covers all four pollutants. Let me give you a few reasons why.
Failure to include carbon will increase costs in the long
run. When carbon controls are required--and they will be--much
investment that could have been made intelligently today will
have been wasted. A narrow bill will prolong uncertainty. Is
carbon really off the table? For how long? Will it be put back
on the table right after companies have made investments?
As Katie McGinty pointed out, a narrow bill would miss the
opportunity for the United States to position itself ahead of
competitors in the global marketplace for designing cost-
effective strategies to fight global climate change.
The smart money knows that there is going to be a huge
market for climate-friendly energy technologies. The United
States can either play a leadership role in looking at that
market or it can play a catch-up role. This legislation gives
the United States an opportunity to get ahead of the curve.
I detail in my testimony the reasons that President Bush
gave for his reversal. I won't go into those points now.
Let me just conclude by my final point, which is why things
are off to a bad start.
As the director of the choir that I sing in reminds us,
even the most beautiful music can be spoiled by a few
discordant voices, and, no matter how people try to make
harmony, it is impossible with those discordant voices. I'd
like to mention a few discordant voices that we are hearing.
One is the proposal to drill in the Arctic National
Wildlife Refuge. If you really want to encourage a reasoned
discourse about energy policy, why does one lead with a policy
to drill in a very special place? That should be the last place
we look to meet our energy needs, not the first place to talk
about drilling.
Second, pointing the finger at environmental rules as a
cause of California's energy problem is wrong and it diverts
attention from real solutions and further polarizes debate.
Third, the coal lobby is now promoting huge new exemptions
from the Clean Air Act for coal-fired power plants. This, too,
is not the way to promote a reasoned discussion about the role
coal should play in the nation's energy policy.
Finally, efforts to blame New Source Review and other
permitting requirements from interfering with development and
location of new powerplants is short-sighted. Fundamental
advertising principles should remind us that if you associate
things in the public mind, you're going to reap the
consequences of that association. If you say over and over
again, ``We can't build new powerplants because of
environmental rules,'' what is the public going to conclude?
They're going to conclude they should be anxious about those
new powerplant projects because somehow they are in conflict
with their environmental aspirations. That's not the way to
reduce controversy; it is the way to increase anxiety.
I hope that what we can do in the months ahead is move away
from looking at energy policy like a boxing match where we are
trying to score points for a referee and instead look at this
as an opportunity where we can take a deep breath, work
together, figure out how to find solutions.
Thank you very much.
Senator Voinovich. Thank you very much.
Our next witness is Mr. Olon Plunk, vice president for
environmental services, Xcel Energy.
Mr. Plunk?
STATEMENT OF OLON PLUNK, VICE PRESIDENT FOR ENVIRONMENTAL
SERVICES, XCEL ENERGY
Mr. Plunk. Good morning, Mr. Chairman, members of the
committee. My name is Olon Plunk. I am vice president for
environmental services of Xcel Energy. Xcel Energy is a public
utility holding company headquartered in Minneapolis,
Minnesota. We own or operate more than 15,000 megawatts of
electric capacity generated by coal, natural gas, nuclear, and
renewable energy generating facilities. We have operations in
12 States and serve over three million customers.
Today I am testifying regarding some of our experiences
with the Clean Air Act. I am also here to express my support
for alternative approaches to the current air quality
regulatory scheme. We believe that the current regulations and
EPA's implementation of them present very real obstacles to the
goal of ensuring an adequate, reliable, and reasonably priced
supply of energy for our nation.
Xcel Energy serves most of Colorado and all of the fast-
growing Denver metropolitan area. In recent years, we have
embarked on an aggressive effort to meet these burgeoning
energy demands. Our new capacity acquisition efforts, however,
have not been without difficulties. One of the chief obstacles
we face involves new source permitting under the Clean Air Act.
For example, in early 2000 we were struggling to obtain a
permit for a new gas-fired combined cycle unit at our Ft. St.
Vrain facility located in eastern Colorado. The permit that we
submitted would have used the cleanest low-NOx combustion
technology available. Despite this fact, EPA demanded
additional expensive emission controls at the facility.
We proposed a different approach. In the Denver area,
approximately 50 miles away, we operate an existing coal-fired
facility that has significantly higher NOx emissions than the
proposed gas turbine. We offered to install new burners on this
coal-fired plant that would have reduced its NOx emissions by a
much greater amount and at significantly less cost than the
EPA's preferred controls on the new gas-fired Ft. St. Vrain
unit.
Both the State of Colorado and the members of the
environmental community were supportive of this proposal.
Unfortunately, EPA was not. Although some EPA managers
expressed great interest in the idea, EPA ultimately stopped it
because, in EPA's words, it was contrary to the integrity of
the PSD permit program.
Because of our customers' great need for this additional
generation capacity, we could not risk the potential that an
EPA enforcement action would prevent or delay construction of
the plant. We agreed to install EPA's preferred controls at
much greater cost and less environmental benefit than under our
proposal.
In sharp contrast to our experience with EPA, we have found
that, working with the State of Colorado, we have been able to
achieve great environmental progress at much lower cost by
focusing on flexibility and certainty. We operate three coal-
fired power plants in the Denver area. In 1997 we proposed a
voluntary emission reduction program to reduce uncontrolled
sulfur dioxide emissions from those plants by 70 percent.
We worked closely with the Colorado environmental community
and a diverse group of stakeholders to develop and pass
legislation that encourages the Colorado Air Pollution Control
Division to enter into flexible, voluntary emission reduction
agreements for stationary sources. In return for these
significant reductions, the legislation grants such things as a
period of regulatory assurance, during which the sources will
not be subject to additional state regulatory requirements.
The act also requires that regulated utilities, such as
Xcel Energy, can recover the cost of these controls from their
customers.
In July 1998 we entered into an emission reduction
agreement with Colorado. Under the agreement, we will reduce
our sulfur dioxide emissions by approximately 20,000 tons per
year. The agreement grants the company flexibility in complying
with its requirements through annual emission averages,
flexible tonnage caps, and trading of emissions between the
different plants. It grants us certainty by ensuring that the
plants will not be subject to new or different State
requirements for a period of 15 years. Finally, it assures that
we can recover the cost of these controls in a way that does
not put the plants at a competitive disadvantage.
From our experience working with these issues and
struggling to meet energy demands in the west, we have learned
several things about the kinds of reform that would help the
nation resolve its current energy security problems and prevent
their recurrence.
First, the tremendous growth in the nation's energy demand
requires that our industry build and maintain new and existing
power plants. In order to protect the air quality while meeting
these needs, Clean Air Act regulations must become more
flexible. Our own experience in Denver is proof that the right
kind of flexibility creates the conditions that lead to
cleaner, cheaper power.
Second, the Clean Air Act should provide plant owners with
greater certainty. Owners of existing plants must be able to
maintain their facilities and improve their efficiency without
the fear that these efforts will be punished by an EPA
enforcement action for alleged violations of New Source Review
rules.
Plant owners should be allowed to plan rationally and
flexibly for the emission reduction requirements that will be
associated with their operations for the life of their
facilities.
Finally, the Clean Air Act should recognize that States are
uniquely situated to address the concerns of local air quality.
Our experience in Colorado demonstrates that States are well
equipped to think creatively about clean air issues and find
innovative solutions. Congress should be responsible for
setting the broad agenda and national goals for the nation's
air quality program. States should implement that agenda and
those goals at the local level without unnecessary interference
by the EPA.
Finally, Xcel Energy believes that nuclear power must
remain an important part of our nation's energy portfolio. We
cannot maintain and improve upon the nation's air quality
without taking full advantage of this emission-free generation
source.
As many members of the subcommittee know, we are facing the
very real prospect of prematurely closing our Prairie Island
plant in Minnesota because of the Federal Government's failure
to meet its obligation to manage the spent fuel generated by
the facility. We hope that this issue will also continue to
receive attention by Congress.
As Congress considers various multi-pollutant strategies
for the utility industry, these principles should serve as a
valuable guide. We believe that, if properly designed, such
strategies could achieve greater environmental progress at less
cost than the current regulatory program. By bringing
flexibility and certainty to the construction and operation of
power plants, these strategies would also play an important
role in a comprehensive, effective energy policy.
Mr. Chairman, I thank the committee for taking time to
listen to me today, and we would be happy to answer any
questions that you may have.
Senator Voinovich. Thank you, Mr. Plunk.
I'd like to start the questioning with a question to you,
Mr. Alexander.
You describe the problem with the EPA's best available
technology program, and you say that it limits the industry's
flexibility in balancing environmental and energy needs of the
public. I'd like you to explain if the problem could be fixed
administratively by EPA, or does it require congressional
action?
The second question is the question about New Source
Review. We have heard from Mr. Hawkins that that isn't a real
problem, and I would like you to comment on that, also.
Mr. Alexander. With respect to the best available
technology issue, especially with respect to a retrofit
application, it is extremely important that there is some
understanding and recognition that the types of facilities that
are out there. Much like if you had a home, you cannot
necessarily put the very best in that limited space that you
have.
In Ohio we have some facilities that are space limited, and
when we think about having to put best available technology, it
is impossible to retrofit those plants. In fact, in one of the
plants we have a consent decree that says that.
Yet, we are working on a technology called ``Powerspan''
that is a multi-pollutant technology that reduces
SO2, NOx, mercury, and collects small particulates,
but yet that technology doesn't quite reach the best available
levels that could be achieved compared to a new technology on a
brand new facility where you have the space to do that.
That technology won't be deployed or may not be deployed
because the EPA requires and will recognize only the very best.
So the option for that facility may be shut down as compared to
continue to operate.
It leads into the New Source Review and the uncertainties
that that has created for our industry. Both of these, while I
would suggest that over the last 20 years the interpretation of
both BACT, as well as New Source Review, would not have led to
the problems that we're dealing with today. So today's
interpretation of those requirements are leading to
circumstances in which what everyone had considered to be
routine maintenance now is leading to a circumstance in which
facilities and, quite frankly, things that were done on
powerplants 20 years ago are now being challenged, and there is
a suggestion that new source standards must be applied, and
that is best available technology again in a retrofit
application.
I think it is very, very important as we move forward that
we deal with these kinds of issues in a way that will allow the
industry to make investments. There needs to be a certainty
about the investment decisions that we make. We need to have
some flexibility so that we can take--that we can balance the
existing fleet with what the new requirements are going to be.
Obviously, we are going to need some reasonable time limits
to change this fleet out and meet the energy requirements of
this country.
Senator Voinovich. Thank you.
Mr. Nemtzow, I would really like to have you give me a
report on what you think of the incentives in the Murkowski
bill and other incentives that you feel that might be
worthwhile to look at, because it is interesting, now that we
have the incentives in that bill, I'm getting calls from
everyone around the country saying I've got a great idea and we
ought to incentivize this new idea. I'd be really interested in
your organization's review of that for me, and if you could
share it with the other members of this committee.
Mr. Nemtzow. Thank you. I'd be pleased to.
There is an embarrassment of riches of ideas, as you are
finding out. I would like to also comment on Senator Smith's
bill and the other leading bills there.
The Alliance endorses the provisions, the thrust of those
in the Murkowski-Lott bill, and while we do have some sharp
critiques of that bill, it is not for what you're talking
about; it is for what is missing from the bill, the issues it
doesn't deal with.
In terms of the tax incentives, I think Senator Murkowski
has done a wonderful job in terms of taking some of the best
ideas he has got--tax incentives for new homes, for highly
efficient new homes, similar but slightly different from your
bill, Mr. Chairman; for existing homes; for highly efficient
appliances, which is virtually the same in that case as Senator
Grassley's bill. He's got provisions for combined heat and
power, which, for example, DuPont and others in Delaware and
throughout the country have been leaders in that technology,
and this is for the next generation there. So there is a wealth
of good policies there.
Senator Smith's bill has those and also has provisions for
commercial buildings, which we support, and for air
conditioners.
Then, what is missing from both those approaches--and,
Senator Smith, if I may speak for your bill, if not for you--is
not--I don't think you ever said it is a comprehensive tax
incentive for energy, but you were doing some of the leading
provisions, so I don't mean to cite anything that is missing
there.
What Senator Bingaman and Senator Hatch and Senator
Rockefeller are likely to do in different vehicles are
provisions for tax incentives for new automotive technologies.
This, of course, is key. This is the problem we are not
solving.
I wish I knew what Linda Stuntz was driving, but she is not
driving the hybrids that are on the street today, the Toyota
Prius, a phenomenal car, the Honda Insight, and now, of course,
the big three led by Ford are racing to catch up.
What the new provisions will do is provide incentives for
fuel cells and hybrids and the next generation technologies,
and I'm ahead of myself and the NRDC, who is negotiating with
the auto makers--and I think you will see something very
exciting, politically exciting, in terms of bringing together
different players, as well as technically exciting.
In conclusion, if I could say, Senator, I think the
philosophical approach that Congress should take on these
incentives are to provide tax incentives for cutting-edge
technologies, for things that are just at arm's reach, as
Senator Smith's and the other approaches are.
You don't want to provide incentives for things that people
will do, anyway. It is too expensive for the taxpayers. You
don't need those incentives. You need the ones for the ones
that are cutting edge, not so far that they are beyond reach of
companies or individuals, but just at the edge. I think if you
follow that philosophy you will find a lot of good in the
Murkowski and the other proposals.
Senator Voinovich. I'm interested, as a sponsor of the
Murkowski legislation, to get your thoughts on it on what you
think may be missing. It's all going to cost money, and you're
going to have to prioritize, you know, the incentives. You
won't be able to do them all.
Mr. Nemtzow. Homes, cars, appliances I think are key there,
and I would also submit that politically homes will resonate in
ways because it affects so many Americans in ways that some of
the other technologies don't. So I think I would recommend you
put those at the top of your list.
Senator Voinovich. I was in Cleveland with the
administrator of the EPA on Monday, and visiting a home that is
about as energy efficient as you can find, and I think that,
even with the high cost of gas, their original projection was,
like, $300 a year. I think it is probably going to be around
$600, but some people's gas bill a month is $600, so there's a
lot of things that are going on out there that I think we can
do on that side of it.
Senator Carper?
Senator Carper. Thank you, Mr. Chairman.
Gentlemen, welcome to each of you.
As someone said in their testimony, there can only be one
winner in the NCAA. Actually, there will be two--the men and
women. I'm reminded of that as our Delaware women's team went
to the first round and lost. But had they won we could still be
in the hunt.
One of the real values for me for a hearing like this is to
find out where we agree and where you agree. I'm reminded in
some of what I've read lately that, whether it is technology to
provide cleaner-operating, more-fuel-efficient motor vehicles,
whether it is technology to provide less energy consumption for
air conditioners, I was reading about small--I guess it is an
electric co-op out in Colorado which has taken a heat pump and
they bury the coils of the heat pump down under the ground and,
instead of being up on the surface where the temperature might
be 10, 20 degrees, down several feet under the ground it is
always 54 degrees, and it can be used to heat the homes in
winter and cool them in the summer. They install a couple
hundred a year of these. I'm just reminded, if we could do that
sort of thing all over the country we could really get
something done.
I'm convinced that we have a lot of the technology, and,
frankly, a lot of the products that are developed, whether it
is for more energy-efficient homes or cars or air conditioners
or appliances. We actually have this stuff being manufactured,
and manufactures would probably like to build them and sell
them. The question is how do we make sure that we buy them. How
do we make sure that we buy them?
What I really want to do is just go down the row and ask
each of you just to dwell on that if you will. All the
technology, all the ability to take and harness that technology
and turn it into more energy-efficient products doesn't do us a
lot of good unless people and companies put the stuff to good
use. What should we do to better ensure that that happens?
Mr. Plunk, I was struck by your accent. For a guy from a
company from Minnesota, I was wondering what part of Minnesota
you were raised in.
[Laughter.]
Mr. Plunk. I have been bumped around a little bit. I've
gone through two utility mergers. I started out in Amarillo, so
what you're hearing is a West Texas accent.
Senator Carper. All right. I thought maybe southern
Minnesota.
[Laughter.]
Mr. Plunk. Southern Minnesota.
Senator Carper. Southwestern Minnesota.
Mr. Plunk. We have a real diverse service territory ,
essentially from the Canadian border to the Mexican border. I
presently live in Denver, Colorado.
Senator Carper. Thank you.
Mr. Plunk. I might give you an example, Senator, of an
issue that we are experiencing right now that does deploy an
electrotechnology.
In one of our service territories, speaking of the region
in Texas, we have we have a lot of natural gas supply and
compression facilities in that service territory . Most of that
natural gas compression is driven off of internal combustion
engines. It is not very efficient when compared to the heat
cycle in a steam electric generating plant.
Because of the high natural gas prices that they have
experienced in that region, they have come to us asking us to
electrify that gas compression, rather than them doing it by
natural gas fired internal combustion engine.
What that will do is give them essentially an emission-free
compression source coming off of our electrified system. Now,
our system is going to be coming off of highly efficient steam
electric generating cycles. It is being produced through a mix
of coal, natural gas, and even some wind in our system down
there, so it is going to be driven off of a diverse fuel mix.
So the essential thing there that is driving them is the
price signal for that energy, because it is more efficient for
them to electrify that process. Overall, even though that is
going to make our emissions of CO2 and NOx and
SO2 a little bit higher on our system--I haven't
done the calculations, but I suspect overall there is a net
emissions decrease because of them replacing it with something
that is driven by a more efficient process.
Senator Carper. OK. Thank you.
Mr. Plunk. That's just one example.
Senator Carper. All right. Again, thank you very much for
that example.
The question I'm asking you to come back to is what are we
to be doing, as policymakers, to encourage the actual purchase
and putting to use of the technology and the products that have
been developed? Thank you.
Mr. Hawkins. Thank you, Senator Carper.
I would mention information, incentives--including dealing
with financing--and performance standards. I'll give you an
example. NRDC's offices use about one-third the electricity
that conventional office space uses. We have those offices
built out for maybe 20 percent more initial cost than it would
have cost for standard construction job, but we had one person
spend about two-thirds of his time for a year collecting the
information. Most organizations don't have the ability or the
insight to actually allocate a person's time to do that. You
have to root around and find all these things. They are there.
They are on the market and you can apply them and get two-
thirds savings, just as we have.
Information is very important. Keeping programs alive in
the Federal, State, and local governments to provide this
information, finding ways for entrepreneurs to provide the
information.
Incentives--first-cost financing is a problem for some
energy-saving technologies. We all know the examples of the
compact fluorescent lights. They use a quarter of the energy,
they last ten times as long, they save everyone who uses them
lots of money, but they cost more, first cost.
Through things like the Public Benefits Trust, electric
generating companies or other service providers can provide a
way of dealing with this up-front financing issue so that the
whole country will save money and consumers will save money and
they won't be deterred by the higher first cost of some of
these products.
Performance standards--David Nemtzow has mentioned energy
efficiency standards for refrigerators, for other forms of
major appliances. The motor vehicle industry is another huge
opportunity for better performance standards. Those are all
places where products that we buy and then have a lifetime for
maybe a decade or more using energy, we can influence our
energy footprint by just being smarter about having modern
performance standards.
Senator Carper. Thank you.
Mr. Nemtzow. Some of these issues have been covered, but
let me suggest that the philosophy with which to approach your
question is we should try to get the marketplace to work
wherever possible, and that, I think, is a truism, but there is
a ``wherever possible'' there.
Let me start with the exception first. In the energy
marketplace, in the consumer marketplace there are many market
values that classical economics teaches us about. For example,
almost half of the refrigerators bought every year in this
country are bought by somebody who will never, ever see the
electric bill for them--landlords, home builders, developers--
so they are going to buy based on what makes sense--first cost
or looks. They don't have to pay the electric bill. They won't
care about efficiency. Nobody would expect them to. That's a
market failure that needs to be addressed by regulation or some
other non-market force.
Let's talk about the marketplace, which is the right way to
do it. First, of course, are price signals. You have to give
people the price of their decision and the cost of it, as much
as possible. One of California's many mistakes was to protect
consumers from the reality of what was happening in the real
world of natural gas prices. Consumers haven't conserved--well,
they are conserving now, but they hadn't planned, they're not
doing it voluntarily.
Even better than that is educating consumers about what
products are out there and why it is in their interest, and
there is a bevy of programs. Governor Pataki in New York is on
TV all the time trying to head off his summer's problems.
Governor Ridge I think will soon be there, of course, Governor
Davis.
We talked about the Energy Star program. If you want to
come to the Alliance to Save Energy home page, Senator, we have
a calculator there where you can estimate how much energy you
are saving or wasting at home and some opportunities for
saving, so there are a lot of ways to educate consumers that
you, as a policymaker, can support.
Finally, we talked about the tax incentives that the
chairman asked about, and I think that is key in this day and
age. To provide the economic incentives for those new
technologies, get them out there, let people try them. You try
it, you like it, and then the marketplace will be more
friendly.
So those are some of the approaches, but there's a lot to
do. Consumers now, after a decade of not having to worry about
energy, of course have to worry about it now, so they are
primed. Now we just have to give them the tools to make some
smart decisions.
Senator Carper. Thank you.
Mr. Alexander. Senator, thank you.
My company has been engaged in energy management and
offering controls for a number of years--geothermal
applications for residential homes, whole house energy
efficiency. We are the largest mechanical contractor in the
Midwest. We offer energy management controls on HVAC equipment,
lighting equipment, and also a green roofs program, which is a
reflective roof on buildings.
We have seen in this experience boils down to three simple
prospects. I think a lot of it has already been talked about.
First, you have to have a quality product that serves the needs
of the customer. If it is a quality product, first in the door
works.
Second, the customer has to see real-time prices. You
cannot continue to have subsidized prices, controlled, capped
prices. They must see real-time prices so they can make those
kinds of economic decisions and choices which will allow the
deployment of these new technologies, which are more expensive.
Third, we talked a lot about subsidies. I would suggest
that if we look toward subsidies, you look toward subsidies
that help the development and the initial deployment of the
resource, because if you have a quality product, customers are
seeing real-time prices, then what you need to do is to get the
business started, but that there is not a large capital
investment required for the market to get developed.
If you can do that and target subsidies toward the--there
are direct subsidies to the customers--you could target those
toward people that could not otherwise afford to make that
capital investment because they don't have that ability to even
make that tradeoff. That's where I think you should concentrate
your effort.
Senator Carper. Thank you all.
Senator Voinovich. Thank you. That information, Mr.
Hawkins, is very, very important. We undertook the green lights
program in the State of Ohio, and it has just been wonderful.
It is an initial high cost to get into it, but we've saved so
much money. We asked the universities to do management
studies--and this sounds like a no-brainer, but a lot of them
weren't turning down their heat at night, and one of our
universities saved almost $750,000 just by doing that, and
others installing those automatic things at certain times when
they're shut down.
There's a lot that can be done, and I was really impressed
with your second--the energy efficiency right next to the
petroleum. That is our No. 1 source. Then the next source was
energy efficiency, which was terrific.
Mr. Nemtzow. If I may comment, Senator, one of the problems
is energy efficiency is invisible. What we want is for the
Maytag appliance that's fuel efficient to look just like the
other one. That's the plan. We want it to be invisible. But
then our success story gets lost because of that invisibility.
Senator Voinovich. I'd just like to make one comment. One
of the questions that I have got, and I think that maybe every
member of this committee, and that is that we have conservation
and we have technology and we have alternative fuels, and
that's all happening, and some of it more rapidly than others.
Then folding that into--and I know this is difficult--but
folding that into looking down the road 15 years, say, in terms
of our energy needs, and what impact does that have on our use
of natural gas, what impact does it have on nuclear power, what
impact does it have on use of coal. It is how do you put all of
this together in a way that doesn't get you off on one thing
and you fail to recognize there's something happening over
here. It is a very difficult thing for us to weigh.
I think part of what we are going to come up with here has
got to take that kind of thing into consideration if we are
going to deal with this thing appropriately.
I've spoken enough.
Chairman Smith?
Senator Smith. Thank you, Mr. Chairman.
I think I indicated before, and as all four of you
gentlemen know, we are trying over the next several months, and
the purpose of these hearings is to try to gather enough
information to be able to write a bill that amends, if you
will, the Clean Air Act in a way that provides for the energy
that we need and a safer, cleaner environment.
With that in mind, let me just probe with you a little bit,
Mr. Hawkins. If we make the assumption that we are putting more
carbon into the atmosphere than the natural system can
accomplish across the board--we're not just talking utilities
here--if we make that assumption and in order to reduce the
CO2 levels in the atmosphere, if we assume that
energy efficiency will increase if we give the right incentives
to do it, we make some reasonable assumptions that Mr. Nemtzow
talked about, which I agreed with, in terms of where we are
headed with automobiles--I don't know what the timeline is, but
we certainly have hybrid automobiles now. We're certainly
moving toward fuel cells. As to when they are here, I don't
know exactly. If we make the assumption that what Mr. Alexander
just talked about a few moments ago, that with cleaner coal
technology voluntarily administered with the company from New
Hampshire, Powerspan, reducing emissions and reducing some of
the emissions, if we make all those assumptions why is it
necessary to go regulate specifically the powerplant, command
control powerplant emission for carbon? Why can we not put all
of these together and I can add one more, which is the creation
of coral reefs, more tightening up the gas pipelines, providing
reforestation or rain forest purchase, landfills. All of these
things could be done in a trade and exchange program that would
get us there, allow more flexibility, as they have all asked
for, and get us there.
Are you insisting that it be command, control, end-of-pipe,
end-of-powerplant emission control on carbon?
Mr. Hawkins. To answer your question, Mr. Chairman, no, we
are not insisting on end-of-pipe carbon control for
powerplants, nor are we insisting on command and control.
However, we do believe that sound policy is to establish a cap
on carbon emissions, just as the successful 1990 law
established a cap on sulfur emissions. That will permit a
market mechanism for the electric sector to respond in a
variety of ways so that it integrates reducing carbon with the
objectives that are set forth for the other three pollutants.
If that isn't done, the risk is that the engineering
calculation and the short-sighted cost calculation that is
driven by discount rates will say, ``All right, even though
this strategy won't do anything to reduce our carbon, it will
get us in compliance with sulfur, nitrogen, and mercury, so
that's what you ought to do. Even if it means that 15 years
down the road you are going to face an obligation to control
carbon that you won't have put yourself in a position to deal
with, I can show you with my slide rule and my calculator that
the discount rate should cause you to ignore that right now.''
But that's still a wasted resource, and it also perpetuates the
release of carbon into the atmosphere at levels greatly in
excess of what we need to start thinking about in order to get
us moving.
So failure to integrate this runs the risk of investments
that will be optimized for the other three pollutants, and if
carbon is reduced at all it will only be because it is
incidental to those other three decisions.
The analyses that we've seen say that you cannot robustly
predict that you will get significant carbon reductions by
pursuing the other three pollutants independently.
Senator Smith. Even if we had a system involving credits
provided to those utilities for such things as reforestation,
coral reefs, etc.?
Mr. Hawkins. Well, a credit is useful if there is an
obligation that one applies the credit to, but if you don't
have any obligation to limit carbon, then whether you pursue an
opportunity to reduce carbon is going to be pretty
questionable, because why are you doing it. Are you doing it
because of some speculative future possibility? That causes the
discount rate calculator to run even harder.
Senator Smith. Well, if you implement a voluntary system
under a so-called ``cap and trade system'' out there, and you
implemented a voluntary system to try to achieve the reasonable
goals on these emissions, if it is getting results that's what
we want, isn't it? I mean, I'm just asking you, can you
envision any way of supporting any type of legislation that
would--the result would be a reduction. Obviously, there will
be a reduction in NOx, SOx, and mercury, but the result would
be reductions in carbon, but without command control at each
powerplant? Can you envision supporting any type of legislation
that would accomplish that?
Mr. Hawkins. We think that a target for carbon needs to be
an integral part of the legislation, and we are willing to work
with you, Mr. Chairman, to see if there are ways that you can
robustly get a program that will, in fact, allow all of us to
conclude that yes, we will hit that carbon target because there
are effective and accountable means for determining what the
obligations are, and even if they were flexibly implemented
that they, nonetheless, will reliably produce a carbon target
and achieve a carbon target.
So we are not locked into one particular formula for how
one writes legislation to produce the carbon target output,
and, indeed, I would point out that the Clean Power Act of 2001
does not specify how the carbon target is to be achieved. It
leaves that in the bill that has been introduced to the
administrator to design market-based systems to achieve that
target. But it is a clear target, and one that has meaning, and
meaning that is as clear as it is for the other three
pollutants.
Senator Smith. Final point, Mr. Chairman. If we look at Mr.
Alexander's example, where they are working with Powerspan, as
I said, a New Hampshire company, on a voluntary basis--and
mercury, as you know, is not regulated. However, if this pilot
project which they're working on, if the preliminary reports
are anywhere near accurate, you're looking at a possible 75 to
80 percent reduction in mercury with this technology without
any regulation whatsoever.
So I think we have plenty of evidence that the companies,
utilities are willing to move forward on a voluntary basis,
perhaps under a cap and trade system, to make these reductions.
Indeed, we don't have one now and they are moving in that
direction. That's a dramatic reduction in an emission that we
don't even regulate, 80 percent.
Mr. Hawkins. If I could comment, Mr. Chairman, in a
deregulated electric market, capturing a portion of the market
or losing it will depend on fractions of a cent per kilowatt
hour. So if there are technologies that improve performance at
zero additional cost--and I have to underscore ``zero''--then
sure, there is a possibility that they will be used. But unless
that additional cost is zero, no matter how small it is, no
matter how good a bargain it looks to be, if it does raise the
cost of generation by a fraction of a cent, I would say it is
not going to be chosen because of the forces of the competitive
marketplace.
So if you want to accomplish it, it is critical that the
industry have targets that apply to everybody so that it isn't
just a matter of volunteerism, because volunteerism will carry
you only so far in a very competitive market.
Senator Smith. I'd just make one other point.
Mr. Nemtzow, in your discussions or your comments regarding
autos, do you have any idea when you--this ball park you think
that a hydrogen vehicle, for example, would be--fuel cell
vehicle would be marketed extensively here in the United
States? Fifty years?
Mr. Nemtzow. Less than that. I'd have to quote Samuel
Goldwyn about not making predictions about the future, and so
it is dangerous in this business.
Fuel cells that don't run on hydrogen you can expect much
sooner. You'll see them this decade. Daimler-Chrysler is a
leader domestically on select models.
The problem with hydrogen--of course, it works very well in
the fuel cell. The problem is getting it to the customer,
getting the infrastructure, and that's why the big three are
betting, I think correctly, on gasoline for the next period of
time because the infrastructure is there and it is much easier.
So I would say fuel cells, yes; hydrogen fuel cells, it's
beyond this decade. Hybrids are the next exciting technology.
Senator Smith. Sure, and I think looking at that--and,
although that's not under anybody's proposal here on cap and
trade--if, in fact, in the next 25 to 50 years--be generous and
say 50--we take 50 percent of the source of all of the
emissions we're talking about, including carbon, out of the
equation completely because automobiles are no longer burning
gasoline, we've made dramatic reductions and dramatic progress
without any end-of-pipe regulation on the utilities that are
producing the energy for us.
The question is when is Armageddon. I mean, is it 10 years
from now? Twenty years from now? Fifty years? One hundred
years? Is it tomorrow? I mean, that's really the issue, and
those are things we all have to put in play here as we try to
craft legislation that makes all this work.
Unfortunately, we don't have all those answers
specifically.
Senator Voinovich. Thank you.
Senator Carper, do you have any other questions you want to
ask?
Senator Carper. Well, we don't have all the answers, but we
got a couple of them here today. This has been a real good
session.
I wanted to go back, Mr. Chairman, if I could to the issue
of real-time prices. When I think of real-time prices, I think
of a different context.
Let me just use an example. I was talking with the
president of AMTRAK a week or two ago, and we were talking
about the pricing of train tickets, and you've got some trains
that run maybe early in the morning or late afternoon where
everybody wants to ride those trains, and trains that run in
the evening, 7, 8, 9, not as many people want to leave
Washington around those times.
We were talking about how we might adjust pricing so that
those folks who wanted to get on the 5 Metroliner, they pay
more money. Those people who were willing to wait until 7, 8,
9, they pay less money. But we charge the same price for all
the trains.
When you talk about real-time pricing, particularly with
pricing of electricity, there are times during the day when
electricity ought to cost more for us to consume than other
times. When you're talking about real-time pricing--I think it
was Mr. Alexander--I'm thinking adjusting how much we pay for
electricity by virtue of the peak demand times, but that's not
what you're talking about, though, is it?
Mr. Alexander. Senator, I think yes, that is in part. I
think there needs to be a--you need to have two kinds--when you
think about real-time pricing, you need to have two kinds of
issues that need to be solved. No. 1, you have to have metering
and information in the customer's hands so that they know what
they are using at any point in time and they also know the
price of what they're using. Now, the deployment of that type
of metering capability and information kind of capability is
seriously lacking in the industry. I mean, the large industrial
customers have it, some large commercial customers have it, but
it is not into the residential class and it is not in the small
commercial class, so that part of the deployment of moving
toward a true system in which customers make real-time choices,
they need real-time information to do that. That is going to be
developed and will be deployed over a series of years as we
move through deregulation.
The second aspect of it is that we are still operating in
many, many States--Ohio included, California included--on the
basis of a capped, regulated rate which does not allow even
today customers to experience even an average real price in the
marketplace, so they are continuing to experience the prices
that, for example, might have been set in a utilities case back
in the early 1990's and are going to be frozen for another 10
years or so, and they will see no price change in that bill for
that timeframe.
When you're in that environment, it is very difficult to
deploy new technology, especially when it costs more, or to
make customers make those kinds of energy efficiency decisions.
Those are the things that need to be addressed as you move
through this transition in the history of our industry.
Senator Carper. All right. We were talking about the same
thing. Thank you for that clarification.
Mr. Chairman, thank you.
Senator Voinovich. Thank you.
Senator Smith?
Senator Smith. Thank you.
Senator Voinovich. We would like to thank the witnesses for
coming this morning. I think it has been very, very informative
and gives us a little perspective that we didn't have before
and will help us in our decisionmaking, and we thank you very,
very much for taking time out of your busy schedule to be with
us today.
[Whereupon, at 11:50 a.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
Statement of Senator Jon S. Corzine, U.S. Senator from the State of New
Jersey
Thank you, Mr. Chairman. I would like to thank you and Senator
Lieberman for your leadership in scheduling this hearing on the
interaction between our environmental regulations and our nation's
energy policy.
Mr. Chairman, the President has called for a comprehensive energy
policy and I agree that we need to do more. But a comprehensive energy
policy should not come at the expense of protecting human health and
the environment. While we have made great strides in cleaning our
nation's air since the enactment of the Clean Air Act 30 years ago,
there is more that needs to be done.
In my State of New Jersey, for example, 6 of our cities and
counties rank among the worst in air quality in the nation, due to
problems from high-levels of ground ozone, also known as smog,
according to the Environmental Protection Agency. These high levels of
ozone have caused significant respiratory problems in our population,
especially among our most vulnerable: the youngest, the oldest and the
infirm.
I understand that much of the smog that hangs over New Jersey is
produced by the people who live there and the cars that they drive. New
Jersey can and should take steps to deal with pollution caused by its
auto emissions. But a large amount of the smog and other air pollutants
which we face comes from other regions of the country. In fact, the New
Jersey Department of Environmental Protection estimates that as much as
one-third of our air pollution--including smog--either comes from or is
caused by pollutants from another State.
What this says to me is that we simply need to do more to reduce
the levels of air pollutants on a comprehensive basis. That's why I
became a co-sponsor of the Clean Power Act, sponsored by Senators
Jeffords and Lieberman. This is an important bill because it marks the
beginning of a debate as to how much further we should reduce already
regulated pollutants such as sulfur dioxide and nitrogen oxide.
This bill is also important because it regulates carbon dioxide. I
was disappointed when the Bush Administration reversed itself last week
on the question of whether carbon dioxide should be regulated. There is
little doubt now that increased carbon dioxide in the atmosphere causes
global warming. It is time we take steps to reduce its levels.
Again, Mr. Chairman, I thank you for holding this hearing. I look
forward to working with you as the subcommittee considers these and
related issues.
__________
Statement of Linda G. Stuntz, Former Deputy Secretary of Energy
Mr. Chairman and members of the subcommittee: Thank you for the
opportunity to testify before you today on this extremely important
subject: ``Harmonizing the Clean Air Act with our Nation's Energy
Policy.'' Some 12 years ago, when I served as Deputy Undersecretary for
Policy at the Department of Energy in the Bush Administration, I was
the Department's point person in the development of the Clean Air Act
Amendments of 1990, both within the Administration and with respect to
Congress. That experience, including countless hours with some of you
around then-Majority Leader Mitchell's conference table to hammer out
agreement between the Administration and the Senate, left me entirely
persuaded that there is no more difficult, nor more important,
challenge than coordinating our air quality objectives and our energy
policy objectives.
Current Energy Consumption
Let me start first with where we are. In Figure 1, you can see
total U.S. energy consumption for the year 2000, broken down by fuel
source. (This and the other four charts used in my testimony all come
from the U.S. Energy Information Administration's Annual Energy Outlook
2001, published in December 2000.) As you would expect, the three
energy pillars on which we rely are oil (39 percent), natural gas (23
percent) and coal (22 percent), with nuclear, hydropower and non-hydro
renewables making up another 16 percent, collectively.
Previous Trends
That is a good snapshot, but to understand the challenge of
harmonizing clean air and energy policy, we need to understand where we
have been, and where we are going. Let's start with where we have been.
. Figure 2 shows U.S. energy production by fuel from 1970--2000.
Interestingly, total production has remained about constant. As a
result, the growth in demand for energy has been met by imports,
primarily of oil and natural gas. Coal and nuclear production have
risen steadily. Natural gas production has still not returned to where
it was in the early 1970's, although it is growing. Oil production is
falling, hydro is virtually static, and nonhydro renewables, despite
substantial Federal and State incentives in the form of guaranteed
markets, research and development spending, production tax incentives
and other efforts to boost its production, have risen only slightly.
Future Energy Production--Electricity
The implications of these trends for future energy production, and
for future air quality policy are highlighted in EIA's projected U.S.
energy production by fuel, looking out to 2020, as depicted in Figure
3. The three emission-free sources of energy are projected to decline
(nuclear), increase only slightly (nonhydro renewables) or remain
static (hydropower). The decline in petroleum production levels off.
Coal production continues a steady upward growth, and natural gas
production soars, driven in large part by increased electrification of
our economy.
This increased electrification of our economy deserves special
attention. Buried in the dry statistical language of the Annual Energy
Outlook for 2001 is a very profound statement:
Electricity demand is projected to grow by 1.8 percent per year from
1999 through 2020, higher than the rate of 1.3 percent forecast for
the same period in AEO 2000. The higher demand projection results
from the higher projected economic growth and a reevaluation of the
potential for growth in electricity use for a variety of
residential and commercial appliances and equipment, including
personal computers.
In other words, between this year and last year EIA increased its
forecast of annual electricity growth by 38 percent!
To meet this increased demand, which still is less than projected
GDP growth, natural gas use for electricity generation, excluding
cogeneration, is projected to triple over the next two decades, as 89
percent of new electricity generation built between now and 2020 is
projected to be gas-fired. This is depicted in Figure 4.
Now I have always been ``bullish'' on U.S. natural gas resources,
and the ability of our industry to develop the advanced technologies
necessary to find and recover natural gas from ever more difficult
locations, BUT this picture makes me uncomfortable. Whenever this
country has decided as a matter of national policy that we will prefer
one fuel (or as I call it, engage in ``fuel fads''), the experience has
been uniformly dismal. Nuclear was going to be too cheap to meter. Gas
was in such short supply that we banned its use for electricity
generation in 1978, and insisted that coal be used to generate
electricity. Remember the Synthetic Fuels Corporation? One could even
consider MTBE to be a similar fuel ``fad.'' If nothing else, we should
have learned from these experiences that our national well-being is
best served by a diverse portfolio of energy supplies, and by setting
performance standards, not dictating the means by which those standards
should be met.
Let me point out also, with respect to this chart, that despite the
phenomenal growth in the use of natural gas to generate electricity,
coal remains the largest source of electricity.
Future Petroleum Consumption
Figure 5 expresses EIA's projections for future petroleum
consumption. This is really a tale of cars, trucks and planes, and
should not be a surprise given continuing growth in miles traveled by
increasing numbers of SUVs, planes and trucks. Yes, there are exciting
.developments with respect to hybrid vehicles, fuel cells and hydrogen
fuels, but wide use of any of these is judged by EIA to be unlikely at
least before 2020.
Implications for Clean Air Policy
Based on EIA's analyses, it plainly will not be possible for us in
the foreseeable future to reduce in any meaningful way the use of coal
to generate electricity, or the use of petroleum to fuel our cars.
Therefore, air quality policies need to focus NOT on phasing out coal-
based generation, but on developing and requiring deployment of
technologies that will enable us to use coal more cleanly and
efficiently.
Similarly, we can continue to reduce emissions from vehicles, both
by improving fuels and by improving the vehicles, but we need to be
mindful that we have pushed our existing refinery industry and the fuel
distribution and storage infrastructure to its limits. The entire motor
fuel supply system is more brittle and subject to disruption if
anything goes wrong, because refined products are far less fungible,
and it is more difficult to use imports to offset short-term
disruptions. We saw this last summer in Chicago.
I have heard many times the argument that ``industry always cries
wolf,'' and ultimately, ``if we regulate it, they will do it, and do it
at less cost than they said they would.'' It is true that emissions
reductions have been achieved at lower cost than initially predicted
because of the use of flexible trading mechanisms, as in the
SO2 reduction program contained in the Clean Air Act
Amendments of 1990. There are important lessons here. But one is not
that, ``if we mandate it, they will do it and there will be no
problem.''
Last week, I heard the Governor of Washington report to the Energy
and Natural Resources Committee that he has worked with EPA Region 10
to obtain waivers to allow diesel peaking generators to be used around
the clock in order to keep the lights on in Washington State. Emissions
from these generators are far worse than any coal-fired power plant.
In California, Governor Davis has issued an Executive Order
requiring the South Coast Air Quality Management District to make NOx
allowances available to power plans at $7.50 per pound, essentially
suspending, for the time being, the AQMD's NOx reduction program based
on an ever-shrinking pool of NOx allowances available.
I cite these examples NOT to suggest that air quality regulation is
responsible for the Western electricity crisis. That would be overly
simplistic. What these examples show is that sound energy policy is the
ally, not the opponent, of good air quality policy. When we make it too
difficult to site, construct and maintain adequate electricity
generation, and when we place too much reliance on a single fuel, we
expose the environment and ourselves as consumers to damage that can
wipe out months and years of careful progress.
Conclusion and Recommendations
I commend you, Mr. Chairman, for conducting this hearing. At a time
when California is struggling through rolling blackouts, the Northwest
and much of the West is seeing soaring electricity prices, and much of
the rest of the country is experiencing substantial increases in
natural gas bills, we are reminded how essential it is that we have
access to adequate, affordable supplies of energy. As a nation, we have
made great progress in cleaning our air over the past decade.
Unfortunately, the story with respect to our energy foundation is a far
less happy one. If we do not work harder to keep energy and environment
in better balance, both will suffer. . I would encourage this
subcommittee to continue and deepen its inquiry as to the linkages
between energy and clean air policy. In the ``Lower Body,'' on whose
staff I served many years ago, the Energy and Commerce Committee now
includes the Subcommittee on Energy and Air Quality. I think the
collection of this jurisdiction in a single subcommittee is a very
important step in addressing these issues in more integrated fashion.
Senate committee jurisdictions being quite different, I understand that
such a subcommittee would be a good deal more difficult to construct
here, but I encourage you to explore the ways in which this
subcommittee can work more closely with your colleagues on the Energy
and Natural Resources Committee. You have a great deal to learn from,
and teach, each other, and both energy and air quality policy will be
the better for it.
Thank you for your attention. I welcome your questions.
__________
Statement of Hon. Kathleen A. McGinty, Former Chair, Council on
Environmental Quality
Mr. Chairman and members of the subcommittee: Thank you for
inviting me to join this discussion today.
Let me move right to my bottom line: when it comes to meeting our
energy and environmental needs, we face an enormous wealth of
opportunities. Yet, instead of fostering and tirelessly promoting these
opportunities, leadership in Washington today seems bent on creating a
climate of ``crisis'' and fear.
The hyperbole being thrown around bears little resemblance to
reality. So, what is going on? Sadly, One can only surmise that events
of the day are being seized upon opportunistically to promote narrow
special interests, and sacrifice the broader public interest in the
process.
A glaring example in the energy and environmental area is the
effort of the Bush Administration to use the California energy
situation as an excuse finally to sacrifice the arctic national
wildlife refuge to the short-term interests of a few oil companies.
This effort is objectionable on many grounds. But, the reasoning of the
Bush Administration is particularly objectionable. Less than 1 percent
of California's electricity comes from oil. But even if more of it came
from oil, the refuge likely holds only a very limited amount of
economically extractable oil, and we know that it will take 10-15 years
to bring that even that oil on line. In short, sacrificing the refuge
will do nothing to help California's near-term problem. Yet Americans
nonetheless are being asked to sacrifice this priceless, irreplaceable
resource.
And, with all due respect, I suspect that this hearing is part of a
similar strategy-namely, to seize upon current energy issues to push
through policies that roll back critical environment and public health
protections. It is no secret that this has been a top goal of the
leadership on Capitol Hill at least since Mr. Gingrich's 1994
``Contract with America.'' Over the last 6 years, citizens groups,
doctors, teachers, religious leaders, workers, and yes--a vast array of
responsible business leaders--and others, joined committed leaders in
the Congress and a determined Clinton/Gore White House to foil most of
these special interest drives. But, with the change of administration,
special interests are seeing opportunity anew and, I believe, are
grasping at any and all developments to justify their self-interested
campaigns.
Let's just take on the implicit premise of this hearing-did the
Federal Clean Air Act cause the energy problems being experienced in
California?
Answer: no. You don't have to go to the Sierra Club for that
answer. Just ask some of the major electricity generators operating
there. In response to assertions by the White House and others that
environmental regulations are holding back output, generators have
repeatedly said: ``absolutely false.''
What are the main drivers? They are economic and they have to do
with best guesses about markets. We need look no further than recent
stock market performance to know that even the experts don't always
guess right about how the markets will behave.
Power plants were not built in California in the early 1990's
because there was an excess of power. Then came-not new regulation, but
deregulation in the mid 1990's, and with it some market uncertainty
that further dampened interest in plant construction. Indeed, the
California policy of prohibiting long-term supply contracts is evidence
of a widespread anticipation that there would continue to be excess
capacity and decreasing prices.
But, the unanticipated then happened: stronger economic growth than
had been anticipated; stronger growth in electronic-based commerce than
had been anticipated; and the weather hit new extremes of hot and cold.
The result-instead of excess supply, there was not enough supply.
And let's look nationally. Is the Federal Clean Air Act-even
including the strong new requirements put in place by the Clinton/Gore
Administration-preventing increases in generation?
Again, absolutely not. In fact, experts say that some 190,000
Megawatts of new capacity is in the pipeline-roughly a 25 percent
increase in the nation's generating capacity. Some 22,000 megawatts of
the new capacity projected by EIA to come on line by 2020 is coal
fired. In fact, Wall Street will tell you that investments in energy
generation are some of the hottest investments out there now, and that
environmental issues are a pull for those new investments, not an
obstacle to them.
Are environmental concerns completely irrelevant to the California
story? No. But to the extent they play a role, they are largely local
concerns related primarily to the siting of plants, pipelines and
transmission lines. Now, since ``local control'' and ``States rights''
are professed as articles of faith by the White House and many on
Capitol Hill, it would seem inconsistent at best for there to be a
Federal effort to interfere in these areas of local prerogative. I
assume therefore that no such thing is intended in this hearing.
To me, this whole debate is a tremendous tragedy. Why? Because,
quite simply, our country is better than this. Americans are smarter
than this. With ingenuity and inventiveness, we have moved beyond the
tired old rhetoric of ``it's the environment vs. the economy. Its jobs
or the environment.'' We know that we can and we must have both-or we
will have neither.
This principle was proved repeatedly during the Clinton/Gore
Administration. While some of the most demanding environmental
protections ever were put in place, the nation experienced unsurpassed
economic performance as well.
Let's look at the energy area in particular. It has been charged
that the Clinton/Gore Administration neglected energy policy and/or
that environmental policies were in conflict with energy goals.
Absolutely not so. The record proves the opposite:
According to numbers compiled by the minerals management service, in
1992, the last year of the last Bush Administration, domestic oil
and gas drilling activity was at the lowest level since World War
II. By contrast, under Clinton/Gore, natural gas production on fed
lands onshore increased 60 percent. Oil production offshore,
particularly in the Gulf of Mexico was increased 65 percent over
1992 levels, and natural gas production in deep waters in this area
increased 80 percent in just the last 2 years of the Clinton/Gore
Administration. Moreover, coal production on fed lands was
substantially higher under Clinton/Gore than under either Bush or
Reagan.
And, all of that was accomplished while more lands were protected
and preserved than in any Administration since that of Teddy Roosevelt.
The Clinton/Gore Administration also pushed for and secured new
investments in drilling technologies that will enable the production of
millions of additional barrels of oil and some additional 6 trillion
cubic feet of natural gas domestically every year. These increases will
be realized without increasing the environmental footprint of current
oil and gas extraction activities.
But, while shoring up these conventional sources of energy, the
Clinton/Gore Administration also moved aggressively to achieve better
balance in our sources of energy. Contrary to the statements of the
Bush Administration and the congressional leadership, when nearly 80
percent of our electricity is derived from fossil fuels, you cannot
achieve better balance (and therefore security) by just aiming further
to increase supplies of fossil fuels. That just makes a dangerous
situation worse. To reduce risk, you have to diversify your portfolio.
That is what we worked to do in the Clinton/Gore Administration. In
doing so, we advanced policies that enhanced our energy security, were
a boost to our economy and helped cleanup the air. We did not pit these
vital interests against each other as is being done today.
Wind: we invested in new turbines and now wind is the fastest
growing source of energy in the world. It is a clean source of energy
and it is now working to boost even depressed economies like those that
have been experienced in rural America and in the farming sector.
Geothermal: investments have reduced the cost of this technology by
one-third.
Photovoltaic: sales and shipments of this key technology have
tripled.
Efficiency: investments in just 5 key technologies have already
saved consumers some $15 billion; new appliance efficiency standards
will save consumers $40 billion by 2010; and the intensity of Federal
energy use has decreased by 12 percent, saving taxpayers some 600
million/year.
While impressive, our gains in these areas should be even larger.
Why? Because while the Clinton/Gore Administration achieved nearly a 40
percent increase in efficiency investments and more than a 50 percent
increase in renewables investments, those increases only represented
some 12 cents on the dollar of overall increases the Clinton/Gore
Administration requested of the Congress. If we are serious about
achieving a better balance in energy, these investments must be
increased substantially. It is particularly troubling in this regard to
learn that the White House apparently proposes to go in exactly the
opposite direction. Estimates are that the Bush budget will slash
efficiency and renewables by some 30-40 percent. This kind of policy
simply cannot be squared with any sincere effort to improve balance and
security in energy in this country.
Perhaps the most compelling example of bringing the environment and
the economy together in the energy area is the multipollutant approach
to cleaning up power plants. When former Vice President Gore first
publicly announced his support for this kind of approach in April of
2000-after having worked on it since 1996--his statement was endorsed
by everyone from the sierra club to some of the nation's largest coal
fired power generators like American Electric Power, WEPCO, and others.
Indeed, the consensus was so broad that even candidate Bush endorsed
the plan.
Why? Because so many realize that good energy policy is good
environmental policy, and good environmental policy is good economic
policy.
And, they realize that we need a comprehensive policy that protects
the environment while giving power generators the certainty they need
to plan investments. That, in turn, means that the climate issue simply
must be accounted for in a comprehensive approach. To fail to include
climate as the White House now proposes is irresponsible; it virtually
guarantees that current supply problems will be repeated in the future
since it ignores one of the most important drivers on the energy
horizon. It is a threat to reliability.
And that is why the Bush reversal on this issue seems so
inexplicable. Why would such a broadly supported and smart policy be so
cavalierly thrown overboard? Sadly, again, one has to assume that the
broad consensus was sacrificed to some narrow, short-term special
interest.
My hope is that this committee will chart a different course. That
this committee will see that Americans have come together as never
before-leaders in business and the environmental community working with
a common vision and pursuing a shared interest in economic and
environmental vitality. The opportunities are enormous for
technological leadership; for substantial economic advance; and for a
healthy and whole environment.
True leadership requires that strategies-like those being advanced
by the Bush Administration and many in Congress--calling for Americans
to sacrifice their quality of life and values they hold dear--must be
rejected. True leadership consists in supporting the common interest
over the narrow special interest. True leadership today consists in
nurturing the wonderful and promising consensus that has emerged among
Americans-business and environmental leaders alike-and seizing the
wealth of opportunities with which we are blessed.
__________
Statement of Anthony J. Alexander, President, FirstEnergy Corp.
Chairman Voinovich and distinguished members of the Senate
Subcommittee on Clean Air, thank you for the opportunity to share
FirstEnergy's perspective on this important issue.
My name is Anthony J. Alexander, and I am president of FirstEnergy.
FirstEnergy is a diversified energy services holding company
headquartered in Akron, Ohio.
Our four electric utility operating companies comprise the nation's
tenth largest investor-owned electric system. We serve 2.2 million
customers within 13,200 square miles of northern and central Ohio and
western Pennsylvania.
We are in the process of merging with Morristown, New Jersey-based
GPU, Inc., a transaction that will make FirstEnergy the fifth-largest
investor-owned electric system in the country, based on serving 4.3
million customers.
FirstEnergy owns and operates more than 12,000 megawatts of
generation. Of this, 62 percent is coal-fired, 32 percent is nuclear
and the rest is natural gas, oil, or pumped-storage hydro.
Last year, more than 60 percent of our generation was produced by
nuclear and scrubber-equipped coal-fired units.
Since passage of the Clean Air Act in 1970, we've spent a total of
$4.6 billion on environmental protection to ensure that our plants meet
all Federal, State and local environmental laws and regulations.
Just since the Clean Air Act was amended in 1990, we've spent
nearly $1.5 billion in environmental protection. During that same time,
we've reduced emissions of nitrogen oxides by 60 percent and sulfur
dioxide by 57 percent.
As electricity deregulation continues to evolve--along with
regional problems associated with tight generating supplies--we must
strike an appropriate balance between meeting the electricity needs of
our customers and our responsibilities to the environment.
We need to recognize that the rules of our industry have changed.
Under deregulation, the competitive market will determine how much
capacity is built, what types of sources are used, and what the price
of electricity will be. As utilities are relieved of their obligation
to supply power, the economics of making investments further change.
The impact of environmental regulations on the supply and price of
generation needs to be considered, especially since consumers will no
longer have the protection of regulated rates when transition periods
end.
If supplies remain tight, or become tighter in order to retrofit
environmental equipment, the impact certainly will be reflected in
customer prices--and perhaps, even in service reliability.
This is not to say that competition and environmental regulations
are mutually exclusive. In fact, I believe the opposite is true.
Environmental regulations must be an integral part of a successful
competitive electricity market.
FirstEnergy believes that the following five principles are
important to developing a comprehensive energy policy that addresses
both environmental and market issues:
1. Encourage the production of electricity from increasingly clean
and diverse fuel sources.
2. Recognize the significant role coal plays in meeting the
nation's growing electricity needs.
3. Implement environmental regulation fairly and consistently
across broad geographic regions.
4. Provide the regulatory flexibility and certainty to meet
emission reductions.
5. Encourage energy efficiency efforts to limit energy demand and
usage.
Let me briefly address each of these five principles.
First, the production of electricity from increasingly
clean and diverse fuel sources should be encouraged. A balanced
portfolio of generation--including coal, nuclear, natural gas, solar,
wind and hydro--will minimize the risk of price fluctuations affecting
any single generation source.
Second, there must be recognition of the significant role
coal plays in meeting the nation's growing electricity needs. Policies
that would eliminate coal as a viable fuel source, or that would
discourage ways to burn it more cleanly and efficiently, are
counterproductive.
Natural gas generation will continue to play a key role in
minimizing price spikes in the electricity market--as long as the price
of natural gas doesn't become cost prohibitive. However, it cannot
replace coal, which provides more than half of the electricity we use
in this country, and more than 90 percent of Ohio's use.
Third, environmental regulations must be implemented
fairly and consistently across all geographic regions so that, in the
competitive market, all participants are subject to the same rules.
Otherwise, selective enforcement will ultimately undermine the
development of retail competition.
In the recent initiative by U.S. EPA claiming decades of routine
work at power plants constituted major modifications that triggered New
Source Review, the Agency targeted specific regions of the country--the
Midwest and South, and only certain companies in those regions--in what
amounted to a radical reinterpretation of existing law.
It is impossible for a capital-intensive industry such as ours to
operate effectively under unclear, ever-changing rules and regulations.
Such actions can only have a negative effect on future development of
generation.
As the national energy policy is crafted, we hope that Congress
supports Senator Voinovich's proposal that new, second-generation
environmental laws include cost-benefit considerations that balance the
full spectrum of public needs and interests. That's especially
important considering that consumers will bear the costs in a
competitive energy marketplace. New laws should not add needlessly to
the future cost of electricity or adversely affect available supplies.
Fourth, future environmental legislation must allow for
adequate regulatory flexibility and certainty. That will encourage
development of innovative, more cost-effective control technologies,
and provide more options for existing facilities when meeting new
regulations.
As part of that effort, we support market-based allowance trading
that provides trading credits to all sources of electric generation--
not only to those sources that burn fossil fuels. This would help
create an economic incentive for the use of low-and non-emitting
sources and produce ongoing environmental benefits. I would point out
that today's best-available control technology--or BACT--requirements
significantly limit the generating industry's flexibility in balancing
the environmental and energy needs of the public.
Under the U.S. EPA's current interpretation of BACT, for example,
we could not use a new control technology to help achieve NOx or
SO2 reductions, even if it was almost as effective as the
best available, and achieved reductions of other substances as well.
Yet, if that new technology were used throughout the industry, far more
emission reductions could be achieved than through selective BACT
deployment. This kind of regulatory inflexibility doesn't make business
sense and, more important, doesn't make environmental sense.
I believe Congress should determine the appropriate reduction
requirements and timeframes, then allow the industry to meet them in
the most cost-effective ways possible. The command-and-control approach
will only serve to drive up costs and curb innovation.
Finally, we need to encourage energy-efficiency programs.
Conservation and a shift to more off-peak consumption can be achieved
by providing customers with real-world price information. Ultimately,
that means retail prices will need to track more closely with wholesale
prices. While this will be a difficult adjustment, there's no other way
to truly achieve a dramatic reduction in the consumption of
electricity, or an improvement in the efficiency of its use.
In short, environmental regulations must work within--not against--
the competitive electricity marketplace. They should provide
flexibility, uniform performance obligations and compliance schedules.
They should also encourage fuel diversity, energy-efficiency and
continued use of coal and other abundant natural resources to ensure
that we maintain a clean, reliable, affordable supply of electricity.
Thank you.
______
Responses by Anthony J. Alexander to Additional Questions from Senator
Lieberman
Question 1. Do you believe that CO2 reductions will be
required of your industry in the next decade?
Response. It is up to Congress to decide whether it is appropriate
to require reductions of CO2 emissions. However, I believe
that this decision should take into account the fact that there are
currently no commercially available technologies for reducing
CO2 from power plant emissions. While some CO2
reductions will occur as a result of the ongoing changes within the
electric industry--including increased use of renewables and natural-
gas-fired generation, as well as improvements in the way we burn coal--
large-scale reductions are only possible today by significantly
reducing our use of coal-fired generating plants. Should research
result in a viable CO2 reduction technology, it may be
possible to have larger scale reductions of CO2 without
drastically reducing our use of coal--the source of more than half the
nation's electricity. In my testimony, I stated that we need to
encourage energy-efficiency programs. While programs that reduce the
demand for electricity will result in CO2 reductions, they
are not likely to provide a return to 1990 levels of CO2
within this decade, if that is the standard being considered. At
FirstEnergy, we have reduced CO2 by about 20 percent since
1990 through a combination of various voluntary activities, including
an exchange with Duquesne Light of some of our coal-fired plants for
nuclear generation, DOE-sponsored climate challenge efforts, the
shutdown of some older, less efficient coal-fired units, and increases
in electricity generated at our nuclear units.
Question 2. You asked for uniformity in our regulatory scheme.
Sometimes, however, different areas have different sensitivities to
pollutants. For example, the soils of the Adirondacks lack the buffers
they need to absorb acid rain. National parks are more sensitive to the
aesthetic concerns posed by smog. Shouldn't our laws be capable of
recognizing such regional variability to protect particularly sensitive
areas?
Response. My request for uniformity relates to new second-
generation control schemes in addition to, not in lieu of, the National
Ambient Air Quality Standards (NAAQS) program. As you know, the NAAQS
have been the cornerstone of the Clean Air Act since 1970. The NAAQS
are set at levels that protect public health with an adequate margin of
safety, and protect public welfare. The Supreme Court recently held
that the economic costs of implementation are not relevant to the level
of health and welfare protection to be provided by the NAAQS. So, my
request for uniformity is based upon a belief that most of the emerging
regional issues can be solved by national programs which produce the
maximum environmental benefits per dollar invested, and do not upset
the current competitive balance between companies. The NAAQS attainment
program, which typically deals with source impacts within 50
kilometers, would presumably remain in the law. Attainment and
maintenance of NAAQS would continue to be a national requirement,
whether or not additional uniform emission reductions are required. For
example, the attainment and maintenance of the NAAQS was in no way
compromised, relaxed, or superseded by the additional ten-million-ton
reduction in utility SO2 emissions and two-million-ton
reduction in utility NOx emissions mandated by the Acid Rain Program.
Even without attempting precise source-receptor correlations, the
emission reductions called for in the Acid Rain Program certainly don't
cause any added adverse air quality impacts anywhere, and probably help
the particularly sensitive areas as much as or more than less efficient
and more complicated and costly command-and-control programs. National
emissions trading programs, such as the one included in the Acid Rain
Program, provide an opportunity to reduce emissions at lower costs than
the command-and-control approach. Such programs also share the benefits
widely and spread the costs across more of our population. The Acid
Rain Program has been among the most successful environmental programs
ever passed by Congress. Last year we began Phase II of the Acid Rain
Program and the positive environmental results should become evident
throughout this decade and beyond (over the next 50 years according to
the congressionally directed National Acid Precipitation Assessment
Program study).
Question 3. I sympathize with your desire for certainty and
flexibility. Some contend, however, that we should only proceed with
the regulation of the first three pollutants. Would your business
decisions as a result of such comprehensive regulation differ if
CO2 was or was not included?
Response. If Congress elected to include CO2 as a
regulated pollutant in a comprehensive environmental law, it could
affect future business decisions. Much would depend on how Congress
addressed CO2, including the timing and level of reductions,
and whether an emissions trading program would be included. As I said
in my testimony, there must be recognition of the significant role coal
plays in meeting the nation's growing electricity needs. In the absence
of commercially available CO2 control technology, we would
have no choice but to shut down much-needed coal-fired generating
plants to meet reduction mandates. Considering that more than half the
nation's electricity is generated using coal, I don't believe this is a
viable option.
__________
Statement of David M. Nemtzow, President, Alliance to Save Energy
Mr. Chairman and members of the committee, thank you for the
opportunity to testify before you today about how we can meet the
nation's future energy needs while limiting, even lessening,
environmental impacts.
My name is David Nemtzow. I am President of the Alliance to Save
Energy, a bipartisan, non-profit coalition of business, government,
environmental, and consumer leaders dedicated to improving the
efficiency with which our economy uses energy. Senators Charles Percy
and Hubert Humphrey founded the Alliance in 1977; it is currently
chaired by Senators Jeff Bingaman and James Jeffords as well as
Representative Ed Markey.
Over 70 companies and organizations currently belong to the
Alliance to Save Energy. If it pleases the chairman I would like to
include for the record a complete list of the Alliance's Board of
Directors and Associate members, which includes many of the nation's
leading energy efficiency firms, electric and gas utilities, and other
companies providing cost savings and pollution reduction to the
marketplace.
The Alliance has a long history of researching and evaluating
Federal energy efficiency efforts. We also have a long history of
supporting and participating in efforts to promote energy efficiency
that rely not on mandatory Federal regulations, but on partnerships
between government and business and between the Federal and State
governments. Federal energy efficiency programs at the Department of
Energy (DOE), the Environmental Protection Agency (EPA), and other
agencies are largely voluntary programs that further the national goals
of environmental protection, as well as broad-based economic growth,
national security and economic competitiveness.
i. introduction
Energy-Efficiency: A Bipartisan Tradition
From the days of our first national nightmare of gas lines and
soaring fuel prices, energy efficiency has had champions in Congress
from both sides of the aisle. Sen. Charles Percy, who founded the
Alliance to Save Energy in 1977, recognized the need to promote energy
efficiency to address a glaring hole in our nation's economic security.
He knew that a partnership between business, government,
environmentalists, and consumer advocates would not only result in
benefits for each sector, it would help avoid the need for coercive
regulation when our problems reach crisis level.
That maxim is no less true today, even though oil supplies and
prices have eased. Our fossil fuel economy is now believed by many to
have put new stresses on our environment. Energy efficiency has been
repeatedly cited as a key solution to slow the loading of carbon and
other greenhouse gases into the atmosphere. Fortunately, we now have a
quarter-century track record of showing how energy efficiency reduces
air pollutants--including SO2, NOx, mercury, carbon dioxide,
particulates, and others.
Support of action by the Federal Government to promote energy
efficiency has also been historically bipartisan. Though the
establishment of the Department of Energy and energy efficiency
programs is most often associated with the Carter Administration, key
advancements in Federal efforts were made under the Reagan and Bush
Administrations. While funding was cut severely from Carter-era levels,
President Ronald Reagan signed the National Appliance Efficiency and
Conservation Act (NAECA) the law requiring DOE to set energy efficiency
standards for appliances and other equipment. That program has led to
tens of billions of dollars in savings for the American people and
significant carbon emissions reductions. The first Bush Administration,
in the context of its support for the Rio Treaty, began to
significantly expand funding for DOE energy efficiency and renewable
energy efforts and created the Green Lights and Energy Star programs at
EPA. In addition, former President Bush signed the Energy Policy Act of
1992, which expanded the scope and magnitude of energy efficiency
efforts.
The House and Senate caucuses devoted to promoting renewable energy
and energy efficiency continue that tradition of bipartisanship.
Currently, the House Renewable Energy and Energy-Efficiency Caucus
features 173 members from both parties, while the newer Senate version
counts 32 of your colleagues as its members. Such support from all
parts of the political spectrum is what has made clean energy a driving
force in the American economy.
Today's Testimony
I am here today to testify on the relationship of energy policy and
environmental policy. At today's hearing I know you will receive
testimony indicating that certain environmental policies make it more
difficult to produce energy in this country, and other testimony that
certain energy policies are lessening our nation's environmental
quality.
That is small wonder, after all energy and environmental decisions
are inexorably linked since so many of our environmental challenges
result from the production, transportation and/or consumption of energy
resources. Most notably, 80-90 percent of our air pollution comes from
energy use, as does an even larger percentage of carbon dioxide, the
leading greenhouse gas. Unfortunately, the list doesn't end there:
energy use contributes significantly to other environmental problems,
including water pollution, land use disruptions, toxic and nuclear
wastes, etc. So we must accept that energy and environmental decisions
are intertwined, and the policies designed to aid in one area will
often have impacts--often negative--in the other.
That is why cutting energy waste and using energy efficiently is so
critical. Energy efficiency means providing the services that our
modern, in fact future, economy and lifestyles demand--lighting,
heating, cooling, transportation, IT, and much more--but doing so with
less energy input. Energy efficiency means relying on technologies--
many of which are familiar, while others are still innovative or still
in the laboratory, perhaps at Oak Ridge National Laboratory in the
chairman's home State or at the United Technologies company in the
ranking member's home State--that can provide the same or superior
services, productivity and comfort while using less energy input.
Lessening energy input means reducing the numerous pollutants and
environmental stresses that result from our currently wasteful energy
practices.
ii. energy efficiency and environmental pollution
Proven Performer
Increasing energy-efficiency has been reducing air pollution in the
United States for at least 25 years. Alliance research shows that the
gains made in energy efficiency alone during the past 25 years have
resulted in 18 percent less air pollution today. This massive
assistance to our environmental health is in addition to improvements
made through the Clean Air Act and other air regulations.
The most polluting activity on earth is the production,
transportation, and use of energy. Electricity generation, vehicle
exhaust, oil spills, the heating and cooling of buildings, industrial
processes, and myriad other uses of energy account for what is
estimated to be 80-90 percent of environmental pollution in this
country. As our population and economic activity increases into the
21st Century, environmental stresses on our air, water, and land will
be heightened.
We can bring these large figures down to some snapshots. In March,
2000, the Rand Corporation completed a study of the economic and
environmental impacts of utility energy-efficiency programs in
California. Rand's analysis found that the reduction in demand for
electricity achieved by these programs prevented a 40 percent increase
in stationary source air pollution in California. In addition to these
findings, it is important to note that Rand documented a return of
roughly $1000 for every $1 spent on commercial and industrial energy
efficiency by utilities between 1977 and 1995, and asserted that 3
percent of the 1995 California State gross state product can be
attributed to these investments.
While some may now say that we could use more plants in California
now that the current crisis has taken hold, it is important to note
that energy-efficiency efforts by utilities were cut back drastically
in the onset of deregulation in the State. Continued demand reduction
through the end of the 1990's would have put the State in a
significantly more secure position than it finds itself today.
NOx, SOx, and Carbon: EPA Data
Alliance to Save Energy analysis of Environmental Protection Agency
pollution data shows that energy-efficiency has been particularly
effective at reducing emissions of nitrogen oxides and carbon dioxide.
On average, since 1977, energy-efficiency measures in the U.S. have
reduced nitrogen oxides by 13 percent over what annual emissions levels
would have been. Energy-efficiency has reduced sulfur dioxide by an
average of 3 percent per year. (See enclosed tables.)
Energy-Efficiency and SIPs: A New Tool for States
More than ever, States are looking for innovative ways to meet
their obligations under the Clean Air Act to develop and issue State
Implementation Plans. A growing acknowledgement that energy-efficiency
is an effective tool to reduce criteria air pollutants and carbon is
fueling a new look at energy-efficiency set-asides and other measures.
We strongly support this move to look at energy and environment as
two parts of the same equation. Their separation in the public
consciousness--and Mr. Chairman, often times in committee
jurisdiction--is the single biggest obstacle we have to solving our
energy crises and environmental problems. If energy and environmental
policy is moved in concert then better programs will be developed. With
the U.S. Supreme Court's recent decisions regarding the State
Implementation Plans for NOx and the 8 hour rule for ozone, this effort
should have new immediacy.
Climate Change and the Alliance to Save Energy
Let me start, Mr. Chairman, by stating that the Alliance to Save
Energy currently has no official policy on climate change. We are not
on record regarding targets or timetables, the Kyoto treaty, nor any
other proposed form of regulation to address the problem. However, we
are very cognizant of both the science and politics surrounding the
issue, and even more acutely, the potential for energy efficiency to be
a large part of the solution to global climate change.
But we must look at where our carbon emissions would be without the
investments that have been made in this country since 1977.
Mr. Chairman, our nation's emission of carbon would be a full one-
third (33 percent) greater without the progress that has been made in
the past quarter century.
Mr. Chairman, the Alliance is not surprised that energy efficiency
stands to be a key component of nearly any climate change strategy.
Slowing or stemming climate change should rightly take its place with
economic growth, reduction of other environmental pollutants, increased
national security, and promoting American competitiveness abroad, as a
reason to move full speed ahead with research, development, and
deployment of energy-efficient technology throughout the economy. We
are such believers in the positive effects of energy efficiency that if
you told us it cured the common cold, we might not be surprised.
However, energy efficiency becomes an even more crucial component
for our nation's near-term future when we think of the fact that a huge
amount of our nation's capital stock will turn over in the next 10
years. EPA estimates that fully 60 percent of our carbon emissions in
2010 will come from equipment not yet purchased. Decisions about how we
develop and deploy technology will have a profound effect on whether
the nation is even able to sufficiently reduce emissions if a political
consensus on action to stem climate change should develop. In this
context, energy efficiency becomes an insurance policy that the nation
can ill-afford to pass up, and one that should be pursued with no
regret.
Five of our most prestigious national laboratories recently came
out with a study titled, ``Scenarios for a Clean Energy Future.'' The
conclusion of that study was that targeted investment in a selection of
energy-efficiency measures could get us more than one half of the way
to 1990 levels of carbon emissions. Furthermore, by 2020, these
targeted efficiency measures would pay for themselves. Let me state
that again Mr. Chairman. Five of our national laboratories believe that
targeted investments in energy-efficiency can get our nation at least
half way to the targets of the Kyoto treaty FOR FREE. In no place have
I seen these findings refuted or substantially questioned. Yet few
policymakers are seriously considering implementing these investments.
Frankly, Mr. Chairman, we should stop carrying on an increasingly
surreal debate over how much evidence we need for a conclusive finding
that climate change exists, and start putting in place an insurance
policy that will benefit the country economically and environmentally
no matter what happens--and mitigate potential impacts of global
warming.
iii. federal energy efficiency efforts
Energy efficiency Research, Development, and Deployment: Why the
Federal Government?
Back in 1995, when some in Congress were contemplating the
dissolution of the Department of Energy, two major reports were
released that came to the same conclusion: If we forego Federal
research and development in energy technologies, it will not be
replaced in kind by the private sector. Both the Galvin Commission
studying the national laboratories and DOE's Yergin Task Force looked
at energy research and development and arrived at this conclusion.
Among the reasons they cited as barriers to corporate efforts are high
R&D costs, internal cost-cutting which has resulted in widespread
downsizing of companies, uncertainty of property rights and the ability
to capture all the benefits of R&D, and high initial investment in R&D
capability.
In the early 1990's, Federal energy research efforts were
criticized for producing technology and innovation in a vacuum. While
research accomplishments were substantial, many business leaders
believed that these efforts were not relevant to markets for lighting,
building materials, automobiles and other products. This decade has
seen an exponential rise in cooperation, planning, and cost-sharing
with the private sector to assure that Federal research and deployment
really do create the maximum value added. These process gains are
exemplified by EPA's Green Lights and Energy Star as well as DOE's
Industries of the Future and Buildings Roadmap programs.
Technology Deployment is Integral to a Successful Research Agenda
Some critics of DOE and EPA energy efficiency efforts have argued
that while basic research is an acceptable activity of the Federal
Government, deployment and market transformation are not.
The need for having deployment in the toolbox of DOE is illustrated
by the story of the flame retention oil burner. DOE did not develop
this technology. However, in response to the oil price shocks of the
1970's, DOE worked with the oil heat industry to field test and promote
the technology as a substantial energy-saver. The key was a program to
train fuel oil technicians how to install these advanced burners to
yield the most savings for homeowners.
The subsequent realization by the oil heat industry of its
attributes created demand, and adoption of the flame retention head oil
burner increased about tenfold between 1979 and 1983. As of 1996, the
technology was in use in about 7.3 million households, over half of
oil-heated homes. The burner provides an 11-22 percent energy saving,
Mr. Chairman, and, as of 1999, a conservative energy savings estimate
of over $14 billion billion for consumers from a simple, existing
technology--in large part due to deployment efforts by DOE. DOE's
responsibility for this benefit can be traced to addressing barriers
that were inhibiting wide use of the technology, and accelerating
market penetration.
Federal Programs: Have They Returned Our Investment?
In 1996, Mr. Chairman, the General Accounting Office did a study of
a variety of success stories which DOE had published in 1994.
Unfortunately, the purpose of the study appeared to be political, and
it attempted to discredit energy efficiency programs by attacking DOE's
methodology for preparing the success stories. But rather than
achieving this goal, it ended up validating billions in energy savings
for a few key technologies which far outstrip out entire national
investment in energy efficiency over the past 20 years.
Mr. Chairman, the accumulated success of these programs at saving
money for American consumers and taxpayers is remarkable. The GAO study
validated DOE's assertion that just five technologies developed or
assisted by the DOE buildings program resulted in $28 billion in energy
savings over the past 20 years for an approximate $8 billion in
investment in all energy-efficiency programs as of 1994. DOE has
updated results for those programs that credits these technologies with
returning $50.9 billion to the U.S. economy through 1999. Add gains
from the low-income Weatherization Assistance Program, State energy
programs, and building and appliance standards work, and returns total
$89.6 billion. Add FEMP gains and it moves to $101 billion. Add the
hundreds of other technologies to come out of the business, industrial,
and transportation programs and the additional accrued energy savings
of the past 5 years and you get a portrait of an overwhelmingly cost-
effective effort which has contributed significantly and directly to
the quality of life of Americans.
Mr. Chairman, I have yet to know of another Federal program that
has returned more than $100 billion to the economy for such a
relatively small investment of $12.0 billion through 1999.
(The technologies are: low-emissivity windows, electronic ballasts,
advanced refrigerator compressors, the flame retention head oil burner,
and DOE-II building design software.)
By the same token, the EPA Energy Star and Green Lights programs,
as well as other EPA climate programs, have already returned more than
$40 billion in energy savings to to the economy from less than $750
million in Federal investment through 1999. In addition, these Federal
partnerships with businesses, State and local governments, school
districts, non-profits, and other organizations have yielded reductions
of more than 300 million metric tons of carbon equivalent pollution.
It must be noted, Mr. Chairman, that these dollar returns are from
just lower fuel and energy bills--they do not include the economic
value of reductions in pollution, increases in productivity and comfort
of employees and consumers, or national security benefits of oil
imports.
A More Comprehensive Audit Must be Performed
Mr. Chairman, I believe we need an even more comprehensive review
of the accomplishments of energy efficiency programs in the Federal
Government that spans the work of DOE, EPA, the Agency for
International Development, and other agencies. Until we get a clearer
picture of the size and scope of the accomplishment of Federal energy
efficiency efforts, we cannot fully assess their value in a climate
change context.
Tax Credits
Numerous leading Senators and Representatives of both parties have
introduced legislation to promote energy-efficient technologies. Rep.
Bill Thomas of California has been a leader in promoting tax credits
for energy-efficient new homes and for upgrading existing homes; Sen.
Charles Grassley has done the same for highly efficient appliances; and
Sen. Bob Smith has introduced legislation that covers homes, commercial
buildings and other equipment. Perhaps most significantly, Senators
Murkowski, Lott and others included tax credits for energy efficiency
in S. 388/S. 389, the Republican comprehensive energy package, and
Senator Bingaman is expected to do so in his comprehensive bill.
These actions are a powerful bi-partisan endorsement of efficiency
as an environmentally responsive energy policy. The Alliance strongly
supports such efforts.
Public Benefits Fund
We are all familiar by now, Mr. Chairman, with the ongoing
electricity troubles in California. These ills are now spreading to
other States in the west, and Chicago, New York, and other eastern
cities expect to experience shortages of electricity this summer. A
reliable, affordable source of electricity is extremely important to
Americans.
Public benefits spending, such as that which was assessed by the
Rand Corporation for California has been immensely successful at
delivering electric capacity cheaply, quickly, and cleanly. In fact,
Mr. Chairman, we assert that the delivery of energy-efficiency measures
is a cleaner, cheaper, and quicker strategy for assuring electricity
supply in our cities than building new generation and upgrading
transmission.
The bill that Sen. Bingaman is expected to introduce today will
include a non-bypassable wires charge for electricity consumers that
will go directly toward insuring reliability in the power supply, as
well as helping low-income Americans meet rising costs, and assisting
States in their efforts to bring greater renewable energy resources on
line. We strongly support this public benefits fund for use to shore up
huge gaps in public interest programs that deregulation has left by the
wayside.
iv. energy efficiency and the economy
Energy efficiency makes money and puts people to work. The economic
gains from energy efficiency come in two forms. The greatest benefit
comes from displaced costs--money that households and businesses can
spend elsewhere because they no longer have to spend it on energy. That
spending includes additional investment and hiring additional workers.
Direct economic benefits come from growth in industries that generate
energy-efficient products and services. Companies that sell insulation
or efficient windows domestically and/or for export employ Americans in
high-skill service and manufacturing jobs. Secondary economic benefits
come from businesses and consumers re-spending these newfound energy
savings in sectors of the economy which are more labor-intensive than
energy supply.
Energy efficiency Must Be Measured as an Energy Source
Our energy system operates against the backdrop of a U.S. economy
that has become significantly more energy-efficient over the past
quarter-century. But we often fail to realize the actual contribution
of energy efficiency to our GDP and national well being.
Mr. Chairman, it isn't easy to compare the contribution of energy
efficiency to the environment and the economy with more traditional
energy sources such as oil and coal. It requires the observer to regard
saved or unused energy as created energy in the same way that oil comes
out of the well and coal comes out of the mine. In addition, I think
that any economist would tell you that energy efficiency measures have
increased the supply of energy and thus helped to lower the price.
Energy not used is just as salable and usable when conserved as when
produced. Upgrades in energy efficiency made to home appliances,
industrial equipment, building systems, or car and truck fleets serve
as an energy source that increases our overall supply of electricity,
coal, oil, and natural gas.
Energy-Efficiency, our Number 2 Energy Source in 1999
Alliance research shows that, for 1999, the most recent year for
which we have complete data, energy efficiency was the second leading
source of energy for U.S. consumption, and if we consider only domestic
energy sources, it's No. 1. I might add, Mr. Chairman, this is an
extremely conservative estimate, staying well within the tight
parameters of Department of Energy modeling. Mr. Chairman, it would
have been number-one if we declined to count oil imports, now more than
half of this nation's oil consumption. Our analysis of 1999 energy
consumption shows that energy efficiency provided the nation with 27
quadrillion Btus (quads), nearly 25 percent of U.S. energy consumption.
While energy efficiency trails our mammoth oil consumption (38 quads),
it significantly outstrips the contribution of natural gas (22 quads),
coal (22 quads), nuclear (8 quads) and hydro (4 quads). (See attached
chart.)
Mr. Chairman, the contribution of energy efficiency to our nation's
overall supply is now so great that we cannot regard as an esoteric
externality anymore. We must promote and support it in the same way we
do the coal belt and the oil patch, which enjoy a variety of tax breaks
and subsidies based on their use of fuel.
These figures show energy efficiency for what it is--an
unparalleled driver of environmentally sound economic growth.
Mr. Chairman these economic snapshots of efficiency show an energy
industry that spans the economy and the populace. But it is not an
energy industry that looks like what we have known in the past.
However, all the functions of traditional energy industries are
represented. But with energy-efficiency, the miners are businesses
trying to cut their costs. The roughnecks are homeowners trying to keep
their families warmer in the winter. The geologists are mechanical
engineers working to get more out of less. Energy efficiency is highly
dispersed throughout the economy. Because of its diffuse nature, energy
efficiency doesn't carry the political clout of the coal-mining
regions, or of the oil and gas-producing regions. There is no ``energy
efficiency patch.''
By the same token there is not a defined energy efficiency
industry. Whirlpool makes highly efficient appliances but they sell
washing machines and refrigerators, not energy efficiency. Honeywell
sells controls that regulate building systems that can save a company
millions of dollars a year, not energy efficiency. Owens-Corning sells
fiberglass insulation which can make a house warmer, more comfortable,
and more economical to live in, but they sell insulation, not energy-
efficiency.
So when we have to make tough choices about what we do with Federal
dollars, we must think about energy efficiency as what it is--an energy
source that is essential for the economic health of our nation--and one
that is paying off like a gusher for the American people. Yes, Mr.
Chairman, that energy is produced cleanly, displacing both conventional
air pollutants as well as ones believed by many to be causing a warming
of the Earth's climate. It enhances our national security, as this year
we again went to war to protect our interests in Mideast oil fields.
Energy efficiency cuts costs for businesses and consumers, and it
increases our international competitiveness--all the things we have
traditionally talked about.
The tough choices on energy and climate must be made with a clear
eye on the contribution to the environment, the economy, national
security, and international competitiveness delivered in the past and
promised for the future by energy-efficiency.
v. other benefits of energy efficiency
National Security
As historians consider the reasons for the Persian Gulf War, one
must acknowledge that the U.S. went to war with Iraq in 1991 in large
part to defend our critical oil interests in the region. Within the
past year, we have again gone to war with Iraq to protect those same
interests. When considered by economists, the billions which American
taxpayers spent to protect those interests--never mind the dangers
posed to a half a million American soldiers--should be added not onto
our military or diplomatic budget, but onto our national expenditure
for energy.
The U.S. has now crossed the line of being dependent for more than
55 percent of its oil consumption on foreign sources. Two-thirds of
that habit comes from transportation. Without more aggressive research
and innovation in automobile technology that situation will grow
significantly worse in the coming decades for two reasons. One, U.S.
consumption will continue to grow both in the number of vehicles on the
road and the amount driven by each one. Two, the concentration of
remaining global oil reserves will grow more consolidated in the
Persian Gulf region as time goes on, making the U.S. more and more
beholden to a region which demonstrates its volatility nearly every
day. Consequently, U.S. dependence on foreign oil is projected to rise
to nearly 60 percent within 10 years.
In the absence of congressional support for increasing Corporate
Average Fuel Economy Standards (CAFE), the Partnership for a New
Generation of Vehicles remains our best bet for the development of
cleaner, more fuel-efficient cars with which to reduce our dependence
on foreign oil supplies. This program has come under some criticism,
and perhaps it is valid to question why the Big Three automakers
require millions of dollars in Federal research to develop products
that are less environmentally harmful. However, cleaner, more efficient
cars remain a national priority, and PNGV is making progress. While
much of the advancement made thus far through the program has been kept
proprietary, the known advances in fuel cells and hybrids are getting
us closer to clean cars. In fact, Mr. Chairman, the fact that this
information is being kept proprietary is a good sign that progress is
being made and that people are expecting money to be made in the
future.
vi. investing in energy efficiency: nothing to lose and everything to
gain
Mr. Chairman, I have described here how energy efficiency has been
a transforming force in the American economy, and how Federal energy
efficiency efforts have played a key role in that expansion.
Investments in research, development, and deployment of energy-
efficient technology pay for themselves many times over in economic,
environmental, and national security benefits. In addition, these are
strides forward that would happen much more slowly or even not at all
without Federal leadership.
Any evaluation of climate change programs must fully factor in the
benefits of energy efficiency gains in any cost-benefit analysis. In
order to do that, we must undertake a more comprehensive accounting of
the benefits of Federal energy efficiency programs that began 25 years
ago, and have continued through today.
Mr. Chairman, I believe that due to their contribution to
environmental quality energy efficiency efforts at DOE, EPA and other
agencies should be escalated. Accordingly, I am deeply troubled by
reports in the press--that appear to be accurate--that the Bush
Administration will be deeply cutting the DOE efficiency programs when
it makes its fiscal year 2002 budget recommendations in early April. I
cannot imagine a worse way to face our nation's multiple energy crises
and our environmental demands than by cutting energy efficiency
programs. I have yet to learn of a Federal investment that has yielded
such rich rewards so broadly dispersed over the economy.
Thank you for the opportunity to testify before your committees
today. I'm happy to address any questions you might have.
__________
Statement of David G. Hawkins, Director, Air and Energy Programs,
Natural Resources Defense Council
Mr. Chairman, members of the subcommittee, thank you for your
invitation to testify on behalf of NRDC, the Natural Resources Defense
Council, regarding the Clean Air Act and national energy policy. NRDC
is a nonprofit citizen organization dedicated to environmental
protection, with more than 400,000 members nationwide. Since 1970, NRDC
has followed closely the implementation of the Clean Air Act and has
sought to promote actions under the law that carry out Congress' policy
decisions to protect public health and the environment from harm caused
by air pollution.
With all respect to the subcommittee, my first point today is to
suggest that the title of this hearing does not capture the issue
before us. Rather than discussing ways to change the Clean Air Act to
harmonize with an independently determined national energy policy, we
need to define our tasks as identifying the goals that are important to
Americans in the areas of energy, public health protection, and
environmental quality and then designing energy and clean air policies
that support these goals. I think any objective view of the historical
record would demonstrate that the way we have pursued our energy goals
in the past has interfered with Americans' desire for clean air, rather
than the other way around. Today's hearing appears to be prompted by
concerns that the Clean Air Act is interfering with meeting the
nation's energy needs. While I welcome the opportunity to speak to
these claims, I think it would be healthy for your sister committee,
the Senate Committee on Energy and Natural Resources, to hold a hearing
to review widespread concerns regarding the impact of our energy
policies on public health and the environment. NRDC certainly would
appreciate any encouragement you can give your colleagues on that
committee. Perhaps Senators Campbell, Graham, and Wyden, who serve on
both committees, could form an Health, Energy, Environment Harmony
Caucus!
In this testimony I would like to touch on three topics: the need
to clean up electric power plants, the flaws in President Bush' change
of position on including carbon dioxide in that program, and the role
of new source pollution control requirements in the nation's air
quality management program and useful improvements to that program.
i. the need for a comprehensive program to clean up polluting power
plants
Today, electricity generation imposes an enormous burden of air
pollution on the American public and the great bulk of that pollution
comes from plants that are not meeting technically feasible, affordable
modern environmental performance standards. This fact is the product of
actions, both lawful and unlawful, that have resulted in an electric
generating fleet that is older, dirtier, and less efficient than is
needed to protect health and the environment.
As I explain in greater detail in Part III of my testimony,
Congress in 1970 drew a distinction between existing pollution sources
and sources that are new or modified: new and modified power plants
were required to minimize air pollution through performance standards
based on state-of-the-art clean power techniques, while existing,
unmodified plants were required to clean up only to the degree needed
to address local air quality problems.
There were several reasons for this approach. First, most air
quality problems were perceived as local. Second, at the time, the
electric power industry was mostly a local one. Third, the exemption
was assumed to be temporary-Congress believed existing plants would
retire and be replaced by new ones meeting modern performance
standards.
Now, nearly 30 years later, the facts on the ground have changed.
We know now that many of our most threatening air pollution problems
are not local-they are regional, national, and even global. Our
electric generating industry is rapidly becoming a national industry
with all parts of the country connected by wires over which the product
can move anywhere in three large regions of the lower 48 States. And
those powerplants that were supposed to retire have, by lawful and
unlawful means, kept on running like the Energizer Bunny. As a result,
pollution from electric power generation is a dominant cause of nearly
all our most pressing air quality related problems.
Four pollutants cause a host of public health and environmental
damage: sulfur dioxide, nitrogen oxides, mercury, and the pollutant no
one can get away from, carbon dioxide, the dominant greenhouse gas.
Electric generation in the U.S. is the largest single source of these
four horsemen of air pollution. Electric powerplants release over two-
thirds of total U.S. emissions of sulfur dioxide; they release 40 per
cent of U.S. carbon dioxide; and they release about one-third of the
nation's nitrogen oxide and mercury pollution.
These pollutants are responsible for a Pandora's box of health and
environmental harm:
fine particles, formed from sulfur and nitrogen
emissions, that contribute to tens of thousands of premature deaths in
the U.S. each year;
smog, that plagues our major cities, and causes
respiratory attacks in kids and seniors;
acid rain, that still damages lakes, streams, forests,
and monuments;
regional haze, that spoils trips to national parks for
millions of visitors annually;
nitrogen emissions, that help over-fertilize estuaries,
including the Chesapeake Bay, Long Island Sound, Pamlico Sound, and the
Gulf of Mexico, leading to dead zones where aquatic life perishes;
mercury contamination of lakes and streams, that has lead
40 States to issue continuing advisories of the fish that store this
toxin; and,
carbon dioxide driven climate change, that threatens--
to kill millions of people through more destructive
floods, droughts, heat waves, intense storms, and climate-related
infectious disease;
to produce sea-level rise that would inundate the homes
of tens of millions of people and cost hundreds of billions of dollars
in damages and for countermeasures in those countries with the
resources to respond; and
to destroy complex ecosystems that have evolved over
thousands of years under the influence of climate cycles that were not
destabilized by fossil fuel combustion.
Consider also the energy we waste with current generating
technology. Today's fossil generating plants are about 34 percent
efficient in converting the chemical energy found in fossil fuels into
electricity. What that means in real terms is that we must mine three
tons of coal and pollute the air with the emissions caused by burning
three tons of coal just to get electricity with the energy equivalent
of one ton of coal. In fact, the energy we waste each year in making
electricity is greater than the total energy in all the coal we burn
each year in the United States. Stated another way, if we could
increase the efficiency of our power plant fleet from about 34 percent
to around 68 percent, we would cut sulfur, nitrogen, mercury, and
carbon pollution from electricity generation in half, even with no
change in the fuel mix.
Our plague of pollution problems and wasted energy is the result of
policies and practices that still allow 30-, 40- and 50-year old plants
to keep operating without meeting modern performance standards for
pollution or efficiency. In addition to harming health and the
environment, the de facto grandfather status of most of today's power
plants creates unfair competition in the electricity market. In effect,
the patchwork of lenient or nonexistent rules at the State and local
level, combined with evasion of Federal requirements, has created
pollution havens where grandfathered plants can engage in domestic
environmental dumping, distorting fair energy markets.
As we move to modernize the electricity market economically, we
must accompany it with modern environmental performance measures. A
central purpose of electric industry restructuring legislation is to
create a free and fair, competitive market for energy services. But
fair competition is impossible in an environment where air pollution
performance requirements are balkanized. Because electricity markets
are connected by wires, different pollution standards promote a
``survival of the filthiest'' market, where the power plants that are
the dirtiest, run harder because they can slightly underbid cleaner
generators.
These market distortions do not deliver consumer benefits. The
price differences caused by different pollution requirements are quite
small-usually 2-3 mills per kilowatt-hour or less-but these small
differences are enough to give dirtier producers a decisive market
advantage in many areas. The market distortions also discourage
investment in new, cleaner, more efficient generation and in renewable
resources.
Under the current rules, an entrepreneur who seeks financing for,
say, a clean, high-efficiency natural gas plant can point out that it
emits no sulfur, no mercury, and much less nitrogen oxides (NOx) and
carbon dioxide (CO2) than the competition. But, with the
partial exception of sulfur (for which allowance programs exist under
the acid rain law), this superior environmental performance has no
economic value in the market place. The financier wants to know whether
the plant will be able to run more cheaply than the competition. If the
competition is a group of grandfathered coal-fired power plants, the
answer often will be no, and financing may go to a higher-polluting new
plant rather than a clean one.
To address the egregious health, environmental, and economic flaws
in the current air pollution control programs, a number of bills were
introduced in the last Congress and last week the bipartisan ``Clean
Power Act of 2001,'' S. 556, was introduced in the Senate. Among its
lead sponsors are three members of this committee, Senators Lieberman,
Clinton, and Corzine. The Clean Power Act establishes industry-wide
caps on tons of each of the ``four-horsemen'' pollutants: sulfur
dioxide (SOx), NOx, CO2, and mercury. The caps on SOx and
NOx would provide building blocks for meeting health-based smog and
fine particle standards (challenged unsuccessfully by industry in the
Supreme Court) and would reduce acid rain further. The mercury cap
would attack the largest single remaining U.S. source of this
pollutant. And the CO2 cap would return the industry's
emissions to 1990 levels-the target set in the 1992 Rio Climate Treaty
that the first President Bush signed and that the Senate has ratified.
With the exception of mercury, for which there are both local and
regional concerns, the bill would implement the cap through market-
based approaches where power generators could trade their clean-up
obligations to meet the caps in the most efficient manner. One possible
market mechanism, a ``generation performance standard,'' would define
the amount of pollution that could be legally emitted for a kilowatt-
hour of electricity from fossil generation, thus creating a level
playing field for those generators. This system will directly reward
cleaner, more efficient generators.
In contrast to the current situation, if the Clean Power Act were
now law, a developer of a new clean power plant would be able to show
direct tangible economic benefits from its reduced environmental
impact. Because the new plant would be able to generate electricity
below the average pollution performance required under the law, every
kilowatt-hour generated would also generate another source of revenue:
emission allowances that can be banked or sold on the market. This
additional revenue stream would make financing such projects that much
more attractive.
A final benefit of these integrated pollution cleanup bills is that
they provide a clear roadmap for business in planning long-term
investments. The history of clean air progress has developed as a
series of unconnected initiatives, typically focused on a single
pollutant. Today, we can survey the next 10-15 years and be confident
that additional measures will be pursued to reduce the four horsemen
pollutants. But if we pursue the traditional approach, no one can say
now with confidence, when, how deep, and in what order these important
steps will occur.
As a result, business planners must approach today's investments by
making educated guesses about environmental requirements. Billions of
dollars are changing hands as generation plants are sold under State
restructuring programs. One thing we can say for sure is that someone
is guessing wrong. By enacting integrated cleanup programs, Congress
could both provide certainty and reduce the tendency to prolong
dependence on existing outmoded plants through the traditional process
of applying end-of-pipe cleanup devices normally aimed at controlling
only one pollutant.
In short, we know we need to reduce a range of damaging pollutants
from the electric generating sector; we know how to do it; and we know
that failure to take these steps now will increase damage, prolong
uncertainty, and encourage unfair competition. Mr. Chairman and members
of the subcommittee, we hope you will seize the opportunity presented
by the Clean Power Act to harmonize clean air and energy goals. By
doing so you can address the key issues that face the industry and the
public in a manner that produces a cleaner, more efficient, more
sustainable, and more competitive electricity market that delivers
energy services for lower costs.
ii. president bush' position on carbon dioxide
As you know, on March 13, 2001, President Bush announced that,
despite his campaign promise to support emission reductions for all
four major pollutants from power plants, including carbon dioxide, he
now opposes inclusion of CO2 in a power plant control bill.
You may also know that NRDC and virtually every other environmental
organization strongly objected to the President's change of position,
the reasons he gave for his decision, and the way in which he made his
decision.
From what I have said in Part I of my testimony you can understand
that NRDC believes that control of carbon dioxide from power plants is
as critical to health and the environment as control of the other three
pollutants. Requiring the electricity industry to return its carbon
emissions to 1990 levels is a practical and necessary first step in
demonstrating that the U.S. intends to honor its commitment under the
1992 Rio Climate Treaty, which, as I said, has been ratified by the
Senate. Failure to include carbon dioxide in a clean-up bill would mean
the legislation would not be comprehensive. By decoupling carbon
emissions from control strategies on the other three pollutants, a
limited bill would increase the tendency for plant owners to make
short-sighted investments in control methods that might reduce sulfur,
nitrogen, and mercury but would perpetuate high levels of carbon
emissions. Indeed, a narrow-focus strategy that slaps controls on
inefficient, outmoded generators could well extend the life of such
facilities further, wasting energy and making it more difficult and
costly to reduce carbon when Congress decides (as I believe will
happen) to take on that threat to planet. A narrow bill would send a
confusing signal to investors: is carbon really off the table or will
it be put back on in a couple of years just after we have selected a
strategy that ignores that pollutant? A two-step program to control the
four major pollutants from electric generators will cost consumers more
in the end than enacting a comprehensive bill now.
Let me turn to the reasons President Bush gave in his March letter
for his about-face. The first reason cited by the President is his
claim that carbon dioxide is ``not a 'pollutant' under the Clean Air
Act.'' To start, the claim that carbon dioxide is not a Clean Air Act
pollutant is irrelevant as a justification for abandoning his pledge to
support a new law (imagine President Lincoln announcing he would oppose
adoption of the 14th Amendment because he had learned that the original
Constitution did not prohibit discrimination). However, President Bush
is wrong on the law as well as on his logic.
To my knowledge, the only official interpretation of the status of
carbon dioxide under the Act was issued in a legal memorandum prepared
in April 1998, by the chief agency officer authorized to interpret the
Act, EPA General Counsel Jonathan Z. Cannon (copy attached). In his
memorandum, Mr. Cannon concluded that while not yet covered by
regulations issued under the Act, carbon dioxide met the statutory
criteria for a ``pollutant'' as the term is defined in the law. Indeed,
as pointed out by Mr. Cannon, carbon dioxide is mentioned by name in a
list of multiple pollutants from fossil fuel power plants for which
Congress directed EPA to develop pollution prevention programs. Sec.
103(g). To be sure, this section of the law does not by itself confer
authority on EPA to regulate carbon dioxide, just as it does not
provide regulatory authority for any of the other pollutants listed in
section 103(g) that EPA has regulated under other provisions of the
Act. While lawyers will argue about the scope of EPA's current
authority to regulate carbon dioxide, the Act is clear that carbon
dioxide is a pollutant. (See attached NRDC Fact Sheet.)
Perhaps some will argue, Mr. Cannon was general counsel in the last
Administration and we now have a new president. It is true that
President Bush is the Chief Executive of the United States but his oath
under the Constitution is to faithfully execute its laws, not to make
them up. If President Bush did not rely on Mr. Cannon's existing
interpretation of the Act, on what official's legal interpretation did
he rely? Was a memorandum of law prepared for the president's
consideration? If so, by whom? We don't know the answers to these
questions and we should know, to promote confidence in the way the
president reaches his decisions.
President Bush' second reason for changing his position was an
assertion that including carbon dioxide in new legislation would lead
to significantly higher electricity prices. Was this conclusion based
on any analysis performed by his Administration? Apparently not. His
letter cites one report for the high cost conclusion: ``Analysis of
Strategies for Reducing Multiple Emissions from Power Plants.'' I will
say more about this report in a moment. First, let me point out that
while the president apparently did not ask his own appointees to
prepare an analysis for him, there were four other reports done in the
last 6 months regarding the costs of programs to reduce power plant
emissions of carbon dioxide. The other four studies, including a
November, 2000, Department of Energy report, Scenarios for a Clean
Energy Future, concluded that substantial carbon dioxide reductions
from the electric sector could be achieved at very low costs. For
example, the DOE ``Clean Energy Future'' study found that electric
sector carbon dioxide emissions could be reduced to 1990 levels with a
net increase in Americans' energy bills of less than 1 percent in the
year 2010 and with large energy bill savings in later years due to more
efficient use of energy. Citations to this and the other studies are
attached.
Thus, there were five studies the president could have consulted
regarding the costs of carbon controls-four that found low to modest
costs and one outlier that forecast high costs. Unfortunately, his
letter leaves the impression that his staff seized on the EIA analysis,
not based on any broad review of the issue but because it contained the
conclusion that could be used to rationalize the president's change of
position. If this is correct, it is quite striking. The president made
an explicit and clear policy commitment during the campaign. His
surrogates repeated his pledge in additional public appearances during
the campaign. One would think that before abandoning such an explicit
promise, the president would have directed a thorough review by his own
Administration team of policy options and the costs of those options to
determine whether there was a real conflict between his promise and
Americans' energy goals. At the very least, one would have hoped that
the president's staff would have recommended a process that included an
examination of all relevant recent analyses and, when presented with a
conflict in those analyses, that more time would have been taken to
determine which cost analyses were more reliable. While the president's
letter states the information he received ``warrants a reevaluation,''
he didn't announce he was undertaking a reevaluation. He just made a
decision that flatly contradicted his campaign pledge. All of these
facts suggest that careful policy analysis had very little to do with
the president's decision.
What should we make of the report cited by the president? While he
called it a ``Department of Energy Report,'' the analysis is, in fact,
a ``Service Report'' prepared by the Energy Information Administration
(EIA) for submission to former Congressman David McIntosh in response
to his request for an analysis of emission reduction scenarios
specified by the Congressman. Now EIA is respected for its analytical
capabilities but it is also clear that when Congressmen McIntosh
requested the analysis, his staff knew before the EIA computers were
turned on that the result would forecast high costs for carbon
controls. Given Mr. McIntosh' vehement opposition to any form of carbon
emission reductions, this prospect probably did not make him unhappy.
Is EIA's predictable result due to deliberate deception by EIA?
Certainly not. It is an artifact of the approach EIA used to evaluate
the policies specified by Mr. McIntosh. The analytic approach and
assumptions that EIA adopts in modeling electric services options
guarantee that any policy aimed at significantly reducing carbon from
electricity generators will be calculated as having a high cost. One
would have more confidence in the reality of this prediction if there
were no credible conflicting conclusions. But, in fact, the Department
of Energy Clean Energy Future study I mentioned above, uses the same
model run by EIA and reaches dramatically different conclusions. A
principle reason for this is that in DOE's runs, analysts incorporate a
number of sensible policies designed to help Americans use electricity
and natural gas more efficiently. These policies lower consumer energy
bills and make it possible to clean up power plants at much lower
costs. For example, the DOE analysis ignored by the president includes
policies found in Chairman Smith's recently reintroduced Energy
Efficient Buildings Incentives Act, S. 207, also sponsored by Senators
Reid, Lieberman, and Chafee of this committee. By examining a
harmonized set of energy and clean air policies such as those
championed by Chairman Smith, the DOE Clean Energy Future report comes
much closer to the truth about the costs of smart carbon reduction
programs than the EIA service report done at Mr. McIntosh' request.
President Bush also refers to concerns about current high energy
prices in California and other States as supporting his new position on
carbon dioxide. This point really does not withstand analysis. Prices
are high today and generation capacity in California and the West is
constrained. But any legislation enacted by Congress for power plants
will not affect energy supplies today. Instead, a reduction timetable
will be some years in the future, allowing time to install pollution
controls and for repowering or replacement of the very plants whose
breakdowns contributed to California's problems in the last year. As
explained in attached NRDC fact sheets, environmental requirements have
not caused today's electricity price and supply problems and no amount
of scapegoating will change the facts or improve our chance of
designing effective remedies.
Finally, I must comment on the president's statements regarding the
Kyoto Protocol in his letter. Just last month the president's foreign
policy officials requested and received a delay in the resumed meeting
of the parties to the Rio Climate Treaty, previously scheduled for May
2001. The State Department requested this delay because, it told other
countries, the Administration was conducting a comprehensive review of
climate change policy that could not be completed by the May meeting.
How is that need for a thorough review to be squared with the
president's apparently definitive denunciation of the Kyoto agreement
in his letter? Granted, in this case, his statements are consistent
with views he expressed on the campaign trail. But why not await the
review he has promised before reaffirming views he formed without
benefit of such an analysis? The president says the Kyoto agreement
would ``cause serious harm to the U.S. economy.'' What analyses did he
review in reaching this conclusion? The previous Administration
published analyses concluding that compliance with the agreement would
have less than a 1 percent impact on forecasted GDP, equivalent to
adding no more than a month or two to a 10-year forecast for achieving
a vastly increased level of wealth in this country. The president may
well disagree with the previous Administration's analysis but on what
basis? Wouldn't he and the American public be benefited by preparation
of the best objective analysis that the new Administration is capable
of producing? Why the hurry to issue the verdict before hearing the
evidence?
The other thing the president had to say about the Kyoto agreement
was that it was unfair because it does not establish the same reduction
targets for China and India as for the United States. In my opinion,
this is a shameful statement. Consider that the U.S. and other
developed countries are among the wealthiest nations on earth and that
they have put into the atmosphere about 75 percent of the carbon
dioxide that has accumulated since the start of the industrial
revolution 150 years ago. Consider also the relative economic ability
of the U.S., India, and China to take the first steps in demonstrating
that we can fight global warming. The mortality rate for children under
5 years old in India is 13 times higher than in the U.S.; China's
mortality rate for these children is 6 times higher than ours. In
India, close to half the population attempts to survive on less than $1
per day; in China, one in five people lives on this level. Consider
electricity consumption: the average American uses more electricity in
a day than the average person in India uses in a month; compared to
China the average American uses more electricity in a month than a
Chinese person uses in 15 months.
For the president to demand that India and China make equal
commitments to control carbon dioxide as a condition for the U.S. to
take a first step along with other wealthy nations, flies in the face
of Americans' vision of our country as a compassionate and responsible
world citizen. America's heart is bigger than this. The president spoke
of compassion during the campaign and I have to believe his heart is
bigger than this too.
There is a practical point to be made here as well. China and India
are important nations to engage in global strategies to fight climate
change. The U.S. certainly needs a strategy to break down barriers with
these countries and produce a more cooperative basis for discussion of
all countries' global warming responsibilities over time. But what
possible strategy could underlie the President's decision to single out
China and India for criticism in his letter? Did Secretary of State
Powell advise that this would be helpful in moving those two countries
to a position that is less contentious on this issue? That seems
unlikely.
NRDC hopes the president actually will evaluate and reevaluate his
positions on carbon dioxide from power plants and the Kyoto agreement,
rather than flatly reversing one position and restating the other with
no current analysis to inform his decisions. If he does so, he could
rebuild some badly needed bridges that are now in flames.
iii. the clean air act's dual-track air quality strategy
Now I want to turn to the role of new source review under the Clean
Air Act. Members who read my testimony before this subcommittee in
February, 2000, will find this material familiar, since I repeat in
this section, what I said at that time.
In 1970 Congress adopted a dual-track program to protect and
enhance our nation's air quality. The first program calls on States to
adopt comprehensive pollution control programs under State law to
achieve air quality objectives set forth in National Ambient Air
Quality Standards (NAAQS) adopted by EPA. This ambient program is an
example of the ``assimilative capacity'' approach to environmental
management-based on the belief that the environment can assimilate a
certain amount of dirt or toxins released from human activities without
causing identifiable harm. This approach starts by identifying exposure
levels of pollution that current research indicates may be tolerable
for humans and ecosystems and then seeks to reduce emissions from
pollution sources enough to meet the maximum tolerable exposure
targets.
The 1970 Act's ambient management program strengthened previous
efforts enacted by Congress in the 1960's and relied on States to set
control rules for pollution sources at levels just tough enough to
bring total pollution down to the level of the national ambient
standards. Implicit in this approach is that an area's air quality
determines the amount of clean-up required of sources. Even if there
are readily available means of reducing a source's pollution, a State
is not required to adopt such measures if not needed to meet the NAAQS.
But Congress did not rely exclusively on the assimilative approach
to air quality protection in the 1970 Act. Congress adopted another
strategy designed to minimize air pollution by requiring sources to
meet emission performance standards based on modern ``best practices''
in pollution abatement. The performance standard approach does not set
required levels of control based on the air quality conditions of
particular areas. Rather, the required emission reductions are
determined by assessing how much polluting processes can be cleaned up,
taking account of technical and economic constraints.
Congress expected that future ambient goals would likely be more
ambitious than 1970's defined goals and wanted an independent program
that would be effective in reducing total emissions over time.
Congress' intent in the performance standard program was to use the
force of new purchases and investments to incorporate advances in
pollution prevention and control as a complementary strategy to the
ambient management program.
Congress applied the performance standard approach to both
stationary and mobile sources but with some important distinctions. In
the mobile source area (cars, trucks, buses), only entirely new
vehicles were subject to federally established modern performance
standards. Congress was presented with analyses demonstrating that with
traditional rates of ``fleet turnover,'' most of the benefits of
tighter new car standards would be experienced in less than 10 years.
In requiring performance standards for stationary sources, Congress
adopted more sweeping provisions. The Act requires that both new and
modified stationary sources must meet modern performance standards.
Congress in 1970 also adopted a very expansive definition of
``modification,'' to assure that environmental performance would
improve as investments were made.
The 1970 Act's principal tool for improved pollution control for
new and modified sources was the New Source Performance Standard
(NSPS), a national, categorical requirement based on very good, but not
the best, pollution minimizing practices. In 1977, when the Act was
amended, Congress adopted the new source review (NSR) and prevention of
significant deterioration (PSD) programs to strengthen efforts to
minimize emissions and air quality impacts from new and modified
sources. \1\ In the 1977 Amendments Congress expanded both the scope of
the rigor of the requirements for improved performance from new and
modified sources. Coverage would no longer be limited to the categories
for which EPA had adopted NSPS requirements; rather all new and
modified sources above certain pollution tonnage thresholds would be
required to minimize their emissions. Second, the level of the
performance requirement would not be tied to often out-of-date NSPS;
rather case-by-case determinations of current best performance would be
required. Third, covered sources locating in clean areas as well as
dirty areas would have to pass ambient impact tests to prevent a
worsening of air quality. In 1990, Congress again increased its
emphasis on pollution prevention from new and modified sources,
reducing the size thresholds for coverage in badly polluted areas.
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\1\For simplicity, for this testimony I will refer to these
programs generally as NSR. 2 Chevron, U.S.A., Inc. v. NRDC, 467 U.S.
837 (1984).
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In sum, Congress has repeatedly endorsed the concept of modern
performance standards for new and modified pollution sources, adopting,
in successive amendments, strengthened requirements intended to make
the NSR programs more effective in reducing pollution.
However, these programs have for 20 years been the subject of
criticism from industry representatives and from many academic
economists. The economists' argument runs, ``why should new sources be
regulated more strictly than existing sources? After all, air quality
is determined by how much pollution is released and where it is
released. The air certainly cannot tell the difference between a pound
of pollution from a plant built in 1965 and that from a plant built in
1995.''
Critics of the Act's new source requirements argue that instead of
regulating new and old sources differently, we should simply establish
our desired air quality objectives and allow them to be met by the most
efficient means. Under this approach, agencies first would do research
to identify the adverse effects of air pollution on health and welfare;
next, agencies would convert this research into environmental
standards; then, the agencies would design pollution control programs
to achieve the environmental standards; finally, agencies and pollution
sources would implement the pollution control programs and the air
would become cleaner.
This critique and prescription has a certain superficial appeal. As
I have mentioned, the ambient management program has been a central
program of the Clean Air Act since 1970 and it should continue. The
question is whether it is prudent to rely on the ambient standards
approach as the only strategy for improving and protecting air quality.
In my view that would be a mistake.
The 1970 and later Clean Air Acts reflect a judgment by Congress
that the ambient standards approach should be the major pollution
control strategy but that it should be complemented by other
independently functioning programs such as the NSR and Mobile Source
Emission Standards programs. I think that this judgment was a wise one.
The history of air pollution control efforts both before and after the
1970 Act reveals that the ambient standards approach, while
conceptually sound, has its weak spots, which when exploited by well-
organized opposition, can prevent the program from solving air quality
problems in a timely fashion.
First, the Government's capacity to acquire unambiguous information
about natural processes is very limited. The research is complex,
expensive, and time consuming. Due to perennial shortages of money,
talent, and time, most of the studies undertaken in the past and those
being conducted now are less than perfect. As a result, their
conclusions are easy to pick apart and dismiss as not dispositive.
Moreover, the health effects we are concerned about are increasingly
related to chronic exposures to low levels of combinations of
pollutants. We have never conducted an adequate study to characterize
the effects from these kinds of exposures and none is even planned.
The uncertainties in what we know about air pollution effects in
turn lead to controversy and delay in establishing environmental
standards. All of us, including this committee, have experienced this
controversy in the continuing disputes about EPA's revised ozone and
particulate standards.
The next step in the process--control program design--can also be
affected. Different interests argue at length about how emissions in a
particular location relate to air quality in that location or
elsewhere. This can and has led to uncertainty, controversy and delay
in designing pollution reduction programs to meet environmental
standards. The continuing fights over efforts to address transported
air pollution are an example of this problem.
Another weak spot in the ambient standards abatement program is
that it often requires large changes in established patterns of
behavior. When an air pollution control agency adopts a regulation that
applies to an existing source it is trying to get firms to spend their
money, time, and thought in ways they have not planned. Not
surprisingly, these firms often resist, which leads to uncertainty,
controversy and delay in the final step of the ambient standards
approach, the actual implementation of pollution reduction measures in
the real world.
This resistance to change often feeds back to the first step in the
ambient standards process, setting the standards themselves. Pressure
is mounted to weaken existing standards and to oppose the setting of
new ones. Again, the unified fight of industrial polluters against the
revision of the ozone and particulate standards highlights this
problem.
These weaknesses do not call for abandoning the ambient standards
approach. But they do suggest the wisdom of complementing that approach
with programs that are strong where the ambient approach is weak. The
Act's NSR programs meet that need. Implemented properly, these programs
can assure that as new well-controlled sources replace old ones, we
will make progress in reducing emissions as our economy grows. By
controlling the major pollutants, the new source programs also serve as
a hedge against unidentified risks associated with those pollutants. By
dealing with engineering facts rather than biological facts, the new
source programs usually involve more manageable factual controversies.
We are relatively good at measuring the dollar costs of meeting
performance standards and calculating the emission reductions such
standards can provide. Finally, by focusing on new and modified
sources, the new source programs can lessen the social and political
costs of reducing pollution. Because they operate at the time firms are
making new investments, these programs allow firms to plan pollution
prevention and control into their plant operations.
All of this does not argue that the new source programs should
replace the ambient program, only that they should complement that
program. For the new source programs have weaknesses in areas where the
ambient program performs better. The new source programs focus on the
highly technical details of engineering and thus are too insulated from
effective public participation. Controlling pollution only from new
sources often is not the cheapest way to achieve a unit of emissions
reduction. In my view, the premium we pay to accomplish reductions
where the ambient program has failed to deliver them is a prudent
investment, but controls on new and modified sources should not be our
only program. Finally, new source programs, because they are technology
based, do not guarantee a desirable level of environmental quality. We
will degrade our air quality unless we improve pollution reducing
methods and processes at least as fast as we grow. The new source
programs do not create adequate incentives for such improvements and
thus must be complemented by the ambient standards and PSD programs
which do recognize that clean air is a scarce resource.
In sum, the Clean Air Act's dual track approach to air quality
management employs the principle of diversification to reduce risks. In
an uncertain world, a prudent investor will forego putting all her
money into the one stock with the apparent highest yield. Instead she
will spread her risk by selecting a range of investments-some which
offer high risk and high yield and others which offer less risk and
less yield. Similarly, the Act resembles a stable ecosystem which has a
diversity of species. Such systems are much less likely to fail in the
face of adversity than systems that have no diversity.
IV. How Should EPA's NSR Programs be ``Reformed''?
NRDC has participated over the last decade in stakeholder
discussions convened by EPA to consider ways to improve the Act's NSR
programs. A major reason these talks have made little progress is the
lack of agreement on the purposes of these programs. There are two
major purposes: to assure that new investments do not degrade air
quality and to assure that when new investments are made, emissions are
minimized by requiring sources to meet performance standards that
reflect modern emission prevention capabilities.
While a great deal of attention has been paid to the complexity of
the NSR permitting process, the larger environmental failure of the NSR
program is that the program has not brought down emissions as Congress
intended. Citizens, pollution control agencies, and Members of Congress
are increasingly aware of the fact that grandfathered air pollution
sources are more and more the central impediment to clean air progress.
Contrary to the intent of Congress, investments in new production have
not resulted in existing grandfathered sources being replaced by
facilities that must meet modern performance standards. As a result,
grandfathered sources dominate the pollution inventory throughout the
United States.
The degree to which old stationary sources determine our nation's
burden of air pollution is striking, especially when compared to the
impact of old cars on pollution loads. For example, fossil electric
powerplants built more than 20 years ago are responsible for 84 percent
of total U.S. nitrogen oxides (NOx) pollution from that sector and 88
percent of sulfur dioxide ( SOx). In contrast, 20-year-old cars
contribute less than 7 percent of U.S. car NOx pollution and 3 percent
of that sector's VOC (volatile organic compounds) pollution. It is
obvious that the Title II new mobile source program has done quite a
good job of preventing old cars from dominating today's pollution
problems but the Title I new stationary source program has performed
miserably on this score.
There are some obvious reasons for the NSR program's poor pollution
reduction performance. First, the rules themselves contain too many
loopholes that allow sources to avoid NSR even though they continue to
make significant investments year after year. Second, as recent
enforcement actions have alleged, there are many instances of firms
escaping the requirements of the rules by misclassifying projects in an
unlawful manner.
Reform of the NSR program should address its failure to produce
pollution reduction from old grandfathered sources as a priority issue
as well as explore ways to simplify the NSR process. A genuine reform
of the program should aim to make two basic changes: the program should
apply to more industrial projects than it now does and the review
process should be streamlined to enable decisions to be made quickly
while protecting the public's right to participate. Instead, the
``reform'' proposals EPA has published over the last decade have
concentrated almost entirely on changes that would expand the loopholes
of the current rules so that even fewer grandfathered sources would be
required to clean up as they upgraded their capital equipment.
The combination of categorical exemptions and exclusions, weak
rules for calculating emission increases, and broad provisions for
``netting out'' of review allow far too many sources to avoid the NSR
program indefinitely. When illegal evasions of the rules are added to
the many exemption opportunities in the rules, we get the results we
see-most sources never encounter the Federal NSR program and their
pollution remains with us. NRDC has filed lengthy comments with EPA on
these issues over the years and I will not burden the subcommittee with
a recitation of the details here. I would like to mention one area-that
of ``netting.'' Netting is the jargon for a transaction that allows new
projects at existing sources to escape NSR. In essence it allows the
source operator to count ``reductions'' from grandfathered pieces of
polluting equipment at the site in calculating whether a new project
will result in an emission increase that would require new source
review. By allowing sources to avoid the modern performance
requirements of NSR, netting preserves the status quo, perpetuating
excessively high levels of pollution originally emitted by poorly
controlled, grandfathered pollution sources.
Netting rewards sources that have managed to manipulate the current
system to preserve high levels of emissions. Current netting policy
allows those high emission levels to function as an asset that can be
deployed to avoid NSR/PSD review. Thus, netting operates at cross
purposes with sound air quality objectives. It creates incentives to
keep emissions at unnecessarily high levels and perpetuates an
inefficient allocation of emission ``shares'' by providing the greatest
rewards to the most polluting sources. Netting frustrates one of the
primary objectives of the NSR/PSD program, which is to link
requirements for modern emission performance standards to investments,
so that emissions are reduced as the economy expands. Instead, netting
allows existing emission levels to be perpetuated indefinitely.
While the netting rules are complex, the fundamental problem with
the approach is easy to understand. Netting allows a grandfathered
pollution source to ``bequeath'' its excessive pollution privileges to
its descendant, the new piece of equipment. Under netting, the new
piece of equipment is not required to meet modern performance
standards; it can emit at much higher levels by relying on the
pollution entitlements transferred from old, grandfathered pieces of
equipment. In this way, excessive amounts of pollution can live on long
after the original sources have disappeared. Netting resembles the
former hereditary peerage system in England, where membership in the
House of Lords and other privileges were handed down from generation to
generation. England recently acknowledged this system has no proper
place in a modern democracy. We too need to eliminate the pollution
peerage that is imbedded in EPA's netting rules.
For nonattainment NSR, the Supreme Court in Chevron made it clear
that EPA has the authority to eliminate the availability of netting
altogether.2 One perverse effect of netting in nonattainment NSR is
that new equipment is installed without meeting ``lowest achievable
emission rate'' (LAER) performance standards. This in turn means that a
greater level of emission reduction is required to offset the new
equipment's emissions than if the new equipment had met LAER standards.
These additional emission reductions must come from a finite pool of
existing emission sources whose total pollution load must be further
reduced for the area to attain the ambient standards. Thus, the effect
of NSR netting is to allow existing source owners to unilaterally
dedicate the cheapest and easiest emission reductions in a
nonattainment area to compensate for poorly controlled new units,
leaving State and local control agencies with the more difficult task
of developing an attainment plan from the more expensive, politically
controversial remaining emission reduction opportunities.
EPA's original defense of its 1981 change to allow netting under
the nonattainment NSR program was that areas choosing such an approach
would be required to develop timely attainment plans in any event so
that there would be no environmental harm. It is now the year 2000 and
EPA can no longer deny that the theory it presented to the Supreme
Court in the early 1980's has no basis in reality. In fact, areas have
not succeeded in developing timely and adequate attainment plans. State
and local agencies have protested repeatedly to EPA that they cannot
identify sufficient, politically feasible emission reductions to
demonstrate timely attainment. EPA has responded with policies that
have permitted lengthy delays in the submission of adequate plans.
Given that the premise for EPA's initial adoption of NSR netting in
1981 has not been achieved, it is time for nonattainment netting to be
abolished.
To restrict netting in the PSD NSR program, EPA should reform its
definition of contemporaneous so that only activities which are part of
the project for which the netting claim is made can qualify. Second,
EPA should reduce the netting credits available for shutting down or
limiting operations at existing units to reflect the obvious fact that
the new emission-increasing projects will have greater longevity than
the older existing units that are generating the netting credits. For
example, consider a source that proposes to build a 100-ton-per-year
new unit with a 35-year useful life and to net out the increase with
the shutdown of a 100-ton source that has only 5 years of life
remaining. The stream of emission reductions from the shutdown source
ends after 5 years but the emission increases from the new source
continue for an additional 30 years. There clearly is an enormous
increase in the cumulative emissions from the facility over the life of
the new project that is not captured if netting credits are given for
the shutdown unit based only on a comparison one year's emissions.
v. new source review and energy facilities
Over the last year, as we have experienced high prices and
shortages in some energy markets, the cry has been raised that
permitting requirements, including the Act's NSR requirements, are
preventing construction of needed facilities. These are not new claims.
They are raised whenever the basic fact that energy is a scarce
resource makes its way on to the evening news. So we see repeated
references to the fact that California ``has not built a major power
plant in a decade'' and the claim that permitting requirements are the
reason. As NRDC's attached fact sheet points out, the claim is wrong.
Power plant construction slowed to a trickle in California in the
1990's not because of permitting requirements but because private
investors first did not forecast enough demand to be assured of returns
that would beat other uses for their money; then uncertainties created
by the development of a deregulated electricity market caused further
hesitation. A review of California's permitting files demonstrates that
nearly all power plant projects were approved and without significant
delays. The fact is, had there been no permitting requirements at all
in California during the 1990's, private investors still did not have
adequate market incentives to spend money building new plants.
However, in this Congress bills have been introduced that would
carve gaping exemptions for from NSR requirements for new and modified
power plants. For example, S. 60 and similar provisions in S. 389,
Senator Murkowski's energy bill, would exempt from NSR and from any
additional emission regulation, projects at new or existing coal-fired
power plants. While these exemptions are labeled ``credit for emission
reduction'' or ``clean-coal'' projects, in fact the legislation does
not require emissions to be reduced as a condition for eligibility. The
eligibility criteria are so broadly drafted that virtually any
expansion project at an existing plant or any new coal plant could be
built with an exemption from NSR and a prohibition of coverage by new
pollution control requirements, such as future rules for mercury
controls or rules to reduce nitrogen oxides to address regional smog
problems. A detailed analysis of S. 60's exemptions, which applies as
well to similar provisions in S. 389, is attached.
In truth, these efforts to repeal Clean Air Act safeguards are
short-sighted and counterproductive to the goal of increasing public
acceptance of new energy projects. While the nation's energy concerns
continue to be a convenient excuse for attacking environmental
permitting requirements, with the ``NIMBY syndrome'' derided as a
telltale symptom of our ills, the fact is, people want nearby plants to
be as clean as possible and want the chance to participate in location
decisions. Weakening the Clean Air Act would increase anxiety and
opposition to new projects, not lessen it.
As you consider this issue I would encourage each member of the
subcommittee to ask, ``how close is the nearest large fossil fuel
generating station to my home-1 mile away, 2, 5, 10?'' Suppose a new
station was proposed less than a mile from your home; how would you
talk about it in your own kitchen or living room? Would you like the
opportunity to ask questions about the design, performance, scale, and
perhaps even the location of the project? Would you like a public
process that your neighbors could join in? Would you like the right to
get answers from the approval authorities? Would you like some recourse
if officials ignored your questions and suggestions for improvement of
the project? Other Americans want these same safeguards and they
deserve better than to be labeled ``NIMBY.''
The path to harmonizing clean air and energy goals is not down the
road of exemptions from safeguards. The right path involves adopting
comprehensive integrated programs to clean up existing polluting power
plants and improving current new source programs so that they more
reliably and efficiently assure citizens that expanded energy supplies
can be achieved without degrading environmental quality. Mr. Chairman
and members of the subcommittee, NRDC would be happy to work with you
to move down this path. Thank you for the opportunity to present these
views and I am happy to answer any questions you may have.
__________
Statement of Olon Plunk, Vice President, Environmental Services, Xcel
Energy Inc.
Mr. Chairman and members of the committee, my name is Olon Plunk. I
am Vice President for Environmental Services of Xcel Energy Inc. Xcel
Energy is a public utility holding company headquartered in
Minneapolis, Minnesota. Its regulated subsidiaries have the capacity to
generate over 15,000 MW of electricity from coal, natural gas, nuclear
and renewable power facilities. Xcel Energy has operations in 12 States
and serves over 3.1 million customers.
Today, I am testifying regarding some of Xcel Energy's experiences
with EPA's implementation of the Clean Air Act. I am also here to
express my support for alternative approaches to the current air
quality regulatory scheme. Xcel Energy believes that the current
regulations and EPA's implementation of them stand in the way of the
efforts that will be necessary to ensure that the country will have an
adequate, reliable, and reasonably priced supply of energy.
Xcel Energy has experience with the electricity challenges
affecting the West. We serve most of Colorado and all of the Denver
metropolitan area. Metropolitan Denver, as you know, is one of the
fastest growing cities in the country. During the course of the last
several years, Xcel Energy has embarked on an effort to build or
acquire more electric generating capacity to meet the region's growing
energy demands. As a result of this new capacity, we have been able to
avoid the power shortages that have had such a devastating impact on
California.
However, because of air quality regulation, our resource
acquisition efforts have not always gone smoothly. Our CEO, Wayne
Brunetti, previously appeared before this subcommittee and described
some of the problems presented to us by the new source permitting
requirements of the Clean Air Act. For example, in early 2000, we were
struggling to obtain a Prevention of Significant Deterioration permit
for a new gas-fired ``combined cycle'' unit at our Fort St. Vrain
facility located in Platteville, Colorado. The permit that we proposed
would have used the cleanest low-NOx combustion technology available.
Despite this fact, EPA demanded that we install additional, expensive
emission controls at the facility. We suggested a different approach:
In the Denver metropolitan area, approximately 50 miles from the Fort
St. Vrain facility, we operate an existing coal-fired facility that has
significantly higher NOx emissions than the new gas turbine. We offered
to install new burners on this coal-fired plant that would have reduced
its NOx emissions by a significantly greater amount--and at
significantly less cost--than EPA's preferred controls on the new gas-
fired Fort St. Vrain unit. Moreover, these reductions would have
occurred in the Denver metropolitan area rather than far from the city
on Colorado's eastern plains. Both the State of Colorado and members of
the environmental community supported this proposal.
Unfortunately, EPA did not. Although some EPA managers expressed
great interest in the idea, EPA ultimately stopped it because, in EPA's
words, it was contrary to ``the integrity of the PSD program.'' EPA
threatened to bring an enforcement action if the State issued a permit
to the new Fort St. Vrain unit based on our proposal. Because of our
customers' great need for this additional generating capacity, we could
not risk the possibility that an EPA enforcement action would prevent
or delay construction of the plant. We agreed to install EPA's
preferred emission control technology to reduce approximately 200 tons
of nitrogen oxides per year at Fort St. Vrain at a total cost of $2.3
million--approximately one half of the environmental benefit at
substantially greater cost than the approach that EPA rejected.
In 2000, we were also engaged in litigation with EPA over a
somewhat different permitting issue. Under Colorado's resource
acquisition process, Xcel Energy purchases most of the new generating
capacity needed to meet its customer demands from independent power
producers. These independent entities are responsible for building and
operating the new facilities. Their only relationship to Xcel Energy is
a power purchase agreement. Although the independent power producers
are at most contractors of Xcel Energy, EPA in late 1999 ruled that
their facilities were single sources with (and therefore modifications
of) existing Xcel Energy power plants located a few miles away. Because
of our concerns about the effect of this ruling on our ability to
acquire the generating resources necessary to meet customer demands, we
challenged the ruling in the 10th Circuit Court of Appeals.
Regrettably, the 10th Circuit never reached the merits of our
challenge. Notwithstanding the fact that EPA's ruling was issued under
threat of sanctions against the State of Colorado and immediately
became the settled law controlling hundreds of millions of dollars of
investment in new generating plants, the court found that EPA's ruling
was not final agency action and therefore not ripe for review.
Fortunately for our company and the people of Colorado, EPA's
ruling did not prevent the construction of the new power plants
necessary to meet our needs at this time. However, EPA's ruling did
prevent some of the plants from locating close to one another near
existing transmission capacity. Thus, EPA's ruling has had the effect
of separating new power plants from one another and forcing the
construction of new transmission lines. The committee is undoubtedly
aware that transmission capacity is an important factor in the ability
of utilities such as Xcel Energy to meet customer energy demands.
In sharp contrast to our experience with EPA, we have found that,
working with the State of Colorado, we have been able to achieve great
environmental progress at much lower cost by focusing on flexibility
and certainty. As Mr. Brunetti told you last year, Xcel Energy operates
three coal-fired power plants in the Denver metropolitan area. In 1997,
after much study of different alternatives, we proposed a voluntary
emission reduction program to reduce substantially the sulfur dioxide
and nitrogen oxide emissions from those plants. For sulfur dioxide, we
proposed to reduce uncontrolled emissions by 70 percent.
We worked closely with the Colorado environmental community and a
diverse group of stakeholders to develop and pass legislation that
would allow our proposal to become a reality. That legislation
encourages the Colorado Air Pollution Control Division to enter into
flexible voluntary emission reduction agreements with stationary
sources. It grants such sources a period of ``regulatory assurance''
during which they will not be subject to additional State regulatory
requirements. The act also ensures that regulated utilities (such as
Xcel Energy) can recover the costs of the new emission controls from
their customers.
In July 1998, Colorado and Xcel Energy's operating subsidiary
entered into an agreement to implement our proposed Denver emission
reduction program. Unlike traditional command and control approaches,
the agreement allowed us to define the most cost-effective way to
reduce emissions from the plants. The agreement grants the company
flexibility in complying with its requirements--through annual
emissions averages, flexible tonnage caps and trading of emissions
between the different plants. It grants us certainty by ensuring that
the plants will not be subject to new or different State requirements
for a period of 15 years. Finally, it assures that we can recover the
costs of these controls in a way that does not put the plants at a
competitive disadvantage. As a result of this agreement, Xcel Energy
will make dramatic reductions in emissions from these power plants--
reductions that are far greater than would have been achieved through
traditional air quality regulation.
The success of this plan was the result of a great deal of hard
work by a broad range of parties. We do not believe that, under the
current Clean Air Act, we could have reached such an environmentally
beneficial result by working solely with EPA. This plan became a
reality largely because of the leadership of the State of Colorado.
From our experience working with these issues and struggling to
meet energy demands in Colorado, we have learned several things about
the kinds of reform that would help the West and the nation resolve the
current electricity crisis and prevent its recurrence:
First, the tremendous growth in energy demand in the
country requires utilities to develop new power plants and maintain
their existing facilities. In order to protect the air while allowing
for the permitting, construction and maintenance of power plants, Clean
Air Act regulations must become more flexible. We believe that the
history of the Title IV Acid Rain program demonstrates that broad-based
emissions trading programs are more effective and less costly than
EPA's traditional plant-by-plant command and control approach. Our own
experience in the Denver metropolitan area is proof that the right kind
of flexibility creates the conditions that lead to an enhanced
environment and cleaner, cheaper power.
Second, and of at least equal importance, the Clean Air
Act should provide plant owners with greater certainty in building and
maintaining these existing generating plants. This certainty must allow
owners of existing plants to maintain their facilities and improve
their efficiency without fear that these efforts will be challenged by
an EPA enforcement action for alleged violations of the New Source
Review rules. They must also allow plant owners to plan rationally and
flexibly for the emission reduction requirements that will be
associated with their operations for the life of their facilities.
Finally, the Clean Air Act should recognize that States
are uniquely situated to address the concerns of local air quality. We
believe that our experience in Colorado demonstrates that States are
willing and able to think creatively about Clean Air Act issues and
find innovative solutions. Congress should be responsible for setting
the broad agenda and national goals for the nation's air quality
program. States should implement that agenda and those goals creatively
at the local level--without unnecessary interference by EPA.
Mr. Chairman, any discussion of a reconciliation of our nation's
clean air and energy policies would remain incomplete if we did not
discuss the role of nuclear energy. As you and other members of the
subcommittee well know, nuclear energy has been, and will for some time
continue to be, the largest single source of emissions-free, base-load
electricity. In 2000, nuclear powered electricity plants set yet
another record in this country, generating 755 billion kilowatt hours
of electricity.
The role that nuclear energy plants have played in the avoidance of
air emissions is without question. Between 1973 and 1999, U.S. nuclear
power plants reduced cumulative emissions of nitrogen oxide and sulfur
dioxide by 31.6 million tons and 61.7 million tons, respectively. Over
the same period, the nation's nuclear plants reduced the cumulative
amount of carbon emissions by 2.61 billion tons.
The experience of Xcel Energy matches these industry-wide figures.
Approximately 30 percent of the electricity that our customers in
Minnesota use is generated by nuclear energy. If we were to replace our
two-unit Prairie Island facility with a new, state-of-the-art coal-
fired facility, we would need to find clean air credits that would
anticipate the emission of some 1,500 tons of sulfur dioxide, 4,000
tons of nitrogen oxide, 50-100 pounds of mercury and 9,000,000 tons of
carbon dioxide, annually.
Given the tremendous economic and environmental value of Prairie
Island to our company, we would not, in the normal course, be examining
issues related to its closure. However, as most of the members of the
subcommittee know, we are facing the very real prospect of prematurely
closing this plant due to the Federal Governments failure to meet its
1998 statutory and contractual obligation to manage the spent fuel
generated by the facility. We hope that this issue will also continue
to receive attention by Congress.
As Congress considers various multi-pollutant strategies for the
utility industry, these principles should serve as a valuable guide.
Xcel Energy believes that, if properly designed, such strategies could
achieve greater environmental progress at less cost than the current
regulatory program. By bringing flexibility and certainty to the
construction and operation of power plants, these strategies would also
play an important role in a comprehensive, effective and balanced
energy policy.
Mr. Chairman, I thank the committee for taking time to listen to me
today, and would be happy to answer any questions that you or the
members may have.
______
Responses by Olon Plunk to Additional Questions from Senator Lieberman
Question 1. Do you believe that CO2 reductions will be
required of your industry in the next decade?
Response. It is very difficult to predict whether CO2
reductions will be required of the utility industry in the next decade.
In order to impose a CO2 emission reduction program on the
utility or any other industry, the country must confront a wide range
of difficult scientific, economic and political issues, including the
following:
Any proposed CO2 emission reduction plan must
account for the uncertainty in the existing global climate change
models and research. A CO2 program will ultimately be judged
a success only ff.it is based on facts and sound science.
Unlike regulations addressing pollutants under the Clean
Air Act, a CO2 emission reduction plan has extraordinarily
broad implications for the American economy and its reliance on the
combustion of fossil fuels for the generation of electricity. An
improperly designed CO2 program could have a significant
impact on the reliability of the nation's electric energy supply and
consequently a devastating effect on the daily lives of our nation's
citizens.
As the Senate has already made clear in its consideration
of the Kyoto accords, a CO2 program could affect American
competitiveness if it imposes greater costs on our Nation than other
countries (especially countries like China in the developing world).
These issues make the creation of a CO2 reduction
program applicable to the utility industry a significant political and
economic challenge during the next 10 years.
Question 2. I sympathize with your desire for certainty and
flexibility. Some contend, however, that we should only proceed with
regulation of the first three pollutants. Would your business decisions
as a result of such comprehensive regulation differ if CO2
was or was not included?
Response. In most circumstances, the answer would be ``yes,'' but
that answer depends on the nature of the three and four pollutant
strategies under consideration. For example, if a proposed three
pollutant strategy would require-excessive and infeasible reductions in
mercury emissions, many existing power plants would be forced to shut
down--thus reducing significantly reducing carbon emissions. In that
case, my company might make the same business decisions apart from
whether CO2 were part of the program.
Regardless of whether three or four pollutants are included in a
comprehensive approach, Xcel Energy believes that the program should be
designed with the following principles in mind: (1) the program should
preserve fuel diversity and allow the continued use of coal-fired
generation as a necessary component of the nation's energy
infrastructure; (2) the program should be technically feasible; (3) for
every type of emissions covered by the program, the program should
allow both new and existing sources to use emission trading and other
flexible mechanisms; and (4) the program should provide the certainty
necessary for the industry to make rational investment decisions to
insure the reliability of the nation's energy supply during the next 15
to 20 years.
CLEAN AIR ACT OVERSIGHT ISSUES
----------
THURSDAY, APRIL 5, 2001
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Clean Air, Wetlands, Private Property, and
Nuclear Safety,
Washington DC.
The subcommittee met, pursuant to notice, at 9 a.m. in room
SD-406, Senate Dirksen Building, Hon. George V. Voinovich
(chairman of the subcommittee) presiding.
ENVIRONMENTAL REGULATIONS AND ENERGY POLICY
Present: Senators Voinovich, Inhofe, Lieberman, Carper, and
Clinton.
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH,
U.S. SENATOR FROM THE STATE OF OHIO
Senator Voinovich. The hearing will come to order. I would
like to explain in the beginning that we have two votes at
9:30, so we are going to try and stay here until about 9:40,
slip out and then come back as soon as soon as we can so that
we can continue the hearing. We apologize to the witnesses in
advance.
Today is our second hearing on the interaction of our
environmental regulations and the nation's energy policy. Two
weeks ago we held our first hearing in which we concentrated on
our utility issues.
Today, we will concentrate primarily on oil and gas issues.
We need to ensure a reliable and dependable fuel supply, while
continuing to improve public health and our environment. Today
we are too reliant on foreign sources of oil. In January, OPEC
decreased production by one million and a half barrels per day.
Two weeks ago they decreased production by an additional one
million barrels a day. That is two and a half million barrels
reduction since the beginning of this year.
Without the Saudis, we could be held hostage to the Middle
East and in deep trouble. The same Iraq that we are bombing is
selling us oil today.
Our reliance on foreign oil has increased from 1973. At
that time when we had our last real problem, we were 35 percent
reliant on foreign oil. Today, it is 56 percent. It is
projected to be 65 percent in the year 2020. We have a domestic
refining capacity problem. There have been no new refineries
built in the last 25 years. In fact, since 1983, 33 percent of
our refineries have closed. The average annual capacity rate of
those refineries is about 92 percent, while during peak demand
periods the capacity rate runs between 95 and 98 percent. So,
they are working at probably their top capacity.
The high capacity rate causes us to import more refined
products and leave us vulnerable to emergency shutdowns and
equipment failures at any of our larger refineries.
This problem will only get worse as our fleet of refineries
ages. As Linda Stunt said at our last hearing, we are a fossil
fuel based economy and we will be for the foreseeable future.
While I support alternative fuels, such as wind and solar,
we should continue research in those areas. But it is not
realistic that we can replace fossil fuels today or even
tomorrow. I think that is really important that we understand
that.
Too often those who emphasize alternatives fail to realize
that there is no way that alternatives can meet our energy
demands. Demand is increasing not only in our country, but also
worldwide. For example, China used to export oil. Today, they
import oil. The demand for oil in the world is growing.
On fuel for vehicles, we will continue to be petroleum
based. We heard testimony at the last hearing that hybrid
vehicles look promising. They are certainly on a shorter
timeframe than fuel cells. But hybrids are not quite there yet,
and the current technology still uses gasoline.
I met yesterday with Rick Waggoner, the President of
General Motors, who told me that the electric vehicle program
in California is not proving as feasible as many thought. The
problems there have increased with the electricity crisis that
they have in the State.
I am, however, in favor of alternative fuels for vehicles.
I think ethanol, for example, is very promising. In Ohio, 40
percent of the gasoline we use has an ethanol content to it.
Although we need to resolve the problem related to the Highway
Trust Fund. Many people are not aware of the fact that two and
a half cents from the ethanol tax goes into the General Fund of
the United States.
I think, particularly, Senator Inhofe, you will remember
last year we had a colloquy on the fact that we need to take
that two and a half cents and see if we can't get that money
put into the Highway Trust Fund. As more and more people use
ethanol, States are going to be impacted because that money is
not going into the Highway Trust Fund, but added to the General
Fund. I have talked with Senator Grassley about this.
At our last hearing, Senator Carper mentioned an experiment
in Delaware where they are mixing diesel fuel with soybean oil.
I understand in Oklahoma they are doing experiments making
ethanol from switchgrass. So, we need to broaden our fuel base.
For today, tomorrow and tomorrow we are still petroleum
dependent and we are going to have problems with price spikes
and supply disruptions. We need to address the price and supply
issues while continuing to improve the environment and public
health.
The question is: How do we harmonize our energy needs and
our environmental needs so that we come up with an energy
policy for this country? There are three main areas where
environmental regulations may be causing problems contributing
to fuel price spikes and shortages.
The first is the exploration and production of oil and gas,
which has led us to increase our foreign imports. The second is
during the refining process, environmental regulations are
partially responsible for no new refineries in 25 years and the
closure of over 75 refineries.
In addition, the constantly changing environmental
regulations and the enforcement practices of the EPA, in
particular the changing definitions under the New Source Review
Program have led to complications in producing refined
products. Because of the uncertainty of EPA's New Source Review
Program, people are refraining from essential maintain and
repair work which will only lead to more facility shutdowns in
the near future.
The program has also created a disincentive for installing
the latest pollution control devices and modernizing
facilities. Installing one piece of equipment can cause the
entire facility to trigger in NSR, which may not be financially
viably.
Third, the boutique fuel requirements across the country
and the inability to site new pipelines have caused additional
problems in getting fuel to the consumers. With our growing
dependence on natural gas, this problem is only to get worse.
Now, we had an FTC investigation last year. It is very
interesting; the report of the FTC got very little coverage in
the media. What did they say? Well, what they said is and at
that time, if you recall, it was alleged that there was price
gouging and price fixing in the Mid West.
The report is very valuable, and I want it entered into the
record today. I want to read a couple of quotes from it. ``The
current high capacity utilization rates in the oil refining
industry leave little room for error in predicting short run
demand. Unexpected demand for a certain oil product is
difficult to satisfy without reducing the supply of another oil
product. Unexpected supply problems can result in temporary
shortages across many oil products. Assuming that demand
continues to grow, occasional price spikes in various parts of
the country are likely unless refining capacity is increased
substantially.''
The FTC found no evidence ``of illegal collusion to reduce
output to raise prices. Rather each industry participant acted
unilaterally and followed individual profit maximization
strategies.''
The report found the primary causes were refinery
production problems, refinery turnarounds, unexpected refinery
disruptions and RFG phase two manufacturing problems, pipeline
disruptions and low inventories.
So, it went on. It concluded that the gasoline price spike
in the Midwest was short lived. Soon after prices spiked,
additional gasoline was produced and imported to the region and
prices dropped as quickly and dramatically as they had risen,
notwithstanding industry's ability to respond to the short-term
problems, the long-term refining imbalance in the United States
must be addressed or similar price spikes in the Midwest and
other regions of the country are likely.
I thought we got off to a good beginning in our last
hearing. We have some outstanding witnesses today. We are going
to get another perspective on it. I think the witnesses are
balanced. We try to do that so we just don't hear one side of
the story. I am looking forward to their testimony.
[The prepared statement of Senator Voinovich follows:]
Opening Statement of Hon. George V. Voinovich, U.S. Senator from the
State of Ohio
Today's hearing is our second in a series, ``Interaction of our
Environmental Regulations and the Nation's Energy Policy.'' Two weeks
ago, we held our first hearing in which we concentrated on utility
issues. Today will we concentrate primarily on oil and gas issues.
One of the great challenges facing our nation is the need to ensure
a reliable and dependable fuel supply while continuing to improve
public health and the environment. Accomplishing these goals without a
major disruption to our economy or our way of life will be a test to
our ingenuity and our resolve.
One of the first hurdles we need to surmount is our over-reliance
on foreign sources of oil. The extent that our reliance on foreign oil
has increased is astonishing. In 1973, during the Arab Oil Embargo, we
imported 35 percent of our oil. In the year 2000, that number had
climbed to 56 percent. It is estimated that at our present rate of
consumption, we will import 65 percent of our oil needs by the year
2020. Since OPEC has us ``over a barrel'' so to speak they are able to
turn the spigots on or off at their whim.
Twice already this year, OPEC has announced a decrease in oil
production by a combined total of 2.5 million barrels of oil per day.
This action has driven up prices at the pump in the U.S., much to the
consternation of many Americans. If not for the help and friendship of
the Saudis to minimize the oil cartel's production cuts, we would be in
deep trouble. However, it does not sit well with this Senator that
while our military is engaged with Saddam Hussein, he is selling us
oil.
One of the issues that we face which keeps our imports high is the
fact that we have a domestic refining capacity problem. There have been
no new refineries built in the last 25 years, and in fact since 1983 we
have lost 33 percent of our refineries. The average annual capacity
rate is 92 percent while during peak demand periods the capacity rate
runs between 95 percent and 98 percent. This high capacity rate causes
us to import more refined products and leaves us vulnerable to
emergency shutdowns and equipment failures at any of our larger
refineries. This problem will only get worse as our nation's refineries
age.
At our last hearing, Linda Stuntz said that we are a fossil fuel
based economy and we will be for the foreseeable future. I agree.
With regards to fuel for vehicles, the American and world auto-
markets will continue to be petroleum based. While demand for fuel oil
is increasing in our nation, it is also increasing worldwide. China,
for example has gone from a net exporter of petroleum to a net
importer. Having said that, I believe it is imperative that we continue
to conduct research into the use of alternative fuels for vehicles.
At our last hearing, we heard testimony about the potential that
hybrid vehicles posses. Hybrid vehicles are not quite ``there'' yet and
the current technologies still use some gasoline. Still, they are
certainly on a shorter timeframe than fuel cells. I met yesterday with
Rick Wagoner, the President of General Motors who told me that the
electric vehicle program in California is not proving feasible, and the
problems will only increase with the electricity crisis.
I also believe ethanol is a promising fuel source. In Ohio, 40
percent of our fuel contains ethanol. As an aside, I am still concerned
that we have not satisfactorily addressed the issue of allocating 2.5
cent-per-gallon ethanol fuel tax into the Highway Trust Fund instead of
the general treasury. In a colloquy during the MTBE debate last year
there was agreement to put the 2.5 cent ethanol tax into the Highway
Trust Fund rather than into general revenues. We need to resolve this
issue.
In addition to ethanol, we should look at other alternative fuels.
At our last hearing, Senator Carper mentioned an experiment in Delaware
where diesel fuel is mixed with soybean oil. I also understand that in
Oklahoma experiments are being conducted that make ethanol from switch
grass. All of these activities will help broaden our fuel base.
However, while I support the use of alternative fuels, too often
those who emphasize alternative fuels fail to realize that there is no
way that they can fully meet our current energy demands. We need to
address the price and supply issues while continuing to improve the
environment and public health. The question is how do we harmonize our
energy needs and our environmental needs to achieve a National Energy
Policy.
Therefore, today, we must deal in the reality that our nation is
still petroleum-dependent and we are going to have problems with price
spikes and supply disruptions. We have already discussed the role
foreign oil plays in such matters, but we need to explore how they are
affected by environmental laws and regulations here in the United
States.
There are three main areas where environmental regulations may be
causing problems contributing to fuel price spikes and shortages. The
first is the exploration and production of oil and gas which has led us
to increase our foreign imports.
The second can be traced to the refining process. Environmental
regulations are partially responsible for the fact that no new
refineries have been built in the last 25 years and that over 75
refineries have been closed in the same time-frame. In addition,
constantly changing environmental regulations and the enforcement
practices of the EPA in particular the changing definitions under the
New Source Review program have led to complications in producing
refined products.
Because of the uncertainty of the EPA's New Source Review Program,
companies are refraining from essential maintenance and repair work.
This will only lead to more facility shut downs in the near future. The
program has also created a disincentive for installing the latest
pollution control devices and modernizing facilities. Installing one
piece of equipment can cause an entire facility to trigger NSR, which
may not be financially viable.
Third, the boutique fuel requirements that are in random use across
the country and the inability to site new pipelines have caused
additional problems in getting fuel to consumers. With our growing
dependence on natural gas as an energy source, this problem is only
going to get worse.
FTC Investigation
Finally, I would like to say a few words about the Federal Trade
Commission investigation into alleged price gouging and price fixing in
the Midwest last year. They released their report last Friday. By a 5-0
decision, the FTC found no credible evidence of collusion or other
anti-competitive conduct by the oil industry in the causes of the
gasoline price spikes in local markets during the spring and summer of
2000.
But the Report itself is very valuable and I am going to enter it
into the record and read a few quotes from it. First:
``The current high capacity utilization rates in the oil refining
industry leave little room for error in predicting short-run
demand. Unexpected demand for a certain oil product is difficult to
satisfy without reducing the supply of another oil product, and
unexpected supply problems can result in temporary shortages across
many oil products. Assuming that demand continues to grow,
occasional price spikes in various parts of the country are likely
unless refining capacity is increased substantially.''
And: ``FTC staff found no evidence of illegal collusion to reduce
output or raise prices. Rather, each industry participant acted
unilaterally and followed individual profit-maximization
strategies.''
The report found that the primary causes were:
Refinery Production Problems (refinery turnarounds, unexpected
refinery disruptions, and RFG Phase II manufacturing problems),
Pipeline Disruptions, and Low Inventories.
The report found that the secondary problems were:
Unavailability of MTBE as a Substitute for ethanol in Chicago and
Milwaukee, Unocal Patents, waiver of RFG Phase II Requirements in St.
Louis, High Crude Oil Prices, Increase in Gasoline Demand, and Taxes.
The report concludes:
``The gasoline price spike in the Midwest was short-lived. Soon after
prices spiked, additional gasoline was produced and imported to the
region, and prices dropped as quickly and dramatically as they had
risen. Notwithstanding the industry's ability to respond to the
short-term problem, the long-term refining imbalance in the United
States must be addressed, or similar price spikes in the Midwest
and other regions of the country are likely.''
conclusion
I thought we got off to a good start at the last hearing and with
this hearing I hope to build on our findings.
There is no doubt that we are dealing with a national energy
crisis. The impact of this energy crisis is, and will continue to be,
of such a magnitude that I believe what this committee does this year
could have more sway over what happens to the U.S. economy and
America's pocket books than at any other time in U.S. history. I
maintain optimism that we will be able to deal with these issues in a
bipartisan manner. We have a distinguished group of witnesses this
morning and I look forward to their testimony.
I would now like to call on Senator Inhofe.
OPENING STATEMENT OF HON. JAMES M. INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. Thank you, Mr. Chairman.
By the way, the program that you referred to on the grass
is Oklahoma State University. In fact, the person who is
heading that up is the former United States Senator Henry
Bellmon from Oklahoma. He is very optimistic about that.
You know, so often we look at what might be out there in
the future, but our crisis is here now. In a recent report
entitled ``The U.S. Downstream: The EPA Takes Another Bite Out
of America's Fuel Supply,'' Merrill Lynch concluded that the
EPA's clean regulations ``will clearly have the impact of
reducing existing U.S. refinery capacity.''
Now, this is a problem. On this chart back on the price
spikes, if you start out with 100 percent refinery capacity,
which we have today, everything that is on here will have that
effect. Of course, the American people are very sensitive to
the cost of energy right now.
I think we as a nation need to rethink the manner in which
we approach regulation. We need to keep an open mind. We need
not to use some of the terms that we have heard such as ``sneak
attacks on the environment.''
In fact, the opposite is true. If we rethink regulation, we
can be in a better position in the future. We can find
ourselves in a place where we can have far greater
environmental protection and more reliable and diverse energy
sources.
The chairman talked about the problem that we have right
now in terms of our reliance upon other nations. I can't say
that this is a partisan thing because we have not had a
national energy policy. We first tried in the Reagan
Administration. He didn't do it. I thought surely when Bush
came in out of the oil patch that we would have one. We didn't
have one there either. We didn't have one during the Clinton
Administration. Now it is time that we do have one.
In fact, I can remember, and this happened in New York
State, Senator Clinton, when Don Hodel was Secretary of
Interior. He and I had a dog and pony show where we would go to
the consumption States and talk about how serious it was
because our reliance upon foreign oil at that time was
approaching 40 percent.
We were trying to approach it in reality for what it is as
a national security issue. Our reliance upon the Middle East
for our ability to fight a war is not in our nation's best
interest. We were not able to sell it back then, but I think
now, because of the events that have taken place people are
more sensitive to it.
I think when you look at the refineries, working at 100
percent capacity, it is going to be simultaneously hit with a
number of regulations in the next few years such as Tier II of
the sulfur-diesel rules and some of the rules and regulations
that have already been out there.
As many of you know, Senator Breaux and I recently sent a
letter to Vice President Cheney in his capacity as chairman of
the National Energy Policy Development Group that the EPA's New
Source Review Enforcement, its flawed and confusing policies
will continue to interfere with our nation's ability to meet
our energy and fuel needs.
I chaired this committee. We swapped committees not too
long ago. I chaired this committee. In the last 4 years we have
had hearings on New Source Review. We had one hearing out in
your State of Ohio. We heard testimony on some of the things.
It was really ludicrous. They would change one pipe and all of
a sudden that triggers a New Source Review. So, we need to have
common sense there.
Finally, there has been a lot of talk and negative press
about President Bush's decision on CO2. But the
press and environmentalists have neglected to give him any
credit for supporting a streamlined process, which will
significantly reduce mercury, which does have a health effect,
NOx, which is the precursor to ozone, and SO2, which
causes acid rain.
These are types of initiatives that we have to examine if
we as a nation are going to provide an energy supply and
protect human health and the environment. So, I think that it
is good that we are having this hearing. It is good that we are
having the types of witnesses that we have that can give us a
balance. I think that the timing is right, too, Mr. Chairman,
because everyone is sensitive because of the cost of energy
right now. I think maybe we are the ones who are going to be in
a position to do something about it in the long term.
So, thank you for having this hearing.
[The referenced document follows:]
March 23, 2001.
The Honorable Richard B. Cheney,
Vice President of the United States of America,
The White House,
1600 Pennsylvania Avenue, NW
Washington, DC. 20500.
Dear Mr. Vice President: In your capacity as the chairman of the
National Energy Policy Development Group, we are writing to bring to
your attention our concerns that, unless addressed, the prior
Administration's EPA's New Source Review (``NSR'') enforcement policies
will continue to interfere with our nation's ability to meet our energy
and fuel supply needs. We strongly urge that the Administration take
into account these concerns in developing its national energy plan.
As you are very much aware, the nation faces a potential energy
supply shortage of significant dimensions. The California energy crisis
is receiving the greatest attention in the media. However, major
challenges exist in meeting demands for gasoline and other fuels,
especially in the Midwest. More troubling, current projections suggest
fuel shortages and price spikes--far exceeding last year's problem.
These are due to a number of factors including: difficulties in making
summer-blend Phase II reformulated gasoline; EPA hurdles to expanding
refinery capacity; and the overall increase in energy demand.
Unless reviewed and addressed, EPA's implementation of NSR
permitting requirements will continue to thwart the nation's ability to
maintain and expand refinery capacity to meet fuel requirements. In
1998, EPA embarked on an overly aggressive initiative in which it
announced new interpretations of its NSR requirements that it has
applied retroactively to create a basis for alleging that actions by
electric utilities, refineries and other industrial sources taken over
the past 20 years should have been permitted under the Federal NSR
program. We also understand that these new interpretations conflict
with EPA's regulations, its own prior interpretations and actions, and
State permitting agency decisions.
EPA's actions have been premised heavily on its reinterpretation of
two elements of the NSR permitting requirements. First. EPA's
regulations specifically exempt ``routine maintenance, repair and
replacement'' activities from NSR permitting. EPA now claims that
projects required to be undertaken by utilities and refineries over
the past 20 years to maintain plants and a reliable supply of
electricity and fuels were not routine and thus should have gone
through the 18-month, costly NSR permitting process. EPA's enforcement
officials are asserting this even though, for more than two decades,
EPA staff have had full knowledge that these maintenance, repair and
replacement projects were not being permitted.
A second ground for many of EPA's claims has to do with whether
projects resulted in significant emissions increases. By employing a
discredited method for determining whether emissions increases would
result from a project-using so called ``potential emissions'' instead
of actual emissions, EPA is asserting that numerous projects resulted
in emission increases when in reality they had no effect on emissions
or were followed by emissions decreases.
EPA's NSR interpretations have created great uncertainty as to
whether protects long recognized to be excluded from NSR permitting can
be undertaken in the coming months to assure adequate and reliable
energy supplies. Electric utilities and refineries have expected that
they could undertake maintenance activities, modest plant expansions,
and efficiency improvements without going through lengthy and
extraordinarily costly NSR permitting, as long as the project involved
either routine maintenance or no significant increase in actual
emissions.
Now, in light of the new interpretations, utilities and refineries
find themselves in a position where they cannot undertake these very
desirable and important projects. This is not an acceptable result when
the Nation is faced with severe strains on existing facilities. Against
this backdrop, we strongly urge that the National Energy Policy
Development Group:
give investigation of EPA's implementation of its NSR
requirements a high priority;
suspend EPA's activities until such time as there has
been a thorough review of both the policy and its implications;
clarify whether the implications of EPA's new NSR
interpretations and its enforcement initiative are being reviewed by
the White House Office of Energy Policy and the Secretary of Energy
prior to actions that could undermine energy and fuel supply; and
establish guidelines to assure that EPA's application and
enforcement of its NSR requirements will not interfere with the
Administration's energy and fuel supply policy. Requirements should be
developed, which are consistent with responsible implementation of the
statutory NSR requirements.
Specifically, to assist you in assessing the implications of NSR on
meeting the nation's energy and fuel supply demands, you may want to
obtain the following: (1) all requests since January 1, 1998 for
information under section 114 of the Clean Air Act issued to facilities
and companies in any sector involved in energy and fuel supply; and (2)
notices of violation issued to, and complaints filed against, any such
company and/or facility alleging NSR violations during that period. We
are submitting a similar request to EPA today.
Thank you for your consideration of this matter. We look forward to
working with you in the future to develop environmental policy, which
further protects human health and the environment and works in concert
with sound energy policy.
Sincerely,
James M. Inhofe, U.S. Senator.
John Breaux, U.S. Senator.
Senator Voinovich. Thank you.
Senator Clinton?
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON,
U.S. SENATOR FROM THE STATE OF NEW YORK
Senator Clinton. Thank you, Mr. Chairman. I would like to
thank you and Senator Lieberman for holding this hearing today
on the future of our environmental and energy policies.
This is a continuation in a series of hearings and I really
applaud the committee leadership for bringing the environment
and energy together as we debate the important issues before
us.
I would like to submit my opening statement for the record
and take my time to introduce one of the witnesses who we will
be hearing from in just a minute. I would like to welcome both
witnesses, Dr. Hirsch and Eliot Spitzer, the New York Attorney
General.
Mr. Spitzer is someone who has adopted a very strong and
vigorous approach toward the issues that are within his
jurisdiction as our State's Attorney General. The environment
is at the top of that list.
Last month in Roessleville, New York, which is just
southwest of Albany, we co-chaired an environmental roundtable
where we had an in-depth discussion about many of the issues
that are within the jurisdiction of this committee. I thank him
for that discussion last month. I hope we can continue that and
perhaps even have some of our colleagues on the committee join.
Since becoming New York's 63d Attorney General in January
1999, General Spitzer has distinguished himself as a leader on
environmental protection, public safety, civil rights and
consumer affairs.
Most recently, he has helped lead the way in our State, and
I think around the nation, in coming with an action plan that I
hope he will explain to us, for a balanced electric power
policy in New York State.
It is that kind of forward thinking that has brought him to
fight to cut pollution causing acid rain and smog in our State,
to be on the forefront of pesticide issues and other important
public health and environmental issues.
I am delighted that the committee would invite the Attorney
General to address us and I thank you for having this important
hearing.
[The prepared statement of Senator Clinton follows:]
Senator Voinovich. Senator Lieberman.
OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN,
U.S. SENATOR FROM THE STATE OF CONNECTICUT
Senator Lieberman. Thank you, Mr. Chairman. It is a
pleasure to be working with you on these hearings. We are
dealing here with complicated but urgent questions. They can
benefit from exactly the kind of open discussion that we had at
our last hearing and I am sure we will have this morning.
As others have said, this is all about balance. We need to
have a reliable, cost efficient source of energy for our
country, but we also need to protect our environment. There are
increasingly those who say that we can't have both. Of course,
we believe very strongly that we can have both. The most
compelling evidence of that, I think, is the record of the
1990's when we had booming economic times and substantial
increases in the protection of our environment.
So, I was struck at the last hearing by one of the
witnesses who said energy efficiency gains are the second
largest source of energy in the United States, after petroleum.
It is a good construct with which to approach this. Obviously,
energy efficiency doesn't get us everything we want, but when
you think about it as a source of energy and one whose limits
are not yet known and clearly whose emissions are minimal to
zero, it is one to think a lot about.
So, I thank you, Mr. Chairman, as we hold these hearings,
hopefully, leading all of us to be part of a debate that is
coming in Congress about a national energy policy, but also
leading to a reauthorization and amendment of the Clean Air
Act.
I do want to make a brief note of one issue that is of
importance to my home State of Connecticut, and I know to New
York and other States. The Clean Air Act requires reformulated
gasoline to contain 2 percent oxygen, a requirement that is
satisfied, apparently, about 85 percent of the time by adding
the oxygenate, MTBE.
Last year the Blue Ribbon Panel on Oxygenates and Gasoline
found that between 5 and 10 percent of drinking water supplies
in high oxygenate use areas had detectable amounts of MTBE. The
odor, taste and possible health effects resulting from that
contamination have created a national movement for its
elimination.
In fact, in Connecticut, the legislature responded to
concerns last year about MTBE by banning use of the additive
effective in 2003.
I hope our witnesses will help us find a way to address
this concern while also protecting our air and our water.
I want to welcome Dr. Hirsch and Mr. Spitzer. I want to say
a special welcome to Attorney General Spitzer. I always loved
being in the company of Attorneys General. One of the hardest
transitions I had to make, Mr. Chairman, when I went from being
Attorney General of Connecticut to being a Senator was that no
one called me ``General'' any more.
So, General Spitzer, it is great to see you. You are truly
a general in the army of those who fight, as one of your
distinguished predecessors said, ``as the peoples' attorney''
for their best interests. It is good to have you here.
Senator Voinovich. Thank you, Senator Lieberman.
As I mentioned, I thought we did get off to a good start at
the last hearing. We are dealing, I think, with a national
energy crisis. It is unbelievable what is happening across the
country at this time. No one could have predicted it. We are
here with this energy crisis.
I believe that this crisis will continue to be of great
magnitude. I really believe that what this committee does this
year could have more sway over what happens to the U.S. economy
and America's pocketbooks than maybe at any time in the history
of this committee.
Recently, I spoke to the Winter Meeting of the Board of
Directors of the National Association of Manufacturers. I was
just overwhelmed with the anecdotal information that I got in
terms of what impact this energy crisis was having on
manufacturing in this country.
I can tell you, it is primarily the reason why we have a
recession today in Ohio, a deep recession that our State is
trying to grapple with in terms of providing services to the
citizens of our State.
I would ask that the statement of concern on energy supply
policies be inserted in the record from the National
Association of Manufacturers.
Senator Voinovich. I will say this: I maintain optimism
about the fact that we can work on this problem in a bipartisan
basis and a bicameral basis. Somehow, we can work together to
figure out how we can harmonize the needs of the environmental
and the energy needs and really make a wonderful gift to the
American people and that is, for once and for all, having a
energy policy.
We are lucky to have such great witnesses. We look forward
to hearing from General Spitzer and Dr. Hirsch. Without further
words, I would like to call on Mr. Hirsch to present his
testimony. Thank you for being here.
STATEMENT OF ROBERT HIRSCH, BOARD OF DIRECTORS, ANNAPOLIS
CENTER, AND CHAIR OF THE NAS ENERGY AND ENVIRONMENT BOARD
Mr. Hirsch. Thank you, Mr. Chairman, and distinguished
Members.
I am Dr. Robert Hirsch. I am a member of the Board of the
Annapolis Center for Science-Based Public Policy, which is a
nonpartisan, not-for-profit study group. I am also chairman of
the Board of Energy and Environmental Systems at the National
Academies and I am a Senior Energy Analyst at the RAND
Corporation. I21My experience is in energy technology
management and analysis in both government and industry. I have
been involved in a number of different areas of energy
technology. The views this morning are my own and do not
necessarily reflect the positions of my three affiliations.
My messages to you today are as follows: One, we are
experiencing a new kind of energy crisis that has only begun
and we need to take decisive action.
Two, there is no silver bullet to solve our problems.
Three, the fundamental challenge, as has been indicated, is
to balance, balance, balance what we do about it.
Why do I call this a new kind of energy crisis? It is
because the problems are more complicated than an oil embargo
or a Gulf War. Our challenges involve many different aspects of
our very complex U.S. energy infrastructure.
Furthermore, I believe that our problems will take upwards
to a decade or more to fix. Why do I feel it will take so long?
It is because the problems are large in scale, large in number
and large in cost, and because we are simultaneously working,
as we should be, to reduce some of the remaining environmental,
health and safety risks associated with our energy system.
By now you have probably heard enough about the electricity
problems in California, the natural gas price spikes throughout
the country, the heating oil problems in the Northeast and the
gasoline problems in the Midwest. These problems were
predictable. Indeed, there were some unheeded warnings along
the way.
Part of the reason we are in such a pickle is that there is
no one in the Federal Government responsible for the well being
of the U.S. energy system, no one with the authority,
responsibility and respect to warn us when potentially
significant problems begin to rear their ugly head. The
Department of Energy is responsible for nuclear weapons,
environmental cleanup and almost incidentally, energy. FERC is
responsible for regulating various elements of interstate
energy flows. EPA is responsible for environmental care, and
the States are responsible for energy matters within their
borders. The energy goose has been laying golden eggs for so
long that energy is off the radar screen or at least has been
off the radar screen of most people until we have the
occasional trauma.
Right now we are seeing a number of traumas simultaneously,
and there is reason to believe that there are more to come. For
instance, as has already been mentioned here, our refineries
are running near 100 percent capacity and we have been slowly
increasing our imports of refined products, adding yet another
dependence on foreign sources.
No new refineries have been built in this country since the
1970's, and a number have been shut down. Furthermore, we are
in the process of phasing out an important gasoline additive,
MTBE, an action that will further reduce refinery production
rates at a time when demand is continuing to increase.
In addition, the EPA has mandated much lower levels of
sulfur in gasoline and diesel fuels, necessitating significant
new investments in refineries in the United States and offshore
to supply us with our increasing needs for fuels.
Refining is historically a low rate of return business. So
many companies are naturally reluctant to invest the vast sums
needed for the mandated changes. Am I suggesting that we reduce
our environmental goals? Absolutely not. In my opinion, we must
reduce sulfur levels in our fuels in order to further reduce
air pollution. I just wish we could accomplish our laudable
goals with less acrimony.
How about siting and building the new electric transmission
lines needed to deliver the higher levels of electric power
that people are demanding? That is a not-so-obvious problem in
California and in other places around the country.
As you may know, siting new transmission lines has
encountered interminable delays in many parts of the country
and threatens to choke off the higher power that people demand.
About natural gas pipelines and petroleum product
pipelines, both are problems in many areas. Permits for new
pipelines are tough to come by and land for right-of-ways is
increasingly expensive.
At a meeting in New Orleans 2 weeks ago, a major oil
company representative indicated that his company is using
drag-reducing agents in some of their pipelines because their
pipelines are operating at full capacity. With petroleum
product demands increasing, that indicates trouble ahead; and
the list continues.
If you want more electric power, you have to build more
electric power plants. Natural gas is clean and was very cheap
until recently. Over 90 percent of the planned new electric
power generation in the United States will be natural gas
fired. In one sense that is good because of the environmental
attractiveness of natural gas generators with exhaust gas
cleanup.
In another sense, it is troubling because the mushrooming
dependence on natural gas will make the country ever more
vulnerable to future natural gas disruptions and price spikes.
Analysts can run complicated models to tell you about
vulnerability, but it is really common sense. If you had, for
instance, all of your retirement money in the NASDAQ in the
last year, you would have some troubles. If you had all of your
money in bonds in the early 1990's, you would have missed some
good opportunities.
The answer isn't all gas or all coal or all nuclear or all
renewables. Each has its strengths and weaknesses. For
instance, many people don't realize that for larger power loads
the popular renewables are simply fuel savers for other power
plants. So, their ultimate contribution to U.S. energy needs
will be limited, even after their prices and their costs come
down.
Energy efficiency is extremely important and must be part
of the equation. However, making a major difference, a major
national difference in energy usage would require much higher
energy prices to motivate people to buy more efficient
appliances, cars, et cetera, or there would have to be heavy
Federal Government intervention, and it would still take a
decade or more to work out the problems.
Be wary of anyone who tries to sell you a silver bullet in
energy. There are none. A diversity of approaches is essential.
Where does all of this lead? To me, we need, as indicated,
a more balanced, a better-balanced approach. We need a
diversity of energy sources and energy efficiency if we are to
minimize our costs and our vulnerabilities. However, that would
require Federal intervention, which is not universally
welcomed.
Let us not forget energy research and development. Our
Federal investments at the Department of Energy and its
predecessor agencies have yielded very important technologies,
some of which are in use today and others are on the shelf,
ready to go when we need them.
Also, it may be that we need to be temporarily flexible in
some of our near term environmental goals to help us get back
on an even keel. They are doing that in California now. I, for
one, on the other hand, do not endorse permanently turning back
the clock on pollution reduction.
Finally, let us not be afraid to have open, honest dialog
on our options. Every one of them has advantages and
disadvantages. Let us discuss the options objectively and
strive to minimize the extremism and misinformation that so
often characterizes such discussion.
Let us put somebody in charge of overseeing our nation's
energy system. If it is to be the Secretary of Energy, let us
make that clear by law and give him or her the authority and
the budgets needed for the task.
Thank you.
Senator Voinovich. Thank you very much.
Attorney General Spitzer?
STATEMENT OF ELIOT SPITZER, ATTORNEY GENERAL STATE OF NEW YORK
Mr. Spitzer. Mr. Chairman, Senators Lieberman, Clinton and
Inhofe, thank you for those kind words. Thank you for inviting
me to testify before this subcommittee concerning the
interaction between our environmental regulations and our
nation's energy policy.
Let me be crystal clear: There need be no conflict between
environmental protection and a sound energy policy. Indeed,
careful attention to environmental and health protections will
enhance, not harm, our energy security.
Our energy supply must be reliable and affordable. I agree
that it must be expanded. However, it must not only be
superficially inexpensive, appearing cheap because of hidden
costs borne elsewhere.
An energy supply that is provided at the cost of harm to
the public health or the environment--imposing enormous, but
usually unquantified costs on the American public through
health care costs, lost productivity, premature mortality or
lost enjoyment of health or natural resources--is not in the
nation's best interests.
Proposals for such a policy will backfire. By contrast,
proposals for clean energy and energy conservation will garner
public support and confidence and provide the path to a
balanced energy future.
I urge you to work together, as we are trying to do in New
York, to move the country toward a balanced energy policy and
to reject the claim that environmental protections are the
cause of the energy squeeze we are seeing today. Environmental
protections are not the cause of, but part of the solution to
the energy challenge.
It was the lack of perceived demand, not environmental
regulations that led companies not to build new power plants
over the last decade. Indeed, many environmentalists support
new plants that if linked with strong efficiency programs will
take the place of our dirtiest existing plants.
My office investigated air pollution problems facing New
York. Neighboring States, in particular Connecticut and New
Jersey, joined in this. Asthma is on the rise in urban areas.
Indeed, pediatric asthma in New York City is two to five times
the national average and double what it was 20 years ago.
Numerous studies have shown that thousands of people in New
York alone and tens of thousands in the country die prematurely
due to particulate air pollution.
Over 20 percent of the lakes in the Adirondacks are dead,
so acidic that fish cannot survive in them. Without dramatic
additional reductions in air pollution, that figure will rise
to 40 percent within several decades.
Every summer, portions of the Long Island Sound bordering
New York and Connecticut and many other estuaries throughout
the country become eutrophic, so devoid of oxygen that fish
cannot survive.
New York's and our nation's cultural heritage, our
buildings and our monuments are corroding under onslaught of
acid rain. Mercury contaminates most of our waters, rendering
fish unsafe to eat and threatening human health. These harms of
pollution are quite real. They are not merely a matter of
environmental preferences. Asthma, premature mortality and
other respiratory diseases cost Americans billions of dollars
every year. The loss of recreational jobs, tourism and
commercial fishing, plus the increased expense of water
treatment, cost the nation billions every year. The loss of our
architectural history is priceless and it costs many millions
each year just to stem the destruction.
To address the harms caused by pollution, my office sued
the coal-fired power plants that are the source of much of this
air pollution. These lawsuits are premised on clear violations
of the New Source Review provisions of the Clean Air Act, which
required that old plants be upgraded to modern standards when
non-routine modifications are made.
These suits are based on well-settled interpretations of
statutes and regulations that date from the Reagan and first
Bush Administrations. The law is clear and industry documents
prove beyond any doubt that the industry understood the types
of investments at issue in this litigation were covered by the
statutes and regulations. Companies were evading the New Source
Review provisions and expanding or upgrading their plants
without installing the necessary pollution controls. Our
lawsuits simply seek to have these controls installed.
We filed notices of Intent to Sue against 17 coal-fired
electricity plants located in upwind States in September 1999.
You should know that we play fair in New York and do not only
pursue out-of-State sources. With the State Department of
Environmental Conservation, we also commenced enforcement
actions against eight coal-fired plants in New York.
Shortly after we filed our notices of intent, the Federal
Environmental Agency commenced legal action against a number of
coal-fired plants as well. A number of other northeastern
States joined our actions.
I should note that Governor Whitman, acting through her
appointed Attorney General, was very supportive of this effort.
We have now reached agreements in principle with two
companies, Virginia Electric Power Company and Cinergy
Corporation. These agreements will lead to enormous reductions
in the emissions from the coal-burning plants from these
companies. They will spend approximately $2.8 billion in
support of these emission control systems, an agreement they
entered voluntarily because they understood the weight of our
legal argument.
In addition, we are in active discussions with several of
the owners of several of New York's coal-fired plants.
In discussing resolution of these lawsuits with the
companies, we recognized the need to ensure the nation's energy
supply. We gave the companies significant time to install the
needed controls. These lawsuits will have absolutely no
detrimental effect on our energy supply. We ensured that the
upgrades could be implemented consistent with the operating and
financial needs and abilities of the companies.
We expect that pursuant to the settlements some facilities
will be repowered and expanded. Moreover, these settlements
provide the regulatory certainty these companies need to
invest. By providing clear guidelines for the future these
settlements delineate a path through the environmental laws,
allowing the companies to invest in their coal plants.
The result is to improve our energy diversity, increase our
energy supply and improve the environment, a win-win result.
These lawsuits are achieving major environmental improvements
while helping, and not in any way harming, our energy security.
For that reason, I disagree, respectfully but vehemently,
with the request by Senators Inhofe and Breaux that these cases
be suspended.
Indeed, it is the uncertainty created by the effort to
suspend the New Source Review program, not any uncertainty
created by the litigation, that is jeopardizing progress in
this area.
Senator Voinovich asked how to harmonize our environmental
and energy policies. We can harmonize these two critical needs
by addressing not only how much power we have available, but
how the power is generated.
We can achieve a sustainable energy portfolio by enacting
policies that promote clean, distributed generation, renewable
power, and energy efficiency and at the same time ensuring that
the necessary new supply can be brought on line promptly.
Recent studies demonstrate that even in northern States
such as New York solar power which is best generated on hot
summer days can already be cost effective in reducing peak
electricity demand which also comes on hot summer days.
We also have significant wind resources if the electricity
can be properly distributed. Finally, we can achieve
significant gains in energy efficiency even in New York, which
ranks second among the States for the most efficient use of
energy today.
One important way to achieve these gains is to implement as
soon as possible the appliance energy efficiency standards,
which the new Administration has put on hold. They are critical
to a sound energy policy.
If we were to improve efficiency by an achievable 10 to 20
percent, we would be solidly on the path to resolving the
energy challenge and we probably, just by that measure, would
go most of the way toward meeting even the most aggressive
climate change goals. Finally, we would reduce our dependence
on foreign fossil fuels.
In sum, the Clean Air Act, as well as other environmental
regulations, should not be viewed as hindering a sound energy
policy. The American people will not accept energy production
that poisons their air and their water, any more than they will
accept blackouts. Indeed, it is a false dichotomy to suggest
that people must choose one or the other. An environmentally
sound energy policy is the only sustainable future.
Fortunately, it is achievable if we demonstrate leadership and
foresight.
Thank you very much.
Senator Voinovich. Thank you, Attorney General Spitzer.
I would like to start off quickly. I do not want to debate
the issue of the lawsuits that we have. Frankly, I did not
expect that we would be getting testimony on it. I would like
to ask two questions, Attorney General Spitzer, that are
relevant because ``I am the Governor of Ohio.'' I am proud of
the fact that while I was Governor of our State that we did
achieve the current ambient air standards.
I would like to point out that New York is not in
attainment of the current ambient air standards. It is
interesting say, if they are not in current attainment, how are
they going to attain the new standards?
Second of all, more important that New York is expected to
have power outages this summer, at least brownouts and possibly
blackouts.
I understand the main problem for the city is an adequate
transmission capacity, not necessarily the generation problem.
In your opinion, are there any environmental impediments to
increasing the transmission capacity for New York? This is
going to be a big problem this summer for your State and
particularly for the city.
Mr. Spitzer. Let me address each of those questions. I
think they are very well framed questions. First, you are
correct, New York State has not complied with the attainment
standards. Part of the problem, even though it is not the
exclusive answer, is that we have an inflow of pollution from
out of State. That indeed was the rationale for our lawsuits.
I think it is very poignant that the power plants in Ohio
and elsewhere--and I don't say this to cast blame, but I think
it is just a fascinating fact--built smokestacks that were in
excess of 700-feet tall. The reason for that, and I think it
was a very wise policy by the energy companies because they
like to be good neighbors for those in the immediate vicinity
of the plants, was they do not want the emissions from their
plants to fall on their neighbors.
Unfortunately, what these smokestacks do is send the
emissions up into the air stream where they come down farther
to the east, which means New York, New Jersey and Connecticut,
which is precisely why we have such an overwhelming interest in
ensuring that the plants in the Midwest comply with the Clean
Air Act.
So, I think that yes, Ohio was to a certain extent able to
satisfy its statutory mandate----
Senator Voinovich. Not to a certain extent. We did achieve
it.
Mr. Spitzer. To a certain extent because it was able to
shift the burden eastward. I applaud you for caring enough to
reach and satisfy the attainment standards, however, I think
part of the reason you were able to do that is that we are now
caught with the very emissions that come from the Ohio plants
and that is the predicate for our lawsuit.
Senator Voinovich. We could close down our plants and you
would still have a problem in terms of achieving your emission
standards. I ought to get off this subject. It is one that I
have been dealing with for a long time.
How about the issue of transmissions?
Mr. Spitzer. I agree with you entirely about the T&D
systems. I applaud you, and I say this very sincerely, for
getting Ohio into compliance. We are working aggressively
within New York State. As I said, we play fair. We are pursuing
New York emissions as well. That doesn't mean we will ignore
out-of-State emissions.
With respect to transmissions and distribution, in the
report that I issued we focus a great deal upon transmission
and distribution constraints. New York State has not invested
adequately. It is an interesting figure. Ten years ago we
invested over $300 million annually to improve our transmission
and distribution systems.
In 1998, it was down to $90 million. We have load pockets
downstate--New York City and Long Island--that make it very
difficult to move the energy from those regions where we have
an energy surplus, Western New York where we have access to
hydropower from either Quebec or elsewhere, down to New York
City. We have to improve more in our T&D systems.
I disagree a little bit with the second part of your
question. I don't think we will have, there is no certainty,
certainly, to the notion that we will have either brownouts or
blackouts in New York City this summer.
I think that if we make the necessary adjustments and put
in place, and I support putting in place, some of the turbine
generation in New York City and on the Island that we need, we
will avoid that concern this summer.
Senator Voinovich. Dr. Hirsch, here is a big question. You
say that we are not organized to have an energy policy. Have
you given any thought to how you would organize the Federal
Government so that we do have an energy policy? Where would you
put the overseer of this program?
Mr. Hirsch. The logical place would be in the Department of
Energy, in my opinion. It should be the Secretary of Energy. As
indicated, he does not now have responsibility for overseeing
the well being of a very complicated energy system that we have
in the United States.
That, I think, needs to change. As I said before, a number
of the issues that we are facing today were predictable.
Indeed, if somebody was looking at the details of what was
happening in the oil patch in terms of drilling for natural
gas, you could have predicted that there would have been a
problem coming.
Could we have done somebody about that? It would have taken
heroic action, but we could have, I think.
In terms of the problems with transmission and distribution
of electric power, there needs to be somebody seriously looking
at these issues and reporting so that you all and we all listen
and pay attention to the problems before they get to the point
that they are today.
The same thing with oil, natural gas pipelines and so
forth.
Senator Voinovich. Thank you.
Senator Clinton.
Senator Clinton. I think we have to go vote; don't we? I
think this is such an important discussion. I would only add
that the interchange between the chairman and General Spitzer
is important in several respects.
You know, I have a great deal of admiration and respect for
our chairman and for our Attorney General. I honestly believe,
going along with what Dr. Hirsch just said, that we can give
real leadership to this. We can, in this Congress, in this
Session, in a bipartisan way, by getting people around the
table and honestly discussing our differences and trying to
figure out how to bring about the changes that we all seek. To
that end, of course, I am hopeful that there will be sufficient
funds left in our Federal budget to provide some of the carrots
that we need, some of the incentives that we need so that our
utility companies have the incentives that are required to move
toward efficiency and controlling emissions and that we also
make the kind of investments Dr. Hirsch is speaking of that
need to come from the public sector, as well as the private
sector, in a partnership.
I honestly believe if we did this right now, and I would
respectfully ask the Administration whom I am sure must have
representatives in the audience, to think carefully about what
we could do in a bipartisan way to achieve these ends with the
kind of incentives that are possible.
Senator Voinovich. I think we will recess now for 15
minutes and then get back. We will catch the last of the first
vote and do an early vote on the second one.
[Recess]
Senator Voinovich. The committee will come to order.
I would like to call on Senator Inhofe. I would also like
to make note of the fact that Senator Corzine stopped by and
although he cannot be here, he has asked that his statement be
inserted in the record. He would appreciate the witnesses
responding to several questions that are in his opening
statement.
Senator Voinovich. Senator Inhofe.
Senator Inhofe. Thank you, Mr. Chairman.
Let me just make a comment rather than ask a question. I
think, Mr. Spitzer, you probably will have a response to it.
You implied in your testimony that the NSR Program is quite
clear. I would like to submit for the record a March 12, 2001
letter and attachment from Russ Harding, Michigan's DEQ
Director, to Administrator Whitman. In this letter he is
representing the DEQs of six States.
These directors state, and I am quoting now that ``They
understand the complexity of the current air permit program,
referring to NSR, and the roadblocks to administer it fairly
and consistently.''
The attachment to the letter then outlines proposals for
much needed true reforms. Based on this letter and discussions
I have had, it doesn't sound like your opinion of the NSR is
shared by everybody or by many of them.
Mr. Spitzer. Sir, I appreciate the comment. I think you
said that they described it as complex. I don't think
``complex'' and ``clear'' are necessarily opposites. It is
complex, certainly, but the tax code is complex but also I
think it is quite clear how we pay taxes, in most instances.
I think that the NSR guidelines and regulations, certainly
the ones that we have invoked in our litigation, are, we
believe, very clear. I would suggest what we could submit to
you--and we would be happy to respond precisely to that
letter--but what I will also send to you is our motion for
partial summary judgment in our litigation against AEP, which
is one of the pending litigations.
We will have to redact some of it because some of it is
based upon internal documents from the company that are filed
under seal. But I think you will see that we rely upon almost
entirely regulations and interpretations of regulations that
were issued during the Presidents Reagan and Bush
Administrations.
I think that we are not invoking either new interpretations
or trying to put a gloss on new interpretations. We are using
very stable, accepted interpretations of an NSR structure that
the companies, and again the internal documents demonstrate
this, understood.
Senator Inhofe. My staff just reminded me that we went
through this in another hearing, that this is a 20-page
regulation with 4,000 pages of guidance documents.
I do want to submit this letter for the record. You can
respond specifically to the letter.
Mr. Spitzer. We would be pleased to do that, sir. Senator
Inhofe. I neglected to ask, and I would ask now unanimous
consent that the letter from John Breaux and myself be inserted
in the record right after my opening comments and this letter
at this point.
Senator Voinovich. Without objection.
Senator Inhofe. Dr. Hirsch, there have been no new
refineries sited in almost 20 years. Do you want to tell us
why?
Mr. Hirsch. Well, it is a low margin business. It is not
attractive for people to get involved from the outside in most
cases. A lot of refineries that are there now, particularly
with the large oil companies, have been expanded over time. The
economics are not unreasonable for folks like that.
Also, to try to get permits to site a new refinery would be
a bear, just an absolute bear. People would object to that the
way they object to power lines and other things. So, it would
be a daunting task. It is easier to expand existing refineries.
Senator Inhofe. You know, I have talked to a lot of
refineries and some in my State of Oklahoma. They say it is not
just the regulations, but it is the uncertainty and the
interpretations and it is a moving target. There are huge costs
of compliance, only to find out that they are complying with
the wrong thing.
Mr. Spitzer, do you have any thoughts about that?
Mr. Spitzer. Absolutely. I think you focus on the word
``uncertainty.'' I agree with you. I think uncertainty is a
risk that business does not like to assume. So, one of the
things we have sought to accomplish in our settlements with
both Cinergy and VEPCO is certainty with respect to the nature
of the investments they have to make to ensure compliance. We
believe that is an unalloyed good.
With respect to your larger point about the failure to get
additional supply on line, again, the report that we issued a
few weeks ago addresses that very clearly. We need new supply.
I agree with Dr. Hirsch. He and I were chatting during the
break. We have to improve the siting process. We have to invest
in transmission and distribution lines so that we have a grid
that works, that permits energy to flow into load pockets right
now that are cutoff.
We make some very specific recommendations in my report,
though they are specific to New York State, about how we can
improve the siting process and how we have to also work to
overcome what we all understand is local opposition to plants
that are not necessarily desirable neighbors.
So, I think I agree with you with respect to the cost of
uncertainty. I don't think that is the underlying reason that
we have not had new investment. I think that in the market, in
its regulated context for many years there was not an
understanding of the pent-up demand. I think that goes to the
California crisis as well.
Senator Inhofe. OK. Now, we are running the clock here. Can
I get one more question in here since the other people have not
come in?
Senator Voinovich. Surely.
Senator Inhofe. I wanted to ask you to respond, if you
would, Dr. Hirsch. In the statement of General Spitzer,
``Environmental protections are not the cause of, but a part of
the solution to our energy challenge.''
You saw the spike chart which we have used now for a couple
of years. Would you respond to that statement and also what
role the regulations play in the future costs of energy, of gas
and fuel?
Mr. Hirsch. That is a tough question. The reason why it is
a touch question is that it depends on who you talk to.
Senator Inhofe. We are finding that out.
Mr. Hirsch. Yes. There are people who are trying to run
businesses and work hard for pennies, in particular going back
to refiners. They worry about fractions of a penny.
Environmental regulations come along and cause them to have to
put in equipment and change the way they operate, causing their
costs to go up by two, three, four or five cents. Now, that is
not only difficult for them personally, but it is tough from a
competitive standpoint unless everybody is treated equally.
It is important that we reduce a number of our air
pollutants. You and I, our kids, and our grandkids are
breathing them. We have to do something about that, but we
ought to be able to do it in a way that works a little better
than it is working now, where people are dragged kicking and
screaming, in a number of cases.
you will always have some people who will hold out, but it
seems to me there must be a better way to do it.
Senator Inhofe. Thank you. Thank you, Mr. Chairman.
Senator Voinovich. Thank you. I really don't know whether
Senator Lieberman and Senator Clinton are coming back. I would
like to thank the panel for being here this morning. I
appreciate your testimony. We will be submitting some other
questions to you if you would be willing to respond to them.
Thank you very much for being here.
Mr. Hirsch. Thank you, sir.
Senator Voinovich. I would like to apologize to the next
panel for the long wait that they have had.
Testifying today will be Mr. Thomas Stewart, Executive Vice
President of the Ohio Oil and Gas Association. Following Mr.
Stewart will be Mr. Jason Grumet, Executive Director of the
Northeast States for Coordinated Air Use Management; Mr. Bob
Slaughter, Director of Public Policy for the National
Petrochemical and Refiners Association; and Mr. Carlos Porras,
Executive Director of the Communities for a Better Environment;
and Mr. Taylor Bowlden, Vice President of Policy and Government
Affairs at the American Highways Users Alliance.
I understand that Mr. Bowlden worked for Senator Symms on
the EPW Committee for 10 years.
I would like to particularly welcome Mr. Steward from Ohio,
the Ohio Oil and Gas Association. I have worked with that
organization during my years as a legislator and then as
Governor of Ohio.
Now, I would like to begin the testimony. Mr. Stewart, will
you start?
STATEMENT OF THOMAS STEWART, EXECUTIVE VICE PRESIDENT, OHIO OIL
AND GAS ASSOCIATION
Mr. Stewart. Good morning. I am Tom Stewart and I serve as
the Executive Vice President of the Ohio Oil and Gas
Association, a trade association representing over 1300 oil and
gas producers in the State of Ohio and allied support
industries.
I am also testifying on behalf of the Independent Petroleum
Association of America who represents thousands of independent
producers throughout the nation and who I am proud to say is a
fine advocate for our issues here in Washington, DC.
The exploration and production industry is distinguished by
its breadth and diversity. Oil and natural gas are found in 33
States, 12 of which are represented on the committee. There are
over 850,000 oil and gas wells in the country in areas ranging
from arid plains and forests to wetlands. These wells produce
from reservoirs that are shallow to ultra-deep. Production
levels range from the very prolific to wells that produce less
than one barrel of oil per day.
The operation of these wells has been regulated since the
1920's, with an increasing emphasis on environmental controls
since the 1960's. Because of the diverse conditions associated
with production, the regulatory process must be flexible in
reflecting the unique conditions in each State and the areas
within the States.
It requires the technical expertise which has been
developed in each of these States and which does not exist
within the Federal EPA. For this reason, Federal law and
determinations issued by EPA have generally deferred regulation
of the industry and the various States.
Furthermore, many studies catalogued by interstate oil and
gas compact commissions have established that environmental
regulation at the State level results consistently in higher
standards of protection than does Federal regulation.
Complying with environmental regulation remains a
significant cost for my industry, with estimates of annual
costs ranging from $1.6 billion to more than $2.6 billion.
Equally important is understanding that independent
producers, who range from large publicly traded companies to
small business operations, drill 85 percent of the wells within
this country. The common factor for these independents is that
their revenues and hence their ability to meet environmental
costs come solely from exploration, production, and sale of
crude oil and natural gas from the wellhead.
So, unlike large major producers, the integrated oil and
gas industry, the independents have no means of passing on
production and regulatory costs through other operations such
as refining and marketing.
Consequently, we place great emphasis on cost-effective
regulation, limited paperwork burdens and avoiding duplicative
regulatory requirements.
In general, the unique problems associated with the diverse
nature of the E&P industry have been addressed, making the
burden of regulation manageable. However, there are some
exceptions. For example, the most compelling environmental
issue confronting my industry is the movement to have U.S. EPA
regulate hydraulic fracturing under the Save Drinking Water
Act.
Hydraulic fracturing is a common and necessary procedure
used by producers to complete the majority of domestic crude
oil and natural gas wells. A producer performs the fracturing
procedure to increase the flow of oil and gas from rock known
to contain oil and gas, but the rock's natural characteristics
do not allow oil and gas to reach the well bore in sufficient
volumes.
The process involves pumping fluid, often fresh water, down
the well and into the reservoir to create drainage ditches deep
within the reservoir of the rock.
Since 1951, massive numbers of hydraulic fracturing jobs
have been performed in Ohio and throughout the United States,
dramatically increasing the nation's oil and gas resource base.
This process revolutionized and made modern the Ohio oil and
gas industry.
At the time that the Safe Drinking Water Act was enacted,
the States had already developed extensive underground
injection control programs to manage liquid waste resulting
from operations. Congress recognized the States' efforts by
modifying the Safe Drinking Water Act to allow States primacy
based upon comparable State oil and gas UIC programs.
In so doing, Congress recognized that State UIC programs
were well structured and that an overall Federal program would
not be sufficiently flexible enough to deal with the varying
circumstances from State to State.
At no time during these debates has there ever been a
suggestion to increase hydraulic fracturing in the UIC waste
management requirements. This is because fracturing is a
temporary injection of fluids designed for well stimulation and
is not underground injection designed for waste control.
Because of this and the purposes for which it was designed,
it does not create an environmental problem.
Nonetheless, in the mid-1990's, the Legal Environmental
Assistance Foundation, after years of failing to make and
environmental case against coaled methane development,
petitioned the U.S. EPA to regulate fracturing under the UIC
program.
EPA rejected LEAF, arguing that Congress never intended UIC
to cover fracturing. LEAF appealed this to the 11th Circuit
Court, which in 1997 issued a decision, but did not address the
environmental risk, but merely spoke to the plain language of
the statute, saying that it should include it as underground
injection. Initially, EPA responded to the LEAF decision by
requesting that the Groundwater Protection Council study coal
bed methane wells, which was the prime focus. After evaluating
10,000 wells, they found one complaint, the LEAF case Alabama
well that EPA had already concluded was not a fracturing
problem.
LEAF now returned to file a second case against EPA, likely
to be decided this year, arguing that EPA should implement
nationwide rules. If EPA loses this case, all hydraulic
fracturing jobs could be federally regulated.
Simply stated, EPA's original rejection of LEAF's complaint
implements the balance Congress struck between protection of
drinking water while also encouraging the continued development
of gas and oil resources.
However, LEAF would have EPA carve out fracturing for
Federal regulatory oversight for steep, inactive and other
injection methods.
The National Petroleum Council estimates that 68 percent of
the wells drilled in the next decade to meet natural gas demand
would require fracturing.
To regulate fracturing under Federal regulation, as LEAF
suggests, would drastically impede domestic recovery of oil and
gas reserves. It would contravene the very purpose of the Safe
Drinking Water Act.
Even if EPA wins the LEAF case, the likely result will be a
rash of lawsuits of similar nature.
Not considered an issue at the time, the Safe Drinking
Water Act was passed, Congress did not specifically excluded
fracturing. Two decades later, the court ignored the facts of
the issue and changed the scope of the law on a technicality.
We would hope that Congress would address this issue by
legislation. We appreciate Senator Inhofe's efforts in this
regard during the last session.
One other issue I would like to bring up of the many that
are in my written testimony is the Endangered Species Act.
While Federal land managers, principally the Bureau of Land
Management, develop resource management plans, one of their
most important concerns is habitat management. However, balance
needs to be struck.
Endangered species is not a very big issue in Ohio, but it
has had an impact. For example, in the Wayne National Forest of
Ohio, a small oil and gas producer for an extended period has
been seeking to obtain a permit from the Bureau of Land
Management to drill a development well on a Federal lease
tract.
Since applying for the permit in February 2000, the
producer has been waiting for the Forest Service to perform an
environmental assessment taking into account new information,
if any, regarding endangered species.
It is ironic that the producer already operates two wells
on the same property. It is even more ironic that continuous
oil and gas operations have existed in this area since 1860.
While this producer has been waiting for the Federal process to
resolve itself, his requisite permits issued by the State have
been issued and expired. Needless to say, he is frustrated with
the process that stymies the drilling of a simple development
well in what is the most mature oil and gas-producing basin in
the United States.
Senator Voinovich. Mr. Stewart, I think you will have to
wrap it up.
Mr. Stewart. I could not agree with what the other
witnesses have said before, Senator. We do agree that there has
to be a harmony brought between environmental regulation on a
wide scope and the nation's energy supply. We encourage
Congress to drive toward that by national policy or by separate
issue.
Senator Voinovich. Thanks very much. We appreciate your
being here.
Our next witness is Mr. Jason Grumet, Executive Director,
Northeast States for Coordinated Air Use Management.
Mr. Grumet?
STATEMENT OF JASON S. GRUMET, EXECUTIVE DIRECTOR, NORTHEAST
STATES FOR COORDINATED AIR USE MANAGEMENT
Mr. Grumet. Thank you, Chairman Voinovich, Senator Inhofe
and Senator Carper.
My name is Jason Grumet. I am the Executive Director of
NESCAUM, which for over 30 years has been assisting the
Northeast States in establishing a coordinated approach to our
common air quality goals.
On behalf of those eight States, I would like to express
our appreciation for the opportunity to testify before you here
today.
The issues before the committee, Mr. Chairman, are clearly
numerous and complex. I would like to, at the outset, commend
you and Senator Lieberman for bringing this opportunity forward
so we can understand better and explore the necessary
connection between sustainable energy and environmental
policies.
Mr. Chairman, the current focus on our energy situation in
this country, presents clear challenges and also obvious
opportunities, it is understandable and yet regrettable that
our body politic tends to focus on energy issues during moments
of scarcity, whether they are real or perceived.
At these moments of scarcity, the fundamental vulnerability
of our nation's dependence on a monoculture of imported oil is
most obvious. It is also at these moments of scarcity where
long-term strategies which look at the environment's impact on
energy and energy policy's impact on the environment, as well
as strategies that understand the need to focus on more energy
efficient demand side policies are often eschewed in favor of
quick fix strategies which try to provide immediate relief at
the pump, socket and switch.
It is worth noting, Mr. Chairman, that Congress has boldly
grappled with our country's hydrocarbon dependence in the past.
The 1992 Energy Policy Act set forth ambitious but reasoned
goals to try to break this monoculture of dependence on foreign
petroleum.
By 1999, 75 percent of the vehicles purchased by our
government were supposed to operate on non-petroleum
alternative fuels. By the year 2000, a full 10 percent of our
motor fuels used in this country were slated to be non-
petroleum and by 2010 that number was slated to rise up to 30
percent.
The best description of our success and approach to this
effort has been sadly woeful, Mr. Chairman. Presently, less
than 1 percent of the fuels used on our nation's highways are
non-petroleum.
The Energy Administration indicated that the 20 million
barrel per day use of oil is projected to rise to 26 million
barrels per day by 2020. Last year, $100 billion of U.S. money
was spent on imported oil. The trade deficit on the basis of
that vast expenditure surged to the highest ever of $135
billion.
Mr. Chairman, as a founding member of the Governors'
Ethanol Coalition, I know that you appreciate the need to
diversify our energy stock to a more reliable, diverse and
domestic feedstock.
However, I would respectfully submit to you and the rest of
this panel that had our nation devoted the resources and
innovation to achieve the goals of EPACT over the last decade,
both the mood and the options available to us today would be
far improved.
Mr. Chairman, I also agree with the statement you made
initially that our economy today and tomorrow is going to rely
on petroleum. I hope to take issue with that next tomorrow. It
is my sincere hope that tomorrow's tomorrow will in fact enable
us to have an economy that also relies on clean and renewable
energy like fuel cells and electric vehicles.
We in the Northeast States are working diligently to try to
bring that about.
I would like to focus on three regulatory policies, if I
may, that deal with the issues that we must grapple with today
to harmonize our existing dependence on petroleum with our very
legitimate environmental needs.
I will try to touch on these quickly. I will not mention
NSR at all because I think Attorney General Spitzer did a fine
job on behalf of the Northeast States position.
First, Mr. Chairman, is the question of mobile source
toxics. In 1990, this body adopted Section 202(l) of the Clean
Air Act which ``directs the agency to promulgate regulations to
control hazardous air pollutants from motor vehicles and motor
vehicle fuels.''
These standards, at a minimum for benzene and formaldehyde
should ``reflect the greatest degree of emission reduction
achievable for the application of technology which would be
available.''
Mr. Chairman, EPA's efforts in this regard have been
uninspired at best. While we recognize that motor vehicles are
responsible for known carcinogens that are emitted in excess of
health standards throughout the country, we finally got a rule
under court order from U.S. EPA that does nothing to actually
reduce the emissions of these mobile source toxins.
At best, Mr. Chairman, EPA's role could be described as
what we used to call on the kickball court a ``do-over.'' They
identify many of the inadequacies in their understanding of the
problem and have committed to a regulatory response in 2003.
I would ask this committee to work with these States to see
that that in fact is achieved.
Next, Mr. Chairman, I would like to mention briefly the
issue of diesel. Diesel is the lifeblood of our transportation
technology. But our failure to control diesel emissions have
led to an unacceptable toll on our environment and public
health.
Moreover, the inability to control diesel effectively over
the last 30 years has created a vulnerability in our diesel
supply because we simply can't rely on a fuel that is going to
exact that kind of public health harm.
There are two issues underway which would address this.
First are the consent decrees entered into by diesel
manufacturers to address the fact that over one million engines
were sold in this country which violate the environmental
standards that they were committed to achieve.
Second is the 2007 rule, recently promulgated by this
agency, which for the first time would make the words ``clean
and diesel'' rightfully belong in the same sentence.
I would ask that this committee work to help us oversee the
consent decrees, which sadly are beginning to unravel. The very
companies that signed these decrees are now seeking relief from
their very commitments, which causes us great concern in the
Northeast.
With regard to the 2007 rule, the agency should be
commended and the Administration from moving forward to
implement this regulation.
I would like to submit for the record a letter signed by a
number of States and industries supporting this rule and noting
one concern. That concern is that there are suggestions that
the Administration is going to impose a third-party review to
kind of look over the shoulder of EPA and determine whether
this rulemaking should go forward.
We think that would actually provide much more harm than
good by undermining investment decisions and undermining the
very certainty that industry needs to comply with these
regulations.
Senator Voinovich. Can you wrap it up?
Mr. Grumet. Any review that is done should be done within
the FACA.
Finally, Mr. Chairman, Senator Lieberman mentioned the
issue of MTBE. Congress and only Congress can get our country
out of this fix by lifting the oxygen mandate. Presently it is
not possible to protect air quality, water quality and maintain
a reliable fuel and low-cost fuel because of the oxygen
mandate.
We are left between the rock of MTBE contamination and the
hard place of an ill-designed ethanol mandate.
I would like to thank Senator Inhofe and Senator Smith for
their efforts last year to address the oxygen mandate. I commit
to work with this and other issues in the coming days.
Thank you very much.
Our next witness is Bob Slaughter who is the Director of
Public Policy for the National Petrochemical and Refiners
Association.
Mr. Slaughter?
STATEMENT OF BOB SLAUGHTER, DIRECTOR, PUBLIC POLICY, NATIONAL
PETROCHEMICAL AND REFINERS ASSOCIATION
Mr. Slaughter. Thank you, Mr. Chairman. I want to thank you
for the opportunity to comment on national energy policy and
environmental regulation's impact. NPRA represents almost 500
companies, virtually all domestic refiners and most
petrochemical manufacturers.
It has been many years since we have had serious national
debate on energy policy. For the last two decades, low prices
and plentiful supplies have allowed policies and policymakers
to take energy for granted.
As a result, programs with great impact on energy have
often been pursued in an isolated fashion. Important national
goals such as environmental improvements have not been balanced
with the need for reliable domestic energy supplies. The
tradeoffs inherent in policy decisions have not always been
recognized.
Our national energy policy thus far has resulted in
declining domestic oil production, domestic natural gas
production is still below levels in the early 1970's,
increasing imports of crude oil and products and refining
capacity stretched to its limit with further expansion limited
by regulatory policies.
Domestic refiners are increasingly challenged to meet
demand. Since 1983, the number of U.S. refineries has decreased
from 231 to 152. Total capacity has been relatively stable, but
energy demand has risen dramatically, by 20 percent.
For much of 2000, refineries ran near their operational
maximum. Utilization peaked at 97 percent last summer. As this
graph from a recent National Petroleum Council study shows,
U.S. demand for petroleum products exceeds domestic refining
capacity resulting in increased product imports.
For the last 20 years, there was excess U.S. refining
capacity. This chart says that is gone. Due to financial and
regulatory constraints, it is unlikely new refineries will be
constructed in the United States. No new refinery has been
built here in about 20 years. Hence, the importance of
expanding capacity at existing sites. That is where the NSR
regulations will come in and I will discuss them later.
Rates of return for refineries averaged only about 5
percent in the last decade, roughly the return from a passbook
savings account, but with much greater risk. Refiners had to
make large investments to meet environmental requirements. The
National Petroleum Council estimated these costs exceeded the
book value of the entire refining industry during the last
decade.
Refiners now again face substantial challenges. As my
second chart shows, an avalanche of environmental requirements
is coming, all within the same narrow implementation period.
Investment requirements will be substantial. We think as much
as $20 billion over the next decade.
The recent closure of one Midwest refinery providing 9
percent of Midwestern supply reminds us that some existing
refineries may not be able to continue to operate. The product
distribution structure is also challenged. The complicating
factor has been the addition of various area-specific fuels to
the fuel mix.
The next chart, prepared by Exxon-Mobil, identifies current
fuel requirements across the nation. Assuming three grades per
category, there are almost 50 distinct gasolines on this chart.
Pipelines and terminals have the same problem keeping these
fuels separate. They, too, are faced with constraints on their
operations and find it difficult to expand.
As we saw in the Midwest last summer, differing fuel
specifications severely limit the ability to move supplies to
areas that become short. Some ongoing initiatives merit a
second look because they threaten future energy supplies.
The first is EPA's New Source Review Enforcement Program in
which EPA has retroactively reinterpreted its permitting rules
long after modifications to refineries were made, amounting to
``regulation through enforcement'' rather than through public
rulemaking.
The companies acted in good faith to modify existing
facilities to keep up with existing demand. They had the
knowledge of regulators and now face millions of dollars in
fines and additional costs as a result of their efforts.
Bear in mind, if refiners had been unable to make the
expansions at existing refineries, the first chart showing the
balance between demand and refining capacity in the U.S. would
be even farther out of balance than it is today.
The refining industry is not arguing against enforcement,
but we are arguing for fairness and equity in ensuring
compliance by everyone.
We commend Senators Breaux and Inhofe for their recent
letter to the Vice President questioning EPA's approach.
Permitting uncertainties will discourage capacity expansions
and slow necessary modifications. In many cases these
modifications are necessary to produce cleaner burning fuels
like Tier II low sulfur gasoline.
The choice that America has to make is between these
expansions or increased imports of petroleum products. We
support market-based incentives as we move forward with new NSR
requirements, but fuel supplies will be further strained unless
we get a new, streamlined and flexible permitting process.
We urge the Administration to review EPA's current
enforcement initiative and to include permitting process
improvements in national energy policy.
To be fair, future action on enforcement will also need to
consider those who have already settled with EPA in order to
avoid disadvantaging them.
Another EPA initiative that concerns us is the ultra-low
sulfur diesel program. An important study commissioned by
Charles River Associates indicated that there will be a 12
percent shortage in national supplies of highway diesel in the
first year of that program. That program, despite our
recommendations, was put right on top of the EPA's gasoline
sulfur reduction program.
The National Petroleum Council recommended very strongly
against that move and found that there was increased danger of
supply disruptions if those rules were not appropriately
sequenced.
Contrary to others on this panel, we think the rule would
be improved by an independent analysis by a third party, the
National Academy of Sciences. This rule's timeframe should be
adjusted to reduce the potential for supply problems without
foregoing its environmental benefits.
I would just like to say on MTBE, Mr. Chairman, we know
that there is another concern for future energy supplies
regarding MTBE. As you know, oxygenates assist in the
production of cleaner-burning fuels. Several States have
legislated an end to MTBE use due to groundwater concerns. But
we ask the panel to bear in mind that MTBE does significantly
supplement gasoline supplies. It is about 4 percent of the
nation's gasoline supply, but is 11 percent of the gasoline
supplies in RFG areas on the coasts. So, it is an extremely
important component of gasoline supply and we ask you to bear
that in mind in moving forward on that issue.
Thank you very much.
Senator Voinovich. Our next witness is Mr. Carlos Porras,
Executive Director, Communities for a Better Environment.
Mr. Porras?
STATEMENT OF CARLOS J. PORRAS, EXECUTIVE DIRECTOR, COMMUNITIES
FOR A BETTER ENVIRONMENT
Mr. Porras. Thank you, Mr. Chairman and distinguished
members of the committee.
My name is Carlos Porras and I am Executive Director of a
non-profit organization based in California with offices in
Oakland, and the Los Angeles area, Huntington Park.
I am very grateful to be able to present to you today a
slightly different version of, I think, the impacts and
considerations that are currently before you with this very
pressing issue of energy policy in the United States which we
are feeling very much so in the State of California and in
particular in the communities that we do our work in. In urban
areas of Los Angeles County it has very much come to fruition
for us with some brownouts, blackouts, and the proposed siting
of a new power plant in one of our communities, the city of
Southgate.
The city of Southgate is approximately 85 to 95 percent
Latino. I think this is very important to weigh in your
considerations as we move forward with our considerations on
energy and in particular the impact it has on regulation and
environmental regulation which has a direct health impact in
many communities, those which unfortunately not at the table
when considerations and decisions are made.
I want to note that we have documented in the Los Angeles
area some of these environmental problems and the
disproportionate burden that it has in certain communities in a
report that we published in 1998.
One of the things that is critical, I think, in looking at
the regulatory impacts is to note that certain people, sub-
populations are disproportionately impacted historically by
what are policies, programs, enforcement or in many cases lack
of enforcement has on the health of certain communities.
What we have done here to illustrate in this map of Los
Angeles County, what you see is the color-shaded areas. The
yellow areas are zero to 40 percent people of minority, by 1990
Census data. The red-shaded areas are 80 to 100 percent
communities of color. The green dots that you see in this map
are one data base, toxic release inventory sites. That was
gathered by the Federal Government. This shows the
disproportionate impact.
What I would like to point out on this map, which is very
important to note, is that as the doglegs of race by
demographic in the county go, there is a pattern also with
toxic release inventory sites.
Now, this has a very critical effect on health. One other
thing to note is that that was one data base. In the
communities that we are working in, Southgate being one, there
is not just one source of pollution. This map indicates eight
data bases which shows the huge impact, the cumulative effect
of which is not being considered in the regulatory process.
Coming back to the issue at hand, it is very much an issue
of health for us. A New Source Review has a direct correlation
with the problems in our communities, the health effect. Recent
studies coming out of the University of Southern California
School of Medicine and another study at Occidental College and
UC-Santa Cruz looks at the health effects of children in
schools from these sources, point sources.
The impacts are having a direct effect on our children's
learning abilities. So, I think it is important to keep that in
consideration of any amendments to the Federal Clean Air Act,
in particular New Source Review. In one of our struggles in our
communities there is a refinery, Powerine Oil Company
historically was built in 1936 and closed in 1995. it is
currently seeking to reopen.
Under the Federal Clean Air Act that refinery should go
through New Source Review and install best available control
technology. Why? Historically, this refinery was documented as
being the dirtiest in the State of California. The land use and
development around the refinery has changed since it was built
in 1936. There is a State mental health hospital within a few
hundred yards, an elementary school within an eighth of a mile,
a senior citizens center two blocks downwind from the refinery.
This refinery has repeatedly violated the air quality
management district's permits.
Senator Voinovich. Mr. Porras, could you wrap soon? Thank
you.
Mr. Porras. Yes. It is currently, as I said attempting to
open without going through New Source Review. We have a
significant problem with any type of operation given the
history of historical violations that this refinery has had. A
New Source Review is really the only method by which the
community can attempt to protect their health and have a voice
in the decisionmaking.
I would like to finally offer what we believe are some
suggestions for public policy. That is that first and foremost
toxic use reduction must be incentivized and prioritized by
regulation.
Pollution prevention should be incentivized and required by
regulation. Last, due to the fact that many of the substances
that are generated and emitted into our environment causing
serious health problems are yet unknown. We offer that the
precautionary principle of ``First do no harm'' should be a
public policy model that merits your consideration.
I thank you and thank you for the opportunity to speak to
you.
Senator Voinovich. Mr. Bowlden?
STATEMENT OF TAYLOR BOWLDEN, VICE PRESIDENT, POLICY AND
GOVERNMENT AFFAIRS, AMERICAN HIGHWAY USERS ALLIANCE
Mr. Bowlden. Good morning, Mr. Chairman and good morning,
Senator Inhofe and Senator Carper.
I am Taylor Bowlden, Vice President of the American Highway
Users Alliance. We appreciate the opportunity to talk to you
today about how motor fuel consumption fits into our energy
policy debate.
Today I want to discuss three specific issues that fall
within the purview of this committee's jurisdiction. First is
the importance of easing traffic congestion in order to reduce
fuel consumption.
Second is the need to streamline the environmental review
process to expedite congestion-relief projects.
Third is the adverse impact on highway improvements
associated with legislative proposals to mandate ethanol use in
motor fuels.
Let me begin with the connection between traffic congestion
and fuel consumption. As most Americans could attest, traffic
congestion has grown worse in the past decade. Just a few
statistics will illustrate the crux of the congestion problem.
Since 1970, American's population has grown by 32 percent, but
the number of licensed drivers is up by 64 percent.
The number of vehicles has increased by 90 percent. The
miles we drive those vehicles has jumped by 132 percent. Yet,
during the same period of time road mileage has increased by
just 6 percent.
It is no wonder that traffic congestion is a source of
public frustration and concern like it never has been before.
The Texas Transportation Institute estimates that in 1999
traffic delay cost more than $75 billion in the 68 cities
included in their biennial report and wasted approximately 6.6
billion gallons of fuel.
What can be done to ease congestion? There are a variety of
solutions depending on the particular circumstances, but there
is no doubt that a program focused on eliminating the worst
traffic choke points would produce significant fuel and time
savings.
Cambridge Systematics, a highly respected transportation
consulting firm, found that improving traffic flow at our
nation's 167 worst bottlenecks would reduce gasoline and diesel
consumption by 19,883,000,000 gallons over the next 20 years.
That is one billion gallons of fuel a year, roughly one-seventh
the cost the Texas Transportation Institute estimates for their
68 cities.
Fuel savings are just the beginning of the benefits that
could be realized from improving those bottlenecks. The
Cambridge Systematics report also says that we would prevent
290,000 crashes. We would nearly halve the pollution at those
bottlenecks. We could slash emissions of carbon dioxide at
those sites by 71 percent and we would reduce truck delivery
and motorist delays by an average 19 minutes per trip.
Mr. Chairman, this is a win-win approach to energy policy
because it would accommodate the public's need and desire for
greater mobility while simultaneously reducing the amount of
fuel needed to meet the demand for transportation.
Now, let me mention the environmental streamlining issue.
Today, it takes approximately 12 years for a major highway
project to move through the stages of planning, design,
environmental review and right-of-way acquisition. That is 12
years before construction begins.
Typically, one to 5 years of that time is spent completing
the environmental review. Congress made a serious attempt to
deal with this issue in TEA-21, but I think it is fair to say
that the work of the Federal agencies to date has not met the
expectations of the members of this committee and in the House
who crafted that statutory provision.
Given the time and expense involved in the current review
process, we urge Congress to renew its effort at reform.
Specifically, we encourage you to consider giving States the
opportunity to play a greater role in interacting with Federal
resource agencies.
In addition, we believe Congress should designate the
transportation officials as the official arbiters of the
transportation purpose and need of a proposed project and give
those officials authority to set appropriate deadlines for
comment by Federal resource agencies.
Finally, Mr. Chairman, I want to mention quickly the impact
of ethanol-blended fuels in the Highway Program. As members of
the subcommittee know, gasoline blended with ethanol is taxed
at a lower rate than regular gasoline, resulting in a revenue
loss to the Highway Trust Fund.
In addition, as the chairman noted in his opening
statement, a portion of the tax that is imposed on ethanol is
deposited in the General Fund rather than the Highway Trust
Fund.
In combination, the General Fund diversion and the ethanol
tax subsidy cost the Trust Fund $1.2 billion in lost revenues
last year.
Toward the end of the last Congress, this committee
considered and approved legislation that would phaseout MTBE in
gasoline simultaneously establishing a nationwide renewable
fuels program, essentially mandating a large new market for
ethanol-blended gasoline.
We estimated that had that legislation been enacted, the
Trust Fund's total subsidy to ethanol would have been $2.5
billion annually by 2007. Lost tax revenues attributable to
ethanol-blended fuel would inevitably reduce the amount of
highway funds distributed annually to the States and the loss
of highway funding means less money available for projects to
reduce congestion and conserve fuel.
I do want to commend you, Mr. Chairman, for taking the lead
in addressing part of that problem. As you mentioned, you had a
colloquy last year with other members about getting that
portion of the tax that is going to the General Fund put back
into the Trust Fund. We hope you will pursue that initiative
and we commend you for it.
Thank you again for inviting me to testify.
Senator Voinovich. Thank you very much.
I would like to welcome Senator Carper here to the hearing
this morning.
One of the things that has bothered me recently with regard
to this discussion of a national energy policy is the fact that
a bill that I am cosponsoring with Senator Murkowski and
Senator Lott is that there is a lot of emphasis on the issue of
ANWR. It seems that is being kind of the lightning rod of the
bill, and it really deals with so many other things.
I would like anyone to comment on what other sources of oil
supply are available within our control in terms of the U.S.
Government and how reasonable is it for us to be able to get
our hands on it?
I know, for example, from reading and talking to people
that a lot of sources of oil in this country just have been
kind of abandoned. Even the people who are doing the work of
extracting it have abandoned it because the price of a barrel
of oil went so low that it wasn't reasonable for people to go
at it.
What is available in terms of oil supply in this country
and what would it take for us to get at it? Let us not talk
about ANWR. Let us talk about somebody else and some others
areas that are available and how long would it take us to get
it out.
That doesn't ignore what you just said, Mr. Bowlden. I
think it is very important that when we put our energy policy
together we have to look at some other practical things that
are out there. We have cars just sitting there in traffic jams
and all the other stuff that we have out there that is
incredible. It just defies common sense.
Even the issue of, you know, you drive down the highway
every day and you see one person behind the wheel. There is not
enough emphasis on alternatives. There are a lot of things that
we can do.
Specifically, what is available out there? If we opened it
all up, how much would we be relying on foreign oil?
Mr. Stewart. Senator, I think it is undoubtedly a fact that
we are always going to be relying upon foreign sources for oil.
The oil base in the United States is one of the most mature in
the modern era of oil extraction.
On the other hand, the natural gas resource base in North
America is vast. It is frustrating because if you go out to the
Rocky Mountains or into the Gulf of Mexico, on both shores,
there are vast resources out there that have been blocked off
from access for reason unknown.
For instance, the coal bed methane resources in the Rocky
Mountains that are tied up in the LEAF case that I talked about
earlier. I personal don't understand how we are ever going to
get away from foreign reliance for crude oil without taking
into consideration just the mature base that we have.
Senator Voinovich. Are you saying that but for large tracts
like ANWR, what else is available won't make a dent in our
reliance on foreign oil?
Mr. Stewart. I think you need to keep in mind what happened
at the end of 1997 when the crude oil prices collapsed to near
$8, posted price to the wellhead. That was a direct attack on
foreign producers on the margin of well base which supplies
about 450,000 barrels a day to this country.
That resource base was knocked down, substantially never to
be recovered. That in itself is a national petroleum reserve
that has been supplemented, as we talked earlier in our opening
statements, for instance by Iraqi oil.
I think the national energy policy needs to take into
consideration the mature characteristics of oil production in
the United States. To recognize that and come up with ways to
sustain and underpin that oil base is the best means we have of
controlling foreign encroachment into our marketplace, and then
drive toward natural gas, which is apparently what everybody
wants to drive toward.
Senator Voinovich. I would like if some organization could
give me a report on that, just really to define what is
available. The natural gas thing I understand. I know there are
just tremendous reserves out there.
From my perspective, my narrow Ohio perspective, our
natural gas costs have skyrocketed. It is negatively impacting,
as you know, our businesses in the State. I had hearings with
the elderly and others. It is just driving people into our soup
kitchens. People are giving up food and clothing because of the
fact that they can't pay their energy bills. We have to do
something about it.
Mr. Stewart. Well, it is frustrating because the resource
base of natural gas is there. It is a matter of getting the
molecules into the ground and into the marketplace.
Mr. Grumet. Mr. Chairman, just to say briefly, I very much
appreciate your invocation of the notion that we are focused
far too much on ANWR. I think the reason now, however, is that
it symbolizes the fundamental debate between supply and demand
approaches to addressing this problem.
We are existing in an energy house with a cracked
foundation. ANWR is about a new paint job. I think the conflict
we have and the challenge we have is that while trying to
exploit these resources to balance that with better efficiency.
It is worth knowing that some work we did suggests that it
will take about 50 years to extract the full breadth of the
reserve in ANWR.
In 10 years, if we increase the fuel economy of light duty
trucks and SUVs to be the same a passenger cars, we would
reduce as much oil as is available in that 50-year reserve.
So, it is part of a balanced package that looks both at the
demand side as well as the supply side. I think we could
diffuse a lot of the misdirected focus that, I agree with you,
is being focused on ANWR.
Senator Voinovich. Thank you.
Senator Inhofe?
Senator Inhofe. Thank you, Mr. Chairman.
I know the national energy policy is not really the purview
of this hearing, but you brought this up with Mr. Stewart. Let
me just kind of followup and give you a different perspective
or ask for a response.
It happens that in the early 1950's I started out in that
business. I was a tool dresser in a cable tool rig. No one
knows what that is nowadays. You do? OK.
We went after the shallow stuff. Our wells were marginal. I
remember so well coming back, and this happened in 1970, the
same year that EPA started, so it wasn't the result of that. I
remember going back to the owner of these rigs. We had about 25
cable tool rigs and they were really producing oil. He said,
any more I have been producing cheap oil of Oklahomans for many
years, but I can no longer comply with all the regulations.
This wasn't even EPA regulation.
I think it is pretty well established that if we had in
production the oil from plugged wells for the last 15 years it
would equal close to what we import from Saudi Arabia.
I am not going to ask you a question, but I would like to
ask you a question for the record, since it would be unfair to
ask you now.
Our energy policy, the bill that our chairman mentioned,
the only criticism I have, even though I am a sponsor of that
bill, is that it doesn't get to these reserves. I think that
there are reserves out there. I know they are trying to avoid
any messing around with the tax policy, because it is going to
require that. I don't know of any other way to make this
happen.
So, for the record, I would like to have you let me know if
there is any idea you have where we could add predictability in
there. This is the problem these guys have. Any time you go
from $8 to $40 in the period of a year, it can go the other
way.
These guys are not going to be in a position to go out and
venture their capital unless there is some predictability. I
would like to have you address that from your vast experience
and those with whom you work to see if there are some ideas
that we can up with in this legislation, if you would do that.
Mr. Stewart. Well, Senator, the predictability of the price
of oil, as you well know from Oklahoma, is certainly an issue.
My own State, Ohio, is the largest oil producer in the
Appalachian Basin. You do not see producers going out and
drilling for oil right now, even though they have had oil
prices----
Senator Inhofe. That is my point. It is hard to sell here
in Washington. They are thinking about the price. They don't
understand. What is the price going to be if we are fortunate
enough to have something to sell a year from now?
Mr. Stewart. Well, if you go back to the 1980's, adjusted
for inflation, in real dollars, the price of oil was $50 back
then. So we are getting half of what we got. That may be an
unfair comparison in some circumstances, but when you need to
attract capital to this industry and you go out to the
investment community and say, ``I want to drill for oil``M and
then show them the price of oil curve----
Senator Inhofe. I think we are making the same point here.
I would also just like to mention, when you say we are going to
be dependent upon foreign sources, this is true. What
percentage--and I believe this should be a part of this
legislation, a cornerstone--what percentage are we going to be
willing to be dependent on foreign sources? That is just a
thought.
I don't want my time to expire. I had a question I wanted
to ask Mr. Slaughter. You know, I very much appreciate the
environmental goals of sulfur and diesel regulation. My major
concern has been, before this committee and several hearings
even already this year, fuel shortages and price spikes.
I know that the Administration is going to have an external
and independent review. I had something to do with that. But I
am concerned about the time lines now because if a review takes
2 years to start, then you are going to have 6 months or 8
months of a year for this to take place.
Yet, we are looking at a deadline of 2006. So, I would like
to get from you, in terms of having this resolved and in place
by you folks and the people you represent, I would like to have
you share with us and get into the record here how the timeline
affects what we want to ultimately achieve after this review
takes place.
Mr. Slaughter. The industry generally needs 4 years,
Senator, in order to adequately make all the preparations, get
permits, do the construction work and bring a new fuel on line.
So, we believe that we are going to need some resolution and
know where we are headed on diesel sometime probably in 2002,
perhaps the middle of that year.
As you know, the rule requires at least 80 percent, and we
think quite more likely closer to 100 percent of diesel meet
ultra-low sulfur levels in June of 2006. So, we are concerned
about the timeframe. This is one of the reasons why we were
urging that an independent study be done before the rule was
taken final. We are absolutely convinced that is the way it
should have been done.
Then we would not be up against this mid-2006 timeline,
which may cause a significant shortage, which I talked about.
Senator Inhofe. You heard me mention that we had the
hearing. I think you were even there at the Ohio hearing. We
went into some of the problems with these new policies from the
Administration. In some instances the Administration
retroactively applied new policies or issued reinterpretations
applicable to the changes in facilities.
How would the New Source Review enforcement initiative
impact the ability of the refining industry to produce and
supply sufficient quantities of clean fuels to the public?
Mr. Slaughter. It is an impediment to making the changes in
the facilities that are necessary to make those fuels, Senator.
The uncertainty over the exact meaning of the New Source Review
requirements at this time by this reinterpretation has caused
considerable confusion in the refining industry. We simply
don't know what the requirements are going forward. The agency
has decided to try to basically reinterpret all the rules
through enforcement actions dealing with individual companies
rather than follow the Administrative Procedures Act and issue
rules that are common to all.
As you pointed out, these were 20 pages of rulemaking which
have now become 4,000 pages of interpretation. As part of this
4-year lead time that I talked with you about earlier on diesel
sulfur, a lot has to be done, but permits are the key matter
that has to be taken care of in making these fuel changes for
both gasoline and diesel.
If more certainty isn't brought to this matter, then it
will be difficult to make all the changes necessary to have all
these mandated new fuels in the market on time. The industry
has been trying to work with EPA to make sure that they will be
in the market on time, particularly gasoline sulfur. But the
results so far are not all that encouraging.
Senator Inhofe. I know I have gone over my time. Let me
just give the assurance to Mr. Stewart that I had legislation
last year on hydraulic fracturing that we are going to
reintroduce this year. I have already talked about it to some
members that I think will support it.
Senator Voinovich. It is interesting. To followup on the
diesel thing, we have a manufacturer in Ohio who has an
emulsion type of additive for gasoline and he can't get that
thing through the EPA currently.
They are using it in Europe right now. In fact, the
European nations are encouraging people to use it. It reduces
pollution from the current diesel fuel by about 40 percent. You
know, from a logic point of view, I am not sure just how much
it adds to the cost, but I think it is not that much an
increase. Maybe that would be a way of maybe helping to
transition later on to reducing the sulfur and at the same time
during that period make a dramatic reduction in the pollution
from diesel fuel.
I talked to another major manufacturer of automobiles who
said we ought to be using a lot more automobiles in this
country that use diesel fuel, that Europe is increasing the
number of diesel automobiles.
There are a lot of inconsistencies here that we need to
look at.
Mr. Grumet. Mr. Chairman?
Senator Voinovich. Do you have a comment? Sure, Mr. Grumet.
Mr. Grumet. I would like to comment for just a moment on
this diesel question. I thank you.
There is a bit of irony in this exchange because what we
need, I think, is clearly certainty for the industry to invest
in the infrastructure necessary to meet these challenges. We
have that certainty. We have a final rule that had 370 comments
and numerous public hearings that were initiated by the last
Administration and finalized by this Administration.
Now we are in essence seeking to undermine that certainty
with a third-party review, which will deprive us of the ability
to invest with confidence. It becomes a self-fulfilling
prophecy for failure if we stretch out this uncertainty and
disable the investment that is going on.
I have to tell you that I didn't make it to the NPRA
conference, which is always very informative, held a couple of
weeks ago. But let me read you to titles of three papers
presented.
``Unipure's ASR-2 Diesel Desulfurization Process: A Novel,
Cost-Effective Process for Ultra-Low Sulfur Diesel Fuel.''
``Sulphco--Desulfurization Via Selective Oxidation--Pilot
Plant Results and Commercialization Plans.''
Finally, ``Application of Phillips' Zorb Process to
Distillates--Meeting the Challenge.''
I don't begin to suggest that I know what the Zorb process
is, but the people at Phillips do, Mr. Chairman. I think we
should let these companies now work within the 5-year lead time
that we have provided and make sure that we can in fact
harmonize these affluent diesel standards.
Senator Inhofe. Mr. Chairman, let me at least respond.
Obviously, you and I don't agree on this review. I think it
is important that you not necessarily have the last word in
this.
Mr. Grumet. That is your prerogative, sir.
Senator Inhofe. I would like to have Mr. Slaughter respond
to your objection to the review process.
Senator Voinovich. Senator Inhofe, I would like to respond,
too. I think to clarify this, I think what we are talking about
here is to look at this and just see from a practical point of
view what impact this would have if you put it into effect when
they anticipate putting it into effect in terms of the
reliability of a resource to the people.
I want you to know something, I went through, this last
year in Ohio, a situation where the supply wasn't there. We
went to reformulated gasoline and gasoline prices went up to
over $2 a gallon.
You know, it is common sense. I am not in favor of saying
you don't get it on ``x'' date. But I want to tell you
something, I am interested. I think some of the environmental
groups have got to understand that the public now is at the
table; OK? I am the one who got the telephone calls last year
about ``What about the gasoline? Why is this happening?''
We had the FTC thing and everybody was saying, ``Oh, those
oil companies are out there gouging.''
The fact of the matter is they weren't. We don't have the
refinery capacity. We don't have the transmission lines. We
don't have a lot of things that are out there. So, somewhere
long the line we have to balance up the consumer, you know, the
person in my city today who is going to the soup kitchen,
hunger center, can't do things because their energy costs are
up there.
We don't burn coal any more. We are not burning enough of
it. We have to get to the point where we have one group saying,
``Well, yeah, yeah, yeah.'' But we have to get to common sense.
That is the trouble today in this country. Everybody is off on
their own thing. One special interest group here. Another
special interest group here.
It is about time we got in the same room and started to be
concerned about the people out there, yes, their environment
and their health, improving the environment. But some how
figuring it how, how do we work together? You just say, ``Well,
this is the way it is and if you don't like it--tough.''
Then, boom, you don't have the diesel fuel that is out
there. You have truckers that are working. We are in a
recession right now. The people are looking at us. We are
debating about this stuff. They are saying, ``What is going
on?''
I am sorry.
Senator Inhofe. I am not.
Senator Voinovich. Anyhow, I think that is where we are. We
are just trying to use common sense here.
Mr. Grumet. Mr. Chairman, I am not seeking the last word
for a moment. I would suggest, though, that there is a Clean
Air Act Advisory Committee created by Congress that has full
involvement of industry, academia, environmental groups, and
private citizens.
There is a Mobile Source Technical Subcommittee that is
already in the process of reviewing these rules. So, I couldn't
agree with you more, with the sentiments, the frustration, the
concern. I am merely suggesting that we have a process in place
that could provide that review without undermining the
investment certainty we need so we don't have the shortages
that we both fear.
Senator Voinovich. I have one question. You are talking
about refineries.
Mr. Grumet. Yes.
Senator Voinovich. And you are telling me you have to
increase the capacity of the refineries. You are saying that
New Source Review has something to do with that, and I
understand that, because of the uncertainty and so forth.
The issue I have is: Why can't we build more refineries?
Why aren't you building more refineries? You are saying we can
improve the capacity of the refineries. But the statistics that
I have say they are at 95, 94, and 98 percent. You said one
went down at 9 percent. How do we get more refineries?
Mr. Slaughter. Well, it is extremely difficult to build a
new refinery and this is because the regulations are extremely
strict. It is very difficult to get local support for heavy
manufacturing to be sited in any area.
So, therefore, you know, the industry has reluctantly
reached the conclusion that we are more likely to be able to
use existing sites and expand capacity at existing sites than
start new refineries. There hasn't been a new refinery built in
the U.S. for over 20 years.
So, the real question is: Will we be able to increase the
capacity of our existing plants enough to at least meet a large
part of growing demand?
The problem with this retroactive enforcement campaign is
that essential it has jumbled all of the rules for adding
capacity at existing sites. So, even that very promising area
where we might be able to increase refining capacity may well
be closed off to us.
I think it is extremely important that you make some
comments like the ones that you just made because one of the
difficulties is that when the industry tries to make what are
really very reasonable and rational points about supply
considerations, we are essentially denounced for opposing the
goals of regulations, the goals of which we support.
I think that unless policymakers like yourselves make
statements such as you have just made and refocus this debate
on the choices and balancing that have got to be made and done
in these rulemakings, it is not going to happen any more.
Senator Voinovich. Well, the issue is this: It is like what
do we do specifically? Is it rulemaking that is the problem? Is
it legislation that needs to be changed so that we butt up
against what is the problem so you can sit in the room and say,
if this is changed, this will happen?
Then Mr. Grumet knows what they are and says, ``Well, let
us talk about these things.''
Do you specifically have a list of five things or six
things that would give you the ability to increase your
refining in a short period of time, which we need, and then
maybe get at the issue of a new facility?
When you give us those things, then we can get the
environmental people and sit down with them.
Senator Inhofe. Where on that list would ``uncertainty''
be?
Mr. Slaughter. ``Uncertainty'' would be right up at the top
because the major problem is you have to have an effective
process to get permits and be able to build new capacity and
make changes to comply with the mandates that have already been
put on us.
The New Source Review regulations, the regulations that we
have to follow increasingly whenever we do anything to our
refineries, EPA says even when we change our catalysts, are so
confused and in such a mess. Everyone agrees on that point. No
one agrees as to what the fix should be. But everybody wants
one and the country needs one. The only way, I think, we are
going to get one is being brought to a table.
Someone is going to have to exercise leadership because not
everyone is going to get what he or she wants in a resolution
of these questions.
Senator Voinovich. I am concerned about New Source Review,
as you know, as certainty and changing the rules and so forth.
It would be really nice if the people who are concerned about
New Source Review would get into a room and come back with some
recommendations for this committee.
I don't think that Senator Murkowski's legislation deals
with that. It is a big problem. Then, again, if we could then
get the environmental groups in there to say here is what they
are planning on doing and seeing if something can be worked out
so that we move forward and at the same time protect and
improve our environment.
Mr. Grumet.
Mr. Grumet. Mr. Chairman, thank you. I appreciate being
thought of as an environmental group, but I should stress that
actually I represent the air pollution programs in the eight
Northeast States.
There is a concept that I think is a pathway through much
of this. You have talked about it before. That is that we
should set clear and comprehensive environmental limits and
then get out of the way and let industry figure out how to do
the rest.
That concept applies to almost everything we have talked
about today. There are innovative efforts in Oklahoma and other
States to adopt plant-wide applicability limits, which is in
essence a permit on the entire facility.
Within that real cap on that facility's emissions then
regulators could become responsibly disinterested in exactly
what and how the facility meets those standards.
In reformulated gasoline, if we could maintain the
performance standards but lift the prescriptive oxygen mandate
and give refiners the flexibility to achieve those performance
standards without telling them how to do it.
Broadly put, if we could set comprehensive multi-pollutant
caps like those envisioned in the legislation that Senators
Lieberman, Jeffords and many Northeast State Senators have
supported for utilities that ensure that the environmental
benefits on mercury, on sulfur, on NO2, on carbon
were addressed, we could then become responsibly disinterested
in how industry decides to meet those standards. We can use
market-based mechanisms.
The option is there. It is on the table. There have been, I
fear to tell you, meetings of people talking about NSR for 7
years. I would be happy to try to see if we could help
summarize some of that.
The pathway through this, I firmly believe, is a
combination of clear and comprehensive environmental standards
and then letting industry figure out how to achieve those
standards.
Senator Inhofe. Mr. Chairman, he had mentioned several
things that are our responsibilities in new compliances over
the years. The chart that I had here, each one of these has had
a direct effect.
It seems to me, in looking at it in terms of supply and
demand, we have not always been at that 100 percent refinery
capacity. Right now, you can argue between 94 and 100 percent.
But when you reach that point, everything that is new is passed
on.
That is where the chairman gets the telephone calls and I
get the telephone calls. That is what doesn't seem to be
addressed. To me, maybe it is not that simple, but certainly
supply and demand is the major concern here and the major
problem in terms of the costs.
Mr. Slaughter. Yes, Senator. I might just add that one of
the problems with all the flexibility programs, and everyone
agrees that we need more flexibility and set performance goals
and don't tell people what to do but just give them goals to
meet.
The devil is always in the details. There is a host of fine
print that has come along with all of those supposedly flexible
programs that basically often turns them into nothing more than
a copy of the existing system.
So, this again is why you do need everyone to come together
and for a fair result to be reached. But I think it does
require a good dose of leadership.
Senator Voinovich. I am going to ask my staff people to
identify them. We have to get on with this. One of the things
that bothers me about being a Senator is that I am a former
Governor and Senator Inhofe is a former Mayor. We have all
these hearings and all this testimony and I really appreciate
this. Mr. Porras, you came from California here. I really
appreciate what you are trying to do in your community and your
people live in a lot of areas where you have some bad stuff and
you are getting a lot more than they should be getting. I am
concerned about that.
I am just saying, we just talk and talk and talk. We are
running out of time. We have to get started. So, I would like
to start drafting multi-emissions. We have talked with some of
the environmental groups in New York. They said they are
interested in mercury. They are interested in NOx. They are
interested in SO2. They said, ``If you really took
care of those things and we could see quicker activity in this
area, we would be willing to sit at the table.''
They didn't say you have to do the carbon thing. They said,
``You could really guarantee that.''
So, we are going to start drafting our legislation and see
where people are. The NSR thing, we have to start looking at
that. That covers the whole gamut of just about everything. But
we need to get on with this. We are going to get on with it,
put some meat on the bones and start talking about this thing
and see if we can't get something done this year.
Mr. Porras. Mr. Chairman, may I make one comment?
Senator Voinovich. Mr. Porras, we will finish on your
comments.
Mr. Porras. I would just like to thank you first of all for
the leadership of convening this discussion on the issue of New
Source Review.
I think what is important is to go back and look at the
spirit of the Federal Clean Air Act, what was intended. Now
interpretations may have been confused along the way. But on
the point of New Source Review there was significant debate
when the act was promulgated.
Now, the compromise at that time, and again because of the
health implementations of the environmental degradation that
results from these facilities, because of that the compromise
that was reached was that New Source Review would be
transitioned into, best available control technology would be
transitioned into the industry through the course of time,
lessening the burden of the capital outlay of requiring it all
at once. I think the spirit of that is what needs to be focused
on so that the future policy will recognize that rather than
just throw the baby out with the bath water, let us find
something that works, something that still retains the spirit
of the Federal Clean Air Act to protect public health.
Senator Voinovich. I think that is a real good consensus. I
want to tell you one example and I will just finish on this. In
Lorraine, Ohio, USS Colby wants to put in a brand new blast
furnace, $100 million. Twenty-five million dollars of that is
going to be used to reduce pollution.
They are going to close down this other blast furnace that
is terrible, you know. It is still operating because of the
fact that it is grandfathered in. They were told that you can't
open the new one because the new one, which is the most modern
technology, is going to violate the new ambient air standards
that we set for the Lorain area. When we set the standards that
plant was just about shut down.
That is the kind of thing that I think doesn't make sense.
We need to start to look at it. ``Gee, they are going to put in
a new plant. They are going to reduce substantially; close down
this other thing that is polluting the air. That is kind of a
sensible thing.''
Then some bureaucrat comes along and says, ``Oh, I am
sorry, but the standard we set, your new blast furnace is not
going to reach that new standard.''
There is some kind of common sense that we need to insert
in the way this operates. If we can do that, I think we are
going to have a cleaner environment and I think we are going to
have an energy policy.
Thank you very much for being here. The hearing is
adjourned.
[Whereupon, at 11:37 a.m. the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
Statement of Hon. Ben Nighthorse Campbell, U.S. Senator from the State
of Colorado
Thank you, Mr. Chairman. I would like to welcome all of the
witnesses for appearing before the committee today. I am looking
forward to the testimony that you all will be providing us shortly on
aspects of environmental regulations and our energy policy. As you
know, I sit on the Energy Committee which oversees energy policy, and
now I sit on this committee which has jurisdiction over the Clean Air
Act and other important environmental issues. Being on both of these
committees enables me to help forge a responsible balance between
environmental protection and adequate energy supply, which is the scope
of this hearing. Let me stress that we have to find a balance between
the two, especially since we are experiencing this dire energy crisis.
I believe the Bush Administration has it just right--to maintain
our economic health, we must have a dependable energy policy. We need
an energy policy that makes the best use of both coal and natural gas.
We are a long way from a point where a majority of our energy supply is
not from these two fuel sources. So, we need to focus on coal and
natural gas now.
Many utilities have refused to invest in new coal-fired generation
plants because of the regulatory barriers they have to scale. These are
the reasons we have to revisit and sometimes recall regulations for a
short period of time. Coal is our main fuel for electricity generation,
and we need to be able to produce this type of power in an economically
sound manner.
Another set of regulations to reduce the sulfur content in diesel
fuel will have unintended consequences too. Trucks today run on diesel,
not wind or solar power. Everything we buy to eat and wear comes on a
truck. If the trucks stop rolling, this nation stops rolling. Over 95
percent of all commercial manufacturing goods and agricultural products
are shipped by truck at some point. 9.6 million people have jobs
directly or indirectly related to trucking.
In addition, trucking contributes over 5 percent of America's gross
domestic product.
Also, several Federal hydroelectric dams are constrained by
Endangered Species Act restrictions. Some of the restrictions are
needed, but we have to consider any possible way to reverse our current
energy trends, even if that means revisiting some of the regulations.
Many will say that we are sacrificing the environment for energy,
but that is not the case. Strict regulations and standards have been
set for sulfur dioxide which causes acid rain and nitrogen oxide which
causes smog. But, when one regulation was not put forth to limit
emissions of carbon dioxide, many started to say that the Bush
Administration was attacking the which is just plain wrong.
environment,
Caps on carbon dioxide would be so expensive that coal fired
generation plants, which now provide over half the nation's electric
power, could be forced to shut down. This would further strain our
electricity grids and put the entire country into a position where
rolling blackouts would be common, which we cannot allow to happen. We
need to revisit which ever regulations need to be looked at. No one is
going to take away a regulation on a whim; there is always a reason.
The main reason is to get our nation out of this energy crisis. Then
once we get a hold of the crisis and we are not in immediate danger of
repeating it, we can revisit the regulations again.
I ask Unanimous Consent that a white paper written by the Assistant
Director of the Colorado Department of Natural Resources, entitled
``The Impact of Environmental Regulations on Hydropower Generation,''
be included in the Record. This document gives a good view of how some
regulations are affecting hydropower in my home State of Colorado.
I will have some questions that I would like the witnesses to
address so that we can further explore this issue during the time for
questions.
Thank you Mr. Chairman.
______
[February 15, 2001]
The Impact of Environmental Regulations on Hydropower Generation
(By Kent Holsinger, Assistant Director, Colorado Department of Natural
Resources)
Introduction
The value of electrical power is immeasurable. It heats our homes,
offices and schools, lights our way in the dark, delivers us the news,
and allows us to produce goods and services. The United States, at
least until recently, was the envy of the world when it came to
electric power generation. The cost of our power was 37 percent lower
than in Europe, 49 percent lower than in Germany, and 73 percent lower
than in Japan. What happened?
Population migration to the West, increasing reliance on computers,
the Internet, and cellular phones, among other things, has propelled
the demand for energy to epic proportions. Meanwhile, increased
regulation and environmental demands on water in the West have created
an alchemy of issues and a poignant contradiction: Consumers want more
power at affordable prices; Environmentalists want fewer dams and more
restrictions on existing dams.
Hydroelectric Power
The Western Area Power Administration (Western) markets and
delivers hydroelectric power from 55 dams in the West, the vast
majority of which are owned and operated by the Bureau of Reclamation
(the Bureau). The Bureau is the nation's second largest hydroelectric
producer. Hydropower, has been, and continues to be, critical to the
nation and the West.
In 1941 Franklin Delano Roosevelt tasked his countrymen to build an
arsenal of ships, boats and planes capable of defending the United
States and the world from Hitler's advancing forces. The buildup
required huge quantities of aluminum, which, in turn, required
staggering amounts of energy. Roosevelt's goal was achieved because of
nearly unlimited, cheap hydropower production in the Northwest.
Today, hydroelectric power produces roughly 13 percent of the
nation's generating capacity (nuclear power accounts for 14 percent and
fossil fuels generate 62 percent). But hydropower has many advantages
over other power sources. Not only are hydroelectric plants more
reliable and durable than other sources, they are inexpensive to
operate, clean and extraordinarily efficient.
Hydroelectric plants operate at 85 to 90 percent efficiency--more
than twice that of fossil-fueled plants. Water storage in reservoirs
serves as the best means to store large amounts of electricity. Need
more power? Release some water. Simple as that. No mining; no
transportation costs period. Hydroelectric plants are also flexible in
meeting peak power demands. Their ability to start quickly and adjust
to load changes make hydroelectric dams invaluable during times of high
energy demand.
The Western Area Power Administration depends on hydroelectric
power to serve millions of consumers in 15 western States (Arizona,
California, Colorado, Iowa, Kansas, Minnesota, Montana, Nebraska,
Nevada, New Mexico, North Dakota, South Dakota, Texas, Utah and
Wyoming). In 1999, Western generated $886 million in revenues and
repaid an estimated $149 million of investments in Federal water
projects. Power marketing administrations, such as Western and the
Bonneville Power Administration, (Bonneville) were built to market and
deliver affordable power to rural communities while paying the debt
service on Federal water projects. They were doing just that until the
U.S. Fish and Wildlife Service started demanding flows for endangered
fish over and above irrigation and power production needs.
Environmental Restrictions on Hydroelectric Power
There are environmental impacts when rivers are harnessed to
produce power: siltation and barriers to fish migration are among the
foremost, but at what cost do we forego power production? In recent
years, the U.S. Fish and Wildlife Service and the National Marine
Fisheries Service have been directing the Bureau to run hydroelectric
plants not for power generation, but for environmental needs including
species listed under the Endangered Species Act.
In the Colorado River Basin, when the U.S. Fish and Wildlife
Service demands flows from the Bureau in the spring to mimic natural
flooding this depletes critical summer supplies and releases stored
water when power usage and demand is lowest. With low reservoir levels,
power marketing administrations are then poorly equipped to deal with
peak power demands during hot and dry summers.
Take last summer: its dry as dust, the temperature soars and so
does the demand for energy. But the Aspinall Unit, a series of three
hydro-producing reservoirs in Colorado, had no water for peaking power.
To make matters worse, the U.S. Fish and Wildlife Service forced the
Bureau to decrease reservoir releases to minimum levels so the Federal
Government could study the effects of drought on fish. Western, in
turn, had to purchase power on the open market (when costs were 3.6
times higher than just 1 year before). In sum, the U.S. Fish and
Wildlife Service caused Western to release water when there was no
market for power and to purchase power when the market was at its
highest. The potential cost in lost power generation has yet to be
quantified. Cold comfort for consumers.
Impacts
Several Federal hydroelectric dams in the Upper Basin of the
Colorado River are constrained by Endangered Species Act restrictions.
In 1996, the Department of Interior issued a Record of Decision that
slashed capacity at Glen Canyon by 456 megawatts for environmental
reasons primarily fish flows and sand bars. One megawatt is roughly the
energy required to supply one thousand homes. The Environmental Impact
Statement alone cost $104 million to complete. Today, reoperations cost
an estimated $100 million annually! Moreover, in the Spring and Summer
of 2000, a 6-month test operation for additional endangered fish
benefits was conducted at a cost of $3.5 million. The cost to replace 6
months of lost electricity was between $16 and $24 million.
Other examples abound. Since 1991, Flaming Gorge Dam has been
subject to ESA requirements at an estimated cost of $7.2 million
annually (based on today's prices). Operations of the Navajo
hydroelectric plant in New Mexico have also been hindered. The Bureau
is now doing an EIS on Navajo reoperations that should outline some of
these problems.
Things are even worse in the Pacific Northwest. The U.S. Army Corps
of Engineers and the Bureau own and operate 29 hydro projects on the
Columbia and Snake Rivers in the Northwest. Those dams generate the
least expensive electricity in the country. Unlike the Colorado River
Basin, peak demands in the Northwest occur due to heating demand in the
winter. The Bonneville Power Administration markets and distributes
power from these Federal dams. Power revenues pay for the operation of
the projects, debt service to repay initial investments in the system,
and flow and habitat improvements for endangered fish.
In a recent report, the Northwest Power Pool, a seven-State
coalition of power interests in the Pacific Northwest, warned that cold
snaps in the region will trigger blackouts should dry conditions
continue. Reservoir storage in key hydroelectric facilities is only 63
percent of average in part because of dry hydrology and releases for
fish last summer. Historically, BPA managed the system to supply power
throughout the duration of a 4-year drought. Since the application of
the Endangered Species Act, the system can only supply power for a 10-
month drought.
While salmon runs are at all time highs, the National Marine
Fisheries Service (NMFS) has listed up to 40 distinct subspecies under
the Endangered Species Act. These fish have different spawning runs and
different needs at different times. Some biologists protest on the
grounds Northwest salmon should be lumped into much broader categories
as salmon have been in the Northeastern United States. Overall, salmon
numbers are very high in most of the Northwest. But Federal biologists
are unwavering. In fact, they advocate killing, yes killing, up to one-
third of the hatchery raised salmon that have successfully migrated
above the Bonneville dam because they are not the ``right'' fish.
Federal biologists also insist on hugely controversial flow
programs for the salmon and steelhead. Fish flows affect power
generation in two ways: forced spills and flow augmentation. Last week,
electricity prices reached over 30 times the price Bonneville sells to
its customers. The difference in prices cost the agency $50 million
over 4 days in January. Should the National Marine Fisheries Service
continue to run the hydroelectric plants for fish, Bonneville will have
to purchase $1.3 billion to $2.6 billion in electricity to meet its
power supply obligations. Should dry conditions persist, those numbers
could increase by a factor of ten. Such a devastating blow could hurl
an already uneasy economy into the abyss. Some utilities are already
teetering on financial ruin.
Bonneville has declared a power emergency to release water slated
for 12 spring and summer runs of Columbia Basin salmon to generate
electricity. But there is no lasting authority to disregard fish flows
and without significant precipitation even that won't be enough.
Conclusion
In today's computer-driven society, dependable supplies of
electrical power are more important than ever. Power marketing
administrations are already purchasing power on the open market and
passing along outlandish price increases to consumers. The cost for
Endangered Species Act and environmental protections is breathtaking.
Yet, some environmental groups that clamor to remove dams for fish
habitat have been strangely quiet amidst the recent crisis. Could they
be contemplating whether or not to expend the energy on their e-mail
networks?
Should the U.S. Fish and Wildlife Service and the National Marine
Fisheries Service continue to force power marketing administrations to
operate for the benefit of fish rather than power, the West could be
cast into darkness and the nation propelled into a bleak economic
future. Truly, balancing economic benefits with environmental
protection is a monumental task. But when the stakes are this high,
policymakers must question how best to achieve that balance. Only
through sound science and truly collaborative efforts may stakeholders
and Federal decisionmakers achieve these goals. If they do, the power
marketing administrations will continue generating so that supply is
strong and prices are low and all utilities (and consumers) will
benefit.
Kent Holsinger is the Assistant Director for water issues at the
Colorado Department of Natural Resources. He can be reached at (303)
866-3311.
__________
Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New
Jersey
Mr. Chairman, Thank you for holding a hearing on this very
important topic. As we are all aware, our nation's energy policy and
our global environment are closely interconnected. That is why we must
remain vigilant in ensuring that we pursue an energy policy that meets
our short-term needs, while taking into account the legacy that we, as
stewards of our nation's environment, leave behind.
I am particularly grateful that the witnesses appearing today have
spent many long hours preparing to inform us and the public on this
very important issue.
The air we breathe, the water we drink and the land upon which we
live are precious resources. To that end, I hope that, in pursuing an
energy policy, we keep in mind not only ways to keep those natural
resources clean with existing sources of energy but also invest in
finding newer, cleaner and renewable energy sources.
__________
Statement of Dr. Robert L. Hirsch, Member, Board of the Annapolis
Center for Science Based Public Policy
Mr. Chairman and distinguished committee members: I am Dr. Robert
Hirsch, a Member of the Board of the Annapolis Center for Science Based
Public Policy, a non-partisan, not-for-profit study group. I am also
chairman of the Board on Energy and Environmental Systems at the
National Academies and a senior energy analyst at RAND. My experience
is in energy technology management and analysis in both government and
industry in many areas of energy technology. The views expressed here
are my own and do not necessarily represent positions of my three
affiliations.
My messages to you today are as follows:
1. We are experiencing a new kind of U.S. energy crisis that has
only begun, and we need to take decisive action.
2. There is no silver bullet to solve our problems.
3. The fundamental challenge that we face is balance, balance, and
balance.
The U.S. Energy Crisis
Why do I call this a new kind of energy crisis? It's because the
problems are more complicated than an oil embargo or a Gulf war. Our
challenges involve many different aspects of our very complex U.S.
energy infrastructure. Furthermore, I believe that our problems will
take upwards of a decade or more to fix. Why so long? Because the
problems are large in number, scale, and cost, and because we are
simultaneously working to reduce some of the remaining environmental,
health and safety risks associated with our energy system.
By now you've probably heard enough about the electricity problems
in California, the natural gas price spikes throughout the country, the
heating oil problems in the Northeast, and the gasoline problems in the
Midwest. These problems were predictable, and, indeed, there were some
unheeded warnings along the way. Part of the reason that we are in such
a pickle is that there was no one in the Federal Government responsible
for the wellbeing of the U.S. energy system--no one with authority,
responsibility and respect to warn us when potentially significant
problems began to rear their ugly heads. The Department of Energy is
responsible for nuclear weapons, environmental cleanup and, almost
incidentally, energy. FERC is responsible for regulating various
elements of interstate energy flows. The EPA is responsible for
environmental care, and the States are responsible for energy matters
within their borders.
The energy goose has been laying golden eggs for so long that
energy is off the radar screen of most people, until we have the
occasional trauma. Right now, we are seeing a number of traumas
simultaneously, and there is reason to believe that there are more to
come.
For instance, in addition to the problems I just mentioned, our oil
refineries are running at near 100 percent capacity, and we have slowly
been increasing our imports of refined products--adding another
dependence on foreign sources. No new refineries have been built in the
U.S. since the 1970's, and a number have been shut down. Furthermore,
we are in the process of phasing out an important gasoline additive,
MTBE, an action that will further reduce refinery production rates at a
time when demand is continuing to increase. In addition, the EPA has
mandated much lower levels of sulfur in gasoline and diesel fuels,
necessitating significant new investments in refineries in both the
U.S. and offshore to supply the U.S. with our increasing needs.
Refining is historically a low return-on-investment business, so
many companies are naturally reluctant to invest the vast sums of money
needed for mandated changes. Am I suggesting that we reduce our
environmental goals? Most certainly not. In my opinion, we must reduce
sulfur levels in our fuels in order to further reduce air pollution. I
just wish that we could accomplish our laudable goals with less
acrimony.
How about siting and building the new electric transmission lines
needed to deliver higher levels of electric power? That's a not-so-
obvious problem in California and elsewhere. As you may know, siting
new transmission lines has encountered interminable delays in many
parts of the country and threatens to choke off higher power demands in
a number of locations.
What about natural gas pipelines and petroleum product pipelines?
Both are problems in many areas. Permits for new pipelines are tough to
come by, and land for right-of-ways is increasingly expensive. At a
meeting in New Orleans 2 weeks ago, a major oil company representative
indicated that his company is using drag reducing agents in some of
their pipelines because their pipelines are operating at full capacity.
With petroleum product demands increasing, that indicates trouble
ahead! And the list of energy problems goes on.
No Silver Bullets
If you want more electric power, you must build more power plants.
Natural gas is clean and was very cheap until recently. Over 90 percent
of planned new generation in the U.S. will be natural gas fired. In one
sense, that's good because of the environmental attractiveness of
natural gas generators with exhaust gas cleanup. In another sense, it's
troubling because that mushrooming dependence on natural gas will make
the country ever more vulnerable to future natural gas disruptions and
price spikes. Analysts can run complex models that can demonstrate that
over-dependence on a single fuel will increase national
vulnerabilities. But in fact it's common sense. For instance, if all
your retirement money was in the NASDAQ over the past year, you'd have
problems. If all your money was in bonds in the early 1990's, you would
have missed some golden opportunities.
The answer isn't all gas or all coal or all nuclear or all
renewables. Each has its strengths and weaknesses. For instance, many
people don't realize that for large power loads, the popular renewables
are simply fuel savers for other power plants, and so their ultimate
contribution to U.S. energy needs will be limited, even after their
costs are brought down further.
Energy efficiency is important and must be part of the equation.
However, making a major difference in energy usage on a national scale
would require much higher energy prices or heavy Federal Government
intervention and a decade or more of large investments.
Be wary of anyone who tries to sell you a silver bullet in energy.
There are none. A diversity of approaches is essential.
Balance, Balance, Balance
Where does all of this lead? To me, we need a better-balanced
approach. We need a diversity of energy sources and energy efficiency,
if we are to minimize our costs and vulnerabilities. However, that
would likely require Federal intervention, which would not be
universally welcomed.
And let's not forget energy research and development. Our Federal
investments at DOE and its predecessor agencies have yielded very
important technologies, some of which are in use today and others that
are on the shelf, ready when we need them.
Also, it may be that we will need to be temporarily flexible on
some of our near-term environmental goals to help get us back on an
even keel in energy. They're doing that in California now. However, I,
for one, do not endorse turning permanently the clock back on pollution
reduction.
Finally, let's not be afraid to have open honest dialog on our
options. Every one of them has its advantages and disadvantages. Let's
discuss our options objectively and strive to minimize the extremism
and misinformation that so often characterizes such discussions. Let's
put someone in charge of overseeing our nation's energy system, please.
If it's to be the Secretary of Energy, let's make that clear by law and
then provide the authority and budgets needed for the task.
Postscript: When Federal agencies or the Congress need expert, non-
partisan, non-biased analysis, the three institutions with which I am
involved have often been of help. The National Academies draw on the
nation's most experienced and capable experts and provide the nation's
highest level, most respected, in-depth studies of the full range of
technical and technology-related matters. The Annapolis Center for
Science Based Public Policy also draws on national experts and has
provided relatively quick, brief, lay-level perspectives on narrower
topics. RAND has in-house expertise across the spectrum of technical,
environmental, economic and behavioral disciplines, and has provided
analysis on small to very large issues, often relatively rapidly.
__________
Statement of Eliot Spitzer, Attorney General, State of New York
Thank you for inviting me to testify before this subcommittee
concerning the interaction between our environmental regulations and
our nation's energy policy. This is a critical issue, both in the
short-term and over the longer term.
Introduction
While we usually take for granted the electricity that permeates
our life and fuels our modern society, we cannot do so any longer.
Recent events in California have forced us to look carefully at our
energy supply and examine it critically. We must ensure Americans with
a reliable and reasonably priced power supply. Moreover, to be reliable
over the long term, the supply must be diverse, so that shortages or
price spikes in any one fuel do not cause excessive dislocation.
Yet while we seek a secure energy future, we now know that we must
also consider the environmental and health impacts of power generation
and use. This panel has correctly noted that the two issues are closely
linked, given that the power sector is the industrial sector that
causes by far the most air pollution. A sound and balanced energy plan
will help us to achieve a reliable and clean energy future.
As many of you have noted, we have not been able to implement a
comprehensive energy policy at either the Federal or State level.
Federal programs have been at best sporadic. In New York, energy policy
has also been largely sporadic, addressing issues, if at all, on a one-
by-one basis. The State Energy Office was abolished 8 years ago and any
efforts to create and implement a comprehensive State energy plan were
dropped. I recently released a report, entitled Attorney General's
Action Plan for a Balanced Electric Power Policy in New York State. It
can be found at our web site at http://www.oag.state.ny.us/press/
reports/power--policy.pdf. I incorporate it with this testimony because
I think it represents a comprehensive blueprint at the State level for
considering and balancing the needs for electricity and the need to
protect our health and environment. I suggest that the Federal
Government could do well to consider such an approach, and I urge you
to review the report carefully.
Let me be crystal clear: there need be no conflict between
environmental protection and a sound energy policy. Indeed, careful
attention to environmental and health protections will enhance, not
harm, our energy security. Our energy supply must be reliable and
affordable. However, it must not be only superficially inexpensive,
appearing cheap because of hidden costs borne elsewhere. An energy
supply that is provided at the cost of harm to the public health or the
environment--imposing enormous, but usually unquantified, costs on the
American public through health care costs, lost productivity, premature
mortality, or lost enjoyment of health or natural resources--is not in
the nation's best interests. Proposals for such a policy will backfire.
I urge you to work together, as we are trying to do in New York, to
move the country toward a balanced energy policy and to reject the
spurious claim that environmental protections are the cause of the
energy squeeze we see today. Environmental protections are not the
cause of, but part of the solution to, our energy challenge. It was the
lack of demand, not environmental regulations, that led companies not
to build new power plants over the last decade; indeed, some
environmentalists would support some new plants that, if linked with
strong efficiency programs, would take the place of our dirtiest
existing plants.
I will not repeat all of the details set forth in the report.
Instead, below, I will focus on the clean air litigation that has been
the subject of some scrutiny and controversy, in an effort to dispel
many of the misperceptions concerning those cases.
Environmental and Health Impacts of Energy Choices
It is critical that any discussion of energy policies not
underestimate the impacts of electricity generation. The level of
impacts is simply not acceptable. As Senator Voinovich said, we want to
go forward, not backward. We cannot go forward, however, if we either
weaken or ignore existing clean air laws. It was this realization that
led New York to its power plant litigation initiative.
Electric utility plants collectively account for about 70 percent
of annual sulfur dioxide (SO2) emissions and 30 percent of
nitrogen oxide (NOx) emissions in the United States, pollutants that
have significant health and environmental impacts. SO2
interacts in the atmosphere to form sulfate aerosols, which may be
transported long distances through the air. These transported sulfate
aerosols are both acidic and respirable, contributing to acid rain and
smog. Particulate matter (PM) is the term for solid or liquid particles
found in the air. Particulate matter composed of particles with
diameters of 10 micrometers or less is referred to as PM10,
while particles with diameters of 2.5 microns or less are referred to
as PM2.5. Coal fired power plants are a major source of both
PM10 and PM2.5. Not only do power plants emit PM
directly, but emissions of NOx and SO2 from these plants
lead to the formation of fine nitrate and sulfate particles that are
particularly harmful to the respiratory system.
Numerous studies, from an EPA acid rain study to a National Oceanic
and Atmospheric Administration back trajectory analysis, to many
private studies, demonstrate conclusively that emissions from coal-
fired power plants in the Midwest and mid-Atlantic travel on prevailing
winds to the Northeast. One 1985 New York study found that over 80
percent of the sulfate deposition in New York's Adirondack Park came
from sources outside New York.
In the eastern United States, sulfate aerosols make up 25 to 50
percent of the inhalable (PM2.5) particles on average and
cause up to 75 percent of the aerosol pollution during extreme
transport episodes. People exposed to sulfur dioxide can suffer a
variety of respiratory ailments. Nitrogen oxides contribute to the
formation of ozone in locations downwind from the source of the
pollution. Ground level ozone also contributes to respiratory
illnesses. Particulate matter is an extremely harmful pollutant that
contributes to a number of respiratory difficulties, ranging from
bronchitis to asthma and even premature death. At least one study
performed for the Federal Government has attributed 30,000 premature
deaths nationwide each year to fine PM attributable to power plant
emissions.
Emissions of NOx and SO2 also cause extensive harm to
natural resources. In the atmosphere, NOx and SO2 are
converted into nitric and sulfuric acids, which fall to the ground as
acid particles, rain, and snow. Power plant emissions are largely
responsible for damage to forests, lakes, and wildlife throughout the
northeast. For example, acid deposition has caused 20 percent of the
lakes in New York's Adirondack Park region to become too acidic to
support fish life. Federal studies conclude that the percentage of
acidified lakes is expected to increase or even double over the next
four decades unless upwind emissions of NOx and SO2,
primarily from coal-fired power plants, are reduced extensively.
Similar impacts are seen in the lakes and streams of other northeastern
States such as Vermont and New Hampshire. This year, when the record
snow pack in northern New York and New England melts, the streams and
lakes will suffer a lethal acid shock.
In addition, acid deposition contributes to the widespread death of
spruce forests in high elevation areas of the northeast. According to a
recent study, more than half of large canopy trees in the Adirondack
Mountains of New York and the Green Mountains of Vermont and
approximately one quarter of large canopy trees in the White Mountains
of New Hampshire have died since the 1960's. Moreover, ozone, which is
also a product of NOx emissions, causes foliar injury (injury to plant
leaves) and can reduce plant growth and reproduction.
Visibility in Class I national parks and wilderness areas has
suffered severe deterioration from manmade haze created in large part
by sulfate particles resulting from power plant emissions. Sulfate
particles swell up in the often humid weather conditions of the
northeast and scatter more light (thereby reducing visibility more)
than most other kinds of particles. In Vermont, for instance, sulfates
cause about half of the fine particle pollution, but closer to 75
percent of the visibility impairment obscuring the landscape for
visitors and residents.
Nitrogen deposition also contributes to the eutrophication of
coastal bays and estuaries, which occurs when an excess of nitrogen
causes algae growth that threatens the survival of other aquatic
species. For example, the Chesapeake Bay, which has severe
eutrophication problems, receives twenty-five percent of its nitrogen
from sources of NOx emissions, primarily from power plants located to
the west of the Chesapeake Bay watershed. Long Island Sound suffers
similar problems, in large part from nitrogen falling onto New York and
Connecticut lands, and from there flowing into the Sound.
Finally, New York's and our nation's cultural heritage--our
buildings and our monuments--are corroding under the onslaught of acid
rain. Some of our finest buildings in the Northeast are losing their
detail and beginning to look as if they were melting.
These harms of pollution are quite real; they are not merely a
matter of environmental preferences. Asthma, premature mortality, and
other respiratory diseases cost Americans billions of dollars each
year. The loss of recreational jobs, tourism, and commercial fishing,
plus the increased expense of water treatment, cost the nation billions
each year. The loss of our architectural history is priceless, and it
costs many millions each year just to stem the destruction.
New Source Review Law and Regulations
To address these harms of pollution, my office sued the coal-fired
power plants that are the source of much of this air pollution. We
filed notices of intent to sue against 17 coal-fired electricity plants
located in upwind States in September 1999. We play fair in New York
and do not only pursue out-of-state sources, so shortly thereafter we,
with the State Department of Environmental Conservation, commenced
enforcement action against eight coal-fired plants in New York as well.
Shortly after we filed our notices of intent, the Federal Environmental
Protection Agency commenced legal action against a number of coal-fired
plants. A number of other northeast States joined our actions. We have
now reached agreements in principle with two companies--the Virginia
Electric Power Company and Cinergy Corporation. In addition, we are in
active discussions with the owners of several of the New York coal-
fired plants to resolve their liability.
The aim of the Clean Air Act litigation brought by New York, other
northeast States, the Federal EPA and various environmental
organizations is to address these harms by going to their source.
Whereas in the past citizens and States had looked entirely to the
Federal Government to address interstate pollution, we decided to
confront the power plants themselves. While some have argued that the
interpretation of the New Source Review (NSR) provisions in these
lawsuits was new, in fact the interpretation stays entirely within EPA
interpretations and court rulings over a decade old. We rely on EPA
memoranda and court decisions from the previous Reagan and Bush
Administrations. There was nothing new about the interpretation. What
was new was only the fact that we decided to investigate and identify
violations.
Congress created the NSR provisions (including the related
Prevention of Significant Deterioration (PSD) provisions) to insure
that increased pollution from the construction of new emissions sources
or the modification of existing emission sources be minimized, and to
ensure that construction activities would be consistent with air
quality planning requirements. Generally, the NSR program requires such
sources to obtain permits from the permitting authority before the
sources undertake construction projects if those projects will result
in an increase in pollutants above a de minimis amount. In addition,
the NSR regulations usually require that sources install state-of-the-
art controls to limit or eliminate pollution. Congress required and
fully expected that those older existing sources would either
incorporate the required controls as they underwent ``modifications,''
or would instead be allowed to ``die'' and be replaced with new, state-
of-the-art units that fully complied with pollution control
requirements.
The Clean Air Act defines ``modification'' as a physical change or
change in the method of operation that increases the amount of an air
pollutant emitted by the source. 42 U.S.C. Sec. 7411(a). Courts for
many years have interpreted the Clean Air Act term ``modification''
broadly. Alabama Power Co. v. Costle, 636 F.2d 323, 400 (D.C. Cir.
1979) (the term `modification' is nowhere limited to physical changes
exceeding a certain magnitude''); Wisconsin Electric Power Co. v.
Reilly, 893 F.2d 901, 905 (7th Cir. 1990) (``WEPCO'') (``[e]ven at
first blush, the potential reach of these modification provisions is
apparent: the most trivial activities--the replacement of leaky pipes,
for example--may trigger the modification provisions if the change
results in an increase in the emissions of a facility.'') The WEPCO
court noted that Congress did not intend to provide ``indefinite
immunity [to grandfathered facilities] from the provisions of [the
Clean Air Act],'' id. at 909, and that ``courts considering the
modification provisions of [the Clean Air Act] have assumed that >any
physical change' means precisely that.'' Id. at 908 (emphasis added)
(citations omitted). EPA recognized, however, that the sweeping
statutory definition of ``modification'' to include ``any physical
change'' could have nonsensical results if carried to an extreme (``the
definition of physical or operational change in Section 111(a)(4)
could, standing alone, encompass the most mundane activities at an
industrial facility (even the repair or replacement of a single leaky
pipe, or a change in the way that pipe is utilized)''). 57 Fed. Reg.
32,314, 32,316 (July 21, 1992). Thus, since 1977, Federal regulations
have exempted routine maintenance, repair, and replacement from the
definition of modification. 40 CFR 52.21(b)(2)(iii). EPA historically
has analyzed and applied the ``routine maintenance'' exemption to
modification by using a common sense test that assesses four primary
factors--(1) the nature and extent; (2) purpose; (3) frequency; and (4)
cost of the proposed work. See, e.g., Memorandum from Don R. Clay, EPA
Acting Assistant Administrator for Air and Radiation, to David A. Kee,
Air and Radiation Division, EPA Region V (Sept. 9, 1988). Our cases
follow these standards.
The NSR provisions also apply only if there is a significant
increase in pollution due to the modification. Methods for calculating
emissions increases generally compare the emissions prior to the
modification and those after the modification. For post-modification
emissions, however, a company undergoing NSR review at the time of the
modification would have to project the emissions after the modification
in its permit application. While the analysis of emissions is still
being refined in the cases under litigation as documents are being made
available by the defendants, in the Tennessee Valley Authority case,
the Environmental Appeals Board found that emissions did increase under
methods favorable to industry at all units at which violations were
alleged.
As noted above, the standards for these cases derive from EPA
memoranda and litigation dating from the Reagan and Bush
Administrations. They are not new interpretations. They do not address
true ``routine'' maintenance; indeed, industry documents indicate that
industry did not consider the modifications at issue to be routine
maintenance. Rather, the modifications were large-scale capital
projects that required significant advance planning. They were intended
to address problems that routine repair or replacement had been unable
to address. Nor were the upgrades modest; in most cases they cost
millions of dollars. By contrast, activities considered by industry to
be ``routine'' include more mundane actions such as the day-to-day
repairs of leaky or broken pipes. Industry documents further show that
industry officials were aware of the potential applicability of the NSR
provisions to their power plant life-extension projects.
Clean Air Act Litigation Settlements
In discussing resolution of these lawsuits with the companies, we
and EPA recognized the need to ensure the nation's energy supply. We
gave the companies significant time to install the needed controls.
These lawsuits will have absolutely no detrimental effect on our energy
supply. We ensured that the upgrades could be implemented consistent
with the operating and financial needs and abilities of the companies.
Indeed, we expect that pursuant to the settlements, some facilities
will be repowered and expanded. Moreover, these settlements will
provide the regulatory certainty that companies need to invest. By
providing clear guidelines, these settlements delineate a path through
the environmental laws by allowing the companies to invest in their
coal plants so long as they invest in state-of-the-art controls. The
result is to improve our energy diversity, increase our energy supply,
and improve the environment, a win-win result.
While the actual agreements in principle that we have reached are
still confidential--we are working to finalize the language of the
consent orders now--the outline of those settlements is public. Those
outlines provide sufficient detail to see that, far from harming our
energy supply, the settlements will enhance it.
In the first case, with Virginia Electric Power Company (VEPCO), we
had alleged that VEPCO made modifications to its plant that
significantly increased emissions, without installing concomitant
pollution controls. For instance, VEPCO rebuilt the boilers at several
plants, changing their design, and expanded the coal yard at its Mount
Storm plant by 50 percent. (VEPCO also doubled the height of the
smokestack at Mount Storm to 730 feet to ensure that air pollution from
the facility did not fall on nearby communities. The result is that
much of the plant's emissions now drift hundreds of miles on prevailing
winds to distant States such as New York.)
The agreement in principle covers eight plants in Virginia and West
Virginia (Mount Storm, at Mount Storm Lake, West Virginia;
Chesterfield, in Chester, Virginia; Bremo, in Bremo Bluff, Virginia;
Chesapeake Energy Center, in Chesapeake, Virginia; Clover, in Clover,
Virginia; North Branch, in Bayard, West Virginia; Possum Point, in
Dumfries, Virginia; and Yorktown, in Yorktown, Virginia.). In the
agreement in principle, VEPCO agreed to cut pollution of sulfur dioxide
and nitrogen oxides by approximately 70 percent over the next 12 years.
(Of course, the primary beneficiaries of these pollution reductions
will be people in Virginia and West Virginia near the plants.)
Capacity, however, will not be decreased. It will install pollution
controls at its largest units on a schedule consistent with its rate
restrictions. The consent order will also provide for VEPCO's funding
of certain energy efficiency and renewable energy projects in New York
and several other States. Finally, the settlement will provide VEPCO
with clear guidelines for changes and upgrades acceptable to EPA that
can be made in the future.
The settlement with Cinergy Corporation addresses 10 power plants
(Cayuga, Cayuga, IN; Gallagher, New Albany, IN; Wabash River, West
Terre Haute, IN; Beckjord, New Richmond, OH; Gibson, Owensville, IN;
Miami Fort, North Bend, OH; Zimmer, Moscow, OH; East Bend, Rabbit Hash,
KY; Edwardsport, Edwardsport, IN; and Noblesville, Noblesville, IN).
This agreement in principle requires substantial pollution reductions
and allows Cinergy to use new technology if appropriate so long as the
new technology meets certain emission limitations. Like the VEPCO
settlement, this agreement should not result in a decrease in Cinergy's
generating capacity; in fact, with the repowering of several units,
Cinergy's generating capacity should increase. The consent order will
also provide for the funding of energy efficiency and renewable energy
efforts.
There is no question, finally, that these companies can easily
afford the settlements. As others who have appeared before you have
testified, coal is by far the least expensive fuel now. These power
plants, being very old, have been fully depreciated. The fixed and
variable costs of running them are exceedingly low. Yet, while their
costs are remaining low, the price consumers are paying for electricity
is increasing dramatically. This revenue increase is a windfall for
these old coal-fired plants. Our estimates are that rates will have to
increase very little, or not at all, for the companies to afford the
clean air pollution upgrades the settlements will require. Certainly,
the rates will remain well below rates in the Northeast. In short,
these lawsuits, while they will cost some money, in no way jeopardize
either the financial health of the companies or the burdens on the
ratepayers.
The VEPCO and Cinergy settlements are not legal straight-jackets as
some have unfairly portrayed them. In the enforcement context, we,
along with officials from EPA and the Department of Justice, can weigh
and have weighed numerous issues that may be unique to each company. We
have allowed technological flexibility. We have recognized financial
constraints and provided ample time for planning and implementation.
These lawsuits and settlements represent an extraordinary accommodation
of clean air and energy needs. I find it nothing short of amazing that
efforts to enforce the law--really no different from the myriad of
other law enforcement efforts my office and many other prosecutors
undertake ranging from drug crimes to fraud investigations--have been
so criticized. Rather, they should be applauded.
There has been some discussion before this subcommittee of the
PowerSpan technology that is being developed by several companies,
including some we have sued. We are meeting next week with PowerSpan
representatives to investigate and understand this technology better.
We have also been discussing other innovative technology with the
private sector and with EPA. We are open to and enthusiastic about new
technologies, particularly ones that may control mercury or carbon
dioxide emissions. It would be a big mistake, and completely
unjustified, to think that we are locked into old technologies. At the
moment, of course, this PowerSpan technology appears promising, but not
proven on a large scale; it is not yet as good as others for most
pollutants. We intend to keep following its development and give it,
and the power companies that will use it, appropriate opportunities for
deployment. In sum, these lawsuits are achieving major environmental
improvements while helping, and not in any way harming, our energy
security. For that reason, I emphatically disagree--respectfully but
vehemently--with the request by Senators Inhofe and Breaux that these
cases be suspended. Regardless of what the Administration decides, we
intend to pursue our cases both within and outside of New York.
Economic Value of Clean Air
Some have taken issue with the value of clean air, suggesting that
it is merely a matter of convenience and not a matter of dollars and
cents. Of course, anyone who has seen a child suffering an asthma
attack, an older person struggling for breath on a smoggy day, or an
adult friend wheezing, would recognize the absurdity of drawing this
distinction. But lest there be any doubt, studies demonstrate that
clean air is good for the American economy. A study done for the
Federal Government found that the net benefits of the Clean Air Act
over the last 20 years, ranging from increased crop production to
decreased health care costs, totaled over $22 trillion. Other studies
demonstrate the same: clean air is good for the American economy.
Moreover, the claim that the cost of clean air requirements has
made new power plant construction unprofitable has little if any basis.
Few power plants were sited during the early 1990's because there was
ample supply. Once it appeared that new supply was needed, new
proposals appeared very quickly. In New York, we have dozens of
proposed new power plants. The regulations that apply to them are
clearly within the financial plans of the many companies proposing such
plants.
As others have noted, there will be an extraordinary market for
clean technologies over the next decade. You were told it would be a
$25 trillion market. New York, like its sister States, wants, deserves,
and should have a substantial share of that market. Yet if we do not
insist on clean air ourselves, we will not find the clean air
technology developed here. By insisting on clean air, we continue to
provide opportunities for our thriving business community.
Finally, it is important to note that, while clean air has
tremendous value, so does dirty air. Dirty air consists of free waste
disposal for a few privileged companies. Any normal company,
particularly power companies in the deregulated and highly competitive
market, looks for ways to reduce costs. Free waste disposal, if
allowed, is one such method. Because of the significant cost advantage
such unloading of costs can provide, we cannot rely on a purely
voluntary system to cut emissions. A voluntary approach will not work
any better in the electric power market than it does or would in other
waste discharge programs. We have seen repeatedly, that absent fair but
strong limits, pollution will be discharged into the public's air or
water or land in order to cut costs. We need a strong air pollution
system, and we need it to be enforced.
The Importance of the State Role
While air pollution is a classic example of a problem that requires
a Federal presence, it is critical not to underestimate the role of
States in confronting this inherently interstate problem. States have
been actively involved in the litigation concerning many of EPA's
recent air quality rules. Many northeastern States have joined in New
York's lawsuits against the Midwestern power plants. Let me remind you
that New York, for example, filed its lawsuit against VEPCO before the
EPA filed any lawsuit. This litigation, and its success, owes a great
deal to State enforcement efforts.
Indeed, the structure of environmental laws gives States a large
and important role. As you know, it is the States that develop the
State Implementation Plans that govern how we will actually achieve the
ambient air quality standards set by EPA. The northeast States have
gone beyond those minimum actions and have taken many other measures on
their own to reduce air pollution, such as imposing stricter controls
on in-state sources. I urge you to work in partnership with the
States--both the State environmental agencies and the State attorney
general offices--when considering the issues before you.
I also urge you to support and encourage strong Federal enforcement
as part of a true Federal-State partnership. There are several reasons
why this is important. First, Federal enforcement levels the playing
field in two distinct areas: (1) between companies that willingly
comply with environmental and other rules and those that do not, and
(2) between States that aggressively enforce the law within their own
borders and those that do not. While at times States can bring
enforcement actions concerning out-of-State sources, such as we did
with the power plants, that is unusual. A State doing a good job
protecting the health of its citizens should not be at a disadvantage
with respect to less conscientious States. Second, Federal enforcement
provides a solid back-drop to State enforcement, playing a role in
unusually difficult or troublesome cases. Finally, Federal enforcement
often brings with it the tremendous technical resources and expertise
of the Federal agencies that oversee the entire program. In the case of
clean air, EPA's expertise and experience is extraordinary and very
helpful both to us in the States and, I believe, the regulated
industries. Reducing Federal enforcement does not create a vacuum that
States fill; rather it hinders State enforcement. In contrast, strong
Federal enforcement actually enhances the State role.
Steps to a Sound and Diverse Energy Supply
Senator Voinovich asked about how to harmonize our environmental
and energy policies. We harmonize these two critical needs by
addressing not only how much power we have available, but how that
power is generated. I discuss this at length in my report. We can
achieve a sustainable energy portfolio by enacting policies that
promote clean distributed generation, renewable power, and energy
efficiency and, at the same time, ensuring that the necessary new
supply can be brought on line promptly. If we were to improve
efficiency by an achievable 10B20 percent, and increase renewable
energy to provide 10-20 percent or more of our nation's energy needs,
which is also quite feasible, we would largely, if not completely,
resolve the current energy challenge. Moreover, we probably, just by
those measures, would go most of the way toward meeting even the most
aggressive climate change goals. Finally, we would reduce our
dependence on foreign fossil fuels.
While not all aspects of my recent report detailing how New York
can achieve both its energy and its environmental goals are necessarily
relevant to Federal policymaking, I suggest that certain of my New York
recommendations offer a sound strategy for the nation.
First, we must embark on an immediate effort to reduce dramatically
demand through conservation and efficiency. We are confident that we
can achieve significant gains in energy efficiency even in New York
which ranks second among the States for the most efficient use of
energy today. (New York ranks second in large part due to the
efficiencies of the mass transportation that is so extensive,
particularly in the New York City region. This energy efficiency
provides yet another reason, in addition to air and water quality and
traffic congestion reasons, for significant Federal support for mass
transit.) Specific measures include:
immediate adoption of the Department of Energy efficiency
standards for residential air conditioners and heat pumps, residential
clothes washers, residential water heaters, and commercial heating and
cooling equipment;
government funding for efficiency improvements, such as
through programs like New York's System Benefit Charge, a small non-
bypassable charge added to the electricity rates that, our experience
proves, more than pays for itself within a couple a years in reduced
consumer bills;
utility portfolio mandates, modeled after the renewable
portfolio standards in effect in many States, to bring utilities
(particularly those in deregulated States where there are no longer
rate hearings and conditions on rate increases) back into the
efficiency effort;
pricing policies to encourage flexible demand (such as
time-of-day or day-night rates that encourage people to use power at
off-peak times) and policies to ensure that people have a direct price
signal for their energy use (such as conversion of master metered
multiple unit dwellings to individual meters);
changing regulations so retailers of electricity are
rewarded for reductions in demand;
State sales tax credits for efficient appliances and
vehicles; and
measures to provide consumers with better information
about their energy choices (such as the excellent Energy Star program).
The Federal Government should increase, not decrease as has been
proposed by the new Administration, its spending on these measures.
Second, we must increase the supply of clean electricity. In New
York, we have created a new siting board to review applications for new
power plants. In my report, I suggest that the existing process is too
slow and can be improved by giving earlier review to those applications
that, because of a variety of factors, deserve a preference and through
other procedural changes. While such siting issues are generally left
to the States, the Federal Government can assist in bringing clean new
sources of supply on line by promptly passing the Clean Power Act, S.
556, and other measures to establish the certainty necessary for
private investment. The Federal Government's role must not be, as some
recommend, to suspend environmental rules; that will only lead to
additional years of uncertainty. In addition, as was mentioned at this
subcommittee's first hearing on March 21,2001, the Federal Government
can help by stopping the rhetoric about environmental requirements
interfering with our energy supply. We have spent years trying to get
beyond the simplistic ``environment versus economy'' argument; it has
been rebutted by innumerable studies. When the Federal Government
revives such myths, it makes people believe that new power plants will
poison them. So they resist them in every available forum. If instead,
the Federal Government reassures Americans that they can have a clean
environment and a secure energy supply, then the siting process
everywhere will be easier and faster.
Third, we must improve the transmission system so that available
power can reach the places where it is needed. For example, in New
York, we have an ample wind resource upstate while our greatest demand
is in New York City. Improvements to the transmission system should
allow us to take advantage of clean supply opportunities wherever
located.
Fourth, we need to increase clean distributed energy sources. Small
scale sources, such as fuel cells, wind generators, small-scale hydro,
solar cells and cogeneration facilities (but not including uncontrolled
diesel generators), can provide significant new supply while avoiding
any incremental strain on the distribution system and without creating
significant emissions.
Finally, we need an all-out effort to expand renewable power
sources, especially wind and solar. Recent studies demonstrate that
even in northern States such as New York, solar power--which is best
generated on hot summer days--can already be cost-effective in reducing
peak electricity demand--which also comes on hot summer days. We also
have significant wind resources--enough to make a significant
contribution to our future needs if properly distributed. We urge both
research efforts and the enactment of a renewable portfolio standard
that would create a market for renewable energy facilities.
I believe that many of these issues are addressed in the
``Comprehensive and Balanced Energy Policy act of 2001'' which is now
being considered. I urge your careful attention to these
recommendations.
Oil and Gas Issues
The second of today's panels will focus on oil and gas issues. Many
of the clean air questions there are similar to those raised by the
electric utility sector. Indeed, the clean air litigation brought by
EPA on refiners is based on the same NSR provisions of the Clean Air
Act. I suggest that the explanation I gave above as to why my clean air
litigation is sound and proper applies to those refinery cases as well.
More broadly, the oil and gas sector again demonstrates that
careful attention to environmental concerns can enhance, and does not
harm, our energy future. EPA's recently promulgated diesel fuel rule,
which has been challenged by certain industries and which my office
will help defend, is a good example. This rule, on its own, will
dramatically improve urban air quality since diesel exhaust is one of
the largest pollution sources in urban areas. In addition, the use of
low-sulfur fuel allows the use of traps and other devices to reduce
particulate pollution. These traps could lead to significant reductions
in PM2.5, the finer particles that can lodge in the lung,
since diesel exhaust is composed of 90 percent PM2.5 and,
according to a California study, contains numerous carcinogenic
compounds.
Another issue of great importance in this area is methyl tertiary-
butyl ether (MTBE). Many drinking water wells in New York, particularly
in Long Island, have been found to be contaminated by MTBE. The costs
of remediating such contamination are usually significantly greater
than the costs associated with uncontaminated petroleum spills. In part
to address this concern, New York has passed a law that will ban MTBE
in 2004. This law, however, has been challenged by MTBE manufacturers
on Federal preemption grounds. Federal action to allow the elimination
of MTBE would be welcome.
Conclusion
In sum, the Clean Air Act, as well as other environmental
regulations, should be viewed as helping, not hindering, a sound energy
policy. The American people will not accept energy production that
poisons their air and their water any more than they will accept
blackouts. Indeed, it is a false dichotomy to suggest that people must
choose one or the other. An environmentally sound energy policy is the
only sustainable future. Fortunately, it is achievable if we
demonstrate leadership and foresight.
______
State of New York: Attorney General's Action Plan for a Balanced
Electric Power Policy in New York State
introduction
Electric power is in the news and on everyone's mind these days,
with good reason. While we usually take for granted this invisible but
vital force that permeates our daily lives and provides the power
without which our modem society could not exist, recent events in New
York and elsewhere demand our close attention and immediate action.
As the economy has grown rapidly in New York over the last decade,
so has the demand for electricity. Demand has risen so dramatically
over the past several years that it is now outstripping available
supply in New York, particularly in New York City and Long Island where
transmission constraints require most power to be generated locally.
Moreover, in New York's restructured market--where the price of power
no longer reflects a regulated price, but rather a market price--the
current supply/demand imbalance has caused dramatic price spikes in
electncity bills For example, Con Edison's customers saw their bills
increase an average 30 percent last summer, even though it was the
coolest summer in years. California's forced rolling blackouts, soaring
energy prices, and threatened bankruptcy of several major utilities
have also heightened New Yorkers' concerns.
At the same time as New York confronts price spikes and potential
shortages, we are faced with continuing reports of the impacts of
electncity generation Power plant emissions contribute greatly to acid
rain and urban smog, which, in turn, cause tremendous damage to our
health and our environment. Urban smog exacerbates asthma, which is
increasing rapidly in New York City and other urban areas--especially
among children. Acid rain is killing entire ecosystems in the--
Adirondacks and other treasured natural areas. Mercury emitted by coal-
fired plants contaminates fish, and greenhouse gases such as carbon
dioxide change the climate. Power plant cooling water intake systems
injure fisheries upon which many New Yorkers depend.
Clearly, New York needs to find better ways to meet its electricity
demands at a reasonable cost while also protecting its citizens' health
and the State's natural resources. To meet growing electricity demand,
the State has had to rely largely on existing power plants, many of
which are old, inefficient, highly polluting, and insufficient to meet
projected demand. New York policymakers would be foolhardy to ignore
the lessons of California, and our own experience, in developing energy
policy.
We must move now on two fronts to develop a sustainable, balanced
energy policy that ensures customers a reliable and reasonably priced
power supply and that preserves our environment and protects our
health. We must meet our immediate short-term needs by increasing clean
supply and reducing the growth in demand through conservation and
efficiency. We must also secure the longer term by using electricity
more efficiently and shifting our dependence on fossil fuel toward
renewable sources of electricity.
For the short term, New York must plan for the summer of 2001.
Summer is when the demand for power is the greatest in our region, as
more air conditioning is used in response to hot weather. We must have
enough power supply available downstate to meet expected demand without
skyrocketing prices. The power generators the New York Power Authority
(``NYPA'') is placing downstate--among the cleanest and most efficient
available--are a sound approach to accomplish those goals. At the same
time, investments in energy efficiency must be significantly increased.
The New York Independent System Operator (``NYISO'') must enhance the
design--and operation of the State's electricity markets to avoid,
price spikes based on abusive market power, and to ensure the integrity
of the wholesale power market. Unless these markets work competitively,
deregulation cannot achieve its goals, and consumers, the economy, and
the environment will suffer as windfalls are reaped by the few at the
expense of the many.
For the longer term, we must address not only how much power we
have available, but how that power is generated To protect our health
and natural resources, the State must move to a cleaner electncity
supply and contain the ever-expanding growth of demand Relying more on
renewable energy and using electricity efficiently should also lower
bills for consumers.
To assure reliable electricity at steady prices we must build new
sources of electric power, expand transmission capacity to reach more
existing sources of power, and create more flexible demand during peak
demand periods through demand-side management, conservation and more
efficient consumption We can achieve this new, balanced energy
portfolio by improving the plant siting process, by enacting policies
that promote clean distributed generation and the use of renewable
energy sources, and by increasing transmission capacity to allow market
sited plants to serve the entire State. We must also ensure that new
clean generating capacity displaces older, dirtier, and less efficient
power plants.
These goals are achievable if we work together and act with care
and speed New York is one of the largest energy users in the United
States, which is the largest energy user in the world Thus, our choices
can have a major influence on global as well as local energy policies
and environmental impacts. The following recommendations are a first
step toward a balanced strategy on electric power.
executive summary
The demand for electricity in New York has grown dramatically over
the past several years, primarily due to a rising economy. Supply
however, has not kept up, raising reliability concerns for the future.
New York has also recently restructured its electric power markets, and
the current supply/demand imbalance has been reflected in the price of
power, sometimes leading to dramatic price volatility in electricity
bills downstate. As we confront our energy needs, we must recognize the
impacts of electricity generation. Power plant emissions contribute to
acid rain, smog, toxic pollution and climate change, all of which have
a serious deleterious impact on our health and environment. These facts
raise both short-term and long-term concerns for New York about the
price, reliability, and impacts of electric power. New York needs to
find better ways to meet its electricity demands at a reasonable cost
while also protecting its citizens' health and the State's natural
resources.
Recommendations
The Attorney General's Bureaus of Telecommunications & Energy and
Environmental Protection recommend the following measures:
A. Short-Term Measures
Currently, New York's growing imbalance in supply and demand is
greater downstate than upstate, due to the nature of transmission
constraints, which make it difficult for significant power to be sent
downstate. We must be sure we have enough electric power supply this
summer to meet the anticipated peak demand downstate by increasing
clean sources of electricity generation and by reducing demand through
aggressive conservation and efficiency measures. Not only must we make
sure that the lights stay on this summer, but also that there is enough
supply so that electricity prices do not skyrocket.
1. New supply is needed, particularly in downstate areas Estimates
of peak supply shortfall downstate in the summer of 2001 require the
additional generation proposed by the New York Power Authority
(``NYPA'') and others.
2. Immediate efforts to reduce demand will improve reliability,
lower price and reduce the need for more supply Funding for the three
existing State programs that promote energy efficiency, conservation
and renewable energy must be increased The Attorney General is
directing a portion of its future power plant settlement funds--
totaling approximately $20 million--to the New York State Energy
Research and Development Authority (``NYSERDA'') for efficiency,
conservation and renewable energy programs Funding for NYPA efficiency
programs should be increased immediately from its current level of $60
million annually to $160 million per year, with an emphasis on projects
to reduce peak demand in New York City and Long Island Funding for Long
Island Power Authority (``LIPA'') efficiency programs should be
increased this spring from $32 million per year to $50 million per year
With increased funding for these demand-reducing programs, it is
estimated that over 600 MW of generation capacity needs could be
avoided statewide over the next 2 years.
B. Long-Term Measures
In the longer term, we must address not only how much power we have
available, but how that power is generated and used. To ensure
environmental protection, a reliable electricity system, and reasonable
prices for electricity, we must develop policies today that (1) improve
the siting process for new power generation, (2) upgrade the
transmission and distribution system, (3) increase renewable energy and
clean distributed generation sources, (4) protect the consumer, and (5)
contain the growth of demand and protect the environment.
1. We must increase our supply for the long term
The State needs to recognize that an increase in supply is
necessary to keep up with demand. We need to be innovative and forward-
looking in considering how to increase supply while protecting our
environment.
a. The siting process must be improved. The Siting Process must be
improved to ensure that necessary new generating facilities come on
line expeditiously, with the least possible impact on the environment
and public health:
The Legislature should require the Siting Board and New
York State Department of Environmental Conservation (``DEC'') to decide
which siting applications merit a preference for earlier review.
The Siting Board should designate a project manager for
each application.
The Siting Board should require applicants to file
environmental permit applications with DEC before filing a siting
application.
The Siting Board should establish a 30-day time limit to
negotiate voluntary stipulations.
The Siting Board should appoint an ombudsman for each
project to be a focal point of contact for community groups and to
mediate disputes.
The New York State Independent System Operator
(``NYISO'') should set deadlines for Transmission and Distribution
Owners to contribute to system reliability impact studies.
The PSC and the NYISO should assign responsibility for
transmission system upgrades necessary for new generating capacity.
b. New and upgraded transmission lines are needed. New York needs
additional high voltage transmission capacity to move large quantities
of power from places with surplus power to areas that currently contain
limited generating capacity. For decades, transmission bottlenecks have
restricted the efficient use of New York's overall existing generating
capacity as well as access to supplies from out-of-state. Despite these
infrastructure flaws, investment in transmission has declined
significantly since 1988. Steps have been taken to establish a
federally sanctioned regional transmission organization (``RTO'') to
address New York's transmission needs However, whether or when such an
RTO will begin operations remains uncertain The PSC and the NYISO have
the authority to begin the work needed to relieve New York's
transmission bottlenecks, and should begin immediately.
c. Renewable generation and clean distributed generation sources
should be increased. Until recently, solar and wind generation were not
economically competitive with fossil fuel power generation. New
technologies for solar and wind generation, combined with increased
fossil fuel costs, have narrowed the cost gap considerably. The
Legislature should join New Jersey, Massachusetts, Connecticut, Texas,
and many other States by adopting a Renewable Portfolio Standard
(``RPS'') requiring retailers of electricity to include in their
portfolio of supply an increasing percentage of renewable generation.
Policies are also needed to increase clean distributed energy
sources. The need for large power plants and the strain on the
transmission system could be lessened by distributing smallscale
generation units (L? fuel cells, wind generators, small-scale hydro,
solar cells, and cogeneration facilities)' that use minimally polluting
technologies directly on the site where the electricity is to be used.
The Legislature should (i) expand tax credits for the purchase of clean
distributed generation technologies, and (ii) expand the Solar Net
Metering Law to include wind and small hydro power--allowing owners of
such generation to sell excess power generated back to the grid. In
addition, NYPA should work with local governments across the State to
install fuel cells at landfills and wastewater treatment facilities,
which produce large quantities of methane that can be used to power
fuel cells.
2. The consumer must be protected during the transition to competitive
markets
a. The NYISO must enhance its market monitoring and price
mitigation functions. Electricity prices must not be permitted to soar
during the transition to competitive markets for this vital service.
The NYISO has made significant progress toward developing competitive
power markets and in monitoring the markets for potential abuses of
market power. However, more needs to be done to ensure stable prices
for the summer of 2001 and beyond, whenever supply and demand are
severely out of balance. The NYISO must implement its proposed
``automatic'' mitigation, which seeks to ensure that prices reflecting
potential abusive exercise of market power do not set the market-
clearing price. The NYISO must also strengthen its current forward-
looking market mitigation, by obtaining approval from the Federal
Energy Regulatory Commission (``FERC'') to order retroactive refunds
when abuses of market power are timely identified. The current $1,000
per megawatt-hour cap on the price of wholesale power should be
retained, and should be kept in line with any price caps in adjoining
markets, until a judgment is made that New York's markets are
reasonably competitive, especially during times of peak demand.
b. Consumers must be protected from extremely volatile electricity
prices while receiving necessary market price signals. During the
transition to deregulation, utilities should 'bear some of the risk of
high wholesale market prices with customers, rather than completely
passing through such prices to consumers. This will incentivize
utilities to better manage their risk, while affording consumers price
signals upon which to make decisions about electricity use.
3. Demand must be contained over the long term and the environment must
be protected
As the economy and population grows, so will demand. We must meet
growth without increasing degradation. Aggressive measures to reduce
demand, together with construction of clean and renewable power plants,
will greatly increase the probability that older, highly polluting
power plants will be displaced.
The NYSERDA, NYPA and LIPA programs that fund efficiency and
renewable projects are not required by law. NYSERDA's funding expires
in 2006, NYPA's funding is year-to-year, and LIPA's funding expires in
2004 The Legislature should mandate that these programs be funded at a
higher level for at least the next 10 years. In addition, the
Legislature should enact other financial incentives to reduce demand,
such as exempting the most energy efficient products from sales tax.
The PSC should improve pricing and revenue signals to encourage
flexible demand and conservation. Utilities should promote offers for
different time-of-day rates to residential customers to encourage load
shifting, and master-metered buildings in New York State should be
converted to direct metering or submetering. The PSC should also
consider changing the way it regulates the price of electricity
distribution If the rate structure rewarded retailers for reductions in
demand, energy conservation would more likely become a priority.
State government can bring utilities into the State's energy
efficiency efforts by enacting an Efficiency Portfolio Standard,
requiring retail sellers of electricity to achieve certain levels of
demand reductions in their service area. The Federal Government can
similarly act to implement stringent minimum energy efficiency
standards for appliances and other electrical products to reduce demand
for electricity nationwide.
No one proposal within this report stands alone. This package of
proposals recognizes the need to address both supply and demand. In so
doing, the State will best promote the growth of competitive electric
power markets while also protecting both consumers and the environment.
Taken together, these recommendations are a balanced approach to
address the State's short-term and long-term electric power needs and
to lay the foundation for a sustainable energy policy for the future.
I. New York Must Address its Growing Imbalance in Electric Supply and
Demand
A. Electricity Supply and Demand are Out of Balance
The recent rapid and welcome growth in New York's economy has
spurred a dramatic increase in demand for electricity statewide, peak
demand for electricity is estimated to be increasing at an annual rate
of 1.4 percent, with demand increasing in some regions at more than
twice the state-wide rate. \1\ Growth in generating capacity and
investments in efficiency have not kept pace. Indeed, addition of new
electric power sources in New York State has slowed dramatically over
the last 5 years, even compared to the limited amount of capacity built
between 1990 and 1995, \2\ and state-mandated demand-side management
investments (and their associated savings in needed generating
capacity) have declined from a high of $330 million in 1993 \3\ to
approximately $170 million in 2000. \4\ This growing imbalance between
supply and demand, if unaddressed, can lead only to ever-soaring
electric power prices and eventual blackouts. However, increasing
capacity without regard to environmental considerations, will
exacerbate our State's air pollution problems.
---------------------------------------------------------------------------
\1\See, NYISO Installed Capacity Load Forecast Study for Summer
2001. Http://www.nyiso.com/markets/icapinfo.html#summer 2001.
\2\Only 308 MW of power were added between 1996-2000, compared
with 3,410.7 MW added between 1990 and 1995. This data is based on
NYISO registration dates for New York power plants currently operating.
\3\ New York State Energy Planning Board (``NYSEPB''), New York
State Energy Plan and Final Environmental Impact Statement. November
1998. p. 3-60, 3-62.
\4\ State-mandated DSM Funding in 2000 came from three sources: 1)
SBC, See 'Order Continuing and Expanding the System Benefits Charge for
Public Benefit Programs, Case NO. 94-E-0952, et. al., (January 26,
2001); 2) NYPA, see NYPA press release, November 30, 2000; and 3) LIPA,
see LIPA, Clean Energy Initiative, May 3, 1999.
---------------------------------------------------------------------------
The present facts are stark. New York State has a geographical
mismatch between generating capacity and where electricity is used. \5\
Physical limitations on the amount of electricity that can be
transported from one part of the State to another over the existing
high voltage transmission system mean that western New York has
surpluses of power whereas eastern New York, particularly downstate in
New York City and Long Island, are short. Moreover, additional capacity
is required to ensure that the lights can be kept on even if a major
generating unit or transmission line fails. These reserve levels are
required to be 18 percent above the projected peak demand for
electricity statewide and in given areas.
---------------------------------------------------------------------------
\5\ New York State's total summer electric generation capacity is
35,098 MW. NYISO 2000 Load And Capacity Data Report, July 1, 2000,
Table 111-2, p. 55. Seasonal effects change capacity levels for certain
generators, resulting in a state-wide winter capacity of 36,649.8 MW.
One megawatt is the amount of power required to light 10,000 100-watt
light bulbs. Because demand for electricity peaks in the summer, the
winter capacity has less significance for system reliability concerns.
The summer peak electricity demand for New York State in 2001 is
projected to be 30,620 MW. See, NYISO Installed Capacity Load Forecast
Study for Summer 2001. Http://www.nyiso.com/markets/
icapinfo.html#summer--2001.
---------------------------------------------------------------------------
New York City is projected to have a summer 2001 peak demand of
10,535 MW, \6\ up 4.6 percent from the record peak demand of 10,076 MW
during the July 1999 heat wave. \7\ The NYISO estimates that New York
City will be a glaring 397 MW short of required capacity during the
upcoming summer Electricity supply on Long Island is only slightly
better For Long Island, the NYISO projects a summer 2001 peak demand of
4,733 MW and a capacity shortfall of 131 MW. \8\
---------------------------------------------------------------------------
\6\ NYISO February 15, 2001 Locational Installed Capacity
Requirements Study.
\7\The power outages experienced in parts of New York City and
Westchester County that began on July 6, 1999 were caused by failures
in Con Edison's distribution network, not insufficiency in supply. See,
New York State Attorney General's report, Con Edison 's July 1999
Electric Service Outages, March 9, 2000.
\8\ These estimates do not take into account the proposed NYPA
generating units or additional projected capacity increases on Long
Island. NYISO February 15, 2001 Locational Installed Capacity
Requirements Study. See also, NYISO, Power Alert: New York's Energy
Crossroads, March 2001, p. 19, and NYISO March 14, 2001 press release,
Expedited Power Plant Development & More Customer Choices Needed To
Avoid California-Type Energy Crisis, Says NYISO Report.
---------------------------------------------------------------------------
For 2001 NYISO forecasts a 1.7 percent annual increase for New York
City and a 2.3 percent annual increase for Long Island. \9\ Thus,
projected summer peak demand in 2002 and 2003 for both New York City
and Long Island may well exceed available generating capacity unless
supply and demand are quickly aligned. \10\ As shown in Table 1, if
current demand growth continues unchanged for the next 2 years, no more
generation capacity is added, and efficiency and conservation are not
improved, both New York City and Long Island risk being unable to
supply sufficient power.
---------------------------------------------------------------------------
\9\See, NYISO Installed Capacity Load Forecast Study for Summer
2001. Http://www.nyiso.com/markets/icapinfo.html#summer--2001.
\10\ See, NYISO Piess Release, New York Independent System
Operator Finds That New York City Faces Electricity Shortage, February
14, 2001. See also, NYISO, Power Alert: New York's Energy Crossroads,
March 2001, p. 19.
Table 1
Downstate New York Shortage Without More Generation Or Reduced Demand\11\
(MegaWatts)
----------------------------------------------------------------------------------------------------------------
2001 2002 2003
Zone 2001 2001 Zone 2002 Zone 2003
Zone Capacity Current Current Capacity Projected Capacity Projected
Required Capacity Deficit Required Deficit Required Deficit
----------------------------------------------------------------------------------------------------------------
NYC...................................... 8428 8031 -397 8560 -529 8680 -649
LI....................................... 4638 4507 -131 4709 -202 4776 -269
----------------------------------------------------------------------------------------------------------------
AAAAAAAA\11\Source: NYISO, Power Alert: New York's Energy Crossroads, March 2001, p. 19.
In addition to these estimates, the Public Service Commission
(``PSC'') has identified a ``statewide need for 600 MW plus per year of
capacity additions to satisfy the demands of a growing economy'' and
``an immediate need for 300 MW [of added capacity now in New York
Cityj, and an additional 200 MW each year thereafter.'' \12\ PSC
Chairman Helmer has also stressed that New York must use effective
strategies to cut demand, comparing building power plants alone to
trying to clap with one hand. \13\
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\12\See, August 2, 2000 testimony of PSC Chairman Maureen Helmer
before the Assembly Standing Committee on Energy, Http://
www.dps.state.ny.us/testimony--8--2--2000.htm, p.3.
\13\See, Albany Times Union, Demand the Key to Power Supply, March
6, 2001, p. E1.
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While electricity conservation and demand management programs could
substantially reduce the amount of additional generation needed, it is
clearly imperative that clean supply be increased, both for the short-
term downstate, and for the long-term throughout the State. Indeed, new
clean and efficient power plants, combined with aggressive demand-side
management and renewable energy investments, should displace older,
dirtier power plants and yield reduced emissions and increased
generating capacity.
B. Supply Must be Greater than Demand, to Avoid Power Outages, and Keep
Electricity Prices from Skyrocketing
In competitive markets, when demand is inflexible and approaches
the limits of available supply, the price paid for a product will climb
dramatically. This characteristic is especially salient in the case of
wholesale electricity markets, where demand currently is relatively
inflexible, and where the physical properties of electrical generation
and flow are such that electricity cannot be stored in any significant
quantity, but is generated, transmitted, and used virtually
instantaneously. \14\ The amount generated and put into the
transmission grid must be balanced with the amount consumed second by
second, or the entire system could break down. \15\When demand
threatens to outstrip supply during periods of peak use, price spikes
will occur. Electricity will be less expensive if surplus capacity is
sufficient not simply to keep the lights on, but to keep wholesale
prices competitive.
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\14\Buyers in other power markets, including natural gas, can ride
out peak demand periods by drawing down storage supplies and avoid
paying volatile spot prices.
\15\Different generation plants have vastly differing production
costs, according to their size, design, operation, and fuel source.
Large steam powered generators and nuclear power plants (in the 500-
1,000 MW range--called ``base load'' units), cannot be activated
quickly, nor can they rapidly adjust electricity output. Therefore,
owners of such units normally offer their power into the market at
relatively low prices, to ensure that it will be dispatched and they
will not have to dump excess output. At the other end of the spectrum,
small gas turbines (ranging from 20 to 60 MW) are designed to allow for
quick startup and output adjustment and, due to their high operating
costs, are most often used during peak hours. Peaking units, including
gas turbines, experience greater wear and maintenance costs if run for
extended periods. To recover their investment and operating expenses
over a relatively limited number of unpredictable hours of use, owners
of such units usually offer power at high prices.
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Once a sufficient number of private sector new generation projects
are approved to be brought on line, market forces can be expected to
bring supply into better balance with demand, yielding greater
wholesale market price stability.
Until we have more experience with market participant behavior, it
is difficult to ascertain what specific amount of capacity would
provide sufficient surplus to not only assure reliability but also
stabilize market prices during peak demand periods. As much as 10-20
percent surplus during peak demand may be required to avoid the steep
end of the price curve. The NYISO projects that by 2005, if no new
generation is added in New York, ``statewide prices could be expected
to increase by about 14 percent from present levels'', but ``[i]f
supply is allowed to grow statewide prices should actually decrease and
could be 20-25 percent lower than if no new generation is added,''
resulting in statewide ``savings of over $1.4 billion annually in
2005.'' \16\ Because the mix of generator types and sizes varies in
each of the 11 zones where NYISO administers market prices, the surplus
capacity needed to avoid volatile prices will necessarily differ for
each zone.
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\16\ See, NYISO, Power Alert: New York's Energy Crossroads, March
2001, p. 9. This NYISO projection assumes that 8,600 MW would be added
to New York's supply, and does not include inflation or fuel cost
increases.
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C. NYPA's Proposed Generators for New York City are Necessary to Meet
Peak Demand for Summer 2001
For the immediate term, by the summer of 2001, we have no choice
but to increase the available power downstate by at least 528 MW, i.e.,
397 in New York City and 131 MW in Long Island. The NYPA has received
approval to construct 11 new gas turbines in New York City with a
combined output of 443.5 MW, most of which are expected to be
operational at the start of the upcoming summer cooling season. In
addition, the Astoria No. 2 plant (a former Con Edison-generator fueled
by natural gas) is expected to be repowered by Orion Power Holdings,
Inc. and available sometime during summer 2001, which would add 170 MW.
Another 60 MW to the generating capacity in New York City is
anticipated from Con Edison's planned reactivation of the Hudson Avenue
No. 10 plant (Brooklyn). \17\ These new NYPA and repowered units, if
completed in time, should address the risk that New York City might
otherwise have insufficient power supply if demand peaks at forecast
levels. \18\
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\17\ While a number of other small-scale potential capacity
additions to existing units in New York City are being pursued at
various sites, it is difficult to determine with certainty which
efforts will be brought en line and whether they will meet the need
when demand peaks.
\18\ The Attorney General supports this effort, but takes no
position on the particular sites selected for the NYPA generators.
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The NYPA units, which burn natural gas as a fuel, are considered
relatively clean in terms of emissions \19\--they emit virtually no
sulfur dioxide (``SO2'') and less nitrogen oxide (``NOx'')
than oil or coal-fired plants. Thus, the potential air quality impact
of this supplemental generation capacity should be limited. \20\ In
addition, the NYPA has committed to reducing air emissions at other New
York City plants so overall air emissions will not increase. \21\ Each
new unit is comparatively small in scale, which should minimize impact
on local communities. \22\
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\19\Power plants emit significant quantities of pollutants,
especially sulfur dioxide, nitrogen oxides, particulate matter, carbon
dioxide, and mercury. These emissions contribute to acid rain and
regional haze, and are dangerous to human health as well as to the
health of fish and wildlife.
\20\The NYPA has stated that they will use the best available
emission control technology to reduce NON, particulate matter, sulfur
dioxide and carbon monoxide emissions. In addition, the NYPA performed
an analysis of the turbines' fine particulate (PM2.5) pollution and
determined the increase to be insignificant. The DEC has issued air
pollution control and acid rain permits limiting emissions for each of
the sites.
\21\DEC Press Release, dated January 12, 2001. The State's
Department of Environmental Conservation (``DEC'') and the NYPA should
formalize an agreement on reduction of overall area emissions.
\22\The NYPA has also committed to noise mitigation measures at
some of the new sites.
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On Long Island, the NYPA is installing one 44 MW capacity gas
turbine at the former site of Pilgrim State Hospital. In addition,
Keyspan is upgrading its Holtsville unit to increase output by 5 MW,
and other gas turbines that will add 35 MW more generating capacity on
Long Island. A merchant generator turbine is slated for Far Rockaway
with 44-50 MW of capacity. Together, these planned additions will
barely satisfy the 131 MW capacity needed for Long Island reliably to
meet forecast demand. Some of these new units are not expected to be
operational by the May 1, 2001 start of the peak season, but instead
may not be available until July 1. Even with the anticipated new
generating unit upgrades and additions, Long Island electric power
resources are likely to be stretched to their limit during peak demand
periods this summer.
D. Current State Programs that Promote Energy Efficiency and Renewable
Energy Should be Expanded
Several programs in New York State currently encourage energy
efficiency and renewable energy. Most are implemented by the New York
State Energy Research and Development Authority (``NYSERDA''), the
NYPA, and the Long Island Power Authority (``LIPA'') \23\ They have
proven to be highly successful and offer a good starting point for an
expanded State efficiency effort.
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\23\The NYPA and LIPA are publicly owned not-for-profit utilities,
whose programs are funded by rates charged their customers.
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1. The Attorney General is Directing Power Plant Settlement Funds to
Supplement NYSERDA Programs
The Attorney General, through his authority to enforce Federal and
State environmental protection laws, has embarked on a number of clean
air initiatives. The Attorney General sued out-of-state coal-fired
power plants that upgraded or expanded their old power plants without
installing the pollution controls required by the Clean Air Act The
Attorney General, with the DEC, is also pursuing legal action against
similar plants in New York. Recognizing the priority the people of New
York have assigned to clean air and a balanced energy policy, the
Attorney General is negotiating to ensure that settlements are directed
to enhancing renewable energy development and efficiency.
The Attorney General is working with the NYSERDA and DEC to ensure
settlement funds are spent most effectively to promote energy
efficiency and renewables The settlement funds may also be used to fund
some of the transmission infrastructure needed to make available
additional wind resources. While agreements-in-principal have not been
finalized--and other cases are in negotiation or litigation--the
lawsuits are likely to yield $20 million or more that can provide the
catalyst for an additional 10-30 MW of renewable energy and perhaps 10
MW of savings through efficiency.
2. The Legislature Should Ensure Funding for NYSERDA Programs by
Extending the System Benefits Charge
The NYSERDA's programs, under the umbrella of the New York Energy
Smart program, are designed to improve energy efficiency through
education, improved operations, purchases and use of energy efficiency
equipment and services, and technology development and demonstration.
The 38 New York Energy Smart programs, range from market transformation
(e.g., ensuring retail stores offer efficient products to their
customers) to low-income assistance (e.g., direct installation of
efficiency measures in low-income households) and renewable energy
development (e.g., production incentives to wind farm developers).
The NYSERDA's programs are funded by the System Benefits Charge
(``SBC''). \24\ The SBC is a small, non-bypassable charge per kilowatt-
hour to all customers buying electricity transmitted and distributed by
the State's investor-owned utilities. Currently, the SBC rate is just
over one-tenth of one cent per kilowatt-hour and collects $150 million
per year. \25\ The existence of the SBC derives from a PSC Order that
expires in 2006. \26\ The Legislature should codify the SBC and extend
it 5 years to ensure a long-term, reliable source of funding for energy
efficiency and renewables. In addition, the Legislature should make
permanent programs funded by the SBC that improve efficiency in low-
income households.
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\24\In Opinion and Order Regarding Competitive Opportunities for
Electric Service, Case NO. 94-E-0952, et. al., (May 20, 1996), the PSC
created the SBC to mitigate the potential adverse environmental impact
of restructuring the electric industry.
\25\See, Order Continuing and Expanding the System Benefits Charge
for Public Benefit Programs, Case NO. 94-E -0952, et. al., (January 26,
2001), p. 12. A small percentage of the funding is administered by the
utilities.
\26\Ibid.
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The NYSERDA has used over $71.8 million SBC funds since 1998 to
encourage efficiency and renewable power investments. These investments
have resulted in estimated electric savings of 486,000 MWh annually;
demand reduction of at least 125 MW; reductions to electric, fuel oil,
and natural gas bills of $54 million annually; reductions to annual air
emissions of 464 tons of NOR, 774 tons of SO2, and nearly
335,000 tons of CO2 and the creation of over one thousand
jobs. \27\ While the $71.8 million was paid out once, the savings are
annual. Based on this experience, a one-time investment of $100 million
in energy efficiency reduces consumer bills by about $75 million per
year. This annual savings accumulates over the lifetime of the
efficiency measure, yielding' a net savings of $375 million over the
first 5 years for just the first year's investment.
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\27\NYSERDA, New York State Energy Smart Program Evaluation and
Status Report, Report to the System Benefits Charge Advisory Group.
Interim Report, September 2000.
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The NYSERDA estimates that the total effect of SBC expenditures
through the summer of 2002 will reduce peak demand between 600 and 660
MW and between 1,200 and 1,300 MW through 2006. \28\ These programs, so
critical to New York's energy and environmental future, should be
codified.
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\28\NYSERDA, Proposed Operating Plan for New York Energy Smart
Programs (2001-2006), February 15, 2001, pp. 2,3.
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3. NYPA Should Work With its Customers to Reduce Demand by an
Additional 200 MW Over the Next Two Years Beyond Its Current
Goals
The NYPA currently provides about $60 million annually to its
customers for demand-side management projects and recovers its costs by
sharing in the electric bill savings. These projects cost taxpayers
nothing to implement, but realize approximately $65 million annually in
energy bill savings, and save enough energy each year to service
300,000 people, and avoid 360,000 tons of CO2 emissions \29\
While the NYPA's demand-side management initiatives currently achieve
capacity savings of between 20 and 60 MW per year, \30\ significant
opportunities exist for greater savings. \31\ The NYPA's customers,
many of which are public entities, consume over 20 percent of the
State's electricity, making this agency well situated to advance the
State's need for more aggressive energy efficiency efforts. By reducing
the government's demand for electricity, The NYPA can save taxpayers
hundreds of millions of dollars in electricity costs. The NYPA should
work with its governmental and business customers to reduce demand and
increase clean distributed generation and renewable energy by at least
an additional 100 MW per year over the next 2 years and commit to fund
its demand-side management programs at an increased level over the next
10 years.
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\29\The NYPA's efficiency programs have successfully reduced
electricity use and electricity bills. For example, the NYPA is working
with the New York City Housing Authority (NYCHA) to replace 180,000
refrigerators with more efficient varieties over 8 years. After this
project is completed in 2003, NYCHA will reduce energy consumption by
103,000 MWh per year and save over $7 million annually in energy costs.
Similarly, its High Efficiency Lighting Program provides energy-
efficiency improvements such as new lighting and upgrades to heating,
ventilation and air-conditioning systems with no up-front costs to
government and educational institutions. These measures can cut up to
25 percent on electric consumption. See, Http://www.nypa.gov/html/
es.htm. See also NYPA press release, November 30, 2000.
\30\ The NYPA currently spends approximately $60 million per year
on demand-side management (``DSM''), but information regarding the
amount of generating capacity saved is unavailable. Capacity savings
were estimated based on past DSM investments. Between 1990 and 1996,
the NYPA spent $255 million on demand-side management programs and
reported saving 84 MW (0.33 MW per million dollars spent). Between 1990
and 1997, Investor-Owned utilities spent $1,277 million on DSM and
reported saving 1,377 MW (1.08 MW per million dollars spent). Thus, an
annual $60 million investment could result in a capacity savings of
between 20 and 60 MW per year.
\31\ For example, one of the NYPA's largest customers, the
Metropolitan Transportation Authority, uses approximately 1,800,000 MWh
per year. By updating its lighting and signal systems and other
efficiency/conservation projects, it is conservatively estimated that
the MTA could reduce its electricity use by 2 percent. (The NYPA
reports that they can achieve up to a 25 percent reduction in energy
consumption for each efficiency project they undertake. Thus a 2
percent overall reduction is a conservative target.) This project alone
could reduce peak demand in New York City--a load pocket--by at least 4
MW, saving 36,000 MWh per year and $2,520,000 in annual energy costs
(based on a rate of 7 cents per kWh--the NYPA's rates vary). See NYPA
1998 Annual Report.
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Because of the dual benefit of reducing demand and reducing the
electricity bills of public entities, the Governor should direct all
State agencies to report on energy use and recommend how to reduce both
base and peak demand within 6 months. The NYPA should work closely with
the State agencies to develop and implement those recommendations,
including providing the financing necessary to obtain technical
assistance, conducting energy audits, and purchasing and installing
more efficient motors, lights, and other appliances or devices.
The NYPA should also expand its existing efficiency programs to
include more local governments and school districts statewide, further
reducing electricity costs for taxpayers The Legislature should direct
the NYPA to provide funding for local governments to assess their
energy efficiency opportunities within 6 months (for New York City and
Long Island) or 12 months (for upstate areas) and reach agreements for
their implementation.
The NYPA sells approximately 40,000,000 MWh of electricity per
year, much of it to government and educational institutions. \32\ For
the NYPA to achieve 200 MW in additional savings beyond its current
program, it will need to reduce energy consumption from all of its
customers by 7 percent over 2 years. \33\ This would save the NYPA's
government customers (the taxpayers) and business customers
$196,224,000 in energy costs annually. \34\ The environmental gains
would be commensurately large--an estimated 2 7 million tons of
CO2, 14,280 tons of SO2, and 5,320 tons of NOx
would be avoided. \35\ Finally, energy savings of this--magnitude would
reduce stress on the existing system, improving reliability.
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\32\ New York Power Authority 1998 Annual Report, p.19.
\33\The NYPA would need to achieve 320 MW savings over 2 years to
meet the Attorney General's proposal, assuming the NYPA already
achieves 60 MW savings per year through its existing $60 million per
year program. A 7-percent reduction in electricity use = 5,600,000 MWh.
320 MW x 17,520 hours per 2 years = 5,600,000 MWh.
\34\Based on a rate of 7 cents per kWh. The NYPA's rates vary.
\35\Based on average statewide emission rates according to PSC
Historical Fuel Mix and Emissions Data. Http://www.dps.state.ny.us/
fuelmix.htm.
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4. The Legislature Should Direct LIPA to Increase Its Investments in
Demand Side Management
Shortly after the LIPA acquired the Long Island Lighting Company,
its Board of Trustees issued a Clean Energy Policy Statement that
declared the LIPA would establish a Clean Energy Initiative to support
energy efficiency, clean distributed generation and renewable
technologies. The LIPA funded the Clean Energy Initiative at $32
million per year for 5 years and began implementation in mid-1999. \36\
In light of the current demand/supply imbalance on Long Island, the
Legislature should direct the LIPA to increase its funding for the
Clean Energy Initiative from $32 million to at least $50 million per
year for 10 years.
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\36\ The LIPA's Clean Energy Initiative offers many programs,
including rebates for energy efficient products in their ``EnergyWise''
catalog. More than 37,000 lighting products have been ordered through
the program and an additional 170,000 compact fluorescent lights have
been sold in home improvement stores. Together, they represent
potential electric savings of nearly $9 million and over 2,970 MWh of
electricity. The LIPA's Residential Energy Affordability Partnership, a
low-income energy efficiency program much like the NYSERDA's, directly
installs energy efficiency measures, such as compact fluorescent
lighting, refrigerators, wall and attic insulation, and programmable
thermostats. The Solar Pioneer Program offers direct consumer
incentives toward the installation of qualified photovoltaic systems
between 250 and 10,000 watts, as well as a $3.00 per watt rebate for
installing approved solar equipment.
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The LIPA's existing Clean Energy Initiative--projected to obtain
144 MW of demand-side energy capacity savings by the time it expires in
2004 \37\--will not realize all of the potential for capacity savings
on Long Island. A 1999 study that examined opportunities to meet
expected-increases in demand on Long Island found that expanded energy
efficiency, distributed generation, wind power, fuel cells, and
photovoltaics could yield 690 MW by 2010, including 465 MW from energy
efficiency alone. \38\
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\37\Estimated peak load reductions during the first year of the
Clean Energy Initiative, totaled approximately 39 MW. Energy reductions
resulting from the Clean Energy Initiative during 1999 were estimated
to total approximately 16,000 MWh. These savings were achieved within 1
year of the LIPA's approval of the Clean Energy Initiative,
demonstrating how quickly efficiency measures can be effective. At the
end of the 5-year, $160 million program, the LIPA estimates that it
will save 191,000 MWh of energy per year and avoid the need for 144 MW
of capacity. See, LIPA, Clean Energy Initiative, May 3, 1999.
\38\ Pace Law School Energy Project and Long Island Citizens
Advisory Panel, Power Choices: 21st Century Energy Alternatives for
Long Island, October 1999, p. 3.
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If the Clean Energy Initiative were expanded to $50 million per
year until 2010, as. recommended, capacity savings over the next 10
years could be greater than 450 MW. \39\ If the funding were increased
immediately, and programs were expanded this year, an additional 30 MW
could be avoided over the next 2 years and an additional 45 MW savings
over the remaining 3 years of the LIPA program. Given the cost savings
from efficiency programs in the past, the investment of $50 million per
year would save Long Island ratepayers approximately $35 million in
each succeeding year, leading to dramatic cumulative savings (perhaps
$60 million after 3 years) Again, significant environmental and
reliability gains can also be expected.
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\39\ Estimate based on LIPA's current projections of 144 MW per
$160 million spent over 5 years (0.9 MW per million dollars spent).
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II. The Review Process for the Siting of New Generation Facilities Must
be Streamlined
The need for new supply underscores the importance of the power
plant siting process, yet significant problems in that process affect
the ability to respond quickly to increased demand with increased
supply. Power plants cannot simply be built whenever and wherever
someone decides they would like to do so. Rather, because of their size
and environmental impacts, plans to build power plants are subject to
an extensive and careful State approval process. This State-mandated
review has been fraught with delay and uncertainty, impeding the
ability of aspiring generators to proceed as expeditiously as would be
optimal. Oddly, no process exists by which to rank the relative
environmental impact of the proposed power plants. To increase the
supply of electrical power to meet our economy's needs while protecting
human health and the environment, the process must be dramatically
improved.
Ideally, the siting process should provide one-stop shopping for
generators. Indeed, when the Legislature enacted Article X of the
Public Service Law (``PSL'') in 1992, the goal was for one entity, the
New York State Board On Electric Generation Siting And the Environment
(``Siting Board''), to have authority over the entire review process.
\40\ However, the U. S. Environmental Protection Agency (``EPA'')
authorizes the State DEC to issue permits under the Clean Water Act and
the Clean Air Act. Since such permits are necessary before a generating
facility may be built, the process does not readily fit the one-stop
shopping model. Additionally, the siting of a power plant is often
controversial, so the review process appropriately provides an
opportunity for extensive input by interested parties. For these
reasons, siting a new plant is neither easy nor quick. \41\
Nevertheless, more can and must be done to coordinate and expedite the
process if New York is going to meet the expected increase in demand
with sufficient increase in supply, while at the same time ensuring
that the added capacity results in a cleaner environment. Toward that
end, the Attorney General urges the following:
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\40\Under Article X, any utility, public authority or merchant
generator wishing to build a new generator in New York State with a
capacity of 80 MW or more must comply with and obtain a Certificate of
Environmental Compatibility and Public Need (``Certificate'') from the
Siting Board approving the plant's construction and operation. See
also, 16 NYCRR Chapter X, Subchapter A, Sec. 1000 et seq., which sets
forth the Board's rules and procedures. The five permanent members of
the Siting Board are the PSC Chairman, who serves as the Siting Board
chairman, the Commissioner of Environmental Conservation, Commissioner
of Health, Chairman of NYSERDA and the Commissioner of Economic
Development. The Governor appoints two members of the public as ``ad
hoc members'' for each generator application: one must reside within
the judicial district and the other must be from the county where the
proposed plant is to be located.
\41\Article X requires an entity seeking approval for a generating
facility to file an application with the Siting Board. At least 60 (60)
days before filing its application, an applicant must file a
preliminary statement with the Siting Board and various offices within
the PSC. An applicant must also obtain environmental air and water
permits from the DEC and acceptance of its interconnection study from
the NYISO. The PSC and DEC assign staff members to review the
application, and each also assigns a project manager to coordinate
review within their agencies.
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Before filing the application, the applicant, the PSC, DEC, and
others may voluntarily engage in negotiations regarding environmental
and other studies needed. Once the applicant files its Article X
application with the Siting Board, the Chairman of the PSC has 60 days
to determine if the application is complete, or needs to be
supplemented. Once the application is deemed complete, the Siting Board
has 12 (12) months to decide whether to approve it, during which time
the DEC and PSC jointly conduct public hearings in which expert
witnesses are examined and evidence submitted. The hearing officers
make specific statutory findings and recommend a decision to the Siting
Board, which has the ultimate decisionmaking authority.
A. Decide Which Siting Applications Merit A Preference for Earlier
Review
Currently, the Siting Board reviews each application in the order
received, on a first-come first-served basis The Siting Board does not
now give a reviewing priority based on relative need for generation at
the location of the proposed site or on environmental attributes The
Legislature, however, could and should direct the Siting Board and DEC
to give a preference in the review process to applications for plants
that:
Are located in areas that have an acute need for new generating
capacity, and thus would have the greatest incremental impact on New
York's structural supply deficit;
Repower existing plants so overall emissions are reduced
and community impacts minimized, or otherwise displace electrical
generation that produces greater air emissions in the same air basin;
Achieve a lower emission rate for particulate matter,
NOR, and SO2 than legally mandated or than other proposed
plants, in addition to obtaining the largest offsets (proportional to
the plant size);
Are the most efficient generators, producing the least
CO2 per MWH generated;
Include active controls for mercury emissions;
Are sited on former industrial ``brownfields,'' which
thus would be redeveloped, cleaned and put to use; or
Utilize dry-cooling techniques to minimize water impacts.
Since the Siting Board reviews applications as they come in, all
other things being equal the first applications will be reviewed,
approved and built first. As new supply comes on line, later proposals
for plants may be withdrawn. However, the later proposed plants may, in
fact, be preferable from the perspective of the State's energy needs or
the environment.
To ensure that the State's needs are best served by proposed
plants, and to encourage the private sector to propose such plants, the
Legislature should require the Siting Board to give both procedural and
substantive preference to plants that meet the above criteria. A
preliminary review of any application should establish whether the
plant is located in an existing electricity load pocket, repowers an
existing plant, and what its emissions rates are. \42\ The Siting Board
and DEC staff could be preferentially allocated to plants that meet the
criteria listed. That alone would speed the review and approval of such
plants given existing staff constraints. Similarly, the Siting Board
could, in making approval decisions, give a substantive preference to
plants that meet these criteria.
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\42\ To ease the initial screening process, the application form
could require a cover page that indicates which, if any, of the
preference criteria are met by the proposed plant.
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B. Designate a Project Manager for Each Application
The time to review a siting application could be sharply reduced if
the Siting Board designated a central Project Manager to be responsible
for monitoring and ensuring the progress of an application's review at
all agencies, rather than relying on separate agency project managers
The lack of coordination among the State agencies, especially the DEC
and PSC, has often made it difficult for applicants to get clear
direction to move forward A central project manager for each
application would keep the process from getting bogged down through
conflicting or confusing directions.
C. Require Applicants to File Environmental Permit Applications with
the DEC Before Filing a Siting Application
Initially, applicants filed siting applications and the DEC permit
requests at the same time This led to delays because DEC, subject to
EPA requirements in its permit process, cannot generally decide within
the Siting Board's 60-day period whether the environmental permit
applications are complete As a result, many applications were rejected
by the Siting Board at the 60-day deadline as incomplete, and the
process had to be restarted.
Applicants should be required to submit their DEC permit requests
well ahead of their siting application. \43\ The aforementioned Project
Manager could coordinate this ``front-loading'' of the approval process
so that an applicant will have negotiated with the PSC and DEC, secured
the required environmental permits, and performed the necessary studies
prior to filing the siting application.
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\43\ Underscoring the necessity for a formal rule, the Siting
Board recently adopted an informal policy that it will not consider a
siting application to be complete unless the DEC has proposed a draft
permit.
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D. Establish a 30-Day Time Limit to Negotiate Voluntary Stipulations
The Siting Board encourages, but does not require, applicants to
negotiate voluntary stipulations with State agencies and interested
parties to identify the issues of public concern and the studies or
analyses appropriate for the project under review. \44\ This ``scoping
process'' is intended to speed review by enabling parties to reach
early agreement on which issues need to be addressed in the
application, thereby reducing later objections or litigation. With no
current timeframe for completion, these negotiations are often
protracted--causing unnecessary delay and uncertainty. To address this
problem, the scoping process should be made mandatory and should be
overseen by the Project Manager, who should establish a 30-day
timeframe for the parties, the DEC and PSC to negotiate stipulations.
The Project Manager should clarify the details of the environmental and
other reviews required by the Siting Board and DEC. Adherence to well-
established and understood descriptions of the detailed studies
necessary for permitting under the State Environmental Quality Review
Act (SEQRA) will also result in greater clarity and expedite the
process.
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\44\See, PSL Sec. 163. These studies include those describing the
expected environmental impact and safety of the facility, both during
its construction and its operation, that identify ``(i) the anticipated
gaseous, liquid and solid wastes to be produced at the facility
including their source, anticipated volumes, composition and
temperature, and such other attributes as the board may. specify and
the probable level of noise during construction and operation of the
facility; (ii) the treatment processes to reduce wastes to be released
to the environment, the manner of disposal for wastes retained and
measures for noise abatement; (iii) the anticipated volumes of wastes
to be released to the environment under any operating condition of the
facility, including such meteorological, hydrological and other
information needed to support such estimates; (iv) conceptual
'architectural and engineering plans indicating compatibility of the
facility with the environment; and (v) how the construction and
operation of the facility, including transportation and disposal of
wastes would comply with environmental health and safety standards,
requirements, regulations and rules under State and municipal laws, and
a statement why any variances or exceptions should be granted. `` PSL
Sec. 164(c).
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E. Appoint An Ombudsman For Each Project
The Siting Board should appoint an ombudsman to be a focal point of
contact for community groups seeking to be involved in the siting
process and to work with the Project Manager to--mediate issues
concerning the scope of necessary studies Citizens often identify
community and environmental concerns about which the DEC and 'Siting
Board members are unaware. Earlier identification and mediation of the
issues could speed the permitting process by avoiding the need for
amended applications, supplemental hearings, and subsequent litigation.
F. Set Deadlines for Transmission and Distribution Owners to Contribute
to System Reliability Impact Studies
A siting applicant must submit to the NYISO a System Reliability
Impact Study (``SRIS'') that identifies both the impact a new or
modified plant would have on existing transmission and distribution
systems, and the changes needed to accommodate the proposed additional
generating capacity. NYISO approval of an SRIS is necessary.
To prepare an SRIS, an applicant needs essential technical
information that only the owners of transmission and distribution
systems can supply Currently, these entities are not required to
provide the information within any particular deadline. The PSC and
NYISO should quickly correct this deficiency New York transmission and
distribution owners are either subject to PSC jurisdiction or are
members of the NYISO. The PSC and NYISO should establish an efficient
process for SRJS applicants to obtain information from transmission and
distribution system owners, including the deadline by which a system
owner must comply with an applicant's request for information.
Additionally, formal deadlines for the NYISO to complete its required
review should be set.
G. Assign Responsibility for Transmission System Upgrades Necessary for
New Generating Capacity
New generators may require costly upgrades or modifications of
transmission system facilities to carry the increased power.
Transmission facility owners and generators often disagree as to
whether a transmission system reinforcement is needed to serve new
capacity and which of them should bear an expense. Disputes have the
potential to delay or restrict the availability of new capacity.
Currently, no clear rule governs as to who should bear this
responsibility. However, between them, the PSC and NYISO have
jurisdiction over all possible parties. To ensure expeditious
resolution of such disputes, the PSC and NYISO should quickly decide
disputes over transmission reinforcement obligations.
III. Additional High Voltage Transmission Capacity is Needed
New York must augment the network of high voltage transmission
lines used to move bulk power from places with surpluses to areas where
the power is needed. Major transmission bottlenecks in central New York
(``Central East bottleneck''), around New York City (``In-City
bottleneck'') and at our borders with other States and Canada limit the
amount of power that can be moved. \45\ While minimizing the
environmental and aesthetic impact of transmission lines, these
bottlenecks must be opened.
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\45\See generally, New York State Energy Planing Board, Report on
the Reliability of New York's Electric Transmission and Distribution
Systems (November 2000) (hereinafter ``Planning Board Report'') and New
York State Department of Public Service, Analysis Of Load Pockets And
Market Power In New York State, Final Report (October 1, 1996)
(hereinafter ``PSC Analysis'').
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High-voltage transmission lines enable large amounts of power to
move over long distances, provide flexibility in the location of
plants, and increase access to diverse sources of electricity,
including sources hundreds of miles away. \46\ Long distance access is
especially important in New York, which has cheap hydroelectric and
Canadian power sources at the extreme western and northern borders of
the State.
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\46\Dependence on power plants fueled by natural gas has
contributed to the recent increase in 'the price of natural gas, which
in turn has increased the wholesale price of electric power. Augmenting
transmission capabilities would facilitate access to electricity
generated by other sources.
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A. Bottlenecks in New York Transmission Cut Off Access to Cheap Power
New York's transmission network contains segments that are not able
at all times to carry the optimum amount of power. Each such inadequate
segment forms a ``bottleneck.'' \47\ Near Utica, the transmission lines
from western New York and Ontario converge with the transmission lines
from the north and Quebec to form the Central East bottleneck. Whatever
power is available to the west or north, Central East can pass along
only 5,995 megawatts. \48\ When the demand for power soars in
southeastern New York during the summer, the Central East bottleneck
may limit access to surplus power west and north of this bottleneck The
In-City bottleneck works similarly to set an even lower limit (4,979
megawatts) \49\ on the amount of power New York City and Long Island
can import from western and northern New York, Canada and plants in the
Hudson Valley.
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\47\A transmission bottleneck resembles a section of highway
carrying traffic merging from two or more other highways with the same
number of lanes. As long as the traffic is light, the merge flows
smoothly. But if the merging traffic is heavy, all lanes slow and
movement can cease.
\48\PSC Analysis, p. 235. This description of power flows in the
New York transmission system is highly simplified and is not intended
to take into consideration numerous technical factors that make the
movement of bulk power difficult.
\49\ Id., p. 123.
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B. New York's Transmission System has been Neglected
Despite the potential for transmission upgrades to lower our
electricity costs and avoid having to build new power plants,
fundamental infrastructure is sorely lacking in New York. Measured in
constant dollars, between 1988 and 1998 capital improvements to New
York's transmission system dropped from $307.7 million per year to
$90.0 million per year. \50\ The Central East and In-City bottlenecks
have existed for at least 20 years. Today only one major project to
ease a New York transmission bottleneck is under active regulatory
consideration. \51\
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\50\ Planning Board Report, p. 26.
\51\ The LIPA has applied to the PSC for approval of two
transmission lines under Long Island Sound to Connecticut. If
constructed, these new lines would ease but not eliminate both the
InCity bottleneck and the constraints on importing power from New
England. The PSC reviews transmission construction proposals under
Article VII of the Public Service Law.
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Building a transmission upgrade, such as a new high voltage line,
is complex and expensive. Once the PSC approves a project, an applicant
may then have to negotiate or litigate with possibly hundreds of
landowners for rights of way, and obtain dozens of local building
permits. Uncertainty about who is responsible for transmission under
deregulation and how the cost of transmission construction is to be
recovered in a deregulated marketplace has undoubtedly affected
decisionmaking on transmission upgrades.
C. Upgrades to New York Transmission Capacity Should not Await Approval
of a Regional Transmission Organization
The Federal Energy Regulatory Commission (``FERC'') has proposed
the creation of disinterested Regional Transmission Organizations
(``RTOs'') to improve transmission capability \52\ and has asked
electric utilities to submit proposals for RTOs that would, inter alia,
have authority to prepare and enforce plans for optimizing transmission
systems. A disinterested RTO could weigh the interest of all, decide
what transmission network upgrades are in the public interest and then
enforce its decisions by ordering appropriate utilities and others to
construct improvements On January 16, 2001, the NYISO and the six
private New York electric utilities submitted a joint RTO proposal
requesting that the FERC designate the NYISO the RTO for New York \53\
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\52\Regional Transmission Organizations, Order No. 2000, III FERC
Stats. & Regs. Sec. 31,089 (1999); Order No. 2000-A, III FERC Stats. &
Regs. Sec. 31,092 (2000).
\53\FERC, Docket No. RTO1-000, Order No. 2000 Compliance Filing
(January 16, 2001). The NYPA and the LIPA supported the filing but did
not join as applicants. Id., p. 2, fn 3.
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While an RTO is welcome, we should not wait for an RTO to be up and
running before addressing New York's transmission needs The PSC and the
NYISO must immediately begin working with the transmission facility
owners to assess what transmission upgrades are warranted In
particular, this joint effort should examine what can be done within
the next 2 years to ease the Central East and In-City bottlenecks and
increase our ability to import power from other States and Canada. If
the FERC approves the application to designate the NYISO an RTO or
brings New York under another RTO, the new RTO could take over this
work and not have to start from scratch.
IV. New York Should Encourage New Sources of Generation
While our electricity supply brings innumerable benefits and drives
our economy, electricity generation also significantly impacts public
health and the environment Existing electricity generation in the
United States produces: one-third of the nitrous oxide emissions that
cause urban smog; two-thirds of the sulfur dioxide emissions that cause
acid rain; one-third of the mercury emissions that poison fish and
wildlife; and one-third of the greenhouse gas emissions, particularly
CO2, that are warming the planet.
The impacts of these problems are very severe in New York State,
which is characterized by an asthma rate 2-5 times the national
average, and 20 percent of Adirondack lakes too acidic to support life.
Though up to 40 percent of New York's air pollution comes from sources
out, of State, it is essential that New York lead by example in
creating a sustainable electricity policy.
Not all conventional power plants pose the same level of health and
environmental hazards. Modern combined-cycle gas-fired generators,
which are most of the units proposed for new generation in New York,
are far more efficient than power plants built in the past, and are
equipped with controls that greatly reduce emissions. To the extent
that more efficient units come on line and displace older, less
efficient and dirtier units, air emissions problems in New York will
decrease. \54\ To minimize the adverse impacts of even the cleanest
fossil generation plants, alternatives such as enhanced transmission,
renewable source generation, clean distributed generation, conservation
and increased efficiency must have a major role in a balanced package.
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\54\In the short run, even the most modern gas units will likely
increase total air pollutants, until the older units become too
uneconomical to operate.
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A. Renewable Generation Sources Should Provide at Least an Additional
10 Percent of New York's Electricity
For many decades, New York has benefited from hydro power, a
renewable source that does not release air emissions and uses no
imported fossil fuels. Hydro power currently produces up to one-fifth
of the electricity needs of the State. While ecological and
sociological impacts limit the usefulness of further expansion of hydro
power, recent developments in solar and wind power generation promise
new means of clean electricity generation. \55\
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\55\Large scale hydropower can adversely affect fish and other
aquatic life and can displace indigenous populations. While solar and
wind power cause no air or water emissions problems, wind power can
raise aesthetic concerns.
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Commercial scale electricity generation from wind and solar
(photovoltaic) sources are unlikely to come on line in significant
amounts (over 100 MW) by this summer, however they can meet a
significant portion of New York's electricity needs in the medium to
long term, while reducing air emissions and reliance on imported fossil
fuels. \56\ Indeed, some argue that renewables could satisfy virtually
all of New York's need for increased capacity.
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\56\Electric generators in New York State rely on fuels that
originate elsewhere in the U.S. or abroad. Increasing renewable
generation sources in New York State will produce jobs in-state and
keep electricity expenditures in-state.
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New York is particularly well suited for renewable generation A
study by the State University of New York Atmospheric Sciences Research
Center concluded that solar power could significantly reduce sharp
demand peaks because the State gets most of its sunlight during the
same time as electricity demand peaks--hot summer days. \57\ Similarly,
many areas across the State have strong wind resources It is estimated
that up to 5,000 MW of electric capacity could be produced from large
scale wind generation sites in New York enough to generate about 13
million MWh, or 10 percent of the State's electricity consumption. \58\
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\57\New York Times, New York Ranks Near the Top For Efficient Use
of Energy, October 21, 2000, pp. Bi, B6.
\58\Bailey, B. and Marcus, M., AWS Scientific, Wind Power
Potential in New York State: Wind Resource and New Technology
Assessment, May 1996. ESEERCO Project EP 91-32, p. 36.
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In the past, solar and wind generation were not economically
competitive with fossil fuel power generation. However, new
technologies for solar and wind generation combined with increased
fossil fuel costs narrow the cost gap considerably. \59\ During most of
the 1990's, wind energy was the world's fastest-growing energy source,
expanding by 20-30 percent per year; in the last 24 months, nearly
1,000 MW of wind have been installed in the U.S. \60\
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\59\According the U.S. Department Of Energy (``DOE''), today's
cost of generating electricity from wind is about $0.05 or less per
kilowatt-hour, which represents an 85 percent drop over the past 15
years. Http://www. eren. doe.gov/wind/faqs. html.
\60\ American Wind Energy Association, The Global Wind Energy
Market Report, February, 2001.
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The following steps should enhance use of solar and wind power to
produce clean electricity for New York:
1. The Attorney General Will Use Settlement Funds to Develop Wind Power
The Attorney General's Office sued a number of out-of-state coal-
fired power plants that upgraded or expanded their old power plants
without installing the pollution controls required by the Clean Air Act
and whose pollution significantly harmed New York State. The Attorney
General has directed that a major portion of the settlement money
arising from the Clean Air Act power plant enforcement cases be used as
incentives to develop 10-30 MW of renewable wind generation. The Office
is also pursuing legal action against similar plants in New York. These
cases will likely generate tens of millions of dollars in payments in
lieu of penalties that the State can use for clean air and efficiency
projects.
2. The Legislature Should Enact a Renewable Portfolio Standard
The Legislature should join New Jersey, Massachusetts, Connecticut,
Texas, and many other States by adopting a Renewable Portfolio Standard
(``RPS''). The RPS would require retailers of electricity to include in
their portfolio of supply an increasing percentage of renewable
generation. This would increase demand for renewables such as wind and
solar, that would, in turn, create a competitive market for supplies of
renewable generation.
A bill to create an RPS has been introduced in the State Assembly.
\61\ The Legislature should pass, and the Governor should sign, the
Assembly proposal to require 0.5 percent of all retail electric sales
to come from non-hydro renewables (650,000 MWh; equivalent to about 300
MW of installed capacity, or enough to power 90,000 homes) by 2003. The
percentage grows by a half-percent per year until renewables reach 6
percent of sales Thereafter it grows by 1 percent per year until it
reaches 10 percent The bill includes a cost cap of 2 5 cents/kWh If
renewables at this price cannot be found, retailers have the option of
making payments into a ``Clean Electricity Fund,'' calculated as 2.5
cents times their RPS obligation This fund would incentivize the
development of renewable generation.
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\61\See, A.8506-Englebright.
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An aggressive RPS could create well over 3,000 MW of renewable
generation at little to no additional cost to consumers. For example, a
recent study of Massachusetts' RPS (similar to what the Attorney
General recommends for New York) found that it would add only 0.4
percent to consumer bills by 2003, rising to 2.2 percent in 2012. \62\
An Iowa study--which assumed that the cost of fossil fuels would rise,
while wind's costs would decline--showed customers could save $300
million over a 25-year period if the State met 10 percent of its
electric demand through wind generation. \63\
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\62\ Massachusetts Division of Energy Resources., Massachusetts
Renewable Portfolio Standard Cost Analysis Report. December 21, 2000,
p. 37.
\63\ Wind, Thomas, Wind Utility Consulting, The Electric Price
Impact of an RPS in Iowa, May 1, 2000.
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Much of the renewable supply needs in New York could be met with
wind power, providing significant environmental and economic benefits.
It is estimated that for every 100 MW of wind development about $1
million is generated in property tax revenue. New York could see 2,000
MW of wind power by 2010 with an aggressive RPS and financial
incentives, generating $20 million annually in tax revenues to rural
communities. In addition, since wind farms are generally located on
privately owned land, the development of 2,000 MW in New York means
annual payments of approximately $4 million to farm and forest
landowners. \64\
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\64\ Estimated benefits according to American Wind Energy
Association RPS Fact Sheet, Http://www.awea.org/pubs/factsheets/
nyrps001.pdf
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The reduced emissions of pollution and greenhouse gases resulting
from wind power is significant. A single 1.65 MW wind turbine will each
year displace emissions of 2,161 tons of CO2, 11 tons of
SO2, and 4 tons of NOR, based on the New York State average
utility fuel mix. \65\
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\65\Assumes wind turbine generates electricity 30 percent of the
year. Historical fuel mix data and emission rates according to the DPS
at Http://www.dps.state.ny.us/fuelmix.htm.
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B. Policies are Needed to Increase Clean Distributed Energy Sources
The need for large power plants could be lessened by distributing
small-scale generation units that use minimally polluting technologies
directly on the site where the electricity is to be used. Electric
power can be efficiently generated at small-scale facilities located on
or near the consumer's property. Generation options include fuel cells,
wind generators, small-scale hydro, solar cells, and cogeneration
facilities that combine heating and cooling with electric generation.
Because distributed generation facilities may not always provide the
exact amount of power needed, the facility is usually connected to the
electric power grid. The grid can provide additional power if the
facilities run short, or can take the excess power generated. To the
extent that local sources of electricity reduce the demand placed on
traditional generating plants, they can reduce both (i) the need to
build new power plants, and (ii) the wholesale market scarcity--
conditions that produce price volatility.
Distributed generation's smaller scale often enables new sources of
power to be obtained in less time than with conventional power plants.
Another advantage is the greater diversity of generation sources,
including renewables such as sunlight and wind, decreasing dependency
on fossil fuels. As demonstrated by the current rise in natural gas and
oil prices, excessive reliance on fossil fuels subjects New York to
risk of fuel shortages and cost volatility Distributed generation also
avoids further strain on the transmission and distribution system.
Many forms of distributed generation are. also environmentally
cleaner than conventional power plants. \66\ Moreover, their smaller
scale can minimize the impact on neighborhoods and open space. However,
uncontrolled diesel generators--sometimes used for distributed peak
supply--emit many times the pollution of modern, large-scale power
plants or any form of renewable generation. Thus, public policies
encouraging distributed generation must not include incentives for
environmentally detrimental onsite generation facilities. \67\
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\66\Wind and solar power are cleaner. Fuel cells that operate on
hydrogen fuel emit only water vapor. Other fuel cells use natural gas,
and thus emit carbon dioxide.
\67\For example, LIPA's recent action to promote the use of onsite
back-up generation does not differentiate between clean onsite
generation and diesel generators. This action should be revisited to
ensure that financial incentives to use diesel generators are removed.
See, LIPA Supplemental Service Tariff. Http://www.lipower.org/
suyservtalkpoints.html.
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If more commercial, industrial and multi-family residential
buildings installed modern onsite generation facilities, the balance
between supply and demand in tight regions such as downstate New York
could be improved, reducing the need to construct large new power
plants or transmission lines. In the past, many onsite generators did
not economically compete with traditional sources of electricity.
However, recent technological advances have lowered the costs of
distributed generation. In addition, the transition to wholesale market
pricing and the ability of distributed generation to shave peak demand
levels (thereby relieving all power buyers from prices set at the
steepest part of the supply/demand curve) further increase the relative
economic benefit of distributed generation. \68\
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\68\When customers are billed on a real-time basis, such that
their bills reflect the power used during peak and off-peak hours, the
economic value of solar generation will be maximized, as it is most
productive during periods when demand and market prices are highest.
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The following policies should reduce barriers to, and promote
additional distributed generation:
1. The Legislature Should Offer Financial Incentives to Develop Clean
Distributed Generation
The NYSERDA should provide low-cost loans to finance the investment
necessary to install onsite facilities, and the Legislature should
expand New York State's tax credit for residential solar power systems
to clean distributed technologies such as fuel cells, wind, and small
hydro power projects. \69\ Government incentives are necessary to jump-
start development of supplemental electricity generation in New York.
If the initial investment barriers are reduced, many distributed
generation units could be installed in time to help meet New York's
electricity needs for 2002.
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\69\ New York State residents can claim a State income tax credit
of 25 percent on the cost of their Photovoltaic system, up to a maximum
credit of $3,750.
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2. The Legislature Should Expand the Solar Net Metering Law to Include
Wind and Small Hydro Power
The Legislature should expand the Solar Net Metering Law (Public
Service Law Section 66-j) to include wind and hydro power. The New York
State Legislature enacted the net metering law in 1997, allowing
customers who install solar power to use excess electricity produced by
the solar panels to spin the electricity meter backward, effectively
banking the electricity until it is needed by the customer This
provides the customer with full retail value for all electricity
produced. In its current form, the net metering law applies only to
facilities powered by solar generation Of the 30 States with net
metering opportunities, New York is the only State where small wind
generation systems are ineligible. \70\
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\70\ American Wind Energy Association. Http://www.awea.org/
smallwind/newyork.html
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3. The PSC Should Eliminate Unjustifiable Barriers to Clean Distributed
Generation
Distributed generation facilities typically require connection to
the utility grid. Utilities therefore need to maintain technical
safeguards to prevent distributed generation from adversely affecting
the transmission system. Formerly, utilities imposed burdensome
insurance requirements on independent generators seeking to connect to
the power grid. The PSC recently reviewed such tariff conditions, and
adopted improved interconnection standards designed to lower this and
similar barriers. \71\ However, insurance is still required for solar
power systems that are net-metered. The PSC should remove this existing
barrier and the NYSERDA should provide low-cost insurance or bond
coverage to meet utility interconnection requirements. Furthermore, the
PSC should review utility policies and practices to ensure that any
unjustifiable barriers to distributed generation are eliminated.
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\71\See, New York State Standardized Interconnection Requirements,
Application Process, Contract & Application Forms For New Distributed
Generators, 300 Kilo Volt-Amperes Or Less, Connected In Parallel With
Radial Distribution Lines, issued November 9, 2000.
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4. NYPA Should Work With Local Governments to Install Fuel Cells at
Landfills and Wastewater Treatment Facilities
The NYPA should build on its success with fuel cells and work more
aggressively with local governments to install them, particularly local
governments in load pockets such as New York City and Long Island.
Landfills and wastewater treatment plants produce large quantities of
methane, which can be used to power fuel cells to generate electricity.
If not used to generate power, the gas is either flared or released,
significantly contributing to climate change.
In 1998, the NYPA and the EPA installed the world's first
commercial fuel cell powered by waste gas, located at the Westchester
County Wastewater Treatment Plant in Yonkers. In its first year, the
200 kilowatt fuel cell converted over 20 tons of waste gas into over
1.2 million kWh of electricity. \72\ The NYPA has also installed fuel
cells at NYPD's Central Park Station and North Central Bronx Hospital,
both of which run on natural gas.
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\72\March 23, 1999 EPA press release. Http://www.epa.gov/nheerl/
ordpr/]999/pr032399.pdf
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Other prospects for fuel cells have not materialized. The New York
City Department of Environmental Protection (``DEP'') has estimated
that it flares or releases enough anaerobic digester gas at its 14
wastewater treatment facilities to fuel between 15 and 25 fuel cells.
\73\ But a proposal to install two NYPA fuel cells at one of DEP's
wastewater facilities did not move' forward largely because of the high
cost of fuel cells, which are not yet commercially available. \74\ The
myriad environmental benefits of fuel cells, and the improved
reliability to the grid resulting from distributed generation, must not
be overlooked in cost/benefit analyses. To fully realize the potential
of fuel cells, the NYPA should seek new opportunities for fuel cell
installation across the State, and offer attractive financing to its
local government partners to ensure the projects are implemented. \75\
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\73\ February 15, 2001 conversation between OAG Policy Analyst Tom
Congdon and Energy, Air and Laboratory Services Division Chief Fred
Sachs, DEP Bureau of Wastewater Treatment.
\74\Ibid. DEP's electric bill would have increased significantly
to repay the NYPA for the cost of the fuel cells. The fuel cells
installed at Yonkers Wastewater Treatment Plant and the North Bronx
Hospital were subsidized by the DOE.
\75\As with other NYPA efficiency and renewable programs, these
fuel cells would be financed from the NYPA's existing rate revenue.
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V. Power Prices Must Not Be Permitted To Skyrocket During the
Transition to Competitive Markets
A. New York Wholesale Power Markets Must be Significantly Reformed
Since New York's wholesale power markets began operating in
November 1999, significant flaws in the design of these markets have
been identified. The markets are not fully competitive at all times in
all locations, and thus the opportunity to exercise abusive market
power often arises When improper market power is exercised, electricity
prices can suddenly rise to noncompetitive and, indeed, stratospheric,
levels This creates windfalls for generators, as well as unreasonably
high bills for energy purchasers. It also impedes the development of
truly competitive markets. All possible means must be used to ensure
competitive pricing in the NYISO's markets, thwart the abusive exercise
of market power, and provide redress for purchasers when market power
leads to noncompetitive pricing.
1. NYISO Background
In January 1999, independent power generators, utilities, public
authorities and others interested in competitive electricity markets
and open access to power transmission requested from the FERC authority
to create an ``independent system operator'' to manage New York's high-
voltage transmission grid, operate competitive short-term markets for
power, and undertake other tasks essential to establishing a
competitive 'wholesale market for electricity. \76\ The NYISO began
operations in November 1999.
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\76\FERC approval was required because the FERC regulates
interstate transmission of power and has mandated open access to
transmission services.
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Today the NYISO manages the transmission grid that moves bulk power
around New York, and operates the short-term Day Ahead (``DAM'') and
Real Time (``RTM'') markets that together supply half the power used
each day in the State. (The other half is supplied through bilateral
contracts between generators and users.) On a typical day, the DAM
accounts for about 45 percent of the total power used in New York,
while the RTM typically accounts for 5 percent of the power. The DAM
and RTM determine the price per megawatt-hour to be paid for wholesale
power and the order in which generating plants will be scheduled to
run. In highly simplified terms, the NYISO accepts confidential bids
stating how much power each utility or other electricity retailer \77\
wishes to purchase during each hour of the next day (in the DAM).
Simultaneously, each power supplier submits confidential offers stating
for each generating plant it owns how much power at a given price it is
willing to provide. The NYISO, using complex software, totals the bids
and ranks the offers in ascending price order. The most expensive offer
that must be scheduled to run to provide the total amount of power
requested for a given hour sets the price per megawatt-hour paid to all
suppliers for power delivered during that time (referred to as ``the
market clearing price''). \78\ The RTM operates similarly. \79\
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\77\In New York, independent electricity supply businesses, termed
``energy service companies'' or ``ESCOs,'' may compete with traditional
utilities for customers.
\78\ Alternatives to market clearing prices to set wholesale
electricity prices have been proposed. One approach is to pay each
seller its asking price, rather than pay all sellers the highest offer
taken. Other proposals would peg each offer price to actual costs.
\79\The NYISO also operates competitive markets for generating
reserves and other services related to supplying electricity, and
monitors the power markets to ensure that they operate competitively.
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NYISO membership today consists of private generators, utilities,
public authorities, power marketers, representatives of commercial and
industrial customers, consumer advocates and others, as well as a paid
professional staff. A ten-member Board of Directors sets policy for the
professional staff and determines the actions the NYISO will take in
its relations with the FERC and other government agencies By NYISO
rule, Board members must be disinterested and may not have a financial
interest in any aspect of the electric power industry.
A NYISO Management Committee and two other NYISO committees
discuss, issues and propose actions to the NYISO Board of Directors.
The FERC exercises regulatory authority over the NYISO and other
independent system operators. The NYISO has sought the FERC's approval
of numerous proposed changes in the way NYISO operates and exercises
its authority. While many of the changes involve technical and
``housekeeping'' matters, several have addressed competition problems
identified by the NYISO staffs Market Monitoring Unit (``MMU''). Most
notable are the NYISO's June 30, 2000 petition for a $1,000 per
megawatt-hour cap on the price of power in the short term markets, and
its March 27, 2000 petition for a cap on the price of reserve
generation capacity. The FERC approved the power price cap petition on
July 26, 2000 and the reserves price cap petition on May 31, 2000.
These and other FERC-approved changes in NYISO operations have
moderated but not eliminated the potential for exercise of market
power. \80\
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\80\The NYISO professional staff has taken the position that the
NYISO Board does not need to seek the FERC's approval of every
operational change intended to strengthen the NYISO's efforts to deter
uncompetitive actions. Not all NYISO members agree.
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2. The NYISO Must Ensure That Energy Sellers Cannot Unfairly Exercise
Market Power to Raise Electricity Prices
At least two instances have been identified in which the NYISO
markets were not competitive in 2000. During certain hours of high
demand on June 26, 2000, the price of power in the Day Ahead Market
spiked to $1,000 per megawatt-hour due to bidding practices leading to
excessively high prices. This behavior cost energy buyers an estimated
$100 million in excessive power prices that day. The NYISO has also
identified instances of market power in the sale of generating capacity
reserves from January to March 2000. The Attorney General has urged the
FERC, which has jurisdiction over power transmission and independent
system operators, to provide the NYISO the authority it needs to
address such exercises of market power. \81\
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\81\October 31, 2000 Letter from Attorney General Eliot Spitzer to
FERC Chairman James J. Hoecker.
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The NYISO must ensure that design and operational flaws are
addressed quickly, before the demand for electricity rises with the
start of the summer cooling season in May 2001. In particular, the
NYISO must enhance its ability to identify and correct noncompetitive
prices and practices. The Attorney General supports a three part
approach: (1) ``automatic mitigation'' of DAM prices as soon as
possible; (2) strengthening after-the-fact market monitoring, including
retroactive mitigation of noncompetitive prices; and (3), retaining the
$1,000 cap on power prices. Finally, the NYISO should follow through on
plans to open its markets to increased participation by non-generators
and non-load serving entities, so as to enhance competition and
liquidity in the power markets.
a. Automatic Mitigation Must be Implemented Quickly On February 20,
2001, the NYISO Board voted to extend its current forward looking
market mitigation to the DAM in a way that is intended to prevent the
exercise of market power until competition fully takes hold. \82\ To
effect this mitigation, also referred to as a ``circuit breaker,'' the
NYISO will reprogram the software it uses to operate its power markets
so that the software automatically analyzes bids before they set the
market-clearing price. If the analysis indicates a potential exercise
of market power in the DAM, the suspect power prices will be replaced
with competitive prices. The NYISO expects to implement the software
changes before the 2001 summer cooling season, i.e., by May, 2001. \83\
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\82\New York Independent System Operator Approves Automated
Process For Reviewing Supply Bids--Measure Enhances NYISO 'S Ability To
Prevent Market Abuse--, NYISO press release (February 22, 2001).
\83\Automatic mitigation will use as triggering levels the price
threshold values in the NYISO's current forward-looking market
monitoring procedures. Each day NYISO software will automatically
review Day Ahead offers for evidence of market power and recompute
excessive offers before they can set the market clearing price. In
grossly simplified form, automatic mitigation works as follows: if upon
matching offers with bids, the Day Ahead Market in any zone would yield
a market clearing price that exceeded $150 per megawatt-hour, a price
analysis will be triggered. Depending on where in New York the over-
$150 market clearing price appeared, the NYISO software would examine
every offer in any zone in the State deemed competitively relevant to
the affected zone, and compare it to a predetermined ``reference
price'' associated with the generating facility whose output is
represented by each offer. If the difference between any offer and its
associated reference price exceeds $100, the NYISO software would
substitute the reference price for each offer and recompute a
``reference market clearing price'' for each affected zone. This
recomputed reference market clearing price hen would be compared to the
initial ``unanalyzed'' market clearing price in each affected zone. If
the difference between the two market clearing prices is more than $100
in any zone, the NYISO software would then automatically set aside any
offer in the affected zone that was initially greater than $100 above
its reference price and replace that offer's price with the reference
price. These recomputed offers would then be used in the calculation of
the official market clearing price for that zone.
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While agreeing with the general framework, some have objected that
the NYISO automatic mitigation would still allow considerable exercise
of market power, primarily because the triggering levels in the NYISO
proposal are too high. Among other changes, the objectors would lower
the initial trigger to $100 per megawatt-hour and the market comparison
triggers to $50 per megawatt-hour. Lowering the triggers could more
accurately capture the times and places in--which market power may be
exercised. For this reason, the Attorney General supports lower
thresholds for automatic mitigation.
While lowering the triggers would make automatic mitigation more
effective, such a refinement would likely constitute a material change
from the current NYISO market monitoring standards and thus might
require the FERC's authorization before it could be implemented, with
the concomitant risk of delay or denial. \84\
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\84\ Others object to the idea of automatic mitigation as an
unnecessary tampering with competitive markets. The markets, however,
are not always competitive. Automatic mitigation should prevent
excessive prices from occurring in the first instance.
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Another objection to the current automatic mitigation is that it
does not apply to the RTM. The NYISO staffs explanation is that the
logistics of the RTM operate on such a short timeframe that it is not
practical to design an automatic mitigation mechanism for the RTM.
Experience with Day Ahead mitigation may suggest ways to make automatic
mitigation of the RTM practical. Deployment of Day Ahead automatic
mitigation should not be delayed, but the NYISO should continue to
evaluate capability for automatic mitigation of the RTM as well.
b. Existing Forward-Looking Market Monitoring Must be Strengthened
i. The NYISO's Market Monitoring Triggers Must be Refined
The NYISO staff has a fourteen-member Market Monitoring Unit
(``MMTJ'') that examines the offers, bids and market clearing prices in
the various electricity markets to determine whether noncompetitive
prices or practices have occurred. Once it identifies such a price or
practice, the MMU takes actions to prevent a repetition. The major
difference between automatic mitigation and the current MMU efforts is
that the MMIIJ addresses prices and practices after the market has
cleared; it does not prevent the initial exaction of noncompetitive
prices. As part of its effort, the MMU compares the market clearing
prices in the DAM and RTM to numerical triggers. If a market clearing
price exceeds a trigger, the MMU then employs procedures to identify
potential noncompetitive behavior and fashion forward-looking means for
preventing its repetition.
Because the current MMU threshold values may not identify
accurately enough all situations in which competition is impaired, the
NYISO should seek from the FERC, and the FERC should grant, authority
for the NYISO to lower these triggers. This refinement would increase
the NYISO's ability to discern noncompetitive market behavior leading
to noncompetitive prices. It could also lead to the identification of
loopholes in NYISO rules that the current market monitoring protocol
does not detect.
ii. Authority for Retroactive Mitigation Must be Obtained
The FERC has not authorized the NYISO to recapture excess profits
obtained through the exercise of market power. When the MMU identifies
a noncompetitive pricing or practice, the NYISO can at most order the
offending act or practice to cease prospectively. Thus, currently, one
exercising market power in a NYISO market gets at least ``one bite at
the apple,'' risking nothing more than being admonished not to do it
again. Such limited enforcement capability is inadequate.
Noncompetitive market conditions for even a few hours on a single day
can exact--large sums in excessive prices.
Adding automatic mitigation to the MMU's tools and tightening the
MMU's surveillance triggers will reduce the likelihood of
noncompetitive prices, but no preventive system is perfect. The NYISO
needs the authority to recover excessive noncompetitive profits if and
when market power slips past the NYISO's preventive measures.
As the Attorney General urged in the October 31 letter to FERC
Chairman Hoecker, the NYISO should request from the FERC, and the FERC
should grant, authority retroactively to mitigate noncompetitive prices
identified in the course of its forward-looking market monitoring. The
window for identification of possible exercises of market power and for
retroactive refunds should be short, both to maximize the value of
refunds as a deterrent and to provide the wholesale power market with
certainty. Both consumers and wholesale market participants have an
interest in the speedy resolution of market monitoring inquiries, as
well as in not being forced to pay noncompetitive prices for electric
power.
iii. The Current $1,000 Per Megawatt Hour Price Cap Must be Retained
A $1,000 per megawatt-hour cap on the price of wholesale power
currently exists in the NYISO's Day Ahead Market and Real Time Market,
as well as in relevant markets in the adjacent New England and PJM
power pools. \85\ The NYISO should ask the FERC, and the FERC should
agree, to retain this cap until the wholesale electric market in New
York is fully competitive. While NYISO market monitoring can be the
first line of defense against market power, and retroactive mitigation
may recover excess profits exacted by market power, there may be
circumstances in which neither is able to prevent extreme wholesale
power price spikes The current NYISO price cap thus provides a crucial
final safeguard against extreme price spikes It should be retained
until a change in circumstances justifies modifying or retiring it.
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\85\The current price cap is set to expire on April 30, 2001
unless extended by the FERC upon request.
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To be effective, a price cap must be compatible with conditions in
neighboring power pools Otherwise, power suppliers may have a financial
incentive to sell preferentially into the power pool with the highest
price cap. Today, both power pools neighboring New York have a $1,000
per megawatt-hour price cap. This compatibility of price caps should be
maintained.
iv. The NYISO Should Implement Virtual Bidding to Expand Competition
Today the only parties that may buy or sell electricity through the
NYISO are utilities and other entities that provide retail service to
end users, and those who own or control generating plants. This limits
the number of participants in the NYISO markets. Competition would be
enhanced if power marketers, brokers and others not directly involved
in generating or retailing electricity could buy and sell power through
the NYISO markets. In addition to increasing competition, market
participation by new types of parties would add liquidity to these
markets by increasing the number of ways that power purchases can be
contracted for and financed. The downside of opening the NYISO markets
to new classes of participants is the increased potential for gaming
the markets, especially during times of tight electricity supply.
The NYISO currently plans to implement power trading by parties
other than generators and retailers, participation termed ``virtual
bidding,'' by November 1, 2001. \86\ The NYISO's explanation for the
delay in instituting virtual bidding is that it needs to correct flaws
in its current operating procedures and to develop appropriate software
before adding virtual bidding to an already complex system. \87\ FERC
has accepted the NYISO's explanation. \88\ The NYISO should develop the
necessary software and make the operational improvements needed to
implement virtual bidding as soon as practicable. At the same time, the
NYISO should address the increased complexity that virtual bidding will
add to its markets and strengthen its market monitoring capability to
accommodate the additional market surveillance' that will be needed.
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\86\See, e.g., NYISO, New York Independent System Operator, Inc.
's Report on the Implementation of Virtual Bidding and Zonal Price-
Capped Load Bidding in Docket No. ELOO-90-000, FERC (February 2, 2001),
p. 6.
\87\Id., p.4.
\88\Some have protested to FERC that the NYISO's implementation of
virtual bidding is taking too long. FERC rejected the initial protests
as inconsistent with the prudent development of the NYISO's operations.
FERC Docket No. ELOO-90-000, Order On Complaint, Morgan Stanley Capital
Group, Inc. v. New York Independent System Operator, Inc., 93 FERC
61,107 (October 5, 2000). Certain parties have renewed their protests.
See, e.g., Morgan Stanley Capital Group, Inc., Motion For Immediate
Commission Action Regarding Virtual Bidding Implementation Schedule,
Docket No. E100-90-000 (March 5, 2001).
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c. Exposure to Volatile Prices Must be Minimized Without Shielding
Customers From Market Price Signals
We have seen in New York that highly volatile wholesale electricity
prices can accompany the transition from regulated monopoly to
competitive commodity markets, especially during times when supply is
limited and demand irreducible. During the summer of 2000, Con Edison's
customers experienced electricity rates 30 percent higher than during
the comparable period in 1999, despite cooler weather in 2000 resulting
in lower peak usage levels than usual In addition to the increased cost
of oil and natural gas, an almost twelve-month outage at Con Edison's
Indian Point 2 nuclear plant tightened supply in the downstate markets
significantly, leading to higher wholesale prices in times of high
demand. \89\ If New York's summer weather in 2001 or 2002 is normal or
hotter, wholesale price spikes remain a threat.
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\89\The Attorney General has taken NYISO analyses and examined the
impact of the Indian Point 2 outage on the price of power in the
wholesale markets. The unavailability of Indian Point 2's 41 MW
capacity output from February 16, 2000 through early January 2001
required the NYISO to rely upon more expensive generators during times
of greater demand, and thus increased the market clearing price for
peak-hour power purchased by Con Edison. Indeed, it increased the
market price throughout the State. The Attorney General, in a motion
filed with the PSC has estimated that the outage cost Con Edison's
customers $176.5 million and urged that Con Edison be required to
reimburse customers for this increase in wholesale power costs. See,
PSC Case 00-E-0612--Proceeding on Motion of the Commission to
Investigate the Forced Outage at Consolidated Edison Company of New
York, Inc. 's Indian Point No. 2 Nuclear Generating Facility, December
4, 2000 Motion by New York State Attorney General Eliot Spitzer For
Complete Quantification Of Consolidated Edison 's Liability For Alleged
Imprudent Management Of Its Indian Point 2 Nuclear Plant.
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Con Edison's and Orange & Rockland's current rate structures permit
them to pass through to their customers nearly all of the commodity
cost of electricity, no matter how high. \90\ Con Edison is a multi-
billion dollar company serving over three million customers, and
therefore has much more bargaining power than any of its residential or
small business customers to control price volatility through
negotiation of long-term contracts with generators, and through other
hedges that manage risk. \91\ To give an electric utility like Con
Edison an incentive to hedge its risks in the wholesale market, the
company must pay the price for bad market decisions.
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\90\ Con Edison passes through to its electric customers 90
percent of the difference between the company's forecasted and actual
purchased power costs. (Con Edison, P.S. C. No. 9--Electricity, Leaf
No. 163, Effective September 11, 2000.) Central Hudson Gas & Electric's
rates permit an automatic pass-through, but this is ameliorated by the
utility's long term supply contracts with the companies that purchased
their former generation units. Rochester Gas & Electric has not yet
progressed as far as the other utilities toward restructuring, and
currently retains most of its own generating plants. LIPA, as a public
authority, is not regulated, but instead sets its own rates. LIPA thus
ultimately recovers from its customers any increased cost of power it
purchases from generators, although the lack of automatic pass-through
likely delays the impact.
\91\Other New York utilities, such as Niagara Mohawk Power
Corporation and New York State Electric & Gas Corp. currently operate
under fixed consumer retail rates, and have been able to obtain long-
term supply contracts.
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Recent experience in California demonstrates that completely
insulating consumers from wholesale electricity prices can financially
devastate the affected utilities, especially if, as in California, they
must buy all their energy requirements in the spot market. While the
New York market rules permit and encourage bilateral contracts and
other hedging strategies, we cannot ignore the warning of the
California experience.
As electric power supplies increase, customers ought gradually to
receive more complete price signals to encourage more flexible and
efficient demand. \92\ Until we reach that point, however, we must
ensure price stability for customers during volatile markets. The
complete pass-through of energy costs, such as Con Edison and Orange &
Rockland currently enjoy, must be modified. The PSC should cap Con
Edison's rates once power prices reach a certain per kilowatt hour
level. Below that level, customers would,pay the passed-through market
price. Above that level, Con Edison would swallow a substantial portion
of the difference. Such billing would limit customers' exposure to
market volatility extremes while sending them appropriate price signals
reflecting the market price of the electricity they use. At the same
time, Con Edison would have an incentive to employ long-term supply
contracts and other hedges to moderate the cost of power should market
prices exceed the rate ceiling established. \93\
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\92\ Evidence shows that customers react to price signals by
reducing demand, and often do so relatively quickly. For example,
according to Hal R. Varian, economics professor and Dean at the
University of California at Berkeley, when the electric bills of San
Diego residents more than doubled last summer, power consumption
dropped 5 percent within a few weeks. See, The New York Times, January
11, 2001, p. C2.
\93\The Attorney General opposes alternative bill mitigation
proposals that would not accomplish these goals. One proposal would
permit customers to postpone payment of that portion of their electric
bills representing extremely high levels, and make up the difference
during months when prices are below a certain threshold. This proposal
would still expose customers to the full cost of power, albeit leveled
over a year's bills. Others have proposed to keep rates at or below a
certain pre-determined level throughout the year by offsetting higher
summer peak market price levels with a variety of customer credits
otherwise owed by Con Edison. Since customers are entitled to these
rate offsets whether or not power prices rise, this approach to rate
mitigation is unsatisfactory, and would conceal from customers what is
occurring in the power market.
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VI. Demand for Electricity Must be Reduced to Minimize the
Environmental and Public Health Impacts of Generation and to
Assure Market Competition and Stable Prices
Aggressive measures to reduce demand, together with construction of
clean and renewable power plants, will greatly reduce the environmental
and public health impacts of electricity generation and foster
competitive markets and lower electricity bills. Reducing electricity
use avoids the need for existing power plants to produce that amount of
electricity, and the corresponding emissions. Over the long-term, an
energy policy is sustainable only if it includes environmental factors
among its objectives. When new, more efficient power plants start
supplying electricity to the grid, the need for existing, dirtier power
plants should be reduced. But only if demand is simultaneously reduced
while clean supply is increased will the State ensure a net gain for
the environment and for the consumer. \94\
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\94\If the growth in demand is not reduced, there will be a need
for both the existing power supply and new capacity. The addition of
even the cleanest natural gas plant will result in a net addition of
emissions if the State does not ensure that older, dirtier plants are
displaced by cleaner new ones.
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What appears like a small action to reduce demand can have a large
impact. For example, replacing just one incandescent light bulb with a
compact fluorescent bulb (which uses 70 percent less energy to produce
the same amount of light) can save a consumer over $38, save 337 kWh of
electricity, and avoid over 300 pounds of the greenhouse gas
CO2 in 3 years. If all 6,766,000 households in New York
State replaced just one bulb, over $260 million would be saved, 2.2
billion kWh would be saved (more than the electricity generated at an
100 MW power plant), and over one million tons of CO2
emissions would be avoided in 3 years. (See Appendix.)
New York already ranks as the second most efficient State in per
capita energy use nationwide (in large part due to the natural
efficiency of apartment living). \95\ Nonetheless, opportunities for
improved efficiency and conservation abound. A 1997 study claims that
cost-effective investments in energy-efficient technologies could
reduce New York's electricity use by 34 percent. \96\
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\95\American Council for an Energy Efficient Economy. National and
State Energy Use and Carbon Emissions Trends. September 2000, Http://
www.aceee.org/pubs/e001.pdf
\96\ American Council for an Energy Efficient Economy. Energy
Efficiency and Economic Development in New York, New Jersey and
Pennsylvania. February, 1997.
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New York State has several programs to compensate for market
barriers that discourage energy efficiency. But existing programs are
not sufficient to create the environmentally sound, reliable, and
balanced energy portfolio that is in the State's best interests. The
Attorney General recommends significantly expanding these programs (see
Section I.D.). The Attorney General is similarly using his legal
authority to direct litigation settlement funds to energy efficiency
and renewable power investments. In addition, utility portfolio
standards would over the long-term lead to significant savings--perhaps
1,000 MW through efficiency and 3,000 MW through renewable energy--that
will shift New York's energy policy to a more sustainable framework.
Together, the funding proposals below would direct approximately an
additional $120 million per year (on top of existing programs) to
energy efficiency, conservation, and renewable energy programs in New
York State. (See table 2.) This expansion could result in a savings of
over 600 MW over the next 2 years--an amount sufficient to avoid
capacity shortfalls--and a necessity if New York State's electric grid
is to maintain reliability and to minimize price spikes. At the same
time,-these energy savings will avoid enormous quantities of harmful
pollutants--millions of tons of NOx, SO2, and
CO2--and lead to substantial consumer savings.
If New York's funding levels for efficiency and renewables were
increased from the current level of $242 million per year to $360
million per year, as recommended, New York will still spend less per
capita than many other States in the Northeast. (See Table 3.)
Table 2
Summary of Attorney General's Proposals to Expand Funding for Current Efficiency and Renewable Programs
----------------------------------------------------------------------------------------------------------------
Estimated Estimated
Annual Annual
Capacity Capacity
Programs Current Funding (in Savings Proposed Funding Level Savings
millions of dollars) from from
Current Proposed
Funding Funding
----------------------------------------------------------------------------------------------------------------
System Benefits Charge (NYSERDA's $150 million per year 200 MW $150 million per year 200 MW
EnergySmart Program)\97\. until 2005. until 2010.
NYPA Energy Services\98\.............. $60 million per year.... 20-60 MW $160 million per year 53-160 MW
until 2010.
LIPA Clean Energy Initiative\99\...... $32 million per year 28 MW $50 million per year 45 MW
until 2004. until 2010.
Power Plant Settlements............... $0...................... 0 MW Approximately $20 20-40 MW
million.
TOTAL................................. $242 million per year... 248-288 $360 million per year 318-445
MW plus settlement funds. MW
----------------------------------------------------------------------------------------------------------------
\97\Estimated savings from the funding proposals are based upon NYSERDA projections, see SBC Proposed Operating
Plan For New York EnergySmart Programs (2001-2006) February 15, 2001, p. 2.
\98\ Estimated savings are based upon the past experience in New York and other States. Between 1990 and 1997,
the State's investor-owned utilities spent $1.2 billion on efficiency or demand-side management (DSM)
programs, avoiding the need for over 1,300 MW of capacity. These programs included rebates for efficient
appliances and lighting, consumer education, and low income weatherization projects. The NYPA spent $255
million on DSM investments between 1990 and 1996, avoiding the need for 84 MW of capacity. See, NYSEPB, New
York State Energy Plan and Final Environmental Impact Statement. November 1998. p. 3-60, 3-62.
\99\ Estimated savings based on LIPA's current projections of 144 MW per $160 million spent over 5 years. See,
LIPA, Clean Energy Initiative, May 3, 1999, p. 21.
Table 3
Comparison of Demand Side Management and Renewable Energy Spending Per
Capita By State\100\
------------------------------------------------------------------------
State Annual DSM Spending Per Capita
------------------------------------------------------------------------
Connecticut........................ $35.95
Massachusetts...................... $25.91
New Jersey......................... $28.85
New York........................... $13.30
Attorney General's Proposed Funding
Level
New York........................... $19.78
------------------------------------------------------------------------
\100\American Council for an Energy-Efficient Economy. A Review and
Early Assessment of Public Benefit Policies Under Electric
Restructuring, Volume 2. Summary Table of Public Benefit Programs and
Electric Utility Restructuring., Http://www.aceee.org/briefs/
mktabl.htm. See also, U.S. Census 1999 population estimates, Http://
quickfacts. census.gov/qfd/index. html.
A. Market Barriers to Energy Efficiency
Despite the financial and environmental benefits of efficiency,
many opportunities are not taken due to the numerous market barriers to
energy efficiency investments. Efficiency often requires a higher
capital outlay (e.g., to better insulate a home, get a more efficient
refrigerator or motor) and many consumers look only to the up-front
cost rather than to the lifetime cost when making purchasing decisions.
\100\ Within companies, purchasing agents may be responsible only for
initial costs while another person is responsible for utility bills. In
home or office building and renovations, the person making the capital
outlay (e.g., the builder) rarely pays the monthly energy bills, and
thus has no incentive to build in efficiency. Stores with limited shelf
space often do not offer more efficient products because they are
usually more expensive, and thus take longer to sell.
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\101\Most consumers lack information on the energy, cost, and
environmental savings that would enable them to comparison shop for
more efficient appliances.
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Efficiency investments are also diffuse. Unlike a power plant,
which can generate 100 or 500 MW, efficiency savings come in small
increments of a few kilowatts or less. Thus, to ``generate'' efficiency
savings of 100 or 1,000 MW, many actors must be involved, and each must
reject the incorrect assumption that his/her actions won't make a
difference. For these reasons, most programs to stimulate efficiency
focus on information disclosure and subsidies (such as tax credits,
mail-back rebates to consumers, or payments to sellers) to lower the
initial cost, as well as efforts to encourage retailers to sell
efficient products.
B. The Legislature Should Enact Tax Incentives to Purchase Efficient
Appliances
Since major home appliances account for approximately one-third of
residential energy consumption, the Legislature should pass a sales tax
exemption \102\ for all major home appliances having the EnergyStar
label. \103\ Past experience with short-term sales tax exemptions
suggests that retailers could show significant interest in this
initiative. \104\ During last year's sales tax exemption on clothing,
for example, many stores offered a matching 8 percent-off sale.
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\102\The Senate Majority Leader has introduced legislation that
includes a sales tax exemption for efficient products and other
products that promote conservation. See, S.0002-Bruno.
\103\EnergyStar is a voluntary partnership between the EPA, DOE,
manufacturers, utilities and retailers. Partners promote energy
efficiency by labeling qualifying products with the EnergyStar logo.
EnergyStar-approved products are 10-75 percent more efficient than the
Federal efficiency standard. The NYSERDA is an EnergyStar partner and
promotes EnergyStar products.
\104\The sales tax exemption could also encourage consumers in
neighboring States to buy appliances from New York State businesses.
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If implemented before the coming summer, this incentive could
impact air conditioner sales and thus summer peak demand. Other major
appliances and products (i.e. refrigerators, clothes washers, dish
washers, furnaces, efficient windows, and lighting) also use
significant amounts of energy: While not purchased by any individual
very often, the cumulative annual sales of these appliances in New York
are significant. For example, according to the Association, of Home
Appliance Manufacturers, 440,700 room air conditioners, 481,800
refrigerators, 297,700 clothes washers, and 133,400 electric clothes
dryers were sold in New York State in 1996. \105\
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\105\ Association of Home Appliance Manufacturers, Major
Appliances--Estimated Distributor Sales by State. See http://
www.aham.org/indextrade.htm.
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While it is nearly impossible to predict with precision the cost or
impact of the sales tax exemption on efficient products, conservative
estimates suggest a positive outcome. If, for example, an exemption
steered only 10 percent of air conditioner purchases to more efficient
models, it could save 8,814 MWh per year and would cost the State (in
lost tax revenue) perhaps $1,762,800 per year, while saving ratepayers
$1,181,076 per year.
The sales tax exemption would additionally draw attention to
efficient products and show the environmental and economic benefit of
purchasing such products. Consumer education on the impacts of energy
conservation and each individual's ability to contribute is critical to
implementation of energy efficiency programs.
C. The Legislature Should Create an Efficiency Portfolio Standard
Electricity retailers, unlike electricity generators, have direct
contact with electricity consumers through monthly bills. This contact
provides an opportunity to educate consumers. However, absent a
legislative mandate, retailers lack incentive to conserve energy
because the more they sell, the greater they profit. \106\ The
Legislature should bring retailers into the State's energy efficiency
efforts by enacting an Efficiency Portfolio Standard, requiring retail
sellers of electricity to achieve certain levels of efficiency
improvements in their service area.
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\106\ Since distribution costs are essentially fixed, higher sales
lead to both higher revenue and proportionately higher profits. See
also Section VI.E.3. for proposal to correct these existing market
disincentives against efficiency.
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Retailers could achieve these gains through direct installation of
efficiency measures and include the cost of the installation in their
prices. They could also provide rebates, promotions or education. For
example, using bill inserts and instructing employees (such as those
answering telephone inquiries or installing equipment) to highlight
efficiency and conservation opportunities, retailers could accomplish
significant savings. A re-institution of the utility compact
fluorescent bulb rebate program could be an important promotion. \107\
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\107\ Replacement of incandescent bulbs with energy efficient
compact fluorescents has the potential to significantly reduce energy
consumption and consumer costs. See Appendix A-1.
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While an EPS is a new concept, it has two strong antecedents. Many
States have implemented a Renewable Portfolio Standard that requires
utilities to buy a minimum percentage of electricity from renewable
sources. In addition, before restructuring, utilities were required to
achieve certain energy savings through rate conditions that effectively
acted like an EPS. Indeed, before restructuring, utilities were able to
reduce electrical usage through efficiency measures by over 1,300 MW
over 7 years when State regulations granted utilities incentives to
accomplish that result. \108\ (A further precedent is provided by New
York City's program to install--at its expense--water conservation
devices in hundreds of thousands of homes and apartments. This program
successfully reduced water use significantly.)
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\108\NYSEPB, New York State Energy Plan and Final Environmental
Impact Statement, November 1998, p. 3-62. The demand-side management
programs cost the utilities $1.277 billion between 1990 and 1997.
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D. The Comptroller Should Report Annually on Energy Efficiency and
Renewable Energy Programs
Both to enhance public support for and understanding of efficiency
and renewable programs, as well as to ensure that the money in these
programs is spent most effectively, the Legislature should direct the
Comptroller to prepare an annual report on the implementation of
efficiency and renewable programs. As noted above, three major State
programs currently operate the NYSERDA's EnergySmart program (using SBC
funds), the NYPA's Energy Services programs, and LIPA's Clean Energy
Initiative. While the PSC requires the NYSERDA to report on the
implementation of EnergySmart, the NYPA and LIPA have no reporting
requirement. In addition, there should be verification of progress on
the Renewable and Efficiency Portfolio Standards.
The Comptroller's annual report, prepared in coordination with the
NYSERDA, NYPA, LIPA, PSC and retailers, should include:
total funds expended on efficiency, conservation and
renewable energy;
total MWh and MW saved as a result of the programs;
a running list of all completed projects and a list of
all planned projects;
total energy cost savings to consumers;
comparative effectiveness of programs; and
remaining barriers to additional efficiency, conservation
and renewable energy projects.
Accurate accounting of efficiency and renewable energy projects is
essential to understanding how future energy needs should be met. The
Attorney General would commit to assisting the Comptroller with this
report and in investigating opportunities to remove remaining legal
barriers to a sound energy policy.
E. The PSC Should Improve Pricing and Revenue Signals to Encourage
Flexible Demand and Conservation
In addition to tax incentives, Portfolio Standards, and direct
subsidies through the NYSERDA, NYPA and LIPA, significant opportunities
exist to amend pricing mechanisms to foster efficiency and
conservation:
1. Utilities Should Widely Advertise Offers for Different Time-of-Day
Rates to Residential Customers to Encourage Load Shifting
The Public Service Law requires large electric utilities to offer
residential customers the option of paying different rates for
different times of day of instead of paying one rate for all
electricity used. \109\ For example, instead of paying 13 cents per
kilowatt-hour 24 hours a day, a customer could pay 6 cents during the
night and 15 cents during the day. Despite this law, it appears that
few utilities effectively offer this service to customers. \110\ Since
this pricing could shift demand away from peak times, the PSC should
require utilities to advertise its availability. Time of use pricing
reduces electricity bills for customers who have the flexibility to use
certain appliances, such as the clothes washer and dryer, dishwasher,
or water heater, at times when the price is cheapest. This pricing also
sends truer price signals to the customer, as it is far more expensive
for the utilities to buy electricity during peak periods than in off-
peak periods.
---------------------------------------------------------------------------
\109\See, PSL Sec. 66(27). This law applies only to corporations
with annual gross revenues in excess of $200,000,000.
\110\In a December 20, 2000 Order, the PSC required electric
utilities to file a report identifying measures that could be taken to
reduce peak demand. While several of the utilities indicated that
``real time pricing'' for their very large users of electricity (i.e.
commercial and industrial) might be included in their portfolio of
strategies to reduce demand, very few identified programs that could
reduce peak demand from residential customers. Only New York State
Electric and Gas (NYSEG) offers residential customers both time of use
pricing (to customers who use 35,000 kWh or more annually) and day-
night pricing (to customers who use 1,000 kWh or more per month). ConEd
indicated that residential customers would be eligible to participate
in its Direct Load Program which would reward customers who voluntarily
allow ConEd remotely to control their central air conditioning units
during peak.
---------------------------------------------------------------------------
Given the failure of utilities to offer or advertise time of use
pricing, significant peak demand reductions may be achievable if the
PSC requires more aggressive efforts. The PSC should ensure that each
retailer offer reasonable time-of-day (or at least day-night) pricing
to all customers, and provide consumers an analysis of the possible
savings from such pricing. Appropriate means of financing time-of-day
meters will need to be analyzed.
2. Direct Metering or Submetering Should be Expanded
While time-of-day meters would enable direct metered customers to
shift some power use to off-peak periods, consumption is not measured
individually in many apartments, but rather through the building's
``master'' meter. Studies have indicated that residents in master-
metered buildings tend to consume significantly more electricity than
residents with direct meters or submeters. Consideration should be
given to the possibility of converting master-metered buildings in New
York State to direct metering or submetering. \111\ In master-metered
buildings, individual residents do not pay for their electricity
directly. Rather, electricity charges are included in the rent. These
tenants thus have no direct price signal associated with their
electricity consumption.
---------------------------------------------------------------------------
\111\ Current Energy Code requires all residential new
construction to have separate meters for each dwelling (See, 9 NYCRR
Sec. 7813.52(b)). Between 1951 and 1979, however, the PSC banned
submetering. Thus, much of the housing built during this time--
including most public housing and other publicly assisted co-ops--have
master meters. The Energy Code states that whenever more than 50
percent of a residential building's electrical system is replaced in a
12 month period, each dwelling unit is to be provided with a separate
meter. See, 9 NYCRR Sec. 78 10.6.
---------------------------------------------------------------------------
Direct metering and submetering use direct market forces to
encourage conservation. For example, a NYSERDA pilot project in 1981
showed an energy savings potential of 18-26 percent from submetering.
\112\ If comparable energy savings were achieved in the approximately
400,OQO apartments in 1,800 master-metered buildings in the Con Ed
service area, \113\ demand in the New York City load pocket would be
reduced significantly. The considerable costs involved when converting
to direct metering or submetering can be offset by the savings in the
electricity bills over time.
---------------------------------------------------------------------------
\112\NYSERDA, Facilitating Submetering Implementation, Report 96-
7, May 1996, p. A-2.
\113\Ibid., p. S-1.
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Efforts to expand direct metering and submetering are ongoing, and
should continue. For example, as part of its Residential Innovative
Opportunities program, the NYSERDA has pilot projects to enhance
submetering of cooperative apartment buildings, and has provided
technical advice to building operators interested in converting to
submetering.
3. Utilities Should be Given Incentives to Encourage Energy Efficiency
and Clean Distributed Generation
While generators of electricity are allowed to sell their power at
market value in the current restructured environment, the transmission
and distribution retailers--the utilities--have remained regulated
monopolies. That is, the rates received by the utilities from their
customers for the transmission and distribution of electricity is still
set through rate agreements with the PSC.
Among the most central issues raised by the restructured
marketplace is whether the utilities' profits should be linked directly
to sales.
Under the current rate structure there is a rate cap, which means
the more electricity a retailer sells, the greater the retailer's
profits. But, a retailer's fixed costs for distribution do not increase
substantially when marginally more electricity is sold, and thus the
rate of profit increases for each additional kilowatt-hour of
electricity sold. As a consequence, clean distributed generation,
energy conservation or efficiency--all of which reduce a retailer's
sales--is usually not in a retailer's best interests despite its
significant benefits to consumers and the public.
If the rate structure rewarded retailers for reductions in demand,
energy conservation would more likely become a priority for retailers
and consumers. The PSC should develop a formula for the distribution
charge that rewards (or at least does not discourage) efficiency,
distributed generation, and similar efforts.
F. The Federal Government Should Implement New Appliance Efficiency
Standards
The DOE should implement the new appliance energy efficiency
standards \114\ to reduce energy use in an important sector. Not only
would this help New York's energy efficiency efforts, but since New
York receives significant pollution from upwind States, efficiency
efforts elsewhere can improve New York's air.
---------------------------------------------------------------------------
\114\See, 66 Fed. Reg. 33 13-33, January 12, 2001 (clothes
washers); 66 Fed. Reg. 3335-56, January 12, 2001 (commercial heating
and cooling equipment); 66 Fed. Reg. 4473-97, January 17, 2001 (water
heaters); and 66 Fed. Reg. 7169-7200, January 22, 2001 (residential air
conditioners).
---------------------------------------------------------------------------
In 1977, the DOE promulgated efficiency standards for residential
refrigerators, residential room air conditioners, and fluorescent lamp
ballasts. These standards have been very successful in leading
manufacturers to produce far more efficient products, often 25 percent
or more efficient than previous models. The DOE estimates that the
standards already promulgated will save enough energy to eliminate the
need for over 13,000 MW of generation capacity nationwide.
In early 2001, the DOE announced the adoption of new energy
efficiency standards for four additional types of appliances--
residential central air conditioners and heat pumps, residential
clothes washers, residential water heaters, and commercial heating and
cooling equipment. These new standards are projected to save consumers
and businesses more than $19 billion through the year 2030 and to
alleviate the need to build 91 new 400-megawatt power plants. The
residential central air conditioner standard alone is estimated to
avoid the need for 53 of these plants. \115\ It is critical that these
standards be adopted by the new administration and fully implemented.
---------------------------------------------------------------------------
\115\See, New Efficiency Rules Cut Need for 91 New Power Plants,
Environment News Service, Washington, DC, January 19, 2001. A 'more
complete description of the standards can be found at Http ://
www.eren.doe.gov/buildings/codes--standards/stkappl.htm.
---------------------------------------------------------------------------
VII. Challenge and Encourage New Yorkers to Assist in Reducing Demand
Every New Yorker can help to save energy, clean the air, and
prevent climate change. By implementing these measures, consumers will
also save on their electricity bills. State officials should use
available opportunities to educate the public on efficiency, renewable
power and conservation options.
An average U.S. family spends close to $1,500 a year on its home
utility bills (both heating fuel and electricity bills). Businesses
spend much more. Unfortunately, not even including inefficient
appliances, a large portion of that energy is wasted through actions
such as running an almost empty dish or clothes washer, or uninsulated
attics, walls, floors, and basements. Lights left on when no one is
around, at home or in stores or offices after hours, consume
electricity needlessly. The DOE estimates that the amount of energy
wasted nationwide is about the same amount of energy that we get from
the Alaskan pipeline each year. \116\
---------------------------------------------------------------------------
\116\DOE, www.eren.doe.gov/comsumerinfo/energy savers/
introbody.html. Electricity generated by fossil fuels for one home plus
the energy that is generated in the home (for example, a boiler) emits
twice as much carbon dioxide as does one typical car in 1 year. Every
kilowatt hour of electricity avoided in New York State saves almost one
pound of CO2 from entering the atmosphere.
---------------------------------------------------------------------------
Individual consumers can do many things at home to save
electricity, reduce air pollutants, and reduce their energy bills.
Table A-2 in the Appendix illustrates ways, many of which are free and
available immediately, to save electricity. For example, if a household
increases the air conditioner thermostat in summer by merely three
degrees, it would save 937 kWh/yr, and $126 annually. If all New York
households did the same, then 6.3 million MWh of energy would be
avoided, along with over 3 million tons of carbon dioxide. Avoiding
this amount of carbon dioxide is tantamount to removing 600,000 cars in
1 year.
appendix
Table A-1
Electricity Savings: Incandescent vs. Compact Fluorescent Lights
Savings show result of replacing one incandescent bulb with a compact fluorescent bulb in one household and in
each of the 6,766,000 households in NYS.
----------------------------------------------------------------------------------------------------------------
23 watt compact SAVINGS OVER 3 YEARS
Bulb Type 100 watt incandescent fluorescent BY REPLACING BULB
----------------------------------------------------------------------------------------------------------------
Purchase Price........................ $0.75.................. $11.00.................
Life of the Bulb...................... 750 hours.............. 10,000 hours...........
Number of Hours Burned per Day........ 4 hours................ 4 hours................
Number of Bulbs Needed................ about 6 over 3 years... 1 over 6.8 years.......
Lumens................................ 1,690.................. 1,500..................
Total Cost of Bulbs................... $4.50.................. $11.00.................
Total energy used over 3 years........ 438 kWh per household.. 100.74 kWh per 337.26 kWh per
2.964 billion kWh if household. household
all households. 682 million kWh if all 2.282 billion kWh if
100 w (4 hrs/day)(365 households. all households
days/year). 23 w (4 hrs/day)(365 (equivalent to the
(3 years) = 438000 watt- days/year). power generated from
hours or 438 kWh. (3 years) = 100740 an 86.8 MW power
438 kWh (6,766,000) = watts-hours or 100.74 plant, 24 hours every
2.964 billion kWh. kWh. day.)
100.74 kWh (6,766,000)
= 682 million kWh.
Total Cost of Electricity for 3 years $58.69................. $13.50.................
(avg price in 1999: 13.4 cents/kWh).
Total Cost over 3 years (cost of $63.19 per household... $24.50 per household... $38.69 per household
energy + cost of bulbs). $427,543,540 if all $165,767,OQO if all $261,776,540 if all
households. households. households
Total CO2 emissions over 3 yrs (avg 436.56 lbs per 100.41 lbs per 336.15 lbs. per
emission rate: 996.7 lbs/MWh or household. household. household
0.9967 lbs/kWh). 1,476,882 tons if all 339,687 tons if all 1,137,195 tons if all
households. households. households
438 kWh (.9967 lbs/kWh) 100.74 kWh (.9967 lbs/
= 436.56 lbs. kWh) = 100.41 lbs.
436.56 lbs (6,766,000)/ 100.41 lbs (6,766,000)/
2000 = 1,476,882 tons. 2000 = 339,687 tons.
Total SO2 emissions over 3 yrs (avg 22.38 lbs per household 0.52 lbs per household. 21.86 lbs. per
emission rate: 5.1 lbs/MWh or 0.00511 75,711 tons if all 1,759 tons if all household
lbs/kWh). households. households. 73,952 tons if all
438 kWh (.00511 lbs/ 100.74 kWh (.00511 lbs/ households
kWh) = 22.38 lbs. kWh) = 0.52 lbs.
Total NOx emissions over 3 years (avg 0.83 lbs per household. 0.19 lbs per household. 0.64 lbs. per
emission rate: 1.9 lbs/MWh or 0.0019 2,807 tons if all 643 tons if all household
lbs/kWh). households. households. 2,164 tons if all
438 kWh(.0019 ;bs/kWh) 100.74 kWh(.0019 lbs/ households
= 0.83 lbs. kWh) = 0.19 lbs.
----------------------------------------------------------------------------------------------------------------
Table A-2
Electricity Savings, Electricity Cost Savings, and Carbon Dioxide Emissions Avoided By Implementing Efficiency
and Conservation Measures in One Household and in All New York Households
----------------------------------------------------------------------------------------------------------------
CO2
Electricity saved Electricity saved Money avoided CO2 avoided
Household Measure for one household for all NY saved for for one for all NY
(kWh/yr) households (MWh/ one household households
year) household (lbs/yr) (tons/yr)
----------------------------------------------------------------------------------------------------------------
Replace a 1970's refrigerator w/a 2,197............... 14.9 million........ $294 2,190 7,408,770
new EnergyStar refrigerator.
Increase AC thermostat by 3F 937................. 6.3 million......... $126 934 3,159,410
degrees for cooling.
Replace 5 incandescent light 562................. 3.8 million......... $75 560 1,894,480
bulbs with compact fluorescent.
----------------------------------------------------------------------------------------------------------------
Source: U.S. Energy Information Administration, Household Energy Consumption and Expenditures 1993, and Rocky
Mountain Institute's calculations at www.rmi.org (1999)
__________
Statement of Thomas E. Stewart, on Behalf of the Ohio Oil and Gas
Association And The Independent Petroleum Association of America
Committee members, good morning. I am Thomas E. Stewart and I serve
as the executive vice president of the Ohio Oil & Gas Association, a
trade association whose one thousand three hundred members are involved
in the exploration, production and development of crude oil and natural
gas resources within the State of Ohio. This Association has
represented the Ohio industry since 1947. I am also testifying on
behalf of the Independent Petroleum Association of America (IPAA). IPAA
represents the thousands of independent petroleum and natural gas
producers throughout the nation.
Today's hearing continues the Environment and Public Works
Committee's examination of environmental laws and their interaction
with the nation's energy supply and demand. My testimony today will
focus primarily on several environmental issues and how they impact the
petroleum and natural gas exploration and production (E&P) industry.
Let me begin by describing the unique nature of the industry and
the specific challenges we face in the context of Federal environmental
law. The petroleum and natural gas E&P industry is distinguished by its
breadth and diversity. Oil and gas are natural resources that are found
in 33 States, 12 of which are represented on this committee. There are
over 850,000 producing oil and natural gas wells in the country in
areas ranging from arid plains to forests to wetlands.
The operation of these wells has been regulated since the 1920's
with an increasing emphasis on environmental controls since the 1960's.
This regulation has been and continues to be done effectively by the
States--a reality that has been recognized by the Congress and by the
EPA. Because of the diverse conditions associated with oil and natural
gas production, the regulatory process must be flexible and reflect the
unique conditions in a State or areas within a State. It requires the
technical expertise that has been developed in each State and which
does not exist within the EPA. For this reason Federal law has
generally deferred regulation of this industry to the States.
Additionally, because so much of Federal law is written based on
regulating small numbers of point sources, some laws have created
particular problems for the oil and gas E&P industry. In some instances
this has resulted in specifically crafted provisions to address the oil
and gas E&P industry.
Complying with environmental regulations remains a significant cost
for the E&P industry, with estimates of annual costs ranging from about
$1.6 billion to more than $2.6 billion. These costs are particularly
significant during times of low commodity prices, such as occurred
during the 1998-99 oil price crisis. Equally important is understanding
that independent producers, who range from large publicly traded
companies to small business operations, drill 85 percent of the wells
within the United States. The common factor for these independents is
that their revenues and hence their ability to meet these environmental
costs comes solely from the exploration, production and sale of crude
oil and natural gas from the wellhead. Unlike the large major
producers--the integrated oil and gas industry--the independents have
no means of passing on production and regulatory costs through other
operations, such as refining and marketing. Ohio's producers are
``price-takers'' rather than ``price-makers.''
Consequently, the industry places great emphasis on cost effective
regulation, limiting paperwork burdens, and avoiding duplicative
regulatory requirements. In general, the unique problems associated
with the diverse nature of the E&P industry have been addressed, making
the burden of regulation manageable. However, there have been
exceptions and there are issues that need attention.
Safe Drinking Water Act, LEAF v. EPA and Hydraulic Fracturing
For example, the most compelling environmental issue currently
confronting the oil and natural gas E&P industry is a movement to have
U.S. EPA regulate hydraulic fracturing under the Safe Drinking Water
Act (SDWA).
Hydraulic fracturing is a common and necessary procedure used by
producers to complete crude oil and natural gas wells by stimulating
the well's ability to flow increased volumes of oil and gas from the
well's reservoir rock into the wellbore. It is necessary in order to
obtain production from wells that, for lack of proper stimulation,
would not naturally yield economic volumes of crude oil and natural
gas. Massive numbers of hydraulic fracturing have been performed in
Ohio and throughout the United States, dramatically increasing the
nation's oil and gas resource base.1
At the time the SDWA was enacted, the States had already developed
extensive Underground Injection Control (UIC) programs to manage liquid
wastes resulting from oil and gas operations and the reinjection of
produced waters. By 1980 Congress--recognizing the need for further
State flexibility--modified the SDWA to give States ``primacy'' based
on comparable State oil and gas UIC programs. These changes were made
because Congress recognized that the approach it had envisioned was
inconsistent with the realities of UIC regulation. It recognized that
the State UIC programs were well structured and that EPA could not
fashion a Federal program with the flexibility needed to deal with the
different circumstances existing in the various States.
At no time during these debates--in 1974 or in 1980--was there any
suggestion of including hydraulic fracturing in the UIC waste
management requirements. Nor was it an issue in the 1986 or 1996
reauthorizations of the SDWA. The reason is clear. Hydraulic
fracturing--while it temporarily injects fluids into underground
formations--is not the underground injection that the SDWA was designed
to regulate. There have been over a million hydraulic injection
operations during the past 50 years. States have regulated its use in
their well permitting processes. It does not create environmental
problems.
Nonetheless, in the mid-1990's the Legal Environmental Assistance
Foundation (LEAF), after years of failing to make an environmental case
against coalbed methane development, petitioned the U.S. EPA to
regulate hydraulic fracturing under the UIC program. EPA rejected LEAF,
arguing that Congress never intended UIC to cover hydraulic fracturing.
LEAF appealed to the 11th Circuit Court of Appeals.
In 1997, the 11th Circuit Court decided the LEAF v EPA case. The
Court never addressed the environmental risks of hydraulic fracturing;
it merely decided that the plain language of the statute could include
hydraulic fracturing as underground injection. This decision compels a
revision to the SDWA because its basis is so fundamental that adverse
regulatory action is inevitable.
Initially, EPA responded to the LEAF decision by requesting the
Groundwater Protection Council (GWPC) to study coalbed methane wells.
After evaluating 10,000 wells, it found one complaint--the LEAF case
Alabama well that EPA had already concluded was not a fracturing
problem. However, LEAF went back to the Court to force EPA action. EPA
then compelled Alabama to develop a UIC regulation that requires the
use of federally certified drinking water for fracturing jobs, water
that must be purchased from willing cities and trucked to the well
development operations.
LEAF filed a second case--likely to be decided this year--arguing
that EPA erred in the Alabama regulation. LEAF argues in part that EPA
should have first written a nationally applicable rule. If EPA loses
this case, all hydraulic fracturing jobs could be federally regulated.
The National Petroleum Council estimates that 60 to 80 percent of all
the wells drilled in the next decade to meet natural gas demand will
require fracturing.
Even if EPA wins the LEAF II case, the likely result would be a
rash of cases raising the hydraulic fracturing issue in Federal Circuit
Courts across the country. Given the ``plain language'' nature of the
original case, most attorneys believe that such cases would produce
similar results--a forced Federal regulation in each State.
Not considered an issue at the time the SDWA was passed, Congress
did not specifically exclude hydraulic fracturing. Two decades later, a
court ignored the facts of the issue and changed the scope of the law
on a technicality. Now, a legislative resolution is essential to
clarify the original intent of Congress and the definition of
underground injection. Industry believes that Congress should address
this issue quickly through a bipartisan effort. A clear opportunity
exists to bring the States and EPA together on this matter and produce
an environmentally sound resolution that would prevent the loss of key
energy supplies.
Clean Water Act, Endangered Species and Clean Air Act
While hydraulic fracturing represents the most compelling issue
that needs legislation, there are others that require attention as
well. For example, because many oil and natural gas producers are small
businesses, paperwork burdens are always an issue. Here, some issues
that affect producers are:
Under the Clean Water Act, producers are required to
submit Spill Prevention, Control, and Countermeasure (SPCC) Plan
updates every 3 years (EPA has proposed to extend this period to 5
years). These SPCC plans provide details about the facility's
operations and spill control measures. Producers must also submit
Emergency and Hazardous Chemical Inventory Forms under the Emergency
Planning and Community Right-To-Know Act (EPCRA), but must do so
annually. Most of these EPCRA forms do not change and the same
objective could be achieved by filing every 3 years with annual reports
that would identify any significant changes. It would reduce the
paperwork burden with no environmental detriment.
Additionally, the requirements that trigger the need for
a stormwater construction permit under the Clean Water Act are
changing. The construction area subjected to these permits is being
reduced from five acres to one acre. As a result, oil and gas
production facilities--which have typically not been required to get
these permits--will now be subjected to this regulatory requirement.
While EPA has indicated that it will craft the permit requirements to
minimize burdens to the producer; this process needs to be carefully
monitored as it is implemented to avoid undue delay in developing
production sites.
Not all issues are related to procedures or paperwork. Others
relate to interpretations of laws that can adversely affect natural gas
and oil exploration and development. Historically, these problems have
related more to obtaining permits for operations than to meeting
emissions limitations. For example:
Under the Clean Water Act, some projects require Section
404 dredge and fill permits. While this process is managed by the Corps
of Engineers, it involves interactions with agencies that have
jurisdiction with regard to wetlands. Moreover, the definition of a
wetland has been confusing and in dispute for decades. The result of
these factors has been permitting uncertainty. Part of the concern
results from different objectives of the agencies involved in the
permitting process. While their responsibilities will not change, it is
essential that they all recognize the need to develop domestic energy
supplies and work toward achieving this national objective in a cost
effective, environmentally sound process.
The Endangered Species Act raises similar issues. When
Federal Land Managers--principally the Bureau of Land Management--
develop resource management plans (RMPs) one of their important
considerations is habitat management for endangered species. Oil and
natural gas exploration and production is a temporal process. It
involves drilling activities for a limited period of time followed by
production activities that can include well maintenance efforts while
the well produces. When the well is depleted, it is closed and plugged
and the area returns to its prior condition. Over the years these
activities have become less intrusive to the environment. The
Department of Energy's 1999 report, Environmental Benefits of Advanced
Oil and Gas Exploration and Production Technology, demonstrates the
types of actions that are taken. The key point here is that oil and gas
E&P coexists with nature. This reality needs to be recognized as RMPs
and other permit actions are developed, including habitat management
plans that protect endangered species and encourage energy supply.
Addressing this important balance does not require sacrificing the
principles of the Endangered Species Act, it merely requires greater
efforts to define alternatives that can accommodate both national
objectives whenever possible.
Recently, there has been discussions of aggregating
individual oil and gas wells in a particular geographic area for
purposes of defining a ``major source'' under Title V of the Clean Air
Act. If that is done, it would impose a whole host of additional
regulatory burdens on the producing industry with little benefit to the
environment. The question of how to determine when Federal clean air
regulation should apply to E&P facilities has already been raised in
the context of the operation of Section 112 as amended in 1990.
Congress concluded that individual oil and gas wells should not be
aggregated for the purpose of determining whether they represented a
major stationary source. This decision reflected the reality of oil and
gas E&P operations. While there may be several wells in an area, there
is no certainty that they are operated by the same entity; in general,
they are not. Unfortunately, the issue has arisen with regard to
whether the definition of major source under Title V with regard to
whether facilities permitted by the Federal Government should be
interpreted consistent with Section 112. While the definitional
limitations are not replicated in Title V, we believe that EPA should
use the same approach. In particular, since aggregation would not
result in appreciably different control requirements, it makes no
environmental sense to capture oil and gas E&P operations under the
permitting burdens of Title V.
While issues such as endangered species have greater impact on oil
and gas development in the Western United States, similar issues have
also impacted development in the Appalachian Basin. For example, in the
Wayne National Forest of Ohio, Carlton Oil Corporation, a small oil and
gas producer, for an extended period has been seeking to obtain a
permit from the Bureau of Land Management (BLM) to drill a development
well on a Federal lease tract. Since applying for the permit in
February 2000, the producer has been waiting while the Forest Service
has performed an environmental assessment taking into account new
information, if any, regarding endangered species and the relationship
of that information to the Forest Plan. It is ironic that the producer
already operates two other wells on the same property. Even more ironic
is that continuous oil and gas operations have existed in this area
since 1860. While this producer has been waiting for the Federal
process to resolve itself, his requisite permits issued by the State of
Ohio have been issued and expired. Needless to say, he is frustrated
with a process that stymies the drilling of a simple and common
development natural gas well in what is the most mature oil and gas
producing province within the United States. Meanwhile, Ohioans have
joined the national chorus demanding answers to why natural gas
supplies are tight.
These types of issues reflect an ongoing dilemma that needs to be
addressed. Without altering the underlying requirements of
environmental law, the energy supply implications of new regulations,
guidance, resource management plans, interagency memorandums of
understanding, and other planning and review processes need to be
identified early and become a part of the decisionmaking process. This
step would assure that where possible these actions could be tailored
to address both environmental and energy needs. Such an approach has
been included in Section 101 of S. 388 and S. 389, the National Energy
Security Act of 2001.
Pipeline Issues
There are pipeline issues as well. Congress, in its 1996 amendment
to the Pipeline Safety Act of 1992, directed the U.S. Department of
Transportation (``USDOT'') to define the term ``gathering line'' for
purposes of jurisdiction in its gas pipeline safety regulations. This
is important because gathering lines are generally exempt from
regulation unless they are located within urbanized settings. USDOT
failure in the past to address this issue has created a regulatory
vacuum that has resulted in uncertain and vague application of
regulatory standards within the States.
In 1999, U.S. DOT issued a Request for Comments on the issue of
whether and how to modify the definition and regulatory status of gas
gathering lines for the purposes of pipeline safety regulation. In
response to USDOT's request, an industry coalition comprised of
representatives from across the country and from small independent
producers to the large integrated companies, proposed a unified
definition for the pipeline safety program for gas gathering. That
definition was filed with the agency on April 24, 2000. The American
Petroleum Institute published a recommended practice document based on
this definition.
Establishing regulatory stability in the arena of pipeline
construction and operation is an important goal for the regulated
community, particularly for the Appalachian oil and gas industry. The
Appalachian Basin is the country's oldest natural gas producing field.
It has been producing and gathering natural gas without safety mishaps
for over a hundred years. It is located in very close proximity to
major population areas of the country, especially the northeast. At a
time when consumption of natural gas is expected to increase, it is
imperative that a nationally driven gathering pipeline regulatory
program be established that acknowledges the safety record of the
Appalachian region and that enhances the region's ability to collect
its naturally high quality gas and deliver it to transmission and
distribution systems.
On March 8, 2001 representatives of the Gas Gathering Industry
Coalition, to include the Appalachian industry, met with USDOT
representatives to discuss the agency's plans with regard to its open
rulemaking on the definition of gas gathering for the Pipeline Safety
program. DOT conceded that it has yet to act on the need to establish a
promulgated rule. The agency has offered to reconsider its reluctance
to review the Industry Coalition proposal and committed to providing a
response to industry's request that a public meeting be held to further
discuss the development of a rulemaking. It is essential that the DOT
be given the appropriate support and guidance for bringing to
resolution this long outstanding issue. It is also essential that any
such resolution enhances the movement of gas rather than create
unnecessary regulatory burdens.
Pipeline issues also extend to the downstream industry that seeks
to deliver finished petroleum products to the consumer. In Ohio,
Marathon Ashland Petroleum LLC is proposing to build a 14'' diameter
petroleum products line to connect supply from its Catlettsburg, KY
refinery to one of the fastest growing areas--Central Ohio. The Midwest
faces unique challenges in the petroleum industry as it lacks the
refining capacity to manufacture enough gasoline, diesel fuel, jet
fuel, etc. to satisfy consumer demand. As a result, States like Ohio
rely on Gulf Coast refineries for 25 percent of their petroleum
products--most of which travels through capacity-constrained pipelines.
There is an obvious need for more petroleum products into the Midwest.
Marathon Ashland Petroleum's proposed project (Ohio River Pipe Line)
will bring up to 80,000 barrels/day of refined product into Central
Ohio. Nonetheless, the project has suffered many permit and legal
delays and 3 years later not a single mile of pipeline has been laid.
Marathon Ashland has endured 3 years of environmental reviews and
evaluations of streams, wetlands, rivers, cultural resources, and State
and federally listed threatened or endangered species. Even though the
company has met, and many times significantly surpassed, the
requirements of the requested permit, the approval process is not yet
complete nor is it streamlined to the point where approvals can occur
in an acceptable timeframe. Additionally, there is broad subjectivity
in interpreting the regulations and oftentimes there are conflicting
requirements between the multitude of State and Federal agencies
involved. Primary agencies involved in the process include the U.S.
Army Corps of Engineers, the USEPA, the U.S. Fish and Wildlife Service,
the Ohio EPA, the Ohio Department of Natural Resources, the USDOT's
Office of Pipeline Safety (OPS) and the State Historical preservation
offices. The lengthy process and uncertainty associated with this
project is symbolic of the significant challenges for companies wanting
to invest in infrastructure.
Inadvertent Targets, TMDL
The industry also faces issues where it becomes the inadvertent
target of a Federal regulatory initiative. For example:
EPA has initiated a new program to address Total Maximum
Daily Loadings (TMDLs) on streambodies throughout the United States.
The effort is one of a long line of efforts to try to grapple with non-
point source pollution of water bodies. While the Clean Water Act has
enjoyed great success with its point source control program, non-point
source control has been elusive because of its diverse nature.
Moreover, because it largely must address drainage from agricultural
and forest lands, it has always had to yield to the realities--both
technical and political--that control of these sources requires
something other than a Federal mandate. The E&P industry finds itself,
therefore, in a vulnerable position. In looking at a typical streambody
under the TMDL effort, the point sources will be controlled and
therefore not likely to be further controlled and the agricultural and
forest non-point sources will be deferred until a control strategy can
be developed. This leaves small non-point sources as the only remaining
targets for EPA to address. While they will not resolve the TMDL
problems, they can provide a public relations victory. E&P operations
meet this characterization. They are small but do construction work
that can produce runoff even when managed properly.
The Clean Air Act has elements that can create similar
vulnerability. Its history is clear. State and local regulators do not
want to impose tough regulations on their citizens if they can shift
the control elsewhere. It is much easier to push for auto emissions
controls or fuel standards that are the responsibility of distant
industries than to require local inspection and maintenance control
programs. Visibility regulations are an example where the premise is
based on emissions from facilities hundreds of miles away. It creates
opportunities for regulators in one State to demand action by other
States. In these circumstances there are many western States where
there are few sources and those are regulated for local reasons or
under new source requirements. The E&P sources become potential targets
not because they are significant but because they are there.
These types of events do not improve the nation's environmental
management, but they can threaten its energy supply without any
judgment that such regulations would be appropriate or necessary.
Balanced decisions are necessary--decisions based on cost effective
regulation and sound environmental management needs.
______
attachment
Mr. Stewart serves as the Executive Vice President of the Ohio Oil
and Gas Association, having been elected to that position in September,
199l. At OOGA, Mr. Stewart is director of staff, editor of the
Association's publications and an advocate for the industry as a
registered legislative agent.
Mr. Stewart serves as an Ohio representative to the Interstate Oil
and Natural Gas Compact Commission (IOGCC). Ohio Governor George
Voinovich appointed Mr. Stewart to the position in 1997. At IOGCC,
Stewart chairs the Public Outreach Committee. Stewart also serves on
numerous other committees of national organizations that address issues
impacting independent oil and gas producers. He is the Northeast
Regional Vice President of the National Stripper Well Association and a
charter member of the Cooperating Association Council of the
Independent Petroleum Association of America (IPAA).
Prior to joining OOGA, Mr. Stewart has 15 years' experience in the
oil and gas industry as an oil and gas producer and provider of
contract drilling services. He is the third generation of his family
making their livelihood in the domestic oil and gas industry.
OOGA is a statewide trade association with over 1,300 members who
are actively involved in the exploration, development and production of
crude oil and natural gas within the State of Ohio. The Association's
mission is to protect, promote, foster and advance the common interests
of those engaged in all aspects of the Ohio crude oil and natural gas
producing industry.
1 An oil and gas producer performs a fracturing procedure to
increase the flow of oil and gas from rock, known to contain oil and
gas, but where the rock's natural permeability does not allow oil and
gas to reach the wellbore in sufficient volumes. These reservoirs are
called ``tight'' and wells drilled to them must either be plugged and
abandoned or stimulated to enhance well flow. During a fracture
procedure fluid is pumped into the reservoir rock using necessary force
to split the rock. In other words, to frac a well is to create drainage
ditches that penetrate deep into the reservoir rock.
Hydraulic fracturing is currently the most widely used process for
stimulating oil and gas wells. Most often it is a one-time process
performed on a well. According to the 1989 SPE Monograph on Recent
Advances in Hydraulic Fracturing, the procedure is a standard operating
practice that by 1988 had been performed over 1 million times. At that
time, 35-40 percent of all wells were fractured, and about 25-30
percent of the total U.S. oil reserves have been made economically
feasible by the process. By 1988, SPE experts Stated that fracturing
was responsible for increasing North America's oil reserves by 8
billion barrels.
Since 1951, over 73,000 wells have been drilled to the Clinton,
Berea and Ohio Shale zones of Ohio. Between 1970 and 1992, a
combination of commodity market conditions and government tax policy
caused a boom in tight-formation drilling. During that period, 58,874
wells were drilled in Ohio of which 54,198 wells were productive--a
91.4 percent success rate. Of these wells, 55,046 were drilled to the
Clinton, Berea and Ohio Shale. The Clinton comprised 78.4 percent
percent of that population. With very limited exceptions, hydraulic
fracturing was used to complete all of these wells. Exploitation of the
tight Clinton sands would not have been possible without fracturing.
The hydraulic fracture process made the modern Ohio oil and gas
industry.
According to a recent statement issued by the Ohio Department of
Natural Resources, Mineral Resources Management Agency, the regulatory
agency has not identified a single incident of groundwater
contamination associated with a hydraulic fracturing operation.
__________
Statement of Jason S. Grumet, Executive Director, Northeast States for
Coordinated Air Use Management (NESCAUM)
Thank you Mr. Chairman. My name is Jason Grumet and I am the
Executive Director of the Northeast States for Coordinated Air Use
Management (NESCAUM). NESCAUM is an association of State air pollution
control agencies representing Connecticut, Maine, Massachusetts, New
Hampshire, New Jersey, New York, Rhode Island and Vermont. The
Association provides technical assistance and policy guidance to our
member States on regional air pollution issues of concern to the
Northeast. On behalf of our eight member States, I would like to
express our appreciation for this opportunity to address the
subcommittee regarding the interaction between environmental regulation
and our nation's energy policy.
The issues before the subcommittee this morning are numerous and
complex. I commend the subcommittee for its efforts to develop policy
approaches that are mindful of the necessary connection between
sustainable energy and environmental policies. Through thoughtful
dialog and determined policy, the dual goals of clean air and plentiful
low cost energy are mutually reinforcing. However, it is equally true
that efforts which focus myopically only on energy or the environment,
to the exclusion of the other, are doomed to fail.
The present focus on our nation's energy supply presents challenges
and opportunities. It is understandable yet regrettable that our body
politic tends to focus its attention on energy policy primarily during
moments of predicted or realized scarcity. It is at these times when
the fundamental vulnerability of our nation's dependence on a
monoculture of imported petroleum is most pronounced. Unfortunately, it
is at these same moments when long-term strategies to achieve real
energy security are often eschewed in favor of quick fixes that promise
immediate price relief at the pump or at the switch. A meaningful
national energy policy must address both the supply and demand sides of
our energy equation. On the supply side, we must develop a diverse
portfolio of sustainable energy sources that can be developed without
exacting an unacceptable toll on the natural environment and public
health. On the demand side, we must begin to confront the careless
waste and inefficiency that far too often describe our nation's
consumption of scarce energy resources.
It is worth noting that Congress has boldly grappled with these
questions before. The Energy Policy Act of 1992, explicitly
acknowledged the unsustainable course of our hydrocarbon economy and
set a reasoned goal to diversify our motor fuels supply using
domestically produced non-petroleum alternatives. Under EPACT, 75
percent of the vehicles procured by the Federal Government were slated
to operate on non-petroleum alternative fuels by 1999. By last year,
EPACT established the goal that a full 10 percent of our nation's motor
fuel be displaced by non-petroleum alternatives. By 2010, EPACT
envisions that a minimum of 30 percent of our nation's motor fuel will
be derived from non-petroleum sources.
Our progress toward these goals has been woeful. At present, less
than 1 percent of the motor fuel used on this nation's highways is
derived from non-petroleum alternatives and there are no meaningful
Federal efforts underway to achieve the EPACT goals for 2010. In fact,
the Energy Information Association recently reported that U.S. oil
demand is forecast to jump from the current 20 million barrels per day
to 26 million barrels per day by 2020. Last year alone, our nation
spent over $100 billion for imported oil. On March 15, of this year,
the Associated Press reported that our nation's trade deficit surged to
an all time high of $435.4 billion (up 31.3 percent) on a huge rise in
imports of oil. As a founding member of the Governors' Ethanol
Coalition, I recognize Chairman Voinovich, that you appreciate better
than I the need to promote domestically produced renewable fuels. I
respectfully submit that had our nation directed the necessary public
and private resources and technological commitment toward achieving the
promise of EPACT, the substance and mood of today's discussion and the
scope of our policy options would be very different.
I would now like to briefly discuss three specific environmental
regulatory policies that present opportunities to better harmonize our
nation's air quality and energy policy goals. First I will review two
recent EPA efforts to address the toxic emissions from motor vehicles.
Then I will review the basis for the Northeast States' view that
Congress must act to lift the oxygen mandate in the Federal
Reformulated Gasoline Program.
Mobile Source Toxics
As we chart a long-term course to harmonize our environmental and
energy needs, we must begin to grapple more effectively with the
problem of toxic air pollution resulting from the combustion of motor
fuels. Over a decade ago, Congress reacted to the growing body of
evidence identifying motor vehicles as the dominant source of toxic air
pollution in the nation by adopting Section 202(l) of the of the Clean
Air Act Amendments of 1990 (Act). The Clean Air Act requires the Agency
to produce a study on the ``need for, and feasibility of, controlling
emissions of air toxic pollutants which are . . . associated with motor
vehicles and motor vehicle fuels (sec. 202(l)(1)).'' The Act instructs
the Agency to focus on ``those categories of emissions that pose the
greatest risk to human health.'' Section 2020(l)(2) then directs the
Agency to ``promulgate regulations . . . to control hazardous air
pollutants from motor vehicles and motor vehicle fuels.'' These
standards--at a minimum for benzene and formaldehyde--should ``reflect
the greatest degree of emission reduction achievable through the
application of technology which will be available.''
In its legislative history, Congress instructed EPA to ``broadly
characterize the urban air toxic problem by conducting ambient
monitoring'' in order to determine the ``true scope of the problem.''
Congress characterized EPA's previous efforts in the area of regulating
air toxics as ``this record of false starts and failed opportunities.''
It stated explicitly: ``The Environmental Protection Agency has not
made sufficient use of the existing authorities available under section
112 of the Clean Air Act to protect public health.''
Unfortunately, EPA's efforts to carry out the requirements of this
section and the intent of Congress over the last decade have been
uninspired. In 1993, EPA identified mobile source emission from on-road
vehicles as the No. 1 source of hazardous air pollutant emissions in
the country. However, EPA failed to promulgate a regulatory
determination as required by statute to address these toxic
contaminants. In 1998, EPA published the results of the Cumulative
Exposure Project (CEP), which estimated that ambient concentrations of
seven cancer-causing compounds exceed Federal-health protective
thresholds in every census tract in the country.
In the Northeast, and across the country ambient levels of four
pollutants: benzene, 1,3 butadiene, formaldehyde and acetaldehyde
exceed health-based cancer and non-cancer thresholds by one and
sometimes two orders of magnitude. The CEP, and subsequent analysis by
the NESCAUM States conclude that mobile sources are responsible for the
vast majority of emissions of these four compounds. In the face of this
information, EPA still failed to act. Finally, earlier this month under
Court order, EPA promulgated regulations under 202(l) that set a
backstop to prevent the average toxicity of gasoline from increasing,
but offers no new strategies to mitigate the unacceptable risks posed
by mobile source air toxic emissions. The Northeast States are
disappointed that it has taken the Agency 10 years to promulgate
regulations under Section 202(l) that will provide no air quality
benefits to our member States. These views are expressed rather
strongly in comments NESCAUM delivered on the rule proposal that I
would like to submit to the record (attachment 1).
The most valuable aspect of the recently promulgated rule is EPA's
forthright acknowledgement of the gaps in the Agency's understanding
about key aspects of the mobile source air toxics problem and its
commitment to work with the States and other interested parties to cure
these inadequacies and propose new regulations no later than July 2003.
Specifically EPA commits to: 1) evaluate and re-assess the need for,
and level of controls for both on-highway and nonroad sources of air
toxics; 2) develop better air toxics emission factors for nonroad
sources; 3) improve estimates of air toxics exposures in
microenvironments; 4) improve consideration of the range of total
public exposure to air toxics; and 5) increase our understanding of the
effectiveness and costs of vehicle, fuel, and nonroad controls for air
toxics.
While we trust the sincerity of EPA's commitment to address these
issues through a robust research agenda and welcome the opportunity to
contribute to this process, we recognize that the questions that EPA
now seeks to address are the very same questions that the Agency failed
to confront over the past decade. We ask that this subcommittee join
the States in working to support this effort and conduct the oversight
necessary to ensure that this critical section of the Act is fully and
faithfully executed.
Diesel Emission Control Efforts--Consent Decrees
Diesel engines remain the life-blood of commercial transportation
in this country. However, the failure to date to adequately control the
pollutant emission from diesel engines has exacted an unacceptable and
unnecessary toll on the health of our citizens, especially those who
reside in urban areas where diesel vehicles are most concentrated. Two
ongoing initiatives hold potential to dramatically improve the
environmental performance of diesel engines and diesel fuels. The
stakes are very high. If successful, these efforts will enable our
nation to continue to responsibly rely on diesel engines for years to
come. However, if these efforts fail, our nation will continue to be
forced to choose between the economic benefits provided by the diesel
engine and the health of our citizens.
First, 1998, five diesel engine manufacturers (Caterpillar,
Cummins, Detroit Diesel, Mack Trucks, and Volvo) entered into binding
consent decrees to remedy the most substantial violation of our clean
air laws since the passage of the Clean Air Act. In essence, these
engine makers had designed and marketed over one million engines that
appeared to meet the emission requirements when tested in a controlled
laboratory environment but then dramatically exceeded these standards,
by as much as 300 percent, when operated on our nation's highways. This
flouting of our environmental laws will result in excess emissions of
roughly 100 million tons of NOx over the course of the next 20 years.
To mitigate the consequences of this illegal behavior, engine
manufacturers committed to a host of activities including the early
introduction of cleaner engines in 2002, a commitment to retrofit non-
complying engines when they are brought in for engine rebuilds, and a
commitment to design engines to meet a ``not to exceed'' (NTE) standard
to ensure that engines when operated on the road reflect the emission
profile promised in the laboratory. These commitments were the product
of months of intensive negotiations that enabled the defendant
companies to avoid potential criminal penalties and also allowed these
companies to continue to market non-complying engines until the
transition to cleaner engines could be economically completed in 2004.
It has come to our attention that many of these same companies are
now seeking relief from their own consent decree commitments. I would
like to submit to the record a letter dated February 5, 2001 from the
Detroit Diesel Company to Administrator Whitman seeking relief from the
commitment to market clean engines beginning in 2002 (attachment 2).
This request comes on the heels of a series of requests to create
exceptions to the NTE requirements and a growing body of evidence that
the rebuild programs established in the consent decrees will not
realize their promised environmental benefits. Even if all these
programs are implemented as promised, the consent decrees still would
allow 12 million tons of excess NOx to pollute our States and frustrate
our attainment efforts. We simply cannot afford to weaken the
commitments that form the basis of these consent agreements. If some
engine manufacturers cannot fulfill the commitments established under
the consent agreements, alternative reduction obligations must be
established that more than offset these failures. Anything less
unfairly rewards those companies that have failed to live up to their
commitments at the competitive expense of those companies that have
strived to succeed.
The consent decrees were negotiated in private through a legal
process largely void of the public engagement we have come to rely on
under the Administrative Procedures Act. Because of this, States and
other interested parties have been largely shut out of these negotiated
settlements. We urge this subcommittee to look into the recent
developments in the implementation of the consent decrees in order to
ensure that the public receives the full benefit of the legal bargain.
Diesel Emission Control Efforts--2007 Rule
The Northeast States wish to express our appreciation to the
Administration and EPA for their decision to move forward with the
implementation of the new diesel standards for model year 2007 and
later engines. This rule is critical to State efforts to attain the air
quality standards for ozone and to protect the public from toxic air
pollutants such as particulate, formaldehyde, and acetaldehyde. The
rulemaking process that produced this regulation was both extensive and
inclusive. During the rulemaking process, EPA garnered written input
from over 370 stakeholders and worked closely interested parties in the
development of the final rule. The broad support for this rule is
evident in a March 19, 2001 letter to Administrator Whitman. A broad
coalition including automobile manufacturers, trucking associations,
environmental groups, States, and truck and engine manufacturers joined
together to express our appreciation for the enormous public health and
environmental benefits that will be achieved by under this regulation.
I wish to submit a copy of this letter for the hearing record
(attachment 3).
While some continue to assert that this rule poses a long-term
threat to the refiners of diesel fuel and the makers of diesel engines,
nothing could be farther from the truth. In fact, this rule must be
fairly understood to have saved the diesel engine from inevitable
demise due to the unacceptable threat it has to date posed to public
health. Once this rule is fully implemented the words ``clean'' and
``diesel'' will for the first time rightfully belong in the same
sentence. By promulgating a comprehensive approach that simultaneously
addresses both diesel engines and the quality of diesel fuel, the
Agency has created a role for the continued reliance on diesel-powered
engines for years to come.
The 2007 clean diesel rule rests on a successful history of
technology advancing environmental regulation. Time and again, our
nation has proven that when given adequate lead-time and clear
performance standards, American industries possess the technological
knowledge and innovative ability to produce products that meet our
public health and environmental needs. The Northeast States are
concerned by reports that the Administration is considering upsetting
this time honored dynamic by imposing a third-party technical review,
such as by the National Academy of Sciences, on the clean diesel rule.
While certainly well intended, this idea is likely to do far more harm
than good by creating a climate of uncertainty that could lead refiners
and engine manufacturers to postpone investment in technology research,
development and physical plant upgrades that form the basis of their
compliance strategy.
EPA has provided more than 5 years of lead time for fuel providers
and the manufactures of emission control equipment to put in place the
necessary infrastructure and technical changes needed to meet the
requirements of the rule. Through the Federal Clean Air Act Advisory
Committee (CAAAC), Congress has already established a forum that EPA
effectively employs to secure meaningful and timely public input on
ongoing regulatory initiatives. Already, the Agency maintains a Mobile
Source Technical Review Subcommittee of the full FACA Committee
comprised of technical experts from industry, academia, States and
public health advocacy organizations. This subcommittee is well suited
to oversee progress on implementation of the 2007 rule. In contrast,
formation of a third party review to question the basis of the
standards has potential to become a self-fulfilling prophecy for
failure by undermining the certainty corporations need to invest for
success. Moreover, third party reviews defeat the democratic process
envisioned and required under the Administrative Procedures Act. We
believe the Agency conducted an extensive, inclusive and effective
rulemaking process. Those who disagree have already sought to
legitimately express their concern through the judicial process.
Anointing a group technically trained individuals to second-guess the
Agency's rulemaking process, disconnected from the transparency and
public participation required under the Administrative Procedures Act,
is undermining to this regulation in particular and to the rulemaking
process in general.
Reformulated Gasoline, MTBE, Ethanol and the Oxygen Mandate
Our region has much at stake in the debate over RFG, MTBE and
ethanol. Seven of our eight States have or are participating in the
Federal RFG program. The use of RFG in the Northeast has provided
substantial reductions in smog forming emissions and has dramatically
reduced emissions of benzene and other known human carcinogens found in
vehicle exhaust. However, the unique characteristics of MTBE pose
unacceptable risks to our region's potable groundwater. Groundwater
testing conducted throughout the northeast has detected low levels of
MTBE in roughly 15 percent of the drinking water tested. Nearly 1
percent of samples tested contained MTBE at or near State drinking
water standards. MTBE's unpleasant taste and odor at higher
concentrations and the frequency of MTBE detections poses a
disproportionate and unacceptable threat to our region's drinking
water.
The challenge facing us all is to mitigate the environmental and
economic harms caused by MTBE contamination without sacrificing the
environmental and public health benefits provided by RFG and without
undermining a reliable supply of low-cost gasoline. Unfortunately, the
law as currently written prevents both EPA and the States from
effectively facing this challenge. The oxygen standard leaves States to
choose between the ``rock'' of MTBE contamination and the ``hard
place'' of a summertime ethanol mandate that will result in either
environmental backsliding, gasoline price increases or a combination of
both.
It is simply not possible to protect air quality, water quality and
ensure gasoline price stability unless the oxygen mandate is lifted or,
at a minimum, modified to require EPA to waive this requirement upon
State request. Unless the oxygen requirement is lifted or waived, a
substantial reduction in MTBE use creates a de facto summertime ethanol
mandate. While ethanol usage is far preferable to MTBE from a
groundwater perspective and promotion of ethanol can further a host of
energy, agricultural, and environmental goals, an ethanol mandate in
the summertime reformulated gasoline program is not sound environmental
or economic policy for the Northeast. Due to its high volatility and
resulting increase in evaporative emissions, the use of ethanol during
the summertime ozone season may actually exacerbate our urban and
regional smog problems, absent further protections.
The tension between environmental quality and fuel costs posed by a
de facto ethanol mandate in RFG is demonstrated by recent EPA and State
actions. On March 15, 2001 Administrator Whitman announced that EPA was
proposing to relax the environmental performance requirements for RFG
containing ethanol out of concern for summertime price increases like
those experienced in Chicago and Milwaukee last summer. The lead to the
EPA press release reads:
``Administrator Christie Whitman today told the Speaker of the House
and members of the Illinois and Wisconsin congressional delegations
that EPA is very close to reaching a decision that should help
reduce the costs for blending ethanol into gasoline.''
The release quotes Administrator Whitman stating,``. . . I recently
directed EPA staff to finalize an upward adjustment to the VOC standard
. . . which will provide greater flexibility than the .2 pounds that
was originally proposed.'' I would like to submit a copy of the EPA
statement to the hearing record (attachment 4).
In plain terms, EPA is weakening the environmental performance of
RFG blended with ethanol out of concern over price increases. If
ethanol cannot be relied upon as a cost-effective means to satisfy the
RFG requirements in the States where it is produced, we in the
Northeast shudder at the potential cost implications and/or the
weakening of environmental performance requirements that will result
from imposition of a de facto ethanol mandate in our region.
EPA's decision to incrementally weaken the RFG program to
accommodate ethanol is even more unfortunate when one realizes that the
Agency could provide far more robust consumer protection without
weakening the environmental performance of RFG laws by granting State
requests to waive the oxygen mandate altogether. On March 27, 2001 a
diverse group of State environmental agencies, water quality agencies,
oil companies, fuel suppliers, retailers, and refiners, wrote to
Administrator Whitman to urge EPA to act quickly to approve
California's petition for relief from the oxygen standard. I would like
to submit a copy of this letter to the record (attachment 5). This
broad support for lifting the oxygen mandate by rule or through statute
remains the key to fixing the RFG program. I would like to thank
Senator Inhofe for his efforts last year to advance legislation that
enabled States to waive application of the oxygen standard. The
Northeast States look forward to continuing to work with you and
Chairman Smith in the full committee to pass such legislation this
year.
In the absence of Federal efforts, States are left to choose
between continued MTBE contamination and an ill designed and unwise
summertime ethanol mandate. The State of Connecticut is on the leading
edge of this unfortunate choice having adopted a legislative ban on
MTBE which takes effect in 2003. In a March 14, 2001 report from Arthur
J. Rocque, Commissioner of the Connecticut Department of Environmental
Protection (DEP), to the State Legislature, the Commissioner writes:
``The ban on MTBE effective in the year 2003 is not prudent for the
State of Connecticut and we recommend that the Environment
Committee consider changing the date of the ban. If this action is
not taken, Connecticut's position in the region as the first and
only State to ban MTBE while required under the Clean Air Act to
comply with the Federal reformulated gasoline program (RFG) will
likely result in one of several undesirable options. These options
could include: the delivery of special or non-compliant gasoline or
an increase in the price of gasoline conservatively estimated in
the range of 3-11 cents per gallon.''
I would like to submit a full copy of the Connecticut Report for
the record (attachment 6). There is no question that it is possible to
dramatically increase domestic ethanol production. Similarly there is
no question that it is possible to ship massive quantities of ethanol
to the Northeast by barge, rail and truck. The question remains at what
cost. While our region embraces the goal of increasing renewable fuels
nationally and sees great promise in the development of a biomass
ethanol industry in the Northeast, we are convinced that there are
policy approaches to achieve these legitimate ends that are far
preferable to mandating the use of ethanol in summertime RFG.
Conclusion
In sum, the Northeast States are committed to working with Congress
and the Administration to develop mutually supporting and sustainable
air quality and energy policies. I'd like again to thank the
subcommittee for the opportunity to testify here today.
__________
Statement of Bob Slaughter, General Counsel, National Petrochemical and
Refiners Association (NPRA)
Good morning, I am Bob Slaughter, General Counsel of the National
Petrochemical and Refiners Association (NPRA) and I thank you for this
opportunity to offer our views on national energy policy. NPRA
represents almost 500 companies, including virtually all of the
domestic refining capacity and most petrochemical manufacturers with
processes similar to refiners.
Our members supply consumers with a wide variety of products that
are used daily in homes and businesses. These products include
gasoline, diesel fuel, home heating oil, jet fuel, lubricants and the
chemicals that serve as the ``building blocks'' in making products as
diverse as plastics, clothing, medicine and computers. For many of our
members, energy is both an input and output. Thus, discussion of the
direction for our nation's energy policy is of vital and direct
interest to them. NPRA's members are eager to be part of the dialog to
identify ways to develop additional energy supplies, enhance national
security and use energy more efficiently.
In this testimony, we would like to:
provide our perspective on the current energy situation
and how it developed;
highlight several key regulatory programs that have made,
or will soon make, it more difficult to meet consumers' energy needs;
and
identify fundamental policy principles that we think
should be used to shape new energy policy directions.
In the past year or so, consumers have experienced supply and cost
impacts from disruptions in heating oil, gasoline, natural gas and
electricity markets. While weather, unforeseen equipment problems in
the energy supply and distribution infrastructure, and changes in
consumer demand patterns all can play a role in increasing costs,
government policy also is a major determinant of whether adequate
supplies of energy will be available at reasonable cost.
It has been many years since we've had a serious national debate on
energy policy. For much of the last decade or two, low prices and
plentiful supplies have enabled consumers to take energy for granted.
As a result, policies have often been pursued in a piecemeal fashion
and without the necessary attention to their impact on our overall
supply of energy and on the mix of individual energy supply sources. As
a nation, we have not seen the ``big picture'' because we often have
not examined the cumulative impact of regulatory programs nor have we
fully balanced other important national goals such as environmental
improvement with the need to maintain reliable domestic energy
supplies. Too often, we have not acknowledged the difficult tradeoffs
inherent in major policy decisions. We have, at times, even assumed
that these tradeoffs do not exist. Although as electricity customers in
California can attest, reality does eventually intrude.
Thus, our recent energy situation has been characterized by: 1)
significant concerns about heating oil prices in the Northeast last
winter after a prolonged cold snap; 2) shortages of gasoline in the
Midwest early last summer with prices that exceeded $2 per gallon; 3)
natural gas prices that hit a record high this winter resulting in
consumer heating bills estimated at triple last year's levels; and 4)
rolling blackouts in California and very high electricity prices
throughout the West with concerns being voiced about the ability to
meet electricity demand this summer in cities such as New York and
Chicago.
Overall, our national energy policy, such as it has been, has
resulted in the following:
Domestic oil production is declining.
Domestic natural gas production, while growing, still has
not returned to where it was in the early 1970's.
Imports of crude oil and refined petroleum products are
increasing.
Refining capacity is stretched to its limit and the
prospects for expansion are limited by regulatory policies.
The nation's energy delivery infrastructure is aging and
increasingly overwhelmed by demand, with new construction and/or
expansion made more difficult by regulatory impediments.
According to the Energy Information Administration's (EIA) Annual
Energy Outlook 2001, total U.S. energy consumption in 2000, by fuel
source, was:
39 percent oil
23 percent natural gas
22 percent coal
16 percent nuclear, hydropower and non-hydro renewables
While on the surface this may seem like a reasonably diverse mix of
energy use, critical sectors of the economy are much more heavily
reliant on a particular energy source.
For example, barring unforeseen technological advances, petroleum
products will be needed to provide the vast majority of transportation
fuels for at least the next decade or longer. EIA estimates that
petroleum use for transportation will increase by 5.6 million barrels
per day (MMB/D) between 1999 and 2020.
However, domestic refiners are increasingly challenged in just
meeting existing demand. Since 1983, the number of U.S. refineries has
decreased from 231 to the 152 that are operating now. While total
refining capacity has remained relatively stable throughout this
period, demand has increased dramatically. Thus, for a substantial
period of the last year, refineries were running at or near their
operational maximum. The overall U.S. refinery utilization rate peaked
at 97 percent last summer but was as high as 94 percent in December
(based on EIA data). As the attached graph from the recent National
Petroleum Council (NPC) study (``U.S. Petroleum Refining: Assuring the
Adequacy and Affordability of Cleaner Fuels'') shows, U.S. demand for
petroleum products exceeds domestic refining capacity, hence the growth
in refined petroleum product imports (see attachment 1).
Due to both financial and regulatory constraints, it is rather
unlikely that new refineries will be constructed in the United States.
Indeed, there has been no new refinery built in about 20 years. Rates
of return for refineries have averaged about 5 percent in the last
decade, roughly equivalent to the return from a passbook savings
account--but with much greater risk. In the same period, refiners were
required to make substantial capital investments to meet environmental
requirements--investments that the NPC estimated were greater than the
book value of the refineries themselves.
Since there are few currently viable substitutes for petroleum-
based transportation fuels, the emphasis in the environmental arena has
been on reducing emissions and making petroleum products cleaner
burning. Since the Clean Air Act Amendments of 1990, refiners have had
to:
reduce the volatility of gasoline (as measured by its
RVP);
introduce oxygenated fuels in carbon monoxide
nonattainment areas;
reduce on-highway diesel fuel sulfur levels;
introduce Federal reformulated gasoline in 1995 with a
second phase requiring even more stringent emission reductions in 2000.
And, refiners face even more challenges ahead. As this chart
demonstrates (see attachment 2), an avalanche of new environmental
requirements faces refiners--most of which fall within the same narrow
time period for implementation. While I will address a couple of these
programs later, the investment requirements that refiners face will be
substantial and may raise questions about their continued viability.
NPRA estimates that some $20 billion must be spent over the next decade
to comply with newly issued or anticipated gasoline and diesel fuel
requirements. The recent closure of one Midwest refinery is a reminder
that we cannot assume that all existing refineries will continue to
operate.
Thus, for domestic refiners to maintain or grow capacity,
expansions must be made at existing sites. The alternative is to meet
increased demand with increased imports of petroleum products.
Unfortunately, EPA's permitting programs and the retroactive
reinterpretation of its rules has made expansion of existing capacity
an even more formidable challenge. I will discuss this in more detail
later. Further, the product distribution structure is already severely
challenged, even without new fuel requirements. This chart (attachment
3) was prepared by ExxonMobil and identifies current fuel requirements
within different regions of the United States. A complicating factor in
recent years has been the addition of area-specific and State
requirements (so-called ``boutique'' fuels) to the Federal programs
already in place. As you can see from this map, more than 16 categories
of gasoline are represented (14 shown in color on the map plus
conventional gasoline meeting Northern and Southern volatility
requirements) . Assuming three grades (regular, midgrade and premium)
of each type of gasoline, there are almost 50 distinct gasolines
represented on this chart. That is before any new requirements are
considered. Pipelines and fuel terminal operators struggle to keep all
these grades separate. In the future, they could be faced with the need
for additional segregations and new storage tanks to maintain
compliance and fuel integrity. Yet, they, too are faced with additional
constraints on their operations and, like refiners, find it difficult
to expand their facilities. Recent experience with the Longhorn
pipeline is an example of new constraints that pipelines face since
Longhorn had to commit to not carrying fuels containing MTBE in order
to gain permits and the necessary approvals.
The proliferation of these many different requirements has led to
increased volatility in gasoline markets and to reduced flexibility in
shifting available supplies to areas that need fuel the most. As we saw
in the Midwest last summer and California previously, differing fuel
specifications can severely limit the ability to move supplies to areas
that are short.
When demand exceeds supply, market economics operate so that price
becomes the allocation mechanism for any available supplies, hence the
type of price spikes seen last summer in Chicago. The former chairman
of the Federal Trade Commission (FTC), Robert Pitofsky, in reference to
the Commission's report on Midwest gasoline prices, noted that ``while
there were many short-term causes of the increases, the underlying lack
of U.S. refinery capacity threatens similar price spikes in the future
in the Midwest and elsewhere.''
Looking ahead, fundamental changes in energy markets have increased
the potential for supply constraints and price volatility. Due to these
changes, it is even more important that future government policies be
fully evaluated to determine and understand the impact on energy
supplies. However, first we must deal with several ongoing initiatives
that we believe pose threats to future energy supplies.
The first is EPA's New Source Review enforcement program, which,
for refiners, began in 1999. Let me be clear, the refining industry is
not arguing against enforcement, rather we are asking for fairness in
ensuring compliance by all. EPA has been engaging in retroactive
reinterpretation of its permitting rules--what we see as regulation
through enforcement rather than through a public rulemaking process. In
doing this, EPA has focused on two energy providers that already face
increasing difficulties in meeting consumers' energy needs--utilities
and domestic refineries. In short, EPA is seeking to fine those who
acted in good faith but who failed to comprehend the incomprehensible--
EPA's reinterpretation of the rules after the fact.
EPA has reinterpreted its rules covering modifications to existing
facilities long after those modifications have been completed.
Companies have been faced with potential fines in the millions and
pressed to make binding commitments for installing specific, additional
emissions reduction technologies at their facilities. Three have
settled with EPA simply in order to get on with their business, others
are talking with EPA and others have already begun or are considering
legal challenges to EPA's actions. EPA's enforcement reinterpretations
center on two key elements of the NSR permitting requirements, 1) the
provisions allowing exemptions for routine maintenance, repair and
replacement activities, and 2) calculation of whether an action
resulted in significant emissions increases using a discredited method
for determining emissions based on ``potential'' rather than actual
emissions.
Senators Inhofe and Breaux have recently sent a letter to Vice
President Cheney questioning EPA's approach. We agree with their
concern that unless addressed,``. . . EPA's implementation of NSR
permitting requirements will continue to thwart the nation's ability to
maintain and expand refinery capacity to meet fuel requirements.'' We
also agree that ``EPA's NSR interpretations have created great
uncertainty as to whether projects long recognized to be excluded from
NSR permitting can be undertaken in the coming months to assure
adequate and reliable energy supplies.''
Also as noted earlier, refiners face an avalanche of new regulatory
requirements that will require many facility modifications. The effect
of the uncertainties surrounding EPA's NSR interpretations will be to
slow down future modifications necessary to produce complying fuels and
to discourage expansions of refinery capacity. Remember, that the
industry's ability to meet consumers' demands for fuels today in part
depends on these modifications now questioned retroactively by EPA. If
refiners had not acted--and they acted in compliance with
interpretations of the law and regulations at the time--we would be
worse off today and quite likely be facing reduced fuel supplies and
higher costs. Unless capacity can be further expanded to meet
increasing demand, domestic fuel supplies will grow tighter and markets
more volatile.
NPRA hopes that this committee will give thorough review of EPA's
NSR program implementation a high priority. Further, it may well be
time to reassess this program. Of course, for the sake of equity,
consideration of future action will need to consider those who have
settled with EPA so as not to place them at a disadvantage.
Companies need greater certainty if they are to move forward. The
current uncertainty threatens the implementation of key environmental
programs such as the Tier II low sulfur gasoline program. This program
begins in just a few years and will require numerous refinery
modifications. Yet, because it is both difficult to determine when an
NSR permit is needed and quite time-consuming to secure permits, the
current state of the program may prevent the timely introduction of
cleaner burning fuels.
This is a key time not only to address the problems of the past,
but also to consider improvements for the future. For example,
flexibility in meeting requirements could be enhanced by greater use of
market-based incentives in permitting programs. The effectiveness of
market-based incentives has been demonstrated in the successful sulfur
dioxide trading program implemented under the acid rain provisions of
the Clean Air Act. Administrator Whitman, in her recent letter issuing
EPA's fiscal year 2000 Annual Report, highlighted the importance of
these types of incentives.
Ideas such as cap and trade, averaging and ``bubbling'' (setting an
emissions target for a facility, not for individual processes or pieces
of equipment) should be explored as ways to provide assurances of
environmental improvements without further constraining refiners'
ability to operate and their ability to produce needed fuel supplies.
The bottom line is that fuel supplies will be further strained unless a
more flexible, efficient and streamlined permitting process can be
developed. NPRA urges the Administration to review EPA's existing
enforcement initiative and to include improvements in the permitting
process as essential elements of national energy policy.
One need only look to California to see some of the impediments
that overly complex and confusing permitting processes can play in
impeding the development of energy supplies. We understand that, in
response to the electricity shortages, Governor Davis has ordered an
expedited process to be applied to new electric generation capacity.
Another EPA initiative that could severely jeopardize fuel supplies and
economic growth is the ultra-low sulfur diesel program that was quickly
adopted in the waning days of the previous Administration. The refining
industry is committed to lowering sulfur in diesel fuel, having offered
its own proposal to reduce sulfur by 90 percent from today's levels.
However, EPA adopted a less cost-effective program by choosing a
reduction of 97 percent and an effective date of 2006. As a result,
future diesel fuel supplies are in jeopardy and vital parts of the
economy are at risk. Most goods in the United States are shipped by
truck, including agricultural products.
Regarding the threat to fuel supplies, Charles River Associates (in
a study commissioned by API) determined that the EPA proposal would
result in an average supply shortfall of 12 percent versus current
supplies. However, that is a national average and regional shortfalls
could be greater--Charles River Associates estimates that the Rocky
Mountain region could face a shortfall of 37 percent.
And, to make matters more difficult, the program's effective date
forces refiners to make major investments in the same timeframe that
they must modify refineries to produce low sulfur gasoline. These
overlapping timeframes raise serious questions about the availability
of the engineering and construction resources needed to tackle both
programs simultaneously. As a result, the previously mentioned National
Petroleum Council study cautioned that``. . . a significant risk of
inadequate supplies will result.''
During the course of the rulemaking, the agricultural community,
food marketers, trucking industry and even the Department of Defense
raised concerns about diesel fuel availability and cost. The nation's
largest producer of truck engines also questioned EPA's analysis of the
rule, indicating that its estimate of the potential engine costs (using
a combination of as yet unproven technologies) to meet the heavy duty
truck standards is some six times higher than EPA's.
NPRA tried many times to convince EPA to study this rule further
before deciding on a standard that could mortgage future fuel supplies.
We urged that they take the time to fully appreciate the energy supply
impacts as well as the environmental benefits through an independent
analysis by a third party such as the National Academy of Sciences. We
would continue to welcome such an assessment. Meanwhile, we are
pursuing every avenue, including litigation, to focus attention on and
fix a rule that we think will have severe supply consequences. Simply
put, we are very concerned about the current timeframe for this rule
and think it should be adjusted. Such a step would correct the supply
problems associated in this rule without undercutting its environmental
benefits.
A third area of concern for future energy supplies relates to
efforts to reduce the use of MTBE. The Clean Air Act Amendments of 1990
require the use of oxygenates, such as MTBE in Federal reformulated
gasoline (RFG) to ensure that an average of 2 percent oxygen by weight
is maintained in this fuel. Oxygenates, like MTBE and ethanol, can
assist in the production of cleaner burning fuels. They help expand the
overall amount of gasoline supplies, add octane for better fuel
performance and help reduce the use of other blending components that
may make it more difficult to achieve lower emissions. However,
oxygenates also present tradeoffs. MTBE can move farther and faster
through the soil and into groundwater supplies should there be a spill
or leak. Ethanol requires the use of lower volatility blendstocks to
compensate for the increase in evaporative emissions otherwise
associated with ethanol fuels. Since ethanol rapidly separates out from
the gasoline blend when even small amounts of water are present,
ethanol blends generally cannot be shipped through pipelines, requiring
special blending equipment and additional storage tanks at fuel
terminals.
Several States, including California, New York and Connecticut,
have set deadlines for ending the use of MTBE in gasoline due to
groundwater concerns. However, MTBE does currently play a significant
role in supplementing gasoline supplies. MTBE represents about 4
percent of the nation's gasoline supply on average, and even more in
RFG areas on the coasts--11 percent. Thus, we must fully understand the
implications of actions to reduce its use on gasoline supplies.
NPRA supports strong underground tank enforcement and prompt clean-
up of water already affected by MTBE. Further, if MTBE use is reduced,
the 2 percent RFG oxygen mandate should be eliminated, while the air
toxics reductions achieved in RFG with the help of oxygenate blending
are maintained. Renewables, such as ethanol, can help expand our fuel
supplies, but, given the logistics constraints on their shipment, they
must be allowed to be used where they make the most sense. Ethanol will
continue to grow in importance as a source of fuel octane, but forcing
its use through mandates will increase consumers' fuel costs.
In closing, let me address the question of what should guide future
energy policy. We suggest the following as key guidelines to follow:
1. Don't pick a favorite. The nation is best served by a diverse
portfolio of energy supplies. Natural gas is a good example of a fuel
whose consumption pattern has been changed by government policy. A few
of us still remember the 1970's when concerns about natural gas
supplies led, for a time, to prohibition of its use for electricity
generation. More plentiful supplies in much of the intervening period
have generally erased that memory. Yet, environmental policy objectives
have led to increased natural gas use for electricity generation. This
trend seems likely to continue absent a serious commitment to improving
clean coal technology or a change in attitude regarding nuclear power.
Indeed, natural gas use for electricity generation (excluding
cogeneration) is projected by EIA to triple over the next two decades.
EIA expects that 89 percent of new electricity generation built between
now and 2020 will be gas-fired. Absent additional natural gas supplies
in the United States (and Canada) and additional pipeline capacity to
transport these supplies, questions arise regarding the continued
availability of natural gas and natural gas liquids as reliable and
affordable petrochemical feedstocks that allow domestic petrochemical
producers to be competitive in global markets.
2. Provide access. Many areas in the United States have been placed
``off limits'' for oil and gas exploration and development. We
understand concerns for protecting the environment of these areas.
However, technology is available to minimize the development
``footprint'' and to help prevent adverse impacts. If we are to enhance
domestic supplies, access is needed to promising areas for domestic oil
and gas development.
3. Encourage new technologies to revitalize traditional energy
sources. For example, domestic coal reserves are considerable and coal
could continue to play a key role in our energy equation if ``clean
coal'' research and development was given greater emphasis and
encouragement. Contributions made in one energy sector can have
important benefits in others. For instance, coal could make an
important contribution in powering future electricity generation in an
environmentally acceptable manner and thus allow natural gas (and
natural gas liquids) to provide reliable feedstocks for petrochemicals
where there are few, if any, substitutes.
4. Don't forget the full energy supply chain. While a focus on
``upstream'' issues such as improved access to promising acreage is
important in order to expand the ``input'' side, oil and gas are raw
materials that must be converted into consumer products and delivered
to end users. As noted earlier, there is a critical need to remove
existing impediments to expanding refinery capacity as well as to
continue to seek policy enhancements that can maintain, or increase,
domestic supplies. Similarly, emphasis should be placed on improving
our domestic product distribution infrastructure.
5. Strike a sensible balance. As we know from our own lives,
decisions involve tradeoffs. We all could probably agree that we should
work to preserve the dramatic environmental improvements that have been
made in the last few decades. However, we all also can agree that
Americans would like to continue to improve their lifestyles and
encourage further economic growth. In order to honor all these goals,
we must first fully understand the implications of policy choices and
then carefully weigh the tradeoffs inherent in those choices. Recently,
we have not focused on our nation's energy needs as much as we should.
We need to strike a better balance between environmental goals and our
need for reliable energy supplies. These need not be incompatible
goals, but we do need to work on the right balance. There are policy
tools that can help us make more informed decisions and more fully
understand the tradeoffs we face. Thus, you might consider the
development of energy impact analyses for major rulemakings. Similarly,
periodic review of the cumulative effects of regulations could help us
understand whether the balance is shifting too far in one direction or
the other.
6. Pursue improvements in how regulations are made. Lessons have
been learned about how to develop more effective, and more efficient,
regulations. It is time to put those lessons to work for us in
developing national energy policy. We should set performance goals
rather than mandating the use of specific technologies or setting
product specifications. The command and control approach stifles
innovation. We should avoid overlapping leadtimes for regulatory
programs whenever possible. Costs will be greater for programs that
must compete in the same time period for necessary goods and services
to ensure compliance. We should enhance flexibility through market-
based mechanisms and incentives. Emissions credit trading has been
demonstrated to lower compliance costs. Incentives could help encourage
earlier introduction of cleaner fuels without jeopardizing refiners'
viability through unrealistically stringent mandates. We must rely on
the best information available to inform our policy choices. Use of
sound science and cost-benefit analyses would help us better understand
the tradeoffs in policy decisions.
Finally, while I have concentrated on how to enhance energy
supplies today, we cannot forget about the demand side of the equation.
Improving the efficiency of energy use should also play a vital role in
helping us meet our energy needs. For example, lighter weight materials
can assist in improving vehicle fuel economy. Incentives for the
purchase of higher fuel economy vehicles might also be considered.
Improvements in our roads to improve traffic flow and reduce congestion
can also help conserve our energy resources.
Thank you again for the opportunity to share our views. I look
forward to responding to your questions.
__________
Statement of Carlos J. Porras, Communities for a Better Environment
Honorable members of the Senate Committee on Environment and Public
Works: Thank you for this opportunity to address the committee. My name
is Carlos J. Porras. I am the Executive Director of Communities for a
Better Environment (CBE), a 23-year-old environmental health and
justice organization with over 20,000 members throughout California.
CBE works directly with people who live in some of the most polluted
urban areas of California, many of whom live in the shadows of oil
refineries, to identify feasible, cost-effective means to reduce
pollution and improve safety while still retaining jobs. Since the time
it was signed into law by President Richard Nixon, to the time it was
amended by President George Bush, Sr., the Federal Clean Air Act has
enjoyed bi-partisan support. Implementation and enforcement of the Act
has brought the nation slowly and gradually closer to the day when all
Americans will breathe healthful air, while also allowing the longest
sustained economic expansion in the nation's history. The Clean Air Act
displays a delicate balance of environmental and economic interests
that has served the nation well.
1. Southeast Los Angeles: A Toxic Hotspot
Some of CBE's work has focused in Southern California on the
communities of Southeast Los Angeles County (SELA). SELA is a
predominantly Latino community that is also home to the highest
concentration of toxic chemical generating facilities in the nation.
CBE's research has uncovered a strong correlation between the location
of facilities listed on the toxic release inventory (TRI) and the
percentage of people of color living in the area.\1\ This correlation
has been called ``environmental racism,'' or ``environmental
injustice.'' Additionally the closer one looks at our communities the
more one recognizes the congestion caused by multiple toxic facilities,
this is a phenomenon called ``toxic hot spots.''
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\1\CBE Report, ``Holding Our Breath.''
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2. Powerine/CENCO: A Case Study in the Importance of the Clean Air Act
New Source Review Requirements
I came to work in the environmental arena not in as a back-packer
or hiker, but out of necessity from being a labor union president whose
members were subjected to frequent accidents, explosions, and releases
from one of the worst refineries in California--Powerine. After a
struggle of many years, Powerine ceased operating in 1995. Now a new
company called CENCO seeks to reopen the refinery without first
installing the Best Available Control Technology (BACT), in plain
violation of the Federal Clean Air Act.
Santa Fe Springs, the home of the Powerine Refinery, is located in
the southern portion of Los Angeles County, 12 miles from downtown Los
Angeles. The area of Santa Fe Springs is slightly more than 9 square
miles with a resident population of 16,400 and a daytime employment
population of approximately 80,000.\2\ The ethnic composition of city
residents is 67 percent Latino.
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\2\City of Santa Fe Springs, Discovering Santa Fe Springs,
California, Undated Pamphlet.
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Powerine was identified by the South Coast Air Quality Management
District (``SCAQMD'' or ``Air District'') as having the worst record
for air quality violations and public complaints of any refinery in the
South Coast Air Basin.\3\ The SCAQMD levied hundreds of thousands of
dollars of fines on Powerine for various violations of the Health and
Safety code, including criminal violations, and numerous toxic chemical
releases that have endangered the health and safety of area workers and
residents.\4\ The Santa Fe springs Fire Department Chief has stated
that ``The Powerine Refinery generates and abnormally high number of
releases [[of toxic gases].''\5\
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\3\SCAQMD statement (October 1989).
\4\Los Angeles Time (Mar. 23, 1989); SCAQMD data bases for Jan.1,
1990--April 7, 1994.
\5\Los Angeles Times (Oct. 5, 1989).
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Powerine is among a small handful of refineries in the State still
using the deadly chemical hydrofluoric acid (HF), which was used as a
chemical warfare weapon during World War One. A May 1989 Los Angeles
Times article revealed that Powerine was not adequately equipped to
handle a major HF leak. An accidental release of HF from Powerine could
kill hundreds, or even thousands, of area workers and residents.
In addition to accidental releases, Powerine was responsible for
significant ongoing emissions, including releases of such highly toxic
and/or carcinogenic chemicals as lead, mercury, benzene, cadmium,
xylene, toluene, and a long list of other toxic chemicals.\6\ Indeed,
despite Powerine's classification as a ``small'' refinery, it poses
almost twice as great a cancer risk to the surrounding community than
does the Chevron Richmond refinery, one of the largest refineries in
the nation,\7\ with a throughput approximately five times larger than
Powerine's.
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\6\Draft Environmental Impact Report (DEIR) Powerine Oil Company
Reformulated Fuels Project (Feb. 16, 1994), p. 4-14.
\7\Powerine existing cancer risk level is 14.7 per million. DEIR
p. 3-12. Chevron Richmond existing cancer risk level is 8.4 per
million. DEIR for Chevron Richmond Reformulated Fuels Project p.
IV.D.16.
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Powerine was also responsible for dumping massive quantities (over
400,000 tons) of ``criteria'' pollutants into the air each year, such
as nitrogen oxides (NOx), sulfur oxides (SOx), particulate matter
(PM10), and volatile organic compounds (VOCs).\8\ NOx and
VOCs form ozone, which is known to cause permanent lung scarring,
asthma and emphysema, among other problems. PM10 has been
labeled one of the most serious public health threats, causing
respiratory illnesses such as asthma and emphysema,\9\ and can carry
cancer-causing chemicals deep into the lungs. VOCs are not only ozone-
precursors, but many are also highly toxic chemicals in their own
right. Despite its small'' size, Powerine was ranked the ninth worst
emitter of PM10 in the entire four-county South Coast Air
District, and among the top 20 worst for ROCs and SOx.\10\ For 1991
and 1992, Powerine was the twelfth worst overall polluter in the
basin.\11\ Air samples taken downwind from Powerine reveal elevated
levels of air contaminants.\12\
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\8\SCAQMD, ``The Top 20 Polluters for 1991 and 1992'' (June 30,
1993).
\9\Draft Final Socio-Economic Report for 1991 Air Quality
Management Plan, SCAQMD, p. 4-1 (May 1991).
\10\Los Angeles Times (Jan. 9, 1992).
\11\SCAQMD, ``The Top 20 Polluters for 1991 and 1992'' (Jun.30,
1993).
\12\DEIR p. 3-11.
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For decades, the predominantly Latino community of Santa Fe Springs
and the neighboring areas which live downwind of the refinery, have
borne the brunt of Powerine's toxic pollution. The clustering of
environmental hazards in communities of color has been deemed
``environmental racism.''
My involvement with Powerine stems from the fact that the refinery
is located directly upwind from the city maintenance yard where
approximately 75 members of the City Employees' Association report to
work. I was the President of that union for several years, during which
time employees voiced concern over unidentified noxious odors,
accidental fires, ominous clouds, and paint eroding from cars parked
near the refinery. These concerns, coupled with the cancer-related
deaths of several yard employees prompted the Employees Association to
take action to protect the health and safety of yard employees
threatened by the Powerine facility.
Between February 15, 1989 and October 31, 1990 there were 46
separate complaint dates listed by the Fire Department. These included
complaints about black smoke, gas oil, and rotten egg odors,
SO2 releases, and a release of deadly hydrogen fluoride gas.
On March 15, 1989, Powerine and three company officials were fined
$177,750 for knowingly releasing pollutants into the air between
December 18, 1987 and January 2, 1989. Thirty-eight different charges
were originally filed against Powerine for these releases. The fine was
among the largest ever levied. Deputy District Attorney Fred Macksoud
said that some of Powerine's emission violations remained uncorrected
for as long as a year. ``This case was an aggravated case,'' Macksoud
said, ``We put a heavy hand on these people so they'll learn not to
violate clean air rules.'' In addition to fines of the company, three
company officials were personally fined for their failures in their
responsibilities to oversee faulty equipment responsible for
releases.\13\
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\13\L.A. Times, (March 23, 1989), attached.
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On January 7, 1992, Santa Fe Springs fire fighters were awakened by
an explosion at the Powerine refinery. The three alarm fire took nearly
4 hours to knock down. The explosion and fire were caused by a propane
leak that was ignited by a nearby heater. One worker was hit in the
face with a piece of flying equipment and was hospitalized with an eye
injury. Fire hydrant water supply was too low because water pressure
had not been increased by Powerine as required. (Santa Fe Springs Fire
Department Incident Report No. 200601, January 7, 1992; Daily News,
January 8, 1992).
In 1993 Powerine settled a personal injury lawsuit with Patty
Guthrie. She was working across the street from Powerine when a
vaporized acid cloud from Powerine was accidentally released onto Ms.
Gutherie's worksite (Johnson Trucking Co.). Powerine's incident report
confirmed that the release was a result of a breakdown of a sulfur
unit. While Powerine did not comment on the case, the woman was awarded
$850,000. She alleged that she suffered from traumatic emphysema, which
allows a person to inhale, but not to exhale. Her attorney commented
``Her life has been cut short and she's going to have to be provided
for.'' (Daily News, Jan. 9, 1993) Finally, after decades of such
problems, the Powerine refinery ceased operations in 1995.
3. CENCO Attempts to Resurrect the Powerine Refinery
This history of accidents is highly relevant to the matter before
the committee today. A new company, owned by televangelist Pat
Robertson's Charitable Trust, has proposed to reopen the Powerine
Refinery. CBE and the United States Environmental Protection Agency
have sued CENCO in Federal District Court to require the company to
comply with requirements of the Clean Air Act.
The story of the Powerine Refinery points out the importance of the
Clean Air Act. It was years of inadequate enforcement of the Act and
repeated violations of the Act that resulted in Powerine's long line of
accidents and releases, and ultimately to the closure of the facility.
If the South Coast Air District and EPA had aggressively enforced the
requirements of the Act, Powerine could have been made to run cleaner,
more safely, and possibly more profitably.
The proposed re-opening of the refinery by CENCO points out the
importance of enforcing the Clean Air Act's New Source Review
Requirements (``NSR'')--the very provisions that have been put into
question. The Act requires new facilities, major expansions, and
facilities proposed for re-opening after long closures, to install Best
Available Control Technology (BACT), through a process call New Source
Review. The importance of the New Source Review requirement could not
be clearer than in the case of Powerine. It is obvious that prior to
opening, CENCO must upgrade the refinery to incorporate the Best
Available Control Technology. This is the only way to ensure that when
and if the refinery reopens, it will not again become the worst
refinery in the State. It is also important for CENCO to comply with
other New Source Review requirements such as the analysis of safer
alternative technologies, such as the use of sulfuric acid rather than
hydrofluoric acid, and the consideration of alternative locations
farther from population centers. If this body weakens those New Source
requirements, we can only expect a return to Powerine's days of
accidents, explosions, and toxic chemical releases.
The New Source Review requirement was one of the most important
compromises in the Clean Air Act. Rather than requiring all existing
facilities to install modern technology immediately, NSR requires
installation of Best Available Control Technology only for new
construction, major expansions, or reopening of facilities after
permanent closure. Congress believed that the NSR process would result
in the gradual modernization of all of the nation's major polluting
facilities as those facilities were expanded and rebuilt, when such
retooling is most cost-effective. If this body weakens this
requirement, then we can expect a future of continued operation of
obsolete, polluting, and dangerous refineries and other heavy
industries.
4. Refineries are the No. 1 stationary source of air pollution
The story of Powerine and CENCO is by no means unique. A Report
released by CBE and the Contra Costa Building and Construction Trades
Council just this week concludes that the incidence of serious refinery
accidents is on the rise in recent years in at least one California
County.\14\ The Report recommends stricter enforcement of existing
laws and adoption of new community and worker safeguards.
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\14\CBE and Contra Costa Building and Construction Trades Council
Report, ``No Accident!'' (April 2001).
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The United States' 164 Petroleum Refineries are the single largest
stationary sources of air pollution in the country. In 1998 there were
27 refineries in Texas, 24 in California, 20 in Louisiana, 6 in
Pennsylvania, 6 in New Jersey, and 6 in Illinois. Most of these
refineries are decades old, and some are over a century old.
Modernizing these facilities is a key to achieving clean air throughout
the nation.
Refineries are the single largest stationary source of volatile
organic compounds (VOCs), the primary precursor of urban smog--
releasing over 246,069 tons of VOCs each year. Refineries are the
fourth largest industrial source of toxic emissions, releasing over 58
million pounds per year. Refineries are the single largest source of
benzene emissions--a chemical known to cause cancer in humans--
releasing over 2.9 million pounds per year. Refineries also release a
wide variety of other toxic chemicals, including MTBE, toluene (7
million pounds), xylenes (4.2 million pounds), methyl ethyl ketone (4.1
million pounds), among numerous others.\15\ Refineries are the second
largest industrial source of sulfur dioxide emissions, which create
acid rain, the third largest industrial source of nitrogen oxides,
which contribute to smog, and the fourth largest industrial source of
particulate matter emissions.\16\
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\15\``Oil Refineries Fail to Report Millions of Ponds of Harmful
Emissions,'' U.S. House of Representatives, Minority Staff, Special
Investigations Division, Committee on Government Reform, Prepared for
Rep. Henry Waxman. (Nov. 10, 1999) (Hereinafter, ``Waxman Report'') pp.
i, 3.
\16\Waxman Report, p. 4.
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In addition to these reported emissions, government reports
estimate that 80 million pounds of refinery VOC emissions go unreported
each year, including 15 million pounds of toxic pollutants and 1
million pounds of benzene.\17\ These inaccurately reported emissions
point out the need for continuous emissions monitors (CEMs) at
refineries and other major sources of pollution. CEMs are clearly
provided for in the Clean Air Act, but the requirement has not yet been
enforced adequately.
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\17\Waxman Report, p. ii.
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A recent study demonstrates that non-smokers living downwind of
refineries experience markedly decreased lung capacity.\18\ In 1995
U.S. EPA estimated that 4.5 million persons living within 30 miles of
oil refineries were exposed to benzene at concentrations that posed
cancer risks higher than the Clean Air Act's acceptable risk threshold,
and some experience benzene cancer risks as high as 180 times the
acceptable threshold.\19\ Numerous studies show that communities
burdened by hazardous wastes produced by these facilities and others
are disproportionately often communities of color.\20\
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\18\Detels, et al., American Journal of Public Health (Mar. 1991).
\19\EPA, ``Regulatory Impact Assessment for the Petroleum Refinery
NESHAP: Revised Draft for Promulgation,'' 211-212 (July 1995).
\20\See, e.g., ``Toxic Wastes and Race,'' Civil Rights Commission
of the United Church of Christ. (1987)
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5. There are Cost-Effective Means to Drastically Reduce Refinery
Pollution While Saving or Even Creating New Jobs
More than half of refinery VOCs come from ``fugitive emissions''--
leaks from refinery valves, storage tanks, flanges, seals,
connectors.\21\ As the Waxman report concludes, many of these leaks
can be sealed by ``simply tightening a valve with a wrench.''\22\ The
Report further concludes that eliminating such leaks would be
equivalent to removing the VOC exhaust emissions from five million new
cars.\22\ Indeed, the Clean Air Act itself requires such leak detection
and reporting.\23\
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\21\Waxman Report at p. 3.
\22\Waxman Report, p. iii.
\23\40 CFR 60.482.
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Through Clean Air Act enforcement actions, CBE has reached
agreements with numerous refineries throughout California to install
technologies to reduce VOC and other emissions. For example, CBE's
collaboration with the International Longshore and Warehouse Workers
Union indicated that several oil companies in Los Angeles had failed to
install marine vapor recovery equipment required by the Clean Air Act
to capture toxic gases released during oil tanker loading. The
equipment is similar to vapor recovery nozzles common at gas stations.
Through a series of enforcement actions the companies, (Ultramar, GATX,
and Chevron), agreed to use the required equipment, reducing VOC
emissions by over 95 percent. Some of the companies agreed to reduce
VOC emissions further by installing ``leakless'' bellows valves on
their refineries. Not only did the companies remain in operation, but
they have enjoyed some of their most profitable periods in the time
since the agreements were reached. In fact, some of the companies
report that the newer leakless technology has reduced their operating
cost since it reduces the amount of ongoing inspection and maintenance
required.
CBE has a history of identifying technologies that not only reduce
pollution and increase safety, but also save money in the long run. For
example, CBE worked with Chevron's Richmond, California refinery to
conduct a pollution prevention audit that resulted in installation of
technologies that reduced lead emissions by 97 percent, reduced nickel
emissions by 86 percent, and reduced chromium emissions by 67
percent.\24\ CBE reached an agreement with Unocal's Rodeo refinery,
now owned by Tosco, to reduce its toxic air pollution by 143 tons per
year (a 28 percent reduction) through installation of leakless valves
and valve tightening. CBE has worked with numerous other companies to
capture pollution that would otherwise have been released into the
atmosphere and turn it into usable product. CBE worked with companies
in the South San Francisco Bay Area, to identify technologies that
reduced heavy metal discharge by over 90 percent, while saving enough
money to pay for itself within 5 years.\25\ CBE's work recognizes that
pollution is often wasted product. Pollution prevention can result in
the recapture of marketable product that otherwise would have been lost
to the environment.
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\24\31:8 Environment 45 (Oct. 1989)
\25\CBE Report, ``Clean, Safe Jobs: A Sustainable Manufacturing
Model.'' (1994)
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Contrary to popular belief, enforcement of strict environmental
laws can have a positive impact on the economy. A Boston University
study showed that strict air pollution regulations on Los Angeles area
refineries actually had a positive impact on employment, probably due
to the hiring of people to install and maintain abatement equipment.
The study further found that productivity at refineries forced to
install pollution control equipment was higher than at other similar
refineries not subject to such regulation because the need to invest in
pollution abatement equipment accelerated management decisions to
invest in other more productive technology.\26\ Similarly, an MIT
study showed ``a consistent and systematic positive correlation between
stronger State environmentalism and stronger economic performance
across four of the five indicators. States with stronger environmental
standards tended to have higher growth in their gross State products,
total employment, construction employment, and labor productivity than
States that ranked lower environmentally.''\27\ These conclusions have
lead some labor organizations, such as the Building and Construction
Trades Union, to collaborate with CBE and other environmental groups
with the understanding that environmental enforcement can mean more
jobs building and operating pollution control equipment.
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\26\Berman and Bui, National Bureau of Economic Research (1998).
\27\Meyer, ``Environmentalism and Economic Prosperity: An Update''
(Feb. 16, 1993).
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6. Conclusion
On behalf of Communities for a Better Environment and its 20,000
members, I urge this committee to leave the Act in tact, and ensure
that future generations will enjoy a better environment. Recent
research indicates a startling connection between environmental health
and learning, concluding that children who live in high pollution areas
have statistically lower test scores. Approximately 12 million children
in this country suffer from learning, developmental or behavioral
problems, and the number of learning disabled children enrolled in
special education programs increased nearly 200 percent over the last
20 years. Soaring rates of childhood asthma, especially among inner
city youth, have been a particular concern. The resulting respiratory
problems often diminish learning capacity and achievement.
Increasingly, scientists and regulators alike are linking these adverse
health effects among children to environmental pollution. With the
health of our children at stake, it is clear that we must redouble our
efforts to reduce harmful air pollution, not roll-back important
protections that are critical to achieving healthful air quality.
In particular, CBE recommends the following public policy actions:
1. Toxic Use Reduction: Polluters should be encouraged to reduce
the use of toxic chemicals and to replace such chemicals with non-toxic
alternatives. The best way to reduce the release and disposal of such
chemicals is to prevent their use in the first place.
2. Pollution Prevention: Polluters should be required to prevent
chemicals from entering the environment, rather than focusing resources
on much more expensive efforts to remediate pollution after it has
contaminated soil, air, or water.
3. Precautionary Principle: The precautionary principle common in
the medical field should be applied equally to the environmental field.
Chemicals should be demonstrated to be safe prior to their introduction
into the environment.
______
``The first steps toward accident prevention are identifying the
hazards and assessing the risks. Once information about chemical
hazards in the community is openly shared, industry, government, and
the community can work together toward reducing the risk to public
health and safety.''
``The County recognizes that regulatory requirements alone will not
guarantee public health and safety, and that the public is a key stake
holder in chemical accident prevention, preparedness, and response at
the local level. Preventing accidental releases of regulated substances
is the shared responsibility of industry, government, and the public.
The first steps toward accident prevention are identifying the hazards
and assessing the risks. Once information about chemical hazards in the
community is openly shared, industry, government, and the community can
work together toward reducing the risk to public health and safety.''
``The success of a Safety Program is dependent upon the cooperation
of industrial chemical and oil refining facilities within Contra Costa
County. The public must be assured that measures necessary to prevent
incidents are being implemented, including changes or actions required
by the Department or the Stationary Source that are necessary to comply
with this chapter.'' \1\
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\1\Industrial Safety Ordinance, Ordinance No. 98-48, adopted by
the Contra Costa Board of Supervisors, 1998.
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executive summary
No Accident! presents the results of an analysis of County records
of industrial hazardous materials incidents and accidents. In 1999 and
2000, fires, explosions and toxic releases continued to kill and injure
workers and sicken hundreds of nearby residents. Major accidents
continued at the rate of almost one per month despite various new
agency efforts to prevent chemical spills.
Analysis of the most recent data on file reveals an alarming
failure of industry and government to come to terms with the problems
of industrial accidents. Data maintained by the Contra Costa County
Hazardous Materials Division reveals that:
The County experienced 13 major accidents \2\ in 1999 and
12 major accidents in 2000. Four workers lost their lives during the
period, making it the deadliest 2-year period in County refinery
history.
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\2\This study reviewed official incident report records on file at
the Contra Costa County Hazardous Materials Division. See the
discussion of methodology below.
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Refineries are responsible for the vast majority of major
accidents and serious incidents.
A large percentage of accidents were actually worse than
the facility first reported, which may have prevented appropriate
response and investigation. Some facilities, especially Chevron's
Richmond refinery, failed to notify the County of some accidents until
confronted by offsite complaints.
County staff failed to verify self-reported facility
claims by conducting on-scene investigations 95 percent of the time in
connection with serious incidents and 80 percent of the time in
connection with major accidents.
Many accidents recur at the same ``repeat offender''
processes that are never made fully reliable.
No Accident! concludes with a number of recommendations for action
to address the need for industrial safety, including proposals designed
to:
Fulfill the promise of easy access to information
regarding industrial hazards.
Improve the accuracy of this information.
Focus inquiry on industrial processes most likely to
cause accidents.
Ensure the effective participation in problem solving by
the communities most at risk.
It is no accident that Communities for a Better Environment and the
Contra Costa Building and Construction Trades Council present this
report at the time that the County Board of Supervisors are considering
the effectiveness of the Industrial Safety Ordinance and the need to
increase participation by affected communities. Although the County has
made some progress in taking regulatory initiatives to control
industrial hazards, much remains to be done. The first step is to
understand the scope of the continuing problem.
methodology
Communities for a Better Environment (CBE) and the Contra Costa
Building and Construction Trades Council (CCBCTC) have tracked fires,
explosions and toxic releases at Contra Costa County refineries since
1989. Increasing media coverage has also generated information about
major chemical spills in the area. More recently the Hazardous
Materials division of Contra Costa Health Services has begun to compile
its own data. This report is based on that data.
Definitions
CBE and CCBCTC have used a consistent methodology to analyze data
on accidents in producing reports over the years. \3\ Although Contra
Costa County ordinances have repeatedly changed the definitions of
``major accident'' and ``serious incident,'' CBE and CCBCTC have
consistently analyzed data using the following definitions:
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\3\See Neighborhoods at Risk, A Report on Industrial Accidents in
Contra Costa County: 1989-1996 (July 29, 1996) and Rising Risks to
Refinery Communities, the Troubling Trend of Toxic Spills in Contra
Costa County California 1989-1997 (July 8, 1997).
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Serious Incident--an unplanned event at a facility that uses,
stores or manufactures hazardous materials or waste that causes or has
the potential to cause a significant impact on or offsite. If a serious
incident causes an injury, death or offsite impact, it becomes a
``major accident.''
Major Accident--an incident in which the release of toxic gases,
fire or explosion causes a serious impact to workers, the community, or
the environment. These impacts include death, injury, illness, shelter-
in-place orders (confinement), evacuations, and activation of the
Community Warning System.
By contrast, the current Industrial Safety Ordinance defines
``major accident'' more restrictively to include only those incidents
that result in the release of a Regulated Substance and meet one or
more of the following criteria: (1) result in one or more fatalities;
(2) result in greater than 24 hours of hospital treatment of three or
more persons; (3) cause property damage (on and/or offsite) initially
estimated by the Stationary Source at $500,000 or more; (4) meet the
definition of a Level 3 or Level 2 Incident in the Community Warning
System incident level classification system defined in the September
27, 1997 County guideline for the Community Warning System; or (5)
result in flammable vapor clouds of more than 5,000 pounds. The current
ISO has also eliminated entirely the definition of ``serious
incident.''
Data Compilation
CBE reviewed summary lists issued monthly by the County to identify
possible serious incidents and major accidents. For events that
appeared to meet the definition of serious incident, CBE reviewed the
initial intake form on file at the County as well as subsequent
documentation for that event. Incidents meeting the serious incident
criteria were entered into a data base containing the facility
identification, the date, and a summary description of the incident.
For each incident, other data elements were extracted from available
documentation, including whether action was taken by the County,
whether an on-scene investigation was conducted, whether the incident
was more severe than initially estimated, whether workers were injured,
whether a fire or explosion occurred, whether flaring or a pressure
relief valve was triggered, whether a vapor cloud or smoke was
released, whether a written report was prepared, and whether a root
cause investigation pursuant to the ISO was undertaken.
In some cases, lengthy notes were condensed to a brief description.
In other cases, only brief descriptions of the incident were available,
lacking some essential information. \4\
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\4\See the discussion below of the problems of self-reporting and
the County's failure to investigate incidents.
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Finally, CBE reviewed all serious incidents to determine whether
they met the criteria for a major accident.
Potential For Error
Given the lack of independent monitoring data, the reliance on the
County's current incident reporting program creates the potential for
error in analyses such as this. In cases where data supplied to the
County was flawed or incomplete, the classification of incidents as
major accidents may also introduce a potential for error. Other
potential sources of error include hand written incident forms by
County staff which are illegible in some cases, the large number of
incidents, missing forms in County files at the time of review, missing
or incomplete information, lack of standard terms, and self-reporting
by involved parties.
conclusions
The Rate of Major Accidents Remains Unacceptably High
There were 25 major accidents in Contra Costa County industrial
facilities in 1999 through 2000. This is more than one major accident
every month. In comparison, the previous analysis reported one major
accident every 5 weeks during the period January 1996 to June 1997. \5\
Clearly, major accidents continue at the same unacceptably high rate.
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\5\See Rising Risks to Refinery Communities, the Troubling Trend
of Toxic Spills in Contra Costa County California 1989-1997 (July 8,
1997) p. 1.
Note that the data for the 1999/2000 period confirms the conclusion
in the previous analysis that the rate of reported major accidents has
risen since 1989. In the period from 1989 to June 1997, the reported
major accident rate was one every 2 months. However, in the last 18
months of this period, from January 1996 to June 1997, the reported
major accident rate was one every 5 weeks, leading CBE/CCBCTC to
suspect an increase in the statistic. The data for the last 2 years
showing more than one major accident reported every month confirms this
conclusion.
Concern should be heightened by the fact that the County has
adopted and implemented new programs to reduce these incidents. While
some progress has been made in implementing new safety procedures and
equipment, the fact that significant numbers of incidents continue to
occur indicates that not enough has been done.
Some observers attribute the increase in major accidents to better
reporting by industry. There is no doubt that since 1989 industry has
improved its reporting in response to requirements developed by the
County. The question remains whether the rate is tolerable to
communities and workers.
Refineries Are Responsible for the Vast Majority of Major Accidents and
Serious Incidents
With 23 out of 25 major accidents, refineries were the leading
source of major accidents in 1999 and 2000. This most recent data is
consistent with past studies, which also indicate that refineries are
the leading source of major accidents.
With 7 major accidents at both the Rodeo and Avon Facilities, Tosco
had the poorest record in the County. Chevron had 6 major accidents in
the 2-year period. The Shell refinery in Martinez had 2 major
accidents.
Chevron is not covered by one of the new County programs designed
to reduce industrial accidents, the Industrial Safety Ordinance,
because it is located in the city of Richmond rather than in County
jurisdiction. Richmond has failed to adopt a parallel Industrial Safety
Ordinance, despite the passage of a City Council action and the
participation of Richmond City staff in a parallel environmental review
process with the. County. Because of this lack of action, Chevron
enjoys less safety oversight than any facility in the County. It
appears that workers and local residents may have paid a price for this
lack of oversight.
In addition to major accidents, serious incidents at Contra Costa
industrial facilities continue to plague the region. Review of County
Hazardous Materials Division files shows that most of these incidents
occur at oil refineries. Chevron, Tosco Rodeo, the Avon refinery
(Tosco/Ultramar), and Shell were responsible for 202 of the total 216
serious incidents in 1999 and 2000. The fact that refineries in the
County are responsible for 94 percent of serious incidents is
consistent with past analyses.
It may well be that refining industry pressures to exceed past
performance and to increase competitive advantages have overwhelmed
remedial efforts. Many facilities may have engaged in cost cutting
measures, increased production and delayed maintenance, which in turn
may have out-paced any new safety improvements. During this period,
refineries have been bought, sold, and affected by mergers. These
industry efforts together with other market forces have led most oil
companies to post extremely high profits in 1999 and 2000.
Major Accidents Continue to Kill and Injure Workers
Worker deaths and injuries on the job continue to occur at alarming
rates at Contra Costa County refineries. In 1999 and 2000, at least 16
injuries and 4 deaths were reported to the Contra Costa County
Hazardous Materials Division. In fact more injuries may have occurred
because workplace injuries are not always reported to the County.
Worker injuries are usually reported to CAL OS HA, which is responsible
for worker health and safety issues.
When four workers were killed and one seriously injured while
working on an operating unit at Tosco Avon, the accident became the
County's worst. In response, the public pressured County Supervisors to
request closure of the facility so an independent safety review could
be conducted. Tosco reluctantly accepted the recommendation of a
committee of various stakeholders that it submit to a broad review of
the facility's safety culture. The review by A.D. Little revealed
serious flaws in Tosco management's approach to safety at the facility.
Other plants have not been subject to this kind of review.
Facilities Underestimate Incident Severity
The survey of reports made to the County of serious incidents at
industrial facilities indicates that in at least 29 percent of serious
incidents the facility acknowledged that it had initially
underestimated the problem. Because many of the County incident forms
did not contain this information, it was unknown in over two-thirds of
the cases whether industry had accurately reported incident
information. Thus the underreporting problem may be even more serious.
In several cases in 1999 and 2000, Chevron did not report serious
incidents until neighbors or the Sheriff alerted the County of a
problem. On one incident report, a frustrated county staff member wrote
that Chevron was not following the notification process in a proper and
legal manner.
In many cases, a refinery reported a process upset that was
expected to have no offsite impact. However, the facility was forced to
report later that it had underestimated the problem. In some cases,
these incidents became major accidents.
The County Usually Fails To Conduct On-Site Investigations To Verify
Reports
In only 5 percent of serious incidents reported by industrial
facilities did the County Hazardous Materials staff verify industry
claims by going to the scene. In 95 percent of serious incidents,
County staff relied on the facility's self-reported information to make
decisions. This failure to verify incident reports may encourage the
tendency noted above for facilities to underestimate the severity of
incidents. Available data indicates that initial reports underestimated
the severity of problems at least 29 percent of the time. The actual
statistic may be far greater due to lack of on-scene investigation.
Even in connection with major accidents, the County conducted an
on-scene investigation only 20 percent of the time.
The combination of industry's underestimation of the seriousness of
incidents and government's failure to investigate impedes a full
understanding of the nature, severity, and causes of accidents and
inhibits the development of effective long-term solutions. Without
adequate information about the problems, responses will likely be
inadequate and workers and communities will remain threatened. . The
fact that workers continue to be injured and killed as a result of
chemical accidents suggests that more rigorous investigation techniques
are justified.
Investigation of the scene of an incident and verification of
claims by industry officials are standard techniques that are key to
compliance and enforcement. Rather than utilizing these techniques, the
County has continued to rely on self-reporting by facilities that may
be of questionable accuracy.
In order to encourage accurate reporting and response to the
serious problem of chemical accidents in Contra Costa County, CBE and
CCBCTC continue to urge that onsite investigations of potentially
serious incidents be conducted by County staff.
Recurring Incidents Demonstrate a Failure To Remediate Problems
Many of the serious incidents and major accidents at Contra Costa
County refineries are due to recurring problems at certain process
units that remain unresolved and result in continuing accidents. An
examination of County records for 1999 and 2000 shows that, over and
over again, incidents occurred in the same problem areas, even after
the facility claimed to have solved the problem and resumed operations.
Chevron's refinery was the worst facility for recurring problems in
the County with a total of 33 incidents involving the same 4 units.
Fourteen serious incidents occurred at Chevron's FCC unit alone. Twelve
serious incidents occurred at a related unit, the Isomax. Both the
Isomax and the FCC units had experienced major accidents in past years.
These units were involved in Chevron's controversial reformulated fuels
project, which was challenged by community and environmental groups as
increasing pollution and accident risks from increased intensive
refining methods. Since Richmond has failed to adopt the County's
Industrial Safety Ordinance approach, there is no adequate County
oversight or public opportunity to examine and find root cause
solutions. Instead Chevron controls self-investigations and solutions,
which are apparently ineffective.
Tosco's Rodeo refinery closely followed as the County's second
worst facility for recurring problem units with a total of 22 incidents
involving five units. Recurring problems caused serious incidents in
the refinery's Unicracker unit, gas compressors, Catacarb, sulfur
plant, and Coker unit, again and again. Several of these units have had
major accidents in past years.
The Tosco Rodeo Catacarb problems are particularly troubling due to
the 1994 major accident that sickened hundreds of workers and thousands
of neighbors. It appears that problems in the process have not been
fully resolved by Tosco or the County. In 1994, a 16 day leak was
blamed on delayed maintenance as officials sought to exceed past
production records. Whether delays in maintenance continue to be a
problem should be carefully investigated. Another factor in the
accident was the County's failure to conduct an on-scene investigation
to verify management's claims that emissions were not traveling
offsite.
Tosco Rodeo is also experiencing continuing problems at its gas
compressors which apparently cannot accommodate various unit upsets. As
a result, toxic gases have had to be released through flares and relief
devices into the community and the environment. Again, gas compressor
failures had been previously identified as a problem in a 1995 audit.
Apparently company and County efforts were ineffective in preventing
continuing problems. Likewise, problems at the facility's sulfur plant
and at an area known as the sulfur pit are recurring. This area has
experienced a number of fires over the years, which is of particular
concern.
One apparent success is the replacement of the old ground flare
adjacent to Hillcrest school, which caused major accidents in 1999 and
in previous years. However, this problem was identified in 1995 and
thus took at least 4 years to solve. Is this the speed at which we can
expect other serious problems to be solved?
The Avon refinery, operated for most of the period by Tosco and
recently taken over by Ultramar, was the fourth worst for repeat
problems. Most of the problems resulted from the practice of attempting
to repair units and problems while operations continued rather than
shutting down the facility first. This troubling trend continued
despite the tragic incident that killed four workers and seriously
injured another while the workers attempted repair on an operating
unit.
recommendations
Based on review and analysis of Contra Costa County records of
information reported by industry about incidents and accidents in the
region, CBE and CCBCTC make the following recommendations to the County
and other agencies:
1. Make data on incidents at Contra Costa County easily available
in a timely fashion to fenceline neighbors and the public via the
Internet and other effective methods.
2. Require County staff to compile and analyze incident data on a
monthly basis and make it readily available to the public. Analysis
should include the categories included in this study at a minimum. The
County's Hazardous Materials Ombudsperson is the logical independent
party to conduct this review and analysis.
3. Require County Hazardous Materials staff to conduct on-scene
investigations during all potentially serious incidents in order to
verify facility claims and to gauge appropriate response. In addition,
County staff should be required to conduct on-scene investigations of
incidents on a regular basis by random selection to ensure accurate
reporting by facilities.
4. Target recurring problems with repeat offender units and
processes at Contra Costa County facilities by County officials for
immediate action under the ISO and other appropriate regulations.
Surprise inspections of such repeat offenders should be conducted
immediately.
5. Mandate investigations by the California Air Resources Board
(CARB) that explore linkages between its reformulated fuels
requirements and increased and repeat accidents and harmful emissions
at Bay Area refineries. Existing problems with the production of
reformulated fuels must be addressed immediately in a comprehensive
fashion by all agencies.
6. Require facilities that violate the notification policy, either
by delay or underestimation of the impact, to install state-of-the-art
fence line monitoring systems, such as the one in use at Tosco Rodeo.
Continued failure to report incidents in a timely and accurate fashion
must be met with requirements aimed at providing the County with
independent monitoring and with stiff penalties for the violators.
7. Implement basic video monitoring of facility flares and sites to
enable officials to verify immediately the extent of possible offsite
impact during incidents. Kentucky, for example, has operated such a
system for years. Facilities should bear the cost of such a system.
8. Amend the County's Industrial Safety Ordinance to (a) expand the
definition of a ``major accident'' to ensure more frequent
investigations and root cause analyses in order to prevent more
accidents, (b) give the Board of Supervisors the power to require safer
systems rejected by the facility for cost or other inappropriate
reasons, and (c) require adequate training of contract workers in
accordance with the California State-certified apprenticeship training
programs.
9. Enact a parallel Industrial Safety Ordinance in the city of
Richmond in 2001 to ensure that facilities operate under the same
safety programs as their competitors in the County.
10. Implement outreach programs to increase the meaningful
participation of Environmental Justice communities in safety programs.
Such programs should rely on the proven success of past efforts led by
community-based organizations.
11. Investigate the implementation of the ISO and other programs
designed to ensure the safety of industrial neighborhoods to determine
whether it has violated the County's promise of equal protection under
the new Environmental Justice Policy. The Board of Supervisors should
lead this investigation.
__________
Statement of Taylor Bowlden, American Highway Users Alliance
Mr. Chairman and members of the subcommittee, thank you for the
invitation to appear before you today. I am Taylor Bowlden, vice
president of the American Highway Users Alliance. The Highway Users
represents both motorists and a broad cross-section of businesses that
depend on safe and efficient highways to transport their families,
customers, employees, and products. Our members pay the bulk of the
taxes that finance the Federal highway program, and they want those
taxes used to make highway travel safer and less congested.
We are pleased to have this opportunity to discuss with the
subcommittee the important issue of motor fuel consumption and demand
in the development of our nation's energy policy. Today, I will address
three specific issues in the purview of the Environment and Public
Works Committee that should be considered in Congress' energy policy
debates:
The importance of easing traffic congestion in order to
reduce fuel consumption;
The need to streamline the environmental review process
to expedite congestion relief projects; and
The adverse impact on fuel prices and highway
improvements associated with legislative proposals to mandate ethanol
use in motor fuels.
Traffic Congestion and Fuel Consumption
Most Americans observe it in their daily commutes, and more
objective data verify that traffic congestion has grown worse in cities
across the country during the past decade. Moreover, economic and
demographic forecasts suggest that this trend will continue for the
foreseeable future, although most experts agree that the annual
increase in highway travel demand should begin to slow relative to the
dramatic jumps reported in recent years.
A few statistics will illustrate the problem succinctly. Since
1970, America's population has grown by 32 percent, but the number of
licensed drivers has doubled that pace, growing by 64 percent. The
number of vehicles has increased by 90 percent, and the miles we drive
those vehicles has skyrocketed by 132 percent! Yet, during the same
period of time, road mileage has increased by a mere 6 percent.
The statistics only make clear why congestion has grown. The
adverse economic and social consequences are evident in the daily
experience of ordinary commuters and commercial shippers and carriers
across the country. Alan Pisarski, an internationally known
transportation consultant and author of the definitive study on
commuting (called ``Commuting in America''), made the following
observations at a recent congressional hearing:
When workers hit the road at 5 am and then sleep in their
cars in parking lots at the office or at transit stations, the system
is failing;
When commuter routes are congested in the reverse
direction--outbound in the morning; inbound in the evening--the system
is failing;--When peak period spreads over so many hours that truckers
cannot afford to get off the road and wait out the rush hour, the
system is failing;--When small incidents cause monumental tie-ups or a
fender-bender becomes a 100 car pile-up, the system is failing.
And the system is failing in many parts of the country. The Texas
Transportation Institute (TTI) estimates that in 1999 travel delay cost
more than $75 billion in the 68 cities included in TTI's annual report
and wasted approximately 6.6 billion gallons of fuel.
Unless Congress and the states do something dramatic to alleviate
congestion, the problems associated with it, including significant
additional fuel consumption, will only get worse. A recent industry
study shows that by the end of this decade, with only moderate economic
growth, the number of Class 8 trucks is expected to increase by over 35
percent, and the number of Class 3, 4, and 5 trucks will double. Why?
Lance Grenzeback, senior vice president at Cambridge Systematics, a
highly respected transportation research firm, told a congressional
panel recently, AWe are seeing a customer-driven shift toward
customized, mass-market products and services. This has expanded the
demand for highly tailored and reliable freight services. This trend is
accelerating with the adoption of e-commerce and e-business.
In other words, we're moving larger numbers of smaller shipments,
requiring more trucks.
Eliminating Congestion Chokepoints
What can be done to ease congestion? There are many potential
solutions, depending on circumstances in a particular area. There is no
doubt, however, that a program targeted at eliminating the nation's
worst traffic chokepoints would produce significant fuel and time
savings in addition to other social and environmental benefits.
Cambridge Systematics found that improving traffic flow at our
nation's 167 worst bottlenecks (which comprise only a few hundred of
the nearly four million miles of U.S. roads) would reduce gasoline and
diesel consumption by 19,883,611,000 gallons over the next 20 years.
These findings were contained in a study prepared in 1999 for The
Highway Users, entitled Unclogging America's Arteries: Prescriptions
for Healthier Highways.
A followup study we commissioned--Saving Time, Saving Money--
estimates the value of these fuel savings at $28 billion over the next
20 years, but again that number only considers improvements to the
worst bottlenecks . . . system-wide road investments would increase
those fuel-saving benefits manifold!
The fuel saving benefits associated with bottleneck relief are just
the tip of the iceberg. In addition, Unclogging found that fixing the
167 traffic bottlenecks nationwide will, over the 20-year life of the
improvements:
Prevent almost 290,000 crashes, including nearly 1,150
fatalities and 141,000 injuries;
Nearly halve pollution at the bottlenecks, reducing
carbon monoxide by 45 percent and smog-causing volatile organic
compounds by 44 percent;
Slash emissions of carbon dioxide, a greenhouse gas, by
71 percent at those sites; and
Reduce truck delivery and motorist delays by an average
of 19 minutes per trip--nearly 40 minutes a day for commuters who must
negotiate a bottleneck in both morning and evening rush hours.
The overall economic value of these beneficial by-products of
congestion relief is astonishing. According to Saving Time, Saving
Money, businesses, commuters, and other motorists nationwide would
enjoy more than $336 billion in economic improvements as a direct
result of fixing these bottlenecks. The average commuter traveling
through one of the bottlenecks twice each workday could expect to save
$345 each year in time and fuel alone if the improvements were made.
Copies of both of these important studies can be accessed at our web-
site at www.highways.org.
It is important to note that alleviating congestion at a traffic
chokepoint does not necessarily require additional road capacity at the
particular site. Preliminary analysis of a proposed new highway
connecting Rockville, Maryland with Fairfax, Virginia, for instance,
indicates that the new route would carry 120,000 vehicles per day. That
project would significantly reduce traffic volumes at the interchange
of I-270 and the Capital Beltway, the fifth worst bottleneck in the
country, because many commuters would no longer have to use the Beltway
to travel from their home in one Washington suburb to their work in
another.
Other means of reducing congestion at a bottleneck may include new
information technologies to help commuters choose other routes during
heavy congestion, corridor access for bus or rail transit, flexible
work hours at major employment centers nearby, and of course,
additional lanes at the bottleneck. I11While a balanced approach
incorporating all of these options may work best in many cases, it is
also important to note that investments in transportation alternatives
to the exclusion of additional highway capacity are unlikely to be
successful. While noting that transit improvements, better highway
operations, adjusted work hours, telecommuting and other efficiency
options are vital components of an overall solution,
TTI's Dr. Timothy Lomax testified recently that these same options
``do not seem to offer the promise of large increases in person
carrying capacity for the current system.''
Dr. Anthony Downs, senior fellow at the Brookings Institute,
observed in the same congressional hearing that transit carried 3.5
percent of work trips in 1995, compared to 90.7 percent in private
vehicles. ``Even if the total percentage of persons commuting by public
transit tripled,'' Downs said, ``that would reduce the percentage using
private vehicles by only 11.6 percent. Any reduction in congestion
achieved through increased transit usage would be more than overcome by
sheer population growth.''
While we would strongly encourage Congress to develop a program
targeted at eliminating bottlenecks in order to reduce congestion and
conserve fuel, we recognize that some will deride such a program as
folly because additional highway capacity will only lead to more travel
and renewed congestion. Independent studies have differed widely on the
question of whether and to what extent travel is ``induced'' by the
addition of road capacity.
Without entering that debate here, I would only repeat an
observation made by Mr. Pisarski, the transportation consultant whose
congressional testimony I cited previously:
``Most trips we make have economic transactions at their ends, and if
not, they have social interactions of great value to those making
the trips. Given that, ``induced travel,'' which seems to be so
reviled today, seems like a very attractive concept to me. We
should celebrate it, not condemn it.''
Finally, I would note that eliminating traffic bottlenecks to
reduce fuel consumption is a win-win approach to energy policy. It is a
policy aimed at accommodating the public's need and desire for greater
mobility while, simultaneously, reducing the amount of fuel needed to
meet the demand for transportation. Many other energy conservation
proposals, including the proposed increase in Corporate Average Fuel
Economy standards, are aimed at changing rather than accommodating
consumer choices, an approach in which the odds are heavily weighted
against success.
Streamlining the Environmental Review Process
Should Congress embrace the idea of funding a program targeted at
eliminating traffic bottlenecks, its success will depend in large
measure on streamlining the process for reviewing the environmental
impact of major road projects. Today, it takes approximately 12 years
for major highway construction projects to wend their way through the
stages of planning, design, environmental review, and right-of-way
acquisition. That's before a single spade of dirt can be turned!
Typically, one to 5 years of that time is spent completing the
necessary environmental reviews, often to the detriment of the
environment, public safety, and mobility.
Examples abound of proposed projects delayed by a cumbersome and
costly review process that 60 percent of Americans in a recent
nationwide poll said takes too long. Here in Washington, for instance,
officials have long known that the 38-year-old Woodrow Wilson Bridge,
bearing almost 200,000 vehicles a day on Interstate-95 crossing the
Potomac River between Maryland and Virginia, must be replaced because
of structural problems and inadequate capacity. Yet, it took 11 years
from the time the first bridge improvement study was initiated until
construction finally began in October 2000. Even as construction has
finally begun, litigation against the project continues. Under the
current timetable, the first span of a new bridge will open to traffic
in autumn of 2004, approximately the same time when engineers have
projected the old bridge will have to be closed to truck traffic
because of structural weaknesses.
Similarly, a bridge over the Ohio River to connect the Indiana and
Kentucky portions of I-265 around Louisville has been in the planning
and review process for 15 years. The ongoing environmental review,
public hearings, and litigation make it likely that construction on the
bridge won't begin until 2003 at the earliest. Meantime, Louisville
motorists waste time sitting in traffic or ``taking the long way'' to
get around town, business development is slowed because of this
critical missing link in the area's transportation network, and local
taxpayers foot the bill for even more environmental studies and
litigation.
The fact is any transportation project faces a Federal bureaucratic
and legal obstacle course. There are at least 65 Federal laws,
regulations, or executive orders that directly address the
environmental effect of building roads. At least six cabinet
departments and three independent or executive agencies have
responsibility for administering those various provisions. Due to the
proliferation of reporting requirements and the layers of bureaucratic
review, the environment itself often takes a back seat to the
cumbersome process designed to protect it.
In TEA-21, Congress made a serious attempt to deal with this
problem by directing the U.S. Department of Transportation (DOT) to
work with the Environmental Protection Agency and Federal resource
agencies to streamline the review process. Based on House and Senate
oversight hearings held last year, it seems fair to say that the
product of DOT's work to date has not met the expectations of those
Members of Congress who drafted the statutory provision. We still do
not have a review process that ensures environmental concerns will be
raised early and that an appropriate timeframe for action can be set
and enforced.
Given the significant time and expense involved in the current
environmental review process, we urge Congress to renew its effort at
reform. Specifically, we encourage you to consider giving States the
opportunity to play a greater role in interacting with Federal resource
agencies and developing the necessary environmental assessments or
impact statements. In addition, we believe Congress should designate
transportation officials as the final arbiter of the ``transportation
purpose and need'' of a proposed project and give those officials
authority to set appropriate deadlines for comment by Federal resource
agencies. We believe these reforms would expedite the review process
while fully protecting the environmental resources that may be affected
by a proposed project.
It is worth noting that the economic benefits attributable to
improvements at all 167 of the nation's worst bottlenecks would be
increased by $30.2 billion if the time for completing the projects
could be reduced by as little as 3 years, according to Saving Time,
Saving Money. Since most of those improvements would require the
preparation of an environmental impact statement, a successful program
to expedite the environmental review could, in fact, reduce the typical
review time from the current 5 years down to 2 years or possibly less.
In so doing, Congress would not only have improved mobility and reduced
fuel consumption but also reduced tailpipe emissions from idling cars
and made highway travel significantly safer.
Ethanol's Impact on Highway Improvements
Mr. Chairman, if Congress focuses on eliminating bottlenecks to
reduce congestion and save fuel, and even if the environmental review
process is streamlined in order to expedite transportation
improvements, those projects will still cost money. No one knows better
than the members of this committee that the Federal funding for such
improvements comes solely from taxes paid by motorists and deposited in
the Highway Trust Fund.
Today, gasoline is taxed at 18.4 cents per gallon and diesel at
24.4 cents. Gasoline blended with ethanol, however, is taxed at a lower
rate, resulting in a revenue loss to the trust fund and a corresponding
decrease in Federal funds distributed to the States for highway
improvements.
Last year, this committee considered and approved legislation, S.
2962, that would have phased out the use of methyl tertiary butyl ether
(MTBE) in gasoline, simultaneously establishing a nationwide renewable/
alternative fuels program, essentially mandating a large, new market
for ethanol-blended gasoline. Given the dramatic adverse effect that
such legislation would have on funds available for road safety and
congestion relief projects, The Highway Users wrote to all Senators
expressing our strong opposition to the bill.
We understand that similar legislation may be introduced in this
Congress, so I am taking this opportunity to reiterate a couple of
points from our analysis of last year's bill. In addition to the
revenue loss resulting from the lower tax rate on ethanol, a portion of
the tax that is imposed on ethanol-blended fuel is deposited in the
General Fund rather than the Highway Trust Fund. Last year, the General
Fund diversion combined with the tax subsidy cost the trust fund $1.224
billion in lost revenues. If S. 2962 had been enacted, the mandated
ethanol market would have substantially increased the sale of ethanol-
blended fuel. By 2007, when the current ethanol tax subsidy expires, we
estimate the trust fund's total subsidy to ethanol would have been
$2.465 billion annually.
With the highway funding guarantees of TEA-21, lost tax revenues
attributable to ethanol-blended fuel will inevitably reduce the amount
of highway funds distributed annually to the States. The loss of
highway funding means less money will be available for projects to
reduce congestion and conserve fuel.
I want to commend you, Mr. Chairman, for taking the lead last year
in addressing part of this problem. In a colloquy with other members of
the committee, you suggested that the portion of the ethanol tax that
is currently deposited in the General Fund should be transferred to the
Highway Trust Fund, and other members agreed to support such an effort.
We strongly encourage you to pursue this course at the appropriate
time, and we look forward to working with you to accomplish that goal.
I would note, however, that even if all the tax currently imposed on
ethanol-blended fuel is deposited in the Highway Trust Fund, the trust
fund will still be losing as much as $2 billion per year if Congress
mandates a national market for ethanol while maintaining the trust fund
subsidy.
Mr. Chairman, these issues are of great importance to taxpaying
motorists across the country. I appreciate this opportunity to testify,
and I will be happy to answer any questions that you or other members
of the subcommittee may have.
__________
Statement of Thomas L. Robinson, Chief Executive Officer, Robinson Oil
Corporation, on behalf of the National Association of Convenience
Stores and the Society of Independent Gasoline Marketers of America
My name is Tom Robinson. I am Chief Executive Officer of Robinson
Oil Corporation of San Jose, California. Our company owns and operates
28 ``Rotten Robbie'' retail gasoline outlets located in the San
Francisco Bay Area of California.
I submit this statement to this subcommittee today as a
representative of the National Association of Convenience Stores
(``NACS'') and the Society of Independent Gasoline Marketers of America
(``SIGMA''). NACS represents an industry of more than 120,000 retail
outlets, 75 percent of which sell motor fuels. In 1999, convenience
stores sold more than 117 billion gallons of motor fuels which accounts
for more than 60 percent of American consumption.
SIGMA is an association of approximately 260 motor fuels
marketers operating in all 50 States. Together, SIGMA members supply
over 28,000 motor fuel outlets and sell over 48 billion gallons of
gasoline and diesel fuel annually--or approximately 30 percent of all
motor fuels sold in the nation last year.
Collectively, NACS and SIGMA members sell more than 75 percent of
the gasoline and diesel fuel purchased by American consumers each year.
I appreciate the opportunity to submit this statement on the
interaction between environmental regulations and the nation's energy
policy. The companies I represent are different from all of the
witnesses who will give testimony at today's hearing. For all practical
purposes, we are a surrogate for the nation's gasoline and diesel fuel
consumers. Our primary mission is to secure adequate supplies of
gasoline to sell to consumers at a competitive price. My company is not
involved in the exploration or production of oil, nor does it refine
oil. If companies like mine, independent marketers of motor fuels, are
unable to secure this adequate supply, then we cease to be a
competitive force in the marketplace. If independent marketers cease to
be an effective competitive force in the marketplace, then consumers
lose as retail gasoline and diesel fuel prices rise in response to the
supply shortage.
NACS and SIGMA have two primary messages for this subcommittee
today. First, if we, collectively, do not address aggressively the
motor fuels supply crisis that is facing this nation in the near
future, then the price spikes we have witnessed, for the past decade in
California and for the past 2 years in other portions of the nation, in
gasoline, diesel fuel, and other petroleum products will become the
norm rather than the exception. Ultimately, if we fail to act, it will
be consumers who will pay for this inaction--through higher retail
motor fuels prices at the pump.
Second, the debate over the future of our nation's energy policy
need not be confrontational. Our nation can have both a clean
environment and affordable, plentiful supplies of gasoline and diesel
fuel. However, in order to achieve these twin goals, all sides to the
current debate--industry, government, consumers, and
environmentalists--must approach this debate in a spirit of
cooperation, not confrontation.
These are not new points for either the associations I represent or
for me. As a California marketer I have personally witnessed these
events happening over and over again. I personally have had the
opportunity to present these points to Congress in the past.
Unfortunately, our warnings have been ignored. However, it is my
personal hope that the renewed attention to the need for a national
energy policy will produce the results NACS and SIGMA have been calling
for over the years.
The challenge facing this subcommittee and your colleagues in
Congress today is straightforward. We must preserve current and future
improvements in air quality while at the same time maintaining and
expanding supplies of motor fuels. Otherwise, our nation's consumers
will pay the price when supply shortages occur and retail prices at the
pump spike, as they have done repeatedly over the past 3 years in
several areas of the nation and over the past decade in California.
These price spikes will not be limited to the additional expense of
producing the new cleaner fuels. Rather, they will be multiples of this
amount as the market drives prices far above the additional cost of
manufacture in times of short supply.
I firmly believe that our nation is facing a serious energy crisis
in the motor fuels refining and marketing industry. Dozens of petroleum
refineries have closed over the past two decades and new environmental
protection mandates, such as low sulfur gasoline and diesel fuel, are
likely to exacerbate this trend. Operating inventories of diesel fuel
and gasoline are at historically low levels and the nation's refineries
are operating at or near maximum capacity. Gasoline and diesel fuel
demand is increasing by between 1 and 2 percent each year, and yet the
number of refineries operating to meet this ever increasing demand is
decreasing. In 1990, there were essentially six different types of
gasoline being sold nationwide. Now, there are over 25 different
gasoline formulations, all being transported and distributed through
the nation's motor fuel infrastructure. The pressure of overlapping
Federal, State and local regulations has crippled what was previously
one of the most efficient commodity distribution systems in the world--
the United States' fungible grade motor fuels distribution system.
As the saying goes, there is no free lunch. It should not surprise
policymakers that after tens of billions of dollars in environmental
compliance costs borne by refiners and marketers, the complete
fragmentation of the motor fuels distribution system, and the
politically motivated diverse gasoline formulations adopted by various
States, there is a price to pay--a price that ultimately must be paid
by consumers of gasoline and diesel fuel. As long as the motor fuels
refining and distribution system works perfectly, supply and demand
stay roughly in balance and retail prices remain relatively stable.
However, if a pipeline or refinery goes down, overseas crude oil
production is reduced, the weather disrupts smooth product deliveries,
or a new regulatory curve ball is thrown at the motor fuels refining
and marketing industries, we do not have the flexibility to react and
counterbalance these forces.
If there is one point that I really want to emphasize it is the
point of ``no free lunch.'' Our country can have clean and
environmentally friendly fuels and it can have plentiful supplies--
there will be a cost and it will be borne by the consumer (that is a
given)--our job is to make the lunch, if not free, at least a fair
bargain.
Californians have become somewhat accustomed to motor fuels price
volatility over the past 5 years because California is in fact the
laboratory for the fuels programs that EPA currently is forcing on the
rest of the country. When a refinery in California goes down, or a
pipeline breaks, the impact on prices is almost immediate. In
California, gasoline prices can increase by 40 cents per gallon within
2 or 3 days. When prices get high enough to attract supply from other
markets, then eventually the supply shortage is alleviated and prices
start to fall.
This is the reason I am submitting this statement today. The motor
fuels supply problems we have witnessed in California over the past
decade are now being visited on the rest of the nation. If we do not
act, independent motor fuels marketers (who I am very concerned about),
and gasoline consumers (who we all should be very concerned about),
will suffer in the near future.
The public policy solution to the current motor fuels supply crisis
will not be simple, but it must be addressed. NACS and SIGMA posit that
the solution is not the rollback of environmental protections. This
solution is a non-starter and should be discarded. Alternatively, NACS
and SIGMA encourage Congress to consider an effective plan to assist
our nation's domestic refining industry to meet the challenges posed by
ever more stringent environmental mandates and restore fungibility to
the nation's distribution system. This will increase gasoline and
diesel fuel supplies and keep retail prices down.
We must collectively arrive at a public policy that assures that
our nation's refineries, both large and small, stay in business, expand
to meet increases in demand, and produce clean, affordable motor fuels.
But this policy cannot be achieved without enlightened government
policies and programs. The capital expenditures that refineries must
make over the next 6 years in order to meet new environmental mandates
are huge. Many refineries, particularly small, regional refineries,
will be unable to justify those expenditures and will cease operation--
further straining motor fuels supplies. Already, this year, Premcor
announced that it would close its Blue Island refinery rather than
undertake the upgrades necessary to make low sulfur gasoline and diesel
fuel. Other refineries, owned by both large and small companies, will
follow suit in the next few years.
NACS and SIGMA urge Congress to assist these refineries in making
these upgrades. This assistance will be particularly important to
small-and medium-size `` regional'' refineries because the
environmental upgrade costs fall more heavily on these smaller
refineries because they do not enjoy the economies of scale that some
larger refineries possess to make these upgrades. In many cases, these
smaller refineries represent the `` marginal'' gallon of gasoline and
diesel fuel in many marketplaces--the gallon that is the difference
between adequate supplies and supply shortages.
Motor fuels marketers and refiners are not always on good
terms. We compete daily in the marketplace for customers and market
share. So it may seem odd to have motor fuels marketers recommend to
Congress that assistance must be given to our nation's domestic
refining industry. However, without adequate and diverse sources of
gasoline and diesel fuel supply, independent marketers cannot exist.
Thus, the solution we are proposing to Congress is the only way our
segment of the marketing industry can survive and can continue to
provide consumers--your constituents--with the most affordable, clean
gasoline and diesel fuel in the world.
NACS and SIGMA do not have a specific legislative proposal to put
forward at this time to put our joint recommendation into operation.
Instead, we offer the following principles which we are convinced must
be a part of any legislative initiative: (1) greater fungibility in
motor fuels and a stop to the balkanization of our nation's gasoline
and diesel fuel markets; (2) fuel requirements that recognize the
limitations and strengths of the motor fuel distribution system in the
United States; (3) reasonable implementation plans for new
environmental initiatives; (4) fuels programs that set performance
goals, rather than specific formulas; and (5) while we are not
suggesting the government bail out refineries which are not
economically viable, we believe the economic viability of a refinery
should not be determined by the timing of the implementation of a new
environmental regulation. If such regulations render a refinery non-
viable, then adjustments to that regulation should be considered.
We look forward to working with this subcommittee and others in
Congress to explore legislative options in the months ahead. We offer
our assistance to this subcommittee in this exploration.
The debate over our nation's energy policy is just starting. But
the crisis has been on the horizon for some time. We can either discuss
potential solutions collectively now, or we can wait until the next
price spike, and the outraged response of consumers. We encourage all
parties to this debate to adopt fresh approaches to the problems our
nation is facing. Both the environment and our nation's motor fuel
consumers can be the winners in this debate, but only if all sides
agree with the premise that environmental protection and affordable
energy are not inherently contradictory goals. NACS and SIGMA assert
that these goals need not be irreconcilable.
Thank you for permitting me to submit this statement.
__________
Statement of the National Association of Manufacturers
An adequate and secure energy supply at globally competitive prices
is necessary for the nation's economic growth. The NAM--and its more
than 14.000 member companies and associations, including 10,000 small
and medium manufacturers--supports the development of markets and
policies that provide adequate, reliable and competitively priced
energy resources with a minimum of government intervention. The NAM
promotes an economically balanced and varied mix of energy sources'
consistent with prudent environmental policies. The NAM is very
concerned that many current Federal policies are working at odds with
the fundamental need to maintain adequate future energy supplies for
the economy and the welfare of the American people.
The top priority of the NAM for the past decade has been to
advocate a pro-growth, pro-manufacturing and pro-worker policy agenda.
Durable economic growth is the only guarantor of rising living
standards for Americans. The NAM has long recognized that a skilled
work force, high technology and innovation are important underpinnings
of prosperity--but so, too, are adequate energy supplies.
Overall, U.S. manufacturers continue to strive for improved
efficiency in the competitive world marketplace, including increasingly
efficient uses of energy. For example, although manufacturing output
has increased by 41 percent since 1990, industrial electricity
consumption has increased by only 11 percent. (Overall U.S. electricity
use has increased 22 percent during the same period). A recent NAM poll
of its members revealed that, over the past 5 years alone, 85 percent
of U.S. manufacturers have upgraded and improved the energy efficiency
of their U.S.-based plants and offices.
Despite continuing efforts to increase energy efficiency,
increasing the supply of traditional energy sources and developing
alternative energy sources remain critical for sustained economic
growth. [See Appendix 1: U.S. Energy Profile). Unfortunately,
harbingers of energy supply problems are increasingly evident in the
United States. Last summer, electricity supply shortages occurred in
the Midwest and Northeast. This summer, California has suffered power
interruptions and the first-ever rotating blackout in the San Francisco
area. One step that must be taken to address the uncertainties
accompanying a patchwork of State restructuring laws regarding electric
utility regulation is passage of Federal legislation. The NAM supports
Federal legislation that would facilitate wholesale and retail
competition and strengthen reliability and efficiency of supply as soon
as possible.
However, the energy-policy warning signs are not just flashing
because of regional electricity disruptions. Also this year, the U.S.
has already experienced tight supplies on natural gas and
transportation fuels. The Department of Energy has just issued a
warning of higher natural gas and potentially higher heating oil prices
this coming winter due to insufficient supplies. The warning signs are
here that the need for adequate energy supplies has been neglected for
too long.
The current Administration has created an unbalanced national
energy policy by focusing on energy efficiency, natural gas and non-
traditional energy sources. while undermining the use of other energy
sources. A policy that is narrowly focused on certain fuels to the
exclusion of others, such as by promoting switching from coal to
natural gas for electricity generation, is a recipe for disaster.
Historically, the Federal Government has caused enormous economic waste
when it tries to pick ``winners and losers'' in the energy marketplace.
It has also caused waste when its energy policies are not coordinated
with other policy objectives or considered in the context of economic
growth.
Of particular concern for the NAM is the apparent policy disconnect
between favoring natural gas use and discouraging natural gas
production. The National Petroleum Council (NPC), the Energy
Information Administration and others are projecting dramatic increases
in natural gas use in the next 10-20 years--especially in electricity
generation. However, the NPC warns that not enough natural gas supplies
are being developed to meet the NPC's estimated 7 Tcf (34 percent)
increase in natural gas use over the next decade, which is more than
twice the percentage growth in gas use from the 1980's to 1998. The NPC
identifies as a critical barrier to meeting future demand projections
for natural gas the fact that access to over 200 Tcf of natural gas
reserves is being restricted on multiple-use Federal lands and the OCS.
Currently, natural gas and oil exploration and production are off
limits or significantly restricted in 40 percent of the Rocky Mountain
region and in the OCS off of the entire East Coast, the entire West
Coast and more than 50 percent of the Eastern Gulf of Mexico. Access to
new coal deposits is also being systematically denied. (See Appendix 2.
Administration Restrictions On Resource Access.)
Denial of access to resources on multiple-use Federal lands is not
the only policy of this Administration that discourages the use of
traditional fuels. Since first entering office in 1993, this
Administration has assaulted virtually every domestic energy source
(except ``non-hydro renewables,'' which account for only about 2
percent of total electricity generated)--particularly coal use. After
failing in its attempt to secure a Btu tax on fossil fuels, mandated
centralized inspections for automobiles and forced van pooling, the
Administration focused its efforts on more indirect means by denying
access to fossil resources to cutoff supplies and by using
environmental restrictions to reduce production and use. (See Appendix
3. EPA Restrictions on Energy Production and Use.) The Administration
has even tried to use international pressure to force domestic energy-
use reductions by signing the ill-advised Kyoto Protocol in 1997. If
ratified, this Protocol would arbitrarily impose quotas on carbon
dioxide emissions equivalent to a reduction in fossil-fuel use by more
than 30 percent from projected levels in 2010.
An energy policy that emphasizes only some energy sources and
priorities--without regard for their negative impacts on energy
markets--threatens the sustainability of the national economy and the
welfare of the American people. When such a policy also undermines the
development of domestic oil, gas, nuclear. coal and hydroelectric
power, then these ``supply side'' disincentives add up to what is
essentially a policy of planned energy dependence by the United States
on foreign sources.
Conclusion
Adequate supplies of reliable and competitive energy and an overall
energy strategy must become a priority for the next Administration. The
NAM strongly believes that America must make progress in all of its
energy options in order to meet the challenges of a growing population
while increasing prosperity, national security and environmental
protection.
Action
The NAM will work actively with this Administration and Congress in
the time remaining, and with the Presidential and congressional
candidates to urge them to turn their attention to the seriousness of
this problem and the need for prompt action to meet these concerns.
Appendix 1: U.S. Energy Profile
During the 1990's, U.S. electricity generation grew by 22
percent. Although the use of non-hydro renewable energy for electricity
generation has increased by a third during this decade, it still
represents only about a little over 2 percent of total net generation.
Hydroelectric power produces about 12 percent of total
electricity generation. However, it has been declining sharply in
recent years. Delays in Federal relicensing (8-year schedule) burdens
applicants with endangered-species and other environmental studies and
pre-conditions, exacerbating the delays and the costs. This
Administration has even torn down hydroelectric dams. Nuclear energy
has increased 26 percent in the past 10 years, and now supplies 20
percent of total generation. However, no new plants are scheduled to
begin operating. This Administration has steadfastly opposed, and
recently vetoed, legislation that would ensure timely construction of a
desperately needed Federal storage facility for spent nuclear fuel. In
the meantime, the Administration has breached its contractual
obligation to begin removing spent fuel from the nation's nuclear
reactors, despite receiving $17 billion in pre-payments from the
consumers of electricity. Finally, virtually all nuclear operating
licenses are up for renewal by 2015. NRC has indicated it expects no
more than 85 of the 103 units will file for renewals. Coal--which
currently provides more than 50 percent of total net generation--has
increased almost 19 percent in the past 10 years, despite growing
hurdles created by administrative agencies. However, no major coal-
fired electricity generating stations are being built, despite the fact
that coal represents 90 percent of U.S. recoverable fossil energy
reserves. Oil use in electricity has dropped dramatically since the
1973-74 Arab oil embargo, off 30 percent in the past 10 years to 3
percent of total generation. Petroleum is still a vital transportation
fuel, however, and is the energy source for which we are most dependent
on foreign sources--nearly 60 percent of our needs. As a result,
petroleum accounts for one-third of our total trade deficit. Meanwhile,
domestic crude oil production has fallen almost 20 percent over the
past 10 years, as vast areas of onshore and offshore United States have
been put off-limits to energy leasing. Worse, value-added refining is
moving overseas, with 36 U.S. oil refineries having closed in just the
past 8 years. No new major refineries have been built in this country
in the past quarter-century, and regulatory hurdles complicate making
refinery investments needed to produce adequate supplies of lower-
sulfur transportation fuels being required by EPA. America consumed
21.4 Tcf of natural gas last year, about 15 percent of which was used
by utilities for electricity production. Domestic natural gas
production declined from the early 1970's peak of over 21.7 Tcf a year
to 1986's low point of 16.06 Tcf. Production increased to 18.82 by
1994. Has remained relatively stable for the past 6 years, (in 1999 it
was 18.71 Tcf). Canadian imports have increased more than 130 percent
over the past 10 years (to over 3 Tcf) to meet the increased U.S.
demand. The National Petroleum Council (NPC) and the American
Association of Petroleum Geologists (AAPG) predict a severe gas supply
shortage in the next 10-15 years unless multiple-use Federal lands
onshore and offshore--and the more than 200 Tcf in natural gas reserves
inside them--are opened to exploration and production.
Appendix 2: Administration Restrictions on Resource Access
Administration policies and/or regulatory actions that impede or
prevent the development of domestic fossil-fuel resources include the
following:
Multi-year moratoria on Outer Continental Shelf leasing
and drilling off of the entire Atlantic and Pacific coasts and portions
of Alaska and the Eastern Gulf off of Florida. Army Corps of Engineers
elimination of nationwide Wetlands Permits--100-year Flood Plain
Exclusion (50 million acres).
Forest Service moratorium on new road construction (40
million to 60 million acres).
Bureau of Land Management has proposed regulations--a
``plain language'' rewrite of onshore oil and gas activities, that
impose additional requirements that provide no benefits yet cause
further delays.
BLM permitting delays in critical areas like Wyoming
(coal-bed methane).
OCS permitting delays by the EPA and NOAA prevent a valid
Federal lease (with 1 Tcf of natural gas) off of Florida, acquired in
the mid-1980's, from going forward.
(Monuments designation initiatives under Antiquities Act
(millions of acres in at least seven Western States); already declared
Escalante Staircase a monument' abrogating valid oil and gas leases and
ending plans for a large low-sulfur coal mine. Expansive
interpretations by Commerce Department of Essential Fish Habitat
regulations threatening oil and gas activity in Gulf of Mexico
Expansive interpretations of Endangered Species Act by BLM, Forest
Service, Fish and Wildlife Service causing sometimes indefinite
permitting delays BLM's designation of areas as Wilderness Study Areas,
which has become de facto prohibitions of multiple use while BLM
studies whether to ask Congress to list the area as wilderness EPA
Interim Guidance reinterpreting CERCLA release to require daily reports
of air emissions from hundreds of thousands of small rural engines
would affect oil and gas production and transportation--especially
marginal wells Department of Labor reinterpretation of Process Safety
Management Regulations to require unnecessary and expensive regulations
of remote unoccupied exploration and production facilities
EPA reluctance to support legislation to clarify that
hydraulic fracturing of gas-bearing formations should not treated as
``underground injection'' under the Safe Drinking Water Act. As many as
60 percent of future gas wells may need to employ fracturing technology
Lack of cooperation and coordination between BLM, U.S. Forest Service,
EPA and other agencies in implementing National Environmental Policy
Act requirements for permitting and leasing processes causing
significant delays The Interior Department's Bureau of Land Management
State Office in New Mexico this month announced that it would soon
begin using new guidelines for approval of San Juan basin drilling
permits that could severely affect gas production in the second-largest
gas field in the nation. Activity in this mature producing area (that
accounts for some 6 percent to 7 percent of the country's gas
production. more than half of which goes to California) is within
projections of the BLM Resource Management Plan However. while the
State office does a new EIS that may lead to improvements in the RMP,
BLM is proposing new permitting guidelines that hold the potential to
prevent drilling enough wells to even maintain current production
levels Redundant NOAA Coastal Zone Management Act consistency
regulations that impede OCS exploration and production activities
without any additional environmental benefits Proposed DOI (Minerals
Management Service and BLM) ``plain language rewrite of oil and gas
lease forms imposing new requirements and additional administrative
burdens will encourage litigation, making it more difficult to drill
and produce hydrocarbons on Federal lands.
Appendix 3: EPA Restrictions on Energy Production and Use:
NOx SIP Call: The EPA's 1998 final rule to reduce
nitrogen oxide emissions by 85 percent throughout the eastern United
States will result in estimated utility costs of $14.1 billion in
capital investments, and an increased annualized cost of $2.7 billion
for power plants and other major sources. The rule required the
emission-reduction measures to be in place by May 1, 2003. The EPA's
refusal to provide flexibility to States in setting their ozone
attainment strategy, along with threats to impose a Federal
Implementation Plan (FIP) if States did not comply with the State
Implementation Plan (SIP) call, placed immense pressure on coal
combustion. States have until October 2000 to submit their plans. New
Source Performance Standards: In 1998, the EPA issued revised nitrogen
oxide (NOx) New Source Performance Standards (NSPS) for all new and
modified (``reconstructed'') utility and industrial boilers. A new
``guidance'' is expected to be issued by OECA before the end of this
year that will lower the threshold of what is a ``reconstruction,''
thereby forcing many additional existing power generators to install
expensive retro-fit equipment or become subject to enforcement actions.
Particulate Matter: The costs of compliance for coal-fired power plants
would greatly increase if the EPA's final rule setting new ``fine''
PM2.5 standards and revising the ``coarse'' PM10
standards are found to be valid by the U.S. Supreme Court. New Source
Review (NSR): The Clean Air Act requires a pre-construction permit
before building or making modifications to facilities that would result
in significant new emissions. The Act explicitly allows companies to do
routine maintenance and repair, but the EPA wants to force older
facilities--particularly coal-burning ones--to install expensive air-
pollution control equipment. In addition, the EPA's threats of
litigation and heavy-handed enforcement significantly contribute to
cost burdens for these plants. For example, in November 1999, the EPA
filed lawsuits against several coal-burning utilities, alleging
violations of the New Source Review (NSR) rule, claiming that the
utilities made major modifications to their facilities and, in doing
so, failed to apply for NSR permits. In addition, the EPA is currently
preparing to issue a final rule on NSR while also coercing existing
sources to meet ``best available control technology'' (BACT) by a
certain deadline.
Ozone Non-attainment Areas: The EPA efforts to force
States to designate areas that are not in ``attainment'' with the
agency's revised ``Eight-Hour Ozone Standard'' (promulgated in 1997,
and in litigation in the Supreme Court) is an attempt to circumvent a
possible rejection of the rule by the Court, while chilling economic
development and energy use in those designated areas. The EPA
threatened to withhold Federal highway funds to States to force State
compliance.
Regional Haze Rules: New rules call for States to
establish goals for improving visibility in Class I areas (national
parks and wilderness areas) and to develop long-term strategies for
reducing emissions of air pollutants that cause visibility impairment.
Strict EPA visibility regulations could cost the refining industry $0.4
billion to $1.0 billion--above and beyond the costs incurred for
complying with other requirements of the Clean Air Act, such as NAAQS.
In addition. oil and gas producers might need to invest between $0.2
billion and $2.5 billion over the next several years, to comply with
the proposed rule. Future exploration and development in the United
States is likely to be hampered or curtailed, with potentially serious
consequences for the nation. Since most new development in the United
States is near Class I areas, the efforts of States and Federal land
managers to comply with regional haze requirements are likely to
preclude timely and efficient development of oil and gas resources.
TMDL Rules: On July 11, 2000, the EPA issued the controversial
Total Maximum Daily Loads (TMDL) rule, even though on June 30, 2000,
Congress sent to the White House legislation that would have required
the EPA to take a closer look at the 30,000 comments received and to
rewrite the rule. The EPA delayed the effective . date for the rule
until October 2001, after a congressionally imposed prohibition
expires. Most electric-utility operations will be affected if a water
segment they are located on or near is listed as impaired. The
stringent TMDL standards will likely necessitate regulation of air
deposition of pollutants into water bodies, thus opening another back
door to air-emission regulation.
Btu Tax on Fossil Fuels: The Administration's early advocacy of a
Btu tax on fossil fuels would have discouraged use of fossil resources
and reduced manufacturers' competitiveness. New Source Review
Revisions: The EPA in 1996 issued a proposed rule for a revised NSR
program. The EPA is currently preparing to issue the final rule and has
been conducting discussions with the regulated community on an
alternative (``off-ramp'') to the new NSR rule. The off-ramp, as
proposed, would work as follows:
Coal-burning utilities will be able to obtain relief from stringent
new NSR rule if they, in return, agree to a suite of emission
reductions to be achieved by a certain deadline. EPA has discussed the
inclusion of CO2 within the bundle of emissions to be
``voluntarily'' regulated.
CO2 Regulation: The EPA issued a memorandum in April
1998, asserting the EPA's authority under the Clean Air Act to regulate
CO2 as a pollutant. It did so in absence of any scientific
evidence to suggest that the EPA will be able to make the showing that
CO2 is harmful to human health and the environment, as is
necessary to designate a compound as a criteria pollutant.
TRI Reporting: The toxics release inventory (TRI) (under the
Emergency Planning Community Right-to-Know Act) was recently changed by
the EPA to require electric utilities to report chemical-release data.
Additionally, the level at which reporting is required for mercury was
lowered by several orders of magnitude. In making these changes, the
EPA presented no studies or supporting rationale for why communities
should suddenly be concerned about these releases. These reporting
requirements--without being based on actual health concerns--further
discourage the siting of electricity generating stations.
Mercury: In November 1998, EPA issued a draft Mercury Action Plan
to reduce overall mercury emissions. This plan has required expensive
testing by coal-fired power plants and is likely to result in a
regulatory determination by December that will lead lo costly Maximum
Achievable Control Technology standards for coal-fired utilities.
Particulate Matter / Ozone rulemaking: The EPA proposed new NAAQS
for Ozone and PM2.5 Particulate matter used to be the
technical term for soot: however. the new regulatory size threshold set
by the EPA (2.5 microns) is so small that it captures individual
molecules of sulfates. In essence, this amounts to a back-door
tightening of Title IV (acid rain) of the 1990 CAA.
MTBE: Against the advice of scientists, the EPA encouraged billions
of dollars in investments to make methyl tertiary butyl ether (MTBE)
additives to motor gasoline. Now the agency wants to keep the
questionable oxygenate benefits by replacement chemicals that will
raise the price of gasoline and require more crude oil to be used to
make each gallon of ``government gas.'' Prior to imposing oxygen
substitutes, there should be a rigorous reevaluation of the need for an
oxygen mandate in gasoline, in light of technological progress in
engine manufacture and the increased overall compliance with attainment
of the carbon-monoxide ambient air standards.
Federally Permitted Releases: On Dec. 21, 1999, the EPA published
an Interim Guidance on air emissions under the Comprehensive
Environmental Response, Compensation and Liability Act and the
Emergency Planning and Community Right-To-Know Act (collectively
CERCLA). The Interim Guidance defines which air emissions must be
reported under CERCLA and which are exempt from reporting as a
federally permitted release (FPR). Identification of specific hazardous
constituents at every emission point in a facility may not be
technically feasible in many instances and may be prohibitively
expensive. The Interim Guidance incorrectly requires speciation of
emissions to qualify for the exemption, effectively eliminating the
exemption.
__________
Interstate Natural Gas Association of America,
10 G Street, NE, Suite 700
Washington, DC 20002, April 5, 2001.
Honorable George Voinovich, Chairman,
Subcommittee on Clean Air, Wetland, Private Property and Nuclear
Safety,
Committee on Environment and Public Works,
U.S. Senate,
Washington, DC 20510.
Dear Mr. Chairman: On behalf of the Interstate Natural Gas Association
of America (INGAA), I am writing to provide additional information for
your April 5, 2001 public hearing on the interaction between
environmental regulation and energy policy. I request that you make
this letter and the attached reports a part of the hearing record. For
the record, INGAA represents interstate natural gas pipelines in the
United States, interprovincial natural gas pipelines in Canada and
PEMEX in Mexico.
In 1998, the U.S. Department of Energy (DOE) predicted that U.S.
consumption of natural gas would increase from approximately 22
Trillion cubic feet (Tcf) in 2000 to approximately 30 Tcf by 2010. The
INGAA Foundation followed this prediction in 1999 with a study entitled
``Pipeline and Storage Infrastructure Requirements for a 30 Tcf U.S.
Gas Market.'' Both DOE and the INGAA Foundation predicted that this
demand boost would be driven primarily by a significant increase in the
use of natural gas for electric generation, due to its superior
environmental benefits. Approximately 6.5 Tcf of the 30 Tcf estimate
would be attributable to electric generation.
Because of higher natural gas prices and possible pipeline capacity
constraints in some regions of the United States, some policymakers are
calling for revitalized use of coal and nuclear power in the future.
These same policymakers are questioning whether the United States is
too dependent on natural gas for our future.
While INGAA believes and supports the need for balanced energy
policy, such a balanced energy policy needs to continue recognizing the
positive benefits of natural gas-fired power generation. In fact, the
environmental consequences of p? continuing to strive for a 30 Tcf
natural gas market by approximately 2010 could result in serious
environmental impacts for years to come.
Attached is a recently completed study by the INGAA Foundation
entitled ``Implication of Reduced Gas Use on Emissions from Power
Generation.'' This study examines a low-use case of natural gas for
electric generation of 4.8 Tcf in 2010, a drop of 1.7 Tcf or 24 percent
from the predicted 6.5 Tcf figure. Coal replaces natural gas for this
1.7 Tcf capacity drop. This potential drop in natural gas usage would
result in the failure to reduce 10 percent of the emissions of mercury
and nitrogen oxides (NOx), and 4 percent in carbon dioxide
(CO2) emissions. These 111,730 million tons of NOx emissions
alone is comparable to the NOx emissions from 4 million automobiles.
The 108 million tons in CO2 emissions is comparable to
similar emissions from 28 million automobiles.
This data provides a compelling case for the Bush Administration
and the Congress to continue to develop the exploration, production and
pipeline infrastructure needed to reach a 30 Tcf natural gas market in
the United States by 2010. To back off now would have serious
environmental consequences at the very time citizens are demanding a
cleaner environment, and most public opinion polls demonstrate a
willingness on behalf of the public to pay reasonably higher energy
prices for a cleaner environment.
I hope you find these INGAA Foundation reports useful to your
Subcommittee's deliberations, and we would be pleased to meet with you
and/or your staff in the future to discuss these issues in more detail.
Sincerely,
Cuba Wadlington, Jr., President and CEO,
Williams Gas Pipeline.
Note: Reports referred in letter are retained in committee files.
CLEAN AIR ACT OVERSIGHT ISSUES
----------
FRIDAY, APRIL 27, 2001
U.S. Senate,
Committee on Environment and Public Works,
Salem, New Hampshire.
The committee met, pursuant to notice, at 2 p.m. in the
media center of Salem High School, 44 Geremonty Drive, Salem,
New Hampshire, Hon. Bob Smith (chairman of the committee)
presiding.
USE OF METHYL TERTIARY BUTYL ETHER (MTBE)
Present: Senator Smith.
OPENING STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE
STATE OF NEW HAMPSHIRE
Senator Smith. This hearing of the Environment and Public
Works Committee of the U.S. Senate will come to order. Let me
say good afternoon to everyone, thank you all for coming.
This hearing is on MTBE. It may not be a household word,
unless you have it in your household. Part of the problem is to
give attention to this issue. That is why we're here today.
I certainly want to thank the witnesses who will be here
for this panel and the second panel. We'll just say for the
benefit of those who are watching, we expect this to go about 2
hours overall, so you can plan accordingly.
I want to also thank Salem High School for allowing us to
use this room. It's a terrific room for this kind of function.
I'm just going to make a brief statement, then we'll go to
the witnesses. Since taking over as chairman of the Environment
and Public Committee, I've tried to ensure that New Hampshire
residents have a strong a voice in national issues and some
local issues, of course, as we develop environmental policy
into the next century. In the 2 years prior to my chairmanship,
only two New Hampshire witnesses had testified before the
committee. With these witnesses today, we have heard from 30.
The gentleman who just came in to sit down, Bob Varney, at DES,
has been to Washington several times. It does make a
difference, because we have a lot of smart people in this
State, and it's nice to showcase them around the country.
It certainly played a major role last year in ensuring that
our tree farmers in northern New Hampshire didn't lose their
business because of a shortsighted EPA Clean Water Act
regulation known as Total Maximum Daily Load (TMDL). Acronyms
are very prevalent in Washington.
Another issue that has enormous New Hampshire involvement
was that of brownfields reform. I'm very pleased to report that
on Wednesday, the brownfields cleanup bill passed the U.S.
Senate by a vote of 99 to 0. Let me tell you, as Bob already
knows, because he has been working on it longer than I have--
and I've been working on it for at least 10 years--we haven't
been able to get agreement in the Senate. Now to pass it 99 to
0, with Ted Kennedy and Jesse Helms on the same side, all in
agreement--it's got to be good. We're very excited about the
enactment of this bill. It's going to bring a lot of money into
New Hampshire to clean up those sites. But more importantly,
it's going to promote the cleanup of brownfields, even without
Federal money because contractors now will be allowed to clean
them up.
That's not the subject of this hearing. What we're looking
at now is something that's called MTBE. The actual name is
methyl tertiary butyl ether, but we'll call it MTBE the rest of
the day, if you don't mind.
I've asked our witnesses to share with us their expertise
and their testimony and their knowledge on this issue in a way
that they see fit. This will be very valuable in our efforts to
develop the bill to deal with this problem, not only in New
Hampshire, but also in other States of the United States.
California, for one, has a tremendous problem. There are two
very prominent Democrat Senators there, Feinstein and Boxer. We
need their help, so this bill will be bipartisan. It is a
regional problem, not a partisan one, as you'll find out as we
go on.
MTBE is a clean, cheap gasoline additive that boosts
octane. It's been added to gasoline for over two decades. So
those of you that are watching, and you're wondering what in
the world this stuff is, we'll try to quickly mention it. I
know the experts will be able to give you a lot more specifics.
The 1990 Clean Air Act Amendments amended the Act to
require the use of reformulated gasoline through a Federal
clean air program run by the EPA called the RFG program. That
law requires a cleaner burning gasoline to be used in certain
areas of the country to improve air quality. Other areas,
including southern New Hampshire, chose to participate. The RFG
program has been successful in achieving air quality beyond the
requirements that we expected.
Unfortunately, a major side-effect of MTBE use in gasoline
is that is sometimes causes water quality problems. The RFG
program mandates the use of oxygenate inert gasoline. MTBE is
one of two options currently in use, and the other is ethanol.
We'll get into that a little bit later.
The problem, though, with MTBE, is its ability to migrate
very quickly through the ground, through the water into the
water table. Then it's diffused through that water very
quickly. Even at low levels of contamination, MTBE renders
water unusable, as we will hear from Mrs. Miller in just a
moment, because of its foul odor and taste. In an effort to
address the clean air concern, the impact on our drinking water
was neglected.
Adequate research and science might have prevented this.
But we didn't pay attention to the science or perhaps didn't
look for the science. Now we have several billion dollars tied
up in cleaning up our water as a result of trying to clean up
our air. Now we have to change the law, perhaps at the State
level, Senator Klemm, and certainly at the Federal level.
We need fewer ``stovepipe,'' narrow-vision solutions to
pollution problems; and we should find more holistic solutions
for our environmental challenges. We should ask ourselves,
``What these laws will do to the environment? Can we look at
the system in a holistic way, as opposed to viewing it through
a narrow scope.''
One of the most distressing aspects of MTBE contamination
is that the health effects of this gasoline additive are
largely unknown. I'm hoping that folks from UNH will have more
to say about that. But because of MTBE, New Hampshire has spent
a lot of money in order to provide safe water for residents
with contaminated wells. The Department of Environmental
Services under Bob Varney is one of the best in the country,
believe me. I don't say that lightly. That is a fact, and I've
talked to almost all of them all over the country.
The State has been providing bottled water as well as
installing and maintaining very expensive and extensive
treatment equipment. Particularly hard hit have been the
communities in the southern interior, such as the homes around
Arlington Lake in Salem, Frost Road in Derry and Green Hills
Estates in Raymond.
New Hampshire is not alone. Many other States also have had
gasoline leaks or spills that resulted in costly cleanups, even
the closure of wells. It remains a major problem that will not
go away without Federal action, but we need to do it soon.
I'm glad to hear that Governor Shaheen has joined this
battle with her recent request to opt out of the RFG program.
I'm glad to hear that the State legislature is pursuing
creative options to get New Hampshire out of the RFG program. I
support those efforts.
We also share the common goal for protecting New
Hampshire's water, and I intend to work with the State in every
way I can, with every amount of influence that I can muster as
the chairman of this committee, to see that we get that done.
Unfortunately, even if allowed, New Hampshire's removal
from the RFG program is not enough. It's only a band-aid. It's
not going to provide the cure that we need. It's not going to
keep MTBE out of New Hampshire. It's not going to clean up
existing contamination, and additional measures will be
required to maintain air quality. What it might do, if just the
RFG issue is dealt with, is raise the price of New Hampshire
gasoline, which I don't think anybody's too excited about.
So we've got to find a better way. We've got go beyond our
current vision; we have to increase current air quality and
water quality assurances.
Last year, I had introduced a bill in the Senate, S. 2962,
that offered a comprehensive solution. It provided cleanup
money; it banned MTBE; and it allowed the Governors to waive
the oxygenate mandate. I believe Mr. Varney testified that it
protected the current air quality from backsliding.
So why didn't that bill pass and become law? It did report
out of committee, but it died on the Senate floor, like so many
other pieces of legislation. Why? Because of competing regional
interests across the country. The MTBE producers, the ethanol
producers, the refiners, there are so many. Then you have the
regional issues of who has MTBE in their wells and who doesn't.
So due to all these competing interests, many of the
proposed Federal fixes just simply died. That was the problem.
So any legislation dealing with MTBE will have to go through
the Committee on Environment and Public Works. When it does
come through there, I intend to have New Hampshire taken care
of.
We need to work together, though. The problem is, we need
consensus. Everybody can't get exactly what they want. That's
what we did with Brownfields, which is why were able to get a
99 to 0 vote. Also we saw a 85 to 1 vote on the restoration of
the Everglades, which didn't really pertain to New Hampshire,
unless you want your kids to go and see the alligators, and I
think you do.
I'm going to make sure any bill that comes in through this
committee is one that takes care of us here. It's my intention
now, after we hear the information and testimony from the
experts from our State, to introduce a bill very similar to
last year's.
As each witness testifies, please remember that this is a
national hearing. It will get national attention. It is being
covered locally by the cable folks, but remember, this
testimony will go into the committee's records. I can pass this
out to my colleagues in the other 50 States to let them know
how much of a problem we have here in New Hampshire, that the
chairman of this committee has here in New Hampshire, to be
specific. I need help for my constituents.
So thank you, each and every one of you for coming, all of
the witnesses and the participants. Let me also say that each
of the witnesses, we'll give you about 5 minutes, we're going
to turn a light on somewhere. Don't be intimidated by it. If
you can wrap it in 5 or 6 minutes, we'd appreciate it. All of
your remarks written will be made part of the record. We've
allowed time to have folks come up, take the microphone. This
will become part of the record of Congress and the Senate. If
you can try to do it in a minute or so, we'd appreciate it,
especially if there are a lot of people speaking.
If you choose to not make oral remarks, maybe you don't
feel comfortable stepping up to the microphone, you can send me
written remarks and I will make them part of the record if you
get them to me within the next 2 weeks. So that whatever you
have to say will be part of the Federal record on this issue.
Let me introduce the first panel now. I'm pleased to have
Christina Miller, who is a homeowner in Derry, the Honorable
Arthur Klemm, President of the New Hampshire State Senate, and
Robert Varney, who is the Commissioner of the New Hampshire
DES. I think, Senator Klemm, since Mrs. Miller has this
contaminant in her well, I think we'll start with her and move
across to you, if that's OK with you.
[Documents submitted for the record follow:]
State House,
Office of the Governor,
Concord, NH 03301, April 16, 2001.
The Honorable Christine Todd Whitman, Administrator,
U.S. Environmental Protection Agency,
Ariel Rios Federal Building,
1200 Pennsylvania Avenue, NW
Washington, DC 20460
Re: Intent to Opt Out of the Federal Reformulated Gasoline Program
Dear Administrator Whitman: I write to make you aware of my decision
that the State of New Hampshire must seek withdrawal from the Federal
Reformulated Gasoline (RFG) program immediately. Therefore, I ask the
U.S. Environmental Protection Agency (EPA) to promptly address its
procedures for States opting out of the RFG program (40 CFR 80.72) to
allow a much sooner effective date than January 1, 2004. I am taking
this action because it appears to represent the only rational, and
legal, approach available to the State at this time to sharply reduce
the levels of methyl tertiary-butyl ether (MTBE) in gasoline supplied
to New Hampshire.
As you know, MTBE is a significant and rapidly increasing threat to
New Hampshire's groundwater and surface water resources. MTBE is
difficult and expensive to remediate because of its high solubility and
its ability to move quickly t.hrough groundwater. Because MTBE travels
farther in groundwater and does not break down rapidly, it can be
difficult to pinpoint the source of the contamination. MTBE has been
detected in public drinking water supplies and in private wells, and
its remediation is consuming a disproportionately large percentage of
the funds we have set aside for all petroleum contamination needs.
New Hampshire is particularly frustrated with existing Federal
barriers that prevent States from readily and effectively reducing or
phasing-out the use of MTBE in gasoline. The Federal Clean Air Act
essentially prohibits States from controlling individual components of
gasoline, and it expressly mandates the oxygen content of RFG. Refiners
in the east blend MTBE in RFG in concentrations 5-10 times greater than
conventional gasoline--because it is the most cost-effective
alternative for meeting this mandate. Because the Federal Clean Air Act
and 'its associated regulations provide States with virtually no
authority to reduce MTBE in gasoline, States that use RFG are
essentially compelled to contaminate their precious water resources.
This is an unacceptable situation.
From the time we first recognized this problem, it has been clear
that there are no simple solutions. As a result, on behalf of the New
England Governors, I asked the Northeast States for Coordinated Air Use
Management (NESCAUM) to thoroughly study the issues and options
surrounding RFG and MTBE. Soon after, EPA's National Blue Ribbon Panel
on MTBE was launched. The work products of both of these initiatives--
NESCAUM's RFG/MTBE Findings and Recommendations and the Blue Ribbon
Panel Findings and Recommendations on the Use of Oxygenates in Gasoline
recommended elimination of the oxygenate mandate from the Clean Air
Act. The MTBE problem requires a Federal solution, but Congress has
made little progress to date and no Federal solution appears imminent.
As a result, the State of New Hampshire is forced to pursue the
only legal, rational option that exists for reducing MTBE in gasoline:
to opt out of the Federal RFG program. I have thus directed the New
Hampshire Department of Environmental Services (DES) to immediately
inform EPA Region I of this action, to promptly consult with EPA's
regional office to establish the requirements necessary to implement
this action, and to expeditiously fulfill those requirements. Since I
understand that a strict interpretation of the applicable Federal
regulations (i.e., 40 CFR 80) prevents New Hampshire from opting out of
the RFG program prior to January 1, 2004, I further request that EPA
address these regulations to provide for an earlier opt out date and/or
such other relief as may prevent further MTBE contamination of New
Hampshire's water resources between now and 2004.
As a former Governor, I am sure you understand the economic and
environmental importance of solving the problem of MTBE contamination.
From your experience as Governor, you are also aware of the aggressive
steps States have taken to replace underground fuel tanks and educate
consumers regarding spill prevention and the proper handling of
gasoline. Given the volume of gasoline distributed, however, it is
ultimately unreasonable to expect that there will be no releases, even
with the most diligent gasoline handling. The pollution prevention and
source reduction approaches that the States have found to be
extraordinarily effective advise us to reduce, and eventually
eliminate, the use of MTBE as a gasoline additive in the first 'place.
I look forward to working with you so that New Hampshire can
eliminate the risks posed to our groundwater resources by MtBE in the
near future. Should you have any questions, please feel free to contact
me or DES Commissioner Robert W. Varney at your convenience.
Very truly yours,
Jeanne Shaheen, Governer.
______
Bill Summary of S. 2962 as reported in the 106th Congress
Federal Reformulated Fuels Act of 2000--Amends the Clean Air Act
(CAA) to authorize a State Governor, upon notification to the
Administrator of the Environmental Protection Agency (EPA) during the
90-day period beginning on this Act's enactment date, or during the 90-
day period beginning on the date an area in the State becomes a covered
area as a result of reclassification as a Severe ozone nonattainment
area, to waive oxygen content requirements for reformulated gasoline
sold or dispensed in the State. Considers gasoline that complies with
all other requirements for reformulated gasoline other than those
regarding oxygen content to be reformulated gasoline.
Requires the Administrator to promulgate regulations to ensure that
reductions of toxic air pollutant emissions and aromatic hydrocarbon
content achieved under the reformulated gasoline program before this
Act's enactment are maintained in States for which the oxygenate
requirement is waived or to apply a specified alternative performance
standard to reformulated gasoline sold in such States.
(Sec. 3) Authorizes the Administrator to control the sale or
introduction into commerce of any fuel or fuel additive that causes or
contributes to air or water pollution that may be anticipated to
endanger public health or welfare. Permits States not subject to a
prohibition on enforcement of certain State emission control standards
to prescribe such control on fuel or fuel additives for water quality
protection purposes.
Requires the Administrator to ban the use of methyl tertiary butyl
ether (MTBE) in gasoline. Authorizes the Administrator to establish a
schedule to phaseout the use of MTBE preceding such ban.
(Sec. 4) Authorizes the Administrator to approve a revision of a
State implementation plan that excludes an area from a waiver from Reid
vapor pressure requirements provided for ethanol if: (1) the State
demonstrates that increases in volatile organic compound emissions
resulting from the waiver significantly interfere with attainment or
maintenance of the national ambient air quality standard for ozone; and
(2) the Administrator determines the exclusion to be reasonable and
practicable.
(Sec. 5) Directs (currently, authorizes) the Administrator, for
purposes of registration of fuels or fuel additives and on a regular
basis, to require manufacturers of such fuels or additives to conduct
tests to determine potential public health and environmental effects
(currently, public health effects) of the fuel or additive and to meet
other existing requirements.
(Sec. 6) Requires motor vehicle fuel sold in the United States in
2008 and thereafter to be comprised (on a 6-month average basis) of a
specified percentage of clean alternative fuel. Phases in such
percentage requirement, to require motor vehicle fuel to contain 1.5
percent clean alternative fuel in 2011 and thereafter.
Requires all motor vehicle fuel sold in the United States during
2002 through 2007 to contain, on a 6-month average basis, a specified
percentage of renewable fuel. Phases in the percentage requirement, to
require fuel to contain 1.1 percent renewable fuel by 2007.
Authorizes credit trading programs to permit persons who refine,
blend, or import motor vehicle fuel with more than the required clean
alternative or renewable fuel content or who manufacture certain
energy-efficient vehicles to use or transfer such credits to others for
compliance purposes. Permits the use of the vehicle manufacturer
credits to provide any portion of the non-Federal share required for an
alternative fuel project under Federal-aid highway provisions regarding
the congestion mitigation and air quality improvement program or a
voluntary supply commitment under the Energy Policy Act of 1992.
Provides for a temporary waiver of this section's requirements upon
State petition if: (1) implementation would severely harm the economy
or environment of a State, region, or the United States; or (2) there
is an inadequate domestic supply or distribution capacity to meet such
requirements. Authorizes exemptions from such requirements for small
refiners,
Makes violators of this section subject to civil penalties under
the CAA.
(Sec. 7) Authorizes the Administrator to approve State
implementation plan revisions that apply a prohibition on the sale of
conventional gasoline in covered areas (areas requiring the use of
reformulated gasoline) to a nonclassified area.
(Sec. 8) Amends the Solid Waste Disposal Act to authorize the EPA
Administrator and States to use funds from the Leaking Underground
Storage Tank Trust Fund to: (1) carry out corrective actions with
respect to a release of MTBE that presents a risk to human health or
welfare or the environment; and (2) conduct inspections, issue orders,
or bring actions under the underground storage tank regulation program.
Authorizes appropriations.
(Sec. 9) Directs the Administrator to publish analyses of: (1) the
changes in emissions of air pollutants and air quality due to the use
of motor vehicle fuel and fuel additives resulting from the
implementation of this Act; and (2) the effects of motor vehicle fuel
and fuel additives on public health and the environment.
Requires the Administrator to publish regulations establishing
performance requirements to ensure that, as compared with emissions due
to the use of motor vehicle fuel and fuel additives during the period
of 1998 through 2000, emissions due to the use of such fuel and
additives will not be significantly greater on a per-gallon average
basis in any region or cause air quality to be significantly worse in
any region.
Directs the Administrator to publish regulations establishing
performance requirements for such fuel and additives, the use of such
fuel and additives, and motor vehicles that are necessary to ensure
adequate public health and environmental protection and to achieve
specific reductions in the use of compounds or associated emission
products that pose the greatest human health risk.
Requires the Administrator to finalize an emissions model that
reflects the effects of fuel characteristics or components on emissions
from vehicles in the motor vehicle fleet during 2005.
mtbe background fact sheet
Methyl tertiary butyl ether has been used as an octane booster in
gasoline since the 1970's. The historic levels of MTBE used for octane
enhancement are low, approximately 1 percent of the total national fuel
market, compared to the levels found in reformulated gasoline being
used today, approximately 3 percent of the total national fuel market.
The reformulated gasoline (RFG) program was established by the
Clean Air Amendments of 1990. The RFG program requires gasoline in
certain areas to meet specific formula and performance standards that
are stricter than standards for conventional gasoline. The RFG program
sets minimum content requirements for oxygen and detergents as well as
limits on the amount of benzene, aromatics and lead allowed in
gasoline. The RFG program also limits emissions of toxic air pollutants
and volatile organic compounds. The 2 percent oxygen requirement of the
RFG program is currently fulfilled by adding either 15 percent MTBE or
10 percent ethanol to gasoline.
The RFG program has been successful, One notable success it that
reformulated gasoline in many RFG areas exceeds the statutory
requirement to reduce toxic emissions. This over-compliance is due to
the dilution effect of the oxygenate additives MTBE and ethanol,
relatively toxic-free additives.
When leaked or spilled into the environment, MTBE can cause serious
drinking water quality problems. MTBE moves quickly through land and
water without significant biodegredation or natural attenuation. Once
in undergroundwater supplies, MTBE can be detected by smell and taste
at low concentrations. Small amounts of MTBE can render water supplies
undrinkable.
Cleanup of MTBE contamination is possible but difficult and
expensive. There are several ways to remove MTBE from drinking water.
Contaminated water may be filtered, aerated or bioremediated. All
options require installation and use of special equipment as well as
on-going maintenance.
Existing programs are either not fully funded or are not structured
to provide funding to States for cleanup of substances that move
quickly and that ruin drinking water supplies at low levels, well below
levels that may be hazardous to public health.
The major sources of MTBE contamination are leaking underground
storage tanks. Many underground storage tanks have been or are
currently being replaced, per a recent EPA regulation, however there
remains questions regarding the ability to employ completely sealed
fuel storage systems. Other sources include automobile accidents,
fueling over-fills and backyard mechanics.
Christina, you're on.
STATEMENT OF CHRISTINA MILLER, DERRY, NEW HAMPSHIRE
Mrs. Miller. Good afternoon, Senator, representatives and
other distinguished guests. Thank you for allowing me to come
and speak about my MTBE experiences.
My name is Christina Miller and I am a homeowner and live
at 14 Skywalk Drive in Derry, New Hampshire. My husband and I
have been living at this address since June 1998. When we
purchased this property, a water test was performed and our
water measured high in nitrates, so an additional water
purification system was installed. No mention of MTBE was made,
nor were any tests provided.
In January 2000, we received a notice that our MTBE sample
was below the 13 parts per billion limit at 9 parts per
billion. We were retested in April 2000 and the reading was
then 22. First of all, this indicates that anyone with any
detection of MTBE should be cautions, because there can be
significant fluctuations. Current studies are all short term in
length and are still limited as to the impact to the damage of
your liver, kidney and other carcinogens.
Furthermore, another test in May then indicated the
percentage had dropped again. But also, MTBE, as a known
problem, its dispersion and control is not well understood.
Letters we received are very confusing. On page one of a letter
from the New Hampshire Department of Health and Human Services
dated July 31st, 2000, which had a 9.5 MTBE level indicated
that there are no restrictions on water usage. Then on page two
it stated, although the MTBE concentration is below drinking
water standards, because of the concern about possible
fluctuations in the contaminant level, we understand that DES
will be installing a point of entry water treatment system.
When the MTBE levels were 22, we were warned not to use the
water. The material provided told us how to better store
gasoline, making us feel like we were the source of the
problem. I don't feel provided us with enough information that
made us more comfortable on the effects of MTBE.
Even though I was pregnant and informed the authorities
involved in the study, we were not offered water alternatives
or informed in any letter about alternative water purification
or MTBE's harmful effects on us, never mind my unborn baby.
Since we were informed about this problem, I began to do what I
consider a considerable amount of research on my own, but
almost to no avail. There is not much information found on the
effects of MTBE or the problems that it may cause in the long
run.
Of all the information that is out there, I have come to
the conclusion that there was not enough testing done on MTBE
before it had begun to be used in gasoline. In June of 2000, we
finally started to receive bottled water. We were provided as
much as we needed. Nice, but still a problem to take a shower,
to do the laundry, wash our fruits and vegetables, or for
cooking, among many other things we use faucet water for but
take for granted.
After repeated phone calls and what seemed like lots of
convincing, it was finally decided we might qualify for a water
purification system. A new water purification system was
finally installed at our residence in September. What concerns
us also is the fact that we received no paperwork that the
system will be maintained and upgraded as needed for the
lifetime of the residence.
Also a big concern of ours is the resale value of our home,
as we intend to sell it in the future. We are also still very
concerned about our health, which probably won't go away for a
while, as there still is no resolution to this problem.
In closing, the NHDES did the right thing in testing for
levels across the State, but should provide honest and full
disclosure to all residents on MTBE and its possible harmful
effects. The NHDES needs to also be proactive instead of
reactive. We had to continually call to get results. We still
have not been provided any notice of what the source of
contamination is.
Finally, if there are long term effects on our health, how
does the State expect to respond?
Thank you.
Senator Smith. Thank you very much, Mrs. Miller.
Mr. Bob Varney, Director of the Department of Environmental
Services in New Hampshire. I've had the pleasure of working
with him now for, well, probably more years than either one of
us wants to admit.
STATEMENT OF ROBERT W. VARNEY, COMMISSIONER, NEW HAMPSHIRE
DEPARTMENT OF ENVIRONMENTAL SERVICES
Mr. Varney. Thank you, Mr. Chairman. I am pleased to be
here on behalf of New Hampshire today.
The issue of MTBE contamination has been of great concern
to us here in the State for quite some time. It's even more of
a problem in the southern part of our State where we have more
gasoline usage and more potential sources of contamination, as
well as closer proximity of residences.
We have been very frustrated, quite frankly, in dealing
with the MTBE issue. We very much appreciate your leadership in
the U.S. Senate in trying to craft a compromise, as you've done
recently with the Brownfields legislation, to help us reduce
and eventually eliminate MTBE as soon as possible.
Here in New Hampshire, using the best available information
on health related issues, we have set a very protective health
standard of 13 parts per billion for drinking water, which is
the most protective health standard for MTBE in the country.
California is the only other State that has set a standard.
U.S. EPA has not even set a standard on this nationally. But we
moved ahead on our own, because we were very concerned about
the long term health effects on our citizens.
We have a substantial amount of information on our website,
and have tried the best we can with the limited resources that
we have to help various citizens who have been impacted.
Overall, 16 percent of our public water supplies have some
level of MTBE contamination in them. In Rockingham County, it's
even higher. Our private wells are also affected, and it could
range, depending on the year, from 14 percent to 25 percent of
our wells have some level of MTBE in them.
The interesting thing about this is that it's not always
directly correlated to an underground fuel tank issue. We have
removed about 15,000 tanks in this State and have replaced them
with about 4,000 state-of-the-art double walled or cathodically
protected tanks. They have a 99.9 percent compliance rate for
USD regulations which I believe is probably the highest in the
country.
Even so, we're still finding MTBE in places where you
wouldn't expect it. It appears that some of it may be from
homeowner use, in terms of lawnmowers, snowblowers, weed
whackers, chain saws and so on, where small amounts of gasoline
are impacting local wells. We need to work as hard as we can on
public education.
Overall expenses have been substantial. We've spent about
$200,000 for various point of entry treatment systems, such as
you've heard about today, with very limited funding available.
One of our difficulties is having a source that we can look to
to pick up the tab for some of these costs. Our projections are
that it's going to cost the State as much as a $1 million to
deal with the remediation of MTBE by the year 2006, based on
current trends. We urge you to look very seriously at the LUST
trust fund and other potential sources of revenue that could
help the State and help the local communities and local
homeowners to be able to deal with this issue quickly and cost
effectively.
As you know, there are various tradeoffs regarding MTBE,
both air and water. It's not a simple solution. You know the
issue well. Just to get that vote out of the committee was
quite an accomplishment, I think. We look to your leadership in
the future in Congress to try to come up with a national
solution for MTBE. We need to work with our neighboring States
to ensure that we don't create a boutique fuel problem where we
have fuel supplies or huge increase in gasoline costs.
We need to make sure that we're not replacing one problem
with another problem, which the ethanol replacement situation
could be, not only in terms of cost and availability but also
in terms of remediation issues that haven't been fully studied
yet and aren't fully understood. For example, the availability
of ethanol in groundwater may result in benzene being more
persistent in the environment, and that's a known carcinogen.
So we may actually increase the risk to public health in the
future as it relates to ethanol, and more studies are needed.
Finally, I just want to say that we appreciate your
efforts. We need State flexibility to be able to do the right
thing. We need to eliminate MTBE as soon as possible, and do it
in a way that will have the best overall impact on public
health. Keep in mind that our violations for clean air are
usually 1 day events. But contamination of MTBE in someone's
water supply is a daily or even hourly impact on our citizens.
So we need to consider that tradeoff as we look to the future
and come up with some permanent national solutions that will be
in New Hampshire's best interests.
Thank you, Senator.
Senator Smith. Thank you very much, Mr. Varney.
Senator Klemm, welcome.
STATEMENT OF HON. ARTHUR KLEMM, PRESIDENT, NEW HAMPSHIRE STATE
SENATE
Senator Klemm. Thank you, Senator Smith.
Let me say I appreciate your coming to the district to talk
about this issue. I am here today to bring more awareness to an
issue that affects all of us, my neighbors and many citizens in
New Hampshire. As a legislator and a businessman, I am growing
increasingly concerned with reports of MTBE manifesting itself
in groundwater in New Hampshire, and particularly in this
district.
As you've heard, the Commissioner has spoken in great
detail about the problems we have. But my understanding is that
there are reports of MTBE causing asthma, shortness of breath,
headaches and an inability to concentrate. MTBE has been proven
to cause cancer in animals and is considered a carcinogen.
Water used for drinking and bathing should have not more
than 13 parts per billion per State law. Yet in some
communities, such as Salem, levels have been detected as high
as 150 parts per billion. The Town reports that over 25 private
properties have had positive test results for MTBE. Southern
New Hampshire has a high population and a lot of private wells.
The New Hampshire House was unable to pass legislation this
past year to ban the substance. But now, alongside key
legislators in the House and Senate, we are prepared to go
forward and make a difference.
This year, I am working with a bipartisan group of law
makers to promote legislation to clean up our water supply and
alleviate future contamination. There are three pieces of
legislation before the House and Senate this year aimed at
taking control of this problem. House Bill 755 relates to
groundwater contamination and is being worked on in the House
committee. House Bill 758, relative to the sale of gasoline
containing ethers, which I am a co-sponsor of, has been voted
out of committee 13 to 1 and will soon move on to the Senate.
Last, Senate Bill 189, which sets up a gasoline remediation
and elimination fund, is being worked on in the Senate
Environment Committee and is expected to come out of committee
shortly.
In conclusion, I anticipate even more communities will come
to the legislature for help in the coming months. I am working
out in front on this legislation because I do not think we, as
lawmakers, want to be playing catch-up on this issue. I think
it is in our best interest to act now to encourage cleaner
water for our neighborhoods.
Thank you for hearing my testimony today. I ask you to work
with us to move forward in the interest of public health.
Senator Smith. Thank you very much, Senator Klemm. I want
to start by thanking you for your leadership on this issue, and
your colleague, Senator Russ Prescott, who could not be here
today because of another commitment.
Senator Prescott had a meeting the other night that I
attended with some 50 or so constituents, many of whom, like
Mrs. Miller, who was there, had this MTBE in their wells. I
want you to know that I welcome any efforts on your part and
the State's part to correct this problem. It's a good impetus
for me to put pressure on my colleagues to say that we need to
resolve this issue.
So I welcome your support in that and whatever you pass
moving us in the right direction should certainly be a help.
Let me just start with you, Senator Klemm. You have a
convenience store, and I just met, along the border, right in
this area of Salem, where you have these Windhams. I know, I
met with a representative group in Washington a couple of days
ago of convenience store owners.
One of the problems that they raised with me, they said
that we know that we have this problem with some of our tanks,
but we just don't have the resources to replace them. Some of
these people are on a margin, they have two or three employees.
Maybe you could comment on what you're hearing from your
colleagues in the convenience store business where you have
those tanks, and also what you're hearing from constituents.
Senator Klemm. Thank you for the question. Fortunately,
under Commissioner Varney's leadership, New Hampshire was ahead
on this problem. We set up a program for reimbursement for
stores to take their tanks out of the ground and have them
replaced with double walled tanks and cathodic protection and
all of the up to date science that we have to see if any of
these tanks are leaking.
As Commissioner Varney has said, there are almost, I guess
it's 99.9 percent compliance in the State because of this
program. It's one of the ways we're looking at maybe helping,
that the MTBE is maybe doing something very similar to the fund
we created to replace these tanks to help homeowners in the
State.
Senator Smith. Mr. Varney, it's 99 percent completion on
the tanks, is that about right, in terms of replaced tanks?
Mr. Varney. We've had about 99 percent compliance with the
rule. There are only eight or ten or so tanks left statewide
that are not in compliance. One of the ways that we've done
that, in addition to the fund that Senator Klemm just
mentioned, is one additional provision which has turned out
well for us also, and that's a program whereby if an operator
can show that they don't have the resources to remove the tank,
and in particular, there are cases where they probably don't
even sell gasoline any more, they don't have the market and
don't have the funds to remove the tank.
We can actually step in and, in agreement with the owner,
who shows that they don't have the resources, can actually
remove the tank for them and then place a lien on the property.
The property is then a clean property that has higher value,
we've eliminated the threat to the neighborhood in terms of a
leaking underground tank. For some of these property owners,
the property may be their major asset. So at some point in the
future, we'll be reimbursed when there's a transfer of
property.
That's worked out very well because it's minimized the
impact on the small business owner that's struggling to
survive.
Senator Smith. You've obviously done an incredible job here
in the State. I wish other States had done as well in terms of
replacing those tanks. The obvious fact, though, that jumps out
at you is that you have 99 percent or so completion of the
replacement of the leaking tanks. Yet we still have 6,000 plus
wells contaminated in New Hampshire, and they're growing.
So it has to say that there are other sources. You
mentioned a few, whether it be the lawnmower or whatever. Also
I think you might add to the list the fact that when you put
the nozzle back on the pump after you've pumped your gas, it
may run off there. Certainly boats on the lakes for surface
water, not groundwater.
Where are the lion's share of the other contaminants, do
you think? What corrective action, if we've gotten the tank
problem taken care of, what other corrective action do we have
to take to stop this increase in wells being contaminated?
Mr. Varney. Well, a couple of things. One is the homeowner
use that I mentioned previously. The other is simply
discovering tanks that no one knew existed.
Senator Smith. So there may be more out there that we don't
know about?
Mr. Varney. There may be other tanks out there that we're
unaware of that even in some cases the property owner is
unaware of. Every day I hear of different stories of people
finding tanks that no one knew were there. So the universe
increases over time as properties are redeveloped, as people
look to finance and perhaps do some site research and
investigation.
So those would be the primary uses. But also keep in mind
that we use gasoline for our automobiles and for many uses. Any
spillage that's associated with those uses, even in very small
amounts, can contaminate a well.
Senator Smith. Let me ask the same question of both of you.
We have in the Federal Leaking Underground Storage Tank
program, the acronym, they used to call it LUST, and that
didn't sound too good. So we took the L off, and it's now the
Underground Storage Tank program. Had a little trouble with
that acronym.
We have about $15 billion in that Federal program right
now. Would you both be supportive of using some of the money in
a State like New Hampshire, where we've met our compliance
obligations on the tanks, for the most part, as we find new
ones, as you said we might, would you be supportive of using
some of the dollars in that fund for remedial help for people
like Mrs. Miller, who have the problem in their wells? Is it
appropriate to take that money from that program, which is
really designed to stop the tanks from leaking by replacing
them or sealing them, but would you be in favor of taking some
of those dollars and putting them toward immediate and urgent
help for those who are in need?
Mr. Varney. Yes, I would.
Senator Smith. Is that appropriate, in your opinion?
Mr. Varney. Yes, I do think it's appropriate, and I think
there's a logical nexus in regard to that issue. I really do. I
think that the resources need to be there. The States are
struggling to do the best they can with their limited
resources. Having the UST trust fund available to us as a
resource could make a huge difference and improve our ability
to respond quickly and provide the funding and the followup
there that's needed by the local citizens.
Senator Klemm. I also agree with what Commissioner Varney
has said. We are working in the State house in concord to come
up with a program very similar just to treat the MTBE problem,
very similar to the Underground Storage Tank Fund. I think that
if there is money available at the Federal level to help the
citizens with their MTBE problems, I think we should use that
money.
Senator Smith. I think we just got item No. 1 in our
Federal legislation to use dollars in that Underground Storage
Tank for the help of people like Mrs. Miller.
Mrs. Miller, let me ask you, as a person really living with
it, it's easy for us to sit here and talk about it, but you're
living with it in your well, what is you greatest concern? What
is the thing that bothers you the most about this? What is it
that you really are concerned about more than anything else?
Mrs. Miller. Probably the greatest concern that we have is
that we don't right now, in our area, we don't know where it's
coming from. They've done a lot of testing in our area. They
come back quarterly to take a sample to see if it changes. It
does for us. It went all the way from 4 to 22, and no one
really knows when it rains if it's worse, if it's dry if it's
worse. It's something that not too many people know much about.
So I guess that's what concerns us the most, is that it
will be affecting our health. We do have the system, but now we
have to deal with the system. For us, we were lucky, because
our basement was unfinished. So it took up almost a quarter of
our basement, because they ended up finding we were high in
radon, too, which ended up having another whole system for us.
So I think that's what concerns us the most. I mean, the
look, we can get over the look of the whole system in our
basement, because it's good for our health now that we have
good water. But I think overall we're concerned, because how do
we know if it's going to get worse or better? I guess there
just needs to continue to be more research on it.
Senator Smith. Commissioner Varney, do you have any
specifics that you can share with us at this point as to where
the source might be for this vein of water that's causing this,
if in fact we've sealed most of the tanks in the area that we
know of? I don't mean to put you on the spot. It's not a
hostile question. I just was curious if you know what that
source might be, or the predominant source here in this area.
Mr. Varney. I don't. Greg McGarry from our staff, who is
working on that issue, is here, and may know some more about
it.
Senator Smith. Greg, why don't you just come up, identify
yourself for the record.
Mr. McGarry. We're seeing a difficult situation [inaudible]
contaminate groundwater and bedrock [inaudible] water flowing
[inaudible] unlike groundwater in the soil, it's pretty much
[inaudible]. Consequently, we are having difficulty making a
determination where that [inaudible].
Senator Smith. So again, when you say backyard mechanics,
are there extensive examples of that in this area?
Mr. McGarry. No, there's probably one or two [inaudible]--
washing parts [inaudible] leaking gasoline [inaudible]
contaminated gasoline [inaudible] backyard.
Senator Smith. Sometimes extra funds wouldn't do the job,
because you wouldn't have the science to work it anyway. But in
this particular case, right here in this area, if additional
funds either at the State or Federal or both level were to be
provided to do more studies on these kinds of sources, would
this be helpful, or are we pretty much just going to----
Mr. Varney. Yes, absolutely, Senator. We are, as you can
imagine, with the increase in MTBE contamination, we're
stretched thin on this issue. We have very limited resources
and we're trying to deal with multiple sites, multiple
problems, multiple sources of pollution, where it's pollution
you can't see, you're not sure where it is, you're not sure
where it came from, you're not sure when it occurred. To do all
of the investigation work in a timely and accelerated fashion,
you need resources available to be able to do that, to be able
to bring on additional consultants who would work under our
direction would accelerate the process substantially.
Senator Smith. You have done or are doing a study on this
aren't you?
Mr. Varney. Yes, we are.
Senator Smith. Has that been completed or do you know? Has
that study been completed, sir?
Mr. McGarry. No.
Senator Smith. What's the timeline on that, roughly?
Mr. McGarry. [inaudible] depending on the hydraulics used,
depending on the concentration [inaudible] so it's literally a
moving target that's very difficult to get a handle on on a
technical basis.
Senator Smith. When you think about the number of wells
that are now contaminated, you could probably extrapolate to
30,000 or 40,000 wells or more over the next few years if this
continues. But whether there's MTBE in the gasoline or not, the
fact that there might be gasoline or whatever it is in your
drinking water or in your bathing water is not a comforting
thought.
Now, tell how the problem is exacerbated by the fact that
it is MTBE in the gasoline as opposed to just gasoline moving
into the water without MTBE. If we took MTBE out these folks
are still going to have gasoline in their water.
Mr. McGarry. Probably they're not.
Senator Smith. All right, that's what I want to hear.
Mr. McGarry. Probably they're not. The vast majority of
public and private wells or water supplies that have been
affected contain only MTBE or extremely low concentrations of
other gasoline additives.
Senator Smith. It moves quickly where the rest of those
liquids don't.
Mr. McGarry. Right, the soil can tend to hold back some of
the other gasoline components, bacteria in the soil is also
capable of consuming much of those gasoline components at low
concentration. But MTBE moves very quickly, bacteria, not
particularly thrilled with consuming the MTBE, in part because
it's a man-made compound.
Senator Smith. I might want to have you, Nancy, when you
come up here, expand on that a little bit yourself. I'd be
interested in hearing that. Thank you very much, Fred.
Mrs. Miller, is there anything now that any of us need to
do to help you in the immediate? We all know we're trying to
get this taken care of. But is there anything at the Federal
level or at the State level or at the DES level or whatever to
help you? Is your water OK now as far as the treatment that
you're getting? What are your needs that you want to let us
know about right here now that we can deal with?
Mrs. Miller. I think our water right now is fine. I guess
[inaudible] to let us know [inaudible] as well as [inaudible]
get a letter from the DES explaining what the level means. I
guess the only thing we were concerned about was that we do
have the system and they do maintain it, we don't pay anything
for it, it's all paid for by the State. I guess just having
something letting us know that. I mean, we don't plan to move.
But if we do, who's to say that the people that are going to
buy it believe us that we don't pay for anything? I mean, it's
very nice that we don't pay for it. I don't think I would
believe it if I went to a house to buy it that everything's
free right now.
I guess that's what I find it hard to believe, that we will
never have to pay for it. I don't want the system to just sit
in our basement, if the money runs out and then we will have to
pay for it, then that will make it a problem for us.
Senator Smith. Thank you very much. Does any other witness
wish to make concluding remarks before we move on to the next
panel?
I want to thank you all for being here. We appreciate it.
If you'd like to stay, I want to go to the Q&A period, we can
have everyone come up and maybe some of the members of the
audience may have a question. If you have to leave, we
understand.
Thank you. One other question. Is what Mrs. Miller's
problem is fairly reflective, fairly symptomatic of everybody
else's problem in this region? Are there people out there that
don't have the equipment that she has in her basement, or ar we
getting there? Are there people out there that are really
suffering right now, can't use their water? Where are we on
that?
Mr. Varney. We have been very quietly working with local
homeowners for many years around the State dealing with
gasoline contamination in their wells, helping not only to
provide bottled water initially and point of entry water
treatment systems but even locating new supply sources to put
in a community public water supply so they would have a water
line instead of an individual well.
So it's something we've been dealing with for a long, long
time. Because of the characteristics of MTBE, the problem is
worsening and it's putting a big strain on our resources here
in the State. So any Federal support, Federal funding that
could be provided would be put to very good use.
Senator Smith. Thank you very much to all of you for your
testimony, especially Mrs. Miller, thank you.
As the next panel comes up, I want to take a moment to
introduce the two folks who are sitting behind me. Chris
Hessler does all the clean air issues for me on the Environment
and Public Works Committee, as one of the deputy staff
directors on that committee. Of course Melinda Cross, who
assists Chris and helps me a lot. She's from Newmarket. So
somebody from Newmarket made good and moved out into the world.
So I'm delighted to have both of them with me. For all of
you that have technical questions, they would probably be the
best ones to ask, either formally or informally.
I'd like to introduce the second panel. Moving from right
to left, Dr. Nancy Kinner, who's a professor at the University
of New Hampshire. Bill Holmberg, who's a resident of Bowe, New
Hampshire, and biofuels producer. Patty Aho, Maine Petroleum
Association. It's great to have all three of you here. We
appreciate your coming and providing you testimony.
Again, same rules. You have 5 or 6 minutes to summarize.
Your written statement will be made part of the record and if
you wish to add anything to it, you'll have 2 weeks to do that,
if you find something else you need to add to it.
So I'll start with you, Dr. Kinner.
STATEMENT OF NANCY KINNER, PROFESSOR OF CIVIL ENGINEERING,
UNIVERSITY OF NEW HAMPSHIRE
Ms. Kinner. Thank you very much, Senator.
If we could have the lights down. What I'm going to talk
today about is really going to tie in with the first panel.
It's about the fate, transport, and remediation of MTBE in
groundwater.
I just wanted to give you a little bit of background. I'm
the director of the Bedrock Bioremediation Center, which is a
U.S. EPA funded research center at the University of New
Hampshire. We have a national test site for remediation of
chlorinated solvents, and will be opening up a site on gasoline
MTBE. One of our main goals is to actually do independent third
party testing of innovative and emerging technologies for
treatment of these contaminants in bedrock.
If we look at MTBE, as became clear in the first panel,
it's very soluble in water. It's readily dissolved into
groundwater or into precipitation, so that if we have a
release, for instance, of uncombusted fuel, that MTBE in the
gasoline can dissolve in precipitation and then be carried down
as rainfall to the earth's surface, and then as runoff go into
either surface water or infiltrate into the groundwater. If we
have some kind of a gasoline spill or release, the MTBE will
travel with that gasoline down through the soil and then the
gasoline, because it's insoluble in water, and lighter than the
water, will pool on top of the groundwater, and then the MTBE,
because it's so soluble in water, will dissolve into the
groundwater.
To give you an idea of the scope of this, if gasoline
contains about 10 percent MTBE and the temperature is 77
degrees Fahrenheit, the solubility of MTBE is such that we
could have up to 5 million micrograms per liter of MTBE in
water right below that gasoline. To put it in perspective, the
MTBE advisories and regulations range anywhere from 70
micrograms per liter, which is the EPA health advisory, down to
the 13 micrograms per liter primary drinking water standard in
New Hampshire.
Once MTBE gets into that water, it stays there. It won't
adhere to rock or soil, as Fred mentioned earlier. This is
unlike other gasoline contaminants, benzene, toluene,
naphthalene, that all like to stick to surfaces. But MTBE
moves. It travels along at the same velocity as the
groundwater.
So if the groundwater in an area moves in inches per year,
the MTBE will move in inches per year. If it moves in feet per
day, it's moving very rapidly with the water.
As a result, plumes of MTBE can travel for miles from the
source, potentially. One gallon of gasoline can contaminate up
to 4 million gallons of groundwater with MTBE. So that if we
talk about remediation, we need to have upwards of 10,000fold
reductions to meet those regulatory and advisory levels. Now,
remediation in different environments is progressively harder.
If we look at surface water, it's relatively easy. It's an
oxygenated environment, relatively easy to see where the
water's going and to pump out the contaminated water.
As we move to soil and then to bedrock, treatment gets
progressively harder, because it's difficult to know where the
water actually goes in the soil and bedrock. We don't know the
pathways because we can't see them like we could a river.
If we look at remediation technologies, they break down
into two broad categories, what we call ex situ treatment,
which is to pump the water out of the ground and treat it at
the surface. We have a small unit like that on Mrs. Miller's
well, that's called a point of entry unit, where we're just
treating her water.
Ex situ contrasts with in situ. In situ treatment is where
we actually do the treatment in the ground. Now, ex situ
treatment has some problems associated with it. To treat the
groundwater completely, we must get all the contaminated water
out of the ground. That's hard to do, because MTBE spreads so
far and so wide in groundwater. We don't know where those
pathways are.
This is unlike those other contaminants we were talking
about that stick to the soil and we know they're very
localized. In situ remediation primarily centers on using the
microbes that live in the ground to degrade the MTBE. These
microbes are naturally occurring, and they basically use that
MTBE as an energy source, just like we would use hamburgers.
They degrade it to CO2 and water.
The microbes, however, need other materials to do that
degradation. For example, they need oxygen or nitrates. The
advantage of in situ treatment is that we don't have to pump
all of that water out of the ground to treat it. However,
there's no free lunch, because the natural rate of in situ
treatment is relatively slow. For example, if the concentration
of MTBE was about 1,000 micrograms per liter, it would take 13
years with the natural rate of microbial degradation to get
down to those advisory levels.
Also, we have another problem with these microorganisms in
that sometimes they don't take the MTBE all the way to
CO2. They'll stop at an intermediate organic,
something like tert-butyl alcohol, which is not a very good
contaminant to have, either.
In some cases what we can do is what's called enhanced in
situ remediation, and in this case, we add materials to the
ground to accelerate that natural rate of remediation. That's
called bioremediation. For example, out at a naval air station
in California, they've added oxygen to the ground and in that
case, the concentration of MTBE in 1 year has gone from about
800 to 7 micrograms per liter.
The challenge here, though, is distributing those materials
in the ground.
Senator Smith. Could you just take a second and go into the
cost of that? Is that cost prohibitive? Can you give us any
idea on that?
Ms. Kinner. On that particular site, it's not cost
prohibitive. Obviously it costs several million dollars to do
the whole thing. But you're cleaning up the whole plume of
groundwater, not just the water that's coming up in somebody's
well. It's on the same order of magnitude of cleanup of other
contaminants.
So in conclusion, the problem with MTBE is its overwhelming
solubility in water, and its desire to stay there and to travel
with that groundwater. To put this in perspective, MTBE ranks
as the fourth most produced organic chemical in the United
States. There were about 10.5 million gallons of MTBE produced
per day in 1998. So there's a lot of MTBE out there. Even if we
banned it today, the MTBE pollution in the groundwater would
continue to be a huge problem nationwide, because it keeps on
moving and gets degraded very slowly.
So I think what we need to do is certainly put some money
into the search to develop and test innovative technologies to
deal with this problem.
Thank you, Senator.
Senator Smith. Thank you very much, Professor Kinner.
Let me express my apologies to Jeff Rose, who I didn't know
was sitting there. I apologize, Jeff. Jeff Rose does all of my
environmental work here in the State. He has set up one other
hearing and a number of other meetings and works very closely
with the Department of Environmental Services and all the folks
here in the State. I'm pleased to have him here, and apologize.
I didn't know you were sitting back there, Jeff.
The next guest is Mr. Holmberg. Please proceed.
STATEMENT OF WILLIAM C. HOLMBERG, PRESIDENT, BIOREFINER
Mr. Holmberg. Mr. Chairman, thanks for the opportunity to
be here today. I have just learned a great deal from Dr. Kinner
and may change my presentation based on what she had to say.
Senator Smith. Well, if you learned something, it will be
worth it, right?
Mr. Holmberg. Right. Maybe I should wait until I hear from
the other person here.
I've been involved in the area of biofuels for about 26
years, in the government, in the private sector, and managing
association programs. I'm not going to focus a great deal on
the issue of MTBE, because you're doing a wonderful job of
covering that issue here. But I want to thank you for this
opportunity. Also, thank you for the fact that you came to the
environmental inaugural ball in January and made a very
impressive speech, and added to the success of that effort in
Washington. Thank you for that.
Senator Smith. You might have to speak up a little louder,
Bill, or put that microphone closer to you.
Mr. Holmberg. The primary issue before you today is MTBE,
and I fully agree that it should be banned and phased out of
the gasoline pool. I ask that you consider a phase-out schedule
that accommodates the reality of the problem and the economic
consequences of such action.
Consequently, I suggest that you set up a legislative
process so that the States are authorized to make the decision,
rather than making a decision at the Federal level. Because
it's different in every State, different circumstances,
different levels of MTBE utilized, different contamination of
the groundwater. Also there's the issue of a basic public
relations attack on MTBE from those who benefit from the demise
of that particular gasoline additive. I'm not suggesting that's
the case here at all. I'm just suggesting that nationwide, that
creeps into the formula.
It's interesting to note that MTBE is used in many parts of
the world, continually so, for the last 10 years. Dr. Kinner
just pointed out that it's still in great use. But it's
interesting to note that the amount of public outcry has
diminished significantly. I think that's probably because the
wells are being cleaned up, and the tanks are being sealed up.
Again, back to that attack by those who have a vested interest
in the demise of MTBE they are relaxing their attack, and that
helps.
It's also interesting to note that the people who launched
that covert attack are the same folks that did not support you
legislation last year. I think you recognize that that's
probably the case.
The advance of the biorefinery concept that I have been
working on, which is the conversion of cellulosic biomass to
biofuels, bioenergy and biochemicals, is of great importance to
the northern New England States. Because, essentially, you have
no fossil reserve or gas or coal, and you're dependent on some
form of transportation fuel. Given the present path we're on,
that dependence is simply going to increase with the passage of
time.
What you do have in these three northern New England States
is vast reserves of biomass. They can be converted into
biofuels, biochemicals and bioenergy, electricity and thermal
energy. It not only includes agriculture and forestry residues,
but it includes rights of way, park, yard and garden trimmings,
the clean biomass portion that goes to the dump. We here in New
Hampshire have done a tremendous job of cleaning up or
recycling biomass. It ideally is set up for a biorefinery.
With gasoline prices possibly reaching $2 a year, and as
people are beginning to talk about energy, I think it's clear
to appreciate that we've got to find a way to reduce our
dependence on all those fossil fuels that are imported into New
Hampshire, principally the transportation fuels. Biomass
presents that opportunity.
There is action required on two fronts. One is a steadily
expanding market for biofuel. The renewable fuels standard that
was in your legislation last year, S. 2962, reported out of
your committee, is the best instrument to achieve that. The
Renewable Fuels Act of 2001, S. 670, is out there now being
considered. I ask that you include a renewable fuels component
in your legislation, or co-sponsor S. 670.
When you start thinking out of the box, then we have to
recognize that over the past almost 50 years, that hundreds of
millions of dollars of Federal funds have been spent on the
technology to convert cellulosic biomass to biofuels,
biochemicals and bioenergy. The oil and gas industry estimates
that that is in excess of $7 billion. We've got to find a way
to take those hundreds of millions of dollars and put them to
good work for the New England States.
Thank you.
Senator Smith. Thank you very much, Mr. Holmberg.
Ms. Aho.
STATEMENT OF PATRICIA W. AHO, EXECUTIVE DIRECTOR, MAINE
PETROLEUM ASSOCIATION
Ms. Aho. Thank you very much, Senator Smith. I'm Patty Aho.
I'm the Executive Director of the Maine Petroleum Association.
We are a division of the American Petroleum Institute, and as
such, I also oversee the issues of concern to our members here
in New Hampshire.
As you indicated in your opening remarks and as the other
two members of my panel have indicated today, a great deal of
the focus of attention during the last few years has been on
ethers and gasolines, specifically MTBE. But as the discussions
regarding MTBE have occurred, there have also been discussions
regarding the use of ethanol as an alternative to the use of
MTBE in gasoline. I'd like to address you very briefly in
regard to ethanol issues that we would face here in northern
New England, in New Hampshire and in Maine, regarding ethanol.
As was indicated briefly by Mr. Holmberg, ethanol is not
widely available here in northern New England. There is very
little, if any, that is currently available. Ethanol is
primarily available in the midwest, and that poses some
questions in regard to the use of ethanol in gasoline here in
New Hampshire or here in northern New England.
Over the last few years, there have been a number of
various forum and studies that have occurred regarding the
availability of ethanol and the infrastructure that would be
needed here in order to use it and make it more widely
available. Last year, the Coalition of Northeastern Governors
hosted a forum here in New Hampshire regarding bioethanol, the
economic issues, the infrastructure issues it would mean to
northern New England, as well as to the northeast.
In Maine, we have a State agricultural products utilization
commission that has recently contracted to do a feasibility
study on creating a bioethanol refinery in northern Maine. A
subcommittee of your committee recently heard from the
executive director of NESCAUM, the North Eastern Sates for
Coordinated Air Use Management, who indicated that yes, you
could bring ethanol into the northeast and the New England
area. The question becomes at what cost.
Unfortunately, the cost has become an issue and we've seen
that the Commissioner of the Department of Environmental
Protection in Connecticut has recently even indicated that
price ranges may be from 3 to 11 cents per gallon right now, if
you look at ethanol as a substitute for MTBE. The cost and
availability are clearly issues here in northern New England.
Coupled with that, though, is the infrastructure question
that it would take in order to provide ethanol in our gasoline.
Your terminals provide you product into New Hampshire in the
Portsmouth-Newington area. You also receive product from the
Portland Harbor area as well a the Boston harbor terminals.
Those terminals don't have the infrastructure needed right now
in order to support ethanol. Ethanol needs to be separated and
segregated before it can be blended into the gasoline. Those
terminals don't have the equipment for blending ethanol into
gasoline when it's picked up by trucks and taken to gasoline
stations.
Gasoline stations in New Hampshire or Maine and northern
New England right now also probably might need to do other
types of retrofits in order to make sure that the underground
tanks and pipes are compatible for ethanol-containing gasoline.
So there are clearly availability and infrastructure problems.
These discussion arise usually in terms of can we use
ethanol as a replacement for MTBE in reformulated gasoline. The
reason for that obviously is because of the 2 percent oxygenate
mandate that's required under the Clean Air Act for the
Reformulated Gasoline Program.
So we would encourage you to repeal the 2 percent oxygenate
mandate part of that so that the Reformulated Gasoline Program
and refiners do not have to meet that particular oxygenate
mandate. We think that then discussions regarding alternatives
to the use of MTBE would take different tones and also would
have different solutions available if the 2 percent oxygenate
mandate were actually repealed.
We appreciate very much the opportunity to present
information to you this afternoon and we will continue to work
with you, your committee, as well a the State legislators and
regulators on these particular serious issues that we're all
facing. Thank you very much.
Senator Smith. Thank you very much, Ms. Aho, for your
testimony. We appreciate it.
On that RFG requirement, isn't it true that if we did
repeal the RFG mandate or waived it, that it would have no
impact on clean air itself? Does it harm the air to remove that
mandate?
Ms. Aho. To the extent that I think you would still be able
to have fuel formulas that provide a clean air benefit, no, I
don't think you would be harming the air.
Senator Smith. Again, the problems associated with using
ethanol in New Hampshire, you spoke correctly, I think, about
the cost, the estimates do run up to 11 or 12 cents a gallon
more. Maybe Dr. Kinner could comment on this, what about the
impact of using it on the air itself, in terms of what ethanol
would do to the air here in New Hampshire or in New England as
opposed to other regions of the country?
Ms. Aho. I think I will defer.
Ms. Kinner. To the extent that ethanol increases certain
air emissions, then you would have to take those into account.
Volatile organic compounds can be increased with the use of
ethanol. So that would be one of the, not necessarily
tradeoffs, but it would certainly be one of the considerations
that any State environmental group would have to take into
consideration.
Senator Smith. Mr. Holmberg?
Mr. Holmberg. Two points. One is if you take the 2 percent
oxygenate requirement out of RFG, that means you pull out
either MTBE or ethanol, both high octane additives. Refiners
have to get octane someplace, and they routinely will turn to
the aromatics. That brings in the benzene issue, and benzene is
a known carcinogen.
So we have to be very careful about what we replace in
gasoline in terms of taking out the oxygenate.
Senator Smith. Would you be supportive of legislation,
however, that would not guarantee ethanol all the market if we
replace, if we take out MTBE, but would allow ethanol to
compete in areas where it's not an environmental problem, or to
compete? Would you have any problem with legislation that did
that, or are you insisting on a mandate for ethanol?
Mr. Holmberg. I'm not insisting on a mandate and----
Senator Smith. You are or not?
Mr. Holmberg. Not. And your legislation last year didn't
call for a mandate, either.
Senator Smith. It didn't, but the ethanol people blocked my
bill.
Mr. Holmberg. That was the point I was trying to make.
Senator Smith. So their market was tripled in my
legislation, basically on a free market approach. But the bill
was blocked by ethanol Senators coming to the floor, coming to
vote before, because it didn't have enough.
Mr. Holmberg. That's one of the key points that I wanted to
bring up in my testimony, that there's rationale for the
existing ethanol industry to oppose the advance of ethanol from
cellulosic biomass. They want to control the market and they
want to have access to their ability to control the price
structure. They don't want too much corn going into that
industry. There's competition involved. Increased production
threatens the tax incentives. There are just lots of reasons
why the major ethanol producers are opposed to the kind of
ethanol industry I think the nation needs and should be
instituted here in the northern New England States.
Senator Smith. So you're saying that ethanol can be used
here?
Mr. Holmberg. It can be used here. It can be made here.
Senator Smith. You disagree with that?
Ms. Aho. No, sir, I don't. It can certainly be used here.
Efforts are underway to study the feasibility of creating a
bioethanol refinery plant in Maine. So there are efforts
underway to see if it can be made here as well.
I don't disagree with either of those two points. What I do
have problems with, though, is in people searching or looking
toward ethanol as the panacea or solution to simply removing
ethers from gasoline. It's in those discussions that then we
run into trouble in northern New England, because if you were
to do that as of, say, the beginning of next year, we don't
have the ethanol availability here nor do we have the
infrastructure here to support that in order to use ethanol in
gasoline.
Senator Smith. Dr. Kinner, in watching your presentation
there, you have a, aren't you working on something? Can you
tell me a little bit about that, the Bedrock Bioremediation
Center there?
Ms. Kinner. We're looking at chlorinated solvents, which
behave quite differently than MTBE or gasoline. But the whole
point of that study site is for us to actually develop the
methods to monitor and to remediate chlorinated solvents in
bedrock. In particular, we're looking at competent or deep
bedrock, which is a very difficult problem to deal with.
So we actually have our first test going on starting this
summer, an independent evaluation of a commercial product which
is to remediate TCE in bedrock. So we actually set up a full
test array and actually monitor very carefully whether or not
that TCE is being degraded and what it's being degraded to, to
make sure that that's an acceptable compound as well.
Senator Smith. In your presentation, you talked about the
pump-and-treat cleanups and trying to solve all the problems.
If we proceeded down that road now in terms of dollars, putting
dollars into that kind of holistic approach of trying to clean
up the entire aquifer, if you will, are we just maintaining or
just treading water? If MTBE continues to come into the supply,
are we staying ahead of it by doing that, or are we wasting
money?
Let me qualify ``wasting money.'' We're not wasting money
if we're helping people be able to use their water, obviously.
But if we were to put a lot of money into that approach, will
we ever get ahead of it that way or do we have to do that in
combination with getting at the source? Are we staying ahead if
we didn't get the source, we haven't found the solution to the
source, are we still staying ahead?
Ms. Kinner. I think in most remediationsites, one of the
first things that you try to do is to locate the source and
eliminate the source. That's a pretty standard rule of thumb. I
believe in the case for Mrs. Miller, the difficulty there is
that it's a bedrock well. So finding the source is much more
difficult.
To give you an analogy why that's hard, if you think about
contaminant moving through soil, it's like a contaminant moving
through the streets of Manhattan, lots of pathways, you can
pretty much get from point A to point B pretty easily. But if
you look at roadways in northern New Hampshire, there are very
few, and you don't always know where they're going if you're on
one of those logging roads.
So when you're looking in bedrock, you don't know where
that contaminant came from, because it's not just a direct path
from a higher elevation to a lower elevation. So it makes it
very difficult to find the source in bedrock. In some cases, it
may be that it is almost impossible to find the source so we
have to remediate the water that's contaminated as a fall-back
position.
Senator Smith. Carl Sagan asked a question many, many years
ago, I can't remember how many--30 or 40, I guess. He said,
``Someday we're going to have this little rover and we're going
to shoot it up to Mars and we're going to run it all around
Mars' surface. It's going to take samples and send it back.''
Everyone said, ``What is he talking about, how is that going to
happen?''
I'm asking you to look into the future a little bit. If we
were to take an approach on this to work very closely with the
Mrs. Millers out there, and help them through remediation, put
the dollars into the remediation, and say, ``We're going to buy
on to all of this other pump and treat. We're going to leave
that alone, because in 20 years, 25 years--you can give me your
best guess--we're not going to be producing automobiles that
burn gasoline any more. Therefore, we're going to take our
problem away. We're going to go to hybrid automobiles or
hydrogen vehicles. We're not going to be filling them up at the
pump with gasoline.''
Are we going to hit Armageddon before we get to that point,
with the manufacture of automobiles to such a point that it's
going to cause us so many environmental problems we're never
going to recover, or should we just put the money into the
research to get there sooner with the automobiles, the hybrid
and hydrogen vehicles?
Ms. Kinner. I think certainly, if we look into the future,
gasoline for fueling vehicles may be eliminated. But I think
the short-term problem for somebody like Mrs. Miller is, she's
only the tip of the iceberg. These MTBE plumes are moving. So
we get more and more people impacted as those plumes move.
Those systems are extremely expensive when you look on an
individual scale.
For instance, Commissioner Varney mentioned that they'll be
spending upwards of a million dollars. The systems are
expensive to put in. Economy of scale is not with you on a POE
(point of entry) unit. They're also very expensive to maintain.
So that by just treating those individual wells, it's somewhat
problematic in the short term.
Senator Smith. Right. But if we assume that we were to
treat those just as we're doing now for Mrs. Miller but put
money into moving quicker to get at the source, which is the
automobile, the fuel used in the automobile or are you
suggesting we do all three? In other words, do the remediation,
do the kind of research, the pump and treat, the research you
showed up on the slide, and at the same time move forward as
quickly as we can toward cleaner, more efficient automobiles?
Mr. Kinner. I think if we can eliminate gasoline being
used, it would save a lot of problems on a large scale.
Senator Smith. So the sooner, the better?
Ms. Kinner. Yes. But I do think that no matter what,
looking at the projections that are out there, we have an MTBE
problem here for a long time to come. Because once it gets into
the environment, that degradation is very, very slow.
Senator Smith. We have no idea how long that degradation
takes at this point?
Ms. Kinner. It varies in different environments. Because on
the slide, I was mentioning that typically, the organisms use
oxygen to do the degradation. But in many of these aquifers,
there is no oxygen present, because they're very deep down and
the only source if oxygen is from the air diffusing down into
the environment. So 13 years is somewhat perhaps optimistic in
some of these deeper situations. I believe Mrs. Miller's well
is down about 300 feet.
Senator Smith. Thank you very much.
Mr. Holmberg, I just want to be sure, do you support an
ethanol market mandate or not?
Mr. Holmberg. I support the provisions that were in your
legislation last year and in S. 670.
Senator Smith. Which gives them a portion of the market but
allows for the flexibility of areas such as New Hampshire or
California or some other place to use another alternative if
they wish?
Mr. Holmberg. Yes. I would like to make the point that
ethanol, when you talk about hybrids, electric vehicles or fuel
cells, that ethanol is the preferred fuel for fuel cells
production of hydrogen. Once you start that process, the
opportunity to expand the ethanol industry in northern New
England is tremendous, and the market for ethanol is assured
all the way out to any future that I can see, because of the
ability to convert it to hydrogen.
Senator Smith. Does any witness have anything they wish to
add?
[No response.]
Senator Smith. I want to say thank you to this panel. It
was a fantastic panel, as was the first one, very informative.
Before we go to the Q&A for the folks in the audience, I
just would like to make a couple of announcements. I want to
certainly thank Channel 17, Salem Cable Access, for their gavel
to gavel coverage, and New Hampshire Public Television, who is
also covering this. These aren't things like missing planes in
China, this is pretty heavy stuff and it's very difficult to
understand, and we very much appreciate your covering this. I
know it's of fantastic interest to your viewers, and I commend
you for doing it.
One other announcement, lest I forget. On May 30, we intend
to have a hearing--somewhere in the sea coast, I don't think
we've pinned it down just yet. We're going to be bringing, at
that hearing, a lot of new technology that's quite incredible.
It's really something you don't want to miss. We have a number
of people who are going to be testifying and talking about
hydrogen vehicles, maybe give you a chance to ride in a
hydrogen bus, hybrid car, and see some new technology and some
incredible things that are happening on all of the
environmental issues, air, land and water. It will be a very
exciting hearing. It's called the New Technologies hearing.
Also to remind everyone that if you wish to add testimony
or put testimony in the record, we'll keep the record open for
2 weeks, until 2 weeks from today.
So with that, if the other witnesses are still here, I
would invite you to come back up. Maybe you could slide another
chair up or something. Then if the people in the audience have
questions, if you would just walk up to the microphone and
please identify yourselves for the record.
I do have a sign-in, so what I'll do is I'll start with
that. If you signed up here I'll call you in the order you've
signed up, and then if there's somebody else that wants to ask
a question beyond that, then feel free to do it.
Richard Norris. Use that microphone right there. Please
feel free to direct your question to any of the witnesses or
any of the panel behind me, my staff or me. Preferably the
staff and the witnesses.
STATEMENT OF RICHARD NORRIS
Mr. Norris. Thank you, Mr. Chairman. I said earlier to you
that I would be quite brief, and I will. The reality of being
brief is enhanced by your announcement that you plan a
technology hearing later in which a subject matter that
interests me will be expanded on, and that is the question of
going to a different source of energy. Separating hydrogen from
water, for example, hydrogen from oxygen. Because the
contaminant we get from that is water, again, that goes on the
ground. Your concern is of course within the environment.
I'm just concerned about one thing, and that is the old
story about the Arkansas traveler who's only concerned with the
hole in his roof when it rains. I hope that you will keep your
attention on what we can do to improve our sources of energy
and the possibility of hydrogen is one of them. We are alerted
to it by, I think, is it Dean Kamen and his first group that is
talking about a small personal motor vehicle that would be
powered by hydrogen.
The point for me is simply that hydrogen, as a source of
fuel, is becoming real, and I hope you and your committee will
keep it in your mind. I won't say more, because I'll go and
watch carefully for your hearing on the sea coast on
technology.
Senator Smith. Dean Kamen is a very bright guy, and I'm
hoping we'll be able to have him testify. Maybe he'll announce
what this new little gadget is, but don't hold your breath on
that one.
I hope I can read this--Doug Bogan, is that correct? Doug
Bogan.
STATEMENT OF DOUG BOGAN, DIRECTOR, NEW HAMPSHIRE CLEAN WATER
ACTION
Mr. Bogan. My name is Doug Bogan, I'm New Hampshire Program
Director for Clean Water Action. It's a national environmental
group obviously concerned about water quality issues. Senator
Smith, I would like to thank you for putting together this
program today and commend you for making this issue a priority.
Because it has been a priority of my organization and others in
State and throughout the country for some years.
I mostly have comments, and may have a question or two
along the way. But I do feel that in the discussion that we've
had so far today the origins of this problem have been given
short shrift. There hasn't been enough discussion of why we
have MTBE in our gasoline to begin with. From our perspective,
having watched this for many years, the story of MTBE is really
a sordid tale of willful neglect on the part of the Government,
miscommunication between different agencies, particularly
within the Environmental Protection Agency itself, and really a
determination to seek really the cheap fix with regard to air
quality.
Now, some of you know that my organization has been
involved in air quality issues as well as water quality issues.
We certainly want to see cleaner air in New Hampshire and
throughout the region. But we do feel that the use of MTBE and
the whole Reformulated Gasoline Program was really flawed from
the get-go, because it really tried to solve the problem of air
pollution through tinkering with the fuel formula for gasoline
rather than really going to the source of the problem, the fact
that we use so much gasoline, to begin with, and that we don't
use it efficiently, and that it's not burned cleanly, and that
MTBE is not really the best solution to that problem.
Then again, of course, we have the ensuing problem of water
contamination that was known 10, 15 years ago. We know that EPA
scientists were aware of it. Evidently it didn't get passed on
to the right officials at the right time. We really feel that
there was a neglect of the available data then. We obviously
know a lot more about the problem now. We do feel that the
Government, both at the State and Federal level, needs to move
on to admit that there were mistakes made, but to use the
available science to solve this problem.
It really comes down to the basic metaphor we use a lot, I
actually just heard it last night at a meeting in UNH talking
about Rachel Carson, that if you come into your house and you
see water running down the stairs from the bathroom upstairs,
and you go up and you find the bathtub has been running,
overflowing, and it's spilling out over the floor, well, you
could go grab a mop and a bucket and you could try to mop it
all up. But the much simpler and real long term solution to the
problem is you go up and you turn off the tap.
I think that's the real problem we have here, is that we're
not doing enough to turn off the tap to deal with the problem
at its source. So we encourage you to pursue that. We do feel
that the people here today and through the last few years that
have become aware of this problem, whether indirectly or
directly through their own drinking water, deserve a better
answer, and they deserve a better solution than, well, we'll
just treat your water and we'll provide you bottled water. They
really need to know that the problem is going to be solved,
that the source will be eliminated.
We feel that the people should not have to worry about the
safety of their drinking water. Everybody has a right to clean,
safe drinking water. We shouldn't have to live in fear of
whether there will be health damage many years down the road
because of contaminants like MTBE as well as the many other
ones that we know about.
So I do want to point out that I don't think it was
mentioned here today that the State of New Hampshire, as I
understand it, was not required to use MTBE to use the
Reformulated Gasoline Program. The State opted into the program
with the certain purpose of reducing air pollution in the
region. But as I said before, we don't feel that it was the
best way to go about the problem. It may have been cheaper, but
we're seeing the consequences now, that there are many, many
costs that weren't taken into account.
Just a real quick calculation of some of the costs of
remediating these private wells. I've heard an estimate of
6,000, 7,000 wells that may be exceeding the State's new
standard for MTBE. It's estimated that it may cost $4,000 for
the immediate cost, capital cost of setting up the remediation
and another $1,000 per year after that. That all adds up to
about $35 million for these 7,000 wells throughout the State in
the first year, and then another $7 million each year after
that. That's a huge price to pay, if people even know and find
out that they have contaminated water. Many people probably
won't find out until it's really too late.
So we should be avoiding those kinds of costs, we should
address the problem at the source. We do feel that there are
alternatives and we feel that we need to get to the source of
the problem with air pollution, too. I know, Senator, you've
been doing a good job looking at that issue, particularly with
the power plants that need to be cleaned up. We now know that
they are a much more addressable source of the nitrogen oxides
that lead to smog that MTBE was mainly originally created to
address.
So I do want to commend you, Senator, for making this an
issue, making it a priority. I also want to applaud you for
your leadership in State and particularly in the U.S. Senate to
get something moving on this issue so that we can have safer
drinking water in the future.
Senator Smith. Thank you very much, Doug. I'd like to make
a response to your question from a political sense, but before
I do that, if Bob or Nancy or anybody wants to make a comment
on the technical aspects of his question. I don't know the
history of when you put the MTBE here in the State in regard to
the requirement, but if you wish to comment on that.
Mr. Varney. Sure. The opt-in by the State of New Hampshire
was first of all done at a time when the concerns about MTBE
were not readily known to our agency as well as to the State
legislature or Governor's office, etc. We also know about the
fuel distribution system in New Hampshire, and we looked at it
analytically and determined that we were going to get RFG fuel
whether we opted into the program or not, given our
relationship to the markets, to ourselves.
By opting in, we were able to take credit for clean air
reductions that would be associated with that opt-in provision
and be able to include it in our State implementation plan. So
it's pretty easy now to sit back as a Monday morning
quarterback and look at, we should have done this, we should
have done that. But at the time there were no negative comments
from any environmental group. In fact, we were applauded for
opting in at that time from the environmental community here in
New Hampshire and in New England. Other States did the same.
The key for us is having the flexibility so that we cannot
doubt and do it in a way where we don't have to sacrifice water
quality for the sake of clean air, where we can opt out and do
the right thing, eliminate the oxygenate requirements and be
able to opt out sooner than the current EPA regulations allow
us to do. Having that kind of flexibility available to the
States is what we need.
Senator Smith. Anybody else wish to comment? Mr. Holmberg.
Mr. Holmberg. On the history, the reason that oxygenates
came along in reformulated gasoline with the passage of the
Clean Air Act was that as lead was being phased out of
gasoline, the level of aromatics in gasoline went up amazingly.
This was a real threat to human health and contamination of the
groundwater. So that's why the oxygenates came in in 1990.
Senator Smith. And I'll just add the political. Certainly
the U.S. Congress deserves its share of the blame. In 1991 or
1990, when the Clean Air Act was amended with this provision,
there was very little science, really, done. Some speculate
that there was science there that we didn't look at. Whether
that's the case or not, there was a mad rush to clean up the
air. We didn't do enough research on this particular product,
in my view. Therefore, all of us collectively made a mistake,
but I think made a mistake with good intentions.
I think it certainly lends a lot of credence to the
argument that we ought to investigate and thoroughly analyze
the science as we know it. Unfortunately, there's not a lot of
exact science in some of these issues. That's the problem.
Did you want to comment, Dr. Kinner?
Ms. Kinner. Yes. The one thing I think that needs to come
out here is that these point of entry systems that have been
installed are not treating the problem in the groundwater. They
are just treating what comes up to that person's well. That
problem is only the tip of the iceberg of what's out there. So
that if we just use POE systems I admit we're treating people's
water, like Mrs. Miller, which we have to do, but we're still
leaving that contaminant in the groundwater, polluting the vast
majority of the groundwater. So I think we need to look at a
broader based solution to what is in the environment.
The other thing I'd add is I think before you go to a
solution like ethanol, you really have to think about what are
the implications of that ethanol when it gets to the
groundwater as well, and how is that going to interact with
things like benzene and toluene which sorb on the soil and they
move more readily with ethanol present. So I think before we
jump into that solution we ought to do a little bit of
background research as well.
Mr. Bogan. I do have a couple questions, if I may.
Mr. Varney, isn't it true that the State had an opportunity
back in 1998 to opt out of the program, and the State of Maine
I believe did do at that time? Could you explain?
Mr. Varney. Sure. As you know, Doug, and it's been
explained to you on numerous occasions, New Hampshire and Maine
are in different categories as it relates to the Clean Air Act.
So what they're able to do, because they did not have an
approved SEP, was to be able to opt out of the program.
Whereas, with us, where we did the right thing and had an
approved SEP, approved by the Federal EPA, we have this 2004
requirement placed upon us as it relates to opting out.
Second, Maine has not banned MTBE. That's been widely
reported by various parties. There is still MTBE in Maine. So
they have reduced their MTBE as we're trying to reduce it. But
the analogy to Maine, we're comparing apples to oranges. It's a
very different situation in New Hampshire, because we're
treated differently under the Clean Air Act.
What we're trying to resolve is to have the Federal
Government reward us for doing the right thing and don't
penalize us for doing the right thing, which is what the
current situation is.
Mr. Bogan. Wasn't there a choice, though, at the time, of
how you would meet the requirement to deal with the air
pollution problem? I mean, you didn't have a gun to your head
that you've got to use MTBE or you've got to----
Mr. Varney. No, we didn't specify MTBE. We have RFG, which
is a regional fuel. We don't have a State specific fuel. We
don't have the authority to specify the characteristics of
fuels according to Federal law. So we're using every authority
that's available to us under the current laws and regulations
that exist at the Federal level. That's what's guiding us at
this time.
Senator Smith. The next person on the list is Mary Ellen
Martin. Mary Ellen, if you'd like.
While you're coming up, let me just indicate, the idea, the
intention here in terms of the thrust of Mr. Bogan's question
is to ban MTBE, to waive the oxygenate requirement, not
backslide on the Clean Air Act. By that, I mean not walking
away from the Clean Air requirements.
The problem politically we have, I know it's very
frustrating for me as a Senator from New Hampshire, and indeed,
the chairman of the Environment and Public Works Committee, to
have to say this. But we have some really tough competing
interests that we've got to work on, which is why this hearing
is helpful in getting this information back. No. 1, you've got
the MTBE producers.
You may say, so? Well, we told them to produce this product
and they did it. They have their own interests in Congress. I
think Texas and Utah, I believe, are the predominant States
that produce MTBE. Maybe they want some kind of transition
money to move into something else. So do we buy them off by
providing remedial help, Mrs. Martin, and at the same time
providing help to them? That's an issue. I'm not saying that's
what we'll do, but that's an issue.
Second, you have the refiners. They have certain
requirements. You have the ethanol producers. They are a huge,
huge voting block in the U.S. Senate, and they are tough
customers. Whatever you feel about ethanol, the point is, it
really gets down, in some cases, to profit versus the health of
our citizens.
Frankly, I'm going to put health first. That's what I hope
I can convince my colleagues of back there. We gave you triple
the market, and you want all of the market and we can't get
this taken care of. That's not right. That's the message I'm
taking back. Whether we win that argument or not, I don't know.
But I think we win it morally, that's for sure. If we can get
it done politically, then we'll get this done.
I don't want to create false impressions. It's tough. It's
going to be a tough, tough issue. I intend to do everything I
can to get it done. The folks at New Hampshire DES have been
tremendous in their help, not only with their political help
but also with their knowledge and input as we try to draft a
bill. But this will be all helpful as we go back to draft
legislation.
I know that we've talked to Senator Prescott the other
night, Senator Klemm, too, there were some people at that
meeting who said, what do we do, do we pass a bill at the State
level or what do we do. I wouldn't discourage anybody from
passing whatever they thought. I think it's anything you want
to pass you feel deals with the problem from the State
perspective to be helpful. If it doesn't fit with the Federal
law, then it's my job to try to get the Federal law changed to
fit with what New Hampshire's done.
So you don't hurt me at all in my effectiveness by doing
it. So feel free to do whatever you need to do in that regard.
Mary Ellen Martin.
STATEMENT OF MARY ELLEN MARTIN
Mrs. Martin. I loved that last statement, sir. Thank you
for that last statement. That will be a great help to Senator
Klemm and I in the next couple of weeks.
I'd like to begin by just answering a question that you
posed, Senator, on the difference between the cleanup of
gasoline with and without MTBE. I just happen to have in my
little extensive tote bag back there a reference. The health
and environmental assessment of MTBE that was done by U.C.
Davis, reported in November 1998. The cost to remove MTBE from
drinking water is 40 to 80 times higher than treating for
conventional gasoline with no MTBE. The cost to remove MTBE
from groundwater is 50 to 100 percent higher than treating for
conventional gasoline with no MTBE.
So adding to the already copious testimony of the need for
treatment, I would like to agree with Mr. Bogan to some degree.
We've covered that very extensively. We are swimming in this
stuff, we have to address treatment of this stuff. But we
really need to address the issue of preventing this stuff from
getting into our water in the first place. This is one of the
primary directions of legislation which Senator Klemm and I and
several of the local senators who are also sponsoring have
going in New Hampshire.
USTs are not a problem in the equation in New Hampshire. I
understand that in other parts of the country they are, but
they're irrelevant here. The talk of cleanup as it continues to
affect more and more citizens I think is going to be more and
more frequent, by more and more bodies and more and more
interest groups.
I think Mrs. Miller and her neighbors in Derry, as well as
the folks here in Salem deserve a little bit of more
explanation as to why we are sitting here in this mess to the
degree that we are. While Commissioner Varney and I spoke 3
years ago when I began to try and move this elephant up the
mountain, i.e., address this issue of MTBE in our water supply,
nevertheless, when we had that opportunity to opt out, when we
had all the knowledge that Maine had at that time, and Maine's
own field people had discovered the plume of MTBE back in 1986,
and taken it to a national awareness level.
So the knowledge was out there. I don't think anyone would
condemn us for what we did back in 1990. Granted, we're not on
the primary cutting edge of information and maybe shouldn't be
expected to be. But what we did or didn't do in 1997 I think we
could bring into question, as well as how we proceeded from
that point.
Now, I'd like to make note of the fact that addressing the
issue of the parts per billion was done as a result of a
legislative initiative. This was not something we proceeded on
within the Department, as well as the notification level was
something that was mandated to the Department by the
legislature.
At this point in time, I would like to ask Commissioner
Varney why he seems to have felt from 1997 to the present that
the credit that we were obtaining for using MTBE in the RFG
program, the credits we obtained that were being applied one
way or another to meet your requirements under the Clean Air
Act, why those credits seemed more important than moving
forward on water, why that issue has been a roadblock in every
of the six or seven pieces of legislation we've tried to move
forward in the past 6 years, while the escalation of the water
problem in every one of our issues and every one of our
hearings has been given short shrift, while we constantly
focused on these counterfeit air credits.
Second, I just feel that as far as the citizens of our
State are concerned, while we appreciate the struggle of the
two Goliaths that Bob's having to deal with up in Washington,
the two Goliaths being agriculture and the oil industry, that's
political perception and it's kind of a long way away from your
neighbors and the people here in Derry who are dealing with
those wells.
What we're doing here in New Hampshire can have immediate
relevance to your situation. We have constantly been told over
the course of this 3 years that we could not act as a State to
address the additives or formulation of fuel. Repeatedly,
repeatedly we've been told this. Yet under Section 211(C)(4)(a)
of the Clean Air Act, where it specifically says, indeed, that
no State or political subdivision may prescribe or attempt to
enforce any control or prohibition respecting any
characteristic or component of a fuel or fuel additive in a
motor vehicle or motor vehicle engine, that is, however,
prescribed by the statement for the purpose of motor vehicle
emissions control.
None of the legislation we have brought forward has been
for the purpose of motor vehicle emissions control. It has been
to address the pollution of our water and the pollution of our
people. That legislation has not been able to move because we
have been repeatedly told that we did not have the authority to
address this.
In addition, Senator, we now have a legal opinion which
I've provided to your staff out of a firm in Washington, DC.
which indeed does say under our State police powers, we have
every authority to address the preservation and prevention of
the pollution of our water, as well as the public health
interests of our citizens.
So at this point I would just like to close by saying, we
intend to move forward with this with legislation next week.
There's action in both the House and the Senate, and I would
encourage any and all citizens in New Hampshire who are
concerned about this issue to stay plugged in for what's
happening next week. Because we are going to move it next week.
Senator Smith. Thank you very much.
I see this lady was trying to get the microphone and I
don't have--come on up, because the next person I have is a
man, and I know that's not you.
STATEMENT OF MARGO HARRISON
Mrs. Harrison. I apologize for the way I'm dressed. I was
planting trees today as part of a town program for planting
trees.
I wanted to thank Dr. Kinner, your presentation was
wonderful. The main point, a great deal has been said today
about everybody's special interest and how long this is going
on. Of course, everyone, motherhood and apple pie, clean air,
clean water, this is the proposition. We're 90 percent water.
There was a thing at the Motor Vehicles Department that 80
percent of New Hampshire is covered with trees and the rest is
underwater.
I have a couple quick questions and then get to the point.
I had understood from reading the paper that MTBE is very
volatile. We have a lot of lakes in town. If it spills from
people filling their boats up with gas or whatever, it just
evaporates and we don't have to worry about it. But the
impression I'm getting today is au contraire, that if it spills
and then it somehow gets into the, sinks to the bottom of the
lake or you're filling your boat up before you take off, you're
adding to the problem.
A neighbor of mine who enjoys his snowmobiles very much
spills enough gas in his driveway so that he was sweeping it
down the driveway into the street. We called the fire
department. It seemed to us there was so much gas, the fire
department said, don't worry about it. Well, should you or
shouldn't you?
Anyway, my main point is, I walk around my neighborhood
every day trying to get in shape. There are dozens of gas cans
that people use to fill up their boats. They're tipped over,
upside down, they're all over the place. Now, why not public
education? Why not give out flyers every time people fill up
their car with gas? Where is all this stuff? Here are all these
specialists who know about this, but we don't until we have a
problem with our wells.
It would be very easy to hand things out at gas stations or
wherever people pick up this potentially lethal chemical and
help people handle it better. There are two streets up in my
neighborhood where we're paying half a million dollars to put
in a special water line because there are some contaminated
wells. Well, I don't know if it's deep rock contamination, I
doubt it, most of the wells around the pond I live on are just
a couple of hundred feet deep, if that.
So there's probably people working under boats or their
cars or whatever. But they didn't know. It seems to me that we
should address that as well, very aggressively, so that people
know to look and don't find themselves pregnant with a
contaminated well, rather than after the fact.
Well, I would just like to urge that more along that line
be done and that your slide show have much wider distribution,
Dr. Kinner. Very, very well done. Thank you.
Senator Smith. Could I have your name, please?
Mrs. Harrison. Margo Harrison.
Senator Smith. Thank you.
Does anybody have a response?
Ms. Kinner. She asked a question about the volatility of
MTBE. When you think about MTBE and its volatility, you're
correct, it is much more volatile than something like benzene
in gasoline. But that's only if you have a beaker of it sitting
right here and air above it. The minute we put that MTBE in
gasoline, now it's in something it likes to be in. So it may
still be volatile, but it then gets into water, its volatility
goes down very, very low, because this is something it likes to
be in even more.
So it's a question of where you like to be when you think
about those things, it's a relative scale. Does that explain it
for you? Ms. Aho. I would like to respond to that. The American
Petroleum Institute has tried to disseminate quite a bit of
information in regard to the proper stewardship of gasoline.
You're absolutely correct, everybody has to handle gasoline
appropriately, not just the terminals or the gasoline station
operators, but all of us as homeowners as well.
We have materials on our website that we try to get out to
people in the State of Maine. We have worked with the
Department of Environmental Protection to make sure that
information like that is disseminated. We'd be more than happy
to work with the Department of Environmental Services here as
well to get that information out to homeowners in regard to
proper handling and care of gasoline.
Senator Smith. The only other name that I have on the list
here is James Robodosi. Come on up, and if there's anyone else,
please feel free to just come up and we'll take your question.
Mr. Robodosi. Good afternoon, thank you very much for being
here. Thank you, Senator Smith.
My name is Jim Robodosi. I live on Blake Road. I started
the Blake Road neighborhood, bringing the water up to our area.
We have 32 homes in our area that have wells, 28 of our homes
contaminated with MTBE. We were able to pass the amendment to
get water brought up to us, that will be some time in August
hopefully.
I can feel with Mrs. Miller, how she is. We have 6.9 in our
parts per billion of MTBE in our wells. The gentleman down the
street has 160 parts per billion. But the thing that kind of
made me think was that, a question that you asked Mrs. Miller,
what can we do to make you feel more comfortable or whatever,
and she said that she has a filtration system in her home.
Dr. Kinner took my point right away when she made the point
that it only takes care of the small picture, right where it
is, and doesn't take care of the whole picture. I'd still be
leery, because the MTBE is still in the ground, even though it
is filtered.
My other question is, our reservoirs, and we have large
filtration systems, but from what I understand, they're sand
filtration systems. Does sand filter out MTBE? Because as I
understand, the homes in our area that have the filtrations are
all activated charcoal. I just want to make the point that you
folks are all doing a great job here, the big picture. But us
small people, we're an orphan site, which wasn't brought up at
all. We don't know where ours came from.
I'm not a backyard mechanic, and I don't like to be
stereotyped that way. I have no idea how it got there. Yes,
we'd like to get water up there and taken care of. But I'm not
sure, 13 years or more, that's a long time.
Also, I just want to let people know that the small people,
myself, my neighbors and whatever, are dealing with this every
day. We have to pay $350 a year for 20 years to have water
brought up to our homes, because there's no funding for orphan
sites. There's only funding for the LUST fund. I think we need
to look into orphan sites now.
Thank you very much. Have a good afternoon.
Senator Smith. Thank you very much.
Yes, sir, just identify yourself, please.
STATEMENT OF HAL LANG
Mr. Lang. Thank you. My name is Hal Lang, and I'll identify
myself three ways. One is an enlightened user of gasoline
products, such as chain saws, etc., as a selectman for the town
of Paloma, where you have 20 to 30 wells contaminated with
MTBE, and as a member of the legislature sitting on the
Science, Technology and Energy Committee, where we've heard
bills on MTBE for the last 3 years.
First of all, I want to commend you for what you're trying
to do, what you've attempted in the past year and continue to
do and for holding this. I would make several recommendations
for solving the problem, and I think the first and most
important one is getting relief from the RFG requirement in New
Hampshire. That is one method to stop at least the bulk of the
stuff getting into the environment. At least give us a chance
to try and get a handle on what's in there now.
I think, and it would be a question that maybe could be
answered by understanding the basic reasons for having RFG is
probably moot. With the later model vehicles, with improvements
and especially if we go to low sulfur fuel, we really get the
benefits we would derive, we would get with conventional
gasoline. A comment there, we've dealt with conventional
gasoline for years, we know how to deal with it. It is a
problem, it's a toxic chemical. But at least we did not create
the problem we have now with MTBE.
The other thing is education. The woman is absolutely
correct. I mentioned I was an enlightened user. When I fill up
my chain saws now, I try to make sure I don't spill any
gasoline, and when I do, I have something to catch it. Because
I'm now aware that I can contaminate my own well with a minor
spill. The people of this country, this State and this nation,
need to have an appreciation of what they can do themselves. I
think it will help change behavior, because that is obviously a
source of contamination.
I would urge you as another method in which you propose is
pushing forward as quickly as you can the requirement for more
energy efficient vehicles and boats. Obviously marine vehicles
are a major source of untreated gasoline, unburned gasoline
getting into our surface waters, because they're very
inefficient. We know that these, for instance, four stroke
versus two stroke marine engines are much more efficient than
the two strokes. They put less raw gasoline into our surface
waters and therefore would help reduce contamination.
I think there are several avenues we can look. We identify
the problem and look at all the items, the methods of
pollutants getting into our waters. We should deal with each
one of those. There's things we can do at the local level, at
the State level, we would hope you would help us at the Federal
level.
I think again the idea of your non-gasoline vehicles,
moving that, that will benefit this country immensely. We're
talking about we need to drill in the Arctic national wildlife
to get maybe a couple of days worth of supply. We can solve
that immediately if we just made these things more efficient by
5 percent. Going obviously with hybrid vehicles and pushing
that technology, that is where the major investment can be made
and where there is a big payback.
I think again the problem with the legislation, as you're
aware, Senator, is that it was very specific. It should have
allowed us the flexibility for solving the problem. I'm sure
you've taken that message, but I would urge you to take it
again. Give the States the flexibility of finding ways to solve
the clean air issues with the most efficient way that we can
do. Let the manufacturers do it. The testimony we hear often
from the American Petroleum Institute is, we've been told we
had to use 2 percent. So go tell them, I'll remove that. I
understand the problems that you have with that.
Finally, as was mentioned before, there is a House bill
coming up next Thursday, House bill 758, which came from my
committee, it was sponsored by Representative Martin. The big
issue, the contention point is, what is the most rapid way and
most effective way for New Hampshire to get out from under the
RFG requirement. I'm under the impression certainly that when
we opted in, even though it was a voluntary opt-in, not
mandated, we cannot opt out in 2004.
It is the opinion of some that, to heck with that, we will
just mandate that we won't allow gasoline to come into the
State with MTBE or a high percentage of MTBE. But the testimony
we hear is that you can do all you want, the distributors are
under Federal mandate to bring it in. Now, what we are
directing in the modified version of House bill 758 is Bob
Varney and DES to submit by no later than next January the
commission request for opt-out in the hope that we can get that
as quickly as possible.
So if I could get a comment on that, are we doing the right
thing?
Mr. Hessler. I think the short answer is that it's useful
to explore all of the potential avenues at the State level.
There are a variety of legal opinions, some of them need to be
tested as to whether they actually have some authority that
folks would like to see explored, such as the authority to ban
a specific substance, like MTBE.
If that, the main problem with a State specific answer is
that you could easily wind up with a State specific gasoline,
which would be substantially more expensive than either RFG or
your conventional gasoline. So that's why the Federal solution,
which would allow the gasoline producers to provide a single
cleaner burning fuel than RFG without this MTBE problem for all
the States that want to use the RFG, would not only take care
of your air quality problem but would also protect the gasoline
prices. So that's the value of the Federal approach on this.
Mr. Lang. I guess the basic question, what gets us there
quicker and surer?
Mr. Hessler. I think that's a political question----
Mr. Lang. There's two different answers to that one, too.
We know that for certain if we direct opt-out by 2004, that's
certain, I think. But I'm not sure that's the quickest and most
efficient way to get that.
Mr. Hessler. Certainly if legislation were to go through
before 2004, that would enable the nation's gasoline producers
to respond more quickly. I think the real difficulty there,
though, as Senator Smith pointed out a couple of times during
the hearing, this is somewhat of a titanic clash of interests.
He put forward a very reasonable bill that's market oriented,
was the least expensive solution to the problem, and yet it
didn't pass muster for policy reasons.
So there's a very high political hurdle in Washington that
he has been trying to take on directly. So we'll continue to
work in his direction and try and get over that hurdle. But I
don't think that precludes folks at the State level doing all
they can as well.
Mr. Lang. Mind if I ask a couple more questions? I really
appreciate your taking the time to listen to them.
Is there any way that the EPA can grant us opt-out? Can
they grant us absolution, or whatever we need, or some
permission, if we come up with an alternate fuel that doesn't
have 2 percent oxygenate requirement, doesn't meet the 2
percent oxygenate requirement but we can demonstrate we can
keep our air clean, has EPA the ability to give us permission
to opt out?
Mr. Hessler. Lots of people could answer this, but I'll
simply say that the current Federal regulation says that those
States that have opted in may not opt out until 2004. The
primary logic for that was to not allow for fragmented gasoline
markets, where folks were either opting in and out at odd
times, driving up the number of specialized gasolines that the
gasoline producers would have to supply around the nation. That
was the purpose for that 2004 date.
I think that what's happening here at the State level may
test whether there's an opportunity to change that. I don't
know if anybody else wants to comment.
Mr. Varney. That was actually the subject of a letter from
Governor Shaheen to EPA Administrator Whitman recently on that
very issue, to reevaluate the EPA rulemaking that includes that
2004 provisions, and to revise that rule so that opt-out can
occur faster. So we've already made that request to the head of
the EPA as part of the submission last week.
Mr. Lang. One final comment, maybe it's a question. First
of all, I want to thank Dr. Kinner for the comments she made. I
think one of the problems we had when we entered into this
thing with RFG, we really didn't evaluate the implications, the
total implication of switching to this form of fuel. When we
talk about things like ethanol, I think we need to evaluate it.
Because some of the things I understand, some of the byproducts
of ethanol are formaldehyde. That's my understanding, I may be
wrong in that. Again, what are we going to get ourselves into?
So there's no, to me, gasoline is a toxic chemical with
different variety of toxic compounds, and we'll replace it with
a different toxic compound, we need to understand the full
implications before we move in any single direction. I do
appreciate those people that understand that, and I think give
us the wherewithal to determine our own destiny and we'll get
there.
Senator Smith. Let me just make one point. I'm not here to
axe the ethanol industry, they have performed a valuable
function in helping throughout the country to meet the clean
air requirements. But the issue here is that if you ban MTBE,
then there is going to be a race to the market, if you will.
Ethanol feels they can fill that. All we're saying is, you can
fill it wherever you can fill it, if it doesn't harm the region
where they fill it.
That's not the position of the majority. Not all, the
majority of the ethanol States is, the majority of the ethanol
States are adamant that they get the market, period. That's why
the legislation that I have, which I thought was pretty
reasonable, but I'm not saying it's just because of me, but we
had support for the legislation, but not enough to get it
through. We moved to the direction of the ethanol by providing
about triple the market. That was not enough.
Again, I think it's important to understand here, this is
not about filling the market for ethanol. This is a health
concern here, there's an environmental concern here. I think we
have to make that point. To me, it's not--well, it's somewhat
different, but it's similar also in the sense you've got floods
in the midwest. We don't say, well, we don't have any rivers in
whatever, in some States, therefore we're not going to help you
where you're flooding.
We have a problem here, we have a problem in California as
well, and there are other regions in the country where this is,
using ethanol is a problem. So I'm not against ethanol, I'm
just against it being forced to be used in New Hampshire or any
other State where it's not good to use it right now. Maybe the
infrastructure in the future, or maybe the mix problem that
causes the smog, maybe that's resolved down the road.
You're right, formaldehyde is a byproduct. Let's not create
more problems. Let's go slowly here. I think usually, with the
States opportunity to opt out, what the States know is usually
best. But we do have some Federal law here that has to be, the
Federal law has to be changed, otherwise we pass something that
may be in violation of Federal law, you'll be in $25,000 fines
or something.
So we want to be sure we work this together. That's why
it's helpful to have this dialog.
Mr. Lang. Thank you very much, Senator. I really wish you
Godspeed on this journey, and anything we can do in the State,
I'm sure you know you can count on us to help you.
Senator Smith. We appreciate it very much.
Let me make this last question.
STATEMENT OF HOWIE GLEN
Mr. Glen. Thank you, Senator.
My name is Howie Glen, I live in Salem. I came here today
because I've been in the gasoline business for 44 years. So I
wanted to come and listen.
I have to just emphasize to Senator Klemm to please do
whatever you can to get this additive out of the gasoline. You
can handle that. I have to, I just want to commend Commissioner
Varney. I've watched him over the years and I've dealt with him
over the years. I am an independent gasoline station operator,
I have two small stations. In the last 11 years, thanks to all
the rules and regulations of DES, I have spent approximately
$350,000 of my money to keep my stations clean.
Last week, I heard people say that you were dropping the
ball on the air quality. Last week, one of my stations, I had
to spend $7,000 to upgrade a vapor recovery system because DES
ruled that they were going to use California standards and it
was out of code. So I had to have that done.
I think that anybody that can have a 99.9 percent rating
deserves a lot better than some of the things I heard here
today about the Department of Environmental Services. I think
that they's done a job, I think they're trying to control the
issue, they come and inspect my stations. Although you don't
like to have it done, you're glad it's done once they leave and
say everything's all right. Then it's OK, he's a good guy. Say
it's bad, that's a different issue.
I have to commend them. I think they've done an excellent
job, they've worked hard with what they've had to work with.
People complain about a contaminant in a well, and I own a
station that's comparatively close to these people on Blake
Road. I have one and it's been checked.
We do what we have to do, we try to run a clean business
and we try to make a living. But when you have to take over a
period of 11 to 12 years $350,000 out of your pocket to stay in
that business, a lot of times you say, maybe it's time to close
up and give in to the big guys and let them have it. But we've
fought it, we'll continue to fight it. We do what we have to
do.
I commend you, Commissioner, I think you've done an
excellent job. Senator Klemm, I know you can do what has to be
done to get it out of the product. Thank you very much.
Senator Smith. Don't give in to the big guys yet, hang in
there.
Anybody else? All right. Go ahead. Let's try to make it as
quick as you can.
STATEMENT OF BOB MAGUIRE
Mr. McGuire. I'll be very brief, Senator. My name's Bob
McGuire, I'm a representative from here in Salem.
I just want to cal your attention to a floor bill that we
have, it's House bill 758 in the Senate. Essentially what it
does, it may take care of a couple of issues, some concern was
expressed earlier, a couple of issues. One was the mandate,
once removed, doesn't put a time specific date or levels for
the removal of the MTBEs. The floor amendment, the correct
amendment to House bill 758 does do that. It does have a
specific time schedule and limits on the MTBE, time period by
which they have to be removed.
Those are two concerns that we have. There's a group that
may be a little more proactive, and there seems to be tendency
to be. Our attitude is to take of the Mrs. Millers and the
other people from the Blake Road area here as quickly as
possible, and be their advocates. That's where we are.
So we are requesting that DES, our fellow representatives
and members of the Senate do familiarize themselves with this
floor amendment, and if it's at all possible, for us to receive
as much support as possible for it. Thank you again for your
good work.
Senator Smith. Thank you very much, Bob.
Mr. Coburn. Thank you, Senator, I'll try to be equally
brief. My name is Ken Coburn, and I work for Bob Varney,
running the air division.
Senator you recognized the presence of your staff members,
Chris Hessler and Melinda Cross. I want to recognize on behalf
of the State their efforts. There was a period in June and July
last summer when I made 5 day trips to Washington in a 10-day
period, spending innumerable hours with Chris and Melinda,
negotiating with Senator Bond's staff and Senator Grassley's
staff and Senator Daschle, the ethanol States, trying to get a
deal done. As you know, that was put forth by yourself in S.
2962, an excellent bill. I urge that you put forth a similar
effort this session.
One of the reasons that those efforts were so difficult may
be of interest to the committee and perhaps to the viewers is
that for frame of reference, all Federal support of State air
programs, all 50 States, through EPA's budget, is about $200
million a year. The ethanol subsidy is about $800 million a
year. One company of that takes home $400 million a year, twice
as much as all Federal assistance for State air programs.
It's unconscionable. A State ban is not the way to go.
There's no State ban that I'm aware of that has proven
effective. The only place where they have been effective is in
the States that have solely used ethanol in the first place. A
Federal solution is necessary.
So in terms of what we're seeking, we do want the oxygenate
mandate repealed so that we're neither required to use MTBE or
nor ethanol. We'd like it to be sooner than 2004 if that's at
all possible. We would like incentives for new technologies.
I'm certainly pleased that you're bringing that hearing to New
Hampshire, and options for other alternatives like mass transit
and then certainly remediation funding.
I think I can speak for all of us in the State and DES and
on behalf of Commissioner Varney that we stand ready to assist
in that quest however we can. Thank you very much.
Senator Smith. Thank you very much, Ken. I think in
reference, one of the dangers we face is that out of
frustration and anger, and I know that the California Senators
are about at that point, is to just simply throw your hands up
and say, OK, let's just ban it, period. What happens then is
that the ethanol folks move into the market. That's not good
for New Hampshire.
So it's very, very complicated. I'm not making excuses, but
it is very, very complicated to try to work through this and to
deal with the regional and competing interests. We're going to
do our best. I appreciate your comments, Ken, I appreciate
yours, Commissioner Varney is working with us and providing the
technical help that we need to try to work through that.
I thought we had a deal that would work, but unfortunately,
that didn't happen.
I want to in closing say thank you again to all of the
audience for being here and those who asked questions.
Certainly we thank the witnesses, Christina Miller, who's a
resident of Derry who has this in her well, and Commissioner
Varney, Senator Klemm, Professor Kinner, Bill Holmberg, and
Patty Aho. Thank you so much for being here. I thank my three
staff members as well, Jeff Rose, Chris Hessler and Melinda
Cross.
Also again in closing, I thank Channel 17--you get a little
commercial here--Channel 17, Salem cable access, for covering
this and also New Hampshire Public Television. We'll see you on
May 30 with another hearing that will be of interest. We're
going to work very hard in the next 30 days to try to work this
out, to try to get some resolution to this MTBE issue at the
Federal level, which hopefully will complement what's going on
at the State level.
Final point, Mr. Holmberg?
Mr. Holmberg. Please understand that Big Ethanol has their
own agenda and that agenda sometimes does not coincide with the
best interests of the nation.
Senator Smith. You're correct on that.
Mr. Holmberg. We have to work with others to counterbalance
that power.
Senator Smith. They are tough, but they are very important.
Mr. Holmberg. I'd like to make the point that it is unfair
to condemn the fuel ethanol industry because of the sins of a
few corporations. Let's work together to bring a clean ethanol
industry into New England.
Senator Smith. Absolutely. Working together is the only way
you're going to get anything accomplished.
Thanks again to everyone, and let me also remind you that
if someone has a question or comment that you would like to
submit for the record, you have 2 weeks to do it. Just send it
to the committee in Washington, the Environmental and Public
Works Committee, and we'll put it in the record.
This hearing is adjourned.
[Whereupon, at 4:05 p.m., the committee was adjourned, to
reconvene at the call of the Chair.]
[Additional statements submitted for the record follow:]
Statement of Christina Miller, Derry, NH
Good Afternoon, Senators, Representatives and other distinguished
guests. Thank you for allowing me to come and speak about my MTBE
experiences.
My name is Christina Miller and I am a homeowner and live at 14
Skylark Drive in Derry NH. We have been living at this address since
June 1998. When we purchased this property, a fairly thorough water
test was performed and our water measured high in nitrates so an
additional water purification system was installed. No mention of MTBE
was made nor were any tests provided.
MTBE
During 1999, the MTBE problem was highlighted in many States across
the country and examined in TV and other news reports. During the New
Jersey investigation U.S. Rep Bob Franks NJ, reported that ``The
Environmental Protection Agency knew about potential threats to public
health and drinking water supplies years before the agency allowed the
widespread use of a potentially cancer-causing gasoline additive to
combat air pollution. The 1987 EPA internal memo assessing the health
effects of MTBE noted that it could be toxic, causing neurological
problems or tumors when inhaled or absorbed by the skin. The memo also
stated that the chemical had been found in groundwater in four States,
affecting up to 20,000 people.'' USC and others have investigated the
linkages of liver disease and cancer related problems.
This is a Problem Across all America--Not Just New Hampshire
So far, tens of thousands of private drinking water wells and a
handful of municipal water supplies have been contaminated by MTBE in
the United States and further spreading of the chemical through
underwater springs and aquifers is likely, say researchers. Among the
worst examples of MTBE pollution so far are South Tahoe, California,
where about half the drinking water wells have been contaminated, and
Santa Monica, California, where 80 percent of the public water supply
has been contaminated. Both cities now have to import water from
elsewhere at costs of up to $3 million a year. In Maine, more than
5,000 private drinking water wells were found contaminated, forcing
residents to hook into municipal water lines. The MTBE predicament
could be costly for oil and gas companies who are already being held
responsible for some of the pollution, according to the Environmental
Protection Agency (EPA). Estimates for cleaning up MTBE are around $1
million per well, because current cleanup technologies for the chemical
are limited. Several lawsuits around the country name gasoline
operators as defendants in MTBE contamination cases, including ones
filed by the South Tahoe Water District, a San Francisco-based
environmental group called Communities for a Better Environment, and a
group of five private citizens in North Carolina, to name a few. A
number of energy companies, including Shell Oil, are responding to the
threat of more numerous legal challenges by sponsoring research into
microbial treatment--the cheapest MTBE remediation technology currently
available. Microbial treatment uses bacteria to breakdown MTBE into its
harmless components. Other methods of cleanup are significantly more
expensive and include absorption using activated carbon, photo-
oxidation using ultra violet light, and chemical oxidation using
substances like hydrogen peroxide. Because of the financial and
technological hurdles, many contaminated areas have yet to be cleaned
up--and are instead simply sectioned off to reduce spreading while more
cost-effective treatments are found. While MTBE's destructive nature in
water may have come as a surprise to most, officials at the EPA say the
chemical's troublesome characteristics were never a mystery to them--
even before the U.S. Clean Air Act went into place.
My Experience
In January 2000, we received a notice that our MTBE sample was
below the limit (9 parts per billion). We were retested in April 2000
and the reading was 22. First of all this indicates that anyone with
any detection of MTBE should be cautious because of these significant
fluctuations. Current studies are all short term in length, and are
still limited as to the impact and damage to liver, kidneys and as a
carcinogen. Further more, another test in May then indicated the
percent had dropped again. Thus, although MTBE is a known problem, its
dispersion and control is not well understood.
Letters we received are very confusing. On page one of a letter
from NH Department of Health and Human Services dated July 31, 2000,
(with a 9.5 MTBE level) indicated that there are ``no restrictions on
water usage'', yet on page two it stated ``although the MTBE
concentration is below drinking water standard, because of the concern
about possible fluctuations in the contaminant level, we understand
that DES will be installing a point-of-entry water treatment system.''
When the MTBE levels were 22, we were warned not to use the water.
The materials provided told us how to better store gasoline and I don't
feel provided us with enough information that made be more comfortable
about the effects of MTBE. Even though I was pregnant and informed the
authorities involved in this study, we were not offered water
alternatives or informed in any of the letters about alternative water
purification or MTBE's harmful effects on us, never mind my unborn
baby. Since we were informed about this problem, I began to do what I a
considerable amount of research on my own. But almost to no avail.
There is not much information found on the effects of MTBE or the
problems that it may cause in the long run. Of all the information that
is out there, I have come to the conclusion that no one has done enough
testing on MTBE.
In June of 2000, we finally started to receive bottled water. We
were provided as much as we needed. Nice, but still a problem to take a
shower, do the laundry, wash our fruits and vegetables, and for
cooking, among many other things you use faucet water for, but take for
granted. After repeated phone calls and what seemed like lots of
convincing, it was finally decided we ``might'' qualify for a water
purification system.
The System
A new water purification was installed finally at our residence in
September. What concerns us also, is the fact that we received no paper
work that this system will be maintained and upgraded as needed for the
lifetime of the residence and our ability to resell our home in the
future may be directly related to proving the status of this system. We
are also still very concerned about our health, which probably won't go
away for a while since there still is no resolution to this problem.
In closing, the NHDES did the right thing in testing for levels
across the State but should provide honest and full disclosure to all
residents on MTBE and its possible harmful effects. The NH DES needs to
also be very proactive. We had to continually call to get results. We
still have not been provided any notice of what the source of
contamination is. Finally, if there are long-term effects on our
health, how does the State expect to respond?
__________
Statement of New Hampshire State Senator Arthur Klemm
Thank you Senator Smith. Let me say, I appreciate your coming to
the district to talk about this issue. I am here today to bring more
awareness to an issue that affects all of us, my neighbors, and many
citizens in New Hampshire.
As a legislator and a businessman, I am growing increasingly
concerned with the reports of MTBE manifesting itself in the
groundwater in New Hampshire and particularly this district.
The Commissioner will go into more of the technical details but my
understanding is that there are reports of MTBE causing asthma,
shortness of breath, headaches, and an inability to concentrate. MTBE
has been proven to cause cancer in animals. It is considered a
carcinogen.
Water used for drinking and bathing, should have not more than 13
parts per billion. Yet in some communities, such as Salem, levels have
been detected as high as 150 parts per billion. The Town reports that
over 25 private properties have had positive test results for MTBE.
Southern NH has a high population and a lot of private wells.
The NH House was unable to pass legislation this past year to ban
this substance. Now, alongside key Legislators in the House and Senate,
we are prepared to make a difference.
This year, I am working with a bi-partisan group of lawmakers to
promote legislation to clean up our water supplies and eliminate future
contamination.
There are three pieces of legislation before the House and Senate
this year aimed at taking control of this problem.
HB 755, relates to groundwater contamination. That bill is still in
the House Committee.
HB 758, relative to the sale of gasoline containing ethers. I am
co-sponsor of that bill which was voted out of committee 13-1 and will
soon move on to the Senate.
And last, SB 189, sets up a gasoline remediation and elimination
fund. This bill is still in the Senate Environment Committee, they are
expected to vote on it soon.
In conclusion, I anticipate even more communities will come to the
legislature for help in the coming months. I am getting ``out in
front'' on this legislation because I do not think we, as lawmakers,
want to be playing ``catchup'' on this issue. I think it is in our best
interest to act now to bring cleaner water to our neighbors.
Thank you for hearing my testimony today. I ask you to work with us
to move forward in the interest of the public's health.
__________
Statement of Robert W. Varney, Commissioner, New Hampshire Department
of Environmental Services
introduction
Good afternoon Mr. Chairman, members of the committee. My name is
Robert Varney; I am the Commissioner of the New Hampshire Department of
Environmental Services (``DES'' or the ``Department''). I am pleased to
be here today to present the State of New Hampshire's views on the
gasoline additive methyl tertiary butyl ether (MTBE), the effect this
compound has had on the water resources of our State, and the costs
associated with the investigation and remediation of MTBE
contamination. Our testimony also addresses the significant constraints
imposed by the Clean Air Act Amendments of 1990 on the State's ability
to remove MTBE from our gasoline supply. Thank you for this opportunity
to address this important issue with you.
background
MTBE was first introduced in the 1970's to help replace lead in
gasoline. MTBE's desirable blending characteristics, its relatively low
cost, and its favorable impact on--octane rating made it an attractive
gasoline additive. As a result, it was mixed with conventional gasoline
at concentrations of approximately 2 percent by volume in regular
grades and up to 9 percent in premium grades. In addition, the use of
ethers, and in particular MTBE, was dramatically increased in 1995 with
the introduction of Federal reformulated gasoline (RFG) requirements as
part of the 1990 Amendments to the Federal Clean Air Act (CAA). Because
its high oxygen content enables more complete combustion (reducing CO
emissions, particularly in carbureted engines), and its relatively low
vapor pressure reduces evaporative emissions (reducing VOC and air
toxics emissions), MTBE was chosen by most refiners to meet he Federal
oxygenate requirement (minimum 2 percent oxygen by weight) for RFG when
it was mandated in the CAA. The presence of MTBE (and other ethers) in
RFG also dilutes the concentration of more harmful toxics and
carcinogens that are normally present in gasoline, such as benzene. The
CAA requires the use of RFG in certain ozone nonattainment areas, and
RFG was adopted for use in New Hampshire's ozone nonattainment areas
(the State's four southeastern counties) in 1991 to help meet New
Hampshire's emission reduction obligations under the CAA.
There is no Federal maximum contaminant level (MCL) for MTBE in
drinking water. New Hampshire law requires that the State drinking
water standard, for any compound for which no Federal standard exists
and where the compound has been shown to cause cancer in laboratory
animals, must be protective to a risk of one cancer incidence in a
population of one million. In 1990, in consultation with the New
Hampshire Department of Health and Human Services (DHHS), DES adopted a
State criterion for MTBE of 100 parts per billion (ppb). In 1997, this
was lowered to 70 ppb, again after consultation with DHHS based on a
review of more recent studies on the health effects of MTBE.
In 1999, DES and DHHS, at the request of the State legislature,
performed further review of the available information on the human
health effects of MTBE, focused particularly on research and analysis
performed since 1997. As a result, in May 2000, DES set New Hampshire's
MTBE standard at 13 ppb. One other State, California, has also adopted
a State MCL of 13 ppb. Nationally, New Hampshire and California now
have the most stringent MTBE drinking water standard.
mtbe in public water supplies and private wells
New Hampshire first monitored for MTBE in drinking water in 1987.
From 1987 to 1995, a total of 92 public water supplies reported first-
time detects of MTBE, for an average of 11 new public water supply
detects per year. In 1996, after one full year of RFG use in New
Hampshire's four southeastern counties, 35 public water supplies
reported first time detects of MTBE. Since 1996, an average of 40
public water suppliers per year have reported first time detects. DES
believes that the observed increase in average new detects from 11 per
year to 40 per year is directly related to RFG usage in New Hampshire.
In the year 2000, 16.2 percent (or 187) of public water supplies
had reported MTBE detects. In the four RFG counties, the percentages
are higher than statewide averages, ranging from 18.6 percent in
Merrimack County to 24.5 percent in Rockingham County. In contrast, the
six ``non-RFG'' counties have MTBE detects in just over 8 percent of
public water supplies. This further confirms the relationship between
RFG in gasoline and MTBE in groundwater.
Fortunately, the detected concentrations of MTBE are between 0.5
and 5 ppb in approximately 85 percent of public water supplies with
detectable MTBE, as compared with the MCL of 13 ppb. Only 2 of the 8
systems that currently have MTBE concentrations above 13 ppb do not
have treatment systems installed, and these two are expected to take
corrective action over the next several months.
New Hampshire has about 200,000 private residential wells that
provide approximately 35 percent of the population with its drinking
water. These wells are largely unregulated, in contrast with public
water supplies that are subject to the rigorous standards established
in the Safe Drinking Water Act. As a result, comprehensive water
quality testing of private residential wells rarely occurs, although it
is widely recognized that contaminants with significant public health
implications exist in these wells at predictable frequencies, including
radon, arsenic and MTBE. Consequently, this population of wells has not
been universally tested for MTBE. In December 2000, DES announced an
ongoing private well testing initiative to increase public awareness of
the need for periodic and more extensive water testing for contaminants
of concern, including MTBE.
Although the available data are limited, we know that MTBE
contamination has had an impact on a significant number of private
residential wells. For the period from 1995 to 2000, of 269 private
wells tested by the DES laboratory, 39 (14 percent) experienced
detections of MTBE, with concentrations below the 13 ppb MCL in 27
wells (10 percent) and above the MCL in 12 wells (4.4 percent). In the
year 2000 alone, 105 private wells were sampled, and MTBE detected at
levels below the MCL in 24 wells and above the MCL in 5 wells. This
indicates an increasing trend in both the number of residential wells
sampled--which we attribute to the increased attention to MTBE--and the
rate of MTBE detection. Not surprisingly, these detection rates are
comparable with those found during a 1998 study by the State of Maine,
in which MTBE was detected in 15.8 percent (or 150) of 951 private
wells sampled. Considering the available date from New Hampshire and
Maine, with approximately 200,000 residential wells in New Hampshire,
it is reasonable to project that between 30,000 (15 percent) and 40,000
(20 percent) of New Hampshire's wells may have detectable levels of
MTBE, with levels above the 13 ppb MCL in around 8,000 wells (4
percent).
state funding for remediation and water treatment
The State of New Hampshire has taken aggressive action to address
MTBE contamination.. Among the specific measures the Department has
undertaken are the following:
In 1998, DES set in motion a process to reduce the risk
to citizen exposure to MTBE-contaminated drinking water. DES began
having all drinking water laboratories do what DES's lab had already
been doing: test for MTBE along with other volatile organic compounds
they routinely analyze for in drinking water samples.
DES requested all public water suppliers to notify their
consumers whenever MTBE has been detected in concentrations over 5 ppb.
All municipal public water supplies have been tested for
MTBE. (None currently exceed the State's drinking water standard.)
DES has implemented an educational outreach plan for the
prevention of gasoline spillage. This ongoing effort includes: radio
and television public service announcements; DES web page information;
numerous press releases, interviews with news media; presentations at
public forums; conference displays; and coordination with other
organizations. In cooperation with Northeast States for Coordinated Air
Use Management and the private sector, DES also launched ``Gas Care,''
a national spill prevention program that Governor Shaheen participated
in launching through the taping of a video news release.
DES has continued its aggressive underground storage tank
(UST) program that replaces old, sometimes leaking tanks with new,
state-of-the-art tanks throughout the State. This program has a
compliance rate of nearly 100 percent. Over 13,000 old tanks have been
removed and replaced with over 4,600 owner-purchased and installed new
leak-resistant tanks. The success of this program has translated into a
substantial decline in UST gasoline leaks.
DES sponsors an active household hazardous waste
collection program that includes collecting old gasoline. DES
contributes $250,000 annually to municipalities for this program, which
serves 150 communities statewide.
In 2000, the Legislature passed and Governor Shaheen
signed HB 1569 which instructed DES to analyze levels of MTBE in all
grades of gasoline in the six counties outside the reformulated
gasoline area. DES expanded the scope of the study to include gasoline
sampling in all ten of the State's counties. The analyses found MTBE
and four other oxygenates in gasoline. This finding was unexpected, and
resulted in a requirement for the reporting of analytical results for
these other oxygenates in drinking water and groundwater. DES has also
requested the New Hampshire Department of Health and Human Services to
review the data available regarding these compounds to determine if
drinking water standards should be established for these contaminants
as well.
DES and the New Hampshire Marine Trades Association
instituted a ``Clean Marine Initiative'', aimed at reducing pollution
from motorboat outboard engines. In an effort to achieve quicker
introduction of the new low pollution marine outboard engines, DES and
the Marine Trades Association entered into an agreement to promote the
sale of these cleaner engines. Twenty one dealers have signed the
agreement, setting high goals for the sales of low pollution marine
engines, half of all engines sold in the year 2000 and more than 90
percent by the year 2003, well ahead of the mandated introduction of
clean marine engines in 2006. (This initiative received an
Environmental Merit Award from EPA-New England last week.)
In the summer of 2001, DES will undertake a focused
investigation of private water supplies near automobile junkyards,
which we suspect may be a source of groundwater contamination,
including MTBE. Thirty junkyards will be chosen at random throughout
the State and sampling will be conducted of private wells near each of
these facilities to determine if groundwater has been affected.
Through 1999 when the drinking water criterion for MTBE in New
Hampshire was 70 ppb, the number of private wells that were known to
have had a concentration of MTBE exceeding that level was small. To
deal with MTBE contaminated wells, nine point-of-entry (POE) treatment
systems were installed by the Department of Environmental Services
through 1999. However, with the reduction in the drinking water
standard to 13 ppb and an increased awareness by the public of the MTBE
contamination, the number of POEs installed in 2000 was 25. The
installation costs alone of those treatment systems was nearly
$160,000. The installation cost, coupled with short term bottled water
use and sampling and maintenance of the nine systems previously
installed, resulted in a total POE cost due to MTBE contamination in
excess of over $190,000.
More significant than the costs that the State of New Hampshire
incurred last year for non-UST sites is the projected future costs
associated with the investigation and remediation of MTBE
contamination. The assessment of MTBE contaminated sites has absorbed
significant personnel resources, and based on our best estimates of the
number of new sites we expect to discover in the future, this demand
for contracted engineering work and DES staff time will increase
significantly. We are estimating, and need to budget for, a total cost
for engineering consulting services for the investigation and
remediation of MTBE contamination of $150,000 per year for the next 5
years. This is in addition to the more than $1,000,000 in State
personnel time that we estimate will be needed to deal with MTBE
contaminated sites. Moreover, there will continue to be a need to
install POE treatment systems for those homes whose wells have been
contaminated by MTBE. We have every reason to expect that the number of
POEs needed in the coming years will increase, with the cost of
installation of new systems increasing from $150,000 next year to
$270,000 5 years out. The operation and maintenance expenses for all of
the POEs installed by the State increasing to well over $100,000 per
year in the next few years. We are also preparing to deal with the need
to extend public drinking--water supplies in those areas where there
has been widespread contamination of private wells. For our budget
planning purposes, we are estimating a need for $200,000 per year to
address the State's cost share for the extension of public drinking
water supplies in those areas. In sum, we project total annual costs of
$740,000 in 2002, increasing to $991,000 in the year 2006 to deal with
MTBE contamination at non-USTR sites..
These costs are for only those sites not associated with
contamination from leaking underground storage tank facilities. For UST
sites, we estimate that approximately 200 such systems have been
installed specifically to treat MTBE, of which 100 are currently in
operation. The estimated costs associated with these systems is over $1
million for installation, plus $1,600 per year per system for annual
operation. Current operation and maintenance costs for the 100 systems
are estimated at $160,000 per year.
Currently, two existing dedicated State funds and a federally
funded program are being used to investigate and provide water
treatment systems to residents whose drinking water is contaminated by
MTBE. For MTBE contamination associated with a leaking underground
storage tank (LUST), the funding sources consist of the LUST Trust
Cooperative Agreement with the U.S. Environmental Protection Agency and
the State Oil Discharge and Disposal Cleanup Fund (ODD Fund). The ODD
Fund is available for reimbursement of owners of underground storage
tanks who incur costs in cleaning up oil discharges in groundwaters and
surface waters and soils of the State. This Fund cannot be used when
the source of the problem is either unknown or not associated with a
LUST site. Expenditures from the LUST Trust Cooperative Agreement are
similarly limited to LUST sites alone.
The New Hampshire Oil Pollution Control Fund (OPCF) is used to fund
the investigation and cleanup of MTBE contamination from unknown
sources or sources not associated with a LUST site. The OPCF is funded
by a fee of $0.001 per gallon of petroleum imports into the State, and
was originally established principally to clean up a major petroleum
spill in surface waters such as Portsmouth Harbor, the Piscataqua
River, and Great Bay. The costs previously discussed for the
installation and operation of private treatment systems for MTBE
removal were funded solely from the OPCF. As the number of private and
public water supplies discovered with MTBE contamination increases, the
demands on the OPCF for treatment and remediation will become a major
drain on this fund. Long-term use of the OPCF for MTBE related issues
will rapidly deplete the fund, leaving the State vulnerable to a major
spill in the River and Great Bay and without sufficient funds to clean
up extensive MTBE contamination.
The State of New Hampshire and its municipalities, its businesses,
and its citizens have expended considerable funds in addressing MTBE
contamination of public water supplies and private wells. It is
entirely proper for the Federal Government to provide funding
assistance in the cleanup of ``orphan'' MTBE contaminated sites. The
Federal Government currently assesses $0.001 per gallon on all
petroleum products sold in the country. The revenue from that tax,
which in fiscal year 2000 amounted to $189 million, is placed in the
Federal LUST Trust Fund. The Trust Fund currently has a balance of
about $1.5 billion. Interest alone from the Fund nearly equals the
annual appropriation of--approximately $70 million that goes to EPA for
the LUST Trust Cooperative Agreements to the States. The Trust Fund was
established to assist the States in the cleanup of contamination caused
by gasoline only from leaking underground storage tank sites. Thus,
addressing these ``orphan'' MTBE contaminated sites from the Fund has
not been permitted. New Hampshire believes annual appropriations from
the Fund should at least equal revenue to the Fund, including interest.
This would amount to over $200 million per year being returned to the
States for the cleanup of contamination. In addition, individual States
should be permitted to use a portion of those moneys for remediation of
MTBE sites not associated with leaking underground storage tanks. This
will provide a minimum of Federal support to assist States in dealing
with the unforeseen and unintended consequences of reliance on MTBE as
a fuel additive.
clean air act constraints on new hampshire's ability to eliminate mtbe
from the state's fuel supply
As set forth above, there is abundant evidence that MTBE has become
a significant and rapidly increasing contamination threat to the
State's groundwater and surface water resources. MTBE is difficult and
expensive to remediate. Further, it can be difficult to pinpoint the
source of the contamination, and we are finding that an increasingly
disproportionate part of the funds we have dedicated for petroleum
remediation are caused by contamination problems related primarily to
MTBE. We have aggressively undertaken preventive and remedial measures
to address this contamination epidemic. New Hampshire also has
aggressively pursued avenues to reduce and eliminate MTBE from our
State's gasoline supply, but the State is severely limited by the
Federal Clean Air Act in what measures it can take.
The Clean Air Act (1) prohibits States in almost all instances from
controlling individual components of gasoline and (2) expressly
mandates the oxygen content of RFG (the ``oxygenate mandate''), leaving
States with practically no authority to implement and enforce
regulations to reduce MTBE levels in gasoline. Refiners use MTBE in
conventional gasoline to help meet performance standards, and in RFG
(which typically contains 5-10 times as much MTBE as conventional
gasoline) because it is the most cost-effective alternative for meeting
the oxygenate mandate in the East. Thus, virtually all gasoline
supplied to the Northeast contains some level of MTBE. Even if it were
legal to control MTBE at the State level, to do so could result in the
supply of a gasoline that is actually more hazardous to public health
and the environment than what we currently have. Also, it would most
likely result in the requirement of a formulation for gasoline that is
not presently available, which potentially exposes consumers and
businesses to extreme variability in pricing and supply. Attachment A,
a memorandum to Commissioner Robert W. Varney from DES's Air Director
Ken Colburn, provides a more comprehensive discussion of the barriers
that States face relative to reducing MTBE levels in gasoline.
In addition to the difficulties States face in trying to enforce
actions to reduce MTBE levels in gasoline, there is also an absence of
workable substitutes for MTBE. The only currently possible alternative
to MTBE to meet the oxygenate mandate is ethanol. However, ethanol is
not considered to be a workable substitute for States in the Northeast.
Although not final, a recent study entitled Health, Environmental, and
Economic Impacts of Adding Ethanol to Gasoline in the Northeast States,
conducted jointly by the New England Interstate Water Pollution Control
Commission (NEIWPCC) and the Northeast States for Coordinated Land Use
Management (NESCAUM), helps to identify the impacts to public health,
the environment, and the regional economy of widespread use of ethanol
as a gasoline additive in the Northeast. The State of Connecticut
currently has by statute instituted a ban on MTBE beginning in January
2003. However, knowing that a ban of MTBE in the presence of an
oxygenate mandate would essentially result in an ethanol mandate, and
in consideration of the preliminary findings of the NEIWPCC/NESCAUM
study, the State's Department of Environmental Protection (DEP)
recently wrote to environmental leadership in the legislature
recommending that the effective date of the MTBE ban be delayed.
Attachment B contains a copy of the letter from the Connecticut DEP to
the State's Legislative Environment Committee which provides more
information on the concerns with using ethanol in gasoline. It is clear
that ethanol does not provide the solution to this problem.
Ultimately, the only rational and legal action that is currently
available to States to reduce MTBE is to opt-out of the Federal RFG
program. This would eliminate the oxygenate mandate and reduce the need
for oxygenate additives such as MTBE and ethanol. For these reasons,
New Hampshire Governor Jeanne Shaheen last week issued Executive Order
2001-02, which directs DES to take immediate steps to opt out of the
RFG program. Attachment C contains copies of Executive Order 2001-02
and a letter of intent from Governor Shaheen to EPA Administrator
Whitman. Even that action, however, prevents timely action to reduce
MTBE, as the existing Federal regulation pertaining to RFG opt out
requests (40 CFR 80.72) prohibits an effective date for opt out earlier
than January 1, 2004.
As you know from your efforts on S. 2962 in Congress last session,
States have few options to address MTBE in light of current Federal
law. The Clean Air Act needs to be revised to eliminate the oxygenate
mandate. New Hampshire, as have other States, has enjoyed the notable
air quality benefits of the RFG program, and would prefer to maintain
RFG's considerable air quality upside. We also respect the desire on
the part of Federal policymakers to maintain regional consistency in
fuel formulations. However, New Hampshire alone uses roughly 650
million gallons of gasoline per year. We also have one of the most
successful tank replacement programs in the nation. Given the volume of
gasoline that is distributed, it is unreasonable to expect that there
will be no releases into the environment, even with the most diligent
handling. To address the problem of MTBE contamination, we must pursue
a pollution prevention approach that reduces, and ultimately
eliminates, the use of MTBE as a gasoline additive.
Thank you again for this opportunity to provide the State of New
Hampshire's perspective on this important issue.
______
Attachment A
State of New Hampshire,
Department of Environmental Services,
TO: Robert W. Varney, Commissioner
FROM: Kenneth A. Colburn, Director Air Resources Division
DATE: March 8, 2001
RE: State Level Regulation of Ethers in Gasoline
Purpose
As you know, legislation is proposed this session in New Hampshire
to restrict the use of gasoline ethers such as methyl tertiary-butyl
ether (MTBE) in the State (i.e., HB 755, HB 758). The purpose of this
memo is to examine the implications of regulating the total ether
content of gasoline at the State level.
During the last 3 years, there have been significant efforts in New
Hampshire's Legislature to reduce and/or phase-out the use of MTBE as a
gasoline additive because of its negative impact on the State's water
resources. Specifically, MTBE, when introduced into the environment,
travels much more readily in groundwater than gasoline, and is not
broken down (biodegraded) as rapidly as most other components of
gasoline. Although the legislative focus has generally been on MTBE,
its negative characteristics are believed to be shared by other
gasoline ethers, including tertiary-amyl methyl ether (TAME), ethyl
tertiary-butyl ether (ETBE), and di-isopropyl ether (DIPE). Because of
their favorable blending characteristics (e.g., relatively high octane,
low vapor pressure), ethers have been used in gasoline for over 20
years. However, the use of ethers, and MTBE in particular, was
dramatically increased in 1995 with the introduction of Federal
reformulated gasoline (RFG) requirements as part of the 1990 Amendments
to the Federal Clean Air Act (CAA).
DES's own efforts to monitor the presence of ethers in gasoline,
and to track the presence and treatment of ethers in ground and surface
water supplies, show that removing ethers from gasoline could reduce
contamination of New Hampshire's water resources resulting from
gasoline spills and leaks. However, State legislation to control
individual fuel components conflicts with Federal statutory and
regulatory requirements relative to fuel formulation, and may have
significant environmental, regulatory, and economic ramifications.
Background
MTBE was first introduced in the 1970's to help replace lead in
gasoline. MTBE's desirable blending characteristics, its relatively low
cost, and its favorable impact on octane rating made it an attractive
gasoline additive. As a result, it was mixed with conventional gasoline
at concentrations of approximately 2 percent by volume in regular
grades to 9 percent in premium grades. In addition, because its high
oxygen content enables more complete combustion (reducing CO emissions,
particularly in carbureted engines), and its relatively low vapor
pressure reduces evaporative emissions (reducing VOC and air toxics
emissions), MTBE was chosen by most refiners to meet the Federal
oxygenate requirement (minimum 2 percent oxygen by weight) for RFG when
it was mandated in the CAA. The CAA requires the use of RFG in certain
ozone nonattainment areas, and RFG was adopted for use in New
Hampshire's ozone nonattainment areas (i.e., the State's four
southeastern counties) in 1991 to help meet New Hampshire's emission
reduction obligations under the CAA. The presence of MTBE (and other
ethers) in RFG also dilutes the concentration of more harmful toxics
and carcinogens that are normally present in gasoline, such as benzene.
It is not clear when other ethers (TAME, ETBE, DIPE) were
introduced into gasoline, but DES studies have shown that they are
often present in both conventional gasoline and RFG. Although
commissioned for the purpose of studying the volume of RFG that is
delivered outside areas where it is required, DES's Study of
Reformulated Gasoline Distributed Outside of New Hampshire's Four
County Nonattainment Area \1\ published in December 2000, revealed that
other ethers are used in gasoline supplied in New Hampshire. Out of 180
samples tested, 162 were found to contain TAME, in concentrations
varying from 0.2 percent to 5.5 percent by volume. ETBE and DIPE were
found in only a few samples, generally in low concentrations. These
findings do, however, indicate that efforts to reduce MTBE
contamination in water resources should include consideration of all
gasoline ethers (TAME, ETBE, DIPE).
---------------------------------------------------------------------------
\1\The Study of Reformulated Gasoline Distributed Outside of New
Hampshire's Four County Nonattainment Area is available on the DES web
site. See http://www.des.state.nh.us/ard/rfgstudy.
---------------------------------------------------------------------------
Control of Gasoline Additives
Designed to maintain consistent national fuel specifications, the
language of Section 211(c) of the CAA leaves little flexibility for
States to regulate fuels and fuel additives. Section 211 (c)(4)(A) of
the CAA specifically prohibits States from prescribing or attempting to
enforce any control or prohibition of a fuel or fuel additive.
Section 211 (c)(4)(C) describes how a State can petition EPA, via a
revision of its State Implementation Plan (SIP), to allow it to
regulate a fuel additive (a process referred to as ``securing a Section
211(c) waiver''). However, EPA is authorized to approve such requests
only if it determines that State regulation is necessary to achieve or
maintain a national ambient air quality standard (NAAQS). MTBE is used
a component of gasoline by refiners and is not required to be a part of
either conventional gasoline or RFG. The performance requirements of
gasoline do not change whether MTBE is used or not. In addition, as an
oxygenate, MTBE is considered to be helpful in reducing carbon monoxide
(CO) emissions from vehicles. \2\ Thus, it would be extremely difficult
to make a case that reductions in the use of MTBE in New Hampshire
would contribute to attainment or maintenance of a NAAQS.
---------------------------------------------------------------------------
\2\Oxygenated fuels were introduced in the late 1980's as a
mitigation strategy for CO nonattainment areas (e.g., Denver, New York
City). The presence of oxygenates, such as MTBE, in gasoline helps
promote more complete combustion of the fuel, which reduces CO
emissions, particularly in older technology vehicles. However, the CO
benefit of oxygenates in gasoline is negligible in today's cars, and
the CO benefit in the overall fleet is reduced as older vehicles are
replaced by new vehicles.
---------------------------------------------------------------------------
The Administrator of the U.S. Environmental Protection Agency (EPA)
has the authority to control or prohibit fuel additives, but only if an
acceptable justification for the action is provided, including
consideration of all available relevant medical and scientific data. In
response to the growing concerns regarding MTBE in water, EPA appointed
an independent Blue Ribbon Panel of experts to investigate the use of
oxygen additives in gasoline. In the final report, entitled Blue Ribbon
Panel Findings and Recommendations on the Use of Oxygenates in
Gasoline, \3\ the Panel called for a significant reduction in the use
of MTBE in gasoline, and recommended that Congress and EPA take action
to lift the oxygen mandate. EPA has shown support for the Panel
recommendations and has encouraged Congress to pass legislation that
responded to the Panel's recommendations. To date, legislation that
would solve this problem has not moved forward. EPA is also taking
action to control MTBE under the Toxic Substances Control Act (TSCA) as
a backup to the needed congressional action. However, a TSCA rulemaking
is procedurally burdensome and may take several years to complete. \4\
---------------------------------------------------------------------------
\3\Report of EPA's National Blue Ribbon Panel on MTBE, see http://
www.epa,gov/otag/consumer/ftjels/oxypanel/rec721.pdf.
\4\See also http://www.epa.gov/otag/consumer/fuels/mtbe/
f00010.htm.
---------------------------------------------------------------------------
Some States have adopted rules to regulate MTBE. However, in the
absence of an approved Section 211(c) waiver, a State may not be able
to defend enforcement of such a rule, and could be subject to
litigation for implementation of a rule that conflicts with Federal
law. Regardless, EPA would continue to enforce RFG in New Hampshire as
it has traditionally done. If gasoline supplied to an RFG area
continues to meet the RFG specifications, EPA probably won't take any
action. However, if a State rule on gasoline resulted in deliveries
that did not meet RFG specification, a supplier/distributor who
delivered such fuel (or a retailer who sells it) could be subject to
Federal fines of $25,000 per day. Given the alternative between meeting
the intent of a State rule that is not enforceable and complying with
Federal requirement that is, suppliers would almost certainly choose
the latter.
Two notable instances where States have proposed restricting or
banning the use of MTBE and been challenged are California and New
York. In both cases, the Oxygenated Fuels Association (OFA, which
represents MTBE manufacturers) has filed complaints against the States
for controlling of a fuel additive in violation of Section 211
(c)(4)(A).
Neither suit has yet been resolved, but it does appear that OFA has
a strong case in both States based on Section 211(c) of the CAA and
Federal supremacy.
Some States that have implemented rules to regulate fuel
characteristics and/or components have not been challenged. The State
of Minnesota adopted a rule that effectively bans MTBE as a gasoline
additive. The State did not seek a Section 211(c) waiver. The State has
not been challenged on this rule, in part because there is a ready
supply of ethanol (and political support for its use) to meet the
oxygen requirements of RFG where it is required. The State of Maine has
implemented a rule which controls the vapor pressure of gasoline in
certain parts of the State. Even though this rule is not technically
enforceable under Section 211(c), the gasoline industry has complied
voluntarily with the rule. In addition, Maine represents only a small
portion of the regional gasoline market, and any party who might be
inclined to challenge the rule has thus far chosen not to do so. \5\
---------------------------------------------------------------------------
\5\Maine's unique status with respect to policy and fuels is
discussed further in a separate memorandum.
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Potential Economic Impacts
When DES studied the distribution of RFG in New Hampshire last
fall, \6\ some combination of ethers was found in all 180 samples
analyzed. Of the 140 samples taken from areas outside where RFG is
required, \7\ all contained some concentration of MTBE and/or other
ethers, although only seven of the samples contained enough oxygen (2
percent by weight) to possibly certify as RFG. The gasoline supply and
distribution industry has testified that virtually all gasoline (both
RFG and conventional) currently supplied to New Hampshire, and the
region, contains some concentration of MTBE. Thus, a State prohibition
on gasoline ethers would in effect require a boutique fuel that is not
currently available in this region, making it more likely that such a
rule, or its enforcement, would be challenged.
---------------------------------------------------------------------------
\6\The Study of Reformulated Gasoline Distributed Outside of New
Hampshire's Four County Nonattainment Area is available on the DES web
site. See http://www.des.state.nh.us/ard/rfgstudy.
\7\RFG is presently required to be sold in Hillsborough,
Merrimack, Rockingham, and Strafford Counties, also referred to the
State Implementation Plan as New Hampshire's ``four county area.'' The
four county area includes all of New Hampshire's classified 1-hour
ozone nonattainment areas. This area represents roughly 70 percent of
the State's gasoline consumption.
---------------------------------------------------------------------------
Given a reasonable amount of time to respond, it may be possible
that conventional gasoline (which has no specific requirement relative
to the oxygen content) without ethers can be supplied to New Hampshire.
However, because RFG is presently required to contain 2 percent oxygen
by weight, the supply of gasoline that meets the standards for RFG
without any ether additives is much more in question. In addition, MTBE
is used as an octane enhancer in gasoline. The extent to which there
may be a problem for refiners to meet their octane goals in gasoline
without the option of ethers is unknown.
The two major reports completed to date which assessed alternative
gasoline formulations and oxygenate options are NESCAUM's RFG/MTBE
Findings and Recommendations \8\ and EPA's Blue Ribbon Panel Findings
and Recommendations on the Use of Oxygenates in Gasoline \9\. Both
reports concluded that MTBE and ethanol are the only practical
alternatives for meeting the oxygenate mandate in the short term (2-4
years). Unless the oxygenate mandate in RFG is relaxed through
congressional action, a prohibition or control on ethers in gasoline
would effectively create an ethanol mandate. Because of its alcohol
characteristics (e.g., affinity for water, increased evaporability),
ethanol must be transported and stored separately from other products,
and requires a specially refined base gasoline product, known as RBOB,
\10\ for blending. In addition, a terminal operator must modify the
facility (i.e., install additional plumbing) to allow blending of the
ethanol.
---------------------------------------------------------------------------
\8\Prepared by NESCAUM at the request of New Hampshire Governor
Jeanne Shaheen in her capacity as Chair of the New England Governor's
Conference, see http://www.nescaum.org/RFG/RFGPh2.shtml.
\9\Report of EPA's National Blue Ribbon Panel on MTBE, see http://
www.epa.gov/otaci/consumer/fuels/oxypanel/rec721.pdf.
\10\RBOB is Reformulated Blend for Oxygenate Blending. It contains
no oxygenate, has low octane, and is made specifically for blending
with ethanol.
---------------------------------------------------------------------------
In the summer, the vapor pressure (measure of evaporability
relative to temperature) of gasoline is required by EPA to be lower
than in the winter to help limit evaporative emissions of volatile
organic compounds (VOC) from gasoline. Ethanol tends to raise the
overall vapor pressure when blended with gasoline, thus RBOB must have
a lower base vapor pressure than comparable feedstock gasoline used for
MTBE blending. RBOB can be produced cost-effectively for wintertime
blending with ethanol because the vapor pressure requirements are not
as restrictive. However, the cost of producing RBOB for summertime
blending (when the vapor pressure of gasoline is required to be lower)
has made ethanol use in the summer economically infeasible in the
Northeast because it cannot compete with MTBE/ether blends.
Ethanol is used predominantly in areas where it is produced, such
as in the Midwest, where ethanol is in ready supply, support for its
use is strong, and the oil industry has responded to the demand for
RBOB. At the present time, the only supplier using ethanol in the
Northeast is Getty, who made a commitment over 10 years ago to use
ethanol in wintertime gasoline blends in some areas along the east
coast. Getty originally made the commitment because its projections
suggested that they could supply ethanol blends cost effectively.
Getty's supplier of ethanol is Archer-Daniels-Midland, which transports
it by both rail and barge to Getty terminals. The RBOB necessary to
blend with the ethanol is supplied via special contract with a single
refinery in Lyndon, New Jersey, and thus ethanol blending is limited to
areas proximal to that particular refinery. Conversations with
officials from Getty indicate that none of the gasoline distributed to
its facilities in New Hampshire contains any ethanol. DES testing of
gasoline samples this past fall (see footnote 1) supports that
conclusion. An additional downside to ethanol blending from the
standpoint of terminal operations is that separate storage must be
dedicated to ethanol at a time (winter) when extra storage for heating
oil would be extremely useful.
In recent bills proposing to control MTBE, the gasoline supply and
distribution industry has testified to the operational complications of
supplying gasoline blends to New Hampshire that are not presently
available in this region. In addition, potential price and supply
volatility increases as the number of suppliers decreases. Given New
Hampshire's small share of the regional gasoline market, the number of
suppliers willing to make a special ``boutique'' gasoline for the State
is likely to be limited. It is extremely difficult to predict the
impact that requiring a unique gasoline for New Hampshire would have on
supply and pricing.
Potential Health and Environmental Impacts
There may also be unanticipated health and environmental impacts
from regulation of gasoline ethers. NESCAUM's report (RFG/MTBE Findings
and Recommendations, see footnote 4) found, among other things, that:
`` . . . gasoline refiners that supply the Northeast have
overcomplied with RFG toxic performance standards by more than 75
percent, in part due to the presence of MTBE. This substantial margin
of overcompliance may be lost if MTBE (which is used both as an
oxygenate and an octane enhancer) is reduced or eliminated from RFG.''
In order to prevent increases in air toxics that are likely to
accompany decreases in MTBE and other ethers, it may be necessary to
seek additional controls on those components of gasoline that directly
result in air toxic emissions (e.g., benzene, aromatics, and olefins).
However, as mentioned previously, approval of a Section 211(c) waiver
request is contingent on EPA finding that such a request is necessary
to achieve attainment of a NAAQS. Since there is no NAAQS for air
toxics, a Section 211(c) waiver request that includes measures designed
solely to reduce emissions of air toxics is not likely to be approved
by EPA.
The impacts to groundwater from spills of ethanol blend gasolines
have not been fully studied. Preliminary studies by the New England
Interstate Water Pollution Control Commission (NEIWPCC) on the
characteristics of ethanol, storage issues, and impacts resulting from
releases of gasoline containing ethanol suggest that, while ethanol
blends overall may be better than MTBE/ether blends from the standpoint
of groundwater contamination, other toxic constituents of gasoline
(e.g., benzene, toluene, ethylene, xylene) may actually travel further
through the groundwater with ethanol blends. This is because organisms
in the soil which break down petroleum products prefer ethanol over
other components of gasoline. However, the NEIWPCC report is expected
to conclude that this result would still be preferable to having MTBE
present in gasoline.
Conclusion
At the present time, virtually all gasoline supplied to New
Hampshire contains at least some MTBE and/or other ethers. \11\ In
addition, because MTBE is the additive of choice for meeting the
Federal oxygenate mandate in RFG, gasoline in areas of New Hampshire
where RFG was adopted (Hillsborough, Merrimack, Rockingham, Strafford
counties), contain significantly higher levels of MTBE and other
ethers.
---------------------------------------------------------------------------
\11\See the DES special study ``Study of Reformulated Gasoline
Distributed Outside of New Hampshire's Four County Nonattainment Area
``, available on the DES website: http://www.des.state.nh.us/ard/
rfgstudy.
---------------------------------------------------------------------------
Because of the potential for contamination of water resources by
MTBE and other ethers from releases of gasoline into the environment,
the desire to take action at the State level to ban or restrict their
use is justified. However, the existing language of Federal statute,
specifically Section 211(c) of the Federal CAA, places significant
restrictions on States' ability to regulate the use of ethers in
gasoline. Legally, a State can only enforce its own regulation of fuels
if it has EPA' s blessing (an approved waiver from Section 211(c) of
the CAA). The States of New York and California have adopted State bans
on MTBE, and their actions have been challenged by MTBE stakeholders,
who appear to have a strong case. New Hampshire should monitor these
cases closely to help assess its ability to defend potential actions to
regulate ethers in gasoline and the associated legal expenses.
In addition to possible legal challenges, because virtually all
gasoline supplied in this region contains some concentration of ethers
primarily MTBE), the implementation of a rule that regulates the ether
content of gasoline may create a ``boutique'' gasoline in New
Hampshire. Some States, including Minnesota and Maine, have implemented
rules which regulate gasoline formulation in an effort to reduce the
use MTBE as a fuel additive, and the gasoline industry has complied
voluntarily. This is believed to be because, in both instances, the
formulation required has been reasonably available in the region. A ban
on ethers in New Hampshire would effectively be a requirement to supply
a new gasoline formulation, particularly in areas where RFG is required
(i.e, New Hampshire's four county area, roughly 70 percent of the
State's gasoline consumption). Requiring a gasoline that is not
commercially available may have significant impacts on the supply and
pricing of gasoline, and the extent of these impacts are difficult to
predict.
Attachment B
State of Connecticut,
Department of Environmental Protection,
March 14, 2001.
Senator Donald E. Williams,
Representative Jessie O. Stratton,
Co-Chairpersons, Environment Committee,
Room 3200, Legislative Office Building,
Hartford, CT 06106.
Re: Annual Report Pursuant to Public Act No. 00-175, An Act Concerning
the Use of MTBE
Dear Co-Chairpersons Williams and Stratton: This is to followup to my
letter of 12/29/00 updating you on the status of the Department of
Environmental Protection's (the ``Department's) efforts pursuant to
Public Act No. 00-175, An Act Concerning the Use Of MTBE. According to
this act, the Department is required to submit an annual report to the
Environment Committee outlining the Department's progress on a plan to
eliminate methyl tertiary butyl ether (``MTBE'') as a gasoline
additive. As stated in my letter of 12/29/00, the Department decided to
delay the submission of our annual report to await the completion of
the regional study evaluating ethanol as an alternative to MTBE. This
study, conducted by the Northeast States for Coordinated Air Use
Management (NESCAUM) and the New England Water Pollution Control
Commission (NEIWPCC) while not yet final, contains several significant
findings, which warrant your attention and consideration.
The findings outlined in the NESCAUM/NEIWPCC study lead the
Department to conclude that the ban on MTBE effective in the year 2003
is not prudent for the State of Connecticut and we recommend that the
Environment Committee consider changing the date of the ban. If this
action is not taken, Connecticut's position in the region as the first
and only State to ban MTBE while required under the Clean Air Act to
comply with the Federal Reformulated Gasoline Program (RFG) will likely
result in one of several undesirable options. These options could
include the delivery of special or non-compliant gasoline or an
increase in the price of gasoline conservatively estimated in the range
of 3-11 cents per gallon. If the legislature does not initiate a
legislative change this session the Department is prepared to recommend
changing the date in the next legislative session.
These conclusions are based on the findings highlighted in the
attached summary. If there are any questions regarding the Department's
activity regarding MTBE, please contact Tomn Tyler, my Legislative
Liaison, at 424-3001. Thank you for your consideration of this matter.
Sincerely,
Arthur J. Rocque, Jr., Commissioner.
______
Annual Report Pursuant to Public Act No. 09-175
an act concerning the use of mtbe
The following is a synopsis or the key findings from the NESCAUM/
NEIWPCC study.
Background
The Federal reformulated gasoline program (RFG) was designed to
reduce emissions from motor vehicles. To comply with the RFG program,
gasoline must achieve a set of emission performance standards and meet
a minimum oxygen content requirement. Currently, approximately three-
quarters of all gasoline sold in the northeast market is RFG. Refiners
have opted to sell an RFG blend containing MTBE at 11 percent by
volume, which translates into approximately 1 billion gallons of MTBE
sold annually in the Northeast. The RFG program has provided
substantial reductions in emissions of smog-forming pollutants, benzene
and other hazardous air pollutants from motor vehicles. However,
substantial evidence indicates that the unique chemical and physical
properties of MTBE pose an unacceptable risk to the region's potable
water supply. The challenge facing policymakers is to maintain the air
quality benefits of RFG while reducing the threat that MTBE poses to
the region's water resources.
Cost Implications of Eliminating MTBE
MTBS and ethanol are the only two oxygenates currently produced in
quantities sufficient to meet the demand created by the RFG program.
Therefore, under current Federal law eliminating MTBE represents a de
facto mandate for ethanol. The consequences of introducing hundreds of
millions of gallons of ethanol into the region's gasoline pool by 2003
will have significant economic impacts by potentially increasing the
cost of gasoline in Connecticut by a range of 3-11 cents per gallon.
However, the 2003 date puts Connecticut on a more accelerated phase-out
schedule than other States regionally or nationally and this may result
in costs outside the range or the projected 3-11 cent increase per
gallon. The increase in cost is the result of several key factors:
Fuel Reformulation Costs--Formulation changes associated
with eliminating MTBE are likely to increase the cost of gasoline
production due to the need for process changes and equipment
modifications as well as the inclusion of replacement blend components
which are more expensive than MTBE. Critical factors in the cost
effectiveness equation are the timeframe for phase-in, the relative
supply and demand for fuel constituents, and the longer term prospects
for developing ethanol production capacity in the New England.
Infrastructure Costs--Due to ethanol's unique properties,
notably its affinity for water, a new infrastructure to transport
millions of gallons of ethanol from the mid-west and internationally
will need to be developed. The existing distribution systems have water
infiltration problems that cause ethanol to separate out of gasoline.
Ethanol will require different handling and transport methods than have
been used for MTBE. California has estimated that U wilt cost
approximately $60 million and will take up to 24 months to modify
storage tanks. Unloading facilities and the installation of blending
equipment at distribution terminals. The NESCAUM/NEIWPCC study
estimates that the cost for the Northeast would be roughly $48 million.
Economic Costs--Projections show that in 2003
approximately 13 billion gallons of gasoline will be sold in
Connecticut. A one-cent per gallon increase translates to about $15
million of outflow from the State. Since most RFG is produced outside
the region, increased gasoline prices represent a substantial outflow
of economic resources from the regional economy. The NESCAUM/NEIWPCC
study cites a 1999 U.S. Department of Energy report estimating that the
average cost of RFG produced at east coast refineries would increase by
3.9 cents per gallon if all MTBE were replaced by 2004 under a
nationwide ban on ethers. Connecticut is the only State in New England
that has banned MTBE by 2003. This makes projecting potential increases
in gasoline prices difficult. While difficult to predict with accuracy,
unilateral action by Connecticut will result in per-gallon increases in
the cost of gasoline beyond those predicted for national or regional
actions. The NECAUM/NEIWPCC study clearly shows that a longer lead-time
that enables a coordinated regional phase-out of MTBE would translate
into cost savings on projected increases in gasoline prices.
Environmental Impacts of MTBE v. Ethanol
Gasoline spilled or leaked into the environment is a major source
of water pollution, and at elevated levels, gasoline and its
constituents can adversely affect drinking water quality. Both ethanol
and MTBE exhibit a high solubility in water and high mobility in the
subsurface. Because it biodegrades quickly in the environment, ethanol
poses significantly less risk to water resources than MTBE. However, in
certain instances, the environmental transport properties of ethanol
can make other gasoline constituents more soluable in groundwater, and
potentially inhibits the degradation or other more toxic components in
gasoline such as benzene end toluene. While the potential increases in
exposure from ethanol do not compare with the risks born by MTBE, it
raises another issue for consideration and management.
Waiver Request
Under Section 211(k) of the Clean Air Act States may receive a
waiver from the oxygenate requirement of the RFG program. This is not
to be confused with a waiver from the use of MTBE. The State of
California submitted a waiver request to the U.S. Environmental
Protection Agency (EPA) in 1999. At the time of this writing, EPA has
yet to even propose a decision in response to California's request.
While the Department intends to seek a waiver as part of a regional
strategy a waiver request will not serve as a timely solution for
Connecticut in the absence of a waiver, an amendment to the Federal
Clean Air Act would be required to enable the State to comply with RFG
requirements. Non-compliance will result in Federal sanctions and the
loss of millions of dollars in transportation funding. In addition,
Connecticut will still need to make up the difference in the emissions
shortfall that has been credited to the RIG program.
Public Education and Outreach on Effective Gasoline Management
There are opportunities fur enhancing current public education and
outreach efforts on the importance of a safe and effective gasoline
management. Department has already initiated a public outreach effort
and has met several times with representatives from petroleum marketing
and fuel additive industry groups to establish a campaign to educate
the public on the proper handling of gasoline. This group plans to
utilize aspects of a campaign called ``Gas Care'' that was launched by
the Alliance for Proper Gasoline Handling in 2000. Also, the
Department's efforts in enhancing compliance with the I-95 Federal
Underground Storage Tank regulations have served as an important
measure in promoting effective gasoline management. However, while
Department's efforts have resulted in over 8,500 tanks now in
compliance with these requirements, there are over 5,100 non-compliant
tanks remaining. This universe represents a labor-intensive effort
which currently is severely understaffed.
Attachment C
executive order 2001-02
An order pertaining to reducing water contamination resulting from
the use of Methyl tertiary Butyl Ether (MTBE) in Reformulated Gasoline
WHEREAS, MTBE has become a significant and rapidly increasing
contamination threat to groundwater and surface water resources in the
State of New Hampshire; and
WHEREAS, 16 percent of New Hampshire's public water supplies have
some level of MTBE contamination; and
WHEREAS, 27 percent of the private well samples analyzed for MTBE
by the Department of Environmental Services' laboratory in the year
2000 had some level of MTBE and 4 percent had MTBE concentration in
excess of the State's drinking water standard of 13 ppb; and
WHEREAS, a study conducted by the Department of Environmental
Services found MTBE in all gasoline across the State, at levels up to
12.4 percent, and that other oxygenates with similar characteristics to
MTBE were found in all ten counties, with levels up to 5.5 percent; and
WHEREAS, MTBE is considered a potential human carcinogen at high
doses by the U.S. Environmental Protection Agency; and
WHEREAS, due to its high solubility in water and its ability to
move quickly through groundwater, MTBE from leaking storage tanks and
spills tends to move further than other components of gasoline and is
more difficult to remediate; and
WHEREAS, MTBE does not break down as rapidly as other gasoline
constituents once released into the environment; and
WHEREAS, the State of New Hampshire and its citizens and businesses
are incurring significant costs to deal with the increasing presence of
MTBE contamination, namely in undertaking remedial steps to remove the
threat of continuing contamination at individual sites, providing
alternative drinking water supplies to homes affected by MTBE
contamination, and substantially increasing staff time spent on MTBE
contaminated sites and related issues; and
WHEREAS, the State of New Hampshire has aggressively pursued all
available, legal options to reduce the concentration of MTBE in
gasoline sold in the State and the threat posed by MTBE contamination
in its water resources, including:
Initiating exhaustive assessments of MTBE and a task force
to seek a regional gasoline solution; working with dealers to
promote cleaner marine engines; and helping to launch a national
public education program regarding the proper handling and disposal
of gasoline;
Conducting one of the strongest underground storage tank
replacement programs in the country, achieving a compliance rate of
over 99 percent;
Establishing a new safe drinking water standard for MTBE of
13 parts per billion, the most protective primary drinking water
standard in the country; and
Formally requesting relief from Federal requirements; and
WHEREAS, MTBE was added to gasoline in the mid-1 970's to help
replace lead because it added octane and improved combustion in
gasoline engines, resulting in cleaner emissions; and
WHEREAS, Title I of the Federal Clean Air Act Amendments of 1990
(CAA) mandated significant emission reductions from New Hampshire's
ozone nonattainment areas (i.e., Hillsborough, Merrimack, Rockingham,
and Strafford counties), and in order to help satisfy these
requirements, in 1991 New Hampshire decided--by opting in to the
Federal Reformulated Gasoline (RFG) program--to require cleaner-burning
gasoline in these counties starting in 1995; and
WHEREAS, because the CAA expressly mandates the oxygen content of
RFG, requiring that it have at least 2 percent oxygen by weight, RFG
contains approximately 11 percent MTBE by volume--five to ten times the
amount historically found in gasoline in the Northeast; and
WHEREAS, because the ability of States to regulate the properties
and composition of gasoline--including its oxygen content--is expressly
limited by the CAA, State action to ban MTBE is unlikely to withstand
legal challenge; and
WHEREAS, even if MTBE were eliminated, the CAA oxygen mandate would
still force New Hampshire to use other oxygenates--such as ethanol--
that are not readily available, could lead to unacceptable price and
supply impacts, and need to be analyzed to ensure that we understand
public health and environmental issues associated with these
alternatives; and
WHEREAS, despite these and other actions, the number of MTBE
detections in the State's water resources continues to rise, and
despite the State's vigorous efforts to advance Federal legislation to
eliminate the CAA oxygen mandate, neither Congress nor the U.S.
Environmental Protection Agency appear likely to address this problem
in the foreseeable future; and
WHEREAS, the only remaining option available to the State of New
Hampshire is to opt out of the Federal RFG program and to make up for
the emission reductions that RFG provides by adopting other emission
control measures; and
WHEREAS, the air quality benefits that have been achieved through
the RFG program should be maintained, and diminishing or
``backsliding'' from these air quality benefits is unacceptable from
the standpoint of public health; and
WHEREAS, protection of New Hampshire's economic well-being, natural
environment, public health, and quality of life demands that the
State's air and water quality be enhanced simultaneously, rather than
treated as mutually exclusive goals;
NOW, THEREFORE, I, JEANNE SHAHEEN, GOVERNOR of the State of New
Hampshire, by the authority vested in me pursuant to Part II, Article
41 of the New Hampshire Constitution, do hereby order and direct the
Department of Environmental Services (DES) to prepare and submit to the
U.S. Environmental Protection Agency the documentation necessary for
New Hampshire to opt-out of the Federal Reformulated Gasoline program
immediately, pursuant to my request that the Administrator of the U.S.
Environmental Protection Agency revise the Code of Federal Regulations
Title 40, Part 80, Subpart D, Section 80.72(c) to allow for an
accelerated opt-out of the Federal Reformulated Gasoline program; and
FURTHERMORE, I order and direct DES to work with the New Hampshire
General Court to adopt in this legislative session any provision
necessary to accomplish this goal, including control measures
sufficient to replace the emission reduction benefits achieved by RFG,
to provide adequate funding and statutory flexibility for remediation
of MTBE-contaminated sites and water resources by extending the sunset
date of the Oil Discharge and Cleanup Fund to January 1, 2010, and
increasing the reimbursable limit of that fund from $1 million to $1.5
million for MTBE (and other petroleum) contaminated sites; and
FURTHERMORE, I order and direct DES to continue to promote and
participate in efforts to develop acceptable regional or Federal
approaches to reduce the threat of MTBE contamination, including but
not limited to elimination of the oxygen mandate, waivers from Federal
fuel requirements, cleaner reformulations of fuels, and other such
measures; and
FURTHERMORE, I order and direct DES to analyze and transmit to my
office and the General Court, the results of any State, regional or
national studies on the environmental fate and transport of ethanol in
air, surface water and groundwater, to ensure a full understanding of
the potential environmental and public health consequences of ethanol
as an alternative to MTBE; and
FURTHERMORE, I order and direct DES to analyze and transmit to my
office the results of litigation concerning MTBE, and to recommend any
actions which, based on the outcome of the litigation, may allow the
State to better address the issue of MTBE contamination; and
FURTHERMORE, I order and direct DES to take all reasonable steps to
encourage the Federal Government to appropriate adequate funding to
States for the costs incurred to remediate MTBE-contaminated sites and
water resources and to prevent future contamination.
Given at the Executive Chamber in Concord, this sixteenth day of
April, two thousand one.
__________
Statement of William C. Holmberg, President, Biorefiner
My name is Bill Holmberg. I am a resident of Bow, New Hampshire. I
have been involved in environmental issues, renewable energy, as well
as biofuels and other transportation fuels, since 1971. My involvement
includes government service at EPA, FEO/FEA and DOE, president of
energy-oriented associations and startup companies promoting the
biorefinery concept in the private sector.
Thank you Mr. Chairman for the opportunity to present thoughts
which I believe are of importance to Northern New England and the
nation in terms of energy, the environment and economic well being.
First, I want to congratulate you for your position on ANWAR. I believe
it wise, and will briefly explain why later in this testimony. I also
want to thank you for attending and speaking at the Environmental
Inaugural Ball in the nation's capital this past January. You helped
make the Ball a great success.
The primary issue before you today is the fate of MTBE. I agree
that MTBE should be banned and phased out of the gasoline pool. But, I
ask that you consider a phaseout schedule that accommodates the reality
of the problem and the economic consequence of such action. May I also
suggest that leaving the decision up to the States has merit because of
the different perceptions of the problem in the separate States? This
is primarily due to the status of leaking underground storage tanks,
the movement of groundwater and its relationship to the aquifer, the
amount of MTBE used in a State, and the focus of public relations
attacks by those benefiting from the demise of MTBE. I appreciate the
distribution problems of providing different fuel formulations to
individual States; but, perhaps the States in a region (New England,
for example) could coalesce in the best interests of the environment,
water quality, and the economics of the region.
It is interesting to note that MTBE is still widely used in many
parts of the country, but complaints have subsided appreciably. Again,
dealing with the underground storage tank problem is likely the primary
reason. In addition, I believe the relaxation of the public relations
attack is also a contributing factor. I ask that you consider the
possibility that the forces that covertly orchestrated those attacks
are the same forces that failed to support your MTBE legislation that
was successfully reported out of the Environment and Public Works
Committee during the last Congress. That failure is geared to the
reality that these forces are determined to control the ethanol market,
and have little interest in seeing the industry expand into the routine
use of cellulosic biomass as a feedstock to produce ethanol.
The advance of the biorefinery concept (the conversion of
cellulosic biomass to biofuels, bioenergy and biochemicals) is of vital
importance to the Northern New England States. These States essentially
have little significant fossil fuel reserves--oil, gas or coal. They
have, however, vast reserves of cellulosic biomass--agriculture and
forestry residues, rights-of-way, park, yard and garden trimmings, and
the clean biomass portion of municipal wastes that go to landfills.
Those biomass reserves are renewable and represent the sustainable
economic and energy security of New Hampshire, Vermont and Maine, other
New England States, and large regions elsewhere in the nation.
Mr. Chairman, $2 per dollar gasoline prices, and perhaps higher,
are being predicted for this summer. This situation could only worsen
in future years. But, a reasonable transition to an ever increasing
reliance on biofuels made from feed grains and cellulosic biomass as
well as Biodiesel made from oil-seed, animal fats, tallow and used
cooking oil, will slow the rise in cost of fossil-based transportation
fuels and also bring healthy, new competition to the marketplace and a
new industrial base to the region.
This long sought-after transition requires action on two fronts:
A steadily expanding market for biofuels. The Renewable
Fuels Standard that was included in your legislation last year, S.
2962, as reported out of your committee, can best achieve this goal. I
seek your consideration of again including that provision in your new
legislation, or as an alternative, cosponsoring S. 670, the Renewable
Fuels Act of 2001.
New, ``out-of-the box'' thinking and action to
commercialize the emerging biorefinery concept through concentrated,
aggressive and coordinated government actions at the Federal and State
levels. Studies on the value of including biomass as feedstocks to
produce biofuels, bioenergy and biochemicals, and accompanying
research, have been going on for more than half a century. Hundreds of
millions of dollars of public funds have been spent. The American
Petroleum Institute sites a number in excess of $7 billion.
This year alone, the President's budget calls for well over a
$100,000,000 to be spent by DOE and USDA. Only biopower (electricity
and thermal energy) have achieved a modest level of success.
There are increasing levels of biochemicals entering the
marketplace, but this technology was well developed before the advent
of petrochemical feedstocks. The first gallon of cellulosic biomass
ethanol has yet to enter the marketplace.
The nation needs a ``man on the moon'' type priority approach to
truly launch the Biorefinery concept. The Northern New England States
need a cooperative and aggressive program to take advantage of their
most promising energy resource--biomass--and to put it to work to the
benefit of New Hampshire, Vermont and Maine. The technologies to launch
the process are in hand today. The bureaucratic and political will to
harness these technologies come up short. I seek your support for a
``man on the moon'' approach to overcome these shortcomings and I would
be pleased to work with your staff to develop a plan. Perhaps a good
place to start this planning is in the Conservation Center of the
Society for the Protection of New Hampshire Forests. You saw their
innovative approach to energy on Monday. Thank you for speaking at
their Earth Day event.
In terms of ANWR--given available data, it is possible to calculate
that, with passage of last year's S. 2962, or this year's S. 670, there
will be more gallons of finished fuel entering the transportation
market by 2010 than if exploratory and production drilling at ANWR
proceeds.
Furthermore, if the increased ethanol production were reacted with
isobutylene to produce ethyl tertiary butyl ether (ETBE), the amount of
non-petroleum based automotive fuels would be twice the amount of
finished product that could be produced at ANWR. ETBE is being used in
Europe in increasingly large volumes as a clean-burning gasoline
additive with great success, with no reported problems. In addition,
butane, the feedstock used to produce isobutylene, is in surplus supply
because of the need to reduce the vapor pressure of gasoline sold in
several parts of the nation during summer months. The phaseout of MTBE
(also containing isobutylene) will exacerbate that surplus, as will the
increased production of natural gas that frequently contains natural
gas liquids that include butanes.
Therefore, with the passage of S. 670, the need for oil from ANWR
is marginalized. Add ETBE to the process and the need for ANWR is
further diminished.
You have expressed concern over the ozone forming potential of
ethanol in gasoline. This concern is well founded in ozone non-
attainment areas during the summer months. This is caused by the
increased vapor pressure of the fuel when ethanol is added to gasoline
in small amounts. There are two available solutions to the problem and
two on the horizon:
Oil refiners can provide lower vapor pressure gasoline
for blending with gasoline. This is done in the Chicago/Milwaukee
region.
Ethanol can be used as E-85 in flexible fuel vehicles--
the vapor pressure problem goes away when the amount of ethanol in
gasoline exceeds 22 percent.
Ethanol is converted to hydrogen, which is then used as
an automotive fuel in an engine or fuel cell.
Ethanol is used as ETBE, which has superior blending
characteristics, but only after it is well established here in the U.
S. that ETBE does not cause problems in water supplies. The
Environmental Research Group at the University of New Hampshire could
explore this issue.
The solutions to the automotive fuel problems are in hand.
Aggressive, concerted and regional actions are needed to release them
into full commercialization. You expressed concern about the
importation of ethanol into States like New Hampshire. Two
considerations:
The provision in S. 670, giving a 1.5 credit to biomass
ethanol compared to 1 credit for starch or sugar-based ethanol, coupled
with aggressive, regional actions, should soon make it possible to soon
produce ethanol here in the New England States; and
S. 670 contains carefully designed protections for
Northeastern refiners and motorists. First, the Clean Alternative Fuels
Program section allows refiners to meet their gradually increasing
targets by trading credits, rather than having to purchase the physical
``wet barrels'' of alternative fuel, including ethanol. In this way,
refiners can make the best choice based upon fuel availability and
pricing, and transportation considerations. In addition, the
legislation allows for suspension of the requirement if the EPA
Administrator and Secretaries of Energy and Agriculture determine that
insufficient supplies of ethanol and other alternative fuels could
distort motor fuel prices.
I am taking advantage of your offer to modify my testimony based on
what we learned or heard at your hearing. Several points:
One of the main justifications for including the
oxygenate requirement in reformulated gasoline (RFG) in the Clean Air
Act Amendment of 1990, was the steps the major oil companies took to
provide needed octane while lead was being phased out--which they, of
course, fought. Their octane preference was aromatic hydrocarbons--
benzene, toluene and xylene (BTX). Benzene is a known and potent
carcinogen; toluene and xylene, to some degree, convert to benzene in
the combustion process as well as in the catalytic converters. As I
recall, BTX levels were raised from about 20 percent of the gasoline
content, when lead was used, to about 32 percent after lead was no
longer available. There are additional problems with BTX in vehicle
performance and in the efficiency of catalytic converters. Perhaps the
main issue here is that the public can get used to the more invisible
cancer threat of BTX, but the smell, taste and concern about MTBE
demands action. That action is appropriate, but the results should not
be more BTX.
Ethanol should be the answer, but that ethanol should be
produced in all regions of the country from the most available
feedstocks--for NNE, biomass is the logical feedstock.
Concerns about ethanol were raised at your hearing:
1. Formaldehyde emissions. I don't think that is the case.
Formaldehyde emission should come down. Acetaldehyde emissions may
increase and lead to formations in the atmosphere that should be
watched. Studies to date indicate no significant consequences. The
attachment covers this issue.
2. Leakage of 95 percent ethanol (plus the denaturant) from storage
tanks in terminals where the ethanol, a solvent, would react with
previously spilled fossil hydrocarbons and transport the blend into the
groundwater. Because there is BTX in those hydrocarbons, benzene could
then be detected in this water. That concern should be investigated and
followed by the Environmental Research Group at the University of New
Hampshire. The attachment also covers this issue.
3. That tactics of certain elements of the ethanol industry, in
terms of not supporting S. 2962 at the critical point in the
legislative process. These elements have a vested interest in
controlling the capacity of the industry and the feedstocks being
used--the biomass resources of Northern New England do not fit into
their corporate goals. As I said in my closing comments, ``Please do
not taint the future fuel ethanol industry with the sins of a small, in
number, but a powerful part of the industry.''
It's important to understand that the vast renewable biomass
reserves of New England and the nation (that go beyond forest and wood-
lot residues and include waste streams identified above) represent
unwanted competition to the most powerful industries in the world. To
the most powerful--they are very profitably processing fossil
hydrocarbons (domestic and foreign), and we are proposing to process
local, renewable, living carbohydrates. To the powerful carbohydrate
processing businesses--they can command the starch and sugar
feedstocks, and we are proposing to process the yet uncontrollable
cellulosic fraction of biomass--including massive carbohydrate waste
streams. Complicated, but just bringing up the issues can be an
important first step leading to a better understanding of the
difficulties in birthing the biorefinery industry.
Thank you, Mr. Chairman, for this opportunity to express my
thoughts and to be of service to Northern New England and the nation.
__________
__________
Statement of Patricia W. Aho, Executive Director, Maine Petroleum
Association
I appreciate this opportunity to present information pertaining to
issues surrounding the use of ethanol in gasoline in New Hampshire and
Maine. The Maine Petroleum Association is a division of the American
Petroleum Institute, which is a national trade association representing
nearly 500 companies engaged in all sectors of the U.S. oil and natural
gas industry, including exploration, production, refining,
distribution, and marketing. As Executive Director of the Maine office,
I also oversee issues of concern to our members in New Hampshire.
background
Federal reformulated gasoline (RFG) is currently required to be
used in four southern New Hampshire counties Hillsborough, Strafford,
Rockingham, and Merrimack. Conventional gasoline is used in the
remainder of New Hampshire. Conventional gasoline is used in Maine
except in the summer ozone season when 7.8 RVP conventional gasoline is
required in Maine's southern counties. The RFG gasoline which is
supplied to New Hampshire uses predominately MTBE as the oxygenate to
meet the requirements of Federal law and regulations that require a
minimum of 2 percent oxygen by weight. Over the past few years,
attention has focused on alternatives that may be used in lieu of MTBE.
The focus of many discussions by policymakers and regulators in New
Hampshire and Maine has been to determine whether ethanol is a viable
alternative.
ethanol availability
Last summer, the Coalition of Northeastern Governors hosted a forum
on ethanol blending in gasoline in the Northeast and Mid-Atlantic.
Because ethanol is not widely available in the Northeast, the forum
presented information regarding the economic issues associated with its
use in gasoline and the associated development of a regional
infrastructure which would be necessary in order to ensure long term
production capability. Additionally, the forum discussed issues
regarding cellulosic biomass ethanol technology, which is of interest
in New Hampshire and Maine because of its potential to be produced from
biomass waste, including agricultural, wood and municipal solid waste.
Currently, the Agricultural Products Utilization Commission in
Maine has issued a request for proposal to study the feasibility of
building and financially sustaining a biomass-ethanol plant in northern
Maine. What is important to note from both of these ongoing efforts, is
that there is very little, if any, current production capacity for
ethanol in either New Hampshire or Maine. API undertook an analysis of
the cost and benefits of State-level oxygenate mandates to expand
ethanol production in January 1999. This study provides an overview
regarding Federal ethanol subsidies, and the market structure of the
industry. It indicates that the total capitalization of a 15 million
gallon per year ethanol plant is roughly $30 million. Thus the capital
necessary for the startup of an ethanol plant would be significant here
in northern New England. (I have attached a copy of the study to this
statement.)
Recent testimony before this committee's Subcommittee of Clean Air,
Wetlands, Private Property and Nuclear Safety by Jason Grumet,
Executive Director of the Northeast States for Coordinated Air Use
Management (NESCAUM) acknowledged that the Northeast and northern New
England do not currently have an available supply of ethanol. He said,
`` it is possible to ship massive quantities of ethanol to the
Northeast by barge, rail and truck. The question remains at what
cost.'' Recently, Comm. Arthur Rocque, Connecticut Department of
Environmental Protection has acknowledged that it is not prudent for
the State of Connecticut to ban the use of MTBE effective October 2003,
and bases his concern on a study evaluating ethanol as an alternative
to MTBE which has been conducted by NESCAUM, and the New England Water
Pollution Control Commission (NEIWPCC). In fact, Comm. Rocque indicates
that to the State of Connecticut, banning MTBE would pose undesirable
options to the State including: ``the delivery of special or non-
complaint (sic) gasoline or an increase in the price of gasoline
conservatively estimated in the range of 3-11 cents per gallon.'' Comm.
Rocque has indicated that the Department of Environmental Protection in
Connecticut is prepared to recommend changing the date during the next
legislative session.
ethanol infrastructure
New Hampshire receives its gasoline from marine barge shipments
which come into terminals in Portsmouth and Newington, and from trucks
which may pick-up products from terminals in Portland, Maine, Boston
harbor, Springfield, Massachusetts and even as far away as Albany, New
York. Gasoline containing ethanol needs to be transported and stored
differently than does gasoline which contains ethers. Ethanol must be
transported and stored separately from the gasoline until the point
where it is loaded into the truck at the terminal rack, for delivery to
retail locations. Terminals which are located in New Hampshire,
Massachusetts, or Maine, which would be supplying gasoline with
ethanol, would need to build new storage tanks and retrofit terminals
with new blending equipment in order to supply the product. Many of our
terminals may have difficulties in receiving siting approvals for such
additional storage capacity; space constraints may prove to be a
significant challenge in expanding existing petroleum terminals.
Exacerbating the separation and segregation requirements, are the
number of fuels required in the northern New England area. New
Hampshire requires two different fuels, Maine requires two different
fuels also. Recently, some proposals have seemed to address only MTBE
used in RFG rather than all fuels, which would result in an even
greater strain on the gasoline infrastructure. If ethanol were required
to be used to comply with the Federal oxygenate mandate in reformulated
gasoline, then the terminals servicing New Hampshire marketers would in
turn have to carry even more types of gasoline. Our refinery and
distribution system is currently stretched to the breaking point. There
are over 45 different types of gasoline required nationwide, so any
additional requirements for gasoline would pose significant challenges
for the industry.
Other infrastructure issues also arise with the consideration of
gasoline containing ethanol, including possible changes that might be
needed to either underground or aboveground storage tank systems. For
example, some fiberglass reinforced plastic tanks may not be compatible
with ethanol, and there are questions whether premature failure of leak
monitoring systems, and other parts of the fuel dispensing equipment at
a gasoline station may occur.
Ethanol is predominately produced in the Midwest and would have to
be transported into the Northeast. Until such time as any ethanol is
produced in the New England area, the alternative for transporting
ethanol from the Midwest include barge, tanker, rail or truck.
Infrastructure for this type of transportation will need to be
developed prior to any ability to move significant quantities of
ethanol to Northeast terminals for blending.
Finally also it is important to note that gasoline containing
ethanol cannot be co-mingled with gasoline containing ethers. Terminals
and gasoline stations would not be able to intermingle the two products
in its tanks. Thus proposals which attempt to phase-down the use of
MTBE or ethers in gasoline, without removing the Federal oxygenate
mandate, are not feasible.
conclusion
In conclusion, I appreciate the opportunity to present information
to you today; API is committed to working with Congress, the
Administration, and State policymakers and regulators to develop
appropriate energy policies for our future. Thank you very much.
______
attachment
[From the American Petroleum Institute, January 1999]
The Costs and Benefits of State-Level Oxygenate Mandates to Expand
Ethanol Production
Considerable research has been carried out over the last several
decades to address questions relating to the cost and benefits of
ethanol programs at the Federal and State levels. Proponents argue that
ethanol programs support agricultural production and boost farm income
in particular States. In addition, various environmental benefits are
attributed to ethanol use, and it is claimed that its use reduces the
risk of dependence on foreign oil. New legislation that would
significantly increase ethanol demand, e.g., requiring oxygenated motor
fuel use statewide, is currently being considered by various State
legislatures. \1\ On the other hand, opponents to ethanol subsidies
argue that the cost to taxpayers and to consumers, e.g., in terms of
decreased tax revenue, and increased gasoline and food expenditures,
outweigh the benefits to farm producers and processors. The principal
purpose of this paper is to assess the likely costs and benefits of
additional State level mandates being considered by various State
assemblies that, if implemented, would significantly increase ethanol
demand and production. Before turning to this issue, a brief
description of existing Federal and State ethanol subsidies is provided
as well as a characterization of the market structure of the ethanol
industry.
---------------------------------------------------------------------------
\1\Minnesota mandated the use of oxygenated fuel year round in
both attainment and non-attainment areas in 1997 to be phased in over a
number of years. Ethanol is the sole oxygenate in use in Minnesota.
---------------------------------------------------------------------------
Federal Ethanol Subsidies
The rationale for tax exemptions on alternative fuels at the
Federal level grew out of energy security concerns associated with the
1973-74 Arab oil embargo. The objective was to displace gasoline by
subsidizing renewable fuels. The nation's dependence on foreign oil
would decline as oil imports dropped, or so it was thought. A Federal
exemption of 4 cents per gallon for alcohol fuels was initiated with
the enactment of the Energy Tax Act (P.L. 95-618) in 1978, representing
the full amount of the Federal gasoline tax. The magnitude of the
Federal tax exemption has been changed periodically since that time,
most recently with the Omnibus Budget Reconciliation Act of 1990 that
established a rate of 5.4 cents per gallon of motor fuel containing 10
percent alcohol by volume. \2\ This translates into a 54 cents tax
exemption per gallon of ethanol. The act also introduced a tax credit
of 10 cents per gallon of ethanol for small ethanol producers (less
than 15 million gallons per year). The Energy Policy Act of 1992
extended the tax exemption to gasohol containing less than 10 percent
alcohol. Mixtures containing 7.7 percent alcohol receive an exemption
of 4.16 cents per gallon, and the exemption for the 5.5 percent mixture
is 3.08 cents per gallon.
---------------------------------------------------------------------------
\2\Motor fuel blenders have the alternative of taking an income
tax credit of 54 cents per gallon of ethanol.
---------------------------------------------------------------------------
Magnitude and Types of State Level Ethanol Subsides and Mandates
States have justified ethanol subsidies on grounds ranging from
local economic masons to environmental and energy security concerns.
The levels and types of subsidies vary by State as seen in Table 1.
Common types of programs include production subsidies, tax exemptions
on motor fuel taxes, and guaranteed loans at below market rates for new
production facilities. For example, Minnesota has provided a 5 cents
per gallon blenders' credit, a 20 cents per gallon producers' subsidy,
and low interest loans of up to $500,000 per plant through the Ethanol
Production Facility Loan Program. More generally, the magnitudes of
State level ethanol subsidies of the major producing States range from
zero to 40 cents per gallon of ethanol.
Statewide year-round use of motor fuel with 2.7 percent oxygen was
mandated in Minnesota in October 1997. \3\ This will roughly double the
amount of ethanol consumption in the State when fully implemented. Such
mandates go far beyond the already considerable levels of existing
Federal aid State ethanol subsidies, and if enacted by a significant
fraction of States, will result in soaring levels of ethanol demand and
an aggressive expansion in ethanol production.
---------------------------------------------------------------------------
\3\The 2.7 percent oxygen requirement effectively precludes the
use of oxygenates other than ethanol.
---------------------------------------------------------------------------
Market Structure of the Industry
U.S. ethanol production is concentrated in both large and small
plants, e.g., large plants exceeding 130 million gallons per year
account for over 50 percent of U.S. capacity while plants with capacity
of 45 million gallons per year or less account for roughly 23 percent
of total capacity as seen in Figure 1. \4\ Previous research [see,
e.g., USDA, ERS, 1988, USDA, Office of Energy, 1986] shows that unit
production costs at larger plants can be up to 45 percent less than
those at smaller plants, i.e., increasing returns-to-scale
characterizes ethanol production With average \5\ ethanol production
costs of roughly $1 00 per gallon, this suggests a range of between $85
per gallon and $125 per gallon across large aid small producers under
current feedstock prices While the magnitude of these costs would
change with changing corn prices, the differential, reflecting
production economies, would remain. A natural question to ask is why
small and medium size plants are built. Them are several reasons,
primary among them are icing constraints and subsidies for small
producers.
---------------------------------------------------------------------------
\4\Plant production by State is given in Table A-2 of the
appendix.
\5\This reflects a weighted average across wet and dry ethanol
plants at current corn prices. Average wet miller production casts are
$ .85 per gallon while these of dry millers are $1.25 per gallon. Wet
millers supply roughly 60 percent of the ethanol brought to market, dry
millers the remainder.
The total capitalization of a 15 million gallon-per-year ethanol
plant is roughly $30 million of which $8 million goes for construction,
$10 million toward equipment, $6 million for engineering and design,
and $6 million to working capital for startup of operations, The sale
of common stock typically provides between 40 and 50 percent of the
required capital with bank loans with terms ranging between 7 to 10
years supplying the rest. \6\ Given existing producer subsidies and
State mandates, bankers do not have to assume that the plant will be
profitable, i.e., they provide financing at near zero risk! This
follows since the loans are likely to be repaid even if the ethanol
plant is an economic failure in States where producer subsidies exist.
Assuming a $.20 per gallon producer subsidy, a 15 million gallon plant
receives $3 million per year. This provides $30 million over a 10-year
period, enough to build the plant (and pay back bank loans) and cover
startup costs. State mandates that insure the continuation of local
demand for ethanol, and shareholder equity, further reduce the risk of
non-recoverable loan default to near zero. Bank financing of larger
plants would put more bank capital at risk, and the evidence to date
suggests that capital constraints become binding over the 15 million to
30 million gallon per year plant size. Hence, for the independent
producers, capital constraints limit plant size before significant
returns-to-scale can be realized. Large companies, e.g., ADM and
Cargill, not subject to such capital constraints, build and operate
large plants to realize lower unit production costs.
---------------------------------------------------------------------------
\6\ Some States provide low interest loans of up to $500,000 per
plant for small producers.
---------------------------------------------------------------------------
The Costs of State Oxygenate Mandates
A relevant policy question associated with any public expenditure
(be it a highway, public park or a subsidy for motor fuel) is whether
the societal benefits of the product or service will likely exceed the
societal costs? In some cases the answer to this question is relatively
straightforward, e.g., even at the time of project commencement the net
benefits of the Federal interstate highway system were recognized,
while in other cases the optimal amount of government support for a
project may be less clear, particularly in its early stages, e.g. the
optimal level of public expenditures targeted at global warming.
In the case of public expenditures for ethanol production, the
evidence to date strongly suggests that societal costs have
significantly exceeded societal benefits. In fact, there is widespread
agreement among economists that ethanol production would not take place
without the current level of Federal and State subsidies since it
cannot compete on a level playing field with readily available
substitutes. It follows that State mandates that significantly increase
ethanol demand by requiring ethanol use in attainment as well as non-
attainment areas, as in Minnesota, lead to further resource
misallocation and waste. The cost-benefit analysis of the Minnesota
program presented below provides evidence in support of this view.
Motorists Could Pay More For Motor Fuel
At a time when crude oil and hence gasoline prices are at historic
lows, motorists could pay more for motor fuel under expanded oxygenate
mandates like those in Minnesota (notwithstanding low corn prices and
existing ethanol subsidies). This is borne out in the Energy
information Administration's most recent weekly retail price data
listed in Table 2. The estimates characterize prices of motor fuel sold
in attainment areas (conventional), carbon monoxide non-attainment
areas (oxygenated) and ozone non-attainment areas (RFG). The average of
5 weekly observations running from 11/9/98 to 12/7/98 reveals that
oxygenated fuel in PADD 2 was selling for roughly $.03 per gallon more
than conventional fuel. Since Minnesota is the only State in PADD 2
with an oxygenate requirement, oxygenated fuel prices in PADD 2 are
Minnesota prices. Furthermore, ethanol is the sole oxygenate in use in
Minnesota.
This data squares with a recent report Ethanol Programs: A Program
Evaluation Report prepared by the State of Minnesota, Office of the
Legislative Auditor in February 1997 that on p.9 states ``. . . the
retail price of gasohol (in Minnesota) will exceed the price of
conventional gasoline by about 2 to 3 cents per gallon over the next
several years''. \7\
---------------------------------------------------------------------------
\7\It is important to note that this conclusion could change given
a significant relative price change between corn and crude oil.
Before Minnesota imposed its statewide mandate, the use of an
oxygenate was required under Federal law in the Twin Cities
metropolitan area for one-third of the year. Given that roughly one-
half of total State vehicle miles traveled fall within the Twin Cities
area it follows as a crude approximation that one-third of one-half, or
one-sixth, of all gasoline consumed in the State fell under the Federal
oxygenate mandate. Hence, the year-round statewide oxygenate mandate is
directly attributable to the remaining 5/6 of total State consumption
not covered under Federal law.
Given that roughly 2 billion gallons of gasoline are consumed in
Minnesota each year, and that gasohol blends currently sell for roughly
$.03 per gallon more at the pump than straight gasoline \8\ [Table 2
above], it follows that the statewide oxygenate mandate could cost
Minnesota and visiting out-of-state motorists $50 million per year (516
x 2 billion gallons x $.03 per gallon) in additional motor fuel costs
(upon full program phase-in).
---------------------------------------------------------------------------
\8\The average PADD 2 conventional fuel price is taken as a proxy
for the Minnesota conventional fuel price in this analysis.
---------------------------------------------------------------------------
State Taxpayers Will Pay Higher Taxes or Face Reduced Government
Services
In addition, the State mandate (to be phased in over time) will
eventually increase ethanol demand by roughly 132 million gallons (.077
x 2 billion gallons gasoline x 5/6 x 1.03) per year. \9\ This implies a
producer subsidy of $26.4 million per year (132 million gallons x $.2
per gallon). According to the Minnesota State Report [1997), ethanol
production capacity in Minnesota stood at roughly 92 million gallons
per year in 1997, with an additional 37.5 million gallons of capacity
(3 plants) under construction, and 105 million gallons of capacity (6
plants) in the planning stage. Total production capacity will be 235
million gallons if and when all 9 plants come on line. Below market
rate loans for plant construction for 9 plants will add roughly $.3
million per year to taxpayers bills. \10\ The total increase in
subsidies due to the oxygenate mandate, to be paid in large part by
Minnesota taxpayers, is estimated to be $26.7 million per year.
---------------------------------------------------------------------------
\9\The first factor in parenthesis specifies the percent ethanol
blend with gasoline required to meet a 2.7 percent oxygen requirement
while the last factor takes into account the energy differential
between straight gasoline and the ethanol blend.
\10\The current $05 per gallon blender's credit is due to be
phased out and therefore not included as a public expenditure.
---------------------------------------------------------------------------
Federal Taxpayers Subsidize State Ethanol Expansion
Federal tax revenue will decline by $71.3 million per year (132
million gallons x $54 per gallon) due to the Minnesota oxygenate
mandate, plus $8.6 million per year (132 million gallons x $.10 per
gallon x .65) as a result of the subsidy to small producers. The
Federal subsidy for small producers (less than 15 million gallons per
year) is $.10 per gallon, and roughly 65 percent of all Minnesota
plants that will be in production after the 9 new plants come on line
fall under the definition of small producer. The total Federal subsidy
for Minnesota's statewide oxygenate mandate is estimated to be $ 79.9
million per year.
In sum, for States actively considering oxygenate mandates such as
that recently passed in Minnesota, the timing could not be worse. With
no recovery in crude oil prices on the horizon, at least over the near
term, additional oxygenate mandates could result in a significant
increase in motor fuel outlays for consumers in those States. The total
program costs are estimated at $156.6 million per year, as seen in
Table 3 on page 9.
the benefits of state oxygenate mandates
The Minnesota Agricultural Sector will Benefit from State Oxygenate
Mandates
Increased ethanol production will result in an increase in the
demand for corn, positively impacting the farm sector. Corn production
in Minnesota is roughly 1.1 billion bushels. An increase in demand of
132 million gallons of ethanol due to the State oxygenate mandate
translates into a demand increase of 52.8 million bushels of corn
assuming a coefficient of .4 bushels of corn per gallon of ethanol, or
4.8 percent of current production. A price increase at the local level
of 5.04 to 5.05 per bushel, or 2.3 percent at the current corn price of
$2.14 per bushel, could be expected to result from an increase in
demand of this magnitude [Personal Communications, Economic Research
Service (ERS), 1998]. \11\ Production margins (gross value of
production less variable and fixed costs) for Minnesota corn producers
are estimated by ERS to be $79.94 per acre at $2.19 per bushel of corn.
This translates into $.64 per bushel given a yield of 124 bushels per
acre. Hence, net income to Minnesota corn producers is estimated to
increase by $25.8 million (52.8 million bushels x $.64 per bushel) due
to the increase in ethanol demand as a result of the oxygenate mandate.
This estimate assumes that demand is filled entirely through Minnesota
production. It could be the case that a fraction of the demand is
filled through out-of-state production though with Minnesota corn
prices significantly lower than those in surrounding States, this
fraction is likely to be low. Furthermore, the estimate assumes that
demand would be filled entirely through additional production and would
not simply be filled by diverting from exports or other uses. To the
extent that this is not the case, the benefits reported here are
overestimates.
---------------------------------------------------------------------------
\11\The change in the national average corn price due to this
demand increase would be negligible.
---------------------------------------------------------------------------
There will also be indirect benefits accruing to the agricultural
sector, e.g., the co-products of additional ethanol production will add
value to the sector as will the increase in demand for agricultural
supplies. The output multiplier associated with feed grains, derived
from the U.S. input-output accounts [Survey of Current Business, Vol.
77, No. 11, November 1997], is employed to derive a rough estimate of
these indirect benefits. The multiplier (2 in the case of feed grains)
indicates the increase in economy-wide output necessary to bring $1 of
product (in this case corn) to market. In other words, for every dollar
of corn brought to market an additional dollar of economic activity is
generated throughout the economy. This implies an additional $115.6
million in production given that $115.6 million ($2.19 per bushel x
52.8 million bushels) in additional corn is produced due to the State
oxygenate mandate. Assuming a 10 percent profit margin on this
production yields an additional $11.6 million in benefits. Hence, the
total benefits to the agricultural and related sectors are estimated to
be $37.4 million per year, also given in Table 3.
There Will Be Winners and Losers in the Agricultural Sector
Not all farm producers would benefit from an aggressive ethanol
expansion program. As stated above, corn prices would likely increase
resulting in increased acreage planted to corn. Higher corn prices
result in higher prices of other feed grams and wheat as producers
substitute these commodities for corn in their feed rations. The
acreage planted to these commodities also increases due to increases in
feed demand other than corn. The situation is different for soybean
producers as soybean and corn production compete for the same acreage.
Given the increase in acreage planted to corn, flower acres are planted
to soybeans. The soybean enterprise shrinks and profitability declines
with ethanol expansion. \12\
---------------------------------------------------------------------------
\12\In addition, corn oil, a co-product of ethanol production,
substitutes for soybean oil further driving down the domestic demand
for soybeans.
---------------------------------------------------------------------------
Minimal Environmental and Energy Security Benefits
Given that the State mandate applies to areas already in
attainment, environmental benefits will be negligible. Also, 132
million gallons of ethanol per year will displace roughly 102 million
gallons of gasoline per year (2.4 million barrels of crude per year).
The United States imports roughly 3,285 million barrels of crude and
product per year. Hence, the energy security benefit associated with
this program is also negligible. It is important to note that given the
diversification of U.S. imports of crude by country of origin that has
occurred over the last several decades, the energy security value of
import reduction (even at levels significantly greater than considered
here) has declined.
The result is unambiguous. As seen in Table 3, the societal cost of
the State oxygenate mandate is roughly 4 times greater than the
societal benefit resulting in an annual net loss of $119 million, This
result reflects the significant misallocation of resources associated
with ethanol production. It is important to recognize that the
statewide oxygenate mandate requires the use of an oxygenate in
attainment areas that otherwise could simply have used straight
gasoline. Inherent in each gallon of ethanol produced over and above
the level required to meet Federal mandates is a resource cost to
society equal roughly to the production cost differential between
ethanol and straight gasoline. With ethanol production costs at roughly
$1.20 per gallon in Minnesota and wholesale gasoline prices at $.30 per
gallon, the resource loss (or societal waste) associated with the
Minnesota oxygenate mandate is estimated to be $119 million per year
(132 million gallons x $.90 per gallon).
One might presume that such large losses would be unacceptable to
the agents bearing them. It should be pointed out, however, that a
large part of the program cost is subsidized at the Federal level,
resulting in less of a burden to Minnesota taxpayers and consumers. As
well, benefits flow to a narrow group of producers (increasing the
incentive to lobby) while costs are spread over the entire population
(decreasing the incentive to lobby).
Conclusions
There is movement in some State legislatures to adopt statewide
oxygenate mandates similar to the program put in place in Minnesota in
1997. The proponents argue that mandates will benefit corn producers
directly by increasing the demand for corn, and indirectly in that the
corn producers will realize the value-added of additional ethanol
production, further boosting their incomes. While proponents are
correct in asserting that mandates will benefit corn producers by
increasing the demand for corn, this paper has clearly shown that the
additional benefits to the agricultural sector do not compensate for
the program costs. In particular, the implementation of statewide
oxygenate mandates could increase fuel costs to motorists and reduce
Federal and State tax revenue. These costs are roughly 4 times as large
as the benefits to the agricultural sector. The result is unambiguous.
State residents, e.g., in Iowa, would be worse off given the
implementation of such a program.
It is important to point out that the claim made by proponents that
the value-added of additional ethanol production will be realized by
corn producers in the States where the mandates are enacted may or may
not be true, depending upon the particular State. While this may in
part be true in States like Minnesota, where ownership structures of
ethanol plants are predominantly cooperatives (with corn producers as
members), it is clearly not true in States like Iowa, where the entire
ethanol production in the State can be attributed to two large
corporations. In this case the value-added of ethanol production flows
not to corn producers in the State, but rather to the shareholders of
the two large corporations. Hence, corn producers in Iowa will not
realize the value-added of additional ethanol production in the State
(unless they own stock in the corporations producing the ethanol).
Were an aggressive national program put in place, household food
expenditures would also be likely to rise, adding to total program
costs. In addition, transporting the ethanol from producers to distant
consumers would be expensive given that ethanol moves by rail or barge
rather than through pipelines. The former modes of transportation are
inefficient relative to the later.
References
Charles River Associates, The Effect of Ethanol Tax Subsidies on
the U.S. Economy, September 1995.
State of Minnesota, Office of the Legislative Auditor, Ethanol
Programs: A Program Evaluation Report, February 1997.
U.S. Department of Agriculture, Office of Energy, Fuel Ethanol and
Agriculture: An Economic Assessment, Agricultural Economic Report
Number 562, August, 1986.
U.S. Department of Agriculture, Economic Research Service, Ethanol:
Economic and Policy Tradeoffs, Report 1988-201-025:60429, January,
1988.
U.S. Department of Agriculture, Office of Energy, Personal
Communications, December 1998.
__________
Statement of Thomas L. Adams, President, Oxygenated Fuels Association
(OFA)
Mr. Chairman--Our nation continues to face an energy crisis.
Additionally, as you are well aware, the overwhelming majority of
citizens continue to express a strong desire for cleaner air. One of
the tools that is successfully employed in battling both the energy
supply and clean air dilemmas is Methyl Tertiary Butyl Ether (MTBE).
However, it is being challenged by some who have concerns about its
perceived threat to groundwater and surface water. As President of the
association representing international and domestic companies engaged
in the manufacture and sale of MTBE, we urge you to avoid a rush to
judgment that could seriously impact the nation's precarious energy
supply and potentially undo the clean air strides that have been made.
A summary of my testimony is as follows:
MTBE plays a key role in improving air quality.
MTBE makes up roughly 4 volume percent of the U.S.
gasoline pool (11 percent or more in many major metropolitan areas) and
with refineries operating at near capacity levels, elimination of this
component could have lasting negative impacts on price and supply of
gasoline.
MTBE is not a human health threat. In fact, there are
many examples of the significant role played by MTBE in improving the
health of all Americans. Despite press accounts, no national or
international agency has ever classified MTBE as a carcinogen.
Where gasoline components have contaminated drinking
water sources, the cause of the problem is a release of gasoline due to
leaks from underground storage tanks.
I would like to now briefly address the benefits of MTBE, health
effects concerns, its impact on water quality and the options that the
nation has as alternatives to its use.
The Environmental Benefits of MTBE
It is important to review the accomplishments of the Reformulated
Gasoline (RFG) program, and the role that MTBE has played in those
accomplishments. The Clean Air Act requires that all RFG must contain 2
percent, by weight, of oxygen. There are two primary oxygenates being
used in the RFG gasoline pool today: MTBE and ethanol. MTBE is a
product that is made by combining methanol and isobutylene. It is
manufactured by refineries and by chemical companies. Congress was wise
enough to allow the marketplace to determine the most cost effective or
efficient source of oxygen for RFG. For a variety of environmental,
commercial, and performance-related reasons, MTBE has become the
oxygenate-of-choice for making RFG for those regions outside the Mid-
West. MTBE is used in 80-85 percent of all the RFG produced today.
The RFG program consists of two phases: Phase I--the period from
1995 through 1999. Phase II started at the beginning of 2000.
EPA has compiled data for the United States showing that Phase I
RFG has surpassed the requirements of the Clean Air Act. An analysis of
the Phase I RFG produced by refiners shows that the fuel reduces ozone-
forming compounds, such as VOCs, by over 28 percent--that's 44 percent
above the 15 percent requirement of the law. Emissions of air toxics
are reduced by approximately 30 percent--that's almost twice as much as
required by law.
Ambient air monitoring confirms that the RFG program is working.
Testing shows that benzene levels have declined by 31 percent between
1994 and 1997; levels of ethyl benzene, another toxic component of
gasoline, have declined 52 percent during the same period. RFG areas
also showed significant decreases in other vehicle-related VOC
concentrations. EPA has testified that the emissions reductions
required for Phase I RFG--which have been met and exceeded--and the
emissions reductions of Phase II RFG--which are already nearly met--are
equivalent to taking more than 16 million vehicles off the road.
As a key component of RFG, MTBE contributes to the environmental
benefits of RFG in several ways. First, by adding MTBE to gasoline,
refiners dilute or displace gasoline components such as aromatics
(benzene, toluene and xylene) which contribute to the formation of
ozone and emissions of toxics and PM (particulate matter). These
compounds themselves are hazardous air pollutants. EPA has acknowledged
that if oxygenates were not used to produce RFG, levels of aromatics
may have to be increased to provide the necessary octane.
Second, by adding MTBE to RFG, refiners improve the combustion of
the gasoline, resulting in fewer emissions of smog-forming pollutants,
such as VOCs and carbon monoxide, as well as Particulate Matter. Use of
MTBE reduces harmful exhaust emissions, which due to their highly
reactive nature causes a disproportionate amount of smog formation.
Third, MTBE has a lower vapor pressure--the rate at which it
evaporates--than the primary competitive product, ethanol, and many
other volatile components of gasoline. Lower vapor pressure equates to
lower evaporative emissions of VOCs.
Fourth, oxygenates, like MTBE, play a particularly important role
in significantly reducing emissions from millions of small engines
without catalytic converters. In California, these small, off-road
engines used in recreation, gardening and forestry account for a
significant level of toxic air emissions from mobile sources.
Health Effects of MTBE
The detections of MTBE in a small percentage of nation's drinking
water supplies have prompted questions concerning the health effects of
MTBE. Those with a desire to see MTBE removed from the marketplace have
gone further to suggest that little is known about the health effects
of MTBE. In fact, nothing could be further from the truth.
MTBE's first contribution to the health of Americans was as a
replacement for lead in gasoline in the late 1970's. MTBE was added to
maintain octane in the fuel. Under the Clean Air Act, the refiners'
ability to use MTBE in unleaded fuel was subject to EPA approval. The
refiners made the appropriate demonstrations, including providing
information on the known health effects of MTBE, and EPA approved the
use of MTBE at concentrations of up to 7 percent, by volume. In 1981,
EPA approved a blending of MTBE in unleaded gasoline to a maximum of 11
weight percent. In the early 1980's, refiners created an industry study
group, managed by the American Petroleum Institute.
The industry group sponsored a toxicology testing program and
submitted the results to EPA. In 1986, a Federal Interagency Testing
Committee, acting under authority of the Toxic Substances Control Act,
recommended additional testing of MTBE based on expected increased
production levels, potential exposure as a gasoline component, and the
need to complete data sets. The industry agreed to conduct such testing
and established a program under EPA oversight and guidelines. From 1988
until 1992, the industry testing group sponsored and/or conducted all
of the tests required by EPA. Progress reports on these tests were
submitted to EPA for inclusion in the public docket. In 1988, EPA
approved the blending of MTBE in unleaded gasoline to a maximum of 15
percent by volume.
In addition to the industry-sponsored tests, toxicologists at EPA's
laboratory in Cincinnati, Ohio conducted the first examination of the
risks of exposure to MTBE by ingestion. The peer-reviewed study,
reported in the Journal of the American College of Toxicology, did not
identify any adverse long-term effects associated with exposure to
MTBE. Regretfully, MTBE is repeatedly and incorrectly treated as ``the
skunk at the garden party.'' The popular media characterize it as a
``probable'' or ``possible'' carcinogen.
In 1999, the International Agency for Research on Cancer (IARC),
part of the World Health Organization, conducted a review of the
existing research on the chronic (long-term) effects of exposure to
MTBE. IARC can classify a substance into one of five categories: Group
1 carcinogenic to humans; Group 2A--probably carcinogenic to humans;
Group 2B possibly carcinogenic to humans; Group 3--unclassifiable as to
carcinogenic risk to humans; and Group 4--probably not carcinogenic to
humans. The IARC review put MTBE in Group 3, concluding that there is
``inadequate evidence in humans for the carcinogenicity'' of MTBE. Such
a finding places MTBE in the same category as caffeine, tea, and
fluorescent lighting.
As an aside, you might find it interesting to know that MTBE has
been used by physicians for years to dissolve gall stones within the
human body. Other respected and recognized expert bodies who have
recently examined the scientific weight of evidence on MTBE and have
also declined to list it as a known, probable, possible or likely human
carcinogen include the California Proposition 65 Scientific Advisory
Panel Carcinogen Identification Committee and the Federal National
Toxicology Program (NTP).
In May 2000, the National Institute for Environmental Health
Sciences (NIEHS) released its congressionally mandated report on
cancer-causing substances. The report declined to list MTBE as a
cancer-causing agent or as an agent likely to cause cancer, but did,
however, add ethanol-based beverage alcohol to the list of known
carcinogens. As recently as December 20, 2000, the European Union
environmental agency's Classification Labeling Committee announced that
it had determined that MTBE was not classifiable as a human carcinogen
and that it would not ban MTBE.
In summary, we do not believe there is any credible evidence that
indicates MTBE presents a significant risk to human health from either
a short-term exposure or over a longer term. Over 80 studies have
concluded there is no risk to human health. Ethanol on the other hand
has been classified as a known human carcinogen. What is clear is that
MTBE has resulted in reduced cancer risk by reducing hazardous air
pollutants.
Impact on Water Quality
While MTBE quietly labored as the workhorse of the Clean Air Act
since 1992, few in the public took notice until MTBE was detected in a
few, isolated sources of drinking water, principally in California. A
recent study (``A Screening Level Assessment of Household Exposures to
MTBE in California Drinking Water,'' Williams, P.R., et.al.) in the
March 2000 edition of Soil, Sediment & Groundwater indicates that the
average MTBE concentrations in California have steadily declined over
the 1995-99 time period. The source of MTBE contamination of drinking
water supplies in most cases is leaking underground gasoline storage
tanks. For example, the South Lake Tahoe area in California is served
by seven local gas stations. According to testimony given during the
California public hearings on groundwater contamination by MTBE, all of
these stations were leaking gasoline into the groundwater; not
surprisingly, this gasoline eventually found its way into the water
supply for South Lake Tahoe, California. Violations of existing
regulations included evidence of disabled dispenser sensors, poor
installation, disabled leak detection, and inadequate documentation of
annual inspections.
This problem primarily can be attributed to inefficiencies in
California's tank program. Some 107 agencies and authorities have
jurisdiction over gasoline tanks in California. For primarily this
reason, the EPA has not certified California's UST Program. Studies and
field experience show that leaking underground tanks of gasoline have
been the main source of MTBE in the isolated instances where it has
been found in groundwater in the past. Other studies show that spills
of gasoline with MTBE on surface soils or water are not a significant
threat to drinking water supplies. Like other gasoline components, MTBE
will easily volatize into the atmosphere within days. It also easily
biodegrades in these surface waters. As a result, any contamination
that might occur from a surface spill is generally of short duration.
It is important to have some context in evaluating the frequencies,
and levels, of MTBE detections in drinking water supplies. The majority
of detections of MTBE in groundwater have been at 2 ppb or less. To put
the term ppb (parts per billion) in perspective, 1 ppb equates to a
time span of 1 second in 31.7 years. Therefore, 2 ppb equates to a time
span of less than 5 seconds in the life of the average person. There is
currently no enforceable Federal standard for MTBE in drinking water,
although EPA has recently required public water systems to monitor for
MTBE in their drinking water supplies and report that information to
EPA. The EPA has established an MTBE Drinking Water Guideline based
only on aesthetics of 20-40 ppb noting that there ``is little
likelihood that an MTBE concentration of 20 to 40 ppb in drinking water
would cause adverse health effects in humans.''
Last, if there is a problem with MTBE in groundwater, the answer is
to fix the source of the problem--leaking underground storage tanks. A
most recent report by the General Accounting Office (GAO) states that
while State compliance with Federal equipment requirements is high,
operational and maintenance problems could lead to spills, leaks and
health risks.
Alternative Oxygenates
Much has been made of ethanol as a potential substitute for MTBE as
a fuel oxygenate. In those areas of the country where reliance on
ethanol makes some economic sense, it is already the oxygenate of
choice and Federal law itself is, of course, neutral as to which
oxygenate may be used. However, greatly expanded use of ethanol makes
little sense.
First, expanding ethanol use will come at the expense of air
quality. Use of ethanol is not as effective at combating air toxics and
even increases levels of certain toxics called aldehydes; and
peroxyacyl nitrates (PAN). Ethanol is less effective at controlling
criteria air pollutants as well. NESCAUM (the Northeast States for
Coordinated Air Use Management) has previously commented that,
``Greater emissions of volatile organic compounds (VOCs) would occur
during the early and late portions of the [Northeast] region's ozone
season since gasoline blended with ethanol is more volatile than
similar gasoline without ethanol. `` In addition, the higher volatility
ethanol-blended gasoline can contribute to an overloading of an
automobile's evaporative canister and subsequently lead to higher CO
emissions. EPA has acknowledged that the increased use of ethanol will
result in increased NOx emissions.
Oxygenates like MTBE go to work in an engine at the point where
most pollution is produced: the cold cycle. For the first three to 4
minutes after you start your ignition, your car's engine produces the
majority of its emissions. Because oxygenates combust at low
temperatures with MTBE combusting at far lower temperatures than
ethanol--fuel chemistry clearly demonstrates that MTBE is the most
effective component of pollution control when the car is still
relatively cold. In addition, to meet the other Federal specifications,
RFG without oxygenates would have to increase its ratio of aromatics.
The result of this change is two-fold: first, there will be a certain
increase in air toxics from automobiles; and second, more ozone
precursors from the use of aromatics will be created. In fact, if
ethanol is used to replace MTBE, it is more volatile than MTBE and
therefore would increase evaporative emissions.
It is not at all clear that greater reliance on ethanol will help
resolve any problems with water quality. Gasoline contains a range of
aromatics, such as benzene, toluene, and xylene that are among its most
toxic components. In subsurface conditions, studies have indicated that
ethanol, as part of gasoline, will extend the benzene plumes by 20
percent to 27 percentor more by interfering with the biodegradability
of these aromatics, thus creating the potential for a significant
source of toxic water contaminants. Given that ethanol can't be blended
at the refinery and must be blended at the terminal, this raises a
concern about ethanol and it's handling in pure form. Of course, IARC
has classified ethanol as a known carcinogen.
Even if expanded ethanol production were a good idea, ethanol
cannot be produced in sufficient quantities economically to satisfy
America's needs within the RFG program. Indeed, it is unlikely that
ethanol can meet its current demands in the Midwest while cost-
effectively supplying any new markets on either coast. Just take a look
at the cost of ethanol based RFG in the Chicago area. A congressional
Research Service Study issued on June 16, 2000 indicates that RFG with
ethanol ran roughly 50 cents per gallon higher than MTBE gasoline with
25 cents of that differential attributed to the RFG program with
ethanol blending as the oxygenate. This is due to the difficulty in
making the non-oyxgenated hydrocarbon portion of the RFG for ethanol
known as RBOB. The supplies of gasoline components that can be used
with ethanol in RFG are more limited, which contributes to a tighter
RFG supply and higher cost. Imagine trying to make an ethanol based RFG
that is thousands of miles away from the ethanol supply and which could
be further complicated by transportation difficulties and potential
summer droughts.
MTBE has extended the nation's supply of gasoline, contributing to
the historic low gasoline prices around the country in recent years.
Ethanol, due to it's high volatility problem, and the restrictive
consequences it places on refiners, has a net impact of reducing the
nation's gasoline supply, and thereby increasing the nation's gasoline
prices.
Ethanol has logistical problems, including its inability to be
carried in gasoline blends through pipelines, the most efficient way to
transport fuels. Further, ethanol costs the American taxpayer 53 cents
for every gallon consumed. As CBS News described ethanol, it is
``probably the most economically inefficient, unwarranted form of
corporate welfare in our entire Federal budget.'' (Eye on America
segment, 3/26/96) The American Road and Transportation Builders
Association stated in testimony before the U. S. Senate Environment and
Public Works Committee that the current ethanol tax subsidy deprived
the Federal Highway Trust Fund of approximately $1.1billion/year. In a
nutshell, ethanol, in spite of all the State and Federal welfare it
receives is not an effective or economically viable alternative.
Conclusion
It is clear that there is no credible evidence that MTBE presents a
significant risk to human health, either from short-term exposures or
over a longer term. What is clear is that MTBE has resulted in
significant reductions in cancer risk by reducing hazardous air
pollutants. It has also helped clean the air and we as a nation
continue to need to continuously combat the issue of dirty air. The
pressure to address the groundwater contamination problems created by
leaking underground storage tanks puts several questions in stark
relief.
First, is there a need to replace MTBE? The answer is no. Detection
data indicates that as underground storage tank compliance improves,
detections of MTBE in drinking water supplies decrease. Nationally,
measured in the mid 90's when our UST compliance was only 20 percent to
40 percent, less than 1 percent of the community water system
detections had concentrations exceeding 20 ppb. Therefore, the risks to
drinking water supplies are decreasing with time, not increasing as
some claim.
Second, is there a viable replacement for MTBE? Again, the answer
is no. Alternatives to MTBE, including ethanol, are more expensive and
more difficult to transport. Industry experts estimate that even under
ideal circumstances, replacing MTBE with ethanol will raise prices at
the pump a minimum of seven cents or more a gallon. But prices could
rise much higher than that if shortages of ethanol and, as a result, of
gasoline develop. Currently, refiners use about 286,000 barrels a day
of MTBE; total ethanol capacity is far less than half of that today,
and most of that ethanol is already committed to supplying octane in
other gasolines.
Third, if you restrict or prohibit the use of MTBE, can you be
certain that you will not increase the risks of adverse health effects?
Some refiners claim that they can make RFG without oxygenates that
meets the Federal Phase II requirements, but is there any third-party
independent confirmation? EPA has such a question pending before it in
the form of request from California, but it seems very reluctant to say
yes or no. Possibilities do not always equate to practice. Oxygenates
in Phase I RFG allowed for over-achievement. Eliminating oxygenates
from Phase II requirements may effectively limit the possibility of
similar results.
Finally, what are the other consequences of taking MTBE out of the
gasoline supply? As described above, MTBE constitutes a significant
percentage of the gasoline pool. If you take away that volume, what are
the supply and price ramifications? I think we have seen the answer to
that in the spike in gasoline prices across the nation last summer.
President Bush recently stated to the National Energy Policy
Development Group, that if we have a price spike in refined product,
``It's going to be because we don't have enough capacity, refining
capacity--we're not generating enough product.''
Our present energy problems will only be compounded by removing
this beneficial product from our gasoline supplies. I urge you to avoid
a rush to judgment.
I thank you again for the opportunity to offer written comments on
this important issue.
______
Salem Revisited: Updating the MTBE Controversy
(By Richard O. Faulk and John S. Gray)
``I am wronged. IT Is a shameful thing that you should mind these
folks that are out of their wits''
What Does ``Salem'' Have to Do With MTBE?
Martha Carrier, the casualty of those ``out of their wits,'' was
hanged as a witch on August 19, 1692 in Salem, Massachusetts. In all,
20 innocent persons were executed in 1692 as a result of hysteria
attending the Salem witch trials. After the executions, letters
criticizing the trials were sent to the colony's Governor, who then
precluded the use of ``spectral and intangible evidence'' in trials. No
prosecution was successful thereafter.
More than 300 years later, Martha Carrier's statement illustrates
an almost identical problem that plagues the current controversy
surrounding Methyl Tertiary Butyl Ether (``MTBE''), a gasoline additive
accused of polluting water supplies and endangering public health when
leaked from underground storage tanks (``USTs''). Like the Salem witch
trials, UST litigation is presently engulfed in hype--including dire
predictions of environmental and health disasters that will flow from
MTBE contamination. And like the ``spectral and intangible'' evidence
used in Salem, unreliable evidence is being used to indict MTBE. But as
in the witch trials, MTBE will be vindicated if reliable evidence is
used to judge the controversy.
A Real Public Health and Environmental Crisis?
Is the MTBE controversy a real public health and environmental
crisis? Or is it simply one more example of American regulatory and
legal hysteria? Does this controversy mark the beginning of yet another
mass tort explosion? Or is it simply another unsubstantiated crusade
designed to waste millions of dollars and unnecessarily preoccupy
judicial resources? A careful and reflective inquiry suggests that
rumors that the class action lawyers have ``struck gold'' are, at best,
premature, and, at worst, utterly false. Although a number of lawsuits
regarding MTBE have been filed, their certifiability as class actions
is doubtful, and their long-term viability is questionable. The
noticeable lack of individual consumer complaints belies the existence
of a significant controversy, and the few suits filed by municipal
water suppliers already appear to be transparently designed to upgrade
previously contaminated or deteriorated systems, more than to address
real dangers of MTBE contamination.
Unreliable Evidence and Exaggerated Claims
Moreover, at this point, personal injury claims cannot survive
judicial scrutiny. Serious health problems, such as cancer, have not
been associated with exposure to MTBE and probably will never be linked
in a scientifically reliable way. The U.S. government's National
Toxicology Program has refused to list MTBE a carcinogen, and the World
Health Association has reached the same conclusion. Recently, a major
report to the entire European Union determined that MTBE does not
present a risk to the health of its citizens or the quality of its
water. Empirical studies conclusively show that MTBE levels in
California water are minimal and that they are far below levels that
could impact human health or compromise water utility. Indeed, the
extent of water supplies that are actually compromised appears to be
relatively slight. Hence, despite the hyperbolic antics of a few
lawyers and public officials, the problem, if any, is primarily
localized and focused, instead of national and comprehensive--hardly a
compelling script for a mass tort drama.
A Crisis in Containment
Additionally, there is compelling evidence that the alleged MTBE
``crisis'' did not arise from any problems with MTBE itself, but rather
from failures to contain gasoline stored in USTs. These lapses were
compounded by ineffective enforcement of UST regulations designed to
prevent gasoline leaks into the environment. The U.S. Government, for
example, delayed enforcement of its UST regulations for 10 years after
they were issued. Recently published research demonstrates major and
chronic failures of enforcement by responsible agencies, especially in
California, which resulted in massive non-compliance and which
unreasonably delayed detection and remediation of gasoline leaks on a
statewide basis.
Diminishing Risks and Shrinking Damages
As compliance with UST regulations increases, however, the
upgrading of UST systems and the remediation of past leaks not only
reduces the risks of future pollution, but also lowers the damages, if
any available for past leakage. The number of potentially injured
parties is shrinking dramatically, as are the amounts reasonably
necessary to compensate them. For example, although plaintiffs are
currently seeking ``stigma'' damages for diminished property values,
the law typically precludes such recoveries unless the plaintiffs have
suffered a true loss as the result of a diminished sale price, instead
of a ``paper'' loss while still owning the property. Even then,
emerging concepts such as Risk-Based Corrective Action (``RBCA'') and
``Brownfields'' initiatives deflate the amount of recoverable damages
substantially.
A Valuable Product Unfairly Maligned
This article, published in two parts, discusses and evaluates the
current controversy surrounding MTBE. It examines (i) the
administrative, legislative and litigation history of MTBE in the
context of the Clean Air Act and State environmental statutes, (ii) the
importance of applicable UST regulations, (iii) the question of MTBE
toxicity for personal injury claims and public health concerns, and
(iv) the scope of property damages available to persons who are not
physically impacted by MTBE contamination. Certain supporting
references are attached, as are excerpts from an updated version of
this paper regarding the emerging ethanol controversy and breaking
international news. From this evaluation, we conclude that the MTBE
controversy is not a real public health or environmental crisis, but
rather yet another speculative product of the American legal industry.
The facts, as opposed to the allegations, demonstrate that MTBE is a
valuable product that is unfairly and outrageously maligned.
__________
Statement of Clint Norris, Chief Operating Officer, BC International
Thank you for the opportunity to provide testimony for
consideration by your full committee. I met one of your staffers, Jeff
Rose, on April 23, 2001 in Salem, NH, and he fully explained your
reasons for postponing the hearing. Unfortunately, I will be unable to
attend on the revised hearing date, but am submitting my comments in
writing. It is my intent that they will be additive and meaningful--and
also brief. Individually, I have worked not only in industry, but also
have served as policy and strategy advisor to governments via a role as
a periodic consultant to the United Nations. My firm, BC International,
has been actively involved biomass ethanol development, not only in New
England, but throughout the USA and worldwide since the early 90's. We
are currently participating in several U.S. DOE/NREL-supported projects
to locate ethanol plants in the Southern and Western US, using various
wastes to make ethanol. We have also been engaged in feasibility work
in the Northeast, and have spent some considerable effort looking at
viability of forest based feedstocks over the past few years. We are
very familiar with the issues and are pleased to discuss them in this
forum. We are also engaged in the use of biomass to make other
petroleum based products in order to use our own country's renewable
resources as the fossil based supplies get more expensive over time.
There are more than environmental reasons for addressing the issue
of renewable fuels. There are also strategic issues regarding reducing
our foreign-sourced energy dependences; there are economic issues
associated with a serious trade deficit and its impact on our nation's
capital resources; there are inter-generational issues associated with
affordable energy and its future availability; and there are public
health issues. Weaving a policy that successfully integrates all the
needs will require courage and a rhetoric filter of grand proportions
in order to do what is best to address these issues. The following
facts may be helpful.
1. Alcohol (Ethanol) has been around for thousands of years. People
drink it with their food, at ballgames, in their back yards, etc. They
spray it on their bodies via personal care products, use it as an
antiseptic to dress wounds, gargle with it in mouthwash, spray it in
their hair in hairsprays, etc. It is also used industrially as a
solvent. It is generally safe, but it is a chemical and it can be
toxic, as all chemicals are. To gage toxicity, as a reference point,
Merlot wine generally contains 13 percent ethanol, or 130,000,000 parts
per billion. When ethanol breaks down or is burned, it can give off
acetaldehyde, but acetaldehyde also breaks down to acetic acid
(vinegar), then to carbon dioxide and water.
2. In contrast, MTBE has only been around for a very few years. No
one would think of drinking it, spraying it on their bodies, pour it on
a wound or gargle with it. If water is contaminated with 0.2 parts per
billion, it has a turpentine-like taste, and to gage toxicity of MTBE--
it can be toxic at levels below 10 parts per billion. When MTBE is
burned it gives off formaldehyde, which also further breaks down,
eventually, to carbon dioxide and water.
3. NRC reported that measurements in the countryside to determine
MTBE presence from vehicles which used it were relatively easy to make.
In contrast, ethanol and acetaldehyde were difficult to detect beyond
background levels that are always present, due to the nature of living
matter as it undergoes its natural breakdown and return to the earth.
Thus, our environment does have a ``natural'' level of ethanol-based
compounds in it.
4. The Health Effects Institute of Cambridge, MA was commissioned
to do a study on the effects of oxygenates used in gasoline. It's a 155
page report. On pages 103-6, ethanol is mentioned. The study concludes
that reproductive, development, and long term effects of exposure to
ethanol from its use in fuel is not expected to cause any effects. The
reason is because exposure levels are not expected to increase blood
levels significantly--the increase in levels would be much lower than
those found endogenously in the blood. As a point of reference, the
report states``. . . ethanol is a product of many catabolic pathways
and is present in blood even in the absence of ingested alcohol.''
5. Currently, national ethanol production is located primarily in
the Midwest. By utilizing improved technologies that cost effectively
make ethanol from biomass wastes and resources, the biomass-rich
Northeast also has the potential to become an ethanol production
center. I believe that specific measures to support biomass ethanol
should be a component of policies to support renewable fuels. This will
ensure that the economic and environmental benefits of ethanol
production both continue in the Midwest and spread to other regions of
the nation, as ethanol markets and production expands.
6. If a national policy is not forthcoming in the short term, and
States seek to ban the use of MTBE (such as Gov. Shaheen's recent
order), a default mandate will be created for some alternative, most
likely ethanol. Other alternatives have some limitations. Alkylates--
potentially attractive to refiners--require additives to get fuel
octane to necessary levels. The additives are normally ``BTX''--
benzene, toluene, and xylene. BTX burns with more particulates and
toxics, which results in loss of air quality vs levels already
achieved. This is called backsliding and the EPA Blue Ribbon Panel
specifically recommended against backsliding.
7. A renewable fuels program preserves the original non-
environmental policy intent of the oxygenate mandate, and allows
accomplishment of other broad policy goals the 2 percent oxygenate
mandate originally sought to advance. Some of these policy goals
include greater economic development, greater fuel diversity, and
increased national security. Consistent with these goals, I support
thoughtful policies to develop renewable fuel use nationwide.
8. NESCAUM reported that 1.3 billion gallons per year of MTBE are
presently used in gasoline in the Northeast. Assuming a 5.7 percent
ethanol blend in gasoline, replacement of a 10 percent MTBE blend with
ethanol would require about 750 million gallons per year of ethanol.
Abundant biomass resources and a potentially large Northeast market for
ethanol provide the region with the opportunity to establish itself as
a leader in the nascent biomass-to-ethanol industry supplying the
northeast needs. Abundant biomass resources also exist to ensure ample
ethanol production to guard against any supply disruptions.
9. Increased use of ethanol will help protect against price spikes
by creating an additional supply source for fuel. Gas prices have risen
sharply last year in part due to U.S. reliance on imported fuel and a
decrease in international petroleum production. Increasing the
diversity of domestic fuel sources will improve price stability in the
U.S.
10. Nationally, no new petroleum refineries have been built since
the 70's. This has put great stress on those refineries trying to meet
the nation's needs during the past 3 decades of growth. Chemical plants
that run greater than a nominal 85 percent sales to capacity ratio are
generally at increased risk of running into supply chain reliability
problems. Our nation's refineries are running at levels exceeding 90
percent. The use of ethanol, in addition to being one of the safer
alternatives, will provide some relief for these stressed refineries by
acting as a fuel extender.
11. The nation's infrastructure is quietly developing in a way that
will bring even greater relief to the heavily burdened refining
industry. Ford, General Motors and Daimler-Chrysler are all making
flexible fuel vehicles (FFV's). An example is the standard Taurus. FFVs
can run up to 85 percent ethanol (E-85) in their gas tanks. These
growing numbers of vehicles are creating a corresponding growth in
demand for E-85, which in turn provides even more relief for the public
concern over refinery-dependent price spikes.
With your continued leadership, we can develop a policy solution
that facilitates the phase-out of MTBE while also continuing to advance
the development of renewable fuels. I firmly believe that a consensus-
based legislative outcome can meet the broad range of policy needs,
including: fuel security, economic development, cleaner air, the
protection of water quality, mitigation of global warming, and
reduction of biomass wastes. I look forward to working with you and
other stakeholders on this issue. Please do not hesitate to contact me
with any questions. Thank you for your leadership and initiative on
this issue.
__________
Letter from Gahagan & Associates Submitted for the Record
mtbe & ethanol
Dear Senator Smith: Thank you for the opportunity to provide testimony
for consideration by your full committee on April 23, 2001 in Salem,
NH. My firm has been actively involved in ethanol and biomass ethanol
development in New England for the past 3 years. We are currently
participating in a U.S. DOE/NREL-funded feasibility study to locate an
ethanol plant in Northern Maine. For the past 2 years, I have been a
participant in NESCAUM's MTBE Task Force that covers New England and
the Mid-Atlantic States. We are also founders and principals of
Northeast BioEnergy, LLC (``NEB''), an ethanol plant developer.
NEB has been formed in response to the expected phase down of MTBE
and the need to replace it with ethanol. Unlike the mid-West which has
over the past 25 years developed a corn ethanol industry that now
produces in the order of 1.5 billion gallons of ethanol per year as an
oxygenate without MTBE, Eastern and Western States each consume in the
order of 1.5 billion gallons of MTBE per year. Because corn does not
grow well in the East or the West, mid-Western corn producers will be
hard-pressed to meet timely demand for an additional 3 billion gallons
per year of ethanol.
In response to the opportunity to develop an ethanol industry in
the Northeast, NEB has adopted a three-phase approach to developing
regional ethanol and biomass ethanol resources and supplies:
Phase One: Start with known and available proven conventional
tuber/grain processing technology; import corn and other grains from
the mid-west; this is necessary primarily for project finance. Because
of existing infrastructure at candidate plant sites, it may be (net)
less expensive to bring in grain v. corn ethanol; feasibility for this
is being evaluated this Spring.
Phase Two: Add E-10, a dedicated energy crop; this proprietary
tuber/cellulose combination has been developed in cooperation with the
University of Idaho; we're bringing in seed for trails in Maine this
spring; it will take 2-3 seasons to produce any significant volume;
tuber will be processed using Phase One technology; cellulose will be
used as a soil additive or animal feed supplement pending Phase Three--
conversion to biomass ethanol. E-10 projects 1000 gallons per acre from
the tuber; plus an additional 500 gallons per acre from the cellulose
stock. This compares very favorably against corn--about 325 gallons per
acre. There is no difference between ethanol produced from corn and
ethanol produced from biomass.
Phase Three: Add cellulose (biomass wood residue) technology; the
incremental cost of adding emerging cellulose technology to a
conventional tuber/grain processing plant is expected make the
cellulose increment financeable; starting up with Phase Three
technology cannot be financed at this time because it is unproven.
Significant biomass resources in the Northeast, combined with E-10 and
mid-West grain supplements could eventually meet the demand for an
estimated 1 + billion gallons per year MTBE replacement in the New
England States.
In the context of our support for a national domestic renewable
fuels program that includes ethanol from both corn and biomass
resources, Northeast legislators and regulators should be aware of the
need to support this phase-in approach to ethanol production in the
Northeast as MTBE is being phased out.
NEB is pleased to be working with a major regional oil refiner and
distributor for ethanol offtake agreements. This company has for many
years had a strategic interest in the introduction of new fuel
formulations that provide environmental benefits. Their recent
introduction of an ultra low sulfur gasoline is a recent example.
The geopolitical, environmental, and economic merits of producing
domestic renewable fuels from corn and other emerging energy crops have
been well documented by others. Nevertheless, here are a few target
points for you to consider:
1. Henry Ford's proposed and preferred choice of fuel for his cars
was ethanol. Unfortunately, Mr. Ford didn't have the muscle to take on
the Oil Trust. Congress imposed a heavy tax on ethanol; petroleum
interests won over agricultural interests.
2. In the 1920's, American engines required more octane. We had a
choice to use either ethanol or lead to meet the demand for higher
octane. Lead was patented; ethanol was not; commercial considerations
won over agricultural interests. Use of lead was the first petroleum
strike against U. S. public health.
3. In the 1970's, we had a choice to replace lead with ethanol for
U.S. public health reasons. In the name of free market, benzene won.
Use of benzene was the second petroleum strike against U. S. public
health.
4. In the 1980's, American engines required more oxygen. We had a
choice to use either ethanol or MTBE to meet the demand for higher
oxygen. In the name of free market and foreign oil interests, MTBE won.
Use of MTBE was the third petroleum strike against U.S. public health.
Lead, benzene, MTBE--three petroleum strikes and you're out!
5. While I fundamentally believe in the free market, I've come to
accept that when it comes to U.S. public health and foreign oil, we
should learn from our so-called free market mistakes. We should
recognize there's no free market and little if any free choice when we
mobilize to protect U.S. petroleum interests in the Middle East.
6. In the name of U.S. public health, we've now mandated lead,
benzene and MTBE out. In the name of U.S. public health and domestic
renewable fuels, maybe it's (finally) time to remember Henry Ford and
mandate ethanol in. After all, we've had at least 6,000 years of
experience learning how to manage and control interactions between
alcohol (ethanol) and the human body, far longer than we've been trying
to control interactions between automobiles and fuel. Wouldn't we
rather deal with something as familiar as a .08 Federal alcohol
standard, especially when compared to the unknown, unforeseen,
unpredictable consequences of whatever is to be the next petroleum-
derived lead, benzene or MTBE type solution?
7. Just as it could have been a U.S. public health and domestic
renewable fuels winner against lead and benzene, ethanol is still the
most cost-effective, environmentally friendly U.S public health
alternative to MTBE. There are volumes and volumes of technical
information that can be provided by the Renewable Fuels Association
(RFA) and many others to support this statement.
8. Ethanol is certainly the least toxic of all alternate options to
MTBE. For example, substitution of iso-octanes frequently results in
lower octane numbers and the addition of BTX which means higher toxics
and a backslide in air quality levels that have already been achieved.
On a toxics-weighted basis, ethanol is clearly a safer alternative for
a large-scale public use such as transportation fuel.
9. A Renewable Fuel Standard that does not specify ethanol could
open the door for unproven and potentially risky alternatives. Ethanol
is a fully proven renewable.
10. Ethanol can be transported by pipeline. It is being done in
commercial applications today.
11. Use of ethanol in summer months need not be harmful to the
environment. All RFG must meet the same VOC performance requirements,
whether MTBE or ethanol is used as the oxygenate. Because ethanol
slightly increases the volatility of the resulting blend when mixed
with gasoline, refiners have to produce a lower volatility blendstock
when ethanol RFG is used. Thus, evaporative emissions are the same.
12. Use of ethanol would not (alone) cause consumer costs to
increase. Midwest gas prices rose last summer primarily because of an
inability to provide just-in-time supply due to a pipeline failure.
This caused regional shortages and the resulting supply/demand price
response. Prices went up for both RFG and conventional gasoline (where
ethanol is not used and no volatility adjustment is made). Midwest
ethanol RFG still averaged 5-10 cents below RFG in other areas of the
country, including the Northeast.
13. According to energy experts, a primary cause of price
volatility is limited U.S. refining capacity--now nearing a ``maxed-
out'' state. With no new refineries added since the 70's, use of
ethanol in the fuel supply would be a welcome extender to the limited
ability of the industry to respond to summer demand, and in fact could
reduce the upward pressure on prices.
14. Oxygenates are required to produce reformulated gasolines that
meet the performance requirements of the Clean Air Act. In the absence
of oxygenates, refiners could again dramatically increase the use of
aromatics, such as benzene, toluene and xylene. This would mean
significant backsliding from the toxic benefits currently provided by
RFG.
15. If you remove 11 percent of the Northeast's gasoline supply
because of the MTBE ban, it would be wise to replace that volume with
something other than additional petrochemicals derived from imported
crude oil.
16. From a financing perspective, it will be more difficult to
finance ethanol projects in the Northeast if there is regulatory
uncertainty. A change in the status quo could not only diminish
environmental quality; it would not be good for business.
17. The development of a corn ethanol industry in mid-Western
States over the past 25 years from 20 million gallons ethanol per year
in 1978 to more than 1.6 billion gallons ethanol in 2000 provides
tangible, viable evidence for the environmental and economic value of
domestic ethanol. New England would be wise to follow the example of
mid-Western States and adopt domestic ethanol as a replacement for
MTBE. This may require subsidies at the State level similar to those in
mid-Western States as shown below:
Alaska 6-8 cents/gal excise tax exemption (60 to 80
cents/gal ethanol)
Connecticut--1 cent/gal excise tax exemption (10 cents/
gal ethanol)
Hawaii--4 percent sales tax exemption
Idaho--2.1 cents/gal excise tax exemption (21 cents/gal
ethanol)
Illinois--2 percent sales tax exemption
Iowa--1 cents/gal excise tax exemption (10 cents/gal
ethanol)
Minnesota--20 cents/gal producer payment
Missouri--20 cents/gal producer payment
Montana--30 cents/gal producer payment
Nebraska--20 cents/gal producer payment
Ohio--1 cent per gallon of E10 income tax credit
South Dakota--20 cents/gal producer payment
Wyoming--40 cents/gal producer payment.
From a regional as well as a national perspective, encouragement of
domestic renewable fuels such as ethanol is in our best interest. At
this time, ethanol represents the most market-ready alternative to
MTBE. With ethanol as the substitute, there is no need to backslide in
either air or water quality.
Respectfully submitted,
Hayes Gahagan, Principal & CEO.
CLEAN AIR ACT OVERSIGHT ISSUES
----------
WEDNESDAY, MAY 2, 2001
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The committee met, pursuant to notice, at 9:33 a.m. in room
628, Senate Dirksen Building, Hon. Robert C. Smith (chairman of
the committee) presiding.
SCIENCE OF GLOBAL CLIMATE CHANGE AND GREENHOUSE GAS EMISSIONS
Present: Senators Smith, Voinovich, Wyden, Chafee, Corzine,
Reid, Clinton, Inhofe, Warner, Specter, and Lieberman.
OPENING STATEMENT OF HON. BOB SMITH, U.S. SENATOR FROM THE
STATE OF NEW HAMPSHIRE
Senator Smith. The hearing will come to order.
Senator Voinovich is going to be chairing the hearing. He
will be here shortly, but I thought since the time has gone
past 9:30 that I would begin.
Also, I would indicate that I have to leave. I will be in
and out of here during the hearing. I apologize for that to the
witnesses and to my colleagues.
Just a brief statement before I recognize Senator Wyden:
Local climate change is an issue that has generated a lot of
discussion across the political spectrum. Unfortunately, I
think from my perspective a lot of that discussion has been
driven more by politics. When President Bush recently confirmed
what everyone in the room already knew, that the Kyoto Protocol
was dead, he was loudly jeered. While there are those who will
continue to demand the Administration reverse itself, the
reality is that if we, the Senate, were to vote on Kyoto today,
it would be turned down by a pretty strong bipartisan vote, I
believe. I think that was shown in 1997 with a vote of 95 to 0,
that this body would not support the provisions of the Kyoto
Protocol.
Kyoto may be a lightning rod, but the treaty itself is
flawed and I think a false issue. To continue to push forward
on this failed treaty is to invite continual bipartisan
bickering and, ultimately, in my view delay a productive
discussion on climate change.
I applaud the President for taking Kyoto off the table. I
know that will invite some controversy, but efforts to paint
the President's position as extreme or reckless are not
warranted. I think we have proven that again with the
bipartisan vote here. The purpose for such charges must be
looked at.
I suggest that what we need is not more attacks, but
instead let's get beyond Kyoto and focus on collective efforts
of a more serious examination of this issue. Our challenge is
to look at the issue based on a hard examination of what we
know, what we do not know, and what we must do in the name of
prudence.
Not to steal the thunder of any witnesses who may be coming
here today, but I would like to briefly just boil down the
state of the science that I believe is necessary for
policymakers to understand.
First, what do we know for certain? Well, I think we know
three things. Atmospheric concentrations of greenhouse gases
are increasing. Human activities are responsible for a
significant portion of that increase, No. 2, and at some point
the increased concentrations will cause serious changes in the
chemistry of our planet. I think those are facts that are
pretty much not disputable.
What don't we know? Pretty much everything else about
climate change. All the projections about sea level rises,
temperature increases, the future rate of concentration
increase, and the cost of emission reductions, all of those
things are speculation. They are derived from models or
assumptions and predictions, and the uncertainty in the results
of this work is tremendous.
So how do we craft policy with that kind of uncertainty?
Well, I guess I would have to say cautiously, very cautiously.
Many of those who have supported the Kyoto Protocol have argued
that, because emissions related to human activities have the
potential to lead to adverse climate changes over the course of
this new century, we must err on the side of caution by
dramatically reducing industrial emissions of CO2.
To that I say, caution is a good thing, but only when
appropriately applied. We should apply the precautionary
principle not only to the examination of possible harm from
emissions, but also to the possible harm to the economy from
overly aggressive emission curves. An appropriate policy should
recognize both the economic and the environmental hazards of
too little or too much action regarding climate change. How far
away is Armageddon, if there is an Armageddon? Is it tomorrow?
Is it a hundred years from now, a thousand years from now? We
don't know the answer to that question.
If we are too aggressive, we could damage our economy and
cripple our ability to address this issue and other
environmental matters. If we are too timid, we could invite the
environmental peril that could cause economic ruin in parts of
the nation.
I believe all of us would like to make a policy decision
based on more complete information. We should aggressively seek
necessary information, so that we may make intelligent
decisions. But also we know that we are not going to have all
the information we would like to have. It is not exact science.
The steps we eventually do take to address environmental
concerns should be consistent with sound economic and energy
policies as well.
I want to say, many companies--and I've talked to many of
them--are pursuing this type of activity today. Hundreds of
American companies are investing in energy efficiencies that
make good short-term economic sense and at the same time avoid
emissions in significant quantities.
For example, to boast a little bit about New Hampshire,
more than 73 companies and public entities are committed to
using energy efficient heating, cooling, and lighting fixtures
in more than 22 million square feet of office space. This will
result in a reduction of 2.5 billion pounds of CO2,
an annual energy savings of $10 million. That is just New
Hampshire.
It is not just New Hampshire. Similar efforts in Ohio--the
chairman knows where that is [laughter]--will result in the
elimination of 45 billion pounds of CO2 emissions
annually. Investments in energy efficient technologies in
Oklahoma have prevented the release of 3.8 billion pounds of
CO2. You don't hear too much about these things from
some of the critics.
Chevron has invested billions to reduce gas from flaring.
Just a single project currently in the planning phase will
reduce greenhouse emissions by 100 million metric tons over the
20-year life of the project. This is only one idea that Chevron
is working on.
CMS Energy is also working on similar efforts that will
result in the reduction of nearly 3 million metric tons of
carbon per year.
I ask unanimous consent, Mr. Chairman, that the written
testimony be inserted into the record.
Senator Voinovich. Without objection.
[The prepared statement of Senator Smith follows:]
Statement of Hon. Bob Smith, U.S. Senator from the State of New
Hampshire
Global climate change is an issue that has generated a great deal
of excitement across the political spectrum. Unfortunately, much of
that excitement has been driven by politics. For example, when
President Bush recently confirmed what everyone in this room already
knew--that the Kyoto Protocol was dead--he was loudly jeered.
While there are those who will continue to demand the
Administration reverse itself, the reality is that if we, the Senate,
were to vote on Kyoto today, it would certainly be defeated by a strong
bipartisan vote.
We made it very clear by an overwhelming 1997 vote of 95-0, that
this body would not support the provisions of the Kyoto Protocol. Kyoto
may be a political lighting rod, but the treaty itself is a false
issue. To continue to push forward on this failed treaty is to invite
continual partisan bickering and ultimately delay a productive
discussion on Climate Change.
I, for one, applaud the President for taking Kyoto off of the
table.
Efforts to paint the President's position as extreme or reckless
are not warranted, and the purpose for such charges must be closely
examined. I strongly suggest that what we need is not more attacks but,
instead, to get beyond Kyoto and focus our collective efforts on a more
serious examination of the issue.
Our challenge is to look at the issue based on a hard examination
of what we know, what we do not know, and what we must do in the name
of prudence.
Not to steal the thunder of any of our excellent witnesses today,
but let me attempt to boil down the state of the science that I believe
is necessary for policymakers to understand.
First, what do we know for certain? Just three things:
1. Atmospheric concentrations of greenhouse gasses are increasing.
2. Human activities are responsible for a significant portion of
that increase.
3. Like a high school chemistry experiment, at some point the
increased concentrations will cause serious changes in the chemistry of
our planet.
What don't we know? Pretty much everything else about climate
change. All of the projections about sea level rises, temperature
increases, the future rate of concentration increase and the cost of
emission reductions are speculation; they are derived from models based
on assumptions and predictions. The uncertainty in the results of this
work is tremendous.
So, how do we craft policy from that much uncertainty? Cautiously.
Very cautiously. Many of those who have supported the Kyoto Protocol
have argued that because emissions related to human activities have the
potential to lead to adverse climate changes over the course of this
new century, then we must err to the side of caution by dramatically
reducing industrial emissions of CO2 and other greenhouse
gases.
To that I say, caution is a good thing, but only when appropriately
applied. We should apply the precautionary principle not only to the
examination of possible harm from emissions, but also to the possible
harm to the economy from overly aggressive emission curbs. An
appropriate policy should recognize both the economic and environmental
hazards of too little or too much action regarding climate change. If
we are too aggressive we could damage our economy and cripple our
ability to address this and other pending environmental matters. If we
are too timid we could invite environmental peril, that could cause
economic ruin in parts of the nation.
I believe all of us would like to make a policy decision based on
more complete information. We should aggressively seek necessary
information so that we may make an intelligent decision, and the steps
that we eventually do take to address environmental concerns should be
consistent with sound economic and energy policies.
The steps that we consider today should be based on sound science--
to buy time. Many companies are pursuing this type of activity today.
Hundreds of American companies are investing in energy efficiencies
that make good short-term economic sense, and at the same time avoid
emissions in significant quantities.
For example in New Hampshire: More than 73 companies and public
entities are committed to using energy efficient heating, cooling, and
lighting fixtures in more than 22 million square feet of office space.
This will result in a reduction of 2.5 billion pounds of
CO2--an annual energy saving of $10 million. Similar efforts
in Ohio will result in the elimination of 45 billion pounds of
CO2 emissions annually. Investments in energy efficient
technologies in Oklahoma have prevented the release of 3.8 billion
pounds of CO2.
Chevron has invested billions in efforts to reduce gas flaring. In
just a single project, currently in the planning phase, will reduce
greenhouse emissions by 100 million metric tons over the 20 year life
of the project. This is only one of many ideas Chevron is working on.
CMS Energy is also working on similar efforts that will result in a
reduction of nearly 3 million metric tons of Carbon per year.
This is the direction our policy should lead. These are actions
that make good economic sense, and may even lead to the development of
technologies that all the world will buy from us in the future in order
to address their own emissions. At the same time, we can begin to make
slow our rate of emissions to buy more time for us to understand the
problem we face.
One thing is for certain we all care about our children and future
generations. We owe it to future generation to leave them a healthy
environment and a solid strong economy. The choices we make today will
determine that future.
Senator Smith. This is the direction that our policy should
lead. What happens when we export that technology to those
nations, to get them to buy it, to those nations who now are
saying they either can't or won't adhere to any treaty, Kyoto
or otherwise? These are actions that make good economic sense
and may even lead to the development of further technologies
that the world will be buying from us. At the same time we
begin to make slow our rate of emissions, buy more time for us
to understand the problem we face.
One thing for certain: I hope we can all agree that we all
care about our children and we care about the future. We owe it
to the future, all of our children and grandchildren, to leave
them a healthy environment and a solid, strong economy. The
choices we make today will determine that future. I believe
that if we look at the science we know, try to find out the
science we don't know, take the technology that we have and
export it around the world, and use it here effectively in the
United States, we will reduce the emissions, Mr. Chairman, that
we are concerned about, including carbon, and we will do it in
a way that will enhance our environment and enhance our
economy.
Thank you, Mr. Chairman. I will turn the gavel over to you.
OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, U.S. SENATOR
FROM THE STATE OF OHIO
Senator Voinovich [assuming the chair.] Thank you very
much. I appreciate the fact that you began the hearings this
morning.
Today's hearing is on the science of global climate change
and the options and obstacles related to reducing net
greenhouse gas emissions. It was suggested by Senator Lieberman
earlier this year--and I thought it was a good idea--to bring
the best and brightest people here before this committee to
discuss this issue.
I would like to thank our chairman for allowing me to chair
this important full committee hearing.
It has been almost 4 years since this committee had a
hearing on climate change science. Since then not only has the
issue evolved, but the membership of this committee has
changed. There are eight new members of this committee,
including myself. Therefore, I thought it would be important to
hold this hearing, so that all of the members of this committee
would have an update on this very, very important issue.
The state of the science has evolved, and I think it is
important for us to hear from the leading scientists as to what
we currently understand and what we don't understand regarding
climate change. Most of the information the public hears is
media summaries, taken from political summaries which summarize
the UN's IPCC reports. That's the Intergovernmental Panel on
Climate Change. I would like to make it clear that is the
United Nations Intergovernmental Panel on Climate Change. That
is out of the United Nations. They try to summarize these
studies. With all of these summaries, no wonder it is difficult
for everyone to understand what is going on.
Today we will see if we shed a little light on the state of
the science. We will also take a look at some of the options
and obstacles related to reducing net greenhouse gas emissions.
Some of the topics I hope we cover include carbon sequestration
and energy efficiency. In dealing with reduction issues it is
important to understand what can reasonably be accomplished and
at what cost. If actions are warranted, we need to make sure we
understand the effects of those actions, or perhaps inactions.
First and foremost, we need to understand the science and
what it means, where the questions are, and what further
research needs to be completed. I am sure most of us remember
back in the seventies when the media reported on the coming Ice
Age and how the planet would be covered in a sheet of ice,
which dramatically changed to predictions of global warming in
the late eighties and nineties. We need to make sure we do not
get our understanding of the science from Time magazine or
summaries by politicians, but instead turn to the scientists
conducting the actual research.
There is an article in Science News, November 1969.
```Earth's Cooling Climate.'' ``How long the current cooling
trend continues is one of the most important problems of our
civilization,'' says Dr. Mitchell of the Environmental Science
Services Administration.''
Here's an article in the Science Digest. This is February
1973. ``Brace Yourself for an Ice Age.'' ``The idea of another
Ice Age is not a new one but recently scientists have been
confronted with the possibility that it may be much sooner than
anyone thought.''
Time magazine, ``Another Ice Age?'' This is back in June
1974. It warned of expanding arctic saying, ``ice and snow
covering in the northern hemisphere had suddenly increased by
12 percent in 1971 and the increase has persisted ever since.''
Of course, last but not least is the Environmental
Magazine, February 1996, and the front cover is ``Global
Warming.''
On Kyoto, I would like to say a few words about the treaty.
I know the international press, some countries, and even some
here in the United States have criticized President Bush for
killing the Kyoto Treaty. The Kyoto Treaty was dead long before
President Bush was sworn into office. The treaty was dead when
Bill Clinton signed it December 11, 1998. In fact, the treaty
was probably dead before the negotiations at Kyoto even began.
The treaty that came out of the Kyoto negotiations could not
have survived the Byrd-Hagel test as found in the Byrd-Hagel
resolution passed in the 105th Congress on July 25, 1997.
It passed in the Senate 95-0. Although I was not a member
of the Senate at the time, it is interesting to note that many
members of this committee voted for it, including Senators
Smith, Warner, Inhofe, Bond, Specter, Campbell, Baucus, Graham,
Lieberman, Boxer, and Wyden. I believe Senator Reid is the only
member of the committee at that time who didn't cast a vote on
that resolution.
Now one could argue that there was never a meeting of the
minds between the U.S. negotiators and their European
counterparts at Kyoto. When the U.S. negotiators returned from
Kyoto in 1997, they announced that the U.S. would get
meaningful credits for international trading and carbon sinks.
However, last fall at the Hague negotiations broke down when
the EU rejected the U.S. trading program and the carbon sink
proposal, despite significant concessions by the United States.
Apparently, the two sides did not understand each other's
position back in 1997.
Cynics would say that many of the countries that are
publicly berating the United States are privately relieved that
the treaty has been pronounced dead since compliance would have
been difficult, if not impossible, for many of them. As the
Economist magazine pointed out last month, the only European
countries that are likely to meet the Kyoto targets are Britain
and Germany. Japan and the rest of Europe are no further along
in this issue than the United States of America.
At this point I think it is important not to play partisan
games with this issue. We all want to make sure that we do the
right thing that protects our environment without causing
unnecessary harm to the economy. I would like to have the
following questions answered today:
What is the current state of the science?
Where do people agree and disagree?
Where do we need more scientific research?
If we do, what areas of technology do we need to
do more research.
I would like to know, what is the appropriate
role of the Federal Government?
I am sure these questions are just the tip of the iceberg,
and I don't expect we will be able to answer all of them today,
but we should start to get answers.
We have tried to put together today a balanced hearing,
representing all sides of this issue, and I think we have
succeeded. Our first panel will discuss the state of the
science. Both witnesses have been involved in the research at
IPCC. Our second panel will include a mix of technology,
science, and business experts. I look forward to their
testimony.
I notice that the ranking member of this committee, Senator
Reid, is here. Under protocol, Senator, we'll call on you for
the next statement.
OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE
STATE OF NEVADA
Senator Reid. Thank you very much. I appreciate very much
your concern about this issue, and I am very happy that we are
conducting this hearing.
For every year that goes by without Congress or the
President making a serious effort to reduce greenhouse gases,
the odds increase that my grandchildren are going to inherit a
warmer, more chaotic world. We hear a lot of talk about Senator
Byrd's amendment on the Senate floor, but we can only hear from
Senator Byrd himself, who just within the past week has stated
in a meeting similar to the one in which we are now gathered
that he had no intention of his amendment being grounds for
wiping out the Kyoto Treaty. He thought his amendment would
lead to some discussions, discussions that Third World
countries should have more involvement. We could hear more from
Senator Byrd, but I only want to say that his amendment and
those who voted for it, it was certainly not an effort to--or
at least the vast majority of those who voted for it--to
somehow ``deep six'' that treaty.
A recent study by scientists at MIT, the Massachusetts
Institute of Technology, calculates there is a one-in-four
chance that the world will warm between 5 and 7 degrees
Fahrenheit in the next hundred years.
I have this chart up just to take a brief look at it. Mr.
Chairman, I am from a State that gambles; I don't gamble
myself----
[Laughter.]
Senator Reid. [continuing] but I think this chart gives
pretty good odds that we have a problem here in the world.
I would hope that we are going to spend more time on this
complicated subject than the committee has to date. This is the
Environment Committee, and we have spent far too little time on
this very important issue.
I applaud the chairman for allowing this hearing to go
forward. I appreciate very much, Senator Voinovich, your taking
the time to chair this committee.
We need to do more. This committee hasn't looked at this
matter directly for more than 2 years. Can you imagine that?
The Environment Committee of the Senate on an issue of this
importance, we simply have ignored it for 2 years, and that is
not good.
Our committee has the responsibility and the jurisdiction
to develop legislation that reduces manmade emissions that
cause, or have the potential to cause, harm to the environment
and public health. It is far past time for this committee to do
its duty and produce some proposals, helping them work together
to develop bipartisan legislation to reduce emission of
greenhouse gases.
Mr. Chairman, we are on the Senate floor now, and in the
next couple of weeks we are going to talk about education, and
we should; it's a very important issue. But I would hope that
we can spend some time this year debating this issue and coming
up with some concrete proposals. We may not be able to do
everything that needs to be done, but, hopefully, we can do
something.
I understand some of my colleagues have been put in the
difficult position by the President's decision to reverse his
campaign promise on reductions of carbon dioxide from power
plants. We don't need to beat a dead horse, but even his EPA
Director gives a speech talking about the United States leading
the charge in reducing carbon dioxide. Four days later her legs
are literally cut out from under her, the President saying, no,
we are not going to reduce carbon dioxide the way that she had
talked about.
It is time for leadership and progress. I would say
President Bush is a good person. I know he means to do the
right thing. I just think he is getting bad advice. I would
like to see this committee help to be part of the advice that
he gets. I would like this committee to be a laboratory of new
bipartisan issues for cutting greenhouse gases. I have no doubt
that the Administration is equally interested in such progress.
There has been a lot of talk about voluntary versus
mandatory requirements to reduce these gases. My colleagues
know that the nation has a Senate-ratified commitment to reduce
emissions to 1990 levels. That was to have been accomplished
through voluntary measures. Unfortunately, we failed miserably
using voluntary means. We are now about 13 percent above our
target.
So what we need is a comprehensive approach--excuse me, I
have allergies. I hope it is not caused by the global warming,
but it is bad.
[Laughter.]
So what we need is a comprehensive approach that achieves
real net reductions by a time certain. I don't know any other
way to get the ball rolling.
Carbon dioxide and other greenhouse gas emissions must come
down. The Senate has already made that policy decision.
Scientists at the IPCC and elsewhere can help us help to
determine which policy options are most useful and when they
should be implemented. But it is time for opponents of that
decision to work with us on real world reduction strategies. It
is now our job to figure out how to accomplish that goal in the
most effective and expeditious way. I am glad that we have some
witnesses here on the second panel to tell us about policies we
might adopt to move in the right direction.
I would hope also that the Administration's energy policy
plan, even though it doesn't sound as though it moves in the
right direction for climate purposes or for protecting the
environment, really will do that. We need a plan that reduces
harmful emissions, not increases them. Press accounts
describing the Administration's plan say it would simply result
in burning more fossil fuels. That is really shortsighted and
irresponsible and has little or no chance of getting wide
bipartisan support. Emphasizing increased and efficient fossil
fuel use when we know that carbon concentrations in the
atmosphere are higher than they have been for some say 400,000
years is a little bit like handing Nero a fiddle to play while
Rome burns.
I believe, Mr. Chairman, a strong and supportable energy
plan would first emphasize renewable energy, energy efficiency,
and conservation. Then, once all the economically viable energy
is wrung out of these resources, we can turn to cleaner and
safer uses of coal and other traditional fuels.
Mr. Chairman, we had a hearing 1 day this week in another
committee, one of the Appropriations subcommittees, and there
it was determined that the States of South Dakota--I'm sorry it
leaves me temporarily what the other state would be--could
produce enough electricity by windmills to produce all the
necessary energy that the whole United States would use. It was
also determined there that the State of Nevada in a 100-square-
mile plot where the Nevada Test Site now stands could produce
enough electricity by solar to power all the United States. Now
we know that is not going to happen tomorrow, but I think we
need to get on with having proper incentives to get that
started. No one can disagree, I don't think, that we should
continue burning fossil fuels the way we have. Geothermal,
wind, and solar, we need to share these abundances that we have
in States with lots of wind and lots of sun with the rest of
the country.
Finally, Mr. Chairman, I want to try to be constructive. I
want results, but I am not interested in amending the Clean Air
Act or any other environmental statutes as part of an energy
plan that doesn't make tangible cuts in greenhouse gases.
I would like unanimous consent to include in the hearing
record a summary of a recent study showing that reducing carbon
emissions can be done cost-effectively.
Thank you for your patience.
Senator Voinovich. Without objection, that will be part of
the record.
We are going to follow the ``early bird'' rule, and the
next Senator I am going to call upon for a statement is Senator
Wyden.
OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM THE
STATE OF OREGON
Senator Wyden. Thank you, Mr. Chairman. I commend you for
holding a very important hearing, and I also want to associate
myself with the remarks of the distinguished Democratic Leader.
Mr. Chairman and colleagues, very briefly, I want it
understood that I believe there is no plausible scientific
deniability about the human contribution to climate change.
There has been one objective scientific report after another
that has documented the fact. There is no plausible scientific
deniability about the human contribution to climate changes.
The challenge now, as our colleagues have talked about, is to
work in a bipartisan way to deal with the problem. I think
Chairman Voinovich put it pretty well; we should not spend our
time in partisan bickering.
Toward that end, Senator Larry Craig and I, a Republican
who is a senior member on the Natural Resources Committee in
Agriculture, he and I today are going to introduce a
comprehensive bill to use trees as a key complement of our
strategy to fight this problem. This is an approach that will
bring together industry and the environmental community to
address 25 percent of the problem. We are not going to deal
with the entire problem using a tree that absorbs carbon
dioxide from the atmosphere, but you can deal with a very
significant portion of this problem under the approach that
Senator Larry Craig and I will be introducing today.
So I hope our colleagues on both sides of the aisle will
join us on this legislation in creating a revolving loan fund
for private landowners to plant trees and keep them to
sequester carbon. It is easy to administer. It is
scientifically sound.
To give you an idea why something like this makes sense, it
costs between $2 and $20 per ton to store carbon in trees.
Alternative strategies can cost up to $100 per ton.
I think the distinguished Democratic Governor has made a
very fine statement. I concur in it entirely. I happen to agree
with what Chairman Voinovich has said, that we ought to get
away from partisan bickering.
Folks, the scientific evidence is compelling here. Humans
are contributing to this problem. Let us get on with forging a
bipartisan approach to deal with it, one that makes sense, as
Senator Smith said before he left, from the environmental
standpoint and from the economic standpoint. Two Senators,
Senator Craig and I, introduced legislation to try to advance
that goal and look forward to working with our colleagues on a
bipartisan basis.
Senator Reid. How many trees do you have to plant?
Senator Wyden. You have got to plant a significant number,
Harry, but the point is that the savings relative to the
alternative, $100 per ton compared to $2 and $20 per ton, are
just staggering. There are approaches that could bring us
together, that could allow me to go to Jim Inhofe and say,
``Jim, Larry and I can work with you in a way that is going to
make sense for industry and make sense from an environmental
standpoint, deal with a quarter of the problem.'' Let's get on
with it.
I think that is why Chairman Voinovich said let's get
beyond the partisan bickering, and I would say it is time.
Senator Voinovich. Well, I would be interested in your
legislation because one of the goals I had as Governor of Ohio
was that I think we planted 11 million trees a year. Many of
the States are involved and it would be interesting to see how
that national program would fit in with the legislation that
you have and maybe encourage the private sector to do a lot
more than what they are now doing.
Senator Chafee?
OPENING STATEMENT OF HON. LINCOLN CHAFEE, U.S. SENATOR FROM THE
STATE OF RHODE ISLAND
Senator Chafee. Thank you, Mr. Chairman. I also would like
to thank you for calling this hearing, the first one in a
number of years. Being new here, I am very interested in
hearing the testimony. I know there is going to be a great deal
of debate just within this semicircle as well as within the
scientific community, and I look forward to that debate.
My own common sense tells me that every once in a while
when you read in the newspapers about somebody who pulls into
the garage and falls asleep in their car, and the coroner the
next day says they died of carbon monoxide poisoning, that we
have to do something on this subject. Therefore, I was
disappointed in the new Administration backing away from
addressing carbon dioxide in a comprehensive, multi-pollutant
approach.
I also was disappointed that the new Administration is
going to oppose the Kyoto agreement on global warming. This was
not because I thought the Kyoto Protocol was a flawless
document. The negotiations at Hague demonstrated that future
work was necessary to reach a consensus on several aspects of
that accord. But, instead, the Kyoto Protocol is a good
framework for future negotiations on global climate policy.
Without that foundation, the rest is tenuous. I do think it is
incumbent on the United States to be a leader on this subject.
So I do look forward to working with my colleagues and also
to hearing from the scientists. Six of the seven of the
panelists are doctors and other leaders in industry, and I look
forward to hearing their testimony.
Thank you, Mr. Chairman.
[The prepared statement of Senator Chafee follows:]
Statement of Hon. Lincoln Chafee, U.S. Senator from the State of Rhode
Island
I would like to welcome our witnesses and to thank Chairman Smith,
subcommittee Chairman Voinovich, and Senators Reid and Lieberman for
holding today's full committee hearing on the important and critical
issue of global climate change.
The science supports the notion that human activities are
disrupting the balance of carbon dioxide, methane and other greenhouse
gases in the atmosphere, resulting in global climate alterations. A
recent Intergovernmental Panel of Climate Change (IPCC) report
estimates that the earth may warm anywhere between 2.5 to 10.4 degrees
Fahrenheit over the next century. The world's leading atmospheric
scientists are telling us that global warming is already occurring and
the hottest 10 years on record have all occurred since 1980, with 1998
recorded as the hottest year ever.
Two decisions by the new Administration have spurred intense
discussion in recent weeks: to back away from addressing carbon dioxide
in a comprehensive multi-pollutant approach; and second, to oppose the
Kyoto agreement on global warming. Like many of my colleagues, I was
disappointed with these decisions. This was not because I thought the
Kyoto Protocol was a flawless document--the negotiations at the Hague
illustrated that future work was necessary to reach a consensus on
several aspects of Kyoto accord. Instead, the Kyoto Protocol is a good
framework for future negotiations on global climate policy. Without the
foundation, the rest is tenuous.
I am interested in learning from our witnesses today where the
scientific consensus lies on climate change; what effects humans may
have on the change and how quickly it may occur; and what options may
exist for stabilizing greenhouse gases in the atmosphere.
I look forward to working with my colleagues on the Committee and
in the Senate as we review the science and determine the best course of
action for addressing greenhouse gas emissions and global climate
change.
Senator Voinovich. Thank you, Senator.
Senator Corzine?
OPENING STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE
STATE OF NEW JERSEY
Senator Corzine. Thank you, Mr. Chairman. I join my other
colleagues in complimenting you on having this hearing because
this is one of those issues, at least among the community that
I represent, people are most concerned about.
It really is as far-reaching an issue that we face today I
think as a nation and as a globe. It is complex. We have made
progress. There are good ideas that come in a bipartisan way,
but we need to deal with the science, economics, and I think
the politics of moving forward on this agenda. The pollutants
bill was something that I was disappointed to see we were
subtracting pieces from. Inattention and inaction I don't think
is tolerable or consistent with the science, and the health and
viability of our global ecosystems are too vital for us to talk
indefinitely. I think we need to move forward.
I will leave the rest of my statement, with your approval,
for unanimous consent and submit it. But I think this is
terrific that we are having this and I hope we do that to the
fullest possible extent, so that we have a real understanding
of the issues as we approach deriving solutions and putting
them on the table for folks in general.
Thank you.
Senator Voinovich. Thank you.
Senator Inhofe?
OPENING STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM
THE STATE OF OKLAHOMA
Senator Inhofe. Thank you, Mr. Chairman. When you were
talking about some of the Time magazine articles and the
hysterias of the past, I was reminded that many years ago when
I was in high school, they were saying that because of the
changes in water levels and climate changes that within 50
years, which would have been the year 2000, the entire State of
California would have slid into the Pacific Ocean, which would
have solved some of the problems, of course, that they are
facing today.
[Laughter.]
In the last few weeks there has been a lot of negative
press about President Bush's carbon and Kyoto decisions, but
with the allegations of politicized science, a looming
recession, and a national energy crisis, I think that President
Bush did the right thing.
There are three issues that I want to address today, and I
have scratched off some of this, Mr. Chairman, because it would
be redundant of some of the things that you have said, but
there are a couple of things I am going to say in a different
way.
First of all, the science and politics of the United
Nations' Intergovernmental Panel on Climate Change, IPCC, keep
in mind, as you pointed out, that it is the United Nations.
Second, the science and politics of U.S. National Assessment,
and, third, the need for more research in a number of areas.
As for the IPCC report, I am very interested in hearing
about allegations that--and I will list about five of them
here: A portion of the UN's process, the 18-page summary for
policymakers, misleads readers and even distorts the underlying
scientific conclusions. Second, the scientists did not write
this document. Third, allegations that--perhaps the most
disturbing--this summary was subsequently and materially
altered. Fourth, the IPCC summary is designed to reflect policy
decisions rather than the underlying science. Last, one of the
most prominent scientists involved, a lead author, and many
other scientists do not agree with or approve of the
conclusions with which their names are associated. Now these
are very serious charges, and if true, the IPCC report should
not be the basis of any policymakers' actions, other than
possibly investigate and formally object to such actions.
Second, regardless of the IPCC process, the U.S. First
National Assessment of Climate Change must be based on sound
and objective science, based on the weight of the evidence, so
that this assessment can be used to develop our nation's
domestic and international strategies on climate change. It is
an analysis of the effects of global climate change on the
environment, agriculture, water, health, society, biological
diversity, and on and on. The report is being prepared by the
U.S. Global Change Research Program, a group that includes
representatives from different Federal agencies. The total
amount of taxpayer spending dedicated to detour assessment-
related activities nears an estimated $10 billion, and it would
be $1.4 billion for the year 2000.
In fact, Representatives Knollenberg and Emerson and I so
strongly believed that it was so important that this assessment
be an objective and sound work that we joined a suit against
the National Assessment through the VEGA-chartered committee
charges that the process, No. 1, violated the United States
Global Change Research Act of 1990 by producing a report
lacking certain specific issues, areas covered. Second, that
same organization was in violation for producing a report
including several issue areas not requested by Congress or by
the statute, but by political appointee in the White House.
Third, that same organization ignored the Emerson amendment to
the relevant Fiscal Year 2000 House-passed appropriations bill
acceded to in Public Law 106-74 requiring the underlying
science be performed prior to producing a report reportedly
based on those conclusions.
If we are going to develop effective policies to deal with
the issues surrounding climate change, the IPCC and the
National Assessment must be of the highest integrity. There has
never been a more compelling case to have a policy decision
based on the objective weight of scientific evidence.
Last December the Department of Energy's Energy Information
Administration released a study on regulating CO2
emissions from utilities. The study concluded that the
mandatory regulation of CO2 from utilities will cost
between $60 and $115 billion per year by the year 2005. The
mandatory regulation of CO2 would make the price and
availability of energy a national crisis at a scale our nation
has never before experienced.
Well-thought-out, reflecting-consensus environmental
regulations can certainly provide benefits to the American
people, but as regulatory experts Wendy Gramm and Susan Dudley
of the George Mason University's Mercatus Center recently wrote
in an article in the Atlantic Journal, ``When regulations are
rushed into effect without adequate thought, they are likely to
do more harm than good.''
If you do not do it in the extreme way that so many of the
environmentalist groups want--and we see all the commercials
detailing horror stories, while the energy crisis which would
be caused by developing policies based on the IPCC report or
the National Assessment so far would be a real live horror
story. Let's not forget, when the price of energy rises, that
means the less fortunate in our society must make the decision
between keeping the heat and the lights on or paying for other
essential needs. There is a real human cost to implementing
policies based on political science rather than sound science.
Last, No. 3, regardless of the state of the science right
now, I do fully support public and private research into
climatic change science, energy efficiency, and alternative
energy sources. Senator Reid talked about the potential of
solar and wind energy. That would be great if we could get to
that point, and I would very much support that. By doing these
things, we will put our nation and the planet in a position to
address carbon in our atmosphere, should the science 1 day show
a need to do so.
Thank you, Mr. Chairman.
Senator Voinovich. Thank you.
Senator Clinton?
OPENING STATEMENT OF HON. HILLARY RODHAM CLINTON, U.S. SENATOR
FROM THE STATE OF NEW YORK
Senator Clinton. Thank you, Mr. Chairman. Obviously, this
is an important hearing and there are differing points of view
to be considered and reconciled. So I thank you for bringing us
here together.
Obviously, this is a hot topic, literally and
metaphorically, for all of us. I think it is indisputable that
global warming and the impact of human activity on our
environment is certainly one of the most pressing problems
facing us, and as decisionmakers, we are going to have to
confront what it means.
I have a very simple approach to it, and that is, if we
look at statistics that are gathered from many different
sources, it is apparent to me that a lot of the difficulties
that we are confronting because of rising temperatures are
likely to get worse. Today, for example, is the Fourth Annual
Asthma Awareness Day here on Capital Hill, hosted by the Asthma
and Allergy Network and Mothers of Asthmatics. I am proud to be
an honorary co-chair along with a number of my colleagues here,
including Senators Voinovich, Inhofe, and Corzine.
We know from any mother's perspective that increased
temperatures actually worsen conditions for asthma sufferers.
Pediatric asthma rates are reaching epidemic proportions in New
York and other places in the country, and that is just one
element of the kind of challenge that we are facing which has a
relationship to what the temperature is and how we deal with
the challenges that are posed by rising temperatures.
We know that air quality is still a very big difficulty in
many parts of New York and other parts of the country. I am
certainly devoted to cleaning up the air, as many of us are, of
dealing with the pollutants that we know are in the atmosphere
and causing damage. But I don't think there can be any doubt
that there is a link between increasing temperatures and
increasing smog in cities like New York and many other places,
and that that increased smog can exacerbate respiratory
diseases.
Now how are we going to judge the sound science? Obviously,
we are going to listen to researchers and scientists. I agree
with Senator Wyden that, at least as I review the evidence, the
debate is over. It is just a question of what we are going to
do in order to address rising temperatures and their impacts.
Another cost that we are paying, in addition to asthma and
respiratory disease, and the hospitalization that is often
accompanied with pediatric asthma, is the seeming increase in
severe weather events. According to rough estimates from FEMA,
the Federal Energy Management Agency, disaster relief for
severe storms and flood-related events is increasing. Now some
could say you shouldn't build on the side of a river, but when
you have 100-year floods happening twice in 5 years, it might
raise some serious issues as to what exactly is going on.
We are facing this issue today in part because we haven't
been willing to really work as hard as we need to in order to
come up with some solutions. I was disappointed, like many
others, when the Administration reversed itself and the
President's campaign promise on CO2 and declared the
Kyoto Protocol dead. Now I have been pleased, however, that
since that declaration of death, there does seem to be an
effort to breathe some clean air into the life of that corpse
in the White House and that they are actively working on the
issue and attempting to come up with some response, because the
United States must be a leader in addressing global warming.
We know that we are the largest producer of manmade carbon
dioxide. I am worried greatly that the Administration's energy
proposals will worsen an already very difficult situation. I
look at the proposed budget, and I think everyone around this
table would agree we do need to invest more in renewables; we
do need to do the research to find out whether those wind farms
that Senator Reid talked about would be viable. They seem to
be. I have talked to a number of utility executives who are
beginning to invest in them, but the President's budget has
rather significant cutbacks in renewable energy, energy
efficiency and conservation, in the Partnership for a New
Generation of Vehicles.
There is a lot of things we could be doing right now, but
nobody wants to take the political risk of increasing the
amount of mileage required from some of our vehicles, trying to
work out an incentive program for utilities to even do more to
cut emissions. I think this is one of those issues that people
will look back on and say, What were they thinking of? Were we
so selfish, so self-centered about our needs that we did not
work out the best possible realistic solution to what was a
looming environmental and energy crisis? I don't think that we
really can withstand that kind of scrutiny either now or in the
future.
That is why I am pleased to be part of an effort that must
be bipartisan, where the Administration not only has to work
with Congress, but with people of good faith around the world.
We can't let the perfect be the enemy of the good. We say that
a lot in this committee.
There were certainly problems with Kyoto, and if they can
be fixed, if we can come up with a set of standards that
actually do move us forward, then we should, but let's not
forget that, in the wake of Rio, we adopted voluntary
standards, and we're worse off today than we were then.
So I think that, just as previous generations came up with
the law of the seas and came up with treaties to deal with
Antarctica and made some other rather significant steps forward
in international cooperation, we ought to be looking to do the
same here. So I am very grateful that the chairman would hold
this important hearing. I look forward to working with my
colleagues on addressing these very important issues.
Senator Voinovich. Thank you very much.
We are very fortunate today to have two distinguished
witnesses, Dr. Richard S. Lindzen and Dr. Kevin E. Trenberth.
Please come to the table.
As you are probably familiar, the rules of the committee
are that the statement that you make, your opening statement,
should not exceed 5 minutes. I think you are familiar with the
light system. The reason for that, to limit the opening
statements, is to give the committee an opportunity to ask
questions of you. Hopefully, if there are some things that you
didn't get out in your opening statement, you can get them out
when you respond to the questions being asked by members of the
committee.
Our first witness is Dr. Richard S. Lindzen. He is the
Alfred P. Sloane Professor of Meteorology at the Massachusetts
Institute of Technology. Dr. Lindzen.
STATEMENT OF RICHARD S. LINDZEN, ALFRED P. SLOANE PROFESSOR OF
METEOROLOGY, MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Dr. Lindzen. Thank you, Senator Voinovich, for the
opportunity to appear before you. Holding to 5 minutes, I will
refer you to my written testimony for some details.
As concerns the science of this issue, despite the
statements of some Senators today, I think the public
presentation of the issue of global warming over the past 12
years has, by the very nature of the presentation, forced
confusion and irrationality to dominate the discussion. On the
one hand, the issue is presented as a complex, multifaceted
problem involving atmospheric composition, heat transfer,
weather, temperature, ocean dynamics, hydrology, sea level,
glaciology, ecology, and even epidemiology--all topics that are
individually filled with uncertainty. On the other hand, we are
assured the science is settled.
What exactly is this settled science? That is rarely
explained. I think in some ways Senator Smith came as close as
anything I have heard this morning. Then instead of explaining
it, the usual procedure is to claim it is supported by
thousands of outstanding scientists involved in the UN's IPCC
procedure. That, too, has to be considered in some detail.
Finally, it is presumed whatever it is that is settled
implies a wide array of catastrophe scenarios endangering the
very existence of future generations.
Finally, solutions like those envisioned in the Kyoto
Protocol are proposed without making it clear, although it is
widely agreed, that adherence to the Kyoto agreement would have
almost no impact on climate. Now to question such a situation
is to be marginalized as a skeptic while no degree of
counterfactual exaggeration is held to be out of the
mainstream.
The detailed testimony points out that there are numerous
facts that are universally agreed upon in the field that are
not--universal, at least widespread agreement--are not
supportive of catastrophic scenarios. Also, there is pretty
good agreement that the large computer models of the climate,
which are the basis not only of the scenario predictions, but
also of the chart that was shown from MIT, are broadly
unsuccessful and unreliable. Again, I will go into some details
on that.
However, the problem we have since the Rio agreement is, as
a nation, we have signed onto the precautionary principle. That
really takes the scientific pressure off of models to be
correct. What we basically require now or claim is that the
models represent things that are possible; that is, they cannot
be disproven. This is a very difficult situation in order to
consider acting upon them. This does not define what
``possible'' means and generally puts us in the awkward
situation of having to act on anything anyone wishes.
The IPCC does deserve some consideration, if not
necessarily to criticize it severely, at least understand what
the procedures mean. The procedures are in many ways extremely
opaque, and certainly the claim of support by thousands of
outstanding scientists is more a mantra than a reasonable
statement.
That this can lead to policies that are detrimental to the
economy and even to the environment has often been noted, but
less frequently has it been noted, but perhaps more important,
given my provincial outlook, is the fact that the present
situation is also detrimental to science and its ability to
soundly answer important questions to the benefit of society.
I would maintain that we have, to a very large extent,
built into our scientific process a predilection for alarmism.
There is no easier way to justify science than alarmism. The
very fact that meetings such as this do in general endorse more
research will convince the scientists that the way to get more
support for research is to promote alarmism. I think one of the
main things we can do is figure out how to support science
without causing it to have this bias.
Thank you.
Senator Voinovich. Thank you.
Dr. Trenberth, who is the Head of the Climate Analysis
Section, Climate and Global Dynamics Division, National Center
for Atmospheric Research. Thank you for being here.
STATEMENT OF KEVIN E. TRENBERTH, HEAD, CLIMATE ANALYSIS
SECTION, CLIMATE AND GLOBAL DYNAMICS DIVISION, NATIONAL CENTER
FOR ATMOSPHERIC RESEARCH
Dr. Trenberth. Thank you, Mr. Chairman.
I am also lead author of the Intergovernmental Panel on
Climate Change; in fact, on the same chapter as Dr. Lindzen.
However, I was also involved in writing the technical summary
and the draft of the policymakers' summary, the summary for
policymakers. I am happy to answer any questions about that
procedure.
I would just emphasize that the IPCC process is a very open
process. There are two major reviews, and people from all parts
of the political spectrum do take part. The objective of the
IPCC is to produce the best statement, along with the
uncertainty, that can be made relevant to policy.
The conclusion from the IPCC in the latest round was that
there is new and stronger evidence that most of the warming
observed over the last 50 years is attributable to human
activities. What I thought I would do now is just quickly run
through some of the main points of the findings--the scientific
findings.
As Senator Smith noted earlier, there are some certainties.
The greenhouse gases are increasing in the atmosphere and these
are from human activities, especially the burning of fossil
fuels. They have long lifetimes. Carbon dioxide has a lifetime
of over a century. Therefore, they accumulate in the
atmosphere. So even with constant emissions, concentrations in
the atmosphere still increase. Carbon dioxide has increased
more than 30 percent in the last 200 years, most of that since
World War II, and also the other greenhouse gases are
increasing. These are greenhouse gases. They produce global
warming--that is, global heating.
First, some of that heating increases temperature, and we
know that temperatures have increased about 1.2 degrees
Fahrenheit in the last 100 years, .7 degrees in the last 30
years. That is a more confident number. The year 1998 is the
warmest year and the 1990's is the warmest decade, and we
believe that is true in the last thousand years, based upon
paleoclimatic evidence.
There is a lot of other evidence to support the reality of
this warming. Glaciers are melting around the world. Sea level
is rising. Arctic ice is thinning and also retreating,
especially in summertime. The temperatures in the ocean clearly
show that the oceans are warming, and snow cover is decreasing
in general.
There are changes in the atmospheric circulation which
complicate matters. This relates to weather events, and in this
past winter, temperatures were well below average, in fact,
across much of the lower 48 States, but there were record high
temperatures in Alaska, 9 degrees Fahrenheit above normal.
Similarly, it was very warm throughout Europe.
So this kind of structure to the variability from year to
year sometimes complicates perceptions as to what is happening.
Global warming doesn't mean it warms everywhere and in a steady
fashion.
Over the United States, in particular, it has become
wetter. We now understand that this is because of the general
warming of the tropical oceans, and the wetness of the United
States means that that moderates the temperatures in fact. We
also know that more of this rainfall, this wetness, comes from
very heavy events. So there is an increased risk of flooding as
a consequence.
Now another consequence of global warming, the heating of
the planet, is that there is more drying at the surface. In
fact, most of the heat goes into evaporating surface moisture
along as there is moisture around. If there is not, then things
dry out, we get droughts, and we get heat waves.
A consequence of the increased drying is that there is more
moisture in the atmosphere, and there are good observations to
show that the humidity in the atmosphere has increased by over
10 percent over the United States in the last 20 years or so.
That humidity, that increased moisture in the atmosphere,
provides fuel for all of the weather systems. Consequently, it
rains harder when it does rain and it even snows harder. As a
result, there is an increased risk of flooding, and we are
seeing examples of that right now.
Computer models that we use for attributing the causes of
the climate change, and also for making future projections,
have a number of uncertainties. First, there are uncertainties
as to what the projections of carbon dioxide and so on would be
in the future. So, instead of making predictions of those,
there are various projections or scenarios that are put
forward, and they are used for planning purposes, but they
should not be confused with true predictions of what is going
to happen.
There are better estimates of natural variability from
climate models and also from past climate records, and they
indicate fairly clearly now that the global mean temperatures
are outside the realm of natural variability and have been
since about 1980 or so. So we can account for a lot of the
structure of the global mean temperature changes.
However, global mean temperatures are more like the canary
in the coal mine. They are really an indicator of what is going
on. They are not the most important thing. The other changes,
in precipitation--for instance, I think water resources--are
probably a much bigger issue for society.
The best estimates in the future are that the global mean
temperature will increase about 3 to 6 degrees Fahrenheit over
the next 100 years or so, and other numbers have been put
forward. Some extreme numbers I don't think are very viable.
They have often appeared in news reports, but I think some of
the reporting of the IPCC results is misleading in that regard.
Let me just close by saying that, while our models are
imperfect, to assume that the climate is not changing--which
Senator Smith was referring to--that also uses a model which we
are certain is wrong. Thank you.
Senator Voinovich. Thank you.
I would like to welcome Senator Warner. Senator Warner,
before we ask the witnesses questions, would you like to make
an opening statement?
Senator Warner. No, Mr. Chairman. Thank you very much.
Senator Voinovich. Thank you, Senator Warner.
Dr. Lindzen, you had an opportunity to hear Dr. Trenberth's
statement in regard to the various conclusions that have been
made in terms of increase in warming because of fossil fuels,
the 30 percent more in greenhouse gases, and so forth,
glaciers, sea levels--frightening stuff. The question I have
is, Do you agree with the information that has just been
presented before this committee by Dr. Trenberth?
Dr. Lindzen. It is hard to know because, analyzed
carefully, I am not altogether sure what he was relating to
what. I think, for example, the statement that increasing
carbon dioxide is occurring there is universal agreement on. I
think the statement that increasing carbon dioxide and other
greenhouse gases, we should realize they have already amounted
to half the increase we expect by a doubling of CO2,
will more likely cause warming, increase in temperatures, than
decrease. I don't think there is any question, moreover, that
man, like the butterfly, has an impact on climate.
What I think is important to realize is those statements
have no policy implications because, if they are not
quantified, if they are not significant, they could just as
well be compatible with a negligible impact from CO2
as a serious impact. So when one draws upon universal
agreement, one had better be aware that one is also drawing
upon triviality.
The questions then boil down to more serious ones of
quantification. Kevin mentioned storminess, but he does not
mention that the main source of energy for extra tropical
storms is the equator-to-pole temperature difference, and that
is predicted to decrease in a warmer world. So we only hear one
side rather than the other on that.
He speaks about glaciers retreating, but he doesn't mention
that there are quite a few glaciers retreating in regions where
the temperature is decreasing rather than increasing, and that,
in fact, over Scandinavia the glaciers are advancing again, and
there has been very little movement any place since around
1970.
In speaking about increased rain over the United States,
this amounts to a few percent, and Tommy Karl presented that,
but I know of no hydrologist who thinks we can measure that. So
I am not sure how he did it.
As far as ice thinning over the Arctic, that was a report a
couple of years ago, but a report came out only a few weeks ago
in Geophysical Research Letters that pointed out the errors in
that.
Kevin mentioned the thousand-year record, but Wally
Broerker just came out with an article in Science pointing out
that the methodology of that measurement, which just uses a
handful of tree rings to give you accuracy, claimed accuracy of
a couple of tenths of degree, is inappropriate.
So there is an evolving area of science. The science where
there is agreement and where one speaks of things being settled
is not policy-relevant. The policy-relevant parts are highly
uncertain and often suggestive of much less impact.
On top of that we have--back to the issue of Kyoto, and
that is, if you adhere to Kyoto and you expected, let's say, 6
degrees global warming, Kyoto would knock it down to 5.5. If
the Third World participated, it would knock it down to maybe
4, 3.5. There is nothing Kyoto would do that would change the
fact that, if you really expect a global warming, you would
still have it.
Finally, as far as models go, just to give you a
perspective, they are so far incapable of predicting or dealing
with or replicating ice ages, warm climates of the past, and so
climate dynamics is very poorly handled. There are all sorts of
sources of natural variability, and that means internal,
nothing forced, that they can't handle. Yet, all the statements
you have heard about man's demonstrated role assume that models
correctly produce internal variability.
Senator Voinovich. Thank you.
Senator Reid?
Senator Reid. Dr. Lindzen, I know you are a scientist, and
I am sure you have all kinds of scientific degrees, but common
sense to me dictates that all this stuff going into the air
which can be quantified over all the many years it has isn't
good for the environment. Would you agree with that? If I see
all this stuff going into the air, including fossil fuels----
Dr. Lindzen. It is certainly true of many things, although
I would say that Senator Chafee's relating CO to CO2
is indicative. Remember CO2 per se is odorless,
invisible, nontoxic, essential to life, and a product of
breathing. So to refer to that in the same sentence as carbon
monoxide, which is poisonous, or soot, which is adversely
impacting health in obvious ways, I think confuses the issue.
It doesn't help it.
Senator Reid. Well, but, Doctor, what I want you to do,
rather than try to belittle we Members of the Senate, I think
what you should do is answer my question. That is, all this
black stuff belching into the air from diesel fuel, power
plants, automobiles, is that good for the environment?
Dr. Lindzen. Of course not.
Senator Reid. OK, then, let's take the next point. The next
point would be, what we are trying to do here, rather than
determine exactly whether a model is right and whether they can
replicate the Ice Age, what we want to do--I am speaking for
myself--what I want to do is figure out a way to cut down the
use of fossil fuel, for a couple of reasons. One is I
personally believe, although I am not a scientist, that it is
not good for my grandchildren. No. 2, I think anything we can
do here in the United States to cut down the use of fossil fuel
is good for our economy, because if we can stop importing so
much of this foreign oil, it would be better for us in so many
ways. Would you agree with that?
Dr. Lindzen. I am in no position as a scientist to offer
any expert agreement or disagreement on those matters.
Senator Reid. Well, you would agree as a scientist that we
would be better off producing electricity with wind or solar or
geothermal than we would be by burning fossil fuel. You would
agree with that?
Dr. Lindzen. Not at all.
Senator Reid. Tell me why.
Dr. Lindzen. Well, because I haven't studied them. I know
that wind-generated electricity has its problems.
Senator Reid. Tell me what problems.
Dr. Lindzen. Well, bad for birds, among other things. It
also is very space-intensive. It also has the problem that I
speak about without expertise that, when you have large-scale
wind generation plants, you will impact the wind itself. The
wind doesn't exist independently of the devices, and you could
very well end up with a wind farm, if it is too large, that
kills its own wind. That is a bit wasteful of both terrain,
land, and economic resources.
As far as panels go, it is again a space issue, an
environmental usage issue, as to whether Nevada wants large
parts of Nevada used to be covered by panels. These things, as
you say, can be assessed, but to ask somebody to agree that
this is better, I mean that doesn't make sense to me. Maybe it
does to you.
It seems to me that with fossil fuels we have available
from Australia and elsewhere new forms of coal that are almost
chemically indistinguishable from hydrocarbons. Whether those
have advantages or not I don't know. There are clean coal
technologies. I am no expert on them, but they have to be
assessed as well.
Senator Reid. Tell me what you are an expert in.
Dr. Lindzen. Climate dynamics, the physics of climate.
Senator Reid. I see. I guess the problem I am having is
that, for example, Dr. Trenberth stated that the assumption
that warming is not happening also relies on models. Would you
tell me what uncertainty is related with those models that he
talks about?
Dr. Lindzen. First, I think you have to distinguish warming
meaning a change in temperature and warming meaning man's
causing it. There is very little question that warming is going
on. There is very little question that it is very hard to know
how to attribute it.
When he says that models are also responsible for the
possibility that man's activities may not cause much warming,
this is a statement that you have at least conceptual models
that the feedbacks may not be as positive as they are in
existing models.
He showed us that carbon dioxide alone, if it increased,
doubled, would not cause more than about 2 degrees Fahrenheit
warming, and that is not a huge amount. The claims that it
would cause much more are due to the fact that most existing
models amplify what carbon dioxide does by having clouds and
water vapor come in and make Nature worse.
Senator Reid. Dr. Trenberth, would you respond to that?
Dr. Trenberth. There are uncertainties in models, indeed,
but the models are good enough, we believe, to be able to
attribute the climate change to why it is happening now. The
real problem is that the models are probably not good enough to
make really reliable predictions in the future. In that sense,
there is a lot of work to be done.
Professor Lindzen is correct that the warming from carbon
dioxide alone, when you double the amount of carbon dioxide in
the atmosphere, would be around, I would say, 2.5 degrees
Fahrenheit, but the best estimate overall is that about 5
degrees Fahrenheit would be the overall warming that would
occur. A lot of that comes from the fact that a lot of the heat
goes into evaporating moisture, putting more water vapor in the
atmosphere, and water vapor is a powerful greenhouse gas and
that provides a positive feedback.
Senator Reid. One final thing. I know my time is gone, Mr.
Chairman. Both of you have done a lot of work in this field,
that's true. I would like to know from what funding sources
that you have received your money for these studies. Would you
both do that and make it part of the record?
Dr. Trenberth. For myself, and many of my colleagues, in
fact, my main line of research is not on climate change. I am
more an expert originally on El Nino. I find that when we look
at El Nino, there are changes going on and we run headlong into
the fact that the climate is changing.
My institution is supported by the National Science
Foundation and I have grants with NASA and NOAA.
Senator Reid. Dr. Lindzen?
Dr. Lindzen. My funding is also from DOE, NASA, NSF.
Senator Reid. Thank you very much. Thanks, Mr. Chairman,
for your patience.
Senator Voinovich. Thank you.
Senator Reid. I would say also that Senator Lieberman, who
is the ranking member of the subcommittee, is on his way. He
will, along with Senators Corzine and Clinton, who are members
of the subcommittee, will be here. I have to go to the Capitol.
Excuse me.
Senator Voinovich. Thank you.
Senator Chafee?
Senator Chafee. Dr. Trenberth, welcome. You said in your
opening statement that in the 2001 plenary the IPCC carefully
crafted the following: ``In the light of new evidence, and
taking into account the remaining uncertainties, most of the
observed warming of the last 50 years is likely to have been
due to the increase in greenhouse gas concentrations.'' Could
you just expand on that and your reaction to the relative
strength or weakness of that finding?
Dr. Trenberth. Perhaps it is worth commenting briefly on
the procedures in the IPCC. The scientists are primarily
involved in writing the overall document and the technical
summary. For the policymakers' summary, a draft is put forward
by the scientists, and I was involved in that, but then it goes
through an intergovernmental meeting where each word and line
is approved and actually modified in an intergovernmental
process.
The way that is supposed to work is that the politicians
take for themselves how to say things and the scientists defend
actually what can be said. There were 42 scientists at that
meeting that were defending what could be said. But there was a
lot of negotiation over that particular wording, and that
wording was actually crafted at the meeting itself. It was a
compromise between a lot of different positions that were being
put forward at the meeting.
Dr. Lindzen. Could I mention in my testimony I do have the
wording in the draft submitted by the scientists and the
wording that emerged, if you wanted to look at the two.
Senator Chafee. Very good. Thank you.
I still have some time. I would like to ask Dr. Lindzen to
just elaborate on how man and the butterfly impact on climate,
in particular.
Dr. Lindzen. This is the nature of a chaotic system. There
is a distinguished professor at MIT, Ed Lorenz, who asked, if
you have a system that is unpredictable, as in many respects
our weather is, would the fluttering of a butterfly lead to a
different evolving path for the weather? And the answer was,
yes, it could eventually. It might be negligible. It might be
rare. It might be very difficult to specify. But it became a
popular theme for people studying chaos to muse on. I was
simply saying, if people can muse on the impact of the
fluttering of a butterfly's wings, then, of course, man has an
impact; we're klutzier than a butterfly.
Senator Chafee. Thank you, Mr. Chairman.
Senator Voinovich. Senator Inhofe?
Senator Inhofe. Thank you, Mr. Chairman.
Getting back to this process, for both of you, I would like
to kind of pursue that a little bit. If one of you wrote a
scientific report, which you do with regularity, and there is a
process by which both the House and the Senate and the
bureaucracy would come together to negotiate what your work
actually said, do you really believe that the final
congressional summary of the report would accurately reflect
the science and the research? Dr. Trenberth?
Dr. Trenberth. Well, my response to what came out of the
Shanghai meeting in this particular case was that, first, the
report actually roughly doubled in length. I certainly
preferred the original draft. There is a tendency for some
sectors of the United Nations to want to have certain things
mentioned, such as the Asian monsoon or in Africa. Statements
were carefully inserted. This can change the balance of the
document a little bit, but the statements that are in there are
actually accurate.
The heaviest lobbying that went on in Shanghai was actually
from Saudi Arabia, who was clearly trying to water down and
undermine the whole process, I would say.
Senator Inhofe. Dr. Lindzen, you said a minute ago, in
response to one of the questions that was asked by Senator
Chafee, that in your opening statement, a part you didn't get
to in your summary, you had some examples of what was said, of
statements that were the scientific statements as opposed to
the political statements. Would you give an example or two?
Dr. Lindzen. Well, let me first give an example of what
Kevin mentioned as an alteration. In the original draft, the
statement about man's responsibility read, ``From the body of
evidence since the second assessment, we conclude that there
has been a discernible human influence on global climate.'' I
would mention ``discernible'' doesn't tell you anything,
because if it is below a certain value, it means we have no
problem.
Studies are beginning to separate the contributions to
observe climate change attributable to individual external
issuances, both anthropogenic and natural. This work suggests
that anthropogenic greenhouse gases are a substantial
contributor to the observed warming, especially over the past
30 years, going back to that. However, the accuracy of these
estimates continues to be limited by uncertainties in estimates
of internal variability, natural and anthropogenic forces, and
the climate response to external forces.
I think, by and large, that is a good statement. It was
changed to, ``In the light of new evidence, and taking into
account the remaining uncertainties, most of the observed
warming over the last 50 years is likely to have been due to an
increase in greenhouse gas concentrations.'' There is a
profound difference between these statements, but it was
intended.
The same thing, the chapter Kevin and I worked on on
physical processes pointed out many difficulties with models
that were crucial to their prediction of significant warming,
whether they were peripheral--concerning clouds; there were
arguments about water vapor. There are all sorts of things in
there.
The summary statement was, ``Understanding of climate
processes and their incorporation in climate models have been
proved, including water vapor, sea ice dynamics, and ocean
detransport.'' Not a clue that there were questions.
Senator Inhofe. That is a very good answer, and I don't
want you to repeat any other examples, but in your written
statement are there other examples? A few?
Dr. Lindzen. Yes.
Senator Inhofe. All right. There is a statement that you
had made, Dr. Lindzen, quoted here. ``If we view Kyoto as an
insurance policy, it is a policy where the premium appears to
exceed the potential damages and where the coverage extends to
only a small fraction of the potential damages.'' Would you
like to elaborate on that?
Dr. Lindzen. Sure. All I am saying is you have estimates of
damages to the most likely forming scenario. You have estimates
of GDP reduction from implementing Kyoto. At this point they
are comparable or perhaps even the GDP looks a bit larger than
the savings you incur by preventing the climate damage.
Economists can argue over that. But then you come to the
stunning fact that Kyoto will not change the climate much. So
you are left with both the damages and the cost but no
coverage. I don't think that is a reasonable insurance policy.
Senator Inhofe. Thank you very much. Thank you, Mr.
Chairman.
Senator Voinovich. Senator Corzine?
Senator Corzine. I guess with respect to that last
response, I would love to hear Dr. Trenberth's comments on
whether that tradeoff was exactly how other scientists would
have assessed that cost-benefit analysis, because I think it is
through that peer review and peer challenge that you can
actually get to conclusions, if I understand the scientific
process. So I would ask if you have any comments on that.
Then I have a whole series of issues that I'm confused when
there are views expressed that the quantitative data, aside
from the amount, the historic quantitative data, is in place
and appears to be under challenge, whether we have had a global
mean warming trend, whether you can use ice core delvings to
actually draw scientific conclusions. Are there real debates
about those issues? My reading--and, again, sometimes it is
more popular press than the scientific press--would lead me to
believe that there is an overwhelming weight of scientific
argumentation with regard to a number of those kinds of
statistical bases of historic review.
So those two areas: Why is there a debate today that I read
in Dr. Lindzen's commentary on quantitative data from an
historical perspective, leaving aside modeling, which always
has some probability analysis associated with it? And then his
comment on cost-benefit work that follows on from Senator
Inhofe's question.
Dr. Trenberth. Well, first, looking at Kyoto, there are
three options for dealing with this problem. One is to stop it
from happening, cut emissions. The second is to adapt to the
problem as it goes along, and the third one is to do nothing.
It doesn't seem as though it is possible to stop the
problem, and I don't think ``doing nothing'' is an option,
quite frankly. That means we have to adapt to the problem and
plan for it.
What Kyoto does is it buys us about 15 years for when
preindustrial levels of carbon dioxide would double is another
way of looking at it. It doesn't solve the problem, but it
gives us more time to plan and to adapt to the climate change
as it is happening.
Senator Corzine. To study the real impacts of whether it is
occurring, to give greater weight to the probability
assessments that the models would have because you would have
new information, presumably?
Dr. Trenberth. Right. The models can get better, and we can
actually get into the whole business of really doing climate
predictions, presumably, eventually.
With regard to the evidence, there is a lot of evidence and
a lot of different variables that we can look at. It is very
easy to point to one particular thing and say, oh, this
suggests--like this cold winter in the Midwest, in the center
of the country this year, global warming can't be happening,
but, in fact, if you look around and look at it globally, you
can see that this is part of an overall pattern, and Alaska had
its warmest winter on record.
So there is a lot of natural variability. There are
uncertainties in all of these things that scientists actually
like to argue about, but the IPCC statement is an overall
assessment, and it takes into account all of the evidence. What
we find with some of the naysayers is that their evidence is
often very selective. IPCC takes into account all of the
evidence.
Senator Corzine. So you find a state of consensus stronger,
significantly stronger, than we are hearing from your
colleague?
Dr. Trenberth. I would make that statement, yes.
Senator Corzine. Thank you.
Senator Voinovich. Senator Clinton?
Senator Clinton. Dr. Trenberth, I would like to ask you,
what are your policy recommendations? I know that Dr. Lindzen
suggests that there is no policy-relevant content to the
information that is available at this point in time, but I
would like to ask you to respond to that. I would appreciate
any recommendations that you think do flow naturally from the
understanding of the science as it is viewed today, because I
agree with you that we can do nothing; we can adapt; we can try
to reverse. What is it that you would recommend that this body
take under consideration as policy to flow from the findings
that you have put forth?
Dr. Trenberth. Essentially, the IPCC has made the statement
that global warming is happening in their best assessment. We
have attributed the recent climate change over the last, in
particular, 30 years to the human influence on climate. There
is a direct follow-on from that to say that these climate
changes, therefore, are only going to have a greater impact in
the future and it is likely to be disruptive. Probably the
biggest impact on society is through extremes: the droughts and
the floods, in particular.
So there is a cost to climate change. I think when we are
considering the economy, we should not just be considering the
costs of mitigation, but also the costs of climate change and
the fact that they are put off in some other agency, like FEMA
or somewhere else, and not considered. It is very hard to point
your finger and say, ``yes, this particular flood was caused by
climate change,'' but the evidence does suggest often that
there is a contributing factor, and that will probably only get
worse. So I would encourage the cost of climate change to be
considered in the economic decisions that are being made.
My personal viewpoint is that there should be a very broad
portfolio dealing with energy considerations. I find renewable
energy sources and conservation measures and incentives to cut
down on waste--not leave all the lights on in a building for
security measures when it is not needed and then turn the air
conditioning on to get rid of the surplus heat. Incentive
structures to take that kind of thing away seem to be
desirable, and a similar thing for automobiles in terms of gas
mileage.
I am from New Zealand, and New Zealand's main source of
power is hydroelectric power. I think it is one which is often
overlooked. There are certainly environmental costs attached to
that, as there are with wind farms or solar farms, so that one
has to look at the tradeoffs on these things. I think a broad
portfolio on all fronts is needed.
Senator Clinton. I am also interested in your points about
how greenhouse gases stay in the atmosphere and accumulate over
a long period of time, and that while we are debating this
issue, it is either getting worse or there is no impact. But if
you were to go back to Senator Reid's point about being a
gambler, it strikes me as a bad bet not to take what would be
prudent measures and provide a policy framework to encourage
such prudent measures while we continue to try to further plumb
what the meaning of a lot of these changes is.
You have in your written testimony written about water and
the impact of climate change on our water supplies, and
particularly the safety of our drinking water. Could you
elaborate what your concerns are about drinking water supplies
and the access to water? I know we have seen some rather
alarming trends with the Great Lakes having the second year of
the lowest level that has been recorded. So the issues of water
and temperature are ones that I would like you to briefly
address.
Dr. Trenberth. Thank you, yes. Global warming produces
increased drying, and this means that there is increased
evaporation, and plants are apt to wilt somewhat sooner than
they otherwise would without global warming.
The moisture in the atmosphere then is lying around. There
are increases in moisture, and it gets gathered up by all of
the weather systems. For example, a thunderstorm. It reaches
out and gathers the water vapor that is available and dumps it
down. The evidence suggests that when it rains now, it is
raining harder than it was--about 10 percent harder--than it
was 20 or 30 years ago.
There are a number of consequences of that. The first one
is that more of the water runs off, and therefore, there is a
risk of flooding as a result of that. It also means that less
of it soaks into the soils and is then subsequently available
for agriculture. So that exacerbates the risk of drought when
the storms go away.
When there is runoff, a lot of the water runs off across
the surface of the earth rather than soaking in through the
soils. If it goes through the soils, there is a filtration
process which cleans the water. If it runs off across the
surface, it picks up all kinds of chemicals. Water is a
solvent. It picks up fecal matter from fields, and so on, and
water supplies get contaminated. There are many examples around
the United States, and especially in other countries, where
there are stomach upsets and health problems often not related
to any big picture thing. They are often isolated in small
communities, mountain communities, and so on, but they are
related to contamination of water supplies in this fashion.
Management of water, consequently, I believe, will be a
major issue in the future, first, because when we get it, we
are probably getting too much of it. Then, second, when we
don't have it, it would be best if we could save it for later
use. So I think this will be a big pressure point on society,
given the increased demand.
Senator Clinton. Thank you.
Senator Voinovich. Thank you.
Senator Lieberman, the ranking member of the subcommittee,
is here. Senator Lieberman, would you like to make a statement?
OPENING STATEMENT OF HON. JOSEPH I. LIEBERMAN, U.S. SENATOR
FROM THE STATE OF CONNECTICUT
Senator Lieberman. Thanks very much.
Senator Voinovich. By the way, I should acknowledge the
fact that the two of us met earlier and you suggested that we
ought to have this hearing, and my response was I thought it
was a great idea because so many of us are in the dark in terms
of this whole issue of climate change, global warming. We have
had a very lively meeting here this morning.
Senator Lieberman. Thank you, Mr. Chairman. The first thing
I wanted to do was to thank you for convening this hearing. In
the normal course of life in the Senate, wouldn't you know it,
on the morning it is held I am detained in the ongoing
negotiations on the education bill that is on the floor. So I
apologize to you, my colleagues, and to the witnesses.
I have read the testimony that you have given. I just would
say a few words and ask that my full statement be included in
the record, if I might.
Senator Lieberman. To me, this is an issue that really will
test our political leadership here in this country, all of us,
and around the world because it is an issue which I believe, as
a layperson following the science, that there is compelling
evidence that, in fact, the planet is warming. While we are
beginning to see some consequences of it, as Senator Stevens
said yesterday at a Commerce Committee hearing, that he was
struck by the creeping of the ocean waters into Arctic
villages, for instance.
Nonetheless, the great test here is that the worst
consequences of this will not happen in the lives of many of us
here now. So this calls on us to truly be trustees, stewards of
the planet and protectors of those who follow us here. I hope
we can rise to that challenge.
The Senate has followed deliberations here, often funding
programs to at least begin to deal with the problem. We had
that now legendary Byrd-Hagel resolution some period of time
ago. I do think the resolution is subject, at least by my
understanding, my participation in it, there is some
misunderstanding because a number of us who are quite intensely
concerned about global warming voted for it for two reasons.
One was we thought the main thrust of it was not to oppose
Kyoto, but to say that ultimately this problem was only going
to be solved and American leadership was only going to make
sense if the developing nations also were part of the solution;
they're not standing aside as part of the problem. I think the
resolution has been misinterpreted or misunderstood, and
understandably so, since then, but I hope that we can come back
and rebuild a consensus to do something about this problem.
I was troubled by the Administration's unilateral statement
of intention of essentially withdrawal from Kyoto or pull away
from it. I am encouraged, on the other hand, by the stories I
read that within the Administration there is a group meeting
studying global warming, hearing from experts with varying
opinions on it, which I appreciate it.
I guess I was troubled a few days ago when Vice President
Cheney gave that speech up in Toronto outlining some of the
upcoming proposals for a National Energy Policy, and in the
entire speech there was not one mention of climate change and
the consequences of the investments that he was talking about
in coal and other greenhouse gas-emitting energy technologies
on our climate. So I think we have a lot of work to do together
here. I hope this kind of hearing in which we all learn will be
the basis for the Senate to go forward and try to find common
ground.
I remember a few years ago, Mr. Chairman, the late Senator
Chafee, John Chafee, and I put in a measure which we thought
was really a small step forward and would not engender any
opposition. We simply said in the proposal that we should
create a means to give credit to greenhouse gas-emitting
sources, industries particularly, for reducing those greenhouse
gas emissions prior to any national scheme for requiring those
reductions, but so that they would get credit for their
initiative today. John Chafee and I found that we were, I
wouldn't say roundly attacked, but at least opposed by people
on all sides, one side thinking we were putting the proverbial
camel's nose under the tent and the other side feeling that we
were not obviously asking as much as was required by the facts
here.
So having had that experience, I understand the perils of
trying to form a consensus here, but I hope through our
leadership on this committee--and I thank you again for
convening this hearing--that we can openmindedly assess the
facts and finds some ways to move forward.
I remember being at a seminar on global warming several
years ago, and there was a Congressman there from the House. It
happened to be a Republican. When it was over, he said--they
were scientists we were listening to--he said, now if you all
are right and we act in response to your advice, we will
essentially save the planet as we know it; if you're wrong and
we're just hyperventilating, overreacting, we will have taken
action to reduce air pollution, to make America more energy-
independent. Either way, it is not a bad result, and I agree.
So we hope we can find ways to continue to move forward.
Thanks, Mr. Chairman, for allowing me to say a few words
today. I look forward to the testimony of the second panel. I
thank both of the witnesses.
Senator Voinovich. OK, thank you, Senator.
The witnesses would agree that human beings have
contributed to warming the atmosphere? Both of you agree to
that, that there is a thing called global warming that is
occurring and that we contribute to it in some fashion? Do both
witnesses agree to that?
Dr. Trenberth. I would agree.
Dr. Lindzen. Sure, as long as you put no numbers on it.
Senator Voinovich. OK, all right. I am going to get into a
practical situation. If we assume that wind, solar, hydro, and
some of these other things that are being talked about cannot
currently or in the near future respond to the energy demands
of the United States of America, and we take into consideration
that we are seeing some astronomic increases in energy costs
going on throughout our country--particularly in my own State,
the heating bills of people there and the businesses have been
just extreme, particularly for businesses.
I believe, for example, that the heating energy cost thing
is really contributing substantially to the recession that we
are in today in this country. We have to look at more nuclear,
and let's say, contrary to what Senator Reid said, moving away
from fossils, that we have to take advantage of the 250 years
of coal fossil fuel we have available today in this country.
There are some who argue that we should have mandatory caps on
the amount of CO2 emissions.
The question is, if we do go forward and we burn coal, and
we use the best clean coal technology that is available, what
do you think about the issue of having some type of mandatory
cap on CO2 connected with that? Now the President
has basically said he is not for that, CO2 should
not be part of that consideration. The issue is, should we
mandate a cap on it at a national level or should we rather say
that there is no question that there is a problem that man is
contributing and that fossil fuel probably is one of the
contributors to it, and that we ought to be doing everything to
encourage people to reduce CO2, including
sequestration, and so forth, but not make it mandatory, in
light of the fact the cost involved in that kind of thing would
be very expensive, and therefore, drive up the cost of energy
in this country? Do you understand the question?
Dr. Trenberth. I think perhaps I can comment somewhat
sensibly on it at least. One of the problems with the cap is,
how do you trace who exceeded their allotment? This is part of
the problem actually also with Kyoto. What would the penalty
actually be? I think there are a lot of problems with a cap,
and that probably isn't the way you would want to go about
doing things.
The whole timeline is a considerable issue. This is true
also with Kyoto. On the one hand, there is a need for binding
targets, but the timelines that are needed have to take into
account the changes in technology that are needed. So if you
are dealing with the motorcar, a 10-year timeline is a
reasonable timeline. If you are dealing with a coal-fired power
station, then the lifetime of the power station is 35 or 40
years, and what you want to do is to make sure that, when that
power station has reached its fruitful life, that maybe new
technology is used to replace it, if you don't want to write
that thing off and have a big economic cost as a result. So the
way in which you go about doing these things and multiple
timelines seem to me to be a useful thing to do.
Another part of this with regard to caps and related things
is that this is a global problem--and this is one of the things
we have just been highlighting with Kyoto--is that there are
not targets for a number of developing countries. I think that
is, indeed, a problem. On the other hand--well, I won't comment
further on Kyoto. I think that Kyoto is a useful basis for
moving ahead perhaps, but it does require then international
negotiations also in order to really deal with this problem,
but leadership by the United States in showing how we might go
about it could be a big step forward.
Senator Voinovich. Dr. Lindzen?
Dr. Lindzen. Yes, I said to Senator Reid, the we don't
pretend expertise on energy policy, but there is one
mathematical statement one can make. If one needs to optimize a
policy for economical, efficient, and pollution-free energy
reduction, one does not generally aid the optimization by
putting additional constraints on it. We have to decide our own
priorities, and if this is not per se a priority, the others
will not be helped by it. You can do a better job without it.
Senator Voinovich. Any of the other Senators here want to
ask questions of the witnesses?
[No response.]
I want to thank you very much. This has been very helpful
to me, and I think I am less confused than I was before.
Dr. Trenberth?
Dr. Trenberth. You were citing some magazines before, and I
just thought I might add one to your collection. The latest
issue of Environment magazine, the May issue, the cover story
is on human influence on climate, and, in fact, the cover story
is by myself. It is actually a summary and a commentary on the
latest IPCC report.
Senator Voinovich. Thank you very much. I will get it.
I really appreciate the two of you being here today.
Our next panel--and I appreciate their patience here this
morning--is Dr. John R. Christy, Dr. Jae Edmonds, Dr. Rattan
Lal, Mr. James E. Rogers, and Dr. Marilyn A. Brown.
I think the witnesses are all familiar with the procedure
here. They had a chance to watch it.
Our first witness will be Dr. John R. Christy. Dr. Christy
is an Associate Professor, Department of Atmospheric Science,
the University of Alabama at Huntsville. Dr. Christy, thank you
for being here.
STATEMENT OF JOHN R. CHRISTY, PROFESSOR, DEPARTMENT OF
ATMOSPHERIC SCIENCE, UNIVERSITY OF ALABAMA IN HUNTSVILLE
Dr. Christy. Thank you, Mr. Chairman and committee members.
Actually, I was promoted 3 or 4 years ago to professor. I am
also Alabama State Climatologist and recently served as one of
the lead authors of the IPCC. I am glad to be back in front of
this committee to testify about climate change again.
I will refer to the figures that are in the back of your
written testimony I have submitted.
I want to say first that carbon dioxide, the agent thought
to exert the largest part of human-related climate change, is
literally the lifeblood of the planet. The green world you see
around you would not be here without it. Carbon dioxide means
life, and at several times its current value promoted the
development of the plant world we now depend on and enjoy.
Carbon dioxide is not a pollutant.
Now will CO2 affect the climate significantly?
The models suggest the answer is yes, though I have serious
doubts. A common feature of climate model projections with
CO2 increases----
Senator Voinovich. Dr. Christy, I wear hearing aids, and
you are speaking very fast, and I am having a hard time
understanding. Could you slow down a little bit? I know you
want to get what you can in in the 5-minutes, but if you could
slow down----
Dr. Christy. Excuse me. A common feature of climate model
projections with CO2 increases is a rise in the
global temperature of the atmospheric layer from the surface to
30,000 feet. This temperature rise itself is projected to be
significant at surface, with similar or increasing magnitude as
one rises through this layer we call the troposphere.
Over the past 22 years, calculations of surface
temperature, indeed, show a rise between 0.5 and 0.6 degrees
Fahrenheit. This is about half the total rise in the last 100
years. In the troposphere, however, there are estimates which
include the satellite data that Dr. Roy Spencer of NASA and I
produced, which show there is only a slight warming, 0 to 0.15
degrees Fahrenheit, as shown in figure 1. New evidence, shown
in figures 2 and 3, corroborate that many different systems
show the same thing: the bulk of the atmosphere has not warmed
in the past 22 years.
Now since my last appearance before this committee there
has been 1 year above the 20-year average and two below it.
Rather than seeing a rise in global temperature that increases
with altitude, as climate models project, we see that in the
real world since 1979 the warming decreases substantially with
altitude.
Am I coming across?
Senator Voinovich. Yes, thank you.
Dr. Christy. So the reality of the past 22 years may only
indicate that the climate experiences large, natural variations
in the vertical temperature structure which climate models have
yet to reproduce. However, this means that any attention drawn
to the surface temperature rise over the past 20-plus years as
evidence of climate change must also acknowledge the fact that
the bulk of the atmosphere that was projected to warm has not.
One modeler told me recently that the surface versus
troposphere difference was the largest problem they faced.
Well, this is a curious phenomenon, but we don't live 30,000
feet in the atmosphere and we don't live in a global average.
We live in specific places on the earth.
Making projections for local regional places is virtually
impossible. I will show an example from Alabama, figure 4. You
will see several climate model runs of temperature showing
Alabama's temperature from 1860 to the present and then beyond
to 2100. It is clear that the model runs did not do especially
well over the time period of observations, and none predicted
the cooling that we have actually experienced in the State of
Alabama. If in trying to reproduce the past we see such errors,
we can only expect to see similar errors in the predictions.
I want the committee to be very, very skeptical of media
reports in which weather extremes are used as proof of human-
induced climate change. Weather extremes occur somewhere all
the time. For example, the U.S. temperature for last November/
December combined was estimated to be the coldest since records
began in 1895. That does not prove that the United States or
the globe is cooling or that climate is changing unnaturally.
What it demonstrates is that extremes occur all the time.
Other climate data gives similar nonalarmist results, and
therefore, are overlooked by the media. As we showed in the
IPCC, hurricanes have not increased; thunderstorms, hail, and
tornadoes have not increased. Droughts and wet spells, as shown
in figure 5, in the United States have not increased or
decreased.
I will skip that piece right there; I see the yellow light.
I am decidedly an optimist about this situation. Our
country is often criticized for producing 25 percent of the
world's anthropogenic CO2. However, we are rarely
recognized and applauded for producing with that CO2
25 percent of what the world really wants and needs: its food,
technology, medical advances, defense, and so on. As figure 7
shows, we in the United States will continue to produce more
and more of the world wants with increasing energy efficiency.
In summary, I would say, as someone who actually produces
and analyzes climate information, that I find pronouncements
today about climate change catastrophes due to increased
greenhouse gases to be very overly alarmist. Thank you.
Senator Voinovich. Thank you, Dr. Christy.
Dr. Edmonds, who is from the Pacific Northwest National
Laboratory. Dr. Edmonds.
STATEMENT OF JAE EDMONDS, PACIFIC NORTHWEST NATIONAL
LABORATORY, BATTELLE MEMORIAL INSTITUTE
Dr. Edmonds. Thank you, Mr. Chairman and members of the
committee, for the opportunity to testify here this morning on
energy and climate. My presence here today is possible because
the U.S. Department of Energy has provided me and my team at
the Pacific Northwest National Laboratory long-term research
supports, and without that support, much of the knowledge base
on which I draw today would not exist. That having been said, I
come here today to speak as a researcher, and the views I
express are mine alone.
I will focus my remarks on two matters: first, the timing
of the global response decline or change needed to stabilize
the concentration of greenhouse gases in the atmosphere and,
two, the need to expedite the development of technologies to
achieve this goal at reasonable cost. My remarks are grounded
in a small number of important observations.
The United States is a party to the Framework Convention on
Climate Change, which has as its objective the stabilization of
greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the
climate system. This is not the same as stabilizing emissions.
Because emissions accumulate in the atmosphere, the
concentration of carbon dioxide will continue to rise
indefinitely even if emissions are held at current levels or
slightly reduced. Limiting the concentration of CO2,
the most important greenhouse gas, means that the global energy
system must be transformed by the end of the 21st century.
Given the long life of energy infrastructure, preparations for
that transformation must start today.
In 1996, Drs. Wigley, Richels and I published an economics-
based analysis of carbon emissions time paths that would
stabilize CO2 concentrations. This work indicates
that an energy transition must begin in the very near future.
For example, for a global concentration of 550 parts per
million, global CO2 emissions must begin to break
from present trends within the next 10 to 15 years. Given that
it takes decades to go from energy research to the practical
application of the research within some commercial energy
technology, and then perhaps another three to four decades
before that technology is widely deployed throughout the global
energy market, we will likely have to make this deflection from
present trends with technologies that are already developed.
To reduce global emissions even further would require a
fundamental transformation in the way we use energy, and that
will only be possible if we have an energy technology
revolution. That will only come about if we increase our
investments in energy R&D.
The global energy system, and not just the United States
energy system, must undergo a transition from a one in which
emissions continue to grow throughout the century into one in
which emissions keep and then begin to decline. Coupled with
significant global population and economic growth, this
transition represents a daunting task, even if the
concentration as high as 750 parts per million is eventually
determined to meet the goal of the Framework Convention.
A credible commitment to limit cumulative emissions is also
needed to move new energy technologies off the shelf and into
widespread adoption in the marketplace. The cost of stabilizing
the concentration of greenhouse gases will depend on many
factors, including the desired concentration, economic and
population growth, and the portfolio of energy technologies
that might be made available. Not surprisingly, if the costs
are lower, the better and more cost-effective the portfolio of
energy technologies that can be developed.
The Global Energy Technology Strategy Program to address
climate change is an international public/private sector
collaboration advised by an eminent steering group. Analysis
conducted during the first phase of that program supports the
need for a diverse technology portfolio. No single technology
controls the cost of stabilizing CO2 concentrations
under all circumstances. The portfolio of energy technologies
that is employed varies across space and time. Regional
differences inevitably lead to different technology mixes in
different nations, while changes in technology options over
time inevitably lead to different technology mixes across time.
Recent trends in public and private spending on energy
research and development in the world and in the United States
suggests that the role of technology in addressing climate
change may not be fully understood or appreciated. Although
public investment in energy R&D has increased slightly in
Japan, it has declined somewhat in the United States and
dramatically in Europe, where reductions of 70 percent or more
since the 1980's are the norm. Moreover, less than 3 percent of
this investment is directed at technologies that, although not
currently available commercially at an appreciable level, have
the potential to lower the cost of stabilization significantly.
Mr. Chairman, thank you for this opportunity to testify. I
will be happy to answer your and the committee's questions.
Senator Voinovich. Thank you, Dr. Edmonds.
Our next witness is Dr. Rattan Lal, School of Natural
Resources at the Ohio State University, which is my alma mater.
Dr. Lal, we are very happy to have you here.
STATEMENT OF RATTAN LAL, SCHOOL OF NATURAL RESOURCES, OHIO
STATE UNIVERSITY
Dr. Lal. Thank you, Senator. I feel greatly honored to be
here to be part of this very important hearing.
In addition to the strong support that I receive from the
State of Ohio and Ohio State University, I have also received
support from the Natural Resource Conservation Service of the
USDA for the last 10 years. We are also developing a program
now with three National Laboratories: the Pacific Northwest
National Laboratory, the Oak Ridge National Laboratory, and the
Los Alamos National Laboratory.
I want to address three issues in this very short time. No.
1, we have heard today that the source of carbon dioxide is
primarily fossil fuel combustion. I want to indicate a couple
of other sources which are also important. No. 2, what is the
impact of laws on the carbon from the other sources on the
quantity of those resources? And, No. 3, agriculture is often
blamed as the cause of environmental problems, and I would like
to state a potential that agriculture can, indeed, be a
solution to the problems.
Senator I especially want to come back to the point that
you raised that Ohio has been growing 11 million trees, and I
want to indicate what those trees might be doing toward
potential sink in soil of the carbon.
No. 1 problem: The carbon dioxide concentration has changed
from about 600 gigatons in the pre-industrial era to 770
gigatons now. A gigaton is a billion tons. There are two
sources from which that problem came. Fossil fuel combustion
contributed 270 gigatons. In comparison to that, deforestation,
biomass burning, and soil cultivation with respect to plowing
contributed 136 gigatons. Out of that 136 gigatons, soil
cultivation, plowing, et cetera, contributed somewhere between
60 and 90 gigatons. So soil and deforestation have been in the
past a very important source of carbon. The difference is,
while fossil fuel carbon we cannot reverse, the carbon in soil
and trees that we have lost we can reverse, and that also can
have an important impact on the natural resources and the
economy.
The No. 2 point which I want to raise is, what impact did
have the loss of carbon from soil on the quality of the soil,
on the quality of the water resources? First of all, most of
our nation's soils have lost over one-third to one-half of
their soil carbon pool since the start of agriculture. That
carbon pool amounts to 10 to 20 tons of carbon per acre so far
that we have lost in the middle of the United States. This loss
of carbon from soil has resulted in decline in soil quality,
which means we have put more fertilizers, performed extractive
operations, applied other inputs to produce the same yield that
we would have if the quality of our soil had not deteriorated.
Because of the loss of soil carbon, the results are
increased soil erosion, sedimentation, flooding, leaching of
pollutants, and transport of other contaminants into the
natural waters. The dangers of nonpoint-source pollution are
exacerbated by erosion and reduction in the capacity of soil to
bar chemicals. These problems have resulted in considerable
environmental issues that need to be addressed.
My third point then is, how can agriculture be a solution
to this problem? First of all, there are two things we can do.
We can restore the degraded soils. Whether they are degraded by
erosion, by mining--we have quite a lot of mineland
activities--or by other processes, those soils can be restored
and reclaimed. Some of the carbon that we lost, 20 or 30 tons
per acre, some of it, maybe 60 percent of it, can be put back
through restoration.
Some of the techniques for restoration include CRP, the
Conservation Reserve Program; a wetlands reserve program;
mineland reclamation, restoring vegetative buffers and strips
along riparian zones.
Adopting conservation tillings, we have only about to 30 or
40 percent of the conservation tillings and rotation. I think
that is another very important one. Forestation, as you
mentioned, is a very important one.
The potential of all these practices is about 270 gigatons
of carbon sequestration a year in the United States compared to
a total potential, including forest fire models, if you combine
soil and forest, about 520 gigatons. This potential is about 70
percent of the commitment the United States would have under
the Kyoto Protocol.
This is a truly win/win situation. It improves soil/water
quality. It increased agricultural and forest production. It
reduces gaseous emissions, and as Senator Lieberman said, you
cannot go wrong. Either way, this is the best option.
I thank you, Senator, for giving me the opportunity to be
here.
Senator Voinovich. Thank you, Dr. Lal.
Our next witness is James E. Rogers. Mr. Rogers is
Chairman, President, and CEO of the Cinergy Corporation. Mr.
Rogers, thank you for being here today.
Again, thank you all for your patience.
STATEMENT OF JAMES E. ROGERS, CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, CINERGY CORPORATION
Mr. Rogers. Mr. Chairman and members of the committee, I
would like to thank you all very much for giving me the
opportunity to share my thoughts on global climate change.
It was my pleasure to testify before this committee last
year on the need for a comprehensive environmental emissions
reduction program for coal-fired plants, where you would have a
reduction of SOx, NOx, and mercury, and also address the
CO2 issue. My views have not changed since that
hearing. With the growing demand for more electric generation,
energy producers, now more than ever, need certainty that could
come from a comprehensive, longer-term reduction program that
this Congress should pass, certainly should consider and pass.
In addition, I believe that Congress must consider at the
same time the uncertainties and challenges posed to my industry
by the climate change issue. If legislative remedies are
intended to build some kind of certainty into our planning
process, climate change must be on that environmental roadmap.
Now our company has a lot at stake. We are the largest non-
nuclear utility. We are heavily dependent on coal. We burn 30
million tons of coal a year, and we have worked hard to reduce
the impact of our coal-fired plants on the environment. We
spent $650 million in emission controls and clean coal
technology in the last decade. We are spending $700 million to
reduce NOx over the next 3 years. We just spent a billion for
gas-fired plants that are environmentally more friendly than
coal-fired plants with respect to their emissions.
As I sit here and look at the challenges that we have and I
think about the issues and I listen to the science this morning
and the discussion on this panel, you all have had the
opportunity to hear from several very distinguished witnesses
regarding the state of the science on the climate issue. Mr.
Chairman, you asked a question with respect to the
uncertainties, and I thought you got a clear answer, as clear
as you can get. But it is clear that there are uncertainties.
But, notwithstanding the uncertainties, I believe that it is
prudent to start taking measured steps now to begin to address
the risks.
I thought it was interesting that Senator Chafee pointed
out that six out of seven people on these panels have Ph.D.'s.
I happen to be the one who doesn't. I actually find that an
advantage.
I come from the business world and, as a lawyer, deal with
ambiguities, uncertainties, improbabilities, and that is what
this issue really is all about, if you think about it. I would
suggest to you that, as policymakers, you need to think about
this as we do as business people. You need to view the climate
issue as a risk mitigation challenge.
What does that mean? What that means is we need to come up
with a very pragmatic, common-sense approach to the issue. We
need to focus in the first instance on no-regrets first steps
and lay the groundwork for future transformation of the energy
production fleet in the United States.
First steps should focus on activities that provide other
benefits as well as reduce carbon. We can reduce other harmful
emissions. We can decrease fuel consumption. We can lower
production costs. We can decrease the need for new generating
plants. We can focus on conservation and demand-side
management. These are the kinds of first steps that we need to
be taking.
We need, to say it in another way, to take first steps that
hold the industry roughly where it is today. Let the debate
continue. Let the scientific analysis continue. But this is a
do no harm strategy.
We are at a tricky point in terms of our understanding of
where we are, but what we ought to be doing is looking at ways
to flatten out the carbon growth curve, allow technology to
develop, and to continue the analysis. To me, those first steps
are critical, and we cannot plan to provide energy for the
people of this country unless we have certainty with respect
not only to SOx, NOx, and mercury, but also with respect to the
climate change issue.
Longer term--and this is a long-term issue we need to
address--longer term we need to continue to fund R&D programs
for new technologies to generate zero emission power. So, as I
sit here before you this morning, I am kind of reminded of the
fact that for 25 years I had Neil Armstrong on my board of
directors. I haven't been around that long, but he has
certainly served on that board for that period of time.
As I think about what this country did 40 years ago, when
we really as a country stepped up and focused on putting a man
on the moon, we need that same kind of commitment and passion
in trying to attack the technological puzzle that is wrapped
around this whole climate change issue. We need to take first
steps, as I suggested, but we also need to make a commitment on
a longer-term basis to deal with it, because we have the
capability within this country to develop the technology to
deal with these issues. We just need to get on about it and
recognize that, yes, there are uncertainties; yes, there are
ambiguities, but we must take the first step. That is the only
way we can provide reliable, affordable energy to people and at
the same time achieve our environmental goals in this country.
Thank you.
Senator Voinovich. Thank you.
Our next witness is Dr. Marilyn A. Brown. Dr. Brown is the
Director of Energy Efficiency and Renewable Energy Program at
the Oak Ridge National Laboratory. Thank you, Dr. Brown, for
being here and, again, your patience.
STATEMENT OF MARILYN A. BROWN, DIRECTOR, ENERGY EFFICIENCY AND
RENEWABLE ENERGY PROGRAM, OAK RIDGE NATIONAL LABORATORY
Dr. Brown. Thank you, Mr. Chairman and members of the
committee, for inviting me to talk with you today. I am also
the lead author of a recently published report called
``Scenarios for a Clean Energy Future,'' and I would like to
highlight some of its key findings for you.
That report was co-authored by researchers of five
Department of Energy national laboratories. It was funded by
the Energy Department and the Environmental Protection Agency,
but the views I am expressing today are not necessarily those
of those two funding agencies.
This study is the most comprehensive assessment to date of
technologies and policies that can be deployed to address the
nation's energy challenges. It involves the analysis of
hundreds of technologies and policies. The focus is the United
States and the timeframe is the next 20 years.
The study creates a range of scenarios that characterize
how the future might unfold under different sets of policies.
First, we have the business-as-usual scenario, which is really
a forecast. If policies continue as they are today, what will
happen? The other two major scenarios are defined by policies
that assume that the public and political leaders have a
greater sense of resolve to address the nation's energy needs
and environmental challenges.
So under the business-as-usual forecast, we see a
continuing increase in energy consumption in this country,
about 10 percent more in each of the next two decades, and
there is a concomitant increase in carbon emissions, about
proportionate to energy use.
In the moderate scenario, one of these alternative policies
scenarios, we define an array of market-based policies that
range from a 50 percent increase in energy research to an
expanded set of voluntary programs such as those currently in
operation at DOE and EPA, and a system of tax credits to
promote efficient appliances, vehicles, and non-hydro renewable
electricity.
In the advanced scenario we are a bit more aggressive, and
we define policies that include, for instance, doubling our
current energy R&D budgets and voluntary agreements between
industry and the government to reduce the energy content of our
industrial products, as well as agreements between government
and automakers to achieve various fuel economy goals, renewable
portfolio standards, and, finally, a domestic carbon cap and
trading system.
So we have these three scenarios. I am going to focus
mostly on where we get with the advanced scenario, but just
keep in mind we get between a third and a half as far with the
moderate set of more market-based policies.
So under this advanced scenario, the United States consumes
20 percent less in the year 2020 than it would under the
forecast that assumes today's policies. That savings is enough
to meet the energy needs of all the businesses, consumers, and
industries in the three largest energy-consuming States of the
United States: California, Texas, and Ohio. It will bring us
down essentially to where we are today in terms of our energy
needs.
By 2020, U.S. carbon emissions would be reduced back to
1990 levels. In addition, NOx, SOx, and mercury emissions would
be significantly reduced. We would save consumers money on
their energy bills. In particular, $122 billion in reduced
energy costs in the year 2020 would be achieved. Some but not
all energy prices would rise. Because of the carbon cap and
trade system and other policies, the amount of energy required
to drive our economy would be so much reduced that the total
energy bill would be less in the aggregate than it would be
today.
Oil consumption is cut by 5 million barrels per day. This
results in a reduction of $23 billion in reduced transfer of
wealth from U.S. oil consumers to world oil exporters in the
year 2020.
Finally, electricity demand would be cut 22 percent
relative to the forecasters' growth rate, just a few percentage
more than today's electricity requirements.
What evidence do we have that such technologies are real
possibilities and not just wishful thinking? In my testimony,
if you will take a look at figure 3, we show the progress that
has been made in improving the efficiency of today's
appliances, in particular, the household refrigerator. Back in
1970 those units that, hopefully, you no longer have in your
basement cooling beer, they consumed nearly 2,000 kilowatt
hours per year. Today's new refrigerator consumes approximately
600 kilowatt hours, and that is the result of a major research
effort funded by the Department of Energy, along with Federal
standards that regulate the power consumption of appliances.
I have many other technology opportunity examples in my
testimony. I will just quickly segue to the conclusions. This
Clean Energy Future study identifies a set of policy pathways
that could speed the development and introduction of cost-
effective, efficient, and clean energy technologies into the
marketplace. These technologies are good for business, they are
good for the consumers, and they are good for the economy and
the environment.
To secure these benefits, the nation needs to move forward
on many fronts to develop policies to remove the market
barriers, to conduct the research, to accelerate this
technological progress, and to conduct programs to facilitate
deployment. These, in combination with the political leadership
that the world expects of the United States, are all essential
ingredients of a clean energy future and of a balanced national
energy and environmental policy.
Thank you.
Senator Voinovich. Thank you very much.
Mr. Rogers, in your opinion, what would the Kyoto Treaty,
if implemented, do to your company, the utility industry, and
our nation's economy? You also in your testimony talked about
technology incentives. I am a little bit concerned about the
Federal Government--and Dr. Brown, you talked about incentives
also--I am concerned a little bit about the Federal Government
choosing technology winners and losers. How would you structure
an incentive program that doesn't preclude technologies which
we may not even be aware of today, and then what would the
Federal Government's role be in this?
Mr. Rogers. Let me first address the Kyoto Protocol.
Senator Voinovich, it is pretty clear that, given the
tremendous growth in our economy in the decade of the nineties,
it would be very difficult today during the timeline of the
Kyoto Protocol to reduce CO2 7 percent below the
1990 levels. So, to me, the possibility--there is a very low
probability that we could hit the 1990 level. It is just not
doable given the growth in the economy today and still at the
same time provide affordable, reliable power to fuel the
economy of this country.
That was the Kyoto Protocol. That doesn't say that we
shouldn't step up and make some commitments with respect to
climate change and CO2 going forward. I think the
important point here is, as we debate and as the science
continues to evolve, we need to flatten the curve. That is to
me a no-regrets way to think about this issue going forward. So
it is pretty clear to me the adverse impact it could have on
the cost of power and the economy to get back to 1990, but I
don't think that in any way takes away from trying to flatten
the curve going forward.
With respect to technology, I agree with you, the
government shouldn't be in the business of picking winners and
losers. The government should also create the right environment
for investment. To the extent that we step up and deal from a
policy standpoint with SOx, NOx, mercury, and we deal in a
clear way with CO2, and give some certainty to what
the requirements are going to be, it is the giving certainty
with respect to future reductions that will drive the
development of technology.
There are different kinds of technology. There is
technology with respect to reducing emissions. There is no
silver bullet answer for CO2 today, but that is not
to say that it might not get developed over the next 5 to 10
years.
At the same time, we will encourage technology with new
electric production. We know we have investments in renewables.
Our own company is invested in wind. We have invested in fuel
cells. We have invested in micro-turbines. So there is a number
of new technologies that we in the industry are already
investing in as we look down the road. But it is certainly with
respect to future environmental requirements that will be the
force that drives it. That is the technology.
We, as you know, were successful in the early 1990's with
coal gasification. The reality is, to make that commercial and
economic, you have to have those first steps. So, again,
funding coal gasification is something that happened in the
decade of the 1990's. We need to consider to look at it for new
state-of-the-art technologies and move it forward.
Senator Voinovich. My comment is that we need new
technology and we need to go forward, but one of the things I
keep hearing here in the Senate from some of my colleagues is
it is wind, it is solar, it is water. From a realistic point of
view, if you look at the energy needs of this country, these
are good things and we need to move forward with them, but the
fact is our energy needs are going up, which forces us to look
at: What do we currently have and how do we deal with it, and
how do we provide the energy to this country and at the same
time think about the consumers that are involved? They really
haven't been at the table and, frankly, have not been concerned
lately because they have been kind of on a honeymoon in terms
of energy costs, but now we are starting to see that the
chickens have come home to roost.
These prices are starting to go up. They are starting to
have an impact on--I had hearings in Cleveland with the
Catholic charities and with Lutheran on housing and heating
costs and the impact that it is having on the least of our
brothers and sisters. How do you reconcile dealing with these
environmental needs and the energy needs and also think about
the impact that this is going to have on just the ordinary
citizen, and beyond that, what impact it is going to have on
the economy of the United States of America?
I think somebody made the point earlier that--was it some
25 percent were contributing, but nobody talks about the 25
percent that we are contributing to the economy, providing the
goods and services to people that people need. That is the
problem that we all have to grapple with in terms of moving
forward in this area.
There is no question that the panelists all agree that we
need to have more technology and start looking at these things,
hoping that as we rachet those things up, the demands for some
of these other things will either level off or ultimately come
down, which would be good for everyone.
Mr. Rogers. Senator Voinovich, I thought you made a very
good point. I mean, we can't solve it all with renewables. We
understand that. We have got to continue to use coal. Fifty-one
percent of the electricity in this country is produced by coal.
I would quickly suggest there are some in the coal industry
who think to deal with climate change means the end of coal. I
don't believe that. I believe that we can still address the
issue and we will still use coal. We're at a delicate point now
because you are right, if you look back over the last 10 to 12
years, all across the country new power plants haven't been
built, electric rates have generally decreased in real terms
dramatically, and even for our own company they have decreased
in model terms over the last 10 years as coal prices have come
down.
The fact of the matter is that we are in a different part
of the cycle than we have been in the last 10 years. We are in
a part of the cycle where we have to build new generation to
meet the needs. But the question is: What kind of generation?
What is the right mix of generation? What are our environmental
commitments as we go forward?
I wanted to tell you I cannot--I just bought a $1 billion
worth of gas-fired. I am not convinced that I want to build
more gas-fired or buy more gas-fired generation, given that the
current price of natural gas, which has doubled in the last
year.
So then the answer is, well, how do I meet the demands of
my customers? I would like to build a state-of-the-art coal
plant, but the reality is nobody in this country is going to
turn--while there has been a lot proposed, there has been no
dirt turned on coal plants. Because the uncertainty with
respect to SOx, mercury, and CO2 is great, it makes
it very difficult for anybody to make that bet, given those
uncertainties.
Senator Voinovich. Senator Lieberman? Thank you.
Senator Lieberman. Thanks, Mr. Chairman.
Mr. Rogers, maybe I will pick right up with you because I
appreciate very much what you have said. I take it you believe
that, one way or the other, there are going to be
CO2 reductions required of your industry in the
future?
Mr. Rogers. I agree.
Senator Lieberman. I am going to read from the end of your
statement because I think it is important. This is the written
statement. You said, ``My company seeks comprehensive multi-
emission power plant legislation because we want long-term
clarity and certainty built into our environmental compliance
planning process. I think there is general agreement on both
sides of the aisle that this approach makes sense.
``For me, this line of reasoning dictates the necessity of
including a carbon commitment in the legislation. Without some
sense of what our carbon commitment might be over the next 10,
15, or 20 years, how can I or any other utility CEO think we
have a complete picture of what major requirements our plants
may face.''
So I appreciate that statement, and, of course, I agree
with you on the first part that, one way or the other, there
will be CO2 reductions required. I take it what you
are saying is the obvious, which is that you need a certain
picture of the future to make the kinds of enormous investments
that are required, and to do it in a rational way.
Mr. Rogers. I think it is critical that we address today--I
mean, again, I don't know if ``balance'' is the right word
between our need for affordable energy in this country to fuel
our economy and our environmental goals, because it seems to be
a tradeoff. You either get one or you get the other. I don't
think that--we ought to be smart enough to solve to get both.
Senator Lieberman. Right.
Mr. Rogers. So it is my judgment that if we get clarity on
the environmental policy from Congress, then we can go to work
and invest in the technologies, go to work to hit the deadlines
that are set out there. But we also have to be realistic.
The other thing that I did, Senator Lieberman, is list what
I thought were the criteria in terms of any kind of legislation
on CO2, including reasonable timelines, recognizing
this problem took a long time for us to get to where we are and
it is going to take a long time to work our way out of it. But
it is my firm belief we have to get started now on the problem.
Quite frankly, from my standpoint, if you guys just kind of
put it off for 5 years or for 10 years, and I go build a plant
with a 40-year life, I still have to deal with the issue then,
but I had to be able to plan my way into it.
Senator Lieberman. I really hope just on the basis of
exactly what you are saying we can re-engage the Administration
in this question and see if we can find a way to add carbon to
the three other pollutants that the Administration is committed
to regulating, and what was originally talked about I thought
was a pretty creative, non-command-and-control approach to this
with market-based trading based on the Clean Air Act. I hope we
can find our way to back this.
The final question for you, if I may, just listening to Dr.
Edmonds' testimony about timelines and years by which we have
to really begin to deal with this, how much time generally is
necessary for you to plan for the development of a power plant?
Mr. Rogers. Once you make the decision that you want to
build a power plant, it takes a couple of years to get all the
environmental permits that you need to get it done, the lineup,
the equipment. It then for coal planning could take you between
three and 5 years to build. There are no overnight answers when
you are building base-low plants.
We have been able to satisfy ourselves by building these
simple cycle gas-fired plants that you could put on the ground
pretty quickly, in a year or 18 months, but the requirements
just to build a new coal plant, there is a long lead time
associated with that.
Senator Lieberman. Thanks.
Dr. Lal, I appreciated your testimony. I was actually at
Kyoto when the pact was agreed on, and some of the most intense
discussions were over sequestration. As you probably know, last
year at the Hague again the battle continued because in some
sense I think some of us around the world feel that the United
States' focusing on sequestration is in a sense trying to buy
our way out without reducing our use. I always feel this is all
about the result, and there are various ways to achieve the
result. What you are talking about depends on new technologies,
and what Dr. Brown has talked about, et cetera, et cetera.
I wonder if you have thought about what Federal programs
might be important for implementing the kinds of agricultural
and forest measures that you have described in your testimony.
Dr. Lal. Thank you, Senator. Two points: One, yes, I was at
the Hague meeting, and I was also disappointed that the sinks
were not accepted in the discussion. First of all, the U.S.
probably has lost about 3 to 5 gigatons of carbon compared to
the world soils having lost 66 to 90 gigatons, historic loss.
We think most potential, in fact, even in developing countries,
such as in Africa, South Asia, where the natural resources have
been tremendously depleted, I am very much surprised often that
that part equalized very well. How can we put that carbon back?
Restoring degraded land, set aside land programs. CRP, the
Conservation Reserve Program, has been a success.
Conservation tilling certainly has a potential, but it has
not been followed even in Ohio on a permanent basis. One crop
is grown with conservation tilling and the next crop is not.
While conservation tillings can lead to carbon sequestration,
about 200 to 400 pounds per acre per year, if you plow next
year, it goes back up again. So somehow the policy that the
farmers are encouraged to adopt conservation tilling on a
permanent basis would certainly be a solution.
Reforestation of steep lands, degrading lands, minelands,
in eastern Ohio, we worked with AEP on that program over the
last 50 years, reclaiming mineland, put in about 35 tons of
carbon back into the land over a 50-year period. So any
forestation, in addition to sequestering carbon in the biomass,
trees, obviously puts carbon back into the soil. I might
mention that the residence time of carbon that goes in the soil
is much longer than it is in the trees.
So there are certain programs that we could support.
Conservation tilling is one of them. Putting in cover crops,
perhaps eliminating summer farrow in the western part of the
region that is followed, putting any biomass back on the land.
We have almost a billion tons of biosolids produced which are
now considered as a liability. Ultimately, they could really
prove to be an asset if they are put back on the land properly.
Senator Lieberman. Thanks. I appreciate that answer.
So I think all of you here, in one way or another, for the
most part testify to the fact that this is a significant
problem, but that there are many ways to go at it, including
reduction of current emissions, as Mr. Rogers said; new
technologies, as Dr. Brown said; sequestration, as Dr. Lal
said, and the kind of focus and intensity that other witnesses
have talked about because of the timelines involved here.
So, anyway, I thank you very much for your helpful
testimony. I hope we can go forward and find common ground and
make something happen. Thank you.
Senator Voinovich. Senator Chafee?
Senator Chafee. Well, thank you, Mr. Chairman, once again,
for having the hearing.
Mr. Rogers, welcome and thank you for your patience also.
It is heartening to hear your recognition that something
has to be done, and your company's recognition of that. Could
you comment on your competitors and how they are facing this
issue and the reality that you have that something has to be
done? How are your competitors reacting? How does that affect
your company?
Mr. Rogers. That is a tough question. I will say, let me
just speak for the entire utility industry. If you look back to
the mid-nineties and you look at how the electric utility
industry stepped up on the climate challenge, I remember us
sitting around saying, ``Can we hit a goal of reducing 40
million tons a year on a voluntary program?'' when we stepped
up in Vice President Gore's proposal with respect to the
climate challenge. We all struggled with ourselves: Can we do
it? Well, in 1999 we were able to do 120-plus million through a
voluntary program. There has not been another industry in this
country that has stepped up and dealt with the CO2
issue the way the electric utility industry has over the last
five to 6 years.
Within my industry there are differing points of view with
respect to this, and it is really a function of whether you
generate electricity with nuclear or gas or coal. Everybody's
position is almost a direct result of what their generation
emits happens to be. But I think there are a number of
companies in our industry, all of which are competitors of
mine, who see the world in a similar way, that we have to deal
with this issue; it is the right thing to do because it is a
long-term problem, but we have got to get about doing it.
One of the ways we talk about technology--and Senator
Voinovich asked the question a few moments ago, how do you do
it or pick it? One of the things we could well do as a program
is, as part of the doing it now, you get credit to the extent
you invest in technologies that could either lead to reductions
of emissions of CO2 or new technologies that allow
you to generate electricity in a more environmentally benign
way or with less CO2 emissions than the current
technologies.
So there are a lot of ways, short of the government
stepping up and investing, to stimulate investment going
forward. I thought Dr. Brown, if you read carefully her
testimony, there is a whole list of things. I think there are
companies in our industry that are all--I mean, I am not the
largest investor in wind. Florida Power and Light is the
largest investor. If you look at other companies in the
industry, we are all slowly but quietly positioning and moving
ourselves to deal with this.
Our challenge competitively, I would much rather know the
rules because I am so dependent on coal. It is more valuable to
me than guys who are dependent on nuclear. So, from my vantage
point, the way I see the competition playing out, I need to
know that answer for my shareholders and, most importantly, for
my customers.
Senator Chafee. Thank you, sir.
Senator Voinovich. I visited the Gavin plant last week. The
Gavin plant is one of the largest producers of electricity in
the United States, the coal-fired facility. They put up a $600
million scrub around the facility, and they are just finishing
up with a new $200 million investment to deal with the NOx
problem. They are going to be reducing NOx by about 90 percent.
So there is still a little bit going on.
I posed a question to them about the issue of
CO2, and the reaction was that, first of all, the
technology out there in terms of CO2 and what you do
about it is not there. Their concern was that the cost of going
the next step and dealing with CO2 would be very,
very prohibitive and drive up the cost of their energy. It gets
back to the old issue of, do you put a mandatory cap on what
you can put out? The issue is, what is that cap? I think it was
one of the witnesses earlier who said that he wasn't certain
about a cap because, how do you figure it when you have a lot
of people all over the world who are contributing to this
problem?
The issue is, if you did NOx, SOx, mercury, and came up
with a program that didn't mandatory cap CO2, what
would you recommend in exchange for not having the caps in
terms of your industry dealing with this issue of
CO2?
Mr. Rogers. Senator Voinovich, a way to think about it that
goes to your question and gives you specificity with respect to
what to do going forward is you could have what I would call a
voluntary opt-in program where, once you opt in, you have
certain specific requirements. Every company would have to make
the judgment with respect to what it did with respect to its
competitive position going forward.
The point of the matter is that it allows companies in our
position that want to build coal plants, and are prepared to
make commitments with respect to CO2--because the
issue, and you said it right, I mean there is no technology
today that reduces CO2 that you could put on the
back end of your plant like you can do for SOx or NOx. But you
do have the capability--I mean we have invested in co-
generation for companies like BP, where we are putting 800
megawatts of co-generation in to buy heat and power that is
very efficient in their Texas City plant. We are doing it with
GM, our company is. We are doing it with Eastman Kodak in
upstate New York, where we go in and operate the facilities and
at the same time put in co-generation to buy heat and power
that is significant reductions in CO2.
So my point here is that you might not be able to reduce it
for existing plants, but there is a whole set of other things
that you can do. Most importantly, you can go after the issue
with respect to incremental generation that has to be built in
this country. As Vice President Cheney said in his speech in
Toronto, he said we have to build one new power plant every
week for the next 20 years. Now I am not going to quarrel with
whether that is true or not, but if it is anywhere in that
direction, we are going to have significant incremental
emissions going forward.
What I am suggesting to you, we need to be creative at
coming up with an approach, whether it is a voluntary opt-in
with a mandatory level or a combination carrot stick in terms
of mandatory/voluntary pieces of this, but we need to deal with
the incremental emissions. That is really going to be one of
our greatest challenges.
Senator Voinovich. Dr. Lal, Senator Lieberman talked about
Kyoto. Why were the Europeans not willing to give us credit for
sequestration?
Dr. Lal. There are two reasons, Senator, that I can think
of. When I talked to my colleagues from Norway, from Britain,
from Germany, and other scientists and foresters, they were
certainly agreed to the principles. The main problem is the
land mass available for carbon sequestration in the United
States, Canada, and Australia which does not exist with the
countries in the European community. Therefore, that major one
piece that is natural to the United States, to us here, is not
available there. They do not have the possibility. That is one
part.
Second, I think there is clearly quite a lot of lack of
information on soil carbon sequestration, on forest carbon
sequestration that may be applied to get away from the fossil
fuel combustion. I think it is important to make it clear to
policymakers across the Atlantic that this is, indeed, a win/
win situation for all parties concerned, including natural
resources, a good thing to do either way. I think it would be
understood.
My suggestion to my colleagues here at USDA and other
places was perhaps we need to have a fact sheet which explains
what carbon sequestration, what sink means, what could it do
for the improvement of natural resources universally,
especially in developing countries of Africa, South America,
and Asia, which are now the so-called countries in dissent who
are so much against it. I think it is a lack of understanding
and information. We need to do a bit more public relations.
Senator Voinovich. It is interesting listening to Dr. Lal.
If you go back in your career, one of the bills that I was
responsible for when I was in the State legislature was our
reclamation act, which is a model for the rest of the country.
Today if you travel to Ohio and go over the former strip mines
and see all that land restored, and your testimony today makes
me feel even better about the fact that we did it at the time,
or our farmland preservation program in the State to try to
preserve the farmland and our tree planting program. I must say
that at the time that we were doing these things I didn't fully
appreciate the impact that it would have on the issue of
climate change. So it is a side benefit that we never
anticipated.
Senator Lieberman?
Senator Lieberman. Thanks, Mr. Chairman. First of all, I
want to tell you that unexpectedly I did spend a lot of time in
and over Ohio last fall.
[Laughter.]
I was impressed by the greenery that I saw from land and
air, and I thank you for the role you played in it.
Dr. Brown and Dr. Edmonds, you both talked about the role
technology, new technologies, can play in helping us deal with
this problem. This is, after all, an age of technologies, new
technologies, and it seems like that is the place we should
look for help in solving this and other problems.
Dr. Edmonds, if I read and heard you correctly, you said
that you are concerned about current trends in research and
development of new technologies in these areas, greenhouse gas-
causing areas particularly. I wonder if you could elucidate on
that a bit and what concerns you.
Dr. Edmonds. Thank you, Senator. One of the things that we
learned in this Global Energy Technology Strategy Program--and
I would be happy to make the summary report available to the
staffs.
It took 3 years of research. It was a public/private
collaboration. It included sponsors from both the public sector
and the private sector in the United States and around the
world.
One of the important findings that came out of that work
was that, while a wide array of portfolio was needed to manage
the risks that are associated with climate change, that, in
fact, over the course of the period of time since the 1980's
that in the United States and elsewhere the support for energy
R&D in both the public sector and the private sector has
declined. It has declined in the United States. If you go to
Europe, you will find that it has declined precipitously.
Declines of 70 percent or more are commonplace. This is a cause
for alarm. So that was the first thing that struck me.
Senator Lieberman. The first response to that would be for
us, presumably, to increase investment in research and
development through the Department of Energy and to create
incentives for the private sector to do the same.
Dr. Edmonds. Certainly, it would benefit us all to make
those investments across the wide portfolio of energy R&D, and
it is a wide portfolio. It ranges all the way from the basic
sciences, the biological sciences that are going to be needed
to undergird the development of a competitive commercial
biomass industry, for example, to make the soil carbon not only
the option that it is today, but to enhance it. That is going
to require research.
Also, the second thing that I think was really striking was
that, while we do a pretty good job, I think, in allocating
resources to the problem of addressing energy security, and
therefore, we have a portfolio that includes solar, wind,
geothermal, energy conservation, nuclear, and the performance
of fossil fuels, those need to be continued. All the analysis
we have done is predicated on the successful performance of
those technologies.
In addition, there is a whole suite of technologies which
have particular leverage for the climate problem that are
attractive candidates. They include the soils. They include
captured sequestration of carbon, of fossil fuel use which
would allow us to take advantage of this enormously abundant
and inexpensive resource that is available to us. I think that
is an important element.
Also, the undergirding of research to make a hydrogen
economy eventually possible, and that includes investments in
material sciences, investments in fuel cell technology, and,
finally, the investments in commercial biomass. It could start
as tree planting. One of the things that is really interesting,
if you take this long-term perspective that we have, is that
tree planting always turns into biomass. It turns into biomass
because trees grow, mature, and they stop taking up carbon.
Eventually, you want to harvest them, turn them into energy,
and use that land to grow the trees again.
Senator Lieberman. Thanks. That was an excellent answer.
Dr. Brown, let me ask you to become involved here and
generally what the Federal Government can do to stimulate some
of the new technologies that your report describes very well,
and if you have any response to the question Mr. Rogers has
posed in passing which is, what can we do to help them put
something on the other end of that plant to reduce carbon
emissions?
Dr. Brown. Well, I guess I would like to underscore that,
while we do need to invest in energy R&D, both basic and
applied, to be able to continue to grow this portfolio of
options, there are a lot of options that are cost-effective
today, and every year there are more and more of them. In
industrial facilities, for instance, the utilities that are
used, the steam, the motors and drive systems, we have shown
time and time again that you can go into those plants and you
can conduct an audit and recommend that, for modest
investments, there are opportunities to save a lot of energy
with a one-, at most one-and-a-half, year payback.
So I would like to suggest this: While it does take a long
time for us to grow our energy supply options, probably more so
for the central power plants, a little less so for the co-
generation and distributed power, that it hardly takes us any
time to make the energy that we are using go further. So I
would just like to reinforce that there is a whole suite of
programs in place. They are in the Administration's proposed
budget proposed to be significantly cut. I would argue that
that is really cutting an energy supply resource because the
savings can allow our energy supplies to go further.
So it is not just the R&D program, which I really think is
underinvested in. These are public/private partnerships where
by sending a signal, a commitment, by the Federal Government,
we work with our private companies and work together to develop
solutions, there are also important deployment activities where
we need to develop the software assessment, tools, the
validated performance data to be able to show that
opportunities that are cost-effective do exist.
Senator Lieberman. Thanks. That was an excellent and
hopeful answer. Thanks to the panel. They are very helpful to
us.
Senator Voinovich. The challenge I think is that there is a
smorgasbord of things that we can give consideration to. We
have a major problem in this country with something called New
Source Review that came about as a result of a couple of years
ago a reinterpretation of regulation under the Air Act that
basically said that some of the things that utilities have done
over a period of years required permits, and they didn't get
them.
One of the things we have to really grapple with now is to
clear the air on that because there are just a lot of folks
around that are not doing things that could make them more
efficient, do a better job, because they are in limbo in terms
of what it is that they can or cannot do. Some companies like
Mr. Rogers' have paid a fine and agreed to do some things, and
so forth. I think that is one area that has to be looked at.
Then the next question is you have ``X'' number of dollars
available and the government is involved; do you provide it in
reductions, in credits given to companies to buy energy-
efficient machinery? For example, in Cincinnati, Ohio at
Cincinnati Milicrom they have two types of injection molding
machines. One of them burns an enormous amount of energy. The
other one burns very little energy, but it is very, very
expensive. They are advocating that we should reward people for
buying the machinery that uses the very little amount of
energy. So that is one investment you could make.
Another would be some new technology that would help get
into a new area of producing energy--biomass or whatever it
would be, fuel cells--and how you allocate these resources in a
way that makes the most sense overall. There is no question
that we have a real challenge on our hands.
I want to thank the panelists. I thought that you have
different points of view, but I think there is a coming
together that it is time in this country that we look at our
energy needs, our environmental needs, and try to the best of
our ability harmonize those so that we come up with some
national energy policy that makes sense and takes into
consideration the fact that the consumers are also in the room,
and for the past number of years they haven't been there. They
are real concerned about what we are doing in this area.
I am sure that we will be calling upon some of you to help
us grapple with this problem. I believe that if we put each
other's shoes on, we can come up with something that is going
to really be meaningful for our country. I really believe if we
don't come up with this energy policy that is sensible, we are
in deep trouble in terms of our competitive position in the
world marketplace, and we should be leaders.
Maybe we ought to go back and try to rewrite Kyoto and come
back and say this thing started out maybe pie in the sky and
wasn't realistic. Let's get real and come back with some stuff
that we are willing to do and you are going to have to be
willing to do it. It may not be as ambitious as what some would
like it to be, but it does move us along in a way that makes
sense.
Thank you very much for coming today.
[Whereupon, at 12:28 p.m., the committee was adjourned, to
reconvene at the call of the chair.]
[Additional statements submitted for the record follow:]
Statement of Hon. Harry Reid, U.S. Senator from the State of Nevada
I'm glad we're having this hearing, Mr. Chairman. I hope it leads
to action soon.
For every year that goes by without Congress or the President
making a serious effort to reduce greenhouse gases, the odds increase
that my grandchildren are going to inherit a warmer and more chaotic
world.
A recent study by scientists at the Massachusetts Institute of
Technology calculates that there is a one in four chance that the world
will warm between 5 and 7 degrees Fahrenheit in the next 100 years. I
don't like those odds at all. Not when we're talking about the future.
I hope we're going to spend more time on this complicated subject than
the committee has to date. The committee hasn't looked at this matter
directly for over 2 years.
Our committee has a responsibility and the jurisdiction to develop
legislation that reduces manmade emissions that cause or have the
potential to cause harm to the environment and public health. It is far
past time for this committee to do its duty and produce some proposals.
I hope we can work together to develop bipartisan legislation to
reduce emissions of greenhouse gases. I understand that my colleagues
have been put in a difficult position by the President's decision to
reverse his campaign promise on reductions of carbon dioxide from power
plants.
But, it's time for leadership and progress. I would like this
committee to be the laboratory of new bipartisan initiatives for
cutting greenhouse gases. We will just have to hope that the
Administration is equally interested in such progress.
There has been a lot of talk about voluntary versus mandatory
requirements to reduce these gases. My colleagues know that the nation
has a Senate-ratified commitment to reduce emissions to 1990 levels.
That was to have been accomplished through voluntary measures.
Unfortunately, we have failed miserably using voluntary means. We're
now about 13 percent above our target.
So, what we need is a comprehensive approach that achieves real net
reductions by a time certain. I don't know of any other way to get the
ball rolling.
Carbon dioxide and other greenhouse gas emissions must come down.
The Senate has already made that policy decision. Scientists at the
IPCC (International Panel on Climate Change) and elsewhere can help us
how to determine which policy options are most useful and when they
should be implemented. But, it's time for opponents of that decision to
work with us on real world reduction strategies.
It's now our job to figure out how to accomplish that goal in the
most effective and expeditious way. I'm glad we have some witnesses
here on the second panel to tell us about policies we might adopt to
move in the right direction.
Unfortunately, from what little I've heard about the
Administration's energy policy plan, it doesn't sound as if it moves in
the right direction for climate purposes or for protecting the
environment.
We need a plan that reduces harmful emissions, not increases them.
Press accounts describing the Administration plan say it would simply
result in burning more fossil fuels. That's short-sighted and
irresponsible. It has little or no chance of getting wide, bipartisan
support.
Emphasizing increased and inefficient fossil fuel use--when we know
that carbon concentrations in the atmosphere are higher than they've
been in 400,000 years--is a little bit like handing the Emperor Nero a
fiddle to play while Rome burns.
A strong and supportable energy plan would first emphasize
renewable energy, energy efficiency and conservation. Then, once all
the economically viable energy is wrung out of those resources, we can
turn to cleaner and safer uses of coal and other traditional fuels.
As my colleagues may have heard me say before, Nevada has a wealth
of clean and climate-friendly renewable resources, particularly
geothermal, wind and solar. We are more than willing to share our
abundance with the nation. But, I can't support a plan that relegates
these sources to obscurity. It wouldn't make economic or environmental
sense for my State.
Finally, Mr. Chairman, I want to be constructive and I want
results. But, I'm not interested in amending the Clean Air Act or any
other environmental statutes as part of an energy plan that doesn't
make tangible cuts in greenhouse gases.
__________
Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
Thank you, Mr. Chairman, for calling this timely hearing on such an
important issue. I would also like to thank our distinguished panel of
experts for testifying today.
There was a time when I would have found it hard to believe that
humans could do anything that would affect the weather. It was just
something we had to learn to live with. But now, I accept the view of
most scientists that our everyday activities are slowly changing the
world's climate. In fact, there is evidence that a majority of the
global warming of the past 50 years is attributable to human
activities. While the effects may seem barely perceptible at first,
they will grow over time and result in major changes that I have come
to believe will alter our children's future.
If left unchecked, many believe the growth in these emissions could
have potentially serious effects. Rising global temperatures are
expected to raise sea level, change precipitation and other local
climate conditions. Changes in regional climates could alter forests,
crop yields and water supplies. Such shifting climate patterns and more
frequent violent weather, such as floods and droughts, could mean more
trouble for Montana's and the nation's farming and ranching families
and communities.
I believe that we need to take action to address the consequences
of climate change. Kyoto was an important first step. Although most
agree that it would have been impossible for the United States and
other developed nations to meet the emissions targets contained in the
Kyoto Protocol, I don't think that abandoning the entire Protocol was
the best approach. We can still work toward implementing some of the
market-based mechanisms that were adopted in principle and Kyoto. We
can still work to engage the entire world in trying to reach a workable
solution. In reality, we have to engage the entire world, including
developing nations.
The simple fact is, developing countries, such as China, India and
Brazil, emit about 40 percent of the world's greenhouse gases. We can't
reach a solution by addressing only 60 percent of the problem. Unless
all countries participate, we risk giving our competitors an unfair
advantage. The participation of developing countries is absolutely
necessary.
Whether we like it or not, the world still looks to the United
States to take the lead on this and many other important global issues.
We can continue to advance the science of climate change and to pioneer
research and development into advanced technologies that improve the
efficiency of our power plants, automobiles and other greenhouse gas
emitting facilities, technologies that we can export to the rest of the
world. The worst thing we could do is abandon the issue entirely.
I look forward to hearing the expert testimony of today's
witnesses. I and my colleagues certainly appreciate your insight and
knowledge on this issue.
__________
Statement of Hon. Jon S. Corzine, U.S. Senator from the State of New
Jersey
Thank you, Mr. Chairman. I want to commend you for holding this
hearing on what I believe to be the most important environmental issue
that we face--climate change. Mr. Chairman, this issue is enormously
complex in every aspect. Scientifically. Economically. Politically.
But complexity is no excuse for inattention or inaction. Because
the health and viability of the global ecosystems upon which we all
depend are at stake.
I won't dwell here on the range and scope of potential climate
change impacts, which are well documented elsewhere. Suffice it to say
that no other issue that will come before this committee demands more
serious attention. So I look forward to today's testimony on science
and mitigation options, and I hope that this hearing is the beginning
of a sustained effort. Because the time to act is now.
The Intergovernmental Panel on Climate Change recently released its
Third Assessment Report, and the science is increasingly clear and
alarming. We know that human activities, primarily fossil fuel
combustion, have raised the atmospheric concentration of carbon dioxide
to the highest levels in the last 420,000 years. We know that the
planet is warming, and that the balance of the scientific evidence
suggests that most of the recent warming can be attributed to increased
atmospheric greenhouse gas levels. We know that without concerted
action by the U.S. and other countries, greenhouse gases will continue
to increase. Finally, we know that climate models have improved, and
that these models predict warming under all scenarios that have been
considered. Even the smallest warming predicted by current models--2.5
degrees Fahrenheit over the next century--would represent the greatest
rate of increase in global mean surface temperature in the last 10,000
years.
Mr. Chairman, when I consider these findings, I conclude that we
need to begin now to mitigate climate change. We can and should improve
the science of climate change. But a call for more research should not
obscure or minimize what we already know.
Mr. Chairman, the Senate--and the Environment Committee in
particular--needs to provide leadership on this issue. President Bush
has pulled back from the Kyoto protocol, leaving a policy vacuum in his
wake. He has pledged to craft an alternative to Kyoto, but in the
meantime, he will soon issue an energy policy proposal that, by all
reports, will not address climate change in a meaningful way. If this
is true--and I sincerely hope that it is not--then we can only conclude
that President Bush is not serious about addressing climate change.
So the task of dealing with climate change would appear to fall to
us. Mr. Chairman, current and future generations are depending on us.
To give you one example, the people of New Jersey are depending on me
to protect their treasured Atlantic Ocean beaches. Like all coastal
areas, these beaches are threatened by projected changes in sea levels
due to climate change. I am concerned about this impact. I am concerned
about climate change impacts across New Jersey, the country and the
globe.
I look forward to hearing from our witnesses. I hope that they can
help us to identify sensible mitigation policy options that the
committee can continue to work on. Thank you.
__________
Statement of Richard S. Lindzen, Alfred P. Sloan Professor of
Meteorology, Massachusetts Institute of Technology
I wish to thank Senator Voinovich, Senator Smith and the
Environment and Public Works Committee for the opportunity to clarify
the nature of consensus and skepticism in the Climate Debate. I have
been involved in climate and climate related research for over 30 years
during which time I have held professorships at the University of
Chicago, Harvard University and MIT. I am a member of the National
Academy of Sciences, and the author or coauthor of over 200 papers and
books. I have also been a participant in the proceedings of the IPCC
(the United Nation's Intergovernmental Panel on Climate Change). The
questions I wish to address are the following: What can we agree on and
what are the implications of this agreement? What are the critical
areas of disagreement? What is the origin of popular perceptions? I
hope it will become clear that the designation, ``skeptic,'' simply
confuses an issue where popular perceptions are based in significant
measure on misuse of language as well as misunderstanding of science.
Indeed, the identification of some scientists as ``skeptics'' permits
others to appear ``mainstream'' while denying views held by the so-
called ``skeptics'' even when these views represent the predominant
views of the field.
Climate change is a complex issue where simplification tends to
lead to confusion, and where understanding requires thought and effort.
Judging from treatments of this issue in the press, the public has
difficulty dealing with numerical magnitudes and focuses instead on
signs (increasing v. decreasing); science places crucial emphasis on
both signs and magnitudes. To quote the great 19th Century English
scientist, Lord Kelvin, ``When you can measure what you are speaking
about and express it in numbers, you know something about it; but when
you cannot measure it, when you cannot express it in numbers, your
knowledge is of a meager and unsatisfactory kind.''
As it turns out, much of what informed scientists agree upon is
barely quantitative at all:
that global mean temperature has probably increased over
the past century,
that CO2 in the atmosphere has increased over
the same period,
that the added CO2 is more likely to have
caused global mean temperature to increase rather than decrease, and
that man, like the butterfly, has some impact on climate.
Such statements have little relevance to policy, unless
quantification shows significance.
The media and advocacy groups have, however, taken this agreement
to mean that the same scientists must also agree that global warming
``will lead to rising sea waters, droughts and agriculture disasters in
the future if unchecked'' (CNN). According to Deb Callahan, president
of the League of Conservation Voters, ``Science clearly shows that we
are experiencing devastating impacts because of carbon dioxide
pollution.'' (Carbon dioxide, as a ``pollutant'' is rather singular in
that it is a natural product of respiration, non-toxic, and essential
for life.) The accompanying cartoon suggests implications for severe
weather, the ecosystem, and presumably plague, floods and droughts (as
well as the profound politicization of the issue). Scientists who do
not agree with the catastrophe scenarios are assumed to disagree with
the basic statements. This is not only untrue, but absurdly stupid.
Indeed, the whole issue of consensus and skeptics is a bit of a red
herring. If, as the news media regularly report, global warming is the
increase in temperature caused by man's emissions of CO2
that will give rise to rising sea levels, floods, droughts, weather
extremes of all sorts, plagues, species elimination, and so on, then it
is safe to say that global warming consists in so many aspects, that
widespread agreement on all of them would be suspect ab initio. If it
truly existed, it would be evidence of a thoroughly debased field. In
truth, neither the full text of the IPCC documents nor even the
summaries claim any such agreement. Those who insist that the science
is settled should be required to state exactly what science they feel
is settled. In all likelihood, it will turn out to be something trivial
and without policy implications except to those who bizarrely subscribe
to the so-called precautionary principle a matter I will return to
later. (Ian Bowles, former senior science advisor on environmental
issues at the NSC, published such a remark on 22 April in the Boston
Globe: ``the basic link between carbon emissions, accumulation of
greenhouse gases in the atmosphere, and the phenomenon of climate
change is not seriously disputed in the scientific community.'' I think
it is fair to say that statements concerning matters of such complexity
that are not disputed are also likely to be lacking in policy relevant
content. However, some policymakers apparently think otherwise in a
cultural split that may be worthy of the late C.P. Snow's attention.)
The thought that there might be a central question, whose
resolution would settle matters, is, of course, inviting, and there
might, in fact, be some basis for optimism. While determining whether
temperature has increased or not is not such a question, the
determination of climate sensitivity might be. Rather little serious
attention has been given to this matter (though I will mention some in
the course of this testimony). However, even ignoring this central
question, there actually is much that can be learned simply by sticking
to matters where there is widespread agreement. For example, there is
widespread agreement:
that CO2 levels have increased from about
280ppm to 360ppm over the past century, and, that combined with
increases in other greenhouse gases, this brings us about half way to
the radiative forcing associated with a doubling of CO2
without any evidence of enhanced human misery.
that the increase in global mean temperature over the
past century is about 1F which is smaller than the normal interannual
variability for smaller regions like North America and Europe, and
comparable to the interannual variability for the globe. Which is to
say that temperature is always changing, which is why it has proven so
difficult to demonstrate human agency.
that doubling CO2 alone will only lead to
about a 2F increase in global mean temperature. Predictions of greater
warming due to doubling CO2 are based on positive feedbacks
from poorly handled water vapor and clouds (the atmosphere's main
greenhouse substances) in current computer models. Such positive
feedbacks have neither empirical nor theoretical foundations. Their
existence, however, suggests a poorly designed earth which responds to
perturbations by making things worse.
that the most important energy source for extratropical
storms is the temperature difference between the tropics and the poles
which is predicted by computer models to decrease with global warming.
This also implies reduced temperature variation associated with weather
since such variations result from air moving from one latitude to
another. Consistent with this, even the IPCC Policymakers Summary notes
that no significant trends have been identified in tropical or
extratropical storm intensity and frequency. Nor have trends been found
in tornadoes, hail events or thunder days.
that warming is likely to be concentrated in winters and
at night. This is an empirical result based on data from the past
century. It represents what is on the whole a beneficial pattern.
that temperature increases observed thus far are less
than what models have suggested should have occurred even if they were
totally due to increasing greenhouse emissions. The invocation of very
uncertain (and unmeasured) aerosol effects is frequently used to
disguise this. Such an invocation makes it impossible to check models.
Rather, one is reduced to the claim that it is possible that models are
correct.
that claims that man has contributed any of the observed
warming (i.e., attribution) are based on the assumption that models
correctly predict natural variability. Such claims, therefore, do not
constitute independent verifications of models. Note that natural
variability does not require any external forcing natural or
anthropogenic.
that large computer climate models are unable to even
simulate major features of past climate such as the 100 thousand year
cycles of ice ages that have dominated climate for the past 700
thousand years, and the very warm climates of the Miocene, Eocene, and
Cretaceous. Neither do they do well at accounting for shorter period
and less dramatic phenomena like El Ninos, quasi-biennial oscillations,
or intraseasonal oscillations all of which are well documented in the
data.
that major past climate changes were either uncorrelated
with changes in CO2 or were characterized by temperature
changes which preceded changes in CO2 by 100's to 1000's of
years.
that increases in temperature on the order of 1F are not
catastrophic and may be beneficial.
that Kyoto, fully implemented, will have little
detectable impact on climate regardless of what one expects for
warming. This is partly due to the fact that Kyoto will apply only to
developed nations. However, if one expected large global warming, even
the extension of Kyoto to developing nations would still leave one with
large warming.
None of the above points to catastrophic consequences from
increasing CO2. Most point toward, and all are consistent
with minimal impacts. Moreover, the last item provides a definitive
disconnect between Kyoto and science. Should a catastrophic scenario
prove correct, Kyoto will not prevent it. If we view Kyoto as an
insurance policy, it is a policy where the premium appears to exceed
the potential damages, and where the coverage extends to only a small
fraction of the potential damages. Does anyone really want this? I
suspect not. Given the rejection of the extensive U.S. concessions at
the Hague, it would appear that the Europeans do not want the treaty,
but would prefer that the United States take the blame for ending the
foolishness. As a practical matter, a large part of the response to any
climate change, natural or anthropogenic, will be adaptation, and that
adaptation is best served by wealth.
Our own research suggests the presence of a major negative feedback
involving clouds and water vapor, where models have completely failed
to simulate observations (to the point of getting the sign wrong for
crucial dependences). If we are right, then models are greatly
exaggerating sensitivity to increasing CO2. Even if we are
not right (which is always possible in science; for example, IPCC
estimates of warming trends for the past 20 years were almost
immediately acknowledged to be wrong so too were claims for arctic ice
thinning ), the failure of models to simulate observations makes it
even less likely that models are a reliable tool for predicting
climate.
This brings one to what is probably the major point of
disagreement:
Can one trust computer climate models to correctly predict the
response to increasing CO2?
As the accompanying cartoon suggests, our experience with weather
forecasts is not particularly encouraging though it may be argued that
the prediction of gross climate changes is not as demanding as
predicting the detailed weather. Even here, the situation is nuanced.
From the perspective of the precautionary principle, it suffices to
believe that the existence of a computer prediction of an adverse
situation means that such an outcome is possible rather than correct in
order to take ``action.'' The burden of proof has shifted to proving
that the computer prediction is wrong. Such an approach effectively
deprives society of science's capacity to solve problems and answer
questions. Unfortunately, the incentive structure in today's scientific
enterprise contributes to this impasse. Scientists associate public
recognition of the relevance of their subject with support, and
relevance has come to be identified with alarming the public. It is
only human for scientists to wish for support and recognition, and the
broad agreement among scientists that climate change is a serious issue
must be viewed from this human perspective. Indeed, public perceptions
have significantly influenced the science itself. Meteorologists,
oceanographers, hydrologists and others at MIT have all been
redesignated climate scientists indicating the degree to which
scientists have hitched their futures to this issue.
That said, it has become common to deal with the science by
referring to the IPCC ``scientific consensus.'' Claiming the agreement
of thousands of scientists is certainly easier than trying to
understand the issue or to respond to scientific questions; it also
effectively intimidates most citizens. However, the invocation of the
IPCC is more a mantra than a proper reflection on that flawed document.
The following points should be kept in mind. (Note that almost all
reading and coverage of the IPCC is restricted to the highly publicized
Summaries for Policymakers which are written by representatives from
governments, NGO's and business; the full reports, written by
participating scientists, are largely ignored.) In what follows, I will
largely restrict myself to the report of Working Group I (on the
science). Working Groups II and III dealt with impacts and responses.
The media reports rarely reflect what is actually in the
Summary. The media generally replace the IPCC range of ``possible''
temperature increases with ``as much as'' the maximum despite the
highly unlikely nature of the maximum. The range, itself, assumes,
unjustifiably, that at least some of the computer models must be
correct. However, there is evidence that even the bottom of the range
is an overestimate. (A recent study at MIT found that the likelihood of
actual change being smaller than the IPCC lower bound was 17 times more
likely than that the upper range would even be reached, and even this
study assumed natural variability to be what computer models predicted,
thus exaggerating the role of anthropogenic forcing.) The media report
storminess as a consequence despite the admission in the summary of no
such observed relation. To be sure, the summary still claims that such
a relation may emerge despite the fact that the underlying physics
suggests the opposite. The media's emphasis on increased storminess,
rising sea levels, etc. is based not on any science, but rather on the
fact that such features have more graphic impact than the rather small
increases in temperature. People who have experienced day and night and
winter and summer have experienced far greater changes in temperature,
and retirement to the sun belt rather than the Northwest Territory
represents an overt preference for warmth.
The summary does not reflect the full document (which
still has not been released although it was basically completed last
August). For example, I worked on Chapter 7, Physical Processes. This
chapter dealt with the nature of the basic processes which determine
the response of climate, and found numerous problems with model
treatments especially with clouds and water vapor. The chapter was
summarized with the following sentence: ``Understanding of climate
processes and their incorporation in climate models have improved,
including water vapor, sea-ice dynamics, and ocean heat transport.''
The vast majority of participants played no role in
preparing the summary, and were not asked for agreement.
The draft of the Policymakers Summary was significantly
modified at Shanghai. The IPCC, in response to the fact that the
Policymakers Summary was not prepared by participating scientists,
claimed that the draft of the Summary was prepared by a (selected)
subset of the 14 coordinating lead authors. However, the final version
of the summary differed significantly from the draft. For example the
draft concluded the following concerning attribution:
From the body of evidence since IPCC (1996), we conclude that there
has been a discernible human influence on global climate. Studies are
beginning to separate the contributions to observed climate change
attributable to individual external influences, both anthropogenic and
natural. This work suggests that anthropogenic greenhouse gases are a
substantial contributor to the observed warming, especially over the
past 30 years. However, the accuracy of these estimates continues to be
limited by uncertainties in estimates of internal variability, natural
and anthropogenic forcing, and the climate response to external
forcing.
The version that emerged from Shanghai concludes instead:
In the light of new evidence and taking into account the remaining
uncertainties, most of the observed warming over the last 50 years is
likely to have been due to the increase in greenhouse gas
concentrations.
In point of fact, there may not have been any significant warming
in the last 60 years. Moreover, such warming as may have occurred was
associated with jumps that are inconsistent with greenhouse warming.
The preparation of the report, itself, was subject to
pressure. There were usually several people working on every few pages.
Naturally there were disagreements, but these were usually hammered out
in a civilized manner. However, throughout the drafting sessions, IPCC
``coordinators'' would go around insisting that criticism of models be
toned down, and that ``motherhood'' statements be inserted to the
effect that models might still be correct despite the cited faults.
Refusals were occasionally met with ad hominem attacks. I personally
witnessed coauthors forced to assert their ``green'' credentials in
defense of their statements.
None of the above should be surprising. The IPCC was created to
support the negotiations concerning CO2 emission reductions.
Although the press frequently refers to the hundreds and even thousands
of participants as the world's leading climate scientists, such a claim
is misleading on several grounds. First, climate science, itself, has
traditionally been a scientific backwater. There is little question
that the best science students traditionally went into physics, math
and, more recently, computer science. Thus, speaking of ``thousands''
of the world's leading climate scientists is not especially meaningful.
Even within climate science, most of the top researchers (at least in
the US) avoid the IPCC because it is extremely time consuming and non-
productive. Somewhat ashamedly I must admit to being the only active
participant in my department. None of this matters a great deal to the
IPCC. As a U.N. activity, it is far more important to have participants
from a hundred countries many of which have almost no active efforts in
climate research. For most of these participants, involvement with the
IPCC gains them prestige beyond what would normally be available, and
these, not surprisingly, are likely to be particularly supportive of
the IPCC. Finally, judging from the Citation Index, the leaders of the
IPCC process like Sir John Houghton, Dr. Robert Watson, and Prof. Bert
Bolin have never been major contributors to basic climate research.
They are, however, enthusiasts for the negotiating process without
which there would be no IPCC, which is to say that the IPCC represents
an interest in its own right. Of course, this hardly distinguishes the
IPCC from other organizations.
The question of where do we go from here is an obvious and
important one. From my provincial perspective, an important priority
should be given to figuring out how to support and encourage science
(and basic science underlying climate in particular) while removing
incentives to promote alarmism. The benefits of leaving future
generations a better understanding of nature would far outweigh the
benefits (if any) of ill thought out attempts to regulate nature in the
absence of such understanding. With respect to any policy, the advice
given in the 1992 report of the NRC, Policy Implications of Greenhouse
Warming, remains relevant: carry out only those actions which can be
justified independently of any putative anthropogenic global warming.
Here, I would urge that even such actions not be identified with
climate unless they can be shown to significantly impact the radiative
forcing of climate. On neither ground independent justification or
climatic relevance is Kyoto appropriate.
______
Responses by Dr. Richard S. Lindzen to Additional Questions from
Senator Reid
Question 1. Have you received funds for climate related research
from non-governmental sources? If so, please generally identify those
sources.
Response. I already answered this question in the hearing. The
answer remains ``no.'' That said, I have no objections in principle to
such support. However, private sources have demonstrably favored
scientists supportive of global warming.
Question 2. ``Broadly unsuccessful and unreliable'' are the terms
that you used to describe the climate models employed by your
colleagues at MIT. Why would they bother using such flawed instruments?
Response. I cannot speak for my colleagues, but several answers are
commonly offered:
a. They are using the models, not to make forecasts, but to see what
possibilities exist for interactions.
b. The models, themselves, are considered ``works in progress.''
Question 3. Dr. Trenberth stated that your assertions and
assumptions that warming is not happening at the rate generally
accepted by a majority of the scientific community also rely on models.
Could you respond, including an indication of which models you rely
upon and the uncertainty associated with those models?
Response. What I believe Dr. Trenberth was referring to was not any
specific model, but rather a model input. I was speaking of the
response of models to the known increase in anthropogenic greenhouse
gases. ALL current large scale models show much more warming than has
been observed. They get around this by putting arbitrary amounts of
sulfate aerosol into their models so as to cancel the effect of
greenhouse gases. Thus, models with widely varying responses to
greenhouse gases can all be made to roughly agree with the surface
record of the past century.
Question 4. You quoted from an old National Research Council (1992)
and maintain that it remains relevant. Policymakers should``. . . carry
out only those actions which can be justified independently of any
putative anthropogenic global warming.'' Since you acquire that opinion
by association, what would constitute satisfactory independent
justification?
Response. I am not sure what you are talking about. All the
recommendation was meant to say was that the degree of uncertainty did
not warrant actions that were not worth pursuing in their own right.
The degree of uncertainty has not changed appreciably since the earlier
NRC report.
Question 5. Can the climate system tolerate infinite anthropogenic
increases in carbon dioxide and other greenhouse gases without change?
If the answer is no, what and when is the breakpoint that must be
avoided to prevent significant harm to private property, the
environment and public health?
If your answer is that it is not possible to know that yet, what
information would be necessary to determine that anthropogenic
emissions should be reduced and, given the residence time of these
gases in the atmosphere, how far in advance must we have that
information to take policy action to avert significant harm to private
property, the environment and public health?
Response. There is no physical possibility of infinite
anthropogenic increase in carbon dioxide and other greenhouse gases. As
noted in the recent NRC report to the White House, the earth remained
thriving during earlier periods with far more carbon dioxide than have
been forecast in any current scenario. However, levels about 3-4 times
those at present would likely create sufficient changes as to require a
measure of adaptation beyond what normal climate changes call for. We
have, in my opinion, at least a century to monitor the system in order
to see if actions will be needed to preclude such a possibility. This
will leave, in my opinion, adequate time to take suitable measures
especially since we can reasonably assume that we will have greater
resources at that time to do so. Should I prove wrong, evidence over
the next 30 years will show this. A program of measures concentrating
on the most short lived substances should then provide mitigation while
longer term measures of mitigation and adaptation are prepared. Rushing
at present seems likely to incur the very harm to the environment,
private property and public health that you wish to avoid. After all,
the warming over the past century has been accompanied with great
increases in wealth, health, and general well being. It would,
therefore, be difficult to justify great expense to avoid that measure
of warming, and warming over the next century may, in fact, be even
smaller quite apart from any actions we take. Indeed, one matter on
which there is widespread scientific agreement, is that the measures
agreed to by diplomats at Kyoto would have no discernible impact on
climate regardless of what views one may hold on the matter.
__________
Statement of Dr. Kevin E. Trenberth, National Center for Atmospheric
Research
Introduction
My name is Kevin Trenberth. I am the Head of the Climate Analysis
Section at NCAR, the National Center for Atmospheric Research. I am
especially interested in global-scale climate dynamics; the
observations, processes and modeling of climate changes from
interannual to centennial time scales. I have served on many national
and international committees including National Research Council/
National Academy of Science committees, panels and/or boards. I served
on the National Research Council Panel on Reconciling observations of
global temperature change, whose report was published in January 2000.
I co-chaired the international CLIVAR Scientific Steering Group of the
World Climate Research Programme (WCRP) from 1996 to 1999 and I remain
a member of that group as well as the Joint Scientific Committee that
oversees the WCRP as a whole. CLIVAR is short for Climate Variability
and Predictability and it deals with variability from El Nino to global
warming. I have been involved in the global warming debate and I have
been extensively involved in the Intergovernmental Panel on Climate
Change (IPCC) scientific assessment activity as a lead author of
individual chapters, the Technical Summary, and Summary for Policy
Makers (SPM) of Working Group (WG) I.
The IPCC is a body of scientists from around the world convened by
the United Nations jointly under the United Nations Environment
Programme (UNEP) and the World Meteorological Organization (WMO) and
initiated in 1988. Its mandate is to provide policymakers with an
objective assessment of the scientific and technical information
available about climate change, its environmental and socio-economic
impacts, and possible response options. The IPCC reports on the science
of global climate change and the effects of human activities on climate
in particular. Major assessments were made in 1990, 1995 and now 2001.
Each new IPCC report reviews all the published literature over the
previous 5 years or so, and assesses the state of knowledge, while
trying to reconcile disparate claims and resolve discrepancies, and
document uncertainties.
WG I deals with how the climate has changed and the possible
causes. It considers how the climate system responds to various agents
of change and our ability to model the processes involved as well as
the performance of the whole system. It further seeks to attribute
recent changes to the possible various causes, including the human
influences, and thus it goes on to make projections for the future. WG
II deals with impacts of climate change and options for adaptation to
such changes, and WG III deals with options for mitigating and slowing
the climate change, including possible policy options. Each WG is made
up of participants from the United Nations countries, and for the 2001
assessment, WG I consisted of 123 lead authors, 516 contributors, 21
review editors, and over 700 reviewers. The IPCC process is very open.
Two major reviews were carried out in producing the report, and
skeptics can and do participate, some as authors. The strength is that
the result is a consensus report. The SPM was approved line by line by
governments in a major meeting. The rationale is that the scientists
determine what can be said, but the governments determine how it can
best be said. Negotiations occur over wording to ensure accuracy,
balance, clarity of message, and relevance to understanding and policy.
The latest report (IPCC 2001) reaffirms in much stronger language that
the climate is changing in ways that cannot be accounted for by natural
variability and that ``global warming'' is happening. A summary and
commentary is given in Trenberth (2001).
Observed Climate Change Analyses of observations of surface
temperature show that there has been a global mean temperature increase
of about 1.2 F over the past one hundred years. The calendar year 1998
is the warmest on record, exceeding the previous record held by 1997.
Preliminary annual global mean temperatures in the latest year, 2000,
were about the same as for 1999. The 1990's are the warmest decade on
record. Synthesis of information from tree rings, corals, ice cores and
historical data further indicates that these years are the warmest in
at least the past 1000 years for the Northern Hemisphere, which is as
far back as annual-resolution hemispheric estimates of temperatures can
be made. The melting of glaciers over most of the world and rising sea
levels confirm the reality of the global temperature increases. The
warming is observed over land and ocean, and over both hemispheres. It
is not an urban heat island effect. Further supporting evidence comes
from the substantial retreat and thinning of Arctic sea ice, increased
temperatures throughout the upper layers of the global oceans,
decreases in Northern Hemisphere snow cover and in the freezing season
of lakes and rivers.
There is good evidence for decadal changes in the atmospheric
circulation and for ocean changes. These mean that increases in
temperature are not uniform or monotonic; some places warm more than
the average and some places cool. A good example is the past winter,
where it was cold and temperatures were well below average in most of
the lower 48 States, but Alaska had its warmest winter on record,
averaging 9 F above normal. Similarly it was very warm throughout
Europe.
Changes in precipitation and other components of the hydrological
cycle vary considerably geographically. It is likely that precipitation
has increased by perhaps 1 percent/decade in the 20th Century over most
mid and high latitude continents of the Northern Hemisphere. Over the
United States, surface temperatures have not risen as much as over
Eurasia and instead it has become wetter, with more very heavy events,
and this pattern has been shown to be a response to the general warming
of the tropical oceans (Hoerling et al. 2001). Changes in climate
variability and extremes are beginning to emerge.
One persistent issue has been the discrepancy in trends from the
so-called satellite temperature record and that at the surface. The
satellite record begins in 1979 and measures microwave radiation from
the Earth coming from about the lowest 5 miles of the atmosphere.
Consequently it does not measure the same thing as the surface
temperature. Climate models run with increasing greenhouse gases
suggest that warming in the lower atmosphere should be larger than at
the surface whereas the observed record shows much less warming from
1979-1999 and this has been highlighted by skeptics. However, when
observed stratospheric ozone depletion is included, the models suggest
that the surface and tropospheric temperatures should increase at about
the same rate. In fact this is what has happened from about 1960 to the
present based on balloon observations that replicate the satellite
record after 1979. The shorter satellite record is influenced by El
Nino and effects of volcanic eruptions, and thus the Mt. Pinatubo
eruption in 1991 leads to a relative downward trend in the lower
atmosphere. Other effects, such as from cloudiness changes, have not
been quantified but also influence the two records differently.
Accordingly, the small trend in the satellite record is not
inconsistent with the observed larger trend in surface temperatures
(NRC 2000).
Human Influences
The amount of carbon dioxide in the atmosphere has increased by
about 31 percent since the beginning of the industrial revolution, from
280 parts per million by volume (ppm) to 367 ppm, owing mainly to
combustion of fossil fuels and the removal of forests. In the absence
of controls, future projections are that the rate of increase in carbon
dioxide amount may accelerate and concentrations could double from pre-
industrial values within the next 50 to 100 years. Several other
greenhouse gases are also increasing in concentration in the atmosphere
from human activities (especially biomass burning, agriculture, animal
husbandry, fossil fuel use and industry, and through creation of
landfills and rice paddies). These include methane, nitrous oxide, the
chlorofluorocarbons (CFCs) and tropospheric ozone, and they tend to
reinforce the changes from increased carbon dioxide. However, the
observed decreases in lower stratospheric ozone since the 1970's,
caused principally by human-introduced CFCs, contribute to a small
cooling.
Human activities also affect the tiny airborne particulates in the
atmosphere, called aerosols, which influence climate in other ways.
Aerosols occur in the atmosphere from natural causes; for instance,
they are blown off the surface of deserts or dry regions. The eruption
of Mt. Pinatubo in the Philippines in June 1991 added considerable
amounts of aerosol to the stratosphere which, for about 2 years, led to
a loss of radiation at the surface and a cooling. Human activities
contribute to aerosol particle formation mainly through injection of
sulfur dioxide into the atmosphere (which contributes to acid rain)
particularly from power stations, and through biomass burning. A direct
effect of resulting sulfate aerosols, which are seen as the milky
whitish haze from airplane windows, is the reflection of a fraction of
solar radiation back to space, which tends to cool the Earth's surface.
Other aerosols (like soot) directly absorb solar radiation leading to
local heating of the atmosphere, and some absorb and emit infrared
radiation. A further influence of aerosols is that many act as nuclei
on which cloud droplets condense, affecting the number and size of
droplets in a cloud and hence altering the reflection and the
absorption of solar radiation by the cloud. Because man-made aerosols
are mostly introduced near the Earth's surface where they can be washed
out of the atmosphere by rain, they typically remain in the atmosphere
for only a few days and they tend to be concentrated near their sources
such as industrial regions. They therefore affect climate with a very
strong regional pattern and usually produce cooling. In contrast, the
greenhouse gases are not washed out. Their long lifetimes ensure a
buildup in amounts over time, as is observed to be happening.
The determination of the climatic response to the changes in
heating and cooling is complicated by feedbacks. Some of these can
amplify the original warming (positive feedback) while others serve to
reduce it (negative feedback). If, for instance, the amount of carbon
dioxide in the atmosphere were suddenly doubled, but with other things
remaining the same, the outgoing long-wave radiation would be reduced
and instead trapped in the atmosphere. To restore the radiative
balance, the atmosphere must warm up and, in the absence of other
changes, the warming at the surface and throughout the troposphere
would be about 1.2 C. In reality, many other factors will change, and
various feedbacks come into play, so that the best IPCC estimate of the
average global warming for doubled carbon dioxide is 2.5 C. In other
words, the net effect of the feedbacks is positive and roughly doubles
the response otherwise expected. The main positive feedback comes from
increases in water vapor with warming.
In 2001, the IPCC gave special attention to this topic. The many
issues with water vapor and clouds were addressed at some length in
Chapter 7 (of which I was a lead author, along with Professor Richard
Lindzen (M.I.T.), and others). Recent possibilities that might nullify
global warming (Lindzen 2001) were considered but not accepted because
they run counter to the prevailing evidence, and the IPCC (Stocker et
al. 2001) concluded that ``the balance of evidence favours a positive
clear sky water vapor feedback of the magnitude comparable to that
found in the simulations.''
Increases in greenhouse gases in the atmosphere produce global
heating (``global warming'') which leads to expectations for increases
in global mean temperatures (often mistakenly thought of as global
warming), but other changes in weather are also important. In
particular, surface heating enhances the evaporation of moisture and
thus enhances the hydrological cycle (see Trenberth 1999). Global
temperature increases signify that the water-holding capacity of the
atmosphere increases and, together with enhanced evaporation, this
means that the actual atmospheric moisture should increase, as is
observed to be happening in many places. Because water vapor is a
powerful greenhouse gas, this provides a positive feedback. It also
follows that naturally occurring droughts are likely to be exacerbated
by enhanced drying. Thus droughts, such as those set up by El Nino, are
likely to set in quicker, plants wilt sooner, and the droughts may
become more extensive and last longer with global warming. Once the
land is dry then all the solar radiation goes into raising temperature,
bringing on sweltering heat waves. Further, globally there must be an
increase in precipitation to balance the enhanced evaporation. The
presence of increased moisture in the atmosphere implies stronger
moisture flow converging into precipitating weather systems. This leads
to the expectation of enhanced rainfall and snowfall events, which are
also being observed in many areas. In general, it is observed that
where an increase in precipitation occurs, more falls as heavy events,
increasing risk of flooding.
Modeling and Attribution of Climate Change
The best climate models encapsulate the current understanding of
the physical processes involved in the climate system, the
interactions, and the performance of the system as a whole. They have
been extensively tested and evaluated using observations. They are
exceedingly useful tools for carrying out numerical climate
experiments, but they are not perfect, and so have to be used carefully
(Trenberth 1997). Key issues in global climate change remain those of
first detecting whether the recent climate is different than should be
expected from natural variability, and second attributing the climate
changes to various causes, including the human influences. The latest
models have increasingly been able to reproduce the climate of the past
century or so. Also their estimates of natural variability are
compatible with those from the paleoclimate reconstructions. As a
result, they can break down the contributions to the warming into
components. Increases in solar luminosity probably were responsible for
some of the warming from about 1910 to 1950 (perhaps as much as 0.3 F),
but the warming of about 0.7 F in the past 30 years can only be
accounted for by the increases in greenhouse gases in the atmosphere.
Consequently, after much debate in the final plenary, the IPCC (2001)
carefully crafted the following: ``In the light of new evidence, and
taking into account the remaining uncertainties, most of the observed
warming over the last 50 years is likely to have been due to the
increase in greenhouse gas concentrations.''
In 1995 the IPCC assessment concluded that ``the balance of
evidence suggests a discernible human influence on global climate''
(IPCC 1996). Since then the evidence has become much stronger--from the
recent record warmth, the improved paleo-record that provides context,
better understanding of the role of stratospheric ozone depletion,
improved modeling and simulation of the past climate, and improved
statistical analysis. Thus the headline in IPCC (2001) is ``There is
new and stronger evidence that most of the warming observed over the
last 50 years is attributable to human activities.'' The best
assessment of global warming is that the human climate signal emerged
from the noise of background variability in the late 1970's.
Biggest impact is likely to be felt by making the extremes more
extreme. For any change in mean climate, there is likely to be an
amplified change in extremes. The wide range of natural variability
associated with day-to-day weather means that we are unlikely to notice
most small climate changes except for the extremes. Extremes are
exceedingly important to both natural systems and human systems and
infrastructure, as we are adapted to a range of natural weather
variations, and it is these extremes that exceed tolerances and cause
nonlinear effects: the so-called ``straw that breaks the camel's
back.'' For instance, floods that used to have an expected return
period of 100 years may now recur in 50 or 30 years. In practice, this
effect may be experienced in floods through dams or levees that break,
inundating the surrounding countryside and urban areas, resulting in
loss of life, water damage, and more subtle effects such as polluted
drinking waters.
The attribution of the recent climate change to the increases in
greenhouse gases in spite of uncertainties related to aerosols has
direct implications for the future. Because of the long lifetime of
carbon dioxide and the slow penetration and equilibration of the
oceans, there is a substantial future commitment to further global
climate change even in the absence of further emissions of greenhouse
gases into the atmosphere. Future projections of climate change depend
on future emissions. They are given by the IPCC and not detailed here.
In spite of differences among models and the many uncertainties that
exist, the models produce some consistent results. All show
considerable warming. All show larger changes over high northern
latitudes and the northern continents, including North America, because
land warms up faster than the oceans. Further research is needed to
understand why the models respond as they do, and to reduce the
uncertainties. While some changes arising from global warming are
benign or even beneficial, the rate of changes as projected exceed
anything seen in nature in the past 10,000 years and are apt to be
disruptive in many ways. The economic effects of the weather extremes
are substantial and clearly warrant attention in policy debates.
References Hoerling, M. P., J. W. Hurrell, and T. Xu, 2001: Tropical
origins for recent North Atlantic climate change. Science, 292, 90-92.
IPCC, 1996: Climate Change 1995: The Science of Climate Change. Eds. J.
T. Houghton et al., Cambridge University Press, Cambridge, U.K. 572 pp.
IPCC, 2001: Climate Change 2001: The Scientific Basis. Eds. J. T.
Houghton, et al., Cambridge University Press, Cambridge, U.K. (in
press). Lindzen, R. S., M-D. Chou, and A. Y. Hou, 2001: Does the Earth
have an adaptive infrared iris? Bulletin of the American Meteorological
Society, 82, 417-432.
National Research Council (NRC) 2000: Reconciling observations of
global temperature change. National Academy Press. 85 pp. Stocker, T.,
G. K. C. Clarke, H. Le Treut, R. S. Lindzen, V. P. Meleshko, R. K.
Mugara, T. N. Palmer, R. T. Pierrehumbert, P. J. Sellers, K. E.
Trenberth, and J. Willebrand, 2001: ``Physical Climate Processes
and Feedbacks'' Chapter 7 of Climate Change 2001: The Scientific Basis.
Eds. J.
T. Houghton, et al., Cambridge University Press. Cambridge, U.K.
(in press). Trenberth, K. E., 1997: The use and abuse of climate models
in climate change research. Nature, 386, 131-133. Trenberth, K. E.,
1999: Conceptual framework for changes of extremes of the hydrological
cycle with climate change. Climatic Change, 42, 327-339. Trenberth, K.
E., 2001: Stronger evidence for human influences on climate: The 2001
IPCC Assessment. Environment, 43, 4(May), 8-19.
Any opinions, findings, conclusions, or recommendations
expressed in this publication are those of the author and do not
necessarily reflect those of the National Science Foundation.
The National Center for Atmospheric Research (NCAR) is sponsored by
the National Science Foundation.
______
[From Environment, May 2001]
Stronger Evidence of Human Influence on Climate: The 2001 IPCC
Assessment
(By Kevin E. Trenberth)
The third assessment from Working Group of the Intergovernmental
Panel on Climate Change (IPCC), \1\ issued in January 2001, affirmed
previous findings but with much stronger language. Its message is
clear: The Earth's climate is changing in ways that cannot be accounted
for by natural variability--``global warming'' is indeed happening.
This article provides an outline of the IPCC process, as well as a
summary of and commentary on the main findings of Working Group I.
---------------------------------------------------------------------------
\1\IPCC, Climate Change 2001: The Scientfic Basis, J.T. Houghton
et al., eds. (Cambridge U.K.: Cambridge University Press, 2001) (in
press).
---------------------------------------------------------------------------
IPCC reports on the evolving science of global climate change,
focusing special attention on the ways in which human activities affect
the climate. IPCC reviews the evidence for climate change and the
possible causes and considers how the climate system responds to
various agents of change. Because our climate models are simplified
versions of the real world and are still being improved upon, IPCC
evaluates the ability of models to describe the processes involved in
the climate system and the functioning of the system as a whole. The
panel seeks to attribute recent observed changes to possible causes,
especially the human influences, and then, using climate models,
projects future change from those causes.
Climate changes have occurred in the past naturally for various
reasons, over periods ranging from decades to millennia. Fluctuations
in the sun's energy output and other factors that influence the amount
and fate of the energy that reaches the Earth's surface have caused
natural climate change. And now, by greatly changing the composition of
the atmosphere, humankind is performing an enormous geophysical
experiment. \2\ Human actions alter the Earth's environment in ways
that cause climate change. \3\ Legitimate debates go on about the
extent and rate of change and what, if anything, can be done about it,
but that the experiment is underway is not in doubt.
---------------------------------------------------------------------------
\2\R. Revelle and H.E. Suess, ``Carbon Dioxide Exchange between
Atmosphere and Ocean and Question of an Increase of Atmospheric
CO2 during the Past Decades'' Tellus 9(1957): 18-27.
\3\F.S. Rowland, ``Climate Change and Its Consequences: Issues for
the New U.S. Administration:' Environment, March 2001, 28-34.
---------------------------------------------------------------------------
Land use (e.g., farming and building cities), storage and use of
water (e.g., dams, reservoirs, and irrigation), generation of heat
(e.g., furnaces), and the use of fossil fuels are the human-induced
environmental changes that most influence the climate. The use of
fossil fuels introduces visible particulate pollution (called aerosols)
and gases such as carbon dioxide (CO2) into the atmosphere,
both of which alter the balance of radiation on Earth. These gases are
relatively transparent to incoming solar radiation, yet they absorb and
reemit outgoing infrared radiation. The resulting blanketing effect is
known as the greenhouse effect, and the gases involved are called
greenhouse gases. Not all greenhouse gases are the result of human
activities. There is a large natural greenhouse effect that makes the
Earth habitable. The increase in CO2 levels over the last
century or two from human activities, as well as the introduction of
other greenhouse gases more recently, mean that more energy stays in
the system. Global warming and the associated climate change are the
expected results.
Observed Climate Change
Records of surface temperature show that a global mean warming of
about 0.7 degrees C has occurred over the past 100 years. IPCC reports
this change as 0.6 plus/minus 0.2 degrees C, but this is a linear fit
to what is obviously not a linear trend (see Figure 1 below for the
instrumental record of global mean temperatures). Temperatures
increased most noticeably from the 1920's to the 1940's; they then
leveled off from the 1950's to the 1970's and took off again in the
late 1970's. The 1990's mark the warmest decade on record, and 1998 is
by far the warmest year on record, exceeding the previous record held
by 1997. Preliminary annual global mean temperatures in the year 2000
were about the same as for 1999. Synthesis of information from tree
rings, corals, ice cores, and historical data further indicates that
the 1990's are the warmest decade in at least the past 1,000 years for
the Northern Hemisphere, which is as far back as annual-resolution
hemispheric estimates of temperatures can be made. \4\ The melting of
glaciers over most of the world and rising sea levels confirm the
reality of the global temperature increases.
---------------------------------------------------------------------------
\4\Reconstructions of temperature and rainfall make use of
multiple proxy indicators at individual sites around the world but have
to be merged, reconciled, and combined to give regional and larger area
averages. Sufficient data with annual resolution now exist to do this
for the Northern Hemisphere for the past 1,000 years but not for the
Southern Hemisphere or for beyond the past millennium. See M.E. Mann,
R.S. Bradley, and M.K. Hughes, ``Global-scale Temperature Patterns and
Climate Forcing over the Past Six Centuries,'' Nature 392, 23 April
1998, 779-87; and M.E. Mann, R.S. Bradley, and M.K. Hughes, ``Northern
Hemisphere Temperatures during the Past Millennium: Inferences,
Uncertainties, and Limitations,'' Geophysical Research Letters 26
(1999): 759-62.
There is good evidence from measurements of sea level pressure,
wind, and temperature over the 20th century for decadal changes in the
atmospheric circulation and some evidence for similar ocean changes.
For instance, these include changes in winds over the North Atlantic
and Europe related to the phenomenon known as the North Atlantic
Oscillation and changes in El Nino. \5\ Such observations signal that
increases in temperature are not uniform or monotonic. For example,
some places warn more than the average, while other places cool.
Changes in precipitation and other components of the hydrological cycle
also vary considerably geographically. For instance, it is likely that
precipitation has increased by perhaps 1 percent per decade during the
20th century over most mid-and high-latitude continents of the Northern
Hemisphere. Changes in climate variability are also being seen and
changes in extremes are beginning to emerge. Perhaps of greatest note
are the Observed increases in the heat index (which measures humidity
and temperature effects on comfort) and the observed trend toward more
intense precipitation events.
---------------------------------------------------------------------------
\5\J.W. Hurrell, ``1995: Decadal Trends in the North Atlantic
Oscillation Regional Temperatures and Precipitation,'' Science 269
(1995): 676-9; K.E. Trenberth and T.J. Hoar, ``The 1990-1995 El Nino-
Southem Oscillation Event: Longest on Record,'' Geophysical Research
Letters 23 (1996): 57-60; and K.E. Trenberth and T.J. Hoar, ``El Nino
and Climate Change,'' Geophysical Research Letters 24 (1997): 3057-60.
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One persistent controversy in climate change science has been the
discrepancy between the trend seen in the so-called satellite
temperature record and that seen in the temperature record from the
Earth's surface. The controversy stems in part from the fact that the
two data sets do not measure the same phenomenon. The satellite record,
which begins in 1979, measures microwave radiation from the lowest 8
kilometers of the Earth's atmosphere and thus depicts temperatures in
that part of the atmosphere, which are quite different from those at
the surface. Climate models that assess the scenario of increasing
greenhouse gases suggest that warming in the lower atmosphere should be
greater than that at the surface. But here is the point of contention
for skeptics: The observed satellite record shows less warming from
1979-1999. Consequently, doubt has been cast on the veracity of both
the surface temperature record and the models. However, when the
observed stratospheric ozone depletion is included in the models, the
models predict that the surface and tropospheric temperatures increase
at about the same rate. In fact, this is what has happened from about
1960 to the present based on balloon observations, which replicate the
satellite record after 1979. Because the satellite record includes only
two decades, the influence of El Nino and the eruption of Mt. Pinatubo
in 1991 leads to a disproportionate relative downward trend in
temperatures observed in the lower atmosphere. Other effects, such as
changes in cloud cover, have not been accounted for by the models and
may also affect the two records differently. Accordingly, the different
short-term trend in the satellite record is not at odds with the
warming in the surface record.
The Climate System and Its Driving Forces
Because we humans live in and breathe the atmosphere, it is natural
for us to focus on the atmospheric changes. But the atmosphere is only
one element of a greater climate system that involves interactions
among various internal components and external forcings. The internal,
interactive components include the atmosphere, the oceans, sea ice, the
land and its features (including the vegetation, albedo, biomass, and
ecosystems), snow cover, land ice, and the hydrology of the land
(including rivers, lakes, and surface and subsurface water). The
factors that are normally regarded as external to the system include
the sun and its output, the Earth's rotation, sun-Earth geometry and
the slowly changing orbit, the physical components of the Earth system
such as the distribution of land and ocean, the topographic features on
the land, the ocean-bottom topography and basin configurations, and the
mass and basic composition of the atmosphere and the oceans. These
factors determine the mean climate, which may vary from natural causes.
Climate variations arise naturally when the atmosphere is influenced by
and interacts with other internal components of the system and
``external'' forcings.
The continual flow of radiation from the sun provides the energy
that drives the Earth's climate. About 31 percent of that radiation
gets reflected back into space by molecules, tiny airborne particles
(aerosols), clouds, or by the Earth's surface and thus plays no part in
the climate. The sun's massive energy input leads to warming. To
maintain a balance, the Earth radiates back into space, in the form of
``long-wave'' or infrared radiation, roughly the same amount of energy
that it receives. The amount of radiation lost from the top of the
atmosphere to space corresponds to a global mean surface temperature of
about -19 degrees C, much colder than the annual average global mean
temperature of about 14 degrees C. The higher mean temperature of the
Earth, given the amount of energy radiated from its surface, can be
explained by the existence of the atmosphere. The Earth's atmosphere
intercepts the bulk of energy emitted at the surface and, in turn,
reemits energy both toward space and back to the Earth. The energy that
escapes into space is emitted from the tops of clouds at various
atmospheric levels (which are almost always colder than the surface) or
by atmospheric gases that absorb and emit infrared radiation. These
greenhouse gases, notably water vapor and CO2, produce a
blanketing effect known as the natural greenhouse effect. Water vapor
gives rise to about 60 percent of the current greenhouse effect and
CO2 accounts for about 26 percent. \6\ Clouds also absorb
and emit infrared radiation and have a blanketing effect similar to
that of the greenhouse gases. But because clouds also reflect solar
radiation, they act to cool the surface. Though on average the two
opposing effects offset one another to a large degree, the net global
effect of clouds in our current climate, as. determined by space-based
measurements, is a small cooling of the surface.
---------------------------------------------------------------------------
\6\J.T. Kiehl and K.E. Trenberth, ``Earth's Annual Global Mean
Energy Budget,'' Bulletin of the American Meteorological Society 78
(1997): 197-208.
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Human Influences
The amount of CO2 in the atmosphere has increased by
about 31 percent since the beginning of the Industrial Revolution, from
280 parts per million (ppm) by volume to 367 ppm. This increase is due
mainly to combustion of fossil fuels and the removal of forests.
Projections of future CO2 concentrations suggest that, in
the absence of controls, the rate of increase may accelerate and thus
double the concentrations of CO2 from pre-industrial levels
within the next 50 to 100 years. Human activities (especially biomass
burning; agriculture; animal husbandry; fossil fuel extraction,
distillation, and use; and the creation of landfills and rice paddies)
have increased the atmospheric concentrations of several other
greenhouse gases (methane, nitrous oxide, chlorofluorocarbons (CFCs))
and tropospheric ozone. These other greenhouse gases tend to reinforce
the changes caused by increased CO2 levels. However, the
observed decreases in lower stratospheric ozone since the 1970's,
caused principally by human-introduced CFCs and halocarbons, contribute
a small cooling effect.
Aerosols enter the atmosphere naturally when they are blown off the
surface of deserts or dry regions, blasted into the atmosphere during
volcanic eruptions, or released during forest fires. They impact
climate in various ways. For instance, the aerosols introduced into the
atmosphere during the eruption of Mt. Pinatubo in the Philippines in
June 1991 blocked enough radiation for 2 years to cause observable
cooling. Human activities contribute to aerosol particle formation
mainly through emissions of sulfur dioxide (SO2) (a major
source of acid rain), particularly from coal-burning power stations and
through biomass burning. Sulfate aerosols, visible as a milky, whitish
haze from airplane windows, reflect a fraction of solar radiation back
to space and hence work to cool the Earth's surface. Some aerosols,
like soot, absorb solar radiation and lead to local warming of the
atmosphere. Other aerosols absorb and reemit infrared radiation.
Aerosols play still another role. By acting as the nuclei on which
cloud droplets condense, they affect the number and size of droplets in
a cloud and thereby alter the reflective and absorptive properties of
clouds. \7\ Aerosols from human activities are mostly introduced near
the Earth's surface and are often washed out of the atmosphere by rain.
They typically remain aloft for only a few days near their sources.
Aerosols therefore have a very strong regional affect on the climate,
usually producing cooling.
---------------------------------------------------------------------------
\7\Recent evidence highlights the possible importance of this
effect, although the magnitude is very uncertain, See J.M. Hansen, M.
Sato, A. Lacis, and R. Ruedy, 'The Missing Climate Forcing,''
Philosophical Transactions of the Royal Society of London 352 (1997):
231-40.
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The determination of the climatic response to the changes in
heating and cooling is complicated by feedbacks. Some of these
feedbacks amplify the original warming (positive feedback) and others
serve to reduce warming (negative feedback). If, for instance, the
amount of CO2 in the atmosphere were suddenly doubled while
all other factors remained constant, the amount of energy absorbed by
the atmosphere would increase. With additional energy trapped in the
system, a new balance would have to be reached. To accomplish this
balance the atmosphere would have to warm up. In the absence of other
changes, the warming at the surface and throughout the troposphere
would be about 1.2 degrees C. \8\ In reality, many other factors could
change as a result of doubled CO. concentrations, and various feedbacks
would come into play. When the positive and negative feedbacks are
considered, the best IPCC estimate of the average global warming for
doubled CO2 is 2.5 degrees C. The net effect of the
feedbacks is positive and, in fact, roughly doubles the global mean
temperature increase otherwise expected. Increases in water vapor that
accompany warming contribute the strongest positive feedback.
---------------------------------------------------------------------------
\8\K.E. Trenberth, J.T. Houghton, and L.G. Meira Filho, ``The
Climate System: An Overview:' in J.T. Houghton et al., eds., Climate
Change 1995: The Science of Climate Change (Cambridge, U.K.: Cambridge
University Press, 1996), 51-64.
---------------------------------------------------------------------------
Modeling of Climate Change
To quantify the response of the climate system to changes in
forcing, the complex interactions and feedbacks among the components
must be accounted for (see Figure 2). Numerical models of the climate
system based upon sound, well-established physical principles are the
tools used to estimate climate change. Experiments can be run with
climate models in which concentrations of greenhouse gases or other
influences, like aerosols, are varied. The best models capture the
current understanding of the physical processes involved in the climate
system, the interactions among the processes, and the performance of
the system as a whole. The predictive powers of a model can be tested
by running the model with known forcings from the past through it and
then comparing the results to actual climate records. Though models are
exceedingly useful tools for carrying out numerical climate
experiments, they do have limitations and must be used carefully. \9\
The latest models have been able to reproduce the climate of the past
century or so with increasing accuracy (see Figure 3 on page 15). Thus
the global mean temperature record is well replicated within limits
imposed by natural fluctuations merely by specifying the changes in
atmospheric composition and changes in the sun.
---------------------------------------------------------------------------
\9\K.E. Trenberth, ``The Use and Abuse of Climate Models in
Climate Change Research:' Nature 386, 13 March 1997, 131-33.
Detection and Attribution
Two main issues that must be settled before politicians are likely
to take action: First, it must be discerned whether the recent climate
has changed more than expected from natural variability; second,
observed climate changes must be attributed to various causes,
including human influences. Several key points that emerged from the
recent IPCC assessment address these issues:
The magnitude and rate of change of mean surface
temperature globally, or at least in the Northern Hemisphere, over the
past few decades is outside the range of anything deduced from paleo-
climate records of the last 1,000 years. Data are inadequate before
that.
Estimates of internal climate variability (how much
climate can vary from natural causes not including changes in the sun)
derived from models are reasonably consistent with the preindustrial
variability deduced from paleo-climate data. Together, the estimates
from model and paleo-climate observations provide more reliable
estimates of the natural variability.
Consequently, given the better sense of natural climate
variability, detection of climate change is much clearer now than it
was 5 years ago. Hence, it is very unlikely that recent climate change
is natural in origin.
The natural forcing agents (e.g., solar and volcanoes)
over the last two to four decades are likely to have had a net cooling
effect and, thus, cannot be a cause of the recent increase in
temperature.
A combination of internal climate variability, natural
forcing, and perhaps small anthropogenic forcing can account for the
increases in the observed globally averaged surface temperature up
until about 1970. Increases in solar radiation may account, in part
(perhaps 0.15 to 0.2 degrees C), for the warming between about 1920 and
1940, even though solar changes are poorly known before 1979 when
satellite observations began (see Figure 3). However, it is also
probable that a natural component related to changes in North Atlantic
Ocean circulation may have played a role.
The rate and magnitude of the warming over the last few
decades cannot be explained unless the net human influence is one of
warming over the last 30 years. Uncertainties in cooling by aerosol
forcing (especially the effects on clouds) are therefore constrained.
The nearer the ``balance'' or the offset between positive
anthropogenic greenhouse gas forcing and negative anthropogenic aerosol
forcing over the last 50 years, the larger the climate responsiveness
needs to be to explain warming over recent decades. For instance, if
the net warming is small, the climate system must be quite sensitive to
that warming to produce the observed temperature change. But if the
warming is larger, the climate system must be less sensitive to produce
the same temperature change. This has implications for future
predictions.
The line of argument shown by these points is open to the criticism
that there is some circular reasoning involved. The objective of
attributing climate change to specific causes is to account for the
change in temperature, but the temperature change itself is invoked as
part of the argument. Ideally, only the knowledge of forcings and
responsiveness of the system, as given by models, are used to replicate
the observed temperature. Neither the forcings nor the true sensitivity
of the systems are known well enough to proceed in this manner. Climate
modelers attempt to avoid such a trap by basing their models on sound
physical principles. However, many parameters have to be chosen when
developing models. Although the choices are based on knowledge of the
processes, and the parameters are physically based, there is ample
scope for unintentional tuning. For example, the brightness of clouds
depends on the size and number of cloud droplets but varies from cloud
to cloud and is not known well. Choice of a particular value for the
model clouds may compensate for shortcomings in the amount of clouds in
the model. Inevitably, running a model with two different sets of
parameters yields different results, and the set that brings the model
into best agreement with observations is chosen for further use in the
model. It is important, therefore, to recognize that the procedure is
not as objective as it might appear and that uncertainties remain.
The most contentious section in the Summary for Policy Makers
proved to be the concluding paragraph on attribution. After much
debate, a carefully. crafted statement was agreed upon: ``In the light
of new evidence, and taking into account the remaining uncertainties,
most of the observed warming over the last 50 years is likely to have
been due to the increase in greenhouse gas concentrations,'' Moreover,
although not highlighted by IPCC, increasing evidence suggests that the
signal of human influence on climate emerged from the noise of natural
variability in about 1980 and will only get larger.
The implications of these findings may be felt in the near future.
The models predict that global temperature increases of 0.1 to 0.2
degrees C over the next decade are likely unless volcanic eruptions
interfere. \10\ Time will tell whether the assessment is correct,
perhaps within a decade.
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\10\IPCC, note 1 above.
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Prediction of Climate Change
Climate models have been used to project the effects of future
global warming to the year 2100. Because human activities are not
predictable in any deterministic sense, ``predictions'' based on human
influences necessarily contain a ``what if'' emissions scenario. IPCC
presumes that these predictions will be used for plan-fling purposes,
including actions to prevent undesirable outcomes, consistent with the
Framework Convention on Climate Change. Such actions, which are a
consequence of the prediction, may change the outcome and thus make the
prediction wrong. Accordingly, they are not truly predictions but
rather projections that are tied to particular emissions scenarios.
This is art important point, because some skeptics have ignored the
distinction and misused it to challenge findings. For example, in 1990,
only scenarios with increasing greenhouse gases were used. Then, in
1995, the first primitive scenarios with aerosols were included, which
produced a cooling. Some skeptics, pointing to this difference, claimed
that the models had changed and were therefore suspect, when, in fact,
it was the scenarios that had changed, not the models. In addition, for
a given scenario, the rate of temperature increase depends on the model
used and how, for instance, the model depicts features such as clouds.
It is for this reason that a range of possible outcomes exists. About
half of the spread in range of values at 2100 is due to uncertainties
in models. The spread in values is unrelated to the scenarios and
should not be considered as representative of anything real. The rest
of the spread in range can accounted for by the different scenarios.
In 2001, the future emissions scenarios were set up by the Special
Report on Emissions Scenarios (SRES) \11\ (see the box on this page)
and included 35 scenarios. The projections for six ``illustrative''
CO2 emission scenarios are given in Figure 4a. For each
emissions scenario, IPCC calculates expected concentrations of
CO2. In the year 2100, the projected values range from about
550 ppm to almost 1,000 ppm, compared with 367 ppm at present.
Projections of temperature change and sea-level rise for these same
scenarios are shown in Figures 4b and 4c on page 18. When the range of
uncertainties is factored in and the projections for 2100 across all 35
scenarios are analyzed, there is an increase in the global mean
temperature from 1.4 degrees C to 5.8 degrees C (see Figure 4b). Most
increases fall between 2 degrees C to 4 degrees C. These numbers exceed
those in the 1995 IPCC report, which showed temperature changes ranging
from about 1 degree C to 3.5 degrees C. \12\ The increase is higher
mainly because the new emissions scenarios include lower sulfur
emissions (which are likely to be reduced for air quality reasons). The
35 scenarios also expand the range of possibilities from the last
report and contribute to the range in temperature projected in 2100.
Modifications in carbon cycle models that convert emissions to
concentrations and in climate models account for less than 20 percent
of the deviation between the 1995 IPCC report and this year's report
and thus do not account for much change in the range.
---------------------------------------------------------------------------
\11\IPCC, Special Report on Emissions Scenarios, Summary for
Policy Makers (2000).
\12\IPCC, Climate Change 1995: The Science of Climate Change, J.T.
Houghton et al., eds., (Cambridge, U.K.: Cambridge University Press,
1996). For a review of the second IPCC assessment, see Climate Change
1995: The Science of Climate Change, reviewed by W.C. Clark and J.
Jager, Environment, November 1997, 23-8; Climate Change 1995: Impacts,
Adaptations, and Mitigation, reviewed by R.W. Kates, Environment,
November 1997, 29-33; and Climate Change 1995: Economic and Social
Dimensions, reviewed by T. O'Riordan, Environment, November 1997, 34-
39.
---------------------------------------------------------------------------
Figure 4c also shows the corresponding sea-level rise. Because heat
penetrates slowly into the voluminous oceans, sea-level rise is
expected to be manifested over a longer period of time than temperature
change. Because the heat inputs that have already occurred will only
work their way through the system slowly, even in the unlikely scenario
of a massive reduction in greenhouse gas emissions, sea-level rise will
continue unabated. Note again that though these projections include
crude estimates of the effects of sulfate aerosol, they deliberately
omit other possible human influences, such as changes in land use. \13\
A major concern is that the projected rates of climate change in
Figures 4b and 4c exceed anything seen in nature in the past 10,000
years.
---------------------------------------------------------------------------
\13\It is estimated that conversion from forests to agriculture in
the United States makes the surface much brighter, especially in the
late summer and fall after crops are harvested. This means more solar
radiation is reflected, which results in cooling.
---------------------------------------------------------------------------
An increase in global mean temperature logically follows increased
heating. But temperature increase, often thought of as the sole
indicator of ``global warming,'' is not the only possible outcome. For
example, rising concentrations of greenhouse gases enhance the
hydrological cycle by furnishing additional energy for the evaporation
of surface moisture. Because the water-holding capacity of the
atmosphere is greater at higher temperatures, increased atmospheric
moisture should accompany global temperature increases. Because water
vapor is also a powerful greenhouse gas, it contributes a strong
positive feedback, amplifying global warming. Naturally occurring
droughts are also liable to be exacerbated by enhanced drying. Thus
droughts, such as those set up by El Nino, are likely to take hold more
quickly, wilt plants sooner, and become more extensive and longer-
lasting with global warming. When the land is dry, the energy that
would ordinarily drive the hydrological cycle goes into raising
temperatures, bringing on sweltering heat waves. Further, globally
there will have to be an increase in precipitation to balance the
enhanced evaporation. More moisture in the atmosphere implies stronger
moisture 'flow converging into all precipitating weather systems-such
as thunderstorms or extratropical rain or snow storms-and rain or snow
events of greater intensity. \14\
---------------------------------------------------------------------------
\14\K.E. Trenberth, ``Atmospheric Moisture Residence Times and
Cycling: Implications for Rainfall Rates with Climate Change,''
Climatic Change 39 (1998): 667-94.
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For any change in mean climate, there, is likely to be an amplified
change in extremes. Because of the wide range of natural variability
associated with day-to-day weather, most small climate changes will
probably go unnoticed: the extremes, however, will be easily detected.
Extremes play an exceedingly important role for natural and human
systems and infrastructure, All living organisms are adapted to a range
of natural weather variations, New extremes could he devastating to
ecosystems. Extremes that exceed tolerances of a system can cause
nonlinear effects: the so-called ``straw that breaks the camel's
back,'' For instance, floods that historically have had an expected
return period of 100 years may now recur in 50 or 30 years. \15\ More
frequent extreme floods may overstress dams and levees, causing breaks
and the consequent damage to infrastructure, loss of human life, and
contamination of drinking water.
---------------------------------------------------------------------------
\15\K.E. Trenberth, ``The Extreme Weather Events of 1997 and
1998:' Consequences 5 (1999): 2-15.
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The changes in extremes of weather and climate observed to date
have only recently been compared to the changes projected by models.
many of which agree with recent observed trends. Models project that
higher maximum temperatures, more hot days. and more heat waves are all
likely. The largest temperature increases are expected mainly in areas
where soil moisture decreases arc apt to occur. Increases of daily
minimum temperatures are projected to occur over most land areas and
are generally larger where snow and ice retreat. A decreased number of
frost days and cold waves is likely. Changes in surface air temperature
and surface humidity will mean increases in the heat index and
increased discomfort. Increases in surface air temperature will lead to
a greater number of days during which cooling (such as from air
conditioning) might be considered desirable for comfort and fewer days
during which space heating is required for comfort. Precipitation
extremes are expected to increase more than the mean, as will the
frequency of extreme precipitation events. A general drying is
projected for the mid-continental areas during summer, as a result of
higher temperatures and increased drying not offset by increased
precipitation in these regions. Theoretical and modeling studies
project increases in the upper limit of intensity of tropical cyclones
in addition to appreciable increases in their average and peak
precipitation intensities. Changes in El Nino are also likely, but
their nature is quite uncertain. \16\
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\16\The 1997-1998 El Nino is the biggest recorded event by several
measures. The last two decades have been marked by unusual El Nino
activity. See Trenberth and Hoar, 1996 and 1997, note 5 above. A key
question is how is global warming influencing El Nino? Because El Nino
is involved with movement of heat in the tropical Pacific Ocean, it is
conceptually easy to see how increased heating from the buildup of
greenhouse gases might interfere. Climate models certainly show changes
with global warming, but none simulate El Nino with sufficient fidelity
to have confidence in the results. So the question of how El Nino may
change with global warming is a current research topic.
---------------------------------------------------------------------------
Humans Are Changing the Climate
In 1995, the IPCC assessment concluded that ``the balance of
evidence suggests a discernible human influence on global climate.''
\17\ Since then the evidence has become much stronger-the recent record
warmth of the 1990's, the historical context provided by the improved
paleo-record, improved modeling and simulation of the past climate, and
improved statistical analysis. Thus the headline in the new IPCC report
states, ``There is new and stronger evidence that most of the warming
observed over the last 50 years is attributable to human activities.''
\18\ The best assessment of global warming is that the human
contribution to climate change first emerged from the noise of
background variability in the late 1970's. Hence, climate change is
expected continue into the future. The amplification of extremes is
likely to cause the greatest impact. Although some change arising from
global warming may be benign or even beneficial, the economic effects
of more extreme weather will be substantial and clearly warrant
attention in policy debates.
---------------------------------------------------------------------------
\17\Trenberth, note 14 above.
\18\IPCC, note 1 above.
---------------------------------------------------------------------------
Because of the long lifetime of CO2 in the atmosphere
and the slow heat penetration and equilibration of the oceans, there is
already a substantial commitment to further global climate change, even
in the absence of further emissions of greenhouse gases. IPCC
considered implications for stabilizing CO2 and greenhouse
gases at various concentrations up to four times pre-industrial levels
and concluded that substantial reductions in emissions, well below
current levels, would be required sooner or later in all cases. Even
full implementation of the Kyoto Protocol would merely slow the time of
doubling of CO2 concentrations from pre-industrial values by
perhaps 15 years (for instance from 2060 to 2075). \19\ Moreover, these
projections emphasize that even stabilizing concentrations would not
stop climate change because of the slow response of the system; for
this reason, temperature increases and especially sea-level rise would
continue for many decades thereafter. As we begin to understand that
our geophysical experiment might turn out badly, we are also
discovering that it cannot be turned off abruptly.
---------------------------------------------------------------------------
\19\T.M.L. Wigley, ``The Kyoto Protocol: CO2,
CH4 and Climate Implications,'' Geophysical Research Letters
25 (1998): 2285-8.
---------------------------------------------------------------------------
The IPCC report provides the evidence that global warming is
happening and now the question arises, What, if anything, should be
done about these findings? The options include: do nothing, mitigate or
stop the problem, adapt to the changes as they happen, or find some
combination of these options. Different value systems come, into play
in deciding how to proceed. Considerations include those of population
growth, equity among developed and developing countries,
intergenerational equity, stewardship of the planet, and the
precautionary principle (``better to be safe than sorry''). Those with
vested interests in the current situation frequently favor the first
option, extreme environmentalists favor the second, and those who have
a belief that technology can solve all problems might favor the third.
In rationally discussing options, it is helpful to recognize the
legitimacy of these different points of view. This problem is truly a
global one because the atmosphere is a global commons. These immense
problems cannot be solved by one Nation acting alone. Unfortunately, to
date, international progress toward mitigating and preparing for the
possible outcomes of global warming is inadequate.
The evidence presented by the IPCC report suggests that there is a
strong case for slowing down the projected rates of climate change
caused by human influences. Any climate change scenario is fraught with
uncertainties. But a slowing in the warming process would allow
researchers to improve projections of climate change and its impacts.
Actions taken to slow down climate change would provide time to better
prepare for and adapt to the changes as they appear. Natural systems
and human systems, many of which have long amortization lifetimes
(e.g., power stations, dams, and buildings), are then less likely' to
be dislocated or become obsolete quickly. Therefore, we must plan
ahead. Greater energy efficiency and expanding use of renewable
resources, such as solar power, are clearly key steps toward slowing
the rate of climate change.
Kevin E. Trenberth heads the Climate Analysis Section of the
National Center for Atmospheric Research (sponsored by the National
Science Foundation) in Boulder, Colorado. He participated as a lead
author of a chapter, as well as a lead author of both the Technical
Summary and the Summary for Policy Makers of the third IPCC Working
Group I report. He can be reached at (303) 497-1318 or
[email protected].
______
Responses of Dr. Kevin E. Trenberth to Additional Questions from
Senator Corzine
Question 1. Dr. Lindzen's testimony describes the state of
scientific consensus about climate change as ``lacking in policy
relevant content.'' Do you agree with this assessment and, if so, why?
Response. I do not agree that the scientific consensus about
climate change is ``lacking in policy relevant content.'' Some relevant
points follow. The assessment has determined:
1) The climate is changing.
2) The global change is significant and outside of the realm of
natural variability.
3) The change in the last 50 years is mostly caused by human
activities.
4) The biggest contributor is the observed increases in carbon
dioxide in the atmosphere which arise mostly from emissions from fossil
fuel burning. However, there are several other factors (e.g. methane)
and activities (such as deforestation) that also contribute.
5) The slow response of the climate system, especially the oceans,
means that we have not yet seen the full change already mandated by our
activities.
6) The prospects are that changes will continue and will grow in
magnitude, but not in a straightforward way.
7) Changes are likely to occur at a rate that is much greater than
anything seen historically (in the last 10,000 years).
8) Change itself is thus likely to be disruptive--unless we can
plan for and adjust to the expected changes beforehand. Some changes
might be beneficial, but prospects are for more extremes (like floods
and droughts) which are not.
9) Our current observing, modeling and prediction capabilities
limit our ability to plan very reliably. However, projections scope out
the magnitude of the anticipated changes.
10) The long lifetime of carbon dioxide means that we cannot stop
the problem, at best we can slow it down. But that would buy time for
better planning and adaptation.
11) The atmosphere is global, contributions from all countries
count.
12) Effects will be uneven, across countries, across societies, and
across rich and poor, although the latter are more vulnerable. They
will affect everyone, regardless of their contributions to the problem.
There will be winners and losers.
Even what seems to be a benign change can be disruptive. For
instance, I recently had a call from a scientist from Greece who had
been working in Crete. The winters there have become drier, the rainy
season has shifted more into the spring and is now more intense when it
occurs. The change in rainfall has meant that the primary crop of
olives has insufficient moisture when developing, and the quality and
quantity have gone down. The new climate is less suitable for olives.
These changes are believed to be related to global warming.
Accordingly I believe that the above findings have direct relevance
to policies on:
The need to reduce emissions of greenhouse gases into the
atmosphere to slow the rates of change
To improve observations of how the climate is changing
To increase research that will lead to better predictions
of how the climate will change
To make plans to deal with the effects of climate change,
and perhaps compensate victims of climate-related disasters
The need for the U.S. to play a leadership role
internationally on this whole issue
Question 2. Can you please offer your assessment of the integrity
of the IPCC Assessment Report process? Do you believe the IPCC takes
into account the best scientific literature available, and produces
credible scientific documents?
Response. Yes.
The IPCC process involves scientists from many nations. A
deliberate attempt is made to involve scientists from developing
countries--although they may not contribute a lot to the report, they
contribute to the understanding and acceptance of the report.
Scientists from all political and ideological persuasions are included
and are encouraged to be involved. The process is very open. Well known
skeptics are involved as lead authors, contributors and as reviewers
(including Dr. Lindzen). For the Third Assessment IPCC report, Working
Group I consisted of 123 lead authors, 516 contributors, 21 review
editors, and over 700 reviewers. Two major reviews were carried out:
the first by scientists, the second with comments by anyone, including
governments and NGO's. All comments are taken into account and all are
addressed, with a file of the answers kept by IPCC Technical Support
Unit and overseen by independent editors, two per chapter. A key point
is that the assessment is performed by scientists who have as their
objective to produce the best statement about the state of the science.
Each new IPCC report reviews all the published literature over the
previous 5 years or so, and assesses the state of knowledge, while
trying to reconcile disparate claims and resolve discrepancies, and
highlight uncertainties. The report cannot be selective in what it
deals with. It is the most credible document imaginable. The result is
very much a consensus document. It has all of the advantages implied by
that but also the disadvantages: It is not necessarily the latest or
greatest, it is too long for readability, but because it does sort out
what can be reliably stated, and it is a useful reference. The greatest
weakness is that all chapters are written in parallel, and also the
working groups operate in parallel. Several plenary sessions of all
authors help to cut down on conflicts, gaps, and duplication, but that
some of those problems remain is almost inevitable. The summaries
provide more digestible material for most readers.
Only in the Summary for Policy Makers do governmental officials get
involved in a word by word approval process, in which how things are
said is determined by governments, but what is said is vigorously
defended by the scientists that are present.
Question 3. Dr. Lindzen expresses dissatisfaction in his testimony
that certain positive feedbacks are poorly accounted for in current
models. In your testimony, you note that the likely net effect of all
feedbacks is positive. Can you elaborate on the significance of this
for interpreting the outputs of climate models?
Response. There are shortcomings of our understanding of the
processes involved and how they are depicted in models. These arise
from inadequate observations and theoretical underpinnings associated
with the incredible complexity of dealing with scales from molecules
and cloud droplets to the planetary-scale atmospheric circulation, as
well as computational limitations. Several steps are done:
1) Individual processes are dealt with as best possible given the
understanding and computational limitations.
2) The processes are assembled in models and then the model
components are tested with strong constraints. The components include
modules of the atmosphere, the oceans, the land and sea ice, and the
land surface. For instance the atmosphere can be simulated with
specified ocean (sea surface temperature) conditions, etc.
3) The climate system model as a whole is then tested against
observations when it is run in an unconstrained mode.
One strong test is to simulate the annual cycle of seasonal
variations. Another is to simulate measured variability from year to
year. Yet another is to simulate past climates (paleoclimate), based on
reconstructions of conditions thousands or millions of years ago using
tree rings, ice cores etc.
All models have some shortcomings, and some are better than others.
Note that feedbacks are not explicitly inserted, they arise from the
above process. However, it is not possible to pass all of these tests
without inferring aspects related to the feedbacks.
In particular, with no feedbacks, a doubling of carbon dioxide
concentration in the atmosphere is estimated to produce a global mean
temperature increase of 1.2 degrees C. The best estimate with all
feedbacks is 2.5 degrees C. The dominant feedback is from water vapor.
Increased heating produces increases in evaporation and atmospheric
moisture content and, as water vapor is a greenhouse gas, it has a
positive feedback. Professor Lindzen believes this feedback may be
overestimated but the evidence does not support his views, as outlined
in my testimony. It has been shown that without positive water vapor
feedbacks, it is not possible to get close to passing these tests.
Question 4. I represent a coastal State, New Jersey. I am therefore
particularly concerned about a projected rise in sea level from three
to 35 inches by 2100. Can you elaborate on the projected Atlantic coast
impacts of climate change over that time period?
Response. Rising sea level is a major problem for small island
States and coastal regions. The central estimate for 2100 is about 20
inches increase. But sea level will continue to rise much more further
into the future.
Sea level varies naturally with tides and with storms. Therefore
there is some resiliency to its effects. However, the effects can be
catastrophic if all three are combined: higher sea level at high tide
and a storm surge. An example is that during a major El Nino, sea level
rises by 6 to 12 inches along the coast of California. In early 1998
the rise was 8 inches. When storms and high tides combined with this,
it led to tremendous coastal erosion and a number of examples of houses
along the coast toppling into the sea.
There are many other effects and these are all nicely summarized in
a two-page spread of National Geographic, February 2001, called Earth
Pulse, about 8 pages from the front of that issue (unfortunately with
no page numbers). Effects include infiltration of fresh water systems
in the water table by salt water, loss of coastal wetlands, and beach
erosion. Protective dikes and powerful pumps are used in some places to
keep the sea out (e.g. New Orleans area, where the problem is
exacerbated by subsiding land).
Other risks on the Atlantic coast are enhanced versions of things
seen in recent years. More prolonged droughts, but also more risk of
inundations from decaying tropical storms. Hurricane Floyd in 1999 on
the heals of a drought might be a case in point.
Question 5. The recently published National Assessment on climate
change, coordinated by the USGCRP, stated that climate change would
affect the Northeast's ecosystems, such as bays and estuaries. Can you
give us an example of an ecosystem or species that would be adversely
impacted by minimal changes in temperature?
Response. I am not an expert in ecosystems and I cannot answer the
specific question. However, Northeast bays and estuaries would be
affected not only by temperature changes, but also changes in
precipitation, runoff, salinity, and storminess. Water quality would
likely change. Seasonal changes in snow cover and melt, and ice on
rivers and streams would likely increase runoff in winter or early
spring instead of late spring. Algal blooms are projected as likely to
increase, limiting other aquatic vegetation. However, details of what
would happen in this area are quite uncertain and also depend on water-
borne pollutants. While change is likely, its detailed nature and
impact on specific species is not so clear.
Question 6. What further studies can be done to understand how
oceans play an important part in climate change and the reduction of
greenhouse gases? What other climate components or processes would you
recommend that Federal research be focused on?
Response. We do not have a global observing system for the oceans.
Nor are many other observation systems for climate adequate. The
foremost need, in my view, is to develop an observing system for the
oceans that is global. Up till now this has not been practical, but new
technology now makes it possible and plans have been developed. The
observing system has space-based components, including altimeters to
measure sea level, passive radiometers to measure sea surface
temperature, ocean color, and precipitation, and active sensors
(including radars) to measure surface winds (or wind stress) and
precipitation. However, satellite borne instruments cannot see below
the surface, and an in situ observing system is also vital.
Implementing the plans for the ``ARGO'' array of profiling floats is
essential to provide measurements of temperature and salinity so that
we can begin to track the ocean state. This is vital 1) to know how the
oceans are changing, 2) to provide observations that can be used to
improve and validate models, and eventually 3) to provide initial
states of the oceans for climate predictions. The latter have now begun
for El Nino in the equatorial Pacific but the need is global.
I would also recommend complementary improvements in atmospheric
and land surface observations, so that they can be used for climate
purposes. Many observations taken now are used for weather prediction
and insufficient care is taken to enable the smaller climate signals to
be reliably tracked. Infrastructure is needed to merely keep track of
how well the observing system we now have is performing and to nip
problems in the bud.
I also recommend that increased funding for research programs such
as CLIVAR, which is short for ``Climate variability and
predictability.'' It is an international program under the World
Climate Research Programme (WCRP), but with a strong U.S. component and
a project office in Washington, DC. under the U.S. Global Change
Research Program (i.e. it is a multi-agency program). Many process
studies are planned under CLIVAR and these are targeted at improving
understanding and modeling capabilities to predict El Nino and natural
climate variability, as well as make climate change projections more
reliable. A new set of implementation plans has just been developed for
U.S.CLIVAR. Sister international programs under the WCRP include those
devoted to the Global Energy and Water Cycle (GEWEX), The Climate and
the Cryosphere (CLIC), and the Stratospheric Processes And their Role
in Climate (SPARC). Climate modeling is the integrating thread that
pulls all of these together, and substantial further research and
computational resources are needed, as documented in a recent NRC
report.
______
Response by Dr. Kevin Trenberth to Additional Question from Senator
Reid
Question. Have you received funding for climate related research
from non-governmental sources? If so, please generally identify those
sources.
Response. No, I have not received any funding from non-governmental
sources for climate related research, although I did receive some funds
from the Electric Power Research Institute to help publish my book
``Climate System Modeling'', Cambridge University Press, 1992, 788 pp.
__________
Statement of John R. Christy, University of Alabama in Huntsville
Mr. Chairman and committee members, I am pleased to accept your
invitation to speak to you again about climate change. I am John
Christy, Professor of Atmospheric Science and Director of the Earth
System Science Center at the University of Alabama in Huntsville. I am
also Alabama's State Climatologist and recently served as one of the
Lead Authors of the IPCC.
Carbon Dioxide
The concentration of carbon dioxide (CO2) is increasing
in the atmosphere due primarily to the combustion of fossil fuels.
Fortunately (because we produce so much of it) CO2 is not a
pollutant. In simple terms, CO2 is the lifeblood of the
biosphere. The green world we see around us would disappear if not for
atmospheric CO2. These plants largely evolved at a time when
the atmospheric CO2 concentration was many times what it is
today. Indeed, numerous studies indicate the present biosphere is being
invigorated by the human-induced rise of CO2. In and of
itself, therefore, the increasing concentration of CO2 does
not pose a toxic risk to the planet. It is the secondary impact of
CO2 that may present challenges to human life in the future.
It has been proposed that CO2 increases could cause climate
change of a magnitude beyond what naturally occurs that would force
costly adaptation or significant ecological stress. For example,
enhanced sea level rise and/or reduced rainfall would be two possible
effects likely to be costly to those regions so affected. Data from the
past and projections from climate models are employed to provide
insight on these concerns.
Climate Models
Climate models attempt to describe the ocean/atmospheric system
with equations which approximate the processes of nature. No model is
perfect because the system is incredibly complex. One modest goal of
model simulations is to describe and predict the evolution of the
ocean/atmospheric system in a way that is useful to discover possible
environmental hazards which lie ahead. The goal is not to achieve a
perfect forecast for every type of weather in every unique geographic
region, but to provide information on changes in large-scale features.
If in testing models for current large-scale features one finds
conflict with observations, this suggests that at least some
fundamental process, for example heat transfer, are not adequately
described in the models.
Global Averages
A common feature of climate model projections of global average
temperature changes due to enhanced greenhouse gasses is a rise in the
temperature of the atmosphere from the surface to 30,000 feet the true
bulk of the atmosphere. This temperature rise itself is projected to be
significant at the surface, with increasing magnitude as one rises
through this layer called the troposphere. Most people use the term
Global Warming to describe this possible human-induced temperature
rise.
Over the past 22-years various calculations of surface temperature
do indeed show a rise between +0.52 and +0.63 F (0.29 and 0.35 C
depending on which estimate is used.) This represents about half of the
total surface warming since the 19th century. In the troposphere,
however, the values, which include the satellite data Dr. Roy Spencer
of NASA and I produce, show only a very slight warming between +0.00
and +0.15 F (+0.00 and +0.08 C) a rate less than a third that observed
at the surface (Fig. 1). New evidence shown in Figs. 2 and 3 continues
to show the remarkable consistency between independent measurements of
these upper air temperatures.
Since the last time I testified before this committee, 1998 was
above the long term average, but 1999 and 2000 were below. So, rather
than seeing a warming over time that increases with altitude as climate
models project, we see that in the real world the warming decrease
substantially with altitude.
It is critically important in my view to correctly model
tropospheric temperature changes because this is where much of the
global atmospheric heat is stored, moved about and eventually expelled
to space. This layer also has a strong influence on surface temperature
through radiation processes. It is conceivable that a model which
retains too much heat in the troposphere, may also retain too much at
the surface when integrated over long time periods.
It is certainly possible that the inability of the present
generation of climate models to reproduce the reality of the past 22+
years may only reflect the fact that the climate experiences large
natural variations in the vertical temperature structure over such time
periods. By recognizing this however, any attention drawn to the
surface temperature rise over the past two decades must also
acknowledge the fact that the bulk of the atmospheric mass has not
similarly warmed.
Regional Averages
This disparity between observations and model results is a curious
and unexplained issue regarding the global average vertical temperature
structure. But we do not live 30,000 feet in the atmosphere, and we do
not live in a global average surface temperature. We live in specific
places. Local and regional projections of surface climate are very
difficult and challenging. An example from Alabama's past is useful
here only to illustrate the difficulty of providing local predictions
with a high level of confidence.
In Fig. 4 you will see several climate model runs which attempt to
reproduce Alabama's temperature from 1860 to the present, and one that
attempts to predict its temperature out to 2100. These complex models
incorporate solar changes, increasing CO2, aerosol cooling
(a highly uncertain hypothesis) and so on. It is clear that the model
runs did not do especially well over the time period of observations,
with none predicting the actual cooling we have seen in Alabama over
the last century. If in trying to reproduce the past we see such
errors, one must assume that predicting the future of regional climate
will be at least as difficult.
The models may have done fairly well in the global average, and may
have done acceptably well in many geographic locations, but these
results do not give me the confidence to understand how the weather
will be different in the coming century. (Please note that every
century is different from its predecessor because of natural
variations.) If in trying to reproduce the past we see such model
errors, one must assume that predicting the future would produce
similar opportunities for errors on a regional basis.
Weather Extremes and Climate Change
I want to encourage the committee to be suspicious of media reports
in which weather extremes are given as proof of human-induced climate
change. Weather extremes occur somewhere all the time. For example, in
the 48 conterminous States, the U.S. experienced the coldest combined
November and December in 106 years, yet that does not prove U.S. or
global cooling.
Has hot weather occurred before in the US? In my region of Alabama,
the 19 hottest summers of the past 108 years occurred prior to 1955. In
the midwest, of the 10 worst heatwaves, only two have occurred since
1970, and they placed seventh and eighth. Hot weather has happened
before and will happen again.
Similar findings appear from an examination of destructive weather
events. The intensity and frequency of hurricanes have not increased.
The intensity and frequency of tornadoes have not increased. The same
is true for thunderstorms and hail. (Let me quickly add that we now
have more people and much more wealth in the paths of these destructive
events so that the losses have certainly risen, but that is not due to
climate change.) Droughts and wet spells have not statistically
increased or decreased (Fig.5). Last summer's drought in Texas was not
the worst that State has seen. In fact, temperature trends for summers
in Texas are actually slightly downward.
One century is a relatively short time in climate scales. When
looking at proxy records of the last 2000 years for drought in the
Southwest, the record suggests the worst droughts occurred prior to
1600 (Fig. 6). The dust bowl of the 1930's appears as a minor event on
such a time scale. This should be a warning that with or without any
human influence on climate we should be prepared for a significant,
multi-year drought. (Low cost energy would help mitigate the costs of
transporting water to the stricken areas.)
When considering information such as indicated above, one finds it
difficult to conclude the climate change is occurring in the United
States and that it is exceedingly difficult to conclude that part of
that change might have been caused by human factors.
In the past 150 years, sea level has risen at a rate of 6 4 in. (15
cm 10 cm) per century and is apparently not accelerating. Sea level
also rose in the 17th and 18th centuries, obviously due to natural
causes, but not as much. Sea level has been rising naturally for
thousands of years (about 2 in. per century in the past 6,000 years).
If we look at ice volumes of past interglacial periods and realize how
slow ice responds to climate, we know that in the current interglacial
period (which began about 11,000 years ago) there is still more land
ice available for melting, implying continued sea level rise.
One of my duties in the office of the State Climatologist is to
inform developers and industries of the potential climate risks and
rewards in Alabama. I am very frank in pointing out the dangers of
beach front property along the Gulf Coast. A sea level rise of 6 in.
over 100 years, or even 50 years is minuscule compared with the storm
surge of a powerful hurricane like Frederick or Camille. Coastal areas
threatened today will be threatened in the future. The sea level rise,
which will continue, will be very slow and thus give decades of
opportunity for adaptation, if one is able to survive the storms.
Summary
Regional climate change, including that part that might be human
related, is essentially impossible to predict at this point. Will there
be an increase in 3-year droughts or a decrease? No one knows. I can
say with a high degree of certainty that some regions will see an
increase and some a decrease, because the climate is always changing.
I am decidedly an optimist. As Fig. 7 shows we in the U.S. will
continue to produce more and more of what the world wants (its food,
products, technology, defense, medical advances, and so on) with less
and less energy. I remember as a college student at the first Earth Day
being told it was a certainty that by the year 2000, the world would be
starving and out of energy. Such doomsday prophesies grabbed headlines,
but have proven to be completely false. Similar pronouncements today
about catastrophes due to human-induced climate change sound all too
familiar and all too exaggerated to me as someone who actually produces
and analyzes climate information.
__________
Statement of Jae Edmonds, Pacific Northwest National Laboratory,
Battelle Memorial Institute
Thank you Mr. Chairman and members of the Committee for the
opportunity to testify here this morning on energy and climate change.
My presence here today is possible because the U.S. Department of
Energy has provided me and my team at PNNL long-term research support.
Without that support much of the knowledge base upon which I draw today
would not exist. That having been said, I come here today to speak as a
researcher and the views I express are mine alone. They do not
necessarily reflect those of any organization. I will focus my remarks
on two matters: 1. The timing of the global response to climate change
needed to stabilize the concentration of greenhouse gases in the
atmosphere, and 2. The need to expedite the development of technologies
to achieve this goal at reasonable cost.
My remarks are grounded in a small number of important
observations. First, the United States is a party to the Framework
Convention on Climate Change (FCCC). The FCCC has as its objective the
``stabilization of greenhouse gas concentrations in the atmosphere at a
level that would prevent dangerous anthropogenic interference with the
climate system.'' (Article 2) This is not the same as stabilizing
emissions. Because emissions accumulate in the atmosphere, the
concentration of carbon dioxide will continue to rise indefinitely even
if emissions are held at current levels or slightly reduced. Limiting
the concentration of CO2, the most important greenhouse gas,
means that the global energy system must be transformed by the end of
the 21st century. Given the long life of energy infrastructure,
preparations for that transformation must start today.
Second, research that I have conducted with Tom Wigley at the
National Center for Atmospheric Research and Richard Richels at EPRI
indicates that, to attain global CO2 concentrations ranging
from 350 parts per million volume (ppmv) to 750 ppmv, global emissions
of CO2 must peak in this century and then begin a long-term
decline. Recall that the average concentration in 1999 was 368 ppmv and
pre-industrial values were in the neighborhood of 275 ppmv. The timing
and magnitude of the peak depends on the desired CO2
concentration as well as on a variety of factors shaping future U.S.
and global technology and economy. In 1997 global fossil fuel carbon
emissions were approximately 6.6 billion tonnes of carbon per year with
an additional approximately 1.5 billion tonnes of carbon per year from
land-use change such as deforestation. (The values for land-use change
emissions are known with much less accuracy than those of fossil fuel
emissions.) Values taken from the paper Drs. Wigley, Richels and I
published in Nature in 1996 for alternative CO2
concentrations, peak emissions and associated timing are given in the
table below:
----------------------------------------------------------------------------------------------------------------
CO2 Concentration (ppmv) 350 450 550 650 750
----------------------------------------------------------------------------------------------------------------
Maximum Global CO2 Emissions (billions of tonnes carbon 8.5 9.5 11.2 12.9 14.0
per year)...............................................
Year in which Global Emissions Must Break from Present Today 2007 2013 2018 2023
Trends..................................................
Year of Maximum Global Emission.......................... 2005 2011 2033 2049 2062
Year 2100 Global Fossil Fuel Emissions (billions of 0 3.7 6.8 10.0 12.5
tonnes carbon per year).................................
----------------------------------------------------------------------------------------------------------------
The time path of emissions will have a profound effect on the cost
of achieving atmospheric stabilization. The emissions paths we
developed were constructed to lower costs by avoiding the premature
retirement of capital stocks, taking advantage of the potential for
improvements in technology, reflecting the time-value of capital
resources, and taking advantage of the workings of the natural carbon
cycle-regardless of which concentration was eventually determined to
``prevent dangerous anthropogenic interference with the climate.'' It
is also important to note that the transition must begin in the very
near future. For example, for a global concentration of 550 ppmv,
global CO2 emissions must begin to break from present trends
(i.e. deviations of more than 100 million tonnes of carbon from present
trends) within the next 10 to 15 years. Given that it takes decades to
go from ``energy research'' to the practical application of the
research within some commercial ``energy technology'' and then perhaps
another three to four decades before that technology is widely deployed
throughout the global energy market, we will likely have to make this
deflection from present trends with technologies that are already
developed. To reduce global emissions even further will require a
fundamental transformation in the way we use energy and that will only
be possible if we have an energy technology revolution and that will
only come about if we increase our investments in energy R&D.
The table above shows that the global energy system, not just the
United States energy system, must undergo a transition from one in
which emissions continue to grow throughout this century into one in
which emissions peak and then decline. Coupled with significant global
population and economic growth, this transition represents a daunting
task even if a concentration as high as 750 ppmv is eventually
determined to meet the goal of the Framework Convention. A credible
commitment to limit cumulative emissions is also needed to move new
energy technologies ``off the shelf' and into wide spread adoption in
the marketplace.
Stabilizing the concentration of greenhouse gases in the atmosphere
will require a credible commitment to limit cumulative global emissions
of CO2. Such a limit is unlikely to be achieved without
cost. The cost of stabilizing the concentration of greenhouse gases
will depend on many factors including the desired concentration,
economic and population growth, and the portfolio of energy
technologies that might be made available. Not surprisingly costs are
higher the lower the desired concentration of greenhouse gases. They
are higher for higher rates of economic and population growth. And,
they are lower the better and more cost effective the portfolio of
energy technologies that can be developed.
It is not well recognized that most long-term future projections of
global energy and greenhouse gas emissions and hence, most estimates of
the cost of emission reductions, assume dramatic successes in the
development and deployment of advanced energy technologies occur for
free. For example, the Intergovernmental Panel on Climate Change
developed a set of scenarios based on the assumption that no actions
were implemented to mitigate greenhouse gas emissions. The central
reference case that assumes technological change as usual is called
IS92a. This central reference scenario assumes that by the year 2100
three-quarters of all electric power would be generated by non-carbon
emitting energy technologies such as nuclear, solar, wind, and hydro,
and that the growth of crops for energy (commercial biomass) would
account for more energy than the entire world's oil and gas production
in 1985. Yet with all these assumptions of technological success, the
need to provide for the growth in population and living standards
around the world drive fossil fuel emissions well beyond 1997 levels of
6.6 billion tonnes of carbon per year to approximately 20 billion
tonnes of carbon per year. Subsequent analysis by the IPCC as well as
independent researchers serves to buttress the conclusion that even
with optimistic assumptions about the development of technologies that
the concentration of in the atmosphere can be expected to continue rise
throughout the century.
My second point follows directly from the preceding observations.
Technology development is critical to controlling the cost of
stabilizing CO2 concentrations. Improved technology can both
reduce the amount of energy needed to produce a unit of economic output
and lower the carbon emissions per unit of energy used.
The Global Energy Technology Strategy Program to Address Climate
Change is an international, public/private sector collaboration \1\
advised by an eminent Steering Group \2\. Analysis conducted at the
Pacific Northwest National Laboratory as well as in collaborating
institutions during Phase I supports the need for a diversified
technology portfolio. No single technology controls the cost of
stabilizing CO2 concentrations under all circumstances. The
portfolio of energy technologies that is employed varies across space
and time. Regional differences in such factors as resource endowments,
institutions, demographics and economics, inevitably lead to different
technology mixes in different nations, while changes in technology
options inevitably lead to different technology mixes across time.
---------------------------------------------------------------------------
\1\Sponsors of the program were: Battelle Memorial Institute, BP,
EPRI, ExxonMobil, Kansai Electric Power, National Institute for
Environmental Studies (Japan), New Economic and Development
Organization (Japan), North American Free Trade Agreement-Commission
for Environmental Cooperation, PEMEX (Mexico), Tokyo Electric Power,
Toyota Motor Company, and the U.S. Department of Energy. Collaborating
research institutions were: The Autonomous National University of
Mexico, Centre International de Recherche sur l'Environnment et le
Developpement (France), China Energy Research Institute, Council on
Agricultural Science and Technology, Council on Energy and Environment
(Korea), Council on Foreign Relations, Indian Institute of Management,
International Institute for Applied Systems Analysis (Austria), Japan
Science and Technology Corporation, National Renewable Energy
Laboratory, Potsdam Institute for Climate Impact Research (Germany),
Stanford China Project, Stanford Energy Modeling Forum, and Tata Energy
Research Institute (India).
\2\Richard Balzhiser, President Emeritus, EPRI; Richard Benedick,
Former U.S. Ambassador to the Montreal Protocol; Ralph Cavanagh, Co-
director, Energy Program, Natural Resources Defense Council; Charles
Curtis, Executive Vice President, United Nations Foundation; Zhou Dadi,
Director, China Energy Research Institute; E. Linn Draper, Chairman,
President and CEO, American Electric Power; Daniel Dudek, Senior
Economist, Environmental Defense Fund; John H. Gibbons, Former
Director, Office of Science and Technology Policy, Executive Office of
the President; Jose Goldemberg, Former Environment Minister, Brazil;
Jim Katzer, Strategic Planning and Programs Manager, ExxonMobil; Yoicbi
Kaya, Director, Research Institute of Innovative Technology for the
Earth, Government of Japan; Hoesung Lee, President, Korean Council on
Energy and Environment; Robert McNamara, Former President, World Bank;
John Mogford, Group Vice President, Health, Safety and Environment BP;
Granger Morgan, Professor, Carnegie-Mellon University; Hazel O'Leary,
Former Secretary, U.S. Department of Energy; Rajendra K. Pachauri,
Director, Tata Energy Research Institute; Thomas Schelling,
Distinguished University Professor of Economics, University of
Maryland; Hans-Joachim Schellnhuber, Director, Potsdam Institute for
Climate Impact Research; Pryadarshi R. Shukla, Professor, Indian
Institute of Management; Gerald Stokes, Assistant Laboratory Director,
Pacific Northwest National Laboratory; John Weyant, Director, Stanford
Energy Modeling Forum; and Robert White, Former Director, National
Academy of Engineering.
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Technologies that are potentially important in stabilizing the
concentration of CO2 include energy efficiency and renewable
energy forms, non-carbon energy sources such as nuclear power and
fusion, improved applications of fossil fuels, and technologies such as
terrestrial carbon capture by plants and soils, carbon capture and
geologic sequestration, fuel cells and batteries, and commercial
biomass. Many of these technologies are undeveloped or play only a
minor role in their present state of development. Energy research and
development by both the public and private sectors will be needed to
provide the scientific foundations needed to achieve improved economic
and technical performance, establish reliable mechanisms for monitoring
and verifying the disposition of carbon, and to develop and market
competitive carbon management technologies. For example, advances in
the biological sciences hold the promise of dramatically improving the
competitiveness of commercial biomass as an energy form.
Recent trends in public and private spending on energy research and
development in the world and in the United States suggest that the role
of technology in addressing climate change may not be fully understood
nor appreciated. Although public investment in energy R&D has increased
slightly in Japan, it has declined somewhat in the United States and
dramatically in Europe, where reductions of 70 percent or more since
the 1 980's are the norm. Moreover, less than 3 percent of this
investment is directed at technologies that, although not currently
available commercially at an appreciable level, have the potential to
lower the costs of stabilization significantly.
In summary, stabilizing the concentration of greenhouse gases at
levels ranging up to 750 ppmv represents a necessary but daunting
challenge to the world community. Energy related emissions of
CO2 must peak and begin a permanent decline during this
century. The lower the desired concentration, the more urgent the need
to begin the transition. Both a credible global commitment to limit
cumulative emissions and a portfolio of technologies will be needed to
minimize the cost of achieving that end including technologies that are
not presently a significant part of the global energy system. Their
development and deployment will require enhanced energy R&D by both the
public and private sectors. Unfortunately, current trends in energy R&D
are cause for concern.
Mr. Chairman, thank you for this opportunity to testify. I will be
happy to answer your and the committee's questions.
______
__________
Statement of Rattan Lal, Director, Carbon Management and Sequestration
Program, Ohio Agriculture Research and Development Center, Ohio State
University, Columbus, OH
Soil Carbon Sequestration To Reduce Net Gaseous Emissions
Mr. Chairman, members of the Committee on Environment and Public
Works. I am Rattan Lal, Professor of Soil Science and Director of the
Carbon Management and Sequestration Program at The Ohio State
University. I am especially thankful to Senator Voinovich for the
opportunity to offer testimony on ``Soil Carbon Sequestration to Reduce
Net Gaseous Emissions.''
Let me begin by expressing my appreciation of strong cooperation
with several institutions and organizations across the country. During
the past decade, the program at The Ohio State University (OSU) has
been supported by USDA-Natural Resource Conservation Service (NRCS). I
cannot thank NRCS enough for its past, present and future support. We
have also worked with scientists from USDA-Agricultural Research
Service (ARS). The multi-institutional team comprised of OSU/NRCS/ARS
has published 12 books, which constitute a major literature on this
topic. In addition, OSU also has on-going programs with the Pacific
Northwest National Laboratory and the Oak Ridge National Laboratory.
Being a founding member of the ``Consortium for Agricultural Soils
Mitigation of Greenhouse Gases (CASMGS),'' the OSU team is
collaborating with faculty from ten universities in developing a long-
term program on soil carbon sequestration. Following up on the research
done for estimating the potential of U.S. cropland and grazing lands to
sequester carbon, OSU/NRCS group is now working with USDA-Forest
Service (FS) to estimate the potential of U.S. forest soils to
sequester carbon. We are presently formulating a program with the Los
Alamos National Laboratory, in cooperation with the Ohio Coal
Development Office and American Electric Power, to develop a long-term
program on soil C sequestration, soil quality and net primary
productivity of different ecosystems, with immediate focus on
reclamation of mineland sites in Ohio, West Texas and New Mexico. We
are also working with USDA-Economic Research Service (ERS) on the topic
of soil degradation and its effects on productivity and the C dynamics.
We are working with these partners because we share the same values and
goals of ``sustainable management of soil and water resources, reducing
net emissions, and creating a clean environment.''
The basis of our shared commitment is the mutual concern about the
quality of the nation's soil and water resources and the environment.
We realize how important and critical the quality of soil resources is
for maintaining high economic agricultural production while moderating
the quality of air and water. Advances in soil science, especially
those in relation to efficient use of water and nutrients by input-
responsive and high yielding varieties, broke the yield barriers,
ushered in the Green Revolution, and brought about a quantum jump in
agricultural production in the post-World War II era. Gains in
agricultural production globally during the second half of the 20th
century saved millions from starvation, and once again proved the neo-
Malthusian views wrong. Now we want to use the knowledge of soil
science in addressing another important and global issue of the modern
era--reducing net emissions of greenhouse gases into the atmosphere.
The atmosphere is a classic example of a common pool resource that
is prone to exploitation. With industrialization and expansion of
agriculture, through deforestation and plowing, comes soil degradation
and emission of gases into the atmosphere. Indeed, the atmospheric
concentration of three important greenhouse gases (carbon dioxide,
methane and nitrous oxide) has been increasing due to anthropogenic
perturbations of the global carbon and nitrogen cycles. For example,
the pre-industrial concentration of carbon dioxide at 280 parts per
million (0.028 percent or 600 billion tons or Gt) increased to almost
365 ppm (0.037 percent or 770 Gt) in 1998 and is increasing at the rate
of 0.5 percent/yr or 3.8 Pg/yr. The historic gaseous increase between
1850 and 1998 has occurred due to two activities: (1) fossil fuel
burning and cement production which has contributed 270 (+30) Gt of
carbon as CO2, and (2) deforestation and soil cultivation
which has emitted 136 (+55) Gt. Of this, the contribution from world
soils may have been 78 (+17) Gt of which 26 (+9) Gt may be due to
erosion and related soil-degradative processes. In comparison with the
global emissions, cropland soils of the United States have lost 3 to 5
Gt of carbon since conversion from natural to agricultural ecosystems.
Greenhouse gases are released into the atmosphere when trees are
cut down and burnt, soils plowed, and wetlands are drained and
cultivated. In addition, excessive soil cultivation and inappropriate
or inefficient use of nitrogenous fertilizers can result in emission of
greenhouse gases from soil to the atmosphere. Finally, accelerated soil
erosion can lead to a drastic reduction in soil organic carbon (SOC)
content. Although the fate of the carbon that is transported by wind
and water is not well understood, it is believed that a considerable
portion of the eroded carbon may be mineralized and emitted into the
atmosphere. It is estimated that soil erosion annually emits 1.1 Gt of
C globally and 0.15 Gt from soils of the United States. Although
agricultural processes are presently not the main source of gaseous
emissions, they have clearly been a significant source. Yet, the
emissions of C from soils are reversible through conversion to a
restorative land use and adoption of recommended agricultural
practices. These estimates of the amount of lost C, crude as these may
be, provide a reference point about the sink capacity through land use
conversion and adoption of recommended practices.
Soil organic matter (SOM), of which 58 percent is carbon, is one of
our most important national resources. It consists of a mixture of
plant and animal residues at various stages of decomposition and by-
products of microbial activity. The SOM is a minor component of the
soil (1-3 percent), but plays a very important role in biological
productivity and ecosystem functions. Enhancing SOM content is
important to improving soil quality, reducing risks of pollution and
contamination of natural waters, and decreasing net gaseous emissions
to the atmosphere. The SOM pool can be enhanced through: (1)
restoration of degraded soils and ecosystems, and (2) intensification
of agriculture on prime soils.
Enhancing the SOM pool is an important aspect of restoration of
soils degraded by severe erosion, salinization, compaction, and
mineland disturbance. Degraded soils have been stripped of a large
fraction of their original SOM pool. There are 305 million hectares
(Mha) of moderately and severely degraded soils worldwide. U.S.
cropland prone to moderate and severe erosion is estimated at 20.4 Mha
by wind erosion and 24.3 Mha by water erosion. An additional 20 Mha are
prone to salinization, and 0.6 Mha of land strip-mined for coal is in
need of restoration.
Land conversion and restoration transforms degraded lands into
ecologically compatible land use systems. The Conservation Reserve
Program (CRP) is designed to convert highly erodible land from active
crop production to permanent vegetative cover for a 10-year period. In
addition to erosion control, land under CRP can sequester carbon in
soil at the rate of 0.5 to 1.0 t/ha/year (450 to 900 lbs C/acre/yr).
Erosion control also involves establishing conservation buffers and
filter strips. These vegetated strips, ranging from 5 to 50 m wide
(16.5 to 165 ft. wide) are installed along streams as riparian buffers
and on agricultural lands to minimize soil erosion and risks of
transport of non-point source pollutants into streams. The rate of C
accumulation in soil under conservation buffers is similar to that of
the land under CRP. The USDA has a voluntary program to develop 3.2
million km (2 million miles) of conservation buffers.
Wetlands are also an important component of the overall
environment. Approximately 15 percent of the world's wetlands occur in
the United States (40 Mha or 100 million acres) of which 2 Mha (5
million acres) are in need of restoration. Natural wetlands have a
potential to accumulate carbon (net of methane) at the rate of 0.2 to
0.3 t/ha/yr (180 to 270 lbs/acre/yr).
Surface mining of coal affected 30,375 ha (75,025 acres) of land in
the U.S. during 1998. Restoring minelands, through leveling and using
amendments for establishment of pastures and trees, has a potential to
sequester 0.5 to 1 t C/ha/yr (450 to 900 lbs C/acre/yr) for 50 years.
Similar potential exists in restoring salt-affected soils.
The overall potential of restoration of degraded soils in the
United States is 17 to 39 million metric tons or Tg per year for the
next 50 years. Intensification of agriculture involves cultivating the
best soils using the best management practices to produce the optimum
sustainable yield. Some recommended agricultural practices, along with
the potential of SOC sequestration are listed in Table 1. Conversion
from plowing to no till or any other form of a permanent conservation
till has a large potential to sequester carbon and improve soil
quality. There is a strong need to encourage the farming community to
adopt conservation tillage systems.
Adoption of recommended practices on 155 Mha (380 million acres) of
U.S. cropland has a potential to sequester 58 to 170 Tg C/yr. Grazing
lands, rangeland and pastures together, occupy 212 Mha (524 million
acres) of privately owned land and 124 Mha (300 million acres) of
publicly owned land.
Total soil C sequestration potential of U.S. grazing land is 22 to
98 Tg C/yr.
The potential of U.S. forest soils to sequester C is 48 to 86 Tg C/
yr (Birdsey, 2001).
Thus, the total potential of U.S. agricultural and forest soils
(Table 2) is 145 to 393 Tg C/yr or an average of 270 Tg C/yr.
Total U.S. emissions were 1840 Tg CE/yr in 1999 (USEPA, 2000), and
are increasing at 2 percent/yr. Thus, the emissions in 2001 are about
1914 Tg C/yr, of which the contribution of all agricultural practices
is 42.9 MMTCE/yr. Therefore the potential carbon sequestration in U.S.
soils represents 14 percent of total U.S. emissions, and 6.3 times the
emissions from agricultural activities. Thus, soil C sequestration
alone can reduce the net emissions. The U.S. commitment under the Kyoto
Protocol is reducing emissions by about 660 MMTCE. Thus, soil C
sequestration can account for 40 percent of the commitment.
The current net C sinks are estimated at 270 Tg/yr, which comprise
only 21 Tg/yr of soil C sequestration (USEPA, 2000). If the full
potential of soil C sequestration is realized, the total sink capacity
can be 519 Tg C/yr (Table 3), which is 78 percent of the commitment
under the Kyoto Protocol. These statistics indicate the need for a
serious consideration of determining what fraction of the total
potential is realizable, at what cost and by what policy instruments.
There is a widespread perception that agricultural practices cause
environmental problems, especially those related to water contamination
and the greenhouse effect. Our research has shown that scientific
agriculture and conversion of degraded soils to a restorative land use
can also be a solution to environmental issues in general and to
reducing the net gaseous emissions in particular. Thus, soil carbon
sequestration has a potential to reduce the net U.S. emissions by 270
Tg C/yr. This potential is realizable through promotion of CRP, WRP,
erosion control and restoration of degraded soils, conservation
tillage, growing cover crops, improving judicious fertilizer use and
precision farming.
Actions that improve soil and water quality, enhance agronomic
productivity and reduce net emissions of greenhouse gases are truly a
win-win situation. It is true that soil C sequestration is a short-term
solution to the problem of gaseous emissions. In the long term,
reducing emissions from the burning of fossil fuels by developing
alternative energy sources is the only solution. For the next 50 years,
however, soil C sequestration is a very cost-effective option, a
``bridge to the future'' that buys us time in which to develop those
alternative energy options.
References
1. Birdsey, R. 2001. Potential carbon storage in forest soils of
the U.S. Unpublished, USDA-FS.
2. Lal, R., J. Kimble, E. Levine and B.A. Stewart (eds). 1995.
Soils and Global Change. Advances in Soil Science, Lewis Publishers,
Chelsea, MI, 440 pp.
3. Lal, R., J. Kimble, E. Levine and B.A. Stewart (eds). 1995. Soil
Management and Greenhouse Effect. Advances in Soil Science, Lewis
Publishers, Chelsea, MI, 385 pp.
4. Lal, R., J.M. Kimble, R.F. Follett and B.A. Stewart (eds). 1998.
Soil Processes and the Carbon Cycle. CRC. Boca Raton, FL, 609 pp.
5. Lal, R., J.M. Kimble, R.F. Follett and B.A. Stewart (eds). 1998.
Management of Carbon Sequestration in Soils. CRC, Boca Raton, FL, 457
pp.
6. Lal, R., J.M. Kimble, R.F. Follett and C.V. Cole. 1998. The
Potential of U.S. Cropland to Sequester C and Mitigate the Greenhouse
Effect. Ann Arbor Press, Chelsea, MI, 128 pp.
7. Lal, R., J.M. Kimble and B.A. Stewart (eds). 2000. Global
Climate Change and Pedogenic Carbonates. Lewis/CRC Publishers, Boca
Raton, FL, 378 pp.
8. Lal, R., J.M. Kimble and B.A. Stewart. 2000. Global Climate
Change and Tropical Ecosystems. Lewis/CRC Publishers, Boca Raton, FL,
438 pp.
9. Lal, R., J.M. Kimble and B.A. Stewart 2000. Global Climate
Change and Cold Regions Ecosystems. CRC/Lewis Publishers, Boca Raton,
FL.
10. Lal, R., J.M. Kimble and R.F. Follett (eds). 2001. Assessment
Methods for Soil Carbon. CRC/Lewis Publishers, Boca Raton, FL, 676 pp.
11. Follett, R.F., J.M. Kimble and R. Lal (eds). 2000. The
Potential of U.S. Grazing Lands to Sequester Carbon and Mitigate the
Greenhouse Effect. CRC/Lewis Publishers, Boca Raton, FL, 442 pp.
12. Lal, R. and J.M. Kimble. 1997. Conservation tillage for carbon
sequestration. Nutrient Cycling in Agroecosystems, 49, 243-253.
13. Lal, R., R.F. Follett, J.M. Kimble and C.V. Cole. 1999.
Managing U.S. cropland to sequester carbon in soil. J. Soil Water
Conserv. 54: 374-381.
14. Lal, R. (ed) 2001. Soil Carbon Sequestration and the Greenhouse
Effect. Special Publication, Soil Science Society of America, Madison,
WI.
15. Lal, R. 1999. Soil management and restoration for C
sequestration to mitigate the greenhouse effect. Prog. Env. Sci. 1:
307-326.
16. Lal, R. and J.P. Bruce. 1999. The potential of world cropland
to sequester carbon and mitigate the greenhouse effect. Env. Sci. &
Policy 2: 177-185.
17. Lal, R. 2000. Carbon sequestration in drylands. Annals Arid
Zone 38: 1-11.
18. Izaurralde, R.C., N.J. Rosenberg and R. Lal. 2001. Mitigation
of climate change by soil carbon sequestration. Adv. Agron. 70: 1-75.
19. Lal, R. 2001. World cropland soils as a source or sink for
atmospheric carbon. Adv. Agron. 71: 145-191.
20. Lal, R. 2000. We can control greenhouse gases and feed the
world--with proper soil management. J. Soil Water Conserv. 55: 429-432.
21. Lal, R. 2001. Potential of desertification control to sequester
carbon and mitigate the greenhouse effect. Climate Change.
22. USEPA 2000. Inventory of U.S. Greenhouse Gas Emissions and
Sinks: 1990-1999 (draft). EPA 23RR-00-001.
Table 1. Recommended practices for soil C sequestration. Practice
Potential rate of soil carbon sequestration (t/ha/yr) Conservation
tillage & mulch farming Compost and manuring Elimination of summer
fallow Growing winter cover crops Integrated nutrient management/
precision farming Improved varieties and cropping systems Water
conservation and water table management Improved pasture management
Afforestation/reforestation Fertilizer use in forest soils Restoration
of eroded mineland and otherwise degraded soils 0.1-0.5 0.05-0.5 0.05-
0.4 0.2-0.5 0.1-0.4 0.05-0.4 0.05-0.3 0.05-0.3 0.08-0.4 0.8-3.0 0.3-1
Source: Lal et al. (1998); Follett et al. (2000); Birdsey (2000)
Table 2. Total potential of U.S. agricultural soils for C
sequestration. Strategy Potential of soil C sequestration (MMT C/yr)
Land conversion and restoration Intensification of cropland Improved
management of grazing land Improved management of forest soils Total
17-39 58-170 22-98 48-86 145-393 (270 + 175)
Source: Lal et al. (1998); Follett et al. (2000); Birdsey (2000)
Table 3. Potential sink capacity of terrestrial ecosystems.
Activity Sink capacity (Tg C/yr) Above-ground forest Soils Landfill
Total 247 270 *2 519
*The soil sink potential can be realized through policy
intervention, and needs to be adjusted for hidden C costs of input
used.
______
Responses of Rattan Lal to Additional Questions from Senator Corzine
Question 1. What are your recommendations for carbon sequestration
on a project level?
Response. Soil carbon plays an important role in the global carbon
cycle. World soils contain 2300 billion tons of carbon to 1-meter
depth, of which 1,550 billion tons is organic carbon and 750 billion
tons is inorganic carbon. In comparison, world biota (trees, shrubs,
grasses, plants, etc.) contain 560 billion tons of carbon. The
atmospheric pool contains 760 billion tons, and is presently increasing
at the rate of about 3.5 billion tons per year. Therefore, the soil
carbon pool is about 4.1 times the biotic pool, and about 3 times the
atmospheric pool.
There are 4 other points that are important with regards to soil
carbon pool:
(i) There is a direct link between the soil carbon pool and the
atmospheric pool. Change in soil carbon pool by 1 billion ton
translates into the atmospheric concentration of carbon dioxide by 0.47
parts per million by volume.
(ii) The mean residence time of carbon in soil is longer than that
in the biota, which is 25 years in soil and about 5 years in the biota
on a global scale.
(iii) The carbon pool in world's managed soils is now lower than
their potential capacity because of the historic loss (because of
plowing, low input agriculture, biomass removal or burning) and
prevalence of soil degradative processes (e.g., erosion, compaction,
etc.) The historic loss of soil carbon pool is estimated at 60 to 90
billion tons for soils of the world and 3 to 5 billion tons for those
of the U.S. The strategy is to increase soil carbon pool through
management techniques that enhance carbon sequestration.
(iv) There is a close inter-dependence between soil carbon and the
biotic carbon pools. Increase in soil carbon pool leads to increase in
the biotic pool because of an overall improvement in soil quality.
Question 2. Would you agree that carbon sequestration should be
conducted on project level?
Response. Yes, implementation of ``projects'' for carbon
sequestration is a good strategy. However, a ``project'' must be
considered in a broader context. The project may involve: (i)
restoration of degraded soils (e.g., mineland soils and steeplands,
eroded soils), (ii) adoption of improved management practices on
croplands, and (iii) implementing improved management of grazing land.
Improved management of disturbed/degraded soils may involve
afforestation and use of amendments. Agricultural intensification on
cropland may involve conversion from plow till to no till farming,
application of manure, integrated nutrient management with precision
farming, growing winter cover crops, elimination of summer fallow, and
changing methods of irrigation. Further, highly erodible land (HEL) can
be taken out of production and converted to Conservation Reserve
Program (CRP).
Adoption of improved practices on grazing land may involve
establishing different species, and injecting manure in the rangeland.
All land use projects have soil carbon sequestration as an integral
component of carbon balance.
In all projects, including these involving afforestation, it is
utterly important to monitor ``total or ecosystem carbon.'' The
ecosystem carbon involves both above ground (biomass) and below ground
(soil carbon) pools.
Similar to the carbon in the biomass (above ground), methodology
exists to monitor and verify soil carbon pool and fluxes. The project
level information on carbon sequestration is incomplete unless full
accounting is done for both above ground (biomass) and soil carbon pool
and fluxes.
Question 3. In the absence of rules for sinks projects under the
Kyoto Protocol, would it be possible to trade credits via a voluntary
national scheme?
Response. Yes, private trading is already being done and must be
encouraged. There is a U.S. voluntary carbon trading market. Several
utility companies, including Greenhouse Emissions Management Consortium
(GEMCO), are already trading credits. The AEP is involved in a large
venture in Brazil, Bolivia and Belize. This is an encouraging
development.
As a soil scientist, a major concern I have about carbon trading is
the value of carbon. Soil carbon is currently being traded (by GEMCO
and others) at a price of $3 to $6 per ton of carbon. This is too low a
value because at a sequestration rate of 100 to 200 lbs/acre/year,
farmers will practically get nothing for their efforts. Thus, there is
an urgent need to identify parameters necessary to assess the
``societal'' value of soil carbon for trading carbon credits. The
societal value must consider onsite benefits and ancillary effects of
soil carbon sequestration.
Question 4. Should a partnership be established now between
companies that manage forests for harvest?
Response. Yes, partnerships can be established. The objectives are
to plant forest on degraded soils and save the existing forest
especially in the tropical rainforest ecosystem. When forest is planted
on degraded soils, companies that manage forests must monitor both
biomass and soil carbon. Further, the land already cleared (for
pastures or cropland) must be managed judiciously to reduce the need
for clearing new land.
__________
Statement of James E. Rogers, Chairman, President and Chief Executive
Officer, Cinergy Corp.
Mr. Chairman and members of the committee, my name is Jim Rogers
and I am the chairman, president, and CEO of Cinergy Corp. I would like
to thank you for giving me the opportunity to share my thoughts on
global climate change and suggest how Congress might consider this
critical issue, especially in the context of developing a comprehensive
emission reduction strategy for the electricity industry.
Introduction
It was my pleasure to testify before this subcommittee just 2 weeks
short of a year ago on the need for a coordinated comprehensive
emissions reduction program for coal-fired power plants.
My views have not changed since that hearing. With the growing
national demand for more electric generation, energy producers more
than ever need the certainty that a comprehensive longer-term program
would bring. I believe that Congress, in considering a long-term
comprehensive approach to power plant emissions, must consider the
uncertainties and challenges posed to my industry by the climate change
issue. If indeed, the legislation is intended to build some kind of
``certainty'' into our planning process, climate change must be on that
environmental road map.
There are those in my industries and others who believe any plan
that considers climate change will doom the coal industry. I disagree
and, in fact, am a firm believer that no climate change policy--one
that is accepted by the public--can be successful if it ignores our
most plentiful domestic natural resource.
Coal-fired power plants, which supply more than half of the
nation's electricity, face a battery of existing and proposed emission
control requirements from Federal and State agencies and even
neighboring countries. These requirements and proposed new programs are
focused primarily on the reductions of four power plant emissions:
Sulfur dioxide, nitrogen oxides, mercury and carbon dioxide.
Because these regulatory initiatives are largely uncoordinated and
often conflicting, the electric power industry faces enormous
uncertainties as it tries to develop appropriate plans to upgrade
plants and add pollution control equipment. Utility planners are even
more challenged by the need to ensure their customers continue to
receive reliable and affordable energy.
But, the unfortunate results of today's regulatory soup are
unnecessarily high costs for both shareholders and consumers, longer
downtimes for our generating stations and continued uncertainty in an
industry that is critical to the U.S. economy. Our progress on clean
air has not been what it could--or should--be. We appreciate the
interest expressed by Chairman Smith, Chairman Voinovich, Ranking
Member Reid and Ranking Member Lieberman in promoting a legislative
solution to this vexing regulatory problem. I am optimistic that this
Congress and the new Administration will work together to reduce power
plant emissions in a comprehensive manner and I look forward to working
with you to make that happen.
Cinergy's Environmental Commitment
Cinergy has a lot at stake. We are one of the nation's leading
diversified energy companies with a total capitalization of $9.0
billion and assets of $12.0 billion. Our Energy Merchant segments owns
or operates nearly 21,000 megawatts of electric and combined heat plant
generation in the U.S. and overseas. Approximately 14,000 of those
megawatts comprise our core system of 14 baseload stations and seven
peaking stations located in Ohio, Indiana and Kentucky, where we serve
1.5 million electric and 500,000 retail gas customers.
While we have made substantial investments in renewable energy,
combined heat and power plants, microturbines and fuel cells and other
emerging technologies, much of the electricity we produce here in the
U.S. is generated by coal-fired power plants located in the Ohio River
valley.
Last year, Cinergy burned 29.2 million tons of coal in our
generating stations and we project our coal consumption will continue
to grow in the foreseeable future. As you can see from the chart, coal
is vital to the Midwestern economy, supplying 80 percent of the
generation in 1999.
We're proud that the fuel we've purchased has provided a livelihood
to thousands from West Virginia to Illinois. But we're equally proud of
our environmental record, which tells the story of progress made in
reducing the emissions from our coal-fired power plants.
Since 1990, we've invested more than $650 million in scrubbers,
precipitators, low nitrogen oxide burners, selective non-catalytic
reduction units and a clean coal technology project at our Wabash River
Station in Indiana. These technology improvements have resulted in a 47
percent decrease in our sulfur dioxide emission rate and a 25 percent
drop in our emissions rate for nitrogen oxides. The future promises
even more.
Over the next 5 years, we plan to buildup to 11 selective catalytic
reduction units on our power plants, significantly reducing our
nitrogen oxide emissions. We will also install sophisticated computer
software to improve our plants' coal combustion process and boiler
efficiency. We have already pioneered with success the use of selective
non-catalytic reduction at one of our Ohio plants and will explore
further use of this technology.
Our goal is clear: We will strive to reduce the impact the
company's coal-fired power plants have on our environment as cost-
effectively as possible in order to keep electricity costs reasonable.
Congress can help put the logic back in environmental policy with a
comprehensive multi-emission bill that sets the course for cleaner air,
fuel diversity and reasonable goals. By passing such legislation, you
can remove one of the ``question marks'' that hang over our industry as
we struggle to meet a growing need for electric power.
A comprehensive approach must address reasonable timetables for
further reductions in sulfur dioxide and nitrogen oxides and new
reductions of mercury. It must fix New Source Review and give utilities
maximum flexibility to meet the nation's environmental goals while
still keeping the lights on.
The Climate Challenge
Obviously, I am not a climate scientist but I have tried to follow
the scientific debate that has occurred over the years on global
climate change.
Most atmospheric scientists seem to agree that human activities are
affecting the climate on Earth although there is still debate over the
significance, timing and impact on the planet. While the science will
certainly advance in the years to come, I am convinced that it is
prudent to take action now to address what we do know.
This does not mean we must act precipitously and without careful
and complete debate over the proper long-term response. We should
remember that this problem has been created by two centuries of
industrialization. We cannot change our way of life overnight and we
will be mired in endless debate if we try.
But we need to start down the road.
The U.S. electric utility industry, in fact, began that journey 7
years ago, becoming one of the earliest industrial sectors to take a
major step to dramatically reduce its carbon emissions. Beginning in
1994 with the Climate Challenge, Cinergy and other utilities
representing more than 70 percent of the electric generation in the
United States, enrolled in a voluntary carbon emission reporting and
reduction program. Under the Climate Challenge the electric utility
industry reduced, avoided, or sequestered 124 million tons of
CO2 equivalent green house gases in 1999.
The industry believes that future voluntary programs to reduce or
offset greenhouse gas emissions can be just as successful. Even though
the Climate Challenge pledged carbon reductions and offsets only
through the year 2000, many of the programs initiated under the
Challenge will continue to deliver reductions and offsets for many
years.
cinergy's commitment to addressing climate change
As an original participant in the Climate Challenge, Cinergy has
been actively involved in a number of projects, both at home and
abroad, to reduce or offset our carbon emissions. Ten years ago,
Cinergy's operating companies, PSI Energy and The Cincinnati Gas &
Electric Company, were more than 95 percent coal-fired. Our profile
today is much different. Through our Cinergy Solutions, Global Power
and Capital and Trading affiliates, we have invested in natural gas,
combined heat and power, cogeneration and renewable projects that now
account for 32 percent of our total electric production. Another
Cinergy affiliate, Vestar, provides energy facility and infrastructure
improvements and energy management services to large users, making them
more energy efficient. We have chosen to invest many of our R&D dollars
in so-called ``disruptive technologies'' that are already beginning to
alter the way traditional utilities do business. These technologies
fall into categories such as e-commerce, information management,
digital utility, retail services and distributed generation--all of
which contribute either directly or indirectly to increased
efficiencies and reduced carbon emissions. Cinergy has partnered with
The Nature Conservancy and other utilities in operating a 125,000-acre
tropical forest preservation and management project in Belize. It is
estimated that this project will sequester five million tons of carbon
as well as protect the forest from being developed for agricultural
purposes. We are investing over $2 million in cooperation with The
Nature Conservancy, Ducks Unlimited, the National Wild Turkey
Federation, Quail Unlimited and local communities to plant three
million trees and thousands of acres of native grasses here in the
United States. These projects not only sequester carbon but they also
enhance the local environment and can be effective land conservation
tools.
pragmatism must underpin our next steps
All these projects and plans say one thing loud and clear: The
electric utility industry has already begun successfully addressing the
climate change issue and is positioned to make further progress in the
years ahead. This is not to say that we can do everything all at once
without massive impacts on the reliability and cost of electricity.
President Bush's recent letter to Senator Hagel and others on climate
change highlights the reality that some cures may be unacceptably
disruptive, at least in my industry. For example, Cinergy has not and
cannot support the Kyoto Protocol. We have the same concerns regarding
developing nation coverage that the Senate recognized in its 95-0
support for the Byrd-Hagel Resolution back in 1997. We cannot, as the
Kyoto Protocol requires, turn back the clock to 1990 in a few short
years. Cinergy, like most electric power companies in this country, fed
the decade's economic boom with progressively higher demands for
electricity. This robust growth led to similar growth in our carbon
emissions. As a practical matter, we cannot return to those levels by
the end of this year or by the end of this decade. As I read the
President's letter, I noted his concern about global climate change and
his desire to address it in a reasonable, timely matter and in a way
that doesn't disrupt our economy. He said ``no'' to Kyoto but he didn't
put global climate change on the shelf. I agree with the President's
view and believe we need to move beyond the debate over the Kyoto
Protocol to create a workable climate change program. I also agree with
the President's view that carbon dioxide should not be regulated as a
``pollutant'' under the Clean Air Act. The tools provided in the Act to
fight smog in Los Angeles or acid rain in New Hampshire are
inappropriate to address the slow buildup of greenhouses gases
worldwide. There are no silver bullets out there that can ``fix'' the
greenhouse gas problem quickly. Global climate change is the most
challenging environmental issue we've ever faced. We have technologies
that can scrub most of the sulfur dioxide, nitrogen oxides and reduce
mercury and particulates out of our smokestacks There is no such
technology for carbon. That doesn't mean, of course, that power
generators cannot go forward with a program to reduce greenhouse gases
through other means, as the industry has demonstrated in the Climate
Challenge program.
FIRST STEPS IN IDENTIFYING SOLUTIONS TO THE CLIMATE ISSUE
While global climate change is a long-term problem that demands a
long-term solution, we need to take steps now to begin reducing our
greenhouse gas emissions. Congress should base any response on three
truisms: First, the national economy depends on an ample supply of
energy and those of us who produce that energy can only do so if we are
able to use all the fuel sources available to us. This country is
facing a looming energy shortage and we simply can't turn our backs on
the abundant supply of fossil fuels that are providing most of
America's electric generation. Second, voluntary programs, economic
incentives and market approaches and flexibility are the keys to cost-
effective greenhouse gas reductions. Third, there must be a recognition
that a greenhouse gas strategy for the nation and, specifically, for
the electric utility industry, must consist of both a near-term program
that focuses on flattening our carbon growth curve and long-term goals
that focus on the technological solutions that ultimately will be
needed. Based on these considerations, a short to mid-term program
should have the following attributes.
Reasonable Goals
The program should not set these early goals so high as to knock
current generating stations out of the box. We need these plants for
the foreseeable future and companies should be allowed to recoup the
capital investments they have made to supply their customers with
electric power.
Broad Goals
Congress should consider setting industry goals but should not try
to impose these goals or targets on a unit-by-unit or generating
station by generating station basis. Since there is no technological
fix to reduce greenhouse gases on existing plants, targets aimed so
narrowly would result in many of these plants being closed.
Consideration of Growth and Costs
Congress should consider both economic growth and the costs
involved. Goals could be based on current emission levels or
established by using a future level. A growth factor based on the most
efficient generation available or a cost ceiling may provide
appropriate safeguards.
Flexibility
Industry should have full flexibility in meeting any goal. On-
system reductions, efficiency gains, demand side management,
renewables, co-generation, carbon sinks, sequestration, carbon
internment and reductions in other greenhouse gases such as methane--
all must be recognized and endorsed as appropriate strategies.
Market-Based Mechanisms
Private sales and allowance trading should also be included. We
know that market forces can work to keep costs in check and they should
be employed here to the greatest extent possible.
Credibility
Congress should update Section 1605(b) of the Energy Policy Act to
ensure all reductions are quantifiable, credible and independently
verified. For the purposes of any future international agreement, the
U.S. Government needs to stand by those demonstrated reductions.
Technology Promotion
A short-term policy ought to provide appropriate mechanisms to
ensure that current technologies get into the marketplace. On the
fossil fuel side, I'm thinking about the many advances that have been
made in developing clean coal technologies but, for economic reasons,
haven't been deployed. On the renewables and alternative generation
side, I believe Congress should provide more economic incentives to
jump start emerging wind, solar, fuel cell and microturbine
technologies.
Incentives
To encourage widespread participation, the policy should include
proper incentives such as New Source Review reform and financial
assistance.
Safe Harbor for New Generation
In order to ensure continued development of needed generation
during this period, we should consider creating a 10-20 year safe
harbor for new facilities that meet ``best carbon reduction
practices.'' In the long run, technological solutions are the best hope
for achieving a maximum level of carbon dioxide reductions. Legislation
should encourage government and the private sector to work together to
speed the development and deployment of new energy-efficient
technologies and a mechanism to scrub greenhouse gases out of the
fossil fuel energy production chain. In fact, the real solution to
global climate change lies in our ability to develop breakthrough
technologies that will decouple energy production from greenhouse
gases. With sufficient resources and attention, I have no doubt that we
can and will achieve that goal. If global climate change is as serious
a threat as many experts say, the United States should attack this
technological puzzle as single-mindedly as it did nearly 40 years when
our best scientists focused on putting a man on the Moon. In summary,
Congress needs to address the climate change issue and develop an
initial climate change program for the industry as part of the
comprehensive multi-emission bill. My company seeks comprehensive
multi-emission power plant legislation because we want long-term
clarity and certainty built into our environmental compliance planning
process. I think there is general agreement on both sides of the aisle
that this approach makes sense. For me, this line of reasoning dictates
the necessity of including a carbon commitment in the legislation.
Without some sense of what our carbon commitment might be over the next
10, 15 or 20 years, how can I or any other utility CEO think we have a
complete picture of what major requirements our plants may face?
Further, I know from personal experience that it's impossible to build
new coal baseload power plants since the economics cannot be determined
without knowing what requirements the plant will face on carbon.
Congress has a unique opportunity to make a difference in our nation's
long-term air quality and to take affirmative action toward
establishing a workable global climate policy. Cinergy stands ready to
do what we can to help. I thank you for the opportunity to speak to you
today and I look forward to taking your questions.
______
Responses of James E. Rogers to Additional Questions from Senator Smith
Question 1. What is a reasonable market penetration or generation
capacity growth for renewables over the next 5 years, assuming today's
economic factors?
Response. Cinergy is one of the leading U.S. electric utilities to
have actively invested in renewable energy projects over the last 3
years. Since 1998, we've invested more than $260 million in renewable
energy projects, generating over 300 megawatts of electricity here in
the United States and in Europe. These projects include wind energy,
run-of-the-river hydroelectric, landfill gas recovery, fuel cells and
biomass.
Our primary emphasis has been the development of a wind energy
strategy, which we believe holds the greatest immediate promise of
adding to the company's ``green energy'' portfolio.
Renewable energy resources currently supply approximately 1 percent
of electric energy consumed in the United States. Of all the renewable
resources, wind generation is the least expensive and is the fastest
growing technology being installed both in the U.S. and worldwide, with
an annual growth rate in excess of 30 percent. During the course of
this year alone, 1,500 megawatts of wind generation will be installed
in this country, of which Cinergy's contribution will be approximately
10 percent.
Provided that the Production Tax Credit is maintained, I would
expect that renewable energy generation capacity could form between
three and 5 percent of the nation's electricity supply within the next
5 years. Renewable energy does not have to be a high cost alternative
to more traditional fossil sources of supply. With the Production Tax
Credit at its current level, a wind energy project in a good wind
location can supply power for as cheaply as 2.5 c/kWh over the 20-year
period, which is below what a new gas-fired plant can supply, given
today's fuel prices.
In order to achieve a three to 5 percent market penetration for
renewables in the next 5 years, a consistent long-term policy needs to
be implemented, either through a long-term extension of the Production
Tax Credit or establishment of a phased-in Federal renewable portfolio
standard. The temporary termination, in June 1999, of the Production
Tax Credit, resulted in an abrupt halt to all but a handful of wind
energy projects. Its reintroduction several months later renewed
interest in wind energy--an interest we maintain today.
This situation could be repeated next year and is illustrative of
the need for a consistent, long-term policy on the Production Tax
Credit.
Cinergy is currently planning to increase its renewable energy
generation capacity to be in excess of 5 percent of our overall
generating capacity within the next 5 years. I would envision this to
be a reasonable objective for market penetration nationwide over the
next 5 years, as part of a responsible and well-balanced energy policy.
Question 2. Your comments regarding the need for certainty and a
multi-pollutant bill that covers carbon dioxide have been echoed by
other industry leaders in private, but few have come forward apparently
because of the President's campaign promise reversal. What might
motivate them to most effectively and constructively encourage the
Administration and Congress to move forward on legislation?
Response. Over the last 3 years as chairman of the Edison Electric
Institute's CEO Environmental Committee, I have seen our industry's
thinking evolve on the climate issue to a point today where I believe
the majority of my fellow CEOs would support a sensible, cost-effective
greenhouse gas reduction program.
The industry certainly doesn't speak with one voice but I sense
that most of us are prepared to address this issue constructively,
acknowledging that we have responsibility to do our part in reducing
the emissions that contribute to climate change.
I have said to this committee that a multi-pollutant bill is
necessary because we, the sector that is entrusted to produce the
energy that fuels our economy, can best do our job if we know what
emissions we need to control and when we need to control them. Ideally,
Congress would give us a long-term environmental road map and the
flexibility to make power plant emission reductions in the most
economic way possible.
To me, and others, it makes no sense to pursue a comprehensive
multi-pollutant bill without dealing with carbon dioxide. This issue is
ripe now and we need to deal with it. No CEO wants to be in the
position of having to invest hundreds of millions of dollars to control
SO2, NOx and mercury while still being left to ``guess'' on
carbon dioxide.
The electric utility industry needs a long-term carbon program--not
the draconian one that Kyoto would have inspired. We need a commitment
to technology and to the future of coal. Finally, it needs assurances
that the government will be partner and not an antagonist as we move
together to address climate change.
Question 3. When could your company cost-effectively reduce carbon
dioxide emissions to 1990 levels? How much would it cost and what would
need to be done?
Response. With our company's baseload generation more than 95
percent coal-fired, our only alternative would be to convert most, if
not all, our units to natural gas. I would venture to say that this
would be the same strategy employed by most Midwest utilities that rely
on coal, resulting in a virtual one-fuel economy. Such a strategy would
be expensive and shortsighted. It would significantly drive up the cost
of energy with its negative effects on the overall economy. And,
because natural gas-fired turbines also emit carbon dioxide,
eventually, with increased demand for electricity, you'd see the
emissions creep up again.
What distinguishes carbon dioxide from other power plant emissions
is that there is currently no technological fix. And that's where I
think, as I mentioned in my testimony, that the Federal Government and
the private sector need to concentrate their efforts. Let's get the
best scientists on the job with all the tools possible at their
disposal to invent a technology that can reduce or eliminate carbon
dioxide from a power plant's flue gas. Let's put in place the proper
incentives to encourage the private sector to improve operating
efficiencies and develop carbonless energy technologies.
With a technological solution comes the opportunity to make serious
reductions in carbon emissions, without jeopardizing the economy.
__________
Statement of Marilyn A. Brown, Director, Energy Efficiency and
Renewable Energy Program, Oak Ridge National Laboratory
Mr. Chairman and members of the committee, thank you for inviting
me to summarize for you the findings of a recent study that examines
the ability of energy-efficient and clean energy technologies to reduce
U.S. greenhouse gas emissions.
I am Marilyn Brown, Director of the Energy Efficiency and Renewable
Energy Program at the Oak Ridge National Laboratory in Oak Ridge,
Tennessee, and I am one of the lead authors of the study completed late
last year titled Scenarios for a Clean Energy Future. \1\
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\1\The report is posted on the World Wide Web at http://
www.ornl.gov/ORNL/Energy--Eff/CEF.htm
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Introduction
The Clean Energy Future study is the most comprehensive assessment
to date of technologies and market-based policies to address the
energy-related challenges facing this Nation. It involved the analysis
of hundreds of energy-related technologies and 50 policies. The focus
is the United States, and the timeframe is the next 20 years. Thus, it
is not a global or long-term study; rather, it is an assessment of what
could be done here and now.
The study was commissioned by the U.S. Department of Energy and was
co-funded by the U.S. Environmental Protection Agency. It was prepared
by researchers from five DOE national laboratories: Argonne National
Laboratory, Lawrence Berkeley National Laboratory, the National
Renewable Energy Laboratory, Oak Ridge National Laboratory, and Pacific
Northwest National Laboratory.
The Clean Energy Future study concludes that accelerating the
development and deployment of energy-efficient and renewable energy
technologies could significantly reduce air pollution and greenhouse
gas emissions, oil dependence, and economic inefficiencies, at no net
cost to the economy. The overall economic benefits of the technologies
and policies that are modeled result in energy savings that equal or
exceed the cost of implementing the policies and of investing in the
technologies.
Barriers to Energy Efficiency and Clean Energy Policies
Like many other analyses, the Clean Energy Future study describes a
large reservoir of highly cost-effective, energy-efficient technologies
that are available or could soon be available to U.S. consumers; yet
many of these technologies remain unexploited. These technologies could
save us money, make our power system more reliable, make our society
less energy wasteful, and preserve our environment--so why aren't we
using them? If energy-efficient technology is cost-effective, why isn't
more of it hitting the markets? If individuals and businesses can make
money from energy efficiency, why don't they just do it?
Although some like to assert that markets are perfect, practical
experience tells us otherwise. Energy markets, like many markets, are
plagued by barriers that can impede the adoption of new products, even
those that are beneficial and economical. These market failures and
barriers include:
Misplaced incentives (for instance, these often occur in
apartment buildings where landlords pay the utility bills, giving
tenants no incentive to conserve)
Distorting fiscal and regulatory policies (for example,
electricity rates that do not reflect the real-time cost of electricity
production)
Unpriced costs (such as the health problems associated
with burning hydrocarbons: because energy prices do not include the
full cost of environmental externalities, they understate the societal
cost of energy), and
Unpriced benefits (such as the public benefits associated
with energy R&D: because the benefits of private-sector investments in
R&D extend beyond any individual firm, investments are insufficient
from a public perspective).
The existence of market barriers that inhibit investment in
improved energy technologies is a primary driver for public policy
intervention. In many cases, feasible, low-cost policies and programs
can be put in place to eliminate or compensate for market imperfections
and barriers, enabling markets to operate more efficiently for the
benefit of the society.
Scope of the Study
Scenarios for a Clean Energy Future assesses promising energy
technologies and a range of public policies that could reduce the
bamers to their use. It does so by developing scenarios that
characterize how the future might unfold under different sets of
policies. Three primary scenarios are presented: a business-as-usual
(BAU) forecast and two alternative policy cases that reflect increasing
levels of public commitment and political resolve to solving the
nation's energy-related problems.
The BAU forecast assumes that current energy policies and
programs continue, resulting in a steady but modest pace of
technological progress and improved efficiencies.
The Moderate scenario is defined by an array of market-
based policies including a 50 percent increase in cost-shared Federal
energy R&D, expanded voluntary programs, and tax credits for efficient
appliances, vehicles, and non-hydro renewable electricity.
The Advanced scenario is defined by more aggressive
policies including a doubling of Federal energy R&D; voluntary
agreements to promote energy efficiency in vehicles and industrial
processes; appliance efficiency standards; renewable portfolio
standards; and a domestic carbon cap and trading system.
The impacts of these policies are examined using various assessment
methods and modeling tools. A modified version of the Energy
Information Administration's National Energy Modeling System is then
used to quantitatively integrate the impacts of each scenario's
policies.
Results
The BAU scenario forecasts that U.S. energy consumption will
increase from nearly 100 quadrillion Btu (quads) in 2000 to 110 quads
in 2010 and 119 quads in 2020. Carbon dioxide emissions are forecast to
increase at a comparable rate, to 1,770 million metric tons of carbon
(MtC) in 2010 and 1,920 MtC in 2020 (see Figure 1). While there is
necessarily great uncertainty associated with any specific forecast,
all indications are that, without change, the United States is on a
path toward increasing energy consumption and carbon emissions well
into the foreseeable future.
Under the Advanced scenario, the United States consumes 23 quads
(20 percent) less energy in 2020 than is predicted under the BAU
forecast. That savings amounts to almost 25 percent of our current
energy use, and it is enough to meet the current energy needs of all
the citizens, businesses, and industries located in the top three
energy-consuming States--Texas, California, and Ohio. Other key
findings of the Advanced scenario include the following:
By 2020, U.S. CO2 emissions have been reduced
to 1990 levels [avoiding 565 MtC compared with the BAU forecast. By
2010, carbon emissions are approximately 300 MtC less than in the BAU
case.
Clean energy technologies and policies could shave $122
billion off the U.S. energy bill in 2020 ($189 billion in gross energy
savings minus $67 billion in carbon permit costs). These savings far
outweigh any costs of implementation. (See Figure 2.)
Under the Advanced scenario, voluntary agreements to
increase the fuel efficiency of cars and light trucks, combined with
other measures, could cut U.S. oil consumption by 5 million barrels per
day. This would result in an estimated $238 reduction in transfer of
wealth from U.S. oil consumers to world oil exporters, in the year
2020, and reducing the cost to the U.S. economy of a future oil price
shock such as we are presently experiencing. .
hnproving the energy efficiency of U.S. buildings and
industry through voluntary programs, tax credits, efficiency standards,
and other measures could reduce electricity demand by 22 percent
relative to the BAU forecast--all at a negative net cost.
Two policies that are key to the energy and emissions savings in
the Advanced scenario are increased resources for R&D in energy
efficiency and clean energy, and a domestic carbon trading system.
The Advanced scenario assumes that the Federal Government
doubles its spending for cost-shared energy R&D, resulting in an
overall increase of $2.8 billion per year (half Federal appropriations
and half private-sector cost sharing).
A carbon trading system sets limits on the quantities of
carbon emissions that can be released annually. Companies that produce
emissions can comply with the cap by either reducing their emissions or
purchasing emissions permits from other companies. The Federal
Government would collect revenues from the emissions permits and
transfer them to taxpayers. The goal of this policy is to change the
relative price of carbon-based fuels without lowering personal incomes.
A Sampling of Technology Opportunities
The foundation of a clean energy future is efficient, clean energy
technologies and sources. These technologies deliver the reductions in
energy consumption, energy costs, and polluting emissions envisioned in
the report. But what evidence do we have that these new technologies
are real possibilities, not just wishful thinking? Consider the outcome
of a major R&D effort that began in the late 1970's to improve the
efficiency of household refrigerators, as one example.
Between 1977 and 1982, DOE invested approximately $5 million in R&D
to make home refrigerators more energy-efficient. Working in a public/
private partnership with compressor and appliance manufacturers, DOE
and two Federal laboratories identified ways of improving the
performance of refrigerator compressors, motors, insulation, and
controls, and they provided test data for use in the setting of
national standards. These technology investments, in conjunction with
the issuance of appliance standards, cut the energy use of the average
new refrigerator in half by the year 1990 and saved U.S. consumers $9
billion in energy costs from 1981 to 1990 (1999 dollars) (see Figure
3).
In 1997, a DOE-industry cooperative R&D effort developed a
prototype ``fridge of the future'' that used nearly half as much energy
again, as refrigerators then on the market and surpassed the 2001
efficiency standard for refrigerators. These developments in
combination with the 2001 U.S. standard will save consumers billions of
dollars each year.
With these advances, we are approaching the technical limits of
home refrigerator/freezer technology. However, in other cooling
applications, opportunities abound. For example, in Senator Reid's
State of Nevada, a natural gas-powered absorption chiller will be
installed this summer in the Clark County Government Center for
performance testing. This novel technology promises dramatic
improvements in efficiency and emissions over chillers now on the
market, and it uses no ozone-depleting refrigerants. These, and other
building efficiency opportunities are highlighted in the Clean Energy
Future study, including lower-cost compact fluorescent lamps, light-
emitting diodes (LEDs) to replace incandescent traffic lights, heat
pump water heaters, and switch mode power supplies to reduce standby
losses.
Numerous opportunities exist in the industrial sector, as well.
Just this week, Delphi Automotive Systems is hosting an event in
Saginaw, Michigan, to celebrate the success of nickel aluminide trays
used in its steel carburizing heat-treating furnaces. Nickel aluminide
alloys, developed through a DOE-industry R&D partnership, are
extraordinarily strong, hard, and heat-resistant. Their use in fixtures
for high-temperature manufacturing can cut energy use by 5 to 10
percent by making it feasible to operate furnaces at higher
temperatures and with fewer shutdowns. Nearly 100 such emerging
technologies for improving industrial energy efficiency are modeled in
the Clean Energy Future study. These include, for example, near net
shape casting technologies for reducing the cost of producing iron and
steel, and improved black liquor gasification that could make kraft
pulp mills net electricity exporters.
In the realm of the here and now, improvements to industrial
utility systems (steam, compressed air, motors, and pumps, etc.) offer
tremendous energy-saving opportunities. Industrial motor systems, for
example, use 25 percent of all the electricity consumed in the United
States. In the Advanced scenario they are a source of considerable
energy savings, based on the presumption of expanded technical
assistance and voluntary programs. For instance, this scenario doubles
the funding for DOE's ``Best Practices'' program, which encourages the
use of energy-efficient motor, steam, and process heating systems. In
just the 5 most recently completed projects, annual energy savings of
131 trillion Btu were realized with an annual cost savings of $17
million, and an average payback on investment of 1.2 years. Full
implementation of proven, cost-effective energy-efficient technologies
could save 11 to 18 percent of the power used in motor-driven
industrial systems, saving billions of dollars annually.
In transportation, the Clean Energy Future study underscores the
availability of a collection of fuel-economy improvements to gasoline-
powered vehicles that could be rapidly accelerated into the market
through a combination of R&D, incentives, and voluntary agreements
between government and automakers. These technologies include a range
of engine technology improvements (such as advanced valve-timing and
lift controls, friction reductions, direct injection, and 4- and 5-
valve designs) as well as gasoline-hybrid technology and lightweight
materials substitution, especially aluminum and plastics. Altogether
the Advanced scenario policies and technologies improve the fuel
economy of gasoline-powered passenger cars from 28 to 44 miles per
gallon by the year 2020.
Over the course of these same two decades, the Clean Energy Future
study indicates that other propulsion systems and alternative fuels for
passenger vehicles could be propelled into the market with an
aggressive slate of polities. These include fuel cells, which account
for 2.2 million of the passenger cars and light trucks sold in the
Advanced scenario in 2020, and turbocharged direct injection diesels,
which account for 2.6 million of light duty vehicles sold in 2020.
Expanded R&D is critical to achieving the technology breakthroughs
necessary for such growth in market shares of these novel, fuel-saving
systems.
In the electricity sector, combined heat and power is singled out
in the Advanced scenario as a highly promising distributed energy
resource. By locating power-producing equipment near industrial plants
that require electricity, it is possible to also put the waste heat
from the power generation to use in the industrial process. This
enables the efficiency of the U.S. electric grid-which has ranged
between 28 and 33 percent over the past four decades, to be
dramatically increased. Through policies such as expanded research, tax
credits, and interconnection standards, combined heat and power
technologies in the Advanced scenario reduce U.S. energy consumption by
nearly 2.5 quads in the year 2020.
The expanded research budget portrayed in the Advanced scenario
also drives down the cost and improves the performance of natural gas
combined cycled plants and nonhydro renewable power. In combination
with other incentives for low-carbon power, these policies grow the
nonhydro renewable contribution to 10 percent of electricity production
in 2020, with the bulk of the increment coming from wind power.
Research on turbines that operate in less-windy regimes promises even
more opportunities for wind power. Economic turbines in less windy
regimes means that wind power can be used closer to eastern loads
without the need for large transmission investments. Natural gas grows
to one-third of power generation, just surpassing coal's contribution.
In addition to lowering the nation's carbon emissions, a revised fuel
portfolio such as this would significantly reduce local air pollution.
Conclusion
Energy conservation does not have the rugged, dramatic appeal of
oil drilling or coal mining. It does not wow us with massive dams,
dramatic cooling towers, or tall smokestacks. But energy conservation
makes a tremendous amount of energy available. In fact, over the past
25 years, energy efficiency has become the No. 1 domestic source of
energy available for use by U.S. consumers. In 1999, almost a quarter
of the energy we used was energy that would have been lost to waste
without the energy-efficiency technologies that have been developed and
implemented since the Arab oil embargo of 1973-74. A Btu saved is a Btu
available to power our homes, industries, and cities, Energy efficiency
is a clean energy source, producing no emissions or runoff. It improves
our balance of payments, and we need not go to war periodically to
defend it.
Clearly, following current approaches to energy policy in this
Nation will bring substantial increases in carbon and other polluting
emissions over the next 20 years. The BAU case in Scenarios for a Clean
Energy Future projects carbon emissions 31 percent and 43 percent above
1990 levels by 2010 and 2020, respectively. Virtually any future based
on continuing current trends would include large increases in carbon
emissions. The inescapable conclusion is that, absent major shifts in
policy and the economy, the United States will be ever further from
stabilizing its carbon emissions.
The Clean Energy Future study identifies a set of policy pathways
that could speed the introduction of cost-effective, efficient, clean
energy technologies into the marketplace. These technologies are good
for business, good for consumers, good for the economy, and good for
the environment. To secure these benefits, the Nation needs to move
forward on many fronts--on policies to remove market barriers, R&D to
accelerate technology advancements, and programs to facilitate
deployment of the new technologies. These, in combination with the
political leadership that the world expects of the United States, are
all necessary ingredients of a clean energy future.
Thank you for this opportunity to talk with you today. I would be
happy to answer any questions.
Biographical Sketch
Marilyn Brown is the Director of Oak Ridge National Laboratory's
Energy Efficiency and Renewable Energy Program. During her 18 years at
ORNL, she has researched the design and impacts of policies and
programs aimed at accelerating the development and deployment of
sustainable energy technologies. She currently manages a $110 million/
year program of research to develop and assess advanced energy
efficiency and renewable energy technologies. Prior to coming to ORNL
in 1984, she was a tenured Associate Professor in the Department of
Geography at the University of Illinois at Urbana-Champaign, where she
taught graduate and undergraduate seminars on technological change,
resource geography, and statistical analysis. She has received two NSF
grants and funding from numerous other sources to support her research
on the diffusion of energy innovations. She has a Ph.D. in geography
from the Ohio State University where she was a University Fellow, a
Masters Degree in resource planning from the University of
Massachusetts, and a BA in political science (with a minor in
mathematics) from Rutgers University. She has authored more than 140
publications and has received awards for her research from the American
Council for an Energy-Efficient Economy, the Association of American
Geographers, the Technology Transfer Society, and the Association of
Women in Science. Dr. Brown sits on the boards of several energy and
environmental organizations and journals.
______
Response of Dr. Marilyn A. Brown to Additional Question from
Senator Corzine
Question. The Clean Energy Future report contains strong
conclusions about our ability to achieve greenhouse gas reductions at
negative cost. By contrast, the IPCC's Third Assessment Report
concludes that the cost of implementation of viable energy technologies
.may at times be substantial, and must overcome other market barriers.
To the extent that the two reports are directly comparable, can you
highlight the differences in assumptions, data and/or methodology
between the two reports?
Response. The IPCC's Third Assessment Report draws its conclusions
about the cost of climate change mitigation by reviewing the
literature. It does not rely on a single analysis, but rather
integrates and summarizes the findings of studies that had been peer
reviewed and published by approximately mid-2000. Since the Scenarios
for a Clean Energy Future was not published until November 2000, its
findings were not included in the IPCC's literature review.
Nevertheless, some of the studies reviewed in the Third Assessment
Report use methodologies and data that are similar to the Scenarios for
a Clean Energy Future; others use very different approaches.
Based on a review of the ``Summary for Policymakers: Climate Change
2001: Mitigation'' (one part of the Third Assessment Report), I am
struck by how similar its conclusions are to those of the Scenarios for
a Clean Energy Future. For instance, consider the summary Table SPM
(Estimates of Potential Global Greenhouse Gas Emission Reductions in
2010 and in 2020), from the IPCC report. It concludes the following
regarding net direct costs per tonne of carbon avoided:
Buildings: ``Most reductions are available at negative
net direct costs.''
Industry: ``More than half available at net negative
direct costs.''
Transportation: ``Most studies indicate net direct costs
less than $25/tC.''
Electricity generation: ``Limited net negative direct
cost options exist.''
The Scenarios for a Clean Energy Future draws very similar
conclusions about the cost of reducing U.S. carbon emissions to
approximately 1990 levels, by 2020.
One notable difference between the two studies is in the
transportation sector. The Scenarios for a Clean Energy Future assumes
that a doubling of Federal energy R&D resources (in combination with
various supporting policies) produce several technology breakthroughs.
These, in turn, enable sizable greenhouse gas emission reductions,
particularly in the second decade (2010-2020), at no net direct cost.
The two studies also agree that successful implementation of ``no-
cost'' greenhouse gas mitigation options requires policy initiatives
that address the market and institutional barriers impeding adoption of
cost-effective emission-reduction measures. Chapter 2 of the Scenarios
for a Clean Energy Future overviews these barriers as a basis for
selecting the policy scenarios that are modelled in the report.
______
Responses of Dr. Marilyn A. Brown to Additional Questions from
Senator Reid
Question 1. What is a reasonable market penetration or. generation
capacity growth rate for renewables over the next 5 years, assuming
today's economic factors?
Response. The Business-As-Usual (BAU) scenario of the Scenarios for
a Clean Energy Future report (CEF) provides a basis from which to
answer the above question once updated for events that have occurred
since its development, i.e. since early 1999. Table 1 shows the CEF BAU
estimates of generation capacity for renewables from 1999 through 2006.
The most striking features of these estimates are their small size and
lack of significant growth over time.
Table 1
Renewable Electric Generating Capacity in the CEF BAU Scenario (GW)
----------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006
----------------------------------------------------------------------------------------------------------------
Wind............................................ 2.68 2.8 2.99 3.18 3.2 3.22 3.24 3.27
Biomass......................................... 1.72 1.76 1.84 1.9 1.91 1.93 1.97 2.02
Geothermal...................................... 2.88 2.94 3.07 3.01 2.93 2.87 2.95 2.92
Other........................................... 3.85 3.97 4.02 4.1 4.17 4.24 4.32 4.4
Total non-hydro renewables...................... 11.13 11.47 11.92 12.19 12.21 12.26 12.48 12.61
----------------------------------------------------------------------------------------------------------------
These CEF BAU-scenario values in Table 1 are essentially the same
as those of the EIA's Annual Energy Outlook 1999 on which the CEF BAU
scenario is based. As shown in Table 2, in the most recent Annual
Energy Outlook 2001, the ETA has increased its estimate of the
penetration of wind to reflect actual market installations and changes
in market conditions. However even this Outlook, released only 7 months
ago, has severely underestimated the market penetration of wind with
its market projection of only 4.4 GW by 2005. Wind plants currently on
order to be installed in 2001 will reach this level this year (2001),
not in 2005.
Table 2
Estimates of Renewable Electric Capacity in 2005
------------------------------------------------------------------------
AE099 AEOO1 DOE/GPRA
------------------------------------------------------------------------
Wind.............................. 3.24 4.43 8.4-10.5
Biomass........................... 1.97 1.68 3.6-4.1
Geothermal........................ 3.08 3.15 3.2-3.4
Other............................. 4.32 4.24 4.3-4.6
Total non-hydro renewables........ 12.61 13.5 19.5-22.6
------------------------------------------------------------------------
This rapid growth in actual wind capacity is largely the result of
continuing improvements in wind technology, the extension of the
Federal production tax credit for wind, mandates by the States for
increased use of renewables, and recent volatility in natural gas
prices. The Interlaboratory Working Group that produced the CEF has not
examined the impact of all these recent market factors on the
penetration of renewables. However it is fairly clear that their
continued presence will yield significant growth in wind, biomass, and
geothermal over the next 5 years. An independent estimate made for the
DOE Office of Energy Efficiency and Renewable Energy in 2000 as part of
its response to the Government Performance and Results Act \1\ projects
that by 2005 nonhydro renewables could contribute as much as 22 GW (see
Table 2). Given the recent rapid penetration of wind, these DOE/EERE
estimates appear most reasonable.
---------------------------------------------------------------------------
\1\NREL, 2000, Projected Benefits of Federal Energy Efficiency and
Renewable Energy Programs fiscal year 2001-FY 2020, National Renewable
Energy Laboratory, Golden CO, July.
Question 2. What would be the most cost-effective incentive or
program that the Federal Government could offer to encourage a
reduction in greenhouse gases to 1990 levels? What's the earliest that
the level could be achieved, without serious harm to the economy?
Response. These are difficult questions, which I can only partially
address. The Scenarios for a Clean Energy Future describes a set of
public policies and programs that reduce U.S. carbon emissions to
approximately 1990 levels by the year 2020. It also concludes that such
an ``advanced'' scenario would not cause serious harm to the economy.
To drive emissions down faster would require even more aggressive
policies. A few examples of such policies are listed below:
Buildings: mandate the demand-side management programs
run by electric utility companies in the 1980's and first half of the
1990's, which were responsible for a substantial fraction of the energy
efficiency improvements already realized in the buildings sector.
Industry: establish tax incentives for new capital
investments in energy equipment to accelerate the rate at which
technological innovation diffuses into industries, thereby more quickly
retiring outmoded and inefficient production equipment and facilities.
Transportation: enact greenhouse gas standards for motor
fuels that would be specified as a limit on the average greenhouse gas
emissions factor of all motor fuels.
Electricity: require all coal-fired power plants to meet
the same emissions standards as new plants under the Clean Air Act,
thereby removing the ``grandfathering'' clause that has allowed higher
polluting, older coal-fired plants to continue to operate unabated.
Additional work would be required to model the costs and impacts of
such policies. Indeed, there are numerous alternative packages of
policies that would need to be assessed for costs and environmental
(and other) impacts, in order to answer your question. It is my
personal opinion that accelerated reductions would be more costly, but
if promoted by smart policies they still might not cause serious harm
to the economy.
I believe that enhanced Federal investment in energy R&D is the
most effective Federal program for achieving significant long-term
reductions in greenhouse gases. Reducing the costs and improving the
performance of an array of clean energy technologies are essential
enablers of low-cost/no-cost solutions. The Scenarios for a Clean
Energy Future report documents the sizable benefits that could arise
from a stronger program of energy R&D.
The study concludes that the following policies, in combination
with doubling the Federal energy R&D budget, were most important in
achieving the emission reductions of the advanced scenario:
Buildings: efficiency standards for equipment and
appliances; voluntary labeling and deployment programs.
Industry: voluntary programs and voluntary agreements
with individual industries and trade associations.
Transportation: voluntary fuel economy agreements with
auto manufacturers; ``pay-at-the-pump'' auto insurance.
Electricity Generation: renewable energy portfolio
standards and production tax credits.
Cross-Economy Policies: domestic carbon trading system.
These would make up my short list of potentially most cost-
effective policies and programs, in terms of cost of carbon reduction.
However, many other policies are extremely promising, and are not in
our ``short list'' because they are narrower in scope and impact. An
example is the development of a national interconnection standard that
would facilitate the development of distributed energy resources.
__________
Statement of Florentin Krause, Ph.D., Director, International Project
for Sustainable Energy Paths
Short Summary
This report identifies and corrects shortcomings in recent modeling
studies on the economics of reducing greenhouse gas emissions in the
U.S. The major assessments of the Kyoto Protocol--by the U.S. Energy
Information Administration, the Clinton White House Council of Economic
Advisers, the U.S. Department of Energy Interlaboratory Working Group,
and the Stanford Energy Modeling Forum--are found to be seriously
incomplete. Each study is shown to omit one or several of four major
cost-reducing policy options, resulting in cost estimates that are far
too pessimistic.
The present study is the first to integrate all cost-cutting policy
options into a coherent least-cost policy framework. Three domestic
policies--a national carbon cap and permit trading program,
productivity-enhancing market reforms and technology programs, and
recycling of permit auction revenues into economically advantageous tax
cuts--are combined with international emission allowance trading. In
analyzing this integrated least-cost approach, the present study
introduces no new models. It relies on established, peer-reviewed
methodologies used in the major U.S. assessments to date.
This reassessment leads to the following principal findings:
1) The U.S. could meet the emission reduction targets set forth in
the Kyoto Protocol by 2010 and exceed them by 2020 while increasing
economic output from baseline growth projections.
2) In 2010, an integrated least-cost strategy would produce an
annual net output gain of about $50-60 billion/yr or roughly 0.5
percent of GDP. By 2020, this gain grows to $120 billion/yr or 1
percent of GDP. On a cumulative net present value basis, the U.S. would
gain $250 billion by 2010 and $600 billion by 2020.
3) Most of these economic gains can be flexibly achieved through a
purely domestic no-regrets strategy or through an international
approach.
4) A strong synergy exists between a national energy policy aimed
at safeguarding the economy and a least-cost policy aimed at slowing
climate change. By reducing consumption of oil and natural gas relative
to rising business-as-usual trends, a climate policy would help protect
the U.S. against energy price shocks.
5) Net economic benefits can be realized in the early years of
implementation and continue to grow over time. As energy-using
equipment and capital stocks turn over, market, organizational, and
institutional reforms have the effect of speeding up and completing the
penetration of currently available, highly cost-effective energy
efficiency technologies that require little or no time-consuming
research, demonstration, and commercialization.
6) Potential economic savings from energy productivity gains far
exceed the costs of technology R&D programs. Together with expanded
markets under a climate protection policy, these have the effect of
accelerating cost reductions for renewable energy sources and other
low-carbon technology options.
7) Postponing least-cost emissions reduction policies or embarking
on suboptimal policies would result in lost opportunities for the U.S.
economy of $50-150 billion/yr in 2010.
8) In the context of an integrated least-cost strategy, credits for
carbon sinks and constraints on the use of the Kyoto flexibility
mechanisms are of only minor significance.
9) An integrated least-cost approach would more effectively
insulate U.S. industries from competitiveness problems than a global
emissions trading approach applied in isolation. Productivity gains and
tax shifts would reduce production costs and export prices in most
industries below baseline levels rather than merely limiting increases
in costs and prices.
10) The perception that emission reduction targets such as those of
the Kyoto Protocol are unavoidably costly or unfair is the result of
outdated modeling assessments. Integrated economic analysis such as
that contained in this report is needed as an input for future climate
negotiations.
The findings of this study are in qualitative agreement with the
Economists' Statement on Climate Change signed by over 2,500 economists
including eight Nobel laureates in 1997, which states: ``Economic
studies have found that there are many potential policies to reduce
greenhouse-gas emissions for which the total benefits outweigh the
total costs. For the United States in particular, sound economic
analysis shows that there are policy options that would slow climate
change without harming American living standards, and these measures
may in fact improve U.S. productivity in the longer run.'' (Italics
added for emphasis).
executive summary
Conventional wisdom has it that implementing the Kyoto treaty would
unavoidably lead to slower economic growth and higher costs for U.S.
consumers and businesses. Recent energy supply problems have heightened
these concerns. As a result, many policymakers in the U.S. feel that
they are faced with an unhappy tradeoff between the environmental
advantage of early and stronger climate policy action and the perceived
economic benefit of later and weaker action.
This purported conflict between economic and environmental goals
has strongly shaped the U.S. stance in the U.N. climate negotiations.
In order to reduce domestic economic impacts, the U.S. has called on
developing countries to make emission reduction commitments of their
own, and it has demanded the unrestricted use of the Kyoto flexibility
mechanisms and large credits for carbon sinks.
These positions have centrally contributed to the recent collapse
of the U.N. Conference of Parties (COP) negotiations: many participants
and observers saw the U.S. positions on sinks and flexibility
mechanisms as indirect attempts to rewrite the Kyoto targets. More
recently, the U.S. administration has entirely rejected the treaty in
its current form.
The present report finds that U.S. perceptions of national
interests in the pre-and post-Kyoto negotiations have been greatly
distorted by flawed and outdated economic modeling studies. What has
been missing in the assessments so far is an integration of individual
policy options into a coherent least-cost framework drawing on all
major cost-reducing policies simultaneously. New information presented
in this report shows that such an economically efficient, integrated
energy and climate approach would allow the U.S. to fully meet emission
reduction targets such as those set forth in the Kyoto Protocol and
significantly exceed them by 2020, and do so while increasing economic
output, not decreasing it.
By 2010, an integrated least-cost strategy would produce a gain of
$50-60 billion/yr to the U.S. economy (constant 1997 dollars). These
gains grow to $120 billion/yr by 2020--before accounting for the
benefits of slowing climate change. The cumulative gain over the next
decade would be more than $250 billion, growing to a cumulative $600
billion over the second decade (net present value in 1997 dollars). The
present report also shows that these positive economic impacts are
neither dependent on--nor materially augmented by--U.S. proposals on
sinks and flexibility mechanisms.
Furthermore, the present analysis shows that an integrated least-
cost approach to climate mitigation solves two problems with one policy
strategy. The most important element of a money-saving climate
strategy--increased energy productivity investments--is also the most
cost-efficient way for overcoming current energy supply problems in the
U.S. Large opportunities for cost-effective investments in demand-side
efficiency and cogeneration reduce not only the projected use of coal,
but also of natural gas and oil. By doing so, a climate-oriented energy
policy protects U.S. consumers and firms from rising costs of energy
services and from risks of supply disruptions in the electricity, oil,
and gas markets.
These conclusions arise from a fresh examination of the key
economic analyses of the Kyoto Protocol that were published during
1997-2000, either by the U.S. Government itself or as an outflow of
major academic projects. In the present report, we subject these
studies to an analytical review and integrate their findings into an
internally consistent economic perspective. We then use this
perspective to evaluate the U.S. position in the U.N. climate treaty
negotiations and proposed responses to energy challenges at home.
a least-cost strategy: flexibility with no regrets
To minimize abatement costs, climate change mitigation needs to
combine four major policy approaches:
(1) Economy-wide policies that send uniform and consistent price
signals to all economic actors through taxes or, alternatively, through
domestic emission caps that are linked to a permit auction and trading
scheme (cap-and-trade systems). The price and cost of permits adds a
carbon charge to energy prices that works in the same manner as a
carbon tax.
(2) Domestic reforms based on cost-benefit tested incentives,
standards, and voluntary agreements. These reforms would reduce market,
organizational, institutional, and regulatory barriers to highly
profitable energy efficiency investments and other no-regrets
technology options. Also included here are targeted technology R&D and
commercialization programs for reducing the costs of renewable energy
sources and other low carbon technologies.
(3) Linkage of emissions tax revenues or permit auction revenues
with tax shifts and subsidy reforms, such as cuts in taxes on payrolls
or investments, to offset revenues received from taxes on emissions or
permit auctions. Such fiscal reforms can further increase energy
efficiency and total factor productivity in the economy, adding a
second no-regrets element that produces economic and environmental
double dividends.
(4) Trading of emission allowances with other countries that have
lower-cost abatement opportunities than those available in the domestic
economy. This is the `flexibility' strategy based on the Kyoto
mechanisms: international emissions trading (IET), Joint Implementation
(JI), and the Clean Development Mechanism (CDM).
A fifth element consists of suitable adjustment policies that
shield carbon-intensive industries and their workers from having to
bear a disproportionate burden, such as border tax adjustments and
regional adjustment funds. These policies do not improve economic
efficiency per se but help reduce political conflicts that might
otherwise impede or prevent timely action.
At the center of the present review is the treatment of these
strategies for minimizing mitigation costs and social impacts in the
studies supporting U.S. policy development. Since most cost assessments
to date incorporate the first policy option--price signals based on a
carbon tax or permit trading system--our focus is on whether the other
cost-reducing options were included in each assessment, or omitted from
analysis.
how adequate are u.s. cost assessments?
Our review shows that all the major economic assessments being
cited in the U.S. debate on the Kyoto treaty are significantly
incomplete (Table 1). Though each major cost-reducing policy option is
examined in at least one study, no study examines the joint application
of all domestic no-regrets options, or for that matter, the joint
application of the domestic no-regrets options and international
trading.
This observation calls into question claims that the U.S. lacks
affordable domestic mitigation options, or that the U.S. is heavily
dependent on international trading mechanisms and credits for carbon
sinks if it is to reduce costs to acceptable levels. The validity of
these claims can only be established through an analysis in which all
of the major cost-reducing policy options described above are
implemented jointly.
The present report is the first to offer such an integrated least-
cost analysis. We reexamine the economics of cutting carbon emissions
in the U.S. by calculating what the economic impacts of the Kyoto
targets or similar targets would be if the U.S. were to implement its
provisions using an integrated least-cost policy approach. In pursuing
this analysis, we do not introduce any new models or modeling
techniques, but rely on procedures and results that have already been
developed and used in the U.S. government's own studies.
methodology of this report
An integrated analysis of the above four policy options requires
the joint evaluation of carbon charges and market and institutional
reforms. A convenient and operational approach to this task has been
developed by the U.S. Department of Energy's Interlaboratory Working
Group (IWG). It is based on the familiar economic concept of the
tradeoff curve between GDP growth and carbon emission reductions.
Conventional economic instruments such as carbon taxes or permit
auctions move the economy along that curve while cost-effective market
reforms and tax shifts move the economy toward the curve or shift the
curve itself.
The standard modeling approach is depicted in Figure ES. 1a: a
carbon charge is implemented to reduce emissions to their target level.
In conventional models the historical tradeoff curve for the economy is
described as the production possibilities frontier, i.e., the best the
economy can do given available inputs of labor, capital, and
technology. As a result, emissions can only be reduced by moving the
economy along the tradeoff curve to a point with lower emissions. This
movement is brought about by energy price effects from carbon taxes or
permit auctions, which lead to adjustments in the mix of energy and
non-energy inputs by consumers and businesses. These economic
substitution effects somewhat reduce GDP.
The concept of no-regrets policies rests on the empirical
observation that the economy does not operate fully at the frontier of
optimal economic and technological efficiency. The tradeoff curve of
conventional models is only an apparent frontier. Cost-benefit tested
market reforms--such as the utility demand-side management programs of
many States, the appliance efficiency standards of the U.S. Department
of Energy, and marketing and information efforts like the U.S.
Environmental Protection Agency's Energy Star and Green Lights
programs--represent a move toward the actual frontier by eliminating
market, organizational, and institutional barriers to cost-effective
investments. By increasing energy efficiency and total factor
productivity, more GDP can be produced with fewer emissions. Similarly,
economically efficient tax shifts reduce dead-weight losses from the
tax system. In both cases, the economy's tradeoff curve is shifted
outward toward higher GDP/carbon ratios.
When carbon charges and no-regrets policies are implemented jointly
(Figure ES. 1b), much of the targeted emissions reduction is provided
by market reforms. As a result, required carbon charges are smaller,
and so are GDP losses from economic substitution effects. Depending on
their design, tax shift reforms can partially or more than fully offset
these losses. Assuming that losses are just offset, the net economic
impact of carbon mitigation becomes equal to the net change in the
total cost of energy services (lighting, heating, cooling, driving,
etc.) brought about by market reforms and technology programs.
The present study is the first integrated analysis of these
policies and effects. Emissions reductions and economic gains from
cost-benefit tested market reforms and technology programs (arrow c in
Figure ES. 1b) are derived from the U.S. Department of Energy's Clean
Energy Futures study (CEF), which was published in November 2000. This
major analysis was conducted by the U.S. DOE's Interlaboratory Working
Group, a team of experts from five national laboratories. The CEF study
represents a highly conservative assessment of these non-price
policies, and it combines them with domestic permit trading. However,
it does not cover tax shifts or international trading, and it analyzes
levels of emission reductions that remain well below the Kyoto target
for 2010. Other studies have suggested that the U.S. has further
options that would permit emission reductions up to and beyond this
target at favorable cost.
The impacts of carbon charges (arrow a in Figure ES. 1b) are
derived from the work of the Energy Modeling Forum (EMF-16) at Stanford
University. The groups participating in this Forum analyzed the
economic impacts of the Kyoto Protocol on the basis of standardized
runs for a number of different economic models, including the model
used by the Clinton Administration's Council of Economic Advisers in
its official evaluation of the Kyoto treaty. These studies provide the
best available basis for calculating the substitution effects of carbon
charges on the U.S. economy. They also analyze international trading
and the Kyoto flexibility mechanisms. However, they do not cover market
reforms or tax shifts, and they omit the important effects of these
domestic no-regrets policies on the international allowance market. Our
study derives central (average) estimates from this comparative work
(labeled `EMF-16 Mean' in the accompanying charts and tables).
Gains in GDP from tax shifts (arrow b in Figure ES. 1b) are derived
from a number of U.S. Government and academic studies. These studies
show that tax shifts can be designed with widely varying effects on
GDP, ranging from a partial offset of losses (weak double dividend) to
more than a complete offset leading to net gains (strong double
dividend). For our central estimates, we assume that tax shifts will
just offset the GDP losses from economic substitution effects caused by
carbon charges.
Following the arrows in Figure ES. 1b, the total economic impact of
an integrated climate policy is calculated as the sum of these effects.
Interactions between carbon charges and net savings in energy service
bills are already accounted for in the models used in the above
studies. We additionally include the environmental co-benefits
associated with lower fossil fuel consumption and, in our global
trading analysis, the cost of purchasing international emission
allowances. The details of these calculations are documented in the
main report.
solving two problems with one strategy
Conventional wisdom has it that domestic action to reduce carbon
emissions in the U.S. is expensive because of a lack of cheap low-
carbon technologies. The central proposition--that the U.S. lacks cost-
saving opportunities for domestic emission reductions in its energy
system--is at odds with the U.S. government's own authoritative studies
by the national laboratories. Our review of this and other work shows
that a strong overlap exists between a national energy policy aimed at
safeguarding the U.S. economy and a least-cost oriented climate policy.
This synergy is clearly demonstrated in the Clean Energy Futures
study by the national laboratories. It not only offers a comprehensive
analysis of the nation's domestic technological options in fighting
climate change; it also illustrates how an integrated least-cost
strategy aimed at the climate problem can help the U.S. deal with
vulnerability to oil price shocks, disproportionate growth in the
consumption of gas, demand and supply imbalances in electricity
markets, and resulting volatility in energy prices.
To correctly perceive the national economic interests of the U.S.
in the international negotiating process, it is important to understand
these interactions. Beginning with the energy supply picture, Figures
ES.2a and ES.2b compare the growth in U.S. oil, gas, and electricity
requirements in 2010 and 2020 for the CEF reference case (business as
usual or BAU scenario), and for the climate policy case (CEF `Advanced'
scenario). The level of demand and the mix of energy supplies in the
CEF reference case is based on a widely used forecast issued by the
U.S. Energy Information Administration (EIA).
Relative to the baseline projections of the EIA, the CEF climate
policy scenario not only reduces the consumption of carbon-intensive
coal, but also of oil and gas. Specifically, oil consumption is 10
percent lower in 2010 and 21 percent lower in 2020. Electricity
requirements change by the same percentages, and natural gas
consumption is lower by 7 percent in 2010 and by 12 percent in 2020.
Indeed, the CEF analysis shows that with certain electricity market
improvements, gas-fired cogeneration of heat and power could reduce
total U.S. gas requirements even further than shown in Figure ES. 2, at
a net cost saving for consumers and firms, while reducing U.S. carbon
emissions by 26 and 40 MtC in 2010 and 2020.
These results suggest that a least-cost oriented climate policy
does not need to worsen U.S. supply problems in the natural gas or
electricity markets. On the contrary, a least-cost approach would help
relieve and prevent these problems. Moreover, such relief is not a
transient respite but keeps on growing over the next two decades, as is
evident from comparing Figures ES.2a and ES.2b.
Unlike with purely supply oriented approaches, this substantial
relief of U.S. energy supply problems does not arise from lowered
economic activity or reduced energy services (driving, lighting,
heating, cooling, etc.). As is evident from comparing Figures ES. 2 and
ES. 3, the need for growth in conventional energy sources is alleviated
by investments in energy efficiency, and to a secondary degree, in
renewable energy sources. In the CEF scenario, the combined
contribution of efficiency and renewables to total energy services
triples from 7 percent in the reference forecast to about 20 percent by
2010, and quadruples to about 30 percent in 2020.
As the CEF study documents, not only are more efficient demand-side
technologies currently available, they also are highly cost-effective.
By clearing away the market, organizational, and institutional barriers
that currently hamper the rapid diffusion of these technologies, the
U.S. can cut its energy bills while simultaneously gaining important
breathing space for readying a new generation of cheaper and cleaner
energy supply technologies. At the same time, the U.S. can avoid
excessive investments in long-lived energy supply facilities that would
further lock in yesterday's technologies.
money savings from domestic market reforms
The overlap between a least-cost climate policy and national energy
policy extends to the economic realm. The key sources of this synergy
are cost-benefit tested market reforms that facilitate cost-effective
energy efficiency investments, combined with increased R&D efforts.
The EIA reference case excludes all such market reforms (beyond
those already in place or under way in the base year). This assumption
reflects past policy trends and considerations of political economy.
Though market reforms are economically worthwhile on their own in the
absence of climate change, many policymakers hesitate to advocate such
government actions unless they also represent a least-cost path for
realizing other clearly identified societal objectives. The broader
environmental objective of reducing greenhouse gas emissions is
operative in the Clean Energy Futures policy scenario but is not
considered in the EIA's Annual Energy Outlook forecast, which is a
business as usual perspective.
The assumptions used in the CEF scenarios regarding the
effectiveness of expanded market reforms are a highly conservative
extrapolation of past experience with such programs. Only a portion of
all new and replacement investments in energy using equipment is
shifted toward higher efficiency technologies compared to the reference
case. For example, in the buildings sector, this fraction is about a
third in 2010 and half in 2020. Even with these conservative
assumptions, market reforms are shown to have powerful economic
effects. They include:
(1) Productivity gains from energy efficiency investments;
(2) Accelerated reductions in the costs of current and emerging
technologies;
(3) An expanded array of no-regrets efficiency technologies;
(4) Lower (pre-tax) prices for fossil fuels and a relatively
cheaper electricity supply mix at lower levels of total demand; and
(5) Avoided pollution damage and control costs.
Figure ES. 4 shows economic results for the CEF scenario when
market reforms are implemented without a climate policy component,
i.e., without a carbon cap and permit auction system. The annual cost
for investments, program delivery, and R&D is about $30 billion/yr.
These costs are far exceeded by the roughly $45 billion/yr in reduced
expenditures on energy that occur on account of higher energy
productivity and reduced demand alone, assuming the same energy prices
as in the EIA reference case (demand effect). However, reduced energy
demand produces a sizable additional economic benefit from its effect
on energy prices, which adds another benefit of close to $40 billion/yr
(price effect). Finally, the co-benefits of reduced environmental
damages from air pollution and other impacts add a saving of roughly $5
billion/yr.
Net gains--calculated as (demand effect) plus (price effect) plus
(avoided pollution damages) minus (investments and program costs)--are
$60 billion/yr in 2010. For the sake of simplicity, we refer to these
savings as net energy bill savings. More precisely, they are a
reduction in the total national cost of energy services (i.e., in the
total expenditures on energy carriers plus levelized investments and
program and R&D costs, some of which deliver energy services through
efficiency improvements rather than energy consumption). These net
energy bill savings are 8 percent in 2010, equivalent to 0.5 percent of
projected GDP.
By 2020, these figures double to $123 billion/yr (including $12
billion/yr in avoided pollution damages), equivalent to 16 percent of
the national energy bill or one percent of GDP. If the EIA reference
projections of future U.S. energy prices should turn out to be too
low--as would be the case if recent trends persist--the economic
benefits of market reforms could be significantly larger still.
As the CEF study shows, the energy productivity savings from no-
regrets market reforms are far greater than the funds needed to pay for
the accelerated introduction of renewable energy sources or other
carbon-reducing technology options.
cutting carbon emissions at a profit
With its conservative assumptions, the CEF study's market reforms
alone produce about 30 percent of the U.S. Kyoto target in 2010 and
about half in 2020. When a $50/tC charge is added, the CEF scenario
leads to a roughly 60 percent realization of the Kyoto target in 2010
and 85 percent in 2020.
This roughly doubling of emissions reductions brought about by the
carbon charge diminishes net economic savings by only a small fraction.
The national cost of energy services rises by only $6 billion/yr in
2010 and $3 billion/yr in 2020, respectively, relative to the no-
carbon-charge case. (In this calculation, which adopts a national
perspective, the carbon charge payments themselves cancel, since they
are merely a transfer payment).
Our report finds that even though the CEF scenarios do not reach
the Kyoto target, the U.S. can fully achieve that level of emission
reductions at a net economic gain--even if a purely domestic strategy
is used. The key to this outcome is a combination of the above-
discussed no-regrets market reforms with tax shifts that offset the
negative GDP effects of a cap-and-trade permit system or carbon tax, as
qualitatively illustrated in Figure ES. 1 above.
Again, the EIA forecast used as the reference case in the CEF study
does not include any no-regrets options for implementing carbon
charges, i.e., growth-enhancing tax shifts. Though they are
economically worthwhile on their own, such tax shifts require new
sources of government revenues to offset reductions in existing, more
distortionary taxes. Climate policy scenarios do include new revenues
from carbon taxes or emissions permit auctions, but no such new source
of revenues is available in the EIA reference case.
Figure ES. 5 shows how market reforms and tax shifts play out in
the aggregate in 2010. The chart compares the Kyoto analysis of the
Energy Modeling Forum with an integrated least-cost approach in which
the CEF scenario is extended to reach the Kyoto target. Under a
domestic permit trading system alone, a high permit price of $230/tC is
required to reach the Kyoto target. The resulting economic losses based
on the mean of estimates from the Energy Modeling Forum are of the
order of $130 billion/yr. Co-benefits of reduced pollution reduce this
figure to about $110 billion, or one percent of projected year 2010
GDP.
When domestic market reforms are added, the permit price required
to reach the Kyoto target drops to less than $140/tC. This reduces GDP
losses from substitution effects. At the same time, market reforms
trigger cost-effective energy productivity investments, which cut the
costs per unit of energy service as well as the nation's total bill for
energy services. As a result of these savings, economic losses shrink
by about two-thirds to $40 billion.
When tax shifts are also included, GDP losses from substitution
effects are eliminated entirely. Depending on the extent and
effectiveness of tax shifts (we model 50 to 150 percent offset of
substitution losses), U.S. economic output in 2010 increases by an
amount that ranges from less than 10 to more than $90 billion per year
(again including environmental co-benefits of about $20 billion).
For the midpoint level of effectiveness (100 percent offset), tax
shifts just compensate for the GDP impacts of the carbon charge. What
remains, then, are the reductions in the total cost of energy services
from market reforms (simply referred to as net energy bill savings),
plus the environmental co-benefits of reduced carbon emissions. With a
carbon charge of roughly $140/tC, net savings from market reforms are
lower than they would be in the absence of carbon charges, but the co-
benefits of avoided pollution compensate much of this effect. The total
economic gain is about $50 billion/yr, equivalent to about half a
percent of projected GDP in 2010.
extending the time horizon to 2020
The extension of the above analysis to 2020 is of great importance
for the U.S. policy debate and the U.N. negotiations in that it
indicates whether emission reductions can be profitably maintained or
even increased over the following decade as economic growth continues
to push the reference forecasts beyond current emissions levels.
Using the CEF results for 2020, we examine a domestic least-cost
strategy, again consisting of permit trading, market reforms, and tax
shifts. We analyze two alternative emission reduction targets. In the
first case, it is assumed that the U.S. Kyoto target for 2010
(i.e.,1990 emission levels minus 7 percent) will be maintained in the
subsequent decade. In the second case, the target is increased to the
minus 20 percent level originally proposed at Kyoto by the Alliance of
Small Island States (AOSIS), a group of countries most vulnerable to
sea level rise.
As expected, the U.S. energy system in 2020 is more responsive to
both market reforms and carbon charges. The Kyoto target is reached at
$65/tC--roughly half the charge required in 2010. Expanding emission
reductions to minus 20 percent of 1990 levels requires only a modest
further increase in the carbon price, to $77/tC.
Net economic benefits are roughly $120-125 billion/yr in 2020,
equivalent to 0.9 percent of projected GDP. This is more than double
the economic gains achieved with the same strategy in 2010. When the
year 2020 emission reduction target is extended from minus 7 to minus
20 percent of 1990 levels, net economic gains are somewhat lower but
still of the same order of magnitude as for the Kyoto target. The
higher carbon charge necessary in 2020 to achieve the minus 20 percent
target does lead to reduced net savings in energy service bills.
However, this effect is partially offset by larger environmental co-
benefits.
The more than doubling of net benefits between 2010 and 2020 is
explained by three factors: (a) money-saving productivity investments
are far from saturation in 2010, and are continuing to penetrate the
capital stock in the period between 2010 and 2020; (b) capital stock
turnover in many important categories of energy-using equipment, and
thus the penetration rate of demand-side efficiency programs, is
inherently faster than economic growth, on account of short (10-20
year) equipment lifetimes; and (c) the costs of advanced low-carbon
technologies decline at an accelerated pace, due to learning curve
effects and R&D impacts.
Examining the CEF scenarios for the entire period from now until
2020, it is evident that a domestic no-regrets strategy of permit
auctions, tax shifts, and market reforms already becomes significantly
profitable within the first couple of years of implementation. From
there, it grows more lucrative year by year as the capital stock turns
over.
These findings call for a revision of conventional wisdom, which
presumes an economic advantage from postponing most emission reductions
to later years. Larger emissions reductions do become easier to achieve
in later years, as more time is allowed for the adjustment process in
the economy. However, because growing levels of emissions reductions
below the baseline become profitable even in the early years, foregoing
the early reductions implied in the Kyoto target would amount to a
significant opportunity cost for U.S. consumers and firms.
international implementation
The positive economic picture found so far further improves when a
domestic least-cost strategy is integrated with the Kyoto flexibility
mechanisms. Here, we analyze the limiting case of unrestrained global
emissions trading. Other scenarios with only a supplementary role for
trading are discussed in the subsequent section. Figure ES. 6 compares
the international trading case of the EMF-16 analysis with the results
for the CEF/Kyoto strategy combining international flexibility with
domestic no-regrets action.
As a point of reference, the chart begins with the domestic worst-
case policy based on a carbon tax without tax shifts or market reforms.
When global trading is incorporated into this policy case, the carbon
price drops by more than 80 percent from $230/tC to about $40/tC. Total
mitigation costs decline by two thirds or more.