House Hearing, 112TH Congress - Out of Thin Air: Epa's Cross-State Air Pollution Rule

OUT OF THIN AIR:
EPAS CROSSSTATE AIR POLLUTION RULE

HEARING
BEFORE THE
COMMITTEE ON SCIENCE, SPACE, AND

TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
THURSDAY, SEPTEMBER 15, 2011
Serial No. 11235
Printed for the use of the Committee on Science, Space, and Technology
(
Available via the World Wide Web: http://science.house.gov
U.S. GOVERNMENT PRINTING OFFICE

70585PDF
WASHINGTON
2011
For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 5121800; DC area (202) 5121800
Fax: (202) 5122104 Mail: Stop IDCC, Washington, DC 204020001
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,
EDDIE BERNICE JOHNSON, Texas
Wisconsin
JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas
LYNN C. WOOLSEY, California
DANA ROHRABACHER, California
ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland
BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma
DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona
W. TODD AKIN, Missouri
DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas
MARCIA L. FUDGE, Ohio
N, New Mexico
MICHAEL T. MCCAUL, Texas
BEN R. LUJA
PAUL C. BROUN, Georgia
PAUL D. TONKO, New York
SANDY ADAMS, Florida
JERRY MCNERNEY, California
JOHN P. SARBANES, Maryland
BENJAMIN QUAYLE, Arizona
TERRI A. SEWELL, Alabama
CHARLES J. CHUCK FLEISCHMANN,
FREDERICA S. WILSON, Florida
Tennessee
HANSEN CLARKE, Michigan
E. SCOTT RIGELL, Virginia
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
(II)
CONTENTS
Thursday, September 15, 2011
Page
Witness List .............................................................................................................

Hearing Charter ......................................................................................................
2
3
Opening Statements
Statement by Representative Ralph M. Hall, Chairman, Committee on
Science, Space, and Technology, U.S. House of Representatives .....................
Written Statement ............................................................................................
Statement by Representative Eddie Bernice Johnson, Ranking Minority Member, Committee on Science, Space, and Technology, U.S. House of Representatives ...........................................................................................................
10
11
12
14
Witnesses:
Bryan W. Shaw, Chairman, Texas Commission on Environmental Quality
Oral Statement .................................................................................................
Gregory Stella, Senior Scientist, Alpine Geophysics, LLC
Oral Statement .................................................................................................
Barry T. Smitherman, Commissioner, Texas Railroad Commission
Oral Statement .................................................................................................
Wayne E. Penrod, Executive Manager, Environmental Policy, Sunflower Electric Power Corporation
Oral Statement .................................................................................................
Chip Merriam, Chief Legislative and Regulatory Compliance Officer, Orlando
Utilities Commission
Oral Statement .................................................................................................
The Honorable Gina McCarthy, Assistant Administrator, Office of Air and
Radiation, U.S. Environmental Protection Agency
Oral Statement .................................................................................................
Discussion .................................................................................................................
16
18
22
24
37
38
40
42
47
49
56
58
62
Appendix 1: Answers to Post-Hearing Questions

Bryan W. Shaw, Chairman, Texas Commission on Environmental Quality ......
Gregory Stella, Senior Scientist, Alpine Geophysics, LLC ...................................
Wayne E. Penrod, Executive Manager, Environmental Policy, Sunflower Electric Power Corporation ........................................................................................
Chip Merriam, Chief Legislative and Regulatory Compliance Officer, Orlando
Utilities Commission ............................................................................................
(III)
77
79
80
83
84
IV
Page
Appendix 2: Additional Material for the Record

Letter from Mr. Bryan W. Shaw and Mr. Barry T. Smitherman to Mr.
Cass R. Sunstein, Administrator, Office of Information and Regulatory Affairs, OMB ............................................................................................................
Impacts of the Cross-State Air Pollution Rule on the ERCOT System ...............
Exhibit 1: EPA CSAPR Overview, Sunflower Electric Power Corporation .........
Letter to Hon. Cass R. Sunstein from Members of Congress ..............................
Letter to Mr. Robert Perciasepe, Deputy Administrator, EPA, from Mr. David
A. Campbell, Chief Executive Officer, Luminant ..............................................
Letter to Mr. Cass R. Sunstein, OMB, from Mr. Thomas R. Kuhn, President,
Edison Electric Institute ......................................................................................
Letter to Chairman Ralph M. Hall and Ranking Member Eddie Bernice
Johnson from Pedro J. Pizarro, Preisdent, Edison Mission Group ..................
Dynegy: Comments on Proposed Federal Implementation Plans to Reduce
Interstate Transport of Fine Particulate Matter and Ozone ............................
Consent Decree: State of Illinois vs. Illinois Power Company and Dynegy
Midwest Generation, Inc. ....................................................................................
Letter to Chairman Ralph M. Hall and Ranking Member Eddie Bernice
Johnson from Mr. Robert C. Flexon, Dynegy .....................................................
Letter to Ms. Gina McCarthy, Assistant Administrator, Office of Air and
Regulation, EPA, from Mr. Jonathan Gardner, International Vice President,
IBEW .....................................................................................................................
News Release: Luminant Announces Facility Closure, Job Reductions in Response to EPA Rule ..............................................................................................
Luminant: Related Fact Sheet for September 12, 2011, News Release ..............
NERA: Proposed CATR and MACT .......................................................................
Letter to Mr. David Campbell, CEO, Luminant, from Robert Perciasepe,
Deputy Administrator, EPA ................................................................................
Standard and Poors Global Credit Portal, September 12, 2011 .........................
Letter to Administrator Lisa P. Jackson, USEPA, from Nicholas A. Brown,
et al., Southwest Power Pool, Inc. ......................................................................
102
105
115
122
130
135
137
141
150
170
172
174
178
181
211
213
227
OUT OF THIN AIR:

EPAS CROSSSTATE AIR POLLUTION RULE
COMMITTEE
HOUSE OF REPRESENTATIVES,
SCIENCE, SPACE, AND TECHNOLOGY,
Washington, DC.
ON
The Committee met, pursuant to call, at 9:34 a.m., in Room 2318

of the Rayburn House Office Building, Hon. Ralph Hall [Chairman
of the Committee] presiding.
(1)
3
HEARING CHARTER

U.S. HOUSE OF REPRESENTATIVES
Out of Thin Air:

EPAs Cross-State Air Pollution Rule
9:30 A.M.12:00 P.M.
2318 RAYBURN HOUSE OFFICE BUILDING
Purpose
On Thursday, September 15, 2011, the House Committee on Science, Space, and
technology will hold a hearing to review the scientific, procedural, and technical
basis of the Environmental Protection Agencys Cross-State Air Pollution Rule, including a discussion of economic, employment and reliability impacts.
Witnesses
Panel One
Dr. Bryan W. Shaw, Chairman, Texas Commission on Environmental Quality
Mr. Gregory Stella, Senior Scientist, Alpine Geophysics, LLC
Mr. Barry T. Smitherman, Commissioner, Texas Railroad Commission
Mr. Wayne E. Penrod, Executive Manager, Environmental Policy, Sunflower
Electric Power Corporation
Mr. Chip Merriam, Chief Legislative & Regulatory Compliance Officer, Orlando Utilities Commission
Panel Two
Background
The Clean Air Act (CAA) requires the Environmental Protection Agency (EPA) to
promulgate National Ambient Air Quality Standards (NAAQS) for PM2 and
ozone, nd requires States to develop State Implementation Plans (SIP) that outline
how each State will meet such standards. 1
When EPA finalized new NAAQS for both PM2 and ozone in 1997, some States
found that despite their best efforts, their SIPs were inadequate for compliance. The
problem resulted in part due to the contribution of pollution from upwind States.
Under Section 110(a)(2)(D) of the CAA, States must include provisions in their SIPs
to prevent sources within their State from significantly contributing to the ability
of downwind States to attain the standards. Finding that interstate transport of sulfur dioxide (SO2) and nitrogen oxides (NO2) constituted a significant contribution 2
to downwind States inability to attain compliance with those NAAQS, EPA issued
the Clean Air Interstate Rule (CAIR) in 2005.
Clean Air Interstate Rule (CAIR)
CAIR established a regional cap-and-trade program for SO2 and NO2 emissions
from electric generating units (EGUs) in 28 eastern States and the District of Co1 NAAQS pollutants (also called criteria pollutants) are pollutants that may reasonably be
anticipated to endanger public health or welfare . . . CAA Section 108(a)(1). EPA has identified
six pollutants subject to NAAQS: ozone, particulate matter (2 and 2), carbon monoxide, sulfur
dioxide, nitrogen oxide, and lead.
2 Significant contribution was defined by CAIR as the product of three factors: (1) the actual
amount of transported pollution from upwind States that contributes to nonattainment in downwind States; (2) how often contributions over specific thresholds occur; and (3) the comparative
amount of the upwind transported contribution to the total nonattainment situation to the
downwind area.
4
lumbia. The program was composed of three emission caps: two were annual regional emission caps that address the interstate contribution of SO2 and NO2 to PM2
nonattainment; the third cap was a seasonal cap to address interstate contribution
of NO2 to ozone nonattainment. See attachment A for States affected by these regional caps.
Based on a methodology centered on reductions from EGUs and adjusted for type
of fossil fuel burned, each affected State was assigned a portion of the regional cap
in the form of a Statewide emissions budget or cap. Each covered State was then
required to submit a revised SIP identifying measures it intended to implement to
achieve its emissions budget. In its final rule, EPA encouraged States to adopt the
most cost-effective measures to achieve their emissions budget, specifically through
a cap-and-trade program. This type of program had been successful in the past, specifically with regard to the Acid Raid Program established under Title IV of the
CAA, and the NO2 SIP Call, a seasonal NO2 cap-and-trade program that includes
electric utility and other major stationary sources. The interstate trading allowed
by the CAIR rule was intended to promote the reduction of emissions in the most
cost-effective manner, and then selling emission allowances to those EGUs that decided the most cost-effective method of compliance was for them was buying allowances on the market.
Despite general support from stakeholders, CAIR was challenged in court by petitioners that argued the rule was not strong enough to address pollution from
upwind sources. On July 11, 2008, a unanimous court decision found that EPA
lacked the authority to promulgate a regional cap-and-trade rule under Section 110
of the CAA unless it could show a link between the pollution emitted in specific
States and nonattainment standards or failure to maintain standards in downwind
States. The court found that EPA had established a significant contribution made
by power plants to pollution levels in other States as required under Section 110,
but that its methodology for establishing emission budgets was unrelated to that
link. Because the trading program established under CAIR assumed that the entire
upwind region contributed significantly, and not that each States sources contributed significantly to downwind States nonattainment as defined in Section 110(a),
the interstate trading aspect of the rule was considered unlawful.
Without CAIR, States would have a difficult time demonstrating that their SIPs
could meet NAAQS. Therefore, the court subsequently modified its decision on December 23, 2008, stating that the CAIR rule could remain in effect until a new rule
was promulgated by EPA. Although the Court did not impose a specific deadline on
EPAs development of a replacement rule for CAIR, it did say that it was not granting an indefinite stay, and that petitioners may sue again if EPA did not promulgate a new rule.
Cross-State Air Pollution Rule (CSAPR)
On July 6, 2010, EPA proposed a replacement for CAIR, the Clean Air Transport
Rule. The proposed transport rule left the CAIR Phase I limits in place and set new
limits replacing CAIRs Phase II limits in 2012, three years earlier than the original
CAIR rule. The proposed rule included the States in CAIR and added three new
StatesOklahoma, Kansas, and Nebraska. The rule allowed unlimited trading of allowances within individual States, but severely limited interstate trading in order
to address one of the Courts reasons for vacating the CAIR rule. In order to ensure
expedited implementation of the rule, EPA proposed a Federal Implementation Plan
(FIP) for each of the States, focusing solely on EGUs. States may develop their own
6
SIPs and choose to control other types of sources in addition to EGUs if they wish,
but the federal plan will take effect until the State acts to replace it.
Exactly one year later, in July 2011, EPA finalized the transport rule, now called
the Cross-State Air Pollution Rule (CSAPR). The final rule includes requirements
for 28 States (see attachment B) to reduce SO2 and NO2 emissions that may contribute to nonattainment of the ozone or fine particulate PM2 NAAQS for downwind
States. Since the proposed rule came out in July 2010, EPA issued three Notices
of Data Availability (NODAs) to address fuel cost assumptions, emission inventories,
and allowance allocation methods. As a result, the final rule contains a variety of
significant changes when compared to the July 2010 proposal, or CAIR.
There were several significant changes between the proposed rule and the finalized CSAPR. The final rule requires States to comply with the cap established in
their emission budgets by January 1, 2012, instead of the January 1, 2014, date in
the proposed rule. The final rule also included a new allowance allocation approach
that bases allocations on heat input, discounting the type of coal used or the efficiency of the plant. As a result of updated modeling and analysis tools, EPA decided
to change the mix of States included in the final rule. Texas was added to the annual SO2 and NO2 programs, while Connecticut, Delaware, the District of Columbia,
Florida, Louisiana, and Massachusetts were removed. Iowa, Missouri, and Wisconsin were added to the ozone-season NO2 program; Connecticut, Delaware, and
the District of Columbia were removed.
Like the proposed rule, the final CSAPR left in place the CAIR Phase I limits and
replaced the CAIR Phase II limits with new limits to take effect in 2012, three years
earlier than CAIR, and also included a third Phase to take effect in 2014. The reductions envisioned under CAIR are already underway. On August 11, 2010, EPA
reported that emissions of SO2 had declined sharply in both 2008 and 2009. In 2009,
SO2 emissions from fossil-fuel power plants were 44% below 2005 levels and NO2
emissions were 45% below 2005 levels. 5
Key IssuesThe following issues identified by experts and stakeholders continue
to be the subject of ongoing debate regarding the justifications for, and impact of,
the final CSAPR rule:
Modeling vs. Measurement. EPA modeling does not reflect the significant emissions reductions made since implementation of the 2005 CAIR rule, resulting
in modeling data inconsistent with real-world conditions and the potential for
overestimation of States downwind impacts. Additionally, the most recent air
quality data indicate fewer nonattainment and maintenance areas than projected by EPA, thereby lessening the benefits that would be obtained under the
CSAPR.
Implementation Timeline. The CSAPR rule was finalized on July 6, 2011, and
Phase II compliance is required by January 1, 2012, leaving less than six
months for companies and States to act to reduce emissions. This issue was acknowledged by the Administration during interagency comment on the rule,
specifically noting that such a substantial change occurring six months prior
to the effectiveness of the assurance provision leaves sources with few options
5 EPA
2009 Acid Rain Program Emission and Compliance Data Report, August 11, 2010.
7
to respond in a cost-effective manner, increasing the likelihood of disrupting
system reliability if it becomes necessary to achieve compliance through derates
and/or idling. 6
Allowance Banking. The CSAPR drastically limits the use of banked allowances
saved under the Acid Rain program and the NO2 SIP Call, increasing implementation costs and compliance challenges.
Costs and Benefits. EPAs cost-benefit analysis does not consider costs of control
equipment installed for CAIR compliance, but nonetheless takes credit for emission reductions already achieved by these controls.
Implementation Flexibility. In order to facilitate implementation of the rule,
EPA has issued a FIP in place of allowing States to generate their own SIPs,
contrary to the cooperative federalism outlined in the CAA.
Reliability. EPA asserts that CSAPR will not compromise electric reliability. Others have questioned this assumption. For example, the Electric Reliability Council
of Texas (ERCOT) concluded that rolling brownouts would have been necessary if
the rule had been in place in 2011: ERCOT would have experienced rotating outages during days in August. Off-peak capacity reductions in the three scenarios
evaluated as part of this study, when coupled with the annual maintenance outages
that must be taken on other generating units and typical weather variability during
these periods, also place ERCOT at increasing risk of emergency events, including
rotating outages of customer load. 7
Impact on Electricity Rates, Jobs, and the Economy. According to an analysis
conducted by NERA Economic Consulting, the combined impacts of EPAs
CSAPR and proposed utility MACT rules would increase retail electricity prices
by 12 percent in 2016 and reduce net employment significantly over the next
eight years (with losses outweighing gains by more than 4 to 1). This finding
has been reinforced by some of the largest electric generators and unions in the
U.S., which indicate that CSAPR and related EPA rules will cause the retirement of numerous power plants and mining operations, as well as significant
job losses.
6 OMB Summary of Interagency Working Comments, Doc. EPA-HQ-OAR-2009-0491-4133

(posted to the docket on July 11, 2011).
7 7 http://www.ercot.com/content/news/presentations/2011/ERCOT CSAPR Study.pdf.
10
Chairman HALL. The Committee on Science, Space, and Technology will come to order, and I say good morning to you and thank
you for being so punctual and at your places. And I thank some of
my staff who has urged you to stay within the limit of five minutes.
We are going to relegate our questions to three minutes each because we are going to have to go vote in a little bit, and we know
your time is valuable and the other witnesses time is semi-valuable. And we want to give each of us the same length of time to
talk. Thank you all. And I thank the Members.
And welcome today to our hearing that is entitled Out of Thin
Air: EPAs Cross-State Air Pollution Rule. In front of you are
packets containing written testimony, biographies, and Truth-inTestimony for everybody here, and disclosures for todays witnesses. Todays hearing includes two panels, which I will note for
the record is not the typical practice of our Committee.
I will now recognize myself for five minutes for an opening statement. And I relegate myself to three minutes, but I dont know
what part of this I leave out because I didnt write any of it, but
I am going to read most of it.
I want to welcome everyone here today for this hearing entitled
Out of Thin Air: EPAs Cross-State Air Pollution Rule. I particularly want to thank all the witnesses on the first panel who provided their testimony on time. Despite being told more than three
weeks in advance about this hearing, we had a little problem with
the other testimony that is given, but maybe everybody has a reason for that, so we usually try to overlook that. But thank you for
being punctual and being responsive.
A week ago, President Obama gave a speech about jobs and
asked Congress to give him $450 billion in new money to spend.
As we debate the merits of that proposal, I hope the Administration will recognize the single most important thing it can do for the
economy that doesnt cost a dime. All it takes is for the President
to assert some leadership and get the out-of-control EPA to stop its
regulatory assault on American jobs.
The issue today before us is a prime example of that. The CrossState Rule is intended to ensure upwind States do not negatively
impact the air quality of their downwind neighbors, a seemingly
reasonable concept. In reality, however, it serves as another monument to the activist EPAs legacy of putting bad politics ahead of
good science without regard to economics. To fully state the number of problems with this rule would far exceed my five minutes or
two minutes or 15 minutes it would take me, but there are a few
that require mention.
First, issuing a rule forcing major installations of pollution-control equipment and expecting States to comply with it five months
later is unheard of, even by EPAs previous track record and appears to be setting up States to fail. To add insult to injury, EPA
added Texas and several other States to the rule at the last
minute, without giving affected stakeholders the ability to review
or comment on this decision. Incredibly, EPA has staked its justification for the inclusion of Texas on the basis of a single-projected impact on a county in Illinois. Just to be clear, EPA has
modeled a potential effect in the single area hundreds of miles
11
away. This has not been actually measured; in fact, that county
even is currently meeting the standard.
Furthermore, the model assumptions EPA used to estimate such
linkages are hidden from the public and not subject to peer review.
These black-box models allow EPA to pick and choose its input
data and assumptions free from technical scrutiny. This is not how
science really should be done.
Today, we will hear from witnesses from States that have been
adversely affected by this rule. The concerns are the same: not
enough time, EPAs abuse of modeling to justify the rule, and electrical reliability concerns that will result from the rules implementation. Now, for my State of Texas, it is important to note that it
is a clean-air success story. Through a flexible, pro-jobs, all-of-theabove energy strategy, Texas has achieved recent environmental
progress that eclipses many other States in the country. Since
1995, electric utilities in Texas have reduced sulfur dioxide emissions by 26 percent, NO2emissions by 62 percent. The Cross-State
Air Pollution Rule requires Texas to reduce its SO emissions by an
additional 47 percent, so by January 1, 2012.
Last week during a Congressional hearing, Assistant Administrator Gina McCarthy stated, I dont want to create the impression
that EPA is in the business of creating jobs, a little sarcastic, I
think. I want to assure Mrs. McCarthy not to worry. Americans are
not getting that impression from EPA. And I frankly think it is a
shame for an Administration official to make a smart-aleck remark
like that when people are in jeopardy of losing their jobs and having to come home and tell their family that they dont have a job
and they cant provide for them. We are in a desperate time to
have that kind of talk.
Just this week, Texas companies have announced that they will
have to cut jobs specifically in response to this rule. EPA may not
be in the business of creating jobs, but with more than nine percent
unemployment, it certainly should not be in the business of destroying them either, which is what will happen if this rule goes
into effect the way they have planned it.
And I now representrecognize a very fine Ranking Member,
Ms. Johnson, for five minutes for an opening statement.
[The prepared statement of Chairman Hall follows:]
PREPARED STATEMENT OF REPRESENTATIVE RALPH M. HALL, CHAIRMAN,
I want to welcome everyone here today for this hearing entitled Out of Thin Air:
EPAs Cross-State Air Pollution Rule. I particularly want to thank all the witnesses
on the first panel who provided their testimony on time. Despite being told more
than three weeks in advance about this hearing, Assistant Administrator McCarthy
submitted her testimony less than 24 hours in advance of this hearing and well past
the Committees deadline. This is yet another example of the Administrations disrespect to the Congress.
A week ago President Obama gave a speech about jobs and asked Congress to give
him $450 billion in new money to spend. As we debate the merits of that proposal,
I hope the Administration will recognize the single most important thing it can do
for the economy doesnt cost a dime; all it takes is for the President to assert some
leadership and get the out-of-control EPA to stop its regulatory assault on American
jobs.
The issue before us today is a prime example of that. The Cross-State rule is intended to ensure upwind States do not negatively impact the air quality of their
downwind neighbors, a seemingly reasonable concept. In reality, however, it serves
12
as another monument to the activist EPAs legacy of putting bad politics ahead of
good science without regard to economics. To fully state the number of problems
with this rule would far exceed my five minutes, but there are a few that require
mentioning.
First, issuing a rule forcing major installations of pollution control equipment and
expecting States to comply with it five months later is unheard of, even by EPAs
previous track record, and appears to be setting up States to fail. To add insult to
injury, EPA added Texas and several other States to the rule at the last minute,
without giving affected stakeholders the ability to review or comment on this decision. Incredibly, EPA has staked its justification for the inclusion of Texas on the
basis of a single projected impact on a county in Illinois. Just to be clear, EPA has
modeled a potential affect in a single area hundreds of miles awaythis has not
been actually measured. In fact, that county is currently meeting the standard.
Furthermore, the model assumptions EPA uses to estimate such linkages are hidden from the public and not subject to peer review.
These black box models allow EPA to pick and choose its input data and assumptions free from technical scrutiny. That is not how science should be done.
Today we will hear from witnesses from States that have been adversely affected
by this rule. The concerns are the same: not enough time; EPAs abuse of modeling
to justify the rule; and electrical reliability concerns that will result from the rules
implementation. As for my State of Texas, it is important to note that it is a clean
air success story. Through a flexible, pro-jobs, all-of-the-above energy strategy,
Texas has achieved recent environmental progress that eclipses many other States
in the country. Since 1995, electric utilities in Texas have reduced sulfur dioxide
emissions by 26 percent and NO2 emissions by 62 percent. The Cross-State Air Pollution Rule requires Texas to reduce its SO2 emissions by an additional 47 percent,
by January 1, 2012.
Last week during a Congressional hearing, Assistant Administrator Gina McCarthy stated, I dont want to create the impression that EPA is in the business of
creating jobs. I want to assure Ms. McCarthy not to worryAmericans are not getting that impression. I think it is a shame for an Administration official to make
a smart-aleck remark like that when real people are in jeopardy of losing their jobs.
Just this week, Texas companies have announced that they will have to cut jobs,
specifically in response to this rule. EPA may not be in the business of creating jobs,
but with more than nine percent unemployment, it certainly should not be in the
business of destroying them either, which is what will happen if this rule goes into
effect the way you have planned. I now recognize Ranking Member Johnson for five
minutes for an opening statement.
Ms. JOHNSON. Thank you very much, Mr. Hall, and let me apologize for being a little late. I was stuck in the 395 tunnel after the
police cut it off for 30 minutes. And so I got here a lot later than
I intended. I really intended to have breakfast before coming.
But let me commend you for having this hearing. The finalized
Cross-State Air Pollution Rule is effectively known as Casper.
This is a very complex and contentious regulatory issue and not
one that would fall within the Committees purview. But the principle is simple and embodied in Clean Air Acts Good Neighbor Provision. Air pollution doesnt stop at the State line, just as it doesnt
at city limits, and when the pollution from one State affects the air
quality of another, measures should be taken to mitigate that impact. For instance, the emissions of some pollutants from my home
State of Texas with its booming economy, growing population, and
vibrant fossil energy sector are some of the highest in the country.
You cant fence it in, so it stands to reason that the effects will be
felt somewhere downwind and that we owe it to our neighbors to
clean up our act. The hard part is figuring out how. This is why
we have EPA and why Congress and the Republican President
passed the Clean Air Act to identify threats to the environment
and public health and determine the fairest and most cost-effective
ways to remedy them.
13
However, much as we might wish for a world where big environmental issues are addressed voluntarily by industry or through the
workings of the free market, or are best regulated by the individual
States, we all know that it just does not work that way. Now more
than ever the American people need a strong EPA to protect their
rights of clean air and clean water.
I am a nurse by profession. I know the statistics of the lungs that
have been affected by all of this pollution. That said, while I will
always be a strong defender of EPAs charge to protect public
health and the environment, I am concerned about their process for
the inclusion of Texas in the final Transport Rule at this time. As
indicated in the letter my colleagues and I from Texas sent to
OMB, some important affected parties in Texas feel that they did
not have sufficient opportunity to comment. These parties will likely have difficulty meeting the timeline of the final rule.
I am not and nor is EPA a job killer. We are simply trying to
protect the lives of the people. I simply feel that stakeholders need
more time to work with EPA on an economically and environmentally responsible solution, a solution that I know we can reach.
We have evidence.
With so much at stake in this and other rules, EPA cannot afford
to get bogged down and derailed by procedural missteps. What the
public, State governments and industry stakeholders need more
than anything is regulatory certainty that allows for long-term investment planning. I sincerely hope that this somewhat irregular
and confusing process is not laying the groundwork for what could
be a protracted battle when in the end, clean air is in everyones
best interest.
Beyond those concerns, let me take this opportunity to clarify
where I stand on the broader concern about EPA. First, do not mistake my position on this single issue as standing with Governor of
Texas Perry or others in the Republican Party in the misguided
disingenuous war on the dedicated scientists and public servants at
the EPA. So I do not join my Governor in this race to the bottom
as he seeks to outcompete the rest of the country in tearing down
environmental and public health protections. I stand with the people of Texas who, regardless of where they fall in the partisan divide, universally agree that they have a right to clean air and clean
water, and that respiratory diseases, heart attacks, premature
deaths are not part of the sacrifice that we have to make for the
sake of the Texas Miracle.
Air quality-related illnesses have very real and destructive effects on the economy on the order of hundreds of billions of dollars
annually, and the benefits for reducing those effects will be seen
throughout our country. Second, despite the noise from the echo
chamber on the right, on the whole, EPA regulations do not, do not,
do not kill jobs. From catalytic converters to CFCs, scrubbers to
seatbelts, for decades we have heard how almost every major environmental consumer protection act that Congress considers will
decimate the American industrial base and result in irreparable
economic disruption, only to see the power of American innovation
quickly leave these cynics and pessimists in the dark.
In fact, there is much more evidence showing that jobs are created and the economy expands following the passage of major re-
14
forms. For example, the U.S. economy grew by 64 percent in the
years following the passage of the Clean Air Act, and recent vehicle
fuel economy and emissions standards have already resulted in the
creation of 150,000 jobs. And that is some of the figures that have
not just been tabulated by EPA but others as well. Yes, some types
of industries will see a decline in the face of new regulations. That
is very true of much of what we see. Technology, though, makes a
difference.
In TexasI am over my time, but, Mr. Hall, let me finish. In
Texas, depending on how the relevant firms decide to comply, we
stand to lose a number of rural jobs at lignite mines and power
plants. I truly hate to see any family suffer a job loss, but I am
an optimist. With the well-founded faith that ultimately these regulations act as a catalyst for the creation of new jobs in industrial
sectors and that the hardworking and talented Texas workforce
will be the ones to benefit in the end.
In conclusion, my position on the specific issue of Texas inclusion
in the final Transport Rule is clear. Texas needs more time to consider the full implications of the rule to submit comments to EPA
and possibly to prepare for implementation. Too many jobs in our
State are at stake in the short term. However, my position on the
protection of public health through higher air and water quality
standards and our ability to meet those standards through homegrown innovation should be equally clear and never in question.
The sooner we learn that we do not have to sacrifice jobs for a
cleaner environment, the sooner we will see a more robust economy
and a healthier public, two things that we all look forward to.
Thank you.
[The prepared statement of Ms. Johnson follows:]
PREPARED STATEMENT OF MS. EDDIE BERNICE JOHNSON,
RANKING MINORITY MEMBER,
I want to thank Chairman Hall for holding a hearing on the recently finalized
Cross-State Air Pollution Rule, affectionately known as Casper. This is a very
complex and contentious regulatory issue, and not one that would fall within the
Committees purview. But the principle is simple and embodied in the Clean Air
Acts Good Neighbor provision. Air pollution doesnt stop at the State line, and
when the pollution from one State affects the air quality in another, measures
should be taken to mitigate that impact.
For instance, the emissions of some pollutants from my home State of Texas
with its booming economy, growing population, and vibrant fossil energy sectorare
some of the highest in the country. You cant fence that in. So, it stands to reason
that the effects will be felt somewhere downwind, and that we owe it to our neighbors to clean up our act. The hard part is figuring out how.
This is why we have an EPA, and why Congress and a Republican President
passed the Clean Air Actto identity threats to the environment and public health,
and determine the fairest and most cost-effective ways to remedy them. However,
as much as we might wish for a world where big environmental issues are addressed voluntarily by industry or through the workings of the free market, or are
best regulated by the individual States, we all know that it just does not work that
way. Now, more than ever, the American people need a strong EPA to protect their
rights to clean air and water.
That said, while I will always be a strong defender of EPAs charge to protect public health and the environment, I am concerned about their process for the inclusion
of Texas in the final transport rule. As indicated in the letter my colleagues from
Texas and I sent to OMB, some important affected parties in Texas feel that they
did not have sufficient opportunity to comment. These parties will likely have dif-
15
ficulty meeting the time line of the final rule. I simply feel that stakeholders need
more time to work with EPA on an economically and environmentally responsible
solution, a solution I know we can reach.
With so much at stake in this and other rules, EPA cannot afford to get bogged
down and derailed by procedural missteps. What the public, State governments, and
industry stakeholders need more than anything is regulatory certainty that allows
for long-term investment planning. I sincerely hope that this somewhat irregular
and confusing process has not laid the groundwork for what could be a protracted
battle when, in the end, clean air is in everybodys best interest.
Beyond those concerns, let me take this opportunity to clarify where I stand on
the broader concern about the EPA.
First, do not mistake my position on this single issue as standing with Texas Governor Perry or others in the Republican Party in the misguided and disingenuous
war on the dedicated scientists and public servants at the EPA. I do not join my
governor in his race to the bottom as he seeks to out-compete the rest of the country
in tearing down environmental and public health protections.
I stand with the people of Texas who, regardless of where they fall in the partisan
divide, universally agree that they have a right to clean air and water, and that
respiratory diseases, heart attacks, and premature deaths are not part of the sacrifice we have to make for the sake of the Texas Miracle. Air quality-related illnesses have very real and destructive effects on the economyon the order of hundreds of billions of dollars annuallyand the benefits for reducing those effects will
be seen throughout the country.
Second, despite the noise from the echo chamber on the right, on the whole, EPA
regulations DO NOT kill jobs. From catalytic converters to CFCs, scrubbers to seatbelts, for decades we have heard how almost every major environmental and consumer protection act that Congress considers will decimate the American industrial
base and result in irreparable economic disruption, only to see the power of American innovation quickly leave these cynics and pessimists in the dust.
In fact, there is much more evidence showing that jobs are created and the economy expands following the passage of major reforms. For example, the U.S. economy
grew by 64 percent in the years following passage of the Clean Air Act, and recent
vehicle fuel economy and emissions standards have already resulted in the creation
of over 150,000 jobs.
Yes, some types of industries will see a decline in the face of new regulations. In
Texas, depending on how the relevant firms decide to comply, we stand to lose a
number of rural jobs at lignite mines and power plants. I truly hate to see any family suffer a job loss. But, I am an optimist with a well-founded faith that ultimately
these regulations act as a catalyst for the creation of new jobs and industrial sectors, and that the hardworking and talented Texas workforce will be the ones to
benefit in the end.
In conclusion, my position on the specific issue of Texas inclusion in the final
transport rule (CSAPR) is clearTexas needs more time to consider the full implications of the rule, to submit comments to EPA, and possibly to prepare for implementation. Too many jobs in my State are at stake in the short term. However, my position on the protection of public health through higher air and water quality standards, and our ability to meet those standards through home-grown innovation,
should be equally clear and never in question . The sooner we learn that we do not
have to sacrifice jobs for a cleaner environment, the sooner we will see a more robust economy and a healthier public, two things we should all look forward to.
Thank you.
Chairman HALL. The gentlelady yields back her time. If there

are other Members who wish to submit additional opening statements, your statements will be added to the record at this point.
And at this time, I would like to introduce our first witness
panel. Dr. Bryan Shaw is the Chairman of the Texas Commission
on Environmental Quality and also an Associate Professor in the
Biological and Agricultural Engineering Department of Texas A&M
University. Prior to his current appointment, Dr. Shaw was an Associate Director of the Center of Agricultural Air Quality Engineering and Science and has served as a member of the EPA Science
Advisory Board Environmental Engineering Committee.
Next, we have Gregory Stella, a Senior Scientist at Alpine Geophysics. Mr. Stella is internationally recognized as a technical au-
16
thority in the planning, development, evaluation, and modeling of
local, national, and international emissions inventories and policy
options for the projection and control of ozone and particular matter pollutants and precursors.
Our third witness is Barry T. Smitherman, a recent appointed
Commissioner on the Texas Railroad Commission. He is also a
member of the National Association of Regulatory Unity Commissioners, Board of Directors, and the Committee on Energy, Resources, and the Environment. In his prior role as Chairman of the
Public Utility Commission of Texas, he served as an ex officio
board member on the Electric Reliability Council of Texas and Vice
President of the Regional State Committee for the Southwest
Power Pool.
Next, we have Mr. Wayne E. Penrod, Executive Manager of Environmental Policy at the Sunflower Electric Power Corporation in
Kansas. He is responsible for Sunflowers compliance with all federal and State environmental regulations, permitting, and reporting activities for Sunflowers generation facilities.
Rounding out the panel, we have Mr. Chip Merriam, Chief Legislative and Regulatory Compliance Officer of the Orlando Utilities
Commission. Mr. Merriam is responsible for managing energy and
water regulatory and compliance matters for the Orlando Utilities
Commission and is heavily involved in the development of the
State of Florida and federal legislative policy.
And as our witnesses should know, spoken testimony is limited
to five minutes, after which the Members of the Committee will
have three minutes each to ask a question. And we hope you can
stay as close to the five minutes, but if you have to run over, we
understand that. We recognize, and on both sides of the docket recognize, that you are giving up time for your preparation for being
here, for your travel here, for your service here and going back to
wherever you came from. So we wont be really bad on you if you
go over the five minutes.
So I guess at this time I now recognize Mr.Dr. Bryan Shaw,
Chairman of the Texas Commission on Environmental Quality.
STATEMENT OF DR. BRYAN W. SHAW, CHAIRMAN,
TEXAS COMMISSION ON ENVIRONMENTAL QUALITY
Mr. SHAW. Thank you, Chairman Hall, Members. My name is

Bryan Shaw. I am the Chairman of the Texas Commission on Environmental Quality. Also, as you pointed out, I am on leave of absence as a Professor of Agricultural Engineering at Texas A&M
University, so I will try to rein in my natural desire to speak for
50 minutes at a time and try to stay under the five-minute mark.
I want to talk about this rule, the Cross-State Air Pollution Rule.
Specifically, I want to talk about the concerns we have with the
lack of due process that was afforded the State of Texas in this
process, and not just the lack of due process also but the specific
implications in this matter. Both you and Member Johnson have
pointed out some of the concerns with the timing. And specifically,
I want to lay out that process as it occurred.
Texas was included only in the Ozone Seasonal Requirements in
the proposed rule. Those are the requirements from May to Sep-
17
tember. In the final rule, Texas was included not only for the ozone
but also in the annual standard for PM2 and specifically in the
Group 2 SO2 trading component. This gives us a very short time
frame, less than 31/2 months from today, January 2012, to comply
with this regulation. The lack of adequate notice and meaningful
opportunity for comment occurred because of the fact that in the
proposed CATR, the Cross-State Air Transport Rule, they did not
include Texas in the annual programs for NO2 and SO2 reductions
for PM2. In fact, EPAs own models acknowledge that Texas did not
exceed the linkages that would be necessary to include us.
At rule finalization and for the very first time, Texas was included and linked to a monitor in Granite City, Illinois, and included in the Federal Implementation Plan for the 1997 PM2
standard. Because Texas was not significantly linked in the PM2
rule proposal, it was not possible for the State to provide meaningful comment on the technical underpinnings of a linkage to any
particular one monitor among dozens of non-attainment or maintenance receptors for PM2 covered by rule.
EPA maintains throughout its rule preamble and in response to
comment that Texas had ample opportunity for comment and notice of a potential inclusion. However, Texas had not had been provided additional information on possible linkages or proposed budgets in order to provide meaningful comment. In fact, what EPA
took comment on in the proposal was a questionable scenario
whereby EPA posited that Texas might increase its sulfur dioxide
emissions in effect because the rule was likely to make it cheaper
to burn higher sulfur coal. The State of Texas and others commented on the fallacy of that approach. EPA abandoned that and
instead relied on a newly-found and created linkage which first appeared in the final rule.
Interestingly, EPA informed six other States that their supplemental modeling from the time of proposal to finalization of the
rule showed that additional modeling linked them for ozone to
other sites that werent included in the proposal. EPA, instead of
moving forward, did not include those linkages and did not include
them in the final rule. They afforded those six States supplemental
notice and opportunity for comment even though three of those
StatesKansas, Oklahoma, and Michiganhad been linked to
other monitors which Texas was not in the initial rule. It seems
toEPA seems to understand that those other States needed an
opportunity to comment on the linkages, but not Texas. EPAs insistence that Texas knew of its inclusion in this program and that
it was possible that inclusion was going to occur and therefore inclusion under a wholly separate and unproposed scenario was reasonable, raises both due process concerns and equity concerns.
Texas was only provided the final emissions budget for SO2 and
NO2 at rule finalization. EPA apparently believes the proposed
emission budget is not necessary for adequate notice and comment.
However, every other State included in this rule received a proposed budgetor a budget at proposal.
Now, it seems that after having had our first meeting with
EPAthough I requested a meeting with the Administrator prior
to the finalization of the rulewe werewe met with the Deputy
Administrator justI am going to say his name PerciasepeEPA
18
seems to want to look at finding ways to minimize the unintended
impacts of this rule on a case-by-case basis. More specifically, suggesting they may be able to provide additional budget allocations
for emissions on a case-by-case basis. This shows clearly the EPA
does not understand the competitive wholesale market-based approach that Texas has and doesnt recognize the challenges with
being able to move forward and ensure that we have the reliability
that is necessary to keep the lights on and keep Texans safe whenever we have adverse weather conditions that make us rely on adequate air conditioning and other power supply.
As you look at the linkage that EPA cited was a .18 micrograms
per cubic meter, which is .03 micrograms per cubic meter, that is
.03 millionths of a gram per cubic meter above the linkage threshold to a monitor in Granite City, Illinois. This linkage is tenuous,
and yet based on this, EPA has recommended that Texas have a
47 percent reduction of their SO2 emissions from the 2010 level.
I point out that Texas has had a great deal of success. In fact,
we have reduced our SO2 emissions by over 32 percent from 1999
to 2010. This rule does not provide adequate time for us to implement this reduction and the EPA cant undo the negative consequences of this rule simply by trying to address the errors in
their data and the errors in their analysis specifically with ERCOT
and regard to reliability of the Texas system. We need to have an
opportunity for full vetting so that we avoid the consequences I
have spoken of.
Thank you for the opportunity to present to you today, sir, and
Members.
[The prepared statement of Mr. Shaw follows:]
PREPARED STATEMENT OF DR. BRYAN W. SHAW, CHAIRMAN,
TEXAS COMMISSION ON ENVIRONMENTAL QUALITY
As Chairman of the Texas Commission on Environmental Quality (TCEQ), I appreciate the opportunity to provide testimony and information to the U.S. House
Committee on Science, Space, and Technology at the hearing entitled Out of Thin
Air: EPAs Cross-State Air Pollution Rule. This is a critical topic regarding the effect of the EPAs recently finalized rule on the environment, electric reliability, and
commerce throughout our Nation, as well as in the State of Texas. Equally important is the precedent set by the EPA with this rule and its disregard for transparency and full public participation; its selective use of data undermining common
sense and Federal Clean Air Act obligations; and its unrealistic timetables for compliance. Instead, EPA is forcing the burdens of its own flawed interstate transport
rule schemes onto the shoulders of a single, vital industry in order to meet the requirements of a paper exercise having limited relation to actual air quality in America. As I have said before, a strong economy does not need to come at the cost ofthe
environment, and Texas has shown that to be true.
The TCEQ regularly weighs and balances matters that affect the environment
and economy. We value regulation that addresses real environmental risks while
being based on sound science and compliance with State and federal statutes. In
every case where Texas disagrees with the EPAs rule, it is because EPAs rule is
not consistent with these principles.
Cross-State Air Pollution Rule (CSAPR)
The EPA finalized Federal Implementation Plans (FIP) on July 6, 2011, requiring
27 eastern States to reduce sulfur dioxide (S02) and nitrogen oxides (NO2) emissions
from electric generating units (EGU) to address transport obligations under the
1997 and 2006 fine particulate matter (PM2) and 1997 ozone National Ambient Air
Quality Standards (NAAQS). The FIPs require reductions during the ozone season
(May through September) of NO2 emissions that cross State lines for States under
19
the ozone requirements and reductions in annual S02 and NO2 for States under the
PM2 requirements. The FIPs utilize cap and trade programs that include overall
State budget emission caps with unlimited intrastate and limited interstate allowance trading. Although the rule proposal only included Texas under the ozone season requirements, the final rule not only includes Texas in the annual PM2 programs for NO2 and Group 2 S02 trading (in addition to the ozone program requirements), but it requires substantial reductions to be in place beginning January
2012 1just three and a half months from today.
The TCEQ has significant legal concerns regarding the lack of adequate notice
and the overreach of the EPAs emission reduction requirements. These concerns
have certainly been articulated by the many submitted requests for reconsideration
by affected parties. However, even without the procedural legal weakness of this
rule, the technical flaws merit re-examination. This rule serves as another example
where the EPA inadequately rationalizes the need for a complex regulatory scheme
to solve a non-existent problem.
Lack of Adequate Notice or Meaningful Opportunity to Comment
The CSAPR, or Clean Air Transport Rule (CATR) as it was originally proposed
in August 2010 by the EPA, did not include Texas in the annual program for NO2
and S02 emission reductious to address PM2 transport. In fact, the EPAs proposed
rule acknowledged that Texas power plant emissions, as modeled by the EPA, did
not exceed the thresholds for inclusion in the PM2 portion of CATR (for either the
1997 annual or the 2006 24-hour standards). At rule finalization, and for the very
first time, Texas was significantly linked for PM2 to a monitor in Granite City,
Illinois, and included in the FIP for the 1997 annual PM2 standard. Because Texas
was not significantly linked to any PM2 monitors at proposal, it was not possible
for the State to provide meaningful comment on the technical underpinnings of a
linkage to any potential one monitor among dozens of nonattainment or maintenance receptors for PM2 covered by the rule.
The EPA, throughout its final rule preamble and in its response to comments,
maintains that Texas had ample notice of its potential inclusion in the PM2 program
and need not have been provided additional information on possible linkages or proposed budgets in order to provide meaningful comment. At proposal, the EPA had
developed a questionable scenario under which CATR would make higher sulfur
coals more cost effective than lower sulfur fuels. The EPAs hypothesis regarding
this cascading result of price points was that Texas SO2 emissions would increase
and therefore cause an air quality effect exceeding the threshold. The EPA used this
scenario to take comment on whether Texas should be included in the program as
a Group 2 State. In other words, the only topic on which the EPA sought comment
at proposal was regarding Texas potential inclusion in the PM2 program. But this
request for comment was specific to a hypothetical scenario involving increased SO2
emissions, not an actual linkage to a specific monitor. No potentially significantly
linked monitors were ever identified at proposal or in any subsequent notice. The
TCEQ and others subsequently provided comments critical of this hypothetical scenario, which the EPA ultimately abandoned at rule finalization, relying instead on
a newly created significant linkage whose first appearance was at final adoption.
Interestingly, the EPA provided six other States supplemental notice and an opportunity to comment on ozone monitor linkages that were not identified at rule
proposal, though three of these States (Kansas, Oklahoma, and Michigan) had already been proposed for inclusion in the rules ozone program based on linkages to
other monitors subsequently dropped at rule finalization. Such action by EPA suggests it understands the importance of fully providing information regarding significant monitor linkages to States for review and comment prior to rule finalization.
Yet, inexplicably, the EPA failed to provide Texas with similar supplemental notice
on its unproposed significant PM2 linkage. The EPAs insistence that Texas knew
its inclusion in the PM2 program was possible and therefore its inclusion under a
wholly separate and unproposed scenario is reasonable raises significant due process
and equity concerns. However, EPAs argument that CSAPR, as it relates to Texas,
is not subject to additional notice and comment requirements is undercut by the
supplemental notice it provided to other States which could have expected their inclusion in the program based on proposed information.
With this new, significant linkage, Texas was provided only a final budget for annual NO2 and S02. This deprived Texas of any opportunity for comment on the im1 The compliance period begins January 1, 2012, but reductions could take place at anytime
within the year, as long as the yearly emissions total is within the required assurance level and
covered by allowances.
20
pacts of such budgets or the calculations of significant contribution to Texas new
linkage monitor forming the basis of such budgets. Texas was not provided proposed
annual budgets, and therefore had no indication of the EPAs interpretation of calculations for emissions reductions needed to prevent Texas significant contribution
to any hypothetical monitor. Though the EPA had assembled data regarding what
it believed to be cost-effective controls at a number of price points for States (Texas
included), EPA went no further for Texasit set no cost threshold level for Texas;
did no analysis to determine the effect of specific reductions downwind for Texas;
and set no proposed budgets for Texas. Further, in the proposed rule preamble, the
EPA notes that when setting budgets for Group 2 States (and Group 1 States in
2012, prior to their 2014 budget step-down), it chose to not use cost curves to set
annual budgets. Instead EPA reviewed the actual performance that EGUs achieved
in 2009. Given the limited information provided for Texas, it would have been nearly impossible for Texas to guess on a possible budget regarding its possible inclusion, and any such guess would likely have been far larger (particularly if using
2009 data) than the budget the EPA finalized for Texas. According to the EPA, a
proposed budget was not necessary for adequate notice and comment. If that is true,
why did every other State included in CSAPR receive a budget at proposal?
Had Texas been afforded the opportunity to comment on a linkage to the Granite
City monitor and on emissions reductions necessary to prevent significant contribution to nonattainment at this monitor, it surely would have pointed out that the
nonattainment monitor in question is situated within approximately 1/2 mile of a
steel mill. The linkage monitor is, unsurprisingly, heavily influenced by local emissions. In fact, the monitor was specifically sited to monitor particulate emissions
from the mill. Texas would also have commented that the monitor has measured
attainment of the annual PM2 standard since 2008 when the mill stopped operating.
It is important to note that the mill has since resumed operations under the requirements of a Memorandum of Understandiug (MOU) with the TIlinois Environmental Protection Agency, and the monitor continues to show attainment. This significant information could have resulted in the EPAs modeling analysis projecting
attainment for the monitor, thereby eliminating the basis for Texas and many other
States inclusion in the rules PM2 program. Further, EPAs proposed and final notices of attainment for the St. Louis area make no mention of possible transport
issues that would affect the areas ability to stay in attainment. Finally, Texas
would have provided comment regarding (1) S02 control cost assumptions and (2)
the overreach of any budget (had one been provided at proposal) requiring disproportionately significant emissions reductions based upon any known contribution
linkage to a monitorknown to be attaining the standard in question.
The EPA Disregards the Federal Clean Air Act and Over-Controls Emissions
Section 1l0(a)(2)(D)(i)(I) of the Federal Clean Air Act, which is the statutory basis
for both the Clean Air Interstate Rule (CAIR) and CSAPR, requires States to prohibit sources within the State from emitting air pollutants in amounts that will contribute significantly to nonattainment in, or interfere with maintenance by, any
other State with respect to any national primary or secondary ambient air quality
standard. The statute does not provide the EPA authority to require States to prohibit emissions below the significant contribution threshold.
Of all States included in CSAPR for annual PM2 linkages, Texas linkage to a
downwind receptor is among the weakest, at 0.18 micrograms per cubic meterjust
0.03 micrograms per cubic meter over the EPAs linkage threshold. Of States
linked to any receptors in the eastern U.S. for the annual PM2 standard, only
Maryland has a smaller downwind contribution. Despite this tenuous link, the SO2
budget Texas received at rule finalization would require a 47% reduction in 2012
in EGU emissions of 217,708 from its 2010 emissions. Considering that the monitor
linking Texas is known to be currently monitoring attainment (with the influence
of Texas 2010 EGU S02 emissions at 461,662 tons), it is unreasonable and untenable that the EPA could require such significant reductions to be accomplished in
less than four months.
The fact that the EPA does not believe Texas will be able to comply with its budget in a cost-effective manner calls into question the validity of the budget itself. EPA
conducted a lignite sensitivity analysis for Texas that acknowledges the infeasibility of large-scale coal switching as a compliance strategy for many coal-fired
plants in the State. The EPAs own analysis of cost-effective emission reductions
projects that in 2012, under CSAPR, Texas EGUs would emit over 280,000 tons of
SO2or 36,000 tons beyond the EPAs allotted budget for Texas. Thus, even if it
were possible to operate as projected by EPAs model, the State cannot meet its
21
emission reduction obligation. The EPA apparently believes this to be reasonable,
in that Texas could theoretically purchase allowances from its Group 2 trading partners and still be below its assurance level. A presumption that Texas must rely on
out-of-State allowances improperly disregards rule compliance costs and makes clear
the inadequacy of Texas budget. More disturbing is the EPAs failure to consider
whether such a volume of allowances would even be available among the limited
Group 2 trading program. If each Group 2 State made exactly the reductions predicted by the EPA at a $500/ton cost threshold in 2012 (the threshold the EPA
claims it used to determine budgets), and Texas made the reductions predicted by
the lignite analysis, and all available allowances were sold only to Texas, Texas
would still be short by 23,894 allowances. Failure to hold 23,894 allowances to cover
emissions would result in forfeiture by the EGUs unable to secure those allowances
of 47,788 additional allowances from the following years budget. This allowance
shortage could result in civil penalties totaling over $327 billion for just one control
period and the potential for criminal penalties.
The EPAs own final modeling data, which does not take into account local controls from the previously mentioned steel mills MOU, shows that the Granite City
monitor would be projected to have neither attainment nor maintenance problems
for the annual PM2 standard by 2014, with or without the existence of CSAPR controls. Put differently, the EPAs own modeling makes clear that States projected
2014 base case S02 emissions levels are adequate to ensure that no State significantly contributes to nonattainment or interferes with maintenance at the Granite
City monitor. Despite this information, Texas projected 2014 base case S02 emissions are approximately 453,000 tons, or over 200,000 tons higher than the level the
EPA deems necessary to eliminate significant contribution.
Though I have focused on the lack of notice and technical flaws regarding Texas
inclusion in the PM2 program, it is worth noting that the two monitors to which
Texas is linked for ozone, and therefore required to make ozone-season NO2 reductions for, are both monitoring attainment of the 1997 eight-hour ozone standard.
The Baton Rouge area, in fact, has been proposed by the EPA for redesignation to
attainment of that standard.
Economic Effects
This rule puts at risk the economic future of power generation and those dependent on affordable electricity in Texas. It also places vulnerable citizens at a significant health and safety risk. For example, elderly and low-income populations whose
health and welfare are dependent on reliable energy would face significant adverse
consequences resulting from such a rule. While air pollution regulation is certainly
necessary to protect the health of our citizens, the elements of this regulation pertaining to Texas SO2 emissions are not necessary for public health protection and
only result in negative consequences.
The Presidents Executive Order 13563, enacted January 18, 2011, calls for careful analysis of the likely consequence of regulation, including consideration of underlying science, or alternatives, of costs and benefits and of simplified, harmonized,
and flexible methods for achieving regulatory goals. Because the possibility of including Texas was not adequately fleshed out as a part of the rule proposal, the
EPA did not adequately assess the impacts of this rule on Texas, nor did Texas have
the opportunity to comment on the possible consequences. Further, the EPAs analysis entitled Resource Adequacy and Reliability in the IPM 2 Projections for the
Transport Rule TSD 3 was not available at rule proposal and includes significant
errors regarding generation capacity within ERCOTthe largest grid operator within Texas. For example, the EPA overestimates ERCOTs generation capacity by
nearly 20,000 megawatts.
If coal-fired power plants in Texas are faced with these significant emission reductions, decisions regarding the operation of these plants may result in considerable
reductions in the safety margins of power operation of this State. The strong disincentives for operation of coal-fired power plants would undoubtedly result in significant cost to energy consumers including the possible shutdown of base-load
units. Manufacturing and production plants also rely on affordable energy to continue or even expand operation. EPA has failed to consider this potentially devastating economic ripple effect. Again, because the proposal did not contain any
specifics on how Texas would be regulated under this scheme, we were not able to
fully evaluate and provide comments on the significant effects, such as shutdowns,
of this rule.
2
3
Integrated Planning Model.

Technical Support Document.
22
More importantly, the resulting effect of increased cost of power and power shortages, such as rolling blackouts, would not only jeopardize the personal and economic
health of Texas citizens but also endanger lives. Whether it is cost prohibitive to
operate electricity or electricity is simply unavailable, vulnerable populations, such
as the elderly and low income, will be put at risk because the EPA has pursued
inappropriate regulation of S02 in Texas under the guise of PM2 transport.
Conclusion
Texas inclusion in the CSAPR FIP for PM2 was based solely on a previously unidentified significant linkage to a monitor next to a functioning steel mill that has
implemented an MOU with federally enforceable controls ensuring attainment of
the standard in question. Texas S02 budget for the rule is not attainable at the cost
levels predicted by the EPA, but it also far exceeds the level that would be necessary, even if the monitor showed nonattainment, to eliminate Texas significant
contribution to nonattainment.
It should go without saying that the EPA has drastically overreached in its
scheme to address interstate transport. The questionable technical data used to include States in the CSAPR program is wholly divorced from the equally questionable technica1 data used to determine States required emissions reductions. Most
likely, the average rational person would have no difficulty supporting the idea that
States should control emissions proportionately to the level at which those emissions
negatively affect other States. The EPA, however, has abandoned rational science
and common sense in an attempt to squeeze as many reductions out of a single industry in as short a time as possible. EPA took this course of action at the expense
of affected entities who have not had a chance to fully understand and object to the
myriad flaws in the rule. EPA instead demands drastic reductions in unrealistic
time frames in order to address a non-existent problem allegedly caused by Texas.
The fact is, the linking monitor is fully in attainment for the standards in question.
This simple fact, among a number of other EPA errors and inconsistencies, highlights and underscores the weak justification for CSAPR, and makes the utter lack
of transparency and public participation afforded to Texas all the more egregious.
The EPAs practice of proposing technically flawed and inadequate rules, in combination with a lack of action where needed within the SIP process, leaves all sectors of industry in a reactive mode. How could any facilityEGUs producing power,
or even those dependent upon reliable powerplan for economic growth where tomorrows regulatory demands are in constant flux?
The energy sector is a captive recipient of the EPAs attention. Unlike other industry, the possibility of moving to a more industry-friendly regulatory environmental outside of the U.S. is not an option. These regulations have vast economic
effects, not limited to the direct energy generation costs that will be felt by every
energy consumer, but also through the indirect effects of higher costs associated
with the cost of manufactnring goods, and regrettably, the potential for lost jobs,
as all sectors struggle to absorb these costs.
Businesses need certainty to drive our economy and thrive. Businesses should be
subject to reasonable and appropriately protective regulation. For citizens to be protected from harmful pollution, both Federal and State Governments need to focus
their resources on real risks, instead of creating false crises that frighten the public
and misuse public resources. The potential effect of this rule on power generation
and electric reliability in Texas and throughout the eastern U.S. could be devastating, at a time when we can least afford such problems. Under average conditions, the potential generation loss in Texas caused by this rule will have real impacts to real people. Should Texas face another sweltering summer like this past
one, there is every reason to worry about loss of life.
Chairman HALL. Thank you very much. I now recognize the second witness, Mr. Gregory Stella, Senior Scientist at Alpine Geophysics.
STATEMENT OF MR. GREGORY STELLA,
SENIOR SCIENTIST, ALPINE GEOPHYSICS, LLC
Mr. STELLA. Mr. Chairman and Members of the Committee,

thank you for giving me the opportunity to testify today regarding
the results of two recent independent studies that my firm, Alpine
Geophysics, has conducted on behalf of the Midwest Ozone Group.
23
These two studies utilize state-of-the-science data, methods, and
models to assess the needs for the types of emission reductions contemplated by the Cross-State Air Pollution Rule. We conducted
these analyses of emission reductions and air quality improvements
for purposes of comparing them to EPAs findings from its modeling
of the proposed Clean Air Transport Rule, now finalized as the
Cross-State Air Pollution Rule. Specifically, we have identified two
major areas in which our assessment differs distinctly from that
conducted by EPA.
Firstly, EPA did not use the most recently available emissions
inventories and air quality measurements at the time of its rulemaking, and secondly, EPA did not account for the air pollution
controls and related emission reductions that have been or are
being installed to satisfy the requirements of the Clean Air Interstate Rule, or CAIR.
Our first study was designed to quantify historical changes in
ozone and particulate matter precursor emissions and the associated changes in air quality attributed to those emission changes
during a 10-year period covering 1999 through 2009. On regional
and state levels, our findings confirm that across the lower 48
States, all pollutants have typically decreased since 1999. In particular, NO2 and SO2 emissions from electric utility fuel combustion
sources have significantly decreased as the result of the Acid Rain
Program, NO2 Budget Trading Program, and CAIR control implementation.
With respect to mobile sources, all studied pollutants except ammonia decreased over time as a result of various fuel and fleet
rulemakings. Correspondingly, we computed ozone and fine particulate matter design value trends for each region in the United
States for the same period of 1999 through 2009. Our results again
demonstrated that average eight-hour ozone and both the average
annual and 24-hour PM2 design values have decreased across the
Nation during this 10-year period. Noticeably, EPA did not rely on
this more recent air quality data in the development of the CrossState Air Pollution Rule, instead relying on older air quality monitoring data that does not reflect these improvements.
The objective of our second study was to perform technically
credible photochemical modeling, including the EPA Attainment
Test for three key years2008, 2014, and 2018in a study area
that includes much of the central, midwestern, and northeastern
United States. As a result of this modeling and use of the most recent emissions and observational air quality measurements and design value calculations, we found that in 2008, within our study
area, air quality was much better than was assumed by EPA in the
Cross-State Air Pollution Rule. With only three counties exceeding
the 1997 eight-hour ozone NAAQS, all but nine counties in attainment with the annual PM2 NAAQS and 21 counties in nonattainment with the 24-hour PM2 NAAQS.
Additionally, our future years simulations of 2014 and 2018 indicated that within our study area, all counties and monitors
achieved eight-hour ozone attainment by 2014 and remained in attainment in 2018. Only one county, Allegheny County, Pennsylvania, affected largely by local sources, was found to remain in
nonattainment of the annual PM2 NAAQS in 2014 and 2018 and
24
only two counties, also ones affected by local sources, were found
to remain in nonattainment of the 24-hour PM2 NAAQS in 2014
and 2018.
From these results, we have found that the ozone objectives of
the Cross-State Air Pollution Rule can be achieved no later than
2014 and that both annual and 24-hour PM2 NAAQS can be met
in 2014 in all counties within our study area except for those affected by local sources with no new controls beyond those that have
been or are being constructed to satisfy the requirements of CAIR.
In summary, our studies and associated results indicate that significant ozone and particulate matter precursor emission reductions have occurred in the United States since 1999 and that air
quality has improved more rapidly than has been predicted by EPA
in the development of the Cross-State Air Pollution Rule. Additionally, by using no more than recent emissions and air quality concentration data, the majority of nonattainment and maintenance
counties identified in EPAs Cross-State Air Pollution Rule analysis
are found to be in attainment by 2009 with both the ozone and the
particulate matter NAAQS objectives of the final rule.
Finally, our modeling demonstrates that the air quality objectives of the Cross-State Air Pollution Rule can be achieved in an
eastern portion of the United States with no new controls beyond
those being installed to satisfy EPAs original care.
I thank you for your time and this opportunity to present this
information before the Committee, and I am happy to answer any
questions that Members may have on this work.
[The prepared statement of Mr. Stella follows:]
PREPARED STATEMENT OF MR. GREGORY STELLA,
SENIOR SCIENTIST, ALPINE GEOPHYSICS, LLC
Mr. Chairman and Members of the Committee, thank you for giving me the opportunity to testify today regarding the results of two recent independent analyses that
my firm, Alpine Geophysics, LLC, has conducted on behalf of the Midwest Ozone
Group. These two studies utilized state-of-the-science data, methods, and models to
provide (a) an emissions and air quality trends picture for a recent 10-year period,
(b) residual ozone and particulate matter nonattainment results for a 12km modeling domain (study area) over much of the central, midwestern and northeastern
United States and (c) a list of nonattainment and maintenance monitoring sites for
2012 which based on air quality observations from 2006 through 2009, were determined to already achieve attainment of the target National Ambient Air Quality
Standards (NAAQS) in EPAs Proposed Transport Rule (75 FR 45210; PTR) and
final Cross-State Air Pollution Rule (76 FR 48208; CSAPR).
Introduction
On August 2, 2010, the U.S. Environmental Protection Agency (EPA) issued Federal Implementation Plans to Reduce Interstate Transport of Fine Particulate Matter
and Ozone; Proposed Rule stating that:
EPA is proposing to limit the interstate transport of emissions of nitrogen oxides (NOX) and sulfur dioxide (SO2). In this action, EPA is proposing to both
identify and limit emissions within 32 States in the eastern United States that
affect the ability of downwind States to attain and maintain compliance with
the 1997 and 2006 fine particulate matter (PM2) national ambient air quality
standards (NAAQS) and the 1997 ozone NAAQS.
In support of this proposal (and resulting final rule), EPA developed and processed base year 2005 and future-year emission inventories from multiple source categories with emissions and air quality models to determine relative contributions to
25
downwind nonattainment and to simulate changes in air quality as the result of
control strategy implementation.
Alpine conducted two separate studies to compare with the findings of the proposed EPA rule. Specifically, we have identified two major areas in which our assessment differs markedly from that conducted by EPA. First, EPA did not use the
most recently available emissions inventories and air quality measurements at the
time of its rulemaking, and second, EPA did not account for the air pollution controls and related emission reductions that have been or are being installed to satisfy
the requirements of the Clean Air Interstate Rule (or CAIR).
The first project was designed to quantify historical changes in ozone and particulate matter precursor emissions and the associated changes in air quality attributed
to those emissions changes from a 10-year period covering 1999 through 2009. The
second analysis was designed to develop a residual ozone and particulate matter
nonattainment picture for a study area over much of the eastern United States utilizing more recent emissions and air quality data and an alternate Business As
Usual future-year scenario for 2014 and 2018 (comparable to EPAs Clean Air
Interstate Rule or CAIR) that were simulated by EPA in support of its proposed
rules and to additionally use these more recent design value data to determine
which of EPAs identified nonattainment or maintenance sites were actually already
in attainment with the NAAQS, based on observations from 20062009.
Emissions and Air Quality Trends
The objective of our first project was to develop and present publicly available information on trends in emissions and ambient air quality in the United States over
the period 1999 through 2009 in easy-to-understand visual and tabular formats. In
addition to the quantitative historical summary provided, we included a qualitative
assessment of meteorological influences on these trends as available for temperature
and rainfall anomalies. Our metrics were developed for the United States using subregional groupings of States (Figure 1).
Figure 1. Sub-regional state groupings for emissions and air quality trends analysis.
We collected and processed publically available EPA emission inventories for

years within the study period of interest (19992009) by pollutant and source cat-
26
egory to develop the trends for the analysis. 1 To improve the year-to-year quantification of emissions, we augmented the EPA data with year-specific continuous
emissions monitoring (CEM) emissions (2002 through 2009) and year-specific wildfire emissions data (2005 through 2008). Categories were grouped in our study as
follows:
electric generation (EGU) coal fuel combustion;
electric generation non-coal fuel combustion;
industrial fuel combustion;
other fuel combustion;
industrial processes;
on-road vehicles;
non-road engines and vehicles; and
miscellaneous (including wildfire, prescribed fire, agricultural activities, etc.).
Our findings (examples provided in Figures 2 and 3) were comparable to EPA national level published reports 2 of emissions and air quality trends and confirm that
in each region analyzed, we confirmed that all pollutants have decreased since 1999
in aggregate with some demonstrated intermediate-year increases typically due to
variability in year-to-year fire emissions. NO2 and SO2 from electric utility fuel combustion sources show a significant decrease over time as a result of the Acid Rain
Program, NO2 Budget Trading Program and CAIR control implementation. All pollutants (except ammonia) from the highway and off-highway vehicles categories
show decrease over time as a result of various mobile source fuel and fleet
rulemakings, including the Tier 2/Gasoline Sulfur rule and Heavy Duty Engine/Vehicle and Highway Diesel Fuel rules.
Correspondingly, we computed and summarized ozone and fine particulate matter
(PM2) design value trends for each region in the eastern United States for the same
period of 1999 through 2009. These design values were calculated at both State and
regional levels and for each three-year period we computed the average of design
values across all monitoring sites meeting data completeness requirements. The
eight-hour ozone and 24-hour and annual particulate matter design values for each
overlapping three-year period started with 19992001 and ended with 20072009
and were calculated based on EPA data handling conventions. Our results found
that average eight-hour ozone and both the average annual and 24-hour PM2 design
values have decreased in all five regions during the 10-year period. (Figures 4, 5
and 6).
Figure 2. Midwestern States NO2 emission trends.
Figure 3. Northeastern states SO2 emission trends.

1
2
http://www.epa.gov/ttn/chief/eiinformation.html.
http://www.epa.gov/airtrends/index.html.
27
28
Figure 4. Regional average eight-hour ozone design value trends.
Figure 5. Regional average annual PM2 design value trends.
Figure 6. Regional average 24-hour PM2 design value trends.
29
Ozone and Particulate Matter Attainment Modeling
The objective of our attainment modeling analysis was to perform technically
credible photochemical modeling, including the EPA attainment test, for three key
years: 2008, 2014, and 2018 for comparison with projections published by EPA in
its rule proposals. Modeling for year 2008 served the important objective of providing a recent typical baseline year for the purpose of calculating relative response factors (RRFs), which tie observed design values to the air quality modeled
results. Most importantly, moving to 2008 took direct advantage of recent reductions
in ozone and particulate matter design values measured across the eastern State
study area (Figure 7) and the controls and related emission reductions that were
already occurring in response to CAIR. Results of our work clarified when the effects of Business As Usual (BAU) State and federal control programs would begin
to significantly lower the eight-hour ozone and annual and daily PM design values
at key monitors in the study area.
Figure 7. 36/12 km CAMx modeling domain. Red box represents eastern State
study area.
30
We constructed the summer (eight-hour ozone) and annual (PM2) 2008 base year
model performance evaluation inventories and future year 2014 and 2018 inventories using the most recent EPA 2005v4 data sets as the foundation. To these foundation files we updated the base year inventories to contain (a) 2008 Clean Air Markets Division (CAMD) CEM data for EGU sources (as reported under various programs and accounting for controls installed through 2008), (b) 2008 year-specific vehicle miles traveled (run through the MOBILE6 tool to generate onroad emissions),
(c) wild and prescribed fire emissions (from EPAs SMART Fire contract), and (d)
biogenic emissions using a most recent version (v2.03a) of the MEGAN biogenics
emissions model. All data that we used for the upgrades is and was available to and
through EPA as it prepared its proposals.
The non-EGU future year inventories included all pertinent growth and control
measures on the books up to that year as provided by EPAs PTR data distribution 3 as well as additional consent decree and local and State program data available at the time of our modeling. Additional growth and control data obtained from
EPA were applied to EPAs 2005v4 to generate 2008 emissions and fill in the 2008
inventory in whole. In cases where growth and control data were not available, interpolations of EPA 2005 and 2010 inventories were used for 2008 emissions.
To determine future SO2 and NO2 emissions for EGUs, we utilized output from
the Emission-Economic Modeling System (EEMS), which is a modeling system that
has been used by individual utilities and organizations to evaluate the economic and
compliance implications of environmental policies and rules. EEMS is a computer
model that was developed in 1997 to perform specific emission and economic analyses of environmental policies and regulations impacting the electric utility and coal
industries. In general, EEMS uses a set of decision rules to identify a combination
of control options (technology versus allowances) that approximates the least cost
solution for a given utility system under a specific regulatory (e.g., trading) regime.
The SO2 and NO2 emission forecast for this analysis (Business As Usual) assumed compliance with the Clean Air Interstate Rule, as well as known utility
agreements contained in Consent Decrees and State programs. The future regional
electrical generation by fuel type and regional fuel forecasts that were incorporated
into the model were from the Energy Informations Administrations Annual Energy
Outlook 2009 (AEO2009)Updated Reference Case. 4
The modeling inventories developed for the 2008 base year and the 2014 and 2018
forecast years were prepared using the same technical methodologies as employed
by EPA for the PTR and CSAPR. These inventories, founded upon the base and future year modeling analyses performed by EPA, have undergone considerable QA
by the agency and thus represent some of the best information available in the central and eastern United States for this regional modeling purpose. We feel that the
resulting first principal inventories are of sufficient technical credibility to justify
their use in this regional analysis and are consistent with the inventories produced
by EPA for the same purpose.
We then examined the air quality impacts of the emissions prepared for the base
year 2008 simulation and examined residual nonattainment in 2014 and 2018. The
air quality modeling associated with this task had three primary objectives:
Perform 2008 baseline and 2014 and 2018 future year modeling exercises with
the Comprehensive Air Quality Model with extensions (CAMx) v.5.20.1 modeling system setup at 36/12 km scale over the study area for 2008. These simulations shed light on the degree to which current controls and controls considered Business As Usual provide for attainment of the PTR objective NAAQS.
Use EPAs PTR attainment results with the new information produced for 2014
and 2018 to examine the rate at which residual ozone and PM nonattainment
monitors come into attainment as planned federal and local controls begin to
take effect in the out-years.
Identify those areas, if any, for which residual nonattainment of the eight-hour
ozone or annual/daily PM NAAQS are simulated in the future years.
In this analysis, we used measurements of ambient ozone and PM2 data from several State and federal monitoring networks. This includes data from over 500 ozone
monitoring sites as well as over 500 Federal Reference Method (FRM) PM2 sites in
the eastern U.S. In addition, speciated PM2 data from the Chemical Speciation Network (CSN) and IMPROVE network were used to estimate PM2 species concentrations at each FRM site. The ambient data used in this analysis were obtained from
EPAs Air Quality System (AQS).
3
4
http://www.epa.gov/airtransport/techinfo.html.
http://www.eia.gov/oiaf/archive/aeo09/index.html.
31
The EPA modeling guidance 5 recommends using the average of the three design
value periods centered on the year of the base year emissions. Since 2008 was the
base emissions year for the our modeling and design values were not yet available
to represent the base year using the three design value periods centered on this
year (20062008, 20072009, and 20082010), we used an alternate approach recommended by EPA.
An alternate EPA recommended averaging technique assumes that at least five
complete years of ambient data is available at each monitor. In some cases there
were less than five years of available data (especially at relatively new monitoring
sites). In this case, EPA recommends that data from the monitor is used if there
are at least three consecutive years of data. If there are three years of data, then
the baseline design value will be based on a single design value.
For ozone, we used the design value period that straddled the baseline inventory
year (e.g., the 20072009 design value period for our 2008 baseline inventory year).
For both annual and 24-hour PM2, 2009 design value data were not yet available
at the time of our analysis and so a design value period from a three-year period
which at least contained our base year in its range (20062008) was used.
Projection of Future Design Values and Determination of Nonattainment
for Ozone and Annual and 24-Hour PM2
The EPA notes that the projection methodology for ozone and PM2 involves using
the model predictions in a relative sense to estimate the change in concentration
between 2008 and each future year scenario. For a particular location, the percent
change in modeled concentration (the relative response factor (RRF)) is multiplied
by the corresponding observed base period ambient concentration (DVb) to estimate
the future year design value for that location (DVf).
Consistent with EPA methods of calculating future year design values in the PTR
with the Modeled Attainment Test Software (MATS), 6 we generated ozone and PM2
future design values and resulting nonattainment predictions using EPA default settings in the software package and with noted differences in design value period
years chosen as noted above.
Results
The Modeled Attainment Test Software (MATS) v2.3.1 was used to implement the
modeled attainment tests for particulate matter (PM2) and ozone (O2) for the air
quality simulations conducted in this analysis. An update we made to the public distribution of this model was the inclusion of final 2009 ozone design value data as
published by EPA in August 2010. These data were used in the attainment tests
conducted for eight-hour ozone in the modeling domain. Most recent data distributed with the noted version of the software were used in the annual and 24-hour
PM2 attainment tests.
Some of the key attainment findings of this latest study included:
Eight-hour Ozone Attainment Demonstration: Using eight-hour ozone design
values calculated from 20072009 observational data sets, we found that only
three counties in our study area exceeded the objective 1997 eight-hour ozone
NAAQS of 85 ppb in 2008. Our future year simulations of 2014 and 2018 indicated that all counties and monitors within the study area achieve eight-hour
ozone attainment by 2014 and remain in attainment in 2018. From these results, we found that the ozone objectives of the proposed transport rule can be
achieved with no new controls beyond BAU no later than 2014.
Annual PM2 Attainment Demonstration: Our modeling showed that all but nine
counties in the study area were in attainment of the annual PM2 NAAQS in
2008. From this list, only one county (Allegheny County, PA) was found to remain in nonattainment of the 15.0 g/m3 annual PM2 NAAQS in 2014 (16.6 g/
m3) and 2018 (16.2 g/m3). From these results, the annual PM2 objectives of the
proposed transport rule can be achieved with no new controls beyond BAU no
later than 2014 with the possible exception of additional local controls at the
Allegheny County, PA, location. This site has been previously documented to be
heavily influenced by emissions from local sources. 7
5
http://www.epa.gov/ttn/scram/guidance/guide/final-03-pm-rh-guidance.pdf.
http://www.epa.gov/scram001/modelingappsmats.htm.
Proposed Revision to the Allegheny County Portion of the Pennsylvania State Implementation Plan. Attainment Demonstration for the Liberty-Clairton PM2 Nonattainment Area. Allegheny County Health Department. February 22, 2010.
6
7
32
24-hour PM2 Attainment Demonstration: Our modeling showed that twenty-one
counties in the study area are in nonattainment of the 24-hour PM2 NAAQS
in 2008. From this list, only two counties (Allegheny County, PA, and Brooke
County, WV) were found to remain in nonattainment of the 35 g/m3 24-hour
PM2.5 NAAQS in 2014 (51.2 and 38.0 g/m3, respectively) and in 2018 (50.0
and 37.2 g/m3, respectively). From these results, the 24-hour PM2 objectives
of the proposed transport rule can be achieved with no new controls beyond
BAU no later than 2014 with the possible exception of additional local controls
at the Allegheny County, PA, and Brooke County, WV, locations.
Impacts of Updated Design Values on Determinations of Contributions to
Nonattainment and Maintenance in the Proposed EPA Transport
Rule
The EPAs Proposed Transport Rule and Cross-State Air Pollution Rule identify
the link between specific upwind States and downwind ozone or PM2 nonattainment
areas based on photochemical modeling of the 2005 base year and two future years:
2012 and 2014. Model results for the base and future years are used to compute
relative response factors (RRFs) equal to the ratio of predicted future year to corresponding predicted base year design values (DVs). These RRFs are then multiplied by DVs calculated from monitoring data for a base period centered on the 2005
base model year to obtain the predicted future year DV.
Two different base period DVs are calculated from observations: the average of
DVs computed from measurements for periods ending 2005, 2006, and 2007 (i.e., average of the three design values for the three attainment periods 20032005, 2004
2006, and 20052007) and the maximum of these three base period DVs. RRFs and
resulting predicted future year DVs were computed by EPA using the Modeled Attainment Test Software (MATS).
EPAs PTR and CSAPR identify two categories of ozone and PM2 monitoring sites
based on the predicted future year DVs determined from MATS in the above manner:
Nonattainment sites are those monitoring sites for which the average of the
three DVs is projected to exceed the NAAQS in 2012.
Maintenance sites are those monitoring sites that are not nonattainment sites
as in (1) above but the maximum of the three DVs is projected to exceed the
NAAQS in 2012.
EPA used source apportionment modeling to determine which states are predicted
to contribute an amount in excess of 1% of the level of the NAAQS to ozone or PM2
at each downwind nonattainment or maintenance monitoring site defined in the
above manner. Emissions from any such States are deemed to produce a significant contribution to either nonattainment or maintenance sites, respectively, of the
ozone or PM2 NAAQS for purposes of the rule. Thus, significant transport couples
are defined by EPA based on DVs calculated from observations made during 2003
2007. However, in late 2010, EPA released DVs based on observations from two
more recent periods: 20062008 and 20072009. 8 These more recent DVs reflect reductions in ozone and PM2 precursor emissions which have occurred since 2003
2007 and thus a reduction in the number of potential nonattainment and maintenance sites as defined above.
We examined EPAs list of nonattainment and maintenance monitoring sites for
2012 as defined in the PTR to determine which of these sites were actually already
in attainment of the NAAQS based on observations from 20062009. Sites already
in attainment based on these most recent data represent locations where transport
from upwind sources is not contributing to nonattainment or maintenance problems.
In performing this comparison, we used DVs calculated from annual summary statistics (e.g., annual fourth highest daily maximum eight-hour average ozone concentration) for 20062009. In some cases, insufficient data were available from
which to compute the annual summary statistic. In these cases, we used procedures
for filling in missing data similar to those used by EPA for computing air quality
trends 9. This is a conservative approach within the context of this analysis as DVs
8 Results presented here are based on EPAs final ozone and PM design values for 2006
2
2008, final ozone design values for 20072009 and 13 July 2010 draft PM2 design values for
20072009
(http://epa.gov/airtrends/values.html;
http://www.epa.gov/ttn/analysis/
dvreview.htm).
9 http://epa.gov/airtrends/reports.html.
33
based on filled-in data may suggest a monitoring site is a nonattainment or maintenance site whereas MATS does not contain a DV for the monitoring site.
Results
Total counts of nonattainment and maintenance monitoring sites based on EPAs
2012 projections in the PTR versus nonattainment and maintenance sites determined from 20062009 data are provided in Table 1. These results show that over
80% of the sites predicted by EPA to be in nonattainment of the ozone or PM2
standards in 2012 are already in attainment as of 2009 based on an average of the
20062008 and 20072009 DVs. Furthermore, over 80% of the PM2 2012 maintenance sites and 1/3 of the ozone 2012 maintenance sites are no longer maintenance
sites as of 2009. These results indicate that air quality has improved more rapidly
than predicted by EPAs PTR modeling.
We examined locations of monitoring sites projected by EPA to be nonattainment
in 2012 which were observed to be in attainment as of 2009 based on averaging the
20062008 and 20072009 DVs. Table 2 lists all counties with such monitoring
sites. Similarly, Table 3 lists all counties with monitoring sites projected by EPA
to be maintenance in 2012 which were observed to be neither maintenance nor nonattainment as of 2009 based on 20062008 and 20072009 DVs.
34
35
36
Summary and Conclusions

Our findings confirm that in each region analyzed, all ozone and particulate matter precursor pollutants have decreased since 1999 in aggregate with some demonstrated intermediate-year variability typically due to specific year-to-year fire
emissions. Additionally, our results show that average eight-hour ozone and both
the average annual and 24-hour PM2 design values have decreased in all five regions of the continental United States during the 10-year period from 1999 through
2009.
Photochemical modeling analyses, including the EPA attainment test, were conducted for three key years: 2008, 2014, and 2018. The modeling for year 2008 served
the important function of providing a recent typical baseline year for the purpose
of calculating relative response factors (RRFs). Most importantly, moving to 2008
took direct advantage of recent reductions in design values measured across the
study area and the use of current emissions inventory data made available from
EPA and others which include the controls and related emission reductions that
were already occurring in response to CAIR. Results of this work clarify when the
effects of Business As Usual State and federal control programs would begin to
significantly lower the eight-hour ozone and annual and 24-hour PM2 design values
at key monitors in the modeling domain.
The SO2 and NO2 emission forecast for this analysis (Business As Usual) assumed compliance with the Clean Air Interstate Rule, as well as utility agreements
with regard to Consent Decrees and State programs. The future regional electrical
generation by fuel type and regional fuel forecasts that were incorporated into the
model were from the Energy Informations Administrations Annual Energy Outlook
2009 (AEO2009)Updated Reference Case.
Using EPA attainment test software and algorithms with the output from our
Business As Usual air quality model simulations for 2008, 2014 and 2018, we concluded that the ozone objectives of the proposed transport rule can be achieved within our study area with no new controls beyond Business As Usual no later than
2014.
We also concluded that the annual PM2 objectives of the proposed transport rule
can be achieved within our study area with no new controls beyond Business As
Usual no later than 2014 with the possible exception of additional local controls
at the Allegheny County, PA, location.
Additionally, we concluded that the 24-hour PM2 objectives of the proposed transport rule can be achieved within our study area with no new controls beyond Business As Usual no later than 2014 with the possible exception of additional local
controls at the Allegheny County, PA, and Brooke County, WV, locations.
37
Finally, we concluded that that over 80% of the sites predicted by EPA to be in
nonattainment of the ozone or PM2 standards in 2012 are already in attainment as
of 2009 based on an average of the 20062008 and 20072009 DVs. Furthermore,
over 80% of the PM2 2012 maintenance sites and 1/3 of the ozone 2012 maintenance
sites are no longer maintenance sites as of 2009. These results indicate that air
quality has improved more rapidly than predicted by EPAs PTR and CSAPR modeling.
Chairman HALL. Mr. Stella, thank you very much. You stayed
exactly within the five minutes.
I now recognize our third witness, Mr. Barry T. Smitherman,
Commissioner of the Texas Railroad Commission.
STATEMENT OF MR. BARRY T. SMITHERMAN,
COMMISSIONER, TEXAS RAILROAD COMMISSION
Mr. SMITHERMAN. Mr. Chairman, Ranking Member Johnson,

Members of the Committee, the Texas Railroad Commission
which does not regulate railroads but regulates the oil, gas, and
coal industry in Texaswas founded in 1891. Prior to my appointment two months ago, I was for seven years on the Public Utility
Commission, the last four as Chairman. My testimony today is that
the Cross-State Air Pollution Rule was promulgated using a flawed
process, will jeopardize the reliability of the Texas Electric Grid,
which contains three of the 10 largest cities in America and is
home to the largest petrochemical industry in our Nation. It will
also eliminate many high-paying jobs.
In the original version, as you have heard, the State of Texas
along with three other StatesOklahoma, Arkansas, and Mississippiwas included only for seasonal ozone. As a result, neither
Texas regulators, the Texas Electric Grid operator, or industry participants were given notice that more stringent regulations might
be passed relating to coal-fired electric generation, and in fact, significantly, there was a map which detailed our status and the other
States status as well.
In fact, in a report dated July 21, 2011, prepared by the ERCOT
technical personnel, they said, Based on the proposed rule, an
ERCOT study evaluating the expected impacts of all pending EPA
regulations did not include any incremental impacts from CATR on
the ERCOT system. With publication of the final version of
CSAPR on July 6, our worst fears were confirmed. In fact, in a rare
public press release on July 19, ERCOT leadership highlighted the
surprise change the EPA made by including Texas and said,
CSAPR could cause a shortage of generation necessary to keep the
lights on in Texas.
Subsequently, on September 1, ERCOT completed a detailed
study of the effects of CSAPR and concluded that it would impact
the reliability of the Texas electric grid by requiring between 1,200
and 6,000 megawatts of generation to not run during certain periods of the year. On several days this past summer, ERCOT experienced record demand for electricity on our grid and we were required to ask load to voluntarily curtail in order to keep the lights
on. We also, Mr. Chairman, imported power from Mexico during
several of these periods of time. In other words, if the plant closures that were announced this week by Luminant had been in ef-
38
fect this past summer, we would have been unable to keep the
lights on for several days. Now, that puts lives at risk.
But in addition to doing that, approximately 1,300 megawatts of
electric generation and three lignite mines to support that generation will close according to recent announcements. That kills 500
high-paying jobs in Texas and hurts the Texas economy. Approximately 3,000 Texans work directly in the lignite mining industry,
which is responsible for over 1.3 billion in annual gross product.
As Dr. Shaw said, Texas has been recognized for reducing SO2
emissions over the last 10 years, but if allowed to go forward,
CSAPR would require a 47 percent reduction in Texas in less than
six months. Now, Texas has been able to achieve much of our air
quality improvements by increasing the amount of electricity coming from wind energy and from natural gas-fired generation. Air
quality in Texas will continue to improve without the implementation of CSAPR. We have over 10,000 megawatts, more than any
other State, of wind energy on our grid, and that number is likely
to increase.
More significantly, new unconventional natural gas discoveries in
Texas using horizontal drilling and hydraulic fracturing techniques
make available vast quantities of cheap burning natural gas. When
natural gas is used to make electricity, members, electricity rates
are very low. In Dallas today you can purchase electricity for less
than five cents a kilowatt hour. I believe that going forward as we
add natural resources, generation resources in Texas to meet our
growing economy where jobs are still being created, much of that
will be done using clean-burning natural gas.
In short, Mr. Chairman, Texas needs time to retrofit our plants
to comply with CSAPR and please not focus on killing more jobs
and jeopardizing the reliability of our grid and the lives of many
of our citizens. Thank you.
[The prepared statement of Mr. Smitherman follows:]
PREPARED STATEMENT OF MR. BARRY T. SMITHERMAN,
COMMISSIONER, TEXAS RAILROAD COMMISSION
My name is Barry Smitherman, and I am a Commissioner with the Texas Railroad Commission. The Railroad Commission was founded in the Texas Constitution
in 1891, and we regulate the oil, gas, and lignite coal mining industries in Texas.
We are recognized worldwide for our expertise in fossil fuel regulation. Prior to my
serving at the Railroad Commission, I was a member for the past seven years of
the Public Utility Commission of Texasfor the last four years of that tenure, I was
Chairman. The PUCT regulates the electric and land line telecommunications industries in Texas. In addition, the Chairman of the PUCT is a board member of
ERCOT, the Electric Reliability Council of Texas, our electric grid operator or Independent System Operator (IS0).
My testimony today is that the Cross State Air Pollution Rule (CSAPR) was promulgated using a flawed procedural process, will jeopardize the reliability of the
Texas electric grid, and will eliminate many high-paying jobs nationwide. Let me
address each of these in order.
The original version of CSAPR, then known as the Clean Air Transport Rule
(CATR), was first published in the summer of 2010. In that version, the State of
Texas, along with three other StatesOklahoma, Arkansas, and Mississippiwas
included only for seasonal ozone, not for SO2 or NO2 reductions. As a result, neither
Texas regulators, nor the Texas electric grid operator, nor industry stakeholders
were given notice that more stringent regulations might be passed relating to coal
fired electric generation. In fact, in a report dated July 21, 2011, and prepared by
ERCOT, the potential reliability implications of a number of impending EPA regulations, including the MACT HAP rule, the 316 (B) cooling water intake rule, the coal
39
combustion residual ash rule, and potential future greenhouse gas regulations, were
analyzed. In presenting the results of their analysis, the ERCOT technical personnel
specifically stated that the CATR would not apply to Texas: Based on the proposed
rule, an ERCOT study completed on June 21, 2011, evaluating the expected impacts
of the pending regulations, did not include any incremental impacts from the CATR
on the ERCOT system.
As the date for the final version of what is now known as CSAPR approached,
stakeholders in Texas began to hear rumors that we would now be included for SO2
and NO2, rather just seasonal ozone, which is what we were initially led to believe.
Texas Commission on Environmental Quality Chairman, Dr. Brian Shaw, and I
wrote a letter to the EPA, dated June 9, 2011, outlining our concerns with what
we were hearing about the final version of the regulations (copy of that letter attached). With publication of the final version of the CSAPR on July 6, 2011, the
stakeholder, regulatory, and grid operator communities worst fears were confirmed.
In fact, in a rare public press release on July 19, 2011, ERCOT leadership highlighted the surprise gotcha change the EPA made by singling Texas out for yearround SO2 and both year-round and peak period NO2, after specifically stating
Texas would not be included, and sounded the alarm about the fact that CSAPR
could cause a shortage of generation necessary to keep the lights on in Texas. Subsequently, on September 1, 2011, ERCOT completed a detailed technical analysis of
CSAPR (copy attached) wherein the engineers at ERCOT clearly state that CSAPR
will impact the reliability of the Texas Electric Market by requiring between 1,200
and 6,000MW of generation to not run during certain periods of the year. On several
days in 2011, ERCOT experienced record demand for electricity and was forced to
implement procedures that resulted in load voluntarily curtailing consumption to
maintain grid reliability. If the plant closures that were announced Monday as a
direct result of CSAPR would have been closed this summer, ERCOT would have
been forced into rolling blackouts on multiple days. Therefore, we have empirical
evidence that CSAPR would force Texas into blackouts on the hottest and coldest
days of the year when Texas most vulnerable citizens need electric heating and
cooling in order to survive.
In addition to putting the lives of vulnerable citizens at risk, with the announcement that Luminant will have to idle 1,300MW of electric generation and the mines
to support that generation, the CSAPR rule has already killed 500 high-paying jobs
and hurt the economy. According to Nobel Economics Prize nominee, Ray Perryman,
approximately 3,000 Texans work directly in the lignite mining industry, which is
responsible for over $1.3 billion in annual gross product, as well as almost 14,000
permanent jobs. Many of these jobs will be lost if CASPR, as presently written, is
implemented within the currently anticipated timetable.
Texas has been recognized nationally for reducing SO2 emissions by 33% over the
last 10 years. If allowed to go forward, CSAPR will require a 47% decrease from
current SO2 levels in less than six months. Even the AFL-CIO said in comments
to the EPA that EPAs proposed 2012 annual SO2 and NO2 emissions reduction
deadline is unrealistic and unnecessary, and that the 2012 interim deadline and
the deep 2014 emissions reduction requirements could trigger shutdowns that will
unnecessarily eliminate jobs. Even the AFL-CIO agrees that, while emissions reductions are a good goal, they must be done sensibly, and on a realistic timeline.
Texas was able to achieve much of our air quality improvement by increasing the
amount of electricity coming from wind energy and gas-fired generation. And while
it is true that four new coal-fired generation plants have commenced operation in
ERCOT within the last several years, each of them will be compliant with CSAPR.
Finally, air quality in Texas will continue to improve in the future without the
implementation of CASPR. We have over 10,000 MW of wind in Texas, and that
number is likely to rise.
More significantly, however, new unconventional natural gas discoveries in Texas,
using horizontal drilling and hydraulic fracturing techniques, make available vast
quantities of cheap, clean-burning natural gas. Natural gas has less SO2 and NO2
than coal and no mercury or particulate matter. Natural gas also has about 40%
of the CO2 of coal.
When used to make electricity, natural gas today results in extremely low electricity rates. In Texas, for example, consumers can purchase electricity in Dallas for
as low as 4.5 cents a kwh. I have no doubt that as Texas seeks to add new generation resources in order to meet the needs of our rapidly growing state, with its vibrant job-creating economy, that clean burning natural gas fired generation will be
the mainstay of our expanding generation fleet. In the short run, EPA must allow
Texas enough time to refit our plants to comply with the new rule, and not focus
on cramming through a punitive, job-killing rule that may almost immediately jeopardize the lives of our most medically fragile citizens, and which is opposed by a
40
wide coalition of unions, nonprofits, scientists, engineers and regulators. In the long
run, I hope this Committee and the rest of Congress looks at the bait-and-switch
tactics and dubious science EPA used to pass this rule, and puts the brakes on at
this agency. If these politically motivated, punitive regulations are allowed to stand
in Texas today, they set the precedent for a runaway agency to do whatever they
see fit tomorrow.
Thank you for the opportunity to testify.
Chairman HALL. Thank you, sir, and for giving us back almost
a minute. And by the way, I had breakfast with Elizabeth Ames,
gentleman, one of your commissioners this morning earlier. Who is
watching the gate down there in Texas?
Mr. SMITHERMAN. Commissioner Porter, sir.
Chairman HALL. All right. That is good. Thanks. I now recognize
our fourth witness, Mr. Wayne E. Penrod, Executive Manager of
Environmental Policy of the Sunflower Electric Power Corporation.
STATEMENT OF MR. WAYNE E. PENROD,
EXECUTIVE MANAGER,ENVIRONMENTAL POLICY,
SUNFLOWER ELECTRIC POWER CORPORATION
Mr. PENROD. Thank you, Chairman Hall, Ranking Member Johnson. I appreciate the opportunity to come today to talk to you about
the circumstances that we find ourselves in related to the Clean
Cross-State Air Pollution Rule, which we call Zapper. The problems with this rule are notice; a lack of transparency as it relates
to the modeling and the impacts that our sources might have; reliability, that is the ability to keep the lights on as a result of the
electricity distribution that is assumed by the rule; and four, is the
time it will take to comply with the rule and how we are to go
about achieving compliance with it.
In the attachments to my testimony, I had a couple of slides, one
of which was the 2005 CAIR States and the second was the CrossState Air Pollution Rule States that are impactedconspicuous by
their absence in the first slide, Kansas, Nebraska, and Oklahoma,
and to some degree a difference in classification for Texas and Minnesota. As late as fallexcuse meas late as January of 2011,
January this year, the lastnumber threenotice of date of availability published by the EPA relative to the Clean Air Transport
Rule, Kansas Utilities were not looking at any required reductions
in emissions. In fact, Sunflower didnt even have the opportunity
to take the opportunity to file comments because we didnt expect
to be impacted at all by the final rule. It was to be promulgated
by EPA. That turned out not to be the case.
We are primarily a single coal-based unit that operates in the
western half of Kansas, and that is our primary source of energy
for our people. The whole community was going to suffer a 50 percent load-carrying capacity as the result of the passage of the
Clean Airor the Cross-State Air Pollution Rule, 50 percent. We
weresuggested that we might be able to buy energy, that we
might be able to fuel-switch, that we might be able to install gas
capacity. All those things in six months are beyond the pale, frankly, suggestions as a way we might be able to comply with this rule.
Kansas is unique in several respects aside from being flat. There
are 15 coal-based units in Kansas. Ten of them are fairly large
units. Of those 10, seven of them are scrubbed. Only one large one
41
is not. All are equipped with some version of low-NO2 burners or
overfire air. One of the large units has selected catalytic reduction.
As we look around, we dont see how those unitssome of them
legacy unitsare going to be able to reduce their emissions of either NO2 or SO2 beyond the levels that are required in this CSAPR
rule. In fact, one of the plants has a super-compliance opportunity.
That is words in their consent order that preceded their being able
to retrofit some of their old scrubbers with new ones.
So we wonder why we are included. I have heard some of the discussion earlier about receptors in other States and how those receptors cause us maybe to think about why we should be included.
We have that same concern. We know that when CAIR was first
proposed, Kansas was included, but by virtue of some discussions
that we had with EPA and some review and evaluation of the data
that they used in developing their model, we took exception to it
and were able to make corrections, and Kansas was suddenly not
a part of that rule. We think maybe that is really what needs to
happen here. Unfortunately, we are not afforded the opportunity to
communicate with them and to try to get a remodel run that might
show that.
Reliability is a major concern. One of the slides in my attachment again shows a picture of the impact on reliability. Actually,
a percent voltage that we expect to see at a base case in Kansas
and you see a few small faded white dots. And the EPA base case
is imposed on that same scale you see a lot of bright lights; those
are negatives. It will be bright dark frankly in those places where
those situations occur. We dont expect to escape summer operation
without some major energy shortages, and it will be rather sudden
and rather widespread in our part of the State. So those are the
things that we see that are problems with this reliability.
I would tell you that we are unique in another respect. Sunflower
has a shovel-ready project that we were able to advance two years
and we are going to start installing low-NO2 burners and overfire
air on our coal-based unit beginning the first of January. Very unusual circumstance, but this is an unusual rule. And we cant wait
until 2013 to figure out whether or not we can buy allowances that
might cover our emissions. So we are doing that. We are going to
pay a penalty. It is going to cost us probably 30 percent more to
do that work than when we had originally intended to do it, which
was 2013.
Also, we find that rather than being able to purchase burners
made in Kansas, they are going to be imported from China. We are
going to meet the schedule. We are not going to suffer the inability
to meet the load with our lowest-cost, most-reliable unit that serves
the people of the western half of Kansas.
I thank you for the opportunity to come today and speak with
you about this.
[The prepared statement of Mr. Penrod follows:]
42
PREPARED STATEMENT OF MR. WAYNE E. PENROD, EXECUTIVE MANAGER,
ENVIRONMENTAL POLICY, SUNFLOWER ELECTRIC POWER CORPORATION
Introduction
Sunflower Electric Power Corporation (Sunflower) appreciates the opportunity to
provide testimony to this Committee on EPAs Cross-State Air Pollution Rule
(CSAPR). For Kansas, CSAPR imposes very near-term requirements (in 2012 and
2014) to reduce annual emissions of nitrogen oxides (NO2) and sulfur dioxide (SO2).
EPA also proposes to require Kansas utilities to reduce ozone-season emissions of
NO2, also in the very near term. Under this proposal, Kansas will be required to
offset its ozone-season NO2 emissions with additional allowances for the 2012 ozone
season, even though the ozone season requirements are still only proposed.
CSAPR will significantly undermine the reliability of the electricity transmission
and distribution system and increase the cost of providing electric energy in central
and western Kansas. Preliminary modeling by the Southwest Power Pool indicates
the rule may cause significant voltage reductions in central and southwest Kansas
and in the north Texas panhandle, situations which could lead to electricity blackouts. 1
Moreover, EPAs process for promulgating this rule was technically flawed. Because of changes to EPAs modeling in the middle of the rulemaking process, Kansas
became subject to significant, potentially unachievable near-term emission reduction
requirements with almost no advance notice. Yet the changes result from modeling
that is a proprietary black box, and we are therefore unable to understand the
exact basis for the emission reduction requirements to which we have become subject.
The modeling itself is also flawed because it assumes the downwind area that is
supposedly affected by Kansas ozone-season emissions is in nonattainment. Yet actual real-world monitoring data show this area is in attainment. Moreover, the modeling does not take into account future reductions from Kansas emission sources
that are either already completed or otherwise locked in and which will reduce any
impacts to this area even further.
In sum, Kansas has become subject to very harsh requirements with little advance notice based on (a) use of a model to which the public does not have access
and (b) for the ozone season requirements, the erroneous modeling assumption that
Kansas emissions are causing a downwind county to violate EPA air quality standards.
Sunflower and Mid-Kansas
These comments are provided on behalf of Sunflower and Mid-Kansas Electric
Company, LLC (Mid-Kansas). Sunflower and Mid-Kansas are not-for-profit electric
generation and transmission cooperative corporations that are owned and operated
by the rural electric distribution cooperatives to which they supply electricity. These
distribution cooperatives, in turn, are owned by their members who are electric consumersfamilies, farms and other businesses. These electric consumers select their
distribution cooperative board members through democratic elections, and these
board members in turn appoint the board members of Sunflower and Mid-Kansas.
Sunflower is owned by members Lane-Scott Electric Cooperative, Inc., Dighton;
Prairie Land Electric Cooperative, Inc., Norton; Pioneer Electric Cooperative, Inc.,
Ulysses; The Victory Electric Cooperative Association, Inc., Dodge City; Western Cooperative Electric Association, Inc., WaKeeney; and Wheatland Electric Cooperative,
Inc., Scott City; all in Kansas.
Mid-Kansas Electric Company, LLC, is a coalition of five rural electric cooperatives and one wholly owned subsidiary including Lane-Scott Electric Cooperative,
Inc., Dighton; Prairie Land Electric Cooperative, Inc., Norton; Southern Pioneer
Electric Company, Ulysses (a wholly owned subsidiary of Pioneer Electric Cooperative, Inc.; The Victory Electric Cooperative Association, Inc., Dodge City; Western
Cooperative Electric Association, Inc., WaKeeney; and Wheatland Electric Cooperative, Inc., Scott City; all in Kansas.
Together the electricity provided by Sunflower and Mid-Kansas to these distribution cooperatives, and to more than 25 municipalities within the service area meets
the electricity requirements of more than 400,000 people in central and western
Kansas. Because Sunflower and Mid-Kansas and their distribution cooperative
members operate on a not-for-profit basis, the cost of compliance with CSAPR flows
directly through to these electricity consumers.
1
See Exhibit 1, slide 7.
43
As in many rural areas, these individuals tend to be older and living on fixed incomes and tend to have incomes below the federally defined poverty level. The people served at retail by the distribution cooperatives include more than 64,000 (16%)
above the age of 65 and more than 48,000 (12%) whose annual household income
is below the federal poverty level.
CSAPR Impact Is Immediate
The Administrator of the Environmental Protection Agency (EPA) signed the final
CSAPR on July 6, 2011. 2 The rule was published in the Federal Register on August
8, 2011, and is effective January 1, 2012. As proposed, the rule was known as the
Clean Air Transport Rule (CATR) (July 2010). The rule replaces the Clean Air
Interstate Rule (CAIR) that was issued in 2005. CAIR was overturned in court, but
remains in place until CSAPR goes into effect on January 1, 2012. The CAIR rule
did not apply to Kansas, and the CSAPR rule does not provide adequate time for
Kansas utilities to properly respond to its requirements.
Because CAIR requirements have effectively remained in place, the utilities covered by that rule continued pollution control projects planned in 2005 and beyond.
These projects included the installation of selective catalytic reactors for reducing
NO2 emissions and scrubbers for reducing SO2 emissions. An allowance trading program was established under CAIR for the affected States to assure that utility
plants did not exceed the emissions budgets established by EPA. Many of these pollution control projects were completed in 2010the last of them will conclude this
fall.
However, several States, including Kansas, were not included in the CAIR rule,
and therefore Kansas, and these other States, did not plan for nor did they install
the long-term, large-scale pollution control projects that were planned and installed
in the CAIR States. Kansas was included in CSAPR as proposed, but the NO2 budgets proposed would not have required any emission reductions at any Sunflower or
Mid-Kansas coal or gas-based facilities. In fact, because Sunflower was not impacted
by the proposed budget for allowances, Sunflower did not even file comments on the
proposed rule.
Sunflower, however, was affected by CSAPR as finalized. Under the rule, Sunflower will receive NO2 allowances adequate to generate only about 50% of its energy requirements in 2012 (Phase I), just five months after the rule became final. 3
Project engineering, permitting, vendor selection, manufacture and delivery, and installation of projects to reduce emissions generally consume between 18 and 48
months. Recall that the industrial Midwestern and Southeastern States have been
working on similar projects since 2005. The imposition of such a compliance schedule on utilities within States that had absolutely no meaningful notice of such requirements is unjustifiable.
Black Box
The heart of CSAPR is the emission budget that is established for each State.
Statewide utility emissions are limited to the amount of their budgets, with the possibility that such budgets can be exceeded if, in limited situations, certain other
States are able to emit less than their budgets. As noted, for Sunflower, the budgets
mean that Sunflower must find a way to reduce or offset 50 percent of its otherwise
forecast NO2 emissions by the beginning of next year.
The way EPA performs its modeling, however, prevents Sunflower from fully understanding why it is that, under the proposed rule, Sunflower would have been allocated sufficient NO2 allowances, but under the final rule those allowances have
been cut in half. This is because the model EPA uses, the IPM model, is proprietary
and the public, therefore, is unable to replicate the model results. Thus, although
Sunflower can understand the different assumptions that EPA used in the modeling
that resulted in the final rule as compared with the proposed rule, we cannot track
those changes through the model to see exactly why those changed assumptions resulted in the final NO2 budgets.
It is as if we have been given a very large invoice for payment, but are told we
cannot perform an audit to determine how the amount due on the invoice was cal2
76 Fed. Reg. 48208 (August 8, 2011).

3 The 2010 average NO emission rate for Sunflower/Mid-Kansas resources was about 0.30
2
lb/mmBtu. The 2012 (Phase I) allowances allocated to Sunflower support an average NO2 emission rate of about 0.16 lb/mmBtu. The 2014 (Phase II) average supported by allowances is just
over 0.13 lb/mmBtu.
44
culated. Indeed, we are not able to know whether the changes in the Kansas budget
resulted from a model glitch or unsubstantiated assumptions by EPA.
We think this is an extremely unfair and certainly not a transparent way for EPA
to promulgate rules. Given the large costs for Sunflower, Mid-Kansas and Kansas
as a whole, and indeed for the whole country, EPA should either make the model
available or use a different, non-proprietary model. The stakes are too high for EPA
to keep a key part of the rulemaking process secret.
Questionable Modeling of Impact of Kansas Emissions Outside of Kansas
The premise of CSAPR is that utility emissions are being transported to downwind States, interfering with the ability of these downwind States to attain EPAs
national ambient air quality standards (NAAQS). EPA proposes that Kansas should
be subject to ozone-season NO2 requirements because EPA air quality modeling
shows that Kansas emissions will cause or contribute to a Holland, Michigan
(Allegan County), violation of the eight-hour ozone NAAQS. But this modeling is
flawed for two reasons.
First, the assumptions EPA uses to estimate Kansas emissions throughout the
rulemaking were based upon actual emissions that occurred in 2006, then in 2008,
and finally in 2009, and thus they do not take into consideration the substantial
emission reductions that have already been or will be achieved by 2012 and 2014
because of emission control projects already completed or in the pipeline. Additionally, the early allowance allocations, even in January 2011, did not penalize the
Sunflower/Mid-Kansas generation facilities at all; clearly something has changed,
and we cannot see into the black box to identify the changes. It seems plausible
that if these recent emission reductions from Kansas sources were considered and
if the model properly responded to the changes, that at a minimum the modeled impact on the Allegan County, Michigan, receptor would almost certainly be less than
the 1% threshold adopted by EPA for significance. It seems plausible to us that, as
with CAIR, Kansas should be out of CSAPR altogether and the regulatory program
would have no effect on Kansas utilities.
Second, based on actual air quality modeling data, Allegan County is no longer
failing to attain the ozone standard. In fact, the Michigan DNRE petitioned EPA
on August 2, 2011, to move Allegan County to an attainment classification. The required demonstration concludes that current and future expected ozone air quality,
based upon local actions, will meet both the one-hour and eight-hour ozone NAAQS.
Thus, EPAs model, which concludes that Allegan County is in non-attainment, does
not reflect real-world conditions.
In summary, for ozone season NO2 emissions, Kansas is proposed to become subject to expensive new standards that may place the Kansas electric supply system
at significant risk, with very little notice, in order to solve an air quality problem
to which Kansas is no longer significantly contributing and that, in any event, no
longer exists at the determined receptor in Michigan.
CSAPR Will Have Significant Reliability Impacts in Kansas and Elsewhere
Sunflower is a member of the Southwest Planning Pool (SPP). The SPP is a Regional Transmission Organization (RTO), mandated by the Federal Energy Regulatory Commission (FERC) to ensure reliable supplies of power, adequate transmission infrastructure, and competitive wholesale prices of electricity in an eightState region in the middle of the United States. As a North American Electric Reliability Corporation Regional Entity, SPP oversees enforcement and development of
reliability standards.
SPP engages in regular planning to ensure reliable operation of the system. The
SPP transmission planning process is described in Attachment O of the SPP Open
Access Transmission Tariff and utilizes three planning horizons. The Near-Term Assessment is conducted annually and generally looks at time horizon of three to five
years. SPP long-range transmission planning is conducted over a three-year planning cycle with a 20-year assessment being conducted during the first half of the
three-year cycle and a 10-year assessment conducted in the second half of the threeyear cycle. This open and transparent planning process developed by the SPP stakeholders and approved by FERC is utilized to assure that the type of incremental
changes in supply and transmission resources that utilities normally make are
planned and implemented consistent with reliability requirements.
However, the requirements of CSAPR, which go into effect in 2012, are being implemented much too quickly to be adequately studied by SPP and accommodated in
the SPPs normal planning process. Indeed, the SPP has only recently begun study-
45
ing the impacts of CSAPR on the reliable operation of the SPP system, because the
rule was only recently issued.
Moreover, EPA is not proposing the type of incremental changes for 2012/2014
that would normally be a subject of short-term study by the SPP, a process with
sufficient time to plan how to accommodate those incremental changes. Rather EPA
is implementing a dramatic shift in operating resources that will lead to a re-dispatch of the system as compared to the current dispatch plan. In fact, the Sunflower/Mid-Kansas resources identified by EPA to be dispatched in those years include substantial operation of the Great Bend, Holcomb 1, and S3 units.
But this unit dispatch makes little sense and it is the least likely generation scenario that would be actually dispatched absent CSAPR. EPA allowances are only
adequate to support a 50% capacity factor on Holcomb 1, while historical capacity
factors are consistently above 90%. Further, natural gas prices make the Great
Bend unit the last resource likely to be dispatched to meet the load. Finally, S3 is
a black-start combustion turbine with the highest heat rate of any generating unit
in the system; it is also the oldest unit operated for the combined Sunflower/MidKansas system and would likely require substantial pre-operational maintenance if
such a duty-cycle were to be reasonably expected of it. CSAPR, thus, will have a
radical and unplanned effect on our system, the systems of other Kansas utilities,
and indeed on the entire SPP.
Had there been time to implement these significant dispatch changes into the way
the electric system operates, both in Kansas and throughout the SPP region, the
SPP would have long ago been working on a dispatch model that conforms the proposed dispatch to assess the needed improvements to preserve the real-to world system reliability. Instead SPP is hurriedly assessing the reliability impacts of the
CSAPR utilizing EPAs generation dispatch model. Preliminary results suggest that
in the summer of 2012 there will be significant degradation of voltage levels in
southwest and south central Kansas and the north Texas panhandle, and that these
conditions could cause various blackout conditions to occur. At the current time,
given CSAPR, the SPP computers have not been able to solve the approximately
50,000 simultaneous equations necessary to indicate that the electricity grid model
remains intact. SPP engineers, though, have been able to identify several local severe voltage contingencies in Sunflowers service area.
The SPP continues to study the reliability effects of CSAPR and will have more
definitive information in the near future. As previously stated, the short lead time
for implementation of CSAPR does not adequately allow for planning or implementation of environmental controls or additional generating resources needed to comply with CSAPR. This puts electric generation operators, transmission owners, and
reliability coordinators in a proverbial Catch-22 situation: they can either maintain system reliability and violate EPA mandates and be subject to EPA sanctions,
or they can comply with EPA mandates and risk system reliability and face NERC
and FERC sanctions. Most importantly, electric customers will bear the increased
costs associated with either outcome.
CSAPR Compliance Options
The reason the CSAPR requirements are so costly and, indeed, may not be achievable is the fact that EPA has overstated the ability of utilities like Sunflower and
Mid-Kansas to comply with the rule on such short notice. EPA has suggested that
utilities can comply with the rule by installing new control technology, by relying
more on natural gas, by allowance trading, by fuel switching to natural gas and lowsulfur coal, and by purchasing electricity from others. Yet none of these options is
truly available given the extremely short compliance schedule.
The timeframe for construction of emission control technologies is not adequate
Obviously, for systems that do not have pollution control projects nearing completion as a result of CAIR, there is no possibility of constructing new pollution control
devices by the end of this year or even by 2014. In addition to construction times,
nearly all of these projects will require the issuance of a PSD construction permit
prior to commencing construction; failure to secure such a permit is a criminal offense under the PSD permit program. Sunflower has been engaged in such a process
since early 2010, intending to finish the installation of a low-NO2 burner, overfire
air system in the fall of 2013. Because of pre-existing plans, we already had a PSD
permit application submitted in March 2011, expected a permit issuance by spring
of 2012 (about one year), and expected to issue contracts for manufacture in early
summer 2012. In order to expedite the process, we issued a letter of intent so as
to commence manufacture of the burner components on August 1, 2011 (a year
ahead of schedule), and have rescheduled our outage for January 2012, effectively
advancing the project schedule by over 18 months. But this schedule was not with-
46
out consequences; we expect to pay a 20 to 25% premium for the components, which
will now be manufactured in China. But even if expedited, more capital-intensive
projects, such as selective catalytic reactor or scrubber installations, cannot be completed in time to meet Phase II requirements.
New natural gas-based resources cannot be brought on line quickly enough
achieving reductions by bringing new resources online in such a short timeframe,
unless such resources were already in process, simply cannot be done by 2012 or
2014.
Allowance trades within Kansas are inadequate for utilitiesCSAPR authorizes
intrastate trading of CSAPR allowances, but that will have only a limited effect for
Kansas utilities. All Kansas utilities must reduce emissions significantly. It is highly unlikely that any of them can reduce so quickly and so significantly as to generate sufficient allowances to cover the emissions of other Kansas utilities. In Sunflowers situation there will not be an excess supply of allowances to trade among
Kansas utilities.
The importation of up to 18% of budgeted allowances from States that have met
their objectives is inadequate for KansasCSAPR authorizes limited interstate trading of allowances. A State can exceed its budget by up to 18% if another State with
which it is authorized to trade has excess allowances. But there is good reason to
believe that the trading market will not be robust, particularly by 2012 and even
2014. First, the rule is so new and its effect so little understood because of its complexity that utilities that do generate excess allowances will bank them for their
own future use rather than trading them. Second, utilities will likely be particularly
cautious about trading given the experience in CAIR. When CAIR was overturned
in court, the value of CAIR allowances was immediately reduced to near zero. Under
CSAPR, EPA is about to terminate utility accounts of both CAIR and acid rain allowances. This results in the elimination of millions of dollars in allowance values.
Having seen their significant investments in CAIR allowances disappear, utilities
are likely to be reluctant to jump into significant allowance trading under CSAPR.
Finally, utility caution about trading will be enhanced by the significant penalty
provisions that are associated with a State exceeding its emissions budget but being
unable to cover that excess with allowances from other States. 4
In sum, it is unreasonable for EPA to expect utilities to rely on trading in the
early years of the rule to make up for their inability to install controls fast enough.
Fuel switchingEPA identifies that a key compliance strategy for implementing
CSAPR is for utilities to switch from high-sulfur to low-sulfur coal, or from coal to
natural gas. Even assuming that sufficient fuel and transportation resources exist
for such a strategy to be widely effective, it does not solve the problem for Kansas
utilities. Specifically for managing SO2 reductions there are only two Kansas units
that blend some relatively small amounts of local Kansas coal with low-sulfur coal;
all other coal-based units already use low-sulfur PRB coal. Further, the act of
switching steam units from coal to natural gas fuel to manage NO2 results in only
a trivial reduction; switching the generation dispatch from PRB coal-based steam
units to gas-based steam units likewise does not accomplish any significant reduction.
Electricity purchases from other providersEPAs suggestion that the purchase of
electricity from other providers is a viable way of meeting the allowance dilemma
is not realistic. Electricity markets now take the form of very short-term purchasesknown as the existing next-day market and the soon-to-be-implemented
day-two marketand firm power transactions that are for fixed terms of length
suitable for the participants. Power purchases as a compliance strategy either will
not work or will drive up the cost of electricity.
First, short-term markets rely on price signals determined by individual utilities
on an ongoing basis. Like other utilities in the SPP Sunflower prices all of its resources each day into the next-day market. For Sunflower to sell electricity to others so that they can meet their CSAPR obligations, Sunflower would have to increase generation from its own resources, thereby increasing emissions above the
EPA-determined budget which could only be satisfied by purchasing additional allowances. How then does Sunflower price the resources that it would utilize for the
benefit of anothers allowance shortages without transferring the same allowance
shortage to itself by the same transaction? The net effect of these uncertainties will
4 EPA, in the final CSAPR rule, determined that SO allowances would be available for pur2
chase at about $600, annual NO2 allowances at $500, and ozone season NO2 allowances at
$1,300. First contracts for allowance trading completed just this last week have been reported
at SO2 prices of $2,600 per allowance and annual NO2 allowances at $3,500 each. These prices
reported are four to seven times higher than EPA estimated for such transactions.
47
likely make trading more difficult, not less, and increase the price of electricity to
all who make such transactions.
Long-term transactions, on the other hand, are the responsible way to meet pool
obligations when such a large part of the native load (50% in the case of Sunflower)
now needs to be met with a purchased power contract. However, before any utility
can expect delivery of electricity by a firm contract, it must arrange a firm transmission path, a process that requires the power pools involvement to determine
whether such a path is available for the transfer of firm electricity from one company to a neighboring company. It is already too late for Sunflower to acquire such
a path in order to meet peak-season 2012 loads, and it is probably too late for the
2013 peak season. 5
Clearly EPAs conclusion that the purchase of power from other utilities is not a
clear path on which utilities can depend for complying with EPAs emission dispatch
of electricity producing resources.
Conclusion
CSAPR will result in large consequences for rural Kansas electric consumers, including the undermining of the reliability of the electric system, yet the rule is
based on flawed modeling. The model is a black box, preventing utilities from understanding the significant changes in budgets that occurred from the proposed rule
to the final rule. Moreover, for the ozone season NO2 program, the modeling assumes that Kansas emissions are contributing to the inability of a single county in
Michigan to attain EPA air quality standards, yet that county is already attaining
those standards.
Sunflower and Mid-Kansas appreciate the opportunity to submit this testimony,
and we would be glad to respond to any questions you might have.
Chairman HALL. Thank you. We now recognize our final witness

for this panel, Mr. Chip Merriam, Chief Legislative and Regulatory
Compliance Officer of the Orlando Utilities Commission, for five
minutes. Thank you, sir.
STATEMENT OF MR. CHIP MERRIAM,
CHIEF LEGISLATIVE AND REGULATORY COMPLIANCE
OFFICER,
ORLANDO UTILITIES COMMISSION
Mr. MERRIAM. Thank you, Chairman Hall and Ranking Member

Johnson.
I represent the Orlando Utilities Commission, known as OUC,
the Reliable One. We are the second-largest municipal generator of
electricity in the State of Florida. We are the 16th largest in the
Nation. We are able to provide service to the cities of Orlando, St.
Cloud, and parts of unincorporated Orange and Osceola Counties.
One of the things that we would like to be recognized for is we
are an example of one of the closest connections between regulatory
decisions that are made in Washington and the ratepayers that are
paying the salaries, the bills, offor organizations such as ours.
Federal regulatory rules and implementations are burdensome
and we all know that they have impacts associated with them. Our
Commission and our Board ishas strived and will continue to
strive to make sure that we are environmentally good stewards
even though we burn coal and we burn natural gas. We also have
nuclear as well as landfill gas and solar available to us.
We were prepared when the Clean Air Interstate Rule was
brought forward. We worked with our trade agencies and organiza5 This process can take 12 to 18 months to complete the studies, and if additional transmission needs to be constructed, this could take anywhere from three to 10 years, depending
on the scope of facilities necessary.
48
tions; we worked with EPA in commenting. We had a 2014 deadline as the others that were covered by this rule in order to be prepared for this to move forward. On the Clean Air Transport Rule,
again, we were prepared and we were actually capitalizing some of
our projects such as low-NO2 burners in order to achieve the deadline of 2014. As we move forward, the surprise for us was the immediacy of the Cross-State Air Pollution Rule. All of a sudden,
now, the target date to beachieve compliance is for us as an
ozone-season-only State is May 1. Our projects are still capitalized
out to 2014. Florida has approximately 11,000 tons short in their
allowances to achieve compliance using the method that was set
forth by the Cross-State Rule. We are going to have to achieve it
by living within our own means within the State at this point in
time.
OUC has got a very unique water management system. In a
State that receives an average of 54 inches of rainfall a year, we
have no discharge off of our site. We take all 54 inches of rain that
contacts our landfill onsite, contacts our generation facility, and we
actually run it through our scrubbers and evaporate that water instead of discharging it into protected waters in the State of Florida.
Additionally, we take waste water from the Orange County
Waste Water Treatment Facility and we use that to cool our boilers
and process, again, our electricity. We thought this was a significantly visionary approach in the 80s when we constructed the facility. What the Cross-State Rule is going to require us to do today
in order to live within the means is we will have to take a portion
if not all of one of our unitscoal units offline during the NO2 season for the 156 days. We will also, in order to meet our reliability
requirements, have to go out on the market and buy a power purchase agreement in order to bring energy in to make sure we meet
our reliability requirements. What that is going to drive which is
unique to us in this rule is we are going to have to find another
way to manage that water on the site. So we are looking at upwards of $40 to $50 million of additional injection wells or other
means in order to deal with this rainfall that we were trying to
take care of on our own.
And what also gives us some pauseand Ranking Member Johnson brought this forwardwas the certainty that is required in
order to meet the obligations of being a generator today. While we
are sitting here talking about a Cross-State Rule, we are looking
straight down the barrel of the MACT Rule, the Maximum Achievable Control Technology, the CO2 New Source Performance Standards, additional changes to PM2 and NAAQS, Coal Ash, and 316(b)
Rules. All of these will have a significant impact as we have to
modify, capitalize more projects on our site.
What we would really like and what all the members have said
here is the time, same time and some of the same flexibility that
was provided for in the CAIR discussions and the Transport Rule
discussions. Our position is at this point we are not going to challenge the technical side of the rule if we can get the time. We are
going to build the things necessary to get there. Moving back the
deadline to allow us to pay out and change the capital cost would
be very beneficial to our ratepayers.
49
In closing, I would just like to emphasize that Central Florida is
still reeling today from the economic downtown that we have all
been experiencing. Our unemployment is high. We have seen a significant increase of us having to deal with long-term customers
making utility payment arrangements because they cannot afford
to pay their current bills that are presented to them today. All
these businesses have been hit particularly hard and if we have to
increase our rates to manage water to make these generation
changes, because we are so close to our customers, it is a direct
pass-through to them. So it would be a new and a very difficult impact.
So with that, I thank you for the opportunity.
[The prepared statement of Mr. Merriam follows:]
PREPARED STATEMENT OF MR. CHIP MERRIAM, CHIEF LEGISLATIVE
REGULATORY COMPLIANCE OFFICER, ORLANDO UTILITIES COMMISSION
AND
Mr. Chairman, thank you for the opportunity to provide the Committee on
Science, Space and Technology with some real world impacts resulting from the new
Cross-State Air Pollution Rule (CSAPR) promulgated by the Environmental Protection Agency and signed by the Administrator on July 6, 2011.
First, an introduction of whom I represent.
My name is Chip Merriam; I am the Chief Legislative and Regulatory Compliance
Officer with the Orlando Utilities Commission, known as OUCThe Reliable One.
OUC is the second largest municipal utility in Florida and the 16th largest in the
Nation, providing electric and water service to more than 313,000 metered accounts
in the cities of Orlando and St. Cloud and unincorporated portions of Orange and
Osceola counties.
We are privileged to serve our customers and get an opportunity daily to meet
with them at our customer service center in downtown Orlando as many struggle
to pay for the current cost of energy. We are an example of one of the closest connections between regulatory decisions from Washington and the direct impact on utility
ratepayers. I can tell you firsthand that federal regulatory burdens are never easy,
but in tough economic times, the regulatory impacts we are discussing today are
devastating. Nearly 40 percent of OUCs customer base has an annual household
income of less than $35,000 per year. Any time there is a fiscal impact to our bottom
line, it is passed on to our ratepayers. Our customers ask us for a few but important
things; namely, to keep our rates as low as possible, to make our service the most
reliable, and to provide a reasonable explanation for any rate increases.
With that in mind, OUC has worked hard to diversify our fuel portfolio. With the
exception of our fleet and service vehicles, we are not dependent on foreign oil. Our
fuel sources include natural gas, coal, nuclear, landfill gas, and solar. This diversity
allows us to dispatch our fuels in the most economical manner available.
Allow me to walk you through OUCs experience with the EPA rulemaking, beginning with the Clean Air Interstate Rule (CAIR), and discuss the changes after the
District Court of Appeals ruling. Ill also discuss the changes OUC anticipated and
commented on regarding the Transport Rule, as well as how CSAPR dramatically
altered the game.
OUC, along with our industry partners, offered comments during the development
of CAIR. While we had differences with the EPA regarding the technical basis of
the Rule, it always has been OUCs mission to be a good steward of Central Floridas environment.
OUC began the capital discussion to achieve compliance with the clear understanding described in the Rule that new emission controls would have to achieve
compliance by 2014. EPA had provided enough allowances, flexibility, and time such
that an energy generator like OUC could appropriately plan and make major capital
changes to our generation facility.
The Rule was challenged. The District Court of Appeals found parts of the Rule
fatally flawed and remanded the Rule back to EPA. At that point, OUC had already
committed $50 million out of a total estimated $150 million in capital projects necessary to comply with CAIR.
Understanding the basis for the Courts rulings, OUC chose to continue the design
of our capital project changes while holding off on further construction until a new
rule was drafted. The risk of expending the remaining $100 million while not know-
50
ing the goals of a new rule greatly concerned our leadership, as did the risk that
we may miss the target of complete compliance. Based on this thinking, OUC purchased emission credits to ensure compliance with CAIR during this transition period until a new rule would be finalized by EPA.
EPA then began the process of developing a new rule to replace CAIRthe Clean
Air Transport Rule (CATR). Again, the industry was watching and commenting in
a manner that appeared to reflect some understanding by EPA of the industry concerns. The first emission reduction requirements identified in the Rules Option 0
was reasonable for Florida, and, from an OUC perspective, the implications to our
budget were significantly reduced. However, the next two options provided much
more restrictive emissions requirements. Option 2 (the final drafted option) provided
OUC leadership with optimism that the change of direction at the time of the CAIR
challenge was the correct business decision for our ratepayers. The emission credits
we had purchased were enough to allow the design work to move forward during
the transition. The final drafted option of the Transport Rule provided for a declining emission allowance but gave OUC enough flexibility that the budgeted capital
construction process could mature and achieve full compliance by 2014 without further need for allowances.
With the vision that our decision process was appropriate and fiscally and technically sound, we were stunned when a new rule, now called the Cross-State Air
Pollution Rule (CSAPR), was signed by the Administrator of EPA on July 6, 2011.
The new Rule has significant impacts on Florida and some very costly changes for
OUC.
The basics of the Cross-State Rule:
Include the replacement of the CAIR, beginning January 1, 2012.
Address the transport of sulfur dioxide (SO2) and nitrogen oxides (NO2) across
state borders.
Apply to electric generation units (EGUs) only.
Include designs to eliminate significant contribution of EGUs to downwind
States nonattainment of (or impairing ability to maintain compliance with) the
National Ambient Air Quality Standards (NAAQS) for ozone and fine particulate matter (PM2).
And this Rule is only one of a suite of overlapping EPA power sector regulations.
While the Rule provides for an allowance trading program, the allowances were
greatly reduced. From the Option 0 of the Transport Rule to the allowances provided for in the Cross-State Rule, Floridas Emission Budget was reduced from
56,939 to 27,825 metric tons (see Figure 1). Put another way, emissions allowances
were cut by more than half. OUC emissions also were slashed as identified in Figure 2. A more detailed graphic is depicted in Figure 3.
All of this occurred without the regulated industry providing comments and without allowing for the States to work with EPA and develop a state implementation
plan. Since the CSAPR is a Federal Implementation Plan, it sidesteps the States
ability to adopt an after-the-fact state plan. Since the federal plan is the rule, a
State would find it difficult to adopt a plan that is not the federal plan.
The Rule is one of many overlapping regulatory actions by the EPA that include
but are not limited to:
The Utility Maximum Achievable Control Technology Rule (MACT)
CO2 New Source Performance Standards (NSPS) that apply to existing new and
modified units. At this time, this greenhouse gas rule has unknown requirements to improve efficiency, and compliance timing is likely tied to the Utility
MACT Rule.
New, more stringent National Ambient Air Quality Standards (NAAQS) for
ozone, which were just delayed by the White House, along with more stringent
PM2 NAAQS that are expected to further reduce SO2 and NO2 emissions.
Coal Ash Rule.
316(b) Cooling Water Intake Structure Rule.
The Cross-State Rule will have significant impacts to OUC and our customers.
The emission allowances purchased prior to CSAPR expire December 31, 2011,
with the new Rule taking effect January 1, 2012. Florida and OUC are in the ozoneonly portion of the Rule that begins May 1, 2012, only months after the publishing
of the Rule. Under this timeline, there is little opportunity for the utilities in need
of capital construction development to complete construction in such short timeframes.
51
Because of the reduction in emission allowances and restrictions on trades, OUC
will have to lower the capacity of our 450 megawatt coal Unit 1 to little more than
100 MW. Yet we still could be at risk for further reductions that could force us to
take the unit offline before the end of the 156-day ozone season. We remain on the
timetable, as required under CAIR and CATR, for final completion of construction
prior to the start of the 2014 ozone season. This will require OUC to purchase additional generation options (through Power Purchase Agreements), since the Ozone
Season coincides with our highest demand periodsummer in Florida.
OUCs main energy generation site is unique. The site was designed in the early
1980s with a visionary approach. It utilized recycled water from a nearby wastewater treatment plant to be used in the cooling towers and prohibited the runoff
of any stormwater from the site. With an average of 54 inches of rainfall a year,
we keep all stormwater on site and convert it to steam through our scrubbers. We
also utilize wastewater from Orange County, Florida, to meet our other generation
needs and allow that water to evaporate over time.
An additional side effect of CSPAR on OUC is that with the loss of full operation
of both of OUCs coal units, the efficient design of our site does not provide for the
management of the Florida summer rains and the additional stormwater. Therefore,
OUC would be required to design, permit, and construct other means to manage and
store this stormwater at an additional projected cost of nearly $40 million.
With this as background, I thought a description of the impacts associated by a
rule such as the Cross-State Air Pollution Rule (CSPAR) would benefit the committee. Todays discussion is not about criticizing EPA and our technical differences
in the Rule; rather, it is to provide the Committee with factual impacts when such
rules are developed without the necessary input from the industry that must manage under these rules. Frankly, the Commissioners who make up the governing
body of OUC want to deliver the best, most affordable and reliable service to our
customers while serving as great stewards of our environment.
Our position is that when the EPA can demonstrate the benefits of moving forward on air or water quality improvements, we will do our best to find a way to
achieve compliance while always keeping an eye on the bottom line when it comes
to electric rates. The real costs are not reflected in the economic studies provided
by EPA, and there appears to be no full connection or link to the promulgation of
rules within the EPA. It just is not as simple as the economic studies reflected in
the rule development. Our strong suggestion would be for EPA to work with the
electric generators to determine if there are common, cost-effective ways to achieve
scientifically credible improvements in the utilization of coal for the generation of
energy in the United States.
OUCs position is not to challenge the Rule but to demonstrate the need for more
time to reach the emission requirements identified. Moving back the deadline also
would provide more time to pay for the costs associated with the Rule. Utilizing the
same timeframes developed in both CAIR and CATR, organizations such as OUC
will be able to comply.
In closing, I would like to emphasize that Central Florida is still reeling from the
economic downturn. Unemployment is high, and we have seen a significant increase
in the number of long-term customers needing utility payment arrangements. Small
businesses have been hit particularly hard by the recession and are still struggling
to make ends meet. Increasing utility rates to pay for the CSAPR regulation could
have a devastating effect on OUC customers and the Central Florida economy.
52
53
Chairman HALL. And I thank you. And I thank all of you for
your testimony. And I yield myself the first three minutes.
Mr. Stella addressed some of the omissions of the scientific information used by the EPA in arriving at their decision, and I thank
you for that and the Commissioner in plain language at the cost
of jobs and money. I will ask Dr. Shaw, our witness on the next
panel, Gina McCarthy, has claimed that the public health benefits
far outweigh any cost Texas might experience, and whether or not
we ought to experience them or not, I am not asking you to get into
that, but what are the real costs? They have already been enumerated that each of you is going to be damaged and be hurt, but do
you have anything to add to their
Dr. SHAW. Thank you, Chairman Hall. Specifically, I dont have
the full numbers of what the cost would be, because, frankly, the
individual utilities are still trying to calculate what that strategy
will be and what the cost associated with that will be. One thing
we know that is clear is that the health benefits are questionable.
And that is part of the reason we need an opportunity to be able
to vet this because there are assumptions both in the data of what
is being admitted
Chairman HALL. The objection to the time as much as you are
the decisions?
Mr. SHAW. Yes, sir, and partially because we need to be able to
verify the basis of their decision. We found errors that make us believe that the decision is wrong, but without the opportunity for
comment forand input, it is difficult to convince EPA of that.
And, moving forward, saying we will paper over it doesnt make
those problems go away. And so there is a need for more time to
be able to address the true cost both in the environmental benefits
and as in cost to comply.
Chairman HALL. And Commissioner, you have the same problems as he does? Do you have anything in addition to your testimony?
Mr. SMITHERMAN. Mr. Chairman, I would add
Chairman HALL. How would you answer Ms. McCarthy?
Mr. SMITHERMAN. I would say that when the lights go out in
Texas, it is usually either 20 degrees or 105 degrees. And when
that happens, vulnerable citizens are at risk and there is a cost associated with that.
Chairman HALL. All right. I yield back my time. The Chair recognizes Ms. Johnson for her three minutes.
Ms. JOHNSON. I am not going to be so cutting that five wouldnt
hurt.
You know, I was a practicing nurse before I went into politics,
and I still visit hospitals, and I would invite you to visit the Childrens Hospital in Dallas or even a Parkland Emergency Room
where we have the most uninsured people in the country. They go
to the emergency room for sick care. Eighty-some percent of the
young people that are admitted to Childrens Hospital have respiratory problems, and more than that are the older people who
have the same thing in Parkland Emergency Room. And you can
check that out. You are welcome to visit.
I am not a person that is against business, but I do feel strongly
that when we devise techniques and technologies that will protect
54
the health of people, they are available. They are costly sometimes,
but I think that needs time. I think we can work out more winwin situations, but it must be done.
Reflect with me for a moment. I remember when we had a lot
of lead in paint and a lot of lead in gasoline, and the rules came
that had to change because it was damaging to health. The technologies came and nowthat is gone. It is a thing of the past and
people and the health of people have benefitted from it. The technologies are possible. Many companies have met them. I am not
saying that you dont need time to reach and achieve these
changes. My question is, especially my Texas people, what are the
new technologies are you pushing? How successfully have you
pushed them? And how important is the Clean Air Rule to you as
rulemakers? And what would have been done without the regulations?
Mr. SHAW. Ranking Member Johnson, this is Bryan Shaw. I appreciate the opportunity to answer that question. I, too, share your
concern for addressing respiratory challenges. And part of the reason
Ms. JOHNSON. That is just part of ityou see it, but you know
you got all kind of blood dyscrasias and everything else coming
from a lot of this pollution.
Mr. SHAW. Sure, and the key thing is my concern with the way
this rule has been developed is we are, as I like to say, chasing the
wrong rabbit potentially. We have very real environmental and
health concerns we need to address, but if we have bad data that
leads to these regulations, and leads to where we invest both private capital and government dollars, we wont see the benefits that
are projected. And that ismy concern is that EPAs data failed to
present the evidence to where we know that is the proper place to
invest. For example, I believe that there are likely other pollutant
sources and other pollutants of concern that we need to focus on
that will have very real health benefits. EPA, through the process
they utilized, has not provided evidence so that we have the comfort that this is actually going to result in those benefits that you
and I both want.
Mr. SMITHERMAN. Ranking Member Johnson, if I may, great
question, and here is what we have done. We are employing cleaner coal technologies in Texas. The new plants that are coming online are cleaner than the old ones, no question about it. We are
using more natural gas, which has none ofsomeno mercury, no
pollutant, less NO2, less SO2, 40 percent CO2. We have more wind
on the grid than any other State, 10,000 megawatts probably doubling that. We are building transmission in order to enable us to
get more energy out of our existing generation fleet. So I think we
are pushing the envelope on technology and it is achieving real results for us. Can we do more in the future? Of course we can. But
these investments take time.
Ms. JOHNSON. Thank you.
Chairman HALL. The gentleladys time has expired, and I have
an agreement on both sides of the Chair here we have a vote, we
have about eight minutes to get to that vote, and we are going to
recognizewe have time for Mr. Rohrabacher? All right. They say
we have time for Mr. Rohrabacher, and I used a minute of his
55
three minutes so you have two minutes to go. You have got a full
two minutes, Mr. Rohrabacher.
Mr. ROHRABACHER. Thank you very much, Mr. Chairman. Let me
just noteand I am sorry there was a group of young people here
earlier. Most of the kids in California believe that the air pollution
level right now in California is so much worse than it was when
I went to high school, and I ask them that every single time. The
fact is it is just the opposite. We have made dramatic progress in
these last 20 and 30 years in terms of health-related diseases in
terms of pollutants in the air, dramatic progress. And once you try
to start ignoring that and trying to frighten people, we end up
wasting money by frightening people that their progress isnt being
made and that money is totally evaporated which could then have
been used to actually make things better. And I think that is what
we are facing today in this situation, Mr. Chairman.
We have gotwhat we have testimonywhat we are hearing is
that by eliminating the flexibility and speeding up this process, we
are going to waste hundreds of millions of dollars that could be
used to actually buy themake the capital investments that would
cause real progress in the future. Mr. Penrod I guess we said was
30 percent more and we are going to buy foreign-manufactured
goods because of this speedup. Merriam said $50 million more and
Mr. Smitherman has testified that air pollution washas been dramatically down anyway since 1999. This action by the EPA is being
rushed onto us. And I might add we have another example of what
thatof what this Administration accomplishes when they rush
through something.
We have Solyndrais that how you pronounce itSolyndra,
their solar plant up there in Fremont, California; we just gave
them $500 million and now they are going bankrupt. Well, that is
$500 million that now has evaporated from being able to create
real jobs someplace else and be able to clean the air with real investments that are based on solid science rather than trying to
scare people into doing things prematurely before we have got the
investment and the equipment ready to do the job.
So thank you very much, Mr. Chairman, for holding this hearing,
and thank you, panelists, for giving us some very valuable information.
Chairman HALL. And thank you. And I would ask Mr. Harris
are you leaving? We have only five minutes to get over there but
I would give you 30 seconds if you want toall right. Dont judge
our interest and appreciation you are here, the Democrats or the
Republicans because they havethey are honoring two new members over there and there are special honors for them because they
are two new Republicans. But the Democrats are welcoming them,
too, just like we are over there now, and so we would be over there.
We are going to dismiss this panel. You are free to go when you
want to. And weyou are excused and we will move to the next
panel when we get back. And we will be coming back probably five
minutes after the last vote over in the House, and I expect that will
be 20, 30 minutes from now, maybe 40 minutes.
Thank you so much for good testimony and thank you for your
courtesy and for all the jobs. And Mr. Commissioner, go back down
56
there and get us some more oil and gas. Lets drill a landmark, too,
just as soon as we can.
With that, we are recessed.
[Recess.]
Chairman HALL. The Committee will come to order.
At this time, I would like to introduce our second witnesses
panel. The Hon. Gina McCarthy is Assistant Administrator of the
Office of Air and Radiation for the U.S. Environmental Protection
Agency. Prior to her confirmation, Ms. McCarthy served as a Commissioner of the Connecticut Department of Environmental Protection. She has worked at both the State and local levels on critical
environmental issues and helped coordinate policies on economic
growth, energy, transportation and environment.
As our witness probably knowsshe is not a stranger to testifying on the Hillthe spoken testimony is limited to five minutes
but because of your schedule and our appreciation for you being
here, if you go a little over, well, Ms. Johnson wouldnt let me hit
the gavel at all, I know, so take what time you really need and we
appreciate you being here. At this time I recognize you, Ms. McCarthy.
STATEMENT OF HON. GINA MCCARTHY,
ASSISTANT ADMINISTRATOR FOR THE OFFICE OF AIR AND
RADIATION,
U.S. ENVIRONMENTAL PROTECTION AGENCY
Ms. MCCARTHY. Thank you very much, Mr. Chairman. I appreciate it.
Chairman Hall, Ranking Member Johnson, Members of the Committee, I do appreciate the opportunity to be with you today.
The Cross-State Air Pollution Rule will cut power plants emissions from States in the eastern half of the country so that local
communities can meet the Acts goals to reduce both smog and
soot. Now, I understand that many Members of the Committee
have expressed concern about the economic impacts associated with
the cross-State rule, and while Congress did not set up EPA as a
job creation organization, our agency, as EPAs mission is public
health and environmental protection, EPA nevertheless takes its
job very seriously, to look at the economic consequences of the rules
that it develops. It spends a great deal of time and resources on
developing the best cost-benefit analysis we have, and we also have
as an Administration begun to address the analysis associated with
jobs more than any prior Administration, and we have conducted
a thorough cost-benefit and economic analysis as well as a jobs
analysis of the rule that is in discussion today.
So each year the cross-State rule will prevent tens of thousands
of premature deaths and hundreds of thousands of aggravated
asthma attacks including up to 1,700 premature deaths just in the
State of Texas. Nationally, the rule will net $120 billion to $280
billion in annual benefits in 2014. Total health benefits in Texas
will be between $5.8 and $14 billion annually in 2014.
EPA had to issue the cross-State rule to replace the Bush Administrations Clean Air Interstate Rule, or CAIR, which the court said
in 2008 did not meet Clean Air Act requirements. In the meantime,
57
States obligations to address transported emissions in the CAIR
program have remained in effect. Its emissions reduction requirements will end when the cross-State rules start.
I will focus on two questions today. First, why is Texas in the
cross-State rule, and secondly, can Texas comply with the program
that begins in 2012.
Texas was in CAIR and is in the cross-State rule because NO2
and SO2 emissions from its power plant significantly contribute to
air pollution problems in at least one other State. Texas emissions
also contribute to fine particle pollution in 11 other States, in ozone
pollution in 13 other States. But that is not surprising because
Texas emitted 462,000 tons of SO2 in 2010. In fact, Texas is the
second largest emitter of the 27 states that are covered by this
rule. Texas is home to three of the 11 largest power plant sources
of SO2 emissions, all of which are owned by Luminant. If the crossstate rule excluded Texas, Texas was projected to increase the pollution it would send to other states. Texas, like all other states, has
a legal responsibility to address air quality problems that it contributes to downwind.
Texas had fair warning that it might be in the cross-state rule.
Texas was in the CAIR annual control program as early as 2005.
EPA specifically proposed to include Texas in the summertime program, and the EPAs proposal also requested comments on including Texas in the annual programs which provided sufficient legal
as well as practical notice.
The State of Texas and the major Texas utilities, including
Luminant, provided detailed comments on the proposal, including
specifically the question of Texass inclusion in the annual programs. Based on those comments, EPAs new projections determined that Texas SO2 emissions would be even higher than our
earlier projections confirming that Texas, like 27 other states, significantly contributed to downwind nonattainment problems. We
have fully met our notice and comment obligations both legally and
in practice with respect to Texas in the cross-state program.
Can Texas comply with the program in 2012? EPA understood
that new SO2 pollution control equipment would not be able to be
installed before 2012. So we designed the 2012 requirement to take
advantage of already existing, not new pollution control installations. NRG reportedly expects to meet the cross-State rule by increasing scrubber efficiency. It doesnt expect its compliance costs
to be either material nor any plants to be shut down.
Why are we able to start the program in 2012? Well, because
CSAPR is not the start of the States obligation to reduce pollution
that threatens the air quality in downwind States. That obligation
to be a good neighbor was put in place by Congress when it passed
the Clean Air Act. The Bush Administration defined a pathway forward for States to meet this obligation when it issued CAIR in
2005, but that rule was found not to be consistent with the Clean
Air Act.
CSAPR is a replacement of CAIR that is built on a stronger both
legal as well as scientific foundation. Under CAIR, States and
power plants have already implemented, or plan to implement, pollution controls. CSAPR, just like CAIR, is a market-based program
that gives companies compliance flexibility. It does not dictate a
58
specific technology or require specific unit-by-unit reduction. Texas
power plants have more than one cost-effective option that they can
choose under the cross-State rule. Although the program starts in
2012, power plants first compliance obligation, their first compliance obligation is not until March 1, 2013. While the program
starts in 2012, the first compliance for SO2, which is the biggest
challenge that Texas faces, is March of 2013 when they are required to turn in allowances.
So let me assure you, we do not want and we will not in any way
force the lights to go out or the air conditioning to not be available
within the State of Texas or anywhere else as a result of these
rules.
I look forward to your questions, and again, I thank you for the
opportunity to be here.
[The prepared statement of Ms. McCarthy follows:]
PREPARED STATEMENT OF MS. REGINA MCCARTHY,
ASSISTANT ADMINISTRATOR FOR AIR AND RADIATION,
U.S. ENVIRONMENTAL PROTECTION AGENCY
Chairman Hall, Ranking Member Johnson, and Members of the Committee, I appreciate the opportunity to appear before you today to testify on the Cross-State Air
Pollution Rule.
The Cross-State Air Pollution Rule
On July 6, 2011, Administrator Jackson signed the final Cross-State Air Pollution
Rule (previously known as the Transport Rule). This rule cuts power plant pollution
from States in the eastern half of the country that contribute to harmful smog and
soot-forming pollution.
In a single year (2014), the Cross-State Air Pollution Rule is projected to produce
net benefits valued at $120 billion to $280 billion and to avoid: 1
Up to 34,000 premature deaths;
15,000 heart attacks;
400,000 cases of aggravated asthma;
19,000 cases of acute bronchitis;
19,000 hospital and emergency room visits;
Over 1.8 million days when people miss work or school due to respiratory illness
and other diseases caused or exacerbated by air pollution.
The Cross-State Air Pollution Rule will save lives, prevent illness, and protect
American communities by cutting power plant pollution that hurts air quality in
downwind States. By 2014, the rule and other State and EPA actions will reduce
sulfur dioxide (SO2) emissions by 73 percent and nitrogen oxides emissions by 54
percent from 2005 levels. 2 The rule is based on the need to meet the 1997 ozone
and 2006 fine particle air quality standards and implements the Clean Air Acts
good neighbor provision to cut pollution. By reducing air pollution regionally, the
rule makes it easier for communities to meet Clean Air Act goals.
The Cross-State Air Pollution Rule is achievable, cost-effective, and flexible because it uses proven market-based compliance mechanisms to keep costs low, encourages technological innovation, and allows the power sector to transition to
cleaner electricity generation. The rules market-based approach gives companies
flexibility in developing compliance strategies; it does not dictate a specific technology for any particular company or power plant.
Many U.S. power plants have already invested in proven, readily available pollution technologies. This rule will provide badly needed regulatory certainty that will
enable investments Just last week, a spokesperson for Exelon, one of the largest
1 EPA final Cross-State Air Pollution Rule Table VIII.C1 Estimated Annual Reductions in
Incidences of Health Effects Based on 2014 Modeling. http://www.epa.gov/crossstaterule/actions.html.
2 Id.
59
utilities in the United States, noted that Electricity generators have known the rule
was coming for years, and many have already made plans to comply with it, so timely implementation will level the playing field for power plants that are already controlling these emissions by requiring others to do so. 3
The Cross-State Air Pollution Rule will improve air quality in thousands of counties throughout the eastern, central, and southern U.S.counties that are home to
over 75% of the U.S. population, including 57 million children under the age of 18.
This rule will help States achieve the health-based ambient air quality standards
for ozone and fine particles, more commonly called smog and soot. After full implementation of this rule, the Houston-Galveston metropolitan area is the only area affected by this rule that we project will need additional local measures to meet the
1997 ozone standards.
The Cross-State Air Pollution Rule is affordable, technologically achievable, and
will dramatically improve public health.
Background
Effective technologies for controlling SO2 and NO2 emissions from power plants
have been available for years. Many power plants have installed modern pollution
control equipment to limit NO2 and SO2 emissions. Yet, a substantial portion of the
aging coal fleet has not. 4 Although SO2 scrubbers have been available for more than
35 years, well over a third of the coal-fired electrical utility capacity has yet to apply
them . 5 Many of those units were built before the Clean Air Act was enacted in
1970.
We are not the first Administration to recognize the need to clean up power plants
and to issue rules to address that need. In fact, since 1989, when President George
H.W. Bush proposed the Clean Air Act Amendments of 1990, power plant clean up
has been the continuous policy of the U.S. Government.
President George W. Bush recognized the need to further clean up the power sector, championing legislation such as the Clear Skies Act, and rules such as the
Clean Air Interstate Rule (CAIR), to address these public health issues. Explaining
the need to reduce power plant emissions, my predecessor testified to Congress that
the Bush Administration plan would dramatically reduc[e] fine particle pollution
caused by SO2 and NO2 emissions, and noted that Of the many air pollutants regulated by EPA, fine particle pollution is perhaps the greatest threat to public
health. 6
In 2005, the Bush Administration promulgated CAIR to limit SO2 and NO2 emissions from power plants in the eastern half of the country to help areas attain the
ozone and fine particle standards. The U.S. Court of Appeals for the District of Columbia Circuit held that CAIR did not meet Clean Air Act requirements and remanded the rule to EPA for revision. CAIR has been in effect for almost seven
years, including the past few years while EPA was developing the Cross-State Air
Pollution Rule to replace it, in compliance with the Courts decision. EPAs replacement rule ends power plants CAIR emission reduction obligations when CSAPRs
reduction obligations start.
Texas and the Cross-State Air Pollution Rule
The Committee has asked me to discuss concerns raised by Texas and Texas
stakeholders regarding CSAPR. Texas is affected by CSAPR in two ways: It benefits
from reduced air pollution emissions from plants in Texas and other States, and its
power plants must limit emissions of SO2 and NO2.
Pollution reductions by power plants in Texas and other States will provide significant benefit to Texanspreventing an estimated 6701,700 premature deaths
per year starting in 2014, and will assist Houston-Galveston in its effort to bring
its air quality to attainment of the ozone standard. Reductions from power plants
outside Texas will help reduce the emission reduction obligations that might otherwise need to be placed on Texas businesses. Under CSAPR, Texas power plants are
required to limit summertime NO2 emissions to reduce ozone, and to limit annual
NO2 and SO2 emissions to reduce fine particle pollution. The requirements for annual emission reductions are similar to the ones that Texas power plants have faced
3
Exelon spokesman Paul Elsberg, Argus Air Daily, Volume 18, 173, September 2011.
NEEDS v.4.10 PTox Database. http://www.epa.gov/airmarkets/progsregs/epa-ipm/docs/
NEEDSv410PTox.xlsx.
5 Id.
6 Testimony of Jeffrey Holmstead, Assistant Administrator, U.S. Environmental Protection
Agency, Before the Energy and Air Quality Subcommittee, Energy and Commerce Committee,
U.S. House of Representatives (May 26, 2005).
4
60
since the 2005 promulgation of the Clean Air Interstate Rule, which will be replaced
by CSAPR in 2012. Without CSAPR, and in the absence of CAIR, EPA projected
that Texas power plants would contribute significantly to air pollution in downwind
States, tribes, and local communities, in some cases forcing more costly local reductions, and in all cases unfairly imposing tremendous health costs on thousands of
American families.
The claim that the inclusion of Texas in the Cross-State Air Pollution Rule is out
of thin air is false. In July of 2010, EPA proposed to include Texas in the summertime NO2 program and requested comment on whether to include Texas in the annual NO2 and SO2 program. Texas and its utilities provided comments during the
rulemaking process. In particular, the Texas Council on Environmental Quality
(TCEQ) provided information on high sulfur coal usage by the Texas power industry
that was different than what EPA had relied on in the proposed rule. Based on this
new information, EPA estimated that Texas would have higher SO2 emissions in
2012 than what EPA had projected as part of the analysis supporting the proposed
rule. With respect to including Texas in both the summertime and annual programs,
we have fully met our notice-and-comment obligations under the Clean Air Act and
the Administrative Procedure Act.
EPA used a two-step process to set limits on upwind States emissions. First, EPA
determined whether a States power plant emissions were projected to contribute
significantly to air quality problems in a downwind area (making it hard for a downwind area to attain or stay in attainment with ambient air quality standards). Second, EPA determined the amount of emission reductions that power plants in
upwind States could make without exceeding a cost threshold. We followed both
steps with Texas. The record demonstrated that Texas power plants contributed to
air quality problems in downwind States, and that they could reduce their pollution
at a reasonable cost. Based on the factual record, Texas power plants have a legal
responsibility under the Clean Air Act to take action to address the air quality problems they create downwind.
Relying on similar analysis, the Bush administration included Texas in the CAIR
annual SO2 and NO2 control programs promulgated in 2005. It should thus come
as no surprise that EPA reached the same conclusion after updating its analysis in
2010 and 2011. In fact, EPAs modeling projects that Texas power plants would actually increase the amount of pollution they send to their downwind neighbors if
the Cross State Air Pollution Rule excluded Texas.
EPAs analysis also demonstrated that Texas power plants have more than one
cost-effective option to meet their obligations. EPA and the Office of Management
and Budget had several meetings or calls with Texas stakeholders during the development of CSAPR. Based on their concerns, we ran an additional sensitivity analysis regarding options for Texas power plants to meet their obligations starting in
2012. EPA modeling shows that Texas can comply with the requirements of this
rule without threatening electricity reliability or the continued operation of coalburning units, including those power plants that burn lignite coal from local mining
operations (mine mouth coal plants). That analysis shows that, if the state and its
utilities so choose, Texas power plants can meet this rule without jeopardizing electricity system reliability or altering current use of lignite. Like other states covered
by this rule, Texas has the opportunity (and is encouraged by EPA) to replace EPAs
allowance allocation approach with its own preferred approach as soon as 2013, the
second year of the program, by submitting its own State Implementation Plan (SIP).
Texas took advantage of this opportunity under CAIR, and EPA has developed a
streamlined process to expedite the application and approval of these SIPs under
CSAPR.
CSAPRs emission reductions come in two phases, one starting in 2012 and deeper
reduction starting in 2014 for some states. 7 In part, this was to ensure adequate
time for cost-effective compliance. The 2012 requirements were designed to take advantage of existing pollution control technologies and strategies and not to require
the installation of additional SO2 control technology. The 2014 requirements, however, are expected to lead to installation of additional control technologies. For all
power plants in affected states, not just Texas, the rule allows adequate time for
compliance; especially since the industry has known for years that additional requirements were coming. Industry has moved rapidly to comply with past requirements. For example, they installed an average of 20 gigawatts (GW) of scrubbers
7 Texas is a Group Two State and not subject to the lowered SO budget in 2014. Their 2012/
2
2014 budgets are the same.
61
each year between 2008 and 2010. They also added 150 GW of new generating capacity between 2001 and 2003. 8
After CSAPR was finalized, a number of Texas stakeholders raised a variety of
concerns related to the rule. We are taking these claims very seriously. We do not
want the lights, or the air conditioning, to go out in Texas (or anywhere else) as
a result of our rules. We are investigating these claims, meeting with interested
stakeholders as necessary to obtain further information, and will decide whether additional action is necessary and appropriate to address reliability or other issues in
Texas. Based on technical information companies have recently provided, we are initiating a process to increase the emissions budget for Texas by tens of thousands
of additional tons, reducing the amount of emissions that the State is required to
cut. The Administrator has also made clear that EPA has not ruled out any potential solution to the concerns being raised, should the flexibility and choice of compliance strategies built into the rule not prove adequate to meeting those concerns.
The Clean Air Act
The Cross-State Air Pollution Rule is a continuation of the 40-year Clean Air Act
success story. For 40 years, the nations Clean Air Act has made steady progress
in reducing the threats posed by pollution and allowing us all to breathe easier. In
the last year alone, programs implemented pursuant to the Clean Air Act Amendments of 1990 are estimated to have reduced premature mortality risks equivalent
to saving over 160,000 lives; spared Americans more than 100,000 hospital visits;
and prevented millions of cases of respiratory problems, including bronchitis and
asthma. 9 They also enhanced productivity by preventing 12 million lost workdays;
and kept kids healthy and in school, avoiding 3.2 million lost school days due to
respiratory illness and other diseases caused or exacerbated by air pollution. 10
However, few of the emission control standards that gave us these huge gains in
public health were uncontroversial at the time they were developed and promulgated. Most major rules have been adopted amidst claims that that they would be
bad for the economy and bad for employment.
Some may find it surprising that the Clean Air Act also has been a good economic
investment for our country. In contrast to doomsday predictions, history has shown,
again and again, that we can clean up pollution, create jobs, and grow our economy
all at the same time. Over that same 40 years since the Act was passed, the Gross
Domestic Product of the United States grew by more than 200 percent. 11 In fact,
some economic analysis suggests that the economy is billions of dollars larger today
than it would have been without the Clean Air Act. 12
Some would have us believe that job-killing describes EPAs regulations. It is
misleading to say that enforcement of the Clean Air Act is bad for the economy and
employment. It isnt. Families should never have to choose between a job and
healthy air. They are entitled to both.
Studies led by Harvard economist Dale Jorgenson in 2001 to 2002 found that implementing the Clean Air Act actually increased the size of the U.S. economy because of lower demand for health care and a healthier, more productive workforce. 13
By 2030, the Clean Air Act will have prevented 3.3 million work days lost and
avoided the cost of 20,000 hospitalizations every year, based on recent EPA estimates. 14 A study that examined four regulated industries (pulp and paper, refining,
8 NEEDS v.4.10 PTox Database http://www.epa.gov/airmarkets/progsregs/epa-ipm/docs/

NEEDSv410PTox.xlsx.
9 USEPA (2011). The Benefits and Costs of the Clean Air Act from 1990 to 2020. Final Report.
Prepared by the USEPA Office of Air and Radiation. February 2011. Table 56. This study is
the third in a series of studies originally mandated by Congress in the Clean Air Act Amendments of 1990. It received extensive peer review and input from the Advisory Council on Clean
Air Compliance Analysis, an independent panel of distinguished economists, scientists and public health experts.
10 Ibid.
11 Bureau of Economic Analysis, National Economic Accounts, Table 1.1.5. Gross Domestic
Product, http://bea.gov/national/index.htm#gdp.
12 Dale W. Jorgenson Associates (2002a). An Economic Analysis of the Benefits and Costs of
the Clean Air Act 19701990. Revised Report of Results and Findings. Prepared for EPA. http://
yosemite.epa.gov/ee/eerm.nsf/vwAN/EE-0565-01.pdf/$file/EE-0565-01.pdf.
13 Jorgenson (2002a).
14 Jorgenson (2002a).
62
iron and steel, and plastic) concluded that, We find that increased environmental
spending generally does not cause a significant change in employment. 15
The EPAs updated public health safeguards under the Clean Air Act will encourage investments in labor-intensive upgrades that can put current unemployed or underemployed Americans back to work. Environmental spending creates jobs in engineering, manufacturing, construction, materials, operation and maintenance. For example, EPA vehicle emissions standards directly sparked the development and application of a huge range of automotive technologies that are now found throughout
the global automobile market. The vehicle emissions control industry employs approximately 65,000 Americans with domestic annual sales of $26 billion. 16 Likewise,
in 2008, the United States environmental technologies and services industry employed 1.7 million workers generated approximately $300 billion in revenues and led
to exports of $44 billion of goods and services, 17 larger than exports of sectors such
as plastics and rubber products. 18 The size of the world market for environmental
goods and services is comparable to the aerospace and pharmaceutical industries
and presents important opportunities for U.S. industry. 19
Jobs also come from building and installing pollution control equipment. For example, the U.S. boilermaker work force grew by approximately 35 percent, or 6,700
boilermakers, between 1999 and 2001 during the installation of controls to comply
with EPAs regional nitrogen oxide reduction program. 20 Over the past seven years,
the Institute for Clean Air Companies (ICAC) estimates that implementation of just
one rulethe Clean Air Interstate Rule Phase 1resulted in 200,000 jobs in the
air pollution control industry. 21 Similar effects have been recognized by the electric
power industry as well. In a letter to the editor in the Wall Street Journal, eight
major utilities that will be affected by our power plant air pollution standards said,
Contrary to claims that EPAs agenda will have negative economic consequences,
our companies experience complying with air quality regulations demonstrates that
regulations can yield important economic benefits, including job creation, while
maintaining reliability. 22
The Cross-State Air Pollution Rule at issue today continues the Clean Air Acts
40-year success story. Thank you for the opportunity to testify today. I look forward
to your questions.
Chairman HALL. And we thank you for your testimony, and reminding Members that the Committee rules limit questioning normally to five minutes but we have an agreement with this witness.
She has come before us with the understanding that she has to be
away from here by noon, so we will keep our questions down to
three minutes each in the interest of time and giving everyone a
chance, and I think there will be more here, and dont take the absence of people in these chairs for not caring to hear from you or
getting a chance to ask you questions, because we just swore in two
Members over there, and I think they are still in session. We were
interrupted a couple of times, but we are taking this down, and
even TV in some of it, and all will have copies of your testimony
15 Morgenstern, R. D., W. A. Pizer, and J. S. Shih. 2002. Jobs versus the Environment: An
Industry-Level Perspective. Journal of Environmental Economics and Management 43(3):412
436.
16 Manufacturers of Emissions Control Technology (http://www.meca.org/cs/root/organizationinfo/whoweare).
17 DOC International Trade Administration. Environmental Technologies Industries: FY2010
Industry
Assessment.
http://web.ita.doc.gov/ete/eteinfo.nsf/
068f3801d047f26e85256883006ffa54/4878b7e2fc08ac6d85256883006c452c/$FILE/
Full%20Environmental%20Industries%20Assessment%202010.pdf (accessed February 8, 2011).
18 U.S. Census Bureau, Censtats Database, International Trade DataNAICS, http://
censtats.census.gov/naic36/naics36.shtml (accessed September 6, 2011).
19 Network of Heads of the European Environment Protection Agencies, 2005. The Contribution of Good Environmental Regulation to Competitiveness. http://www.eea.europa.eu/aboutus/documents/praguestatement/praguestatement-en.pdf (accessed February 8, 2011).
20 International Brotherhood of Boilermakers, Boilermaker Labor Analysis and Installation
Timing, March 2005, EPA Docket OAR20030053 (docket of the Clean Air Interstate Rule).
21 November 3, 2010, letter from David C. Foerter, Executive Director of the Institute of
Clean Air Companies, to Senator Thomas R. Carper, http://www.icac.com/files/public/
ICACCarperResponse110310.pdf (accessed February 8, 2011).
22 December 8, 2010, WSJ Were OK With the EPAs New Air Quality Regulations.
63
and our questions, and I have used a minute of my three minutes
now.
I just want to ask you this. Let us talk some about options. One
of the major things that the others have set forth that have testified here today was the time and the effect of the time and their
inability to comply with that time. It seems like to me that there
ought to be some way to make some adjustment on that. I am
going to ask you about options, though. You state that EPA conducted an analysis that demonstrates that Texas power plants
have more than one cost-effective option to meet their obligations.
Well, given the short period and the severity of the cuts, buying allowances is extremely costlythat is one of themas evidenced by
the price of $2,600 per ton we saw in the market last week. The
other, fuel switching, is not that easy as most utilities purchase
coal on long-term contracts including for 2012, and additional control technologies cant be built in the next five months. After these
options are eliminated as too costly or unfeasible, what cost-effective solutions does EPA recommend and what are left? I only have
about a minute for you.
Ms. MCCARTHY. Then I will be very quick. EPA does not specifically require any particular option to be developed or to be chosen
at any particular facility. It is an entirelyit is a business decision.
It is a market approach to achieving these reductions. We believe
that there is equipment installed in the state already that can be
maximized in terms of its efficiency. Those are scrubbers for particulate matter that actually reduce SO2 emissions, one of the main
concerns. There is also FCRs, SNCRs, low-NOx boilers that are in
place that can be turned on every day all year around instead of
them are currently used part of the year, part of the days during
that part of the year. There are also upgrades of pollution control
equipment that can be done quickly, simple pollution control additions that can be made. There is lower-sulfur coal and there is fuel
switching. We believe that there are a number of options in addition to the purchasing of allowances.
Chairman HALL. Let me interrupt you there. The options you
have stated are not feasible, so what else do you have to offer, if
anything?
Ms. MCCARTHY. Actually, Mr. Chairman, we believe that all of
those options are quite feasible and can be done to achieve the requirements by the time the first compliance period is required to
be met, which for SO2 is March of 2013. Now, I will also add that
we have been petitioned to look at this issue and we are taking
very seriously our obligation to look at that. If we believe that we
have been incorrect as a result of those petitions and investigating
those, every option is available to us.
Chairman HALL. Well, it has been testified here and those companies say that it cant be done. Why does EPA think that they
know better?
Ms. MCCARTHY. Well, EPA in this particular rule identified not
just the air quality reductions that needed to be made but they also
identified that we did not want companies in 2012 to have to expend significant funds to comply. We are looking at a very low cost
per ton, and we believe that those tonnage reductions are available
by the use of existing equipment, by the use of operational changes,
64
fuel switching and other mechanisms that are very readily available to them today.
Chairman HALL. I thank you.
I recognize Ms. Johnson for three minutes.
Ms. JOHNSON. Thank you very much, and thank you, Ms. McCarthy, for appearing.
I dont disagree with the findings of EPA, although I know that
there is some question, but what I do question is how can we assure that Texas has other options other than the closure of the lignite mines and the power plants in that time, and I want you to
comment briefly too, Dr. Smitherman indicated that it was a
flawed process that you used, and I want you to comment on that.
Dr. Shaw indicated that you had bad data, and, you know, these
were serious indictments, and what I would like to have you do is
clarify those issues, and Dr. Stella indicated that if some things are
assumed by the EPA, I think it is important for your credibility to
be justified with how you do things and what rules you follow.
Ms. MCCARTHY. Thank you for asking those questions. Let me
try to get at them very quickly.
The first thing is, do we need to closedo companies need to
choose to close the lignite facilities in order to comply. The simple
answer is no. This system is set up to allow a number of choices,
business choices. It may be that that business has chosen to take
that path forward but EPA anticipated that Texas may want to
choose other options, and in the rule itself, we included information
that indicated that you could maintain the same historical use of
lignite coal in Texas and still achieve the reductions under the rule
within the same cost constraints, which make them very inexpensive reductions, so we believe you do not need to do that, and we
are sitting down with the company and the State of Texas to walk
through our analysis on that.
And you asked a question about a flawed process. We believe we
not only met the letter but the spirit of the law in terms of moving
forward to include Texas in this annual program. They are in the
CAIR program. When we proposed this rule, we were proposing to
bring them in for seasonal ozone. We also took comment on whether or not we should include them in the annual program, and it
was comments from the State of Texas itself in response to that solicitation of comment that told us that they knew about this, they
provided us information, and on the basis of the information they
provided, we redid the modeling, which clearly showed that Texas
would increase its emissions if we brought in the cross-State rule
if we didnt bring in the cross-State rule and the CAIR program
went away. So we feel very comfortable that we are both legally as
well as in the spirit of the law done what we needed to do.
Now, the third issue is bad data. I will tell you that we strongly
disagree with the data analysis or the back-of-the-envelope calculation that we heard from Mr. Shaw. We are going to walk through
those issues, but we did a thorough analysis.
And the last issue is Stella and the modeling. Let me tell you
that Stella had some fatal flaws in the way it modeled this rule.
Let me just name two. First of all, they failed to understand that
we need to look at pre-CAIR data. We needed to do modeling, not
just look at current monitoring data, because the court told us that
65
CAIR has to go away and has to go away quickly. We had to replace it. That is what this rule does. So we had to look at the world
before CAIR and make sure that we were backstopping all of those
reductions and then moving forward.
Secondly, by basing it on monitoring data, they are looking at an
economy that has a downturn and they are not recognizing that we
want to make sure that Texas and other States have the ability to
grow and we factor in that growth when we do our analysis.
Ms. JOHNSON. Thank you.
Chairman HALL. Thank you. Time has expired.
The Chair now recognizes the gentleman from Maryland, Mr.
Harris, for three minutes.
Mr. HARRIS. Thank you very much, Mr. Chairman, and thank
you, Ms. McCarthy, for appearing before the Committee.
I have a question. As a physician, I just am curious that the
claim that this somehow saves money says that we avoid up to
34,000 premature deaths. Could you break that down to what these
premature deaths are due to?
Ms. MCCARTHY. I can tell you that the analysis we do is on the
basis of health data. It looks at exposure
Mr. HARRIS. I understand. Can you just break that down? What
are these deaths due to?
Chairman HALL. He is not asking you what your practice is.
What did you do in this
Ms. MCCARTHY. The deaths are due to the pollution
Mr. HARRIS. No, no, no. What diseases? You can use specific diagnoses for me. I will understand them.
Ms. MCCARTHY. Well, I wouldnt want to presume that I could
articulate them to the extent that you could understand them. We
would have respiratory illnesses, heart illnesses
Mr. HARRIS. Well, you say 15,000 heart attacks per year. If every
one of those patients died, I could see that is 15,000. The estimated
number of asthma deaths per year on the EPA website is 10,000
per year due to exacerbations, so that would be 25,000 if every one
of those was attributed to this. How do you get up to 34,000? I
mean, and I am used to science. When they say up to 34,000, there
is usually a confidence interval there. You know, it is like one to
34,000 or 10 to 34,000. Why would you use something so unscientific to say up to 34,000?
Ms. MCCARTHY. The health data is all part of the record, and I
would indicate to you that we are looking at health benefits
Mr. HARRIS. Okay. Thank you. And I would appreciate.
Ms. MCCARTHY [continuing]. Across the United States.
Mr. HARRIS. Sure, I understand that, and if you could get me
that information, I appreciate it. Now, is that health data due to
the particulates or the ozone?
Ms. MCCARTHY. It would mostly be the particulate matter
but
Mr. HARRIS. Werent these numbers the same numbers, though,
that were floated around a week ago when the Administration suspended its ozone standards?
Ms. MCCARTHY. Clearly not, no.
Mr. HARRIS. They werent?
Ms. MCCARTHY. No, they were not.
66
Mr. HARRIS. What were those figures?
Ms. MCCARTHY. I actually dont have them at the top of my head
but I certainly can provide them.
Mr. HARRIS. I would appreciate that, because I recall that the
deaths in the press reports from the advocates were very, very
similar to that, and there is evidence, I think, that 90 percent of
the health benefit claimed by the EPA under this rule are for particulates, so I am just curious about that, how many times you can
count a death for a rule for its proposed benefit.
Ms. MCCARTHY. We do that
Mr. HARRIS. Are those particulate matter, the data that supports
that death and injury data, is that publicly available?
Ms. MCCARTHY. Yes.
Mr. HARRIS. Could you get that to me?
Ms. MCCARTHY. Yes, sir.
Mr. HARRIS. Thank you very much, because I would love to have
it, you know, reviewed independently from the EPA.
Ms. MCCARTHY. I think I should probably clarify only because I
just realized what you are indicating is that the 15,000 heart attacks that we reference are nonfatal, so that would be very different than thinking that we
Mr. HARRIS. That is even worse because the number of people
that have a heart attack who go on to die actually now under current therapy is actually quite low, so the numbers of deaths from
heart attacks actually would be strikingly low as part of that
34,000, so I am just curious about that.
But anyway, my time is expired. Thank you, Mr. Chairman, and
I appreciate follow-up on those two questions I asked. Thank you.
Chairman HALL. I thank the gentleman.
The gentleman from Maryland, Mr. Sarbanes, is recognized for
three minutes.
Mr. SARBANES. Thank you, Mr. Chairman.
Thank you for your testimony. I want to commend you, because
it sounds to meand I dont profess to be an expert on this, but
it sounds to me from your testimony and from what I have read
in your written testimony that the EPA has taken a very responsible course with respect to this Cross-State Air Pollution Rule and
regime that it wants to put in place to protect peoples safety and
health. Even with respect to the concerns that have been raised by
the Texas delegation, I think that your responses have been good
and straightforward and indicate that there is no sort of special
mission here to get Texas, that you are trying to do your job and
you understand that the downwind effects from pollution in one
part of the country or one State have to be measured, have to be
regulated. Otherwise we are not going to be able to make progress
with respect to these air pollution issues.
I just wanted to ask you on behalf of Marylanders, I know that
the Maryland Department of Environment submitted some comments speaking to concerns about the nitrogen oxide standards and
the Cross-State Air Pollution Rule. I think our Secretary of Environment, Sherry Wilson, testified through those comments that,
you know, that we are interested in making sure that the standard
is where it needs to be because we have a lot of air that blows into
Maryland that is above the levels with respect to National Ambient
67
Air Quality Standards for ozone. So can you speak a little bit to
how the rule that you are looking at you think would benefit Marylanders who have that concern?
Ms. MCCARTHY. I certainly can. The 27 States that are incorporated in the region that is regulated under this rule encompass
three-quarters of the United States population. We recognize that
for many years the Clean Air Act has required States to take care
of their downwind contribution, but we have failed to be able to
achieve the reductions that were necessary to do that.
This rule actually does a couple of things. First, it scientifically
links where there are challenges in different States to achieve
that are trying to achieve nonattainmentare in nonattainment.
Let me say that again. That are out of attainment that need to get
in attainment and also how they can maintain that. We know that
Maryland and other states in the East have had significant challenges and met those challenges in their own States, but because
of pollution from upwind States, they continually are trying to
drive more reductions at higher and higher cost per ton. This rule
makes the link to the upwind States scientifically but then we look
at, how do we also look at where there are cost-effective reductions
up there so that we can bring those reductions to the table, because
we dont expect the upwind States to bring the downwind into attainment but meet their own significant contribution. So this rule
will go significantly far to help Maryland and other States that
have been recipients of this pollution to get into and to maintain
attainment.
Chairman HALL. The gentlemans time has expired. The Chair
recognizes the gentleman from Georgia, Dr. Broun, for three minutes.
Mr. BROUN. Ms. McCarthy, in the last week you said it is not
EPAs jobit is not EPAs purpose of creating jobs. Maam, this
rule of yours is going to destroy jobs and it is going to greatly harm
our economy. Now, the questions I have are these. The final crossState rule is significantly more stringent than the proposed rule.
The cross-State rule requires more emissions reductions and imposes new regulations on the trading of allowances. Can you explain why the final rule was much more stringent? Do you think
it is practical for power plants that have been looking at the proposed rule for almost a year now and developing compliance plans
based on that rule and how without notice get a final rule which
is much more stringent to be able to suddenly change those compliance plans and only have until January 1st to make those changes?
Ms. MCCARTHY. Thank you for your question. First of all, I would
like to point out that the context of my statement from last week
needs to be
Mr. BROUN. Ms. McCarthy, I asked you a question. I just made
a statement with that. Would you please answer my question? Because I dont have but a minute and a half left. I have got several
other questions.
Ms. MCCARTHY. Okay. My statement is, we are not insensitive
to jobs and I certainly am not. We do not believe
Mr. BROUN. Please go ahead and answer my question. I would
appreciate it.
Ms. MCCARTHY. I thought I was doing that. I apologize.
68
So we have looked at the rule. We have designed it in a way that
not only can be achieved in terms of achieving the air quality reductions but very
Mr. BROUN. You are not answering my question. Why is it more
stringent than the proposed rule?
Ms. MCCARTHY. Well, because we have updated our data and it
is the basis of emissions that are being emitted and it takes advantage of current technologies that are in place to continue to
drive
Mr. BROUN. How do you think the power company can when they
have been planning for almost a year to put in place plans to follow
this new rule?
Ms. MCCARTHY. Well, actually, many power companies have
known and all of them should have known that this program has
actually been in place since 2005. The courts told us we had to replace it
Mr. BROUN. No, but you have changed the proposed rule to this
new rule. Let me ask you another question. Shouldnt the public
have been given an opportunity to comment on this final rule since
it is so different from the original proposal?
Ms. MCCARTHY. They were given ample opportunity to comment,
and it is not significantly different than the proposed rule.
Mr. BROUN. Maam, it is. The final cross-State rule will have significant real impacts in starting just over three months because
power plants cannot install technologies to reduce emissions in
such a short period of time. Plants will be restricted on how much
they can run starting next year. I believe this raises costs for utility customers. Did EPA reach out to State regulators and public
utility commissioners on the details of the final cross-State rule before you issued it?
Ms. MCCARTHY. We met with States as well as companies continuously through the proposal as well as prior to the final and
after the final, and
Mr. BROUN. Would you submit, please, for the record the dates
and names of such contacts?
Ms. MCCARTHY. Sure.
Mr. BROUN. Thank you. My time is expired. I yield back.
now recognizes the gentlelady from Maryland, Mrs. Edwards, for
three minutes.
Ms. EDWARDS. Thank you, Mr. Chairman, and to the Ranking
Member for the hearing, and I just want to say first, really, thank
you to the Environmental Protection Agency, which is under the direction of Lisa Jackson. I think that you are all doing yeomans
work in a really difficult environment to balance the interests of
business but also the public interest and protecting our health and
our air quality. So I want to thank you for your leadership.
I know that Maryland has actually some of the toughest rules
along the East Coast, but I think one of the challenges that we face
is that we are not just a State that is an island on its own, that
part of the reason that we need the EPA to take a broad look
across State boundaries is because air travels across State boundaries, and so it makes entire sense that the EPA has really taken
69
this on to try to balance all of those interests but to ensure the
public health, and so I thank you for that commitment.
Ms. McCarthy, I want to just ask you one thing. Isnt it true that
the new rule is in fact less stringent than the rule that the court
remanded?
Ms. MCCARTHY. It isit actually isit is designed with the same
market flexibility. It is based on better data than we had before
and it still offers a broad range of options for facilities to come into
compliance either through cost-effective reductions at their own facilities or through the market and the purchase of allowances.
Ms. EDWARDS. And I note that. I know that you received testimony in the rulemaking from Constellation Energy in Maryland,
which is one of our largest energy companies, and what they said
is, they have already made a billion-dollar investment in making
sure that they come into compliance, and they are urging the EPA,
in fact, to act quickly to implement the rules, and you have heard
from a number of energy companies saying exactly the same thing.
I was actually out at FedEx Field just a while ago with NRG Energy, which is installing solar panels there. They too have also
said, you know, the same thing: it is time for the EPA to act so
that there is clarity in the industry as to the direction that we
ought to go but not to leave them in this limbo unclear of what the
investments are going to make, and so I wonder if you could talk
about what, if any, other options are really available to the EPA
to address the part of the ruling that says, you know, there are a
lot of different alternatives for the industry to take.
Ms. MCCARTHY. Well, first of all, I want to tell you that Maryland is one of the 27 states in the Cross-State Air Pollution Rule,
and in that region on average, those states have reduced their SO2
emissions since 1990 by 70 percent, so congratulations.
But what we are here to talk about is the States that may not
have been as prepared. If you look at comparable timelines in the
State of Texas, they are almost where they started. SO2 reductions
in Texas have been reduced from 1990 to today only by .1 percent.
So we have a challenge here, and
Chairman HALL. The gentleladys time has expired. I now recognize the gentleman from California, Mr. Rohrabacher, for three
minutes.
Mr. ROHRABACHER. Thank you very much. You were just about
to suggest what the trend line was. Let me ask you, for the last
10 or 20 years, the trend line in terms of cleanliness of our air has
been in what direction?
Ms. MCCARTHY. For most of the major pollutants, it is significantly reduced.
Mr. ROHRABACHER. Significantly reduced?
Ms. MCCARTHY. Yes, sir.
Mr. ROHRABACHER. And so now we find ourselves in a situation
where the EPA, even though there is a trend line going dramatically in the right direction, has decided that they have to move up
a deadline and what business is calling draconian. We just had five
witnesses in front of us talking about that this moving up the
deadline will cost hundreds of millions of dollars that otherwise
wouldnt cost, so what is the crisis that makes you move up the
70
deadline at the cost of hundreds of millions of dollars to the American people?
Ms. MCCARTHY. The courts were telling us that EPA had to act
to respond to the original vacature of CAIR and then its remand.
I will say that while the trend lines nationally have gone down,
there are some States that have not sufficiently looked at the ability
Mr. ROHRABACHER. Did the court set the deadline for you?
Ms. MCCARTHY. The courts told us we had to
Mr. ROHRABACHER. Did they set the deadline for you?
Ms. MCCARTHY. Their deadline
Mr. ROHRABACHER. No. The answer is no.
Ms. MCCARTHY [continuing]. As soon as possible.
Mr. ROHRABACHER. Yes, so the answer is no, they did not set a
deadline. Do you think the courts wanted you to waste hundreds
of millions of dollars of American peoples money in order to move
up a deadline that could be achieved at a lot less cost within a year
or two?
Ms. MCCARTHY. Our deadlines are achievable with cost-effective
reductions.
Mr. ROHRABACHER. That is not what we just heard in testimony
from people who probably have as much expertise on this as you
do. But here we are in the aftermath of an actual case in California
where $500 million was given by this Administration to a solar
panel company that then went bankrupt, again evaporating hundreds of millions of taxpayer dollars yet we have an example of another company. On September 11, 2011, a letter to the Deputy Administrator at the EPA suggests that the EPA has offered to make
technical adjustments that will give Texas and Luminant thousands of additional tons of pollution allowances to reduce required
emissions reductions. Now, let me ask this. Is this just for this particular group or have other companies across the country been offered this technical adjustments that will allow for additional allowances?
Ms. MCCARTHY. Well, in order to ensure that the reductions
could be achievable in 2012 at a low cost, we took great care to look
at what kind of technologies were already in place that could
achieve those reductions quickly. Luminant came to us as well as
the State of Texas and identified three scrubbers within Texas that
had been on a pathway to be invested in and be ready to
Mr. ROHRABACHER. So have any other utilities across the country
asked for this? Is this the only example of where people have asked
for this?
Ms. MCCARTHY. No. There are about a little over a handful of adjustments we are making on the basis of technology installations
that are in place and ready to be turned on. The particular concern
Mr. ROHRABACHER. But others have
Ms. MCCARTHY. The particular concern we have with Luminant
is, they have chosen to make an announcement that they are actually closing mines associated with burning lignite when we believe
they havent thoroughly looked at all of their options or given us
an opportunity to
71
Mr. ROHRABACHER. But I would hope you would be as concerned
about the other people who are losing hundreds of millions of dollars in jobs because
Ms. MCCARTHY. We are open to all
Mr. ROHRABACHER [continuing]. Of actions of the EPA and perhaps we will see who gets special favors. We know that this solar
company got it in California and ended up costing the taxpayers
$500 million.
Chairman HALL. The gentlemans time is about to really expire.
Ms. MCCARTHY. I justMr. Chairman, I just wanted to say that
we are talking to a number of States. If there are technical adjustments, we are making them. There are no special favors here.
now recognizes Mr. Neugebauer, the gentleman from Texas, for
three minutes.
Mr. NEUGEBAUER. Thank you, Mr. Chairman.
I want to go back and kind of make sure we are correct here. The
court said that CAIR could stay in place until a replacement was
put in place. Is that correct?
Ms. MCCARTHY. Then they told us to do it as expeditiously as
possible because CAIR was not legal.
Mr. NEUGEBAUER. Now, you didnt answer my question.
Ms. MCCARTHY. I did.
Mr. NEUGEBAUER. No, you didnt.
Ms. MCCARTHY. I said and. You are correct, and they added
other requirements for us to get it done as quickly as possible.
Mr. NEUGEBAUER. But they did say it could stay in place until
a replacement could be found?
Ms. MCCARTHY. That is correct. They remanded it instead of
vacating it.
Mr. NEUGEBAUER. Yes or no.
Ms. MCCARTHY. Yes.
Mr. NEUGEBAUER. Thank you. But it never said that the EPA
could not take into account the gains that were made under CAIR,
right? The improvements that were made under that particular
Ms. MCCARTHY. I dont believe it took into account that particular issue. I dont know in what context we would take credit for
gains or not.
Mr. NEUGEBAUER. Well, some of those companies were banking.
They were making improvements and banking.
Ms. MCCARTHY. Oh, they were, but they clearly told us that we
couldnt continue with the CAIR program or the use of those
banked allowances.
Mr. NEUGEBAUER. The court told you you could not use banked
allowances?
Ms. MCCARTHY. That is correct.
Mr. NEUGEBAUER. Are you sure about that?
Ms. MCCARTHY. Yes, we are sure.
Mr. NEUGEBAUER. So we had some legislation in place, and companies spent billions of dollars, you know, under that program
making improvements, getting credits for doing that, and then we
are coming out with this new rule that says you know what, all
that great stuff you did in the past, we are not going to give you
credit for that. Is that right?
72
Ms. MCCARTHY. I dontlet me explain how we did it. We actually looked at the achievements that have been made with CAIR.
We looked at the air quality reductions that would be necessary to
make to help with the attainment and maintenance issues in downwind States and then we looked upwind at where the inexpensive
reductions could be made and then we established State budgets
accordingly. That does not mean we ignored or didnt consider all
of the benefits, and, in fact, over the past five years, there has been
significant installation of pollution control equipment as a result of
CAIR that we are taking advantage of. That is why we can move
forward in 2012 with cost-effective reductions.
Mr. NEUGEBAUER. So are you using the 2005 data or the 2009
data?
Ms. MCCARTHY. We are using both current monitoring data as
well as modeling data in order to establish those linkages to look
at how to allocate the pollution from the upwind States and then
in order to establish those budgets. So we are looking at both monitoring and modeling data, but you are absolutely right that we are
looking at identifying the pollution that would be emitted without
CAIR in order to establish those budgets, recognizing that those
States that have been aggressive in CAIR would be able to achieve
reductions, or even in some cases, already be in compliance with
2012 levels.
Mr. NEUGEBAUER. But if you are using 2005 data, you may not
be using current data then.
Ms. MCCARTHY. We are actually using of combination of both
current monitoring data as well as modeling data to understand
what the world would have looked like without CAIR because the
world will be without CAIR when the cross-State rule comes into
place, then to model what those monitors would look like using
both information at the monitor itself as well as our modeling data
to make those adjustments. I know it is complicated, and I apologize, but I certainly can send you how we did our modeling and
how we made our projections, but we feel very confident that it is
the way that it needs to be done in order to actually backstop from
any backsliding if CAIR goes away and the cross-State rule takes
over.
Mr. NEUGEBAUER. I see my time is expired, Mr. Chairman.
Chairman HALL. The gentlemans time has expired. The gentleman from Texas, Mr. McCaul, is recognized for three minutes.
Mr. MCCAUL. Thank you, Mr. Chairman.
Ms. McCarthy, with all due respect, I believe at a time we are
trying to create jobs in the Congress and the Administration, your
agency is destroying jobs and causing real harm, justifying it based
on possible noncompliance in the future. I believe this rule will result in higher prices for electricity. It has already shut down two
plants. It is being imposed on Texas with very short warning, and
Texas has been included not because of actual measurements that
show problems but because of models that show hypothetical problems in the future. We heard that testimony from the previous
panel.
My questions, I have two questions. One is that because Texas
was not included in the initial rule, state agencies, energy companies and residents did not have the opportunity to offer their input
73
into the rulemaking process. I understand that Texas was included
in the final rule, but why were Texans not given the opportunity
afforded to others to offer their suggestions and concerns on this
rule and make the necessary preparations for compliance once you
decided to include us? And I will say there were six other States
that were added in the final rule and they were provided a time,
supplementary notice on their inclusion that allowed them time to
comment, yet Texas was not treated in the same way and provided
this similar type of notice, and rather we were just put on the final
rule. Now, would you mind commenting to those two questions?
Ms. MCCARTHY. No, I dont mind commenting, but first of all, the
cross-State rule does not shut down facilities. It is the most flexible
market-based approach that we have to achieve cost-effective reductions. If EPAif you would like, I would refer you to the Houston Chronicle article today that is entitled Dont Blame EPA over
Luminant Woes. You know, we are not to blame for Luminants
financial trouble. We can achieve reductions and they can achieve
those reductions, we believe, without the closure of those facilities
and we would like to see that happen.
Mr. MCCAUL. We like to comply, but I think you need to be reasonable and not, you know, shove us into a rule without any input
from the State and not giving us time to, you know, have input the
way you did six other States. That doesnt seem fair to me. As a
Texan, it looks like that you are being unfair with Texas and that
this Administration is playing unfair with the State of Texas.
Ms. MCCARTHY. I clearly dont want you to walk away believing
that because Texas in terms of their air quality emissions and
what we expect of them is the same process that we use for every
State to identify their contribution and make reductions. I will tell
you that we did solicit comment. It disturbs me that Texas is now
claiming that they didnt have due process. We have been as transparent as we possibly could be with this rule. We solicited comment, and the fact that they actually commented should deflate
that issue somewhat or that claim.
Mr. MCCAUL. If I could just close. My time is expired. Again, you
have six other States, Iowa, Kansas, Michigan, Missouri, Oklahoma
and Wisconsin, added in the final rule. They were provided with a
supplementary notice on their inclusion. They allowed for their
comment.
Ms. MCCARTHY. Because it was on the basis of new data, and the
proposal didnt request comment on their inclusion so we did have
to do a supplemental rule. That is not the same situation as the
State of Texas.
Mr. MCCAUL. So Texas was treated differently than the six other
States?
Ms. MCCARTHY. We had different data at the time that we put
the proposal out. We actually solicited comment on their inclusion
and they provided comment. We adjusted our model, and indeed
they significantly contributed to pollution in downwind States.
Mr. MCCAUL. In closing, Mr. Chairman, I do think that if we are
treated differently, there isI understand your position, but I do
think it smacks of unfairness. Thank you.
74
Chairman HALL. The gentlemans time has expired. We will have
some insertions into the record. I think the gentlelady has a letter
request. Do you want to state your request?
Ms. JOHNSON. I would like to ask for the letter that the delegation signed be submitted for the record as well as the one from
Dynergy that was sentwell, to both of us.
Chairman HALL. At this time, I would like to enter into the hearing record a number of important letters and documents containing
stakeholder viewpoints and technical analysis regarding the
CSAPR rule. This includes several pieces of correspondence between affected utilities and EPA and an analysis by ERCOT of the
rules impact on reliability and analysis of the economic and jobkilling impacts of the rule by Nera Economic Consulting as well as
Standard and Poor, and these documents have all been shared in
advance with the Minority and with the Majority and a complete
list can be made available to members at their request.
[The information may be found in Appendix 2.]
Chairman HALL. And Ms. McCarthy, just yesterday the Chairman of the Texas House Committee on State Affairs, Byron Cook,
sent you a letter requesting your appearance at a Committee hearing on the CSAPR rule on September 22nd at 10 a.m. in Austin.
Chairman Cook wrote, It is absolutely essential that this agency
explain to Texas why the State was unexpectedly without opportunity for input included in this rule. Will you accommodate
Chairman Cooks request to appear at the Texas committee hearing?
Ms. MCCARTHY. Mr. Hall, I will take that request under due consideration.
Chairman HALL. I appreciate it if you will.
I would like to leave the record open long enough for your callous
remark that you are not in the business of creating jobs. You dont
really mean that, do you?
Ms. MCCARTHY. I actually didnt put it in that context. I was actually providing
Chairman HALL. If you want to make a statement, make it for
the record and I will
Ms. MCCARTHY. I will. Both EPA as well as I personally am very
concerned not just about the environmental health but also the economic health of this State, and I recognize and EPA does its responsibility to develop rules as
Chairman HALL. You can talk on from now on if you want to because we are on your time now.
Ms. MCCARTHY. No, sir, I just
Chairman HALL. No, you need to be gone by 12 and it is five
after 12, and we thank you
Ms. MCCARTHY. I just didnt want you to believe that I was callous to jobs.
Chairman HALL. Well, I want to believe that. I sure do.
Ms. MCCARTHY. Please do.
Chairman HALL. And we thank you for your time here and we
wish you well.
Ms. MCCARTHY. You too, Mr. Chairman. Thank you.
Chairman HALL. With the round of questions completed, I thank
the witnesses from both panels for valuable testimony and the
75
Members for their questions. The Members of the Committee may
have additional questions for any one of the witnesses. We will ask
the witnesses, including Mrs. McCarthy, to respond to those in
writing. The record will remain open for two weeks for additional
comments from Members.
We are adjourned.
[Whereupon, at 12:07 p.m., the Committee was adjourned.]
76
ANSWERS
TO
POST-HEARING QUESTIONS
77
ANSWERS
TO
POST-HEARING QUESTIONS
Responses by Dr. Bryan W. Shaw, Chairman, Texas Commission on Environmental

Quality
Questions Submitted by Chairman Ralph M. Hall
Q1a. Can you describe the historic way in which States have led the way for
enviromnental progress under the Clean Air Act and other statutes?
A1a. In Texas, protection of air quality predates the Federal Clean Air Act, and
State requirements are often more stringent than what is required by the federal
statute. States are given primary responsibility for ensuring air quality protection
under the Federal Clean Air Act, with United States Environmental Protect Agencys (EPA) role being primarily supervisory and secondary to the role of the States.
States, including Texas, are responsible for developing State implementation plans
(SIP), which contain the necessary control strategies for ensuring that States attain
and maintain [he National Ambient Air Quality Standards (NAAQS). SIPs must
also contain major and minor permitting programs and provisions for public participation. These programs are developed and managed by the States, with the exception of some States that rely on EPA to manage their Prevention of Significant Deterioration (PSD) permitting programs, the programs that permit major sources of
air pollutants. Texas has been delegated authority to manage its own PSD permitting program from EPA (with the exception of greenhouse gas permits), and permits
both major and minor sources of air pollutants in the State. With the exception of
certain activities that produce de minimis amounts of air pollution, all stationary
sources in Texas that produce air contaminants must be permitted. Texas has also
developed a variety of robust rules to set limits on types of air pollution, particularly
in the States nonattainment areas, to ensure that those areas meet and attain the
NAAQS by the applicable Federal Clean Air Act deadlines.
In addition to rules that are required for implementation of the NAAQS, Texas
has worked to develop innovative permitting mechanisms to allow flexibility while
requiring sources to control their emissions. For example, Texas has required all
grandfathered major sources of air pollution to obtain air quality permits that contain federally enforceable emissions limitations. In this way, Texas went beyond
what is required by the federal statute to ensure that emission sources in the state
will have control requirements that can be enforced to ensure protection of the
States air quality resources. Because of innovative programs for point sources,
Texas has seen 58% reduction to point source nitrogen oxides (NO2) emissions from
2000 through 2009.
The strides that Texas has made in reducing emissions and more importantly ambient concentrations of ozone are more impressive considering Texas population increase and position as an economic engine of the entire country. Texas now has the
second largest population in the country behind California. Between April 1, 2000,
and July 1, 2009, Texas population increased by more than 840,000 people, more
than any other state, yet its mobile somce emissions decreased. The Federal Government has the primary responsibility to regulate mobile sources. States have very little ability to effect change in this area. The Texas Legislature, however, chose to
fund one of the most aggressive, if not the most aggressive, programs to reduce NO2
from mobile sources. The Texas Comnission on Environmental Quality (TCEQ) has
provided over $900,000,000 in grants through its Texas Emissions Reduction Plan
program to diesel equipment owners to replace old, dirtier diesel engine equipment
with new, cleaner equipment. Over $150,000,000 has been provided through the
Drive A Clean Machine program to repair gasoline vehicles that fail emission tests
and replace old vehicles with newer, cleaner cars and trucks, Texas also has requirements for cleaner-burning fuel that are more stringent than federal fuel requirements in order to reduce NO2 and volatile organic compounds (VOC) emissions
(Texas Low Emission Diesel and Low Reid Vapor Pressure Gasoline programs).
Q1b. Is there a role for State flexibility in implementation under CSAPR? If so, what
is it?
A1b. CSAPR provides limited flexibility to States to adopt abbreviated SIPs in
States efforts to address limited portions of the federal implementacion plans (FIP)
prescribed by EPA in the rule. These limitations are discussed on pages 48326
48332 of the final rule preamble, and in rule provisions found at 40 C.F.R. 52.38
(governing the trading rule NO2 provisions) and 52.39 (governing the trading rule
SO2 provisions). CSAPR provides for no State authority or flexibility for the 2012
control period.
78
With regard to this limited flexibility afforded to States in providing EPA SIPs
for the CSAPR, a major underlying issue still has not been addressed by the EPA.
Section 110(a)(2)(D)(i)(I) of the FCAA obligates States to prohibit emissions that
contribute significantly to nonattainment, or interfere with maintenance by, any
other State with respect to the NAAQS. However, Section 110(a)(2)(D)(i)(I) is clearly
a requirement for inclusion in the SIPs that States are required to submit under
Section 110(a)(1). The writers of the FCAA clearly envisioned that States would be
given the opportunity to implement local controls as necessary to address transport
impacts to other States. While the EPA indicates that it has determined that States
covered by CSAPR have not submitted SIP revisions adequate to meet the requirements of Section 110(a)(2)(D)(i)(I), the EPA does not plan to limit this approach to
just the 1997 and 2006 PM2 NAAQS and the 1997 ozone NAAQS. The EPA has indicated (75 FR 45213) that future revisions to NAAQS may necessitate revisions to
CSAPR with greater reductions from the sources covered under CSAPR, or possibly
from States or different source categories not included in the current rule. Based
on this statement, the EPA has predetermined that no States will ever be in compliance with Section 110(a)(2)(D)(i)(I) of the FCAA. Therefore, the EPA has assumed
sole responsibility and authority for Section 110(a)(2)(D)(i)(I) for the ozone and PM2
NAAQS, including any future revisions to these standards.
Q2. In a letter from EPA to Luminant, the EPA Deputy Administrator claimed that
EPA has offered to make technical adjustments . . . that will give Texas and
Luminant thousands of additional tons of pollution allowances and that there
are alternative compliance approaches that rely on existing pollution control
technology already installed. In your view, would EPAs offer of additional allowances or alternative compliance approaches be sufficient for Texas generators
to meet the 2012 and 2014 standards in a cost-effective way?
A2. The TCEQ believes that Texas should not be included in the CSAPR for fine
particulate matter (PM2). Texas was not included in the rule for PM2 at proposal.
The TCEQ has technical concerns with the EPA claim that Texas is contributing
to the monitor in Granite City, Illinois. EPA also violated Texas due process rights
as well, on the grounds that neither Texas, not her citizens, were provided an opportunity to comment on CSAPR.
On October 6, 2011, the EPA proposed revisions to the CSAPR that would provide
an additional 70,067 tons of SO2 allowances to the Texas CSAPR budget and delay
until 2014 the implementation of the assurance provisions limiting interstate trading. Based on TCEQs initial review of the EPAs proposed revisions, the proposal
may lessen some of the impact of the CSAPR on some Texas utilities, but it completely fails to address TCEQs overall concerns regarding the feasibility of such
substantial reductions in sulfur dioxide (SO2) emissions in such an unprecedented
short period of time. Even accounting for the additional allowances proposed for
Texas budget, recent SO2 scrubber startups, and announced SO2 scrubber startups
for 2012, the TCEQ expects that substantial SO2 reductions will still be needed in
Texas for the 2012 control period.
Furthermore, while the 2012 control period is an annual compliance, companies
must reduce their SO2 emissions early enough in the year to avoid running out of
allowance mid-year and being forced to shut down. Companies must certify compliance with CSAPR, and there are significant penalties associated with a companys
actual SO2 emissions exceeding the allowances held. Therefore, companies are unlikely to gamble compliance on SO2 allowances becoming available at the end of the
2012 control period. The EPAs intent for delaying the assurance provisions until
2014 is to encourage trading in the initial two years of the CSAPR program. However, Texas remains limited to trading with Group Two States, which does not appear to be a viable trading market for SO2 allowances. In effect, companies will only
have a matter of months to achieve the large reductions in SO2 emissions that the
EPA is mandating with the CSAPR, leaving companies with limited options for compliance.
The TCEQ will continue reviewing the EPAs proposed revisions to CSAPR, and
plans on submitting comments to the EPA on the proposed changes. However, the
TCEQ does not consider the CSAPR, as finalized or with the proposed revisions to
the rule, to be cost-effective or environmentally beneficial.
79
Responses by Mr. Gregory Stella, Senior Scientist, Alpine Geophysics, LLC
Q1a. You state in your testimony that over 80 percent of the sites predicted by EPA
to be in nonattainment of the ozone or PM2 standards in 2012 are already in
attainment as of 2009. This appears to indicate major errors in EPA modeling
accuracy. In your opinion, why is the EPA model wrong on 80% of attainment
projections?
A1a. The issue is not that EPAs model is wrong; rather it is the fact that older
data were used to develop EPAs attainment projections. The methods and models
used by EPA and Alpine were consistent, however, EPAs use of an older emissions
base year (2005), design value data (20032007), and emission projections and associated controls absent the implementation of CAIR resulted in estimates of poorer
air quality in 2012 compared to Alpines results. When we used a more current base
year inventory (2008) and current design value data (20072009) which account for
control technologies and associated emission reductions in response to current compliance with CAIR, air quality in 2009 already is observed to be below CSAPR air
quality objectives.
Q1b. How can it be improved?
A1b. In my professional opinion, the use of a most current modeling platform, including emission inventories, projection factors (inclusive of already implemented
control technologies), observational data and associated metrics (design values),
would provide a more current picture of existing air quality and establish a more
current baseline from which to develop emission projections and associated air quality predictions.
Q1c. Is it fair to say that the majority of EPAs estimates about the need for this
rule are based on questionable predictions?
A1c. I do not think that it is fair to say that EPAs estimates are based on questionable predictions. Rather, I would say that the modeling upon which EPA established its estimated predictions is based on outdated data.
Q2a. In your written testimony, you state that your firm identified two critical components where EPAs underlying science for the CSAPR rule appears to be incomplete. You refer to EPAs exclusion of the most recently available emissions
inventories and air quality measurements at the time of its rulemaking and
EPAs exclusion of the controls and related emission reductions that are actually occurring in response to the Clean Air Interstate Rule (or CAIR). Could
you please explain for the Committee how the exclusion of these two components
would directly impact the integrity of the CSAPR rule, and the accuracy of any
of its downstream regulations and requirements?
A2a. In our analysis, we observed that when the control technologies already installed as a result of current compliance with CAIR are included in the modeling
platform (emissions, air pollutant concentrations, and associated projections), the air
quality objectives of CSAPR are already met or are projected to be met in many
areas without additional emission reductions beyond those originally identified in
CAIR. As these results show current (2009) attainment of CSAPR air quality objectives in many EPA identified nonattainment or maintenance downwind areas, the
need for incremental emission reductions addressing interstate transport of air pollutants to these EPA identified areas may be unnecessary.
Q3. Has the air become cleaner over the last decade? Is there any reason to expect
that the large portions of the U.S. that meet National Air Quality Standards in
2009 would reverse the trend in 2014?
A3. According to both EPA published reports 1 and studies conducted by Alpine
Geophysics, LLC (associated written testimony to this response) concentrations of
air pollutants measured by EPA have decreased over the last decade. While there
is always the possibility that changes in meteorology, technology, economic activity,
or emission regulation may impact the direction of emission and air quality trends
in the U.S., in my professional opinion and based on promulgated air quality regulation and long-term emission trends, I do not see a reason to expect that the large
portions of the U.S. that meet National Air Quality Standards in 2009 would reverse this trend by 2014.
1
http://www.epa.gov/airtrends/2010/index.html.
80
Responses by Mr. Wayne E. Penrod, Executive Manager, Environmental Policy, Sunflower Electric Power Corporation
Q1a. In your written testimony you note that EPAs CSAPR is based on flawed modeling, and that the underlying model itself is a black box. Could you please
describe for the Committee the range of relevant information that was withheld
by EPA, and how this impacted the rulemaking process overall?
A1a. Response: Information regarding IPM and EPAs use of it is found on their
website at the following URL. Their description of the value the model (emphasis
added) brings to their work is fairly revealing and it describes what the model enables them to accomplish. http://www.epa.gov/airmarkets/progsregs/epa-ipm/.
The excerpt below from this website addresses the question.
General Purpose of IPM Modeling
EPA uses the Integrated Planning Model (IPM) to analyze the projected impact
of environmental policies on the electric power sector in the 48 contiguous
States and the District of Columbia. Developed by ICF Consulting, Inc. and
used to support public and private sector clients, IPM is a multi-regional, dynamic, deterministic linear programming model of the U.S. electric power sector. It provides forecasts of least-cost capacity expansion, electricity dispatch,
and emission control strategies for meeting energy demand and environmental,
transmission, dispatch, and reliability constraints. IPM can be used to evaluate
the cost and emissions impacts of proposed policies to limit emissions of sulfur
dioxide (SO2), nitrogen oxides (NO2), carbon dioxide (CO2),and mercury (Hg)
from the electric power sector. The IPM was a key analytical tool in developing
the proposed Transport Rule.
Among the factors that make IPM particularly well suited to model multi-emissions control programs are (1) its ability to capture complex interactions among
the electric power, fuel, and environmental markets; (2) its detail-rich representation of emission control options encompassing a broad array of retrofit technologies along with emission reductions through fuel switching, changes in capacity mix and electricity dispatch strategies; and (3) its capability to model a
variety of environmental market mechanisms, such as emissions caps, allowances, trading, and banking. IPMs ability to capture the dynamics of the allowance market and its provision of a wide range of emissions reduction options
are particularly important for assessing the impact of multi-emissions environmental policies like the proposed Transport Rule.
Although the inputs to the model are highly complicated and sometimes difficult
to follow, this information is generally made available by EPA to the public, as are
the outputs. What is not available are the inner workings of the model and how the
model processes the inputs to produce the outputs, which is why the model is called
a black box. Because the model is proprietary, the public cannot itself run the
model, and therefore cannot, for instance, vary the assumptions to see what the outputs will be. We are simply asked to trust that the model is accurately processing
the inputs in producing the outputs. But for all we know, a change in a modeling
input that produces a particular result could be the result of a glitch in the model.
The IPM model is a virtual electric grid upon which different dispatch scenarios
can be simulated. The model has been used for several years to simulate the complex interactions that can occur when evaluating different economic policy strategies. It has been used to identify the lowest cost electricity-generating unit additions. It has also been used to evaluate utility mergers, both real and virtual. The
value of the IPM tool is to identify the differences, within bounds, between or
among different or competing strategies; it should not be expected to yield a single
dispositive answer to any question.
The inputs to the model include information and assumptions about electricity
generation and transmission facilities, fuel, load forecasts, economic factorsin theory, all the information that goes into operation of the electric grid. Outputs of the
model are the resulting amounts of electricity each generating unit will produce, the
overall impact on electric rates, the amount of each type of generation fuel that is
used, etc. In other words, the inputs to the model are all of the inputs that EPA
thinks are necessary to run the U.S. power grid. However there are hundreds of significant assumptions and many simplifications that are involved in developing a
model upon which to draw realistic comparisons.
81
One of the main problems a lack of access to the model causes when EPA uses
the model is that EPA may tell the public it is considering a change in modeling
inputs and ask for comment, but we have no way of knowing how the changed assumption will change the rule. This happened three times during the rulemaking
process, when EPA issued Notices of Data Availability proposing to change modeling inputs without telling the public how doing so would change state budgets.
There was no way for the public to understand how the new inputs would change
the budgets, because EPA wasnt saying and because the model is proprietary and
unavailable for the public to run itself. This is nowhere more significant than in the
45% allowance allocation difference in the third NODA for Sunflowers operations.
Moreover, we know that certain modeling inputs are flawed. As just one important example, one of the main criticisms that those with experience in the electric
utility industryincluding FERC and various RTOsmade of FERCs reliability
analysis is that the IPM model assumes that power flows freely within broad geographic areas and is not subject to local bottlenecks and constraints. As an EPA
Technical Support Document for the MATS rule states, [w]ithin each model region,
IPM assumes that adequate transmission capacity exists to deliver any resources located in, or transferred to, the region. 1 This assumption, however, is factually inaccurate because there are significant local transmission bottlenecks. These local reliability concerns and the failure of EPAs model to simulate them are the reason
FERCs Chairman called the methodology EPA used to assess reliability irrelevant 2 in assessing true reliability impacts. Again, this is very evident in the recent
Southwest Power Pool modeling summary analysis (attached)very low voltages in
regions served by Sunflower and other neighboring utilities.
Kansas utilities have, after the rule became final, tried to duplicate some of the
EPA work. We discovered that;
Only EPA had access to the actual input parameters to an important sub-routine within the model, and
Information provided by EPA concerning the treatment of certain default parameters was reported erroneously.
The effect of these mistakes wasted considerable amounts of our time and resources that could have been given to trying to understand more fully what EPA
did in other areas of the model. This discovery only serves to raise further questions
regarding other aspects of the EPA modeling which we were unable to adequately
evaluate in the available time.
It should also be identified that EPA did not even always ask for comment when
it changed inputs to the model; of course, these input changes resulted in significant
output differences. In the final rule, EPA justified the reduced budgets based on
new input information that was never made available for comment. Significantly,
this is exactly counter to the process that EPA insists that utilities use when they,
for instance, propose to construct a new source. EPA insists that the air dispersion
impacts of a proposed source be strictly evaluated using EPA-issued guidance and
that such modeled evaluations be done on EPA-approved software. They carefully
evaluate the inputs and outputs on a case-by-case basis. Whenever any issue or
problem is encountered during the EPA evaluation of the source, they insist that
the applicant redefine the model, correct whatever mistake was made (even if the
mistake was made by the EPA or EPA contractors), resubmit the results, and then
re-issue the entire process for new public comment. That same level of transparency
should be expected of EPA.
Q1b. In your opinion, what is the single greatest scientific flaw or assumption in
EPAs rulemaking process for CSAPR, and its compliance projections?
A1b. Clearly there are two huge flaws in the rulemaking process. The largest is
the assumption that utilities can move electricity on the grid as easily as the simplistic assumption used by EPA in the model (as identified above). The Southwest
Power Pool (SPP) has clearly identified that electric system reliability will be significantly impacted. In fact, SPP has identified that their much more realistic, singlepurpose electric grid model will not solve in certain areas given the generation solution reached by the EPA model to allocate allowances. Under the circumstances we
find ourselves on the horns of a dilemmaeither operate as required to meet the
1 Resource Adequacy and Reliability in the IPM Projections for the Toxics Rule, EPA-HQ-OAR2009-0234-3063[1], Exhibit 12 at 1.
2 The American Energy Initiative: Impacts of the Environmental Protection Agencys New and
Proposed Power Sector Regulations on Electric Reliability Before the Subcomm. on Energy and
Power of the H. Comm. on Energy and Commerce, 112th Congress (September 14, 2011) (response of Jon Wellinghoff, Chairman, FERC, to question by Rep. Rush).
82
load under the reliability requirements of the SPP, or operate so as to conform to
the inadequate allowance structure devised by EPA. Clearly, our obligation to meet
both conflicting requirements will be a most difficult, costly, and uncertain task.
EPA does not in their own modeling adhere to the standards they require of the
utilities. As we know by experience, for example, whenever a new emission source
that may impact the visibility in a National Park is proposed, additional time and
modeling may be required by the responsible federal land manager. Since the SPP
has identified serious concerns with the reliability of the electric grid, an essential
element in the security of a modern society, surely this is reason enough for EPA
to undertake additional, open, transparent modeling of grid reliability resulting
from the rule.
Secondly, the assertion that a liquid, vibrant allowance trading market will develop in 2012 enabling utilities to comply with the rule defies logic. EPA recognizes
that utilities will not be able to install all of the new control technologies in time
to meet the rule by 2012 and that other compliance options are relatively limited.
EPA believes, however, that an allowance market will emerge in which utilities can
cover their compliance obligations by purchasing allowances.
The problem is that utilities have no reason to believe that this will be so, and
every reason to believe that it wont. Because EPA cut so many State emission
budgets between the proposed and final rule, we can only ask from what sources
EPA believes excess allowances can be generated in so short a time period. First
the allowance budget identifies several severe shortfalls; even EPA identifies that
new control technology must be installed, and further asserts, illogically, that the
time for deploying some of these technologies is adequate to generate allowances.
We have no reason to be confident that there will be any allowances available to
cover the shortfalls, particularly at a price that would make economic sense.
Moreover, the allowance trading scheme is limited under CSAPR because, for SO2,
utilities can only trade with utilities in their own State or in States in the same
group. Also, a great deal of allowance value was wiped out when EPA decided that
the old CAIR allowances cannot be used in CSAPR in light of the court decision in
the CAIR case. With CSAPR subject to so many legal challenges, we think utilities
may wish to hold onto and bank any credits they have, and utilities will be reluctant to buy allowances and risk having that value similarly wiped out if CSAPR is
overturned. Thus, since we must plan conservatively, given the threat of serious
penalties for non-compliance, we must assume that we cannot meet a significant
part of our compliance obligations with allowances.
Because we cant rely on the availability of allowances, our only compliance option
is as I outlined in my initial testimony. We have to essentially re-dispatch our system, cutting back generation at our more efficient base-load coal unit, and increasing generation at more expensive units. Moreover, as set forth in my testimony, we
accelerated our acquisition of pollution control equipment, which resulted in a higher cost and our having to purchase the equipment from China rather than from a
Kansas manufacturer as originally planned.
Q2. What impact would extreme weather in Kansas have on electricity generation,
delivery, and reliability if CSR were to be implemented in its current form, and
with its current compliance deadline?
A2. Certainly, a colder-than-expected winter or a hotter-than-expected summer
would increase electricity demand and increase the risk that our generation and
transmission resources are not adequate, in contingency situations, to meet the load.
This is especially the case given the identified transmission constraints caused by
the EPA dispatch model. Indeed, the Southwest Power Pool told EPA in a September 20, 2011, letter, the electric system will be strained to meet CSAPR. This
strain will be magnified if there is a loss of one or more significant transmission
or generation facilities, either of ours or of our neighbors, occurs during a severe
hot- or cold-weather event. These unexpected and isolated events will occur. They
always have, and the reserve sharing arrangements of the SPP are constructed to
provide shared mutual resources for those circumstances. All of those reliability
management practices developed by SPP and other reliability pools are placed at
greater risk of collapse in extreme weather conditions given the effects of CSAPR.
83
Responses by Mr. Chip Merriam, Chief Legislative & Regulatory Compliance Officer,Orlando Utilities Commission
Q1. Is it possible for OUC and other Florida utilities to just purchase NO2 allowances from other CSAPR states that are able to reduce NO2 emissions within
the compliance window?
A1. From our early experience with this rule, those who have excess allowances
in Florida will not be interested in releasing those allowances for two reasons: the
first, for those that may have excess, the margins between expected emissions and
allocated allowances are very tight, as such, OUC strongly believes that these entities will opt to bank the excess allowances rather than release them into the market
with the thought that they may eventually need them, and second, those with allowances are trying to determine what the real value of these allowances might become
as we all near the compliance period. Those in the CSAPR are demonstrating the
same response as we have experienced within the State of Florida, making sure
they have adequate allowances before those allowances are for sale and also awaiting what the real value of the allowances will be as the compliance period nears.
Q2. What impact would hurricanes or severe weather have on electricity generation,
delivery, and reliability if CSAPR were to be implemented in its current form,
and with its current compliance deadline?
A2. There are at least two questions within this question which are as follows:
First, electric generation usually does not have the same type of impacts as does
transmission and distribution services during severe weather events. Generation is
very reliable during cyclonic events, or at least that is what we thought in Florida
until the hurricane season of 2005. Because of the impacts resulting from the onslaught of Hurricanes Katrina and Rita on natural gas production in the Gulf of
Mexico, the supply of natural gas to the State was cut dramatically for several days.
Since there are not any large-scale gas storage facilities in the State, gas fired generation was significantly curtailed and, if not for the coal units which are a part
of the focus of this EPA rulemaking effort, the State might not have faired as well
as it did.
Second, delivery and reliability are much different. In order to meet the demands
of the CSAPR, OUC will take our Stanton Coal Unit 1 offline for all or part of three
summer seasons as we modify the coal unit with the installation of Selective Catalytic Reduction to reduce the NO2 emissions. Additionally, OUC will be forced to
shift planned maintenance outages from the spring to the summer peak season in
order to reduce emissions to try to comply with the Rule. This is the same time the
State of Florida is most at risk for cyclonic events. In order to meet with our reliable
standards, as well as demands on our generation fleet, OUC will, most likely, have
to go out on the market and purchase supplemental generation from other generators. This will now place our generation requirements on the transmission system
which has been impacted during past hurricane seasons.
84
Responses by The Honorable Gina McCarthy, Assistant Administrator, Office of Air
and Radiation, U.S. Environmental Protection Agency
Q1a. In your response to my question regarding available compliance options for the
State of Texas, you answered that the compliance decisions are business decisions and can be done through a market approach. You stated that EPA believes there is pollution control equipment installed in the State already that
can be maximized in terms of efficiency. Please provide a list of equipment on
each power plant in Texas that EPA has determined can be maximized for efficiency. Please include the current efficiency of each identified piece of equipment and the maximum efficiency EPA believes this equipment can achieve.
A1a. EPAs IPMv.4.10 computer model uses Energy Information Agency (EIA) information for SO2 removal rates for flue-gas desulfurization. These values are reported directly to EIA by the sources themselves using form 860 (data is referred
to as EIA 860). In the case of seven units in Texas, EPA made adjustments to the
SO2 removal rates based on subsequent information from Luminant on how they
had interpreted the form and, in some cases, misreported information. NO2 rates
are based on 2009 data. There is a hierarchy of rules used to determine rates. The
rules and all the hueristics that go along with them can be found in section 2 of
the Supplemental Documentation on the CSAPR website (http://www.gpo.gov/
fdsys/pkg/FR-2011-07-11/pdf/2011-17456.pdf).
85
86
Q1b. You also claimed that there are FCRs, SNCRs, and low NO2 boilers already
in place that can be turned on every day all year around instead of them currently used part of the year, part of the days, during that part of the year.
Please provide a list of each power plant in Texas that EPA has determined
is not using its FCRs, SNCRs, and low-NO2 boilers all day, every day, all year.
Please include the current amount of time this equipment is currently being utilized and the technical analysis that EPA has conducted to determine that this
equipment can and should be utilized all day, every day, all year.
A1b. EPA determined that from a technical standpoint, the State, as a whole, already has the controls in place to make the needed reductions even at current heat
input levels. EPA reached this conclusion with the following process. For each unit
in Texas, we calculated the lowest quarterly NO2 rate achieved by that unit between
2005 and 2010 and applied that rate to 2010 data. If all of Texass units had operated at their lowest quarterly NO2 rates for the entire year (using their 2010 heat
input), it would have resulted in a reduction of nearly 22,000 tons of NO2 for 2010,
which would yield an emission level substantially lower than the CSAPR state
budget for annual NO2 in Texas. We believe these data show that Texas units have
substantial flexibility in controlling their NO2 emissions and meeting their CSAPR
obligations even without the installation of new NO2 controls. In addition, utilities
provided information to EPA indicating that some controls were operational for limited periods of time.
87
Q1c. Additionally, you claimed that there are upgrades of pollution control equipment that can be done quickly. Please provide EPAs analysis that identifies
each power plant in Texas that has pollution control equipment eligible for
quick upgrades. Please include a list of each piece of equipment in the identified power plant, what upgrades can be made, what, if any, permits are required to do these upgrades, how long the upgrades will take to install, and
the cost of each upgrade.
A1c. EPA analysis indicated that sources could meet both the annual and ozoneseason requirements in the rule in 2012 by running existing controls (or those already expected to come online in the near future) efficiently, making changes in dispatch (how electricity is distributed across units at a facility) including shifting generation from higher-emitting units to lower-emitting units, fuel switching, or buying
allowances. Additional upgrades are possible but they are not necessary to achieve
compliance.
Q1d. You stated that there is low-sulfur coal and fuel switching options. Please provide EPAs analysis in which you determined purchasing low-sulfur coal for
2012 was a cost-effective option for any plant affected by this rule. Please include EPAs complete analysis of the coal market, transportation availability
concerns, and any assessment of the cost difference between the low-sulfur coal
and the coal type normally burned.
A1d. The coal choices (including low-sulfur subbituminous and bituminous coals),
transportation options, and the comparative cost of different coal sulfur grades that
are available to electric generating units are included in EPAs modeling of the U.S.
electric power sector and are comprehensively documented in Chapter 9 and related
appendices of Documentation for EPA Base Case v.4.10 Using the Integrated Planning Model (available on the Web at www.epa.gov/airmarkets/progsregs/epa-ipm/
docs/v410/Chapter9.pdf, www.epa.gov/airmarkets/progsregs/epa-ipm/docs/v410/
Chapter9Appendix93.xls, www.epa.gov/airmarkets/progsregs/epa-ipm/docs/v410/
Chapter9Appendix94Data.xls, and www.epa.gov/airmarkets/progsregs/epa-ipm/
docs/v410/Chapter9Appendix94Graphs.pdf). The assumptions described in this
documentation and used in EPAs modeling were prepared by leading industry coal
experts. They are very extensive. For example, they include 85 separate coal supply
curves and more than 1,200 coal transportation links.
For each coal-fired electric generating unit, the power sector model identifies the
lowest-cost coal or combination of coals that can be burned by the unit and allow
it to meet its generating and emission requirements. These coals include the type
88
normally burned as well as any low-sulfur coal options available to the unit. The
coals that the model projects will be used in any given modeled year (including
2012) are reported in model run output files (also available on the Web).
89
90
In addition to the optimal least-cost solution in Texas, we have examined options
that do not involve switching from lignite to lower sulfur sub-bituminous coal. In
this complementary analysis, EPA constrained Texas units from increasing their
blending of sub-bituminous coal beyond the level each unit reported to EIA for 2010.
Under these conditions, Texas is still projected to meet its SO2 assurance level using
other cost-effective emission reduction strategies, including greater dispatch from
lower-emitting generators, while still maintaining 2010 lignite blending levels.
Q2. In your response to my questioning about the CSAPR timeline, you repeatedly
stated that the first compliance period does not have to be met until March 2013.
It is my understanding however, that the allowances that would cover emissions
from January 1, 2012, to December 31, 2012, would be due to EPA in March
2013. Is this correct? Please clarify what you mean when you say the compliance
period does not have to start until March 2013.
A2. On December 30, 2011, the U.S. Court of Appeals for the District of Columbia
Circuit stayed the Cross-State Rule pending resolution of litigation challenging it.
The Court order imposing the stay did not discuss the merits of the challenges. EPA
believes the Cross-State Rule is legally sound and will continue defending it vigorously. While the stay is in effect, power plants will not have to comply with the
Cross-State Rule until the stay is lifted. Pursuant to the Courts order, the Clean
Air Interstate Rule (CAIR), which was to be replaced by the Cross State Rule as
of January 1, 2012, is now in effect.
Q3. During the hearing, you stated that the Cross-State Air Pollution Rule was designed with the same market flexibility as the CAIR rule. It was my understanding that the market mechanism used in the CAIR rule was part of the reason the rule was vacated in the first place. Please describe the market mechanisms in both the CAIR and CSAPR rules and explain how they are the same.
A3. CSAPR maintains a trading system like CAIR, but CSAPR has greater limits
on trading starting in 2014. This addresses the D.C. Circuit Court concern that
CAIR did not provide adequate assurance that the required reductions would occur
within each State, but did not prohibit all emissions trading. In response to the
court ruling, EPA established assurance provisions to guarantee that, in each State,
the emissions that significantly contribute to downwind air quality problems will be
eliminated. The CSAPR assurance provisions limit the total number of allowances
that each State can use for compliance by imposing a penalty on sources whose
emissions cause a State to exceed its budget by more than an allowed variability
limit. But like CAIR, the CSAPR maintains the flexibility of trading, which promotes innovative emission reduction strategies and builds on a highly successful
market-based approach familiar to the power sector. Over the past 15 years, trading
programs have achieved dramatic SO2 and NO2 emission reductions at a fraction
of expected cost and with nearly perfect compliance. Similar to CAIR, the emissions
reporting and tracking systems under CSAPR will support an active allowance market by providing quarterly data, the wide distribution of allowances among numerous entities, and overall recognition of the benefits of trading due to differentiated
compliance costs.
Q4. In his September 11, 2011, letter to David Campbell, the EPA Deputy Administrator stated that, EPA has offered to make technical adjustments . . . that will
give Texas and Luminant thousands of additional tons of pollution allowances
to reduce required emissions reductions. Can you describe the technical adjustments referenced in the letter?
A4. On February 7, 2012, the EPA finalized technical changes to CSAPR that will
facilitate compliance by Texas power plants. In developing CSAPR, the EPA relied
on information, in many cases submitted by power plant operators or accessible in
public documents, about the operation of certain power plants in Texas. After we
finalized the rule, EPA became aware of information updating, correcting, or completing the earlier information. This allowed the agency to identify data discrepancies and to remedy those discrepancies. Accordingly, on February 7, 2012, EPA
finalized technical adjustments that result in an approximately 50,000 ton increase
to Texas SO2 budget and small increases to both Texas ozone season NO2 and annual NO2 budgets with corresponding revisions to assurance levels and new unit
set-asides. In addition to the increase in the number of allowances that Texas power
plants will receive, EPA finalized adjustments to increase a companys menu of compliance options by allowing sources to use an unlimited number of interstate allowances for compliance in 2012 and 2013. This was designed to provide greater assurance that the allowance trading market will continue to develop rapidly. The technical changes are substantial for Texas, although overall they maintain the exten-
91
sive public health benefits of CSAPR and do not change the core elements or fundamental structure of the rule.
Q4b. Are these technical adjustments and additional allowances available to any
other State or utility that inquires?
A4b. EPA conducted a notice-and-comment rulemaking allowing all parties to submit relevant information, and based on additional information provided by commenters, EPA finalized adjustments affecting multiple state budgets.
Q4c. It is our understanding that the allocations will not be drawn from other
States budgets. Can you describe from where the additional allowances are to
be drawn?
A4c. The technical corrections created additional allowances. They were not drawn
from other States budgets.
Q4d. Finally, can you discuss the impact that the allocation of these allowances
would have on emissions budgets throughout the program?
A4d. The finalized revisions will not affect the significant air quality improvements
slated to occur under CSAPR, nor will they undermine CSAPRs goal to reduce
interstate transport of pollution to help downwind States in their efforts to attain
and maintain the National Ambient Air Quality Standards (NAAQS). While individual State adjustments vary, overall, the budget increases are slightabout one
percentwhen compared to the millions of tons of pollution reductions secured by
CSAPR.
Q5. The final CSAPR rule describes the costs of the rule as the retirement of smaller
or less efficient EGUs, employment shifts as workers are retrained at the same
company or reemployed elsewhere in the economy, and certain relatively small
permitting costs. In laymans terms, these costs are better known as plants
being closed and workers being laid off. Given our Nations struggle to create
jobs, what gives the EPA the confidence to claim that workers who lose their jobs
as a result of this rule will be re-employed elsewhere in the economy? Could
you give this Committee some examples of where your agency identified job opportunities for these workers?
A5. In Appendix D to the Regulatory Impact Analysis, 1 EPA estimates the shortterm job effects of the CSAPR. EPA anticipates that there will be increased jobs due
to increased demand for pollution control equipment and reductions in labor demand due to retirements of generating units and changes in demand for fuels. EPA
estimates a short-term increase in job-years demanded (due to new pollution controls) of 2,230 job years in 2014 due to CSAPR. A job-year is defined as the amount
of work that can be completed by a full-time individual for one year. Most of these
jobs are expected to last over an extended period of time, although some jobs last
longer than others. For example, the production and installation of pollution control
equipment due to anticipated requirements will likely increase construction demand
labor, resulting in short-term employment that could last a few years. Operational
jobs needed to operate the pollution control equipment are likely to be longer term.
As shown in the Regulatory Impact Analysis, EPA estimates longer-term changes
in employment within the electric power sector to range from 1,000 fewer jobs each
year relative to baseline to 3,000 more jobs, with a best estimate of 700 additional
jobs.
Utilities often seek to reassign employees that have been displaced due to a plant
closure. For example, South Carolina Electric & Gas (SCE&G) recently announced
a plan to retire some coal units and repower some coal units to natural gas. SCE&G
will assist affected employees in looking for other positions within the company. 2
In addition, the natural gas repowering and pollution control installations at
SCE&G facilities will result in both short- and long-term employment opportunities.
Q6. The final rule states that a stand-alone analysis of employment impacts is not
included in a standard cost-benefit analysis. However, the rule also states that
the need to hire labor and expertise to implement new pollution controls will
generate an additional 2,250 jobs in 2014. Where does EPA believe the funds
1 Regulatory Impact Analysis for the Federal Implementation Plans to Reduce Interstate
Transport of Fine Particulate Matter and Ozone in 27 States; Correction of SIP Approvals for
22 States. U.S. EPA Office of Air and Radiation. June 2011. Available at: http://www.epa.gov/
airtransport/pdfs/FinalRIA.pdf.
2 http://www.sceg.com/en/news-room/current-news/sceg-announces-plans-to-retire-a-portionof-its-coal-fired-generation.htm.
92
will come from to pay for this new labor and expertise, and wont these costs
be passed on to consumers in the form of higher electricity prices?
A6. As shown in the RIA for the final CSAPR, the EPA estimates the annual costs
of the rule to be approximately $0.8 billion in 2014. These costs include the cost of
hiring additional labor to implement new pollution controls. On average, the EPA
estimates that electricity rates paid by consumers may increase in the region affected by the CSAPR by 0.8 percent by 2014 due to this regulatory action. This electricity rate increase is associated with increased health and environmental benefits
to society that range from $120 to $280 billion annually (in 2007 dollars) by 2014.
These health and environmental benefits to society vastly outweigh the costs of implementing this rule.
Q7. In the past, you and EPA Administrator Lisa Jackson have claimed that
CSAPR and related rules have included an analysis of electric reliability, as
well as consultations with FERC. However, when FERC Chairman Jon
Wellinghoff testified in front of Congress, he emphasized that their informal assessment in no way should be used for planning, and that the only relevant
assessments are conducted by planning authorities like ERCOT. How has
ERCOTs breakdown of the massive reliability concernsincluding rotating outagesbeen included in EPAs CSAPR decision-making?
believes the Cross-State Rule is legally sound and will continue defending it vigorously. While the stay is in effect, power plants will not have to comply with the
Cross-State Rule. Pursuant to the Courts order, the Clean Air Interstate Rule
(CAIR), which was to be replaced by the Cross-State Rule as of January 1, 2012,
is now in effect.
As to concerns about reliability for future years, EPAs analysis of the Cross-State
Rule shows that Texas power plants can meet this rules emission reduction obligations while maintaining a healthy annual capacity reserve margin above the planning target established by the ERCOT. EPA carefully examined the economic and
electricity impacts of including Texas in the CSAPR programs for annual SO2 and
NO2 reductions in the final rule. Our conclusions are in keeping with the past 40
years of Clean Air Act experience, which has seen our country make tremendous
improvements in public health while simultaneously maintaining economic growth
and ensuring reliability. We share your concern over reliability issues facing
ERCOT, but we find no evidence that they would have to choose between clean air
and air conditioning. Texas will be able to provide cleaner air to its residents and
to downwind States under this rule while also maintaining economic growth.
EPA does not believe that the CSAPR rule will lead to a greater likelihood of
blackouts next summer. Nor do we believe the CSAPR rule requires Texas plants
to shut down in 2012. We have closely examined the ERCOT report in terms of the
number of megawatts ERCOT expects to be offline as a result of the CSAPR rule
and of ERCOTs assessment of what the impact would have been if those megawatts
had not been available over the past summer. It is important to recognize, however,
that the ERCOT report made no prediction of the likelihood of blackouts next summer, and does not revise their projection of an adequate reserve margin for 2012.
Moreover, ERCOT has other options for maintaining grid reliability including bringing some of the mothballed plants back into service for next summer, which they
have done, and pursuing their initiatives to expand existing programs for demand
reduction. It is clear to us that there are multiple tools available to ensure adequate
grid reliability while securing the clean air benefits of the CSAPR rule.
Q8. The State of South Carolina has asked the Federal Energy Regulatory Commission to convene a State-federal panelcalled a section 209 panelto resolve specific reliability problems likely to result in that State because of the new EPA
power-sector rules. Federal law allows for this type of dialogue in order to order
to ensure adequate planning has occurred in advance of federal policy developments. Are you aware of this? Will EPA delay the implementation of CSAPR and
related rules UNTIL this dialogue is complete?
A8. FERCs response to this petition is within FERCs authority and discretion. At
this point we cannot know whether FERC will respond to this petition or in what
time frame. In any event there is nothing in the petition that warrants any delay
in the implementation of CSAPR or related rules. Based on its analysis, EPA does
not believe that these rules will have any significant adverse effect on electricity reliability. There are numerous tools that can avoid localized reliability problems,
93
should they arise, including both demand-side and supply-side resources that can
be used. In addition, the Clean Air Act itself authorizes mechanisms that can bring
sources into compliance and ensure electricity reliability. For example, under EPAs
Mercury and Air Toxics Standards (MATS), the Clean Air Act provides three years
for all sources to comply; a fourth year as needed to complete installation of control
technologies; and a pathway for reliability-critical sources to obtain up to a fifth
year if unable to complete necessary retrofits or transmission upgrades by that time.
Questions Submitted by Representative Paul Broun
Q1a1c. At the hearing, I asked you if EPA reached out to State regulators and public utility commissioners on the details of the final cross-State rule before
it was issued. I asked you to provide such information for the record. (a)
Please provide the dates and names of the contacts of all the State regulators EPA met with during each stage of the rules promulgation. (b) Please
provide the dates and names of the contacts of all the Public utility commissioners EPA met with during each stage of the rules promulgation. (c)
Please provide the dates and names of the contacts of all the companies
EPA met with during each stage of the rules promulgation.
A1a1c. As part of the development of regulations, EPA seeks to invite public comment from all interested stakeholders. State agencies are among the important constituencies that we reach out to. In developing the power plant rules, EPA reached
out to PUCs on several occasions, including the following:
In December of 2009, Gina McCarthy travelled to Dallas to give a keynote address at the winter meeting of the National Association of Regulatory Utility
Commissioners, (NARUC) an association comprised of the Commissioners from
utility regulatory bodies in each State. In her talk, Ms. McCarthy spoke about
the upcoming power plant rules and the role that the PUCs would play in implementation.
At that meeting, Ms. McCarthy also spoke at a breakfast for interested State commissioners in more detail about these subjects.
EPA participates in the Eastern Interconnection States Planning Council (EISPC).
EISPC represents the 39 states and eight Canadian Provinces located within the
Eastern Interconnection electric transmission grid. EPA staff gave a presentation on
August 26, 2010, entitled EPAs Power Sector Rulemakings.
In February 2011 at a NARUC winter meeting in Washington, DC, Ms. McCarthy
spoke about the rules that would become CSAPR and MATS in some detail. She
talked about the role that the State Commissioners would play in implementation
of the rule including encouraging energy efficiency and demand response as a part
of implementation, and encouraging early planning and action on the part of the
power generating companies to assure timely compliance.
Ms. McCarthy also participated on a panel discussion for an audience of State regulators at the National Electricity Forum sponsored by NARUC and DOE on the
impact of environmental regulations on the electricity system.
EPA staff participated in two Webinars sponsored by NARUC for State commissioners and their staffs. The purpose was to brief them on the power plant rules
and to take their questions. These were held on September 24 and October 15 of
2010.
On August 30, 2011, EPA, in conjunction with DOE, organized a Webinar for
State utility commissioners, air offices and energy offices in the Southeast to discuss
EPA rules for the power sector.
EPA staff also participated in a series of three meetings organized by the Bipartisan Policy Center in conjunction with NARUC and Northeast States for Coordinated Air Use Management (NESCAUM) on the power sector regulations that were
under development.
EPA did receive comments from some PUCs on CSAPR and from others on MATS.
NARUC submitted comments on MATS as well.
We have also heard from local governments at hearings and in the public comment process. And we have reached out to the public power providers, which include
municipal power providers. This effort has been ongoing beginning with meetings
that Ms. McCarthy hosted early on in her tenure at EPA.
94
Questions Submitted by Representative Dana Rohrabacher
Q1a. You stated during questioning about Luminants decision to close several lignite mines that we believe [they] havent thoroughly looked at all of their options. Please provide the analysis EPA conducted to determine that Luminant
had not thoroughly looked at all of their options.
A1a. IPM, the electricity dispatch model used by EPA for analysis of CSAPR, is
a multi-regional, dynamic, deterministic linear programming model of the U.S. electric power sector that generates optimal decisions. It determines the least-cost
method of meeting energy and peak demand requirements over a specified period
of time.
Luminant will make business decisions regarding compliance and operation in
light of the rule. However, in addition to the optimal least-cost solution for Texas,
we examined options that do not involve switching from lignite to lower sulfur subbituminous coal and found that cost-effective compliance is still achievable. In this
complementary analysis, EPA constrained Texas units from increasing their blending of sub-bituminous coal beyond the level each unit reported to EIA for 2010.
Under these conditions, Texas is still projected to meet its 2012 SO2 assurance level
using other cost-effective emission reduction strategies, including greater dispatch
from lower-emitting generators, while still maintaining 2010 lignite blending levels.
Q1b. Why does EPA believe it knows how to run a utility company better than those
currently running it?
A1b. EPA has not claimed that it should serve as a substitute for utility decisionmaking. In fact, the opposite is trueEPA has stressed that compliance and operational decisions are left entirely to the utilities, and EPA has designed CSAPR with
ample flexibility to account for a variety of compliance strategies. However, EPA
does have information about utility facilities and is in a position to make observations about potential feasible compliance options. In addition to EPA, other organizations such as UBS Securities have evaluated Luminants options and concluded
that the utility could comply with CSAPR without closing its coal-fired power
plants. UBS Securities says, We reiterate our belief Texas reliability is not threatened by CSAPR as we do not believe material capacity will be retired. 3
Q1c. Please list the names of all EPA employees who have the expertise running a
utility who would be able to make the determination that Luminant had not
thoroughly looked at all of their options.
A1c. See response to 1b.
Questions Submitted by Representative Randy Neugebauer
Q1. You stated at the hearing that EPA had to look at pre-CAIR data because the
Court vacated the rule and EPA needed to replace it. Please identify the exact
part of the CAIR ruling that stated that EPA had to base the replacement regulation with the assumption that CAIR had never taken place.
A1. The Court determined that CAIR was fatally flawed and could remain in effect
only as a stopgap measure until EPA could act to replace it. Thus, unlike most other
regulatory requirements, the emission limitations contained in CAIR are only temporary. Moreover, the duration of these limitations is directly tied to CSAPR.
CSAPR replaces CAIR. Thus, CAIR itself will be terminated for the SO2, annual
NO2, and ozone-season NO2 control periods when the emission limitations established in the final CSAPR for those control periods take effect. For this reason,
emission reductions made to comply with CAIR cannot be treated as if they were
emission reductions achieved to comply with rules and other enforceable requirements that establish permanent emission limitations. EPA takes reductions made
to comply with permanent limitations into consideration when quantifying each
states baseline emissions for the purpose of analyzing whether its emissions significantly contribute to nonattainment or interfere with maintenance in another state.
However, the unique legal status of CAIR and its replacement with CSAPR distinguish the emission reductions required by CAIR from those of other regulatory requirements. Since the limitations and emission reduction requirements in CAIR are
temporary and will be terminated by CSAPR, they must be excluded from CSAPRs
base case analysis. EPAs analysis properly recognized that, after CAIR is terminated, the emission limitations imposed by CAIR will cease to exist.
3 Analysts doubt Luminants need to shut plants; available online: http://www.chron.com/
business/energy/article/Analysts-doubt-Luminant-s-need-to-shut-plants-2175119.php.
95
On December 30, 2011, the U.S. Court of Appeals for the District of Columbia Circuit stayed the Cross-State Rule pending resolution of litigation challenging it. The
Court order imposing the stay did not discuss the merits of the challenges. EPA believes the Cross-State Rule is legally sound and will continue defending it vigorously. While the stay is in effect, power plants will not have to comply with the
Cross-State Rule until the stay is lifted. Pursuant to the Courts order, the Clean
Air Interstate Rule (CAIR), which was to be replaced by the Cross-State Rule as
of January 1, 2012, is now in effect.
Q1a. Doesnt the fact that the Court stated EPA could keep CAIR in place until a
replacement rule was finalized oppose the argument that the Court intended
EPA to promulgate a replacement rule as if the original CAIR rule was never
implemented?
A1a. See response to 1.
Q2a. In the hearing, when I was asking you about the Courts decision to remand
the CAIR rule and if the Court had said you could not take into account the
gains made under CAIR, you stated that you did not know what context we
would take credit for gains or not. The gains I was referring to were the gains
made in reducing pollution under the CAIR rule. Did EPA take into account
the significant amount of reductions in pollution attributable to CAIR compliance or not?
A2a. See response to 1.
Q2b. Did EPA start modeling runs from the current or most recent three years of
monitoring data when determining what current emission levels were like and
how much needed to be reduced?
A2b. EPA used monitoring data for the period 2003 through 2007 as the starting
point for projecting ozone and PM2 concentrations to 2012 and 2014. The air quality
projections were based on modeling of 2005 base-year emissions and 2012 and 2014
forecast emissions. The 2012 and 2014 base-case emissions account for reductions
associated with all existing enforceable State and federal emissions control programs (with the exception of CAIR), consent decrees, and known plant closures. The
rationale for EPAs methodology for projecting future air quality is described in the
CSAPR preamble.
Q3a. You stated that EPA is using a combination of both current monitoring data
as well as modeling data to understand what the world would have looked like
without CAIR because the world will be without CAIR when the cross-state rule
comes in place. Does this mean EPA assumed that every power plant that installed pollution control equipment will automatically turn it off or dismantle
it so their emissions would mimic what they were before CAIR was in place?
A3a. EPA assumed that control equipment would still exist but that the statutory
requirements of CAIR to reduce emissions and operate the controls would no longer
be in effect.
Q3b. If this was not EPAs assumption, please provide an explanation as to why
EPA believed it needed to model the emissions of these plants in the absence
of CAIR, or rather, as if CAIR never existed.
A3b. See response to 1.
Q4a4d. At the same time, you also stated that EPA modeled what those monitors
would have looked like using both information from the monitor itself as
well as our modeling data to make those adjustments. (a) Does this mean
that EPA used modeling data, and hypothetical data of what EPA assumed
emissions would have been without CAIR based on 2005 monitoring data,
and put that into a model in order to come up with a state budget? (b) Is
using data that results from another model, rather than a monitoring station an acceptable, peer-reviewed practice? (c) Please provide the EPA protocols that permit the use of modeled data as an input for another model instead of the use of current, monitoring data. (d) Please provide the references in the scientific literature that peer reviews and endorses the concept of using modeled data as an input for another model rather than data
obtained through monitoring.
A4a4d. The use of meteorological and emissions models to provide inputs to air
quality models is a well-established practice. EPA and States have been using models to inform and support air quality decisions for many decades. EPA uses models
in the development and evaluation of regulations, and they are used by State air
96
pollution control agencies in the development of State Implementation Plans for attainment demonstrations. Models are needed in order to determine air quality concentrations and source contributions for future time periods as well as to determine
the expected air quality impacts of particular emissions control scenarios. In addition, models are needed to assess the impacts on air quality expected from emissions
control scenarios, like CSAPR.
EPA used monitored air quality during the period 2003 through 2007 coupled
with air quality photochemical modeling for 2005 and 2012 to calculate eight-hour
ozone concentrations and annual and 24-hour PM2 concentrations for the CSAPR
2012 baseline. This air quality modeling, in part, relied upon inputs from emissions
forecasts for electric generating units (EGUs) and onroad and nonroad mobile
sources that were based on emissions models specific to each of these sectors. The
air quality projections for 2012 were used to identify monitoring sites that are expected to be nonattainment and/or have maintenance problems for the ozone or particulate matter NAAQS in 2012 without the emission reductions from CAIR.
Upwind States that contribute one percent or more of the NAAQS to 2012 nonattainment and/or maintenance sites were considered for State budgets as part of
CSAPR. To determine the State emission budgets, EPA identified a cost threshold
of $500/ton for ozone-season nitrogen oxides (NO2) control for all States required to
reduce ozone-season NO2 emissions. EPA also identified a cost threshold of $500/
ton for annual NO2 control for all States required to reduce annual NO2 emissions
and a cost threshold of $500/ton of sulfur dioxide (SO2) starting in 2012 for all
States required to reduce SO2 emissions and $2,300/ton for the Group 1 States starting in 2014. EPA used these cost thresholds to quantify each States emissions that
significantly contribute to nonattainment or interfere with maintenance of the
NAAQS downwind. Using the Integrated Planning Model (IPMv4.10) to model EGU
emissions, EPA based State emission budgets on the State level emissions that remained at the corresponding cost thresholds.
Current monitoring data alone cannot be used to determine future air quality. A
key consideration in our projection methodology is the use of monitoring data to anchor the design value projections to the future. The modeling is used in a relative
sense by multiplying the modeled percent change in ozone or PM2 species concentrations by the base-year monitoring data. The protocols for this type of air quality
modeling approach are described in the EPA guidance document: Guidance on the
Use of Models and Other Analyses for Demonstrating Attainment of Air Quality
Goals for Ozone, PM2, and Regional Haze (EPA, 2007 http://www.epa.gov/ttn/
scram/guidance/guide/final-03-pm-rh-guidance.pdf ). EPA and States have been
using the recommended projection methodology for national rules and State ozone
and PM2 SIPs over the last decade. The following published papers further describe
and evaluate methods for coupling modeling and monitoring data to project the impacts of emissions changes on air quality.
2001: Hogrefe, C. and S.T. Rao, Demonstrating Attainment of the Air Quality
Standards: Integration of Observations and Model Predictions into the Probabilistic
Framework. J. Air Waste Manag. Assoc., 51, 106010722.
2004: Sistla, G., C. Hogrefe, W. Hao, J.-Y. Ku, E. Zalewsky, R.F. Henry and K.
Civerolo, An Operational Assessment of the Application of the Relative Reduction
Factors (RRF) in Demonstration of Attainment of the 8-hr Ozone National Ambient
Air Quality Standard (NAAQS). J. Air Waste Manag. Assoc., 54, 950959.
2005: Jones, J.M., C. Hogrefe, R.F. Henry, J.-Y. Ku, and G. Sistla, An Assessment of the Sensitivity and Reliability of the Relative Reduction Factor (RRF) Approach in the Development of 8-hr Ozone Attainment Plans, J. Air Waste Manag.
Assoc., 55, 1319.
2008: Hogrefe, C., K.L. Civerolo, W. Hao, J.-Y. Ku, E.E. Zalewsky, and G. Sistla,
Rethinking the Assessment of Photochemical Modeling Systems in Air Quality
Planning Applications, J. Air Waste Manag. Assoc., 58, 10861099.
2010: Yunhee Kim, J.S. Fu, T.L. Miller, Improving ozone modeling in complex
terrain at a fine resolutionPart II. Influence of schemes in MM5 on daily maximum 8-h ozone concentrations and RRFs (Relative Reduction Factors) for SIPs in
the nonattainment areas, Atmospheric Environment, Vol. 44, Issue 17, Jun 2010,
pg 21162124.
Questions Submitted by Representative Michael McCaul
Q1. During the hearing, I stated that I was concerned that EPA was treating Texas
unfairly, a concern you essentially said was unfounded. How many States received a State budget to comment on in the proposed transport rule? Was Texas
97
given a State budget to comment on in the proposed transport rule? How does
EPA consider its treatment of Texas to be fair when all the other States in the
proposed rule did in fact, receive a State budget?
A1. EPA did explicitly request comment on the option of including Texas in the
final rule. While Texas was not included in the State budget tables in the proposal,
Texas sources had the same information as other sources on how EPA was designing the final rule, including how downwind receptors would be addressed, what level
of emissions constitutes significant contribution, what remedy EPA would and
should be using for reducing emissions contributing significantly to poor air quality
downwind, how allowances should be allocated, and all other key issues. In fact, the
Agency received comments on the proposed rule and associated notices of data availability from Texas sources, regulators, and the Texas Commission on Environmental
Quality (TCEQ) that are comparable to comments received from other States agencies and sources. EPA responded to those comments by updating our data and improving our modeling, just as we did in response to comparable comments from
other States and sources. The comments submitted by Texas stakeholders on EPAs
emissions inventory are the basis of the final rules approach on Texas, including
the Texas State budgets included in the final CSAPR. The transparent presentation
of methodologies and data for all States, including Texas, demonstrated how EPA
determined State reduction requirements in the proposal. Texas and individual companies like Luminant had all the data used by EPA to calculate State budgets and
they could (and did) use that information to determine what Texas budget would
have been under the proposal.
Q2. You stated that Iowa, Kansas, Michigan, Missouri, Oklahoma, and Wisconsin
were provided a supplementary notice on their inclusion in the rule based on
new data. Was EPAs decision to include Texas in the annual programs in the
finalized rule based on new modeling information that was not included in the
draft rule? If so, how come EPA does not treat the new modeling information
that determined Texas inclusion the same as the new data that is determining
these other six States inclusion?
A2. The new data that necessitated that a supplementary notice be made for Iowa,
Kansas, Michigan, Missouri, Oklahoma, and Wisconsin was that the States were
given no notice that their ozone-season NO2 emissions could lead to ozone pollution
contributions at, or above, the one percent contribution threshold to one of two specific receptor-monitors in either Allegan, MI, or Harford, MD. These monitors were
newly identified in the air quality modeling for the final rule to have problems
maintaining the NAAQS in the final. These monitors were estimated to be in attainment with the NAAQS in the air quality modeling for the proposal. In addition,
for several of the States, specifically, Missouri, Iowa, and Wisconsin, they were not
modeled to contribute to any receptors in the proposal that had difficulty attaining
or maintaining the NAAQS. The receptors that Oklahoma, Kansas, and Michigan
contributed to in the proposal were modeled to be in attainment in the final.
This contrasts with Texas, where the public was able to identify the specific receptor-monitor that Texas contributed to in both the proposed and final rules. This
monitor was consistently modeled to have problems attaining and maintaining the
NAAQS in both the proposal and the final rule. In both the proposal and final rule,
the maximum annual PM2 contribution from Texas to a nonattainment and/or maintenance receptor was to this monitor. In the proposal, EPA identified that under the
remedy control scenario that emissions from Texas could lead to the contribution
from Texas exceeding the threshold. In the proposal, EPA specifically took comment
on whether Texas should be included in the rule. In the final rule, as a result of
comments made by the public, the base case SO2 emissions from Texas were modeled to be at levels near the level of the proposed remedy control scenario. Thus,
it is not surprising that in the final air quality modeling that Texas contribution
is at, or above, the one percent contribution threshold to the specific receptor.
Questions Submitted by Representative Steven Palazzo
Q1. The Clean Air Act is based upon cooperative federalism, a model that involves
the Federal Government setting basic air standards and the States developing
specific State Implementation Plans. According to The Plain English Guide to
the Clean Air Act from your website, It makes sense for State and local air
pollution agencies to take the lead in carrying out the Clean Air Act. They are
able to develop solutions for pollution problems that require special understanding of local industries, geography, housing, and travel patterns . . . Why
98
cant States develop their own State Implementation Plans for this rule for
2012?
While the stay is in effect, the EPA will not be implementing the Rule, and power
plants will not have to comply with it until the stay is lifted. Pursuant to the
Courts order, the Clean Air Interstate Rule (CAIR), which was to be replaced by
the Cross-State Rule as of January 1, 2012, is now in effect. The Court order imposing the stay did not discuss the merits of the challenges. EPA believes the CrossState Rule is legally sound and will continue defending it vigorously.
Q2. In their Regulatory Impact Analysis for this rule, EPA admits that [i]n the
short run . . . industries are able to pass on $0.7 billion (in 2007 dollars) of the
Transport Rules costs to U.S. households in the form of higher prices. They
also admit that the rule will make U.S. products less competitive, in acknowledging that as [t]he price of goods produced in the United States increase, domestic exports decline, and domestic production is replaced to a certain degree
by imports. Does this Administration condone a rule that will punish the only
bright spot in our economyexportsand increases consumer costs?
A2. EPA carefully considered the economic impacts of the CSAPR in developing the
rule and developed a detailed in-depth Regulatory Impact Analysis (RIA) 4 for this
rulemaking outlining the benefits, costs, and economic impacts anticipated for this
rule. It is necessary to look at the total picture of economic consequences expected
for the rule to make an assessment of impact to consumers and the economy. In
the RIA, EPA reports that the monetary estimates of public health benefits for the
CSAPR range from approximately $120 to $280 billion annually while the annual
costs of the rule to society are approximately $0.8 billion in 2014, indicating that
this regulation is providing public health benefits that vastly outweigh its costs.
Residents of the affected areas of the U.S. will benefit from decreased premature
mortalities, fewer hospital admissions for cardiovascular and respiratory ailments,
a drop in emergency room visits for asthma, a reduction in school and work loss
days, and a variety of other health benefits, as well as improvement in visibility in
the areas where people live, work and play.
The EPAs economic analysis suggests that the $0.8 billion costs of the rule will
be shared by households, in the form of higher-priced electricity rates, and by producers in terms of reduced production. However, it is important to recognize that
these market impacts are relatively small for this rule. For example, consumers on
average will experience an increase of 0.8 percent in retail electricity prices in the
region benefitting from the CSAPR in 2014. While the small projected increase in
electricity prices may have some effects on the economy in terms of secondary market impacts, these impacts are expected to be minimal, given how small the price
effects are. The impacts on exports in particular are expected to range from a decline of 0.001 percent (one one-thousandth of one percent) for the transportation sector to a decline of 0.009 percent (nine one-thousandths of one percent) for the nonmetallic minerals sector annually.
Questions Submitted by Representative Randy Hultgren
Q1. I understand there will not be tangible environmental benefits (separate from
CAIR) from the Rule until 2014. Is that correct?
believes the Cross-State Rule is legally sound and will continue defending it vigorously. While the stay is in effect, the EPA will not be implementing the Rule, and
power plants will not have to comply with it until the stay is lifted. Pursuant to
the Courts order, the Clean Air Interstate Rule (CAIR), which was to be replaced
by the Cross-State Rule as of January 1, 2012, is now in effect.
Benefits of CSAPR will begin immediately upon implementation and will be realized in every year that CSAPR reduces emissions. Beyond reducing emissions from
the no-CAIR baseline immediately, the rule will expedite emissions reductions as
owners and operators make immediate investments to prepare for 2014 and beyond.
4 Regulatory Impact Analysis for the Federal Implementation Plans to Reduce Interstate
Transport of Fine Particulate Matter and Ozone in 27 States; Correction of SIP Approvals for
22 States. U.S. EPA Office of Air and Radiation. June 2011. Available at: http://www.epa.gov/
airtransport/pdfs/FinalRIA.pdf.
99
EPA did not estimate the benefits for years prior to 2014, but the Agencys emissions modeling for CSAPR shows greater emission reductions in 2012 than 2014 due
to baseline emissionsemissions from which the rule is able to reducebeing higher in 2012 than 2014. Therefore, the health benefits in 2012 would be larger than
the estimated annual benefits for 2014 of $120 to $280 billion.
Q2. Under the Rule, many companies get far more allowances between 201213 than
they need to operategiving them a windfall profit. How does giving windfalls
to certain companies help the environment?
A2. The level of emissions is what provides environmental and human health benefits, not the allocation of allowances. Once the emissions levels are determined, the
allocation of allowances is simply an accounting exercise that makes implementation
possible. In other words, allowances are the currency used for trading program implementation, but their distribution has no bearing on environmental protection.
Regarding whether certain entities receive far more allowances than they need
to operate the allocation method utilized in the rule limits the allocations allotted
to any individual unit based on historic emissions. In other words, no unit receives
more emission allowances than the amount that would cover their historic emissions. Due to this limitation, sources are not provided far more emission allowances
than they could reasonably emit.
Q3. Some companies get far fewer allowances between 201213 than they need. How
does that help the environment?
A3. See response to 2.
Q4. How many coal plants do you expect to shut down because of this Rule? What
kind of analysis on consumer price impacts has EPA done on the Final Rule?
A4. Because of the flexibility afforded under CSAPRs market-based, allowance
trading system, this rule does not force retirements nor does it require specific control strategies. Retiring a plant is a business decision made by plant owners and
operators based on a range of market forces. EPA analysis indicated that sources
could meet both the annual and ozone-season requirements in 2012 by running existing controls (or those expected to come online in the near future), making changes
in dispatch (how electricity is distributed across units at a facility) including shifting
generation from higher-emitting units to lower-emitting units, fuel switching, or
buying allowances. For NO2 requirements, EPA also projected some retrofitting of
low NO2 burners, installation of overfire air systems, and making combustion control improvements. EPA projected that approximately 4.8 GW of additional coalfired generation may be removed from operation by 2014 with CSAPR, a small portion of the more than 300 GW of total coal capacity and 1,100 GW of installed capacity expected to be online by 2014. Units taken out of service are typically the least
efficient and oldest units that are operated infrequently.
EPA used a multimarket partial equilibrium model to estimate the economic impacts of the rule to industry sectors outside the electric power industry and social
costs, including electricity prices, associated with the rule. See Chapter 8 of the Regulatory Impact Analysis for more detail: http://epa.gov/crossstaterule/pdfs/
FinalRIA.pdf.
Q5a5b. CSAPR is one of a number of rulemakings which power generators will simultaneously be forced to comply with between 2012 and 2016. Has EPA
done an analysis of the costs of the numerous regulations; its impact on
prices for electricity; and the impact of the additional natural gas which
utilities will need to use to keep the lights on? (a) If not, given the disparate impact the higher prices for electricity and natural gas and the disparate impact on those least able to absorb price increases as seniors and
minorities, dont you think the Congress is entitled to know the cumulative
cost, and would you recommend that the Administration support the
TRAIN Act? (b) If not, please have your staff compile a cumulative analysis
on the effects of those rules and share it with this Committee.
A5a5b. For each rulemaking that the Agency undertakes that exceeds a certain
cost, the EPA is required to perform a detailed cost-benefit analysis to support any
particular regulatory action. This analysis includes a detailed assessment of the estimated economic impacts and benefits. A draft Regulatory Impact Assessment
(RIA) is presented and available for public comment at the time a proposed rule is
issued. As each rule is promulgated and finalized, we incorporate the emission reductions into the baseline for our analytical efforts, to the extent that it is feasible
and practicable to do so. For example, the RIA for MATS incorporates the estimates
100
from the final CSAPR into its baseline, so that estimated impact of MATS could be
viewed beyond those of the proposed CSAPR.
In particular, EPA has conducted resource adequacy analyses within the context
of EPA air rules, which can be found in the RIAs and corresponding technical support documents. In the regulatory development process for the CSAPR and MATS,
EPA conducted extensive analyses on the impacts that these rules would have on
power generation incremental to baselines without these rules, including looking at
impacts on both the regional and national levels. On a Nationwide average, as
shown in the RIA for the final CSAPR, the EPA estimates that electricity prices
paid by consumers may increase incrementally over the baseline by 0.8 percent by
2014 due to this regulatory action. This electricity price increase is associated with
increased health benefits to society that range from $120 to $280 billion annually
(in 2007 dollars) by 2014. The annual costs of the rule to society, inclusive of electricity price increases, are approximately $0.8 billion in 2014. For MATS, EPA assessed the impacts of MATS implementation incremental to a baseline that included
the CSAPR. This assessment, as shown in the RIA for the final MATS, found that
on a Nationwide average, electricity prices paid by consumers may increase incrementally over the baseline by three percent by 2016. This price increase is associated with increased health benefits to society ranging from $37 billion to $90 billion
annually (in 2007 dollars) by 2016. The annual costs of the rule to society, inclusive
of electricity price increases, are approximately $9.6 billion in 2016. These analyses
indicate that these regulations will provide health benefits to society that vastly outweigh the costs of implementing these rules. Additionally, despite the minor incremental increase in electricity prices under these rules, electricity prices are estimated to be lower than 1990 levels and to stay well within normal historical fluctuations.
Questions Submitted by Representative Dan Lipinski
Q1. Could you quantify the percentage of the pollutants in Illinois that actually come
from other States? Can you estimate how much it would costs to clean these up
without looking at the out-of-State pollutants and compare that to the costs of
implementing the Cross-State Air Pollution Rule?
A1. As part of the development of the Cross-State Air Pollution Rule (CSAPR),
EPA quantified the contributions from SO2 and NO2 emissions to annual and 24hour PM2 at monitoring sites in Illinois that are projected, based on EPAs CSAPR
modeling, to be nonattainment or have maintenance problems in the 2012 base case
for either or both of these NAAQS. EPA calculated the contributions of sulfate and
nitrate particles at each of these receptors from SO2 and NO2 emissions in Illinois
as well as from SO2 and NO2 emissions in States upwind of Illinois, individually.
The percent of the total contribution to sulfate plus nitrate that is attributable to
emissions in upwind States at each projected 2012 PM2 nonattainment and maintenance site in Illinois is provided in the following table. Additional information on
these data can be found in the Air Quality Modeling Final Rule Technical Support
Document (http://www.epa.gov/crossstaterule/pdfs/AQModeling.pdf)
101
The CSAPR was promulgated under the good neighbor provision of the Clean
Air Act, which explicitly addresses emissions that are transported across State
boundaries, rather than local emissions. It is important to note that the emission
contributions shown in the table above could not be addressed through local controls
alone and the trading provisions included in the rule incentivize the regulated community to identify the most cost-effective compliance options available. EPAs analysis of the SO2 and NO2 reductions required under CSAPR found that these reductions are most cost effectively obtained from the power sector relative to the costs
of obtaining similar reductions from other source categories.
102
APPENDIX 2: ADDITIONAL MATERIAL
FOR THE
RECORD
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230

House Hearing, 112TH Congress - Out of Thin Air: Epa's Cross-State Air Pollution Rule

Uploaded by

Copyright:

Available Formats

House Hearing, 112TH Congress - Out of Thin Air: Epa's Cross-State Air Pollution Rule

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

House Hearing, 112TH Congress - Out of Thin Air: Epa's Cross-State Air Pollution Rule

Uploaded by

Copyright:

Available Formats

OUT OF THIN AIR:

EPAS CROSSSTATE AIR POLLUTION RULE

COMMITTEE ON SCIENCE, SPACE, AND

THURSDAY, SEPTEMBER 15, 2011

Serial No. 11235

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

Witness List .............................................................................................................

Appendix 1: Answers to Post-Hearing Questions

Appendix 2: Additional Material for the Record

OUT OF THIN AIR:

The Committee met, pursuant to call, at 9:34 a.m., in Room 2318

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

Out of Thin Air:

6 OMB Summary of Interagency Working Comments, Doc. EPA-HQ-OAR-2009-0491-4133

Chairman HALL. The gentlelady yields back her time. If there

Mr. SHAW. Thank you, Chairman Hall, Members. My name is

Integrated Planning Model.

Mr. STELLA. Mr. Chairman and Members of the Committee,

We collected and processed publically available EPA emission inventories for

Figure 3. Northeastern states SO2 emission trends.

Figure 5. Regional average annual PM2 design value trends.

Figure 6. Regional average 24-hour PM2 design value trends.

Summary and Conclusions

Mr. SMITHERMAN. Mr. Chairman, Ranking Member Johnson,

See Exhibit 1, slide 7.

76 Fed. Reg. 48208 (August 8, 2011).

Chairman HALL. Thank you. We now recognize our final witness

Mr. MERRIAM. Thank you, Chairman Hall and Ranking Member

8 NEEDS v.4.10 PTox Database http://www.epa.gov/airmarkets/progsregs/epa-ipm/docs/

Responses by Dr. Bryan W. Shaw, Chairman, Texas Commission on Environmental

You might also like