STATEMENT OF HON. JON S. CORZINE, U.S. SENATOR FROM THE STATE OF NEW

JERSEY

Mr. Chairman, Thank you for holding a hearing on this very important topic. As we are all aware, our nation's energy policy and our global environment are closely interconnected. That is why we must remain vigilant in ensuring that we pursue an energy policy that meets our short-term needs, while taking into account the legacy that we, as stewards of our nation's environment, leave behind.

I am particularly grateful that the witnesses appearing today have spent many long hours preparing to inform us and the public on this very important issue.

The air we breathe, the water we drink and the land upon which we live are precious resources. To that end, I hope that, in pursuing an energy policy, we keep in mind not only ways to keep those natural resources clean with existing sources of energy but also invest in finding newer, cleaner and renewable energy sources.

STATEMENT OF DR. ROBERT L. HIRSCH, MEMBER, BOARD OF THE ANNAPOLIS CENTER FOR SCIENCE BASED PUBLIC POLICY

Mr. Chairman and distinguished committee members: I am Dr. Robert Hirsch, a Member of the Board of the Annapolis Center for Science Based Public Policy, a non-partisan, not-for-profit study group. I am also chairman of the Board on Energy and Environmental Systems at the National Academies and a senior energy analyst at RAND. My experience is in energy technology management and analysis in both government and industry in many areas of energy technology. The views expressed here are my own and do not necessarily represent positions of my three affiliations. My messages to you today are as follows:

1. We are experiencing a new kind of U.S. energy crisis that has only begun, and we need to take decisive action.

2. There is no silver bullet to solve our problems.

3. The fundamental challenge that we face is balance, balance, and balance. The U.S. Energy Crisis

Why do I call this a new kind of energy crisis? It's because the problems are more complicated than an oil embargo or a Gulf war. Our challenges involve many different aspects of our very complex U.S. energy infrastructure. Furthermore, I believe that our problems will take upwards of a decade or more to fix. Why so long? Because the problems are large in number, scale, and cost, and because we are simultaneously working to reduce some of the remaining environmental, health and safety risks associated with our energy system.

By now you've probably heard enough about the electricity problems in California, the natural gas price spikes throughout the country, the heating oil problems in the Northeast, and the gasoline problems in the Midwest. These problems were predictable, and, indeed, there were some unheeded warnings along the way. Part of the reason that we are in such a pickle is that there was no one in the Federal Government responsible for the wellbeing of the U.S. energy system-no one with authority, responsibility and respect to warn us when potentially significant problems began to rear their ugly heads. The Department of Energy is responsible for nuclear weapons, environmental cleanup and, almost incidentally, energy. FERC is responsible for regulating various elements of interstate energy flows. The EPA is responsible for environmental care, and the States are responsible for energy matters within their borders.

The energy goose has been laying golden eggs for so long that energy is off the radar screen of most people, until we have the occasional trauma. Right now, we are seeing a number of traumas simultaneously, and there is reason to believe that there are more to come.

For instance, in addition to the problems I just mentioned, our oil refineries are running at near 100 percent capacity, and we have slowly been increasing our imports of refined products-adding another dependence on foreign sources. No new refineries have been built in the U.S. since the 1970's, and a number have been shut down. Furthermore, we are in the process of phasing out an important gasoline additive, MTBE, an action that will further reduce refinery production rates at a time when demand is continuing to increase. In addition, the EPA has mandated much lower levels of sulfur in gasoline and diesel fuels, necessitating significant new investments in refineries in both the U.S. and offshore to supply the U.S. with our increasing needs.

Refining is historically a low return-on-investment business, so many companies are naturally reluctant to invest the vast sums of money needed for mandated changes. Am I suggesting that we reduce our environmental goals? Most certainly

not. In my opinion, we must reduce sulfur levels in our fuels in order to further reduce air pollution. I just wish that we could accomplish our laudable goals with less acrimony.

How about siting and building the new electric transmission lines needed to deliver higher levels of electric power? That's a not-so-obvious problem in California and elsewhere. As you may know, siting new transmission lines has encountered interminable delays in many parts of the country and threatens to choke off higher power demands in a number of locations.

What about natural gas pipelines and petroleum product pipelines? Both are problems in many areas. Permits for new pipelines are tough to come by, and land for right-of-ways is increasingly expensive. At a meeting in New Orleans 2 weeks ago, a major oil company representative indicated that his company is using drag reducing agents in some of their pipelines because their pipelines are operating at full capacity. With petroleum product demands increasing, that indicates trouble ahead! And the list of energy problems goes on.

No Silver Bullets

If you want more electric power, you must build more power plants. Natural gas is clean and was very cheap until recently. Over 90 percent of planned new generation in the U.S. will be natural gas fired. In one sense, that's good because of the environmental attractiveness of natural gas generators with exhaust gas cleanup. In another sense, it's troubling because that mushrooming dependence on natural gas will make the country ever more vulnerable to future natural gas disruptions and price spikes. Analysts can run complex models that can demonstrate that overdependence on a single fuel will increase national vulnerabilities. But in fact it's common sense. For instance, if all your retirement money was in the NASDAQ over the past year, you'd have problems. If all your money was in bonds in the early 1990's, you would have missed some golden opportunities.

The answer isn't all gas or all coal or all nuclear or all renewables. Each has its strengths and weaknesses. For instance, many people don't realize that for large power loads, the popular renewables are simply fuel savers for other power plants, and so their ultimate contribution to U.S. energy needs will be limited, even after their costs are brought down further.

Energy efficiency is important and must be part of the equation. However, making a major difference in energy usage on a national scale would require much higher energy prices or heavy Federal Government intervention and a decade or more of large investments.

Be wary of anyone who tries to sell you a silver bullet in energy. There are none. A diversity of approaches is essential.

Balance, Balance, Balance

Where does all of this lead? To me, we need a better-balanced approach. We need a diversity of energy sources and energy efficiency, if we are to minimize our costs and vulnerabilities. However, that would likely require Federal intervention, which would not be universally welcomed.

And let's not forget energy research and development. Our Federal investments at DOE and its predecessor agencies have yielded very important technologies, some of which are in use today and others that are on the shelf, ready when we need them.

Also, it may be that we will need to be temporarily flexible on some of our nearterm environmental goals to help get us back on an even keel in energy. They're doing that in California now. However, I, for one, do not endorse turning permanently the clock back on pollution reduction.

Finally, let's not be afraid to have open honest dialog on our options. Every one of them has its advantages and disadvantages. Let's discuss our options objectively and strive to minimize the extremism and misinformation that so often characterizes such discussions. Let's put someone in charge of overseeing our nation's energy system, please. If it's to be the Secretary of Energy, let's make that clear by law and then provide the authority and budgets needed for the task.

Postscript: When Federal agencies or the Congress need expert, non-partisan, non-biased analysis, the three institutions with which I am involved have often been of help. The National Academies draw on the nation's most experienced and capable experts and provide the nation's highest level, most respected, in-depth studies of the full range of technical and technology-related matters. The Annapolis Center for Science Based Public Policy also draws on national experts and has provided relatively quick, brief, lay-level perspectives on narrower topics. RAND has in-house expertise across the spectrum of technical, environmental, economic and behavioral

disciplines, and has provided analysis on small to very large issues, often relatively rapidly.

STATEMENT OF ELIOT SPITZER, ATTORNEY GENERAL, STATE OF NEW YORK Thank you for inviting me to testify before this subcommittee concerning the interaction between our environmental regulations and our nation's energy policy. This is a critical issue, both in the short-term and over the longer term.

Introduction

While we usually take for granted the electricity that permeates our life and fuels our modern society, we cannot do so any longer. Recent events in California have forced us to look carefully at our energy supply and examine it critically. We must ensure Americans with a reliable and reasonably priced power supply. Moreover, to be reliable over the long term, the supply must be diverse, so that shortages or price spikes in any one fuel do not cause excessive dislocation.

Yet while we seek a secure energy future, we now know that we must also consider the environmental and health impacts of power generation and use. This panel has correctly noted that the two issues are closely linked, given that the power sector is the industrial sector that causes by far the most air pollution. A sound and balanced energy plan will help us to achieve a reliable and clean energy future.

As many of you have noted, we have not been able to implement a comprehensive energy policy at either the Federal or State level. Federal programs have been at best sporadic. In New York, energy policy has also been largely sporadic, addressing issues, if at all, on a one-by-one basis. The State Energy Office was abolished 8 years ago and any efforts to create and implement a comprehensive State energy plan were dropped. I recently released a report, entitled Attorney General's Action Plan for a Balanced Electric Power Policy in New York State. It can be found at our web site at http://www.oag.state.ny.us/press/reports/power-policy.pdf. I incorporate it with this testimony because I think it represents a comprehensive blueprint at the State level for considering and balancing the needs for electricity and the need to protect our health and environment. I suggest that the Federal Government could do well to consider such an approach, and I urge you to review the report carefully.

Let me be crystal clear: there need be no conflict between environmental protection and a sound energy policy. Indeed, careful attention to environmental and health protections will enhance, not harm, our energy security. Our energy supply must be reliable and affordable. However, it must not be only superficially inexpensive, appearing cheap because of hidden costs borne elsewhere. An energy supply that is provided at the cost of harm to the public health or the environment—imposing enormous, but usually unquantified, costs on the American public through health care costs, lost productivity, premature mortality, or lost enjoyment of health or natural resources-is not in the nation's best interests. Proposals for such a policy will backfire.

I urge you to work together, as we are trying to do in New York, to move the country toward a balanced energy policy and to reject the spurious claim that environmental protections are the cause of the energy squeeze we see today. Environmental protections are not the cause of, but part of the solution to, our energy challenge. It was the lack of demand, not environmental regulations, that led companies not to build new power plants over the last decade; indeed, some environmentalists would support some new plants that, if linked with strong efficiency programs, would take the place of our dirtiest existing plants.

I will not repeat all of the details set forth in the report. Instead, below, I will focus on the clean air litigation that has been the subject of some scrutiny and controversy, in an effort to dispel many of the misperceptions concerning those cases. Environmental and Health Impacts of Energy Choices

It is critical that any discussion of energy policies not underestimate the impacts of electricity generation. The level of impacts is simply not acceptable. As Senator Voinovich said, we want to go forward, not backward. We cannot go forward, however, if we either weaken or ignore existing clean air laws. It was this realization that led New York to its power plant litigation initiative.

Electric utility plants collectively account for about 70 percent of annual sulfur dioxide (SO2) emissions and 30 percent of nitrogen oxide (NOx) emissions in the United States, pollutants that have significant health and environmental impacts. SO2 interacts in the atmosphere to form sulfate aerosols, which may be transported long distances through the air. These transported sulfate aerosols are both acidic and respirable, contributing to acid rain and smog. Particulate matter (PM) is the

term for solid or liquid particles found in the air. Particulate matter composed of particles with diameters of 10 micrometers or less is referred to as PM10, while particles with diameters of 2.5 microns or less are referred to as PM2 5. Coal fired power plants are a major source of both PM10 and PM25. Not only do power plants emit PM directly, but emissions of NOx and SO2 from these plants lead to the formation of fine nitrate and sulfate particles that are particularly harmful to the respiratory system.

Numerous studies, from an EPA acid rain study to a National Oceanic and Atmospheric Administration back trajectory analysis, to many private studies, demonstrate conclusively that emissions from coal-fired power plants in the Midwest and mid-Atlantic travel on prevailing winds to the Northeast. One 1985 New York study found that over 80 percent of the sulfate deposition in New York's Adirondack Park came from sources outside New York.

In the eastern United States, sulfate aerosols make up 25 to 50 percent of the inhalable (PM2.5) particles on average and cause up to 75 percent of the aerosol pollution during extreme transport episodes. People exposed to sulfur dioxide can suffer a variety of respiratory ailments. Nitrogen oxides contribute to the formation of ozone in locations downwind from the source of the pollution. Ground level ozone also contributes to respiratory illnesses. Particulate matter is an extremely harmful pollutant that contributes to a number of respiratory difficulties, ranging from bronchitis to asthma and even premature death. At least one study performed for the Federal Government has attributed 30,000 premature deaths nationwide each year to fine PM attributable to power plant emissions.

Emissions of NOx and SO2 also cause extensive harm to natural resources. In the atmosphere, NOx and SO2 are converted into nitric and sulfuric acids, which fall to the ground as acid particles, rain, and snow. Power plant emissions are largely responsible for damage to forests, lakes, and wildlife throughout the northeast. For example, acid deposition has caused 20 percent of the lakes in New York's Adirondack Park region to become too acidic to support fish life. Federal studies conclude that the percentage of acidified lakes is expected to increase or even double over the next four decades unless upwind emissions of NOx and SO2, primarily from coalfired power plants, are reduced extensively. Similar impacts are seen in the lakes and streams of other northeastern States such as Vermont and New Hampshire. This year, when the record snow pack in northern New York and New England melts, the streams and lakes will suffer a lethal acid shock.

In addition, acid deposition contributes to the widespread death of spruce forests in high elevation areas of the northeast. According to a recent study, more than half of large canopy trees in the Adirondack Mountains of New York and the Green Mountains of Vermont and approximately one quarter of large canopy trees in the White Mountains of New Hampshire have died since the 1960's. Moreover, ozone, which is also a product of NOx emissions, causes foliar injury (injury to plant leaves) and can reduce plant growth and reproduction.

Visibility in Class I national parks and wilderness areas has suffered severe deterioration from manmade haze created in large part by sulfate particles resulting from power plant emissions. Sulfate particles swell up in the often humid weather conditions of the northeast and scatter more light (thereby reducing visibility more) than most other kinds of particles. In Vermont, for instance, sulfates cause about half of the fine particle pollution, but closer to 75 percent of the visibility impairment obscuring the landscape for visitors and residents.

Nitrogen deposition also contributes to the eutrophication of coastal bays and estuaries, which occurs when an excess of nitrogen causes algae growth that threatens the survival of other aquatic species. For example, the Chesapeake Bay, which has severe eutrophication problems, receives twenty-five percent of its nitrogen from sources of NOx emissions, primarily from power plants located to the west of the Chesapeake Bay watershed. Long Island Sound suffers similar problems, in large part from nitrogen falling onto New York and Connecticut lands, and from there flowing into the Sound.

Finally, New York's and our nation's cultural heritage our buildings and our monuments are corroding under the onslaught of acid rain. Some of our finest buildings in the Northeast are losing their detail and beginning to look as if they were melting.

These harms of pollution are quite real; they are not merely a matter of environmental preferences. Asthma, premature mortality, and other respiratory diseases cost Americans billions of dollars each year. The loss of recreational jobs, tourism, and commercial fishing, plus the increased expense of water treatment, cost the nation billions each year. The loss of our architectural history is priceless, and it costs many millions each year just to stem the destruction.

New Source Review Law and Regulations

To address these harms of pollution, my office sued the coal-fired power plants that are the source of much of this air pollution. We filed notices of intent to sue against 17 coal-fired electricity plants located in upwind States in September 1999. We play fair in New York and do not only pursue out-of-state sources, so shortly thereafter we, with the State Department of Environmental Conservation, commenced enforcement action against eight coal-fired plants in New York as well. Shortly after we filed our notices of intent, the Federal Environmental Protection Agency commenced legal action against a number of coal-fired plants. A number of other northeast States joined our actions. We have now reached agreements in principle with two companies-the Virginia Electric Power Company and Cinergy Corporation. In addition, we are in active discussions with the owners of several of the New York coal-fired plants to resolve their liability.

The aim of the Clean Air Act litigation brought by New York, other northeast States, the Federal EPA and various environmental organizations is to address these harms by going to their source. Whereas in the past citizens and States had looked entirely to the Federal Government to address interstate pollution, we decided to confront the power plants themselves. While some have argued that the interpretation of the New Source Review (NSR) provisions in these lawsuits was new, in fact the interpretation stays entirely within EPA interpretations and court rulings over a decade old. We rely on EPA memoranda and court decisions from the previous Reagan and Bush Administrations. There was nothing new about the interpretation. What was new was only the fact that we decided to investigate and identify violations.

Congress created the NSR provisions (including the related Prevention of Significant Deterioration (PSD) provisions) to insure that increased pollution from the construction of new emissions sources or the modification of existing emission sources be minimized, and to ensure that construction activities would be consistent with air quality planning requirements. Generally, the NSR program requires such sources to obtain permits from the permitting authority before the sources undertake construction projects if those projects will result in an increase in pollutants above a de minimis amount. In addition, the NSR regulations usually require that sources install state-of-the-art controls to limit or eliminate pollution. Congress required and fully expected that those older existing sources would either incorporate the required controls as they underwent "modifications," or would instead be allowed to "die" and be replaced with new, state-of-the-art units that fully complied with pollution control requirements.

The Clean Air Act defines "modification" as a physical change or change in the method of operation that increases the amount of an air pollutant emitted by the source. 42 U.S.C. § 7411(a). Courts for many years have interpreted the Clean Air Act term "modification" broadly. Alabama Power Co. v. Costle, 636 F.2d 323, 400 (D.C. Cir. 1979) (the term 'modification' is nowhere limited to physical changes exceeding a certain magnitude"); Wisconsin Electric Power Co. v. Reilly, 893 F.2d 901, 905 (7th Cir. 1990) ("WEPCO") ("[elven at first blush, the potential reach of these modification provisions is apparent: the most trivial activities-the replacement of leaky pipes, for example-may trigger the modification provisions if the change results in an increase in the emissions of a facility.") The WEPCO court noted that Congress did not intend to provide "indefinite immunity [to grandfathered facilities] from the provisions of [the Clean Air Act]," id. at 909, and that "courts considering the modification provisions of [the Clean Air Act] have assumed that >any physical change' means precisely that." Id. at 908 (emphasis added) (citations omitted). EPA recognized, however, that the sweeping statutory definition of "modification" to include "any physical change" could have nonsensical results if carried to an extreme ("the definition of physical or operational change in Section 111(a)(4) could, standing alone, encompass the most mundane activities at an industrial facility (even the repair or replacement of a single leaky pipe, or a change in the way that pipe is utilized)"). 57 Fed. Reg. 32,314, 32,316 (July 21, 1992). Thus, since 1977, Federal regulations have exempted routine maintenance, repair, and replacement from the definition of modification. 40 CFR 52.21(b)(2)(iii). EPA historically has analyzed and applied the "routine maintenance" exemption to modification by using a common sense test that assesses four primary factors-(1) the nature and extent; (2) purpose; (3) frequency; and (4) cost of the proposed work. See, e.g., Memorandum from Don R. Clay, EPA Acting Assistant Administrator for Air and Radiation, to David A. Kee, Air and Radiation Division, EPA Region V (Sept. 9, 1988). Our cases follow these standards.

The NSR provisions also apply only if there is a significant increase in pollution due to the modification. Methods for calculating emissions increases generally compare the emissions prior to the modification and those after the modification. For