SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH, NATURAL RESOURCES, AND REGULATORY AFFAIRS, COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT, Washington, DC. The subcommittee met, pursuant to notice, at 10:07 a.m., in room 2154, Rayburn House Office Building, Hon. David McIntosh (chairman of the subcommittee) presiding.

Present: Representatives McIntosh, Snowbarger, and Kucinich. Staff present: Mildred Webber, staff director; Barbara Kahlow, professional staff member; Larisa Dobriansky, senior counsel; Andrew Wilder, clerk; Sean Cunningham, counsel; Elizabeth Mundinger, minority counsel; and Alys Campaigne and Brian Cohen, minority professional staff members.

Mr. MCINTOSH. The Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs shall come to order.

I want to welcome our witnesses here today. Governor Underwood of West Virginia, thank you very much for taking time to testify on this issue of great concern to your State and all of us.

I also want to thank Representative Scott Orr from the Montana State Legislature, who will tell us about the effects of the Kyoto Protocol in his State. And finally, I want to welcome a good friend of mine, Mayor Dan Canan, from my hometown of Muncie, IN.

Earlier in our first hearing on the global warming issue we also heard from two State legislators, Rhode Island State Senator Bill Walaska and Michigan State Representative Tom Alley. Together these witnesses make a bipartisan statement about what the effects of the proposed Kyoto Protocol will have on State and local governments, and the communities that they serve. Many Governors, mayors, legislators, and other elected officials, Democrats, and Republicans alike are very apprehensive about the potentially devastating impact on the economies and social fabrics in their States and cities.

At yesterday's hearing we heard from Dr. Janet Yellen, the President's Economic Adviser, and, as that hearing revealed, the Clinton administration has not only failed to disclose what the true impacts of the treaty will be on the American economy, but also has publicly refused to provide any credible economic analysis to (627)

backup their rosy predictions. Yet, many outside economists paint a very dire picture. In particular, in the case of job loss where many of them are predicting that we could have more than 3 million jobs lost as a result of this treaty. Even the AFL-CIO has come up to Congress and testified that there would be significant job loss if this treaty is implemented.

The leaders of our States and cities want to know the facts because they know that the workers, the families, and the small businesses in their communities will be the ones who have to pay the price of national sacrifice for this treaty. These leaders are also concerned about the Clinton administration's backdoor attempt to by-pass the Constitution, and implement the treaty through what appears to be an elaborate taxpayer-funded campaign to cajole, lobby, and ultimately coerce the States and the cities into early compliance without any ratification from the Senate.

Let me go into some detail on that. Using Federal money, the Clinton EPA has waged a behind-the-scenes propaganda campaign aimed at pressuring State and local governments, particularly the State environmental agencies, into implementing the requirements of the treaty.

For example, at an EPA bank-rolled conference entitled, "Climate Change: Post Kyoto and Beyond," held in Baltimore on January 22nd of this year, participants from State governments were instructed in the conference brochure that the United States, "must now begin designing policies and programs to meet the reduction goals of the Kyoto Protocol."

In other words, the EPA is using taxpayer money to lobby unelected State officials to begin implementing the Kyoto Treaty, even though it has not been ratified by the Senate. Of course, the Constitution requires that the U.S. Senate ratify any treaty before it goes into effect. In this case, the U.S. Senate has made clear through a resolution, 95 to 0, bipartisan support for the proposition that they are not going to ratify a treaty that exempts developing countries.

In fact, this treaty as signed by Vice President Gore would exempt 77 percent of the countries. China, India, Mexico, and Brazil, to name a few, are completely unfettered by the treaty. They already have competitive advantages. We've seen jobs go to those countries because of cheaper labor, lower production costs, and lower environmental health and safety standards. Now, they will be able to use less expensive energy sources, such as coal, while we in the United States will be restricted on that, or at least have to pay heavy tax in terms of higher prices for that energy.

If President Clinton and Vice President Gore have their way, these countries will be free to develop and pollute all they want while the U.S. economy goes into the deep freeze. The leaders of China and other developing nations understand that it is to their advantage not to subject their nations to the same requirements as the United States and other developed countries. They are not about to sell out their own economies, and they made it very clear in Kyoto they would not sign the Protocol even if there were a provision for voluntary compliance. Instead, they prefer to let Vice President Gore sell out the United States, give away our American

jobs, and American competitiveness, and this is precisely what seems to be happening with this treaty.

One of the things that I think is very important is to take a look at what is happening in the State legislature. A number of them have prudently taken action to prevent early implementation of the treaty in their home States. Governor Underwood has taken the lead in West Virginia by signing legislation to prevent any environmental quality agency from imposing EPA-style emissions reduction programs on the people of West Virginia in anticipation of the Kyoto Protocol.

Whether ratified or unratified, the Kyoto Protocol could become the most costly and far reaching scheme of regulatory control this country has ever known. Let's ask ourselves what does this mean in terms of American workers, consumers, and families. The rigid emissions requirements of this treaty are necessary to achieve energy rationing to reduce the amount of carbon emissions on a scale not seen since the stagflation, and the gas lines of the late 1970's. Gas prices could go up 70 cents a gallon.

According to an AFL-CIO study, as many as 1.5 million jobs could be lost by 2010, and some of the independent economic studies show that it is as much as 3 million jobs. Independent studies confirm this across the board when they assume that we have to have higher energy costs. Frankly, the days of full employment would be no more if this treaty goes into effect.

The prices for consumer goods, such as food and clothing could rise as much as 50 percent and real wages could be driven down by about $2,600 per household by the time this treaty is implemented in the United States. According to these independent studies, some States and localities will be particularly hard hit as new energy taxes required under the treaty. The States that rely on energy production, manufacturing, and trade exports would be hit hardest. As Governor Underwood and Representative Orr will testify, this means economic chaos for the coal mining States, like West Virginia and Montana.

Montana and West Virginia in particular will lose thousands of jobs. Over 11,000 jobs are expected to disappear from Montana alone, which is a sparsely populated State. West Virginia could lose 6,000 jobs, including 3,000 high-paying manufacturing jobs, while the price of natural gas for consumers and industries in West Virginia will rise 50 to 70 percent.

Oil-producing States could also take heavy loss. Louisiana, Texas, Oklahoma, in particular, could lose 4 percent or more of their gross domestic product. States depending on energy intensive manufacturing industries, including the automobile, steel, aluminum, paper, and chemical industries will bear a disproportionate burden. Indiana, where I'm from, Michigan, New Jersey, Tennessee, and Alabama will be especially hard hit.

Let me give you one example of the devastation this treaty could cause in my district in Indiana. Three years ago, foreign competition and high regulatory costs drove 1,000 jobs making manual transmissions from the Borg-Warner plant in Muncie, IN to Mexico. Now if President Clinton and Vice President Gore have their way, the remaining 1,200 jobs at the plant making transfer cases for sports utility vehicles could be driven out because the higher