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provisions. The Subcommittee's continuing dedication to solving the ozone problem is impressive.

While Friends of the Earth believes Title VI should require a faster phaseout of class I and class II substances, we are comforted by the fact that the law allows for more stringent measures. Additionally, its specific provisions provide for safe alternatives, mandatory product labeling, chemical recycling, and tight controls on ozone-destroying emissions and non-essential products. In light of the new NASA findings, Congress has a great responsibility to make certain that the EPA implements each provision to the fullest extent possible.

We are concerned that the Office of Management and Budget (OMB) is holding-up EPA's rulemaking process and that OMB may make it difficult for the agency to take advantage of the powerful law Congress has provided. At the time of drafting this testimony, proposed rules on Section 604 (phaseout of class I substances), Section 609 (servicing of motor vehicle air conditioners), and Section 610 (non-essential products) were waiting for clearance at OMB. The release of two of these proposals are more than one month overdue.

The ultimate strength of these rulemaking proposals will depend on how they are implemented. For example, the non-essential product ban, at a minimum, must prohibit the sale of CFC-propelled party streamers, CFC-based noise horns, and CFCbased cleaning fluids. But the law also requires EPA to identify and prohibit the sale of other non-essential ozone-destroying products. EPA has identified non-insulating foams, residential halon fire extinguishers, and some remaining CFC-based aerosol products as in this category. Congress must ensure that the EPA can and does proceed on eliminating all of these non-essential products.

Industry itself often demonstrates that CFCs are no longer needed for a specific use sector. As we will hear from the witness from Northern Telecom, the company plans to eliminate CFC use in its operations by the end of this year. Once it can be shown that CFCs are non-essential for an application, such as cleaning printed circuit boards, the EPA should apply the non-essential ban. If this is not done, industry innovators will be penalized, as their competitors will be able to continue business as usual.

The Safe Alternatives Policy and the "lowest achievable level" requirement of the National Recycling and Emission Reduction Program provision are also extremely important components of Title VI. We fully expect the agency to use these tools to place stringent controls on industry's plans to replace CFCs with HCFCs. Industry cannot justify the use of these ozone-depleting substitute chemicals when safer alternatives are available. For example, researchers recently revised the ozone depletion potential (ODP) for HCFC-141b from 1 to 15-a fifty percent increase. This chemical, which industry plans to sell for foam blowing and solvent applications, must be restricted. EPA cannot consider using HCFC-141B in the solvent sector "safe" or the "lowest achievable emission level". Further, in no case should HCFCs be permitted in aerosols other than essential medical applications.

Section 606 of Title VI requires the EPA Administrator to hasten the phaseout of class I and class II substances if scientific information indicates a faster timetable is necessary to protect human health and the environment. The new NASA data provides such a scientific basis.

We thank the Members of this Subcommittee who signed the April 9 letter to EPA Administrator Reilly, reminding him that Section 606 of Title VI requires him to accelerate the phaseout schedule of Class I and Class II substances if more stringent timetables are necessary to protect human health and the environment. There is no doubt that the NASA data and the EPA's revised skin cancer predictions demands such actions. The agency projects an additional 200,000 skin cancer deaths over the next 50 years as well as other detrimental effects on crops and aquatic ecosystems. We have written Mr. Reilly a similar letter and plan to join other environmental organizations in formally petitioning the agency later this summer.

It is important that EPA not only hasten the phaseout of CFCs, but also the phaseout of halons, methyl chloroform, carbon tetrachloride, and HCFCs. Halon production, for example, could be stopped immediately. Research indicates that the halon bank, those halons trapped inside fire protection equipment, is so large that it could satisfy essential halon applications for decades. Unfortunately, no system exists at this time to manage the halon bank.

In the area of HCFCs, Congress was ahead of other governments when it set clear production phaseout dates in Title VI. As mentioned above, however, the new NASA data emphasizes that restrictions on these chemicals must be tighter.

FUNDING FOR OZONE PROTECTION

The Office of Management and Budget decision to cut funding for EPA's environmental mitigation program on the development of control options and alternatives to ozone depleting chemicals is in direct conflict with U.S. efforts to eliminate these destructive chemicals.

The Office of Management and Budget (OMB) has prohibited the EPA from using $1.65 million appropriated to the EPA for fiscal year 1991 to fund research on environmental mitigation programs. These funds were part of the EPA's portion of the U.S. Global Change Research Program. Specifically, this means that certain EPA projects aimed at determining how best to eliminate ozone-depleting chemicals will have to find a different source of funding.

Apparently, the OMB has made this decision because the administration wants the research that it sponsors under this program to focus on understanding global environmental problems rather than finding solutions to them. Given the weight of evidence demonstrating that ozone depletion is a serious problem, and that fact that the U.S. has already committed to phasing out the several ozone-depleting chemicals, the OMB decision can only be viewed as counterproductive and baffling.

Sources at the EPA are hopeful that the agency will continue the mitigation projects by moving them into different program areas. If this is not the case, the agency will be forced to stop some very useful work. For example, one of the projects in jeopardy aims to identify ways to increase the efficiency of refrigeration systems though the use of alternative coolants and improved non-CFC insulation materials. Developing ozone-safe, energy efficient refrigeration technologies is one of the greatest challenges facing society as it makes the transition away from CFCs. Friends of the Earth is concerned, however, that other important EPA programs may suffer if money has been diverted away from them to continue EPA's ozone depletion mitigation work.

We are pleased to note that the Senate Appropriations Subcommittee on VAHUD-Independent Agencies has recently made an effort to overrule OMB's efforts to limit environmental mitigation work. In its report to accompany H.R. 2519, the subcommittee redirected $4 million global warming and stratospheric ozone "research" funds to global warming and stratospheric ozone depletion "mitigation research" for fiscal year 1992. The $4 million, which still must be approved in conference committee, is specifically earmarked for a demonstration fuel cell powerplant which consumes waste methane, a key greenhouse gas. While this is an important project, the action does not provide funding for specific projects to limit ozone-depleting chemicals.

EPA's overall funding levels for its stratospheric ozone protection program should be increased to enable the agency to carry out the additional workload of implementing Title VI.

As we said earlier in this testimony, successful ozone protection efforts in the United States depend on Congress ensuring that the EPA fully implements Title VI of the Clean Air Act. Not only must the EPA use its full authority to eliminate ozone-destroying compounds, but the agency must have the resources to carry out this huge task. Adequate funding for environmental mitigation research is just a fraction of what EPA needs. Unfortunately, EPA's overall budget for its stratospheric ozone protection program is not commensurate with the added workload Congress gave to the agency when it enacted the Clean Air Act Amendments of 1990.

EPA's funding for ozone protection activities is found in two offices. Most important is the Global Change Program within EPA's Office of Air and Radiation. Approximately 80 percent of this office's activities concern ozone protection, with the balance addressing global warming. The Global Change Program has received several new rulemaking requirements and other tasks under the Clean Air Amendments. Unfortunately, the Global Change Program's ozone budget will not increase significantly between fiscal 1991 and 1992. The best calculations that Friends of the Earth can make based on EPA data is that the administration budget for FY92 proposed to cut funding for ozone activities in the Global Change Program from $9.0 million in FY91 to $7.3 million in FY92. If a proposed congressional funding add to the administration request for FY92 is approved, then FY92 funding would increase slightly to $9.55 million-hardly enough to carry out the Title VI of the Clean Air Act Amendments. Furthermore, it is our understanding that there was not a significant increase for these activities between FY90 and FY91. The bottom line is that funding for ozone activities by the lead office in carrying them out has remained essentially the same while the size, importance and urgency of the job have increased enormously.

Following is a summary of the best information that Friends of the Earth has been able to obtain through its Appropriations Project. We recommend that the committee seek confirmation and fuller details directly from EPA.

Office of Air and Radiation's Global Change Program Funding for Ozone Activities

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The highest priority need to carry out the new requirements is more people on staff. But this need isn't being met. Between FY90 and FY91, there was no significant increase in staff for ozone work in OAR's Global Change Program. Between FY91 and FY92, it appears that the number of staff, measured in FTE's (full-time equivalents, or workyears), will increase from 20.2 to 25.2. In dollars, this implies an increase in salaries and expenses money from about $1.25 million in FY91 to $1.70 million in FY92. These increases in staff and dollars assume that the office gets the increase requested in the administration budget request, which seems probable given congressional action so far this year. A 25 percent increase in staff is inadequate to carry out the new clean air amendments. Our best judgment is that the office needs to at least double its ozone staff, to a total of 45 or 50 FTE's.

There are rumors of an initiative within EPA to internally reprogram additional FTE's for FY92 to address this staff need in the Global Change Program. If such an initiative exists, then this Committee and the Appropriations Subcommittee of VA, HUD and Independent Agencies should support the reprogramming initiative assuming that other high-priority programs are not hurt.

The second need in the Global Change Program office is for more Abatement, Control and Compliance (AC&C) funding to hire consultants and fund other activities. Here the picture is grim. It would be much worse if it weren't for Congressional additions to the administration requests each year. In FY91, ozone activities in the Global Change Program received approximately $7.77 million in AC&C funds. This included a $3.5 million congressional add to the administration request. For FY92, the administration actually proposed cutting AC&C funds for ozone activities to about $5.6 million, as best we can calculate. The good news is that the Senate Appropriations Subcommittee on VA, HUD and Independent Agencies recently proposed in its bill an increase of $2.25 million for CFC activities. The bad news is that this increase for FY92 would still only get the AC&C funding level up to about the FY91 level.

We recommend that this Committee strongly support the Senate's proposed add of $2.25 million to the administration request, and seek an even larger increase if possible.

Finally, there is also significant funding for ozone activities in the Office of Air and Radiation's Office of Research and Development, where there is a Stratospheric Modification program. One of the components of this program is the Stratospheric Ozone Research Program. We believe this program. While the administration proposes an increase in the Stratospheric Modification program, this increase appears not to be targeted to ozone problems.

Congress should cut funding for NASA's High Speed Commercial Transport (HSCT) program. The NASA budget recently approved by the House and Senate Appropriations Committees contains $76.4 million for fiscal year 1992 to research the feasibility of this ozone-damaging aircraft.

In addition to increasing funding for the EPA's stratospheric ozone protection programs, Congress must stop funding projects that will lead to further ozone destruction. At a time when ozone-depletion is worse than ever, Friends of the Earth cannot understand why the U.S. government is spending millions of taxpayer dollars to research the feasibility of High Speed Commercial Transport (HSCT) aircraft. These airplanes, which would fly in the stratosphere, produce nitrogen oxide exhaust that is known to destroy protective ozone.

The NASA request approved by Congress allocates $76.4 million to NASA for fiscal year 1992 to determine if the aerospace industry can overcome the environmental problems associated with the HSCT. Last year, NASA received $44 million it requested for this purpose. NASA proposes to spend a total of at least $284 million on the HSCT through fiscal year 1995.

A recent analysis conducted by Harold S. Johnson, Professor of Chemistry at the University of California, Berkeley, concludes that without improvements in HSCT engine design, a commercially viable fleet of HSCTs would deplete the ozone layer by 15 to 20 percent. NASA and the aerospace industry aim to reduce harmful nitrogen oxide emissions by a factor of ten. According to Johnson, even this reduction in emissions would still cause an estimated ozone depletion of 2 to 3 percent. Any amount of ozone loss from this source would be unacceptable. We also note that it is unlikely that the HSCT could ever be made commercially viable, and that it has serious noise problems.

Spending money today to research ways of minimizing the impact of the HSCT on Earth's ozone layer makes no sense when overall funding for ozone protection and other environmental programs remains inadequate.

Congress can bring extra protection to the ozone layer and increase government revenue by enhancing the existing tax on ozone-depleting chemicals.

Finally, Mr. Chairman, as members of both this subcommittee and the Finance Committee, you and several of your colleagues (Mr. Mitchell, Mr. Moynihan, Mr. Chafee, Mr. Durenberger, and Mr. Symms) have an opportunity to bring extra protection to the ozone layer by expanding the existing tax on ozone-depleting chemicals. The CFC tax is one of the most powerful tools Congress has created to protect the ozone layer. This economic instrument has successfully encouraged industry to adopt alternatives to CFCs and increase CFC recycling. In the short period since the tax took effect in 1990, CFC production dropped 23 percent below the limit allowed by the Montreal Protocol.

In addition to stimulating reductions in CFC consumption, the CFC tax is a source of significant revenue. In its original form, the tax was projected to raise $4.5 billion through fiscal year 1995. When Congress expanded the tax last year to include two additional chemicals, methyl chloroform and carbon tetrachloride, the projected revenue rose $.5 billion. Congress can bring extra protection to the ozone layer and further increase revenue by enhancing this important tax. Friends of the Earth's Environmental Tax Project and Ozone Protection Campaign have joined forces to achieve this goal and welcome the opportunity to work with you and your staff. Our proposals for improving the excise tax on ozone-depleting chemicals include:

Raising the tax's base rate. Currently the base tax rate per pound of chemical will rise from $1.37 to $1.67 in 1992, $2.65 in 1993, and $3.10 in 1995. (The total tax per chemical equals the base rate multiplied by the chemical's ozone depletion potential (ODP).) We propose raising the base rate to $2.00 in 1992, $4.00 in 1994, and $5.00 in 1995. This approach would make it more expensive for industry to delay eliminating CFC use.

Taxing methyl chloroform at the same rate as CFC-113. Because methyl chloroform's ODP is .1 the tax is currently about $.14 per pound. This tax is so light that there is little incentive for industry to switch away from using this solvent. Further, it may encourage industry to switch from CFC-113, another ozone-depleting solvent, to methyl chloroform. Equalizing the tax on these two chemicals will provide industry an equal incentive to adopt ozone-safe solvents. Calculated with the current tax base rate, this change would raise an additional $5 billion over five years, and even more if the base rate is increased.

Eliminating reduced tax rate for halons and foam blowers. Halons are up to ten times more potent in destroying ozone than CFCS, but the halon industry has managed to arrange a reduced tax base rate of $.25 per pound through 1993. The tax applies the same special rate on CFCs used by manufacturers of rigid foam insulation. Both of these exemptions are unnecessary.

● Adding HCFCs to the list of taxed chemicals. HCFCs have 2-15 percent of the ozone-depleting strength as CFCs. Some HCFCs, such as HCFC-141B, are more potent than methyl chloroform. These chemicals should also be subject to the excise tax.

When Congress re-evaluates the CFC tax later this session, it should also consider diverting some of the revenue to fund research for innovative safe alternatives to ozone-depleting chemicals. The Finance Committee should also examine the viability of providing tax credits for equipment retrofit expenditures. An early CFC phaseout will require adaption of existing equipment to operate on substitute compounds. For example, tax credits to cover the cost of retrofitting a car air conditioner could

lighten the financial burden on consumers who wish to stop using CFC-based technologies as soon as possible.

This concludes our remarks for today. I would be happy to answer any questions you may have.

PREPARED STATEMENT OF ARTHUR D. FITZGERALD

Mr. Chairman and distinguished Members of the subcommittee, I am Art FitzGerald, Assistant Vice President, Environmental Affairs for Northern Telecom. I am pleased to be here today to discuss my company's CFC elimination program, our experience with CFC replacement technologies and our partnership with the Mexican government to eliminate ozone-depleting solvent emission from Mexico's electronic manufacturing industries.

Northern Telecom is the leading global supplier of fully digital telecommunications switching systems, providing products and services to telephone operating companies, corporations, government, universities and other institutions worldwide. Northern Telecom employed 49,000 people worldwide and had revenues of $6.8 billion in 1990. In the first quarter of 1991, the company acquired STC PLC, a leading United Kingdom telecommunications firm with 14,000 employees and 1990 revenues of approximately $1.6 billion.

Headquartered in Nashville, TN, Northern Telecom Inc., the U.S company, employs approximately 22,000 people across the nation. Northern Telecom's 1990 U.S. revenues were $3.94 billion. Substantially all of those sales were products and services manufactured and provided in the U.S.

At the time of the signing of the Montreal Protocol in 1987, Northern Telecom was a significant user of CFC solvents. In each of the years, 1986 and 1987, we purchased about 1,000,000 kilograms or 2,200,000 pounds of CFCs and halons. CFCs were used mainly for cleaning of printed circuit boards. Halons were used for fire protection in both hand-held extinguishers and room flooding applications.

Following an internal study in 1988 with the U.S. Environmental Protection Agency, Northern Telecom committed to a three-year CFC elimination timetable. At a United Nations Environment Programme (UNEP) Conference in October 1988, Northern Telecom announced that it would be the first corporation in its industry sector to pursue a global phase-out objective for CFC solvents, having determined that Northern Telecom could meet its manufacturing requirements without using CFC's.

True to our word, we will be at zero CFC solvent usage by the end of this year. From mid-1988 to mid-1991, we reduced our usage by 90 percent.

Today, all Northern Telecom locations have successfully switched to "no-clean", with the exception of one facility in Santa Clara, CA, that chose water cleaning. In the no-clean concept, fluxes and pastes with low solids content are applied to prepare the components for soldering. With a low solids content, very litHe residue is left on the printed circuit board and on the joints after soldering. Product performance is not affected.

Water cleaning uses water soluble fluxes that are removed in a closed loop aqueous cleaning system through rosin beds.

I should point out that the "no-clean" concept may not be the answer for every company and indeed cannot currently be used by companies required to meet military specifications. These specifications, however, are being modified to accept alternatives to the traditional CFC solvents.

Northern Telecom facilities that have made particularly large reductions in CFC use include those located in Research Triangle Park, NC; Stone Mountain, GA; Chicago, IL; Rancho Bernardo, CA; Morrisville, NC; West Palm Beach, FL; and many others, both here and overseas.

We also have good news to tell with regard to the cost of our CFC elimination program. Northern Telecom has expended approximately $1 million over three years for equipment modifications, R&D and professional time. However, our total savings to date amount to $4 million-for a net savings of $3 million. These savings are ongoing through reduced purchases of CFCs and savings in taxes and disposal

expenses.

I believe that Northern Telecom has the most aggressive CFC solvent elimination program in our industry. Our commitment to being a leader and our partnership with the EPA as early as March 1988, has lead to:

● a Manual of CFC-113 Solvent Management Practices for the EPA which has been published by the EPA;

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