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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

[$ in millions]

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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 Subcon nittee 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;

a significant contribution to an “ad-hoc" Solvents Committee, composed of industry, military agencies and governments to revise U.S. military CFC specifications;

our co-founding of the Industry Cooperative for Ozone Layer Protection (ICOLP) which now has 17 multinational corporations as members. They are all major CFC solvent users who have pledged to an early phase-out and to share their knowledge with industry, government and other stakeholders worldwide. The EPA, the U.S. Air Force, and other governments and institutions from the Soviet Union, Japan, Sweden, Mexico and the United States are affiliate members of this important new model for technology transfer;

the creation for ICOLP of a database called OZONET to carry alternatives to ozone depleting solvents electronically to the world user community. It can be accessed by over 90 percent of the world's business telephones; most often by a local telephone call; and finally,

our taking the lead role on a first-of-its-kind project to transfer new technology to Mexico's solvent using industry. Under the terms of the Montreal Protocol, a multilateral funding mechanism has been established to assist developing countries with programs to retrofit industry with alternatives to ozone depleting substances. Northern Telecom, in partnership

with the EPA and with the Department of Urban & Ecological Development (SEDŪE) of Mexico announced on May 6, 1991 in Washington that the first project under the funding mechanism would proceed as quickly as possible so that Mexico could meet its commitment to complying with the same deadlines that developed countries are obliged to meet under the Protocol. Northern Telecom held the first planning seminar on June 7 for the Tijuana and Mexicali Maquiladoras and the first multiple day workshop is planned for September.

This hands-on training session will be undertaken by experts from Northern Telecom and other companies that are members of ICOLÝ. Workshops will be followed by visits of Mexican industry representatives to plants of Northern Telecom and IČOLP companies. Subsequently, new needed technologies and equipment will be identified and any necessary funding will be applied for under the Montreal Protocol. A Phase 2 is to include the actual purchase and retrofit of equipment and technologies.

The project for Tijuana and Mexicali is the first of several planned for other Maquiladoras such as Juarez, Mogales, Monterey and Matamoros. We are committed to making this a successful project because we believe that a shared stakeholder partnership is the best way to affect technology transfer, and thus, in this case, as rapidly as possible protect the stratospheric ozone layer. We believe this will prove to be a model for further projects in other countries.

I have attached to my statement a "Background Information” paper which further details Northern Telecom's internal and external CFC elimination efforts. Also, I would be happy to provide you, Mr. Chairman, and members of the subcommittee with copies of the NT/EPA manual I referred to which is a guide for eliminating CFC-113 use in the electronics industry.

On behalf of Northern Telecom, thank you very much for the opportunity to appear before your subcommittee to describe one of our important environmental programs and our contribution to environmental projects external to the company.

PREPARED STATEMENT OF KEVIN FAY Good Morning. My name is Kevin Fay, and I am Executive Director of the Alliance for Responsible CFC Policy. The Alliance is a coalition of producers and users of CFCs and their substitutes in the United States. The Alliance has been a strong supporter of the international framework for protecting the ozone layer. (See Exhibit I). We have participated in all of the negotiating sessions leading to the Montreal Protocol and its most recent revisions, and in the development of Title VI of the Clean Air Act Amendments of 1990.

We appreciate this opportunity to appear before the subcommittee to discuss the status of the Montreal Protocol, efforts to implement Title VI of the Clean Air Act Amendments, and related issues of ozone depletion mitigation research funding.

In response to recent events, the Alliance believes that the current global and domestic policy process is working effectively and successfully. We should not discard the current process; rather we should rely on it. Industry supports the following:

• continued emphasis on the participation and enforcement of the Montreal Protocol's global regulatory framework;

o rapid approval and commercialization of alternative compounds and processes, including HCFCs and HFCs;

aggressive recovery, recycling, and reclaiming of used CFCs and HCFCs and recognition of the challenges posed by the installed equipment base;

efforts to accomplish technology transfer to developing countries to encourage the acceleration of the phaseout among these nations; and

significant new research efforts concerning the effects and potential remediation of ozone depletion.

EXISTING REGULATORY FRAMEWORK

The announcement earlier this year from EPA of new NASA data indicating accelerated depletion of the ozone layer over North America is a cause for increased concern among citizens, industry, and policy officials worldwide. More recently, some scientists have stated that the eruption of Mount Pinatubo could temporarily further enhance ozone depletion.

Despite the new data and natural events beyond our control, the global and domestic policy process is working. The phaseout of CFCs, and the reduction in buildup of atmospheric chlorine concentrations is moving forward. It is chlorine concentration that has served as the surrogate for measuring our response to the ozone depletion concern. With this as our guide, it appears that we have reduced the potential peak chlorine concentration by more than 50 percent.

The Montreal Protocol on Substances that Deplete the Ozone Layer, originally signed in September 1987, remains an unprecedented agreement for addressing this critical global environmental issue. It is a solid regulatory achievement built on a foundation of global cooperation and goodwill among governments, industry and environmental organizations. It addresses a complex scientific objective while balancing the social and economic concerns of the developed and less developed nations.

The approximately 70 signatories to the Protocol represent more than 90 percent of the worldwide CFC production and usage. The treaty is a dynamic agreement based on scientific understanding, technological feasibility, and economics. The Amendments adopted to the Protocol in London last year showed that the process can and will work.

At the recent meeting of the Protocol parties in Nairobi, the diplomats undertook significant discussions concerning the recently released scientific information, and the need to take this information into account as part of the Protocol's built-in assessment process. The purpose of the assessment process is to ensure that the Protocol remains environmentally effective, as well as technologically and economically sensible.

It remains apparent that our only hope of ultimately reducing global atmospheric chlorine concentrations is to use this international process to ensure that we achieve a 100 percent participation rate and full compliance by all parties. Anything less than 100 percent participation and compliance will lead to a higher peak chlorine level and elevated chlorine concentrations (in excess of 2 parts per billion (ppb)) well beyond the year 2100. (See Exhibit II).

The 1990 amendments to the Protocol were guided by rigorous scientific and technical analysis. They included a phaseout of CFC production by the year 2000, the addition of other ozone depleting compounds (carbon tetrachloride, methyl chloroform, and several small volume CFCs), and a resolution concerning the phaseout of compounds with low ozone depletion potentials (known as HCFCs). There was also a keen awareness among the policymakers that a balance must be struck between the rapid phaseout of CFCs, the availability of safe alternatives, the needs of existing installed equipment, and the need to encourage participation among all nations, developed and developing. It was understood that this balance must be struck if we are to have an effective global mechanism that encourages the 100 percent participation rate necessary to reduce atmospheric chlorine.

The current assessment process is scheduled to be completed by the end of this year, and will be the basis for further amendments to the Protocol to be adopted in September 1992. The assessment may indicate some ability to accelerate the phaseout of fully halogenated CFCs. We also expect that the assessment will emphasize once again the need for the HFC and HCFC compounds in order to accomplish the phaseout.

It is expected that this assessment will and should be instrumental in the EPA's own consideration of accelerating the phaseouts under Section 606 of the Clean Air Act. However, we do not believe that the policy development process should get ahead of the scientific and technical assessment framework provided for in the Protocol.

The new scientific information creates a greater sense of urgency concerning the effects of ozone depletion, and highlights the need for additional effects research and identification of steps for potential effects remediation. It also emphasizes the

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