kopia lustrzana https://github.com/thinkst/zippy
541 wiersze
31 KiB
Plaintext
541 wiersze
31 KiB
Plaintext
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Introduction
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As recognized by the President's National Energy Plan (NEP), one
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of the principal energy challenges facing us is increasing our
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energy supplies in ways that protect and improve the environment.
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Thus, the President directed EPA to propose legislation that would
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significantly reduce SO2, NOx, and mercury emissions from power
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generation through a cap and trade program. Such a program, coupled
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with appropriate measures to address local concerns, would provide
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significant health benefits even as we increase energy supplies and
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maintain reasonable electricity rates.
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Our work on this issue has given us insight that I believe will
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be helpful to you. The more I learn about the cost and
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inefficiencies of the current and future regulatory regime to which
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power generators will be subjected if we do not have new
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legislation, the more I am convinced that we can --and must --
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develop a smarter approach that protects the environment and public
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health while reducing the cost to consumers and industry and
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optimizing the size of both the state and federal government
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machinery necessary to achieve that protection. It is possible to
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achieve better results at lower costs,
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but not if we simply add yet another program on top of all of
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the existing regulations.
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The current Clean Air Act has been enormously successful, but we
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can do better. Significant cost savings can be achieved for power
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generators and consumers through a comprehensive legislative
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package. I look forward to working with you to develop such an
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approach to reduce emissions from power generation. We applaud
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Senator Jeffords for tackling this important issue and for
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recognizing that a cap and trade program is the best way to achieve
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these reductions. However, we have significant concerns with S. 556
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as drafted. Our analysis to date suggests that it could increase
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consumers' electricity rates by as much as 50%, which we believe is
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unacceptable. In addition, the combination of emission reductions
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and timing is not feasible and could threaten the reliability of
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electricity supply. We are concerned that S. 556's short timeframes
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for installation of controls could lead power plants to be taken
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off-line at important times, which could lead to electricity
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shortages.
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In addition, there are a number of issues that Congress should
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consider that S. 556 does not address. As drafted, S. 556 would
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make some existing requirements unnecessary, but would not
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eliminate them. Rather than add yet another layer of environmental
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regulations on top of the existing ones, we believe that S. 556
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should eliminate those unnecessary existing requirements. S. 556
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also does not have an allocation scheme. One lesson we should learn
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from the success of the Acid Rain cap and trade program is that
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when certain key issues can be resolved through clear legislation,
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we can avoid years of litigation, business uncertainty and costs,
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and delayed environmental protection.
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Finally, and most importantly, the Administration strongly
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opposes including CO2 reductions in any multi-pollutant bill. The
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CO2 provisions in S. 556 will cost consumers too much and endanger
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our energy security by causing too much electricity generation to
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switch from coal to natural gas. Greenhouse gas emissions should be
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addressed in the context of climate change, which is being
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undertaken by the President's Cabinet level working group. For all
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of these reasons, the Administration must oppose S. 556. In my
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testimony today I will elaborate further on these key points.
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Background
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Over the last 30 years, we have made substantial progress
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towards improved environmental quality under the Clean Air Act.
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During this time, gross domestic product has increased almost 160%.
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At the same time, we have reduced emissions of six key air
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pollutants by 29%, while coal consumption has increased 77% and
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energy consumption has increased 45%. Eleven years ago President
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George H. W. Bush signed into law the most far reaching amendments
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to the Clean Air Act since its enactment in 1970. Included in those
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amendments was the Acid Rain cap and trade program, the first
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program tailored specifically to the utility sector, which is
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achieving significant environmental and public health benefits at a
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fraction of the initial cost estimates and with relatively little
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government bureaucracy. It is time to revisit and update the Clean
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Air Act once again in order to achieve the additional reductions
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needed to address public health and environmental problems in the
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most cost effective manner.
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The Acid Rain Program is achieving its emission reduction goal
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at a fraction of the estimated costs because it allows and
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encourages innovative thinking and long range planning.1 The
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existing program establishes a cap on SO2 emissions to ensure that
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the environmental goal is met, and employs an innovative
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market-based allowance trading program to achieve the goal at
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lowest cost. Allowances are the currency with which compliance with
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the SO2 emissions requirements is achieved. Sources, rather than
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government, decide the most cost-effective way to use available
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resources to comply. Units that reduce their emissions below the
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number of allowances they hold may trade allowances with other
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units in the system, sell them to other sources or save them for
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future use. There are neither restrictions on trading nor
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government second-guessing.
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Allowance trading provides incentives for energy conservation
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and technology innovation that can both lower the cost of
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compliance and yield pollution prevention benefits. Simply, the
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allowance market puts a price or value on each ton of SO2 not
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emitted. The association of a monetary value
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with reduced emissions encourages innovation: in the 1990's,
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scrubber costs decreased by approximately 40% and scrubber sulfur
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removal efficiencies improved from 90% to 95%, and experimentation
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led to the blending of fuels to lower emissions. To ensure that the
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cap is met and to provide credibility, sources also are required to
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install systems that continuously monitor and report emissions.
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The Acid Rain Program has proven to be an excellent model for
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cap and trade programs. Compliance with the program has been nearly
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100 percent and annual emissions of SO2 from power plants have
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already been reduced over 6 million tons (about 35 percent) from
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1980 levels. Greater reductions earlier than expected have lowered
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risks to human health and provided benefits to the environment
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sooner. Acid rain levels were dramatically reduced over large areas
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of the U.S. and trading did not result in geographic shifting of
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emissions, or "hot spots", as some feared.
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Despite the significant progress we have made under the Clean
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Air Act, air emissions from power generators are still contributing
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to serious public health and environmental problems. Administrator
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Whitman addressed these concerns extensively in her testimony
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before you on July 26, 2001. Rather than reiterate her testimony, I
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will emphasize just a few of her key points. Problems associated
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with sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury
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emissions are of national and international significance, and the
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interstate and long range transport of emissions continue to play
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significant roles in the nature and magnitude of the problems.
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Emission and deposition of SO2, NOx, and mercury and their
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transformation byproducts are known to have a wide range of adverse
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effects on human health and the environment, including:
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• SO2 and NOx emissions contribute to fine particles, which are
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associated with premature mortality, aggravated chronic bronchitis,
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hospitalizations due to cardio-respiratory symptoms, emergency room
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visits due to aggravated asthma symptoms, and acute respiratory
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symptoms.
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1 Governor Whitman's July 26, 2001, testimony before this
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Committee contains a detailed discussion of the success of the Acid
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Rain cap and trade program.
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Fine particles formed from power plant emissions as well as
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mobile source emissions are of
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concern. • NOx emissions contribute to ground-level ozone,
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which aggravates respiratory illnesses and causes lung
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inflammation, particularly for at-risk populations such as
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children, the elderly and those afflicted with asthma, emphysema,
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and other respiratory ailments.
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• Mercury emissions contribute to mercury deposition in water.
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Children born to women who consume large amounts of
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mercury-contaminated fish while pregnant may be at risk for
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neurodevelopmental defects.
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• SO2 and NOx emissions contribute to atmospheric sulfate and
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nitrate concentrations that cause visibility impairment, including
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impairment in many national parks and wilderness areas.
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• SO2 and NOx contribute to acid deposition, which damages
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lakes and streams, adversely affecting the fish and other species
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that live in them, and leaches nutrients from the soil.
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• NOx emissions contribute to nitrogen deposition that may lead
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to eutrophication of estuaries and near-coastal waters and can
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damage forested watersheds.
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EPA, states, and industry, working together, have made important
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strides in addressing the adverse impacts of fossil fuel combustion
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by the electric power industry since the passage of the Clean Air
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Act in 1970. Despite significant improvements in air quality
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throughout the country however, emissions from power generation
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continue to result in serious health, environmental and economic
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impacts. In 1999, the electric power industry was responsible for
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67% of sulfur dioxide emissions, 25% of nitrogen oxide emissions,
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and 37% of mercury emissions in the United States.
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Business as Usual
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The President's flexible, market-based approach to reducing
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emissions from power generators stands in sharp contrast to the
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complex web of existing regulations which currently confront the
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industry. Over the years, Congress, EPA and the States have
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responded to specific environmental and public health problems by
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developing separate regulatory programs to address the specific
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problems. Each individual program uses its own approach on its own
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timeline to serve its own purpose. Absent changes to the Act, EPA
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and states will be forced to follow the same approach in future
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regulations. It is time to consolidate and simplify to achieve our
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clean air goals. A comprehensive legislative approach with
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mandatory caps could replace a good portion of the current
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regulatory requirements with a system that will reduce the
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administrative burden on industry and governments, use market-based
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approaches to lower compliance costs, reduce consumers' costs, and
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increase national energy security by providing the industry with
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more certainty about its future regulatory obligations. By enacting
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such an approach, we can achieve environmental and public health
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protection more effectively and at less cost. If we do it the
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President's way, it will be a win-win.
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There are many regulations in place that will reduce air
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emissions from electric power generation. These regulations include
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both federal and State requirements that address a variety of
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emissions including SO2, NOx, CO, PM10, and a number of hazardous
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air pollutants. These programs
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include the National Ambient Air Quality Standards for SO2,
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particulate matter and ozone, the section 126 and the NOx SIP Call
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rules, the Acid Rain Program, new source review, new source
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performance standards, and the regional haze rule.
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But the regulation of power generators does not end with
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existing regulations. EPA is obligated by a settlement agreement to
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issue by the end of 2004 a Maximum Achievable Control Technology
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(MACT) standard to require source-specific controls of mercury and
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other hazardous air pollutants from electric utilities. Emissions
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reductions are required by the end of 2007. States will also be
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requiring utilities to comply with Best Available Retrofit
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Technology (BART) programs (either source-specific standards or a
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trading program) to meet requirements to reduce regional haze.
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It is expected that the existing fine particle and ozone
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standards now in place will also result in further regulation of
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power generators. Modeling shows that when full implementation of
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existing regulations such as the acid rain program, the NOx SIP
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Call, the Tier II standards for cars and trucks, the heavy duty
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diesel engine standards, and the low sulfur gasoline and diesel
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fuel rules are taken into account, additional reductions will be
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needed to bring areas into attainment. States will be required to
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develop plans for these areas. In addition, NOx and SO2 reductions
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are also needed to reduce continuing damage from acid rain and
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nitrogen deposition.
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Because states and EPA will have to find some way to
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significantly reduce NOx and SO2 emissions, it is probable that
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power generators will be required to reduce their emissions
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significantly. Power generation accounts for a significant
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percentage of these emissions, and our analysis shows that there
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are significant reductions available at lower cost than from other
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sources. Additionally, states know that if they do not get the
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reductions from power generators, they will have to impose
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significant reduction requirements on other local industrial and
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commercial sources or impose local transportation control
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measures.
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Under current law, the necessary reductions would be achieved
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through the development of individual state plans. States will not
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just control their own sources, however. They will be reaching out
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to control power generators and large industrial facilities in
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other states because transport from other states contributes to
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both ozone and fine particle pollution in many areas. This is what
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has happened in the eastern part of the country when states
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realized that emissions from sources in other states were
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significantly contributing to their 1-hour ozone non-attainment
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problems. Under section 126 of the Clean Air Act, a state can
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petition EPA and request that EPA require reductions from sources
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outside the petitioning state's borders. The petitioning state is
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entitled to relief if EPA finds that the sources are significantly
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contributing to the petitioning state's nonattainment problem.
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EPA's requirement, adopted in response to section 126 petitions,
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that sources in a number of eastern states reduce NOx emissions was
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recently upheld by the Court of Appeals for the District of
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Columbia Circuit. Since states now know that EPA has authority to
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address transport pollution through responses to 126 petitions or
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by issuing a rule like the NOx SIP Call, we anticipate that states
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will be turning to these types of control approaches early in the
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SIP process. Although those of us who are
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traveling that path with the current 126 petitions and NOx SIP
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Call believe it will eventually take us to our environmental goal,
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it has been -- and still is -- a very rocky road for industry,
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environmentalists, the states, EPA and other stakeholders.
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This one-at-a-time, uncoordinated series of regulatory
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requirements for the power industry is not the optimal approach for
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the environment, the power generation sector, or American
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consumers. With most plants needing to install control equipment to
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meet these requirements, it is likely that this approach would lead
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to installation of controls that become obsolete and stranded
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capital investments as additional requirements are promulgated.
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Further, the attainment efforts of individual States and localities
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not only impose costs on these entities, but also can increase
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complexity for companies which face differing requirements when
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operations cross state lines. These factors are exacerbated by
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limited timeframes that may constrain available compliance options
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and thwart long range planning. These and other inefficiencies
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point to the need for a nationally coordinated approach that could
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reduce cost while improving environmental progress and
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accountability.
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Changing the Way We Do Business: Certainty, Flexibility,
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Accountability and Innovation
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We believe there is a better way, one that could cost American
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consumers and industry far less than under current law and ensure
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protection of the air we breathe in a far more certain,
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straightforward manner. I know that many members of this Committee
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share that belief and are also working to develop such an approach.
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It would provide power generators with more certainty about their
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regulatory future and thus allow them to make wiser decisions about
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investments in new technology, which would improve energy security.
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This Administration is developing such a proposal. It will build on
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the successes of the Acid Rain cap and trade program. It would
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establish national cap-and-trade programs for NOx, SO2 and mercury
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emissions from power generators (with appropriate measures to
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address local concerns). Such an approach will benefit the power
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generation industry, the economy, and the states, while improving
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public health and the environment.
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Up-front knowledge of future requirements for multiple
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pollutants would lead firms to follow significantly different and
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less expensive compliance strategies at individual plants, compared
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with compliance choices which must be made as requirements are
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addressed in a sequential manner under the current law. The savings
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come from the opportunity to make cost-effective plant investment
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and retirement decisions with full knowledge of upcoming SO2, NOx
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and mercury requirements, rather than investing in "add-on" control
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equipment to meet the requirements of each regulation. Integration,
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advance knowledge, and certainty regarding environmental
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requirements will have even greater value over the coming decade as
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the electric power industry undergoes further structural changes.
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An integrated package of measures that addresses both the existing
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regulatory requirements as well as many future environmental needs
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would provide the greatest degree of certainty and flexibility for
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the industry, while achieving the necessary emission reductions at
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lower cost than under current law.
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In exchange for flexibility in methods to control emissions, a
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full accounting of emissions through
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continuous monitoring and reporting is essential, as well as
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significant consequences for failing to comply. Such provisions
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have been critical to the success of the Acid Rain Program,
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encouraging individual sources to find the most cost-effective
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means of compliance with the collective emission reduction
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goal.
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Flexibility stimulates technological innovation, fuels economic
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activity and reduces cost to industry and consumers. Strategies and
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technologies for the control of SO2, NOx and mercury emissions
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exist now, and improved methods are expected to become available
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over the next several years. The air pollution control and
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monitoring technology industry is expected to continue to respond
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with cost-effective compliance solutions just as they have done for
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the past 30 years. A predictable demand for such jobs over the next
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15 years is preferable to the boom and bust cycle created by the
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current regulatory approach.
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This approach also would reduce states' administrative burdens
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and obligations. A national cap and trade program with appropriate
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caps for NOx and SO2 could provide the emission reductions
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necessary to bring a significant number of areas into attainment
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with the ozone and fine particle standards. Even those areas that
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would not be brought into attainment by these caps would need
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significantly fewer emission reductions to come into attainment.
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Our approach would significantly reduce the state resources needed
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to conduct modeling, planning and regulatory activities to attain
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the standards. Additionally, the Acid Rain cap and trade program is
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administered with a relatively small staff relying on strong,
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state-of-the-art data tracking and reporting capabilities. Thus,
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well-designed national cap and trade programs can help use
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government resources and taxpayer dollars more efficiently at both
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the state and federal level.
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Caps ensure that environmental goals are met. A cap that
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represents significant reductions of emissions protects the
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environment by reducing overall loadings. Consideration of local
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concerns is important in conjunction with trading provisions.
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Therefore, the National Energy Plan recommended that the
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Administration's approach include appropriate measures to address
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local concerns, such as the unlikely occurrence of an SO2 "hot
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spot" or area of concentrated emissions. Significant reductions
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will go a long way towards addressing local concerns. In addition,
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EPA will be conducting modeling that will predict where emissions
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reductions will occur. Under the Acid Rain cap and trade program,
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we have not seen local hot spots because the highest emitters are
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often the most cost-effective to control and therefore, the most
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likely to control.
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As I mentioned, EPA and the Administration are still in the
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process of developing our proposal. Several guidelines are shaping
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our efforts. These guidelines may provide a valuable basis as you
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weigh the proposals before you. They will also guide our assessment
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of other proposals, including S. 556. These principles are
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structured to ensure consistency with the NEP objectives. The NEP
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goals of increasing energy supplies, accelerating the protection
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and improvement of the environment, and increasing our nation's
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energy supply must be advanced. Towards that end, energy diversity,
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the preservation of electricity generation and transmission
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reliability, and improvement of energy
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9 efficiency/energy intensity of the electric power industry
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should be a key consideration. In particular, to prevent the
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reoccurrence of energy shortages and price volatility, a diverse
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mix of fuel sources should be maintained.
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Specific Comments on S. 556
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We share the desire expressed in S. 556 to significantly reduce
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and cap emissions of SO2, NOx and mercury from power generation. We
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applaud your acknowledgment of market-based incentives,
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particularly cap and trade systems, as a powerful tool in
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environmental protection. In this way, S. 556 builds on successful
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elements of the Clean Air Act.
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We do, however, oppose S. 556 because of concerns with the bill
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-- both with some provisions that are in the bill and with some
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that are missing. We believe the emission reductions and timing in
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the bill will be too costly for consumers and will endanger
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national energy security. We believe the bill is missing some
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provisions -- it should address the allocation scheme and
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integration with existing programs. Finally, we oppose inclusion of
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CO2 in this bill.
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First, let me explain some of our specific concerns about the
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SO2, NOx, and mercury provisions in the bill. We are concerned that
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the significant emissions reductions are required too quickly. We
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do not believe it is reasonable to expect all the control
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technology installations to be completed in that time frame without
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very high costs and electricity reliability problems. To meet these
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deadlines, facilities may need to be taken off-line during critical
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periods. Reliability problems could arise as large amounts of
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capacity are taken out of service for extended periods of time to
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install the control equipment necessary to meet the emissions
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reduction requirements. The abbreviated time frame would force many
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generators to make these retrofits simultaneously. This would
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significantly reduce the amount of generating capacity available to
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meet consumer' electrical needs.
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We have not modeled the specific provisions in S. 556, but
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useful information is provided by comparing the analyses EPA and
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EIA conducted to respond to a request from Senators Smith,
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Voinovich and Brownback with the analyses responding to a request
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from Senators Jeffords and Lieberman. In the
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Smith/Voinovich/Brownback analysis, when we analyzed SO2 and NOx
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reduction levels similar to S. 556, mercury reduction levels more
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modest than S. 556 and no CO2 reductions, we did not find
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significant impacts on coal production or electricity prices.
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However, in the analysis responding to the Jeffords/Lieberman
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request that had NOx, SO2, mercury and CO2 reduction levels similar
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to S. 556, we found significant ramifications: approximately a
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20-30% decline of coal generation and a 30-50% increase in
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electricity prices compared to the reference case (depending on
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assumptions of energy technology penetration).
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The 90% source-specific control for mercury is also problematic.
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We have not seen anything that demonstrates that every coal-fired
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power plant would be able to achieve 90% source-specific controls
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for mercury by 2007, without considerable fuel switching, which
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would be very disruptive to our economy and undermine energy
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security. In addition, requiring the same level of reduction at
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a
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plant that emits 0.1 pounds of mercury and a plant that emits
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2000 pounds of mercury - regardless of cost - is neither efficient
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nor necessary.
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We are also very concerned about the "outdated power plant"
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provision. Requiring every plant over 30 years old to meet New
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Source Performance Standards and New Source Review modification
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requirements seems unnecessary and could undermine the benefits of
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the cap and trade approach. Allowing sources to make reductions
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where it is most economical to do so is one of the reasons cap and
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trade programs should be less costly than command-and-control
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programs that achieve the same or even fewer reductions. When you
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have a hard cap, as you would under S. 556, requiring emission
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reductions at a specific source does not reduce the overall level
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of pollution, it just limits industry's flexibility about where to
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make the reductions. Layering additional requirements, such as the
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"outdated power plants" provision, on top of a cap and trade
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program is very likely to increase costs without providing
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significant environmental benefits.
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Second, we have concerns about what is not in S. 556. Comparing
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our experience on the Acid Rain Program with the NOx SIP Call and
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the Section 126 petitions demonstrates the benefit of having
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certain key issues decided by Congress rather than left to Agency
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rulemakings. Congressional resolution of key issues simplifies
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whatever Agency rulemaking is needed and decreases the
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opportunities for the program to get tied up in protracted
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litigation.
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Perhaps the most important program element not addressed in the
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bill is integration of this new program with the existing Clean Air
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Act provisions. An effective market-based approach would make some
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existing provisions of the Clean Air Act unnecessary. For example,
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depending on the ultimate cap levels chosen by Congress, this type
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of legislation would obviate the need for Best Available Retrofit
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Technology requirements, mercury MACT, and new source review
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case-by-case technology requirements for power generators.
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Also missing from S. 556 is the scheme for allocating
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allowances. Developing an allocation scheme requires answering
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|
numerous questions. Should the allowances be auctioned off or be
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|
handed out for free? If they are not auctioned, should they be
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|
allocated based on heat input or electrical and steam output?
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Should power generators that do not emit air pollutants (e.g.,
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hydropower facilities) be given allowances? Should allowance
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|
allocations be updated, and if so, how frequently? Should
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|
allocations be fuel neutral? Imbedded in these and other questions
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|
are important environmental and energy policy choices with
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significant equity consequences. It may not be efficient for EPA to
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make these choices in rulemaking.
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There are other issues as well that this Committee should
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consider, such as coordination with existing state and regional
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programs like the Western Regional Air Partnership and the NOx
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reduction programs in the east. The Committee may also wish to
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|
consider provisions to track environmental progress to evaluate the
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|
efficacy of the program this bill would establish.
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Finally, the Administration strongly opposes including
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reductions for CO2 in S. 556 or any multi-pollutant bill. Pursuing
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sharp reductions in CO2 from the electricity generating sector
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|
alone would cause a dramatic shift from coal to natural gas and
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|
thus would run the risk of endangering national energy security,
|
|
substantially increasing energy prices and harming consumers.
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|
The Administration will not support any legislation that would
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|
cause a significant decline in our nation's ability to use coal as
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|
a major source of current and future electricity. At the same time,
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the Administration will not support any legislation that does not
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|
enhance the cleanliness of coal-fired electricity generation and
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|
promote a future for clean coal technologies. In short, the
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|
Administration supports a clean coal policy as a critical component
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|
of our nation's energy and environmental policies, recognizing that
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other sources of energy also have a critical role to play.
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|
Additionally, as Governor Whitman said when she testified before
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you in July, including CO2 in this bill will slow down, if not
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|
prevent, the consensus necessary for passage of legislation to
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|
control multiple emissions from power plants. Governor Whitman and
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|
I both believe consensus on the appropriate levels and timing for
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|
reductions of NOx, SO2 and mercury is achievable relatively soon.
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|
We should not delay the public health and environmental benefits
|
|
from reduction of these emissions while we wait for consensus to
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|
develop on CO2.
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|
We agree that climate change is a serious issue we need to
|
|
address. However, CO2 has never been regulated as a pollutant under
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|
the Clean Air Act and does not pose any direct threat to human
|
|
health unlike NOx, SO2 and mercury. The current body of scientific
|
|
knowledge does not provide information regarding atmospheric
|
|
concentrations of CO2 or reduction levels necessary to prevent
|
|
dangerous interference with the climate system.
|
|
In April, the President convened a Cabinet-level policy review
|
|
of this issue and was provided with initial recommendations that he
|
|
accepted and announced on June 11. In that regard, the
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|
Administration is implementing two major initiatives on climate
|
|
science and advanced energy and sequestration technologies. The
|
|
United States now spends $1.6 billion annually on climate science
|
|
to reduce uncertainties - a commitment unmatched by any other
|
|
nation. The "National Climate Change Technology Initiative" will
|
|
accelerate priority research and the application of advanced energy
|
|
and sequestration technologies, recognizing that the real answer to
|
|
addressing climate change in the long term lies in the development
|
|
and global introduction of such technologies in this century. And
|
|
the cabinet-level policy review is ongoing. Finally, as greenhouse
|
|
gas emissions are projected to grow exponentially in the developing
|
|
world in the next two decades, we must evaluate the costs of
|
|
imposing domestic reductions as a very high cost against
|
|
potentially low-cost opportunities for mitigating and sequestering
|
|
carbon emissions in the developing world.
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|
We appreciate the role of S. 556 in generating important
|
|
discussions and emphasizing the importance of a new approach to
|
|
controlling emissions in the power sector. I look forward to the
|
|
additional hearings you will need to address these important issues
|
|
and to working with the Committee
|
|
to develop an approach that the President can support.
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|
The history of Clean Air Act legislation is one of great
|
|
accomplishments made possible by bipartisan efforts. I thank you
|
|
for the opportunity to work with you to continue that great
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|
tradition.
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